Civil Law Review 2 Case Digests

Compilation of Case Digests in CIVIL LAW Review 2

June 2014

Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 CHARLES BUMAGAT, JULIAN BACUDIO, ROSARIO PADRE, SPOUSES ROGELIO and ZOSIMA PADRE, and FELIPE DOMINCIL, Petitioners, vs. REGALADO ARRIBAY, Respondent. G.R. No. 194818.June 9, 2014

Facts: Petitioners are the registered owners, successors-in-interest, or possessors of agricultural land, consisting of about eight hectares.Petitioners filed a Complaint for forcible entry against respondent. Respondent filed a Motion to Dismiss,claiming that the subject properties are agricultural lands – which thus renders the dispute an agrarian matter and subject to the exclusive jurisdiction of the Department of Agrarian Reform Adjudication Board (DARAB). However, in a January 30, 2006 Order,17 the MCTC denied the motion, finding that the pleadings failed to show the existence of a tenancy or agrarian relationship between the parties that would bring their dispute within the jurisdiction of the DARAB. Respondent’s motion for reconsideration was similarly rebuffed. Respondent alleged among others that petitioners’ titles have been ordered cancelled in a December 1, 2001 Resolution issued by the Department of Agrarian Reform, Region 2 in Administrative Case No. A0200 0028 94; that he is the absolute owner of approximately 3.5 hectares of the subject parcels of land, and is the administrator and overseer of the remaining portion thereof, which belongs to his principals Leonardo and Evangeline Taggueg (the Tagguegs); that petitioners abandoned the subject properties in 1993, and he planted the same with corn; that in 2004, he planted the land to rice; that he sued petitioners before the Municipal Agrarian Reform Office (MARO) for non-payment of rentals since 1995; and that the court has no jurisdiction over the ejectment case, which is an agrarian controversy During the proceedings before the MCTC, respondent presented certificates of title, supposedly issued in his name and in the name of the Tagguegs in 2001, which came as a result of the supposed directive in Administrative Case No. A0200 0028 94 to cancel petitioners’ titles. Meanwhile, Romulo Sr. died and his heirs instituted Administrative Case No. A0200 0028 94 to cancel petitioners’ titles. The heirs won the case, and later on new titles over the property were issued in their favor. In turn, one of the heirs transferred his title in favor of respondent. Issue: Whether or not there was tenurial arrangement between the parties. Held: There is no tenurial arrangement, not even an implied one. As correctly argued by petitioners, a case involving agricultural land does not immediately qualify it as an agrarian dispute. The mere fact that the land is agricultural does not ipso facto make the possessor an agricultural lessee or tenant. There are conditions or requisites before he can qualify as an agricultural lessee or tenant, and the subject being agricultural land constitutes just one condition.41 For the DARAB to acquire jurisdiction over the case, there must exist a tenancy relation between the parties. "[I]n order for a tenancy agreement to take hold over a dispute, it is essential to establish all its indispensable elements, to wit: 1) that the parties are the landowner and the tenant or agricultural lessee; 2) that the subject matter of Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 the relationship is an agricultural land; 3) that there is consent between the parties to the relationship; 4) that the purpose of the relationship is to bring about agricultural production; 5) that there is personal cultivation on the part of the tenant or agricultural lessee; and 6) that the harvest is shared between the landowner and the tenant or agricultural lessee."In the present case, it is quite evident that not all of these conditions are present. For one, there is no tenant, as both parties claim ownership over the property. By: Stephanie Mariz C. Khan

AVELINA ABARIENTOS REBUSQUILLO [substituted by her heirs, except Emelinda R. Gualvez] and SALVADOR A. OROSCO, Petitioners,vs. SPS. DOMINGO and EMELINDA REBUSQUILLO GUALVEZ and the CITY ASSESSOR OF LEGAZPI CITY, Respondents. G.R. No. 204029.June 4, 2014

Facts: Petioners Avelina Abarientos Rebusquillo (Avelina) and Salvador Orosco (Salvador) filed a Complaint for annulment and revocation of an Affidavit of Self-Adjudication and a Deed of Absolute Sale before the court a quo. In it, petitioners alleged that Avelina was one of the children of Eulalio Abarientos (Eulalio) and Victoria Villareal (Victoria). Eulalio died intestate on July 3, 1964, survived by his wife Victoria, six legitimate children, and one illegitimate child, namely: (1) Avelina AbarientosRebusquillo, petitioner in this case; (2) Fortunata Abarientos-Orosco, the mother of petitioner Salvador; (3) Rosalino Abarientos; (4) Juan Abarientos; (5) Feliciano Abarientos; (6) Abraham Abarientos; and (7) Carlos Abarientos. His wife Victoria eventually died intestate on June 30, 1983. On his death, Eulalio left behind an untitled parcel of land in Legazpi City consisting of two thousand eight hundred sixty-nine(2,869) square meters, more or less, which was covered by Tax Declaration ARP No. (TD) 0141. In 2001, Avelina was supposedly made to sign two (2) documents by her daughter Emelinda Rebusquillo-Gualvez (Emelinda) and her son-in-law Domingo Gualvez (Domingo), respondents in this case, on the pretext that the documents were needed to facilitate the titling of the lot. It was only in 2003, so petitioners claim, that Avelina realized that what she signed was an Affidavit of SelfAdjudication and a Deed of Absolute Sale in favor of respondents. As respondents purportedly ignored her when she tried to talk to them, Avelina sought the intervention of the RTC to declare null and void the two (2) documents in order to reinstat TD0141 and so correct the injustice done to the other heirs of Eulalio. Issue: Whether or not there was a simulation of contract. Held: The Civil Code provides: Art. 1345. Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter, when the parties conceal their true agreement. (emphasis supplied) Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement. In absolute simulation, there is a colorable contract but it has no substance as the parties have no intention to be bound by it. The main characteristic of an absolute simulation is that the apparent contract is not really desired or intended to produce legal effect or in any way alter the juridical situation of the parties. As a result, an absolutely simulated or fictitious contract is void, and the parties may recover from each other what they may have given under the contract. However, if the parties state a false cause in the contract to conceal their real agreement, the contract is relatively simulated and the parties are still bound by their real agreement. Hence, where the essential requisites of a contract are present and the simulation refers only to the content or terms of the contract, the agreement is absolutely binding and enforceable between the parties and their successors in interest. (emphasis supplied) In the present case, the true intention of the parties in the execution of the Deed of Absolute Sale is immediately apparent from respondents’ very own Answer to petitioners’ Complaint. As respondents themselves acknowledge, the purpose of the Deed of Absolute Sale was simply to "facilitate the titling of the [subject] property," not to transfer the ownership of the lot to them. Furthermore, respondents concede that petitioner Salvador remains in possession of the property and that there is no indication that respondents ever took possession of the subject property after its supposed purchase. Such failure to take exclusive possession of the subject property or, in the alternative, to collect rentals from its possessor, is contrary to the principle of ownership and is a clear badge of simulation that renders the whole transaction void. By: Stephanie Mariz C. Khan

HECTOR L. UY, Petitioner, v. VIRGINIA G. FULE; HEIRS OF THE LATE AMADO A. GARCIA, NAMELY: AIDA C. GARCIA, LOURDES G. SANTAYANA, AMANDO C. GARCIA, JR., MANUEL C. GARCIA, CARLOS C. GARCIA, AND CRISTINA G. MARALIT; HEIRS OF THE LATE GLORIA GARCIA ENCARNACION, NAMELY: MARVIC G. ENCARNACION, IBARRA G. ENCARNACION, MORETO G. ENCARNACION, JR., AND CARINA G. ENCARNACION; HEIRS OF THE LATE PABLO GARCIA, NAMELY: BERMEDIO GARCIA, CRISTETA GARCIA, NONORATO GARCIA, VICENTE GARCIA, PABLO GARCIA, JR., AND TERESITA GARCIA; HEIRS OF THE LATE ELISA G. HEMEDES, NAMELY: ROEL G. HEMEDES, ELISA G. HEMEDES, ROGELIO G. HEMEDES, ANDORA G. HEMEDES, AND FLORA G. HEMEDES, Respondents. G.R. No. 164961, June 30, 2014

Facts: The dispute herein involves the parcel of land registered under Transfer Certificate of Title (TCT) No. 30111 of the Registry of Deeds of Camarines Sur with an area of 180,150square meters located in San Agustin, Pili, Camarines Sur that was part of the vast tract of land covered by TCT No. 1128 registered in the name of the late Conrado Garcia. TCT No. 1128 was derived from Original Certificate of Title (OCT) No. 854 registered on November 23, 1933 in the Registration Book of the Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Register of Deeds of Camarines Sur pursuant to Decree No. 517240, No. 854, issued in LRC GLRO Record No. 47802. Upon the death of Conrado Garcia on November 23, 1972, his heirs entered into an extrajudicial settlement of his estate, including the vast track of land. Thereafter, his heirs caused the registration on March 7, 1973 of the vast track of land under TCT No. RT-8922 (16498), covering Lot 1, PSU-81269 and Lot 2, PSU-81269. In September 1985, the Department of Agrarian Reform (DAR) engaged Geodetic Engr. Rolando A. Sales (Engr. Sales) to conduct a survey of the disputed land, referring to it as Lot 562, Cad. 291 (Csd-05-003874). Together with DAR Technologist Carmen Sorita and DAR Team Leader Julian F. Israel, Engr. Sales issued a joint certification dated August 30, 1988 to the effect that the disputed land was an "untitled" property owned by Conrado Garcia. The joint certification dated August 30, 1988 was buttressed by the certification issued on January 30, 1989 by the Office of the Register of Deeds of Camarines Sur to the effect that no title covering Lot 562, Cad. 291 (Csd-05003874) appeared on record. As a result, the disputed land was included in the Operation Land Transfer (OLT) program of the DAR pursuant to Presidential Decree No. 27. In 1988, the DAR and the Office of the Register of Deeds of Camarines Sur respectively issued emancipation patents (EPs) and original certificates of title (OCTs) coveringthe disputed land to the farmersbeneficiaries, namely: Catalino Alcaide, Mariano Ronda, Ponciano Ermita, Felipe Marcelo, Salvador Pedimonte, Fabiana Pedimonte and Leonila Pedimonte (farmers-beneficiaries). In the interim, farmer-beneficiary Mariano Ronda sold his portion to Chisan Uy who then registered his title thereto under TCT No. 29948 and TCT No. 29949 of the Registry of Deeds of Camarines Sur. On the other hand, the heirs of farmer-beneficiary Mariano Ronda (Isabel Ronda, et al.) sold their land to petitioner Hector Uy for P10 million. The petitioner registered his title thereto under TCT No. 31436 and TCT No. 31437, both of the Registry of Deeds of Camarines Sur. In 1997, TCT No. RT-8922 (16498)was cancelled following the partition of the property covered therein. Subsequently, TCT No. 30136 and TCT No. 30111 were issued in the names of respondents heirs of the late Conrado Garcia. TCT No. 30111 covered the disputed land. Issue: Whether or not petitioner is a purchaser in good faith. Held: A buyer for value in good faith is one who buys property of another, without notice that some other person has a right to, or interest in, such property and pays full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other persons in the property. He buys the property with the well- founded belief that the person from whom he receives the thing had title to the property and capacity to convey it. To prove good faith, a buyer of registered and titled land need only show that he relied on the face of the title to the property. He need not prove that he made further inquiry for he is not obliged to explore beyond the four corners of the title. Such degree of proof of good faith, however, is sufficient only when the following conditions concur: first, the seller is the registered owner of the land; second, the latter is in possession thereof; and third, at the time of the sale, the buyer was not aware of any Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 claim or interest of some other person in the property, or of any defect or restriction in the title of the seller or in his capacity to convey title to the property. Absent one or two of the foregoing conditions, then the law itself puts the buyer on notice and obliges the latter to exercise a higher degree of diligence by scrutinizing the certificate of title and examining all factual circumstances in order to determine the seller’s title and capacity to transfer any interest in the property. Under such circumstance, it was no longer sufficient for said buyer to merely show that he had relied on the face of the title; he must now also show that he had exercised reasonable precaution by inquiring beyond the title. Failure to exercise such degree of precaution makes him a buyer in bad faith. An examination of the deed of sale executed between Isabel Ronda, et al. and the petitioner respecting the portions covered by TCT No. 31120 and TCT No. 31121 indicates that the TCTs were issued only on August 17, 1998 but the deed of sale was executed on July 31, 1998. While it is true, as the petitioner argues, that succession occurs from the moment of death of the decedent pursuant to Article 777 of the Civil Code, his argument did not extend to whether or not he was a buyer in good faith, but only to whether or not, if at all, Isabel Ronda, et al., as the heirs of Mariano Ronda, held the right to transfer ownership over their predecessor’s property. The argument did not also address whether or not the transfer to the petitioner was valid. Evidently, the petitioner entered into the deed of sale without having been able to inspect TCT No. 31120 and TCT No. 31121 by virtue of such TCTs being not yet in existence at that time. If at all, it was OCT No. 9852 and OCT No. 9853 that were available at the time of the execution of the deed of sale, and such OCTs were presumably inspected by petitioner before he signed the deed of sale. It is notable that said OCTs categorically stated that they were entered pursuant to an emancipation patent of the Ministry of Agrarian Reform pursuant to the Operation Land Transfer (OLT) Program of the government. Furthermore, said OCTs plainly recited the following prohibition: "…it shall not be transferred except by hereditary succession or to the Government in accordance with the provisions of Presidential Decree No. 27, Code of Agrarian Reforms of the Philippines and other existing laws and regulations…." The foregoing circumstances negated the third element of good faith cited in Bautista v. Silva, i.e., that "at the time of sale, the buyer was not aware of any claim or interest of some other person in the property, or of any defect or restriction in the title of the seller or in his capacity to convey title to the property." As we have ruled in Bautista v. Silva, the absence of the third condition put the petitioner on notice and obliged him to exercise a higher degree of diligence by scrutinizing the certificates of title and examining all factual circumstances in order to determine the seller’s title and capacity to transfer any interest in the lots. Consequently, it is not sufficient for him to insist that he relied on the face of the certificates of title, for he must further show that he exercised reasonable precaution by inquiring beyond the certificates of title. Failure to exercise such degree of precaution rendered him a buyer in bad faith. "It is a well-settled rule that a purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor." The petitioner was not an innocent purchaser for value; hence, he cannot be awarded the disputed land. By: Reeve Marlo Arturo S. Goteesan Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


ARCO PULP AND PAPER CO., INC. and CANDIDA A. SANTOS, Petitioners, vs. DAN T. LIM, doing business under the name and style of QUALITY PAPERS & PLASTIC PRODUCTS ENTERPRISES, Respondent. G.R. No. 206806. June 25, 2014

Facts: Dan T. Lim works in the business of supplying scrap papers, cartons, and other raw materials, under the name Quality Paper and Plastic Products, Enterprises, to factories engaged in the paper mill business. From February 2007 to March 2007, he delivered scrap papers worth 7,220,968.31 to Arco Pulp and Paper Company, Inc. (Arco Pulp and Paper) through its Chief Executive Officer and President, Candida A. Santos. The parties allegedly agreed that Arco Pulp and Paper would either pay Dan T. Lim the value of the raw materials or deliver to him their finished products of equivalent value. Dan T. Lim alleged that when he delivered the raw materials, Arco Pulp and Paper issued a post-dated check dated April 18, 2007 in the amount of 1,487,766.68 as partial payment, with the assurance that the check would not bounce. When he deposited the check on April 18, 2007, it was dishonored for being drawn against a closed account. On the same day, Arco Pulp and Paper and a certain Eric Sy executed a memorandum of agreement where Arco Pulp and Paper bound themselves to deliver their finished products to Megapack Container Corporation, owned by Eric Sy, for his account. According to the memorandum, the raw materials would be supplied by Dan T. Lim, through his company, Quality Paper and Plastic Products. The memorandum of agreement reads as follows: Per meeting held at ARCO, April 18, 2007, it has been mutually agreed between Mrs. Candida A. Santos and Mr. Eric Sy that ARCO will deliver 600 tons Test Liner 150/175 GSM, full width 76 inches at the price of P18.50 per kg. to Megapack Container for Mr. Eric Sy’s account. It has been agreed further that the Local OCC materials to be used for the production of the above Test Liners will be supplied by Quality Paper & Plastic Products Ent., total of 600 Metric Tons at P6.50 per kg. (price subject to change per advance notice). Quantity of Local OCC delivery will be based on the quantity of Test Liner delivered to Megapack Container Corp. based on the above production schedule. On May 5, 2007, Dan T.Lim sent a letter to Arco Pulp and Paper demanding payment of the amount of 7,220,968.31, but no payment was made to him. Issue: Whether or not there was novation. Held: Novation is a mode of extinguishing an obligation by changing its objects or principal obligations, by substituting a new debtor in place of the old one, or by subrogating a third person to the rights of the creditor. Article 1293 of the Civil Code defines novation as follows: Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 "Art. 1293. 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. Payment by the new debtor gives him rights mentioned in articles 1236 and 1237." In general, there are two modes of substituting the person of the debtor: (1) expromision and (2) delegacion. In expromision, the initiative for the change does not come from — and may even be made without the knowledge of — the debtor, since it consists of a third person’s assumption of the obligation. As such, it logically requires the consent of the third person and the creditor. In delegacion, the debtor offers, and the creditor accepts, a third person who consents to the substitution and assumes the obligation; thus, the consent of these three persons are necessary. Both modes of substitution by the debtor require the consent of the creditor. Novation may also be extinctive or modificatory. It is extinctive when an old obligation is terminated by the creation of a new one that takes the place of the former. It is merely modificatory when the old obligation subsists to the extent that it remains compatible with the amendatory agreement. Whether extinctive or modificatory, novation is made either by changing the object or the principal conditions, referred to as objective or real novation; or by substituting the person of the debtor or subrogating a third person to the rights of the creditor, an act known as subjective or personal novation. For novation to take place, the following requisites must concur: 1) There must be a previous valid obligation. 2) The parties concerned must agree to a new contract. 3) The old contract must be extinguished. 4) There must be a valid new contract. Novation may also be express or implied. It is express when the new obligation declares in unequivocal terms that the old obligation is extinguished. It is implied when the new obligation is incompatible with the old one on every point. The test of incompatibility is whether the two obligations can stand together, each one with its own independent existence. Because novation requires that it be clear and unequivocal, it is never presumed, thus: In the civil law setting, novatio is literally construed as to make new. So it is deeply rooted in the Roman Law jurisprudence, the principle — novatio non praesumitur —that novation is never presumed.At bottom, for novation tobe a jural reality, its animus must be ever present, debitum pro debito — basically extinguishing the old obligation for the new one. There is nothing in the memorandum of agreement that states that with its execution, the obligation of petitioner Arco Pulp and Paper to respondent would be extinguished. It also does not state that Eric Sy somehow substituted petitioner Arco Pulp and Paper as respondent’s debtor. It merely shows that petitioner Arco Pulp and Paper opted to deliver the finished products to a third person instead. The consent of the creditor must also be secured for the novation to be valid: Novation must be expressly consented to. Moreover, the conflicting intention and acts of the parties underscore the absence of any express disclosure or circumstances with which to deduce a clear and unequivocal intent by the parties to novate the old agreement.


Compilation of Case Digests in CIVIL LAW Review 2 In this case, respondent was not privy to the memorandum of agreement, thus, his conformity to the contract need not be secured. If the memorandum of agreement was intended to novate the original agreement between the parties, respondent must have first agreed to the substitution of Eric Sy as his new debtor. The memorandum of agreement must also state in clear and unequivocal terms that it has replaced the original obligation of petitioner Arco Pulp and Paper to respondent. Neither of these circumstances is present in this case. Petitioner Arco Pulp and Paper’s act of tendering partial payment to respondent also conflicts with their alleged intent to pass on their obligation to Eric Sy. When respondent sent his letter of demand to petitioner Arco Pulp and Paper, and not to Eric Sy, it showed that the former neither acknowledged nor consented to the latter as his new debtor. These acts, when taken together, clearly show that novation did not take place. Since there was no novation, petitioner Arco Pulp and Paper’s obligation to respondent remains valid and existing. By: Reeve Marlo Arturo S. Goteesan

SPOUSES VICTOR and EUNA BINUA, Petitioners, vs. LUCIA P. ONG, Respondent. G.R. No. 207176 June 18, 2014

Facts: In a Joint Decision dated January 10, 2006 by the Regional Trial Court of Tuguegarao City, Branch 2 (RTC-Branch 2), in Criminal Cases Nos. 8230, 8465-70, petitioner Edna was found guilty of Estafa and was sentenced to imprisonment from six ( 6) years and one ( 1) day of prision mayor, as minimum, to thirty (30) years of reclusion perpetua, as maximum, for each conviction. Petitioner Edna was also ordered to pay the respondent the amount of P2,285,000.00, with ten percent (10%) interest, and damages. Petitioner Edna sought to avoid criminal liability by settling her indebtedness through the execution of separate real estate mortgages over petitioner Victor’s properties on February 2, 2006, and covering the total amount of P7,000,000.00. Mortgaged were portions of Lot No. 1319 covered by Transfer Certificate of Title (TCT) No. T-15232 and Lot No. 2399 covered by TCT No. T-15227, both located in Tuguegarao City. Petitioner Edna, however, failed to settle her obligation, forcing the respondent to foreclose the mortgage on the properties, with the latter as the highest bidder during the public sale. The petitioners then filed the case for the Declaration of Nullity of Mortgage Contracts, alleging that the mortgage documents were "executed under duress, as the [petitioners] at the time of the execution of said deeds were still suffering from the effect of the conviction of [petitioner] Edna, and could not have been freely entered into said contracts." Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Issue: WON THE LOWER COURT ERRED IN REFUSING TO DECLARE NULL AND VOID THE MORTGAGE CONTRACTS DESPITE ITS FINDING THAT SAID CONTRACTS WERE EXECUTED UNDER FEAR, DURESS AND THREAT Held: The petitioners claim that they were compelled by duress or intimidation when they executed the mortgage contracts. According to them, they "were still suffering from the effect of the conviction of [petitioner] Edna, and could not have been freely entered into said contracts." The petitioners also allege that the respondent subsequently "rammed the two (2) mortgage contracts involving two (2) prime properties on [petitioner Victor’s] throat, so to speak[,] just so to make him sign the said documents," and that the respondent took advantage of the misfortune of the petitioners and was able to secure in her favor the real estate mortgages. Article 1390(2) of the Civil Code provides that contracts where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud are voidable or annullable. Article 1335 of the Civil Code, meanwhile, states that "[t]here is intimidation when one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his consent." The same article, however, further states that "[a] threat to enforce one’s claim through competent authority, if the claim is just or legal, does not vitiate consent." In De Leon v. Court of Appeals, the Court held that in order that intimidation may vitiate consent and render the contract invalid, the following requisites must concur: (1) that the intimidation must be the determining cause of the contract, or must have caused the consent to be given; (2) that the threatened act be unjust or unlawful; (3) that the threat be real and serious, there being an evident disproportion between the evil and the resistance which all men can offer, leading to the choice of the contract as the lesser evil; and (4) that it produces a reasonable and well-grounded fear from the fact that the person from whom it comes has the necessary means or ability to inflict the threatened injury. In cases involving mortgages, a preponderance of the evidence is essential to establish its invalidity, and in order to show fraud, duress, or undue influence of a mortgage, clear and convincing proof is necessary. Based on the petitioners’ own allegations, what the respondent did was merely inform them of petitioner Edna’s conviction in the criminal cases for estafa. It might have evoked a sense of fear or dread on the petitioners’ part, but certainly there is nothing unjust, unlawful or evil in the respondent's act. The petitioners also failed to show how such information was used by the respondent in coercing them into signing the mortgages. The petitioners must remember that petitioner Edna's conviction was a result of a valid judicial process and even without the respondent allegedly "ramming it into petitioner Victor's throat," petitioner Edna's imprisonment would be a legal consequence of such conviction. In Callanta v. National Labor Relations Commission, the Court stated that the threat to prosecute for estafa not being an unjust act, but rather a valid and legal act to enforce a claim, cannot at all be considered as intimidation. As correctly ruled by the CA, "[i]f the judgment of conviction is the only basis of the [petitioners] in saying that their consents were vitiated, such will not suffice to nullify Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 the real estate mortgages and the subsequent foreclosure of the mortgaged properties. No proof was adduced to show that [the respondent] used [force], duress, or threat to make [petitioner] Victor execute the real estate mortgages.” By: Reeve Marlo Arturo S. Goteesan

NORA B. CALALANG-PARULAN and ELVIRA B. CALALANG, Petitioners, vs. ROSARIO CALALANG-GARCIA, LEONORA CALALANG-SABILE, and CARLITO S. CALALANG, Respondents. G.R. No. 184148. June 9, 2014

Facts: In a Complaint for Annulment of Sale and Reconveyance of Property , the respondents Rosario Calalang-Garcia, Leonora Calalang-Sabile, and Carlito S. Calalang asserted their ownership over a certain parcel of land against the petitioners Nora B. Calalang-Parulan and Elvira B. Calalang. The said lot with was allegedly acquired by the respondents from their mother Encarnacion Silverio, through succession as the latter’s compulsory heirs. According to the respondents, their father, Pedro Calalang contracted two marriages during his lifetime. The first marriage was with their mother Encarnacion Silverio. During the subsistence of this marriage, their parents acquired the above-mentioned parcel of land from their maternal grandmother Francisca Silverio. Despite enjoying continuous possession of the land, however, their parents failed to register the same. On June 7, 1942, the first marriage was dissolved with the death of Encarnacion Silverio. Pedro Calalang entered into a second marriage with Elvira B. Calalang who then gave birth to Nora B. Calalang-Parulan and Rolando Calalang. According to the respondents, it was only during this time that Pedro Calalang filed an application for free patent over the parcel of land with the Bureau of Lands. Pedro Calalang committed fraud in such application by claiming sole and exclusive ownership over the land since 1935 and concealing the fact that he had three children with his first spouse. As a result, on September 22, 1974, the Register of Deeds of Bulacan issued Original Certificate of Title (OCT) No. P-28715 in favor of Pedro Calalang only. Pedro Calalang sold the said parcel of land to Nora B. Calalang-Parulan. The respondents assailed the validity of TCT No. 283321 on two grounds. First, the respondents argued that the sale of the land was void because Pedro Calalang failed to obtain the consent of the respondents who were co-owners of the same. As compulsory heirs upon the death of Encarnacion Silverio, the respondents claimed that they acquired successional rights over the land. Thus, in alienating the land without their consent, Pedro Calalang allegedly deprived them of their pro indiviso share in the property. Second, the respondents claimed that the sale was absolutely simulated as Nora B. Calalang-Parulan did not have the capacity to pay for the consideration stated in the Deed of Sale. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 The trial court rendered decision in favor of the respondents. The CA reversed the factual findings of the trial court and held that Pedro Calalang was the sole and exclusive owner of the subject parcel of land. Issue: Whether or not the contract of sale was valid. Held: As the sole and exclusive owner, Pedro Calalang had the right to convey his property in favor of Nora B. Calalang-Parulan by executing a Deed of Sale on February 17, 1984. The CA therefore erred in ruling that Pedro Calalang deprived his heirs of their respective shares over the disputed property when he alienated the same. It is hornbook doctrine that successional rights are vested only at the time of death. Article 777 of the New Civil Code provides that "[t]he rights to the succession are transmitted from the moment of the death of the decedent." In Butte v. Manuel Uy and Sons, Inc.,19 we proclaimed the fundamental tenets of succession: The principle of transmission as of the time of the predecessor's death is basic in our Civil Code, and is supported by other related articles. Thus, the capacity of the heir is determined as of the time the decedent died (Art. 1034); the legitime is to be computed as of the same moment (Art. 908), and so is the in officiousness of the donation inter vivas (Art. 771). Similarly, the legacies of credit and remission are valid only in the amount due and outstanding at the death of the testator (Art. 935), and the fruits accruing after that instant are deemed to pertain to the legatee (Art. 948). Thus, it is only upon the death of Pedro Calalang on December 27, 1989 that his heirs acquired their respective inheritances, entitling them to their pro indiviso shares to his whole estate. At the time of the sale of the disputed property, the rights to the succession were not yet bestowed upon the heirs of Pedro Calalang. And absent clear and convincing evidence that the sale was fraudulent or not duly supported by valuable consideration (in effect an in officious donation inter vivas), the respondents have no right to question the sale of the disputed property on the ground that their father deprived them of their respective shares. Well to remember, fraud must be established by clear and convincing evidence. Mere preponderance of evidence is not even adequate to prove fraud.20 The Complaint for Annulment of Sale and Reconveyance of Property must therefore be dismissed. By: Stephanie Mariz C. Khan JOSE ESPINELI a.k.a. DANILO ESPINELI, Petitioner, vs. PEOPLE OF THE PHILIPPINES, Respondent. G.R. No.179535. June 9, 2014

Facts: An Information charging petitioner with the crime of murder was filed. The facts show that in the early evening of December 15, 1996, Alberto Berbon y Downie (Alberto), a 49-year old Senior Desk Coordinator of the radio station DZMM, was shot in the head and different parts of the body in Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 front of his house in Imus, Cavite by unidentified malefactors who immediately fled the crime scene on board a waiting car. Meanwhile, the group of Atty. Orly Dizon (Atty. Dizon) of the National Bureau of Investigation (NBI) arrested and took into custody one Romeo Reyes (Reyes) for the crime of Illegal Possession of Deadly Weapon. Reyes confided to the group of Atty. Dizon that he was willing to give vital information regarding the Berbon case. In due course, NBI Agent Dave Segunial(NBI Agent Segunial) interviewed Reyes on February 10, 1997 and reduced his statement into writing whereby Reyes claimed that on December 15, 1996, he saw petitioner and Sotero Paredes (Paredes) board a red car while armed with a .45 caliber firearm and armalite, respectively; and that petitioner told Paredes that "ayaw ko nang abutin pa ng bukas yang si Berbon."Subsequently, Reyes posted bail and was released on February 14, 1997. Thenceforth, he jumped bail and was never again heard of. NBI Agent Segunial testified on these facts during the trial. Issue: Whether or not the accused is liable for damages. Held: While the CA correctly imposed the amount of P50,000.00 as civil indemnity, it failed, however, to award moral damages. These awards are mandatory without need of allegation and proof other than the death of the victim, owing to the fact of the commission of murder or homicide. Thus, for moral damages, the award of P50,000.00 to the heirs of the victim is only proper. Anent the award of actual damages, this Court sees no reason to disturb the amount awarded by the trial court as upheld by the CA since the itemized medical and burial expenses were duly supported by receipts and other documentary evidence. The CA did not grant any award of damages for loss of earning capacity and rightly so. Though Sabina testified as to the monthly salary of the deceased, the same remains unsubstantiated. "Such indemnity cannot be awarded in the absence of documentary evidence except where the victim was either self-employed or a daily wage worker earning less than the minimum wage under current labor laws.The exceptions find no application in this case. In addition and in conformity with current policy, an interest at the legal rate of 6% per annum is imposed on all the monetary awards for damages from date of finality of this judgment until fully paid. By: Stephanie Mariz C. Khan

GADRINAB vs. SALAMANCA et al. G.R. No. 194560 June 11, 2014

Facts: Respondents, together with Adoracion Gadrinab and Arsenia Talao, are siblings and heirs of the late Spouses Talao, who died intestate, leaving a parcel of land in Sta. Ana, Manila.


Compilation of Case Digests in CIVIL LAW Review 2 The five Talao children divided the property among themselves through an extrajudicial settlement. Arsenia Talao waived her share over the property in favor of her siblings. Respondent Salamanca filed a complaint for partition against her siblings. All parties claimed their respective shares in the property and later on entered into a compromise agreement, which was approved by the court and became final and executory. During the execution thereof, however, petitioner Nestor refused to vacate a portion of the property. The siblings then agreed to partition the accrued rentals to only three, leaving Nestor with the only portion of the property which is unsold. Now, respondent Salamanca moved for the physical partition of the property occupied by petitioner Nestor. Nestor opposed the motion claiming that the judgment on the compromise agreement had already become final and executory and had the effect of res judicata. The RTC granted the motion for physical partition. On appeal, the CA affirmed the RTC and dismissed the appeal. Hence this petition. Issue: Whether the courts may allow the physical partition of a property despite finality of a previous judgment on compromise agreement involving the division of the same property. Held: No. In a compromise agreement, the parties freely enter into stipulations. "A judgment based on a compromise agreement is a judgment on the merits" of the case. It has the effect of res judicata. In Spouses Romero v. Tan, the Court said that a judicial compromise has the effect of res judicata and is immediately executory and not appealable unless set aside by mistake, fraud, violence, intimidation, undue influence, or falsity of documents that vitiated the compromise agreement. There are two rules that embody the principle of res judicata. The first rule refers to "bar by prior judgment," which means that actions on the same claim or cause of action cannot be relitigated. The second rule refers to "conclusiveness of judgment." This means that facts already tried and determined in another action involving a different claim or cause of action cannot anymore be relitigated. Under the doctrine of finality of judgment or immutability of judgment, a decision that has acquired finality becomes immutable and unalterable, and may no longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of fact and law, and whether it be made by the court that rendered it or by the Highest Court of the land. Doctrines on bar by prior judgment and immutability of judgment apply whether judgment is rendered after a full- blown trial or after the parties voluntarily execute a compromise agreement duly approved by the court. Because a judicial compromise agreement is in the nature of both an agreement between the parties and a judgment on the merits, it is covered by the Civil Code provisions on contracts. It can be avoided on grounds that may avoid an ordinary contract, e.g., it is not in accord with the law; lack of consent by a party; and existence of fraud or duress. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


Further, the pertinent Civil Code provisions on compromise agreements provide: Article 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence, or falsity of documents is subject to the provisions of Article 1330 of this Code. Article 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable. Therefore, courts cannot entertain actions involving the same cause of action, parties, and subject matter without violating the doctrines on bar by prior judgment and immutability of judgments, unless there is evidence that the agreement was void, obtained through fraud, mistake or any vice of consent, or would disrupt substantial justice. In this case, there was no issue as to the fact that the parties freely entered into the compromise agreement. There was also no dispute about the clarity of its terms. Some of the parties simply do not wish to abide by the compromise agreement’s terms. Judges have the ministerial and mandatory duty to implement and enforce a compromise agreement. Absent appeal or motion to set aside the judgment, courts cannot modify, impose terms different from the terms of a compromise agreement, or set aside the compromises and reciprocal concessions made in good faith by the parties without gravely abusing their discretion. By: JOANALEN G. BERMAS CABLING vs. LUMAPAS G.R. No. 196950, 18 June 2014

Facts: Petitioner Cabling was the highest bidder in an extrajudicial foreclosure sale over a property situated in Sta. Rita, Olongapo City. The Final Deed of Sale was issued by the Sheriff of Olongapo City and the title to the property was duly transferred to the petitioner after more than one year therefrom. Petitioner Cabling filed an Application for the Issuance of a Writ of Possession with the RTC. Petitioner’s application was granted and the RTC subsequently issued a Writ of Possession and Notice to Vacate. Respondent Lumapas, however, filed a Motion for Intervention as a third party in actual possession of the foreclosed property. She claimed that the property had previously been sold to her by Aida Ibabao, the property’s registered owner and the judgment debtor/mortgagor in the extrajudicial foreclosure sale, pursuant to a Deed of Conditional Sale. The RTC issued an order holding in abeyance the implementation of the petitioner’s writ of possession until after the resolution of the respondent’s motion. Thereafter, the RTC rendered the assailed decision stating that "an ex-parte writ of possession issued pursuant to Act No. 355, as amended, cannot be enforced against a third person who is in actual possession of the foreclosed property and who is not in privity with the debtor/mortgagor." Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 On appeal, the CA dismissed the petition and affirmed in toto the RTC’s assailed orders holding that the obligation of the trial court to issue a writ of possession ceases to be ministerial once it appears that there is a third party in possession of the property claiming a right adverse to that of the debtor/mortgagor and where such third party exists, the trial court should conduct a hearing to determine the nature of his adverse possession. Hence, this petition. Issue: Whether respondent may be considered as having an adverse title against petitioner, thus warranting the abeyance of the implementation of the writ of possession. Held: No. In the present case, the respondent cannot be said to possess the subject property by adverse title or right as her possession is merely premised on the alleged conditional sale of the property to her by the judgment debtor/mortgagor. The execution of a contract of conditional sale does not immediately transfer title to the property to be sold from seller to buyer. In such contract, ownership or title to the property is retained by the seller until the fulfillment of a positive suspensive condition which is normally the payment of the purchase price in the manner agreed upon. Here, the Deed of Conditional Sale between the respondent (buyer) and the subject property’s registered owner (seller) expressly reserved to the latter ownership over the property until full payment of the purchase price, despite the delivery of the subject property to the respondent. It appears from the records that no deed of absolute sale over the subject property has been executed in the respondent's favor. Thus, the respondent's possession from the time the subject property was "delivered" to her by the seller cannot be claimed as possession in the concept of an owner, as the ownership and title to the subject property still then remained with the seller until the title to the property was transferred to the petitioner in March 2009. As a rule, in the extrajudicial foreclosure of real estate mortgages under Act No. 3135 (as amended), the writ of possession issues as a matter of course, without need of a bond or of a separate and independent action, after the lapse of the period of redemption, and after the consolidation of ownership and the issuance of a new TCT in the purchaser’s name. An exemption is that the possession of the property shall be given to the purchaser or last redemptioner unless a third party is actually holding the property in a capacity adverse to the judgment obligor. In order for the respondent not to be ousted by the ex parte issuance of a writ of possession, her possession of the property must be adverse in that she must prove a right independent of and even superior to that of the judgment debtor/mortgagor. By: JOANALEN G. BERMAS DOLORES CAMPOS, Petitioner, vs. DOMINADOR ORTEGA, SR. and JAMES SILOS, Respondent. G.R. No. 171286. June 2, 2014

Facts: On August 17, 1999, petitioner Dolores Campos filed a case for specific performance with damages against respondents Dominador Ortega, Sr. and James Silos. Plaintiff occupied the entire Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 second level as well as the front portion of the ground level of a residential structure located at No. 2085 F. Blumentritt Street, Mandaluyong City. The lot on which the said structure is standing is owned by the government, while the structure itself is owned by Dominga Boloy from whom plaintiff leased the same beginning in 1966. Under the Zonal Improvement Program Guideline Circular No. 1 dated September 16, 1977 of the National Housing [Authority], plaintiff is a qualified beneficiary of NHA’s Zonal Improvement Program, she being in the premises since 1966 as lessee of a residential structure. According to the aforementioned circular, only occupants who have been actually residing in the ZIP project area either as sharer or renter before August 15, 1975 are qualified beneficiaries under this NHA program. The plaintiff was given until December 19, 1987 within which to buy the property located at Lot 17, Block 7[,] Phase III of the Hulo estate but did not exercise her right because the property involved is different from what she had been occupying since 1966 until they left. Before any clarification was made on this matter and before plaintiff could exercise [her] right to purchase, [she] learned that the property, Lot 18, Block [7], Phase III of Hulo estate was already sold to herein defendants in violation of her right. Issues: 1. Whether or not petioner acquired a vested and cognizable right respecting their property 2. Whether or not specific performance is the correct remedy Held: 1. While it is true that NHA recognizes plaintiff as the censused owner of the structure built on the lot, the issuance of the tag number is not a guarantee for lot allocation. Plaintiff had petitioned the NHA for the award to her of the lot she is occupying. However, the census, tagging, and plaintiff's petition, did not vest upon her a legal title to the lot she was occupying, but a mere expectancy that the lot will be awarded to her. A vested right is one that is absolute, complete and unconditional and no obstacle exists to its exercise. It is immediate and perfect in itself and not dependent upon any contingency. To be vested, a right must have become a title – legal or equitable – to the present or future enjoyment of property. Neither does petitioner have a "cognizable" right respecting the lot in question. Notably, she readily admitted not exercising their option to buy Boloy’s property despite the knowledge that one of the requirements before an entitlement to an award of the government-owned lot is that they must own the subject house. In this case, petitioner, as the party alleging fraud in the transaction and the one who bears the burden of proof, miserably failed to demonstrate that respondents committed fraud or that they connived with government officials and employees to cause undue damage or prejudice to petitioner. Petitioner did not present even a single evidence to support the view that the repetitive absences of the persons necessary for the meetings before the Arbitration and Awards Committee were intentional or done with malicious intent. Also, as the CA found, records would show that respondent Ortega, Sr. initially purchased 1/3 of the residential structure on November 23, 1987, per Deed of Absolute Sale, which, recognizing his co-occupancy with others, also gave respondent Silos and petitioner the similar option to buy their respective 1/3 portion. Petitioner did not exercise the option Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 given. Hence, upon such failure, the entire structure was eventually sold to both respondents through the Deed of Sale dated February 19, 1988. 2. We agree with the CA that the case for specific performance with damages instituted by petitioner effectively attacks the validity of respondents' Torrens title over the subject lot. It is evident that, ultimately, the objective of such claim is to nullify the title of respondents to the property in question, which, in turn, challenges the judgment pursuant to which the title was decreed. This is a collateral attack that is not permitted under the principle of indefeasibility of Torrens title. Section 48 of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, unequivocally states: SEC. 48. Certificate not subject to collateral attack. - A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law. A collateral attack transpires when, in another action to obtain a different relief and as an incident to the present action, an attack is made against the judgment granting the title while a direct attack (against a judgment granting the title) is an action whose main objective is to annul, set aside, or enjoin the enforcement of such judgment if not yet implemented, or to seek recovery if the property titled under the judgment had been disposed of. The issue on the validity of title, i.e., whether or not it was fraudulently issued, can only be raised in an action expressly instituted for that purpose. The appropriate legal remedy that petitioner should have availed is an action for reconveyance. Proof of actual fraud is not required as it may be filed even when no fraud intervened such as when there is mistake in including the land for registration. Under the principle of constructive trust, registration of property by one person in his name, whether by mistake or fraud, the real owner being another person, impresses upon the title so acquired the character of a constructive trust for the real owner, which would justify an action for reconveyance. In the action for reconveyance, the decree of registration is respected as incontrovertible but what is sought instead is the transfer of the property wrongfully or erroneously registered in another's name to its rightful owner or to 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. An action for reconveyance resulting from fraud prescribes four years from the discovery of the fraud, which is deemed to have taken place upon the issuance of the certificate of title over the property, and if based on an implied or a constructive trust it prescribes ten (10) years from the alleged fraudulent registration or date of issuance of the certificate of title over the property. However, an action for reconveyance based on implied or constructive trust is imprescriptible if the plaintiff or the person enforcing the trust is in possession of the property. In effect, the action for reconveyance is an action to quiet title to the property, which does not prescribe. In this case, petitioner, taking into account Article 1155 of the Civil Code and jurisprudence on the matter, should be guided by the following facts in enforcing her legal remedy/ies, if still any: (1) Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 her judicial admission that they no longer possess the subject lot, claiming that they stayed therein from 1966 until 1997 when they were ejected by the sheriff of Pasig RTC; (2) TCT No. 13342 was issued on December 9, 1997; and (3) the instant case for specific performance with damages was filed on August 17, 1999. By: Aliah M. Comagul

Alvin Patrimonio v. Napoleon Gutierrez and Octavio Marasigan III G.R. No. 187769 June 4, 2014

Facts: The petitioner and the Gutierrez entered into a business venture named Slam Dunk Corporation (Slum Dunk), a production outfit that produced mini-concerts and shows related to basketball. Petitioner was a professional basketball player while Gutierrez was a sports columnist. In the course of their business, the petitioner pre-signed several checks to answer for the expenses of Slam Dunk. Although signed, these checks had no payee’s name, date or amount. The blank checks were entrusted to Gutierrez with the specific instruction not to fill them out without previous notification to and approval by the petitioner. According to petitioner, the arrangement was made so that he could verify the validity of the payment and make the proper arrangements to fund the account. In the middle of 1993, without the petitioner’s knowledge and consent, Gutierrez went to a former teammate of petitioner (Marasigan), to secure a loan in the amount of P200,000.00 on the excuse that the petitioner needed the money for the construction of his house. In addition to the payment of the principal, Gutierrez assured Marasigan that he would be paid an interest of 5% per month from March to May 1994. Marasigan granted it. Gutierrez simultaneously delivered to Marasigan one of the blank checks the petitioner pre-signed with the words “Cash” “Two Hundred Thousand Pesos Only”, and the amount of “P200,000.00”. Marasigan deposited the check but it was dishonoured. Marasigan sought recovery from Gutierrez, to no avail. He thereafter sent several demands which went unheeded. Consequently, he filed a criminal case for violation of B.P. 22 against the petitioner. Petitioner then filed before the RTC a Complaint for Declaration of Nullity of Loan and Recovery of Damages against Gutierrez and co-respondent Marasigan. He completely denied authorizing the loan or the check’s negotiation, and asserted that he was not privy to the parties’ loan agreement. RTC ruled in favour of Marasigan. The appellate court did not reverse the decision of the RTC, hence this present petition. Issue: Whether or not the petitioner is liable for the contract entered into between Gutierrez and Marasigan. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Held: No. As a general rule, a contract of agency may be oral. However, it must be written when the law requires a specific form. Article 1878 paragraph 7 of the Civil Code expressly requires a special power of authority before an agent can loan or borrow money in behalf of the principal. Article 1878 does not state that the authority be in writing. As long as the mandate is express, such authority may be either oral or written. In the earlier case of Lim Pin v. Liao Tian, et al., that the requirement under Article 1878 of the Civil Code refers to the nature of the authorization and not to its form. Be that as it may, the authority must be duly established by competent and convincing evidence other than the self serving assertion of the party claiming that such authority was verbally given. A review of the records reveals that Gutierrez did not have any authority to borrow money in behalf of the petitioner. Records do not show that the petitioner executed any special power of attorney (SPA) in favor of Gutierrez. In fact, the petitioner’s testimony confirmed that he never authorized Gutierrez (or anyone for that matter), whether verbally or in writing, to borrow money in his behalf, nor was he aware of any such transaction. In the absence of any authorization, Gutierrez could not enter into a contract of loan in behalf of the petitioner. In the absence of any showing of any agency relations or special authority to act for and in behalf of the petitioner, the loan agreement Gutierrez entered into with Marasigan is null and void. Thus, the petitioner is not bound by the parties’ loan agreement. Another significant point that the lower courts failed to consider is that a contract of loan, like any other contract, is subject to the rules governing the requisites and validity of contracts in general. In this case, the contract is made without the consent of petitioner, and hence, one element of a valid contract is lacking. By: Aliah M. Comagul

SPOUSES DOMINADOR PERALTA AND OFELIA PERALTA, Petitioners, vs. HEIRS OF BERNARDINA ABALON, represented by MANSUETO ABALON, Respondents. G.R. No. 183448. June 30, 2014 HEIRS OF BERNARDINA ABALON, represented by MANSUETO ABALON, Petitioners,vs. MARISSA ANDAL, LEONIL AND AL, ARNEL AND AL, SPOUSES DOMINDOR PERALTA AND OFELIA PERALTA, and HEIRS of RESTITUTO RELLAMA, represented by his children ALEX, IMMANUEL, JULIUS and SYLVIA, all surnamed RELLAMA. G.R. No. 183464. June 30, 2014

Facts: The civil case before the RTC of Legaspi City involved a parcel of land registered under the name of Bernardina Abalon and fraudulently transferred to Restituto Rellama and who, in turn, subdivided the subject property and sold it separately to the other parties to this case – Spouses Dominador and Ofelia Peralta; and Marissa, Leonil and Arnel, all surnamed Andal. Thereafter, Spouses Peralta and the Andals individually registered the respective portions of the land they had bought under their names. The heirs of Bernardina were claiming back the land, alleging that since it Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 was sold under fraudulent circumstances, no valid title passed to the buyers. On the other hand, the buyers, who were now title holders of the subject parcel of land, averred that they were buyers in good faith and sought the protection accorded to them under the law. It appears that a Deed of Absolute Sale was executed over the subject property in favor of Restituto M. Rellama (Rellama) on June 10, 1975. Likewise, they alleged that Abalon had always been in possession of the subject property through her tenant Pedro Bellen who was thereafter succeeded by his wife, Ruperta Bellen, and then his son, Godofredo Bellen. On the other hand, they said that Rellama had never set foot on the land he was claiming. They alleged that the defendants-appellants are not buyers in good faith as they were aware that the subject land was in the possession of the plaintiffs-appellees at the time they made the purchase. They thus claim that the titles issued to the defendants-appellants are null and void. In his answer, Rellama alleged that the deed of absolute sale executed by Abalon is genuine and that the duplicate copy of OCT No. (O) 16 had been delivered to him upon the execution of the said deed of transfer. As for Spouses Peralta and the Andals, who filed their separate answers to the complaint, they mainly alleged that they are buyers in good faith and for value. The court a quo rendered judgment in favor of the plaintiffs-appellees and ordered the restoration of OCT No. (O) 16 in the name of Abalon and the cancellation of the titles issued to the defendants-appellants. The fact that only a xerox copy of the purported deed of sale between Rellama and Abalon was presented before the Register of Deeds for registration and the absence of such xerox copy on the official files of the said Office made the court a quo conclude that the said document was a mere forgery. The CA reversed the decision.

Issue: Whether a forged instrument may become the root of a valid title in the hands of an innocent purchaser for value, even if the true owner thereof has been in possession of the genuine title, which is valid and has not been cancelled. Held: The assailed Decision of the CA held that the Andals were buyers in good faith, while Spouses Peralta were not. Despite its determination that fraud marred the sale between Bernardina Abalon and Rellama, a fraudulent or forged document of sale may still give rise to a valid title. The appellate court reasoned that if the certificate of title had already been transferred from the name of the true owner to that which was indicated by the forger and remained as such, the land is considered to have been subsequently sold to an innocent purchaser, whose title is thus considered valid. The CA concluded that this was the case for the Andals. After executing the Deed of Sale with Bernardina Abalon under fraudulent circumstances, Rellama succeeded in obtaining a title in his name and selling a portion of the property to the Andals, who had no knowledge of the fraudulent circumstances involving the transfer from Abalon to Rellama. The records of the RTC and the CA have a finding that when Rellama sold the properties to the Andals, it was still in his name; and there was no annotation that would blight his clean title. To Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 the Andals, there was no doubt that Rellama was the owner of the property being sold to them, and that he had transmissible rights of ownership over the said property. Thus, they had every right to rely on the face of his title alone. The established rule is that a forged deed is generally null and cannot convey title, the exception thereto, pursuant to Section 55 of the Land Registration Act, denotes the registration of titles from the forger to the innocent purchaser for value. Thus, the qualifying point here is that there must be a complete chain of registered titles.This means that all the transfers starting from the original rightful owner to the innocent holder for value – and that includes the transfer to the forger – must be duly registered, and the title must be properly issued to the transferee. In the instant case, there is no evidence that the chain of registered titles was broken in the case of the Andals. Neither were they proven to have knowledge of anything that would make them suspicious of the nature of Rellama’s ownership over the subject parcel of land. Hence, we sustain the CA’s ruling that the Andals were buyers in good faith. Consequently, the validity of their title to the parcel of the land bought from Rellama must be upheld. As for Spouses Peralta, we sustain the ruling of the CA that they are indeed buyers in bad faith. The appellate court made a factual finding that in purchasing the subject property, they merely relied on the photocopy of the title provided by Rellama. The CA concluded that a mere photocopy of the title should have made Spouses Peralta suspicious that there was some flaw in the title of Rellama, because he was not in possession of the original copy. This factual finding was supported by evidence.

By: Aliah M. Comagul

GOLDEN VALLEY EXPLORATION, INC. (GVEI) vs. PINKIAN MINING COMPANY (PMC) and COPPER VALLEY, INC. (CVI). G.R. No. 190080, 11 June 2014 Facts: PMC is the owner of 81 mining claims 15 of which were covered by Mining Lease Contract (MLC) while the remaining 66 had pending applications for lease. PMC entered into an Operating Agreement (OA) with GVEI, granting the latter "full, exclusive and irrevocable possession, use, occupancy , and control over the mining claims for a period of 25 years, with a stipulation that GVEI’s non-payment of royalties would give PMC sufficient cause to cancel or rescind the OA, In a letter, PMC extra-judicially rescinded the OA upon GVEI’s violations of thereof. GVEI contested PMC’s extra-judicial rescission of the OA through a Letter. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 PMC no longer responded to GVEI’s letter. Instead, it entered into a Memorandum of Agreement (MOA) with CVI, whereby the latter was granted the right to enter, possess, occupy and control the mining claims and to explore and develop the mining claims, among others, for a period of 25 years. Due to the foregoing, GVEI filed a Complaint Annulment of Contract and Damages against PMC and CVI. The RTC declared the rescission of the OA void and the execution of the MOA between PMC and CVI without force and effect. On appeal, the CA reversed the RTC ruling and upheld the validity of PMC’s rescission of the OA and its subsequent execution of the MOA with CVI. Issue: Whether there was a valid rescission of the OA. Held: Yes. In reciprocal obligations, either party may rescind the contract upon the other’s substantial breach of the obligation/s he had assumed thereunder. Article 1191 of the Civil Code which states that “the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible”. As a general rule, the power to rescind an obligation must be invoked judicially and cannot be exercised solely on a party’s own judgment that the other has committed a breach of the obligation. This is so because rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental violations as would defeat the very object of the parties in making the agreement. As a well-established exception, however, an injured party need not resort to court action in order to rescind a contract when the contract itself provides that it may be revoked or cancelled upon violation of its terms and conditions. By expressly stipulating in the OA that GVEI’s non-payment of royalties would give PMC sufficient cause to cancel or rescind the OA, the parties clearly had considered such violation to be a substantial breach of their agreement. Thus, in view of the above-stated jurisprudence on the matter, PMC’s extra-judicial rescission of the OA based on the said ground was valid. By: JOANALEN G. BERMAS



July 2014


Compilation of Case Digests in CIVIL LAW Review 2 SPOUSES EDUARDO and LYDIA SILOS vs. PHILIPPINE NATIONAL BANK. G.R. No. 181045. July 2, 2014. Del Castillo Doctrine: In loan agreements, it cannot be denied that the rate of interest is a principal condition, if not the most important component. Thus, any modification thereof must be mutually agreed upon; otherwise, it has no binding effect. Moreover, the Court cannot consider a stipulation granting a party the option to prepay the loan if said party is not agreeable to the arbitrary interest rates imposed. Premium may not be placed upon a stipulation in a contract which grants one party the right to choose whether to continue with or withdraw from the agreement if it discovers that what the other party has been doing all along is improper or illegal. Facts: Spouses Eduardo and Lydia Silos have been in business for about two decades of operating a department store and buying and selling of ready-to-wear apparel. In August 1987 the spouses constituted a REM over a 370 sq m lot in Kalibo, Aklan, in order to secure a one-year revolving credit line of P150,000.00 obtained from PNB. In July 1988, and July 1989 the credit line was increased to P1.8 million and P2.5 million respectively. Additional security was given in the form of a 134-sq m. lot. The Silos issued eight Promissory Notes and signed a Credit Agreement. All the Promissory Notes contained a stipulation granting PNB the right to increase or reduce interest rates "within the limits allowed by law or by the Monetary Board." The Real Estate Mortgage agreement provided the same right to increase or reduce interest rates "at any time depending on whatever policy PNB may adopt in the future". In August 1991, an Amendment to Credit Agreement was executed by the parties. Under this Amendment to Credit Agreement, the Silos issued PNB 18 Promissory Notes with varying interest rates, which they settled except the last (the note covering the principal). The 9th up to the 17th promissory notes provide for the payment of interest at the "rate the Bank may at any time without notice, raise within the limits allowed by law . . . ." On the other hand, the 18th up to the 26th promissory notes — including PN 9707237, which is the 26th promissory note — carried the following provision: . . . For this purpose, I/We agree that the rate of interest herein stipulated may be increased or decreased for the subsequent Interest Periods, with prior notice to the Borrower in the event of changes in interest rate prescribed by law or the Monetary Board of the Central Bank of the Philippines, or in the Bank's overall cost of funds. I/We hereby agree that in the event I/we are not agreeable to the interest rate fixed for any Interest Period, I/we shall have the option to prepay the loan or credit facility without penalty within ten (10) calendar days from the Interest Setting Date. (Emphasis supplied) PNB regularly renewed the line from 1990 up to 1997, and the Silos made good on the promissory notes, religiously paying the interests without objection or fail. But in 1997, the spouses failed when the interest rates soared due to the Asian financial crisis. The Silos' sole outstanding promissory note for P2.5 million — PN 9707237 executed in July 1997 became past due, and despite repeated demands, they failed to make good on the note. Said PN 9707237 provided for the penalty equivalent to 24% per annum in case of default. Thus, PNB foreclosed on the two mortgage, and were sold to it at auction. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


More than a year later, or on March 24, 2000, the Silos filed a civil case, seeking annulment of the foreclosure sale and an accounting of the PNB credit. On February 28, 2003, the trial court rendered judgment dismissing the civil case. The Silos moved for reconsideration, but the trial court granted only a modification in the award of attorney's fees, reducing the same from 10% to 1%. Thus, PNB was ordered to refund to petitioner the excess in attorney's fees in the amount of P356,589.90. Hence the spouses appealed to the CA, which partly ruled for the spouses. The CA noted that, based on receipts presented by petitioners during trial, the latter dutifully paid a total of P3,027,324.60 in interest, over and above the P2.5 million principal obligation. But the spouses are stopped from questioning the interest since they paid the same religiously and without fail for seven years. The CA nevertheless noted that PNB wrongly applied an interest rate of 25.72% instead of the agreed 25%; thus it overcharged petitioners, and the latter paid, an excess of P736.56 in interest. The CA then proceeded to declare valid the foreclosure and sale of properties, which came as a necessary result of petitioners' failure to pay the outstanding obligation upon demand. Finally, the CA ruled that petitioners are entitled to P377,505.09 surplus, which is the difference between PNB's bid price of P4,324,172.96 and petitioners' total computed obligation as of January 14, 1999, or the date of the auction sale, in the amount of P3,946,667.87. Hence, the present Petition. Issue/s: (1) Whether or not the interest rate as stipulated in the escalation clause (increases made by the PNB) is valid. (2) Whether or not Estoppel will apply to the spouses Silos. (3) Whether or not legal interest rate will apply. (4) Whether or not the penalty charge of 24% per annum based on the defaulted principal amount shall be imposed. Held: (1) NO. It appears that PNB's practice, more than once proscribed by the Court, has been carried over once more to the Silos spouses. In a number of decided cases, the Court struck down provisions in credit documents issued by PNB to, or required of, its borrowers which allow the bank to increase or decrease interest rates "within the limits allowed by law at any time depending on whatever policy it may adopt in the future." In the first case, PNB v. CA, such stipulation and similar ones were declared in violation of Article 1308 of the Civil Code. P.D. No. 1684 and C.B. Circular No. 905 no more than allow contracting parties to stipulate freely regarding any subsequent adjustment in the interest rate that shall accrue on a loan or forbearance of money, goods or credits. In fine, they can agree to adjust, upward or downward, the interest previously stipulated. However, contrary to the stubborn insistence of petitioner bank, the said law and circular did not authorize either party to unilaterally raise the Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 interest rate without the other's consent. It is basic that there can be no contract in the true sense in the absence of the element of agreement, or of mutual assent of the parties. In the second case, PNB v. CA, et al., 196 SCRA 536, 544-545 (1991) we held that the unilateral action of the PNB in increasing the interest rate on the private respondent's loan violated the mutuality of contracts ordained in Article 1308 of the Civil Code: Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. Then again, in a third case, Spouses Almeda v. Court of Appeals, the Court invalidated the very same provisions in the respondent's prepared Credit Agreement, declaring thus: The binding effect of any agreement between parties to a contract is premised on two settled principles: (1) that any obligation arising from contract has the force of law between the parties; and (2) that there must be mutuality between the parties based on their essential equality. Any contract which appears to be heavily weighed in favor of one of the parties so as to lead to an unconscionable result is void. Any stipulation regarding the validity or compliance of the contract which is left solely to the will of one of the parties, is likewise, invalid. Still, in a fourth case, PNB v. CA, the above doctrine was reiterated. PNB's argument rests on a misapprehension of the import of the appellate court's ruling. The Court of Appeals nullified the interest rate increases not because the promissory note did not comply with P.D. No. 1684 by providing for a de-escalation, but because the absence of such provision made the clause so onesided as to make it unreasonable. That ruling is correct. It is in line with our decision in Banco Filipino Savings & Mortgage Bank v. Navarro that although P.D. No. 1684 is not to be retroactively applied to loans granted before its effectivity, there must nevertheless be a de-escalation clause to mitigate the one-sidedness of the escalation clause. We made the same pronouncement in a fifth case, New Sampaguita Builders Construction, Inc. v. Philippine National Bank, thus — Courts have the authority to strike down or to modify provisions in promissory notes that grant the lenders unrestrained power to increase interest rates, penalties and other charges at the latter's sole discretion and without giving prior notice to and securing the consent of the borrowers. This unilateral authority is anathema to the mutuality of contracts and enable lenders to take undue advantage of borrowers. Although the Usury Law has been effectively repealed, courts may still reduce iniquitous or unconscionable rates charged for the use of money. Furthermore, excessive interests, penalties and other charges not revealed in disclosure statements issued by banks, even if stipulated in the promissory notes, cannot be given effect under the Truth in Lending Act. Yet again, in a sixth disposition, Philippine National Bank v. Spouses Rocamora, the above pronouncements were reiterated to debunk PNB's repeated reliance on its invalidated contract stipulations. Verily, all these cases, including the present one, involve identical or similar provisions found in respondent's credit agreements and promissory notes. These stipulations must be once more invalidated, as was done in previous cases, there is the lack of agreement of the parties to the Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 imposed interest rates. For this case, this lack of consent by the petitioners has been made obvious by the fact that they signed the promissory notes in blank for the respondent to fill. We find credible the testimony of Lydia in this respect. Respondent failed to discredit her; in fact, its witness PNB Kalibo Branch Manager Aspa admitted that interest rates were fixed solely by its Treasury Department in Manila, which were then simply communicated to all PNB branches for implementation. If this were the case, then this would explain why petitioners had to sign the promissory notes in blank, since the imposable interest rates have yet to be determined and fixed by respondent's Treasury Department in Manila. To repeat what has been said in the above-cited cases, any modification in the contract, such as the interest rates, must be made with the consent of the contracting parties. The minds of all the parties must meet as to the proposed modification, especially when it affects an important aspect of the agreement. In the case of loan agreements, the rate of interest is a principal condition, if not the most important component. Thus, any modification thereof must be mutually agreed upon; otherwise, it has no binding effect. What is even more glaring in the present case is that, the stipulations in question no longer provide that the parties shall agree upon the interest rate to be fixed; instead, they are worded in such a way that the borrower shall agree to whatever interest rate respondent fixes. (2) NO, with the present credit agreement, the element of consent or agreement by the borrower is now completely lacking, which makes respondent's unlawful act all the more reprehensible. Accordingly, the spouses are correct in arguing that estoppel should not apply to them, for "[e]stoppel cannot be predicated on an illegal act. As between the parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or is against public policy." It appears that by its acts, respondent violated the Truth in Lending Act, or Republic Act No. 3765, which was enacted "to protect . . . citizens from a lack of awareness of the true cost of credit to the user by using a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy." Section 4 thereof provides that a disclosure statement must be furnished prior to the consummation of the transaction. Under Section 4 (6), "finance charge" represents the difference between (1) the aggregate consideration (down payment plus installments) on the part of the debtor, and (2) the sum of the cash price and non-finance charges. By requiring the petitioners to sign the credit documents and the promissory notes in blank, and then unilaterally filling them up later on, respondent violated the Truth in Lending Act, and was remiss in its disclosure obligations. However, the one-year period within which an action for violation of the Truth in Lending Act may be filed evidently prescribed long ago, or sometime in 2001, one year after petitioners received the March 2000 demand letter which contained the illegal charges. The fact that petitioners later received several statements of account detailing its outstanding obligations does not cure respondent's breach. To repeat, the belated discovery of the true cost of credit does not reverse the ill effects of an already consummated business decision. (3) YES, legal interest rate will apply starting from the 2nd promissory note. With regard to interest, the Court finds that since the escalation clause is annulled, the principal amount of the loan is subject to the original or stipulated rate of interest, and upon maturity, Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 the amount due shall be subject to legal interest at the rate of 12% per annum. This is the uniform ruling adopted in previous cases, including those cited here. The interests paid by petitioners should be applied first to the payment of the stipulated or legal and unpaid interest, as the case may be, and later, to the capital or principal. Respondent should then refund the excess amount of interest that it has illegally imposed upon petitioners; "[t]he amount to be refunded refers to that paid by petitioners when they had no obligation to do so." Thus, the parties' original agreement stipulated the payment of 19.5% interest; however, this rate was intended to apply only to the first promissory note which expired on November 21, 1989 and was paid by petitioners; it was not intended to apply to the whole duration of the loan. Subsequent higher interest rates have been declared illegal; but because only the rates are found to be improper, the obligation to pay interest subsists, the same to be fixed at the legal rate of 12% per annum. However, the 12% interest shall apply only until June 30, 2013. Starting July 1, 2013, the prevailing rate of interest shall be 6% per annum pursuant to our ruling in Nacar v. Gallery Frames and Bangko Sentral ng Pilipinas-Monetary Board Circular No. 799. (4) NO. Petitioners claim that this penalty should be excluded from the foreclosure amount or bid price because the Real Estate Mortgage and the Supplement thereto did not specifically include it as part of the secured amount. Respondent justifies its inclusion in the secured amount, saying that the purpose of the penalty or a penal clause is to ensure the performance of the obligation and substitute for damages and the payment of interest in the event of non-compliance. Respondent adds that the imposition and collection of a penalty is a normal banking practice, and the standard rate per annum for all commercial banks, at the time, was 24%. Its inclusion as part of the secured amount in the mortgage agreements is thus valid and necessary. The Court sustains petitioners' view that the penalty may not be included as part of the secured amount. Having found the credit agreements and promissory notes to be tainted, we must accord the same treatment to the mortgages. After all, "[a] mortgage and a note secured by it are deemed parts of one transaction and are construed together." Being so tainted and having the attributes of a contract of adhesion as the principal credit documents, we must construe the mortgage contracts strictly, and against the party who drafted it. An examination of the mortgage agreements reveals that nowhere is it stated that penalties are to be included in the secured amount. Construing this silence strictly against the respondent, the Court can only conclude that the parties did not intend to include the penalty allowed under PN 9707237 as part of the secured amount. Given its resources, respondent could have — if it truly wanted to — conveniently prepared and executed an amended mortgage agreement with the petitioners, thereby including penalties in the amount to be secured by the encumbered properties. Yet it did not. By: Ellaine Janica T. Galias


Compilation of Case Digests in CIVIL LAW Review 2 ERLINDA K. ILUSORIO vs. BAGUIO COUNTRY CLUB CORPORATION AND ANTHONY R. DE LEON. G.R. No. 179571, July 02, 2014 Perez Facts: Spouses Potenciano and Erlinda Ilusorio (Spouses Ilusorio) are the owners of a parcel of land and a cottage situated inside the recreational complex of respondent Baguio Country Club Corporation (BCCC). The said property was accessible only through the property of BCCC, basic facilities such as access to the main road, electricity and water supply. Sometime in 1999, BCCC, thru its Manager, respondent Anthony R. De Leon (De Leon), without prior notice to the Spouses Ilusorio, allegedly cut-off electric and water supply at the cottage, rendering it unusable to the Spouses Ilusorios’ guests. This prompted Erlinda Ilusorio (Erlinda) to initiate a complaint for injunction, mandamus and damages against BCCC and De Leon before the RTC of Makati City. The complaint prayed that respondents be directed to provide access from the cottage to the main road, and, to supply water and electric services to the subject property. The payment of actual, moral and exemplary damages and attorney’s fees in the aggregate amount of P5,500,000.00 was likewise sought by Erlinda. In their Answer the respondents averred that Erlinda has no legal capacity to sue because the property is registered in the name of Potenciano and that the water and electric services at the cottage were cut-off and the personal properties found therein were removed and delivered to Potenciano’s residence in Parañaque City upon his direct instruction since the cottage pose a fire hazard to the recreational center. For lack of cause of action, therefore, respondents moved for the dismissal of the complaint. The trial court refused to grant the Motion to Dismiss filed by the respondents. Both parties moved for the reconsideration of the Orde but were denied. In view of the death of Potenciano on 28 June 2001, the appellate court, in a Decision dated 25 October 2001, dismissed the petition filed by Erlinda for being moot and academic. After the procedural incidents before the appellate court were settled, respondents went back to the lower court to file a Motion to Dismiss the complaint for being moot and academic considering that the cottage in dispute was already removed as early as 2003 to pave way for the construction of log cabins. The motion was opposed by Erlinda, asserting that even if her main action for injunction and mandamus could no longer prosper due to the removal of the cottage, she still has existing claims for damages, separate and distinct from the main action, occasioned by respondents’ unlawful deprivation of her right to use the subject property. The RTC dismissed the case for being moot and academic. Erlinda appealed with the Court of Appeals and argued that the action for damages could stand alone even if her actions for mandamus and injunction had become moot and academic for the fact remained that when she was denied beneficial use of her property, her right as its owner was violated, giving rise to a cause of action for damages. The Court of Appeals affirmed the decision of the RTC. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Issue: Whether or not the Court of Appeals erred in ruing that the cause of action for damages was already moot and academic and that Erlinda is no longer entitled to the award of actual and moral damages as well as attorney’s fees. Held: The Court has ruled that an issue becomes moot and academic when it ceases to present a justiciable controversy so that a declaration on the issue would be of no practical use or value. In such cases, there is no actual substantial relief to which the plaintiff would be entitled to and which would be negated by the dismissal of the complaint. Courts will decline jurisdiction over moot cases because there is no substantial relief to which petitioner will be entitled and which will anyway be negated by the dismissal of the petition. The Court will therefore abstain from expressing its opinion in a case where no legal relief is needed or called for. There is no dispute that the action for mandamus and injunction filed by Erlinda has been mooted by the removal of the cottage from the premises of BCCC. The staleness of the claims becomes more manifest considering the reliefs sought by Erlinda, i.e., to provide access and to supply water and electricity to the property in dispute, are hinged on the existence of the cottage. Collolarily, the eventual removal of the cottage rendered the resolution of issues relating to the prayers for mandamus and injunction of no practical or legal effect. A perusal of the complaint, however, reveals that Erlinda did not only pray that BCCC be enjoined from denying her access to the cottage and be directed to provide water and electricity thereon, but she also sought to be indemnified in actual, moral and exemplary damages because her proprietary right was violated by the respondents when they denied her of beneficial use of the property. In such a case, the court should not have dismissed the complaint and should have proceeded to trial in order to determine the propriety of the remaining claims. Instructive on this point is the Court’s ruling in Garayblas v. Atienza Jr.: The Court has ruled that an issue becomes moot and academic when it ceases to present a justiciable controversy so that a declaration on the issue would be of no practical use or value. In such cases, there is no actual substantial relief to which the plaintiff would be entitled to and which would be negated by the dismissal of the complaint. However, a case should not be dismissed simply because one of the issues raised therein had become moot and academic by the onset of a supervening event, whether intended or incidental, if there are other causes which need to be resolved after trial. When a case is dismissed without the other substantive issues in the case having been resolved would be tantamount to a denial of the right of the plaintiff to due process. It is clear enough that the issue of whether Erlinda is entitled to actual, moral and exemplary damages and attorney’s fees because of BCCC’s acts in denying her access and discontinuing water and electric supply to the property has not been mooted by the removal of the cottage. The acts complained of have, if true and are of good bases, already caused damage to Erlinda when the suit was commenced below. The issue of damages being sought by Erlinda against respondents should be taken up during the trial on the merits where and when the allegations of the parties may properly be addressed. A remand of this case for that purpose is necessary. By: Gykslyn L. Gicos Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 CITY OF DAGUPAN, REPRESENTED BY THE CITY MAYOR BENJAMIN S. LIM vs. ESTER F. MARAMBA, REPRESENTED BY HER ATTORNEY-IN-FACT JOHNNY FERRER Leonel. Facts: Respondent Maramba was a grantee of a DENR miscellaneous lease contract for a 284sqm property in Dagupan City, for a period of 25 years, causing the construction of a commercial fish center thereon. Petitioner city caused the demolition of the commercial fish center, prompting respondent to file a complaint for injunction and damages with prayer for a writ of preliminary injunction and/or TRO. The complaint alleged that the demolition was unlawful and that the “complete demolition and destruction of the previously existing commercial fish center of plaintiff is valued at Five Million (P10,000,000.00) pesos.” The word, “ten,” was handwritten on top of the word, “five.” In the complaint’s prayer, Maramba asked for a judgment “ordering defendant corporation to pay plaintiff the amount of P10,000.00 for the actual and present value of the commercial fish center completely demolished by public defendant.” The word, “million,” was handwritten on top of the word, “thousand,” and an additional zero was handwritten at the end of the numerical figure. RTC ruled in favor of Maramba and awarded P10 million as actual damages. Petitioner city filed a motion for reconsideration – denied. On August 25, 2005, the trial court granted the petition for relief and consequently modified its July 30, 2004 decision. It reduced the award of actual damages from P10 million to P75,000.00.

Issue/s: 1. Whether actual damages must be substantiated in order to be awarded? 2. Whether or not the amount of damages is proper? Held: 1. Yes. It must be substantiated. First, nowhere in the trial court’s decision penned by Judge Laron did it state or refer to any document presented by Maramba to substantiate her claimed costs. In fact, the amounts she testified on did not even add up to the P10 million the court awarded as actual damages. Second, the body of the trial court’s July 30, 2004 decision mentioned that Maramba was entitled to P1 million as moral damages and P500,000.00 as attorney’s fees. This is inconsistent with the dispositive portion that awarded P500,000.00 as moral damages and P500,000.00 as attorney’s fees.


Compilation of Case Digests in CIVIL LAW Review 2 The affidavit of merit discussed that Maramba testified on her shock, sleepless nights, and mental anguish, but she never expressly asked for moral damages or specified the amount of P500,000.00. 2. The issue on the amount of damages is a factual question that this court may not resolve in a Rule 45 petition. Article 2199 of the Civil Code defines actual damages. It states that “[e]xcept as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proven.” Competent proof of the amount claimed as actual damages is required before courts may grant the award. Petitioner city emphasized the argument it made in its motion for reconsideration that the improvements allegedly destroyed or damaged consists only of G.I. sheets and some makeshift stalls used for buying and selling of fishery products and by no stretch of imagination would said materials amount to Php10,000,000.00 as claimed by the plaintiff. By: Parlade, Julie Pearl Claudine T. SPOUSES RODOLFO BEROT AND LILIA BEROT vs. FELIPE C. SIAPNO. G.R. No. 188944. July 9, 2014. Sereno Facts: On May 23, 2002, Macaria Berot and spouses Rodolfo and Lilia P. Berot obtained a loan from Felipe C. Siapno in the sum of PhP250,000.00, payable within one year together with interest thereon at the rate of 24% per annum from that date until fully paid. As security for the loan, Macaria, and Lilia mortgaged to Siapno a portion, consisting of 147 sq m. of a parcel of land with an area of 718 sq. m, situated in Banaoang, Calasiao, Pangasinan. The lot is in the names of Macaria and her husband Pedro Berot, deceased. On June 23, 2003, Macaria died. Because of the mortgagors' default, Siapno filed an action against them for foreclosure of mortgage and damages on July 15, 2004 in the RTC of Dagupan City. After trial, the lower court rendered a decision allowing the foreclosure of the subject mortgage. Accordingly, the Spouses are hereby ordered to pay the plaintiff within 90 days from notice of this Decision the amount of PhP250,000.00 representing the principal loan, with interest at 2% monthly from February, 2004 and 30% of the amount to be collected as and for attorney's fees. Defendants are also assessed to pay the sum of PhP20,000.00 as litigation expenses and another sum of PhP10,000.00 as exemplary damages for their refusal to pay their aforestated loan obligation. The spouses filed a motion for reconsideration of the decision but it was denied. On appeal, the CA affirmed with modification in that the award of exemplary damages, attorney's fees and expenses of litigation is deleted. The spouses moved for the reconsideration of the CA Decision, but their motion was denied. Hence, the present Petition for Review on Certiorari under Rule 45, proffering purely questions of law. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Issue: Whether or not the nature of the loan obligation is joint or solidary. Held: The nature of the loan obligation contracted by petitioners is joint. Under Article 1207 of the Civil Code of the Philippines, the general rule is that when there is a concurrence of two or more debtors under a single obligation, the obligation is presumed to be joint: Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestations. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. The law further provides that to consider the obligation as solidary in nature, it must expressly be stated as such, or the law or the nature of the obligation itself must require solidarity. In PH Credit Corporation v. Court of Appeals, we held that: A solidary obligation is one in which each of the debtors is liable for the entire obligation, and each of the creditors is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. On the other hand, a joint obligation is one in which each debtors is liable only for a proportionate part of the debt, and the creditor is entitled to demand only a proportionate part of the credit from each debtor. The well-entrenched rule is that solidary obligations cannot be inferred lightly. They must be positively and clearly expressed. A liability is solidary "only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires." In the instant case, the trial court expressly ruled that the nature of petitioners' obligation to respondent was solidary. It scrutinized the real estate mortgage and arrived at the conclusion that petitioners had bound themselves to secure their loan obligation by way of a real estate mortgage in the event that they failed to settle it. But such pronouncement was not expressly stated in its 30 June 2006 Decision. However, a closer scrutiny of the records would reveal that the RTC expressly pronounced that the obligation of petitioners to the respondent was solidary. To this the SC does not agree with the finding by the trial court, we found no record of the principal loan instrument, except an evidence that the REM was executed by Macaria and petitioners. When Rodolfo Berot testified in court, he admitted that he and his mother, Macaria had contracted the loan for their benefit. The testimony of petitioner Rodolfo only established that there was that existing loan to respondent, and that the subject property was mortgaged as security for the said obligation. His admission of the existence of the loan made him and his late mother liable to respondent. We have examined the contents of the real estate mortgage but found no indication in the plain wordings of the instrument that the debtors — the late Macaria and herein petitioners — had expressly intended to make their obligation to respondent solidary in nature. Absent from the mortgage are the express and indubitable terms characterizing the obligation as solidary. Respondent was not able to prove by a preponderance of evidence that petitioners' obligation to him was solidary. Hence, applicable to this case is the presumption under the law that the nature of the obligation herein can only be considered as joint. It is incumbent upon the party alleging otherwise to prove with a preponderance of evidence that petitioners' obligation under the loan contract is indeed solidary in character. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


By: Ellaine Janica T. Galias

OLIVAREZ REALTY CORPORATION AND DR. PABLO R. OLIVAREZ vs. BENJAMIN CASTILLO. G.R. No. 196251, July 09, 2014 Leonen

Facts: Benjamin Castillo was the registered owner of a 346,918-square-meter parcel of land located in Laurel, Batangas, which the Philippine Tourism Authority claims ownership based on a different TCT. On April 5, 2000, Castillo and Olivarez Realty Corporation, represented by Dr. Pablo R. Olivarez, entered into a contract of conditional sale over the property. Under the deed of conditional sale, Castillo agreed to sell his property to Olivarez Realty Corporation for P19,080,490.00. Olivarez Realty Corporation agreed to a down payment of P5,000,000.00 as to the balance of 14,080,490.00, Olivarez Realty Corporation agreed to pay in 30 equal monthly installments every eighth day of the month beginning in the month that the parties would receive a decision voiding the Philippine Tourism Authority’s title to the property. Under the deed of conditional sale, Olivarez Realty Corporation shall file the action against the Philippine Tourism Authority “with the full assistance of [Castillo].” Paragraph C of the deed of conditional sale provides: [Olivarez Realty Corporation] assumes the responsibility of taking necessary legal action thru Court to have the claim/title TCT T-18493 of Philippine Tourism Authority over the above-described property be nullified and voided; with the full assistance of [Castillo] Should the action against the Philippine Tourism Authority be denied, Castillo agreed to reimburse all the amounts paid by Olivarez Realty Corporation. Paragraph D of the deed of conditional sale provides: In the event that the Court denie[s] the petition against the Philippine Tourism Authority, all sums received by [Castillo] shall be reimbursed to [Olivarez Realty Corporation] without interest). As to the “legitimate tenants” occupying the property, Olivarez Realty Corporation undertook to pay them “disturbance compensation,” while Castillo undertook to clear the land of the tenants within six months from the signing of the deed of conditional sale. Should Castillo fail to clear the land within six months, Olivarez Realty Corporation may suspend its monthly down payment until the tenants vacate the property. Paragraphs E and F of the deed of conditional sale provide: That [Olivarez Realty Corporation] shall pay the disturbance compensation to legitimate agricultural tenants and fishermen occupants which in no case shall exceed ONE MILLION FIVE HUNDRED THOUSAND (P1,500,000.00) PESOS. Said amount shall not form part of the purchase price. In excess of this amount, all claims shall be for the account of [Castillo];


Compilation of Case Digests in CIVIL LAW Review 2 That [Castillo] shall clear the land of [the] legitimate tenants within a period of six (6) months upon signing of this Contract, and in case [Castillo] fails, [Olivarez Realty Corporation] shall have the right to suspend the monthly down payment until such time that the tenants [move] out of the land[.] The parties agreed that Olivarez Realty Corporation may immediately occupy the property upon signing of the deed of conditional sale. Should the contract be cancelled, Olivarez Realty Corporation agreed to return the property’s possession to Castillo and forfeit all the improvements it may have introduced on the property. On September 2, 2004, Castillo filed a complaint against Olivarez Realty Corporation and Dr. Olivarez with the Regional Trial Court of Tanauan City, Batangas alleging that Dr. Olivarez convinced him into selling his property to Olivarez Realty Corporation on the representation that the corporation shall be responsible in clearing the property of the tenants and in paying them disturbance compensation. He further alleged that Dr. Olivarez solely prepared the deed of conditional sale and that he was made to sign the contract with its terms “not adequately explained [to him] in Tagalog”. After the parties had signed the deed of conditional sale, Olivarez Realty Corporation immediately took possession of the property. However, the corporation only paid P2,500,000.00 of the purchase price. Contrary to the agreement, the corporation did not file any action against the Philippine Tourism Authority to void the latter’s title to the property. The corporation neither cleared the land of the tenants nor paid them disturbance compensation. Despite demand, Olivarez Realty Corporation refused to fully pay the purchase price. Arguing that Olivarez Realty Corporation committed substantial breach of the contract of conditional sale and that the deed of conditional sale was a contract of adhesion, Castillo prayed for rescission of contract under Article 1191 of the Civil Code of the Philippines. He further prayed that Olivarez Realty Corporation and Dr. Olivarez be made solidarily liable for moral damages, exemplary damages, attorney’s fees, and costs of suit. In their answer, Olivarez Realty Corporation and Dr. Olivarez admitted that the corporation only paid P2,500,000.00 of the purchase price. In their defense, defendants alleged that Castillo failed to “fully assist” the corporation in filing an action against the Philippine Tourism Authority. Neither did Castillo clear the property of the tenants within six months from the signing of the deed of conditional sale. Thus, according to defendants, the corporation had “all the legal right to withhold the subsequent payments to [fully pay] the purchase price.” Olivarez Realty Corporation and Dr. Olivarez prayed that Castillo’s complaint be dismissed. By way of compulsory counterclaim, they prayed for P100,000.00 litigation expenses and P50,000.00 attorney’s fees.The trial court found that Olivarez Realty Corporation and Dr. Olivarez’s answer “substantially [admitted the material allegations of Castillo’s] complaint and did not raise any genuine issue [as to any material fact].” According to the trial court, the corporation was responsible for suing the Philippine Tourism Authority and for paying the tenants disturbance compensation. Since defendant corporation neither filed any Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 case nor paid the tenants disturbance compensation, the trial court ruled that defendant corporation had no right to withhold payments from Castillo. With these findings, the trial court ruled that Olivarez Realty Corporation breached the contract of conditional sale. In its decision dated April 23, 2007, the trial court ordered the deed of conditional sale rescinded and the P2,500,000.00 forfeited in favor of Castillo “as damages under Article 1191 of the Civil Code.” The trial court declared Olivarez Realty Corporation and Dr. Olivarez solidarily liable to Castillo for P500,000.00 as moral damages, P50,000.00 as exemplary damages, and P50,000.00 as costs of suit. Olivarez Realty Corporation and Dr. Olivarez appealed to the Court of Appeals. In its decision, Court of Appeals affirmed in toto the trial court’s decision. As to the trial court’s award of damages, the appellate court ruled that a court may award damages through summary judgment “if the parties’ contract categorically [stipulates] the respective obligations of the parties in case of default.” As found by the trial court, paragraph I of the deed of conditional sale categorically states that “in case [the deed of conditional sale] is cancelled, any improvement introduced by [Olivarez Realty Corporation] on the property shall be forfeited in favor of [Castillo].” Considering that Olivarez Realty Corporation illegally retained possession of the property, Castillo forewent rent to the property and “lost business opportunities.” The P2,500,000.00 down payment, according to the appellate court, should be forfeited in favor of Castillo. Moral and exemplary damages and costs of suit were properly awarded. Hence,

this

petition.

Issue: Whether the Court of Appeals erred in rendering their decision. Held: The petition lacks merit. Contrary to petitioners’ claim, there is no “obvious ambiguity” as to which should occur first — the payment of the disturbance compensation or the clearing of the land within six months from the signing of the deed of conditional sale. The obligations must be performed simultaneously. In this case, the parties should have coordinated to ensure that tenants on the property were paid disturbance compensation and were made to vacate the property six months after the signing of the deed of conditional sale. On one hand, pure obligations, or obligations whose performance do not depend upon a future or uncertain event, or upon a past event unknown to the parties, are demandable at once. On the other hand, obligations with a resolutory period also take effect at once but terminate upon arrival of the day certain. Olivarez Realty Corporation’s obligation to pay disturbance compensation is a pure obligation. The performance of the obligation to pay disturbance compensation did not depend on any condition. Moreover, the deed of conditional sale did not give the corporation a period to perform the obligation. As such, the obligation to pay disturbance compensation was demandable at once. Olivarez Realty Corporation should have paid the tenants disturbance compensation upon execution of the deed of conditional sale. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


With respect to Castillo’s obligation to clear the land of the tenants within six months from the signing of the contract, his obligation was an obligation with a resolutory period. The obligation to clear the land of the tenants took effect at once, specifically, upon the parties’ signing of the deed of conditional sale. Castillo had until October 2, 2000, six months from April 5, 2000 when the parties signed the deed of conditional sale, to clear the land of the tenants. Olivarez Realty Corporation, therefore, had no right to withhold payments of the purchase price. As the trial court ruled, Olivarez Realty Corporation “can only claim non-compliance [of the obligation to clear the land of the tenants in] October 2000.” The claim that Castillo sold the property to another is fictitious and was made in bad faith to prevent the trial court from rendering summary judgment. Petitioners did not elaborate on this defense and insisted on revealing the identity of the buyer only during trial. Even in their petition for review on certiorari, petitioners never disclosed the name of this alleged buyer. Thus, as the trial court ruled, this defense did not tender a genuine issue of fact, with the defense “bereft of details.” As demonstrated, there are no genuine issues of material fact in this case. These are issues that can be resolved judiciously by plain resort to the pleadings, affidavits, depositions, and other papers on file. As the trial court found, Olivarez Realty Corporation illegally withheld payments of the purchase price. The trial court did not err in rendering summary judgment. Castillo is entitled to cancel the contract of conditional sale, since Olivarez Realty Corporation illegally withheld payments of the purchase price, Castillo is entitled to cancel his contract with petitioner corporation. However, we properly characterize the parties’ contract as a contract to sell, not a contract of conditional sale.In both contracts to sell and contracts of conditional sale, title to the property remains with the seller until the buyer fully pays the purchase price.Both contracts are subject to the positive suspensive condition of the buyer’s full payment of the purchase price. In a contract of conditional sale, the buyer automatically acquires title to the property upon full payment of the purchase price his transfer of title is “by operation of law without any further act having to be performed by the seller.” In a contract to sell, transfer of title to the prospective buyer is not automatic.“The prospective seller [must] convey title to the property [through] a deed of conditional sale.” The distinction is important to determine the applicable laws and remedies in case a party does not fulfill his or her obligations under the contract. In contracts of conditional sale, our laws on sales under the Civil Code of the Philippines apply. On the other hand, contracts to sell are not governed by our law on sales but by the Civil Code provisions on conditional obligations. Specifically, Article 1191 of the Civil Code on the right to rescind reciprocal obligations does not apply to contracts to sell, As this court explained in Ong v. Court of Appeals, failure to fully pay the purchase price in contracts to sell is not the breach of contract under Article 1191. Failure to fully pay the purchase price is “merely an event which prevents the [seller’s] obligation to convey title from acquiring binding force.” This is because “there can be no rescission of an obligation that is still nonBeltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 existent, the suspensive condition not having [happened]. In this case, Castillo reserved his title to the property and undertook to execute a deed of absolute sale upon Olivarez Realty Corporation’s full payment of the purchase price.122 Since Castillo still has to execute a deed of absolute sale to Olivarez Realty Corporation upon full payment of the purchase price, the transfer of title is not automatic. The contract in this case is a contract to sell. As this case involves a contract to sell, Article 1191 of the Civil Code of the Philippines does not apply. The contract to sell is instead cancelled, and the parties shall stand as if the obligation to sell never existed. Olivarez Realty Corporation is liable for moral and exemplary damages and attorney’s fees.We note that the trial court erred in rendering summary judgment on the amount of damages. Under Section 3, Rule 35 of the 1997 Rules of Civil Procedure, summary judgment may be rendered, except as to the amount of damages. In this case, the trial court erred in forfeiting the P2,500,000.00 in favor of Castillo as damages under Article 1191 of the Civil Code of the Philippines. As discussed, there is no breach of contract under Article 1191 in this case. The trial court likewise erred in rendering summary judgment on the amount of moral and exemplary damages and attorney’s fees. Nonetheless, we hold that Castillo is entitled to moral damages, exemplary damages, and attorney’s fees. Moral damages may be awarded in case the claimant experienced physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. As for exemplary damages, they are awarded in addition to moral damages by way of example or correction for the public good. Specifically in contracts, exemplary damages may be awarded if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. Under the deed of conditional sale, Olivarez Realty Corporation may only suspend the monthly down payment in case Castillo fails to clear the land of the tenants six months from the signing of the instrument. Yet, even before the sixth month arrived, Olivarez Realty Corporation withheld payments for Castillo’s property. It even used as a defense the fact that no case was filed against the Philippine Tourism Authority when, under the deed of conditional sale, Olivarez Realty Corporation was clearly responsible for initiating action against the Philippine Tourism Authority. These are oppressive and malevolent acts, and we find Castillo entitled to P500,000.00 moral damages and P50,000.00 exemplary damages. Plaintiff Castillo is entitled to moral damages because of the evident bad faith exhibited by defendants in dealing with him regarding the sale of his lot to defendant [Olivarez Realty Corporation]. He suffered much prejudice due to the failure of defendants to pay him the balance of purchase price which he expected to use for his needs which caused him wounded feelings, sorrow, mental anxiety and sleepless nights for which defendants should pay P500,000.00 as moral damages more than six (6) years had elapsed and defendants illegally and unfairly failed and refused to pay their legal obligations to plaintiff, unjustly taking advantage of a poor uneducated man like plaintiff Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 causing much sorrow and financial difficulties. Moral damages in favor of plaintiff is clearly justified . . . [Castillo] is also entitled to P50,000.00 as exemplary damages to serve as a deterrent to other parties to a contract to religiously comply with their prestations under the contract. We likewise agree that Castillo is entitled to attorney’s fees in addition to the exemplary damages. Considering that Olivarez Realty Corporation refused to satisfy Castillo’s plainly valid, just, and demandable claim, the award of P50,000.00 as attorney’s fees is in order. However, we find that Dr. Pablo R. Olivarez is not solidarily liable with Olivarez Realty Corporation for the amount of damages. Under Article 1207 of the Civil Code of the Philippines, there is solidary liability only when the obligation states it or when the law or the nature of the obligation requires solidarity. In case of corporations, they are solely liable for their obligations. The directors or trustees and officers are not liable with the corporation even if it is through their acts that the corporation incurred the obligation. This is because a corporation is separate and distinct from the persons comprising it. As an exception to the rule, directors or trustees and corporate officers may be solidarily liable with the corporation for corporate obligations if they acted “in bad faith or with gross negligence in directing the corporate affairs” In this case, we find that Castillo failed to prove with preponderant evidence that it was through Dr. Olivarez’s bad faith or gross negligence that Olivarez Realty Corporation failed to fully pay the purchase price for the property. Dr. Olivarez’s alleged act of making Castillo sign the deed of conditional sale without explaining to the latter the deed’s terms in Tagalog is not reason to hold Dr. Olivarez solidarily liable with the corporation. Castillo had a choice not to sign the deed of conditional sale. He could have asked that the deed of conditional sale be written in Tagalog. Thus, Olivarez Realty Corporation is solely liable for the moral and exemplary damages and attorney’s fees to Castillo. Although we discussed that there is no rescission of contract to speak of in contracts of conditional sale, we hold that an action to cancel a contract to sell, similar to an action for rescission of contract of sale, is an action incapable of pecuniary estimation. Like any action incapable of pecuniary estimation, an action to cancel a contract to sell “demands an inquiry into other factors” aside from the amount of money to be awarded to the claimant. Specifically in this case, the trial court principally determined whether Olivarez Realty Corporation failed to pay installments of the property’s purchase price as the parties agreed upon in the deed of conditional sale. The principal nature of Castillo’s action, therefore, is incapable of pecuniary estimation. By: Gykslyn L. Gicos


Compilation of Case Digests in CIVIL LAW Review 2 SPS. ALEJANDRO MANZANILLA AND REMEDIOS VELASCO VS. WATERFIELDS INDUSTRIES CORPORATION, REPRESENTED BY ITS PRESIDENT, ALIZA MA. Del Castillo.

Facts: Spouses Manzanilla leased a 6,000sqm portion of their 25,000sqm land to Waterfields, as represented by its President Aliza R. Ma (Ma). Beginning April 1997, however, Waterfields failed to pay the monthly rental. Hence, demand to pay and vacate was made to Waterfields but the same remained unheeded. The MTC found Ma’s letter of July 9, 1997 to have amended the Contract of Lease. In particular, Section 4 of the Contract of Lease which provides that the rental deposit shall answer for any unpaid rentals, damages, penalties and unpaid utility charges was superseded by the portion in Ma’s July 9, 1997 letter which states that “the deposit stipulated in our lease contract shall be used exclusively for the payment of unpaid utilities, if any, and other incidental expenses only and applied at the termination of the lease”. Consequently, the MTC declared that Waterfields violated the lease agreement due to non-payment of rentals and disposed of the case as follows. RTC affirmed. The CA, however, had a different take. It gave weight to the spouses Manzanilla’s allegation that they terminated the Contract of Lease. Upon such termination, it held that the rental deposit should have been applied as payment for unpaid utilities and other incidental expenses, if any. Issue: Whether or not CA decided a question of substance not in accord with laws and applicable decisions of this honorable court when it held that the provisions of Art. 1278 of the New Civil Code was applicable and that compensation had taken place? Held: There can be no issue as to the due execution, effectivity and enforceability of Ma’s July 9, 1997 letter since aside from the fact that Waterfields itself admitted in its Answer that the Contract of Lease was amended on July 9, 1997, the MTC and the RTC had uniformly ruled that the said letter operates as an amendment to the original contract. And as the rental deposit cannot be applied as payment for the monthly rentals pursuant to the amendment, Waterfields is considered in default in its payment thereof. Conversely, Waterfields has committed a violation of the Contract of Lease which gave rise to a cause of action for ejectment against it. By: Parlade, Julie Pearl Claudine T.

VICENTE JOSEFA vs. MANILA ELECTRIC COMPANY. G.R. No. 182705. July 18, 2014. Brion. Facts: At around 1:45 p.m. on April 21, 1991, a dump truck, a jeepney and a car figured in a vehicular accident along Ortigas Avenue, Pasig City. As a result of the accident, a 45-foot wooden electricity post, 3 75 KVA transformers, and other electrical line attachments were damaged. Upon investigation, Meralco discovered that it was a truck registered in Josefa's name that hit the electricity Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 post. Meralco demanded from Josefa reimbursement for the replacement cost of the electricity post and its attachments, but Josefa refused to pay. Thus, Meralco sued Josefa and Pablo Manoco, the truck driver, for damages before the RTC of Pasig City. In its complaint, Meralco alleged that (Bautista) Manoco's reckless driving resulted in damage to its properties. It also imputed primary liability on Josefa for his alleged negligence in the selection and supervision of Manoco. The RTC dismissed the complaint for insufficiency of evidence. The RTC held that Meralco failed to establish that it was the truck that hit the electricity post. The RTC ruled that SPO2 Galang's account of the accident was merely hearsay since he did not personally witness the incident. It also did not give probative value to the police blotter entry dated January 7, 1994 since the accident had long occurred in 1991. The CA reversed the RTC ruling and held that the RTC erred in disregarding the parties' stipulation at the pre-trial that it was the truck that hit the electricity post. The CA also found that Bautista was Josefa's employee when the accident occurred since Josefa did not specifically deny this material allegation in the amended complaint. It likewise noted that the sheriff's return stated that Bautista was under Josefa's employ until 1993. The CA concluded that the fact that the truck hit the electricity post was sufficient to hold Josefa vicariously liable regardless of whether Bautista was negligent in driving the truck. In the same breath, the CA also stated that the employer's presumptive liability in quasi-delicts was anchored on injuries caused by the employee's negligence. Even assuming that Bautista was not Josefa's employee, the CA maintained that Josefa would still be liable for damages since the law presumes that the registered owner has control of his vehicle and its driver at the time of the accident. It thus ordered Josefa to pay Meralco. Josefa filed the present petition after the CA denied his motion for reconsideration. Issue/s: (1) Whether or not Bautista exercised due diligence in driving when the truck hit the electricity post; (2) Whether or not Josefa is vicariously liable for Bautista's negligence under paragraph 5, Article 2180 of the Civil Code; (3)

Whether Meralco is entitled to actual damages, attorney's fees, and expenses of litigation.

Held: (1) Bautista did not exercise due diligence. Bautista's negligence was the proximate cause of the property damage caused to Meralco. Bautista is presumed to be negligent in driving the truck under the doctrine of res ipsa loquitur. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. This fault or negligence, if there is no pre-existing contractual relation between the parties, is called quasi-delict. Thus, for a quasi-delict case to prosper, the complainant must establish: (1) damages to the complainant; (2) negligence, by act or omission, of the defendant or by some person for whose acts the defendant must respond, was guilty; and (3) the connection of cause and effect between such negligence and the damages. With respect to the third element, the negligent act or omission must be the proximate cause of the injury. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


Contrary to the CA's finding, the parties did not stipulate that the truck hit the electricity post. The pre-trial order shows that the parties merely agreed that the truck "was involved in an accident on April 21, 1991. Nonetheless, Meralco has sufficiently established the direct causal link between the truck and the electricity post through Abio's testimony. Abio categorically stated during trial that he saw the truck hit the electricity post. We find his first-hand account of the incident during the directexamination frank and straightforward. Even without Abio's testimony, it does not escape this Court's attention that Josefa judicially admitted in his motions and pleading that his truck hit the electricity post. These statements constitute deliberate, clear and unequivocal admissions of the causation in fact between the truck and the electricity post. Contrary to the CA's opinion, the finding that it was the truck that hit the electricity post would not immediately result in Josefa's liability. It is a basic rule that it is essentially the wrongful or negligent act or omission that creates the vinculum juris in extra-contractual obligations. In turn, the employee's negligence established to be the proximate cause of the damage would give rise to the disputable presumption that the employer did not exercise the diligence of a good father of a family in the selection and supervision of the erring employee. The procedural effect of res ipsa loquitur in quasi-delict cases is that the defendant's negligence is presumed. For this doctrine to apply, the complainant must show that: (1) the accident is of such character as to warrant an inference that it would not have happened except for the defendant's negligence; (2) the accident must have been caused by an agency or instrumentality within the exclusive management or control of the person charged with the negligence complained of; and (3) the accident must not have been due to any voluntary action or contribution on the part of the person injured. The present case satisfies all the elements of res ipsa loquitur. It is very unusual and extraordinary for the truck to hit an electricity post, an immovable and stationary object, unless Bautista, who had the exclusive management and control of the truck, acted with fault or negligence. We cannot also conclude that Meralco contributed to the injury since it safely and permanently installed the electricity post beside the street. Thus, in Republic v. Luzon Stevedoring Corp., we imputed vicarious responsibility to Luzon Stevedoring Corp. whose barge rammed the bridge, also an immovable and stationary object. (2) YES. Josefa is vicariously liable under paragraph 5, Article 2180 of the Civil Code because there is an employer-employee relations between Bautista and Josefa, and Josefa failed to show that he exercised the diligence of a good father of a family in the selection and supervision of Bautista. The finding that Bautista acted with negligence in driving the truck gives rise to the application of paragraph 5, Article 2180 of the Civil Code which holds the employer vicariously liable for damages caused by his employees within the scope of their assigned tasks. In the present case, Josefa avoids the application of this provision by denying that Bautista was his employee at the time of the incident. Josefa cannot evade his responsibility by mere denial of his employment relations with Bautista in the absence of proof that his truck was used without authorization or that it was stolen when the accident occurred. In quasi-delict cases, the registered owner of a motor vehicle is the employer of its driver in contemplation of law. The registered owner of any vehicle, even if not used Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 for public service, would primarily be responsible to the public or to third persons for injuries caused while the vehicle was being driven on highways or streets. In order for Josefa to be relieved of his vicarious liability, he must show that he exercised due diligence in the selection and supervision of Bautista. In concrete terms, Josefa should show by competent object or documentary evidence that he examined Bautista as to the latter's qualifications, experience and service records prior to employment. He should likewise prove by competent object or documentary evidence that he formulated standard operating procedures, monitored their implementation and imposed disciplinary measures for breach of these procedures. However, Josefa failed to overcome the presumption of negligence against him since he waived his right to present evidence during trial. (3) Meralco is only entitled to temperate damages with interest at legal rate. Notwithstanding Josefa's vicarious liability, Meralco failed to point out the specific facts that afford a basis for its claim for actual damages. Actual damages cannot be presumed; they must be pleaded and proven in court in order to be recoverable. One is entitled to an adequate compensation only for the pecuniary loss that he has adequately proved based upon competent proof and on the best evidence obtainable by him. We cannot give weight to Exhibit "D" as to the amount of actual damages for being hearsay. Exhibit "D" constitutes hearsay evidence since it was derived on alleged pieces of documentary evidence that were not identified and authenticated in court during trial. Meralco is entitled to temperate damages because it clearly suffered pecuniary loss as a result of Bautista and Josefa's negligence. When the court finds that some pecuniary loss has been suffered but the amount cannot, from the nature of the case, be proven with certainty, the court may award temperate damages in the exercise of its sound discretion. Considering the attendant circumstances of this case, we find the amount of P200,000.00 to be a fair and sufficient award by way of temperate damages. Meralco is not entitled to attorney's fees and expenses of litigation. The CA likewise erred in awarding Meralco attorney's fees and expenses of litigation without explaining its basis. In Buan v. Camaganacan, we held that the text of the decision should state the reason why attorney's fees are being awarded; otherwise, the award should be disallowed. Besides, no bad faith has been imputed to Josefa that would warrant the award of attorney's fees under Article 2208 (5) of the Civil Code. It is a settled rule that attorney's fees shall not be recovered as cost where the party's persistence in litigation is based on his mistaken belief in the righteousness of his cause. There is also no factual, legal, or equitable justification that would justify the Court's award of attorney's fees under Article 2208 (11) of the Civil Code. Finally, we impose an interest rate of 6% per annum on temperate damages pursuant to the guidelines enunciated in Eastern Shipping Lines v. CA, as modified by Nacar v. Gallery Frames. By: Ellaine Janica T. Galias


Compilation of Case Digests in CIVIL LAW Review 2 JUANITO M. GOPIAO vs. METROPOLITAN BANK & TRUST CO. G.R. No. 188931. 28 July 2014 Peralta. Facts: Respondent Metropolitan Bank & Trust Co. filed a Petition for the Issuance of Writ of Possession of real properties located in San Fernando, Pampanga. RTC issued the writ in favor of respondent Bank when it purchased the subject properties at a public auction and registered the same in its name. Consequently, a Notice to Vacate was served on Green Asia Construction and Development Corporation, represented by the spouses Legaspi. Upon learning of the notice to vacate, petitioner filed an Affidavit of Third Party Claim on and a Very Urgent Motion for Intervention and to Recall and/or Stop the Enforcement/Implementation of the Writ of Possession. In said actions, petitioner alleged to be in actual occupation of the subject properties and claimed ownership thereof by virtue of a Deed of Sale dated May 20, 1995 executed by the Spouses Legaspi in his favor. Court denied. Petitioner filed a motion for reconsideration which was also denied. He elevated his claim to CA via petition for certiorari but petition was also dismissed. MR – denied again. Issues: Whether or not the CA erred in ruling on a non-issue: the good faith of respondent as mortgagee? Whether or not CA erred in ruling on the existence of double sale? Held: 1. It is a well-established rule that 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. The foregoing rule, however, admits of a few exceptions, one of which is when a third party in possession of the property claims a right adverse to that of the debtor-mortgagor. However, petitioner’s possession of the subject properties in this case is questionable. As correctly observed by the courts below, petitioner failed to substantiate his possession with sufficient evidence. Apart from the un-notarized and unrecorded Deed of Absolute Sale, petitioner did not present other convincing evidence to bolster his claim of ownership and/or possession. 2. Going now to the contention of the petitioner that the CA erred in ruling that there exists a double sale in this case and thus, the good faith of respondent Bank is material. According to the petitioner, the rule on double sales under Article 1544 of the Civil Code is inapplicable herein since there is no double sale to speak of; the first transaction, a sale and the second, a mortgage. As such, the CA erred in giving credence to the good faith of respondent Bank, which is really a non-issue herein.


Compilation of Case Digests in CIVIL LAW Review 2 We disagree. On the contrary, jurisprudence is replete with rulings that apply the double sales rule to cases where one of the two sales was conducted in a public auction. In contrast, the CA aptly noted the good faith of respondent Bank in this case. In its decision, it ruled that respondent Bank has sufficiently shown that prior to the approval of the loan application of the Spouses Legaspi, it checked the records of the properties offered as collaterals at the Register of Deeds and verified that the titles were clean. Moreover, it inspected the premises and found no occupants. Thus, respondent Bank cannot be said to have acquired the subject properties in bad faith as to negate its right of possession thereof. By: Parlade, Julie Pearl Claudine T.

LEONARDO C. CASTILLO REPRESENTED BY LENNARD V. CASTILLO vs. SECURITY BANK CORPORATION, JRC POULTRY FARMS OR SPOUSES LEON C. CASTILLO, JR., AND TERESITA FLORES-CASTILLO G.R. No. 196118. July 30, 2014. PERALTA. Facts: Leonardo C. Castillo and Leon C. Castillo, Jr. are siblings. Leon and Teresita Flores-Castillo (the Sps Castillo) were doing business under the name of JRC Poultry Farms. Sometime in 1994, the Sps.. Castillo obtained a loan from SBC for P45 Million. To secure said loan, they executed a REM over 11 parcels of land belonging to different members of the Castillo family and which are all located in San Pablo City. They also procured a second loan amounting to P2.5 M, which was covered by a mortgage on a land in Pasay City. Subsequently, the Sps. Castillo failed to settle the loan, prompting SBC to proceed with the foreclosure of the properties. SBC was then adjudged as the winning bidder in the foreclosure sale, nevertheless the Sps. Castillo were able to redeem the foreclosed properties, with the exception of two lots. On January 30, 2002, Leonardo filed a complaint for the partial annulment of the REM. He alleged that he owns one of the properties in REM and that the Sps. Castillo used it as one of the collaterals for a loan without his consent. He contested his supposed SPA in Leon's favor, claiming that it is falsified. He also assailed the foreclosure of the lots under TCT Nos. 20030 and 10073 which were still registered in the name of their deceased father. Lastly, Leonardo attacked SBC's imposition of penalty and interest on the loans as being arbitrary and unconscionable. On the other hand, the Sps. Castillo insisted on the validity of Leonardo's SPA. They alleged that they incurred the loan not only for themselves, but also for the other members of the Castillo family. Upon receiving the proceeds of the loan, they distributed the same to their family members, as agreed upon. However, when the loan became due, their relatives failed to pay their respective shares such that Leon was forced to use his own money until SBC had to finally foreclose the mortgage. In a Decision dated October 16, 2006, the RTC of San Pablo City ruled in Leonardo's favor.


Compilation of Case Digests in CIVIL LAW Review 2 Both parties elevated the case to the CA. The CA denied Leonardo's appeal and granted that of the Sps. Castillo and SBC. It reversed and set aside the RTC Decision, essentially ruling that the real estate mortgage is valid. Leonardo filed a Motion for Reconsideration, but the same was denied for lack of merit. Hence, this case to the Court. Issue/s: (1) Whether or not the real estate mortgage constituted over the property under TCT No. T-28297 is valid and binding. (2) Whether or not the interest and penalty charges imposed by SBC are just, and not excessive or unconscionable. Held: YES. The Court finds the petition to be without merit. The following are the legal requisites for a mortgage to be valid: (1) It must be constituted to secure the fulfillment of a principal obligation; (2) The mortgagor must be the absolute owner of the thing mortgaged; (3) The persons constituting the mortgage must have the free disposal of their property, and in the absence thereof, they should be legally authorized for the purpose. Leonardo asserts that his signature in the SPA authorizing his brother, Leon, to mortgage his property covered by TCT No. T-28297 was falsified. He claims that he was in America at the time of its execution. As proof of the forgery, he focuses on his alleged CTC used for the notarization of the SPA on May 5, 1993 and points out that it appears to have been issued on January 11, 1993 when, in fact, he only obtained it on May 17, 1993. But it is a settled rule that allegations of forgery must be proved by clear, positive, and convincing evidence by the party alleging it. Here, Leonardo simply relied on his self-serving declarations and he did not even bother comparing the alleged forged signature on the SPA with samples of his real and actual signature. However, if the Court were to assume, that Leonardo indeed secured his CTC only on May 17, 1993, this does not automatically render the SPA invalid. The appellate court aptly held that defective notarization will simply strip the document of its public character and reduce it to a private instrument, but nonetheless, binding, provided its validity is established by preponderance of evidence. Article 1358 of the Civil Code requires that the form of a contract that transmits or extinguishes real rights over immovable property should be in a public document, yet the failure to observe the proper form does not render the transaction invalid. The necessity of a public document for said contracts is only for convenience; it is not essential for validity or enforceability. Even a sale of real property, though not contained in a public instrument or formal writing, is nevertheless valid and binding, for even a verbal contract of sale or real estate produces legal effects between the parties. Consequently, when there is a defect in the notarization of a document, the clear and convincing evidentiary standard originally attached to a duly-notarized document is dispensed with, and the measure to test the validity of such document is preponderance of evidence. Here, the preponderance of evidence indubitably tilts in favor of the respondents, still making the SPA binding between the parties even with the aforementioned assumed irregularity. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 There are several telling circumstances that would clearly demonstrate that Leonardo was aware of the mortgage and he indeed executed the SPA to entrust Leon with the mortgage of his property. Leon had in his possession all the titles covering the 11 properties mortgaged, including that of Leonardo. Leonardo and the rest of their relatives could not have just blindly ceded their respective TCTs to Leon. It is likewise ridiculous how Leonardo seemed to have been totally oblivious to the status of his property for 8 long years, and would only find out about the mortgage and foreclosure from a nephew who himself had consented to the mortgage of his own lot. Considering the lapse of time from the alleged forgery on May 5, 1993 and the mortgage on August 5, 1994, to the foreclosure on July 29, 1999, and to the supposed discovery in 2001, it appears that the suit is a mere afterthought or a last-ditch effort on Leonardo's part to extend his hold over his property and to prevent SBC from consolidating ownership over the same. More importantly, Leonardo himself admitted on cross-examination that he granted Leon authority to mortgage, only that, according to him, he thought it was going to be with China Bank, and not SBC.

(2) YES. The Court finds that the interest and penalty charges imposed by SBC are just, and not excessive or unconscionable. SBC's 16% rate of interest is not computed per month, but rather per annum or only 1.33% per month. In Spouses Bacolor v. Banco Filipino Savings and Mortgage Bank, the Court held that the interest rate of 24% per annum on a loan of P244,000.00 is not considered as unconscionable and excessive. As such, the Court ruled that the debtors cannot renege on their obligation to comply with what is incumbent upon them under the contract of loan as they are bound by its stipulations. Also, the 24% per annum rate or 2% per month for the penalty charges imposed on account of default, cannot be considered as skyrocketing. The enforcement of penalty can be demanded by the creditor in case of non-performance due to the debtor's fault or fraud. The non-performance gives rise to the presumption of fault and in order to avoid the penalty, the debtor has the burden of proving that the failure of the performance was due to either force majeure or the creditor's own acts. In the instant case, petitioner failed to discharge said burden and thus cannot avoid the payment of the penalty charge agreed upon. By: Ellaine Janica T. Galias

HEIRS OR REYNALDO DELA ROSA, Namely: TEOFISTA DELA ROSA, JOSEPHINE SANTIAGO AND JOSEPH DELA ROSA, vs. MARIO A. BA TONGBACAL, IRENEO BATONGBACAL, JOCELYN BA TONGBACAL, NESTOR BATONGBACAL AND LOURDES BA TONGBACAL. G.R. No. 179205.July 30, 2014 Perez Facts: The subject property consists of a 3, 750 square meter-portion of the 15,00 square meters parcel of land situated in Barrio Saog, Marilao, Bulacan denominated as Lot No. 1, and registered under Transfer Certificate of Title (TCT) No. T-107449 under the names of Reynaldo Dela Rosa (Reynaldo), Eduardo Dela Rosa (Eduardo), Araceli Dela Rosa (Araceli) and Zenaida Dela Rosa (Zenaida). Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


Sometime in 1984, Reynaldo offered to sell the subject property to Guillermo Batongbacal (Guillermo) and Mario Batongbacal (Mario) for P50.00 per square meter or for a total of P187,500.00. Pursuant to the agreement, Reynaldo received an advance payment of P31,500.00 leaving a balance of P156,000.00. As shown in the document denominated as Resibo and signed by Reynaldo on 18 February 1987, the parties agreed that the amount of P20,000.00 as part of the advance payment shall be paid upon the delivery of the Special Power-of-Attorney (SPA), which would authorize Reynaldo to alienate the subject property on behalf of his co-owners and siblings namely, Eduardo, Araceli and Zenaida. The balance thereon shall be paid in P10,000.00 monthly installments until the purchase price is fully settled. Subsequent to the execution of the said agreement, Mario and Guillermo, on their own instance, initiated a survey to segregate the area of 3,750 square meters from the whole area covered by the TCT. As a result, they came up with a subdivision plan specifically designating the subject property. Mario and Guillermo thereafter made several demands from Reynaldo to deliver the SPA as agreed upon, but such demands all went unheeded. Consequently, Guillermo and Mario initiated an action for Specific Performance or Rescission and Damages before the Regional Trial Court (RTC) of Malolos, Bulacan, seeking to enforce their Contract to Sell and they asserted that they have a better right over the subject property and alleged that the subsequent sale thereof effected by Reynaldo to third persons is void as it was done in bad faith. It was prayed in the Complaint that Reynaldo be directed to deliver the SPA and, in case of its impossibility, to return the amount of P31,500.00 with legal interest and with damages in either case. To protect their interest, they executed a Notice of Lis Pendens over the title of the property and registered their claim thereon. Reynaldo in his Answer countered that the purported Contract to Sell is void, because he never gave his consent thereto. Reynaldo insisted that he was made to understand that the contract between him and the Batongbacals was merely an equitable mortgage whereby it was agreed that the latter will loan to him the amount of P3l, 500.00 payable once he receives his share in the proceeds of the sale of the land registered under TCT No. T-107449. RTC, dismissed the civil case for failure of the plaintiffs to produce sufficient evidence and ordered Reynaldo to return the sum of P28,000.00 with 12% annual interest for failure to prove that the contract entered with Mario was an equitable mortgage. It was held by the trial court, however, that the supposed Contract to Sell denominated as Resibo is unenforceable under Article 1403 of the New Civil Code because Reynaldo cannot bind his co-owners into such contract without an SPA authorizing him to do so On appeal, the Court of Appeals brushed aside the claim of equitable mortgage and held that the sale effected by Reynaldo of his undivided share in the property is valid and enforceable. According to the appellate court, no SPA is necessary for Reynaldo's disposition of his undivided share as it is limited to the portion that may be allotted to him upon the termination of the coownership. The appellate court thus proceeded to rescind the contract and ordered Reynaldo to Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 return the amount he received as consideration thereby restoring the parties to their situation before entering into the agreement On 9 September 2007, the appellate court was notified of the death or Reynaldo, and his heirs sought to be substituted as party in this case. Petitioners Heirs of Reynaldo are now before this Court via this instant Petition for Review on Certiorari praying that the Court of Appeals Decision and Resolution be reversed on the ground that it was rendered not in accordance with the applicable law and jurisprudence. Issue: Whether or not the contract entered into by parties was a Contract to Sell or an equitable mortgage. Held: Petition denied. CA decision is affirmed. An equitable mortgage is defined as one although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law. For the presumption of an equitable mortgage to arise, two requisites must concur: (1) that the parties entered into a contract denominated as a sale; and (2) the intention was to secure an existing debt by way of mortgage. Consequently, the non-payment of the debt when due gives the mortgagee the right to foreclose the mortgage, sell the property and apply the proceeds of the sale for the satisfaction of the loan obligation. While there is no single test to determine whether the deed of absolute sale on its face is really a simple loan accommodation secured by a mortgage, the Civil Code, however, enumerates several instances when a contract is presumed to be an equitable mortgage, to wit: Article 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: 1) When the price of a sale with right to repurchase is unusually inadequate; (2) When the vendor remains in possession as lessee or otherwise; (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; (4) When the purchaser retains for himself a part of the purchase price; (5) When the vendor binds himself to pay the taxes on the thing sold; (6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. A perusal of the contract denominated as Resibo reveals the utter frailty of petitioners' position because nothing therein suggests, even remotely, that the subject property was given to secure a monetary obligation. The terms of the contract set forth in no uncertain terms that the instrument was executed with the intention of transferring the ownership of the subject property to the buyer in exchange for the price. Nowhere in the deed is it indicated that the transfer was merely intended to secure a debt obligation. On the contrary, the document clearly indicates the intent of Reynaldo to sell his share in the property. The primary consideration in determining the true nature of a contract is the intention of the Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 parties. 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. That the parties intended some other acts or contracts apart from the express terms of the agreement, was not proven by Reynaldo during the trial or by his heirs herein. Beyond their bare and uncorroborated asseverations that the contract failed to express the true intention of the parties, the record is bereft of any evidence indicative that there was an equitable mortgage. Neither could the allegation of gross inadequacy of the price carry the day for the petitioners. It must be underscored at this point that the subject of the Contract to Sell was limited only to '14 proindiviso share of Reynaldo consisting an area of 3,750 square meter and not the entire 15,001-square meter parcel of land. As a co-owner of the subject property, Reynaldo's right to sell, assign or mortgage his ideal share in the property held in common is sanctioned by law. The applicable law is Article 493 of the New Civil Code, which spells out the rights of co-owners over a co-owned property Pursuant to this law, a co-owner has the right to alienate his pro-indiviso share in the co-owned property even without the consent of his co-owners. This right is absolute and in accordance with the well-settled doctrine that a co-owner has a full ownership of his pro-indiviso share and has the right to alienate, assign or mortgage it, and substitute another person for its enjoyment. In other words, the law does not prohibit a co-owner from selling, alienating, mortgaging his ideal share in the property held in common. By: Gykslyn L. Gicos

NATIONAL TRANSMISSION CORPORATION, vs. ALPHAOMEGA INTEGRATED CORPORATION G.R. No. 184295. July 30, 2014 Perlas-Bernabe, J.: Facts: AIC, a duly licensed transmission line contractor, participated in the public biddings conducted by TRANSCO and was awarded six (6) government construction projects. In the course of the performance of the contracts, AIC encountered difficulties and incurred losses allegedly due to TRANSCO’s breach of their contracts, prompting it to surrender the projects to TRANSCO under protest. In accordance with an express stipulation in the contracts, AIC submitted a request for arbitration before the CIAC and, thereafter, filed an Amended Complaint against TRANSCO alleging breach of contract. AIC prayed for judgment declaring all six (6) contracts rescinded and ordering TRANSCO to pay, in addition to what had already been paid under the contracts, moral damages, exemplary damages, and attorney’s fees at P100,000.00 each, and a total of P40,201,467.19 as actual and compensatory damages. CIAC rendered its final award 2006 ordering the payment of actual and compensatory damages in favor of AIC. Unconvinced, TRANSCO instituted a petition for review with the CA. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


Before filing its comment to the petition, AIC moved for the issuance of awrit of execution, not for the amount of P17,495,117.44 awarded in the Final Award, but for the increased amount of P18,967,318.49. Issues: 1. Whether or not AIC was entitled to its claims for damages as a result of project delays, and 2. Whether or not CA erred in increasing the award of damages? Held: 1. Jurisprudence teaches that mathematical computations as well as the propriety of the arbitral awards are factual determinations. The Court finds no reason to disturb the factual findings of the CIAC Arbitral Tribunal on the matter of AIC’s entitlement to damages which the CA affirmed as being well supported by evidence and properly referred to in the record. It is well-settled that findings of fact of quasi-judicial bodies, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect, but also finality, especially when affirmed by the CA. The CIAC possesses that required expertise in the field of construction arbitration and the factual findings of its construction arbitrators are final and conclusive, not reviewable by this Court on appeal. 2. While the CA correctly affirmed in full the CIAC Arbitral Tribunal’s factual determinations, it improperly modified the amount of the award in favor of AIC, which modification did not observe the proper procedure for the correction of an evident miscalculation of figures, including typographical or arithmetical errors, in the arbitral award. Section 17.1 of the CIAC Rules mandates the filing of a motion for the foregoing purpose within fifteen (15) days from receipt thereof. Failure to file said motion would consequently render the award final and executory under Section 18. 1 of the same rules. The Arbitral Tribunal eventually denied AIC’s aforesaid motion for execution because, despite its merit, the Arbitral Tribunal could not disregard the time-limitation under the CIAC Rules. By: Parlade, Julie Pearl Claudine T.



August 2014


Compilation of Case Digests in CIVIL LAW Review 2 MIDWAY MARITIME AND TECHNOLOGICAL FOUNDATION, REPRESENTED BY ITS CHAIRMAN/PRESIDENT PHD IN EDUCATION DR. SABINO M. MANGLICMOT vs. MARISSA E. CASTRO, ET AL. G.R. No. 189061, August 06, 2014. Facts: Petitioner Midway Maritime and Technological Foundation is the lessee of two parcels of land in Cabanatuan City. Its president, Dr. Manglicmot, is married to Adoracion, who is the registered owner of the property under TCT Nos. T-71321 and T-71322. Inside said property stands a residential building, which is now the subject matter of the dispute, owned by the respondents. The two parcels of land, on a portion of which the residential building stand, were originally owned by the respondents’ father Louis Castro, Sr. who is also the president of Cabanatuan City Colleges (CCC). On August 15, 1974, Castro mortgaged the property to Bancom Development Corporation (Bancom) to secure a loan. During the subsistence of the mortgage, CCC’s board of directors agreed to a 15-year lease of a portion of the property to the Castro children, herein respondents, who subsequently built the residential house now in dispute. The lease was to expire in 1992.When CCC failed to pay its obligation, Bancom foreclosed the mortgage and the property was sold at public auction in 1979, with Bancom as the highest bidder. Bancom thereafter assigned the credit to Union Bank, and later on, consolidated its ownership over the properties in 1984 due to CCC’s failure to redeem the property. When Union Bank sought the issuance of a writ of possession over the properties, which included the residential building, respondents opposed the same. The case reached the Court in G.R. No. 97401 entitled, Castro, Jr. v. CA, and in a Decision dated December 6, 1995, the Court ruled that the residential house owned by the respondents should not have been included in the writ of possession issued by the trial court as CCC has no title over it. In the meantime, Adoracion’s father, Tomas Cloma (Tomas), bought the two parcels of land from Union Bank in an auction sale conducted on July 13, 1993. Tomas subsequently leased the property to the petitioner and thereafter, sold the same to Adoracion. Several suits were brought by the respondents against the petitioner, including an action for Ownership, Recovery of Possession and Damages, docketed as Civil Case No. 3700 (AF). The respondents prayed that they be declared as the owners of the residential building, and that the petitioner be ordered to vacate the same and pay rent arrearages and damages. The petitioner, however, denied respondents’ ownership of the residential building and claimed that Adoracion owns the building, having bought the same together with the land on which it stands. RTC, rendered judgment in favor of the respondents, declared them as the absolute owners of the residential building and ordered petitioner to pay the respondents unpaid rentals from August 1995 until fully paid. CA dismissed the petitioner’s appeal and affirmed the RTC decision. Issue: Whether there was a lease agreement between the petitioner and the respondents as regards the residential building. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Held: YES, the Court ruled that such issue is a question of fact that has been resolved by the RTC in the affirmative. It is settled that “[o]nce a contact of lease is shown to exist between the parties, the lessee cannot by any proof, however strong, overturn the conclusive presumption that the lessor has a valid title to or a better right of possession to the subject premises than the lessee.”Section 2(b), Rule 131 of the Rules of Court prohibits a tenant from denying the title of his landlord at the time of the commencement of the relation of landlord and tenant between them. In Santos v. National Statistics Office, the Court expounded on the rule on estoppel against a tenant and further clarified that what a tenant is estopped from denying is the title of his landlord at the time of the commencement of the landlord-tenant relation. If the title asserted is one that is alleged to have been acquired subsequent to the commencement of that relation, the presumption will not apply. In this case, the petitioner’s basis for insisting on Adoracion’s ownership dates back to the latter’s purchase of the two parcels of land from her father, Tomas. It was Tomas who bought the property in an auction sale by Union Bank in 1993 and leased the same to the petitioner in the same year. Note must be made that the petitioner’s president, Manglicmot, is the husband of Adoracion and son-in-law of Tomas. It is not improbable that at the time the petitioner leased the residential building from the respondents’ mother in 1993, it was aware of the circumstances surrounding the sale of the two parcels of land and the nature of the respondents’ claim over the residential house. Yet, the petitioner still chose to lease the building. Consequently, the petitioner is now estopped from denying the respondents’ title over the residential building. More importantly, the respondents’ ownership of the residential building is already an established fact. “Nemo dat quod non habet. One can sell only what one owns or is authorized to sell, and the buyer can acquire no more right than what the seller can transfer legally.”18 It must be pointed out that what Tomas bought from Union Bank in the auction sale were the two parcels of land originally owned and mortgaged by CCC to Bancom, and which mortgage was later assigned by Bancom to Union Bank. Contrary to the petitioner’s assertion, the property subject of the mortgage and consequently the auction sale pertains only to these two parcels of land and did not include the residential house. This was precisely the tenor of Castro, Jr. v. CA where the Court nullified the writ of possession issued by the trial court insofar as it affected the residential house constructed by the respondents on the mortgaged property as it was not owned by CCC, which was the mortgagor. The Court ruled: [Article 2127 of the Civil Code] extends the effects of the real estate mortgage to accessions and accessories found on the hypothecated property when the secured obligation becomes due. The law is predicated on an assumption that the ownership of such accessions and accessories also belongs to the mortgagor as the owner of the principal. The provision has thus been seen by the Court, x x x, to mean that all improvements subsequently introduced or owned by the mortgagor on the encumbered property are deemed to form part of the mortgage. That the improvements are to be considered so incorporated only if so owned by the mortgagor is a rule that Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 can hardly be debated since a contract of security, whether real or personal, needs as an indispensable element thereof the ownership by the pledgor or mortgagor of the property pledged or mortgaged. The rationale should be clear enough — in the event of default on the secured obligation, the foreclosure sale of the property would naturally be the next step that can expectedly follow. A sale would result in the transmission of title to the buyer which is feasible only if the seller can be in a position to convey ownership of the thing sold (Article 1458, Civil Code). It is to say, in the instant case, that a foreclosure would be ineffective unless the mortgagor has title to the property to be foreclosed. The rule is that “when a decision becomes final and executory, it becomes valid and binding upon the parties and their successors in interest.” Such being the case, Castro, which already determined with finality the respondents’ ownership of the residential house in question, is applicable and binding in this case and the petitioner cannot be allowed to challenge the same. Thus, as correctly ruled by the CA, “[t]o our mind, the pronouncement resolving the said issue necessarily touches also the issue on the ownership of the building. x x x The finding of the Court [in Castro], now being final and executory, is no longer open for inquiry and therefore, has attained its immutability.” By: Jo Ann Liza M. Narag UPSI PROPERTY HOLDINGS, INC., vs. DIESEL CONSTRUCTION CO., INC.. G.R. No. 200250, August 06, 2014 Facts: The controversy stemmed from a complaint filed by respondent Diesel Construction Co., Inc. (Diesel) against UPSI before the Construction Industry Arbitration Commission (CIAC) for collection of unpaid balance of the contract price and retention money under their construction agreement, damages for unjustified refusal to grant extension of time, interest, and attorney’s fees. On December 4, 2001, Arbitral award was rendered by the CIAC in favor of Diesel. The CIAC judgment became the subject of a petition for review before the CA, which rendered a decision. UPSI filed its Motion for Partial Reconsideration, while Diesel filed its Motion for Reconsideration. The CA denied that of UPSI, but partially granted that of Diesel. Unsatisfied, Diesel and UPSI filed their separate petitions for review before the Court, which were later consolidated. The Court then rendered judgment which rendered that Diesel’s petition is partially granted and UPSI’s Petition is denied with qualification. UPSI moved for a reconsideration and Diesel filed its Motion for Leave to File and Admit Attached Comment and/or Opposition which the Court denied with finality the motion filed by UPSI and granted that of Diesel’s. Decision of the Court became final and executory. Eventually, Diesel filed the Motion for Issuance of Writ of Execution with the CIAC. On February 17, 2009, despite numerous pleadings filed by UPSI opposing the execution of the Court’s decision, the CIAC granted the execution sought by Diesel. Still unsatisfied, UPSI questioned by certiorari the execution granted by the CIAC before the CA which the latter denied the UPSI petition and later its Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 motion for reconsideration. Pending the resolution of the petition for certiorari, Diesel sought the amendment of the writ of execution before the CIAC so that the payment of legal interest be included in the writ as well as in the reimbursement of half of the arbitration costs. Despite the opposition by UPSI, CIAC partially granted Diesel’s motion in its Order, which considered the interest being claimed by Diesel. But as far as the reimbursement of half of the arbitration costs was concerned, the CIAC denied it. UPSI questioned the CIAC order via a petition for certiorari with the CA, docketed arguing that the CIAC gravely abused its discretion when it substantially modified the writ of execution by holding that Diesel was entitled to legal interest. The CA, however, denied the petition.

Issue: Whether or not the inclusion of the legal interest in the writ of execution despite the “silence” of the Court in the dispositive portion of its judgment which has become final and executory is valid. Held: YES, it is valid. It is true that a decision that has attained finality becomes immutable and unalterable and cannot be modified in any respect, even if the modification was meant to correct erroneous conclusions of fact and law, and whether the modification was made by the court that rendered it or by this Court as the highest court of the land. Any attempt on the part of the x x x entities charged with the execution of a final judgment to insert, change or add matters not clearly contemplated in the dispositive portion violates the rule on immutability of judgments." The rule is that in case of ambiguity or uncertainty in the dispositive portion of a decision, the body of the decision may be scanned for guidance in construing the judgment. After scrutiny of the subject decision, nowhere can it be found that the Court intended to delete the award of legal interest especially that, as Diesel argues, it was never raised. In fact, what the Court carefully reviewed was the principal amount awarded as well as the liquidated damages because they were specifically questioned. Recall that the CA modified the awards granted by the CIAC, but not the legal interest. In finally resolving the controversy, the Court affirmed the amount of unpaid balance of the contract price in favor of Diesel but expressly deleted the award of liquidated damages. There being no issue as to the legal interest, the Court did not find it necessary anymore to disturb the imposition of such. Thus, contrary to UPSI’s argument, there is no substantial variance between the March 24, 2008 final and executory decision of the Court and the writ of execution issued by the CIAC to enforce it. The Court’s silence as to the payment of the legal interests in the dispositive portion of the decision is not tantamount to its deletion or reversal. The CA was correct in holding that if such was the Court’s intention, it should have also expressly declared its deletion together with its express mandate to remove the award of liquidated damages to UPSI. Corollarily, had the inclusion of the legal interest in the writ been violative of the rule on immutability of judgment, the CIAC would not have granted it. Consequently, the Court, in Nacar vs. Gallery Frames, instructs: Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping Lines are accordingly modified to embody BSP-MB Circular No. 799, as follows:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasidelicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages. II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein. Following the foregoing ruling by the Court, the legal interest remains at 6% and 12% per annum, as the case may be, since the judgment subject of the execution became final on March 24, 2008. Interests accruing after July 1, 2013, however, shall be at the rate of 6% per annum. By: Jo Ann Liza M. Narag


Compilation of Case Digests in CIVIL LAW Review 2 ECE vs. HERNANDEZ G.R. No. 212689, August 11, 2014

Facts: On September 7, 2006, Haydyn Hernandez (respondent) filed a Complaint for specific performance, with damages, against Emir Realty and Development Corporation (EMIR) and ECE Realty and Development Incorporated (ECE) before the Housing and Land Use Regulatory Board Expanded National Capital Region Field Office (HLURB-Regional Office) for failure of latter to deliver the 30 sqm. condominium unit in the agreed period. This is also despite the payment respondent a total of P452,551.65. Moreover, the respondent discovered that Unit 808 contained only 26 sq m, not 30 sq m as contracted, thus, he asked for a corresponding reduction in the price by P120,000.00, based on the price per sq m of P30,000.00. Instead, EMIR and ECE demanded that he settle all his amortizations in arrears with interest. Sometime in 2005, the respondent learned that unit were sold to a third party. HLURBRegional Office ordered EMIR and ECE to reimburse the respondent the amount of P452,551.65, plus legal interest, from the filing of the complaint, and to pay the respondent P50,000.00 as moral damages, P50,000.00 as attorney’s fees, and P50,000.00 as exemplary damages. ECE and EMIR appealed to HLURB Board of Commissioners which upheld the decision but dropped EMIR as respondent. ECE then appealed to the OP. OP dismissed the appeal and ECE’s MR. On petition to review before the CA, the decision of the OP was affirmed with modification deleting award of moral and exemplary damages. Hence this petition. Issue(s): Whether or not CA is correct in its decision in the imposition of six (6) percent being the amount refunded is neither a loan nor a forbearance of money, goods or credit and the interest imposed after finality at the legal rate at 12%. Held: YES. The SC affirmed the CA decision with modification by reducing the interest imposable after finality from 12% to 6 %. From the finality of the judgment awarding a sum of money until it is satisfied, the award shall be considered a forbearance of credit. Pursuant to Central Bank Circular No. 416 issued on July 29, 1974, in the absence of written stipulation the interest rate to be imposed in judgments involving a forbearance of credit was twelve percent (12%) per annum, up from six percent (6%) under Article 2209 of the Civil Code. This was reiterated in Central Bank Circular No. 905, which suspended the effectivity of the Usury Law beginning on January 1, 1983. But since July 1, 2013, the rate of twelve percent (12%) per annum from finality of the judgment until satisfaction has been brought back to six percent (6%). Section 1 of Resolution No. 796 of the Monetary Board of the Bangko Sentral ng Pilipinas dated May 16, 2013 provides: “The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of an express contract as to such rate of interest, shall be six percent (6%)


Compilation of Case Digests in CIVIL LAW Review 2 per annum.” Thus, the rate of interest to be imposed from finality of judgments is now back at six percent (6%), the rate provided in Article 2209 of the Civil Code. By: Jenz Rivera HEIRS OF FRANCISCO I. NARVASA, SR. et al. vs. EMILIANA IMBORNAL et al. G.R. No. 182908, August 06, 2014 Facts: Basilia Imbornal+ (Basilia) had four (4) children, namely, Alejandra, Balbina, Catalina, and Pablo. Francisco I. Narvasa, Sr. (Francisco) and Pedro Ferrer (Pedro) were the children of Alejandra, while petitioner Petra Imbornal (Petra) was the daughter of Balbina. Petitioners are the heirs and successors-in-interest of Francisco, Pedro, and Petra (Francisco, et al.). On the other hand, respondents Emiliana, Victoriano, Felipe, Mateo, Raymundo, Maria, and Eduardo, all surnamed Imbornal, are the descendants of Pablo. During her lifetime, Basilia owned a parcel of land situated at Sabangan, Barangay Nibaliw West, San Fabian, Pangasinan with an area of 4,144 square meters (sq. m.), more or less(Sabangan property), which she conveyed to her three (3) daughters Balbina, Alejandra, and Catalina (Imbornal sisters) sometime in 1920. Catalina’s husband Ciriaco, applied for and was granted a homestead patent over a 31,367-sq. m. riparian land (Motherland) On December 5, 1933, OCT No. 1462 was issued in his name and later was cancelled, and TCT No. 101495 was issued in the name of Ciriaco’s heirs. Ciriaco and his heirs had since occupied the northern portion of the Motherland, while respondents occupied the southern portion. Sometime in 1949, the First Accretion, approximately 59,772 sq. m. in area,adjoined the southern portion of the Motherland. On August 15, 1952, OCT No. P-318 was issued in the name of respondent Victoriano, married to Esperanza Narvarte, covering the First Accretion. Decades later, or in 1971, the Second Accretion, which had an area of 32,307 sq. m., more or less, abutted the First Accretion on its southern portion.19 On November 10, 1978, OCT No. 21481 was issued in the names of all the respondents covering the Second Accretion. Claiming rights over the entire Motherland, Francisco, et al., filed an Amended Complaint for reconveyance, partition, and/or damages against respondents. They anchored their claim on the allegation that Ciriaco, with the help of his wife Catalina, urged Balbina and Alejandra to sell the Sabangan property, and that Ciriaco used the proceeds therefrom to fund histhen-pending homestead patent application over the Motherland. In return, Ciriaco agreed that once his homestead patent is approved, he will be deemed to be holding the Motherland – which now included both accretions – in trust for the Imbornal sisters. Likewise, Francisco, et al. alleged that through deceit, fraud, falsehood, and misrepresentation, respondent Victoriano, with respect to the First Accretion, and the respondents collectively, with regard to the Second Accretion, had illegally registered the said accretions in their names, notwithstanding the fact that they were not the riparian owners (as they did not own the Motherland to which the accretions merely formed adjacent to). In this relation, Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Francisco, et al. explained that they did not assert their inheritance claims over the Motherland and the two (2) accretions because they respected respondents’ rights, until they discovered in 1983 that respondents have repudiated their (Francisco, et al.’s) shares thereon.22 Thus, bewailing that respondents have refused them their rights not only with respect to the Motherland, but also to the subsequent accretions, Francisco, et al. prayed for the reconveyance of said properties, or, in the alternative, the payment of their value, as well as the award of moral damages in the amount of P100,000.00, actual damages in the amount of P150,000.00, including attorney’s fees and other costs. RTC rendered a Decision in favor of Francisco, et al. and thereby directed respondents to: (a) reconvey to Francisco, et al. their respective portions in the Motherland and in the accretions thereon, or their pecuniary equivalent; and (b) pay actual damages in the amount of P100,000.00, moral damages in the amount of P100,000.00, and attorney’s fees in the sum of P10,000.00, as well as costs of suit. On appeal, the CA rendered a Decision reversing and setting aside the RTC Decision and entering a new one declaring: (a) the descendants of Ciriaco as the exclusive owners of the Motherland; (b) the descendants of respondent Victoriano as the exclusive owners of the First Accretion; and (c)the descendants of Pablo (i.e., respondents collectively) as the exclusive owners of the Second Accretion. Hence this petition. Issue(s): One of the issues raised is whether or not implied trust existed between the Imbornal sisters and Ciriaco. Held: NO. An implied trust arises, not from any presumed intention of the parties, but by operation of law in order to satisfy the demands of justice and equity and to protect against unfair dealing or downright fraud. Article 1456 of the Civil Code states that“[i]f property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.” The burden of proving the existence of a trust is on the party asserting its existence, and such proof must be clear and satisfactorily show the existence of the trust and its elements. While implied trusts may be proven by oral evidence, the evidence must be trustworthy and received by the courts with extreme caution, and should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required because oral evidence can easily be fabricated. In this case, it cannot be said, merely on the basis of the oral evidence offered by Francisco, et al. that the Motherland had been either mistakenly or fraudulently registered in favor of Ciriaco. Accordingly, it cannot be said either that he was merely a trustee of an implied trust holding the Motherland for the benefit of the Imbornal sisters or their heirs. Homestead patent award requires proof that the applicant meets the stringent conditions set forth under Commonwealth Act No. 141, as amended, which includes actual possession, cultivation, and improvement of the homestead. It must be presumed, therefore, that Ciriaco underwent the rigid Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 process and duly satisfied the strict conditions necessary for the grant of his homestead patent application. As such, it is highly implausible that the Motherland had been acquired and registered by mistake or through fraud as would create an implied trust between the Imbornal sisters and Ciriaco, especially considering the dearth of evidence showing that the Imbornal sisters entered into the possession of the Motherland, or a portion thereof, or asserted any right over the same at any point during their lifetime. Hence, when OCT No. 1462 covering the Motherland was issued in his name pursuant to Homestead Patent No. 24991 on December 15, 1933, Ciriaco’s title to the Motherland had become indefeasible. It bears to stress that the proceedings for land registration that led to the issuance of Homestead Patent No. 24991 and eventually, OCT No. 1462 in Ciriaco’s name are presumptively regular and proper, which presumption has not been overcome by the evidence presented by Francisco, et al. In this light, the Court cannot fully accept and accord evidentiary value to the oral testimony offered by Francisco, et al. on the alleged verbal agreement between their predecessors, the Imbornal sisters, and Ciriaco with respect to the Motherland. Weighed against the presumed regularity of the award of the homestead patent to Ciriaco and the lack of evidence showing that the same was acquired and registered by mistake or through fraud, the oral evidence of Francisco, et al. would not effectively establish their claims of ownership. It has been held that oral testimony as to a certain fact, depending as it does exclusively on human memory, is not as reliable as written or documentary evidence, especially since the purported agreement transpired decades ago, or in the 1920s. Hence, with respect to the Motherland, the CA did not err in holding that Ciriaco and his heirs are the owners thereof, without prejudice to the rights of any subsequent purchasers for value of the said property. By: Jenz Rivera HEIRS OF SPOUSES JOAQUIN MANGUARDIA AND SUSAN MANALO vs. HEIRS OF SIMPLICIO AND MARTA VALLES G.R. NO. 177616, AUGUST 27, 2014

Facts: Simplicio and Marta Valles were registered owners of a lot designated Lot 835. It appeared that they sold the lot, by way of notarized Deeds of Sale, to Simplicio’s daughter, Adelaida; their brothers Melquiades and Rustico; and Marta’s daughter Encarnacion. Melquiades sold his parcel, Lot 835-B, to Encarnacion and Roberto Araza, who later sold the lot to Roberto’s Aunt, Soledad Araza. Soledad later sold the parcel to the Spouses Joaquin Manguardia and Susan Manalo (Spouses Manguardia). Rustico sold his part of the lot, Lot 835-D, to Pedro and Soledad Araza, who later sold the parcel to the Spouses Leonardo and Rebecca Araza (Spouses Araza). Thereafter, the heirs of Simplicio and Marta Valles (Respondents) commenced an action for the Declaration of Nullity of Certificates of Title and Deeds of Sale, Cancellation of Certificates of Title, Recovery of Possession and Damages against the heirs of spouses Manguardia and the heirs of spouses Leonardo and Rebecca (Petitioners) before the Regional Trial Court (RTC). Respondents alleged that Simplicio and Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Marta were long dead when the documents were executed. Therefore, the sale was null and void. In their respective Answers, Petitioners alleged that their predecessors-in-interest were purchasers in good faith and that their ownership was never questioned despite Respondents’ knowledge thereof. The RTC ruled that the sale was void ab initio, finding that the vendees in the questioned sale document, who were predecessors-in-interest of the present Petitioners, could not feign ignorance of the death of the purported vendors because two of them are their brothers, while each of the other two are children of each of the said vendors. The Court of Appeals affirmed the Decision of the RTC. Issue :Whether or not predecessors-in-interest of Petitioners were purchasers in good faith. Held: Petitioners were not purchasers in good faith. If circumstances exist that require a prudent man to investigate and he does not, he is deemed to have acted in mala fide, and his mere refusal to believe that a defect exists or his willful closing of his eyes to the possibility of the existence of a defect in his vendor’s title will not make him an innocent purchaser for value. Here, the relationships by consanguinity or affinity, between and among the vendors and vendees in the series of sales of the subject properties, were established by testimonial evidence. it can reasonably be assumed from these relations that the spouses Manguardia and Leonardo were not buyers in good faith. By: Leonardo Dingayan ANCHOR SAVINGS BANK vs. PINZMAN REALTY AND DEVELOPMENT CORPORATION G.R. NO. 192304, AUGUST 13, 2014

Facts: Pinzman Realty and Development Corporation (Respondent) obtained a loan in the amount of PHP 3,000,000.00 from Anchor Savings Bank (Petitioner) secured by a mortgage over lots owned by Marilyn Mañalac (Mañalac). Mañalac also executed a Promissory Note and Disclosure Statement in favor of the petitioner in the total amount of P3,308,447.74 which amount already included payment for three months interest. There were no stipulations on the interest rate for the entire debt. Of the three checks issued by Mañalac in payment of the obligation, only the first was cleared, leaving a balance of PHP 3,012,525.32. When she received the Second Notice of Extrajudicial Foreclosure, the principal amount was PHP 4,577,269.42, excluding penalties, charges, attorney’s fees and costs of foreclosure. Petitioner appeared to have applied an interest rate of 30.33%. Private respondents filed a Complaint for the Annulment of Extrajudicial Foreclosure of Mortgaged Properties, Auction Sale, Certificate of Sale and Damages against the petitioner before the Regional Trial Court (RTC) alleging that the amount demanded in the Notice of Extrajudicial Sale was exorbitant and excessive and contending that the proper amount should only be PHP 3,825,907.16 if the balance of the loan were computed with interest at the rate of 3% reckoned from the date of last payment. The RTC dismissed the Complaint finding did not take any measures to enjoin the foreclosure sale despite their knowledge of the alleged usurious interest charges. The Court of Appeals (CA) reversed the Decision, finding that the Promissory Note and Disclosure Statement did not contain any stipulation on the rate of interest. Thus, the CA held that petitioner erred in unilaterally imposing an interest rate of 30.33% on the unpaid portion of the loan. Instead, the CA applied an interest rate of 12% per annum. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


Issue:Whether or not the foreclosure sale of Mañalac’s property was invalid. Held: The foreclosure sale was invalid. A foreclosure sale arising from a usurious mortgage cannot be given legal effect because a mortgagor cannot be legally compelled to pay for a grossly inflated loan. A judgment ordering a foreclosure sale is conditioned upon a finding on the correct amount of the unpaid obligation and the failure of the debtor to pay the said amount. Here, Petitioner unilaterally imposed an exorbitant interest rate of 30.33%, hence, the rate was usurious and the foreclosure proceeding therefrom was invalid. By: Leonardo Dingayan ROWENA SOLANTE vs. COMMISSION ON AUDIT G.R. No. 207348, August 20, 2014 VELASCO, J. Doctrine: If the period in the contract is merely an estimate, then the lapse of the said period will not make the obligation immediately demandable because it cannot be deemed a “day certain” in the context of Article 1193, the first paragraph of which provides that “Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes.” Facts: In 1989, the City of Mandaue (the City) and F.F. Cruz and Co., Inc. (F.F. Cruz) entered into a Contract of Reclamation in which F.F. Cruz, in consideration of a defined land sharing formula thus stipulated, agreed to undertake, at its own expense, the reclamation of foreshore and submerged lands from the Cabahug Causeway in that city. The project was to be completed in six (6) years or until 1995. In connection with the reclamation project, the parties also agreed, by way of a Memorandum of Agreement, on the use of a parcel of land belonging to the city where, as a compensation for its use for building housing facilities for F.F. Cruz’s employees, the improvements introduced thereto by F.F. Cruz shall be owned by the City. The project was not completed by that date. Thereafter, in 1997, the Department of Public Works and Highways entered into an agreement with F.F. Cruz to demolish the said housing facilities because these improvements stand in the way of the Metro Cebu Development Project II (MCDP II), which included the widening of the Plaridel Extension Mandaue Causeway. Petitioner Rowena Solante, then the Human Resources Management Officer III, prepared disbursement vouchers in favor of F.F. Cruz in the amount of PHP 1,084,836.42 for the cost of the housing facilities. This was done with approval of Samuel Darza, Project Director of the MCDP II, who addressed the said disbursement through a Letter-Complaint, alleging that F.F. Cruz was no longer the owner of the property as the ownership thereof has passed to the City pursuant to the Contract of Reclamation. The Commission on Audit (COA) disallowed the disbursement, ruling that the fact that the project was not completed in 1995 did not negate the government’s ownership of the improvements. Also, it was the intention of the parties that the government be compensated for the use of the land for the housing facilities, and making the government pay for the use of the land would render such intention of the parties inutile. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Issue: Whether or not the ownership of the improvements built by F.F. Cruz on the land owned by the City already passed to the government.

Held: The ownership of the improvements did not pass to the government and F.F. Cruz remained to be the owner of the improvements, notwithstanding that project had not been completed. The COA concluded that after the six (6)-year period, F.F. Cruz was automatically deemed to be in delay, the contract considered as completed, and the ownership of the structures built in accordance with the MOA transferred to the City of Mandaue. But this position was erroneous, because a reading of the contract of reclation showed that the period of six (6) years was an estimate and not a “day certain” in the context of Article 1193, the first paragraph of which provides that “Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes.” Thus, the lapse of six (6) years from the perfection of the contract did not, by itself, make the obligation to finish the reclamation project demandable, such as to put the obligor in a state of actionable delay for its inability to finish. Thus, F.F. Cruz was not in delay. The lapse of six (6) years from the perfection of the subject reclamation contract, without more, could not have automatically vested Mandaue City, under the MOA, with ownership of the structures. Even if the allotted six (6) years within which F.F. Cruz was the completion date of the reclamation project, the lapse thereof does not automatically mean that F.F. Cruz was in delay. As may be noted, the City never made a demand for the fulfillment of its obligation under the Contract of Reclamation. The first paragraph of Article 1169 provides: Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. Here, the records were bereft of any document whence to deduce that the City of Mandaue exacted from F.F. Cruz the fulfillment of its obligation under the reclamation contract. As it were, the Mandaue-F.F.Cruz MOA states that the structures built by F.F. Cruz on the property of the city will belong to the latter only upon the completion of the project. Clearly, the completion of the project is a suspensive condition that has yet to be fulfilled. Until the condition arises, ownership of the structures properly pertains to F.F. Cruz. By: Leonardo Dingayan

KRYSTLE REALTY DEVELOPMENT CORPORATION, REPRESENTED BY CHAIRMAN OF THE BOARD, WILLIAM C. CU, vs DOMINGO ALIBIN, AS SUBSTITUTED BY HIS HEIRS, NAMELY: BEATRIZ A. TORZAR, VIRGINIA A. TARAYA, ROSARIO A. MARCO, JESUS A. ALIBIN, AND JAY ALIBIN, AS SUBSTITUTED BY HIS CHILDREN, NAMELY: JAYNES ALIBIN, JAY ALIBIN, AND JESUS ALIBIN, JR.s. G.R. No. 196117, August 13, 2014 PERLAS-BERNABE, J. Facts: Respondent Domingo Alibin owned an undivided one-half portion of Lot No. 1680 situated at Tahao, Legazpi City, Albay, and registered in his name and that of Mariano Rodrigueza. On the Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 strength of a contract to sell purporting to convey Domingo’s one-half (½) share of the said lot to Caridad Rodrigueza as well as a Deed of Absolute Sale whereby Mariano and Caridad transferred their respective rights to the subject lot in favor of petitioner Krystle Realty Development Corporation (Krystle Realty), the original certificate of title was cancelled. In lieu thereof, three (3) TCTs were issued all on the same day in the names of the Rodriguezas at one-half (½) share each, and in the name of Krystle Realty covering the entire lot. Claiming that he had not sold his share to Caridad nor received any consideration for the alleged transfer, and that the signature on the deed of sale was not his, Domingo sought to annul the said deed. He died, however, during the pendency of the case, and was consequently substituted by his heirs, herein respondents. Caridad, on the other hand, insisted that she had paid Domingo in two (2) instalments. She then took possession of Domingo’s one-half (½) portion of the subject lot and declared the same for taxation purposes. For its part, Krystle Realty claimed that it was a purchaser in good faith, and that the action, if at all, should be directed against Caridad. Caridad likewise died, and was substituted first by her brother, Mariano, and upon the latter’s death, by Rufino Rodrigueza. The parties agreed to submit to a handwriting expert of the NBI the determination of the genuineness of Domingo’s signature on the deed of sale. NBI issued stating that the questioned and the standard/sample signatures of Domingo submitted to it for examination were written by one and the same person. The RTC declared Krystle Realty to be a purchaser in bad faith in view of the admission of its representative, Mr. William Cu, that he was aware of the fact that Domingo was part owner of the subject lot and that he even asked a certain Rudy Gueco to talk to Domingo about the sale of his onehalf (½) share. Aggrieved, Krystle Realty and Caridad elevated their cases on appeal before the CA. CA affirmed the findings of the RTC. Issue: Whether or not the Krystle Realty as a purchaser in bad faith. Held: No. Krystle Realty’s claim that it is a buyer in good faith, the Court finds that the latter cannot veer away from the admission of its representative, Mr. William Cu, i.e., that he was aware of Domingo’s interest in the subject lot, and that Caridad had no title in her name at the time of the sale, thus, giving rise to the conclusion that it (Krystle Realty) had been reasonably apprised of the ownership controversy over the subject lot. This notwithstanding, records show that Krystle Realty proceeded with the transaction without further examining the seller’s title and thus, could not claim to have purchased the subject lot in good faith. Verily, one is considered a buyer in bad faith not only when he purchases real estate with knowledge of a defect or lack of title in his seller but also when he has knowledge of facts which should have alerted him to conduct further inquiry or investigation, as Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Krystle Realty in this case. Further, the irregularities attending the issuance of TCT as pointed out by the CA are equally indicative of lack of good faith on Krystle Realty’s part. Indeed, what it failed to realize is that, as one asserting the status of a buyer in good faith and for value, it had the burden of proving such status, which goes beyond a mere invocation of the ordinary presumption of good faith. By: De Mesa, Nadia Marie T. ELIZABETH DEL CARMEN, vs. SPOUSES RESTITUTO SABORDO AND MIMA MAHILUM-SABORDOs. G.R. No. 181723, August 11, 2014 PERALTA, J. Facts: Spouses Toribio and Eufrocina Suico (Suico spouses), along with several business partners, entered into a business venture by establishing a rice and corn mill at Cebu. They obtained a loan from the Development Bank of the Philippines (DBP), and to secure the said loan, four parcels of land owned by the Suico spouses, and another lot owned by their business partner, Juliana Del Rosario, were mortgaged. Subsequently, the Suico spouses and their business partners failed to pay their loan obligations forcing DBP to foreclose the mortgage. After the Suico spouses and their partners failed to redeem the foreclosed properties, DBP consolidated its ownership over the same. DBP later allowed the Suico spouses and Reginald and Beatriz Flores (Flores spouses), as substitutes for Juliana Del Rosario, to repurchase the subject lots by way of a conditional sale. The Suico and Flores spouses were able to pay. Threatened with the cancellation of the conditional sale, the Suico and Flores spouses sold their rights over the said properties to herein respondents Restituto and Mima Sabordo, subject to the condition that the latter shall pay the balance of the sale price. DBP approved the sale of rights of the Suico and Flores spouses in favor of herein respondents. Subsequently, respondents were able to repurchase the foreclosed properties of the Suico and Flores spouses. Respondent Restituto Sabordo (Restituto) filed with the then Court of First Instance of Negros Occidental an original action for declaratory relief with damages and prayer for a writ of preliminary injunction. The Regional Trial Court ruled in favor of the Suico spouses. On appeal, the CA, in its Decision modified the RTC decision by giving the Suico spouses to exercise their option to purchase or redeem the subject lots from respondents. Toribio Suico died leaving his widow, Eufrocina, and several others, including herein petitioner, as legal heirs. Later, they discovered that respondents mortgaged the Lots with Republic Planters Bank (RPB) as security for a loan which, subsequently, became delinquent. Thereafter, claiming that they are ready with the payment, but alleging that they cannot determine as to whom such payment shall be made, petitioner and her co-heirs filed a Complaint with the RTC seeking to compel herein respondents and RPB to interplead and litigate between themselves their respective interests on the abovementioned sum of money. Respondents filed their Answer with Counterclaim praying for the dismissal of the above Complaint. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


RPB filed a Motion to Dismiss the subject Complaint on the ground that petitioner and her coheirs had no valid cause of action and that they have no primary legal right which is enforceable and binding against RPB. RTC rendered judgment, dismissing the Complaint of petitioner and her co-heirs for lack of merit. Respondents' Counterclaim was likewise dismissed. Petitioner filed an appeal with the CA contending that the judicial deposit or consignation of the money was valid and binding and produced the effect of payment of the purchase price of the subject lots. CA denied the above appeal for lack of merit and affirmed the disputed RTC Decision. Petitioner and her co-heirs filed a Motion for Reconsideration, but it was likewise denied by the CA. Hence, the present petition for review on certiorari. Issue: Whether or not that the consignation of the Petitioner and her co-heirs made was a judicial deposit based on a final judgment and, as such, does not require compliance with the requirements of Articles 1256 and 1257 of the Civil Code. Held: Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment, and it generally requires a prior tender of payment. It should be distinguished from tender of payment which is the manifestation by the debtor to the creditor of his desire to comply with his obligation, with the offer of immediate performance. Tender is the antecedent of consignation, that is, an act preparatory to the consignation, which is the principal, and from which are derived the immediate consequences which the debtor desires or seeks to obtain. Tender of payment may be extrajudicial, while consignation is necessarily judicial, and the priority of the first is the attempt to make a private settlement before proceeding to the solemnities of consignation. Tender and consignation, where validly made, produces the effect of payment and extinguishes the obligation. In the instant case, the Court finds no cogent reason to depart from the findings of the CA and the RTC that petitioner and her co-heirs failed to make a prior valid tender of payment to respondents. It is settled that compliance with the requisites of a valid consignation is mandatory. Failure to comply strictly with any of the requisites will render the consignation void. One of these requisites is a valid prior tender of payment. Under Article 1256, the only instances where prior tender of payment is excused are: (1) when the creditor is absent or unknown, or does not appear at the place of payment; (2) when the creditor is incapacitated to receive the payment at the time it is due; (3) when, without just cause, the creditor refuses to give a receipt; (4) when two or more persons claim the same right to collect; and (5) when the title of the obligation has been lost. None of these instances are present in the instant case. Hence, the fact that the subject lots are in danger of being foreclosed does not excuse petitioner and Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 her co-heirs from tendering payment to respondents, as directed by the court. BY: De Mesa, Nadia Marie T.



September 2014


Compilation of Case Digests in CIVIL LAW Review 2 ECE REALTY AND DEVELOPMENT, INC. vs. RACHEL G. MANDAP G.R. No. 196182. 1 September 2014

Facts: Petitioner is engaged in the building and development of condominium units. In 1995, it started a project condominium building in Pasay. However, printed advertisements were made indicating therein that the said project was to be built in Makati. In December 1995, respondent agreed to buy a unit and on 18 June 1996, both parties executed a Contract to Sell wherein it was indicated that the project is located in Pasay. More than two years after the execution of the Contract to Sell, Mandap demanded the return of the payments she made on the ground that she discovered that the project was being built in Pasay and not in Makati as was advertised. The demand was unheeded, prompting her to file a complaint with the HLURB which was dismissed and later on, the Office of the President had the same verdict. On appeal with the CA, the earlier decisions were reversed, now prompting the petitioner to elevate the case before the SC. Issue: Was there fraud in the execution of the Contract to Sell? Held: There was no fraud. Case law has shown that in order to constitute fraud that provides basis to annul contracts, it must fulfil two conditions. First, the fraud must be dolo causante or it must be fraud in obtaining the consent of the party. Second, fraud must be proven by clear and convincing evidence and not just by preponderance of evidence. In the case, petitioner was guilty of false representation of a fact but this does not constitute causal fraud which would have served as basis for annulling the contract. Mandap failed to prove that the location of the project was the causal consideration which led her into buying her unit in the project. Assuming arguendo that the misrepresentation consists of fraud, Mandap’s act of signing the contract, after knowing the property’s actual location, can be construed as an implied ratification thereof under Article 1393 of the Civil Code. By: Clara Maria Beatriz S. Calayan MEYER ENTRPRISES VS CORDERO GR No. 197336. 3 September 2014

Facts: Petitioner filed an action for damages against respondent for the caused by the latter’s dike constructed which disrupted the flow of the sea, causing damage to petitioner’s property. He prayed for moral, exemplary and actual damages. Defendant says he is merely doing what has been authorized by the city government and that the petitioner’s quarrying was the proximate cause of the damage. He prayed for moral and exemplary damages plus litigation expenses. The trial court dismissed petitioners action, ordering petitioner to pay damages to respondent. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


Issue: Is the payment of damages to Cordero proper? Held: Petitioner is guilty of malicious prosecution. Its accusations were merely to vex and humiliate the respondent, who opposed its quarrying. Hence, the award of damages is proper. By: Jimmy Jerard Castro

Rolando C. De La Paz vs L & J Development Company GR. No. 183360. September 8, 2014

Facts: Petitioner lent P350,000 to respondent without a specified maturity date at 6% monthly interest. Respondent failed to pay, so petitioner filed a complaint for collection. Respondent claims the interest rate is unconscionable. Interest rate upheld by the RTC and increased by the CA to 12% Issue: Was the CA correct in increasing the interest? Held: The lack of a written stipulation to pay interest on the loaned amount disallows a creditor from charging monetary interest. Under Article 1956 of the Civil Code, no interest shall be due unless it has been expressly stipulated in writing. Jurisprudence on the matter also holds that for interest to be due and payable, two conditions must concur: a) express stipulation for the payment of interest; and b) the agreement to pay interest is reduced in writing. Here, it is undisputed that the parties did not put down in writing their agreement. Thus, no interest is due. The collection of interest without any stipulation in writing is prohibited by law. Even if the payment of interest has been reduced in writing, a 6% monthly interest rate on a loan is unconscionable, regardless of who between the parties proposed the rate. By: Jimmy Jerard Castro

NAPOCOR VS TARCELO GR. No. 198939. September 8 2014

Facts: Petitioner filed action in court to expropriate lots belonging to private respondent. The purpose is to lay underground pipelines. They are disputing the amount of just compensation to be paid. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Petitioner wants to pay only 10% of the full market value of the property, while respondents want the full amount. RTC orders petitioner to pay full value, upheld by the CA. Issue: How much should be paid as just compensation? Held: The exercise of the right of eminent domain, whether directly by the State or by its authorized agents, is necessarily in derogation of private rights At bar, it cannot be gainsaid that the construction of underground pipeline is a simple case of mere passage of gas pipeline. It will surely cause damage and prejudice to the agricultural potentials of appellees’ property. Deep excavation will have to be done whereby plants and trees will be uprooted. A possible leakage could certainly do harm and adversely restrict the agricultural and economic activity of the land. This is not to mention that it will create an environmental health hazard dangerous to the occupant’s life and limb. Hence, defendants-appellees are entitled for (sic) just compensation to (sic) the fullmarket value of their property notjust ten percent (10%) of it. By: Jimmy Jerard Castro NAPOCOR VS SAMAR GR. No. 197329. September 8 2014

Facts: Petitioner filed action to expropriate the property of respondent for the purpose of laying transmission lines. Expropriation case dismissed for failure to prosecute. Sometime later, respondents file action for payment of compensation and damages, alleging petitioner did not pay. RTC orders the payment of P1000/sqm. CA ruled that the rules on expropriation did not apply, and the case was simply a claim for damages. Issue: Does the rules on expropriation apply? Held: The procedure for determining just compensation is set forth in Rule 67 of the 1997 Rules of Civil Procedure. Section 5 of Rule 67 partly states that ‘upon the rendition of the order of expropriation, the court shall appoint not more than three (3) competent and disinterested persons as commissioners to ascertain and report to the court the just compensation for the property sought to be taken. Records show that sometime in 1990, NPC filed an expropriation case docketed as Civil Case No. IR-2243. However, in an Order dated July 12, 1994, the expropriation case was dismissed by the RTC for failure of NPC to prosecute. Subsequently, or on December 5, 1994, respondents filed Civil Case No. IR-2678 which is a complaint for compensation and recovery of damages. Nevertheless, just compensation for the property must be based on its value at the time of the taking of said property, not at the time of the filing of the complaint. Consequently, the RTC should have fixed the value of the property at the time NPC took possession of the same in 1990, and not at Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 the time of the filing of the complaint for compensation and damages in 1994 or its fair market value in 1995. By: Jimmy Jerard Castro RAL BUILDERS, INC. v. FOUNDATION SPECIALISTS, INC. G.R. NO. 194507. September 8, 2014. Peralta, J. Facts: On August 20, 1990, Federal Builders, Inc. (FBI) entered into an agreement with Foundation Specialist, Inc. (FSI) whereby the latter, as subcontractor, undertook the construction of the diaphragm wall, capping beam, and guide walls of the Trafalgar Plaza located at Salcedo Village, Makati City (the Project). Under the agreement, FBI was to pay a downpayment equivalent to twenty percent (20%) of the contract price and the balance, through a progress billing every fifteen (15) days, payable not later than one (1) week from presentation of the billing. On January 9, 1992, FSI filed a complaint for Sum of Money against FBI before the RTC of Makati City seeking to collect the amount of P1,635,278.91, representing Billing No. 3 and 4, with accrued interest from August 1, 1991 plus moral and exemplary damages with attorney’s fees. FSI alleged that FBI refused to pay said amount despite demand and its completion of 97& of the contracted works. In its Answer with Counterclaim, FBI claimed that FSI completed only 85% of the contracted works, failing to finish the diaphragm wall and component works in accordance with the plans and specifications and abandoning the jobsite. FBI maintains that because of FSI’s inadequacy, its schedule in finishing the Project has been delayed resulting in the Project owner’s deferment of its own progress billings. It further interposed counterclaimsfor amounts it spent for the remedial works on the alleged defects in FSI’s work. Issues: 1. WON Federal Builders, Inc. was liable to pay the balance of P1,024,600.00 less the amount of P33,354.40 notwithstanding that the diaphragm wall constructed by Foundation Specialists, Inc. was concededly defective and out-of-specifications and that petitioner had to redo it at its own expense. 2. WON the legal interest should be 12% Held: Contrary to the allegations of FBI, FSI had indeed completed its assigned obligations, with the exception of certain assigned tasks, which was due to the failure if FBI to fulfill its end of the bargain. The defects FBI complained of, such as the misaligned diaphragm wall and the erroneous location of the rebar dowels, were not only anticipated by the parties, having stipulated alternative plans to remedy the same, but more importantly, are also attributable to the very actions of FBI. Accordingly, Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 considering that the alleged defects in FSI’s contracted works were not so much due to the fault or negligence of the FSI, but were satisfactorily proven to be caused by FBI’s own acts, FBI’s claim of P8,582,756.29 representing the cost of the measures it undertook to rectify the alleged defects must necessarily fail. Thus, in the absence of any record to otherwise prove FSI’s neglect in the fulfillment of its obligations under the contract, this Court shall refrain from reversing the findings of the courts below, which are fully supported by and deducible from, the evidence on record. Indeed, FBI failed to present any evidence to justify its refusal to pay FSI for the works it was contracted to perform. As such, We do not see any reason to deviate from the assailed rulings. Second assignment of error, 12% interest rate is inapplicable, since this case does not involve a loan or forbearance of money. Eastern Shipping Lines, Inc. v. Court of Appeals guidelines in computing legal interest: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. In line, however, with the recent circular of the Monetary Board of the BangkoSentralngPilipinas (BSP-MB) No. 799, we have modified the guidelines in Nacar v. Gallery Frames:


Compilation of Case Digests in CIVIL LAW Review 2 I.

When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasidelicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.

II.

With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. It should be noted, however, that the new rate could only be applied prospectively and not retroactively. Consequently, the 12% per annum legal interest shall apply only until June 30, 2013. Come July 1, 2013, the new rate of 6% per annum shall be the prevailing rate of interest when applicable. Thus, the need to determine whether the obligation involved herein is a loan and forbearance of money nonetheless exists. In the absence of any stipulation as to interest in the agreement between the parties herein, the matter of interest award arising from the dispute in this case would actually fall under the second paragraph of the above-quoted guidelines in the landmark case of Eastern Shipping Lines, which necessitates the imposition of interest at the rate of 6%, instead of 12% imposed by the courts below. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 The 6% interest rate shall further be imposed from the finality of the judgment herein until satisfaction thereof, in light of our recent ruling in Nacar v. Gallery Frames.

BY: Patricia Garvida

CESAR V. AREZA AND LOLITA B. AREZA v. EXPRESS SAVINGS BANK, INC. AND MICHAEL POTENCIANO G.R. No. 176697. September 10, 2014. Perez, J: Facts: Petitioners Cesar V. Areza and Lolita B. Areza maintained two bank deposits with respondent Express Savings Bank’s Biñan branch: 1) Savings Account No. 004-01-000185-5 and 2) Special Savings Account No. 004-02-000092-3. They were engaged in the business of “buy and sell” of brand new and second-hand motor vehicles. On 2 May 2000, they received an order from a certain Gerry Mambuay (Mambuay) for the purchase of a second-hand Mitsubishi Pajero and a brand-new Honda CRV. The buyer, Mambuay, paid petitioners with nine (9) Philippine Veterans Affairs Office (PVAO) checks payable to different payees and drawn against the Philippine Veterans Bank (drawee), each valued at Two Hundred Thousand Pesos (P200,000.00) for a total of One Million Eight Hundred Thousand Pesos (P1,800,000.00). About this occasion, petitioners claimed that Michael Potenciano (Potenciano), the branch manager of respondent Express Savings Bank (the Bank) was present during the transaction and immediately offered the services of the Bank for the processing and eventual crediting of the said checks to petitioners’ account. On the other hand, Potenciano countered that he was prevailed upon to accept the checks by way of accommodation of petitioners who were valued clients of the Bank. On 3 May 2000, petitioners deposited the said checks in their savings account with the Bank. The Bank, in turn, deposited the checks with its depositary bank, Equitable-PCI Bank, in Biñan, Laguna. Equitable-PCI Bank presented the checks to the drawee, the Philippine Veterans Bank, which honored the checks. On 6 May 2000, Potenciano informed petitioners that the checks they deposited with the Bank were honored. He allegedly warned petitioners that the clearing of the checks pertained only to the availability of funds and did not mean that the checks were not infirmed.Thus, the entire amount of P1,800,000.00 was credited to petitioners’ savings account. Based on this information, petitioners released the two cars to the buyer. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Sometime in July 2000, the subject checks were returned by PVAO to the drawee on the ground that the amount on the face of the checks was altered from the original amount of P4,000.00 to P200,000.00. The drawee returned the checks to Equitable-PCI Bank by way of Special Clearing Receipts. In August 2000, the Bank was informed by Equitable-PCI Bank that the drawee dishonored the checks on the ground of material alterations. Equitable-PCI Bank initially filed a protest with the Philippine Clearing House. In February 2001, the latter ruled in favor of the drawee Philippine Veterans Bank. Equitable-PCI Bank, in turn, debited the deposit account of the Bank in the amount of P1,800,000.00. On 9 March 2001, petitioners issued a check in the amount of P500,000.00. Said check was dishonored by the Bank for the reason “Deposit Under Hold.” According to petitioners, the Bank unilaterally and unlawfully put their account with the Bank on hold. On 22 March 2001, petitioners’ counsel sent a demand letter asking the Bank to honor their check. The Bank refused to heed their request and instead, closed the Special Savings Account of the petitioners with a balance of P1,179,659.69 and transferred said amount to their savings account. The Bank then withdrew the amount of P1,800,000.00 representing the returned checks from petitioners’ savings account. Acting on the alleged arbitrary and groundless dishonoring of their checks and the unlawful and unilateral withdrawal from their savings account, petitioners filed a Complaint for Sum of Money with Damages against the Bank and Potenciano with the RTC of Calamba. Issue: WON the Bank had the right to debit P1,800,000.00 from petitioners’ accounts Held: The Bank cannot set-off the amount it paid to Equitable-PCI Bank with petitioners’ savings account. Under Article 1278 of the New Civil Code, compensation shall take place when two persons, in their own right, are creditors and debtors of each other. And the requisites for legal compensation are: Article 1278. In order that compensation may be proper, it is necessary: 1. That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; 2. That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; 3. That the two debts be due; 4. That they be liquidated and demandable; 5. That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. It is well-settled that the relationship of the depositors and the Bank or similar institution is that of creditor-debtor. Article 1980 of the New Civil Code provides that fixed, savings and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 loans. The bank is the debtor and the depositor is the creditor. The depositor lends the bank money and the bank agrees to pay the depositor on demand. The savings deposit agreement between the bank and the depositor is the contract that determines the rights and obligations of the parties. But as previously discussed, petitioners are not liable for the deposit of the altered checks. The Bank, as the depositary and collecting bank ultimately bears the loss. Thus, there being no indebtedness to the Bank on the part of petitioners, legal compensation cannot take place. The Bank incurred a delay in informing petitioners of the checks’ dishonor. The Bank was informed of the dishonor by Equitable-PCI Bank as early as August 2000 but it was only on 7 March 2001 when the Bank informed petitioners that it will debit from their account the altered amount. This delay is tantamount to negligence on the part of the collecting bank which would entitle petitioners to an award for damages under Article 1170 of the New Civil Code which reads: Article 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. The damages in the form of actual or compensatory damages represent the amount debited by the Bank from petitioners’ account. We delete the award of moral damages. Contrary to the lower court’s finding, there was no showing that the Bank acted fraudulently or in bad faith. It may have been remiss in its duty to diligently protect the account of its depositors but its honest but mistaken belief that petitioners’ account should be debited is not tantamount to bad faith. We also delete the award of attorney’s fees for it is not a sound public policy to place a premium on the right to litigate. No damages can be charged to those who exercise such precious right in good faith, even if done erroneously.

BY: Patricia Garvida SPOUSES FRANCISCO SIERRA (SUBSTITUTED BY DONATO, TERESITA, TEODORA, LORENZA, LUCINA, IMELDA, VILMA, AND MILAGROS SIERRA) AND ANTONINA SANTOS, SPOUSES ROSARIO SIERRA AND EUSEBIO CALUMA LEYVA, AND SPOUSES SALOME SIERRA AND FELIX GATLABAYAN (SUBSTITUTED BY BUENAVENTURA, ELPIDIO, PAULINO, CATALINA, GREGORIO, AND EDGARDOGATLABAYAN, LORETO REILLO, FERMINAPEREGRINA, AND NIDA HASHIMOTO) vs. PAIC SAVINGS AND MORTGAGE BANK, INC. G.R. No. 197857, 10 September 2014 Facts: On May 31, 1983, Goldstar Conglomerates, Inc. obtained from First Summa Savings and Mortgage Bank, now respondent Paic Savings and Mortgage Bank, Inc., a loan of P 1.5 Million Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 wherein 6 promissory notes and a Deed of Real Estate Mortgage were executed. Petitioners mortgaged 4 parcels of land and after signing the mortgage deed, Zaldaga, GCI’s representative, gave petitioner Francisco Sierra manager’s checks amounting to P200,000.00. GCI defaulted thereby prompting PSMB to extrajudicially foreclose the mortgage. As petitioners also failed to redeem the property, they filed a complaint for the declaration of nullity of the real estate mortgage and its extrajudicial foreclosure before the RTC. They asserted that they were made to believe that they applied for a loan, thus they unsuspectingly signed a document denominated as Deed of Real Estate Mortgage which was not interpreted in a language/dialect known to them, and which was not accompanied by the loan documents. PSMB averred that the mortgage was valid, having been duly signed by petitioners before a notary public and that they allowed time to pass without pursuing their purported right against Summa Bank and/or PSMB. The RTC ruled that the loan transaction was a valid and binding agreement between Summa Bank and GCI; that the subject deed did not reflect the true intent and agreement between Summa Bank and petitioners who were made to believe that they were the principal obligors in the loan, thereby invalidating their consent to the mortgage. The CA however ruled that petitioners had knowingly and voluntarily executed the subject deed and that the action to annul the subject deed had already prescribed, since the same was brought more than four (4) years from the discovery of the mistake or fraud, reckoned from the time the earliest checks issued to petitioners were dishonored, or on January 9, 1984, this being the time the consideration or price for the execution of the subject deed turned out to be false. Thus, they are already barred by laches.    Issues: (1) Whether or not petitioners were aware that they were mere accommodation mortgagors (2) Whether or not the case is dismissible on the grounds of prescription and laches. Held: (1) Yes. There being valid consent on the part of petitioners to act as accommodation mortgagors, petitioners are not entitled to the proceeds of the loan, nor were required to be furnished with the loan documents or notice of the borrower’s default in paying the principal, interests, penalties, and other charges on due date, or of the extrajudicial foreclosure proceedings, unless stipulated in the subject deed. An accommodation mortgagor is a third person who is not a debtor to a principal obligation but merely secures it by mortgaging his or her own property. (2) Yes. Since the complaint for annulment was anchored on a claim of mistake, i.e., that petitioners are the borrowers under the loan secured by the mortgage, the action should have been brought within four (4) years from its discovery. However, the complaint failed to disclose when petitioners learned that they were not the borrowers under the loan secured by the subject mortgage. Thus, laches applies. Despite notice on June 19, 1984 of the scheduled foreclosure sale, petitioners, for unexplained reasons, failed to impugn the real estate mortgage and oppose the public auction sale for a period of more than seven (7) years from said notice. By: Ghyslaine D. San Andres Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Re: ANONYMOUS LETTERCOMPLAINT ON THE ALLEGED INVOLVEMENT AND FOR ENGAGING IN THE BUSINESS OF LENDING MONEY AT USURIOUS RATES OF INTEREST OF MS. DOLORES T. LOPEZ, SC CHIEF JUDICIAL STAFF OFFICER, AND MR. FERNANDO M. MONTALVO, SC SUPERVISING JUDICIAL STAFF OFFICER, CHECKS DISBURSEMENT DIVISION, FISCAL MANAGEMENT AND BUDGET OFFICE A.M. No. 2010-21-SC, 30 September 2014 Facts: An undated letter-complaint addressed to the Complaints and Investigation Division (CID) of the Office of Administrative Services (OAS) of the Supreme Court triggered this administrative matter. This was purportedly sent by a concerned employee who chose to remain anonymous, assailed the profitable money-lending with usurious interest scheme engaged in by respondents Dolores T. Lopez, an SC Chief Judicial Staff Officer, and Fernando M. Montalvo, an SC Supervising Judicial Staff Officer, both of the Checks Disbursement Division of the Court’s Fiscal Management and Budget Office (FMBO). The said money-lending activities targeted low-salaried employees of the Court like the drivers and employees of the janitorial services; that such money-lending had been going on with the help of the personnel of the Checks Disbursement Division of FMBO by enticing employees of the Court to pledge forthcoming benefits at a discounted rate. The OAS submitted its report and recommendations, whereby it recommended the dismissal of the letter-complaint against Montalvo for lack of merit; but endorsed Lopez’s suspension “for thirty (30) days for lending money with interest to a number of economically challenged employees and janitors; and directed her to immediately cease and desist from engaging in any form of personal business and other financial transactions, with a warning that a repetition of the same or similar act in the future will be dealt with more severely.” Issue: WON the money-lending activity perpetrated by Lopez is in the nature of a contract of loan. Held: YES. The SC ruled that in a contract of loan, according to Article 1933 of the Civil Code, “one of the parties delivers to another, either something not consumable so that the latter may use the same for a certain time and return it, in which case the contract is called a commodatum; or money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid, in which case the contract is simply called a loan or mutuum.” The fact of her parting with her money in favor of another upon the condition that the same amount would be paid back was exactly what constituted a loan under the law. By: Myraflor L. Chavez

EMERITU C. BARUT vs. PEOPLE OF THE PHILIPPINES G.R. No. 167454, 24 September 2014 Facts: SPO4 Vicente Ucag was coming from a picnic in Laguna and returning home to Taguig, Metro Manila on board a passenger jeepney driven by his brother Rolando on the South Luzon Expressway. Ucag’s wife and 16 year-old son Vincent were then riding an owner-type jeep driven by Rico Villas on the same route. When the latter vehicle exited at the Sucat Interchange ahead of Ucag’s passenger jeepney, PNCC guards Conrado Ancheta and Barut stopped Villas and directed him to park his Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 vehicle at the road side. After informing Villas that his vehicle had no headlights, Ancheta asked for his driving license, but it took a while before Villas produced the same apparently waiting for his companions in the passenger jeepney to arrive. Nonetheless, Villas ultimately surrendered his driving license. The passenger jeepney carrying Ucag stopped where Villas’ jeep had parked. Ucag argued with Ancheta and Barut as to the return of the driver’s license. Later on, however, Ucag turned around in order to avoid further argument, and simply told Villas to return for his driving license the next day. This apparently irked Ancheta, who dared Ucag to finish the issue right there and then. Ancheta suddenly pulled out his .38 caliber revolver and fired it several times, hitting Ucag on both thighs. Ucag fired back and hit Ancheta. Upon seeing the exchange of gunshots, Vincent Ucag rushed towards his father to go to his succor. Before Vincent could reach his father, however, Barut fired at Vincent in the chest. Vincent was rushed to the Parañaque Medical Center, where he expired while undergoing emergency surgery. His father was brought to the Camp Panopio Hospital in Quezon City for treatment and medical attendance. Petitioner was found guilty of the crime of Homicide by the Regional Trial Court. On appeal, the Court of Appeals affirmed the conviction of Barut. Issue: WON the CA erred in affirming the award of civil liability by the RTC without specifying the amounts corresponding to actual and moral damages, as well as to the civil indemnity for the death of Vincent. Held: YES. The SC ruled that both lower courts thereby erred on a matter of law. Actual and moral damages are different in nature and purpose. To start with, different laws govern their grant, with the amounts allowed as actual damages being dependent on proof of the loss to a degree of certainty, while the amounts allowed as moral damages being discretionary on the part of the court. Secondly, actual damages address the actual losses caused by the crime to the heirs of the victim; moral damages assuage the spiritual and emotional sufferings of the heirs of the victim of the crime. On the civil indemnity for death, law and jurisprudence have fixed the value to compensate for the loss of human life. Thirdly, actual damages may not be granted without evidence of actual loss; moral damages and death indemnity are always granted in homicide, it being assumed by the law that the loss of human life absolutely brings moral and spiritual losses as well as a definite loss. By: Myraflor L. Chavez

LEONARDO BOGNOT vs. RRI LENDING CORPORATION G.R. No. 180144, 24 September 2014 Facts: The petitioner and his younger brother, Rolando A. Bognot, applied for and obtained a loan of Five Hundred Thousand Pesos (P500,000.00) from the respondent, payable on November 30, 1996. The loan was evidenced by a promissory note and was secured by a post dated check dated November 30, 1996. Evidence on record shows that the petitioner renewed the loan several times on a monthly basis. When the respondent sent the petitioner follow-up letters demanding payment of the loan, plus interest and penalty charges, these demands went unheeded. On November 27, 1997, the respondent, through Bernardez, filed a complaint for sum of money before the Regional Trial Court (RTC) against the Bognot siblings. The RTC ruled in the respondent’s favor and ordered the Bognot siblings to pay the amount of the loan, plus interest and penalty charges. It considered the wordings Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 of the promissory note and found that the loan they contracted was joint and solidary. On appeal, the CA affirmed the RTC’s findings. It found the petitioner’s defense of payment untenable and unsupported by clear and convincing evidence. Issues: 1. WON the CA erred in holding the petitioner solidarily liable with Rolando and his wife; 2. WON the parties’ obligation was extinguished by: (i) payment; and (ii) novation by substitution of debtors. HELD: 1. YES. The SC ruled that there is solidary liability when the obligation expressly so states, when the law so provides, or when the nature of the obligation so requires. Thus, when the obligor undertakes to be "jointly and severally" liable, the obligation is solidary. In the instant case, although the phrase “jointly and severally” in the promissory note clearly and unmistakably provided for the solidary liability of the parties, we note and stress that the promissory note is merely a photocopy of the original, which was never produced. Other than the promissory note in question, the respondent has not presented any other evidence to support a finding of solidary liability. The well-entrenched rule is that solidary obligation cannot be inferred lightly. It must be positively and clearly expressed and cannot be presumed. 2. NO. The SC ruled that petitioner failed to discharge his burden of proving payment and the presence of novation. Article 1249, paragraph 2 of the Civil Code provides: “The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.” Reliance by the petitioner on the legal presumption to prove payment is misplaced. To reiterate, no cash payment was proven by the petitioner. The cancellation and return of the check dated April 1, 1997, simply established his renewal of the loan – not the fact of payment. As to the issue of novation, the SC ruled that to give novation legal effect, the original debtor must be expressly released from the obligation, and the new debtor must assume the original debtor’s place in the contractual relationship. Depending on who took the initiative, novation by substitution of debtor has two forms – substitution by expromision and substitution by delegacion. The petitioner contends that novation took place through a substitution of debtors when Mrs. Bognot renewed the loan and assumed the debt. He alleged that Mrs. Bognot assumed the obligation by paying the renewal fees and charges, and by executing a new promissory note. Contrary to the petitioner’s contention, Mrs. Bognot did not substitute the petitioner as debtor. She merely attempted to renew the original loan by executing a new promissory note and check. More importantly, the respondent never agreed to release the petitioner from his obligation. In order to give novation legal effect, the creditor should consent to the substitution of a new debtor. Novation must be clearly and unequivocally shown, and cannot be presumed. Since the petitioner failed to show that the respondent assented to the substitution, no valid novation took place with the effect of releasing the petitioner from his obligation to the respondent. By: Myraflor L. Chavez



PEDRITO DELA TORRE vs. DR. ARTURO IMBUIDO, DRA. NORMA IMBUIDO in their capacity as owners and operators of DIVINE SPIRIT GENERAL HOSPITAL and/or DR. NESTOR PASAMBA G.R. No. 192973, 29 September 2014 Facts: The case stemmed from a complaint for damages filed by Pedrito against herein respondents. Pedrito alleged in his complaint that he was married to one Carmen Castillo Dela Torre (Carmen), who died while admitted at the Divine Spirit General Hospital on February 13, 1992. Carmen was due to give birth on February 2, 1992 and was brought at around 11:30 p.m. on that day by Pedrito to the Divine Spirit General Hospital. When Carmen still had not delivered her baby at the expected time, Dr. Norma discussed with Pedrito the possibility of a caesarean section operation. Carmen was brought to the hospital’s operating room for her caesarian section operation, which was to be performed by Dr. Nestor. On February 10, 1992, Pedrito noticed that Carmen’s stomach was getting bigger, but Dr. Norma dismissed the patient’s condition as mere flatulence (kabag). The condition of Carmen, however, did not improve. It instead worsened that on February 13, 1992, she vomited dark red blood. At 9:30 p.m. on the same day, Carmen died. An autopsy report prepared by Dr. Richard Patilano (Dr. Patilano), Medico-Legal Officer-Designate of Olongapo City, however, provided that the cause of Carmen’s death was “shock due to peritonitis, severe, with multiple intestinal adhesions; Status post C[a]esarian Section and Exploratory Laparotomy.” The Regional Trial Court (RTC) of Olongapo City, Branch 75, rendered its Decision in favor of Pedrito. The trial court gave greater weight to the testimony of Dr. Patilano. On appeal, the CA rendered its Decision reversing and setting aside the decision of the RTC. For the appellate court, it was not established that the respondents failed to exercise the degree of diligence required of them by their profession as doctors. Issue: WON the respondents should be held liable for the death of Carmen. Held: NO. The SC ruled that in medical negligence cases, there is a physician-patient relationship between the doctor and the victim, but just like in any other proceeding for damages, four essential elements must be established by the plaintiff, namely: (1) duty; (2) breach; (3) injury; and (4) proximate causation. All four elements must be present in order to find the physician negligent and, thus, liable for damages. To justify an award of damages, the negligence of the doctor must be established to be the proximate cause of the injury. The Court agrees with the CA that the report and testimony of Dr. Patilano failed to justify Pedrito’s entitlement to the damages awarded by the RTC. Considering that it was not duly established that Dr. Patilano practiced and was an expert in the fields that involved Carmen’s condition, he could not have accurately identified the said degree of care, skill, diligence and the medical procedures that should have been applied by her attending physicians. As the Court held in Spouses Flores v. Spouses Pineda, the critical and clinching factor in a medical negligence case is proof of the causal connection between the negligence and the injuries. The claimant must prove not only the injury but also the defendant's fault, and that such fault caused the injury. A verdict in a malpractice action cannot be based on speculation or conjecture. Causation must be proven within a reasonable medical probability based upon competent expert testimony

By: Myraflor L. Chavez Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 SUBIC BAY LEGEND RESORTS AND CASINOS, INC. vs. BERNARD C. FERNANDEZ G.R. No. 193426, 29 September 2014 Facts: Petitioner Subic Bay Legend Resorts & Casinos, Inc., a duly organized and existing corporation operating under Philippine laws, operates the Legenda Hotel and Casino (Legenda) located in the Subic Bay Freeport Zone in Zambales. On the other hand, respondent Bernard C. Fernandez is the plaintiff in Civil Case No. 237-0-97 prosecuted against petitioner in Olongapo RTC. It turns out that the appellee’s brother and Ludwin Fernandez were zero-in by the petitioner’s security section for their anomalous use of dollar denominated chips inside the casino. They were accosted and interrogated by the security officers of the casino. The ultimatum was simple: they confess that the chips were given by a certain employee, Michael Cabrera, or they would not be released from questioning. The same line of questioning confronted them when they were later twned-over for blotter preparation to the Intelligence and Investigation Office of the Subic Bay Metropolitan Authority (IIO SBMA). Finally, the brothers succumbed to Legenda's instruction to execute a joint statement implicating Cabrera as the illegal source of the chips. The trial court in this case ruled in favor of the plaintiff (herein respondent) as there is no dispute that the subject chips were in the possession of the plaintiff. He claims he got hold of them as payment for car services he rendered to a Chinese individual. On appeal, the CA affirmed the decision of the trial court. Issue: WON the court erred in granting the award of attorney's fees and costs of suit in favor of the respondent. Held: NO. The SC held that under Article 2208 of the Civil Code, attorney's fees may be recovered when the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim, or in any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered. Petitioner's act of arbitrarily confiscating the casino chips and treating Ludwin and Deoven the way it did, and in refusing to satisfy respondent's claim despite the fact that it had no basis to withhold the chips, confirm its bad faith, and should entitle respondent to an award. By: Myraflor L. Chavez PHILIPPINE NATIONAL BANK vs. SPOUSES EDUARDO AND MA. ROSARIO TAJONERA and EDUAROSA REALTY DEVELOPMENT INC. G.R. No. 195889, 24 September 2014 Facts: Respondent Eduarosa Realty Development, Inc. (ERDI) was engaged in realty construction and sale of condominium buildings. Respondent, Ma. Rosario Tajonera (Rosario), as the Vice President of ERDI, also performed the duties of president and marketing director dealing with banks, suppliers and contractors. ERDI, through Rosario, obtained loans from petitioner Philippine National Bank (PNB) and entered into several credit agreements to finance the completion of the construction of their 20-storey Eduarosa Tower Condominium located in Roxas Boulevard, Paranaque City. The principal amount of loan extended by PNB to ERDI was Sixty Million Pesos (60,000,000.00). As Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 security for the initial loan, ERDI executed the Real Estate Mortgage (REM) consisting of three (3) parcels of land covered by Transfer Certificate of Title (TCT) Nos. 38845, 38846 and 38847 with an aggregate area of 1,352 square meters situated in Roxas Boulevard, Tambo, Paranaque, Metro Manila, registered in the name of ERDI (Paranaque properties). In addition, the loan was secured by the assignment of proceeds of contract receivables arising from the sale of condominium units to be constructed on the mortgaged Paranaque properties. ERDI failed to settle its obligation. As a consequence, PNB filed an application for foreclosure of the Greenhills property. As the highest bidder, PNB was issued the Certificate of Sale, dated October 9, 1997. Upon ERDI’s failure to redeem the property, PNB consolidated its title and caused the cancellation of TCT No. 29733. A new title, TCT No. 9424-R, was issued in the name of PNB. This prompted the respondents to file a complaint against PNB for annulment of sale, cancellation of title, cancellation of mortgage, and damages before the RTC. The RTC rendered its judgment in favor of the respondents. On appeal, the CA affirmed the decision of the RTC, but deleted the award of moral and exemplary damages. Issue: WON the CA erred in annulling the mortgage contract constituted over the Greenhills property of the respondents. Held: NO. The SC ruled that the agreement between PNB and the respondents was one of a loan. Under the law, a loan requires the delivery of money or any other consumable object by one party to another who acquires ownership thereof, on the condition that the same amount or quality shall be paid. PNB, not having released the balance of the last loan proceeds in accordance with the Third Amendment had no right to demand from the respondent’s compliance with their own obligation under the loan. Indeed, if a party in a reciprocal contract like a loan does not perform its obligation, the other party cannot be obliged to perform what is expected of them while the other's obligation remains unfulfilled. When the respondents executed the Supplement to REM covering their Greenhills property, they signified their willingness to pay the additional loans. It should be noted, as correctly found by the CA, that the Supplement to REM was constituted not only as security for the execution of the First Amendment but also in consideration of the Second and Third Amendments. It is true that loans are often secured by a mortgage constituted on real or personal property to protect the creditor's interest in case of the default of the debtor. By its nature, however, a mortgage remains an accessory contract dependent on the principal obligation, such that enforcement of the mortgage contract depends on whether or not there has been a violation of the principal obligation. In this case, to repeat, PNB did not fulfill its principal obligation under the Third Amendment by failing to release the amount of the last additional loan in full. Consequently, the Supplement to REM covering the Greenhills property became unenforceable, as the said property could not be entirely foreclosed to satisfy the respondents’ total debts to PNB. Moreover, the Supplement to REM was no longer necessary because PNB’s interest was amply protected as the loans had been sufficiently secured by the Paranaque properties. By: Myraflor L. Chavez


Compilation of Case Digests in CIVIL LAW Review 2 SPOUSES MICHELLE M. NOYNAY and NOEL S. NOYNAY vs. CITIHOMES BUILDER AND DEVELOPMENT, INC. G.R. No. 204160, 22 September 2014 Facts: Citihomes and Spouses Noynay executed a contract to sell covering the sale of a house and lot located in San Jose Del Monte, Bulacan, and covered by Transfer Certificate of Title (TCT) No. T43469. Under the terms of the contract, the price of the property was fixed at P915,895.00, with a downpayment of P183,179.00, and the remaining balance to be paid in 120 equal monthly installments with an annual interest rate of 21% commencing on February 8, 2005 and every 8th day of the month thereafter. Subsequently, on May 12, 2005, Citihomes executed the Deed of Assignment of Claims and Accounts (Assignment) in favor of United Coconut Planters Bank (UCPB) on May 12, 2005. Under the said agreement, UCPB purchased from Citihomes various accounts, including the account of Spouses Noynay, for a consideration of 100,000,000.00. In February of 2007, Spouses Noynay allegedly started to default in their payments. Months later, Citihomes decided to declare Spouses Noynay delinquent and to cancel the contract considering that nine months of agreed amortizations were left unpaid. Citihomes sent its final demand letter asking Spouses Noynay to vacate the premises due to their continued failure to pay the arrears. Spouses Noynay did not heed the demand, forcing Citihomes to file the complaint for unlawful detainer before the MTCC on July 29, 2009. The MTCC dismissed the complaint. It considered the annotation in the certificate of title, which was dated prior to the filing of the complaint, which showed that Citihomes had executed the Assignment favor of UCPB, as having the legal effect of divesting Citihomes of its interest and right over the subject property. As far as the MTCC was concerned, Citihomes did not have a cause of action against Spouses Noynay. The RTC, however, reversed the ruling of the MTCC. On appeal, the CA affirmed the conclusion of the RTC that Citihomes still had the right and interest over the property in its capacity as the registered owner. Issue: WON Citihomes failed to comply with the procedures for the proper cancellation of the contract to sell as prescribed by Maceda Law. Held: YES. The SC in deciding the case cited the case of Pagtalunan v. Manzano, where it ruled the importance of complying with the provisions of the Maceda Law as to the cancellation of contracts to sell involving realty installment schemes. There it was held that the cancellation of the contract by the seller must be in accordance with Section 3 (b) of the Maceda Law, which requires the notarial act of rescission and the refund to the buyer of the full payment of the cash surrender value of the payments made on the property. The actual cancellation of the contract takes place after thirty (30) days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer. In this case, Spouses Noynay had been paying the amortizations for three (3) years, there is no reason to doubt Spouses Noynay's compliance with the minimum requirement of two years payment of amortization, entitling them to the payment of the cash surrender value provided for by law and by the contract to sell. To reiterate, Section 3(b) of the Maceda Law requires that for an actual cancellation to take place, the notice of cancellation by notarial act and the full payment of the cash surrender value must be first received by the buyer. Clearly, no payment of the cash surrender value was made to Spouses Noynay. Necessarily, no cancellation of the Contract to Sell could be considered as validly effected. By: Myraflor L. Chavez Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


October 2014


Compilation of Case Digests in CIVIL LAW Review 2 AUTOMAT REALTY AND DEVELOPMENT CORPORATION, LITO CECILIA AND LEONOR LIM vs. SPOUSES MARCIANO DELA CRUZ, SR. AND OFELIA DELA CRUZ G.R. No. 192026, 01 October 2014 LEONEN, J. Facts: Petitioner Automat Realty and Development Corporation (Automat) is the registered owner of two parcels of land located in Barangay Malitlit, Sta. Rosa, Laguna, covered by TCT Nos. T-210027 and T-209077. Petitioner Leonor Lim (petitioner Lim) was the real estate broker behind Automat’s purchase of the property. The land was not occupied in 1990 when it was purchased by Automat. Respondent Ofelia dela Cruz volunteered her services to petitioner Lim as caretaker to prevent informal settlers from entering the property. Automat agreed, through its authorized administrator, petitioner Lim, on the condition that the caretaker would voluntarily vacate the premises upon Automat’s demand. Respondent spouses’ family stayed in the property as rent-paying tenants. They cultivated and improved the land. They shared the produced palay with Automat through its authorized agent, petitioner Lito Cecilia (petitioner Cecilia). He also remitted the rentals paid by respondent Ofelia Dela Cruz to petitioner Lim in Makati and to Automat's office in Quezon City. Sometime in August 2000, Automat asked respondent spouses to vacate the premises as it was preparing the groundwork for developing the property. Respondent spouses refused to vacate unless they were paid compensation. They claimed “they were agricultural tenants [who] enjoyed security of tenure under the law.” On October 19, 2000, respondent spouses filed a petition for maintenance of peaceful possession before PARAD. The latter dismissed the complaint declaring that “no agricultural tenancy can be established between [the parties] under the attending factual circumstances. But DARAB and CA reversed and set aside the PARAD's decision. Issue: Whether or not a lease contract exists between petitioner and respondent? Held: Yes. Automat is considered to have consented to a civil lease. Article 1643 of the Civil Code provides that “[i]n the lease of things, one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite. . . .” The Civil Code accommodates unwritten lease agreements such as Article 1682 that provides: “The lease of a piece of rural land, when its duration has not been fixed, is understood to have been for all the time necessary for the gathering of the fruits which the whole estate leased may yield in one year, or which it may yield once, although two or more years may have to elapse for the purpose.” On the other hand, Article 1687 states that “[i]f the period for the lease has not been fixed, it is understood to be from year to year, if the rent agreed upon is annual; from month to month, if it is monthly; from week to week, if the rent is weekly; and from day to day, if the rent is to be paid daily. . . .” Applying this provision, “the contract expires at the end of such month [year, week, or day] unless prior thereto, the extension of said term has been sought by appropriate action and judgment is, eventually, rendered therein granting the relief.” Under the statute of frauds, an unwritten lease agreement for a period of more than one year is unenforceable unless ratified. Respondent spouses were allowed to stay in the property as caretakers and, in turn, they paid petitioners rent for their use of the property. Petitioners’ acceptance of rental payments may be considered as ratification of an unwritten lease agreement whose period depends on their agreed frequency of rental payments. BY: BOHOLANO, MA. EVITA Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 BPI EXPRESS CARD CORPORATION vs MA. ANTONIA R. ARMOVIT G.R. No. 163654, 08 October 2014 BERSAMIN, J. Facts: Armovit, then a depositor of the Bank of the Philippine Islands at its Cubao Branch, was issued by BPI Express Credit a pre-approved BPI Express Credit Card (credit card) in 1989 with a credit limit of P20,000.00 that was to expire at the end of March 1993. On November 21, 1992, she treated her British friends from Hong Kong to lunch at Mario's Restaurant in the Ortigas Center in Pasig. As the host, she handed to the waiter her credit card to settle the bill, but the waiter soon returned to inform her that her credit card had been cancelled upon verification with BPI Express Credit and would not be honored. Inasmuch as she was relying on her credit card because she did not then carry enough cash that day, her guests were made to share the bill to her extreme embarrassment. Outraged, Armovit called BPI Express Credit to verify the status of her credit card. She learned that her credit card had been summarily cancelled for failure to pay her outstanding obligations. She vehemently denied having defaulted on her payments. Thus, by letter dated February 3, 1993, she demanded compensation for the shame, embarrassment and humiliation she had suffered in the amount of P2,000,000.00. The RTC and the CA rule in favor of the respondent. Issue: Whether or not petitioner is liable to pay moral damages for breach of contract? Held: Yes. The relationship between the credit card issuer and the credit card holder is a contractual one that is governed by the terms and conditions found in the card membership agreement. Such terms and conditions constitute the law between the parties. In case of their breach, moral damages may be recovered where the defendant is shown to have acted fraudulently or in bad faith. Malice or bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity. However, a conscious or intentional design need not always be present because negligence may occasionally be so gross as to amount to malice or bad faith. Hence, bad faith in the context of Article 2220 of the Civil Code includes gross negligence. The Court disagrees with the contentions of BPI Express Credit that it was not gross negligent. The Terms and Conditions Governing the Issuance and Use of the BPI Express Credit Card printed on the credit card application form spelled out the terms and conditions of the contract between BPI Express Credit and its card holders, including Armovit. Such terms and conditions determined the rights and obligations of the parties. Yet, a review of such terms and conditions did not reveal that Armovit needed to submit her new application as the antecedent condition for her credit card to be taken out of the list of suspended cards. BPI Express Credit made an error of inadvertently including her credit card in Caution List No. 225 dated March 11, 1993 sent to its affiliated merchants. Bereft of the clear basis to continue with the suspension of the credit card privileges of Armovit, BPI Express Credit acted in wanton disregard of its contractual obligations with her. We concur with the apt observation by the CA that BPI Express Credit's negligence was even confirmed by the telegraphic message it had addressed and sent to Armovit apologizing for the inconvenience caused in inadvertently including her credit card in the caution list. It was of no consequence that the telegraphic message could have been intended for another client, as BPI Express Credit apparently sought to convey subsequently, because the tenor of Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 the apology included its admission of negligence in dealing with its clients, Armovit included. Indeed, BPI Express Credit did not observe the prudence expected of banks whose business was imbued with public interest. BY: BOHOLANO, MA. EVITA

FE U. QUIJANO vs. ATTY. DARYLL A. AMANTE G.R. No. 164277, 08 October 2014 BERSAMIN, J. Facts: The petitioner and her siblings, namely: Eliseo, Jose and Gloria, inherited from their father, the late Bibiano Quijano, the parcel of land registered in the latter's name under Original Certificate of Title (OCT) No. 0-188 of the Registry of Deeds in Cebu City with an area of 15,790 square meters, more or less. On April 23, 1990, prior to any partition among the heirs, Eliseo sold a portion of his share to respondent Atty. Daryll A. Amante (respondent). On September 30, 1992, petitioner Fe, Eliseo, Jose and Gloria executed a deed of extrajudicial partition to divide their father's estate (consisting of the aforementioned parcel of land) among themselves. Due to the petitioner's needing her portion that was then occupied by the respondent, she demanded that the latter vacate it. Despite several demands, the last of which was by the letter dated November 4, 1994,7 the respondent refused to vacate, prompting her to file against him a complaint for ejectment and damages in MTCC. The MTCC ruled in favor of petitioner but the RTC and CA reversed the aforesaid decision. Issue: Whether or not may pass upon the issue of ownership in an ejectment case? Held: Yes. An ejectment case can be either for forcible entry or unlawful detainer. It is a summary proceeding designed to provide expeditious means to protect the actual possession or the right to possession of the property involved. The sole question for resolution in the case is the physical or material possession (possession de facto) of the property in question, and neither a claim of juridical possession (possession de jure) nor an averment of ownership by the defendant can outrightly deprive the trial court from taking due cognizance of the case. Hence, even if the question of ownership is raised in the pleadings, like here, the court may pass upon the issue but only to determine the question of possession especially if the question of ownership is inseparably linked with the question of possession. The adjudication of ownership in that instance is merely provisional, and will not bar or prejudice an action between the same parties involving the title to the property. Considering that the parties are both claiming ownership of the disputed property, the CA properly ruled on the issue of ownership for the sole purpose of determining who between them had the better right to possess the disputed property. In a co-ownership, the undivided thing or right belong to different persons, with each of them holding the property pro indiviso and exercising her rights over the whole property. Each co-owner may use and enjoy the property with no other limitation than that he shall not injure the interests of his co-owners. The underlying rationale is that until a division is actually made, the respective share of each cannot Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 be determined, and every co-owner exercises, together with his co-participants, joint ownership of the pro indiviso property, in addition to his use and enjoyment of it. Even if an heir's right in the estate of the decedent has not yet been fully settled and partitioned and is thus merely inchoate, Article 4932 of the Civil Code gives the heir the right to exercise acts of ownership. Accordingly, when Eliseo sold the disputed property to the respondent in 1990 and 1991, he was only a co-owner along with his siblings, and could sell only that portion that would be allotted to him upon the termination of the co-ownership. The sale did not vest ownership of the disputed property in the respondent but transferred only the seller's pro indiviso share to him, consequently making him, as the buyer, a co-owner of the disputed property until it is partitioned. Respondent has a better right over the subject property.

BY: BOHOLANO, MA. EVITA CENTENNIAL GUARANTEE ASSURANCE CORPORATION vs. UNIVERSAL MOTORS CORPORATION, RODRIGO T. JANEO, JR., GERARDO GELLE, NISSAN CAGAYAN DE ORO DISTRIBUTORS, INC., JEFFERSON U. ROLIDA, AND PETER YAP G.R. No. 189358, 08 October 2014 PERLAS-BERNABE, J. Facts: A Complaint for Breach of Contract with Damages and Prayer for Preliminary Injunction and TRO was filed by Nissan Specialist Sales Corporation (NSSC) and its President and General Manager Orimaco against herein respondents Universal Motors Corporation (UMC), Janeo, Jr., Gelle, Nissan Cagayan de Oro Distributors, Inc. (NCOD), Rolida, and Yap before the RTC. The TRO prayed for was eventually issued by the RTC upon the posting by NSSC and Orimaco of a P1,000,000.00 injunction bond issued by their surety, CGAC. The TRO enjoined the respondents from selling, dealing, and marketing all models of motor vehicles and spare parts of Nissan, and from terminating the dealer agreement between UMC and NSSC. It likewise restrained UMC from supplying and doing trading transactions with NCOD, which, in turn, was enjoined from entering and doing business on Nissan Products within the dealership territory of NSSC as defined in the Dealer Agreement. The TRO was converted to a writ of preliminary injunction in 2002. Respondents filed a petition for certiorari and prohibition before the CA to assail the issuance of the aforesaid injunctive writ. The CA rendered a Decision holding that the RTC committed grave abuse of discretion in issuing the writ absent a clear legal right thereto on the part of NSSC and Orimaco. Consequently, the Writ of Preliminary Injunction issued by the RTC was ordered dissolved. Respondents filed an application for damages against the injunction bond issued by CGAC in the amount of P1,000,000.00.


Compilation of Case Digests in CIVIL LAW Review 2 The RTC dismissed the complaint for breach of contract with damages for lack of merit and further ruled that respondents were entitled to recover damages against the injunction bond. The RTC ordered NSSC, Orimaco, and CGAC to jointly and severally pay respondents actual damages and lost opportunities suffered by UMC in the amounts of P928,913.68 and P14,271,266.00, respectively; P50,000.00 as attorney’s fees and P500,000.00 as lost income in favor of NCOD, Rolida, and Yap; and exemplary damages of P300,000.00 for each of the respondents. CGAC assailed the order before the CA, questioning the existence of good reasons to warrant the grant of execution pending appeal and the propriety of enforcing it against one which is not the losing party in the case but a mere bondsman whose liability is limited to the surety bond it issued. The CA affirmed in part the assailed order by limiting the amount of CGAC’s liability to only P1,000,000.00. Issue: WON CGAC, as a surety, is liable in relation to whatever is adjudged to the principal. Held: YES That CGAC’s financial standing differs from that of NSSC does not negate the order of execution pending appeal. As the latter’s surety, CGAC is considered by law as being the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be inseparable. Verily,in a contract of suretyship, one lends his credit by joining in the principal debtor’s obligation so as to render himself directly and primarily responsible with him, and without reference to the solvency of the principal. Thus, execution pending appeal against NSSC means that the same course of action is warranted against its surety, CGAC.

and

CGAC’s liability should, as the CA correctly ruled, be confined to the amount of P1,000,000.00, not P500,000.00 as the latter purports.

Section 4(b), Rule 58 of the Rules provides that the injunction bond is answerable for all damages that may be occasioned by the improper issuance of a writ of preliminary injunction. The bond insures with all practicable certainty that the defendant may sustain no ultimate loss in the event that the injunction could finally be dissolved. Consequently, the bond may obligate the bondsmen to account to the defendant in the injunction suit for all: (1) such damages; (2) costs and damages; (3) costs, damages and reasonable attorney’s fees as shall be incurred or sustained by the person enjoined in case it is determined that the injunction was wrongfully issued. In this case, the RTC, in view of the improvident issuance Writ of Preliminary Injunction, adjudged CGAC’s principals, NSSC and Orimaco, liable not only for damages as against NCOD, Rolida, and Yap but also as against UMC. Since CGAC is answerable jointly and severally with NSSC and Orimaco for their liabilities to the above-mentioned parties for all damages caused by the improvident issuance of the said injunctive writ, and considering that the total amount of damages evidently exhausts the full P1,000,000.00 amount of the injunction bond, there is perforce no reason to reverse the assailed CA Decision even on this score. By: GARCIA , NIKKI A. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 ESPERANZA C. CARINAN vs. SPOUSES GAVINO CUETO AND CARMELITA CUETO G.R. No. 198636, 08 October 2014 REYES, J. Facts: The case originated from a complaint for specific performance with damages filed by Spouses Cueto (respondents) against Esperanza and her son, Jazer. The respondents alleged that sometime in May 1986, Esperanza and her husband, Jose, acquired from one Roberto the rights over a parcel of land formerly covered by Transfer Certificate of Title (TCT) No. T-129128 under the name of the GSIS, measuring 180 square meters. Their transaction was covered by a Deed of Assignment and Transfer of Rights with Assumption of Obligations. Esperanza and Jose were to assume the payment of the applicable monthly amortizations for the subject land to the GSIS. Several amortizations remained unpaid by Esperanza and Jose, resulting in an impending cancellation in 2005 of GSIS’ conditional sale of the subject property to Roberto. It was then that Esperanza, then already a widow, sought financial assistance from her brother, Gavino, in 2005. The respondents then paid from their conjugal savings Esperanza’s total obligation of P785,680.37 under the subject deed of assignment. The respondents alleged that Esperanza and Jazer undertook to execute a Deed of Absolute Sale in favor of the respondents once the title over the subject property was transferred to their names, subject to the condition that they would be given the first option to buy it back within three years by reimbursing the expenses incurred by the respondents on the property. Besides satisfaction of the unpaid amortizations to GSIS, the respondents paid for the transfer of the subject property from Roberto to Esperanza, and the renovation of the residential house erected on the subject land, resulting in additional expenses of P515,000.00. TCT was already under the name of Esperanza was surrendered to the respondents. In 2006, the respondents demanded from Esperanza and Jazer the fulfillment of their commitment to transfer the subject property to the respondents’ names through the execution of a deed of sale. When Esperanza and Jazer failed to comply despite efforts for an amicable settlement, the respondents filed with the RTC the subject complaint for specific performance with damages. Esperanza and Jazer disputed these claims. They argued that there was neither a written or verbal agreement for the transfer of the disputed property to the respondents’ names, nor a promise for the repayment of the amounts that were paid by the respondents. Esperanza believed that Gavino paid her outstanding balance with the GSIS out of sheer generosity and pity upon her. She denied having borrowed the respondents’ money because given her financial standing, she knew that she could not afford to pay it back. Furthermore, to require her to execute a deed of sale for the property’s full conveyance would totally disregard the payments that she personally made for the purchase. Issue(s): 1. WON Petitioners should be compelled to convey the subject property to the respondents. 2. WON the money paid by the respondents for Esperanza’s arrears is considered as a donation. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Held: 1. Esperanza and Jazer could not be compelled to convey the subject property to the respondents. Even granting that a promise to sell was made by Esperanza, the same was unenforceable as it was not reduced into writing. 2. The Court adopts the RTC’s and CA’s finding that between Esperanza and the respondents, there was a clear intention for a return of the amounts which the respondents spent for the acquisition, transfer and renovation of the subject property. The respondents then reasonably expected to get their money back from Esperanza. Esperanza’s claim that the expenses and payments in her behalf were purely gratuitous remained unsupported by records. The absence of intention to be reimbursed is negated by the facts of this case. The respondents’ conduct never at any time intimated any intention to donate in favor of Esperanza and Jazer. A donation is a simple act of liberality where a person gives freely of a thing or right in favor of another, who accepts it (Article 725, New Civil Code, as amended). But when a large amount of money is involved, as in this case, this court is constrained to take Esperanza and Jazer’s claim of generosity by the respondents with more than a grain of salt. Esperanza’s refusal to pay back would likewise result in unjust enrichment, to the clear disadvantage of the respondents. “The main objective of the principle against unjust enrichment is to prevent one from enriching himself at the expense of another without just cause or consideration.”21 While Esperanza claims that her brother’s generosity was the consideration for the respondents’ payment of her obligations, this was not sufficiently established, that even the respondents vehemently denied the allegation. In order to sufficiently substantiate her claim that the money paid by the respondents was actually a donation, Esperanza should have also submitted in court a copy of their written contract evincing such agreement. Article 748 of the New Civil Code (NCC), which applies to donations of money, is explicit on this point as it reads: Art. 748. The donation of a movable may be made orally or in writing. An oral donation requires the simultaneous delivery of the thing or of the document representing the right donated. If the value of the personal property donated exceeds five thousand pesos, the donation and the acceptance shall be made in writing. Otherwise, the donation shall be void. A donation must comply with the mandatory formal requirements set forth by law for its validity. When the subject of donation is purchase money, Article 748 of the NCC is applicable. Accordingly, the donation of money as well as its acceptance should be in writing. Otherwise, the donation is invalid for non-compliance with the formal requisites prescribed by law. Although the Court affirms the trial and appellate courts’ Held that, first, there was no donation in this case and, second, the respondents are entitled to a return of the amounts which they spent for the subject property, it still cannot sustain the respondents’ plea for Esperanza’s full conveyance of the subject property. To impose the property’s transfer to the respondents’ names would totally Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 disregard Esperanza’s interest and the payments which she made for the property’s purchase. Thus, the principal amount to be returned to the respondents shall only pertain to the amounts that they actually paid or spent. The Court finds no cogent reason to disturb the trial court’s resolve to require in its Decision dated December 15, 2009, around four years after the sums were paid for the subject property’s acquisition and renovation, the immediate return of the borrowed amounts.

By: GARCIA , NIKKI A.

ELIZA ZUÑIGA-SANTOS,* REPRESENTED BY HER ATTORNEY-IN FACT, NYMPHA Z. SALES, v. MARIA DIVINA GRACIA SANTOS-GRAN** AND REGISTER OF DEEDS OF MARIKINA CITY. G.R. No. 197380, 08 October 2014 PERLAS-BERNABE, J. Facts: In 2006, petitioner through her authorized representative, Sales, filed a Complaint for annulment of sale and revocation of title against respondents Gran and the Register of Deeds of Marikina City before the RTC. In her Complaint, petitioner alleged, among others, that: (a) she was the registered owner of three (3) parcels of land prior to their transfer in the name of private respondent Gran; (b) she has a second husband by the name of , with whom she did not have any children; (c) she was forced to take care of Lamberto’s alleged daughter, Gran, whose birth certificate was forged to make it appear that the latter was petitioner’s daughter; (d) pursuant to void and voidable documents, i.e., a Deed of Sale, Lamberto succeeded in transferring the subject properties in favor of and in the name of Gran; (e) despite diligent efforts, said Deed of Sale could not be located; and (f) she discovered that the subject properties were transferred to Gran sometime in November 2005. Accordingly, petitioner prayed, inter alia, that Gran surrender to her the subject properties and pay damages, including costs of suit. For her part, Gran filed a Motion to Dismiss, contending that (a) the action filed by petitioner had prescribed since an action upon a written contract must be brought within ten (10) years from the time the cause of action accrues, or in this case, from the time of registration of the questioned documents before the Registry of Deeds; and (b) the Amended Complaint failed to state a cause of action as the void and voidable documents sought to be nullified were not properly identified nor the substance thereof set forth, thus, precluding the RTC from rendering a valid judgment in accordance with the prayer to surrender the subject properties. The RTC granted Gran’s motion and dismissed the Amended Complaint for its failure to state a cause of action, considering that the deed of sale sought to be nullified was not attached. It likewise held that the certificates of title covering the subject properties cannot be collaterally attacked and that since the action was based on a written contract, the same had already prescribed under Article 1144 of the Civil Code. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 The CA sustained the dismissal of petitioner’s Amended Complaint but on the ground of insufficiency of factual basis. It disagreed with the RTC’s finding that the said pleading failed to state a cause of action since it had averred that: (a) petitioner has a right over the subject properties being the registered owner thereof prior to their transfer in the name of Gran; (b) Lamberto succeeded in transferring the subject properties to his daughter, Gran, through void and voidable documents; and (c) the latter’s refusal and failure to surrender to her the subject properties despite demands violated petitioner’s rights over them. The CA likewise ruled that the action has not yet prescribed since an action for nullity of void deeds of conveyance is imprescriptible. Nonetheless, it held that since the Deed of Sale sought to be annulled was not attached to the Amended Complaint, it was impossible for the court to determine whether petitioner’s signature therein was a forgery and thus, would have no basis to order the surrender or reconveyance of the subject properties. Issue: Whether or not the dismissal of petitioners complaint should be sustained. Held: The Court finds the Complaint’s dismissal to be in order considering that petitioner’s cause of action had already prescribed. It is evident that petitioner ultimately seeks for the reconveyance to her of the subject properties through the nullification of their supposed sale to Gran. An action for reconveyance is one that seeks to transfer property, wrongfully registered by another, to its rightful and legal owner. Having alleged the commission of fraud by Gran in the transfer and registration of the subject properties in her name, there was, in effect, an implied trust created by operation of law pursuant to Article 1456 of the Civil Code which provides: Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. To determine when the prescriptive period commenced in an action for reconveyance, the plaintiff’s possession of the disputed property is material. If there is an actual need to reconvey the property as when the plaintiff is not in possession, the action for reconveyance based on implied trust prescribes in ten (10) years, the reference point being the date of registration of the deed or the issuance of the title. On the other hand, if the real owner of the property remains in possession of the property, the prescriptive period to recover title and possession of the property does not run against him and in such case, the action for reconveyance would be in the nature of a suit for quieting of title which is imprescriptible. In the case at bar, a reading of the allegations of the Complaint failed to show that petitioner remained in possession of the subject properties in dispute. On the contrary, it can be reasonably deduced that it was Gran who was in possession of the subject properties, there being an admission by the petitioner that the property covered was being used by Gran’s mother-in-law. In fact, petitioner’s relief in the Amended Complaint for the “surrender” of three (3) properties to her bolsters such stance. And since the new titles to the subject properties in the name of Gran were issued by Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 the Registry of Deeds of Marikina on the following dates: TCT No. 224174 on July 27, 1992,44 TCT No. N-5500 on January 29, 1976,45 and TCT No. N-4234 on November 26, 1975,46 the filing of the petitioner’s complaint before the RTC on January 9, 2006 was obviously beyond the ten-year prescriptive period, warranting the Complaint’s dismissal all the same.

By: GARCIA , NIKKI A. EXTRAORDINARY DEVELOPMENT CORPORATION, v. HERMINIA F. SAMSON-BICO AND ELY B. FLESTADOs. G.R. No. 191090, 13 October 2014 PEREZ, J. Facts: During his lifetime, Apolonio owned a parcel of land consisting of 29,748 square meters situated at Barangay Pantok, Binangonan, Rizal cover. When Apolonio and Maria died, the property was inherited by Juan and Irenea. When the latter died, the heirs of Juan and Irenea became coowners of the property. On 16 April 2002, the heirs of Juan, without the consent of respondents, the heirs of Irenea executed in favor of petitioner EDC a Deed of Absolute Sale4 covering the subject property for P2,974,800.00. EDC was able to cause the registration of the Deed of Absolute Sale with the Office of the Provincial Assessor Rizal and transfer the tax declaration over the subject property in its name. This prompted respondents to file the Complaint for Annulment of Contract and Reconveyance of Possession with Damages. In its Answer, EDC alleged that it is a buyer in good faith and for value of the subject property because it was of the honest belief that the heirs of Juan are the only heirs of the late Apolonio. EDC counterclaimed for damages.On the other hand, the heirs of Juan asserted that respondents were aware of and were parties to the contract to sell entered into by them and EDC. Issue: Would the sale by a co-owner of a physical portion of an undivided property held in common be valid? Held: Yes. The fact that the agreement in question purported to sell a concrete portion of the hacienda does not render the sale void, for it is a well-established principle that the binding force of a contract must be recognized as far as it is legally possible to do so. “Quando res non valet ut ago, valeat quantum valere potest.” (When a thing is of no force as I do it, it shall have as much force as it can have.) Applying this principle to the instant case, there can be no doubt that the transaction entered into by Salome and Soledad could be legally recognized in its entirety since the object of the sale did not even exceed the ideal shares held by the former in the co-ownership. As a matter of fact, the deed of sale executed between the parties expressly stipulated that the portion of Lot 162 sold to Soledad would be taken from Salome’s 4/16 undivided interest in said lot, which the latter could Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 validly transfer in whole or in part even without the consent of the other co-owners. Salome’s right to sell part of her undivided interest in the co-owned property is absolute in accordance with the wellsettled doctrine that a co-owner has full ownership of his pro-indiviso share and has the right to alienate, assign or mortgage it, and substitute another person in its enjoyment. Since Salome’s clear intention was to sell merely part of her aliquot share in Lot 162, in our view no valid objection can be made against it and the sale can be given effect to the full extent. We are not unaware of the principle that a co-owner cannot rightfully dispose of a particular portion of a co-owned property prior to partition among all the co-owners. However, this should not signify that the vendee does not acquire anything at all in case a physically segregated area of the co-owned lot is in fact sold to him. Since the co-owner/vendor’s undivided interest could properly be the object of the contract of sale between the parties, what the vendee obtains by virtue of such a sale are the same rights as the vendor had as co-owner, in an ideal share equivalent to the consideration given under their transaction. In other words, the vendee steps into the shoes of the vendor as co-owner and acquires a proportionate abstract share in the property held in common.

By: RESMA, JOSE CRIS G.

SPOUSES DOMINADOR MARCOS AND GLORIA MARCOS, Petitioners, v. HEIRS OF ISIDRO BANGI AND GENOVEVA DICCION, REPRESENTED BY NOLITO SABIANOs. G.R. No. 185745, 15 October 2014 REYES, J. Facts: On June 26, 1998, respondents, filed with the RTC a complaint, for annulment of documents, cancellation of transfer certificates of titles, restoration of original certificate of title and recovery of ownership plus damages against spouses Dominador Marcos (Dominador) and Gloria Marcos (Gloria) petitioners. In their complaint, the respondents averred that on November 5, 1943, their parents, Isidro and Genoveva, bought the one-third portion of a 2,138-square meter parcel of land situated in San Manuel, Pangasinan and) from Eusebio Bangi (Eusebio), as evidenced by a Deed of Absolute Sale executed by the latter. After the sale, the respondents claimed that Isidro and Genoveva took possession of the subject property until they passed away. Further, the respondents alleged that sometime in 1998, they learned that the title to the subject property, including the portion sold to Isidro and Genoveva, was transferred to herein petitioner.Thus, the respondents sought the nullification of the Deeds of Absolute Sale. In their answer, herein petitioners, together with the spouses Jose and Pacita, Ceasaria and the spouses Emilio and Zenaida, denied the allegations of the respondents, claiming that they are the owners of the subject property, including the one-third portion thereof allegedly sold by Eusebio to the respondents’ parents Isidro and Genoveva. They averred that the subject property was originally owned by Alipio; that after his death, his children – Eusebio, Espedita and Jose Bangi – inherited the Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 same. That on May 8, 1995, Espedita and Jose Bangi executed a deed of extrajudicial partition with quitclaim wherein they waived their rights over the subject property in favor of Eusebio’s children – Ceasaria, Zenaida, Pacita and herein petitioner Gloria. Issue: Whether the CA committed reversible error in affirming the RTC Decision which upheld the Deed of Absolute Sale dated November 5, 1943 over the one-third portion of the subject property executed by Eusebio in favor of the spouses Isidro and Genoveva? Held: No. The evidence presented by the parties indubitably show that, after the death of Alipio, his heirs – Eusebio, Espedita and Jose Bangi – had orally partitioned his estate, including the subject property, which was assigned to Eusebio. On this score, the CA’s disquisition is instructive, viz: Even so, We are of the considered view that in 1943, when Eusebio Bangi executed the deed of sale in favor of Isidro Bangi, Eusebio already had acquired interest in the property covered by OCT No. 22361 through succession from his father, Alipio Bangi, who died in 1918. Further, it appears that such interest extends to the entire property embraced by OCT No. 22361. This much can be gleaned from the testimony of appellant Gloria Marcos herself, who said that her father Eusebio owned the entire lot because his siblings Espedita and Jose already had their share from other properties. That there was no written memorandum of the partition among Alipio Bangi’s heirs cannot detract from appellee’s cause. It has been ruled that oral partition is effective when the parties have consummated it by the taking of possession in severalty and the exercise of ownership of the respective portions set off to each. Here, it is obvious that Eusebio took possession of his share and exercised ownership over it. Thus, the preponderant evidence points to the validity of the sale executed between Eusebio Bangi and Isidro Bangi on November 5, 1943 over the one-third portion of the property covered by OCT No. 22361. The foregoing circumstances cast doubt as to the petitioners’ insinuation that the estate of Alipio had only been partitioned in 1995, when Espedita and Jose Bangi executed the said Deed of Extrajudicial Partition with Quitclaim. As pointed out by the CA, the execution of the Deed of Extrajudicial Partition with Quitclaim is but a ruse to defeat the rights of the respondents over the onethird portion of the subject property. If at all, the Deed of Extrajudicial Partition with Quitclaim executed by Espedita and Jose Bangi merely confirms the partition of Alipio’s estate that was earlier had, albeit orally, in which the subject property was assigned to Eusebio. Accordingly, considering that Eusebio already owned the subject property at the time he sold the one-third portion thereof to the spouses Isidro and Genoveva on November 5, 1943, having been assigned the same pursuant to the oral partition of the estate of Alipio effected by his heirs, the lower courts correctly nullified the Deeds of Absolute Sale dated August 10, 1995 and November 21, 1995, as well as TCT No. T-47829 and T-48446.

By: RESMA, JOSE CRIS G.


Compilation of Case Digests in CIVIL LAW Review 2 CARLOS A. LORIA, v. LUDOLFO P. MUÑOZ, JR.. G.R. No. 187240, 15 October 2014 LEONEN, J. Facts: In his complaint, Muñoz alleged that he has been engaged in construction under the name, “Ludolfo P. Muñoz, Jr. Construction.” In August 2000, Loria visited Muñoz in his office in Doña Maria Subdivision in Daraga, Albay. He invited Muñoz to advance P2,000,000.00 for a subcontract of a P50,000,000.00 river-dredging project in Guinobatan. Loria represented that he would make arrangements such that Elizaldy Co, owner of Sunwest Construction and Development Corporation, would turn out to be the lowest bidder for the project. Elizaldy Co would pay P8,000,000.00 to ensure the project’s award to Sunwest. After the award to Sunwest, Sunwest would subcontract 20% or P10,000,000.00 worth of the project to Muñoz. The project to dredge the Masarawag and San Francisco Rivers in Guinobatan was subjected to public bidding. The project was awarded to the lowest bidder, Sunwest Construction and Development Corporation. Sunwest allegedly finished dredging the Masarawag and San Francisco Rivers without subcontracting Muñoz. With the project allegedly finished, Muñoz demanded Loria to return his P2,000,000.00. Loria, however, did not return the money. Loria answered Muñoz’s complaint. He admitted receiving P481,800.00 from Muñoz but argued that the complaint did not state a cause of action against him. According to Loria, he followed up the project’s approval with the Central Office of the Department of Public Works and Highways as the parties agreed upon. He was, therefore, entitled to his representation expenses. Issue: Whether or not Loria must return Munoz’s P2,000,000.00under the principle of unjust enrichment? Held: Yes. The principle of unjust enrichment has two conditions. First, a person must have been benefited without a real or valid basis or justification. Second, the benefit was derived at another person’s expense or damage. In this case, Loria received P2,000,000.00 from Muñoz for a subcontract of a government project to dredge the Masarawag and San Francisco Rivers in Guinobatan, Albay. However, contrary to the parties’ agreement, Muñoz was not subcontracted for the project. Nevertheless, Loria retained the P2,000,000.00. Thus, Loria was unjustly enriched. He retained Muñoz’s money without valid basis or justification. Under Article 22 of the Civil Code of the Philippines, Loria must return the P2,000,000.00 to Muñoz. Contrary to Loria’s claim, Section 6 of the Presidential Decree No. 1594 does not prevent Muñoz from recovering his money. Under Section 6 of the Presidential Decree No. 1594, a contractor shall not subcontract a part or interest in a government infrastructure project without the approval of the relevant department secretary: Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


Section 6. Assignment and Contract. The contractor shall not assign, transfer, pledge, subcontract or make any other disposition of the contract or any part or interest therein except with the approval of the Minister of Public Works, Transportation and Communications, the Minister of Public Highways, or the Minister of Energy, as the case may be. Approval of the subcontract shall not relieve the main contractor from any liability or obligation under his contract with the Government nor shall it create any contractual relation between the subcontractor and the Government. A subcontract, therefore, is void only if not approved by the department secretary. By: RESMA, JOSE CRIS G.

ROLANDO ROBLES, REPRESENTED BY ATTY. CLARA C. ESPIRITU, v. FERNANDO FIDEL YAPCINCO, PATROCINIO B. YAPCINCO, MARIA CORAZON B. YAPCINCO, AND MARIA ASUNCION B. YAPCINCO-FRONDAs. G.R. No. 169568, 22 October 2014 BERSAMIN, J. Facts: The property subject of this case was originally owned and was in the name of Fernando F. Yapcinco. Yapcinco, sometime in 1944 constituted a mortgage over the said property in favor of Jose C. Marcelo to secure the performance of his obligation. In turn, Marcelo transferred his rights as the mortgagee to Apolinario Cruz. When Yapcinco failed to make good his obligation, Cruz was prompted to foreclose the property. The CFI of Tarlac ruled that the administratrix of the late Yapcinco to pay Apolinario Cruz the indebtedness secured by the mortgage plus interest; and in case of the failure to pay after 90 days from the date of the decision, the property would be sold at a public auction. Apolinario Cruz was adjudged the highest bidder in the public auction held on March 18, 1959. In his favor was then issued the certificate of absolute sale,6 and he took possession of the property in due course. However, he did not register the certificate of sale; nor was a judicial confirmation of sale issued. On September 5, 1972, Apolinario Cruz donated the property to his grandchildren, namely: Carlos C. de la Rosa, Apolinario Bernabe, Ferdinand Cruz, and petitioner Rolando Robles. On August 29, 1991, however, Apolinario Bernabe falsified a deed of absolute sale. As a consequence of which, a new TCT was issued in the name of Bernabe and his co-vendees. this prompted the other donees to file a complaint for the nullification of the contract of sale, cancellation of title and reconveyance against Apolinario Bernabe and his co-vendees but such was not pursued aggressively. On January 2, 2000, the respondents, all heirs of the Spouses Yapcinco, instituted an action against Apolinario Bernabe and his co-vendees in the RTC in Tarlac City for the annulment of TCT in Bernabe’s name, document restoration, reconveyance and damages. The RTC declared the deed of Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 sale in favor of Bernabe and his co-vendee null and void and ordered the restoration of the TCT in the name of Fernando Yapcinco. On December 17, 2002, the petitioner filed an action for the nullification of document, cancellation of title, reconveyance and damages against the respondents. He averred that the heirs of Yapcinco had acted in bad faith in causing the issuance of TCT No. 354061 because they had known fully well that the property had long been excluded from the estate of Yapcinco by virtue of the CFI decision dated July 27, 1956, and which the CA affirmed on April 25, 1958; that a certificate of absolute sale was issued in the name of Apolinario Cruz as early as 1959; and that he had a vested right in the property pursuant to the deed of donation executed on September 5, 1972 by Apolinario Cruz in his favor, among others. The RTC ruled rendered in favor of the plaintiff by declaring the subject land covered by TCT No. 354067 to be owned by the late Apolinario Cruz and is part of his estate. But this was subsequently reversed by the CA. The CA held that due to the non-registration of the certificate of sale, the period of redemption did not commence to run. It also held that Apolinario Cruz never acquired title to the property and could not have conveyed and transferred ownership over the same to his grandchildren through the deed of donation. Issue: Whether or not the CA correctly ruled that Apolinario Cruz, as purchaser in a judicial foreclosure of sale, never acquired title to the subject property by the mere omission to register the certificate of sale and that therefore it is still the respondents who has the better right over the subject property. Held: No, the CA erred in Held that the mere omission on the part of Fernando Cruz to register the Certificate of Sale resulted in non-acquisition of title over the subject property. The registration of the sale is required only in extra-judicial foreclosure sale because the date of the registration is the reckoning point for the exercise of the right of redemption. In contrast, the registration of the sale is superfluous in judicial foreclosure because only the equity of redemption is granted to the mortgagor, except in mortgages with banking institutions. The equity of redemption is the right of the defendant mortgagor to extinguish the mortgage and retain ownership of the property by paying the secured debt within the 90-DAY PERIOD AFTER THE JUDGMENT BECOMES FINAL, OR EVEN AFTER THE FORECLOSURE SALE BUT PRIOR TO THE CONFIRMATION OF THE SALE. In this light, it was patent error for the CA to declare that: "By Apolinario Cruz's failure to register the 18 March 1958 Certificate of Absolute Sale in the Office of the Register of Deeds, the period of redemption did not commence to run." In the case at bar, It was not denied that Fernando F. Yapcinco, as the mortgagor, did not pay his obligation, and that his default led to the filing of the action for judicial foreclosure against him, in which he actively participated in the proceedings, and upon his death was substituted by the administratrix of his estate. In the end, the decision in the action for judicial foreclosure called for the holding of the public sale of the mortgaged property. Due to the subsequent failure of the estate of Fernando F. Yapcinco to exercise the equity of redemption, the property was sold at the public sale, and Apolinario Cruz was declared the highest bidder. Under the circumstances, the respondents as Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 the successors-in-interest of Fernando F. Yapcinco were fully bound by that decision and by the result of the ensuing foreclosure sale. Being the heirs and successors-in-interest of the late Fernando F. Yapcinco, they could not repudiate the foreclosure sale and its consequences, and escape such consequences that bound and concluded their predecessor-in-interest whose shoes they only stepped into. Given their position on the lack of judicial confirmation of the sale in favor of Apolinario Cruz, they should have extinguished the mortgage by exercising their equity of redemption through paying the secured debt. They did not do so, and, instead, they sought the annulment of TCT No. 243719 and caused the issuance of another title in their name. The effect of the failure of Apolinario Cruz to obtain the judicial confirmation was only to prevent the title to the property from being transferred to him. For sure, such failure did not give rise to any right in favor of the mortgagor or the respondents as his successors-ininterest to take back the property already validly sold through public auction. Nor did such failure invalidate the foreclosure proceedings. To maintain otherwise would render nugatory the judicial foreclosure and foreclosure sale, thus unduly disturbing judicial stability. The decision by the CA is hereby REVERSED and SET ASIDE. By: TORRES, ALJEANE F.

SPOUSES JAIME SEBASTIAN AND EVANGELINE SEBASTIAN,vs.. BPI FAMILY BANK, INC., CARMELITA ITAPO AND BENJAMIN HAO. G.R. No. 160107, 22 October 2014 BERSAMIN, J. Facts: Herein Petitioner Spouses were employees of the Respondent BPI, Jaime being a Branch Manager and Evangeline a bank teller. On October 30, 1987, they availed themselves of a housing loan from BPI Family as one of the benefits extended to its employees. Their loan amounted to P273,000.00, and was covered by a Loan Agreement, whereby they agreed that the loan would be payable in 108 equal monthly amortizations of P3,277.57 starting on January 10, 1988 until December 10, 19963 and that the monthly amortizations would be deducted from his monthly salary. To secure the payment of the loan, they executed a real estate mortgage in favor of BPI Family5 over the property situated in Bo. Ibayo, Marilao, Bulacan and covered by TCT No. T-30.827 (M) of the Register of Deeds of Bulacan. The petitioner’s amortizations were regularly deducted from Jaime’s salary until he received a notice of termination from BPI. Evangeline also received notice of her termination. The notices of termination contain a demand for the full payment of the outstanding loan balance. The spouses both questioned their dismissal before the NLRC.


Compilation of Case Digests in CIVIL LAW Review 2 About a year after their termination from employment, the petitioners received a demand letter dated January 28, 1991 from BPI Family’s counsel requiring them to pay their total outstanding obligation amounting to P221,534.50. In the meantime, BPI Family instituted a petition for the foreclosure of the real estate mortgage. The petitioners received on March 6, 1991 the notice of extrajudicial foreclosure of mortgage dated February 21, 1991. To prevent the foreclosure of their property, the petitioners filed against the respondents their complaint for injunction and damages with application for preliminary injunction and restraining order in the RTC in Malolos, Bulacan. They therein alleged that their obligation was not yet due and demandable considering that the legality of their dismissal was still pending resolution by the labor court; hence, there was yet no basis for the foreclosure of the mortgaged property; and that the property sought to be foreclosed was a family dwelling in which they and their four children resided. The RTC dismissed the spouses’ complaint. Subsequently, the CA promulgated its assailed decision affirming the judgment of the RTC in toto. The petitioners then filed their motion for reconsideration,22 in which they contended for the first time that their rights under Republic Act No. 6552 (Realty Installment Buyer Protection Act) had been disregarded, considering that Section 3 of the law entitled them to a grace period within which to settle their unpaid installments without interest. The MR was denied. Issue: Whether or not the foreclosure of the real estate mortgage on petitioners’ family home proper. Held: Yes, the foreclosure of petitioner’s family home was proper. Accordingly, the petitioners could not raise the applicability of Republic Act No. 6552, or the strict construction of the loan agreement for being a contract of adhesion as issues for the first time either in their motion for reconsideration or in their petition filed in this Court. To allow them to do so would violate the adverse parties’ right to fairness and due process. It is well-settled that no question will be entertained on appeal unless it has been raised in the proceedings below. Points of law, theories, issues and arguments not brought to the attention of the lower court, administrative agency or quasi-judicial body, need not be considered by the viewing court, as they cannot be raised for the first time at that late stage. Basic considerations of fairness and due process impel this rule. Any issue raised for the first time on appeal is barred by estoppel. Republic Act No. 6552 was enacted to protect buyers of real estate on installment payments against onerous and oppressive conditions. Having paid monthly amortizations for two years and four months, the petitioners now insist that they were entitled to the grace period within which to settle the unpaid amortizations without interest provided under Section 3, supra. Otherwise, the foreclosure of the mortgaged property should be deemed premature inasmuch as their obligation was not yet due and demandable. The petitioners’ insistence would have been correct if the monthly amortizations being paid to BPI Family arose from a sale or financing of real estate. In their case, however, the monthly Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 amortizations represented the installment payments of a housing loan that BPI Family had extended to them as an employee’s benefit. The monthly amortizations they were liable for was derived from a loan transaction, not a sale transaction, thereby giving rise to a lender-borrower relationship between BPI Family and the petitioners. It bears emphasizing that Republic Act No. 6552 aimed to protect buyers of real estate on installment payments, not borrowers or mortgagors who obtained a housing loan to pay the costs of their purchase of real estate and used the real estate as security for their loan. The “financing of real estate in installment payments” referred to in Section 3, supra, should be construed only as a mode of payment vis-à-vis the seller of the real estate, and excluded the concept of bank financing that was a type of loan. Accordingly, Sections 3, 4 and 5, supra, must be read as to grant certain rights only to defaulting buyers of real estate on installment, which rights are properly demandable only against the seller of real estate. There was basis to declare the petitioners’ entire outstanding loan obligation mature as to warrant the foreclosure of their mortgage. It is settled that foreclosure is valid only when the debtor is in default in the payment of his obligation. The petitioners, having signed a deed of mortgage in favor of appellee bank, appellants should have foreseen that when their principal obligation was not paid when due, the mortgagee has the right to foreclose the mortgage and to have the property seized and sold with a view to applying the proceeds to the payment of the principal obligation. Petition DENIED. By: TORRES, ALJEANE F.

FOREST HILLS GOLF AND COUNTRY CLUB, INC. vs. GARDPRO, INC.. G.R. No. 164686, 22 October 2014 BERSAMIN, J. Facts: Petitioner Forest Hills Golf and Country Club, Inc. (interchangeably Forest Hills or Club), a non-profit stock corporation, was established to promote social, recreational and athletic activities among its members. Members. In March 1993, Fil-Estate Properties, Inc., a party to a Project Agreement to develop the Forest Hills Residential Estates and the Forest Hills Golf and Country Club, undertook to market the golf club shares of Forest Hills for a fee. In July 1995, Fil-Estate Properties, Inc. (FEPI) assigned its rights and obligations under the Project Agreement to Fil- Estate Golf and Development, Inc. (FEGDI). In 1995, FEPI and FEGDI engaged Fil-Estate Marketing Associates Inc., (FEMAI) to market and offer for sale the shares of stocks of Forest Hills. President of FEMAI made it clear that membership in the Club was a privilege, such that purchasers of shares of stock would not automatically become members of the Club, but must apply for and comply with all the requirements in order to qualify them for membership, subject to the approval of the Board of Directors. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 In 1996, Gardpro, Inc. (Gardpro) bought class “C” common shares of stock, which were special corporate shares that entitled the registered owner to designate two nominees or representatives for membership in the Club. When the general manager of the club, notified the shareholders that they were already accepting applicants, Gardpro designated Fernando R. Martin and Rolando N. Reyes to be its corporate nominees; hence, the two applied for membership in the Club. Forest Hills charged them membership fees of P50,000.00 each, prompting Martin to immediately call up Albert and complain about being thus charged despite having been assured that no such fees would be collected from them. With Albert assuring that the fees were temporary, both nominees of Gardpro paid the fees. Later, Gardpro decided to change its designated nominees, and Forest Hills charged Gardpro new membership fees of P75,000.00 per nominee. When Gardpro refused to pay, the replacement did not take place and for this, it filed a complaint before the SEC. The Sec hearing officer decided in favor of Gardpro. SEC En Banc affirmed the findings of the hearing officer. The SEC En Banc found that what the by-laws authorizes is the collection of a “transfer fee,” in such amount as may be prescribed by the Board, for every change in the designated nominees of a juridical entity (Art. II, Sec. 2.2 Subsection 2.2.2). This should be differentiated from the provision of Art. III, Sec. 13.6 of the By-laws, which authorizes the collection of “transfer fee” of P60,000 for corporate members for each transfer of stock in the club's books. The transfer fee under the former provision refers to the one imposed on the change in the corporate member's designated nominee only while the transfer fee under the latter provision refers to the a transfer of the stock itself from one corporate member to another which necessitates entry in the club's books. CA affirmed the findings of SEC. Issue: Whether or not under the applicable provisions of law on the interpretation of contracts, the replacement nominees of Gardpro, Inc., who were applying for membership in Forest Hills, should pay the required membership fees. Held: No, Forest Hills was not authorized under its articles of incorporation and by-laws to collect new membership fees for the replacement nominees of Gardpro. Under Section 2.2.6 of the Club’s by-laws, membership fees of P45,000.00 must be paid by the applicant within 30 days from the approval of the application before the share could be registered in the Stock and Transfer Books of the Club. Non-payment of the membership fees within the 30-day period would be deemed a withdrawal of the application. The amount of the fees could be waived, increased or decreased by the Board of Directors. Pursuant to the Club’s articles of incorporation and by-laws, the membership fees should be paid by the corporate member. Based on the procedure set forth in Section 2.2.7 of the by-laws, the applicant was the juridical entity, not its nominee or nominees. Although the nominee or nominees also accomplished their application forms for membership in the Club, it was the corporate member that was obliged to pay the membership fees in its own capacity because the share was registered in its name in the Stock and Transfer Book.


Compilation of Case Digests in CIVIL LAW Review 2 Golf clubs usually sell shares to individuals and juridical entities in order to raise capital for the construction of their recreational facilities. In that regard, golf clubs accept juridical entities to become regular members, and allow such entities to designate corporate nominees because only natural persons can enjoy the sports facilities. In the context of this arrangement, Gardpro’s two nominees held playing rights. But the articles of incorporation of Forest Hills and Section 2.2.2 of its by-laws recognized the right of the corporate member to replace the nominees, subject to the payment of the transfer fee in such amount as the Board of Directors determined for every change. The replacement could take place for any of the following reasons, namely: (a) if the nominee should cease to be an officer of the corporate member;24 or (b) if the corporate member should request the replacement. In case of a replacement, the playing rights would also be transferred to the new nominees. According to the second paragraph of Section 13.6 of the by-laws, the transfer of playing rights entailed the payment of P10,000.00. Yet, Section 2.2.2 of the by-laws stipulated a transfer fee for every replacement. This warranted the conclusion that Gardpro should pay to Forest Hills the transfer fee of P10,000.00 because it desired to change its nominees. Also, there was inconsistency in the amounts of membership fees. On one hand, Section 13.7 (Membership Fees) of the by-laws stated that “the membership fee of Forty Five Thousand Pesos (P45,000.00) x x x for corporate members must be paid by the applicant;” on the other, Albert’s affidavit alleged that “each nominee shall pay the P75,000.00 membership fee.” To resolve the inconsistency, the by-laws should prevail because they constituted the private statutes of the corporation and its members and must be strictly complied with and applied to the letter. The relevant provisions of the articles of incorporation and the bylaws of Forest Hills governed the relations of the parties as far as the issues between them were concerned. Indeed, the articles of incorporation of Forest Hills defined its charter as a corporation and the contractual relationships between Forest Hills and the State, between its stockholders and the State, and between Forest Hills and its stockholder; hence, there could be no gainsaying that the contents of the articles of incorporation were binding not only on Forest Hills but also on its shareholders. The charter and the by-laws were thus the fundamental documents governing the conduct of Forest Hills’ corporate affairs; they established norms of procedure for exercising rights, and reflected the purposes and intentions of the incorporators. Until repealed, the by-laws were a continuing rule for the government of Forest Hills and its officers, the proper function being to regulate the transaction of the incidental business of Forest Hills. The bylaws constituted a binding contract as between Forest Hills and its members, and as between the members themselves. Every stockholder governed by the by-laws was entitled to access them. In construing and applying the provisions of the articles of incorporation and the by-laws of Forest Hills, the CA has leaned on the plain meaning rule embodied in Article 1370 of the Civil Code, to the effect that if the terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. Our Held in Benguet Corporation, et al. v. Cesar Cabildo is instructive: The cardinal rule in the interpretation of contracts is embodied in the first paragraph of Article 1370 of the Civil Code: “[i]f the terms of a contract are clear and leave no doubt upon the Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 intention of the contracting parties, the literal meaning of its stipulations shall control.” This provision is akin to the “plain meaning rule” applied by Pennsylvania courts, which assumes that the intent of the parties to an instrument is “embodied in the writing itself, and when the words are clear and unambiguous the intent is to be discovered only from the express language of the agreement.” The process of interpreting a contract requires the court to make a preliminary inquiry as to whether the contract before it is ambiguous. A contract provision is ambiguous if it is susceptible of two reasonable alternative interpretations. Where the written terms of the contract are NOT AMBIGUOUS and can only be read one way, the court will interpret the contract as a matter of law. If the contract is determined to be ambiguous, then the interpretation of the contract is left to the court, to resolve the ambiguity in the light of the intrinsic evidence. The CA was also guided by Article 1374 of the Civil Code, which declares that “[t]he various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly.” Verily, all stipulations of the contract are considered and the whole agreement is rendered valid and enforceable, instead of treating some provisions as superfluous, void, or inoperable. The Court AFFIRMS the decision promulgated on September 26, 2003.

By: TORRES, ALJEANE F.



November 2014



MCMP CONSTRUCTION CORP., vs. MONARK EQUIPMENT CORP.. G.R. No. 201001, November 10, 2014 VELASCO JR., J.: Doctrine: Art. 1229. 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. 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: MCMP Construction Corporation (MCMP) leased heavy equipment from Monark Equipment Corporation (Monark) for various periods in 2000, the lease covered by a Rental Equipment Contract (Contract). Thus, Monark delivered five (5) pieces of heavy equipment to the project site of MCMP in Tanay, Rizal and Llavac, Quezon, the delivery evidenced by invoices as well as Documents Acknowledgment Receipt Nos. 04667 and 5706, received and signed by representatives of MCMP, namely, Jorge Samonte on December 5, 2000 and Rose Takahashi on January 29, 2001, respectively. Notably, the invoices state: "Credit sales are payable within 30 days from the date of invoice. Customer agrees to pay interest at 24% p.a. on all amounts. In addition, customer agrees to pay a collection fee of 1% compounded monthly and 2% per month penalty charge for late payment on amounts overdue. Customer agrees to pay a sum equal to 25% of any amount due as attorney's fees in case of suit, and expressly submit to the jurisdiction of the courts of Quezon City, Makati, Pasig or Manila, Metro Manila, for any legal action arising from, this transactions." Despite the lapse of the thirty (30)-day period indicated in the invoices, MCMP failed to pay the rental fees. Upon demands made upon MCMP to pay the amount due, partial payments were made. Further demands went unheeded. As of April 30, 2002, MCMP owed Monark the amount of PhP1,282,481.83. Thus, on June 18, 2002, Monark filed a suit for a Sum of Money with the RTC. On November 20, 2007, the RTC issued its Decision in favor of the plaintiff, and ordering the defendant to pay the former: From this Decision of the RTC, MCMP filed a Motion for Reconsideration dated January 31, 2008 while Monark interposed a Motion for Clarification and/or Partial Reconsideration. On April 28, 2008, the RTC issued an Order, disposing as follows: "WHEREFORE, in light of the foregoing, the Court finds no reversible error in the assailed decision henceforth, the Motion for Reconsideration of defendant is hereby DENIED for lack of merit. On the other hand, the plaintiffs Motion for Clarification and/or Partial Reconsideration is hereby GRANTED for being meritorious. Therefore, in the dispositive portion of the assailed decision dated 20 November 2007, the following should be included: 'The payment of interests, charges and fees due after April 30, 2002 and up to the time when Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 all the obligations of the defendant to the plaintiff shall have been fully paid, computed in accordance with the stipulations entered into between the parties. The CA affirmed in toto the decision of the RTC. Issue: Whether or Not the interest rate is iniquitous and unconscionable. Held: The Court takes notice that the trial court imposed upon MCMP a 24% per annum interest on the rental fees as well as a collection fee of 1% per month compounded monthly and a 2% per month penalty charge. In all then, the effective interest rate foisted upon MCMP is 60% per annum. On top of this, MCMP was assessed for attorney's fees at the rate of 25% of the total amount due. These are exorbitant and unconscionable rates and, following jurisprudence, must be equitably reduced. In Macalinao v. Bank of the Philippine Islands, the Court reduced the interest imposed by the bank of 36% for being excessive and unconscionable: "x x x Nevertheless, it should be noted that this is not the first time that this Court has considered the interest rate of 36% per annum as excessive and unconscionable. We held in Chua vs. Timan: The stipulated interest rates of 7% and 5% per month imposed on respondents' loans must be equitably reduced to 1% per month or 12% per annum. We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3% per month and higher are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not against the law. While C.B. 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, it is as if there was no express contract thereon. Hence, courts may reduce the interest rate as reason and equity demand. The same is true with respect to the penalty charge. Notably, under the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card, it was also stated therein that respondent BPI shall impose an additional penalty charge of 3% per month. Pertinently, Article 1229 of the Civil Code states: Art. 1229. 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. 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.


Compilation of Case Digests in CIVIL LAW Review 2 Following the above principles previously laid down by the Court, the interest and penalty charges imposed upon MCMP must also be considered as iniquitous, unconscionable and, therefore, void. As such, the rates may validly be reduced. Thus, the interest rate of 24% per annum is hereby reduced to 12% per annum. Moreover, the interest shall start to accrue thirty (30) days after receipt of the second set of invoices on January 21, 2001, or March 1, 2001 in accordance with the provisions in the invoices themselves. Additionally, the penalty and collection charge of 3% per month, or 36% per annum, is also reduced to 6% per annum. And the amount of attorney's fees is reduced from 25% of the total amount due to 5%. By: George D. Rocero

SPS. FELIPE SOLITARIOS AND JULIA TORDA, petitioners, vs. SPS. GASTON JAQUE AND LILIA JAQUEs. G.R. No. 199852, November 12, 2014 VELASCO JR., J.: Doctrines: (1) It is further established that when doubt exists as to the true nature of the parties' transaction, courts must construe such transaction purporting to be a sale as an equitable mortgage, as the latter involves a lesser transmission of rights and interests over the property in controversy. Thus, in several cases, the Court has not hesitated to declare a purported contract of sale to be an equitable mortgage based solely on one of the enumerated circumstances under Article 1602. (2) The only right of a mortgagee in case of non-payment of debt secured by mortgage would be to foreclose the mortgage and have the encumbered property sold to satisfy the outstanding indebtedness. The mortgagor's default does not operate to automatically vest on the mortgagee the ownership of the encumbered property, for any such effect is against public policy Facts: The property subject of this suit is a parcel of agricultural land designated as Lot 4089, consisting of 40,608 square meters (sq. m.), and located in Calbayog, Samar. It was originally registered in the name of petitioner Felipe Solitarios under Original Certificate of Title (OCT) No. 1249, and, thereafter, in the name of the respondents, spouses Gaston and Lilia Jaque (the Jaques), under Transfer Certificate of Title (TCT) No. 745. In a Complaint for Ownership and Recovery of Possession with the RTC of Calbayog City, the respondents spouses Jaque alleged that they purchased Lot 4089 from the petitioners, spouses Solitarios in stages. This sale is allegedly evidenced by a notarized Deed of Sale dated May 8, 1981. Two months later, the spouses Solitarios supposedly mortgaged the remaining half of Lot 4089 to the Jaques via a Real Estate Mortgage (REM) to secure a loan amounting to P3,000.00.


Compilation of Case Digests in CIVIL LAW Review 2 After almost two (2) years, the spouses Solitarios finally agreed to sell the mortgaged half. However, instead of executing a separate deed of sale for the second half, they executed a Deed of Sale dated April 26, 1983 for the whole lot to save on taxes and condoned the spouses Solitarios' P3,000.00 loan. In spite of the sale, the Jaques, supposedly out of pity for the spouses Solitarios, allowed the latter to retain possession of Lot 4089, subject only to the condition that the spouses Solitarios will regularly deliver a portion of the property's produce. In an alleged breach of their agreement, however, the spouses Solitarios stopped delivering any produce sometime in 2000. Worse, the spouses Solitarios even claimed ownership over Lot 4089. Thus, the Jaques filed the adverted complaint with the RTC. For their part, the spouses Solitarios denied selling Lot 4089 and explained that they merely mortgaged the same to the Jaques after the latter helped them redeem the land from the Philippine National Bank (PNB). The spouses Solitarios narrated that, way back in 1975, they obtained a loan from PNB secured by a mortgage over Lot 4089. They were able to pay this loan and redeem their property with their own funds. Shortly thereafter, in 1976, they again mortgaged their property to PNB to secure a P5,000.00 loan. This time, the Jaques volunteered to pay the mortgage indebtedness, including interests and charges and so gave the spouses Solitarios P7,000.00 for this purpose. It was their understanding that they would pay back the Jaques by delivering to them a portion of the produce of Lot 4089. The spouses Solitarios contended that this agreement was observed by the parties until May 2000, when Gaston Jaque informed them that he was taking possession of Lot 4089 as owner. And to their surprise, Gaston Jaque showed them the Deeds of Sale dated May 8, 1981 and April 26, 1983, the REM contract dated July 15, 1981, and TCT No. 745 to prove his claim. The spouses Solitarios contended that these deeds of sale were fictitious and their signatures therein forged. Further, the spouses Solitarios challenge the validity of TCT No. 745, alleging that the Jaques acquired it through fraud and machinations and by taking advantage of their ignorance and educational deficiency. On April 15, 2004, the RTC rendered a Decision upholding the validity of the deeds of sale in question and TCT No. 745, rejecting the allegations of forgery and fraud. However, in the same breath, the RTC declared that what the parties entered into was actually an equitable mortgage as defined under Article 1602 in relation to Article 1604 of the New Civil Code, and not a sale. The RTC anchored its holding on the nature of the pertinent contracts in question on its findings that: (1) after the alleged sale, the spouses Solitarios remained in possession of the land; (2) the Jaques did not physically occupy Lot 4089; (3) the consideration for the sale of the whole land as stated in the Deed of Sale dated April 26, 1983, was only P12,000.00, an amount grossly inadequate for a titled coconut and rice lands consisting of 40,608 sq. m.; (3) the Jaques did not disturb the possession of Lot 4089 by Leonora Solitarios, Felipe's sister-in-law, who resided therein; and (4) the Jaques never had a tenant in the subject property. On appeal, the CA reversed and set aside the RTC Decision, rejecting the trial court's holding that the contract between the parties constituted an equitable mortgage. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


Issue: Whether the parties effectively entered into a contract of absolute sale or an equitable mortgage. Held: No. The petition is impressed with merit. Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: (1) When the price of a sale with right to repurchase is unusually inadequate; (2) When the vendor remains in possession as lessee or otherwise; (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; (4) When the purchaser retains for himself a part of the purchase price;c (5) When the vendor binds himself to pay the taxes on the thing sold; (6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws. Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. As evident from Article 1602 itself, the presence of any of the circumstances set forth therein suffices for a contract to be deemed an equitable mortgage. No concurrence or an overwhelming number is needed. With the foregoing in mind, We thus declare that the transaction between the parties of the present case is actually one of equitable mortgage pursuant to the foregoing provisions of the Civil Code. It has never denied by respondents that the petitioners, the spouses Solitarios, have remained in possession of the subject property and exercised acts of ownership over the said lot even after the purported absolute sale of Lot 4089. This fact is immediately apparent from the testimonies of the parties and the evidence extant on record, showing that the real intention of the parties was for the transaction to secure the payment of a debt. Nothing more. The intention of the parties was for the transaction to secure the payment of a debt. To stress, Article 1602(6) of the Civil Code provides that a transaction is presumed to be an equitable mortgage: (6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.


Compilation of Case Digests in CIVIL LAW Review 2 This provision may very well be applied in this case. There is sufficient basis to indulge in the presumption that the transaction between the parties was that of an equitable mortgage and that the spouses Solitarios never wanted to sell the same to the Jaques. It is clear that the Jaques extended two loans to the spouses Solitarios, who in exchange, offered to the former the subject property, not to transfer ownership thereto, but to merely secure the payment of their debts. This may be deduced from the testimonies of both Felipe Solitarios and Gaston Jaque, revealing the fact that they agreed upon terms for the payment of the loans, in particular, the sharing in the produce of the lot. Verily, the fact that the parties agreed on payment terms is inconsistent with the claim of the Jaques that when the spouses Solitaries executed the questioned deeds of sale they had no other intention but to transfer ownership over the subject property. Thus, there is ground to presume that the transaction between the parties was an equitable mortgage and not a sale. There is nothing in the records sufficient enough to overturn this presumption. In negotiating the transactions, the parties did not deal with each other on equal terms. The Civil Code provisions that consider certain types of sales as equitable mortgages are intended for the protection of the unlettered such as the spouses Solitarios, who are penurious vis-avis their creditors. Without doubt, the spouses Solitarios need the protection afforded by the Civil Code provisions on equitable mortgage. Certainly, the parties were negotiating on unequal footing. Still another fact which militates against plaintiffs' cause is their failure to prove during trial that they really endeavored to explain to the defendants the real nature of the contract they were entering into, it appearing that the defendants are of low education compared to them especially plaintiff Gaston Jaque who is a retired military officer. The law requires that in case one of the parties to a contract is unable to read (or maybe of low education), and fraud is alleged, the person enforcing the contract must show that the term thereof have been fully explained to the former (Spouses NenaArriola and Francisco Adolfo, et.al. vs. Demetrio Lolita, Pedro, Nena, Brauliq and Dominga, all surnamed Mahilum, et. al. G.R. No. 123490, August 9, 2000). It is further established that when doubt exists as to the true nature of the parties' transaction, courts must construe such transaction purporting to be a sale as an equitable mortgage, as the latter involves a lesser transmission of rights and interests over the property in controversy. Thus, in several cases, the Court has not hesitated to declare a purported contract of sale to be an equitable mortgage based solely on one of the enumerated circumstances under Article 1602. So it should be in the present case. The transfer of the subject property is a pactum commissorium. Further, We cannot allow the transfer of ownership of Lot 4098 to the Jaques as it would amount to condoning the prohibited practice of pactum comissorium. Article 2088 of the Civil Code clearly provides that a creditor cannot appropriate or consolidate ownership over a mortgaged property merely upon failure of the mortgagor to pay a debt obligation, viz.: Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Art. 2088. The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and void. The essence of pactum commissorium is that ownership of the security will pass to the creditor by the mere default of the debtor. This Court has repeatedly declared such arrangements as contrary to morals and public policy. As We have repeatedly held, the only right of a mortgagee in case of non-payment of debt secured by mortgage would be to foreclose the mortgage and have the encumbered property sold to satisfy the outstanding indebtedness. The mortgagor's default does not operate to automatically vest on the mortgagee the ownership of the encumbered property, for any such effect is against public policy, as earlier indicated. WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Regional Trial Court, Calbayog City is REINSTATED. By: George D. Rocero

S.V. MORE PHARMA CORPORATION and ALBERTO A. SANTILLANA, petitioners, vs. DRUGMAKERS LABORATORIES, INC. and ELIEZER DEL MUNDOs. G.R. No. 200408, November 12, 2014 S.V. MORE PHARMA CORPORATION and ALBERTO A. SANTILLANA, petitioners, vs. DRUGMAKERS LABORATORIES, INC. and ELIEZER DEL MUNDOs. G.R. NO. 200416, November 12, 2014 Perlas-Bernabe, J.: Doctrine: Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty. Facts: Eliezer, Evangeline C. Del Mundo, and Atty. Quirico T. Carag (Del Mundo Group) are the registered owners of 50% of E.A. Northam Pharma Corporation, a domestic corporation which exclusively distributes and markets 28 various pharmaceutical products that are exclusively manufactured by Drugmakers, a domestic corporation under the control of Eliezer. The remaining 50% in E.A. Northam are owned by Alberto and Nilo S. Valente (Santillana Group). The Del Mundo Group ceded all their rights and interests in E.A. Northam in favor of the Santillana Group for a consideration of P4,200,000.00, and they agreed that: (a) the said pharmaceutical products shall remain jointly owned by Eliezer/Drugmakers and Alberto; (b) the products shall be exclusively manufactured by Drugmakers as long as Eliezer maintains majority ownership and control of the said company; and (c) the products will be sold, conveyed, and transferred to S.V. More, provided that Alberto remains its chief executive officer with majority ownership and control thereof. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


E.A. Northam entered into a Deed of Sale/Assignment with S.V. More, whereby E.A. Northam agreed to convey, transfer, and assign all its rights over 28 pharmaceutical products in favor of S.V. More which shall then have the right to have them sold, distributed, and marketed in the latter’s name, subject to the condition that such pharmaceutical products will be exclusively manufactured by Drugmakers based on their existing Contract Manufacturing Agreement (CMA) set to expire in October 1993. On October 20, 1993, S.V. More requested a copy of the existing CMA from Drugmakers, but to no avail. Hence, on October 23, 1993, S.V. More entered into a Contract to Manufacture Pharmaceutical Products (CMPP) with Hizon Laboratories, Inc., and, thereafter, caused the latter to manufacture some of the pharmaceutical products covered by the Deed of Sale/Assignment. Then the BFAD issued the corresponding Certificates of Product Registration (CPR) therefor, with S.V. More as distributor, and Hizon Laboratories as manufacturer. Drugmakers and Eliezer filed a Complaint for Breach of Contract and Damages against S.V. More and Alberto, and Hizon Laboratories, and its President, Rafael H. Hizon, Jr. Petitioners denied any liability, and alleged that the Deed of Sale/Assignment failed to state the true intention of the parties. Further, petitioners maintained that they did not violate the stipulation in the Deed of Sale/Assignment regarding the continuous manufacture of the subject pharmaceutical products by Drugmakers because said stipulation did not confer to Drugmakers the exclusive right to manufacture the said products. The RTC ruled in favor of respondents, and ordered petitioners, Hizon Laboratories and Rafael, to jointly and severally pay Drugmakers P6,000,000.00 as actual damages representing loss of income and/or loss of business opportunity and damages. The CA affirmed the RTC Held but it deleted the award for moral and exemplary damages and it absolved Rafael and Hizon Laboratories. Issue: W/N the CA correctly affirmed petitioners’ liability for breach of contract. Held: The consolidated petitions are partly meritorious. Petitioner S.V More, through the CMPP and absent the prior written consent of respondent Drugmakers, contracted the services of Hizon Laboratories to manufacture some of the pharmaceutical products covered by the said contracts. Thus, since the CMPP with Hizon Laboratories was executed on October 23, 1993, or seven (7) days prior to the expiration of the CMA on October 30, 1993, it is clear that S.V. More who authorized the foregoing, breached the obligation to recognize Drugmakers as exclusive manufacturer, thereby causing prejudice to the latter. However, the award of actual damages (due to loss of profits) in the amount of P6,000,000.00 was erroneous due to improper factual basis. The breach occurred only for a period of seven (7) days, or from October 23, 1993 until October 30, 1993 – that is, the date when the CMA expired. The CMA – from which stems S.V. More’s obligation to recognize Drugmakers’s status as the exclusive manufacturer of the subject pharmaceutical products and which was only carried over in the other two (2) above-discussed contracts – was never renewed by the parties, nor contained an automatic renewal clause, rendering the breach and its concomitant effect, i.e., loss of profits on the part of Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Drugmakers, only extant for the limited period of seven (7) days. It is also evident that only six (6) of the 28 pharmaceutical products were caused by petitioners to be manufactured by Hizon Laboratories. Respondents palpably suffered some form of pecuniary loss resulting from petitioners’ breach of contract, hence, the Court awarded in their favor the sum of P100,000.00 in the form of temperate damages under Article 2224 of the Civil Code which states that “temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty,” as in this case. BY: Brenda Dela Cruz – Beltran

OWEN PROSPER A. MACKAY, vs. SPOUSES DANA CASWELL AND CERELINA CASWELLs. G.R. No. 183872, November 17, 2014 DEL CASTILLO, J.: Facts: Petitioners needed electrical installation service in their newly built home in San Narciso, Zambales. They asked Zambales II Electric Cooperative (Zameco II) how much its service for the installation would be. Engr. Pulangco quoted an estimate of P456,000.00. However, petitioners instead hired respondent Owen who offered to do the job for only P250,000.00. Respondent allegedly completed the installation, by then, petitioners had paid him P227,000.00. At Cerelina Caswell’s (Cerelina) request, Zameco II inspected the installation work and tested the distribution transformers. The inspection showed defects, and thus, Zameco II refused to provide energization to the Caswell home. The petitioners looked for respondent but he could not be found. Hence, they were constrained to ask Zameco II to correct all the problems it found. Petitioners file a case for Estafa against respondent Owen, however, on ground of reasonable doubt, Owen was acquitted on May 15, 2003. Owen in turn filed a Complaint for Collection of Sum of Money with Damages against the Caswells for the unpaid P23,000.00 for his installation work.

Issue: Whether or not respondent should be paid the unpaid balance for his services. Held: We deny the Petition. Owen failed to execute his work in such a manner that it has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Suffice it to say that Owen’s job was not only to finish the electrical installation work. It was likewise his obligation to do quality work and to provide quality materials to ensure that electricity would flow in the Caswell home. For the Caswells to avail of this utility, it is definitely expected that the electrical materials used should meet the technical requirements for a service entrance as imposed by the only distributor of the electricity in the area, Zameco II, so that the latter can supply residential electric service efficiently and safely to the Caswells. However, as shown above, Owen failed to execute his work in such a manner that it has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. The CA correctly ruled that Caswells’ effort to communicate with Owen effectively served as a demand to rectify the latter’s work. Under Article 1715 of the Civil Code, if the work of a contractor has defects which destroy or lessen its value or fitness for its ordinary or stipulated use, he may be required to remove the defect or execute another work. If he fails to do so, he shall be liable for the expenses by the employer for the correction of the work. The demand required of the employer under the subject provision need not be in a particular form. In the case at bar, we agree with the CA that Owen was given the opportunity to rectify his work. Subsequent to Zameco II’s disapproval to supply the Caswells electricity for several reasons, the Court gives credence to the latter’s claim that they looked for Owen to demand a rectification of the work, but Owen and his group were nowhere to be found. Had Owen really been readily available to the Caswells to correct any deficiency in the work, the latter would not have entertained the thought that they were deceived and would not have been constrained to undergo the rigors of filing a criminal complaint and testifying therein. Without doubt, the Caswells exercised due diligence when they demanded from Owen the proper rectification of his work. As correctly held by the CA, the Caswells substantially complied with the requirement of Article 1715 of the Civil Code. For Owen’s failure to provide quality work, he is to reimburse the rectification costs the Caswells had shouldered as the latter’s actual damages; the unpaid compensation. Owen is claiming shall be set-off from the Caswells’ monetary claims supported by receipts. The Court recognizes that in view of the substandard work done, the Caswells necessarily incurred expenses by purchasing materials to finally get a supply of electricity in their home. One is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. In the case at bar, we give credence to the documents relied upon by the CA and the MTC in arriving at the rectification cost, i.e., a) Engr. Pulangco’s handwritten receipt of P15,400.00, to which he had testified before the court that he had indeed received such amount and b) the Sales Invoice No. 2029 issued by Peter A. Eduria Enterprises reflecting the total cost of P53,805.00.00. It must be noted en passant that Cerelina herself admitted that the contract price agreed upon was the lump sum of P250,000.00, and that she only paid Owen P227,000.00, while the dispositive portion of the MTC Decision stated that Owen’s claims are dismissed, the lower court implies that the Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 P23,000.00 unpaid compensation he sought to recover from the Caswells shall not be given directly to him, offsetting the said amount from the rectification cost that the Caswells had prayed for. In effect, under the circumstances, we deem this fair and just to measure the actual damages due the Caswells by reducing the cost they shouldered to repair the defects with the unpaid amount of the contract price due Owen. WHEREFORE,

the

instant

petition

is DENIED. AFFIRMED in

toto. No

costs.

BY: Jeremy B. Luglug NEDLLOYD LIJNEN B.V. ROTTERDAM and THE EAST ASIATIC CO., LTD., petitioners, vs. GLOW LAKS ENTERPRISES, LTD.. G.R. No.156330, November 19, 2014 Perez, J.: Doctrine: A common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilance over the goods it transported. When the goods shipped are either lost or arrived in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable. To overcome the presumption of negligence, the common carrier must establish by adequate proof that it exercised extraordinary diligence over the goods. It must do more than merely show that some other party could be responsible for the damage. Facts: Petitioner is a foreign corporation engaged in the business of carrying goods by sea and doing business in the Philippines thru its local ship agent, co-petitioner East Asiatic Co., Ltd. Respondent is likewise a foreign corporation not licensed to do, and it is not doing business in the Philippines. On or about 14 September 1987 respondent loaded on board M/S Scandutch at the Port of Manila a total 343 cartoons of garments, complete and in good order for pre-carriage to the Port of Hong Kong. The goods arrived in good condition in Hong Kong and were transferred to M/S Amethyst for final carriage to Colon, Free Zone, Panama. Both vessels, M/S Scandutch and M/S Amethyst, are owned by Nedlloyd represented in the Philippines by its agent, East Asiatic. The goods which were valued at US$53,640.00 was agreed to be released to the consignee, Pierre Kasem, International, S.A., upon presentation of the original bills of lading. Upon arrival of vessel, petitioners purportedly notified the consignee of the arrival of the shipments, and its custody was turned over to the National Ports Authority in accordance with the laws, customs regulations and practice of trade in Panama. Unauthorized persons managed to forge the covering bills of lading and on the basis of the falsified documents, the ports authority released the goods. Respondent filed a formal claim with Nedlloyd for the recovery of the amount of US$53,640.00 representing the invoice value of the shipment but to no avail. Hence, a case was filed seeking for the recovery of the said amount. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Petitioners asserted that they were never remiss in their obligation as a common carrier and the goods were discharged in good order and condition into the custody of the National Ports Authority of Panama in accordance with the Panamanian law. They averred that they cannot be faulted for the release of the goods to unauthorized persons, their extraordinary responsibility as a common carrier having ceased at the time the possession of the goods were turned over to the possession of the port authorities. The RTC dismissed of the complaint but granted petitioners’ counterclaims. The RTC ruled that Panama law was duly proven during the trial and pursuant to the said statute, carriers of goods destined to any Panama port of entry have to discharge their loads into the custody of Panama Ports Authority to make effective government collection of port dues, customs duties and taxes. The subsequent withdrawal effected by unauthorized persons on the strength of falsified bills of lading does not constitute misdelivery arising from the fault of the common carrier. On appeal, the Court of Appeals reversed the findings of the RTC and held that foreign laws were not proven in the manner provided by Section 24, Rule 132 of the Revised Rules of Court, and therefore, it cannot be given full faith and credit. Issue: Whether or not petitioners are liable for the misdelivery of goods under Philippine laws. Held: Yes. It is well settled that foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial notice of them. Like any other fact, they must be alleged and proved. To prove a foreign law, the party invoking it must present a copy thereof and comply with Sections 24 and 25 of Rule 132 of the Revised Rules of Court .Contrary to the contention of the petitioners, the Panamanian laws, particularly Law 42 and its Implementing Order No. 7, were not duly proven in accordance with Rules of Evidence and as such, it cannot govern the rights and obligations of the parties in the case at bar. Under the New Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over goods, according to the circumstances of each case. Common carriers are responsible for loss, destruction or deterioration of the goods unless the same is due to flood, storm, earthquake or other natural disaster or calamity. Extraordinary diligence is that extreme care and caution which persons of unusual prudence and circumspection use for securing or preserving their own property or rights. This expecting standard imposed on common carriers in contract of carrier of goods is intended to tilt the scales in favor of the shipper who is at the mercy of the common carrier once the goods have been lodged for the shipment. Hence, in case of loss of goods in transit, the common carrier is presumed under the law to have been in fault or negligent. The fact that the shipments were not delivered to the consignee as stated in the bill of lading or to the party designated or named by the consignee, constitutes misdelivery thereof, and under the law it is presumed that the common carrier is at fault or negligent if the goods they transported, as in this case, fell into the hands of persons who have no right to receive them.


Compilation of Case Digests in CIVIL LAW Review 2 Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier begins from the time the goods are delivered to the carrier. This responsibility remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner exercises the right of stoppage in transitu and terminates only after the lapse of a reasonable time for the acceptance, of the goods by the consignee or such other person entitled to receive them. In this case, there is no dispute that the custody of the goods was never turned over to the consignee or his agents but was lost into the hands of unauthorized persons who secured possession thereof on the strength of falsified documents. The loss or the misdelivery of the goods in the instant case gave rise to the presumption that the common carrier is at fault or negligent. BY: Brenda Dela Cruz – Beltran

SNOW MOUNTAIN DAIRY CORPORATION, petitioner v. GMA VETERANS FORCE, INC.. G.R. No. 192446, November 19, 2014 Peralta, J.: Doctrines: 1. Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages. Indeed, no evidence was presented by respondent establishing the actual amount of loss suffered by reason of the pre-termination. It is elementary that to recover damages, there must be pleading and proof of actual damages suffered. 2. Article 2224. Temperate or moderate damages, which are more than nominal but less than compensatory damages may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty. Undeniably, however, respondent suffered pecuniary loss because of the pre-termination of its services without any valid cause. But since there was no proof capable of ascertaining the actual loss, we refer to Article 2224 of the Civil Code. Facts: Snow Mountain and GMA Veterans Force, Inc. entered into a ONE YEAR security service agreement whereby the security agency would provide SNOW Mountain 7 security guards and under the agreement, it was stipulated that “The AGENCY shall charge the CLIENT for the Contract Price equivalent to SIXTEEN THOUSAND FOURTEEN (PI 6,014.00) PESOS per month per guard per twelve hours duty”. Barely 3 months into the agreement, Snow Mountain pre-terminated the contract. GMA informed Snow Mountain that the contract was valid for a year and that it could only be terminated for just cause and with 30 day notice. As a result of the pre-termination of the contract, GMA filed a case for damages with the RTC. GMA security agency alleged that it had entered in a security service agreement with petitioner; that it had recruited seven security in compliance with the service agreement and in the Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 process, incurred expenses for training, physical and medical examinations, documentations, procurement of equipments like service firearms, uniform and related expense and that it incurred income opportunity loss worth P952,833.00 which it could have earned if the agreement was faithfully honored up to the end of the contract period. Respondent prayed for actual, moral and exemplary damages, and attorney's fees. Snow Mountain on the other hand alleged that there was no basis for the claim of actual damages in the form of unrealized income as said claim was premised on a contingent circumstance, which was the fulfillment and completion of the security agreement. RTC rendered decision in favor of security agency ordering Snow Mountain to pay compensatory damages representing the unserved portion of the contract in the amount of P952, 833.50. CA affirmed the award of compensatory damages. Issue(s): 1. Was the award of actual damages proper in this case? 2. Is the Security Agency entitled to temperate damages? Held: 1.NO. Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages. Thus, actual or compensatory damages are those awarded in satisfaction of, or in recompense for, loss or injury sustained. They proceed from a sense of natural justice and are designed to repair the wrong that has been done, to compensate for the injury inflicted and not to impose a penalty. The burden is to establish one's case by a preponderance of evidence which means that the evidence, as a whole, adduced by one side, is superior to that of the other. Actual damages are not presumed. The claimant must prove the actual amount of loss with a reasonable degree of certainty premised upon competent proof and on the best evidence obtainable. Specific facts that could afford a basis for measuring whatever compensatory or actual damages are borne must be pointed out. The award of actual damages cannot be simply based on the mere allegation of a witness without any tangible claim, such as receipts or other documentary proofs to support such claim. Indeed, no evidence was presented by respondent establishing the actual amount of loss suffered by reason of the pre-termination. It is elementary that to recover damages, there must be pleading and proof of actual damages suffered. Clearly, there was no basis for the lower court's award of actual damages in the absence of evidence proving the same. 2. YES. Undeniably, however, respondent suffered pecuniary loss because of the pretermination of its services without any valid cause. But since there was no proof capable of ascertaining the actual loss, we refer to Article 2224 of the Civil Code which provides: Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Article 2224. Temperate or moderate damages, which are more than nominal but less than compensatory damages may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty. Temperate damages 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. We also take into consideration that respondent certainly spent for the security guard's training, firearms with ammunitions, uniforms and other necessary things before their deployment to petitioner. In Adriano v. Lasala, we found that respondents suffered pecuniary loss because of petitioners' untimely termination of the former's security services for no cause at all. We then affirmed the CA's award of temperate damages in the amount of P200, 000.00 in lieu of actual damages awarded by the RTC since there was no proof capable of ascertaining the actual loss. In this case, we find it just and proper to award temperate damages in the amount of P200, 000.00 in lieu of actual damages. BY:

Eric Jason B. Dugyon

LAND BANK OF THE PHILIPPINES, vs. JAIME K. IBARRA, ANTONIO K. IBARRA, JR., LUZ IBARRA VDA. DE JIMENEZ, LEANDRO K IBARRA, AND CYNTHIA IBARRA-GUERREROs. G.R. No. 182472, November 24, 2014 Peralta, J.: Facts: Respondents are the registered owners of a parcel of agricultural land in Pampanga. Pursuant to the government's Land Reform Program, the Department of Agrarian Reform (DAR) acquired 6.0191 hectares of said property and placed it under the coverage of Presidential Decree (PD) No. 27. Respondents filed a Complaint for the Determination of Just Compensation before the Regional Trial Court. Thereafter, they filed with the RTC an Omnibus Motion for the Issuance of an Order Authorizing Plaintiffs to Withdraw Amount Deposited in their Name and Amount to be Withdrawn Must be Fixed in Accordance with Section 18 of Republic Act (RA) No. 6657. RTC issued an Order directing petitioner Land Bank of the Philippines to make a provisional payment to respondents in the amount of P136,110.64. Petitioner filed its Compliance manifesting its conformity with said Order. The RTC rendered a Decision in favor of the plaintiff by modifying the computation of the respondent Department of Agrarian Reform (DAR). The

CA

ruled

that

the

computations

should

be

based

on

RA


No.

6657.

Compilation of Case Digests in CIVIL LAW Review 2 Issue: Whether or not the computation should be based on RA No. 6657 as respondents contend or under PD No. 27 in relation with EO No. 228 as petitioner contends.

Held: We rule in favor of respondents.

The issue in this case has long been laid to rest by this Court. In numerous cases, We have repeatedly held that the seizure of landholdings or properties covered by PD No. 27 did not take place on October 21, 1972, but upon the payment of just compensation. Indeed, acquisition of property under the Operation Land Transfer Program under PD No. 27 does not necessarily mean that the computation of just compensation thereof must likewise be governed by the same law. In determining the applicable formula, the date of the payment of just compensation must be taken into consideration for such payment marks the completion of the agrarian reform process. If the agrarian reform process is still incomplete as when just compensation is not settled prior to the passage of RA No. 6657, it should be computed in accordance with said law despite the fact that the property was acquired under PD No. 27. Clearly, by law and jurisprudence, R.A. No. 6657, upon its effectivity, became the primary law in agrarian reform covering all then pending and uncompleted processes, with P.D. No. 27 and E.O. No. 228 being only suppletory to the said law. It is, therefore, on equitable considerations that We base the retroactive application of RA No. 6657 for it would be highly inequitable on the part of the landowners to compute just compensation using the values not at the time of the payment but at the time of the taking in1972, considering that the government and the farmer-beneficiaries have already benefitted from the land.

Moreover, petitioner's contention that RA No. 6657 does not apply to tenanted rice and corn lands is erroneous. We cannot see why Sec. 18 of RA 6657 should not apply to rice and corn lands under PD 27. Section 75 of RA 6657 clearly states that the provisions of PD 27 and EO 228 shall only have a suppletory effect. This eloquently demonstrates that RA 6657 includes PD 27 lands among the properties which the DAR shall acquire and distribute to the landless. And to facilitate the acquisition and distribution thereof, Sees. 16, 17, and 18 of the Act should be adhered to. Attorney’s fees are not ipso facto damages. We likewise do not find any error in the CA's deletion of the award of attorney's fees in favor of respondents for it is a settled rule that attorney's fees and litigation expenses cannot automatically be recovered as part of damages in light of the policy that the right to litigate should bear no premium. An adverse decision does not ipso facto justify an award of attorney's fees Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 to the winning party. Counsel's fees are awarded only in those cases enumerated in Article 2208 of the Civil Code, which must always be reasonable. Thus, in the absence of facts which will justify the award of attorney's fees to respondents herein, We find the deletion of the same proper. Petitioner's belief in the righteousness of its claim does not necessarily connote ill motive.

Neither do we find error in the CA's Held that petitioner cannot be made to pay for the costs of the suit for since it is an instrumentality performing a governmental function in agrarian reform proceedings, charged with the disbursement of public funds, it is exempt from the payment of costs of suit under Section 1, Rule 142 of the Rules of Court. WHEREFORE, is AFFIRMED.

premises

considered,

the

instant

petition

is DENIED. The

Decision

BY: Jeremy B. Luglug

Metropolitan Bank And Trust Company, vs. Wilfred N. Chiok. G.R. No. 172652 Bank of the Philippine Islands, vs. Wilfred N. Chiok. G.R.No. 175302 Global Business Bank, Inc., vs. Wilfred N. Chiok. G.R. No. 175394. November 26, 2014 Leonardo-De Castro, J.: Doctrine: Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other. When Nuguid failed to deliver the agreed amount to Chiok, the latter had a cause of action against Nuguid to ask for the rescission of their contract. On the other hand, Chiok did not have a cause of action agaist Metrobank and Global Bank that would allow him to rescind the contracts of sale ofthe manager’s or cashier's checks, which would have resulted in the crediting of the amounts thereof back to his accounts. Otherwise stated, the right of rescission under Article 1191 of the civil code can only be exercised in accordance with the principle of relativity of contracts under Article 1311 of the same code. Facts: Respondent Wilfred N. Chiok (Chiok) had been engaged in dollar trading for several years. He usually buys dollars from Gonzalo B. Nuguid (Nuguid) at the exchange rate prevailing on the date of the sale. Chiok pays Nuguid either in cash or manager’s check, to be picked up by the latter or deposited in the latter’s bank account. Nuguid delivers the dollars either on the same day or on a later date as may be agreed upon between them, up to a week later. Chiok and Nuguid had been dealing Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 in this manner for about six to eight years, with their transactions running into millions of pesos. For this purpose, Chiok maintained accounts with petitioners Metropolitan Bank and Trust Company (Metrobank) and Global Business Bank, Inc. (Global Bank), the latter being then referred to as the Asian Banking Corporation (Asian Bank). Chiok likewise entered into a Bills Purchase Line Agreement (BPLA) with Asian Bank. Under the BPLA, checks drawn in favor of, or negotiated to, Chiok may be purchased by Asian Bank. Upon such purchase, Chiok receives a discounted cash equivalent of the amount of the check earlier than the normal clearing period. On July 5, 1995, pursuant to the BPLA, Asian Bank “bills purchased” Security Bank & Trust Company (SBTC) Manager’s Check (MC) No. 037364 in the amount of P25,500,000.00 issued in the name of Chiok, and credited the same amount to the latter’s Savings Account No. 2-007-03-00201-3. On the same day, July 5, 1995, Asian Bank issued MC No. 025935 in the amount of P7,550,000.00 and MC No. 025939 in the amount of P10,905,350.00 to Gonzalo Bernardo, who is the same person as Gonzalo B. Nuguid. The two Asian Bank manager’s checks, with a total value of P18,455,350.00 were issued pursuant to Chiok’s instruction and was debited from his account. Likewise upon Chiok’s application, Metrobank issued Cashier’s Check (CC) No. 003380 in the amount of P7,613,000.00 in the name of Gonzalo Bernardo. The same was debited from Chiok’s Savings Account No. 154-42504955. The checks bought by Chiok for payee Gonzalo Bernardo are therefore summarized as follows: Drawee Bank/Check No. Asian Bank MC No. 025935

Asian Bank MC No. 025939 Metrobank CC No. 003380 TOTAL

Amount (P) Source of fund 7,550,000.00 Chiok’s Asian Bank Savings Account No. 2-007-03-002013, which had been credited with the value of SBTC MC No. 037364(P25,500,000.00) when the latter was purchased by Asian Bank from Chiok pursuant to their BPLA. 10,905,350.00 (aggregate value of Asian Bank MCs: 18,455,350.00) 7,613,000.00 Chiok’s Metrobank Savings Account No. 154-425049553 26,068,350.00

On the following day, July 6, 1995, Chiok filed a Complaint for damages with application for ex parte restraining order and/or preliminary injunction with the Regional Trial Court (RTC) of Quezon City against the spouses Gonzalo and Marinella Nuguid, and the depositary banks, Asian Bank and Metrobank. The complaint was later amended to include the prayer of Chiok to be declared the legal owner of the proceeds of the subject checks and to be allowed to withdraw the entire proceeds thereof.


Compilation of Case Digests in CIVIL LAW Review 2 On the same day, July 6, 1995, the RTC issued a TRO directing the spouses Nuguid to refrain from presenting the said checks for payment and the depositary banks from honoring the same until further orders from the court. On August 29, 2002, the RTC rendered its Decision in favor Chiok and ordering Global Business Bank and Metropolitan Bank & Trust Company to pay him. The RTC went on to rule that due to the timely service of the TRO and the injunction, the value of the three checks remained with Global Bank and Metrobank. The RTC concluded that since Nuguid did not have a valid title to the proceeds of the manager’s and cashier’s checks, Chiok is entitled to be paid back everything he had paid to the drawees for the checks. On May 5, 2006, the Court of Appeals rendered the assailed Decision affirming the RTC Decision with modifications. The fallo of the Decision reads: WHEREFORE, premises considered, the Decision dated August 29, 2000 of the RTC, Branch 96, Quezon City is AFFIRMED with the following MODIFICATIONS: 1.) The contract to buy foreign currency in the amount of $1,022,288.50 between plaintiff-appellee Wilfred N. Chiok and defendant Gonzalo B. Nuguid is hereby rescinded. Corollarily, Manager’s Check Nos. 025935 and 025939 and Cashier’s Check No. 003380 are ordered cancelled. -XXXXAccording to the Court of Appeals, Article 1191 of the Civil Code provides a legal basis of the right of purchasers of MCs and CCs to make a stop payment order on the ground of the failure of the payee to perform his obligation to the purchaser. The appellate court ruled that such claim was impliedly incorporated in Chiok’s complaint Issue: Whether or not the purchaser of manager’s and cashier’s checks has the right to have the checks cancelled by filing an action for rescission of its contract with the payee Held: As it was construed by the Court of Appeals, the Amended Complaint of Chiok was in reality an action for rescission of the contract to buy foreign currency between Chiok and Nuguid. The Court of Appeals then proceeded to cancel the manager’s and cashier’s checks as a consequence of the granting of the action for rescission, explaining that “the subject checks would not have been issued were it not for the contract between Chiok and Nuguid. Therefore, they cannot be disassociated from the contract and given a distinct and exclusive signification, as the purchase thereof is part and parcel of the series of transactions necessary to consummate the contract.” We disagree with the above held by the CA. The right to rescind invoked by the Court of Appeals is provided by Article 1191 of the Civil Code, which reads:


Compilation of Case Digests in CIVIL LAW Review 2 Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law. The cause of action supplied by the above article, however, is clearly predicated upon the reciprocity of the obligations of the injured party and the guilty party. Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other. When Nuguid failed to deliver the agreed amount to Chiok, the latter had a cause of action against Nuguid to ask for the rescission of their contract. On the other hand, Chiok did not have a cause of action against Metrobank and Global Bank that would allow him to rescind the contracts of sale of the manager’s or cashier’s checks, which would have resulted in the crediting of the amounts thereof back to his accounts. Otherwise stated, the right of rescission under Article 1191 of the Civil Code can only be exercised in accordance with the principle of relativity of contracts under Article 1131 of the same code, which provides: Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. x x x. In several cases, this Court has ruled that under the civil law principle of relativity of contracts under Article 1131, contracts can only bind the parties who entered into it, and it cannot favor or prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof. Metrobank and Global Bank are not parties to the contract to buy foreign currency between Chiok and Nuguid. Therefore, they are not bound by such contract and cannot be prejudiced by the failure of Nuguid to comply with the terms thereof. The petitions in G.R. No. 172652 and G.R. No. 175302 are GRANTED. The Decision of the Court of Appeals dated May 5, 2006, and the Resolution on the same case dated November 6, 2006 are hereby REVERSED AND SET ASIDE, and a new one is issued ordering the DENIAL of the Amended Complaint of for lack of merit. The petition in G.R. No. 175394 is hereby rendered MOOT. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


By: ERIC JASON B. DUGYON

LOADSTAR SHIPPING COMPANY, INC. and LOADSTAR INTERNATIONAL SHIPPING COMPANY, INC., petitioners, vs. MALAYAN INSURANCE COMPANY, INC.. G.R. No. 185565, November 26, 2014 Reyes, J.: Doctrine: An insurer indemnifies the insured based on the loss or injury the latter actually suffered from. If there is no loss or injury, then there is no obligation on the part of the insurer to indemnify the insured. Should the insurer pay the insured and it turns out that indemnification is not due, or if due, the amount paid is excessive, the insurer takes the risk of not being able to seek recompense from the alleged wrongdoer. This is because the supposed subrogor did not possess the right to be indemnified and therefore, no right to collect is passed on to the subrogee. Facts: Petitioner and Philippine Associated Smelting and Refining Corporation (PASAR) entered into a Contract of Affreightment for domestic bulk transport of the latter’s copper concentrates. On September 10, 2000, 5,065.47 wet metric tons (WMT) of copper concentrates were loaded in Cargo Hold Nos. 1 and 2 of MV “Bobcat”, a marine vessel owned by Loadstar International Shipping Co., Inc. and operated by Loadstar Shipping under a charter party agreement. While MV Bobcat on its way going to Isabel, Leyte, it was found out that there is a crack on starboard side of the main deck which caused seawater to enter and wet the cargo inside Cargo Hold No. 2 forward/aft. PASAR and Philex’s representatives inspected the vessel and the samples of copper concentrates from Cargo Hold No. 2 were found to be contaminated by seawater. PASAR rejected 750 MT of the 2,300 MT cargo discharged from Cargo Hold No. 2, and sent a formal notice of claim in the amount of P37,477,361.31 to Loadstar Shipping. Elite Surveyor recommended payment to the assured the amount of P32,351,102.32 as adjusted, which amount was paid by Malayan to PASAR. PASAR signed a subrogation receipt in favor of Malayan, which in turn, demanded reimbursement from Loadstar Shipping. Loadstar refused to comply, hence, Malayan instituted with the RTC a complaint for damages. Malayan also sought to declare the bill of lading as void since it violates the provisions of Articles 1734 and 1745 of the Civil Code. Petitioners denied plaintiff-appellant’s allegations and averred that: they are not engaged in the business as common carriers but as private carriers; that the vessel was seaworthy and defendantsappellees exercised the required diligence under the law; that the entry of water into Cargo Hold No. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 2 must have been caused by force majeure or heavy weather; that due to the inherent nature of the cargo and the use of water in its production process, the same cannot be considered damaged or contaminated. The RTC dismissed the complaint stating that the vessel was seaworthy at the time of loading and that the damage was attributable to the perils of the sea. The CA reversed the RTC Held and ordered defendants-appellees to pay plaintiff-appellant P33,934,948.75 as actual damages and deducted the amount US$90,000.00 from the amount of actual damages. Issue: Whether or not petitioner is liable for actual damages against Malayan Held: No. Malayan’s claim against the petitioners is based on subrogation to the rights possessed by PASAR as consignee of the allegedly damaged goods. The right of subrogation stems from Article 2207 of the New Civil Code which states: Art. 2207. If the plaintiff’s property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury. An insurer indemnifies the insured based on the loss or injury the latter actually suffered from. If there is no loss or injury, then there is no obligation on the part of the insurer to indemnify the insured. Should the insurer pay the insured and it turns out that indemnification is not due, or if due, the amount paid is excessive, the insurer takes the risk of not being able to seek recompense from the alleged wrongdoer. This is because the supposed subrogor did not possess the right to be indemnified and therefore, no right to collect is passed on to the subrogee. Article 2199 of the New Civil Code speaks of how actual damages are awarded: Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages. In the instant case, the CA modified its Decision dated April 14, 2008 by deducting the amount of US$90,000.00 from the award, however, the same is still iniquitous for the petitioners because PASAR and Malayan never proved the actual damages sustained by PASAR. It is a flawed notion to merely accept that the salvage value of the goods is US$90,000.00, since the price was arbitrarily fixed between PASAR and Malayan. Actual damages to PASAR, for example, could include the diminution in value as appraised by experts or the expenses which PASAR incurred for the restoration of the copper concentrates to its former condition, if there is damage and rectification is still possible. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


It is also noteworthy that when the expert witness for the petitioners, Engineer Francisco Esguerra testified as regards the lack of any adverse effect of seawater on copper concentrates, Malayan never presented evidence of its own in refutation to Esguerra’s testimony. And, even if the Court will disregard the entirety of his testimony, the effect on Malayan’s cause of action is nil. As Malayan is claiming for actual damages, it bears the burden of proof to substantiate its claim. CA decision is reversed. BY: Brenda Dela Cruz – Beltran SEVEN BROTHERS SHIPPING CORPORATION, vs. DMC-CONSTRUCTION RESOURCES, INC. G.R. No. 193914, November 26, 2014 Sereno, CJ.: Doctrine: Temperate or moderate damages may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with certainty Facts: Petitioner Seven Brothers Shipping Corporation is the owner of the cargo ship M/V "Diamond Rabbit," (vessel), while respondent DMC-Construction Resource, Inc. is the owner of coal-conveyor facility, which was destroyed when the vessel became uncontrollable and unmanueverable during a storm. On 5 March 1996, respondent sent a formal demand letter to petitioner, claiming the damages sustained by their vessel. When petitioner failed to pay, respondent filed with the RTC a Complaint for damages against respondent. Based on the pieces of evidence presented by both parties, the RTC ruled that as a result of the incident, the loading conveyor and related structures of respondent were indeed damaged. In the course of the destruction, the RTC found that no force majeure existed, considering that petitioner's captain was well aware of the bad weather, and yet proceeded against the strong wind and rough seas, instead of staying at the causeway and waiting out the passage of the typhoon. It further concluded that "there was negligence on the part of the captain; hence, defendant [petitioner] as his employer and owner of the vessel shall be liable for damages caused thereby." Regarding liability, the RTC awarded respondent actual damages in the amount of P3,523,175.92 plus legal interest of 6%, based on the testimony of respondent's engineer, Loreto Dalangin (Engr. Dalangin). The value represented 50% of the P7,046,351.84 claimed by the respondent as the fair and reasonable valuation of the structure at the time of the loss, because as manifested by Engr. Dalangin at the time of the incident, the loading conveyor and related structures were almost five years old, with a normal useful life of 10 years. Aggrieved, petitioner appealed via a Notice of Appeal which the CA DISMISSED, but MODIFIED in that Seven Brothers Shipping Corporation is found liable to DMC Construction Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Equipment Resources, Inc. for nominal damages in the amount of P3,523,175.92 due to the destruction of the latter's coal conveyor post and terminal by the cargo ship M/V "Diamond Rabbit." The CA affirmed the RTC's Decision with respect to the finding of negligence on the part of the vessel's captain. However, the appellate court modified the nature of damages awarded (from actual to nominal), on the premise that actual damages had not been proved. Respondent merely relied on estimates to prove the cost of replacing the structures destroyed by the vessel, as no actual receipt was presented. Issue: Whether or not the CA erred in awarding nominal damages to respondent after having ruled that the actual damages awarded by the RTC was unfounded. Held: The SC rule that temperate, and not nominal, damages should be awarded to respondent in the amount of P3,523,175.92. To resolve the issue at hand, we must first determine whether there was indeed a violation of petitioner's right. In this light, we are inclined to adopt the factual findings of the RTC and the CA. Under the Civil Code, when an injury has been sustained, actual damages may be awarded under the following condition: Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages. Jurisprudence has consistently held that "[t]o justify an award of actual damages x x x credence can be given only to claims which are duly supported by receipts." We take this to mean by credible evidence. Otherwise, the law mandates that other forms of damages must be awarded, to wit: Art. 2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages, may be adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion of the court, according to the circumstances of each case. Under Article 2221 of the Civil Code, nominal damages may be awarded in order that the plaintiffs right, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered. We have laid down the concept of nominal damages in the following wise: Nominal damages are 'recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind or where there has been a breach of contract and no substantial injury or actual damages whatsoever have been or can be shown.


Compilation of Case Digests in CIVIL LAW Review 2 In contrast, under Article 2224, temperate or moderate damages may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with certainty. Given these findings, we are of the belief that temperate and not nominal damages should have been awarded, considering that it has been established that respondent herein suffered a loss, even if the amount thereof cannot be proven with certainty. Consequently, in computing the amount of temperate or moderate damages, it is usually left to the discretion of the courts, but the amount must be reasonable, bearing in mind that temperate damages should be more than nominal but less than compensatory. For failure of respondent to establish by competent evidence the exact amount of damages it suffered, we are constrained to award temperate damages. Considering that the lower courts have factually established that the conveyor facility had a remaining life of only five of its estimated total life often years during the time of the collision, then the replacement cost of P7,046,351.84 should rightly be reduced to 50% or P3,523,175.92. This is a fair and reasonable valuation, having taking into account the remaining useful life of the facility. By: George D. Rocero

SPOUSES TAGUMPAY N. ALBOS AND AIDA C. ALBOS, petitioners, vs. SPOUSES NESTOR M. EMBISAN AND ILUMINADA A. EMBISAN, DEPUTY SHERIFF MARINO V. CACHERO, AND THE REGISTER OF DEEDS OF QUEZON CITYs. G.R. No. 210831, November 26, 2014 VELASCO JR., J.: Doctrines: (The compounding of interest should be in writing) Payment of monetary interest shall be due only if: (1) there was an express stipulation for the payment of interest; and (2) the agreement for such payment was reduced in writing. Thus, We have held that collection of interest without any stipulation thereof in writing is prohibited by law. Nevertheless, even if there was such an agreement that interest will be compounded, We agree with the petitioners that the 5% monthly rate, be it simple or compounded, written or verbal, is void for being too exorbitant. A foreclosure should be nullified where the respondents thereof were deprived of the opportunity to settle the debt, in view of the overstated amount demanded from them.

Facts: On October 17, 1984, petitioners entered into an agreement, denominated as “Loan with Real Estate Mortgage,” with respondent spouses Nestor and Iluminada Embisan (spouses Embisan) in the amount of P84,000.00 payable within 90 days with a monthly interest rate of 5%. To secure the Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 indebtedness, a parcel of land owned by the petitioners was mortgaged to the spouses Embisan. For failure to settle their account upon maturity, petitioners requested and were given an extension of eleven (11) months to pay the loan obligation. However, when said deadline came, petitioners once again defaulted. Another extension of five (5) months was requested and set. The deadline came and went but the obligation remained unpaid. Thus, when the petitioners requested a third extension, an additional eight (8) months was granted on the condition that the monthly 5% interest from then on, i.e. June 1986 onwards, will be compounded. This stipulation, however, was not reduced in writing. On February 9, 1987, respondent spouses addressed a letter to petitioners demanding the payment of P234,021.90, representing the unpaid balance and interests from the loan. This was followed, on April 14, 1987, by another letter of the same tenor, but this time demanding from the petitioners the obligation due amounting to P258,009.15. Due to petitioners’ failure to settle their indebtedness, respondent spouses proceeded to extrajudicially foreclose the mortgaged property on October 12, 1987. Respondent spouses were the highest bidders in the auction sale and were later issued a Sherriff’s Certificate. The property was never redeemed, and so the respondent spouses executed an Affidavit of Consolidation which was then subsequently registered in the Registry of Deeds. On August 14, 1989, herein petitioners filed a complaint for the annulment of the Loan with Real Estate Mortgage, Certificate of Sale, Affidavit of Consolidation, Deed of Final Sale, before the Regional Trial Court of Quezon City (RTC). Following trial, the RTC rendered a Decision dismissing the complaint for lack of merit. The CA promulgated the assailed Decision, affirming in toto the held of the trial court. Hence, the instant petition. Issue: Whether or not the extra-judicial foreclosure proceedings should be nullified for being based on an allegedly erroneous computation of the loan’s interest.

Held: The petition is meritorious. The compounding of interest should be in writing Article 1956 of the New Civil Code, which refers to monetary interest, provides: Article 1956. No interest shall be due unless it has been expressly stipulated in writing. As mandated by the foregoing provision, payment of monetary interest shall be due only if: (1) there was an express stipulation for the payment of interest; and (2) the agreement for such payment Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 was reduced in writing. Thus, We have held that collection of interest without any stipulation thereof in writing is prohibited by law. In the case at bar, it is undisputed that the parties have agreed for the loan to earn 5% monthly interest, the stipulation to that effect put in writing. When the petitioners defaulted, the period for payment was extended, carrying over the terms of the original loan agreement, including the 5% simple interest. However, by the third extension of the loan, respondent spouses decided to alter the agreement by changing the manner of earning interest rate, compounding it beginning June 1986. Given the circumstances, We rule that the first requirement––that there be an express stipulation for the payment of interest––is not sufficiently complied with, for purposes of imposing compounded interest on the loan. The requirement does not only entail reducing in writing the interest rate to be earned but also the manner of earning the same, if it is to be compounded. Failure to specify the manner of earning interest, however, shall not automatically render the stipulation imposing the interest rate void since it is readily apparent from the contract itself that the parties herein agreed for the loan to bear interest. Instead, in default of any stipulation on the manner of earning interest, simple interest shall accrue. Imposing 5% monthly interest, whether compounded or simple, is unconscionable Nevertheless, even if there was such an agreement that interest will be compounded, We agree with the petitioners that the 5% monthly rate, be it simple or compounded, written or verbal, is void for being too exorbitant, thus running afoul of Article 1306 of the New Civil Code, which provides: Article 1306. 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. (emphasis added) As case law instructs, the imposition of an unconscionable rate of interest on a money debt, even if knowingly and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant spoliation and an iniquitous deprivation of property, repulsive to the common sense of man. It has no support in law, in principles of justice, or in the human conscience nor is there any reason whatsoever which may justify such imposition as righteous and as one that may be sustained within the sphere of public or private morals. In this case, the 5% monthly interest rate, or 60% per annum, compounded monthly, stipulated in the Kasulatan is even higher than the 3% monthly interest rate imposed in the Ruiz case. Thus, we similarly hold the 5% monthly interest to be excessive, iniquitous, unconscionable and exorbitant, contrary to morals, and the law. It is therefore void ab initio for being violative of Article 1306 of the Civil Code. With this, and in accord with the Medel and Ruiz cases, we hold that the Court of Appeals correctly imposed the legal interest of 12% per annum in place of the excessive interest stipulated in the Kasulatan.(emphasis added) Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


The foreclosure sale should be nullified In view of the above disquisitions, We are constrained to nullify the foreclosure proceedings with respect to the mortgaged property in this case, following the doctrine in Heirs of Zoilo and Primitiva Espiritu v. Landrito. The foreclosure proceeding in Heirs of Espiritu was eventually nullified by this Court because the Landritos were deprived of the opportunity to settle the debt, in view of the overstated amount demanded from them. As held: Since the Spouses Landrito, the debtors in this case, were not given an opportunity to settle their debt, at the correct amount and without the iniquitous interest imposed, no foreclosure proceedings may be instituted. A judgment ordering a foreclosure sale is conditioned upon a finding on the correct amount of the unpaid obligation and the failure of the debtor to pay the said amount. In this case, it has not yet been shown that the Spouses Landrito had already failed to pay the correct amount of the debt and, therefore, a foreclosure sale cannot be conducted in order to answer for the unpaid debt. x x x As a result, the subsequent registration of the foreclosure sale cannot transfer any rights over the mortgaged property to the Spouses Espiritu. The registration of the foreclosure sale, herein declared invalid, cannot vest title over the mortgaged property. x x x Applying Espiritu, the extra-judicial foreclosure of the mortgaged property dated October 12, 1987 is declared null, void, and of no legal effect. WHEREFORE, in view of the foregoing, the petition is GRANTED. The Decision is REVERSED and SET ASIDE. Let a new Decision be entered, the dispositive portion of which reads: 1. The stipulation in the Loan with Real Estate Mortgage imposing an interest of 5% monthly is declared void. 2. In view of the nullity of the interest imposed on the loan which affected the total arrearages upon which foreclosure was based, the foreclosure of mortgage, Certificate of Sale, Affidavit of Consolidation, Deed of Final Sale are declared void. 3. The case is remanded to the Regional Trial Court to compute the current arrearages of petitioners taking into account the partial payments made by them and the imposition of the simple interest rate of 12% per annum. BY: Jeremy B. Luglug



December 2014


Compilation of Case Digests in CIVIL LAW Review 2 CAGAYAN II ELECTRIC COOPERATIVE, INC., REPRESENTED BY ITS MANAGER AND CHIEF EXECUTIVE OFFICER, GABRIEL A. TORDESILLAS v. ALLAN RAPANAN AND MARY GINE TANGONAN G.R. No. 199886, December 03, 2014

Facts: On October 31, 1998, around 9:00 p.m., a motorcycle with three passengers figured in a mishap along the National Highway of Maddalero, Buguey, Cagayan. It was driven by its owner Camilo Tangonan who died from the accident, while his companions respondent Rapanan and one Erwin Coloma suffered injuries. On March 29, 2000, Rapanan and Camilo’s common law wife, respondent Mary Gine Tangonan, filed before the Regional Trial Court (RTC) of Aparri, Cagayan a complaint for damages against petitioner. They alleged that while the victims were traversing the national highway, they were struck and electrocuted by a live tension wire from one of the electric posts owned by petitioner. They contended that the mishap was due to petitioner’s negligence when it failed to fix and change said live tension wire despite being immediately informed by residents in the area that it might pose an immediate danger to persons, animals and vehicles passing along the national highway. The RTC rendered a decision in favor of petitioner and dismissed the complaint for damages of respondents. It held that the proximate cause of the incident is the negligence and imprudence of Camilo in driving the motorcycle. It further held that respondent Mary Gine has no legal personality to institute the action since such right is only given to the legal heir of the deceased. Mary Gine is not a legal heir of Camilo since she is only his common law wife. On appeal, the CA reversed the RTC and held petitioner liable for quasi-delict.

Issue: Whether or not petitioner Cagayan II Electric Cooperative, Inc. liable for quasi-delict resulting in the death of Camilo Tangonan and physical injuries of Rapanan, and ordering it to pay respondents damages and attorney’s fees Held: Negligence is defined as the failure to observe for the protection of the interest of another person that degree of care, precaution, and vigilance which the circumstances justly demand, whereby such other person suffers injury. Article 2176 of the Civil Code provides that “[w]hoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is a quasi-delict.” Under this provision, the elements necessary to establish a quasi-delict case are: (1) damages to the plaintiff; (2) negligence, by act or omission, of the defendant or by some person for whose acts the defendant must respond, was guilty; and (3) the connection of cause and effect between such negligence and the damages. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 The presence of the first element is undisputed because the unfortunate incident brought about the death of Camilo and physical injuries to Rapanan. This Court, however, finds that the second and third elements are lacking thus precluding the award of damages in favor of respondents. Adviento, petitioner’s employee testified that their electric poles along the highways, including the one where the mishap took place, were erected about four to five meters from the shoulder of the road. Another employee of petitioner, Rasos, testified that after the typhoons hit Cagayan, he together with his co-employees, after checking the damage to the electric lines, rolled the fallen electric wires and placed them at the foot of the electric poles so as to prevent mishaps to pedestrians and vehicles passing by. Their testimonies were corroborated by what was recorded in the Police Blotter of the Buguey Police Station, Buguey, Cagayan after SPO2 Tactac investigated on the incident. The facts shows that the motorcycle was probably running too fast that it lost control and started tilting and sliding eventually which made its foot rest cause the skid mark on the road. Therefore, the mishap already occurred even while they were on the road and away from petitioner’s electric wires and was not caused by the latter as alleged by respondents. It just so happened that after the motorcycle tilted and slid, the passengers were thrown off to the shoulder where the electric wires were. This Court hence agrees with the trial court that the proximate cause of the mishap was the negligence of Camilo. Had Camilo driven the motorcycle at an average speed, the three passengers would not have been thrown off from the vehicle towards the shoulder and eventually strangulated by the electric wires sitting thereon. Moreover, it was also negligent of Camilo to have allowed two persons to ride with him and for Rapanan to ride with them when the maximum number of passengers of a motorcycle is two including the driver. This most likely even aggravated the situation because the motorcycle was overloaded which made it harder to drive and control. When the plaintiff’s own negligence was the immediate and proximate cause of his injury, he cannot recover damages. As to the second issue, assuming arguendo that petitioner was indeed negligent, the appellate court erred in awarding damages in favor of Camilo’s legal heirs since they were not impleaded in the case. It should be noted that it was Mary Gine, the common law wife of Camilo, who is the complainant in the case. As a mere common law wife of Camilo, she is not considered a legal heir of the latter, and hence, has no legal personality to institute the action for damages due to Camilo’s death.

By: Maricris C. Ortega Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 PEOPLE VS. SHIRLEY A. CASIO G.r. No. 211465, December 3, 2014

Facts: Chief PSI Ylanan, SPO1 Mendaros, SPO1 Altubar, PO1 Luardo, and PO1 Veloso composed the team of police operatives. PO1 Luardo and PO1 Veloso were designated as decoys, pretending to be tour guides looking for girls to entertain their guests. IJM provided them with marked money, which was recorded in the police blotter. The team went to Queensland Motel and rented Rooms 24 and 25. These rooms were adjacent to each other. Room 24 was designated for the transaction while Room 25 was for the rest of the police team. PO1 Luardo and PO1 Veloso proceeded to D. Jakosalem Street in Barangay Kamagayan, Cebu City’s red light district. Accused noticed them and called their attention by saying “Chicks mo dong?” At that point, PO1 Luardo sent a text message to PSI Ylanan that they found a prospective subject. After a few minutes, accused returned with AAA and BBB, private complainants in this case. Accused gave the assurance that the girls were good in sex. PO1 Luardo inquired how much their services would cost. Accused replied, “Tag kinientos” (500.00). PO1 Veloso and PO1 Luardo convinced accused to come with them to Queensland Motel. Upon proceeding to Room 24, PO1 Veloso handed the marked money to accused. As accused counted the money, PO1 Veloso gave PSI Ylanan a missed call. This was their pre-arranged signal. The rest of the team proceeded to Room 24, arrested accused, and informed her of her constitutional rights. The police confiscated the marked money from accused. Meanwhile, AAA and BBB “were brought to Room 25 and placed in the custody of the representatives from the IJM and the DSWD.” Regional Trial Court, Branch 14 in Cebu City found accused guilty beyond reasonable doubt. The Court finds accused, SHIRLEY A. CASIO, GUILTY beyond reasonable doubt of trafficking in persons under paragraph (a), Section 4 as qualified under paragraph (a), Section 6 of R.A. 9208 and sentenced to suffer imprisonment of TWENTY (20) YEARS and to pay a fine of ONE MILLION (Php1,000,000.00). Finally, accused is ordered to pay the costs of these proceedings. The Court of Appeals affirmed the findings of the trial court but modified the fine and awarded moral damages. The accused-appellant is accordingly sentenced to suffer the penalty of life imprisonment and a fine of Php2,000,000 and is ordered to pay each of the private complainants Php150,000 as moral damages. Hence, the instant petition.


Compilation of Case Digests in CIVIL LAW Review 2 Issue/s: (1) (2)

Whether the award of moral damages for the crime of Trafficking in persons as a prostitute is proper? Whether the award of exemplary damages for the crime of Trafficking in persons as a prostitute is proper?

Held: (1) YES. The payment of P500,000 as moral damages for the crime of Trafficking in Persons as a Prostitute finds basis in Article 2219 of the Civil Code, which states that MORAL DAMAGES MAY BE RECOVERED IN THE FOLLOWING AND ANALOGOUS CASES: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

A criminal offense resulting in physical injuries; Quasi-delicts causing physical injuries; Seduction, abduction, rape, or other lascivious acts; Adultery or concubinage; Illegal or arbitrary detention or arrest; Illegal search; Libel, slander or any other form of defamation; Malicious prosecution; Acts mentioned in Article 309; Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35

The criminal case of Trafficking in Persons as a Prostitute is an analogous case to the crimes of seduction, abduction, rape, or other lascivious acts. In fact, it is worse. To be trafficked as a prostitute without one’s consent and to be sexually violated four to five times a day by different strangers is horrendous and atrocious. There is no doubt that Lolita experienced physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, and social humiliation when she was trafficked as a prostitute in Malaysia. 2) YES. The payment of P100,000 as exemplary damages shall be granted since the crime of Trafficking in Persons was aggravated, being committed by a syndicate, the award of exemplary damages is likewise justified. Human trafficking indicts the society that tolerates the kind of poverty and its accompanying desperation that compels our women to endure indignities. It reflects the weaknesses of that society even as it convicts those who deviantly thrive in such hopelessness. We should continue to strive for the best of our world, where our choices of human intimacies are real choices, and not the last resort taken just to survive. Human intimacies enhance our best and closest relationships. It serves as a foundation for two human beings to face life’s joys and challenges while Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 continually growing together with many shared experiences. The quality of our human relationships defines the world that we create also for others.

By

Catherine

A.

Padon

COMMISSIONER OF INTERNAL REVENUE., vs. THE STANLEY WORKS SALES (PHILS.), INCORPORATED G.R. NO. 187589, 03 December 2014

Facts: On January 1, 1979, respondent and Stanley Works Agencies (Pte.) Limited, Singapore (Stanley-Singapore) entered into a Representation Agreement. Under such agreement, StanleySingapore appointed respondent as its sole agent for the selling of its products within the Philippines on an indent basis. On April 16, 1990, respondent filed with the BIR its Annual Income Tax Return for taxable year 1989. On March 19, 1993, pursuant to Letter of Authority dated July 3, 1992, the BIR issued against respondent a Pre-Assessment Notice (PAN) No. 002523 for 1989 deficiency income tax. On March 29, 1993, respondent received its copy of the PAN. On April 12, 1993, petitioner, through OTC Domingo C. Paz of Revenue Region No. 4B-2 of Makati, issued to respondent Assessment Notice No. 002523-89-6014 for deficiency income tax for taxable year 1989. The Notice was sent on April 15, 1993 and respondent received it on April 21, 1993. On May 19, 1993, respondent, through its external auditors Punongbayan & Araullo, filed a protest letter and requested reconsideration and cancellation of the assessment. On November 16, 1993, a certain Mr. John Ang, on behalf of respondent, executed a “Waiver of the Defense of Prescription Under the Statute of Limitations of the National Internal Revenue Code” (Waiver). Under the terms of the Waiver, respondent waived its right to raise the defense of prescription under Section 223 of the NIRC of 1977 insofar as the assessment and collection of any deficiency taxes for the year ended December 31, 1989, but not after June 30, 1994. The Waiver was not signed by petitioner or any of his authorized representatives and did not state the date of acceptance as prescribed under Revenue Memorandum Order No. 20-90. Respondent did not execute any other Waiver or similar document before or after the expiration of the November 16, 1993 Waiver on June 30, 1994. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 On January 6, 1994, respondent, through its external auditors Punongbayan & Araullo, wrote a letter to the Chief of the BIR Appellate Division and requested the latter to take cognizance of respondent's protest/request for reconsideration, asserting that the dispute involved pure questions of law. On February 22, 1994, respondent sent a similar letter to the Revenue District Officer (RDO) of BIR Revenue Region No. 4B-2 and asked for the transmittal of the entire docket of the subject tax assessment to the BIR Appellate Division. On September 30, 1994, respondent, through its external auditors Punongbayan & Araullo, submitted a Supplemental Memorandum on its protest to the BIR Revenue Region No. 4B-2. On September 20, 1995, respondent, through its external auditors Punongbayan & Araullo, filed a Supplemental Memorandum with the BIR Appellate Division. On November 29, 2001, the Chief of the BIR Appellate Division sent a letter to respondent requiring it to submit duly authenticated financial statements for the worldwide operations of Stanley Works and a sworn declaration from the home office on the allocated share of respondent as a “branch office.” On December 11, 2001, respondent, through its counsel, the Quisumbing Torres Law Offices, wrote the BIR Appellate Division and asked for an extension of period within which to comply with the request for submission of documents. On January 15, 2002, respondent sent a request for an extension of period to submit a Supplemental Memorandum. On March 4, 2002, respondent, through its counsel, the Quisumbing Torres Law Offices, submitted a Supplemental Memorandum alleging, inter alia, that petitioner's right to collect the alleged deficiency income tax has prescribed. On March 22, 2004, petitioner rendered a Decision denying respondent’s request for reconsideration and ordering respondent to pay the deficiency income tax plus interest that may have accrued. This constitutes the final decision of this Office on the matter. On March 30, 2004, respondent received its copy of the assailed Decision. Hence, on April 28, 2004, respondent filed before the Court in Division a Petition for Review. After trial on the merits, the CTA First Division found that although the assessment was made within the prescribed period, the period within which petitioner may collect deficiency income taxes had already lapsed. Accordingly, the court cancelled Assessment Notice No. 002523-89-6014 dated 12 April 1993. The CTA Division ruled that the request for reconsideration did not suspend the running of the prescriptive period to collect deficiency income tax. There was no valid waiver of the statute of limitations, as the following infirmities were found: (1) there was no conformity, either by respondent Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 or his duly authorized representative; (2) there was no date of acceptance to show that both parties had agreed on the Waiver before the expiration of the prescriptive period; and (3) there was no proof that respondent was furnished a copy of the Waiver. Applying jurisprudence and relevant BIR rulings, the waiver was considered defective; thus, the period for collection of deficiency income tax had already prescribed. CTA en banc ruling as to the issue of estoppel, the court ruled that this measure could not be used against respondent, as it was petitioner who had failed to act within the prescribed period on the protest asking for a reconsideration of the assessment Issue/s: (1) (2)

Whether or not petitioner’s right to collect the deficiency income tax of respondent for taxable year 1989 has prescribed. Whether or not respondent’s repeated requests and positive acts constitute “estoppel” from setting up the defense of prescription under the NIRC.

Held: (1)

NO.

The statute of limitations on the right to assess and collect a tax means that once the period established by law for the assessment and collection of taxes has lapsed, the government’s corresponding right to enforce that action is barred by provision of law. The period to assess and collect deficiency taxes may be extended only upon a written agreement between the CIR and the taxpayer prior to the expiration of the three-year prescribed period in accordance with Section 222 (b) of the NIRC. In relation to the implementation of this provision, the CIR issued Revenue Memorandum Order (RMO) No. 20-90 on 4 April 1990 to provide guidelines on the proper execution of the Waiver of the Statute of Limitations. In the execution of this waiver, there are procedures should be followed. To emphasize, the Waiver was not a unilateral act of the taxpayer; hence, the BIR must act on it, either by conforming to or by disagreeing with the extension. A waiver of the statute of limitations, whether on assessment or collection, should not be construed as a waiver of the right to invoke the defense of prescription but, rather, an agreement between the taxpayer and the BIR to extend the period to a date certain, within which the latter could still assess or collect taxes due. The waiver does not imply that the taxpayer relinquishes the right to invoke prescription unequivocally. Although we recognize that the power of taxation is deemed inherent in order to support the government, tax provisions are not all about raising revenue. Our legislature has provided safeguards and remedies beneficial to both the taxpayer, to protect against abuse; and the government, to promptly act for the availability and recovery of revenues. A statute of limitations on Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 the assessment and collection of internal revenue taxes was adopted to serve a purpose that would benefit both the taxpayer and the government. Under the former law, the right of the Government to collect the tax does not prescribe. However, in fairness to the taxpayer, the Government should be estopped from collecting the tax where it failed to make the necessary investigation and assessment within 5 years after the filing of the return and where it failed to collect the tax within 5 years from the date of assessment thereof. Just as the government is interested in the stability of its collection, so also are the taxpayers entitled to an assurance that they will not be subjected to further investigation for tax purposes after the expiration of a reasonable period of time. The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the Government and to its citizens; to the Government because tax officers would be obliged to act promptly in the making of assessment, and to citizens because after the lapse of the period of prescription citizens would have a feeling of security against unscrupulous tax agents who will always find an excuse to inspect the books of taxpayers, not to determine the latter's real liability, but to take advantage of every opportunity to molest peaceful, law-abiding citizens. Without such legal defense taxpayers would furthermore be under obligation to always keep their books and keep them open for inspection subject to harassment by unscrupulous tax agents. The law on prescription being a remedial measure should be interpreted in a way conducive to bringing about the beneficent purpose of affording protection to the taxpayer within the contemplation of the Commission which recommends the approval of the law. (2)

NO.

Anent the second issue, SC do not agree with petitioner that respondent is now barred from setting up the defense of prescription by arguing that the repeated requests and positive acts of the latter constituted estoppels, as these were attempts to persuade the CIR to delay the collection of respondent’s deficiency income tax. True, respondent filed a Protest and asked for a reconsideration and cancellation of the assessment on 19 May 1993; however, it is uncontested that petitioner failed to act on that Protest until 29 November 2001, when the latter required the submission of other supporting documents. In fact, the Protest was denied only on 22 March 2004. Petitioner’s reliance on CIR v. Suyoc (Suyoc) is likewise misplaced. In Suyoc, the BIR was induced to extend the collection of tax through repeated requests for extension to pay and for reinvestigation, which were all denied by the Collector. Contrarily, herein respondent filed only one Protest over the assessment, and petitioner denied it 10 years after. The subsequent letters of respondent cannot be construed as inducements to extend the period of limitation, since the letters were intended to urge petitioner to act on the Protest, and not to persuade the latter to delay the actual collection. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


Petitioner cannot take refuge in BPI either, considering that respondent and BPI are similarly situated. Similar to BPI, this is a simple case in which the BIR Commissioner and other BIR officials failed to act promptly in resolving and denying the request for reconsideration filed by the taxpayer and in enforcing the collection on the assessment. Both in BPI and in this case, the BIR presented no reason or explanation as to why it took many years to address the Protest of the taxpayer. The statute of limitations imposed by the Tax Code precisely intends to protect the taxpayer from prolonged and unreasonable assessment and investigation by the BIR.19 Even assuming arguendo that the Waiver executed by respondent on 16 November 1993 is valid, the right of petitioner to collect the deficiency income tax for the year 1989 would have already prescribed by 2001 when the latter first acted upon the protest, more so in 2004 when it finally denied the reconsideration. Records show that the Waiver extends only for the period ending 30 June 1994, and that there were no further extensions or waivers executed by respondent. Again, a waiver is not a unilateral act of the taxpayer or the BIR, but is a bilateral agreement between two parties to extend the period to a date certain. Since the Waiver in this case is defective and therefore invalid, it produces no effect; thus, the prescriptive period for collecting deficiency income tax for taxable year 1989 was never suspended or tolled. Consequently, the right to enforce collection based on Assessment Notice No. 002523-896014 has already prescribed. By:

Stephanie

H. Siason

IGLESIA FILIPINA INDEPENDIENTE VS. HEIRS OF BERNARDINO TAEZA GR. No. 179597, December 3, 2014

Facts: This case stemmed from the decision of this Court on Iglesia Felipina Independiente v. Heirs of Bernardino Taeza,G.R. No. 179597, February 3, 2014 which provides that it is erroneous for the CA to ignore the fact that the laymen’s committee objected to the sale of the lot in question. The Canons require that ALL the church entities listed in Article IV (a) thereof should give its approval to the transaction. Thus, when the Supreme Bishop executed the contract of sale of petitioner’s lot despite the opposition made by the laymen’s committee, he acted beyond his powers. This case clearly falls under the category of unenforceable contracts mentioned in Article 1403, paragraph (1) of Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 the Civil Code, which provides, thus: Art. 1403. The following contracts are unenforceable, unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; In Mercado v. Allied Banking Corporation, the Court explained that: x x x Unenforceable contracts are those which cannot be enforced by a proper action in court, unless they are ratified, because either they are entered into without or in excess of authority or they do not comply with the statute of frauds or both of the contracting parties do not possess the required legal capacity. After Respondents' Motion for Reconsideration of the aforementioned Decision was denied with finality in a Resolution3 dated July 9, 2014. Nevertheless, herein parties filed a Joint Manifestation dated July 14, 2014, wherein they prayed that the attached Compromise Agreement dated June 27, 2014 be approved by the Court for the speedy resolution of the dispute between the parties. Issue: Whether the Supreme Bishop is authorized to enter into a contract of sale in behalf of the petitioner? Held: Note, however, that the only signatory to the Compromise Agreement is Right Rev. Ernesto M. Tamayo, Bishop of the Diocesan Church of Tuguegarao, purportedly authorized by the Supreme Bishop, Most Reverend Ephraim S. Fajutagana, via a Special Power of Attorney dated as far back as September 27, 2011. This would give rise to the same question of whether the Supreme Bishop is indeed authorized to enter into a contract of sale in behalf of petitioner. The Court stated in its Decision dated February 3, 2014, that “any sale of real property requires not just the consent of the Supreme Bishop but also the concurrence of the laymen's committee, the parish priest, and the Diocesan Bishop, as sanctioned by the Supreme Council.” The Compromise Agreement, which stipulates that the subject property would be sold to a third party and the proceeds therefrom divided between herein parties, again raises the issue of the authority of the person acting in behalf of petitioner.

By: Maricris C. Ortega


Compilation of Case Digests in CIVIL LAW Review 2 METROPOLITAN BANK TRUST COMPANY, PETITIONER, -VERSUS- LEY CONSTRUCTION AND DEVELOPMENT CORPORATION AND SPOUSES MANUEL LEY AND JANET LEY, RESPONDENTS Gr. No. 185590, December 3, 2014

Facts: This is an action for recovery of a sum of money and damages with a prayer for the issuance of writ of preliminary attachment filed by the plaintiff Philippine Banking Corporation against the defendants, namely: Ley Construction and Development Corporation (hereafter “LCDC”) and Spouses Manuel and Janet C. Ley (hereafter “[defendant]-spouses”). The complaint alleges that: Defendant LCDC, a general contracting firm, through the oral representations of defendant-spouses, applied with plaintiff, a commercial bank, for the opening of a Letter of Credit. Plaintiff issued Letter of Credit in favor of the supplier-beneficiary Global Enterprises Limited. The letter of credit covered the importation by defendant LCDC of Fifteen Thousand (15,000) metric tons of Iraqi cement from Iraq. Defendant applied for and filed with plaintiff two (2) Applications for Amendment of Letter of Credit Thereafter, the supplier-beneficiary Global Enterprises, Inc. negotiated its Letter of Credit with the negotiating bank Credit Suisse of Zurich, Switzerland. Credit Suisse then sent a reimbursement claim by telex to American Express Bank Ltd., New York with a certification that all terms and conditions of the credit were complied with. Accordingly, American Express Bank debited plaintiff’s account and credited Credit Suisse Zurich Account with American Express Bank, Ltd., New York for the negotiation of Letter of Credit. Plaintiff received from Credit Suisse the necessary shipping documents pertaining to Letter of Credit that were in turn delivered to the defendant. Upon receipt of the aforesaid documents, defendants executed a trust receipt. However, the cement that was to be imported through the opening of the subject Letter of Credit never arrived in the Philippines. The prompt payment of the obligation of the defendant LCDC was guaranteed by [defendant]-spouses under the Continuing Surety Agreement executed by the latter in favor of the defendant. The obligation covered by the subject Letter of Credit has long been overdue and unpaid, notwithstanding repeated demands for payment thereof. Plaintiff, therefore, instituted the instant complaint for recovery. Issue: Whether the Bank may hold LCDC liable for its obligations under the Letter of Credit, and the spouses Ley for their obligations under the Continuing Surety Agreement which stands as security for the Letter of Credit and not for the Trust Receipt? Held: NO. A cause of action is an act or omission by which a party violates the right of another has three essential elements: 1. The existence of a legal right in favor of the plaintiff; 2. A correlative legal duty of the defendant to respect such right; and Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 3. An act or omission by such defendant in violation of the right of the plaintiff with a resulting injury or damage to the plaintiff for which the latter may maintain an action for the recovery of relief from the defendant. Although the first two elements may exist, a cause of action arises only upon the occurrence of the last element, giving the plaintiff the right to maintain an action in court for recovery of damages or other appropriate relief. In this case, however, even the legal rights of the Bank and the correlative legal duty of LCDC have not been sufficiently established by the Bank in view of the failure of the Bank's evidence to show the provisions and conditions that govern its legal relationship with LCDC, particularly the ABSENCE OF THE PROVISIONS AND CONDITIONS SUPPOSEDLY PRINTED AT THE BACK OF THE APPLICATION AND AGREEMENT FOR COMMERCIAL LETTER OF CREDIT. Even assuming arguendo that there was no impropriety in the negotiation of the Letter of Credit and the Bank's cause of action was simply for the collection of what it paid under said Letter of Credit, the Bank did not discharge its burden to prove every element of its cause of its action against LCDC. This failure of the Bank to present preponderant evidence that will establish the liability of LCDC under the Letter of Credit necessarily benefits the spouses Ley whose liability is supposed to be based on a Continuing Surety Agreement guaranteeing the liability of LCDC under the Letter of Credit. Another thing, in a letter of credit, there are three distinct and independent contracts: (1) the contract of sale between the buyer and the seller, (2) the contract of the buyer with the issuing bank, and (3) the letter of credit proper in which the bank promises to pay the seller pursuant to the terms and conditions stated therein. Here, what is involved is the second contract – the contract of LCDC, as the buyer of Iraqi cement, with the Bank, as the issuer of the Letter of Credit. The Bank refers to that contract in the Petition for Review on Certiorari and the Memorandum filed by the Bank in this case when the Bank argues that, AS LCDC AND THE SPOUSES LEY HAVE ADMITTED THE ISSUANCE OF THE LETTER OF CREDIT IN THEIR FAVOR, THEY ARE “DEEMED TO HAVE LIKEWISE ADMITTED THE TERMS AND CONDITIONS THEREOF, AS EVIDENCED BY THE STIPULATION THEREIN APPEARING ABOVE THE SIGNATURE OF RESPONDENT JANET LEY,” viz: “In consideration of your arranging, at my/o[u]r request[,] for the establishment of this commercial letter of credit (thereinafter referred to as the [“]Credit[”]) substantially in accordance with the foregoing, I/we hereby covenant and agree to each and all of [the] provisions and conditions stipulated on the reverse side hereof.” The above stipulation actually appears on the Application and Agreement for Commercial Letter of Credit. IT IS THE CONTRACT WHICH CONTAINS THE PROVISIONS AND CONDITIONS Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 GOVERNING THE LEGAL RELATIONSHIP OF THE BANK AND LCDC, PARTICULARLY THEIR RESPECTIVE RIGHTS AND OBLIGATIONS, IN CONNECTION WITH THE BANK’S ISSUANCE OF LETTER OF CREDIT NO. DC 90-303-C.

BY: Catherine

A. Padon

FLORENTINO W. LEONG AND ELENA LEONG, ET AL., vs. EDNA C. SEE G.R. NO. 194077, 03 December 2014

Facts: This petition originated from two civil complaints involving the sale of a parcel of land in favor of respondent Edna C. See (Edna). Before us is a petition for review assailing the Court of Appeals’ (a) May 19, 2010 decision affirming in toto the trial court's July 9, 2008 decision granting Edna possession and ownership over the land upon finding her to be a buyer in good faith and for value, and (b) August 25, 2010 resolution denying reconsideration. Petitioners pray for the reversal of the Court of Appeals’ decision and resolution, as well as the trial court’s decision. They pray that this court render its decision as follows: (a) The Deed of Sale between Edna See and Carmelita Leong is hereby declared null and void. The Register [of] Deeds for the City of Manila is hereby directed to cancel TCT No. 231105 in the name of Edna See and reinstating TCT No. 175628; (b) Confirming the right of Elena Leong and those people claiming right under her, to the possession over the subject property; [and] (c) Defendants Carmelita Leong and Edna See are declared to be jointly and severally liable to pay plaintiff, Florentino Leong[,] the sum of Php50,000.00 as moral damages; the sum of Php50,000.00 a[s] Attorney’s Fees; and the cost of suit. The spouses Florentino Leong (Florentino) and Carmelita Leong (Carmelita) used to own the property located at No. 539–41 Z.P. De Guzman Street, Quiapo, and Manila. Petitioner Elena Leong (Elena) is Florentino's sister-in-law. She had stayed with her in-laws on the property rental-free for over two decades until the building they lived in was razed by fire. They then constructed makeshift houses, and the rental-free arrangement continued. Florentino and Carmelita immigrated to the United States and eventually had their marriage dissolved in Illinois. A provision in their marital settlement agreement states that “Florentino shall convey and quitclaim all of his right, title and interest in and to 540 De Guzman Street, Manila, Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Philippines

.

.

.

to

Carmelita.”

The Court of Appeals found that “[a]pparently intercalated in the lower margin of page 12 of the instrument was a long-hand scribbling of a proviso, purporting to be a footnote remark”: Neither party shall evict or charge rent to relatives of the parties, or convey title, until it has been established that Florentino has clear title to the Malabon property. Clear title to be established by the attorneys for the parties or the ruling of a court of competent jurisdiction. In the event Florentino does not obtain clear title, this court reserves jurisdiction to reapportion the properties or their values to effect a 50-50 division of the value of the 2 remaining Philippine properties. On November 14, 1996, Carmelita sold the land to Edna. In lieu of Florentino's signature of conformity in the deed of absolute sale, Carmelita presented to Edna and her father, witness Ernesto See, a waiver of interest notarized on March 11, 1996 in Illinois. In this waiver, Florentino reiterated his quitclaim over his right, title, and interest to the land. Consequently, the land’s title, covered by TCT No. 231105, was transferred to Edna's name. Edna was aware of the Leong relatives staying in the makeshift houses on the land. Carmelita assured her that her nieces and nephews would move out, but demands to vacate were unheeded. On April 1, 1997, Edna filed a complaint for recovery of possession against Elena and the other relatives of the Leong ex-spouses. The complaint alleged that in 1995 after the fire had razed the building on the land, Elena erected makeshift houses on the land without Carmelita’s knowledge or consent. In response, Elena alleged the title’s legal infirmity for lack of Florentino's conformity to its sale. She argued that Carmelita's non-compliance with the proviso in the property agreement — that the Quiapo property “may not be alienated without Florentino first obtaining a clean title over the Malabon property” — annulled the transfer to Edna. On April 23, 1997, Florentino filed a complaint for declaration of nullity of contract, title, and damages against Carmelita Leong, Edna C. See, and the Manila Register of Deeds, alleging that the sale was without his consent. The two cases were consolidated. RTC ruled in favor of Edna.CA affirmed in toto the trial court’s decision. Issue: Whether respondent Edna C. See is a buyer in good faith and for value. Held: Yes. The Torrens system was adopted to “obviate possible conflicts of title by giving the public the right to rely upon the face of the Torrens certificate and to dispense, as a rule, with the necessity of inquiring further.”


Compilation of Case Digests in CIVIL LAW Review 2 One need not inquire beyond the four corners of the certificate of title when dealing with registered property.58 Section 44 of Presidential Decree No. 1529 known as the Property Registration Decree recognizes innocent purchasers in good faith for value and their right to rely on a clean title: Section 44. Statutory liens affecting title. - Every registered owner receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser of registered land taking a certificate of title for value and in good faith, shall hold the same free from all encumbrances except those noted in said certificate and any of the following encumbrances which may be subsisting, namely: First. Liens, claims or rights arising or existing under the laws and Constitution of the Philippines which are not by law required to appear of record in the Registry of Deeds in order to be valid against subsequent purchasers or encumbrances of record. Second. Unpaid real estate taxes levied and assessed within two years immediately preceding the acquisition of any right over the land by an innocent purchaser for value, without prejudice to the right of the government to collect taxes payable before that period from the delinquent taxpayer alone. Third. Any public highway or private way established or recognized by law, or any government irrigation canal or lateral thereof, if the certificate of title does not state that the boundaries of such highway or irrigation canal or lateral thereof have been determined. Fourth. Any disposition of the property or limitation on the use thereof by virtue of, or pursuant to, Presidential Decree No. 27 or any other law or regulations on agrarian reform. Both lower courts found respondent to be an innocent purchaser in good faith for value. The trial court discussed: By her overt acts, Edna See with her father verified the authenticity of Carmelita’s land title at the Registry of Deeds of Manila. There was no annotation on the same thus deemed a clean title (page 19, TSN, 12 January 2005). Also, she relied on the duly executed and notarized Certificate of Authority issued by the State of Illinois and Certificate of Authentication issued by the Consul of the Republic of the Philippines for Illinois in support to the Waiver of Interest incorporated in the Deed of Absolute Sale presented to her by Carmelita (Exhibit 2). Examination of the assailed Certificate of Authority shows that it is valid and regular on its face. It contains a notarial seal. . . . The assailed Certificate of Authority is a notarized document and therefore, presumed to be valid and duly executed. Thus, Edna See’s reliance on the notarial acknowledgment found in the duly notarized Certificate of Authority presented by Carmelita is sufficient evidence of good faith.


Compilation of Case Digests in CIVIL LAW Review 2 Petitioners beg to disagree with the ruling of the Honorable Trial Court and the Honorable Court of Appeals. Respondent Edna See is not a buyer in good faith. The ruling that every person can rely on the correctness of the certificate of title and that the buyer need not go beyond the four corners of the title to determine the condition of the property is not absolute and admits of exception. As held in the case of Remegia Feliciano vs. Sps. Zaldivar, G.R. No. 162593, 2006 Sep 26 the principle of indefeasibilty of a Torrens title does not apply where fraud attended the issuance of the title. The Torrens title does not furnish a shield for fraud. As such, a title issued based on void documents may be annulled. Even assuming the procurement of title was tainted with fraud and misrepresentation, “such defective title may still be the source of a completely legal and valid title in the hands of an innocent purchaser for value.” Respondent, an innocent purchaser in good faith and for value with title in her name, has a better right to the property than Elena. Elena’s possession was neither adverse to nor in the concept of owner.

By:

Stephanie H. Siazon OFFICE OF THE OMBUDSMAN., vs. AMALIO A. MALLARI G.R. NO. 183161, 03 December 2014

Facts: On October 24, 1997, ECOBEL Land, Inc. (ECOBEL), represented by its Chairman, Josephine Edralin Boright (Boright), applied for a medium term financial facility loan with the Government Service Insurance System (GSIS) Finance Group for the construction of a 26-storey twin tower condominium building, ECOBEL Tower, along Taft Avenue in Ermita, Manila. The loan application was denied for the following reasons: insufficiency of collateral, ECOBEL did not have the needed track record in property development, and the loan was sought during the Asian financial crisis. Subsequently, ECOBEL applied for a two-year surety bond with GSIS to guarantee payment of a Ten Million US Dollar (US$10,000,000.00) loan with the Philippine Veterans Bank (PVB) acting as the obligee. On December 10, 1997, the ECOBEL bond application was approved in principle "subject to analysis/evaluation of the project and the offered collaterals.” After an evaluation by the GSIS Bond Reinsurance Treaty Underwriting Committee, then chaired by Leticia G. Bernardo (Bernardo), Manager of the Surety Department, General Insurance Group (GIG), the collateral offered was found to be a second mortgage. Accordingly, the Committee informed ECOBEL of the rejection of the collateral offered and requested for additional collateral. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


Meanwhile, Alex M. Valencerina (Valencerina), then Vice-President for Marketing and Support Services, GIG, submitted the ECOBEL bond application through his Memorandum, dated January 27, 1998, for the evaluation and endorsement of the GSIS Investment Committee (INCOM). In the said Memorandum, Valencerina stated that the project was “viable” and the payment guarantee bond was “fully secured” by reinsurance and real estate collaterals. He also cited that the “funder has given the principal limited time to avail of the loan. Failure to submit and/or present the payment guarantee bond would lead to the cancellation of the ‘booking’ of the funds.” The memorandum was coursed through Mallari, then Senior Vice-President of GSIS, GIG, addressed to the President and General Manager of GSIS. Mallari scribbled his own endorsement by stating "Strongly reco. based on info and collaterals herein stated." On March 10, 1998, the INCOM, through Resolution approved the ECOBEL application. The following day, March 11, 1998, the GSIS Surety Bond or G (16) GIF Bond No. 02913211 (ECOBEL bond) in the amount of Ten Million US Dollars (US$10,000,000.00) was correspondingly issued in favor of ECOBEL with PVB as the obligee. The ECOBEL bond was signed by Mallari on behalf of the GSIS GIG to guarantee the repayment of the principal and interest on the loan granted to ECOBEL through the obligee to be used for the construction of its tower building.

Group

In the meantime, Mallari was reassigned to the Housing and Real Property Development pursuant to Office Order No. 73-98, dated July 27, 1998.

On November 19, 1998, a Memorandum15 was issued by Federico Pascual, President and General Manager of GSIS, ordering the suspension of the processing and issuance of guarantee payment bonds. Despite the directive, Valencerina and Fernando U. Campana (Campana), then Vice-President of the London Representative Office (LRO), International Operations, GIG, issued a Certification, dated January 14, 1999, stating that ECOBEL bond "is genuine, authentic, valid and binding obligation of GSIS and may be transferred to Bear, Stearns International Ltd., and any of its assignees and Aon Financial Products, Inc. and any of its assignees within the period commencing at the date above. GSIS has no counterclaim, defense or right of set-off with respect to the surety bond provided that DRAWING CONDITIONS have been satisfied." On February 9, 1999, almost a year from the issuance of the ECOBEL bond, Valencerina received from Boright the premium payment for the bond in the amount of ?12,731,520.00, in FEBTC check, post-dated February 26, 1999 as a one-year premium for the period, March 11, 1998 to March 11, 1999. Thereafter, Transfer Certificate of Title (TCT) No. 66289 covering the land located in Lipa City, Batangas, consisting of 205,520 square meters, submitted as collateral, turned out to be “not genuine” or spurious. The said land, with an appraised value of? 202,437,200.00, was the major collateral for the issuance of the ECOBEL bond. The land was titled in the name of Vicente Yupangco who did not appear to hold any interest in ECOBEL, either as officer or stockholder. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


Thus, on February 12, 1999, the ECOBEL bond was cancelled by GSIS, through Atty. Saludares of the Underwriting Department II. On the same day, Valencerina informed Boright that the bond was invalid and unenforceable and that the FEBTC check, postdated February 26, 1999, was disregarded by GSIS. On February 19, 1999, despite the notice of the bond cancellation, ECOBEL was granted a loan by Bear and Stearns International Ltd. (BSIL) in the face amount of US$10,000,000.00 using the ECOBEL bond. The amount actually drawn and received by ECOBEL was US$9,307,000.00. After the drawdown, Campaña at the LRO received the surety bond premium check payments, dated April 1, 1999 and April 15, 1999, in the total amount of US$200,629.00. The said checks were remitted to GSIS Manila on May 10, 1999. On March 7, 2000, a Notice of Default on Payment was issued against ECOBEL which placed GSIS under threat of a suit. GSIS was furnished with a copy of the said notice and was similarly advised on March 9, 2000. In a Certification, dated March 20, 2000, PVB stated that it did not accept the proposal for it to be named “obligee” in the ECOBEL bond, as there was no contract or agreement executed between ECOBEL and PVB. The CA ruled that there was no substantial evidence to hold Mallari administratively liable for grave misconduct warranting the imposition of the supreme penalty of dismissal. Mallari affixed his signature in the proposed bond after the GSIS INCOM approved the ECOBEL bond for the payment guarantee bond. It added that the proposed bond signed by him did not legally come into existence because PVB did not agree to be the obligee of the ECOBEL bond. Hence, it could never be the source of any right or obligation.

Issue: Whether suretyship exits? Held: At the outset it is well to quote the principles, policies and procedural guidelines involved in a regularly issued surety bond. A contract of suretyship is an agreement whereby a party, called the surety, guarantees the performance by another party, called the principal or obligor, of an obligation or undertaking in favor of another party, called the obligee. Although the contract of a surety is secondary only to a valid principal obligation, the surety becomes liable for the debt or duty of another although it possesses no direct or personal interest over the obligations nor does it receive any benefit therefrom. The contract of suretyship is further elucidated, in this wise: The surety's obligation is not an original and direct one for the performance of his own act, but merely accessory or collateral to the obligation contracted by the principal. Nevertheless, although the contract of a surety is in essence secondary only to a valid principal obligation, his liability to the Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 creditor or promisee of the principal is said to be direct, primary and absolute; in other words, he is directly and equally bound with the principal. Thus, suretyship arises upon the solidary binding of a person deemed the surety with the principal debtor for the purpose of fulfilling an obligation. 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. Internally, GSIS is guided by its established guidelines, the Policy and Procedural Guidelines (PPG) No. 16-76, dated November 26, 1976, which deals with Bond Underwriting Guidelines for the General Insurance Fund. This was amended and supplemented by PPG No. 64-80-A, dated January 25, 1980, the pertinent provisions of which read: Mallari, being a high-ranking GSIS official, was expected to exemplify competence and exercise good judgment in upholding the interest of GSIS. By hastily approving and signing the ECOBEL bond, he surely failed to perform his essential discretionary duties. When he affixed his signature on the surety bond, deficiency and misrepresentation were obvious on its face as found by the Ombudsman in its January 27, 2005 decision: [T]he date of the contract agreement between principal (ECOBEL) and Obligee (Philippine Veterans Bank) was left blank, indicating that the contract was not available up to the time the Bond was signed. In fact, there was no such contract or agreement executed between Ecobel Land Inc. and Philippine Veterans Bank! It runs counter to the provision that states “… a copy of which contract/agreement is hereto attached and made a part hereof …” which appears in the bond itself. Significantly and as aptly concluded by the OSG, ECOBEL did not possess the character, capacity and capital as a debtor as required for the grant of the GSIS surety bond. Thus, Mallari’s approval, issuance and promotion of the ECOBEL bond evince bad faith, ill motive and corruption, in contravention of his duty to protect the right and interest of GSIS, and to follow basic laws on surety as GSIS policies and guidelines dictate, thereby constituting the administrative offense of grave misconduct. By: Stephanie H. Siazon

ANTONIO L. DALURAYA, PETITIONER, V. MARLA OLIVA, RESPONDENT G.R. No. 210148, December 08, 2014

Facts:On January 4, 2006, Daluraya was charged in an Information for Reckless Imprudence Resulting in Homicide in connection with the death of Marina Oliva. Records reveal that sometime in the afternoon of January 3, 2006, Marina Oliva was crossing the street when a Nissan Vanette, bearing plate number UPN-172 and traversing EDSA near the Quezon Avenue flyover in Quezon City, ran her over. While Marina Oliva was rushed to the hospital to receive medical attention, she Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 eventually died, prompting her daughter, herein respondent Marla Oliva (Marla), to file a criminal case for Reckless Imprudence Resulting in Homicide against Daluraya, the purported driver of the vehicle. During the proceedings, the prosecution presented as witness Shem Serrano (Serrano), an eye-witness to the incident, who testified that on said date, he saw a woman crossing EDSA heading towards the island near the flyover and that the latter was bumped by a Nissan Vanette bearing plate number UPN-172. The prosecution also offered the testimonies of (a) Marla, who testified as to the civil damages sustained by her family as a result of her mother’s death; (b) Dr. Paul Ortiz (Dr. Ortiz), who presented his findings on the autopsy conducted upon the body of Marina Oliva; and (c)Police Senior Inspector Lauro Gomez (PSI Gomez), who conducted the investigation following the incident and claimed that Marina Olivawas hit by the vehicle being driven by Daluraya, albeit he did not witness the incident. After the prosecution rested its case, Daluraya filed an Urgent Motion to Dismiss (demurrer) asserting,inter alia, that he was not positively identified by any of the prosecution witnesses as the driver of the vehicle that hit the victim, and that there was no clear and competent evidence of how the incident transpired. Issue: Whether the Court of Appeals was correct in finding Daluraya civilly liable for Marina Oliva’s death despite his acquittal in the criminal case for Reckless Imprudence Resulting in Homicide on the ground of insufficiency of evidence Held:No. Every person criminally liable for a felony is also civilly liable. The acquittal of an accused of the crime charged, however, does not necessarily extinguish his civil liability. In Manantan v. CA, the Court expounded on the two kinds of acquittal recognized by our law and their concomitant effects on the civil liability of the accused, as follows: Our law recognizes two kinds of acquittal, with different effects on the civil liability of the accused. First is an acquittal on the ground that the accused is not the author of the act or omission complained of. This instance closes the door to civil liability, for a person who has been found to be not the perpetrator of any act or omission cannot and can never be held liable for such act or omission. There being no delict, civil liability ex delicto is out of the question, and the civil action, if any, which may be instituted must be based on grounds other than the delict complained of. This is the situation contemplated in Rule 111 of the Rules of Court. The second instance is an acquittal based on reasonable doubt on the guilt of the accused. In this case, even if the guilt of the accused has not been satisfactorily established, he is not exempt from civil liability which may be proved by preponderance of evidence only. In Dayap v. Sendiong, the Court explained further that the acquittal of the accused does not automatically preclude a judgment against him on the civil aspect of the case. The extinction of the penal action does not carry with it the extinction of the civil liability where: (a) the acquittal is based on reasonable doubt as only preponderance of evidence is required; (b) the court declares that the liability of the accused is only civil; and (c) the civil liability of the accused does not arise from or is not based upon the crime of which the accused is acquitted. However, the civil action based Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 on delict may be deemed extinguished if there is a finding on the final judgment in the criminal action that the act or omission from which the civil liability may arise did not exist or where the accused did not commit the acts or omission imputed to him. Thus, if demurrer is granted and the accused is acquitted by the court, the accused has the right to adduce evidence on the civil aspect of the case unless the court also declares that the act or omission from which the civil liability may arise did not exist. This is because when the accused files a demurrer to evidence, he has not yet adduced evidence both on the criminal and civil aspects of the case. The only evidence on record is the evidence for the prosecution. What the trial court should do is issue an order or partial judgment granting the demurrer to evidence and acquitting the accused, and set the case for continuation of trial for the accused to adduce evidence on the civil aspect of the case and for the private complainant to adduce evidence by way of rebuttal. Thereafter, the court shall render judgment on the civil aspect of the case. In case of an acquittal, the Rules of Court requires that the judgment state “whether the evidence of the prosecution absolutely failed to prove the guilt of the accused or merely failed to prove his guilt beyond reasonable doubt. In either case, the judgment shall determine if the act or omission from which the civil liability might arise did not exist.” A punctilious examination of the MeTC’s Order, which the RTC sustained, will show that Daluraya’s acquittal was based on the conclusion that the act or omission from which the civil liability may arise did not exist, given that the prosecution was not able to establish that he was the author of the crime imputed against him. Such conclusion is clear and categorical when the MeTC declared that “the testimonies of the prosecution witnesses are wanting in material details and they did not sufficiently establish that the accused precisely committed the crime charged against him.” Furthermore, when Marla sought reconsideration of the MeTC’s Order acquitting Daluraya, said court reiterated and firmly clarified that “the prosecution was not able to establish that the accused was the driver of the Nissan Vanette which bumped Marina Oliva” and that “there is no competent evidence on hand which proves that the accused was the person responsible for the death of Marina Oliva.” Clearly, therefore, the CA erred in construing the findings of the MeTC, as affirmed by the RTC, that Daluraya’s acquittal was anchored on reasonable doubt, which would necessarily call for a remand of the case to the court a quo for the reception of Daluraya’s evidence on the civil aspect. Records disclose that Daluraya’s acquittal was based on the fact that “the act or omission from which the civil liability may arise did not exist” in view of the failure of the prosecution to sufficiently establish that he was the author of the crime ascribed against him. Consequently,his civil liability should be deemed as non-existent by the nature of such acquittal. By: Catherine A. Padon



PEOPLE VS. FRANCASIO DELFIN Gr. No. 190349, December 10, 2014

Facts: The first rape incident happened on May 27, 2001. At around 10:00 to 11:00 p.m., “AAA,” then an 11-year old girl, was watching television in a store at the public market in Naval, Biliran. When she went outside the public market, appellant summoned her. “AAA” tried to run away, but appellant threatened to shoot her with a slingshot. She thus approached appellant hesitantly. When already near him, appellant suddenly grabbed “AAA’s” hand and dragged her to the second floor of a newlyconstructed commercial building facing the public market. When they were already in a secluded portion, appellant undressed “AAA,” spread her thighs, and inserted his penis into her vagina, causing her pain and horror. Once satiated, appellant gave “AAA” P100.00 and told her not to tell anyone about the incident or her family will be harmed.

The second rape incident happened during the evening of June 30, 2001. At about 11:00 p.m., “AAA” was sleeping inside a jeepney parked outside a billiard hall when appellant focused a flashlight on her face. He then went inside the jeepney and removed “AAA’s” panty and again raped her by inserting his penis into her vagina which caused “AAA” pain. After having difficulty in urinating and experiencing pain and swelling in her abdomen, “AAA” told her aunt, “BBB,” about the rape incidents and pointed to appellant as her rapist. Suspecting that “AAA” was suffering from vaginal infection due to the rape, “BBB” brought “AAA” to the hospital. Thereafter, “AAA’s” family reported the incident to the Department of Social Welfare and Development. Consequently, complaints were filed against appellant.

RTC gave weight and credence to “AAA’s” testimony. Hence, it declared appellant guilty of two counts of statutory rape and liable to pay “AAA” the amount of P50, 000.00 in civil indemnity for each rape committed

On appeal, the CA held that the prosecution was not able to satisfactorily prove that “AAA” was under 12 years of age at the time of the alleged rape since no independent evidence of her age such as her birth certificate was presented. It thus concluded that appellant could not be held liable for statutory rape. However, it noted that in Criminal Case No. N-2130, force, threat and intimidation were properly alleged in the Information as having attended the commission of the crime and was Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 also duly established by evidence. In view thereof, the CA held appellant liable for simple rape and ordered to pay P75,000.00 as civil indemnity and P75,000.00 as moral damages. Hence, this appeal. Issue/s: (1) (2) (3)

Whether the award of civil indemnity amounting to P75, 000 is proper? Whether the award of P75, 000 moral damages is proper? Whether the award of exemplary damages in rape cases is proper?

(1)

YES. With regard to the award of civil indemnity in the amount of P75, 000.00, the same is proper and in consonance with the prevailing policy of the Court.

(2)

NO. The award of moral damages in the amount of P75, 000.00 must however be reduced to P50, 000.00 in line with prevailing jurisprudence.

(3)

YES. In addition, exemplary damages in the amount of P30, 000.00 is awarded to the victim "AAA." Prevailing jurisprudence on simple rape likewise awards exemplary damages in order to set a public example and to protect hapless individuals from sexual molestation.

Held:

Finally, all damages awarded shall earn interest at the rate of 6% per annum from date of finality of this judgment until fully paid. By:

Catherine

A.

Padon

SPOUSES CARLOS J. SUNTAY AND ROSARIO R. SUNTAY, Petitioners, v. KEYSER MERCANTILE, INC., Respondent. G.R. No. 208462, December 10, 2014

Facts: On October 20, 1989, Eugenia Gocolay, chairperson and president of respondent Keyser Mercantile, Inc. (Keyser), entered into a contract to sell with Bayfront Development Corporation (Bayfront) for the purchase on installment basis of a condominium unit in Bayfront Tower Condominium. The subject of the sale was Unit G of the said condominium project with the privilege to use two (2) parking slots. This Contract to Sell was not registered with the Register of Deeds of Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Manila. Thus, the subject unit remained in the name of Bayfront with a clean title. On July 7, 1990, petitioner spouses Carlos and Rosario Suntay (Spouses Suntay) also purchased several condominium units on the 4th floor of Bayfront Tower Condominium through another contract to sell. Despite payment of the full purchase price, however, Bayfront failed to deliver the condominium units. When Bayfront failed to reimburse the full purchase price, Spouses Suntay filed an action against it before the Housing and Land Use Regulatory Board (HLURB) for violation of Presidential Decree (P.D.) No. 957 and P.D. No. 1344, rescission of contract, sum of money, and damages. The HLURB rescinded the Contract to Sell between Bayfront and Spouses Suntay and ordered Bayfront to pay Spouses Suntay the total amount of 2,752,068.60 as purchase price with interest. Consequently, on November 16, 1994, the HLURB issued a writ of execution. Upon the application of Spouses Suntay, the Sheriffs of the Regional Trial Court (RTC) of Manila levied Bayfront’s titled properties The levy on execution in favor of Spouses Suntay was duly recorded in the Register of Deeds of Manila on January 18, 1995. The auction sale was conducted Spouses Suntay were the highest bidder. Keyser then filed a complaint for annulment of auction sale and cancellation of notice of levy before the HLURB, the latter ruled in favor of Keyser. Spouses Suntay appealed the decision to the Office of the President and later to the CA but both affirmed the HLURB judgment. Undaunted, Keyser filed before the RTC of Manila a new complaint for annulment of auction sale, writ of execution, declaration of nullity of title, and reconveyance of property with damages against Spouses Suntay, docketed as Civil Case No. 06-114716. In their answer, Spouses Suntay denied the material allegations of the complaint and interposed special and affirmative defenses of res judicata, forum shopping, prescription, and lack of cause of action. Spouses Suntay elevated the decision to the CA. In its September 7, 2012 Decision, the CA denied the appeal as it found that Spouses Suntay did not acquire the subject property because at the time it was levied, Bayfront had already sold the condominium unit to Keyser. Considering that the judgment debtor had no interest in the property, Spouses Suntay, as purchasers at the auction sale, also acquired no interest. Issues: 1. Whether or not the court of appeals committed a reversible error in sustaining the trial court’s decision by not dismissing the complaint case of herein respondent on ground of prescription of actions under article 1146 of the civil code of the Philippines, as well as, due to estoppel by laches; 2. Whether or not the court of appeals in sustaining the decision of the court a quo committed a serious reversible error in not applying section 52 of p.d. 1529 and article 1544 of the civil code of the Philippines by finding that herein petitioners have better rights of ownership over the subject condominium property in litigation. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 3. Whether or not the court of appeals committed a reversible error in sustaining the trial court’s decision by not dismissing the complaint [on] ground of res judicata; Held: 1. The defense of prescription is likewise unavailing. In Fulton Insurance Company v. Manila Railroad Company, this Court ruled that the filing of the first action interrupted the running of the period, and then declared that, at any rate, the second action was filed within the balance of the remaining period. Applying Article 1155 of the New Civil Code in that case, the interruption took place when the first action was filed in the Court of First Instance of Manila. The interruption lasted during the pendency of the action until the order of dismissal for alleged lack of jurisdiction became final. In the present case, the prescriptive period was interrupted when HLURB Case No. REM032196-9152 was filed on March 21, 1996. The interruption lasted during the pendency of the action and until the judgment of dismissal due to lack of jurisdiction was rendered on the September 23, 2005. Thus, the filing of Civil Case No. 06-114716 on March 24, 2006 was squarely within the prescriptive period of four (4) years. 2. The Court disagrees with the lower courts. They had completely overlooked the significance of a levy on execution. The doctrine is well-settled that a levy on execution duly registered takes preference over a prior unregistered sale. Even if the prior sale was subsequently registered before the sale in execution but after the levy was duly made, the validity of the execution sale should be maintained because it retroacts to the date of the levy. Otherwise, the preference created by the levy would be meaningless and illusory. In this case, the contract to sell between Keyser and Bayfront was executed on October 20, 1989, but the deed of absolute sale was only made on November 9, 1995 and registered on March 12, 1996. The Notice of Levy in favor of Spouses Suntay was registered on January 18, 1995, while the Certificate of Sale on April 7, 1995, both dates clearly ahead of Keyser’s registration of its Deed of Absolute Sale. Evidently, applying the doctrine of primus tempore, potior jure (first in time, stronger in right), Spouses Suntay have a better right than Keyser. In the case of Uy v. Spouses Medina which dealt with essentially the same issues, the Court wrote: Considering that the sale was not registered earlier, the right of petitioner over the land became subordinate and subject to the preference created over the earlier annotated levy in favor of Swift. The levy of execution registered and annotated on September 1, 1998 takes precedence over the sale of the land to petitioner on February 16, 1997, despite the subsequent registration on Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 September 14, 1998 of the prior sale. Such preference in favor of the levy on execution retroacts to the date of levy for to hold otherwise will render the preference nugatory and meaningless.

3. First, the defense of res judicata must fail. The doctrine of res judicata is a fundamental principle of law which precludes parties from re-litigating issues actually litigated and determined by a prior and final judgment. Res judicata constituting bar by prior judgment occurs when the following requisites concur: (1) the former judgment is final; (2) it is rendered by a court having jurisdiction over the subject matter and the parties; (3) it is a judgment or an order on the merits; and (4) there is identity of parties, of subject matter, and of causes of action. The previous case instituted by Keyser in the HLURB was denied on appeal by this Court based on lack of jurisdiction. Thus, the third requisite of res judicata is not present because the previous case was not adjudicated on the merits as it was denied on jurisdictional grounds.

By: Maricris C. Ortega

PHILIPPINE ELECTRIC CORPORATION (PHILEC), PETITIONER VS. COURT OF APPEALS, NATIONAL CONCILIATION AND MEDIATION BOARD (NCMB), DEPARTMENT OF LABOR AND EMPLOYMENT, RAMON T. JIMENEZ, IN HIS CAPACITY AS VOLUNTARY ARBITRATOR, PHILEC WORKERS' UNION (PWU), ELEODORO V. LIPIO, AND EMERLITO C. IGNACIO G.R. No. 168612, December 10, 2014

Facts: Tne Electric Corporation (PHILEC) is a domestic corporation “engaged in the manufacture and repairs of high voltage transformers.” Among its rank-and-file employees were Eleodoro V. Lipio (Lipio) and Emerlito C. Ignacio, Sr. (Ignacio, Sr.), former members of the PHILEC Workers’ Union (PWU). PWU is a legitimate labor organization and the exclusive bargaining representative of PHILEC’s rank-and-file employees. From June 1, 1989 to May 31, 1997, PHILEC and its rank-and-file employees were governed by collective bargaining agreements providing for the following step increases in an employee’s basic salary in case of promotion and with the previous collective bargaining agreements already expired, PHILEC selected Lipio for promotion from Machinist under Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Pay Grade VIII to Foreman I under Pay Grade B. PHILEC served Lipio a memorandum, instructing him to undergo training for the position of Foreman I beginning on August 25, 1997. PHILEC undertook to pay Lipio training allowance as provided in the memorandum Ignacio, Sr., then DTAssembler with Pay Grade VII, was likewise selected for training for the position of Foreman I. PHILEC served Ignacio, Sr. a memorandum, instructing him to undergo training with the following schedule of allowance. On September 17, 1997, PHILEC and PWU entered into a new collective bargaining agreement, effective retroactively on June 1, 1997 and expiring on May 31, 1999. Under Article X, Section 4 of the June 1, 1997 collective bargaining agreement, a rank-and-file employee promoted shall be entitled to the following step increases in his or her basic salary. To be promoted, a rank-and-file employee shall undergo training or observation and shall receive training allowance as provided in Article IX, Section 1(f) of the June 1, 1997 collective bargaining agreement. Claiming that the schedule of training allowance stated in the memoranda served on Lipio and Ignacio, Sr. did not conform to Article X, Section 4 of the June 1, 1997 collective bargaining agreement, PWU submitted the grievance to the grievance machinery. PWU and PHILEC failed to amicably settle their grievance. For PHILEC’s failure to apply the schedule of step increases under Article X of the June 1, 1997 collective bargaining agreement, PWU argued that PHILEC committed an unfair labor practice under Article 248 of the Labor Code. In its position paper, PHILEC emphasized that it promoted Lipio and Ignacio, Sr. while it was still negotiating a new collective bargaining agreement with PWU. Since PHILEC and PWU had not yet negotiated a new collective bargaining agreement when PHILEC selected Lipio and Ignacio, Sr. for training, PHILEC applied the “Modified SGV” pay grade scale in computing Lipio’s and Ignacio, Sr.’s training allowance. This “Modified SGV” pay grade scale, which PHILEC and PWU allegedly agreed to implement beginning on May 9, 1997, covered both rank-andfile and supervisory employees. According to PHILEC, its past collective bargaining agreements with the rank-and-file and supervisory unions resulted in an overlap of union membership in Pay Grade IX of the rank-and-file employees and Pay Grade A of the supervisory employees. Worse, past collective bargaining agreements resulted in rank-and-file. To preserve the hierarchical wage structure within PHILEC’s enterprise, PHILEC and PWU allegedly agreed to implement the uniform pay grade scale under the “Modified SGV” pay grade system, Pay grade bracket I–IX covered rank-and-file employees, while pay grade bracket A–F covered supervisory employees. Voluntary Arbitrator Jimenez held in the decision dated August 13, 1999, that PHILEC violated its collective bargaining agreement with PWU. According to Voluntary Arbitrator Jimenez, the June 1, 1997 collective bargaining agreement governed when PHILEC selected Lipio and Ignacio, Sr. for promotion on August 18 and 21, 1997. The provisions of the collective bargaining agreement being the law between the parties, PHILEC should have computed Lipio’s and Ignacio, Sr.’s training allowance based on Article X, Section 4 of the June 1, 1997 collective bargaining agreement. As to PHILEC’s claim that applying Article X, Section 4 would result in salary distortion within PHILEC’s Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 enterprise, Voluntary Arbitrator Jimenez ruled that this was “a concern that PHILEC could have anticipated and could have taken corrective action” before signing the collective bargaining agreement. Voluntary Arbitrator Jimenez dismissed PWU’s claim of unfair labor practice. According to him, PHILEC’s acts “cannot be considered a gross violation of the [collective bargaining agreement] nor . . . [a] flagrant and/or malicious refusal to comply with the economic provisions of the [agreement].” Thus, Voluntary Arbitrator Jimenez ordered PHILEC to pay Lipio and Ignacio, Sr. training allowance based on Article X, Section 4 and Article IX, Section 1 of the June 1, 1997 collective bargaining agreement. PHILEC received a copy of Voluntary Arbitrator Jimenez’s decision on August 16, 1999. On August 26, 1999, PHILEC filed a motion for partial reconsideration of Voluntary Arbitrator Jimenez’s decision. In the resolution dated July 7, 2000, Voluntary Arbitrator Jimenez denied PHILEC’s motion for partial reconsideration for lack of merit. PHILEC received a copy of the July 7, 2000 resolution on August 11, 2000. On August 29, 2000, PHILEC filed a petition for certiorari before the Court of Appeals, alleging that Voluntary Arbitrator Jimenez gravely abused his discretion in rendering his decision. PHILEC maintained that it did not violate the June 1, 1997 collective bargaining agreement. It applied the “Modified SGV” pay grade rates to avoid salary distortion within its enterprise. In addition, PHILEC argued that Article X, Section 4 of the collective bargaining agreement did not apply to Lipio and Ignacio, Sr. Considering that Lipio and Ignacio, Sr. were promoted to a supervisory position, their training allowance should be computed based on the provisions of PHILEC’s collective bargaining agreement with ASSET, the exclusive bargaining representative of PHILEC’s supervisory employees. The Court of Appeals affirmed Voluntary Arbitrator Jimenez’s decision. It agreed that PHILEC was bound to apply Article X, Section 4 of its June 1, 1997 collective bargaining agreement with PWU in computing Lipio’s and Ignacio, Sr.’s training allowance. On September 27, 2006, PHILEC filed its reply, reiterating its arguments in its petition for review on certiorari.

Issue: (1) (2)

Whether the provisions of the PWU collective bargaining agreement governs the computation of Lipio’s and Ignacio Sr.’s training allowance Whether the 6% legal interest under Circular No. 799, Series of 2013, of the Bangko Sentral ng Pilipinas Monetary Board applies in this case?


Compilation of Case Digests in CIVIL LAW Review 2 Held: (1) Yes. Voluntary Arbitrator Jimenez correctly awarded both Lipio and Ignacio, Sr. training allowances based on the amounts and formula provided in the June 1, 1997 collective bargaining agreement. A collective bargaining agreement is “a contract executed upon the request of either the employer or the exclusive bargaining representative of the employees incorporating the agreement reached after negotiations with respect to wages, hours of work and all other terms and conditions of employment, including proposals for adjusting any grievances or questions arising under such agreement.” A collective bargaining agreement being a contract, its provisions “constitute the law between the parties” and must be complied with in good faith. PHILEC, as employer, and PWU, as the exclusive bargaining representative of PHILEC’s rank-and-file employees, entered into a collective bargaining agreement, which the parties agreed to make effective from June 1, 1997 to May 31, 1999. Being the law between the parties, the June 1, 1997 collective bargaining agreement must govern PHILEC and its rank-and-file employees within the agreed period. Lipio and Ignacio, Sr. were rank-and-file employees when PHILEC selected them for training for the position of Foreman I beginning August 25, 1997. Lipio and Ignacio, Sr. were selected for training during the effectivity of the June 1, 1997 rank-and-file collective bargaining agreement. Therefore, Lipio’s and Ignacio, Sr.’s training allowance must be computed based on Article X, Section 4 and Article IX, Section 1(f) of the June 1, 1997 collective bargaining agreement (2) NO. Considering that Voluntary Arbitrator Jimenez’s decision awarded sums of money, Lipio and Ignacio, Sr. are entitled to legal interest on their training allowances. Voluntary Arbitrator Jimenez’s decision having become final and executory on August 22, 2000, PHILEC is liable for legal interest equal to 12% per annum from finality of the decision until full payment as this court ruled in Eastern Shipping Lines, Inc. v. Court of Appeals: “When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest. . . shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then as equivalent to a forbearance of credit.”


Compilation of Case Digests in CIVIL LAW Review 2 The 6% legal interest under Circular No. 799, Series of 2013, of the Bangko Sentral ng Pilipinas Monetary Board shall not apply, Voluntary Arbitrator Jimenez’s decision having become final and executory prior to the effectivity of the circular on July 1, 2013. In Nacar v. Gallery Frames, we held that: with regard to those judgments that have become final and executory prior to July 1, 2013, said judgments shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein. Petitioner Philippine Electric Corporation is ORDERED to PAY respondent Eleodoro V. Lipio a total of P3,549.00 for a four (4)-month training for the position of Foreman I with legal interest of 12% per annum from August 22, 2000 until the amount's full satisfaction. For respondent Emerlito C. Ignacio, Sr., Philippine Electric Corporation is ORDERED to PAY a total of P3,962.00 for a four (4)-month training for the position of Foreman I with legal interest of 12o/o per annum from August 22, 2000 until the amount's full satisfaction.

By: Catherine A. Padon

REPUBLIC OF THE PHILIPPINES., vs. HEIRS OF SPOUSES DONATO SANCHEZ AND JUANA MENESES, REPRESENTED BY RODOLFO S. AGUINALDO G.R. NO. 212388, 10 December 2014 VELASCO

Doctrine: IT IS SO BASIC UNDER REPUBLIC ACT NO. 26 THAT THE SAME SHALL ONLY APPLY IN CASES WHERE THE ISSUANCE OF OCT HAS BEEN ESTABLISHED, ONLY THAT IT WAS LOST OR DESTROYED UNDER CIRCUMSTANCES PROVIDED FOR UNDER SAID LAW. AGAIN, WITHIN THE CONTEXT OF THIS DISCUSSION, RA NO. 26 WILL NOT APPLY BECAUSE IN THIS CASE, THERE IS NO ESTABLISHED PROOF THAT AN OCT HAD BEEN ISSUED. IN OTHER WORDS, THE APPLICABILITY OF RA NO. 26 HINGES ON THE EXISTENCE OF PRIORLY ISSUED OCT. Facts: Respondents filed an amended petition for reconstitution of Original Certificate of Title (OCT) No. 45361 that covered Lot No. 854 of the Cadastral Survey of Dagupan, pursuant to Republic Act (RA) No. 26. In said petition, respondents made the following allegations: 1. That OCT No. 45361 was issued in the name of their predecessor-in-interest, the spouses Sanchez, pursuant to Decree No. 41812 issued in relation to a Decision dated March 12, Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 1930 of the then Court of First Instance (CFI) of Pangasinan; 2. Said lot was declared for taxation purposes in the name of the spouses Sanchez and that when the latter died intestate; they executed a Deed of Extrajudicial Partition. Said Deed, however, could not be registered because the owner’s copy of OCT No. 45361 was missing; and 3. The Offices of the Register of Deeds (RD) of Lingayen and Dagupan, Pangasinan issued a certification that the copies of Decree No. 41812 and OCT No. 45361 could not be found among its records. Finding the petition sufficient in form and substance, the CFI issued an Order dated June 24, 2001 giving due course thereto and ordered the requisite publication thereof, among others. Meanwhile, the Administrator of the Land Registration Authority (LRA) requested the trial court, which the latter granted through its October 11, 2002 Order, to require respondents to submit the following documents. 1. Certification from the RD that OCT No. 45361 was either lost or destroyed; 2. Copies of the technical description of the lot covered by OCT No. 45361, certified by the authorized officer of the Land Management Bureau/LRA; and 3. Sepia film plan of the subject lot prepared by the duly licensed geodetic engineer. Due to difficulties encountered in securing said documents, respondents moved for the archiving of the case, which motion was granted by the trial court. It was later revived when respondents finally secured the said documents. The petition was published anew and trial later ensued, with the documents submitted by respondents in evidence. On January 11, 2008, the LRA submitted its Report pertaining to the legality of the reconstitution sought in favor of respondents, the relevant portions of which, as quoted by the CA in the assailed Decision, are as follows: (2) From Book No. 35 of the Record Book of Cadastral Lots on file at the Cadastral Decree Section, this Authority, it appears that Decree No. 418121 was issued to Lot No. 854, Dagupan Cadastre on January 12, 1931, in Cadastral Case No. 40, GLRO Cad. Record No. 920. Copy of the said decree, however, is no longer available in this Authority.


Compilation of Case Digests in CIVIL LAW Review 2 The Regional Trial Court (RTC) rendered its Decision dismissing the petition for lack of sufficient evidence, ruling that RA No. 26 only applies in cases where the issuance of the OCT sought to be reconstituted has been established, only that it was lost or destroyed. While acknowledging the existence of Decree No. 418121 which was issued for the lot subject of the case, the RTC nevertheless held that there is no established proof that OCT No. 45361 was issued by virtue of said Decree. Disagreeing with the trial court’s findings and holding that Lot 854 was judicially awarded to respondents’ predecessor-in-interest in Cadastral Case the CA reversed the RTC ruling on appeal and directed the reconstitution of OCT No. 45361 in favor of herein respondents. The CA held that even though respondents were unable to present the documents necessary for reconstitution of title as enumerated under Section 2 of RA No. 26, particularly (a) to (e) thereof, the documentary pieces of evidence presented by respondents fall under paragraph (f) of said provision and are sufficient to warrant the reconstitution of OCT No. 45361. In this regard, the CA emphasized that the certificates of title which the RD manifested to have superseded OCT No. 45361 all bear the notation to the effect that Lot No. 854 was originally registered on January 29, 1931 as OCT No. 45361 pursuant to Decree No. 418121 issued in G.L.R.O. Cadastral Record No. 920, the name of the registered owner of which is not available. This, to the CA, substantially complies with the requirement enunciated in Republic v. Tuastumban that the documents must come from official sources which recognize the ownership of the owner and his predecessors-in-interest.

Issue: Whether or not the petition for reconstitution of Original Certificate of Title (OCT) No. 45361 should be granted.

Held: The Court agrees with the trial court that no clear and convincing proof has been adduced that OCT No. 45361 was issued by virtue of Decree No. 418121. The Decision dated March 21, 1930 and the Registrar’s Index Card containing the notation on OCT No. 45361 do not cite nor mention that Decree No. 418121 was issued to support the issuance of OCT No. 45361. At this point, it is well to emphasize that a petition for reconstitution of lost or destroyed OCT requires, as a condition precedent, that an OCT has indeed been issued, for obvious reasons. Assuming arguendo that respondents were able to sufficiently prove the existence of OCT No. 45361 considering the totality of the evidence presented, the Court finds that reconstitution thereof is still not warranted, applying Section 15 of RA No. 26. Said provision reads: Section 15. If the court, after hearing, finds that the documents presented, as supported by parole evidence or otherwise, are sufficient and proper to warrant the reconstitution of the lost or destroyed certificate of title, and that the petitioner is the registered owner of the property or has an interest therein, that the said certificate of title was in force at the time it was lost or destroyed, and that the description, area and boundaries of the property are substantially the same as those contained in the lost or destroyed certificate of title, an order of reconstitution shall be issued. x x x Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu


As explicitly stated in the above-quoted provision, before a certificate of title which has been lost or destroyed may be reconstituted, it must first be proved by the claimants that said certificate of title was still in force at the time it was lost or destroyed, among others. Here, the mere existence of TCT No. 10202, later cancelled by TCT No. 44365, which, in turn, was superseded by TCT No. 80792, which bear the notations: Originally registered on the 29th day of January, [1931] xxx as OCT No. 45361 pursuant to Decree No. 418121 issued in G.L.R.O. Cadastral Record No. 920. The name of the registered owner of OCT No. 45361 is not available as per certification of the [RD of Lingayen], dated August 18, 1982, entries nos. 107415 and 107416, respectively. Clearly shows that the OCT which respondents seek to be reconstituted is no longer in force, rendering the procedure, if granted, a mere superfluity. Additionally, if indeed OCT No. 45361 was lost or destroyed, it is necessary that the RD issue a certification that such was in force at the time of its alleged loss or destruction. Definitely, the RD cannot issue such certification because of the dearth of records in support of the alleged OCT No. 45361 in its file. The presentation of alleged derivative titles––TCT No. 10202, TCT No. 44365 and TCT No. 80792––will not suffice to replace this certification because the titles do not authenticate the issuance of OCT No. 45361 having been issued by the RD without any basis from its official records. As a matter of fact, it is a wonder how the derivative titles were issued when the existence of OCT No. 45361 could not be established based on the RD’s records. The RD failed to explain how it was able to make an annotation of the original registration of the lot under OCT No. 45361 when respondents are now asking for its reconstitution. It is also highly suspicious why respondents are asking the reconstitution of OCT No. 45361 when, supposedly, it has already been cancelled and new titles have already been issued based on transfers purportedly made by respondents. Lastly, of what use is the reconstituted OCT No. 45361 when the lot has already been transferred to other persons. It will practically be of no value or worth to respondents. Again, we invite you back to the highlighted provision of Section 39 of PD 1529 which states that: “The original certificate of title shall be a true copy of the decree of registration.” This provision is significant because it contemplates an OCT which is an exact replica of the decree. If the old decree will not be canceled and no new decree issued, the corresponding OCT issued today will bear the signature of the present Administrator while the decree upon which it was based shall bear the signature of the past Administrator. This is not consistent with the clear intention of the law which states that the OCT shall be true copy of the decree of registration. Ostensibly, therefore, the cancellation of the old decree and the issuance of a new one is necessary.


Compilation of Case Digests in CIVIL LAW Review 2 It is so basic under Republic Act No. 26 that the same shall only apply in cases where the issuance of OCT has been established, only that it was lost or destroyed under circumstances provided for under said law. Again, within the context of this discussion, RA No. 26 will not apply because in this case, there is no established proof that an OCT had been issued. In other words, the applicability of RA No. 26 hinges on the existence of priorly issued OCT. Will reconstitution of Decree lie then? Again, the answer is no. There is no showing that the decree is lost. In fact, it can be established that a decree, pursuant either to a cadastral proceeding or an ordinary land registration case, has been issued. Under existing land registration laws and jurisprudence, there is no such thing as reconstitution of a decree. RA No. 26 cannot likewise be the basis because the latter refers to an OCT and not a decree of registration.

By: Stephanie

H. Siazon

ANNIE GERONIMO, SUSAN GERONIMO AND SILVERLAND ALLIANCE CHRISTIAN CHURCH v. SPS. ESTELA C. CALDERON AND RODOLFO T. CALDERON G.R. No. 201781, December 10, 2014

Facts: Respondents spouses Estela and Rodolfo Calderon (respondents, for brevity) filed a verified complaint before the HLURB Regional Office against Silverland Realty &Development Corporation, SilverlandVillage I Homeowners Association, Silverland Alliance Christian Church (SACC), Joel Geronimo, Annie Geronimo, Jonas Geronimo and Susan Geronimo,for specific performance and for the issuance of cease and desist order and damages. In their complaint, respondents alleged that they are residents of #31 Silverlane Street, Silverland Subdivision, Pasong Tamo, Tandang Sora, Quezon City. Spouses Joel and Annie Geronimo are residents of #48 Silverlane Street just across their house. Sometime in May 2005, a building was erected beside the house of Joel and Annie. Jonas Geronimo directed the construction. When respondents asked about the building, Susan Geronimo told them that her son, Joel, had bought the adjacent lot to build an extension house in order to create a wider playing area for the Geronimo grandchildren because their two-storey house could no longer accommodate their growing family. When the construction was finished, the building turned out to be the church of petitioner SACC. The church was used for different religious activities including daily worship services, baptisms, summer school, choir rehearsals, band practices, playing of different musical instruments and use of a loud sound system which would last until late in the evening. The noise allegedly affected respondents’ health and caused inconvenience to respondents because they were forced to leave their house if they want peace and tranquility. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Respondents sought assistance from the President of the homeowners’ association. SACC, through Atty. Alan Alambra promised that it will take steps to avoid church activities beyond 10:00 p.m. However, the intolerable noise still continued. In fact, another residence situated at #36 Silverlane Street was used for Sunday school. Due to the added noise and tension, Estela’s nose bled. Respondents went to the Commission on Human Rights, but no settlement was reached. SACC, Joel Geronimo, Annie Geronimo, Susan Geronimo and Jonas Geronimo denied the allegations with regard to the activities that allegedly caused disturbance and stress to respondents. They averred that the HLURB has no jurisdiction over the case which primarily involves abatement of nuisance, primarily lodged with the regular courts. They also alleged lack of privity with respondents and that they are not real parties-in-interest with respect to the subject matter of the complaint. Issue: Whether or not the Court of Appeals erred in affirming that the HLURB has jurisdiction over the present controversy. Held: We agree with the CA that the HLURB has jurisdiction over the present controversy. Jurisdiction over the subject matter of a case is conferred by law and determined by the allegations in the complaint which comprise a concise statement of the ultimate facts constituting the plaintiff’s cause of action. The nature of an action, as well as which court or body has jurisdiction over it, is determined based on the allegations contained in the complaint of the plaintiff, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein. The averments in the complaint and the character of the relief sought are the ones to be consulted. Once vested by the allegations in the complaint, jurisdiction also remains vested irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein. We have ruled that the jurisdiction of the HLURB to hear and decide cases is determined by the nature of the cause of action, the subject matter or property involved and the parties.

In the present case, respondents are buyers of a subdivision lot from subdivision owner and developer Silverland Realty & Development Corporation.Respondents’ action against Silverland Realty & Development Corporation was for violation of its own subdivision plan when it allowed the construction and operation of SACC. Respondents sued to stop the church activities inside the subdivision which is in contravention of the residential use of the subdivision lots. Undoubtedly, the present suit for the enforcement of statutory and contractual obligations of the subdivision developer clearly falls within the ambit of the HLURB’s jurisdiction.Needless to stress, when an administrative agency or body is conferred quasi-judicial functions, all controversies relating to the subject matter pertaining to its specialization are deemed to be included within the jurisdiction of said administrative agency or body. Split jurisdiction is not favored. Thus, respondents properly filed their complaint before the HLURB. The HLURB has exclusive jurisdiction over complaints arising from contracts between the subdivision developer and the lot Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 buyer, or those aimed at compelling the subdivision developer to comply with its contractual and statutory obligations to make the subdivision a better place to live in. PEOPLE OF THE PHILIPPINES, PLAINTIFF-APPELLEE, V. JOSE ESTALIN PRODENCIADO, ACCUSED-APPELLANT G.R. NO. 192232, DECEMBER 10, 2014

Facts: AAA” was born on December 13, 1985 to common[-]law spouses “BBB”, a housewife, and Jose E. Prodenciado (a.k.a. Rommel), a fisherman. The couple has five (5) children[,] with “AAA” being the eldest. At the time the rape incidents took place, appellant and “AAA” resided at Sta. Barbara, Baliuag, Bulacan. Sometime in 1993[,] at around noon, “AAA” brought food for appellant at the hut by the river where her father usually rests after fishing. Suddenly, appellant pulled out a knife, poked it at her and told her to go up the hut with him. As soon as they reached the hut, appellant removed both their clothes and told “AAA” to lie down on the floor. Appellant lowered himself atop “AAA” and inserted his penis into her vagina. After satiating his lust, appellant dressed and warned “AAA” not to tell anybody what happened[,] or else[,] he would kill her mother. At that time, “AAA” was only eight (8) years old. The incident was repeated sometime in 1995 when “AAA” was then [10] years old and was in Grade III. Prodenciado was charged and convicted with two counts each of Statutory Rape and Simple Rape committed against his own daughter, “AAA.” For the statutory rape committed by Prodenciado against “AAA,” we affirm the CA’s award of P75,000.00 as civil indemnity. However, the award of moral damages must be reduced to P50,000.00 while the award of exemplary damages must be increased to P30,000.00. As regards the three counts of qualified rape, “AAA” is entitled to the following awards: P100,000.00 as civil indemnity for each count; P100,000.00 as moral damages for each count; and P100,000.00 as exemplary damages for each count.50 Issue: Whether the damages awarded by the court earns interest? If yes, when is the reckoning point? Held: Yes. All damages awarded shall earn interest at the rate of 6% per annum from date of finality of this judgment until fully paid. By: Catherine A. Padon HON. ORLANDO C. CASIMIRO, IN HIS CAPACITY AS ACTING OMBUDSMAN, OFFICE OF THE OMBUDSMAN; HON. ROGELIO L. SINGSON, IN HIS CAPACITY AS DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS SECRETARY., Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 vs. JOSEFINO N. RIGOR G.R. NO. 206661, 10 December 2014

Facts: Sometime in 2005, the General Investigation Bureau-A of the OMB (GIB-A-OMB) conducted a lifestyle check on respondent Josefino N. Rigor, then the Regional Director of the DPWH-National Capital Region (DPWH-NCR). Thereafter, the GIB-A-OMB filed a complaint against Rigor charging him criminally and administratively before the Office of the Ombudsman (OMB) for alleged unexplained wealth and violation of Republic Act (R.A.) No. 3019 and R.A. 1379. Said complaint was mainly based on certain irregularities on Rigor’s Statement of Assets, Liabilities and Net Worth (SALNs), allegedly failing to declare therein several properties, business interests, and financial connections. Its administrative aspect asserted that Rigor committed Dishonesty, Grave Misconduct, and Falsification of Official Documents. Among the properties he failed to declare was in his 1999 and 2000 SALN are the fourteen (14) parcels of land located in Barrio Maluid, Victoria, Tarlac, covered by Transfer Certificate of Title (TCT) Nos. 223271 to 223284, which were all issued by the Registry of Deeds for Tarlac province on August 21, 1989 in the name of Josefino Rigor, married to Abigail S. Rigor. On July 28, 2006, the OMB issued a Decision finding Rigor guilty of Dishonesty. Subsequently, Rigor moved for a reconsideration, which the OMB granted on April 29, 2011. It thus ruled accordingly, respondent is adjudged GUILTY of Simple Negligence and is hereby fined the amount of One Thousand Pesos, with a warning that repetition of the same or similar act shall be dealt with more strictly. The DPWH Secretary then filed, through the Office of the Solicitor General (OSG), an Omnibus Motion (for Leave to Intervene and to Admit Motion for Reconsideration), praying for its intervention in the case to be allowed. The DPWH argued that there existed strong and compelling reasons for the reversal of the April 29, 2011 OMB Order. On June 7, 2011, the OMB directed Rigor to file his Comment on said Motion. On July 18, 2011; the OMB reversed its order of the April 29, 2011. This Order is immediately executory pursuant to Ombudsman Memorandum Circular No. 01, Series of 2006, in relation to paragraph 1, Section 27 of R.A. 6770, and Section 7, Rule III, Administrative Order No. 7, Rules of Procedure of the Office of the Ombudsman, as amended, and in accordance with the ruling of the Supreme Court in Ombudsman vs. Joel Samaniego. On Appeal CA reinstated the order of the OMB on April 29, 2011. Issue: Whether or not Rigor, is correct in his allegation that he had no obligation to declare the fourteen (14) parcels of land in Victoria, Tarlac because these properties were actually owned by Riyacorp Piggery Form Incorporated, a family corporation which his parents owned. He was merely authorized to mortgage these properties and was never the owner of the same prior to the subsequent transfer to Metrobank, the present owner. Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 Held: No. However, the annotations on the Memorandum of Encumbrances of the titles showed that said properties were the subject of a Deed of Sale in favor of the Associated Bank way back in 1987. The ownership over these properties was also consolidated in the name of said bank in the same year and new TCTs were consequently issued. Thus, in all likelihood, the owner of the properties prior to Rigor was Associated Bank and not Riyacorp, and the latter could not have possibly authorized Rigor to mortgage the properties. This proves that Rigor was, in fact, the owner of the lots and not merely Riyacorp’s authorized mortgagor. As such, he was under obligation to declare the same from 1989 to 2000, before the consolidation of ownership in favor of Metrobank in 2001.

By:

Stephanie

H.

Siason



January 2015

BANK OF THE PHILIPPINE ISLANDS (FORMERLY PRUDENTIAL BANK) VS. SPOUSES DAVID M. CASTRO AND CONSUELO B. CASTRO, Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 G.R. No. 195272 dated 14 January 2015 PEREZ, J. Facts: Spouses Castro contracted two loans from Prudential Bank in the amounts P100,000 and P55,000 on July and August 1987. The loans were secured by a Real Estate Mortgage (REM) over petitioner’s property in Quezon City and another in Alaminos, Laguna, registered in the name of David’s mother. The loans remained unpaid as of 30 April 1996 and the balance has ballooned to P290,205,05 and P96,870.20, respectively. Prudential Bank, through counsel, filed two separate for foreclosure of the mortgage. In their first petition, Prudential Bank admitted that through inadvertence, the photocopies in Laguna were mixed and attached to the photocopies of the last two pages of the REM, covering the QC property. Thus, in the Notice of Sheriff’s Sale, the name of David’s mother appeared as mortgagor while the amount of mortgaged indebtedness P96,870.20. The real property pertained to is the Quezon City property. It was subsequently sold at a public auction in favor of Prudential Bank whose winning bid was P396,000.00 Spouses Castro filed a complaint alleging that the extrajudicial foreclosure and sale of the Quezon City property is null and void for lack of notice and publication of the sale and further claiming that the property is not covered by the REM executed by David’s mother, which was the basis of Notice of Sheriff’s sale, which was postponed and published. Prudential Bank asserted that the spouses were fully aware of the foreclosure of the Quezon City property because their loan remained unpaid. Prudential Bank admitted their clerical and harmless inadvertence in the preparation of the petition for extrajudicial foreclosure but nonetheless claimed that the spouses were notified and should have noticed the inadvertence and alerted the Sheriff. Failure to do so amounted to laches. Bank of the Philippine Islands (BPI) succeeded Prudential Bank by virtue of a merger. It filed a petition for review. The spouses argued that the sale is not valid because public policy is involved in the need for strict compliance with the requirements of the notice in extrajudicial foreclosure of mortgage. It was posited that the lesser amount of indebtedness as stated in the notice would mislead potential bidder in public auction and subject the value of the property to risk unwarranted diminution and that the property was misidentified. Issue: Whether or not the extrajudicial foreclosure of the mortgage is valid Held: Yes. Foreclosure proceedings have in their favor the presumption of regularity and the party who seeks to challenge the proceedings has the burden of evidence to rebut the same. The spouses failed to prove that Prudential Bank has not complied with the notice requirement of the law. With jurisprudence as the measure, the errors pointed out by the spouses 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 bidders as shown by the fact that the winning registered bid is over and above the real amount of indebted ness. Moreover, there is no indication of collusion between the sheriff who conducted the sale and the Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 bank. The notice rule was complied with when the Notice of Sheriff’s sale was published in Philippine Recorder, a national newspaper of general circulation once a week for three consecutive weeks. Lastly, David admitted on the witness stand that he know that there was an application for foreclosure on their Quezon City property but the REM used as basis of the foreclosure covered the Laguna properties. Upon learning this information, he should have registered his objection or sought clarification from the sheriff’s office. Instead, he let the public auction proceed and belatedly objected the sale. By: Gary Louie D. Martinez

ALMENDRAS vs. ALMENDRAS G.R. NO.179491, January 14, 2015 Sereno, CJ. Facts: Petitioner sent letters to House Speaker Jose de Venecia, Jr., and to Dr. Nemesio Prudente, The controversial portion of the first and second letters reads as follows: This is to notify your good self and your staff that one ALEXIS "DODONG" C. ALMENDRAS, a brother, is not vested with any authority to liaison or transact any business with any department, office, or bureau, public or otherwise, that has bearing or relation with my office, mandates or functions. Noteworthy to mention, perhaps, is the fact that Mr. Alexis “Dodong” C. Almendras, a renown blackmailer, is a bitter rival in the just concluded election of 1995 who ran against the wishes of my father, the late Congressman Alejandro D. Almendras, Sr. He has caused pain to the family when he filed cases against us: his brothers and sisters, and worst against his own mother. I deemed that his act of transacting business that affects my person and official functions is malicious in purpose, done with ill motive and part of a larger plan of harassment activities to perforce realise his egoistic and evil objectives. May I therefore request the assistance of your office in circulating the above information to concerned officials and secretariat employees of the House of Representatives.”These letters were allegedly printed, distributed, circulated and published by petitioner, assisted by Atty. Roberto Layug, with evident bad faith and manifest malice to destroy respondent Alexis C. Almendras’ good name. Issue/s: Whether or not respondent is entitled to moral damages? Held: Yes. In awarding damages in libel cases, the court is given ample discretion to determine the amount, depending upon the facts of the particular case. Article 2219 of the Civil Code expressly authorizes the recovery of moral damages in cases of libel, slander or any other form of defamation. However while no proof of pecuniary loss is necessary in order that moral damages may be awarded, x x x it is nevertheless essential that the claimant should satisfactorily show the existence of the Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 factual basis of damages and its causal connection to defendant’s acts.” Considering that respondent sufficiently justified his claim for damages (i.e. he testified that he was "embarrassed by the said letters [and] ashamed to show his face in [sic] government offices") we find him entitled to moral and exemplary damages. By: ELIJAH DEL ROSARIO

SPOUSES JOSE O. GATUSLAO AND ERMILA LEONILA LIMSIACO-GATUSLAO Vs. LEO RAY Y. YANSON G.R. No. 191540 21 JANUARY 2015 Facts: Petitioner is the daughter of the late Felicisimo Limsiaco who died intestate on February 7, 1989 and was the registered owner of two (2) parcels of land with improvements in Bacolod City described as Lots 10 and 11 Block 8 of the subdivision plan and covered by TCT Nos. T-33429 and 24331. Limsiaco mortgaged the said lots along with the house to the Philippine National Bank (PNB). He defaulted and the bank subsequently foreclosed on the mortgage and caused the properties’ sale at a public auction on June 24, 1991 where it emerged as the highest bidder. When the redemption period expired without Limsiaco’s estate redeeming the properties, the bank caused the consolidation of titles in its name. Thereafter, on November 10, 2006, PNB sold the above properties in favor of respondent. As a consequence, respondent became the new owner of said properties. Being the new owner, Respondent filed with the RTC an Ex-Parte Motion for Writ of Possession and petitioners opposed the Motion as Respondent was not the buyer of the subject properties at the public auction sale and only purchased the same through a subsequent sale made by PNB. Further, the intestate estate of Limsiaco had already instituted an action for annulment of foreclosure of mortgage and auction sale affecting the contested properties. The RTC granted the issuance of the Writ of Possession. The petitioners filed with the Supreme Court a Petition for Review on Certiorari. Issue:

Whether or not Respondent is entitled to the issuance of writ of possession?

Held: The Supreme Court held that Respondent is entitled to the issuance of a writ of possession. It held that Respondent, 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 and as such, is necessarily entitled to avail of the provisions of Section 7 of Act 3135 as if he is PNB. Further, it stressed that the issuance of a Writ of Possession may not be stayed by a pending action for annulment of mortgage or the foreclosure itself as 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 foreclosure. The purchaser is Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 entitled to a writ of possession without prejudice to the outcome of the pending annulment case. Clearly, the petitioner’s argument is devoid of merit. BY: Gerard Nelson C. Manalo

NFF INDUSTRIAL CORPORATION vs. G & L ASSOCIATED BROKERAGE, and/or GERARDO TRINIDAD G.R. No. 178169 12 JANUARY 2015 Facts: Petitioner is engaged in the business of manufacturing bulk bags while respondent is among its custumers. Respondent Gerardo Trinidad is the general manager of respondent company. Petitioner alleges that on July 20, 1999, respondent company ordered 1,000 pieces of bulk bags from petitioner at Php 380.00 per piece or for a total of Php 380,000.00 payable within 30 days from delivery covered by Purchase Order No. 97-002 dated 29 July 1999 and to be delivered to the company c/o Hi-Cement Corporation, Norzagaray, Bulacan. Shortly therafter, respondent company ordered an additional 1,000 pieces of bulk bags for a total of 2,000 pieces. Accordingly, petitioner made delivery of the bulk bags to Hi-Cement Corporation on various dates and were duly acknowledged by the representatives of respondent company and that all deliver receipts were rubber stamped, dated and signed by the security guard-on-duty as well as other representatives of respondent company and were all covered by sales invoices amounting to Php 760,000.00. Respondent contended that the bulk bags were not delivered to respondent company, the same not having been received by the authorized representative in conformity with the terms of the Purchase Order. Thirty (30) days elapsed but no payment was made by respondent company prompting petitioner to send a demand letter. Respondent company failed to respond to the demand letter, petitioner followed up its claim through a series of telephone calls but to no avail. Petitioner sent another demand letter and final demand letter and as the demand remained unheeded, petitioner filed a complaint for sum of money against respondents. The RTC rendered a decision in favor of the petitioners. The respondents appealed before the CA and reversed the RTC’s decision. The Petitioner filed a Motion for Reconsideration but was denied. Hence, the petition for review on certiorari. Issue: Whether or not there was a valid delivery on the part of the petitioner in accordance with law, which would give rise to an obligation to pay on the part of respondent for the value of the bulk bags.


Compilation of Case Digests in CIVIL LAW Review 2 Held: The Supreme Court ruled in favor of the petitioner. It held that the 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 petitioner’s 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 have 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. BY: CLARO C. CARINO



February 2015

ATTY. LEO CAUBANG vs. JESUS G. CRISOLOGO and NANETTE B. CRISOLOGO GR. NO. 174581, FEBRUARY 4, 2015 Beltran, Bermas, Boholano,Calayan, Carino, Castro, Chavez, Comagul, De Mesa, Del Rosario, Dingayan, Dugyon Galias, Garcia, Garvida, Goteesan, Khan, Luglug, Manalo, Martinez, Narag, Ortega, Padon, Parlade Resma, Rivera, Rocero, San Andres, Siason-Contreras, Torres, Yu

Compilation of Case Digests in CIVIL LAW Review 2 PERALTA, J.: Doctrine: The principal object of a notice of sale in a foreclosure of mortgage is not so much to notify the mortgagor as to inform the public generally of the nature and condition of the property to be sold, and of the time, place, and terms of the sale. Notices are given to secure bidders and prevent a sacrifice of the property. Therefore, statutory provisions governing publication of notice of mortgage foreclosure sales must be strictly complied with and slight deviations therefrom will invalidate the notice and render the sale, at the very least, voidable. Certainly, the statutory requirements of posting and publication are mandated and imbued with public policy considerations. Failure to advertise a mortgage foreclosure sale in compliance with the statutory requirements constitutes a jurisdictional defect, and any substantial error in a notice of sale will render the notice insufficient and will consequently vitiate the sale.

Facts: Spouses Crisologo obtained two loans from PDCP Bank. The first is an Express Loan amounting to 200K, while the other is a Term Loan in the amount of 1.5M. Both are secured by a mortgage. Upon release of the term loan, they were given two PNs (500k & 1M). Under the PNs, they agreed to pay in 3 years for 12 equal quarterly amortizations. Altough they were able to pay the Express Loan, they defaulted in the other loan. Several demands were made but still failed to settle their accounts. The bank filed a petition for the extrajudicial foreclosure of the mortgage. The petitioner prepared the notice of sale, causing the posting in 3 public places and publication in Oriental Daily Examiner, a local newspaper in Davao City. Caubang conducted the auction sale with the bank as the only bidder. Thereafter, a certificate of sale was issued in favor of the bank. The spouses filed for the nullity of the foreclosure and auction sale with damages against the bank and Caubang. RTC ordered the nullification for failure to comply with the publication requirement. CA affirmed RTC’s decision. Hence, this petition.

Issue: Whether or not Oriental Daily Examiner is a newspaper of general circulation in the municipality or city of Davao. Held: NO. Under Section 3 of Act No. 3135: Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notices shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city.


Compilation of Case Digests in CIVIL LAW Review 2 In this case, Caubang never made an effort to inquire as to whether the Oriental Daily Examiner was indeed a newspaper of general circulation, as required by law. It was shown that the Oriental Daily Examiner is not even on the list of newspapers accredited to publish legal notices, as recorded in the Davao RTC’s Office of the Clerk of Court. It also has no paying subscribers and it would only publish whenever there are customers. Since there was no proper publication of the notice of sale, the Spouses Crisologo, as well as the rest of the general public, were never informed that the mortgaged property was about to be foreclosed and auctioned. As a result, PDCP Bank became the sole bidder. This allowed the bank to bid for a very low price (P1,331,460.00) and go after the spouses for a bigger amount as deficiency. Wherefore, Petition is DENIED.

BY: MICHELLE M. YU


Civil Law Review 2 Case Digests

Recommend Documents