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Special Lecture Notes in

CIVIL LAW
By: DEAN ED VINCENT S. ALBANO
Bar Review Director
HUMAN RELATIONS

The core of Articles 19, NCC is bad faith.


It is a well-settled rule that good faith is always presumed. Bad faith is never presumed, for whoever alleges
bad faith has the burden of proving it. Once again that has been the basis of the SC in deciding the case of Elizabeth
Diaz v. Encanto, et al., G.R. No. 171303, January 20, 2016, Leonardo-De Castro, J.
In this case a professor at the University of the Philippines applied for a sabbatical leave with pay, but it was
denied. This issue was brought to court where there was a finding that the grant or denial of such leave is not a
matter of right as it is subject to the exigencies of the service, like acute shortage of teaching staff. Even the Office of
the Ombudsman has similar findings with the CA that the grant of leave is not a matter of right and that there was no
bad faith on the part of the officials of the UP in denying it. Yet, before the SC, the applicant insisted that the
concerned officials acted in bad faith. Are the findings of the CA and Ombudsman correct? Why?
Ans.: Yes. There are no traces of bad faith or malice in denying the application for sabbatical leave. They processed
the application in accordance with their usual procedure. While the RTC declared that petitioner Diaz should have
been granted a sabbatical leave, it is important to note that the RTC awarded damages to petitioner Diaz merely for
the unreasonable and unconscionable delay in the resolution of her sabbatical leave application. It is an elementary
rule in this jurisdiction that good faith is presumed and that the burden of proving bad faith rests upon the party
alleging the same. (Barons Marketing Corp. v. Court of Appeals and Phelps Dodge Phils., Inc., 349 Phil. 769 [1998])
Article 19 of the Civil Code “prescribes a ‘primordial limitation on all rights’ by setting certain standards
that must be observed in the exercise thereof.” (Barons Marketing Corp. v. Court of Appeals and Phelps Dodge Phils.,
Inc., 349 Phil. 769 [1998]) Abuse of right under Article 19 exists when the following elements are present: (1) there
is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another.
(Dart Philippines, Inc. v. Calogcog, 613 Phil. 224 [2009])

FAMILY LAW

Divorce obtained abroad between a foreigner and a Filipino; effect.


In Medina v. Koike, et al., G.R. No. 215723, July 27, 2016, Perlas-Bernabe, J, a Filipino citizen got married to a
Japanesse but a divorce decree was obtained in Japan before the Mayor of Ichinomiya City, Aichi Prefecture, Japan as
shown by a Divorce Certificate and the same was duly recorded in the Official Family Register of Koike. There was a
petition for judicial recognition of the foreign divorce and declaration of capacity to remarry pursuant to Article
26[2] of the Family Code.
At the hearing, no one appeared to oppose the petition. On the other hand, Doreen presented several foreign
documents, namely, "Certificate of Receiving/ Certificate of Acceptance of Divorce" and "Family Register of
Michiyuki Koike" both issued by the Mayor of Ichinomiya City and duly authenticated by the Consul of the Republic
of the Philippines for Osaka, Japan. She also presented a certified machine copy of a document entitled "Divorce
Certificate" issued by the Consul for the Ambassador of Japan in Manila that was authenticated by the Department of
the Foreign Affairs, as well as a Certification issued by the City Civil Registry Office in Manila that the original of said
divorce certificate was filed and recorded in the said Office. In addition, photocopies of the Civil Code of Japan and
their corresponding English translation, as well as two (2) books entitled "The Civil Code of Japan 2000” and “The
Civil Code of Japan 2009”were likewise submitted as proof of the existence of Japan’s law on divorce.
The RTC denied Doreen's petition, ruling that in an action for recognition of foreign divorce decree pursuant
to Article 26 of the Family Code, the foreign divorce decree and the national law of the alien recognizing his or her
capacity to obtain a divorce must be proven in accordance with Sections 24 and 25 of Rule 132 of the Revised Rules
on Evidence. The RTC ruled that while the divorce documents presented by Doreen were successfully proven to be
public or official records of Japan, she nonetheless fell short of proving the national law of her husband, particularly
the existence of the law on divorce. The RTC observed that the "The Civil Code of Japan 2000" and "The Civil Code of
Japan 2009," presented were not duly authenticated by the Philippine Consul in Japan as required by Sections 24
and 25 of the said Rules, adding too that the testimony of Doreen relative to the applicable provisions found therein
and its effect on the matrimonial relations was insufficient since she was not presented as a qualified expert witness
nor was shown to have, at the very least, a working knowledge of the laws of Japan, particularly those on family
relations and divorce. It likewise did not consider the said books as learned treatises pursuant to Section 46, Rule
130 of the Revised Rules on Evidence, since no expert witness on the subject matter was presented and considering
further that Philippine courts cannot take judicial notice of foreign judgments and law. Motion for Reconsideration
was denied hence, this petition. Ruling on the petition, the SC
Held: Philippine law does not provide for absolute divorce; hence, our courts cannot grant it. However, Article 26 of
the Family Code - which addresses foreign marriages or mixed marriages involving a Filipino and a foreigner -
allows a Filipino spouse to contract a subsequent marriage in case the divorce is validly obtained abroad by an alien
spouse capacitating him or her to remarry.

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The law confers jurisdiction on Philippine courts to extend the effect of a foreign divorce decree to a Filipino
spouse without undergoing trial to determine the validity of the dissolution of the marriage. (Fujiki v. Marinay, 712
Phil. 524 [2013])
In Corpuz v. Sto. Tomas, 642 Phil. 420 [2010], the Court had the occasion to rule that:
The starting point in any recognition of a foreign divorce judgment is the acknowledgment
that our courts do not take judicial notice of foreign judgments and laws. Justice Herrera explained
that, as a rule, "no sovereign is bound to give effect within its dominion to a judgment rendered by a
tribunal of another country." This means that the foreign judgment and its authenticity must be
proven as facts under our rules on evidence, together with the alien's applicable national law to
show the effect of the judgment on the alien himself or herself. The recognition may be made in an
action instituted specifically for the purpose or in another action where a party invokes the foreign
decree as an integral aspect of his claim or defense.

Thus, in Garcia v. Recio, 418 Phil. 723 [2001], it was pointed out that in order for a divorce obtained abroad
by the alien spouse to be recognized in our jurisdiction, it must be shown that the divorce decree is valid according
to the national law of the foreigner. Both the divorce decree and the governing personal law of the alien spouse who
obtained the divorce must be proven. Since our courts do not take judicial notice of foreign laws and judgment, our
law on evidence requires that both the divorce decree and the national law of the alien must be alleged and proven
like any other fact.

PSYCHOLOGICAL INCAPACITY

In a complaint for declaration of nullity of marriage on the ground of psychological incapacity, the plaintiff
alleged the immaturity, deceitfulness and lack of remorse for his dishonesty and lack of affection towards the
plaintiff-wife. Is she entitled to the relief? Explain.
No. Psychological incapacity should refer to no less than a mental, not physical, incapacity that causes a
party to be truly incognitive of the basic marital covenants that must concomitantly be assumed and discharged by
the parties to the marriage that, as so expressed by Article 68 of the Family Code, include their mutual obligations to
live together, to observe love, respect and fidelity, and to render help and support. The intendment of the law has
been to confine the meaning of psychological incapacity to the most serious cases of personality disorders clearly
demonstrative of an utter insensitivity or inability to give meaning and significance to the marriage. To qualify as
psychological incapacity as a ground for nullification of marriage, a person’s psychological affliction must be grave
and serious as to indicate an utter incapacity to comprehend and comply with the essential objects of marriage,
including the rights and obligations between husband and wife. The affliction must be shown to exist at the time of
marriage, and must be incurable. (Mendoza v. Republic, et al., G.R. No. 157649, November 12, 2012, Bersamin, J)

State the policy of the Constitution on marriage.


In Hernandez, 320 SCRA 76 (1999), we ruminated that: xxx expert testimony should have been presented to
establish the precise cause of private respondent’s psychological incapacity, if any, in order to show that it existed at
the inception of the marriage. The burden of proof to show the nullity of the marriage rests upon petitioner. The
Court is mindful of the policy of the 1987 Constitution to protect and strengthen the family as the basic autonomous
social institution and marriage as the foundation of the family. Thus, any doubt should be resolved in favor of the
validity of the marriage. (Mendoza v. Republic, et al., G.R. No. 157649, November 12, 2012, Bersamin, J)

Are expert opinions in psychological incapacity cases indispensable? Explain.


No. The totality of the evidence proving such incapacity at and prior to the time of the marriage is the
crucial consideration. In Ting v. Velez-Ting, 582 SCRA 694 (2009) it was said that by the very nature of cases
involving the application of Article 36, it is logical and understandable to give weight to the expert opinions
furnished by psychologists regarding the psychological temperament of parties in order to determine the root cause,
juridical antecedence, gravity and incurability of the psychological incapacity. However, such opinions, while highly
advisable, are not conditions sine qua non in granting petitions for declaration of nullity of marriage. At best, courts
must treat such opinions as decisive but not indispensable evidence in determining the merits of a given case. In
fact, if the totality of evidence presented is enough to sustain a finding of psychological incapacity, then actual
medical or psychological examination of the person concerned need not be resorted to. The trial court, as in any
other given case presented before it, must always base its decision not solely on the expert opinions furnished by the
parties but also on the totality of evidence adduced in the course of the proceedings. (Mendoza v. Republic, et al., G.R.
No. 157649, November 12, 2012, Bersamin, J)

When is actual medical examination a sine qua non in granting actions for declaration of nullity of marriage
on the ground of psychological incapacity? Explain.
Even if the expert opinions of psychologists are not conditions sine qua non in the granting of petitions for
declaration of nullity of marriage, the actual medical examination of a party maybe dispensed with only if the totality
of evidence presented was enough to support a finding of his psychological incapacity. This does not mean that the
presentation of any form of medical or psychological evidence to show the psychological incapacity would have
automatically ensure the granting of the petition for declaration of nullity of marriage. What is essential, is the
“presence of evidence that can adequately establish the party’s psychological condition,” as the Court said in Marcos.
But where he parties had the full opportunity to present the professional and expert opinions of psychiatrists
tracing the root cause, gravity and incurability of the alleged psychological incapacity, then the opinions should be
presented and be weighed by the trial courts in order to determine and decide whether or not to declare the nullity
of the marriages. The trial courts, as in all the other cases they try, must always base their judgments not solely on

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the expert opinions presented by the parties but on the totality of evidence adduced in the course of their
proceedings. (Mendoza v. Republic, et al., G.R. No. 157649, November 12, 2012, Bersamin, J)

Psychological incapacity; illness must be a downright incapacity or inability to perform duties to the marriage
bond.
In Rep. v. Reghis Romero II, et al., G.R. No. 209180; Romero v. Romero II, G.R. No. 209253, February 24, 2016,
Perlas-Bernabe, J, the RTC granted the petition and declared the marriage between Reghis and Olivia null and void
ab initio on the ground of psychological incapacity. It relied on the findings and testimony of Dr. Basilio, holding that
Reghis suffered from a disorder that rendered him unable to perform the obligations of love, respect and fidelity
towards Olivia as it gave him a strong obsession to succeed in his career, to the exclusion of his responsibilities as a
father and husband. It also concurred with Dr. Basilio’s observation that Reghis is still deeply attached to his parents
and siblings such that he pursues his business ventures for their benefit. Likewise, it agreed that Reghis’ behavioral
disorder existed even before his marriage or even his adolescent years and that the same is incurable. It was
affirmed by the CA on appeal. Is the CA’s ruling correct? Why?
Ans.: No. The policy of the Constitution is to protect and strengthen the family as the basic autonomous social
institution, and marriage as the foundation of the family. As such, the Constitution decrees marriage as legally
inviolable and protects it from dissolution at the whim of the parties. (Navales v. Navales, 578 Phil. 826 [2008])
Psychological incapacity, as a ground to nullify a marriage under Article 36 of the Family Code, should refer to the
most serious cases of personality disorders clearly demonstrative of an utter insensitivity or inability to give
meaning and significance to the marriage. (Santos v. CA, 310 Phil. 21 [1995]) It must be a malady that is so grave and
permanent as to deprive one of awareness of the duties and responsibilities of the matrimonial bond one is about to
assume. (Navales v. Navales)
Verily, all people may have certain quirks and idiosyncrasies, or isolated traits associated with certain
personality disorders and there is hardly any doubt that the intention of the law has been to confine the meaning of
psychological incapacity to the most serious cases. Thus, to warrant the declaration of nullity of marriage, the
psychological incapacity must: (a) be grave or serious such that the party would be incapable of carrying out the
ordinary duties required in a marriage; (b) have juridical antecedence, i.e., it must be rooted in the history of the
party antedating the marriage, although the overt manifestations may emerge only after the marriage; and (c) be
incurable, or even if it were otherwise, the cure would be beyond the means of the party involved. (Santos v. CA)
In Republic v. CA, 335 Phil. 664 [1997], the Court laid down definitive guidelines on the interpretation and
application of Article 36 of the Family Code. Among others, it clarified that the illness must be grave enough to bring
about the incapacity or inability of the party to assume the essential obligations of marriage such that “mild
characteriological peculiarities, mood changes, occasional emotional outbursts” cannot be accepted as root causes.
The illness must be shown as downright incapacity or inability, not a refusal, neglect or difficulty, much less ill will.
In other words, there is a natal or supervening disabling factor in the person, an adverse integral element in the
personality structure that effectively incapacitates the person from really accepting and thereby complying with the
obligations essential to marriage.

Q – Is his contention that he married Olivia not out of love, but out of reverence for the latter’s parents?
Explain.
Ans.: In Republic v. Albios, G.R. No. 198780, October 16, 2013, 707 SCRA 584, the Court held that motives for entering
into a marriage are varied and complex. The State does not and cannot dictate on the kind of life that a couple
chooses to lead. Any attempt to regulate their lifestyle would go into the realm of their right to privacy and would
raise serious constitutional questions. The right to marital privacy allows married couples to structure their
marriages in almost any way they see fit, to live together or live apart, to have children or no children, to love one
another or not, and so on. Thus, marriages entered into for other purposes, limited or otherwise, such as
convenience, companionship, money, status, and title, provided that they comply with all the legal
requisites, are equally valid. Love, though the ideal consideration in a marriage contract, is not the only
valid cause for marriage. Other considerations, not precluded by law, may validly support a marriage.
The standards used by the Court in assessing the sufficiency of psychological evaluation reports may be
deemed very strict, but these are proper, in view of the principle that any doubt should be resolved in favor of the
validity of the marriage and the indissolubility of the marital tie. After all, marriage is an inviolable institution
protected by the State. Accordingly, it cannot be dissolved at the whim of the parties, especially where the pieces of
evidence presented are grossly deficient to show the juridical antecedence, gravity and incurability of the condition
of the party alleged to be psychologically incapacitated to assume and perform the essential marital duties.

Bringing her children to mahjong sessions exposed them to culture of gambling; psychological incapacitated.
This case originated as an action to declare a marriage void on the ground of psychological incapacity due to
the act of the woman of continuously bringing her children to mahjong sessions. It was dismissed, but the SC
reconsidered its decision ruling that bringing her children to her mah-jong sessions exposed them to culture of
gambling that erode their moral fiber, hence, she is suffering from psychological incapacity.
In Valerio Kalaw v. Ma. Elena Fernandez, G.R. No. 166357, January 14, 2015, Bersamin, J, the SC in its original
decision dated September 19, 2011 (657 SCRA 822) dismissed the complaint for declaration of nullity of the
marriage of the parties on the ground of psychological incapacity alleging that she always brought her children to
mahjong sessions.
A fair assessment of the facts would show that respondent was not totally remiss and incapable of appreciating and
performing her marital and parental duties. Not once did the children state that they were neglected by their mother.
In the decision of September 19, 2011, the Court further declared as follows:
Respondent admittedly played mahjong, but it was not proven that she engaged in mahjong so
frequently that she neglected her duties as a mother and a wife.

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Judgment reconsidered; bringing children to mahjong sessions exposed them to culture of gambling; eroded
moral fiber.
The frequency of the respondent’s mahjong playing should not have delimited the Court’s determination of
the presence or absence of psychological incapacity. Instead, the determinant should be her obvious failure to fully
appreciate the duties and responsibilities of parenthood at the time she made her marital vows. Had she fully
appreciated such duties and responsibilities, she would have known that bringing along her children of very tender
ages to her mahjong sessions would expose them to a culture of gambling and other vices that would erode their
moral fiber. Nonetheless, the long-term effects of the respondent’s obsessive mahjong playing surely impacted on
her family life, particularly on her very young children.
The fact that the respondent brought her children with her to her mahjong sessions did not only point to
her neglect of parental duties, but also manifested her tendency to expose them to a culture of gambling. Her
willfully exposing her children to the culture of gambling on every occasion of her mahjong sessions was a very
grave and serious act of subordinating their needs for parenting to the gratification of her own personal and escapist
desires.
She revealed her wanton disregard for her children’s moral and mental development. This disregard
violated her duty as a parent to safeguard and protect her children, as expressly defined under Article 209 and
Article 220 of the Family Code, to wit:
Article 209. Pursuant to the natural right and duty of parents over the person and property
of their unemancipated children, parental authority and responsibility shall include the caring
for and rearing of such children for civic consciousness and efficiency and the development of
their moral, mental and physical character and well-being.
Article 220. The parents and those exercising parental authority shall have with respect to
their unemancipated children or wards the following rights and duties:
(1) To keep them in their company, to support, educate and instruct them by right
precept and good example, and to provide for their upbringing in keeping with their means;
(2) x x x x
(3) To provide them with moral and spiritual guidance, inculcate in them honesty,
integrity, self-discipline, self-reliance, industry and thrift, stimulate their interest in civic affairs,
and inspire in them compliance with the duties of citizenship;
(4) To enhance, protect, preserve and maintain their physical and mental health at
all times;
(5) To furnish them with good and wholesome educational materials, supervise their
activities, recreation and association with others, protect them from bad company, and prevent
them from acquiring habits detrimental to their health, studies and morals.

Law and Court’s mandate to protect inviolability of marriage.


To stress, the mandate of the courts is to protect the inviolability of marriage as the basic foundation of our
society does not preclude striking down a marital union that is “ill-equipped to promote family life,” thus:
Now is also the opportune time to comment on another common legal guide utilized in
the adjudication of petitions for declaration of nullity in the adjudication of petitions for
declaration of nullity under Article 36. All too frequently, this Court and lower courts, in denying
petitions of the kind, have favorably cited Sections 1 and 2, Article XV of the Constitution, which
respectively state that “[t]he State recognizes the Filipino family as the foundation of the nation.
Accordingly, it shall strengthen its solidarity and actively promote its total development[t],” and
that [m]arriage, as an inviolable social institution, is the foundation of the family and shall be
protected by the State.” These provisions highlight the importance of the family and the
constitutional protection accorded to the institution of marriage.
But the Constitution itself does not establish the parameters of state protection to
marriage as a social institution and the foundation of the family. It remains the province of the
legislature to define all legal aspects of marriage and prescribe the strategy and the modalities to
protect it, based on whatever socio-political influences it deems proper, and subject of course to
the qualification that such legislative enactment itself adheres to the Constitution and the Bill of
Rights. This being the case, it also falls on the legislature to put into operation the constitutional
provisions that protect marriage and the family. This has been accomplished at present through
the enactment of the Family Code, which defines marriage and the family, spells out the
corresponding legal effects, imposes the limitations that affect married and family life, as well as
prescribes the grounds for declaration of nullity and those for legal separation. While it may
appear that the judicial denial of a petition for declaration of nullity is reflective of the
constitutional mandate to protect marriage, such action in fact merely enforces a statutory
definition of marriage, not a constitutionally ordained decree of what marriage is. Indeed, if
circumstances warrant, Sections 1 and 2 of Article XV need not be the only constitutional
considerations to be taken into account in resolving a petition for declaration of nullity.
Indeed, Article 36 of the Family Code, in classifying marriages contracted by a
psychologically incapacitated person as a nullity, should be deemed as an implement of this
constitutional protection of marriage. Given the avowed State interest in promoting marriage as
the foundation of the family, which in turn serves as the foundation of the nation, there is a
corresponding interest for the State to defend against marriages ill-equipped to promote family
life. Void ab initio marriages under Article 36 do not further the initiatives of the State concerning
marriage and family, as they promote wedlock among persons who, for reasons independent of
their will, are not capacitated to understand or comply with the essential obligations of marriage.

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On the basis of the above, the SC reconsidered its earlier decision, hence, nullifying the marriage on the
ground of psychological incapacity.

Totality of evidence is sufficient; no need for personal examination by a physician.


The expert is ultimately necessary to enable the trial court to properly determine the issue of psychological
incapacity of the respondent (if not also of the petitioner). Consequently, the lack of personal examination and
interview of the person diagnosed with personality disorder did not per se invalidate the findings of the experts. The
Court has stressed in Marcos v. Marcos, G.R. No. 136490, October 19, 2000, 343 SCRA 755, 757, that there is no
requirement for one to be declared psychologically incapacitated to be personally examined by a physician, because
what is important is the presence of evidence that adequately establishes the party’s psychological incapacity.
Hence, “if the totality of evidence presented is enough to sustain a finding of psychological incapacity, then actual
medical examination of the person concerned need not be resorted to.”
The totality of the evidence must show a link, medical or the like, between the acts that manifest
psychological incapacity and the psychological disorder itself. If other evidence showing that a certain condition
could possibly result from an assumed state of facts existed in the record, the expert opinion should be admissible
and be weighed as an aid for the court in interpreting such other evidence on the causation. Indeed, an expert
opinion on psychological incapacity should be considered as conjectural or speculative and without any probative
value only in the absence of other evidence to establish causation. The expert’s findings under such circumstances
would not constitute hearsay that would justify their exclusion as evidence. (Camacho-Reyes, supra). This is so,
considering that any ruling that brands the scientific and technical procedure adopted by the expert as weakened by
bias should be eschewed if it was clear that her psychiatric evaluation had been based on the parties’ upbringing and
psychodynamics.

Cohabitation for 5 years, a requisite to be exempted from marriage license requirement.


In Santiago v. People, G.R. No. 200233, July 15, 2015, Sereno, CJ, Santos & Gelang were previously married,
but Santos got married to Santiago during the existence of the first marriage. Charged with the crime of bigamy,
Santiago contended that she thought that Santos was a widower and that she did not know about the first marriage
of Santos. They married under Article 34, Family Code, an admission that they have cohabited long before their
marriage. She was convicted and moved that the judgment be reconsidered contending that her marriage is void due
to lack of license. She asserted that they did not live together as husband and wife for five (5) years prior to their
marriage. It was denied. On appeal, the CA affirmed the decision of the RTC. Before the SC she contended that she
cannot be a co-accused in the instant case, because she was not aware of Santos’ previous marriage. But in the main,
she argued that for there to be a conviction for bigamy, a valid second marriage must be proven by the prosecution
beyond reasonable doubt.
In affirming the lower courts’ decision, the SC
Held: It is clear that the marriage between petitioner and Santos took place without a marriage license. The absence
of this requirement is purportedly explained in their Certificate of Marriage, which revealed that their union was
celebrated under Article 34 of the Family Code. The provision reads as follows:
No license shall be necessary for the marriage of a man and a woman who have lived
together as husband and wife for at least five years and without any legal impediment to marry
each other. The contracting parties shall state the foregoing facts in an affidavit before any person
authorized by law to administer oaths. The solemnizing officer shall also state under oath that he
ascertained the qualifications of the contracting parties are found no legal impediment to the
marriage.

Therefore, their marriage would have been exempted from a marriage license had they cohabited
exclusively as husband and wife for at least five years before their marriage. (Republic v. Dayot, 573 Phil. 553
[2008])
However, evidence showed that they never cohabited, as she was residing in the house of her in-laws, and
her children from her previous marriage disliked him.
Petitioner and Santos had only known each other for only less than four years. Thus, it follows that the two
of them could not have cohabited for at least five years prior to their marriage.

No affidavit of cohabitation; effect if they lied to the solemnizing officer.


The partners did not submit an affidavit of cohabitation as required by Article 34 of the Family Code. They
lied before the solemnizing officer and misrepresented that they had actually cohabited for at least five years before
they married each other. Unfortunately, subsequent to this lie was the issuance of the Certificate of Marriage, in
which the solemnizing officer stated under oath that no marriage license was necessary, because the marriage was
solemnized under Article 34 of the Family Code.
No less than the Constitution provides that “marriage, as a inviolable social institution, is the foundation of
the family and shall be protected by the State.” (Constitution, Article XV, Sec. 2) It must be safeguarded from the
whims and caprices of the contracting parties. In keeping therefore with this fundamental policy, the Court affirmed
the conviction of petitioner for bigamy.

Strict standards in declaration of presumptive death once again reiterated; passive efforts not sufficient.
In Republic v. Jose B. Sareñogon, Jr., G.R. No. 199194, February 10, 2016, Del Castillo, J, there was a petition
for declaration of presumptive death of a spouse. In his testimony, he said that he first met Netchie in Clarin,
Misamis Occidental in 1991. They later became sweethearts and on August 10, 1996, they got married in civil rites at
the Manila City Hall. However, they lived together as husband and wife for a month only because he left to work as a
seaman while Netchie went to Hongkong as a domestic helper. For three months, he did not receive any
communication from Netchie. He likewise had no idea about her whereabouts. While still abroad, he tried to contact
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Netchie’s parents, but failed, as the latter had allegedly left Clarin, Misamis Occidental. He returned home after his
contract expired. He then inquired from Netchie’s relatives and friends about her whereabouts, but they also did not
know where she was. Because of these, he had to presume that his wife Netchie was already dead. He filed the
Petition before the RTC so he could contract another marriage pursuant to Article 41 of the Family Code.
The RTC declared the spouse presumptively death having disappeared for more than four (4) years. The
OSG filed a petition for certiorari under Rule 65 which the CA held as an error saying that misappreciation of
evidence could not translate into excess or lack of jurisdiction amounting to lack of jurisdiction.
Reversing the CA, the SC
Held: In the 2005 case of Republic v. Bermudez-Lorino, 489 Phil. 761 [2005], it was held that the RTC’s Decision on a
Petition for declaration of presumptive death pursuant to Article 41 of the Family Code is immediately final and
executory. Thus, the CA has no jurisdiction to entertain a notice of appeal pertaining to such judgment. The correct
remedy to challenge the RTC Decision was to institute a petition for certiorari under Rule 65, and not a petition for
review under Rule 45. (Republic v. Granada, 687 Phil. 403 [2012], citing Republic v. Bermudez-Bermudez-Lorino;
See: Rep. v. Cantor; Republic v. Narceda, G.R. No. 182760, April 10, 2013, 695 SCRA 483)

The “well-founded belief” requisite under Article 41 of the Family Code is complied with only upon a showing
that sincere honest-to-goodness efforts had indeed been made to ascertain whether the absent spouse is still
alive or is already dead.
Article 41 of the Family Code pertinently provides that:
Art. 41. A marriage contracted by any person during the subsistence of a previous marriage
shall be null and void, unless before the celebration of the subsequent marriage, the prior spouse
had been absent for four consecutive years and the spouse present had a well-founded belief that
the absent spouse was already dead. In case of disappearance where there is danger of death under
the circumstances set forth in the provisions of Article 391 of the Civil Code, an absence of only two
years shall be sufficient.
For the purpose of contracting the subsequent marriage under the preceding paragraph
the spouse present must institute a summary proceeding as provided in this Code for the
declaration of presumptive death of the absentee, without prejudice to the effect of reappearance of
the absent spouse. (83a)

In Republic v. Cantor, it was further held that:


Before a judicial declaration of presumptive death can be obtained, it must be shown that
the prior spouse had been absent for four consecutive years and the present spouse had a well-
founded belief that the prior spouse was already dead. Under Article 41 of the Family Code, there
are four essential requisites for the declaration of presumptive death:
1. That the absent spouse has been missing for four consecutive years, or
two consecutive years if the disappearance occurred where there is danger of
death under the circumstances laid down in Article 391 of the Civil Code;
2. That the present spouse wishes to remarry;
3. That the present spouse has a well-founded belief that the absentee is
dead; and,
4. That the present spouse files a summary proceeding for the declaration
of presumptive death of the absentee.

“Well-founded belief” does not include passive efforts to locate the absent spouse.
In the case of Republic v. Cantor, the Court held that the present spouse (Maria Fe Espinosa Cantor) merely
conducted a “passive search” because she simply made unsubstantiated inquiries from her in-laws, from neighbors
and friends. For that reason, this Court stressed that the degree of diligence and reasonable search required by law
is not met (1) when there is failure to present the persons from whom the present spouse allegedly made inquiries
especially the absent spouse’s relatives, neighbors, and friends, (2) when there is failure to report the missing
spouse’s purported disappearance or death to the police or mass media, and (3) when the present spouse’s evidence
might or would only show that the absent spouse chose not to communicate, but not necessarily that the latter was
indeed dead. The rationale for this palpably stringent or rigorous requirement has been marked out thus:
x x x [T]he Court, fully aware of the possible collusion of spouses in nullifying their
marriage, has consistently applied the “strict standard” approach. This is to ensure that a petition
for declaration of presumptive death under Article 41 of the Family Code is not used as a tool to
conveniently circumvent the laws. Courts should never allow procedural shortcuts and should
ensure that the stricter standard required by the Family Code is met. x x x
The application of this stricter standard becomes even more imperative if we consider the
State’s policy to protect and strengthen the institution of marriage. Since marriage serves as the
family’s foundation and since it is the state’s policy to protect and strengthen the family as a basic
social institution, marriage should not be permitted to be dissolved at the whim of the parties. x x x
x x x [I]t has not escaped this Court’s attention that the strict standard required in petitions
for declaration of presumptive death has not been fully observed by the lower courts. We need only
to cite the instances when this Court, on review, has consistently ruled on the sanctity of marriage
and reiterated that anything less than the use of the strict standard necessitates a denial. To rectify
this situation, lower courts are now expressly put on notice of the strict standard this Court
requires in cases under Article 41 of the Family Code.”

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Co-ownership ensues after death of a spouse; sale by one is valid over his interest.
In Melicio Domingo v. Sps. Molina, G.R. No. 200274, April 20, 2016, Brion, J, Anastacio was married to Flora.
During the marriage, he obtained a loan from the Spouses Molina, and after Flora’s death, he sold his interest over
their conjugal property to the creditors. His son filed an action to annul the sale and to recover ownership
contending that he could not have sold such portion of the conjugal property without the consent of Flora who
already died. The lower courts dismissed the complaint because what Anastacio sold was his share of the property.
Was the validity of the sale without the consent of Flora valid? Why?
Ans.: The sale is valid.
As early as Taningco v. Register of Deeds of Laguna, G.R. No. L-15242, June 29, 1962, 5 SCRA 381, it was held
that the properties of a dissolved conjugal partnership fall under the regime of co-ownership among the surviving
spouse and the heirs of the deceased spouse until final liquidation and partition. The surviving spouse, however, has
an actual and vested one-half undivided share of the properties which does not consist of determinate and
segregated properties until liquidation and partition of the conjugal partnership.
The spouses Molina would be a trustee for the benefit of the co-heirs of Anastacio in respect of any portion
that might belong to the co-heirs after liquidation and partition. In Heirs of Protacio Go, Sr. V. Servacio, it was said:
x x x [I]f it turns out that the property alienated or mortgaged really would pertain to the
share of the surviving spouse, then said transaction is valid. If it turns out that there really would
be, after liquidation, no more conjugal assets then the whole transaction is null and void. But if it
turns out that half of the property thus alienated or mortgaged belongs to the husband as his share
in the conjugal partnership, and half should go to the estate of the wife, then that corresponding to
the husband is valid, and that corresponding to the other is not. Since all these can be determined
only at the time the liquidation is over, it follows logically that a disposal made by the surviving
spouse is not void ab initio. Thus, it has been held that the sale of conjugal properties cannot be
made by the surviving spouse without the legal requirements. The sale is void as to the share of the
deceased spouse (except of course as to that portion of the husband’s share inherited by her as the
surviving spouse). The buyers of the property that could not be validly sold become trustees of said
portion for the benefit of the husband’s other heirs, the cestui que trust ent. Said heirs shall not be
barred by prescription or by laches.

Melecio’s recourse as a co-owner of the conjugal properties, including the subject property, is an action for
partition under Rule 69 of the Revised Rules of Court. As held in the case of Heirs of Protacio Go, Sr., “it is now settled
that the appropriate recourse of co-owners in cases where their consent were not secured in a sale of the entire
property as well as in a sale merely of the undivided shares of some of the co-owners is an action for PARTITION
under Rule 69 of the Revised Rules of Court.”

Putative father of an illegitimate child was the informant of the live birth; he is considered the father;
considered as recognition.
In Alejandra Arado Heirs, etc. v. Anacleto Alarcon, et al., G.R. No. 163362, July 8, 2015, Bersamin, J, Raymundo
and Joaquina were married with a son Nicolas, who got married to Florencia. The latter had no issue but Nicolas had
an extra-marital affair with Francisca and out of their relationship, Anacleto was born. Anacleto married Elenette.
Raymundo died in 1939; Nicolas died in 1954; Florencia died in 1960; Joaquina died in 1981. Florencia had three (3)
siblings namely Sulpicio, Braulia, and Veronica. Joaquin had four (4) siblings namely Alejandra, Nemesio, Cledonia
and Melania. In 1992, the siblings of Joaquina filed a complaint for recovery of property and damages against
Anacleto and Elenette.
They insisted that Anacleto was not duly recognized as Nicolas’ illegitimate son; that inasmuch as Anacleto
was born to Francisca during the subsistence of Nicolas’ marriage to Florencia, Anacleto could only be the spurious
child of Nicolas; that there was no law for the acknowledgment of a spurious child; that even if Anacleto would be
given the benefit of the doubt and be considered a natural child, Article 278 of the Civil Code states that
“[r]ecognition shall be made in the record of birth, a will, a statement before a court of record, or in any authentic
writing;” that the appearance of the father’s name in the certificate of birth alone, without his actual intervention,
was insufficient to prove paternity; that the mere certificate by the civil registrar that the father himself registered
the child, without the father’s signature, was not proof of the father’s voluntary acknowledgment; that the baptismal
certificate was insufficient proof of paternity.
In turn, respondents countered that Nicolas recognized Anacleto as his illegitimate child because Nicolas
had himself caused the registration of Anacleto’s birth. Is the ruling correct? Why?
Ans.: Nicolas had duly acknowledged Anacleto as his illegitimate son. The birth certificate of Anacleto appearing in
the Register of Births showed that Nicolas had himself caused the registration of the birth of Anacleto, he being the
informant of the live birth to be registered. Considering that Nicolas, the putative father, had a direct hand in the
preparation of the birth certificate, reliance on the birth certificate of Anacleto as evidence of his paternity was fully
warranted. (Jison v. Court of Appeals, G.R. No. 124853, February 24, 1998, 286 SCRA 495, 523, where the Court
opined: “It is settled that a certificate of live birth purportedly identifying the putative father is not competent
evidence as to the issue of paternity, when there is no showing that the putative father had a hand in the preparation
of said certificates, and the Local Civil Registrar is devoid of authority to record the paternity of an illegitimate child
upon the information of a third person. Simply put, if the alleged father did not intervene in the birth certificate, e.g.,
supplying the information himself, the inscription of his name by the mother or doctor or registrar is null and void;
the mere certificate by the registrar without the signature of the father is not proof of voluntary acknowledgment on
the latter’s part.”

Collateral attack on legitimacy; seconday evidence in proof of filiation.


In Geronimo v. Santos, G.R. No. 197099, September 28, 2015, Villarama, J, Karen Santos filed an action for
annulment of documents and recovery of possession of properties alleging that she was the sole heir of her parents.
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She alleged that the defendants who were the siblings of her father adjudicated upon themselves said property and
obtained a title over it. The defendants countered, saying that the spouses were childless and that the record of birth
of Karen was simulated. After trial, the RTC ruled in favor of Karen and ruled that the birth certificate was not
tampered. Further, it ruled that assuming arguendo that the birth certificate was questionable, the filiation of Karen
was proven by evidence of open and continuous possession of the status of a legitimate child. It considered the overt
acts of the deceased as recognition such as: payment of her school fees; making her the beneficiary of the burial
benefits from the GSIS; filing a petition for guardianship over Karen. Finally, it was ruled by the RTC that they failed
to impugn her filiation and status within the period under Arts. 170 and 171 of the Family Code. The petitioners
questioned the act of proving filiation in an action for annulment of document as the law contemplates a direct
action, hence, her filiation or civil status cannot be assailed indirectly or collaterally. The CA ruled that filiation can
be proven by secondary evidence under Article 172 of the Family Code which allows the introduction of evidence of
filiation by way of open and continuous possession of the status of legitimate child.
Before the SC, it was contended by the petitioner that secondary evidence may be admitted only in a direct
action under Article 172 as the law is meant to be instituted as a separate action and proof of filiation cannot be
raised as a collateral issue like an action for declaration of nullity of a document and recovery of possession. Is the
petition correct? Why?
Ans.: Yes. Petitioner is correct that proof of legitimacy under Article 172, or illegitimacy under Article 175, should
only be raised in a direct and separate action instituted to prove the filiation of a child. The rationale behind this
procedural prescription is stated in the case of Tison v. Court of Appeals, 342 Phil. 550 [1997], viz.:
Well settled is the rule that the issue of legitimacy cannot be attacked collaterally.
The rationale for these rules has been explained in this wise:
“The presumption of legitimacy in the Family Code x x x actually fixes a civil status for the
child born in wedlock, and that civil status cannot be attacked collaterally. The legitimacy of the
child can be impugned only in a direct action brought for that purpose, by the proper parties, and
within the period limited by law.
The legitimacy of the child cannot be contested by way of defense or as a collateral
issue in another action for a different purpose. The necessity of an independent action directly
impugning the legitimacy is more clearly expressed in the Mexican Code (Article 335) which
provides: ‘The contest of the legitimacy of a child by the husband or his heirs must be made by
proper complaint before the competent court; any contest made in any other way is void.’ This
principle applies under our Family Code. Articles 170 and 171 of the code confirm this view,
because they refer to “the action to impugn the legitimacy.” This action can be brought only by the
husband or his heirs and within the periods fixed in the present articles.
Upon the expiration of the periods provided in Article 170, the action to impugn the
legitimacy of a child can no longer be brought. The status conferred by the presumption, therefore,
becomes fixed, and can no longer be questioned. The obvious intention of the law is to prevent the
status of a child born in wedlock from being in a state of uncertainty for a long time. It also aims to
force early action to settle any doubt as to the paternity of such child, so that the evidence material
to the matter, which must necessarily be facts occurring during the period of the conception of the
child, may still be easily available.
Only the husband can contest the legitimacy of a child born to his wife. He is the one
directly confronted with the scandal and ridicule which the infidelity of his wife produces; and he
should decide whether to conceal that infidelity or expose it, in view of the moral and economic
interest involved. It is only in exceptional cases that his heirs are allowed to contest such
legitimacy. Outside of these cases, none – even his heirs – can impugn legitimacy; that would
amount to an insult to his memory.” (citing Tolentino, A., COMMENTARIES AND JURISPRUDENCE
ON THE CIVIL CODE OF THE PHILIPPINES, Vol. 1, 1990 ed., 536-537).

ARTICLE 177 – LEGITIMATION

Status of a child cannot be collaterally attacked.


In BBB v. AAA, G.R. No. 193225, February 9, 2015, Reyes, J, a case of Anti-Violence Against Women &
Children (RA 9262), a man and a woman lived together as husband and wife. They gave birth to two (2) children.
Subsequently they got married and thereafter, the birth certificates of their children including the child of the
woman in a previous relationship were amended to change their civil status to legitimated by virtue of the said
marriage. But due to their unhealthy relationship they lived separately from one another. The woman demanded for
support from husband including the child in the previous relationship who was legitimated but the husband refused
to give support to the said child. He contended that he is not his biological son, hence, his refusal to give support is
justified. Is the contention correct? Why?
Ans.: No. Article 177 of the Family Code provides that “[o]nly children conceived and born outside of wedlock of
parents who, at the time of the conception of the former, were not disqualified by any impediment to marry each
other may be legitimated.” Article 178 states that “[l]egitimation shall take place by a subsequent valid marriage
between parents.”
The parties do not dispute the fact that BBB is not CCC’s biological father. Such being the case, it was
improper to have CCC legitimated after the celebration of BBB and AAA’s marriage. Clearly then, the legal process of
legitimation was trifled with. BBB voluntarily but falsely acknowledged CCC as his son, hence, he is bound by the
principle of estoppel which provides that through estoppel an admission or representation is rendered conclusive
upon the person making it, and cannot be denied or disproved as against the person relying thereon.
At least for the purpose of resolving the instant petition, the principle of estoppel found application and it
now bars BBB from making an assertion contrary to his previous representations. He should not be allowed to evade
a responsibility arising from his own misrepresentations. He is bound by the effects of the legitimation process. CCC
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remains to be BBB’s son, and pursuant to Article 179 of the Family Code, the former is entitled to the same rights as
those of a legitimate child, including the receipt of his father’s support.
Notwithstanding the above, there is no absolute preclusion for BBB from raising before the proper court the
issue of CCC’s status and filiation. However, BBB cannot do the same in the instant petition before the Court now. In
Tison v. CA, 342 Phil. 550 [1997], the Court held that “the civil status of a child cannot be attacked collaterally.” The
child’s legitimacy “cannot be contested by way of defense or as a collateral issue in another action for a different
purpose.” The instant petition sprang out of AAA’s application for a PPO before the RTC. Hence, BBB’s claim that CCC
is not his biological son is a collateral issue, which the Court has no authority to resolve now.

Spouses were married prior to the effecitivity of the Family Code. What law governs the sale of a conjugal
property after the Family Code has gone into effect. Explain.
The Family Code applies. The proper law to apply is, therefore, Article 124 of the Family Code, for it is
settled that any alienation or encumbrance of conjugal property made during the effectivity of the Family Code is
governed by Article 124 of the Family Code.
Article 254 the Family Code has expressly repealed several titles under the Civil Code, among them the entire
Title VI in which the provisions on the property relations between husband and wife, Article 173 included, are
found.
Article 124 of the Family Code provides:
“Article 124. The administration and enjoyment of the conjugal partnership property
shall belong to both spouses jointly. In case of disagreement, the husband’s decision shall prevail,
subject to recourse to the court by the wife for proper remedy, which must be availed of within five
years from the date of the contract implementing such decision.
In the event that one spouse is incapacitated or otherwise unable to participate in
the administration of the conjugal properties, the other spouse may assume sole powers of
administration. These powers do not include disposition or encumbrance without authority
of the court or the written consent of the other spouse. In the absence of such authority or
consent, the disposition or encumbrance shall be void. However, the transaction shall be
construed as a continuing offer on the part of the consenting spouse and the third person, and may
be perfected as a binding contract upon the acceptance by the other spouse or authorization by the
court before the offer is withdrawn by either or both offerors.”

According to Article 256 of the Family Code, the provisions of the Family Code may apply retroactively
provided no vested rights are impaired. In Tumlos v. Fernandez, the Court rejected the petitioner’s argument that the
Family Code did not apply because the acquisition of the contested property had occurred prior to the effectivity of
the Family Code, and pointed out that Article 256 provided that the Family Code could apply retroactively if the
application would not prejudice vested or acquired rights existing before the effectivity of the Family Code. Herein,
however, the petitioners did not show any vested right in the property acquired prior to August 3, 1988 that
exempted their situation from the retroactive application of the Family Code. (Sps. Aggabao v. Sps. Parulan, G.R. No.
165803, September 1, 2010, Bersamin, J)

Power of administration does not include acts of disposition or encumbrance.


An authority to dispose cannot proceed from an authority to administer, and vice versa, for the two powers
may only be exercised by an agent by following the provisions on agency of the Civil Code (from Article 1876 to
Article 1878). Specifically, the apparent authority of Atty. Parulan, being a special agency, was limited to the sale of
the property in question, and did not include or extend to the power to administer the property.
The petitioners’ insistence making of a counter-offer in meeting ratified the sale merits no consideration.
Under Article 124 of the Family Code, the transaction executed sans the written consent of Dionisio or the proper
court order was void; hence, ratification did not occur, for a void contract could not be ratified. (Art. 1409, NCC; Sps.
Aggabao v. Sps. Parulan, G.R. No. 165803, September 1, 2010, Bersamin, J)

Nature of the contract.


The last sentence of the second paragraph of Article 124 of the Family Code makes this clear, stating that in
the absence of the other spouse’s consent, the transaction should be construed as a continuing offer on the part of
the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the
other spouse or upon authorization by the court before the offer is withdrawn by either or both offerors. (Sps.
Aggabao v. Sps. Parulan, G.R. No. 165803, September 1, 2010, Bersamin, J)
The petitioners contend that the forgery of the SPA notwithstanding, the CA could still have decided in their
favor conformably with Veloso v. Court of Appeals, a case where the petitioner husband claimed that his signature
and that of the notary public who had notarized the SPA the petitioner supposedly executed to authorize his wife to
sell the property had been forged. In denying relief, the Court upheld the right of the vendee as an innocent
purchaser for value.
Veloso is inapplicable, however, because the contested property therein was exclusively owned by the
petitioner and did not belong to the conjugal regime. Veloso not being upon conjugal property, Article 124 of the
Family Code did not apply.
In contrast, the property involved pertained to the conjugal regime, and, consequently, the lack of the
written consent of the husband rendered the sale void pursuant to Article 124 of the Family Code. (Sps. Aggabao v.
Sps. Parulan, G.R. No. 165803, September 1, 2010, Bersamin, J)

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PROPERTY
ARTICLE 448, NCC

Lot No. 4 belonging to Angeles is adjacent to Lot No. 5 belonging to Pascual. The house of Angeles straddled on
the lot of Pascual and Angeles built his house in good faith. State the rights of the parties. Explain.
Ans.: The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to
appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546
and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper
rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of
the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof. (Art. 448, NCC)
With the unassailable finding that Angeles’ house straddled the lot of Pascual, and that Angeles had built his
house in good faith, Article 448 of the Civil Code, which spells out the rights and obligations of the owner of the land
as well as of the builder, is unquestionably applicable. Consequently, the land being the principal and the building
the accessory, preference is given to Pascual as the owner of the land to make the choice as between appropriating
the building or obliging Angeles as the builder to pay the value of the land. Contrary to the insistence of Angeles,
therefore, no inconsistency exists between the finding of good faith in his favor and the grant of the reliefs set forth
in Article 448 of the Civil Code. (Angeles v. Pascual, G.R. No. 157150, September 21, 2011, Bersamin, J)

Co-owners may not acquire a property subject of co-ownership by prescription.


As a rule, in order that a co-owner’s possession may be deemed adverse to that of the cestui que trust or the
other co-owners, the following elements must concur:
1. The co-owner has performed unequivocal acts of repudiation of the co-ownership amounting to an ouster of
the cestui que trusts or the other co-owners;
2. Such positive acts of repudiation have been made known to the cestui que trust or the other co-owners;
3. The evidence on the repudiation is clear and conclusive; and
4. His possession is open, continuous, exclusive, and notorious. (Adille v. Court of Appelas, G.R. No. L-
44546,January 29, 1988, 157 SCRA 455, 461; Vda. de Arceo v. Court of Appeals, G.R. No. 81401, May 18,
1990, 185 SCRA 489, 495; Heirs of Jose Reyes, Jr. v. Amanda Reyes, et al., G.R. No. 158377, August 4, 2010,
Bersamin, J)

Claim of ownership must be proven; Requisite of reconveyance of property.


In Ibot v. Heirs of Francisco Tayco, G.R. No. 202950, April 6, 2015, Reyes, J, petitioner was the registered
owner of a property. The respondents claimed to be the owners of the property, but presented no indicia of any
document to support their claim although they alleged that it was sold to their predecessor-in-interest. The
petitioner even sent a demand for them to vacate the property prior to the filing of an action for ejectment. In
dismissing the claim, the SC ruled that they failed to prove it by preponderance of evidence and
Held: In an action to recover, the property must be identified, and the plaintiff must rely on the strength of his title
and not on the weakness of the defendant’s claim.
In order to successfully maintain an action to recover the ownership of a real property, the person who
claims a better right to it must prove two things: first, the identity of the land claimed; and second, his title thereto.
(Sampaco v. Lantud, G.R. No. 163551, July 18, 2011, 654 SCRA 36, 50-51). While the first requisite was proven, the
third was not as the claims were conflicting.
In an action for reconveyance, however, a party seeking it should establish not merely by a preponderance
of evidence but by clear and convincing evidence that the land sought to be reconveyed is his.
In the case at bar, the respondents failed to dispense their burden of proving by clear and convincing
evidence that they are entitled to the reconveyance.
Mere claim of ownership does not suffice. An action for reconveyance should be maintained by the true
owner. It does not suffice that the respondents are in possession of the land subject hereof.

QUIETING OF TITLE

Dare Adventure Farm, Inc. acquired a property from Agripina Goc-ong, etc. Later on, it found out that the Goc-
ongs executed an affidavit declaring ownership of the same property and mortgaged it to the Ng spouses, with
a stipulation that if they failed to pay the loan, the Ngs would automatically become the owner of the property.
For failure to pay the obligation, a complaint for recovery of sum of money was filed or in the alternative, for
the foreclosure of the mortgage. Having failed to file an answer the Goc-ongs were declared in default and
judgment was rendered against them declaring plaintiffs as the owners of the property. Dare Adventure filed
an action for annulment of the judgment of the RTC with the CA which dismissed the same ruling that the
appropriate remedy is either an action for quieting of title or action for reconveyance. Is the decision correct?
Explain.
Ans.: Yes; it may vindicate its right through an action for quieting of title, a remedy designed to remove any cloud
upon, or doubt or uncertainty affecting title to real property. The action for quieting of title may be brought
whenever there is a cloud on title to real property or any interest in real property by reason of any instrument,
record, claim. (Dare Adventure Farm Corp. v. CA, et al., G.R. No. 161122, September 24, 2012, Bersamin, J)
In the action, the competent court is tasked to determine the respective rights of the plaintiff and the other
claimants, not only to put things in their proper places, and make the claimant, who has no rights to the immovable,
respect and not disturb the one so entitled, but also for the benefit of both, so that whoever has the right will see
every cloud of doubt over the property dissipated, and he can thereafter fearlessly introduce any desired
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improvements, as well as use, and even abuse the property. (Heirs of Enrique Toring v. Heirs of Teodosia Boquilaga,
G.R. No. 163610, September 27, 2010, 631 SCRA 278, 293-294)
According to Vda. de Recinto v. Inciong, G.R. No. L-26083, May 31, 1977, 77 SCRA 196, 201, the remedy
belongs to the landowner whose property has been wrongfully or erroneously registered in another person’s name,
and such landowner demands the reconveyance of the property in the proper court of justice. If the property has
meanwhile passed into the hands of an innocent purchaser for value, the landowner may seek damages. In either
situation, the landowner respects the decree as incontrovertible and no longer open to review provided the one-
year period from the land coming under the operation of the Torrens System of land registration already passed.

Notes: An action for reconveyance of a property is a legal and equitable remedy available to a landowner whose
property has been wrongfully or erroneously registered in another’s name, after one year from the date of the
decree of registration and so long as the property has not passed to an innocent purchaser for value. (Luga vs.
Arciaga, 654 SCRA 661 [2011])
A petition for annulment of judgments or final orders of a Regional Trial Court in civil actions can only be
availed of where “the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no
longer available through no fault of the petitioner.” (Manila vs. Gallardo-Manzo, 657 SCRA 20 [2011])

Action for quieting of title originates from equity jurisprudence.


In Heirs of Liberato Castillejos, et al. v. La Tondeña Incorporada, G.R. No. 190158, July 20, 2016, Reyes, J, the
SC once again had the occasion to say that "an action to quiet title to property or to remove a cloud thereon is a
remedy or form of proceeding originating in equity jurisprudence. The plaintiff in such an action seeks for
adjudication that any adverse claim of title or interest in the property in question is invalid, so that the plaintiff and
those claiming under him or her may forever be free from any danger of the hostile claim" (Spouse Divinagracia v.
Cometa, 518 Phil. 79 [2006]).
For the action to prosper, two requisites must concur, viz: (1) the plaintiff or complainant must have a legal
or an equitable title to or interest in the real property which is the subject matter of the action; and (2) the deed,
claim, encumbrance or proceeding that is being alleged as a cloud on plaintiff’s title must be shown to be in fact
invalid or inoperative despite its prima facie appearance of validity or legal efficacy. (Robles v. CA, 384 Phil. 635
[2000])

A bought a property from B, but the title remained under the name of B. After B’s death, an action for quieting
of title was filed against the heirs of B who contended that the action cannot prosper because it is a collateral
attack on such title. Is the contention correct? Why?
Ans.: No. The action is not a direct or collateral attack on the title for the action was merely asserting that the
existing title under the name of the seller had become inoperative due to the conveyance in favor of A and
resultantly should be cancelled. The plaintiff therefore did not assail the validity of the title or challenge the
judgment decreeing the title. In other words, the action sought the removal of a cloud on the buyer’s title and
confirmation of his/her ownership over the said property. (Oño, et al. v. Lim, G.R. No. 154270, March 9, 2010,
Bersamin, J)

When is an action deemed an attack on a title? Explain.


Ans.: An action or proceeding is deemed an attack on a title when its objective is to nullify the title, thereby
challenging the judgment pursuant to which the title was decreed. (Sarmiento v. Court of Appeals, G.R. No. 152627,
September 16, 2005, 470 SCRA 99, 107-108, citing Malilin, Jr. v. Castillo, G.R. No. 136803, June 16, 2000, 333 SCRA
628, 640) The attack is direct when the objective is to annul or set aside such judgment, or enjoin its enforcement.
On the other hand, the attack is indirect or collateral when, in an action to obtain a different relief, an attack on the
judgment is nevertheless made as an incident thereof.
Quieting of title is a common law remedy for the removal of any cloud, doubt, or uncertainty affecting title
to real property. Whenever there is a cloud on title to real property or any interest in real property by reason of any
instrument, record, claim, encumbrance, or proceeding that is apparently valid or effective, but is, in truth and in
fact, invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an action may be brought to
remove such cloud or to quiet the title. In such action, the competent court is tasked to determine the respective
rights of the complainant and the other claimants, not only to place things in their proper places, and to make the
claimant, who has no rights to said immovable, respect and not disturb the one so entitled, but also for the benefit of
both, so that whoever has the right will see every cloud of doubt over the property dissipated, and he can thereafter
fearlessly introduce the improvements he may desire, as well as use, and even abuse the property as he deems fit.
(Baricuatro, Jr. v. Court of Appeals, G.R. No. 105902, February 9, 2000, 325 SCRA 137, 146-147; Oño, et al., v. Lim,
G.R. No. 154270, March 9, 2010, Bersamin, J)

A is the owner of a parcel of land adjoining the Parañaque River. A portion of the river dried up and A applied
for registration of the same contending that it is an accretion, thus, it belongs to him. Is the contention correct?
Explain.
Ans.: No. It is erroneous to treat the dried-up river bed as an accretion that became the property of A pursuant to
Article 457 of the Civil Code. That land was definitely not an accretion. The process of drying up of a river to form dry
land involved the recession of the water level from the river banks, and the dried-up land did not equate to
accretion, which was the gradual and imperceptible deposition of soil on the river banks through the effects of the
current. In accretion, the water level did not recede and was more or less maintained. Hence, A as the riparian
owners had no legal right to claim ownership of the same.
The State exclusively owned the lot and may not be divested of its right of ownership. Article 502 of the Civil
Code expressly declares that rivers and their natural beds are public dominion of the State. It follows that the river
beds that dry up, continue to belong to the State as its property of public dominion, unless there is an express law
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that provides that the dried-up river beds should belong to some other person. (Rep. v. Santos III, G.R. No. 160453,
November 12, 2012, Bersamin, J)

Notes: Indeed, under the Regalian doctrine, all lands not otherwise appearing to be clearly within private ownership
are presumed to belong to the State. No public land can be acquired by private persons without any grant, express or
implied, from the Government. It is indispensable, therefore, that there is a showing of a title from the State.
Occupation of public land in the concept of owner, no matter how long, cannot ripen into ownership and be
registered as a title.
Subject to the exceptions defined in Article 461 of the Civil Code (which declares river beds that are
abandoned through the natural change in the course of the waters as ipso facto belonging to the owners of the land
occupied by the new course, and which gives to the owners of the adjoining lots the right to acquire only the
abandoned river beds not ipso facto belonging to the owners of the land affected by the natural change of course of
the waters only after paying their value), all river beds remain property of public dominion and cannot be acquired
by acquisitive prescription unless previously declared by the Government to be alienable and disposable.
Considering that Lot 4998-B was not shown to be already declared to be alienable and disposable, respondents
could not be deemed to have acquired the property through prescription.
Accretion as a mode of acquiring property under Article 457 of the Civil Code requires the concurrence of
the following requisites: (1) that the deposition of soil or sediment be gradual and imperceptible; (2) that it be the
result of the action of the waters of the river; and (3) that the land where accretion takes place is adjacent to the
banks of rivers. (New Regent Sources, Inc. vs. Tanjuatco, Jr., 585 SCRA 329 [2009])
The reason for the grant of preferential right to the riparian or littoral owner is the same as the justification
for giving accretions to the riparian owner, which is that accretion compensates the riparian owner for the
diminutions which his land suffers by reason of the destructive force of the waters—in the case of littoral lands, he
who loses by the encroachments of the sea should gain by its recession. (Cantoja vs. Lim, 617 SCRA 44 [2010])
All lands not appearing to be clearly of private dominion presumptively belong to the State. (DCD
Construction, Inc. vs. Republic, 656 SCRA 560 [2012])

EASEMENT

Nature of easement of right of way.


An easement of right of way is a real right. When an easement of right of way is granted to another person,
the rights of the property’s owner are limited. (See Cristobal v. Court of Appeals, 353 Phil. 318, 328 (1998) [Per J.
Bellosillo, First Division]) An owner may not exercise some of his or her property rights for the benefit of the person
who was granted the easement of right of way. Hence, the burden of proof to show the existence of the above
conditions is imposed on the person who seeks the easement of right of way. (Cristobal v. Court of Appeals, 353 Phil.
318, 327 (1998) [Per J. Bellosillo, First Division], citing Costabella Corporation v. Court of Appeals, 271 Phil. 350, 358
(1991) [Per J. Sarmiento, Second Division], which in turn cited Locsin v. Climaco, G.R. No. L-27319, January 31, 1969,
26 SCRA 816, 836 [Per J. Castro, En Banc], Angela Estate, Inc. v. Court of First Instance of Negros Occidental, 133 Phil.
561, 574 (1968) [Per J. Castro, En Banc], and Bacolod-Murcia Milling Co., Inc., et al. v. Capitol Subdivision, Inc., et al.,
124 Phil. 128, 133 (1966) [Per J. J.B.L. Reyes, En Banc])

In easement of right of way, “least prejudice” has preferred status over distance.
The petitioner sought for an easement of right of way from the respondents alleging that her property is
isolated without her fault. It was alleged that there was no means of engress or egress to a public highway.
Respondents contended that there was a means of engress or egress to the public highway because adjacent to her
property is a canal where a bridge can be constructed as passageway like what others have done. The RTC found out
that if the right of way would pass through respondents’ property there would be destruction of their properties.
Since there is an irrigation canal, she could construct a bridge over it and pass through it as the way to the irrigation
canal would appear to be the shortest and easiest way to reach the barangay road. On appeal, the CA affirmed the
decision of the RTC. Is the decisions of the lower courts correct? Why?
Ans.: Yes. Assuming, however, that petitioner or her mother did not cause the isolation of petitioner’s property,
petitioner still cannot be granted the easement of right of way over the proposed portion of respondents’ property.
This is because she failed to satisfy the requirements for an easement of right of way under the Civil Code.
The following requisites need to be established before a person becomes entitled to demand the
compulsory easement of right of way: (See Bacolod-Murcia Milling Co., Inc., et al. v. Capitol Subdivision, Inc., et al.,
124 Phil. 128, 132–133 [1966])
1. An immovable is surrounded by other immovables belonging to other persons, and is without adequate
outlet to a public highway;
2. Payment of proper indemnity by the owner of the surrounded immovable;
3. The isolation of the immovable is not due to its owner’s acts; and
4. The proposed easement of right of way is established at the point least prejudicial to the servient estate, and
insofar as consistent with this rule, where the distance of the dominant estate to a public highway may be
the shortest (Alicia Reyes v. Sps. Ramos, G.R. No. 194488, February 11, 2015).

Continuing of dominant estate not the test in granting right of way.


The convenience of the dominant estate’s owner is not the basis for granting an easement of right of way,
especially if the owner’s needs may be satisfied without imposing the easement.
Mere convenience for the dominant estate is not what is required by law as the basis of
setting up a compulsory easement. Even in the face of necessity, if it can be satisfied without
imposing the easement, the same should not be imposed.

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Also in Floro v. Llenado, we refused to impose a right of way over petitioner’s property
although private respondent’s alternative route was admittedly inconvenient because he had to
traverse several ricelands and rice paddies belonging to different persons, not to mention that said
passage is impassable during the rainy season.
And in Ramos, Sr. v. Gatchalian Realty, Inc., this Court refused to grant the easement prayed
for even if petitioner had to pass through lots belonging to other owners, as temporary ingress and
egress, which lots were grassy, cogonal, and greatly inconvenient due to flood and mud because
such grant would run counter to the prevailing jurisprudence that mere convenience for the
dominant estate does not suffice to serve as basis for the easement (See also Cristobal v. Court of
Appeals, 353 Phil. 318, 328-329; Dichoso, Jr. v. Marcos, G.R. No. 180282, April 11, 2011, 647 SCRA
495).

Access to the public highway can be satisfied without imposing an easement on respondents’ property.
If in between the property of the dominant estate and the highway or road, there is an irrigation canal,
which can be traversed by constructing a bridge, similar to what was done by the owners of the nearby properties
there is no need to utilize respondents’ property to serve petitioner’s needs. Another adequate exit exists. Petitioner
can use this outlet to access the public roads.
The outlet may be longer and more inconvenient to petitioner because she will have to traverse other
properties and construct a bridge over the irrigation canal before she can reach the road. However, these reasons
will not justify the imposition of an easement on respondents’ property because her convenience is not the gauge in
determining whether to impose an easement of right of way over another’s property (Dichoso, Jr. v. Marcos, G.R. No.
180282, April 11, 2011, 647 SCRA 495, 504).

Petitioner failed to satisfy the requirement of “least prejudicial to the servient estate.”
Article 650 of the Civil Code provides that in determining the existence of an easement of right of way, the
requirement of “least prejudice to the servient estate” trumps “distance [between] the dominant estate [and the]
public highway.” “Distance” is considered only insofar as it is consistent to the requirement of “least prejudice.”
The court had already affirmed the preferred status of the requirement of “least prejudice” over distance of the
dominant estate to the public highway. (Cristobal v. Court of Appeals, 353 Phil. 318, 329 [1998]). Quimen v. Court of
Appeals, 326 Phil. 969, 979 [1996]) Thus, in Quimen, the Csourt granted the longer right of way over therein
respondent’s property because the shorter route required that a structure of strong materials needed to be
demolished. (Quimen v. Court of Appeals, 326 Phil. 969, 981 [1996]) The court said:
[T]he court is not bound to establish what is the shortest distance; a longer way may be
adopted to avoid injury to the servient estate, such as when there are constructions or walls which
can be avoided by a round about way, or to secure the interest of the dominant owner, such as
when the shortest distance would place the way on a dangerous decline.
....
The criterion of least prejudice to the servient estate must prevail over the criterion of
shortest distance although this is a matter of judicial appreciation. While shortest distance may
ordinarily imply least prejudice, it is not always so as when there are permanent structures
obstructing the shortest distance; while on the other hand, the longest distance may be free of
obstructions and the easiest or most convenient to pass through. In other words, where the
easement may be established on any of several tenements surrounding the dominant estate, the
one where the way is shortest and will cause the least damage should be chosen. However, as
elsewhere stated, if these two (2) circumstances do not concur in a single tenement, the way which
will cause the least damage should be used, even if it will not be the shortest.

Petitioner would have permanent structures — such as the garage, garden, and grotto already installed on
respondent’s property — destroyed to accommodate her preferred location for the right of way.
The cost of having to destroy these structures, coupled with the fact that there is an available outlet that can
be utilized for the right of way, negates a claim that respondents’ property is the point least prejudicial to the
servient estate.

Nature of easement.
An easement is a limitation on the owner’s right to use his or her property for the benefit of another. By
imposing an easement on a property, its owner will have to forego using it for whatever purpose he or she deems
most beneficial. Least prejudice, therefore, is about the suffering of the servient estate. Its value is not determined
solely by the price of the property, but also by the value of the owner’s foregone opportunity for use, resulting from
the limitations imposed by the easement. (PAUL A. SAMUELSON andWILLIAM D. NORDHAUS, ECONOMICS 13 (18th
ed., 2005). Opportunity cost is defined as “[t]he cost of the forgone alternative[.]”)
Imposing an easement on the part of respondents’ property for petitioner’s benefit would cost respondents
not only the value of the property but also the value of respondents’ opportunity to use the property as a garage or a
garden with a grotto. (See also: Helen Calimoso, et al. v. Alex Roullo, G.R. No. 198594, January 25, 2016, Brion, J)

NUISANCE

Basketball ring may be a nuisance per accidens.


A basketball ring and its board were destroyed upon order of the barangay chairman. When sued for
Malicious Mischief, Grave Misconduct, Conduct Prejudicial to the Best Interest of the Service & Abuse of Authority,
she alleged that the basketball court affected the peace of the barangay, blocked jeepneys, the noise from the games
caused lack of sleep among the residents. What she did was in response to a public duty and thus, performing her
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duties at the time. The Ombudsman dismissed the complaint based on such defense but the CA reversed on appeal
since the action was not approved by ordinance and that unless a thing is a nuisance per se, such a thing may not be
abated via an ordinance and extrajudicially. The barangay chair and the tanod were penalized as the destruction was
done without following legal procedure. Before the SC, they contended that their act was merely in abatement of a
nuisance which they claimed as within her power as barangay chairman to perform and was part of her duty to
maintain peace and order. Is the judgment of the CA correct? Why?
Ans.: Yes. The basketball ring is not a nuisance per se that may be summarily abated. At most, it is a mere nuisance
per accidens, for it does not pose an immediate effect upon the safety of persons and property. It is unlike a mad dog
on the loose, which may be killed on sight because of the immediate danger it poses to the safety and lives of the
people; nor is like pornographic materials, contaminated milk, and narcotic drugs which are inherently pernicious
and which may be summarily destroyed; nor is it similar to a filthy restaurant which may be summarily padlocked in
the interest of the public health. (Ynot v. IAC, 232 Phil. 615 [1987]) A basketball ring by itself, poses no immediate
harm or danger to anyone but is merely an object of recreation. Neither is it, by its nature, injurious to the rights of
property, of health or of comfort of the community and, thus, it may not be abated as a nuisance without the benefit
of a judicial hearing. (Estate of Francisco v. CA, 276 Phil. 649 [1991])
Prevailing jurisprudence holds that unless a nuisance is a nuisance per se, it may not be summarily abated.
(Rana v. Wong, G.R. No. 192861, June 30, 2014, 727 SCRA 539, 553; Perez v. Spouses Madrona, G.R. No. 184478,
March 21, 2012, 668 SCRA 696, 706-707; Cruz, et al. v. Pandacan Hiker’s Club, Inc., G.R. No. 188213, January 11,
2016, Peralta, J)

Who abates a nuisance.


Under Article 700 of the Civil Code, the abatement, including one without judicial proceedings, of a public
nuisance is the responsibility of the district health officer. Under Article 702 of the Code, the district health officer is
also the official who shall determine whether or not abatement, without judicial proceedings, is the best remedy
against a public nuisance. The two articles do not mention that the chief executive of the local government, like the
Punong Barangay, is authorized as the official who can determine the propriety of a summary abatement.
The barangay officials claimed to have acted in their official capacities in the exercise of their powers under
the general welfare clause of the Local Government Code. But they could cite no barangay nor city ordinance that
would have justified their summary abatement through the exercise of police powers found in the said clause. No
barangay nor city ordinance was violated; neither was there one which specifically declared the said basketball ring
as a nuisance per se that may be summarily abated. Though it has been held that a nuisance per se may be abated via
an ordinance, without judicial proceedings, (Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc., supra) They are
required to justify their abatement via such an ordinance because the power they claim to have exercised – the
police power under the general welfare clause – is a power exercised by the government mainly through its
legislative, and not the executive, branch. The prevailing jurisprudence is that local government units such as the
provinces, cities, municipalities and barangays exercise police power through their respective legislative bodies.
(Metropolitan Manila Development Authority v. Garin, 496 Phil. 82, 92 (2005); City of Manila v. Laguio, supra)
The barangay officials do not claim to have acted in their private capacities but in their capacities as public
officials, thus, they are held administratively liable for their acts. And even in their capacities as private individuals
who may have abated a public nuisance, they came up short of the legal requirements. They do not claim to have
complied with any of the requisites laid down in Article 704 of the Civil Code, to wit:
Art. 704. Any private person may abate a public nuisance which is specially injurious to
him by removing, or if necessary, by destroying the thing which constitutes the same, without
committing a breach of the peace, or doing unnecessary injury. But it is necessary:
(1) That demand be first made upon the owner or possessor of the property to abate the
nuisance;
(2) That such demand has been rejected;
(3) That the abatement be approved by the district health officer and executed with the
assistance of the local police; and
(4) That the value of the destruction does not exceed three thousand pesos.

DONATION

Remuneratory donation; form required need not be a public document.


The owner of a property wanted to prevent the BCDA from converting her property into a resettlement site,
hence, she and the respondent executed a contract transferring her right over the said property. One of the
provisions of the contract is that she gave said parcel of land to remunerate his ten (10) years of service to her. Later
on she, filed a complaint to nullify the contract alleging that it was absolutely simulated, or even assuming it to be
remuneratory donation, still it is invalid, because the donation was not notarized. Is the contention correct? Explain.
Ans.: No. The subject is a remuneratory donation. The contract, as well as the evidence presented during the trial,
are silent as to the value of the burden, hence, instead of the law on donations, the rules on contract should govern
the subject contract because the donation is onerous as the burden is imposed upon the donee of a thing with an
undetermined value. It is not necessary that the contract be in a public instrument if it involves immovable property,
properly citing Pada-Kilario v. Court of Appeals, 379 phil. 515, 527 [2002], which states that the requirement of
Article 1358 of the Civil Code that acts which have for their object the creation, transmission, modification or
extinguishment of real rights over immovable property, must appear in a public document, is only for convenience,
non-compliance with which does not affect the validity or enforceability of the acts of the parties as among
themselves (Reyes v. Asuncion, G.R. No. 196083, November 1, 2015, Peralta, J).

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SUCCESSION

Preterition totally abrogates a will; exception.


The Supreme Court once again ruled that if a compulsory heir in the direct line is not instituted in a will,
there is preterition which may result in the total abrogation or nullity of a will. It may not totally nullify a will if there
are legatees and devisees.
A father executed a will but did not institute one of his children, thus, when the will was submitted to
probate, an opposition was filed. The proponent contended that he was not preterited because he received a
donation inter vivos from his father, but that was never proven.
Believing that the decedent died intestate, the heirs filed an intestate proceeding, but during the pendency
of the same, one of the heirs filed a petition for the probate of his will. She asked for the suspension of the intestate
proceeding to give way to the probate of the will. The two cases were consolidated but the heirs moved to dismiss
the probate proceeding on the ground of preterition. The proponent of the will agreed to hold evidentiary hearing to
resolve the issue of preterition, but the petitioner did not appear. The court suspended the intestate proceeding and
set the probate proceeding. Then, it ruled that while testacy is preferred over intestacy, courts will not hesitate to set
aside probate proceedings if it appears that the probate of the will might become an idle ceremony because the will
is intrinsically void. In fact, during the evidentiary hearings, it was admitted that one of the heirs was preterited, and
reinstated the administrator. The CA affirmed the RTC ruling and ruled that preterition of a compulsory heir in the
direct line annuls the institution of heirs and opens the entire inheritance into intestate succession, thus, the
continuation of the testate proceeding would be superfluous and impractical because the inheritance will be
adjudicated intestate. Was there preterition? Why?
Ans.: Yes. Preterition consists in the omission of a compulsory heir from the will, either because he is not named or,
although he is named as a father, son, etc., he is neither instituted as an heir nor assigned any part of the estate
without expressly being disinherited – tacitly depriving the heir of his legitime. (Nuguid v. Nuguid, G.R. No. L-23445,
June 23, 1966, 17 SCRA 449, 454, citing VI Manresa, Commentarios al Codigo Civil Español, 7th Ed. (1951), p. 424;
Aznar v. Duncan, G.R. No. L-24365, 17 SCRA 590, 595, citing VI Manresa, p. 428) Preterition requires that the
omission is total, meaning the heir did not also receive any legacies, devises, or advances on his legitime.
In other words, preterition is the complete and total omission of a compulsory heir from the testator’s
inheritance without the heir’s express disinheritance.
Article 854 of the Civil Code states the legal effects of preterition:
Art. 854. The preterition or omission of one, some, or all of the compulsory heirs in the
direct line, whether living at the time of the execution of the will or born after the death of the
testator, shall annul the institution of heir; but the devises and legacies shall be valid insofar as
they are not inofficious.
If the omitted compulsory heirs should die before the testator, the institution shall be
effectual, without prejudice to the right of representation.

Under the Civil Code, the preterition of a compulsory heir in the direct line shall annul the institution of
heirs, but the devises and legacies shall remain valid insofar as the legitimes are not impaired. Consequently, if a will
does not institute any devisees or legatees, the preterition of a compulsory heir in the direct line will result in total
intestacy. (Nuguid)
In the present case, the decedent’s will evidently omitted Francisco Olondriz as an heir, legatee, or devisee.
As the decedent’s illegitimate son, Francisco is a compulsory heir in the direct line. Unless Morales could show
otherwise, Francisco’s omission from the will would lead to the conclusion of his preterition.
During the proceedings in the RTC, Morales had the opportunity to present evidence that Francisco received
donations inter vivos and advances on his legitime from the decedent. However, Morales did not appear during the
hearing dates, effectively waiving her right to present evidence on the issue. We cannot fault the RTC for reaching
the reasonable conclusion that there was preterition (Iris Morales v. Ana Maria Olandriz, et al., G.R. No. 198994,
February 3, 2016, Brion, J).

Extent of the power of the probate court.


The general rule is that in probate proceedings, the scope of the court’s inquiry is limited to questions on
the extrinsic validity of the will; the probate court will only determine the will’s formal validity and due execution.
(Nepomuceno v. Court of Appeals, 223 Phil. 418, 423 [1985]) However, this rule is not inflexible and absolute.
(Nepomuceno v. CA) It is not beyond the probate court’s jurisdiction to pass upon the intrinsic validity of the will
when so warranted by exceptional circumstances. (See Nuguid; Nepomuceno; Balanay v. Hon. Martinez, 159-A Phil.
718, 723 [1975]) When practical considerations demand that the intrinsic validity of the will be passed upon even
before it is probated, the probate court should meet the issue. (Balanay, supra note 10, at 723, citing Nuguid)
The decedent’s will does not contain specific legacies or devices and Francisco’s preterition annulled the
institution of heirs. The annulment effectively caused the total abrogation of the will, resulting in total intestacy of
the inheritance. (Nuguid v. Nuguid) The decedent’s will, no matter how valid it may appear extrinsically, is null and
void. The conduct of separate proceedings to determine the intrinsic validity of its testamentary provisions would
be superfluous, hence, no error was committed in ordering the case to proceed intestate.

PRESCRIPTION

A mortgage action prescribes after 10 years. Explain the application of this rule.
The phrase “mortgage action” used in Article 1142 refers to an action to foreclose a mortgage, and has
nothing to do with an action to annul the foreclosure of the mortgage. (Philippine National Bank v. Rocamora,
G.R. No. 164549, September 18, 2009, 600 SCRA 395, 411; Cando v. Olazo, G.R. No. 160741, March 22,

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2007, 518 SCRA 741, 748; Nuñez v. GSIS Family Bank, G.R. No. 163988, November 17, 2005, 475 SCRA
305, 321)
Nonetheless, we find to be untenable the petitioner’s contention in its motion for reconsideration that
Article 1149 of the Civil Code (“All other actions whose periods are not fixed in this Code or in other laws must be
brought within five years from the time the right of action accrues”) was instead applicable. This action to annul the
foreclosure of the mortgage was not yet barred by prescription because the applicable period of prescription was 10
years from the time the right of action accrued by virtue of the action being upon a written contract. Indeed, the
reckoning of the period of prescription should start from July 12, 1983, when the foreclosure of the mortgage was
made, indicating that this action, being commenced on July 12, 1993, was not barred by prescription. (Rural Bank of
Malasiqui v. Ceralde, et al., G.R. No. 162032, November 25, 2015, Bersamin, J)

OBLIGATIONS AND CONTRACTS

If no substantial breach, rescission is improper.


In Nolasco, et al. v. Cuerpo, et al., G.R. No. 210215, December 9, 2015, Perlas-Bernabe, J, there was a contract
of sale between the parties. One of the terms and conditions provided that:
Petitioners shall, within ninety (90) days from the signing of the subject contract, cause the
completion of the transfer of registration of title of the property subject of [the subject contract],
from Edilberta N. Santos to their names, at petitioners’ own expense. Failure on the part of
petitioners to undertake the foregoing within the prescribed period shall automatically
authorize respondents to undertake the same in behalf of petitioners and charge the costs
incidental to the monthly amortizations upon due date. There was failure to comply, hence it
was contended that rescission due to substantial breach is the proper remedy. Is the ruling correct?
Why?

Ans.: No. For a contracting party to be entitled to rescission (or resolution) in accordance with Article 1191 of the
Civil Code, the other contracting party must be in substantial breach of the terms and conditions of their contract. A
substantial breach of a contract, unlike slight and casual breaches thereof, is a fundamental breach that defeats the
object of the parties in entering into an agreement. (Maglasang v. Northwestern University, Inc., G.R. No. 188986,
March 20, 2013, 694 SCRA 128) Here, it cannot be said that petitioners’ failure to undertake their obligation
defeated the object of the parties in entering into the subject contract, considering that the same paragraph provides
respondents contractual recourse in the event of petitioners’ non-performance of the aforesaid obligation, that is, to
cause such transfer themselves in behalf and at the expense of petitioners.
Indubitably, there is no substantial breach on the part of petitioners that would necessitate a rescission (or
resolution) of the subject contract.
In reciprocal obligations, either party may rescind – or more appropriately, resolve – the contract upon the
other party’s substantial breach of the obligation/s he had assumed thereunder. (Golden Valley Exploration, Inc. v.
Pinkian Mining Company, G.R. No. 190080, June 11, 2014, 726 SCRA 259, 265) This is expressly provided for in
Article 1191 of the Civil Code.

Basis of the right of rescission.


“More accurately referred to as resolution, the right of rescission under Article 1191 is predicated on a
breach of faith that violates the reciprocity between the parties to the contract. This retaliatory remedy is given to
the contracting party who suffers the injurious breach on the premise that it is ‘unjust that a party be held bound to
fulfill his promises when the other violates his.’” Note that the rescission (or resolution) of a contract will not be
permitted for a slight or casual breach, but only for such substantial and fundamental violations as would defeat the
very object of the parties in making the agreement. (EDS Manufacturing, Inc. v. Healthcheck International, Inc., G.R.
No. 162802, October 9, 2013, 707 SCRA 133, 141) Ultimately, the question of whether a breach of contract is
substantial depends upon the attending circumstances. (Maglasang v. Northwestern University, Inc., G.R. No.
188986, March 20, 2013, 694 SCRA 128, 136)

Nature of an action for rescission.


An action for rescission actually seeks one of the alternative remedies available to a contracting party under
Article 1191, NCC. The other alternative remedy is to ask for fulfillment with damages.
The law recognizes an implied or tacit resolutory condition in reciprocal obligations. The condition is
imposed by law, and applies even if there is no corresponding agreement thereon between the parties. The
explanation for this is that in reciprocal obligations a party incurs in delay once the other party has performed his
part of the contract; hence, the party who has performed or is ready and willing to perform may rescind the
obligation if the other does not perform, or is not ready and willing to perform.
It is true that the rescission of a contract results in the extinguishment of the obligatory relation as if it was
never created, the extinguishment having a retroactive effect. The rescission is equivalent to invalidating and
unmaking the juridical tie, leaving things in their status before the celebration of the contract. However, until the
contract is rescinded, the juridical tie and the concomitant obligations subsist. (Reyes v. Rossi, G.R. No. 159823,
February 18, 2013, Bersamin, J)

Rescission; cause of action.


In ASB Realty Corp. v. Ortigas & Co., Ltd. Partnership, G.R. No. 202947, December 9, 2015, Bersamin, J, a deed
of sale over a property was entered into between Ortigas and Amethyst Pearl Corp. with the condition that the latter
would construct a building thereon within four (4) years from December 31, 1991. In the meantime, Amethyst
assigned the property to ASB with knowledge of Ortigas, and with knowledge of ASB of the annotations but without
express or implied assumption of the obligations to construct the building. Due to the failure of Amethyst to
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construct the building, Ortigas filed a complaint for specific performance against ASB. Is ASB liable considering its
knowledge of the covenants that are annotated at the back of the title? Ruling that it is not, the SC
Held: By acquiring the parcel of land with notice of the covenants contained in the Deed of Sale between the vendor
(Ortigas) and the vendee (Amethyst), the petitioner bound itself to acknowledge and respect the encumbrance. Even
so, the petitioner did not step into the shoes of Amethyst as a party in the Deed of Sale. Thus, the annotation of the
covenants contained in the Deed of Sale did not give rise to a liability on the part of the petitioner as the
purchaser/successor-in-interest without its express assumption of the duties or obligations subject of the
annotation. The annotation was only the notice to the purchaser/successor-in-interest of the burden, claim or lien
subject of the annotation.
In a similar case, Garcia v. Villar, G.R. No. 158891, June 27, 2012, 675 SCRA 80, 92-93, the SC ruled that the
sale or transfer of the mortgaged property cannot affect or release the mortgage; thus the purchaser or transferee is
necessarily bound to acknowledge and respect the encumbrance.
However, Villar, in buying the subject property with notice that it was mortgaged, only undertook to pay
such mortgage or allow the subject property to be sold upon failure of the mortgage creditor to obtain payment from
the principal debtor once the debt matures. Villar did not obligate herself to replace the debtor in the principal
obligation, and could not do so in law without the creditors consent. Article 1293 of the Civil Code provides:
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 the rights mentioned in articles 1236
and 1237.

Therefore, the obligation to pay the mortgage indebtedness remains with the original debtors.
To be clear, contractual obligations, unlike contractual rights or benefits, are generally not assignable. But
there are recognized means by which obligations may be transferred, such as by sub-contract and novation. In this
case, the substitution of the petitioner in the place of Amethyst did not result in the novation of the Deed of Sale. To
start with, it does not appear from the records that the consent of Ortigas to the substitution had been obtained
despite its essentiality to the novation. Secondly, the petitioner did not expressly assume Amethyst’s obligations
under the Deed of Sale, whether through the Deed of Assignment in Liquidation or another document. And, thirdly,
the consent of the new obligor (i.e., the petitioner), which was as essential to the novation as that of the obligee (i.e.,
Ortigas), was not obtained.

Rescission, not proper.


Is rescission the proper remedy for Ortigas to recover the subject property from the petitioner? Explain.
Ans.: No. The Civil Code uses rescission in two different contexts, namely: (1) rescission on account of breach of
contract under Article 1191; and (2) rescission by reason of lesion or economic prejudice under Article 1381.
Cogently explaining the differences between the contexts of rescission in his concurring opinion in Universal Food
Corp. v. Court of Appeals, L-29155, May 13, 1970, 33 SCRA 1, 22-23, the eminent Justice J.B.L. Reyes observed:
x x x The rescission on account of breach of stipulations is not predicated on injury to
economic interests of the party plaintiff but on the breach of faith by the defendant, that violates
the reciprocity between the parties. It is not a subsidiary action, and Article 1191 may be scanned
without disclosing anywhere that the action for rescission thereunder is subordinated to anything;
other than the culpable breach of his obligations by the defendant. This rescission is a principal
action retaliatory in character, it being unjust that a party be held bound to fulfill his promises
when the other violates his, as expressed in the old Latin aphorism: "Non servanti fidem, non est
fides servanda." Hence, the reparation of damages for the breach is purely secondary.
On the contrary, in the rescission by reason of lesion or economic prejudice, the cause of
action is subordinated to the existence of that prejudice, because it is the raison d'etre as well as the
measure of the right to rescind. Hence, where the defendant makes good the damages caused, the
action cannot be maintained or continued, as expressly provided in Articles 1383 and 1384. But the
operation of these two articles is limited to the cases of rescission for lesion enumerated in Article
1381 of the Civil Code of the Philippines, and does not apply to cases under Article 1191.

Ortigas’ complaint was predicated on Article 1191 of the Civil Code. Is it proper? Why?
Ans.: No. Rescission under Article 1191 of the Civil Code is proper if one of the parties to the contract commits a
substantial breach of its provisions. It abrogates the contract from its inception and requires the mutual restitution
of the benefits received; (Supercars Management & Development Corporation v. Flores, G.R. No. 148173, December
10, 2004, 446 SCRA 34, 43) hence, it can be carried out only when the party who demands rescission can return
whatever he may be obliged to restore.
Considering the foregoing, Ortigas did not have a cause of action against the petitioner for the rescission of
the Deed of Sale. Under Section 2, Rule 2 of the Rules of Court, a cause of action is the act or omission by which a
party violates a right of another. The essential elements of a cause of action are: (1) a right in favor of the plaintiff by
whatever means and under whatever law it arises or is created; (2) an obligation on the part of the defendant not to
violate such right; and (3) an act or omission on the part of the defendant in violation of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the plaintiff for which the latter may maintain an action
for recovery of damages or other relief. It is only upon the occurrence of the last element that the cause of action
arises, giving the plaintiff the right to file an action in court for the recovery of damages or other relief. (Fluor Daniel,
Inc.-Philippines v. E.B. Villarosa & Partners Co., Ltd., G.r. No. 159648, July 27, 2007, 528 SCRA 321, 327).
The petitioner was not privy to the Deed of Sale because it was not the party obliged thereon. Not having
come under the duty not to violate any covenant in the Deed of Sale when it purchased the subject property despite
the annotation on the title, its failure to comply with the covenants in the Deed of Sale did not constitute a breach of
contract that gave rise to Ortigas' right of rescission. It was rather Amethyst that defaulted on the covenants under
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the Deed of Sale; hence, the action to enforce the provisions of the contract or to rescind the contract should be
against Amethyst. In other words, rescission could not anymore take place against the petitioner once the subject
property legally came into the juridical possession of the petitioner, who was a third party to the Deed of Sale. (Art.
1385, NCC)

There was a contract of conditional sale of a real property. One of the terms and conditions of the contract
provides that in case of breach, the seller can extrajudicially rescind the contract. There was delay in the
payment of amortizations for six (6) months. Can the seller rescind the contract extrajudicially? Explain.
Ans.: Yes. Article 1191 of the Civil Code does not prohibit the parties from entering into an agreement whereby a
violation of the terms of the contract would result to its cancellation. In Pangilinan v. Court of Appeals, the Court
upheld the vendor’s right in a contract to sell to extrajudicially cancel the contract upon failure of the vendee to pay
the installments and even to retain the sums already paid, holding:
“[Article 1191 of the Civil Code] makes it available to the injured party alternative
remedies such as the power to rescind or enforce fulfillment of the contract, with damages in either
case if the obligor does not comply with what is incumbent upon him. There is nothing in this law
which prohibits the parties from entering into an agreement that a violation of the terms of the
contract would cause its cancellation even without court intervention. The rationale for the
foregoing is that in contracts providing for automatic revocation, judicial intervention is necessary
not for purposes of obtaining a judicial declaration rescinding a contract already deemed rescinded
by virtue of an agreement providing for rescission even without judicial intervention, but in order
to determine whether or not the rescission was proper. Where such propriety is sustained, the
decision of the court will be merely declaratory of the revocation, but it is not itself the revocatory
act. Moreover, the vendor’s right in contracts to sell with reserved title to extrajudicially cancel the
sale upon failure of the vendee to pay the stipulated installments and retain the sums and
installments already received has long been recognized by the well-established doctrine of 39 years
standing. The validity of the stipulation in the contract providing for automatic rescission upon
non-payment cannot be doubted. It is in the nature of an agreement granting a party the right to
rescind a contract unilaterally in case of breach without need of going to court. Thus, rescission
under Article 1191 was inevitable due to petitioner’s failure to pay the stipulated price within the
original period fixed in the agreement.” (Lina Calilap-Asmeron v. DBP, et al., G.R. No. 157330,
November 23, 2011, Bersamin, J)

Application of payment; debtor has the right; effect if he does not exercise.
The right to make application of payment is a right of the debtor which is merely directory in nature and
must be promptly exercised, lest, such right passes to the creditor. Such is the pronouncement of the SC in Sps. Tan,
etc. v. China Banking Corp., G.R. No. 200299, August 17, 2016, Perez, J, where after the bank foreclosed the mortgages
over the properties which were used to secure the payment of obligations contracted by the debtor, the debtor
failed to manifest its preference as to which among the obligations that were due the proceeds of the sale should be
applied. Hence, the bank made the application of payment, by applying the proceeds of the sale to the interest first
and then to the principal. Expounding on the rule, the SC said that
Held: Obligations are extinguished, among others, by payment or performance. (Go Cinco, et al. v. Court of Appeals,
et al., 618 Phil. 104, 112 [2009]) Under Article 1232 of the Civil Code, payment means not only the delivery of money
but also the performance, in any other manner, of an obligation. Article 1233 of the Civil Code states that a debt shall
not be understood to have been paid unless the thing or service in which the obligation consists has been completely
delivered or rendered, as the case may be. In contracts of loan, the debtor is expected to deliver the sum of money
due the creditor. These provisions must be read in relation with the other rules on payment under the Civil Code,
such as the application of payment, to wit:
Art. 1252. He who has various debts of the same kind in favor of one and the same creditor,
may declare at the time of making the payment, to which of them the same must be applied. Unless
the parties so stipulate, or when the application of payment is made by the party for whose benefit
the term has been constituted, application shall not be made as to debts which are not yet due.
If the debtor accepts from the creditor a receipt in which an application of the payment is
made, the former cannot complain of the same, unless there is a cause for invalidating the contract.

In Premiere Development Bank v .. Central Surety & Insurance Company Inc., 598 Phil. 827, 844-845 [2009], it
was held that the right of the debtor to apply payment is merely directory in nature and must be promptly exercised,
lest, such right passes to the creditor, viz:
Article 1252 gives the right to the debtor to choose to which of several obligations to apply·
a particular payment that he tenders to the creditor. But likewise granted in the same provision is
the right of the creditor to apply such payment in case the debtor fails to direct its application. This
is obvious in Art. 1252, par. 2, viz.: 'If the debtor accepts from the creditor a receipt in which an
application of payment is made, the former cannot complain of the same.' It is the directory nature
of this right and the subsidiary right of the creditor to apply payments when the debtor does not
elect to do so that make this right, like any other right, waivable.
Rights may be waived, unless the waiver is contrary to law, public order, public policy,
morals or good customs, or prejudicial to a third person with a right recognized by law.
A debtor, in making a voluntary payment, may at the time of payment direct an application
of it to whatever account he chooses, unless he has assigned or waived that right. If the debtor does
not do so, the right passes to the creditor, who may make such application as he chooses. But if
neither party has exercised its option, the court will apply the payment according to the justice and
equity of the case, taking into consideration all its circumstances."
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In the event that the debtor failed to exercise the right to elect, the creditor may choose to which among the
debts the payment is applied as in the case at bar. It is noteworthy that after the sale of the foreclosed properties at
the public auction, the debtor failed to manifest its preference as to which among the obligations that were all due
the proceeds of the sale should be applied. Its silence can be construed as acquiescence to China Bank's application
of the payment first to the interest and penalties and the remainder to the principal which is sanctioned by Article
1253 of the New Civil Code.

Under Article 1332, NCC, when one of the parties is unable to read, or if the contract is in a language not
understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the
terms thereof have been fully explained to the former. In a case, it was contended that the petitioner had not
given her full consent to the deed of conditional sale on account of her lack of legal and technical knowledge. In
brushing aside such contention, the SC
Held: The petitioner was not illiterate. She had appeared to the trial court to be educated, its cogent observation of
her as “lettered” being based on how she had composed her correspondences to DBP. Her testimony also revealed
that she had no difficulty understanding English.
Thereby revealed was her distinctive ability to understand written and spoken English, the language in
which the terms of the contract she signed had been written.
Clearly, Article 1332 of the Civil Code does not apply to the petitioner. According to Lim v. Court of Appeals,
the provision came into being because a sizeable percentage of the country’s populace had comprised of illiterates,
and the documents at the time had been written either in English or Spanish, viz.:
“In calibrating the credibility of the witnesses on this issue, we take our mandate from
Article 1332 of the Civil Code which provides: “When one of the parties is unable to read, or if the
contract is in a language not understood by him, and mistake or fraud is alleged, the person
enforcing the contract must show that the terms thereof have been fully explained to the former.”
This substantive law came into being due to the finding of the Code Commission that there is
still a fairly large number of illiterates in this country, and documents are usually drawn up
in English or Spanish. It is also in accord with our state policy of promoting social justice. It
also supplements Article 24 of the Civil Code which calls on court to be vigilant in the
protection of the rights of those who are disadvantaged in life. (Lim v. Court of Appeals, G.R.
No. 55201, February 3, 1994, 229 SCRA 6161, 623; Lina Calilap-Asmeron v. DBP, et al., G.R. No.
157330, November 23, 2011, Bersamin, J)

There was a contract to sell a subdivision lot with an undertaking to construct the amenities. The seller, in a
suit for specific performance filed by the buyer, sought to be excused from performing its obligation under the
contract, invoking Article 1267, NCC as its basis. It contended that the depreciation of the Philippine Peso since
the time of the execution of the contract, the increase in the cost of labor and construction materials and the
increase in the value of the lot in question were valid justifications for its release from the obligation to
construct the amenities. Rule on the contention of the seller. Explain.
Ans.: The contention is not correct. Under Section 20 of Presidential Decree No. 957, all developers, including the
petitioner, are mandated to complete their subdivision projects, including the amenities, within one year from the
issuance of their licenses.
Pursuant to Section 30 of Presidential Decree No. 957, the amenities, once constructed, are to be maintained
by the developer like the petitioner until a homeowners’ association has been organized to manage the amenities.
There is no question that the petitioner did not comply with its legal obligation to complete the construction
of the subdivision project, including the amenities, within one year from the issuance of the license. Instead, it
unilaterally opted to suspend the construction of the amenities to avoid incurring maintenance expenses. In so
opting, it was not driven by any extremely difficult situation that would place it at any disadvantage, but by its desire
to benefit from cost savings. Such cost-saving strategy dissuaded the lot buyers from constructing their houses in the
subdivision, and from residing therein.
Considering that the petitioner’s unilateral suspension of the construction of the amenities was intended to
save itself from costs, its plea for relief from its contractual obligations was properly rejected because it would
thereby gained a position of advantage at the expense of the lot owners like the respondent. Its invocation of Article
1267 of the Civil Code, which provides that “(w)hen the service has become so difficult as to be manifestly beyond
the contemplation of the parties, the obligor may also be released therefrom in whole or in part,” was factually
unfounded. For Article 1267 to apply, the following conditions should concur, namely: (a) the event or change in
circumstances could not have been foreseen at the time of the execution of the contract; (b) it makes the
performance of the contract extremely difficult but not impossible; (c) it must not be due to the act of any of the
parties; and (d) the contract is for a future prestation. The requisites did not concur herein because the difficulty of
performance under Article 1267 of the Civil Code should be such that one party would be placed at a disadvantage by
the unforeseen event. Mere inconvenience, or unexpected impediments, or increased expenses did not suffice to
relieve the debtor from a bad bargain. (Castro v. Longa, Nos. L-2152 and L-2153, July 31, 1951)
And secondly, the unilateral suspension of the construction had preceded the worsening of economic
conditions in 1983; hence, the latter could not reasonably justify the petitioner’s plea for release from its statutory
and contractual obligations to its lot buyers, particularly the respondent. Besides, the petitioner had the legal
obligation to complete the amenities within one year from the issuance of the license (under Section 20 of
Presidential Decree No. 957), or within two years from July 15, 1976 (under the express undertaking of the
petitioner). Hence, it should have complied with its obligation by July 15, 1978 at the latest, long before the
worsening of the economy in 1983. (Tagaytay Realty Co., Inc. v. Gacutan, G.R. No. 160033, July 11, 2015, Bersamin, J)

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Notes: Presidential Decree No. 957 is a law that regulates the sale of subdivision lots and condominiums in view of
the increasing number of incidents wherein “real estate subdivision owners, developers, operators, and/or sellers
have reneged on their representations and obligations to provide and maintain properly” the basic requirements
and amenities, as well as of reports of alarming magnitude of swindling and fraudulent manipulations perpetrated
by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers
or titles free from liens and encumbrances. (San Miguel Properties, Inc. vs. Perez, 705 SCRA 38 [2013])
The action for specific performance, although civil in nature, could be brought only in the Housing and Land
Use Regulatory Board (HLURB). (Id.)

State the rule on the payment of a monetary obligation. Explain.


Ans.: As a general rule, all obligations shall be paid in Philippine currency. However, the contracting parties may
stipulate that foreign currencies may be used for settling obligations. This is pursuant to Republic Act No. 8183,
which provides as follows:
Section 1. All monetary obligations shall be settled in the Philippine currency which is
legal tender in the Philippines. However, the parties may agree that the obligation or transaction
shall be settled in any other currency at the time of payment.

It was said in C.F. Sharp & Co. v. Northwest Airlines, Inc., G.R. No. 133498, April 11, 2002, 381 SCRA 314, 319-
320, that the repeal of Republic Act No. 529 had the effect of removing the prohibition on the stipulation of currency
other than Philippine currency, such that obligations or transactions could already be paid in the currency agreed
upon by the parties. However, both Republic Act No. 529 and Republic Act No. 8183 did not stipulate the applicable
rate of exchange for the conversion of foreign currency-incurred obligations to their peso equivalent. It follows,
therefore, that the jurisprudence established under Republic Act No. 529 with regard to the rate of conversion
remains applicable. In C.F. Sharp, the Court cited Asia World Recruitment, Inc. v. NLRC, to the effect that the real value
of the foreign exchange-incurred obligation up to the date of its payment should be preserved (Netlink Computel,
Inc. v. Delmo, G.R. No. 160827, June 18, 2014).
There was no written contract between Netlink and Delmo stipulating that the latter’s commissions would
be paid in US dollars. The absence of the contractual stipulation notwithstanding, Netlink was still liable to pay
Delmo in US dollars because the practice of paying its sales agents in US dollars for their US dollar-denominated
sales had become a company policy. This was impliedly admitted by Netlink when it did not refute the allegation
that the commissions earned by Delmo and its other sales agents had been paid in US dollars. Instead of denying the
allegation, Netlink only sought a declaration that the US dollar commissions be paid using the exchange rate at the
time of sale. The principle of non-diminution of benefits, which has been incorporated in Article 100 of the Labor
Code, forbade Netlink from unilaterally reducing, diminishing, discontinuing or eliminating the practice. Verily, the
phrase “supplements, or other employee benefits” in Article 100 is construed to mean the compensation and
privileges received by an employee aside from regular salaries or wages (Netlink Computel, Inc. v. Delmo, G.R. No.
160827, June 18, 2014).

FRAUD

Q – In a action for annulment of a real estate mortgage, the petitioners contended that they were made to sign
the deed of real estate mortgage in blank. Is their contention correct? Why?
Ans.: No. Fraud cannot be presumed but must be proved by clear and convincing evidence. Whoever alleges fraud
affecting a transaction must substantiate his allegation, because a person is always presumed to take ordinary care
of his concerns, and private transactions are similarly presumed to have been fair and regular. (Section 3(p), Rule
131, Rules of Court; also, Dutch Boy Philippines, Inc. v. Seniel, G.R. No. 170008, January 19, 2009, 576 SCRA 231, 240,
citing Memita v. Masongsong, G.R. No. 150912, May 28, 2007, 523 SCRA 244, 256-257; and Mangahas v. Court of
Appeals, G.R. No. 95815, March 10, 1999, 304 SCRA 375, 382) To be remembered is that mere allegation is definitely
not evidence; hence, it must be proved by sufficient evidence. (Real v. Sangu Philippines, Inc., G.R. No. 168757,
January 19, 2011, 640 SCRA 67, 85, citing General Milling Corporation v. Casio, G.R. No. 149552, March 10, 2010, 615
SCRA 13, 32-33; Metropolitan Fabrics, Inc., et al. v. Prosperity Resources, Inc., et al., G.R. No. 154390, March 17, 2014,
Bersamin, J)

Period to annul a mortgage.


With the contract being voidable, petitioners’ action to annul the real estate mortgage already prescribed.
Article 1390, in relation to Article 1391 of the Civil Code, provides that if the consent of the contracting parties was
obtained through fraud, the contract is considered voidable and may be annulled within four years from the time of
the discovery of the fraud.The discovery of fraud is reckoned from the time the document was registered in the
Register of Deeds in view of the rule that registration was notice to the whole world. Thus, because the mortgage
involving the seven lots was registered on September 5, 1984, they had until September 5, 1988 within which to
assail the validity of the mortgage. But their complaint was instituted in the RTC only on October 10, 1991. Hence,
the action, being by then already prescribed, should be dismissed.

NOVATION

There was consignment of pieces of jewelry for sale and return if not sold. The accused claimed that his partial
payments to the complainants novated his contract with them from agency to loan, thereby converting his
liability from criminal to civil. He insisted that his failure to complete his payments prior to the filing of the
complaint-affidavit by the complainants notwithstanding, the fact that the complainants later required him to
make a formal proposal before the barangay authorities on the payment of the balance of his outstanding
obligations confirmed that novation had occurred. The lower court rejected the contention holding that
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novation is not one of the grounds prescribed by the Revised Penal Code for the extinguishment of criminal
liability. It is well settled that criminal liability for estafa is not affected by compromise or novation of contract,
for it is a public offense which must be prosecuted and punished by the Government on its own motion even
though complete reparation should have been made of the damage suffered by the offended party. A criminal
offense is committed against the People and the offended party may not waive or extinguish the criminal
liability that the law imposes for the commission of the offense. The criminal liability for estafa already
committed is not affected by the subsequent novation of the contract. Is the ruling correct? Why?
Ans.: Yes, because the partial payments he made and his purported agreement to pay the remaining obligations did
not equate to a novation of the original contractual relationship of agency to one of sale.
Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent
one that terminates the first, either by (a) changing the object or principal conditions; or (b) substituting the person
of the debtor; or (c) subrogating a third person in the rights of the creditor. In order that an obligation may be
extinguished by another that substitutes the former, it is imperative that the extinguishment be so declared in
unequivocal terms, or that the old and the new obligations be on every point incompatible with each other.
Obviously, in case of only slight modifications, the old obligation still prevails (Degaños v. People, G.R. No. 162826,
October 14, 2013, Bersamin, J).

Novation is never presumed.


The Court has further pointed out in Quinto v. People, G.R. No. 126712, April 14, 1999, 305 SCRA 708:
Novation is never presumed, and the animus novandi, whether totally or partially, must
appear by express agreement of the parties, or by their acts that are too clear and unequivocal to be
mistaken.
The extinguishment of the old obligation by the new one is necessary element of novation
which may be effected either expressly or impliedly. The term “expressly” means that the contracting
parties incontrovertibly disclose that their object in executing the new contract is to extinguish the old
one. Upon the other hand, no specific form is required for an implied novation, and all that is
prescribed by law would be an incompatibility between the two contracts. While there is really no
hard and fast rule to determine what might constitute to be a sufficient change that can bring about
novation, the touchstone for contrarity, however would be an irreconcilable incompatibility between
the old and the new obligations (Degaños v. People, G.R. No. 162826, October 14, 2013, Bersamin, J).

Two (2) ways which indicate presence of novation.


There are two ways which could indicate, in fine, the presence of novation and thereby produce the effect of
extinguishing an obligation by another which substitutes the same. The first is when novation has been explicitly
stated and declared in unequivocal terms. The second is when the old and the new obligations are incompatible on
every point. The test of incompatibility is whether or not the two obligations can stand together, each one having its
independent existence. If they cannot, they are incompatible and the latter obligation novates the first. Corollarily,
changes that breed incompatibility must be essential in nature and not merely accidental. The incompatibility must
take place in any of the essential elements of the obligation, such as its object, cause or principal conditions thereof;
otherwise, the change would be merely modificatory in nature and insufficient to extinguish the original obligation.
The changes alluded to by petitioner consists only in the manner of payment. There was really no
substitution of debtors since private complainant merely acquiesced to the payment but did not give her consent to
enter into a new contract (Degaños v. People, G.R. No. 162826, October 14, 2013, Bersamin, J).

Several loans were obtained by the debtor from the creditor where a consolidated promissory note dated July
23, 1986 was executed by them pegging the entire obligation to P500,000.00 payable on August 23, 1986. For
failure to comply with the promissory note, the creditor filed an action for sum of money where after trial,
judgment was rendered ordering the debtors to pay. The CA decided ordering the debtor to pay P500,000.00
plus 5.5 percent interest per month. But due to the promulgation of Medel v. CA, which struct down as void the
stipulation on the interest being iniquitous or unconscionable, it revived the decision of the RTC.
Upon the finality of the decision in Medel v. Court of Appeals, a motion for execution was filed. The
debtor opposed, claiming that he and the respondents had agreed to fix the entire obligation at P775,000.00.
According to him, their agreement, which was allegedly embodied in a receipt dated February 5, 1992,
whereby he made an initial payment of P400,000.00 and promised to pay the balance of P375,000.00 on
February 29, 1992, superseded the July 23, 1986 promissory note.
To buttress their claim of novation, the petitioners relied on the receipt issued on February 5, 1992
whereby the obligation was fixed at P750,000.00. They insisted that even the maturity date was extended until
February 29, 1992. Such changes, they asserted, were incompatible with those of the original agreement under
the promissory note.
Was there a novation of the August 23, 1986 PN when the creditor issued the February 5, 1992 receipt?
Explain.
Ans.: A novation arises when there is a substitution of an obligation by a subsequent one that extinguishes the first,
either by changing the object or the principal conditions, or by substituting the person of the debtor, or by
subrogating a third person in the rights of the creditor. For a valid novation to take place, there must be, therefore:
(a) a previous valid obligation; (b) an agreement of the parties to make a new contract; (c) an extinguishment of the
old contract; and (d) a valid new contract. In short, the new obligation extinguishes the prior agreement only when
the substitution is unequivocally declared, or the old and the new obligations are incompatible on every point. A
compromise of a final judgment operates as a novation of the judgment obligation upon compliance with either of
these two conditions. (Foundation Specialists, Inc. v. Betonval Ready Concrete, Inc., G.R. No. 170674, August 24,
2009, 596 SCRA 697, 706-707)

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The receipt dated February 5, 1992, did not create a new obligation incompatible with the old one under the
promissory note.
To be clear, novation is not presumed. This means that the parties to a contract should expressly agree to
abrogate the old contract in favor of a new one. In the absence of the express agreement, the old and the new
obligations must be incompatible on every point (Valenzuela v. Kalayaan Development & Industrial Corporation,
G.R. No. 163244, June 22, 2009; Heirs of Servando Franco v. Sps. Gonzales, G.R. No. 159709, June 27, 2012, Bersamin,
J).

According to California Bus Lines, Inc. v. State Investment House, Inc., G.R. No. 147950, December 11, 2003,
418 SCRA 297, 309-310:
“The extinguishment of the old obligation by the new one is a necessary element of
novation which may be effected either expressly or impliedly. The term “expressly” means that the
contracting parties incontrovertibly disclose that their object in executing the new contract is to
extinguish the old one. Upon the other hand, no specific form is required for an implied novation,
and all that is prescribed by law would be an incompatibility between the two contracts. While
there is really no hard and fast rule to determine what might constitute to be a sufficient change
that can bring about novation, the touchstone for contrariety, however, would be an irreconcilable
incompatibility between the old and the new obligations.”

When incompatibility of two(2) contracts exist.


There is incompatibility when the two obligations cannot stand together, each one having its independent
existence. If the two obligations cannot stand together, the latter obligation novates the first. (Valenzuela v. Kalayaan
Development & Industrial Corporation, supra, note 17; California Bus Lines, Inc. v. State Investment House, Inc.,
supra, note 21; Kwong v. Gargantos, G.R. No. 152984, November 22, 2006, 507 SCRA 540, 548) Changes that breed
incompatibility must be essential in nature and not merely accidental. The incompatibility must affect any of the
essential elements of the obligation, such as its object, cause or principal conditions thereof; otherwise, the change is
merely modificatory in nature and insufficient to extinguish the original obligation. (Transpacific Battery
Corporation v. Security Bank & Trust Co., G.R. No. 173565, May 8, 2009, 587 SCRA 536, 546)

Maria Antonia Armovit was granted a credit card by BPI. After the expiry date, she asked for reactivation, but
BPI refused to lift the suspension as she has not submitted a new application which is not required under the
terms and conditions of their contract. She filed an action for damages. It was contended by BPI that the
contract requires her to submit a new application to enable the reactivation of her card. Is the contention
correct? Explain.
Ans.: No. Considering that the terms and conditions nowhere stated that the card holder must submit the new
application form in order to reactivate her credit card, to allow BPI Express Credit to impose the duty to submit the
new application form in order to enable Armovit to reactivate the credit card would contravene the Parol Evidence
Rule. Indeed, there was no agreement between the parties to add the submission of the new application form as the
means to reactivate the credit card. When she did not promptly settle her outstanding balance, BPI Express Credit
sent a message on March 19, 1992 demanding payment with the warning that her failure to pay would force it to
temporarily suspend her credit card. It then sent another demand letter requesting her to settle her obligation in
order to lift the suspension of her credit card and prevent its cancellation. She paid her obligation. In the context of
the contemporaneous and subsequent acts of the parties, the only condition for the reinstatement of her credit card
was the payment of her outstanding obligation. Had it intended otherwise, BPI Express Credit would have surely
informed her of the additional requirement. That it did not do so confirmed that they did not agree on having her
submit the new application form as the condition to reactivate her credit card. (BPI Express Card Corp. v. Armovit,
G.R. No. 163654, October 8, 2014, Bersamin, J)

Nature of the relationship between a credit card holder and the card issuer.
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. (BPI Express Card Corp. v.
Armovit, G.R. No. 163654, October 8, 2014, Bersamin, J)

Contract of services.
In connection with the 12th ASEAN Summit where the Province of Cebu was the site, the latter decided
to construct the Cebu International Convention Center (CICC). WTCI emerged as the winning bidder to
construct. There was an issue as to the nature of the liability of the Province of Cebu in connection with WTCI’s
performance of a particular service like the performance of additional works on CICC consisting of site
development, additional structural, architectural, plumbing and electrical works thereon, where it advanced
the cost of the additional works. Is it a forebearance of money or contract of services? Explain.
Ans.: It is one of contract of services.
The term "forbearance," within the context of usury law, has been described as a
contractual obligation of a lender or creditor to refrain, during a given period of time, from
requiring the borrower or debtor to repay the loan or debt then due and payable )Sunga-Chan v.
CA, 578 Phil. 262 (2008)).

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In Estores v. Supangan, G.R. No. 175139, April 18, 2012, 670 SCRA 95, the Court explained that forbearance
of money, goods, or credit refers to arrangements other than loan agreements where a person acquiesces to the
temporary use of his money, goods or credits pending the happening of certain events or fulfilment of certain
conditions such that if these conditions are breached, the said person is entitled not only to the return of the
principal amount given, but also to
compensation for the use of his money equivalent to the legal interest since the use or deprivation of funds is akin to
a loan.
Applying the foregoing standards the liability of the Province of Cebu to WTCI is not in the nature of a
forbearance of money as it does not involve an acquiescence to the temporary use of WTCI's money, goods or
credits. Rather, it involves WTCI's performance of a particular service, i.e., the performance of additional works on
CICC, consisting of site development, additional structural, architectural, plumbing, and electrical works thereon.
The liabilities arising from construction contracts do not partake of loans or forbearance of money but are
in the nature of contracts of service. In Federal Builders, Inc. v. Foundation Specialists, Inc. , G.R. Nos. 194507 and
194621, September 8, 2014, 734 SCRA 379, the Court ruled that the liability arising from the non-payment for the
construction works, specifically the construction of a diaphragm wall, capping beam, and guide walls of the Trafalgar
Plaza in Makati City, do not partake of a loan or forbearance of money but is more in the nature of a contract of
service (WT Construction, Inc. v. The Province of Cebu, G.R. No. 208984; Province of Cebu v. WT Construction, Inc.,
G.R. No. 209245, September 16, 2015, Perlas-Bernabe, J).
Hence, the rate of legal interest imposable on the liability of the Province of Cebu to WTCI is 6% per annum,
in accordance with the guidelines laid down in Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, July 12,
1994, 234 SCRA 78 (Eastern Shipping Lines, Inc.), viz.:
The guidelines have been updated in Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, 703 SCRA
439 (Nacar), pursuant to Bangko Sentral ng Pilipinas (BSP) Circular No. 799, series of 2013, which reduced the rate
of legal interest for loans or transactions involving forbearance of money, goods, or credit from 12o/o to 6% per
annum. Nevertheless, the rate of legal interest for obligations not constituting loans or forbearance such as the one
subject of this case remains unchanged at 6% per annum.
As to the computation of the interest due WTCI from the time of the filing of the complaint, the same should
be reckoned from the time WTCI made the extrajudicial demand for the payment of the principal.
The legal interest rate of 6% shall be imposed from the finality of the herein judgment until satisfaction
thereof. This is in view of the principle that in the interim, the obligation assumes the nature of a forbearance of
credit which, pursuant to Eastern Shipping Lines, Inc. as modified by Nacar, is subject to legal interest at the rate of
6% per annum.

TRUST

Period to file action for reconveyance of property acquired through mistake or fraud be filed.
Ten years. The prescription of actions for the reconveyance of real property based on implied trust is 10
years. Under Article 1456 of the Civil Code, the person obtaining property through mistake or fraud is considered by
force of law a trustee of an implied trust for the benefit of the person from whom the property comes. Under Article
1144, Civil Code, an action upon an obligation created by law must be brought within 10 years from the time the
right of action accrues. Consequently, an action for reconveyance based on implied trust prescribes in 10 years. (Sps.
Dico, Sr. v. Vizcaya Management Corp., G.R. No. 161211, July 17, 2013, Bersamin, J)
The reckoning point for purposes of the Dico’s demand of reconveyance based on fraud was their discovery
of the fraud. Such discovery was properly pegged on the date of the registration of the transfer certificates of title in
the adverse parties’ names, because registration was a constructive notice to the whole world.

Implied trust converted to express trust.


In 1960 Felisa, as owner of a parcel of land, transferred the same to her daughter Bella, married to Delfin, Sr.
and Felimon, Sr., to assist them in procuring a loan from the GSIS. Her title was cancelled and a new one was issued
under the names of Bella and Delfin. In a letter dated September 21, 1970, addressed to the latter, she said that the
property still belonged to her and that she transferred the property due to their intention to procure a loan from the
GSIS. She requested that beneath the letter, they should sign, and they signed and she likewise signed the same.
What is the nature of the transfer of the property? Explain.
Ans.: Taking into considering the contents of the letter, the transfer was a case of an express trust.
The words of Felisa in the letter unequivocally and absolutely declared her intention of transferring the title
over the subject property to Bella, Delfin, Sr., and Felimon, Sr. in order to merely accommodate them in securing a
loan from the GSIS. She likewise stated clearly that she was retaining her ownership over the subject property and
articulated her wish to have her heirs share equally therein. Hence, while in the beginning, an implied trust was
merely created between Felisa, as trustor, and Bella, Delfin, Sr., and Felimon, Sr., as both trustees and beneficiaries,
the execution of the September 21, 1970 letter settled, once and for all, the nature of the trust established between
them as an express one, their true intention irrefutably extant thereon (Go v. The Estate of the Later Felisia de
Buenaventura, etc., G.R. No. 211972; Guerrero, et al. v. The Estate of the Late Felisa de Buenaventura, etc., G.R. No.
212045, June 22, 2015, Perlas-Bersamin, J).
Bella's attempt to thwart the express trust established in this case by claiming that she affixed her signature
on the September 21, 1970 letter only "to appease" her mother, Felisa, and that she could afford to sign the letter
since the title covering the subject property was in their name as owners anyway, does not hold water. As held in
Lee Tek Sheng v. CA, 354 Phil. 556 [1998], the "[m]ere issuance of the certificate of title in the name of any person
does not foreclose the possibility that the real property may be under co-ownership with persons not named in the
certificate or that the registrant may only be a trustee or that other parties may have acquired interest subsequent
to the issuance of the certificate of title." Registration does not vest title; it is merely the evidence of such title. (Heirs
of Rosa and Cirila Dumaliang v. Serban, 545 Phil. 243, 256 [2007]).
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Bella never denied the purpose for which the sale to them of the subject property was effected. Instead, they
relied heavily and anchored their defense on the existence of their certificate of title covering the subject property,
which, to reiterate, was insufficient to prove their ownership over the same independent of the express trust.

Action for reconveyance; prescription.


The action for reconveyance instituted by respondents has not yet prescribed, following the jurisprudential
rule that express trusts prescribe in ten (10) years from the time the trust is repudiated.
In this case, there was a repudiation of the express trust when Bella, as the remaining trustee, sold the
subject property to Wilson and Peter on January 23, 1997. As the complaint for reconveyance and damages was filed
by respondents on October 1 7, 1997, or only a few months after the sale of the subject property to Wilson and
Peter, it cannot be said that the same has prescribed.

Action for quieting of title is enforcing implied trust; prescription to enforce is 10 years.
The cause of action for quieting of title, recovery and damages over a property acquired through a forged
deed can be considered as that of enforcing an implied trust under Article 1456 of the Civil Code which provides that
if a 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.
An action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten years,
the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title
over the property (Vda. de Portugal vs. IAC, 159 SCRA 178). But this rule applies only when the plaintiff is not in
possession of the property, since if a person claiming to be the owner thereof is in actual possession of the property,
the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe (Heirs of Jose
Olviga v. Court of Appeals, G.R. No. 104813, October 21, 1993, 227 SCRA 330; Tolentino, et al. v. Sps. Latagan, et al.,
G.R. No. 179874, June 25, 2015, Peralta, J).

Nature of trust.
Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It is a
fiduciary relationship that obliges the trustee to deal with the property for the benefit of the beneficiary. Trust
relations between parties may either be express or implied. An express trust is created by the intention of the
trustor or of the parties, while an implied trust comes into being by operation of law. (Heirs of Tranquilino Labiste v.
Heirs of Jose Labiste, 605 Phil. 495, 503 [2009]).
Express trusts are created by direct and positive acts of the parties, by some writing or deed, or will, or by
words either expressly or impliedly evincing an intention to create a trust. Under Article 1444 of the Civil Code,
"[n]o particular words are required for the creation of an express trust, it being sufficient that a trust is clearly
intended." It is possible to create a trust without using the word "trust" or "trustee." Conversely, the mere fact that
these words are used does not necessarily indicate an intention to create a trust. The question in each case is
whether the trustor manifested an intention to create the kind of relationship which to lawyers is known as trust. It
is immaterial whether or not he knows that the relationship which he intends to create is called a trust, and whether
or not he knows the precise characteristics of the relationship which is called a trust. (Torbela v. Spouses Rosario,
678 Phil. 1, 38-39 [2011]).
In the case of Tamayo v. Callejo, 150-B Phil. 31 [1972], the Court recognized that a trust may have a
constructive or implied nature in the beginning, but the registered owner's subsequent express acknowledgement in
a public document of a previous sale of the property to another party effectively converted the same into an express
trust.

SALES

There was a contract denominated as “Kasulatan ng Biling Mabibiling Muli.” The vendors, however continued
in the possession of the property even after the execution of the agreement. It remained declared under the
names of the vendors. What is the true nature of the contract? Explain.
Ans.: The contract is an equitable mortgage.
Under the law, a contract shall be presumed to be an equitable mortgage in any of the following cases:
(2) When the vendor remains in possession as lessee or otherwise;
(5) When the vendor binds himself to pay the taxes on the thing sold. (Art. 1602, NCC)

The existence of any one of the conditions enumerated under Art. 1602 of the Civil Code, not a concurrence
of all or of a majority thereof, suffices to give rise to the presumption that the contract is an equitable mortgage.
(Raymundo v. Bandong, G.R. No. 171250, July 4, 2007, 526 SCRA 514, 528) Consequently, the contract between the
vendors and vendees was an equitable mortgage. (Heirs of Jose Reyes, Jr. v. Amanda Reyes, et al., G.R. No. 158377,
August 4, 2010, Bersamin, J)

The contract did not state the period of redemption but merely stated that the right of redemption shall be “sa
oras na sila’y makinabang.” No redemption was made but the creditor-mortgagee did not likewise foreclose
the mortgage. State the effect of such mutual failure to enforce their rights. Explain.
Considering that sa oras na sila’y makinabang, the period of redemption stated in the Kasulatan ng Biling
Mabibiling Muli, signified that no definite period had been stated, the period to redeem should be ten years from the
execution of the contract, pursuant to Articles 1142 and 1144 of the Civil Code. Thus, the full redemption price
should have been paid by July 9, 1955; and upon the expiration of said 10-year period, mortgagees Spouses Francia
or their heirs should have foreclosed the mortgage, but they did not do so. Instead, they accepted Alejandro’s
payments, until the debt was fully satisfied by August 11, 1970.
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The acceptance of the payments even beyond the 10-year period of redemption estopped the mortgagees’
heirs from insisting that the period to redeem the property had already expired. Their actions impliedly recognized
the continued existence of the equitable mortgage. The conduct of the original parties as well as of their successors-
in-interest manifested that the parties to the Kasulatan ng Biling Mabibiling Muli really intended their transaction to
be an equitable mortgage, not a pacto de retro sale.
In Cuyugan v. Santos, G.R. No. 10265, March 3, 1916, 34 Phil. 100, 121, the purported buyer under a so-
called contract to sell with right to repurchase also accepted partial payments from the purported seller. We held
that the acceptance of partial payments was absolutely incompatible with the idea of irrevocability of the title of
ownership of the purchaser upon the expiration of the term stipulated in the original contract for the exercise of the
right of redemption. Thereby, the conduct of the parties manifested that they had intended the contract to be a
mortgage, not a pacto de retro sale. (Heirs of Jose Reyes, Jr. v. Amanda Reyes, et al., G.R. No. 158377, August 4, 2010,
Bersamin, J)

Contract is contract to sell; when it is.


Once again, the SC in Rodriguez v. Sps. Sioson, G.R. No. 199180, July 27, 2016, Reyes, J, a contract was ruled to
be one of a contract to sell where the owner agreed to sell the subject property to the other party upon full payment
of the purchase price.
This is the very nature of a contract to sell, which is a "bilateral contract whereby the prospective seller,
while expressly reserving the ownership of the property despite delivery thereof to the prospective buyer, binds
himself to sell the property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, i.e.,
the full payment of the purchase price" (Ace Foods, Inc. v. Micro Pacific Technologies Co., Ltd., 723 Phil. 742, 751
[2013]).
The agreement to execute a deed of sale upon full payment of the purchase price “shows that the vendors
reserved title to the subject property until full payment of the purchase price” (Diego v. Diego, et al., 704 Phil. 373,
384 [2013] citing Reyes v. Tuparan, 665 Phil. 425, 442 [2011]).

Effect of delivery in contract to sell.


The delivery of the property is irrelevant in a contract to sell since ownership is retained by the registered
owner in spite of the partial payment of the purchase price and delivery of possession of the property. Thus, in
Roque v. Aguado, G.R. No. 193787, April 7, 2014, 720 SCRA 780, it was ruled that since the petitioners have not paid
the final installment of the purchase price, the condition which would have triggered the parties' obligation to enter
into and thereby perfect a contract of sale cannot be deemed to have been fulfilled; consequently, they "cannot
validly claim ownership over the subject portion even if they had made an initial payment and even took
possession of the same."
Having failed to pay the purchase price in full, the prospective buyer cannot claim ownership and the owner
is not legally proscribed from alienating the same lot to other buyers.

Delivery makes the vendee the owner.


Sps. Pastrano sold a parcel of land to Ledesma in 1968 who in turn sold it to Spouses Badilla who took
possession of the same. Claiming to be the owner, Bragat filed an action for reconveyance against Badilla. The latter
filed an action for quieting of title claiming that they are the owners. The RTC ruled in favor of Bragat which was
affirmed by the CA. Is the CA’s ruling correct? Why?
Ans.: No. The Spouses Badilla are the owners considering that when Bragat bought the property, Spouses Pastrano
were no longer the owner as they have already sold it to the Spouses Badilla who took possession of the property.
Although that sale appeared to be merely verbal, and payment therefor was to be made on installment, it
was a partially consummated sale, with the Badillas paying the initial purchase price and Ledesma surrendering
possession. That the parties intended for ownership to be transferred may be inferred from their lack of any
agreement stipulating that ownership of the property is reserved by the seller and shall not pass to the buyer until
the latter has fully paid the purchase price. (Art. 1478, NCC). The fact is, Ledesma even delivered to the Badillas the
owner's duplicate copy of the title. The Civil Code states that ownership of the thing sold is transferred to the vendee
upon the actual or constructive delivery of the same. (Arts. 1477, 1496, NCC). And the thing is understood as
delivered when it is placed in the control and possession of the vendee. (Art. 1497, NCC). Payment of the purchase
price is not essential to the transfer of ownership as long as the property sold has been delivered; and such delivery
(traditio) operated to divest the vendor of title to the property which may not be regained or recovered until and
unless the contract is resolved or rescinded in accordance with law. (Philippine National Bank v. Court of Appeals,
338 Phil. 795, 822 (1997), citing Sampaguita Pictures, Inc. v. Jalwindor Manufacturers, Inc. 182 Phil. 16, 22 (1979),
and Pingol v. Court of Appeals, G.R. No. 102909, September 6, 1993, 226 SCRA 118, 128; Sps. Badilla v. Bragat, G.R.
No. 187013, April 22, 2015, Peralta, J).

Effect if sale is verbal.


The same is true even if the sale is a verbal one, because it is held that when a verbal contract has been
completed, executed or partially consummated, its enforceability will not be barred by the Statute of Frauds, which
applies only to an executory agreement. (Ainza v. Spouses Padua,501 Phil. 295, 300 (2005)). Thus, where a party has
performed his obligation, oral evidence will be admitted to prove the agreement. And, where it was proven that one
party had delivered the thing sold to another, then the contract was partially executed and the Statute of Frauds
does not apply. (Cordial v. Miranda,401 Phil. 307, 321 (2000), citing Hernandez v. Andal, 78 Phil. 196, 204, (1947);
Pascual v. Realty Investment, Inc., 91 Phil. 257, 260 (1952); and Diwa v. Donato,July 29, 1994, 234 SCRA 608, 615-
615, National Bank v. Philippine Vegetable Oil Co., 49 Phil. 857, 867 (1927)).
Well-settled is the rule that no one can give what one does not have - nemodat quod non habet – and,
accordingly, one can sell only what one owns or is authorized to sell, and the buyer acquires no better title than the
seller. Thus, the sales made on the dates May 5, 1984 and October 2, 1987 are void for being simulated and for lack
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of a subject matter. On these sales, Bragat cannot claim good faith as she herself knew of Pastrano's lack of
ownership.

Bank as mortgagee should exercise utmost diligence in inspecting property.


A real property was mortgaged with the bank. After verification, it found that there was an access road
traversing the same leading to Tagaytay Highland Golf Course but it did not inquire into the same, instead, it
disregarded such suspicious, provoking its presence. Is the bank a mortgagee in good faith? Explain.
Ans.: No. Where the mortgagee acted with haste in granting the loan, and did not ascertain the ownership of the land
being mortgaged it cannot be considered an innocent mortgagee. (Arguelles v. Malarayat Rural Bank, Inc., G.R. No.
200468, March 19, 2014, 719 SCRA 563)
When the purchaser or the mortgagee is a bank, the rule on innocent purchasers or mortgagees for value is applied
more strictly. (Heirs of Gregorio Lopez v. Development Bank of the Philippines, G.R. No. 193551, November 19,
2014) Being in the business of extending loans secured by real estate mortgage, banks are presumed to be familiar
with the rules on land registration. (Erasusta, Jr. v. Court of Appeals, 527 Phil. 639, 652 [2006]) Since the banking
business is impressed with public interest, they are expected to be more cautious, to exercise a higher degree of
diligence, care and prudence, than private individuals in their dealings, even those involving registered lands. (Heirs
of Gregorio Lopez v. Development Bank of the Philippines, G.R. No. 193551, November 19, 2014; Arguelles v.
Malarayat Rural Bank, Inc., supra note 46, at 573; and PNB v. Corpuz, 626 Phil. 410, 413 [2010]) Banks may not
simply rely on the face of the certificate of title. (Heirs of Gregorio Lopez v. Development Bank of the Philippines,
G.R. No. 193551, November 19, 2014) Hence, they cannot assume that, simply because the title offered as security is
on its face free of any encumbrances or lien, they are relieved of the responsibility of taking further steps to verify
the title and inspect the properties to be mortgaged. (Land Bank of the Philippines v. Poblete, supra) As expected,
the ascertainment of the status or condition of a property offered to it as security for a loan must be a standard and
indispensable part of a bank’s operations. (Philippine Amanah Bank (now Al-Amanah Islamic Investment Bank of
the Philippines, also known as Islamic Bank) v. Contreras, G.R. No. 173168, September 29, 2014, 736 SCRA 567, 580)
It is of judicial notice that the standard practice for banks before approving a loan is to send its representatives to
the property offered as collateral to assess its actual condition, verify the genuineness of the title, and investigate
who is/are its real owner/s and actual possessors (Land Bank of the Philippines v. Poblete, supra; Alano v. Planter's
Development Bank, 667 Phil. 81, 89-90 [2011]; Philippine National Bank v. Corpuz, 626 Phil. 410, 413 [2010];
Erasusta, Jr. v. Court of Appeals, 527 Phil. 639, 651 [2006]; and PNB v. Heirs of Militar, 504 Phil. 634, 644 [2005];
LBP v. Belle Corp., G.R. No. 205271, September 2, 2015, Peralta, J).

Mirror doctrine applies in mortgages.


A person who deliberately ignores a significant fact that could create suspicion in an otherwise reasonable
person is not a mortgagee in good faith. A mortgagee cannot close his eyes to facts which should put a reasonable
man on his guard and claim that he acted in good faith under the belief that there was no defect in the title of the
mortgagor. His mere refusal to believe that such defect exists or the willful closing of his eyes to the possibility of the
existence of a defect in the mortgagor's title will not make him an innocent mortgagee for value if it afterwards
develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to
its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a
like situation (LBP v. Belle Corp., G.R. No. 205271, September 2, 2015, Peralta, J).

At the time the purchasers of a parcel of land bought the property, the same was covered by an Emancipation
Patent under PD No. 27. Inscribed at the back of the title was the prohibition that is shall not be transferred
except by hereditary succession or to the Government. Are the purchasers buyers in good faith? Explain.
No, because they knew of a defect or flaw in the title of the sellers. This is so because of the inscribed
prohibition against sale of the property in accordance with PD No. 27.
In determining whether or not a buyer of property is a purchaser in good faith, he must show that he has
bought the property without notice that some other person had a right to, or interest in, such property, and he
should pay a full and fair price for the same at the time of his purchase, or before he had notice of the claim or
interest of some other persons in the property. (Sandoval v. CA, G.R. No. 106657, August 1, 1996, 260 SCRA 283) He
must believe that the person from whom he receives the property was the owner and could convey title to the
property, (Duran v. IAC, G.R. No. L-64159, September 10, 1985) for he cannot close his eyes to facts that should put a
reasonable man on his guard and still claim he acted in good faith (Embrado v. CA, G.R. No. 51457, June 27, 1994; Uy
v. Fule, G.R. No. 164961, June 30, 2014, Bersamin, J).

Requisites to be a buyer in good faith and for value.


In Bautista v. Silva, G.R. No. 157434, September 19, 2006, 502 SCRA 334, the Court enunciates the requisites
for the buyer to be considered a purchaser in good faith, viz.:
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 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.
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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.

Notes: Settled is the rule that a buyer of real property in possession of persons other than the seller must be wary
and should investigate the rights of those in possession, for without such inquiry the buyer can hardly be regarded
as a buyer in good faith and cannot have any right over the property. (Heirs of Romana Saves vs. Heirs of Escolastico
Saves, 632 SCRA 236 [2010])
A purchaser in good faith is one who buys the property of another, without notice that some other person has a right
to, or interest in, such property, and pays the full and fair price for it at the time of such purchase or before he has
notice of the claim or interest of some other persons in the property. (Tamani vs. Salvador, 647 SCRA 132 [2011])

Void title can be the root of a valid title if transferred to innocent purchaser for value.
In Tolentino, et al. v. Sps. Latagan, et al., G.R. No.179874, June 22, 2015, Peralta, J, the SC once again
expounded on the effect of a forged deed which effected the transfer of a real property and whether the purchaser of
the property is a buyer in good faith.
Citing Rufloe v. Burgos, G.R. No. 143573, January 30, 2009, the Court held that a forged deed of sale is null
and void and conveys no title, for it is a well-settled principle that no one can give what one does not have; nemo dat
quod non habet. Once 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. (Consolidated Rural Bank, Inc. v. Court of Appeals, G.R. No. 132161, January
17, 2005, 448 SCRA 347, 363). Due to the forged Deed of Absolute Sale the buyer acquired no right over the subject
property which he could convey to his daughter. All the transactions subsequent to the falsified sale between him
and his daughter are likewise void.
Aforged or fraudulent document may become the root of a valid title, if the property has already been
transferred from the name of the owner to that of the forger, (Lim v. Chuatoco, G.R. No. 161861, March 11, 2005, 453
SCRA 308), and then to that of an innocent purchaser for value. (Camper Realty Corp. v. Pajo-Reyes, et al., 646 Phil.
689 [2010]; Rufloe v. Burgos, supra.; citing Cayana v. Court of Appeals, G.R. No. 125607, March 18, 2004, 426 SCRA
10, 22). This doctrine emphasizes that a person who deals with registered property in good faith will acquire good
title from a forger and be absolutely protected by a Torrens title. This is because a prospective buyer of a property
registered under the Torrens system need not go beyond the title, especially when she has not notice of any badge of
fraud or defect that would place her on guard. In view of such doctrine, the Court now resolves the second issue of
whether or not Maria is an innocent purchaser for value.

Non-payment of price or consideration; effect.


It was contended that the daughter testified that she did not pay her father the price stated in the
contract of sale, hence, the contract is simulated, thus, it void for lack of consideration. Is the contention
correct? Why?
Ans.: No. As to the lack of consideration for the second deed of sale, it is presumed that a written contract is for a
valuable consideration. (Rules of Court, Rule 131). Thus, the execution of a deed purporting to convey ownership of
a realty is in itself prima facie evidence of the existence of a valuable consideration and the party alleging lack of
consideration has the burden of proving such
allegation. (Ong v. Ong, G.R. No. L-67888, October 8, 1985, citing Caballero, et al. v. Caballero, et al., C.A. 45 O.G.
2536).

LEASE

Distinguish civil law lease from agricultural lease.


Ans.: The lease of an agricultural land can be either a civil law or an agricultural lease. In the civil law lease, 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 that
may be definite or indefinite. In the agricultural lease, also termed as a leasehold tenancy, the physical possession of
the land devoted to agriculture is given by its owner or legal possessor (landholder) to another (tenant) for the
purpose of production through labor of the latter and of the members of his immediate farm household, in
consideration of which the latter agrees to share the harvest with the landholder, or to pay a price certain or
ascertainable, either in produce or in money, or in both. Specifically, in Gabriel v. Pangilinan, 58 SCRA 590 (1974),
this Court differentiated between a leasehold tenancy and a civil law lease in the following manner, namely: (1) the
subject matter of a leasehold tenancy is limited to agricultural land, but that of a civil law lease may be rural or
urban property; (2) as to attention and cultivation, the law requires the leasehold tenant to personally attend to and
cultivate the agricultural land; the civil law lessee need not personally cultivate or work the thing leased; (3) as to
purpose, the landholding in leasehold tenancy is devoted to agriculture; in civil law lease, the purpose may be for
any other lawful pursuits; and (4) as to the law that governs, the civil law lease is governed by the Civil Code, but the
leasehold tenancy is governed by special laws (Jusayan, et al. v. Sombilla, G.R. No. 163928, January 21, 2015,
Bersamin, J).

May the right of first refusal to buy a property being leased be invoked while the case is on appeal? Explain.
Ans.: No, because it should have been invoked when there was notice to the lessee that the property was being sold
to another person. Since he did not invoke it within a reasonable time, he is precluded from invoking it. the failure to

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do so is an indication that he declined or abandoned such right. (Peña, et al. v. Sps. Tolentino, G.R. No. 155227-28,
February 9, 2011, Bersamin, J)

ESTOPPEL

Estoppel by deed arises if there is express commitment.


A compromise between the BSP and Orient Commercial Banking Corp. where properties of Ever Crest Golf
Club Resort, Inc. and Mega Heights, Inc. were used to secure the payment of the obligations of Orient to BSP and
agreed that the said properties shall be subject of existing writ of attachment until the obligation shall have been
fully paid. As there was no compliance with the judgment based on compromise, BSP moved for execution of the
compromise against the aforesaid properties. Ever Crest and Mega Heights objected on the ground that they were
not impleaded as parties in the suit or signatory to the compromise agreement. Is the contention correct? Why?
Ans.: No. Petitioners are in estoppel by deed of virtue of the execution of the compromise agreement, especially so
that they were the ones who offered their properties as security. They firmly committed in the compromise
agreement, to have their properties with improvements be made subject to the writ of attachment in order “to
secure the faithful payment of the outstanding obligation until such obligation shall have been fully paid by
defendants to plaintiff,” and expressly assured Bangko Sentral in the same compromise agreement that “all the
corporate approvals for the execution of this Compromise agreement by Ever Crest Golf Club Resort, Inc., and Mega
Heights, Inc., consisting of stockholders resolution and Board of Directors approval have already been obtained at the
time of the execution of this Agreement.” They warranted in the compromise agreement that: “Failure on the part of
the defendants to fully settle their outstanding obligations and to comply with any of the terms of this Compromise
Agreement shall entitle the plaintiff to immediately ask for a Writ of Execution against all assets of the Ever Crest Golf
Club Resort, Inc., and Mega Heights, Inc., now or hereafter arising upon the signing of this Compromise Agreement.” By
such express commitments, they are estopped from claiming that the properties of Ever Crest and Mega Heights
could not be the subject of levy pursuant to the writ of execution. In other words, they could not anymore assail the
court for authorizing the enforcement of the judgment on the compromise agreement against the assets of Ever
Crest (Jose Go, et al. v. Bangko Sentral ng Pilipinas, et al., G.R. No. 202262, June 8, 2015, Bersamin, J).

Three (3) kinds of estoppel.


There are three kinds of estoppels, to wit: (1) estoppel in pais; (2) estoppel by deed; and (3) estoppel by
laches. Under the first kind, a person is considered in estoppel if by his conduct, representations, admissions or
silence when he ought to speak out, whether intentionally or through culpable negligence, “causes another to believe
certain facts to exist and such other rightfully relies and acts on such belief, as a consequence of which he would be
prejudiced if the former is permitted to deny the existence of such facts.” Under estoppel by deed, a party to a deed
and his privies are precluded from denying any material fact stated in the deed as against the other party and his
privies. Under estoppel by laches, an equitable estoppel, a person who has failed or neglected to assert a right for an
unreasonable and unexplained length of time is presumed to have
abandoned or otherwise declined to assert such right and cannot later on seek to enforce the same, to the prejudice
of the other party, who has no notice or knowledge that the former would assert such rights and whose condition
has so changed that the latter cannot, without injury or prejudice, be restored to his former state. (Co Chien v. Sta.
Lucia Realty & Development, Inc., G.R. No. 162090, January 31, 2007, 513 SCRA 570, 581).

AGENCY

SPA necessary if principal authorizes agent to sell real property.


In Florentina Bautista-Spille v. Nicorp Management & Dev. Corp., et al., G.R. No. 214057, October 19, 2015,
Mendoza, J, the only evidence adduced to prove that the agent had authority to sell the principal’s property was a
General Power of Attorney which merely authorized the agent to exercise administration and supervision over the
properties of the principal. It was contended that there was no perfected contract to sell. Is the contention correct?
Why?
Held: Yes. The well-established rule is when a sale of a parcel of land or any interest therein is through an agent, the
authority of the latter shall be in writing, otherwise the sale shall be void (Articles 1874 and 1878 of the Civil Code).
An SPA in the conveyance of real rights over immovable property is necessary. (Woodchild Holdings, Inc. v.
Roxas Electric and Construction Company, Inc. , 479 Phil. 896, 912 (2004)). In Cosmic Lumber Corporation v. Court of
Appeals, 332 Phil. 948 [1996], the Court enunciated,
When the sale of a piece of land or any interest thereon is through an agent, the authority
of the latter shall be in writing; otherwise, the sale shall be void. Thus, the authority of an agent to
execute a contract for the sale of real estate must be conferred in writing and must give him specific
authority, either to conduct the general business of the principal or to execute a binding contract
containing terms and conditions which are in the contract he did execute. A special power of
attorney is necessary to enter into any contract by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable consideration. The express mandate
required by law to enable an appointee of an agency (couched) in general terms to sell must be one
that expressly mentions a sale or that includes a sale as a necessary ingredient of the act
mentioned. For the principal to confer the right upon an agent to sell real estate, a power of
attorney must so express the powers of the agent in clear and unmistakable language. When there
is any reasonable doubt that the language so used conveys such power, no such construction shall
be given the document."

Such authority must be conferred in writing and must express the powers of the agent in clear and
unmistakable language in order for the principal to confer the right upon an agent to sell the real property.
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(Yoshizaki v. Joy Training Center of Aurora, Inc., G.R. No. 174978, July 31, 2013, 702 SCRA, 631, 642). It is a general
rule that a power of attorney must be strictly construed, and courts will not infer or presume broad powers from
deeds which do not sufficiently include property or subject under which the agent is to deal. (Woodchild Holdings,
Inc. v. Roxas Electric and Construction Company, Inc., supra note 20, at 913). Thus, when the authority is couched in
general terms, without mentioning any specific power to sell or mortgage or to do other specific acts of strict
dominion, then only acts of administration are deemed conferred. (Veloso v. Court of Appeals, 329 Phil. 398, 405
(1996)).
There was no perfected contract to sell. Nowhere in the General Power of Attorney was the agent granted,
expressly or impliedly, any power to sell the subject property or a portion thereof. The authority expressed in the
General Power of Attorney was couched in very broad terms covering petitioner's businesses and properties. Time
and again, the Court has stressed that the power of administration does not include acts of disposition, which are
acts of strict ownership. As such, an authority to dispose cannot proceed from an authority to administer, and vice
versa, for the two powers may only be exercised by an agent by following the provisions on agency of the Civil Code.
(Aggabao v. Parulan, 644 Phil. 26, 37 [2010]).

Duty when dealing with agent.


The well-settled rule is that a person dealing with an assumed agent is bound to ascertain not only the fact
of agency but also the nature and extent of the agent's authority. (Lintonjua v. Fernandez, 471 Phil. 440, 458 [2004]).
The law requires a higher degree of prudence from one who buys from a person who is not the registered owner. He
is expected to examine all factual circumstances necessary for him to determine if there are any flaws in the title of
the transferor, or in his capacity to transfer the land. (Abad v. Guimba, 503 Phil. 321, 331-332 [2005]). In
ascertaining good faith, or the lack of it, which is a question of intention, courts are necessarily controlled by the
evidence as to the conduct and outward acts by which alone the inward motive may, with safety, be determined.
Good faith, or want of it, is not a visible, tangible fact that can be seen or touched, but rather a state or condition of
mind which can only be judged by actual or fancied token or signs. (Philippine National Bank v. Militar, 526 Phil.
788, 798 [2006]).

Spouses Marcos and Susan Prieto filed a complaint to declare as void the real estate mortgages executed by
Spouses Antonion & Monette Prieto in favor of FEBTC claiming that while the former executed a SPA in favor of
the latter, the mortgages were executed under their names alone although they used as collateral the
properties of the former in the loan obtained by them. The bank contended that the contracts are binding upon
Marcos and Susan since they sent a letter acknowledging the said loan and that the contracts involved
properties belonging to them. The RTC ruled in favor of the bank due to the acknowledgment by Marcos and
Susan of the mortgages and that the contract involved properties belonging to them. The CA affirmed the
decision, hence, appeal was made before the SC based on the aforesaid contentions. Is the appeal proper? Why?
Ans.: No. Even if it was assumed that Antonio’s obtaining the loans in his own name, and executing the mortgage
contracts also in his own name had exceeded his express authority under the SPA, Marcos was still liable to FEBTC
by virtue of his express ratification of Antonio’s act. Under Article 1898 of the Civil Code, the acts of an agent done
beyond the scope of his authority do not bind the principal unless the latter expressly or impliedly ratifies the same.
(See: Art. 1898, NCC)
In agency, ratification is the adoption or confirmation by one person of an act performed on his behalf by
another without authority. The substance of ratification is the confirmation after the act, amounting to a substitute
for a prior authority. (Manila Memorial Park Cemetery v. Linsangan, G.R. No. 151319, November 22, 2004, 443 SCRA
377, 394) Here, there was such a ratification by Marcos, as borne out by his execution of the letter of
acknowledgement on September 12, 1996 (Prieto v. CA, G.R. No. 158597, June 18, 2012, Bersamin, J).

Contract of adhesion; effect.


The Court is confounded by Marcos’ dismissal of his own express written ratification of Antonio’s act. Being
himself a lawyer, Marcos was aware of the import and consequences of the letter of acknowledgment. The Court
cannot agree with his insistence that the letter was worthless due to its being a contract of adhesion. The letter was
not a contract, to begin with, because it was only a unilateral act of his. Secondly, his insistence was fallacious and
insincere because he knew as a lawyer that even assuming that the letter could be treated as a contract of adhesion
it was nonetheless effective and binding like any other contract. The Court has consistently held that a contract of
adhesion was not prohibited for that reason. In Pilipino Telephone Corporation v. Tecson, for instance, the Court said
that contracts of adhesion were valid but might be occasionally struck down only if there was a showing that the
dominant bargaining party left the weaker party without any choice as to be “completely deprived of an opportunity
to bargain effectively.” That exception did not apply here, for, verily, Marcos, being a lawyer, could not have been the
weaker party. As the tenor of the acknowledgment indicated, he was fully aware of the meaning and sense of every
written word or phrase, as well as of the legal effect of his confirmation thereby of his agent’s act. It is axiomatic that
a man’s act, conduct and declaration, wherever made, if voluntary, are admissible against him, for the reason that it
is fair to presume that they correspond with the truth, and it is his fault if they do not. (United States v. Ching Po, 23
Phil. 578 [1912]; Prieto v. CA, G.R. No. 158597, June 18, 2012, Bersamin, J)

State the nature of a contract of adhesion. Explain.


Ans.: In Pilipino Telephone Corporation v. Tecson, 428 SCRA 378 (2004), the Court said that contracts of adhesion are
valid but might be occasionally struck down only if there is a showing that the dominant bargaining party left the
weaker party without any choice as to be “completely deprived of an opportunity to bargain effectively.” That
exception does not apply if a party, being a lawyer, could not have been the weaker party. As the tenor of the
acknowledgment indicated, he was fully aware of the meaning and sense of every written word or phrase, as well as
of the legal effect of his confirmation thereby of his agent’s act. It is axiomatic that a man’s act, conduct and
declaration, wherever made, if voluntary, are admissible against him, for the reason that it is fair to presume that
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they correspond with the truth, and it is his fault if they do not. (United States v. Ching Po, 23 Phil. 578 [1912]; Prieto
v. CA, G.R. No. 158597, June 18, 2012, Bersamin, J)

LOAN

State the nature of a credit line.


Ans.: A credit line is really a loan agreement between the parties. In Rosario Textile Mills Corporation v. Home
Bankers Savings and Trust Co., G.R. No. 137232, June 29, 2005, 462 SCRA 88, it was said that a credit line is “that
amount of money or merchandise which a banker, a merchant, or supplier agrees to supply to a person on credit and
generally agreed to in advance.” It is a fixed limit of credit granted by a bank, retailer, or credit card issuer to a
customer, to the full extent of which the latter may avail himself of his dealings with the former but which he must
not exceed and is usually intended to cover a series of transactions in which case, when the customer’s line of credit
is nearly exhausted, he is expected to reduce his indebtedness by payments before making any further drawings.
(Sps. Dela Cruz v. Planters Products, Inc., G.R. No. 158649, February 18, 2013, Bersamin, J)

Stipulated interest of 3% or more is excessive; void.


A contract of loan secured by mortgage was entered into with a stipulated interest of 3% per month. Is the
agreement as to the interest rate valid? Explain.
Ans.: No. It is void because it is excessive, iniquitous, unconscionable and exorbitant, hence, illegal, and void for
being contrary to morals. In Agner v. BPI, Inc., it was ruled that settled is the principle that stipulated interest rates of
three percent (3%) per month and higher are excessive, iniquitous, unconscionable, and exorbitant. While Central
Bank Circular No. 905-82 which took effect on January 1, 1983, (as amended by Cir. No. 799) effectively, removed
the ceiling on interest rates for both secured and unsecured loans, regardless of maturity, nothing in the said
circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which
would either enslave their borrowers or lead to a hemorrhaging of their assets. Since the stipulation on the interest
rate is void for being contrary to morals, if not against the law, it is as if there was no express contract on said
interest rate; thus, the interest rate may be reduced as reason and equity demand (Marilag v. Martinez, G.R. No.
201892, July 22, 2015, Perlas-Bernabe, J).

SURETY/GUARANTY

Written on Genbank letterhead, the continuing guaranty dated February 8, 1966 and the continuing guaranty
dated February 22, 1967 contained identical principal provisions to the effect that: (a) he had guaranteed the
“punctual payment at maturity” of the loans secured by the continuing guaranty; (b) Genbank, as the creditor
bank of YLTC, could “make or cause” payments under the terms and conditions of their loan agreement; (c)
under paragraph II, Jesus had offered as security for the loans of YLTC his own properties in the possession of
Genbank or for which Genbank had attached a lien, which, upon default by YLTC in paying the loan, Genbank,
“without demand or notice” upon respondent, would have the full power and authority to sell; (d) should YLTC
incur in default in the payment of the loans, Genbank could “proceed directly” against Jesus “without
exhausting the property” of YLTC; and (e) paragraph XII expressly stated that the liability of the signatory or
signatories to the continuing guaranty would be “joint and several.” What is the nature of the contract?
Explain.
Ans.: It is a surety. The courts below, as well as the petitioner, interchangeably used the terms guaranty and surety in
characterizing the undertakings of Jesus under the continuing guaranties. The terms are distinct from each other,
however, and the distinction is expressly delineated in the Civil Code, to wit:
Article 2047. By guaranty a person, called the guarantor, binds himself to the creditor to
fulfill the obligation of the principal debtor in case the latter should fail to do so.
If a person binds himself solidarily with the principal debtor, the provisions of Section 4,
Chapter 3, Title I of this Book shall be observed. In such case the contract is called a suretyship.

Thus, in guaranty, the guarantor “binds himself to the creditor to fulfill the obligation of the principal debtor
in case the latter should fail to do so.” The liability of the guarantor is secondary to that of the principal debtor
because he “cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor, and
has resorted to all the legal remedies against the debtor.” In contrast, the surety is solidarily bound to the obligation of
the principal debtor. (Ang v. Associated Bank, G.R. No. 146511, September 5, 2007, 532 SCRA 244, 274-275; Allied
Banking Corp. v. Yujuico, G.R. No. 163116, June 29, 2015, Bersamin, J)

Nature of contract is determined by its contents.


(E. Zobel, Inc. v. Court of Appeals, G.R. No. 113931, May 6, 1998, 290 SCRA 1, 10) In holding that the
continuing guaranty executed in E. Zobel, Inc. v. Court of Appeals was a surety instead of a guaranty, the Court
accented the distinctions between them, viz.:
A contract of surety is an accessory promise by which a person binds himself for another
already bound, and agrees with the creditor to satisfy the obligation if the debtor does not. A
contract of guaranty, on the other hand, is a collateral undertaking to pay the debt of another in
case the latter does not pay the debt.
Strictly speaking, guaranty and surety are nearly related, and many of the principles are
common to both. However, under our civil law, they may be distinguished thus: A surety is usually
bound with his principal by the same instrument, executed at the same time, and on the same
consideration. He is an original promissor and debtor from the beginning, and is held, ordinarily, to
know every default of his principal. Usually, he will not be discharged, either by the mere
indulgence of the creditor to the principal, or by want of notice of the default of the principal,
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no matter how much he may be injured thereby. On the other hand, the contract of guaranty is
the guarantor’s own separate undertaking, in which the principal does not join. It is usually entered
into before or after that of the principal, and is often supported on a separate consideration from
that supporting the contract of the principal. The original contract of his principal is not his
contract, and he is not bound to take notice of its nonperformance. He is often discharged by the
mere indulgence of the creditor to the principal, and is usually not liable unless notified of the
default of the principal.
Simply put, a surety is distinguished from a guaranty in that a guarantor is the insurer of
the solvency of the debtor and thus binds himself to pay if the principal is unable to pay while a
surety is the insurer of the debt, and he obligates himself to pay if the principal does not pay.

With the stipulations in the continuing guaranties indicating that he was the surety of the credit line
extended to YLTC, Jesus was solidarily liable to Genbank for the indebtedness of YLTC. In other words, he thereby
rendered himself “directly and primarily responsible” with YLTC, “without reference to the solvency of the
principal.” (Palmares v. Court of Appeals, G.R. No. 126490, March 3, 1998, 288 SCRA 422, 436, citing Erbelding v.
Noland Co., Inc., 64 S.E. 2d 218 [1951]; Allied Banking Corp. v. Yujuico, G.R. No. 163116, June 29, 2015, Bersamin, J)

Essence of continuing guaranty is surety; caption not controlling; intent controls.


In Allied Banking Corp. v. Yujuico, G.R. No. 163116, June 29, 2015, Bersamin, J, there were two (2) continuing
guaranty undertakings containing identical provisions.
The parties, however, interchangeably used the terms guaranty and surety in characterizing the
undertakings of Jesus under the continuing guaranties. The terms are distinct from each other, however, and the
distinction is expressly delineated in the Civil Code, to wit, the SC said.
Article 2047. By guaranty a person, called the guarantor, binds himself to the creditor to
fulfill the obligation of the principal debtor in case the latter should fail to do so.
If a person binds himself solidarily with the principal debtor, the provisions of Section 4,
Chapter 3, Title I of this Book shall be observed. In such case the contract is called a suretyship.

Thus, in guaranty, the guarantor “binds himself to the creditor to fulfill the obligation of the principal debtor
in case the latter should fail to do so.” The liability of the guarantor is secondary to that of the principal debtor
because he “cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor,
and has resorted to all the legal remedies against the debtor.” (Civil Code, Article 2058). In contrast, the surety is
solidarily bound to the obligation of the principal debtor. (Ang v. Associated Bank, G.R. No. 146511, September 5,
2007, 532 SCRA 244, 274-275).

Use of word guaranty not controlling; contents and intent control.


Although the first part of the continuing guaranties showed that the party as the signatory had agreed to be
bound “either as guarantor or otherwise,” the usage of term guaranty or guarantee in the caption of the documents,
or of the word guarantor in the contents of the documents did not conclusively characterize the nature of the
obligations assumed therein. What properly characterized and defined the undertakings were the contents of the
documents and the intention of the parties. In holding that the continuing guaranty executed in E. Zobel, Inc. v. Court
of Appeals, G.R. No. 113931, May 6, 1998, 290 SCRA 1, 10, was a surety instead of a guaranty, the Court accented the
distinctions between them, viz.:
“The use of the term “guarantee” does not ipso facto mean that the contract is one of
guaranty. Authorities recognize that the word “guarantee” is frequently employed in business
transactions to describe not the security of the debt but an intention to be bound by a primary or
independent obligation. As aptly observed by the trial court, the interpretation of a contract is
not limited to the title alone but to the contents and intention of the parties.”
A contract of surety is an accessory promise by which a person binds himself for another
already bound, and agrees with the creditor to satisfy the obligation if the debtor does not. A
contract of guaranty, on the other hand, is a collateral undertaking to pay the debt of another in
case the latter does not pay the debt.
Strictly speaking, guaranty and surety are nearly related, and many of the principles are
common to both. However, under our civil law, they may be distinguished thus: A surety is usually
bound with his principal by the same instrument, executed at the same time, and on the same
consideration. He is an original promissor and debtor from the beginning, and is held, ordinarily, to
know every default of his principal. Usually, he will not be discharged, either by the mere
indulgence of the creditor to the principal, or by want of notice of the default of the principal,
no matter how much he may be injured thereby. On the other hand, the contract of guaranty is
the guarantor’s own separate undertaking, in which the principal does not join. It is usually entered
into before or after that of the principal, and is often supported on a separate consideration from
that supporting the contract of the principal. The original contract of his principal is not his
contract, and he is not bound to take notice of its non-performance. He is often discharged by the
mere indulgence of the creditor to the principal, and is usually not liable unless notified of the
default of the principal.
Simply put, a surety is distinguished from a guaranty in that a guarantor is the insurer of
the solvency of the debtor and thus binds himself to pay if the principal is unable to pay while a
surety is the insurer of the debt, and he obligates himself to pay if the principal does not pay.

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With the stipulations in the continuing guaranties indicating that he was the surety of the credit line he was
solidarily liable to the bank for the indebtedness of the debtor. In other words, he thereby rendered himself “directly
and primarily responsible” with the debtor, “without
reference to the solvency of the principal.”

Effect of non-renewal of the continuing guaranties.


The continuing guaranties were not renewed after the expiration of the credit line. Yet, the practice was for
the sureties to ensure credit lines issued by the bank annually with the new sureties absorbing the earlier surety
agreements. Considering that no new surety agreements were issued, surety is not liable.

In Techno Dev. Chemical Corp. v. Viking Metal Ind. Inc., G.R. No. 203179, July 4, 2016, Peralta, J, the SC,
reiterating the principle in Nacar v. Gallery Frames, 716 Phil. 267 [2013] ruled that when the judgment of a court
awarding the sum of money becomes final and executory, the legal rate of interest shall be 6% per annum from such
finality until its satisfaction, taking the form of judicial debt.

FORECLOSURE OF MORTGAGE

Q – May the mortgagees foreclose the mortgage extrajudicially if the debtor does not comply with the condition
to pay the loan even if there is no SPA inserted in real estate mortgage? Explain.
Ans.: No, because it is a requirement for the validity of an extrajudicial foreclosure by the mortgagees that a SPA be
inserted in the REM. That the mortgagor agreed to an extrajudicial foreclosure of the mortgage in the event of failure
to pay is not sufficient authority for the mortgagor to foreclose the mortgage extrajudicially.
Their agreement is a mere expression of their amenability to extrajudicial foreclosure as the means of
foreclosing the mortgage, and does not constitute the special power or authority to sell the mortgage property to
enable the mortgagees to recover the unpaid obligations. What is necessary is the special power or authority to sell –
whether inserted in the REM itself, or annexed thereto – that authorizes the mortgagees to sell in the public auction
their mortgaged property (Sps. Baysa v. Sps. Plantilla, et al., G.R. No. 159271, July 13, 2012, Bersamin, J).
The requirement for the special power or authority to sell finds support in the civil law. To begin with,
because the sale of the property by virtue of the extrajudicial foreclosure would be made through the sheriff by the
respondent spouses as the mortgagees acting as the agents of the petitioners as the mortgagors-owners, there must
be a written authority from the latter in favor of the former as their agents; otherwise, the sale would be void. (Art.
1874, NCC). And secondly, considering that, pursuant to Article 1878[5] of the Civil Code, a special power of attorney
was necessary for entering “into any contract by which the ownership of an immovable is transmitted or acquired
either gratuitously or for a valuable consideration,” the written authority must be a special power of attorney to sell.
Contrary to the CA’s opinion, therefore, the power or authority to sell by virtue of the extrajudicial foreclosure of the
REM could not be necessarily implied from the text of paragraph 13, supra, expressing the petitioners’ agreement to
the extrajudicial foreclosure. (Sps. Baysa v. Sps. Plantilla, et al., G.R. No. 159271, July 13, 2012, Bersamin, J)

QUASI-DELICT

When overtaking another vehicle, allowed only if clearly visible and clear.
In Napoleon Senit v. People, G.R. No. 192914, January 11, 2016, Reyez, J, a bus suddenly overtook a big truck
from the right side of the road, hence, the driver tried to avoid the accident by swerving to the right towards the
shoulder of the road and applied the brakes, but the bus was moving too fast and could not avoid the collision with
the pick-up. The bus crashed into the right side of the pick-up causing injuries to the passengers and the driver. The
driver was sued for the crime of imprudence resulting in damage to property and injuries. He was convicted with
award of damages. On appeal, the accused contended that it was the driver of the pick-up who committed a traffic
violation and thus, he should be the one blamed for the incident. Is the contention correct? Explain.
Ans.: No. The prosecution sufficiently proved that the bus driven by the petitioner recklessly drove on the right
shoulder of the road and overtook another south-bound ten-wheeler truck that slowed at the intersection, obviously
to give way to another vehicle about to enter the intersection. It was impossible for him not to notice that the ten-
wheeler truck in front and traveling in the same direction had already slowed down to allow passage of the pick-up,
which was then negotiating a left turn to Aglayan public market. Seeing the ten-wheeler truck slow down, it was
incumbent upon the petitioner to reduce his speed or apply on the brakes of the bus in order to allow the pick-up to
safely make a left turn. Instead, he drove at a speed too fast for safety, then chose to swerve to the right shoulder of
the road and overtake the truck, entering the intersection and directly smashing into the pick-up. In flagrantly failing
to observe the necessary precautions to avoid inflicting injury or damage to other persons and things, the petitioner
was recklessly imprudent in operating the bus.
In Dumayag v. People, G.R. No. 172778, November 26, 2012, 686 SCRA 347, the Court held:
Section 37 of R.A. No. 4136, as amended, mandates all motorists to drive and operate
vehicles on the right side of the road or highway. When overtaking another, it should be made only
if the highway is clearly visible and is free from oncoming vehicle. Overtaking while approaching a
curve in the highway, where the driver's view is obstructed, is not allowed. Corollarily, drivers of
automobiles, when overtaking another vehicle, are charged with a high degree of care and diligence
to avoid collision. The obligation rests upon him to see to it that vehicles coming from the opposite
direction are not taken unaware by his presence on the side of the road upon which they have the
right to pass.

Thus, the petitioner cannot blame the driver of the pick-up for not noticing a fast-approaching bus, as the
cited law provides that the one overtaking on the road has the obligation to let other cars in the opposite direction
now his presence and not the other way around as the petitioner suggests.
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Liability of registered owner of vehicle although not the actual operator; reasons.
MMTC and Mina’s Transit Corp. entered into an agreement to sell several bus units where the former
retained ownership until certain conditions have been met. In the meantime, Mina’s Transit operated the same. One
of the buses hit and damaged a Honda Motorcycle. A complaint for damages was filed against MMTC which
contended that it is not liable since the actual operator and employer was Mina’s which likewise contended that it
exercised the diligence of a good father of a family in the selection and supervision of its employees. Is the trial court
judgment holding MMTC liable correct? Explain.
Ans.: Yes. In view of MMTC’s admission in its pleadings that it had remained the registered owner of the bus at the
time of the incident, it could not escape liability for the personal injuries and property damage suffered by the
another. This is because of the registered-owner rule, whereby the registered owner of the motor vehicle involved in
a vehicular accident could be held liable for the consequences. The registered-owner rule has remained good law in
this jurisdiction considering its impeccable and timeless rationale, as enunciated in the 1957 ruling in Erezo, et al. v.
Jepte, 102 Phil. 103, 108-109 [1975] where the Court pronounced:
Registration is required not to make said registration the operative act by which
ownership in vehicles is transferred, as in land registration cases, because the administrative
proceeding of registration does not bear any essential relation to the contract of sale between the
parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of
the vehicle upon any public highway (section 5 [a], Act No. 3992, as amended.) The main aim of
motor vehicle registration is to identify the owner so that if any accident happens, or that any
damage or injury is caused by the vehicle on the public highways, responsibility therefor can be
fixed on a definite individual, the registered owner. Instances are numerous where vehicles running
on public highways caused accidents or injuries to pedestrians or other vehicles without positive
identification of the owner or drivers, or with very scant means of identification. It is to forestall
these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration
is primarily ordained, in the interest of the determination of persons responsible for damages or
injuries caused on public highways.
“‘One of the principal purposes of motor vehicles legislation is
identification of the vehicle and of the operator, in case of accident; and another is
that the knowledge that means of detection are always available may act as a
deterrent from lax observance of the law and of the rules of conservative and safe
operation. Whatever purpose there may be in these statutes, it is subordinate at
the last to the primary purpose of rendering it certain that the violator of the law
or of the rules of safety shall not escape because of lack of means to discover him.’
The purpose of the statute is thwarted, and the displayed number becomes a
‘snare and delusion,’ if courts would entertain such defenses as that put forward
by appellee in this case. No responsible person or corporation could be held liable
for the most outrageous acts of negligence, if they should be allowed to place a
‘middleman’ between them and the public, and escape liability by the manner in
which they recompense their servants.” (King vs. Brenham Automobile Co., 145
S.W. 278, 279.)

Indeed, MMTC could not evade liability by passing the buck to Mina’s Transit. The stipulation in the
agreement to sell did not bind third parties, who were expected to simply rely on the data contained in the
registration certificate of the erring bus (Metro Manila Transit Corp. v. Cuevas, G.R. No. 167797, June 15, 2015,
Bersamin, J).

The Court has reiterated the registered-owner rule in other rulings, like in Filcar Transport Services v. Espinas,
G.R. No. 174156, June 20, 2012, 674 SCRA 117, 128-130, to wit:
x x x It is well-settled that in case of motor vehicle mishaps, the registered owner of the
motor vehicle is considered as the employer of the tortfeasor-driver, and is made primarily liable
for the tort committed by the latter under Article 2176, in relation with Article 2180, of the Civil Code.
In Equitable Leasing Corporation v. Suyom, we ruled that insofar as third persons are
concerned, the registered owner of the motor vehicle is the employer of the negligent driver,
and the actual employer is considered merely as an agent of such owner.
In that case, a tractor registered in the name of Equitable Leasing Corporation (Equitable)
figured in an accident, killing and seriously injuring several persons. As part of its defense, Equitable
claimed that the tractor was initially leased to Mr. Edwin Lim under a Lease Agreement, which
agreement has been overtaken by a Deed of Sale entered into by Equitable and Ecatine Corporation
(Ecatine). Equitable argued that it cannot be held liable for damages because the tractor had already
been sold to Ecatine at the time of the accident and the negligent driver was not its employee but of
Ecatine.
In upholding the liability of Equitable, as registered owner of the tractor, this Court said that
“regardless of sales made of a motor vehicle, the registered owner is the lawful operator insofar as the
public and third persons are concerned; consequently, it is directly and primarily responsible for the
consequences of its operation.” The Court further stated that “[i]n contemplation of law, the
owner/operator of record is the employer of the driver, the actual operator and employer
being considered as merely its agent.” Thus, Equitable, as the registered owner of the tractor, was
considered under the law on quasi-delict to be the employer of the driver, Raul Tutor; Ecatine, Tutor’s
actual employer, was deemed merely as an agent of Equitable.
Thus, it is clear that for the purpose of holding the registered owner of the motor vehicle
primarily and directly liable for damages under Article 2176, in relation with Article 2180, of the Civil
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Code, the existence of an employer-employee relationship, as it is understood in labor relations law, is
not required. It is sufficient to establish that Filcar is the registered owner of the motor vehicle causing
damage in order that it may be held vicariously liable under Article 2180 of the Civil Code. (Citations
Omitted)

Indeed, MMTC could not evade liability by passing the buck to Mina’s Transit. The stipulation in the agreement
to sell did not bind third parties like the Cuevases, who were expected to simply rely on the data contained in the
registration certificate of the erring bus. (Metro Manila Transit Corp. v. Cuevas, et al., G.R. No. 167797, June 15, 2015,
Bersamin, J)

Is there a remedy of MMTC against the operator? Explain.


Ans.: Yes. Although the registered-owner rule might seem to be unjust towards MMTC, the law did not leave it
without any remedy or recourse. According to Filcar Transport Services v. Espinas, MMTC could recover from Mina’s
Transit, the actual employer of the negligent driver, under the principle of unjust enrichment, by means of a cross-
claim seeking reimbursement of all the amounts that it could be required to pay as damages arising from the driver’s
negligence. A cross-claim is a claim by one party against a co-party arising out of the transaction or occurrence that
is the subject matter either of the original action or of a counterclaim therein, and may include a claim that the party
against whom it is asserted is or may be liable to the cross-claimant for all or part of a claim asserted in the action
against the cross-claimant. (Section 8, Rule 6 of the Rules of Court; MMTC v. Cuevas, et al., G.R. No. 167797, June 15,
2015, Bersamin, J)

Felix Paras was on board an Inlan Trailways bus when a Philtranco bus bumped it resulting in injuries to
passengers including Paras. Unable to obtain financial assistance from Inland, he filed a complaint for
damages for breach of contract of carriage. Inland denied responsibility claiming that it exercised utmost
diligence in ensuring the safety of its passengers citing the police report that the proximate cause of the
accident was the violent bumping of the rear portion of the bus of Inland by a Philtranco bus. Inland filed a
third-party complaint where after trial judgment was rendered against Philtranco and its driver which the CA
affirmed on appeal. Before the SC, Philtranco contended that Paras cannot recover damages, moral damages
from Philtranco based on quasi-delict because the suit was based on breach of contract. Is the contention
correct? Explain.
Ans.: No. As a general rule moral damages are not recoverable in an action predicated on a breach of contract. This is
because such action is not included in Article 2219 of the Civil Code as one of the actions in which moral may be
recovered. By way of exception, moral damages are recoverable in an action predicated on a breach of contract (a)
here the mishap results in the death of a passenger, as provided in Article 1764, in relation to Article 2206, (3), of
the Civil Code; and (b) where the common carrier has been guilty of fraud or bad faith, as provided in Article 2220 of
the Civil Code.
Although this action does not fall under either of the exceptions, the award of moral damages to Paras was
nonetheless proper and valid. There is no question that Inland filed its third-party complaint against Philtranco and
its driver in order to establish in this action that they, instead of Inland, should be directly liable to Paras for the
physical injuries he had sustained because of their negligence. To be precise, Philtranco and its driver were brought
into the action on the theory of liability that the proximate cause of the collision between Inland’s bus and
Philtranco’s bus had been “the negligent, reckless and imprudent manner defendant Apolinar Miralles drove and
operated his driven unit, owned and operated by third-party defendant Philtranco Service Enterprises, Inc
(Philtranco Service Enterprises, Inc. v. Paras, et al., G.R. No. 161909, April 25, 2012, Bersamin, J).”

Objective of Inland in filing the third party complaint.


The apparent objective of Inland was not to merely subrogate the third-party defendants for itself, but,
rather, to obtain a different relief whereby the third-party defendants would be held directly, fully and solely liable
to Paras and Inland for whatever damages each had suffered from the negligence committed by Philtranco and its
driver. In other words, Philtranco and its driver were charged as joint tortfeasors who would be jointly and severally
be liable to Paras and Inland.
Impleading Philtranco and its driver through the third-party complaint was correct. The device of the third-
party action, also known as impleader, was in accord with Section 12, Rule 6 of the Revised Rules of Court, the rule
then applicable, which provides that a third-party complaint is a claim that a defending party may, with leave of
court, file against a person not a party to the action, called the third-party defendant, for contribution, indemnity,
subrogation or any other relief, in respect of his opponent’s claim” (Philtranco Service Enterprises, Inc. v. Paras, et
al., G.R. No. 161909, April 25, 2012, Bersamin, J).

What is the basis of the claim that the 3rd party plaintiff asserts?
Ans.: The claim that the third-party complaint asserts against the third-party defendant must be predicated on
substantive law. Here, the substantive law on which the right of Inland to seek such other relief through its third-
party complaint rested were Article 2176 and Article 2180 of the Civil Code, which read:
“Article 2176. Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this chapter. (1902a)
Article 2180. The obligation imposed by article 2176 is demandable not only for one’s
own acts or omissions, but also for those of persons for whom one is responsible.
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not engaged in
any business or industry.
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The responsibility treated of in this article shall cease when the persons herein mentioned
prove that they observed all the diligence of a good father of a family to prevent damage”
(Philtranco Service Enterprises, Inc. v. Paras, et al., G.R. No. 161909, April 25, 2012, Bersamin, J).

Q – Should the cause of action be the same against Inland and Philtranco? Explain.
Ans.: No. Paras’ cause of action against Inland (breach of contract of carriage) did not need to be the same as the
cause of action of Inland against Philtranco and its driver (tort or quasi-delict) in the impleader. It is settled that a
defendant in a contract action may join as third-party defendants those who may be liable to him in tort for the
plaintiff’s claim against him, or even directly to the plaintiff. Indeed, Prof. Wright, et al., commenting on the provision
of the Federal Rules of Procedure of the United States from which Section 12, supra, was derived, observed so, to wit:
(Viluan v. Court of Appeals, Nos. L-21477-81, April 21, 1966, 16 SCRA 742; Samala v. Judge Victor, G.R. No. L-53969,
February 21, 1989, 170 SCRA 453, 460)
“The third-party claim need not be based on the same theory as the main claim. For
example, there are cases in which the third-party claim is based on an express indemnity contract
and the original complaint is framed in terms of negligence. Similarly, there need not be any legal
relationship between the third-party defendant and any of the other parties to the action.
Impleader also is proper even though the third party’s liability is contingent, and technically does
not come into existence until the original defendant’s liability has been established. In addition, the
words ‘is or may be liable’ in Rule 14(a) make it clear that impleader is proper even though the
third-party defendant’s liability is not automatically established once the third-party plaintiff’s
liability to the original plaintiff has been determined.” (Philtranco Service Enterprises, Inc. v. Paras,
et al., G.R. No. 161909, April 25, 2012, Bersamin, J)

Is it necessary that judgment be rendered against Inland first before Philtranco may be held liable? Explain.
Ans.: No. It is not a pre-requisite for attachment of the liability to Philtranco and its driver that Inland be first
declared and found liable to Paras for the breach of its contract of carriage with him.
Section 16, Rule 6 of the Revised Rules of Court defines a third party complaint as a “claim that a defending
party may, with leave of court, file against a person not a party to the action, called the third-party defendant, for
contribution, indemnification, subrogation, or any other relief, in respect of his opponent’s claim.” (Viluan vs. Court
of Appeals, et al., 16 SCRA 742 [1966]).

State the reasons why Paras can recover damages based on quasi-delict even if the action is based on breach of
contract.
Ans.: Allowing the recovery of damages by Paras based on quasi-delict, despite his complaint being upon contractual
breach, served the judicial policy of avoiding multiplicity of suits and circuity of actions by disposing of the entire
subject matter in a single litigation. (Philtranco Service Enterprises, Inc. v. Paras, et al., G.R. No. 161909, April 25,
2012, Bersamin, J)

Philtranco assailed the award of temperate damages by the CA considering that Paras and Inland had not
raised the matter in the trial court and in their respective appeals and that the CA could not substitute the
temperate damages granted to Paras if Paras could not properly establish his actual damages despite
evidence of his actual expenses being easily available to him. Rule on the contentions. Explain.
Ans.: The contentions are not correct. Actual damages, to be recoverable, must not only be capable of proof, but must
actually be proved with a reasonable degree of certainty. The reason is that the court “cannot simply rely on
speculation, conjecture or guesswork in determining the fact and amount of damages,” but “there must be
competent proof of the actual amount of loss, credence can be given only to claims which are duly supported by
receipts.” (Viron Transportation Co., Inc. v. Delos Santos, G.R. No. 138296, November 22, 2000, 345 SCRA 509, 519)
Paras should not suffer from the lack of definite proof of his actual expenses for the surgeries and
rehabilitative therapy; and that Inland should not be deprived of recourse to recover its loss of the economic value
of its damaged vehicle.
In awarding temperate damages in lieu of actual damages, the CA did not err, because Paras and Inland
were definitely shown to have sustained substantial pecuniary losses. It would really be a travesty of justice were
the CA now to be held bereft of the discretion to calculate moderate or temperate damages, and thereby leave Paras
and Inland without redress from the wrongful act of Philtranco and its driver. (Government Service Insurance
System v. Labung-Deang, G.R. No. 135644, September 17, 2001, 365 SCRA 341, 350; Philtranco Service Enterprises,
Inc. v. Paras, et al., G.R. No. 161909, April 25, 2012, Bersamin, J)
There is no question that Article 2224 of the Civil Code expressly authorizes the courts to award temperate
damages despite the lack of certain proof of actual damages, as it provides 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.”

May the court award temperate damages even if actual damages were not proven? Explain.
Ans.: Yes. The rationale for Article 2224 has been stated in Premiere Development Bank v. Court of Appeals, G.R. No.
159352, April 14, 2004, 427 SCRA 686, 699, in the following manner:
“Even if not recoverable as compensatory damages, Panacor may still be awarded damages
in the concept of temperate or moderate damages. When the court finds that some pecuniary loss
has been suffered but the amount cannot, from the nature of the case, be proved with certainty,
temperate damages may be recovered. 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 (Philtranco Service Enterprises,
Inc. v. Paras, et al., G.R. No. 161909, April 25, 2012, Bersamin, J).
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Damnum absque injuria
Well-settled is the rule that even in the exercise of a right and in the performance of an obligation, if one
abuses his right and causes damage to another, he can be liable for damages. On the other hand, one who makes use
of his own legal right does no injury.
In Orchard Golf & Country Club, Inc., et al. v. Yu, et al., G.R. No. 191033, January 11, 2016, Perala, J, despite the
“no two-some” policy of the club, as it is required by the rules that there should be at least three players, the two
members played without a tee time control slip in violation of the handbook. After investigation they were
suspended, hence, they sued the Club for damages where the RTC ruled in their favor. Is the decision the correct?
Why?
Ans.: No. There is no factual and legal basis to grant moral and exemplary damages, attorney’s fees and costs of suit
in favor of respondents. The damages suffered, if there are any, partake of the nature of a damnum absque injuria. As
elaborated in Spouses Custodio v. CA, 323 Phil. 575 [1996]:
x x x [T]he mere fact that the plaintiff suffered losses does not give rise to a right to recover
damages. To warrant the recovery of damages, there must be both a right of action for a legal
wrong inflicted by the defendant, and damage resulting to the plaintiff therefrom. Wrong without
damage, or damage without wrong, does not constitute a cause of action, since damages are merely
part of the remedy allowed for the injury caused by a breach or wrong.
There is a material distinction between damages and injury. Injury is the illegal invasion of
a legal right; damage is the loss, hurt, or harm which results from the injury; and damages are the
recompense or compensation awarded for the damage suffered. Thus, there can be damage without
injury in those instances in which the loss or harm was not the result of a violation of a legal duty.
These situations are often called damnum absque injuria.
In order that a plaintiff may maintain an action for the injuries of which he complains, he
must establish that such injuries resulted from a breach of duty which the defendant owed to the
plaintiff – a concurrence of injury to the plaintiff and legal responsibility by the person causing it.
The underlying basis for the award of tort damages is the premise that an individual was injured in
contemplation of law. Thus, there must first be the breach of some duty and the imposition of
liability for that breach before damages may be awarded; it is not sufficient to state that there
should be tort liability merely because the plaintiff suffered some pain and suffering.
Many accidents occur and many injuries are inflicted by acts or omissions which cause
damage or loss to another but which violate no legal duty to such other person, and consequently
create no cause of action in his favor. In such cases, the consequences must be borne by the injured
person alone. The law affords no remedy for damages resulting from an act which does not amount
to a legal injury or wrong.
In other words, in order that the law will give redress for an act causing damage, that act
must be not only hurtful, but wrongful. There must be damnum et injuria. If, as may happen in many
cases, a person sustains actual damage, that is, harm or loss to his person or property, without
sustaining any legal injury, that is, an act or omission which the law does not deem an injury, the
damage is regarded as damnum absque injuria.
The proper exercise of a lawful right cannot constitute a legal wrong for which an action
will lie, although the act may result in damage to another, for no legal right has been invaded. One
may use any lawful means to accomplish a lawful purpose and though the means adopted may
cause damage to another, no cause of action arises in the latter’s favor. Any injury or damage
occasioned thereby is damnum absque injuria. The courts can give no redress for hardship to an
individual resulting from action reasonably calculated to achieve a lawful end by lawful means.

“One who makes use of his own legal right does no injury. Qui jure suo utitur nullum damnum facit. If
damage results from a person's exercising his legal rights, it is damnum absque injuria.” (Pro Line Sports Center, Inc.
v. CA, 346 Phil. 143, 154 [1997]) In this case, respondents failed to prove by preponderance of evidence that there
was fault or negligence on the part of petitioners in order to oblige them to pay for the alleged damage sustained as a
result of their suspension as Club members. Certainly, membership in the Club is a privilege. Regular members are
entitled to use all the facilities and privileges of the Club, subject to its rules and regulations. The mental anguish
respondents experienced, assuming to be true, was brought upon them by themselves for deliberately and
consciously violating the rules and regulations of the Club. Considering that respondents were validly suspended,
there is no reason for the Club to compensate them. Indeed, the penalty of suspension provided for in Section 1,
Article XIV of the By-Laws is a means to protect and preserve the interest and purposes of the Club. This being so,
the suspension of respondents does not fall under any of the provisions of the Civil Code pertaining to the grant of
moral and exemplary damages, attorney’s fees, and litigation costs.

DAMAGES

Death due to crime; amount of damages.


Once again, in People v. Guting, G.r. No. 205412, September 9, 2015, Leonardo-De Castro, J, the SC had the
occasion to say that when death occurs due to a crime, the following damages may be awarded: (1) civil indemnity
ex delicto for the death of the victim; (2) actual or compensatory damages; (3) moral damages; ( 4) exemplary
damages; and ( 5) temperate damages. (People v. Nelmida, G.R. No. 184500, September 11, 2012, 680 SCRA 386,
437).
Prevailing jurisprudence pegs the amount of civil indemnity and moral damages awarded to the heirs of the
victim of Parricide at P75,000.00 each. (People v. Tibon, 636 Phil. 521, 533 (2010)). The temperate damages
awarded by the RTC in the amount of P30,000.00 should be decreased to P25,000.00 to also conform with the latest
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jurisprudence. It is fitting to additionally award exemplary damages in the sum of P30,000.00 considering the
presence of the qualifying circumstance of relationship.
Damages for the loss of earning capacity of the deceased should be awarded as well. In People v. Verde, 362
Phil. 305, 321 [1999], that:
The heirs are also entitled to damages for the loss of earning capacity of the deceased. The
fact that the prosecution did not present documentary evidence to support its claim for damages
for loss of earning capacity of the deceased does not preclude recovery of said damages. The
testimony of the victim's wife, Delia Gealon, as to the earning capacity of her husband Francisco
Gealon sufficiently establishes the basis for making such an award. It was established that
Francisco Gealon was 48 years old at the time of his death in 1991. His average income was
P200.00 a day. Hence, in accordance with the American Expectancy Table of Mortality adopted in
several cases decided by this Court, the loss of his earning capacity may be calculated.

To be able to claim damages for loss of earning capacity despite the non-availability of documentary
evidence, there must be oral testimony that: (a) the victim was self-employed earning less than the minimum wage
under current labor laws and judicial notice was taken of the fact that in the victim's line of work, no documentary
evidence is available; or (b) the victim was employed as a daily wage worker earning less than the minimum wage
under current labor laws. (People v. Dizon, 378 Phil. 261, 278 [1999]).

Q – There was a contract for the construction of a house which was not completed. The owner filed a complaint
for breach of contract with damages praying that the defendants be ordered to finish the construction of the
house. It was contended however by the defendants that the house has long been finished and that the
plaintiffs are now estopped from assailing their signing of the certificate of house acceptance/completion
considering that they had the option not to pre-sign the certificate. This was the defense of Comsavings Bank. Is
the defense valid? Why?
Ans.: No. The liability of Comsavings Bank did not arise from its breach of warranties under its purchase of loan
agreement with NHMFC. Under the purchase of loan agreement, it undertook, for value received, to sell, transfer and
deliver to NHMFC the loan agreements, promissory notes and other supporting documents that it had entered into
and executed with respondents, and warranted the genuineness of the loan documents and the “construction of the
residential units.” Having made the warranties in favor of NHMFC, it would be liable in case of breach of warranties
to NHMFC, not respondents, eliminating breach of such warranties as a source of its liability towards respondents.
Instead, the liability of Comsavings Bank towards respondents was based on Article 20 and Article 1170 of
the Civil Code, viz.:
Article 20. Every person who, contrary to law, willfully or negligently causes damage to
another, shall indemnify the latter for the same.
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.

Based on the provisions, a banking institution like Comsavings Bank is obliged to exercise the highest
degree of diligence as well as high standards of integrity and performance in all its transactions because its business
is imbued with public interest. In Philippine National Bank v. Pike, it was held that “The stability of banks largely
depends on the confidence of the people in the honesty and efficiency of banks.”
Gross negligence connotes want of care in the performance of one’s duties; it is a negligence characterized
by the want of even slight care, acting or omitting to act in a situation where there is duty to act, not inadvertently
but willfully and intentionally, with a conscious indifference to consequences insofar as other persons may be
affected. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them.
There is no question that Comsavings Bank was grossly negligent in its dealings with respondents because
it did not comply with its legal obligation to exercise the required diligence and integrity. As a banking institution
serving as an originator under the UHLP and being the maker of the certificate of acceptance/completion, it was fully
aware that the purpose of the signed certificate was to affirm that the house had been completely constructed
according to the approved plans and specifications, and that respondents had thereby accepted the delivery of the
complete house. Given the purpose of the certificate, it should have desisted from presenting the certificate to
respondents for their signature without such conditions having been fulfilled. Yet, it made respondents sign the
certificate despite the construction of the house not yet even starting. Its act was irregular per se because it
contravened the purpose of the certificate. Worse, the pre-signing of the certificate was fraudulent because it was
thereby enabled to gain in the process the amount of P17,306.83 in the form of several deductions from the
proceeds of the loan on top of other benefits as an originator bank. On the other hand, respondents were prejudiced,
considering that the construction of the house was then still incomplete and was ultimately defective. Compounding
their plight was that NHMFC demanded payment of their monthly amortizations despite the non-completion of the
house. Had Comsavings Bank been fair towards them as its clients, it should not have made them pre-sign the
certificate until it had confirmed that the construction of the house had been completed. (Comsavings Bank v. Sps.
Capistrano, G.R. No. 170942, April 28, 2013, 704 SCRA 72, Bersamin, J)

Is the award of moral and exemplary damages proper? Explain.


Ans.: Yes, the award of moral and exemplary damages is warranted.
Under Article 2219 of the Civil Code, moral damages may be recovered for the acts or actions referred to in
Article 20 of the Civil Code. Moral damages are meant to compensate the claimant for any physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and
similar injuries unjustly caused. (Cagungun v. Planters Development Bank, G.R. No. 158674, October 17, 2005, 473
SCRA 259, 271)
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His anxiety and anguish over the incomplete and defective construction of their house, as well as the
inconvenience he and his wife experienced because of this suit were not easily probable. On her part, Estrella was a
mere housewife, but was the attorney-in-fact of Danilo in matters concerning the loan transaction. (Comsavings
Bank v. Sps. Capistrano, G.R. No. 170942, April 28, 2013, 704 SCRA 72, Bersamin, J)

Award of exemplary damages was sustained.


The law allows the grant of exemplary damages to set an example for the public good. The business of a
bank is affected with public interest; thus, it makes a sworn profession of diligence and meticulousness in giving
irreproachable service. For this reason, the bank should guard against injury attributable to negligence or bad faith
on its part. The banking sector must at all times maintain a high level of meticulousness. The grant of exemplary
damages is justified by the initial carelessness of petitioner, aggravated by its lack of promptness in repairing its
error. (Petilla v. Court of Appeals, No. L-38188, June 18, 1987, 151 SCRA, 1, 12)

Concept of temperate damages.


The Code Commission, in explaining the concept of temperate damages under Article 2224,
makes the following comment:
There are cases where from the nature of the case, definite proof of
pecuniary loss cannot be offered, although the court is convinced that there has
been such loss. For instance, injury to one’s commercial credit or to the goodwill of
a business firm is often hard to show with certainty in terms of money. Should
damages be denied for that reason? The judge should be empowered to calculate
moderate damages in such cases, rather than that the plaintiff should suffer,
without redress from the defendant’s wrongful act.” (Philtranco Service
Enterprises, Inc. v. Paras, et al., G.R. No. 161909, April 25, 2012, Bersamin, J)

In the body of its decision, the CA concluded that considering that Paras had a minimum monthly income of
P8,000.00 as a trader he was entitled to recover compensation for unearned income during the 3-month period
of his hospital confinement and the 6-month period of his recovery and rehabilitation; and aggregated his
unearned income for those periods to P72,000.00. Yet, the CA omitted the unearned income from the
dispositive portion. May the SC award it instead? Explain.
Ans.: Yes. The omission should be rectified, for there was credible proof of Paras’ loss of income during his disability.
According to Article 2205 (1), of the Civil Code, damages may be recovered for loss or impairment of earning
capacity in cases of temporary or permanent personal injury. Indeed, indemnification for damages comprehends not
only the loss suffered (actual damages or damnum emergens) but also the claimant’s lost profits (compensatory
damages or lucrum cessans). (Titan-Ikeda Construction and Development Corporation v. Primetown Property Group,
Inc., G.R. No. 158768, February 12, 2008, 544 SCRA 466, 491) Even so, the formula that has gained acceptance over
time has limited recovery to net earning capacity; hence, the entire amount of P72,000.00 is not allowable. The
premise is obviously that net earning capacity is the person’s capacity to acquire money, less the necessary expense
for his own living. (Villa Rey Transit, Inc. v. Court of Appeals, 31 SCRA 511, 515-517) To simplify the determination,
therefore, the net earning capacity of Paras during the 9-month period of his confinement, surgeries and
consequential therapy is pegged at only half of his unearned monthly gross income of P8,000.00 as a trader, or a
total of P36,000.00 for the 9-month period, the other half being treated as the necessary expense for his own living
in that period. (Philtranco Service Enterprises, Inc. v. Paras, et al., G.R. No. 161909, April 25, 2012, Bersamin, J)

Moral Damages to be recoverable must be capable of proof and must be actually proved with a reasonable
degree of certainty.
To be recoverable, moral damages must be capable of proof and must be actually proved with a reasonable
degree of certainty. Courts cannot simply rely on speculation, conjecture or guesswork in determining the fact and
amount of damages. Yet, nothing was adduced here to justify the grant of moral damages. What we have was only
the allegation on moral damages, with the complaint stating that the respondents had been forced to litigate, and
that they had suffered mental anguish, serious anxiety and wounded feelings from the petitioner’s refusal to restore
the possession of the land in question to them. The allegation did not suffice, for allegation was not proof of the facts
alleged (Abobon v. Abobon, et al., G.R. No. 155830, August 15, 2012, Bersamin, J).

Damages in medical malpractice cases.


In a medical malpractice case where the patient suffered injuries because of the negligence of a doctor, the
patient spent a substantial sum of money in another operation to repair the damage done. The Court applied the
principle of res ipsa loquitur and the doctrine of informed consent in holding the doctor liable in Nilo Rosit v. Davao
Doctors Hospital, et al., G.R. No. 210445, December 7, 2015, Velasco, J, especially so that the patient was able to prove
the actual expenses that he incurred due to the negligence of the doctor. In Mendoza v. Spouses Gomez, G.R. No.
160110, June 18, 2014, 726 SCRA 505, 521-522, it was said that a claimant is entitled to actual damages when the
damage he sustained is the natural and probable consequences of the negligent act and he adequately proved the
amount of such damage.
He is also entitled to moral damages as provided under Article 2217 of the Civil Code, given the necessary
physical suffering he endured as a consequence of defendant’s negligence.
To recall, from the time he was negligently operated upon or for a period of one (1) month, he suffered pain
and could not properly use his jaw to speak or eat.

Moral damages, etc. when recoverable.


May moral, exemplary or temperate damages be awarded if they were not prayed for in a complaint?
Explain.
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Ans.: No, as there would be no factual basis for the award. It is well-settled that in order that moral damages may be
awarded, there must be pleading and proof of moral suffering, mental anguish, fright and the like. (Mahinay v.
Velasquez, Jr., 464 Phil. 146, 149 [2004] citing San Miguel Brewery, Inc. v. Magno, 128 Phil. 328, 336 [1967]; Sps.
Golez v. Nemeno, G.R. No. 178317, September 23, 2015, Villarama, J).

Exemplary damages.
As to the award of exemplary damages, Mendoza v. Spouses Gomes, G.R. No. 160110, June 18, 2014,
enumerates the requisites for the award of the same.
Our jurisprudence sets certain conditions when exemplary damages may be awarded:
First, they may be imposed by way of example or correction only in addition, among others, to
compensatory damages, and cannot be recovered as a matter of right, their determination
depending upon the amount of compensatory damages that may be awarded to the claimant.
Second, the claimant must first establish his right to moral, temperate, liquidated or compensatory
damages. Third, the wrongful act must be accompanied by bad faith, and the award would be
allowed only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner.

The three (3) requisites are met in the Rosit case. Dr. Gestuvo's actions are clearly negligent. Likewise, Dr.
Gestuvo acted in bad faith or in a wanton, fraudulent, reckless, oppressive manner when he was in breach of the
doctrine of informed consent. Dr. Gestuvo had the duty to fully explain to Rosit the risks of using large screws for the
operation. More importantly, he concealed the correct medical procedure of using the smaller titanium
screws mainly because of his erroneous belief that Rosit cannot afford to buy the expensive titanium screws. Such
concealment is clearly a valid basis for an award of exemplary damages.

Moral damages and civil indemnity need not be pleaded in a homicide case.
In convicting the accused in a homicide case the lower courts in Ladines v. People, et al., G.R. No. 167333,
January 11, 2016, Bersamin, J, limited the civil liability to civil indemnity of P50,000.00. The limitation was a plain
error which must be correct moral damages and civil 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. Moral
damages and civil indemnity require neither pleading nor evidence simply because death through crime always
occasions moral sufferings on the part of the victim’s heirs. (People v. Osianas, G.R. No. 182548, September 30, 2008,
567 SCRA 319, 339-340; People v. Buduhan, G.R. No. 178196, August 6, 2008, 561 SCRA 337, 367-368; People v.
Berondo, Jr., G.R. No. 177827, March 30, 2009, 582 SCRA 547, 554-555) As the Court said in People v. Panado, G.R.
No. 133439, December 26, 2000, 348 SCRA 679, 690-691:
x x x a violent death invariably and necessarily brings about emotional pain and anguish on
the part of the victim’s family. It is inherently human to suffer sorrow, torment, pain and anger
when a loved one becomes the victim of a violent or brutal killing. Such violent death or brutal
killing not only steals from the family of the deceased his precious life, deprives them forever of his
love, affection and support, but often leaves them with the gnawing feeling that an injustice has
been done to them.

The civil indemnity and moral damages are fixed at P75,000.00 each because homicide was a gross crime.

What is the concept of the term “aggravating circumstances” used in the Civil Code in the imposition of
exemplary damages? Explain.
Ans.: The term “aggravating circumstances” used by the Civil Code, the law not having specified otherwise, is to be
understood in its broad or generic sense. The commission of an offense has a two-pronged effect, one on the public
as it breaches the social order and the other upon the private victim as it causes personal sufferings, each of which is
addressed by, respectively, the prescription of heavier punishment for the accused and by an award of additional
damages to the victim. The increase of the penalty or a shift to a graver felony underscores the exacerbation of the
offense by the attendance of aggravating circumstances, whether ordinary or qualifying, in its commission. Unlike
the criminal liability which is basically a State concern, the award of damages, however, is likewise, if not primarily,
intended for the offended party who suffers thereby. It would make little sense for an award of exemplary damages
to be due the private offended party when the aggravating circumstance is ordinary but to be withheld when it is
qualifying. Withal, the ordinary or qualifying nature of an aggravating circumstance is a distinction that should only
be of consequence to the criminal, rather than to the civil, liability of the offender. In fine, relative to the civil aspect
of the case, an aggravating circumstance, whether ordinary or qualifying, should entitle the offended party to an
award of exemplary damages within the unbridled meaning of Article 2230 of the Civil Code (People v. Catubig, G.R.
No. 137842, August 23, 2001, 363 SCRA 621, 635; People v. Belgar, G.R. No. 182794, September 8, 2014, Bersamin,
J).

GOOD LUCK TO ALL


2017 BAR CANDIDATES

We Are All Praying For Your Success

FROM: ABRC FAMILY


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