A CADEMICUS REVIEW CENTER

Dean Ferdinand A. Tan

CIVIL LAW CASES (2012-2016)

J. BERSAMIN

Persons and Family Relations

Soledad Lavadia vs. Heirs of Juan Luces Luna

G.R. No. 171914, July 23, 2014
BERSAMIN, J.:
The Civil Code continued to follow the nationality rule, to the effect that Philippine laws relating to family
rights and duties or to the status, condition and legal capacity of persons were binding upon citizens of the
Philippines, although living abroad.
FACTS:
ATTY. LUNA, a practicing lawyer, was at first a name partner in the prestigious law firm Sycip, Salazar, Luna,
Manalo, Hernandez & Feliciano Law Offices at that time when he was living with his first wife Eugenia
Zaballero-Luna, where they begot seven (7) children. On January 12, 1976, ATTY. LUNA obtained a divorce
decree of his marriage with EUGENIA from the Civil and Commercial Chamber of the First Circumscription
of the Court of First Instance of Sto. Domingo, Dominican Republic. On the same date, ATTY. LUNA
contracted another marriage, this time with SOLEDAD. Thereafter, ATTY. LUNA and SOLEDAD returned to
the Philippines and lived together as husband and wife until 1987. Sometime in 1977, ATTY. LUNA organized
a new law firm named: Luna, Puruganan, Sison and Ongkiko (LUPSICON) where ATTY. LUNA was the
managing partner. On February 14, 1978, LUPSICON through ATTY. LUNA purchased the 6th Floor of
Kalaw-Ledesma Condominium Project. Sometime in 1992, LUPSICON was dissolved and the condominium
unit was partitioned by the partners but the same was still registered in common. The parties stipulated that the
interest of ATTY. LUNA over the condominium unit would be 25/100 share. ATTY. LUNA thereafter
established and headed another law firm with Atty. Renato G. De la Cruz and used a portion of the office
condominium unit as their office. The said law firm lasted until the death of ATTY. JUAN.
After the death of ATTY. JUAN, his share in the condominium unit including the lawbooks, office
furniture and equipment found therein were taken over by Gregorio Z. Luna, ATTY. LUNAs son of the first
marriage. The 25/100 pro-indiviso share of ATTY. Luna in the condominium unit as well as the law books,
office furniture and equipment became the subject of the complaint filed by SOLEDAD against the heirs of
ATTY. JUAN. The complaint alleged that the subject properties were acquired during the existence of the
marriage between ATTY. LUNA and SOLEDAD through their joint efforts.The RTC rendered its decision
after trial upon the aforementioned facts, disposing thusly: (a) The 24/100 pro-indiviso share in the
condominium unit is adjudged to have been acquired by Juan Lucas Luna through his sole industry;(b) Plaintiff
has no right as owner or under any other concept over the condominium unit (c) Plaintiff is declared to be the
owner of the books Corpus Juris, Fletcher on Corporation, American Jurisprudence and Federal Supreme Court
Reports found in the condominium unit and defendants are ordered to deliver them to the plaintiff as soon as
appropriate arrangements have been made for transport and storage.

ISSUES:
Whether or not the divorce between Atty. Luna and Eugenia Zaballero-Luna (Eugenia) had validly dissolved
the first marriage;
Whether the second marriage entered into by the late Atty. Luna and the petitioner entitled the latter to any
rights in property.

RULING:
Atty. Lunas first marriage with Eugenia subsisted up to the time of his death

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 The Civil Code continued to follow the nationality rule, to the effect that Philippine laws relating to
family rights and duties or to the status, condition and legal capacity of persons were binding upon citizens of
the Philippines, although living abroad. Pursuant to the nationality rule, Philippine laws governed this case by
virtue of both Atty. Luna and Eugenio having remained Filipinos until the death of Atty. Luna on July 12, 1997
terminated their marriage.
From the time of the celebration of the first marriage on September 10, 1947 until the present, absolute
divorce between Filipino spouses has not been recognized in the Philippines. The non-recognition of absolute
divorce between Filipinos has remained even under the Family Code, even if either or both of the spouses are
residing abroad. Indeed, the only two types of defective marital unions under our laws have been the void and
the voidable marriages. As such, the remedies against such defective marriages have been limited to the
declaration of nullity of the marriage and the annulment of the marriage.
Conformably with the nationality rule, however, the divorce, even if voluntarily obtained abroad, did
not dissolve the marriage between Atty. Luna and Eugenia, which subsisted up to the time of his death on July
12, 1997. The non-recognition of absolute divorce in the Philippines is a manifestation of the respect for the
sanctity of the marital union especially among Filipino citizens. For as long as this public policy on marriage
between Filipinos exists, no divorce decree dissolving the marriage between them can ever be given legal or
judicial recognition and enforcement in this jurisdiction.

The Agreement for Separation and Property Settlement was void for lack of court approval

Considering that Atty. Luna and Eugenia had not entered into any marriage settlement prior to their
marriage on September 10, 1947, the system of relative community or conjugal partnership of gains governed
their property relations. The conjugal partnership of gains subsists until terminated for any of various causes of
termination enumerated in Article 175 of the Civil Code.
The mere execution of the Agreement by Atty. Luna and Eugenia did not per se dissolve and liquidate
their conjugal partnership of gains. The approval of the Agreement by a competent court was still required
under Article 190 and Article 191 of the Civil Code. Upon approval of the petition for dissolution of the
conjugal partnership, the court shall take such measures as may protect the creditors and other third persons.
After dissolution of the conjugal partnership, the provisions of articles 214 and 215 shall apply. The provisions
of this Code concerning the effect of partition stated in articles 498 to 501 shall be applicable.
But was not the approval of the Agreement by the CFI of Sto. Domingo in the Dominican Republic
sufficient in dissolving and liquidating the conjugal partnership of gains between the late Atty. Luna and
Eugenia?
The query is answered in the negative. There is no question that the approval took place only as an
incident of the action for divorce instituted by Atty. Luna and Eugenia, for, indeed, the justifications for their
execution of the Agreement were identical to the grounds raised in the action for divorce. With the divorce not
being itself valid and enforceable under Philippine law for being contrary to Philippine public policy and public
law, the approval of the Agreement was not also legally valid and enforceable under Philippine law.
Consequently, the conjugal partnership of gains of Atty. Luna and Eugenia subsisted in the lifetime of their
marriage.

Atty. Lunas marriage with Soledad, being bigamous, was void; properties acquired during their
marriage were governed by the rules on co-ownership

In the Philippines, marriages that are bigamous, polygamous, or incestuous are void. Due to the second
marriage between Atty. Luna and the petitioner being void ab initio by virtue of its being bigamous, the
properties acquired during the bigamous marriage were governed by the rules on co-ownership, conformably
with Article 144 of the Civil Code. In such a situation, whoever alleges co-ownership carried the burden of
proof to confirm such fact. To establish co-ownership, therefore, it became imperative for the petitioner to offer
proof of her actual contributions in the acquisition of property. Her mere allegation of co-ownership, without
sufficient and competent evidence, would warrant no relief in her favor.
The petitioner asserts herein that she sufficiently proved her actual contributions in the purchase of the
condominium unit in the aggregate amount of at least P306, 572.00, consisting in direct contributions of P159,
072.00, and in repaying the loans of Atty. Luna; and that such aggregate contributions of P306,572.00
corresponded to almost the entire share of Atty. Luna in the purchase of the condominium unit amounting to
P362,264.00 of the units purchase price of P1,449,056.00. The petitioner further asserts that the lawbooks were
paid for solely out of her personal funds, proof of which Atty. Luna had even sent her a thank you note; that
she had the financial capacity to make the contributions and purchases.
The CA entirely debunked the petitioners assertions on her actual contributions. SOLEDAD was not able
to prove by preponderance of evidence that her own independent funds were used to buy the law office

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condominium and the law books subject matter in contention in this case proof that was required for Article
144 of the New Civil Code and Article 148 of the Family Code to apply. Article 148 provided that: only the
property acquired by both of the parties through their actual joint contribution of money, property or industry
shall be owned in common and in proportion to their respective contributions. Such contributions and
corresponding shares were prima facie presumed to be equal. However, for this presumption to arise, proof of
actual contribution was required. If one of the parties was validly married to another, his or her share in the co-
ownership accrued to the absolute community or conjugal partnership existing in such valid marriage. If the
party who acted in bad faith was not validly married to another, his or her share shall be forfeited in the manner
provided in the last paragraph of the Article 147. The rules on forfeiture applied even if both parties were in
bad faith.
Co-ownership was the exception while conjugal partnership of gains was the strict rule whereby marriage
was an inviolable social institution and divorce decrees are not recognized in the Philippines.
As to the 25/100 pro-indiviso share of ATTY. LUNA in the condominium unit, SOLEDAD failed to prove
that she made an actual contribution to purchase the said property. The fact that CCT No. 4779 and
subsequently, CCT No. 21761 were in the name of JUAN LUCES LUNA, married to Soledad L. Luna was
no proof that SOLEDAD was a co-owner of the condominium unit. Acquisition of title and registration thereof
are two different acts. It is well settled that registration does not confer title but merely confirms one already
existing. The phrase married to preceding Soledad L. Luna is merely descriptive of the civil status of
ATTY. LUNA. SOLEDAD, the second wife, was not even a lawyer. So it is but logical that SOLEDAD had no
participation in the law firm or in the purchase of books for the law firm. SOLEDAD failed to prove that she
had anything to contribute and that she actually purchased or paid for the law office amortization and for the
law books.
The Court upholds the foregoing findings and conclusions by the CA both because they were substantiated
by the records and because we have not been shown any reason to revisit and undo them. Her mere allegations
on her contributions, not being evidence, did not serve the purpose. In contrast, given the subsistence of the
first marriage between Atty. Luna and Eugenia, the presumption that Atty. Luna acquired the properties out of
his own personal funds and effort remained. It should then be justly concluded that the properties in litis legally
pertained to their conjugal partnership of gains as of the time of his death. Consequently, the sole ownership of
the 25/100 pro indiviso share of Atty. Luna in the condominium unit, and of the lawbooks pertained to the
respondents as the lawful heirs of Atty. Luna.

Property

Heirs of Mario Malabanan vs. Republic of the Philippines

G.R. No. 179987
September 3, 2013
BERSAMIN, J.:
Alienable and disposable lands of the State fall into two categories, to wit: (a) patrimonial lands of the State, or
those classified as lands of private ownership under Article 425 of the Civil Code, without limitation; and (b)
lands of the public domain, or the public lands as provided by the Constitution, but with the limitation that the
lands must only be agricultural.
FACTS:
The property subject of the application for registration is a parcel of land situated in Barangay Tibig, Silang
Cavite, more particularly identified as Lot 9864-A, Cad-452-D, with an area of 71,324-square meters.
Applicant Mario Malabanan, who had purchased the property from Eduardo Velazco, filed an application for
land registration covering the property in the Regional Trial Court (RTC) in Tagaytay City, Cavite, claiming
that the property formed part of the alienable and disposable land of the public domain, and that he and his
predecessors-in-interest had been in open, continuous, uninterrupted, public and adverse possession and
occupation of the land for more than 30 years, thereby entitling him to the judicial confirmation of his title. To
prove that the property was an alienable and disposable land of the public domain, Malabanan presented during
trial a certification dated June 11, 2001 issued by the Community Environment and Natural Resources Office
(CENRO) of the Department of Environment and Natural Resources (DENR). RTC rendered judgment
granting Malabanans application for land registration. CA promulgated its decision reversing the RTC and
dismissing the application for registration of Malabanan. CA declared that under Section 14(1) of the Property
Registration Decree, any period of possession prior to the classification of the land as alienable and disposable
was inconsequential and should be excluded from the computation of the period of possession.

ISSUE: Whether or not petitioners were entitled to the land

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RULING:
Classifications of land according to ownership
Land, which is an immovable property, may be classified as either of public dominion or of private ownership.
Land is considered of public dominion if it either: (a) is intended for public use; or (b) belongs to the State,
without being for public use, and is intended for some public service or for the development of the national
wealth. Land belonging to the State that is not of such character, or although of such character but no longer
intended for public use or for public service forms part of the patrimonial property of the State. Land that is
other than part of the patrimonial property of the State, provinces, cities and municipalities is of private
ownership if it belongs to a private individual. Pursuant to the Regalian Doctrine (Jura Regalia), a legal concept
first introduced into the country from the West by Spain through the Laws of the Indies and the Royal Cedulas,
all lands of the public domain belong to the State. This means that the State is the source of any asserted right
to ownership of land, and is charged with the conservation of such patrimony. All lands not appearing to be
clearly under private ownership are presumed to belong to the State. Also, public lands remain part of the
inalienable land of the public domain unless the State is shown to have reclassified or alienated them to private
persons.

Classifications of public lands according to alienability

Whether or not land of the public domain is alienable and disposable primarily rests on the classification of
public lands made under the Constitution. Constitution places a limit on the type of public land that may be
alienated. Under Section 2, Article XII of the 1987 Constitution, only agricultural lands of the public domain
may be alienated; all other natural resources may not be. Alienable and disposable lands of the State fall into
two categories, to wit: (a) patrimonial lands of the State, or those classified as lands of private ownership under
Article 425 of the Civil Code, without limitation; and (b) lands of the public domain, or the public lands as
provided by the Constitution, but with the limitation that the lands must only be agricultural. Consequently,
lands classified as forest or timber, mineral, or national parks are not susceptible of alienation or disposition
unless they are reclassified as agricultural. A positive act of the Government is necessary to enable such
reclassification, and the exclusive prerogative to classify public lands under existing laws is vested in the
Executive Department, not in the courts. If, however, public land will be classified as neither agricultural, forest
or timber, mineral or national park, or when public land is no longer intended for public service or for the
development of the national wealth, thereby effectively removing the land from the ambit of public dominion, a
declaration of such conversion must be made in the form of a law duly enacted by Congress or by a Presidential
proclamation in cases where the President is duly authorized by law to that effect.27 Thus, until the Executive
Department exercises its prerogative to classify or reclassify lands, or until Congress or the President declares
that the State no longer intends the land to be used for public service or for the development of national wealth,
the Regalian Doctrine is applicable.

Disposition of alienable public lands

We now observe the following rules relative to the disposition of public land or lands of the public domain,
namely:
(1) As a general rule and pursuant to the Regalian Doctrine, all lands of the public domain belong to the State
and are inalienable. Lands that are not clearly under private ownership are also presumed to belong to the State
and, therefore, may not be alienated or disposed;
(2) The following are excepted from the general rule, to wit:
(a) Agricultural lands of the public domain are rendered alienable and disposable through any of the exclusive
modes enumerated under Section 11 of the Public Land Act. If the mode is judicial confirmation of imperfect
title under Section 48(b) of the Public Land Act, the agricultural land subject of the application needs only to be
classified as alienable and disposable as of the time of the application, provided the applicants possession and
occupation of the land dated back to June 12, 1945, or earlier. Thereby, a conclusive presumption that the
applicant has performed all the conditions essential to a government grant arises, and the applicant becomes the
owner of the land by virtue of an imperfect or incomplete title. By legal fiction, the land has already ceased to
be part of the public domain and has become private property.
(b) Lands of the public domain subsequently classified or declared as no longer intended for public use or for
the development of national wealth are removed from the sphere of public dominion and are considered
converted into patrimonial lands or lands of private ownership that may be alienated or disposed through any of
the modes of acquiring ownership under the Civil Code. If the mode of acquisition is prescription, whether
ordinary or extraordinary, proof that the land has been already converted to private ownership prior to the
requisite acquisitive prescriptive period is a condition sine qua non in observance of the law (Article 1113,
Civil Code) that property of the State not patrimonial in character shall not be the object of prescription.

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 The petitioners failed to present sufficient evidence to establish that they and their predecessors-in-interest had
been in possession of the land since June 12, 1945. Without satisfying the requisite character and period of
possession - possession and occupation that is open, continuous, exclusive, and notorious since June 12, 1945,
or earlier - the land cannot be considered ipso jure converted to private property even upon the subsequent
declaration of it as alienable and disposable. Prescription never began to run against the State, such that the
land has remained ineligible for registration under Section 14(1) of the Property Registration Decree. Likewise,
the land continues to be ineligible for land registration under Section 14(2) of the Property Registration Decree
unless Congress enacts a law or the President issues a proclamation declaring the land as no longer intended for
public service or for the development of the national wealth.

Sps. Alfonso and Maria Angeles Cusi vs. Lilia Domingo

G.R. No. 195825, February 27, 2013
BERSAMIN, J.:
Under the Torrens system of land registration, the registered owner of realty cannot be deprived of her
property through fraud, unless a transferee acquires the property as an innocent purchaser for value. A
transferee who acquires the property covered by a reissued owner's copy of the certificate of title without
taking the ordinary precautions of honest persons in doing business and examining the records of the proper
Registry of Deeds, or who fails to pay the full market value of the property is not considered an innocent
purchaser for value.
FACTS:
On July 18, 1997, one Radelia Sy (Sy), representing herself as the owner of the property, petitioned the RTC
for the issuance of a new owners copy of Domingos TCT No. N-165606, appending to her petition a deed of
absolute sale dated July 14, 1997 purportedly executed in her favor by Domingo; and an affidavit of loss dated
July 17, 1997, whereby she claimed that her bag containing the owners copy of TCT No. N-165606 had been
snatched from her on July 13, 1997 while she was at the SM City in North EDSA, Quezon City. The RTC
granted Sys petition on August 26, 1997. The Registry of Deeds of Quezon City then issued a new owners
duplicate copy of TCT No. N-165606, which was later cancelled by virtue of the deed of absolute sale dated
July 14, 1997, and in its stead the Registry of Deeds of Quezon City issued TCT No. 186142 in Sys name. Sy
subsequently subdivided the property into two, and sold each half by way of contract to sell to Spouses
Edgardo and Ramona Liza De Vera and to Spouses Alfonso and Maria Angeles Cusi. The existence of the
individual contracts to sell was annotated on the dorsal portion of Sys TCT No. 186142 as Entry No. PE-
8907/N-186142, stating that the consideration of the sale was P1,000,000.00 for each set of buyers, or for a
total of P2,000,000.00 for the entire property that had an actual worth of not less than P14,000,000.00. TCT
No. 186142 in the name of Sy was then cancelled by virtue of the deeds of sale executed between Sy and
Spouses De Vera, and between Sy and Spouses Cusi, to whom were respectively issued TCT No. 18956810
and TCT No. 189569. All the while, the transactions between Sy and the De Veras, and between Sy and the
Cusis were unknown to Domingo, whose TCT No. N-165606 remained in her undisturbed possession. It turned
out that the construction activities taking place on the property that Domingo learned about were upon the
initiative of the De Veras in the exercise of their dominical and possessory rights. Domingo commenced this
action against Sy and her spouse, the De Veras and the Cusis in the RTC.

ISSUE: Whether or not she was an innocent purchaser for value and in good faith.

RULING: No
Now beyond dispute is the nullity of the transfer of Domingos property to Sy because both lower courts united
in so finding. The unanimity in findings of both the RTC and the CA on this all-important aspect of the case is
now conclusive on the Court.
Under the Torrens system of land registration, the State is required to maintain a register of landholdings that
guarantees indefeasible title to those included in the register. The system has been instituted to combat the
problems of uncertainty, complexity and cost associated with old title systems that depended upon proof of an
unbroken chain of title back to a good root of title. The State issues an official certificate of title to attest to the
fact that the person named is the owner of the property described therein, subject to such liens and
encumbrances as thereon noted or what the law warrants or reserves. One of the guiding tenets underlying the
Torrens system is the curtain principle, in that one does not need to go behind the certificate of title because it
contains all the information about the title of its holder. This principle dispenses with the need of proving
ownership by long complicated documents kept by the registered owner, which may be necessary under a
private conveyancing system, and assures that all the necessary information regarding ownership is on the
certificate of title. Consequently, the avowed objective of the Torrens system is to obviate possible conflicts of

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title by giving the public the right to rely upon the face of the Torrens certificate and, as a rule, to dispense with
the necessity of inquiring further; on the part of the registered owner, the system gives him complete peace of
mind that he would be secured in his ownership as long as he has not voluntarily disposed of any right over the
covered land.
The petitioners were shown to have been deficient in their vigilance as buyers of the property. It was not
enough for them to show that the property was unfenced and vacant; otherwise, it would be too easy for any
registered owner to lose her property, including its possession, through illegal occupation. Nor was it safe for
them to simply rely on the face of Sys TCT No. 186142 in view of the fact that they were aware that her TCT
was derived from a duplicate owners copy reissued by virtue of the loss of the original duplicate owners copy.
That circumstance should have already alerted them to the need to inquire beyond the face of Sys TCT No.
186142. There were other circumstances, like the almost simultaneous transactions affecting the property
within a short span of time, as well as the gross undervaluation of the property in the deeds of sale, ostensibly at
the behest of Sy to minimize her liabilities for the capital gains tax, that also excited suspicion, and required
them to be extra-cautious in dealing with Sy on the property.
Another circumstance indicating that the Cusis and the De Veras were not innocent purchasers for value was
the gross undervaluation of the property in the deeds of sale at the measly price of P1,000,000.00 for each half
when the true market value was then in the aggregate of at least P14,000,000.00 for the entire property. Even if
the undervaluation was to accommodate the request of Sy to enable her to minimize her liabilities for the
capital gains tax, their acquiescence to the fraud perpetrated against the Government, no less, still rendered
them as parties to the wrongdoing. They were not any less guilty at all. In the ultimate analysis, their supposed
passivity respecting the arrangement to perpetrate the fraud was not even plausible, because they knew as the
buyers that they were not personally liable for the capital gains taxes and thus had nothing to gain by their
acquiescence. There was simply no acceptable reason for them to have acquiesced to the fraud, or for them not
to have rightfully insisted on the declaration of the full value of the realty in their deeds of sale. By letting their
respective deeds of sale reflect the grossly inadequate price, they should suffer the consequences, including the
inference of their bad faith in transacting the sales in their favor.
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 full and fair price for the same.38 As an examination of the
records shows, the petitioners were not innocent purchasers in good faith and for value. Their failure to
investigate Sy's title despite the nearly simultaneous transactions on the property that ought to have put them on
inquiry manifested their awareness of the flaw in Sy's title. That they did not also appear to have paid the full
price for their share of the property evinced their not having paid true value.

Sps. Celso Dico Sr. and Angeles Dico vs. Vizcaya Management Corp.
G.R. No. 161211, July 17, 2013
BERSAMIN, J.:
The prescription of actions for the reconveyance of real property based on implied trust is 10 years.
FACTS:
Celso Dico was the registered owner of Lot No. 486 of the Cadiz Cadastre, comprising an area of 67,300
square meters and covered by Transfer Certificate of Title (TCT) No. 22922 of the land records of Negros
Occidental. Lot No. 486 was adjacent to Lot No. 29-B and Lot No. 1412 (formerly Lot No. 1118-B), both also
of the Cadiz Cadastre. Celso and his wife Angeles resided on Lot No. 486 since 1958. On May 30, 1964,
Angeles filed in the District Office of the Bureau of Lands in Bacolod City, her free patent application covering
a portion of Lot No. 29-B. On his part, Celso also filed in the same office an application for free patent
covering Lot No. 1412. It does not appear, however, that the Bureau of Lands acted on their applications.
Respondent Vizcaya Management Corporation (VMC) was the registered owner under TCT No. T-41835 of
Lot No. 29-B, also of the Cadiz Cadastre, comprising an area of 369,606 square meters, more or less. VMC
derived its title to Lot No. 29-B from Eduardo and Cesar, both surnamed Lopez, the registered owners under
TCT No. T-14827, which emanated from TCT No. RT-9933 (16739) in the names of Victoria, Eduardo and
Cesar, all surnamed Lopez. TCT No. RT-9933 (16739) was a transfer from TCT No. T-14281, which had been
transferred from Original Certificate of Title (OCT) No. 21331 in the name of Negros Philippines Lumber
Company. OCT No. 21331 was issued pursuant to Decree No. 190483 of G.L.R.O. Cadastral Record No. 196.
VMC likewise claimed to be the owner of Lot No. 1412, formerly known as Lot No. 1118-B, also of the Cadiz
Cadastre, containing an area of 85,239 square meters, more or less, and registered in its name under TCT No.
T-41834.4
Lot Nos. 1426-B, with an area of 6,635 square meters covered by TCT No. T-24135, and 1426-C, with an area
of 6,107 square meters covered by TCT No. T-24136, appear to be registered in the names of Eduardo Lopez
and Cesar Lopez, who had earlier formed VMC.

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 In 1967, VMC, then newly formed, caused the consolidation and subdivision of Lot No. 29-B, Lot No. 1412,
Lot No. 1426-B, and Lot No. 1426-C. The consolidation-subdivision plan was prepared by Engr. Ricardo
Quilop and filed in the Land Registration Commission (LRC), renamed National Land Titles and Deeds
Registration Administration, but presently known as the Land Registration Authority. The consolidation-
subdivision plan was assigned the number (LRC) PCS-6611. On July 26, 1967, LRC Commissioner Antonio L.
Noblejas approved the consolidation-subdivision plan, resulting in Lot No. 29-B, Lot No. 1412, Lot No. 1426-
B, and Lot No. 1426-C being consolidated and subdivided.
VMC filed against the Dicos a complaint for unlawful detainer in the City Court of Cadiz (Civil Case No. 649).
On April 24, 1981, the City Court of Cadiz rendered its decision in favor of VMC, ordering the Dicos to
demolish the concrete water gate or sluice gate (locally known as trampahan) located inside Lot No. 1, Block 3
of the Cristina Village Subdivision. Inasmuch as the Dicos did not appeal, the decision attained finality. On
July 3, 1981, the City Court of Cadiz issued a writ of execution. On November 11, 1985, a second alias writ of
execution was issued.
On May 12, 1986, the Dicos commenced an action for the annulment and cancellation of the titles of VMC
(Civil Case No. 180-C), impleading VMC, the National Land Titles and Deeds Registration Administration,
and the Director of the Bureau of Lands. On March 12, 1987, the Dicos amended the complaint. They averred,
among others, that they were the registered owners of Lot No. 486 and the possessors-by-succession of Lot No.
1412 (formerly Lot No. 1118) and Lot No. 489; that VMC had land-grabbed a portion of their Lot No. 486
totaling 111,966 square meters allegedly brought about by the expansion of Cristina Village Subdivision; and
that on May 30, 1964 they had filed free patent applications in the Bureau of Lands for Lot No. 1412 and Lot
No. 489.6 They prayed that the possession of Lot No. 486, Lot No. 1412, and Lot No. 489 be restored to them;
and that the judgment in Civil Case No. 649 be annulled.

ISSUE: Whether or not CA erred in holding that prescription and/or laches already barred them from asserting
their right

RULING: No
We find and hold that the action of the Dicos for reconveyance was properly dismissed. CA correctly pointed
out that 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 or
constructive trust prescribes in 10 years.
Here, the CA observed that even granting that fraud intervened in the issuance of the transfer certificates of
title, and even assuming that the Dicos had the personality to demand the reconveyance of the affected property
on the basis of implied or constructive trust, the filing of their complaint for that purpose only on May 12, 1986
proved too late for them. The reckoning point for purposes of the Dicos 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.19 The long period of 29 years that had meanwhile lapsed from the issuance of the pertinent
transfer certificate of title on September 30, 1934 (the date of recording of TCT No. RT-9933 (16739) in the
name of the Lopezes) or on November 10, 1956 (the date of recording of TCT No. T-41835 in VMCs name)
was way beyond the prescriptive period of 10 years.

Republic of the Philippines vs. Zurbaran Realty and Development Corporation

G.R. No. 164408, March 24, 2014
BERSAMIN, J.:
Registration under Section 14(1) of P.D. No. 1529 is based on possession and occupation of the alienable and
disposable land of the public domain since June 12, 1945 or earlier, without regard to whether the land was
susceptible to private ownership at that time. The applicant needs only to show that the land had already been
declared alienable and disposable at any time prior to the filing of the application for registration. On the
other hand, an application under Section 14(2) of P.D. No. 1529 is based on acquisitive prescription and must
comply with the law on prescription as provided by the Civil Code. In that regard, only the patrimonial
property of the State may be acquired by prescription pursuant to the Civil Code.
FACTS:

7
 Respondent Zurbaran Realty and Development Corporation filed in the Regional Trial Court (RTC) in
San Pedro, Laguna an application for original registration covering a parcel of land situated in Barrio Banlic,
Municipality of Cabuyao, Province of Laguna, alleging that it had purchased the land on March 9, 1992 from
Jane de Castro Abalos; that there was no mortgage or encumbrance of any kind affecting the land; and that the
applicant and its predecessorsininterest had been in open, continuous and exclusive possession and
occupation of the land in the concept of an owner.
The Republic opposed the application, arguing that the applicant and its predecessorsininterest had
not been in open, continuous, exclusive and notorious possession and occupation of the land since June 12,
1945; that the land was a portion of the public domain, and, therefore, was not subject to private appropriation.
A certification was issued by the Records Management Division of the Land Management Bureau
stating that it had no record of any kind of public land applications/land patents covering the parcel of land
subject of the application.
The respondent presented Gloria P. Noel, its Vice President and Treasurer, who testified that the
respondent had purchased the land from Jane de Castro Abalos on March 9, 1992 that the land had been
declared for taxation purposes in the name of Abalos. The RTC rendered its decision granting the application
for registration. On appeal, the CA promulgated its judgment affirming the RTC.

ISSUE: Whether or not the CA gravely erred on a question of law when it affirmed the Trial Courts grant of
the application for original registration.

RULING:
YES.
Section 14 of P.D. No. 1529 enumerates those who may file an application for registration of land
based on possession and occupation of a land of the public domain.
Section 14(1) mandates registration on the basis of possession, while Section 14(2) entitles registration
on the basis of prescription. Registration under Section 14(1) is extended under the aegis of the Property
Registration Decree and the Public Land Act while registration under Section 14(2) is made available both by
the Property Registration Decree and the Civil Code.
In other words, registration under Section 14(1) of P.D. No. 1529 is based on possession and
occupation of the alienable and disposable land of the public domain since June 12, 1945 or earlier, without
regard to whether the land was susceptible to private ownership at that time. The applicant needs only to show
that the land had already been declared alienable and disposable at any time prior to the filing of the application
for registration. On the other hand, an application under Section 14(2) of P.D. No. 1529 is based on acquisitive
prescription and must comply with the law on prescription as provided by the Civil Code. In that regard, only
the patrimonial property of the State may be acquired by prescription pursuant to the Civil Code.
An application for registration based on Section 14(2) of P.D. No. 1529 must, therefore, establish that
the land had already been converted to or declared as patrimonial property of the State at the beginning of the
said 10year or 30year period of possession.
The respondents application does not enlighten as to whether it was filed under Section 14(1) or
Section 14(2) of P.D. No. 1529. At any rate, the evidence presented by the respondent and its averments in the
other pleadings reveal that the application for registration was filed based on Section 14(2), not Section 14(1)
of P.D. No. 1529. The respondent did not make any allegation in its application that it had been in possession
of the property since June 12, 1945, or earlier, nor did it present any evidence to establish such fact. With the
application of the respondent having been filed under Section 14(2) of P.D. No. 1529, the crucial query is
whether the land subject of the application had already been converted to patrimonial property of the State.
Here, there is no evidence showing that the land in question was within an area expressly declared by law either
to be the patrimonial property of the State, or to be no longer intended for public service or the development of
the national wealth. The Court is left with no alternative but to deny the respondents application for
registration.

Leonora Pascual vs. Josefino Daquioag

G.R. No. 162063, March 31, 2014
BERSAMIN, J.:
As a general rule, a writ of execution should strictly conform to every particular of the judgment to be
executed, and not vary the terms of the judgment it seeks to enforce, nor may it go beyond the terms of the
judgment sought to be executed; the execution is void if it is in excess of and beyond the original judgment or
award.
FACTS:

8
 Petitioner Pascual filed a Free Patent Application over Lot No. 13194, Lot No. 13212 and Lot No.
13214, Cad. 577D. Respondent Catalina AlmazanVillamor presented a protest, which was given due course
by the Executive Director of Region I of the DENR in San Fernando, La Union. The free patent application of
Pascual was likewise rejected. Moreover, claimantProtestant Almazan - Villamor was advised to file Free
Patent Applications immediately after the finality of the Decision.
Pascual appealed to the Secretary of the DENR, who affirmed the decision of the Regional Executive
Director. Pascual thereafter appealed to the Office of the President (OP), which affirmed the decision of the
Secretary of the DENR. Still dissatisfied with the result, Pascual elevated the decision of the OP to the CA by
petition for review, but the CA outrightly denied due course her petition for review. The Regional Executive
Director of the DENR issued the writ of execution directing the CENRO to execute the decision.
Accordingly, respondent CENRO Josefino L. Daquioag issued a memorandum directing respondents to
implement the writ of execution against Pascual. Pascual brought a special civil action for certiorari with
prayer for issuance of writ of injunction in the RTC assailing the issuance of the memorandum and the
execution proceedings, and by placing Catalina AlmazanVillamor in possession of the premises in question,
alleging that the decision of the Regional Executive Director of the DENR did not authorize or direct such
action; that placing AlmazanVillamor in possession of the properties would be tantamount to her being ejected
without due process of law; the RTC dismissed Pascuals petition for certiorari for lack of merit.

ISSUES:
Whether or not the public respondent has the authority to order the eviction/ejection of the petitioner from the
parcels of land through questioned memorandum.
Whether or not the CA rightly sustained the RTCs dismissal of Pascuals petition for certiorari.

RULING:
YES.
As a general rule, a writ of execution should strictly conform to every particular of the judgment to be
executed, and not vary the terms of the judgment it seeks to enforce, nor may it go beyond the terms of the
judgment sought to be executed; the execution is void if it is in excess of and beyond the original judgment or
award. Admittedly, the phrase placing the winning party, Catalina Almazan Villamor in the premises of the
land in question was not expressly stated in the dispositive portion of the decision of the Regional Executive
Director of the DENR. But the absence of that phrase did not render the directive to enforce invalid because the
directive was in full consonance with the decision sought to be executed.
The denial of Pascuals free patent application was based on the recognition of Almazan Villamors
ownership of the subject properties. Possession is an essential attribute of ownership. Whoever owns the
property has the right to possess it. Adjudication of ownership includes the delivery of possession if the
defeated party has not shown any right to possess the land independently of her rejected claim of ownership.
Accordingly, Daquioags memorandum placing AlmazanVillamor in possession of the properties was not
inconsistent with the decision of the Regional Executive Director of the DENR, as affirmed by the OP.
The RTC correctly held that placing AlmazanVillamor in possession of the properties was necessary
to give effect to the order requiring Pascual to refrain from entering the premises.

The CA rightly sustained the RTCs dismissal of Pascuals petition for certiorari because of the impropriety of
her chosen remedy. A special civil action for certiorari is the proper action to bring when a tribunal, board or
officer exercising judicial or quasijudicial function has acted without or in excess of its or his jurisdiction, or
with grave abuse of discretion amounting to lack or excess of jurisdiction and there is no appeal, or any plain,
speedy, and adequate remedy in the ordinary course of law. The term quasijudicial function applies to the
action and discretion of public administrative officers or bodies that are required to investigate facts or to
ascertain the existence of facts, hold hearings, and draw conclusions from them as a basis for their official
action and to exercise discretion of a judicial nature. However, the issuance by Daquioag of the assailed
memorandum implementing the writ of execution did not derive from the performance of a judicial or quasi
judicial function. He was not thereby called upon to adjudicate the rights of the contending parties or to
exercise any discretion of a judicial nature, but only performing an administrative duty of enforcing and
implementing the writ.

Republic of the Philippines vs. Rosario de Guzman Vda De Joson

G.R. No. 163767, March 10, 2014
BERSAMIN, J.:

9
The Regalian doctrine dictates that all lands of the public domain belong to the State. The applicant for land
registration has the burden of overcoming the presumption of State ownership by establishing through
incontrovertible evidence that the land sought to be registered is alienable or disposable based on a positive
act of the government.
FACTS:
The respondent filed her application for land registration in the CFI in Bulacan. In their opposition, the
Director of Lands and the Director of Forest Development averred that whatever legal and possessory rights the
respondent had acquired by reason of any Spanish government grants had been lost, abandoned or forfeited for
failure to occupy and possess the land for at least 30 years immediately preceding the filing of the application;
and that the land applied for, being actually a portion of the Labangan Channel operated by the Pampanga
River Control System, could not be subject of appropriation or land registration. The CFI rendered its decision,
ordering the registration of the land in favor of the respondent. The CA affirmed the RTC.

ISSUE: Whether or not the RTC and the CA erred in granting the application for registration.

RULING:
The respondent sought to have the land registered in her name by alleging that she and her predecessorsin
interest had been in open, peaceful, continuous, uninterrupted and adverse possession of the land in the concept
of owner since time immemorial. However, the Republic counters that the land was public land; and that it
could not be acquired by prescription.
Through the years, Section 48(b) of the CA 141 has been amended several times. The Court of
Appeals failed to consider the amendment introduced by PD 1073. The original Section 48(b) of C.A. No.141
provided for possession and occupation of lands of the public domain since July 26, 1894. This was
superseded by R.A. No. 1942, which provided for a simple thirtyyear prescriptive period of occupation by an
applicant for judicial confirmation of imperfect title. The same, however, has already been amended by
Presidential Decree No. 1073, approved on January 25, 1977. Under Section 14(1), therefore, the respondent
had to prove that: (1) the land formed part of the alienable and disposable land of the public domain; and (2)
she, by herself or through her predecessorsininterest, had been in open, continuous, exclusive, and notorious
possession and occupation of the subject land under a bona fide claim of ownership from June 12, 1945, or
earlier. It is the applicant who carries the burden of proving that the two requisites have been met. Failure to do
so warrants the dismissal of the application.
The respondent unquestionably complied with the second requisite by virtue of her having been in
open, continuous, exclusive and notorious possession and occupation of the land since June 12, 1945, or earlier.
Nonetheless, what is left wanting is the fact that the respondent did not discharge her burden to prove the
classification of the land as demanded by the first requisite. She did not present evidence of the land, albeit
public, having been declared alienable and disposable by the State. Even had the respondents effort to insert
the certification been successful, the same would nonetheless be vain and ineffectual. In Menguito v.
Republic, the Court pronounced that a survey conducted by a geodetic engineer that included a certification on
the classification of the land as alienable and disposable was not sufficient to overcome the presumption that
the land still formed part of the inalienable public domain.
We reiterate the standing doctrine that land of the public domain, to be the subject of appropriation,
must be declared alienable and disposable either by the President or the Secretary of the DENR. Verily, a mere
surveyor has no authority to reclassify lands of the public domain, such as in the present case. By relying
solely on the said surveyors assertion, petitioners have not sufficiently proven that the land in question has
been declared alienable.
The Regalian doctrine dictates that all lands of the public domain belong to the State. The applicant for
land registration has the burden of overcoming the presumption of State ownership by establishing through
incontrovertible evidence that the land sought to be registered is alienable or disposable based on a positive act
of the government. Here, respondent Corporation only presented a CENRO certification in support of its
application. Clearly, this falls short of the requirements for original registration. Yet, even assuming that the
DENRCENRO certification alone would have sufficed, the respondents application would still be denied
considering that the reclassification of the land as alienable or disposable came only after the filing of the
application in court in 1976.
We noted in Naguit that it should be distinguished from Bracewell v. Court of Appeals since in the
latter, the application for registration had been filed before the land was declared alienable or disposable. The
dissent though pronounces Bracewell as the better rule between the two. Yet two years after Bracewell,
its ponente, the esteemed Justice Consuelo YnaresSantiago, penned the ruling in Republic v. Ceniza, which
involved a claim of possession that extended back to 1927 over a public domain land that was declared
alienable and disposable only in 1980. Why did the Court in Ceniza, through the same eminent member who
authored Bracewell, sanction the registration under Section 48(b) of public domain lands declared alienable or

10
disposable thirtyfive (35) years and 180 days after 12 June 1945? The telling difference is that in Ceniza, the
application for registration was filed nearly six (6) years after the land had been declared alienable or
disposable, while in Bracewell, the application was filed nine (9) years before the land was declared alienable
or disposable. That crucial difference was also stressed in Naguit to contradistinguish it from Bracewell, a
difference which the dissent seeks to belittle.
On the other hand, under Section 14(2), ownership of private lands acquired through prescription may
be registered in the owners name. Did the respondent then acquire the land through prescription considering
that her possession and occupation of the land by her and her predecessorsininterest could be traced back to
as early as in 1926, and that the nature of their possession and occupation was that of a bona fide claim of
ownership for over 30 years? It is clear that property of public dominion, which generally includes property
belonging to the State, cannot be the object of prescription or, indeed, be subject of the commerce of man.
Lands of the public domain, whether declared alienable and disposable or not, are property of public dominion
and thus insusceptible to acquisition by prescription.

Hector Uy vs. Virginia Fule et al

G.R. No. 164961, June 30, 2014
BERSAMIN, J.:
The standard is that for one to be a purchaser in good faith in the eyes of the law, he should buy the property of
another without notice that some other person has a right to, or interest in, such property, and should pay a 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 belief that the person from whom he receives the
property was the owner and could convey title to the property. Indeed, a purchaser cannot close his eyes to
facts that should put a reasonable man on his guard and still claim he acted in good faith.
FACTS:
The dispute herein involves the parcel of land registered under Transfer Certificate of Title (TCT) No.
30111 of the Registry of Deeds of Camarines Sur that was part of the vast tract of land covered by TCT No.
1128 registered in the name of the late Conrado Garcia. Upon the death of Conrado , his heirs entered into an
extrajudicial settlement of his estate, including the vast track of land. Thereafter, his heirs caused the
registration of the vast track of land under TCT No. RT-8922 (16498), covering Lot 1, PSU-81269 and Lot 2,
PSU-81269.cralawred
In September 1985, the Department of Agrarian Reform engaged Geodetic Engr. Rolando A. Sales to
conduct a survey of the disputed land. Sales issued a joint certification to the effect that the disputed land was
an untitled property owned by Conrado Garcia. The joint certification was buttressed by the certification
issued by the Office of the Register of Deeds to the effect that no title covering Lot 562, Cad. 291 (Csd-05-
003874) appeared on record. As a result, the disputed land was included in the Operation Land Transfer
program of the DAR.
The DAR and the Office of the Register of Deeds of Camarines Sur respectively issued emancipation
patents and original certificates of title covering the disputed land to the farmers-beneficiaries. In the interim,
farmer-beneficiary Mariano Ronda sold his portion to Chisan Uy who then registered his title thereto. On the
other hand, the heirs of farmer-beneficiary Mariano Ronda sold their land to petitioner Hector Uy. The
petitioner registered his title thereto
In 1997, TCT No. RT-8922 (16498) was cancelled following the partition of the property covered therein.
Subsequently, TCT No. 30136 and TCT No. 30111 were issued in the names of respondents heirs of the late
Conrado Garcia. TCT No. 30111 covered the disputed land. In 1998, the President, acting through the DAR
Secretary, issued EPs to the farmers-beneficiaries pursuant to P.D. No. 27 and P.D. No. 266. On December 21,
1998, the respondents filed a complaint for cancellation of titles, quieting of title, recovery of possession, and
damages against public defendants and the farmer-beneficiaries in the Regional Trial Court (RTC) in Pili,
Camarines Sur.
The RTC resolved in favor of the respondents by finding that no notice of the inclusion of the disputed land
under the operation of P.D. No. 27 had been given to them. The RTC decreed plaintiffs as the owners of the
lands covered by TCT No. 30111 and declaring said title as VALID, BINDING AND EFFECTIVE, against the
whole world. Isabel Ronda, et al. (heirs of deceased farmer-beneficiary Mariano S. Ronda), Catalino Alcaide,
Julia Casaysayan, Chisan Uy, and the petitioner appealed to the CA. The defendant public officials did not
appeal. On their part, Catalino Alcaide, Julia Casaysayan, and Chisan Uy claimed that the RTC erred in
assuming jurisdiction over the case when in fact it had no such jurisdiction. In its decision, the CA ruled in
favor of respondents, hence denying the appeal. Hence, the petition for review on certiorari.

11
ISSUE: Whether or not the petitioner was a purchaser in good faith of the property in litis.

RULING: NO
The standard is that for one to be a purchaser in good faith in the eyes of the law, he should buy the
property of another without notice that some other person has a right to, or interest in, such property, and
should pay a 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 belief that the person
from whom he receives the property was the owner and could convey title to the property. Indeed, a
purchaser cannot close his eyes to facts that should put a reasonable man on his guard and still claim he
acted in good faith.
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.
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 sellers title and capacity to transfer any interest in the property.
An examination of the deed of sale executed between Isabel Ronda, et al. and the petitioner respecting
the portions covered by TCT No. 31120 and TCT No. 31121 indicates that the TCTs were issued only on
August 17, 1998 but the deed of sale was executed on July 31, 1998. While it is true, as the petitioner argues,
that succession occurs from the moment of death of the decedent pursuant to Article 777 of the Civil Code, his
argument did not extend to whether or not he was a buyer in good faith, but only to whether or not, if at all,
Isabel Ronda, et al., as the heirs of Mariano Ronda, held the right to transfer ownership over their predecessors
property. The argument did not also address whether or not the transfer to the petitioner was valid.
Evidently, the petitioner entered into the deed of sale without having been able to inspect TCT No.
31120 and TCT No. 31121 by virtue of such TCTs being not yet in existence at that time. If at all, it was OCT
No. 9852 and OCT No. 9853 that were available at the time of the execution of the deed of sale, and such
OCTs were presumably inspected by petitioner before he signed the deed of sale. It is notable that said OCTs
categorically stated that they were entered pursuant to an emancipation patent of the Ministry of Agrarian
Reform pursuant to the Operation Land Transfer (OLT) Program of the government.
The foregoing circumstances negated the third element of good faith cited in Bautista v. Silva, i.e., that
at the time of sale, the buyer was not aware of any claim or interest of some other person in the property, or of
any defect or restriction in the title of the seller or in his capacity to convey title to the property.

The petitioner was not an innocent purchaser for value; hence, he cannot be awarded the
disputed land.
In view of the result thus reached by us, it becomes superfluous to settle the issue of which between
P.D. No. 27 and Section 27 of R.A. No. 6657 should control, and whether or not the R.A. No. 6657 has
repealed P.D. No. 27. Even so, the Court has expressly clarified that R.A. No. 6657 did not repeal or supersede
P.D. No. 27. Finally, the Court need not belabor the fact that R.A. 6657 or the CARP Law operates distinctly
from P.D. 27. R.A. 6657 covers all public and private agricultural land including other lands of the public
domain suitable for agriculture as provided for in Proclamation No. 131 and Executive Order No. 229; while,
P.D. 27 covers rice and corn lands. On this score, E.O. 229, which provides for the mechanism of the
Comprehensive Agrarian Reform Program, specifically states: Presidential Decree No. 27, as amended, shall
continue to operate with respect to rice and corn lands, covered thereunder. It cannot be gainsaid, therefore, that
R.A. 6657 did not repeal or supersede, in any way, P.D. 27. And whatever provisions of P.D. 27 that are not
inconsistent with R.A. 6657 shall be suppletory to the latter, and all rights acquired by the tenant-farmer under
P.D. 27 are retained even with the passage of R.A. 6657.

Aznar Brothers Realty Company vs. Sps. Jose and Magdalena Ybanez
G.R. No. 161380, April 21, 2014
BERSAMIN, J.:
Private ownership of land as when there is a prima facie proof of ownership like a duly registered possessory
information or a clear showing of open, continuous, exclusive, and notorious possession, by present or
previous occupants is not affected by the issuance of a free patent over the same land, because the Public

12
Land Law applies only to lands of the public domain. The Director of Lands has no authority to grant free
patent to lands that have ceased to be public in character and have passed to private ownership. Consequently,
a certificate of title issued pursuant to a homestead patent partakes of the nature of a certificate issued in a
judicial proceeding only if the land covered by it is really a part of the disposable land of the public domain.
FACTS:
Casimiro Ybaez with the marital consent of Maria Daclan, executed a Deed of Absolute Sale in favor
of Aznar Brothers conveying an unregistered agricultural land. The parties agreed to register the sale under Act
No. 3344.
Casimiro died intestate leaving as heirs his wife Maria, and their children. On August 29, 1977, the
heirs of Casimiro executed a document entitled Extrajudicial Declaration of Heirs with an Extrajudicial
Settlement of Estate of Deceased Person and Deed of Absolute Sale, whereby they divided and adjudicated
among themselves Lot No. 18563. By the same document, they sold the entire lot for P1,000.00 to their co-heir,
Adriano D. Ybaez. Adriano sold Lot No. 18563 to Jose R. Ybaez. Jose R. Ybaez filed Free Patent
Application in respect of the land he had bought from Adriano. In due course, on July 20, 1979, Original
Certificate of Title (OCT) No. 2150 was issued to Jose R. Ybaez.
Aznar Brothers filed in the RTC a complaint against Jose R. Ybaez claiming absolute ownership of
Lot No. 18563 by virtue of the Deed of Absolute Sale dated March 21, 1964 executed in its favor by Casimiro.
Jose R. Ybaez moved to dismiss the complaint of Aznar Brothers on the ground of lack of cause of action,
lack of jurisdiction over the nature of the action, and estoppel by laches. After Aznar Brothers opposed, the
RTC denied the motion to dismiss.
Aznar Brothers amended its complaint a second time to implead Jose R. Ybaezs wife Magdalena
Marcos-Ybaez as defendant, averring that both defendants held no legal right nor just title to apply for free
patent over the lot in question, for the land was no longer a public disposable agricultural land but a private
residential land that it already owned. Aznar Brothers sought a restraining order or a writ of preliminary
injunction to prevent the Spouses Ybaez from disposing of the land. It further sought the declaration as null
and void ab initio the Extrajudicial Declaration of Heirs with Extrajudicial Settlement of Estate of Deceased
Person and Deed of Absolute Sale.
The RTC admitted the second amended complaint, emphasizing that the original cause of action
of accion publiciana would not be changed because the second amended complaint would incorporate
additional but related causes of action, a change permitted only during the pre-trial stage. The RTC rendered
judgment declaring that the identity of the land sold to Aznar Brothers by Casimiro and the land sold by the
heirs of Casimiro to Jose R. Ybaez was not an issue anymore.

ISSUE: Whether or not the appeal will prosper.

RULING:
Identity of the lot in litis is no longer a proper issue herein
The CA and the RTC both held that the identity of the property in litis was no longer an issue to be
considered and determined because the parties did not raise it at the pre-trial. The Spouses Ybaez insist herein,
however, that the RTC and the CA should have made such a finding nonetheless in view of the materiality of
whether the land claimed by Aznar Brothers was different from Lot No. 18563, the land subject of their OCT
No. 2150.
We clarify that although the Spouses Ybaezs non-appeal barred them from assigning errors for
purposes of this review, they are not prevented from now insisting, if only to uphold the judgment of the CA
against Aznar Brothers, that the property in litis was not the same as Lot No. 18563, but they would not be
accorded any relief upon those reasons, even if the Court should find Aznar Brothers appeal unmeritorious or
utterly frivolous.hanrobleslaw
Regardless, the holding by both lower courts was proper and correct. The non-inclusion in the pre-trial
order barred the identity of the property in litis as an issue, for it is basic that any factual issue not included in
the pre-trial order will not be heard and considered at the trial, much less, on appeal. The parties had the
obligation to disclose during the pre-trial all the issues they intended to raise during the trial, except those
involving privileged or impeaching matters, for the rule is that the definition of issues during the pre-trial
conference will bar the consideration of others, whether during trial or on appeal.
The waiver of the identity of the property in litis as an issue did not violate the right of any of the
parties herein due to the Rules of Court having forewarned them in Section 7, Rule 18 of the Rules of Court that
should the action proceed to trial, the pre-trial order would explicitly define and limit the issues to be tried, and
its contents would control the subsequent course of the action, unless modified before trial to prevent manifest
injustice.
Moreover, for the Spouses Ybaez to call upon the Court now to analyze or weigh evidence all over
again upon such a factual matter would be impermissible considering that the Court is not a trier of facts. There

13
are exceptional instances in which the Court has held itself competent to make its own appreciation of the facts.
However, none of the aforementioned exceptions obtains in this case. Accordingly, the Court, just as the lower
courts have been bound, shall proceed upon the assumption that the property in litis and Lot No. 18563 were
one and the same realty.

CA correctly concluded that Aznar Brothers owned Lot No. 18563; and that the Spouses Ybaez were
not buyers in good faith
In its assailed judgment, the CA concluded that the RTC erred in holding in favor of the Spouses
Ybaez observing that the trial court erred when it held from the totality of the evidence adduced by the parties,
there is no preponderant evidence that the defendants had prior knowledge of the previous sale of subject
property to the plaintiff when they bought the same from Adriano D. Ybaez.
The Deed of Absolute Sale (Exhibit F) in favor of plaintiff-appellant Aznar was registered under Act
3344, as amended on March 23, 1964 with the Register of Deeds of Cebu City. The registration of said deed
gave constructive notice to the whole world including defendant-appellees of the existence of said deed of
conveyance. Defendant-appellees cannot, therefore, claim to be buyers in good faith of the land in question.
Resultantly, they merely stepped into the shoes of their sellers vis a vis said land. Since their sellers were not
owners of the property in question, there was nothing that they could have sold to defendant-appellees.
We sustain the CAs conclusion that the Spouses Ybaez were guilty of bad faith, and that they
acquired Lot No. 18563 from sellers who were not the owners. Accordingly, we resolve the second error raised
herein in favor of Aznar Brothers. The CA correctly found, that the Spouses Ybaez held no right to Lot No.
18563 because Adriano, their seller, and his siblings were not the owners of Lot No. 18563. Indeed, Casimiro
had absolutely conveyed his interest in Lot No. 18563 to Aznar Brothers under the Deed of Absolute Sale of
March 21, 1964 with the marital consent of Maria Daclan, Casimiros surviving spouse and the mother of
Adriano and his siblings.
There is also no question that the Spouses Ybaez were aware of the conveyance of Lot No. 18563 by
Casimiro to Aznar Brothers considering that the Deed of Absolute Sale of March 21, 1964 between Casimiro
and Aznar Brothers was registered in the book of registry of unregistered land on the same day pursuant to their
agreement. Such registration constituted a constructive notice of the conveyance on the part of the Spouses
Ybaez pursuant to Section 194 of the Revised Administrative Code of 1917, as amended by Act No. 3344.

Estoppel by laches did not bar Aznar Brothers right over Lot No. 18563
Unexpectedly, the CA disregarded its aforecited correct conclusion on Aznar Brothers ownership of
Lot No. 18563, and instead ruled that estoppel by laches had already barred Aznar Brothers dominical claim
over Lot No. 18563.
There is absolutely no doubt that in law, plaintiff-appellant had lost its dominical and possessory claim
over the land for its inaction from 1964 when it bought the land up to 1989 when it filed the Complaint in the
trial court or a long period of 25 years. This is called estoppel by laches. Aznar Brothers now assails this
adverse ruling under its first assigned error by pointing out that the CA erred in relying on estoppel by laches, a
rule of equity, to bar its dominical claim over Lot No. 18563. We hold and declare that the CAs ruling in
favor of the Spouses Ybaez was devoid of legal and factual support, and should be rightfully reversed. Laches
is the failure or neglect for an unreasonable and unexplained length of time to do that which by exerting due
diligence a party could and should have done earlier.
The CA incorrectly barred the claim of Aznar Brothers to Lot No. 18563 because of laches. For one,
Aznar Brothers immediately registered the purchase in accordance with Act No. 3344, the law then governing
the registration of unregistered land. Its action in that regard ensured the protection of the law as to its
ownership of the land, and evinced that it did not abandon its ownership. Verily, its maintaining Lot No. 18563
as an unregistered land from then on should not prejudice its rights; otherwise, its registration pursuant to law
would be set at naught. Secondly, the supposed acts of possession of Lot No. 18563 exercised by the Spouses
Ybaez from the time of their purchase from Adriano, including causing it to be surveyed for purposes of the
application for free patent, did not prejudice Aznar Brothers interest because the registration under Act No.
3344 had given constructive notice to the Spouses Ybaez of its prior acquisition of the land.

Lot No. 18563, not being land of the public domain, was not subject to the free patent
issued to the Spouses Ybaez
The Spouses Ybaezs position rests on their having been issued the free patent and OCT No. 2150.
The records do not support the position of the Spouses Ybaez. Aznar Brothers acquired Lot No. 18563 as the
private land of Casimiro. In their Deed of Absolute Sale of March 21, 1964, Casimiro expressly warranted that
the land was his own exclusive property. With the ownership of Aznar Brothers being thus established, the
free patent issued to Jose R. Ybaez by the Government was invalid for the reason that the Government had no
authority to dispose of land already in private ownership. The invalidity of the free patent necessarily left OCT

14
No. 2150 a patent nullity. As ruled in Heirs of Simplicio Santiago v. Heirs of Mariano E. Santiago: The settled
rule is that a free patent issued over a private land is null and void, and produces no legal effects
whatsoever. Private ownership of land as when there is a prima facie proof of ownership like a duly
registered possessory information or a clear showing of open, continuous, exclusive, and notorious
possession, by present or previous occupants is not affected by the issuance of a free patent over the same
land, because the Public Land Law applies only to lands of the public domain. The Director of Lands has no
authority to grant free patent to lands that have ceased to be public in character and have passed to private
ownership. Consequently, a certificate of title issued pursuant to a homestead patent partakes of the nature
of a certificate issued in a judicial proceeding only if the land covered by it is really a part of the disposable
land of the public domain.

Sps. Bernabe Mercader, Jr. and Lorna Mercader vs. Sps. Jesus Bardilas and Leticia Bardilas
G.R. No. 163157, June 27, 2016
BERSAMIN, J.:
The owner of the servient estate retains ownership of the portion on which the easement is established, and may
use the same in such manner as not to affect the exercise of the easement.
FACTS:
The issue concerns the right of way between the owners of three parcels of land denominated as Lot No. 5808-
F-l, Lot No. 5808-F-2-A and Lot 5808-F-2-B. The lots were portions of Lot No. 5808-F with an area of 2,530
square meters, and registeted under Transfer Certificate of Title No. 78424 of the Registry of Deeds in Cebu
City in the name of "Arsenia Fernandez, of legal age, married to Simeon Cortes, both Filipinos." Another
subdivision lot derived from Lot No. 5808-F was Lot No. 5808-F-3. On May 11, 1992, the Clarita Village
Association erected a concrete perimeter fence to close the exit point of the right of way of the Spouses
Bardilas from Lot No. 5808-F-2-B to the existing road within Clarita Village. The closure forced the Spouses
Bardilas to use the second exit to Buhisan Road, which is from their Lot No. 5808-F-3. Spouses Bardilas,
through Atty. Alfredo J. Sipalay, informed the Spouses Mercader of the encroachment by about 14 square
meters of the latter's residential house and fence on the right of way. Spouses Mercader, through Atty. Rolindo
A. Navarro, responded by insisting that as the owners of Lot No. 5808-F-2-A they were equally entitled to the
right of way; and that they were proposing to buy the equivalent portion of the right of way to which they were
entitled at a reasonable price. Spouses Bardilas rejected the claim of the Spouses Mercader that they were
entitled to the use of the right of way, and reiterated their demand for P30,000.00 as the fair market value of the
property. Finding the demand for payment of P30,000.00 by the Spouses Bardilas to be unlawful, unwarranted
and unfounded, the Spouses Mercader commenced on September 8, 1992 their action for declaratory relief,
injunction and damages against the Spouses Bardilas

ISSUE: Whether or not respondents are equally "entitled to the road-right-of-way being conferred upon them
by TITLE pursuant to Article 622 of the New Civil Code

RULING:
Easement or servitude is a real right constituted on another's property, corporeal and immovable, by virtue of
which the owner of the same has to abstain from doing or to allow somebody else to do something on his
property for the benefit of another thing or person. It exists only when the servient and dominant estates belong
to two different owners. It gives the holder of the easement an incorporeal interest on the land but grants no title
thereto. Therefore, an acknowledgment of the easement is an admission that the property belongs to another. It
is settled that road right of way is a discontinuous apparent easement in the context of Article 622 of the Civil
Code, which provides that continuous non-apparent easements, and discontinuous ones, whether apparent or
not, may be acquired only by virtue of title. But the phrase with existing Right of Way in the TCT is not one of
the modes of acquisition of the easement by virtue of a title. Acquisition by virtue of title, as used in Art. 622 of
the Civil Code, refers to "the juridical act which gives birth to the easement, such as law, donation, contract,
and will of the testator."
What really defines a piece of land is not the area mentioned in its description, but the boundaries therein laid
down, as enclosing the land and indicating its limits. An encumbrance "subject to 3 meters wide right of way"
was annotated on TCT No. 107915, which covers Lot No. 5808-F2-B of the Spouses Bardilas. As the owners
of the servient estate, the Spouses Bardilas retained ownership of the road right of way even assuming that said
encumbrance was for the benefit of Lot No. 5808-F-2-A of the Spouses Mercader. The latter could not claim to
own even a portion of the road right of way because Article 630 of the Civil Code expressly provides that "[t]he
owner of the servient estate retains ownership of the portion on which the easement is established, and may use

15
the same in such manner as not to affect the exercise of the easement." With the right of way rightfully
belonging to them as the owners of the burdened property, the Spouses Bardilas remained entitled to avail
themselves of all the attributes of ownership under the Civil Code.

Republic of the Philippines vs. Apolonio Bautista Jr.

G.R. No. 166890, June 28, 2016
BERSAMIN, J.:
The applicant for judicial confirmation of imperfect title must trace his possession of the subject land to June
12, 1945, or earlier. Any length of possession that does not comply with the requirement cannot support the
application, which must be then dismissed for failure to comply with Commonwealth Act No. 141 (Public Land
Act) and Presidential Decree No. 1529 (Property Registration Decree).
FACTS:
After acquiring Lot 17078 of Cad. 547-D, Subic Cadastre, located in Capisanan, Subic, Zambales from Mario
Jardin on February 15, 1971 and Cornelia Villanueva on May 25, 1973, Apolonio, Sr. had the property declared
for taxation purposes. He had been the sole and exclusive possessor and occupant from the time of acquisition
until his death, with no party questioning his possession and ownership, or staking any adverse claim against
him thereon. He died in 1987, and was succeeded by his children, namely: respondent Apolonio, Jr. and his
siblings. Apolonio, Sr.'s children executed an extra-judicial settlement of their father's estate, whereby
Apolonio, Jr. 's brothers and sisters waived their rights in his favor. Thus, the property was declared for taxation
purposes in Apolonio, Jr. 's name under Tax Declaration No. 014-0432A of the Municipality of Subic,
Zambales. There were no arrears in real estate taxes. The declared value was P73,040.00. On October 21, 1996,
Apolonio Jr. commenced LRC Case No. N-1210-96 in the MTC. He later on testified that his father had been in
actual possession since 1969, and had eventually acquired the land from Jardin and Villanueva through the
notarized Deeds of Absolute Sale dated February 15, 1971, and May 25, 1973; and that his father had paid
taxes on the land.

ISSUE: Whether or not Apolonio is entitled to the land

RULING:
In its amendment of the Public Land Act that took effect on January 25, 1977, Presidential Decree No. 1073
changed the length of the requisite possession from "thirty (30) years immediately preceding the filing of the
application" to possession "since June 12, 1945, or earlier. Apolonia, Jr. presented only himself to establish the
possession and ownership of his father, Apolonia, Sr., who was his immediate predecessor-in-interest. He did
not present as witnesses during the trial either of the transferors of Apolonia, Sr. -that is, Mario Jardin or
Cornelia Villanueva -to establish the requisite length of the possession of the predecessors-in-interest of the
applicant that would be tacked to his own. His personal incompetence to attest to the possession of the property
within the time required by law underscored the weakness of the evidence on possession, particularly as it has
not been denied that the applicant had arrived in the Philippines only on November 28, 1987. Considering that
the possession and occupation of the property in question by Apolonia, Jr. and his predecessors-in-interest were
not shown in the records to have been "since June 12, 1945, or earlier," the application must be rejected. Only
the title of those who had possessed and occupied alienable and disposable lands of the public domain within
the requisite period could be judicially confirmed. Indeed, alienable public land held by a possessor, either
personally or through his predecessors-in-interest, openly, continuously and exclusively during the prescribed
statutory period is converted to private property by the mere lapse or completion of the period

Obligations and Contracts

Spouses Quirino Dela Cruz and Gloria Dela Cruz vs. Planters Products, Inc.
G.R. No. 158649, February 18, 2013
BERSAMIN, J.:
If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control. In determining their intention, their contemporaneous and subsequent
acts shall be principally considered.
FACTS:
Spouses Quirino V. Dela Cruz and Gloria Dela Cruz operated the Barangay Agricultural Supply, an agricultural
supply store in Aliaga, Nueva Ecija engaged in the distribution and sale of fertilizers and agricultural chemical
products, among others. At the time material to the case, Quirino, a lawyer, was the Municipal Mayor of
Aliaga, Nueva Ecija. Gloria applied for and was granted by respondent Planters Products, Inc. (PPI) a regular

16
credit line of P200,000.00 for a 60-day term, with trust receipts as collaterals. Quirino and Gloria submitted a
list of their assets in support of her credit application for participation in the Special Credit Scheme (SCS) of
PPI. Gloria signed in the presence of the PPI distribution officer/assistant sales representative two documents
labelled Trust Receipt/Special Credit Scheme, indicating the invoice number, quantity, value, and names of
the agricultural inputs (i.e., fertilizer or agricultural chemicals) she received upon the trust of PPI.

ISSUE: Whether the two transaction documents signed by Gloria expressed the intent of the parties to establish
a creditor-debtor relationship between them

RULING:
Parties entered into a creditor-debtor relationship
Gloria signed the application for credit facilities, indicating that a trust receipt would serve as collateral for the
credit line. On August 4, 1978, Gloria, as dealer, signed together with Quirino the list of their assets having a
total value of P260,000.00 that they tendered to PPI to support our credit application in connection with our
participation to your Special Credit Scheme. Gloria further signed the Trust Receipt/SCS documents defining
her obligations under the agreement, and also the invoices pursuant to the agreement with PPI, indicating her
having received PPI products on various dates. These established circumstances comprised by the
contemporaneous and subsequent acts of Gloria and Quirino that manifested their intention to enter into the
creditor-debtor relationship.
Credit line of P200,000.00 commenced the business relationship between the parties. A credit line is really a
loan agreement between the parties. Gloria offered trust receipts as her collateral for securing the loans that PPI
extended to her. Gloria and Quirino offered to have their conjugal real properties beef up the collaterals for the
credit line. A close look at the Trust Receipt/SCS indicates that the farmer-participants were mentioned therein
only with respect to the duties and responsibilities that Gloria personally assumed to undertake in holding
goods in trust for PPI. At this juncture, the Court clarifies that the contract, its label notwithstanding, was not a
trust receipt transaction in legal contemplation or within the purview of the Trust Receipts Law (Presidential
Decree No. 115) such that its breach would render Gloria criminally liable for estafa. The petitioners could not
validly justify the non-compliance by Gloria with her obligations under the Trust Receipt/SCS by citing the
loss of the farm outputs due to typhoon Kading. There is no question that she had expressly agreed that her
liability would not be extinguished by the destruction or damage of the crops.

Heirs of Servando Franco vs. Sps. Veronica and Danilo Gonzales

G.R. No. 159709, June 27, 2012
BERSAMIN, J.:
There is novation when there is an irreconcilable incompatibility between the old and the new obligations.
There is no novation in case of only slight modifications; hence, the old obligation prevails.
FACTS:
Servando Franco and Leticia Medel obtained a loan from Veronica R. Gonzales, who was engaged in the
money lending business under the name Gonzales Credit Enterprises, in the amount of P50,000.00, payable in
two months. Veronica gave only the amount of P47,000.00, to the borrowers, as she retained P3,000.00, as
advance interest for one month at 6% per month. Servado and Leticia executed a promissory note
for P50,000.00, to evidence the loan, payable on January 7, 1986. Servando and Leticia obtained from Veronica
another loan in the amount of P90,000.00, payable in two months, at 6% interest per month. They executed a
promissory note to evidence the loan, maturing on January 19, 1986. They received only P84,000.00, out of
the proceeds of the loan. On maturity of the two promissory notes, the borrowers failed to pay the indebtedness.
Servando and Leticia secured from Veronica still another loan in the amount of P300,000.00, maturing in one
month, secured by a real estate mortgage over a property belonging to Leticia Makalintal Yaptinchay, who
issued a special power of attorney in favor of Leticia Medel, authorizing her to execute the mortgage.
Servando and Leticia executed a promissory note in favor of Veronica to pay the sum of P300,000.00, after a
month, or on July 11, 1986. However, only the sum of P275,000.00, was given to them out of the proceeds of
the loan. Like the previous loans, Servando and Medel failed to pay the third loan on maturity. Servando and
Leticia with the latter's husband, Dr. Rafael Medel, consolidated all their previous unpaid loans
totaling P440,000.00, and sought from Veronica another loan in the amount of P60,000.00, bringing their
indebtedness to a total of P500,000.00, payable on August 23, 1986. He borrowers failed to pay their
obligations. Veronica R. Gonzales, joined by her husband Danilo G. Gonzales, filed with the Regional Trial
Court a complaint for collection of the full amount of the loan including interests and other charges.
The Court in Medel v. Court of Appeals struck down as void the stipulation on the interest for being
iniquitous or unconscionable. Upon the finality of the decision in Medel v. Court of Appeals, the respondents

17
moved for execution. Servando Franco opposed, claiming that he and the respondents had agreed to fix the
entire obligation at P775,000.00. According to Servando, 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.

ISSUE: Was there a novation of the August 23, 1986 promissory note when respondent Veronica Gonzales
issued the February 5, 1992 receipt?

RULING:
Novation did not transpire because no irreconcilable incompatibility existed between the promissory
note and the receipt
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. The receipt dated February 5, 1992 did not
create a new obligation incompatible with the old one under the promissory note. 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.
The issuance of the receipt created no new obligation. Instead, the respondents only thereby recognized
the original obligation by stating in the receipt that the P400,000.00 was partial payment of loan and by
referring to the promissory note subject of the case in imposing the interest. The loan mentioned in the receipt
was still the same loan involving the P500,000.00 extended to Servando. Advertence to the interest stipulated in
the promissory note indicated that the contract still subsisted, not replaced and extinguished, as the petitioners
claim. A new contract that is a mere reiteration, acknowledgment or ratification of the old contract with slight
modifications or alterations as to the cause or object or principal conditions can stand together with the former
one, and there can be no incompatibility between them.

Landbank of the Philippines vs. Heirs of Sps. Jorja Soriano and Magin Soriano
G.R. No. 178312, January 30, 2013
BERSAMIN, J.:
The validity of a compromise is dependent upon its compliance with the requisites and principles of contracts
dictated by law. Also, the terms and conditions of a compromise must not be contrary to law, morals, good
customs, public policy and public order.
FACTS:
The respondents are the children of the late Spouses Jorja Rigor-Soriano and Magin Soriano, the owners of the
two parcels of land, both of the Registry of Deeds of Nueva Ecija, containing an area of 10.9635 hectares
located in Poblacion/Talabutab, Gen. Natividad, Nueva Ecija and 4.1224 hectares located in Macabucod,
Aliaga, Nueva Ecija, respectively. The properties became subject to Operation Land Transfer (OLT) and were
valued by the Land Bank and the Department of Agrarian Reform (DAR) at P10,000.00/hectare. Contending,
however, that such valuation was too low compared to existing valuations of agricultural lands, the respondents
commenced this action for just compensation, claiming that the properties were irrigated lands that usually
yielded 150 cavans per hectare per season at a minimum of two seasons per year. They asked that a final
valuation of the properties be pegged at P1,800,000.00, based on Administrative Order No. 61, Series of 1992
and Republic Act No. 6657. Land Bank disagreed, insisting that Presidential Decree No. 27 and Executive
Order No. 228 governed the fixing of just compensation for the properties; that the Government, through the
DAR as the lead agency in the implementation of all agrarian laws, had taken the properties in 1972 pursuant to
Presidential Decree No. 27, and had since then redistributed the properties to farmer-beneficiaries; and that in
all cases under Presidential Decree No. 27 and Executive Order No. 228, its participation was only to pay the
landowners accepting the valuations fixed by the DAR, upon the latters direction and in the amounts the DAR
determined. It prayed that the valuation by the DAR be retained or that a valuation be made judicially. RTC
rendered a decision ordering Landbank to pay P1,227,571.10. Land Bank submitted to the Court a so-called

18
Joint Manifestation and Motion (Re: Unconditional Acceptance of Revaluation) stating that the approval by
Land Banks responsible officers of the revaluation of the properties was communicated to the respondents for
their unconditional acceptance. Court received the Joint Motion to Approve the Attached Agreement and the
Agreement. Thereby, the parties prayed that the Court consider and approve the Agreement.

ISSUE: Whether or not there has been a compromise between the parties

RULING: Yes
There is no question that the foregoing Agreement was a compromise that the parties freely and voluntarily
entered into for the purpose of finally settling their dispute in this case. Under Article 2028 of the Civil Code, a
compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an
end to one already commenced. Accordingly, a compromise is either judicial, if the objective is to put an end
to a pending litigation, or extrajudicial, if the objective is to avoid a litigation. As a contract, a compromise is
perfected by mutual consent. However, a judicial compromise, while immediately binding between the parties
upon its execution, is not executory until it is approved by the court and reduced to a judgment. The validity of
a compromise is dependent upon its compliance with the requisites and principles of contracts dictated by law.
Also, the terms and conditions of a compromise must not be contrary to law, morals, good customs, public
policy and public order. A review of the terms of the Agreement indicates that it is a judicial compromise
because the parties intended it to terminate their pending litigation by fully settling their dispute. Indeed, with
the respondents thereby expressly signifying their unconditional or absolute acceptance and full receipt of the
foregoing amounts as just compensation for subject properties the First Party and the Second Party hereby
consider the case titled Land Bank of the Philippines v. Heirs of Spouses Jorja Rigor-Soriano and Magin
Soriano, namely: Marivel S. Carandang and Joseph Soriano (G.R. No. 178312) pending before the Supreme
Court, closed and terminated, the ultimate objective of the action to determine just compensation for the
landowners was achieved.

Domingo Gonzalo vs. John Tarnate Jr.

G.R. No. 160600, January 15, 2014
BERSAMIN, J.:
The doctrine of in pari delicto which stipulates that the guilty parties to an illegal contract are not entitled to
any relief, cannot prevent a recovery if doing so violates the public policy against unjust enrichment.
FACTS:
After the Department of Public Works and Highways (DPWH) had awarded the contract for the
improvement of the Sadsadan-Maba-ay Section of the Mountain Province-Benguet Road to his company,
Gonzalo Construction, petitioner subcontracted to respondent John Tarnate, Jr. (Tarnate) the supply of
materials and labor for the project. Gonzalo also executed a deed of assignment whereby he, as the contractor,
was assigning to Tarnate an amount equivalent to 10% of the total collection from the DPWH for the project as
the rent for Tanates equipment that had been been utilized in the project.
However, Tarnate learned that Gonzalo had unilaterally rescinded the deed of assignment, and that the
disbursement voucher for the 10% retention fee had then been issued in the name of Gonzalo, and the retention
fee released to him. Tarnate demanded the payment of the retention fee from Gonzalo, but to no avail,
prompting him to file a suit against Gonzalo to recover the retention fee moral and exemplary damages for
breach of contract, and attorneys fees. For his defense, Gonzalo argued that Tarnate, having been fully aware
of the illegality and ineffectuality of the deed of assignment from the time of its execution, could not go to
court with unclean hands to invoke any right based on the invalid deed of assignment or on the product of such
deed of assignment.

ISSUE:
Whether or not the doctrine of in pari delicto will prevent Tarnate from recovering the retention fee from
Gonzalo.

RULING: NO.
Pursuant to Section 6 of Presidential Decree No. 1594, every contractor is prohibited from
subcontracting with or assigning to another person any contract or project that he has with the DPWH unless
the DPWH Secretary has approved the subcontracting or assignment.
Their subcontract was illegal, therefore, because it did not bear the approval of the DPWH Secretary.
Necessarily, the deed of assignment was also illegal, because it sprung from the subcontract. The illegality of

19
the Sub-Contract Agreement necessarily affects the Deed of Assignment because the rule is that an illegal
agreement cannot give birth to a valid contract.
According to Article 1412 (1) of the Civil Code, the guilty parties to an illegal contract cannot recover
from one another and are not entitled to an affirmative relief because they are in pari delicto or in equal fault.
The doctrine of in pari delicto is a universal doctrine, such that, where the parties are in pari delicto, no
affirmative relief of any kind will be given to one against the other. Nonetheless, the application of the doctrine
of in pari delicto is not always rigid. An accepted exception arises when its application contravenes well-
established public policy. The prevention of unjust enrichment is a recognized public policy of the State, for
Article 22 of the Civil Code explicitly provides that "[e]very person who through an act of performance by
another, or any other means, acquires or comes into possession of something at the expense of the latter without
just or legal ground, shall return the same to him.
There is no question that Tarnate provided the equipment, labor and materials for the project
obligations under the subcontract and the deed of assignment; and that it was Gonzalo as the contractor who
received the payment for his contract with the DPWH as well as the 10% retention fee that should have been
paid to Tarnate. Gonzalo would be unjustly enriched at the expense of Tarnate if the latter was to be barred
from recovering because of the rigid application of the doctrine of in pari delicto.
The doctrine of in pari delicto which stipulates that the guilty parties to an illegal contract are not entitled to
any relief, cannot prevent a recovery if doing so violates the public policy against unjust enrichment.
On the other hand, the grant of moral damages, attorneys fees and litigation expenses to Tarnate to be
inappropriate. No damages may be recovered under a void contract, which, being nonexistent, produces no
juridical tie between the parties involved. Lastly, the letter and spirit of Article 22 of the Civil Code command
Gonzalo to make a full reparation or compensation to Tarnate. The illegality of their contract should not be
allowed to deprive Tarnate from being fully compensated through the imposition of legal interest.

First United Constructors Corporation and Blue Star Construction Corporation vs. Bayanihan
Automotive Corporation
G.R. No. 164985, January 15, 2014
BERSAMIN, J.:
The legal basis for recoupment by the buyer is the first paragraph of Article 1599 of the Civil Code.
Legal compensation takes place when the requirements set forth in Article 1278 and Article 1279 of the Civil
Code are present.
FACTS:
From May 27, 1992 to July 8, 1992, petitioner First United Constructors Corporation and petitioner
Blue Star Construction Corporation ordered six units of dump trucks from the respondent. For two consecutive
purchases (Hino Prime Mover and Isuzu Transit Mixer respectively), FUCC partially paid in cash, and the
balance through post-dated checks, The respondent learned that FUCC had ordered the payment stopped upon
presentment of checks for payment, hence, it demanded for the full settlement of their obligation from, but to
no avail. Instead, the petitioners informed them that they were withholding payment of the checks due to the
breakdown of the second dump truck they had earlier purchased from respondent.
Due to the refusal to pay, the respondent commenced this action for collection of the unpaid balance
represented by the two checks. RTC rendered its judgment, ordering petitioners to pay for the unpaid balance
of the purchase price of the Hino Prime Mover and the Isuzu Transit Mixer with legal interest and attorneys
fees; and declaring the respondent liable to pay the petitioners the costs of the repairs incurred by the
petitioners. The RTC held that the petitioners could not avail themselves of legal compensation because the
claims they had set up in the counterclaim were not liquidated and demandable.

ISSUES:
Whether or not the petitioners can validly exercise the right of recoupment.
Whether or not the costs of the repairs and spare parts for the second dump truck could be offset for the
petitioners obligations to the respondent.

RULING:
Petitioners could not validly resort to recoupment against respondent.
The legal basis for recoupment by the buyer is the first paragraph of Article 1599 of the Civil Code.
Defendants-appellants act of ordering the payment on the prime mover and transit mixer stopped was improper
considering that the said sale was a different contract from that of the dump trucks earlier purchased by
defendants-appellants.

20
 The claim of defendants-appellants for breach of warranty, i.e. the expenses paid for the repair and spare
parts of dump truck no. 2 is therefore not a proper subject of recoupment since it does not arise out of the
contract or transaction sued on or the claim of plaintiff-appellee for unpaid balances on the last two (2)
purchases, i. e. the prime mover and the transit mixer. Recoupment must arise out of the contract or transaction
upon which the plaintiffs claim is founded. To be entitled to recoupment, therefore, the claim must arise from
the same transaction, i.e., the purchase of the prime mover and the transit mixer and not to a previous contract
involving the purchase of the dump truck.

Legal compensation was permissible

Legal compensation takes place when the requirements set forth in Article 1278 and Article 1279 of the
Civil Code are present. Considering that preponderant evidence showing that petitioners had spent the amount
of P71,350.00 for the repairs and spare parts of the second dump truck within the warranty period of three
months supported the finding of the two lower courts, the Court accepts their finding.
A debt is liquidated when its existence and amount are determined. Accordingly, an unliquidated claim set
up as a counterclaim by a defendant can be set off against the plaintiffs claim from the moment it is liquidated
by judgment.. With petitioners expenses for the repair of the dump truck being already established and
determined with certainty by the lower courts, it follows that legal compensation could take place because all
the requirements were present.

Roberto David vs. Eduardo David

G.R. No. 162365, January 15, 2014
BERSAMIN, J.:
Redemption within the period allowed by law is not a matter of intent but of payment or valid tender of the full
redemption price within the period. Verily, the tender of payment is the sellers manifestation of his desire to
repurchase the property with the offer of immediate performance.
FACTS:
Eduardo and his brother Edwin C. David sold their inherited properties to Roberto, specifically: (a) a
parcel of land together with all the improvements existing thereon, located in Baguio City; and (b) two units
International CO 9670 Truck Tractor with two Mi-Bed Trailers. The parties further agreed to give Eduardo and
Edwin the right to repurchase the properties within a period of three years from the execution of the deed of
sale based on the purchase price agreed upon, plus 12% interest per annum.
In April 1997, Roberto and Edwin executed a memorandum of agreement (MOA)5 with the Spouses
Go, by which they agreed to sell the Baguio City lot to the latter. Roberto gave Eduardo P2,800,000.00 and
returned to him one of the truck tractors and trailers subject of the deed of sale. Eduardo demanded for the
return of the other truck tractor and trailer, but Roberto refused to heed the demand. Thus, Eduardo initiated
this replevin suit against Roberto. Roberto denied that Eduardo could repurchase the properties in question; and
insisted that the MOA had extinguished their deed of sale by novation. The RTC rendered judgment in favor of
Eduardo. On appeal, the CA promulgated its decision affirming the RTC. Hence, this petition for review
on certiorari.

ISSUES:
Whether or not Eduardo can exercise the right of repurchase.
Whether or not the MOA had extinguished the obligations established under the deed of sale by novation.

RULING:
YES.
A sale with right to repurchase is governed by Article 1601 of the Civil Code. The CA and the RTC both
found and held that Eduardo had complied with the conditions stipulated in the deed of sale and prescribed by
Article 1616 of the Civil Code. Pertinently, the CA stated: It should be noted that the alleged repurchase was
exercised within the stipulated period of three (3) years from the time the Deed of Sale with Assumption of
Mortgage was executed. From the testimony of the defendant himself, the preconditions for the exercise of
plaintiffs right to repurchase were adequately satisfied by the latter. Redemption within the period allowed by
law is not a matter of intent but of payment or valid tender of the full redemption price within the period.
Verily, the tender of payment is the sellers manifestation of his desire to repurchase the property with the offer
of immediate performance. Here, Eduardo paid the repurchase price to Roberto by depositing the proceeds of

21
the sale of the Baguio City lot in the latters account. Such payment was an effective exercise of the right to
repurchase.

The issue of novation involves a question of fact, as it necessarily requires the factual determination of the
existence of the various requisites of novation, namely: (a) there must be a previous valid obligation; (b) the
parties concerned must agree to a new contract; (c) the old contract must be extinguished; and (d) there must be
a valid new contract.
In sales with the right to repurchase, the title and ownership of the property sold are immediately
vested in the vendee, subject to the resolutory condition of repurchase by the vendor within the stipulated
period. Accordingly, the ownership of the affected properties reverted to Eduardo once he complied with the
condition for the repurchase, thereby entitling him to the possession of the other motor vehicle with trailer.

Asb Realty Corporation vs. Ortigas & Company Limited Partnership

G.R. No. 202947, December 9, 2015
BERSAMIN, J.:
The doctrine of estoppel was based on public policy, fair dealing, good faith and justice, and its purpose was to
forbid a party to speak against his own act or omission, representation, or commitment to the injury of another
to whom the act, omission, representation, or commitment was directed and who reasonably relied thereon.
The doctrine sprang from equitable principles and the equities in the case, and was designed to aid the law in
the administration of justice where without its aid injustice would result. Estoppel has been applied by the
Court wherever and whenever special circumstances of the case so demanded.
FACTS:
Ortigas & Company Limited Partnership entered into a Deed of Sale with Amethyst Pearl Corporation
involving the parcel of land with an area of 1,012 square meters situated in Barrio Oranbo, Pasig City and
registered under Transfer Certificate of Title (TCT) No. 65118 of the Register of Deeds of Rizal4 for the
consideration of P2,024,000.00. Amethyst assigned the subject property to its sole stockholder, petitioner ASB
Realty Corporation (the petitioner), under a so-called Deed of Assignment in Liquidation in consideration of
10,000 shares of the petitioners outstanding capital stock. Thus, the property was transferred to the petitioner
free from any liens or encumbrances except those duly annotated on TCT No. PT-94175. The Register of
Deeds of Rizal cancelled TCT No. PT-94175 and issued TCT No. PT-105797 in the name of the petitioner with
the same encumbrances annotated on TCT No. PT-94175. Ortigas filed its complaint for specific performance
against the petitioner. For reliefs, Ortigas prayed for the reconveyance of the subject property, or, alternatively,
for the demolition of the structures and improvements thereon, plus the payment of penalties, attorneys fees
and costs of suit.

ISSUE: Whether or not Ortigas action for rescission would prosper

RULING:
Ortigas action for rescission could not prosper
The express terms of the Deed of Assignment in Liquidation, indicate that Amethyst transferred to the
petitioner only the tangible asset consisting of the parcel of land covered by TCT No. PT-94175 registered in
the name of Amethyst. By no means did Amethyst assign the rights or duties it had assumed under the Deed of
Sale. The petitioner thus became vested with the ownership of the parcel of land free from any lien or
encumbrance except those that are duly annotated on the [title] from the time Amethyst executed the Deed of
Assignment in Liquidation. Ortigas apparently recognized without any reservation the issuance of the new
certificate of title in the name of Amethyst and the subsequent transfer by assignment from Amethyst to the
petitioner that resulted in the issuance of the new certificate of title under the name of the petitioner. As such,
Ortigas was estopped from assailing the petitioners acquisition and ownership of the property.
The application of estoppel was appropriate. The doctrine of estoppel was based on public policy, fair dealing,
good faith and justice, and its purpose was to forbid a party to speak against his own act or omission,
representation, or commitment to the injury of another to whom the act, omission, representation, or
commitment was directed and who reasonably relied thereon. The doctrine sprang from equitable principles
and the equities in the case, and was designed to aid the law in the administration of justice where without its
aid injustice would result. Estoppel has been applied by the Court wherever and whenever special
circumstances of the case so demanded.
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 Amethysts
obligations under the Deed of Sale, whether through the Deed of Assignment in Liquidation or another

22
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 under Article 1191 of the Civil Code
is proper if one of the parties to the contract commits a substantial breach of its provisions. It abrogates the
contract from its inception and requires the mutual restitution of the benefits received; hence, it can be carried
out only when the party who demands rescission can return whatever he may be obliged to restore. Ortigas did
not have a cause of action against the petitioner for the rescission of the Deed of Sale.

Megaworld Properties and Holdings Inc. et al vs. Majestic Finance and Investment Co.
G.R. No. 169694, December 9, 2015
BERSAMIN, J.:
In each activity, the obligation of each party was dependent upon the obligation of the other. Although their
obligations were to be performed simultaneously, the performance of an activity obligation was still
conditioned upon the fulfillment of the continuous obligation, and vice versa. Should either party cease to
perform a continuous obligation, the other's subsequent activity obligation would not accrue. Conversely, if an
activity obligation was not performed by either party, the continuous obligation of the other would cease to
take effect. The performance of the continuous obligation was subject to the resolutory condition that the
precedent obligation of the other party, whether continuous or activity, was fulfilled as it became due.
Otherwise, the continuous obligation would be extinguished.
FACTS:
Megaworld Properties and Holdings, Inc. (developer) entered into a Joint Venture Agreement (JVA) with
Majestic Finance and Investment Co., Inc. (owner) for the development of the residential subdivision located in
Brgy. Alingaro, General Trias, Cavite. According to the JV A, the development of the 215 hectares of land
belonging to the owner (joint venture property) would be for the sole account of the developer; and that upon
completion of the development of the subdivision, the owner would compensate the developer in the form of
saleable residential subdivision lots.6 The JV A further provided that the developer would advance all the costs
for the relocation and resettlement of the occupants of the joint venture property, subject to reimbursement by
the owner; and that the developer would deposit the initial amount of P10,000,000.00 to defray the expenses for
the relocation and settlement, and the costs for obtaining from the Government the exemptions and conversion
permits, and the required clearances.
The developer and owner agreed, through the addendum to the JV A, to increase the initial deposit for the
settlement of claims and the relocation of the tenants from P10,000,000.00 to P160,000,000.00. The developer,
by deed of assignment, transferred, conveyed and assigned to Empire East Land Holdings, Inc.
(developer/assignee) all its rights and obligations under the JV A including the addendum. The owner filed in
the RTC a complaint for specific performance with damages against the developer, the developer/assignee, and
respondent Andrew Tan, who are now the petitioners herein. The complaint was mainly based on the failure of
the petitioners to comply with their obligations under the JV A.

ISSUE: whether either party of a joint venture agreement to develop property into a residential subdivision has
already performed its obligation as to entitle it to demand the performance of the other's reciprocal obligation

RULING:
The obligations of the parties under the JV A were unquestionably reciprocal. Reciprocal obligations are those
that arise from the same cause, and in which each party is a debtor and a creditor of the other at the same time,
such that the obligations of one are dependent upon the obligations of the other. They are to be performed
simultaneously, so that the performance by one is conditioned upon the simultaneous fulfillment by the other.
The determination of default on the part of either of the parties depends on the terms of the JV A that clearly
categorized the parties' several obligations.
In each activity, the obligation of each party was dependent upon the obligation of the other. Although their
obligations were to be performed simultaneously, the performance of an activity obligation was still
conditioned upon the fulfillment of the continuous obligation, and vice versa. Should either party cease to
perform a continuous obligation, the other's subsequent activity obligation would not accrue. Conversely, if an
activity obligation was not performed by either party, the continuous obligation of the other would cease to take
effect. The performance of the continuous obligation was subject to the resolutory condition that the precedent
obligation of the other party, whether continuous or activity, was fulfilled as it became due. Otherwise, the
continuous obligation would be extinguished.
According to Article 1184 of the Civil Code, the condition that some event happen at a determinate time shall
extinguish the obligation as soon as the time expires, or if it has become indubitable that the event will not take
place. Here, the common cause of the parties in entering into the joint venture was the development of the joint

23
venture property into the residential subdivision as to eventually profit therefrom. Consequently, all of the
obligations under the JVA were subject to the happening of the complete development of the joint venture
property, or if it would become indubitable that the completion would not take place, like when an obligation,
whether continuous or activity, was not performed. Should any of the obligations, whether continuous or
activity, be not performed, all the other remaining obligations would not ripen into demandable obligations
while those already performed would cease to take effect. This is because every single obligation of each party
under the JV A rested on the common cause of profiting from the developed subdivision.
It appears that upon the execution of the JV A, the parties were performing their respective obligations until
disagreement arose between them that affected the subsequent performance of their accrued obligations. Being
reciprocal in nature, their respective obligations as the owner and the developer were dependent upon the
performance by the other of its obligations; hence, any claim of delay or non-performance against the other
could prosper only if the complaining party had faithfully complied with its own correlative obligation.

Mactan Cebu International Airport vs. Heirs of Gavina Ijordan

G.R. No. 173140, January 11, 2016
BERSAMIN, J.:
A sale of jointly owned real property by a co-owner without the express authority of the others is unenforceable
against the latter, but valid and enforceable against the seller.
FACTS:
Julian Chizon (Julian) executed a Deed of Extrajudicial Settlement and Sale (Deed) covering Lot No. 4539
(subject lot) situated in Ibo, Municipality of Opon (now Lapu-Lapu City) in favor of the Civil Aeronautics
Administration (CAA), the predecessor-in-interest of petitioner Manila Cebu International Airport Authority
(MCIAA). Since then until the present, MCIAA remained in material, continuous, uninterrupted and adverse
possession of the subject lot through the CAA, later renamed the Bureau of Air Transportation (BAT), and is
presently known as the Air Transportation Office (ATO). The subject lot was transferred and conveyed to
MCIAA by virtue of Republic Act No. 6958. Respondents caused the judicial reconstitution of the original
certificate of title covering the subject lot (issued by virtue of Decree No. 531167). Consequently, Original
Certificate of Title (OCT) No. R0-2431 of the Register of Deeds of Cebu was reconstituted for Lot No. 4539 in
the names of the respondents' predecessors-in-interest. They asserted that they had not sold their shares in the
subject lot, and had not authorized Julian to sell their shares to MCIAA's predecessor-in-interest.

ISSUE: Was the subject lot validly conveyed in its entirety to the petitioner

RULING:
Both the CA and the RTC found the Deed and the Tax Declaration with which MCIAA would buttress its right
to the possession and ownership of the subject lot insufficient to substantiate the right of MCIAA to the relief
sought. CA and the RTC concluded that the Deed was void as far as the respondents' shares in the subject lot
were concerned, but valid as to Julian's share. Their conclusion was based on the absence of the authority from
his co-heirs in favor of Julian to convey their shares in the subject lot. We have no reason to overturn the
affirmance of the CA on the issue of the respondents' co-ownership with Julian. Hence, the conveyance by
Julian of the entire property pursuant to the Deed did not bind the respondents for lack of their consent and
authority in his favor. As such, the Deed had no legal effect as to their shares in the property. Article 1317 of
the Civil Code provides that no person could contract in the name of another without being authorized by the
latter, or unless he had by law a right to represent him; the contract entered into in the name of another by one
who has no authority or legal representation, or who has acted beyond his powers, is unenforceable, unless it is
ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the
other contracting party. But the conveyance by Julian through the Deed had full force and effect with respect to
his share of 1/22 of the entire property consisting of 546 square meters by virtue of its being a voluntary
disposition of property on his part.
MCIAA's assertion of estoppel or ratification to bar the respondents' contrary claim of ownership of their shares
in the subject lot is bereft of substance. The doctrine of estoppel applied only to those who were parties to the
contract and their privies or successors-in-interest. Moreover, the respondents could not be held to ratify the
contract that was declared to be null and void with respect to their share, for there was nothing for them to
ratify. Verily, the Deed, being null and void, had no adverse effect on the rights of the respondents in the
subject lot.

24
Sps. Roberto and Adelaida Pen vs. Sps. Santos and Linda Julian
G.R. No. No. 160408, January 11, 2016
BERSAMIN, J.:
Article 2088 of the Civil Code prohibits the creditor from appropriating the things given by way of pledge or
mortgage, or from disposing of them; any stipulation to the contrary is null and void. The elements for pactum
commissorium to exist are as follows, to wit: (a) that there should be a pledge or mortgage wherein property is
pledged or mortgaged by way of security for the payment of the principal obligation; and (b) that there should
be a stipulation for an automatic appropriation by the creditor of the thing pledged or mortgaged in the event
of non-payment of the principal obligation within the stipulated period.
FACTS:
The Julians obtained a P60,000.00 loan from Adelaida Pen. On May 23, 1986 and on May 27, 1986, they were
again extended loans in the amounts of P50,000.00 and P10,000.00, respectively by Adelaida. The initial
interests were deducted by appellant Adelaida, (1) P3,600.00 from the P60,000.00 loan; (2) P2,400.00 from the
P50,000.00 loan; and (3) P600.00 from the P10,000.00 loan. Two (2) promissory notes were executed by the
appellees in favor of Adelaida to evidence the foregoing loans, one dated April 9, 1986 and payable on June 15,
1986 for the P60,000.00 loan and another dated May 22, 1986 payable on July 22, 1986 for the P50,000.00
loan. Both loans were charged interest at 6% per month. As security, on May 23, 1986, the appellees executed a
Real Estate Mortgage over their property covered by TCT No. 327733 registered under the name of appellee
Santos Julian, Jr. The owner's duplicate of TCT No. 327733 was delivered to the appellants. When the loans
became due and demandable, appellees failed to pay despite several demands. As such, appellant Adelaida
decided to institute foreclosure proceedings. However, she was prevailed upon by appellee Linda not to
foreclose the property because of the cost of litigation and since it would cause her embarrassment as the
proceedings will be announced in public places at the City Hall, where she has many friends. Instead, appellee
Linda offered their mortgaged property as payment in kind.

ISSUE: whether or not the CA erred in ruling against the validity of the deed of sale; and (2) whether or not the
CA erred in ruling that no monetary interest was due for Linda's use of Adelaida's money.

RULING:
Article 2088 of the Civil Code prohibits the creditor from appropriating the things given by way of pledge or
mortgage, or from disposing of them; any stipulation to the contrary is null and void. The elements for pactum
commissorium to exist are as follows, to wit: (a) that there should be a pledge or mortgage wherein property is
pledged or mortgaged by way of security for the payment of the principal obligation; and ( b) that there should
be a stipulation for an automatic appropriation by the creditor of the thing pledged or mortgaged in the event of
non-payment of the principal obligation within the stipulated period. The first element was present considering
that the property of the respondents was mortgaged by Linda in favor of Adelaida as security for the farmer's
indebtedness. As to the second, the authorization for Adelaida to appropriate the property subject of the
mortgage upon Linda's default was implied from Linda's having signed the blank deed of sale simultaneously
with her signing of the real estate mortgage. The haste with which the transfer of property was made upon the
default by Linda on her obligation, and the eventual transfer of the property in a manner not in the form of a
valid dacion en pago ultimately confirmed the nature of the transaction as a pactum commissorium.
It is notable that in reaching its conclusion that Linda's deed of sale had been executed simultaneously with the
real estate mortgage, the CA first compared the unfilled deed of sale presented by Linda with the notarized
deed of sale adduced by Adelaida. The CA justly deduced that the completion and execution of the deed of sale
had been conditioned on the non-payment of the debt by Linda, and reasonably pronounced that such
circumstances rendered the transaction pactum commissorium. The Court should not disturb or undo the CA's
conclusion in the absence of the clear showing of abuse, arbitrariness or capriciousness on the part of the CA.
Dacion en pago is in the nature of a sale because property is alienated in favor of the creditor in satisfaction of a
debt in money. For a valid dacion en pago to transpire, however, the attendance of the following elements must
be established, namely: (a) the existence of a money obligation; (b) the alienation to the creditor of a property
by the debtor with the consent of the former; and (c) the satisfaction of the money obligation of the debtor. To
have a valid dacion en pago, therefore, the alienation of the property must fully extinguish the debt. Yet, the
debt of the respondents subsisted despite the transfer of the property in favor of Adelaida.
In a sale, the contract is perfected at the moment when the seller obligates herself to deliver and to transfer
ownership of a thing or right to the buyer for a price certain, as to which the latter agrees. The absence of the
consideration from Linda's copy of the deed of sale was credible proof of the lack of an essential requisite for
the sale. In other words, the meeting of the minds of the parties so vital in the perfection of the contract of sale
did not transpire. And, even assuming that Linda's leaving the consideration blank implied the authority of
Adelaida to fill in that essential detail in the deed of sale upon Linda's default on the loan, the conclusion of the

25
CA that the deed of sale was a pactum commisorium still holds, for, as earlier mentioned, all the elements of
pactum commisorium were present.
The CA correctly deleted the monetary interest from the judgment. Pursuant to Article 1956 of the Civil Code,
no interest shall be due unless it has been expressly stipulated in writing. In order for monetary interest to be
imposed, therefore, two requirements must be present, specifically: (a) that there has been an express
stipulation for the payment of interest; and ( b) that the agreement for the payment of interest has been reduced
in writing. Considering that the promissory notes contained no stipulation on the payment of monetary interest,
monetary interest cannot be validly imposed.
The CA properly imposed compensatory interest to offset the delay in the respondents' performance of their
obligation. Nonetheless, the imposition of the legal rate of interest should be modified to conform to the
prevailing jurisprudence. The rate of 12% per annum imposed by the CA was the rate set in accordance with
Eastern Shipping Lines, Inc., v. Court of Appeals. In the meanwhile, Bangko Sentral ng Pilipinas Monetary
Board Resolution No. 796 dated May 16, 2013, amending Section 2 of Circular No. 905, Series of 1982, and
Circular No. 799, Series of 2013, has lowered to 6% per annum the legal rate of interest for a loan or
forbearance of money, goods or credit starting July 1, 2013. This revision is expressly recognized in Nacar v.
Gallery Frames. It should be noted, however, that imposition of the legal rate of interest at 6% per annum is
prospective in application.

Agency
Marcos Prieto vs. Court of Appeals
G.R. No. 158597, June 18, 2012
BERSAMIN, J.:
Ratification or confirmation may validate an act done in behalf of another without authority from the latter.
The effect is as if the latter did the act himself.
FACTS:
Spouses Marcos V. Prieto and Susan M. Prieto filed in the Regional Trial Court in Bauang, La Union a
complaint against Far East Bank and Trust Company (FEBTC) and the Spouses Antonio Prieto and Monette
Prieto to declare the nullity of several real estate mortgage contracts. The plaintiffs narrated that they had
executed a special power of attorney (SPA) to authorize Antonio to borrow money from FEBTC, using as
collateral their real property consisting of a parcel of land located in Calumbaya, Bauang, La Union; that
defendant spouses, using the property as collateral, had thereafter obtained from FEBTC a series of loans
totaling P5,000,000.00, evidenced by promissory notes, and secured by separate real estate mortgage
contracts; that defendant spouses had failed to pay the loans, leading FEBTC to initiate the extra-judicial
foreclosure of the mortgages; and that the promissory notes and the real estate mortgage contracts were in the
name of defendant spouses for themselves alone, who had incurred the obligations, rendering the promissory
notes and the mortgage contracts null and void ab initio. RTC rendered its decision dismissing the complaint,
ruling that the mortgage contracts, even if entered into in the name of the agent, should be deemed made in his
behalf as the principal because the things involved belonged to the principal

ISSUE: (1) Whether or not the decision of CA was void (2) Whether or not CA erred in rejecting his petition
for certiorari because his notice of appeal in the RTC had been tardy by only two days (3) Whether or not there
was failure on the part or FEBTC to duly investigate the authority of Antonio in contracting the exceptionally
and relatively immense loan

RULING: (1) No (2) No (3) No

First of all, Marcos submits that the CAs assailed resolution was signed only by Associate Justices
Vasquez and Reyes, Jr.; that Associate Justice Guaria III as the third Member did not sign the resolution; that
the absence of Associate Justice Guaria IIIs signature revealed the lack of unanimity in the voting, rendering
the resolution null and void pursuant to Section 4 of the 1999 Internal Rules of the Court of Appeals. Associate
Justice Guaria III expressly concurred in the resolution in question, as borne out by the copy itself of the
assailed resolution attached to the petition for review as Enclosure A.
The general rule is that a timely appeal is the remedy to obtain reversal or modification of the judgment
on the merits. In other words, the perfection of an appeal within the reglementary period is mandatory because
the failure to perfect the appeal within the time prescribed by the Rules of Court unavoidably renders the
judgment final as to preclude the appellate court from acquiring the jurisdiction to review the judgment. We
stress, too, that the statutory nature of the right to appeal requires the appealing party to strictly comply with the
statutes or rules governing the perfection of the appeal because such statutes or rules are considered

26
indispensable interdictions against needless delays and are instituted in favor of an orderly discharge of judicial
business. In the absence of highly exceptional circumstances warranting their relaxation, therefore, the statutes
or rules should remain inviolable.
Marcos could not deny that under the express terms of the SPA,[26] he had precisely granted to Antonio
as his agent the authority to borrow money, and to transfer and convey the property by way of mortgage to
FEBTC; to sign, execute and deliver promissory notes; and to receive the proceeds of the loans on the formers
behalf. In other words, the mortgage contracts were valid and enforceable against petitioner, who was
consequently fully bound by their terms. Even if it was assumed that Antonios 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 Antonios 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.
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. Here, there was such a ratification by Marcos, as borne out by his execution of
the letter of acknowledgement. Being himself a lawyer, Marcos was aware of the import and consequences of
the letter of acknowledgment.

Credit Transactions
Spouses Francisco and Merced Rabat vs. Philippine National Bank
G.R. No. 158755, June 18, 2012
BERSAMIN, J.:
The inadequacy of the bid price in an extrajudicial foreclosure sale of mortgaged properties will not per
se invalidate the sale. Additionally, the foreclosing mortgagee is not precluded from recovering the deficiency
should the proceeds of the sale be insufficient to cover the entire debt.
FACTS:
Respondent spouses Francisco and Merced Rabat applied for a loan with PNB. Subsequently, the
RABATs were granted a medium-term loan of P4.0 Million to mature three years from the date of
implementation. RABATs signed a Credit Agreement and executed a Real Estate Mortgage over twelve (12)
parcels of land which stipulated that the loan would be subject to interest at the rate of 17% per annum, plus the
appropriate service charge and penalty charge of 3% per annum on any amount remaining unpaid or not
renewed when due. RABATs executed another document denominated as "Amendment to the Credit
Agreement" purposely to increase the interest rate from 17% to 21% per annum, inclusive of service charge and
a penalty charge of 3% per annum to be imposed on any amount remaining unpaid or not renewed when due.
They also executed another Real Estate Mortgage over nine (9) parcels of land as additional security for their
medium-term loan of Four Million (P4.0 M). These parcels of land are agricultural, commercial and residential
lots situated in Mati, Davao Oriental. The several availments of the loan accommodation on various dates by
the RABATs reached the aggregate amount of P3,517,380, as evidenced by the several promissory notes, all of
which were due on 14 March 1983. The RABATs failed to pay their outstanding balance on due date. PNB
filed a petition for the extrajudicial foreclosure of the real estate mortgage executed by the RABATs. After due
notice and publication, the mortgaged parcels of land were sold at a public auction WITH PNB as the lone and
highest bidder. As the proceeds of the public auction were not enough to satisfy the entire obligation of the
RABATs, the PNB sent anew demand letters. Upon failure of the RABATs to comply with the demand to settle
their remaining outstanding obligation which then stood at P14,745,398.25, including interest, penalties and
other charges, PNB eventually filed a complaint for a sum of money before the Regional Trial Court of
Manila.

ISSUE: (1) Whether or not the inadequacy of the bid price at the forced sale nullifies the sale (2) Whether or
not PNB was entitled to recover any deficiency due to the invalidity of the forced sales

RULING: (1) No (2) Yes

The inadequacy of the bid price at a forced sale, unlike that in an ordinary sale, is immaterial and does
not nullify the sale; in fact, in a forced sale, a low price is considered more beneficial to the mortgage debtor
because it makes redemption of the property easier. At any rate, we consider it notable enough that PNBs bid
price of 3,874,800.00 might not even be said to be outrageously low as to be shocking to the conscience. As
the CA cogently noted in the second amended decision, that bid price was almost equal to both

27
the 4,000,000.00 applied for by the Spouses Rabat as loan, and to the total sum of 3,517,380.00 of their
actual availment from PNB.

It is settled that if the proceeds of the sale are insufficient to cover the debt in an extrajudicial
foreclosure of the mortgage, the mortgagee is entitled to claim the deficiency from the debtor. There should be
no question that PNB was legally entitled to recover the penalty charge of 3% per annum and attorneys fees
equivalent to 10% of the total amount due. The documents relating to the loan and the real estate mortgage
showed that the Spouses Rabat had expressly conformed to such additional liabilities; hence, they could not
now insist otherwise. Equally axiomatic are that a contract is the law between the contracting parties, and that
they have the autonomy to include therein such stipulations, clauses, terms and conditions as they may want to
include. Inasmuch as the Spouses Rabat did not challenge the legitimacy and efficacy of the additional
liabilities being charged by PNB, they could not now bar PNB from recovering the deficiency representing the
additional pecuniary liabilities that the proceeds of the forced sales did not cover.

International Hotel Corporation vs. Francisco Joaquin, Jr. and Rafael Suarez
G.R. No. 158361, April 10, 2013
BERSAMIN, J.:
To avoid unjust enrichment to a party from resulting out of a substantially performed contract, the principle of
quantum meruit may be used to determine his compensation in the absence of a written agreement for that
purpose. The principle of quantum meruit justifies the payment of the reasonable value of the services rendered
by him.
FACTS:
Respondent Francisco B. Joaquin, Jr. submitted a proposal to the Board of Directors of the International Hotel
Corporation (IHC) for him to render technical assistance in securing a foreign loan for the construction of a
hotel, to be guaranteed by the Development Bank of the Philippines (DBP). The proposal encompassed nine
phases, namely: (1) the preparation of a new project study; (2) the settlement of the unregistered mortgage prior
to the submission of the application for guaranty for processing by DBP; (3) the preparation of papers
necessary to the application for guaranty; (4) the securing of a foreign financier for the project; (5) the securing
of the approval of the DBP Board of Governors; (6) the actual follow up of the application with DBP3; (7) the
overall coordination in implementing the projections of the project study; (8) the preparation of the staff for
actual hotel operations; and (9) the actual hotel operations. The IHC Board of Directors approved phase one to
phase six of the proposal during the special board meeting on February 11, 1969, and earmarked P2,000,000.00
for the project. Anent the financing, IHC applied with DBP for a foreign loan guaranty. DBP processed the
application, and approved it on October 24, 1969 subject to several conditions. On July 11, 1969, shortly after
submitting the application to DBP, Joaquin wrote to IHC to request the payment of his fees in the amount of
P500,000.00 for the services that he had provided and would be providing to IHC in relation to the hotel project
that were outside the scope of the technical proposal. Joaquin intimated his amenability to receive shares of
stock instead of cash in view of IHCs financial situation. Joaquin presented to the IHC Board of Directors the
results of his negotiations with potential foreign financiers. He narrowed the financiers to Roger Dunn &
Company and Materials Handling Corporation. He recommended that the Board of Directors consider
Materials Handling Corporation based on the more beneficial terms it had offered. His recommendation was
accepted. Negotiations with Materials Handling Corporation and, later on, with its principal, Barnes
International (Barnes), ensued. While the negotiations with Barnes were ongoing, Joaquin and Jose Valero, the
Executive Director of IHC, met with another financier, the Weston International Corporation (Weston), to
explore possible financing. When Barnes failed to deliver the needed loan, IHC informed DBP that it would
submit Weston for DBPs consideration. As a result, DBP cancelled its previous guaranty through a letter dated
December 6, 1971. IHC entered into an agreement with Weston, and communicated this development to DBP
on June 26, 1972. However, DBP denied the application for guaranty for failure to comply with the conditions
contained in its November 12, 1971 letter. Due to Joaquins failure to secure the needed loan, IHC, through its
President Bautista, cancelled the 17,000 shares of stock previously issued to Joaquin and Suarez as payment for
their services. The latter requested a reconsideration of the cancellation, but their request was rejected. Joaquin
and Suarez commenced this action for specific performance, annulment, damages and injunction by a
complaint dated December 6, 1973 in the Regional Trial Court in Manila

ISSUE: Whether or not the petitioner is obliged to pay the respondent

RULING: Yes

28
Article 1186 and Article 1234 of the Civil Code cannot be the source of IHCs obligation to pay
respondents
Article 1186 refers to the constructive fulfillment of a suspensive condition, whose application calls for two
requisites, namely: (a) the intent of the obligor to prevent the fulfillment of the condition, and (b) the actual
prevention of the fulfillment. Mere intention of the debtor to prevent the happening of the condition, or to place
ineffective obstacles to its compliance, without actually preventing the fulfillment, is insufficient. IHC had no
intention, willful or otherwise, to prevent Joaquin and Suarez from meeting their undertaking. Such absence of
any intention negated the basis for the CAs reliance on Article 1186 of the Civil Code.
It is well to note that Article 1234 applies only when an obligor admits breaching the contract after honestly
and faithfully performing all the material elements thereof except for some technical aspects that cause no
serious harm to the obligee. IHC correctly submits that the provision refers to an omission or deviation that is
slight, or technical and unimportant, and does not affect the real purpose of the contract. The principle of
substantial performance is inappropriate when the incomplete performance constitutes a material breach of the
contract. A contractual breach is material if it will adversely affect the nature of the obligation that the obligor
promised to deliver, the benefits that the obligee expects to receive after full compliance, and the extent that the
non-performance defeated the purposes of the contract. Accordingly, for the principle embodied in Article 1234
to apply, the failure of Joaquin and Suarez to comply with their commitment should not defeat the ultimate
purpose of the contract.

IHC is nonetheless liable to pay under the rule on constructive fulfillment of a mixed conditional
obligation
To secure a DBP-guaranteed foreign loan did not solely depend on the diligence or the sole will of the
respondents because it required the action and discretion of third persons an able and willing foreign financial
institution to provide the needed funds, and the DBP Board of Governors to guarantee the loan. Such third
persons could not be legally compelled to act in a manner favorable to IHC. There is no question that when the
fulfillment of a condition is dependent partly on the will of one of the contracting parties, or of the obligor, and
partly on chance, hazard or the will of a third person, the obligation is mixed. Considering that the respondents
were able to secure an agreement with Weston, and subsequently tried to reverse the prior cancellation of the
guaranty by DBP, we rule that they thereby constructively fulfilled their obligation.

Quantum meruit should apply in the absence of an express agreement on the fees
Anent the P2,000,000.00, the CA rightly concluded that the full amount of P2,000,000.00 could not be awarded
to respondents because such amount was not allocated exclusively to compensate respondents, but was
intended to be the estimated maximum to fund the expenses in undertaking phase 6 of the scope of services. It
is notable that the confusion on the amounts of compensation arose from the parties inability to agree on the
fees that respondents should receive. Considering the absence of an agreement, and in view of respondents
constructive fulfillment of their obligation, the Court has to apply the principle of quantum meruit in
determining how much was still due and owing to respondents. Under the principle of quantum meruit, a
contractor is allowed to recover the reasonable value of the services rendered despite the lack of a written
contract. The measure of recovery under the principle should relate to the reasonable value of the services
performed. The principle prevents undue enrichment based on the equitable postulate that it is unjust for a
person to retain any benefit without paying for it. Being predicated on equity, the principle should only be
applied if no express contract was entered into, and no specific statutory provision was applicable.

United Coconut Planters Bank vs. Christopher Lumbo and Milagros Lumbo
G.R. No.162757, December 11, 2013
BERSAMIN, J.:
The implementation of a writ of possession issued pursuant to Act No. 3135 at the instance of the purchaser at
the foreclosure sale of the mortgaged property in whose name the title has been meanwhile consolidated
cannot be prevented by the injunctive writ.
FACTS:
The respondents borrowed the aggregate amount of P12,000,000.00 from UCPB. To secure the performance of
their obligation, they constituted a real estate mortgage on a parcel of land located in Boracay, Aklan and all the
improvements thereon that they owned and operated as a beach resort known as Titays South Beach Resort.
Upon their failure to settle the obligation, UCPB applied on November 11, 1998 for the extrajudicial
foreclosure of the mortgage, and emerged as the highest bidder at the ensuing foreclosure sale held on January
12, 1999. The certificate of sale was issued on the same day, and UCPB registered the sale in its name on
February 18, 1999. The title over the mortgaged property was consolidated in the name of UCPB after the

29
respondents failed to redeem the property within the redemption period. On January 7, 2000, the respondents
brought against UCPB in the RTC an action for the annulment of the foreclosure, legal accounting, injunction
against the consolidation of title, and damages (Civil Case No. 5920). During the pendency of Civil Case No.
5920, UCPB filed an ex parte petition for the issuance of a writ of possession to recover possession of the
property (Special Proceedings No. 5884). On September 5, 2000, the RTC granted the ex parte petition of
UCPB, and issued on December 4, 2001 the writ of possession directing the sheriff of the Province of Aklan to
place UCPB in the actual possession of the property. The writ of possession was served on the respondents on
January 23, 2002 with a demand for them to peacefully vacate on or before January 31, 2002. Although the
possession of the property was turned over to UCPB on February 1, 2002, they were allowed to temporarily
remain on the property for humanitarian reasons. On February 14, 2002, the respondents filed in the RTC
handling Special Proceedings No. 5884 a petition to cancel the writ of possession and to set aside the
foreclosure sale. They included an application for a writ of preliminary injunction and temporary restraining
order to prevent the implementation of the writ of possession. RTC denied the respondents application for the
issuance of a writ of preliminary injunction

ISSUE: Whether the CA correctly granted the injunctive writ to enjoin the implementation of the writ of
possession the RTC had issued to place UCPB in the possession of the mortgaged property

RULING:
A writ of possession commands the sheriff to place a person in possession of real property. It may be issued in
the following instances, namely: (1) land registration proceedings under Section 17 of Act No. 496; (2) judicial
foreclosure, provided the debtor is in possession of the mortgaged property, and no third person, not a party to
the foreclosure suit, had intervened; (3) extrajudicial foreclosure of a real estate mortgage, pending redemption
under Section 7 of Act No. 3135, as amended by Act No. 4118; and (4) execution sales, pursuant to the last
paragraph of Section 33, Rule 39 of the Rules of Court. With particular reference to an extra-judicial
foreclosure of a real estate mortgage under Act No. 3135, as amended by Act No. 4118, the purchaser at the
foreclosure sale may apply ex parte with the RTC of the province or place where the property or any part of it
is situated, to give the purchaser possession thereof during the redemption period, furnishing bond in an
amount equivalent to the use of the property for a period of twelve months, to indemnify the debtor should it be
shown that the sale was made without violating the mortgage or without complying with the requirements of
Act No. 3135; and the RTC, upon approval of the bond, order that a writ of possession be issued, addressed to
the sheriff of the province in which the property is situated, who shall then execute said order immediately. We
underscore that the application for a writ of possession by the purchaser in a foreclosure sale conducted under
Act No. 3135 is ex parte and summary in nature, brought for the benefit of one party only and without notice
being sent by the court to any person adverse in interest. The relief is granted even without giving an
opportunity to be heard to the person against whom the relief is sought. Its nature as an ex parte petition under
Act No. 3135, as amended, renders the application for the issuance of a writ of possession a non-litigious
proceeding. Indeed, the grant of the writ of possession is but a ministerial act on the part of the issuing court,
because its issuance is a matter of right on the part of the purchaser. The judge issuing the order for the granting
of the writ of possession pursuant to the express provisions of Act No. 3135 cannot be charged with having
acted without jurisdiction or with grave abuse of discretion.
The reckoning of the period of redemption by the mortgagor or his successor-in-interest starts from the
registration of the sale in the Register of Deeds. Although Section 620 of Act No. 3135, as amended, specifies
that the period of redemption starts from and after the date of the sale, jurisprudence has since settled that such
period is more appropriately reckoned from the date of registration. The property was sold at the public auction
on January 12, 1999, with UCPB as the highest bidder. The sheriff issued the certificate of sale to UCPB on the
same day of the sale. Considering that UCPB registered the certificate of sale in its name on February 18, 1999,
the period of redemption was one year from said date. By virtue of the non-redemption by the respondents
within said period, UCPB consolidated the title over the property in its name. It is clear enough, therefore, that
the RTC committed no grave abuse of discretion but acted in accordance with the law and jurisprudence
in denying the respondents application for the injunctive writ

Philippine National Bank vs. Sps. Enrique Manalo and Rosalinda Jacinto et al
G.R. No. 174433, February 24, 2014
BERSAMIN, J.:
Although banks are free to determine the rate of interest they could impose on their borrowers, they can do
so only reasonably, not arbitrarily. They may not take advantage of the ordinary borrowers lack of familiarity

30
with banking procedures and jargon. Hence, any stipulation on interest unilaterally imposed and increased by
them shall be struck down as violative of the principle of mutuality of contracts.
FACTS:
Respondent Spouses Manalo applied for an All-Purpose Credit Facility with Philippine National Bank
to finance the construction of their house wherein they executed a Real Estate Mortgage over their property. It
was agreed upon that the Spouses Manalo would make monthly payments on the interest. However, PNB
claimed that their last recorded payment was made on December, 1997. Thus, PNB sent a demand letter to
them on their overdue account and required them to settle the account. After the Spouses Manalo still failed to
settle their unpaid account despite the two demand letters, PNB foreclose the mortgage, PNB being the highest
bidder.
The Spouses Manalo instituted this action for the nullification of the foreclosure proceedings and
damages. After trial, the RTC rendered its decision in favor of PNB. On appeal, the CA affirmed the decision
of the RTC insofar as it upheld the validity of the foreclosure proceedings initiated by PNB, but modified the
Spouses Manalos liability for interest.

ISSUES:
Whether or not the CA was correct in nullifying the interest rates and in fixing the same at 12 % despite that
fact that the same was raised by respondents only for the first time on appeal.
Whether or not there was a mutuality of consent in the imposition of interest rates on the respondent spouses
loan.

RULING:
Procedural Issue
Contrary to PNBs argument, the validity of the interest rates and of the increases, and on the lack of mutuality
between the parties were impliedly raised during the trial itself, and PNBs lack of vigilance in voicing out a
timely objection made that possible. It appears that Enrique Manalos Judicial Affidavit introduced the issues
of the validity of the interest rates and the increases, and the lack of mutuality between the parties. There is no
showing that PNB raised any objection in the course of the cross examination. Consequently, the RTC rightly
passed upon such issues in deciding the case, and its having done so was in total accord with Section 5, Rule 10
of the Rules of Court.
The RTC did not need to direct the amendment of the complaint by the Spouses Manalo. Section 5,
Rule 10 of the Rules of Court specifically declares that the failure to amend does not affect the result of the
trial of these issues. The failure of a party to amend a pleading to conform to the evidence adduced during trial
does not preclude an adjudication by the court on the basis of such evidence which may embody new issues not
raised in the pleadings, or serve as a basis for a higher award of damages. Former Chief Justice Moran put the
matter in this way:
When evidence is presented by one party, with the expressed or implied consent of the adverse party,
as to issues not alleged in the pleadings, judgment may be rendered validly as regards those issues, which shall
be considered as if they have been raised in the pleadings. There is implied, consent to the evidence thus
presented when the adverse party fails to object thereto. There is also no merit in PNBs contention that the
CA should not have considered and ruled on the issue of the validity of the interest rates. We do not agree.
Section 5, Rule 10 of the Rules of Court applies when evidence is introduced on an issue not alleged in the
pleadings and no objection is interposed by the adverse party. In this case, Enrique Manalos Judicial Affidavit
would introduce the very issues that PNB is now assailing. The question of whether the evidence on such issues
was admissible to prove the nullity of the interest rates is an entirely different matter. The RTC accorded
credence to PNBs evidence showing that the Spouses Manalo had been paying the interest imposed upon them
without protest. On the other hand, the CAs nullification of the interest rates was based on the credit
agreements that the Spouses Manalo and PNB had themselves submitted.
Based on the foregoing, the validity of the interest rates and their increases, and the lack of mutuality
between the parties were issues validly raised in the RTC, giving the Spouses Manalo every right to raise them
in their appeal to the CA.

Substantive Issue
Although banks are free to determine the rate of interest they could impose on their borrowers, they can
do so only reasonably, not arbitrarily. They may not take advantage of the ordinary borrowers lack of
familiarity with banking procedures and jargon. Hence, any stipulation on interest unilaterally imposed and
increased by them shall be struck down as violative of the principle of mutuality of contracts.
PNB arrogated unto itself the sole prerogative to determine and increase the interest rates imposed on the
Spouses Manalo. Such a unilateral determination of the interest rates contravened the principle of mutuality of

31
contracts embodied in Article 1308 of the Civil Code. The Court has declared that a contract where there is no
mutuality between the parties partakes of the nature of a contract of adhesion, and any obscurity will be
construed against the party who prepared the contract, the latter being presumed the stronger party to the
agreement, and who caused the obscurity. PNB should then suffer the consequences of its failure to specifically
indicate the rates of interest in the credit agreement.
PNB could not also justify the increases it had effected on the interest rates by citing the fact that the
Spouses Manalo had paid the interests without protest, and had renewed the loan several times. We rule that the
CA, citing Philippine National Bank v. Court of Appeals, rightly concluded that a borrower is not estopped
from assailing the unilateral increase in the interest made by the lender since no one who receives a proposal to
change a contract, to which he is a party, is obliged to answer the same and said partys silence cannot be
construed as an acceptance thereof.
Lastly, the CA observed, and properly so, that the credit agreements had explicitly provided that prior
notice would be necessary before PNB could increase the interest rates. In failing to notify the Spouses Manalo
before imposing the increased rates of interest, therefore, PNB violated the stipulations of the very contract that
it had prepared. Hence, the varying interest rates imposed by PNB have to be vacated and declared null and
void, and in their place an interest rate of 12% per annum computed from their default is fixed pursuant to the
ruling in Eastern Shipping Lines, Inc. v. Court of Appeals.

Development Bank of the Philippines vs. Guarina Agricultural and Realty Development Corp.
G.R. No. 160758, January 15, 2014
BERSAMIN, J.:
The foreclosure of a mortgage prior to the mortgagors default on the principal obligation is premature, and
should be undone for being void and ineffectual. The mortgagee who has been meanwhile given possession of
the mortgaged property by virtue of a writ of possession issued to it as the purchaser at the foreclosure sale
may be required to restore the possession of the property to the mortgagor and to pay reasonable rent for the
use of the property during the intervening period.
FACTS:
Guaria Corporation applied for a loan from DBP. Guaria Corporation executed a promissory note
that would be due on November 3, 1988. Guaria Corporation executed a real estate mortgage over several real
properties in favor of DBP loan and a chattel mortgage over the personal properties existing at the resort
complex and those yet to be acquired.
The loan was released in several installments. Guaria Corporation demanded the release of the
balance of the loan, but DBP refused. DBP thus demanded that Guaria Corporation expedite the completion of
the project, and warned that it would initiate foreclosure proceedings should Guaria Corporation not do so.
Unsatisfied with the non-action and objection of Guaria Corporation, DBP initiated extrajudicial foreclosure
proceedings. Guaria Corporation sued DBP in the RTC to demand specific performance of the latters
obligations under the loan agreement, and to stop the foreclosure of the mortgages (Civil Case No. 12707).
Guaria Corporation amended the complaint to seek the nullification of the foreclosure proceedings and the
cancellation of the certificate of sale. DBP applied for the issuance of a writ of possession which was granted
by the RTC.

ISSUE:
Whether or not DBPs foreclosure of the mortgaged properties is invalid and uncalled for. Whether or not the
doctrine of the law of the case finds application in this case.

RULING:
The foreclosure of a mortgage prior to the mortgagors default on the principal obligation is premature, and
should be undone for being void and ineffectual. The mortgagee who has been meanwhile given possession
of the mortgaged property by virtue of a writ of possession issued to it as the purchaser at the foreclosure
sale may be required to restore the possession of the property to the mortgagor and to pay reasonable rent
for the use of the property during the intervening period.
Loan is a reciprocal obligation, as it arises from the same cause where one party is the creditor, and the
other the debtor. This means that in a loan, the creditor should release the full loan amount and the debtor
repays it when it becomes due and demandable. Hence, by its failure to release the proceeds of the loan in their

32
entirety, DBP had no right yet to exact on Guaria Corporation the latters compliance with its own obligation
under the loan. Indeed, if a party in a reciprocal contract like a loan does not perform its obligation, the other
party cannot be obliged to perform what is expected of it while the others obligation remains unfulfilled. In
other words, the latter party does not incur delay.
While a creditor and a debtor could regulate the order in which they should comply with their reciprocal
obligations, it is presupposed that in a loan the lender should perform its obligation - the release of the full loan
amount - before it could demand that the borrower repay the loaned amount. Considering that it had yet to
release the entire proceeds of the loan, DBP could not yet make an effective demand for payment upon Guaria
Corporation to perform its obligation under the loan. Under the circumstances, DBPs foreclosure of the
mortgage and the sale of the mortgaged properties at its instance were premature, and, therefore, void and
ineffectual.

The doctrine of law of the case simply means, that when an appellate court has once declared the law in a
case, its declaration continues to be the law of that case even on a subsequent appeal, notwithstanding that the
rule thus laid down may have been reversed in other cases. But the law of the case, as the name implies,
concerns only legal questions or issues thereby adjudicated in the former appeal. The foregoing understanding
of the concept of the law of the case exposes DBPs insistence to be unwarranted.
To start with, the ex parte proceeding on DBPs application for the issuance of the writ of possession was
entirely independent from the judicial demand for specific performance herein. In fact, C.A.-G.R. No. 12670-
SP, being the interlocutory appeal concerning the issuance of the writ of possession while the main case was
pending, was not at all intertwined with any legal issue properly raised in the appeal to determine whether or
not DBPs foreclosure was valid and effectual. And, secondly, the ruling in C.A.-G.R. No. 12670-SP did not
settle any question of law involved herein because this case for specific performance was not a continuation of
C.A.-G.R. No. 12670-SP (which was limited to the propriety of the issuance of the writ of possession in favor
of DBP), and vice versa.

Rural Bank of Malasiqui Inc. vs. Romeo Ceralde

G.R. No. 162032, November 25, 2015
BERSAMIN, J.:
FACTS:
Romeo M. Ceralde and Eduardo M. Ceralde, Jr., are the owners of the parcels of land covered by Transfer
Certificate of Title (TCT) Nos. 111647 and 111648 respectively, of the Registry of Deeds of Pangasinan.
Under varied dates in the years 1978, 1980, 1981 and 1982, they mortgaged these properties in favor of
appellee rurak bank of Malasiqui, Inc., as security for agricultural loans they obtained from the bank. At the
time, however, the land had already been placed under the coverage of Operation Land Transfer and the
corresponding Certificates of Land Transfer were already issued to the tenants thereon. Nevertheless, appellee
rural bank, through its president, adviced mortgagors-appellants to submit an Affidavit of Non-Tenancy, which
appellants complied with. The mortgages were then approved by appellee rural bank. After the respondents did
not pay the loans at maturity, the petitioner caused the extrajudicial foreclosure of the mortgages. In the ensuing
foreclosure sale, the petitioner acquired the mortgaged properties for being the highest bidder. The respondents
commenced this action in the RTC to recover the net value of the just compensation of the lands subject of the
mortgages, averring that their right to receive the payment for just compensation either directly from the tenants
or from the Land Bank of the Philippines could not be the subject of the foreclosure proceedings; and that their
equitable interest in the right to receive the just compensation was protected under Section 80 of Republic Act
No. 3844 (Agricultural Land Reform Code), as amended, based on Opinion No. 92, Series of 1978, issued by
the Secretary of Justice.

ISSUE: which between the parties -on one hand, the petitioner, the rural bank that foreclosed the mortgage
constituted on the agricultural lands earlier expropriated under the land reform program of the State, and
acquired the lands under mortgage as the highest bidder in the ensuing foreclosure sale; and, on the other, the
respondents, the registered owners and mortgagors of the lands in favor of the petitioner -was entitled to the
payment of the just compensation for the lands.

RULING:
CA itself found that the petitioner had been well aware of the conditions of the landholding, including the
existence of the tenants thereon. CA concluded that the petitioner was also in bad faith, for, based on the
testimony of Romeo, it was the president herself of the petitioner who had told him that the loan application
would be granted if only he could secure a certificate of non-tenancy from the MARO whose office had been
located just in front of the petitioners premises. And, the tenants deposited the harvests in the warehouse

33
owned by the president of the petitioner, thereby signifying that the petitioner had actual knowledge of the
existence of the tenants on the lands under mortgage. There was no question that the petitioner had not been
misled by any misrepresentation on the status of tenancy on the lands. The submission of the affidavit of non-
tenancy by the respondents had been at the behest of its president who was then acting in its behalf. It is plain,
moreover, that because its business of rural banking involved the duty and the responsibility to investigate the
conditions of the lands being tendered as collaterals, the petitioner should have discovered the presence of the
tenants in due time and quickly enough by its exercise of due diligence.
Section 80 of Republic Act No. 3844 remained in effect after the effectivity of Republic Act No. 6657. The
latter law expressly repealed only the following provisions, namely: Section 35 of Republic Act No. 3834;18
Presidential Decree No. 316;19 the last two paragraphs of Section 12 of Presidential Decree No. 946;20 and
Presidential Decree No. 1038.21 Worthy to note, too, is that the repealed laws did not concern the subject
matter of Section 80 of Republic Act No. 3844; hence, the catch-all repeal or amendment of all other laws,
decrees, executive orders, rules and regulations, issuances or parts thereof inconsistent with Republic Act No.
6657 did not affect Section 80 of Republic Act No. 3844. In view of the foregoing, Section 80 of Republic Act
No. 3844 and Section 71 of Republic Act No. 6657 must be given equal application.
The respondents had acted in bad faith by misrepresenting that the lands were not tenanted; and, secondly, title
was already consolidated in its name when the lands came to be covered by OLT. We hold that the respondents
were entitled to the net value of the lands not only by law but also by equity. As to equity, we need only to
point out that when the parties are both at fault, the mistake of one is negated by the other's, and they are then
returned to their previous status where the law will look at the facts as if neither is at fault. In such event, we
can only apply the law, particularly Section 80 of Republic Act No. 3844, as amended, and such application
favors the respondents, as we have already explained

Torts and Damages

Vector Shipping Corporation and Francisco Soriano vs. American Home Assurance Company and
Sulpicio Lines
G.R. No. 159213, July 3, 2013
BERSAMIN, J.:
Subrogation under Article 2207 of the Civil Code gives rise to a cause of action created by law. For purposes
of the law on the prescription of actions, the period of limitation is ten years.
FACTS:
Vector was the operator of the motor tanker M/T Vector, while Soriano was the registered owner of the M/T
Vector. Caltex entered into a contract of affreightment with Vector for the transport of Caltexs petroleum
cargo through the M/T Vector. Caltex insured the petroleum cargo with respondent for 7,455,421.08 under
Marine Open Policy No. 34-5093-6. In the evening of December 20, 1987, M/T Vector and the M/V Doa Paz,
the latter a vessel owned and operated by Sulpicio Lines, Inc., collided in the open sea near Dumali Point in
Tablas Strait, located between the Provinces of Marinduque and Oriental Mindoro. The collision led to the
sinking of both vessels. The entire petroleum cargo of Caltex on board the M/T Vector perished. Respondent
indemnified Caltex for the loss of the petroleum cargo in the full amount of 7,455,421.08. On March 5,
1992, respondent filed a complaint against Vector, Soriano, and Sulpicio Lines, Inc. to recover the full amount
of 7,455,421.08 it paid to Caltex (Civil Case No. 92-620). RTC issued a resolution dismissing the case. CA
reversed the RTC. Although thereby absolving Sulpicio Lines, Inc. of any liability to respondent, the CA held
Vector and Soriano jointly and severally liable to respondent for the reimbursement of the amount of
7,455,421.08 paid to Caltex.

ISSUE: whether this action of respondent was already barred by prescription for bringing it only on March 5,
1992

RULING: No
We concur with the CAs ruling that respondents action did not yet prescribe. The legal provision governing
this case was not Article 1146 of the Civil Code, but Article 1144 of the Civil Code. We find and hold that that
the present action was not upon a written contract, but upon an obligation created by law. Hence, it came under
Article 1144 (2) of the Civil Code. This is because the subrogation of respondent to the rights of Caltex as the
insured was by virtue of the express provision of law embodied in Article 2207 of the Civil Code. Verily, the
contract of affreightment that Caltex and Vector entered into did not give rise to the legal obligation of Vector
and Soriano to pay the demand for reimbursement by respondent because it concerned only the agreement for
the transport of Caltexs petroleum cargo. As the Court has aptly put it in Pan Malayan Insurance Corporation
v. Court of Appeals, supra, respondents right of subrogation pursuant to Article 2207, supra, was not
dependent upon, nor d[id] it grow out of, any privity of contract or upon written assignment of claim [but]

34
accrue[d] simply upon payment of the insurance claim by the insurer. Considering that the cause of action
accrued as of the time respondent actually indemnified Caltex in the amount of 7,455,421.08 on July 12,
1988, the action was not yet barred by the time of the filing of its complaint on March 5, 1992, which was well
within the 10-year period prescribed by Article 1144 of the Civil Code.
It is undeniable that respondent preponderantly established its right of subrogation. Its Exhibit C was Marine
Open Policy No. 34-5093-6 that it had issued to Caltex to insure the petroleum cargo against marine peril. Its
Exhibit D was the formal written claim of Caltex for the payment of the insurance coverage of 7,455,421.08
coursed through respondents adjuster. Its Exhibits E to H were marine documents relating to the perished
cargo on board the M/V Vector that were processed for the purpose of verifying the insurance claim of Caltex.
Its Exhibit I was the subrogation receipt dated July 12, 1988 showing that respondent paid Caltex
7,455,421.00 as the full settlement of Caltexs claim under Marine Open Policy No. 34-5093-6. All these
exhibits were unquestionably duly presented, marked, and admitted during the trial. Specifically, Exhibit C was
admitted as an authentic copy of Marine Open Policy No. 34-5093-6, while Exhibits D, E, F, G, H and I,
inclusive, were admitted as parts of the testimony of respondents witness Efren Villanueva, the manager for
the adjustment service of the Manila Adjusters and Surveyors Company. The payment made to Caltex as the
insured being thereby duly documented, respondent became subrogated as a matter of course pursuant to
Article 2207 of the Civil Code. In legal contemplation, subrogation is the substitution of another person in the
place of the creditor, to whose rights he succeeds in relation to the debt; and is independent of any mere
contractual relations between the parties to be affected by it, and is broad enough to cover every instance in
which one party is required to pay a debt for which another is primarily answerable, and which in equity and
conscience ought to be discharged by the latter.

Philtranco Service Enterprises Inc. vs. Felix Paras and Inland Trailways, Inc. and Court of Appeals
G.R. No. 161909, April 25, 2012
BERSAMIN, J.:
In an action for breach of contract of carriage commenced by a passenger against his common carrier, the
plaintiff can recover damages from a third-party defendant brought into the suit by the common carrier upon a
claim based on tort or quasi-delict. The liability of the third-party defendant is independent from the liability of
the common carrier to the passenger.
FACTS:
Paras is engaged in the buy and sell of fish products. Sometime on 08 February 1987, on his way home
to Manila from Bicol Region, he boarded a bus with Body No. 101 and Plate No. EVE 508, owned and
operated by Inland Trailways, Inc and driven by its driver Calvin Coner. At approximately 3:50 oclock in the
morning of 09 February 1987, while the said bus was travelling along Maharlika Highway, Tiaong, Quezon, it
was bumped at the rear by another bus with Plate No. EVB 259, owned and operated by Philtranco Service
Enterprises, Inc. As a result of the strong and violent impact, the Inland bus was pushed forward and smashed
into a cargo truck parked along the outer right portion of the highway and the shoulder thereof. Consequently,
the said accident bought considerable damage to the vehicles involved and caused physical injuries to the
passengers and crew of the two buses, including the death of Coner who was the driver of the Inland Bus at the
time of the incident. Paras was not spared from the pernicious effects of the accident. He was found and
diagnosed by Dr. Antonio Tanchuling, Jr. to be affected with contusion/hematoma, dislocation of hip upon
fracture of the fibula on the right leg, fractured small bone on the right leg and close fracture on the tibial
plateau of the left leg. Paras filed a complaint for damages based on breach of contract of carriage against
Inland. Inland filed third party complaint against Philtranco.

ISSUE: Whether or not Paras can recover damages

RULING:
Paras can recover moral damages in this suit based on quasi-delict
As a general rule, indeed, 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 damages may be recovered. By way of exception, moral damages are recoverable in an action
predicated on a breach of contract: (a) where 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

35
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
Inlands bus and Philtrancos bus had been the negligent, reckless and imprudent manner defendant Apolinar
Miralles drove and operated his driven unit, the Philtranco Bus with Plate No. 259, owned and operated by
third-party defendant Philtranco Service Enterprises, Inc. The apparent objective of Inland was not to merely
subrogate the third-party defendants for itself, as Philtranco appears to suggest, 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 here as joint tortfeasors who would be jointly and severally be
liable to Paras and Inland. 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.
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 plaintiffs claim against him, or even directly to the plaintiff. Nor was it 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.

Award of temperate damages was in order

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. The receipts
formally submitted and offered by Paras were limited to the costs of medicines purchased on various times. CA
fixed actual damages only at that small sum of P1,397.95. On its part, Inland offered no definite proof on the
repairs done on its vehicle, or the extent of the material damage.
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. We are satisfied
that the CA exerted effort and practiced great care to ensure that the causal link between the physical injuries of
Paras and the material loss of Inland, on the one hand, and the negligence of Philtranco and its driver, on the
other hand, existed in fact. It also rejected arbitrary or speculative proof of loss. Clearly, the costs of Paras
surgeries and consequential rehabilitation, as well as the fact that repairing Inlands vehicle would no longer be
economical justly warranted the CA to calculate temperate damages of P50,000.00 and P250,000.00
respectively for Paras and Inland.

Paras loss of earning capacity must be compensated

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 claimants lost
profits (compensatory damages or lucrum cessans). 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 persons capacity to acquire money, less the necessary
expense for his own living. 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.

Increase in award of attorneys fees

In view of the lapse of a long time in the prosecution of the claim, the Court considers it reasonable and proper
to grant attorneys fees to each of Paras and Inland equivalent to 10% of the total amounts hereby awarded to
them, in lieu of only P20,000.00 for that purpose granted to Paras.

Legal interest on the amounts awarded

Pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals,[38] legal interest at the rate of 6% per
annum accrues on the amounts adjudged reckoned from July 18, 1997, the date when the RTC rendered its
judgment; and legal interest at the rate of 12% per annum shall be imposed from the finality of the judgment
until its full satisfaction, the interim period being regarded as the equivalent of a forbearance of credit.

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Comsavings Bank (now GSIS Family Bank) vs. Sps. Danilo and Estrella Capistrano
G.R. No. 170942, August 28, 2013
BERSAMIN, J.:
A banking institution serving as an originating bank for the lJnitied Home Lending Program (UHLP) of the
Government owes a duty to observe the highest degree of diligence and a high standard of integrity and
performance in all its transactions with its clients because its business is imbued with public interest.
FACTS:
Respondents were the owners of a residential lot with an area of 200 square meters known as Lot 8 of Block 4
of the Infant Jesus Subdivision situated in Bacoor, Cavite, and covered by Transfer Certificate of Title (TCT)
No. 316885 of the Register of Deeds of Cavite. Desirous of building their own house on the lot, they availed
themselves of the UHLP implemented by the National Home Mortgage Finance Corporation (NHMFC). They
executed a construction contract with Carmencita Cruz-Bay, the proprietor of GCB Builders, for the total
contract price of P265,000.00 with the latter undertaking to complete the construction within 75 days. To
finance the construction, GCB Builders facilitated their loan application with Comsavings Bank, an NHFMC-
accredited originator. As proof of their qualifications to avail themselves of a loan under the UHLP and to
comply with the conditions prescribed for the approval of their application, they submitted their record of
employment, the amount of their income, and a clearance from the Social Security System (SSS) to the effect
that they had no existing loans, among others. They executed in favor of GCB Builders a deed of assignment of
the amount of the 300,000.00 proceeds of the loan from Comsavings Bank. Comsavings Bank informed
respondent Estrella Capistrano that she would have to sign various documents as part of the requirements for
the release of the loan. Among the documents was a certificate of house completion and acceptance.
Comsavings Bank handed Estrella a letter addressed to GCB Builders informing the latter that respondents had
complied with the preliminary requirements of the UHLP, and were qualified to avail themselves of the loan
amounting to P303,450.00 payable within 25 years at 16% per annum, subject to the following terms and
conditions, namely: the signing of mortgage documents, 100% completion of the construction of the housing
unit, original certificate of occupancy permit and certification of completion, and submission of house pictures
signed by the borrower at the back. Comsavings Bank informed respondents of the approval of an interim
financing loan of 260,000.00 payable within 180 days, which amount was to be paid out of the proceeds of the
loan from NHMFC. respondents received a letter from NHMFC advising that they should already start paying
their monthly amortizations of P4,278.00 because their loan had been released on April 20, 1993 directly to
Comsavings Bank. On June 1, 1993, Estrella Capistrano went to the construction site and found to her dismay
that the house was still unfinished. respondents wrote to NHMFC protesting the demand for amortization
payments considering that they had not signed any certification of completion and acceptance, and that even if
there was such a certification of completion and acceptance, it would have been forged. Respondents sued GCB
Builders and Comsavings Bank for breach of contract and damages,6 praying that defendants be ordered jointly
and severally liable

ISSUE: Whether or not Comsaving is liable to the respondents

RULING:
Comsaving Banks liability was not based on its purchase of loan agreement with NHMFC but on Article
20 and Article 1170 of the Civil Code
The CA rightfully declared Comsavings Bank solidarily liable with GCB Builders for the damages sustained by
respondents. However, we point out that such liability did not arise from Comsavings Banks 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 the 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.
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. 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

37
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 (through Estrella Capistrano, both in her
personal capacity and as the attorney-in-fact of her husband Danilo Capistrano) despite the construction of the
house not yet even starting. Its act was irregular per se because it contravened the purpose of the certificate.
Ignoring the glaring irregularity, Comsavings Bank accepted the unsigned (hence, unauthenticated) pictures,
released the loan to GCB Builders, and turned over the pictures to NHMFC for the reimbursement of the loan.
Had Comsavings Bank complied with its duty of observing the highest degree of diligence, it would have
checked first whether the pictures carried the signatures of respondents on their dorsal sides, and whether the
house depicted on the pictures was really the house of respondents, before releasing the proceeds of the loan to
GCB Builders and before submitting the pictures to NHMFC for the reimbursement. Again, this is an
indication of Comsavings Banks gross negligence.

Dr. Fernando Solidum vs. People of the Philippines

G.R. No. 192123, March 10, 2014
BERSAMIN, J.:
Res ipsa loquitur is literally translated as the thing or the transaction speaks for itself. The doctrine res ipsa
loquitur means that where the thing which causes injury is shown to be under the management of the
defendant, and the accident is such as in the ordinary course of things does not happen if those who have the
management use proper care, it affords reasonable evidence, in the absence of an explanation by the
defendant, that the accident arose from want of care.
FACTS:
Gerald Albert Gercayo was born with an imperforate anus. Two days after his birth, he underwent
colostomy, a surgical procedure to bring one end of the large intestine out through the abdominal wall. On
May 17, 1995, Gerald, then three years old, was admitted at the Ospital ng Maynila for a pullthrough
operation. Dr. Leandro Resurreccion headed the surgical team. The anesthesiologists included Dr. Marichu
Abella, Dr. Arnel Razon and petitioner Dr. Fernando Solidum (Dr. Solidum). During the operation, Gerald
experienced bradycardia, and went into a coma. His coma lasted for two weeks, but he regained consciousness
only after a month.He could no longer see, hear or move.
Ma. Luz Gercayo, mother of Gerald, lodged a complaint for reckless imprudence resulting in serious
physical injuries with the City Prosecutors Office of Manila against the attending physicians. Upon a finding
of probable cause, the City Prosecutors Office filed an information solely against Dr. Solidum. The RTC
rendered its judgment finding Dr. Solidum guilty beyond reasonable doubt of reckless imprudence resulting to
serious physical injuries. The CA affirmed the conviction.

ISSUES:
1. Whether or not the doctrine of res ipsa loquitor was applicable herein.
2. Whether or not Dr. Solidum was liable for criminal negligence.
3. Whether or not Ospital ng Maynila can be held civilly liable.

RULING:
Res ipsa loquitur is literally translated as the thing or the transaction speaks for itself. The doctrine res ipsa
loquitur means that where the thing which causes injury is shown to be under the management of the
defendant, and the accident is such as in the ordinary course of things does not happen if those who have the
management use proper care, it affords reasonable evidence, in the absence of an explanation by the defendant,
that the accident arose from want of care.
The applicability of the doctrine of res ipsa loquitur in medical negligence cases was significantly and
exhaustively explained in Ramos v. Court of Appeals, where the Court said medical malpractice cases do not
escape the application of this doctrine. Thus, res ipsa loquitur has been applied when the circumstances
attendant upon the harm are themselves of such a character as to justify an inference of negligence as the cause
of that harm.
Although generally, expert medical testimony is relied upon in malpractice suits to prove that a
physician has done a negligent act or that he has deviated from the standard medical procedure, when the
doctrine of res ipsa loquitur is availed by the plaintiff, the need for expert medical testimony is dispensed with
because the injury itself provides the proof of negligence.
In order to allow resort to the doctrine, therefore, the following essential requisites must first be
satisfied, to wit: (1) the accident was of a kind that does not ordinarily occur unless someone is negligent; (2)

38
the instrumentality or agency that caused the injury was under the exclusive control of the person charged; and
(3) the injury suffered must not have been due to any voluntary action or contribution of the person injured.
The Court considers the application here of the doctrine of res ipsa loquitur inappropriate. Although it
should be conceded without difficulty that the second and third elements were present, considering that the
anesthetic agent and the instruments were exclusively within the control of Dr. Solidum, and that the patient,
being then unconscious during the operation, could not have been guilty of contributory negligence, the first
element was undeniably wanting. Luz delivered Gerald to the care, custody and control of his physicians for a
pullthrough operation. Except for the imperforate anus, Gerald was then of sound body and mind at the time
of his submission to the physicians. Yet, he experienced bradycardia during the operation, causing loss of his
senses and rendering him immobile. Hypoxia, or the insufficiency of oxygen supply to the brain that caused the
slowing of the heart rate, scientifically termed as bradycardia, would not ordinarily occur in the process of a
pullthrough operation, or during the administration of anesthesia to the patient, but such fact alone did not
prove that the negligence of any of his attending physicians, including the anesthesiologists, had caused the
injury.

Negligence is defined as the failure to observe for the protection of the interests of another person that
degree of care, precaution, and vigilance that the circumstances justly demand, whereby such other person
suffers injury. Reckless imprudence, on the other hand, consists of voluntarily doing or failing to do, without
malice, an act from which material damage results by reason of an inexcusable lack of precaution on the part of
the person performing or failing to perform such act.
Dr. Solidums conviction by the RTC was primarily based on his failure to monitor and properly
regulate the level of anesthetic agent administered on Gerald by overdosing at 100% halothane. In finding the
accused guilty, despite the explanations, the RTC argued that the volteface of Dr. Vertido on the question of
the dosage of the anesthetic used on the child would not really validate the nonguilt of the anesthesiologist.
The Prosecution did not prove the elements of reckless imprudence beyond reasonable doubt because
the circumstances cited by the CA were insufficient to establish that Dr. Solidum had been guilty of
inexcusable lack of precaution in monitoring the administration of the anesthetic agent to Gerald.
In litigations involving medical negligence, the plaintiff has the burden of establishing appellants
negligence and for a reasonable conclusion of negligence, there must be proof of breach of duty on the part of
the surgeon as well as a causal connection of such breach and the resulting death of his patient. In other
words, the negligence must be the proximate cause of the injury. For, negligence, no matter in what it consists,
cannot create a right of action unless it is the proximate cause of the injury complained of. And the proximate
cause of an injury is that cause, which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the result would not have occurred. Here, the
Prosecution presented no witnesses with special medical qualifications in anesthesia to provide guidance to the
trial court on what standard of care was applicable. It would consequently be truly difficult, if not impossible,
to determine whether the first three elements of a negligence and malpractice action were attendant.
Dr. Solidum was criminally charged for failing to monitor and regulate properly the levels of
anesthesia administered to said Gerald Albert Gercayo and using 100% halothane and other anesthetic
medications.However, the foregoing circumstances, taken together, did not prove beyond reasonable doubt
that Dr. Solidum had been recklessly imprudent in administering the anesthetic agent to Gerald. The existence
of the probability about other factors causing the hypoxia has engendered in the mind of the Court a reasonable
doubt as to Dr. Solidums guilt, and moves us to acquit him of the crime of reckless imprudence resulting to
serious physical injuries.
We have to clarify that the acquittal of Dr. Solidum would not immediately exempt him from civil
liability. But we cannot now find and declare him civilly liable because the circumstances that have been
established here do not present the factual and legal bases for validly doing so. His acquittal did not derive only
from reasonable doubt. Consequently, to adjudge Dr. Solidum civilly liable would be to speculate on the cause
of the hypoxia. We are not allowed to do so, for civil liability must not rest on speculation but on competent
evidence.

In criminal prosecutions, the civil action for the recovery of civil liability that is deemed instituted with
the criminal action refers only to that arising from the offense charged. It is puzzling, therefore, how the RTC
and the CA could have adjudged Ospital ng Maynila jointly and severally liable with Dr. Solidum for the
damages despite the obvious fact that Ospital ng Maynila, being an artificial entity, had not been charged along
with Dr. Solidum. For one, Ospital ng Maynila was not at all a party in the proceedings. Hence, its fundamental
right to be heard was not respected from the outset. The RTC and the CA should have been alert to this
fundamental defect. Verily, no person can be prejudiced by a ruling rendered in an action or proceeding in
which he was not made a party. Such a rule would enforce the constitutional guarantee of due process of law.
Moreover, Ospital ng Maynila could be held civilly liable only when subsidiary liability would be properly

39
enforceable pursuant to Article 103 of the Revised Penal Code. But the subsidiary liability seems farfetched
here. The conditions for subsidiary liability to attach to Ospital ng Maynila were not complied with.

BJDC Construction vs. Nena Lanuzo et al

G.R. No. 161151, March 24, 2014
BERSAMIN, J.:
The test by which to determine the existence of negligence in a particular case may be stated as follows: Did
the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily
prudent person would have used in the same situation? If not, then he is guilty of negligence. The law here in
effect adopts the standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the
Roman law.
FACTS:
Nena E. Lanuzo filed a complaint for damages against BJDC Construction (company), a single
proprietorship engaged in the construction business. The company was the contractor of the reblocking project
to repair the damaged portion of one lane of the national highway at San Agustin, Pili, Camarines Sur. Nena
alleged that she was the surviving spouse of the late Balbino Los Baos Lanuzo (Balbino) who figured in the
accident that transpired at the site of the reblocking work resulting in his instant death; and that the companys
failure to place illuminated warning signs on the site of the project, especially during night time, was the
proximate cause of the death of Balbino. She prayed that the company be held liable for damages. The RTC
rendered judgment in favor of the company holding that the plaintiffs were unable to make out a case for
damages, with a preponderance of evidence. The CA reversed the RTC applying the doctrine of res ipsa
loquitor.

ISSUES:
1. Whether or not the company is to be held liable for the alleged negligence.
2. Whether or not the doctrine of Res Ipsa Loquitor finds application in the given case.

RULING:
Inasmuch as the RTC and the CA arrived at conflicting findings of fact on who was the negligent party, the
Court holds that an examination of the evidence of the parties needs to be undertaken to properly determine the
issue. The Court must ascertain whose evidence was preponderant for Section 1, Rule 133 of the Rules of
Court mandates that in civil cases the party having the burden of proof must establish his case by a
preponderance of evidence. In civil cases, the burden of proof is on the party who would be defeated if no
evidence is given on either side. The burden of proof is on the plaintiff if the defendant denies the factual
allegations of the complaint in the manner required by the Rules of Court, but it may rest on the defendant if he
admits expressly or impliedly the essential allegations but raises affirmative defense or defenses, which if
proved, will exculpate him from liability.
Upon a review of the records, the Court affirms the findings of the RTC, and rules that the Lanuzo heirs, the
parties carrying the burden of proof, did not establish by preponderance of evidence that the negligence on the
part of the company was the proximate cause of the fatal accident of Balbino.

The test by which to determine the existence of negligence in a particular case may be stated as follows: Did
the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily
prudent person would have used in the same situation? If not, then he is guilty of negligence. The law here in
effect adopts the standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the
Roman law.
First of all, we note that the Lanuzo heirs argued in the trial and appellate courts that there was a total
omission on the part of the company to place illuminated warning signs on the site of the project, especially
during night time, in order to warn motorists of the project. In this appeal, however, they contend that the
negligence of the company consisted in its omission to put up adequate lighting and the required signs to warn
motorists of the project, abandoning their previous argument of a total omission to illuminate the project site. In
contrast, the company credibly refuted the allegation of inadequate illumination. Zamora, its flagman in the
project, rendered an eyewitness account of the accident by stating that the site had been illuminated by light
bulbs and gas lamps.

40
 Secondly, the company presented as its documentary evidence the investigation report dated December 3,
1997 of SPO1 Corporal (Annex 1), the relevant portions of which indicated the finding of the police
investigator on the presence of illumination at the project:
3. That upon arrival at the scene of the incident it was noted that road sign/barricade installed on the road has a
light.
In our view, the RTC properly gave more weight to the testimonies of Zamora and SPO1 Corporal than
to those of the witnesses for the Lanuzo heirs. There was justification for doing so, because the greater
probability pertained to the former. Absent any showing that the trial courts calibration of the credibility of
the witnesses was flawed, we are bound by its assessment. This Court will sustain such findings unless it can be
shown that the trial court ignored, overlooked, misunderstood, misappreciated, or misapplied substantial facts
and circumstances, which, if considered, would materially affect the result of the case.

NO, the doctrine of res ipsa loquitur had no application here.

For the doctrine to apply, the following requirements must be shown to exist, namely: (a) the accident
is of a kind that ordinarily does not occur in the absence of someones negligence; (b) it is caused by an
instrumentality within the exclusive control of the defendant or defendants; and (c) the possibility of
contributing conduct that would make the plaintiff responsible is eliminated.
The Court has warned in Reyes v. Sisters of Mercy Hospital, however, that res ipsa loquitur is not a
rigid or ordinary doctrine to be perfunctorily used but a rule to be cautiously applied, depending upon the
circumstances of each case. Based on the evidence adduced by the Lanuzo heirs, negligence cannot be fairly
ascribed to the company considering that it has shown its installation of the necessary warning signs and lights
in the project site. In that context, the fatal accident was not caused by any instrumentality within the exclusive
control of the company.

Metro Manila Transit Corporation vs. Reynaldo Cuevas

G.R. No. 167797, June 15, 2015
BERSAMIN, J.:
The registered owner of a motor vehicle whose operation causes injury to another is legally liable to the latter.
But it is error not to allow the registered owner to recover reimbursement from the actual and present owner
by way of its cross-claim.
FACTS:
Metro Manila Transit Corporation (MMTC) and Mina's Transit Corporation (Mina's Transit) entered into an
agreement to sell dated August 31, 1990, whereby the latter bought several bus units from the former at a
stipulated price. They agreed that MMTC would retain the ownership of the buses until certain conditions were
met, but in the meantime Mina's Transit could operate the buses within Metro Manila.
On October 14, 1994, one of the buses subject of the agreement to sell, bearing plate number NXM-449-TB-pil
94, hit and damaged a Honda Motorcycle owned by Reynaldo and driven by Junnel. Reynaldo and Junnel sued
MMTC and Minas Transit for damages in the Regional Trial Court (RTC) in Cavite.
In its answer with compulsory counterclaim and cross-claim, MMTC denied liability, and averred that although
it retained the ownership of the bus, the actual operator and employer of the bus driver was Minas Transit; and
that, in support of its cross-claim against Minas Transit, a provision in the agreement to sell mandated Mina s
Transport to hold it free from liability arising from the use and operation of the bus units.
On its part, Minas Transit contended that it was not liable because: (a) it exercised due diligence in the
selection and supervision of its employees; (b) its bus driver exercised due diligence; and (c) Junnels
negligence was the cause of the accident.
After trial, the RTC rendered judgment in favor of the respondents on September 17, 1999 ordering petitioner
Metro Manila Transit Corporation (MMTC) and its codefendant Minas Transit Corporation (Minas Transit) to
pay damages in favor of respondents Reynaldo Cuevas and Junnel Cuevas. The RTC, however, did not rule on
the propriety of the cross-claim. On appeal, the CA affirmed the RTCs decision.

ISSUE: Whether or not MMTC was liable for the injuries sustained by the respondents despite the provision in
the agreement to sell that shielded it from liability.

RULING:
Petition is partly meritorious. In view of MMTCs 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 Cuevases. 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.

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Indeed, MMTC could not evade liability by passing the buck to Minas 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.
Although the registered-owner rule might seem to be unjust towards MMTC, the law did not leave it without
any remedy or recourse.1wphi1 According to Filcar Transport Services v. Espinas ,14 MMTC could recover
from Minas 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 drivers negligence. A cross-claim is a claim by one party against a coparty 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.
MMTC set up its cross-claim against Mina's Transit precisely to ensure that Mina's Transit would reimburse
whatever liability would be adjudged against MMTC. Yet, it is a cause of concern for the Court that the RTC
ignored to rule on the propriety of MMTC's crossclaim. Such omission was unwarranted, inasmuch as Mina's
Transit did not dispute the cross-claim, or did not specifically deny the agreement to sell with MMTC, the
actionable document on which the cross-claim was based. Even more telling was the fact that Mina's Transit
did not present controverting evidence to disprove the crossclaim as a matter of course if it was warranted for it
to do so. Under the circumstances, the RTC should have granted the cross-claim to prevent the possibility of a
multiplicity of suits, and to spare not only the MMTC but also the other parties in the case from further expense
and bother. Compounding the RTC's uncharacteristic omission was the CA's oversight in similarly ignoring the
cross-claim. The trial and the appellate courts should not forget that a cross-claim is like the complaint and the
counterclaim that the court must rule upon.

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