INTERPORT

RESOURCES CORPORATION vs. SECURITIES SPECIALIST, INC., and R.C. LEE

SECURITIES INC.
G .R. No. 154069, June 6, 2016, BERSAMIN, J.

Novation extinguished an obligation between two parties. Clearly, the effect of the assignment of the
subscription agreements to SSI was to extinguish the obligation of R.C. Lee to Oceanic, now Interport,
to settle the unpaid balance on the subscription. As a result of the assignment, Interport was no longer
obliged to accept any payment from R.C. Lee because the latter had ceased to be privy to Subscription
Agreements. On the other hand, Interport was legally bound to accept SSI's tender of payment for the
75% balance on the subscription price because SSI had become the new debtor under Subscription
Agreements. As such, the issuance of the stock certificates in the name of R.C. Lee had no legal basis in
the absence of a contractual agreement between R. C. Lee and Interport.

FACTS:

In January 1977, Oceanic Oil & Mineral Resources, Inc. (Oceanic) entered into a subscription
agreement with R.C. Lee, a domestic corporation engaged in the trading of stocks and other
securities, covering 5,000,000 of its shares. Thereupon, R.C. Lee paid 25% of the subscription,
leaving 75% unpaid. Oceanic issued Subscription Agreements Nos. 1805, 1808, 1809, 1810, and
1811 to R.C. Lee.

Oceanic merged with Interport, with the latter as the surviving corporation. Interport was a
publicly-listed domestic corporation whose shares of stocks were traded in the stock exchange.
Under the terms of the merger, each share of Oceanic was exchanged for a share of Interport.

SSI, a domestic corporation registered as a dealer in securities, received in the ordinary course of
business Oceanic Subscription Agreements Nos. 1805, 1808 to 1811, all outstanding in the name of
R.C. Lee, and Oceanic official receipts showing that 25% of the subscriptions had been paid. The
Oceanic subscription agreements were duly delivered to SSI through stock assignments indorsed in
blank by R.C. Lee.

Later on, R.C. Lee requested Interport for a list of subscription agreements and stock certificates
issued in the name of R.C. Lee and other individuals named in the request. In response, Interport's
Corporate Secretary, provided the requested list of all subscription agreements of Interport and
Oceanic, as well as the requested stock certificates of Interport. Upon finding no record showing
any transfer or assignment of the Oceanic subscription agreements and stock certificates of
Interport as contained in the list, R.C. Lee paid its unpaid subscriptions and was accordingly issued
stock certificates corresponding thereto.

On February 8, 1989, Interport issued a call for the full payment of subscription receivables, setting
March 15, 1989 as the deadline. SSI tendered payment prior to the deadline. However, the
stockbrokers reported to SSI that Interport refused to honor the Oceanic subscriptions.

SSI learned that Interport had issued the 5,000,000 shares to R.C. Lee, relying on the latter's
registration as the owner of the subscription agreements in the books of the former, and on the
affidavit executed by the President of R.C. Lee stating that no transfers or encumbrances of the
shares had ever been made.

SSI made demands upon Interport and R.C. Lee for the cancellation of the shares issued to R.C. Lee
and for the delivery of the shares to SSI. On October 6, 1989, after its demands were not met, SSI
commenced this case in the SEC to compel the respondents to deliver the 5,000,000 shares and to
pay damages. It alleged fraud and collusion between Interport and R.C. Lee in rejecting the tendered
payment and the transfer of the shares covered by the subscription agreements.

SEC ordered the respondent Interport to deliver the corresponding shares previously covered by
Oceanic Oil Mineral Resources Inc. subscription agreements Nos. 1805-1811 to petitioner SSI, to the
extent only of 25% thereof, as duly paid by petitioner SSI; and if the same will not be possible, to
deliver the value thereof at the market price as of the date of judgment. CA affirmed the SEC.

ISSUE:

Whether or not Interport was liable to deliver to SSI the Oceanic shares of stock, or the value
thereof, under Subscriptions Agreement.

RULING:

YES, Interport is liable to deliver to SSI the Oceanic shares of stock, or the value thereof, under
Subscriptions Agreement.

The SEC correctly categorized the assignment of the subscription agreements as a form of novation
by substitution of a new debtor and which required the consent of or notice to the creditor. Under
the Civil Code, obligations may be modified by: ( l) changing their object or principal conditions; or
(2) substituting the person of the debtor; or (3) subrogating a third person in the rights of the
creditor.

In this case, the change of debtor took place when R.C. Lee assigned the Oceanic shares under
Subscription Agreement Nos. 1805, and 1808 to 1811 to SSI so that the latter became obliged to
settle the 75% unpaid balance on the subscription. Interport was duly notified of the assignment
when SSI tendered its payment for the 75% unpaid balance, and it could not anymore refuse
to recognize the transfer of the subscription that SSI sufficiently established by documentary
evidence.

It should be stressed that novation extinguished an obligation between two parties. Clearly, the
effect of the assignment of the subscription agreements to SSI was to extinguish the obligation of
R.C. Lee to Oceanic, now Interport, to settle the unpaid balance on the subscription. As a result of
the assignment, Interport was no longer obliged to accept any payment from R.C. Lee because the
latter had ceased to be privy to Subscription Agreements Nos. 1805, and 1808 to 1811 for having
been extinguished insofar as it was concerned. On the other hand, Interport was legally bound to
accept SSI's tender of payment for the 75% balance on the subscription price because SSI had
become the new debtor under Subscription Agreements Nos. 1805, and 1808 to 1811. As such, the
issuance of the stock certificates in the name of R.C. Lee had no legal basis in the absence of a
contractual agreement between R. C. Lee and Interport.

Interport issued the shares without respondent R.C. Lee having anything to show for the same. On the
other hand, respondent Interport refused to recognize complainant SSI's claim to five (5) millions (sic)
shares inspite of the fact that its claim was fully supported by duly issued subscription agreements,
stock assignment and receipts of payment of the initial subscription.

Subscription Agreements Nos. 1805, and 1808 to 1811 were now binding between Interport and
SSI only, and only such parties were expected to comply with the terms thereof. Hence, the Court
modify the decision of SEC and ordered Interport Resources Corporation: (a) To accept the tender
of payment of Securities Specialist, Inc. corresponding to the 75% unpaid balance of the total
subscription price under Subscription Agreements Nos. 1805, 1808, 1809, 1810 and 1811; (b) To
deliver 5,000,000 shares of stock and to issue the corresponding stock certificates to Securities
Specialist, Inc. upon receipt of the payment of the latter; (c) In the alternative, if the foregoing is no
longer possible, Interport Resources Corporation shall pay Securities Specialist, Inc. the market
value of the 5,000,000 shares of stock at the time of promulgation of this decision.


SPOUSES ROBERTO and ADELAIDA PEN v. SPOUSES SANTOS and LINDA JULIAN
G.R. No. 160408, January 11, 2016, BERSAMIN, J., FIRST DIVISION

Civil Law; Pledge; Mortgage; Pactum Commissorium; 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.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 nonpayment 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 formers indebtedness. As to the second, the authorization for Adelaida
to appropriate the property subject of the mortgage upon Lindas default was implied from Lindas
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.

Same; Sales; Dacion en Pago; 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.The petitioners have theorized that their
transaction with the respondents was a valid dacion en pago by highlighting that it was Linda who
had offered to sell her property upon her default. Their theory cannot stand scrutiny. 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.

Same; Same; 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.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 Lindas 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 Lindas leaving the consideration blank implied the authority of Adelaida to fill in that essential
detail in the deed of sale upon Lindas default on the loan, the conclusion of the CA that the deed of
sale was a pactum commissorium still holds, for, as earlier mentioned, all the elements of pactum
commissorium were present.

Same; Same; Monetary Interest; Pursuant to Article 1956 of the Civil Code, no interest shall be due
unless it has been expressly stipulated in writing.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.

FACTS:

The Julians obtained loans from Adelaida Pen. The initial interests were deducted in advance from
the loan by Adelaida. Two (2) promissory notes were executed by the Julians in favor of Adelaida to
evidence the loans. As security, the Julians executed a Real Estate Mortgage over their property
registered under the name of Santos Julina, Jr. The owners duplicate of TCT was delivered to the
Sps. Pen.

Linda averred that at the time the mortgage was executed, they were likewise required by Adelaida
to sign a document purportedly an Absolute Deed of Sale. Said document did not contain any
consideration, and was undated, unfilled and unauthorized. Linda Julian offered to pay Adelaida
the amount. The latter refused to accept the offer. Linda desisted from the offer and requested that
she be shown the land title which she conveyed to Adelaida, but the latter refuse. Upon verification
with the RD of QC, she was informed that the title to the mortgaged property had already been
registered in the name of Adelaida.

Linda filed an Affidavit of Adverse Claim. Her counsel formally demanded the reconveyance of the
title and/or the property to them, but Adelaida refused. RTC ruled in favor of the Julians. CA
affirmed the decision of RTC. The CA pronounced the deed of sale as void because of the deed of
sale having been executed at the same time as the real estate mortgage, which rendered the sale as
a prohibited pactum commissorium in light of the fact that the deed of sale was a blank as to the
consideration and the date, which details would be filled out upon the default by the respondents;
that the promissory notes contained no stipulation on the payment of interest on the obligation, for
which reason no monetary interest could be imposed for the use of money; and that the
compensatory interest should instead be imposed as a form of damages arising from Lindas failure
to pay the outstanding obligation.

ISSUES:

I. WON the deed of sale between parties is void for being a pactum commissorium.
II. WON no monetary interest was due for Lindas use of Adelaidas money.

RULING:

I. YES.

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 commssorium 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 formers
indebtedness. As to the second, the authorization for Adelaida to appropriate the property
subject of the mortgage upon Lindas default was implied from Lindas 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 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.

The petitioners have theorized that their transaction with the respondents was a valid dacion en
pago by highlighting that it was Linda who had offered to sell her property upon her default. Their
theory cannot stand scrutiny. 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 Lindas copy of the deed of sale was credible proof of the
lack of 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 Lindas
leaving the consideration blank implied the authority of Adelaida to fill in that essential detail in the
deed of sale upon Lindas default on the loan, the conclusion of the CA that the deed of sale was a
pactum commissorium still holds, for all the elements of pactum commissorium were present.

II. YES.

Interest that is the compensation fixed by the parties for the use or forbearance of money is
referred to as monetary interest. On the other hand, interest that may be imposed by law or by the
courts as penalty or indemnity for damages is called compensatory interest. In other words, the
right to recover interest arises only either by virtue of a contract or as damages for delay or failure
to pay the principal loan on which the interest is demanded.

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.


MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY (MCIAA) v. HEIRS OF GAVINA
IJORDAN
G.R. No. 173140, January 11, 2016, BERSAMIN, J., FIRST DIVISION

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.

Civil Law; Contracts; Agency; 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.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.

Same; Land Registration; Torrens System; Under the Torrens System, no adverse possession could
deprive the registered owners of their title by prescription; Thus, once title is registered, the owner
may rest secure, without the necessity of waiting in the portals of the court, or sitting on the mirador
su casa to avoid the possibility of losing his land.MCIAAs contention on acquisitive prescription in
its favor must fail. Aside from the absence of the satisfactory showing of MCIAAs supposed
possession of the subject lot, no acquisitive prescription could arise in view of the indefeasibility of
the respondents Torrens title. Under the Torrens System, no adverse possession could deprive the
registered owners of their title by prescription. The real purpose of the Torrens System is to quiet
title to land and to stop any question as to its legality forever. Thus, once title is registered, the
owner may rest secure, without the necessity of waiting in the portals of the court, or sitting on
the mirador su casa to avoid the possibility of losing his land.

FACTS:

In 1957, Julian Cuizon executed a Deed of Extrajudicial Settlement and Sale (Deed) covering the
subject lot situated in Lapu-Lapu City in favor of the Civil Aeronautics Administration (CAA), the
predecessor-in-interest of MCIAA. Since then until present, MCIAA remained in material,
continuous, uninterrupted and adverse possession of the subject lot through the CAA, presently
known as Air Transportation Office (ATO). The subject lot was transferred and conveyed to MCIAA
by virtue of RA No. 6958.

In 1980, the respondents caused the judicial reconstitution of the original certificate of title
covering the subject lot. Consequently, OCT of the RD of Cebu was reconstituted for the subject lot
in the names of the respondents predecessors-in-interest, all surnamed Cuison. The respondents
ownership of the subject lot was evidenced by OCT. They asserted that they had not sold their
shares in the subject lot, and had not authorized Julian to sell their shares to MCIAAs predecessor-
in-interest.

The failure of the respondents to surrender the owners copy of OCT prompted MCIAA to sue them
for the cancellation of title in the RTC, alleging that the certificate of title conferred no right in favor
of the respondents because the lot had already been sold to the Government in 1957; that the
subject lot had been declared for taxation purposes under in the name of MCIAA.

The RTC dismissed MCIAAs complaint insofar as it pertained to the shares if the respondents in the
subject lot but recognized the sale as to the 1/22 share of Julian.

The CA affirmed the orders of the RTC.

ISSUE:

WON the subject lot was validly conveyed in its entirety to MCIAA.

RULING:

NO.

Firstly, both CA and 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. Considering that possession was a factual matter that the lower courts
had thoroughly examined and based their findings on, we cannot undo their findings. The well
established rule is that the findings of fact of the trial court, when affirmed by the CA, are final and
conclusive. The Court is not a trier of facts.

Secondly, the CA and RTC concluded that the Deed was void as far as the respondents shares in
the subject lot were concerned, but valid as to Julians 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 heir 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 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 by virtue of its being a
voluntary disposition of property on his part.
 even if a co-owner sells the whole property as his, the sale will affect only his own share
but not those of the other co-owners who did not consent to the sale. This because the sale
or other disposition of a co-owner affects only his undivided share and the transferee gets
only what would correspond to his grantor in the partition of the thing owned in
common.

Lastly, MCIAA's contention on acquisitive prescription in its favor must fail. Aside from the
absence of the satisfactory showing of MCIAA's supposed possession of the subject lot, no
acquisitive prescription could arise in view of the indefeasibility of the respondents' Torrens
title. Under the Torrens System, no adverse possession could deprive the registered owners of
their title by prescription. The real purpose of the Torrens System is to quiet title to land
and to stop any question as to its legality forever. Thus, once title is registered, the owner may
rest secure, without the necessity of waiting in the portals of the court, or sitting on the mirador su
casa to avoid the possibility of losing his land.


ASB REALTY CORPORATION v. ORTIGAS & COMPANY LIMITED PATNERSHIP
G.R. No. 202947, DECEMBER 9, 2015, BERSAMIN, J., FIRST DIVISION

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 had been applied by the Court wherever and whenever special
circumstances of the case so demanded.

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

FACTS

Ortigas & Company Limited Partnership (Ortigas) entered into a Deed of Sale with Amethyst Pearl
Corporation (Amethyst) involving the parcel of land situated in Barrio Oranbo, Pasig City for the
consideration of P2,024,000.00. As a result, the Register of Deeds of Rizal cancelled the TCT and
issued a new one in the name of Amethyst. The conditions contained in the Deed of Sale were also
annotated as encumbrances.

Amethyst assigned the subject property to its stockholder, 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. The Register of Deeds of Rizal
issued a new TCT in the name of petitioner with the same encumbrances annotated.

Ortigas filed its complaint for specific performance against the petitioner by virtue of the clause in
the contract containing, Any of the afore-described violations committed by the defendant
empower the plaintiff to sue under paragraph N. Unilateral Cancellation, plaintiff may have the
Deed of Absolute Sale cancelled and the property reverted to it by paying the defendant the amount
it has paid less the items indicated therein. Ortigas alleged that the petitioner has violated the
terms of the Deed of Absolute Sale. For reliefs, Ortigas prayed for the reconveyance of the subject
property, or, alternatively, for the demolition of the structure and improvements thereon, plus the
payment of penalties, attorneys fees and costs of suit.

RTC rendered its decision and dismissed the complaint. CA reversed the decision of RTC. It ruled
that the mere assignment or transfer of the subject property from Amethyst to ASB does not serve
to defeat the vested right of Ortigas to avail of remedies to enforce the subject restriction within the
applicable prescriptive period.

ISSUE:

I. WON Ortigas action for rescission could prosper.
II. WON the covenants annotated on the TCT bound the petitioner to the performance of the
obligations assumed by Amethyst under the Deed of Sale.
III. WON rescission is the proper remedy for Ortigas to recover the subject property from the
petitioner.

RULING:

I. NO. Ortigas action for rescission could not prosper.

The Court holds that Ortigas could not validly demand the reconveyance of the property, or the
demolition of the structures thereon through rescission.

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 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 had been
applied by the Court wherever and whenever special circumstances of the case so demanded.

II. YES. The annotations bound the petitioner but not to the extent that rendered the
petitioner liable for the non-performance of the covenants stipulated on the Deed of Sale.

Section 39 of Act No. 496 (The Land Registration Act) requires that every person receiving a
certificate of title in pursuance of a decree of registration, and every subsequent purchaser of
registered land who takes a certificate of title for value in good faith shall hold the same free of all
encumbrances except those noted on said certificate.

By acquiring the parcel of land with notice of the covenants contained in the Deed of Sale between
Ortigas and Amethyst, the petitioner bound itself to acknowledge and respect the encumbrance.
Even so, the petitioner did not step into the shoes of Amethyst as a party in the Deed of Sale. Thus,
the annotation of the covenants contained in the Deed of Sale did not give rise to a liability on the
part of the petitioner as the purchaser/successor-in-interest without its express assumption of the
duties or obligations subject of the annotation. As stated, the annotation was only the notice to the
purchaser/successor-in-interest of the burden, claim or lien subject of the annotation.

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

The burden to perform the covenants under the Deed of Sale, or the liability for the non-
performance thereof, remained with Amethyst.

III. NO.

The Civil Code uses rescission in two different contexts, namely: (1) rescission on account of breach
of contract under Article 1191; and (2) rescission by reason of lesion or economic prejudice under
Article 1381.

The rescission on account of breach of stipulations is not predicated on injury to economic interest
of the party plaintiff but on the breach of faith by the defendant, that violates the reciprocity
between the parties. It is not a subsidiary action, and Article 1191 may be scanned without
disclosing anywhere that the action for rescission thereunder is subordinated to anything; other
than the culpable breach of his obligations by the defendant. This rescission is in principal
action retaliatory in character, it being unjust that a party be held bound to fulfil his promises when
the other violates his, as expressed in the old Latin aphorism: Non servant fidem, non est fides
servanda. Hence, the reparation of damages for breach is purely secondary.

On the contrary, in the rescission by reason of lesion or economic prejudice, the cause of action is
subordinated to the existence of that prejudice, because it is the raison detre as well as the measure
of the right to rescind. Hence, where the defendant makes good of the damages caused, the action
cannot be maintained or continued, as expressly provided in Articles 1383 and 1384. But the
operation of these two articles is limited to the cases of rescission for lesion enumerated in Article
1381 of the Civil Code of the Philippines, and does not apply to cases under Article 1191.

Ortigas complaint was predicated on Article 1191 of the Civil Code. Considering the foregoing,
Ortigas did not have a cause of action against the petitioner for the rescission of the Deed of
Sale. Under Section 2, Rule 2 of the Rules of Court, a cause of action is the act or omission by which
a party violates a right of another. The essential elements of a cause of action are: (1) a right in
favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an
obligation on the part of the defendant not to violate such right; and (3) an act or omission on the
part of the defendant in violation of the right of the plaintiff or constituting a breach of the
obligation of the defendant to the plaintiff for which the latter may maintain an action for recovery
of damages or other relief. It is only upon the occurrence of the last element that the cause of action
arises, giving the plaintiff the right to file an action in court for the recovery of damages or other
relief.

The second and third elements were absent herein. The petitioner was not privy to the Deed of
Sale because it was not the party obliged thereon. Not having come under the duty not to
violate any covenant in the Deed of Sale when it purchased the subject property despite
the annotation on the title, its failure to comply with the covenants in the Deed of Sale
did not constitute a breach of contract that gave rise to Ortigas' right of rescission. It was
rather Amethyst that defaulted on the covenants under the Deed of Sale; hence, the
action to enforce the provisions of the contract or to rescind the contract should be against
Amethyst. In other words, rescission could not anymore take place against the petitioner once
the subject property legally came into the juridical possession of the petitioner, who was a third
party to the Deed of Sale.


MEGAWORLD PROPERTIES AND HOLDINGS, INC., EMPIRE EAST LAND HOLDINGS, INC., and
ANDREW L. TAN v. MAJESTIC FINANCE AND INVESTMENT CO., INC.
G.R. No. 169694, DECEMBER 9, 2015, BERSAMIN, J., FIRST DIVISION

The obligations of the parties under the JVA 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 fulfilment by the other.

Civil Law; Obligations; Reciprocal Obligations; 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.The obligations of the
parties under the JVA 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.

Same; Same; Conditional Obligations; Suspensive Conditions; 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.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 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 JVA rested on the common cause of profiting from the developed subdivision.

FACTS:

Megaworld Properties and Holdings, Inc. (developer) entered into a Joint Venture Agreement (JVA)
with Majestic Finance and Investment Co., (owner) for the development of the residential
subdivision located in Brgy. Alingaro, General Trias, Cavite. According to the JVA, 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. The JVA
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 JVA, to increase the initial deposit
for the settlement of claims and the relocation of the tenants from P10,000,000.00 to
P60,000,000.00.

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 JVA including the
addendum.

The owner filed in the RTC a complaint for specific performance with damages against the
developer, the developer/assignee, and Andrew Tan. The complaint was mainly based on the
failure of the petitioner to comply with their obligations under the JVA.

The owner filed in RTC a manifestation and motion, praying therein that the petitioners be directed
to provide round-the-clock security for the joint venture property in order to defend and protect it
from the invasion of unauthorized persons. The manifestation and motion were opposed, pointing
out that: (1) the move to have them provide security in the properties was premature; and (2)
under the principle of reciprocal obligations, the owner could not compel them to perform their
obligations under the JVA if the owner itself refused to honor its obligations under the JVA and the
addendum.

RTC issued an order directing the developer to provide the sufficient round-the-clock security for
the protection of the joint venture property.

A special civil action for certiorari was instituted in the CA, claiming that RTC gravely abused its
discretion amounting to lack or excess of jurisdiction in issuing the order. CA, however, dismissed
the petition for lack of merit.

ISSUE:

WON 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 others
reciprocal obligation.

RULING:

NO.

The obligations of the parties under the JVA 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 fulfilment by the other.

The determination of default on the part of either of the parties depends on the terms of the JVA
that clearly categorized the parties several obligations into two types.

The first type related to the continuous obligations that would be continuously performed from the
moment of the execution of the JVA until the parties shall achieved the purpose of their joint
venture. The continuous obligations under the JVA were as follows: (1) the developer would secure
the joint venture property from unauthorized occupants; (2) the owner would allow the developer
to take possession of the joint venture property; (3) the owner would deliver any and all documents
necessary for the accomplishments of each activity; and (4) both the developer and the owner
would pay the real estate taxes.

The second type referred to the activity obligations. The activities under the JVA fell into seven
major categories, specifically: (1) the relocation of the occupants; (2) the completion of the
development plan; (3) the securing of exemption and conversion permits; (4) the obtention of the
development permits from government agencies; (5) the development of the subject land; (6) the
issuance of titles for the subdivided lots; and (7) the selling of the subdivided lots and the
reimbursement of the advances.

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 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 JVA rested on the
common cause of profiting from the developed subdivision.

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.

Yet, the record is bereft of the proof to support the lower courts unanimous conclusion that the
owner had already performed its correlative obligation under the JVA as to place itself in the
position to demand that the developer should already perform its obligation of providing the
round-the-clock security on the property. In issuing its order, therefore, the RTC acted
whimsically because it did not first ascertain whether or not the precedent reciprocal
obligation of the owner upon which the demanded obligation of the developer was
dependent had already been performed. Without such showing that the developer had ceased to
perform a continuous obligation to provide security over the joint venture property despite
complete fulfilment by the owner of all its accrued obligations, the owner had no right to demand
from the developer the round-the-clock security over the 215 hectares of land.


RURAL BANK OF MALASQUI, INC., v. ROMEO M. CERALDE and EDUARDO M. CERALDE,
JR.
G.R. No. 162032, NOVEMBER 25, 2015, BERSAMIN, J., FIRST DIVISION

Remedial Law; Special Civil Actions; Foreclosure of Mortgage; The phrase mortgage action used in
Article 1142 refers to an action to foreclose a mortgage, and has nothing to do with an action to annul
the foreclosure of the mortgage.The petitioner is correct about the erroneous reliance on Article
1142 of the Civil Code, a legal provision on prescription that states: A mortgage action prescribes
after ten years. The phrase mortgage action used in Article 1142 refers to an action to foreclose a
mortgage, and has nothing to do with an action to annul the foreclosure of the mortgage, like this
one. Nonetheless, we find to be untenable the petitioners contention in its motion for
reconsideration that Article 1149 of the Civil Code (All other actions whose periods are not fixed in
this Code or in other laws must be brought within five years from the time the right of action
accrues.) was instead applicable. This action to annul the foreclosure of the mortgage was not yet
barred by prescription because the applicable period of prescription was 10 years from the time
the right of action accrued by virtue of the action being upon a written contract. Indeed, the
reckoning of the period of prescription should start from July 12, 1983, when the foreclosure of the
mortgage was made, indicating that this action, being commenced on July 12, 1993, was not barred
by prescription.

Civil Law; Statute of Limitations; Laches; The courts, under the principle of equity, are not to be guided
strictly by the statute of limitations or the doctrine of laches when a manifest wrong or injustice would
result from doing so.Similarly, the petitioners argument that the respondents were already
barred by laches had no substance. It would be wrong and unjust to bar the respondents from
recovering what was rightfully and legally theirs. In this regard, we adopt with approval the CAs
declaration to the effect that the rule on laches, being an equitable doctrine whose application was
controlled by equitable considerations, could not be applied to defeat justice or to perpetrate fraud.
Indeed, the Court should implement the better rule, which is that the courts, under the principle of
equity, are not to be guided strictly by the statute of limitations or the doctrine of laches when a
manifest wrong or injustice would result from doing so.

Same; Estoppel; Elements of.Estoppel is applied when the following elements concur, namely:
x x x first, the actor who usually must have knowledge, notice or suspicion of the true facts,
communicates something to another in a misleading way, either by words, conduct or silence;
second, the other in fact relies, and relies reasonably or justifiably, upon that communication; third,
the other would be harmed materially if the actor is later permitted to assert any claim inconsistent
with his earlier conduct; and fourth, the actor knows, expects or foresees that the other would act
upon the information given or that a reasonable person in the actors position would expect or
foresee such action.

Agrarian Reform; Section 80 of Republic Act (RA) No. 3844 remained in effect after the effectivity of
RA No. 6657.Contrary to the petitioners claim, 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; Presidential Decree No. 316; the
last two paragraphs of Section 12 of Presidential Decree No. 946; and Presidential Decree No. 1038.
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.

FACTS

This appeal resolves the question of 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.

Romeo M. Ceralde and Eduardo M. Ceralde, Jr., are the owners of the parcels of land covered by TCT
Nos. 111647 and 111648 respectively, of RD Pangasinan. They mortgaged these properties in favor
of Rural Bank of Malasqui, Inc., as security for agricultural loans obtained from the bank. At the
time, however, the land had already been placed under the coverage of Operation Land Transfer
and corresponding Certificates of Land Transfer were already issued to the tenants thereon.
Nevertheless, the rural bank, through its president, adviced the Ceraldes to submit an Affidavit of
Non-Tenancy, which the latter complied with. The mortgages were then approved by the 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 filed an 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 the R.A. No. 3844 (Agricultural Land
Reform Code), as amended, based on Opinion No. 92, Series of 1978, issued by the Secretary of
Justice. They prayed that the extrajudicial foreclosure of the mortgages constituted over the two
parcels of land be annulled.

The petitioner contended, among others, that it had foreclosed the mortgages because of the failure
of the respondents to pay their loans upon maturity and despite repeated demands; that the
respondents had misrepresented to it the untenanted status of the properties; and that the claim of
the respondents was already barred by laches.

The RTC dismissed the complaint of the respondents. It opined that the petitioner only enforced the
mortgage contract upon the default of the respondents; that the respondents were guilty of
misrepresentation from the very beginning in obtaining the loan; and that the respondents were
barred by estoppel on account of their misrepresentation, as well as by laches in view of the fact
that their objection came too late and only after the properties had already been transferred in the
names of the tenant-beneficiaries.

CA reversed and set aside the decision of the RTC and ordered the appellee to pay the appellants
the sum of P119,912.00 plus interest.

ISSUES:

I. WON the action was barred by prescription, laches or estoppel.
II. WON the Rural Bank violated RA 3844 (Agrarian Laws).
III. WON the respondents were entitled to the net value of their landholdings.

RULING:
I. NO.

As to prescription

The reliance on Article 1142 of the Civil Code, a legal provision on prescription that states: A
mortgage action prescribes after ten years, is erroneous. The phrase mortgage action used in Article
1142 refers to an action to foreclose a mortgage, and has nothing to do with an action to annul the
foreclosure of the mortgage.

Article 1149 of the Civil Code (All other actions whose periods are not fixed in this Code or in other
laws must be brought within five years from the time the right of action accrues.) is also
inapplicable. This action to annul the foreclosure of the mortgages was not yet barred by
prescription because the applicable period of prescription was 10 years from the time the
right of action accrued by virtue of the action being upon a written contract. Indeed, the
reckoning of the period of prescription should start from July 12, 1983, when the foreclosure of the
mortgage was made, indicating that this action, being commenced on July 12, 1993, was not bared
by prescription.

As to laches

Similarly, the petitioners argument that the respondents were already barred by laches had no
substance. It would be wrong and unjust to bar the respondents from recovering what was
rightfully and legally theirs. In this regard, we adopt with approval the CAs declaration to the effect
that the rule on laches, being an equitable doctrine whose application was controlled by equitable
considerations, could not be applied to defeat justice or to perpetrate fraud. Indeed, the Court
should implement the better rule, which is that the courts, under the principle of equity, are not to
be guided strictly by the statute of limitations or the doctrine of laches when a manifest wrong or
injustice would result from doing so.

As to estoppel

Estoppel is applied when the following elements concur, namely:
X x x first, the actor who usually jave knowledge, notice, or suspicion of the true facts,
communicates something to another in a misleading way, either by words, conduct or silence;
second, the other in fact relies, and relies reasonably or justifiably, upon that communication;
third, the other would be harmed materially if the actor is later permitted to assert any claim
inconsistent with his earlier conduct; and fourth, the actor knows, expects or foresees that the
other would act upon the information given or that a reasonable person in the actors position
would expect or foresee such action.

The established circumstances of the case rendered the doctrine of estoppel absolutely
inapplicable. 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
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.

II. Yes

Section 80 of RA No. 3844 and Section 71 of RA No. 6657 were not inconsistent with each other, but
actually complemented each other. Section 80, as amended by PD No. 251, only stated that the Land
Bank of the Philippines would be the institution to pay the private lending institutions. Equally
relevant was that Section 75 of RA No. 6657 stipulated that the provisions of RA No. 3844 would
have suppletory effect to RA No. 6577. Absent the inconsistency between Section 80 of RA No. 3844
and Section 71 of RA No. 6657, the bases of the CA in declaring the petitioner to have violated RA
No. 3844 remained.

Without passing judgment on the merits of MOJ Opinion 092, Series of 1978, the Court only needs
to remind that the legal opinion remained good only insofar as it was not inconsistent with the law
it purported to interpret. It remains beyond question that Section 80 of RA No. 3844, supra, did not
prohibit the foreclosure of the mortgage of agricultural landholdings. It clearly only provided that
the Land Bank of the Philippines would pay the landowners the net value of the land minus the
outstanding balance of the obligations in favor of the lending institutions in the event of an existing
lien or encumbrance on the land in favor of private parties or institutions. Hence, the opinion of the
then Minister of Justice to the effect that banks were not allowed to foreclose lands covered by PD
No. 27, as amended, became legally untenable. Conformably with the tenets of the statutory
construction, the law as written should be applied absent any ambiguity.

What is quite clear and uncontroverted is that both the petitioner and the respondents were guilty
of bad faith. Although the coverage of the lands in question under the OLT was made known to the
petitioner only after the execution of the mortgages albeit prior to the foreclosure, the latter was
already put on notice of the coverage under the OLT, and should have desisted from proceeding
with the foreclosure in accordance with law.

Section 80 of RA No. 3844 remained in effect after the effectivity of RA No. 6657. The latter law
expressly repealed only the following provisions, namely: Section 35 of RA No. 3834; PD No. 316;
the last two paragraphs of Section 12 of PD No. 946; and PD No. 1038. Worthy note, too, is that the
repealed laws did not concern the subject matter of Section 80 of RA 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 RA 6657 did not affect Section 80 of RA No. 3844.

In view of the foregoing, Section 80 of RA No. 3844 and Section 71 of Section No. 6657 must be
given equal application.

III. YES.

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 others, 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 RA No. 3844, as amended, and such application favors the respondents, as we have already
explained.


ASSET POOL A (SPV-AMC), INC., v. CLARK DEVELOPMENT CORPORATION
G.R. No. 205915, NOVEMBER 10, 2015, BERSAMIN, J., FIRST DIVISION
(Judgment Based on Compromise Agreement)

Civil Law; Contracts; Compromise Agreements; Words and Phrases; A compromise agreement is a
contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one
already commenced.A compromise agreement is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one already commenced. According to
Article 2029 of the Civil Code, the court shall endeavor to persuade the parties in a civil case to
agree upon some fair compromise. The contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided such stipulations, clauses, terms and
conditions are not contrary to law, morals, good customs, public order, or public policy. Once the
parties have entered into a compromise, their agreement has the effect and authority of res
judicata, but there shall be no execution except in compliance with a judicial compromise. Such
means of dispute settlement is an accepted, even desirable and encouraged, practice in courts of
law and administrative tribunals.

FACTS:

The petitioner was the transferee and successor-in-interest of UCPB and Metrobank who were the
secured creditors of Mondragon Leisure and Resorts Corporation (MLRC) for its working capital
requirements in the development and operation of the Tourism Estate Phase I that eventually
became known as the Mimosa Leisure Estate (MLE).

This case was the appeal of the petitioner of the adverse decision of the CA in its petition for
certiorari assailing the order issued by the RTC in Angeles City, Pampanga in a civil action for
specific performance and damages brought by the petitioner to compel the respondent to include
the claims of the secured creditors in the documents attendant to the bidding for the privatization
of the MLE.

During the pendency of the appeal, the respondent announced that the privatization of MLE would
again be open for public bidding.

On November 6, 2015, the parties submitted their Urgent Joint Motion to Render Judgment Based on
a Compromise Agreement and Lift the Temporary Restraining Order dated October 21, 2015 for the
purpose of terminating their pending disputes. They attached the compromise agreement and
its annexes.

ISSUE:

Whether the appeal shall proceed.

RULING:

The appeal shall no longer proceed.

A compromise agreement is a contract whereby the parties, by making reciprocal concessions,
avoid a litigation or put an end to one already commenced. According to Article 2029 of the Civil
Code, the court shall endeavour to persuade the parties in a civil case to agree upon some fair
compromise. The contracting parties may establish such stipulations, clauses, terms and conditions
as they may deem convenient, provided such stipulations, clauses, terms and conditions are not
contrary to law, morals, good customs, public order, or public policy. Once the parties have entered
into a compromise, their agreement has the effect and authority of res judicata, but there shall be no
execution except in compliance with a judicial compromise, even desirable and encouraged,
practice in courts of law and administrative tribunals.

Wherefore, in light of the foregoing, the Court APPROVES the Compromise Agreement; renders
judgment in accordance with its terms and stipulations and enjoins the parties to comply with its
terms and stipulations in utmost good faith.


REPUBLIC OF THE PHILIPPINES v. JOSE ALBERTO ALBA
G.R. No. 169710, AUGUST 19, 2015, BERSAMIN, J., FIRST DIVISION

The intent behind the laws use of the terms possession and occupation is to emphasize the need for
actual and not just constructive or fictional possession.

The law speaks of possession and occupation. Since these words are separated by the conjunction and,
the clear intention of the law is not to make one synonymous with the other. Possession is broader
than occupation because it includes constructive possession. When, therefore, the law adds the word
occupation, it seeks to delimit the all encompassing effect of constructive possession. Taken together
with the words open, continuous, exclusive and notorious, the word occupation serves to highlight the
fact that for an applicant to qualify, his possession must not be a mere fiction. Actual possession of a
land consists in the manifestation of acts of dominion over it of such a nature as a party would
naturally exercise over his own property.

Civil Law; Land Registration; Property Registration Decree; Requisites for the Filing of an Application
for Registration of Title Under Section 14(1) of Presidential Decree (PD) No. 1529.There are three
requisites for the filing of an application for registration of title under Section 14(1) of PD 1529,
namely: (1) that the property in question is alienable and disposable land of the public domain; (2)
that the applicant by himself or through his predecessors-in-interest have been in open, continuous,
exclusive and notorious possession and occupation; and (3) that such possession is under a bona
fide claim of ownership since June 12, 1945, or earlier. In short, the right to file the application for
original registration derives from a bona fide claim of ownership dating back to June 12, 1945, or
earlier, by reason of the claimants open, continuous, exclusive and notorious possession of
alienable and disposable land of the public domain.

Same; Ownership; Tax Declarations; In Cequea v. Bolante, 330 SCRA 217 (2000), the Supreme Court
(SC) has pointed out that only when tax declarations were coupled with proof of actual possession of
the property could they become the basis of a claim of ownership.The respondents claim of
ownership on the basis of the tax declarations alone did not also suffice. In Cequea v. Bolante, 330
SCRA 217 (2000), the Court has pointed out that only when tax declarations were coupled with
proof of actual possession of the property could they become the basis of a claim of ownership.
Indeed, in the absence of actual public and adverse possession, the declaration of the land for tax
purposes did not prove ownership. It is well-settled that tax declarations are not conclusive proof
of possession or ownership, and their submission will not lend support in proving the nature of the
possession required by the law.

FACTS:

Jose Alberto Alba was the purchaser for value of the parcels of land and applied for the original
registration of title over the parcels of land in the MCTC.

The OSG opposed the application for original registration of title, contending that Jose Alba and his
predecessors-in-interest had not been in open, continuous, exclusive and notorious possession
and occupation of the lands in question.

After trial, the MCTC granted the application for registration of the parcel of land. This was affirmed
by the CA.

ISSUES:

I. WON requirement for the submission of the approved tracing cloth plan may be excused.
II. WON Jose Alba established his required possession.

RULING:

I. YES. Requirement for the submission of the approved tracing cloth plan may be excused if
other competent means of proving identity and location of the lands subject of the
application are available and produced in court.

Section 17 of P.D. No. 1529 shows that it is mandatory for the applicant for original registration to
submit to the trial court not only the original or duplicate copies of the muniments of title but also
the copy of the duly approved survey plan of the land sought to be registered. The survey plan is
crucial because it provides reference of the propertys exact identity and location.

The Court has relaxed the requirement for the submission of the tracing cloth plan by holding that
yet if the reason for requiring an applicant to adduce in evidence the original tracing cloth plan is
merely to provide a convenient and necessary means to afford certainty as to the exact identity of
the property applied for registration and to ensure that the same does not overlap with the
boundaries of the adjoining lots, there stands to be no reason why a registration application must
be denied for failure to present the original tracing cloth plan, especially where it is accompanied by
pieces of evidence such as a duly executed blueprint of the survey plan and a duly executed
technical description of the property which may likewise substantially and with as much
certainty prove the limits and extent of the property sought to be registered.

Although the best means to identify a piece of land for registration purposes is the original tracing
cloth plan approved by the Bureau of Lands (now the Lands Management Services of the Department
of Environment and Natural Resources), other evidence could provide sufficient identification. The
submission of the approved plan and technical description of the lot constituted a substantial
compliance with the legal requirement of ascertaining the identity or location of the lands subject of
the application for registration.

II. NO. Jose Alba did not establish his required possession.

There are three requisites for the filing of an application for registration of title under Section 14(1)
of PD 1529, namely: (1) that the property in question is alienable and disposable land of the public
domain; (2) that the applicant by himself or through his predecessors-in-interest have been in
open, continuous, exclusive and notorious possession and occupation; and (3) that such possession
is under a bona fide claim of ownership since June 12, 1945, or earlier. In short, the right to file the
application for original registration derives from a bona fide claim of ownership dating back to June
12, 1945, or earlier, by reason of the claimants open, continuous, exclusive and notorious
possession of alienable and disposable land of the public domain.

The respondent did not satisfactorily demonstrate that his or his predecessors-in-interests
possession and occupation were of the nature and character contemplated by the law. None of his
witnesses testified about any specific acts of ownership exercised by him or his predecessors-in-
interest on the lands. The general statements of his witnesses on the possession and occupation
were mere conclusions of law that did not qualify as competent and sufficient evidence of his open,
continuous, exclusive and notorious possession and occupation. His witnesses did not testify on the
specific acts of possession of the respondent or of his predecessors-in-interest.

The intent behind the laws use of the terms possession and occupation is to emphasize the need for
actual and not just constructive or fictional possession.

The law speaks of possession and occupation. Since these words are separated by the conjunction
and, the clear intention of the law is not to make one synonymous with the other. Possession is
broader than occupation because it includes constructive possession. When, therefore, the law adds
the word occupation, it seeks to delimit the all encompassing effect of constructive possession.
Taken together with the words open, continuous, exclusive and notorious, the word occupation
serves to highlight the fact that for an applicant to qualify, his possession must not be a mere fiction.
Actual possession of a land consists in the manifestation of acts of dominion over it of such a nature
as a party would naturally exercise over his own property.
The claim of ownership on the basis of the tax declarations alone did not also suffice. Only when the
tax declarations were coupled with proof of actual possession of the property could they become
the basis of a claim of ownership. In the absence of actual public and adverse possession, the
declaration of the land for tax purposes did not prove ownership. It is well-settled that tax
declarations are not conclusive proof of possession or ownership, and their submission will not
lend support in proving the nature of the possession required by the law.


ROBLES vs. YAPCINCO
G.R. No. 169568, FIRST DIVISION, October 22, 2014, Bersamin, J.

The dispute involves the ownership of a judicially-foreclosed parcel of land sold at a public auction, but
which sale was not judicially confirmed. On one side is the petitioner, the successor in interest of the
purchaser in the public auction, and, on the other, the heirs of the mortgagor, who never manifested
interest in redeeming the property from the time of the foreclosure.

The judicial confirmation operated only "to divest the rights of all the parties to the action and to vest
their rights in the purchaser, subject to such rights of redemption as may be allowed by law."

FACTS:

The property in litigation was originally registered in the name of Fernando F. Yapcinco, married to
Maxima Alcedo. In 1994, Yapcinco constituted a mortgage on the property in favor of Jose Marcelo
to secure the performance of his obligation. In turn, Marcelo transferred his rights as the mortgagee
to Apolinario Cruz. When Yapcinco was not able to pay the obligation, Cruz brought an action for
judicial foreclosure of the mortgage. During the pendency of the action, Yapcinco died and
Patrocinio Kelly was appointed as administratix of the estate of Yapcinco.

The CFI (now RTC) of Tarlac rendered a decision ordering Kelly to pay Cruz the indebtedness
secured by the mortgage plus interest, and failure to pay after 90 days from the date of the decision,
the property would be sold at a public auction.

Cruz was adjudged the highest bidder in the public auction. He was issued the certificate of absolute
sale and took possession of the property in due course. However, he did not register the
certificate of sale nor a judicial confirmation of sale was issued.

After sometime, Cruz donated the property to his grandchildren, namely: Carlos Dela Rosa,
Apolinario Bernabe, Ferdinand Cruz and Rolando Robles. Apolinario Bernabe falsified a deed of
absolute sale where he made it appear that Yapcinco had sold the property to him, Ma. Teresita
Escopete, Orlando Santos and Oliver Puzon. As a result of which, the Register of Deeds cancelled
Yapcincos title and issued in the names of Bernabe and others as co-vendees.

Dela Rosa, and Cruz, the other donees, filed a complaint in the RTC for the nullification of the
contract of sale, cancellation of title and reconveyance against Bernabe and his co-vendees but the
case was not aggressively pursued.

After sometime, all the heirs of Spouses Yapcinco instituted an action against Benabe and his co-
vendees for the annulment of the TCT issued to Bernabe, document restoration, reconveyance and
damages. They claimed that although the property had been mortgaged, the mortgage had
not been forecloses judicially or extra-judicially and that the deed of absolute sale between
Yapcinco and Bernabe was void because Yapcinco had already been dead as of the date of
the sale.

The RTC rendered its judgment declaring the TCT and deed of absolute sale null and void and
restored the TCT in the name of Yapcinco.

Rolando Robles then filed an action for the nullification of the document, cancellation of title
reconveyance and damages against the Heirs of Yapcinco alleging that the heirs acted in bad faith
because they had fully known that the property had long been excluded from the estate of Yapcinco
and that a certificate of absolute sale was issued in the name of Apolinario Cruz and that he had a
vested right in the property pursuant to the deed of donation executed in his favor by Cruz.

The RTC rendered decision in favor of Robles declaring the subject land to be owned by the late
Apolinario Cruz and is part of his estate.

The CA reversed the judgment of the RTC holding that due to the non-registration of the
certificate of sale, the period of redemption did not commence to run. It also held that Cruz
never acquired title to the property and could not have conveyed and transferred ownership
to his grandchildren through a deed of donation.

ISSUE:

Whether Apolinario Cruz is entitled to the disputed property?

HELD:

Yes.

It was not denied that Fernando Yapcinco, as the mortgagor, did not pay his obligation and that his
default led to the filing of the action for judicial foreclosure against him. In the end, the decision in
the action for the judicial foreclosure called for the holding of the public sale of the mortgaged
property. Due to the subsequent failure of the estate of Fernando Yapcinco to exercise the equity of
redemption, the property was sold at a public sale where Apolinario Cruz was declared the highest
bidder.

The effect of the failure of Apolinario Cruz to obtain the judicial confirmation was only to prevent
the title to the property from being transferred to him. Such failure did not give rise to any right
in favor of the mortgagor or the heirs of Yapcinco to take back the property already validly
sold through public auction. Nor such failure invalidate the foreclosure proceedings. To
maintain otherwise would render nugatory the judicial foreclosure and foreclosure sale.

The non-transfer of the title notwithstanding, Apolinario Cruz as the purchaser should not be
deprived of the property purchased at the foreclosure sale. With the foreclosure and subsequent
public sale known to the heirs of Yapcinco and in view of the unquestioned possession by
Apolinario Cruz and his grandchildren from the time of the foreclosure sale until the present, the
heirs of Yapcinco could not assert any better right to the property on the basis of lack of judicial
confirmation of the sale. The judicial confirmation operated only "to divest the rights of all the
parties to the action and to vest their rights in the purchaser, subject to such rights of redemption
as may be allowed by law."


SOLEDAD L. LAVADIA vs. HEIRS OF JUAN LUCES LUNA, represented by GREGORIO Z. LUNA and
EUGENIA ZABALLERO-LUNA
G.R. No. 171914, FIRST DIVISION, July 23, 2014, BERSAMIN, J.:*

Divorce between Filipinos is void and ineffectual under the nationality rule adopted by Philippine
law. Hence, any settlement of property between the parties of the first marriage involving Filipinos
submitted as an incident of a divorce obtained in a foreign country lacks competent judicial
approval, and cannot be enforceable against the assets of the husband who contracts a subsequent
marriage.

Civil Law; Conflict of Laws; Nationality Rule; 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.
The first marriage between Atty. Luna and Eugenia, both Filipinos, was solemnized in the
Philippines on September 10, 1947. The law in force at the time of the solemnization was the
Spanish Civil Code, which adopted the nationality rule. 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.

Same; Same; Same; Divorce; The nonrecognition of absolute divorce between Filipinos has
remained even under the Family Code, even if either or both of the spouses are residing abroad.
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
nonrecognition 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.

Same; Same; Same; Same; The nonrecognition of absolute divorce in the Philippines is a
manifestation of the respect for the sanctity of the marital union especially among Filipino
citizens.It is true that on January 12, 1976, the Court of First Instance (CFI) of Sto. Domingo in the
Dominican Republic issued the Divorce Decree dissolving the first marriage of Atty. Luna and
Eugenia. 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. This finding conforms to the Constitution, which characterizes
marriage as an inviolable social institution, and regards it as a special contract of permanent union
between a man and a woman for the establishment of a conjugal and family life. The nonrecognition
of absolute divorce in the Philippines is a manifestation of the respect for the sanctity of the marital
union especially among Filipino citizens. It affirms that the extinguishment of a valid marriage must
be grounded only upon the death of either spouse, or upon a ground expressly provided by law. 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.

Same; Same; Same; Property Relations; Conjugal Partnership of Gains; 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.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. This is because the Spanish Civil Code, the
law then in force at the time of their marriage, did not specify the property regime of the spouses in
the event that they had not entered into any marriage settlement before or at the time of the
marriage. Article 119 of the Civil Code clearly so provides, to wit: Article 119. The future spouses
may in the marriage settlements agree upon absolute or relative community of property, or upon
complete separation of property, or upon any other regime. In the absence of marriage settlements,
or when the same are void, the system of relative community or conjugal partnership of gains as
established in this Code, shall govern the property relations between husband and wife.

Same; Same; Same; Marriages; In the Philippines, marriages that are bigamous, polygamous, or
incestuous are void.In the Philippines, marriages that are bigamous, polygamous, or incestuous
are void. Article 71 of the Civil Code clearly states: Article 71. All marriages performed outside the
Philippines in accordance with the laws in force in the country where they were performed, and
valid there as such, shall also be valid in this country, except bigamous, polygamous, or incestuous
marriages as determined by Philippine law. Bigamy is an illegal marriage committed by contracting
a second or subsequent marriage before the first marriage has been legally dissolved, or before the
absent spouse has been declared presumptively dead by means of a judgment rendered in the
proper proceedings. A bigamous marriage is considered void ab initio.

Same; Same; Property Relations; Co-Ownership; 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.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, viz.: Article 144. When a man and a woman live together as husband and wife, but they are
not married, or their marriage is void from the beginning, the property acquired by either or both of
them through their work or industry or their wages and salaries shall be governed by the rules on
co-ownership. (n) 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.

FACTS:

ATTY. LUNA initially married in a civil ceremony on September 10, 1947 and later solemnized in a
church ceremony at the Pro-Cathedral in San Miguel, Bulacan on September 12, 1948. After almost
two (2) decades of marriage, ATTY. LUNA and EUGENIA eventually agreed to live apart from
each other in February 1966 and agreed to separation of property, to which end, they entered into
a written agreement entitled "AGREEMENT FOR SEPARATION AND PROPERTY SETTLEMENT"
dated November 12, 1975, whereby they agreed to live separately and to dissolve and liquidate
their conjugal partnership of property.

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. Also in Sto. Domingo, Dominican Republic, on the same date,
ATTY. LUNA contracted another marriage, this time with SOLEDAD.

Sometime in 1977, ATTY. LUNA organized a new law firm named LUPSICON where ATTY. LUNA
was the managing partner. LUPSICON through ATTY. LUNA purchased the 6th Floor of Kalaw-
Ledesma Condominium Project (condominium unit).

Sometime in 1992, LUPSICON was dissolved and the condominium unit was partitioned by the
partners but the same was still registered in common under CCT No. 21716. 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. Dela Cruz and used a
portion of the office condominium unit as their office. The said law firm lasted until the death of
ATTY. JUAN on July 12, 1997.

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. Gregorio Z. Luna then leased out the 25/100 portion of the
condominium unit belonging to his father to Atty. Renato G. De la Cruz who established his own law
firm named Renato G. De la Cruz & Associates.

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 with the RTC of Makati City. The complaint prayed that SOLEDAD
be declared the owner of the portion of the subject properties; that the same be partitioned; that
an accounting of the rentals on the condominium unit pertaining to the share of SOLEDAD be
conducted; that a receiver be appointed to preserve ad administer the subject properties; and that
the heirs of ATTY. LUNA be ordered to pay attorneys fees and costs of the suit to SOLEDAD.

ISSUE:

WON the divorce between Atty. Luna and Eugenia Zaballero-Luna (Eugenia) had validly dissolved
the first marriage; and NO.
WON the second marriage entered into by the late Atty. Luna and the petitioner entitled the latter
to any rights in property. NO.

RULING

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

The first marriage between Atty. Luna and Eugenia, both Filipinos, was solemnized in the
Philippines on September 10, 1947. The law in force at the time of the solemnization was the
Spanish Civil Code, which adopted the nationality rule. 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.

It is true that on January 12, 1976, the Court of First Instance (CFI) of Sto. Domingo in the
Dominican Republic issued the Divorce Decree dissolving the first marriage of Atty. Luna and
Eugenia. 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. This finding conforms to the Constitution,
which characterizes marriage as an inviolable social institution, and regards it as a special contract
of permanent union between a man and a woman for the establishment of a conjugal and family
life. 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. It affirms that
the extinguishment of a valid marriage must be grounded only upon the death of either spouse, or
upon a ground expressly provided bylaw. 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. This is because the Spanish Civil Code,
the law then in force at the time of their marriage, did not specify the property regime of the
spouses in the event that they had not entered into any marriage settlement before or at the time of
the marriage.

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.

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.

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

The CA expressly declared that Atty. Lunas subsequent marriage to Soledad on January 12,
1976 was void for being bigamous, on the ground that the marriage between Atty. Luna and
Eugenia had not been dissolved by the Divorce Decree rendered by the CFI of Sto. Domingo in the
Dominican Republic but had subsisted until the death of Atty. Luna on July 12, 1997. The Court
concurs with the CA.

In the Philippines, marriages that are bigamous, polygamous, or incestuous are void. Article 71 of
the Civil Code clearly states that all marriages performed outside the Philippines in accordance with
the laws in force in the country where they were performed, and valid there as such, shall also be
valid in this country, except bigamous, polygamous, or incestuous marriages as determined by
Philippine law.

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.

In the cases which involved the issue of co-ownership of properties acquired by the parties to a
bigamous marriage and an adulterous relationship, respectively, we ruled that proof of actual
contribution in the acquisition of the property is essential. The claim of co-ownership of the
petitioners therein who were parties to the bigamous and adulterous union is without basis
because they failed to substantiate their allegation that they contributed money in the purchase of
the disputed properties. Also the fact that the controverted property was titled in the name of the
parties to an adulterous relationship is not sufficient proof of coownership absent evidence of
actual contribution in the acquisition of the property.

Did the petitioner discharge her burden of proof on the co-ownership?

The CA entirely debunked the petitioners assertions on her actual contributions.

SOLEDADs claim that she made a cash contribution of P100,000.00 is unsubstantiated.
Clearly, there is no basis for SOLEDADs claim of co-ownership over the 25/100 portion of the
condominium unit and the trial court correctly found that the same was acquired through the sole
industry of ATTY. LUNA.

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. Indeed, the petitioner, as the party claiming the co-ownership, did not discharge her
burden of proof. 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 litislegally pertained to
their conjugal partnership of gains as of the time of his death. Consequently, the sole ownership of
the 25/100 pro indivisoshare of Atty. Luna in the condominium unit, and of the lawbooks pertained
to the respondents as the lawful heirs of Atty. Luna.


HECTOR L. UY v. VIRGINIA G. FULE
G.R. No. 164961, FIRST DIVISION, June 30, 2014, BERSAMIN, J.

The decisive question here is whether or not the petitioner was a purchaser in good faith of the
property in litis. 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.

Civil Law; Sales; Buyer in Good Faith; In determining whether or not a buyer of property is a
purchaser in good faith, he must show that he has bought the property without notice that some
other person had a right to, or interest in, such property, and he should pay a full and fair price for
the same at the time of his purchase, or before he had notice of the claim or interest of some other
persons in the property.We stated at the start that in determining whether or not a buyer of
property is a purchaser in good faith, he must show that he has bought the property without notice
that some other person had a right to, or interest in, such property, and he should pay a full and fair
price for the same at the time of his purchase, or before he had notice of the claim or interest of
some other persons in the property. He must believe that the person from whom he receives the
property was the owner and could convey title to the property, for he cannot close his eyes to facts
that should put a reasonable man on his guard and still claim he acted in good faith.

Same; Same; Same; It is a well-settled rule that a purchaser cannot close his eyes to facts which
should put a reasonable man upon his guard, and then claim that he acted in good faith under the
belief that there was no defect in the title of the vendor.The foregoing circumstances negated the
third element of good faith cited in Bautista v. Silva, 502 SCRA 334 (2006), i.e., that at the time of
sale, the buyer was not aware of any claim or interest of some other person in the property, or of
any defect or restriction in the title of the seller or in his capacity to convey title to the property. As
we have ruled in Bautista v. Silva, the absence of the third condition put the petitioner on notice and
obliged him to exercise a higher degree of diligence by scrutinizing the certificates of title and
examining all factual circumstances in order to determine the sellers title and capacity to transfer
any interest in the lots. Consequently, it is not sufficient for him to insist that he relied on the face of
the certificates of title, for he must further show that he exercised reasonable precaution by
inquiring beyond the certificates of title. Failure to exercise such degree of precaution rendered him
a buyer in bad faith. It is a well-settled rule that a purchaser cannot close his eyes to facts which
should put a reasonable man upon his guard, and then claim that he acted in good faith under the
belief that there was no defect in the title of the vendor.

FACTS:

Upon the death of Conrado Garcia, 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.

The Department of Agrarian Reform (DAR) engaged Geodetic Engr. Sales to conduct a survey of the
disputed land. Engr. 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 of Camarines Sur 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 (OLT) program of the DAR pursuant to Presidential Decree
No. 27.

In 1988, the DAR and the Office of the Register of Deeds of Camarines Sur respectively issued
emancipation patents (EPs) and original certificates of title (OCTs) 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 to the Registry of Deeds of Camarines Sur. On the other hand, the heirs of farmer-
beneficiary Mariano Ronda (Isabel Ronda, et al.) sold their land to petitioner Hector Uy for P10
million. The petitioner registered his title both of the Registry of Deeds of Camarines Sur.

In 1997, TCT No. RT-8922 (16498) was cancelled following the partition of the property covered
therein. Subsequently, TCT No. 30136 and TCT No. 30111 were issued in the names of respondents
heirs of the late Conrado Garcia. TCT No. 30111 covered the disputed land. 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 the DAR Secretary; the Municipal Agrarian
Reform Officer of Pili, Camarines Sur; DAR Technologist Carmen Sorita; DAR Team Leader Julian
Israel; Engr. Sales; and Regional Director Antonio Nuesa of DAR Regional Office No. V (public
defendants) and the farmer-beneficiaries (private defendants) in the Regional Trial Court (RTC) in
Pili, Camarines Sur, alleging that they had been denied due process; and that the titles of the
defendants (who included the petitioner) in the disputed land constituted clouds on their own title.
They prayed that the private defendants certificates of title, including those of their
purchasers Chisan Uy and the petitioner, be cancelled; that the private defendants be ordered
to surrender the possession of the disputed land to them; and that in default thereof the private
defendants be ordered to pay the fair market value of the property, with reparation for damages in
either case.

The RTC resolved in favor of the respondents. 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. The CA ruled in favor of
respondents. Hence, the petitioner has appealed, along with Chisan Uy, Catalino Alcaide and Julia
Casaysayan.

ISSUE:

WON the petitioner was a purchaser in good faith of the property in litis

RULING:

NO. The petitioner was not an innocent purchaser for value; hence, he cannot be awarded
the disputed land.

A buyer for value in good faith is one who buys property of another, without notice that some other
person has a right to, or interest in, such property and pays full and fair price for the same, at the
time of such purchase, or before he has notice of the claim or interest of some other persons in the
property. He buys the property with the well-founded belief that the person from whom he
receives the thing had title to the property and capacity to convey it.

To prove good faith, a buyer of registered and titled land need only show that he relied on the face
of the title to the property. He need not prove that he made further inquiry for he is not obliged to
explore beyond the four corners of the title. Such degree of proof of good faith, however, is
sufficient only when the following conditions concur: first, the seller is the registered owner of the
land; second, the latter is in possession thereof; and third, at the time of the sale, the buyer was not
aware of any claim or interest of some other person in the property, or of any defect or restriction
in the title of the seller or in his capacity to convey title to the property.

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. Under such circumstance, it was no longer sufficient for said
buyer to merely show that he had relied on the face of the title; he must now also show that
he had exercised reasonable precaution by inquiring beyond the title. Failure to exercise such
degree of precaution makes him a buyer in bad faith.

An examination of the deed of sale executed between Isabel Ronda, et al. and the petitioner
respecting the portions covered by TCT No. 31120 and TCT No. 31121 indicates that the
TCTs were issued only on August 17, 1998 but the deed of sale was executed on July 31,
1998. While it is true, as the petitioner argues, that succession occurs from the moment of death of
the decedent pursuant to Article 777 of the Civil Code, his argument did not extend to whether or
not he was a buyer in good faith, but only to whether or not, if at all, Isabel Ronda, et al., as the heirs
of Mariano Ronda, held the right to transfer ownership over their 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. Furthermore, said OCTs plainly
recited the following prohibition: it shall not be transferred except by hereditary succession or to
the Government in accordance with the provisions of Presidential Decree No. 27, Code of Agrarian
Reforms of the Philippines and other existing laws and regulations.

The foregoing circumstances negated the third element of good faith 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
absence of the third condition put the petitioner on notice and obliged him to exercise a higher
degree of diligence by scrutinizing the certificates of title and examining all factual circumstances in
order to determine the sellers title and capacity to transfer any interest in the lots. Consequently, it
is not sufficient for him to insist that he relied on the face of the certificates of title, for he
must further show that he exercised reasonable precaution by inquiring beyond the
certificates of title. Failure to exercise such degree of precaution rendered him a buyer in bad
faith. It is a well-settled rule that a purchaser cannot close his eyes to facts which should put a
reasonable man upon his guard, and then claim that he acted in good faith under the belief that
there was no defect in the title of the vendor.


AZNAR BROTHERS REALTY COMPANY v. SPOUSES JOSE AND MAGDALENA YBAEZ
G.R. No. 161380, FIRST DIVISION, April 21, 2014, BERSAMIN, J.

The Deed of Absolute Sale in favor of plaintiff-appellant Aznar was registered under Act 3344, as
amended, 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.
(Gerona v. Guzman, 11 SCRA 153) 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.

Civil Law; Land Registration; Although a deed or instrument affecting unregistered lands would be
valid only between the parties thereto, third parties would also be affected by the registered deed or
instrument on the theory of constructive notice once it was further registered. As ruled in Gutierrez
v. Mendoza-Plaza, 607 SCRA 807 (2009): The non-registration of the aforesaid deed does not also
affect the validity thereof. Registration is not a requirement for validity of the contract as between
the parties, for the effect of registration serves chiefly to bind third persons. The principal purpose
of registration is merely to notify other persons not parties to a contract that a transaction
involving the property has been entered into. The conveyance of unregistered land shall not be
valid against any person unless registered, except (1) the grantor, (2) his heirs and devisees, and
(3) third persons having actual notice or knowledge thereof. As held by the Court of Appeals,
petitioners are the heirs of Ignacio, the grantor of the subject property. Thus, they are bound by the
provisions of the deed of donation inter vivos.

Same; Same; Constructive Notice; The only exception to the rule on constructive notice by registration
of the deed or instrument affecting unregistered realty exists in favor of a third party with a better
right.The only exception to the rule on constructive notice by registration of the deed or
instrument affecting unregistered realty exists in favor of a third party with a better right. This
exception is provided in Section 194, as amended by Act No. 3344, to the effect that the registration
shall be understood to be without prejudice to a third party with a better right; and in paragraph
(b) of Section 113 of P.D. No. 1529, to the effect that any recording made under this section shall be
without prejudice to a third party with a better right. As to who is a third party with better right
under these provisions is suitably explained in Hanopol v. Pilapil, 7 SCRA 452 (1963), a case where
the sale of unregistered land was registered under Act No. 3344 but the land was sold twice, as
follows: It thus appears that the better right referred to in Act No. 3344 is much more than the
mere prior deed of sale in favor of the first vendee. In the Lichauco case just mentioned, it was the
prescriptive right that had supervened. Or, as also suggested in that case, other facts and
circumstances exist which, in addition to his deed of sale, the first vendee can be said to have better
right than the second purchaser.

Same; Land Registration; An action to declare the nullity of a void title does not prescribe and is
susceptible to direct, as well as to collateral, attack.The principle of indefeasibility of the Torrens
title does not protect OCT No. 2150 because the free patent on which the issuance of the title was
based was null and void. A direct attack as well as a collateral attack are proper, for, as the Court
declared in De Guzman v. Agbagala, 546 SCRA 278 (2008): x x x. An action to declare the nullity of a
void title does not prescribe and is susceptible to direct, as well as to collateral, attack. OCT No. P-
30187 was registered on the basis of a free patent which the RTC ruled was issued by the Director
of Lands without authority. The petitioners falsely claimed that the land was public land when in
fact it was not as it was private land previously owned by Carmen who inherited it from her
parents.

FACTS:

Casimiro Ybaez (Casimiro), with the marital consent of Maria Daclan, executed a Deed of Absolute
Sale in favor of Aznar Brothers conveying for P2,500.00 the 17,575-square-meter unregistered
agricultural land in Banika-Bulacao, Pardo, Cebu City. Saturnino Tanuco sold to Aznar Brothers for
P2,528.00 the 15,760-square-meter parcel of corn and cogon land planted with 17 coconut trees
situated in Candawawan, Pardo, Cebu City, bounded on the North by Alfonso Pacaa. The parties
agreed to register the parcel of land under Act No. 3344.

Casimiro died intestate leaving as heirs his wife Maria. The heirs of Casimiro executed an
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 the lot with an area
of 16,050 square meters situated in Banika, Bulacao, Pardo Cebu City. By the same document, they
sold the entire lot for P1,000.00 to their co-heir, Adriano D. Ybaez (Adriano).

Adriano sold Lot No. 18563 to Jose R. Ybaez for P60,000.00. Lot No. 18563 is described in their
deed of sale as containing an area of 16,050 square meters. Jose R. Ybaez filed Free Patent
Application in respect of the land he had bought from Adriano. In due course, Original Certificate of
Title 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. Alleging that the free patent issued in favor of Jose R. Ybaez
covered the same property already adjudicated as private property, 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.

ISSUE:

WON the petitioner AZNAR BROTHERS REALTY COMPANY is the sole and exclusive owner of the
unregistered parcel of land

RULING:

YES. CA correctly concluded that Aznar Brothers owned Lot No. 18563; and that the Spouses
Ybaez were not buyers in good faith.

The Deed of Absolute Sale in favor of plaintiff-appellant Aznar was registered under Act 3344,
as amended, 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. (Gerona v. Guzman, 11 SCRA 153) 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 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. Considering that such conveyance was effective and binding on Adriano and his siblings,
there was no valid transmission of Lot No. 18563 upon Casimiros death to any of said heirs, and
they could not legally adjudicate Lot No. 18563 unto themselves, and validly transfer it to Adriano.
The conveyance by Adriano to Jose R. Ybaez on June 21, 1978 was absolutely void and ineffectual.

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

Although a deed or instrument affecting unregistered lands would be valid only between the
parties thereto, third parties would also be affected by the registered deed or instrument on
the theory of constructive notice once it was further registered in accordance with Section
194.

ESTOPPEL BY LACHES DID NOT BAR AZNAR BROTHERS RIGHT OVER LOT NO. 18563

Plaintiff-appellant was never in possession of the land which it bought. Even after buying the land
from Casimiro Ybaez, plaintiff-appellant did not take possession of it. On the other hand, the heirs
of Casimiro Ybaez took possession of said land upon the latters death. Said heirs sold their shares
on said land to one of their co-heirs, Adriano Ybaez, who in turn, sold the whole land to defendant
appellees, the spouses Jose and Magdalena Ybaez. The latter continued possessing said land, tax
declared it, paid realty taxes thereon and finally secured a free patent and title over it. Up to the
present, defendant-appellees are in possession of the land as owners thereof.

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. The Spouses Ybaez counter that the CA was correct because Aznar Brothers did not
assert possession and ownership over the land for 25 yearsWe 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.

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. Thereby, the
Spouses Ybaez became bound by the sale from Casimiro to Aznar Brothers, and rendered them
incapable of acquiring the land in good faith from Adriano. Consequently, Jose R. Ybaezs
intervening application for the free patent, the grant of the free patent and the issuance of OCT No.
2150 thereafter did not supplant the superior rights and interest of Aznar Brothers in Lot No.
18563. And, lastly, the Spouses Ybaez would not suffer any prejudice should Aznar Brothers
prevail herein, for Adriano, their predecessor-in-interest, did not transmit to them any kind or
degree of right or interest in Lot No. 18563.

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.

In contrast, 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 No. 2150 a patent nullity.

The principle of indefeasibility of the Torrens title does not protect OCT No. 2150 because the
free patent on which the issuance of the title was based was null and void. A direct attack as well as
a collateral attack are proper, for an action to declare the nullity of a void title does not prescribe
and is susceptible to direct, as well as to collateral, attack.

Nonetheless, it appears that Aznar Brothers actually mounted a direct attack on the title of the
Spouses Ybaez. In the original complaint, Aznar Brothers sought judgment ordering them to
[s]urrender all the documents pertaining to the Free Patent for cancellation. Such relief was
predicated on the allegation that the land in question was already adjudicated as private property
of the plaintiff through the Deed of Absolute Sale of March 21, 1964. Aznar Brothers reiterated the
relief in the amended complaint. In its second amended complaint, it expressly prayed for the
cancellation and annulment of OCT No. 2150. By such pleadings, it directly attacked OCT No.
2150, because their object was to nullify the title, and thus challenge the judgment or proceeding
pursuant to which the title was decreed.


RAUL H. SESBREO v. HONORABLE COURT OF APPEALS
G.R. No. 160689, FIRST DIVISION, March 26, 2014, BERSAMIN, J.:

Constitutional Law; Searches and Seizures; The constitutional guaranty against unlawful searches and
seizures is intended as a restraint against the Government and its agents tasked with law
enforcement. If the search is made upon the request of law enforcers, a warrant must generally be
first secured if it is to pass the test of constitutionality. However, if the search is made at the behest
or initiative of the proprietor of a private establishment for its own and private purposes, as in the
case at bar, and without the intervention of police authorities, the right against unreasonable search
and seizure cannot be invoked for only the act of private individual, not the law enforcers, is
involved. In sum, the protection against unreasonable searches and seizures cannot be extended to
acts committed by private individuals so as to bring it within the ambit of alleged unlawful
intrusion by the government.

Civil Law; Human Relations; Abuse of Rights; The concept of abuse of rights prescribes that a person
should not use his right unjustly or in bad faith; otherwise, he may be liable to another who suffers
injury.Clearly, Sesbreo did not establish his claim for damages if the respondents were not guilty
of abuse of rights. To stress, the concept of abuse of rights prescribes that a person should not use
his right unjustly or in bad faith; otherwise, he may be liable to another who suffers injury. The
rationale for the concept is to present some basic principles to be followed for the rightful
relationship between human beings and the stability of social order. Moreover, according to a
commentator, the exercise of right ends when the right disappears, and it disappears when it is
abused, especially to the prejudice of others[;] [i]t cannot be said that a person exercises a right
when he unnecessarily prejudices another. Article 19 of the Civil Code sets the standards to be
observed in the exercise of ones rights and in the performance of ones duties, namely: (a) to act
with justice; (b) to give everyone his due; and (c) to observe honesty and good faith. The law
thereby recognizes the primordial limitation on all rights that in the exercise of the rights, the
standards under Article 19 must be observed.

Same; Same; Same; In order that liability may attach under the concept of abuse of rights, the
following elements must be present, to wit: (a) the existence of a legal right or duty, (b) which is
exercised in bad faith, and (c) for the sole intent of prejudicing or injuring another.

FACTS:
VECO was a public utility corporation organized and existing under the laws of the Philippines.
VECO engaged in the sale and distribution of electricity within Metropolitan Cebu. Sesbreo was
one of VECOs customers under the metered service contract. To ensure that its electric meters
were properly functioning, and that none of it meters had been tampered with, VECO employed
respondents Engr. Felipe Constantino and Ronald Arcilla as violation of contract (VOC) inspectors.

The VOC Team conducted a routine inspection of the houses at La Paloma Village, Labangon, Cebu
City, including that of plaintiffappellant Sesbreo, for illegal connections, meter tampering, seals,
conduit pipes, jumpers, wiring connections, and meter installations. After Bebe Baledio, plaintiff
appellant Sesbreos maid, unlocked the gate, they inspected the electric meter and found
that it had been turned upside down. Defendantappellant Arcilla took photographs of the
upturned electric meter. With Chuchie Garcia, Peter Sesbreo and one of the maids present,
they removed said meter and replaced it with a new one. At that time, plaintiffappellant
Sesbreo was in his office and no one called to inform him of the inspection. The VOC Team then
asked for and received Chuchie Garcias permission to enter the house itself to examine the
kind and number of appliances and light fixtures in the household and determine its
electrical load. Afterwards, Chuchie Garcia signed the Inspection Division Report, which showed
the condition of the electric meter on May 11, 1989 when the VOC Team inspected it, with notice
that it would be subjected to a laboratory test. She also signed a Load Survey Sheet that showed the
electrical load of plaintiffappellant Sesbreo.

Sesbreo accused the VOC inspection team dispatched by the VECO to check his electric meter
with conducting an unreasonable search in his residential premises. The RTC rendered
judgment dismissing the claim; and the CA affirmed the dismissal. Hence, this appeal by Sesbreo.

The respondents assert that the VOC team had the continuing authority from Sesbreo as the
consumer to enter his premises at all reasonable hours to conduct an inspection of the meter
without being liable for trespass to dwelling. The authority emanated from paragraph 9 of the
metered service contract entered into between VECO and each of its consumers.

Sesbreo contends, however, that paragraph 9 did not give Constantino, Arcilla and Balicha the
blanket authority to enter at will because the only property VECO owned in his premises was the
meter; hence, Constantino and Arcilla should enter only the garage. He denies that they had the
right to enter the main portion of the house and inspect the various rooms and the appliances
therein because those were not the properties of VECO. He posits that Balicha, who was not an
employee of VECO, had no authority whatsoever to enter his house and conduct a search. He
concludes that their search was unreasonable, and entitled him to damages in light of their
admission that they had entered and inspected his premises without a search warrant.

ISSUE:

WON Sesbreo is entitled to recover damages for abuse of rights?

RULING:

NO. Sesbreos insistence has no legal and factual basis.

We do not accept Sesbreos conclusion. Paragraph 9 clothed the entire VOC team with
unquestioned authority to enter the garage to inspect the meter. The members of the team
obviously met the conditions imposed by paragraph 9 for an authorized entry. Firstly, their entry
had the objective of conducting the routine inspection of the meter. Secondly, the entry and
inspection were confined to the garage where the meter was installed. Thirdly, the entry was
effected at around 4 oclock p.m., a reasonable hour. And, fourthly, the persons who inspected the
meter were duly authorized for the purpose by VECO.

Although Balicha was not himself an employee of VECO, his participation was to render
police assistance to ensure the personal security of Constantino and Arcilla during the
inspection, rendering him a necessary part of the team as an authorized representative.
Under the circumstances, he was authorized to enter considering that paragraph 9 expressly
extended such authority to properly authorized employees or representatives of VECO.

The constitutional guaranty against unlawful searches and seizures is intended as a
restraint against the Government and its agents tasked with law enforcement. It is to be
invoked only to ensure freedom from arbitrary and unreasonable exercise of State power.

It is worth noting that the VOC inspectors decided to enter the main premises only after
finding the meter of Sesbreo turned upside down, hanging and its disc not rotating. Their
doing so would enable them to determine the unbilled electricity consumed by his household. The
circumstances justified their decision, and their inspection of the main premises was a continuation
of the authorized entry. There was no question then that their ability to determine the unbilled
electricity called for them to see for themselves the usage of electricity inside. Not being agents of
the State, they did not have to first obtain a search warrant to do so.

Balichas presence participation in the entry did not make the inspection a search by an
agent of the State within the ambit of the guaranty. As already mentioned, Balicha was part of
the team by virtue of his mission order authorizing him to assist and escort the team during its
routine inspection. Consequently, the entry into the main premises of the house by the VOC team
did not constitute a violation of the guaranty.

Our holding could be different had Sesbreo persuasively demonstrated the intervention of malice
or bad faith on the part of Constantino and Arcilla during their inspection of the main premises, or
any excessiveness committed by them in the course of the inspection. But Sesbreo did not. On the
other hand, the CA correctly observed that the inspection did not zero in on Sesbreos residence
because the other houses within the area were similarly subjected to the routine inspection. This,
we think, eliminated any notion of malice or bad faith.

Clearly, Sesbreo did not establish his claim for damages if the respondents were not guilty
of abuse of rights. To stress, the concept of abuse of rights prescribes that a person should not use
his right unjustly or in bad faith; otherwise, he may be liable to another who suffers injury. The
rationale for the concept is to present some basic principles to be followed for the rightful
relationship between human beings and the stability of social order.

Although the act is not illegal, liability for damages may arise should there be an abuse of rights, like
when the act is performed without prudence or in bad faith. In order that liability may attach under
the concept of abuse of rights, the following elements must be present, to wit: (a) the existence of a
legal right or duty, (b) which is exercised in bad faith, and (c) for the sole intent of prejudicing or
injuring another. There is no hard and fast rule that can be applied to ascertain whether or not the
principle of abuse of rights is to be invoked. The resolution of the issue depends on the
circumstances of each case.

Sesbreo asserts that he did not authorize Baledio or Chuchie Garcia to let anyone enter his
residence in his absence; and that Baledio herself confirmed that the members of the VOC team had
intimidated her into letting them in.

The assertion of Sesbreo is improper for consideration in this appeal. The RTC and the CA
unanimously found the testimonies of Sesbreos witnesses implausible because of inconsistencies
on material points; and even declared that the nonpresentation of Garcia as a witness was odd if
not suspect. Considering that such findings related to the credibility of the witnesses and their
testimonies, the Court cannot review and undo them now because it is not a trier of facts, and is not
also tasked to analyze or weigh evidence all over again. Verily, a review that may tend to supplant
the findings of the trial court that had the firsthand opportunity to observe the demeanor of the
witnesses themselves should be undertaken by the Court with prudent hesitation. Only when
Sesbreo could make a clear showing of abuse in their appreciation of the evidence and records by
the trial and the appellate courts should the Court do the unusual review of the factual findings of
the trial and appellate courts. Alas, that showing was not made here.

Nor should the Court hold that Sesbreo was denied due process by the refusal of the trial judge to
inhibit from the case. Although the trial judge had issued an order for his voluntary inhibition, he
still rendered the judgment in the end in compliance with the instruction of the Executive Judge,
whose exercise of her administrative authority on the matter of the inhibition should be
respected. In this connection, we find to be apt the following observation of the CA.


REPUBLIC vs. ZURBARAN DEVELOPMENT AND REALTY CORPORATION
G.R. No. 164408, FIRST DIVISION, March 24, 2014, Bersamin, J.

An application for original registration of land of the public domain under Section 14(2) of
Presidential Decree (PD) No. 1529 must show not only that the land has previously been declared
alienable and disposable, but also that the land has been declared patrimonial property of the State at
the onset of the 30year or 10year period of possession and occupation required under the law on
acquisitive prescription. Once again, the Court applies this ruleas clarified in Heirs of Mario
Malabanan v. Republicin reviewing the decision promulgated on June 10, 2004, whereby the Court
of Appeals (CA) granted the petitioners application for registration of land.

Civil Law; Land Registration; Property Registration Decree (Presidential Decree [P.D.] No. 1529);
Section 14 of Presidential Decree (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.The
following persons may file in the proper Court of First Instance an application for registration of
title to land, whether personally or through their duly authorized representatives: (1) Those who
by themselves or through their predecessors-in-interest have been in open, continuous, exclusive
and notorious possession and occupation of alienable and disposable lands of the public domain
under a bona fide claim of ownership since June 12, 1945, or earlier. (2) Those who have acquired
ownership of private lands by prescription under the provision of existing laws.

Same; Same; Same; Under Section 14(1), it is not necessary that the land must have been declared
alienable and disposable as of June 12, 1945, or earlier, because the law simply requires the property
sought to be registered to be alienable and disposable at the time the application for registration of
title is filed.An application for registration under Section 14(1) of P.D. No. 1529 must establish the
following requisites, namely: (a) the land is alienable and disposable property of the public domain;
(b) the applicant and its predecessors-in-ihnterest have been in open, continuous, exclusive and
notorious possession and occupation of the land under a bona fide claim of ownership; and (c) the
applicant and its predecessors-in-interest have possessed and occupied the land since June 12,
1945, or earlier. The Court has clarified in Malabanan that under Section 14(1), it is not necessary
that the land must have been declared alienable and disposable as of June 12, 1945, or earlier,
because the law simply requires the property sought to be registered to be alienable and disposable
at the time the application for registration of title is filed. The Court has explained that a contrary
interpretation would absurdly limit the application of the provision to the point of virtual
inutility.

Same; Same; Same; Registration under Section 14(1) of Presidential Decree (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.

Same; Same; Same; An application under Section 14(2) of Presidential Decree (P.D.) No. 1529 is based
on acquisitive prescription and must comply with the law on prescription as provided by the Civil
Code.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. For
acquisitive prescription to set in, therefore, the land being possessed and occupied must already be
classified or declared as patrimonial property of the State. Otherwise, no length of possession
would vest any right in the possessor if the property has remained land of the public dominion.
Malabanan stresses that even if the land is later converted to patrimonial property of the State,
possession of it prior to such conversion will not be counted to meet the requisites of acquisitive
prescription. Thus, registration under Section 14(2) of P.D. No. 1529 requires that the land had
already been converted to patrimonial property of the State at the onset of the period of possession
required by the law on prescription.

Same; Same; Same; Requisites of an application for registration based on Section 14(2) of Presidential
Decree (P.D.) No. 1529.An application for registration based on Section 14(2) of P.D. No. 1529
must, therefore, establish the following requisites, to wit: (a) the land is an alienable and
disposable, and patrimonial property of the public domain; (b) the applicant and its predecessors-
in-interest have been in possession of the land for at least 10 years, in good faith and with just title,
or for at least 30 years, regardless of good faith or just title; and (c) the land had already been
converted to or declared as patrimonial property of the State at the beginning of the said 10-year or
30-year period of possession.

FACTS:

On May 28, 1993, respondent Zurbaran Realty and Development Corporation filed in the RTC in San
Pedro, Laguna an application for original registration covering a 1,520 square meter 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, married to Jose Abalos, for P300,000.00.

The Republic, represented by the Director of Lands, 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 muniments of title
and tax declaration presented did not constitute competent and sufficient evidence of a bona
fide acquisition of the land; and that the land was a portion of the public domain, and, therefore,
was not subject to private appropriation.

The RTC held that the respondent and its predecessorsininterest had been in open, public,
peaceful, continuous, exclusive and adverse possession and occupation of the land under a bona
fide claim of ownership even prior to 1960 and, accordingly, granted the application for
registration. The Republic appealed and the CA promulgated its judgment affirming the RTC. Hence,
this appeal.

The Republic contends that the respondent did not establish the time when the land covered by the
application for registration became alienable and disposable; that such detail was crucial because
the possession of the respondent and its predecessorsininterest, for the purpose of determining
whether it acquired the property by prescription, should be reckoned from the time when the land
was declared alienable and disposable; and that prior to the declaration of the land of the public
domain as alienable and disposable, it was not susceptible to private ownership, and any
possession or occupation at such time could not be counted as part of the period of possession
required under the law on prescription.

The respondent counters that whether it established when the property was declared alienable and
disposable and whether it complied with the 30year required period of possession should not be
entertained anymore by the Court because: (a) these issues had not been raised in the trial court
and were being raised for the first time on appeal; and (b) factual findings of the trial court,
especially when affirmed by the CA, were binding and conclusive on this Court. At any rate, the
respondent insists that it had been in open, public, peaceful, continuous, and adverse possession of
the property for the prescribed period of 30 years as evidenced by the fact that the property had
been declared for taxation purposes in 1960 in the name of its predecessorsininterest, and that
such possession had the effect of converting the land into private property and vesting ownership
upon the respondent.

In reply, the Republic asserts that it duly opposed the respondents application for registration; that
it was only able to ascertain the errors committed by the trial court after the latter rendered its
decision; and that the burden of proof in land registration cases rested on the applicant who must
prove its ownership of the property being registered. The Republic maintains that the Court had the
authority to review and reverse the factual findings of the lower courts when the conclusion
reached was not supported by the evidence on record, as in this case.

ISSUE:

WON the application for original registration, despite the absence of evidence that respondent and
its predecessorsininterest have complied with the period of possession and occupation required
by law, shall be granted?

RULING:
NO.

An application for registration under Section14(1) of P.D. No. 1529 must establish the following
requisites, namely: (a) the land is alienable and disposable property of the public domain; (b) the
applicant and its predecessors in interest have been in open, continuous, exclusive and notorious
possession and occupation of the land under a bona fide claim of ownership; and (c) the applicant
and its predecessorsininterest have possessed and occupied the land since June 12, 1945, or
earlier. The Court has clarified in Malabanan that under Section14(1), it is not necessary that the
land must have been declared alienable and disposable as of June 12, 1945, or earlier, because the
law simply requires the property sought to be registered to be alienable and disposable at the time
the application for registration of title is filed. The Court has explained that a contrary interpretation
would absurdly limit the application of the provision to the point of virtual inutility.

To properly appreciate the respondents case, we must ascertain under what provision its
application for registration was filed. If the application was filed under Section 14(1) of P.D. No.
1529, the determination of the particular date when the property was declared alienable and
disposable would be unnecessary, inasmuch as proof showing that the land had already been
classified as such at the time the application was filed would be enough. If the application was filed
under Section 14(2) of P.D. No. 1529, the determination of the issue would not be crucial for, as
earlier clarified, it was not the declaration of the land as alienable and disposable that would make
it susceptible to private ownership by acquisitive prescription.

Article 422 of the Civil Code states that [p]roperty of public dominion, when no longer intended for
public use or for public service, shall form part of the patrimonial property of the State.

Accordingly, there must be an express declaration by the State that the public dominion
property is no longer intended for public service or the development of the national wealth
or that the property has been converted into patrimonial. Without such express declaration,
the property, even if classified as alienable or disposable, remains property of the public dominion,
pursuant to Article 420(2), and thus incapable of acquisition by prescription. It is only when such
alienable and disposable lands are expressly declared by the State to be no longer intended for
public service or for the development of the national wealth that the period of acquisitive
prescription can begin to run. Such declaration shall be in the form of a law duly enacted by
Congress or a Presidential Proclamation in cases where the President is duly authorized by law.

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. The application alleged that the respondent and its predecessors
ininterest had been in open, continuous and exclusive possession and occupation of the property
in the concept of an owner, but did not state when possession and occupation commenced and the
duration of such possession. 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. In short, has the land been declared by law as no longer
intended for public service or the development of the national wealth?

The respondent may perhaps object to a determination of this issue by the Court for the same
reason that it objects to the determination of whether it established when the land was declared
alienable and disposable, that is, the issue was not raised in and resolved and by the trial court. But
the objection would be futile because the issue was actually raised in the trial court, as borne out by
the Republics allegation in its opposition to the application to the effect that the land is a portion
of the public domain not subject to prescription. In any case, the interest of justice dictates the
consideration and resolution of an issue that is relevant to another that was specifically raised. The
rule that only theories raised in the initial proceedings may be taken up by a party on appeal refers
only to independent, not concomitant, matters to support or oppose the cause of action.

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.


BJDC CONSTRUCTION vs. NENA E. LANUZO
G.R. No. 161151, FIRST DIVISION, March 24, 2014, BERSAMIN, J.

The party alleging the negligence of the other as the cause of injury has the burden to establish the
allegation with competent evidence. If the action based on negligence is civil in nature, the proof
required is preponderance of evidence.

Civil Law; Damages; Negligence; In order that a party may be held liable for damages for any injury
brought about by the negligence of another, the claimant must prove that the negligence was the
immediate and proximate cause of the injury.

Civil Law; Damages; Negligence; Res Ipsa Loquitur; For the doctrine of res ipsa loquitur 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.

FACTS:

On January 5, 1998, Nena E. Lanuzo (Nena) filed a complaint for damages against BJDC Construction
(company), a single proprietorship engaged in the construction business under its
Manager/Proprietor Janet S. de la Cruz. 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 from September 1997 to November 1997.

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 at about 6:30 p.m. on
October 30, 1997; that Balbinos Honda motorcycle sideswiped the road barricade placed by the
company in the right lane portion of the road, causing him to lose control of his motorcycle and to
crash on the newly cemented road, 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.

In its answer, the company denied Nenas allegations of negligence, insisting that it had installed
warning signs and lights along the highway and on the barricades of the project; that at the time of
the incident, the lights were working and switched on; that its project was duly inspected by the
Department of Public Works and Highways (DPWH), the Office of the Mayor of Pili, and the Pili
Municipal Police Station; and that it was found to have satisfactorily taken measures to ensure the
safety of motorists.

The company further alleged that since the start of the project in September 1997, it installed
several warning signs. The company insisted that the death of Balbino was an accident brought
about by his own negligence, as confirmed by the police investigation report that stated, among
others, that Balbino was not wearing any helmet at that time, and the accident occurred while
Balbino was overtaking another motorcycle; and that the police report also stated that the road
sign/barricade installed on the road had a light. Thus, it sought the dismissal of the complaint and
prayed, by way of counterclaim, that the Nena be ordered to pay P100,000.00 as attorneys fees, as
well as moral damages to be proven in the course of trial.

The RTC rendered judgment in favor of the company. The Lanuzo heirs appealed to the CA which
reversed the judgment of the RTC ordering the defendantappellee to pay the plaintiffappellants,
heirs of the victim Balbino L. B. Lanuzo, the sums of P50,000.00 as death indemnity, P20,000.00 by
way of temperate damages and P939,736.50 as loss of earning capacity of the deceased Balbino L.

ISSUE:

WON the respondents had satisfactorily presented a prima facie case of negligence which the
appellee had not overcome with an adequate explanation and which alleged negligence is the
proximate cause of death of Lanuzo?

RULING:

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.

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 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, and that Balbino had been in the process of overtaking
another motorcycle rider at a fast speed when he hit the barricade placed on the newly cemented
road. On his part, SPO1 Corporal, the police investigator who arrived at the scene of the accident on
October 30, 1997, recalled that there were light bulbs on the other side of the barricade on the lane
coming from Naga City; and that the light bulb on the lane where the accident had occurred was
broken because it had been hit by the victims motorcycle. Witnesses Gerry Alejo and Engr.
Victorino del Socorro remembered that light bulbs and gas lamps had been installed in the area of
the project.

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 site.

Additionally, the company submitted the application for lighting permit covering the project site
(Annex 7) to prove the fact of installation of the electric light bulbs in the project site.

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. Moreover, the trial courts assessment of the credibility
of the witnesses and of their testimonies is preferred to that of the appellate courts because of the
trial courts unique firsthand opportunity to observe the witnesses and their demeanor as such.

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.

The Court observes, too, that SPO1 Corporal, a veteran police officer detailed for more than 17
years at the Pili Police Station, enjoyed the presumption of regularity in the performance of his
official duties. The presumption, although rebuttable, stands because the Lanuzo heirs did not
adduce evidence to show any deficiency or irregularity in the performance of his official duty as the
police investigator of the accident. They also did not show that he was impelled by any ill motive or
bias to testify falsely.

Thirdly, the CA unreasonably branded the testimonies of Zamora and SPO1 Corporal as self
serving. They were not. Selfserving evidence refers to outofcourt statements that favor the
declarants interest; it is disfavored mainly because the adverse party is given no opportunity to
dispute the statement and their admission would encourage fabrication of testimony. But court
declarations are not selfserving considering that the adverse party is accorded the opportunity to
test the veracity of the declarations by crossexamination and other methods.

There is no question that Zamora and SPO1 Corporal were thoroughly crossexamined by the
counsel for the Lanuzo heirs. Their recollections remained unchallenged by superior contrary
evidence from the Lanuzo heirs.

Fourthly, 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.

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. In contrast, Balbino had the exclusive control of how he operated
and managed his motorcycle. The records disclose that he himself did not take the necessary
precautions. As Zamora declared, Balbino overtook another motorcycle rider at a fast speed, and in
the process could not avoid hitting a barricade at the site, causing him to be thrown off his
motorcycle onto the newly cemented road. SPO1 Corporals investigation report corroborated
Zamoras declaration. This causation of the fatal injury went uncontroverted by the Lanuzo heirs.

Moreover, by the time of the accident, the project, which had commenced in September 1997, had
been going on for more than a month and was already in the completion stage. Balbino, who had
passed there on a daily basis in going to and from his residence and the school where he then
worked as the principal, was thus very familiar with the risks at the project site. Nor could the
Lanuzo heirs justly posit that the illumination was not adequate, for it cannot be denied that
Balbinos motorcycle was equipped with headlights that would have enabled him at dusk or night
time to see the condition of the road ahead. That the accident still occurred surely indicated that he
himself did not exercise the degree of care expected of him as a prudent motorist.

According to Dr. Abilay, the cause of death of Balbino was the fatal depressed fracture at the back of
his head, an injury that Dr. Abilay opined to be attributable to his head landing on the cemented
road after being thrown off his motorcycle. Considering that it was shown that Balbino was not
wearing any protective head gear or helmet at the time of the accident, he was guilty of negligence
in that respect. Had he worn the protective head gear or helmet, his untimely death would not have
occurred.

The RTC was correct on its conclusions and findings that the company was not negligent in
ensuring safety at the project site. All the established circumstances showed that the proximate and
immediate cause of the death of Balbino was his own negligence. Hence, the Lanuzo heirs could not
recover damages.


SOLIDUM vs. PEOPLE
G.R. No. 192123, FIRST DIVISION, March 10, 2014, BERSAMIN, J.*

Civil Law; Quasi-Delicts; Res Ipsa Loquitur; 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.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. It is simply a recognition of the postulate that, as a matter of common
knowledge and experience, the very nature of certain types of occurrences may justify an inference
of negligence on the part of the person who controls the instrumentality causing the injury in the
absence of some explanation by the defendant who is charged with negligence. It is grounded in the
superior logic of ordinary human experience and on the basis of such experience or common
knowledge, negligence may be deduced from the mere occurrence of the accident itself. Hence, res
ipsa loquitur is applied in conjunction with the doctrine of common knowledge.

Same; Same; Same; Same; In the medical profession, specific norms or standards to protect the
patient against unreasonable risk, commonly referred to as standards of care, set the duty of the
physician to act in respect of the patient.In the medical profession, specific norms or standards to
protect the patient against unreasonable risk, commonly referred to as standards of care, set the
duty of the physician to act in respect of the patient. Unfortunately, no clear definition of the duty of
a particular physician in a particular case exists. Because most medical malpractice cases are highly
technical, witnesses with special medical qualifications must provide guidance by giving the
knowledge necessary to render a fair and just verdict. As a result, the standard of medical care of a
prudent physician must be determined from expert testimony in most cases; and in the case of a
specialist (like an anesthesiologist), the standard of care by which the specialist is judged is the care
and skill commonly possessed and exercised by similar specialists under similar circumstances. The
specialty standard of care may be higher than that required of the general practitioner.

FACTS:

Gerald Albert Gercayo (Gerald) was born on June 2, 19922 with an imperforate anus. Two days
after his birth, Gerald underwent colostomy, a surgical procedure to bring one end of the large
intestine out through the abdominal wall, enabling him to excrete through a colostomy bag attached
to the side of his body.

On May 17, 1995, Gerald, then three years old, was admitted at the Ospital ng Maynila for a pull-
through operation. Dr. Leandro Resurreccion headed the surgical team, and was assisted by several
doctors and the anesthesiologists included 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 but he could no longer see, hear or move.

Agitated by her sons helpless and unexpected condition, Ma. Luz Gercayo (Luz) 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, alleging that Dr. Solidum failed and neglected to use the care and diligence as the best of
his judgment would dictate under said circumstance, by failing to monitor and regulate properly
the levels of anesthesia administered to said GERALD ALBERT GERCAYO and using 100% halothane
and other anesthetic medications, causing as a consequence of his said carelessness and negligence,
said GERALD ALBERT GERCAYO suffered a cardiac arrest and consequently a defect called hypoxic
encephalopathy meaning insufficient oxygen supply in the brain, thereby rendering said GERALD
ALBERT GERCAYO incapable of moving his body, seeing, speaking or hearing, to his damage and
prejudice.

The RTC convicted Dr. Solidum. The CA affirmed the conviction and ruled that the case appears to
be a textbook example of res ipsa loquitur.

Prior to the operation, the child was evaluated and found fit to undergo a major operation. As noted
by the OSG, the accused himself testified that pre-operation tests were conducted to ensure that the
child could withstand the surgery. Except for his imperforate anus, the child was healthy. The tests
and other procedures failed to reveal that he was suffering from any known ailment or disability
that could turn into a significant risk. There was not a hint that the nature of the operation itself
was a causative factor in the events that finally led to hypoxia.

Where common knowledge and experience teach that a resulting injury would not have occurred to
the patient if due care had been exercised, an inference of negligence may be drawn giving rise to
an application of the doctrine of res ipsa loquitur without medical evidence, which is ordinarily
required to show not only what occurred but how and why it occurred. When the doctrine is
appropriate, all that the patient must do is prove a nexus between the particular act or omission
complained of and the injury sustained while under the custody and management of the defendant
without need to produce expert medical testimony to establish the standard of care. Resort to res
ipsa loquitur is allowed because there is no other way, under usual and ordinary conditions, by
which the patient can obtain redress for injury suffered by him.

ISSUES:

1. Whether ipsa liquitor is applicable. (No)
2. Whether Dr. Solidum is liable for medical negligence. (No)

HELD:

The doctrine of res ipsa loquitur is inappropriate in this case.

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 doctrine is not a rule of substantive law, but merely a mode of proof or a mere procedural
convenience. The doctrine, when applicable to the facts and circumstances of a given case, is not
meant to and does not dispense with the requirement of proof of culpable negligence against the
party charged. It merely determines and regulates what shall be prima facie evidence thereof, and
helps the plaintiff in proving a breach of the duty. The doctrine can be invoked when and only
when, under the circumstances involved, direct evidence is absent and not readily available.

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) 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 pull-through 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 pull-through 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.

Dr. Solidum is not liable for medical negligence.

No. 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 to perform 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.

On the witness stand, Dr. Vertido made a significant turnaround. He affirmed the findings and
conclusions in his report except for an observation which, to all intents and purposes, has become
the storm center of this dispute. He wanted to correct one piece of information regarding the
dosage of the anesthetic agent administered to the child. He declared that he made a mistake in
reporting a 100% halothane and said that based on the records it should have been 100% oxygen.

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. Indeed, Dr. Vertidos findings did not preclude the probability that other
factors related to Geralds major operation, which could or could not necessarily be attributed to
the administration of the anesthesia, had caused the hypoxia and had then led Gerald to experience
bradycardia. Dr. Vertido revealingly concluded in his report, instead, that "although the
anesthesiologist followed the normal routine and precautionary procedures, still hypoxia and its
corresponding side effects did occur."

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.

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.

In the medical profession, specific norms on standard of care to protect the patient against
unreasonable risk, commonly referred to as standards of care, set the duty of the physician in
respect of the patient. The standard of care is an objective standard which conduct of a physician
sued for negligence or malpractice may be measured, and it does not depend therefore, on any
individuals physicians own knowledge either. In attempting to fix a standard by which a court may
determine whether the physician has properly performed the requisite duty toward the patient,
expert medical testimony from both plaintiff and defense experts is required.

The doctrine of res ipsa liquitor 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 ordinary course of things
does not happen if those who have management use proper care, it affords reasonable evidence, in
the absence of an explanation by defendant that the accident arose from want of care.

Nevertheless, despite the fact that the scope of res ipsa liquitor has been measurably enlarged, it
does not automatically apply to all cases of medical negligence as to mechanically shift the burden
of proof to the defendant to show that he is not guilty of the ascribed negligence. Res ipsa liquitor 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. It is generally restricted to situations in
malpractice cases where a layman is able to say, as a matter of common knowledge and
observation, that the consequences of professional care were not as such as would ordinarily have
followed if due care had been exercised. A distinction must be made between the failure to secure
results, and the occurrence of something more unusual and not ordinarily found if the service or
treatment rendered followed the usual procedure of those skilled in that particular practice. It must
be conceded that the doctrine of res ipsa liquitor can have no application in a suit against a
physician or surgeon which involves the merits of a diagnosis or of a scientific treatment. The
physician or surgeon is not required at his peril to explain why any particular diagnosis was not
correct, or why any particular scientific treatment did not produce the desired results.

Thus, res ipsa liquitor is not available in a malpractice suit if the only showing is that the desired
result of an operation or treatment was not accomplished. The real question, therefore, is whether
or not in the process of the operation any extraordinary incident or unusual event outside the
routine performance occurred which is beyond the regular scope of customary professional activity
in such operations, which if unexplained would themselves reasonably speak to the average man as
the negligent case or causes of the untoward consequence. If there was such extraneous
intervention, the doctrine of res ipsa liquitor may be utilized and the dependent is called upon to
explain the matter, by evidence of exculpation, if he could.


REPUBLIC vs. DE GUZMAN VDA. DE JOSON
G.R. No. 163767, FIRST DIVISION, March 10, 2014, BERSAMIN, J.

Under Section 14(1), of the Property Registration Decree, 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 predecessors-in-interest, 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.

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 Department of Environment and Natural
Resources (DENR). In Republic v. T.A.N. Properties, Inc., 555 SCRA 477 (2008), we explicitly ruled:
The applicant for land registration must prove that the DENR Secretary had approved the land
classification and released the land of the public domain as alienable and disposable, and that the
land subject of the application for registration falls within the approved area per verification
through survey by the PENRO or CENRO. In addition, the applicant for land registration must
present a copy of the original classification approved by the DENR Secretary and certified as a true
copy by the legal custodian of the official records. These facts must be established to prove that the
land is alienable and disposable. This doctrine unavoidably means that the mere certification issued
by the CENRO or PENRO did not suffice to support the application for registration, because the
applicant must also submit a copy of the original classification of the land as alienable and
disposable as approved by the DENR Secretary and certified as a true copy by the legal custodian of
the official records.

The period of possession prior to the reclassification of the land as alienable and disposable land of the
public domain is not considered in reckoning the prescriptive period in favor of the possessor. As
pointedly clarified also in Heirs of Mario Malabanan v. Republic, 587 SCRA 172 (2009): Should
public domain lands become patrimonial because they are declared as such in a duly enacted law or
duly promulgated proclamation that they are no longer intended for public service or for the
development of the national wealth, would the period of possession prior to the conversion of such
public dominion into patrimonial be reckoned in counting the prescriptive period in favor of the
possessors? We rule in the negative. The limitation imposed by Article 1113 dissuades us from
ruling that the period of possession before the public domain land becomes patrimonial may be
counted for the purpose of completing the prescriptive period. Possession of public dominion
property before it becomes patrimonial cannot be the object of prescription according to the Civil
Code. As the application for registration under Section 14(2) falls wholly within the framework of
prescription under the Civil Code, there is no way that possession during the time that the land was
still classified as public dominion property can be counted to meet the requisites of acquisitive
prescription and justify registration.

FACTS:

Rosario De Guzman, filed her application for land registration in the CFI in Bulacan. On June 2,
1977, at the initial hearing of the application, Fiscal Liberato L. Reyes interposed an opposition in
behalf of the Director of Lands and the Bureau of Public Works.

The records show that the land subject of the application was a rice land with an area of 12,342
square meters; that the rice land had been originally owned and possessed by one Mamerto
Dionisio since 1907 that on May 13, 1926, Dionisio, by way of a deed of sale, had sold the land to
Romualda Jacinto that upon the death of Romualda Jacinto, her sister Maria Jacinto (mother of
the respondent) had inherited the land that upon the death of Maria Jacinto in 1963,
Rosario De Guzman had herself inherited the land, owning and possessing it openly, publicly,
uninterruptedly, adversely against the whole world, and in the concept of owner since then that
the land had been declared in her name for taxation purposes and that the taxes due thereon had
been paid.

In their opposition filed by Fiscal Reyes, the Director of Lands and the Director of Forest
Development averred that whatever legal and possessory rights De Guzman 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 OSG also filed in behalf of the Government an opposition to the application, insisting that the
land was within the unclassified region of Paombong, Bulacan that areas within the unclassified
region were denominated as forest lands and thus fell under the exclusive jurisdiction,
control and authority of the Bureau of Forest Development (BFD) and that the CFI did not
acquire jurisdiction over the application considering that: (1) the land was beyond the commerce of
man (2) the payment of taxes vested no title or ownership in the declarant or taxpayer.

The RTC ruled in favor of Rosario on the ground that she had sufficiently established her open,
public, continuous, and adverse possession in the concept of an owner for more than 30 years,
which was affirmed by the CA.

ISSUE:

Whether the land subject of the application for registration is susceptible of private acquisition.

RULING:

No.

The determination of the issue hinges on whether or not the land was public if so, whether the
respondent satisfactorily proved that the land had already been declared as alienable and
disposable land of the public domain and that she and her predecessors in interest had been in
open, peaceful, continuous, uninterrupted and adverse possession of the land in the concept of
owner since 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. Rosario 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 Rosario 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.

Belatedly realizing the failure to prove the alienable and disposable classification of the land,
Rosario attached as Annex A to her appellees brief the certification dated March 8, 2000 issued by
the Department of Environment and Natural ResourcesCommunity Environment and
Natural Resources Office (DENR-CENRO), to the effect that the land falls within the Alienable or
Disposable Land Project No. 19 of Paombong, Bulacan.

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. This doctrine unavoidably means that the mere certification issued by the CENRO
or PENRO did not suffice to support the application for registration, because the applicant
must also submit a copy of the original classification of the land as alienable and disposable
as approved by the DENR Secretary and certified as a true copy by the legal custodian of the
official records.

Yet, even assuming that the DENR-CENRO 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. The certification itself
indicated that the land was reclassified as alienable or disposable only on October 15, 1980.

The period of possession prior to the reclassification of the land as alienable and disposable
land of the public domain is not considered in reckoning the prescriptive period in favor of
the possessor. In other words, the period of possession prior to the reclassification of the land, no
matter how long, was irrelevant because prescription did not operate against the State before then.


PHILIPPINE NATIONAL BANK vs. MANALO
G.R. No. 174433, FIRST DIVISION, 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 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.

Remedial Law; Civil Procedure; Amendment of Pleadings; 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. 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.

Same; Interest Rates; Interest should be computed from the time of the judicial or extrajudicial
demand.Indeed, the Court said in Eastern Shipping Lines, Inc. v. Court of Appeals, 234 SCRA 78
(1994), that interest should be computed from the time of the judicial or extrajudicial demand.
However, this case presents a peculiar situation, the peculiarity being that the Spouses Manalo did
not demand interest either judicially or extrajudicially. In the RTC, they specifically sought as the
main reliefs the nullification of the foreclosure proceedings brought by PNB, accounting of the
payments they had made to PNB, and the conversion of their loan into a long term one. In its
judgment, the RTC even upheld the validity of the interest rates imposed by PNB. In their
appellants brief, the Spouses Manalo again sought the nullification of the foreclosure proceedings
as the main relief. It is evident, therefore, that the Spouses Manalo made no judicial or extrajudicial
demand from which to reckon the interest on any amount to be refunded to them. Such demand
could only be reckoned from the promulgation of the CAs decision because it was there that the
right to the refund was first judicially recognized. Nevertheless, pursuant to Eastern Shipping Lines,
Inc. v. Court of Appeals, 234 SCRA 78 (1994), the amount to be refunded and the interest thereon
should earn interest to be computed from the finality of the judgment until the full refund has been
made.

FACTS:

PNB granted an All-Purpose Credit Facility to the Spouses Manalo in the amount of P1,000,000.00.
The spouses executed a Real Estate Mortgage in favor of PNB as a security for the loan. The credit
facility was renewed and increased several times over the years.

It was agreed upon that the Spouses Manalo would make monthly payments on the interest but the
spouses defaulted. After the spouses still failed to settle their unpaid account despite the two
demand letters, PNB foreclosed the mortgage. PNB was the highest bidder; hence the Certificate of
Sale was issued to PNB.

After more than a year after the Certificate of Sale had been issued to PNB, the Spouses Manalo
instituted an action for the nullification of the foreclosure proceedings and damages. They alleged
that they had obtained a loan for P1,000,000.00 from a certain Benito Tan upon arrangements
made by Antoninus Yuvienco, then the General Manager of PNBs Bangkal Branch where they had
transacted that they had been made to understand and had been assured that the P1,000,000.00
would be used to update their account, and that their loan would be restructured and converted
into a longterm loan that they had been surprised to learn, therefore, that they had been declared
in default of their obligations, and that the mortgage on their property had been foreclosed and
their property had been sold and that PNB did not comply with Section 3 of Act No. 3135, as
amended.

Central to this case is the allegation made in the Judicial Affidavit of Enrique Manalo that
PNB imposed a rate of interest which ranges from 19% to as high as 28% and which changes
from time to time. Enrique Manalo was cross-examined on the matter by the counsel of PNB
notwithstanding the failure of Spouses Manalo to raise the issue on interest rate before the RTC.

PNB claims that the Spouses Manalos continuous payment of interest without protest indicated
their assent to the interest rates imposed, as well as to the subsequent increases of the rates.

The RTC ruled in favor of PNB, but on appeal to the CA, the CA declared that the interest rates and
subsequent increases in the rates were invalid for lack of mutuality between the contracting
parties. The CA imposed a 12% interest rate against Spouses Manalo, to be reckoned from default.

ISSUES:

I. Whether the imposition of interest by PNB in the absence of stipulation as to rate was
proper.
II. Whether or not the CA was correct in nullifying the interest rates imposed and in fixing the
same at 12% from default, despite the fact that (i) the same was raised only for the first time
on appeal, (ii) it was never part of the complaint (iii) was excluded as an issue during pre-
trial, and worse, (iv) there was no formally offered pertaining to the same during trial.

RULING:

I. No.

The credit agreement executed succinctly stipulated that the loan would be subjected to interest at
a rate determined by the Bank to be its prime rate plus applicable spread, prevailing at the
current month. This stipulation was carried over to or adopted by the subsequent renewals of the
credit agreement. PNB thereby 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 contracts embodied in Article 1308
of the Civil Code.

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.

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.

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.

Conformably with Nacar v. Gallery Frames and S.C. Megaworld Construction v. Parada, therefore, the
proper interest rates to be imposed in the present case are as follows:

1. Any amount to be refunded to the Spouses Manalo shall bear interest of 12% per annum
computed from March 28, 2006, the date of the promulgation of the CA decision, until June
30, 2013 and 6% per annum computed from July 1, 2013 until finality of this decision
and
2. The amount to be refunded and its accrued interest shall earn interest of 6% per annum
until full refund.

II. No.

It is settled that even if the complaint be defective, but the parties go to trial thereon, and the
plaintiff, without objection, introduces sufficient evidence to constitute the particular cause of
action which it intended to allege in the original complaint, and the defendant voluntarily produces
witnesses to meet the cause of action thus established, an issue is joined as fully and as effectively
as if it had been previously joined by the most perfect pleadings. Likewise, when issues not raised
by the pleadings are tried by express or implied consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings.

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. Although the pleading may not have been amended to conform to the evidence
submitted during trial, judgment may nonetheless be rendered, not simply on the basis of the issues
alleged but also on the basis of issues discussed and the assertions of fact proved in the course of
trial. The court may treat the pleading as if it had been amended to conform to the evidence,
although it had not been actually so amended. 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.

Clearly, a court may rule and render judgment on the basis of the evidence before it even though
the relevant pleading had not been previously amended, so long as no surprise or prejudice is
thereby caused to the adverse party. Put a little differently, so long as the basic requirements of fair
play had been met, as where litigants were given full opportunity to support their respective
contentions and to object to or refute each others evidence, the court may validly treat the
pleadings as if they had been amended to conform to the evidence and proceed to adjudicate on the
basis of all the evidence before it.


DR. ENCARNACION C. LUMANTAS, M.D., petitioner, vs. HANZ CALAPIZ, REPRESENTED BY HIS
PARENTS, HILARIO CALAPIZ, JR. and HERLITA CALAPIZ, respondent.
G.R. No. 163753, January 15, 2014, FIRST DIVISION, BERSAMIN, J.

Criminal Law; Civil Liability; It is axiomatic that every person criminally liable for a felony is also
civilly liable. Nevertheless, the acquittal of an accused of the crime charged does not necessarily
extinguish his civil liability.It is axiomatic that every person criminally liable for a felony is also
civilly liable. Nevertheless, the acquittal of an accused of the crime charged does not necessarily
extinguish his civil liability. In Manantan v. Court of Appeals, 350 SCRA 387 (2001), the Court
elucidates on the two kinds of acquittal recognized by our law as well as on the different effects of
acquittal on the civil liability of the accused, viz.: Our law recognizes two kinds of acquittal, with
different effects on the civil liability of the accused. First is an acquittal on the ground that the
accused is not the author of the act or omission complained of. This instance closes the door to civil
liability, for a person who has been found to be not the perpetrator of any act or omission cannot
and can never be held liable for such act or omission. There being no delict, civil liability ex delicto
is out of the question, and the civil action, if any, which may be instituted must be based on grounds
other than the delict complained of. This is the situation contemplated in Rule 111 of the Rules of
Court. The second instance is an acquittal based on reasonable doubt on the guilt of the accused. In
this case, even if the guilt of the accused has not been satisfactorily established, he is not exempt
from civil liability which may be proved by preponderance of evidence only.

Same; Same; Every person is entitled to the physical integrity of his body. Although we have long
advocated the view that any physical injury, like the loss or diminution of the use of any part of ones
body, is not equitable to a pecuniary loss, and is not susceptible of exact monetary estimation, civil
damages should be assessed once that integrity has been violated.Every person is entitled to the
physical integrity of his body. Although we have long advocated the view that any physical injury,
like the loss or diminution of the use of any part of ones body, is not equitable to a pecuniary loss,
and is not susceptible of exact monetary estimation, civil damages should be assessed once that
integrity has been violated. The assessment is but an imperfect estimation of the true value of ones
body. The usual practice is to award moral damages for the physical injuries sustained. In Hanzs
case, the undesirable outcome of the circumcision performed by the petitioner forced the young
child to endure several other procedures on his penis in order to repair his damaged urethra.
Surely, his physical and moral sufferings properly warranted the amount of P50,000.00 awarded as
moral damages.

Same; Same; Interest Rates; Interest of 6% per annum should then be imposed on the award as a
sincere means of adjusting the value of the award to a level that is not only reasonable but just and
commensurate; For that purpose, the reckoning of interest should be from the filing of the criminal
information.Many years have gone by since Hanz suffered the injury. Interest of 6% per annum
should then be imposed on the award as a sincere means of adjusting the value of the award to a
level that is not only reasonable but just and commensurate. Unless we make the adjustment in the
permissible manner by prescribing legal interest on the award, his sufferings would be unduly
compounded. For that purpose, the reckoning of interest should be from the filing of the criminal
information on April 17, 1997, the making of the judicial demand for the liability of the petitioner.

FACTS:

Spouses Calapiz brought their 8-year-old son, Hanz Calapiz (Hanz), to the Misamis Occidental
Provincial Hospital, Oroquieta City, for an emergency appendectomy. Hanz was attended to by the
petitioner, who suggested to the parents that Hanz also undergo circumcision at no added cost to
spare him the pain. With the parents consent, the petitioner performed the coronal type of
circumcision on Hanz after his appendectomy. On the following day, Hanz complained of pain in his
penis, which exhibited blisters. On January 30, 1995, Hanz was discharged from the hospital over
his parents protestations, and was directed to continue taking antibiotics. On February 8, 1995,
Hanz was confined in a hospital because of the abscess formation between the base and the shaft of
his penis. Dr. Henry Go, an urologist diagnosed the boy to have a damaged urethra. Thus, Hanz
underwent cystostomy, and thereafter was operated on three times to repair his damaged urethra.
When his damaged urethra could not be fully repaired and reconstructed, Hanzs parents brought a
criminal charge against the petitioner for reckless imprudence resulting to serious physical injuries.
In its decision, the RTC acquitted the petitioner of the crime charged for insufficiency of the
evidence. Nonetheless, the RTC ruled that the petitioner was liable for moral damages because
there was a preponderance of evidence showing that Hanz had received the injurious trauma from
his circumcision by the petitioner. CA affirmed the RTC, sustaining the award of moral damages.

ISSUE:

Whether the CA erred in affirming the petitioners civil liability despite his acquittal of the crime of
reckless imprudence resulting in serious physical injuries.

RULING:

The CA did not err in holding the petitioner civilly liable despite acquittal of the crime
charged.

It is axiomatic that every person criminally liable for a felony is also civilly liable. Nevertheless, the
acquittal of an accused of the crime charged does not necessarily extinguish his civil liability.
The Rules of Court requires that in case of an acquittal, the judgment shall state whether the
evidence of the prosecution absolutely failed to prove the guilt of the accused or merely failed to
prove his guilt beyond reasonable doubt. In either case, the judgment shall determine if the act or
omission from which the civil liability might arise did not exist.

Conformably with the foregoing, therefore, the acquittal of an accused does not prevent a judgment
from still being rendered against him on the civil aspect of the criminal case unless the court finds
and declares that the fact from which the civil liability might arise did not exist.
The petitioners contention that he could not be held civilly liable because there was no proof of his
negligence deserves scant consideration. The failure of the Prosecution to prove his criminal
negligence with moral certainty did not forbid a finding against him that there was preponderant
evidence of his negligence to hold him civilly liable.

Many years have gone by since Hanz suffered the injury. Interest of 6% per annum should then be
imposed on the award as a sincere means of adjusting the value of the award to a level that is not
only reasonable but just and commensurate. Unless we make the adjustment in the permissible
manner by prescribing legal interest on the award, his sufferings would be unduly compounded.
For that purpose, the reckoning of interest should be from the filing of the criminal information on
April 17, 1997, the making of the judicial demand for the liability of the petitioner.


DOMINGO GONZALO, petitioner, vs. JOHN TARNATE, JR., respondent.
G.R. No. 160600, January 15, 2014, FIRST DIVISION, 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.

Civil Law; Subcontracting; There is no question that every contractor is prohibited from
subcontracting with or assigning to another person any contract or project that he has with the
Department of Public Works and Highways (DPWH) unless the DPWH Secretary has approved the
subcontracting or assignment.There is no question that 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. This is
pursuant to Section 6 of Presidential Decree No. 1594. Gonzalo, who was the sole contractor of the
project in question, subcontracted the implementation of the project to Tarnate in violation of the
statutory prohibition. 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.

Same; Contracts; In Pari Delicto; 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.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 that holds that no action arises, in equity or at law, from an illegal contract; no suit can be
maintained for its specific performance, or to recover the property agreed to be sold or delivered,
or the money agreed to be paid, or damages for its violation; and where the parties are in pari
delicto, no affirmative relief of any kind will be given to one against the other.

Same; Same; Same; 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.

Same; Unjust Enrichment; Unjust enrichment exists, according to Hulst v. PR Builders, Inc., 532 SCRA
74 (2007), when a person unjustly retains a benefit at the loss of another, or when a person retains
money or property of another against the fundamental principles of justice, equity and good
conscience. 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. It is well to note that Article 22 is part of the chapter of the Civil Code on Human Relations,
the provisions of which were formulated as basic principles to be observed for the rightful
relationship between human beings and for the stability of the social order; designed to indicate
certain norms that spring from the fountain of good conscience; guides for human conduct that
should run as golden threads through society to the end that law may approach its supreme ideal
which is the sway and dominance of justice.

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 Domingo Gonzalo (Gonzalo) subcontracted to
respondent John Tarnate, Jr. (Tarnate) the supply of materials and labor for the project under the
latters business known as JNT Aggregates.

In furtherance of their agreement, Gonzalo 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. This 10% retention fee was the rent for Tarnates equipment that had been
utilized in the project. The deed of assignment was submitted to the DPWH. During the processing
of the documents for the retention fee, however, Tarnate learned that Gonzalo had unilaterally
rescinded the deed of assignment by means of an affidavit of cancellation of deed of assignment
filed in the DPWH 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. Thus, he brought
this suit against Gonzalo in the Regional Trial Court (RTC) in Mountain Province to recover the
retention fee.

RTC ruled in facor of Tarnate which was affirmed by CA on appeal.

ISSUE:

Whether the doctrine of in pari delicto should not be applied and thereby giving affirmative relief in
favor of respondent Tarnate.

RULING:

The doctrine of in pari delicto does not apply in this case.

There is no question that 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. This is pursuant to Section 6 of Presidential Decree No.
1594. Gonzalo, who was the sole contractor of the project in question, subcontracted the
implementation of the project to Tarnate in violation of the statutory prohibition. 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.

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 that holds that no
action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific
performance, or to recover the property agreed to be sold or delivered, or the money agreed to be
paid, or damages for its violation; and 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 in
compliance with his 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 pursuant to the deed of assignment.
Considering that Gonzalo refused despite demands to deliver to Tarnate the stipulated 10%
retention fee that would have compensated the latter for the use of his equipment in the project,
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 prevention of
unjust enrichment called for the exception to apply in Tarnates favor. Consequently, the RTC and
the CA properly adjudged Gonzalo liable to pay Tarnate the equivalent amount of the 10% retention
fee.


DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. GUARIA AGRICULTURAL AND
REALTY DEVELOPMENT CORPORATION, respondent.
G.R. No. 160758, January 15, 2014, FIRST DIVISION, 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.

Civil Law; Contracts; Loans; Under the law, a loan requires the delivery of money or any other
consumable object by one party to another who acquires ownership thereof, on the condition that the
same amount or quality shall be paid.The agreement between DBP and Guaria Corporation was a
loan. Under the law, a loan requires the delivery of money or any other consumable object by one
party to another who acquires ownership thereof, on the condition that the same amount or quality
shall be paid. Loan is a reciprocal obligation, as it arises from the same cause where one party is the
creditor, and the other the debtor. The obligation of one party in a reciprocal obligation is
dependent upon the obligation of the other, and the performance should ideally be simultaneous.
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.

Same; Same; Mortgages; By its nature, a mortgage remains an accessory contract dependent on the
principal obligation, such that enforcement of the mortgage contract will depend on whether or not
there has been a violation of the principal obligation.DBPs actuations were legally unfounded. It is
true that loans are often secured by a mortgage constituted on real or personal property to protect
the creditors interest in case of the default of the debtor. By its nature, however, a mortgage
remains an accessory contract dependent on the principal obligation, such that enforcement of the
mortgage contract will depend on whether or not there has been a violation of the principal
obligation. 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. In other words, Guaria Corporation would not incur in delay before DBP fully performed
its reciprocal obligation.

Remedial Law; Civil Procedure; Law of the Case; Words and Phrases; Law of the case has been defined
as the opinion delivered on a former appeal, and means, more specifically, that whatever is once
irrevocably established as the controlling legal rule of decision between the same parties in the same
case continues to be the law of the case, whether correct on general principles or not, so long as the
facts on which such decision was predicated continue to be the facts of the case before the court.Law
of the case has been defined as the opinion delivered on a former appeal, and means, more
specifically, that whatever is once irrevocably established as the controlling legal rule of decision
between the same parties in the same case continues to be the law of the case, whether correct on
general principles or not, so long as the facts on which such decision was predicated continue to be
the facts of the case before the court. The concept of law of the case is well explained in Mangold v.
Bacon, an American case, thusly: The general rule, nakedly and boldly put, is that legal conclusions
announced on a first appeal, whether on the general law or the law as applied to the concrete facts,
not only prescribe the duty and limit the power of the trial court to strict obedience and conformity
thereto, but they become and remain the law of the case in all other steps below or above on
subsequent appeal. The rule is grounded on convenience, experience, and reason. Without the rule
there would be no end to criticism, reagitation, reexamination, and reformulation. In short, there
would be endless litigation. It would be intolerable if parties litigants were allowed to speculate on
changes in the personnel of a court, or on the chance of our rewriting propositions once gravely
ruled on solemn argument and handed down as the law of a given case. An itch to reopen questions
foreclosed on a first appeal would result in the foolishness of the inquisitive youth who pulled up
his corn to see how it grew. Courts are allowed, if they so choose, to act like ordinary sensible
persons. The administration of justice is a practical affair. The rule is a practical and a good one of
frequent and beneficial use.

Same; Same; Same; Same; 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.The doctrine of law of the case simply means, therefore, 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. For practical considerations, indeed, once the appellate court has issued a pronouncement on
a point that was presented to it with full opportunity to be heard having been accorded to the
parties, the pronouncement should be regarded as the law of the case and should not be reopened
on remand of the case to determine other issues of the case, like damages. But the law of the case, as
the name implies, concerns only legal questions or issues thereby adjudicated in the former appeal.

FACTS:

Guaria Corporation applied for a loan from DBP to finance the development of its resort complex.
Guaria Corporation executed a real estate mortgage and chattel mortgage as security for the
repayment of the loan. The loan was released in several instalments, and Guaria Corporation used
the proceeds to defray the cost of additional improvements in the resort complex. Guaria
Corporation demanded the release of the balance of the loan, but DBP refused.

DBP found upon inspection of the resort project, its developments and improvements that Guaria
Corporation had not completed the construction works. In a letter dated February 27, 1978, and a
telegram dated June 9, 1978, 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).
However, DBP moved for the dismissal of the complaint, stating that the mortgaged properties had
already been sold to satisfy the obligation of Guaria Corporation at a public auction. Due to this,
Guaria Corporation amended the complaint to seek the nullification of the foreclosure proceedings
and the cancellation of the certificate of sale.

In the meantime, DBP applied for the issuance of a writ of possession by the RTC. The RTC granted
DBPs motion. Aggrieved, Guaria Corporation assailed the granting of the application before the CA
on certiorari (C.A.-G.R. No. 12670-SP). After the CA dismissed the petition for certiorari, DBP sought
the implementation of the order for the issuance of the writ of possession.

The RTC rendered its judgment in the main case (Civil Case No. 12707) finding the extra-judicial
sales of the mortgaged properties null and void. It is also resolved that defendant give back to the
plaintiff or its representative the actual possession and enjoyment of all the properties foreclosed
and possessed by it. CA sustained the RTCs judgment.

ISSUES:

1. Whether DBPs foreclosure of the mortgage and the sale of the mortgaged properties were
valid.
2. Whether the doctrine of the law of the case is applicable under the circumstances.

RULING:

1. DBPs foreclosure of the mortgage and the sale of the mortgaged properties at its
instance were premature, and, therefore, void and ineffectual.

The agreement between DBP and Guaria Corporation was a loan. Loan is a reciprocal obligation, as
it arises from the same cause where one party is the creditor, and the other the debtor. The
obligation of one party in a reciprocal obligation is dependent upon the obligation of the other, and
the performance should ideally be simultaneous. 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.

By its failure to release the proceeds of the loan in their 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.

Still, DBP called upon Guaria Corporation to make good on the construction works pursuant to the
acceleration clause written in the mortgage contract (i.e., Stipulation No. 26),[32] or else it would
foreclose the mortgages. DBPs actuations were legally unfounded. By its nature, a mortgage
remains an accessory contract dependent on the principal obligation, such that enforcement of the
mortgage contract will depend on whether or not there has been a violation of the principal
obligation. 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. In other words, Guaria Corporation would not incur in delay before DBP fully performed
its reciprocal obligation. 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.

2. The doctrine of law of the case is not applicable.

DBP insists that the decision of the CA in C.A.-G.R. No. 12670-SP already constituted the law of the
case. Hence, the CA could not decide the appeal in C.A.-G.R. CV No. 59491 differently.

The doctrine of law of the case simply means, therefore, 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. For
practical considerations, indeed, once the appellate court has issued a pronouncement on a point
that was presented to it with full opportunity to be heard having been accorded to the parties, the
pronouncement should be regarded as the law of the case and should not be reopened on remand
of the case to determine other issues of the case, like damages. 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 and litigated in C.A.-G.R. CV No. 59491, which was 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.


ROBERTO R. DAVID, petitioner, vs. EDUARDO C. DAVID, respondent.
G.R. No. 162365, January 15, 2014, FIRST DIVISION, BERSAMIN, J.

Civil Law; Sales; Sale With Right to Repurchase; The seller given the right to repurchase may exercise
his right of redemption by paying the buyer: (a) the price of the sale, (b) the expenses of the contract,
(c) legitimate payments made by reason of the sale, and (d) the necessary and useful expenses made on
the thing sold.A sale with right to repurchase is governed by Article 1601 of the Civil Code, which
provides that: Conventional redemption shall take place when the vendor reserves the right to
repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and
other stipulations which may have been agreed upon. Conformably with Article 1616, the seller
given the right to repurchase may exercise his right of redemption by paying the buyer: (a) the
price of the sale, (b) the expenses of the contract, (c) legitimate payments made by reason of the
sale, and (d) the necessary and useful expenses made on the thing sold.

Civil Law; Mortgages; Redemption; The 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.In Metropolitan Bank and Trust Company v. Tan, 569 SCRA 814 (2008),
the Court ruled that a 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. As we stated in Legaspi v. Court of Appeals, 142 SCRA 82 (1986), a sincere
tender of payment is sufficient to show the exercise of the right to repurchase. Here, Eduardo paid
the repurchase price to Roberto by depositing the proceeds of the sale of the Baguio City lot in the
latters account. Such payment was an effective exercise of the right to repurchase.

Same; Sales; Sale With Right to Repurchase; 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.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.

FACTS:

Respondent Eduardo and his brother, acting on their own and in behalf of their co-heirs, sold their
inherited properties to Roberto, specifically: (a) a parcel of land located in Baguio City (Baguio City
lot); and (b) two units International CO 9670 Truck Tractor with two Mi-Bed Trailers. A deed of sale
with right to repurchase embodied the terms of their agreement, stipulating that the consideration
for the sale was P6,000,000.00.

Roberto and Edwin executed a memorandum of agreement (MOA) with the Spouses Marquez and
Soledad Go (Spouses Go), by which they agreed to sell the Baguio City lot to the latter for a
consideration of P10,000,000.00. The MOA stipulated that in order to save payment of high and
multiple taxes considering that the x x x subject matter of this sale is sold to Roberto, Edwin will
execute the necessary Deed of Absolute Sale in favor of the Spouses Go, in lieu of Roberto. The
Spouses Go then deposited the amount of P10,000,000.00 to Robertos account.

After the execution of the MOA, 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, alleging that he was exercising the right
to repurchase under the deed of sale; and that he was entitled to the possession of the other motor
vehicle and trailer.

The RTC rendered judgment in favor of Eduardo. CA promulgated its decision affirming the RTC. It
opined that although there was no express exercise of the right to repurchase, the sum of all the
relevant circumstances indicated that there was an exercise of the right to repurchase pursuant to
the deed of sale, that the findings of the RTC to the effect that the conditions for the exercise of the
right to repurchase had been adequately satisfied by Eduardo.

ISSUE:

Whether respondent Eduardo has exercised his right to repurchase.

RULING:

Yes, Eduardo exercised his right to repurchase.

In Metropolitan Bank and Trust Company v. Tan, the Court ruled that a 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. As stated in Legaspi v. Court of
Appeals, a sincere tender of payment is sufficient to show the exercise of the right to repurchase.
Here, Eduardo paid the repurchase price to Roberto by depositing the proceeds of the sale of the
Baguio City lot in the latters account. Such payment was an effective exercise of the right to
repurchase.

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.


FIRST UNITED CONSTRUCTORS CORPORATION and BLUE STAR CONSTRUCTION
CORPORATION, petitioners, vs. BAYANIHAN AUTOMOTIVE CORPORATION, respondent.
G.R. No. 164985, January 15, 2014, FIRST DIVISION, BERSAMIN, J.

Civil Law; Sales; Recoupment; Words and Phrases; Recoupment (reconvencion) is the act of rebating
or recouping a part of a claim upon which one is sued by means of a legal or equitable right resulting
from a counterclaim arising out of the same transaction.Recoupment (reconvencion) is the act of
rebating or recouping a part of a claim upon which one is sued by means of a legal or equitable right
resulting from a counterclaim arising out of the same transaction. It is the setting up of a demand
arising from the same transaction as the plaintiffs claim, to abate or reduce that claim. The legal
basis for recoupment by the buyer is the first paragraph of Article 1599 of the Civil Code.

Same; Same; Same; Recoupment must arise out of the contract or transaction upon which the
plaintiffs claim is founded.It was improper for petitioners to set up their claim for repair expenses
and other spare parts of the dump truck against their remaining balance on the price of the prime
mover and the transit mixer they owed to respondent. 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. That there was a
series of purchases made by petitioners could not be considered as a single transaction, for the
records show that the earlier purchase of the six dump trucks was a separate and distinct
transaction from the subsequent purchase of the Hino Prime Mover and the Isuzu Transit Mixer.
Consequently, the breakdown of one of the dump trucks did not grant to petitioners the right to
stop and withhold payment of their remaining balance on the last two purchases.

Same; Same; Same; Legal Compensation; Legal compensation takes place when the requirements set
forth in Article 1278 and Article 1279 of the Civil Code are present.Legal compensation takes place
when the requirements set forth in Article 1278 and Article 1279 of the Civil Code are present, to
wit: Article 1278. Compensation shall take place when two persons, in their own right, are creditors
and debtors of each other. Article 1279. In order that compensation may be proper, it is necessary:
(1) That each of the obligors be bound principally, and that he be at the same time a principal
creditor of the other; (2) That both debts consists in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3)
That the two debts be due; (4) That they be liquidated and demandable; (5) That over neither of
them there be any retention or controversy, commenced by third persons and communicated in
due time to the debtor.

Same; Same; Same; Article 1290 of the Civil Code provides that when all the requisites mentioned in
Article 1279 of the Civil Code are present, compensation takes effect by operation of law, and
extinguishes both debts to the concurrent amount.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.
Article 1290 of the Civil Code provides that when all the requisites mentioned in Article 1279 of the
Civil Code are present, compensation takes effect by operation of law, and extinguishes both debts
to the concurrent amount. 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. Hence, the amount of P71,350.00
should be set off against petitioners unpaid obligation of P735,000.00, leaving a balance of
P663,650.00, the amount petitioners still owed to respondent.

FACTS:

Petitioner First United Constructors Corporation (FUCC) and petitioner Blue Star Construction
Corporation (Blue Star) were associate construction firms sharing financial resources, equipment
and technical personnel on a case-to-case basis. From May 27, 1992 to July 8, 1992, they ordered
six units of dump trucks from the respondent, a domestic corporation engaged in the business of
importing and reconditioning used Japan-made trucks.

On September 19, 1992, FUCC ordered from the respondent one unit of Hino Prime Mover that the
respondent delivered on the same date. On September 29, 1992, FUCC again ordered from the
respondent one unit of Isuzu Transit Mixer that was also delivered to the petitioners. For the two
purchases, FUCC partially paid in cash, and the balance through post-dated checks.

Upon presentment of the checks for payment, the respondent learned that FUCC had ordered the
payment stopped. The respondent immediately demanded the full settlement of their obligation
from the petitioners, but to no avail. Instead, the petitioners informed the respondent that they
were withholding payment of the checks due to the breakdown of one of the dump trucks they had
earlier purchased from respondent, specifically the second dump truck delivered on May 27, 1992.

Due to the refusal to pay, the respondent commenced this action for collection seeking payment of
the unpaid balance in the amount of P735,000.00 represented by the two checks. In their answer,
petitioners prayed that the respondent return the price of the defective dump truck minus the
amounts of their two checks worth P735,000.00; that the respondent should also reimburse them
their expenses for the repair of the dump truck.

Both RTC and CA held that the remedy of recoupment could not be properly invoked by the
petitioners because the transactions were different; that the expenses incurred for the repair and
spare parts of the second dump truck were not a proper subject of recoupment because they did
not arise out of the purchase of the Hino Prime Mover and the Isuzu Transit Mixer; and that the
petitioners claim could not also be the subject of legal compensation or set-off, because the debts in
a set-off should be liquidated and demandable.

ISSUES:

1. Whether or not the petitioners validly exercised the right of recoupment through the
withholding of payment of the unpaid balance of the purchase price of the Hino Prime Mover
and the Isuzu Transit Mixer;
2. Whether or not the costs of the repairs and spare parts for the second dump truck delivered to
FUCC on May 27, 1992 could be offset for the petitioners obligations to the respondent.

RULING:

1. Petitioners could not validly resort to recoupment against respondent.

Recoupment (reconvencion) is the act of rebating or recouping a part of a claim upon which one is
sued by means of a legal or equitable right resulting from a counterclaim arising out of the same
transaction. It is the setting up of a demand arising from the same transaction as the plaintiffs
claim, to abate or reduce that claim. The legal basis for recoupment by the buyer is the first
paragraph of Article 1599 of the Civil Code.
It was improper for petitioners to set up their claim for repair expenses and other spare parts of the
dump truck against their remaining balance on the price of the prime mover and the transit mixer
they owed to respondent. 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. That there was a series of purchases made by
petitioners could not be considered as a single transaction, for the records show that the earlier
purchase of the six dump trucks was a separate and distinct transaction from the subsequent
purchase of the Hino Prime Mover and the Isuzu Transit Mixer. Consequently, the breakdown of
one of the dump trucks did not grant to petitioners the right to stop and withhold payment of their
remaining balance on the last two purchases.

2. Legal compensation was permissible.

As to whether petitioners could avail themselves of compensation, both the RTC and CA ruled that
they could not because the claims of petitioners against respondent were not liquidated and
demandable. The Court cannot uphold the CA and the RTC.

The RTC already found that petitioners were entitled to the amount of P71,350.00 stated in their
counterclaim for the cost of repairs incurred, and the CA concurred in this finding. 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. Article 1290 of the Civil Code provides that when all the
requisites mentioned in Article 1279 of the Civil Code are present, compensation takes effect by
operation of law, and extinguishes both debts to the concurrent amount. 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. Hence, the amount of P71,350.00 should be set off against petitioners unpaid obligation of
P735,000.00, leaving a balance of P663,650.00, the amount petitioners still owed to respondent.


FAR EAST BANK & TRUST COMPANY vs. CHANTE
G.R. No. 170598, FIRST DIVISION, October 9, 2013, BERSAMIN, J.

In this dispute between a bank and its depositor over liability for several supposedly fraudulent
withdrawals from the latter s account through an automated tellering machine (ATM), we hereby
resolve the issue of liability against the bank because of the intervention of a system bug that
facilitated the purported withdrawals.

In civil cases, the burden of proof is on the party who would be defeated if no evidence is given on
either side. This is because our system frees the trier of facts from the responsibility of investigating
and presenting the facts and arguments, placing that responsibility entirely upon the respective
parties. The burden of proof, which may either be on the plaintiff or the defendant, is on the plaintiff
if the defendant denies the factual allegations of the complaint in the manner required by the Rules
of Court; or on the defendant if he admits expressly or impliedly the essential allegations but raises
an affirmative defense or defenses, that, if proved, would exculpate him from liability.

Being the plaintiff, FEBTC must rely on the strength of its own evidence instead of upon the
weakness of Chans evidence. Its burden of proof thus required it to preponderantly demonstrate
that his ATM card had been used to make the withdrawals, and that he had used the ATM card and
PIN by himself or by another person to make the fraudulent withdrawals. Otherwise, it could not
recover from him any funds supposedly improperly withdrawn from the ATM account. We remind
that as a banking institution, FEBTC had the duty and responsibility to ensure the safety of the
funds it held in trust for its depositors. It could not avoid the duty or evade the responsibility
because it alone should bear the price for the fraud resulting from the system bug on account of its
exclusive control of its computer system.

FACTS:

Robert Mar Chante (Chan), was a current account depositor of petitioner Far East Bank & Trust Co.
(FEBTC) at its Ongpin Branch. FEBTC issued to him Far East Card, known as a "Do-It-All" card to
handle credit card and ATM transactions, was tagged in his current account. With the use of his card
and the PIN, he could then deposit and withdraw funds from his current account from any FEBTC
ATM facility, including the MEGALINK facilities of other member banks that included the PNB.

A civil case sprang from the complaint brought by FEBTC in the RTC to recover from Chan the
principal sum of P770,488.30 representing the unpaid balance of the amount fraudulently
withdrawn from Chans Current Account.

FEBTC alleged that between 8:52 p.m. of May 4, 1992 and 4:06 a.m. of May 5, 1992, Chan had used
his Far East Card to withdraw funds totaling P967,000.00 from the PNB-MEGALINK ATM facility at
the Manila Pavilion Hotel in Manila and the withdrawals were done in a series of 242 transactions
with the use of the same machine. FEBTC added that at the time of the ATM withdrawal
transactions, there was an error in its computer system known as "system bug" whose nature had
allowed Chan to successfully withdraw funds in excess of his current credit balance of P198,511.70.

On his part, Chan denied liability. Although admitting his physical possession of Far East Card No.
05-01120-5-0 on May 4 and May 5, 1992, he denied making the ATM withdrawals totaling
P967,000.00, and instead insisted that he had been actually home at the time of the withdrawals. He
alluded to a possible "inside job" as the cause of the supposed withdrawals, citing a newspaper
report to the effect that an employee of FEBTCs had admitted having debited accounts of its
depositors by using his knowledge of computers as well as information available to him. He claimed
that it would be physically impossible for any human being like him to stand long hours in front of
the ATM facility just to withdraw funds.

The records show that FEBTC as one of the measures it adopted pursuant to its ATM Service
Agreement with Chan was to program its computer system to repossess his ATM card. When Chan
again attempted to withdraw at the ATM facility, the ATM facility retained his ATM card until its
recovery by the bank.

FEBTC debited his current account in the amount of P192,517.20 pursuant to Chans ATM Service
Agreement. It debited the further sum of P3,000.00, leaving the unrecovered portion of the funds
allegedly withdrawn by him at P770,488.30.

RTC rendered judgment in favor of FEBTC. On appeal, the CA reversed the decision of the RTC
holding that there is no direct evidence on the issue of who made the actual withdrawals.

ISSUE:

Whether FEBTC discharged its burden of proof.

HELD:

No.

Although there was no question that Chan had the physical possession of Far East Card No. 05-
01120-5-0 at the time of the withdrawals, the exclusive possession of the card alone did not suffice
to preponderantly establish that he had himself made the withdrawals, or that he had caused the
withdrawals to be made. In his answer, he denied using the card to withdraw funds from his
account on the dates in question, and averred that the withdrawals had been an inside job. His
denial effectively traversed FEBTCs claim of his direct and personal liability for the withdrawals,
that it would lose the case unless it competently and sufficiently established that he had personally
made the withdrawals himself, or that he had caused the withdrawals. In other words, it carried the
burden of proof.

In civil cases, the burden of proof is on the party who would be defeated if no evidence is given on
either side. This is because our system frees the trier of facts from the responsibility of investigating
and presenting the facts and arguments, placing that responsibility entirely upon the respective
parties.

The burden of proof, which may either be on the plaintiff or the defendant, is on the plaintiff if the
defendant denies the factual allegations of the complaint in the manner required by the Rules of
Court; or on the defendant if he admits expressly or impliedly the essential allegations but raises an
affirmative defense or defenses, that, if proved, would exculpate him from liability.

Being the plaintiff, FEBTC must rely on the strength of its own evidence instead of upon the
weakness of Chans evidence. Its burden of proof thus required it to preponderantly demonstrate
that his ATM card had been used to make the withdrawals, and that he had used the ATM card and
PIN by himself or by another person to make the fraudulent withdrawals. Otherwise, it could not
recover from him any funds supposedly improperly withdrawn from the ATM account.

We remind that as a banking institution, FEBTC had the duty and responsibility to ensure the safety
of the funds it held in trust for its depositors. It could not avoid the duty or evade the responsibility
because it alone should bear the price for the fraud resulting from the system bug on account of its
exclusive control of its computer system.


MALVAR vs. KRAFT FOOD PHILS., INC.
G.R. No. 183952, FIRST DIVISION, September 9, 2013, BERSAMIN, J.

Although the practice of law is not a business, an attorney is entitled to be properly compensated for
the professional services rendered for the client, who is bound by her express agreement to duly
compensate the attorney. The client may not deny her attorney such just compensation.

Same; Same; A client has an undoubted right to settle her litigation without the intervention of the
attorney, for the former is generally conceded to have exclusive control over the subject matter of
the litigation and may at any time, if acting in good faith, settle and adjust the cause of action out of
court before judgment, even without the attorneys intervention.A client has an undoubted right
to settle her litigation without the intervention of the attorney, for the former is generally conceded
to have exclusive control over the subject matter of the litigation and may at any time, if acting in
good faith, settle and adjust the cause of action out of court before judgment, even without the
attorneys intervention. It is important for the client to show, however, that the compromise
agreement does not adversely affect third persons who are not parties to the agreement.

Attorneys Fees; It is basic that an attorney is entitled to have and to receive a just and reasonable
compensation for services performed at the special instance and request of his client.In fine, it is
basic that an attorney is entitled to have and to receive a just and reasonable compensation for
services performed at the special instance and request of his client. The attorney who has acted in
good faith and honesty in representing and serving the interests of the client should be reasonably
compensated for his service.

Attorneys Fees; The duty of the Supreme Court is not only to ensure that the attorney acts in a
proper and lawful manner, but also to see to it that the attorney is paid his just fees.The duty of
the Court is not only to ensure that the attorney acts in a proper and lawful manner, but also to see
to it that the attorney is paid his just fees. Even if the compensation of the attorney is dependent
only on winning the litigation, the subsequent withdrawal of the case upon the clients initiative
would not deprive the attorney of the legitimate compensation for professional services rendered.

Same; In the absence of the lawyers fault, consent or waiver, a client cannot deprive the lawyer of
his just fees already earned in the guise of a justifiable reason.In the absence of the lawyers fault,
consent or waiver, a client cannot deprive the lawyer of his just fees already earned in the guise of a
justifiable reason. Here, Malvar not only downplayed the worth of the Intervenors legal service to
her but also attempted to camouflage her intent to defraud her lawyer by offering excuses that
were not only inconsistent with her actions but, most importantly, fell short of being justifiable.

FACTS:

The case initially concerned the execution of a final decision of the Court of Appeals (CA) in a labor
litigation, but has mutated into a dispute over attorney's fees between the winning employee and
her attorney after she entered into a compromise agreement with her employer under
circumstances that the attorney has bewailed as designed to prevent the recovery of just
professional fees.

On August 1, 1988, Kraft Foods (Phils.), Inc. (KFPI) hired Czarina Malvar (Malvar) as its Corporate
Planning Manager. From then on, she gradually rose from the ranks, becoming in 1996 the Vice
President for Finance in the Southeast Asia Region of Kraft Foods International (KFI), KFPIs
mother company.

On November 29, 1999, respondent Bienvenido S. Bautista, as Chairman of the Board of KFPI and
concurrently the Vice President and Area Director for Southeast Asia of KFI, sent Malvar a memo
directing her to explain why no administrative sanctions should be imposed on her for possible
breach of trust and confidence and for willful violation of company rules and regulations. Following
the submission of her written explanation, an investigating body was formed. In due time, she was
placed under preventive suspension with pay. Ultimately, on March 16, 2000, she was served a
notice of termination.

Obviously aggrieved, Malvar filed a complaint for illegal suspension and illegal dismissal against
KFPI and Bautista. The Labor Arbiter found and declared her suspension and dismissal illegal.

The NLRC affirmed the decision of the Labor Arbiter but additionally ruled that Malvar was entitled
to "any and all stock options and bonuses she was entitled to or would have been entitled to had
she not been illegally dismissed from her employment," as well as to moral and exemplary
damages.

KFPI and Bautista assailed the adverse outcome before the CA on certiorari contending that the
NLRC thereby committed grave abuse of discretion. However, the petition for certiorari was
dismissed by the CA, but with the CA reversing the order of reinstatement and instead directing the
payment of separation pay to Malvar, and also reducing the amounts awarded as moral and
exemplary damages.

After the judgment in her favor became final and executory, Malvar moved for the issuance of a writ
of execution. Malvars total monetary award amounted to P27,786,378.11. Both parties appealed
before the SC.

While the appeal was pending in this Court, Malvar and the respondents entered into a compromise
agreement where it was agreed that KFPI shall pay Ms. Malvar Php 40,000,000.00, which is in
addition to the Php14,252,192.12 already paid to and received by Ms. Malvar from KFPI.

Thereafter, Malvar filed an undated Motion to Dismiss/Withdraw Case, praying that the appeal be
immediately dismissed/withdrawn in view of the compromise agreement, and that the case be
considered closed and terminated.

Before the Court could act on Malvars Motion to Dismiss/Withdraw Case, the Court received a so-
called Motion for Intervention to Protect Attorneys Rights from The Law Firm of Dasal, Llasos and
Associates, through its Of Counsel Retired Supreme Court Associate Justice Josue N. Bellosillo18
(Intervenor), whereby the Intervenor sought, among others, that both Malvar and KFPI be held and
ordered to pay jointly and severally the Intervenors contingent fees.

According to the Intervenor, it was certain that the compromise agreement was authored by the
respondents to evade a possible loss of P182,000,000.00 or more as a result of the labor litigation,
but considering the Intervenors interest in the case as well as its resolve in pursuing Malvars
interest, they saw the Intervenor as a major stumbling block to the compromise agreement that it
was then brewing with her. Obviously, the only way to remove the Intervenor was to have her
terminate its services as her legal counsel. This prompted the Intervenor to bring the matter to the
attention of the Court to enable it to recover in full its compensation based on its written agreement
with Malvar.

Upon execution of the Compromise Agreement and pursuant thereto, petitioner immediately
received from respondents P40,000,000.00. But despite the settlement between the parties, Malvar
did not pay Intervenor its just compensation as set forth in their engagement agreement; instead,
she immediately moved to Dismiss/Withdraw the Present Petition.

ISSUE:

Whether the Motion for Intervention to protect attorneys rights can prosper.

HELD:

Yes.

On considerations of equity and fairness, the Court disapproves of the tendencies of clients
compromising their cases behind the backs of their attorneys for the purpose of unreasonably
reducing or completely setting to naught the stipulated contingent fees. Thus, the Court grants the
Intervenors Motion for Intervention to Protect Attorneys Rights as a measure of protecting the
Intervenors right to its stipulated professional fees that would be denied under the compromise
agreement. The Court does so in the interest of protecting the rights of the practicing bar rendering
professional services on contingent fee basis.

Although the practice of law is not a business, an attorney is entitled to be properly compensated
for the professional services rendered for the client, who is bound by her express agreement to duly
compensate the attorney. The client may not deny her attorney such just compensation.

The claim for attorneys fees does not void or nullify the compromise agreement between Malvar
and the respondents. There being no obstacles to its approval, the Court approves the compromise
agreement. The Court adds, however, that the Intervenor is not left without a remedy, for the
payment of its adequate and reasonable compensation could not be annulled by the settlement of
the litigation without its participation and conformity. It remains entitled to the compensation, and
its right is safeguarded by the Court because its members are officers of the Court who are as
entitled to judicial protection against injustice or imposition of fraud committed by the client as
much as the client is against their abuses as her counsel.

In other words, the duty of the Court is not only to ensure that the attorney acts in a proper and
lawful manner, but also to see to it that the attorney is paid his just fees. Even if the compensation
of the attorney is dependent only on winning the litigation, the subsequent withdrawal of the case
upon the clients initiative would not deprive the attorney of the legitimate compensation for
professional services rendered.

We hold that the contingent fee of 10% of P41,627,593.75 and 10% of the value of the stock option
was reasonable. The P41,627,593.75 was already awarded to Malvar by the NLRC but the award
became the subject of the appeal in this Court because the CA reversed the NLRC. Be that as it may,
her subsequent change of mind on the amount sought from the respondents as reflected in the
compromise agreement should not negate or bar the Intervenors recovery of the agreed attorneys
fees.


SPOUSES CELSO DICO, SR. AND ANGELES DICO vs. VIZCAYA MANAGEMENT CORPORATION
G.R. No. 161211; FIRST DIVISION; July 17, 2013; BERSAMIN, J.:

The prescription of actions for the reconveyance of real property based on implied trust is 10 years.

Civil Law; Trusts; 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.The 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.

Remedial Law; Civil Procedure; Pleadings and Practice; Actions; Defenses and objections not pleaded
in a motion to dismiss or in an answer are deemed waived.Although defenses and objections not
pleaded in a motion to dismiss or in an answer are deemed waived, it was really incorrect for the
Dicos to insist that prescription could not be appreciated against them for that reason. Their
insistence was contrary to Section 1, Rule 9 of the Rules of Court, which provides as follows: Section
1. Defenses and objections not pleaded.Defenses and objections not pleaded either in a motion to
dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the
evidence on record that the court has no jurisdiction over the subject matter, that there is another
action pending between the same parties for the same cause, or that the action is barred by a prior
judgment or by statute of limitations, the court shall dismiss the claim. (2a) Under the rule, the
defenses of lack of jurisdiction over the subject matter, litis pendentia, res judicata, and prescription
of action may be raised at any stage of the proceedings, even for the first time on appeal, except that
the objection to the lack of jurisdiction over the subject matter may be barred by laches.

FACTS:

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. On July 26, 1967, LRC Commissioner Antonio L. Noblejas
approved the consolidation-subdivision plan. In all, the total landholding of VMC after the
consolidation was 481,583 square meters.

VMC proceeded to develop the Don Eusebio Subdivision project. Subsequently, VMC also developed
the Cristina Village Subdivision project. Under PSD-12746 of the subdivision plan for Cristina
Village Subdivision, consolidated Lots Nos. 2, 3, and 4 were subdivided into 348 small lots. Starting
1971, VMC sold lots in its Don Eusebio Subdivision and Cristina Village Subdivision.

In 1981, VMC filed against the Dicos a complaint for unlawful detainer. 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 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. 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. 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.

The RTC ruled in favor of the Dicos. On appeal the CA reversed the RTC. The CA denied the Dicos
motion for reconsideration.

ISSUES:

WON prescription already barred petitioners cause of action?

RULING:

YES. We find and hold that the action of the Dicos for reconveyance was properly dismissed.

The 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.

That observation was correct and in accord with law and jurisprudence. Verily, 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. 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.

And, lastly, the insistence of the Dicos that prescription could not be used by the CA to bar their
claim for reconveyance by virtue of VMCs failure to aver them in a motion to dismiss or in the
answer was unwarranted.

We agree with VMC's contention to the contrary. Although defenses and objections not pleaded in a
motion to dismiss or in an answer are deemed waived, it was really incorrect for the Dicos to insist
that prescription could not be appreciated against them for that reason. Their insistence was
contrary to Section l, Rule 9 of the Rules of Court.


VECTOR SHIPPING CORPORATION vs. AMERICAN HOME ASSURANCE COMPANY
G.R. No. 159213, FIRST DIVISION, 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.

On September 30, 1987, 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 American Home Assurance Company under Marine Open Policy. In the evening of December
20, 1987, M/T Vector and M/V Dona Paz (owned by Sulpicio Lines) collided in the open sea near
Tablas Strait. The collision led to the sinking of both vessels. The entire petroleum cargo on board
M/T Vector perished and American Home Assurance indemnified Caltex for the loss.

On March 5, 1992, American Home Assurance filed a complaint against Vector, Soriano and
Sulpicio Lines to recover the full amount it paid to Caltex.

The RTC dismissed the case because the action is based upon a quasi-delict and which must be
commenced within 4 years from the day the quasi-delict occurred. The tort complained of occurred
on December 20, 1987. The case, on the other hand, was filed on March 5, 1992. Clearly, 5 years has
passed since the tort occurred prior to the filing of the complaint.

The CA, wherein the decision of the RTC was reversed and absolved Sulpicio Lines from liability.
Accordingly, Vector Shipping Corporation and Francisco Soriano are held jointly and severally
liable to American Home Assurance Company.

Furthermore, the CA opined that the resolution of this case is primarily anchored on the
determination of what kind of relationship existed between Caltex and M/V Dona Paz and between
Caltex and M/T Vector for purposes of applying the laws on prescription. After a careful perusal of
the factual milieu and the evidence adduced by the parties, the CA is constrained to rule that the
relationship that existed between Caltex and M/V Dona Paz is that of a quasi-delict while that
between Caltex and M/T Vector is culpa contractual based on a Contract of Affreightment or a
charter party.

ISSUE:

Whether the action was already barred by prescription for bringing it only on March 5, 1992,
almost 5 years after the collision.

HELD:

No.

Article 1144. The following actions must be brought within ten years from the time the cause of
action accrues:
1. Upon a written contract;
2. Upon an obligation created by law;
3. Upon a judgment.

American Home Assurance Companys action did not yet prescribe. However, this Court cannot
adopt the CAs characterization of the cause of action as based on the contract of affreightment
between Caltex and Vector, with the breach of contract being the failure of Vector to make the M/T
Vector seaworthy, as to make this action come under Article 1144 (1). Instead, 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.

Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured
property is destroyed or damaged through the fault or negligence of a party other than the assured,
then the insurer, upon payment to the assured, will be subrogated to the rights of the assured to
recover from the wrongdoer to the extent that the insurer has been obligated to pay. Payment by
the insurer to the assured operates as an equitable assignment to the former of all remedies which
the latter may have against the third party whose negligence or wrongful act caused the loss. The
right of subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon
written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer.

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 did it grow out of, any
privity of contract or upon written assignment of claim but accrued simply upon payment of the
insurance claim by the insurer."


INTERNATIONAL HOTEL CORPORATION, petitioner, vs. FRANCISCO B. JOAQUIN, JR. and
RAFAEL SUAREZ, respondents.
G.R. No. 158361 April 10, 2013, FIRST DIVISION, 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.

Remedial Law; Appeals; Question of Law; A question of law exists when there is doubt as to what the
law is on a certain state of facts, but, in contrast, a question of fact exists when the doubt arises as to
the truth or falsity of the facts alleged.A question of law exists when there is doubt as to what the
law is on a certain state of facts, but, in contrast, a question of fact exists when the doubt arises as to
the truth or falsity of the facts alleged. A question of law does not involve an examination of the
probative value of the evidence presented by the litigants or by any of them; the resolution of the
issue must rest solely on what the law provides on the given set of circumstances. When there is no
dispute as to the facts, the question of whether or not the conclusion drawn from the facts is correct
is a question of law.

Civil Law; Obligations; Suspensive Condition; Article 1186 of the Civil Code 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.Article 1186 of the Civil Code reads: Article 1186. The condition shall be deemed
fulfilled when the obligor voluntarily prevents its fulfillment. This provision 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.

Same; Contracts; Breach of Contract; 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.The CA applied
Article 1234 of the Civil Code, which states: Article 1234. If the obligation has been substantially
performed in good faith, the obligor may recover as though there had been a strict and complete
fulfillment, less damages suffered by the obligee. 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.

Same; Obligations; Conditional Obligations; The existing rule in a mixed conditional obligation is that
when the condition was not fulfilled but the obligor did all in his power to comply with the obligation,
the condition should be deemed satisfied.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 personsan 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. The existing rule in a
mixed conditional obligation is that when the condition was not fulfilled but the obligor did all in
his power to comply with the obligation, the condition should be deemed satisfied.

Same; Same; Quantum Meruit; 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.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.

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 IHC Board of Directors approved the proposal. 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. 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. IHC entered into an agreement with Weston. However, DBP
denied the application for guaranty.

Due to Joaquins failure to secure the needed loan, IHC, through its President Bautista, canceled the
17,000 shares of stock previously issued to Joaquin and Suarez as payment for their services.
Consequently, Joaquin and Suarez commenced this action for specific performance, annulment,
damages and injunction in the Regional Trial Court. RTC and CA upheld IHCs liability under Article
1186 of the Civil Code. It ruled that in the context of Article 1234 of the Civil Code, Joaquin had
substantially performed his obligations and had become entitled to be paid for his services.

ISSUE:

1. Whether Article 1186 and Article 1234 of the Civil Code can be the source of IHCs obligation to
pay respondents.
2. Whether the respondents is entitled to any compensation.

RULING:

1. Article 1186 and Article 1234 of the Civil Code cannot be the source of IHCs obligation to
pay respondents.

Article 1186 of the Civil Code reads: The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment.

This provision 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.

The error lies in the CAs failure to determine IHCs intent to preempt Joaquin from meeting his
obligations. The minutes of IHCs special board meeting discloses that Joaquin impressed upon the
members of the Board that Materials Handling was offering more favorable terms for IHC. IHC only
relied on the opinion of its consultant in deciding to transact with Materials Handling and, later on,
with Barnes. In negotiating with Barnes, 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.

Article 1234 does not likewise apply which provides: If the obligation has been substantially
performed in good faith, the obligor may recover as though there had been a strict and complete
fulfillment, less damages suffered by the obligee.

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. By reason of the inconsequential nature of the breach or omission, the law
deems the performance as substantial, making it the obligees duty to pay.

Conversely, 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 nonperformance
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. The primary objective of the parties in entering into the services
agreement was to obtain a foreign loan to finance the construction of IHCs hotel project.

Finding the foreign financier that DBP would guarantee was the essence of the parties contract, so
that the failure to completely satisfy such obligation could not be characterized as slight and
unimportant as to have resulted in Joaquin and Suarezs substantial performance that
consequentially benefitted IHC. Whatever benefits IHC gained from their services could only be
minimal, and were even probably outweighed by whatever losses IHC suffered from the delayed
construction of its hotel. Consequently, Article 1234 did not apply.

2. IHC is nonetheless liable to pay under the rule on constructive fulfillment of a mixed
conditional obligation.

Notwithstanding the inapplicability of Article 1186 and Article 1234 of the Civil Code, IHC was
liable based on the nature of the obligation. Considering that the agreement between the parties
was not circumscribed by a definite period, its termination was subject to a conditionthe
happening of a future and uncertain event.

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 personsan 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. The existing rule in a mixed conditional obligation is that when the
condition was not fulfilled but the obligor did all in his power to comply with the obligation, the
condition should be deemed satisfied.

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. 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.


SPOUSES ALFONSO AND MARIA ANGELES CUSI v. LILIA V. DOMINGO
G.R. No. 19582, 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:

The property in dispute was a vacant unfenced lot situated in White Plains, Quezon City and
covered a TCT issued in the name of respondent Lilia V. Domingo. In July 1999, Domingo learned
that construction activities were being undertaken on her property without her consent. She soon
unearthed the series of anomalous transactions affecting her property.

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 appending to her petition a deed
of absolute sale purportedly executed in her favor by Domingo and an affidavit of loss whereby she
claimed that her bag containing the owners copy of the TCT had been snatched from her while she
was at the SM City in North EDSA. The RTC granted Sys petition and the Registry of Deeds of
Quezon City then issued a new owners duplicate copy of the TCT, and which was later cancelled by
virtue of the deed of absolute sale, and in its stead the Registry of Deeds issued a TCT in Sys name.

Sy subsequently subdivided the property into two, and sold each half by way of contract to sell to
Spouses De Vera and to Spouses Cusi. The consideration of the sale was P1,000,000.00 for each set
of buyer that had an actual worth of not less than P14,000,000.00.

All the while, the transactions were unknown to Domingo, whose TCT 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.

Domingo commenced this action in the RTC seeking the annulment/cancellation of titles. The RTC
rendered judgment declaring the sale between Domingo and Sy void and Sps. De Vera and Sps. Cusi
to be not purchasers in good faith and for value.

On appeal, the CA affirmed the decision of the RTC.

ISSUE:

Whether or not Sps. Cusi and Sps. De Vera are buyers in good faith and for value (NO)

RULING:

The Court concurs with the finding by the CA that the Cusis and De Vera were not purchasers for
value and in good faith.

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 nor was it safe for
them to simply rely on the face of Sys TCT 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. 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 when the true market value was then in the aggregate of at
least P14,000,000.00, 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.

The records also show that the forged Deed of Sale from Domingo to Sy appeared to be executed on
July 14, 1997; that the Affidavit of Loss by which Sy would later on support her petition for the
issuance of the duplicate owners copy of Domingos TCT was executed on July 17, 1997, the very
same day in which Sy registered the Affidavit of Loss in the Registry of Deeds; that Sy filed the
petition for the issuance of the duplicate owners copy of Domingos TCT; that the RTC granted her
petition on August 26, 1997; and that on October 31, 1997, a real estate mortgage was executed in
favor of one Emma Turingan, with the mortgage being annotated on November 10, 1997.

Being the buyers of the registered realty, the Cusis and the De Veras were aware of the
aforementioned several almost simultaneous transactions affecting the property. Their awareness,
if it was not actual, was at least presumed, and ought to have put them on their guard, for, as the CA
pointed out, the RTC observed that these almost simultaneous transactions, particularly the date of
the alleged loss of the TCT and the purported Deed of Sale, sufficed to arouse suspicion on the part
of any person dealing with the subject property. But they still went on with their respective
purchase of the property without making the deeper inquiries. In that regard, they were not acting
in good faith. Furthermore, 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.


LAND BANK OF THE PHILIPPINES vs. HEIRS OF SPOUSES JORJA RIGOR-SORIANO AND MAGIN
SORIANO
G.R. No. 178312, January 30, 2013, FIRST DIVISION, BERSAMIN, J.

Civil Law; Compromise Agreements; 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.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.

FACTS:

The respondents are the children of the late Spouses Jorja Rigor-Soriano and Magin Soriano, the
owners of the two parcels of land. 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. It prayed that the valuation by the DAR be retained or that a
valuation be made judicially.

The RTC ordered the defendant Land Bank of the Philippines to pay petitioner. Land Bank and the
respondents filed separate motions for reconsideration, but the RTC denied their motions. Land
Bank appealed the decision to the CA, which sustained the RTC and denied Land Banks motion for
reconsideration. Hence, Land Bank appeals via petition for review on certiorari.

Land Bank submitted to the Court a so-called Joint Manifestation and Motion. The Court required
the respondents to comment on Land Banks submission of the Joint Manifestation and Motion.
Land Bank submitted a Manifestation, informing the Court that the parties had filed by registered
mail their Joint Motion to Approve the Attached Agreement, submitting therewith their Agreement.

The 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 as its disposition of
the petition for review on certiorari, and render its judgment in accordance with the terms of the
Agreement.

ISSUE:

WON the herein agreement is a compromise?

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, particularly paragraph 6 and paragraph 7, 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.

WHEREFORE, finding the Agreement to have been validly and voluntarily executed by the parties in
compliance with the requirements of law, the Court hereby APPROVES it.

Considering that the Agreement shows that the payment of just compensation was already fully
executed, and that the affected properties were already delivered to Land Bank of the Philippines,
thereby leaving nothing further to be complied with by the parties, the Court declares this appeal
CLOSED and TERMINATED, without pronouncements as to costs of suit.


ARABELLE J. MENDOZA v. REPUBLIC OF THE PHILIPPINES and DOMINIC C. MENDOZA
G.R. No. 157649, November 12, 2012, BERSAMIN, J.

To entitle petitioner spouse to a declaration of the nullity of his or her marriage, the totality of the
evidence must sufficiently prove that respondent spouse's psychological incapacity was grave,
incurable and existing prior to the time of the marriage.

Even if the expert opinions of psychologists are not conditions sine qua non in the granting of petitions
for declaration of nullity of marriage. What was essential, we should emphasize herein, was the
"presence of evidence that can adequately establish the partys psychological condition," as the Court
said in Marcos.

But where, like here, the parties had the full opportunity to present the professional and expert
opinions of psychiatrists tracing the root cause, gravity and incurability of the alleged psychological
incapacity, then the opinions should be presented and be weighed by the trial courts in order to
determine and decide whether or not to declare the nullity of the marriages. It bears repeating that
the trial courts, as in all the other cases they try, must always base their judgments not solely on the
expert opinions presented by the parties but on the totality of evidence adduced in the course of their
proceedings.

In this case, however, we find the totality of the evidence adduced by petitioner insufficient to prove
that Dominic was psychologically unfit to discharge the duties expected of him as a husband, and that
he suffered from such psychological incapacity as of the date of the marriage. Accordingly, the CA did
not err in dismissing the petition for declaration of nullity of marriage.

FACTS:

Petitioner and Dominic had been next-door neighbors in the appartelle they were renting while
they were still in college. After a month of courtship, they became intimate and their intimacy
ultimately led to her pregnancy with their daughter. They got married on her 8th month of
pregnancy in civil rites. After the marriage, they remain dependent on their parents for support as
the respondent remained jobless until he finished his college course. Meanwhile, the petitioner took
on various jobs to meet the familys needs. Being the one with the fixed income, she shouldered all
of the familys expenses.

On his part, Dominic sold Encyclopedia after his graduation from college before he started working
as a car salesman for Toyota Motors. Ironically, he spent his first sales commission on a celebratory
bash with his friends. After sometime, the petitioner discovered the illicit relationship of the
respondent with his co-employee.

In November 1995, Dominic gave her a car as a birthday present. But she soon found out that the
checks given by her to the respondent were not paid for the cars insurance coverage but for his
personal needs. Worse, she also found out that he did not pay for the car itself, forcing her to rely on
her father-in-law to pay part of the cost of the car. To make matters worse, Dominic was fired from
his employment after he ran away with money belonging to his employer. He was criminally
charged with violation of B.P. 22, for which he was arrested and incarcerated. After petitioner and
her mother bailed him out of jail, petitioner discovered that he had also swindled many clients.

On October 15, 1997, Dominic abandoned the conjugal abode because petitioner asked him for time
and space to think things over. A month later, he threatened to commit suicide after she refused his
attempt at reconciliation. At that, she and her family immediately left the house to live in another
place concealed from him.

On August 5, 1998, petitioner filed in the RTC her petition for the declaration of the nullity of her
marriage based on his psychological incapacity under Article 36 of the Family Code.

The RTC declared the marriage between petitioner and Dominic an absolute nullity. However, the
CA reversed the judgment of the RTC. Specifically, it refused to be bound by the findings and
conclusions of the petitioners expert witness establishing psychological incapacity of the
respondent.

Hence, this appeal by petitioner.

ISSUES:

Whether or not a medical experts testimony is a requirement for declaration of nullity of marriage
(NO)

RULING:

We consider the CAs refusal to accord credence and weight to the psychiatric report. The CA
correctly indicated the findings of the expert witness of the petitioner were one-sided because
Dominic was not himself subjected to an actual psychiatric evaluation and that he also did not
participate in the proceedings. The findings and conclusions on his psychological profile were solely
based on the self-serving testimonial descriptions and characterizations of him rendered by
petitioner and her witnesses. In fine, the failure to examine and interview Dominic himself naturally
cast serious doubt on Dr. Samsons findings.

It was not the absence of the medical experts testimony alone that was crucial but rather
petitioners failure to satisfactorily discharge the burden of showing the existence of psychological
incapacity at the inception of the marriage. In other words, the totality of the evidence proving such
incapacity at and prior to the time of the marriage was the crucial consideration, as the Court has
reminded in Ting v. Velez-Ting:

By the very nature of cases involving the application of Article 36, it is logical and understandable to
give weight to the expert opinions furnished by psychologists regarding the psychological
temperament of parties in order to determine the root cause, juridical antecedence, gravity and
incurability of the psychological incapacity. However, such opinions, while highly advisable, are not
conditions sine qua non in granting petitions for declaration of nullity of marriage. At best, courts
must treat such opinions as decisive but not indispensable evidence in determining the merits of a
given case. In fact, if the totality of evidence presented is enough to sustain a finding of
psychological incapacity, then actual medical or psychological examination of the person concerned
need not be resorted to. The trial court, as in any other given case presented before it, must always
base its decision not solely on the expert opinions furnished by the parties but also on the totality of
evidence adduced in the course of the proceedings.

In light of the foregoing, even if the expert opinions of psychologists are not conditions sine qua non
in the granting of petitions for declaration of nullity of marriage, the actual medical examination of
Dominic was to be dispensed with only if the totality of evidence presented was enough to support
a finding of his psychological incapacity. This did not mean that the presentation of any form of
medical or psychological evidence to show the psychological incapacity would have automatically
ensured the granting of the petition for declaration of nullity of marriage. What was essential, we
should emphasize herein, was the "presence of evidence that can adequately establish the partys
psychological condition".

We find the totality of the evidence adduced by petitioner insufficient to prove that Dominic was
psychologically unfit to discharge the duties expected of him as a husband, and that he suffered
from such psychological incapacity as of the date of the marriage.




 MAKATI SHANGRI-LA HOTEL AND RESORT, INC., petitioner, vs. ELLEN JOHANNE HARPER,
JONATHAN CHRISTOPHER HARPER, and RIGOBERTO GILLERA, respondents.
G.R. No. 189998 August 29, 2012, FIRST DIVISION, BERSAMIN J.

The hotel owner is liable for civil damages to the surviving heirs of its hotel guest whom strangers
murder inside his hotel room.

Civil Law; Hotelkeepers; The hotel business is imbued with public interest. Catering to the public,
hotelkeepers are bound to provide not only lodging for their guests but also security to the persons and
belongings of their guests. The twin duty constitutes the essence of the business.The hotel business is
imbued with public interest. Catering to the public, hotelkeepers are bound to provide not only
lodging for their guests but also security to the persons and belongings of their guests. The twin
duty constitutes the essence of the business. Applying by analogy Article 2000, Article 2001 and
Article 2002 of the Civil Code (all of which concerned the hotelkeepers degree of care and
responsibility as to the personal effects of their guests), we hold that there is much greater reason
to apply the same if not greater degree of care and responsibility when the lives and personal safety
of their guests are involved. Otherwise, the hotelkeepers would simply stand idly by as strangers
have unrestricted access to all the hotel rooms on the pretense of being visitors of the guests,
without being held liable should anything untoward befall the unwary guests. That would be
absurd, something that no good law would ever envision.

FACTS:

In the first week of November 1999, Christian Harper, a Norwegian national, came to Manila on a
business trip. He checked in at the Shangri-La Hotel and was billeted at Room 1428. He was due to
check out on November 6, 1999. In the early morning of that date, however, he was murdered
inside his hotel room by still unidentified malefactors.

Respondents commenced this suit in the RTC to recover various damages from petitioner alleging
that the murderer succeeded to trespass into the area of the hotels private rooms area and into the
room of the said deceased on account of the hotels gross negligence in providing the most basic
security system of its guests, the lack of which owing to the acts or omissions of its employees was
the immediate cause of the tragic death of said deceased. Both the RTC and CA awarded damages in
favor of the respondents.

ISSUE:

Petitioner seeks the review of the judgment of the CA, submitting the following issues for
consideration and determination, namely:
1. Whether or not the plaintiffs-appellees were able to prove with competent evidence that they
are the widow and son of Mr. Christian Harper.
2. Whether or not the appellees were able to prove that there was negligence on the part of the
appellant and its said negligence was the proximate cause of the death of Mr. Christian Harper.

RULING:

1. The respondents were able to prove that they are widow and son of Mr. Christian Harper
and therefore entitled to seek damages.

Respondents presented the following documents to prove their heirship: birth certificates of Mr.
Harper as well as those of the respondents; marriage certificate; certificate from the Oslo Probate
Court, a Norwegian court, stating that Ellen Harper was married to the deceased, Christian Fredrick
Harper and listed Ellen Harper and Jonathan Christopher Harper as the heirs of Christian Fredrik
Harper.

Petitioner assails the CAs ruling that respondents substantially complied with the rules on the
authentication of the proofs of marriage and filiation set by Section 24 and Section 25 of Rule 132 of
the Rules of Court, because the legal custodian did not duly attest that documents presented by
respondents were the correct copies of the originals on file, and because no certification
accompanied the documents stating that such officer has custody of the originals. It contends that
respondents did not competently prove their being Harpers surviving heirs by reason of such
documents being hearsay and incompetent.

Although the documents were not attested by the officer having the legal custody of the record or
by his deputy in the manner required in Section 25 of Rule 132, and said documents did not comply
with the requirement under Section 24 of Rule 132 to the effect that if the record was not kept in
the Philippines a certificate of the person having custody must accompany the copy of the
document that was duly attested stating that such person had custody of the documents, the
deviation was not enough reason to reject the utility of the documents for the purposes they were
intended to serve.

The official participation in the authentication process of Tanja Sorlie of the Royal Ministry of Foreign
Affairs of Norway and the attachment of the official seal of that office on each authentication
indicated that the documents presented by respondents were of a public nature in Norway,
not merely private documents. Consequently, the objective of ensuring the authenticity of the
documents prior to their admission as evidence was substantially achieved.

2. Petitioner was liable for damages due to its own negligence.

The records revealed that the management practice prior to the murder of Harper had been to
deploy only one security or roving guard for every three or four floors of the building; that such
ratio had not been enough considering the L-shape configuration of the hotel that rendered the
hallways not visible from one or the other end.

Furthermore, the hotel business is imbued with public interest. Catering to the public, hotelkeepers
are bound to provide not only lodging for their guests but also security to the persons and
belongings of their guests. The twin duty constitutes the essence of the business. Applying by
analogy Article 2000, Article 2001 and Article 2002 of the Civil Code (all of which concerned the
hotelkeepers degree of care and responsibility as to the personal effects of their guests), we hold
that there is much greater reason to apply the same if not greater degree of care and responsibility
when the lives and personal safety of their guests are involved. Otherwise, the hotelkeepers would
simply stand idly by as strangers have unrestricted access to all the hotel rooms on the pretense of
being visitors of the guests, without being held liable should anything untoward befall the unwary
guests. That would be absurd, something that no good law would ever envision.


RABAT vs. PHILIPPINE NATIONAL BANK
G.R. No. 158755, FIRST DIVISION, 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:

Spouses Francisco and Merced Rabat were granted on January 14, 1980 a medium-term loan of
P4.0 Million to mature three years from the date of implementation.

Subsequently, the RABATs signed a Credit Agreement and executed a Real Estate Mortgage over 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.

Spouses Rabat 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 and another Real Estate Mortgage over 9 parcels of land as additional security for their
medium-term loan..

Spouses Rabat failed to pay their outstanding balance on due date amounting to P3,517,380.00.
Spouses Rabat requested for more time within which to settle their account but PNB denied the
same.

For failure to pay their obligation, the PNB filed a petition for the extrajudicial foreclosure of the
real estate mortgage executed by Spouses Rabat. After due notice and publication, the mortgaged
parcels of land were sold at a public auction and the PNB was the lone and highest bidder with a bid
of P3,874,800.00.

As the proceeds of the public auction were not enough to satisfy the entire obligation, the PNB sent
anew demand letters at 197 Wilson Street, San Juan, Metro Manila and also in Mati, Davao Oriental.

Upon failure 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 RTC of Manila

Spouses Rabat admitted their loan availments from PNB and their default in the payment thereof.
However, they assailed the validity of the auction sales for want of notice to them before and after
the foreclosure sales. They further added that as residents of Mati, Davao Oriental since 1970 up to
the present, they never received any notice nor heard about the foreclosure proceeding in spite of
the claim of PNB that the foreclosure proceeding had been duly published in the San Pedro Times,
which is not a newspaper of general circulation.

ISSUES:
1. Whether the inadequacy of the bid price of PNB invalidated the forced sale of the properties.
(No)
2. Whether PNB was entitled to recover any deficiency from the Spouses Rabat. (No)

HELD:

Yes.

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.

We have consistently held that 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.

When there is a right to redeem, inadequacy of price should not be material because the judgment
debtor may re-acquire the property or else sell his right to redeem and thus recover any loss he
claims to have suffered by reason of the price obtained at the execution sale. Thus, respondent
stood to gain rather than be harmed by the low sale value of the auctioned properties because it
possesses the right of redemption.

Resolving the second issue, we rule that PNB had the legal right to recover the deficiency amount.
In Philippine National Bank v. Court of Appeals, it was 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. Act No. 3135, which governs the extrajudicial
foreclosure of mortgages, while silent as to the mortgagees right to recover, does not, on the other
hand, prohibit recovery of deficiency. Accordingly, it has been held that a deficiency claim arising
from the extrajudicial foreclosure is allowed.


PRIETO vs. COURT OF APPEALS
G.R. No. 158597, FIRST DIVISION, 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:

Marcos Prieto narrated that in January 1996, they had executed a SPA to authorize Antonio Prieto
to borrow money from FEBTC, using as collateral their real property consisting of a parcel of land
located in Calumbaya, Bauang, La Union. Spouses Antonio Prieto, using the property as collateral,
had thereafter obtained from FEBTC a series of loans totaling P5,000,000.00 and they failed to pay
the loans, leading FEBTC to initiate the extra-judicial foreclosure of the mortgages.

Marcos Prieto averred that the promissory notes and the real estate mortgage contracts were in the
name of Spouses Antonio Prieto themselves alone, who had incurred the obligations, rendering the
promissory notes and the mortgage contracts null and void ab initio.

On October 27, 1997, the Spouses Marcos Prieto filed in the RTC Bauang, La Union a complaint
against FEBTC and the Spouses Antonio Prieto to declare the nullity of several real estate mortgage
contracts.

RTC rendered its decision dismissing the complaint ruling that although the name of plaintiff
Marcos (as registered owner) did not appear in the real estate mortgage contracts, Marcos could
not be absolved of liability because he had no right of action against the person with whom his
agent had contracted; 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; and that even assuming that Antonio had exceeded his authority as agent, Marcos had
ratified Antonios action by executing the letter of acknowledgement dated September 12, 1996,
making himself liable under the premises.

Spouses Marcos Prieto filed a petition for certiorari before the CA which was dismissed by the CA,
holding that Marcos had failed to perfect his appeal on time, and that, consequently, the RTC did not
commit any error or grave abuse of discretion in issuing the challenged orders.

ISSUE:

Whether the real estate mortgage and the subsequent foreclosure of the same is valid.

HELD:

Yes.

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.

The complaint was anchored on the supposed failure of FEBTC to duly investigate the authority of
Antonio in contracting the exceptionally and relatively immense loans amounting to P5,000,000.00.
Marcos alleged therein that his property had thereby become unlawfully burdened by unauthorized
real estate mortgage contracts, because the loans and the mortgage contracts had been incurred by
Antonio and his wife only for themselves, to the exclusion of petitioner. Yet, Marcos could not deny
that under the express terms of the SPA, 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 Marcos, who was
consequently fully bound by their terms. Moreover, 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 affirming the said loan.

The Court is confounded by Marcos dismissal of his own express written ratification of Antonios
act. Being himself a lawyer, Marcos was aware of the import and consequences of the letter of
acknowledgment. The Court cannot agree with his insistence that the letter was worthless due to its
being a contract of adhesion. The letter was not a contract, to begin with, because it was only a
unilateral act of his.


PHILTRANCO SERVICE ENTERPRISES, INC. vs. PARAS
G.R. No. 161909, FIRST DIVISION, 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.

Civil Law; Damages; Moral Damages; Generally, moral damages are not recoverable in an action
predicated on a breach of contract because such an action is not included in Article 2219 of the Civil
Code as one of the actions in which moral damages may be recovered; Exceptions.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.

FACTS:

Felix Paras (Paras), is engaged in the buy and sell of fish products. On his way home to Manila from
Bicol Region, on February 8, 1987, he boarded a bus owned and operated by Inland Trailways, Inc.
(Inland) and driven by its driver Calvin Coner (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 owned and
operated by Philtranco Service Enterprises, Inc. (Philtranco). 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 found and diagnosed by Dr. Antonio Tanchuling, Jr. to be affected with the following
injuries: a) contusion/hematoma; b) dislocation of hip upon fracture of the fibula on the right leg; c)
fractured small bone on the right leg; and d) close fracture on the tibial plateau of the left leg. He
underwent 2 operations affecting the fractured portions of his body.

Paras filed a complaint for damages based on breach of contract of carriage against Inland. Inland
denied responsibility, by alleging, among others, that its driver Coner had observed an utmost and
extraordinary care and diligence to ensure the safety of its passengers. In support of its disclaimer
of responsibility, Inland invoked the Police Investigation Report which established the fact that the
Philtranco bus driver of Apolinar Miralles was the one which violently bumped the rear portion of
the Inland bus, and therefore, the direct and proximate cause of Paras injuries.

Inland filed a third-party complaint against Philtranco and Apolinar Miralles seeking for
exoneration of its liabilities to Paras, asserting that the latters cause of action should be directed
against Philtranco considering that the accident was caused by Miralles lack of care, negligence and
reckless imprudence.

RTC ruled against Philtranco and Apolinar Miralles (third-party defendants); which was affirmed by
the CA.

In its appeal to the SC, Philtranco contends that Paras could not recover moral damages because his
suit was based on breach of contract of carriage, pursuant to which moral damages could be
recovered only if he had died, or if the common carrier had been guilty of fraud or bad faith.

ISSUE:

Whether Paras can recover moral damages in a suit based on quasi-delict.

HELD:

Yes.

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.

As a general rule, indeed, moral damages are not recoverable in an action predicated on a breach of
contract. 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; and (b) where the common
carrier has been guilty of fraud or bad faith.

Although this action does not fall under either of the exceptions, the award of moral damages to
Paras was nonetheless proper and valid. There is no question that Inland filed its third-party
complaint against Philtranco and its driver in order to establish in this action that they, instead of
Inland, should be directly liable to Paras for the physical injuries he had sustained because of
their negligence.

To be precise, Philtranco and its driver were brought into the action on the theory of liability that
the proximate cause of the collision between Inlands bus and Philtrancos bus had been the
negligent, reckless and imprudent manner defendant Apolinar Miralles drove and operated his
driven unit, owned and operated by third-party defendant Philtranco Service Enterprises, Inc. 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.

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.

It is worth adding that allowing the recovery of damages by Paras based on quasi-delict, despite his
complaint being upon contractual breach, served the judicial policy of avoiding multiplicity of suits
and circuity of actions by disposing of the entire subject matter in a single litigation.