CIVIL LAW 1

Justice Presbitero J. Velasco, Jr. (2006-2016)

G.R. No. 138463

Can a party who lost rights of ownership in a parcel of
land due to laches be allowed to regain such
ownership when one who benefited from the delay
waives such benefit?
In the case at bar, petitioners title over the land had
become indefeasible due to the laches of the heirs.
However, like any rights over immovable property,
titleholders may convey, dispose, or encumber their
right or interest. Thus, through the waiver and
quitclaim, the rights of the heirs were acknowledged,
revived, and activated to the extent of the rights
waived by titleholders Victorino, Luis, and Jovito
Reyes. Clearly, the quitclaim executed by titleholders
waived and conveyed their rights over the said lot in
favor of the heirs, whose equitable rights were barred
by laches.
G.R. No. 160711
While it is true that Section 32 of PD 1529 provides
that the decree of registration becomes
incontrovertible after a year, it does not altogether
deprive an aggrieved party of a remedy in law. The
acceptability of the Torrens System would be
impaired, if it is utilized to perpetuate fraud against
the real owners.
The remedy of the land owner whose property has
been wrongfully or erroneously registered in another's
name is, after one year from the date of the decree,
not to set aside the decree, butto bring an ordinary
action in the ordinary court of justice for reconveyance
or, if the property has passed into the hands of an
innocent purchaser for value, for damages.
G.R. No. 126236
ART. 1315. Contracts are perfected by mere consent,
and from that moment the parties are bound not only
to the fulfillment of what has been expressly stipulated
but also to all the consequences which, according to
their nature, may be in keeping with good faith, usage
and law.
It is undisputed that petitioners are educated and are
thus presumed to have understood the terms of the
contract they voluntarily signed. If it was not in
consonance with their expectations, they should have
objected to it and insisted on the provisions they
wanted.
Courts are not authorized to extricate parties from the
necessary consequences of their acts, and the fact that

the contractual stipulations may turn out to be

financially disadvantageous will not relieve parties
thereto of their obligations. They cannot now disavow
the relationship formed from such agreement due to
their supposed misunderstanding of its terms.
The mere fact that the Compromise Agreement favors
one party does not render it invalid.
G.R. No. 168661
Equitable estoppel may be invoked against public
authorities when as in this case, the lot was already
alienated to innocent buyers for value and the
government did not undertake any act to contest the
title for an unreasonable length of time.
Where the title of an innocent purchaser for value who
relied on the clean certificates of the title was sought
to be cancelled and the excess land to be reverted to
the Government, we ruled that "[i]t is only fair and
reasonable to apply the equitable principle of estoppel
by laches against the government to avoid an injustice
to innocent purchasers for value
Likewise time-settled is the doctrine that where
innocent third persons, relying on the correctness of
the certificate of title, acquire rights over the property,
courts cannot disregard such rights and order the
cancellation of the certificate. Such cancellation would
impair public confidence in the certificate of title, for
everyone dealing with property registered under the
Torrens system would have to inquire in every
instance whether the title has been regularly issued or
not. This would be contrary to the very purpose of the
law, which is to stabilize land titles.
G.R. No. 172598
The statement on the subject Tax Credit Certificate
(TCC) stating that it is issued subject to post-audit is in
the nature of a suspensive condition under Article
1181 of the Civil Code, which is quoted hereunder for
ready reference, to wit:
In conditional obligations, the acquisition of rights, as
well as the extinguishment or loss of those already
acquired, shall depend upon the happening of the
event which constitutes the condition.
The above-quoted article speaks of obligations. These
conditions affect obligations in diametrically opposed
ways. If the suspensive condition happens, the
obligation arises; in other words, if the condition does
not happen, the obligation does not come into
existence. On the other hand, the resolutory condition

To have knowledge, you must first have reverence for the Lord. (Proverbs 1:7)
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CIVIL LAW 2

Justice Presbitero J. Velasco, Jr. (2006-2016)

extinguishes rights and obligations already existing; in

other words, the obligations and rights already exist,
but under the threat of extinction upon the happening
of the resolutory condition.
In adopting the foregoing provision of law, this Court
rules that the issuance of the tax credit certificate is
subject to the condition that a post-audit will
subsequently be conducted in order to determine if
the holder is indeed qualified for its issuance. As stated
earlier, the holder takes the same subject to the
outcome of the post-audit. Thus, unless and until there
is a final determination of the holders right to the
issuance of the certificate, there exists no obligation
on the part of the DOF or the BIR to recognize the
rights of then holder or transferee. x xx
x xxx
The validity and propriety of the TCC to effectively
constitute payment of taxes to the government are
still subject to the outcome of the post-audit. In other
words, when the issuing authority (DOF) finds, as in
the case at bar, circumstances which may warrant the
cancellation of the certificate, the holder is inevitably
bound by the outcome by the virtue of the express
provisions of the TCCs.
G.R. No. 133179
Fundamental and familiar is the doctrine that the
relationship between a bank and a client is one of
debtor-creditor.
Articles 1953 and 1980 of the Civil Code provide:
Art. 1953. A person who receives a loan of money or
any other fungible thing acquires the ownership
thereof, and is bound to pay to the creditor an equal
amount of the same kind and quality.
Art. 1980. Fixed, savings, and current deposits of
money in banks and similar institutions shall be
governed by the provisions concerning simple loan.
Thus, we have ruled in a line of cases that a bank
deposit is in the nature of a simple loan or mutuum.
[A] money market is a market dealing in standardized
short-term credit instruments (involving large
amounts) where lenders and borrowers do not deal
directly with each other but through a middle man or
dealer in open market. In a money market transaction,
the investor is a lender who loans his money to a
borrower through a middleman or dealer.

In the case at bar, the money market transaction

between the petitioner and the private respondent is
in the nature of a loan.
G.R. No. 133179
Art. 1231 of the Civil Code enumerates the instances
when obligations are considered extinguished, thus:
Art. 1231. Obligations are extinguished:
(1) By payment or performance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor
and debtor;
(5) By compensation;
(6) By novation.
Other causes of extinguishment of obligations, such as
annulment, rescission, fulfillment of a resolutory
condition, and prescription, are governed elsewhere in
this Code.
Lim Sio Wan did not authorize the release of her
money market placement to Santos and the bank had
been negligent in so doing, there is no question that
the obligation of Allied to pay Lim Sio Wan had not
been extinguished. Art. 1240 of the Code states that
"payment shall be made to the person in whose favor
the obligation has been constituted, or his successor in
interest, or any person authorized to receive it."
As commented by Arturo Tolentino:
Payment made by the debtor to a wrong party does
not extinguish the obligation as to the creditor, if there
is no fault or negligence which can be imputed to the
latter. Even when the debtor acted in utmost good
faith and by mistake as to the person of his creditor, or
through error induced by the fraud of a third person,
the payment to one who is not in fact his creditor, or
authorized to receive such payment, is void, except as
provided in Article 1241. Such payment does not
prejudice the creditor, and accrual of interest is not
suspended by it.45 (Emphasis supplied.)
Since there was no effective payment of Lim SioWans
money market placement, the bank still has an
obligation to pay her at six percent (6%) interest from
March 16, 1984 until the payment thereof.

To have knowledge, you must first have reverence for the Lord. (Proverbs 1:7)
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CIVIL LAW 3

Justice Presbitero J. Velasco, Jr. (2006-2016)

G.R. No. 145842

The controversy between the principal parties started
in July 1992 when Roxas-del Castillo no longer sat in
the ESHRI Board. In fine, she no longer had any
participation in ESHRI's corporate affairs when what
basically is the ESHRI-BF dispute erupted.
Familiar and fundamental is the rule that contracts are
binding only among parties to an agreement. Art. 1311
of the Civil Code is clear on this point:
Article 1311. Contracts take effect only between the
parties, their assigns and heirs, except in cases where
the rights and obligations are not transmissible by
their nature, or by stipulation or by provision of law.
In the instant case, Roxas-del Castillo could not
plausibly be held liable for breaches of contract
committed by ESHRI nor for the alleged wrongdoings
of its governing board or corporate officers occurring
after she severed official ties with the hotel
management.
G.R. No. 164401
For transactions involving payment of indemnities in
the concept of damages arising from default in the
performance of obligations in general and/or for
money judgment not involving a loan or forbearance
of money, goods, or credit, the governing provision is
Art. 2209 of the Civil Code prescribing a yearly 6%
interest. Art. 2209 pertinently provides:
Art. 2209. If the obligation consists in the payment of a
sum of money, and the debtor incurs in delay, the
indemnity for damages, there being no stipulation to
the contrary, shall be the payment of the interest
agreed upon, and in the absence of stipulation, the
legal interest, which is six per cent per annum.
The term "forbearance," within the context of usury
law, has been described as a contractual obligation of
a lender or creditor to refrain, during a given period of
time, from requiring the borrower or debtor to repay
the loan or debt then due and payable.
G.R. No. 164401
The 12% per annum rate under CB Circular No. 416
shall apply only to loans or forbearance of money,
goods, or credits, as well as to judgments involving
such loan or forbearance of money, goods, or credit,
while the 6% per annum under Art. 2209 of the Civil
Code applies "when the transaction involves the
payment of indemnities in the concept of damage
arising from the breach or a delay in the performance

of obligations in general,"32 with the application of

both rates reckoned "from the time the complaint was
filed until the [adjudged] amount is fully paid."33 In
either instance, the reckoning period for the
commencement of the running of the legal interest
shall be subject to the condition "that the courts are
vested with discretion, depending on the equities of
each case, on the award of interest."
Otherwise formulated, the norm to be followed in the
future on the rates and application thereof is:
I. When an obligation, regardless of its source, is
breached, the contravenor can be held liable for
damages. The provisions under Title XVIII on
"Damages" of the Civil Code govern in determining the
measure of recoverable damages.
II. With regard particularly to an award of interest in
the concept of actual and compensatory damages, the
rate of interest, as well as the accrual thereof, is
imposed, as follows:
1. When the obligation breached consists in the
payment of a sum of money, i.e., a loan or forbearance
of money, the interest due should be that which may
have been stipulated in writing. Furthermore, the
interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of
stipulation, the rate of interest shall be 12% per
annum to be computed from default, i.e., from judicial
or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation not constituting loans or
forbearance of money is breached, an interest on the
amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand
can be established with reasonable certainty.
Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run
from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to
run only from the date the judgment of the court is
made (at which time the quantification of damages
may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest
shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or

To have knowledge, you must first have reverence for the Lord. (Proverbs 1:7)
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CIVIL LAW 4

Justice Presbitero J. Velasco, Jr. (2006-2016)

paragraph 2, above, shall be 12% per annum from such

finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance
of credit.
G.R. No. 164401
Art. 1207. The concurrence of two or more creditors or
of two or more debtors in one and the same obligation
does not imply that each one of the former has a right
to demand, or that each of the latter is bound to
render, entire compliance with the prestation. There is
solidary liability only when the obligation expressly so
states, or when the law or the nature of the obligation
requires solidarity. (Emphasis ours.)
G.R. No. 164401
Absolute community property may be held liable for
the obligations contracted by either spouse.
Specifically, Art. 94 of said Code pertinently provides:
Art. 94. The absolute community of property shall be
liable for:
(1) x xxx
(2) All debts and obligations contracted during the
marriage by the designated administrator-spouse for
the benefit of the community, or by both spouses, or
by one spouse with the consent of the other.

G.R. Nos. 146184-85

Under Art. 1308 of the Civil Code, the contract
between the parties is the law between them;
mutuality being an essential characteristic of contracts
giving rise to reciprocal obligations.
And under Art. 1306 of the Code, the parties may
establish stipulations mutually acceptable to them for
as long as such are not contrary to law, morals, good
customs, public order, or public policy.
And where a determinate period for a contracts
effectivity and expiration has been mutually agreed
upon and duly stipulated, the lapse of such period
ends the contracts effectivity and the parties cease to
be bound by the contract.
G.R. Nos. 154211-12
Art. 4 of the Civil Code thusly: "Laws shall have no
retroactive effect, unless the contrary is provided."
The legislative intent as to the retroactive application
of a law is made manifest either by the express terms
of the statute or by necessary implication. The reason
for the rule is the tendency of retroactive legislation to
be unjust and oppressive on account of its liability to
unsettle vested rights or disturb the legal effect of
prior transactions.

(3) Debts and obligations contracted by either spouse

without the consent of the other to the extent that
the family may have been benefited. (Emphasis ours.)

A well-settled exception to the rule on prospectivity is

when the law in question is remedial in nature. The
rationale underpinning the exception is that no person
can claim any vested right in any particular remedy or
mode of procedure for the enforcement of a right.

G.R. No. 182248

G.R. No. 175490

Art. 1431 of the Civil Code, on the subject of estoppel,

provides: "Through estoppel an admission or
representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as
against the person relying thereon."

While C.B. Circular No. 905-82, which took effect on

January 1, 1983, effectively removed the ceiling on
interest rates for both secured and unsecured loans,
regardless of maturity, nothing in the said circular
could possibly be read as granting carte blanche
authority to lenders to raise interest rates to levels
which would either enslave their borrowers or lead to
a hemorrhaging of their assets.

In estoppel by pais, as related to the party sought to

be estopped, it is necessary that there be a
concurrence of the following requisites: (a) conduct
amounting to false representation or concealment of
material facts or at least calculated to convey the
impression that the facts are otherwise than, and
inconsistent with, those which the party subsequently
attempts to assert; (b) intent, or at least expectation
that this conduct shall be acted upon, or at least
influenced by the other party; and (c) knowledge,
actual or constructive of the actual facts.

Since the stipulation on the interest rate is void, it is as

if there was no express contract thereon. Hence,
courts may reduce the interest rate as reason and
equity demand.
G.R. No. 175490
Art. 1229. The judge shall equitably reduce the penalty
when the principal obligation has been partly or

To have knowledge, you must first have reverence for the Lord. (Proverbs 1:7)
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CIVIL LAW 5

Justice Presbitero J. Velasco, Jr. (2006-2016)

irregularly complied with by the debtor. Even if there

has been no performance, the penalty may also be
reduced by the courts if it is iniquitous or
unconscionable.
In exercising this power to determine what is
iniquitous and unconscionable, courts must consider
the circumstances of each case since what may be
iniquitous and unconscionable in one may be totally
just and equitable in another.
G.R. No. 177710
Article (Art.) 1330 of the Civil Code provides that when
consent is given through fraud, the contract is
voidable.
Fraud is "every kind of deception whether in the form
of insidious machinations, manipulations,
concealments or misrepresentations, for the purpose
of leading another party into error and thus execute a
particular act."
Fraud has a "determining influence" on the consent of
the prejudiced party, as he is misled by a false
appearance of facts, thereby producing error on his
part in deciding whether or not to agree to the offer.
Under Art. 1338 of the Civil Code, there is fraud when,
through insidious words or machinations of one of the
contracting parties, the other is induced to enter into a
contract which without them he would not have
agreed to. Insidious words or machinations
constituting deceit are those that ensnare, entrap,
trick, or mislead the other party who was induced to
give consent which he or she would not otherwise
have given.
Deceit is also present when one party, by means of
concealing or omitting to state material facts, with
intent to deceive, obtains consent of the other party
without which, consent could not have been given.
Art. 1339 of the Civil Code is explicit that failure to
disclose facts when there is a duty to reveal them, as
when the parties are bound by confidential relations,
constitutes fraud.
G.R. No. 177710
A contract, as defined in the Civil Code, is a meeting of
minds, with respect to the other, to give something or
to render some service. For a contract to be valid, it
must have three essential elements: (1) consent of the
contracting parties; (2) object certain which is the
subject matter of the contract; and (3) cause of the
obligation which is established.

G.R. No. 177710

The requisites of consent are (1) it should be
intelligent or with an exact notion of the matter to
which it refers; (2) it should be free; and (3) it should
be spontaneous. Intelligence in consent is vitiated by
error, freedom by violence, intimidation or undue
influence, and spontaneity by fraud.
G.R. No. 176841
The Statute of Frauds expressed in Article 1403, par.
(2) of the Civil Code applies only to executory
contracts, i.e., those where no performance has yet
been made. Stated a bit differently, the legal
consequence of non-compliance with the Statute does
not come into play where the contract in question is
completed, executed, or partially consummated.
There can be no serious argument about the partial
execution of the sale in question. The records show
that petitioners had, on separate occasions, given
Gabriel Sr. and Gabriel Jr. sums of money as partial
payments of the purchase price. These payments were
duly receipted by Gabriel Jr.
G.R. No. 176841
The trial courts posture, with which the CA effectively
concurred, is patently flawed. For starters, they
equated incomplete payment of the purchase price
with inadequacy of price or what passes as lesion,
when both are different civil law concepts with
differing legal consequences, the first being a ground
to rescind an otherwise valid and enforceable contract.
Perceived inadequacy of price, on the other hand, is
not a sufficient ground for setting aside a sale freely
entered into, save perhaps when the inadequacy is
shocking to the conscience.
G.R. No. 176841
The general rule is that one dealing with a parcel of
land registered under the Torrens System may safely
rely on the correctness of the certificate of title issued
therefor and is not obliged to go beyond the
certificate. Where, in other words, the certificate of
title is in the name of the seller, the innocent
purchaser for value has the right to rely on what
appears on the certificate, as he is charged with notice
only of burdens or claims on the res as noted in the
certificate.

To have knowledge, you must first have reverence for the Lord. (Proverbs 1:7)
COMPILED BY ATTY. RAL CASABAR

CIVIL LAW 6

Justice Presbitero J. Velasco, Jr. (2006-2016)

G.R. No. 180356

Art. 1279. In order that compensation may be proper,
it is necessary:
(1) That each one of the obligors be bound principally,
and that he be at the same time a principal creditor of
the other;
(2) That both debts consist in a sum of money, or if the
things due are consumable, they be of the same kind,
and also of the same quality if the latter has been
stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or
controversy, commenced by third persons and
communicated in due time to the debtor.
G.R. No. 190755
Art. 1236 of the Civil Code provides:
The creditor is not bound to accept payment or
performance by a third person who has no interest in
the fulfillment of the obligation, unless there is a
stipulation to the contrary.
Whoever pays for another may demand from the
debtor what he has paid, except that if he paid without
the knowledge or against the will of the debtor, he can
recover only insofar as the payment has been
beneficial to the debtor.
G.R. No. 190755
Art. 1293 of the Civil Code states:
Novation which consists in substituting a new debtor
in the place of the original one, may be made even
without the knowledge or against the will of the latter,
but not without the consent of the creditor. Payment
by the new debtor gives him rights mentioned in
articles 1236 and 1237.
G.R. No. 190755
Unjust enrichment exists "when a person unjustly
retains a benefit to the loss of another, or when a
person retains money or property of another against
the fundamental principles of justice, equity and good
conscience." There is unjust enrichment under Art. 22
of the Civil Code when (1) a person is unjustly

benefited, and (2) such benefit is derived at the

expense of or with damages to another.
Additionally, unjust enrichment has been applied to
actions called accion in rem verso.
In order that the accion in rem verso may prosper, the
following conditions must concur: (1) that the
defendant has been enriched; (2) that the plaintiff has
suffered a loss; (3) that the enrichment of the
defendant is without just or legal ground; and (4) that
the plaintiff has no other action based on contract,
quasi-contract, crime, or quasi-delict. The principle of
unjust enrichment essentially contemplates payment
when there is no duty to pay, and the person who
receives the payment has no right to receive it.
G.R. No. 190755
Civil Code requires under Art. 19 that "[e]very person
must, in the exercise of his rights and in the
performance of his duties, act with justice, give
everyone his due, and observe honesty and good
faith."
G.R. No. 190755
Art. 2212. Interest due shall earn legal interest from
the time it is judicially demanded, although the
obligation may be silent upon this point.
G.R. No. 190755
Art. 1169. Those obliged to deliver or to do something
incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of
their obligation.
However, the demand by the creditor shall not be
necessary in order that delay may exist:
(1) When the obligation or the law expressly so
declare; or
(2) When from the nature and the circumstances of
the obligation it appears that the designation of the
time when the thing is to be delivered or the service is
to be rendered was a controlling motive for the
establishment of the contract; or
(3) When demand would be useless, as when the
obligor has rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if
the other does not comply or is not ready to comply in
a proper manner with what is incumbent upon him.
From the moment one of the parties fulfills his
obligation, delay by the other begins.

To have knowledge, you must first have reverence for the Lord. (Proverbs 1:7)
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CIVIL LAW 7

Justice Presbitero J. Velasco, Jr. (2006-2016)

G.R. No. 168770

Under the rule on the Statute of Frauds, as expressed
in Article 1403 of the Civil Code, a contract for the sale
or acquisition of real property shall be unenforceable
unless the same or some note of the contract be in
writing and subscribed by the party charged. Subject
to defined exceptions, evidence of the agreement
cannot be received without the writing, or secondary
evidence of its contents.

Following Art. 1189 of the Civil Code providing that

"[i]f the thing is improved by its nature, or by time, the
improvement shall inure to the benefit of the creditor
x xx," the Ouanos and Inocians do not have to settle
the appreciation of the values of their respective lots
as part of the reconveyance process, since the value
increase is merely the natural effect of nature and
time.
G.R. No. 180257

MCIAAs invocation of the Statute of Frauds is

misplaced primarily because the statute applies only to
executory and not to completed, executed, or partially
consummated contracts.

Article 1207 of the Civil Code pertinently states that

"there is solidary liability only when the obligation
expressly so states, or when the obligation requires
solidarity."

G.R. No. 168770

The solidary liability of Gonzales is clearly stipulated in

the promissory notes which uniformly begin, "For
value received, the undersigned (the "BORROWER")
jointly and severally promise to pay x xx." Solidary
liability cannot be presumed but must be established
by law or contract.

Art. 1187. The effects of a conditional obligation to

give, once the condition has been fulfilled, shall
retroact to the day of the constitution of the
obligation. Nevertheless, when the obligation imposes
reciprocal prestations upon the parties, the fruits and
interests during the pendency of the condition shall be
deemed to have been mutually compensated. If the
obligation is unilateral, the debtor shall appropriate
the fruits and interests received, unless from the
nature and circumstances of the obligation it should
be inferred that the intention of the person
constituting the same was different.
In obligations to do and not to do, the courts shall
determine, in each case, the retroactive effect of the
condition that has been complied with.
In accordance with Art. 1187 of the Civil Code on
mutual compensation, MCIAA may keep whatever
income or fruits it may have obtained from the parcels
of land expropriated. In turn, the Ouanos and Inocians
need not require the accounting of interests earned by
the amounts they received as just compensation.
G.R. No. 168770
Art. 1189. When the conditions have been imposed
with the intention of suspending the efficacy of an
obligation to give, the following rules shall be observed
in case of the improvement, loss or deterioration of
the thing during the pendency of the condition:
XXXXXX
(5) If the thing is improved by its nature, or by time,
the improvement shall inure to the benefit of the
creditor;

G.R. No. 193723

Article 1169 of the Civil Code on delay requires the
following:
Those obliged to deliver or to do something incur in
delay from the time the obligee judicially or
extrajudicially demands from them the fulfilment of
their obligation.
However, the demand by the creditor shall not be
necessary in order that delay may exist:
(1) When the obligation or the law expressly so
declares; x xx
As the contract in the instant case carries no such
provision on demand not being necessary for delay to
exist, We agree with the appellate court that GMC
should have first made a demand on the spouses
before proceeding to foreclose the real estate
mortgage.
G.R. No. 180705
Art. 1318. There is no contract unless the following
requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the
contract;

To have knowledge, you must first have reverence for the Lord. (Proverbs 1:7)
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CIVIL LAW 8

Justice Presbitero J. Velasco, Jr. (2006-2016)

(3) Cause of the obligation which is established.

(Emphasis supplied)
Art. 1409. The following contracts are inexistent and
void from the beginning:
x xxx
(3) Those whose cause or object did not exist at the
time of the transaction;
G.R. No. 185368
To allow petitioner to recover under the terms of the
compromise agreement and to further seek
enforcement of the original loan transaction would
constitute unjust enrichment. The compromise
agreement was entered into precisely to extinguish
the obligation under the loan transaction, not to
create two sources of obligation for respondent. There
is unjust enrichment under Article 22 of the Civil Code
when (1) a person is unjustly benefited; and (2) such
benefit is derived at the expense of or with damages
to another. Since respondent only entered into the
compromise agreement to commit to payment of the
original loan, petitioner cannot separate the two and
seek payment of both, especially as he has already
recovered the amount of the original loan.
G.R. No. 185368
While we agree with petitioners that parties to a loan
agreement have wide latitude to stipulate on any
interest rate in view of the Central Bank Circular No.
905 s. 1982 which suspended the Usury Law ceiling on
interest effective January 1, 1983, it is also worth
stressing that interest rates whenever unconscionable
may still be declared illegal. There is certainly nothing
in said circular which grants lenders carte blanche
authority to raise interest rates to levels which either
enslave their borrowers or lead to a hemorrhaging of
their assets.

Art. 3. The formal requisites of marriage are:

(1) Authority of the solemnizing officer;
(2) A valid marriage license except in the cases
provided for in Chapter 2 of this Title; and
(3) A marriage ceremony which takes place with the
appearance of the contracting parties before the
solemnizing officer and their personal declaration that
they take each other as husband and wife in the
presence of not less than two witnesses of legal age.
Art. 4. The absence of any of the essential or formal
requisites shall render the marriage void ab initio,
except as stated in Article 35(2).
A defect in any of the essential requisites shall render
the marriage voidable as provided in Article 45.
An irregularity in the formal requisites shall not affect
the validity of the marriage but the party or parties
responsible for the irregularity shall be civilly,
criminally and administratively liable.
G.R. No. 183896
Art. 35. The following marriages shall be void from the
beginning:
x xxx
(3) Those solemnized without a license, except those
covered by the preceding Chapter.
It cannot be said that there was a simple irregularity in
the marriage license that would not affect the validity
of the marriage, as no license was presented by the
respondent.

The Court, in said case, tagged the 5% monthly interest

rate agreed upon as "excessive, iniquitous,
unconscionable and exorbitant, contrary to morals,
and the law."

That a wedding ceremony was conducted and a

marriage contract was signed does not operate to cure
the absence of a valid marriage license. Article 4 of the
Family Code is clear when it says, "The absence of any
of the essential or formal requisites shall render the
marriage void ab initio, except as stated in Article
35(2)."

G.R. No. 183896

G.R. No. 198660

As the marriage was solemnized on January 9, 1993,

the Family Code of the Philippines, is the applicable
law. The pertinent provisions that would apply to this
particular case are Articles 3, 4 and 35(3), which read
as follows:

Article 1956 of the Civil Code, which refers to

monetary interest, specifically mandates that no
interest shall be due unless it has been expressly
stipulated in writing.
Thus, the collection of interest in loans or forbearance

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of money is allowed only when these two conditions

concur: (1) there was an express stipulation for the
payment of interest; (2) the agreement for the
payment of the interest was reduced in writing.

he may be obliged to restore. Neither shall rescission

take place when the things which are the object of the
contract are legally in the possession of third persons
who did not act in bad faith.

Absent any of these two conditions, the money debtor

cannot be made liable for interest.

In this case, indemnity for damages may be demanded

from the person causing the loss.

G.R. No. 179518

G.R. No. 179518

Article 453. If there was bad faith, not only on the part
of the person who built, planted or sowed on the land
of another, but also on the part of the owner of such
land, the rights of one and the other shall be the same
as though both had acted in good faith.

Article 449. He who builds, plants or sows in bad faith

on the land of another, loses what is built, planted or
sown without right to indemnity.

It is understood that there is bad faith on the part of

the landowner whenever the act was done with his
knowledge and without opposition on his part.

Article 450. The owner of the land on which anything

has been built, planted or sown in bad faith may
demand the demolition of the work, or that the
planting or sowing be removed, in order to replace
things in their former condition at the expense of the
person who built, planted or sowed; or he may compel
the builder or planter to pay the price of the land, and
the sower the proper rent.

G.R. No. 179518

Article 1191 of the Civil Code states that rescission is
available to a party in a reciprocal obligation where
one party fails to comply therewith:
Article 1191. The power to rescind obligations is
implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment
and the rescission of the obligation, with the payment
of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter
should become impossible.
The court shall decree the rescission claimed, unless
there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the
rights of third persons who have acquired the thing, in
accordance with Articles 1385 and 1388 and the
Mortgage Law.
G.R. No. 179518
Article 1385 of the Civil Code does provide that
rescission shall not take place if the subject matter of
the prior agreement is already in the hands of a third
party who did not act in bad faith, to wit:
Article 1385. Rescission creates the obligation to
return the things which were the object of the
contract, together with their fruits, and the price with
its interest; consequently, it can be carried out only
when he who demands rescission can return whatever

G.R. No. 179518

G.R. No. 179518

An action is deemed an attack on a title when the
object of the action or proceeding is to nullify the title,
and thus challenge the judgment pursuant to which
the title was decreed. The attack is direct when the
object of the action is to annul or set aside such
judgment, or enjoin its enforcement.
On the other hand, the attack is indirect or collateral
when, in an action to obtain a different relief, an
attack on the judgment is nevertheless made as an
incident thereof.
G.R. No. 192531
Even though parental authority is severed by virtue of
adoption, the ties between the adoptee and the
biological parents are not entirely eliminated. To
demonstrate, the biological parents, insome instances,
are able to inherit from the adopted, as can be
gleaned from Art. 190 of the Family Code:
Art. 190. Legal or intestate succession to the estate of
the adopted shall be governed by the following rules:
xxx
(2) When the parents, legitimate or illegitimate, or the
legitimate ascendants of the adopted concur withthe
adopter, they shall divide the entire estate, one-half

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tobe inherited by the parents or ascendants and the

other half, by the adopters;
xxx
(6) When only collateral blood relatives of the adopted
survive, then the ordinary rules of legal or intestate
succession shall apply.
G.R. No. 199852
Art. 1602. The contract shall be presumed to be an
equitable mortgage, in any of the following cases:
(1) When the price of a sale withright to repurchase is
unusually inadequate;
(2) When the vendor remains inpossession as lessee or
otherwise;
(3) When upon or after the expiration of the right to
repurchase another instrument extending the period
of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of
the purchase price;
(5) When the vendor binds himself to pay the taxes on
the thing sold;
(6) In any other case where it may be fairly inferred
that the real intention of the parties is that the
transaction shall secure the payment of a debt or the
performance of any other obligation.
In any of the foregoing cases, any money, fruits, or
other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall
be subject to the usury laws.
Art. 1604. The provisions of Article 1602 shall also
apply to a contract purporting to be an absolute sale.
G.R. No. 201001
SECTION 6. - Obligations with a Penal Clause
Art. 1229. The judge shall equitably reduce the penalty
when the principal obligation has been partly or
irregularly complied with by the debtor. Even if there
has been no performance, the penalty may also be
reduced by the courts if it is iniquitous or
unconscionable.

G.R. No. 201001

Art. 2227. Liquidated damages, whether intended as
an indemnity or a penalty, shall be equitably reduced if
they are iniquitous or unconscionable.
G.R. No. 204029
Art. 1345. Simulation of a contract may be absolute or
relative. The former takes place when the parties do
not intend to be bound at all; the latter, when the
parties conceal their true agreement. (emphasis
supplied)
Art. 1346. An absolutely simulated or fictitious
contract is void. A relative simulation, when it does not
prejudice a third person and is not intended for any
purpose contrary to law, morals, good customs, public
order or public policy binds the parties to their real
agreement.
G.R. No. 206248
Art. 176. Illegitimate children shall use the surname
and shall be under the parental authority of their
mother, and shall be entitled to support in conformity
with this Code. However, illegitimate children may use
the surname of their father if their filiation has been
expressly recognized by their father through the
record of birth appearing in the civil register, or when
an admission in a public document or private
handwritten instrument is made by the father.
Provided, the father has the right to institute an action
before the regular courts to prove non-filiation during
his lifetime. The legitime of each illegitimate child shall
consist of one-half of the legitime of a legitimate child.
G.R. No. 207348
SECTION 2. - Obligations with a Period
Art. 1193. Obligations for whose fulfillment a day
certain has been fixed, shall be demandable only when
that day comes.
Obligations with a resolutory period take effect at
once, but terminate upon arrival of the day certain.
A day certain is understood to be that which must
necessarily come, although it may not be known when.
If the uncertainty consists in whether the day will
come or not, the obligation is conditional, and it shall
be regulated by the rules of the preceding Section.

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G.R. No. 207348

Art. 1169. Those obliged to deliver or to do something
incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of
their obligation.
However, the demand by the creditor shall not be
necessary in order that delay may exist:
(1) When the obligation or the law expressly so
declare; or
(2) When from the nature and the circumstances of
the obligation it appears that the designation of the
time when the thing is to be delivered or the service is
to be rendered was a controlling motive for the
establishment of the contract; or
(3) When demand would be useless, as when the
obligor has rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if
the other does not comply or is not ready to comply in
a proper manner with what is incumbent upon him.
From the moment one of the parties fulfills his
obligation, delay by the other begins.
G.R. No. 210252
For an action to quiet title to prosper, two
indispensable requisites must concur, namely: (1) the
plaintiff or complainant has a legal or equitable title to
or interest in the real property subject of the action;
and (2) the deed, claim, encumbrance, or proceeding
claimed to be casting cloud on the title must be shown
to be in fact invalid or inoperative despite its prima
facie appearance of validity or efficacy.
G.R. No. 210252
However, dismissal with prejudice under Rule 17, Sec.
3 (Sec. 3. Dismissal due to fault of plaintiff.) of the
Rules of Court cannot defeat the right of a co-owner to
ask for partition at any time, provided that there is no
actual adjudication of ownership of shares yet.
Pertinent hereto is Article 494 of the Civil Code:
Article 494. No co-owner shall be obliged to remain in
the co-ownership. Each co-owner may demand at any
time the partition of the thing owned in common,
insofar as his share is concerned.
Nevertheless, an agreement to keep the thing
undivided for a certain period of time, not exceeding
ten years, shall be valid. This term may be extended by
a new agreement.
A donor or testator may prohibit partition for a period

which shall not exceed twenty years. Neither shall

there be any partition when it is prohibited by law. No
prescription shall run in favor of a co-owner or co-heir
against his co-owners or co-heirs so long as he
expressly or impliedly recognizes the co-ownership.
G.R. No. 210831
Article 1956.No interest shall be due unless it has been
expressly stipulated in writing.
As mandated by the foregoing provision, payment of
monetary interest shall be due only if: (1) there was an
express stipulation for the payment of interest; and (2)
the agreement for such payment was reduced in
writing. Thus, We have held that collection of interest
without any stipulation thereof in writing is prohibited
by law.
G.R. No. 203655
Article 1318 of the Code lays down the essential
requisites of a valid contract, to wit:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the
contract; and
(3) Cause of the obligation which is established.
G.R. No. 210445
A medical negligence case is a type of claim to redress
a wrong committed by a medical professional, that has
caused bodily harm to or the death of a patient. There
are four elements involved in a medical negligence
case, namely: duty, breach, injury, and proximate
causation.
Duty refers to the standard of behavior which imposes
restrictions on one's conduct. The standard in turn
refers to the amount of competence associated with
the proper discharge of the profession. A physician is
expected to use at least the same level of care that any
other reasonably competent doctor would use under
the same circumstances. Breach of duty occurs when
the physician fails to comply with these professional
standards. If injury results to the patient as a result of
this breach, the physician is answerable for negligence.
G.R. No. 210445
Resort to the doctrine of res ipsa loquitur as an
exception to the requirement of an expert testimony
in medical negligence cases may be availed of if the
following essential requisites are satisfied: (1) the
accident was of a kind that does not ordinarily occur

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Justice Presbitero J. Velasco, Jr. (2006-2016)

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.
G.R. No. 212058
Art. 2208. In the absence of stipulation, attorney's fees
and expenses of litigation, other than judicial costs,
cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has
compelled the plaintiff to litigate with third persons or
to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against
the plaintiff;
(4) In case of a clearly unfounded civil action or
proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident
bad faith in refusing to satisfy the plaintiff's plainly
valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household
helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen's
compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability
arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just
and equitable that attorney's fees and expenses of
litigation should be recovered.
In all cases, the attorney's fees and expenses of
litigation must be reasonable.
G.R. No. L-40771
While it is true that by themselves tax receipts and
declarations of ownership for taxation purposes are
not incontrovertible evidence of ownership, they
become strong evidence of ownership acquired by
prescription when accompanied by proof of actual
possession. of the property.

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
xxx
G.R. No. 179518
An action is deemed an attack on a title when the
object of the action or proceeding is to nullify the title,
and thus challenge the judgment pursuant to which
the title was decreed. The attack is direct when the
object of the action is to annul or set aside such
judgment, or enjoin its enforcement.
On the other hand, the attack is indirect or collateral
when, in an action to obtain a different relief, an
attack on the judgment is nevertheless made as an
incident thereof.
G.R. No. 105608
We agree with the determination of the RTC and CA as
to the invalidity of the donation. We refer to the
authority of the person who executed the deed of
donation. As it were, the widow of Benjamin, Nakila,
signed the deed of donation. She, however, cannot
give consent to the donation as she has no disposable
right thereto. The legal maxim nemo dat quod non
habet applies to this instance as Nakila only has
usufructuary right equal to the share of her children.
Besides, Nakila signed the deed of donation in her
name and not in the name of her children who are the
heirs in representation of their father, Benjamin. Lest
it be overlooked, the then minor children were not
under the legal guardianship of Nakila, a situation
which thus disqualifies her from signing on their
behalf.
G.R. No. 105608

A. APPLICATIONS

The antecedent facts, as borne by the records, strongly

indicate the simulated character of the sale covered by
the deeds of absolute sale. As found below, Don
Fabian never relinquished possession of the covered
properties during his lifetime. The first deed was
executed on May 1, 1939; the second on May 10,
1939; and the third on September 24, 1939.

Section 14. Who may apply. The following persons may

file in the proper Court of First Instance an application
for registration of title to land, whether personally or

Soledad Monteroso-Cagampang, however, only took

possession of the subject properties after Don Fabians
death in 1948 or nine years after contract execution.

G.R. No. L-40771

PRESIDENTIAL DECREE No. 1529
ORDINARY REGISTRATION PROCEEDINGS

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The gap, unexplained as it were, makes for a strong

case that the parties to the sale never intended to be
bound thereby.
G.R. No. 148777
Indeed, waiver or an intentional and voluntary
surrender of a right can give rise to a valid title or
ownership of a property in favor of another under
Article 6 of the Civil Code.
Art. 6. Rights may be waived, unless the waiver is
contrary to law, public order, public policy, morals, or
good customs, or prejudicial to a third person with a
right recognized by law.
G.R. No. 155635
A foreign divorce can be recognized here, provided the
divorce decree is proven as a fact and as valid under
the national law of the alien spouse. Be this as it may,
the fact that Rebecca was clearly an American citizen
when she secured the divorce and that divorce is
recognized and allowed in any of the States of the
Union, the presentation of a copy of foreign divorce
decree duly authenticated by the foreign court issuing
said decree is, as here, sufficient.
In determining whether or not a divorce secured
abroad would come within the pale of the country's
policy against absolute divorce, the reckoning point is
the citizenship of the parties at the time a valid divorce
is obtained.
G.R. No. 158761
Interpretative regulations and those merely internal in
nature, that is, regulating only the personnel of the
administrative agency and not the public, need not be
published. Neither is publication required of the socalled letters of instructions issued by administrative
superiors concerning the rules or guidelines to be
followed by their subordinates in the performance of
their duties.
G.R. No. 163101
The contract must be considered as the law between
the parties and binding on both.
G.R. No. 163744
Art. 160. All property of the marriage is presumed to
belong to the conjugal partnership, unless it be proved

that it pertains exclusively to the husband or to the

wife.
G.R. No. 163744
While the declared nullity of marriage of Nicholson
and Florencia severed their marital bond and dissolved
the conjugal partnership, the character of the
properties acquired before such declaration continues
to subsist as conjugal properties until and after the
liquidation and partition of the partnership.
G.R. No. 166462
Art. 1306 of the Civil Code guarantees the freedom of
parties to stipulate the terms of their contract
provided that they are not contrary to law, morals,
good customs, public order, or public policy. Thus,
when the provisions of a contract are valid, the parties
are bound by such terms under the principle that a
contract is the law between the parties.
Here, both parties knew for a fact that the property
subject of their contract was occupied by informal
settlers, whose eviction would entail court actions that
in turn, would require some amount of time. They also
knew that the length of time that would take to
conclude such court actions was not within their
power to determine. Despite such knowledge, both
parties still agreed to the stipulation that the payment
of the balance of the purchase price would be deferred
until the informal settlers are ejected.
G.R. No. 184036
Article 1881 of the Civil Code provides that "the agent
must act within the scope of his authority." Pursuant
to the authority given by the principal, the agent is
granted the right "to affect the legal relations of his
principal by the performance of acts effectuated in
accordance with the principals manifestation of
consent."
G.R. No. 185063
Article 160 of the 1950 Civil Code, the governing
provision in effect at the time Bonifacio and Anita
contracted marriage, provides that all property of the
marriage is presumed to belong to the conjugal
partnership unless it is proved that it pertains
exclusively to the husband or the wife. For the
presumption to arise, it is not even necessary to prove
that the property was acquired with funds of the
partnership. Only proof of acquisition during the
marriage is needed to raise the presumption that the
property is conjugal. In fact, even when the manner in

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Justice Presbitero J. Velasco, Jr. (2006-2016)

which the properties were acquired does not appear,

the presumption will still apply, and the properties will
still be considered conjugal.

different vendees, the ownership shall be transferred

to the person who may have first taken possession
thereof in good faith, if it should be movable property.

G.R. No. 185063

Should it be immovable property, the ownership shall

belong to the person acquiring it who in good faith
first recorded it in the Registry of Property.

It is well settled that a conditional sale is akin, if not

equivalent, to a contract to sell. In both types of
contract, the efficacy or obligatory force of the
vendors obligation to transfer title is subordinated to
the happening of a future and uncertain event, usually
the full payment of the purchase price, so that if the
suspensive condition does not take place, the parties
would stand as if the conditional obligation had never
existed.

Should there be no inscription, the ownership shall

pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good
faith.
G.R. No. 193840

In other words, in a contract to sell ownership is

retained by the seller and is not passed to the buyer
until full payment of the price, unlike in a contract of
sale where title passes upon delivery of the thing sold.

Art. 2028. A compromise is a contract whereby the

parties, by making reciprocal concessions, avoid a
litigation or put an end to one already commenced.

G.R. No. 187838

A compromise agreement is a contract whereby the

parties make reciprocal concessions, avoid litigation,
or put an end to one already commenced.

Art. 1370. If the terms of a contract are clear and leave

no doubt upon the intention of the contracting parties,
the literal meaning of its stipulations shall control.
If the words appear to be contrary to the evident
intention of the parties, the latter shall prevail over the
former.
G.R. No. 192486
A double sale situation, which would call, if necessary,
the application of Art. 1544 of the Civil Code, arises
when, as jurisprudence teaches, the following
requisites concur:
(a) The two (or more) sales transactions must
constitute valid sales;
(b) The two (or more) sales transactions must pertain
to exactly the same subject matter;
(c) The two (or more) buyers at odds over the rightful
ownership of the subject matter must each represent
conflicting interests; and
(d) The two (or more) buyers at odds over the rightful
ownership of the subject matter must each have
bought from the very same seller.
G.R. No. 192486
Art. 1544. If the same thing should have been sold to

G.R. No. 193840

Its validity depends on its fulfillment of the requisites

and principles of contracts dictated by law; its terms
and conditions being not contrary to law, morals, good
customs, public policy and public order.
G.R. No. 194014
Article 2085 of the Civil Code provides that a mortgage
contract, to be valid, must have the following
requisites: (a) that it be constituted to secure the
fulfilment of a principal obligation; (b) that the
mortgagor be the absolute owner of the thing
mortgaged; and (c) that the persons constituting the
mortgage have free disposal of their property, and in
the absence of free disposal, that they be legally
authorized for the purpose.
The presence of the second requisiteabsolute
ownershipis the contentious determinative issue.
G.R. Nos. 140836 & 140907
Redemption has been defined as "the right of a
debtor, and sometimes of a debtors other creditors,
to repurchase from a buyer at a forced sale, property
of the debtor that was seized and sold in satisfaction
of a judgment or other claim against the debtor, which
right is usually limited to forced [sale] of real
property." The concept of redemption is to allow the
owner to repurchase or to buy back, within a certain

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period and for a certain amount, a property that has

been sold due to debt, tax, or encumbrance.
G.R. Nos. 167829-30
While the general rule is one cannot be bound to a
contract entered into by another person, there are
exceptions, such as when the contracting person was
authorized to enter a contract on behalf of another, or
when such contract was ratified, as enunciated in the
Civil Code:
Article 1317. No one may contract in the name of
another without being authorized by the latter, or
unless he has by law a right to represent him.
A contract entered into in the name of another by one
who has no authority or legal representation, or who
has acted beyond his powers shall be 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.
G.R. Nos. 169408 & 170144
Under Art. 1235 of the Civil Code, the obligation is
deemed fully complied with when an obligee accepts
the performance thereof knowing its incompleteness
or irregularity, and without expressing any protest or
objection. An obligee is deemed to have waived strict
compliance by an obligor with an obligation when the
following elements are present:
(1) an intentional acceptance of the defective or
incomplete performance;
(2) with actual knowledge of the incompleteness or
defect; and
(3) under circumstances that would indicate an
intention to consider the performance as complete
and renounce any claim arising from the defect.

building or trees after proper indemnity. The parties

shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.
Art. 453. If there was bad faith, not only on the part of
the person who built, planted or sowed on the land of
another, but also on the part of the owner of such
land, the rights of one and the other shall be the same
as though both had acted in good faith.
It is understood that there is bad faith on the part of
the landowner whenever the act was done with his
knowledge and without opposition on his part.
Art. 546. Necessary expenses shall be refunded to
every possessor; but only the possessor in good faith
may retain the thing until he has been reimbursed
therefor.
Useful expenses shall be refunded only to the
possessor in good faith with the same right of
retention, the person who has defeated him in the
possession having the option of refunding the amount
of the expenses or of paying the increase in value
which the thing may have acquired by reason thereof.
Art. 548. Expenses for pure luxury or mere pleasure
shall not be refunded to the possessor in good faith;
but he may remove the ornaments with which he has
embellished the principal thing if it suffers no injury
thereby, and if his successor in the possession does
not prefer to refund the amount expended.
The CA may have made the erroneous conclusion that
Diaz acted in good faith, but because BDC equally
acted in bad faith, Art. 453 of the Civil Code commands
that the rights of one and the other shall be the same
as though both had acted in good faith.

G.R. No. 213233

G.R. No. 213233

Arts. 448, 453, 546, and 548 of the Civil Code are
material in resolving the issue:

Under Article 448, the landowner is given the option,

either to appropriate the improvement as his own
upon payment of the proper amount of indemnity or
to sell the land to the possessor in good faith.
Relatedly Article 546 provides that a builder in good
faith is entitled to full reimbursement for all the
necessary and useful expenses incurred. In this case,
however, the option of selling the land to the builder
in good faith is no longer viable in light of the ruling in
the interpleader case. Hence, there is only one thing
left for [BDC] to do: indemnify Diaz for the
improvements introduced on the property.

Art. 448. The owner of the land on which anything has

been built, sown or planted in good faith, shall have
the right to appropriate as his own the works, sowing
or planting, after payment of the indemnity provided
for in Articles 546 and 548, or to oblige the one who
built or planted to pay the price of the land, and the
one who sowed, the proper rent. However, the builder
or planter cannot be obliged to buy the land if its value
is considerably more than that of the building or trees.
In such case, he shall pay reasonable rent, if the owner
of the land does not choose to appropriate the

To have knowledge, you must first have reverence for the Lord. (Proverbs 1:7)
COMPILED BY ATTY. RAL CASABAR