CIVIL LAW

CIVIL LAW
I. PERSONS AND FAMILY RELATIONS

A. MARRIAGE
1. ESSENTIAL AND FORMAL REQUISITES

JERRYSUS L. TILAR v. REPUBLIC OF THE PHILIPPINES

G.R. No. 214529, July 12, 2017, PERALTA, J.

The Family Code provides for the essential as well as formal requisites for the validity of marriage.
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 not affect the validity of the
marriage but the party or parties responsible for the irregularity shall be civilly, criminally and
administratively liable.

Notably, the proceedings for church annulment which is in accordance with the norms of Canon Law
is not binding upon the State as the couple is still considered married to each other in the eyes of the
civil law. Thus, the principle of separation of the church and state finds no application in this case.

FACTS:

Jerrysus filed with the RTC a petition for declaration of nullity of marriage on the ground of private
respondent's psychological incapacity based on Article 36 of Family Code. They eventually
separated in 2002. Jerrysus consulted a clinical psychologist and respondent was said to be suffering
from "aggressive personality disorder as well as histrionic personality disorder" which made her
psychologically incapacitated to comply with her essential marital obligations.

RTC dismissed the case for lack of jurisdiction arguing that the procedure is governed by the
Church's Canon Law not by the civil law observed by the State in nullity cases involving civil
marriages. Thus, the principle of separation of Church and State finds application in this case.
Hence, Jerrysus filed the instant petition.

ISSUE:

Whether or not the RTC erred in dismissing the case on the ground that the validity of church
marriage is outside of the province of its authority

RULING:

YES, petition is meritorious.

The Family Code provides for the essential as well as formal requisites for the validity of marriage.
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 not affect the
validity of the marriage but the party or parties responsible for the irregularity shall be civilly,
criminally and administratively liable.

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Thus, the contract of marriage is entered into by complying with the requirements and formalities
prescribed by law. Although, marriage is considered a sacrament in the Catholic church, it has civil
and legal consequences which are governed by the Family Code. As petitioner correctly pointed
out, the instant petition only seeks to nullify the marriage contract between the parties as
postulated in the Family Code of the Philippines; and the declaration of nullity of the parties'
marriage in the religious and ecclesiastical aspect is another matter. Notably, the proceedings for
church annulment which is in accordance with the norms of Canon Law is not binding upon the
State as the couple is still considered married to each other in the eyes of the civil law. Thus, the
principle of separation of the church and state finds no application in this case.

The Family Code has provided for the grounds for the termination of marriage. These grounds may
be invoked and proved in a petition for annulment of voidable marriage or in a petition for
declaration of nullity of marriage, which can be decided upon only by the court exercising
jurisdiction over the matter. Section 19 of Batas Pambansa Blg. 129, as amended, otherwise known
as the Judiciary Reorganization Act of 1980 provides:

Section 19.Jurisdiction in civil cases. — Regional Trial Courts shall exercise exclusive original
jurisdiction: (15) In all actions involving the contract of marriage and marital relations;

Hence, a petition for declaration of nullity of marriage, which petitioner filed before the RTC of
Baybay City, falls within its exclusive jurisdiction.

2. PSYCHOLOGICAL INCAPACITY

MARIA TERESA B. TANI-DE LA FUENTE vs RODOLFO DE LA FUENTE, JR.,

G.R. No. 188400, March 8, 2017, Leonen, J.

Psychological incapacity is a mental illness that leads to an inability to comply with or comprehend
essential marital obligations.

FACTS:

Petitioner (Maria Teresa) and respondent (Rodolfo) first met when they were students at the
University of Sto. Tomas. Soon thereafter, they became sweethearts. Petitioner noticed that
respondent was an introvert and was prone to jealousy. He was jealous of everyone who talked to
her and would skip work to stalk her. His jealousy was so severe that he once poked a gun at his
teenage cousin, suspecting him to be her lover. He also treated her like a sex slave, demanding that
they have sex 4 or 5 times a day, he would tie her to the bed or poke things at her. He also suggested
that they invite a third person or that she have sex with another person in his presence. Petitioner
sought help from a doctor, a lawyer and a priest but he refused any counseling. After an incident
where respondent poked a gun at petitioners head, she left the conjugal home and filed this petition
for the declaration of nullity of her marriage, grounded on respondent’s psychological incapacity.

A clinical psychologist (Dr. Lopez) was not able to interview respondent but was able to talk to his
best friend and petitioner. He diagnosed him as having paranoid personality disorder. It’s one of
the severe forms of personality disorder which started from late childhood, and was serious and
incurable.

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The RTC granted the petition but was reversed by the CA.

ISSUE:

W/N the CA erred in reversing the RTC.

RULING:

YES. Non-examination of one of the parties will not automatically render as hearsay or invalidate
the findings of the psychiatrist. The case of Molina does not require a physician to examine a person
and declare him/her to be psychologically incapacitated. What matters is that the totality of
evidence presented establishes the party's psychological condition. Psychological incapacity must
be characterized by (a) gravity, (b) juridical antecedence, and (c) incurability.

Gravity: Dr. Lopez testified that respondent’s disorder is one of the severe forms of personality
disorder even more severe than the other personality disorders like the borderline and narcissistic
personality disorders. He found the respondent to be suffering from a paranoid personality disorder
manifested by the respondent's damaging behavior like reckless driving and extreme jealousy; his
being distrustful and suspicious; his severe doubts and distrust of friends and relatives of the
petitioner; his being irresponsible and lack of remorse; his resistance to treatment; and his
emotional coldness and severe immaturity.

Juridical antecedence: As to the root cause, the said disorder started during respondent's late
childhood years and developed in his early adolescent years.

Incurability: He further testified that this disorder is very severe, serious and incurable because of
the severe paranoia of the patient; that patients with this kind of personality disorder could never
accept that there is something wrong with them and if ever forced to seek treatment, they would
rather engage in an intellectual battle with the therapist rather than cooperate with them.

The facts narrated by petitioner show that respondent failed to, or could not, comply with the
obligations expected of him as a husband. Since the State's interest must be toward the stability of
society, the notion of psychological incapacity should not only be based on a medical or
psychological disorder, but should consist of the inability to comply with essential marital
obligations such that public interest is imperiled.

MARIA VICTORIA SOCORRO LONTOC-CRUZ v. NILO SANTOS CRUZ

G.R. No. 201988, October 11, 2017

Mere showing of 'irreconcilable differences' and 'conflicting personalities' in no wise constitutes

psychological incapacity. Nor does failure of the parties to meet their responsibilities and duties as
married persons" amount to psychological incapacity.

FACTS:

Marivi, 22 years of age, met Nilo, 28 years of age sometime in March 1986. They became steady in
August of the same year. The couple married on October 1986 followed by a church wedding on
February 1987. The marriage produced two sons.

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On July 2005, Marivi filed with the RTC of Muntinlupa City a petition for declaration of nullity of
marriagebased on psychological incapacity. She averred that it had been medically ascertained that
Nilo was suffering from "inadequate personality disorder related to masculine strivings associated
with unresolved oedipal complex,"while she herself was found to be suffering from a "personality
disorder of the mixed type, histrionic, narcissistic with immaturity”.

To show that Nilo failed to provide her with the necessary emotional, psychological, and physical
support, Marivi cited the following:
1. His infidelity and his non-commitment to the marriage as he continued to act like a
bachelor;
2. The lack of 'oneness' in the marriage as Nilo would make decisions (on financial matters)
without consulting or considering her suggestions; treating her as a housemate or a
"mayordoma;" keeping from her his whereabouts, when he would come home or how much
his income was;
3. The lack of sexual contact for more than a decade as Nilo made excuses;
4. Putting up a facade that he is a caring, concerned, and loving husband, especially to his
bosses; and
5. Preference towards the company of his peers/friends.

In his Answer, Nilo claimed that he was madly in love with Marivi; that at the start of their
relationship, both he and Marivi would exhibit negative personality traits which they overlooked;
that he believed that both he and Marivi were suffering from psychological incapacity; and that he
was not singularly responsible for the breakdown of their marriage. He stressed that Marivi also
contributed to the deterioration of their union, to wit:

1. Marivi would demand that he behave in ways he was not accustomed to or inconsistent
with his career position;
2. Marivi was jealous of his friends; and would often make hasty conclusions that he was
having an affair with other women;
3. Marivi would exhibit volatile temperament if things did not go her way; would not admit
mistakes, and blame others instead;
4. Marivi would make decisions impulsively, such as changing an item she gets tired of, or
demanding that Nilo change a motor vehicle simply because she did not like it; and
5. She lacked respect for Nilo, and would speak to him degradingly, and even accuse him of
being gay or a homosexual.

ISSUE:

Whether or not the psychological conditions of the parties fall under Article 36 of the Family Code
to warrant the declaration of nullity of marriage.

RULING:

No. Mere showing of 'irreconcilable differences' and 'conflicting personalities' in no wise constitutes
psychological incapacity. Nor does failure of the parties to meet their responsibilities and duties as
married persons" amount to psychological incapacity.We further elucidated in Yambao v.

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Republic that the psychological condition should render the subject totally unaware or incognitive
of the basic marital obligation:

Article 36 contemplates incapacity or inability to take cognizance of and to assume

basic marital obligations and not merely difficulty, refusal, or neglect in the performance of
marital obligations or ill will. This incapacity consists of the following: (a) a true inability to
commit oneself to the essentials of marriage; (b) this inability to commit oneself must refer
to the essential obligations of marriage: the conjugal act, the community of life and love,
the rendering of mutual help, the procreation and education of offspring; and (c) the
inability must be tantamount to a psychological abnormality. It is not enough to prove that
a spouse failed to meet his responsibility and duty as a married person; it is essential that
he must be shown to be incapable of doing so due to some psychological illness.62

In Marcos v. Marcos, the actual medical examination of the one claimed to have psychological
incapacity is not a condition sine qua non, for what matters is the totality of evidence to sustain a
finding of such psychological incapacity. While it behooves this Court to weigh the clinical findings
of psychology experts as part of the evidence, the court's hands are nonetheless free to make its
own independent factual findings. "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 the proceedings."

Even granting that both parties did suffer from personality disorders as evaluated by the expert
witnesses, we find that the conclusions reached by these expert witnesses do not irresistibly point
to the fact that the personality disorders which plague the spouses antedated the marriage; that
these personality disorders are indeed grave or serious; or that these personality disorders are
incurable or permanent as to render the parties psychologically incapacitated to carry out and carry
on their marital duties. What can be inferred from the totality of evidence, at most, is a case of
incompatibility. For a personality disorder to be declared clinically or medically incurable or
permanent is one thing; for a spouse to refuse or to be reluctant to perform his/her marital duties
is another.

Thus, this Court believes that the protagonists in this case are in reality simply unwilling to work
out a solution for each other's personality differences, and have thus become overwhelmed by
feelings of disappointment or disillusionment toward one another. Sadly, a marriage, even if
unsatisfactory, is not a null and void marriage.

YOLANDA E. GARLET v. VENCIDOR T. GARLET

G.R. No. 193544, August 2, 2017, FIRST DIVISION, LEONARDO-DE CASTRO, J.:

While the Court previously held that “there is no requirement that the person to be declared
psychologically incapacitated be personally examined by a physician,” yet, this is qualified by the
phrase, “if the totality of evidence presented is enough to sustain a finding of psychological
incapacity.” The psychologist’s findings must still be subjected to a careful and serious scrutiny as to
the bases of the same, particularly, the source/s of information, as well as the methodology employed.

FACTS:

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Petitioner Yolanda E. Garlet and respondent Vencidor T. Garlet met each other sometime in 1988.
They became intimately involved and as a result, petitioner became pregnant. Petitioner gave birth
to their son, Michael Vincent Garlet (Michael), out of wedlock on November 9, 1989. Petitioner and
respondent eventually got married on March 4, 1994. Their union was blessed with a second child,
Michelle Mae Garlet (Michelle), on January 23, 1997. However, petitioner and respondent started
experiencing marital problems. After seven years of marriage, petitioner and respondent separated
in 2001. Petitioner now has custody over their two children.

Petitioner filed a Petition for Declaration of Nullity of Marriage on the ground of respondent’s
psychological incapacity to fulfill his essential marital obligations to petitioner and their children.
Both Petitioner and Respondent underwent a Psychological test to determine their capacity to
maintain the marriage. In her report, Ms. De Guzman, Clinical psychologist, cleared petitioner of
any psychological disorder, saying that petitioner has the capacity to understand and comply with
her marital obligations. In contrast, Ms. De Guzman found respondent to be suffering from a
narcissistic type of personality disorder.

The RTC, ruled in favor of Petitioner based on the evidence submitted and psychological report,
the parties never shared a true married life. After a careful evaluation of the records, this Court
finds the petition to be impressed with merit. The respondent is described as suffering from
narcissistic personality disorder found to be permanent, severe, serious, and incurable, rendering
him as psychologically incapacitated to perform the marital obligations.

The CA reversed the RTC judgment. The totality of evidence adduced by Yolanda was not enough
to sustain a finding that Vencidor was psychologically incapacitated. Yolanda wanted to equate
Vencidor’s addiction to alcohol, chronic gambling, womanizing, refusal to find a job and his
inability to take care of their children as akin to psychological incapacity. At best, Yolanda’s
allegations showed that Vencidor was irresponsible, insensitive, or emotionally immature. The
incidents cited by Yolanda did not show that Vencidor suffered from a psychological malady so
grave and permanent, as to deprive him of awareness of the duties and responsibilities of the
matrimonial bond. Yolanda’s portrayal of Vencidor as jobless and irresponsible is not enough. It is
not enough to prove that the parties failed to meet their responsibilities and duties as married
persons; it is essential that they must be shown to be incapable of doing so, due to some
psychological illness.

ISSUE:

Whether or not the Court is bound by Ms. De Guzman’s Psychological Report.

RULING:

NO. Thus, the Court laid down in Republic of the Philippines v. Court of Appeals and
Molina stringent guidelines in the interpretation and application of Article 36 of the Family Code,
to wit:

(1) The burden of proof to show the nullity of the marriage belongs to
the plaintiff. Any doubt should be resolved in favor of the existence and
continuation of the marriage and against its dissolution and nullity. This is
rooted in the fact that both our Constitution and our laws cherish the

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validity of marriage and unity of the family. Thus, our Constitution devotes
an entire Article on the Family, recognizing it “as the foundation of the
nation”. It decrees marriage as legally “inviolable”, thereby protecting it from
dissolution at the whim of the parties. Both the family and marriage are to
be “protected” by the state.

The Family Code echoes this constitutional edict on marriage and the family
and emphasizes their permanence, inviolability and solidarity.

(2) The root cause of the psychological incapacity must be: (a)
medically or clinically identified, (b) alleged in the complaint, (c)
sufficiently proven by experts and (d) clearly explained in the
decision. Article 36 of the Family Code requires that the incapacity must be
psychological – not physical, although its manifestations and/or symptoms
may be physical. The evidence must convince the court that the parties,
or one of them, was mentally or psychically ill to such an extent that
the person could not have known the obligations he was assuming, or
knowing them, could not have given valid assumption thereof.
Although no example of such incapacity need be given here so as not
to limit the application of the provision under the principle
of ejusdem generis (Salita v. Magtolis, 233 SCRA 100, 108), nevertheless
such root cause must be identified as a psychological illness and its
incapacitating nature fully explained. Expert evidence may be given
by qualified psychiatrists and clinical psychologists.

(3) The incapacity must be proven to be existing at “the time of the

celebration” of the marriage. The evidence must show that the illness was
existing when the parties exchanged their “I do’s”. The manifestation of
the illness need not be perceivable at such time, but the illness itself
must have attached at such moment, or prior thereto.

(4) Such incapacity must also be shown to be medically or clinically

permanent or incurable. Such incurability may be absolute or even
relative only in regard to the other spouse, not necessarily absolutely against
everyone of the same sex. Furthermore, such incapacity must be relevant
to the assumption of marriage obligations, not necessarily to those not
related to marriage, like the exercise of a profession or employment in a job.
Hence, a pediatrician may be effective in diagnosing illnesses of children and
prescribing medicine to cure them but may not be psychologically
capacitated to procreate, bear and raise his/her own children as an essential
obligation of marriage.

(5) Such illness must be grave enough to bring about the disability of
the party to assume the essential obligations of marriage. Thus, “mild
characteriological peculiarities, mood changes, occasional emotional
outbursts” cannot be accepted as root causes. The illness must be shown
as downright incapacity or inability, not a refusal, neglect or
difficulty, much less ill will. In other words, there is a natal or

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supervening disabling factor in the person, an adverse integral

element in the personality structure that effectively incapacitates the
person from really accepting and thereby complying with the
obligations essential to marriage.

(6) The essential marital obligations must be those embraced by

Articles 68 up to 71 of the Family Code as regards the husband and
wife as well as Articles 220, 221 and 225 of the same Code in regard to parents
and their children. Such non-complied marital obligation(s) must also be
stated in the petition, proven by evidence and included in the text of the
decision.

(7) Interpretations given by the National Appellate Matrimonial

Tribunal of the Catholic Church in the Philippines, while not
controlling or decisive, should be given great respect by our courts x
x x.

It bears to stress that the burden of proving the nullity of the marriage falls on petitioner.
Petitioner’s evidence shall still be scrutinized and weighed, regardless of respondent’s failure to
present any evidence on his behalf. Any doubt shall be resolved in favor of the existence and
continuation of the marriage. Tested against the present guidelines, the Court agrees with the Court
of Appeals that the totality of petitioner’s evidence is insufficient to establish respondent’s
psychological incapacity.

The Court is not bound by Ms. De Guzman’s Psychological Report. While the Court previously held
that “there is no requirement that the person to be declared psychologically incapacitated be
personally examined by a physician,” yet, this is qualified by the phrase, “if the totality of evidence
presented is enough to sustain a finding of psychological incapacity.” The psychologist’s findings
must still be subjected to a careful and serious scrutiny as to the bases of the same, particularly, the
source/s of information, as well as the methodology employed.

Much in the same way, the Court finds herein that Ms. De Guzman’s sources and methodology is’
severely lacking the requisite depth and comprehensiveness to judicially establish respondent’s
psychological incapacity. Ms. De Guzman relied on the information given by petitioner; Avelino,
respondent’s brother; Ramil Ereve, petitioner’s brother; an anonymous female cousin of
petitioner; and the couple’s neighbors who refused to give their names. On the basis thereof, Ms.
De Guzman determined that respondent suffered from Narcissistic Personality Disorder, the root
cause of which, Ms. De Guzman traced back to respondent, as the youngest child in the family,
being favored, praised, and indulged by his caregivers. From there, Ms. De Guzman already
concluded that respondent’s disorder rendered it beyond his capacity to understand, comply, and
attend to his obligations in the marriage; was present even before marriage; and was “pervasive,
permanent and clinically proven to be incurable.” To put it simply, Ms. De Guzman is saying that
respondent was a spoiled child, and while it can be said that respondent has grown up to be a self-
centered and self-indulgent adult, it still falls short of establishing respondent’s psychological
incapacity characterized by gravity, juridical antecedence, and incurability, so as to render
respondent’s marriage to petitioner void ab initio.

MANUEL R. BAKUNAWA III V. NORA REYES BAKUNAWA

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G.R. No. 217993, August 9, 2017, Reyes, Jr. J.:

If the incapacity can be proven by independent means, no reason exists why such independent proof
cannot be admitted to support a conclusion of psychological incapacity, independently of a
psychologist's examination and report.

FACTS:

Manuel and Nora were college sweethearts and when Nora became pregnant, they got married.
Manuel had to stop his studies and worked for his family’s construction business. He was assigned
to provincial projects and came home only during weekends. However, whenever Manuel came
back from work, he chose to spend his time with friends instead of his family despite his son being
already born. By reason of this, Nora and Manuel often quarrelled. Worse, Manuel depended on his
father and Nora for their family’s needs.

A year later, the couple moved out of Manuel’s parents’ house and Manuel noticed that Nora
became passive and lazy. She became moody and mercurial. This irritated Manuel more and their
verbal quarrels escalated to physical violence.

Subsequently, Nora gave birth to their second child but nothing changed in their relationship.
Manuel spent his time with his friends and drank a lot. Later on, he even had an extramarital affair
and eventually left his family to cohabit with his girlfriend. They already considered themselves
separated.

After a few years, at the request of Nora, Manuel bought his family a house. After spending a couple
of nights there, Nora became pregnant again and gave birth to their third child.

Then 23 years later, Manuel filed a petition for declaration of nullity of their marriage before the
RTC on the ground that he and Nora were psychologically incapacitated. He presented a
psychiatrist who testified that he had Intermittent Explosive Disorder, characterized by irritability
and aggressive behavior that is not proportionate to the cause. On the other hand, Nora was
diagnosed with Passive Aggressive Personality Disorder, marked by a display of negative attitude
and passive resistance in her relationship with Manuel. The psychiatrist’s findings were based on
her interview with Manuel and the parties' eldest son, Moncho, because Nora did not participate in
the psychological assessment. Manuel also alleges in his petition that he continues to live with his
common-law wife and has a son with her, whereas, Nora lives alone in her unit. Their house and
lot was already foreclosed following Nora's failure to pay a loan secured by a mortgage on the said
property.

The RTC granted the petition and declared the marriage of Manuel and Nora void ab initio.
However, upon appeal to the CA, it reversed the decision of the CA.

ISSUE:

Whether the CA correctly reversed the decision of the RTC?

RULING:

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Yes. As the CA correctly ruled, the totality of evidence presented by Manuel comprising of his
testimony and that of Dr. Villegas, as well as the latter's psychological evaluation report, is
insufficient to prove that he and Nora are psychologically incapacitated to perform the essential
obligations of marriage.

Dr. Villegas' conclusion that Manuel is afflicted with Intermittent Explosive Disorder and that Nora
has Passive Aggressive Personality Disorder which render them psychologically incapacitated under
Article 36 of the Family Code,is solely based on her interviews with Manuel and the parties' eldest
child, Moncho. Consequently, the CA did not err in not according probative value to her
psychological evaluation report and testimony.

If the incapacity can be proven by independent means, no reason exists why such independent
proof cannot be admitted to support a conclusion of psychological incapacity, independently of a
psychologist's examination and report. Other than from the spouses, such evidence can come from
persons intimately related to them, such as relatives, close friends or even family doctors or lawyers
who could testify on the allegedly incapacitated spouses' condition at or about the time of marriage,
or to subsequent occurring events that trace their roots to the incapacity already present at the time
of marriage.

In this case, the only person interviewed by Dr. Villegas aside from Manuel for the spouses'
psychological evaluation was Moncho, who could not be considered as a reliable witness to
establish the psychological incapacity of his parents, since he could not have been there at the time
his parents were married.

The Court also notes that Dr. Villegas did not administer any psychological tests on Manuel despite
having had the opportunity to do so. While the Court has declared that there is no requirement
that the person to be declared psychologically incapacitated should be personally examined by a
physician, much less be subjected to psychological tests, this rule finds application only if the
totality of evidence presented is enough to sustain a finding of psychological incapacity. In this
case, the supposed personality disorder of Manuel could have been established by means of
psychometric and neurological tests which are objective means designed to measure specific
aspects of people's intelligence, thinking, or personality.

With regard to the Confirmatory Decree of the National Tribunal of Appeals, which affirmed the
decision of the Metropolitan Tribunal of First Instance for the Archdiocese of Manila in favor of
nullity of the Catholic marriage of Manuel and Nora, the Court accords the same with great respect
but does not consider the same as controlling and decisive, in line with prevailing jurisprudence.

B. PROPERTY RELATIONS BETWEEN HUSBAND AND WIFE

DOLORES ALEJO VS. SPOUSES CORTEZ et. al.

G.R. No. 206114, 19 June 2017, Tijam, J.:

In the event that one spouse is incapacitated or otherwise unable to participate in the administration
of the conjugal properties, the other spouse may assume sole powers of administration. These powers
do not include disposition or encumbrance without authority of the court or the written consent of

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the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall
be void.

FACTS:

At the heart of the instant controversy is a parcel of land located at Pulilan, Bulacan. The property
belonged to the conjugal property/absolute community of property of Spouses Jorge and Jacinta
Leonardo (Spouses Leonardo) and upon which their residential house was built.

It appears that sometime in March 1996, Jorge's father, Ricardo, approached his sister, herein
Dolores Alejo (Dolores), to negotiate the sale of the subject property. Accordingly, Jacinta executed
a Kasunduan with Dolores for the sale of the property for a purchase price of PhP500,000.
The Kasunduan was signed by Jacinta and Ricardo as witness. Jorge, however, did not sign the
agreement.

It further appears that the down payment of PhP70,000 and the PhP230,000 were paid by
Dolores on the dates agreed upon and thereafter, Dolores was allowed to possess the property and
introduce improvements thereon.

However, on July 3, 1996, Jorge wrote a letter to Dolores denying knowledge and consent to
the Kasunduan. Jorge further informed Dolores that Jacinta was retracting her consent to
the Kasunduan due to Dolores' failure to comply with her obligations. This was followed by another
letter from Jorge to Dolores demanding that the latter pay the balance of PhP200,000 on or before
October 5, 1996, otherwise the purchase price shall be increased to PhP700,000. According to
Dolores, she was being compelled by Jorge to sign the agreement but that she refused to do so. As
a result, Jorge went to her house, destroyed its water pump and disconnected the electricity. Before·
the officials of the Barangay, Dolores tendered the balance of PhP200,000 but Jorge refused to
accept the same. Instead, Jorge filed cases for ejectment and annulment of sale, reconveyance and
recovery of possession against her. These cases were later on dismissed by the trial court on
technical grounds.

However, during the pendency of said cases, the subject property was sold by Jorge and Jacinta to
Spouses Cortez under a Deed of Absolute Sale. A new transfer certificate of title was Issued in the
latter's names. At the time of said sale, Dolores was in possession of the subject property.

Consequently, Dolores filed the case a quo for annulment of deed of sale and damages against the
Spouses Cortez and the Spouses Leonardo. The RTC ruled in favour of Alejo noting that while
the Kasunduan patently lacks the written consent of Jorge, the latter's acts reveal that he later on
acquiesced and accepted the same. In particular, the RTC observed that Jorge did not seasonably
and expressly repudiate the Kasunduan but instead demanded from Dolores compliance therewith
and that he allowed Dolores to take possession of the property. Accordingly, the RTC declared
the Kasunduan as a perfected contract and Dolores as the rightful owner of the property.

Upon appeal, the CA granted the appeal and reversed the trial court. The CA declared
the Kasunduan as void absent Jorge's consent and acceptance. Nevertheless, the CA found Dolores
to be a possessor in good faith who is entitled to reimbursement for the useful improvements
introduced on the land or to the increase in the value thereof, at the option of the Spouses
Leonardo. Dolores' motion for reconsideration was denied, hence the instant petition.

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ISSUES:

Whether or not the Kasunduan for the sale of a conjugal real property between Jacinta and Dolores
as a continuing offer has been converted to a perfected and binding contract (NO)

RULING:

PETITION DENIED.

Sale by one Spouse of Conjugal Real Property is Void Without the Written Consent of the other Spouse

Any alienation or encumbrance of conjugal property made during the effectivity of the Family Code
is governed by Article 124 thereof which provides:

Article 124. The administration and enjoyment of the conjugal partnership property shall belong to
both spouses jointly. In case of disagreement, the husband's decision shall prevail, subject to
recourse to the court by the wife for proper remedy, which must be availed of within five years from
the date of the contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal properties, the other spouse may assume sole powers of
administration. These powers do not include disposition or encumbrance without authority of the
court or the written consent of the other spouse. In the absence of such authority or consent, the
disposition or encumbrance shall be void. However, the transaction shall be construed as a
continuing offer on the part of the consenting spouse and the third person, and may be perfected
as a binding contract upon the acceptance by the other spouse or authorization by the court before
the offer is withdrawn by either or both offerors. (Emphasis supplied.)

The law is therefore unequivocal when it states that the disposition of conjugal property of one
spouse sans the written consent of the other is void. Here, it is an established fact that
the Kasunduan was entered into solely by Jacinta and signed by her alone. By plain terms of the law
therefore, the Kasunduan is void.

Nevertheless, The court agrees with the RTC and the CA when it held that the
void Kasunduan constitutes a continuing offer from Jacinta and Dolores and that Jorge had the
option of either accepting or rejecting the offer before it was withdrawn by either, or both, Jacinta
and Dolores.

It is undisputed that after the execution of the Kasunduan, Jorge sent two letters to Dolores: one,
in forming her that he did not consent to the sale; and the other, demanding that' Dolores pay the
balance of the purchase price on or before October 5, 1996 and failing which, the purchase price
shall be increased to PhP700,000.

Clearly, Jorge's first letter was an outright and express repudiation of the Kasunduan. The second
letter, while ostensibly a demand for compliance with Dolores' obligation under
the Kasunduan, varied its terms on material points, i.e., the date of payment of the balance and the
purchase price. Consequently, such counter-offer cannot be construed as evidencing Jorge's

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consent to or acceptance of the Kasunduan for it is settled that where the other spouse's putative
consent to the sale of the conjugal property appears in a separate document which does not contain
the same terms and conditions as in the first document signed by the other spouse, a valid
transaction could not have arisen.

Neither can Jorge's subsequent letters to Dolores be treated as a ratification of the Kasunduan
for the basic reason that a void contract is not susceptible to ratification. Nor can Jorge's alleged
participation in the negotiation for the sale of the property or his acquiescence to Dolores' transfer
to and possession of the subject property be treated as converting· such continuing offer into a
binding contract as the law distinctly requires nothing less than a written consent to the sale for its
validity. Suffice to say that participation in or awareness of the negotiations is not consent.

As above intimated, a determination that the Kasunduan is void renders the other issues raised by
Dolores academic, i.e., whether the doctrine of res judicata applies and whether the Spouses Cortez
are buyers in bad faith; hence they merit no further discussion .

The CA Correctly Ruled that Dolores is a Possessor in Good Faith

While the Kasunduan was void from the beginning, Dolores is, in all fairness, entitled to recover
from the Spouses Leonardo the amount of PhP300,000 with legal Interest until fully paid.

Moreover, the CA correctly appreciated Dolores' standing as a possessor in good faith. It appears
that Dolores acted in good faith in entering the subject property and building improvements on it.
Ricardo represented that "Jacinta and Jorge wanted to sell the subject property. Dolores had no
reason to believe that Ricardo and Jacinta were lying. Indeed, upon her own brother's prodding,
Dolores willingly parted with her money and paid the down payment on the selling price and later,
a portion of the remaining balance. The signatures of Jacinta and of Ricardo (as witness) as well as
her successful entry to the property appear to have comforted Dolores that everything was in order.
Article 526 of the Civil Code provides that she is deemed a possessor in good faith, who is not aware
that there exists in her title or mode of acquisition any flaw that invalidates it.

Likewise, as correctly held by the CA, Dolores, as possessor in good faith, is under no obligation to
pay for her stay on the property prior to its legal interruption by a final judgment. She is further
entitled under Article 448 to indemnity for the improvements introduced on the property with a
right of retention until reimbursement is made. The Spouses Leonardo have the option under
Article 546 of the Civil Code of indemnifying Dolores for the cost of the improvements or paying
the increase in value which the property may have acquired by reason of such improvements.

CARMELITA T. BORLONGAN v. BANCO DE ORO (formerly EQUITABLE PCI BANK)

G.R. No. 217617, April 5, 2017

There is no presumption that the conjugal partnership is benefited when a spouse enters into a
contract of surety.

FACTS:

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Sometime in 1976, Eliseo and his wife Carmelita, acquired a real property covered by TCT No. 0421
(the subject property). In 2012, they went to the Registry of Deeds to obtain a copy of the TCT. To
their surprise, the title contained an annotation that the property covered thereby was the subject
of an execution sale pending before Makati RTC since his wife allegedly was a signatory in a surety
agreement for and in behalf of Tancho Corporation.

Eliseo executed an affidavit of adverse claim and filed a Complaint for Annulment of Surety
Agreements, Notice of Levy on Attachment, Auction Sale and Other Documents in RTC Pasig.

He alleged in his Complaint that the subject property is a family home that belongs to the conjugal
partnership of gains he established with his wife. He further averred that the alleged surety
agreements upon which the attachment of the property was anchored were signed by his wife
without his consent and did not redound to benefit their family. Thus, he prayed that the surety
agreements and all other documents and processes, including the ensuing attachment, levy and
execution sale, based thereon be nullified.

ISSUE:

Whether or not Eliseo can file an independent action for the annulment of the attachment of their
conjugal property

RULING:

Yes. It is not disputed that the conjugal property was attached on the basis of a surety agreement.
In our 2004 Decision in Spouses Ching v. Court of Appeals, we elucidated that there is no
presumption that the conjugal partnership is benefited when a spouse enters into a contract of
surety, holding thusly:

In this case, the private respondent failed to prove that the conjugal partnership of
the petitioners was benefited by the petitioner-husband's act of executing a continuing
guaranty and suretyship agreement with the private respondent for and in behalf of PBMCI.
The contract of loan was between the private respondent and the PBMCI, solely for the
benefit of the latter. No presumption can be inferred from the fact that when the
petitioner-husband entered into an accommodation agreement or a contract of
surety, the conjugal partnership would thereby be benefited. The private respondent
was burdened to establish that such benefit redounded to the conjugal partnership.

Furthermore, it is not apparent from the records of this case that BDO had established the benefit
to the conjugal partnership flowing from the surety agreement allegedly signed by Carmelita. Thus,
Eliseo's claim over the subject property lodged with the RTC Pasig is proper, with the latter correctly
exercising jurisdiction thereon.

RAFAEL C. UY (CABANGBANG STORE), V. ESTATE OF VIPA FERNANDEZ

G.R. No. 200612, April 05, 2017, REYES, J.:

The sale by of one-half undivided share in the subject property was not necessarily void, for his right
as a co-owner thereof was effectively transferred, making the buyer a co-owner of the subject property.

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FACTS:

Levi and Vipa were married on March 24, 1961. Vipa is the registered owner of a parcel of land
covered by TCT No. T-26576 (subject property). Sometime in 1990, a contract of lease was executed
between Vipa and Uy over the subject property. In 1994, Vipa died and her daughter became the de
facto administrator of the estate.

For failure to pay rent, the daughter instituted a case for unlawful detainer. Uy insists, however,
that he already purchased Levi's one-half share in the subject property in consideration of
P500,000.00 as evidenced by the Deed of Sale in 2005. Hence, the case must be dismissed.

ISSUE:

Whether or not Uy validly bought Levi’s one-half share of the property.

RULING:

Yes. Rafael bought Levi's one-half share in the subject property in consideration of P500,000.00 as
evidenced by the Deed of Saledated December 29, 2005. At that time, the conjugal partnership
properties of Levi and Vipa were not yet liquidated. However, such disposition, notwithstanding
the absence of liquidation of the conjugal partnership properties, is not necessarily void.

Thus, upon the termination of the conjugal partnership of gains due to the death of either spouse,
the surviving spouse has an actual and vested one-half undivided share of the properties, which
does not consist of determinate and segregated properties until liquidation and partition of the
conjugal partnership. With respect, however, to the deceased spouse's share in the conjugal
partnership properties, an implied ordinary co-ownership ensues among the surviving spouse and
the other heirs of the deceased.

Although Levi became a co-owner of the conjugal partnership properties with the heirs, he could
not yet assert or claim title to any specific portion thereof without an actual partition of the property
being first done either by agreement or by judicial decree. Before the partition of a land or thing
held in common, no individual or co-owner can claim title to any definite portion thereof. All that
the co-owner has is an ideal or abstract quota or proportionate share in the entire land or thing.

Nevertheless, a co-owner could sell his undivided share; hence, Levi had the right to freely sell and
dispose of his undivided interest. Thus, the sale by Levi of his one-half undivided share in the
subject property was not necessarily void, for his right as a co-owner thereof was effectively
transferred, making the buyer, Rafael, a co-owner of the subject property. It must be stressed that
the binding force of a contract must be recognized as far as it is legally possible to do so.

BENJAMIN A. KO, ET AL. V. VIRGINIA DY ARAMBURO, ET AL.

G.R. No. 190995, August 9, 2017, Tijam, J.

The sale of conjugal property without his wife’s conformity under the Old Civil Code is merely
voidable not void.On the other hand, the Family Code does not provide a period within which the wife
who gave no consent may assail her husband’s sale of real property. It simply provides that without
the other spouse’s written consent or a court order allowing the sale, the same would be void.

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FACTS:

Corazon, Simeon, and Augusto are siblings. Petitioners are the heirs of Corazon who substituted
her. Respondent Virginia is the wife of Simeon while her co-respondents are the heirs of Augusto.
On November 26, 1993, Virginia, together with her co-respondents herein, filed a Complaint for
Recovery of Ownership with Declaration of Nullity and/or Alternatively Reconveyance. Subject of
this case are seven parcels of land located in Tabaco City, Albay with an area of 35,760 sq m, more
or less (subject properties), now all under the name of Corazon.

The complaint alleged that Virginia and her husband Simeon together with Corazon and her
husband Felix acquired the subject properties from Spouses Eusebio and Epifania Casa
ul through a Deed of Cession dated April 10, 1970. Corazon averred that the said properties were
ceded only to her and Simeon, in that, her husband Felix’s name and Virginia’s name appearing in
the Deed were merely descriptive of her and Simeon’s civil status. Corazon alleged that she and
Simeon thought of sharing a third of the subject properties with the heirs of their brother Augusto
who predeceased them, hence they executed a Deed of Cession on April 13, 1970 but later on decided
to recall and not implement the same. In fine, thus, Corazon insisted that only she and Simeon
share one-half portion each of the subject properties. Moreover, she alleged that Simeon already
sold to her his entire ½ share in the property. Hence, she is now the sole owner of the property, and
was able to transfer the titles in her name. She maintained that the transfer was valid since what
was conveyed was Simeon’s exclusive property. Additionally, she posited that Respondents’ action
was barred by prescription.

The RTC ruled that the Deed of Sale was falsified in that the signature of Virginia is a forgery. As
such, it is not a valid instrument to transfer the 1/3 share of the subject properties. The CA affirmed.

ISSUE:

Whether the parties are co-owners of the subject properties in that the subject titles may be
nullified and transferred to the parties as to their respective portions?

RULING:

(It must be noted that the law which governs the instant case is the Old Civil Code, not the Family
Code, as the events of this case occurred before the effectivity of the Family Code.)

The petition is partly meritorious. As to the issue of ownership, the rulings of the lower courts are
affirmed. Augusto’s heirs own 1/3 pro-indiviso share in the subject properties. The courts a
quo found that the said deed, ceding a third of the subject properties to Augusto’s heirs, was in fact
implemented as evidenced by Corazon’s testimony that she was merely administering the said
properties for Augusto’s heirs as her nephews and nieces were still minors at that time. In the same
vein, Simeon’s heirs, which include Virginia, also own 1/3 pro-indiviso share in the subject
properties. The SC upheld the lower courts’ rulings that the 1/3 portion is part of Simeon and
Virginia’s conjugal properties. It is undisputed that the subject properties were originally registered
in the name of Spouses Eusebio and Epifania. It is also undisputed that in a Deed of Cession dated
April 10, 1970, these parcels of land were ceded to Spouses Felix and Corazon, and Spouses Simeon
and Virginia. There is likewise no question that the subject properties were ceded to the said

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spouses during Spouses Simeon and Virginia’s marriage. The presumption in favor of conjugality as
embedded in Article 160 of the Old Civil Code was not rebutted in this case.

Simeon could not have validly sold the 1/3 share of Augusto’s heirs, as well as the 1/3 portion of his
and Virginia’s conjugal share without the latter’s consent, to Corazon. As for the 1/3 portion of the
subject properties pertaining to Augusto’s heirs, the Deed of Absolute Sale is void as the said portion
is owned by Augusto’s heirs as above-discussed and thus, Simeon had no right to sell the same. It
is basic that the object of a valid sales contract must be owned by the seller. As to the 1/3 portion
commonly-owned by Spouses Simeon and Virginia, Simeon’s alienation of the same through sale
without Virginia’s conformity is merely voidable. Article 166of the Old Civil Code explicitly requires
the consent of the wife before the husband may alienate or encumber any real property of the
conjugal partnership except when there is a showing that the wife is incapacitated, under civil
interdiction, or in like situations. In this case, Virginia vehemently denies having conformed to the
December 14, 1974 sale in favor of Corazon.

The SC differed with the lower courts on the aspect of prescription. As for Augusto’s heirs, the
action to nullify the sale of their share, being void is imprescriptible; as for Virginia, the action to
nullify the sale of her share, being merely voidable, is susceptible to prescription. Being a void
contract, thus, the CA correctly ruled that the action to impugn the sale of the same is
imprescriptible pursuant to NCC 1410.

As for the share pertaining to Simeon and Virginia, the governing law in this case is the Old Civil
Code. Under the said law, while the husband is prohibited from selling the commonly-owned real
property without his wife’s consent, still, such sale is not void but merely voidable.Article 173 thereof
gave Virginia the right to have the sale annulled during the marriage within ten years from the date
of the sale. Failing in that, she or her heirs may demand, after dissolution of the marriage, only the
value of the property that Simeon erroneously sold.

In contrast, the Family Code does not provide a period within which the wife who gave no consent
may assail her husband’s sale of real property. It simply provides that without the other spouse’s
written consent or a court order allowing the sale, the same would be void.Thus, the provisions of
the NCC governing contracts is applied as regards the issue on prescription.

Reiterating, Simeon’s sale of their conjugal property without his wife’s conformity under the Old
Civil Code is merely voidable not void. The imprescriptibility of an action assailing a void contract
under Article 1410 of the NCC, thus, does not apply in such case. The 10-year prescriptive period
under Article 173 of the Old Civil Code, therefore, should be applied in this case.

C. PATERNITY AND FILIATION

IN THE MATTER OF THE PETITION FOR CANCELLATION OF CERTIFICATE OF LIVE

BIRTH FO YUHARES JAN BARCELOTE TINITIGAN AND AVEE KYNNA NOELLE
BARCELOTE TINITIGAN v. REPUBLIC OF THE PHILIPPINES, ET AL.
G.R. No. 222095, August 7, 2017, Carpio, J.

It is mandatory that the mother of an illegitimate child signs the birth certificate of her child in all
cases, irrespective of whether the father recognizes the child as his or not. The only legally known
parent of an illegitimate child, by the fact of illegitimacy, is the mother of the child who conclusively

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carries the blood of the mother. Thus, this provision ensures that individuals are not falsely named as
parents.

FACTS:

On 24 June 2008, Barcelote bore a child out of wedlock with a married man named Tinitigan in her
relative's residence. She was not able to register the birth of their child, whom she named Yohan
Grace Barcelote, because she did not give birth in a hospital. To hide her relationship with Tinitigan,
she remained in Davao del Sur while Tinitigan lived with his legitimate family in Davao City and
would only visit her. On 24 August 2011, she bore another child with Tinitigan, whom she named as
Joshua Miguel Barcelote. Again, she did not register his birth to avoid humiliation, ridicule, and
possible criminal charges. Thereafter, she lost contact with Tinitigan and she returned to Davao
City.

When her first child needed a certificate of live birth for school admission, Barcelote finally decided
to register the births of both children. She returned to Davao del Sur to register their births. The
Local Civil Registrar approved the late registration of the births of Yohan Grace Barcelote and
Joshua Miguel Barcelote, with Registry Nos. 2012-1344 and 2012-1335 after submitting proof that the
NSO has no record of both births on file.

However, upon submission of the copies of the late registration of the births to the NSO, Barcelote
was informed that there were two certificates of live birth with the same name of the mother and
the years of birth of the children in their office. The subject birth certificates registered by the Local
Civil Registrar of Davao City state the following:

1. Birth Certificate with Registry No. 2008-
21709:
a. Name: Avee Kyna Noelle Barcelote
Tinitigan;
b. Date of Birth: June 4, 2008;
c. Place of Birth: EUP Family Care Clinic,
Holy Cross Agdao Davao City;
d. Informant: Ricky O. Tinitigan.
2. Birth Certificate with Registry No. 2011-
28329:
a. Name: Yuhares Jan Barcelote Tinitigan;
b. Date of Birth: August 14, 2011
c. Place of Birth: EUP Family Care Clinic, Holy
Cross Agdao Davao City;
d. Informant: Ricky O. Tinitigan.

Thus, Barcelote filed a petition with the RTC for the cancellation of the subject birth certificates
registered by Tinitigan without her knowledge and participation, and for containing erroneous
entries.

The RTC ruled in favour of Barcelote and ordered the cancellation of the two birth certificates as
the subject birth certificates are legally infirm, because they were registered unilaterally by
Tinitigan without the knowledge and signature of Barcelote in violation of Section 5, Act No. 3753.
The RTC also held that the subject birth certificates contain void and illegal entries, because the
children use the surname of Tinitigan, contrary to the mandate of Article 176 of the Family Code
stating that illegitimate children shall use the surname of their mother. However, upon appeal to
the CA, it reversed and set aside the decision of the RTC.

ISSUE:

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Whether the decision of the CA in reversing the decision of the RTC was correct?

RULING:

No. Prior to its amendment, Article 176 of the Family Code provides that an “Illegitimate children
shall use the surname and shall be under the parental authority of their mother, and shall
be entitled to support”. Subsequently, upon the effectivity of RA 9255,the provision that
“illegitimate children shall use the surname and shall be under the parental authority of their
mother” was retained, with an added provision that they “may use the surname of their father if
their filiation has been expressly recognized by their father”.

The use of the word “may” readily shows that an acknowledged illegitimate child is under no
compulsion to use the surname of his illegitimate father. The word “may” is permissive and operates
to confer discretion upon the illegitimate children.

The law is clear that illegitimate children shall use the surname and shall be under the parental
authority of their mother. The use of the word "shall" underscores its mandatory character.
The discretion on the part of the illegitimate child to use the surname of the father is conditional
upon proof of compliance with RA 9255.

Since the undisputed facts show that the children were born outside a valid marriage, then they are
the illegitimate children of Tinitigan and Barcelote. The children shall use the surname of their
mother, Barcelote. The entry in the subject birth certificates as to the surname of the children is
therefore incorrect; their surname should have been "Barcelote" and not "Tinitigan."

Further, the argument that the subject birth certificates are the express recognition of the children's
filiation by Tinitigan is incorrect because they were not duly registered in accordance with the law.
Act No. 3753, otherwise known as the Civil Registry Law, states that “In case of an illegitimate
child, the birth certificate shall be signed and sworn to jointly by the parents of the infant
or only the mother if the father refuses.”

Thus, it is mandatory that the mother of an illegitimate child signs the birth certificate of her child
in all cases, irrespective of whether the father recognizes the child as his or not. The only legally
known parent of an illegitimate child, by the fact of illegitimacy, is the mother of the child who
conclusively carries the blood of the mother. Thus, this provision ensures that individuals are not
falsely named as parents.

Since it appears on the face of the subject birth certificates that the mother did not sign the
documents, the local civil registrar had no authority to register the subject birth certificates. Acts
executed against the provisions of mandatory or prohibitory laws shall be void.

HEIRS OF GILBERTO ROLDAN v. HEIRS OF SILVELA ROLDAN

G.R. No. 202578, September 27 2017, Sereno, CJ.

A baptismal certificate has evidentiary value to prove kinship if considered alongside other evidence
of filiation.

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Prescription cannot be appreciated against the co-owners of a property, absent any conclusive act of
repudiation made clearly known to the other co-owners.

FACTS:

Natalia Magtulisowned an agricultural land in Kalibo, Aklan. Her heirs included Gilberto Roldan
and Silvela Roldan, her two children by her first marriage; and, allegedly, Leopolda Magtulis her
child with another man named Juan Aguirre.After her death in 1961, Natalia left the lot to her
children. However, Gilberta and his heirs took possession of the property to the exclusion of
respondents.

On 19 May 2003, respondents filed before the RTC a Complaint for Partition and Damages against
petitioners.The latter refused to yield the property on these grounds: (1) respondent heirs of Silvela
had already sold her share to Gilberto; and (2) respondent heirs of Leopolda had no cause of action,
given that he was not a child of Natalia.

During trial, petitioners failed to show any document evidencing the sale of Silvela’s share to
Gilberto. Thus, in its Decision dated 14 December 2007, the RTC ruled that the heirs of Silvela
remained co-owners of the property they had inherited from Natalia. As regards Leopoldo Magtulis,
the trial court concluded that he was a son of Natalia based on his Certificate of Baptismand
Marriage Contract. The RTC declared each set of their respective heirs entitled to one-third share
of the property. The CA affirmed the ruling of the RTC that Gilberto, Silvela, and Leopoldo
remained co-owners of the lot. The appellate court refused to conclude that Silvela had sold her
shares to Gilberto without any document evidencing a sales transaction. It also held that Leopoldo
was the son of Natalia, since his Certificate of Baptism and Marriage Contract indicated her as his
mother.

ISSUES:

1. Whether the CA erred in affirming the RTC’s finding that Silvela did not sell her share of the
property to Gilberto?
2. Whether the courts a quo correctly appreciated Leopoldo to be the son of Natalia based on his
baptismal and marriage certificates
3. Whether prescription and laches bar respondents from claiming co-ownership over the lot?

RULING:

1. No. The assessment of the existence of the sale requires the calibration of the evidence on record
and the probative weight thereof. The RTC, as affirmed by the CA, already performed its function
and found that the heirs of Gilberto had not presented any document or witness to prove the fact
of sale. The factual determination of courts, when adopted and confirmed by the CA, is final and
conclusive on this Court except if unsupported by the evidence on record.In this case, the exception
does not apply.

2. No. The Supreme Court has reiterated that a baptismal certificate is insufficient to prove
filiation.But in Makati Shangri-La Hotel and Resort, Inc. v. Harper,this Court clarified that a
baptismal certificate has evidentiary value to prove kinship “if considered alongside other evidence
of filiation.

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In this case, the courts below did not appreciate any other material proof related to the baptismal
certificate of Leopoldo that would establish his filiation with Natalia, whether as a legitimate or as
an illegitimate son.

The only other document considered by the RTC and the CA was the Marriage Contract of
Leopoldo. But, like his baptismal certificate, his Marriage Contract also lacks probative value as the
latter was prepared without the participation of Natalia. In Reyes v. Court of Appeals,[29] we held
that even if the marriage contract therein stated that the alleged father of the bride was the bride’s
father, that document could not be taken as evidence of filiation, because it was not signed by the
alleged father of the bride.

3. No. According to petitioners, prescription and laches have clearly set in given their continued
occupation of the property in the last 42 years. Prescription cannot be appreciated against the co-
owners of a property, absent any conclusive act of repudiation made clearly known to the other
co-owners.

Here, petitioners merely allege that the purported co-ownership “was already repudiated by one of
the parties” without supporting evidence. Aside from the mere passage of time, there was failure
on the part of petitioners to substantiate their allegation of laches by proving that respondents slept
on their rights. Nevertheless, had they done so, two grounds deter them from successfully claiming
the existence of prescription and laches:

First, as demanded by the repudiation requisite for prescription to be appreciated, there is a need
to determine the veracity of factual matters such as the date when the period to bring the action
commenced to run. Second, petitioners have alleged prescription and laches only before this Court.
Raising a new ground for the first time on appeal contravenes due process, as that act deprives the
adverse party of the opportunity to contest the assertion of the claimant.

II. PROPERTY

A. OWNERSHIP

ERLINDA DINGLASAN DELOS SANTOS and her daughters, namely, VIRGINIA, AUREA,
and BINGBING, all surnamed DELOS SANTOS vs ALBERTO ABEJON and the estate of
TERESITA DINGLASAN ABEJON
G.R. No. 215820, March 20, 2017, Perlas-Bernabe, J.

1) Where an obligation is chargeable to a conjugal partnership of gains, and one of the spouses
dies, the portion attributable to the deceased isn’t extinguished by his death, it is merely
passed on to his estate; and thus, his heirs, could not be held directly answerable for the same.

2) The declaration of nullity of a contract which is void ab initio operates to restore things to the
state and condition in which they were found before the execution thereof.

3) Where both the landowner and the builder, planter, or sower acted in bad faith, they shall be
treated as if both of them were in good faith

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FACTS:

Petitioner Erlinda and her late husband Pedro borrowed P100,000 from the former’s sister
(Teresita). As security, they mortgaged a piece of land which was annotated on its title. After Pedro
died, Erlinda ended up unable to pay the loan so she agreed to sell the mortgaged property for the
amount of the loan plus an additional P50,000. She executed a Deed of Sale and a Release of
Mortgage. Due to the sale, the title to the property was cancelled and a new one issued to Teresita.
Thereafter, Teresita constructed a 3-storey building thereon worth P2,000,000.

Subsequently, petitioner refused to acknowledge the sale pointing out that the Deed of Sale was
spurious, alleging that Teresita fabricated the same and caused its registration. An action for sum
of money was filed against Erlinda and her daughters (as Pedro’s heirs) where the following facts
were stipulated by both parties during pre-trial: (1) the Deed of Sale and Release of Mortgage were
forged and thus, should be cancelled; (2) from the time when the spurious deed of sale was executed
until the present, petitioners have been the actual occupants of the subject land as well as the 3-
storey building; (3) the P100,000.00 loan still subsists.

ISSUE:

In view of the admissions/stipulations during pre-trial, what are the liabilities of the parties?

RULING:

Theparties in this case are bound to honor the admissions and/or stipulations they made during
the pre-trial.

1.) As to the P100,000 loan: Petitioners admitted the existence of the P100,000 loan obligation;
such loan was contracted by Erlinda, and her deceased husband, Pedro. As they were
married before the effectivity of the Family Code and absent any showing of any pre-nuptial
agreement, it is safe to conclude that their property relations were governed by the system
of conjugal partnership of gains. The P100,000.00 loan obligation, including interest, if any,
is chargeable to Erlinda and Pedro's conjugal partnership and should the conjugal
partnership be insufficient to cover the same, then Erlinda and Pedro (more particularly,
his estate as he is already deceased) shall be solidarily liable. Their children who were
impleaded in this case, are not directly liable contrary to the RTC and CA decision.

2.) As to effect of spurious Deed of Sale: Since the Deed of Sale involving the subject land stands
to be nullified in view of the parties' stipulation to this effect, it is incumbent upon the
parties to return what they have received from said sale. Erlinda and the rest of petitioners
(as Pedro's heirs) are entitled to the return of the subject land, respondents, as Teresita's
successors-in-interest, are entitled to the refund of the additional P50,000.00 consideration
she paid for such sale.

3.) As to the 3-story building: The rules on accession with respect to immovable property apply,
specifically with regard to builders, planters, and sowers, as this case involves a situation
where the landowner (petitioners) is different from the owner of the improvement built
therein (respondents). There is a need to determine whether petitioners and respondents
are in good faith or bad faith.

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Respondents are in bad faith. The Deed of Sale which was signed by both Erlinda and
Perdro, was executed in 1992. Teresita was apprised of Pedro's death as early as 1990.
Teresita knew that a deceased person signed the document long after his death, which made
the document void. Such awareness of the nullity of the deed and still proceeding with the
construction of the 3-storey building makes her a builder in bad faith.

Petitioners are in bad faith. They knew of the defect in the execution of the Deed of Sale
from the start, but nonetheless, still acquiesced to the construction of the three (3)-storey
building thereon.

Where both the landowner and the builder, planter, or sower acted in bad faith, they shall
be treated as if both of them were in good faith (Art 453, NCC). Applying the rule in Art
448 (NCC) in this case, the land owner (petitioner) has 2 options:
1.) Petitioner may appropriate the three (3)-storey building after payment of the
indemnity provided for in Articles 546 and 548 of the Civil Code. Respondents have
a right of retention over the three 3-storey building as well as the subject land until
petitioners complete the reimbursement.
2.) Petitioner may sell the subject land to respondents at a price equivalent to the
current market value thereof. However, if the value of the subject land is
considerably more than the value of the 3-storey building, respondents cannot be
compelled to purchase the subject land. Rather, they can only be obliged to pay
petitioners reasonable rent.

B. QUIETING OF TITLE TO OR INTEREST IN AND REMOVAL OR PREVENTION OF

CLOUD OVER TITLE OR INTEREST IN REAL PROPERTY

JENESTOR B. CALDITO and MARIA FILOMENA T. CALDITO vs ISAGANI V. OBANDO and

GEREON V. OBANDO
G.R. No. 181596, January 30, 2017, Reyes, J.

In an action to quiet title, petitioners must present proof of their legal or equitable title to or interest
in the real property. They must present proof of specific acts of ownership to substantiate his claim
and cannot just offer general statements which are mere conclusions of law than factual evidence of
possession.

FACTS:

The property in issue in this case was declared for taxation purposes in the name of Felipe Obado.
After he died, Paterno Obado, whom Felipe treated like his own son, subsequently occupied the
property and continued to pay the realty taxes. Upon Paterno’s death, his sons inherited and
continued paying realty taxes thereon.

In 1995, Antonio Ballesteros (Antonio) executed an Affidavit of Ownership narrating his claim over
the subject parcel of land. Subsequently, Antonio and Elena Ballesteros (Spouses Ballesteros) sold
the property to the petitioners through a Deed of Absolute Sale. The petitioners declared the subject
lot for taxation purposes and paid the realty taxes thereon. Petitioners attempted to build a house
on the subject parcel of land but the respondents prevented them from completing the same. Due

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to this, petitioners instituted a complaint for quieting of title against the respondents before the
RTC.

ISSUE:

W/N petitioners were able to prove ownership over the subject parcel of land and are entitled to a
quieting of title.

RULING:

NO. Petitioners failed to prove the title of their immediate predecessors-in-interest. Petitioners'
cause of action relates to an action to quiet title which has two indispensable requisites, namely:
(1) the plaintiff or complainant has a legal or an equitable title to or interest in the real
property subject of the action; find
(2) the deed, claim, encumbrance or proceeding claimed to be casting cloud on his title
must be shown to be in fact invalid or inoperative despite its prima facie appearance of
validity or legal efficacy.

Petitioners' cause of action must fail because of the absence of the first requisite since the
petitioners were not able to prove equitable title or ownership over the subject parcel of land. They
failed to prove the title of Spouses Ballesteros. Antonio's Affidavit of Ownership simply made
general and self-serving statements which were favorable to him, and which were not supported
with documentary evidence, with no specifics as to when their predecessors-in-interest acquired
the subject parcel of land. Such is hardly the well-nigh incontrovertible evidence required in cases
of this nature. Petitioners must present proof of specific acts of ownership to substantiate his claim
and cannot just offer general statements which are mere conclusions of law than factual evidence
of possession. Antonio was not even called to the witness stand to testify on the contents of his
Affidavit of Ownership, thus, making the affidavit hearsay evidence.

While petitioners submitted tax declarations to prove payment of taxes, it was not shown that
Spouses Ballesteros declared the property for taxation purposes or paid taxes due thereon. True, a
tax declaration by itself is not sufficient to prove ownership. However, it may serve as sufficient
basis for inferring possession. What the petitioners presented as their pieces of evidence are receipts
and tax declarations which they, as the new owners of the subject parcel of land, have paid. They
could not rely on these tax declarations and receipts because those are of recent vintage and do not
reflect the fact that their predecessors-in-interest paid realty taxes.

Petitioners cannot benefit from the deed of sale of the subject parcel of land, executed by the
Spouses Ballesteros, to support their claim of possession in good faith and with just title. The
petitioners failed to ascertain whether the Spouses Ballesteros were the lawful owner of the subject
parcel of land being sold. Since the Spouses Ballesteros had no right to sell the subject parcel of
land, the petitioners cannot be deemed to have been the lawful owners of the same.

HEIRS OF VICTOR AMISTOSO, NAMELY: VENEZUELA A. DELA CRUZ, FLORA A. TULIO,

WILFREDO D. AMISTOSO, RUFINO D. AMISTOSO, VICENTE D. AMISTOSO, MAXIMO D.
AMISTOSO, AND ZENAIDA D. AMISTOSO v. ELMER T. VALLECER, REPRESENTED BY
EDGAR VALLECER
G.R. No. 227124, December 6, 2017, Perlas-Bernabe, J.

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Accion publiciana and an action for quieting of title are different causes of action. An action premised
on one would not operate as res judicata on action premised on the other.

FACTS:

In 1996, respondent through his brother filed a complaint for recovery of possession and damages
against petitioners alleging that he purchased the property in question but when was about to take
possession, petitioners refused him from entering and enjoying possession. Petitioners claimed that
they have been in actual, peaceful, and continuous possession of the land as evidenced by
Certificate of Land Transfer (CLT) issued in 1978.

The RTC declared respondent as the absolute owner of the subject property. This was reversed by
the CA because 1) respondent’s brother did not show proof of his capacity to sue on respondent’s
behalf and 2) the CLT issued by the DAR acknowledges petitioners as "deemed owner" of the land
after full payment of its value. Having proven full compliance for the grant of title, petitioners have
a right to the land which must be respected. This decision has attained finality.

In 2012, respondent filed a Complaint for quieting of title, ownership, possession, and damages
citing petitioners' unlawful possession and occupation. Petitioners invoked res judicata due to the
ruling in the 1996 case.

ISSUE:

W/N the second case is barred by res judicata.

RULING:

NO. Res judicata does not applyin this case.Res judicata literally means a matter adjudged. It refers
to the rule that an existing final judgment or decree rendered on the merits, and without fraud or
collusion, by a court of competent jurisdiction, upon any matter within its jurisdiction, is conclusive
of the rights of the parties or their privies, in all other actions or suits in the same or any other
judicial tribunal of concurrent jurisdiction on the points and matters in issue in the first suit.

For res judicata to absolutely bar a subsequent action, the following requisites must concur:
(a) the former judgment or order must be final;
(b) the judgment or order must be on the merits;
(c) it must have been rendered by a court having jurisdiction over the subject matter and
parties; and
(d) there must be between the first and second actions, identity of parties, of subject matter,
and of causes of action.

In the first action (1996) respondent never asked that he be declared the owner of the land in
question, but only prayed that he be allowed to recover possession from petitioners. As such, the
action is properly classified as an accion publiciana. The objective of the plaintiffs in accion
publiciana is to recover possession only, not ownership.

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On the other hand, in the second action (2012), respondent asserted his ownership over the
property by virtue of his Torrens title. He prayed for the court to declare him as the absolute owner
of the property. He is now alleging that the decision in the 1996 case as well as petitioners' unlawful
possession and claim of ownership constitute a cloud on his title. The complaint filed in 2012 is one
for quieting of title. In such action, the competent court is tasked to determine the respective rights
of the parties so that whoever has the right will see every cloud of doubt over the property
dissipated, and he can thereafter fearlessly introduce any desired improvements, as well as use, and
even abuse the property

It is clear that the causes of action in the 1996 and 2012 actions are different from each other. And
thus, the ruling in the former would not operate as res judicata on the latter.

C. POSSESSION

MUNICIPAL RURAL BANK OF LIBMANAN CAMARINES SUR v. VIRGINIA ORDOÑEZ

G.R. No. 204663, September 27 2017, Peralta, J.

Possession can be acquired by juridical acts. These are acts to which the law gives the force of acts of
possession. In one case, this Court has considered a claimant’s act of assigning a caretaker over the
disputed land, who cultivated the same and built a hut thereon, as evidence of the claimant’s
possession of the said land.

The issue of good faith or bad faith of a buyer is relevant only where the subject of the sale is a
registered land but not where the property is an unregistered land.

FACTS:

Respondent filed with the RTC of Libmanan, Camarines Sur a Complaint for Quieting of Title
against herein petitioner bank. Subsequently, the Complaint was amendedwhere respondent
alleged that: she is the owner of a 2,174 square meter parcel of land in Fundado, Libmanan,
Camarines Sur; she acquired the property through inheritance; she and her predecessors-in-interest
had been in open, peaceful, adverse, uninterrupted possession of the subject land in the concbpt of
an owner since time immemorial; and petitioner’s claim of ownership is unfounded, unmeritorious
invalid and based upon an instrument which is null and void or, otherwise, unenforceable.
Respondent prayed that she be declared the absolute owner and, thus, entitled to the lawful
possession of the subject property. She also asked the trial court to order petitioner to pay attorney’s
fees and monthly rentals.

In its Answer with. Counterclaim, petitioner denied the material allegations of respondent’s
Amended Complaint contending that it is, in fact, the true and absolute owner of the subject land;
and the property was previously owned by one Roberto Hermita (Roberto) who mortgaged the said
land to petitioner but subsequently failed to satisfy his obligation causing petitioner to foreclose
the mortgage and subsequently acquire the property and transfer title over it in its name. In its
Counterclaim, petitioner prayed for the payment of moral damages and attorney’s fees.

The RTC rendered its Decisiondismissing respondent’s Amended Complaint as well as petitioner’s
Counterclaim. The court ruled that, before entering into the contract of mortgage with Roberto
Hermita, petitioner, through its manager, did its best to ascertain Roberto’s claim of ownership and

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possession by conducting the requisite investigation. It concluded that the weight of evidence
preponderates in favor of herein petitioner. On the other hand, the CA rules in respondent’s favor.
The appellate court held that: (1) respondent was able to prove that her predecessors-in-interest
had possession of the subject land prior to that of petitioner’s predecessor-in-interest; (2) they
declared the property for tax purposes as early as 1949, as compared to petitioner’s predecessor-in-
interest who paid taxes thereon beginning only in 1970; and (3) contrary to the findings of the RTC,
the evidence preponderates in favor of herein respondent. Thus, the CA declared respondent as
owner of the subject lot and nullified the real estate mortgage executed between petitioner and
Roberto.

ISSUES:

1. Whether the respondent had prior possession over the property through her caretaker Roman
Zamudio?
2. Whether acquisitive prescription can be made to apply to the possession of Roberto Hermita?
3. Whether the petitioner bank was utterly remiss in its duty to establish who the true owners and
possessors of the subject property were?

RULING:

1. Yes. Zamudio’s occupation of the subject property as caretaker may be considered as proof of
respondent’s and her predecessors-in-interest’s prior possession of the said land. For one to be
considered in possession, one need not have actual or physical occupation of every square inch of
the property at all times.Possession can be acquired not only by material occupation, but also by
the fact that a thing is subject to the action of one’s will or by the proper acts and legal formalities
established for acquiring such right. Possession can be acquired by juridical acts. These are acts to
which the law gives the force of acts of possession. In one case, this Court has considered a
claimant’s act of assigning a caretaker over the disputed land, who cultivated the same and built a
hut thereon, as evidence of the claimant’s possession of the said land.

In the present case, it has been established that respondent and her predecessors-in-interest
authorized Zamudio as caretaker of the subject land. Thus, Zamudio’s occupation of the disputed
land, as respondent’s caretaker, as early as 1975, is considered as evidence of the latter’s occupation
of the said property.

2. No. The SC agreed with the decision of the CA in saying that: “Article 1134 of the Civil Code xxx
states that “xxx (o)rdinary acquisitive prescription of things requires possession in good
faith and with just title for the time fixed by law.” In this case, however, it cannot be said that the
possession of Roberto Hermita was in good faith. This is clear from the testimony of Roberto
Hermita that, prior to mortgaging the subject property to the defendant-appellee bank, the mother
of the plaintiff-appellant approached him and claimed ownership over the subject land as well.
Neither can the Court agree with the trial court that extraordinary acquisitive prescription under
Article 1137 of the Civil Code can be appreciated in favor of Sofronio Hermita, predecessor-in-
interest of Roberto Hermita. As previously discussed, no evidence, testimonial or documentary, was
ever presented by the defendant-appellee that Sofronio Hermita was ever in possession of the
subject land” Indeed, aside from tax declarations, petitioner failed to present evidence to prove that,
prior to selling the subject lot to Roberto, his father exercised acts of ownership over the said
property.

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3. Yes. The Court agrees with the CA that a simple check with the proper authorities would have
shown that the same property has been previously declared as owned by respondent’s predecessors-
in-interest and that realty taxes had been paid thereon as early as 1949. Moreover, if petitioner’s
manager had indeed made an ocular inspection of the said property to determine its actual
condition and verify the identity of the true owner and possessor thereof, he should have easily
discovered that respondent’s caretaker was also in possession of the said property and is actually
occupying a portion of the same.

As to whether or not petitioner was in good faith, the issue of good faith or bad faith of a buyer is
relevant only where the subject of the sale is a registered land but not where the property is an
unregistered land.One who purchases an unregistered land does so at his peril. Here, there is no
dispute that at the time that petitioner entered into a contract of mortgage with Roberto and in
subsequently buying the subject lot during the auction sale, the same was still an unregistered land.
Thus, petitioner may not claim good faith and due diligence in dealing with Roberto.

RENE MICHAEL FRENCH v. COURT OF APPEALS

GR No. 220057, Jul 12, 2017, CARPIO, J.

Forcible entry and unlawful detainer are distinct from each other.

FACTS:

Magdalena O'dell, an American, through her attorney-in-fact Thomas O'dell, filed a complaint for
ejectment against petitioner Rene. Magdalena alleged that she is one of the owners of a parcel of
land; that sometime in the 1980s, Henry French (Rene's father), sought her permission to cultivate
a portion of the land without paying any rental. According to Magdalena, she and Henry had an
agreement that he would pay some of her loans with the bank and would vacate the land once she
needs it. However, Magdalena alleged that upon Henry's death, Rene took over possession of the
land without her permission. As such, Rene was occupying the land by mere tolerance of the owner.
Magdalena sent a letter, dated 10 January 2008, demanding Rene to vacate the land but he failed to
comply, prompting Magdalena to file a case against him.

Rene countered that Magdalena and Thomas obtained a loan from PNB and used the land as
collateral. Magdalena and Thomas defaulted in their payment and asked Henry to redeem the land.
Upon payment of the obligation, PNB released the land from mortgage and turned over the original
owner's copy of TCT to Henry. Rene alleged that Magdalena and Thomas assigned, abandoned, and
waived their rights and interests over the land in favor of Henry and his successors-in-interest who
had been in open, continuous, notorious, and public possession of the land in the concept of an
owner for 23 years. The latter had also been paying the land's real property taxes from 1976 until
2007.

MTCC ruled that Rene's occupation of the land was by mere tolerance of the owner. RTC sustained
the MTCC's finding. However, the RTC sustained Rene that the MTCC had no jurisdiction over the
action. The Court of Appeals ruled that the allegations in the complaint comprise a cause of action
for unlawful detainer and not for forcible entry as claimed by Rene. It also noted that Rene did not
even challenge the jurisdiction of the MTCC to try the case.

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ISSUE:

Whether or not the Court of Appeals committed a reversible error in ruling that the Municipal Trial
Court in Cities (MTCC) had jurisdiction over the case filed by Magdalena O'dell against Rene
Michael French

RULING:

NO, the CA was correct in its findings.

The nature of an action and the jurisdiction of the court over a case are determined by the
allegations in the complaint. Forcible entry and unlawful detainer are distinct from each other. The
Court differentiated the two actions, as follows:

In forcible entry, one is deprived of physical possession of real property by means of force,
intimidation, strategy, threats, or stealth whereas in unlawful detainer, one illegally withholds
possession after the expiration or termination of his right to hold possession under any contract,
express or implied. The two are distinguished from each other in that in forcible entry, the
possession of the defendant is illegal from the beginning, and that the issue is which party has
prior de facto possession while in unlawful detainer, possession of the defendant is originally legal
but became illegal due to the expiration or termination of the right to possess.

A complaint for an action for unlawful detainer is sufficient if the following allegations are present:
1. initially, possession of property by the defendant was by contract with or by tolerance of
the plaintiff;
2. eventually, such possession became illegal upon notice by plaintiff to defendant of the
termination of the latter's right of possession;
3. thereafter, the defendant remained in possession of the property and deprived the
plaintiff of the enjoyment thereof; and
4. within one year from the last demand on defendant to vacate the property, the plaintiff
instituted the complaint for ejectment.

As pointed out by the Court of Appeals, all the allegations in the complaint constitute a cause of
action for unlawful detainer. The complaint clearly indicated that Magdalena allowed Henry to
occupy the land subject to certain conditions. Among the conditions is that Henry will vacate the
land when the time comes for Magdalena to use it. Later, Henry died and Rene took over the
property. Magdalena then, through her counsel, sent a demand letter (Jan 2008) to Rene to vacate
the land but the latter failed to comply. Rene's refusal to vacate the land prompted Magdalena to
file the complaint for unlawful detainer on 13 October 2008, well within the one year period from
the demand to vacate. Thus, all the requirements for an action for unlawful detainer have been
sufficiently shown in the complaint.

The Court, likewise, cannot accept Rene's claim that there was transfer of ownership between
Magdalena and Henry. Rene failed to substantiate this claim.

TERESITA BUGAYONG-SANTIAGO, EARL EUGENE SANTIAGO, EDWARD SANTIAGO, and

EDGARDO SANTIAGO, JR vs TEOFILO BUGAYONG
G.R. No. 220389, December 6, 2017, Carpio, J.

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For an action for unlawful detainer to prosper, it is essential that the complaint allege that entry into
the property was initially legal but possession thereafter turned illegal by the expiration or
termination of the right to possess.

FACTS:

Petitioner (Teresita) and her husband bought a piece of property with a building through a Deed
of Absolute Sale, from her parents. When her husband died, their children inherited one-half of the
land. Petitioners sent a letter to respondent Teofilo Bugayong, Teresita's brother, demanding him
to vacate the subject property. When he refused to leave, they filed a complaint for unlawful
detainer.

Teofilo argues that his parents were the absolute and registered owners of the property and that
the late spouses executed a Deed of Quitclaim in favor of all their six children. He further stated
that when he was about to register the quitclaim with the Register of Deeds, petitioners caused the
annotation on the title of the Deed of Absolute Sale. He maintains he had been paying the realty
taxes on the property and he had been in actual possession and enjoyment of the subject property
long before the execution of the assailed Deed of Absolute Sale.

The MCTC ordered Teofilo to vacate the property. The RTC reversed the decision of the MCTC
saying that the wrong action was filed. The RTC declared that the remedy of the petitioners was
either accion publiciana or accion reivindicatoria, which was upheld by the CA.

ISSUE:

W/N the lower courts were correct in dismissing the action for unlawful detainer.

RULING:

YES. Ejectment or accion interdictal takes on two forms: forcible entry and unlawful detainer. In
forcible entry, one is deprived of physical possession of land or building by means of force,
intimidation, threat, strategy, or stealth. In unlawful detainer, one unlawfully withholds possession
thereof after the expiration or termination of his right to hold possession under any contract,
express or implied.

What determines the cause of action is the nature of defendant's entry into the land. If the entry is
illegal, then the action which may be filed against the intruder within one (1) year therefrom is
forcible entry. If, on the other hand, the entry is legal but the possession thereafter became illegal,
the case is one of unlawful detainer which must be filed within one (1) year from the date of the last
demand.

In the present case, petitioners alleged that Teofilo entered the property without their knowledge
and consent. Meaning, Teofilo's entry into the property had been illegal from the beginning. Later
on, when they found out that he occupied the subject property, petitioners merely tolerated his
stay there. Thus, there was illegal entry into the property at the start. Since there was forcible entry
at the beginning and tolerance thereafter, an action for unlawful detainer cannot prosper since a

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requisite for an action for unlawful detainer is that the possession was originally lawful, but turned
unlawful only upon the expiration of the right to possess.

Furthermore, the complaint was not clear on how entry into the subject property was effected and
how or when dispossession started. It was only in succeeding pleadings where petitioners insisted
that respondent entered the property without their knowledge and consent. This failure of
petitioners to allege the key jurisdictional facts constitutive of unlawful detainer is fatal. Since the
complaint did not satisfy the jurisdictional requirement of a valid cause for unlawful detainer, the
municipal trial court had no jurisdiction over the case.

The dismissal by the RTC and the CA of the action for unlawful detainer was proper.

QUEEN ERRIKA L. SADDI v. MARICRIS RENOMERON

G.R. No. 211004, August 23, 2017, Peralta, J.

To justify an action for unlawful detainer, it is essential that the plaintiffs supposed acts of tolerance
must have been present right from the start of the possession which is later sought to be recovered.
Otherwise, if the possession was unlawful from the start, an action for unlawful detainer would be an
improper remedy.

FACTS:

Petitioner Saddi is the owner of a 120 sq m property located at Parang, Marikina City covered by
TCT No. 009-2010001546, which was already titled under her name. She bought the lot from the
late Spouses Restar-Ambata who died childless. Saddi alleged that on August 4, 2010, while she was
in prior possession of the property, Respondent Renomeron, by strategy or stealth, introduced
herself as the adopted daughter of Miguela T. Renomeron, the alleged sister of the late Concepcion
Restar. Renomeron requested Saddi to allow her to stay in the subject property until August 8, 2010,
since she was still looking for an apartment. Out of pity and consideration, Saddi allowed
Renomeron to stay on the condition that she will leave the place on August 8, 2010 pursuant to an
Eviction Letterdated August 4, 2010.

On August 8, 2010, Saddi requested Renomeron to leave or vacate the property so that she could
renovate and introduce improvements thereon, but Renomeron refused to vacate the subject
premises despite several demands, depriving Saddi of the actual physical possession of the said
property.

On December 1, 2010, Saddi sent Renomeron a final demand letterdated November 26, 2010, asking
Renomeron to pay P3,000.00 as monthly rent beginning August 8, 2010 and to vacate the premises
within 15 days from receipt of the demand letter. Despite numerous demands, Renomeron failed
and refused to vacate the property.

Respondent’s defenses included: the invalidity of the Deed of Sale, that there can be no strategy or
stealth on her part because as alleged in the complaint, Saddi herself allowed her to stay in the
property, and that she is in fact a co-owner of the property and was already in possession of the
property.

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The MeTC ruled that Petioner is entitiled to the possession of the subject property. The MeTC
stated that while Renomeron claims that she is in prior physical possession of the subject property
in the concept of an heir and part owner thereof, it is a well-settled rule that in ejectment cases, the
only issue that need be resolved is the physical or material possession of the property involved and
not the ownership thereof.Moreover, the issues regarding the validity of the Deed of Sale, the
Affidavit of Self-Adjudication and the title in the name of Saddi can only be assailed in the action
expressly instituted for that purpose. The RTC affirmed the MeTC ruling.

The CA ruled that the lower courts erred in considering the case as one of unlawful detainer. The
appellate court held that the Defendant’s possession was inceptively unlawful as she allegedly
employed "strategy or stealth" in gaining possession of the property which is in contrast to an
unlawful detainer case where the possession must be inceptively legal. The CA found that the
pertinent allegations in the Complaint as well as the tenor of the Eviction Letter contradict, rather
than support, Saddi's theory that her cause of action is for unlawful detainer. Her arguments
advance the view that Renomeron's occupation of the property was unlawful at its inception, as she
allegedly entered the property through "strategy or stealth;" also, the "tolerated stay" as stated in
the Eviction Letter was in fact a period for her to pack up her things. Hence, the CA held that Saddi
ejectment suit was filed incorrectly as the action should have been one of accion publiciana.

ISSUE:

Whether ejectment is the proper suit to be filed

RULING:

No. It is settled that a complaint sufficiently alleges a cause of action for unlawful detainer if it
recites the following:

(a) initially, possession of property by the defendant was by contract with or by tolerance of the
plaintiff;
(b) eventually, such possession became illegal upon notice by plaintiff to defendant of the
termination of the latter's right of possession;
(c) thereafter, the defendant remained in possession of the property and deprived the plaintiff of
the enjoyment thereof; and
(d) within one year from the last demand on defendant to vacate the property, the plaintiff
instituted the complaint for ejectment

The Eviction Letter dated August 4, 2010, however, states that petitioner, as new owner, was
requesting respondent to vacate the said place and was giving her four days to transfer or move out
all her belongings in the said premises, evincing that respondent was in possession of the property
even before August 4, 2010, the date when petitioner alleged that respondent asked her permission
to stay in the property. Hence, as found by the Court of Appeals, the alleged tolerated four-day stay
was actually for Renomeron to pack up her belongings from the premises and leave.

Obviously, Renomeron was in prior possession of the property as petitioner was ejecting her from
the property and gave her four days to pack up her belongings and vacate the property. Thus,
petitioner failed to satisfy the requirement that her supposed act of tolerance was present right
from the start of the possession by defendant. Petitioner failed to clearly allege who specifically

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permitted respondent to occupy the subject property before she sought to eject respondent from
the property and how and when such tolerance came about. It is worth noting that the absence of
the first requisite is important in the light of respondent's claim that she has been occupying the
property as a co-owner thereof even before the property was purchased by petitioner. As
respondent's possession was unlawful from the start, an action for unlawful detainer would be an
improper remedy.

SPOUSES JANET URI FAHRENBACH AND DIRK FAHRENBACH v. JOSEFINA R.

PANGILINAN
G.R. No. 224549, August 7, 2017, Perlas-Bernabe, J.

The only question that the courts must resolve in forcible entry or unlawful detainer cases is who
between the parties is entitled to the physical or material possession of the property in dispute.

Tacking of possession only applies to possession de jure, or that possession which has for its purpose
the claim of ownership.

FACTS:

Respondent Pangilinan acquired a parcel of unregistered land (“subject lot”) from her aunt,
Felomina Abid (“Abid”), through a Waiver of Rights. Apparently though, Abid also executed a Deed
of Sale in favor of Columbino Alvarez (“Alvarez”) covering the same lot prior to the Waiver of Rights
as seen on the Tax Declaration. Alvarez clarified the matter when he executed a handwritten letter
stating that the description of the property he bought was erroneous since it described
Respondent’s land. He also executed a Sinumpaang Salaysay stating that the said land is not the
property he had intended to buy from Abid but the one with an area of eight (8) hectares which is
covered under another Tax Declaration.

Sometime later, Respondent learned that Petitioners were occupying their lot and built structures
thereon. Petitioners refused to vacate. Hence, Respondent filed a complaint for forcible entry
against them. Petitioners allege that they are not occupying the property of Respondents but that
of Alvarez, which they validly acquired by virtue of a Deed of Sale. They also added that Alvarez
had been in possession of the same parcel of land since 1974 after Abid allowed him to cultivate it.
On the other hand, respondent neither physically possessed the said property nor introduced
improvements thereon.

The MCTC ruled in favor of Petitioner and dismissed the Complaint. The Court observed that while
the parties claim to have bought different properties, it was found and agreed that they were in fact
claiming one and the same lot. It was noted that their findings clearly state that petitioners’
predecessor-in-interest, Alvarez, was the actual occupant of the area being claimed by respondent.
The MCTC ruled that the casual visits made by the Respondent to the property was not sufficient
to constitute actual possession contemplated by law in ejectment cases.

The RTC reversed the ruling of the MCTC and ordered petitioners to vacate the subject lot. The
RTC pointed out that before one can be adjudged to have a better right of possession over another,
it is necessary to first ascertain the actual premises of the property subject of actual and prior
possession. In this case, the RTC observed that the identity of the property petitioners were actually

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occupying was not clear and that upon close examination of the individual tax declarations, the
Court found that Petitioners were actually occupying Respondent’s lot.

CA affirmed the RTCs findings insofar as it held that respondent was the prior possessor of the
subject lot. Meanwhile, the CA rejected petitioners’ argument that their possession of the subject
lot from the time they purchased the same in August 2005 should be tacked to Alvarez’s possession.
According to the CA, the concept of tacking refers to legal possession and does not apply to physical
possession, which is the issue in suits for forcible entry such as this case

ISSUE:

Whether the Respondent was in prior possession of the subject lot?

RULING:

Yes. It is well-settled that the only question that the courts must resolve in forcible entry or unlawful
detainer cases is who between the parties is entitled to the physical or material possession of the
property in dispute. The main issue is possession de facto, independently of any claim of ownership
or possession de jure that either party may set forth in his pleading. The principal issue must be
possession de facto, or actual possession, and ownership is merely ancillary to such issue. In forcible
entry, the plaintiff must prove that it was in prior physical possession of the premises until it was
deprived thereof by the defendant.

In this case, respondent had sufficiently proven her prior possession de facto of the subject lot.
Records disclose that respondent occasionally visited the subject lot since she acquired the same
from Abid in September 1995. She even paid the lot’s realty taxes, as well as requested for a survey
authority thereon. In fact, she submitted old photographsshowing herself on the subject lot, the
identity of which petitioners did not contend. Notably, jurisprudence states that the law does not
require a person to have his feet on every square meter of the ground before it can be said that he
is in possession thereof.In Bunyi v. Factor,the Court held that “visiting the property on weekends
and holidays is evidence of actual or physical possession. The fact of her residence somewhere else,
by itself, does not result in loss of possession of the subject property.

At this juncture, the Court finds it proper to dispel petitioners’ mistaken notion that their
possession should be tacked onto that of Alvarez who allegedly occupied the property since 1974.
In Nenita Quality Foods Corporation v. Galabo,the Court clarified that tacking of possession only
applies to possession de jure, or that possession which has for its purpose the claim of ownership.
The issue of the identity and description of the lots is a conflict between Alvarez and
Respondent — not between petitioners and respondent and is not necessary in the resolution of this
case.

SPOUSES MAXIMO ESPINOZA and WINIFREDA DE VERA vs. SPOUSES ANTONIO

MAYANDOC and ERLINDA CAYABYAB MAYANDOC
G.R. No. 211170, July 3, 2017, PERALTA, J.:

To be deemed a builder in good faith, it is essential that a person asserts title to the land on which he
builds, i.e., that he be a possessor in the concept of owner, and that he be unaware that there exists in
his title or mode of acquisition any flaw which invalidates it

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FACTS:

A parcel of land was originally owned by Eusebio Espinoza. After his death, the parcel of land was
divided among his heirs Pastora, Domingo and Pablo. Petitioner Maximo is the son of Domingo.

Thereafter, Pastora executed a Deed of Sale conveying her share of the same property to
respondents and Leopoldo Espinoza. On that same date, a fictitious deed of sale was executed by
Domingo, conveying 3/4 share in the estate in favor of respondent Erlinda's parents; thus, TCT No.
28397 was issued in the names of the latter.

Later, a fictitious deed of sale was executed by spouses Maximo and Winifreda De Vera and
Leopoldo over the land in favor of spouses Antonio and Erlinda Mayandoc; thus, TCT No. 37403
was issued under their names.

Petitioners then filed an action for annulment of document with prayer for the nullification of TCT
No. 37403. RTC and CA ruled in favor of petitioners and ordered respondents to reconvey the land
in dispute.

Thus, respondents filed a complaint for reimbursement for useful expenses, pursuant to Articles
448 and 546 of the New Civil Code, alleging that the house in question was built on the land in
good faith and they would not have reconstructed the said house had they been aware of the defect
in their title; that petitioners questioned their ownership and possession only in 1997 when a
complaint for nullity of documents was filed by the latter. Petitioners argued that respondents can
never be considered as builders in good faith because they were aware that the deeds of sale over
the land in question were fictitious.

ISSUE:

Whether or not the respondents were builders in good faith

RULING:

YES. To be deemed a builder in good faith, it is essential that a person asserts title to the land on
which he builds, i.e., that he be a possessor in the concept of owner, and that he be unaware that
there exists in his title or mode of acquisition any flaw which invalidates it. The plaintiffs are
builders in good faith. As asserted by plaintiffs and not rebutted by defendants, the house of
plaintiffs was built on the lot owned by defendants in 1995. The complaint for nullity of documents
and reconveyance was filed in 1997, about two years after the subject conjugal house was
constructed. Defendants-spouses believed that at the time when they constructed their house on
the lot of defendants, they have a claim of title.

Art. 526, New Civil Code, states that a possessor in good faith is one who has no knowledge of any
flaw or defect in his title or mode of acquisition. This determines whether the builder acted in good
faith or not. Surely, plaintiffs would not have constructed the subject house if they knew that there
is a flaw in their claim of title. Nonetheless, Art. 527, New Civil Code, states clearly that good faith
is always presumed, and upon him who alleges bad faith on the part of the possessor lies the burden

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of proof. The records do not show that the burden of proof was successfully discharged by the
defendants.

They also have in their favor the legal presumption of good faith. It is the defendants who had the
burden to prove otherwise. They failed to discharge such burden. Thus, Art. 448 comes in to protect
the plaintiff-owners of their improvement without causing injustice to the lot owner. Art. 448
provided a just resolution of the resulting "forced-ownership" by giving the defendants lot owners
the option to acquire the conjugal house after payment of the proper indemnity or to oblige the
builder plaintiffs to pay for the lot. It is the defendants-lot owners who are authorized to exercise
the option as their right is older, and under the principle of accession where the accessory (house)
follows the principal. The rule that the choice under Article 448 of the Civil Code belongs to the
owner of the land is in accord with the principle of accession, i.e., that the accessory follows the
principal and not the other way around. Even as the option lies with the landowner, the grant to
him, nevertheless, is preclusive. The landowner cannot refuse to exercise either option and compel
instead the owner of the building to remove it from the land.

D. EASEMENT

SPOUSES LARRY AND ROSARITA WILLIAMS VS. RAINERO A. ZERDA

G.R. No. 207146, March 15, 2017, Mendoza, J.

Where the easement may be established on any of several tenements surrounding the dominant
estate, the one where the way is shortest and will cause the least damage should be chosen. If having
these two circumstances do not concur in a single tenement, the way which will cause the least
damage should be used, even if it will not be the shortest.

FACTS:

Respondent Zerda is the owner of a piece of land locked in the middle of four properties. Behind it
is a swampy mangrove area owned by the Republic, to the left and right are lots owned by
Woodridge Properties and in front is a lot owned by petitioners where the national highway ran
along. Zerda filed a complaint against Spouses Williams for easement of right of way alleging that
his lot was without adequate outlet to a public highway, except through the spouses’ property. He
also alleged that his isolation was not due to his own acts, the right of way being prayed for is least
prejudicial to the petitioners’ property and he was willing to pay for its value but the spouses
refused.

ISSUE:

W/N respondent is entitled to an easement of right of way.

RULING:

YES. An entitlement to the easement of right of way requires that the following requisites must be
met (New Civil Code)
1. The dominant estate is surrounded by other immovables and has no adequate outlet to a
public highway (Art. 649, par. 1);

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2. There is payment of proper indemnity (Art. 649, par. 1);

3. The isolation is not due to the acts of the proprietor of the dominant estate (Art. 649, last
par.); and
4. The right of way claimed is at the point least prejudicial to the servient estate; and insofar
as consistent with this rule, where the distance from the dominant estate to a public
highway may be the shortest (Art. 650).

All of the requisites are present in this case. As regards the first requisite, there is no dispute that
the respondent's property was surrounded by other immovables owned by different individuals.
The second requisite was also complied with when Zerda wrote the spouses formally asking them
to provide him with a right of way, for which he was in willing to pay a reasonable value or to swap
a portion of his property.

As to the third requisite, the isolation of the dominant estate was not due to the respondent's own
acts. The property he purchased was already surrounded by other immovables leaving him no
adequate ingress or egress to a public highway. Petitioners pointed out that when the respondent
purchased the dominant estate, he knew that the original owner was in negotiation with the
spouses for the sale of the dominant estate, thus, Zerda was in bad faith. Nonetheless, it cannot be
used to defeat the respondent's claim for a right of way. The vendor had every right to sell his
property to anybody.

As to the fourth requisite, the Court finds that the right of way sought by the respondent is at the
point least prejudicial to the servient estate and it is the shortest distance to the national highway.
This is evident in the Sketch Plan submitted. Even assuming that the right of way being claimed by
the respondent is not the shortest distance from the dominant estate to the public highway, it is
well-settled that the criterion of least prejudice to the servient estate must prevail over the criterion
of shortest distance.

DANILO BARTOLATA v. REPUBLIC OF THE PHILIPPINES and DEPARTMENT OF PUBLIC

WORKS AND HIGHWAYS, DEPARTMENT OF TRANSPORTATION AND
COMMUNICATIONS and TOLL REGULATORY BOARD
G.R. No. 223334, 7 June 2017, Velasco, Jr., J.:

Only public lands acquired by qualified applicants without public auction and for residential purposes
are free from any restrictions against encumbrance or alienation. The provision is inapplicable to
Bartolata's property which was awarded to petitioner not in accordance with RA 730, but through
public auction.

FACTS:

Danilo Bartolata acquired ownership over a 400 square meter parcel of land in Taguig by virtue of
an Order of Award from the Bureau of Lands. It appears that Bartolata was the sole bidder for the
property during a public auction conducted with the offer of Pl5 per square meter or P6,000 total
for the 400 square meter lot.

Sometime in 1997, Department of Public Works and Highways, Department of Transportation and
Communications and Toll Regulatory Board (DPWH et. Al) acquired 223 square meters of
Bortolata's property for the development of the Metro Manila Skyway Project. The parties agreed

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that in exchange for the acquisition, Bartolata would be paid just compensation for the appraised
value of the property, fixed at ₱55,000 per square meter or an aggregate of ₱l2,265,000 for the entire
affected area by the Municipal Appraisal Committee of Taguig, Metro Manila. Subsequently,
DPWH et. al. appropriated ₱l,480,000 in favor of Bartolata as partial payment.

Since the date of initial payment, Bartolata had, on numerous occasions, demanded from DPWH
et. al. the balance of Php l0,785,000.00, but the latter refused to settle their outstanding obligation.
This prompted petitioner to file a complaint for a sum of money with the Regional Trial Court .

In their Supplemental DPWH et al. raised that the Order of Award from the Bureau of Lands
granting title to Bartolata over the subject property contained the following encumbrance:

This award shall further be subject to the provisions of the Public Land Law (Commonwealth Act
No. 141, as amended), and particularly the following conditions:

2. The land shall be subject to the easement and servitudes provided for in Section 109-114 of
Commonwealth Act No. 141, as amended.

DPWH et. al then argued that pursuant to Section 112 of Commonwealth Act No. 141 (CA 141), the
government is entitled to an easement of right of way not exceeding 60 meters in width, without
need of payment for just compensation, save for the value of improvements existing.

Under the above-cited provision, any payment for the government's use of the easement, unless
made to compensate the landowner for the value of the improvements affected, is unwarranted.
Consequently, DPWH et. al prayed, by way of counterclaim, that the ₱l,480,000 partial payment
made to petitioner for the acquisition of the latter's property, which was well within the 60-meter
threshold width, be returned to the government.

In rebuttal, Bartolata contended that Presidential Decree No. 2004 (PD 2004), which amended
Republic Act No. 730 (RA 730), allegedly removed the statutory lien attached to the subject
property. DPWH et. al. however, countered that Bartolata could not have benefited from PD 2004
since the removal of restrictions and encumbrances contained in PD 2004 only applies to public
land sold by the government for residential purposes without public auction, whereas Bartolata was
awarded the subject property through a public auction sale.

The RTC dismissed plaintiff's complaint for lack of merit and insufficiency of evidence. Defendant's
counterclaims are likewise denied and dismissed for insufficiency of evidence. Upon appeal, CA
denied the plaintiff’s appeal but ordered to return the amount of Php l,480,000.00 to the Republic
of the Philippines.

The appellate court affirmed the RTC's finding that the subject property is still subject to the
easement of right of way, which is free of any compensation, except only for the value of the existing
improvements that may have been affected. Echoing the RTC's line of reasoning, the CA ruled that
PD 2004 could not be extended to benefit petitioner who acquired the subject property through an
auction sale. The lot in issue is, therefore, subject to the statutory lien embodied in Sec. 112 of CA
141. Hence, this petition.

ISSUES:

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Whether or not the subject property owned by Bartolata is subject easement of right of way
in favor of the government; (YES)

Whether or not DPWH et. al. are liable to pay just compensation to petitioner; and (NO)
Whether or not Dartolata should return the initial payment made by Dartolata in the
amount of ₱l,480,000. (NO)

RULING:

PARTLY MERITORIOUS.The easement of right of way in favor of the government subsists

despite the enactment of PD 2004

First, no less than the Order of Award granting Bartolata a title over the subject property reads that
the parcel of land conferred to him is subject to the restrictions contained under Sec. 109-114 of CA
141, which necessarily includes the easement provided in Sec. 112. Notably, Bartolata was awarded
the subject property in 1987, while PD 2004, which allegedly removed all encumbrances and
restrictions from awarded properties, was signed into law much earlier in 1985. This alone raises
suspicion on the applicability of PD 2004 to the subject property.

Second, the Court finds no reversible error in the RTC and CA's interpretation of the coverage of
PD 2004 and RA 730. The title of RA 730 itself supports the rulings of the courts a quo that the laws
Bartolata relied upon only cover the sale of public lands for residential purposes and to qualified
applicants without public auction.

It can readily be inferred from the title of RA 730 that the definite ambit of the law could not be
extended to sales of public lands via public auction, through which mode of disposition Bartolata
acquired the subject property. Consequently, when RA 730 was amended by PD 2004 to the effect
of removing encumbrances and restrictions on purchased properties without public auction,
Bartolata could not have benefitted from the same.

Lastly, even the contents of RA 730 belie Bartolata’s claim. As can be gleaned, RA 730 was crafted
as an exception to Secs. 61 and 67 of CA 141. These provisions govern the mode of disposition of the
alienable public lands enumerated under Sec. 59 of the same law. Synthesizing the provisions, CA
141 provides that public lands under Sec. 59 can only be disposed for residential, commercial,
industrial, and other similar purposes through lease or sale, in both cases, "to the highest bidder. "
The conduct of an auction is then required under Secs. 61 and 67.

By way of exception, however, RA 730 now allows the sale of public lands without public auction to
qualified applicants. It is through this exceptional case of purchase of public land without public
auction wherein PD 2004 would apply.

Sec. 2 of RA 730, as amended by PD 2004, is clear and unambiguous:

SEC. 2. Lands acquired under the provisions of this Act shall not be subject to any
restrictions against encumbrance or alienation before and after the issuance of the patents
thereon.

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Under its plain meaning, only public lands acquired by qualified applicants without public auction
and for residential purposes are free from any restrictions against encumbrance or alienation. The
provision is inapplicable to Bartolata's property which was awarded to petitioner not in accordance
with RA 730, but through public auction.

Petitioner is not entitled to just compensation.In resolving petitioner's principal claim, we

apply the doctrine in Republic v. Andaya (Andaya). The seminal case of Andaya likewise involved
property subject to the statutory lien under Sec. 112 of CA 141.

In this case, the Court affirmed the CA's interpretation of Sec. 112 of CA 141 and ruled that the
Republic was under no obligation to pay therein respondent Andaya just compensation in enforcing
its right of way. Be that as it may, the Court did not foreclose the possibility of the property owner
being entitled to just compensation if the enforcement of the right of way resulted in the "taking" of
the portions not subject to the legal easement.

To recapitulate, two elements must concur before the property owner will be entitled to just
compensation for the remaining property under Sec. 112 of CA 141: (1) that the remainder is not
subject to the statutory lien of right of way; and (2) that the enforcement of the right of way results
in the practical destruction or material impairment of the value of the remaining property, or in
the property owner being dispossessed or otherwise deprived of the normal use of the said
remainder.

Recall that the subject property in this case is a 400 square meter parcel of land. The 223 square
meter portion of the subject property was traversed by DPWH et. Al. Metro Manila Skyway Project.
And as noted by the CA, the subdivision plan shows that the covered area corresponds to the widths
of 13.92 meters and 13.99 meters, well within the 60-meter width threshold provided by law. DPWH
et. al are then not under any legal obligation to pay just compensation for utilizing the 223 square
meter portion pursuant to the Republic's right of way under Sec. 112 of CA 141, and in accordance
with our ruling in Andaya.

Respondents are barred by estoppel from recovering the initial payment of ₱l,480,000 from
petitioner

"Solutia indebiti" arises when something is delivered through mistake to a person who has no right
to demand it. It obligates the latter to return what has been received through mistake. As defined
in Article 2154 of the Civil Code, the concept has two indispensable requisites: first, that something
has been unduly delivered through mistake; and second, that something was received when there
was no right to demand it.

As discussed above, Bartolata was never entitled to collect and receive just compensation for the
government's enforcement of its right of way, including the ₱l,480,000 payment made by
respondents. For its part, the government erroneously made payment to Bartolata because of its
failure to discover earlier on that the portion of the property acquired was subject to a statutory
lien in its favor, which it could have easily learned of upon perusal of Bartolata's Order of Award.
These circumstances satisfy the requirements for solutio indebiti to apply.

Regardless, DPWH et. al’s action to compel petitioner to return what was mistakenly delivered is
now barred by the doctrine of estoppel. The doctrine is based upon the grounds of public policy,

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fair dealing, good faith and justice, and its purpose is to forbid one to speak against his own act,
representations, or commitments to the injury of one to whom they were directed and who
reasonably relied thereon. The doctrine of estoppel springs from equitable principles and the
equities in the case.

As a general rule, the State cannot be barred by estoppel by the mistakes or errors of its officials or
agents. But as jurisprudence elucidates, the doctrine is subject to exceptions, viz:

In this case, petitioner was erroneously paid ₱l,480,000 on August 14, 1997 when respondents
appropriated the amount in his favor. However, because of respondents' representation that the
amount was a mere down payment for just compensation, petitioner never objected to the taking
of his land and peacefully parted with his property, expecting to be paid in full for the value of the
taken property thereafter. As the events unfolded, respondents did not make good their guarantee.
Instead, they would claim for the recovery of the wrongful payment after almost twelve (12) years,
on July 9, 2009, as a counterclaim in their Supplemental Answer. Indubitably, respondents are
barred by estoppel from recovering from petitioner the amount initially paid.

AMA LAND, INC. v. WACK WACK RESIDENTS' ASSOCIATION, INC.

G.R. No. 202342, July 19, 2017, FIRST DIVISION,(CAGUIOA, J.)

To stress, the temporary easement of right of way under Article 656 of the Civil Code, similar to the
permanent easement of right of way pursuant to its Articles 649 and 650, can only be granted after
proof of compliance with the prerequisites set forth in the articles duly adduced during a full-blown
trial.

FACTS:

A commercial and residential building project located at EDSA comer Fordham Street in Wack
Wack Village, Mandaluyong City, was proposed by AMA Land, Inc. (AMALI). On March 18, 1996,
AMALI notified Wack Wack Residents’ Association, Inc. (WWRAI) - a registered homeowners'
association of Wack Wack Village - of its intention to use Fordham Street as an access road and
staging area of the project. As AMALI received no response from WWRAI, the former temporarily
enclosed the job site and set up a field office along Fordham Street. WWRAI claimed, however, that
AMALI already converted part of the said street as barrack site and staging area even before March
18, 1996. All subsequent attempts of WWRAI to remove the said field office proved futile.

AMALI then filed a petition before the RTC, [wherein it seeks the temporary use of Fordham Street
belonging to WWRAI as an access road to AMALI's construction site of its AMA Tower project
pursuant to Article 656of the Civil Code, and to establish a permanent easement of right of way in
its favor over a portion of Fordham Street pursuant to Article 649 of the Civil Code. Aside from its
prayer for the declaration of temporary and permanent easement of right of way in its favor over a
portion of Fordham Street, AMALI is also] praying for: (a) a temporary restraining order (TRO) to
immediately enjoin WWRAI from demolishing and removing the temporary field office,
constructing a fence isolating Fordham Street, and preventing AMALI from gaining access to the
construction site; (b) a writ of preliminary mandatory injunction directing WWRAI to allow AMALI
to use Fordham Street as an access road and staging area; (c) an order making the TRO and the
aforesaid writ permanent; and (d) an order declaring a permanent right of way in favor of AMALI.
In its answer, [WWRAI] contends that the project of AMALI violates the applicable zoning

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ordinances; that the licenses and permits issued in favor of AMALI were irregular and unlawful;
that the project is a nuisance, and; that EDSA can be utilized as the staging area of the project.

RTC granted the writ of preliminary mandatory injunction "directing [WWRAI] to allow AMALI to
use Fordham Street through a temporary easement of right of way". However, the Court of Appeals
(CA) granted the petition of WWRAI, reversed and set aside the October 28, 2010 and February 23,
2011 Ordersof the Regional Trial Court of Pasig City assigned in San Juan (Metropolitan Manila),
Branch 264 (RTC) in Civil Case No. 65668, ordering the RTC to issue injunctive relief prayed for by
WWRAI pending the determination of the petition for the declaration of permanent easement of
right of way. Thus before the Court is a petition for review on certiorari under Rule 45 was filed by
AMALI.

ISSUE:

Whether or notthe RTC erred when it prematurely decided disputed facts and disposed of the
merits of the case without the benefit of a full-blown trial by granting AMALI's application for
preliminary mandatory injunction because.

RULING:

YES.First of all, the CA Decision categorically found that WWRAI is the owner of the subject
Fordham Street as this was expressly admitted by AMALI and pursuant to the RTC's pre-trial
order.Thus, inasmuch as AMALI prays for the grant of both temporary and permanent easements
of right of way over a portion of Fordham Street against WWRAI in the original petition, WWRAI
should be deemed to be the owner of the servient estate. Simply stated, WWRAI, and not its
members, is the real party in interest in this case. To be sure, even AMALI itself filed the original
petition against WWRAI and not against the latter's members.

Secondly, the question of whether or not AMALI, as owner of the dominant estate, may validly
claim against WWRAI a compulsory permanent right of way under Articles 649 and 650 of the Civil
Code, will depend on a finding that AMALI has established the existence of the following requisites,
namely: (1) the dominant estate is surrounded by other immovables; (2) it is without adequate
outlet to a public highway; (3) after the proper indemnity has been paid; (4) the isolation was not
due to the proprietor of the dominant estate's own acts; and (5) the right of way claimed is at a
point least prejudicial to the servient estate. A sixth requisite is that the right of way must be
absolutely necessary for the normal enjoyment of the dominant estate by its owner. There must be
a real, not fictitious or artificial, necessity for the right of way, and the right cannot be claimed
merely for the convenience of the owner of the enclosed estate. The burden of proving the existence
of the foregoing requisites lies on AMALI, being the owner of the dominant estate. This issue has
been correctly recognized by the CA as still pending determination by the Regional Trial Court of
Pasig City assigned in San Juan (Metropolitan Manila) Branch 264, in Civil Case No. 65668.

In turn, as regards the question of whether AMALI is entitled to a temporary easement of right of
way, Article 656 of the Civil Code provides that this can be granted only after the payment of the
proper indemnity by AMALI, the owner of the dominant estate; and only if AMALI has established
that the easement is indispensable for the construction of its AMA Tower Project.

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The Court is aware that the RTC had previously granted on July 24, 1997, a writ of preliminary
mandatory injunction "directing WWRAI to allow AMALI to use Fordham Street through a
temporary easement of right of way and set the compensation for the use of Fordham Street to Fifty
Thousand Pesos (P50,000.00) per month of use." As to how the RTC arrived at the P50,000.00
monthly compensation and the conclusion that the use of Fordham Street is indispensable in the
construction of the AMA Tower, the Court is perplexed given the admission in the July 24, 1997
Order of the RTC that "the parties waived presentation of witnesses and submitted the incident
[prayer for issuance of a writ of preliminary mandatory injunction] for resolution based on their
respective pleadings." Unlike the RTC Order dated October 28, 2010 which denied WWRAI's
application for a temporary restraining order and writ of preliminary injunction where the judicial
affidavits executed by four members ofWWRAI were summarized, the RTC Order dated July 24,
1997 which granted a temporary easement of right of way in favor of AMALI simply concluded that:

Article 656 of the New Civil Code provides:

"If it be indispensable for the construction, repair, improvement,

alteration or beautification of a building, to carry materials through
the estate of another, or to raise thereon scaffolding or other objects
necessary for the work, the owner of such estate shall be obliged to
permit the act, after receiving payment of the proper indemnity for
the damage caused him."

WWRAI's obligation is undoubtedly established by the above provision. From a map

of the area in question , it is unmistakable that Fordham Street in Wack Wack
Village, which is owned by WWRAI, is the only road which AMALI is able to use
with respect to the necessary preparations relative to the construction project.

The RTC did not even factor in its Order the fact that the front portion of AMALI's property where
the proposed AMA Tower project is situated is facing EDSA, which AMALI describes as a main
thoroughfare. The said Order also fails to identify the specific portion of Fordham Street that would
be subject to the temporary easement of right of way.

Not only is the July 24, 1997 Order granting the temporary easement of right of way short in factual
basis, it is a virtual prejudgment of AMALI's "FIRST CAUSE OF ACTION (DECLARATION OF
TEMPORARY EASEMENT OF RIGHT OF WAY) in its original petition before the RTC." The RTC
erred and/or gravely abused its discretion when it granted AMALI's application for preliminary
mandatory injunction because, in so doing, it prematurely decided disputed facts and disposed of
the merits of the case without the benefit of a full-blown trial wherein testimonial and documentary
evidence could be fully and exhaustively presented, heard and refuted by the parties. As such, the
RTC Order dated July 24, 1997 insofar as it granted a temporary easement of right of way over
Fordham Street in favor of AMALI is concerned is declared void and of no force and effect. The RTC
lacked jurisdiction to declare a temporary easement of right of way arising from Article 656 of the
Civil Code without a full-blown trial.

Article 656 requires proof of indispensability and receipt of payment of the proper indemnity for
the damage caused by the owner of the dominant estate before the owner of the servient estate can
be compelled to grant a temporary easement of right of way. It appears from the rollo that AMALI
presented no witnesses to establish these prerequisites. Being preconditions, they are akin to

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suspensive conditions that must be fulfilled before the obligation on the part of WWRAI to allow
the easements can arise. Until the preconditions are met, AMALI has no legal basis to use a portion
of Fordham Street as an access road and staging area of its AMA Tower project. To allow AMALI to
do so would be in contravention of the legal provisions on the establishment and grant of the legal
easement of right of way under the Civil Code. To stress, the temporary easement of right of way
under Article 656 of the Civil Code, similar to the permanent easement of right of way pursuant to
its Articles 649 and 650, can only be granted after proof of compliance with the prerequisites set
forth in the articles duly adduced during a full-blown trial.

Lastly, the status quo prevailing before the filing of the WWRAI petition before the CA is not
the status quo ante that must be preserved. The object of a writ of preliminary injunction is to
preserve the status quo, which is the last peaceable uncontested status that preceded the pending
controversy. Thus, the proper understanding of the status quo ante should refer to the situation
prior to AMALI's unauthorized use of a portion of Fordham Street as an access road and staging
area of its AMA Tower project.

E. NUISANCE

NORTH GREENHILLS ASSOCIATION, INC.v. ATTY. NARCISO MORALES

G.R. No. 222821, August 09 2017, Mendoza, J.:

A nuisance per accidens is one which depends upon certain conditions and circumstances, and its
existence being a question of fact, it cannot be abated without due hearing thereon in a tribunal
authorized to decide whether such a thing does in law constitute a nuisance. Obviously, it requires a
determination of such circumstances as to warrant the abatement of the nuisance. That can only be
done with reasonable notice to the person alleged to be maintaining or doing the same of the time and
place of hearing before a tribunal authorized to decide whether such a thing or act does in law
constitute a nuisance per accidens.

FACTS:

Morales is a resident of North Greenhills Subdivision. His house is located adjacent to McKinley
Park which is owned and operated by North Greenhills Association (NGA). He has a personal access
door which opens directly into the park.

In 2003, NGA started constructing a pavilion occupying the area adjacent to the residence of
Morales. The construction included a public restroom which was located alongside the wall
separating the house of Morales and the park.

Morales objected to the construction and filed a complaint to the HLURB and sought for the
demolition of the pavilion. He alleged that he had an open, continuous, immediate and
unhampered access to the park through his access door 33 years and that the construction violated
his immediate access to the park. Further, the restroom that was constructed by NGA was a
nuisance per se.

The HLURB, through an ocular inspection found that the construction blocked Morales’ access to
the park and ruled for the removal of the pavilion and the relocation of the common toilet to a

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place which will not be a nuisance to any resident. Upon appeal to the HLURB Board, it modified
the previous order and ordered only for the relocation of the restroom. Upon appeal, the Office of
the President affirmed the ruling of the HLURB Board.

The CA affirmed the ruling of the OP and found that the restroom built was a nuisance per
accidens considering that the structure posed sanitary issues which could adversely affect not only
Morales, but also his entire household; that even if there existed a perimeter wall between the park
and Atty. Morales' home, the odor emanating from the restroom could easily find its way to the
dining area, and the foul and noxious smell would make it very difficult and annoying for the
residents of the house to eat; and that the proximity of the restroom to Atty. Morales' house placed
the people residing therein at a greater risk of contracting diseases both from improperly disposed
waste and human excrements, as well as from flies, mosquitoes and other insects, should NGA fail
to maintain the cleanliness of the structures. The CA further stated that NGA's fear of being exposed
to outsiders and criminals because Morales' access was unfounded. It pointed out that the door had
been in existence for more than three decades and that if dangers truly existed, NGA should have
taken immediate action and blocked the side access years earlier. It then mentioned other ways to
remedy the security concerns of NGA, such as placing a wall strategically at the border of the park
or additional guards to patrol the vicinity.

ISSUES:

1. Whether the restroom was properly classified as a nuisance per accidens

2. Whether Morales had obtained an easement over the park

RULING:

1. No. A nuisance per accidens is one which depends upon certain conditions and circumstances,
and its existence being a question of fact, it cannot be abated without due hearing thereon in a
tribunal authorized to decide whether such a thing does in law constitute a nuisance. Obviously, it
requires a determination of such circumstances as to warrant the abatement of the nuisance. That
can only be done with reasonable notice to the person alleged to be maintaining or doing the same
of the time and place of hearing before a tribunal authorized to decide whether such a thing or act
does in law constitute a nuisance per accidens.

In other words, it requires a proper appreciation of evidence before a court or tribunal rules that
the property being maintained is a nuisance per accidens.

A reading of the CA's decision would easily reveal that its conclusions were merely speculative.

2. No.NGA claims that the CA erred in upholding Atty. Morales' unbridled access to the park, which
effectively constituted an easement of right of way without any basis as against the clear statutory
right of NGA, as the owner of the park, to fence and protect its property on the basis of Articles 429
and 430 of the Civil Code.

The Court agrees with NGA.

Under the Civil Code, NGA, as owner of the park, has the right to enclose or fence his land or
tenements by means of walls, ditches, live or dead hedges, or by any other means without detriment

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to servitudes constituted thereon. It also has a right to exclude others from access to, and enjoyment
of its property.

NGA's legal right to block the access door is beyond doubt. Courts have no business in securing the
access of a person to another property absent any clear right on the part of the latter.

The CA essentially violated the right of NGA. Morales never introduced any evidence that he had
acquired any right by prescription or by agreement or legal easement to access the park through
his side door. Moreover, he never claimed that his side door was his only access to the park. He has
other means and, being adjacent to the park, going through other means is not cumbersome.
Morales knows very well that he can access the park through some other parts of the park.

F. DONATIONS
Lydia Lavarez, et al. Vs. Angeles S. Guevarra, et al
G.R. No. 206103, March 29, 2017, Peralta,J.

To determine the intrinsic validity of a deed of donation subject of the action for annulment, the
donor’s mental state/condition at the time of its execution must be taken into account. Factors such
as age, health, environment, and the intricacy of the document in question, among others, should be
considered.

FACTS:

Rebecca Zaballero, unmarried, had several siblings. Rebecca died intestate and without any issue,
leaving several properties to be settled among her nearest kins – the sons and daughters of her
siblings – who later became the parties in this case. Petitioners filed an action for reconveyance,
partition and nullification of documents against respondents. Respondents claim that there was
nothing to partition since they were not aware of any real or personal properties which their aunt
Rebecca had left behind. The said properties which were included in the complaint had already
been validly donated to them by Rebecca

ISSUE:

W/N Rebecca possessed sufficient mentality to make deeds of donation.

RULING:

NO. A donation is an act of liberality whereby a person disposes a thing or right gratuitously in
favor of another, who, in turn, accepts it. Donations should be intelligent or with an exact notion
of the matter to which it refers; it should be free; and it should be spontaneous. In order for a
donation of property to be valid, what is crucial is the donor’s capacity to give consent at the time
of the donation.

At the time of the execution of the Deeds of Donation covering the properties, Rebecca was already
at an advanced age of 75 and afflicted with senile dementia which was more or less permanent. She
was not necessarily in the pinkest of health since she was then, in fact, admitted to the hospital. It
can be reasonably assumed that the same had the effects of impairing her brain or mental faculties

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so as to considerably affect her consent, and that fraud or undue influence would have been
employed in order to procure her signature on the questioned deeds. Rebecca lived in the family’s
ancestral house with respondents, and the old lady was dependent on their care.

Rebecca could not have had full control over her mental faculties so as to render her completely
capable of executing a valid Deed of Donation. Any donation by Rebecca is a nullity.

SPOUSES JUAN and ANTONINA CANO, ROLANDO CANO and JOSEPHINE "JOSIE"
CANOAQUINO vs SPOUSES ARTURO and EMERENCIANA CANO
G.R. No. 188666, December 14, 2017, Sereno, CJ.

As between parties, a donation of immovable property need only be in a public instrument and need
not be annotated (or registered) for it to be valid. However, annotation is essential for the donation
to be effective against third persons. As an exception, actual notice and knowledge of a prior
unregistered donation, by a third person, has an effect equivalent to registration.

FACTS:

Respondents purchased a registered piece of land from one Feliza Baun after which they took
possession and employed a relative to act as caretaker and harvest the fruit of mango trees planted
thereon. They benevolently allowed petitioners to take actual possession of the property after the
sale because they were blood relatives. This ended when petitioners allegedly harassed and threw
stones at the individuals hired by respondents to spray the mango trees with chemical fruit
inducers. Respondents filed a complaint for ejectment against respondents.

While the ejectment suit was ongoing, petitioners filed a complaint for quieting of title, claiming
absolute ownership over the subject property citing a prior albeit unregistered donation propter
nuptias executed in their favor by Feliza Baun.

ISSUE:

W/N respondents are the rightful owners of the property.

RULING:

YES. While it is true that a valid donation propter nuptias was executed in favor of petitioners even
prior to the sale, respondents are the rightful owners of the property. The prior unregistered
donation does not bind respondents, who are innocent purchasers for value, who had no actual
knowledge of the prior donation.

Pursuant to Article 709 of the Civil Code, all rights over immovable property must be duly inscribed
or annotated on the Registry of Deeds before they can affect the rights of third persons. The same
rule is enunciated in Presidential Decree No. (P.D.) 1529, or the Property Registration Decree,
specifically Sections 51, which provide: xxx The act of registration shall be the operative act to
convey or affect the land insofar as third persons are concerned xxx

As between the parties to a donation of an immovable property, all that is required is for the
donation to be contained in a public document. Registration is not necessary for it to be considered

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valid and effective. However, in order to bind third persons, the donation must be registered in the
Registry of Land Titles and Deeds. Although the non-registration of a deed of donation shall not
affect its validity, the necessity of registration comes into play when the rights of third persons are
affected.

True, that notwithstanding the preference given to a registered lien, this Court has made an
exception in a case where a party has actual knowledge of the claimant’s actual, open, and notorious
possession of the disputed property at the time the levy or attachment was registered. In such
situations, the actual notice and knowledge of a prior unregistered interest, not the mere possession
of the disputed property, was held to be equivalent to registration. In the absence of proof that
respondents had knowledge of petitioners' interest over the land at the time the property was
purchased this Court must rule that they are not bound by the unregistered donation. Respondents
are the rightful owners of the land and are entitled to possession.

G. PRESCRIPTION
1. Instances where Prescription is not allowed

JOSE S. RAMISCAL, JR. v. COMMISSION ON AUDIT

G.R. No. 213716, October 10, 2017, JARDELEZA, J.:

Article 1108 (4) of the Civil Code expressly provides that prescription does not run against the State
and its subdivisions.

FACTS:

11th Congress (1998 to 2001), the Senate's Committees on Accountability of Public Officers and
Investigations (Blue Ribbon) and National Defense and Security held hearings to investigate the
alleged anomalous acquisitions of land by the Armed Forces of the Philippines Retirement and
Separation Benefits System (AFP-RSBS) in Calamba, Laguna and Tanauan, Batangas. Prompted by
a series of resolutions by the Senate, the Deputy Ombudsman for the Military and other Law
Enforcement Offices sent to the COA a request dated April 29, 2004 for the conduct of audit on
past and present transactions of the AFP-RSBS.

On July 28, 2010, the SAT issued Notice of Disallowance (ND) and Notice of Charge (NC). The ND
directed petitioner, Liang, Garcia, and Ragasato immediately settle the amount of P250,318,200
representing excess payment for the Calamba properties.

Ramiscal now explains that the transaction subject of the ND and NC occurred in 1997, a year before
he resigned in 1998. He concluded that in accordance with Articles 1149 and 1153, the COA has until
2003 within which to issue an ND or NC. As it happened, however, it was only in 2004 when the
audit investigation transpired. Consequently, the ND and NC issued against him in 2010 have
already prescribed.

ISSUE:

Whether the action of the COA in issuing the ND and NC had already prescribed.

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RULING:

No. The right of the State, through the COA, to recover public funds that have been established to
be irregularly and illegally disbursed does not prescribe.

Article 1108 (4) of the Civil Code expressly provides that prescription does not run against the State
and its subdivisions. This rule has been consistently adhered to in a long line of cases involving
reversion of public lands, where it is often repeated that when the government is the real party in
interest, and it is proceeding mainly to assert its own right to recover its own property, thee can, as
a rule, be no defense grounded on laches or prescription. We find that this rule applies, regardless
of the nature of the government property. Article 1108 (4) does not distinguish between real or
personal properties of the State. There is also no reason why the logic behind the rule's application
to reversion cases should not equally apply to the recovery of any form of government property. In
fact, in an early case involving a collection suit for unpaid loans between the Republic and a private
party, the Court, citing Article 1108 (4) of the Civil Code, held that the case was brought by the
Republic in the exercise of its sovereign functions to protect the interests of the State over a public
property.

Even if we follow petitioner's argument that Articles 1149 and 1153 of the Civil Code apply here, the
action of the COA is still not barred by the statute of limitations. Indeed, petitioner's actions
occurred in 1997, after the consummated sale of the Calamba properties and its supposed inclusion
in the account of the AFP-RSBS. However, the COA's cause of action would accrue later, for it was
only in 2004 when it was informed of a possible irregularity of the sale when the Ombudsman
requested it to conduct an audit of prior transactions of the AFP-RSBS.

2. Prescription or Limitation of Actions

JOSE DIAZ, JR. (HEREIN SUBSTITUTED BY HIS LEGAL HEIRS VERONICA BOLAGOT-DIAZ
AND RIO ANGELA BOLAGOT-DIAZ) AND ADELINA D. McMULLEN v. SALVADOR
VALENCIANO, JR., [DECEASED] SUBSTITUTED BY MADELINE A. VALENCIANO, RANIL A.
VALENCIANO, ROSEMARIE V. SERRANO, SHEILA VALENCIANO-MOLO AND JOHN-LYN
VALENCIANO-VARGAS
G.R. No. 209376, December 06, 2017, PERALTA, J.:

Article 1144 (3) of the New Civil Code pertains to the prescriptive period to enforce or revive a final
judgment.

FACTS:

A complaint for unlawful detainer was filed by Jose Diaz, Jr. and his sister against Salvador
Valenciano. On July 30, 1992, petitioners and Salvador entered into a Compromise Agreement
where they agreed to amicably settle the civil case provided that: (a) Salvador Sr. will vacate and
surrender the property to petitioner Diaz on January 31, 1994;

For failure of Salvador to vacate the subject property in accordance with the Compromise
Agreement, Diaz filed on February 1, 1994 an Ex-Parte Motion for Execution which was granted on

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February 4, 1994. By sheer tolerance, petitioners allegedly chose not to implement the writ of
execution, and allowed Salvador to stay on the property.

On February 9, 2009, or after more than fifteen (15) years from the issuance of the writ of execution,
petitioners sent a demand letter and filed an unlawful detainer against Salvador Jr., who refused to
vacate the property despite notice. Salvador now argues that the case must be dismissed for being
barred by laches.

ISSUE:

Whether or not petitioners' inaction for a period of about 15 years after the issuance of the writ of
execution calls for the application of the equitable doctrine of estoppel by laches under Article 1144
(3) of the New Civil Code.

RULING:

NO. Suffice it to state that Article 1144 (3) of the New Civil Code pertains to the prescriptive period
to enforce or revive a final judgment. Granted that respondents can no longer enforce the judgment
in the first unlawful detainer case due to the lapse of the reglementary period to execute the same,
they can still file a similar action involving the same property based on the different cause of action.

Under Article 1144 (3), in relation to Article 1152 of the New Civil Code and Section 6, Rule 39 of the
Rules of Court, once a judgment becomes final and executory, the prevailing party may have it
executed as a matter of right by mere motion within five (5) years from the date of entry of
judgment. If such party fails to have the decision enforced by a motion after the lapse of 5 years,
the same judgment is reduced to a right of action which must be enforced by the institution of a
petition in a regular court within ten (10) years from the time the judgment becomes final;
otherwise, the judgment can no longer be executed, for being barred by laches. Verily, the said
provisions on enforcement and revival of judgment do not apply to the filing of a subsequent action
which is based on a different cause of action.

JOSE S. OCAMPO v. RICARDO S. OCAMPO

GR No. 227894, Jul 05, 2017, VELASCO JR., J.

An action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten
(10) years, the point of reference being the date of registration of the deed or the date of the issuance
of the certificate of title over the property.

However, the Court, has permitted the filing of an action for reconveyance despite the lapse of more
than ten (10) years from the issuance of title whereinthe plaintiffs therein were in actual possession of
the disputed land, converting the action from reconveyance of property into one for quieting of title.

FACTS:

Jose and Ricardo are siblings of the late Basilio Ocampo and Juliana Sunglao. The case arose from a
complaint filed by Ricardo against Jose for partition and annulment of TCT issued. Ricardo alleged
that he and Jose are co owners of the Subject Property, which was a conjugal property left by their
parents. Both Jose and Ricardo were residing at the subject property at the time the complaint was

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filed. Ricardo claimed that Jose and his wife conspired in falsifying his signature on a notarized
Extra-Judicial Settlement with Waiver ("ESW") effecting the transfer of the property in the name of
Jose. An Information was filed against Jose and the notary. Ricardo requested for partition of the
property, but petitioner refused. Worse, he secretly mortgaged the property.

Jose raised the affirmative defense of prescription. He argued that the TCT became indefeasible one
year after its issuance and that the action to annul it had prescribed since it was filed 21 years and 7
months from the issuance of the title. He further claimed that the action to annul the ESW is a
collateral attack on the title, and the rule on non-prescription against a co-owner does not apply
since he and his wife had become exclusive owners of the Subject Property.

ISSUES:

1. Whether or not the action for annulment of title and partition has already prescribed
2. Whether the present action is barred by laches

RULING:

1. NO, Prescription has not set in.

Under the Torrens System as enshrined in P.D. No. 1529, the decree of registration and the
certificate of title issued become incontrovertible upon the expiration of one (1) year from the date
of entry of the decree of registration, without prejudice to an action for damages against the
applicant or any person responsible for the fraud. However, actions for reconveyance based on
implied trusts may be allowed beyond the one-year period. An action for reconveyance of a parcel
of land based on implied or constructive trust prescribes in ten (10) years, the point of reference
being the date of registration of the deed or the date of the issuance of the certificate of title over
the property.

However, the Court, has permitted the filing of an action for reconveyance despite the lapse of more
than ten (10) years from the issuance of title wherein the plaintiffs therein were in actual
possession of the disputed land, converting the action from reconveyance of property into
one for quieting of title.

Given the falsity of the ESW, it becomes apparent that Jose obtained the registration through fraud.
This wrongful registration gives occasion to the creation of an implied or constructive trust under
Article 1456 of the New Civil Code. An action for reconveyance based on an implied trust generally
prescribes in ten years. However, if the plaintiff remains in possession of the property, the
prescriptive period to recover title of possession does not run against him. In such case, his action
is deemed in the nature of a quieting of title, an action that is imprescriptible.

In this case, the complaint for partition and annulment of the title was only filed more than twenty
(20) years since the assailed title was issued. Respondent's complaint before the RTC would have
been barred by prescription. However, based on respondent's submission before the trial court,
both petitioner and respondent were residing at the subject property at the time the complaint was
filed. Hence, the present case may be treated as an action for quieting of title.

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Quieting of title is a common law remedy for the removal of any cloud, doubt, or uncertainty
affecting title to real property. The two indispensable requisites must concur, namely: (1) the
plaintiff or complainant has a legal or an 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 his
title must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity
or legal efficacy.

The present action is also not barred by laches

Ricardo did not sleep on his rights, as claimed by petitioner. It is undeniable that respondent had
filed several cases to assert his rights over the property. Aside from the present complaint,
respondent also filed, on separate occasions, three criminal complaints.Time and again, this Court
has ruled that courts, under the principle of equity, will not be guided or bound strictly by the
statute of limitations or the doctrine of laches when to do so, manifest wrong or injustice would
result.

IN VIEW OF THE FOREGOING, the petition is DENIED.

III. OBLIGATIONS AND CONTRACTS

A. OBLIGATIONS

1. SOURCES OF OBLIGATIONS

UNITED ALLOY PHILIPPINES CORPORATION, SPOUSES DAVID C. CHUA and LUTEN

CHUA, v. UNITED COCONUT PLANTERS BANK
G.R. No. 175949. January 30, 2017, Peralta, J.

Obligations arising from contracts have the force of law between the contracting parties and should
be complied with in good faith.

FACTS:

Petitioner United Alloy Philippines Corporation (UNIALLOY) applied for and was granted credit
accommodation by Respondent United Coconut Planters Bank (UCPB) in the amount of P50,000,
as evidenced Credit Agreement, secured by a Surety Agreement executed by UNIALLOY Chairman
Jakob Van Der Sluis (Van Der Sluis), UNIALLOY President, David Chua and his wife, Luten Chua
(Spouses Chua), and one Yang Kim Eng. 6 Promissory Notes were later executed by UNIALLOY in
UCPB’s favor. A “lease-purchase” contract was also entered into as part of the consideration for the
credit accommodation. For this, UNIALLOY was to purchase several real properties which UCPB
co-owns with the Development Bank of the Philippines (DBP).

An Action for Sum of Money with Prayer for Preliminary Attachment was filed against the sureties
when UNIALLOY failed to pay its loan obligations. Afterwhich, UCPB also unilaterally rescinded
the lease-purchase contract.

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In turn, UNIALLOY filed against UCPB, UCPB Vice-President Robert Chua and Van Der Sluis a
complaint for Annulment and/or Reformation of Contract with Damages, with Prayer for a Writ
of Preliminary Injunction or Temporary Restraining Order. UNIALLOY contended that Van Der
Sluis, in cahoots with UCPB Vice-President Robert Chua, committed fraud, manipulation and
misrepresentation to obtain the subject loan for their own benefit. UNIALLOY prayed, among
others, that three (3) of the six (6) Promissory Notes it executed be annulled or reformed or that
it be released from liability thereon.

The RTC rendered Judgment in the collection case in favor of UCPB. CA affirmed.

ISSUE:

WON herein Petitioners, together with their co-defendants Van Der Sluis and Yang, are liable to
pay respondent the amounts awarded by the RTC.

RULING:

Yes. Regarding the Petitioner’s liability to pay, as ruled by the lower courts, UNIALLOY failed to
pay its obligations under the above promissory notes and that herein petitioner Spouses Chua,
together with their co-defendants Van Der Sluis and Yang freely executed a Surety Agreement
whereby they bound themselves jointly and severally with UNIALLOY, to pay the latter's loan
obligations with UCPB.

Article 1159 of the Civil Code expressly provides that "obligations arising from contracts have the
force of law between the contracting parties and should be complied with in good faith." The
lower courts found nothing which would justify or excuse petitioners from non-compliance with
their obligations under the contract they have entered into. Thus, it becomes apparent that
petitioners are merely attempting to evade or, at least, delay the inevitable performance of their
obligation to pay under the Surety Agreement and the subject promissory notes which were
executed in respondent's favor.

The Court notes, however, that the interest rates imposed on the subject promissory notes were
made subject to review and adjustment at the sole discretion and under the exclusive will of
UCPB. In fact, based on the attached Consolidated Statement of Account, UCPB has already
imposed a 24% interest rate on the total amount due on respondents' peso obligation for a short
period of six months. Settled is the rule that any contract which appears to be heavily weighed in
favor of one of the parties so as to lead to an unconscionable result is void. Any stipulation
regarding the validity or compliance of the contract which is left solely to the will of one of the
parties, is likewise, invalid. Excessive interests, penalties and other charges not revealed in
disclosure statements issued by banks, even if stipulated in the promissory notes, cannot be given
effect under the Truth in Lending Act.

The Court, thus, finds it proper to modify the interest rates imposed on respondents' obligation.
Pursuant to the ruling in Nacar v. Gallery Frames, et al., the sums of US$435,494.44 and PhP26,
940,950.80 due to UCPB shall earn interest at the rate of 12% per annum from the date of default,
on August, 1, 2001, until June 30, 2013 and thereafter, at the rate of 6% per annum, from July 1, 2013
until finality of this Decision. The total amount owing to UCPB as set forth in this Decision shall

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further earn legal interest at the rate of 6% per annum from its finality until full payment thereof,
this interim period being deemed to be by then an equivalent to a forbearance of credit.

Finally, pursuant to the parties' Credit Agreement as well as the subject Promissory Notes,
respondents are also liable to pay a penalty charge at the rate of 1% per month or 12% per annum.

2. KINDS OF OBLIGATIONS

WILLIAM C. LOUH, JR. AND IRENE L. LOUH v. BANK OF THE PHILIPPINE ISLANDS
G.R. No. 225562, March 08, 2017, Reyes, J.

When the stipulation on the interest rate and penalty charges is void because it is excessive and
unconscionable, it is as if there was no express contract thereon. Courts may reduce the interest rate
as reason and equity demand.

FACTS:

BPI issued a credit card to William with Irene as extension card holder, where the parties stipulated
that 3.5% finance charge and 6% late payment charge shall be imposed monthly upon unpaid credit
availments. Spouses Louh made purchases but they were remiss in their obligations. They owed BPI
the total amount of P533,836.27. Despite repeated verbal and written demands, the Spouses Louh
failed to pay BPI so a complaint for collection of a sum of money was filed. Spouses Louh failed to
file a timely Answer, they only filed one more than three months after the reglementary period. The
RTC declared the spouses in default and found for BPI which the CA sustained.

ISSUE:

W/N the CA erred in sustaining BPI’s complaint

RULING:

NO. Rules are to be relaxed only in the furtherance of justice and to benefit the deserving. Their
liberal construction in exceptional situations should then rest on a showing of justifiable reasons
and of at least a reasonable attempt at compliance with them. When they were declared in default,
they filed no motion to set aside the RTC's order, a remedy which is allowed The Spouses Louh
failed to show that they exerted due diligence in timely pursuing their cause so as to entitle them
to a liberal construction of the rules, which can only be made in exceptional cases.

The Spouses Louh slept on their rights to refute BPI's testimonial and documentary evidence,
including the receipt of the SOAs and demand letters. BPI cannot be made to pay for the Spouses
Louh's negligence, omission or belated actions.

However, the interest and monthly penalty are excessive and unconscionable.

While C.B. Circular No. 905-82, which took effect on January 1, 1983, effectively removed the ceiling
on interest rates, 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

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lead to a hemorrhaging of their assets. Since the stipulation on the interest rate is void, it is as if
there was no express contract thereon. Hence, courts may reduce the interest rate as reason and
equity demand.

The same is true with respect to the penalty charge. Article 1229 of the Civil Code states:

Art. 1229. The judge shall equitably reduce the penalty when the
principal obligation has been partly or irregularly complied with by
the debtor. Even if there has been no perfom1ance, the penalty may
also be reduced by the courts if it is iniquitous or unconscionable.

BPI imposed a cumulative annual interest of 114%, plus 25% of the amount due as attorney's fees.
The finance and late payment charges to be imposed on the principal amount are reduced to 12%
each per annum.

3. EXTINGUISHMENT OF OBLIGATIONS
a. PAYMENT OR PERFORMANCE
i.CONSIGNATION

TEDDY CASTRO AND LAURO SEBASTIAN v. PABLITO V. MENDOZA, SR., ET AL.

G.R. No. 212778, April 26, 2017, JARDELEZA, J.:

In tender or consignation is an indispensable requirement to the proper exercise of the right of

redemption.

FACTS:

The property is part of a parcel of land originally covered by TCT No. T-20427 registered in the
name of Simeon Santos, married to Laura Cruz (original Santos property). Upon the death of
Simeon, his compulsory heirs, executed a deed of extrajudicial partition with waiver of rights and
sale on May 16, 1977.

Petitioners, on the other hand, are agricultural tenants of the original Santos property. From July
1981 when Teddy substituted his mother Rosalina Castro in the tenancy of the original Santos
property, he has been in its actual possession, occupation, and cultivation, personally performing
all aspects of production with the aid of labor from the other petitioner Sebastian and paying the
agreed lease rentals.

The controversy started when Jesus (owner-heir) sold his share in the original Santos property to
respondent Municipality on October 27, 1992. Jesus sold his undivided interest therein which the
respondent Municipality acquired for the expansion and construction of the Bustos public market.
As of 1989, the lots surrounding the first public market in respondent Municipality, including the
original Santos property and the portion sold by Jesus, have been classified as a commercial area.

On August 22, 1994, after the inauguration of the public market, petitioners filed their complaint
for Maintenance of Peaceful Possession with prayer for Restraining Order/Preliminary Injunction;
Pre-emption and Redemption; and Damages before the PARAD against respondent Municipality.

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In their complaint, petitioners "categorically manifested their serious intent to exercise their rights
of pre-emption and redemption provided for under Sections 11 and 12, Republic Act No. 3884, as
amended.” On August 26, 1994, petitioners deposited the amount of P2,300.00 as redemption price
for the property.

PARAD, judgment rendered in favor of petitioners and against defendants Santos and the
Municipality of Bustos. Likewise, petitioners are entitled to exercise the right of redemption of the
property in question. DARAB modified the decision of the PARAD, directing instead respondent
Municipality to pay disturbance compensation to petitioners. The CA affirmed the uniform rulings
of the PARAD and the DARAB that petitioners are tenants of the property who did not receive
notice of its sale by Jesus. The CA reinstated the PARAD's original ruling.

ISSUES:

1. Whether petitioners validly exercised their right of redemption under Section 12 of Republic Act
No. 3844 (RA 3844), as amended by RA 6389; and
2. Whether petitioners may recover possession, and obtain ownership, of the property.

RULING:

1. Jurisprudence instructs that tender or consignation is an indispensable requirement to the

proper exercise of the right of redemption by the agricultural lessee. An offer to redeem is
validly effected through: (a) a formal tender with consignation, or (b) a complaint filed in
court coupled with consignation of the redemption price within the prescribed period. In
making a repurchase, it is not sufficient that a person offering to redeem merely manifests
his desire to repurchase. This statement of intention must be accompanied by an actual and
simultaneous tender of payment of the full amount of the repurchase price, i.e., the
consideration of the sale, otherwise the offer to redeem will be held ineffectual.

Applying the foregoing, we find that petitioners did not validly exercise their right of
redemption. The filing of the complaint should have been coupled with the consignation of
the redemption price to show their willingness and ability to pay within the prescribed
period.

2. No. Petitioners cannot gain possession and continue tenancy of the property which is
undeniably devoted to public use.

As far back as Manila Railroad Company v. Paredes, we have held that a registered owner may
be precluded from recovering possession of his property and denied remedies usually afforded
to him against usurpers, because of the irremediable injury which would result to the public in
general. In that case, a registered owner failed to recover possession of the litigated property
and the Court made a factual finding that the land owner acquiesced to petitioner Manila
Railroad Company's occupation of the land.

Fairly recent, in Forfom Development Corporation v. Philippine National Railways, citing Manila
Railroad Company v. Paredes, we again disallowed recovery of possession of the property by
the landowner on grounds of estoppel and, more importantly, of public policy which imposes
upon the public utility the obligation to continue its services to the public. We ruled that

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Forfom consented to the taking of its land when it negotiated with PNR knowing fully well that
there was no expropriation case filed at all.

By contrast, petitioners are not registered owners, but possessors who ought to be in
continuous cultivation and possession of the property. Their belated and ineffective
redemption of the property, coupled with their collection of rentals from private respondents,
speaks volumes of their acquiescence to the classification and public use of the property. In
fact, petitioners awaited inauguration of the public market before they filed suit against
respondent Municipality to recover possession of the property. During construction of the
public market for more than a year, petitioners did not appear to question their dispossession
from the property.

Nonetheless, as valid tenants-possessors of the property, petitioners are entitled to disturbance

compensation under Section 36 (1) of RA 3844, as amended.

b. COMPENSATION

CALIFORNIA MANUFACTURING COMPANY, INC. v. ADVANCED TECHNOLOGY SYSTEM,

INC.
G.R. No. 202454, April 25, 2017, SERENO, J.:

For there to have legal compensation, debts must be liquidated and demandable. Liquidated debts
are those whose exact amounts have already been determined.

FACTS:
CMCI is a domestic corporation engaged in the food and beverage manufacturing business.
Respondent ATSI is also a domestic corporation that fabricates and distributes food processing
machinery and equipment, spare parts, and its allied products.

In 2001, CMCI leased from ATSI a Prodopak machine. In 2003, ATSI filed a Complaint for Sum of
Money against CMCI to collect unpaid rentals. CMCI moved for the dismissal of the complaint on
the ground of extinguishment of obligation through legal compensation.

CMCI averred that ATSI was one and the same with Processing Partners and Packaging Corporation
(PPPC), which was a toll packer of CMCI products. To support its allegation, CMCI submitted
copies of the Articles of Incorporation and General Information Sheets (GIS)9 of the two
corporations. CMCI pointed out that ATSI was even a stockholder of PPPC as shown in the latter's
GIS.

CMCI alleged that in 2000, PPPC agreed to transfer the processing of CMCI's product line from its
factory. Upon the request of PPPC, through its Executive Vice President Felicisima Celones, CMCI
advanced ₱4 million as mobilization fund. PPPC President and Chief Executive Officer Francis
Celones allegedly committed to pay the amount in 12 equal instalments deductible from PPPC's
monthly invoice to CMCI beginning in October 2000. CMCI likewise claims that in a letter,
Felicisima proposed to set off PPPC's obligation to pay the mobilization fund with the rentals for
the Prodopak machine.

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CMCI argued that the proposal was binding on both PPPC and A TSI because Felicisima was an
officer and a majority stockholder of the two corporations.

ISSUE:

Whether legal compensation between ATSI's claim against CMCI on the one hand, and the latter's
claim against PPPC on the other hand, has set in.

RULING:

No. There is no mutuality of parties to justify the application of legal compensation in this case.
Article 1279 of the Civil Code provides:

ARTICLE 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.

The law, therefore, requires that the debts be liquidated and demandable. Liquidated debts are
those whose exact amounts have already been determined.

CMCI has not presented any credible proof, or even just an exact computation, of the supposed
debt of PPPC. It claims that the mobilization fund that it had advanced to PPPC was in the amount
of ₱4 million. Yet, Felicisima's proposal to conduct offsetting in her letter dated 30 July 2001
pertained to a ₱3.2 million debt of PPPC to CMCI. Meanwhile, in its Answer to ATSI's complaint,
CMCI sought to set off its unpaid rentals against the alleged ₱10 million debt of PPPC. The
uncertainty in the supposed debt of PPPC to CMCI negates the latter's invocation of legal
compensation as justification for its non-payment of the rentals for the subject Prodopak machine.

B. CONTRACTS
BANKARD, INC. v. LUZ P. ALARTE
G.R. No. 202573, April 19, 2017, DEL CASTILLO, J.:

Every credit card transaction involves three contracts, namely: (a) the sales contract between the
credit card holder and the merchant or the business establishment which accepted the credit card; (b)
the loan agreement between the credit card issuer and the credit card holder; and lastly, (c) the
promise to pay between the credit card issuer and the merchant or business establishment

FACTS:

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In 2007, Bankard, Inc. filed a collection case against Alarte before the MeTC alleging that Alarte
applied for and was granted credit accommodations; that using the credit card, Alarte availed
herself of credit accommodations by "purchasing various products"; that per Statement of Account,
Alarte’s credit availments amounted to a total of ₱67,944.82, inclusive of unbilled monthly
installments, charges and penalties or at least the minimum amount due under the credit card; and
that Alarte failed and refuses to pay her obligations despite her receipt of a written demand.
MeTC and RTC dismissed the complaint on the ground of insufficiency of evidence since it only
presented a single statement of account which does not contain the particulars of purchase
transactions entered into by the latter. This was affirmed by CA.

ISSUE:

Whether or not Bankard, Inc. failed to establish its claim by mere proof of statement of account.

RULING:

No. This Court cannot completely blame the MeTC, RTC, and CA for their failure to understand or
realize the fact that a monthly credit card statement of account does not always necessarily involve
purchases or transactions made immediately prior to the issuance of such statement; certainly, it
may be that the card holder did not at all use the credit card for the month, and the statement of
account sent to him or her refers to principal, interest, and penalty charges incurred from past
transactions which are too multiple or cumbersome to enumerate but nonetheless remain unsettled
by the card holder. This Court cannot judge them for their lack of experience or practical
understanding of credit card arrangements, although it would have helped if they just endeavored
to derive such an understanding of the process.

The case is remanded to the Me TC where petitioner would be required to amend its Complaint
and adduce additional evidence to prove its case; that way, the lower court can better understand
the nature of the claim, and this time it may arrive at a just resolution of the case. This is to say that
while the Court believes that petitioner's claim may be well-founded, it is not enough as to allow
judgment in its favor on the basis of extant evidence. It must prove the validity of its claim; this it
may do by amending its Complaint and adducing additional evidence of respondent's credit history
and proving the loan transactions between them. After all, credit card arrangements are simple loan
arrangements between the card issuer and the card holder.

Simply put, every credit card transaction involves three contracts, namely: (a) the sales contract
between the credit card holder and the merchant or the business establishment which accepted the
credit card; (b) the loan agreement between the credit card issuer and the credit card holder; and
lastly, (c) the promise to pay between the credit card issuer and the merchant or business
establishment.

DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH) SECRETARY SIMEON

DATUMANONG ET. AL. V.MARIA ELENA MALAGA
G.R. No. 204906, 5 June 2017, Del Castillo J.:

Without a formal award of the project in her favor, such a demand would be premature. Consequently,
she has no right of action against petitioners, and no cause of action in Civil Case No. 27059. Indeed,
"only when there is an invasion of primary rights, not before, does the adjective or remedial law

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become operative. Verily, a premature invocation of the court's intervention renders the complaint
without a cause of action and dismissible on such ground."

FACTS:

Malaga owns B.E. Construction, a private contractor and the lowest bidder for two concreting
projects of the Department of Public Works and Highways (DPWH), particularly:
a. Mandurriao-San Miguel Road, Barangay Hibao-an Section in Iloilo City; and
b. Mandurriao-San Miguel Road, Guzman-Jesena Section in Iloilo City as well.

It appears that after the publication of the invitation to bid but prior to the scheduled bidding, the
road condition of the Mandurriao-San Miguel Road in Barangay Hibao-an severely deteriorated to
an almost impassable state on account of the prevailing typhoon and monsoon season, prompting
calls for immediate repairs and other appropriate action from local government units (LGUs ), a
Member of the House of Representatives, and concerned private citizens and interest groups.
Tingson, DPWH Iloilo City District Engineer, thus requested his immediate superior, DPWH
Region VI Director Agustino, that the two concreting projects be implemented by administration,
that is, that these projects be undertaken directly and immediately by the government, on account
of urgency, and thus taken out of the list of projects bid out to private contractors.

DPWH Undersecretary and Bonoan personally inspected the area covered by the proposed projects
recommended that the subject projects be undertaken by administration. Agustino sent a letter to
Datumanong reiterating his earlier request. Since no response was forthcoming from Datumanong,
the DPWH Regional Office VI proceeded with the dropping and opening of bids as scheduled. Thus,
Malaga won as the lowest bidder for the above-mentioned projects.

Datumanong issued a Memorandum of even date approving the DPWH Regional Office VI request,
but only with respect to the Mandurriao-San Miguel Road, Barangay Hibao-an Section considering
the exigent circumstances prevailing. Pursuant to Datumanong's Memorandum, Lagoc, Jerecia and
Gardose, Bids and Awards Committee members, conducted the postevaluation/ qualification of
Malaga's firm, but only for the Mandurriao-San Miguel Road, Guzman-Jesena Section project where
she was declared postqualified for the project, and the same was awarded to her.

Three days after, Lagoc informed Malaga that the Mandurriao San Miguel Road, Barangay Hibao-
an Section project may not be awarded to her, in view of Datumanong's Memorandum. Malaga
replied with formal written demands that the project be awarded to her in spite of Datumanong' s
directive, under pain of civil action and claim for damages. Lagoc wrote back disavowing any
liability and claiming that Datumanong's directive was a supervening event that prevented the
award of the subject project to respondent, and until it is nullified or set aside, the Mandurriao-San
Miguel Road, Barangay Hibao-an Section project shall be undertaken by administration as
directed.

This prompted Malaga to file a civil action for damages. RTC issued an Order dismissing the on the
conclusion that the instant case is a suit against the state and therefore dismissible for it cannot be
sued without its consent. Upon appeal, the CA granted the appeal and remanded this case to the
trial court for proper disposition on its merits. The Court discussed that an unincorporated
government agency such as the DPWH is without any separate juridical personality of its own and
hence enjoys immunity from suit. Even in the exercise of proprietary functions incidental to its

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primarily governmental functions, an unincorporated agency still cannot be sued without its
consent. Petitioners sought to reconsider, but were rebuffed. Hence, the present petition.

ISSUES:

W/N the complaint was a suit against the state to which it has not given its consent to be suit.
W/N Malaga failed to allege any actionable wrong that would entitle her to the damages claimed.

RULING:

PETITION GRANTED. Civil Case dismissed.

Before a government project is awarded to the lowest calculated bidder, his bid must undergo a
mandatory post-qualification procedure whereby the "procuring entity verifies, validates, and
ascertains all statements made and documents submitted by the bidder with the lowest calculated
or highest rated bid using a non-discretionary criteria as stated in the bidding documents."

In one case, bidders in a government project sought to enjoin the award and implementation
thereof, arguing that as the bidders who submitted the lowest numerical bid, they were entitled to
the award. This Court disagreed. Thus, the Court held in said case that –

As correctly pointed out by the respondents, the mere submission of the lowest bid does not
automatically entitle the petitioners to the award of the contract. The bid must still undergo
evaluation and post qualification in order to be declared the lowest responsive bid and thereafter
be awarded the contract. As provided in the Invitation to Apply for Eligibility and to Bid, 'the
Government reserve[s] the right to reject any and all bids, waive any minor defect therein, and
accept the offer most advantageous to the Government.' Such reservation subjects the bidders to
the right of the Government to reject, and consequently accept, any and all bids at its discretion.
Unless such discretion has been arbitrarily exercised causing patent injustice, the Court will not
supplant its decision to that of the agency or instrumentality which is presumed to possess the
technical expertise on the matters within its authority.

From the foregoing, it must be concluded that since Malaga's lowest calculated bid for the subject
project did not undergo the required post-qualification process, then she cannot claim that the
project was awarded to her. And if the project was never awarded to her, then she has no right to
undertake the same. If she has no right to the project, then she cannot demand indemnity for lost
profits or actual damages suffered in the event of failure to carry out the same. Without a formal
award of the project in her favor, such a demand would be premature. Consequently, she has no
right of action against petitioners, and no cause of action in Civil Case No. 27059. Indeed, "only
when there is an invasion of primary rights, not before, does the adjective or remedial law become
operative. Verily, a premature invocation of the court's intervention renders the complaint without
a cause of action and dismissible on such ground."

It may be argued that respondent's claim for damages is likewise potentially premised on Article 27
of the Civil Code, which provides that –

Art. 27. Any person suffering material or moral loss because a public servant or employee refuses
or neglects, without just cause, to perform his official duty may file an action for damages and other

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relief against the latter, without prejudice to any disciplinary administrative action that may be
taken.

In this case, Malaga may claim that individual DPWH's refusal or neglect to award the project to
her is the cause of her injury. However, this Court still finds that Malaga has no cause of action.
Individual petitioners could not have awarded the project to her precisely for the reason that her
bid still had to undergo a post-qualification procedure required under the law. However, such post-
qualification was overtaken by events, particularly Datumanong's November 7, 2001 Memorandum.

In short, respondent's causes of action solely and primarily based on a supposed award, actual or
potential, do not exist. This is so for the precise reason that such an award and the whole bidding
process for that matter, no longer exist, as they were mooted and superseded by the DPWH's
decision to undertake the subject project by administration, as well as by the reservation contained
in the Invitation to Bid that at any time during the procurement process, government has the right
to reject any or all bids.

With the foregoing disquisition, the Court finds no need to resolve the other issues and arguments
raised by the parties.

SWIRE REALTY DEVELOPMENT CORPORATION v. SPEACIALTY CONTRACTS GENERAL

AND CONSTRUCTION SERVICES, INC. AND JOSE JAVELLANA
G.R. No. 188027, August 9, 2017, Reyes, Jr., J

By entering into the Agreement and signifying their acceptance thereto, it is understood therefore that
the respondents undertook to perform all works necessary to fulfill the primary obligation.

FACTS:

A complaint for sum of money was filed by SWIRE REALITY DEVELOPMENT CORPORATION
(Swire) against SPECIALTY CONTRACTS GENERAL AND CONSTRUCTION SERVICES INC.
(Specialty) in the RTC. The complaint alleges a breach of contract. Specifically, Specialty undertook
to perform waterproofing works on Swire’s condominium project to be completed in 100 days from
the date of its constitution. On the other hand, Swire shall pay 20% of the compensation as down
payment and the remaining 80% shall be paid monthly based on accomplished work, subject to a
10% retention fee and a 1% withholding tax. The agreement likewise provided for a penalty in case
of delay in the performance of their respective obligations and that the retention fee shall be
released to Specialty within 90 days from turnover and acceptance of Swire of the completed work.
However, Specialty was only able to accomplish 90% of the task and that despite demand, they
failed to deploy their workers.

The RTC ruled in favour ruled in favour of Swire. Upon appeal, the CA reversed the decision of the
RTC which directed Swire to pay the amount it owed to Specialty based on the agreement and an
additional amount for the additional works that the latter performed.

ISSUE:

Whether the decision of CA was correct?

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RULING:

No. The CA, in concluding that additional works were performed, relied on the testimony during
trial that instructions were given to the respondent to waterproof the pool again as a result of its
change in depth. The CA then made reference to the Site Instruction Form issued by the person in
charge of the project Hector Gallegos as to the extent and scope of the works accomplished.

The Court does not agree with the foregoing findings of the CA. A plain reading of the Agreement
reveals that the works performed and accomplished are included in the Scope of Works therein
agreed upon.

As correctly pointed out by the petitioner, a mere statement in the Site Information Form that
"2nd waterproofing after lightweight concrete topping" should be done on the swimming pool, does
not automatically mean that the same constitutes additional work. In the absence of evidence to
the contrary, it is implied that such work is deemed included in the enumeration of the Swimming
Pool as a covered area in the Agreement.

By entering into the Agreement and signifying their acceptance thereto, it is understood therefore
that the respondents undertook to perform all works necessary to accomplish the waterproofing
requirements in the entire 234.20 square meters of the swimming pool.

Had the respondent really believed the same to be an additional work to be performed, it should
have, prior to performing the same, raised the matter with the petitioner.

Evident from the foregoing facts, there being a clear breach of contract on the part of the
respondents when they failed to fully comply with their obligation under the contract, having
accomplished only 90% of the waterproofing works within the time agreed upon, and failing to
perform the necessary repairs, they are liable for damages and are bound to refund the excess in
payment made by the petitioner.

Likewise, the respondents are liable for the costs incurred by the petitioner in hiring the services of
Esicor to complete their unfinished work in consonance with Article 1167 of the New Civil Code,
which states that if a person obliged to do something fails to do it, the same shall be executed at his
cost.

With respect to the penalty, the petitioner is entitled to damages on account of the respondents'
delay in the performance of their obligation but is reduced by reason of the substantial
accomplishment of the work already performed and absence of bad faith in not completing the
agreement.

On the matter of attorney's fees, the Court finds no basis for giving the award. A mere statement
that a party was forced to litigate to protect his or her interest, without further elaboration, is
insufficient to justify the grant of attorney's fees.

1. ESSENTIAL REQUISITES

Philippine Ports Authority (PPA) Vs. Nasipit Integrated Arrastre and Stevedoring
Services, Inc. (NIASSI)

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G.R. No. 214864, March 22, 2017, Caguiao,J.

A perfected contract may exist, albeit unwritten. Under Article 1315 of the Civil Code, contracts are
perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror.

FACTS:

The Philippine Ports Authority (PPA) is charged with the management and control of all ports in
the Philippines. Nasipit Integrated Arrastre and Stevedoring Services, Inc. (NIASSI) is a duly
organized Philippine corporation engaged in the business of cargo handling.

PPA awarded to NIASSI a 10-year contract to operate as the sole cargo handler at the port of Nasipit,
Agusan del Norte. NIASSI sent its conformity to the Notice of Award on January 3, 2001. In 2004,
PPA advised NIASSI that it received numerous complaints regarding the poor quality of its services
so PPA would take over the cargo-handling services at the Nasipit Port. NIASSI immediately filed a
Petition for Mandamus praying that PPA be directed to formally execute a written contract and
turn over the management and operations of Nasipit Port.

In 2011, the RTC held that PPA should execute a formal ten-year contract in favor of NIASSI.

ISSUE:

W/N the order to execute a contract for a full 10-year term is proper.

RULING:

NO. The term of the perfected contract has already expired.

As to the elements of a contract, there is no dispute as to the subject matter of the contract and the
cause of the obligation. The controversy lies in the consent – whether the Notice of Award gave rise
to a perfected contract. PPA categorically awarded the contract to the petitioner in accordance
with the terms and conditions of the latter’s bid proposal. This is the acceptance of petitioner’s offer
as contemplated by the law. Therefore, the 10-year cargo-handling contract had been perfected on
January 3, 2001, the date when PPA received notice of NIASSI’s conformity to the Notice of Award.

It is worth noting that NIASSI recognized the perfection of the cargo-handling contract in its
Comment to the Petition, saying:

x x x When NIASSI received and signed the “conforme” portion [of

the Notice of Award], there [was] already [a] meeting of minds
between the parties as to the object and cause of the cargo handling
contract, including the terms and duration thereof.

The 10-year cargo-handling contract with NIASSI already expired on January 3, 2011, after the lapse
of 10 years from the date when said contract was perfected. PPA can no longer be directed to
formally execute another contract with NIASSI, since such a directive would unduly lengthen the
term of the cargo-handling contract contrary to the intention of the parties.

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It bears emphasizing, that for a time, PPA assumed the management and operations of the cargo-
handling services at Nasipit Port. The 10-year term of the perfected contract must be deemed
interrupted during the periods when PPA assumed management and control over NIASSI’s cargo-
handling operations. However, even if the Court assumes a conservative stance for purposes of
illustration and sets the cut-off date for NIASSI’s current operations on the date when this Petition
was filed, NIASSI’s total period of operation would be pegged at 12 years, 3 months and 15 days.
Clearly, the 10-year term of the perfected contract had already expired.

2. KINDS OF CONTRACTS

VICENTE L. LUNTAO AND NANETTE L. LUNTAO, v. BAP CREDIT GUARANTY

CORPORATION AND EFREN M. PINEDA
G.R. No. 204412, September 20, 2017, Leonen, J.

The validity of accessory contracts mainly flows from the validity of the principal contracts. A real
estate mortgage is in the nature of an accessory contract. Thus, the validity of a mortgage contract
that was constituted to secure a loan obligation is affected by the validity of the loan contract.

FACTS:

Vicente is the owner of a lot. He then executed an SPA in favour of his sister Nanette to use his lot
as collateral in order to obtain a loan from BAP, a financial institution that was introduced by
Eleanor, their sister, who was also a borrower of BAP. The loan to be obtained was for the
improvement of Nanette’s business named Holy Infant Medical Clinic. When the loan was approved
by BAP, it ordered 900k to be released to the clinic. When the loan became due, BAP sent demand
letters. In reply, Nanette’s brother, Jesus sent, a letter and asked for additional time to settle the
account due to the substantial losses experienced by the clinic. However, the obligation remained
unpaid and prompted BAP to ask for the extra-judicial foreclosure of Vicente’s lot with the RTC
which the latter granted and issued notices of foreclosure and extrajudicial sale.

This prompted Vicente and Nanette to file a complaint in the RTC for the declaration of nullity of
the Real Estate Mortgage. Nanette alleged in the complaint that she was asked by a BAP personnel
to sign blank forms regarding the real estate mortgage, promissory note and disclosure statement.
She signed the forms thinking that it was the bank’s standard operating procedure. She was also
surprised when she received the notice of foreclosure despite not receiving the loan. She also
pointed out that Eleanor’s name was included in the loan documents and that before she received
the notice of foreclosure, she received several demand letters addressed to Eleanor as regards to the
latter’s loan. Vicente and Nanette then claimed that Eleanor’s loan was separate and not secured by
the former’s lot.

During trial, BAP’s employees testified that the loan was actually released and that the amount was
debited from BAP’s account in Security Bank. When they tried to collect the debt from Nanette, no
payment was given.

The RTC ruled in favour of BAP and dismissed the complaint. It found that the loan application
was made by Nanette and Eleanor in behalf of the clinic and that they signed promissory notes for
its payment and that Nanette used the lot of Vicente as security. Further, the RTC found that the
proceeds were actually given to the clinic based on the fact that BAP’s account was debited.

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The RTC gave weight to Jesus' letter. It admitted the existence of the debt, that the loan was
obtained in behalf of the clinic, and that the money was used according to its intended purpose.
The statements of Jesus were not rebutted by Vicente or Eleanor. Further, Vicente and Nanette
failed to present evidence that Eleanor used the loan proceeds for her personal use or that the
foreclosure was because of Eleanor's non-payment of her separate debt. The alleged blank forms
were also not presented in court. Also, there was no evidence presented to support the allegation
that the mortgage was void. Upon appeal to the CA, it affirmed the decision of the RTC.

ISSUE:

Whether the real estate mortgage should be nullified?

RULING:

No. Petitioners argue that since they did not receive any amount from the allegedly approved loan
application, they should not be held liable for its payment. The principal contract being void, the
accessory contract of mortgage was also null and void. However, Petitioners' contention has no
merit.

As an accessory contract, a mortgage contract's validity depends on the loan contract's validity. It
is thus imperative for this Court to determine if the contract of loan between petitioners and private
respondent is valid. This Court has previously held that "like any other contract, a contract of loan
is subject to the rules governing the requisites and validity of contracts in general."

The elements of a valid contract are enumerated in Article 1318 of the Civil Code:
ARTICLE 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;
(3) Cause of the obligation which is established.

All elements should be present in a contract. Otherwise, it cannot be perfected.

Both the RTC and the CA found that Petitioners received the proceeds of the loan through the
account under the name of Holy Infant Medical Clinic/Nanette Luntao/Eleanor Luntao. This
finding was supported by evidence presented by the parties.

Despite having the opportunity to prove that the admission of Jesus is false, petitioners failed to
present rebuttal evidence. They also failed to present evidence to support their allegation that
Eleanor received the loan proceeds or that Eleanor's non-payment of her alleged personal loan with
BAP caused the foreclosure of the mortgage. What petitioners presented were mere denials.
Petition denied.

3. REFORMATION OF INSTRUMENTS

SPOUSES FIRMO S. ROSARIO AND AGNES ANNABELLE DEAN-ROSARIO v. PRISCILLA P.

ALVAR
G.R. No. 212731, September 6 2017, Del Castillo, J.

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Reformation of an instrument is a remedy in equity where a written instrument already executed is

allowed by law to be reformed or construed to express or conform to the real intention of the
parties.The rationale of the doctrine is that it would be unjust and inequitable to allow the
enforcement of a written instrument that does not express or reflect the real intention of the parties.

FACTS:

On separate dates in 1989, Petitioner Agnes Annabelle Dean-Rosario borrowed from Respondent
Priscilla Alvar a total of ₱600,000.00, secured by real estate mortgages over two parcels of land. In
December 1990, the mortgages were discharged. Subsequently, on March 16, 1992 and July 17, 1992,
Agnes executed two Deeds of Absolute Sale over the two lots in favor of Priscilla's daughter,
Evangeline Arceo for the amount of P900, 000.00 each.Evangeline later sold the lots to Priscilla also
for the price of P900, 000.00 each.

On April 27, 1994, Priscilla sent a demand letter to petitioner spouses Rosario asking them to vacate
Lot 1.This prompted petitioner spouses Rosario to file before RTC a Complaint for Declaration of
Nullity of Contract of Sale and Mortgage, Cancellation of Transfer Certificates of Title and Issuance
of new TCTs with Damages, against Priscilla.Petitioner Spouses alleged that Priscilla deceived
Agnes into signing the Deeds of Absolute Sale in favor of Evangeline, as Agnes merely intended to
renew the mortgages over the two lots. Priscilla, in turn, filed with the RTC a Complaint for
Recovery of Possession. She claimed that she is the absolute owner of the subject lots and that
Agnes sold the lots because she was in dire need of money.

The cases were consolidated and the RTC rendered a Decision granting Priscilla's complaint for
recovery of possession while denying petitioner spouses Rosario's complaint for declaration of
nullity of contract of sale. Upon appeal, the CA reversed and ruled that although the transfers from
Agnes to Priscilla were identified as absolute sales, the contracts are deemed equitable mortgages
pursuant to Article 1602. This decision became final and executory.

On October 17, 2007, Priscilla sent a letter to Agnes demanding the payment of her outstanding
obligation amounting to Pl.8 million. Due to the failure or refusal of petitioner spouses Rosario to
heed the demand, Priscilla filed before the Makati RTC, a Complaint for Judicial Foreclosure of Real
Estate Mortgage.The RTC ruled in favor of Respondent and ordered Petitioner Spouses to pay. The
CA affirmed.

ISSUE:

Whether a reformation of the contract is required before the subject lots may be foreclosed?

RULING:

No. Reformation of an instrument is a remedy in equity where a written instrument already

executed is allowed by law to be reformed or construed to express or conform to the real intention
of the parties.The rationale of the doctrine is that it would be unjust and inequitable to allow the
enforcement of a written instrument that does not express or reflect the real intention of the parties.

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In the November 15, 2006 Decision, the CA denied Petitioner Spouses' Complaint for declaration of
nullity of contract of sale on the ground that what was required was the reformation of the
instruments, pursuant to Article 1365of the Civil Code.In ruling that the Deeds of Absolute Sale
were actually mortgages,the CA, in effect, had reformed the instruments based on the true intention
of the parties. Thus, the filing of a separate complaint for reformation of instrument is no longer
necessary because it would only be redundant and a waste of time.

Besides, in the November 15, 2006 Decision, the CA already declared that absent any proof that
petitioner spouses Rosario had fully paid their obligation, respondent may seek the foreclosure of
the subject lots.

In view of the foregoing, we find no error on the part of the CA in ruling that a separate action for
reformation of instrument is no longer necessary as the declaration in the November 15, 2006
Decision that the parties' intention was to execute an equitable mortgage is sufficient reformation
of such instrument.

4. INTERPRETATION OF CONTRACTS

KA KUEN CHUA, doing business under the name and style KA KUEN CHUA
ARCHITECTURAL v. COLORITE MARKETING CORPORATION
G.R. No. 193969-193970, G.R. Nos. 194027-194028, July 5, 2017, REYES, J.

FACTS:

Colorite and Architect Chua doing business under the name and style "Ka Kuen Chua Architectural"
(KKCA), signed a construction contract whereby the latter undertook to build a four-storey
residential/commercial building for the former on a parcel of land located at Makati. In addition to
the main construction contract, the parties also agreed on complementary provisions embodied in
Addendum #01 and Addendum #02.
To undertake the excavation work, Colorite engaged the services of WE Construction Company
(WCC). However, the excavation resulted in erosion, which caused damage to the adjacent
property owned by the Hontiveros family. This prompted the latter to file a formal complaint before
the City Government of Makati. In view of this development, a Hold Order was issued by the
Building Officials of Makati City directing KKCA to stop immediately all its excavation activities in
the premises, and to immediately restore the eroded portion of the adjacent property. The incident
resulted in the delay of the project.

The restoration of the Hontiveros property was completed in October 2005.Notwithstanding this
development, the Hontiveros family's quitclaim remained forthcoming. As a consequence, the Hold
Order remained effective and the construction suspended.

After 878 days of delay, Colorite demanded from KKCA to pay damages pursuant to the contract.
KKCA refused. The dispute impelled Colorite to file the instant claim before the CIAC.

Ruling of the CIAC

On the basis of the evidence submitted by the parties the Arbitral Tribunal finds and so holds:
1. Colorite is entitled to its claim for liquidated damages

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2. Colorite is not entitled to recover its other claims for loss of rental earnings, attorney's fees and
litigation expenses.
3. KKCA is not entitled to its claim for moral and exemplary damages and for attorney's fees; [and]
4. The parties shall bear their respective arbitration costs.

Not satisfied with the CIAC award, both parties filed their respective petitions for review before the
CA.

Ruling of the CA

In addition, the Final Award is MODIFIED with respect to the following:

FOR COLORITE:
1. Colorite is hereby ordered to pay KKCA the amount of Php550,000.00 (Php700,000.00 less P
150,000.00 which it· already advanced) as part of its share in the restoration costs of the Hontiveros
property;
2. Colorite is ordered to share 50% in the total maintenance costs (Php2,047,268.75) or a total
amount of Phpl,023,634.30.

FOR KKCA:
1. KKCA is directed to finish the subject construction project subject to the necessary adjustments
in the contract price;
2. KKCA is enjoined to secure the quitclaim from the Hontiveros family and the lift order from the
city government of Makati in order for the construction project to proceed.

The parties then petitioned before the SC. The following are the arguments of each party;

According to Colorite, the CA erred in:

a) not awarding Colorite full liquidated damages and in ordering the adjustment of the contract
price;
b) ruling that Colorite is liable to share in the restoration costs of the Hontiveros property and
maintenance costs of the project;
c) ruling that KKCA is entitled to its claim for soil protection works.

For its part, KKCA asserts that the CA erred in:

a) finding that excavation and soil protection works are included in KKCA’s responsibilities and
should be deemed included in the Contractor’s Scope of Work indicated in the contract
b) directing KKCA to finish the subject construction project;
c) ruling that KKCA is enjoined to secure the quitclaim from the Hontiveros family, and the lift
order from the City Government of Makati so that the construction project can proceed;
d) awarding Colorite liquidated damages m the amount of Php4,390,000.00;
e) ruling that Colorite is liable only for the amount of Php700,000.00 and not 70% of the costs for
the restoration of the Hontiveros property;
f) not holding Colorite liable for moral damages, exemplary damages, attorney’s fees, arbitration
fees, and other costs of suit

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ISSUE/S:

1) Whether or not KKCA is at fault for the erosion which damaged the Hontiveros property
2) Whether or not soil protection is within the contractor’s scope of work and hence, deemed
included in the contract
3) Whether or not there was an agreement for Colorite to share in the restoration of Hontiveros
property
4) Whether or not KKCA has the obligation to secure the quitclaim from Hontiveros
5) Whether or not Colorite is equally at fault for the delay of the project
5) Whether or not Colorite is entitled to exemplary and liquidated damages and corollarily; whether
or not KKCA is entitled to moral damages damages

RULING:

The instant controversy arose from the delay in the completion of the construction project.The
resolution of the case rests upon an examination of the parties' contractual relationship embodied
in the main construction contract, Addendum #01 and Addendum #02, and the alleged agreement
entered into by the parties where Colorite will contribute Php 700,000.00 in the restoration of the
Hontiveros property.

1) KKCA is at fault for the erosion, which damaged the Hontiveros property

KKCA cannot deny its contractual obligation to ensure that excavation works were properly done.
It is settled that the law does not relieve a party from the effects of an unwise, foolish, or disastrous
contract, entered into with all the required formalities and with full awareness of what he was doing,
and courts have no power to relieve parties from obligations voluntarily assumed, simply because their
contracts turned out to be disastrous deals or unwise investments. Valenti non fit injuria.

The CA was correct when it found that pursuant to paragraph 33 of Addendum #01, and the
pertinent provision of Article XIII of the Main Construction Contract, KKCA assumed the
responsibility of ensuring that properties adjacent to the project are protected from erosion and
settlement

2) Soil protection is within the contractor's scope of work; hence, deemed included in the
contract price

In claiming that it is entitled to be reimbursed for the cost spent for soil protection, KKCA firmly
argued that excavation and soil protection works were not part of its responsibilities. The Court
cannot sanction KKCA's stance. What is material is that KKCA agreed to the stipulations contained
in Addendum #01, which, among others, placed excavation and soil protection works within its
scope of undertakings. Neither does it matter that the stipulations in Addendum #01 and
Addendum #02 were not included in the discussion on the contents of the main Construction
Contract as long as the concerned party was not deprived of ample time to study them. In any event,
it was established that KKCA's consent to the provisions of Addendum #01 and Addendum #02 was
not vitiated.

Paragraph 21 of Addendum #01 included all excavation works within the scope of works of the
general contractor, while paragraph 33 of Addendum #01 stipulates that the general contractor shall

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be responsible for soil protection works, i.e., provide, erect and maintain all necessary bracing,
shoring, planking, etc., as required to protect the adjoining property against settlement and damages,
and to make sure that the methodology to be used will protect the adjacent properties against erosion
and settlement.

Article 1370 of the Civil Code in part states that "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."

3) There was no agreement that Colorite has to share in the restoration of the Hontiveros
property.

On the part of Colorite, its failure to advance part of its share in the restoration cost was due to a
breakdown in the negotiation process which occurred when KKCA was insisting on a 70-30 sharing.
Although We maintain that Colorite was still at fault when it failed to give what was promised when
KKCA was already demanding the same, it cannot be said that such refusal was tainted by bad faith.
Instead, it was more a case of a breakdown in the negotiation process, or a deadlock which the
parties were not able to overcome due to their adherence to their respective positions.

Absent any showing that the minds of the parties did meet on an essential term of the purported
contract, i.e., whether Colorite should contribute Php 700,000.00 or 70% of the total cost, it appears
that no subsequent and definitive agreement or contract was perfected between the parties on this
regard. The perfection of a contract entails that the parties should agree on every point of a
proposition - otherwise, there is no contract at all. As found by the CIAC, aside from the bare
assertions of Chua, no other evidence was offered to sufficiently prove that an agreement to share
in the restoration cost of the Hontiveros property was perfected between the parties.

4) KKCA is under obligation to secure the quitclaim of the Hontiveros family and the lifting
of the Hold Order issued by the City Government of Makati

By express provision of Article 1315 of the Civil Code, the parties are bound not only to the
fulfilment 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.

The records show that KKCA was remiss in its obligation to secure the quitclaim from the
Hontiveros family and work for the lifting of the City Government of Makati's Hold Order. In spite
of the fact that the Hontiveros property has already been restored, it appears that KKCA did not
bother to secure the needed quitclaim or even a certificate of completion from the contractor of
the subject rehabilitation.

5) Colorite is equally at fault for the protracted delay of the project

Under Article V, paragraph (b)of the construction contract, Colorite has the right to terminate the
contract and carry out the completion of the project in the event that the delay exceeds the
maximum allowable number of days of delay. However, Colorite opted to continue to bind KKCA
in the contract.

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While it may be that Colorite is acting within its right, the Court cannot find justification behind
the former's inaction. Colorite asserts that it should be awarded compensatory damages for
unrealized profit amounting to Php 460,189 .00 a month owing to the alleged great demand for
leasable residential/commercial units in the area. However, Colorite's inaction weighs against the
sincerity of its claim. Certainly, it does not appear to be in keeping with good sense that Colorite,
on its part, did not act to secure the lifting of the Hold Order.

The law, under Article 19 of the Civil Code, provides 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."

Article 19 of the Civil Code prescribes a primordial limitation on all rights by setting certain
standards that must be observed in the exercise thereof. Accordingly, when it becomes manifest
that one's right is exercised in bad faith for the sole intent of prejudicing another, an abuse of a
right exists.However, abuse of a right must, of course, be proven since bad faith cannot be
presumed, and nothing was presented here to establish the same.

The Court finds that in continuing to bind KKCA in the contract, Colorite was not impelled by good
intentions. Article 2203 of the Civil Code is explicit that: The party suffering loss or injury must
exercise the diligence of a good father of a family to minimize the

Verily, common human experience dictates that under similar circumstances, anybody in the
predicament of Colorite would have opted to exercise its right to terminate the contract the
moment it became apparent that the contractor would not lift a finger to finish the project. Colorite
should have pursued the completion of the project by another contractor to minimize injury upon
itself, without prejudice, however, to the prosecution of its cause of action against KKCA.

6) On claims of Damages
Since KKCA cannot be regarded to be in bad faith, the Court is left with no basis for awarding
exemplary damages in favor of Colorite. In contracts and quasi-contracts, the award of exemplary
damages connotes that the defendant acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.As the case provides no basis consistent with any of the grounds provided
under Article 2208of the Civil Code for awarding attorney's fees and litigation cost, they cannot be
awarded.

The same evenly applies to KKCA's claim. While the Court does not find sense in Colorite's failure
to exercise its right to terminate its contract with KKCA, it, however, does not equate to a finding
of bad faith. At any rate, KKCA did not impute bad faith against Colorite upon this issue. KKCA
imputed bad faith against Colorite for insisting that excavation and soil protection works are its
responsibilities, and for refusing to comply with the alleged sharing agreement in the restoration
of the Hontiveros property. Since the Court does not subscribe to KKCA's assertions, its claim for
moral damages proved to be without any basis.

Anent Colorite's claim for compensation for lost earnings, the Court agrees with the tribunals below
that it cannot be awarded for want of sufficient basis. It assumes the nature of actual or
compensatory damages, and such form of damages can only be awarded upon proof of the value of
the loss suffered, or that of profits which failed to be obtained.As propounded by the CA, "the only
basis relied upon by Colorite in claiming this item is the allegation that the subject property could

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have been rented at Php 460,189.00 a month. There is, however, no showing that actual lease
agreements exist so as to make the loss of rentals factual and not speculative.”

Respecting Colorite's claim for liquidated damages, the Court does not find any reason to deny
them.

Article 2226 of the Civil Code allows the parties to a contract to stipulate on liquidated damages
to be paid in case of breach. It is attached to an obligation in order to insure performance and has
a double function: (1) to provide for liquidated damages; and (2) to strengthen the coercive force of
the obligation by the threat of greater responsibility in the event of breach. As a general rule,
contracts constitute the law between the parties, and they are bound by its stipulations. For as long
as they are not contrary to law, morals, good customs, public order or public policy, the contracting
parties may establish such stipulations, clauses, terms and conditions as they may deem convenient.

By definition, liquidated damages are a penalty, meant to impress upon defaulting obligors the
graver consequences of their own culpability. Liquidated damages must necessarily make non-
compliance more cumbersome than compliance. Otherwise, contracts might as well make no threat
of a penalty at all.

Thus, the fact that Article V, paragraph (a) of the construction contract provides that the stipulated
liquidated damages was not meant to penalize the contractor for the delay, but in order to
compensate the owner for the loss it may suffer brought about by the delay is inconsequential; it
does not operate to remove the stipulation's character as a penal clause.Neither does it require that
the loss suffered be proved. "Liquidated damages are identical to penalty, so far as legal results are
concerned. In either case, the injured party need not prove the damages suffered by him."

In view of the foregoing, and considering Colorite's own inaction which contributed to the delay of
the project, the Court deems that the amount of liquidated damages, which can be equitably
awarded to Colorite should be that corresponding to the period beginning on March 6, 2005 to
October 2005, the date when the rehabilitation of the Hontiveros property was completed - plus, a
period of six months covering October 31, 2005 to April 30, 2006 representing the sufficient time
within which Colorite should have determined whether the project should continue under the original
construction contract, or whether the contract should be terminated and the project taken over. The
period within which the project shall be completed by another contractor in the event that the
original contract was terminated shall not be considered in the computation of the period of delay.

KKCA is ordered to finish the project. The parties are to share in the increase in the
construction cost over and above the contract price.

For its part, KKCA asserts that it should be released from the obligation of completing the project
because the working relationship between the parties has become· so strained; hence, the
construction project is best to be performed by another contractor.KKCA also argues that to compel
it to finish the project is violative of the constitutional guarantee against involuntary servitude.

The Court cannot sanction KKCA's argument. Both the doctrine of strained relations and the policy
against involuntary servitude are concepts, which only apply to situations where one is in the
service of another, respectively, by virtue of an employment contract or by force or compulsion.
They cannot apply in reciprocal contracts such as contracts for a piece of work, lest we run afoul with

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the principle of autonomy and obligatory nature of contracts evenly guaranteed under Article III,
Section 10of the Constitution. If KKCA truly believes that it has lawful basis to withdraw from the
contract and/or be released therefrom, it should have filed an action for rescission.

The Court agrees that KKCA should finish the project. The contract subsists, and by all legal
measure, the parties should comply with their contractual obligations. For the same reason, the
Court does not share the disquisition of the tribunals below that the escalation clause of the
contract should apply only during and "within the contract period," and that for the purpose of
completing the project, necessary adjustments in the contract price must be made to accommodate
increase in the cost of materials and/or labor "after the contract period."

KKCA breached its obligation in failing to provide sufficient soil protection measures, and this was
the proximate cause of the delay. In a number of cases, the Court maintained that it is fundamental
in the law on damages that the one injured by a breach of contract, or by a wrongful or negligent
act or omission shall have a fair and just compensation commensurate to the loss sustained as a
consequence of the defendant's act.

In building contracts, it has been held that the measure of damages for breach is the amount
expended by the owner in completing the project and in correcting defects.

In order to legally award actual damages, the same must be duly proven.Here, the additional
amount for the completion of the project remains unquantifiable. Nevertheless, on principle, it can
be awarded because said amount is a necessary incident in the completion of the project. Verily,
considering the length of time that the project was delayed, the fact of increase in the construction
cost above the contract price is beyond proof, and the utilization of said amount is an absolute
certainty as long as Colorite remains intent on seeing the project through.

However, considering that Colorite is also to be blamed for the delay of the project, it would be
unjust to rule that KKCA should shoulder the entire amount as it will be tantamount to unjust
enrichment on the part of Colorite. Thus, the parties should commonly share the amount of the
increase in construction cost.

5. VOID AND INEXISTENT CONTRACTS

KT CONSTRUCTION SUPPLY, INC. v. PHILIPPINE SAVINGS BANK

G.R. No. 228435, 21 June 2017, Mendoza, J.:

Acceleration clause is valid and produces legal effects. In the case at bench, the promissory note
explicitly stated that default in any of the installments shall make the entire obligation due and
demandable notice even without or demand

FACTS:

KT Construction Supply, Inc. (KTConstruction) obtained a loan from Philippine Savings

Bank (PSBank) in the amount of ₱2.5 million. The said loan was evidenced by a Promissory
Note executed on the same date. The said note was signed by William K. Go (Go) and Nancy Go-
Tan (Go-Tan) as Vice-President/General Manager and Secretary/Treasurer of KT Construction,
respectively. In addition, both Go and Go-Tan signed the note in their personal capacities.

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The promissory note stipulated that the loan was payable within a period of sixty (60) months from
November 12, 2006 to October 12, 2011. In addition, the said note provided for the payment of
attorney's fees in case of litigation.

On January 3, 2011, PSBank sent a demand letter to KT Construction asking the latter to pay its
outstanding obligation in the amount of ₱725,438.81, excluding interest, penalties, legal fees, and
other charges. For its failure to pay despite demand, PSBank filed a complaint for sum of money
against KT Construction.

The RTC ruled in favor of PSBank. It opined that the promissory note expressly declared that the
entire obligation shall immediately become due and payable upon default in payment of any
installment. The trial court, nevertheless, reduced the interest rate and stipulated interest fees for
being unconscionable.

Upon appeal, the CA affirmed the R TC decision. It explained that due to the acceleration clause,
the loan became due and demandable upon KT Construction's failure to pay an installment. In
addition, the CA disagreed that the promissory note was a contract of adhesion because KT
Construction was not in any way compelled to accept the terms of the promissory note.

Hence, this appeal. KT Construction insists that Go and Go-Tan could not be held solidarily liable
for the judgment award because they were neither impleaded nor served with summons. Moreover,
they did not voluntarily appear before the court. Thus, the courts never acquired jurisdiction over
their persons.
KT Construction further asserts that the complaint was premature because it was not alleged that
it had defaulted in paying any of the installments due and that it had received a demand letter from
PSBank. It reiterates that the promissory note was null and void for being a contract of adhesion.

In its Comment, PSBank countered that Go and Go-Tan were solidarily liable with KT Construction
because they signed the promissory note in favor of PSBank as officers of the corporation and in
their personal capacities. It averred that the obligation was already due and demandable in view of
the acceleration clause in the promissory note. Further, PSBank pointed out that the promissory
note was consensual as the parties voluntarily signed the same.

ISSUE:

Whether or not the complaint in this case was prematurely filed.

Whether or not the promissory note in question is null and void for being a contract of adhesion.

RULING:

PETITION IS PARTLY MERITORIOUS.

It has long been settled that an acceleration clause is valid and produces legal effects. In the case
at bench, the promissory note explicitly stated that default in any of the installments shall make
the entire obligation due and demandable notice even without or demand. Thus, KT Construction
was erroneous in saying that PSBank's complaint was premature on the ground that the loan was

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due only on October 12, 2011. KT Construction's entire loan obligation became due and demandable
when it failed to pay an installment pursuant to the acceleration clause.

Moreover, KT Construction could not evade responsibility by claiming that it had not received any
demand letter for the payment of the loan. PSBank had sent a demand letter, dated February 3,
2011, asking KT Construction to pay the remaining obligation within five (5) days from receipt of
the letter. More importantly, even granting that KT Construction did not receive the demand letter,
the loan still became due and demandable because the parties expressly waived the necessity of
demand.

Further, KT Construction is mistaken that it could not be held liable for the entire loan obligation
because PSBank failed to prove how many installments it had failed to pay. In Bognot v.RR!Lending
Corporation, the Court explained that once the indebtedness had been established, the burden is
on the debtor to prove payment, wit:

Jurisprudence tells us that one who pleads payment has the burden of proving it; the burden rests
on the defendant to prove payment, rather than on the plaintiff to prove non-payment. Indeed,
once the existence of an indebtedness is duly established by evidence, the burden of showing with
legal certainty that the obligation has been discharged by payment rests on the debtor.

In the case at bench, KT Construction admitted that it obtained a loan with PSBank. It, nevertheless,
averred that it had been regularly paying the loan. Thus, KT Construction could have easily
provided deposit slips and other documentary evidence to prove the fact of payment. It, however,
merely alleged that it religiously paid its obligation without presenting any the evidence to
substantiate said obligation.

In a further attempt to absolve itself from the loan obligation, KT Construction argued that the
promissory note was null and void because it was a contract of adhesion. It may be true that KT
Construction had no hand in its preparation. Still, it has been ruled in a plethora of cases that a
contract of adhesion is not invalid per se. Contracts of adhesion, where one party imposes a ready-
made form of contract on the other, are not entirely prohibited. The one who adheres to the
contract is, in reality, free to reject it entirely; if he adheres, he gives his consent.

KT Construction also claimed that attorney's fees should not be awarded for lack of legal basis. The
promissory note, however, categorically provided for the payment of attorney's fees in case of
default. The said stipulation constituted a penal clause to which the parties were bound, it being
part of the contract between the parties. KT Construction was mistaken in relying on Article 2208
of the Civil Code because the same applies only when there is no stipulation as to the payment of
attorney's fees in case of default.

G. HOLDINGS, INC. v. CAGAYAN ELECTRIC POWER AND LIGHT COMPANY, INC.

(CEPALCO) AND FERROCHROME PHILIPPINES, INC.
G.R. No. 226213, September 27 2017, Caguioa, J.

Inexistent contracts produce no legal effect whatsoever in accordance with the principle "quod nullum
est nullum producit effectum"In case of void contracts where the nullity proceeds from the illegality
of the cause of object, when executed (and not merely executory) they have the effect of barring any
action by the guilty to recover what he has already given under the contract.

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FACTS:

Cagayan Electric Power and Light Company, Inc. (CEPALCO) supplied power to the ferro-alloy
smelting plant of Ferrochrome Philippines, Inc. (FPI). The latter failed to pay its electricity bills.
After sending a statement of account with P30,147,835.65 unpaid bills plus 2% monthly surcharge,
CEPALCO filed a collection suit (Civil Case No. 65789) against FPI in July 1996 before the RTC. The
RTC-Pasig rendered its judgment in favor of CEPALCO and the latter moved for execution pending
appeal which was granted but was subsequently enjoined by the CA upon granting FPI’s prayer for
TRO and preliminary injunction.

GHI filed a case (Civil Case No. 2004-111) against the Sheriff of the RTC who issued notices of levy
on the properties, CEPALCO and FPI for Nullification of Sheriffs Levy on Execution and Auction
Sale, Recovery of Possession of Properties and Damages before the RTC-CDO. GHI claimed that
the levied ferro-alloy smelting facility, properties and equipment are owned by it as evidenced by a
Deed of Assignment.

The RTC-CDO rules in favor of CEPALCO, deciding as follows: 1) rescinding the Deed of
Assignment; (2) ordering GHI to pay CEPALCO actual and exemplary damages as well as attorney's
fees; and (3) lifting the writ of preliminary injunction. The rescission of the Deed of Assignment by
the RTC-CDO was anchored on the presence of several badges of fraud, to wit: (a) the consideration
of the assignment was P50 million while the value of the assets of FPI amounted to P280 million;
(b) the existence of the "Outokumpo" work process of smelting (which was allegedly more valuable
than the smelting facility subject of the assignment and without which the smelting facility could
not be operated), as well as its value, were not sufficiently established; (c) the assignment of all or
substantially all of FPI's assets was made when FPI was suffering financially and after the rendition
of the partial judgment in favor of CEPALCO; and (d) GHI did not take exclusive possession of the
assets assigned to it. The CA affirmed.

ISSUES:

1.Whether the Deed of Assignment was absolutely simulated?

2. Whether the Deed of Assignment was done in fraud of creditors and badges of fraud accompanied
its execution?
3. Whether GHI is entitled to its claims for damages?

RULING:

1. Yes. Since the Deed of Assignment is being questioned for being both rescissible and, at the same
time, an absolute simulation, it may be apropos to compare rescissible contracts with void or
inexistent contracts. The Court emphasized that one primary difference between these two
contracts is with regard to their effects. That is, inexistent contracts produce no legal effect
whatsoever in accordance with the principle "quod nullum est nullum producit effectum"In case of
void contracts where the nullity proceeds from the illegality of the cause of object, when executed
(and not merely executory) they have the effect of barring any action by the guilty to recover what
he has already given under the contract.

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The RTC-CDO ruled the Deed of Assignment as a rescissible contract and ordered its rescission.
However, the CA, while affirming the RTC-CDO Decision, stated that it "agree[d] with the RTC[-
CDO] that the Deed of Assignment was absolutely simulated"and, at the same time, noted that "the
RTC-CDO correctly found the existence of fraud or deliberate intent on the part of FPI and GHI to
defraud CEPALCO.” Unfortunately, however, and contrary to what the CA declared, nowhere is it
ruled in the RTC-CDO Decision that the Deed of Assignment was absolutely simulated.

Given a seemingly conflicting finding or ruling by the RTC-CDO and the CA as to the classification
of the Deed of Assignment — whether rescissible or inexistent, it behooves the Court to resolve the
conflict.

Under Article 1345 of the Civil Code, simulation of a contract may be absolute, when the parties do
not intend to be bound at all, or relative, when the parties conceal their true agreement. The former
is known as contracto simulado while the latter is known as contracto disimulado.An absolutely
simulated or fictitious contract is void while a relatively simulated contract 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.

Here, in executing the Deed of Assignment, FPI's intention was not to transfer absolutely the
assigned assets (admittedly valued at about P280 Million) to GHI in payment of FPI's obligations
to GHI amounting to P50, 366,926.71.FPI, as shown above, did not really intend to divest itself of
its title and control of the assigned properties. FPI's real intention was, borrowing the words of
Justice J.B.L Reyes in Rodriguez, to place them beyond the reach of its creditor CEPALCO.

Thus, given the foregoing, the Deed of Assignment is declared inexistent for being absolutely
simulated or fictitious. Accordingly, the CA correctly ruled that the Deed of Assignment was
absolutely simulated, although it was in error in affirming the rescission ordered by the RTC-CDO
because, as explained above, rescissible contracts and void or inexistent contracts belong to two
mutually exclusive groups. This error, however, does not justify the granting of the Petition.

2. Yes. As to the presence of badges of fraud, which the RTC-CDO found to have existed and
affirmed by the CA, they do, in fact, confirm the intention of FPI to defraud CEPALCO. But these
findings do not thereby render as rescissible the Deed of Assignment under Article 1381(3). Rather,
they fortify the finding that the Deed of Assignment was "not really desired or intended to produce
legal effects or in any way alter the juridical situation of the parties" or, put differently, that the
Deed of Assignment was a sham, or a contracto simulado.

3. No. The Court's declaration of the inexistence of the Deed of Assignment renders the resolution
of the fifth issue — on GHI's entitlement to damages — superfluous. Instead, the dismissal of its
complaint for lack of cause of action is warranted.

ENCARNACION CONSTRUCTION & INDUSTRIAL CORPORATION v. PHOENIX READY

MIX CONCRETE DEVELOPMENT & CONSTRUCTION, INC.
G.R. No. 225402, September 04, 2017, Perlas-Bernabe, J.

While the Court has occasionally struck down contracts of adhesion as void, it did so when the weaker
party has been imposed upon in dealing with the dominant bargaining party and reduced to the

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alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal
footing.

FACTS:

On January 27 and March 25, 2009, Phoenix entered into two (2) separate Contract Proposals and
Agreements (Agreements)with ECIC for the delivery of various quantities of ready-mix
concrete.The Agreements were made in connection with the construction of the Valenzuela
National High School (VNHS) Marulas Building.ECIC received the ready-mix concrete delivery in
due course. However, despite written demands from Phoenix, ECIC refused to pay. Hence, Phoenix
filed before the RTC the Complaint for Sum of Money against ECIC for the payment of P982, 240.35,
plus interest and attorney's fees.

In its Answer with Counterclaim, ECIC claimed that it opted to suspend payment since Phoenix
delivered substandard ready-mix concrete, such that the City Engineer's Office of Valenzuela (City
Engineer's Office) required the demolition and reconstruction of the VNHS building's 3rd floor.It
contended that since the samples taken from the 3rd floor slab failed to reach the comprehensive
strength of 6,015 psi in 100 days,the City Engineer's Office ordered the dismantling of the VNHS
building's 3rd floor, and thus, incurred additional expenses amounting to P3, 858,587.84 for the
dismantling and reconstruction.

The RTC ruled in favor of Phoenix and orderd ECIC to pay the former. Primarily, the RTC found
that Phoenix fully complied with its obligation under their Agreement to deliver the ready-mix
concrete, with the agreed strength of 3000 and 3500 psi G-3/4 7D PCD, which ECIC used to
complete the 3rd floor slab of the VNHS building.Moreover, it pointed out that the alleged sub-
standard quality of the delivered ready-mix concrete did not excuse ECIC from refusing payment,
noting that under Paragraph 15 of the Agreement, any claim it has on the quality and strength of
the transit mixed concrete should have been made at the time of delivery. Since ECIC raised the
alleged defects in the delivered concrete only on June 16, 2009, or 48 days after the last delivery date
on April 29, 2009,it considered ECIC to have waived its right to question the quality of the delivered
concrete under the principle of estoppel in pais. The CA affirmed.

ISSUE:

Whether ECIC’s counterclaim for damages must be denied.

RULING:

Yes. In the present petition, ECIC maintains that it is entitled to its counterclaim because the
Agreement it signed with Phoenix, particularly Paragraph 15 thereof, is void for being a contract of
adhesion; and, the ready-mix concrete Phoenix delivered for the 3rd floor slab of the VNHS building
was substandard, causing it to incur additional expenses to reconstruct the building's 3rd floor.

A contract of adhesion is one wherein one party imposes a ready-made form of contract on the
other. It is a contract whereby almost all of its provisions are drafted by one party, with the
participation of the other party being limited to affixing his or her signature or "adhesion" to the
contract. However, contracts of adhesion are not invalid per se as they are binding as ordinary
contracts. While the Court has occasionally struck down contracts of adhesion as void, it did so

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when the weaker party has been imposed upon in dealing with the dominant bargaining party and
reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to
bargain on equal footing.

In this case, there is no proof that ECIC was disadvantaged or utterly inexperienced in dealing with
Phoenix. There were likewise no allegations and proof that its representative (and
owner/proprietor) Ramon Encarnacion was uneducated, or under duress or force when he signed
the Agreement on its behalf.

Moreover, it deserves highlighting that apart from the January 27 and March 25, 2009 Contract
Proposals and Agreements, ECIC and Phoenix had entered into 3 similar Agreements under the
same terms and conditionsfor the supply of ready-mix concrete. Thus, the Court is hard-pressed to
believe that Encarnacion had no sufficient opportunity to read and go over the stipulations of the
Agreement and reject or modify the terms had he chosen to do so.

Finally, it should be noted that ECIC failed to raise the alleged defect in the delivered concrete well
within a reasonable time from its discovery of the hairline cracks, as it notified Phoenix thereof only
48 days after the last delivery date on April 29, 2009, and days after it was already notified thereof
by the City Engineer's Office.

IV. SALES

A. NATURE AND FORM OF CONTRACT

Agnes V. Guison v. Heirs of Loreño Terry, et al.

G.R. No. 191914; August 9, 2017, Sereno, C.J.

Lack of consensus as to the price prevented the perfection of the sale. We emphasize
that the law requires a definite agreement as to a “price certain”; otherwise, there is
no true meeting of the minds between the parties.

FACTS:

A Deed of Absolute Sale was executed in favor of Respondent Terry by Petitioner’s father. The
subject of the sale was a parcel of land in Catanduanes. Respondent then sold certain portions of
the lot to third parties. However, subsequently, Petitioner’s father and Respondent executed an
Agreement of Revocation of Sale relating to the same parcel of land. The instrument stated that
Vargas had erroneously sold the entire area of Lot 10628-pt to Terry. The parties, however, averred
that their true intention was only to convey a 3,000-square-meter portion of the land to Terry,
considering that there was no monetary consideration for the transaction. Consequently, they
agreed to revoke the earlier Deed of Absolute Sale to the extent of 1.0894 hectares, while affirming
the validity of the conveyance to Terry of a 3,000-square-meter potion, whose actual location would
later be determined by both parties in a separate document.

Vargas died on 10 June 1998with no agreement executed regarding the actual location of the land
conveyed to Terry. A Partition Agreementwas then entered into by the Heirs of Angeles Vargas,

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represented by petitioner, and respondent Terry. The instrument, which was executed for the
purpose of physically segregating the 3,000-square-meter portion allotted to Terry. Thereafter,
Terry sold other portions of the property to third parties with all the foregoing transactions leaving
him with ownership of only 17 square meters of the lot.

As such, Petitioner filed a Complaint for annulment of contracts, accion publiciana, and damages
against Terry and all those who had allegedly purchased portions of the lot from him. Petitioner
argued that the original Deed of Absolute Sale and the Agreement of Revocation of Sale should be
considered void for lack of consideration. She then contended that the nullity of those earlier
instruments led to the invalidity of the Partition Agreement, because it was signed in the mistaken
belief that Terry had a right to the property. Respondent third parties claim that they were buyers
in good faith and that Petitioner is estopped from seeking recovery of the property since he
acknowledged Respondent Terry’s entitlement to the property. The RTC rendered a decision in
favor of the Petitioner while the CA reversed.

ISSUES:

1. Whether the Revocation and Partition agreements should be annulled?

2. Whether the Petitioner’s claims are barred by laches?

RULING:

1. Yes. The two agreements are null and void. There was no meeting of the minds regarding the
consideration for the sale. As such, the property was never validly conveyed to Terry. Based on the
provisions of the Revocation Agreement and the Partition Agreement, we conclude that the two
instruments must be read as part of a single contract of sale. In the Revocation Agreement, the
parties recognized the transfer of a 3,000-square meter portion of Lot No. 10628-pt to Terry.
However, instead of identifying the specific segment of the property allegedly conveyed, they
stipulated that “the actual location of the said 3,000 square meters shall be determined by both
parties in a separate document consonant with this agreement, but forming a part hereof.That
separate document was the Partition Agreement subsequently executed by the parties to physically
segregate the portion of the property sold to Terry.

It is therefore evident that the two instruments in question are not separate contracts, but are mere
components of the same sales transaction.

Consideration is one of the requisites of a valid contract of sale as per Article 1458 of the Civil Code.
Neither agreement mentions the purchase price for the sale of the lot. Although it was alleged by
the Respondents that the consideration was paid twice for the same lot (P5,557.60 upon the
execution of the original Deed of Absolute Sale and P3,000 upon the signing of the Revocation
Agreement) while petitioner contends that there was no consideration stated in the Revocation
Agreement, because the parties agreed to determine the price of the property in a separate
document, the Court has determined that indeed, no “price certain” was concluded.

This lack of consensus as to the price prevented the perfection of the sale. We emphasize that the
law requires a definite agreement as to a “price certain”; otherwise, there is no true meeting of the
minds between the parties.

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2. Yes. Despite the invalidity of the agreements, the Petitioner is estopped from questioning the
title of those who purchased the lot from Terry and relied upon Petitioner’s representations in the
Partition Agreement.

The essential elements of estoppel in pais, in relation to the party sought to be estopped, are: 1) a
clear 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; 2) an intent or, at least, an expectation, that this
conduct shall influence, or be acted upon by, the other party; and 3) the knowledge, actual or
constructive, by him of the real facts. With respect to the party claiming the estoppel, the conditions
he must satisfy are: 1) lack of knowledge or of the means of knowledge of the truth as to the facts
in question; 2) reliance, in good faith, upon the conduct or statements of the party to be estopped;
and 3) action or inaction based thereon of such character as to change his position or status
calculated to cause him injury or prejudice. It has not been shown that respondent intended to
conceal the actual facts concerning the property; more importantly, petitioner has been shown not
to be totally unaware of the real ownership of the subject property.

All the foregoing requisites have been fulfilled in this case. When petitioner signed the Partition
Agreement, she clearly recognized Terry’s right as absolute owner of the portion of the property
assigned to him, with no reservation whatsoever. She recognized that right despite her doubts
about the validity of the sale made by her father and the knowledge that Terry had not yet paid for
the land. Moreover, she could not have been oblivious to the fact that the document might be used
to influence others to buy the land, because she knew that Terry had previously sold portions of
the property to third persons. Respondents Sarmiento and Alberto, on the other hand, clearly relied
in good faith on the Partition Agreement

On the other hand, the Court does not agree that the doctrine of laches is applicable here. The
interval of six years between the date of execution of the Partition Agreement and that of the
institution of the Complaint in this case does not, by itself, render the demands of petitioner stale.

B. OBLIGATIONS OF THE VENDOR

FELIX PLAZO URBAN POOR SETTLERS COMMUNITY ASSOCIATION, INC. vs ALFREDO

LIPAT, SR. and ALFREDO LIPAT, JR.
G.R. No. 182409, March 20, 2017, Reyes, J.

In a contract to sell, the obligation of the seller to sell becomes demandable only upon the occurrence
of the suspensive condition, which in this case is the payment of the full contract price. Without
payment, the obligation to sell is not demandable.

FACTS:

Lipat Sr. executed a Contract to Sell (CTS) in favor of the petitioner, whereby the former agreed to
sell to the latter two parcels of land. As stipulated, the petitioner had 90 days to pay in full the
purchase price otherwise, the CTS shall automatically expire. The period elapsed without payment
of the full consideration.

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According to petitioner, the 90-day period was subject to the condition that the subject properties
be cleared of all claims from third persons considering that there were pending litigations.
Petitioner even contributed financial assistance for the expenses of litigation with the assurance
that the CTS will still be enforced once the cases are settled. After the termination of the cases,
however, the respondents refused to enforce the CTS on the ground that the same had expired and
averred that there was no agreement to extend its term. Petitioner filed a case for Specific
Performance. For their defense, the respondents alleged that the CTS was not enforced due to the
petitioner's failure to pay the selling price before the expiration of its term and the “financial
assistance" they received was in the nature of a loan.

ISSUE:

W/N petitioner can oblige the respondents to sell the properties covered by the CTS.

RULING:

NO. The parties entered into a Contract to Sell. The obligation of the seller to sell becomes
demandable only upon the occurrence of the suspensive condition which in this case is the payment
in full of the purchase price by the petitioner prior to the expiration of the 90-day period stipulated.
The petitioner failed to pay the full purchase price stipulated in the CTS on the date fixed therein.
Thus, the respondents are within their rights to refuse to enforce the same.

The petitioner's claim that the reason for their failure to pay the full purchase price was due to the
failure of the respondents to settle the pending litigation involving the subject properties is not
tenable. Clearly, a perusal of the CTS executed by the parties does not show any provision pertaining
to such condition. As a rule, proof of verbal agreement that tends to vary the terms of a written
agreement, is inadmissible under the parol evidence rule.

The petitioner likewise failed to prove by preponderant evidence their claim that an extension was
given to them to pay the full purchase price indicated in the CTS. At any rate, assuming without
conceding that the 90-day period was extended by the parties, the obligation of the respondents
based on the CTS did not arise as a result of the continued failure of the petitioner to pay the full
purchase price. Records are bereft of any showing that the petitioner even attempted to make the
proper consignation of the amounts due, as a result, the obligation on the part of the respondents
never acquired obligatory force, thus, the seller is released from his obligation to sell.

1. WARRANTIES
a. EXPRESS WARRANTIES

PHILIPPINE STEEL COATING CORP. v. EDUARD QUINONES

G. R. No. 194533, APR 19, 2017, SERENO, CJ:

An express warranty can be oral when it is a positive affirmation of a fact that the buyer relied on.

FACTS:

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In 1994, Lopez, a sales engineer of PhilSteel, offered Quinones their new product: primer-coated,
long-span, rolled galvanized iron (G.I.) sheets. The latter showed interest, but asked Lopez if the
primer-coated sheets were compatible with the Guilder acrylic paint process used its company in
the finishing of its assembled buses.

Angbengco, the Sales Manager, to whom Lopez referred the question, assured Quinones that the
quality of their new product was superior to that of the non-primer coated G.I. sheets being used
by the latter in his business. However, sometime in 1995, Quinones received several complaints
from customers who had bought bus units, claiming that the paint or finish used on the purchased
vehicles was breaking and peeling off. Quinones then sent a letter-complaint to PhilSteel invoking
the warranties given by the latter. According to Quinones, the damage to the vehicles was
attributable to the hidden defects of the primer-coated sheets and/or their incompatibility with the
Guilder acrylic paint process, contrary to the prior evaluations and assurances of PhilSteel. Because
of the barrage of complaints, Quinones was forced to repair the damaged buses.

PhilSteel counters that Quinones himself offered to purchase the subject product directly from the
former without being induced by any of PhilSteel's representatives. According to its own
investigation, PhilSteel discovered that the breaking and peeling off of the paint was caused by the
erroneous painting application done by Quinones. Unconvinced, Quinones filed a complaint for
damages.

ISSUES:

1. Whether vague oral statements made by seller on the characteristics of a generic good can be
considered warranties that may be invoked to warrant payment of damages;
2. Whether general warranties on the suitability of products sold prescribe in six (6) months under
Article 1571 of the Civil Code;
3. Assuming that statements were made regarding the characteristics of the product, whether
respondent as buyer is equally negligent; and
4. Whether non-payment of price is justified on allegations of breach of warranty

RULING:

1. Yes. An express warranty can be oral when it is a positive affirmation of a fact that
the buyer relied on.
These “vague oral statements” were express affirmations not only of the costs that could be
saved if the buyer used PhilSteel’s G.I. sheets, but also of the compatibility of those sheets
with the acrylic painting process customarily used in Amianan Motors. Angbengco did not
aimlessly utter those “vague oral statements” for nothing, but with a clear goal of persuading
Quinones to buy PhilSteel’s product.

Taken together, the oral statements of Angbengco created an express warranty. They were
positive affirmations of fact that the buyer relied on, and that induced him to buy
petitioner’s primer-coated G.I. sheets.

Under Article 1546 of the Civil Code, “[n]o affirmation of the value of the thing, nor any
statement purporting to be a statement of the seller's opinion only, shall be construed as a

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warranty, unless the seller made such affirmation or statement as an expert and it was relied
upon by the buyer.”

Despite its claims to the contrary, Angbengco was an expert in the eyes of the buyer
Quinones. Quinones did not talk to an ordinary sales clerk such as can be found in a
department store or even a sari-sari store. If Lopez, a sales agent, had made the assertions
of Angbengco without true knowledge about the compatibility or the authority to warrant
it, then his would be considered dealer’s talk. But sensing that a person of greater
competence and knowledge of the product had to answer Quinones’ concerns, Lopez wisely
deferred to his boss, Angbengco.

2. Yes. The prescription period of the express warranty applies to the instant case.

There being an express warranty, this Court holds that the prescription period applicable to
the instant case is that prescribed for breach of an express warranty. The applicable
prescription period is therefore that which is specified in the contract; in its absence, that
period shall be based on the general rule on the rescission of contracts: four years
(see Article 1389, Civil Code). In this case, no prescription period specified in the contract
between the parties has been put forward. Quinones filed the instant case on 6 September
1996 or several months after the last delivery of the thing sold. His filing of the suit was well
within the prescriptive period of four years; hence, his action has not prescribed.

3. No. The buyer cannot be held negligent in the instant case.

Negligence is the absence of reasonable care and caution that an ordinarily prudent person
would have used in a given situation.21 Under Article 1173 of the Civil Code,22 where it is not
stipulated in the law or the contract, the diligence required to comply with one's obligations
is commonly referred to as paterfamilias; or, more specifically, as bonos paterfamilias or "a
good father of a family." A good father of a family means a person of ordinary or average
diligence. To determine the prudence and diligence that must be required of all persons, we
must use as basis the abstract average standard corresponding to a normal orderly person.
Anyone who uses diligence below this standard is guilty of negligence.

It bears reiteration that Quinones had already raised the compatibility issue at the outset.
He relied on the manpower and expertise of PhilSteel, but at the same time reasonably asked
for more details regarding the product. It was not an impulsive or rush decision to buy. In
fact, it took 4 to 5 meetings to convince him to buy the primed G.I. sheets. And even after
making an initial order, he did not make subsequent orders until after a painting test, done
upon the instructions of Angbengco proved successful. The test was conducted using their
acrylic paint over PhilSteel’s primer-coated G.I. sheets. Only then did Quinones make
subsequent orders of the primer-coated product, which was then used in the mass
production of bus bodies.

4. Yes. The nonpayment of the unpaid purchase price was justified, since a breach of
warranty was proven.

Since what was proven was express warranty, the remedy for implied warranties under
Article 1567 of the Civil Code does not apply to the instant case. Instead, following the ruling

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of this Court in Harrison Motors Corporation v. Navarro, Article 1599 of the Civil Code
applies when an express warranty is breached.

According to the provision, recoupment refers to the reduction or extinction of the price of
the same item, unit, transaction or contract upon which a plaintiffs claim is founded.
In the case at bar, Quinones refused to pay the unpaid balance of the purchase price of the
primer-coated G.I. sheets PhilSteel had delivered to him. He took this action after
complaints piled up from his customers regarding the blistering and peeling-off of the
paints applied to the bus bodies they had purchased. The unpaid balance of the purchase
price covers the same G.I. sheets. Therefore, this Court finds that respondent has
legitimately defended his claim for reduction in price and is no longer liable for the unpaid
balance of the purchase price.

b. IMPLIED WARRANTIES

MARIANITO PADILLA and ALFREDO JAVALUYAS vs UNIVERSAL ROBINA

CORPORATION, represented by its Senior Vice President, JOHNSON ROBERT GO
G.R. No. 214805, December 14, 2017, Del Castillo, J.

In the sale of animal feeds, there is an implied warranty that it is reasonably fit and suitable to be used
for the purpose which both parties contemplated. A claim of breach of such implied warranty, should
be proven by a preponderance of evidence.

FACTS:

Universal Robina Corporation (URC) sold on credit day-old chicks and poultry feeds to petitioners
who took care and grew the chicks until they were ready for harvest. URC had the option of buying
the full-grown broiler chickens that met a target weight. Setting off of credit was made between the
parties after the harvest by comparing the price of the full grown broiler chickens with the amount
of purchases made by petitioners on credit. If the purchases on credit were greater than the value
of the chickens harvested, petitioners paid the balance to URC, but if it were otherwise, petitioners
received earnings.

The parties executed Continuing Credit Accommodation with Real Estate Mortgage (CCAREM)
where URC agreed to extend a continuous credit accommodation for the petitioner’s purchases of
day-old chicks and feeds while each petitioner put up a real estate mortgage as security.

Their relationship continued until petitioners informed URC of the stunting or slow growth and
high mortality rate of the chickens. They claimed that URC supplied them with low quality feeds
or junior day-old chicks. The stunted chickens that failed to meet the target weight were rejected
by URC as a result, complainants incurred outstanding obligations. After failing to pay their
obligations, URC foreclosed the properties covered by the CCAREMs. Petitioners filed a complaint
for damages arguing that the stunting and eventual rejection of the chickens was due to URC's fault
so their obligation to pay URC was extinguished.

ISSUE:

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W/N there is sufficient evidence to establish URC's fault or negligence for the defective/stunted
growth of the broiler chickens as would extinguish petitioners' obligation under the CCAREM.

RULING:

NO. Under the CCAREM, URC is accountable only if the loss, damage, or destruction of the broiler
chickens was due to its fault, otherwise, petitioners should bear the loss and their obligation to pay
the day-old chicks and poultry feeds purchased from URC is not extinguished.

It bears stressing that both the RTC and the CA found no evidence of fault or negligence on the
part of URC. The CA affirmed the finding of the trial court that there was no basis to the allegation
that the stunted growth of the broiler chickens was caused by the purported low-quality poultry
feeds supplied by URC.

The manufacturer or seller of animal feeds cannot be held liable for any damage allegedly caused
by the product in the absence of proof that the product was defective. The defect of the product
requires evidence that there was no tampering with, or changing of the animal feeds. In the sale of
animal feeds, there is an implied warranty that it is reasonably fit and suitable to be used for the
purpose which both parties contemplated. URC maintains that it is unlikely that it supplied its
customers with defective poultry feeds because if it were, it would not have passed quality control.
It is incumbent on petitioners to establish the liability of URC on the basis of breach of implied
warranty. No evidence, however, was adduced. There was nothing in the records, except self-serving
claims, which proves that URC delivered low-quality feeds tainted with harmful components.

In fine, petitioners failed to prove by preponderance of evidence the fault or negligence of URC. For
this reason, petitioners can be held liable for their unsettled obligations under the CCAREMs they
executed in favor of URC.

C. OBLIGATIONS OF THE VENDEE

FELIX B. TIU vs SPOUSES JACINTO JANGAS AND PETRONILA MERTOJANGAS, MARIA G.

ORTIZ, MELENCIO ORTIZ, MERLA M. KITANE, PACITO KITANE, CANDELARIA RUSIANA,
RODRIGO RUSIANA, JUANA T. JALANDONI, ADELAIDA P. RAGAY and TEOFISTO RAGAY,
SR.
G.R. No. 200285, March 20, 2017, Reyes, J.

When a piece of land is in the actual possession of persons other than the seller, the buyer must be
wary and should investigate the rights of those in possession. Without making such inquiry, one
cannot claim that he is a buyer in good faith.

FACTS:

Gregorio Pajulas owned a piece of land, Lot 480-A, which upon his death, went to his 3 daughters:
Adelaida, Isabel and Bruna. Bruna sold her 1/3 share to Spouses Delayco. The heirs of Spouses
Delayco, applied for and was granted a free patent over all of 480-A. Consequently, a Torrens title
was issued in favor of the heirs of Delayco. The heirs of Delayco sold the property to petitioner Tiu
who had a new title declared in his name.

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Spouses Jangas, two of the successors-in-interest, of Isabel Pajulas, filed a complaint for
reconveyance against Petitioner Tiu. A motion for leave to intervene and complaints in intervention
was filed by other successors-in-interest of Isabel Pajulas and Adelaida Pajulas. They claim that they
owned portions of Lot 480-A and that what was conveyed to Spouses Delayco was only Bruna’s 1/3
share, not all of 480-A.

The trial court rendered its judgment in against petitioner taking note that the sale and transfer
effected by Bruna in favor of the Spouses Delayco was merely her one-third-share of the subject
property. This was upheld by the CA.

ISSUE:

W/N whether the petitioner is a buyer in good faith thereby protecting him from the action for
reconveyance.

RULING:

NO. Petitioner Tiu argues that he acquired the subject property in good faith and for value; that he
had it recorded in the Registry of Property, since he was unaware of any prior sale over the subject
property, and the title was free from any liens or encumbrances that could have aroused his
suspicion.

The petitioner knew of the fact that there were other occupants on the subject property. During
cross examination, the petitioner testified that when he visited the subject property for surveying
he already saw two structures that were built thereon, thus, he already knew that someone else
besides his seller has possession over the same. When a piece of land is in the actual possession of
persons other than the seller, the buyer must be wary and should investigate the rights of those in
possession. Without making such inquiry, one cannot claim that he is a buyer in good faith. The
petitioner chose to close his eyes to facts which should have put a reasonable man on his guard.
Consequently, he cannot now claim that he acted in good faith on the belief that there was no
defect in the title of his predecessor-in-interest.

The fact that he was able to secure a title in his name does not operate to vest ownership upon him
of the subject property. A certificate of title is merely an evidence of ownership or title over the
particular property described therein. It cannot be used to protect a usurper from the true owner;
nor can it be used as a shield for the commission of fraud; neither does it permit one to enrich
himself at the expense of others. The petitioner’s failure and intentional omission to disclose the
fact of actual physical possession by another person during registration proceedings constitutes
actual fraud.

The Court is convinced that the petitioner cannot be considered a buyer and registrant in good
faith and for value. Respondents have been in actual possession and occupation of 2/3 of the subject
property at the time that it was sold to the petitioner. The ownership over the two-thirds-portion
of the subject property had already been vested to the respondents prior to such sale.

V. LEASE

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A. GENERAL PROVISIONS

PRIMITIVO MACALANDA v. ATTY. ROQUE ACOSTA

G.R. No.197718, September 6 2017, Tijam, J.

Crucial for the creation of tenancy relations would be the existence of two of the essential elements,
namely, consent and sharing and/or payment of lease rentals

FACTS:

Respondent Acosta filed a complaint for ejectment, collection of deliberately unpaid rentals and
share of land produce plus damages against petitioner Primitivo Macalanda, Jr. before the
Provincial Adjudicator of the Department of Agrarian Reform Adjudication Board, Region 1,
Lingayen, Pangasinan, alleging that: petitioner is respondent’s caretaker of the latter’s land;
respondent had filed civil cases against petitioner before the Municipal Trial Courts of Urbiztondo,
Pangasinan, to secure the proceeds of the sale of the produce of land but the said court dismissed
the cases as the controversy properly belonged to the agrarian courts, prompting him to file the
instant complaint. Petitioner wantonly violated the proprietary rights of respondent by ignoring
the latter’s demands for accounting of the proceeds of sale of the land’s harvest for several years;
and petitioner, like his father before him, is simply a caretaker of his land, whose compensation is
on a sharing basis. Respondent prayed for a judgment ordering petitioner, not being a tenant under
agrarian laws, to vacate the land and to account and pay for the produce of the land illegally
withheld from and due to respondent, and to pay attorney’s fees and damages.

In his Answer, petitioner, moving for the dismissal of the complaint on jurisdictional grounds,
alleged that: he is a tenant of the land as established by the findings of the facts by the Municipal
Circuit Trial Court of Urbiztondo, Pangasinan; he had been religiously paying all his obligations to
respondent; respondent earlier filed a letter-complaint with the Municipal Agrarian Reform Office
(MARO) of Urbiztondo, Pangasinan on the issue of fixing the leasehold rentals over the subject
landholding, an issue which is substantially the same with the issue in the instant complaint; the
instant complaint is violative of the rules on forum shopping.

ISSUE:

Whether Petitioner should be considered a tenant?

RULING:

No. For tenancy relationship to exist, therefore, the following elements must be shown to concur,
to wit: (1) the parties are the landowner and the tenant(2) the subject matter is agricultural land;
(3) there is consent between the parties to the relationship; (4) the purpose of the relationship is to
bring about agricultural production; (5) there is personal cultivation on the part of the tenant or
agricultural lessee; and, (6) the harvest is shared between landowner and tenant or agricultural
lessee. The presence of all these elements must be proved by substantial evidence, thus, the absence
of one will not make an alleged tenant a de jure tenant. Unless a person has established his status
as a de jure tenant, he is not entitled to security of tenure or to be covered by the Land Reform
Program of the Government under existing tenancy laws. Crucial for the creation of tenancy
relations would be the existence of two of the essential elements, namely, consent and sharing

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and/or payment of lease rentals. The existence of a tenancy relationship cannot be presumed and
allegations that one is a tenant do not automatically gives rise to security of tenure.

The Court held that the essential element of consent is not sufficiently established because its
alleged proof, that is, the Deed of Agreement, does not categorically constitute Petitioner as de
jure tenant of the subject land. In fact, in the signature portion of the Deed of Agreement, it referred
to Petitioner as a “tenant/caretaker” of the subject land. Thus, the Deed of Agreement is ambiguous
as to whether Petitioner is a tenant or a caretaker. Other documents must be presented to evince
the consent of Respondent as to the creation of the tenancy relationship. Sadly, aside from the said
deed, Petitioner failed to present any independent and concrete evidence to prove consent. Further,
the essential element of sharing of harvest was also not sufficiently established. Common sense
dictates that Petitioner, if he is indeed a de jure tenant, should fully know his arrangement with the
Respondent as to the sharing of harvest. Petitioner however, failed to persuasively show their
arrangement.

It had also been held by the Court that occupancy and cultivation of an agricultural land, no matter
how long, will not ipso facto make one a de jure tenant. Independent and concrete evidence is
necessary to prove personal cultivation, sharing of harvest, or consent of the landowner.

B. LEASE OF RURAL AND URBAN LANDS

RENATO MA. R. PERALTA vs JOSE ROY RAVAL, G.R. No. 188467 |

JOSE ROY B. RAVAL vs RENATO MA. R. PERALTA, G.R. No. 188764
March 29, 2017, Reyes, J.

A validity of certificate of title cannot be collaterally attacked in an action to rescind a lease

agreement. A direct action to attack the title’s validity has to be filed.

On causes for rescission of lease agreements, Article 1659 (NCC) applies as a rule. If the lease is a
written agreement, the prescriptive period to file rescission is 10 years following the rule in Article 1411.

FACTS:

In 1974, spouses Arzaga, as lessors, entered into a 40-year Contract of Lease with Peralta, as lessee,
over 2 parcels of land and the improvements thereon. Upon the death of the spouses, their heir
Flaviano Arzaga Jr., assigned all his rights, and interests in the subject properties to Raval who had
the Deed of Assignment registered and new TCTs over the parcels of land issued in his name.

Peralta refused to recognize the validity of the assignment to Raval, prompting him to still deposit
his rental payments for the account of Flaviano Jr. Alleging non-compliance with the terms of the
lease, Raval filed a complaint for rescission of lease. Peralta opposed and insisted that Raval was not
his lessor due to the nullity of the deed of assignment. Peralta also argues that prescription has set
in when the action was filed in 1998 (lease started in 1974) as Art 1389 only provides for a period of
4 years to file before such action is barred.

ISSUES:

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1) W/N the assignment to Raval is valid.

2.) W/N the action for rescission of lease has prescribed.

RULING:

1) YES. Raval cannot be deemed a "total stranger" to Peralta's contract of lease with the Spouses
Arzaga because by the subsequent transfers of rights over the leased premises, Peralta became the
original lessors' successor-in-interest. The lone heir of the Spouses Arzaga, Flaviano Jr., has
executed the subject deed of assignment.

Even if the deed of assignment is null and void, a separate petition for the registration of the deed
of assignment and cancellation of the original TCTs in the name of Spouses Arzaga was filed by
Raval in the RTC. The deed of assignment between Flaviano Jr. and Raval was declared valid by the
trial court, as it ordered the cancellation of the Spouses Arzaga's TCTs, and the issuance of new
TCTs under Raval's name. This decision had become final and executory. Peralta’s argument that
the Deed of Assignment is void collaterally raises the issue of the validity of the TCTs in Raval’s
name. This issue cannot be collaterally attacked. It is only when the object of the action is to nullify
the TCTs, and challenge the judgment that decreed such title, that such an action can be considered
a direct attack and, therefore, allowable.

2) NO. Peralta's reference to Article 1389, when he argued that Raval's action had already prescribed
for having been filed more than four years after the execution of the lease contract in 1974, is
misplaced. Article 1389 applies to rescissions in Articles 1380 and 1381, which are distinct from
rescissions of lease under Article 1659. It must be emphasized that specifically on the matter of
rescission of lease agreements, Article 1659 of the NCC applies as a rule. Given the provisions that
exclusively apply to leases, the other provisions of the NCC that deal with the issue of rescission
may not be applicable to contracts of lease.

The lease agreement has a prescriptive period of 10 years, counted from the time that the right of
action accrues, as provided in Article 1144. Raval's cause of action is based on a written contract.
Thus, contrary to Peralta's insistent claim, the action for rescission had not yet prescribed at the
time of its filing in 1998. Raval's cause of action accrued not on the date of the lease agreement's
execution in 1974, but from the time that there was a violation and default by Peralta in his
obligations under the lease agreement. The violations happened either immediately prior to Raval's
repeated extrajudicial demands that began in August 1995; or after Peralta's refusal to heed to the
demands. There was no indication that the violations dated back from the first few years of the
lease agreement's effectivity in the 1970s.

C. SPECIAL RULES ON LEASE OF RURAL/URBAN LANDS

REPUBLIC OF THE PHILIPPINES THROUGH ITS TRUSTEE, THE PRIVATIZATION AND

MANAGEMENT OFFICE vs PHILIPPINE INTERNATIONAL CORPORATION
G.R. No. 181984, March 20, 2017, Sereno, CJ.

When a government agency is abolished, its obligations are re-assumed by the Republic in the absence
of special provisions of law specifying some other manner of disposition.

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FACTS:

The Cultural Center of the Philippines (CCP) and respondent PIC entered into a Lease Agreement
over a parcel of land which had a term of 25 years and renewable for another 25 at the option of the
lessee (PIC). CCP alienated the property to PNB. When PNB was privatized, it assigned the subject
property to the National Government through the Asset Privatization Trust (APT). PIC requested
PNB to annotate its leasehold rights on the property’s certificate of title but PNB refused in view of
the transfer of the title to APT. APT refused the annotation alleging that it wasn’t bound by the
lease agreement between CCP and PIC. PIC instituted a Complaint to compel CCP, PNB, and APT
to respect the terms and conditions of the Lease Agreement which went all the way to the Supreme
Court. PIC succeeded in having its leasehold rights annotated on the title of the subject property.

Prior to the expiration of the 25-year term of the lease, PIC informed APT that it was exercising its
option to renew the contract. APT denied the request. Meanwhile, the APT was abolished and
petitioner Privatization and Management Office (PMO) was created with the mandate to take over
the assets of APT and inherit the latter's powers and functions. PMO denied PIC’s request to
exercise its option to renew the lease.

ISSUE:

W/N PMO is bound by the lease agreement?

RULING:

YES. APT was succeeded by the PMO.When a government agency is abolished, its obligations are
re-assumed by the Republic in the absence of special provisions of law specifying some other
manner of disposition. In this case, RA 8758, which extended the term of the APT, provides that
upon the termination of the APT’s existence, its obligations shall devolve to the National
Government. The National Government in turn devolved those obligations to the PMO through
EO 323. Consequently, the PMO assumes the existing obligations of APT upon the termination of
the latter’s existence.

One of the existing obligations of APT upon the termination of its term was to respect the Lease
Agreement. To recall, there is a previous judgment by the RTC and CA, as affirmed by this Court.
When a final judgment becomes executory, it thereby becomes immutable and unalterable. On
account of the final judgment that bound APT to the Lease Agreement, PMO is also obligated to
respect the lease contract as the former's successor agency.

At any rate, assuming that PMO was a third party to the Lease Agreement, it is still bound by it.
PIC's leasehold rights have been clearly annotated on the certificate of title covering the property.
Once a lease is recorded, as in this case, it becomes binding on third persons.

VI. AGENCY

A. OBLIGATIONS OF THE AGENT

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INTERNATIONAL EXCHANGE BANK NOW UNION BANK OF THE PHILIPPINES vs

SPOUSES JEROME AND QUINNIE BRIONES, AND JOHN DOE
G.R. No. 205657, March 29, 2017, Leonen,J.

Upon accepting an agency, the agent becomes bound to carry out the agency and shall be held liable
for the damages, which the principal may incur due to the agent's non-performance

FACTS:

Spouses Briones took out a loan of P3.7M from iBank (now Union Bank) to purchase a BMW Z4
Roadster. They executed a promissory note that required them to take out an insurance policy on
the car and to give iBank, as attomey-infact, irrevocable authority to file an insurance claim in case
of loss or damage to the vehicle. The BMW was carnapped so the spouses declared the loss to iBank,
which instructed them to continue paying the next three monthly installments "as a sign of good
faith,” a directive they complied with. After they finished paying the 3 installments, iBank
demanded full payment of the lost vehicle. The spouses submitted a notice of claim with their
insurance company which was denied due to a delay in the reporting of the lost vehicle. iBank filed
a complaint for replevin or sum of money against the spouses alleging default in paying the monthly
amortizations of the mortgaged vehicle

ISSUE:

W/N Spouses Briones are liable to iBank for the monthly amortizations of the BMW.

RULING:

NO. Under the promissory note, Spouses Briones appointed iBank as their attorney-in-fact (agent),
authorizing it to file a claim with the insurance company if the mortgaged vehicle was lost or
damaged. iBank was also authorized to collect the insurance proceeds as the beneficiary of the
insurance policy.

As the agent, petitioner was mandated to look after the interests of the Spouses Briones by
collecting the insurance proceeds. However, instead of going after the insurance proceeds, as
expected of it as the agent, petitioner opted to claim the full amount from the Spouses Briones,
disregarding the established principal-agency relationship, and putting its own interests before
those of its principal. The insurance policy was valid when the vehicle was lost, and that the
insurance claim was only denied because of the belated filing.

Having been negligent in its duties as the duly constituted agent, petitioner must be held liable for
the denial of the insurance claim suffered by the Spouses Briones because of non-performance of
its obligation as the agent, and because it prioritized its interests over that of its principal.
Petitioner's bad faith was evident when it advised the Spouses Briones to continue paying three (3)
monthly installments after the loss, purportedly to show their good faith.

If petitioner was indeed acting in good faith, it could have timely informed the Spouses Briones that
it was terminating the agency and its right to file an insurance claim, and could have advised them
to facilitate the insurance proceeds themselves. This would have allowed the spouses to collect from
their insurer and pay the amortizations on the BMW. Petitioner's failure to do so only compounds

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its negligence and underscores its bad faith. Thus, it will be inequitable now to compel the Spouses
Briones to pay the full amount of the lost property.

SPOUSES MAY S. VILLALUZ and JOHNNY VILLALUZ, JR.,v.LAND BANK OF THE

PHILIPPINES and the REGISTER OF DEEDS FOR DAVAO CITY
G.R. No. 192602, January 18, 2017, Third Division, JARDELEZA, J.

An agent appointed in a Power of Attorney with authority to sign documents relating to a mortgage,
may appoint a substitute if the principal has not prohibited him from doing so. A bank can thus validly
transact with a substitute agent as long as the Power of Attorney does not prohibit the appointment
of a substitute.

A real estate mortgage can be validly executed before the loan is released, provided that the loan is
actually released thereafter.

An assignment of inventory (given in addition to a real estate mortgage) is not a substitute for
payment of sums of money. As such, it does not serve to extinguish the loan and the accessory real
estate mortgage.

FACTS:

In 1996, the Spouses May and Johnny Villauz (“Spouses”) executed an SPA in favor of May Villauz’s
mother. Paula Agbisit, which authorized the latter to “sign in our behalf all documents relating the
sale, mortgage, or other disposition’ of a property owned by the Spouses located in Davao City. The
property was to be used as collateral for a loan to expand Paula Agbisit’s backyard cut flower
business.

On June 19, 1996, Paula Agbisit executed her own SPA appointing (as her substitute agent) Milflores
Cooperative (of which she was the Chairperson) as attorney-in-fact in obtaining a loan from and
executing a real estate mortgage in favor of the Land Bank of the Philippines. Milflores Cooperative
also executed a Deed of Assignment of Produce/ Inventory as additional collateral for the loan.

Land Bank of the Philippines approved a P3 million loan in favor of Milflores Cooperative and on
June 25, 1996 made a partial release of P995, 500. On the same day, Paula Agbisit borrowed the
amount of P604, 750 from Milflores Cooperative.

The trial court dismissed the complaint and which dismissal was affirmed by the Court of Appeals.
Hence, this petition to the Supreme Court.

ISSUES:

1. Whether Paula Agbisit could further delegate her authority as attorney-in-fact for the
Spouses Villaluz? If not, was the mortgage in favor of Land Bank executed by Milflores
Cooperative void.

2. Whether the real estate mortgage can be deemed void since there was no loan yet when the
mortgage was executed.

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3. Whether the SPA issued by the Spouses in favor of Paula Agbisit was extinguished when
Milflores Cooperative assigned its produce and inventory to Land Bank as additional
collateral.

RULING:

1. YES. The delegation of authority made by Paula Agbisit to Milflores Cooperative is valid. Articles
1892 and 1893 of the Civil Code provide the rules regarding the appointment of a substitute by an
agent. The law created a presumption that an agent has the power to appoint a substitute. The
consequence of the presumption is that, upon valid appointment of a substitute by the agent, there
ipso facto arises an agency relationship between the principal and the substitute, i.e. the substitute
becomes the agent of the principal. As a result, the principal is bound by the acts of the substitute
as if these acts had been done by the principal’s appointed agent.

In this case, the SPA executed by the Spouses in favor of Paula Agbisit contains no restrictive
language indicative of an intention to prohibit Paula Agbisit from appointing a substitute agent.
Thus, Paula Agbisit’s appointment of Milflores as substitute agent was valid and consequently, the
real estate mortgage is considered validly executed.

2. The Spouses floated a new theory that the mortgage was void because the loan was not yet in
existence when the mortgage was executed on June 21, 1996 as the loan was released only on June
25, 1996.

The Supreme Court ruled that although the validity of the real estate mortgage is dependent upon
the validity of the loan, what is essential is that the loan contract intended to be secured is actually
perfected (although the proceeds are not yet released) prior to the execution of the mortgage
contract.

In loan transactions, it is customary for the lender to require the borrower to execute the security
contracts prior to the initial loan drawdown. This is understandable since a prudent bank would
not want to release its funds without the security arrangements in place. On the other hand, the
borrower would not be prejudiced by mere execution of the security contract because unless the
proceeds are delivered, the obligations under the security contracts will not arise.

In other words, the security contract, in this case, the real estate mortgage, is conditioned upon the
release of the loan amount. This suspensive condition was satisfied when Land Bank released the
first tranche of the ₱3,000,000 loan to Milflores Cooperative, which consequently gave rise to the
Spouses’ obligations under the real estate mortgage.

The Spouses’ theory that the additional security by Milflores Cooperative of its produce/ inventory
extinguished the loan and consequently the agency contract, was likewise found to be
unacceptable.

The assignment was for the express purpose of “securing the payment of the line/ loan, interest,
and charges thereon.” Nowhere in the deed can it be reasonably deduced that the collaterals
assigned by Milflores Cooperative were intended to substitute the payment of the sum of money
under the loan. It was merely an accessory contract to secure the principal loan obligation.

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The Spouses understandably feel shorthanded because their property was foreclosed by reason of
another person’s inability to pay. However, they were not coerced to grant an SPA in favor of Paula
Agbisit. Nor were they prohibited from prescribing conditions on how such power may be
exercised. Absent such express limitations, the law recognized Land Bank’s right to rely on the
terms of the power of attorney as written.

VII. TRUSTS
A. IMPLIED TRUST

MANUEL L. BAUTISTA, SPOUSES ANGEL SAHAGUN and CARMELITA BAUTISTA, and

ANIANO L. BAUTISTA vs. MARGARITO L. BAUTISTA
G.R. No. 202088, March 8, 2017, Peralta, J.

A trust, which derives its strength from the confidence one reposes on another especially between
families, does not lose that character simply because of what appears in a legal document.

FACTS:

Petitioners and Respondent are siblings who established a lending business through a common
fund they inherited from their mother. Whenever the business gave a loan, a property is mortgaged
to one of the siblings, and should the debtor fail to pay, a deed of sale is executed in the name of
one of them. The petitioners claim that the property in issue came from one such transaction. The
property was mortgaged to one of the siblings, Florencia, by one Amelia Mendoza, a debtor of the
lending business. The owner’s duplicate copy of the Torrens title was in fact given to Florencia.

Respondent claims that subsequent to the loan and mortgage, Amelia allegedly sold the property
to him and that he used his own funds to pay for it. He further alleged that he cancelled the debt
she owed from the lending business and also discharged the mortgaged. A petition for the issuance
of a second owner’s duplicate copy of the Torrens title was filed in the RTC and eventually granted
which was issued in Margarito’s name.

This complaint for partition was filed by the petitioners which was granted by the RTC.

ISSUE:

W/N the CA erred in reversing the RTC.

RULING:

YES. The object of partition is to enable those who own property to put an end to the joint tenancy
so as to vest in each a sole estate in specific property or an allotment in the lands or tenements.
However, unless and until the issue of co-ownership is definitively resolved, it would be premature
to effect a partition of an estate.

Respondent failed to prove that Amelia conveyed the property exclusively in his name. Testimonial
and documentary evidence point toward the petitioners’ argument that although the property was
registered solely in respondent’s name, they are co-owners of the property because it was acquired

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through the siblings' lending business. Although a certificate of title is the best proof of ownership
of a piece of land, the mere issuance of the same in the name of any person does not foreclose the
possibility that the real property may be under co-ownership with persons not named in the
certificate or that the registrant may only be a trustee.

This Court finds that an implied resulting trust existed among the parties. There is an implied trust
when a property is sold and the legal estate is granted to one party but the price is paid by another
for the purpose of having the beneficial interest of the property.

A trust, which derives its strength from the confidence one reposes on another especially between
families, does not lose that character simply because of what appears in a legal document. Although
the property was titled under the name of respondent, the surrounding circumstances as to its
acquisition speak of the intent that the equitable or beneficial ownership of the property should
belong to the siblings. The RTC's Order of partition of the property was erroneously set aside

VIII. CREDIT TRANSACTIONS

A.LOAN LI
PHILIPPINE NATIONAL BANK v. CHAN
G.R. No. 206037, March 13, 2017, First Division, DEL CASTILLO, J.

Consignation is deemed to have been made only at the time of the deposit of the thing in court or when
it was placed at the disposal of the judicial authority.

A mortgagee has the right to recover the deficiency resulting from the difference between the amount
obtained in the sale at public auction and the outstanding obligation of the mortgagor at the time of
the foreclosure proceedings.

FACTS:

Respondent is the owner of a three-story commercial building, then leased the same to PNB for a
period of five years. When the lease expired, PNB continued to occupy the property on a month-to
month-basis, vacating the premises on 23 March 2006. Respondent meanwhile obtained a ₱1.5M
loan from PNB, secured by a Real Estate Mortgage constituted over the leased property. Respondent
likewise executed a Deed of Assignment over the rental payments in favor of PNB.

The amount of the loan was subsequently increased, prompting PNB to execute an Amendment to
the Real Estate Mortgage by Substitution of Collateral where the mortgage over the leased property
was released and substituted by a mortgage over a parcel of land located in Manila.

Respondent filed a Complaint for Unlawful Detainer against PNB, alleging failure to pay monthly
rentals from October 2004 until August 2005. PNB’s claimed it applied the rental proceeds from
October 2004 to 15 January 2005 to Respondent’s outstanding loan. As for monthly rentals from 16
January 2005 to February 2006. PNB explained that it received a demand letter from a certain
Lamberto Chua who claimed to be the owner of the released property and requested that the rentals
be paid directly to him until PNB decides to vacate the premises or a new lease contract with Chua
is executed. PNB thus deposited the rentals in a separate non-drawing savings account for the

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benefit of the rightful party. PNB later consigned the rental proceeds with the Metropolitan Trial
Court on 31 May 2006.

ISSUE:

Whether or not PNB properly consigned the disputed rental payments with the Office of the Clerk
of Court of MeTC Manila.

Whether or not PNB is entitled to the disputed rental proceedings to cover the alleged deficiency
in payment of Chan’s liability after the foreclosure proceedings.

RULING:

NO. PNB failed to properly consign the disputed rental payments. The Civil Code provides for
requisites of validity for proper consignation. Failure in any of the requirements is enough ground
to render a consignation ineffective.

PNB’s deposit of the subject monthly rentals in a non-drawings savings account is not the
consignation contemplated by law because it does not place the same at the disposal of the court.
Consignation is necessarily judicial, and does not permit venues other than the courts. As a
consequence of an ineffective consignation. PNB’s obligation to pay rent for the period of 16 January
2005 to 23 March 2006 remained subsisting, as the deposit of the rentals in a non-drawing savings
account cannot be considered to have the effect of payment.

While it is true that consignment with the Metropolitan Trial Court has a retroactive effect, such
payment is deemed to have been made only at the time of the deposit of the thing in court or when
it was placed at the disposal of the judicial authority. PNB’s payment of the monthly rentals can
only be considered to have been made not earlier than 31 May 2006.

NO. PNB is not entitled to the disputed rental proceedings to cover the alleged deficiency in the
payment of Chan’s liability after foreclosure proceedings as there is no sufficient evidence on record
to show such deficiency exists. The Statement of Account submitted by PNB is not enough to prove
a claim of deficiency as it is unsupported by corroborating evidence and the copy of the document
in court records consists of illegible pages.

A mortgagee has the right to recover the deficiency resulting from the difference between the
amount obtained in the sale at public auction and the outstanding obligation of the mortgagor at
the time of the foreclosure proceedings. In this case, the amount of indebtedness of Respondent as
to the loan was computed by PNB only as of 15 May 2006. Respondent’s liability would have
significantly increased by the time the foreclosure was held on 31 October 2006.

B. GUARANTY AND SURETYSHIP

FGU INSURANCE CORP v. SPS FLORO ROXAS AND EUFEMIA ROXAS

G.R. No. 189526, August 9, 2017, Second Division, Leonen, J.

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The liability of a surety is determined strictly in accordance with the actual terms of the performance
bond it issued. It may, however, set up compensation against the amount owed by the creditor to the
principal.

FACTS:

The Sps. Roxas entered into a Contract of Building Construction dated May 22, 1979 with Rosendo
P. Dominguez and Philtrust Bank to complete the construction of their housing project known as
“Vista Del Mar Executive Houses”, which was estimated to cost ₱120 million.

The terms of the contract provide that Philtrust would finance the cost of the materials to the extent
of ₱900,000 while Dominguez would undertake the construction works for ₱300,000. The bank can
only release the funds per Dominguez’s request and the Sps Roxas conformity. Invoices should be
sumitted accounting the purchases before funds would be released.

Sps Roxas and Dominguez also entered into a separate agreement detailing the schedule of
payments of the construction costs of ₱300,000 covering labor, supervision and engineering
services.

Dominguez secured a performance bond with the face amount of ₱450,000 from FGU Insurance.
FGU and Dominguez bound themselves jointly and severallyliable to pay the Sps Roxas and
Philtrust Bank the agreed amount in the event of Dominguez’s non-performance of his obligation
under the contract.

Dominguez failed to complete the construction, thus the Sps. Roxas and Philtrust demanded
payment under the performance bond. Dominguez thus filed a complaint against the Sps. Roxas
and Philtrust Bank.

Dominguez raised the following arguments to deflect liability under the performance bond:
 There was an increase in the prices thus they demanded an adjustment of the stipulated
contract price which the Sps. Roxas and Philtrust refused to comply with
 The Sps. Roxas failed to pay per the schedule of payments agreed upon, thus held in default
 Philtrust Bank refused to deliver any amounts for the purchase of supplies thus they failed
to complete the project
 Furthermore, it argued that it cannot be held liable for the full amount of ₱450,000 for the
amount was merely a maximum amount and not the actual liability it can be held liable for

The Sps. Roxas argued that the performance bond should still be paid nevertheless.

The Regional Trial Court held that the Sps. Roxas breached their obligation to Dominguez under
the Contract of Building Construction when it failed to pay per the schedule of payments. It also
agreed that the non-completion of the project within the stipulated period was justified due to the
rising prices and the refusal of the parties to increase the contract price. Thus, there can be no
demand under the performance bond.

The Court of Appeals reversed the RTC and found that FGU and Dominguez should be liable under
the performance bond. The stoppage of the construction and its total abandonment constituted a
breach of contractual obligation characterized by bad faith. Hence, the CA adjudged Dominguez

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liable to the Sps. Roxas for Php 450k solidarily with FGU, and for moral, exemplary damages and
attorney’s fees.

ISSUE:

Whether or not the Court of Appeals erred in reversing the RTC and finding that Dominguez indeed
failed to perform its obligation, thus holding it liable under the full amount in the performance
bond.

RULING:

NO, the Court of Appeals did not err.

The Supreme Court found that indeed, Dominguez’s failure to complete construction was a
violation of the contract and thus Dominguez and FGU should be held liable for the full amount of
the performance bond, which is ₱450k. Philtrust and the Sps. Roxas can thereby demand directly
from FGU or the Dominguez’s the amount to be paid.

The argument that they should only be held liable for the actual damages since the amount stated
is merely a maximum amount is untenable for the surety contract clearly stipulated the amount of
₱450k should be paid upon non-performance of the obligation.

Furthermore, the argument that only ½ of the amount should be paid as Philtrust and Sps. Roxas
are joint creditors is untenable as well. The surety contract should be read together the Contract of
Building Construction which provides that the contractor shall pay to the “Bank and/or owners”
thus showing that the Bank and the Sps. Roxas are solidary creditors.

The Court however allowed for judicial compensation to take place, considering that the Sps. Roxas
are liable to Dominguez for the payment of the ₱300,000 per the schedule of payments entered
upon which they failed to comply with. Article 1280 of the Civil Code states:

Article 1280. Notwithstanding the provisions of the preceding article, the guarantor may set
up compensation as regards what the creditor may owe the principal debtor.

While Article 1280 specifically pertains to a guarantor, the provision nonetheless applies to a surety
as well. Hence, FGU could offset its liability under the Surety Bond against Dominguez's
collectibles from the Spouses Roxas. His collectibles include the unpaid contractor's fee of
₱90,000.00 plus 14% interest per annum from October 31, 1979 until fully paid. Additionally, his
collectibles cover the Spouses Roxas' advances from the construction funds in the amount of
₱73,136.75 plus 6% legal interest from November 16, 1979 until fully paid. In the event of
compensation, the Spouses Roxas shall be liable to Philtrust Bank for the latter's share in the
obligation.

PHILIPPINE TRUST COMPANY v. REDENTOR GABINETE et. al.

G.R. No. 216120, March 29, 2017, Second Division, PERALTA, J.

Forgery is not presumed but must be proved by clear, positive and convincing evidence by the party
alleging it. The handwriting expert’s testimony is only persuasive, and not conclusive.

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FACTS:

Petitioner Philtrust filed a complaint against Shangrila Realty Corp. and its duly-authorized
representatives, herein Respondents, alleging that Petitioner had granted Shangrila’s application
for a renewal of its bills discounting line amounting to P20M, conditioned on a Continuing
Suretyship Agreement. The terms of the loan stated that four separate amounts were loaned,
evidenced by four separate promissory notes, with interest rate stipulations for three of the
promissory notes set at 23% per annum, and an interest rate stipulation for one of the promissory
notes set at 21% per annum.

Upon maturity of the loan, Shangrila failed to pay Petitioner, rendering the entire principal loan
together with accrued interest and other charges, due and demandable. Petitioner filed a Petition
for Extra Judicial Foreclosure of the real estate mortgage where Petitioner was the highest bidder
at the public auction, with a bid of P6M.

Due to the insufficiency of the proceeds of the foreclosure sale to fully satisfy the obligations of
Shangrila, the proceeds of the foreclosure sale were applied to one of the four promissory notes,
nevertheless leaving a deficiency under such promissory notes as well as a deficiency in the clean
loans under the three other promissory notes.

Respondent Gabinete raised as a defense that he had ceased to be connected with Shangrila as of
1995, and as far as he knows, Shangrila never started doing business after it was incorporated in
March 1994. He also denied under oath the genuineness and due execution of the confirmation
letter, claiming that his signature of conformity is a forgery and he has nothing to do with the loans.

ISSUE:

Whether or not the Gabinete should be held solidarity liable with Shangrila.

RULING:

YES. Jurisprudence holds that a finding of forgery does not depend entirely on the testimony of
handwriting experts, and that the judge still exercises independent judgment on the issue of
authenticity of the signatures under scrutiny. In this case, the RTC judge was able to exercise his
independent judgment in determining authenticity or genuineness of the signature in question,
and was more in depth in its analysis of the absence of forgery than the CA’s finding that forgery is
present, given that Gabinete himself admitted to having two sets of signatures, one shortened
signature and one full signature, that the documents brought to the NBI Examiner did not contain
samples of the shortened signature which was used on the Continuing Surety Agreement, and no
document was submitted by Gabinete to the NBI bearing the year 1997, the same time when the
Continuing Suretyship Agreement was executed. The RTC correctly held that at most, the findings
of the NBI are not conclusive.

Furthermore, the document being contested has been notarized and thus, is considered a public
document, bearing with it the presumption of regularity in its favor. The notary public who
notarized the Continuing Suretyship Agreement testified in court and confirmed that Gabinete
signed the document in her presence.

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C. PLEDGE, MORTGAGE AND ANTICHRESIS, CHATTEL MORTGAGE (include Act

No. 1508 and Section 47 of R.A. No. 8791 or the General Banking Act of 2000)

PHILIPPINE NATIONAL BANK vs LILIBETH S. CHAN

G.R. No. 206037, March 13, 2017, Del Castillo, J.

Consignation is necessarily judicial; it is not allowed in venues other than the courts.

A mortgagee has the right to recover the deficiency in foreclosure proceedings.

FACTS:

Chan leased her commercial building to PNB. During the term of the lease, she obtained a loan
from PNB secured with a real estate mortgage over one of Chan’s properties. When it received a
demand for payment of rent from a 3rd party claiming to be the new owner of Chan’s building, PNB
stopped giving rent payments to Chan, instead it deposited the amount in a separate non-drawing
account.

Due to PNB’s failure to pay rent, Chan filed a complaint for unlawful detainer before the MeTC.
PNB consigned the amount in the non-drawing account with the court. The MeTC found for Chan
and ordered PNB to pay rent plus interest due to late payment. PNB appealed to the RTC claiming
that it was not late in paying rent because it was depositing the amounts in a separate non-drawing
account.

While the appeal was pending in the RTC, Chan failed to pay her loan obligations so PNB initiated
foreclosure proceedings on her mortgaged property. In the public auction, PNB was the highest
bidder. In light of the foreclosure, Chan filed a memorandum in the RTC claiming that PNB had no
right to the rental amount consigned with the Court. She insisted that her loan was fully paid when
PNB bought the mortgaged property. For PNB, it argued that there was a deficiency in the
foreclosure amount and it is entitled to a deficiency claim which can be covered by the rentals.

ISSUES:

1) W/N PNB should pay interest on the rentals.

2) W/N PNB is entitled to the rentals as deficiency claim from the foreclosure proceedings.

RULING:

1) YES. Consignation is the act of depositing the thing due with the court or judicial authorities
whenever the creditor cannot accept or refuses to accept payment. For consignation to be valid, the
amount or thing due must be placed at the disposal of the court. Failure to do so is enough ground
to render a consignation ineffective. PNB's deposit of the subject monthly rentals in a non-drawing
savings account is not the consignation contemplated by law, precisely because it does not place
the same at the disposal of the court. Consignation is necessarily judicial; it is not allowed in venues
other than the courts.

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It is important to point out that PNB's obligation to pay the monthly rentals had already fallen due
and demandable before PNB consigned the rental proceeds with the MeTC. PNB has to pay interest
from the time it failed to pay rent and chose to instead deposit the amounts in the non-drawing
accounts up to the time that it successfully consigned the amount to the MeTC.

2) YES. A mortgagee has the right to recover the deficiency resulting from the difference between
the amount obtained in the sale at public auction and the outstanding obligation of the mortgagor
at the time of the foreclosure proceedings.

As for the issue on PNB' s entitlement to the subject rental proceeds to cover the deficiency in
payment after the foreclosure sale of the mortgaged property, there is no sufficient evidence on
record to show that such a deficiency exists. The case should be remanded to the MeTC for the
proper reception of evidence and computation of Chan’s total indebtedness in order to determine
whether there exists a deficiency in payment as PNB insists.

SPS. FELIX A. CHUA AND CARMEN I. CHUA, ET AL. v. UNITED COCONUT PLANTERS
BANK, ET AL.
G.R. No. 215999, August 16, 2017, Bersamin, J.

The proper application of the proceeds of the foreclosure sale would have necessarily resulted in the
full extinguishment of the mortgagor’s entire obligation.

FACTS:

Petitioners entered into a Joint Venture Agreement (JVA) with Gotesco Properties for the
development of their property in Lucena City into a residential and commercial subdivision.
Gotesco was then represented by respondent Jose Go. Pursuant to the JVA, several deeds of
absolute sale (DOAS) were executed over Petitoners’ 12 parcels of land in Lucena City in favor of
Revere, a corporation controlled and represented by Jose Go. The DOAS were complemented by a
deed of trust dated April 30, 1998 under which it was confirmed that Revere did not part with any
amount in its supposed acquisition of the 12 parcels of land. The deed of trust further confirmed
petitioners’ absolute ownership of the properties.

Prior to the execution of the JVA, petitioners and Jose Go had separate outstanding loan obligations
with UCPB. On March 21, 2000, Petitioners entered into a Memorandum of Agreement (MOA) with
UCPB to consolidate the obligations of the Petitioners, which was determined at P204, 597, 177.04
as of November 30, 1999. The parties thereby agreed to deduct the sum of P103, 893, 450.00 from
said total in exchange for 30 parcels of land including the improvements thereon, and that the
remaining balance of P68 M would be converted by UCPB into equity interest in LGCTI, a company
where the Petitioners served as corporate officers and are stockholders.

To implement the March 21 MOA, UCPB drafted a REM covering the properties listed in the MOA,
which petitioners signed to secure a credit accommodation. Under its terms, this REM covered the
payment of all loans, overdrafts, credit lines and other credit facilities or accommodations obtained
or herein after obtained by the Mortgagors Petitioners.

Jose Go, acting in behalf of Revere, and UCPB executed another REM (Revere REM) involving the
properties held in trust by Revere for Petitioners. The execution of the Revere REM was unknown

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to Petitioners. UCPB foreclosed the mortgages and the properties were sold for P227, 700, 000.
UCPB and LGTCI executed a deed of assignment of liabilities whereby LGCTI would issue 680,000
preferred shares of its stocks to UCPB to offset its remaining obligations totaling P68 M.

The Petitioners wrote to UCPB to request an accounting of Jose Go’s liabilities that had been
mistakenly secured by the mortgage of Petitioners properties, as well as to obtain a list of all the
properties subject of their Rem. They also further requested that the proceeds of the foreclosure
sale of the properties be applied only to Petitioners’ obligation of P204, 597,177.04; and that the rest
of the properties or any excess of their obligations should be returned to them. However, UCPB
did not heed their request.

Thus a complaint was filed with the RTC. The RTC declared the Revere REM as null and void for
having been entered outside the intent of the JVA and for not bearing Petitioners’ signatures. Also,
the Court ruled that it was error on the part of UCPB to apply any portion of the proceeds to settle
the obligations of Jose Go without first totally extinguishing Petitioners’ obligations. The CA
reversed and set aside the judgment of the RTC.

ISSUES:

1. Whether the Revere REM was valid and binding on the Petitioners?
2. Whether the proceeds of the foreclosure sale should be applied in settling the obligations
of Jose Go and his group of companied before fully satisfying the liabilities of Petitioners?

RULING:

1. No. It is to be noted that the REM was executed by Revere through Jose Go purportedly in
connection with the March 21, 2000 MIA on the very same day that Petitioners’ REM were executed.
Yet, Petitioners disclaimed any knowledge or conformity to the Revere Rem. With the two deeds of
trust executed in favor of Revere not having been expressly cancelled or rescinded, the properties
mortgaged by Revere to UCPB were still owned by Petitioners for all intents and purposes.

In examining said deeds of trust, these provided that: “The TRUSTEE hereby acknowledges and
obliges itself not to dispose of, sell, transfer, convey, lease or mortgage the said 12 parcels of land
without the written consent of the TRUSTORS first obtained.” By entering into the Revere REM,
therefore, REVERE openly breached its undertaking under the deeds of trust in contravention of
the express prohibition therein against the disposition or mortgage of the properties. It is also worth
mentioning that the records are bereft of any allegation that Revere had obtained the approval of
petitioners or that the latter had acquiesced to the mortgage of the properties in favor of UCPB.
Absent proof showing that petitioners had transferred the ownership of some or all of the properties
covered by the deeds of trust in favor of Revere or Jose Go, the deeds of trust remained as the
controlling documents as to the parcels of lanf therein covered.

Additionally, UCPB could not now feign ignorance of the deeds of trust. As the RTC pointed out,
UCPB’s own Vice President expressly mentioned in writing that UCPB would secure from Jose Go
the titles necessary for the execution of the mortgages. As such, UCPB’s actual knowledge of the
deeds of trust became undeniable.

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2. No. The foreclosure sale was prompted by Petitioner’s failure to pay their obligations. When the
proceeds of the foreclosure sale were applied to their outstanding obligations, the payment of the
balance of the P68 M was deliberately left out, and the proceeds were conveniently applied to settle
the p75 M of Revere and/or Jose Go’s unpaid obligations with UCPB. This application was in blatant
contravention of the agreement that Revere and Jose Go’s obligations would be paid only if there
were excess in the application of the foreclosure proceeds. Accordingly, the CA should have applied
the proceeds to the entire outstanding obligations of Petitioners, and only the excess, if any, should
have been applied to pay off Revere and/ or Jose Go’s obligations.

Hence, the deed of assignment of liabilities covering the deficiency in its obligation to UCPB in the
amount of P68M is null and void. It can be further concluded that UCPB could not have validly
assigned to Asset Pool A any right or interest in the P68M balance because the proper application
of the proceeds of the foreclosure sale would have necessarily resulted in the full extinguishment
of Petitioner’s entire obligation.

DELFIN DOMINGO DADIS VS. SPOUSES MAGTANGGOL and NORA DE GUZMAN et. al.
G.R. No. 206008, 7 June 2017, Peralta, J.

A person dealing with a seller who has possession and title to the property but whose capacity to sell
is restricted, qualifies as a buyer in good faith if he proves that he inquired into the title of the seller
as well as into the latters capacity to sell; and that in his inquiry, he relied on the notarial
acknowledgment found in the sellers duly notarized special power of attorney.

FACTS:

Delfin filed a Complaint for reconveyance and damages against Spouses Magtanggol De
Guzman (Magtanggol) and Nora Q. De Guzman (Nora) and the Register of Deeds (RD) of Talavera,
Nueva Ecija. Delfin alleged that: he and his deceased wife, Corazon, were the registered owners of
a parcel of land located at Guimba, Nueva Ecija; Their daughter, Marissa, entered into a contract
of real estate mortgage (REM) over the subject property in favor of Magtanggol to secure a loan
obligation of 1,210,000.00; the Spouses De Guzman made it appear that Marissa was authorized by
the Spouses Dadis by virtue of a Special Power of Attorney (SPA); the SPA was a forged document
because it was never issued by him or Corazon as the signatures contained therein are not theirs,
especially so since he was in the United States of America (USA) at the time; it was only in
November 1999, when Corazon died, that Magtanggol informed him of the transaction, but he
could not remedy the situation as he had to go back to the USA.

When he returned to the Philippines in April 2002, he executed a SPA in favor of a friend, Eduardo
Gunsay, to look into the matter and make the necessary actions; in 2003, he was able to procure
copies of the documents pertaining to the mortgage, including the cancellation of their title and
the issuance of a new one, TCT No. N-26572, in favor of the Spouses De Guzman. After his
verification, he immediately caused the filing of an Affidavit of Adverse Claim, which was annotated
at the back of TCT No. N-26572; neither he nor his family benefited from the loan secured by the
mortgage; no demand letter, as well as notices of the foreclosure proceedings and the consolidation
of title, were sent to him; and, in view of these, he is entitled to receive from the Spouses De Guzman
the amounts of ₱200,000.00 as moral damages, ₱500,000.00 as exemplary damages, ₱20,000.00 plus
₱l,000.00, per hearing as attorney's fees, interests, and other costs of suit.

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In their Answer with Motion to Dismiss, the Spouses De Guzman countered that Delfin has no
cause of action against them, stating that: they have no knowledge as regards the supposed falsity
of the SPA presented by Marissa and Corazon at the time the latter pleaded to accommodate them
into entering a mortgage contract; they have no knowledge that Delfin was not in the Philippines
at the time of the execution of the SPA, which, as a duly-notarized document, was presumed to
have been done regularly; Delfin defaulted in paying the obligation despite several repeated
demand, as in fact they even proceeded to his house in November 1999 and were able to talk to
him; in view of his admission that he could not pay the amount involved, they were constrained to
cause the registration of the REM with the RD on May 21, 2001; to give him enough time and
opportunity to reacquire the property, it was only after three years from the time the obligation
became due that they pursued and effected the foreclosure of the property; considering that he still
failed to pay the obligation, the property was foreclosed on August 21, 2001, with them (Spouses De
Guzman) as the highest bidder;

After trial, the RTC ruled that while the mortgage is void, the obligation of Corazon to Magtanggol
is valid. It also established that Delfin was not in the Philippines on December 10, 1996 since, thus,
he could not have signed the SPA authorizing Marissa to mortgage the property. Without his
written consent, the mortgage is void since such act is not merely an act of administration but of
ownership or dominion on the part of Corazon.

On appeal, the CA reversed and set aside the RTC Decision and dismissed Delfin's complaint for
lack of merit. It conceded that, as found by the RTC and undisputed by the parties, the SPA had
been forged. As to the issue of whether Magtanggol is a mortgagee in good faith and for value, it
resolved in the affirmative. Hence, this petition.

ISSUE:

Whether or not Magtanggol is a mortgagee in good faith.

RULING:

NO. In sum, all things being equal, a person dealing with a seller who has possession and title to the
property but whose capacity to sell is restricted, qualifies as a buyer in good faith if he proves that
he inquired into the title of the seller as well as into the latter’s capacity to sell; and that in his
inquiry, he relied on the notarial acknowledgment found in the sellers duly notarized special power
of attorney. He need not prove anything more for it is already the function of the notarial
acknowledgment to establish the appearance of the parties to the document, its due execution and
authenticity.

Note that we expressly made the foregoing rule applicable only under the operative words "duly
notarized" and "all things being equal." Thus, said rule should not apply when there is an apparent
flaw afflicting the notarial acknowledgment of the special power of attorney as would cast doubt
on the due execution and authenticity of the document; or when the buyer has actual notice of
circumstances outside the document that would render suspect its genuineness.

Similar to a buyer, the status of a mortgagee in good faith is never presumed but must be proven
by the person invoking it. Good faith connotes an honest intention to abstain from taking
unconscientious advantage of another. "Good faith, or the lack of it, is a question of intention. In

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ascertaining intention, courts are necessarily controlled by the evidence as to the conduct and
outward acts by which alone the inward motive may, with safety, be determined."

We rule that, based on his own disclosures during the trial, Magtanggol could not be considered as
a mortgagee in good faith because he had actual notice of facts that should have put him on deeper
inquiry into Marissa's capacity to sell. He could not feign ignorance of Delfin's absence or
whereabouts. The subject SPA was not yet existing at the time he first met Corazon and Marissa. It
was him who required it from them. He testified that sometime in 1996, Corazon, together with her
three daughters, went to their house to talk to him regarding the subject property that was
mortgaged in favor of Greenline Lending Corporation, a financial institution based in Cabanatuan.
Because he allegedly pitied Corazon, who was sickly at the time and in order to help in her
medication, he agreed to their offer to mortgage the same property to him after he redeemed it
from Greenline. It was he who informed Corazon that she could not mortgage by herself alone and
advised her to prepare an SPA to be used in their transaction. With these admissions, it is but logical
to infer that the only reason why he required the execution of the subject SPA was that he already
knew, as a matter of fact, after inquiring into or being told of, the absence or whereabouts of Delfin.
Despite this actual knowledge at the time the mortgage transaction was entered into, he did not
question the due execution of the SP A and the resulting authority conferred upon Marissa;
therefore, he is not a mortgagee in good faith.

He clearly failed to observe the required degree of caution in ascertaining the genuineness of the
SPA and the supposed authority of Marissa. He should not have simply relied on the face of the
document submitted by Corazon and Marissa. When the person applying for the loan is other than
the registered owner of the real property being mortgaged, it should have already raised a red flag
and should have induced the mortgagee to make inquiries into and confirm the authority of the
mortgagor. A person who deliberately ignores a significant fact that could create suspicion in an
otherwise reasonable person is not an innocent mortgagee for value.

The falsity of the SPA could not be cured even if Magtanggol later on informed Delfin of the
mortgage transaction and of the proceedings leading to the property's foreclosure, consolidation of
title, and issuance of a new title. The sale (or encumbrance) of conjugal property without the
consent of the husband was not merely voidable but void; hence, it could not be ratified.49 A void
contract is equivalent to nothing and is absolutely wanting in civil effects; it cannot be validated
either by ratification or prescription. Similar to other cases, Spouses Ravina v. Villa Abrille, et
al. already settled:

Significantly, a sale or encumbrance of conjugal property concluded after the effectivity of the
Family Code on August 3, 1988, is governed by Article 124 of the same Code that now treats such a
disposition to be void if done (a) without the consent of both the husband and the wife, or (b) in
case of one spouses inability, the authority of the court. Article 124 of the Family Code, the
governing law at the time the assailed sale was contracted, is explicit:

ART. 124. The administration and enjoyment of the conjugal partnership property shall belong to
both spouses jointly. In case of disagreement, the husband's decision shall prevail, subject to
recourse to the court by the wife for proper remedy which must be availed of within five years from
the date of the contract implementing such decision.

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The particular provision in the New Civil Code giving the wife ten (10) years to annul the alienation
or encumbrance was not carried over to the Family Code. It is thus clear that alienation or
encumbrance of the conjugal partnership property by the husband [or wife] without the consent of
the wife [or husband] is null and void.

As the forged SPA and REM are void ab initio, the foreclosure proceedings conducted on the
strength thereof suffer from the same infirmity. Being not a mortgagee in good faith and an
innocent purchaser for value at the auction sale, Magtanggol is not entitled to the protection of any
right with respect to the subject property. Since it was not shown that the property has been
transferred to a third person who is an innocent purchaser for value (because no intervention or
third-party claim was interposed during the pendency of this case), it is but proper that the
ownership over the contested lot should be retained by Delfin.

PARADIGM DEVELOPMENT CORPORATION OF THE PHILIPPINES v. BANK OF THE

PHILIPPINE ISLANDS
G.R. No. 191174, June 7, 2017, REYES, J:

The registration of the real estate mortgages, even if contrary to the supposed intent of the parties,
will not affect the validity of the mortgage contracts if there was no other basis for the declaration of
its nullity.

FACTS:

Sengkon Trading (Sengkon), a sole proprietorship, obtained a loan from FEBTC under a credit
facility. FEBTC again granted Sengkon another credit facility. Two real estate mortgage (REM)
contracts were executed by PDCP’s President to partially secure Sengkon’s obligations under this
Credit Line.

Sengkon defaulted in the payment of its loan obligations. FEBTC demanded payment from PDCP.
Negotiations were put on hold because BPI acquired FEBTC and assumed the rights and obligations
of the latter.

Upon verification with the Registry of Deeds, PDCP discovered that FEBTC extra-judicially
foreclosed the first and second mortgage without notice to it as mortgagor and sold the mortgaged
properties to FEBTC as the lone bidder. Thereafter, the corresponding Certificate of Sale was
registered. PDCP filed a Complaint for Annulment of Mortgage, Foreclosure, Certificate of Sale and
Damages. PDCP alleged that FEBTC assured it that the mortgaged properties will only secure the
Credit Line sub-facility of the Omnibus Line. With this understanding, PDCP President allegedly
agreed to sign on two separate dates a pro-forma and blank REM. PDCP, however, claimed that it
had no intent to be bound under the second REM, which was not intended to be a separate contract,
but only a means to reduce registration expenses. According to PDCP, when FEBTC registered both
REMs, even if the intent was only to register one, the validity of both REMs was vitiated by lack of
consent. PDCP claims that said intent is supported by the fact that the REMs were constituted
merely as “partial security” for Sengkon’s obligations and therefore there was really no intent to be
bound under both – but only in one – REM.

The RTC rendered its Decision nullifying the REMs and the foreclosure proceedings. The CA
reversed the RTC’s ruling.

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ISSUES:

1. Whether or not the validity of both REMs was vitiated by lack of consent.
2. Whether or not the foreclosure proceedings are valid.

RULING:

1. No. The registration of the REMs, even if contrary to the supposed intent of the parties, did
not affect the validity of the mortgage contracts.

To begin with, the registration of the REM contract is not essential to its validity under
Article 2085. In relation thereto, Article 2125 of the Civil Code reads:
Article 2125. In addition to the requisites stated in Article 2085, it is
indispensable, in order that a mortgage may be validly constituted, that the
document in which it appears be recorded in the Registry of Property. If the
instrument is not recorded, the mortgage is nevertheless binding between the
parties.

The codal provision is clear and explicit. Even if the instrument were not recorded, “the
mortgage is nevertheless binding between the parties.

Hence, even assuming that the parties indeed agreed to register only one of the two REMs,
the subsequent registration of both REMs did not affect an already validly executed REM if
there was no other basis for the declaration of its nullity. That the REMs were intended
merely as “partial security” does not make PDCP’s argument more plausible because as aptly
observed by the CA, the PDCP’s act of surrendering all the titles to the properties to FEBTC
clearly establishes PDCP’ s intent to mortgage all of the four properties in favor of FEBTC
to secure Sengkon’s obligation under the Credit Line.

PDCP’s Amended Complaint is essentially premised on the supposed fraud employed on it

by FEBTC consisting of the latter’s assurances that the REMs it already signed would not be
registered.

In Solidbank Corporation v. Mindanao Ferroalloy Corporation, the Court discussed the

nature of fraud that would annul or avoid a contract, thus:
Fraud refers to all kinds of deception – whether through insidious
machination, manipulation, concealment or misrepresentation- that would lead an
ordinarily prudent person into error after taking the circumstances into account. In
contracts, a fraud known as dolo causante or causal fraud is basically a deception
used by one party prior to or simultaneous with the contract, in order to secure the
consent of the other. Needless to say, the deceit employed must be serious. In
contradistinction, only some particular or accident of the obligation is referred to
by incidental fraud or dolo incidente, or that which is not serious in character and
without which the other party would have entered into the contract anyway.

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Under Article 1344 of the Civil Code, the fraud must be serious to annul or avoid a contract
and render it voidable. This fraud or deception must be so material that had it not been
present, the defrauded party would not have entered into the contract.

In the present case, even if FEBTC represented that it will not register one of the REMs,
PDCP cannot disown the REMs it executed after FEBTC reneged on its alleged promise. As
earlier stated, with or without the registration of the REMs, as between the parties thereto,
the same is valid and PDCP is already bound thereby. The signature of PDCP’s President
coupled with its act of surrendering the titles to the four properties to FEBTC is proof that
no fraud existed in the execution of the contract. Arguably at most, FEBTC’s act of
registering the mortgage only amounted to dolo incidente which is not the kind of fraud that
avoids a contract.

2. No. FEBTC’s failure to comply with its contractual obligation to send notice to PDCP of the
foreclosure sale is fatal to the validity of the foreclosure proceedings.

In Metropolitan Bank v. Wong, the Court ruled that while as a rule, personal notice to the
mortgagor is not required, such notice may be subject of a contractual stipulation, the
breach of which is sufficient to nullify the foreclosure sale.

Precisely, the purpose of the foregoing stipulation is to apprise respondent of any action
which petitioner might take on the subject property, thus according him the opportunity to
safeguard his rights

Thus, we restate: the general rule is that personal notice to the mortgagor in extrajudicial
foreclosure proceedings is not necessary and posting and publication will suffice. Sec. 3 of
Act 3135 governing extra-judicial foreclosure of [REMs], as amended by Act 4118, requires
only posting of the notice of sale in three public places and the publication of that notice in
a newspaper of general circulation. The exception is when the parties stipulate that personal
notice is additionally required to be given the mortgagor. Failure to abide by the general
rule, or its exception, renders the foreclosure proceedings null and void.

MAKILITO MAHINAY v. DURA TIRE & RUBBER INDUSTRIES, INC.

G.R. No. 194152, June 5, 2017, Second Division, LEONEN, J.

The period to redeem a property sold in an extrajudicial foreclosure sale is not extendible. A pending
action to annul the foreclosure sale does not toll the running of the one (1)-year period of redemption
under Act No. 3135.

FACTS:

A parcel of land under the name of A&A Swiss was mortgaged to Dura Tire as security for credit
purchases to be made by Move Overland. In 1992, this land was sold to Mahinay to which he
acknowledged the previous mortgaged agreement. For Move Overland's failure to pay its credit
purchases, Dura Tire applied for extrajudicial foreclosure of the property on January 6,
1995. Certificate of Sale in favour of the highest bidder was registered on February 20, 1995.

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On March 23, 1995, Mahinay filed a Complaint for specific performance and annulment of auction
sale which was however dismissed finding that he was a substitute mortgagor. This decision became
final and executory on August 8, 2007. Relying on CA’s finding that he was a "substitute mortgagor,"
Mahinay filed for judicial declaration of right to redeem on August 24, 2007. Mahinay maintains
that he should be allowed to redeem the property he bought from A&A Swiss despite the lapse of
one (1) year from the registration of the Certificate of Sale on February 20, 1995. Mahinay primarily
argues that the one (1)-year period of redemption was tolled when he filed the Complaint for
annulment of foreclosure sale and resumed when the decision of the CA became final and
executory.

ISSUE:

Whether or not one (1)-year period of redemption was tolled when Mahinay filed his Complaint for
annulment of foreclosure sale.

RULING:

NO. Since the period of redemption is fixed, it cannot be tolled or interrupted by the filing of cases
to annul the foreclosure sale or to enforce the right of redemption. Section 6 of Act No.
3135provides:

Section 6. In all cases in which an extrajudicial sale is made under the special power
hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or
judgment creditor of said debtor, or any person having a lien on the property subsequent
to the mortgage or deed of trust under which the property is sold, may redeem the same at
any time within the term of one year from and after the date of the sale; and such
redemption shall be governed by the provisions of sections four hundred and sixty-four to
four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are
not inconsistent with the provisions of this Act.

The "date of the sale" referred to in Section 6 is the date the certificate of sale is registered with the
Register of Deeds. This is because the sale of registered land does not "'take effect as a conveyance,
or bind the land' until it is registered."

The right of redemption being statutory, the mortgagor may compel the purchaser to sell back the
property within the one (1)-year period under Act No. 3135. If the purchaser refuses to sell back the
property, the mortgagor may tender payment to the Sheriff who conducted the foreclosure
sale. Here, Mahinay should have tendered payment to Sheriff Laurel instead of insisting on directly
paying Move Overland's unpaid credit purchases to Dura Tire.

As early as 1956, this Court held in Mateo v. Court of Appeals that "the right of redemption must be
exercised in the mode prescribed by the statute." The one (1)-year period of redemption is fixed,
hence, non-extendible, to "avoid prolonged economic uncertainty over the ownership of the thing
sold."

To rule otherwise . . . would constitute a dangerous precedent. A likely offshoot of such a ruling is
the institution of frivolous suits for annulment of mortgage intended merely to give the mortgagor
more time to redeem the mortgaged property."

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SPOUSES REYES V. SPOUSES CHUNG

G.R. No. 228112, September 13, 2017, VELASCO, JR., J.:

FACTS:

The winning bidder in an extrajudicial foreclosure sale on the property owned by Spouses Reyes
was EIBI. The corresponding TCT was then issued and registered with the Registry of Deeds. Later,
EIBI sold the property to LNC which later sold the same to Spouses Chung. TCT of LNC was
cancelled, and in lieu thereof, a new title, was issued in the name of Spouses Chung.

To acquire possession of the subject property, the spouses Chung made several demands to Spouses
Reyes to vacate the same and surrender its possession. The demands, however, went unheeded.

Spouses Chung filed an ejectment case but the same was dismissed for insufficiency of evidence.
Pending appeal thereof, they filed an Ex Parte Petition for Writ of Possession. The RTC then set it
for hearing and directed Spouses Reyes to show cause. Spouses Reyes now argues that Spouses
Chung cannot avail the writ of possession since they were not the actual purchaser in the
foreclosure sale. As to Spouses Chung, they argue that as the owner of the subject property, they
are entitled to its possession as a matter of right. Moreover, the issuance of a writ of possession over
the subject property by the court is merely a ministerial function.

ISSUE:

Whether or not the Writ of Possession can be granted even if Spouses Chung were not the actual
purchaser in the foreclosure sale.

RULING:

YES. The remedy of a writ of possession is available to a subsequent purchaser but only after
hearing.

A writ of possession is a writ of execution employed to enforce a judgment to recover the possession
of land. It commands the sheriff to enter the land and give its possession to the person entitled
under the judgment. It may be issued under the following instances:
(1) in land registration proceedings under Section 17 of Act 496;
(2) in a judicial foreclosure, provided the debtor is in possession of the mortgaged realty
and no third person, not a party to the foreclosure suit, had intervened;
(3) in an extrajudicial foreclosure of a real estate mortgage under Section 7 of Act No. 3135,
as amended; and
(4) in execution sales (last paragraph of Section 33, Rule 39 of the Rules of Court).

In an extrajudicial foreclosure of real property, the purchaser becomes the absolute owner thereof
if no redemption is made within one year from the registration of the certificate of sale by those
entitled to redeem. Being the absolute owner, he is entitled to all the rights of ownership over a
property recognized in Article 428of the New Civil Code, not the least of which is possession, or jus
possidendi.

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Possession being an essential right of the owner with which he is able to exercise the other
attendant rights of ownership, after consolidation of title, the purchaser in a foreclosure sale may
demand possession as a matter of right. Thus, Section 7 of Act No. 3135, as amended, imposes upon
the RTC a ministerial duty to issue a writ of possession to the new owner upon a mere ex
parte motion.

However, unlike the original mortgagee-purchaser, Spouses Chung’s right to apply for the issuance
of a writ of possession is circumscribed and cannot be made ex parte; the issuance of a writ of
possession in favor of a subsequent purchaser must be made only "after hearing and after
determining that the subject property is still in the possession of the mortgagor."

Nonetheless, the Court is loath to abate the writ of possession subsequently issued by RTC and
implemented as the Spouses Reyes were eventually given their day in court and allowed to file their
Motion to Quash.

HEIRS OF JOSE PEÑAFLOR v. HEIRS OF ARTEMIO AND LYDIA DELA CRUZ

G.R. No. 197797, August 9, 2017, Perlas-Bernabe, J.

The purpose of a petition for the issuance of a writ of possession under Act No. 3135, is to expeditiously
accord the mortgagee who has already shown a prima facie right of ownership over the subject
property (based on his consolidated title over the same) his incidental right to possess the foreclosed
property. It is only upon a credible showing by a third party claimant of his independent right over the
foreclosed property that the law’s prima facie deference to the mortgagee’s consolidated title should
not prevail.

FACTS:

Respondents are the successors-in-interest of the late Artemio dela Cruz (Artemio), who is the son
of Nicolasa dela Cruz, the original owner of the subject property in this case. On April 15, 1991,
Nicolasa authorized her daughter, Carmelita C. Guanga (Carmelita), Artemio’s sister, to mortgage
the subject property to Jose Peñaflor (Peñaflor), the predecessor-in –interest of herein petitioners,
in order to secure a loan in the amount of P112, 000.00. As Nicolasa failed to settle her loan
obligation when it fell due, Peñaflor filed an application for extra-judicial foreclosure of mortgage
before the RTC. Peñaflor emerged as the highest bidder. The period of redemption expired and an
Affidavit of Consolidation of Ownership was issued in his name. However, Nicolasa refused to
deliver possession to Peñaflor.

The RTC granted the issuance of a writ of possession but this was not enforced as Artemio filed a
complaint for annulment of judgment, which was eventually dismissed. Artemio then filed a
separate complaint for ejectment against Carmelita, his sister, before the MTCC. According to
huim, their mother, Nicolasa, waived and transferred all her rights and interests over the subject
property in his favor. The MTCC granted the ejectment complaint. In the meantime, the RTC with
jurisdiction over the issue on Peñaflor’s Writ of Possession granted it anew. Thus, the RTC issued a
Notice to Vacate to Artemio. He thus filed a motion to quash the writ saying that the writ cannot
be enforced as they are holding they are strangers to this case and are holding the property
adversely to the judgment obligor, i.e. Nicolasa.

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The CA annulled and set aside the writ of possession and notice to vacate. According to the
appellate court, the remedy is not the implementation of the writ of possession but for the
purchaser or the redemptioner to institute ejectment proceedings or a reinvindicatory action.

ISSUE:

Whether or not the CA erroneously set aside the Writ of Possession and Notice to Vacate issued by
the RTC in favor of the Petitioners

RULING:

Yes. Possession being an essential right of the owner with which he is able to exercise the other
attendant right of ownership, after consolidation of title, the purchaser in a foreclosure sale may
demand possession as a matter of right. This is why Section 7 of RA No. 3135, imposes upon the RTC
a ministerial duty to issue a writ of possession to the new owner upon a mere ex parte motion.

However, Section 33, Rule 39 of the Rules of Court, which is applied to extrajudicial foreclosure of
mortgages per Section 6 of Act No. 3135 provides that upon the expiration of the redemption period,
the possession of the property shall be given to the purchaser of last redemptioner, unless a third
party is actually holding the property adversely to the judgment obligor.

To be considered in adverse possession, the third party possessor must have done so in his own
right and not merely as a successor or transferee of the debtor or mortgagor. Here, Nicolasa,
supposedly waived and transferred all her rights to the property in favor of Artemio. However, a
mere waiver of rights is not an effective mode of transferring ownership under our Civil Code.

Also, in this case, the CA improperly considered the evidence submitted in a totally different
proceeding (i.e, he ejectment case) taken against an entirely different party (Carmelita) in reversing
the RTC’s issuance of a writ of possession in favor of Peñaflor. In fact, even without this due process
violation, the evidence were, nonetheless, ostensibly insufficient to prove that Artemio has an
independent right over the subject property adverse to Nicolasa, the judgment obligor/ mortgagor.
Hence, Artemio cannot be considered as a “third party who is actually holding the property
adversely to the judgment obligor.

The purpose of a petition for the issuance of a writ of possession under Act No. 3135, is to
expeditiously accord the mortgagee who has already shown a prima facie right of ownership over
the subject property (based on his consolidated title over the same) his incidental right to possess
the foreclosed property. It is only upon a credible showing by a third party claimant of his
independent right over the foreclosed property that the law’s prima facie deference to the
mortgagee’s consolidated title should not prevail. Verily, a mere claim of ownership would not
suffice. Demonstration should be made within the context of an adversarial hearing, where the
basic principles of Evidence and Civil Procedure ought to be followed.

SPOUSES ROSALINO R. REYES. JR. AND SYLVIA S. REYES v. SPOUSES HERBERT BUN
HONG G. CHUNG AND WIENNA T. CHUNG
G.R. No. 228112, September 13 2017, Velasco, J.

The remedy of a writ of possession is available to a subsequent purchaser but only after hearing.

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FACTS:

Petitioner Spouses from Export and Industry Bank Inc. (EIBI), formerly Urban Bank, Inc., a loan
secured by a Deed of Real Estate Mortgage (REM) on a lot at La Vista, Quezon City (subject
property). The subject property was registered in petitioners' name. They defaulted in the payment
of their loan and thus, the property was extrajudicially foreclosed and sold at public auction, with
EIBI as the highest bidder. The corresponding Certificate of Sale was then issued and registered
with the Registry of Deeds. The redemption period lapsed and the title was consolidated in EIBI’s
name. Later, EIBI sold the subject property to LNC (SPV-AMC) Corporation (LNC) and the TCT
was cancelled and a new one issued to LNC. The latter also then sold the property to Respondent
Spouses Chung for which the title was again cancelled and a new one issued under the respondents’
name.

To acquire possession of the subject property, the respondents made several demands on the
petitioners to vacate the same and surrender its possession. The demands, however, went
unheeded. Thus, on August 28, 2012, the respondents lodged a Complaint for Ejectment against the
petitioners before the MeTC of Quezon City. The RTC dismissed the case. Pending resolution of
the appeal, the respondents filed an "Ex-Parte Petition for Issuance of Writ of Possession under Act
No. 3135 before the RTC. The RTC granted the Petition and a Notice to Vacate addressed to the
Petitioners was issued. However, the latter refused to sign them. Several efforts to implement the
writ were made thereafter, but all to no avail. Petitioners then filed a Motion to Quash which was
denied by the trial court. The Writ of Possession was finally implemented. The CA affirmed the
decision of the RTC.

ISSUE:

Whether the trial court was correct in issuing the Writ of Possession?

RULING:

Yes. Possession being an essential right of the owner with which he is able to exercise the other
attendant rights of ownership, after consolidation of title, the purchaser in a foreclosure sale may
demand possession as a matter of right. Thus, Section 7 of Act No. 3135, as amended, imposes upon
the RTC a ministerial duty to issue a writ of possession to the new owner upon a mere ex
parte motion.

In the case under consideration, the original right to file a Petition for Issuance of Writ of Possession
belonged to EIBI, being the mortgagee purchaser at the extrajudicial foreclosure sale. But, instead
of seeking the issuance of a writ of possession, it sold the subject property to LNC, which, in tum,
sold the same to the respondents. As such, by the sale, the respondents became the new owners of
the subject property and were vested with all the rights and interests of their predecessors EIBI and
LNC, including the right to the possession of the property. Undoubtedly, the respondents can apply
for the issuance of a writ of possession even though they were not the purchasers at the foreclosure
proceedings.

However, unlike the original mortgagee-purchaser, the respondents' right to apply for the issuance
of a writ of possession is circumscribed and cannot be made ex parte; the issuance of a writ of

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possession in favor of a subsequent purchaser must be made only "after hearing and after
determining that the subject property is still in the possession of the mortgagor." This Court
elucidated in the seminal case of Okabe v. Saturnina, thus:

“The remedy of a writ of possession, a remedy that is available to the mortgagee-purchaser to acquire
possession of the foreclosed property from the mortgagor, is made available to a subsequent
purchaser, but only after hearing and after determining that the subject property is still in the
possession of the mortgagor. Unlike if the purchaser is the mortgagee or a third party during the
redemption period, a writ of possession may issue ex-parte or without hearing. In other words, if
the purchaser is a third party who acquired the property after the redemption period, a hearing must
be conducted to determine whether possession over the subject property is still with the mortgagor or
is already in the possession of a third party holding the same adversely to the defaulting debtor or
mortgagor. If the property is not in the possession of the mortgagor, a writ of possession could thus
be issued.”

Nonetheless, the Court is loath to abate the writ of possession already issued and implemented as
the petitioners were eventually given their day in court and allowed to file their Motion to Quash.
As this Court held in Javate v. Tiotuico,'to be heard' does not mean verbal argumentation alone
inasmuch as one may be heard just as effectively through written explanations, submissions or
pleadings. Furthermore, there is no quibble that the petitioners remained in possession of the
subject property prior to the issuance of the writ of possession in favor of the respondents. Thus, to
annul the writ of possession and require the respondents to petition for another one will only
prolong the proceedings.

NORMA I. BARING v. ELENA LOAN and CREDIT COMPANY

G.R. No. 224225, August 14, 2017, Second Division, PERALTA, J.

After the consolidation of title in the buyer's name for failure of the mortgagor to redeem the property,
the writ of possession becomes a matter of right.

FACTS:

Defendants-appellants Norma Baring (now petitioner Baring), Esmeraldo Hernaez (Hernaez) and
the Spouses Virgilio and Rosario Bernardino (Spouses Bernardino) obtained a series of loans and
other credit accommodations in the initial amount of three hundred thousand pesos (P300,000.00)
from herein petitioner-appellee Elena Loan and Credit Company, Inc. (herein respondent Elena
Loan), a duly organized lending investor. As a security for the said loan, Baring executed a Deed of
Real Estate Mortgage over a parcel of land, with improvements, In the Real Estate Mortgage, the
parties agreed that Elena Loan, as the mortgagee, may foreclose the mortgage extrajudicially in
accordance with Act No. 3135 should Baring, the mortgagor, default in the payment of her
obligation.

Subsequently, the debtors failed to pay their obligations under the promissory notes despite
repeated demands. Elena Loan then filed a Petition for Foreclosure under Act No. 3135 and a Notice
of Extrajudicial Sale was issued. Elena Loan participated in the public auction and emerged as the
highest bidder. A Certificate of Sale was then issued in favor of Elena Loan and was registered in
the Office of the Register of Deeds of Las Piñas City.

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The period of redemption expired without Baring exercising her right of redemption. Thus, Elena
Loan filed an Affidavit of Consolidation of Ownership, and as the new owner of the subject property,
it sent a demand letter to Baring and Hernaez requesting them to vacate the subject property. When
the demand remained unheeded, Elena Loan filed an Ex-Parte Petition for the Issuance of a Writ of
Possession which was granted and which petitioner opposes.

ISSUE:

Whether or not respondent is entitled to the issuance of a writ of possession.

RULING:

YES, Elena Loan and Credit Company is entitled to a writ of possession over the mortgaged
property.

It is well-settled that the purchaser in an extrajudicial foreclosure of real property becomes the
absolute owner of the property if no redemption is made within one year from the registration of
the certificate of sale by those entitled to redeem. As absolute owner, he is entitled to all the rights
of ownership over a property recognized in Article 428 of the New Civil Code, not least of which is
possession, or jus possidendi.

Since respondent is the absolute and registered owner of the subject property, and entitled to the
possession thereof, it is the court’s ministerial duty to issue the writ of possession prayed for by the
respondent. The issuance of the writ of possession becomes a ministerial function upon the proper
application and proof of title.

After the consolidation of title in the buyer's name for failure of the mortgagor to redeem the
property, the writ of possession becomes a matter of right.

Petitioner's assertion that respondent has not been granted any authority to operate as a lending
company, as well as the allegations of unconscionable and exorbitant interest rates imposed on her
loans, cannot be raised as a legal basis to prevent the issuance of the writ of possession. Given the
ministerial nature of the RTC's duty to issue the writ of possession after the purchaser has
consolidated its ownership, any question regarding the regularity and validity of the mortgage or
its foreclosure cannot be raised as justification for opposing the issuance of the writ. A pending
action for annulment of mortgage or foreclosure does not stay the issuance of a writ of possession.

PRUDENTIAL BANK (now BANK OF THE PHILIPPINE ISLANDS) v. RONALD RAPANOT

and HOUSING and LAND USE REGULATORY BOARD
G.R. No. 191636, January 16, 2017, CAGUIOA, J.

Failure to obtain prior written HLURB authority to mortgage a condominium unit will result in the
bank not being considered a mortgagee in good faith. Such mortgagee is null and void as against the
buyer of a condominium unit and thus cannot be enforced against such buyer.

Banks are mandated to exercise the highest degree of diligence in the conduct of its affairs.

FACTS:

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Golden Dragon Real Estate Corporation was the developer of the Wack-Wack Twin Towers
Condominium located at Mandaluyong City. On May 9, 1995, Ronald Rapanot paid Golden Dragon
the amount of ₱453, 329.64 as reservation fee for Unit No. 2308-B2 which was covered by CCT No.
2383, registered in the name of Golden Dragon.

On September 13, 1995, Golden Dragon obtained a ₱5 Million loan from Prudential Bank (now BPI),
the proceeds of which were to be used as additional working capital. As security for the loan, Golden
Dragon executed a Mortgage Agreement in favor of Prudential Bank over several condominium
units, including Unit 2308-B2/CCT No. 2383 for which Ronald Rapanot had pad a reservation fee.
The mortgage annotation was duly annotated on CCT No. 2383. However, no prior written authority
to mortgage was obtained by Golden Dragon and Prudential Bank from the HLURB.

On May 21, 1996, Ronald Rapanot and Golden Dragon entered into a Contract to Sell covering Unit
2308-B2. Ronald Rapanot fully paid for the condominium unit on April 23, 1997 and a Deed of
Absolute Sale was issued by Golden Dragon in favor of Ronald Rapanot. Thereafter, Ronald Rapanot
made several verbal demands for the delivery of CCT No. 2283 covering Unit No. 2308-B2.

Since Unit No, 2308-B2 was mortgaged to Prudential Bank, Golden Dragon requested Prudential
Bank for a substitution of collateral for the purpose of replacing Unit No. 2308-B2 with another
condominium unit. However, Prudential Bank denied Golden Dragon’s request due to the latter’s
unpaid accounts.

Due to Golden Dragon and Prudential Bank’s refusal to deliver Unit 2308-B2 and CCT No. 2383,
Ronald Rapanot filed a case with the HLURB. The HLURB decided in favor of Ronald Rapanot. On
appeal to the Office of the President and the Court of Appeals, both bodies decided in favor of
Ronald Rapanot. Hence, this petition to the Supreme Court.

ISSUE:

Whether Prudential Bank’s failure to obtain prior written HLURB authority to mortgage will result
in its not being considered a mortgagee in good faith.

RULING:

YES. Prudential Bank cannot be considered as a mortgagee in good faith. Under Presidential Decree
No. 957, it is clear that no mortgagee on any condominium unit may be constituted by a developer
without prior written approval of the National Housing Authority (now HLURB).

For failure to ascertain whether Golden Dragon secured HLURB’s prior approval as required by PD
957, Prudential Bank cannot be considered a mortgagee in good faith and as such the mortgage is
null and void insofar as the buyer of the condominium unit. Prudential Bank also failed to ascertain
whether any of the properties offered as collateral already had corresponding buyers at the time of
the Mortgage Agreement.

It was stressed that banks are required to exercise the highest degree of diligence in the conduct of
their affairs. The banking system is an indispensable institution in the modern world and plays a
vital role in the economic life of every civilized nation. Whether as mere passive entities for the

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safekeeping and saving of money or as active instruments in business and commerce, banks have
become an ubiquitous presence among the people, who have come to regard them with respect and
even gratitude and, most of all, confidence. Consequently, the highest degree of diligence is
expected, and high standards of integrity and performance are even required of it.

If only Prudential Bank exercised the highest degree of diligence required by the nature of its
business as a financial institution, it would have discovered that (i) Golden Dragon did not comply
with the approval requirement imposed by Section 18 of PD 957, and (ii) that Rapanot already paid
a reservation fee and had made several instalment payments in favor of Golden Dragon, with a view
of acquiring Unit 2308-B2.

The Court tool judicial notice of the fact that commercial banks extend credit accommodations to
real estate developers on a regular basis. In the course of everyday dealings, Prudential Bank had
surely been made aware of the approval and notice requirements under Section 18 of PD 957.

The Court deemed it necessary to stress that a person who deliberately ignores a significant fact
that could create suspicion in an otherwise reasonable person cannot be deemed a mortgagee in
good faith, The nature of Prudential Bank’s business precludes it from feigning ignorance of the
need to confirm that such requirements are complied with prior to the release of the loan in favor
of Golden Dragon, in view of the exacting standard of diligence it is required in the conduct of its
affairs.

FCD PAWNSHOP AND MERCHANDISING COMPANY, et al. v. UNION BANK OF THE

PHILIPPINES, et al.
G.R. No. 207914, January 18, 2017, First Division, DEL CASTILLO, J.

A bank can raise the defense of forum shopping where a borrower files a complaint for annulment of
real estate mortgage and another complaint for injunction and nullification of an extrajudicial
foreclosure and consolidation of title, as both cases are rooted in the same real estate mortgage.

FACTS:

Felicitas Juguilon, Adelaida Dionisio, Fortunato Dionisio, and Franklin Dionisio were the owners of
FCD Pawnshop and Merchandising Company, the latter being the owner of a parcel of land located
in Makati City and covered by TCT No. (168302) S-3664.

In 2009, Fortunato and Franklin Dionisio entrusted the owner’s copy of the said TCT to Atty.
Rowena Dionisio. It was later discovered that the said title was used as collateral by Sunyang Mining
Corp. in favor of Union Bank on the premise that by TCT No. (168302) S-3664 was fraudulently
mortgaged.

Meanwhile, Union Bank caused the extrajudicial foreclosure of the property covered by by TCT No.
(168302) S-3664 and bought the property at the auction sale. On account of perceived irregularities
in the foreclosure sale and proceedings, Fortunato and Franklin Dionisio filed in December 2011 a
Complaint for annulment of the extrajudicial foreclosure against Union Bank and the Registry of
Deeds for Makati.

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The trial court handling the annulment of the extrajudicial foreclosure dismissed the case on the
ground of forum shopping. Upon appeal, the CA upheld the decision of the trial court finding that
there was indeed forum shopping.

ISSUE:

In maintaining a case for annulment of mortgage and a case for annulment of extrajudicial
foreclosure arising from the same real estate mortgage, are Fortunato and Franklin Dionisio guilty
of forum shopping?

RULING:

YES, there is forum shopping when a person maintains a case for annulment of mortgage and a case
for annulment of extrajudicial foreclosure, when both cases are rooted in the same real estate
mortgage.

In the case of Goodland Company, Inc, v. Asia United Bank, the SC enunciated that there can be no
determination of the validity of the extrajudicial foreclosure and the propriety of the injunction in
the injunction case without necessarily ruling on the validity of the real estate mortgage, which is
already the subject of the annulment case. The identity of the causes of action in the two cases
entails that the validity of the mortgage be ruled upon in both, and create a possibility that the two
rulings will conflict with each other. This is precisely what is sought to be avoided by the rule against
forum shopping.

The substantial identity of the two cases remains even if the parties should add different grounds
or legal theories for the nullity of the real estate mortgage or should alter the designation or form
of the action. The well-entrenched rule is that a party cannot, by varying the form of action, or
adopting a different method of presenting his case, escape the operation of the principle that one
and the same cause of action shall not be twice litigated.

In the event that the trial court in the annulment of mortgage case should nullify the mortgage
executed by Sunyang Mining Corp., then subsequent proceedings based thereon, including the
foreclosure, shall be nullified. There is therefore a danger that a decision might be rendered by the
trial court in the annulment of the extrajudicial foreclosure sale case that contradicts the ruling of
the trial court in the annulment of mortgage case.

Procedural law has its own rationale in the orderly administration of justice, namely, to ensure the
effective enforcement of substantive rights by providing for a system that obviates arbitrariness,
caprice, despotism, or whimsicality in the settlement of disputes.

C. QUASI-CONTRACTS

BANK OF THE PHILIPPINE ISLANDS v. AMADO M. MENDOZA AND MARIA MARCOS

VDA. DE MENDOZA
G.R. No. 198799, March 20, 2017, Perlas-Bernabe, J.

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Payment by mistake gives rise to quasi-contractual obligation of solutio indebiti. Reimbursement

must be made with an interest of six percent (6%) per annum on the amount to be refunded and on
the damages and attorney's fees awarded, if any, computed from the time of demand until its
satisfaction.

FACTS:

Respondents opened a foreign currency savings account with BPI and deposited therein an amount
through cash and a US Treasury Check. After the 30-day clearing period, respondents withdrew the
contents of the account leaving only enough to cover bank charges on the transaction. However a
month after such withdrawal, BPI received a notice from its correspondent bank, Bankers Trust
Company New York (Bankers Trust), that the subject check was dishonored due to "amount
altered". BPI informed the respondents of the dishonor and demanded reimbursement of the
withdrawn money. BPI alleged that respondents wrote a letter allowing BPI to apply the proceeds
of a time deposit account that the respondents had with the bank to the amount withdrawn. BPI
also alleged that respondents gave a promissory note containing a promise to pay the amount
withdrawn on a monthly basis. When respondents failed to fulfill their obligation, BPI filed an
action for sum of money.

Respondents testified that they never received the amount that BPI claims they withdrew from the
account. They also claim that the letter allowing BPI to apply the proceeds of a time deposit was
signed by respondents to acknowledge receipt of the letter but there was no consent for the set-off
contrary to BPI’s claim.

ISSUE:

W/N respondents should reimburse BPI the amounts they withdrew.

RULING:

YES. Records show that BPI was able to satisfactorily prove by preponderance of evidence the
existence of respondents' obligation in its favor. Respondent affixed his signature in letters where
he acknowledged the dishonor of the subject check, and subsequently, allowed BPI to apply the
proceeds of their time deposit account to partially offset their obligation to the bank; and they
executed a promissory note wherein respondents undertook to pay BPI in installments per month
until the remaining balance of his obligation is fully paid. On the other hand, aside from his bare
testimony, respondents did not present any corroborative evidence. The unsubstantiated testimony
is self-serving at the most, and hence, cannot be relied upon.

BPI's payment of the proceeds of the subject check was due to a mistaken notion that such check
was cleared, when in fact, it was dishonored due to an alteration in the amount indicated therein.
Such payment on the part of BPI to respondents was clearly made by mistake, giving rise to the
quasi-contractual obligation of solutio indebiti under Article 2154 in relation to Article 2163 of the
Civil Code. Respondents must return to BPI the amount, with legal interest at the rate of six percent
(6%) per annum from the date of extrajudicial demand, the date when BPI informed respondents
of the dishonor of the subject check and demanded the return of its proceeds – until fully paid.

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IX. SUCCESSION
A. LEGAL OR INTESTATE SUCCESION

TERESA R. IGNACIO v. RAMON REYES, FLORENCIO REYES, JR., ROSARIO R. DU and

CARMELITA R. PASTOR
July 12, 2017, G.R. No. 213192, PERALTA, J.

Jurisdiction of the trial court as an intestate court is special and limited as it relates only to matters
having to do with the probate of the will and/or settlement of the estate of deceased persons, but does
not extend to the determination of questions of ownership that arise during the proceedings. This is
true whether or not the property is alleged to belong to the estate. However, this general rule is subject
to exceptions.

FACTS:

Angel and Oliva filed before an intestate court in RTC Pasig a Petition for Letters of
Administration of the Estate of their father Florencio, Sr. and enumerated therein the surviving
heirs including both the petitioner and respondents. The intestate court appointed Oliva as the
special administratrix of the estate of Florencio Sr. and then as the regular administratrix in an
Order. Sometime later, Teresa became the administratrix of the Florencio Sr. estate.

Teresa executed a lease contract over a portion of the parcel of land located at Magsaysay Avenue,
Baguio City and a parcel of land located at session Road, Baguio City. The intestate court approved
the lease contracts upon Teresa's motion.

Herein respondents and the Heirs of Amparo, Intestate Estate of Soledad, Jose and Intestate Estate
of Angel (plaintiffs) alleged in their Complaints that with the exception of the lessees, the parties
and the Florencio Sr. estate own one-tenth (1/10) of each of the land properties. Teresa
misrepresented that the Florencio Sr. estate is the sole owner of the properties and leased the same
to the other parties without their conformity. As co-owners, they have not received their share in
the monthly rentals.

Thus, the respondents filed before the Baguio RTC three complaints for partition, annulment of
lease contract, accounting and damages with prayer for the issuance of a writ of preliminary
injunction against Teresa and the lessees of the subject Baguio properties.

In an Order, the Baguio RTC manifested that it shall await a Request Order from the intestate court
regarding the possible distribution of the subject properties. Subsequently, respondents and the
others filed a motionbefore the intestate court praying for the issuance of an order allowing the
distribution of the heirs' aliquot shares. However, the intestate court denied the motion for
partition stating that the Baguio court cannot take over the issue because the former already has
jurisdiction over the matter. Thereafter, the respondents filed before the CA a petition for certiorari
assailing the Orders of the intestate court disallowing the partition. Teresa argues that there is an
appeal or other plain, speedy and adequate remedy in the ordinary course of law available but the
CA annulled and set aside the assailed Orders of the intestate court.

ISSUES:

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1) Whether or not there is an appeal or other plain, speedy and adequate remedy in the ordinary
course of law available to respondents (NO) and corolarilly;
2) Whether or not the Orders of intestate court denying respondents' motion to allow the
distribution of the estate's were merely interlocutory (YES)

RULING:

In this case, the propriety of the special civil action for certiorari as a remedy depended on whether
the assailed orders of the RTC were final or interlocutory in nature.A "final" judgment or order is
one that finally disposes of a case, leaving nothing more to be done by the Court in respect thereto.
Conversely, an order that does not finally dispose of the case, and does not end the Court's task of
adjudicating the parties' contentions and determining their rights and liabilities as regards each
other, but obviously indicates that other things remain to be done by the Court, is "interlocutory.
Unlike a "final" judgment or order, which is appealable, as above pointed out, an
"interlocutory" order may not be questioned on appeal except only as part of an appeal that
may eventually be taken from the final judgment rendered in the case.

The assailed Orders denying respondents' motion to allow the distribution of the estate's and co-
owners' shares in the subject properties were interlocutory. This is because such denial was not a
final determination of their alleged co-ownership. In fact, the intestate court merely asserted its
jurisdiction over the properties which were allegedly co-owned with the Florencio Sr. estate.

Jurisdiction of the trial court as an intestate court is special and limited as it relates only to matters
having to do with the probate of the will and/or settlement of the estate of deceased persons, but
does not extend to the determination of questions of ownership that arise during the proceedings.
This is true whether or not the property is alleged to belong to the estate.

Furthermore, the doctrine that "in a special proceeding for the probate of a will, the question of
ownership is an extraneous matter which the probate court cannot resolve with finality" applies
with equal force to an intestate proceeding as in the case at bar. A probate court or one in charge
of proceedings whether testate or intestate cannot adjudicate or determine title to properties
claimed to be a part of the estate and which are claimed to belong to outside parties. All that the
said court could do as regards said properties is to determine whether they should or should not be
included in the inventory or list of properties to be administered by the administrator.

However, this general rule is subject to exceptions as justified by expediency and convenience.

First, the probate court may provisionally pass upon in an intestate or a testate proceeding the
question of inclusion in, or exclusion from, the inventory of a piece of property without prejudice
to the final determination of ownership in a separate action. Second, if the interested parties are all
heirs to the estate, or the question is one of collation or advancement, or the parties consent to the
assumption of jurisdiction by the probate court and the rights of third parties are not impaired,
then the probate court is competent to resolve issues on ownership. Verily, its jurisdiction extends
to matters incidental or collateral to the settlement and distribution of the estate, such as the
determination of the status of each heir and whether the property in the inventory is conjugal or
exclusive property of the deceased spouse.

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From the foregoing, this Court holds that the general rule on the limited jurisdiction of the RTC as
intestate court is applicable in Special Civil Action Nos. 5.055-R and 5056-R. As to the Magsaysay
property in Special Civil Action No. 5057-R, it is evident from the certificate of title that the rights
of parties other than the heirs of Florencio Sr. will be impaired should the intestate court decide on
the ownership of the property.

The co-ownership of the said properties by virtue of the certificates of title is a common issue in
the complaints for partition filed before the Baguio RTC. Thus, the intestate court committed grave
abuse of discretion when it asserted jurisdiction over the subject properties since its jurisdiction
relates only to matters having to do with the settlement of the estate of deceased persons. Any
decision that the intestate court would render on the title of the properties would at best be merely
provisional in character, and would yield to a final determination in a separate action.

X. LAND TITLES AND DEEDS

A. TORRENS SYSTEM (GENERAL PRINCIPLES)

FLORENCIA ARJONILLO v. DEMETRIA PAGULAYAN, as substituted by her heirs namely:

HERMANA VDA. DE CAMBRI, PORFIRIO T. PAGULAYAN, and VICENTE, MAGNO, PEDRO,
FLORENCIO, MELECIO, LERMA, all surnamed MATALANG, and AUREA MATALANG-
DELOS SANTOS
G.R. No. 196074, October 4, 2017, MARTIRES, J.:

It is fundamental that a certificate of title serves as evidence of an indefeasible and incontrovertible

title to the property in favor of the person whose name appears therein.

FACTS:

The heirs of Cue claim that a lot has been acquired by Cue during his lifetime. This lot, however, is
registered in the name of Demetria Pagulayan per TCT No. T-35506, issued by the Register of Deeds.

The heirs filed a case with the RTC for Reivindicacion, with Partition. They alleged that although
the property was registered in the name of Pagulayan, it was Cue who purchased it using his own
funds; that being his paramour, Pagulayan exercised undue influence on him in order to register
the property exclusively in her own name; and that the registration of the property in the name of
Pagulayan is void as it is against public policy.

RTC rendered a decision declaring that Pagulayan is not the rightful owner of the subject property
and, consequently, ordered the partition of the subject lot and building among the heirs of Cue. CA,
however, reversed the same.

ISSUE:

Whether or not CA erred in declaring Pagulayan as the rightful owner of the property.

RULING:

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No. Pagulayan is the rightful owner of the property.

The documentary and testimonial evidence on record clearly support ownership of the disputed
property as reflected in TCT No. T-35506, which was issued in her name pursuant to the aforesaid
Deed of Sale. It is fundamental that a certificate of title serves as evidence of an indefeasible and
incontrovertible title to the property in favor of the person whose name appears therein. The
titleholder is entitled to all the attributes of ownership, including possession of the property .

Though it has been held that placing a parcel of land under the mantle of the Torrens system does
not mean that ownership thereof can no longer be disputed, this Court cannot ignore the fact that
the heirs failed to discharge the burden of proving their claim by a preponderance of evidence as
required under the law.

PEN DEVELOPMENT CORPORATION AND LAS BRISAS RESORT CORPORATION v.

MARTINEZ LEYBA, INC.
G.R. No. 211845, August 9, 2017, Del Castillo, J.

Prescription and laches cannot apply to registered land covered by the Torrens system.

FACTS:

Martinez Inc. is a Philippine corporation which owns three parcels of land. On the other hand,
Defendants Pen Development and Las Brisas are likewise Philippine corporations which merged
into one corporate entity named Las Brisas Resmis (LBR). LBR is also the owner of a lot which is
situated adjacent to the lots owned by Matinez.

When LBR fenced its lot, Martinez noticed that the fence encroached its land. Upon surveying, it
was verified that the fence overlapped Martinez’s lot. Hence Martinez sent a letter to LBR as regards
the issue and to cease its intrusion but LBR did not respond and continued developing the land.
This prompted Martinez to reiterate its claim in two more letters that it sent to LBR. LBR then sent
a letter to Martinez claiming that it cannot trace the origin of the titles owned by Martinez.
Martinez then sent two more letters and reiterated its ownership over the lot encroached upon.
Martinez then hired a geodetic engineer to conduct a survey of the land and also revealed that the
building and improvements made by LBR occupied the lot owned by the former. Martinez then
sent a demand letter for LBR to cease and desist from building on its lot. However, no action was
taken by LBR.

Martinez then filed an action for quieting of title, cancellation of title and recovery of ownership
against LBR in the RTC. In its answer, LBR stated that it bought the land covered by TCT 153101
from Republic Bank; that it took possession thereof in good faith that very same year; and that it is
actually Martinez that was encroaching upon its land.

The RTC ruled in favour of Martinez as it found that Martinez’ mother title was registered 58 years
ahead of LBR's mother title. Thus, while defendant's TCT No. 153101 and its mother title are
apparently valid and effective in the sense that they were issued in consequence of a land
registration proceeding, they are in truth and in fact invalid, ineffective, voidable, and
unenforceable insofar as it overlaps plaintiffs prior and subsisting titles. The RTC ordered the

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quieting of the titles owned by Martinez, the cancellation of the title of LBR insofar as it overlaps
the titles of Martinez and to vacate the lot and remove the structures it put up on the same.

Upon Appeal to the CA, it upheld the decision of the RTC.

ISSUES:

1. Whether the honorable CA seriously erred in ruling that petitioner is a possessor/builder in

bad faith?
2. Whether the honorable court of appeals seriously erred in failing to rule that the respondent
incurred laches in enforcing its putative rights?

RULING:

NO for both. On the issue of being a builder in had faith, there is no question that petitioners
should be held liable to respondent for their obstinate refusal to abide by the latter's repeated
demands to cease and desist from continuing their construction upon the encroached area.
Petitioners' sole defense is that they purchased their property in good faith and for value; but this
does not squarely address the issue of encroachment or overlapping. Reiterating, while Petitioners
may have been innocent purchasers for value with respect to their land, this does not prove that
they are equally innocent of the claim of encroachment upon respondent's lands. The evidence
suggests otherwise: despite being apprised of the encroachment, petitioners turned a blind eye and
deaf ear and continued to construct on the disputed area. They did not bother to conduct their own
survey to put the issue to rest, and to avoid the possibility of being adjudged as builders in bad faith.

Finally, on the question of laches, the CA correctly held that as owners of the subject property,
respondent has the imprescriptible right to recover possession thereof from any person illegally
occupying its lands. Even if Petitioners have been occupying these lands for a significant period of
time, respondent as the registered and lawful owner has the right to demand the return thereof at
any time.

Jurisprudence consistently holds that “prescription and laches cannot apply to registered land
covered by the Torrens system” because “under the Property Registration Decree, no title to
registered land in derogation to that of the registered owner shall be acquired by prescription or
adverse possession.”

SPOUSES ELVIRA ALCANTARA AND EDWIN ALCANTARA v. SPOUSES FLORANTE BELEN

AND ZENAIDA ANANIAS, THE PROVINCIAL ENVIRONMENT AND NATURAL RESOURCES
OFFICER, DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES, STA. CRUZ,
LAGUNA, and THE CITY ASSESSOR OF SAN PABLO CITY
G.R. No. 200204, April 25, 2017, SERENO, J.:

As against an array of proofs consisting of tax declarations and/or tax receipts which are not
conclusive evidence of ownership nor proof of the area covered therein, an original certificate of title
indicates true and legal ownership by the registered owners over the disputed premises.

FACTS:

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In 2005, Spouses Alcantara filed before the RTC a Complaint against Spouses Belen for the quieting
of title, reconveyance of possession, and accounting of harvest with damages. Spouses Alcantara
claimed that they were the registered owners of the lot covered TCT No. T-36252. Elvira Alcantara
traced her ownership of the property to her inheritance from her mother, Asuncion Alimon. They
also submitted as evidence the Tax Declarations of the property registered to them and their
predecessors-in-interest, receipts of their payments for real property taxes, and a Sketch/Special
Plan.

On the strength of a sales agreement called Kasulatan ng Bilihang Tuluyan ng Lupa, respondents
countered Spouses Alcantara's claims over the property. Spouses Belen alleged that they bought
the property from its prior owners. Even though respondents did not have any certificate of title
over the property, they supported their claim of ownership with various Tax Declarations under the
name of their predecessors-in-interest. Spouses Belen also submitted a Sketch/Special Plan.

RTC ruled in favour of Spouses Alcantara but this was reversed by CA on appeal.

ISSUE:

Whether the legal issue of ownership can be made in favor of Spouses Belen on the basis of their
Tax Declarations and the Kasulatan ng Bilihang Tuluyan ng Lupa notwithstanding the TCT of
Spouses Alcantara.

RULING:

No. Based on established jurisprudence, we rule that the certificate of title of petitioners is an
absolute and indefeasible evidence of their ownership of the property. The irrelevant Tax
Declarations of Spouses Belen cannot defeat TCT No. T-36252 of Spouses Alcantara, as it is binding
and conclusive upon the whole world. Cureg v. Intermediate Appellate Court explains:

[A]s against an array of proofs consisting of tax declarations and/or tax receipts
which are not conclusive evidence of ownership nor proof of the area covered therein, an
original certificate of title indicates true and legal ownership by the registered owners over
the disputed premises. Petitioners' OCT No. P-19093 should be accorded greater weight as
against the tax declarations x x x offered by private respondents in support of their claim
xxx.

Aside from presenting a certificate of title to the claimed property, petitioners submit as evidence
the Tax Declarations registered to them and to their predecessors-in-interest. These Tax
Declarations, together with the certificate of title presented by petitioners, support their claims
over Lot No. 16932.

Indubitably, a certificate of title serves as evidence of an indefeasible and incontrovertible title to

the property in favor of the person whose name appears therein. The real purpose of the Torrens
System of land registration is to quiet title to land and put stop forever to any question as to the
legality of the title.

The title of petitioners over the realty must likewise be not nullified because Spouses Belen did not
provide any basis for invalidating the Free Patent of Asuncion Alimon.

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MUNICIPALITY OF CAINTA v. CITY OF PASIG AND UNIWIDE SALES WAREHOUSE CLUB,

INC.
G.R. No. 176703/ G.R. No. 176721, 28 June, 2017, Martires, J.

The land registration court, in confirming the applicant's title, necessarily passes upon the technical
description of the land and consequently its location, based on proof submitted by the applicant and
reports by the Commissioner of Land Registration and Director of Lands. There is thus basis to
presume correct the location stated in the Certificate of Title and to rely thereon for purposes of
determining the situs of local taxation, until it is cancelled or amended.

FACTS:

Uniwide conducted and operated business in buildings and establishments constructed on parcels
of land covered by Transfer Certificate of Title (TCT) issued by the Registry of Deeds of Pasig City.
In said TCTs, the location of the parcels of land is indicated as being in Pasig. In 1989, Uniwide
applied for and was issued a building permit by Pasig for its building. Uniwide also secured the
requisite Mayor's Permit for its business from Pasig and consequently paid thereto its business and
realty taxes, fees, and other charges from 1989 to 1996.

However, beginning 1997, Uniwide did not file any application for renewal of its Mayor's Permit in
Pasig nor paid the local taxes thereto. Instead, it paid local taxes to Cainta after the latter gave it
notice, supported by documentary proof of its claims that the subject properties were within
Cainta's territorial jurisdiction.

Consequently, Pasig filed a case for collection of local business taxes, fees, and other legal charges
due for fiscal year 1997 against Uniwide with the RTC-Pasig. Uniwide, in turn, filed a third-party
complaint against Cainta for reimbursement of the taxes, fees, and other charges it had paid to the
latter in the event that Uniwide was adjudged liable for payment of taxes to Pasig. Subsequently,
Uniwide sold the subject properties to Robinsons Land Corporation.

Prior to the institution of said tax collection case, Cainta had filed a petition for the settlement of
its boundary dispute with Pasig before RTC Antipolo City, entitled Municipality of Cainta v.
Municipality of Pasig. Among the territories disputed in the aforesaid case are the subject
properties.

In the course of the trial of the tax collection case, Cainta filed a Motion to Dismiss or Suspend
Proceedings on the ground of litis pendentia, in view of the pending petition for settlement of the
land boundary dispute with Pasig. The RTC-Pasig denied said motion. Thereafter, Cainta filed a
petition for certiorari with the CA with prayer for issuance of a temporary restraining
order (TRO) or a writ of preliminary injunction. No TRO or writ of preliminary injunction was
issued by the CA and Cainta’s petition was dismissed.

The RTC Ruling

The RTC-Pasig ruled in favor of Pasig. It upheld the indefeasibility of the Torrens title held by
Uniwide over the subject properties, whose TCTs indicate that the parcels of land described therein
are located within the territorial limits of Pasig. The RTC-Pasig ruled that the location indicated in
the TCTs is conclusive for purposes of the action for tax collection, and that any other evidence of

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location would constitute a collateral attack on a Torrens title proscribed by law. Anent the third-
party complaint filed by Uniwide against Cainta, RTC-Pasig rendered judgment in favor of Uniwide.
Aggrieved, Cainta and Uniwide elevated their respective appeals before the CA wherein it affirmed
the ruling of RTC Pasig. Hence this petition.

ISSUE:

Whether the RTC-Pasig and the CA were correct in deciding in favor of Pasig by upholding the
indefeasibility of the Torrens title over the subject properties, despite the pendency of the boundary
dispute case between Pasig and Cainta; and if so, whether they properly decided the manner in
settling the obligations due to Pasig.

RULING:

YES. PETITION DENIED.Under Section 150 of the Local Government Code and as affirmed by
Sectios 201 and 247 of the LGC, it is provided that local business taxes and realty taxes are to be
collected by the local government unit where the business is conducted or the real property is
located, the primordial question presented before this Court is: how is location determined for
purposes of identifying the LGU entitled to collect taxes.

This Court holds that the location stated in the certificate of title should be followed until amended
through proper judicial proceedings.

PD 1529, or the Property Registration Decree (PRD), is an update of the Land Registration Act (Act
496) and relates to the registration of real property. Section 31 thereof provides that a decree of
registration, once issued, binds the land and quiets title thereto, and it is conclusive upon and
against all persons, including the National Government and all branches thereof.

The import of these provisions is that the land registration court, in confirming the applicant's title,
necessarily passes upon the technical description of the land and consequently its location, based
on proof submitted by the applicant and reports by the Commissioner of Land Registration and
Director of Lands. There is thus basis to presume correct the location stated in the Certificate of
Title and to rely thereon for purposes of determining the situs of local taxation, until it is cancelled
or amended.

Said reliance is further demanded by Section 31 of the PRD when it mandated that a decree of
registration, which necessarily includes the registered location of the land, is conclusive upon all
persons, including the National Government and all branches thereof. In Odsique v. Court of
Appeals, the Supreme Court held that a certificate of title is conclusive not only of ownership of the
land but also its location.

In the case at bar, it is undisputed that the subject properties are covered by TCTs which show on
their faces that they are situated in Pasig; that Uniwide's business establishment is situated within
the subject properties; that the stated location has remained unchanged since their issuance; that
prior payments of the subject taxes, fees, and charges have been made by Uniwide to Pasig; and
that there is no court order directing the amendment of the subject TCTs with regard to the location
stated therein. This gives Pasig the apparent right to levy and collect realty taxes on the subject
properties and business taxes on the businesses conducted therein.

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Without the adjudication of the RTC-Antipolo finally determining the precise territorial
jurisdiction of these local government units (LGU), these documents alone cannot automatically
effect a modification or amendment to the stated location in the TCTs for the purpose of exacting
tax compliance, as the taxpayer is entitled to rely on the location clearly reflected in the certificate
of title covering the properties. To hold otherwise would subject taxpayers to the vagaries of
boundary disputes, to their prejudice and inconvenience and to the detriment of proper tax
administration. Such scenario is contrary to the canons of a sound tax system.

Moreover, the Implementing Rules and Regulations (IRR) of the LGC provides that in case of a
boundary dispute, the status of the affected area prior to the dispute shall be maintained and
continued for all purposes. It is not controverted that the stated location in the TCTs has remained
unchanged since their issuance and that Uniwide has faithfully paid its local business taxes, fees,
and other charges to Pasig since 1989, prior to the institution of the boundary dispute case. This
status should be maintained until final judgment is rendered and the necessary amendments to the
TCTs, if any, are made.

Thus, in the event that the RTC-Antipolo renders judgment finding that the subject properties are
within the territorial jurisdiction of Cainta, Cainta may be considered a "person having an interest
in registered property" for the purpose of applying for amendment to Uniwide's TCTs to reflect the
proper locational entry based on a final judgment. Until then, however, the location stated in the
TCTs shall be presumed correct and subsisting for the purpose of determining which LGU has
taxing jurisdiction over the subject properties.

All told, considering that the TCTs show that the subject properties are located in Pasig, Pasig is
deemed the LGU entitled to collect local business taxes and realty taxes, as well as relevant fees and
charges until an amendment, if any, to the location stated therein is ordered by the land registration
court after proper proceedings.

As previously discussed, prior to final adjudication by the RTCAntipolo on the boundary dispute
case and necessary amendment to the TCTs, Cainta has no apparent right to collect the taxes on
the subject properties. Thus, when Uniwide paid taxes to it, Cainta was benefited without real or
valid basis, which benefit was derived at the expense of both Uniwide and Pasig.

HEIRS OF CAYETANO CASCAYAN, REPRESENTED BY LA PAZ MARTINEZ V. SPOUSES

OLIVER AND EVELYN GUMALLAOI, AND THE MUNICIPAL ENGINEER OF BANGUI,
ILOCOS NORTE,
G.R. No. 211947, July 03, 2017, LEONEN, J.

When a complaint for recovery of possession is filed against a person in possession of a parcel of land
under claim of ownership, he or she may validly raise nullity of title as a defense and, by way of
counterclaim, seek its cancellation. A certificate of title issued under an administrative proceeding
pursuant to a homestead patent covering a disposable public land within the contemplation of the
Public Land Law or Commonwealth Act No. 141 is as indefeasible as a certificate of title issued under
a judicial registration proceeding.

FACTS:

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The Cascayan Heirs,all heirs of Cayetano Cascayan, filed a complaint for Recovery of Possession,
Demolition, and Damages against the Spouses Gumallaoi before RTC Bangui, Ilocos Norte. The
Cascayan Heirs alleged that by virtue of a free patent application, they were co-owners of a parcel
of cornland covered by Original Certificate of Title (OCT) No. P-78399,denominated as Lot No.
20028. The Cascayan Heirs affirmed that the Spouses Gumallaoi bought Lot No. 20029, an adjacent
lot.

The Spouses Gumallaoi built a residential house on Lot No. 20029 which the Cascayan Heirs alleged
encroached on Lot No. 20028. Due to renovations on their residential house, they further
encroached on Lot No. 20028.Thus, the Cascayan Heirs prayed that the Spouses Gumallaoi be
directed to vacate Lot No. 20028 and to restore it to their possession. The plaintiffs submitted a tax
declaration, a report conducted by surveyor of CENRO, a certification which was later retracted by
the barangay chairman.

By way of counterclaim, the Spouses Gumallaoi maintained that they were the true owners of both
Lot Nos. 20029 and 20028. They claimed that the Cascayan Heirs secured a free patent to Lot No.
20028 through manipulation. They asserted that the supporting affidavits for the Cascayan Heirs'
free patent application were obtained through fraud and deception.

The RTC rendered a Decision declaring the Spouses Gumallaoi the legal owners of Lot No. 20028.
It ruled that petitioners did not prove that they or their predecessor-in-interest had been in
possession of it. It appears that even by the year 2004 when plaintiffs applied for a free patent,
defendants spouses have already been in possession of Lot No. 20028 together with the adjacent
Lot No. 20029. This is clear from the fact that the bigger portion of their house was constructed
over the lot in dispute. By constructing their house both on the two lots, it is unthinkable that they
would have done so under notice or threat that they will eventually be evicted and a substantial
part of their house demolished.

In fact, all these observations lead the Court to believe that the issuance of the free patent was not
made in accordance with the procedure laid down by Commonwealth Act No. 141, otherwise known
as the Public Land Act. As provided in Section 91 thereof, an investigation should be conducted for
the purpose of ascertaining whether the material facts set out in the application are true. In this
case, it appears more likely that there was never any investigation or any verification made by the
CENRO as to the actual status of the land in suit at the time the application of plaintiffs for a free
patent was processed and before the free patent was approved and issued. Otherwise, they would
have known that defendants spouses have constructed the bigger part of their house on Lot No.
20028.

The Cascayan Heirs filed a Motion for New Trial citing mistake as a ground. They claimed that
despite the agreement for the trial court to consider only the Commissioner's Report to resolve the
case, it also examined fraudulent affidavits.RTC denied the Motion for New Trial.

The Cascayan Heirs appealed to CA. They argued that RTC could not order the cancellation of the
patent because they had already been issued a certificate of title pursuant to a public land
patent.Furthermore, under the Public Land Act, it is only the Solicitor General who could institute
an action for reversion of Lot No. 20028.

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The Court of Appeals denied the petition and affirmed RTC. It held that the action was in the nature
of an accion reivindicatoria, wherein the plaintiffs claim ownership over a land and seek recovery of
full possession over it. Thus, the main issue for resolution was who had a better claim over Lot No.
20028, based on the parties' evidence.Consequently, pursuant to Article 434 of the Civil Code, the
plaintiffs had to prove the identity of the land claimed and their title to it. The Court of Appeals
found that OCT No. P-78399 was not conclusive proof of their title to Lot No. 20028 as titles secured
by fraud and misrepresentation are not indefeasible. Hence, this petition for review on certiorari.

ISSUE:

Whether or not CA properly appreciated the evidence presented by the parties

RULING:

YES. Thus, petition by plaintiffs is denied.

Petitions for review on certiorari under Rule 45 shall pertain only to questions of law. The Court of
Appeals' appreciation of the evidence on the possession of Lot No. 20028 and the weight to be given
to the parties' Tax Declarations and affidavits, which is consistent with the RTC;s findings, is
binding on this Court and there is no cogent reason to review it.

The Tax Declaration in the name of the Heirs of Cayetano Cascayan who obviously secured the
same for purposes of their application for free patent, was not also earlier declared in the name of
Cayetano Cascayan. A perusal of the evidence of the defendant spouses shows that the owner was
unknown. It is thus clear that, the lot being declared then to an unknown person, plaintiffs took it
upon themselves and claimed it, secured a tax declaration in their name and applied thereafter for
a free patent therefor the following year.

In other words, plaintiffs obviously applied for a free patent without any basis. It is clear from their
evidence that they were never in possession of the property in suit before they applied for the free
patent. While plaintiffs submitted affidavits to show that they have occupied and cultivated Lot No.
20028 and that it was declared in the name of the heirs of Cayetano Cascayan in support of their
application for free patent, it appears that such evidence has been manipulated.

The Court of Appeals thoroughly examined the evidence submitted by petitioners and found it
lacking in probative value to prove petitioners' ownership over Lot No. 20028. Rather than prove
their ownership, it cast doubt on the title over Lot No. 20028.

Although not raised as an issue before this Court, it nonetheless bears emphasizing that when a
complaint for recovery of possession is filed against a person in possession of a parcel of land under
claim of ownership, he or she may validly raise nullity of title as a defense and, by way of
counterclaim, seek its cancellation.

A certificate of title issued under an administrative proceeding pursuant to a homestead patent

covering a disposable public land within the contemplation of the Public Land Law or
Commonwealth Act No. 141 is as indefeasible as a certificate of title issued under a judicial
registration proceeding. Under the Land Registration Act, title to the property covered by a Torrens
certificate becomes indefeasible after the expiration of one year from the entry of the decree of

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registration. Such decree of registration is incontrovertible and becomes binding on all persons
whether or not they were notified of, or participated in, the in rem registration process. There is no
specific provision in the Public Land Law or the Land Registration Act (Act 496), now Presidential
Decree 1529, fixing a similar one-year period within which a public land patent can be considered
open to review on the ground of actual fraud (such as that provided for in Section 38 of the Land
Registration Act, and now Section 32 of Presidential Decree 1529), and clothing a public land patent
certificate of title with indefeasibility. Nevertheless, this Court has repeatedly applied Section 32 of
Presidential Decree 1529 to a patent issued by the Director of Lands, approved by the Secretary of
Natural Resources, under the signature of the President of the Philippines. The date of the issuance
of the patent corresponds to the date of the issuance of the decree in ordinary cases. Just as the
decree finally awards the land applied for registration to the party entitled to it, the patent issued
by the Director of Lands equally and finally grants and conveys the land applied for to the applicant.
The one-year prescriptive period, however, does not apply when the person seeking annulment of
title or reconveyance is in possession of the lot. This is because the action partakes of a suit to quiet
title which is imprescriptible.

In the case at bar, inasmuch as respondents are in possession of the disputed portions of Lot 2344,
their action to annul Original Certificate of Title No. P-10878, being in the nature of an action to
quiet title, is therefore not barred by prescription.

Section 48 of P.D. 1529, the Property Registration Decree, provides that a certificate of title shall
not be subject to collateral attack and cannot be altered, modified, or canceled except in a direct
proceeding. An action is an attack on a title when the object of the action is to nullify the
title, and thus challenge the judgment or proceeding pursuant to which the title was
decreed. The attack is direct when the object of an 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 or proceeding is
nevertheless made as an incident thereof.

A counterclaim can be considered a direct attack on the title

In this case, while the original complaint filed by the petitioners was for recovery of possession,
or accion publiciana, and the nullity of the title was raised merely as respondents' defense, we can
rule on the validity of the free patent and OCT No. P-10878 because of the counterclaim filed by
respondents. A counterclaim can be considered a direct attack on the title. It was held that a
counterclaim is considered a complaint, only this time, it is the original defendant who becomes
the plaintiff.. It was held that a counterclaim is considered a complaint, only this time, it is
the original defendant who becomes the plaintiff. It stands on the same footing and is to
be tested by the same rules as if it were an independent action.

Thus, the Court of Appeals did not commit an error of law in sustaining the cancellation of OCT
No. P-78399, pursuant to respondents' counterclaim, and in its determination that petitioners
obtained it fraudulently.

The presence of fraud is a factual question. It must be established through clear and convincing
evidence, though the circumstances showing fraud may be varied.

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Here, the CA’s and RTC’s conclusion that petitioners obtained the free patent fraudulently was
based on several findings. They determined that petitioners were never in possession of Lot No.
20028. Even the documents submitted to support their application were flawed: the tax declarations
were inconsistent and the affidavits and Certifications were subsequently retracted. Considering
that the RTC and CA uniformly determined that fraud existed in the free patent application based
on the evidence presented, there is no reason for this Court to delve into this issue.

Thus, the Court of Appeals did not commit any error of law in affirming the Regional Trial Court
Decision, which declared respondents as the legal owners of Lot No. 20028, and in cancelling
petitioners' title to it.

ESPERANZA BERBOSO, v. VICTORIA CABRAL

G.R. No. 204617, July 10, 2017, TIJAM, J.

Section 48 of P.D. No. 1529 or the Property Registration Decree proscribes a collateral attack to a
certificate of title and allows only a direct attack thereof. A Torrens title cannot be altered, modified
or cancelled except in a direct proceeding in accordance with law. When the Court says direct attack,
it means that the object of an 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 or proceeding is nevertheless made as an incident thereof.

FACTS:
A subject land was awarded to Alejandro Berboso by the Department of Agrarian Reform (DAR)
pursuant to P.D. No. 27 by virtue of a Certificate of Land Transfer (CLT). The same was duly
registered with the Register of Deeds. The CLT was replaced by EP No. 445829 and EP No. 445830.
After Alejandro had fully complied with all the requirements for the final grant of title, (TCT)
No.EP-046 and TCT No. EP-047 were issued in the name of Alejandro.

Victoria filed with the DAR Provincial Agrarian Reform Adjudication Board (PARAB) her first
petition to cancel EP Nos. 445829 and 445830.

Meanwhile, Alejandro died. After his death, his heirs settled his estate and executed an Extra-
Judicial Settlement of Estate. Thus, TCT Nos. EP-046 and EP-047 were cancelled and TCT Nos.
263885(M) and 263886(M) were issued in the name of the heirs of Alejandro including petitioner
Esperanza.

The PARAB rendered a decision in favor of Alejandro and accordingly affirmed the validity of the
EP Nos. 445829 and 445830. CA affirmed the decisions of the PARAB and the DARAB. Victoria
assailed the CA decision to SC, but SC dismissed Victoria’s petition.

Pending the resolution of the motion for reconsideration filed by Victoria, the latter filed her second
petition for the cancellation of the said EP Nos. 445829 and 445830 before the PARAB. She claimed
that Esperanza sold a portion of the subject land to Fernando within the prohibitory period under
the existing rules and regulations of the DAR and prayed again for the cancellation of EP Nos.
445829 and 445830 awarded to Alejandro.

SC denied with finality the MR filed by respondent.

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Later, the PARAB issued its Decision in connection with the second petition of Victoria, granting
her petition for cancellation. Esperanza appealed the PARAB's decision to the DARAB, which the
latter granted. Victoria appealed the DARAB's decision to the CA. Ca reversed the DARAB’s
decision. Hence, this petition.

ISSUES:

1) whether or not the principle of res judicata and forum shopping apply in this case, such that the
second petition for cancellation of EP Nos. 445829 and 445830 was barred by former decision of SC
dismissing respondent's first petition;
2) whether the petition for cancellation of EP Nos. 445829 and 445830 constitute as a collateral
attack to the certificate of title issued in favor of Alejandro.

RULING:

1) The principle of res judicata and forum shopping does NOT apply
In determining whether a party violated the rule against forum shopping, the most important factor
to consider is whether the elements of litis pendentia concur, namely: a) there is identity of parties,
or at least such parties who represent the same interests in both actions; b) there is identity of rights
asserted and reliefs prayed for, the relief being founded on the same facts; and, c) that the identity
with respect to the two preceding particulars in the two cases is such that any judgment that may
be rendered in the pending case, regardless of which party is successful, would amount to res
judicata in the other case.

In the case at bar, the first petition for cancellation of EP Nos. 445829 and 445830 was based on the
validity of its issuance in favor of Alejandro, while the second petition was based on the alleged
violation of the prohibition on the sale of the subject land. As such, there is no, as between the first
petition and the second petition, identity of causes of action. Therefore, the final decision in G.R.
No. 135317 does not constitute as res judicata on the second petition.

2) The petition for cancellation of EP Nos. 445829 and 445830 constitutes as a collateral
attack to the validity of the certificate of title issued in favor of petitioner and her children.
Therefore, the same should be dismissed
Section 48 of P.D. No. 1529 or the Property Registration Decree proscribes a collateral attack to a
certificate of title and allows only a direct attack thereof. A Torrens title cannot be altered, modified
or cancelled except in a direct proceeding in accordance with law. When the Court says direct
attack, it means that the object of an 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 or proceeding is nevertheless made as an incident
thereof.

Certificates of title issued pursuant to emancipation patents acquire the same protection accorded
to other titles, and become indefeasible and incontrovertible upon the expiration of one year from
the date of the issuance of the order for the issuance of the patent Lands so titled may no longer be
the subject matter of a cadastral proceeding; nor can they be decreed to other individuals. The rule
in this jurisdiction, regarding public land patents and the character of the certificate of title that
may be issued by virtue thereof, is that where land is granted by the government to a private
individual, the corresponding patent therefor is recorded, and the certificate of title is issued to the

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grantee; thereafter, the land is automatically brought within the operation of the Land Registration
Act.

As such, upon expiration of one year from its issuance, the certificate of title shall become
irrevocable and indefeasible like a certificate issued in a registration proceeding. Therefore, TCT
Nos. 263885(M) and 263886(M) issued in favor of petitioner and her children as heirs of Alejandro
are indefeasible and binding upon the whole world unless it is nullified by a court of competent
jurisdiction in a direct proceeding for cancellation of title. Thus, the petition to cancel EP Nos.
445829 and 445830 is a collateral attack to the validity of TCT Nos. 263885(M) and 263886(M); as
such, the same should not be allowed.

THE HEIRS OF PETER DONTON v. DUANE STIER AND EMILY MAGGAY

G.R. No. 216491, August 14, 2017, Perlas-Bernabe, J.

Forgery, as a rule, cannot be presumed and must be proved by clear, positive and convincing evidence,
and the burden of proof lies on the party alleging forgery.

FACTS:

Sometime in June 2001, while Petitioner Donton was in the United States, he discovered that herein
respondents took possession and control of the subject property, as well as the management of his
business operating thereat.Donton's lawyers in the Philippines made demands upon respondents
to vacate the subject property and to cease and desist from operating his business, but to no avail.
Thus, Donton was forced to return to the Philippines, where he learned that respondents, through
alleged fraudulent means, were able to transfer the ownership of the subject property in their
names. Accordingly, his title, TCT No. N-137480, had been cancelled and a new one, TCT No. N-
225996, had been issued in respondents’ names.

Hence, he filed the instant complaintfor annulment of title and reconveyance of property with
damages against respondents and the Register of Deeds of Quezon City, alleging that the signature
on the Deed of Absolute Saledated July 16, 2001, by virtue of which he purportedly sold the subject
property to respondents, was a forgery.He denied signing or executing the document in favor of
respondents, especially considering that on the date of its purported execution, i.e., July 16, 2001, he
was allegedly still in the United States, having departed from the Philippines on June 27, 2001 and
returned only on August 30, 2001.He averred that respondents conspired with the employees of the
Registry of Deeds of Quezon City to defraud him, and that Stier is an American citizen and a non-
resident alien who is, therefore, not allowed by law to own any real property in the
Philippines.Accordingly, he prayed that TCT No. N-225996 in respondents' names be annulled and
cancelled; that a new title be issued in his name as the rightful owner of the subject property.

In their Answer with Counterclaim, respondents claimed that the subject property had been
lawfully transferred to them, asserting that on September 11, 1995, Donton executed an Occupancy
Agreement whereby he acknowledged that Stier had been residing thereat since January 5, 1995;
that Stier had extended a loan to him in the amount of ₱3,000,000.00 on July 5, 1997, secured by a
mortgage over the subject property and its improvements; and that until full payment thereof,
Donton allowed Stier to occupy the same. Respondents likewise claimed that Donton executed a
Special Power of Attorney (SPA) dated September 11, 1995 in favor of Stier, giving him full authority
to sell, mortgage, or lease the subject property. Unfortunately, Donton failed to pay his obligation

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to Stier; thus, they initially executed a "unilateral contract of sale. During trial, Donton presented
the findings of Rosario C. Perez (Perez), Document Examiner II of the PNP Crime Laboratory in
Camp Crame, who, after comparing the alleged signature of Donton on the Deed of Absolute Sale
to his standard ones, found "significant divergences.”

The RTC dismissed the complaint on insufficiency of evidence, finding that the Deed of Absolute
Sale, being a public and notarial document, enjoys the presumption of regularity, and thus cannot
be simply defeated by Donton’s bare allegation of forgery of his signature thereon. The CA affirmed.

ISSUE:

Whether the title should be annulled and the property reconveyed to the petitioners

RULING:

The petition is partly meritorious. The general rule that only legal issues may be raised in a petition
for review on certiorari under Rule 45 of the Rules of Court does not apply in this case and the Court
decided to look on some of the factual inconsistencies presented in the courts below.

The main thrust of petitioners' contention in this case is that Donton’s signature on the Deed of
Absolute Sale is a forgery. They maintain that it was not possible for him to have signed the said
document considering that he was not in the Philippines on July 16, 2001, the date of execution and
notarization thereof, he being in the United States at the time. To bolster this argument, they
offered in evidence, among others, the immigration stamps on Donton’s passport, showing that the
latter departed from the Philippines on June 20, 2001 and returned on August 30, 2001.

However, as the courts a quo have aptly opined, the foregoing immigration stamps
are insufficient to prove that Donton was physically absent from the country to have been able to
appear before the notary public on July 16, 2001, the date of the acknowledgment of the Deed of
Absolute Sale. It is well to point out, as the R TC did, that petitioners failed to prove Donton’s arrival
or entry in the United States, where he alleged to have gone, and his departure therefrom to return
to the Philippines on August 30, 2001.

Furthermore, forgery, as a rule, cannot be presumed and must be proved by clear, positive and
convincing evidence, and the burden of proof lies on the party alleging forgery - in this case,
petitioners. The fact of forgery can only be established by a comparison between the alleged forged
signature and the authentic and genuine signature of the person whose signature is theorized to
have been forged. Here, as admitted by expert witness Perez, she had no actual knowledge of the
source of the specimen signatures given to her for examination, as it was the CIDG personnel who
provided her with the same.

Be that as it may, the Court, however, differs from the findings of the courts a quo with respect to
Stier’s citizenship. More than the Certification issued by the BOI, which clearly states that Stier is
an American citizen. Nevertheless, considering that petitioners failed to prove their allegation that
Maggay, the other vendee, had no capacity to purchase the subject property, the sale to her remains
valid but only up to the extent of her undivided one-half share therein. Meanwhile, the other
undivided one-half share, which pertained to Stier, shall revert to Donton, the original owner, for
being the subject of a transaction void ab initio. Consequently, the Deed of Absolute Sale, together

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with TCT No. N-225996 issued in respondents’ favor, must be annulled only insofar as Stier is
concerned, without prejudice, however, to the rights of any subsequent purchasers for value of the
subject property.

B. ORIGINAL REGISTRATION

REPUBLIC OF THE PHILIPPINES v. METRO CEBU PACIFIC* SAVINGS BANK AND

CORDOVA TRADING POST, INC.
G.R. No. 205665, October 04, 2017, REYES, JR., J.:

It is settled that the applicant must present proof of specific acts of ownership to substantiate the
claim and cannot just offer general statements, which are mere conclusions of law rather than factual
evidence of possession.

FACTS:

Metro Cebu Public Savings Bank (Metro Cebu) and Cordova Trading Post, Inc. (Cordova Trading)
separate applications for original registration of two parcels of land. They alleged that the entire
was previously possessed and owned by Dalumpines since 1967; by Fausto Daro from 1966 until
1967; and by Pablo from 1948 until 1966. They averred that an older tax declaration over the subject
properties dates as far back as 1945 or earlier still exists in the records. They insist that they and
their predecessors-in-interest have been in open, continuous, and peaceful possession of the subject
properties for more than 30 years.

They attached the following documents in support of their respective applications for original
registration: (1) tracing plan; (2) blue print copies; (3) technical description of the subject properties;
(4) surveyor's certificate/exemption; (5) certified true copy of the latest tax declaration; (6)
Clearance from the Regional Trial Court and Municipal Trial Court in Cities; and (7) Certification
issued by the Community Environment and Natural Resources Office (CENRO) that the subject
properties are alienable and disposable.

MCTC, as affirmed by CA, ordered the registration and the confirmation of the title. OSG however
maintains that the requirement under Section 14(1) of Presidential Decree (P.D.) No. 1529, i.e., open,
continuous, exclusive and notorious possession and occupation of the subject properties under
a bona fide claim of ownership since June 12, 1945, has not been complied with by the respondents.
Hence, the application must be denied.

ISSUE:

Whether or not the CA erred in granting the respondents' Application for Original Registration of
the subject properties.

RULING:

Yes. It is settled that the applicant must present proof of specific acts of ownership to substantiate
the claim and cannot just offer general statements, which are mere conclusions of law rather than
factual evidence of possession.There is nothing in this case which would substantiate the
respondents' claim that they have been in possession of the subject properties since June 12, 1945,

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or earlier. The earliest tax declaration that was presented in the name of Dalumpines was issued
only in 1967. Although the respondents presented a tax declaration over the subject property issued
to Pablo in 1948, they failed to establish the relationship of Pablo to Dalumpines.

In any case, the respondents' claim of ownership of the subject properties based on the tax
declarations they presented will not prosper. It is only when these tax declarations are coupled with
proof of actual possession of the property that they may become the basis of a claim of
ownership. In this case, the respondents miserably failed to prove that they and their predecessors-
in-interest actually possessed the properties since June 12, 1945 or earlier.

Further, the lower courts failed to consider that the respondents failed to sufficiently establish that
the subject properties form part of the alienable and disposable lands of the public domain. The
applicant for land registration must prove that the Department of Environment and Natural
Resources (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 Provincial Environment and
Natural Resources Office (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.

In this case, the respondents failed to present any evidence showing that the DENR Secretary had
indeed approved a land classification and released the land of the public domain as alienable and
disposable, and that the subject properties fall within the approved area per verification through
survey by the PENRO or CENRO. They failed to establish the existence of a positive act from the
government declaring the subject properties as alienable and disposable.

CONRADO ESPIRITU, JR. et. al. v. REPUBLIC OF THE PHILIPPINES

G.R. No. 219070, 21 June 2017, Mendoza, J.:

Proof of specific acts of ownership must be presented to substantiate the claim of open, continuous,
exclusive, and notorious possession and occupation of the land subject of the application. Applicants
for land registration cannot just offer general statements which are mere conclusions of law rather
than factual evidence of possession. Actual possession consists in the manifestation of acts of
dominion over it of such nature as a party would actually exercise over his own property.

FACTS:

Espiritu, Jr. et. al.,, filed before the RTC an Application for Registration of Title to Land covering a
parcel of land with an area of 6,971 square meters, located at Barangay La Huerta, Parafiaque City,
Metro Manila.

The Espiritu et. al alleged that their deceased parents, Conrado Espiritu, Sr. (Conrado, Sr.) and
Felicidad Rodriguez-Espiritu (Felicidad), were the owners of the subject land; that they inherited
the subject land after their parents passed away; and that they, by themselves and through their
predecessors-in-interest, have been in open, public, and continuous possession of the subject land
in the concept of owner for more than thirty (30) years.

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Subsequently, the RTC determined that it had jurisdiction to act on the application. Thereafter,
trial ensued. Marrieta testified that she is one of the children of Conrado, Sr. and Felicidad; that she
has known the subject land since she was seven (7) years old because her parents owned the same;
that before her parents, her grandparents and Felicidad's parents, Dalmacio Rodriguez and
Dominga Catindig were the owners of the subject land; that she, together with her siblings,
inherited the subject land from Conrado, Sr. and Felicidad, who died in March 1984 and on January
10, 1986, respectively; that they possessed the subject land openly and continuously since the death
of their parents; that the subject land was agricultural in nature because it was being used as salt
land during summer and as fishpond during rainy season; and that there were no adverse claimants
over the subject land.

Conrado, Jr. testified that he commissioned the survey of the subject land; that he requested and
received from Laureano B. Lingan, Jr., Regional Technical Director of the Forest Management
Services (FMS), Department of Environment and Natural Resources-National Capital
Region (DENRNCR), a Certification, stating that the subject land was part of the alienable and
disposable land of the public domain; and that they utilized the subject land in their salt-making
business, which they inherited from their parents.

In addition to the testimonies of their witnesses, the petitioners also presented in evidence several
tax declarations covering the subject land; a Certification, dated January 26, 2011, issued by the
Parañaque City Treasurer's Office stating that the real property tax for the subject land had been
fully settled up to year 201O; and the DENR-NCR certification alluded to by Conrado, Jr. during his
direct examination, to the effect that the subject land was verified to be within the alienable and
disposable land under Project No. 25 of Parañaque City, and that it is not needed for forest purposes.

The RTC granted the application for registration. Upon appeal, CA reversed and set aside the ruling
of the trial court. The appellate court ruled that the DENR-NCR certification presented by the
petitioners would not suffice to prove that the subject land was indeed classified by the DENR
Secretary as alienable and disposable. The CA explained that under Department of Agriculture
Orders (DAO) Nos. 20 and 38, the Regional Technical Director of the FMS had no authority to issue
certificates of land classification; and that the Espiritu et. al failed to present a certified true copy
of the original classification approved by the DENR Secretary. Hence, this petition.

ISSUE:

Whether or not the appellate court erred in reversing the trial court and dismissing the application
for registration of title (NO)

RULING:

Registration underSection 14(1) of P.D. No. 1529

Section 14, paragraph 1 of P.D. No. 1529 provides:

Sec. 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 through their duly authorized
representatives:

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(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.

Registration under Section 14(1) of P.D. No. 1529 is based on possession and occupation of the
alienable and disposable land of the public domain since June 12, 1945 or earlier, without regard to
whether the land was susceptible to private ownership at that time. Thus, for registration under
Section 14(1) to prosper, the applicant for original registration of title to land must establish the
following: (1) that the subject land forms part of the disposable and alienable lands of the public
domain; (2) that the applicants by themselves and their predecessors-in-interest have been in open,
continuous, exclusive, and notorious possession and occupation thereof; and (3) that the possession
is under a bona fide claim of ownership since June 12, 1945, or earlier.

Petitioners failed to prove that the subject land is alienable and disposable

The rule is that applicants for land registration bear the burden of proving that the land applied for
registration is alienable and disposable. In this case, during the proceedings before the RTC, to
prove the alienable and disposable character of the subject land, the Espiritu et. al. presented the
DENR-NCR certification stating that the subject land was verified to be within the alienable and
disposable part of the public domain. This piece of evidence is insufficient to overcome the
presumption of State ownership. As already discussed, the present rule requires the presentation,
not only of the certification from the CENRO/PENRO, but also the submission of 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.

Likewise, the Espiritu's claim of substantial compliance does not warrant approval of the
application.

The rule on strict compliance enunciated in Republic of the Philippines v. T.A.N. Properties (T.A.N.
Properties) remains to be the governing rule in land registration cases. This rule was neither
abandoned nor modified by the subsequent pronouncements in Vega and Serrano as these latter
cases were mere pro hac vice. In fact, in Vega, the Court clarified that the ruling on substantial
compliance applies pro hac vice and did not, in any way, detract from the Court's ruling in T.A.N
Properties and similar cases which impose a strict requirement to prove that the land applied for
registration is alienable and disposable.

Substantial compliance may be applied, at the discretion of the courts, only if the trial court
rendered its decision on the application prior to June 26, 2008, the date of the promulgation
of T.A.N. Properties. In this case, the application for registration, which was filed on March 1, 2010,
was granted by the RTC only on July 30, 2012, or four (4) years after the promulgation of T.A.N.
Properties. Evidently, the courts did not have discretion to apply the rule on substantial compliance.
Thus, the petitioners' reliance on Vega and Serrano, as well as on Sta. Ana Victoria, which similarly
appreciated substantial compliance, is clearly misplaced. Hence, the Espiritu et. al failed to prove
the first requisite for registration under Section 14(1).

Petitioners failed to prove possession and occupation of the subject land under a bona fide claim of
ownership since June 12, 1945 or earlier

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As to the second and third requisites, the Court concurs with the appellate court that the Espiritu
et. al failed to establish that they and their predecessors-in-interest have been in open, continuous,
exclusive, and notorious possession and occupation of the subject land on or before June 12, 1945.

In this case, the petitioners presented several tax declarations in their names, the earliest of which
dates back only to 1970. This period of possession and occupation is clearly insufficient to give the
petitioners the right to register the subject land in their names because the law requires that
possession and occupation under a bona fide claim of ownership should be since June 12, 1945 or
earlier.

In a similar vein, the respective testimonies of petitioners Marietta, Oscar, and Conrado, Jr. were
insufficient to support their claim of possession and occupation of the subject land. The only
relevant testimonies offered by the petitioners were to the effect that they had known the subject
land since they were children, as the same were owned by their parents; that it was used as a
fishpond during the rainy season and in their salt-making business during the summer, which
business, however, ceased operation in 2004; and that they could visit the subject land whenever
they wanted to, introduce improvements on it, and prevent intruders therefrom.

In Republic of the Philippines v. Remman Enterprises, Inc., the Court held that for purposes of land
registration under Section 14(1) of P .D. No. 1529, proof of specific acts of ownership must be
presented to substantiate the claim of open, continuous, exclusive, and notorious possession and
occupation of the land subject of the application. Applicants for land registration cannot just offer
general statements which are mere conclusions of law rather than factual evidence of possession.
Actual possession consists in the manifestation of acts of dominion over it of such nature as a party
would actually exercise over his own property.

Petitioners failed to comply with the requirements under Section 14(2) of P.D. No. 1529

Neither could the subject land be registered under Section 14(2), which reads:
(2) Those who have acquired ownership of private lands by prescription under the provision of
existing laws.

In Heirs of Mario Malabanan v. Republic of the Philippines, the Court explained that when Section
14(2) of P.D. No. 1529 provides that persons "who have acquired ownership over private lands by
prescription under the provisions of existing laws," it unmistakably refers to the Civil Code as a
valid basis for the registration of lands.

For registration under this provision to prosper, the applicant must establish the following
requisites: (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.

As regards the first and most important requisite, the Court has ruled that declaration of alienability
and disposability is not enough for the registration of land under Section 14(2) of P.D. No. 1529.
There must be an express declaration 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

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into patrimonial property. This is only logical because acquisitive prescription could only run
against private properties, which include patrimonial properties of the State, but never against
public properties.

Here, the petitioners failed to present any competent evidence which could show that the subject
land had been declared as part of the patrimonial property of the State. The DENR-NCR
certification presented by the petitioners only certified that the subject land was not needed for
forest purposes. This is insufficient because the law mandates that to be subjected to acquisitive
prescription, there must be a declaration by the State that the land applied for is no longer intended
for public service or for the development of the national wealth pursuant to Article 422 of the Civil
Code. Clearly, the petitioners failed to prove that they acquired the subject land through acquisitive
prescription. Thus, the same could not be registered under Section 14(2) of P.D. No. 1529.

REPUBLIC OF THE PHILIPPINES v. ROSARIO L. NICOLAS

G.R. No. 181435, October 2, 2017, SERENO, CJ.:

Each paragraph of Section 14 refers to a distinct type of application depending on the applicable legal
ground. Since each type is governed by its own set of legal principles, the framework for analysis to be
used in resolving an application would vary depending on the paragraph invoked.

FACTS:

Nicolas filed an application before the RTC for registration and confirmation of title based on
her possession and occupation of the property, to wit:
COMES NOW Petitioner Rosario L. Nicolas, of legal age, widow, Pilipino [sic] with
address at Brgy. San Isidro, Rodriguez (formerly Montalban), Rizal Province, Philippines,
by her undersigned counsel and to this Honorable Court respectfully petitions to have the
land hereinafter described below brought under the operation of the Land Registration Act
and to have said land titled, registered and confirmed in her name and further declares that:
xxxx
6. Petitioner acquired the subject parcel of land by way of occupation and has been
in natural, open, public, adverse, contin[u]ous, uninterrupted and in the concept of an
owner/possessor thereof since October 1964 up to the present.

RTC granted the Petition and ordered the issuance of a Decree of Registration in favor of
respondent. CA affirmed the same.

ISSUES:

1. Whether the CA erroneously allowed the judicial confirmation of respondent's title to the
property under Section 14(1) of P.D. 1529; and
2. Whether the CA erred in declaring that respondent is likewise entitled to registration of title
based on ownership by acquisitive prescription under Section 14(2) of P.D. 1529.

RULING:

1. Yes. Respondent has failed to prove that the property is alienable and disposable agricultural
land that may be registered under Section 14(1) of P.D. 1529.

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Section 14(1) of P.D. 1529 governs applications for registration of alienable and disposable lands of
the public domain. This paragraph operationalizes Section 48(b) of Commonwealth Act No. 141 as
amended.56 This provision grants occupants of public land the right to judicial confirmation of
their title. Based on these two provisions and other related sections of C.A. 141, registration is
allowed provided the following requisites have been complied with:
1. The applicant is a Filipino citizen.
2. The applicant, by himself or through his predecessors-in-interest, has been in open,
continuous, exclusive and notorious possession and occupation of the property since 12
June 1945.
3. The prope1ty has been declared alienable and disposable as of the filing of the
application.
4. If the area applied for does not exceed 12 hectares, the application should be filed by 31
December 2020.

Here, Nicolas failed to establish the third requisite, i.e., that the property subject of the application
is alienable and disposable agricultural land.

The Court has emphasized in a long line of cases that an applicant for registration under Section
14(1) must prove that the subject property has been classified as alienable and disposable
agricultural land by virtue of a positive act of the Executive Department. In this case, we note that
both the RTC and the CA glossed over this requirement. The RTC, for instance, only made a general
conclusion as to the classification and alienability of the property, but without any discussion of
the evidence presented. The CA, on the other hand, simply relied on the fact that the property had
been the subject of a private survey in 1964.

Further, Nicolas not only neglected to submit the required CENRO/PENRO certification and DENR
classification, but also presented evidence that completely failed to prove her assertion.

2. Yes. Respondent has failed to prove that the land subject of the application is part of the
patrimonial property of the State that may be acquired by prescription under Section 14(2) of
P.D. 1529.

By express provision of the law, only private lands that have been acquired by prescription under
existing laws may be the subject of applications for registration under Section 14(2). Properties of
the public dominion, or those owned by the State, are expressly excluded by law from this general
rule, unless they are proven to be patrimonial in character.

To establish that the land subject of the application has been converted into patrimonial property
of the State, an applicant must prove the following:
1. The subject property has been classified as agricultural land.
2. The property has been declared alienable and disposable.
3. There is an express government manifestation that the property is already patrimonial, or
is no longer retained for public service or the development of national wealth.

It must be emphasized that without the concurrence of these three conditions, the land remains
part of public dominion and thus incapable of acquisition by prescription.

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Here, the records show that respondent has failed to allege or prove that the subject land belongs
to the patrimonial property of the State. As earlier discussed, the evidence she has presented does
not even show that the property is alienable and disposable agricultural land. She has also failed to
cite any government act or declaration converting the land into patrimonial property of the State.

TOMAS R. LEONIDAS vs. TANCREDO VARGAS and REPUBLIC OF THE PHILIPPINES

G.R. No. 201031, December 14, 2017, Del Castillo, J.

In an application for registration of imperfect title, the applicant must prove that:
(1) the land is alienable and disposable through the presentation of a CENRO/PENRO
certification and a certified true copy of the original classification made by the DENR
Secretary;
(2) the applicant or predecessors-in-interest have been in open, continuous, exclusive and
notorious possession and occupation;
(3) that the possession has been under a bona fide claim of ownership since June 12, 1945 or
earlier. Such possession must be actual, not fictional or constructive.

FACTS:

In 2002, petitioner filed an application for land registration alleging that he inherited the subject
lots from his parents. His mother purchased the property from a public auction way back in 1937,
after which she immediately took possession notoriously, continuously, and exclusively.

The Republic opposed this and claimed that neither the petitioner nor his predecessors-in-interest
had been in continuous, exclusive, and notorious possession and occupation of the subject lots
since June 12, 1945, or prior thereto, as required by Section 48 of Commonwealth Act (CA) No. 141.
The Republic prayed that the petitioner's Application be denied and that the subject lots be
declared part of the public domain.

ISSUE:

W/N the petitioner is entitled to obtain a title over the subject lots

RULING:

NO. Petitioner only met requirement No 1 of the 3 required by the law.Commonwealth Act No. 141
governs the classification and disposition of lands of the public domain. Section 48 of CA 141
enumerates those who are considered to have acquired an imperfect or incomplete title over public
lands and, therefore, entitled to confirmation and registration under the Land Registration Act
[now PD 1529]. , Section 14 (l) [of PD 1529] in relation to Section 48 (b) of CA 141 requires that
applicants for registration of title under must sufficiently establish:
(1) that the subject land forms part of the disposable and alienable lands of the public
domain
(2) that the applicant and his predecessors-in-interest have been in open, continuous,
exclusive and notorious possession and occupation of the same
(3) that his possession has been under a bonafide claim of ownership since June 12, 1945, or
earlier.

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The lots are alienable: To establish that the property is alienable and disposable public land, the
general rule is that: all applications for original registration must include both (1) a CENRO or
PENRO certification and (2) a certified true copy of the original classification made by the DENR
Secretary. In this case, notwithstanding that only a CENRO certification was presented, the
application was filed before the Court’s ruling requiring the DENR Secretary’s certification.

No possession/occupation since June 12, 1945 or earlier: petitioner failed to establish bona fide
possession and ownership over the subject lots since June 12, 1945 or earlier. Petitioner claims that
his mother bought the property from public auction. However, the Certificate of Public Sale
indicated that the balance of the purchase price in the amount of ₱29.44 was never paid. While
they paid for property tax, that only started in 1976. Intermittent and irregular tax payments run
counter to a claim of ownership or possession. Petitioner did not present clear and convincing
evidence that the subject lots had indeed been cultivated by him or by his predecessors-in-interest
for the period of time required by law.

While petitioner testified that he swam near the subject lots, planted trees thereon, and finished
high school at the Victorino Salcedo High School in the neighboring town of Sara, these can hardly
be considered as acts of dominion or ownership over the subject lots. The possession contemplated
by law is actual, not fictional or constructive.

PEOPLE OF THE PHILIPPINES vs MARGARITA C. MENDIOLA, LUALHATI T. TALAVERA,

married to Celso Talavera; ZENAIDA M. ESTACIO, widow; FRANCISCO C. MENDIOLA, JR.,
married to Corazon Marindo; ESTRELLITA M. ESPIRITU, married to Danilo Espiritu;
MARIO C. MENDIOLA, married to Leticia Mendiola; WILFREDO C. MENDIOLA, married
to Teresita E. Mendiola; LIWAYWAY C. MENDIOLA, single; ORLANDO C. MENDIOLA,
married to Melinda Mendiola; SHERRY COMELING, married to Antonio Comeling;
MAMENCIA M. LA CSA, married; RACHEL* LACSA, married to Ferdinand San Juan;
PARALUMAN M. CASINSINAN, married to Leonardo Casinsinan, represented by their
Attorney- In-Fact, PARALUMAN M. CASINSINAN
G.R. No. 211144, December 13, 2017, Tijam, J.

In an application for registration of imperfect title, the applicant must prove that:
(1) the land is alienable and disposable through the presentation of a CENRO/PENRO
certification and a certified true copy of the original classification made by the DENR
Secretary;
(2) the applicant or predecessors-in-interest have been in open, continuous, exclusive and
notorious possession and occupation;
(3) that the possession has been under a bona fide claim of ownership since June 12, 1945 or
earlier. Such possession must be actual, not fictional or constructive.

FACTS:

Respondents filed a verified application for registration of title to land under Presidential Decree
(P.D.) No. 1529. They claimed that they inherited the subject property from their late parents and
have been in physical and continuous possession thereof in the concept of an owner even before
June 17, 1945. During presentation of evidence, the respondents submitted the following: (i)
Conversion Plan and Geodetic Engineer's Certificate of the subject property; (ii) Tax Declarations;

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and (iii) the Certification from the Department of Environment and Natural Resources (DENR)-
National Capital Region (NCR) verifying the subject property as alienable and disposable.

The RTC granted the application but the upon appeal, the CA reversed the trial court.

ISSUE: W/N the petitioner is entitled to obtain a title over the subject lots

RULING:

NO. Petitioner did not meet requirement No 1 of the law.Commonwealth Act No. 141 governs the
classification and disposition of lands of the public domain. Section 48 of CA 141 enumerates those
who are considered to have acquired an imperfect or incomplete title over public lands and,
therefore, entitled to confirmation and registration under the Land Registration Act [now PD 1529].
, Section 14 (l) [of PD 1529] in relation to Section 48 (b) of CA 141 requires that applicants for
registration of title under must sufficiently establish:
(1) that the subject land forms part of the disposable and alienable lands of the public domain
(2) that the applicant and his predecessors-in-interest have been in open, continuous, exclusive
and notorious possession and occupation of the same
(3) that his possession has been under a bonafide claim of ownership since June 12, 1945, or
earlier

The lots are alienable: The conversion plan, technical descriptions of the property, and the
Certification issued by the DENR-NCR are insufficient proof of the alienable and disposable
character of the subject property. Clearly, respondents failed to prove their entitlement thereto.

That certifications issued by the CENRO, or specialists of the DENR, as well as Survey Plans
prepared by the DENR containing annotations that the subject lots are alienable, do not constitute
incontrovertible evidence to overcome the presumption that the property sought to be registered
belongs to the inalienable public domain. Rather, this Court stressed the importance of proving
alienability by presenting a copy of the original classification of the land approved by the DENR
Secretary and certified as true copy by the legal custodian of the official records.

REGINO DELA CRUZ, substituted by his heirs, namely: MARIA, DANILO, REGINO,
JUANITO, CECILIA, ROSALINA and CEFERINO all surnamed DELA CRUZ, represented by
CEFERINO DELACRUZ v. IRENEO DOMINGO, MARO, QUEZON, NUEV A ECIJA, and
REGISTER OF DEEDS NORTH, TALAVERA, NUEVA ECIJA
G.R. No. 210592, November 22, 2017,DEL CASTILLO, J.:

A certificate of land transfer merely evinces that the grantee thereof is qualified to avail of the
statutory mechanisms for the acquisition of ownership of the land tilled by him as provided under
Pres. Decree No. 27. It is the issuance of this emancipation patent that conclusively entitles the
farmer/grantee of the rights of absolute ownership.

FACTS:

Domingo filed a case for recovery of possession with DARAB against Dela Cruz, claiming that Dela
Cruz was in possession by mere tolerance of his land covered by TCT EP-82013 and the latter refused

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to vacate the same even after demand and mediation. Thus, Domingo prayed that as owner of the
land occupied by Dela Cruz, he be placed in possession thereof.

Dela Cruz argues, however, that Domingo sold the lands to Fernando; that Dela Cruz took
possession of the said lands; that in 1978, he was issued Certificate of Land Transfer (CLT) covering
the subject land; that he has fully paid the cost of the said lands; that he later found out that his
land covered by CLT was subsequently awarded to Domingo and registered under TCT EP-82013
and TCT Emancipation Patent (EP); that said registration was made through fraud, deceit and false
machinations; that Domingo could not have been a valid beneficiary of the said lands, since he was
physically disabled ("lumpo") since birth, and for this reason, Domingo's titles should be cancelled
and annulled.

ISSUE:

Whether or not the Emancipation Patent of Domingo must be cancelled on the basis of Certificate
of Land Title of Dela Cruz

RULING:

No. A certificate of land transfer does not vest ownership in the holder thereof. In Martillano v.
Court of Appeals, this Court held that –

x x A certificate of land transfer merely evinces that the grantee thereof is qualified
to, in the words of Pagtalunan, 'avail of the statutory mechanisms for the acquisition
of ownership of the land tilled by him as provided under Pres. Decree No. 27.' It is
not a muniment of title that vests upon the farmer/grantee absolute ownership of
his tillage. On the other hand, an emancipation patent, while it presupposes that
the grantee thereof shall have already complied with all the requirements prescribed
under Presidential Decree No. 27, serves as a basis for the issuance of a transfer
certificate of title. It is the issuance of this emancipation patent that conclusively
entitles the farmer/grantee of the rights of absolute ownership. x x x (Citations
omitted)

Martillano v. Court of Appeals is instructive:

Both instruments have varying legal effects and implications insofar as the
grantee's entitlements to his landholdings. A certificate of land transfer merely
evinces that the grantee thereof is qualified to, in the words of Pagtalunan, 'avail of
the statutory mechanisms for the acquisition of ownership of the land tilled by him
as provided under Pres. Decree No. 27.' It is not a muniment of title that vests upon
the farmer/grantee absolute ownership of his tillage. On the other hand, an
emancipation patent, while it presupposes that the grantee thereof shall have
already complied with all the requirements prescribed under Presidential Decree
No. 27, serves as a basis for the issuance of a transfer certificate of title. It is the
issuance of this emancipation patent that conclusively entitles the farmer/grantee
of the rights of absolute ownership. Pagtalunan distinctly recognizes this point
when it said that:

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It is the emancipation patent which constitutes conclusive authority for the

issuance of an Original Certificate of Transfer, or a Transfer Certificate of Title, in
the name of the grantee ...

Clearly, it is only after compliance with the above conditions which entitle a
farmer/grantee to an emancipation patent that he acquires the vested right of
absolute ownership in the landholding - a right which has become fixed and
established, and is no longer open to doubt or controversy. At best, the
farmer/grantee, prior to compliance with these conditions, merely possesses a
contingent or expectant right of ownership over the landholding.

Clearly, Dela Cruz was not issued an EP over the subject property; he only has CLT. On the other
hand, Domingo was issued EPs over the same property, after which transfer certificates of title, TCT
EPs were issued to him. Between the two of them, Domingo is deemed the owner of the subject
lands, and Dela Cruz has no valid claim. For some reason or other, Dela Cruz was not issued an EP
for the subject lands, while for other lands, he was granted patents. This can only mean that for the
subject lands, he failed to qualify as owner thereof under the government's agrarian reform
program.

REPUBLIC OF THE PHILIPPINES V. SPS.DOLORES AND ABE LASMARIAS; AND

COOPERATIVE BANK OF LANAO DEL NORTE
G.R. No. 206168. April 26, 2017, Peralta, J.:

There was fraud in the applications where the applicants did not disclose that the land they were
applying for were already reserved as sites for school purposes.

FACTS:

Spouses Lasmarias bought a land including a fishpond from Solijon who executed a Deed of Sale of
Registered Land in 1991. The said lot was registered to Solijon per OCT No. P-8720 issued by virtue
of Free Patent applied for by Solijon in 1984 and granted in 1986.The sale was not registered or
annotated on the OCT nor was the title transferred in respondents’ names in order to avoid paying
taxes.

In 1997 to 1999, respondents, through a Special Power of Attorney executed by Solijon, executed a
Real Estate Mortgage on the disputed lot with the Cooperative Bank of Lanao del Norte, however,
respondents failed to satisfy their obligation resulting to the foreclosure of the mortgaged property.
The said mortgage was annotated on the OCT without a deed of sale attached.

Meanwhile, Spouses Lasmarias discovered that their property was encroached by Raw-An
Elementary School. Hence, they sent notice to vacate but to no avail. The Cooperative Bank of
Lanao del Norte intervened in the proceedings before the RTC claiming that it is the present
registered owner of the subject lot by virtue of the auction sale after the respondents failed to pay
their loan secured by the property mortgaged.

Raw-An Elementary School, on the other hand, insisted that the school building has been in
existence on the subject lot since 1950 as supported by school records showing its operation as early
as 1955. It also argued that at the time Solijon applied for a Free Patent, the lot was already occupied,

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thus, Solijon must have committed fraud and misrepresentation when she applied for a Free Patent
which requires that the applicant must be in exclusive possession of the property. Such fraud and
misrepresentation, therefore, according to petitioner, is enough to nullify the grant of patent and
title in Solijon’s name.

ISSUE:

Whether or not Solijon committed fraud and misrepresentation when she applied for a Free Patent.

RULING:

Yes. This Court has ruled that there was fraud in the applications where the applicants did not
disclose that the land they were applying for were already reserved as sites for school purposes.
In Republic v. Lozada,therein respondent filed an application for registration and confirmation of
two parcels of land that she allegedly inherited from her parents, who in turn, had continuous and
exclusive possession of the same, hence, the application was granted. The Republic filed a petition
to review the registration and cancel the certificate of title on the ground that they were procured
by actual fraud. The lots were not only portions of the public domain, but there was a resolution
from the municipal council reserving the lots for school site purposes. This Court ruled that Lozada
was guilty of fraud for not disclosing important facts in her application for registration, including
the fact that her husband’s application was previously rejected because the lands were reserved as
a site for school purposes.

In this case, the facts disclosed not only a reservation for a school site but an already existing school
building on the contested land. The school building was built on the subject land 34 years prior to
Solijon’s free patent application and the school had been in operation for 29 years also prior to
Solijon’s free patent application. Thus, it is impossible for Solijon not to know of the existence of
the school prior to her free patent application. Solijon, therefore, could not apply, and should not
have been granted free patent over the portion of Lot No. 1991-A-1 that was already occupied by
petitioner 34 years prior to her free patent application.

EMILIO CALMA v. ATTY. JOSE M. LACHICA, JR.

G.R. No. 222031, November 22, 2017, TIJAM, J.:

It is settled that a defective title may still be the source of a completely legal and valid title in the
hands of an innocent purchaser for value

FACTS:

Lachica filed a complaint for Annulment of Void Deeds of Sale Ricardo, Calma, and Pablo alleging
that he was the absolute owner and actual physical possessor of the subject property, having
acquired the same sometime in 1974 through sale from Ceferino. In 1981, Lachica caused the
annotation of a Notice of Adverse Claim on TCT T-28380 to protect his claimed rights and interest
in the subject property.

Sometime in March 2001, Lachica discovered that TCT T-28380 was transferred under the name of
Ricardo, which had been later on transferred to the Calma upon Ricardo's sale thereof to the latter.

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Lachica now argues that the sale between Ceferino and Ricardo was null and void since Ricardo
was in full knowledge of the sale of the subject property to him by Ceferino and his adverse claim
was evidently annotated in the latter's title and carried over to Ricardo's title. Calma maintains that
Lachica’s adverse claim had already been cancelled more than four years before the sale to him or
on April 26, 1994. Thus, Calma had no notice of any defect in Ricardo's title before purchase of the
subject property.

ISSUE:

Who between the Lachica and Calma has better right over the subject property.

RULING:

Calma has better right over the subject property. He is an innocent purchaser for value who
exercised the necessary diligence in purchasing the property. He was never remiss in his duty of
ensuring that the property that he was going to purchase had a clean title. Despite Ricardo's title
being clean on its face, Calma still conducted an investigation of his own by proceeding to the
Register of Deeds, as well as to the bank where said title was mortgaged, to check on the
authenticity and the status of the title. In fact, while respondent's adverse claim appears in
Ricardo's title, it also appears therein that the said adverse claim had already been cancelled on
April 26, 1994 or more than four years before Calma puchased the subject property. As correctly
found by the RTC, thus, Ricardo's title is already clean on its face, way before petitioner puchased
the same. Thus, Calma was proven to be in good faith when he dealt with Ricardo and relied on the
title presented and authenticated to him by the Register of Deeds and confirmed by the mortgagee-
bank. Lachica, on the other hand, failed to proffer evidence to prove otherwise.

Applying now the rule on double sale under Article 1544 of the Civil Code, petitioner's right as an
innocent purchaser for value who was able to register his acquisition of the subject property should
prevail over the unregistered sale of the same to the respondent. Article 1544 states:

If the same thing should have been sold to 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.

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.

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.

C. SUBSEQUENT REGISTRATIONS
1. VOLUNTARY DEALINGS

SN ABOITIZ POWER-MAGAT, INC. v. THE MUNICIPALITY OF ALFONSO LISTA, IFUGAO,

represented by the Municipal Mayor
G.R. No. 198647, November 20, 2017, TIJAM, J:

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In actions to amend the certificate of title, the issues must be limited to those which are so patently
insubstantial as not to be genuine issues.

FACTS:

Municipality of Alfonso Lista, Ifugao filed a Complaint, alleging that the NPC fraudulently secured
Special Patent No. 3723 by making it appear in the survey plans that certain parcels of land were
located in Barangay General Aguinaldo, Ramon, Isabela when these parcels of land were actually
located in Barangay Sto. Domingo in Alfonso Lista, Ifugao. As a result, the municipality prays that
the wordings of Special Patent No. 3723 and the subsequent titles derived therefrom be amended
to reflect the true location of the subject parcels of land, which is Brgy. Sto.Domingo in Alfonso
Lista, Ifugao.

ISSUE:

Whether or not the action to amend the title can proceed.

RULING:

No. The action to amend the subject title cannot proceed.

An action to amend the certificate of title is covered by Section 108 of Presidential Decree No. 1529
(P.D. 1529), which provides:

Section 108. Amendment and Alteration of Certificates.- No erasure, alteration, or

amendment shall be made upon the registration book after the entry of a certificate of title
or of a memorandum thereon and the attestation of the same by the Register of Deeds,
except by order of the proper Court of First Instance. A registered owner or other person
having interest in the registered property, and, in proper cases, the Register of Deeds with
the approval of the Commissioner of Land Registration, may apply by petition to the court
upon the ground that the registered interest of any description, whether vested, contingent,
expectant or inchoate appearing on the certificate, have terminated and ceased, or that new
interest not appearing upon the certificate have arisen or been created, or that an omission
or error was made in entering a certificate or any memorandum thereon, or on any
duplicate certificate or that the same or any person on the certificate has been terminated
and no right or interests of heirs or creditors will thereby be affected; or that a corporation
which owned registered land and has been dissolved has not conveyed the same within
three years after its dissolution; or upon any other reasonable ground; and the court may
hear and determine the petition after notice to all parties in interest, and may order the
entry or cancellation of a new certificate, the entry or cancellation of a memorandum upon
a certificate, or grant any other relief upon such terms and conditions, requiring security or
bond if necessary, as it may consider proper; Provided, however. That this section shall not
be construed to give the court authority to reopen the judgment or decree of registration,
and that nothing shall be done or ordered by the court which shall impair the title or other
interest of a purchaser holding a certificate for value and in good faith, or his heirs and
assigns, without his or their written consent. Where the owner’s duplicate certificate is not
presented, a similar petition may be filed as provided in the preceding section.

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Such relief under said provision can only be granted if there is unanimity among the parties,
or there is no adverse claim or serious objection on the part of any party in interest,
otherwise the case becomes controversial and should be threshed out in an ordinary case or in the
case where the incident properly belongs. The issues are limited to those which are so patently
insubstantial as not to be genuine issues.

Proceedings under this provision are summary in nature, contemplating insertions of mistakes
which are only clerical, but certainly not controversial issues.

Here, the issues are controversial in nature and cannot be summarily disposed of. As
aforementioned, the gist of respondent municipality's amended complaint revolves around its
territorial claim over the subject property. To allow this proceeding to take place and grant the
ultimate relief prayed for by respondent municipality is to allow not only the cancellation or
amendment of the subject patent and title, but also the alteration of territorial jurisdiction over the
Province of Isabela, should a ruling be made in favor of respondent municipality.

REMEDIOS V. GEÑORGA vs.HEIRS OF JULIAN MELITON, Represented by ROBERTO

MELITON as Attorney-in-Fact, IRENE MELITON, HENRY MELITON, ROBERTO MELITON,
HAIDE* MELITON, and MARIA FE MELITON ESPINOSA
G.R. No. 224515, July 3, 2017, PERLAS-BERNABE, J.:

If a deed or conveyance is for a part only of the land described in a certificate of title, the Register of
Deeds shall not enter any transfer certificate to the grantee until a plan of such land showing all the
portions or lots into which it has been subdivided and the corresponding technical descriptions shall
have been verified and approved pursuant to Section 50 of this Decree. Meanwhile, such deed may
only be annotated by way of memorandum upon the grantor's certificate of title, original and
duplicate, said memorandum to serve as a notice to third persons of the fact that certain unsegregated
portion of the land described therein has been conveyed, and every certificate with such memorandum
shall be effectual for the purpose of showing the grantee's title to the portion conveyed to him, pending
the actual issuance of the corresponding certificate in his name.

FACTS:
Respondents are the registered owners of a parcel of land in Naga City. Julian owns 8/14 portion of
the land, while the rest of the co-owners own 11/14 each. During his lifetime, Julian sold portions of
the subject land to various persons including petitioner Remedios’ husband. However, Julian failed
to surrender the owner's duplicate copy of the TCT to enable the buyers, including petitioner's
husband, to register their deeds of sale, which led to the filing of a Petition for the surrender of the
owner's duplicate copy of the TCT and/or annulment thereof, and the issuance of new titles
pursuant to Section 107 of PD 1529.
RTC of Naga City decided in favor of the buyers. Accordingly, it ordered the surrender of the TCT
and issuance of certificate of titles. It further held that should the holder fail or refuse to comply,
the TCT shall be declared null and void and the RD-Naga shall issue a new certificate of title in
favor of buyers. The said decision became final and executory but remained unexecuted due to the
sheriff's failure to locate and serve the writ of execution on Ma. Fe despite diligent efforts. Thus, the
RTC later declared the TCT as null and void, resulting in the issuance of a new one, bearing
annotations of the buyers' adverse claims.

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In 2013, respondents then filed a Complaintagainst petitioner seeking the surrender of the subject
owner's duplicate title with damages. They claimed that they are entitled to the possession thereof
as registered owners. RTC granted respondents' petition. CA affirmed the RTC ruling.

ISSUE:

Whether or not the CA correctly affirmed RTC’s Decision directing the surrender and delivery of
possession of the subject owner's duplicate title to respondents.

RULING:

YES. The subject land was an undivided co-owned property when Julian sold different portions
thereof to various persons. However, a perusal of the pertinent deeds of absolute salereveals that
definite portions of the subject land were eventually sold. Consequently, the Court finds that a
partial factual partition or termination of the co-ownership, which entitles the buyers to the
segregation of their respective portions, and the issuance of new certificates of title in their
name upon compliance with the requirements of law.

Section 58 of PD 1529, otherwise known as the "Property Registration Decree," provides;

Procedure Where Conveyance Involves Portion of Land. - If a deed or conveyance is for a part
only of the land described in a certificate of title, the Register of Deeds shall not enter any transfer
certificate to the grantee until a plan of such land showing all the portions or lots into which it has
been subdivided and the corresponding technical descriptions shall have been verified and
approved pursuant to Section 50 of this Decree. Meanwhile, such deed may only be annotated by
way of memorandum upon the grantor's certificate of title, original and duplicate, said
memorandum to serve as a notice to third persons of the fact that certain unsegregated portion of
the land described therein has been conveyed, and every certificate with such memorandum shall
be effectual for the purpose of showing the grantee's title to the portion conveyed to him, pending
the actual issuance of the corresponding certificate in his name.

Upon the approval of the plan and technical descriptions, the original of the plan, together with a
certified copy of the technical descriptions shall be filed with the Register of Deeds for annotation
in the corresponding certificate of title and thereupon said officer shall issue a new certificate of
title to the grantee for the portion conveyed, and at the same time cancel the grantor's certificate
partially with respect only to said portion conveyed, or, if the grantor so desires, his certificate may
be cancelled totally and a new one issued to him describing therein the remaining portion:
Provided, however, that pending approval of said plan, no further registration or annotation of any
subsequent deed or other voluntary instrument involving the unsegregated portion conveyed shall
be effected by the Register of Deeds, except where such unsegregated portion was purchased from
the Government or any of its instrumentalities. If the land has been subdivided into several lots,
designated by numbers or letters, the Register of Deeds may, if desired by the grantor, instead of
cancelling the latter's certificate and issuing a new one to the same for the remaining unconveyed
lots, enter on said certificate and on its owner's duplicate a memorandum of such deed of
conveyance and of the issuance of the transfer certificate to the grantee for the lot or lots thus
conveyed, and that the grantor's certificate is canceled as to such lot or lots.

In this relation, Section 53 of PD 1529 requires the presentation of the owner's duplicate title for the
annotation of deeds of sale.

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Records show that the subject owner's duplicate title had already been surrendered to the RD-Naga
on September 13, 2013, and some of the buyers had secured Certificates Authorizing Registrationand
paid the corresponding fees for the registration of the sales in their favor. Nonetheless, while the
rights of the buyers over the portions respectively sold to them had already been recognized by the
RTC of Naga City in its July 17, 1998 Decision in Civil Case No. RTC '96-3526 which had attained
finality on September 10, 2006, there is no showing that the other affected buyers have similarly
complied with the necessary registration requirements.

Notably, from the time petitioner received possession of the subject owner's duplicate title in 2009,
a considerable amount of time had passed until she submitted the same to the RD-Naga on
September 13, 2013. But even up to the time she filed the instant petition before the Court on May
6, 2016, she failed to show any sufficient justification for the continued failure of the concerned
buyers to comply with the requirements for the registration of their respective deeds of sale and
the issuance of certificates of title in their names to warrant a preferential right to the possession
of the subject owner's duplicate title as against respondents who undisputedly own the bigger
portion of the subject land. Consequently, the Court finds no reversible error on the part of the CA
in affirming the RTC Decision directing petitioner or the RD-Naga to deliver or surrender the
subject owner's duplicate title to respondents.

Moreover, it bears to stress that the function of a Register of Deeds with reference to the registration
of deeds is only ministerial in nature.Thus, the RD-Naga cannot be expected to retain possession of
the subject owner's duplicate title longer than what is reasonable to perform its duty. In the absence
of a verified and approved subdivision plan and technical description duly submitted for
registration on TCT No. 8027, it must return the same to the presenter, in this case, petitioner who,
as aforesaid, failed to establish a better right to the possession of the said owner's duplicate title as
against respondents.

As a final point, it must, however, be clarified that the above-pronounced delivery or surrender is
without prejudice to the rights of the concerned buyers who would be able to subsequently
complete the necessary registration requirements and thereupon, duly request the surrender of the
subject owner's duplicate title anew to the RD-Naga.

2. INVOLUNTARY DEALINGS

FE B. YABUT AND NORBERTO YABUT, SUBSTITUTED BY HIS HEIRS REPRESENTED BY

CATHERINE Y. CASTILLO v. ROMEO ALCANTARA, SUBSTITUTED BY HIS HEIRS
REPRESENTED BY FLORA LLUCH ALCANTARA
G.R. No. 200349, March 06, 2017, Peralta, J.

In an action for reconveyance, what is sought is the transfer of the title to the property, which has
been wrongfully or erroneously registered in the defendant's name. All that is needed to be alleged in
the complaint are these two (2) crucial facts, namely, that the plaintiff was the owner of the land, and
that the defendant had illegally dispossessed him of the same. Therefore, the claimant/complainant
has the burden of proving ownership over the registered land.

FACTS:

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Tiburcio Ballesteros, the father of petitioner, applied for a Sales Application on a piece of land
covering 46 hectares, this was given due course and were parceled into several lots. The lot in issue
is Lot 6509, which has around 11 hectares. While Tiburcio was a prisoner of war in WW2, Lot 6509
was sold by third persons who had no title to the land to one Pantaleon Suazola. Upon his return
from incarceration, Tiburcio acknowledged the sale since Suazola was the son of his compadre.
However, Tiburcio was quite explicit that the sale he acknowledged only covers 6 hectares of Lot
6509’s total of 11. Lot 6509 was subsequently subdivided into four lots: Lots 6509-A which covered
the sale to Suazola and which Tiburcio acknowledged, Lot 6509-B, Lot 6509-C, Lot 6509-D.

Sazuola sold Lots 6509-C and 6509-D to respondent Alcantara. Alcantara applied for a free patent
for the said lots. Tiburcio meanwhile sold Lots 6509-B,C and D to Petitioner Yabut. Yabut registered
the sale under TCT No. T-4.975. Upon learning of the registration, Alcantara filed the present action
for reconveyance claiming that he was the true and lawful owner and possessor of said parcels of
land.

ISSUE:

W/N there is legal basis to support the reconveyance of the properties in question in favor of the
Alcantaras.

RULING:

NO. To warrant reconveyance of the land, one must allege and prove, ownership of the land in
dispute and the defendant's erroneous, fraudulent or wrongful registration of the property.
Alcantara miserably failed to prove that they are the actual owners of the parcel of land. They failed
to present adequate evidence pointing to any legal and valid source of a right over said lots.

Ballesteros executed an affidavit specially stating that he was acknowledging the sale to Suazola,
only because the latter's son was his compadre and only with respect to the six (6) hectares. It could
not have been the whole Lot 6509 since the total area of this property covers 11.5 hectares.
Ballesteros has always retained his claim over the rest of Lot 6509 which was not part of the sale to
Suazola.

Even assuming that the subject properties were indeed wrongfully titled in the name of Ballesteros,
it would be the State, and not Alcantara, that has the legal standing to bring an action for
reconveyance. Alcantara’s filing of a free patent application amounts to an admission that the land
is a public land, and thus, he could not be the rightful owner of the same. Hence, Alcantara was
deemed to have acknowledged that the lands covered by his free patent applications actually belong
to the State.

Finally, respondents also failed to show that the registration of the land in the name of Ballesteros
was procured through fraud or any other illegal means. No actual and definite finding of fraud on
the part of Ballesteros was ever made.

MARCELINO DELA PAZ v. REPUBLIC OF THE PHILIPPINES

G.R. No. 195726, November 20, 2017, MARTIRES, J.:

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In a reconstitution proceeding, the petitioner is burdened to adduce in evidence the documents in the
order stated in Section 3 of R.A. No. 26 as sources of the deed to be reconstituted, and likewise
burdened to prove the execution or existence of the original copy of the title, which is the copy on file
with the Registry of Deeds, and the contents thereof.

FACTS:

On 5 June 2007, Marcelino filed a verified petition for reconstitution of TCT No. 206714 covering a
parcel of land. The documents Marcelino had submitted are the following: (1) Extrajudicial
Settlement, (2) Affidavit of Publication of the extrajudicial settlement, (3) Deed of Absolute Sale,
(4) Certification dated 17 November 2006 issued by the LRA, (5) Affidavit of Loss dated 23 November
2005 executed by Marcelino as to the loss of the duplicate owner's copy, (6) Tax Declaration or
Official Receipt showing payment of real property tax, (7) A photocopy of TCT (8) Extrajudicial
Sketch Plan, (9) Subdivision Plan, and (10) LRA Report.

After considering the evidence presented, the RTC granted the petition and ordered the
reconstitution of TCT No. 206714. CA, however, reversed the same maintaining that it is not
convinced that the evidence adduced in support of the petition for reconsideration was enough.

ISSUE:

Whether or not Marcelino presented competent proof that TCT No. 206714 may be reconstituted
based on the documentary evidence he submitted.

RULING:

No. The petition lacks competent evidentiary basis to reconstitute TCT No. 206714.
Section 3 of R.A. No. 26 provides that transfer certificates of title shall be reconstituted from such
of the sources hereunder enumerated as may be available, in the following order:
(a) The owner's duplicate of the certificate of title;
(b) The co-owner's, mortgagee's, or lessee's duplicate of the certificate of title;
(c) A certified copy of the certificate of title, previously issued by the register of deeds or by a
legal custodian thereof;
(d) The deed of transfer or other document, on file in the registry of deeds, containing the
description of the property, or an authenticated copy thereof, showing that its original had
been registered, and pursuant to which the lost or destroyed transfer certificate of title was
issued;
(e) A document, on file in the registry of deeds, by which the property, the description of which
is given in said document, is mortgaged, leased or encumbered, or an authenticated copy of
said document showing that its original had been registered; and
(f) Any other document which, in the judgment of the court, is sufficient and proper basis for
reconstituting the lost or destroyed certificate of title. (emphasis supplied)

Not one of the documentary evidence Marcelino had presented falls under this enumeration. In
sum, all his documentary evidence being considered, we find that not one of them is a competent
source for reconstitution.

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The requirements under R.A. No. 26 are indispensable and must be strictly complied with. In a
reconstitution proceeding, the petitioner is burdened to adduce in evidence the documents in the
order stated in Section 3 of R.A. No. 26 as sources of the deed to be reconstituted, and likewise
burdened to prove the execution or existence of the original copy of the title, which is the copy on
file with the Registry of Deeds, and the contents thereof.Here, Marcelino failed to do both.

MAMERTO DY v. MARIA LOURDES ROSELL ALDEA

G.R. No. 219500, August 09, 2017, Mendoza, J.

When the Owner’s Duplicate Certificate of Title has not been lost, the reconstituted certificate is
void.

Only an innocent purchaser for value may invoke the mirror doctrine.

FACTS:

Petitioner Mamerto is the owner of a piece of land in Minglanilla, Cebu under TCT No. T-24849. In
June 2005, he agreed to sell the land to his brothers. When asked to get a tax declaration on the
land, one of the brothers found out that the property had gone through a series of anomalous
transactions. He found out that the owner’s duplicate copy of the TCT was declared lost and that
the subject land was subsequently mortgaged. Apparently, the property was sold to Respondent
Lourdes by a person who impersonated Petitioner.

On September 16, 2005, Atty. Manolo D. Rubi, Deputy Register of Deeds, informed Nelson that TCT
No. T-134753 covering the subject land was issued in Lourdes' name. Mamerto insisted that he never
executed any deed of sale in favor of Lourdes and that the signature appearing on the purported
deed of sale was not his authentic signature.Lourdes countered that in 2004, a certain Mila was
introduced to her by her aunt. Mila told her that several parcels of land in Minglanilla, including
the subject land, were purportedly for sale. When she signified her intention the buy the land, Mila
informed her that it was mortgaged to a certain Atty. Lim. She was then introduced by one Fatima
to a person impersonating Mamerto to whom she paid P P1,010,700.00 for half the area of the land.
She was then convinced by the same to purchase the entire 6738 sq m land for a total of P
P1,684,500.00. After weeks of waiting, Lourdes was informed by Fatima that the impostor was dead
and he had not given any money to process the transfer of the subject land. Despite this, the
Register of Deeds issued TCT No. T-134753 under her name.Consequently, Mamerto filed a
complaint for declaration of nullity of deed of sale and TCT No. T-134753, and recovery of real
property with injunction and damages.

The RTC ruled that Mamerto had a better right over the subject land and was the rightful and lawful
owner thereof. It found that Mamerto's owner's duplicate copy was never lost, and so ruled that the
reconstituted title issued in favor of the impostor was null and void. Hence, the RTC nullified
Lourdes' title as it was based on a void reconstituted title. It further opined that the contract of sale
between Lourdes and the impostor was null and void because the latter did not have the right to
transfer ownership of the subject land at the time it was delivered to Lourdes. However, the CA
reversed and set aside the RTC ruling. It declared that Lourdes was an innocent purchaser for value.
The appellate court ruled that a person dealing with registered land is only charged with notice of
the burdens on the property which are noted on the face of the register or the certificate of title.
The CA added that Lourdes exercised ordinary prudence because during the signing of the deed of

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sale, she asked for an identification card and she was given a senior citizen's I.D., showing that the
person she was dealing with was "Mamerto Dy."

ISSUES:

1. Whether the reconstituted title, from which Lourdes’ TCT was derived, is valid?
2. Whether Lourdes is an innocent purchaser for value who is entitled to the application of
the mirror doctrine?
3. Whether Mamerto has a better right over the subject land?

RULING:

1. No. When the Owner’s Duplicate Certificare of Title has not been lost, the reconstituted
certificate is void. The governing law for judicial reconstitution of title is Republic Act (R.A.) No.
26, Section 15 of which provides when reconstitution of a title should be allowed:

Section 15. If the court, after hearing, finds that the documents presented, as supported
by parole evidence or otherwise, are sufficient and proper to warrant the reconstitution
of the lost or destroyed certificate of title, and that petitioner is the registered
owner of the property or has an interest therein, that the said certificate of title
was in force at the time it was lost or destroyed, and that the description, area
and boundaries of the property are substantially the same as those contained in
the lost or destroyed certificate of title, an order of reconstitution shall be issued.

The following requisites must be complied with for an order for reconstitution to be issued: (a) the
certificate of title had been lost or destroyed; (b) that the documents presented by petitioner are
sufficient and proper to warrant reconstitution of the lost or destroyed certificate of title; (c) that
the petitioner is the registered owner of the property or had an interest therein; (d) that the
certificate of title was in force at the time it was lost and destroyed; and (e) that the description,
area and boundaries of the property are substantially the same as those contained in the lost or
destroyed certificate of title. Verily, the reconstitution of a certificate of title denotes restoration in
the original form and condition of a lost or destroyed instrument attesting the title of a person to a
piece of land. The purpose of the reconstitution of title is to have, after observing the procedures
prescribed by law, the title reproduced in exactly the same way it has been when the loss or
destruction occurred.

Indubitably, the fact of loss or destruction of the owner's duplicate certificate of title is crucial in
clothing the RTC with jurisdiction over the judicial reconstitution proceedings. In reconstitution
proceedings, the Court has repeatedly ruled that before jurisdiction over the case can be
validly acquired, it is a condition sine qua non that the certificate of title has not been
issued to another person. If a certificate of title has not been lost but is in fact in the
possession of another person, the reconstituted title is void and the court rendering the
decision has not acquired jurisdiction over the petition for issuance of new title. The
existence of a prior title ipso facto nullifies the reconstitution proceedings.

In this case, Mamerto asserted that he never lost his owner's duplicate copy of TCT No. T-24829
and that he had always been in possession thereof.

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2. No. Only an innocent purchaser for value may invoke the mirror doctrine. The mirror doctrine
provides that every person dealing with registered land may safely rely on the correctness of the
certificate of title issued therefor and is in no way obliged to go beyond the certificate to determine
the condition of the property. In order to resolve whether Lourdes holds an indefeasible title to the
subject land, it becomes necessary to determine whether she is an innocent purchaser for value.
Here, Lourdes cannot be considered a purchaser in good faith.

An innocent purchaser for value is one who buys the property of another, without notice that some
other person has a right or interest in the property, for which a full and fair price is paid by the
buyer at the time of the purchase or before receipt of any notice of claims or interest of some other
person in the property. It is not enough to invoke the ordinary presumption of good
faith. Prudence and due diligence in the exercise of his/her rights must be shown. The
prudence required of a buyer in good faith is not that of a person with training in law, but
rather that of an average man who 'weighs facts and circumstances without resorting to the
calibration of our technical rules of evidence of which his knowledge is nil. In the case at
bench, Lourdes was deficient in her vigilance as buyer of the subject land. During cross-
examination, Lourdes admitted that she did not conduct a thorough investigation

3. Yes. Mamerto may recover the land notwithstanding its registration in Loudes’ name.

While it is true that under Section 32 of PD No. 1529 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.

Furthermore, ownership is not the same as a certificate of title. The legal principle is that if the
registration of the land is fraudulent, the person in whose name the land is registered holds it as a
mere trustee.

NATIONAL HOUSING AUTHORITY v. DOMINADOR LAURITO

GR No. 191657, Jul 31, 2017, THIRD DIVISION, TIJAM, J.

Intervention is a remedy by which a third party, not originally impleaded in the proceedings, becomes
a litigant therein for a certain purpose - to enable the third party to protect or preserve a right or
interest that may be affected by those proceedings.

FACTS:

At the core of the controversy is a parcel of land identified as Lot F-3 of the subdivision plan Psd-
12274 situated in Carmona, Cavite with an area of 224,287 square meters. Petitioner National
Housing Authority (NHA) and respondents heirs of the Spouses Domingo Laurito and Victorina
Manarin (Spouses Laurito) claim conflicting rights of ownership over the subject property based on
different transfer certificates of title, registered on likewise varying dates.

When the title to the property was transferred to NHA, respondents sent demand letters for NHA
to recall the subdivision scheme plan it submitted to the Register of Deeds. When said demands
went unheeded, respondents filed the complaint a quofor quieting of title, annulment of title and
recovery of possession against NHA. Respondents alleged that their parents Spouses Laurito, were

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the registered owners of the subject property registered with the RD for the Province of Cavite. The
Spouses Laurito mortgaged the subject property to the Philippine National Bank but was able to
redeem the same and thereby secured the release of the mortgage.When the RD was gutted by fire
in 1959, the Spouses Laurito caused the administrative reconstitution of their title and a
replacement title. The source of reconstitution was the owner's duplicate certificate of title.

NHA moved to dismiss the complaint but was denied by the RTC. NHA argued that it is not
required to look beyond these derivative titles, having acquired the two parcels of land from its
registered owners.

The RTC discovered that the title of the Spouses Laurito was issued by the RD of Cavite and that it
has not been cancelled and was certified to be existing and intact in the registry. The RTC also
found that the derivative titles upon which NHA based its titles were registered. It was noted that
while NHA claims to be a buyer in good faith, but failed to demonstrate how it acquired the subject
property.

RTC ruled in favor of Dominador Laurito, thus, NHA appealed to the CA. NHA argued that it is a
buyer in good faith since it acquired a property that is duly registered. NHA questioned the
valuation of the property for being mere hearsay. But CA dismissed the appeal. The CA held that
the reconstitution of the title of the Spouses Laurito does not afford preference in favor of NHA's
derivative titles, as the fact remains that the title of the Spouses Laurito was registered earlier in
time.

While the present petition was pending final resolution, intervenors filed a motion to file their so
called petition-in-intervention wherein they essentially claim to be the heirs of Rufina Manarin
(Rufina), the registered owner of a property located in Pasong Saguing, Cabilang Baybay, Carmona,
Cavite. Intervenors allege that the subject property is but a portion of the property registered in the
name of their predecessor-in-interest, Rufina. Respondent and NHA filed their respective
comments on the petition-in-intervention which contained the common argument that the
petition-in-intervention ought to be denied as it would only cause undue and inordinate delay in
the disposal of the instant case.

ISSUE:

Whether or not Spouses Laurito’s rights over the subject property prevail over NHA

RULING:

YES. The RTC as affirmed by the CA correctly affirmed the title of Spouses Laurito over the
subject property and consequently, respondents' right thereto as compulsory heirs

A petition for review on certiorari is one that is limited in purpose. Time and again, the Court
stresses that petitions for review on certiorari shall only raise questions of law, as questions of fact
are not reviewable by this Court. The pivotal issue of who has a better right over the disputed
property is not only a question of law but one that requires a thorough review of the presented
evidence, in view particularly of the respondents' allegation that NHA's titles were derived from
spurious titles covering inexistent lands. Thus, in the usual course, the instant petition is outrightly
dismissible for violating Section 1 of Rule 45.

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In any case, the issue as to who, between two holders of a torrens title over the same property,
should be preferred is not entirely novel but which has been jurisprudentially settled. There can be
no argument that the claimant whose transfer certificate of title was issued earlier in time, absent
any anomaly or irregularity in the registration, prevails.

A purchaser or mortgagee 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 his vendor or mortgagor. This requirement applies with greater force to NHA whose
mandate as the sole government agency engaged in direct shelter productionto develop and
undertake housing development or settlement projects is so impressed with public interest, and as
such, is expected to exercise more care and prudence than a private individual in its dealings, even
those involving registered lands.

Thus, the court cannot regard NHA as a buyer in good faith entitled to protection under the law.
NHA's title undoubtedly came from a dubious source exhibiting badges of spuriousness and hence,
could not have transferred a better right in favor of NHA.

D. NON-REGISTRABLE PROPERTIES

Diaz-Enriquez v. Director of Lands, Court of Appeals, and the Saclolos

G.R. No. 168065, September 6, 2017, Martires, J.

Courts can still adjudicate on the nature of land as public or otherwise notwithstanding the
Director of Lands’ failure to appeal from the court a quo’s decision.

Absent any positive act declaring the land as alienable and disposable, lands of the public
domain presumably belong to the State and are inalienable.

FACTS:

On December 27, 1974, the Saclolos filed before the Naic RTC a joint application for
registration of title over three parcels of land worth 375.2 hectares at Sitio Sinalam, Ternate,
Cavite. They claim title through purchase and actual and exclusive possession, occupation,
and cultivation of the subject lands since time immemorial. The government, through the
Director of Lands, opposed on the grounds that (1) the lands are not alienable and
disposable because they are located within the Calumpang Point Naval Reservation, which
Proclamation No. 307 segregated from the public domain; (2) the right to confirmation of
imperfect title under Sec. 48 of the Public Land Act with respect to lands having an area of
more than 144 hectares has prescribed; and (3) the Saclolos and their predecessor-in-
interest had not been in open, continuous, exclusive, adverse, and notorious possession
and occupation of the subject lands for at least 30 years immediately preceding the filing
of the application. Diaz-Enriquez intervened as the vendee of the lands in question.
The RTC ruled in favor of the Saclolos as Proclamation No. 307 itself indicated the
segregation of the Calumpang Point Naval Reservation was subject to private rights. The

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CA reversed on the ground that the informacion possessiora by which the Saclolos heavily
rely to support their claim did not indicate the area covered by the claim and that other
proof adduced by the Saclolos did not show the nature of their possession. It also held
judicial confirmation of imperfect title under Sec. 48 of the Public Land Act with respect to
lands having an area of more htan 144 hectares had lapsed.

ISSUES:

1. Whether or not the Court of Appeals may declare lands sought to be registered as
not alienable and disposable given the failure of the Director lf Lands to appeal the
decision of the trial court decreeing the issuance of certificates; and
2. Whether or not the Court of Appeals erred in holding the lands are not alienable
and disposable

RULING:

1. The failure of the Director of Lands to appeal from the RTC decision does not preclude
the Court of Appeals from declaring subject lands as public land. The Saclolos are
seeking the registration of their title pursuant to the Public Land Act where the
presumption always is that the land pertains to the state, and the occupants and
possessors claim an interest in the same in the same, by virtue of their imperfect title
or continuous, open, exclusive, and notorious possession and occupation under a bona
fide claim ownership for the required number of years. Further, an applicant must show,
even though there is no opposition to the satisfaction of the court, that he is the
absolute owner in fee simple.

2. In applications for land registration, the question of whether the subject lands were
declared alienable and disposable is of primordial importance because it is
determinative if the land can in fact be subject to acquisitive prescription and is thus
registrable under the Torrens system. Though Proclamation No. 307 recognizes private
rights over parcels of land included in the reservation, a mere invocation of private
rights does not automatically entitle an applicant to have the property registered in his
name. The investigator’s report contradicted the Saclolos’ claim, the informacion
possessoria neither states the lands were alienable and disposable nor the area covered
thereby, and the deed of sale indicates a smaller land area than was claimed by the
Saclolos. The Saclolos failed to discharge the burden of proof in overcoming the
presumption of State ownership of the lands of the public domain.

BERNADETTE S. BILAG, ERLINDA BILAGSANTILLAN, DIXON BILAG, REYNALDO B.

SUELLO, HEIRS OF LOURDES S. BILAG, HEIRS OF LETICIA BILAG-HANAOKA, and HEIRS
OF NELLIE BILAG v. ESTELA AY-AY, ANDRES ACOP, JR., FELICITAS AP-AP, SERGIO AP-AP,
JOHN NAPOLEON A. RAMIREZ, JR., and MA. TERESA A. RAMIREZ
G.R. No. 189950, April 24, 2017, PERLAS-BERNABE, J.

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Lands within the Baguio Townsite Reservation belong to the public domain and are no longer
registrable under the Land Registration Act.

FACTS:

Respondents filed an action for Quieting of Title against the petitiones alleging that Iloc Bilag,
petitioners' predecessor-in-interest, sold to them the subject lands, and that they registered the
corresponding Deeds of Sale with the Register of Deeds. According to respondents, Iloc Bilag not
only acknowledged full payment and guaranteed that his heirs, successors-in-interest, and
executors are to be bound by such sales, but he also caused the subject lands to be removed from
the Ancestral Land Claims. Respondents further alleged that they have been in continuous
possession of the said lands since 1976 when they were delivered to them and that they have already
introduced various improvements thereon.

Despite the foregoing, petitioners refused to honor the foregoing sales by asserting their adverse
rights on the subject lands. Petitioners averred that the subject lands are untitled, unregistered, and
form part of the Baguio Townsite Reservation which were long classified as lands of the public
domain. As such, the RTC has no jurisdiction over the case as it is the Land Management Bureau
which is vested with the authority to determine issues of ownership over unregistered public lands.

ISSUE:

Whether or not the subject property forms part of the Baguio Townsite Reservation, and hence
must not be registered.

RULING:

Yes. Records reveal that the subject lands are unregistered and untitled, as petitioners' assertion to
that effect was not seriously disputed by respondents. A review of the records shows that the subject
lands form part of the parcel of land designated by the Bureau of Lands as part of the Baguio
Townsite Reservation. Based on the finding that the subject lands are untitled and unregistered
public lands, then petitioners correctly argued that it is the Director of Lands who has the authority
to award their ownership. Thus, the RTC Br. 61 correctly recognized its lack of power or authority
to hear and resolve respondents' action for quieting oftitle.

In Heirs of Pocdo v. Avila, the Court ruled that the trial court therein correctly dismissed an action
to quiet title on the ground of lack of jurisdiction for lack of authority to determine who among the
parties have better right over the disputed property, which is admittedly still part of public domain
for being within the Baguio Townsite Reservation, viz.:
The DENR Decision was affirmed by the Office of the President which held
that lands within the Baguio Townsite Reservation belong to the public domain and are no
longer registrable under the Land Registration Act. The Office of the President ordered the
disposition of the disputed property in accordance with the applicable rules of procedure
for the disposition of alienable public lands within the Baguio Townsite Reservation,
particularly Chapter X of Commonwealth Act No. 141 on Townsite Reservations and other
applicable rules.

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Having established that the disputed property is public land, the trial court was therefore correct
in dismissing the complaint to quiet title for lack of jurisdiction. The trial court had no jurisdiction
to determine who among the parties have better right over the disputed property which is
admittedly still part of the public domain.

MAGDALENA C. DILLENA vs MARIANO ALCARAZ, BERNARDO ALCARAZ, JOSELITO

ALCARAZ and AMOR ALCARAZ STA. MARIA
G.R. No. 204045, December 14, 2017, Del Castillo, J.

A complaint filed after February 20, 1995 by a fishpond tenant on issues of tenurial arrangements
cannot be brought before the PARAD and the DARAB since their jurisdiction is limited to agrarian
disputes. Private lands actually, directly and exclusively used for prawn farms and fishponds are no
longer covered by the CARL and its amendatory law.

FACTS:

Salud Crespo owned a piece of land with a fishpond, and he recognized Catalino Dillena as his
tenant. When Ana Alcaraz purchased the land, she also recognized Catalino’s tenancy. When
Catalino died, Narciso the husband of petitioner succeeded in his tenancy rights. When Ana Alcaraz
died, respondents inherited the property and recognized Narciso’s tenancy. It was only when
Narciso died that the controversy started. Respondents informed petitioner that they were doubling
the rent which she believed was unconscionable and was merely meant to dispossess her of the
subject landholding.

Petitioner filed a petition with the Provincial Agrarian Reform Adjudicator (PARAD) praying that
she be declared as a de jure tenant and be maintained in peaceful possession of the subject property.
Respondents filed a motion to dismiss arguing that petitioner is a civil law lessee and as such, any
dispute that may arise from this relationship of the parties is cognizable by the regular courts.

The PARAD, the Department of Agrarian Reform Adjudication Board (DARAB) found for the
petitioner. The CA declared that both the PARAD and DARAB have no jurisdiction over the dispute.

ISSUE:

W/N the PARAD and DARAB have jurisdiction over the controversy.

RULING:

NO. Petitioner argues there is an existing tenancy arrangement between her and respondents
which must be respected. That the amendments introduced in 1995 by RA 7881 to RA 6557 (CARL)
cannot be given retroactive application as to deprive a farmer of his rights under previous agrarian
laws. So while the subject landholding is no longer covered by the CARL the parties tenurial
arrangement subsists and remains as it was vested prior to the effectivity of the amendment to
CARL.

When petitioner filed the case with the Bulacan PARAD in 2004, RA 7881 was already in effect;
therefore, the subject landholding ceased to be covered by the CARL. As early as February 20, 1995,

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private lands actually, directly and exclusively used for prawn farms and fishponds were exempted
from the coverage of the CARL. Under Section 2 of RA 7881, which took effect on February 20, 1995

b) Private lands actually, directly and exclusively used for prawn farms and
fishponds shall be exempt from the coverage of this Act xxx

Consequently, the Bulacan PARAD, as well as the DARAB, had no authority to take cognizance of
her case, since their jurisdiction is limited to agrarian disputes. An agrarian dispute is defined as
any controversy relating to tenurial arrangements, whether leasehold, tenancy, stewardship or
otherwise, over lands devoted to agriculture.

To subscribe to petitioner's view that the tenurial arrangement subsists despite the effectivity of
amendatory laws would render the exclusion of fishponds from CARL practically useless; it would
be as if no exclusion was granted.

The PARAD and DARAB have no jurisdiction in the case.

HEIRS OF FERMIN ARANIA, REPRESENTED BY LOIDA A SORIANO; HEIRS OF ARSENIO

OROSCO, REPRESENTED BY PEDRITO OROSCO; HEIRS OF FLORENOO BARROGA,
REPRESENTED BY ENRIQUE BARROGA; HEIRS OF FRANOSCO VILORIA, REPRESENTED
BY EXEQUIEL VILORIA; DOMINGO MAGALONG; HEIRS OF ANTONIO ANDRES,
REPRESENTED BY PAULINO ANDRES; HEIRS OF GREGORIO GAIUS, REPRESENTED BY
FELIX GAIUS; HEIRS OF FLORENTINO CORPUZ, REPRESENTED BY ERNESTO CORPUZ;
GA VINO CORPUZ; AND HEIRS OF SIMPUOO GALAPON, REPRESENTED BY FERNANDO
GALAPON ---vs.--- INTESTATE ESTATE OF MAGDALENA R. SANGALANG, REPRESENTED
BY ITS ADMINISTRATRIX SO LITA S. JIMENEZ; ANGELO S. JIMENEZ, JR.; JAYSON P.
JIMENEZ; SOLITA S. JIMENEZ; JOHN S. HERMOGENES; HEIRS OF MAGDALENA R.
SANGALANG, REPRESENTED BY ROMUW SANGALANG JIMENEZ; AND ROMULO
SANGALANG JIMENEZ
G.R. No. 193208, December 13, 2017, Martires, J.

Resort to two different remedies, filed in two different divisions of the Court of Appeals may result in
a finding of forum shopping where the requisites of litis pendentia are present.

FACTS:
Petitioners filed an action for recovery of possession of several parcels of land before the Provincial
Agrarian Reform Adjudication Board (PARAD) which formed part of the estate of Magdalena
Sangalang. They alleged that they are the lawful tenant-tillers of the subject landholdings since time
immemorial and they were harassed by Magdalena to leave their respective landholdings. The
respondents countered that the petitioners are not the lawful tenants because the same has been
under the administration of their mother, Magdalena, during her lifetime.

The PARAD held respondents forcibly ousted the petitioners from their lawful possession and
cultivation of their respective landholdings which violated agrarian reform laws. This was upheld
by the Department of Agrarian Reform Adjudication Board (DARAB). A writ of execution pending
appeal was issued by the DARAB. From here respondents filed two actions: (1) A petition for review
with the CA 7th Division and (2) a petition for certiorari with the CA Special 15th Division.

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The CA 7th Division upheld the PARAD and DARAB rulings. The CA 15th Division ruled that the
PARAD and DARAB had no jurisdiction over the controversy.

Petitioners sought annulment of judgment against the ruling of the CA 15th Division.

ISSUE:

W/N the CA 15th Devision’s decision on the petition for certiorari can be nullified and set aside.

RULING:

YES. Petitioners filed an action for annulment of judgment. This is not the correct remedy because
there is neither intrinsic fraud nor lack of jurisdiction in the assailed decision which are the
requisites of such action. Nevertheless, the Court resolves to give due course to the petition in order
to cure the grave injustice suffered by the petitioners brought about by the respondents’ forum
shopping.

Forum shopping is the institution of two or more actions or proceedings involving the same parties
for the same cause of action, either simultaneously or successively, on the supposition that one or
the other court would make a favorable disposition. To determine whether a party violated the rule
against forum shopping, the most important factor to ask is whether the elements of litis pendentia
are present, or whether a final judgment in one case will amount to res judicata in another. The
requisites of litis pendentia are:
(a) the identity of parties, or at least such as representing the same interests in both actions;
(b) the identity of rights asserted and relief prayed for, the relief being founded on the same
facts; and
(c) the identity of the two cases such that judgment in one, regardless of which party is
successful, would amount to res judicata in the other

Identity of parties: in the petition for certiorari with the CA Special 15th Division, the parties are the
Intestate Estate of Magdalena R. Sangalang represented by its administratrix, Solita Jimenez,
Angelo Jimenez, Jr., Jayson Jimenez, Solita Jimenez, and John Hermogenes as petitioners, and the
petitioners herein as respondents. On the other hand, in the petition for review, Romulo S. Jimenez
is the sole petitioner while the petitioners herein are the respondents. A substantial identity of
parties is enough to qualify under the first requisite. Here, it is clear as daylight that the petitioners
in both cases represent the same interest as they are all legal heirs of Magdalena Sangalang.

Identity of cause of action: Both petitions in the appellate court are grounded on the same cause of
action, i.e., the respondents' claim of ownership over the lands in question and the PARAD and
DARAB’s violation of their rights as owners when the administrative bodies ruled in favor of the
petitioners.

Identity of Relief sought: The judgment in the petition for review amounted to res judicata in the
petition for certiorari. There is res judicata or bar by prior judgment when, as between the first case
where the judgment was rendered and the second case that is sought to be barred, there is identity
of parties, subject matter, and causes of action.

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In sum, considering that all the elements of litis pendentia are present, the Court declares that the
respondents are guilty of forum shopping when they filed the petition for certiorari despite the
pendency of the petition for review.
The question now is which of the two petitions filed before the appellate court should have been
dismissed. Jurisprudence has established the rule in the ascending order of importance in
determining which action should prevail:
(1) the date of filing, with preference generally given to the first action filed to be retained;
(2) whether the action sought to be dismissed was filed merely to preempt the later action or
to anticipate its filing and lay the basis for its dismissal; and
(3) whether the action is the appropriate vehicle for litigating the issues between the parties

The abovementioned criteria find application in the case at bar to determine which of the two
petitions filed before the appellate court should have been dismissed.

(a) First, the petition for review was instituted before the petition for certiorari.
(b) Second, the petition for review was certainly not meant to preempt the petition for
certiorari as the latter was only filed supposedly to question the issuance of the writ of
execution pending appeal.
(c) Third, the petition for review was the appropriate vehicle to thresh out the issues
between the parties as it was precisely instituted to assail the DARAB decision in favor
of the petitioners.

Consequently, the petition for review prevails. The decision in the petition for certiorari, which
should have been dismissed, as well as all orders and issuances emanating therefrom are null and
void having no legal force and effect

ALFONSO DIGAN, TIBALDO BUELTA, BERNARDO MARIANO, SANTIAGO ACQUIDAN,

FERNANDO AGNNO, JOHNNY ORIE and FELIMON GACETA (deceased) rep. by his wife
LOLITA GACETA v. NOEMI MALINES
G.R. No. 183004, December 6, 2017, MARTIRES, J.:

A land which has been acquired in a valid sale pursuant to P.D. No. 27 could no longer be bound by
separate Emancipation Patents in favor of other persons.

FACTS:

Modesta Paris (Paris) was the owner of 3 parcels of agricultural land situated in the Municipality of
Cervantes, Ilocos Sur. In 1972, the landholdings of Paris were placed under the coverage of
Operation Land Transfer (OLT) and was subdivided into 6 lots pursuant to PD No. 27. Sometime
in 1976, DAR identified herein petitioners as among the qualified farmer-beneficiaries of the
landholdings of Paris.

On November 1978, Paris sold to Malines and Melecio one of the six lots from her landholdings.
Later, unknown to Malines and Melecio, the Register of Deeds (RD) of Ilocos Sur their titles.

Thereafter, Emancipation Patents (EP) covering the subject land were issued to the petitioners.

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Hence, Malines and Melecio filed a Petition for the Cancellation of the Eps issued to the petitioners
arguing that, among others, petitioners consented to the conveyance unto them through a joint
affidavit of waiver and that their respective shares in the subject land forms part of their retained
area under either P.D. No. 27 or R.A. No. 6657.

ISSUE:

Whether or not the direct sale of the subject land in favor of Malines and Melecio is valid.

RULING:

Yes. Not all conveyances involving tenanted rice and corn lands are prohibited. To achieve its
purpose, P.D. No. 27 laid down a system for the purchase by tenant-farmers of the lands they were
tilling. In furtherance, the DAR issued several memorandum circulars (MC) which recognized the
validity of a direct sale between the landowner and the tenant-beneficiary under a direct payment
scheme (DPS) and at liberal terms and subject to conditions. Among these regulations are MC Nos.
2 and 2- A, series of 1973, and MC No. 8, series of 1974. MC No. 2-A, which amended MC No. 2,
provides the following explicit prohibition, among others:

h. Transfer of ownership after October 21, 1972, except to the actual tenant-
farmer tiller. If transferred to him, the cost should be that prescribed by Presidential
Decree No. 27. (emphasis supplied)

On the other hand, MC No. 8, series of 1974, which repealed and/or modified MC Nos. 2 and 2-A
and other circulars or memoranda inconsistent with it, provided that:

4. No act shall be done to undermine or subvert the intent and provisions of

Presidential Decrees, Letters of Instructions, Memoranda and Directives, such as the
following and/or similar acts:
xxxx
f) Transferring ownership to tenanted rice and/or com lands after October
21, 1972, except to the actual tenant-farmers or tillers but in strict conformity
to the provisions of Presidential Decree No. 27 and the requirements of the
DAR. (emphasis supplied)

In fine, the general rule is that any transfer of ownership over tenanted rice and/or corn lands after
21 October 1972 to persons other than the heirs of the landowner, via hereditary succession, is
prohibited. However, when the conveyance was made in favor of the actual tenant-tiller thereon,
such sale is valid.

Clearly, Malines and Melecio being qualified beneficiaries and actual tillers of the subject land, the
sale thereof to them is valid. Indeed, the sale of the subject land emancipated Malines and Melecio
from the bondage of the soil they were tilling. The very purpose of P.D. No. 27 was therefore
achieved. Consequently, the subject land, having been acquired in a valid sale pursuant to P.D. No.
27, could no longer be bound by separate EPs in favor of other persons.

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REPUBLIC OF THE PHILIPPINES, represented by the REGIONAL EXECUTIVE DIRECTOR,

DENR, REGION VI, ILOILO CITY v.
VALENTINA REGISTER OF PROVINCE OCCIDENTAL, CALISTON, DIOSCORO ESCARDA,
ESPINOSA, DEEDS OF THE OF NEG ROS LEONILA and & SPOUSES ESTRELLA
G.R. No. 186603, April 5, 2017, JARDELEZA, J.:

In cases of reversion, the burden is on the State to prove that the property was classified as timberland
or forest land at the time it was decreed to the applicant.

FACTS:

In 1955, a Cadastral Decree was issued Espinosa covering a 28,880-square meter lot (property). By
virtue of the decree, OCT No. 191-N was issued on October 15, 1962 in the name of Espinosa. In 1976,
Espinosa sold the property to Caliston, who was later issued TCT No. T- 91117.

In 2003, the State filed a Complaint for annulment of title and/or reversion of land. The State
claimed that the property is inalienable public land because it fell within a timberland area as
certified by the Director of Forestry on January 17, 1986.

In answer, Caliston countered that the property is not timberland. Invoking laches and prescription,
she argued that her title was issued earlier in 1962, while the map shows that the property was
classified only in 1986.

ISSUE:

Whether the State has sufficiently proved that the property is part of inalienable forest land at the
time Espinosa was granted the cadastral decree and issued a title.

RULING:

No. The State failed to prove that the property was classified as forest land at the time of the grant
of the cadastral decree and issuance of title to Espinosa.

The State, through the Solicitor General, alleges neither fraud nor misrepresentation in the
cadastral proceedings and in the issuance of the title in Espinosa's favor. The argument for the State
is merely that the property was unlawfully included in the certificate of title because it is of the
public domain.

Since the case is one for reversion and not one for land registration, the burden is on the State to
prove that the property was classified as timberland or forest land at the time it was decreed to
Espinosa. To reiterate, there is no burden on Caliston to prove that the property in question is
alienable and disposable land. At this stage, it is reasonable to presume that Espinosa, from whom
Caliston derived her title, had already established that the property is alienable and disposable land
considering that she succeeded in obtaining the OCT over it. In this reversion proceeding, the State
must prove that there was an oversight or mistake in the inclusion of the property in Espinosa' s
title because it was of public dominion. This is consistent with the rule that the burden of proof
rests on the party who, as determined by the pleadings or the nature of the case, asserts the
affirmative of an issue.

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Here, the State hinges its whole claim on its lone piece of evidence, the land classification map
prepared in 1986.

The records show, however, that LC Map was not formally offered in evidence.Moreover, even
assuming that the survey can be admitted in evidence, this will not help to further the State's cause.
This is because the only fact proved by the map is one already admitted by the State, that is, that
the land was reclassified in 1986. This fact does not address the presumption/conclusion that
Espinosa has, at the time of the cadastral proceedings conducted in 1955, proved that the land is
alienable and disposable, as evidenced by the decree issued in his favor in 1962.

HEIRS OF SPOUSES CORAZON P. DE GUZMAN AND FORTUNATO DE GUZMAN,

REPRESENTED BY JENIE JANE DE GUZMAN-CARPIO v. HEIRS OF MARCELIANO
BANDONG, REPRESENTED BY REGINA Z. BANDONG
G.R. No. 215454, August 9, 2017, Peralta, J.

A free patent that purports to convey land to which the Government did not have any title at the time
of its issuance does not vest any title in the patentee as against the true owner. Private ownership is
not affected by the issuance of a free patent over the same land, because the Public Land Law applies
only to lands of the public domain. The Director of Lands has no authority to grant to another a free
patent for land that has ceased to be a public land and has passed to private ownership. Consequently,
a certificate of title issued pursuant to a homestead patent partakes of the nature of a certificate
issued in a judicial proceeding only if the land covered by it is really a part of the disposable land of
the public domain.

FACTS:

Domingo was the owner of a 3,018 sqm unregistered land in Pangasinan. He then sold a portion of
the property (660 sqm) to Emilio Bandong. Emilio then donated it to his son Pedro. Subsequently,
Pedro sold the lot donated to him to his brother Marceliano Bandong. However, instead of only
selling 660 sqm, he sold 1,320 sqm.

Domingo then died intestate and his heirs executed an extrajudicial settlement of the estate of the
deceased and a Deed of Sale which conveyed the remaining 2,358 sqm of the lot to Spouses De
Guzman. In a cadastral survey conducted, the lot owned by Marceliano was designated as Lot 3011
while the lot owned by Spouses de Guzman was designated as Lot 3015.

Marceliano then applied for a free patent in the DENR and alleged therein that lot 3011 has an area
of 3,221sqm and is a public land not claimed or occupied by any other person. He further stated that
he and his ancestors had been in the lot for 59 years. Subsequently, the application was granted and
an OCT was issued and registered under the name of Marceliano and his spouse (spouses Bandong).

Spouses De Guzman then learned from the caretaker of Spouses Bandong that the latter was
planning to sell the lot which included the former’s portion of the property. Spouses De Guzman
then hired a geodetic engineer to determine the extent of the encroachment on their lot. The
geodetic engineer then found that the property owned by the De Guzmans was encroached and
overlapped by the title applied by Marceliano and covered by his OCT.

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Spouses De Guzman then filed a complaint in the RTC alleging that they are the owners of the
eastern portion of the property covered by the Bandongs’ OCT and that the former were not aware
of its registration under the latter’s name. The RTC ruled in favour of Spouses De Guzman and
ordered the cancellation of Spouses Bandong’s free patent. However, the RTC ruled that Spouses
Bandong have acquired through acquisitive prescription the lot covering 1,119 sqm and ordered that
two separate titles be issued in favour of spouses Bandong and de Guzman. However, upon appeal
to the CA, it reversed the decision of the RTC.

ISSUES:

1. Whether the decision of the CA was correct in reversing the decision of the RTC in
cancelling the free patent of Spouses Bandong?
2. Whether Spouses Bandong was able to acquire through prescription the western portion of
the lot covering 1,119 sqm?

RULING:

1. No. A cause of action for declaration of nullity of free patent and certificate of title would require
the allegations of the plaintiff’s ownership of the contested lot prior to the issuance of such free
patent and certificate of title as well as the defendant's fraud or mistake, as the case may be, in
successfully obtaining these documents of title over the parcel of land claimed by plaintiff. In such
a case, the nullity arises strictly not from the fraud or deceit but from the fact that the land is beyond
the jurisdiction of the Bureau of Lands to bestow and whatever patent or certificate of title obtained
therefor is consequently void ab initio. By asking for the nullification of the free patent granted to
the Spouses Bandong, the Spouses De Guzman are claiming the portion of the subject property
which, they allege, rightfully belongs to them.

It was held that a free patent that purports to convey land to which the Government did not have
any title at the time of its issuance does not vest any title in the patentee as against the true owner.
Private ownership is not affected by the issuance of a free patent over the same land, because the
Public Land Law applies only to lands of the public domain. The Director of Lands has no authority
to grant to another a free patent for land that has ceased to be a public land and has passed to
private ownership. Consequently, a certificate of title issued pursuant to a homestead patent
partakes of the nature of a certificate issued in a judicial proceeding only if the land covered by it is
really a part of the disposable land of the public domain.
Based on the records, the 1960 Deed executed by Domingo in favor of Emilio described the
purchased property as follows:

“that portion of land (Residential), with an area of SIX HUNDRED and SIXTY (660)
square meters, more or less, of the whole parcel of land situated in the barrio
Angatel, Urbiztondo, Pangasinan”

2. Yes. It is apparent from the language of the contract that Domingo, who is the original owner,
intended to transmit only 660 sq. m. of his 3,018-sq.m. land to Emilio. Moreover, the trial court
found that the Spouses De Guzman actually possessed the eastern portion, while the Spouses
Bandong possessed the western portion based on the result of the ocular inspection conducted. As
such, the DENR had no authority to grant to the Spouses Bandong the free patent for the

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whole Real property since a portion of which has ceased to be a public land and has passed to the
private ownership of the Spouses De Guzman.

As regards to the increased land ownership of Spouses Bandong, by virtue of the notarized Deed
between Pedro and Marceliano and the tax declaration covering the 1,320 sq. m. property under
Pedro's name, the Spouses Bandong had a reasonable belief that Pedro was the owner of the said
property and could thereby transmit its ownership. Also, Marceliano was paying taxes over the 1,320
sq. m. property. Tax declarations or realty tax payment of property are good indicia of possession
in the concept of owner, and constitute at least proof that the holder has a claim of title over the
property.

The RTC ascertained that the Spouses Bandong are in actual possession of at least 1,119 sq. m. of the
property since 1979. Aside from the 1960 Deed, the Spouses De Guzman did not present any
evidence of the Spouses Bandong's bad faith or knowledge of the discrepancy in the area of the
property originally conveyed to their father and of the property eventually sold to them. Since they
occupied the portion since 1979, the Spouses Bandong have acquired by ordinary acquisitive
prescription the area in excess of the 660 sq. m. purchased by Emilio, or more or less the area
transferred by Pedro. It is also noted that it was the Spouses De Guzman who constructed the fence
made of barb wire to delineate their boundaries.
It is emphasized that the registration of a patent under the Torrens System merely confirms the
registrant's title. It does not vest title where there is none because registration under this system is
not a mode of acquiring ownership. The registration of the Spouses Bandong's free patent over
the Real property did not vest them the ownership thereof. The Spouses De Guzman successfully
ascertained their prior title, as well as the the Spouses Bandong's title based on their predecessors'
interest, which both corresponded with the area they actually occupied.

XI. TORTS AND DAMAGES

A. TORTS AND QUASI DELICTS

1. THE TORTFEASOR

OUR LADY OF LOURDES HOSPITAL vs SPOUSES ROMEO AND REGINA CAPANZANA

G.R. No. 189218, March 22, 2017, Sereno, CJ.

In an action for damages against a hospital, the negligence of its nurses can be imputed to the
employer where there is no proof that the employer exercised actual supervision and monitoring of
consistent compliance with hospital rules by its staff.

FACTS:

Regina Capanzana was brought to petitioner hospital for an emergency C-section. She successfully
gave birth to a baby boy. 13 hours after her operation, she asked for oxygen, and complained of a
headache, a chilly sensation, restlessness, and shortness of breath. It took around 10 minutes for
nurses to respond to the call and administer oxygen. She was eventually transferred to the Intensive
Care Unit, where she was hooked to a mechanical ventilator. When her condition still showed no
improvement, Regina was transferred to the Cardinal Santos Hospital. The doctors thereat found
that she was suffering from rheumatic heart disease mitral stenosis with mild pulmonary

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hypertension. This development resulted in cardiopulmonary arrest and, subsequently, brain

damage. Regina lost the use of her speech, eyesight, hearing and limbs. She was discharged in a
vegetative state and eventually died.

Respondent spouses Capanzana filed a complaint for damages against petitioner hospital, along
with co-defendants: the nurses on duty. They allege that the nurses were negligent for not having
promptly given oxygen, and that the hospital was equally negligent for not making available and
accessible the oxygen unit on that same hospital floor.

ISSUE:

W/N petitioner hospital is negligent.

RULING:

YES. Proximate cause has been defined as that which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces injury, and without which the result would
not have occurred.The omission of the nurses - their failure to promptly check on Regina and to
refer her to the resident doctor and, thereafter, to immediately provide oxygen - was clearly the
proximate cause that led to the brain damage suffered by the patient.

As to the nurses: the RTC and CA found that there was a delay in the administration of oxygen to
the patient. When she was gasping for breath and turning cyanotic (bluish), it was the duty of the
nurses to intervene immediately by informing the resident doctor. Such high degree of care and
responsiveness was needed cannot be overemphasized because it takes only five minutes of oxygen
deprivation for irreversible brain damage to set in. Regina herself had asked for oxygen but even if
the patient had not asked for oxygen, the mere fact that her breathing was labored to an abnormal
degree should have impelled the nurses to immediately call the doctor and to administer oxygen.
They committed a breach of their duty to respond immediately to the needs of Regina. Regina
suffered from brain damage and the proximate cause of the brain damage was the delay in
responding to Regina's call for help and for oxygen.

As to the hospital: For the negligence of its nurses, petitioner is thus liable under Article 2180 (NCC).
An employer like petitioner hospital may be held liable for the negligence of its employees based
on its responsibility under a relationship of patria potestas. Once negligence of the employee is
shown, the burden is on the employer to overcome the presumption of negligence on the latter's
part by proving observance of the required diligence. The hospital failed to discharge its burden of
proving due diligence in the supervision of its nurses and is therefore liable for their negligence.
While the hospital offered proof of diligence in hiring, there is no proof of actual supervision of the
employees' work or actual implementation and monitoring of consistent compliance with hospital
rules. The hospital is directly liable for the negligence of its nurses.

JOHN E.R. REYES and MERWIN JOSEPH REYES v. ORICO DOCTOLERO, ROMEO AVILA,
GRANDEUR SECURITY AND SERVICES CORPORATION, and MAKATI CINEMA SQUARE
G.R. No. 185597, August 2, 2017, THIRD DIVISION, JARDELEZA, J.

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As a general rule, one is only responsible for his own act or omission under Article 2176. The law,
however, provides for exceptions when it makes certain persons liable for the act or omission of
another. One exception is an employer who is made vicariously liable for the tort committed by his
employee under paragraph 5 of Article 2180. Here, although the employer is not the actual tortfeasor,
the law makes him vicariously liable on the basis of the civil law principle of pater familias for failure
to exercise due care and vigilance over the acts of one’s subordinates to prevent damage to another.

FACTS:

The case arose from an altercation between respondent Orico Doctolero, a security guard of
respondent Grandeur Security and Services Corporation and petitioners John E.R. Reyes and
Merwin Joseph Reyes in the parking area of respondent Makati Cinema Square. The respondents
shot the petitioners but both parties alleged different version of the incident.

Petitioners filed with the Regional Trial Court a complaint for damages against respondents
Doctolero and Avila and their employer Grandeur, charging the latter with negligence in the
selection and supervision of its employees. They likewise impleaded MCS on the ground that it was
negligent in getting Grandeur’s services. In their complaint, petitioners prayed that respondents be
ordered, jointly and severally, to pay them actual, moral, and exemplary damages, attorney’s fees
and litigation costs. Respondents Doctolero and Avila failed to file an answer despite service of
summons upon them. Thus, they were declared in default.

For its part, Grandeur asserted that it exercised the required diligence in the selection and
supervision of its employees. It likewise averred that the shooting incident was caused by the
unlawful aggression of petitioners who took advantage of their “martial arts” skills. On the other
hand, MCS contends that it cannot be held liable for damages simply because of its ownership of
the premises where the shooting incident occurred. It argued that the injuries sustained by
petitioners were caused by the acts of respondents Doctolero and Avila, for whom respondent
Grandeur should be solely responsible.

On January 18, 1999, the RTC rendered judgment against respondents Doctolero and Avila, finding
them responsible for the injuries sustained by petitioners. In reconsidering its Decision, the RTC
held that it re-evaluated the tacts and the attending circumstances of the present case and was
convinced that Grandeur has sufficiently overcome the presumption of negligence. It gave credence
to the testimony of Grandeur’s witness, Eduardo Ungui, the head of the Human Resources
Department (HRD) of Grandeur, as regards the various procedures in its selection and hiring of
security guards.

ISSUE:

Whether Grandeur and MCS may be held vicariously liable for the damages caused by respondents
Doctolero and Avila to petitioners John and Mervin Reyes.

RULING:

NO. MCS is not liable to petitioners. As a general rule, one is only responsible for his own act or
omission. This general rule is laid down in Article 2176 of the Civil Code, which provides:

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Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict and is governed by the provisions of
this Chapter.

The law, however, provides for exceptions when it makes certain persons liable for the act or
omission of another. One exception is an employer who is made vicariously liable for the tort
committed by his employee under paragraph 5 of Article 2180. Here, although the employer is not
the actual tortfeasor, the law makes him vicariously liable on the basis of the civil law principle of
pater familias for failure to exercise due care and vigilance over the acts of one’s subordinates to
prevent damage to another.

It must be stressed, however, that the above rule is applicable only if there is an employer-employee
relationship. This employer-employee relationship cannot be presumed but must be sufficiently
proven by the plaintiff. The plaintiff must also show that the employee was acting within the scope
of his assigned task when the tort complained of was committed. It is only then that the defendant,
as employer, may find it necessary to interpose the defense of due diligence in the selection and
supervision of employees. In the absence of such relationship, vicarious liability under Article 2180
of the Civil Code cannot be applied. The Court found no employer-employee relationship between
MCS and respondent guards. The guards were merely assigned by Grandeur to secure MCS’
premises pursuant to their Contract of Guard Services. Thus, MCS cannot be held vicariously liable
for damages caused by these guards’ acts or omissions. Neither can it be said that a principal-agency
relationship existed between MCS and Grandeur.

On the other hand, paragraph 5 of Article 2180 of the Civil Code may be applicable to Grandeur, it
being undisputed that respondent guards were its employees. When the employee causes damage
due to his own negligence while performing his own duties, there arises the juris tantum
presumption that the employer is negligent, rebuttable only by proof of observance of the diligence
of a good father of a family. The “diligence of a good father” referred to in the last paragraph of
Article 2180 means diligence in the selection and supervision of employees.

To rebut the presumption of negligence, Grandeur must prove two things: first, that it had exercised
due diligence in the selection of respondents Doctolero and Avila, and second, that after hiring
Doctolero and Avila, Grandeur had exercised due diligence in supervising them.

Here, both the RTC and the CA found that Grandeur was able to sufficiently prove, through
testimonial and documentary evidence, that it had exercised the diligence of a good father of a
family in the selection and hiring of its security guards. As testified to by its HRD head Ungui, and
corroborated by documentary evidence including clearances from various government agencies,
certificates, and favorable test results in medical and psychiatric examinations.

The question of diligent supervision, however, depends on the circumstances of employment.

Ordinarily, evidence demonstrating that the employer has exercised diligent supervision of its
employee during the performance of the latter’s assigned tasks would be enough to relieve him of
the liability imposed by Article 2180 in relation to Article 2176 of the Civil Code.

Considering all the evidence borne by the records, we find that Grandeur has sufficiently exercised
the diligence of a good father of a family in the selection and supervision of its employees. Hence,

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having successfully overcome the legal presumption of negligence, it is relieved of liability from the
negligent acts of its employees, respondents Doctolero and Avila.

2. THE CONCEPTS AND DOCTRINES OF RES IPSA LOQUITUR, LAST CLEAR

CHANCE, PROXIMATE CAUSE, DAMNUM ABSQUE INJURIA, PRESUMPTION OF
NEGLIGENCE, VICARIOUS LIABILITY

ROMULO ABROGAR and ERLINDA ABROGAR vs COSMOS BOTTLING COMPANY and

INTERGAMES, INC.
G.R. No. 164749, March 15, 2017, Bersamin, J.

A higher degree of diligence was required given that practically all of the participants were children or
minors and that the law imposes a duty of care towards children and minors even if ordinarily there
was no such duty under the same circumstances had the persons involved been adults of sufficient
discretion.

FACTS:

To promote the sales of Pop Cola, Cosmos, jointly with Intergames, organized the Pop Cola Junior
Marathon. Plaintiff’s son, Rommel, joined and ran the course plotted by the defendants. Rommel
was bumped by a jeepney that was then running along the route of the marathon and in spite of
medical treatment given to him, he died later that same day due to severe head injuries.

Plaintiffs sued the respondents in the CFI to recover various damages for the untimely death of
Rommel.

ISSUES:

1) W/N the defendants were negligent.

2) W/N the negligence of Intergames was the proximate cause of the death.
3) W/N the doctrine of assumption of risks applies.

RULING:

1) Only Intergames was negligent. The sponsorship of Cosmos was limited to financing the
race. Negligence is the failure to observe that degree of care, precaution, and vigilance which the
circumstances justly demand, whereby another person suffers injury. The safety and precautionary
measures undertaken by Intergames were short of the diligence demanded by the circumstances of
persons, time and place under consideration. Hence, Intergames as the organizer was guilty of
negligence.

 In staging the event, Intergames had no employees of its own to man the race, and relied
only on the "cooperating agencies" and volunteers who had worked with it in previous races.
It held no briefings of any kind on the actual duties to be performed by each group of
volunteers It did not instruct the volunteers on how to minimize, if not avert, the risks of
the race. Since the marathon would be run alongside moving vehicular traffic, at the very

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least, Intergames ought to have seen to the constant and closer coordination among the
personnel manning the route to prevent the foreseen risks from befalling the participants.
 Intergames further conceded that the marathon could have been staged on a blocked-off
route where runners could run against the flow of vehicular traffic. Intergames had the
option to hold the race in a route where such risks could be minimized, if not eliminated.

2) YES. To be considered the proximate cause of the injury, the negligence need not be the event
closest in time to the injury; a cause is still proximate, although farther in time in relation to the
injury, if the happening of it set other foreseeable events into motion resulting ultimately in the
damage. The negligence of the jeepney driver, albeit an intervening cause, was not efficient enough
to break the chain of connection between the negligence of Intergames and the injurious
consequence suffered by Rommel.

3) NO. The doctrine of assumption of risk means that one who voluntarily exposes himself to an
obvious, known and appreciated danger assumes the risk of injury that may result therefrom. It is
based on voluntary consent, express or implied, to accept danger of a known and appreciated risk;
but one does not ordinarily assume risk of any negligence which he does not know and appreciate.

Rommel would not have joined the marathon if he had known of or appreciated the risk of harm
or even death from vehicular accident while running in the organized running event. Without
question, a marathon route safe and free from foreseeable risks was the reasonable expectation of
every runner participating in an organized running event. Neither was the waiver of liability signed
by Rommel, then a minor, an effective form of express or implied consent in the context of the
doctrine of assumption of risk.

ORIENT FREIGHT INTERNATIONAL, INC. v. KEIHIN-EVERETT FORWARDING COMPANY,

INC.
G.R. No. 191937, August 9, 2017, Leonen, J.

Article 2176 of the Civil Code does not apply when the party’s negligence occurs in the performance of
an obligation. The negligent act would give rise to a quasi-delict only when it may be the basis for an
independent action where the parties not otherwise bound by a contract.

FACTS:

Respondent Keihin-Everett entered into a Trucking Service Agreement with Matsushita. These
services were subcontracted by Respondent to Petitioner Orient Freight, through their own
Trucking Service Agreement executed on the same day. When the agreement with Matsushita
expired, an In-House Brokerage Service Agreement for Matsushita’s Philippine Economic Zone
Authority export operations was entered into, while retaining Petitioner’s services.

Matsushita called Keihin-Everett’s Sales Manager about a column in the tabloid newspaper, Tempo
which narrated the April 17 2002 interception by Caloocan City police of a stolen truck filled with
shipment of video monitors and CCTV systems owned by Matsushita. When contacted by
Respondent about the news, Petitioner stated that the tabloid report had blown the incident out of
proportion. Respondent independently investigated the incident and when confronted with the
findings, Petitioner wrote back admitting that its previous report was erroneous and that the
pilferage was apparently proven. Matsushita terminated its In-House Brokerage Service Agreement

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with Respondent citing loss of confidence due to the way of handling the April 17, 2002 incident
and non-disclose of the incident’s relevant facts.

Respondent filed a complaint alleging that Petitioner’s “misrepresentation, malice, negligence and
fraud” caused the termination of its In-House Brokerage Service Agreement with Matushita.
Keihin-Everett prayed for compensation for lost income, with legal interest, exemplary damages,
attorney’s fees, litigation expenses, and the costs of the suit. The RTC ruled in favor of Respondent
and said that Petitioner failed to exercise due diligence in disclosing the true facts of the incident
to Keihin-Everett resulting to income losses due to Matsushita’s cancellation of their contract. The
Court of Appeals affirmed.

Petitioner filed a Petition for Review positing that a pre-existing contractual relation between the
parties should bar the application of the principles of quasi-delict. Because of this, the terms and
conditions of the contract between the parties must be applied. The argument is that there being
no obligation under the Trucking Service Agreement to inform Keihin Everett of the hijacking
incident, its report was done in good faith and did not constitute negligence. Its representations
regarding the hijacking incident were a sound business judgment and not a negligent act.

ISSUE:

Whether Petitioner was negligent for failing to disclose the facts surrounding the hijacking incident
which led to the termination of the Trucking Service Agreement?

RULING:

Yes. The test to determine a party’s negligence is if the party used “the reasonable care and caution
which an ordinarily prudent person would have used in the same situation” when it performed the
negligent act. If the party did not exercise reasonable care and caution, then it is guilty of
negligence.

Here, the sound business judgment of Petitioner lacks merit. Despite the circumstances which
would have cautioned Petitioner to act with care while investigating and reporting the hijacking
incident, Petitioner failed to do so.

Negligence may either result in culpa aquiliana or culpa contractual. Culpa aquiliana is the
“wrongful or negligent act or omission which creates a viniculum juris and gives rise to an obligation
between two persons not formally bound by any other obligation,” and is governed by Article 2176
of the Civil Code.

Actions based on contractual negligence and actions based on quasi-delicts differ in terms of
conditions, defenses, and proof. They generally cannot co-exist. Once a breach of contract is
proved, the defendant is presumed negligent and must prove not being at fault. In a quasi-delict,
however, the complaining party has the burden of proving the other party’s negligence.

However, there are instances when Article 2176 may apply even when there is a pre-existing
contractual relation. If a contracting party’s act that breaches the contract would have given rise to
an extra-contractual liability had there been no contract, the contract would be deemed breached
by a tort, and the party may be held liable, under Article 2176 and its related provisions.

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The Court stressed that in situations where the contractual relation is indispensable to hold a party
liable, there must be a finding that the act or commission complained of was done in bad faith and
in violation of Article 21 of the Civil Code to give rise to an action based on tort.

In this case, the doctrine that “the act that breaks the contract may also be a tort”, on which the
lower courts relied, is inapplicable here. Petitioner’s negligence, arising as it does from its
performance of its obligation to respondent, is dependent on this obligation. Neither do the facts
show that Article 21 of the Civil Code applies, there being no finding that petitioner’s act was a
conscious one to cause harm, or be of such a degree as to approximate fraud or bad faith.
Consequently, Articles 1170, 1172, and 1173 of the Civil Code on negligence in the performance of an
obligation should apply.

B. DAMAGES
1. GENERAL PROVISIONS

SPOUSES ED DANTE LATONIO AND MARY ANN LATONIO and the minor ED CHRISTIAN
LATONIO v. MCGEORGE FOOD INDUSTRIES INC., CEBU GOLDEN FOODS INDUSTRIES,
INC., and TYKE PHILIP LOMIBAO
G.R. No. 206184, December 6, 2017, PERALTA, J.:

To warrant the recovery of damages, there must be both a right of action for a legal wrong inflicted
by the defendant, and damage resulting to the plaintiff therefrom. Wrong without damage, or damage
without wrong, does not constitute a cause of action, since damages are merely part of the remedy
allowed for the injury caused by a breach or wrong.

FACTS:

Spouses Ed and Mary Annaccompanied their eight-month-old child Ed Christian to a birthday party
at the McDonald's Restaurant, Ayala Center, Cebu City. During the party and as part of the birthday
package, McDonald's presented two mascots. Intending to have her child's photo taken with the
mascots, Mary Ann placed Ed Christian on a chair in front of the mascot "Birdie." Lomibao was the
person inside the "Birdie" mascot suit. Lomibao positioned itself behind the child and extended its
"wings" to give a good pose for the camera. As photos were about to be taken, Mary Ann released
her hold of Ed Christian. Seconds later, the child fell head first from the chair onto the floor.

Employees of McDonald’s (Cebu Golden Food) assisted petitioners in giving first aid treatment to
Ed Christian. McDonald’s reimbursed Mary Ann for the expenses incurred for the x-ray
examination. It further offered to pay the expenses for the CT scan. Subsequently, spouses
instituted a complaint for damages amounting to 15 Million and attorney's fees against McGeorge,
the licensor of McDonalds Cebu .

RTC held Cebu Golden Food is liable because the proximate cause of Ed Christian’s fall is the
negligence of their employee, Lomibao. On the other hand, the Court of Appeals reversed the trial
court's decision and held that Ed Christian’s mother, Mary Ann, is liable because the proximate
cause of the child's fall was Mary Ann's act of leaving her eightmonth- old child, Ed Christian, in
the "hands" of Lomibao who was at the time wearing the Birdie mascot costume.

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ISSUE:

Whether or not the Court of Appeals erred in ruling that the proximate cause of Ed Christian’s fall
was the negligence of petitioner Mary Ann

RULING:

No. We agree with the appellate court that despite Mary Ann’s insistence that she made sure that
her baby was safe and secured before she released her grasp on Ed Christian.

It is irresponsible for a mother to entrust the safety, even momentarily, of her eight-month-old
child to a mascot, not to mention a bird mascot in thick leather suit that had no arms to hold the
child and whose diminished ability to see, hear, feel, and move freely was readily apparent.
Moreover, by merely tapping the mascot and saying "papicture ta", Mary Ann cannot be said to
have "told, informed and instructed the mascot that she was letting the mascot hold the baby
momentarily." Releasing her grasp of the baby without waiting for any indication that the mascot
heard and understood her is just plain negligence on the part of Mary Ann.

To Our mind, what is more in accord with human experience and dictates of reason is that a diligent
mother would naturally ensure first and foremost the safety of her child before releasing her hold
on him. Mary Ann, in placing Ed Christian on a chair and expecting a bird mascot to ensure the
child's safety, utterly failed to observe the degree of diligence expected of her as a mother of an
eight-month- old baby.

In the absence of negligence on the part of respondents Cebu Golden Foods and Lomibao, as well
as their management and staff, they cannot be made liable to pay for the damages prayed for by the
petitioners.

To warrant the recovery of damages, there must be both a right of action for a legal wrong inflicted
by the defendant, and damage resulting to the plaintiff therefrom. Wrong without damage, or
damage without wrong, does not constitute a cause of action, since damages are merely part of the
remedy allowed for the injury caused by a breach or wrong.

Many accidents occur and many injuries are inflicted by acts or omissions which cause
damage or loss to another but which violate no legal duty to such other person, and
consequently create no cause of action in his favor. In such cases, the consequences must
be borne by the injured person alone. The law affords no remedy resulting from an act
which does not amount to a legal injury or wrong.

2. ACTUAL AND COMPENSATORY DAMAGES

JOSE SANICO AND VICENTE CASTRO v. WERHERLINA P. COLIPANO

G.R. NO. 209969. SEPTEMBER 27, 2017, CAGUIOA, J.:

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Damages for loss of earning capacity may be awarded despite the absence of documentary evidence
when the deceased is employed as a daily wage worker earning less than the minimum wage under
current labor laws.

FACTS:

On December 25, 1993, Christmas Day, Colipano and her daughter were paying passengers in the
jeepney operated by Sanico, which was driven by Castro. Colipano claimed she was made to sit on
an empty beer case at the edge of the rear entrance/exit of the jeepney with her sleeping child on
her lap. And, at an uphill incline in the road to Carmen, Cebu, the jeepney slid backwards because
it did not have the power to reach the top. Colipano pushed both her feet against the step board to
prevent herself and her child from being thrown out of the exit, but because the step board was
wet, her left foot slipped and got crushed between the step board and a coconut tree which the
jeepney bumped, causing the jeepney to stop its backward movement. Colipano's leg was badly
injured and was eventually amputated. Sanico claimed however that the event was due to engine
failure, that he paid for all the hospital and medical expenses of Colipano, and that Colipano
eventually freely and voluntarily executed an Affidavit of Desistance and Release of Claim. RTC
awarded P2,098.80 as actual damages and 360,000 as compensatory damages. CA however reduced
it to 200,000.

ISSUE:

Whether or not the CA erred in the amount of damages awarded.

RULING:

No. The award of the sum of P200,000.00 as compensatory damages for loss of earning capacity is
in order, notwithstanding the objections of defendants-appellants with respect to lack of evidence
on Colipano's age and annual income.

Although as a general rule, documentary evidence is required to prove loss of earning capacity,
Colipano's testimony on her annual earnings of P12,000.00 is an allowed exception. There are two
exceptions to the general rule and Colipano's testimonial evidence falls under the second
exception, viz.:

By way of exception, damages for loss of earning capacity may be awarded despite the absence of
documentary evidence when (1) the deceased is self-employed earning less than the minimum wage
under current labor laws, and judicial notice may be taken of the fact that in the deceased's line of
work no documentary evidence is available; or (2) the deceased is employed as a daily wage worker
earning less than the minimum wage under current labor laws.

The CA applied the correct formula for computing the loss of Colipano's earning capacity:

Net earning capacity = Life expectancy x [Gross Annual Income - Living Expenses (50% of gross
annual income)], where life expectancy = 2/3 (80 - the age of the deceased).

However, the CA erred when it used Colipano's age at the time she testified as basis for computing
the loss of earning capacity. The loss of earning capacity commenced when Colipano's leg was

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crushed on December 25, 1993. Given that Colipano was 30 years old when she testified on October
14, 1997, she was roughly 27 years old on December 25, 1993 when the injury was sustained.
Following the foregoing formula, the net earning capacity of Colipano is P212,000.00.

JOSE SANICO AND VICENTE CASTRO v. WERHERLINA P. COLIPANO

G.R. NO. 209969. SEPTEMBER 27, 2017, CAGUIOA, J.:

Damages for loss of earning capacity may be awarded despite the absence of documentary evidence
when the deceased is employed as a daily wage worker earning less than the minimum wage under
current labor laws.

FACTS:

On December 25, 1993, Christmas Day, Colipano and her daughter were paying passengers in the
jeepney operated by Sanico, which was driven by Castro. Colipano claimed she was made to sit on
an empty beer case at the edge of the rear entrance/exit of the jeepney with her sleeping child on
her lap. And, at an uphill incline in the road to Carmen, Cebu, the jeepney slid backwards because
it did not have the power to reach the top. Colipano pushed both her feet against the step board to
prevent herself and her child from being thrown out of the exit, but because the step board was
wet, her left foot slipped and got crushed between the step board and a coconut tree which the
jeepney bumped, causing the jeepney to stop its backward movement. Colipano's leg was badly
injured and was eventually amputated. Sanico claimed however that the event was due to engine
failure, that he paid for all the hospital and medical expenses of Colipano, and that Colipano
eventually freely and voluntarily executed an Affidavit of Desistance and Release of Claim. RTC
awarded P2,098.80 as actual damages and 360,000 as compensatory damages. CA however reduced
it to 200,000.

ISSUE:

Whether or not the CA erred in the amount of damages awarded.

RULING:

No. The award of the sum of P200,000.00 as compensatory damages for loss of earning capacity is
in order, notwithstanding the objections of defendants-appellants with respect to lack of evidence
on Colipano's age and annual income.

Although as a general rule, documentary evidence is required to prove loss of earning capacity,
Colipano's testimony on her annual earnings of P12,000.00 is an allowed exception. There are two
exceptions to the general rule and Colipano's testimonial evidence falls under the second
exception, viz.:

By way of exception, damages for loss of earning capacity may be awarded despite the absence of
documentary evidence when (1) the deceased is self-employed earning less than the minimum wage
under current labor laws, and judicial notice may be taken of the fact that in the deceased's line of
work no documentary evidence is available; or (2) the deceased is employed as a daily wage worker
earning less than the minimum wage under current labor laws.

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The CA applied the correct formula for computing the loss of Colipano's earning capacity:

Net earning capacity = Life expectancy x [Gross Annual Income - Living Expenses (50% of gross
annual income)], where life expectancy = 2/3 (80 - the age of the deceased).

However, the CA erred when it used Colipano's age at the time she testified as basis for computing
the loss of earning capacity. The loss of earning capacity commenced when Colipano's leg was
crushed on December 25, 1993. Given that Colipano was 30 years old when she testified on October
14, 1997, she was roughly 27 years old on December 25, 1993 when the injury was sustained.
Following the foregoing formula, the net earning capacity of Colipano is P212,000.00.

3. MORAL DAMAGES

SPS. CRISTINO & EDNA CARBONELL v. METROPOLITAN BANK AND TRUST

COMPANY
G.R. No. 178467, April 26, 2017, BERSAMIN, J.:

There can be damage without injury in those instances in which the loss or harm was not the result
of a violation of a legal duty. These situations are often called damnum absque injuria.

FACTS:

An action for damages was filed by Sps. Carbonell alleging that they had experienced emotional
shock, mental anguish, public ridicule, humiliation, insults and embarrassment during their trip to
Thailand because of the respondent's release to them of five US$ 100 bills that later on turned out
to be counterfeit. They claimed that they had travelled to Bangkok, Thailand after withdrawing US$
l ,000.00 in US$ 100 notes from their dollar account at the respondent's Pateros branch; that while
in Bangkok, they had exchanged five US$ 100 bills into Baht, but only four of the US$ 100 bills had
been accepted by the foreign exchange dealer because the fifth one was "no good;" that unconvinced
by the reason for the rejection, they had asked a companion to exchange the same bill at Norkthon
Bank in Bangkok; that the bank teller thereat had then informed them and their companion that
the dollar bill was fake; that the teller had then confiscated the US$ 100 bill and had threatened to
report them to the police if they insisted in getting the fake dollar bill back; and that they had to
settle for a Foreign Exchange Note receipt.3

The spouses claimed that later on, they had bought jewelry from a shop owner by using four of the
remaining US$100 bills as payment; that on the next day, however, they had been confronted by the
shop owner at the hotel lobby because their four US$ 100 bills had turned out to be counterfeit; that
the shop owner had shouted at them: "You Filipinos, you are all cheaters!;" and that the incident
had occurred within the hearing distance of fellow travelers and several foreigners.

The petitioners continued that upon their return to the Philippines, they had confronted the
manager of the Metrobank's Pateros branch on the fake dollar bills, but the latter had insisted that
the dollar bills she had released to them were genuine inasmuch as the bills had come from the
head office; that in order to put the issue to rest, the counsel of the petitioners had submitted the
subject US$ 100 bills to the Bangko Sentral ng Pilipinas (BSP) for examination; that the BSP had
certified that the four US$100 bills were near perfect genuine notes; and that their counsel had

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explained by letter their unfortunate experience caused by the respondent's release of the fake US
dollar bills to them, and had demanded moral damages of ₱10 Million and exemplary damages.

ISSUE:

Whether or not the spouses are entitled to moral and exemplary damages on account of their
suffering the unfortunate experience abroad brought about by their use of the fake US dollar bills
withdrawn from the latter.

RULING:

No. It is true that the petitioners suffered embarrassment and humiliation in Bangkok. Yet, we
should distinguish between damage and injury. In The Orchard Golf & Country Club, Inc. v. Yu, the
Court has fittingly pointed out the distinction, viz.:

x x x Injury is the illegal invasion of a legal right, damage is the loss, hurt, or harm
which results from the injury; and damages are the recompense or compensation awarded
for the damage suffered. Thus, there can be damage without injury in those instances in
which the loss or harm was not the result of a violation of a legal duty. These situations are
often called damnum absque injuria.

In every situation of damnum absque injuria, therefore, the injured person alone bears the
consequences because the law affords no remedy for damages resulting from an act that does not
amount to a legal injury or wrong. For instance, in BP I Express Card Corporation v. Court of
Appeals , the Court turned down the claim for damages of a cardholder whose credit card had been
cancelled after several defaults in payment, holding therein that there could be damage without
injury where the loss or harm was not the result of a violation of a legal duty towards the plaintiff.
In such situation, the injured person alone should bear the consequences because the law afforded
no remedy for damages resulting from an act that did notamount to a legal injury or wrong. Indeed,
the lack of malice in the conduct complained of precluded the recovery of damages.

Here, although the petitioners suffered humiliation resulting from their unwitting use of the
counterfeit US dollar bills, the respondent, by virtue of its having observed the proper protocols
and procedure in handling the US dollar bills involved, did not violate any legal duty towards them.
Being neither guilty of negligence nor remiss in its exercise of the degree of diligence required by
law or the nature of its obligation as a banking institution, the latter was not liable for damages.
Given the situation being one of damnum absque injuria, they could not be compensated for the
damage sustained.

SANTOS-YLLANA REALTY CORPORATION v. SPOUSES RICARDO and FLORENTINA

DEANG
G.R. No. 190043, 21 JUNE 2017, Velasco, Jr., J.

It was incumbent upon respondents to overcome the aforestated presumption and to prove that
petitioner abused its rights and willfully intended to inflict damage upon them before they can claim
damages from the former. Otherwise, having the sole prerogative to move to execute the judgment,
the disputable presumption that petitioner is innocent of wrongdoing against respondents prevails.

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FACTS:

Florentina Deang (Florentina), doing business under the name and style of "Rommel Dry Goods,"
is a former lessee of Stall No. H-6 at Santos-Yllana Shopping Center, which is located on Miranda
Street, Angeles City, Pampanga, and owned and operated by Santos-Yllana Realty Corporation (SY
Realty) since 1975. Due to Florentina's failure to pay her rents and other charges due on the rented
stall, SY Realty filed a Complaint for Ejectment with Damages against spouses Deang before the
Metropolitan Trial Court (MTC) of Angeles City. The MTC rendered a Decision based on a
Compromise Agreement that the parties executed.

Thereafter, SY Realty filed a Motion for Execution of the decision due to Florentina's failure to
comply with the terms of the Compromise Agreement. Spouses Deang objected, alleging that the
amount due to SY Realty had already been paid in full. After resolving the objections, the Angeles
City MTC issued an Order granting the issuance of the Writ of Execution, and the same was
accordingly issued.

Spouses Deang moved to quash the Writ of Execution. On even date, Sheriff Allen Sicat (Sheriff
Sicat) of the Regional Trial Court (RTC) of Angeles City implemented the Writ of Execution and
padlocked respondents' stall. The stall, however, was ordered reopened by the MTC within the same
day due to the pendency of the Motion for Reconsideration.

During the hearings on the Motion for Reconsideration, Spouses Deang reiterated their claim that
they had already paid the rental arrearages and other fees and charges due to SY Realty; hence, the
Motion for Execution should be rendered moot and academic. The Angeles MTC issued an Order
upholding the Writ of Execution and commanding the sheriff to immediately implement the same.
Consequently, Daniel Pangan, Sheriff III of the MTC (Sheriff Pangan), implemented the writ and
padlocked spouses Deang's stall.

Aggrieved by the implementation of the Writ of Execution, Spouses Deang filed a Complaint for
Damages with Prayer for Injunctive Relief against SY Realty and Sheriffs Sicat and Pangan before
the Manila RTC, alleging that the Writ of Execution was illegally implemented. The trial court ruled
in favor of Spouses Deang wherein they observed that the undue haste by which the Angeles MTC
issued the Writ of Execution violated Spouses Deangs's right to due process and to question the
propriety of the issuance of the Writ. Consequently, it held that the enforcement of the Writ was
tainted with malice and bad faith on the part of SY Realty. Accordingly, the RTC of Manila, Branch
44 rendered a Decision, finding for respondents and adjudged petitioner, as well as Sheriffs Sicat
and Pangan, jointly and severally liable for the damages being claimed.

Upon appeal, the CA affirmed the ruling of the trial court and held that the sheriffs failed to observe
the notice requirement mandated under Section 10(c) of Rule 39 in the implementation of the Writ
of Execution. Despite the foregoing findings, the CA adjudged SY Realty liable for damages to
respondents. Hence, this petition.

ISSUE:

Whether or not the CA erred in sustaining the moral and exemplary damages awarded, including
attorney's fees, despite its finding that SY Realty had no participation in the implementation of the
Writ of Execution.

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RULING:

YES. The petition is meritorious. The joint and solidary liability of petitioner has no factual and
legal basis.

It is undisputed that SY Realty succeeded in securing a favorable judgment in the ejectment case;
therefore, it was well within its right to move for the execution of the MTC's Decision pursuant to
Sec. 19, Rule 70 of the Rules of Court. The rule allows for the immediate execution of judgment in
the event that judgment is rendered against the defendant in an unlawful detainer or forcible entry
case. SY Realty clearly elected to exercise its right under the aforestated provision; thus, its move
to execute the MTC judgment enjoys the disputable presumption under Sec. 3(ff), Rule 131 of the
Revised Rules on Evidence that it obeyed the applicable law and rules in doing so.

We have, in Philippine Agila Satellite Inc. v. Usec. TrinidadLichauco, elucidated that "a civil
complaint for damages necessarily alleges that the defendant committed a wrongful act or omission
that would serve as basis for the award of damages." As such, it was incumbent upon respondents
to overcome the aforestated presumption and to prove that petitioner abused its rights and willfully
intended to inflict damage upon them before they can claim damages from the former. Otherwise,
having the sole prerogative to move to execute the judgment, the disputable presumption that
petitioner is innocent of wrongdoing against respondents prevails.

A reading of the RTC's judgment shows that it was not conclusively proved that petitioner
committed bad faith or connived with the sheriffs in the implementation of the Writ. Moreover, no
less than the CA, in the body of its Decision, absolved petitioner from any fault and participation
in the injury inflicted upon respondents by reason of the haphazard implementation of the Writ of
Execution.

On this score, we cannot ascribe any fault on the part of [petitioner] corporation as to the manner
of implementing the writ. As it is, the said corporation is the winning party in the ejectment case.
Just like any others, it only desired the immediate execution of the judgment of the court, which
was rendered favorable to them. Records is bereft of any showing that defendant-appellant [had] a
hand in the non-compliance with the notice requirement mandated by law. (emphasis supplied)

To hold petitioners liable for damages, despite having been categorically absolved, is manifestly
unjust and inequitable. Applying the foregoing disquisition in the present case, We cannot sustain
the judgment affirming petitioner's liability for damages to respondents.

Moral damages are awarded to enable the injured party to obtain means, diversions, or amusements
that will serve to alleviate the moral suffering he has undergone, by reason of the defendant's
culpable action. For a claim for moral damages to prosper, the claimant must prove that:
(1) first, there must be an injury, whether physical, mental or psychological, clearly sustained by the
claimant; (2) second, there must be culpable act or omission factually
established; (3) third, the wrongful act or omission of the defendant is the proximate cause of the
injury sustained by the claimant; and (4) fourth, the award of damages is predicated on any of the
cases stated in Article 2219 of the Civil Code.

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As discussed, the culpable act or omission on the part of SY Realty that resulted in injury to
respondents was not factually established.

The Court likewise cannot affirm SY Realty’s liability for exemplary damages, attorney's fees, and
cost of suit. The award of exemplary damages is proper only if respondents showed their
entitlement to moral, temperate or compensatory damages; yet, similar to the moral damages
claimed, respondents were not able to establish their entitlement. Anent the liability of petitioners
for attorney's fees and cost of suit, the same must similarly be deleted in light of the reversal of
judgment as to them.

Regrettably, the execution of the MTC judgment was tainted with irregularities that resulted in
damage to Spouses Deang. Nevertheless, under the principle of damnum absque injuria, the
legitimate exercise of a person's rights, even if it causes loss to another, does not automatically
result in an actionable injury. SY Realty must not bear the brunt of the sheriffs' misconduct in the
absence of evidence that the latter acted upon its instructions to ignore the rules of procedure in
implementing the Writ.

Anent the liability of Sheriffs Sicat and Pangan to respondents, records do not disclose if the former
questioned the Decision of the CA before this Court. As such, the judgment against them stands.

JUDITH D. DARINES AND JOYCE D. DARINES v. PRESENT: EDUARDO QUIÑONES AND

ROLANDO QUITAN
G.R. No. 206468, August 02, 2017, FIRST DIVISION, DEL CASTILLO, J.

An action for breach of contract of carriage, moral damages may be awarded only in case (1) an
accident results in the death of a passenger; or (2) the carrier is guilty of fraud or bad faith, is pursuant
to Article 1764, in relation to Article 2206(3) of the Civil Code, and Article 2220 thereof. To award
moral damages for breach of contract, therefore, without proof of bad faith or malice on the part of
the defendant, as required by [Article 2220 of the Civil Code], would be to violate the clear provisions
of the law, and constitute unwarranted judicial legislation.

FACTS:
Judith D. Darines and her daughter, Joyce D. Darines alleged in their that they boarded the
Amianan Bus Line as paying passengers en route from Carmen, Rosales, Pangasinan to Baguio City.
Respondent Rolando M. Quitan was the driver of the bus. While travelling on Camp 3, Tuba,
Benguet along Kennon Road, the bus crashed into a truck which was parked on the shoulder of
Kennon Road. As a result, both vehicles were damaged; two passengers of the bus died; and the
other passengers, including petitioners, were injured. Joyce suffered cerebral concussion while
Judith had an eye wound which required an operation.

Petitioners argued that Quitan and respondent Eduardo Quinones, the operator of Amianan Bus
Line, breached their contract of carriage as they failed to bring them safely to their destination.
They also contended that Quitan's reckless and negligent driving caused the collision.
Consequently, they prayed for actual, moral, exemplary and temperate damages, and costs of suit.

For their part, Quinones and Quitan disputed that, during the incident, Quitan was driving in a
careful, prudent, and dutiful manner at the normal speed of 40 kilometers per hour. According to

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them, the proximate cause of the incident was the negligence of the truck driver, who parked the
truck at the roadside right after the curve without having installed any early warning device.

The RTC awarded moral damages grounded on Judith's testimony regarding her pain and suffering.
It likewise awarded exemplary damages by way of correction, and to serve as example to common
carriers to be extraordinarily diligent in transporting passengers. It also granted petitioner’s
attorney's fees plus costs of suit on the ground that petitioners were compelled to litigate the case.

The CA reversed and set aside the RTC Decision stressing that respondents did not dispute that
they were liable for breach of contract of carriage; in fact, they paid for the medical and hospital
expenses of petitioners. Nonetheless, the CA deleted the award of moral damages because
petitioners failed to prove that respondents acted fraudulently or in bad faith, as shown by the fact
that respondents paid petitioners' medical and hospitalization expenses. The CA held that, since
no moral damages was awarded, then there was no basis to grant exemplary damages. Finally, it
ruled that because moral and exemplary damages were not granted, then the award of attorney's
fees must also be deleted.

ISSUE:

Whether or not award of moral damages may be recovered in this case.

RULING:

NO. The principle that, in an action for breach of contract of carriage, moral damages may be
awarded only in case (1) an accident results in the death of a passenger; or (2) the carrier is guilty
of fraud or bad faith, is pursuant to Article 1764, in relation to Article 2206(3) of the Civil Code, and
Article 2220 thereof, as follows:
Article 1764. Damages in cases comprised in this Section shall be awarded in
accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall
also apply to the death of a passenger caused by the breach of contract by a common
carrier. (Emphasis supplied)

Article 2206. The amount of damages for death caused by a crime or quasi-delict
shall be at least three thousand pesos, even though there may have been mitigating
circumstances. In addition:
(3) The spouse, legitimate and illegitimate descendants and ascendants of
the deceased may demand moral damages for mental anguish by reason of
the death of the deceased.
Article 2220. Willful injury to property may be a legal ground for awarding moral
damages if the court should find that, under the circumstances, such damages are
justly due. The same rule applies to breaches of contract where the defendant
acted fraudulently or in bad faith. (Emphasis supplied)

The aforesaid concepts of fraud or bad faith and negligence are basic as they are distinctly
differentiated by law. Specifically, fraud or bad faith connotes "deliberate or wanton wrong doing"or
such deliberate disregard of contractual obligations while negligence amounts to sheer
carelessness. Fraud includes "inducement through insidious machination." In turn, insidious
machination refers to such deceitful strategy or such plan with an evil purpose. On the other hand,

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bad faith does not merely pertain to bad judgment or negligence but relates to a dishonest purpose,
and a deliberate doing of a wrongful act. Bad faith involves "breach of a known duty through some
motive or interest or ill will that partakes of the nature of fraud."

In other cases, the Court disallowed the recovery of moral damages in actions for breach of contract
for lack of showing that the common carrier committed fraud or bad faith in performing its
obligation. Similarly, the Court did not also grant moral damages in an action for breach of contract
as there was neither allegation nor proof that the common carrier committed fraud or bad faith. The
Court declared that "[t]o award moral damages for breach of contract, therefore, without proof of
bad faith or malice on the part of the defendant, as required by [Article 2220 of the Civil Code],
would be to violate the clear provisions of the law, and constitute unwarranted judicial legislation.

The Court also sustains the CA's finding that petitioners are not entitled to exemplary damages.
Pursuant to Articles 2229 and 2234 of the Civil Code, exemplary damages may be awarded only in
addition to moral, temperate, liquidated, or compensatory damages. Since petitioners are not
entitled to either moral, temperate, liquidated, or compensatory damages, then their claim for
exemplary damages is bereft of merit.

Finally, considering the absence of any of the circumstances under Article 2208 of the Civil Code
where attorney's fees may be awarded, the same cannot be granted to petitioners. All told, the CA
correctly ruled that petitioners are not entitled to moral and exemplary damages as well as
attorney's fees.

SPOUSES DIONISIO ESTRADA and JOVITA R. ESTRADA v. PHILIPPINE RABBIT BUS

LINES, INC. and EDUARDO R. SA YLAN,
G.R. No. 203902, July 19, 2017, Del Castillo, J.

Moral damages, as a general rule, are not recoverable in actions for damages predicated on breach of
contract. However, as an exception, such damages are recoverable in cases in which the mishap
results in the death of a passenger and in cases in which the carrier is guilty of fraud or bad faith.

FACTS:

A mishap occurred, between a passenger bus, driven by one Saylan and owned by Philippine Rabbit
Bus, Lines, Inc. and an Isuzu truck driven by Urez and registered in the name of Cuyton. Before the
collision, the bus was following closely a jeepney. When the jeepney stopped, the bus suddenly
swerved to the left encroaching upon the rightful lane of the Isuzu truck, which resulted in the
collision of the two vehicles. Estrada, who was an1ong the passengers of the bus, as evidenced by
the ticket issued to him, was injured on his right arm (which had to be amputated) as a consequence
of the accident. For the treatment of his injury, he incurred expenses as evidenced by various
receipts.

Estrada then filed complaint for damages in the RTC for the injury that he sustained. He argued
that pursuant to the contract of carriage between him and Philippine Rabbit, respondents were
duty-bound to carry him safely as far as human care and foresight can provide, with utmost
diligence of a very cautious person, and with due regard for all the circumstances. However,
through the fault and negligence of Philippine Rabbit's driver, respondents failed to transport him
safely and resulted in the amputation of his right arm.The RTC ruled in favour of Estrada wherein

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it found that Saylan was negligent in driving the bus. The RTC also held Philippine Rabbit jointly
and severally liable with Saylan in paying for moral and actual damages, and attorney’s fees.

On appeal, Philippine Rabbit imputed error upon the RTC in granting moral damages. It argued
that moral damages are not recoverable in an action for damages predicated on breach of contract
except when death results or when the carrier is guilty of fraud or bad faith. Since none of the two
aforementioned circumstances are present in this case, Philippine Rabbit contended that it is
Eduardo alone who should be held civilly liable.

The CA ruled that Philippine Rabbit is correct in its contention that moral damages are not
recoverable in actions for damages predicated on a breach of contract, unless death of a passenger
results, or it is proved that the carrier was guilty of fraud or bad faith, even if death does not result.
The CA held that there was no evidence on record indicative of fraud or bad faith on Philippine
Rabbit's part. Bad faith should be established by clear and convincing evidence. Further, the CA
ruled that the driver may not be held liable under the contract of carriage as he is not a party to the
same. As such, the CA modified the RTC decision and held that Philippine Rabbit as solely and
exclusively liable for actual damages and deleted the award of moral damages and attorney's fees.

ISSUE:

Whether the decision of the CA was correct?

RULING:

Yes. Under Article 2219 of the Civil Code, moral damages are recoverable in the following and
analogous cases: (a) a criminal offense resulting in physical injuries; (b) quasi-delicts causing
physical injuries; (c) seduction, abduction, rape or other lascivious acts; (d) adultery or
concubinage; (e) illegal or arbitrary detention or arrest; (f) illegal search; (g) libel, slander, or any
other form of defamation; (h) malicious prosecution; (i) acts mentioned in Article 309.

Since breach of contract is not one of the items enumerated under Article 2219, moral damages, as
a general rule, are not recoverable in actions for damages predicated on breach of contract.
However, as an exception, such damages are recoverable in cases in which the mishap results in the
death of a passenger and in cases in which the carrier is guilty of fraud or bad faith.

It is obvious that this case does not come under the first of the abovementioned exceptions since
Estrada did not die in the mishap but merely suffered an injury. Nevertheless, Estrada contends
that it falls under the second category since they aver that Philippine Rabbit is guilty of fraud or
bad faith.
It has been held, however, that "allegations of bad faith and fraud must be proved by clear and
convincing evidence."They are never presumed considering that they are serious accusations that
can be so conveniently and casually invoked. And unless convincingly substantiated by whoever is
alleging them, they amount to mere slogans or mudslinging.

In this case, the fraud or bad faith that must be convincingly proved by petitioners should be one
which was committed by Philippine Rabbit in breaching its contract of carriage with Estrada.
Unfortunately for petitioners, the Court finds no persuasive proof of such fraud or bad faith.

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Nonetheless, since it was established that Estrada lost his right arm, temperate damages in lieu of
actual damages for loss/impairment of earning capacity may be awarded in his favor. Under Article
2224, "temperate or moderate damages, which are more than nominal but less than compensatory
damages, may be recovered when the court finds that some pecuniary loss has been suffered but its
amount cannot, from the nature of the case, be proved with certainty."

4. TEMPERATE DAMAGES

SPOUSES DIONISIO ESTRADA and JOVITA R. ESTRADAv.PHILIPPINE RABBIT BUS LINES,

INC. and EDUARDO R. SA YLAN
G.R. No. 203902, July 19, 2017, FIRST DIVISION, DEL CASTILLO, J.

The Court restates in this petition two principles on the grant of damages. First, moral damages, as a
general rule, are not recoverable in an action for damages predicated on breach of
contract. Second, temperate damages in lieu of actual damages for loss of earning capacity may be
awarded where earning capacity is plainly established but no evidence was presented to support the
allegation of the injured party's actual income.

FACTS:

A mishap occurred along the national highway in Barangay Alipangpang, Pozorrubio, Pangasinan,
between the passenger bus driven by [respondent] Eduardo Saylan and owned by [respondent]
Philippine Rabbit Bus, Lines, Inc., and the Isuzu truck where Petitioner Dionisio Estrada was a
passenger. Before the collision, the bus was following closely a jeepney. When the jeepney stopped,
the bus suddenly swerved to the left encroaching upon the rightful lane of the Isuzu truck (which
was on the opposite lane/direction of the bus), which resulted in their collision. Dionisio Estrada
was injured on the right arm as a consequence of the accident. His injured right arm was amputated.
He incurred expenses as evidenced by various receipts.

Dionisio argued that there was a breach of contract of carriage. And since demands for Philippine
Rabbit to pay him damages for the injury he sustained remained unheeded, Dionisio filed a
complaint for damages wherein he prayed for the following awards: moral damages of ₱500,000.00
actual damages of ₱60,000.00, and attorney's fees of ₱25,000.00.

Denying any liability, Philippine Rabbit averred that it carried Dionisio safely as far as human care
and foresight could provide with the utmost diligence of a very cautious person and with due regard
for all the circumstances prevailing. While it did not contest that its bus figured in an accident,
Philippine Rabbit nevertheless argued that the cause collision was an extraordinary circumstance
independent of its driver's action or a fortuitous event. Hence, it claimed to be exempt from any
liability arising therefrom.

The RTC ruled that Philippine Rabbit and Eduardo were jointly and severally liable. For actual and
moral damages. On appeal, the CA ruled that Philippine Rabbit is solely liable for actual damages
since Eduardo Saylan is not a party to the contract of carriage. However, CA ruled in favor of
Philippine Rabbit’s contention that moral damages are not recoverable in actions for damages
predicated on a breach of contract, unless death of a passenger results, or it is proved that the carrier
was guilty of fraud or bad faith, even if death does not result. There was no finding of bad faith on
the part of Philippine Rabbit, hence, the award of moral damages was deleted.

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Petitioners filed a Motion for Reconsideration but the same was denied by the CA for lack of merit,
Hence, this Petition for Review on Certiorari.

ISSUES:
1. Whether or not moral damages are recoverable by Dionisio.
2. Whether or not temperate damages in lieu of actual damages for loss of earning capacity may be
awarded.

RULING:

1. NO.
Under Article 2219 of the Civil Code, moral damages are recoverable in the following and analogous
cases: (1) a criminal offense resulting in physical injuries; (2) quasi-delicts causing physical injuries;
(3) seduction, abduction, rape or other lascivious acts; (4) adultery or concubinage; (5) illegal or
arbitrary detention or arrest; (6) illegal search; (7) libel, slander, or any other form of defamation;
(8) malicious prosecution; (9) acts mentioned in Article 309; and (1) acts and actions referred to in
Articles 21, 26, 27 , 28, 29, 30, 32, 34, and 35. Case law establishes the following requisites for the
award of moral damages: (1) there must be an injury clearly sustained by the claimant, whether
physical, mental or psychological; (2) there must be a culpable act or omission factually established;
(3) the wrongful act or omission of the defendant is the proximate cause of the injury sustained by
the claimant; and (4) the award for damages is predicated on any of the cases stated in Article 2219
of the Civil Code.

Since breach of contract is not one of the items enumerated under Article 2219, moral damages, as
a general rule, are not recoverable in actions for damages predicated on breach of contract. As an
exception, such damages are recoverable [in an action for breach of contract:] (1) in cases in which
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 (2) in cases in which the carrier is guilty of fraud or bad faith, as
provided in Article 2220. It is obvious that this case does not come under the first of the
abovementioned exceptions since Dionisio did not die in the mishap but merely suffered an injury.
Nevertheless, petitioners contend that it falls under the second category since they aver that
Philippine Rabbit is guilty of fraud or bad faith.

It has been held, however, that "allegations of bad faith and fraud must be proved by clear and
convincing evidence." They are never presumed considering that they are serious accusations that
can be so conveniently and casually invoked. And unless convincingly substantiated by whoever is
alleging them, they amount to mere slogans or mudslinging. In this case, the fraud or bad faith that
must be convincingly proved by petitioners should be one which was committed by Philippine
Rabbit in breaching its contract of carriage with Dionisio. Unfortunately for petitioners, the Court
finds no persuasive proof of such fraud or bad faith. There is no showing here that Philippine Rabbit
induced Dionisio to enter into a contract of carriage with the former through insidious
machination. Neither is there any indication or even an allegation of deceit or concealment or
omission of material facts by reason of which Dionisio boarded the bus owned by Philippine Rabbit.
Likewise, it was not shown that Philippine Rabbit's breach of its known duty, which was to transport
Dionisio from Urdaneta to La Union, was attended by some motive, interest, or ill will. From these,
no fraud or bad faith can be attributed to Philippine Rabbit.

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Still, petitioners insist that since the defenses it pleaded in its Answer were designed to evade
liability, Philippine Rabbit is guilty of fraud or bad faith. Again, it bears to mention that the fraud
or bad faith must be one which attended the contractual breach or one which induced Dionisio to
enter into contract in the first place.

2. YES.
Actual damages for loss/impairment of earning capacity are also not recoverable. In lieu
thereof, the Court awards temperate damages.

In an attempt to recover the ₱500,000.00 awarded by the RTC as moral damages but deleted by the
CA, petitioners would instead wanted the Supreme Court to grant them the same amount as just
and proper compensation for the loss of Dionisio's right arm. While petitioners denominated their
claim for ₱500,000.00 as moral damages, their computation was actually based on the supposed
loss/impairment of Dionisio's earning capacity. It is, however, settled that damages for loss [or
impairment] of earning capacity is in the nature of actual damages. Actual or compensatory
damages are those awarded in order to compensate a party for an injury or loss he suffered. They
arise out of a sense of natural justice, aimed at repairing the wrong done. To be recoverable, they
must be duly proved with a reasonable degree of certainty. A court cannot rely on speculation,
conjecture, or guesswork as to the fact and amount of damages, but must depend upon competent
proof that they have suffered, and on evidence of the actual amount thereof.

Thus, as a rule, documentary evidence should be presented to substantiate the claim for damages
for loss of earning capacity. By way of exception, damages for loss [or impairment] of earning
capacity may be awarded despite the absence of documentary evidence when (1) the deceased [or
the injured] was self-employed and earning less than the minimum wage under current labor laws,
in which case, judicial notice may be taken of the fact that in the deceased's line of work no
documentary evidence is available; or (2) the deceased was employed as a daily worker earning less
than the minimum wage under current labor laws.

Here, it is unlikely that petitioners presented evidence to prove a claim for actual damages based
on loss/impairment of earning capacity since what they were claiming at the outset was an award
for moral damages. Unfortunately, no documentary evidence supporting Dionisio's actual income
is extant on the records. It must be emphasized, though, that documentary proof of Dionisio's
actual income cannot be dispensed with since Dionisio does not fall under any of the two exceptions
aforementioned. Thus, as it stands, there is no competent proof substantiating his actual income
and because of this, an award for actual damages for loss/ impairment of earning capacity cannot
be made. Nonetheless, since it was established that Dionisio lost his right arm, temperate damages
in lieu of actual damages for loss/impairment of earning capacity may be awarded in his favor.

Actual damages by way of medical expenses must be supported by official receipts.

Anent petitioners' assertion that actual damages should be awarded to them for the cost of
replacement of Dionisio's amputated right arm, suffice it to state that petitioners failed to show
during trial that the said amputated right arm was actually replaced by an artificial one. All that
petitioners submitted was a quotation of ₱l60,000.00 for a unit of elbow prosthesis and nothing
more. It has been held that actual proof of expenses incurred for medicines and other medical
supplies necessary for treatment and rehabilitation must be presented by the claimant, in the form
of official receipts, to show the exact cost of his medication and to prove that he indeed went

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through medication and rehabilitation. In the absence of the same, such claim must be negated. At
any rate, the RTC already granted petitioners actual damages by way of medical expenses based on
the official hospital receipts submitted.

Dispositive Portion: WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed
May 16, 2012 Decision and October 1, 2012 Resolution of the Court of Appeals in CA-G.R. CV No.
95520 are AFFIRMED with MODIFICATIONS as follows: (1) petitioners are declared entitled to
temperate damages of ₱500,000.00; (2) the award of actual damages is set at the amount of
₱57,658.25; and (3) all damages awarded are subject to legal interest of 6% per annum from the
finality of this Decision until full satisfaction.

XII. OTHER TOPICS

SM SYSTEMS CORPORATION (formerly SPRINGSUN MANAGEMENT SYSTEMS
CORPORATION) vs OSCAR CAMERINO, EFREN CAMERINO, CORNELIO MANTILE,
DOMINGO ENRIQUEZ AND HEIRS OF NOLASCO DEL ROSARIO
G.R. No. 178591, March 29, 2017, Reyes,J.

A compromise agreement may still be entered into by the parties to a case in order to settle their
liabilities, even after the finality of judgment. However, the compromise agreement must have all the
elements of a valid contract.

FACTS:

Victoria Homes was the registered owner of three (3) lots, while respondents were farmers-tenants
cultivating and planting rice and corn on the lots. Victoria Homes, without notifying the farmers,
sold the subject lots to Springsun Management Systems Corporation, the predecessor-in-interest
of SM Systems (SMS). The farmers filed an action for Redemption which was granted by the RTC
and upheld by the CA and the SC.

The farmers moved for the execution of the decision which was granted by the RTC. SMS however,
refused to accept the redemption price being offered by the farmers. Subsequently, SMS and the
farmers executed a document, denominated as Kasunduan, wherein the farmers agreed to receive
₱300,000.00 each from SMS, as compromise settlement. SMS then filed a Motion to Hold Execution
in Abeyance on the Ground of Supervening Event. This was denied by the RTC and the CA.

ISSUE:

W/N the Kasunduan effectively novated the judgment obligation in the action for redemption.

RULING:

YES. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a
litigation or put an end to one already commenced. Contracting parties may establish such
stipulations, clauses, terms, and conditions as they deem convenient, provided that these are not
contrary to law, morals, good customs, public order, or public policy.

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Rights may be waived through a compromise agreement, notwithstanding a final judgment that
has already settled the rights of the contracting parties. To be binding, the compromise must be
shown to have been voluntarily, freely and intelligently executed by the parties, who had full
knowledge of the judgment. There is no justification to disallow a compromise agreement, solely
because it was entered into after final judgment. The validity of the agreement is determined by
compliance with the requisites and principles of contracts, not by when it was entered into.

The farmers themselves raised no challenge relative to the existence of the elements of a valid
contract. The execution of the compromise agreements between SMS and the farmers is an
undisputed fact. There are likewise no claims of vitiated consent and no proof that the agreements
were "rescissible, voidable, unenforceable, or void." The Court does not find the amount of
₱300,000.00 paid to each of the four farmers as unconscionable.

In the case at bar, SMS' obligation to allow redemption of the three parcels of land was superseded
by the terms of the compromise agreements executed with the farmers. SMS' new obligation
consisted of the payment of ₱300,000.00 each to the farmers, who, in turn, waived their redemption
rights. Novation, thus, arose as the old obligation became incompatible with the new.

Considering that the judgment obligation had been novated due to the execution of valid
compromise agreements, the writ of execution should thus be quashed.

CHIQUITA BRANDS, INC. et. al. v. HON. GEORGE OMELIO et. al.
G.R. No. 189102, 7 June 2017, Leonen, J.

A judgment on compromise that has attained finality cannot be "modified in any respect, even if the
modification is meant to correct erroneous conclusions of fact and law, and whether it be made by the
court that rendered it or by the Highest Court of the land.

FACTS:

Thousands of banana plantation workers from over 14 countries instituted class suits for damages
in the United States against 11 foreign corporations. The banana plantation workers claimed to have
been exposed to dibromochloropropane (DBCP) in the 1970s up to the 1990s while working in
plantations that utilized it. As a result, these workers suffered serious and permanent injuries to
their reproductive systems.

DBCP is a pesticide used against roundworms and threadworms that thrive on and damage tropical
fruits such as bananas and pineapples. It was first introduced in 1955 as a soil fumigant. Early
studies have shown that prolonged exposure to DBCP causes sterility. DBCP was also found to have
mutagenic properties.

The United States courts dismissed the actions on the ground of forum non conveniens and directed
the claimants to file actions in their respective home countries.

Filipino claimants filed a complaint for damages against the same foreign corporations before the
Regional Trial Court in Panabo City, Davao del Norte, Philippines. Before pre-trial, Chiquita

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Brands, Inc., Chiquita Brands International, Inc. (collectively, Chiquita), Dow Chemical Company
(Dow), Occidental Chemical Corporation (Occidental), Shell Oil Company (Shell), Del Monte Fresh
Produce, N.A., and Del Monte Tropical Fruit Co. (collectively, Del Monte) entered into a worldwide
settlement in the United States with all the banana plantation workers. The parties executed a
document denominated as the "Compromise Settlement, Indemnity, and Hold Harmless
Agreement"

The Compromise Agreement provided, among others, that the settlement amount should be
deposited in an escrow account, which should be administered by a mediator. After the claimants
execute individual releases, the mediator shall give the checks representing the settlement amounts
to the claimants' counsel, who shall then distribute the checks to each claimant.
The Compromise Agreement also provided that the laws of Texas, United States should govern its
interpretation.

The Regional Trial Court, Panabo City approved the Compromise Agreement by way of judgment
on compromise. Accordingly, it dismissed Civil Case No. 95-45. Several claimants moved for the
execution of the judgment on compromise. They argued that they had already complied with their
obligation under the Compromise Agreement by depositing the settlement amounts into an escrow
account, which was administered by the designated mediator, Mr. M.A. "Mickey" Mills (Mr. Mills).
Hence, there was nothing left for the court to execute.

In its Opposition to the Motion for Execution, Chiquita pointed out that the claimants' execution
of individual quitclaims, denominated as "Release in Full," was an acknowledgement that they had
received their respective share in the settlement amount. The quitclaims proved that the claimants
entered into a compromise agreement and that Chiquita complied with its terms.

The Regional Trial Court, Panabo City granted the Motion for Execution because there was no proof
that the settlement amounts had been withdrawn and delivered to each individual claimant.
Chiquita filed a motion, praying to suspend the execution of judgment and to recall the Writ of
Execution. The Regional Trial Court, Panabo City suspended the implementation of the Writ of
Execution and deferred action on the pending motions until the termination of the proceedings
abroad.

The claimants objected to the reception of evidence in the United States. They argued that Judge
Grageda was not authorized to receive evidence and hold hearings outside his territorial
jurisdiction without this Court's express permission.

Subsequently, the claimants moved to inhibit Judge Grageda. However, the motion was denied.
During the hearing of Civil Case No. 95-45, the claimants picketed outside the courtroom. They
were led by a certain Edgardo 0. Maquiran. The claimants accused Judge Grageda as a corrupt
official who delayed the execution of the judicially approved Compromise Agreement. Judge
Grageda was forced to inhibit from hearing Civil Case No. 95-45 and the case was raffled to Branch
14, Regional Trial Court, presided by Judge George E. Omelio (Judge Omelio).

Shell moved to relocate the case records after its counsel discovered that the sealed boxes
containing the case records were merely stacked "on the corridors of the [j]ustice [h]all, exposed
and unsecured." Suspecting that presiding Judge Omelio had prejudged the case, Shell moved for
his inhibition. . Chiquita also moved to inhibit Judge Omelio but was denied.

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In the Order the Regional Trial Court, Davao City denied Chiquita's Motion for Partial
Reconsideration of the Omnibus Order which directed the implementation of the Writ of
Execution. In the same Order, the trial court included Chiquita's subsidiaries and affiliates in the
Writ of Execution.

The Regional Trial Court, Davao City reasoned that Chiquita never filed its formal offer of
evidence. Hence, the trial court had no other choice but to issue another writ of execution. In the
same Order issued by the court, the Regional Trial Court, Davao City imposed solidary liability on
all the subsidiaries, affiliates, controlled and related entities, successors, and assigns of Dow, Shell,
Occidental, Chiquita, and Del Monte. Accordingly, the Regional Trial Court, Davao City issued the
Alias Writ ofExecution.

Chiquita instituted before this Court a Petition for Certiorari and Prohibition with an application
for the issuance of a temporary restraining order and writ of preliminary prohibitory or mandatory
injunction. They assailed the validity of the following orders and writs on the ground that they
were issued with grave abuse of discretion: (1) Writ of Execution; (2) Omnibus Order dated
December 14, 2006, which directed the implementation of the Writ of Execution as against
petitioners; (3) Order dated July 10, 2009, which denied petitioners' Motion for Partial
Reconsideration of the Omnibus Order dated December 14, 2006; (4) Amended Order dated August
11, 2009, which modified the terms of the Writ of Execution to include petitioners' subsidiaries,
affiliates, controlled and related entities, successors, and assigns doing business in the Philippines;
(5) Amended Writ of Execution; and (6) Alias Writ of Execution.

This Court issued a Temporary Restraining Order against respondent Judge Omelio, Sheriff
Esguerra, and all other persons acting on their behalf enjoining them from implementing and
enforcing the assailed orders and writs.

In the present case, Chiquita argue that the Writ of Execution should never have been issued
because the dismissal of Civil Case No. 95-45 in the Omnibus Order was based on the trial court's
approval of the quitclaims executed by the claimants. Hence, "there was nothing left" for the trial
court to execute. Consequently, the Omnibus Orderwhich directed the implementation of the Writ
of Execution, is likewise a patent nullity.

Petitioners further assert that respondent Judge Omelio issued the assailed orders and writs "in an
arbitrary and despotic manner by reason of passion and hostility" against them and their co-
defendants in Civil Case No. 95-45. They claim that he "consistently displayed bias and partiality in
favor of [the claimants]." Chiquita assert that respondent Judge Omelio should inhibit himself from
hearing Civil Case No. 95-45.

ISSUE:

Whether respondent court committed "grave abuse of discretion amounting to lack or excess of its
jurisdiction in issuing the assailed [o]rders and [w]rits"; (YES)

Whether Judge George E. Omelio of Branch 14, Regional Trial Court, Davao City should inhibit
himself from hearing Civil Case No. 95-45. (YES)

RULING:

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A compromise validly entered into has the authority and effect of res judicata as between the
parties. To this extent, a judicial compromise and an extrajudicial compromise are no different from
each other.

However, unlike an extrajudicial compromise, a compromise that has received judicial imprimatur
"becomes more than a mere contract." A judicial compromise is regarded as a "determination of the
controversy" between the parties and "has the force and effect of [a final] judgment." In other words,
it is both a contract and "a judgment on the merits." It may neither be disturbed nor set aside except
in cases where there is forgery or when either of the parties' consent has been vitiated.

The doctrine on immutability of judgments applies to compromise agreements approved by the

courts in the same manner that it applies to judgments that have been rendered on the basis of a
full-blown trial. Thus, a judgment on compromise that has attained finality cannot be "modified in
any respect, even if the modification is meant to correct erroneous conclusions of fact and law, and
whether it be made by the court that rendered it or by the Highest Court of the land."

The Writ of Execution ordering the collection of the settlement amount directly from Chiquita
Brands Inc. and its co-defendants in Civil Case No. 95- 45 is void.

Under the judicially approved Compromise Agreement, Chiquita are obliged to deposit the
settlement amount in escrow within 10 business days after they receive a signed Compromise
Agreement from the counsel of the claimants.

There was nothing in the Compromise Agreement that required Chiquita to ensure the distribution
of the settlement amount to each claimant. Petitioners' obligation under the Compromise
Agreement was limited to depositing the settlement amount in escrow. On the other hand, the
actual distribution of the settlement amounts was delegated to the chosen mediator, Mr. Mills. To
require proof that the settlement amounts have been withdrawn and delivered to each claimant
would enlarge the obligation of petitioners under the Compromise Agreement.

Consequently, the Omnibus Order which directed the implementation of the Writ of Execution, is
likewise void.

Ordinarily, courts have the ministerial duty to grant the execution of a final judgment. The
prevailing party may immediately move for execution of the judgment, and the issuance of the writ
follows as a matter of course. Execution, being "the final stage of litigation . . . [cannot] be
frustrated. "

Nevertheless, the execution of a final judgment may be stayed or set aside in certain cases. In
resolving whether execution should be suspended or whether a writ of execution should be
quashed, courts should be guided by the same principle in the execution of final judgments.
Certainly, they may require parties to present evidence.

In this case, petitioners cannot rely on the five (5) quitclaims for the trial court to quash or recall
the writ of execution. The quitclaims are insufficient to establish that petitioners complied with
their obligation under the Compromise Agreement. They only prove that five (5) claimants received
their respective share in the settlement amount but do not establish that petitioners deposited the

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entire settlement amount in escrow. At the very least, petitioners should have attached proof of
actual deposit in their Opposition to the Motion for Execution.

Neither can petitioners rely on the evidence presented during the proceedings conducted at the
Philippine Consulate in San Francisco, California, United States. This Court takes judicial notice of
the administrative case filed against Judge Grageda for his act of receiving evidence abroad without
proper authority.

In Maquiran v. Grageda, Judge Grageda was held administratively liable for conducting
proceedings in the United States in relation to Civil Case No. 95-45 without this Court's approval
Although he was granted authority to travel to the United States from August 26, 2003 to September
15, 2003, it was for the sole purpose of visiting his daughter:

Presiding Judge Grageda inhibited himself from further hearing the case before the Regional Trial
Court, Panabo City could act on the pending incidents. The case was then transferred to Davao City
due to the hostile environment in Panabo City. Succeeding events further delayed the proceedings.
Given the circumstances of this case, Chiquita cannot be faulted for failing to make a formal offer
of evidence because they were denied the opportunity to do so. Respondent court should have given
Chiquita the chance to offer the deposition of Mr. Stubbs in evidence before acting on the pending
incidents of the case. Thus, respondent court gravely abused its discretion in issuing the Order
dated July 10, 2009, which affirmed execution against petitioners.

FEDERAL BUILDERS, INC. vs POWER FACTORS, INC.

G.R. No. 211504, March 8, 2017, Bersamin, J.

An agreement to submit to voluntary arbitration for purposes of vesting jurisdiction over a

construction dispute in the Construction Industry Arbitration Commission (CIAC) need not be
contained in the construction contract, or be signed by the parties. It is enough that the agreement
be in writing.

FACTS:

Federal, as the general contractor in the construction of the Bullion Mall, engaged Power as its
subcontractor for electric works. Power sent a demand letter to Federal claiming unpaid amounts,
to no avail. Power filed a request for arbitration in the CIAC invoking the arbitration clause of the
Contract of Service between the parties. Federal moved to dismiss on the ground that CIAC had no
jurisdiction over the case, as the Contract of Service had been a mere draft that was never finalized
or signed by the parties.

The CIAC exercised jurisdiction over the dispute and rendered an award in favor of Powers. Federal
appealed in the CA regarding the CIAC’s jurisdiction but the CA found for Powers.

ISSUE:

W/N the CIAC has jurisdiction over the construction dispute.

RULING:

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YES. Under the CIAC Revised Rules of Procedure Governing Construction Arbitration, all that is
required for the CIAC to acquire jurisdiction is for the parties of any construction contract to agree
to submit their dispute to arbitration.

The agreement contemplated in the CIAC Revised Rules to vest jurisdiction of the CIAC over the
parties' dispute is not necessarily an arbitration clause to be contained only in a signed and finalized
construction contract. The agreement could also be in a separate agreement, or any other form of
written communication, as long as their intent to submit their dispute to arbitration is clear. The
fact that a contract was signed by both parties has nothing to do with the jurisdiction of the CIAC,
and this is the explanation why the CIAC Revised Rules itself expressly provides that the written
communication or agreement need not be signed by the parties.

There was a contract between Federal and Power even if the Contract of Service was unsigned. Such
contract was obligatory and binding between them by virtue of all the essential elements for a valid
contract being present. The works promised to be done by Power were already executed albeit still
incomplete, the subject of their dispute concerned only the amounts still due to Power. The parties
had no issues on the provisions or parts of the Contract of Service other than that pertaining to the
downpayment that Federal was supposed to pay, Federal could not validly insist on the lack of a
contract in order to defeat the jurisdiction of the CIAC. The arbitration clause written in the draft
of Federal was unchallenged by the parties until their dispute arose.

Worthy to note is that the jurisdiction of the CIAC is over the dispute, not over the contract between
the parties. The execution of the contracts and the effect of the agreement to submit to arbitration
are different matters, and the signing or non-signing of one does not necessarily affect the other.
In other words, the formalities of the contract have nothing to do with the jurisdiction of the CIAC.

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