Civil Law: Special Lecture Notes in By: Dean Ed Vincent S. Albano Bar Review Director
Civil Law: Special Lecture Notes in By: Dean Ed Vincent S. Albano Bar Review Director
Civil Law: Special Lecture Notes in By: Dean Ed Vincent S. Albano Bar Review Director
CIVIL LAW
By: DEAN ED VINCENT S. ALBANO
Bar Review Director
HUMAN RELATIONS
FAMILY LAW
Thus, in Garcia v. Recio, 418 Phil. 723 [2001], it was pointed out that in order for a divorce obtained abroad
by the alien spouse to be recognized in our jurisdiction, it must be shown that the divorce decree is valid according
to the national law of the foreigner. Both the divorce decree and the governing personal law of the alien spouse who
obtained the divorce must be proven. Since our courts do not take judicial notice of foreign laws and judgment, our
law on evidence requires that both the divorce decree and the national law of the alien must be alleged and proven
like any other fact.
PSYCHOLOGICAL INCAPACITY
In a complaint for declaration of nullity of marriage on the ground of psychological incapacity, the plaintiff
alleged the immaturity, deceitfulness and lack of remorse for his dishonesty and lack of affection towards the
plaintiff-wife. Is she entitled to the relief? Explain.
No. Psychological incapacity should refer to no less than a mental, not physical, incapacity that causes a
party to be truly incognitive of the basic marital covenants that must concomitantly be assumed and discharged by
the parties to the marriage that, as so expressed by Article 68 of the Family Code, include their mutual obligations to
live together, to observe love, respect and fidelity, and to render help and support. The intendment of the law has
been to confine the meaning of psychological incapacity to the most serious cases of personality disorders clearly
demonstrative of an utter insensitivity or inability to give meaning and significance to the marriage. To qualify as
psychological incapacity as a ground for nullification of marriage, a person’s psychological affliction must be grave
and serious as to indicate an utter incapacity to comprehend and comply with the essential objects of marriage,
including the rights and obligations between husband and wife. The affliction must be shown to exist at the time of
marriage, and must be incurable. (Mendoza v. Republic, et al., G.R. No. 157649, November 12, 2012, Bersamin, J)
When is actual medical examination a sine qua non in granting actions for declaration of nullity of marriage
on the ground of psychological incapacity? Explain.
Even if the expert opinions of psychologists are not conditions sine qua non in the granting of petitions for
declaration of nullity of marriage, the actual medical examination of a party maybe dispensed with only if the totality
of evidence presented was enough to support a finding of his psychological incapacity. This does not mean that the
presentation of any form of medical or psychological evidence to show the psychological incapacity would have
automatically ensure the granting of the petition for declaration of nullity of marriage. What is essential, is the
“presence of evidence that can adequately establish the party’s psychological condition,” as the Court said in Marcos.
But where he parties had the full opportunity to present the professional and expert opinions of psychiatrists
tracing the root cause, gravity and incurability of the alleged psychological incapacity, then the opinions should be
presented and be weighed by the trial courts in order to determine and decide whether or not to declare the nullity
of the marriages. The trial courts, as in all the other cases they try, must always base their judgments not solely on
Psychological incapacity; illness must be a downright incapacity or inability to perform duties to the marriage
bond.
In Rep. v. Reghis Romero II, et al., G.R. No. 209180; Romero v. Romero II, G.R. No. 209253, February 24, 2016,
Perlas-Bernabe, J, the RTC granted the petition and declared the marriage between Reghis and Olivia null and void
ab initio on the ground of psychological incapacity. It relied on the findings and testimony of Dr. Basilio, holding that
Reghis suffered from a disorder that rendered him unable to perform the obligations of love, respect and fidelity
towards Olivia as it gave him a strong obsession to succeed in his career, to the exclusion of his responsibilities as a
father and husband. It also concurred with Dr. Basilio’s observation that Reghis is still deeply attached to his parents
and siblings such that he pursues his business ventures for their benefit. Likewise, it agreed that Reghis’ behavioral
disorder existed even before his marriage or even his adolescent years and that the same is incurable. It was
affirmed by the CA on appeal. Is the CA’s ruling correct? Why?
Ans.: No. The policy of the Constitution is to protect and strengthen the family as the basic autonomous social
institution, and marriage as the foundation of the family. As such, the Constitution decrees marriage as legally
inviolable and protects it from dissolution at the whim of the parties. (Navales v. Navales, 578 Phil. 826 [2008])
Psychological incapacity, as a ground to nullify a marriage under Article 36 of the Family Code, should refer to the
most serious cases of personality disorders clearly demonstrative of an utter insensitivity or inability to give
meaning and significance to the marriage. (Santos v. CA, 310 Phil. 21 [1995]) It must be a malady that is so grave and
permanent as to deprive one of awareness of the duties and responsibilities of the matrimonial bond one is about to
assume. (Navales v. Navales)
Verily, all people may have certain quirks and idiosyncrasies, or isolated traits associated with certain
personality disorders and there is hardly any doubt that the intention of the law has been to confine the meaning of
psychological incapacity to the most serious cases. Thus, to warrant the declaration of nullity of marriage, the
psychological incapacity must: (a) be grave or serious such that the party would be incapable of carrying out the
ordinary duties required in a marriage; (b) have juridical antecedence, i.e., it must be rooted in the history of the
party antedating the marriage, although the overt manifestations may emerge only after the marriage; and ( c) be
incurable, or even if it were otherwise, the cure would be beyond the means of the party involved. (Santos v. CA)
In Republic v. CA, 335 Phil. 664 [1997], the Court laid down definitive guidelines on the interpretation and
application of Article 36 of the Family Code. Among others, it clarified that the illness must be grave enough to bring
about the incapacity or inability of the party to assume the essential obligations of marriage such that “mild
characteriological peculiarities, mood changes, occasional emotional outbursts” cannot be accepted as root causes.
The illness must be shown as downright incapacity or inability, not a refusal, neglect or difficulty, much less ill will.
In other words, there is a natal or supervening disabling factor in the person, an adverse integral element in the
personality structure that effectively incapacitates the person from really accepting and thereby complying with the
obligations essential to marriage.
Q – Is his contention that he married Olivia not out of love, but out of reverence for the latter’s parents?
Explain.
Ans.: In Republic v. Albios, G.R. No. 198780, October 16, 2013, 707 SCRA 584, the Court held that motives for entering
into a marriage are varied and complex. The State does not and cannot dictate on the kind of life that a couple
chooses to lead. Any attempt to regulate their lifestyle would go into the realm of their right to privacy and would
raise serious constitutional questions. The right to marital privacy allows married couples to structure their
marriages in almost any way they see fit, to live together or live apart, to have children or no children, to love one
another or not, and so on. Thus, marriages entered into for other purposes, limited or otherwise, such as
convenience, companionship, money, status, and title, provided that they comply with all the legal
requisites, are equally valid. Love, though the ideal consideration in a marriage contract, is not the only
valid cause for marriage. Other considerations, not precluded by law, may validly support a marriage.
The standards used by the Court in assessing the sufficiency of psychological evaluation reports may be
deemed very strict, but these are proper, in view of the principle that any doubt should be resolved in favor of the
validity of the marriage and the indissolubility of the marital tie. After all, marriage is an inviolable institution
protected by the State. Accordingly, it cannot be dissolved at the whim of the parties, especially where the pieces of
evidence presented are grossly deficient to show the juridical antecedence, gravity and incurability of the condition
of the party alleged to be psychologically incapacitated to assume and perform the essential marital duties.
Bringing her children to mahjong sessions exposed them to culture of gambling; psychological incapacitated.
This case originated as an action to declare a marriage void on the ground of psychological incapacity due to
the act of the woman of continuously bringing her children to mahjong sessions. It was dismissed, but the SC
reconsidered its decision ruling that bringing her children to her mah-jong sessions exposed them to culture of
gambling that erode their moral fiber, hence, she is suffering from psychological incapacity.
In Valerio Kalaw v. Ma. Elena Fernandez, G.R. No. 166357, January 14, 2015, Bersamin, J, the SC in its original
decision dated September 19, 2011 (657 SCRA 822) dismissed the complaint for declaration of nullity of the
marriage of the parties on the ground of psychological incapacity alleging that she always brought her children to
mahjong sessions.
A fair assessment of the facts would show that respondent was not totally remiss and incapable of appreciating and
performing her marital and parental duties. Not once did the children state that they were neglected by their mother.
In the decision of September 19, 2011, the Court further declared as follows:
Respondent admittedly played mahjong, but it was not proven that she engaged in mahjong so
frequently that she neglected her duties as a mother and a wife.
On the basis of the above, the SC reconsidered its earlier decision, hence, nullifying the marriage on the
ground of psychological incapacity.
Therefore, their marriage would have been exempted from a marriage license had they cohabited
exclusively as husband and wife for at least five years before their marriage. (Republic v. Dayot, 573 Phil. 553
[2008])
However, evidence showed that they never cohabited, as she was residing in the house of her in-laws, and
her children from her previous marriage disliked him.
Petitioner and Santos had only known each other for only less than four years. Thus, it follows that the two
of them could not have cohabited for at least five years prior to their marriage.
Strict standards in declaration of presumptive death once again reiterated; passive efforts not sufficient.
In Republic v. Jose B. Sareñogon, Jr., G.R. No. 199194, February 10, 2016, Del Castillo, J, there was a petition
for declaration of presumptive death of a spouse. In his testimony, he said that he first met Netchie in Clarin,
The “well-founded belief” requisite under Article 41 of the Family Code is complied with only upon a showing
that sincere honest-to-goodness efforts had indeed been made to ascertain whether the absent spouse is still
alive or is already dead.
Article 41 of the Family Code pertinently provides that:
Art. 41. A marriage contracted by any person during the subsistence of a previous marriage
shall be null and void, unless before the celebration of the subsequent marriage, the prior spouse
had been absent for four consecutive years and the spouse present had a well-founded belief that
the absent spouse was already dead. In case of disappearance where there is danger of death under
the circumstances set forth in the provisions of Article 391 of the Civil Code, an absence of only two
years shall be sufficient.
For the purpose of contracting the subsequent marriage under the preceding paragraph
the spouse present must institute a summary proceeding as provided in this Code for the
declaration of presumptive death of the absentee, without prejudice to the effect of reappearance of
the absent spouse. (83a)
“Well-founded belief” does not include passive efforts to locate the absent spouse.
In the case of Republic v. Cantor, the Court held that the present spouse (Maria Fe Espinosa Cantor) merely
conducted a “passive search” because she simply made unsubstantiated inquiries from her in-laws, from neighbors
and friends. For that reason, this Court stressed that the degree of diligence and reasonable search required by law
is not met (1) when there is failure to present the persons from whom the present spouse allegedly made inquiries
especially the absent spouse’s relatives, neighbors, and friends, (2) when there is failure to report the missing
spouse’s purported disappearance or death to the police or mass media, and (3) when the present spouse’s evidence
might or would only show that the absent spouse chose not to communicate, but not necessarily that the latter was
indeed dead. The rationale for this palpably stringent or rigorous requirement has been marked out thus:
x x x [T]he Court, fully aware of the possible collusion of spouses in nullifying their
marriage, has consistently applied the “strict standard” approach. This is to ensure that a petition
for declaration of presumptive death under Article 41 of the Family Code is not used as a tool to
conveniently circumvent the laws. Courts should never allow procedural shortcuts and should
ensure that the stricter standard required by the Family Code is met. x x x
The application of this stricter standard becomes even more imperative if we consider the
State’s policy to protect and strengthen the institution of marriage. Since marriage serves as the
family’s foundation and since it is the state’s policy to protect and strengthen the family as a basic
social institution, marriage should not be permitted to be dissolved at the whim of the parties. x x x
x x x [I]t has not escaped this Court’s attention that the strict standard required in petitions
for declaration of presumptive death has not been fully observed by the lower courts. We need only
to cite the instances when this Court, on review, has consistently ruled on the sanctity of marriage
and reiterated that anything less than the use of the strict standard necessitates a denial. To rectify
Co-ownership ensues after death of a spouse; sale by one is valid over his interest.
In Melicio Domingo v. Sps. Molina, G.R. No. 200274, April 20, 2016, Brion, J, Anastacio was married to Flora.
During the marriage, he obtained a loan from the Spouses Molina, and after Flora’s death, he sold his interest over
their conjugal property to the creditors. His son filed an action to annul the sale and to recover ownership
contending that he could not have sold such portion of the conjugal property without the consent of Flora who
already died. The lower courts dismissed the complaint because what Anastacio sold was his share of the property.
Was the validity of the sale without the consent of Flora valid? Why?
Ans.: The sale is valid.
As early as Taningco v. Register of Deeds of Laguna, G.R. No. L-15242, June 29, 1962, 5 SCRA 381, it was held
that the properties of a dissolved conjugal partnership fall under the regime of co-ownership among the surviving
spouse and the heirs of the deceased spouse until final liquidation and partition. The surviving spouse, however, has
an actual and vested one-half undivided share of the properties which does not consist of determinate and
segregated properties until liquidation and partition of the conjugal partnership.
The spouses Molina would be a trustee for the benefit of the co-heirs of Anastacio in respect of any portion
that might belong to the co-heirs after liquidation and partition. In Heirs of Protacio Go, Sr. V. Servacio, it was said:
x x x [I]f it turns out that the property alienated or mortgaged really would pertain to the
share of the surviving spouse, then said transaction is valid. If it turns out that there really would
be, after liquidation, no more conjugal assets then the whole transaction is null and void. But if it
turns out that half of the property thus alienated or mortgaged belongs to the husband as his share
in the conjugal partnership, and half should go to the estate of the wife, then that corresponding to
the husband is valid, and that corresponding to the other is not. Since all these can be determined
only at the time the liquidation is over, it follows logically that a disposal made by the surviving
spouse is not void ab initio. Thus, it has been held that the sale of conjugal properties cannot be
made by the surviving spouse without the legal requirements. The sale is void as to the share of the
deceased spouse (except of course as to that portion of the husband’s share inherited by her as the
surviving spouse). The buyers of the property that could not be validly sold become trustees of said
portion for the benefit of the husband’s other heirs, the cestui que trust ent. Said heirs shall not be
barred by prescription or by laches.
Melecio’s recourse as a co-owner of the conjugal properties, including the subject property, is an action for
partition under Rule 69 of the Revised Rules of Court. As held in the case of Heirs of Protacio Go, Sr., “it is now settled
that the appropriate recourse of co-owners in cases where their consent were not secured in a sale of the entire
property as well as in a sale merely of the undivided shares of some of the co-owners is an action for PARTITION
under Rule 69 of the Revised Rules of Court.”
Putative father of an illegitimate child was the informant of the live birth; he is considered the father;
considered as recognition.
In Alejandra Arado Heirs, etc. v. Anacleto Alarcon, et al., G.R. No. 163362, July 8, 2015, Bersamin, J, Raymundo
and Joaquina were married with a son Nicolas, who got married to Florencia. The latter had no issue but Nicolas had
an extra-marital affair with Francisca and out of their relationship, Anacleto was born. Anacleto married Elenette.
Raymundo died in 1939; Nicolas died in 1954; Florencia died in 1960; Joaquina died in 1981. Florencia had three (3)
siblings namely Sulpicio, Braulia, and Veronica. Joaquin had four (4) siblings namely Alejandra, Nemesio, Cledonia
and Melania. In 1992, the siblings of Joaquina filed a complaint for recovery of property and damages against
Anacleto and Elenette.
They insisted that Anacleto was not duly recognized as Nicolas’ illegitimate son; that inasmuch as Anacleto
was born to Francisca during the subsistence of Nicolas’ marriage to Florencia, Anacleto could only be the spurious
child of Nicolas; that there was no law for the acknowledgment of a spurious child; that even if Anacleto would be
given the benefit of the doubt and be considered a natural child, Article 278 of the Civil Code states that
“[r]ecognition shall be made in the record of birth, a will, a statement before a court of record, or in any authentic
writing;” that the appearance of the father’s name in the certificate of birth alone, without his actual intervention,
was insufficient to prove paternity; that the mere certificate by the civil registrar that the father himself registered
the child, without the father’s signature, was not proof of the father’s voluntary acknowledgment; that the baptismal
certificate was insufficient proof of paternity.
In turn, respondents countered that Nicolas recognized Anacleto as his illegitimate child because Nicolas
had himself caused the registration of Anacleto’s birth. Is the ruling correct? Why?
Ans.: Nicolas had duly acknowledged Anacleto as his illegitimate son. The birth certificate of Anacleto appearing in
the Register of Births showed that Nicolas had himself caused the registration of the birth of Anacleto, he being the
informant of the live birth to be registered. Considering that Nicolas, the putative father, had a direct hand in the
preparation of the birth certificate, reliance on the birth certificate of Anacleto as evidence of his paternity was fully
warranted. (Jison v. Court of Appeals, G.R. No. 124853, February 24, 1998, 286 SCRA 495, 523, where the Court
opined: “It is settled that a certificate of live birth purportedly identifying the putative father is not competent
evidence as to the issue of paternity, when there is no showing that the putative father had a hand in the preparation
of said certificates, and the Local Civil Registrar is devoid of authority to record the paternity of an illegitimate child
upon the information of a third person. Simply put, if the alleged father did not intervene in the birth certificate, e.g.,
supplying the information himself, the inscription of his name by the mother or doctor or registrar is null and void;
Spouses were married prior to the effecitivity of the Family Code. What law governs the sale of a conjugal
property after the Family Code has gone into effect. Explain.
The Family Code applies. The proper law to apply is, therefore, Article 124 of the Family Code, for it is
settled that any alienation or encumbrance of conjugal property made during the effectivity of the Family Code is
governed by Article 124 of the Family Code.
Article 254 the Family Code has expressly repealed several titles under the Civil Code, among them the entire
Title VI in which the provisions on the property relations between husband and wife, Article 173 included, are
found.
Article 124 of the Family Code provides:
“Article 124. The administration and enjoyment of the conjugal partnership property
shall belong to both spouses jointly. In case of disagreement, the husband’s decision shall prevail,
subject to recourse to the court by the wife for proper remedy, which must be availed of within five
years from the date of the contract implementing such decision.
In the event that one spouse is incapacitated or otherwise unable to participate in
the administration of the conjugal properties, the other spouse may assume sole powers of
administration. These powers do not include disposition or encumbrance without authority
of the court or the written consent of the other spouse. In the absence of such authority or
consent, the disposition or encumbrance shall be void. However, the transaction shall be
construed as a continuing offer on the part of the consenting spouse and the third person, and may
be perfected as a binding contract upon the acceptance by the other spouse or authorization by the
court before the offer is withdrawn by either or both offerors.”
According to Article 256 of the Family Code, the provisions of the Family Code may apply retroactively
provided no vested rights are impaired. In Tumlos v. Fernandez, the Court rejected the petitioner’s argument that the
Family Code did not apply because the acquisition of the contested property had occurred prior to the effectivity of
the Family Code, and pointed out that Article 256 provided that the Family Code could apply retroactively if the
application would not prejudice vested or acquired rights existing before the effectivity of the Family Code. Herein,
however, the petitioners did not show any vested right in the property acquired prior to August 3, 1988 that
exempted their situation from the retroactive application of the Family Code. (Sps. Aggabao v. Sps. Parulan, G.R. No.
165803, September 1, 2010, Bersamin, J)
Lot No. 4 belonging to Angeles is adjacent to Lot No. 5 belonging to Pascual. The house of Angeles straddled on
the lot of Pascual and Angeles built his house in good faith. State the rights of the parties. Explain.
Ans.: The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to
appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546
and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper
rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of
the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof. (Art. 448, NCC)
With the unassailable finding that Angeles’ house straddled the lot of Pascual, and that Angeles had built his
house in good faith, Article 448 of the Civil Code, which spells out the rights and obligations of the owner of the land
as well as of the builder, is unquestionably applicable. Consequently, the land being the principal and the building
the accessory, preference is given to Pascual as the owner of the land to make the choice as between appropriating
the building or obliging Angeles as the builder to pay the value of the land. Contrary to the insistence of Angeles,
therefore, no inconsistency exists between the finding of good faith in his favor and the grant of the reliefs set forth
in Article 448 of the Civil Code. (Angeles v. Pascual, G.R. No. 157150, September 21, 2011, Bersamin, J)
QUIETING OF TITLE
Dare Adventure Farm, Inc. acquired a property from Agripina Goc-ong, etc. Later on, it found out that the Goc-
ongs executed an affidavit declaring ownership of the same property and mortgaged it to the Ng spouses, with
a stipulation that if they failed to pay the loan, the Ngs would automatically become the owner of the property.
For failure to pay the obligation, a complaint for recovery of sum of money was filed or in the alternative, for
the foreclosure of the mortgage. Having failed to file an answer the Goc-ongs were declared in default and
judgment was rendered against them declaring plaintiffs as the owners of the property. Dare Adventure filed
an action for annulment of the judgment of the RTC with the CA which dismissed the same ruling that the
appropriate remedy is either an action for quieting of title or action for reconveyance. Is the decision correct?
Explain.
Ans.: Yes; it may vindicate its right through an action for quieting of title, a remedy designed to remove any cloud
upon, or doubt or uncertainty affecting title to real property. The action for quieting of title may be brought
whenever there is a cloud on title to real property or any interest in real property by reason of any instrument,
record, claim. (Dare Adventure Farm Corp. v. CA, et al., G.R. No. 161122, September 24, 2012, Bersamin, J)
In the action, the competent court is tasked to determine the respective rights of the plaintiff and the other
claimants, not only to put things in their proper places, and make the claimant, who has no rights to the immovable,
respect and not disturb the one so entitled, but also for the benefit of both, so that whoever has the right will see
Notes: An action for reconveyance of a property is a legal and equitable remedy available to a landowner whose
property has been wrongfully or erroneously registered in another’s name, after one year from the date of the
decree of registration and so long as the property has not passed to an innocent purchaser for value. (Luga vs.
Arciaga, 654 SCRA 661 [2011])
A petition for annulment of judgments or final orders of a Regional Trial Court in civil actions can only be
availed of where “the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no
longer available through no fault of the petitioner.” (Manila vs. Gallardo-Manzo, 657 SCRA 20 [2011])
A bought a property from B, but the title remained under the name of B. After B’s death, an action for quieting
of title was filed against the heirs of B who contended that the action cannot prosper because it is a collateral
attack on such title. Is the contention correct? Why?
Ans.: No. The action is not a direct or collateral attack on the title for the action was merely asserting that the
existing title under the name of the seller had become inoperative due to the conveyance in favor of A and
resultantly should be cancelled. The plaintiff therefore did not assail the validity of the title or challenge the
judgment decreeing the title. In other words, the action sought the removal of a cloud on the buyer’s title and
confirmation of his/her ownership over the said property. (Oñ o, et al. v. Lim, G.R. No. 154270, March 9, 2010,
Bersamin, J)
A is the owner of a parcel of land adjoining the Parañaque River. A portion of the river dried up and A applied
for registration of the same contending that it is an accretion, thus, it belongs to him. Is the contention correct?
Explain.
Ans.: No. It is erroneous to treat the dried-up river bed as an accretion that became the property of A pursuant to
Article 457 of the Civil Code. That land was definitely not an accretion. The process of drying up of a river to form dry
land involved the recession of the water level from the river banks, and the dried-up land did not equate to
accretion, which was the gradual and imperceptible deposition of soil on the river banks through the effects of the
current. In accretion, the water level did not recede and was more or less maintained. Hence, A as the riparian
owners had no legal right to claim ownership of the same.
Notes: Indeed, under the Regalian doctrine, all lands not otherwise appearing to be clearly within private ownership
are presumed to belong to the State. No public land can be acquired by private persons without any grant, express or
implied, from the Government. It is indispensable, therefore, that there is a showing of a title from the State.
Occupation of public land in the concept of owner, no matter how long, cannot ripen into ownership and be
registered as a title.
Subject to the exceptions defined in Article 461 of the Civil Code (which declares river beds that are
abandoned through the natural change in the course of the waters as ipso facto belonging to the owners of the land
occupied by the new course, and which gives to the owners of the adjoining lots the right to acquire only the
abandoned river beds not ipso facto belonging to the owners of the land affected by the natural change of course of
the waters only after paying their value), all river beds remain property of public dominion and cannot be acquired
by acquisitive prescription unless previously declared by the Government to be alienable and disposable.
Considering that Lot 4998-B was not shown to be already declared to be alienable and disposable, respondents
could not be deemed to have acquired the property through prescription.
Accretion as a mode of acquiring property under Article 457 of the Civil Code requires the concurrence of
the following requisites: (1) that the deposition of soil or sediment be gradual and imperceptible; (2) that it be the
result of the action of the waters of the river; and (3) that the land where accretion takes place is adjacent to the
banks of rivers. (New Regent Sources, Inc. vs. Tanjuatco, Jr., 585 SCRA 329 [2009])
The reason for the grant of preferential right to the riparian or littoral owner is the same as the justification
for giving accretions to the riparian owner, which is that accretion compensates the riparian owner for the
diminutions which his land suffers by reason of the destructive force of the waters—in the case of littoral lands, he
who loses by the encroachments of the sea should gain by its recession. (Cantoja vs. Lim, 617 SCRA 44 [2010])
All lands not appearing to be clearly of private dominion presumptively belong to the State. (DCD
Construction, Inc. vs. Republic, 656 SCRA 560 [2012])
EASEMENT
In easement of right of way, “least prejudice” has preferred status over distance.
The petitioner sought for an easement of right of way from the respondents alleging that her property is
isolated without her fault. It was alleged that there was no means of engress or egress to a public highway.
Respondents contended that there was a means of engress or egress to the public highway because adjacent to her
property is a canal where a bridge can be constructed as passageway like what others have done. The RTC found out
that if the right of way would pass through respondents’ property there would be destruction of their properties.
Since there is an irrigation canal, she could construct a bridge over it and pass through it as the way to the irrigation
canal would appear to be the shortest and easiest way to reach the barangay road. On appeal, the CA affirmed the
decision of the RTC. Is the decisions of the lower courts correct? Why?
Ans.: Yes. Assuming, however, that petitioner or her mother did not cause the isolation of petitioner’s property,
petitioner still cannot be granted the easement of right of way over the proposed portion of respondents’ property.
This is because she failed to satisfy the requirements for an easement of right of way under the Civil Code.
The following requisites need to be established before a person becomes entitled to demand the
compulsory easement of right of way: (See Bacolod-Murcia Milling Co., Inc., et al. v. Capitol Subdivision, Inc., et al. ,
124 Phil. 128, 132–133 [1966])
1. An immovable is surrounded by other immovables belonging to other persons, and is without adequate
outlet to a public highway;
2. Payment of proper indemnity by the owner of the surrounded immovable;
3. The isolation of the immovable is not due to its owner’s acts; and
4. The proposed easement of right of way is established at the point least prejudicial to the servient estate, and
insofar as consistent with this rule, where the distance of the dominant estate to a public highway may be
the shortest (Alicia Reyes v. Sps. Ramos, G.R. No. 194488, February 11, 2015).
Access to the public highway can be satisfied without imposing an easement on respondents’ property.
If in between the property of the dominant estate and the highway or road, there is an irrigation canal,
which can be traversed by constructing a bridge, similar to what was done by the owners of the nearby properties
there is no need to utilize respondents’ property to serve petitioner’s needs. Another adequate exit exists. Petitioner
can use this outlet to access the public roads.
The outlet may be longer and more inconvenient to petitioner because she will have to traverse other
properties and construct a bridge over the irrigation canal before she can reach the road. However, these reasons
will not justify the imposition of an easement on respondents’ property because her convenience is not the gauge in
determining whether to impose an easement of right of way over another’s property (Dichoso, Jr. v. Marcos, G.R. No.
180282, April 11, 2011, 647 SCRA 495, 504).
Petitioner failed to satisfy the requirement of “least prejudicial to the servient estate.”
Article 650 of the Civil Code provides that in determining the existence of an easement of right of way, the
requirement of “least prejudice to the servient estate” trumps “distance [between] the dominant estate [and the]
public highway.” “Distance” is considered only insofar as it is consistent to the requirement of “least prejudice.”
The court had already affirmed the preferred status of the requirement of “least prejudice” over distance of the
dominant estate to the public highway. (Cristobal v. Court of Appeals, 353 Phil. 318, 329 [1998]). Quimen v. Court of
Appeals, 326 Phil. 969, 979 [1996]) Thus, in Quimen, the Csourt granted the longer right of way over therein
respondent’s property because the shorter route required that a structure of strong materials needed to be
demolished. (Quimen v. Court of Appeals, 326 Phil. 969, 981 [1996]) The court said:
[T]he court is not bound to establish what is the shortest distance; a longer way may be
adopted to avoid injury to the servient estate, such as when there are constructions or walls which
can be avoided by a round about way, or to secure the interest of the dominant owner, such as
when the shortest distance would place the way on a dangerous decline.
....
The criterion of least prejudice to the servient estate must prevail over the criterion of
shortest distance although this is a matter of judicial appreciation. While shortest distance may
ordinarily imply least prejudice, it is not always so as when there are permanent structures
obstructing the shortest distance; while on the other hand, the longest distance may be free of
obstructions and the easiest or most convenient to pass through. In other words, where the
easement may be established on any of several tenements surrounding the dominant estate, the
one where the way is shortest and will cause the least damage should be chosen. However, as
elsewhere stated, if these two (2) circumstances do not concur in a single tenement, the way which
will cause the least damage should be used, even if it will not be the shortest.
Petitioner would have permanent structures — such as the garage, garden, and grotto already installed on
respondent’s property — destroyed to accommodate her preferred location for the right of way.
The cost of having to destroy these structures, coupled with the fact that there is an available outlet that can
be utilized for the right of way, negates a claim that respondents’ property is the point least prejudicial to the
servient estate.
Nature of easement.
An easement is a limitation on the owner’s right to use his or her property for the benefit of another. By
imposing an easement on a property, its owner will have to forego using it for whatever purpose he or she deems
most beneficial. Least prejudice, therefore, is about the suffering of the servient estate. Its value is not determined
solely by the price of the property, but also by the value of the owner’s foregone opportunity for use, resulting from
the limitations imposed by the easement. (PAUL A. SAMUELSON andWILLIAM D. NORDHAUS, ECONOMICS 13 (18th
ed., 2005). Opportunity cost is defined as “[t]he cost of the forgone alternative[.]”)
Imposing an easement on the part of respondents’ property for petitioner’s benefit would cost respondents
not only the value of the property but also the value of respondents’ opportunity to use the property as a garage or a
garden with a grotto. (See also: Helen Calimoso, et al. v. Alex Roullo, G.R. No. 198594, January 25, 2016, Brion, J)
NUISANCE
DONATION
SUCCESSION
Under the Civil Code, the preterition of a compulsory heir in the direct line shall annul the institution of
heirs, but the devises and legacies shall remain valid insofar as the legitimes are not impaired. Consequently, if a will
does not institute any devisees or legatees, the preterition of a compulsory heir in the direct line will result in total
intestacy. (Nuguid)
In the present case, the decedent’s will evidently omitted Francisco Olondriz as an heir, legatee, or devisee.
As the decedent’s illegitimate son, Francisco is a compulsory heir in the direct line. Unless Morales could show
otherwise, Francisco’s omission from the will would lead to the conclusion of his preterition.
During the proceedings in the RTC, Morales had the opportunity to present evidence that Francisco received
donations inter vivos and advances on his legitime from the decedent. However, Morales did not appear during the
hearing dates, effectively waiving her right to present evidence on the issue. We cannot fault the RTC for reaching
the reasonable conclusion that there was preterition (Iris Morales v. Ana Maria Olandriz, et al., G.R. No. 198994,
February 3, 2016, Brion, J).
PRESCRIPTION
Ans.: No. For a contracting party to be entitled to rescission (or resolution) in accordance with Article 1191 of the
Civil Code, the other contracting party must be in substantial breach of the terms and conditions of their contract. A
substantial breach of a contract, unlike slight and casual breaches thereof, is a fundamental breach that defeats the
object of the parties in entering into an agreement. (Maglasang v. Northwestern University, Inc., G.R. No. 188986,
March 20, 2013, 694 SCRA 128) Here, it cannot be said that petitioners’ failure to undertake their obligation
defeated the object of the parties in entering into the subject contract, considering that the same paragraph provides
respondents contractual recourse in the event of petitioners’ non-performance of the aforesaid obligation, that is, to
cause such transfer themselves in behalf and at the expense of petitioners.
Indubitably, there is no substantial breach on the part of petitioners that would necessitate a rescission (or
resolution) of the subject contract.
In reciprocal obligations, either party may rescind – or more appropriately, resolve – the contract upon the
other party’s substantial breach of the obligation/s he had assumed thereunder. (Golden Valley Exploration, Inc. v.
Pinkian Mining Company, G.R. No. 190080, June 11, 2014, 726 SCRA 259, 265) This is expressly provided for in
Article 1191 of the Civil Code.
Therefore, the obligation to pay the mortgage indebtedness remains with the original debtors.
To be clear, contractual obligations, unlike contractual rights or benefits, are generally not assignable. But
there are recognized means by which obligations may be transferred, such as by sub-contract and novation. In this
case, the substitution of the petitioner in the place of Amethyst did not result in the novation of the Deed of Sale. To
start with, it does not appear from the records that the consent of Ortigas to the substitution had been obtained
despite its essentiality to the novation. Secondly, the petitioner did not expressly assume Amethyst’s obligations
under the Deed of Sale, whether through the Deed of Assignment in Liquidation or another document. And, thirdly,
the consent of the new obligor (i.e., the petitioner), which was as essential to the novation as that of the obligee (i.e.,
Ortigas), was not obtained.
Ortigas’ complaint was predicated on Article 1191 of the Civil Code. Is it proper? Why?
Ans.: No. Rescission under Article 1191 of the Civil Code is proper if one of the parties to the contract commits a
substantial breach of its provisions. It abrogates the contract from its inception and requires the mutual restitution
of the benefits received; (Supercars Management & Development Corporation v. Flores, G.R. No. 148173, December
10, 2004, 446 SCRA 34, 43) hence, it can be carried out only when the party who demands rescission can return
whatever he may be obliged to restore.
Considering the foregoing, Ortigas did not have a cause of action against the petitioner for the rescission of
the Deed of Sale. Under Section 2, Rule 2 of the Rules of Court, a cause of action is the act or omission by which a
party violates a right of another. The essential elements of a cause of action are: (1) a right in favor of the plaintiff by
whatever means and under whatever law it arises or is created; (2) an obligation on the part of the defendant not to
violate such right; and (3) an act or omission on the part of the defendant in violation of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the plaintiff for which the latter may maintain an action
for recovery of damages or other relief. It is only upon the occurrence of the last element that the cause of action
There was a contract of conditional sale of a real property. One of the terms and conditions of the contract
provides that in case of breach, the seller can extrajudicially rescind the contract. There was delay in the
payment of amortizations for six (6) months. Can the seller rescind the contract extrajudicially? Explain.
Ans.: Yes. Article 1191 of the Civil Code does not prohibit the parties from entering into an agreement whereby a
violation of the terms of the contract would result to its cancellation. In Pangilinan v. Court of Appeals, the Court
upheld the vendor’s right in a contract to sell to extrajudicially cancel the contract upon failure of the vendee to pay
the installments and even to retain the sums already paid, holding:
“[Article 1191 of the Civil Code] makes it available to the injured party alternative
remedies such as the power to rescind or enforce fulfillment of the contract, with damages in either
case if the obligor does not comply with what is incumbent upon him. There is nothing in this law
which prohibits the parties from entering into an agreement that a violation of the terms of the
contract would cause its cancellation even without court intervention. The rationale for the
foregoing is that in contracts providing for automatic revocation, judicial intervention is necessary
not for purposes of obtaining a judicial declaration rescinding a contract already deemed rescinded
by virtue of an agreement providing for rescission even without judicial intervention, but in order
to determine whether or not the rescission was proper. Where such propriety is sustained, the
decision of the court will be merely declaratory of the revocation, but it is not itself the revocatory
act. Moreover, the vendor’s right in contracts to sell with reserved title to extrajudicially cancel the
sale upon failure of the vendee to pay the stipulated installments and retain the sums and
installments already received has long been recognized by the well-established doctrine of 39 years
standing. The validity of the stipulation in the contract providing for automatic rescission upon
non-payment cannot be doubted. It is in the nature of an agreement granting a party the right to
rescind a contract unilaterally in case of breach without need of going to court. Thus, rescission
under Article 1191 was inevitable due to petitioner’s failure to pay the stipulated price within the
original period fixed in the agreement.” (Lina Calilap-Asmeron v. DBP, et al., G.R. No. 157330,
November 23, 2011, Bersamin, J)
Application of payment; debtor has the right; effect if he does not exercise.
The right to make application of payment is a right of the debtor which is merely directory in nature and
must be promptly exercised, lest, such right passes to the creditor. Such is the pronouncement of the SC in Sps. Tan,
etc. v. China Banking Corp., G.R. No. 200299, August 17, 2016, Perez, J, where after the bank foreclosed the mortgages
over the properties which were used to secure the payment of obligations contracted by the debtor, the debtor failed
to manifest its preference as to which among the obligations that were due the proceeds of the sale should be
applied. Hence, the bank made the application of payment, by applying the proceeds of the sale to the interest first
and then to the principal. Expounding on the rule, the SC said that
Held: Obligations are extinguished, among others, by payment or performance. (Go Cinco, et al. v. Court of Appeals,
et al., 618 Phil. 104, 112 [2009]) Under Article 1232 of the Civil Code, payment means not only the delivery of money
but also the performance, in any other manner, of an obligation. Article 1233 of the Civil Code states that a debt shall
not be understood to have been paid unless the thing or service in which the obligation consists has been completely
delivered or rendered, as the case may be. In contracts of loan, the debtor is expected to deliver the sum of money
due the creditor. These provisions must be read in relation with the other rules on payment under the Civil Code,
such as the application of payment, to wit:
Art. 1252. He who has various debts of the same kind in favor of one and the same creditor,
may declare at the time of making the payment, to which of them the same must be applied. Unless
the parties so stipulate, or when the application of payment is made by the party for whose benefit
the term has been constituted, application shall not be made as to debts which are not yet due.
If the debtor accepts from the creditor a receipt in which an application of the payment is
made, the former cannot complain of the same, unless there is a cause for invalidating the contract.
In Premiere Development Bank v .. Central Surety & Insurance Company Inc., 598 Phil. 827, 844-845 [2009], it
was held that the right of the debtor to apply payment is merely directory in nature and must be promptly exercised,
lest, such right passes to the creditor, viz:
Article 1252 gives the right to the debtor to choose to which of several obligations to apply·
a particular payment that he tenders to the creditor. But likewise granted in the same provision is
the right of the creditor to apply such payment in case the debtor fails to direct its application. This
is obvious in Art. 1252, par. 2, viz.: 'If the debtor accepts from the creditor a receipt in which an
application of payment is made, the former cannot complain of the same.' It is the directory nature
of this right and the subsidiary right of the creditor to apply payments when the debtor does not
elect to do so that make this right, like any other right, waivable.
In the event that the debtor failed to exercise the right to elect, the creditor may choose to which among the
debts the payment is applied as in the case at bar. It is noteworthy that after the sale of the foreclosed properties at
the public auction, the debtor failed to manifest its preference as to which among the obligations that were all due
the proceeds of the sale should be applied. Its silence can be construed as acquiescence to China Bank's application
of the payment first to the interest and penalties and the remainder to the principal which is sanctioned by Article
1253 of the New Civil Code.
Under Article 1332, NCC, when one of the parties is unable to read, or if the contract is in a language not
understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the
terms thereof have been fully explained to the former. In a case, it was contended that the petitioner had not
given her full consent to the deed of conditional sale on account of her lack of legal and technical knowledge. In
brushing aside such contention, the SC
Held: The petitioner was not illiterate. She had appeared to the trial court to be educated, its cogent observation of
her as “lettered” being based on how she had composed her correspondences to DBP. Her testimony also revealed
that she had no difficulty understanding English.
Thereby revealed was her distinctive ability to understand written and spoken English, the language in
which the terms of the contract she signed had been written.
Clearly, Article 1332 of the Civil Code does not apply to the petitioner. According to Lim v. Court of Appeals,
the provision came into being because a sizeable percentage of the country’s populace had comprised of illiterates,
and the documents at the time had been written either in English or Spanish, viz.:
“In calibrating the credibility of the witnesses on this issue, we take our mandate from
Article 1332 of the Civil Code which provides: “When one of the parties is unable to read, or if the
contract is in a language not understood by him, and mistake or fraud is alleged, the person
enforcing the contract must show that the terms thereof have been fully explained to the former.”
This substantive law came into being due to the finding of the Code Commission that there is
still a fairly large number of illiterates in this country, and documents are usually drawn up
in English or Spanish. It is also in accord with our state policy of promoting social justice. It
also supplements Article 24 of the Civil Code which calls on court to be vigilant in the
protection of the rights of those who are disadvantaged in life. (Lim v. Court of Appeals, G.R.
No. 55201, February 3, 1994, 229 SCRA 6161, 623; Lina Calilap-Asmeron v. DBP, et al., G.R. No.
157330, November 23, 2011, Bersamin, J)
There was a contract to sell a subdivision lot with an undertaking to construct the amenities. The seller, in a
suit for specific performance filed by the buyer, sought to be excused from performing its obligation under the
contract, invoking Article 1267, NCC as its basis. It contended that the depreciation of the Philippine Peso since
the time of the execution of the contract, the increase in the cost of labor and construction materials and the
increase in the value of the lot in question were valid justifications for its release from the obligation to
construct the amenities. Rule on the contention of the seller. Explain.
Ans.: The contention is not correct. Under Section 20 of Presidential Decree No. 957, all developers, including the
petitioner, are mandated to complete their subdivision projects, including the amenities, within one year from the
issuance of their licenses.
Pursuant to Section 30 of Presidential Decree No. 957, the amenities, once constructed, are to be maintained
by the developer like the petitioner until a homeowners’ association has been organized to manage the amenities.
There is no question that the petitioner did not comply with its legal obligation to complete the construction
of the subdivision project, including the amenities, within one year from the issuance of the license. Instead, it
unilaterally opted to suspend the construction of the amenities to avoid incurring maintenance expenses. In so
opting, it was not driven by any extremely difficult situation that would place it at any disadvantage, but by its desire
to benefit from cost savings. Such cost-saving strategy dissuaded the lot buyers from constructing their houses in the
subdivision, and from residing therein.
Considering that the petitioner’s unilateral suspension of the construction of the amenities was intended to
save itself from costs, its plea for relief from its contractual obligations was properly rejected because it would
thereby gained a position of advantage at the expense of the lot owners like the respondent. Its invocation of Article
1267 of the Civil Code, which provides that “(w)hen the service has become so difficult as to be manifestly beyond
the contemplation of the parties, the obligor may also be released therefrom in whole or in part,” was factually
unfounded. For Article 1267 to apply, the following conditions should concur, namely: (a) the event or change in
circumstances could not have been foreseen at the time of the execution of the contract; (b) it makes the
performance of the contract extremely difficult but not impossible; (c) it must not be due to the act of any of the
parties; and (d) the contract is for a future prestation. The requisites did not concur herein because the difficulty of
performance under Article 1267 of the Civil Code should be such that one party would be placed at a disadvantage by
the unforeseen event. Mere inconvenience, or unexpected impediments, or increased expenses did not suffice to
relieve the debtor from a bad bargain. (Castro v. Longa, Nos. L-2152 and L-2153, July 31, 1951)
Notes: Presidential Decree No. 957 is a law that regulates the sale of subdivision lots and condominiums in view of
the increasing number of incidents wherein “real estate subdivision owners, developers, operators, and/or sellers
have reneged on their representations and obligations to provide and maintain properly” the basic requirements
and amenities, as well as of reports of alarming magnitude of swindling and fraudulent manipulations perpetrated
by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers
or titles free from liens and encumbrances. (San Miguel Propedrties, Inc. vs. Perez, 705 SCRA 38 [2013])
The action for specific performance, although civil in nature, could be brought only in the Housing and Land
Use Regulatory Board (HLURB). (Id.)
It was said in C.F. Sharp & Co. v. Northwest Airlines, Inc., G.R. No. 133498, April 11, 2002, 381 SCRA 314, 319-
320, that the repeal of Republic Act No. 529 had the effect of removing the prohibition on the stipulation of currency
other than Philippine currency, such that obligations or transactions could already be paid in the currency agreed
upon by the parties. However, both Republic Act No. 529 and Republic Act No. 8183 did not stipulate the applicable
rate of exchange for the conversion of foreign currency-incurred obligations to their peso equivalent. It follows,
therefore, that the jurisprudence established under Republic Act No. 529 with regard to the rate of conversion
remains applicable. In C.F. Sharp, the Court cited Asia World Recruitment, Inc. v. NLRC, to the effect that the real value
of the foreign exchange-incurred obligation up to the date of its payment should be preserved (Netlink Computel,
Inc. v. Delmo, G.R. No. 160827, June 18, 2014).
There was no written contract between Netlink and Delmo stipulating that the latter’s commissions would
be paid in US dollars. The absence of the contractual stipulation notwithstanding, Netlink was still liable to pay
Delmo in US dollars because the practice of paying its sales agents in US dollars for their US dollar-denominated
sales had become a company policy. This was impliedly admitted by Netlink when it did not refute the allegation
that the commissions earned by Delmo and its other sales agents had been paid in US dollars. Instead of denying the
allegation, Netlink only sought a declaration that the US dollar commissions be paid using the exchange rate at the
time of sale. The principle of non-diminution of benefits, which has been incorporated in Article 100 of the Labor
Code, forbade Netlink from unilaterally reducing, diminishing, discontinuing or eliminating the practice. Verily, the
phrase “supplements, or other employee benefits” in Article 100 is construed to mean the compensation and
privileges received by an employee aside from regular salaries or wages (Netlink Computel, Inc. v. Delmo, G.R. No.
160827, June 18, 2014).
FRAUD
Q – In a action for annulment of a real estate mortgage, the petitioners contended that they were made to sign
the deed of real estate mortgage in blank. Is their contention correct? Why?
Ans.: No. Fraud cannot be presumed but must be proved by clear and convincing evidence. Whoever alleges fraud
affecting a transaction must substantiate his allegation, because a person is always presumed to take ordinary care
of his concerns, and private transactions are similarly presumed to have been fair and regular. (Section 3(p), Rule
131, Rules of Court; also, Dutch Boy Philippines, Inc. v. Seniel, G.R. No. 170008, January 19, 2009, 576 SCRA 231, 240,
citing Memita v. Masongsong, G.R. No. 150912, May 28, 2007, 523 SCRA 244, 256-257; and Mangahas v. Court of
Appeals, G.R. No. 95815, March 10, 1999, 304 SCRA 375, 382) To be remembered is that mere allegation is definitely
not evidence; hence, it must be proved by sufficient evidence. (Real v. Sangu Philippines, Inc., G.R. No. 168757,
January 19, 2011, 640 SCRA 67, 85, citing General Milling Corporation v. Casio, G.R. No. 149552, March 10, 2010, 615
SCRA 13, 32-33; Metropolitan Fabrics, Inc., et al. v. Prosperity Resources, Inc., et al., G.R. No. 154390, March 17, 2014,
Bersamin, J)
There was consignment of pieces of jewelry for sale and return if not sold. The accused claimed that his partial
payments to the complainants novated his contract with them from agency to loan, thereby converting his
liability from criminal to civil. He insisted that his failure to complete his payments prior to the filing of the
complaint-affidavit by the complainants notwithstanding, the fact that the complainants later required him to
make a formal proposal before the barangay authorities on the payment of the balance of his outstanding
obligations confirmed that novation had occurred. The lower court rejected the contention holding that
novation is not one of the grounds prescribed by the Revised Penal Code for the extinguishment of criminal
liability. It is well settled that criminal liability for estafa is not affected by compromise or novation of
contract, for it is a public offense which must be prosecuted and punished by the Government on its own
motion even though complete reparation should have been made of the damage suffered by the offended party.
A criminal offense is committed against the People and the offended party may not waive or extinguish the
criminal liability that the law imposes for the commission of the offense. The criminal liability for estafa
already committed is not affected by the subsequent novation of the contract. Is the ruling correct? Why?
Ans.: Yes, because the partial payments he made and his purported agreement to pay the remaining obligations did
not equate to a novation of the original contractual relationship of agency to one of sale.
Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent
one that terminates the first, either by (a) changing the object or principal conditions; or (b) substituting the person
of the debtor; or (c) subrogating a third person in the rights of the creditor. In order that an obligation may be
extinguished by another that substitutes the former, it is imperative that the extinguishment be so declared in
unequivocal terms, or that the old and the new obligations be on every point incompatible with each other.
Obviously, in case of only slight modifications, the old obligation still prevails (Degañ os v. People, G.R. No. 162826,
October 14, 2013, Bersamin, J).
Several loans were obtained by the debtor from the creditor where a consolidated promissory note dated July
23, 1986 was executed by them pegging the entire obligation to P500,000.00 payable on August 23, 1986. For
failure to comply with the promissory note, the creditor filed an action for sum of money where after trial,
judgment was rendered ordering the debtors to pay. The CA decided ordering the debtor to pay P500,000.00
plus 5.5 percent interest per month. But due to the promulgation of Medel v. CA, which struct down as void the
stipulation on the interest being iniquitous or unconscionable, it revived the decision of the RTC.
Upon the finality of the decision in Medel v. Court of Appeals, a motion for execution was filed. The
debtor opposed, claiming that he and the respondents had agreed to fix the entire obligation at P775,000.00.
According to him, their agreement, which was allegedly embodied in a receipt dated February 5, 1992,
whereby he made an initial payment of P400,000.00 and promised to pay the balance of P375,000.00 on
February 29, 1992, superseded the July 23, 1986 promissory note.
To buttress their claim of novation, the petitioners relied on the receipt issued on February 5, 1992
whereby the obligation was fixed at P750,000.00. They insisted that even the maturity date was extended until
February 29, 1992. Such changes, they asserted, were incompatible with those of the original agreement under
the promissory note.
Was there a novation of the August 23, 1986 PN when the creditor issued the February 5, 1992 receipt?
Explain.
According to California Bus Lines, Inc. v. State Investment House, Inc., G.R. No. 147950, December 11, 2003,
418 SCRA 297, 309-310:
“The extinguishment of the old obligation by the new one is a necessary element of
novation which may be effected either expressly or impliedly. The term “expressly” means that the
contracting parties incontrovertibly disclose that their object in executing the new contract is to
extinguish the old one. Upon the other hand, no specific form is required for an implied novation,
and all that is prescribed by law would be an incompatibility between the two contracts. While
there is really no hard and fast rule to determine what might constitute to be a sufficient change
that can bring about novation, the touchstone for contrariety, however, would be an irreconcilable
incompatibility between the old and the new obligations.”
Maria Antonia Armovit was granted a credit card by BPI. After the expiry date, she asked for reactivation, but
BPI refused to lift the suspension as she has not submitted a new application which is not required under the
terms and conditions of their contract. She filed an action for damages. It was contended by BPI that the
contract requires her to submit a new application to enable the reactivation of her card. Is the contention
correct? Explain.
Ans.: No. Considering that the terms and conditions nowhere stated that the card holder must submit the new
application form in order to reactivate her credit card, to allow BPI Express Credit to impose the duty to submit the
new application form in order to enable Armovit to reactivate the credit card would contravene the Parol Evidence
Rule. Indeed, there was no agreement between the parties to add the submission of the new application form as the
means to reactivate the credit card. When she did not promptly settle her outstanding balance, BPI Express Credit
sent a message on March 19, 1992 demanding payment with the warning that her failure to pay would force it to
temporarily suspend her credit card. It then sent another demand letter requesting her to settle her obligation in
order to lift the suspension of her credit card and prevent its cancellation. She paid her obligation. In the context of
the contemporaneous and subsequent acts of the parties, the only condition for the reinstatement of her credit card
was the payment of her outstanding obligation. Had it intended otherwise, BPI Express Credit would have surely
informed her of the additional requirement. That it did not do so confirmed that they did not agree on having her
submit the new application form as the condition to reactivate her credit card. (BPI Express Card Corp. v. Armovit,
G.R. No. 163654, October 8, 2014, Bersamin, J)
Nature of the relationship between a credit card holder and the card issuer.
The relationship between the credit card issuer and the credit card holder is a contractual one that is
governed by the terms and conditions found in the card membership agreement. Such terms and conditions
constitute the law between the parties. In case of their breach, moral damages may be recovered where the
defendant is shown to have acted fraudulently or in bad faith. Malice or bad faith implies a conscious and intentional
design to do a wrongful act for a dishonest purpose or moral obliquity. However, a conscious or intentional design
need not always be present because negligence may occasionally be so gross as to amount to malice or bad faith.
Hence, bad faith in the context of Article 2220 of the Civil Code includes gross negligence. (BPI Express Card Corp. v.
Armovit, G.R. No. 163654, October 8, 2014, Bersamin, J)
Contract of services.
In connection with the 12th ASEAN Summit where the Province of Cebu was the site, the latter decided
to construct the Cebu International Convention Center (CICC). WTCI emerged as the winning bidder to
In Estores v. Supangan, G.R. No. 175139, April 18, 2012, 670 SCRA 95, the Court explained that forbearance
of money, goods, or credit refers to arrangements other than loan agreements where a person acquiesces to the
temporary use of his money, goods or credits pending the happening of certain events or fulfilment of certain
conditions such that if these conditions are breached, the said person is entitled not only to the return of the
principal amount given, but also to
compensation for the use of his money equivalent to the legal interest since the use or deprivation of funds is akin to
a loan.
Applying the foregoing standards the liability of the Province of Cebu to WTCI is not in the nature of a
forbearance of money as it does not involve an acquiescence to the temporary use of WTCI's money, goods or
credits. Rather, it involves WTCI's performance of a particular service, i.e., the performance of additional works on
CICC, consisting of site development, additional structural, architectural, plumbing, and electrical works thereon.
The liabilities arising from construction contracts do not partake of loans or forbearance of money but are
in the nature of contracts of service. In Federal Builders, Inc. v. Foundation Specialists, Inc. , G.R. Nos. 194507 and
194621, September 8, 2014, 734 SCRA 379, the Court ruled that the liability arising from the non-payment for the
construction works, specifically the construction of a diaphragm wall, capping beam, and guide walls of the Trafalgar
Plaza in Makati City, do not partake of a loan or forbearance of money but is more in the nature of a contract of
service (WT Construction, Inc. v. The Province of Cebu, G.R. No. 208984; Province of Cebu v. WT Construction, Inc.,
G.R. No. 209245, September 16, 2015, Perlas-Bernabe, J).
Hence, the rate of legal interest imposable on the liability of the Province of Cebu to WTCI is 6% per annum,
in accordance with the guidelines laid down in Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, July 12,
1994, 234 SCRA 78 (Eastern Shipping Lines, Inc.), viz.:
The guidelines have been updated in Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, 703 SCRA
439 (Nacar), pursuant to Bangko Sentral ng Pilipinas (BSP) Circular No. 799, series of 2013, which reduced the rate
of legal interest for loans or transactions involving forbearance of money, goods, or credit from 12o/o to 6% per
annum. Nevertheless, the rate of legal interest for obligations not constituting loans or forbearance such as the one
subject of this case remains unchanged at 6% per annum.
As to the computation of the interest due WTCI from the time of the filing of the complaint, the same should
be reckoned from the time WTCI made the extrajudicial demand for the payment of the principal.
The legal interest rate of 6% shall be imposed from the finality of the herein judgment until satisfaction
thereof. This is in view of the principle that in the interim, the obligation assumes the nature of a forbearance of
credit which, pursuant to Eastern Shipping Lines, Inc. as modified by Nacar, is subject to legal interest at the rate of
6% per annum.
TRUST
Period to file action for reconveyance of property acquired through mistake or fraud be filed.
Ten years. The prescription of actions for the reconveyance of real property based on implied trust is 10
years. Under Article 1456 of the Civil Code, the person obtaining property through mistake or fraud is considered by
force of law a trustee of an implied trust for the benefit of the person from whom the property comes. Under Article
1144, Civil Code, an action upon an obligation created by law must be brought within 10 years from the time the
right of action accrues. Consequently, an action for reconveyance based on implied trust prescribes in 10 years. (Sps.
Dico, Sr. v. Vizcaya Management Corp., G.R. No. 161211, July 17, 2013, Bersamin, J)
The reckoning point for purposes of the Dico’s demand of reconveyance based on fraud was their discovery
of the fraud. Such discovery was properly pegged on the date of the registration of the transfer certificates of title in
the adverse parties’ names, because registration was a constructive notice to the whole world.
Action for quieting of title is enforcing implied trust; prescription to enforce is 10 years.
The cause of action for quieting of title, recovery and damages over a property acquired through a forged
deed can be considered as that of enforcing an implied trust under Article 1456 of the Civil Code which provides that
if a property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of
an implied trust for the benefit of the person from whom the property comes.
An action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten years,
the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title
over the property (Vda. de Portugal vs. IAC, 159 SCRA 178). But this rule applies only when the plaintiff is not in
possession of the property, since if a person claiming to be the owner thereof is in actual possession of the property,
the right to seek reconveyance, which in effect seeks to quiet title to the property , does not prescribe (Heirs of Jose
Olviga v. Court of Appeals, G.R. No. 104813, October 21, 1993, 227 SCRA 330; Tolentino, et al. v. Sps. Latagan, et al.,
G.R. No. 179874, June 25, 2015, Peralta, J).
Nature of trust.
Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It is a
fiduciary relationship that obliges the trustee to deal with the property for the benefit of the beneficiary. Trust
relations between parties may either be express or implied. An express trust is created by the intention of the
trustor or of the parties, while an implied trust comes into being by operation of law. (Heirs of Tranquilino Labiste v.
Heirs of Jose Labiste, 605 Phil. 495, 503 [2009]).
Express trusts are created by direct and positive acts of the parties, by some writing or deed, or will, or by
words either expressly or impliedly evincing an intention to create a trust. Under Article 1444 of the Civil Code,
"[n]o particular words are required for the creation of an express trust, it being sufficient that a trust is clearly
intended." It is possible to create a trust without using the word "trust" or "trustee." Conversely, the mere fact that
these words are used does not necessarily indicate an intention to create a trust. The question in each case is
whether the trustor manifested an intention to create the kind of relationship which to lawyers is known as trust. It
is immaterial whether or not he knows that the relationship which he intends to create is called a trust, and whether
or not he knows the precise characteristics of the relationship which is called a trust. (Torbela v. Spouses Rosario,
678 Phil. 1, 38-39 [2011]).
In the case of Tamayo v. Callejo, 150-B Phil. 31 [1972], the Court recognized that a trust may have a
constructive or implied nature in the beginning, but the registered owner's subsequent express acknowledgement in
a public document of a previous sale of the property to another party effectively converted the same into an express
trust.
SALES
There was a contract denominated as “Kasulatan ng Biling Mabibiling Muli.” The vendors, however continued
in the possession of the property even after the execution of the agreement. It remained declared under the
names of the vendors. What is the true nature of the contract? Explain.
Ans.: The contract is an equitable mortgage.
Under the law, a contract shall be presumed to be an equitable mortgage in any of the following cases:
(2) When the vendor remains in possession as lessee or otherwise;
(5) When the vendor binds himself to pay the taxes on the thing sold. (Art. 1602, NCC)
The existence of any one of the conditions enumerated under Art. 1602 of the Civil Code, not a concurrence
of all or of a majority thereof, suffices to give rise to the presumption that the contract is an equitable mortgage.
(Raymundo v. Bandong, G.R. No. 171250, July 4, 2007, 526 SCRA 514, 528) Consequently, the contract between the
The contract did not state the period of redemption but merely stated that the right of redemption shall be “sa
oras na sila’y makinabang.” No redemption was made but the creditor-mortgagee did not likewise foreclose
the mortgage. State the effect of such mutual failure to enforce their rights. Explain.
Considering that sa oras na sila’y makinabang, the period of redemption stated in the Kasulatan ng Biling
Mabibiling Muli, signified that no definite period had been stated, the period to redeem should be ten years from the
execution of the contract, pursuant to Articles 1142 and 1144 of the Civil Code. Thus, the full redemption price
should have been paid by July 9, 1955; and upon the expiration of said 10-year period, mortgagees Spouses Francia
or their heirs should have foreclosed the mortgage, but they did not do so. Instead, they accepted Alejandro’s
payments, until the debt was fully satisfied by August 11, 1970.
The acceptance of the payments even beyond the 10-year period of redemption estopped the mortgagees’
heirs from insisting that the period to redeem the property had already expired. Their actions impliedly recognized
the continued existence of the equitable mortgage. The conduct of the original parties as well as of their successors-
in-interest manifested that the parties to the Kasulatan ng Biling Mabibiling Muli really intended their transaction to
be an equitable mortgage, not a pacto de retro sale.
In Cuyugan v. Santos, G.R. No. 10265, March 3, 1916, 34 Phil. 100, 121, the purported buyer under a so-
called contract to sell with right to repurchase also accepted partial payments from the purported seller. We held
that the acceptance of partial payments was absolutely incompatible with the idea of irrevocability of the title of
ownership of the purchaser upon the expiration of the term stipulated in the original contract for the exercise of the
right of redemption. Thereby, the conduct of the parties manifested that they had intended the contract to be a
mortgage, not a pacto de retro sale. (Heirs of Jose Reyes, Jr. v. Amanda Reyes, et al., G.R. No. 158377, August 4, 2010,
Bersamin, J)
At the time the purchasers of a parcel of land bought the property, the same was covered by an Emancipation
Patent under PD No. 27. Inscribed at the back of the title was the prohibition that is shall not be transferred
except by hereditary succession or to the Government. Are the purchasers buyers in good faith? Explain.
No, because they knew of a defect or flaw in the title of the sellers. This is so because of the inscribed
prohibition against sale of the property in accordance with PD No. 27.
In determining whether or not a buyer of property is a purchaser in good faith, he must show that he has
bought the property without notice that some other person had a right to, or interest in, such property, and he
should pay a full and fair price for the same at the time of his purchase, or before he had notice of the claim or
interest of some other persons in the property. (Sandoval v. CA, G.R. No. 106657, August 1, 1996, 260 SCRA 283) He
must believe that the person from whom he receives the property was the owner and could convey title to the
property, (Duran v. IAC, G.R. No. L-64159, September 10, 1985) for he cannot close his eyes to facts that should put a
reasonable man on his guard and still claim he acted in good faith (Embrado v. CA, G.R. No. 51457, June 27, 1994; Uy
v. Fule, G.R. No. 164961, June 30, 2014, Bersamin, J).
Notes: Settled is the rule that a buyer of real property in possession of persons other than the seller must be wary
and should investigate the rights of those in possession, for without such inquiry the buyer can hardly be regarded
as a buyer in good faith and cannot have any right over the property. (Heirs of Romana Saves vs. Heirs of Escolastico
Saves, 632 SCRA 236 [2010])
A purchaser in good faith is one who buys the property of another, without notice that some other person has a right
to, or interest in, such property, and pays the full and fair price for it at the time of such purchase or before he has
notice of the claim or interest of some other persons in the property. (Tamani vs. Salvador, 647 SCRA 132 [2011])
Void title can be the root of a valid title if transferred to innocent purchaser for value.
In Tolentino, et al. v. Sps. Latagan, et al., G.R. No.179874, June 22, 2015, Peralta, J, the SC once again
expounded on the effect of a forged deed which effected the transfer of a real property and whether the purchaser of
the property is a buyer in good faith.
Citing Rufloe v. Burgos, G.R. No. 143573, January 30, 2009, the Court held that a forged deed of sale is null
and void and conveys no title, for it is a well-settled principle that no one can give what one does not have; nemo dat
quod non habet. Once can sell only what one owns or is authorized to sell, and the buyer can acquire no more right
than what the seller can transfer legally. (Consolidated Rural Bank, Inc. v. Court of Appeals, G.R. No. 132161, January
17, 2005, 448 SCRA 347, 363). Due to the forged Deed of Absolute Sale the buyer acquired no right over the subject
property which he could convey to his daughter. All the transactions subsequent to the falsified sale between him
and his daughter are likewise void.
Aforged or fraudulent document may become the root of a valid title, if the property has already been
transferred from the name of the owner to that of the forger, (Lim v. Chuatoco, G.R. No. 161861, March 11, 2005, 453
SCRA 308), and then to that of an innocent purchaser for value. (Camper Realty Corp. v. Pajo-Reyes, et al., 646 Phil.
689 [2010]; Rufloe v. Burgos, supra.; citing Cayana v. Court of Appeals, G.R. No. 125607, March 18, 2004, 426 SCRA
10, 22). This doctrine emphasizes that a person who deals with registered property in good faith will acquire good
title from a forger and be absolutely protected by a Torrens title. This is because a prospective buyer of a property
registered under the Torrens system need not go beyond the title, especially when she has not notice of any badge of
fraud or defect that would place her on guard. In view of such doctrine, the Court now resolves the second issue of
whether or not Maria is an innocent purchaser for value.
LEASE
May the right of first refusal to buy a property being leased be invoked while the case is on appeal? Explain.
Ans.: No, because it should have been invoked when there was notice to the lessee that the property was being sold
to another person. Since he did not invoke it within a reasonable time, he is precluded from invoking it. the failure to
do so is an indication that he declined or abandoned such right. (Peñ a, et al. v. Sps. Tolentino, G.R. No. 155227-28,
February 9, 2011, Bersamin, J)
ESTOPPEL
AGENCY
Such authority must be conferred in writing and must express the powers of the agent in clear and
unmistakable language in order for the principal to confer the right upon an agent to sell the real property.
(Yoshizaki v. Joy Training Center of Aurora, Inc., G.R. No. 174978, July 31, 2013, 702 SCRA, 631, 642). It is a general
rule that a power of attorney must be strictly construed, and courts will not infer or presume broad powers from
deeds which do not sufficiently include property or subject under which the agent is to deal. (Woodchild Holdings,
Inc. v. Roxas Electric and Construction Company, Inc., supra note 20, at 913). Thus, when the authority is couched in
general terms, without mentioning any specific power to sell or mortgage or to do other specific acts of strict
dominion, then only acts of administration are deemed conferred. (Veloso v. Court of Appeals, 329 Phil. 398, 405
(1996)).
There was no perfected contract to sell. Nowhere in the General Power of Attorney was the agent granted,
expressly or impliedly, any power to sell the subject property or a portion thereof. The authority expressed in the
General Power of Attorney was couched in very broad terms covering petitioner's businesses and properties. Time
and again, the Court has stressed that the power of administration does not include acts of disposition, which are
acts of strict ownership. As such, an authority to dispose cannot proceed from an authority to administer, and vice
versa, for the two powers may only be exercised by an agent by following the provisions on agency of the Civil Code.
(Aggabao v. Parulan, 644 Phil. 26, 37 [2010]).
Spouses Marcos and Susan Prieto filed a complaint to declare as void the real estate mortgages executed by
Spouses Antonion & Monette Prieto in favor of FEBTC claiming that while the former executed a SPA in favor of
the latter, the mortgages were executed under their names alone although they used as collateral the
properties of the former in the loan obtained by them. The bank contended that the contracts are binding upon
Marcos and Susan since they sent a letter acknowledging the said loan and that the contracts involved
properties belonging to them. The RTC ruled in favor of the bank due to the acknowledgment by Marcos and
Susan of the mortgages and that the contract involved properties belonging to them. The CA affirmed the
decision, hence, appeal was made before the SC based on the aforesaid contentions. Is the appeal proper? Why?
Ans.: No. Even if it was assumed that Antonio’s obtaining the loans in his own name, and executing the mortgage
contracts also in his own name had exceeded his express authority under the SPA, Marcos was still liable to FEBTC
by virtue of his express ratification of Antonio’s act. Under Article 1898 of the Civil Code, the acts of an agent done
beyond the scope of his authority do not bind the principal unless the latter expressly or impliedly ratifies the same.
(See: Art. 1898, NCC)
In agency, ratification is the adoption or confirmation by one person of an act performed on his behalf by
another without authority. The substance of ratification is the confirmation after the act, amounting to a substitute
for a prior authority. (Manila Memorial Park Cemetery v. Linsangan, G.R. No. 151319, November 22, 2004, 443 SCRA
377, 394) Here, there was such a ratification by Marcos, as borne out by his execution of the letter of
acknowledgement on September 12, 1996 (Prieto v. CA, G.R. No. 158597, June 18, 2012, Bersamin, J).
LOAN
SURETY/GUARANTY
Written on Genbank letterhead, the continuing guaranty dated February 8, 1966 and the continuing guaranty
dated February 22, 1967 contained identical principal provisions to the effect that: (a) he had guaranteed the
“punctual payment at maturity” of the loans secured by the continuing guaranty; ( b) Genbank, as the creditor
bank of YLTC, could “make or cause” payments under the terms and conditions of their loan agreement; ( c)
under paragraph II, Jesus had offered as security for the loans of YLTC his own properties in the possession of
Genbank or for which Genbank had attached a lien, which, upon default by YLTC in paying the loan, Genbank,
“without demand or notice” upon respondent, would have the full power and authority to sell; ( d) should YLTC
incur in default in the payment of the loans, Genbank could “proceed directly” against Jesus “without
exhausting the property” of YLTC; and (e) paragraph XII expressly stated that the liability of the signatory or
signatories to the continuing guaranty would be “joint and several.” What is the nature of the contract?
Explain.
Ans.: It is a surety. The courts below, as well as the petitioner, interchangeably used the terms guaranty and surety in
characterizing the undertakings of Jesus under the continuing guaranties. The terms are distinct from each other,
however, and the distinction is expressly delineated in the Civil Code, to wit:
Article 2047. By guaranty a person, called the guarantor, binds himself to the creditor to
fulfill the obligation of the principal debtor in case the latter should fail to do so.
If a person binds himself solidarily with the principal debtor, the provisions of Section 4,
Chapter 3, Title I of this Book shall be observed. In such case the contract is called a suretyship.
Thus, in guaranty, the guarantor “binds himself to the creditor to fulfill the obligation of the principal debtor
in case the latter should fail to do so.” The liability of the guarantor is secondary to that of the principal debtor
because he “cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor, and
With the stipulations in the continuing guaranties indicating that he was the surety of the credit line
extended to YLTC, Jesus was solidarily liable to Genbank for the indebtedness of YLTC. In other words, he thereby
rendered himself “directly and primarily responsible” with YLTC, “without reference to the solvency of the
principal.” (Palmares v. Court of Appeals, G.R. No. 126490, March 3, 1998, 288 SCRA 422, 436, citing Erbelding v.
Noland Co., Inc., 64 S.E. 2d 218 [1951]; Allied Banking Corp. v. Yujuico, G.R. No. 163116, June 29, 2015, Bersamin, J)
Thus, in guaranty, the guarantor “binds himself to the creditor to fulfill the obligation of the principal debtor
in case the latter should fail to do so.” The liability of the guarantor is secondary to that of the principal debtor
because he “cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor,
and has resorted to all the legal remedies against the debtor.” (Civil Code, Article 2058). In contrast, the surety is
solidarily bound to the obligation of the principal debtor. (Ang v. Associated Bank, G.R. No. 146511, September 5,
2007, 532 SCRA 244, 274-275).
With the stipulations in the continuing guaranties indicating that he was the surety of the credit line he was
solidarily liable to the bank for the indebtedness of the debtor. In other words, he thereby rendered himself “directly
and primarily responsible” with the debtor, “without
reference to the solvency of the principal.”
In Techno Dev. Chemical Corp. v. Viking Metal Ind. Inc., G.R. No. 203179, July 4, 2016, Peralta, J, the SC,
reiterating the principle in Nacar v. Gallery Frames, 716 Phil. 267 [2013] ruled that when the judgment of a court
awarding the sum of money becomes final and executory, the legal rate of interest shall be 6% per annum from such
finality until its satisfaction, taking the form of judicial debt.
FORECLOSURE OF MORTGAGE
Q – May the mortgagees foreclose the mortgage extrajudicially if the debtor does not comply with the
condition to pay the loan even if there is no SPA inserted in real estate mortgage? Explain.
Ans.: No, because it is a requirement for the validity of an extrajudicial foreclosure by the mortgagees that a SPA be
inserted in the REM. That the mortgagor agreed to an extrajudicial foreclosure of the mortgage in the event of failure
to pay is not sufficient authority for the mortgagor to foreclose the mortgage extrajudicially.
Their agreement is a mere expression of their amenability to extrajudicial foreclosure as the means of
foreclosing the mortgage, and does not constitute the special power or authority to sell the mortgage property to
enable the mortgagees to recover the unpaid obligations. What is necessary is the special power or authority to sell –
whether inserted in the REM itself, or annexed thereto – that authorizes the mortgagees to sell in the public auction
their mortgaged property (Sps. Baysa v. Sps. Plantilla, et al., G.R. No. 159271, July 13, 2012, Bersamin, J).
The requirement for the special power or authority to sell finds support in the civil law. To begin with,
because the sale of the property by virtue of the extrajudicial foreclosure would be made through the sheriff by the
respondent spouses as the mortgagees acting as the agents of the petitioners as the mortgagors-owners, there must
be a written authority from the latter in favor of the former as their agents; otherwise, the sale would be void. (Art.
1874, NCC). And secondly, considering that, pursuant to Article 1878[5] of the Civil Code, a special power of attorney
was necessary for entering “into any contract by which the ownership of an immovable is transmitted or acquired
either gratuitously or for a valuable consideration,” the written authority must be a special power of attorney to sell.
Contrary to the CA’s opinion, therefore, the power or authority to sell by virtue of the extrajudicial foreclosure of the
REM could not be necessarily implied from the text of paragraph 13, supra, expressing the petitioners’ agreement to
the extrajudicial foreclosure. (Sps. Baysa v. Sps. Plantilla, et al., G.R. No. 159271, July 13, 2012, Bersamin, J)
QUASI-DELICT
When overtaking another vehicle, allowed only if clearly visible and clear.
In Napoleon Senit v. People, G.R. No. 192914, January 11, 2016, Reyez, J, a bus suddenly overtook a big truck
from the right side of the road, hence, the driver tried to avoid the accident by swerving to the right towards the
shoulder of the road and applied the brakes, but the bus was moving too fast and could not avoid the collision with
the pick-up. The bus crashed into the right side of the pick-up causing injuries to the passengers and the driver. The
driver was sued for the crime of imprudence resulting in damage to property and injuries. He was convicted with
award of damages. On appeal, the accused contended that it was the driver of the pick-up who committed a traffic
violation and thus, he should be the one blamed for the incident. Is the contention correct? Explain.
Ans.: No. The prosecution sufficiently proved that the bus driven by the petitioner recklessly drove on the right
shoulder of the road and overtook another south-bound ten-wheeler truck that slowed at the intersection, obviously
to give way to another vehicle about to enter the intersection. It was impossible for him not to notice that the ten-
wheeler truck in front and traveling in the same direction had already slowed down to allow passage of the pick-up,
which was then negotiating a left turn to Aglayan public market. Seeing the ten-wheeler truck slow down, it was
Thus, the petitioner cannot blame the driver of the pick-up for not noticing a fast-approaching bus, as the
cited law provides that the one overtaking on the road has the obligation to let other cars in the opposite direction
now his presence and not the other way around as the petitioner suggests.
Liability of registered owner of vehicle although not the actual operator; reasons.
MMTC and Mina’s Transit Corp. entered into an agreement to sell several bus units where the former
retained ownership until certain conditions have been met. In the meantime, Mina’s Transit operated the same. One
of the buses hit and damaged a Honda Motorcycle. A complaint for damages was filed against MMTC which
contended that it is not liable since the actual operator and employer was Mina’s which likewise contended that it
exercised the diligence of a good father of a family in the selection and supervision of its employees. Is the trial court
judgment holding MMTC liable correct? Explain.
Ans.: Yes. In view of MMTC’s admission in its pleadings that it had remained the registered owner of the bus at the
time of the incident, it could not escape liability for the personal injuries and property damage suffered by the
another. This is because of the registered-owner rule, whereby the registered owner of the motor vehicle involved in
a vehicular accident could be held liable for the consequences. The registered-owner rule has remained good law in
this jurisdiction considering its impeccable and timeless rationale, as enunciated in the 1957 ruling in Erezo, et al. v.
Jepte, 102 Phil. 103, 108-109 [1975] where the Court pronounced:
Registration is required not to make said registration the operative act by which
ownership in vehicles is transferred, as in land registration cases, because the administrative
proceeding of registration does not bear any essential relation to the contract of sale between the
parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of
the vehicle upon any public highway (section 5 [a], Act No. 3992, as amended.) The main aim of
motor vehicle registration is to identify the owner so that if any accident happens, or that any
damage or injury is caused by the vehicle on the public highways, responsibility therefor can be
fixed on a definite individual, the registered owner. Instances are numerous where vehicles running
on public highways caused accidents or injuries to pedestrians or other vehicles without positive
identification of the owner or drivers, or with very scant means of identification. It is to forestall
these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration
is primarily ordained, in the interest of the determination of persons responsible for damages or
injuries caused on public highways.
“‘One of the principal purposes of motor vehicles legislation is
identification of the vehicle and of the operator, in case of accident; and another is
that the knowledge that means of detection are always available may act as a
deterrent from lax observance of the law and of the rules of conservative and safe
operation. Whatever purpose there may be in these statutes, it is subordinate at
the last to the primary purpose of rendering it certain that the violator of the law
or of the rules of safety shall not escape because of lack of means to discover him.’
The purpose of the statute is thwarted, and the displayed number becomes a
‘snare and delusion,’ if courts would entertain such defenses as that put forward
by appellee in this case. No responsible person or corporation could be held liable
for the most outrageous acts of negligence, if they should be allowed to place a
‘middleman’ between them and the public, and escape liability by the manner in
which they recompense their servants.” (King vs. Brenham Automobile Co., 145
S.W. 278, 279.)
Indeed, MMTC could not evade liability by passing the buck to Mina’s Transit. The stipulation in the
agreement to sell did not bind third parties, who were expected to simply rely on the data contained in the
registration certificate of the erring bus (Metro Manila Transit Corp. v. Cuevas, G.R. No. 167797, June 15, 2015,
Bersamin, J).
The Court has reiterated the registered-owner rule in other rulings, like in Filcar Transport Services v. Espinas,
G.R. No. 174156, June 20, 2012, 674 SCRA 117, 128-130, to wit:
x x x It is well-settled that in case of motor vehicle mishaps, the registered owner of the
motor vehicle is considered as the employer of the tortfeasor-driver, and is made primarily liable
for the tort committed by the latter under Article 2176, in relation with Article 2180, of the Civil Code.
Indeed, MMTC could not evade liability by passing the buck to Mina’s Transit. The stipulation in the agreement
to sell did not bind third parties like the Cuevases, who were expected to simply rely on the data contained in the
registration certificate of the erring bus. (Metro Manila Transit Corp. v. Cuevas, et al., G.R. No. 167797, June 15, 2015,
Bersamin, J)
Felix Paras was on board an Inlan Trailways bus when a Philtranco bus bumped it resulting in injuries to
passengers including Paras. Unable to obtain financial assistance from Inland, he filed a complaint for
damages for breach of contract of carriage. Inland denied responsibility claiming that it exercised utmost
diligence in ensuring the safety of its passengers citing the police report that the proximate cause of the
accident was the violent bumping of the rear portion of the bus of Inland by a Philtranco bus. Inland filed a
third-party complaint where after trial judgment was rendered against Philtranco and its driver which the CA
affirmed on appeal. Before the SC, Philtranco contended that Paras cannot recover damages, moral damages
from Philtranco based on quasi-delict because the suit was based on breach of contract. Is the contention
correct? Explain.
Ans.: No. As a general rule moral damages are not recoverable in an action predicated on a breach of contract. This is
because such action is not included in Article 2219 of the Civil Code as one of the actions in which moral may be
recovered. By way of exception, moral damages are recoverable in an action predicated on a breach of contract (a)
here the mishap results in the death of a passenger, as provided in Article 1764, in relation to Article 2206, (3), of
the Civil Code; and (b) where the common carrier has been guilty of fraud or bad faith, as provided in Article 2220 of
the Civil Code.
Although this action does not fall under either of the exceptions, the award of moral damages to Paras was
nonetheless proper and valid. There is no question that Inland filed its third-party complaint against Philtranco and
its driver in order to establish in this action that they, instead of Inland, should be directly liable to Paras for the
physical injuries he had sustained because of their negligence. To be precise, Philtranco and its driver were brought
into the action on the theory of liability that the proximate cause of the collision between Inland’s bus and
Philtranco’s bus had been “the negligent, reckless and imprudent manner defendant Apolinar Miralles drove and
operated his driven unit, owned and operated by third-party defendant Philtranco Service Enterprises, Inc
(Philtranco Service Enterprises, Inc. v. Paras, et al., G.R. No. 161909, April 25, 2012, Bersamin, J).”
What is the basis of the claim that the 3rd party plaintiff asserts?
Ans.: The claim that the third-party complaint asserts against the third-party defendant must be predicated on
substantive law. Here, the substantive law on which the right of Inland to seek such other relief through its third-
party complaint rested were Article 2176 and Article 2180 of the Civil Code, which read:
“Article 2176. Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this chapter. (1902a)
Article 2180. The obligation imposed by article 2176 is demandable not only for one’s
own acts or omissions, but also for those of persons for whom one is responsible.
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not engaged in
any business or industry.
The responsibility treated of in this article shall cease when the persons herein mentioned
prove that they observed all the diligence of a good father of a family to prevent damage”
(Philtranco Service Enterprises, Inc. v. Paras, et al., G.R. No. 161909, April 25, 2012, Bersamin, J).
Q – Should the cause of action be the same against Inland and Philtranco? Explain.
Ans.: No. Paras’ cause of action against Inland (breach of contract of carriage) did not need to be the same as the
cause of action of Inland against Philtranco and its driver (tort or quasi-delict) in the impleader. It is settled that a
defendant in a contract action may join as third-party defendants those who may be liable to him in tort for the
plaintiff’s claim against him, or even directly to the plaintiff. Indeed, Prof. Wright, et al., commenting on the provision
of the Federal Rules of Procedure of the United States from which Section 12, supra, was derived, observed so, to wit:
(Viluan v. Court of Appeals, Nos. L-21477-81, April 21, 1966, 16 SCRA 742; Samala v. Judge Victor, G.R. No. L-53969,
February 21, 1989, 170 SCRA 453, 460)
“The third-party claim need not be based on the same theory as the main claim. For
example, there are cases in which the third-party claim is based on an express indemnity contract
and the original complaint is framed in terms of negligence. Similarly, there need not be any legal
relationship between the third-party defendant and any of the other parties to the action.
Impleader also is proper even though the third party’s liability is contingent, and technically does
not come into existence until the original defendant’s liability has been established. In addition, the
words ‘is or may be liable’ in Rule 14(a) make it clear that impleader is proper even though the
third-party defendant’s liability is not automatically established once the third-party plaintiff’s
liability to the original plaintiff has been determined.” (Philtranco Service Enterprises, Inc. v. Paras,
et al., G.R. No. 161909, April 25, 2012, Bersamin, J)
Is it necessary that judgment be rendered against Inland first before Philtranco may be held liable? Explain.
Ans.: No. It is not a pre-requisite for attachment of the liability to Philtranco and its driver that Inland be first
declared and found liable to Paras for the breach of its contract of carriage with him.
Section 16, Rule 6 of the Revised Rules of Court defines a third party complaint as a “claim that a defending
party may, with leave of court, file against a person not a party to the action, called the third-party defendant, for
contribution, indemnification, subrogation, or any other relief, in respect of his opponent’s claim.” ( Viluan vs. Court
of Appeals, et al., 16 SCRA 742 [1966]).
State the reasons why Paras can recover damages based on quasi-delict even if the action is based on breach of
contract.
Ans.: Allowing the recovery of damages by Paras based on quasi-delict, despite his complaint being upon contractual
breach, served the judicial policy of avoiding multiplicity of suits and circuity of actions by disposing of the entire
subject matter in a single litigation. (Philtranco Service Enterprises, Inc. v. Paras, et al., G.R. No. 161909, April 25,
2012, Bersamin, J)
Philtranco assailed the award of temperate damages by the CA considering that Paras and Inland had not
raised the matter in the trial court and in their respective appeals and that the CA could not substitute the
temperate damages granted to Paras if Paras could not properly establish his actual damages despite
evidence of his actual expenses being easily available to him. Rule on the contentions. Explain.
Ans.: The contentions are not correct. Actual damages, to be recoverable, must not only be capable of proof, but must
actually be proved with a reasonable degree of certainty. The reason is that the court “cannot simply rely on
speculation, conjecture or guesswork in determining the fact and amount of damages,” but “there must be
competent proof of the actual amount of loss, credence can be given only to claims which are duly supported by
receipts.” (Viron Transportation Co., Inc. v. Delos Santos, G.R. No. 138296, November 22, 2000, 345 SCRA 509, 519)
May the court award temperate damages even if actual damages were not proven? Explain.
Ans.: Yes. The rationale for Article 2224 has been stated in Premiere Development Bank v. Court of Appeals, G.R. No.
159352, April 14, 2004, 427 SCRA 686, 699, in the following manner:
“Even if not recoverable as compensatory damages, Panacor may still be awarded damages
in the concept of temperate or moderate damages. When the court finds that some pecuniary loss
has been suffered but the amount cannot, from the nature of the case, be proved with certainty,
temperate damages may be recovered. Temperate damages may be allowed in cases where from
the nature of the case, definite proof of pecuniary loss cannot be adduced, although the court is
convinced that the aggrieved party suffered some pecuniary loss (Philtranco Service Enterprises,
Inc. v. Paras, et al., G.R. No. 161909, April 25, 2012, Bersamin, J).
DAMAGES
To be able to claim damages for loss of earning capacity despite the non-availability of documentary
evidence, there must be oral testimony that: (a) the victim was self-employed earning less than the minimum wage
under current labor laws and judicial notice was taken of the fact that in the victim's line of work, no documentary
evidence is available; or (b) the victim was employed as a daily wage worker earning less than the minimum wage
under current labor laws. (People v. Dizon, 378 Phil. 261, 278 [1999]).
Q – There was a contract for the construction of a house which was not completed. The owner filed a complaint
for breach of contract with damages praying that the defendants be ordered to finish the construction of the
house. It was contended however by the defendants that the house has long been finished and that the
plaintiffs are now estopped from assailing their signing of the certificate of house acceptance/completion
considering that they had the option not to pre-sign the certificate. This was the defense of Comsavings Bank.
Is the defense valid? Why?
Ans.: No. The liability of Comsavings Bank did not arise from its breach of warranties under its purchase of loan
agreement with NHMFC. Under the purchase of loan agreement, it undertook, for value received, to sell, transfer and
deliver to NHMFC the loan agreements, promissory notes and other supporting documents that it had entered into
and executed with respondents, and warranted the genuineness of the loan documents and the “construction of the
residential units.” Having made the warranties in favor of NHMFC, it would be liable in case of breach of warranties
to NHMFC, not respondents, eliminating breach of such warranties as a source of its liability towards respondents.
Instead, the liability of Comsavings Bank towards respondents was based on Article 20 and Article 1170 of
the Civil Code, viz.:
Article 20. Every person who, contrary to law, willfully or negligently causes damage to
another, shall indemnify the latter for the same.
Article 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for
damages.
Based on the provisions, a banking institution like Comsavings Bank is obliged to exercise the highest
degree of diligence as well as high standards of integrity and performance in all its transactions because its business
is imbued with public interest. In Philippine National Bank v. Pike, it was held that “The stability of banks largely
depends on the confidence of the people in the honesty and efficiency of banks.”
Gross negligence connotes want of care in the performance of one’s duties; it is a negligence characterized
by the want of even slight care, acting or omitting to act in a situation where there is duty to act, not inadvertently
In the body of its decision, the CA concluded that considering that Paras had a minimum monthly income of
P8,000.00 as a trader he was entitled to recover compensation for unearned income during the 3-month
period of his hospital confinement and the 6-month period of his recovery and rehabilitation; and aggregated
his unearned income for those periods to P72,000.00. Yet, the CA omitted the unearned income from the
dispositive portion. May the SC award it instead? Explain.
Ans.: Yes. The omission should be rectified, for there was credible proof of Paras’ loss of income during his disability.
According to Article 2205 (1), of the Civil Code, damages may be recovered for loss or impairment of earning
capacity in cases of temporary or permanent personal injury. Indeed, indemnification for damages comprehends not
only the loss suffered (actual damages or damnum emergens) but also the claimant’s lost profits (compensatory
damages or lucrum cessans). (Titan-Ikeda Construction and Development Corporation v. Primetown Property Group,
Inc., G.R. No. 158768, February 12, 2008, 544 SCRA 466, 491) Even so, the formula that has gained acceptance over
time has limited recovery to net earning capacity; hence, the entire amount of P72,000.00 is not allowable. The
premise is obviously that net earning capacity is the person’s capacity to acquire money, less the necessary expense
for his own living. (Villa Rey Transit, Inc. v. Court of Appeals, 31 SCRA 511, 515-517) To simplify the determination,
therefore, the net earning capacity of Paras during the 9-month period of his confinement, surgeries and
consequential therapy is pegged at only half of his unearned monthly gross income of P8,000.00 as a trader, or a
total of P36,000.00 for the 9-month period, the other half being treated as the necessary expense for his own living
in that period. (Philtranco Service Enterprises, Inc. v. Paras, et al., G.R. No. 161909, April 25, 2012, Bersamin, J)
Exemplary damages.
As to the award of exemplary damages, Mendoza v. Spouses Gomes, G.R. No. 160110, June 18, 2014,
enumerates the requisites for the award of the same.
Our jurisprudence sets certain conditions when exemplary damages may be awarded:
First, they may be imposed by way of example or correction only in addition, among others, to
compensatory damages, and cannot be recovered as a matter of right, their determination
depending upon the amount of compensatory damages that may be awarded to the claimant.
Second, the claimant must first establish his right to moral, temperate, liquidated or compensatory
damages. Third, the wrongful act must be accompanied by bad faith, and the award would be
allowed only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner.
The three (3) requisites are met in the Rosit case. Dr. Gestuvo's actions are clearly negligent. Likewise, Dr.
Gestuvo acted in bad faith or in a wanton, fraudulent, reckless, oppressive manner when he was in breach of the
doctrine of informed consent. Dr. Gestuvo had the duty to fully explain to Rosit the risks of using large screws for the
operation. More importantly, he concealed the correct medical procedure of using the smaller titanium
screws mainly because of his erroneous belief that Rosit cannot afford to buy the expensive titanium screws. Such
concealment is clearly a valid basis for an award of exemplary damages.
Moral damages and civil indemnity need not be pleaded in a homicide case.
In convicting the accused in a homicide case the lower courts in Ladines v. People, et al., G.R. No. 167333,
January 11, 2016, Bersamin, J, limited the civil liability to civil indemnity of P50,000.00. The limitation was a plain
error which must be correct moral damages and civil indemnity are always granted in homicide, it being assumed by
the law that the loss of human life absolutely brings moral and spiritual losses as well as a definite loss. Moral
damages and civil indemnity require neither pleading nor evidence simply because death through crime always
occasions moral sufferings on the part of the victim’s heirs. (People v. Osianas, G.R. No. 182548, September 30, 2008,
567 SCRA 319, 339-340; People v. Buduhan, G.R. No. 178196, August 6, 2008, 561 SCRA 337, 367-368; People v.
Berondo, Jr., G.R. No. 177827, March 30, 2009, 582 SCRA 547, 554-555) As the Court said in People v. Panado, G.R.
No. 133439, December 26, 2000, 348 SCRA 679, 690-691:
x x x a violent death invariably and necessarily brings about emotional pain and anguish on
the part of the victim’s family. It is inherently human to suffer sorrow, torment, pain and anger
when a loved one becomes the victim of a violent or brutal killing. Such violent death or brutal
killing not only steals from the family of the deceased his precious life, deprives them forever of his
love, affection and support, but often leaves them with the gnawing feeling that an injustice has
been done to them.
The civil indemnity and moral damages are fixed at P75,000.00 each because homicide was a gross crime.