JURISTS BAR REVIEW CENTERBy: Assoc. Dean Vivian M. Paguirigan

If an American citizen married to a Filipino obtains a divorce but subsequently becomes a Filipino, will that nullify the effects of the divorce obtained by him?

Maria Rebecca Bayot vs. Vicente Bayot, G.R. No.. 155635/163979 November 7, 2008

Vicente Bayot married Rebecca Makapugay in 1979 at Mandaluyong City. In their marriage certificate, Rebecca identified herself as an American Citizen born in Guam. A daughter was born to the couple in 1982 whom they named Alexandra or "Alix". In the birth certificate of Alexandra, Rebecca again identified herself as an American citizen.

The couple resided in Alabang Muntinlupa until their relationship soured in 1996 when Rebecca filed for divorce in the Dominican Republic. She likewise alleged in the petition for divorce that she was an American citizen.

The Dominican Court granted the divorce on February 22, 1996 dissolving Vicente and Rebecca’s marriage, giving them joint custody of Alex and over a year later, it also ordered the settling of the couple’s property pursuant to an agreement they executed in December 1996.

On March 14, 1996, a month after the foreign court issued the divorce, Rebecca filed before the Makati RTC a petition for declaration of nullity of her marriage but she later withdrew the petition. In March 2001, Rebecca re-filed another petition for declaration of nullity this time before the RTC of Muntinlupa on the ground of psychological incapacity on the part of Vicente.

Vicente filed a motion to dismiss on the ground of lack of cause of action and res judicata. He alleged that the prior judgment of divorce bars the petition for nullity. Rebecca also moved that she be granted support pendente lite. Rebecca interposed an opposition to the motion to dismiss insisting on her Philippine citizenship. She argued that the DOJ issued arecognition of her Filipino citizenship by virtue of the indorsement of the DOJ Secretary Tuquero on June 8, 2000 of the Bureau of Immigration Identification Certificate dated October 11, 1995.

RTC denied the motion to dismiss and granted support pendente lite to Rebecca. Vicente went to the CA and asked for injunction. The CA issued the injunction and despite Rebecca’s motions for reconsideration, the CA was undaunted. The CA finally set aside the RTC order and dismissed the case filed by Rebecca for lack of cause of action.

Rebecca went to the SC. SC ruled that at the time Rebecca applied for and obtained the divorce, she was an American and remains to be one absent proof of an effective repudiation of such citizenship. SC noted that she consistently professed, asserted and represented herself as an American 1. In her marriage certiifcate; 2 in the birth certificate of her daughter; 3 when she secured the divorce from the Dominican Republic. While it is true that the DOJ confirmed her Philippine

citizenship in 2000 but under immigration rules applications for recognition of Filipino citizenship require the affirmation by the DOJ of the Order of Recognition issued by the Bureau of Immigration.

The SC said that it can assume hypothetically that Rebecca is now a Filipino citizen but it is indubitable that she did not have that status of or at least was not yet recognized as a Filipino when she secured the February 22, 1996 judgment of divorce. The SC also noted that Rebecca voluntarily withdrew her first petition because she could not show proof of her Filipino citizenship.

Consequent to the dissolution of the marriage, Vicente could no longer be subject to the husband’s obligations under the Family Code and pursuant to the case of Republic v. Orbecido, the marriage is dissolved and Vicente is rendered capacitated to remarry. It is thus clear, that Rebecca lacks under the premises a cause of action to seek declaration of nullity of her marriage, a suit which presupposes the existence of a marriage.

Psychological Incapacity

Benjamin Ting v. Carmen Ting G.R. No. 166562; March 31, 2009

Benjamin and Carmen met in 1972 while they were in medical school. They married in Cebu City in 1975 when Carmen was already pregnant with their first child. The couple begot 6 children.

In October 1993 or after more than 18 years, Carmen filed a petition to declare their marriage void on the ground of psychological incapacity on the part of Benjamin. She alleged that Ben was a habitual drinker and compulsive gambler. She added that when he was drunk, he would assault her and force her to have sex with him. He also failed to give support to their children. All these allegations were denied by Ben.

RTC declared the marriage void because it gave weight to Dr. Onate’s findings. CA initially reversed the RTC but on motion for reconsideration filed by Carmen, it reconsidered its original decision and sustained the trial court’s ruling declaring the marriage void. Ben appealed to the SC.

SC ruled that it has not abandoned the Molina doctrine but only relaxed its stringent requirements because as held in the earlier case of Te vs. Te, with respect to psychological incapacity, no case can be considered as on all fours with another, meaning, courts should interpret the provision on a case-to-case basis, guided by experience, the findings of experts and by decisions of church tribunals.

SC reversed the CA and ruled that the totality of evidence adduced is insufficient to prove that Ben is psychologically unfit to discharge the duties expected of him as a husband. Carmen failed to prove that these “defects” were present at the time of the celebration of their marriage or that these defects were

incurable. In view of the diametrically contradicting psychological evaluations, SC gave greater weight to Dr. Obra’s findings because he based it on actual psychological evaluation report of a psychiatrist who personally examined Ben as well as personal interviews with Benjamin’s brothers whereas, Dr. Onate’s findings were merely based on the stenographic notes of Ben’s deposition.

Spouses Onesiforo and Rosario Alinas vs. Sps.Victor and Elena Alinas GR. No. 158040 April 14, 2008

Petitioners Onesiforo and Rosario are husband and wife but they separated de facto sometime in 1982. They owned two lots - one is Lot 896 B-A (Lot A for brevity) with a bodega standing on it, and the other is Lot 896-B-B (Lot B for brevity) on which their house was erected. Petitioner Onesiforo and respondent Victor are brothers. Petitioners alleged that they entrusted their two lots to respondents with the agreement that any income should be remitted to the SSS and the Rural Bank of Oroquieta to pay off their loan with the said institutions. Lot A was mortgaged to the RBO while Lot B was mortgaged to the SSS. Sometime in 1993, petitioner discovered that their lots were already titled in the name of the respondents. It appeared that Lot A was extrajudicially foreclosed by RBO. After Lot A was transferred in the name of the bank, the respondent spouses purchased it on installment from the RBO. Lot B was also foreclosed by SSS in November 1986, and pursuant to a SPA signed by Onesiforo in favor of Victor, the latter redeemed the lot from SSS for P111, 110.00. Later Onesiforo signed a Deed of Absolute Sale of Lot B to respondent spouses but Rosario did not sign the deed.

Petitioners filed with the RTC of Ozamis a complaint for recovery of possession and ownership of their conjugal properties against the respondents. RTC ruled in favor of the respondents insofar as Lot A (from RBO) was concerned but declared the sale of Lot B void for having been done without the consent of Rosario. RTC ordered petitioners to reimburse respondents the P111, 110 it paid to redeem the property from SSS. Only respondents appealed to the CA. CA modified the RTC by declaring as valid the sale of Lot B with respect to the share of Onesiforo in the same and void with respect to the share of Rosario. Petitioners interposed the appeal to the SC.

SC said the sale of Lot A is valid because it was made after the redemption period had lapsed. Respondents acquired title over the lot from RBO and not from petitioners. SC however found that the CA erred in ruling that Lot B’s sale was valid with respect of the ½ share of Onesiforo. Article 124 of the Family Code provides that:

“Art. 124. The administration and enjoyment of the conjugal partnership shall belong to both spouses jointly. Xxx

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 the power of disposition or encumbrance which

must have the 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.”

The SC citing Homeowners Savings Bank v. Dailo stated that the sale of a conjugal property requires the consent of both the husband and wife. In applying Article 124 of the Family Code, this Court declared that the absence of the consent of one renders the entire sale null and void, including the portion of the conjugal property pertaining to the husband who contracted the sale. Thus, pursuant to Art. 124 of the FC, the sale of Lot B made by petitioner is null and void.

FAMILY HOME

Simeon Cabang et.al. vs. Spouses Guillermo Basay G.R. no. 180587, March 20, 2009

Felix Odong was the registered owner of a parcel of land Lot 7777 in Zamboanga the OCT of which was issued in 1966. Odong and his heirs never occupied the land. In 1987, the respondents bought the property form the heirs of Felix but they also did not occupy the property. Petitioners Cabang were the awardees in a cadastral proceedings, they were awarded Lot 7778 but instead of occupying Lot 7778, petitioners occupied Lot 7777 because a big portion of Lot 7778 was used by the government as a public road.

Respondents filed a complaint for recovery of the land against the petitioners. The case reached the SC and judgment was for the respondents. After the judgment became final, the records were remanded to the trial court for execution but the court denied the motion for execution on the ground that herein petitioners’ family home may not be subject to an order of execution. Upon petition filed by respondents, the CA reversed the order of the RTC. In the present appeal, petitioners argued that the property subject of the controversy is their duly constituted family home and not subject to execution.

SC ruled that while the family home is exempt from execution, for the exemption to apply, it must be constituted on property owned by the persons constituting it. It must be part of either the ACP or the CPG or of the exclusive properties of either spouse with the latter’s consent or on the property of the unmarried head of the family. In this case, the alleged family home of petitioners stood on a land owned by the respondents and the question of ownership had long been decided by the courts. Petitioner’s continued stay on the property is only by mere tolerance of the respondents. Thus, SC denied the petition and ordered the petitioner to vacate.

PROPERTY

Gerardo Mendoza et. al. v. Soledad Salinas G.R. No. 152827 February 6, 2007

Salinas filed an application for registration of a parcel of land in Zambales. At the time Salinas filed the application, the petitioners were in actual physical possession of the land under claim of ownership. Mendozas alleged that they had been in possession of the property since 1964.

The RTC granted the application for registration of Salinas on November 3, 1998. Thereafter, the RTC upon application of Salinas also issued the writ of possession despite opposition filed by the Mendozas. Prior to the filing of the motion for the issuance of the writ, Salinas also filed an ejectment suit against the Mendozas but the MTCC dismissed the ejectment suit against the Mendozas. Salinas manifested that they will not appeal the decision in the ejectment suit and they will just file a motion for the issuance of the writ of possession in the LRC case. So they did, and as previously mentioned the RTC granted the writ.

Mendozas went directly to the SC arguing that they cannot be ousted of possession since they have been in possession since 1964. Salinas countered that the petition was improperly filed before the SC. SC ruled that the substantive issue posed is a question of law – propriety of the issuance of a writ of possession (in a land registration case) hence, direct resort to the SC was proper. SC also ruled that a writ of possession may issue in the following: 1) land registration under Sec. 17 of Act 496; 2) judicial foreclosure provided there are no third persons not parties to the foreclosure had intervened; 3) extrajudicial foreclosure under Sec. 7 of Act 3135.

A judgment confirming the title of the applicant in a registration case and ordering its registration in his name carries with it the delivery of possession which is an inherent element of the right of ownership. The writ may be issued not only against the person who has been defeated in a registration case but also against anyone unlawfully and adversely occupying the land or any portion thereof during the land registration proceedings up to the issuance of the final decree. The issuance of the writ is a ministerial duty of the land registration court BUT it ceases to be so with regard to petitioners who are actual possessor of the property under claim of ownership. Actual possession under claim of ownership raises a disputable presumption of ownership. Article 433 provides:

“Actual possession under claim of ownership raises a disputable presumption of ownership. The true owner must resort to judicial process for the recovery of the property.”

One who claims to be the owner of a property possessed by another must bring the appropriate judicial action for its physical recovery. Judicial process could mean no less than an ejectment suit or reinvindicatory action in which the ownership claims of the contending parties may be properly heard and resolved. While a writ of possession may be issued only pursuant to a decree of registration in a land registration proceedings, it cannot issue against possessors under claim of ownership as actual possession under claim of ownership raises a disputable presumption of ownership, and the true owner must resort to judicial process for the recovery of the property not summarily through a motion for the issuance of a writ of

possession. It was error for the RTC to have issued the writ against the Mendozas.

Florentino Troadio and Pedro Ochoa vs. Mauro Apeta and Apolonia Almazan; G.R. No. 146259, September 13, 2007

The Ochoas and their predecessors in interest have been occupying Lot 1580 in Binan, Laguna since 1910 and they have erected their houses and apartment building thereon. Sometime in 1982 respondents Mauro and Apolonia found out that they were the true owners of the land occupied by the Ochoas. It appears that the lot occupied by the Ochoas, Lot 1580 was registered in the name of the respondents’ predecessor in interest, Margarita Almada and the lot covered by the TCT in the name of the Ochoas was actually lot 1581 and NOT Lot 1580.

Respondents filed a complaint with the RTC for recovery of possession and damages against the petitioners in 1988. The RTC ruled in favor of the respondents and ordered petitioners to deliver possession of the lot to the respondents and to remove their houses and apartment building thereon. The Court of Appeals affirmed the decision of the RTC. Upon denial of their motion for reconsideration, petitioners elevated the case to the SC on the ground that the action for recovery of possession is barred by prescription.

SC ruled that no title to registered land in derogation to that of the registered owner shall be acquired by prescription or adverse possession. Neither can prescription be allowed against the hereditary successors of the registered owner, because they step into the shoes of the decedent and are merely the continuation of the personality of their predecessor-in-interest. The CA therefore did not commit any error when it declared the respondents the true and lawful owners of Lot 1580. However, petitioners were in good faith when they built their houses and apartment building on Lot 1580 since they were convinced that it was covered by their TCT. Article 448 provides that:

“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 Article 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 chose 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. “

Thus, respondents under Article 448 can make a choice either by appropriating the building by paying the proper indemnity or obliging the builder to pay the price of the land. The choice belongs to the owner of the land a rule that accords

with the principle of accession that the accessory follows the principal and not the other way around. He must choose only one. The SC affirmed with modification the decision of the CA in the sense that the respondents would have the option to pay for the houses and apartment or oblige the petitioners to pay the price of the lot in an amount not more than the value of said improvements.

Efren Tandog et.al. vs. Renato Macapagal , Spouses Alfonso and Marina Calderon, and Lands Management Bureau, G.R. No. 144208 September 11, 2007

The land subject of the instant case consists of 147,991 square meters and is located in Antipolo. The Tandogs claim that they and their predecessors-in-interest have been in open and continuous possession of the land. The Tandogs trace their rights to Casimiro Policarpio, unmarried and who died in 1945. They claim to be grandnephews and grandnieces of Casimiro.

Tandogs applied for judicial registration but they found out that about 20,000 sq. m. portion of the land had been occupied by Spouses Calderon who allegedly used falsified documents to justify their possession and that the Calderons later sold the land to the government. Macapagal, on the other hand, was a grantee of Free Patent over 18,000 sq. m.

Tandogs filed a complaint for quieting of title with the RTC of Antipolo. Spouses Calderon denied the allegations of the Tandogs and claimed that they bought the land in 1958 and has since then been in possession of the same. The Calderons also claimed that they had planted trees and paid the realty taxes on the land. The Macapagals entered into a compromise with Tandogs wherein the Tandogs recognized the ownership of the Macapagals.

The RTC dismissed the complaint filed by the Tandogs. CA affirmed and ruled that under Article 476, the claimant must show that there is an instrument, record, claim, encumbrance or proceeding which constitutes or casts a cloud, doubt, question or shadow upon the owner’s title to or interest in real property. CA noted that the most that the Tandogs did was to mark the Deed of Absolute Sale of Real Property and the SPA which are allegedly the falsified documents used by the Calderons as basis for their claim over the land.

SC affirmed the CA. It ruled that a cloud which may be removed by suit to quiet title is not created by mere verbal or parol assertion of ownership of an interest in property. There must be a written or factual basis for the asserted right. While petitioners alleged that the Calderons’ claim is a cloud on their interest, such allegation has not been proved. The alleged falsified documents used by the Calderons were marked as exhibits but were never formally offered in evidence and they cannot be given evidentiary value. The Tandogs failed to establish their legal or equitable title to or interest in the property which is the subject matter of the action. Neither did they present evidence that Casimiro Policarpio existed and that he is their predecessor-in-interest.

Nieves Plasabas and Marcos Malazarte vs. Dominador Lumen and Aurora Aunzo G.R. No. 166519, March 31, 2009

Nieves and Marcos (petitioners) filed a complaint for recovery of title to property with damages against respondents before the then CFI of Leyte. They prayed that judgment be rendered confirming their rights and legal title to the subject property and ordering defendants to vacate the occupied portion and pay damages. Respondents denied petitioners’ allegation and contended that the land was inherited by all the parties from their common ancestor, Francisco Plasabas. It was proven during the trial that Nieves was not the sole owner of the land. After resting their case, respondents raised in their memorandum that the complaint of Nieves should have been dismissed for failure to implead indispensable parties, the other co-owners, Jose, Victor and Victoria.

RTC dismissed the case without prejudice in its Order dated 13 April 1993 for failure of Nieves to implead her brothers and sister whom the RTC considered as indispensable parties. Nieves appealed but the CA affirmed the decision of the RTC. Upon appeal to the SC the SC reversed the decision and remanded the case to the trial court for disposition on the merits.

SC ruled that under Article 487 of the Civil Code, anyone of the co-owners may bring an action for ejectment. This article covers all kinds of actions for the recovery of possession, including accion publiciana and a reivindicatory action. A co-owner may file a suit without necessarily joining all the other co-owners as co-plaintiffs because the suit is deemed to be instituted for the benefit of all. Any judgment of the court in favor of the plaintiff will benefit the other co-owners, but if the judgment is adverse, the same cannot prejudice the rights of the unimpleaded co-owners. Thus, there is no need to determine whether the petitioners’ complaint is one for ejectment or for recovery of title because Article 487 applies to both action. Petitioners do not have to implead their co-owners as parties, the only exception is when the action is for the benefit of the plaintiff alone who claims to be the sole owner and is, thus, entitled to the possession thereof. In such case, the action will not prosper unless the plaintiff impleads the other co-owners who are indispensable parties. Non-joinder is not a ground for dismissal, the remedy being to implead the non-party claimed to be indispensable. Parties may be added by order of the court on motion or its own initiative at any stage of the action. Rogelia and Adelino Daclag vs. Elino Macahilig, Adela Macahilig et. Al; G.R. No. 159578, February 18, 2009

A land was registered in the name of Rogelia Daclag in 1984. When Daclag purchased the land from Maxima Divison, it was then unregistered land. It turned out that Maxima Divison misrepresented herself as the owner of the land. In 1991, respondents Macahilig filed a complaint for reconveyance. The case reached the Supreme Court and it ruled that since the petitioners bought the property when it was still unregistered land, the defense of having purchased the land in good faith is unavailing. The SC, thus, ordered the petitioners to pay the

respondents their share in the produce of the land from the time they were deprived of possession thereof in 1984.

Petitioner moved for reconsideration of the decision in the main arguing that the 10-year prescriptive period for filing an action for reconveyance applies only if the action is based on an implied trust but not in this case where the respondents action was based on fraud, in which case the period to file the action must have been within four years from discovery of the fraud. They also contend that as possessors in good faith they are entitled to the fruits received before the possession is legally interrupted under Article 544. They received the summons only in 1991.

SC reiterated that the prescriptive period for the reconveyance of fraudulently registered real property is 10 years for the date of the issuance of the certificate of title (Caro v. Court of Appeals; 180 SCRA 401) SC granted partial reconsideration with respect to the liability of the petitioners for the fruits. Article 528 provides that possession acquired in good faith does not lose this character except from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully. Possession in good faith ceases from the moment defects in the title are made known to the possessors by extraneous evidence or by suit for recovery of the property.

Records show that petitioners received the summons on August 5, 1991, thus their good faith ceased on the day they received the summons. Under Article 544 of the Civil Code, a possessor in good faith is entitled to the fruits of the thing only so long as his possession is not legally interrupted. Thus, petitioners good faith having ceased only on the day they received the summons, they should therefore be liable to pay the respondents the 10 cavans of palay only from that date, August 5, 1991 and not from 1984.

Spouses Jonel and Sarah Padilla vs. Isauro Velasco, et.al., G.R. No. 169956; January 19, 2009

Respondent Velascos are the heirs of Dr. Artemio Velasco who died single, without issue in 1949. Prior to his death, Artemio acquired a lot in Laguna by purchase from Spouses Sacluti in 1944.

Sometime in 1987, Padillas entered the property as trustees of Solomon spouses who purchased the land from the Rural Bank of Pagsanjan. Respondents demanded that Padillas vacate the property but the latter refused. The Padillas later performed acts of dominion over the property.

In 1991, the Velascos filed a complaint for accion publiciana with accounting and damages against the Padillas before the RTC of Sta. Cruz Laguna. Isauro Velasco claiming to be the administrator of Dr. Artemio’s estate testified that Artemio owned the property (Lot 2161) as evidenced by the deed of sale executed by Spouses Sacluti in favor of Artemio. Isauro likewise presented tax declaration and receipts in the name of Artemio as well as the certification from the LRA that the decree was issued in favor of Artemio. A geodetic engineer also testified

that he notified the petitioners Padilla that the lot they were occupying is lot 2161.

The Padillas on the other hand, claimed that the land is owned by the Solomon spouses as they purchased the same from the Rural Bank of Pagsanjan after the mortgagors, (Hector, Emma, Valeriano all surnamed Velasco, and Virginia Miso) defaulted in their loan obligations to the bank and the land was sold at auction on September 17, 1980 to the bank as highest bidder.

RTC ruled in favor of the Velascos and ordered the Padillas to vacate. CA affirmed the RTC.

The Padillas argued before the SC that the respondents failed to establish the sale of the land from Spouses Sacluti to Artemio Velasco. They added that the action of respondents was barred by prescription since they filed the action only in 1991 or more than ten years after the bank had acquired the subject property on September 17, 1980 at the public auction.

SC ruled that the instant case is for accion publiciana or the recovery of the right to possess. This is a plenary action filed to determine the better right to possession of realty independently of the title. Accion publiciana is also used to refer to an ejectment suit where the cause of dispossession is not among the grounds for forcible entry and unlawful detainer, or when possession has been lost for more than one year and can no longer be maintained under Rule 70 of the Rules of Court. The objective is only to recover possession and not ownership.

SC said the action had not yet prescribed because petitioners dispossessed respondents of the land in October 1987 and the action was filed in October 1991, only four years had elapsed from the time of dispossession.Under Article 555 of the Civil Code, the real right of possession is not lost till after the lapse of ten years. It is settled that the remedy of accion publiciana prescribes after the lapse of ten years, thus, the instant case was filed within the allowable period.

National Power Corporation vs. Benjamin Co G. R. No. 166973; February 10, 2009

Petitioner filed a complaint with the RTC of Pampanga for the acquisition of an easement of right-of-way over three lots belonging to respondent (R.A. 6395 grants NPC the right of eminent domain) in connection with the construction of its transmission lines for its Lahar affected transmission line project.

On 15 April 202, petitioner obtained a writ of possession and took possession of respondent’s property. The RTC rendered a partial decision declaring as valid the expropriation and ordered petitioner to pay P1.17M with 6% interest from the time of the taking. Petitioner appealed to the CA on the issue of just compensation.

The CA ordered petitioner to pay the full FMV of the property at the time of the taking in 2002 with 6% interest per annum. The issue raised on appeal to the SC is what reckoning point for the determination of the just compensation, is it the time of the

taking or at the time of the filing of expropriation proceedings? Also, for what sum should petitioner be liable for? Petitioner argues that under its charter (R.A.6395) it is liable only to an easement fee equivalent to 10% of the market value of the affected property owners.

SC ruled that when the petitioner takes private property to construct transmission lines, it is liable to pay the full market value of the property upon determination by the courts because the construction of the transmission lines will definitely deprive the owners of its normal use. R.A. 6395 must be read in relation to R.A. 8974 which provides new standards in determining the amount of just compensation. The compensation should be ascertained as of the time of the taking or the filing of the complaint whichever came first. (Rule 67) Just compensation is to be ascertained as of the time of the taking which usually coincides with the commencement of the expropriation proceedings but where the action precedes the entry into the property, the just compensation is to be ascertained as of the time of the filing of the complaint. Thus, the compensation in this case should be computed from 27 June 2001

Elvira Arangote vs. Spouses Martin and Lourdes Maglunob and Romeo Salido; G.R. No. 178906; February 18, 2009

Elvira Arangote acquired the subject parcel of land from Esperanza Maglunob, who is is grandaunt of respondents Martin Maglunob and Romeo Salido. In June 1986, Esperenza executed an affidavit in which she renounced her rights, share and participation in the land in favor of Elvira and her husband. It appears that the land was not exclusive property of Esperanza but also of the other heirs of Martin I whom she represented in the partition agreement.

Elvira and her husband, Ray constructed a house on the land in 1989 and in 1993, OCT was issued in her name by the DAR. However, respondents with the help of hired persons, entered the property and built a wall behind and in front of Elvira’s house. Elvira and Ray sued respondents for quieting of title and declaration of ownership. Respondents averred that they were co-owners of the land with Esperanza who allegedly inherited the land from Martin 1 together with Tomas and Inocencia (Martin 2’s and Romeo’s predecessor in interest). They argued that Esperanza could not have validly waived her rights in favor of Elvira and Ray.

MCTC ruled for Elvira. RTC reversed MCTC and declared respondents lawful owners of the land together with the other heirs of Martin I. Elvira went to the CA but the CA affirmed the RTC decision.

Before SC, Elvira argued that both RTC and CA erred in declaring the affidavit of Esperanza void because it is a valid and binding proof of transfer of ownership of the subject property as it was coupled with actual delivery.

SC ruled that the affidavit executed by Esperanza wherein she renounced, relinquished and waived all her rights, share,

interest and participation in the subject property in favor of Elvira and Ray is in fact a donation. Thus, it should have complied with the requirements of Article 749 of the Civil Code. A simple donation of real property to be valid: 1) must be made in a public instrument; 2) it must be accepted, which must be in the same deed of donation or in a separate public instrument; 3) if the acceptance is made in a separate instrument, the donor must be notified in authentic form and the same must be noted in both instruments.

The affidavit executed by Esperanza relinquishing her rights, share and participation over the property in favor of Elvira suffered from legal infirmities. In Sumipat vs. Banga, the Court ruled that title to immovable does not pass from the donor to the done by virtue of a Deed of Donation until and unless it has been accepted in a public instrument and the donor duly notified thereof. In this case, the acceptance of the donation was not made by Elvira either in the same affidavit or in a separate public instrument. Neither was there notice of acceptance given to the donor, therefore the donation is void.

SUCCESSION

Alonzo Q. Ancheta vs. Candelaria Guersey-Dalaygon G.R. No. 139868; June 8, 2006

Spouses Audrey O’Neill and Richard Guersey were American citizens who have resided in the Philippines for 30 years. They have an adopted daughter Kyle. In July 1979, Audrey died and in her will she bequeathed her entire estate to Richard who was also designated as executor. Her will was probated in the U.S. but due to Richard’s renunciation of his appointment, James Philips was appointed as administrator. The court also appointed the law office of petitioner Ancheta as ancillary administrator. The will of Audrey was also admitted to probate by the Philippine court in 1982. Petitioner as administrator of the estate in the Philippines submitted and inventory of Audrey’s properties which includes among others a house at Forbes Park, cash and shares of stock.

In 1981, Richard married Candelaria with whom he has two children. Richard died in 1984 and he left a will giving his entire estate to his second wife, Candelaria, except for his shares in A.G. Interiors which he bequeathed to his adopted daughter, Kyle. The will of Richard was also admitted to probate before the American court and the law office of petitioner was again appointed as ancillary administrator. Richard’s will was also submitted for probate before the RTC of Makati and Atty. Quasha, a member of the law office of the petitioner was appointed as ancillary administrator.

Petitioner then filed in the estate proceedings of Audrey a project of partition wherein they divided the latter’s estate in the following manner: Richard, ¾ of the Makati property and cash and shares of stock of Audrey; and ¼ was given to Kyle. The trial court granted and approved the project of partition. A new title was issued over the Makati property was issued in the name of Richard and Kyle to the extent earlier mentioned.

Meanwhile, as ancillary administrator of Richard’s estate, petitioner also filed a project of partition dividing Richard’s estate: 2/5 of the ¾ interest in the Makati property was allocated to respondent and the 3/5 was allocated to his 3 children including Kyle. The project partition was opposed by Candelaria arguing that under the laws of Maryland, a legacy passes to the legatee the entire interest of the testator in the property subject of the legacy. She argued that since Richard left his entire estate to her except for the shares of stock, Richard’s entire ¾ share in the Makati property should be given to her.

The trial court ruled in favor of respondent and denied the project of partition insofar as the Makati property. It gave to respondent the entire ¾ share of Richard in the property.

Respondent later filed a petition for annulment of the trial court’s order in Spec. Proc. 9625 pertaining to Audrey’s estate. Respondent argued that petitioner breached his fiduciary duty when he disregarded the laws of Maryland in distribution of Audrey’s estate. Respondent argued that since Audrey devised her entire estate to Richard (nothing to Kyle) then the entire Makati property should have been adjudicated to Richard and not merely ¾ thereof. Respondent added Richard bequeathed in his will all his properties to her, then the entire Makati property should now pertain to her.

Petitioner contended that he acted in good faith in submitting the project of partition (Audrey’s estate) as he had no knowledge of the laws of Maryland and that he believed that it is to the best interest of the surviving children that Philippines law be applied as they would receive their just shares.

SC ruled that a decree of distribution of the estate of a deceased vests title to the land in the distributees, which, if erroneous may be corrected by a timely appeal. Once it becomes final, its binding effect is like any other judgment in rem. But in exceptional cases, the final decree of distribution may be set aside for lack of jurisdiction or fraud. Here, it is the petitioner’s failure to introduce evidence on the pertinent laws of Maryland that is the fraudulent act that was committed against respondent and the four year prescriptive period for annulment of judgment should be based from the time of respondent’s discovery thereof.

Being a foreign national, the intrinsic validity of Audrey’s will especially with regard to who are her heirs is governed by her national law as provided in Article 16 of the Civil Code. Article 1039 of the Civil Code further provides that capacity to succeed is governed by the law of the nation of the decedent. Petitioner was duty bound to introduce evidence of the pertinent laws of Maryland and the court cannot accept petitioner’s protestation of good faith.

Given that the pertinent law of Maryland has been brought to record before the CA, and the trial court in the settlement of Richard’s estate, and petitioner or any other interested person does not dispute the existence or validity of the said law, then Audrey’s and Richard’s estate should be distributed according to their respective will, and not according

to the project of partition submitted by petitioner. Consequently, the entire Makati property belongs to respondent.

SC also noted that Audrey and Richard were both American citizens who owned real property in the Philippines. If land is invalidly transferred to an alien, who subsequently becomes a citizen or transfers it to a citizen, the flaw in the original transaction is cured and the title of the transferee is rendered valid. In this case, since the Makati property had already passed to respondent who is a Filipino then whatever flaw that attended the acquisition by the Guerseys of the property is now inconsequential.

Felix Azuela v. Geralda and Aida Castillo G.R. 122880 April 12, 2006

Petitioner Felix Azuela filed a petition for probate of a notarial will purportedly executed Eugenia Igsolo on June 10, 1981. Azuela is the son of Eugenia’s first cousin. In her will, Eugenia bequeathed to Azuela all her rights and interest in a house in Sampaloc Manila. Eugenia’s will was signed by three attesting witnesses on the left-hand margin but they failed to sign at the bottom of the attestation clause and the attestation clause failed to state the number of pages in which the will was written. Also, the will was notarized by Petronilo Bautista in this manner “Nilagdaan ko at ninotario ko ngayong ika-10 ng Hunyo 1981 dito sa lungsod ng Maynila”

Probate of the will was opposed by respondent Geralda Castillo who represented herself as attorney-in-fact of the 12 legitimate heirs of Eugenia. Castillo argued that the will is a forgery and it was not executed in accordance with law because the testatrix’s signature did not appear on the second page of the will and that it was not properly acknowledged.

The trial court admitted the will to probate and said that the modern tendency in respect to the formalities in the execution of wills is liberalization of the interpretation of the law with the end in view of giving the testator more freedom in expressing his last wishes. The CA reversed the Order of the trial court.

The SC ruled that the will is void. Citing Articles 805-806 the SC said that there are three defects in the will of Eugenia. A will whose attestation clause does not contain the number of pages on which the will is written is fatally defective. A will whose attestation clause is not signed by the instrumental witnesses is fatally defective. And perhaps most importantly, a will which does not contain an acknowledgement, but a mere jurat, is fatally defective. Any one of these defects is sufficient to deny probate. A notarial will with all three defects is just aching for judicial rejection.

While it is true that in Singson v. Florentino (92 Phil) and Taboada v. Rosal (118 SCRA 195), the SC allowed the probate of the wills despite the fact that the attestation clause did not state the number of pages of the will, the ruling in these two cases is not applicable because while the attestation clause in the wills did not state the number of pages used in the will, the same however, was found in the last part of the body of the will. Also, following Caneda, there is substantial compliance with this

requirement if the will states elsewhere in it how many pages it is comprised of, as was the situation in Singson and Taboada. However, in this case, there could have been no substantial compliance with the requirements of Article 805 since there is no statement in the attestation clause or anywhere in the will itself as to the number of pages which comprise the will.

Yet another defect found by the SC is failure of the will to comply with Article 806 because the words”nilagdaan ko at ninotario ngayong 10 ng Hunyo 1981 dito sa Lungsod ng Maynila” by no manner of contemplation be construed as an acknowledgment which is defined as the act of one who has executed a deed in going before some competent officer or court and declaring it to be his act or deed. .

Spouses Charlito Coja & Annie Coja vs. Heirs of Feliciano Aquillo, Sr. et.al. G.R, No. 151153 December 10, 2007

Feliciano Sr. and Lorenza Aquillo were husband and wife. They acquired a 120 square meter lot in Masbate upon which they built their conjugal home. The lot was covered by Tax Declaration 1151 in the name of Feliciano. The couple had two children Feliciano Jr. and Luz.

After Lorenza’s death, Feliciano Sr. cohabited with Paz Lachica. During their cohabitation, Paz purchased a 192 square meter lot from Rivas (adjacent to the lot of Feliciano and Lorenza) but she later sold 40 square meters thereof. Two days before Feliciano Sr.’s death in 1965, he married Paz Lachica. Both the estate of Lorenza and Feliciano Sr. remained unsettled even after their death.

Sometime in 1969, the tax declaration over the lot bought by Paz (192 sq.m.) was revised to include the increase in area and also the 120 square meter which originally was part of the conjugal property of Feliciano and Lorenza. Paz later sold in 1986 the total area of 336 sq. meters covered by the Tax declaration to Spouses Coja.

The Cojas applied for issuance of the title with the RTC of Masbate but the application was opposed by Luz(daughter of Feliciano and Lorenza) and also by the OSG on the ground that the applicants had not been in open continuous, exclusive, and notorious possession of the subject land for the period required by law. Luz later died and was substituted by her heirs.

The heirs of Luz and Feliciano Jr. filed a suit for recovery of possession and ownership of the land alleging that they are the true owners and that Paz appropriated the land to herself and had the Tax declaration cancelled. The cases were ordered consolidated.

RTC ruled in favor of Cojas. CA reversed the RTC and ruled that the sale is void with respect to the portion of the land owned by the conjugal partnership of Feliciano and Lorenza. CA noted that the 120 square meters is conjugal property of Feliciano and Lorenza and upon the death of the latter, one-half of the land or 60 square meters was transmitted to her heirs, her husband and two children Luz and Feliciano Jr. at 20 sq. m. each.

SC affirmed the CA. Under Article 160 (now 116) of the Civil Code, all property acquired during the marriage is presumed to belong to the conjugal partnership unless it be proved that it pertains exclusively to the husband or to the wife. SC noted that the revision of the Tax Declaration over the entire 336 sq. m was done upon request of Paz after the death of Feliciano Sr. but that did NOT operate to transfer the title of the property to her which remained conjugal property of Feliciano and his first wife.

Under Article 996 of the Civil Code, upon the death of Lorenza, one-half of the conjugal lot or 60 square meters is transmitted to her heirs namely: Feliciano Sr., Feliciano Jr., and Luz at 20 square meters each while the remaining ½ is transmitted to Feliciano Sr. Upon the death of Feliciano Sr. his right over the property consisting of the 20 square meter inheritance from his late wife, and his 60 square meter share in the conjugal partnership or a total of 80 square meters was transmitted to his heirs: Feliciano Jr., Luz, and his widow Paz Lachica. The spouse is entitled to the same share as that of the legitimate children to the portion of 1/3 each or 26.66 square meters. Thus, as a result of death of Feliciano Sr., a regime of co-ownership exists among the latter’s children and his surviving spouse Paz. Therefore, Paz could not have validly sold the entire 120 square meter lot to the Cojas.

Heirs of Domingo Nicolas vs. Metropolitan Bank and Trust Company G.R. No. 137548, September 3, 2007

Spouses Domingo and Josefa Nicolas are the registered owners of two parcels of land in Quezon City where their residential house and that of their two children were built. The lands are part of the conjugal property of Domingo and Josefa.

In 1986, Domingo died and in 1988, the Office of the Register of Deeds of Quezon City was gutted by fire. Also in 1988, Josefa filed a petition with the LRA for the reconstitution of the titles of the two lots. The LRA approved the petition for reconstitution but the new titles issued were only in the name of Josefa. Thus, Josefa was able to mortgage the lots to respondent Metrobank. The mortgage was foreclosed after Josefa failed to pay the loan and since the period of redemption had lapsed without Josefa redeeming the property, Metrobank consolidated title in its name. Metrobank filed a petition before the RTC of Quezon City for the issuance of the writ of possession which the court granted on January 15, 1998.

Petitioners, heirs of Domingo, filed a petition for annulment of the reconstituted titles, mortgage, and sale at public auction. Petitioners also filed a Motion to Quash the Writ of Possession but the trial court denied their motion. CA affirmed the denial by the trial court of the motion to quash the writ. Petitioners elevated the matter to the SC.

SC granted the petition and modified the judgment in the sense that the writ of possession issued by the RTC was held valid only with respect to the share of Josefa. It noted that petitioners as children and compulsory heirs of the spouses

Nicolas acquired ownership of portions of the lots as their legitime upon the death of Domingo or prior to the foreclosure of mortgage and the filing by the respondent of its petition for the issuance of a writ of possession. Consequently, petitioners are strangers or third parties therein whose rights cannot be determined as they were not impleaded by respondent. They should not be deprived of their legitime by the enforcement of the writ of possession. SC added that while it is basic that after consolidation of title in the buyer’s name for failure of the mortgagor to redeem, the writ of possession becomes a matter of right and its issuance to a purchaser in an extrajudicial foreclosure is merely a ministerial function, considering however, the circumstances obtaining in this case and following the ruling in Rivero v. Natividad, the writ of possession should apply only to the share of Josefa as may be determined in the case for annulment of reconstituted titles, mortgage and sale at public auction filed by herein respondents.

OBLIGATIONS AND CONTRACTS

Mactan-Cebu International Airport Authority vs. Benjamin Tudtud et.al. represented by Lydia Adlawan G. R. No. 174012 November 14, 2008 (Article 1187,1189, 1190)

The predecessor-in-interest of the respondents Tudtud owned a parcel of land in Cebu identified as Lot 988. In 1949, the National Airports Corporation (NAC) embarked on a project to expand the Cebu-Lahug Airport. Lot 988 was acquired by NAC by virtue of expropriation. However, no structures related to the operation of the Cebu Lahug Airport were ever built on Lot 988. Later, the lot was transferred to the ATO and still later to the Mactan Cebu International Airport Authority. When the MCIAA was opened, the Cebu Lahug Airport was closed and abandoned and a significant area was purchased by the Cebu Property Ventures for conversion into a commercial complex.

In October 1996, the original owners of Lot 988 thru their attorney-in-fact, Lydia Adlawan, demanded to repurchase the lot since no structures or improvements pertaining to the operation of the Cebu Lahug Airport were built and the purpose for which the lot was acquired no longer existed.

The Tudtuds later filed a case against MCIAA for reconveyance and damages alleging that NAC assured them that they or their successors-in-interest would be entitled to repurchase in the event that it was no longer used for airport purposes. The Tudtuds invoked the ruling of the SC in MCIAA v. CA involving another lot acquired by NAC for expansion of the Cebu Lahug Airport wherein the court allowed the owner of the lot to recover the same based on parol evidence that NAC promised the right of repurchase. MCIAA contends that the ruling is not applicable because Lot 988 was acquired by virtue or expropriation and NOT by deed of sale.

RTC ruled in favor of the Tudtuds and ordered MCIAA to reconvey. CA affirmed. Before the SC, MCIAA argued that the judgment of expropriation was absolute and unconditional and the claim of alleged verbal assurances from NAC violates the statute of frauds.

SC said that the question of whether a private land which is expropriated for a particular public use but which public use is abandoned, may be returned to the owner depends upon the character of the title acquired by the expropriator. If land is expropriated for a public street is granted upon the condition that the city can use it only for a public street, when the city abandons its use, the property returns to the former owner unless there is some statutory provision to the contrary. In this case, the trial court in its decision instead of simply acknowledging the public purpose prefixed its finding of public purpose upon its understanding that the Lahug Airport will continue to be in operation. This meaningful statement warrants the conclusion that the expropriated properties would remain to be so until it was confirmed that the Lahug Airport was no longer in operation.

SC also said that the mode of acquisition for public purpose whether by expropriation or by contract is not material in determining whether the acquisition is with or without a condition. The rights and duties between the parties herein are governed by Article 1190 of the Civil Code which provides:

“When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon fulfillment of said conditions, shall return to each other what they have received. In case of loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor are laid down in the preceding articles shall be applied to the party who is bound to return.”

Thus, MCIAA is obliged to reconvey the lot to the respondents and the latter must return to MCIAA what they received as just compensation for the expropriation of the Lot plus legal interest computed from default. Respondents must pay MCIAA the necessary expenses it may have incurred in sustaining Lot 988 and the value of its services in managing it to the extent respondents were benefited thereby. Following Article 1187, MCIAA may keep whatever income or fruits it may have obtained and respondents need not account for interests on the amount they received as just compensation. In accordance with Articles 1190 and 1189, if the thing is improved by nature or by time, the improvement shall inure to the benefit of the creditor, respondents, as creditors do not have to settle as part of the process of restitution the appreciation in value of Lot 988 which is a natural consequence of nature and time.

Cordero v. F.S. Management & Dev’t. Corporation G.R. No. 167213 October 31, 2006)

On October 27, 1994, Belen Cordero in her own behalf and as attorney-in-fact of her co-petitioners entered into a contract to sell with respondent over 5 parcels of land in Batangas for P12, 500,000.00. The contract stipulates that the respondent will pay P500,000.00 as earnest money upon payment of which, it may take possession of the property and construct necessary paths but the title will be transferred by the petitioner only upon complete payment of the agreed price.

Respondent FSM paid the earnest money and two other payments in the amount of P1M each. No further payments were made. In November 1996, petitioner sent a letter informing respondent that the contract is revoked and cancelled and that the payments made shall be treated as payment for damages by reason of respondent’s breach. Respondent ignored the letter of petitioner. On February 21, 1997, petitioner filed a case before the RTC for rescission of the contract with damages alleging that respondent failed to comply with its obligation to pay the purchase price. Respondent alleged in its Answer that petitioner was the first to violate the contract when she prevented respondent access to the property despite its payment of P2.5M and that petitioner refused to execute the final contract of sale unless respondent pays additional legal interest. RTC declared the contract rescinded and ordered respondent to pay P4.5M in damages and P800, 000.00 in attorney’s fees.

CA reversed the RTC and set aside the contract to sell without payment of damages to petitioner and the latter was ordered to return all payments received form respondent. MR of petitioner was denied.

SC ruled that the contract between the parties is a contract to sell (because it states that title will be transferred to the buyer only upon complete payment of the agreed purchase price) and in a contract to sell, the seller retains title to the thing to be sold until the purchaser fully pays the agreed purchase price. The full payment of the price is a positive suspensive condition, the non-fulfillment of which is NOT a breach of contract but merely an event that prevents the seller from conveying title to the purchaser. Non-payment renders the contract to sell ineffective and without force and effect. Since the obligation of the petitioners did not arise, Article 1191 of the Civil Code would have no application. While rescission does not apply, petitioners may nevertheless cancel the contract to sell.

Spouses Edgar & Dinah Omengan vs. Philippine National Bank, Montalvo and Acierto G.R. No. 161319; January 23, 2007 (Breach of Contract) Spouses Edgar and Dinah Omengan borrowed 3M from PNB Kalinga Branch secured by two residential lots in Tabuk covered by TCTs in the name of Edgar. The first 2.5M was released by the bank on 3 separate dates. The last 500,000 was withheld by the bank because then manager of the bank received a letter from the sisters of Edgar informing him that while the property mortgaged was titled in the name of Edgar, the same was actually co-owned by them. Montalvo was later replaced by Acierto who then released the remaining 500,000.00 to the spouses Umengan. The spouses applied for an additional credit line of 2M and Acierto informed them that the application is conditionally approved, the condition being that the spouses should ask for the conformity of Edgar’s sisters. Spouses Umengan failed to secure the consent of Edgar’s sisters consequently, the additional 2M was not released. Edgar demanded for the release of the additional loan and argued that the condition (conformity of his sisters) was not part of his credit line agreement with PNB.

A case for breach of contract was filed by the spouses against the bank. RTC ruled in favor of the spouses and ordered the bank to release the additional 2M. CA reversed.

SC ruled there was no breach of contract. Breach is defined as failure without legal reason to comply with the terms of the contract. It is also defined as failure without legal excuse to perform any promise which forms the whole or part of the contract. The original loan of 3M was completely released to the spouses. As to the additional loan, there was no perfected contract over the increase in the credit line. PNB had acquired information sufficient to induce a reasonably prudent person to inquire into the status of the title over the property. The business of a bank is one affected with public interest, for which reason it should guard against loss due to negligence or bad faith. Any investigation previously conducted on the property offered as collateral did not preclude PNB from considering new information on the same property as security for any subsequent loan.

Citibank N.A. (formerly First National and City Bank) vs. Modesta Sabeniano G.R. No. 156132 February 12, 2007

Respondent Modesta was a client of Citibank. She had several deposits and money market placement with Citibank not only here in Manila but also in the foreign branches of the bank in Geneva. Modesta also had several loans with the Citibank Manila amounting to P1.920M and despite repeated demands, she failed to pay. Thus, Citibank applied Modesta’s deposits and money market placements to offset her outstanding loans. Out of the total P2.156M obligation, Citibank Manila used Modesta’s money market placements and dollar deposits in Citibank Geneva amounting to P1.102M. Modesta denied having any loans and that she was ever notified of the offsetting. She filed a case to recover her deposits and money market placement.

RTC ruled in favor of Modesta and declared as illegal and void, the set-off effected by the bank with respect to her dollar deposits in Switzerland. RTC however, found Modesta indebted to the bank and ordered her to pay the amount of the balance of the loan P1.069M. The CA affirmed with modification the decision in that it found that Modesta is not indebted to the bank.

Citibank argued that under the promissory note, Modesta authorized the bank to apply any and all money, stocks, bonds she had on deposit with Citibank N.A. to the full satisfaction of her obligation. It is the bank’s theory that the term Citibank includes all its branches here and abroad on the premise that all branches of Citibank in the Philippines and abroad are part of a single worldwide corporate entity and share the same juridical personality. Citibank posited that Modesta is the debtor for the loans and creditor for her deposits with the same entity and legal compensation under 1279 in relation to 1286 was proper. Compensation takes place by operation of law, even though the debts may be payable at different places, but there shall be an indemnity for expenses of exchange or transportation to the place of payment.

SC ruled that while the General banking Law considers all branches of a foreign bank in the Philippines as one unit, local branches of a foreign bank and its head office (in the foreign country) is governed by Sec. 75 of the GBL and Section 5 of the Foreign banks Liberalization Law provide for a HOME OFFICE GUARANTEE whereby the head office of the foreign bank shall guarantee prompt payment of all liabilities of its Philippine branches. This Home Office Guarantee included in Philippine statutes is clearly intended for the protection of the interests of the depositors and other creditors of the local branches of a foreign bank. Since the head office of the bank is in another state, such guarantee is necessary so as to bring the head office within Philippine jurisdiction and to hold the same answerable for the liabilities of its Philippine branches.

The main issue is whether the foreign bank can use this principle (Home Office Guarantee) for a reverse purpose, in order to extend the liability of a client to the foreign bank’s Philippine branch to its head office as well as to its branches in other countries. That is, if a client obtains a loan from the foreign bank’s Philippine branch does it automatically make the client a debtor not just of the Philippine branch but also of the head office and all other foreign branches?

SC said NO. Although all Philippine branches of Citibank should be treated as one unit, it cannot declare that these Philippine branches are likewise a single unit with is Geneva Branch. The SC ruled that the offsetting or compensation of Modesta’s loans with Citibank Manila using her dollar accounts with Geneva cannot be effected. The parties (Geneva Branch and Modesta) cannot be considered principal creditor of the other. As for the dollar accounts, Modesta was the creditor and Citibank Geneva was the debtor; and for the loans, Citibank Manila was the creditor and Modesta was the debtor. Since legal compensation was not possible, Citibank Manila could use Modesta’s dollar account with Citibank Geneva to liquidate her loans ONLY if she had expressly AUTHORIZED it to do so by contract. SC thus ordered Citibank to return to Modesta the amounts of her dollar deposits with Citibank Geneva plus damages.

Daisy B. Tiu vs. Platinum Plans, Inc. G.R. No. 163512 February 28, 2007

Daisy was the Division Marketing Manager of Platinum Plans from 1987-89. In January 1993, she was re-hired as Senior Assistant VP and Territorial Operations Head in charge of its Hongkong and Asean Operations. The contract was for five years and it contained a NON-INVOLVEMENT PROVISION which reads:

“8. NON INVOLVEMENT PROVISION – The employee undertakes that during his/her engagement with Employer and in case of separation from the Company, whether voluntary or for cause, he/she shall not, for the next TWO (2) years thereafter, engage in or be involved with any corporation, association, entity whether directly or indirectly, engaged in the same business or belonging to the same pre-need industry as the Employer. Any breach of the foregoing provision shall render the

Employee liable to the Employer in the amount of One Hundred Thousand Pesos for and as liquidated damages.”

Prior to the expiration of her 1993 contract (5 years), Daisy stopped reporting for work and thereafter became the VP for Sales of Professional Pension Plans, a rival company of Platinum. Platinum filed a case for damages against Daisy. RTC ruled in favor of Platinum and the ruling was affirmed by the CA. The main issue is the validity of the non-involvement provision. Daisy argued that it is offensive to public policy since the restraint imposed is much greater that what is necessary to afford Platinum a fair and reasonable protection. She adds that Platinum did not invest in her training because at the time she was hired, she already had knowledge and expertise in the pre-need industry.

SC ruled that a non-involvement clause is not necessarily void for being in restraint of trade as long as there are reasonable limitations as to time, trade, and place. Since Tiu was Senior VP and Territorial Operations Head of Asean Operations, she had been privy to confidential and highly sensitive marketing strategies of Platinum and to allow Tiu to engage in rival business soon after she leaves would make Platinum’s trade secrets vulnerable. Article 1306 provides that parties to a contract may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy. Article 1159 on the other hand provides that obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Courts cannot stipulate for the parties nor amend their agreement where the same does not contravene law, morals, good customs, public order or public policy. The non-involvement clause which Daisy Tiu freely agreed upon has the force of law between them and thus, should be complied with in good faith.

Avon Cosmetics Inc. v. Leticia Luna (G.R. No. 153674, December 20, 2006)

Respondent Luna began working for Beautifont, Inc. in 1972, first as franchise dealer and later as supervisor. In 1978, Avon took over the management and operations of Beautifont and Luna continued to work for Avon. The parties executed an Agreement in 1985 wherein Luna agreed to sell or offer to sell, display or promote only and exclusively products sold by the Avon. In the latter part of 1988, Luna was invited to become a Group Franchise Director of Sandre Philippines which sells vitamin products. She consulted a law firm as to the effect of her Agreement with Avon and her decision to become a franchise director of Sandre. The law firm opined that paragraph “5” of the Agreement is contrary to law and public policy being an unreasonable restraint of trade. On October 11, 1988, Avon sent a letter to Luna terminating her supervisor’s agreement with the company citing her act of signing up as Group Franchise director of Sandre as a violation of her agreement with Avon.

Luna filed a complaint for damages before the RTC of Makati. In 1996, RTC ruled in Luna’s favor and Avon appealed. On May 2002, the CA affirmed the RTC.

Before the SC the main issue is whether or not par. (5) is void for being contrary to public policy. SC ruled that par. 5 is an “exclusivity clause” – which is subject to scrutiny when it is perceived to collide with the constitutional provision on unreasonable restraint of trade (Section 19, Article 12 of the Constitution- The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.)

SC said that contracts requiring exclusivity are not per se void. Restraint of trade is unreasonable when it is contrary to public policy – if it has a tendency to injure the public, is against public good, or contravenes some established interest of society. Only those arrangements whose probable effect is to foreclose competition in substantial share of the line of commerce affected can be considered as void for being against public policy. There is nothing invalid or contrary to public policy either in the objective sought to be attained by par. 5 in prohibiting Luna and all other Avon supervisors from selling products other than those of Avon. Avon contends the reason for par. 5 is to safeguard the network it has cultivated through the years. Sandre, a newly formed direct selling business would be saving time, effort and money as it will no longer have to recruit, train, and motivate supervisors and dealers. This is tantamount to unjust enrichment. The exclusivity clause does not in any way limit Sandre’s selling opportunities just the undue use of the resources of Avon.

Estate of Orlando Llenado and Wenifreda Llenado (Administratrix) vs. Eduardo Llenado, Register of Deeds, et. Al., G.R. 145736, March 4, 2009

A parcel of land registered in the name of respondent Eduardo and Jorge Llenado was originally owned and registered in the name of their father, Cornelio Llenado. In December 1975, Cornelio leased part of the land (Lot 249 D-1) to his nephew, Romeo for five years renewable for another five years. Three years into the lease, Romeo assigned all his rights to the lease to Orlando (petitioner). Parties agreed that Orlando shall have the option to renew the lease for another 3 years but during the continuance of the lease, the land cannot be sold, transferred or conveyed to a third party. The land was used by Orlando as a gas station.

Orlando died in 1983 and his wife Wenifreda took over the operations of the gasoline station. In 1987, Cornelio sold the land to his children, Eduardo, Jorge, Virginia and Cornelio, Jr. The lot which is subject of the lease was later titled in the name of Eduardo and Jorge.

In 1993, Eduardo informed Wenifreda that he desires to take over the land but the latter refused. Eduardo sued for unlawful detainer. MTC ruled for Eduardo but the RTC reversed the decision. CA reversed the RTC and reinstated the MTC decision.

After the institution of the ejectment suit, Wenifreda filed a civil case for annulment of the sale and title of Eduardo. She alleged that the transfer to Eduardo was fraudulent because the lease provides that the land cannot be sold, transferred or conveyed to a third party. She added that Cornelio made a verbal promise to Orlando that he would have first priority in case he decides to sell. Eduardo argued that the agreement between Cornelio and Orlando is personal and it does not bind them.

RTC ruled for Wenifreda and ordered the conveyance of the land to her for the same consideration paid by Eduardo and Jorge. RTC said that the death of Orlando transferred all his rights to the lease to his heirs and since the lease was in force at the time of the conveyance, the sale violated the provision in the lease contract. CA reversed the RTC and ruled that the breach of the non-alienation clause did not nullify the sale made by Cornelio to his sons because as mere lessee, Orlando cannot claim a superior right of ownership over the lot.

SC ruled that under Article 1311, the heirs are bound by the contracts entered into by their predecessors-in-interest except when the rights and obligations therein are not transmissible by their nature, by stipulation or by provision of law. A contract of lease is generally transmissible to the heirs of the lessor or lessee. It involves a property right and as such, the death of a party does not excuse non-performance of the contract. The rights and obligations pass to the heirs of the deceased and the heir of the deceased lessor is bound to respect the period of lease. The same principle applies to the option to renew the lease. As a general rule, covenants to renew a lease are not personal but will run with the land. Thus, the successors-in-interest of the lessee are entitled to the benefits, while that of the lessor are burdened with the duties and obligations, which said covenants conferred and imposed on the original parties.

However, the SC noted that when Orlando died the contract of lease was set to expire 26 days later or on December 3, 1983 unless renewed by Orlando’s heirs. The option to renew is an enforceable right, it must necessarily be first exercised to be given effect. A lessor’s covenant or agreement to renew give a privilege to the tenant but is nevertheless an executor contract, and until the tenant has exercised the privilege by way of some affirmative act, he cannot be held for the additional term. In this case, there is no dispute that the Wenifreda was granted the option to renew, yet there was never any positive act on her part before or after the termination of the original period to show their intent to exercise the option. Their silence cannot be taken to mean that they opted to renew, neither can the exercise of the option to renew be inferred from their persistence to remain despite demand by Eduardo for them to vacate.

Tanay Recreation Center & Dev’t. Corp. v. Fausto; G.R. 140182

Tanay Recreation entered into a lease contract with Catalina Fausto for a term of 20 years. There is a provision in the contract that in case the owner decides to sell, the lessee shall have a priority right to buy the property. Before the expiration of the lease, Tanay informed Fausto of its intention to renew the lease, however, the latter’s daughter, Pacunayen

replied that she is now the owner of the property because her mother sold it to her. Tanay filed an action for annulment of sale and specific performance. Respondent claims that by seeking renewal of the lease, Tanay is estopped from assailing the deed of sale. RTC extended the period of lease for another seven years and dismissed Tanay’s claim for damages. CA modified by ordering Tanay to vacate. It ruled that the option to purchase agreed upon by the parties applies only to a situation is made to a stranger and not in this case where the buyer is the daughter. Petitioner appealed to the SC.

SC ruled that when a lease contract contains a right of first refusal, the lessor is under legal duty to the lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at a certain price and the lessee has failed to accept it. The right of first refusal is an integral and indivisible part of the contract of lease and is inseparable from the whole contract. It was error for the CA to rule that the right of first refusal does not apply when the property is sold to Fausto’s relative. When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon. There can be between the parties no evidence of such terms other than the contents of the written agreement.

A sale made in violation a right of first refusal is valid. However, it may be rescinded or as in this case, may be the subject of an action for specific performance.

SC ruled that in order to have full compliance with the contractual right granting petitioner the first option to purchase, the sale of the properties for the price of which they were finally sold to a third person should have likewise been first offered to the former. There should be identity of terms and conditions to be offered to the buyer holding a right of first refusal if such right is not to be rendered illusory. Lastly, the basis of the right of first refusal must be the current offer to sell of the seller or offer to purchase of any prospective buyer. A right of first refusal means identity of terms and conditions to be offered to the lessee and all other prospective buyers and a contract of sale entered into in violation of a right of first refusal of another person, while valid, is rescissible.

Barceliza Capistrano vs. Darryl Limcuando and Fe Sumiran, G.R. 152413; February 13, 2009

Capistrano owned a parcel of land in Laguna covered by OCT 10302. She sold this land to Spouses Zuasola in December 1985. In February 1989, Capistrano sold ½ of the same land to respondents for P75,000.00. It was agreed that respondents will pay only P10,000.00 and the balance will be paid on installments. The Deed of Sale executed by Capistrano, however, was an absolute sale in which it is stated that she purportedly received the entire consideration.

Respondents defaulted in the payment of the installments and Capistrano made repeated demands but respondents claimed that the price had been fully paid pursuant to the Deed of Sale. When respondents learned that Capistrano had previously sold the land to Zuasola, they filed a criminal case against Capistrano.

Capistrano later repurchased the land from the first buyers Zuasolas and also offered to redeem the ½ portion which she sold to the respondents but the latter refused. A TCT was later issued in favor of respondents.

Capistrano filed a complaint for annulment of the sale to the respondents alleging that the sale was a nullity from the beginning as respondents themselves assailed the validity of the sale in the criminal case.

RTC upheld the validity of the deed of sale to respondents. CA affirmed the RTC.

Before the SC, Capistrano argued that the sale is void because the cause of the contract is false since prior to the sale to the respondents, she had already sold the same land to the first buyers, the Zuasolas. She argued that her subsequent repurchase of the land from the Zuasolas does not cure the void contract of sale.

SC denied the petition and ruled that it cannot uphold Capistrano’s contention that the sale to the respondents is void because she had previously sold the same land to the Zuasola. SC said he who comes to court must come with clean hands. Capistrano fraudulently obtained the consent of the respondents in the execution of the deed of sale.

SC added that a person who employed fraud cannot base his action for the annulment of contract upon such flaw of the contract. Citing Article 1397:

Art. 1397. The action for annulment of contract may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud or caused the mistake base their action upon these flaws of the contract.

Capistrano is thus, precluded from seeking the annulment of the contract based on the fraud which she herself has caused.1

Jacobus Hulst vs. PR Builders G.R.No. 156364 September 3, 2007(Void Contracts; Constitutional Prohibition on Land Ownership by Aliens; Unjust Enrichment)

Jacobus and Ida Hulst are husband and wife and are both Dutch nationals. They entered into a contract to sell with PR Builders for the purchase of residential townhouse unit in Batangas. PR builders failed to complete the project by June 1995 which prompted the spouses to file a case before the HLURB for rescission of contract plus damages.

The HLURB Arbiter ruled in favor of the Hulst and ordered PR to return P3.187 M to the Hulsts with interest at 12% from

1 NOTE: The SC here applied the provisions on annulment even if the action was based on the nullity of the contract. Noteworthy, however, is the fact that the action of Capistrano was denominated as one for “annulment” of the void contract.

the time the complaint was filed plus damages. The decision became final and a writ of execution was issued by the HLURB. Pursuant to the writ of execution, 15 parcels of land of PR were levied upon by the sheriff and auction was set on March 27, 2000. Despite the pending motion to quash the writ filed by PR, the auction sale was held and the lands were sold to Holly Properties Corp. for 5.45M of which 5.31 was turned over to the Hulst.

Four months later, the HLURB issued an order setting aside the sheriff’s levy on the ground that the fair market value of the properties levied upon was in excess of the judgment award. Petitioner filed certiorari with the CA but the CA dismissed the petition. Petitioner appealed to the SC alleging the CA gravely erred in affirming the arbiter’s order setting aside the levy made by the sheriff.

SC initially ruled that the contract to sell is void because the Hulst being Dutch nationals are not qualified to acquire private lands in the Philippines. The capacity to acquire private land is made dependent upon the capacity to acquire or hold lands of the public domain. Private land may be transferred or conveyed only to individuals or entities qualified to acquire lands of the public domain.

SC said that under Article 1409, all contracts whose object, cause or purpose is contrary to law or public policy and those expressly prohibited or declared void by law are inexistent and void from the beginning. Generally, parties to a void agreement cannot expect the aid of the law. By way of exception, the law permits the return of what may have been given under the void contract (Art. 1414) if the party repudiates the void contract before the illegal purpose is accomplished or before damage is caused to a third person and if public interest subserved by allowing recovery. The SC added that the contract to sell has not yet transferred ownership to the Hulst at the time they filed the suit for rescission, the violation of the constitutional prohibition did not materialize because the Hulst caused the rescission of the contract to sell. Thus, the SC ruled that 1414 applies. Although the decision of the HLURB had long become final and executory, the same resulted in unjust enrichment on the part of Hulst. In the exercise of its equity jurisdiction (which aims to do complete justice in cases where a court of law is unable to adapt its judgments to the special circumstances of a case because of the inflexibility of its statutory or legal jurisdiction) the SC ordered the Hulst to return the amount 2.12 M out of the 5.31 M turned over to it by the sheriff because Hulst should not be allowed to retain the benefits of the judgment of the HLURB more than what he ought to recover. The levy was declared valid by the SC but it ordered the return of the excess amount received by Hulst.

Jacobus Hulst vs. PR Builders G.R. 156364 September 25, 2008 (Is ownership of a Condominium by an alien within the purview of the constitutional prohibition on land acquisition by aliens)

Petitioner filed a motion for reconsideration of the decision ordering it to return the excess amount to PR Builders. He argued that the contract to sell involved a condominium unit

and did not violate the constitutional proscription against ownership of lands by aliens. He argues that the contract to sell will not transfer to the buyer the ownership of the land on which the unit is situated, thus, the buyer will not get a TCT but merely a Condominium Certificate of Title as evidence of ownership.

SC granted partial reconsideration. It cited Republic Act 4726 known as the Condominium Act which allows foreign nationals to own Philippine real estate through the purchase of condominium units or townhouses constituted under the Condominium principle with Condominium Certificates of Title. Section 5 of the law provides:

“Section 5. Any transfer or conveyance of a unit or an apartment, office, or store or other space therein shall include the transfer or conveyance of the undivided interest in the common areas or, in a proper case, the membership or shareholdings in the condominium corporation; Provided, however, that where the common areas in the condominium project are held by the owners of separate units as co-owners thereof, no condominium unit therein shall be conveyed or transferred to person other than Filipino citizens or corporations at least 60% of the capital stock of which belong to Filipino citizens or corporations at least 60% of the capital stock of which belong to Filipino citizens, except in cases of hereditary succession. Where the common areas in a condominium project are held by a corporation, no transfer or conveyance of a unit shall be valid if the concomitant transfer of the appurtenant membership or stockholding in the corporation will cause the alien interest in such corporation to exceed the limits imposed by existing laws.”

The SC, thus, held considering that the rights and liabilities of the parties under the contract to sell are covered by the condominium act wherein petitioner as unit owner was simply a member of the Condominium Corporation and the land remained owned by the respondent, then the constitutional proscription against aliens owning real property does not apply. There being no circumvention of the constitutional prohibition the court’s pronouncements on the invalidity of the contract to sell should be set aside.

SALES

Enrico S. Eulogio vs. Spouses Clemente Apeles and Luz Apeles, G.R. No. 167884; January 20, 2009

Petitioner Enrico entered into a Contract of lease with option to purchase the property of Spouses Apeles in Quezon City. The house and lot was originally leased to Enrico’s father Arturo. The contract entered into in January 1987 allegedly gave Enrico before the expiration of the 3-year lease to buy the leased property for a price fixed or agreed upon by the parties but for not more than P1.5M. The rentals paid by the lessor during the 3-year lease shall be deducted from the price or consideration as may be mutually agreed upon by the parties.

Before the three year lease expired, Enrico communicated to Luz Apeles his desire to exercise his option to purchase but the spouses refused.

Enrico filed a complaint for specific performance before the RTC invoking his rights under the lease contract. RTC ruled in favor of Enrico and ordered the spouses to execute the deed of sale. The CA reversed the RTC. SC ruled that even assuming that the contract of lease was voluntarily entered into by Luz Apeles, the provision granting the option to purchase in the contract is unenforceable.

SC ruled in favor of the Apeles. An option is a contract by which the owner agrees with another person that the latter shall have the right to buy the former’s property at a fixed price and within a certain time. An option is not itself a purchase, but merely secures the privilege to buy. It is not a sale of property but a sale of the right to purchase. It imposes no binding obligation on the person holding the option aside for the consideration for the offer. In Southwestern Sugar and Molasses Company vs. Atlantic Gulf and Pacific Co, an option contract to bind the promissor must be supported by a consideration. In other words, under Article 1479, a unilateral promise to buy or to sell even if accepted is only binding if supported by a consideration which means that the unilateral promise or option can still be withdrawn even if accepted if the same is not supported by any consideration. Here, it is not disputed that the option is without consideration. It can therefore be withdrawn notwithstanding the acceptance made of it by the appellee. (NOTE: This ruling does not specifically mention the case of Sanchez vs. Rigos where the SC ruled that even if the unilateral offer is not supported by a consideration, once it is accepted by the offeree, it becomes a bilateral contract to buy and to sell.)

Manuel Pagtalunan v. Vda. De Manzano September 13, 2007 G.R. No. 147695 (Sales; Maceda Law)

Patricio Pagtalunan, petitioner’s stepfather, entered into a contract to sell with respondent Rufina vda. De Manzano whereby Patricio agreed to sell to Rufina a parcel of land 236 sq meters for P17, 800 to be paid in the following manner: P1, 500.00 as down payment and the balance to be paid in equal monthly installments of P150.00 pesos each until fully paid. The contract contained a stipulation that in case Rufina defaults in the payment of installment for 90 days, the contract shall be automatically rescinded without need of judicial declaration and all payments made shall be considered as rentals for the use and occupation of the property.

Petitioner Manuel (as successor in interest of the seller Patricio) sent a letter dated February 24, 1997 demanding that Rufina vacate the premises and when the latter failed to heed the demand, petitioner filed a complaint for unlawful detainer against her. Petitioner alleged that Rufina paid only P12,950.00 and stopped paying after December 1979. Petitioner argued that Rufina’s status as buyer ceased when she failed to pay her installments and her status was transformed into that of a lessee.

The MTC ruled in favor of petitioner Manuel and said that Rufina’s failure to pay not a few installments caused the resolution or termination of the contract to sell. MTC thus ordered her to vacate and pay rentals beginning January 1980. The RTC reversed the MTC and ruled that the agreement could not be automatically rescinded since there was delivery to the buyer and that judicial determination of rescission must be secured by petitioner as a condition precedent to convert the possession de facto of Rufina from lawful to unlawful. The RTC dismissed the ejectment suit.

The CA affirmed the RTC and opined that the contract to sell was not validly rescinded under Section 3(b) of Rep. Act 6552 or the Maceda Law which provides that a buyer who has paid at least two years of installments has a grace period one month for every year of installment paid.

Petitioner argued before the SC that based on Rufina’s payments she is entitled to a grace period of 6 months from December 1979 and that nothing in the Maceda Law gives the buyer the right to pay arrearages after the lapse of the grace period. Petitioner contended that his letter dated 24 February 1997 should be considered the notice of cancellation. He also argued that the Maceda Law is not applicable.

SC said the CA correctly applied the Maceda Law. It ruled that the contract was not validly cancelled pursuant to Section 3 (b) of the law. SC noted that Patricio died without cancelling the contract. Petitioner also failed to cancel the contract in accordance with law because the letter dated Feb. 24, 1997 is not the same as the “notice of cancellation or demand for rescission by notarial act required by the Maceda Law. The pertinent provision reads:

“Sec. 3 - In all transactions or contract involving the sale or financing or real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under R.A 3844 as amended by R.A. 6339 where the buyer has paid at least two years of installments, the buyer is entitled to the ff rights in case he defaults in the payment of succeeding installments:

a) To pay WITHOUT additional interest, the unpaid installments due within the total grace period earned by him, which is hereby fixed at the rate on one month grace period for every one year of installment payments made: Provided, that this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any.

b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty percent of the total payment made and after five years of installments, an additional five percent every year but not to exceed ninety percent of the total payments made: Provided, that the actual cancellation of the contract shall take place AFTER thirty days from receipt by the buyer of the notice of cancellation or demand for rescission of the contract by a

notarial act and upon full payment of the cash surrender value to the buyer.

SC said the letter of petitioner merely made a formal demand to vacate and it does not constitute the notice of cancellation referred to in the law. The court added that the law requires refund of the cash surrender value to the buyer before the cancellation of the contract. The provision DOES NOT provide for a different requirement for contracts to sell which allow possession of the property by the buyer upon execution of the contract. There being no valid cancellation of the contract to sell, the CA correctly recognized Rufina’s right to continue occupying the premises.

Spouses Gil and Brenda Torrecampo vs. Dennis Alindogan and Heidi Alindongan G.R. No. 156405; February 28, 2007

In May 1997, Spouses Jose and Lina Belmes executed a deed of sale over a house in lot in Legazpi City in favor of respondents Alindogan. In July 1997, Belmes wrote the Alindogans that they are delivering constructive possession of the property to them. Before the Alindogans could take actual possession of the property, petitioners Torrecampos occupied the premises and refused to vacate the same. A suit for recovery of ownership, possession, and damages was filed by the Alindogans. The Torrecampos alleged that Belmes executed a “Contract to Buy and Sell” in their favor; that the price for the property is P350,000.00 and that they are to pay 220,000.00 as partial payment and the balance of 130,000 shall be paid as soon as Belmes had transferred the title in their names.

The contract between the Torrecampos and the Belmeses read:

“That the vendor agreed to sell and the vendee agreed to buy the above-described parcel of land together with improvements for the sum of P350, 000.00”

The Torrecampos also filed a case against Belmes for specific performance. RTC (in the case filed by the Alindogans against the Torrecampos), ruled in favor of the Alindogans and ordered Torrecampos to vacate. RTC concluded that the contract between the Torrecampos and Belmes was a CONTRACT to SELL and thus, it did not transfer ownership of the house and lot to the Torrecampos. CA affirmed the RTC.

SC ruled that the contract between the parties is merely a contract to sell. In a contract of sale, title passes to the vendee upon the delivery of the thing sold; in a contract to sell, ownership is by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. In a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of the price, also the payment of the price is a positive suspensive condition in a contract to sell, the failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.

In contracts to sell, the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition, that is, full payment of the price by the buyer. It is only upon the existence of the contract of sale that the seller becomes obligated to transfer the ownership of the thing sold to the buyer. Prior to the existence of the contract of sale, the seller is NOT obligated to transfer the ownership to the buyer even if there is a contract to sell between them.

The Torrecampos likewise argued that Art. 1544 applies and when the Alindogans bought the property, they already knew that it was previously sold to them, thus, since the Alindogans were in bad faith, the ownership must pertain to them who were in good faith and first in possession. Article 1544 provides: If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and in the absence thereof, to the person who presents the oldest title, provided there is good faith.

SC ruled however, that Article 1544 does not apply considering that the transaction between Torrecampos and Belmeses is a mere contract to sell.

Spouses Howard and Susan Co Chien vs. Sta. Lucia Realty and Alsons Land Corporation G. R. 162090 January 31, 2007

In December 1995, Sta. Lucia and Alsons offered to sell to spouses Chien golf shares at Eagle Ridge. Sta. Lucia was the developer (60%) while Alsons (40%) owns the land. A contract to sell was executed by the parties whereby the Chiens will purchase 301 square meters for the sum of P1.293M, one-half of the price payable upon signing the contract and the balance upon the delivery of title to the Chiens. Sta. Lucia gave the Chiens a 10% discount on the price but this discount will be forfeited if they fail to pay the balance within seven days from notice that the title to the property is ready for delivery.

At the time of the execution of the Contract to Sell, Sta. Lucia did NOT possess a License to Sell and a certificate of Registration from the HLURB as required by Section 4 and 5 of P.D. 957. The License and Certificate were issued only in 1997.

Sta. Lucia informed the Chiens on January 19, 1998 that the title was ready for delivery and demanded payment of the balance. The Chiens did not pay and instead negotiated for a further discount or in the alternative to exchange the property for a better lot. Sta. Lucia thereafter forfeited the 10% discount previously given. The Chiens, in June 1999, demanded for the return of their down payment arguing that the Contract to Sell was void for the reason that at the time of its execution, Sta. Lucia had no certificate of registration and license to sell. The Chiens thereafter filed a case before the HLURB.

The HLURB ordered Sta. Lucia to refund but on appeal to the HLURB Board of Commissioners, the decision was reversed. The Contract to Sell was declared valid and it ordered the Chiens to pay the balance without penalty. Chiens appealed to the Office of the President and the OP affirmed the HLURB Board. The CA likewise affirmed. SC ruled that while P.D. 957 Sec. 4 & 5 penalizes the selling of subdivision lots and condominium units without prior issuance of a certificate of registration and license to sell by the HLURB, it does NOT provide that the absence thereof will automatically render a contract, otherwise validly entered, void.

The requirements of P.D. 957 do not go into the validity of the contract such that the absence thereof would automatically render the contract null and void. It is rather more of an administrative convenience in order to allow for a more effective regulation of the industry. The intent of the law is to prevent cases of swindling and fraudulent manipulations, such does not obtain in the case at bar. No fraud has been alleged much less proven by the Chiens. The lack of certificate of registration without more, while penalized is not in and of itself sufficient to render a contract void. The contract has the force of law between the contracting parties and obligations arising therefrom should be complied with in good faith unless the stipulations are contrary to law, morals, good customs, or public order or policy.

AGENCY

Gozun v. Mercado G.R. No. 167812 December 19, 2006

Respondent Mercado ran for governor in Pampanga in 1995. He requested petitioner Gozun (who owns JMG Publishing) to print his campaign materials. Gozun delivered the campaign materials to respondent’s headquarters. Meanwhile, Lilian Soriano, a sister-in-law of Mercado obtained a cash advance from Gozun in the amount of two hundred fifty-three (P253, 000.00) allegedly for the allowance of poll watchers and other election related expenses. The receipt showed that the amount was received by Lilian without any indication that she did so in representation of Mercado nor was there any showing that the latter was connected with the transaction involving the cash advance.

Gozun later sent a statement of account to Mercado asking him to pay more than 2.177 million pesos for the campaign materials including the cash advance obtained by Lilian. Mercado’s wife paid P1M leaving a balance of 1.17M.

Despite demands, Mercado refused to pay the balance and a suit for collection was filed by Gozun. RTC ruled for Gozun and ordered respondent to pay the 1.17 M. CA reversed and ruled that there was no evidence to support Gozun’s claim that Lilian was authorized by Mercado to borrow money on his behalf. The CA applied 1317 of the Civil Code and held that Gozun’s claim for the P253,000 is unenforceable against Mercado.

SC ruled that contracts entered into in the name of another by another person who has been given no authority or

legal representation or who has acted beyond his powers are classified as unauthorized contracts and are unenforceable unless they are ratified. An agency may be oral unless the law requires a specific form. However, a special power of attorney is necessary for an agent to borrow money, unless it be urgent and indispensable for the preservation of the things which are under administration.

The SC clarified that the requirement of a special power of attorney refers to the nature of the authorization and NOT to its form. In Lim Pin v. Liao Tian (200 Phil. 685) the court ruled that the requirements are met if there is a clear mandate from the principal specifically authorizing the performance of the act. If the special authority is not written, it must be duly established by evidence.

In the instant case, it bears noting that Lilian signed the receipt of the P253,000.00 in her name alone without indicating that she was acting for an in behalf of Mercado. Thus, she bound herself in her personal capacity and not as an agent of Mercado. The rule in agency is that in order to bind the principal by a mortgage on real property executed by an agent, it must upon its face purport to be made, signed and sealed in the name of the principal; otherwise, it will bind the agent only. Thus, Gozun cannot hold Mercado liable for the 253,000 cash advance of Lilian.

Olaguer v. Locsin G.R. No. 158907 February 12, 2007

Olaguer filed a complaint before the RTC to declare as illegal and void the sale of his shares of stock in Businessday to respondent Locsin. He alleged that he owns 60,000 shares of stock of Businessday Corporation of which he was the EVP with a total par value of six hundred thousand pesos (P600, 000.00). Since he was identified with the opposition during the Marcos regime, he anticipated that he would eventually be arrested and detained. Allegedly, his co-shareholders at Businessday had verbally agreed to continue paying his salary in the event he is arrested. He also issued an SPA in favor of Locsin, Joaquin, and Hofilena appointing them as his agents to sell his shares in Businessday and he agreed to cancel his shares even before they are sold to conceal that he was a stockholder of the paper. Olaguer was in fact arrested on December 24, 1979.

It appears that during the time of his incarceration, Olaguer’s wife received P10, 000.00 monthly from Businessday and after a total of P600, 000.00 was received by Olaguer’s wife, the payments stopped. The certificates of stock in the name of Olaguer were cancelled and later were transferred in the name of Locsin who it turned out purchased the shares himself due to lack of interested buyers. Locsin alleged that Olaguer requested him to sell and if necessary to buy his shares in the event of his arrest. Olaguer claims that the periodic deposits were meant to pay his salary pursuant to his verbal agreement with Locsin that in the event he is detained, he will continue to receive his salary.

RTC dismissed his complaint and ruled that the sale of the shares to Locsin was valid because Olaguer consented to have respondent Locsin buy the shares himself. CA affirmed. CA

noted that the amount he received monthly from Businessday does not correspond to his salary but to the aggregate par value of his shares in the corporation.

SC ruled that although Article 1491 agents are prohibited from purchasing property whose administration may have been entrusted to them, this prohibition is NOT absolute. It does not apply where the principal consents to the sale of the property in the hands of the agent or administrator. Olaguer consented to the sale as shown by the fact that he received a total of installment payments of P600, 000.00 without any protest or complaint. It was only in 1986 that he demanded the return of the shares. As to the contention that the periodic payments do not correspond to the payment of his shares but his salary pursuant to an unwritten agreement that he would continue to receive his salary despite his detention, SC ruled that such act of gratuity on the part of Businessday would be VOID because it constitutes a DONATION under Article 726 and under Article 748, if the value of personal property donated exceeds P5, 000.00, the donation and the acceptance shall have to be made in writing. Otherwise, the donation will be void. Olaguer admitted that such arrangement for the payment of his salary for work he will not perform was NOT made in writing. Thus, assuming this to be true, the same is void.

CREDIT TRANSACTIONS

Sebastian Siga-an vs. Alicia Villanueva G.R. No. 173227; January 20, 2009

Villanueva filed a complaint for a sum of money against Siga-an before the RTC of Las Pinas. She alleged that she was a businesswoman supplying office materials and equiptment to the Philippine Naval Office while Siga-an was a military officer and comptroller at that time.

Villanueva alleged that Siga-an offered to loan her P540,000 in 1992 and since she needed additional capital, she agreed. The loan was not reduced to writing but she issued a check for P500k as partial payment and another check for P200k, the excess of P160,000 according to Siga-an constitutes the interest on the loan. However, Siga-an allegedly pestered Villanueva to pay additional interest and threatened to block or disapprove her transactions with the PNO. She paid a total of P1.2M for the loan of P540k.

She filed the case to recover the alleged overpayment. RTC ruled in favor of Villanueva and ordered Siga-an to refund the excess payment of P660k because it was payment made through mistake and under the principle of solutio indebiti, the amount must be returned to Villanueva. CA affirmed.

Interest is the compensation fixed by the parties for the use or forbearance of money. This is referred to as monetary interest. It may also be imposed by law or by the courts as penalty or indemnity for damages (compensatory interest). Under Article 1956, no interest shall be due unless it has been expressly stipulated in writing. While Siga-an presented a promissory note wherein Villanueva purportedly admitted owing capital and

interest, Villanueva however, explained that Siga-an merely asked her to copy the promissory note in her own handwriting and that he threatened to block her transactions if she refused. This testimony was not rebutted by Siga-an.

Thus, under Article 1960 if the borrower pays interest when there has been no stipulation therefore, the provisions of the Code governing solutio indebiti shall be applied. Article 2154 states, if something is received when there is not right to demand it, and it was unduly delivered through mistake, the obligation to return in it arises. In such a case, a creditor-debtor relations is created under a quasi-contract whereby the payor becomes the creditor who then ahs the right to demand the return of the payment made by mistake.

SC also ruled that the order of the RTC and CA ordering Siga-an to pay interest of 12% on the amount he is supposed to refund because his obligation arose from a quasi-contract of solution indebiti and not from a loan or forbearance of money.

Crisostomo Alcaraz vs. Equitable Credit Card Network, Inc. G.R. No. 152202; July 28, 2006

In May 1995, Equitable issued an Equitable Visa Gold International Card to Alcaraz. Alcaraz did not apply for the card (pre-screened) nor did he submit the usual documents required for the application. Alcaraz used the credit card and accumulated unpaid credit with Equitable and despite several demands, he refused to pay.

Equitable filed a complaint for sum of money including interest of 2.5% per month and late penalty of 1.5% for peso accounts, 1.5% monthly interest and 1% late penalty per month for dollar account until full payment. The bank also prayed for liquidated damages of 25% of the total amount allegedly in accordance with the terms and conditions of the credit card agreement.

Petitioner admitted he had used the credit card but alleged he was an honorary member as he was not required to submit any application or sign any document prior to the issuance of the card. He argued that he was entitled to pay on installment without interest. He denied signing the terms and conditions governing the issuance and use of the credit card.

The RTC ruled in favor of Equitable except for its claim for liquidated and exemplary damages. The CA affirmed the decision with modification in that it ordered Alcaraz to pay the principal amount for both peso (P81, 000.00) and dollar ($4,397) with 12% interest per annum from June 25, 1996 until full payment thereof.

Alcaraz appealed to the SC. He contests the application of interests, penalties, and other charges as provided in the Terms and Conditions when he never signed nor conformed to the said document. Equitable avers that while Alcaraz did not sign or file any application by signing the credit card and using the same, petitioner has agreed to the terms and conditions and any amendment thereto as stated in the back of the credit card itself.

SC ruled that Equitable merely presented a copy of the Terms and Conditions as contained in its standard application form and a copy of the card issued to another client in order to show the alleged standard stipulation printed at the back of the card. However, the standard application form presented by Equitable does NOT bear the signature of Alcaraz and neither was there evidence on record that he was shown a copy of the Terms and conditions before or after the issuance of the credit card much less that he has given his consent thereto. Petitioner should not be condemned to pay the interests and charges without any proof of his conformity and acceptance of the stipulations contained therein. Neither can we accept the bank’s averment that the stipulation quoted at the back of the card is sufficient to bind Alcaraz without a clear showing that he was aware of and consented to the provisions of the document.

However, it is undeniable that Alcaraz had unpaid obligations to the bank and pursuant to Eastern Shipping Lines v. Court of Appeals, where the Court ruled that in the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169, Alcaraz should be held liable for legal interest on both peso and dollar accounts from the time Equitable extrajudicially demanded payment of his obligations.

Central Bank of the Philippines vs. Citytrust Banking Corporation, G.R. No. 141835; February 4, 2009

Citytrust maintained a demand deposit with the Central Bank and as required by the CB, Citytrust submitted the names and specimen signatures of its officers authorized to sign and indorse checks for its account. It also provided CB with the list and signatures of its roving tellers one of whom is Rounceval Flores. Flores was issued a security identification card.

On July 15, 1977, Flores presented for payment to the CB senior teller Cruz, two Citytrust checks one for P850k and the other for P900k . Both checks were signed by Citytrust’s authorized signatories.

When Cruz prepared the cash transfer slip, she affixed her signature and she did not notice that instead of signing his name, Flores signed the name Rosauro Cayabyab. CB then debited the account of Citytrust the amount of P1.75M

Almost two years later, Citytrust sent a letter to CB alleging that the checks presented by Flores were stolen and it demanded for the restoration of the amounts. Citytrust filed a complaint for estafa against Flores for which the latter was convicted. Citytrust filed a separate civil action against the CB alleging that the CB erred in encashing the checks and in charging the proceeds against its account despite the lack of authority of Cayabyab.

RTC ruled that both CB and Citytrust were negligent and should equally share the loss. The CA affirmed the RTC. CA ruled that while Citytrust failed to take adequate precautionary measures to prevent the fraudulent encashment of its checks, petitioner

was not entirely blame-free in light of its failure to verify the signature of Citytrust’s agent.

CB argued that Flores (who signed his name as Cayabyab) having been authorized by Citytrust, the latter is bound by his acts and that Citytrust is to blame in allowing Flores to steal the checks and failing to timely cancel them.

SC affirmed the CA with modification by making both banks liable but the ratio the Central Bank should bear 60% and Citytrust 40% of the loss. SC ruled that while Flores had previous transactions with the CB, it did not excuse the teller Cruz from focusing attention to or at least glancing at Flores as he was signing. The contract between the bank and its depositor is that of debtor and creditor under Article 1980. The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of R.A. 8791(June 13, 2000) or the General Banking Law provides that the State recognizes the fiduciary nature of banking that requires high standards of integrity and performance and the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. On the other hand, Citytrust’s failure to examine its account, cancel the checks and notify the petitioner of their alleged loss should mitigate the CB’s liability in accordance with Article 2179 which provides that if the plaintiff’s negligence was contributory, the immediate and proximate cause of the injury being the defendants lack of care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded.

Roberto Totanes vs. China Banking Corporation, G.R. No. 179880; January 19, 2009

Totanes and Antiquera maintained their individual savings and current accounts with CBC Legaspi Branch. In conspiracy with the branch manager of the bank, they manipulated the handling and operations of their deposit accounts (kiting operation). They effected transfer of funds to each other’s accounts by way of debit and credit memos, and made it appear that their accounts were fully funder when in truth and in fact, they were not.

In July 1986, Antiquera executed a promissory note in favor of CBC promising to pay 150k with interest of 24% per annum until fully paid plus a penalty of 1/10 of 1% per day of the total due from date of default. To secure the loan, Totanes executed a surety agreement binding himself to pay Antiquera’s obligation up to the amount of P300k.

CBC instituted a collection suit after the debtors defaulted. RTC ruled in favor of the bank and ordered Totanes to pay the bank jointly and severally with Antiquera the sum of P300k with 22% per annum. CA affirmed.

Totanes argued before the SC that the surety agreement was not perfected because the principal obligation which is the credit line did not materialize because the surety was signed before the execution of the promissory note. SC said that the contract entered into by Totanes is a continuing surety and while a surety is not bound to any particular principal obligation until that principal obligation is born, there is no doctrinal impediment

that the suretyship agreement itself is binding and valid even before the principal obligation intended to be secured thereby is born.

Development Bank of the Philippines vs. Spouses Jesus and Anacorita Doyon; G.R. No. 167238; March 25, 2009

Spouses Doyon obtained several loans from DBP amounting to P10M. They mortgaged their lands and several motor vehicles of JD Bus Lines. Doyons requested for restructuring of their loans to which DBP agreed. However, the Doyons still failed to pay and when they refused, DBP filed for extrajudicial foreclosure of the REM. To forestall the foreclosure, the Doyons filed an action to nullify the mortgage alleging that they have fully paid their loans. The case filed by the Doyons was not acted upon by the RTC for three years so DBP decided to withdraw the petition for foreclosure and moved for the dismissal of the nullification case filed by the Doyons.

Weeks after the cases were dismissed, DBP sent a demand to the Doyons to settle their loan which had ballooned to P20M. When Doyons failed to pay, DBP filed another an application for extrajudicial foreclosure with the DBP special sheriff and later the bank took possession of the properties.

Doyons filed a case for damages against DBP and argued that by withdrawing the first foreclosure case and moving for the dismissal of the nullification case, DBP led them to believe that they would no longer seek satisfaction of their claims. This act according to the Doyons constitutes an abuse of right and the provision in the mortgage allowing DBP to take constructive possession of the mortgaged properties constitutes pactum commissorium.

RTC ruled for the Doyons and ordered DBP to vacate and pay damages. CA affirmed. SC reversed the CA and ruled that DBP did not abuse its right when it filed the second foreclosure because the obligation of the Doyons remained outstanding. Neither was there bad faith on the part of DBP since it could not be faulted for resorting to foreclosure through a special sheriff since after all, it was the more efficient method of enforcing its rights as mortgagee under its charter. The stipulation allowing DBP to take constructive possession does not amount to pactum commissorium because it is analogous to the provision of Art. 2132 regarding the appointment of a receiver as a convenient and feasible means of preserving the property in litigation. Rosana Ereña vs. Vida Querrer Kauffman G.R .No. 165853, June 22, 2006

Respondent Vida owns a residential house in BF Resort Las Pinas City covered by TCT No. 48521. The owner’s duplicate and tax declaration were kept by her in a safety deposit box inside her house.

In 1997, she went to the United States and she entrusted the house to her live-in partner Eduardo Victor. When Victor followed Vida to the U.S., he in turn entrusted the key to the house to his sister, Mira Bernal.

Eduardo had a daughter named Jennifer who connived with Mira to get the TCT of the property inside the safe and thereafter they mortgaged it to Rosana, the petitioner. Jennifer falsely represented herself as attorney-in-fact of Vida and forged the signature of the latter in the Deed of Mortgage.

Vida discovered what happened upon her return to the Philippines and she filed a complaint against Rosana and Jennifer for the nullification of the Real estate mortgage with damages. Rosana interposed the defense of good faith. During the trial, Socorro Ramos, (aunt of Rosana) testified that Jennifer together with her husband, Richmond came to the house of Rosana and introduced one Vida Querrer as his half-sister. The witness stated that Richmond told her that Vida wants to mortgage the house. Then the supposed Vida even showed an identification card, a police clearance and copies of the TCT and tax declaration. Rosana agreed to accept the property as security after verifying from the Register of Deeds that the property was registered in Vida Kauffman’s name.

RTC ruled in favor of Rosana and Jennifer and dismissed the complaint holding that Rosana was a mortgagee in good faith. The court ruled that the woman who pretended to be Vida had in her possession the TCT of the property and Rosana even verified with the Register of deeds.

CA reversed the decision saying that the RTC clearly disregarded Article 2085 of the Civil Code and the ruling in Insurance Services & Comm’l Traders vs. Court of Appeals where the court ruled that in a real estate mortgage, it is essential that the mortgagor be the absolute owner of the property to be mortgaged, otherwise, the mortgage is void.

SC ruled in favor of Vida. A mortgage is invalid if the mortgagor is not the property owner. Indeed, a mortgagee has a right to rely in good faith on the certificate of title of the mortgagor in the absence of any sign that might arouse suspicion and has no obligation to undertake further investigation. Hence, even if the mortgagor is not the rightful owner of, or does not have valid title to, the mortgaged property, the mortgagee in good faith is entitled to protection. This doctrine presupposes, however, that the mortgagor, who is not the rightful owner f the property, has already succeeded in obtaining a Torrens Title over the property in his name and that, after obtaining said title, he succeeds in mortgaging the property to another who relies on what appears on the said title. The innocent mortgagee for value protected by law is one who purchases a titled land by virtue of a deed executed by the registered owner himself, not by a forged deed, as the law expressly states. The doctrine of innocent mortgagee for value does not apply to a situation where the title is in the name of the rightful owner and the mortgagor is a different person pretending to be the owner. In such a case, the mortgagee is NOT and innocent mortgagee for value and the registered owner will not lose his title.

National Investment and Development Corporation vs. Spouses Francisco and Basilisa Bautista, G.R. No. 150388; March 13, 2009

Metropolitan Bank and Trust Company, Inc. vs. Eugenio Penafiel and Erlinda Penafiel, G.R. No. 173976; February 27, 2009

Respondents mortgaged two lands in Mandaluyong to Metrobank in 1991 to secure a loan they obtained from the bank. The mortgage deed was amended several times on various dates as the amount of the loan covered by the deed was increased.

On July 14, 1999, Metrobank instituted extrajudicial foreclosure proceedings after the spouses defaulted. Respondents received the notice of sale which states that it would be held on September 7, 1999. The notice was published in Maharlika Pilipinas for three consecutive weeks based on the affidavit of publication of its publisher. The lots were sold to the bank as highest bidder for P6.14M.

Respondents filed a complaint for nullification of the foreclosure proceedings on the ground that the bank failed to comply with the publication requirement under Act 3135 because Maharlika is not a newspaper of general circulation in the city where the property is situated.

RTC ruled in favor of the bank. CA reversed and declared that Maharlika was not circulated in Mandaluyong where the properties were situated so there was failure to comply with the law.

SC ruled that under Section 3 of Act 3135, notice shall be given by posting notices of sale for not less than twenty days in at least three public places of the city or municipality where the property is situated and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city.

SC concluded that respondents were able to prove that Maharlika is not a newspaper of general circulation by the following: the certification from the Chief of business Permit in Mandaluyong attesting that Maharlika did not have a business permit in Mandaluyong; that there were no subscribers in Mandaluyong and in the testimony of the publisher that their principal place of business was in Quezon City; that they print and publish the Maharlika in Quezon City and that they circulate the paper only in Quezon City, Cavite and Rizal. SC said that the law does not only require that the newspaper must be of general circulation, it also requires that the newspaper must be circulated in the city or municipality where the property is located.

Heirs of Norberto Quisumbing vs. PNB and Santiago Land Development Corporation, G.R. No. 178242 January 20, 2009; J. Morales

Spouses Ricardo and Beatriz Silverio assigned to Atty. Norberto Quisumbing their rights of redemption with respect to various real properties they mortgaged to the PNB and which the latter had acquired at the foreclosure sale.

When Quisumbing made a formal tender of redemption before the one year period of redemption expired but PNB denied his offer on the ground that the Deeds of Assignment were not valid because it was against Article 1491 of the Civil Code and that the tender was not accompanied by actual money payment and that at any rate, the offer of Quisumbing was below the amount required by P. D. 694 or the PNB charter.

Quisumbing filed a complaint before the RTC of Makati to compel PNB to allow him to exercise his right of redemption. RTC dismissed the case ruling that Quisumbing did not make a valid tender of redemption as it was not accompanied by cash payment. The SC ruled that Quisumbing did not make a valid tender of redemption because since PNB is a banking institution, it is not Act 3135 in relation of Section 28 (amount of his purchase with one percent interest per month up to the time of redemption) of the Rules of Civil Procedure which will govern the redemption price but Section 78 of the General Banking Act which provides:

In the event of foreclosure, whether judicially or extrajudicially, of any mortgage on real estate, ……the mortgagor may within one year after the sale of the real estate redeem the property by paying ----the amount fixed by the court in the order of execution or the amount due under the mortgage deed, with interest at the rate specified in the mortgage and all costs, and judicial or other expenses incurred by the bank by reason the of the execution and sale and as a result of the custody of said property less the income received from said property.

Whether or not Quisumbings were diligent in asserting their willingness to pay is irrelevant. Redemption within the period allowed by law is not a matter of intent but a question of payment or valid tender of full redemption price within the said period. Whether the redemption is being made under Act 3135 or under the GBL, the mortgagor or his assignee is required to tender payment to make said redemption valid.

TORTS AND DAMAGES

Philippine Air Lines vs. Simplicio Griño and Hon. Adriano Savillo, G.R. No. 149547, July 4, 2008 (Torts/Prescription/Warsaw Convention)

Private respondent Griño was invited to participate in the 1993 ASEAN Seniors Golf Tournament in Jakarta Indonesia. He and his companions purchased their tickets from PAL. They were made to understand that PAL plane would take them from Manila to Singapore and that Singapore Airlines would take them to Indonesia.

Respondent and his companions took the PAL flight on October 3, 1993 but upon their arrival in Singapore, they were told that they were not endorsed by PAL and that Singapore Airlines cannot take them to Jakarta without such endorsement because they might end up not being paid by PAL. Respondent then went to the PAL office at the airport but it was closed. They

were in panic and subjected to humiliation, embarrassment, mental anguish, and serious anxiety and were left without recourse but to buy their tickets from another airline. They were able to reach Jakarta but the party who was supposed to fetch them already left the airport. They had to arrange for their own transportation from the airport to the hotel but after the series of nerve-wracking experiences, respondent became ill and was not able to participate in the tournament.

Upon his return to the Philippines, respondent sent a demand letter to PAL on December 20, 1993 and to Singapore Airlines in March 1994. Both disowned liability for the fiasco. Respondent filed a case for damages before the RTC on August 15, 1997 or more than 3 years after he had sent the demand letter to PAL.

PAL filed a Motion to Dismiss on the ground that the claim was barred under Article 29 of the Warsaw Convention which provides that any claim for damages in connection with the international transportation of persons is subject to prescription period of two years. Since the complaint was filed in 1997, according to PAL it was barred.

RTC denied the Motion to Dismiss and ruled that the Civil Code and other pertinent laws apply and not the Warsaw Convention. CA denied the petition for certiorari filed by PAL and it pronounced that the application of the Warsaw Convention must NOT be construed to preclude the application of the Civil Code and other laws. Citing Article 1144 of the Civil Code, which provides for a ten year prescription period, the complaint should not be dismissed. PAL went to the SC on certiorari.

SC ruled that it must be ascertained whether all the claims made by the respondent are covered by the Warsaw Convention which effectively bars all claims made outside the two-year prescription period under Article 29. If the Warsaw Convention covers all of the respondent’s claims then, it should be dismissed. If not, the RTC may still proceed with the case.

The Warsaw Convention applies to all international transportation of persons, baggage or goods performed by any aircraft for hire. Article 19 thereof provides for the liability on the part of a carrier for damages occasioned by delay in the transportation by air or passengers, baggage or goods. A claim covered by the convention can no longer be recovered under local law if the statute of limitations of two years has already lapsed.

SC noted, however, that the Warsaw Convention does NOT exclusively regulate the relationship between passenger and carrier. In United Airlines v. Uy (1999) the Court distinguished between 1) damage to the passenger’s baggage and 2) humiliation he suffered at the hands of the airlines employees. The first is covered by the Warsaw Convention, the second is not. The first prescribes in two years, while the second is covered by the Civil Code on torts which prescribes in four years.

In this case, the complaint alleged that both PAL and SAL were guilty of gross negligence which resulted in his being

subjected to humiliation, embarrassment, mental anguish, serious anxiety, fear and distress.

This case is comparable to Lathigra vs. British Airways (41 F. 3d December 1, 1994) where it was held that the negligent act of reconfirming the passengers reservation days before departure and failing to inform the latter that the flight had already been discontinued is NOT among the acts covered by the Warsaw Convention since the negligence DID NOT occur during the performance of the contract of carriage but days before the scheduled flight. The purported negligence of PAL did not occur during the performance of the contract of carriage but days before the scheduled flight. The negligence consisted in the failure PAL to endorse the tickets to SAL despite its assurances to the respondent that SAL had already confirmed their passage. Hence, the action cannot be dismissed on the ground of the statute of limitations. Had the present case merely consisted of claims incidental to the airlines delay in transporting their passengers then, respondent’s complaint would have been time-barred under Article 29 of the Warsaw Convention. Since it involves a special species of injury resulting from the failure of PAL and SAL to transport respondent, the claims are covered by the provisions of the Civil Code (Article 1146) which provides for a four-year prescriptive period.

PCI Leasing and Finance, Inc. vs. UCPB General Insurance Co., Inc. G.R. No. 162267 July 4, 2008 (Article 2176, 2180/ Registered Owner of a Motor Vehicle)

A Mitsubishi Lancer owned by UCPB and insured by respondent UCPB General Insurance figured in a vehicular accident with an 18 wheeler truck which was registered in the name of PCI Leasing & Finance but operated by Superior Gas & Equitable Company (SUGECO). UCPB Insurance paid the insured the amount of damage to the car and demanded reimbursement from PCI Leasing the registered owner of the truck. PCI refused to pay and contended that it could not be held liable for the collision because the driver of the truck was not its employee and that SUGECO was the actual operator of the truck under the Lease Agreement it signed with PCI.

The RTC ruled in favor of UCPB Insurance and ordered PCI to pay the sum of P244, 500.00 with interest. The CA affirmed the RTC decision. CA said that if the property is covered by a franchise and is transferred or leased to another without the approval of the PSC, the transfer is not binding on the commission and the grantee continues to be responsible under the franchise in relation to the operation of the vehicle. After the denial of its Motion for reconsideration, PCI went to the SC on certiorari.

Two issues were raised by PCI: 1) whether or not as registered owner of the motor vehicle that figured in a quasi-delict it may be held jointly and severally with the driver and third parties 2) whether as financing company it is absolved from liability by the enactment of R.A. 8556 or the Financing Company Act of 1998. It argued that the Public Service Act does not apply because said law applies only to common carriers or those which have franchises to operate as public utilities.

SC ruled that there is partial merit in petitioner’s contention because the Public Service Act is inapplicable. However, the registered owner of the vehicle driven by a negligent driver may still be held liable under applicable jurisprudence involving laws on compulsory motor vehicle registration and the liabilities of employers for quasi-delicts under the Civil Code.

In Erezo v. Jepte (1957) the SC said the main aim of the motor vehicle registration is to identify the owner so that if any accident happens or that any damage or injury is cause by the vehicle on the public highways, responsibility therefore can be fixed on a definite individual, the registered owner. Were the registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise to escape said responsibility and transfer the same to an indefinite person or to one who possesses no property with which to respond financially for the damage or injury done. For damage or injuries arising out of negligence in the operation of a motor vehicle, the registered owner may be held civilly liable with the negligent driver either a) subsidiarily, if the aggrieved party seeks relief based on delict or crime under Art. 100 and 103 of the RPC or b) solidarily, if the complainant seeks relief based on a quasi-delict under Article 2176 and 2180.

Anent the argument that Republic Act 8556 (Section 12) absolves financing companies from liability for the consequences of the quasi-delictual acts involving the financially leased property, the new law notwithstanding developments in foreign jurisdictions do not supersede or repeal the law on compulsory motor vehicle registration.

“Section 12 of R.A 8556 provides: Liability of Lessors - Financing companies shall not be liable for loss, damage or injury caused by a motor vehicle, aircraft, vessel, equipment, machinery or other property leased to a third person or entity except when the motor vehicle, aircraft, vessel, equipment or other property is operated by the financing company, its employees or agents at the time of the loss, damage or injury.”

“Section 5 of R.A. 4136 (Land Transportation and Traffic Code) provides: Compulsory registration of motor vehicles – All motor vehicles and trailers of any type used or operated on or upon any highway of the Philippines must be registered with the Bureau of Land Transportation (now LTO) per Executive Order No. 125, January 30, 1987 and Exec. Order No. 125-A, April 13, 1987) for the current year in accordance with the provisions of this Act”.

“e) Encumbrances of Motor vehicles – Mortgages, attachments, and other encumbrances of motor vehicles in order to be valid against third parties must be recorded in the Bureau. Voluntary transactions or voluntary encumbrances shall likewise be properly recorded on the face of all outstanding copies of the certificates of registration of the vehicle concerned.”

The rule remains the same, a sale, lease or financial lease for that matter that is not registered with the LTO still does not

bind third persons who are aggrieved in tortuous incidents, for the latter need to rely on the public registration of a motor vehicle as conclusive evidence or ownership. A lease, such as the one involved in the instant case, is an encumbrance in contemplation of law, which needs to be registered in order for it to bind third parties. Under this policy, the evil sought to be avoided is the exacerbation of the suffering of the victims of tragic vehicular accidents in not being able to identify a guilty party. A contrary ruling will not serve the ends of justice. The failure to register a lease, sale, transfer or encumbrance should not benefit the parties responsible, to the prejudice of innocent victims. SC affirmed the CA decision holding PCI liable solidarily with the driver of the truck.

Medardo Cadiente vs. Bithuel Macas G.R. No. 161946 November 14, 2008(Torts; Article 2179; Liability of the registered owner of a vehicle)

On July 19, 1994, respondent Macas is a 15 year-old student who was run over a Ford Fiera driven by Cimafranca but registered in the name of petitioner Atty. Cadiente. The incident happened in Davao City while Macas while he was standing on the uncemented portion of the highway (shoulder). The accident resulted in the amputation of both legs of Macas. The father of Macas filed a complaint against Cimafranca and Cadiente and Cadiente filed a third-party complaint against Jalipa, the alleged present owner of the vehicle.

Cadiente alleged that he was no longer the owner of the Ford when the accident happened because he had sold it to Rogelio Jalipa in March 1994. The RTC ruled in favor of Macas and ordered Cadiente and Jalipa solidarily liable to him. The CA affirmed the RTC decision.

Before the SC petitioner raised the issue of contributory negligence on the part of Macas and that the CA erred in holding him solidarily liable with Jalipa. Petitioner theorizes that the victim’s negligence contributed to his own mishap. He argued that the witness Palero who was only two and a half meters always from the victim was NOT hit by the Ford which shows that the victim must have been so negligent as to be bumped and run over by the vehicle.

SC ruled that under Article 2179 of the Civil Code when the plaintiff’s own negligence was the immediate and proximate cause of his injury, he cannot recover damages but if his negligence is merely contributory, the plaintiff may recover damages but the courts shall mitigate the damages to be awarded. Records show that when the accident happened, Macas was on the shoulder of the highway which is where pedestrians are supposed to be. Only stationary vehicles may use the shoulder. Running vehicles are not supposed to pass through the uncemented portion. The Ford in this case without so much as slowing down, took off from the cemented part of the highway and inexplicably swerved to the shoulder and bumped and ran over the victim. SC thus rejected the contention that Macas was the one who was negligent.

SC cited the case of PCI Leasing that the registered owner of any vehicle even if he had already sold it to someone else is

primarily responsible to the public for whatever damage or injury the vehicle may cause because if the registered owner were allowed to evade responsibility by proving who the supposed transferee or owner is. It would be easy for him, by collusion with others to escape said responsibility and transfer the same to an indefinite person. A victim of recklessness on public highways is usually without means to discover or identify the person actually causing the injury or damage. He has no means other than recourse to the registration in the Motor Vehicles Office to determine who the owner is. The protection that the law aims to extend to him would become illusory were the registered owner given the opportunity to escape liability by disproving his ownership.

The SC affirmed the decision of the CA that the petitioner cannot escape liability for the injury caused to respondent Macas.

Spouses Fredelicto and Felicisima Flores vs. Spouses Dominador and Virginia Pineda et.al as heirs of Teresita Pineda and United Doctors Medical Center G.R. No. 158996; November 14, 2008 (Damages; Article 2206)

Teresita Pineda was a 51-year old unmarried woman from Nueva Ecija. On April 17, 1987, she consulted Dr. Fredelicto (Fred, for short) about her body weakness, loss of appetite, frequent urination and vaginal bleeding. Initially, Dr. Fred interviewed her and advised her to go to his clinic at UDMC. He suspected that Teresita might be suffering from diabetes.

Teresita went to UDMC on April 28, 1987 and when Dr. Fred arrived, he did a routine check-up on Teresita who was then too week. He then instructed the hospital staff to prepare Teresita for a D&C operation to be performed by his wife Dr. Felicisima. Dr. Felicisima conducted an internal vaginal exam and at that time, the results of her blood examination showed that her blood sugar level was very high. The pre-operative, evaluation however, was less than complete as the lab results were fully reported only the following the D&C operation. Despite this incomplete evaluation, the D&C operation was performed on Teresita.

The following day, an ultrasound examination was conducted and confirmed that Teresita has an enlarged uterus. Her complete lab exam results came in only after the operation and it showed the presence of sugar in her urine. Her condition worsened even after she was referred to an internist and later tests confirmed she was suffering from diabetes mellitus type II. Insulin was administered but due to complications induced by her diabetes, Teresita died about a week after her operation.

Her heirs filed a suit for damages against the petitioners. RTC ruled in favor of Teresita’s heirs and the ruling was affirmed by the CA.

On appeal to the SC, petitioners argued that they exercised due care and prudence in the performance of their duties as medical professionals. They further said that they operation is the proper and accepted procedure to address

vaginal bleeding which was the medical problem presented to them.

SC held the petitioners liable for damages. There are four elements involved in a medical negligence case namely: duty, breach, injury and proximate causation. To successfully pursue the claim, the plaintiff must prove that the physician either failed to do something which a reasonably prudent health care provider would have done, or that he did something that a reasonably prudent provider would not have done; and the failure or action caused injury to the patient. D& C is the classic gynecologic procedure for the evaluation and possible treatment of abnormal vaginal bleeding. However, Dr. Fred already suspected initially that Teresita may be suffering from diabetes and the suspicion again arose right before the D&C operation when the lab results showed that Teresita’s sugar level was high. The petitioners did not wait for the full medical laboratory results before proceeding with the operation. Petitioners were duly advised by the patient that she was experiencing body weakness, loss of appetite, and frequent urination which are all classic symptoms of diabetes. Dr. Fred’s negligence is not solely his act of ordering a D&C operation but his failure from the start to identify, confirm, despite the patient’s complaint and his own suspicions that diabetes was a risk factor that should be guarded against and his imprudent decision to proceed with the operation despite his early suspicion and the confirmatory early lab results. Reasonable prudence would have shown that diabetes and its complications were foreseeable harm that should have been taken into consideration by the petitioners.

The above facts show that petitioners failed as medical professional to comply with their duty to observe the standard of care to be given to hyperglycemic/diabetic patients undergoing surgery. Thus, the petitioners are liable for Teresita’s death.

Joaquinita Capili v. Dominador and Rosalita Cardaña G. R. No. 157906 November 2, 2006

Jasmin Cardana, 12 years old was a Grade 6 student at San Roque Elementary School where petitioner Capili was the principal. On February 1, 1993, while Jasmin was walking along the perimeter fence of the school, a branch of a caimito tree located within the premises of the school fell on her causing her instantaneous death. Her parents filed a suit for damages against petitioner. They alleged that as early as December 15, 1992, Lerios, a resident of the barangay reported the possible danger the tree posed to passersby. Lerios even pointed to Capili the tree that stood near her office. Capili denied the allegations. She said that Lerios only offered to buy the tree and that she had no knowledge that the tree was dead and rotting.

RTC dismissed the complaint for failure of respondents to establish the negligence of Capili. CA reversed the RTC decision and ruled that Capili was negligent and it ordered her to pay damages to respondents for the death of Jasmin. Capili argued that she was not negligent because she had assigned her next in rank Palaña to see to it that the tree is disposed and that she did not observe any indication that the tree was rotten.

SC ruled that a negligent act is one from which an ordinary prudent person in the actor’s position, in the same or

similar circumstances would foresee such an appreciable risk of harm to others as to cause him not to do the act or to do it in a more careful manner.

The probability that the branches of a dead and rotting tree could fall and harm someone is clearly a danger that is foreseeable. As the school principal, Capili was tasked to ensure the maintenance of the school grounds and safety of the children within the school and its premises. That she was unaware of the rotten state of a tree whose falling branch had caused the death of a child speaks ill of her discharge of the responsibility of her position.

Under Article 2176, plaintiff must prove 1) damages he suffered 2) the fault or negligence of the defendant or some other person for whose act he must respond 3) the connection of cause and effect between the fault or negligence and the damages incurred. The SC ruled that the fact that Jasmin died as a result of the dead rotting tree within the school calls for the application of the principle of RES IPSA LOQUITUR. It applies when the accident was of such character as to warrant an inference that it would not have happened except for the defendant’s negligence; the accident must have been caused by an agency or instrumentality within the exclusive management or control of the person charged with the negligence complained of; and the accident must not have been due to any voluntary action or contribution on the part of the person injured. The effect of the doctrine is to warrant a presumption or inference that the mere falling of the branch of the dead and rotting tree which caused the death of respondents’ daughter was a result of Capili’s negligence being in charge of the school. The burden, thus, shifts to her to prove that the event was not due to her negligence. SC ruled Capili failed to discharge the burden.

Professional Services, Inc. vs. Natividad and Enrique Agana / Agana vs. Juan Fuentes/ Miguel Ampil vs. Agana G.R. No. 126297 January 31, 2007

In April 1984, Natividad Agana was rushed to the Medical City Hospital for loose bowel movement and bloody anal discharge. After a series of examinations, Ampil diagnosed her to be suffering from cancer of the sigmoid. Dr. Ampil found that the cancer had spread and upon consent of Enrique, Ampil performed a hysterectomy on Natividad. It appears that the operation was flawed in that the nurse entered the remarks in the record that 2 sponges were lacking but the doctor still ordered the closure of the incision.

Natividad complained of intense pain in her anal region after the operation and consulted another doctor. Dr. Gutierrez. It was discovered that a foreign object consisting of a gauze measuring 1.5 inches in width was left inside her which badly infected her vaginal vault. Natividad underwent another surgery. She and her husband filed a case for damages against Ampil, PSI, Dr. Fuentes for their negligent acts of leaving 2 pieces of gauze inside her. Pending the outcome of the case, Natividad died.

RTC ruled in favor of Agana and ordered PSI, Ampil and Fuentes solidarily liable for damages to the Aganas. CA

modified in that it exonerated Fuentes but it ordered Ampil to reimburse PSI whatever sums the latter may pay to the Aganas. PSI argued that Ampil is not its employee but a mere consultant and he alone should answer for his own negligence. Ampil on the other hand, asserts that CA erred in finding him negligent sans evidence that he was the one who left the gauzes in Natividad’s vagina.

SC ruled Dr. Ampil being the lead surgeon he is considered the “Captain of the Ship”. The operating surgeon is the person in complete charge of the personnel connected with the operation. While Fuentes performed the hysterectomy, he showed his work to Ampil and after that he left the operating room. Ampil then resumed with the procedure and he was informed that two pieces of gauze were missing but Ampil still ordered the incision to be closed. With respect to PSI, SC ruled that it is liable based on the doctrine of corporate negligence and principle of apparent authority or agency by estoppel.

The doctrine of corporate negligence allows allocating liability for negligent acts of health practitioners absent facts to support the application of respondeat superior. The duty of providing health service is no longer the sole prerogative and responsibility of the physician. The modern hospitals tend to organize a highly professional medical staff whose competence and performance need to be monitored the hospitals commensurate with their inherent responsibility to provide quality medical care. It was duly established that PSI operated the Medical city Hospital for the purpose and providing comprehensive medical services to the public. Accordingly, it has the duty to exercise reasonable care to prevent harm to patients admitted into its facility for treatment PSI failed to perform such duty because it failed to conduct an investigation on the matter reported.

Also, under the “doctrine of apparent authority” or “holding out theory” or “ostensible agency” or “agency by estoppel” PSI is liable because it publicly displays in the lobby of Medical City the names and specializations of physicians associated or accredited by it, including D. Ampil. It is now estopped from passing all the blame to the physicians whose names it proudly paraded in the hospital leading the public to believe that it vouched for their skill and competence. By accrediting Ampil and publicly advertising his qualifications, the hospital created the impression that they were its authorized agents to perform medical or surgical services for its patients. SC said PSI is directly and solidarily liable with Ampil for damages.