2016 Civil Law Updates by Assoc. Dean Viviana Paguirigan.pdf

JURISTS BAR REVIEW CENTER™ CIVIL LAW UPDATES 2016 PRE-BAR REVIEW Assoc. Dean Viviana M. Paguirigan PERSONS AND FAMILY RELATIONS Leonila G. Santiago v. People of the Philippines G.R. No. 200233 July 15, 2015 Four months after the solemnization of their marriage on 29 July 1997, Leonila G. Santiago and Nicanor F. Santos faced an Information for bigamy. Petitioner pleaded "not guilty," while her putative husband escaped the criminal suit. The prosecution adduced evidence that Santos, who had been married to Estela Galang since 2 June 1974, asked petitioner to marry him. Leonila averred that for there to be a conviction for bigamy, the second marriage should be proven valid by the prosecution; but in this case, she argued that their marriage was void due to the lack of a marriage license. She contended that her marriage to Santos was void ab initio for having been celebrated complying with Article 34 of the Family Code, which provides an exemption from the requirement of a marriage license if the parties have actually lived together as husband and wife for at least five years prior to the celebration of their marriage. In her case, petitioner asserted that she and Santos had not lived together as husband and wife for five years prior to their marriage. Hence, she argued that the absence of a marriage license effectively rendered their marriage null and void, justifying her acquittal from bigamy. RTC convicted the petitioner. The CA affirmed. ISSUE: Whether or not the petitioner should be acquitted on the charge bigamy on the ground that the marriage is void for lack of marriage license. No. The Certificate of Marriage, signed by Santos and Santiago, contained the misrepresentation perpetrated by them that they were eligible to contract marriage without a license. We thus face an anomalous situation wherein petitioner seeks to be acquitted of bigamy based on her illegal actions of (1) marrying Santos without a marriage license despite knowing that they had not satisfied the cohabitation requirement under the law; and (2) falsely making claims in no less than her marriage contract. We chastise this deceptive scheme that hides what is basically a bigamous and illicit marriage in an effort to escape criminal prosecution. Our penal laws on marriage, such as bigamy, punish an individual's deliberate disregard of the permanent and sacrosanct character of this special bond between spouses. In Tenebro v. Court of Appeals, we had the occasion to emphasize that the State's penal laws on bigamy should not be rendered nugatory by allowing individuals "to deliberately ensure that each marital contract be flawed in some manner, and to thus escape the consequences of contracting multiple marriages, while beguiling throngs of hapless women with the promise of futurity and commitment." Thus, in the case at bar, we cannot countenance petitioner's illegal acts of feigning a marriage and, in the same breath, adjudge her innocent of the crime. For us, to do so would only make a mockery of the sanctity of marriage.

Viñas vs. Parel-Viñas G.R. No. 208790 January 21, 2015 Petitioner Glenn Vinas filed a petition for declaration of nullity of his marriage with respondent Mary Grace. He alleged that they got married in civil rites in 1999 but Mary Grace refused to perform even the most essential household chores; that she was self-centered and immature; that she was 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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insecure and extremely jealous and she drank and smoked heavily even when she was pregnant. Respondent filed no answer and did not attend any of the proceedings before the trial court. Petitioner submitted himself to Dr. Nedy Tayag for psychological evaluation and the latter found him amply aware of his marital roles and capable of maintaining a mature and healthy heterosexual relationship. On the other hand, Dr. Tayag based her assessment of the respondent upon information she gathered from the petitioner and the latter‘s cousin. She concluded that respondent is suffering from Narcissistic personality disorder and anti-social traits. The RTC declared the marriage void. The CA reversed. The SC that the cumulative testimonies of Glenn, Dr. Tayag and Rodelito, and the documentary evidence offered do not sufficiently prove the root cause, gravity and incurability of Mary Grace‘s condition. The evidence merely shows that Mary Grace is outgoing, strong-willed and not inclined to perform household chores. Further, she is employed in Dubai and is romantically-involved with another man. She has not been maintaining lines of communication with Glenn at the time the latter filed the petition before the RTC. Glenn, on the other hand, is conservative, family-oriented and is the exact opposite of Mary Grace. While Glenn and Mary Grace possess incompatible personalities, the latter‘s acts and traits do not necessarily indicate psychological incapacity. Rumbaua v. Rumbaua is emphatic that: In Bier v. Bier, we ruled that it was not enough that respondent, alleged to be psychologically incapacitated, had difficulty in complying with his marital obligations, or was unwilling to perform these obligations. Proof of a natal or supervening disabling factor – an adverse integral element in the respondent‘s personality structure that effectively incapacitated him from complying with his essential marital obligations – had to be shown and was not shown in this cited case. A careful reading of Dr. Tayag‘s testimony reveals that she failed to establish the fact that at the time the parties were married, respondent was already suffering from a psychological defect that deprived him of the ability to assume the essential duties and responsibilities of marriage. Neither did she adequately explain how she came to the conclusion that respondent‘s condition was grave and incurable. Her testimony was short on factual basis for her diagnosis because it was wholly based on what the petitioner related to her.

Social Security Commission vs. Edna A. Azote G.R. No. 209741, April 15, 2015 Edgardo Azote, a member of the SSS married respondent Edna in civil rites in 1992. They had six children born from 1985 to 1999. Edgardo submitted Form E-4 to the SSS naming Edna and their children as beneficiaries. Edgardo died in 2005 and Edna filed her claim for death benefits with the SSS, but the same was denied. It appeared from the records of SSS that in 1982 Edgardo submitted the same form but designating a different set of beneficiaries, namely Rosemarie, as his wife, and Elmer, as dependent. Edna‘s children were adjudged as beneficiaries and she was considered their legal guardian. Edna filed a petition with the SSC to claim the death benefits, lump sum and monthly pension of Edgardo. SSC dismissed the petition and explained that the NSO records revealed that the marriage between Edgardo and Rosemarie Sino was registered on 28 July 1982. Consequently, Edgardo and Edna‘s marriage was not valid as there is no showing that his first marriage had been annulled or dissolved. There must be a judicial determination of nullity of a previous marriage before a party could enter a second marriage. On appeal, the CA reversed the SSC ruling and held that the SSC could not make a determination of the validity or invalidity of the marriage of Edna and Edgardo considering that no contest came from either Rosemarie or Elmer. CA held that Edna had established her right to the benefits by substantial evidence, namely, her marriage certificate and the baptismal certificates of her children. ISSUE: Whether or not the CA erred in granting death benefits in favor of respondent Edna. The Supreme Court ruled that the CA committed an error in granting death benefits to Edna. Under R.A. 8292 (Social Security Law), the law in force at the time of Edgardo‘s death, only the legal 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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spouse of the deceased-member is qualified to be the beneficiary of the latter‘s SS benefits. In this case, there is a concrete proof that Edgardo contracted an earlier marriage with another individual as evidenced by their marriage contract.

The marriage of Edna and Edgardo was contracted when the Family Code was already in force. Under Article 41 of the said Code, a marriage contracted by any person during subsistence of a previous marriage shall be null and void, unless before the celebration of the subsequent marriage, the prior spouse had been absent for four consecutive years and the spouse present has a well-founded belief that the absent spouse was already dead. In case of disappearance where there is danger under the circumstances set forth in the provisions of Article 391 of the Civil Code, an absence of only two years shall be sufficient. For the purpose of contracting a subsequent marriage under the preceding paragraph, the spouse present must institute a summary proceeding as provided in this Code for the declaration of presumptive death of the absentee, without prejudice to the effect of reappearance of the absent spouse. Edna failed to establish that there was no impediment or that the impediment was already removed at the time of the celebration of her marriage to Edgardo. She could not adduce evidence to prove that the earlier marriage of Edgardo was either annulled or dissolved or that there was a declaration of Rosemarie‘s presumptive death before her marriage to Edgardo. What is apparent is that Edna was the second wife of Edgardo and she failed to show that she was the legal spouse of the member, she would not qualify as beneficiary of the death benefits of the deceased.

Marietta N. Barrido vs. Leonardo V. Nonato G.R. No. 176492 October 20, 2014 Leonardo Nonato and petitioner Marietta N. Barrido were able to acquire a house and lot in Bacolod during their marriage. On March 15, 1996, their marriage was declared void on the ground of psychological incapacity. Leonardo asked for partition of the property but Marietta refused. Thus, on January 29, 2003, Leonardo filed a Complaint for partition before the MTCC of Bacolod City. By way of defense, Marietta claimed that the subject property had already been sold to their children, Joseph Raymund and Joseph Leo. She likewise moved for the dismissal of the complaint because the MTCC lacked jurisdiction, the partition case being an action incapable of pecuniary estimation. The Bacolod MTCC applying Article 129 ruled that the conjugal dwelling be adjudicated to Marietta since the majority of the common children chose to remain with her. The RTC reversed the MTCC decision and held that the lower court erred in awarding the property to Marietta but the RTC upheld the application of Article 129 of the Family Code. The CA ruled that although the RTC correctly ordered the equitable partition of the property in the dispositive portion of its decision, it erred in applying Article 129 of the Family Cod instead of Article 147. ISSUES: Whether partition in equal shares is the proper remedy in this case according to Art. 147 of the Family Code SC ruled in the affirmative. Leonardo and Marietta‘s marriage had been declared void psychological incapacity under Article 36 of the Family Code. During their marriage, however, conjugal partnership regime governed their property relations. Although Article 129 provides for procedure in case of dissolution of the conjugal partnership regime, Article 147 specifically covers effects of void marriages on the spouses‘ property relations.

for the the the

For Article 147 to operate, the man and the woman: (1) must be capacitated to marry each other; (2) live exclusively with each other as husband and wife; and (3) their union is without the benefit of marriage or their marriage is void. Here, all these elements are present. The term "capacitated" in the 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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first paragraph of the provision pertains to the legal capacity of a party to contract marriage. Any impediment to marry has not been shown to have existed on the part of either Leonardo or Marietta. They lived exclusively with each other as husband and wife. However, their marriage was found to be void under Article 36 of the Family Code on the ground of psychological incapacity. Under this property regime, property acquired by both spouses through their work and industry shall be governed by the rules on equal co-ownership. Any property acquired during the union is prima facie presumed to have been obtained through their joint efforts. A party who did not participate in the acquisition of the property shall be considered as having contributed to the same jointly if said party's efforts consisted in the care and maintenance of the family household. Efforts in the care and maintenance of the family and household are regarded as contributions to the acquisition of common property by one who has no salary or income or work or industry. Here, the former spouses both agree that they acquired the subject property during the subsistence of their marriage. Thus, it shall be presumed to have been obtained by their joint efforts, work or industry, and shall be jointly owned by them in equal shares.

January 15, 2014. G.R. No. 18592. HEIRS OF DR. MARIANO FAVIS SR. vs. JUANA GONZALES and SPS. MARIANO AND LARCELITA FAVIS Dr. Mariano Favis Sr. was married to Capitolina with whom he had seven children who are the present petitioners. When Capitolina died, Mariano Sr. took Juana (respondent) as his common-law wife with whom he sired one child, Mariano, Jr. Mariano Sr. and Juana later got married in 1974 and he executed an affidavit acknowledging Mariano Jr. as one of his legitimate children. Mariano Jr. is married to Larcelita, with whom he has four children. Dr. Mariano Sr. died intestate on 29 July 1995 leaving several properties. Prior to his death, he allegedly executed a Deed of Donation transferring and conveying properties in favor of his grandchildren with Juana (second wife). The children of the first marriage of Mariano Sr. filed an action for annulment of the deed of donation and partition against Juana and Mariano Jr. claiming that said donation prejudiced their legitime. Mariano Jr. asserts that the properties donated do not form part of the estate of the late Mariano Sr. because said donation was made inter vivos, hence petitioners have no stake over said properties. RTC declared the donation void and cancelled the tax declarations over the property. It opined that at the age of 92, Mariano Sr. was plagued with illnesses and could not have had full control of his mental capacities to execute a deed of donation. However, the RTC held that Mariano Jr. was legitimated by the subsequent marriage of Mariano Sr. and Juana and therefor he (Mariano Jr.) is a compulsory heir of his father. On appeal, the CA motu proprio ordered the dismissal of the complaint for failure of petitioners to make an averment that earnest efforts toward a compromise have been made, as mandated by Article 151 of the Family Code. ISSUE: Whether or not the appellate court may order of dismissal of the complaint for failure to allege therein that earnest efforts towards a compromise have been made. SC ruled that the CA may not order the dismissal motu proprio. Art. 151 of the Family Code requires that suits between members of the same family must allege that earnest efforts toward a compromise have been made and that if it is not shown that no such efforts were made, the case must be dismissed. However, the complaint below was answered by the respondents without filing a motion to dismiss (based on the failure to comply with a condition precedent) and the decision was appealed on the merits without mention of any defect in the statement of a cause of action. Neither was such failure to allege earnest efforts assigned as an error in the appeal. A failure to allege earnest but failed efforts

at a compromise in a complaint among members of the same family, is not a jurisdictional defect but merely a defect in the statement of a cause of action. Such defect may, however, be waived by failing

2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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to make seasonable objection, in a motion to dismiss or answer, the defect being a mere procedural imperfection which does not affect the jurisdiction of the court. (Agbayani v. Hon. Belen, 230 Phil. 39, 42 (1986) citing Catorce v. Court of Appeals, 214 Phil. 181 (1984). The reason behind Article 151 of the Family Code is to make sure that there is no longer any possibility of a compromise. The facts of the case show that compromise was never an option insofar as the respondents were concerned. Hence, it was error for the CA to have ordered the dismissal of the complaint.

Rodolfo S. Aguilar vs. Edna G. Siasat G.R. No. 200169 January 28, 2015 Alfredo and Candelaria Aguilar (Aguilar spouses) died intestate and without debts and included in their estate are two parcels of land covered by TCT of the Register of Deeds Bago and Bacolod. Petitioner Rodolfo Aguilar filed a case for injunction with damages against Edna alleging that he is the only son and sole heir of the Aguilar spouses. He alleged that he discovered that the subject titles were missing and he suspected that someone from Siasat clan could have stolen the titles to the properties. Respondent Edna claimed that Rodolfo is not the son and sole surviving heir of the Aguilar spouses, but a mere stranger who was raised by the Aguilar spouses out of generosity and kindness of heart; that Rodolfo is not a natural or adopted child of the Aguilar spouses; Edna added that Alfredo predeceased his wife, Candelaria thus, the latter inherited the conjugal share of the former; and that upon the death of Candelaria, her brothers and sisters inherited her estate as she had no issue; and that the subject titles were not stolen but entrusted to her for safekeeping. To prove his claim that he is the son and heir of the Aguilar spouses Rodolfo presented the following pieces of evidence: (i) school records, wherein it is stated that Alfredo Aguilar is Rodolfo‘s parent; (ii) Individual Income Tax Return, which indicated that Candelaria Aguilar is his mother; (iii) Alfredo Aguilar‘s SSS Form E-1 which bears his signature and thumb mark and indicates that Rodolfo, who was born on March 5, 1945, is his son and dependent; (iv) Alfredo Aguilar‘s Information Sheet of Employment with BBMC, indicating that Rodolfo is his son; and (v) Certification issued by the Bacolod Civil Registrar to effect that the record of births during the period of 1945-1946 were all destroyed by nature, hence no true copies of the Certificate of Live Birth of Rodolfo could be issued as requested. On the other hand, respondent Edna offered as evidence an Affidavit previously executed by Candelaria announcing that she and Alfredo have no issue and that she is the sole heir to Alfredo‘s estate. Both the RTC and CA ruled that the pieces of evidence presented by the petitioner failed to establish his claim to be the sole surviving heir of the Aguilar spouses as provided in Art. 172 of the Family Code (FC). Hence, this petition. ISSUE: Whether or not, petitioner‘s pieces of evidence particularly Alfredo Aguilar‘s SSS Form E-1 satisfy the requirement for the proof of filiation and relationship to the Aguilar spouses under Art. 172 of the FC. Citing the case of De Jesus v. Estate of Dizon, the high court ruled that the filiation of illegitimate children, like legitimate children, is established by (1) the record of birth appearing in the civil register or a final judgment; or (2) an admission of legitimate filiation in a public document or a private handwritten instrument and signed by the parent concerned. In the absence thereof, filiation shall be proved by (1) the open and continuous possession of the status of a legitimate child; or (2) any other means allowed by the Rules of Court and special laws. The due recognition of an illegitimate child in a record of birth, a will, a statement before a court of record, or in any authentic writing is, in itself, a consummated act of acknowledgment of the child, and no further court action is required. In fact, any authentic writing is treated not just a ground for compulsory recognition; it is in itself a voluntary recognition that does not require a separate action for judicial approval. Where, instead, a claim for recognition is predicated on other evidence merely tending to prove paternity, i.e., outside of a record of birth, a will, a statement before a court of record or an authentic writing, judicial action within the applicable statute of limitations is essential in order to establish the child‘s acknowledgment.

2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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Rodolfo is correct in asserting that Alfredo Aguilar‘s SSS Form E-1 satisfies the requirement for proof of filiation and relationship to the Aguilar spouses under Art.172 of the FC. By itself, said document constitutes an admission of legitimate filiation in a public document or private handwritten instrument and signed by the parent concerned. To repeat what was stated in De Jesus, filiation may be proved by an admission of legitimate filiation in a public document or a private handwritten instrument and signed by the parent concerned, and such due recognition in any authentic writing is, in itself, a consummated act of acknowledgment of the child, and no further court action is required.

Arado vs. Alcoran G.R. No. 163362 July 08, 2015 Raymundo Alcoran married Joaquina Arado. They had a son named Nicolas Alcoran. Nicolas married Florencia but their union had no offspring. During his marriage to Florencia, Nicolas had an extra marital affair with Francisca who gave birth to the respondent, Anacleto Alcoran in 1951. In 1972, Anacleto married Elenette Sonjaco. Raymundo died in 1939, while Nicolas died in 1954. Likewise, Florencia died in 1960, and Joaquina in 1981. Plaintiffs (collateral relatives of Nicolas) then filed a complaint for recovery of property alleging that when Raymundo died in 1939, his properties were inherited by his son Nicolas alone as it was the period of the old civil code where the spouse could not inherit but only as share of the usufruct which was extinguished during the death of the usufructuary. Plaintiffs averred that Anacleto was not recognized by Nicolas as his child, hence, when Nicolas died his properties passed to his wife Florencia and his mother Joaquina. ISSUE: Whether or not Anacleto has proven his status as an illegitimate son of Nicolas The SC ruled that rightly enough, the RTC and the CA unanimously concluded that Nicolas had duly acknowledged Anacleto as his illegitimate son. The birth certificate of Anacleto appearing in the Register of Births of the Municipality of Bacong, Negros Oriental (Exhibits 3, 3-A) showed that Nicolas had himself caused the registration of the birth of Anacleto. The showing was by means of the name of Nicolas appearing in the column "Remarks" in Page 53, Book 4, Register No. 214 of the Register of Births. Considering that Nicolas, the putative father, had a direct hand in the preparation of the birth certificate, reliance on the birth certificate of Anacleto as evidence of his paternity was fully warranted. Anacleto's baptismal certificate (Exhibit 7) was of no consequence in determining his filiation. We have already held in Cabatania v. Court of Appeals that "while a baptismal certificate may be considered a public document, it can only serve as evidence of the administration of the sacrament on the date specified but not the veracity of the entries with respect to the child's paternity;" and that baptismal certificates were "per se inadmissible in evidence as proof of filiation," and thus "cannot be admitted indirectly as circumstantial evidence to prove [filiation]." Hence, we attach no probative value to the baptismal certificate as proof of the filiation of Anacleto. The lack of probative value of the respondents‘ aforecited corroborative evidence notwithstanding, Anacleto‘s recognition as Nicolas‘ illegitimate child remain beyond question in view of the showing that Nicolas had personally and directly acknowledged Anacleto as his illegitimate child.

BBB,* v. AAA. G.R. No. 193225, February 09, 2015 Petitioner (BBB) and respondent (AAA) met in 1991 and started dating in 1996. AAA was a medical student who was then raising her first child (CCC) from a previous relationship. During the relationship with [BBB], [AAA] bore two more children namely, [DDD] (born on December 11, 1997) and [EEE] (born on October 19, 2000). [BBB] and [AAA] married in civil rights on October 10, 2002 and thereafter, the birth certificates of their children DDD and EEE, including [CCC‘s], were amended to change their civil status to legitimated by virtue of the said marriage. 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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Citing economic and psychological abuse on the part of BBB, [AAA] filed an application for the issuance of a Temporary Protection Order with a request to make the same permanent after due hearing, before the Regional Trial Court of Pasig City. AAA alleged that BBB‘s incessant womanizing resulted in frequent heated arguments between them. BBB‘s alleged mistress FFF insulted and humiliated her in public in the presence of BBB who did nothing to stop FFF. AAA decided to leave the conjugal home with her children. What made matters worse, according to [AAA], was the apparent biases of [BBB] in favor of [DDD] and [EEE]. That despite his promise to treat [CCC] as his own, [BBB] would still treat the latter differently from the two kids, putting [CCC] at a disadvantage. [AAA], cites as example the instances when, [BBB] would buy food and toys for [DDD] and [EEE] only, buying nothing for [CCC]. AAA added that she feels threatened after discovering [that BBB] was stalking her and/or their children. [AAA] alleges that she found out that [BBB] has sought the help of one [GGG], a friend of [BBB] who lives within the same compound where [AAA] lives, to go through the guard‘s logbook to monitor their every move, i.e., who visits them, what time [AAA] leaves and returns back home, etc. While living separately from [BBB], [AAA] discovered that [BBB] was not paying the rentals due on the condominium unit they were occupying, forcing [AAA] to move out. [AAA] was likewise compelled to find work to support the family, after [BBB] has started to be remiss in his financial obligations to the family. In his defense, [BBB] alleges that [AAA‘s] irrational jealousy has caused their frequent arguments. According to [BBB], because of their repeated fights, he was forced to leave the family home to prevent the brewing animosity between him and his wife. The lower court issued a Temporary Protection Order (TPO). The TPO was thereafter, made permanent by virtue of a Decision of the RTC dated August 14, 2007. The CA rendered the assailed decision affirming the factual findings and dispositions of the RTC, but ordering the remand of the case for the latter to determine in the proper proceedings who shall be awarded custody of the children. BBB elevated the case to the Supreme Court. One of the issues raised by BBB is whether or not CCC who is not his biological son is entitled to support from him. Article 177 of the Family Code provides that ―only children conceived and born outside of wedlock of parents who, at the time of the conception of the former, were not disqualified by any impediment to marry each other may be legitimated.‖ Article 178 states that ―legitimation shall take place by a subsequent valid marriage between parents.‖ The parties do not dispute the fact that BBB is not CCC‘s biological father. Such being the case, it was improper to have CCC legitimated after the celebration of BBB and AAA‘s marriage. Clearly then, the legal process of legitimation was trifled with. BBB voluntarily but falsely acknowledged CCC as his son. Article 1431 of the New Civil Code pertinently provides: Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. At least for the purpose of resolving the instant petition, the principle of estoppel finds application and it now bars BBB from making an assertion contrary to his previous representations. He should not be allowed to evade a responsibility arising from his own misrepresentations. He is bound by the effects of the legitimation process. CCC remains to be BBB‘s son, and pursuant to Article 179 of the Family Code, the former is entitled to the same rights as those of a legitimate child, including the receipt of his father‘s support. Notwithstanding the above, there is no absolute preclusion for BBB from raising before the proper court the issue of CCC‘s status and filiation. However, BBB cannot do the same in the instant petition before this Court now. In Tison v. CA, the Court held that ―the civil status [of a child] cannot be attacked 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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collaterally.‖ The child‘s legitimacy ―cannot be contested by way of defense or as a collateral issue in another action for a different purpose.‖ The instant petition sprang out of AAA‘s application for a PPO before the RTC. Hence, BBB‘s claim that CCC is not his biological son is a collateral issue, which this Court has no authority to resolve now. All told, the Court finds no merit in BBB‘s petition, but there exists a necessity to remand the case for the RTC to resolve matters relative to who shall be granted custody over the three children, how the spouses shall exercise visitation rights, and the amount and manner of providing financial support.

Norma A. Del Socorro vs. Van Wilsem G.R. No. 193707, December 10, 2014 Norma A. Del Socorro and Van Wilsem contracted marriage in Holland on September 25, 1990. They were blessed with a son named Roderigo Norjo, who at the time of the filing of the instant petition was sixteen (16) years of age. Their marriage was dissolved in July 1995 by a decree of divorce issued by the court of Holland. At that time, their son was only eighteen (18) months old. Norma and her son came home to the Philippines upon the promise made by Van Wilsem that he will provide monthly support but he never did. Van Wilsem came to the Philippines and married another Filipina in Cebu. Van to date, all the parties, including their son, Roderigo, are presently living in Cebu City. Norma, through her counsel, sent a letter demanding support from respondent. However, respondent refused to receive the letter. Norma filed a complaint affidavit with the Provincial Prosecutor of Cebu City against respondent Van Wilsem for violation of Section 5, paragraph E(2) of R.A. No. 9262 for the latter‘s unjust refusal to support his minor child. The RTC-Cebu issued the herein assailed Order dismissing the criminal case against respondent on the ground that the facts charged in the information do not constitute an offense with respect to the respondent who is an alien. ISSUES: Whether or not a foreign national has an obligation to support his minor child under Philippine law; and Whether or not a foreign national can be held criminally liable under R.A. No. 9262 for his unjustified failure to support his minor child. To determine whether or not a person is criminally liable under R.A. No. 9262, it is imperative that the legal obligation to support exists. SC said that petitioner cannot rely on Article 195 of the New Civil Code in demanding support from respondent, who is a foreign citizen, since Article 15 of the New Civil Code stresses the principle of nationality. In other words, insofar as Philippine laws are concerned, specifically the provisions of the Family Code on support, the same only applies to Filipino citizens. By analogy, the same principle applies to foreigners such that they are governed by their national law with respect to family rights and duties. The obligation to give support to a child is a matter that falls under family rights and duties. Since the Van Wilsem is a citizen of Holland or the Netherlands, the trial court correctly ruled that he is subject to the laws of his country as to whether he is obliged to give support to his child as well as the consequences of his failure to do so. This does not, however, mean that Van Wilsem is not obliged to support his son altogether. In international law, the party who wants to have a foreign law applied to a dispute or case has the burden of proving the foreign law. In the present case, Van Wilsem hastily concludes that being a national of the Netherlands, he is governed by such laws on the matter of provision of and capacity to support. While he pleaded the laws of the Netherlands in advancing his position that he is not obliged to support his son, he never proved the same.

2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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It is incumbent upon respondent to plead and prove that the law of the Netherlands does not impose upon the parents the obligation to support their child (either before, during or after the issuance of a divorce decree), because Llorente v. Court of Appeals, has already enunciated that foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial notice of them. In view of respondent‘s failure to prove the national law of the Netherlands in his favor, the doctrine of processual presumption shall govern. Under this doctrine, if the foreign law involved is not properly pleaded and proved, our courts will presume that the foreign law is the same as our local or domestic or internal law which enforces the obligation of parents to support their children and penalizing the noncompliance therewith. Van Wilsem may be made liable under Section 5(e) and (i) of R.A. No. 9262 for unjustly refusing or failing to give support to Norma‘s son. Under the aforesaid special law, the deprivation or denial of financial support to the child is considered an act of violence against women and children. Given that respondent is living in the Philippines Article 14 and the Territoriality principle in criminal law applies which provides: ―Penal laws and those of public security and safety shall be obligatory upon all who live and sojourn in Philippine territory, subject to the principle of public international law and to treaty stipulations." On this score, it is indisputable that the alleged continuing acts of respondent in refusing to support his child with petitioner is committed here in the Philippines as all of the parties herein are residents of the Province of Cebu City. As such, our courts have territorial jurisdiction over the offense charged against respondent. The SC also debunked respondent‘s claim that his criminal liability has been extinguished by prescription because under R.A. 9262, the action must be filed within 20 years under Section 24 of R.A. No. 92621 because the act of denying support under Section 5(e) of 9262 is a continuing offense which is still ongoing up to the present.

CASTRO vs. GREGORIO G.R. No. 188801 October 15, 2014 Rosario Castro and Atty. Jose Castro were married in 1962. Joanne was born to them but they later separated due to alleged homosexual tendencies of Jose. On August 1, 2000, Jose filed a petition to adopt Jed and Regina who were allegedly his illegitimate children with Lilibeth Gregorio. At the time of the filing of the petition, Jose was 70 years old. On October 16, 2000, the trial court approved the adoption, having ruled that no opposition had been received. Rosario later filed a complaint for disbarment against Jose, alleging that Jose had been remiss in providing support for their daughter Joanne for the past 36 years and that Jose had been showering gifts to his driver and alleged lover, Larry Rentero, and even went to the extent of adopting Larry‘s two children, Jed and Regina. Jose died in 2006. In 2007, Rosario and Joanne filed a petition for annulment of judgment with the Court of Appeals, alleging that Rosario‘s affidavit of consent was fraudulent. The Court of Appeals denied the petition ruling that there is no explicit provision in the rules that the spouse and legitimate child of the adopter should be personally notified of the hearing. ISSUE: Whether or not petitioners should have been given notice by the trial court of the adoption. SC ruled: It is settled that "the jurisdiction of the court is determined by the statute in force at the time of the commencement of the action." As Jose filed the petition for adoption on August 1, 2000, it is Republic Act No. 8552 which applies over the proceedings. The law on adoption requires that the adoption by the father of a child born out of wedlock obtain not only the consent of his wife but also the consent of his legitimate children. In the absence of any decree of legal separation or annulment, Jose and Rosario remained legally married despite their de facto separation. For Jose to be eligible to adopt Jed and Regina, Rosario must first signify her consent to the adoption. Jose, however, did not validly obtain Rosario's consent. His submission of a fraudulent affidavit of consent in her name cannot be considered compliance of the requisites of the law. Had Rosario been given notice by the trial court of 1

SECTION 24. Prescriptive Period. – Acts falling under Sections 5(a) to 5(f) shall prescribe in twenty (20) years. Acts falling under Sections 5(g) to 5(I) shall prescribe in ten (10) years.

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the proceedings, she would have had a reasonable opportunity to contest the validity of the affidavit. Since her consent was not obtained, Jose was ineligible to adopt. The law also requires the written consent of the adopter's children if they are 10 years old or older. It is undisputed that Joanne was over 10 years old at the time of the adoption proceedings. Her written consent, therefore, was necessary for the adoption to be valid. For the adoption to be valid, petitioners' consent was required by Republic Act No. 8552. Personal service of summons should have been effected on the spouse and all legitimate children to ensure that their substantive rights are protected. It is not enough to rely on constructive notice as in this case. Surreptitious use of procedural technicalities cannot be privileged over substantive statutory rights. Since the trial court failed to personally serve notice on Rosario and Joanne of the proceedings, it never validly acquired jurisdiction.

PROPERTY Florentino W. Leong and Elena Leong, et. al. vs. Edna C. See G.R. No. 194077, December 03, 2014 Florentino and Carmelita Leong used to own the Quiapo property which is the subject of this case. Residing with the spouses Leong was Florentino‘s sister-in-law, Elena who was allowed to stay on the property for two decades without paying any rental. After the building they lived in was razed by fire, they constructed makeshift houses, and the rental-free arrangement continued. Florentino and Carmelita‘s marriage was dissolved in the United States and part of their marital settlement agreement provides that Florentino shall convey and waive all his rights, title and interest to Carmelita over the Quiapo property subject to the reservation that neither of them shall charge rent to relatives or convey title until it has been established that Florentino has clear title to the Malabon property. Carmelita later sold the land to respondent See. See was aware of the Leong relatives staying in the makeshift houses on the land. Carmelita on one hand assured See that her nieces and nephews would move out, but demands to vacate were unheeded. See filed a complaint for recovery of possession against Elena and the other relatives of the Leong ex-spouses on a claim that after the fire had razed the building on the land, Elena erected makeshift houses on the land without Carmelita‘s knowledge or consent. Elena on the other hand, alleged that the noncompliance with the proviso in the property agreement — that the Quiapo property "may not be alienated without Florentino first obtaining a clean title over the Malabon property" annulled the transfer to respondent See. Florentino also filed a complaint for declaration of nullity of contract, title, and damages against Carmelita Leong, Edna C. See, and the Manila Register of Deeds, alleging that the sale was without his consent. The two cases were consolidated. The RTC ruled in favor of See which decision was further affirmed by the CA. ISSUES: Whether See is an innocent purchaser for value in good faith. Whether the indefeasibility of the title will apply if its issuance was attended by fraud An innocent purchaser for value refers to someone who buys the property of another without notice that some other person has a right to or interest in it, and who pays a full and fair price at the time of the purchase or before receiving any notice of another person‘s claim. One claiming to be an innocent purchaser for value has the burden of proving the same. The SC agreed with the lower court‘s findings that See was a purchaser in good faith because of her act of verifying the authenticity of Carmelita‘s title with the Register of Deeds and her reliance on the notarized Certificate of Authority issued by the State of Illinois in support of the waiver of interest of Florentino over the subject property. The principle of indefeasibility of a Torrens title does not apply where fraud attended the issuance of the title. Petitioners failed to substantiate their allegation of fraud in the procurement of the title. See, an innocent purchaser in good faith and for value with title in her name, has a better right to the property than Elena. Elena‘s possession was neither adverse to nor in the concept of owner. Article 428 of the Civil Code provides that the owner has the right to enjoy and dispose of a thing, without other limitations than those established by law. The owner has also a right of action against the holder and possessor of the thing in order to recover it.

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Aquino vs. Aguilar G.R. No. 182754 June 29, 2015 Teresa and her husband Crispin Aquino owned a house and lot at Makati City. Since 1981, this property has been occupied by Teresa‘s sister, Josefina Aguilar and the latter‘s family. It appears from the record that the Aguilars stayed on the property with the consent and approval of the Aquinos. The Aguilars demolished the old house and constructed a three-storey building and occupied the third floor of the building for 20 years without any rental. In 2003, Aquinos sent a letter to the respondents informing them that an immediate family member needed to use the premises and demanding the surrender of the property within 10 days from notice. Aguilars refused to vacate and a suit for ejectment was filed by the Aquinos. Aguilars claimed that they had contributed to the improvement of the property and the construction of the building, both in terms of money and management/supervision services. They averred that the construction of the three-storey building was also at the uncompensated supervision of Aguilar, of which only P 2 Million was spent by the Aquinos while they (Aguilars) spent around P 1 Million as contribution to the construction cost. MeTC ruled in favor of the Aquinos and declared that the Aguilars were builders in bad faith who were not entitled to recover their purported expenses for the construction of the building. It emphasized that their occupation of the property was by mere tolerance of petitioners and, as such, could be terminated. RTC and CA affirmed. The CA remanded the case to determine the cost of necessary expenses incurred by the Aquinos during the period of possession and the cost of useful improvements introduced by the Aguilars in the construction of the building. ISSUE: Whether or not the Aguilars are builders in good faith and therefore entitled to reimbursement of the improvements on the property based on Article 1678. The SC ruled that the term ―builder in good faith‖ as used in reference to Article 448 of the Civil Code, refers to one who, not being the owner of the land, builds on that land believing himself to be its owner and unaware of the land, builds on that land, believing himself to be its owner and unaware of the defect in his title or mode of acquisition. The essence of good faith lies in an honest belief in the validity of one‘s right, ignorance of a superior claim, and absence of intention to overreach another. The Spouses Aguilar cannot be considered as builders in good faith on account of their admission that the subject lot belonged to the Spouses Aquino when they constructed the building. Article 1678 is not applicable to this case. The SC ruled that by its express provision, Article 1678 of the Civil Code applies only to lessees who build useful improvements on the leased property. It does not apply to those who possess property by mere tolerance of the owners, without a contractual right. SC ruled that in this case, there is absolutely no evidence of any lease contract between the parties. In fact, respondents themselves never alleged that they were lessees of the lot or the building in question. As builders in bad faith, respondents are not entitled to reimbursement of useful expenses following the Civil Code provisions: ―Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right of indemnity; Art. 450. The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the work, or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the person who built, planted or sowed; or he may compel the builder or planter to pay the price of the land, and the sower the proper rent; and Art. 451. In the cases of the two preceding articles, the landowner is entitled to damages from the builder, planter or sower.‖ Respondents however may recover the necessary expenses incurred for the preservation of the property but without the right of retention.

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Pursuant to Article 452 of the Civil Code, a builder in bad faith is only entitled to recoup the necessary expenses incurred for the preservation of the land but they do not have the right of retention over the premises.

Alicia B. Reyes v. Spouses Ramos G.R. No. 194488, February 11, 2015 Alicia B. Reyes, filed a complaint before the RTC, for easement of right of way against Spouses Ramos. Reyes alleged that she was the registered owner of a 450-square-meter parcel of land designated as Lot No. 3-B-12 which was surrounded by the Ramos property. Reyes sought to establish the easement on a 113 square meter portion of the property of the Spouses Ramos which according to her would be the point least prejudicial to the servient estate. Based on the Ocular Inspection Report, Reyes' property had another outlet to the highway. In

between Reyes‘ property and the highway or road, however, is an irrigation canal, which can be traversed by constructing a bridge, similar to what was done by the owners of the nearby properties. It was also stated in the report that to establish the easement, permanent structures such as the garage, garden, and grotto on the property of Ramos would have to be demolished to accommodate the preferred location of the right of way demanded by Reyes.

Spouses Ramos contended that the isolation of Reyes‘ property was due to her mother's own act of subdividing the property among her children without regard to the pendency of an agrarian case between her and her tenants. Ramos argued that the portion to the property chosen by Reyes as easement was also the most burdensome for them. Said Spouses pointed to an open space that connected Reyes‘ property to another public road. ISSUE: Whether Reyes is entitled to the compulsory easement of right of way over Spouses Ramos's property? The SC ruled in the negative. The following requisites need to be established before a person becomes entitled to demand the compulsory easement of right of way: 1) an immovable is surrounded by other immovables belonging to other persons, and is without adequate outlet to a public highway; 2) Payment of proper indemnity by the owner of the surrounded immovable; 3) the isolation of the immovable is not due to its owner's acts; and 4) the proposed easement of right of way is established at the point least prejudicial to the servient estate, and insofar as consistent with this rule, where the distance of the dominant estate to a public highway may be the shortest. The SC agreed with the lower court‘s finding that Reyes failed to establish that there was no adequate exit to a public highway or that the easement was the least prejudicial to Ramos. The convenience of the dominant estate's owner is not the basis for granting an easement of right of way, especially if the owner's needs may be satisfied without imposing the easement. Thus, mere convenience for the dominant estate is not what is required by law as the basis of setting up a compulsory easement. Also, the cost of having to destroy the permanent structures on property of Ramos coupled with the fact that there is an available outlet that can be utilized for the right of way, negates Reyes‘ claim that the easement sought is the point least prejudicial to the servient estate.

Demetria De Guzman vs. Filinvest Development Corporation G.R. No. 191710 January 14, 2015 The De Guzmans filed a complaint for easement of right of way against Filinvest alleging that they are owners in fee simple of a land in Cainta which adjoins Phase IV-A of Filinvest‘s subdivision and Phase IV A has a potential direct access to Marcos Highway either by foot or by vehicle. Filinvest opposed the complaint and argued that the De Guzmans have an access to Sumulong Highway through another property and the distance thereof from the property of the De Guzmans is only 1500 meters compared to the 2500 meter distance if they will use the Filinvest property going to Marcos Highway. The RTC granted the right of way in favor of De Guzman across Filinvest‘s subdivision after payment of indemnity in the amount of P400, 000.00. The CA while affirming the establishment of the 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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easement, remanded the case for the determination of the exact area to be occupied by the easement and the corresponding amount of the indemnity. The RTC later ruled that the area of the easement shall be 264 square meters at P1, 620.00 per square meter. Filinvest appealed contending that under Article 649 and 650, the right of way should not pertain only to Road Lot 15 but all roads (Road Lots 3, 10, 6, 4, 2, 1) which the De Guzmans will traverse or use before they could reach Marcos Highway. Filinvest insists that the measurement of the area should be 23, 500 square meters and not 264 as mentioned in the RTC decision. The CA ruled in favor of Filinvest that the proper indemnity should consist of the value of the entire stretch of the right of way, which measures 2,350 meters in length and 10 meters in width or of a total area of 23,500 square meters at a price of P1, 620.00 a square meter, plus damages caused to the servient estate. ISSUES: 1. What is the extent of the right of way granted to petitioners under the April 30, 1993 RTC Decision as affirmed by the CA.

2. Whether or not the width of the passage should be modified. 3. Whether or not in easement easement of right of way, there is alienation of the land occupied. The Supreme Court ruled:

The right of way granted to petitioners covers the network of roads within respondent's subdivision and not merely Road Lot 15. If petitioners would indemnify Filinvest only for Road Lot 15, it

follows then that said particular road lot should be the only road lot for which they shall be allowed access. They cannot be allowed access to the other road lots leading to and from the highway as they are not willing to pay indemnity for it. In such a case, the purpose of the right of way, that is, for petitioners to have access to the highway, would thus be defeated. The Court also ruled that it is necessary to modify the width of the easement which would serve as basis in fixing the value of the land as part of the proper indemnity. Article 651 of the Civil Code provides: Art. 651. The width of the easement of right of way shall be that which is sufficient for the needs of the dominant estate, and may accordingly be changed from time to time. The right of way constituting the easement in this case consists of existing and developed network of roads. However, it is iniquitous to compute the indemnity based on the 10 meter width of the existing

roads because the De Guzmans were simply asking for adequate vehicular access. At most, a 3-meter wide right of way can meet the needs of the dominant estate. Thus applying Article 651, multiplying the road length of 2,350 meters by a road width of 3 meters, the total area to be indemnified is 7,050 square meters. At a value of P1, 620.00 per square meter, the total value of the land to form part of the indemnity amounts to P11, 421, 000.00. In addition, petitioners must bear as part of damages the costs for the removal of the fence in Road Lot 15 and pay half of the association dues that the residents of Filinvest are paying as part of their share in the maintenance of the roads.

In easement of right of way, there is no alienation of the land occupied. Payment of the value of the land for permanent use of the easement does not mean an alienation of the land occupied. In fact under the law and unlike in purchase of a property, should the right of way no longer be necessary because the owner of the dominant estate has joined it to another abutting on a public highway, and the servient estate demands that the easement be extinguished, the value of the property received by the servient estate by way of indemnity shall be returned in full to the dominant estate. This only reinforces the concept that the payment of indemnity is merely for the use of the right of way and not for its alienation.

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WILLS & SUCCESSION Reynaldo P. Bascara v. Javier and Pangilinan G.R. No. 188069, June 17, 2015 On August 13, 2004 Rosalina Pardo borrowed money from Pangilinan and executed a real estate mortgage over a parcel of land as security. Pardo failed to pay the loan and Pangilinan foreclosed the REM and the land was sold to her as highest bidder. After the period of redemption had expired, Pangilinan filed an ex parte petition for issuance of the writ of possession. The RTC issued the writ of possession. Petitioner Bascara filed an affidavit of third-party claim and to recall the writ of possession. He alleged that the REM in favor of Pangilinan was forged as the alleged mortgagor Pardo died in 2003 and could not have executed the mortgage in 2004. Bascara added that Pardo executed a deed of donation mortis causa in his favor over the land which is the subject matter of the writ of possession. The RTC ruled in favor of Pangilinan and against Biscara. ISSUE: Whether or not petitioner is the rightful owner of the property by virtue of the deed of donation mortis causa. The Supreme Court ruled that the deed of donation mortis causa executed in favor of petitioner, Bascara cannot be considered as the basis of his ownership to subject property. Bascara allegedly acquired the property from Pardo by reason of a donation mortis causa. He is, therefore, a transferee or successor-in-interest who merely stepped into the shoes of his aunt. He cannot assert that his right of possession is adverse to that of Pardo as he has no independent right of possession. Consequently, under legal contemplation, he cannot be considered as a "third party who is actually holding the property adversely to the judgment obligor." The trial court had the ministerial duty to issue, as it did issue, the possessory writ in favor of respondent Pangilinan. As it appeared, there was no reason for it to order the recall of the writ already issued. The execution of Pardo of donation mortis causa in favor of Bascara does not immediately transfer title to the property to the latter. Considering that the alleged donation is one of mortis causa, the same partake of the nature of testamentary provision. As such, said deed must be executed in accordance with the requisites on solemnities of wills and testaments under Articles 805 and 806 of the New Civil Code; otherwise, the donation is void and would produce no effect. Unless and until the alleged donation is probated, no right to the subject property has been transmitted to petitioner. It was not shown that such document had been probated. Hence the claim of petitioner cannot stand.

Andy Ang vs. Severino Pacunio G.R. No. 208928 July 8, 2015 The Pacunios filed a complaint against for declaration of nullity of sale, reconveyance and damages against Ang involving a parcel of land originally registered under Udiaan‘s name. The Pacunios alleged that they are grandchildren and successors in interest of Udiaan who died in 1972. However, an impostor falsely representing herself as Udiaan sold the subject land to petitioner, Andy Ang in 1993. Hence, the Pacunios filed the aforesaid complaint, essentially contending that Udiaan could not have validly sold the subject land to Ang considering that she was already dead for more than 20 years when the sale occurred. The RTC ruled that while respondents claimed to be Udiaan's successors-in-interest, there is dearth of evidence proving their successional rights to Udiaan's estate, specifically, over the subject land. As such, the RTC concluded that respondents are not the real parties in interest to institute an action against Ang. The CA ruled that as mere grandchildren of Udiaan, the Pacunios have no successional rights to Udiaan's estate. In this regard, the CA ratiocinated that respondents could only succeed from said estate by right of representation if their mother, who is one of Udiaan's children, predeceased Udiaan. However, such fact was not established. ISSUE: Whether or not the Pacunios are the real parties in interest. 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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The SC said no. The rule on real parties in interest has two (2) requirements, namely: (a) to institute an action, the plaintiff must be the real party in interest; and (b) the action must be prosecuted in the name of the real party in interest. Interest within the meaning of the Rules of Court means material interest or an interest in issue to be affected by the decree or judgment of the case, as distinguished from mere curiosity about the question involved. One having no material interest cannot invoke the jurisdiction of the court as the plaintiff in an action. When the plaintiff is not the real party in interest, the case is dismissible on the ground of lack of cause of action. The Pacunios claim to be the successors-in-interest of the subject land just because they are Udiaan's grandchildren. Under the law, however, the Pacunios will only be deemed to have a material interest over the subject land - and the rest of Udiaan' s estate for that matter - if the right of representation provided under Article 970, in relation to Article 982, of the Civil Code is available to them. In this situation, representatives will be called to the succession by the law and not by the person represented; and the representative does not succeed the person represented but the one whom the person represented would have succeeded. For such right to be available to respondents, they would have to show first that their mother: (a) predeceased Udiaan; (b) is incapacitated to inherit; or (c) was disinherited, if Udiaan died testate. However, as correctly pointed out by the CA, nothing in the records would show that the right of representation is available to respondents. Hence, the RTC and the CA correctly found that respondents are not real parties in interest to the instant case.

OBLIGATIONS AND CONTRACTS THE WELLEX GROUP, INC. VS. U-LAND AIRLINES, CO., LTD. G.R. NO. 167519; JANUARY 14, 2015 Wellex and U-Land entered into a Memorandum of Agreement by virtue of which as provided they both agreed to develop a long-term business relationship through the creation of joint interest in airline operations and property development projects in the Philippines. The MOA would be implemented through the acquisition of shares by U-Land from the Wellex, the shares of stock of Air Philippines International Corporation (APIC) and Philippine Estate Corporation (PEC) and by entering joint development agreement with PEC as well as option to acquire shares Express Saving Bank (ESB). Part of the agreement provides that within 40 days from date of said

agreement unless extended by mutual agreement, U-LAND and WELLEX shall execute a Share Holder Purchase Agreement (―SHPA‖) covering the acquisition by U-LAND of the APIC Shares and PEC Shares.

In the SHPA it provides that U-LAND shall, not later than May 22, 1998, remit the sum of US$3.0 million as initial funding for the development projects against delivery by WELLEX of 57,000,000 shares of PEC as security for said amount. That accordingly, Wellex and U-Land agreed that if they were unable to agree on the terms of the share purchase agreement and the joint development agreement within 40 days from signing, then the First Memorandum of Agreement would cease to be effective. And if in case no agreements were executed, the parties would be released from their respective undertakings, except that Wellex would be required to refund within three (3) days the US$3 million given as initial funding by U-Land for the development projects. If Wellex was unable to refund the US$3 million to U-Land, U-Land would have the right to recover on the 57,000,000 PEC shares that would be delivered to it. Thereafter, a second agreement was signed by the parties allegedly incorporated into the First Memorandum of Agreement as a disclosure to U-Land that Wellex was still in the process of acquiring and consolidating its title to shares of stock of APIC. The 40-day period as provided in the agreement

lapsed but Wellex and U-Land were not able to enter into any share purchase agreement although drafts were exchanged between the two. And despite the absence of a share purchase agreement, U-Land remitted to Wellex a total of US$7,499,945 which was acknowledged by Wellex. According to Wellex, the parties agreed to enter into a security arrangement. If the sale of the shares of stock failed to push through, the partial payments or remittances U-Land made were to be secured by shares of stock and parcels of land. That U-Land could recover the amount it paid to Wellex by selling these shares of stock of 60,770,000 PEC shares and 72,601,000 APIC shares. However, despite all these, the transaction 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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and/or the agreement did not push through which led U- Land to ask for the refund of the amount it remitted. Due to failure of Wellex to heed the demand, U-Land filed a complaint for rescission of the agreement against Wellex. The RTC held that rescission is proper. It found that as per representation by Wellex based on the agreement, it failed to comply as what they supposed to perform that is due to U- Land on the fact that APIC does not even own a shares in APC. That such amount to fraud and violated the provisions of the MOA. CA affirmed. ISSUE: Whether rescission or resolution under Article 1191 (as prayed for by Respondent U-Land), and not rescission under Article 1381 (claimed by Wellex), is the one proper in this case The Supreme Court ruled that rescission under 1191 (also known as resolution), and not under 1381, is proper in this case. For Article 1191 to be applicable, there must be reciprocal prestations as distinguished from mutual obligations between or among the parties. A prestation is the object of an obligation, and it is the conduct required by the parties to do or not to do, or to give. Parties may be mutually obligated to each other, but the prestations of these obligations are not necessarily reciprocal. The reciprocal prestations must necessarily emanate from the same cause that gave rise to the existence of the contract. Reciprocity arises from identity of cause, and necessarily the two obligations are created at the same time.‖ The failure of one of the parties to comply with its reciprocal prestation allows the wronged party to seek the remedy of Article 1191. The injured party is entitled to rescission or resolution under Article 1191, and even the payment of damages. It is a principal action precisely because it is a violation of the original reciprocal prestation. Article 1381 and Article 1383, on the other hand, pertain to rescission where creditors or even third persons not privy to the contract can file an action due to lesion or damage as a result of the contract. When a party seeks the relief of rescission as provided in Article 1381, there is no need for reciprocal prestations to exist between or among the parties. All that is required is that the contract should be among those enumerated in Article 1381 for the contract to be considered rescissible. Unlike Article 1191, rescission under Article 1381 must be a subsidiary action because of Article 1383. Contrary to Wellex‘s argument, this is not rescission under Article 1381 of the Civil Code. This case does not involve prejudicial transactions affecting guardians, absentees, or fraud of creditors. Article 1381(3) pertains in particular to a series of fraudulent actions on the part of the debtor who is in the process of transferring or alienating property that can be used to satisfy the obligation of the debtor to the creditor. There is no allegation of fraud for purposes of evading obligations to other creditors. The actions of the parties involving the terms of the First Memorandum of Agreement do not fall under any of the enumerated contracts that may be subject of rescission. Moreover, the desire of both parties to enter into a share purchase agreement that would allow both parties to expand their respective airline operations in the Philippines and other neighboring countries give raise to a reciprocal prestation hence, respondent U-Land correctly sought the principal relief of rescission or resolution under Article 1191.

NUNELON R. MARQUEZ vs. ELISAN CREDIT CORPORATION G.R. NO.194642, April 06, 2015 Marquez obtained a (first loan) from Elisan Credit Corporation (ECC) in December 1991 for P53, 000.00 payable in one-hundred eighty days. Marquez signed a promissory note wherein he vowed to pay the loan in weekly installments and 26% interest per annum. He also agreed to pay (10%) monthly penalty based on the total amount unpaid plus 25% attorney‘s fees on top of costs and judicial expenses. Marquez executed a chattel mortgage over a motor vehicle as security which provides that it shall stand as a security for the first loan and "all other obligations of every kind already incurred or which may hereafter be incurred." Both Marquez and ECC acknowledged the full payment of the first loan. Marquez obtained a second loan for P55, 000.00 from ECC and the promissory note contained exactly the same terms and conditions as the first promissory note. Marquez left an unpaid balance for the second loan and he requested ECC that he be allowed to make daily installments until full payment. 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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After 21 months from the maturity of the second loan, Marquez had already paid a total of 56,440.00 which is greater than the principal sum. ECC still initiated a judicial foreclosure of the chattel mortgage due to the alleged failure of Marquez to settle the balance of the second loan. The MTC ruled in favor of Marquez on the basis of Article 1235 which provides that when an obligee accepts the performance or payment of an obligation, knowing its incompleteness or irregularity and without expressing any protest or objection, the obligation is deemed fully complied with. The RTC, however, ruled that under Article 1253 "if the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered." It also sustained the contention of ECC that the chattel mortgage was revived when Marquez executed the promissory note covering the second loan. The CA affirmed the RTC's ruling but opined that the daily payments by Marquez were properly applied first for the payment of interests and not for the principal. CA added even if the official receipts issued by ECC did not mention that the payments were for the interests, the omission is irrelevant as it is deemed by law to be for the payment of interests first, if any, and then for the payment of the principal amount. ISSUE: Whether or not ECC acted lawfully when it credited the daily payments against the interest instead of the principal? The presumption under Article 1176 does not resolve the question of whether the amount received by the creditor is a payment for the principal or interest. Under this article the amount received by the creditor is the payment for the principal, but a doubt arises on whether or not the interest is waived because the creditor accepts the payment for the principal without reservation with respect to the interest. Article 1176 resolves this doubt by presuming that the creditor waives the payment of interest because he accepts payment for the principal without any reservation. On the other hand, the presumption under Article 1253 resolves doubts involving payment of interest-bearing debts. It is a given under this Article that the debt produces interest. The doubt pertains to the application of payment; the uncertainty is on whether the amount received by the creditor is payment for the principal or the interest. Article 1253 resolves this doubt by providing a hierarchy: payments shall first be applied to the interest; payment shall then be applied to the principal only after the interest has been fully-paid. Correlating the two provisions, the rule under Article 1253 that payments shall first be applied to the interest and not to the principal shall govern if two facts exist: (1) the debt produces interest (e.g., the payment of interest is expressly stipulated) and (2) the principal remains unpaid. The exception is a situation covered under Article 1176, i.e., when the creditor waives payment of the interest despite the presence of (1) and (2) above. In such case, the payments shall obviously be credited to the principal. Since the doubt in the present case pertains to the application of the daily payments, Article 1253 shall apply. Only when there is a waiver of interest shall Article 1176 become relevant. The SC ruled that ECC properly credited the daily payments to the interest and not to the principal because: (1) the debt produces interest, i.e., the promissory note securing the second loan provided for payment of interest; (2) a portion of the second loan remained unpaid upon maturity; and (3) the ECC did not waive the payment of interest. The fact that the official receipts did not indicate whether the payments were made for the principal or the interest does not prove that ECC waived the interest. The SC reiterates that the petitioner made the daily payments after the second loan had already matured and a portion of the principal remained unpaid. As stipulated, the principal is subject to 26% annual interest. Marquez was already in default of the principal when he started making the daily payments. The stipulations providing for the 10% monthly penalty and the additional 25% attorney's fees on the unpaid amount also became effective as a result of his failure to pay in full upon maturity. Interest for default (as distinguished from the stipulated monetary interest of 26% per annum) in the form of the 10% monthly penalty accrued and became due and demandable. Thus, when Marquez started making the 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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daily payments, two types of interest were at the same time accruing, the 26% stipulated monetary interest and the interest for default in the form of the 10% monthly penalty.

GEORGE C. FONG v. JOSE V. DUEÑAS G.R. No. 185592, June 15, 2015 Dueñas is engaged in the bakery, food manufacturing, and retailing business, which are all operated under his two companies, Danton and Bakcom Food Industries, Inc. He entered into a joint venture agreement with Fong to engage in the food business. They agreed to contribute 32.5M each and incorporate a holding company to be known as Alliance Holdings. Fong would contribute cash while Duenas would contribute all his Danton and Bakcom shares. Fong started remitting in tranches his share in the capital. After having remitted about P5M Fong wrote a letter to Duenas informing him that he would limit his contribution to 5M instead of 32.5M because Fong observed that Duenas failed to give him the financial valuation of the shares he would contribute to cover the 32.5M Duenas also failed to incorporate and register the holding company. These circumstances convinced Fong that Dueñas would no longer honor his obligations in their joint venture agreement. Thus, Fong wrote Dueñas informing him of his decision to cancel the joint venture agreement. He also asked for the refund of the P5 Million that he advanced. To meet Fong‘s demand, Dueñas proposed several schemes for payment of the P5 Million. However, Fong did not accept any of these proposed schemes. Fong filed a complaint against him for collection of a sum of money and damages. RTC ruled in favor of Fong and held that the action was in reality an action for rescission. CA reversed and ruled that Fong‘s June 13, 1997 letter evidenced his intention to convert his cash contributions from ―advances‖ to the proposed corporation‘s shares, to mere ―investments.‖ Thus, contrary to the trial court‘s ruling, Dueñas correctly invested Fong‘s P5 Million contribution to Bakcom and Danton. ISSUE: Whether or not rescission is the proper remedy in this case. SC ruled, yes. Fong‘s allegations primarily pertained to his cancellation of their verbal agreement because Dueñas failed to perform his obligations to provide verifiable documents on the valuation of the Danton‘s and Bakcom‘s shares, and to incorporate the proposed corporation. These allegations clearly show that what Fong sought was the joint venture agreement‘s rescission. As a contractual remedy, rescission is available when one of the parties substantially fails to do what he has obligated himself to perform. It aims to address the breach of faith and the violation of reciprocity between two parties in a contract. Under Article 1191 of the Civil Code, The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The mutual restitution of the parties‘ original contributions is only a necessary consequence of their agreement‘s rescission. Fong and Dueñas‘ execution of a joint venture agreement created between them reciprocal obligations that must be performed in order to fully consummate the contract and achieve the purpose for which it was entered into. SC ruled that Dueñas violated his agreement with Fong. Aside from unilaterally applying Fong‘s contributions to his two companies, Dueñas also failed to deliver the valuation documents of the Danton and Bakcom shares to prove that the combined values of their capital contributions actually amounted to P32.5 Million. Dueñas‘ breach justified Fong‘s rescission of the joint venture agreement under Article 1191. However, the Court noted that Fong also breached his obligation in the joint venture agreement.

In his June 13, 1997 letter, Fong expressly informed Dueñas that he would be limiting his cash contribution from P32.5 Million to P5 Million. Although these reasons appear to be valid, they do not erase the fact that Fong still reneged on his original promise to contribute P32.5 Million. Hence, Fong‘s diminution of his capital share to P5 Million also amounted to a substantial breach of the joint venture agreement, which breach occurred before Fong decided to rescind his agreement with Dueñas. As both parties failed to comply with their respective reciprocal obligations, we apply Article 1192 of the Civil Code, which provides that in case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages. Notably, the Court is not aware of the schedule of performance of the parties‘ obligations since the joint venture agreement was never reduced to writing. The facts, however, show that both parties began performing their obligations after executing the joint venture agreement. As the Court cannot precisely determine who between the parties first violated the agreement, we apply the second part of Article 1192. SC held that the joint venture agreement between Fong and Dueñas is deemed extinguished through rescission under Article 1192 in relation with Article 1191 of the Civil Code. After rescission, the parties must go back to their original status before they entered into the agreement. No damages shall be awarded to any party in accordance with the rule under Article 1192 of the Civil Code that in case of mutual breach and the first infractor of the contract cannot exactly be determined, each party shall bear his own damages.

BPI vs. FERNANDEZ, and DALMIRO SIAN, Third Party Respondent. G.R. No.173134 September 2, 2015 In 1991, Tarcila and her husband, Manuel and their children opened several AND/OR deposit accounts with BPI, Shaw Blvd. Branch. The deposits were subject to the following conditions: First, the pretermination of the deposits prior to maturity shall be subject to the discretion of BPI and the presentation and endorsement of the certificate of deposit. Sometime in September 1991, Tarcila went to BPI to pre-terminate these joint AND/OR accounts. She brought with her the certificates of time deposit and the passbook, and presented them to the bank but BPI refused. Shortly after Tarcila left the branch, Manuel arrived and likewise requested the pretermination of the joint AND/OR accounts. Manuel claimed that he had lost the same certificates of deposit that Tarcila had earlier brought with her. BPI, allowed the pre-termination request and requested him to accomplish BPI's pro-forma affidavit of loss. Two days after, Manuel preterminated the remaining certificates of deposit and in place of the actual certificates of deposit, Manuel submitted BPI's pro-forma affidavit of loss that he previously accomplished and an Indemnity Agreement that he and Sian executed on the same day. The Indemnity Agreement discharged BPI from any liability in connection with the pre-termination. None of the codepositors were notified. The proceeds released to Manuel were funneled on the same day to his companion Sian. Sian issued blank withdrawal slips which Manuel used to withdraw the funds from Sian‘s account. Tarcila sued BPI and alleged that the pretermination of the certificates were not valid with respect to her share. She argued that BPI was in bad faith for allowing the pre-termination of the time deposits based on Manuel's affidavit of loss when the bank had actual knowledge that the certificates of deposit were in her possession. During the pre-trial, the parties admitted, among others, the conjugal nature of the funds deposited with BPI. The RTC of Makati ruled in favor of Tarcila and ordered BPI to pay Tarcila her share in the preterminated deposits. RTC cited that the AND/OR nature of the accounts indicate an active solidarity that thus entitled any of the account holders to demand from BPI payment of their proceeds. Since Tarcila made the first demand upon BPI, payments should have been made to her under Article 1214 of the Civil Code, which provides:

"Art. 1214. The debtor may pay any one of the solidary creditors; but if any demand, judicial or extrajudicial, has been made by one of them, payment should be made to him." CA also ruled that BPI was in bad faith in allowing Manuel to preterminate the deposits and facilitating the funneling of the funds to Sian‘s account. ISSUE: Whether or not BPI breached its obligation under the certificates of deposit.

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Yes, BPI breached its obligation under the certificates of deposit. BPI may only terminate the certificates of deposit after it has diligently completed two steps. First, it must ensure the identity of the account holder. Second, BPI must demand the surrender of the certificates of deposit, This is the essence of the contract entered into by the parties which serves as an accountability measure to other co-depositors. By requiring the presentation of the certificates prior to termination, the other depositors may rely on the fact that their investments in the interest-yielding accounts may not be indiscriminately withdrawn by any of their co-depositors. Without the presentation of the certificates of deposit, BPI may not validly terminate the certificates of deposit. BPI allowed the termination of the accounts without demanding the surrender of the certificates of deposits, in the ordinary course of business. Worse, BPI even had actual knowledge that the certificates of deposit were in Tarcila's possession and yet it chose to release the proceeds to Manuel on the basis of a falsified affidavit of loss, in gross violation of the terms of the deposit agreements.

NATIONAL POWER CORPORATION vs. IBRAHIM, MARUHOM, and MANGONDATO G.R. No. 175863 / February 18, 2015 In 1978, NAPOCOR took possession of a land in Marawi City to build a hydroelectric power plant for its Agus 1 project. The land was a portion of a private estate registered in the name of Mangondato but, was occupied by NAPOCOR under the mistaken belief that it is part of a public land reserved for its use by the government. In 1979, Mangondato demanded compensation for the land. After more than a decade, NAPOCOR acknowledged Mangondato‘s right to receive compensation. In the early 1990s, NAPOCOR and Mangondato partook in a series of communications but, failed to yield a consensus as to the fair market value of the land. Mangondato filed a complaint for reconveyance against NAPOCOR before the RTC of Marawi City in July 1992. On the other hand, NAPOCOR filed an expropriation complaint before the RTC on 27 July 1992. Both cases were consolidated before RTC Branch 8 of Marawi City. On 21 August 1992, Branch 8 of the Marawi City RTC upheld granted the expropriation in favor of NAPOCOR and denied Mangondato‘s claim for reconveyance. The RTC ordered the payment of just compensation to Mangondato of 21.9M as well as rentals from 1978 when Napocor occupied the land. While the appeal of Napocor was pending before the CA, respondents Ibrahim and Maruhom filed a complaint against Mangondato and Napocor. Respondents claimed that they are the real owners of the land and Mangondato is a mere trustee. They should be the ones entitled to any rental fees or expropriation indemnity that may be found due for the land. Respondents prayed for the issuance of a TRO to prevent Napocor from paying Mangondato. Meantime, the appeal of Napocor was decided against it the SC also upheld the denial of Napocor‘s appeal. The decision in the consolidated cases became final and executory on 13 May 1996. Branch 8 of the Marawi City RTC ordered the issuance of a writ of execution in favor of Mangondato and a notice of garnishment against several of petitioner‘s bank accounts. Branch 10 of the RTC of Marawi which heard the case filed by the respondents declared that the respondents are the true owners of the land and are entitled to both the rentals and the expropriation indemnity. Napocor appealed and argued that it cannot be held solidarily liable with Mangondato to pay Ibrahims and Maruhoms the rentals and indemnity. ISSUE: Whether it is correct to hold petitioner liable in favor of the Ibrahims and Maruhoms for the rental fees and expropriation indemnity adjudged due for the land. SC ruled that NAPOCOR cannot be held liable with Mangondato because no bad faith may be attributed to it when it paid the rentals and expropriation indemnity to Mangondato pursuant to a final and executory judgment of the RTC. The essence of bad faith consists in the deliberate commission of a wrong. 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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Branch 10 of the Marawi City RTC and the CA erred in their finding of bad faith because they have overlooked the utter significance of one important fact: that petitioner‘s payment to Mangondato of the rental fees and expropriation indemnity adjudged due for the subject land in Civil Case No. 605-92 and Civil Case No. 610-92, was required by the final and executory decision in the said two cases and was compelled thru a writ of garnishment issued by the court that rendered such decision. The payment to Mangondato was not a product of a deliberate choice on the part of the petitioner but was made only in compliance to the lawful orders of a court with jurisdiction. In fact, Napocor‘s previous payment to Mangondato of the rental fees and expropriation indemnity due the subject land pursuant to the final judgment in Civil Case No. 605-92 and Civil Case No. 610-92 may be considered to have extinguished the former‘s obligation regardless of who between Mangondato, on one hand, and the Ibrahims and Maruhoms, on the other, turns out to be the real owner of the subject land. Either way, petitioner cannot be made liable to the Ibrahims and Maruhoms: Should the Ibrahims and Maruhoms turn out to be the real owners of the subject land, petitioner‘s previous payment to Mangondato pursuant to Civil Case No. 605-92 and Civil Case No. 61092—given the absence of bad faith on petitioner‘s part as previously discussed—may nonetheless be considered as akin to a payment made in "good faith "to a person in "possession of credit" per Article 1242 of the Civil Code that, just the same, extinguishes its obligation to pay for the rental fees and expropriation indemnity due for the subject land. Article 1242 of the Civil Code reads: "Payment made in good faith to any person in possession of the credit shall release the debtor." Article 1242 of the Civil Code is an exception to the rule that a valid payment of an obligation can only be made to the person to whom such obligation is rightfully owed. It contemplates a situation where a debtor pays a "possessor of credit" i.e., someone who is not the real creditor but appears, under the circumstances, to be the real creditor. In such scenario, the law considers the payment to the "possessor of credit" as valid even as against the real creditor taking into account the good faith of the debtor. Borrowing the principles behind Article 1242 of the Civil Code, we find that Mangondato—being the judgment creditor in Civil Case No. 605-92 and Civil Case No. 610-92 as well as the registered owner of the subject land at the time—may be considered as a "possessor of credit" with respect to the rental fees and expropriation indemnity adjudged due for the subject land in the two cases, if the Ibrahims and Maruhoms turn out to be the real owners of the subject land.

COMGLASCO CORPORATION/AGUILA GLASS, v. SANTOS CAR CHECK CENTER G.R. No. 202989, March 25, 2015 On August 16, 2000, respondent Santos Car Check Center Corporation (Santos), owner of a showroom located at 75 Delgado Street, in Iloilo City, leased out the said space to petitioner Comglasco Corporation (Comglasco), an entity engaged in the sale, replacement and repair of automobile windshields, for a period of five years at a monthly rental of P60, 000.00 for the first year, P66, 000.00 on the second year, and P72, 600.00 on the third through fifth years. After more than a year into the lease, Comglasco advised Santos through a letter2 that it was pre-terminating their lease contract effective December 1, 2001. Santos refused to accede to the pretermination, reminding Comglasco that their contract was for five years. On January 15, 2002, Comglasco vacated the leased premises and stopped paying any further rentals. Santos sent several demand letters, which Comglasco completely ignored. Santos filed a case for breach of contract and damages against Comglasco on September 15, 2003. RTC ruled in favor of Santos and ordered Comglasco to pay its rentals beginning January 2002 to 2003 with interest. The CA affirmed the judgment of the RTC but reduced the award of attorney‘s fees to P100, 000.00 and deleted the award of litigation expenses and exemplary damages. ISSUE/S: Whether or not the unforeseen event and causes mentioned by petitioner are the legal or physical impossibilities contemplated in Article 1266 and whether or not Article 1267 releases the petitioner from its obligation under the lease. 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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The obligation to pay rentals or deliver the thing in a contract of lease falls within the prestation ―to give‖; hence, it is not covered within the scope of Article 1266. At any rate, the unforeseen event and causes mentioned by Comglasco are not the legal or physical impossibilities contemplated in said article. Comglasco argued that its poor financial condition should release it from the binding effect of the lease contract. Relying on Article 1267 of the Civil Code to justify its decision to pre-terminate its lease with Santos, Comglasco invokes the 1997 Asian currency crisis as causing it much difficulty in meeting its obligations. But in PNCC, the Court held that the payment of lease rentals does not involve a prestation ―to do‖ envisaged in Articles 1266 and 1267 which has been rendered legally or physically impossible without the fault of the obligor-lessor. Article 1267 speaks of a prestation involving service which has been rendered so difficult by unforeseen subsequent events as to be manifestly beyond the contemplation of the parties. To be sure, the Asian currency crisis befell the region from July 1997 and for some time thereafter, but Comglasco cannot be permitted to blame its difficulties on the said regional economic phenomenon because it entered into the subject lease only on August 16, 2000, more than three years after it began, and by then Comglasco had known what business risks it assumed when it opened a new shop in Iloilo City. This article, which enunciates the doctrine of unforeseen events, is not, however, an absolute application of the principle of rebus sic stantibus, which would endanger the security of contractual relations. The parties to the contract must be presumed to have assumed the risks of unfavorable developments. It is therefore only in absolutely exceptional changes of circumstances that equity demands assistance for the debtor. SC ruled mere pecuniary inability to fulfill an engagement does not discharge a contractual obligation, nor does it constitute a defense to an action for specific performance.

TAGAYTAY REALTY CO., INC. v. ARTURO G. GACUTAN G.R. No. 160033 July 1, 2015 On September 6, 1976, the respondent Gacutan entered into a contract to sell with the petitioner TRC for the purchase on installment of residential lot in the Foggy Heights Subdivision then being developed by the petitioner. TRC executed an express undertaking in favor of the respondent to

complete the development amenities to be introduced in the subdivision within a period of two years from July 15, 1976, on the understanding that failure on their part to complete such development within the stipulated period shall give the Vendee the option to suspend payment of the monthly amortization on the lots he purchased until completion of such development without incurring penalty interest.

After three years from the execution of the contract, Gacutan notified TRC that he was

suspending his amortizations because the amenities had not been constructed in accordance with the undertaking. Despite receipt of the respondent‘s other communications requesting updates on the progress of the construction of the amenities so he could resume his amortization, the petitioner did not reply. On June 10, 1985, the petitioner sent to him a statement of account demanding the balance of the price, plus interest and penalty. He refused to pay the interest and penalty.

Gacutan sued TRC for specific performance before the HLURB. TRC sought to be excused from performing its obligation under the contract invoking under Article 1267 of the Civil Code as its basis. TRC argued that it had purposely suspended the construction of the amenities because its lot buyers had not constructed their houses in subdivision. ISSUE: Whether or not the petitioner was relieved from its statutory and contractual obligations to complete the amenities.

2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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The Supreme Court that TRC‘s invocation of Art. 1267 of the Civil Code, which provides that ―when the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom in whole or in part,‖ was factually unfounded. For Art. 1267 to apply, the following conditions should concur, namely: (a) the event or change in circumstances could not have been foreseen at the time of the execution of the contract; (b) it makes the performance of the contract extremely difficult but not impossible; (c) it must not be due to the act of any of the parties; and (d) the contract is for a future prestation. The requisites did not concur because the difficulty of performance under Art. 1267 of the Civil Code should be such one party would be placed at a disadvantage by the unforeseen event. Mere inconvenience, or unexpected impediments, or increased expenses did not suffice to relieve the debtor from a bad bargain.

RICARDO C. HONRADO VS. GMA NETWORK FILMS, INC. G.R. NO. 204702; JANUARY 14, 2015 GMA Films entered into a ―TV Rights Agreement‖ with petitioner Honrado under which the Honrado, as licensor, granted GMA for a fee of P60.5 million the exclusive right to telecast 36 films for three years. Paragraph 3 of the Agreement provides that all betacam copies of the films should pass through broadcast quality test conducted by GMA-7, while Paragraph 4 provides that in the event of the disapproval of the MTRCB, GMA will either replace the rejected film with another title mutually acceptable to both parties or deduct or refund a proportionate reduction from the total price. Subsequently, GMA sued Honrado to collect P1.6 million representing the fee it paid for ―Evangeline Katorse‖ and a portion of the fee paid for ―Bubot.‖ Respondent alleged that it rejected the ―Evangeline Katorse‖ because its running time was too short for telecast and Honrado only remitted P900k to the owner of ―Bubot‖, keeping for himself the balance of P350k. According to GMA, an implied trust arose because Honrado fraudulently kept the money for himself. Honrado, on the other hand, alleged that he replaced the first film with another film which GMA accepted, with a certification by the respondent attesting that the film ―is of good broadcast quality‖. Honrado also alleged that GMA is a stranger to the contracts he entered with the owner of the films in question. The RTC dismissed the complaint and gave credence to Honrado‘s defense. The CA reversed. ISSUES: 1) Whether the petitioner Honrado is liable for breach of the Agreement with GMA 2) Whether GMA can complain about the alleged breach by Honrado of his contracts with the owner of films Honrado is not liable for breach of agreement. Paragraph 4 of the Agreement between Honrado and GMA requires the intervention of MTRCB, the state censor, before GMA Films can reject a film and require its replacement. GMA network went beyond its assigned role under the Agreement of screening films to test their broadcast quality and assumed the function of MTRCB to evaluate the films for the propriety of their content. This runs counter to the clear terms of Paragraphs 3 and 4 of the Agreement. It was GMA network (not the petitioner) that violated the term of the contract. Anent the second issue, the SC ruled that GMA network is not a party but a stranger to the contracts the petitioner entered with the owner of the films. Article 1311 of the Civil Code states that as a general rule, contracts take effect only between the parties, their assigns, and heirs except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The TV Rights Agreement, is a licensing contract, the essence of which is the transfer by the licensor (Honrado) to the licensee (GMA Films), for a fee, of the exclusive right to telecast the films listed in the Agreement. Honrado forged separate contractual arrangements with the owners of the films listed in the Agreement, spelling out the terms of payment to the latter. Whether or not Honrado complied with these terms, however, is a matter to which GMA Films holds absolutely no interest. Being a stranger to such arrangements, GMA Films is no more entitled to complain of any breach by Honrado of his contracts with the film owners than the film owners are for any breach by GMA Films of its Agreement with Honrado.

2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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DOÑA ADELA EXPORT INTERNATIONAL, INC. v. TRADE AND INVESTMENT DEVELOPMENT CORPORATION (TIDCORP), AND THE BANK OF THE PHILIPPINE ISLANDS (BPI). G.R. No. 201931, February 11, 2015 On August 23, 2006, Doña Adela Export International, Inc., (DAEI) filed a Petition for Voluntary Insolvency. RTC issued an order declaring DAEI insolvent and staying all civil proceedings against it. Sometime in August 2011 TIDCORP and BPI as creditors of DAEI filed a Joint Motion to Approve Agreement which contained among others a waiver of confidentiality clause wherein DAEI and the members of its Board of Directors shall waive all rights to confidentiality provided under the Law on Secrecy of Bank Deposits and The General Banking Law of 2000. The RTC approved the compromise agreement between BPI and TIDCORP. DAEI filed a motion for partial reconsideration and claimed that TIDCORP and BPI‘s agreement imposes on it several obligations such as payment of expenses and taxes and waiver of confidentiality of its bank deposits but it is not a party and signatory to the said agreement. The RTC denied the motion and ruled that DAEI‘s silence to the joint motion when it was set for hearing filed by BPI and TIDCORP is tantamount to its acquiescence thereto. DAEI asserts that express and written waiver from the depositor concerned is required by law before any third person or entity is allowed to examine bank deposits or bank records and that its silence is not tantamount to an admission that binds it to the compromise agreement of its creditors. BPI counters that DAEI is estopped from questioning the BPI-TIDCORP compromise agreement because it participated in all the proceedings involving the subject compromise agreement and did not object when the compromise agreement was considered by the RTC.T ISSUE: Whether the waiver of confidentiality provision in the Agreement between TIDCORP and BPI is valid and binding upon DAEI even if it was not a party thereto. The Supreme Court ruled no. The Joint Motion to Approve Agreement was executed by BPI and TIDCORP only. There was no written consent given by DAEI or by its representative that it is waiving the confidentiality of its bank deposits. The provision on the waiver of the confidentiality of DAEI‘s bank deposits was merely inserted in the agreement and DAEI is not bound thereby since it was not a signatory to the compromise agreement. Neither can DAEI be deemed to have given its permission by failure to interpose its objection during the proceedings. It is an elementary rule that the existence of a waiver must be positively demonstrated since a waiver by implication is not normally countenanced. The norm is that a waiver must not only be voluntary, but must have been made knowingly, intelligently, and with sufficient awareness of the relevant circumstances and likely consequences. It is basic in law that a compromise agreement, as a contract, is binding only upon the parties to the compromise, and not upon non-parties. This is the doctrine of relativity of contracts. The rule is based on Article 1311 (1) of the Civil Code which provides that ―contracts take effect only between the parties, their assigns and heirs x x x. ‖ The sound reason for the exclusion of non-parties to an agreement is the absence of a vinculum or juridical tie which is the efficient cause for the establishment of an obligation. Consistent with this principle, a judgment based entirely on a compromise agreement is binding only on the parties to the compromise the court approved, and not upon the parties who did not take part in the compromise agreement and in the proceedings leading to its submission and approval by the court.

STRONGHOLD INSURANCE COMPANY INC. VS. SPOUSES RUNE AND LEA STROEM G.R. NO. 204869; JANUARY 21, 2015 Spouses Stroem entered into an Owners-Contractor Agreement with Asis-Leif & Company, Inc. (ALCI) represented by Cynthia Asis-Leif for the construction of a two-storey house on their lot. ALCI secured a performance bond in the amount of P4.5M from Stronghold Insurance Company (SIC) whereby the latter and ALCI bound themselves solidarily to pay the Stroem spouses the agreed amount in the event the construction is not completed. 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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ALCI failed to finish the project on time despite repeated demands and the Spouses Stroem rescinded the agreement and hired an independent appraiser to evaluate the progress of the construction project. They later filed a complaint for breach of contract with damages against ALCI and SIC. Only SIC was served with summons. The RTC ruled in favor of the Spouses Stroem and ordered SIC to pay damages. SIC argued that the RTC should have dismissed the case in view of the arbitration clause in the agreement and that the stipulations in the Owners-Contractor Agreement are part and parcel of the conditions in the bond issued by it. On the other hand, Spouses Stroem argued that the OwnersContractor Agreement is ―separate and distinct from the Bond. The parties to the Agreement are ALCI/Ms. Asis-Leif and Spouses Stroem, while the parties to the Bond are Spouses Stroem and Stronghold. The considerations for the two contracts are likewise distinct. Thus, the arbitration clause in the Agreement is binding only on the parties thereto, specifically ALCI/Ms. Asis-Leif and Spouses Stroem. ISSUE: Whether SIC as surety can invoke the CIAC has jurisdiction over the case based on the principal contract. The arbitration. arbitration. consent to contract.

SC ruled that SIC cannot invoke the stipulation in the principal contract providing for What is at issue in this case is the parties‘ agreement, or lack thereof, to submit the case to Spouses Stroem argue that SIC is not a party to the arbitration agreement. SIC did not arbitration. Only Spouses Stroem and Asis-Leif may invoke the arbitration clause in the

This court has previously held that a performance bond, which is meant "to guarantee the supply of labor, materials, tools, equipment, and necessary supervision to complete the project is significantly and substantially connected to the construction contract and, therefore, falls under the jurisdiction of the CIAC. The Owners-Contractor Agreement and the performance bond made reference to each other; the performance bond was issued pursuant to the construction agreement. In enforcing a surety contract, the ‗complementary-contracts-construed-together‘ doctrine finds application. According to this principle, an accessory contract must be read in its entirety and together with the principal agreement.‖ Article 1374 of the Civil Code provides: ―ART. 1374. The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly.‖ The ruling in Prudential Guarantee and Assurance Inc. v. Anscor Land, Inc., (G.R. No. 177240, September 8, 2010) to the effect that the Prudential willingly acceded to the terms of the principal contract providing for arbitration despite the absence of a similar stipulation in the performance bond because the construction contract breathes life into the performance bond will not apply to the present

case. In Prudential, the construction contract (principal contract) expressly incorporated the performance bond into the principal contract. In the present case, the Owners-Contractor Agreement between ALCI and Spouses Stroem merely stated that a performance bond shall be issued in favor of the latter. The performance bond merely referenced (not incorporated) the contract entered into by Spouses Stroem and ALCI, which pertained to ALCI‘s duty to construct a two-storey residence building. To be clear, it is in the Owners-Contractor Agreement that the arbitration clause is found. The construction agreement was signed only by Spouses Stroem and the contractor, ALCI, as represented by Ms. Ma. Cynthia Asis-Leif. It is basic that ―contracts take effect only between the parties, their assigns and heirs‖ Not being a party to the construction agreement, SIC cannot invoke the arbitration clause and cannot thus invoke the jurisdiction of the CIAC.

SAN MIGUEL PROPERTIES, INC. VS BF HOMES, INC. G.R. NO. 169343 AUGUST 5, 2015 BF homes (BF) represented by Florencio Orendain, and San Miguel Properties Inc. (SMPI) entered into three successive Deeds of Absolute Sale whereby the latter sold to the former a total of 130 Italia lots. SMPI completed payments of the 130 lots but only 110 of out of the 130 transfer of certificate of titles were delivered to SMPI. After demand which was unheeded, SMPI filed a complaint for specific 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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performance with damages with the HLURB. In its answer, BF claims that Orendain was not authorized to enter into the Deed of Absolute Sale and that the Deeds of Absolute Sale were not notarized and were undated. ISSUE: Whether or not the Deeds of Absolute Sale are unenforceable for failure to comply with the Statute of Frauds The Deeds are enforceable. The contracts of sale of the 130 Italia II lots between BF Homes and SMPI were actually reduced into writing into the three Deeds of Absolute Sale which were signed by the representatives of the two corporations. The only defect was that the Deeds were not notarized and, therefore, were not public documents as required by Article 1358(1) of the Civil Code. The requirement of a public document in Article 1358 is not for the validity of the instrument but for its efficacy. Although a conveyance of land is not made in a public document, it does not affect the validity of such conveyance. The Statute of Frauds embodied in Article 1403, paragraph (2), of the Civil Code requires certain contracts enumerated therein to be evidenced by some note or memorandum in order to be enforceable. The term "Statute of Frauds" is descriptive of statutes which require certain classes of contracts to be in writing. The Statute does not deprive the parties of the right to contract with respect to the matters therein involved, but merely regulates the formalities of the contract necessary to render it enforceable. Evidence of the agreement cannot be received without the writing or a secondary evidence of its contents. The Statute, however, simply provides the method by which the contracts enumerated therein may be proved but does not declare them invalid because they are not reduced to writing. The Statute of Frauds is applicable only to contracts which are executory and not to those which have been consummated either totally or partially. If a contract has been totally or partially performed, the exclusion of parole evidence would promote fraud or bad faith, for it would enable the defendant to keep the benefits already derived by him from the transaction in litigation, and at the same time, evade the obligations, responsibilities or liabilities assumed or contracted by him thereby. This rule, however, is predicated on the fact of ratification of the contract within the meaning of Article 1405 of the Civil Code either (1) by failure to object to the presentation of oral evidence to prove the same, or (2) by the acceptance of benefits under them. The Deeds are already in writing and signed by the parties, and only lack notarization, a formality which SMPI could compel BF Homes to comply with. As private documents, the Deeds are still binding between the parties and the conveyance of the 130 Italia II lots by BF Homes to SMPI by virtue of said Deeds is valid. And second, the Deeds were already ratified as BF Homes had accepted the benefits from said contracts when it received full payment from SMPI of the purchase price for the 130 Italia II lots. The Deeds were also substantially performed considering that BF Homes had previously delivered to SMPI the TCTs for 110 out of the 130 lots, only refusing to deliver the TCTs for the remaining 20 lots.

SECURITIES AND EXCHANGE COMMISSION v. HON. REYNALDO M. LAIGO, AYAD, DELOS REYES et. al. G.R. No. 188639, September 02, 2015 Pursuant to the mandate of Securities Regulation Code, the SEC issued the New Rules on the Registration and Sale of Pre-Need Plans to govern the pre-need industry prior to the enactment of the Pre-Need Code. It required from the pre-need providers the creation of trust funds as a requirement for registration. Legacy, being a pre-need provider, complied with the trust fund requirement and entered into a trust agreement with the Land Bank of the Philippines. In mid-2000, the industry collapsed for a range of reasons. Legacy, like the others, was unable to pay its obligations to the plan holders. This resulted in Legacy being the subject of a petition for involuntary insolvency by private respondents in their capacity as plan holders. Through its manifestation filed in the RTC, Legacy did not object to the proceedings and was declared insolvent by the RTC. The trial court also ordered Legacy to submit an inventory of its assets and liabilities.

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The RTC ordered the SEC, to submit the documents pertaining to Legacy's assets and liabilities. The SEC opposed the inclusion of the trust fund in the inventory of corporate assets on the ground that to do so would contravene the New Rules which treated trust funds as principally established for the exclusive purpose of guaranteeing the delivery of benefits due to the plan holders. Despite the opposition of the SEC, Judge Laigo ordered the insolvency Assignee to take possession of the trust fund. Judge Laigo viewed the trust fund as Legacy's corporate assets and, for said reason, included it in the insolvent's estate. The Assignee argues that Legacy has retained a beneficial interest in the trust fund despite the execution of the trust agreement and that the properties can be the subject of insolvency proceedings. To the Assignee, the ―control‖ mechanisms in the Trust Agreement itself are indicative of the interest of Legacy in the enforcement of the trust fund because the agreement gives it the power to dictate on LBP (trustee) the fulfilment of the trust, such as the delivery of monies to it to facilitate the payment to the plan holders. ISSUES: 1) Whether Legacy is a beneficiary in the Trust Fund Agreement; 2) Whether Legacy is a debtor of the plan holders with respect to the trust fund The SC ruled that Legacy is not a beneficiary. A person is considered as a beneficiary of a trust if there is a manifest intention to give such a person the beneficial interest over the trust properties. Here, the terms of the trust agreement plainly confer the status of beneficiary to the plan holders, not to Legacy. In the recital clauses of the said agreement, Legacy bound itself to provide for the sound, prudent and efficient management and administration of such portion of the collection "for the benefit and account of the plan holders," through LBP as the trustee. This categorical declaration doubtless indicates that the intention of the trustor (Legacy) is to make the plan holders the beneficiaries of the trust properties, and not Legacy. It is clear that because the beneficial ownership is vested in the plan holders and the legal ownership in the trustee, LBP, Legacy, as trustor, is left without any iota of interest in the trust fund. This is consistent with the nature of a trust arrangement, whereby there is a separation of interests in the subject matter of the trust, the beneficiary having an equitable interest, and the trustee having an interest which is normally legal interest. No. Legacy is not a debtor of the plan holders relative to the trust fund. In trust, it is the trustee, and not the trustor, who owes fiduciary duty to the beneficiary. Thus, LBP is tasked with the fiduciary duty to act for the benefit of the plan holders as to matters within the scope of the relation. Like a debtor, LBP owes the plan holders the amounts due from the trust fund. As to the plan holders, as creditors, they can rightfully use equitable remedies against the trustee for the protection of their interest in the trust fund and, in particular, their right to demand the payment of what is due them from the fund. Verily, Legacy is out of the picture and exists only as a representative of the trustee, LBP, with the limited role of facilitating the delivery of the benefits of the trust fund to the beneficiaries -the plan holders. The trust fund should not revert to Legacy, which has no beneficial interest over it. Not being an asset of Legacy, the trust fund is immune from its reach and cannot be included by the RTC in the insolvency estate.

WILSON GO and PETER GO vs. BIHIS G.R. No. 211972 GUERRERO v. BIHIS G.R. No. 212045 22 July 2015. In 1960, Felisa Buenaventura who owns a parcel of land Quezon City supposedly sold to her daughter Bella and the latter‘s husband Delfin and Felimon Buenaventura the subject property to assist them in obtaining a loan from the GSIS. A new TCT was issued in the name of Bella, Delfin, and Felimon.

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Sometime in 1970, Felisa wrote a letter to Bella and Delfin reiterating therein the reason why she allowed the transfer of the title in their names. In the same letter, Felisa stated that she wanted that all her properties including the subject land to be divided equally among her heirs. Upon Felisa's death in 1994, the Bihis Family, Felisa's other heirs who have long been occupying the subject property, caused the annotation of their adverse claim over the same on TCT. Subsequently, however, or on January 22, 1997, the said annotation was cancelled, and the next day, the Heirs of Felimon, Sr. executed an Extrajudicial Settlement of his estate and caused its annotation on said title. TCT No. RT-74910 was then cancelled and TCT No. N-170416 was issued in the names of Bella, et al. Finally, by virtue of a Deed of Sale dated January 23, 1997, the subject property was sold to Wilson and Peter, in whose names TCT No. 170475 currently exists. Months later, or on October 17, 1997, the complaint for reconveyance and damages was instituted by the Bihis family. ISSUES: (1)Whether or not a trust was established and what kind, if any. (2) Whether or not the action for reconveyance over the property had already prescribed. The SC ruled that an implied trust was initially established between the parties but was subsequently converted into an express trust by virtue of the letter of Felisa in 1970. Trust relations between parties may either be express or implied. An express trust is created by the intention of the trustor or of the parties, while an implied trust comes into being by operation of law. The words of Felisa in the above-quoted letter unequivocally and absolutely declared her intention of transferring the title over the subject property to Bella, Delfin, Sr., and Felimon, Sr. in order to merely accommodate them in securing a loan from the GSIS. She likewise stated clearly that she was retaining her ownership over the subject property and articulated her wish to have her heirs share equally therein. Hence, while in the beginning, an implied trust was merely created between Felisa, as trustor, and Bella, Delfin, Sr., and Felimon, Sr., as both trustees and beneficiaries, the execution of the September 21, 1970 letter settled, once and for all, the nature of the trust established between them as an express one, their true intention irrefutably extant thereon. The Court notes that even during the proceedings before the RTC, Bella never denied the purpose for which the sale to them of the subject property was effected. Instead, they relied heavily and anchored their defense on the existence of their certificate of title covering the subject property, which, to reiterate, was insufficient to prove their ownership over the same independent of the express trust. Express trusts are created by direct and positive acts of the parties, by some writing or deed, or will, or by words either expressly or impliedly evincing an intention to create a trust. Under Article 1444 of the Civil Code, "[n]o particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended." It is possible to create a trust without using the word "trust" or "trustee." The action for reconveyance had not yet prescribed. Express trusts prescribe in ten (10) years from the time the trust is repudiated. In this case, there was a repudiation of the express trust when Bella, as the remaining trustee, sold the subject property to Wilson and Peter on January 23, 1997. As the complaint for reconveyance and damages was filed by respondents on October 17, 1997, or only a few months after the sale of the subject property to Wilson and Peter, it cannot be said that the same has prescribed.

SALES SPOUSES MICHELLE and NOEL S. NOYNAY vs. CITIHOMES BUILDER AND DEVELOPMENT, INC. G.R. No. 204160, 22 September 2014 In 2004, Citihomes and Spouses Noynay executed a contract to sell covering the sale of a house and lot located in San Jose Del Monte, Bulacan. The price of the property was fixed at P915, 895.00 subject to a down payment of P183k and the balance to be paid in 120 equal monthly installments. Citihomes later executed a Deed of Assignment in favor of United Coconut Planters Bank. Under the said

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agreement, UCPB purchased from Citihomes various accounts, including the account of Spouses Noynay, for a consideration of 100,000,000.00. After the contract of the Noynay has been in force for 3 years, or in February of 2007, Spouses Noynay allegedly started to default in their payments. Months later, Citihomes decided to declare Spouses Noynay delinquent and to cancel the contract. After its final demand letter left unheeded, Citihomes filed a complaint for unlawful detainer against Spouses Noynay in July 2009. The MTCC dismissed the complaint saying that since Citihomes has already assigned its rights to UCPB, it was divested of its interests and right over the property and thus, would have no cause of action to eject the Noynays. The RTC, however, reversed the ruling of the MTCC. On appeal, the CA affirmed the conclusion of the RTC that Citihomes still had the right and interest over the property in its capacity as the registered owner. ISSUE: Whether or not Citihomes has a cause of action against the Spouses Noynay in view of the Deed of Assignment it had executed in favor of UCPB and assuming that it retained its rights over the property, whether it had complied with the proper cancellation of the contract under the Maceda Law SC ruled that in view of the assignment of rights made by Citihomes in favor of UCPB, the latter was subrogated to the rights as well as to the obligations of Citihomes. The assignor Citihomes becomes a complete stranger to all the matters that have been conferred to the assignee UCPB. In this case, the execution of the Assignment in favor of UCPB relegated Citihomes to the status of a mere stranger to the jural relations established under the contract to sell. With UCPB as the assignee, it is clear that Citihomes has ceased to have any right to cancel the contract to sell with Spouses Noynay. Without this right, which has been vested in UCPB, Citihomes undoubtedly had no cause of action against Spouses Noynay. Granting that the MTCC erred in ruling that Citihomes had no cause of action by reason of the Assignment it made in favor of UCPB, the Court still upholds the right of the Spouses Noynay to remain undisturbed in the possession of the subject property. The reason is simple – Citihomes failed to comply with the procedures for the proper cancellation of the contract to sell as prescribed by Maceda Law. Citing Pagtalunan v. Manzano, SC stressed the importance of complying with the provisions of the Maceda Law as to the cancellation of contracts to sell involving realty installment schemes. There it was held that the cancellation of the contract by the seller must be in accordance with Section 3 (b) of the Maceda Law, which requires the notarial act of rescission and the refund to the buyer of the full payment of the cash surrender value of the payments made on the property. The actual cancellation of the contract takes place after thirty (30) days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer. In this case, Spouses Noynay had been paying the amortizations for three (3) years, there is no reason to doubt Spouses Noynay's compliance with the minimum requirement of two years payment of amortization, entitling them to the payment of the cash surrender value provided for by law and by the contract to sell. To reiterate, Section 3(b) of the Maceda Law requires that for an actual cancellation to take place, the notice of cancellation by notarial act and the full payment of the cash surrender value must be first received by the buyer. Clearly, no payment of the cash surrender value was made to Spouses Noynay. Necessarily, no cancellation of the Contract to Sell could be considered as validly effected.

NFF INDUSTRIAL CORPORATION v. G & L ASSOCIATED BROKERAGE AND/OR GERARDO TRINIDAD G.R. NO. 178169, 12, January, 2015 Respondent G & L Associated Brokerage Inc. ordered 2,000 pieces of bulk bags from petitioner NFF Industrial Co., at P380.00 per piece, payable within 30 days from delivery, with an instruction that the bulk of bags were for immediate delivery at Hi-Cement Co. to Mr. Raul Ambrosio, respondent‘s company checker and authorized representative.

2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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Accordingly, petitioner made deliveries of the bulk of bags to Hi-Cement. However, it was not received by respondent‘s authorized representative, as stated in the terms of the Purchase Order. Respondent failed and refused to pay even after 30 days from the time the last delivery was made. NFF made a series of demands, but still, it remained unheeded. NFF then filed a complaint for a sum of money against respondent. NFF alleged that the deliveries were duly acknowledged by the representative of the respondent company; that all the delivery receipts were rubber stamped, dated and signed the security guard-onduty, as well as other representatives of the company. All sales invoices were duly served upon, and received by the respondent company‘s representative, one Marian Gabay. Conversely, respondents G&L alleged that the deliveries were not received by their authorized representatives. Thus, there was no delivery at all in contemplation of law. ISSUE: Whether or not there was valid delivery on the part of petitioner in accordance with law, which would give rise to an obligation to pay on the part of respondent for the value of the bulk bags. NFF avers that it has delivered the bulk bags to respondent company, which effectively placed the latter in control and possession thereof, as in fact, respondent company had made use of the said bulk bags in the ordinary course of its business activities. Conversely, respondents contend that the evidence on record miserably failed to establish that the alleged deliveries were received by the authorized representative of the respondents. Hence, there was no delivery at all. SC ruled there was valid delivery. Under the Civil Code, the vendor is bound to transfer the ownership of and delivery, as well as warrant the thing which is the object of sale. The ownership of thing sold is considered acquired by the vendee once it is delivered to him in the following wise: Article 1496. The ownership of the thing sold is acquired by the vendee from the moment it

is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. Article 1497. The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee.

Thus, the ownership does not pass by mere stipulation but only by delivery. By allowing petitioner‘s employee to pass through the guard-on-duty, who allowed the entry of the delivery into the premises of Hi-Cement, which is the designated delivery site, respondents had effectively abandoned whatever infirmities may have attended the delivery of the bulk bags. As a matter of fact, if respondents were wary about the manner of delivery, such issue should have been brought up immediately after the delivery was made. Instead, Mr. Trinidad acknowledged receipt of the first batch of the bulks bags and even followed up the remaining balance of the orders for delivery. Accordingly, G&L may be held liable to pay for the price of the bulk bags pursuant to Article 1585 which provides that:

―The buyer is deemed to have accepted the goods when he intimates to the seller that he

has accepted them, or when the goods have been delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them.‖

AGENCY GAMES AND GARMENTS DEVELOPERS, INC. v. ALLIED BANKING CORP. G.R. NO. 181426 JULY 13, 2015

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Bienvenida Pantaleon agreed to purchase a parcel of land in Muntinlupa registered in the name of petitioner GGDI for P14M. Ernesto Mercado, branch manager of Allied Bank, sent two letters to GGDI‘s Legal Counsel, Atty. Lao, which stated that Allied Bank extended a loan to Bienvenida for the

purchase of the property, and that after the transfer of title in favor of Bienvenida and the annotation of the mortgage thereon, Allied Bank guarantees to pay directly to GGDI P8.36M. In the Deed of Sale,

however, the purchase price was reduced to P11M, P3M to be paid upon signing the Deed, the balance with 18% interest per annum until the same is fully paid by way of postdated check, and bank guaranty from Allied Bank to assume payment thereof. Based on the agreement, if Bienvenida fails to pay the balance, the Deed shall be deemed cancelled and null and void and all payments made shall be deemed forfeited in favor of GGDI as liquidated damages. The title in the name of GGDI was cancelled and a new one was issued in the name of Bienvenida. To secure her loan with Allied Bank, Bienvenida executed a Real Estate Mortgage (REM) covering the subject property and one other property in favor of the bank which was duly annotated with the Registry of Deeds. However, unknown to GGDI, Allied Bank already released the proceeds of the loan to spouses Pantaleon. The two Allied Bank checks valued at P500, 000 each issued by Bienvenida to GGDI were dishonored for being drawn against insufficient funds. GGDI filed a Complaint for Breach of Contract with Damages against Bienvenida and her husband and Allied Bank. Allied Bank alleged that it was an innocent mortgagee for value and in good faith. It alleged that because Bienvenida failed to pay the installments and interests due, the entire loan became due and demandable by reason of the acceleration clause in the promissory note executed by Bienvenida. The property was foreclosed and was purchased by Allied Bank at the public auction The RTC ruled in favor of GGDI. The Court of Appeals declared that banks are expressly prohibited by the General Banking Act from entering into any contract of guaranty or security. CA ruled that it was error for the RTC to order the cancellation of the title of Allied Bank in the event that the bank and spouses Pantaleon fail to pay the balance. It ruled that there was no privity of contract between GGDI and Allied Bank and that the latter acquired the property at public auction after the mortgage on the property was foreclosed, and absent substantial evidence to the contrary, the foreclosure and sale are deemed valid and existing. More importantly, the Complaint was a collateral attack on the title of Allied Bank. Hence, this petition. ISSUES: Whether or not Allied Bank is bound by the acts of its manager Mercado. Whether or not the letter issued by Mercado is a contract of guaranty which is prohibited by the General Banking Law Whether or not Allied Bank can be held solidarily liable with Bienvenida to GGDI for the price of the land. The SC ruled that to the public, Mercado, as Branch Manager, is clothed with the authority to transact and contract on behalf of, not just his branch, but Allied Bank itself. Mercado issued the letters in the course of facilitating and processing Bienvenida‘s loan application. There was nothing to indicate to GGDI that Mercado, in issuing the letters in question, was already acting beyond his authority as Branch Manager. If a corporation knowingly permits its officer, or any other agent, to perform acts within the scope of an apparent authority, holding him out to the public as possessing power to do those acts, the corporation will, as against any person who has dealt in good faith with the corporation through such agent, be estopped from denying such authority. GGDI relied in good faith on the assurance stated in Mercado‘s letter that the proceeds of Bienvenida‘s approved loan with Allied Bank would be released directly to it. Without such letter, GGDI would not have parted with its property prior to full payment of the purchase price for the same. Allied Bank cannot now disclaim any liability under the letters by simply averring that Mercado had no authority to issue the same. The application of the doctrine of apparent authority to banks is especially necessary because banks have a fiduciary relationship with the public and their stability depends on the confidence of the people in their honesty and efficiency. The letter of Mercado to GGDI is not a contract of guaranty. By a contract of guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. (Article 2047, Civil Code) Mercado, by the plain language of his letters, 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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merely committed to the manner by which the proceeds of Bienvenida‘s approved loan from Allied Bank would be released, but did not obligate Allied Bank to be answerable with its own money to GGDI should Bienvenida default on the payment of the purchase price for the subject property. No, Allied Bank cannot be held solidarily liable with Bienvenida for the price of the land because it was not a party to the contract nor an assignee thereof. Allied Bank is liable for damages for not complying with its obligation under the letters to release the proceeds of Bienvenida‘s approved loan.

V-GENT, INC. v. MORNING STAR TRAVEL AND TOURS, INC. GR No. 186305 July 22, 2015 V-Gent, Inc. (VGI) purchased 26 two-way plane tickets (Manila-Europe-Manila) from respondent Morning Star Travel and Tours, Inc. V-Gents returned a total of 15 unused tickets to Morning Star, but the latter refunded the value of only 6 tickets and refused to refund the others. VGI filed a case for a sum of money against Morning Star before the MeTC of Manila. Morning Star questioned the personality of VGI to file the suit on the ground that the passengers in whose names the tickets were issued are the real parties-in-interest and not VGI. The MeTC declared that VGI is an agent of the passengers who paid for the tickets but it still dismissed the case for failure of VGI to prove its case by preponderance of evidence. On appeal, the RTC ordered Morning Star to pay to VGI the value of the nine remaining tickets. On further appeal to the CA, the CA granted the petition and dismissed VGI‘s complaint ruling that the latter is not a real party-in-interest. ISSUE: Whether or not V-Gent is as an agent of the passengers has the personality to sue in their behalf. The SC ruled that although VGI was recognized as the agent of the passengers, it has no personality to sue in behalf of the latter. In suits where an agent represents a party, the principal is the real partyin-interest; an agent cannot file a suit in his own name on behalf of the principal. By way of exception, under Rule 3, Section 3 of the Rules of Court an agent may sue or be sued in its own name and without joining the principal when the following elements concur: 1. The agent acted in his own name during the transaction; 2. The agent acted for the benefit of an undisclosed principal; and 3. The transaction did not involve the property of the principal. The above rule is consistent with Article 1883 of the Civil Code which states that, Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal. In such case, the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. Only the first element is present in the case at bar because VGI disclosed the names of the passengers to Morning Star and the tickets were issued in their names; the transaction was paid using the passengers' money. VGI does not have legal standing to file the complaint because it is suing to recover the money of its principals - the passengers - who are the real parties-in-interest because they stand to be injured or benefited in case Morning Star refuses or agrees to grant the refund because the money belongs to them. The SC added that the power to collect and receive payments on behalf of the principal is an ordinary act of administration covered by the general powers of an agent but the filing of suits is an act of strict dominion. Under Article 1878 (15) of the Civil Code, a duly appointed agent has no power to exercise any act of strict dominion on behalf of the principal unless authorized by a special power of attorney. An agent's authority to file suit cannot be inferred from his authority to collect or receive payments; the grant of special powers cannot be presumed from the grant of general powers. Moreover, the authority to exercise special powers must be duly established by evidence, even though it need not be in writing.

2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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SPOUSES ROLANDO AND HERMINIA SALVADOR v. SPOUSES ROGELIO AND ELIZABETH RABAJA AND ROSARIO GONZALES G.R. No. 199990, 4, February, 2015 The spouses Rolando and Herminia Salvador entered into a contract to sell their apartment unit to spouses Rogelio and Elizabeth Rabaja. The Salvadors personally introduced Rosario Gonzales to the Rabajas and told them that Gonzales was their administrator and agent. Gonzales received the Rabajas‘ payments to the Salvadors until the amount paid reached P950k. Later, the Spouses Salvador denied having received the payments from Gonzales. Thus, the Rabajas suspended further payment. The Salvadors asked the Rabajas to vacate and when they refused, a suit for ejectment was instituted by the Salvadors. The Rabajas filed an action for rescission of contract against the Salvadors and prayed for the recovery of the payments already made. In the suit for rescission the RTC ruled in favor of the Rabajas and ordered the Salvadors to return the payments made by the Rabajas. It found that the signature in the SPA issued in favor of Gonzales appear to be genuine. The CA affirmed with modification. ISSUE: Whether or not the contract could be rescinded and whether the Rabajas are entitled to the return of payments made The Supreme Court ruled in favor of the Rabajas stating that they are entitled to the return of their payments. The SC did not give merit to the defense of the Salvadors that they did not receive any money from the Rabajas through Gonzales and that the latter was not their duly authorized agent. The Court cited: ―Art. 1900. So far as third persons are concerned, an act is deemed to have been performed within the scope of the agent's authority, if such act is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent.‖ ―Art. 1902. A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney, or the instructions as regards the agency. Private or secret orders and instructions of the principal do not prejudice third persons who have relied upon the power of attorney or instructions shown them.‖ The law mandates an agent to act within the scope of his authority which what appears in the written terms of the power of attorney granted upon him. The Court holds that, indeed, Gonzales acted within the scope of her authority. The SPA precisely stated that she could administer the property, negotiate the sale and collect any document and all payments related to the subject property. As the agent acted within the scope of his authority, the principal must comply with all the obligations.2 As correctly held by the CA, considering that it was not shown that Gonzales exceeded her authority or that she expressly bound herself to be liable, then she could not be considered personally and solidarily liable with the principal, Spouses Salvador. Perhaps the most significant point which defeats the petition would be the fact that it was Herminia herself who personally introduced Gonzalez to Spouses Rabaja as the administrator of the subject property. By their own ostensible acts, Spouses Salvador made third persons believe that Gonzales was duly authorized to administer, negotiate and sell the subject property. Any internal matter, arrangement, grievance or strife between the principal and the agent is theirs alone and should not affect third persons. If Spouses Salvador did not receive the payments or they wish to specifically revoke the SPA, then their recourse is to institute a separate action against Gonzales.

2

Art. 1910. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority.

As for any obligation wherein the agent has exceeded his power the principal is not bound except when he ratifies it expressly or tacitly.

2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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CREDIT TRANSACTIONS WT CONSTRUCTION, INC., v. THE PROVINCE OF CEBU G.R. Nos. 208984/ G.R. No. 209245. September 16, 2015 Petitioner WT Construction entered into a contract with the Province of Cebu for the construction of the Cebu International Convention Center which would serve as the venue for the Asean Summit. After completing Phase I and receiving payment therefor, WTCI again won the bidding for Phase II of the project involving the adjacent works on CICC. As Phase II neared completion, the Province of Cebu caused WTCI to perform additional works on the project which included site development, and additional structural, architectural, electric, and plumbing works (additional works). Cognizant of the need to complete the project in time for the ASEAN Summit, and with the repeated assurances that it would be promptly paid, WTCI agreed to perform the additional works notwithstanding the lack of public bidding. WTCI completed the project, including the additional works and, accordingly, demanded payment therefor. The Province of Cebu, however, refused to pay which prompted WTCI to file a complaint for collection of sum of money before the RTC. The Province of Cebu admitted the existence of the additional works but maintained that there was no contract between it and WTCI therefor. The RTC ruled in favor of WTCI but reduced the amount of the liability of the Province of Cebu. The trial court also awarded interests on the sums due from the date of the filing of the complaint at the rate of 12% per annum. Only the Province of Cebu interposed an appeal. The CA affirmed the decision but reduced the interest rate from 12% to 6% on the ground that the liability of the Province of Cebu did not arise from a loan or forbearance of money but from the nonpayment of services rendered by WTCI. ISSUES: (a) Whether or not the liability of the Province of Cebu is in the nature of a loan or forbearance of money; and (b) Whether or not the interest due should be computed from the date of the filing of the complaint or from the time extrajudicial demand was made. The Court ruled that the present case does not involve an obligation arising from a loan or forbearance of money. The term "forbearance," within the context of usury law, has been described as a contractual obligation of a lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor to repay the loan or debt then due and payable. In Estores v. Supangan, the Court explained that forbearance of money, goods, or credit refers to arrangements other than loan agreements where a person acquiesces to the temporary use of his money, goods or credits pending the happening of certain events or fulfillment of certain conditions such that if these conditions are breached, the said person is entitled not only to the return of the principal amount given, but also to compensation for the use of his money equivalent to the legal interest since the use or deprivation of funds is akin to a loan. Applying the foregoing standards to the case at hand, the Court finds that the liability of the Province of Cebu to WTCI is not in the nature of a forbearance of money as it does not involve an acquiescence to the temporary use of WTCI's money, goods or credits. Rather, this case involves WTCI's performance of a particular service, i.e., the performance of additional works on CICC, consisting of site development, additional structural, architectural, plumbing, and electrical works thereon. The trial court awarded interest to WTCI only from the time of the filing of the complaint and since WTCI did not appeal from the RTC‘s decision, the reckoning point for the imposition of the interest has become final. The SC also sustained the rate of interest imposed by the appellate court which is 6% per annum. The awards shall further earn legal interest of 6% from the time of the finality of the decision until it is fully paid.

SPS SALVADOR & ALMA ABELLA, v. SPOUSES ROMEO ABELLA & ANNIE ABELLA G.R. No. 195166, July 08, 2015 Salvador and Alma Abella filed a Complaint for sum of money and damages with prayer for preliminary attachment against respondents Romeo and Annie Abella before the RTC. Petitioners alleged that respondents obtained a P500, 000.00 loan from them in 1999 but were able to pay only P200, 000.00 thereby leaving a balance of P300, 000.00. 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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Respondents denied that the amount was given to them was a loan and alleged it was part of the capital for a joint venture involving the lending of money. Respondents added that they would "undertake the management of whatever money they would receive from the petitioners. The RTC ruled in favor of the petitioners. On appeal, the CA ruled that the parties entered into a simple loan agreement but it concluded that since respondents paid interest when there was no written agreement between them in violation of Article 1956, all the interest payments made by the respondents prior to demand made by petitioners in 2002 should be applied to the principal amount. The Court of Appeals noted that respondents made a total payment of 648,500.00, which, as against the principal amount of 500,000.00, entailed an overpayment of 148,500.00. Applying the principle of solutio indebiti, the Court of Appeals ruled that petitioners were liable to reimburse respondents for the overpaid amount of 148,500.00. ISSUES: 1) Whether interest accrued on respondents' loan from petitioners, if so, at what rate? 2) Whether petitioners are liable to reimburse respondents for the supposed excess payments and for interest As correctly ruled by both the CA and the RTC, respondents entered into a simple loan or mutuum, rather than a joint venture, with petitioners. Article 1956 of the Civil Code spells out the basic rule that "[n]o interest shall be due unless it has been expressly stipulated in writing." The text of the acknowledgment receipt is attests to the contracting parties' intent to subject to interest the loan extended by petitioners to respondents. The controversy, however, stems from the acknowledgment receipt's failure to state the exact rate of interest. In Spouses Toring v. Spouses Olan, this Court clarified the effect of Article 1956 of the Civil Code and noted that the legal rate of interest (then at 12%) is to apply: "In a loan or forbearance of money, according to the Civil Code, the interest due should be that stipulated in writing, and in the absence thereof, the rate shall be 12% per annum." The word "shall," a term that has long been settled to denote something imperative or operating to impose a duty. Thus, the rule leaves no room for alternatives or otherwise does not allow for discretion. It requires the application of the legal rate of interest. Our intervening Decision in Nacar v. Gallery Frames recognized that the legal rate of interest has been reduced to 6% per annum pursuant to Circular No. 799, Series of 2013 of the BSP-MB. Thus, it remains that where interest was stipulated in writing by the debtor and creditor in a simple loan or mutuum, but no exact interest rate was mentioned, the legal rate of interest shall apply. At present, this is 6% per annum, subject to Nacar's qualification on prospective application. Applying this, the loan obtained by respondents from petitioners is deemed subjected to conventional interest at the rate of 12% per annum, the legal rate of interest at the time the parties executed their agreement. Moreover, should conventional interest still be due as of July 1, 2013, the rate of 12% per annum shall persist as the rate of conventional interest. This is so because interest in this respect is used as a surrogate for the parties‘ intent, as expressed as of the time of the execution of their contract. In this sense, the legal rate of interest is an affirmation of the contracting parties‘ intent; that is, by their contract‘s silence on a specific rate, the then prevailing legal rate of interest shall be the cost of borrowing money. This rate, which by their contract the parties have settled on, is deemed to persist regardless of shifts in the legal rate of interest. Stated otherwise, the legal rate of interest, when applied as conventional interest, shall always be the legal rate at the time the agreement was executed and shall not be susceptible to shifts in rate. Apart from respondents‘ liability for conventional interest at the rate of 12% per annum, outstanding conventional interest—if any is due from respondents—shall itself earn legal interest from the time judicial demand was made by petitioners, i.e., on July 31, 2002, when they filed their Complaint. This is consistent with Article 2212 of the Civil Code, which provides: Art. 2212. Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. So, too, Nacar states that ―the interest due shall itself earn legal interest from the time it is judicially demanded.‖ Consistent with Nacar, as well as with our ruling in Rivera v. Spouses Chua, the interest due on conventional interest shall be at the rate of 12% per annum from July 31, 2002 to June 30, 2013. Thereafter, or starting July 1, 2013, this shall be at the rate of 6% per annum.

2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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YULIM INTERNATIONAL COMPANY LTD., VS. INTERNATIONAL EXCHANGE BANK (NOW UNION BANK OF THE PHILIPPINES) G.R. No. 203133 February 18, 2015 Respondent iBank granted a P5M loan to Yulim on June 2, 2000 evidenced by a Credit Agreement and was secured by a Chattel Mortgage over Yulim‘s inventories in its merchandise warehouse in Caloocan City. As additional guarantee, the partners, namely, James, Jonathan and Almerick, executed a Continuing Surety Agreement in favor of iBank. The promissory notes (PN) were later consolidated under a single promissory note to mature on February 28, 2002. Yulim defaulted on the said note and iBank filed a complaint for sum of money with prayer for issuance of writ of replevin. Yulim later moved to dismiss the complaint insisting that their loan had been fully paid after they assigned to iBank their Condominium Unit with parking space located in Tomas Morato Avenue, Quezon City with a present value of P5.5M. The RTC held Yulim Company liable but exonerated the individual defendants who executed the Continuing Guaranty in favor of iBank. The CA, however, ruled that the sureties are jointly and severally liable with Yulim. The CA ruled that iBank did not signify that it had accepted the condominium unit under the Deed of Assignment as full payment of Yulim‘s loan. ISSUE: Whether the individual defendants should be held solidarily liable with Yulim Whether or not Yulim’s loan has been extinguished by the execution of the Deed of Assignment. The individual petitioners are solidarily liable with Yulim for the latter‘s obligation to iBank. They do not deny that they executed the Continuing Surety Agreement binding themselves ―jointly and severally with the PRINCIPAL Yulim, hereby unconditionally and irrevocably guarantee full and complete payment when due, whether at stated maturity, by acceleration, or otherwise, of any and all credit accommodations that have been granted‖ to Yulim by iBank, including interest, fees, penalty and other charges. In a contract of suretyship, one lends his credit by joining in the principal debtor‘s obligation so as to render himself directly and primarily responsible with him without reference to the solvency of the principal. According to Article 2047, if a person binds himself solidarily with the principal debtor, the provisions of Articles 1207 to 1222, or on joint and solidary obligations, shall be observed. Thus, where there is a concurrence of two or more creditors or of two or more debtors in one and the same obligation, Article 1207 provides that among them, ―[t]here is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.‖ ―A surety is considered in law as being the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be inseparable.‖ And it is well settled that when the obligor or obligors undertake to be ―jointly and severally‖ liable, it means that the obligation is solidary, as in this case. The Deed of Assignment provides that as soon as title to the condominium unit is issued in its name, Yulim shall "immediately execute the necessary Deed of Real Estate Mortgage in favor of the BANK to secure the loan obligations of the ASSIGNOR and/or the BORROWER." This is a plain and direct acknowledgement that the parties really intended to merely constitute a real estate mortgage over the property. The condominium unit, then, is a mere temporary security, not a payment to settle their promissory note. To stress, the assignment being in its essence a mortgage, it was but a security and not a satisfaction of the petitioners‘ indebtedness. Under Article 1245 of the Civil Code, ―[d]ation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law on sales.‖ Nowhere in the Deed of Assignment can it be remotely said that a sale of the condominium unit was contemplated by the parties, the consideration for which would consist of the amount of outstanding loan due to iBank.

CCC INSURANCE CORP. vs. KAWASAKI STEEL CORPORATION, FFMCCI G.R. No. 156162 June 22, 2015 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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Kawasaki Steel and F .F. Mañacop Construction Company, Inc. (FFMCCI), executed a Consortium Agreement whereby for the construction of the Pangasinan Fishing Port Network Project. According to their Consortium Agreement, Kawasaki and FFMCIA undertook to perform and accomplish their respective and specific portions of work in the intended contract with the Philippine Government. The Republic made an advance payment for the Project to the Kawasaki-FFMCCI Consortium. For the release of its share in the advance payment made by the Republic, and also pursuant to Article 10 of the Consortium Agreement, FFMCCI secured from petitioner CCCIC some bonds in favor of Kawasaki. In turn, FFMCCI and Mañacop executed two Indemnity Agreements promising to compensate CCCIC for any damages the insurance company might incur from issuing the Surety and Performance Bonds. In April 1989, FFMCCI ceased performing its work due to financial problems and Kawasaki and FFMCCI executed a new agreement wherein Kawasaki recognized the completed work of FFMCI and agreed to take over the unfinished work under the condition that any profit arising from the performance by Kawasaki of the unfinished portion of the work shall be for its benefit. Kawasaki formally demanded that CCCIC, as surety, pay Kawasaki the amounts covered by the Surety and Performance Bonds. CCCIC refused to pay on the grounds that: (a) the rights of Kawasaki under the Surety and Performance Bonds had not yet accrued since the said Bonds were mere counterguarantees, for which CCCIC could only be held liable upon the filing of a claim by the Republic against the Kawasaki-FFMCCI Consortium; (b) Kawasaki and FFMCCI, without the consent of CCCIC, executed a new Agreement which novated the terms of the Consortium Agreement and prevented CCCIC from being subrogated to the right of Kawasaki against FFMCCI; (c) Kawasaki, in completing the Transferred Portion of Work was correspondingly compensated, which negated any allegation of loss on the part of Kawasaki; and (d) the obligation of CCCIC was extinguished when the Republic granted the KawasakiFFMCCI Consortium an extension of time to complete the Project, without the consent of CCCIC. Kawasaki filed the complaint against CCCIC under the bonds. The RTC, citing Article 2079 of the Civil Code, ruled that the obligations of CCCIC under the Surety and Performance Bonds were extinguished. On appeal, the CA reversed the RTC Decision. ISSUE: Whether or not CCCIC is liable under the Surety and Performance bonds Whether or not the extension granted by the Republic operates to extinguish the liability of CCCIC under Article 2079 The Court noted that there are two principal contracts in this case: (1) the Consortium Agreement wherein Kawasaki and FFMCCI agreed to jointly enter into a contract with the Republic for the Project; and (2) the Construction Contract whereby the Republic awards the Project to the KawasakiFFMCCI Consortium. The two contracts are each distinguishable from and enforceable independently of one another: the first governs the rights and obligations between Kawasaki and FFMCCI, while the second covers contractual relations between the Republic and the Kawasaki-FFMCCI Consortium. The Surety and Performance Bonds from CCCIC guaranteed the performance by FFMCCI of its obligations under the Consortium Agreement; whereas the Letter of Credit from PCIB warranted the completion of the Project by the Kawasaki FFMCCI Consortium.

The liability of CCCIC under the Surety and Performance Bonds is dependent on the fulfillment and/or non-fulfillment of the obligation of FFMCCI to KAWASAKI under the Consortium Agreement. The Surety and Performance Bonds state that their purpose was "to secure the full and faithful performance on [FFMCCI' s] part of said undertaking," particularly, the repayment by FFMCCI of the down payment advanced to it by Kawasaki and the full and faithful performance by FFMCCI of its portion of work in the Project. These are the only undertakings expressly guaranteed by the bonds, the fulfillment of which by FFMCCI would release CCCIC from its obligations as surety; or conversely, the non-performance of which would give rise to the liabilities of CCCIC as a surety. The Surety and Performance Bonds do not contain any condition that CCCIC would be liable only if, in addition to the default on its undertakings by FFMCCI, the Republic also made a claim against the PCIB Letter of Credit furnished by Kawasaki, on behalf of the Kawasaki-FFMCCI Consortium. It is not 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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disputed that FFMCCI, due to financial difficulties, was unable to repay the advance payment it received from Kawasaki and to finish its scope of work in the Project, thus, FFMCCI defaulted on its obligations to Kawasaki. Given the default of FFMCCI, CCCIC as surety became directly, primarily, and absolutely liable to Kawasaki as the obligee under the Surety and Performance Bonds. To free itself from its liabilities under the Surety and Performance Bonds, CCCIC cites Article 2079 of the Civil Code, which reads: Art. 2079. An extension granted to the debtor by the creditor without the consent of the guarantor extinguishes the guaranty. The mere failure on the part of the creditor to demand payment after the debt has become due does not of itself constitute any extension of time referred to herein. It argued that the extension granted by the Republic for the completion of the project without its consent extinguished its liability under the bonds. The SC said Article 2079 does not apply. The Surety and Performance Bonds guaranteed the performance of the obligations of FFMCCI to Kawasaki under the Consortium Agreement. The Republic was not a party in either the Surety and Performance Bonds or the Consortium Agreement. Under these circumstances, there was no creditor-debtor relationship between the Republic and FFMCCI and Article 2079 of the Civil Code did not apply. The extension granted by the Republic to Kawasaki modified the deadline for the completion of the Project under the Construction Contract, but had no effect on the obligations of FFMCCI to Kawasaki under the Consortium Agreement, much less, on the liabilities of CCCIC.

CLAUDIO et. al. vs. SARAZA G.R. NO. 213286, AUGUST 26, 2015 Porfirio and his wife Mamerta, during their marriage, acquired 10 parcels of land. On June 18, 2004, Florentino made it appear that his parents, Porfirio and Mamerta sold to him one of the lots for P500, 000 through a deed of absolute sale. Subsequently, Florentino sought the registration of the property before the Register of Deeds. On June 22, 2004 Florentino executed a deed of real estate mortgage over the subject lot with special power to sell the mortgaged property in favor of Spouses Saraza to secure the payment of the loan in the amount of P1M. In the mortgage contract, Florentino did not indicate the TCT No. of the land subject of the mortgage because at the time of its execution, the TCT over the land was not yet transferred in his name. It was only on June 28, 2004 or about a week after the mortgage was executed in favor the respondent Sarazas that the TCT was issued in the name of Florentino. Later, Mamerta and the siblings of Florentino filed a case for annulment of mortgage and sale against the respondents. Upon motion of the Sarazas the trial court granted their demurrer to evidence. On appeal, the CA affirmed the RTC. The CA ruled that Spouses Saraza had the right to rely in good faith on TCT No. 145979, which covered the lot given as security by Florentino, considering that there was no showing of any sign to excite suspicion. Thus, they were under no obligation to look beyond what appeared on the face of the certificate of title and investigate it. The appellate court deemed Spouses Saraza as innocent mortgagees for value and as such, the petitioners had shown no right to relief against them. ISSUE: Whether or not spouses Saraza are mortgagees in good faith The Supreme Court ruled in the negative. The doctrine of "the mortgagee in good faith" is based on the rule that all persons dealing with property covered by a Torrens Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title. This doctrine presupposes, however, that the mortgagor, who is not the rightful owner of the property, has already succeeded in obtaining a Torrens title over the property in his name and that, after obtaining the said title, he succeeds in mortgaging the property to another who relies on what appears on said title. Florentino had no title to the mortgaged property at the time he entered into a real estate mortgage agreement with Spouses Saraza on June 22, 2004. It was only on June 28, 2004 or six (6) days after the execution of the mortgage contract that TCT No. 145979 was issued to Florentino. The SC found it unusual that Florentino did not indicate the TCT number in the mortgage contract, if indeed, one had already been issued in his favor. The TCT number is essential to identify the title covering the mortgaged land. Notwithstanding the said omission, Spouses Saraza still allowed the loan and entered into a mortgage agreement with Florentino. Considering the substantial loan involved in the agreement, 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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Spouses Saraza should have undertaken the necessary steps to ascertain any flaw in the title of Florentino or to check his capacity to transfer any interest in the mortgaged land. Instead, Spouses Saraza closed their eyes on a fact which should put a reasonable man on guard as to the ownership of the property being presented as security for a loan. A person who deliberately ignores a significant fact that would create suspicion in an otherwise reasonable person is not an innocent purchaser (mortgagee) for value.

CAUBANG vs. CRISOLOGO GR. NO. 174581, FEBRUARY 4, 2015 Spouses Crisologo obtained two loans from PDCP Bank. The first is an Express Loan amounting to 200K, while the other is a Term Loan in the amount of 1.5M. Both are secured by a real estate mortgage. Although they were able to pay the Express Loan, they defaulted in the payment of the TERM loan. Several demands were made but still failed to settle their accounts. PDCP Bank filed a petition for the extrajudicial foreclosure of the mortgage. The petitioner Atty. Caubang prepared the notice of sale, causing the posting in 3 public places and publication in Oriental Daily Examiner, a local newspaper in Davao City. Caubang conducted the auction sale with the bank as the only bidder. Thereafter, a certificate of sale was issued in favor of the bank. The spouses filed for the nullity of the foreclosure and auction sale with damages against the bank and Caubang. RTC ordered the nullification for failure to comply with the publication requirement. CA affirmed RTC‘s decision. Hence, this petition. Issue: Whether or not Oriental Daily Examiner is a newspaper of general circulation in the municipality or city of Davao. SC held, NO. Under Section 3 of Act No. 3135: Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notices shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city. In this case, Caubang never made an effort to inquire as to whether the Oriental Daily Examiner was indeed a newspaper of general circulation, as required by law. It was shown that the Oriental Daily Examiner is not even on the list of newspapers accredited to publish legal notices, as recorded in the Davao RTC‘s Office of the Clerk of Court. It also has no paying subscribers and it would only publish whenever there are customers. Since there was no proper publication of the notice of sale, the Spouses Crisologo, as well as the rest of the general public, were never informed that the mortgaged property was about to be foreclosed and auctioned. As a result, PDCP Bank became the sole bidder. This allowed the bank to bid for a very low price and go after the spouses for a bigger amount as deficiency. The principal object of a notice of sale in a foreclosure of mortgage is not so much to notify the mortgagor as to inform the public generally of the nature and condition of the property to be sold, and of the time, place, and terms of the sale. Notices are given to secure bidders and prevent a sacrifice of the property. Therefore, statutory provisions governing publication of notice of mortgage foreclosure sales must be strictly complied with and slight deviations therefrom will invalidate the notice and render the sale, at the very least, voidable. Certainly, the statutory requirements of posting and publication are mandated and imbued with public policy considerations. Failure to advertise a mortgage foreclosure sale in compliance with the statutory requirements constitutes a jurisdictional defect, and any substantial error in a notice of sale will render the notice insufficient and will consequently vitiate the sale.

BANGKO SENTRAL NG PILIPINAS vs. AGUSTIN LIBO-ON GR. No. 173864, November 23, 2015 Respondent Spouses Libo-on secured loans from the Rural Bank of Hinirigan, Inc. (RBHI)In the amount of P100,000 and P300,000, respectively. They executed promissory notes payable to the order of Rural Bank for a period of 360 days and executed a deed of Real estate Mortgage as security.

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On September 19, 1997 and October 17, 1997, RBHI in turn secured a loan from petitioner BSP in the amount of P800, 000 and 640,000, respectively. As security for the loan the bank pledged and deposited to BSP PN's with supporting TCT's including the PN and TCT of spouses Libo-on mortgage to the former. On May 3, 2000 BSP demanded from the Spouses Libo-on the payment of their outstanding loan with RBHI but they failed to settle their obligation. BSP filed an application for extrajudicial foreclosure of the property. Spouses Libo-on contested extrajudicial foreclosure and filed application for preliminary injunction which was granted by the trial court. BSP Appealed with CA but it was denied. ISSUES: 1. Whether or not RBHI has the right to pledge the property. 2. Whether or not BSP has the authority to foreclose the subject mortgage The SC ruled that RBHI has no authority to pledge the security documents to BSP during the term of the real estate mortgage contract between Rural bank and the spouses Libo-on because if it is within the term of the contract, the mortgage property remains to be property of the latter. For a contract of pledge to be valid, it is necessary that: 1. the pledge is constituted to secure the fulfillment of the principal obligation; 2. the pledgor be the absolute owner of the thing pledged; 3. the person constituting the pledge has the free disposal of his property, and in the absence thereof, that he be legally authorized for the purpose. Here, the Rural Bank of Hinirigan was neither the absolute owner of the subject property nor the security documents it had pledge to BSP. The possession of the security documents was given to the Rural Bank merely as security collateral in case of non-payment of the loans. Its only purpose is to guarantee the fulfillment of the spouses Libo-ons obligation and in case of default on the part of the latter bank as credit-mortgagee by way of judicial or extrajudicial foreclosure. BSP has no authority to foreclose the subject mortgage. The mere pledge and deposit of the mortgage contract, transfer certificate of title and promissory note executed by the Rural Bank of Hinigaran in favor of BSP, does not produce the effect of giving BSP the authority to intervene with the transaction between the Spouses Libo-on and the Rural Bank of Hinigaran, much less foreclose the mortgaged property of the Spouses Libo-on. In the absence of a notarized deed of assignment, BSP cannot be considered as an assignee who can proceed against the Spouses Libo-on's property.

LEASE SPOUSES RICARDO AND ELENA C. GOLEZ vs. MELITON NEMEÑO G.R. No. 178317. September 23, 2015 Respondent Nemeño is the registered owner of a commercial lot located in Molave, Zamboanga del Sur. He entered into a four-year lease contract with petitioners over the land. The lease contract provides that the monthly rental shall be P2, 000.00 but instead of paying cash, the petitioners shall construct an building on the land at a total cost of P143, 000.00 and the petitioners shall apply the cost of the building to the monthly rentals and at the end of the lease, the building shall become the property of the respondent lessor. However, one year prior to the expiration of the lease, the building constructed by the petitioner (lessees) was gutted by fire. Respondent sent a letter to petitioners demanding accumulated rentals from 1989 up to the time the expiration of the lease in 1992. As the demand was left unheeded, respondent filed a complaint for collection of rentals plus damages before the RTC. Respondent alleged that the petitioner himself was responsible for burning the building and without his knowledge the petitioner insured the building for face values of more than its cost. He prayed that petitioners be ordered to pay him P96, 000.00 representing the unpaid rentals from March 17, 1989 until the expiration of the lease and P100, 000.00 representing damages for violating the lease contract.

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Petitioners, for their part, contended that under the contract of lease, the rental payment is amortized over the cost of the subject building, thus, respondent had already become its co-owner who must suffer the loss of his property. The RTC ruled in favor of respondent and ordered petitioners to pay the full rentals plus damages. It ruled that respondent did not become the co-owner of the subject building before it was burned down as ownership will only pertain to him as soon as the amount agreed upon under the contract shall have been fully paid. It added that the building was still wholly owned by petitioners at the time the same was gutted by fire and thus, they should be the only ones to suffer the loss. The trial court opined that since petitioners can no longer deliver the building which they are obliged to deliver, they are now legally obliged to pay rentals for their use of the premises to prevent unjust enrichment. The CA affirmed. ISSUE: Whether or not petitioners are liable to pay respondent back rentals as well as for the unexpired portion of the lease. SC ruled that petitioners should pay respondent for back rentals. There is no dispute that the contract entered into by the parties is one of lease. True, it had some modifications such that instead of paying the rent in the form of money, petitioners will withhold such payment and will apply the accumulated rent to the cost of the building they built on the leased property. Thereafter, at the end of the lease period or until such time the cost of the building has been fully covered by the rent accumulated, petitioners, as lessees will transfer the ownership of said building to respondent. Unfortunately, the subject building was gutted down by fire. However, the destruction of the building should not in any way be made a basis to exempt petitioners from paying rent for the period they made use of the leased property. Otherwise, this will be a clear case of unjust enrichment. As held in P.C. Javier & Sons, Inc. v. Court of Appeals: xxx The fundamental doctrine of unjust enrichment is the transfer of value without just cause or consideration. The elements of this doctrine are: enrichment on the part of the defendant; impoverishment on the part of the plaintiff; and lack of cause. The main objective is to prevent one to enrich himself at the expense of another. It is commonly accepted that this doctrine simply means that a person shall not be allowed to profit or enrich himself inequitably at another‘s expense.xxx Petitioners used the property for several years for their own benefit having operated a restaurant thereon. It would be the height of injustice to deprive respondent of compensation due him on the use of his property by petitioners. The fact that the parties agreed to a different mode of payment – in this case, a building – does not in any way exempt petitioners from paying compensation due to respondent for the use of the latter‘s property because the building was destroyed. However, the SC said that petitioners should only be liable for rent during the time they were in possession of the leased property. There was no evidence submitted to prove that petitioners were in possession of the leased property after the fire. Therefore, petitioners should be made to pay rent until that time only.

TORTS AND DAMAGES R. TRANSPORT CORPORATION v. LUISITO G. YU G.R. No. 174161, 18, February, 2015 On December 12, 1993 Loreta J. Yu, passenger, alighted from the bus to Robinsons Galleria along the north-bound lane of EDSA when she was hit and run over by a bus driven by Gimena who is employed by petitioner, R. Transport Corporation. Loreta died as a result of the injuries she sustained. Respondent, Luisito Yu filed a case for damages before the RTC against R. Transport, Gimena and MMTC for the death of his wife Loreta. MMTC denied its liability reasoning that it is merely the registered owner of the bus involved in the incident, the actual owner, being petitioner R Transport. It explained that under the Bus Instalment Purchase Program of the government, MMTC merely purchased the subject bus, among several others, for resale to petitioner R Transport, which will in turn operate the same 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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within Metro Manila. Since it was not actually operating the bus which killed respondent‘s wife, nor was it the employer of the driver thereof, MMTC alleged that the complaint against it should be dismissed. The RTC rendered judgment in favor of Yu and ruled that petitioner failed to prove that it exercised the diligence required of a good father of a family in the selection and supervision of its driver, who, by its negligence, ran over the deceased resulting in her death. RTC also held MMTC solidarily liable with petitioner R Transport because it would unduly prejudice a third person who is a victim of a tort to look beyond the certificate of registration and prove who the actual owner is in order to enforce a right of action. CA affirmed the Decision of the RTC with modification in that driver Gimena was made solidarily liable for the damages caused to respondent. According to the appellate court, considering that the negligence of Gimena was sufficiently proven by the records of the case, and that no evidence of whatever nature was presented by petitioner to support its defense of due diligence in the selection and supervision of its employees, petitioner, as the employer of Gimena, may be held liable for the damage caused. ISSUE: Whether R. Transport and MMTC and Gimena should be held solidarily liable even if R. Transport is merely the operator while MMTC is the registered owner. SC upheld the finding of the trial and appellate court that driver Gimena was negligent in hitting and running over the victim and ruled that his negligence was the proximate cause of her death.

Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible. Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. Once negligence on the part of the employee is established, a presumption instantly arises that the employer was remiss in the selection and/or supervision of the negligent employee. To avoid liability for the quasi-delict committed by its employee, it is incumbent upon the employer to rebut this presumption by presenting adequate and convincing proof that it exercised the care and diligence of a good father of a family in the selection and supervision of its employees. This Court has consistently been of the view that it is for the better protection of the public for both the owner of record and the actual operator to be adjudged jointly and severally liable with the driver. As aptly stated by the appellate court, "the principle of holding the registered owner liable for damages notwithstanding that ownership of the offending vehicle has already been transferred to another is designed to protect the public and not as a shield on the part of unscrupulous transferees of the vehicle to take refuge in, in order to free itself from liability arising from its own negligent act.

METRO MANILA TRANSIT CORPORATION v. CUEVAS G.R. No. 167797, June 15, 2015 Metro Manila Transit Corporation (MMTC) and Mina's Transit Corporation (Mina's Transit) entered into an agreement to sell whereby Mina‘s Transit bought several bus units from the former at a stipulated price. They agreed that MMTC would retain the ownership of the buses until certain conditions were met, but in the meantime Mina's Transit could operate the buses within Metro Manila. On October 14, 1994, one of the buses subject of the agreement to sell, hit and damaged a Honda Motorcycle owned by Reynaldo Cuevas and driven by Junnel Cuevas. Reynaldo and Junnel sued MMTC and Mina's Transit for damages. MMTC denied liability and averred that although it retained the ownership of the bus, the actual operator and employer of the bus driver was Mina's Transit; and that, in support of its cross-claim against Mina's Transit, a provision in the agreement to sell mandated Mina's Transport to hold it free from liability arising from the use and operation of the bus units.

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Mina's Transit contended that it was not liable because: (a) it exercised due diligence in the selection and supervision of its employees; (b) its bus driver exercised due diligence; and (c) Junnel's negligence was the cause of the accident. The RTC rendered judgment in favor of Cuevas. It concluded that the proximate cause of the mishap was the negligence of the bus driver; that following Article 2180 of the Civil Code, his employers should be solidarity liable; that MMTC and Mina's Transit, being the joint owners of the bus, were liable. The RTC however, failed to rule on MMTC‘s cross-claim. On appeal, the CA affirmed the RTC's decision. ISSUE: Whether or not it was liable for the injuries sustained by Cuevas despite the provision in the agreement to sell that shielded it from liability. The Supreme Court ruled that the appeal is partly meritorious. In view of MMTC's admission in its pleadings that it had remained the registered owner of the bus at the time of the incident, it could not escape liability for the personal injuries and property damage suffered by the Cuevases. This is because of the registered-owner rule, whereby the registered owner of the motor vehicle involved in a vehicular accident could be held liable for the consequences. The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that any damage or injury is caused by the vehicle on the public highways, responsibility therefor can be fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on public highways caused accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers, or with very scant means of identification. It is to forestall these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the interest of the determination of persons responsible for damages or injuries caused on public highways. In Equitable Leasing Corporation v. Suyom, the SC ruled that in so far as third persons are concerned, the registered owner of the motor vehicle is the employer of the negligent driver, and the actual employer is considered merely as an agent of such owner. Indeed, MMTC could not evade liability by passing the blame to Mina's Transit. The stipulation in the agreement to sell did not bind third parties like the Cuevases, who were expected to simply rely on the data contained in the registration certificate of the erring bus. MMTC may recover from Mina‘s Transit, who is the actual employer of the negligent driver the amounts it may be required to pay to the injured party in accordance with our ruling in Filcar Transport Services v. Espinas. (G.R. No. 174156 June 20, 2012). The SC added that the RTC should have granted the cross-claim to prevent the possibility of multiplicity of suits and to spare not only MMTC but also other parties in the case from further expense and bother. SC modified the appealed decision by granting MMTC‘s cross-claim against Mina‘s Transit.

SPS. VERGARA v. SONKIN G.R. No. 193659, June 15, 2015 Spouses Fernando and Herminia Vergara (Vergaras) and Spouses Ronald and Erlinda Sonkin (Sonkins) are adjoining landowners in Norzagaray, Bulacan. The Sonkins property is slightly lower in elevation than the property owned by the Vergaras. The Sonkins raised the height of the partition wall in 1999 and constructed their house thereon. The house itself was attached to the partition wall such that a portion thereof became part of the wall of the master‘s bedroom and bathroom. Sometime in 2001, the Vergaras levelled the uneven portion of their property by filling it with gravel, earth, and soil. As a result, the level of their property became higher than that of the Sonkins by a third of a meter. Eventually, the Sonkins began to complain that water coming from the Vergara Property was leaking into their bedroom through the partition wall, causing cracks, as well as damage, to the paint and the wooden parquet floor. Sonkin repeatedly demanded from the Vergaras that they build a retaining wall on their property in order to contain the landfill that they had dumped thereon, but the same went unheeded. Hence, Sonkins filed the instant complaint for damages and injunction with prayer for preliminary mandatory 2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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injunction and issuance of a temporary restraining order against the Vergaras. The Vergaras argued that the act of the Sonkins in raising the partition wall made the same susceptible to breakage which cannot be attributed to them. The RTC held the Vergaras liable for damages to the Sonkins but the CA reversed the decision of the trial court on the ground of contributory negligence. ISSUE: 1. Whether or not Sps Sonkin are guilty of contributory negligence. 2. Whether or not the award of damages is proper. It is undisputed that the Sonkin property is lower in elevation than the Vergara property, and thus, it is legally obliged to receive the waters that flow from the latter, pursuant to Article 637 of the Civil Code. This provision refers to the legal easement pertaining to the natural drainage of lands, which obliges lower estates to receive from the higher estates water which naturally and without the intervention of man descends from the latter, i.e., not those collected artificially in reservoirs, etc., and the stones and earth carried by the waters. The owner of the lower estate cannot construct works which will impede this easement; neither can the owner of the higher estate make works which will increase the burden. In this light, the Sonkins should have been aware of such circumstance and, accordingly, made the necessary adjustments to their property so as to minimize the burden created by such legal easement. Instead of doing so, they disregarded the easement and constructed their house directly against the perimeter wall which adjoins the Vergara property, thereby violating the National Building Code in the process. Article 2179 of the Civil Code reads: Art. 2179. When the plaintiffs own negligence was the immediate and proximate cause of his injury, he cannot recover damages. But if his negligence was only contributory, the immediate and proximate cause of the injury being the defendant's lack of due care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded. Verily, contributory negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own protection. While the proximate cause of the damage to the Sonkins was the act of the Vergaras in dumping gravel and soil on their property, thus, pushing the perimeter wall back and causing cracks thereon, as well as water seepage, the Sonkins are nevertheless guilty of contributory negligence for not only failing to observe the two (2)-meter setback rule under the National Building Code, but also for disregarding the legal easement constituted over their property. As such, the Sonkins must necessarily and equally bear their own loss. In view of Sonkins contributory negligence, the SC deleted the award of moral damages in their favor. Anent the issue on attorney's fees, the general rule is that the same cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate. They are not to be awarded every time a party wins a suit. The power of the court to award attorney's fees under Article 2208 of the Civil Code demands factual, legal, and equitable justification. Even when a claimant is compelled to litigate with third persons or to incur expenses to protect his rights, still attorney's fees may not be awarded where no sufficient showing of bad faith could be reflected in a party's persistence in a case other than an erroneous conviction of the righteousness of his cause. In this case, the existence of bad faith is negated by the fact that both parties have valid contentions against each other. Thus, absent cogent reason to hold otherwise, the Court deems it inappropriate to award attorney's fees in favor of either party.

RUKS KONSULT AND CONSTRUCTION

VS.

ADWORLD SIGN AND ADVERTISING CORP. & TRANSWORLD MEDIA ADS, INC. G.R. NO. 204866; JANUARY 21, 2015

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Adworld filed a complaint for damages against Transworld and Comark before the RTC alleging damage to its billboard located at Edsa when the adjacent billboard structure owned by Transworld and used by Comark collapsed and crashed against it. Despite Adworld‘s demand for indemnity, Transworld refused to pay. Transworld averred that the collapse of its billboard structure was due to extraordinarily strong winds that occurred instantly and unexpectedly, and maintained that the damage caused to Adworld‘s billboard structure was hardly noticeable. Transworld likewise filed a Third-Party Complaint against the petitioner Ruks Konsult, the company which built the collapsed billboard structure in the former‘s favor. Transworld alleged therein that the structure constructed by Ruks had a weak and poor foundation not suited for billboards, thus, prone to collapse, and as such, Ruks should ultimately be held liable for the damages caused to Adworld‘s billboard structure. Comark denied liability for the damages caused to Adworld‘s billboard structure, maintaining that it does not have any interest on Transworld‘s collapsed billboard structure as it only contracted the use of the same. The RTC ruled in Adworld‘s favor and declared Transworld and Ruks jointly and severally liable to Adworld. The CA affirmed rulings of the RTC. ISSUES: Whether Ruks and Transworld are guilty of negligence for the collapse of the billboard; and if so, what is the nature of their liability? The SC sustained the finding that both Ruks and Transworld are guilty of negligence. Transworld‘s initial construction of its billboard‘s lower structure was without the proper foundation, and Ruks‘s merely assumed that Transworld would reinforce the weak foundation. Worse, both Transworld and Ruks were fully aware that the foundation for the former‘s billboard was weak; yet, neither of them took any positive step to reinforce the same. They merely relied on each other‘s word that repairs would be done to such foundation, but none was done at all. Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would not do. It is the failure to observe for the protection of the interest of another person that degree of care, precaution, and vigilance which the circumstances justly demand, whereby such other person suffers injury. The foregoing circumstances show that both Transworld and Ruks are guilty of negligence in the construction of the former‘s billboard, and perforce, should be held liable for its collapse and the resulting damage to Adworld‘s billboard structure. This is not a product of fortuitous event but of negligence. As joint tortfeasors, Ruks and Transworld are solidarily liable to Adworld. ―Joint tortfeasors‖ are those who command, instigate, promote, encourage, advise, countenance, cooperate in, aid or abet the commission of a tort, or approve of it after it is done, if done for their benefit. They are also referred to as those who act together in committing wrong or whose acts, if independent of each other, unite in causing a single injury. Under Article 2194 of the Civil Code, joint tortfeasors are solidarily liable for the resulting damage. In other words, joint tortfeasors are each liable as principals, to the same extent and in the same manner as if they had performed the wrongful act themselves.

2016 Civil Law Updates by Assoc. Dean Viviana M. Paguirigan for Jurists Bar Review Center™. All rights reserved 2016 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is strictly prohibited and shall be prosecuted to the full extent of the law, including administrative complaints with the Office of the Bar Confidant, Supreme Court.

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