Biyernes, Mayo 04, 2012


 FROM JANUARY 05, 1998 TO FEBRUARY 6, 2002
(Source: Philippine Law Reports, UP LAW CENTER)

S.M.: Mortgage; A. 2088
GR # 118342, January 05, 1998

FACTS:          The complaint sought (1) the declaration of nullity of DBP’s appropriation of CUBA’s rights, title and interests over a 44 hec. fishpond in Bolinao, Pangasinan for violating A. 2088, NCC.  DBP and Caperal stressed that DBP merely exercised its contractual right under the Assignment of Leasehold Rights, which, allegedly, was not a contract of mortgage. CUBA asserted that said Assignment was a mortgage contract since it was executed simultaneously with the promissory notes covering CUBA’s 3 separate loans amounting to P335k with DBP.  In all these notes was the provision that : “ In the event of foreclosure of the mortgage securing this note, I/We further bind myself/ourselves, jointly and severally, to pay the deficiency, if any. HELD: The deeds of assignment constantly referred to CUBA (assignor) as “borrower”; the assigned rights as mortgaged properties; and the instrument itself, as mortgage contract; several conditions in their contract showed clearly that a mortgage was intended. Also, the parties, in their Stipulation of Facts during the pre trial, admitted that the assignment was by way of security for the loan’s payment.  An assignment to guarantee an obligation is in effect a mortgage. (People’s Bank & Trust Co. vs. Odom, 64P126).

SM:  Succession; determination of relationship under A.962, NCC
GR # 116775, January 22, 1998

FACTS: Justa acquired the 0.5 hec by inheritance from her parents, Juan Arnaldo and Ursula Tubil, and 2.2 hec by purchase.  Estrada, Justa’s nephew, claimed to be the sole surviving heir of Justa on the ground that she died intestate.  He further claimed that Pascasio Uriarte who apparently worked the land as Justa’s tenant refused to give him his share of the harvest.  Estrada claimed that Uriarte has no right to the entire land but could only claim ½ of the 0.5 hec. Justa inherited from her parents.  While the partition case was pending, Pascasio died and was replaced by petitioners-heirs. Allegedly, the petitioners were not mere tenants but Justa’s heirs entitled to her entire land.
HELD: Estrada, as admitted by petitioners, is Justa’s nephew, his mother, Agatonica, being Justa’s half sister.  He is thus Justa’s nearest relative and thus, the only one entitled to her estate. Estrada is  a 3rd degree relative of Justa.  On the other hand, petitioners are the children of Justa’s cousin.  They are thus 5th degree relatives of Justa.  Applying the principle that the nearest excludes the farthest, then Estrada is the lawful heir of Justa.  The fact that his mother is only a half-sister of Justa is of no moment. A nephew is considered a collateral relative who may inherit if no descendant, ascendant, or spouse survives the decedent.  That Estrada is only a half-blood is immaterial.  This alone does not disqualify him from being his aunt’s heir. The determination of whether the relationship is of full or half blood is important only to determine the extent of the share of the survivors.

SM:  Property; forest reserves are incapable of private appropriation and possession for as long as the reservation subsists..
GR # 127236, January 27, 1998

FACTS: Petitioner Gordula filed an application for a free patent over a land, which he had been in possession since 1949, in January, 1973.  The Free patent was issued on January 01, 1974. The subject land in 1973 was still part of the Caliraya- Lumot River Forest reserve and was no longer open to private ownership as it has been classified as public forest reserve for the public good. Thereafter, on November 18, 1987, the REPUBLIC, thru the NAPOCOR, filed an action for annulment of petitioner’s Free Patent, cancellation of titles and The CA also held that the petitioners could not claim ownership by acquisitive prescription since as of 1969; Gordula had been in possession of the property for only 25 years. The period of Gordula’s occupancy after 1969 should not be tacked to the period from 1944 since by then the property was not susceptible of occupancy, disposition, conveyance or alienation. HELD: Forest lands/reserves are incapable of private appropriation and possession thereof however long can not convert them into private properties. (Director of Lands vs. CA). This ruling is premised on the Regalian doctrine enshrined in the ’35,’73 and ‘87Constitutions. Further, no public land can be acquired by private persons without any grant, express or implied from the government; it is indispensable that there be a showing of a title from the State. Gordula did not acquire title to the said land prior to its reservation under Proc. # 573.  He filed his application 3 years after said Proclamation was issued in 1969.  At that time, the land, as part of the Caliraya- Lumot River Forest Reserve, was no longer open to private ownership as it has been classified as “public forest reserve for public good.”

SM: A.121, Family Code; conjugal partnership
GR # 118305, February 12, 1998

FACTS: Philippine Blooming Mills (PBM) obtained a P 50.3M loan from petitioner AIDC.  As added security for the Pam’s credit line, respondent Alfredo Ching, EVP of PBM, executed 2 security agreements making himself jointly and severally answerable w/ PBM in its indebtedness to AIDC.  PBM failed to pay the loan.  Thus, AIDC filed a case for sum of money against PBM and Ching w/ the then CFI of Rizal which ruled in AIDC’s favor.  It further issued a writ of execution and a notice of Sheriff Sale on 3 of the Ching’s conjugal properties.  Consequently, the Chings filed an injunction case to enjoin the auction sale alleging that petitioners can not enforce the judgment against the conjugal properties levied since the loan did not redound to the benefit of the conjugal partnership.          HELD: The SC agreed with the CA in ruling that Alfredo signed as a surety for the P50.3M loan contracted on PBM’s behalf and AIDC failed to prove that his acting as surety redounded to the benefit of the conjugal partnership .The loan procured from AIDC was for the advancement and benefit of PBM and not for the Conjugal partnership’s benefit. Art. 121(3), FC is emphatic that the payment of personal debts contracted by the husband/wife before or during the marriage shall not be charged to the conjugal partnership except to the extent that they redounded to the family’s benefit.  Here, the property also involves the family home.  The loan is a corporate loan, not a personal one. Signing as surety is certainly not an excuse of an industry/profession or an act of administration for the family’s benefit.

SM: Wills and Succession; Collation
GR # 118449, February 11, 1998

FACTS: Estrellita purchased form Rafael a 10,110 sq. m. lot located at Valenzuela, Bulacan for P100k.  She sold the Valenzuela property for P3, 405, 612 and in June of the same year, she bought a house and lot in BF Homes, Parañaque using a portion of the proceeds of the sale of the Valenzuela lot. Estrellita and her 2 children, Carmela and Jennifer, were killed.  Lauro was left as the sole heir but he entered into an extrajudicial settlement of his wife’s estate with Rafael and Salud, her parents. This settlement provided 50% of the total amount of the bank deposits of Estrellita and her daughters to Rafael while the other 50% was given to Lauro.  The Parañaque property and the car were also given to Lauro with Rafael and Salud waiving all their claims, rights, ownership and participation as heirs in the said properties. Rafael died.  In the intestate proceeding the Valenzuela lot allegedly was given by Rafael to Estrellita and that the heirs’ legitime should come from collation of all properties distributed to his children by Rafael during his lifetime.  Ramon, Rafael’s son, further claimed that the petitioner is one of Rafael’s children by right of representation as Estrellita’s widower. HELD: Petitioner is Rafael’s son-in-law and not one of his compulsory heirs.  With respect to Rafael’s estate, petitioner, who was not even shown to be a creditor of Rafael, is considered a 3rd person.  As such, he may not be dragged into the intestate estate proceeding. Secondly, the order of collation is premature since the proceeding is still in its initiatory stage.  There is nothing to indicate that the legitime of any of Rafael’s heirs has been impaired to warrant collation. Further, collation of the Parañaque property, bought using the proceeds of the sale of the Valenzuela property which Rafael transferred to Estrellita, has no statutory basis.  The Order of the probate court presupposes that the Parañaque property was gratuitously conveyed by Rafael to Estrellita.  However, Estrellita paid P900, 000 to Premier Homes, Inc. for said property. The collation is improper for collation covers only properties gratuitously given by decedent during his lifetime to his compulsory heirs which do not obtain to the transfer of the Parañaque realty.  Moreover, Rafael already waived his right to said realty. Lastly, Estrellita died ahead of Rafael.  In fact, it was Rafael who inherited from her an amount more than the value of the Valenzuela lot.  Thus, even assuming that the latter property maybe collated, collation may not be allowed as the value of the Valenzuela lot has long been returned to Rafael’s estate.

SM: A.733, NCC; donations (kinds)
GR # 112796, March 05, 1998

FACTS:          Petitioner’s grandmother Catalina Jacob Vda. De Reyes was awarded a 60.10 sq.m.lot which is a portion of the Monserrat Estate.  Shortly before she left for Canada, Jacob executed as SPA in favor of her son- in-law
Eduardo Español authorizing him to execute all documents necessary for the final adjudication of her claims as awardee of the lot. Jacob revoked said authority in an instrument executed in Canada.  Simultaneously, Jacob executed another SPA in petitioner’s favor.  Thereafter, Jacob executed in Canada a Deed of Donation over Lot 8W in petitioner’s favor.  The petitioner then checked with the register of Deeds and found out that the property was in the delinquent list so he paid the remaining balance and declared the lot in Jacob’s name. Subsequently, petitioner sent a demand letter to private respondent asking him to
vacate Lot8W which the latter refused to do. HELD: The donation in the case at bar was simple and not onerous as claimed by petitioner.  Even conceding that petitioner’s full payment of the purchase price of the lot might have been a burden to him; such payment was not however imposed by the donor as a condition for the donation.  In fact, the donor in the deed did not have any intention to burden/ charge petitioner as the donee.  The words in the deed are typical of a pure donation.  The payments made by petitioner were his voluntary acts.  In simple donations, acceptance of the donation by the donee is indispensable; its absence makes the donation null and void. 

S: A.2176, NCC; Damages; quasi - delict for damages suffered by a 3rd party.
GR # 118889, March 23, 1998

FACTS: 2 vehicles, both Mitsubishi Colt Lancers cruising northward along EDSA, Mandaluyong City figured in a traffic accident. One car was owned by Lydia Soriano and was driven by Benjamin Jacildone while the other was owned by respondent FILCAR Transport Inc., and driven by Peter Dahl- Jensen as lessee. FGU, in view of its insurance contract with Soriano, paid the latter P25, 382.20.  By way of subrogation, it sued Dahl-Jensen and FILCAR as well as respondent Fortune Insurance Co. (FIC) as FILCAR’S insure for quasi delict before the Makati City RTC.  Dahl- Jensen was dropped from the complaint.  HELD: To sustain a claim based on quasi-delict, the following requisite must concur: (a) damage suffered by the plaintiff; (b) fault/negligence of the defendant; and (c) connection of cause and effect between the fault/negligence of the defendant and the damage incurred by plaintiff. FGU failed to prove the existence of the 2nd requisite, i.e. FILCAR’s fault/negligence, because the only fault/negligence that was established was that of Dahl-Jensen.  FILCAR being engaged in a rent- a-car business was only the owner of the car.  As such, there was no vinculum juris between them as employer and employee which would make FILCAR liable under Art.2180.  FILCAR can not in any way be responsible for not being an employer of the latter.  Logically, FGU’s claim against FORTUNE can neither prosper.

SM:  Property; invalid transfer of land to an alien who later transfers the same to a FILCIT
GR # 113539, MARCH 23, 1998

FACTS: Private respondents, both American Citizens, inherited real properties from Simeon de Guzman, who died intestate, located in the Philippines.   His wife, Helen, executed a deed of quit claim assigning, transferring and conveying to their son, David Rey, all her rights, titles and interests in and over 6 parcels of land which the 2 of them inherited from Simeon who himself was an AMCIT. David thereafter sold the land to private respondent Emiliano Cataniag.  Petitioners, the adjoining lot’s owners, questioned the validity and constitutionality of the 2 conveyances, i.e. from Helen to David and between David and Emiliano.  They also claimed ownership thereto based on their right of legal redemption under Art.1621, NCC. HELD:   The SC ruled that although Helen’s deed of quit claim -in which she assigned, transferred and conveyed to David all her rights, titles, and interests over the property she had inherited from her husband-collided with Sec.7, Art. XII of the 87 Constitution. Since the disputed land is now owned by Cataniag, a FILCIT, the prior invalid transfer can no longer be assailed. The objective of the constitutional provision to keep our land in Filipino hands has been served.      Non Filipinos can not acquire or hold
title to private lands or to lands of the public domain, except only by way of legal succession.  However, if land is invalidly transferred to an alien who subsequently becomes a citizen or transfers it to a citizen, the flaw in the original transaction is considered cured and the title of the transferee is rendered valid.

SM:  Contracts; suretyship; Art. 2047, NCC
GR # 126490, March 31, 1998

FACTS: Pursuant to a promissory note (PN), private respondent MB Lending Corp. (MB) extended a loan to the spouses Azarraga together with petitioner amounting to P30k but debtors were able to pay only P16, 300. Consequently, on the basis of petitioner’s solidary liability under the PN, MB filed a complaint against petitioner as the lone party defendant to the exclusion of the principal debtors, allegedly due to the latter’s insolvency. Petitioner claimed that while she agreed to be liable on the note upon default of the principal debtor, MB acted in bad faith in suing her alone without including the Azarragas when they were the only ones who benefited from the loan’s proceeds. HELD: Petitioner expressly bound herself to be jointly and severally liable with the principal maker of the note. The terms of the contract are clear, explicit and unequivocal that petitioner’s liability is that of a surety. A surety is an insurer of the debt, a suretyship is an undertaking that the debtor shall pay.  A surety promises to pay the principal’s debt. If the principal will not pay, he binds himself to perform if the principal does not, w/o regard to his ability to do so. In fine, a surety undertakes directly for the payment and is so responsible at once if the principal debtor makes default. It has not been shown, either in the contract or the pleadings that MB agreed to proceed against petitioner only if and when the defaulting principal has become insolvent

SM: Contracts; A. 1342, NCC
PBC vs. CA
GR # 109803, April 20, 1998

FACTS: Chee Puen, then the general manager of Global Inc., informed private respondent, his estranged wife that their company a P300k loan for its operational expenses.  He proposed that her paraphernal lot in Makati be used as collateral.  He assured her that the loan would not exceed P300k and she was asked to sign 3 sets of blank forms of real estate mortgage (REM) of PBC.  He wrote down in pencil the figure 300 under the space provided for the amount to be loaned and respondent signed the blank mortgage forms due to Chee Puen’s representations.  Chee Puen had the REM document later notarized by Atty. Arzadon using a residence certificate bearing respondent’s forged signature.  Apparently, Chee Puen applied for a P3M loan from PBC.  To secure the loan, he mortgaged respondent’s paraphernal lot in Makati, using the blank REM forms signed by her.  He also misrepresented himself as president and acting corporate secretary of Global, Inc. PBC did not investigate Chee Puen’s authority to mortgage respondent’s property.            Private respondent discovered that Chee Puen obtained a loan of P3M from PBC. HELD: Respondent has not consented to collateralize Global, Inc’s P3M loan with her paraphernal lot.  All facts show that she was misled by Chee Puen and thus, the REM should be nullified. The established facts preclude the application of estoppel against the respondent.  Respondent did not deliberately or intentionally lead the PBCtobelieve that she was putting up her paraphernal realty to secure the P3M loan of Global.It was Chee Puen who made the misrepresentation thus defrauding respondent herself. 
Further, PBC’s reliance in the REMs signed in blank by the respondent was unreasonable.  As a banking institution, PBC was grossly negligent when (a) it took no step to verify whether the respondent was really offering her paraphernal property as collateral; (b) made no credit check on  respondent and Global, Inc.; and (c) conducted no investigation on the authenticity of the “Secretary’s Certificate of Board Resolution.”The business of a bank is affected with public interest and it should observe a higher standard of diligence when dealing with the public.  Neither will it matter that PBC itself was misled by Chee Puen, a 3rd person to the contract.  Under A.1342, NCC, the misrepresentation of a 3rd person will vitiate consent if it has resulted in substantial mistake and the same is mutual.

SM: Surety vs. Guaranty; A.2080, NCC does not apply where the liability is as a surety, not as a guarantor.
GR# 113931, May 6, 1998

FACTS: Respondent Spouses Claveria, doing business under the name “ Agro Brokers”, applied for a loan with respondent Consolidated Bank & Trust Corp. (now SOLID BANK) amounting to P2.875M.  The loan was granted subject to the condition that respondent spouses execute a chattel mortgage over the 3 vessels to be acquired and that a continuing guarantee be executed by Ayala International Phils., Inc., now herein petitioner E.Zobel, Inc. in SOLID BANK’s favor. The Claverias defaulted in the payment of the entire obligation upon maturity.  Petitioner moved to dismiss the complaint asserting that its liability as guarantor of the loan was extinguished pursuant to A.2080, NCC.  It argued that it has lost its right to be subrogated to the first chattel mortgage in view of SOLIDBANK’s failure to register the chattel mortgage with the appropriate government agency.  SOLIDBANK meantime claimed that A.2080 is not applicable because petitioner is not a guarantor but a surety.
HELD: In the contract executed by petitioner in SOLIDBANK’s favor, albeit denominated as a “Continuing Guaranty”, is in fact a contract of surety.  The contract’s terms obligates petitioner as “surety” to induce SOLIDBANK to extend credit to the Claverias. The contract clearly disclose that petitioner assumed liability to SOLIDBANK, as a regular party the undertaking and obligated itself as an original promissory.  It bound itself jointly and severally to the obligation with the Claverias.  In fact, SOLIDBANK need not resort to all other legal remedies or exhaust the Claverias’ properties before it can hold petitioner liable for the obligation. Since the petitioner is a surety, A.2080, NCC is inapplicable.  Said article applies where the liability is as a guaranty not as a surety.

SM: Property; easement of right of way; compulsory easement; Arts. 649-650, NCC
GR# 125339, June 22, 1998

FACTS:  A portion of private respondents’ lot was being used as a passageway by petitioners to and from Visayas Ave. The Paciones and the petitioners met and the latter offered to pay for the use of a portion of Lot1 as a passageway but the Paciones rejected said offer.  They then started enclosing Lot1 with a concrete fence.  Petitioners protested alleging that their property was bounded on all sides by residential houses belonging to different owners and had no adequate outlet and inlet to Visayas Ave. except thru the Paciones’ property.  Petitioners filed an action for easement of right of way with a prayer for TRO. The case was dismissed for lack of 1 essential requisite of a legal easement of right of way was not proved, i.e., the absence of an alternative adequate way/outlet to a public highway. HELD: To be entitled to a compulsory easement of right of way the preconditions provided under Arts. 649-650, NCC must be established.  These are: (1) that the dominant estate is surrounded by other immovable and has no adequate outlet to a public highway; (2) that the proper indemnity has been paid; (3) that the isolation was not due to acts of the proprietor of the dominant estate; (4) that the right of way claimed is at a point least prejudicial to the servient estate and, in so far as consistent with this rule, where the distance from the dominant estate to a public highway maybe shortest.  The burden of proving the existence of these prerequisites lies on the owner of the dominant estate. In the case at bar, the 1st element is palpably absent.  As previously found, an outlet already exists-  the path  walk located at the left side of petitioner’s property  and which is connected to a private road about 500 meters long.  This in turn leads to Ma. Elena St., finally, to Visayas Ave. This outlet was held to be sufficient for the needs of the dominant estate, hence, petitioners have adequate outlet to Visayas Ave. Further, no evidence was adduced by petitioner to prove that the easement they seek to impose on private respondents’ property is to be established at a point least prejudicial to the servient estate.

SM: Property; lease; PD #1517, Land Tenancy in Urban Reform Areas; requisites
GR# 112041, June 22, 1998

FACTS:  The Carreons became members of the Mataas na Lupa Tenants Assoc. (MNLTA).            Unfortunately, fire razed the houses in the area including the Carreons’ house.  One of their children, Honorio, wanted to build a house in the lot and so the Carreons asked the petitioners who constructed a temporary house to vacate but they refused.  Separate complaints were then filed against them.            Meanwhile, the MNLTA pursued its plan to acquire the estate after the promulgation of a Supreme Court decision recognizing its right of first refusal or option to buy pursuant to the Constitution and PD1517.  The MNLTA apparently have acquired the estate thru negotiation with the owners thereof for a title thereafter, was issued to it. HELD: The SC ruled that petitioners are not tenants pursuant to PD 1517.Tenant, under Sec.3 (f) of PD1517, refers to the rightful occupant of land and its structures, but does not include those whose presence on the land is merely tolerated and without the benefit of a contract; those who entered the land by force/deceit; or those whose possession is under litigation. In the case at bar, records showed that petitioners were originally room renters in the Carreons’ house.  When it was razed to the ground, they asked the Carreon’s widower to allow them to construct temporary quarters on the lot with the understanding that they will leave and vacate the same when private respondents will need the lot upon demand.  Obviously, their stay in the premises was merely an act of tolerance on the respondents’ part.  Their status as occupants of the lot can not be classified as “tenants” within the purview of PD 1517.

SM: Torts and Damages; fortuitous event
GR # 126389, July 10, 1998

FACTS: A powerful typhoon Saling hit Metro Manila.  Buffeted by very strong winds, the roof of petitioner’s building was partly ripped off and blown away, landing on and destroying portions of the roofing of the PR’s house.            The PR then filed a complaint for damages based on culpa aquiliana alleging that the damage to their house rendered the same uninhabited, forcing them to stay temporarily in others’ houses. Petitioner meantime raised the defense that Saling was an act of God and thus, beyond human control such that petitioner can not be answerable for the damages wrought thereby, absent any negligence on its part. HELD: In order that a fortuitous event may exempt person from liability, it is necessary that he be free from any previous negligence/misconduct by reason of which the loss may have been occasioned by an act of God. When a person’s negligence concurs with an act of God in producing damage or injury to another, such person is not exempt from liability by showing that the immediate/proximate cause of the damage or injury was a fortuitous event.  When the effect is found to be partly the result of the participation of man-whether it be from active intervention, or neglect, or failure to act- the whole occurrence is thus humanized, and removed from the rules applicable to acts of God. In the instant case, other than the said ocular inspection, no litigation was conducted to determine the real cause of the partial unroofing of petitioner’s school building.  They did not even show that the plans, specifications and design of said school building were deficient and defective and its construction basically flawed. Thus, petitioner has not been shown to be negligent or at fault regarding the construction and maintenance of its school building in question and that Saling was the proximate cause of the damage suffered by PR’s house.  It isn’t enough that the damage be capable of proof but must be actually proved with a reasonable degree of certainty.

SM: Property; quieting of title; A.549, NCC
GR# 121270, August 27, 1998

FACTS:  Antonio Cerrudo acquired a property during his marriage to Pomposa Glorioso. He applied for its registration in his name under the Torrens System thru a cadastral case. He died intestate leaving his wife and son Pablo as heirs. After his death, the land was registered in his own name. Thereafter, Pablo allegedly executed a public instrument ceding ½ of the property to his aunt Gregoria, his father’s only sibling.  Pablo died 3 years later survived by his wife, children and his mother. 14 years later, his aunt Gregoria filed a “Petition for Inscription” before the then CFI of Sariaya.  30 years later, Gregoria conveyed, by Deed of Sale, to her children, herein petitioners, her undivided portion of the subject land. When the petitioners tried to have the property subdivided, the Cerrudos refused.
HELD: Petition for inscription could not have settled Gregoria’s claim for ownership. This proceeding, allowed under Sec.112 of the Land Registration Act, is inapplicable.  The proceedings under Sec112 of said Act are inadequate to settle the issue of ownership over the disputed portion.  Matters described in Sec.112 is non-controversial in nature.  They are limited to issues so patently insubstantial as not to be genuine issues.  These proceedings are summary in nature, contemplating corrections/ insertions of mistake which are only clerical but certainly not controversial issues. Evidence show that there was really no unanimity among the parties.  The issues raised in the petition for inscription should have been threshed out in a more appropriate proceeding.      Further, the action instituted by private respondents to question the proceedings in 1948 and to recover the portion of the land in petitioners’ possession has not been barred by laches. It appears that the possession by petitioners of the disputed portion of land was merely tolerated by the private respondents who were compelled to file the action in the lower court when petitioners sought to partition the whole
property. The lawful owners have a right to demand the return of their property any time as long as the possession was unauthorized or merely tolerated, if at all. This right is forever barred by laches (BISHOP vs. CA, 208 S 636).

SM: Quasi delicts; liability of Employer under A.2180, NCC
GR# 119121, August 14, 1998

FACTS: NPC’s 4 dump trucks left Marawi City for Iligan City when one of its trucks, RFT-9-6-673, DRIVEN BY Ilumba figured in a head- on- collision with a Toyota Tamaraw.  The incident resulted in the death of 3 persons riding in the Toyota, as well as physical injuries to 17 other passengers.  PHESCO claimed that it was not the dump trucks’ owner and that they were owned by NPC.  IT further said that it was merely NPC’s contractor with the main duty of supplying workers and technicians for the latter’s projects.  NPC, meantime, denied such liability and countered that the driver of the dump truck was PHESCO’s employee. HELD: PHESCO was engaged in ‘labor only’ contracting vis-à-vis NPC and as such, it is considered merely as NPC’s agent. In such cases, an ER-EE relationship between the principal employer and the employees of the ’labor-only’ contractor is created. Accordingly, the principal employer is responsible to the employees of the “’labor only’ contractor as if such employees have been directly employed by the principal employer.  Since PHESCO is only a ‘labor only’ contractor, the workers it supplied to NPC, including the truck driver, should be considered as NPC’s employees.

SM:  Donation
GR# 125888, August 13, 1998

FACTS: Aurora Virto Vda.  De Montinola executed an instrument entitled “Deed of Donation Inter Vivos” naming her grandchildren as donees.  The subject of the donation is Lot 3231 of the Cadastral Survey of Panay in Montinola’s name.  The deed also contained the donees’ signatures in acknowledgment of their acceptance of the donation.  The same was registered, and the donor’s title cancelled. Montinola however retained the owner’s duplicate copy of the new title as well as the property itself, until she transferred the same to the Sicads. She revoked the donation and filed a petition with the RTC in Roxas City for the cancellation of the new title and the reinstatement of the donor’s title.  She alleged that her donation was one mortis causa which had to comply with the formalities of a will and since it had not, the donation was void.  The donees opposed and claimed that the donation was inter vivos. HELD: A donation which purports to be one inter vivos but with holds from the donee the right to dispose of the donated property during the donor’s lifetime is in truth one mortis causa. In a donation mortis causa the right of disposition is not transferred to the donee while the donor is still alive. In the case at bar, nothing of any consequence was transferred by the deed of donation in question to Montinola’s grandchildren, the ostensible donees.  They did not get possession of the property donated.  They did not acquire the right to the fruits thereof, or any other right of dominion over the property.  More importantly, they did not acquire the right to dispose of the property- this would accrue to them only after 10 years from   Montinola’s death.  Indeed, they never even laid hands on the certificate of title to the same.  They were thus simply ‘paper owners’ of the donated property. 

SM:  Family Code; Consent of natural parents in adoption.
GR# 10538, September 25, 1998

FACTS: Petitioner and his wife Ana Marie were legally separated before he left for the U.S. where he obtained a decree of divorce.  Their 2 children were left with Ana Marie who was abroad often.  Hence, she decided to have her children adopted by her brother, Ronald, herein private respondent.  Ana Marie freely gave her Affidavit of Consent and one of her children, her son, consented to the adoption. The petition alleged that petitioner had not only divorced Ana Marie but has already abandoned his family to live in the U.S. as an illegal immigrant. The RTC of Cebu granted the petition for adoption.  Petitioner appealed with the CA asserting that he has not abandoned his children as shown by the money he sent them through various bank accounts.  He also pointed out that he never gave his written consent to the adoption. HELD: In cases where the father opposes the adoption primarily because his consent to it was not sought, the matter of whether he had abandoned his child becomes a central issue.  Abandonment of a child by his parent imports any conduct of the parent which evinces a settled purpose to forego all parental duties and relinquish all parental claims to the child.  It means neglect/refusal to perform the natural and legal obligations of care and support which parents owe their children. In the instant case, records show that petitioner’s conduct did not manifest a settled purpose to forego all parental duties and relinquish all parental claims over his children as to constitute abandonment.  Though in the U.S., petitioner was not remiss in his natural and legal obligations of love, care and support for his children.

SM: A.2088, NCC; mortgage; pactum commissorium.
GR # 125055, October 30, 998

FACTS: AFRD granted a P7.5M loan to private respondents, spouses Javillonar covered by a promissory note, a deed of mortgage over a lot (TCT 58748) with its improvements and an undated deed of sale of the mortgaged property in AFRD’s favor as mortgagee. The promissory note expressly provided that upon failure of the mortgagor to pay the interest without prior arrangement with the mortgagee, full possession of the property will be transferred and the deed of sale will be registered.  The owner’s duplicate of TCT 58748 was delivered to AFRD. The Javillonars allegedly failed to pay the interest and consequently, AFRD registered the sale in its favor.  TCT 58748 was cancelled and a new TCT was issued in AFRD’s name. Thereafter, the couple obtained an additional loan of P2.5M from AFRD covered by a promissory note allowing AFRD to appropriate their property covered by AFRD’s new title.  AFRD demanded possession of the mortgaged property but the Javillonars refused to vacate. HELD: A.2088, NCC furnishes 2 elements for pactum commissorium to exist: (1) that there should be a pledge/mortgage wherein pledged/mortgaged by way of security for the payment of the principal obligation; and (2) that there should be a stipulation for an automatic appropriation by the creditor of the thing pledged/mortgaged in the event of non payment of the principal obligation within the stipulated period (UY TONG vs. CA, 161 S 383).            Thus, in the case at bar, the stipulations in the promissory notes providing that (1) upon failure of the couple to pay interest, ownership of the property would be automatically transferred to petitioner and (2) the deed  of sale in its favor would be registered, are substantially , a pactum commissorium.The subject transaction being void, the registration of the deed of sale by virtue of which AFRD was able to obtain TCT 85569 covering the subject lot, must also be declared void.

SM: A.749, NCC; Donation of real property
GR # 110644, October 30, 1998

FACTS: Augusto Dizon died intestate on May 15.1942 leaving as heirs his 5 children: Eduardo, Gaudencio, Salud, Valenta and Natividad.  Dizon left, among others, a parcel of land with an area of 2,188 sq. meters covered by OCT 10384 located in Hagonoy, Bulacan. Gaudencio sold his hereditary rights to his sister Salud for P4k. Petitioners filed an action for compulsory judicial partition of real properties with the Malolos RTC. They alleged that Natividad, herein respondent, refused to agree to the formal distribution of the properties.  This was due to Natividad’s claim that her father donated the lot covered by OCT 10384 in 1936 with the other heirs’ consent. HELD: The alleged donation was done orally and not executed in a public document.  Further, the document which was presented by respondent in support of her claim was a mere private document of conformity which was executed by her elder brother, Eduardo in 1956. Eduardo and Gaudencio however had already ceded their hereditary rights to petitioner Salud Salamat even before 1950. Nevertheless, assuming that Agustin really made the oral donation, respondent can not still claim ownership over the property. The parties being heirs of Agustin are co-owners of the properties.  A co-ownership is a form of trust, with each owner being a trustee for each other and possession of a co- owner shall not be regarded as adverse to other co-owners but in fact is beneficial to them.  Mere actual possession by one will not give rise to the inference that possession was adverse because a co-owner is, after all entitled to possession of the property. Lastly, respondent never made unequivocal acts of repudiation, thus, she can not acquire ownership over said realty thru acquisitive prescription.

SM: Persons and Family Relations; A. 148, NCC
GR# 102330, November 25, 1998

FACTS: Petitioner is private respondent Eusebio Francisco’s legal wife by his 2nd
marriage. The other private respondents are his children by his 1st marriage.
Allegedly, the Francisco’s have acquired several properties since their marriage in February 1962. Eusebio administered these realties until he was invalidated by various diseases, rendering him unfit to administer them.  Petitioner averred that his children convinced their father to sign a general power of attorney which authorized one of his children, Conchita, to administer the house and lot as well as the apartments. Consequently, petitioner filed a suit for damages and for annulment of said General Power Attorney and thus, enjoining its enforcement.  She also sought to be declared as the administratrix of all the properties. 
HELD: The party who invokes the presumption provided by A.160, NCC must first prove that the property in question was acquired during the marriage. Proof of acquisition during the coverture is a condition sine qua non for the operation of the presumption in favor of the conjugal partnership. The party who asserts this presumption must first prove said time element. The presumption refers only to the property acquired during the marriage and does not operate when there is no showing as to when the property alleged to be conjugal was acquired.  Further, this presumption in favor of conjugality is rebuttable, but only with strong, clear and convincing evidence; there must be a strict proof of exclusive ownership of one of the spouses. In the case at bar, petitioner failed to adduce ample evidence to show that the properties which she claimed to be conjugal were acquired during her marriage to Eusebio.

SM: Contracts; Arts. 1385 &1482
GR# 126812, November 124, 1998

FACTS: Petitioner and private respondent Baretto Realty (BR) entered into a contract to sell for one of the lots sold by BR.  Petitioner gave BR earnest money for the said property. It appeared that the same was intended to form part of the purchase price and absent any express provision it shall not be forfeited in favor of BR in case petitioner fails to comply with his obligation. Petitioner informed BR that it would no longer push thru with the sale.  It then resorted to extrajudicial rescission of its agreement to which BR did not object.  In fact, BR sold the subject realty a day after said letter of rescission was received by BR’s president. Petitioner demanded the return of its earnest money but BR refused.  HELD: Under A.1482, NCC, whenever earnest money is given in a contract of sale, it shall be considered as part of the purchase price and as proof of he perfection of the contract.  Petitioner clearly stated without any objection from BR that the earnest money was intended to form part of the purchase price.  It was an advance payment which must be deducted from the total price.  Thus, the parties could not have intended that the earnest money or advance payment would be forfeited when the buyer should fail to pay the balance of the price, especially in the absence of a clear and express agreement thereon.  Petitioner resorted to extrajudicial rescission of its contract with BR which in turn did not object. If the party does not oppose the declaration of rescission of the other party, specifying the grounds therefore, and if it fails to reply or protest against it, its silence thereon suggests an admission of the veracity and validity of the rescinding party’s claim.  By virtue of the extrajudicial rescission of the contract to sell by petitioner without opposition from BR, which, in fact, sold the property to other persons, BR, as the vendor, had the obligation to return the earnest money of P1M. It would be most inequitable if respondent BR would be allowed to retain it and at the same time appropriate the proceeds of the 2nd sale.

SM:  Quasi delicts; Liability of employers under Arts.2180 & 2194, NCC
GR# s 116617 & 126395, November 16, 1998

FACTS: Liza Rosalie Rosales died due to a vehicular accident involving petitioner MMTC’s vehicle driven by Pedro Musa.  Her parents sued MMTC and Musa for damages.  According to MMTC, it has exercised the diligence of a good father of a family with respect to the selection of employees by presenting mainly testimonial evidence on its hiring procedure. Thus, it should not be liable for damages. HELD: The evidence presented by MMTC to show that it exercised the diligence of a good father of a family in the selection and supervision of employees and thus avoid the vicarious liability for the negligent acts of its employees is insufficient to overcome the presumption of negligence against it. MMTC is thus primarily liable for damages arising from the negligence of its employee in view of A.2180, NCC. It can recover from its employee but does not make the latter’s liability subsidiary. They are solidarily liable. The liability of the registered owner of a public service vehicle for damages arising from the tortious acts of its driver is primary, joint and direct with the driver.

SM:  Prescription; constructive trust; donation, A. 736, NCC
GR # 125715, December 29, 1998

FACTS: Rafael and Felicidad Marquez have 12 children. Rafael Sr. executed a “Deed of Donation Inter Vivos” covering said lot as well as the house thereon to 3 of his children, namely: (1) petitioner Rafael, Jr.; (2) Alfredo; and (3) Belen, both private respondents, to the exclusion of his other children, herein petitioners.  TCT 33350 was cancelled and TCT 47572 was issued in private respondents’ names. From 1983 to 1991, the private respondents were in actual possession of the land.  But when petitioners learned about the existence of TCT 47572, they claimed that since they are also Rafael Sr.’s children, they are entitled to their respective shares over the land in question.  The private respondents however ignored the petitioners’ demands. Petitioners filed a complaint for “Reconveyance and Partition with Damages” alleging that both the Affidavit of Adjudication and “Deed of Donation Inter Vivos’ were fraudulent since the private respondents took advantage of their father’s advanced age. The private respondents raised the defense of prescription since the same should have been filed within 4 years from the date of discovery of the alleged fraud.
HELD: When Rafael Sr.. misrepresented in his unilateral affidavit that he was the only heir of his wife when in fact, their children were still alive and managed to secure a transfer of certificate of title under his name a constructive trust under A.1456 was established.  Constructive trusts are created in equity in order to prevent unjust enrichment.  They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains/holds the legal right to property which ought not, in equity and good conscience, to hold. In this regard, it is settled that an action for reconveyance based on an implied/constructive trust prescribes in 10 years from the issuance of the Torrens Title over the property.  In the case at bar, the prescriptive period shall start to run when TCT # 33350 was issued, which was on June 16, 1982.  Thus, since the action for reconveyance was filed on May 31, 1991, approximately 9 years later, it is evident that prescription has not yet barred the action. Implied trusts are obligations created by law, thus, the prescriptive period to enforce the same prescribes in 10 years.

SM: Obligations and contracts; double sale
GR# 129760, December 29, 1998

FACTS: Respondent Ramon Genato entered into a contract to sell with the other respondents, spouses Da Jose.  The contract was in a public instrument and was duly annotated at the back of the 2 Transfer of Certificate of Titles covering the said lots.  The contract provided, among others, the partial down payment of P50k and the payment of the remaining P950k after 30 days and only after verifying and confirming the truth and authenticity of the documents.  Said 30 days was executed for another 30 days.          Pending the effectivity of said extension, and without notifying the Da Joses, Genato executed an Affidavit to Annul the Contract to Sell but no annotation of the same was made at the back of his titles.
Cheng and Genato thereafter entered into a contract of sale over the lands. Genato decided to continue the contract he had with the Da Joses and sent back Cheng’s check but Cheng demanded compliance with their agreement as it was already perfected.  Cheng further executed as Affidavit of Adverse Claim which was annotated on the subject TCTs.  Meanwhile, the Da Joses paid Genato the P950k balance. HELD: The Da Joses were not in default since the 30 day extension period has not yet expired.  In addition, no further condition was agreed upon when the Da Joses were granted the 30 days extension. Even if they did default in their Contract to sell, the affidavit to annul is not even called for.  With or with out it, their non-payment to complete the full down payment of the purchase price ipso facto avoids their contract to sell, it being subjected to a suspensive condition.  When a contract is subject to a suspensive condition, its birth/effectivity can take place only if and when the event which constitutes the condition happens or is fulfilled.  If it does not take place, the parties would stand as if the conditional obligation had never existed.  Further, the act of a party of canceling a contract should be made known to the other.  Since that was not made, the Da Joses contract was not rescinded properly.  Lastly, the knowledge gained by Cheng of t heist transaction between the Da Joses and Genato defeats his rights even if  he is first to register the 2nd transaction, since such knowledge taints his prior registration with bad faith.

SM: Succession; A.777, NCC
GR # 126707, February 25, 1999

FACTS: Evarista dela Merced died intestate and was survived by 3 sets of heirs: (1) Francisco dela Merced, her legitimate brother; (2) Teresita Rupisan her niece from her sister Rosa who died in 1943; and (3) the legitimate children of Eugenia, her other sister who died in 1965.  Evarista left 5 parcels of land situated in Orambo, Pasig City. A year later, Francisco died and was survived by his wife and their 3 children. Thereafter, the 3 sets of heirs of Evarista executed an extrajudicial settlement on her properties, each set with a share of 1/3 pro-indiviso.  Joselito, Francisco’s illegitimate son, filed a petition for annulment of the settlement alleging that he was fraudulently omitted from the said settlement by petitioners who were fully aware of his relationship to the late Francisco. Claiming succession rights, Joselito prayed that he be included as one of the beneficiaries to share in the1/3 pro-indiviso share in Evarista’s estate corresponding to Francisco’s heirs. HELD: The case at bar is one where an illegitimate child inherits from his father the latter’s share in or portion of what the latter already inherited from his deceased sister Evarista. Article 777, NCC governs.  Thus, an illegitimate child, as an heir of his late father, has a right to the undivided share of his father from the estate of his father’s sister who had predeceased him.  Since Evarista died ahead of Francisco, the latter inherited a portion of the former’s estate as one of her heirs. Subsequently, when Francisco died, his heirs namely: his wife; legitimate children; and Joselito, an illegitimate son, inherited Francisco’s share in Evarista’s estate. Joselito does not claim to be Evarista’s heir by right of representation but participates in his own right, as an heir of Francisco, in the latter’s share in Evarista’s estate. 

SM: Sales; A.1484 (1)
GR # 109966, May31, 1999

FACTS: Private respondent Rolando Lantan entered into an agreement with his employer, herein petitioner, leasing unto the former a Colt lancer fro a period of 5 years.  The contract also provided that at the end of the 5 year period, Lantan may exercise the option to purchase price of the car and he should just pay the remaining balance.  Said option is limited to the employee.  It also provided that upon Lantan’s failure to pay 3 accumulated monthly rentals, the petitioner will have the option to lease said vehicle to another. Lantan also has to return the car in case he resigns or is dismissed.  He was laid off after petitioner ceased operations in 1981.  At that time, he has paid P61, 070.94. Petitioner then filed a replevin case against Lantan and his wife, alleging that they have failed to pay the monthly rentals despite repeated demands.  HELD: Although the agreement provides for the payment by Lantan of monthly rentals”, the 5th paragraph thereof gives them the option to purchase the motor vehicle at the end of the 5th year or upon payment of the 60th monthly rental when “all monthly rentals shall be applied to the payment of the full purchase price of the car.” Clearly, the transaction is a lease in name only.  The so-called monthly rentals are in truth monthly amortizations on the car’s price.  Being a contract of sale on installment, A.1484 &1485 apply.  As such, the case should be considered as one for specific performance pursuant to A.1484 (1). The prayer for a writ of replevin is only for the purpose of ensuring specific performance by private respondents.  However, the private respondents could no longer be held liable for the payment of interest on unpaid monthly rentals since it was entered into in pursuance of a car plan adopted by petitioner for the benefit of its deserving employees.  Further, private respondents’ default in payment was due to the cessation of operations of petitioner’s sister company. Elizalde Steel Company. That petitioner accepted payments from Lantan more than 2 years after the latter’s employment have been terminated constitutes a waiver of petitioner’s right to collect interest upon delayed payment. What private respondents paid should be considered the payment in full.

SM: Property; Action for reconveyance in an implied/ constructive trust
GR# 115794, June 10, 1999

FACTS: Respondents were co owners of 3 parcels of land located in Mabaliguen, San Narciso, Zambales.  Petitioner meantime, was their tenant and had been sharing the harvest of the land with repondents’ mother, Macaria Villanueva, during her lifetime. Macaria sold the realty to petitioner’s father, Victoriano , for P1k as shown by a duly notarized deed of sale signed by Macaria and respondents except Inocencio Delos Reyes.  The said land was registered after cadastral proceedings, in the names of Macaria, Cirito and Francisco Delos Reyes on June 21, 1937. HELD: Petitioner’s right of action to recover ownership of the land has prescribed and is barred by laches. The remedy of the land owner whose property has been wrongfully /erroneously registered in another’s name is to bring an action in the ordinary courts for reconveyance.  An action for reconveyance based on an implied/ constructive trust prescribes in 10 years from the issuance of the Torrens Tile over the property. Petitioner slept on his right for 38 years counted from the time the OCT was issued on January 21, 1937, until he filed his amended answer to respondents’ complaint on March 14, 1975, asking for reconveyance of the lots.  His right to bring such action was barred by laches as he took no step towards that direction reasonably after the title to the property was issued under the Torrens System.

SM: Obligation and contracts; Rescission, A.1191, NCC
ONG vs. CA
GR# 97347, July 06, 1999

FACTS: Petitioner Jaime Ong and respondent spouses Miguel and Alejandra Robles executed an “Agreement of Purchase and Sale” on 2 lots for P2M. Ong paid the Robles couple the initial payment of P103, 499.91 as agreed upon, by depositing it with the UPCB.  Ong took possession of the property will all the improvements thereon.  He further deposited the remaining payment with the BPI in accordance with their stipulation that Ong pay the respondents’ loan with BPI. Ong issued 4 post dated Metro Bank checks to answer fro his P1.4M balance but they were dishonored for insufficient funds. Ong failed to replace the checks and out of the P496, 500 BPI loan, he only paid P393, 679.60.  Respondents then sold 3 of their rice mill’s transformers found in the subject lots and Ong gave them the authority to operate the mill while retaining possession of the lots. Respondents demanded Ong the return of their properties. Ong ignored the same.  HELD: A careful reading of the parties’ contract shows that it is a contract to sell whereby ownership is by agreement, reserved in the vendor and is not to pass to the vendee till full payment of the purchase price. In a contract to sell, payment of the purchase price is a positive suspensive condition, the failure of which is not a breach, causal or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force.     In the instant case, the respondents bound themselves to deliver a deed of absolute sale and a clean title upon full payment by Ong of the P2M.  Ong’s failure to complete payment rendered the contract to sell ineffective and without force and effect.  The breach contemplated in A.1191, NCC is the obligor’s failure to comply with an obligation already extant, not a failure of a condition to render binding that obligation.  Hence, the agreement of the parties herein maybe set aside, but not because of a breach on Ong’s part to pay in full. Rather, his failure brought a situation which prevented the obligation of respondents to convey title from acquiring an obligatory force.

SM: Wills and Succession; Holographic will; A.811, NCC
GR# 123486, August 12, 1999

FACTS: Matilde Seño Vda. De Ramonal executed a holographic will. Herein respondents, devisees and legatees of said will filed with the RTC of Misamis Oriental a petition for probate of said will.Petitioners opposed the petition alleging that the holographic will was a forgery and that the same was even illegible.  They argued that the repeated dates incorporated or appearing on the will after every disposition is out of the ordinary. The CA held that the testimonies presented by respondents prove the authenticity of the will and the handwriting and signature therein and allowed the will’s probate. HELD: The word “shall” in a statute commonly denotes an imperative obligation and is inconsistent with the idea of discretion and that the presumption is that the word “shall” when used in a statute is mandatory.  However, in the case at bar, the goal to achieve is to give effect to the wishes of the deceased and the evil to be prevented is the possibility that unscrupulous individuals who for their benefit will employ means to defeat the wishes of the testator. Not all the witnesses presented by the respondents testified explicitly that they were familiar with the testator’s handwriting.  Further, the will was found not in the decedent’s personal belongings but with one of the respondents who kept it even before the decedent’s death.  There was even no opportunity for an expert to compare the signature and the handwriting of the deceased with other documents signed and executed by her during her lifetime.  A comparison of the strokes and signature of  the decedent in the will with the other documents written by her prior to said will showed that there is uncertainty that the holographic will is in the deceased’s handwriting.

SM: Contracts; A.1603, NCC; equitable mortgage
GR # 124355, September 21, 1999

FACTS: Petitioner constructed a house on his Marikina lot (TCT 128394) and agreed to transfer the same to Vicente for P150, 000 to be paid by Vicente from the proceeds of his housing loan from the SSS which granted him a P119, 400 loans.  Ching then executed a Deed of Absolute Sale over said realty in Vicente’s favor.  Ching informed Vicente that he has a P43k balance on the house and lot. Vicente failed to pay the said amount. Thereafter, they executed a Deed of Sale with Assumption of Mortgage and With Right to Repurchase whereby Vicente conveyed the property to Ching. It provided that Ching will assume all the duties and obligations of Vicente imposed upon by the latter in the deed of mortgage he executed in SSS’s favor, as if Ching was the original mortgagor in the mortgaged deed. However, Vicente retained possession of the property. Ching paid in full to the SSS Vicente’s account.  SSS then issued a release of REM annotated on TCT 146078 under Vicente’s name.  Ching demanded that Vicente execute a Deed of Absolute Sale over the property.  Vicente ignored it. HELD: The deed of sale with assumption of mortgage and right to repurchase is actually an equitable mortgage. The purported consideration for the sale with right to repurchasing the amount of P60, 242.86 is unusually inadequate compared to the purchase price of P150k when Vicente bought it from Ching 6 months before the execution of the deed.  Not only did Vicente retained possession of the property but he also retained ownership thereof which led Ching to file the consolidation case.The real intention of the parties was to secure the payment by Vicente of the balance of the purchase price and the transfer fees of P43k.  The stipulation in the Deed of sale with right to repurchase that absolute title shall be vested in the vendee in case the vendor failed to redeem the property on the specified date is void for being a pactum commissorium.  Further, that Ching assumed the mortgage obligation of Vicente to the SSS does not detract from the real nature of the agreement as a contract of mortgage to secure the debt’s payment.

SM: Donation; inofficious donation; A. 1144, NCC cf. A.771, NCC
GR# 112483, October 08, 1999

FACTS: Leoncio Imperial sold his 32,827 sq. meters parcel of land for P1.00 to his acknowledged son who then acquired title over the land and proceeded to subdivide it into several lots. 2 years after the donation, Leoncio filed a complaint for annulment of the Deed of Absolute Sale with the then CFI of Albay alleging that he was deceived by petitioner into signing the said document. The dispute was however resolved through a Compromise Agreement. Leoncio died leaving petitioner and an adopted son, Victor as heirs. Victor thereafter died single and survived only by his natural father, Ricardo Villalon. When Ricardo died, his 2 children filed a complaint with the RTC of Legazpi City for annulment of the donation. Petitioner moved for its dismissal on the ground of res judicata, by virtue of the Compromise Agreement rendered by the CFI of Albay. HELD: Since the action is one for reduction of an inofficious donation the 30 year prescriptive period is inapplicable. A claim for legitime does not amount to a claim of title.  Since the donation in the case at bar, the reduction of which hinges upon the allegation of impairment of legitime, is not controlled by a particular prescriptive period the ordinary rules of prescription apply. Under A.1144, NCC, actions upon an obligation created by law must be brought within 10 years from the time the right of action accrues.  Thus, the 10 year prescriptive period applies to the obligation to reduce inofficious donations required under A. 771, NCC, to the extent that they impair the compulsory heirs’ legitime. The 10 year period accrues upon the donor-decedent’s death. It took private respondents 24 years since Leoncio’s death to initiate the case. The action thus, has long prescribed.  Further, the private respondents are also guilty of estoppel by laches.

SM: Sales; double sale; A.1544,NCC
GR# 102648, November 24, 1999

FACTS: Respondent spouses purchased the subject property on October 18, 19982 from Renato Plata, petitioners’ judgment debtor in Civil Case # 82-12668. Plata’s TCT was cancelled and TCT 57006 was issued in respondents’ names. They relied on Plata’s duplicate certificate of title, free from the notice of attachment.  However, the notice of attachment was entered on the primary entry book of the Pasay City Register of Deeds which failed to annotate the notice of attachment on the original copy of title.  Thus, when the respondents verified the OCT with the Registry of Deeds, they found the same unblemished by any liens/ encumbrances.  HELD: In involuntary registration such as an attachment, levy on execution, lis pendens and the like entry thereof in the day book or entry book is a sufficient notice to al persons of such adverse claim.  Petitioners’ lien of attachment was properly recorded when it was entered in the primary entry book of the Registry of Deeds on October 06, 1982. When the subject property was sold on execution to the petitioners said sale retroacted to the date of inscription of petitioners’ notice of attachment on October 06, 1982. The earlier registration of the petitioners’ levy on preliminary attachment gave them superiority and preference in rights over the attached property as against respondents. This is in accordance to A. 1544, NCC. Thus, the execution sale in favor of the petitioners was antecedent and superior to the sale of the same property to the Bautista couple on October 10, 1982.

SM: Partnership; A. 1767, NCC
GR # 136448, November 03, 1999

FACTS: Antonio Chua and Peter Yao, on behalf of Ocean Quest Fishing Corporation, entered into a contract worth Philippine Fishing Gear Industries (PFGI) fro the purchase of fishing nets of various sizes from the latter.  Chua and Yao claimed that they were engaged in a business venture with petitioner Lim albeit the non participation of the latter in the parties’ agreement. The buyers failed to pay for the fishing nets and the floats. A collection suit was brought against the 3 in their capacities as general partners, allegedly because OQFC was a non-existent corporation as shown by a certification from the SEC. The court held the 3 as general partners based on a Compromise Agreement executed by Chua, Yao and Lim in another case brought by Chua and Yao against Lim, among others.  It ruled that though the Compromise Agreement was silent as to the nature of their obligations, their joint liability could be presumed from the equal distribution of the profit and loss of their business. HELD: The 3 had decided to engage in a fishing business which they started by buying boats worth P3.35M financed by a loan secured from Jesus Lim, petitioner’s brother.  In their Compromise Agreement, they subsequently revealed their intention to pay the loan with the proceeds of the sale of the boats and to divide equally among them the excess or loss.  These boats, the purchase and the repair of which were financed with borrowed money, fell under the term “common fund” under A.1767, NCC. That the parties agreed that any loss/profit from the sale and operation of the boats would be divided equally among them also shows that they had indeed formed a partnership. Further, the nets and floats, both essential to fishing, were obviously acquired in furtherance of their business.  Clearly, Lim benefited from the use of the nets found inside F/B Lourdes, an asset of the partnership. Under the law, an estoppel by corporation, those action on behalf of a corporation and those benefited by it, knowing it to be without a valid existence, are held liable as general partners. Undoubtedly, the 3 decided to form a corporation which, for unknown reasons, was never legally formed.  Nonetheless, their liabilities as contracting parties in representation of it survive.

SM: Torts; A.2180 (5), NCC
GR# 132266, December 21, 1999

FACTS: Jose Benjamin Abad was a Production Manager of petitioner.  Abad was given a car owned by petitioner since he sometimes does overtime work at the petitioner’s office. While leaving a restaurant after work, he figured in a vehicular accident which led to the death of Vasquez, a side walk vendor and respondents’ son. Thereafter respondents and Cebu Doctor’s Hospital sued Abad and petitioner for damages. HELD: The mere fact that Abad was using a service vehicle at the time of the accident is not itself sufficient to charge petitioner with liability for the negligent operation of said car unless it appears that Abad was operating the vehicle within the course/ scope of his employment. The facts surrounding the case showed that Abad was engaged in affairs of his own or was carrying out a personal purpose not in line with his duties at the time the accident occurred.  2:00 am was way beyond Abad’s normal working hours as well as his overtime work.  His being at a place known as a “haven for prostitutes, pimp and drug pushers and addicts”, had no connection to petitioner’s business,; neither had it any relation to his duties as petitioner’s manager.  Rather, using his service car for personal purposes is a form of fringe benefit or one of the perks attached to his position.

SM: A.36, Family Code; psychological incapacity
GR# 126010, December 8, 1999

FACTS: Petitioner Lucita Estrella Hernandez and private respondent Mario Hernandez were married and have 3 children. Petitioner filed before the Tagaytay City RTC a petition for annulment of their marriage on the ground of psychological incapacity of Mario. Allegedly, from the time of their marriage up to the time of filing of the suit, Mario failed to perform his obligation to support the family and contribute to the management of the household, devoting most of his time engaging in drinking sprees with his friends. Further, Mario, after they got married, cohabited with another woman with whom he sired an illegitimate child while having different affairs leading to petitioner having STD. Despite petitioner’s allegations, the RTC dismissed the petition ruling that her grounds were not those mentioned in A.55 of the Family Code.  It held that fraud must exist at the time of celebration of the marriage. HELD: Psychological incapacity should refer to no less than a mental (not physical) incapacity that causes a party to be truly incognitive of the basic marital covenants that concomitantly must be assumed and discharged by the parties to the marriage. The law confines psychological incapacity to the most serious cases of personality disorders clearly demonstrative of an utter insensitivity/ inability to give meaning and significance to the marriage. This psychological condition must exist at the time the marriage is celebrated. If drug addiction, habitual alcoholism, lesbianism or homosexuality should occur only during the marriage, they become mere grounds for legal separation under A.55, FC.

SM: Contracts; equitable mortgage; A.16029 (6) in relation to A.1604, NCC
GR# 131520, Jaunuary 28, 2000

FACTS: Petitioner and private respondent Teofista Tupas entered into a Deed of Absolute Sale covering a 3,230 sq. meters parcel of land located in Boracay Island. Consequently, petitioner took possession and occupied the land. Claiming to have been disturbed in the possession of he said land, petitioner filed a complaint for Quieting of Title and/or Recovery of Possession with Damages against the Tupas couple.  The other private respondents came as intervenors, being co-owners with their sister Teofista of the subject land. HELD: The contract at bar is an equitable mortgage under A.1602 (6). First, the Tupas couple built 2 cottages on the subject land as well as operated a sari-sari store and grew banana plants on the same, such that almost 1/2of the area had been occupied by them.  Despite this bold possession, petitioner admits that no demand to vacate the land was ever made upon the Tupases.  Neither was rent ever collected from them for their occupancy of the land.  Their possession remained undisturbed for years till the 1984 case.            The private respondents had continued paying tax on the subject land even after the supposed sale took place.  Further, Teofista executed a Sworn Statement on June 21, 1973, more than a year after the April 30, 1972 transaction.  This Statement was executed in compliance with PD#76 requiring all land owners during the martial Law period to submit statements of their assets and their corresponding values. Included as asset in Teofista’s Statement is the subject land.

SM:  Contracts; void contract; A.1412 (2)
GR# 131679, February 01, 2000

FACTS: Rodolfo Guansing obtained a P90k loan from CDB and mortgaged a lot covered by TCT#300809 registered in his name. Guansing defaulted in his payment and thus, CDB foreclosed the mortgage which was sold to CDB in the foreclosure sale that ensued.  Guansing failed to redeem his lot and CDB eventually consolidated title to the property in its name evidenced by TCT# 355588.Private respondent Lolita Lim offered to buy the lot from CDB. The offer provided 10% option money and the balance payable in cash. Lim discovered that the subject property was originally registered in the name of Perfecto Guansing, Rodolfo’s father. Apparently, Rodolfo succeeded in having the lot registered in his name under the title he mortgaged to CDB and from which CDB’s title was derived.  However, Perfecto instituted a case for the cancellation of Rodolfo’s title which was granted and the decision became final and executory. HELD: In the instant case, the P30k, although denominated in the offer to purchase as “option money”, is actually in the nature of earnest money or down payment when considered with the other terms of the offer. An option contract is a contract separate from and preparatory to a contract of sale which, if perfected, does not result in the perfection or consummation of the sale.  Only when the option is exercised may a sale be perfected.  Here however, after the payment of the 10% option money, the offer to purchase provides for the payment only of the balance of the purchase price.  This is the result of paying earnest money under A.1482, NCC. Clearly, the parties entered into a contract of sale, perfected and partially executed by the partial payment of the purchase sale. But due to the legal obstacle of the annulment of Rodolfo’s title from which CDB derived its own title, the contract between it and Lim can not be enforced and is void by reasons of public policy.  Since CDB can not be considered a mortgagee in good faith due to its negligence for failing to conduct an exhaustive investigation, it is liable to return the P30k, plus damages as provided by A.1412 (2), NCC.

SM: Human relations; abuse of rights under A.19, NCC
GR # 132344, February 17, 2000

FACTS:  Respondent is a 4th year law student of UE. UE released a tentative list of graduating students with his name on it.  He however had to take a removal examination for one of his subjects but the results were not released immediately.    Jader nevertheless attended the graduation rights and immediately enrolled in the bar review classes as his preparation for the bar exams.  He however he failed the removal exam and is not a graduate eligible to take the 1988Bar Exams. Aggrieved, Jader sued UE for damages since he was not able to take the 1988 Bar Exams due to UE’s negligence.  UE argued that it never led respondent to believe he completed the requirements for an LL.B. degree when his name was included in the tentative list of graduating students.  HELD: When a student is enrolled in any educational/learning institution a contract of education is entered into between said institution and the student.  The professors, teachers/instructors hired by the schools are considered merely as agents and administrators tasked to perform the school’s commitment under the contract. It is thus the contractual obligation of the school to timely inform, and furnish sufficient notice and information to each and every student as to whether s/he had already complied with all the requirements for the conferment of a degree or whether they would be included among those who will graduate.  Prior or subsequent to the graduation ceremony, the school has the obligation to promptly inform the student of any problem involving the latter’s grades and performance and most importantly, of the procedures for remedying the same. UE, in belatedly informing Jader of the results of his removal exam, particularly at a time when he had already commenced preparing for the bar exams, can not be said to have acted in good faith. Educational institutions are duty- bound to inform the students of their academic status and not wait for the latter to inquire from the former.  Articles 19 & 20, NCC provides for good dealings between the persons and contracting parties.

SM: Obligation and contracts; rescissible contracts; A.1381(3), NCC
GR# 129644, March 3, 2000

FACTS: Alfonso Roxas Chua obtained a loan from MetroBank which he secured by mortgaging his conjugal share in a property covered by TCT #410603. Alfonso failed to pay and consequently MetroBank foreclosed the realty.  In 1988, during the period of exercising his right to redeem said realty, Alfonso sold his right of redemption to his son, Paulino who redeemed the property and caused the annotation thereof at the back of the title.  This preceded the annotation of the levy of execution in CBC’s favor by 2 years and the certificate of sale also in CBC’s favor by more than 3 years. CBC is Alfonso’s creditor which obtained judgment against him and Pacific Multi Agro Industrial Co. on November 07, 1985, 2 years before Alfonso sold his right to redeem to Paulino. Consequently, CBC sued Paulino alleging that the transaction between him and his father was fraudulent and was meant to defraud the latter’s creditors such as CBC.
HELD: Since the judgment of the trial court in CBC’s favor against Alfonso was rendered as early as 1985, there is a presumption that the ’88 sale of his property, in this case, the right of redemption, is fraudulent under A.1387, NCC. The fact that Paulino redeemed the property and caused its annotation on the TCT ahead of CBC is of no moment since a fraudulent transaction , such as Alfonso’s and Paulino’s , is not overcome by the mere fact that the deeds of sale were in the nature of public instruments. This presumption is strengthened by the fact that the conveyance has virtually left Alfonso’s other creditors with no other property to attach. The mere fact that the conveyance was founded on valuable consideration as in the case at bar, does not necessarily negates the presumption of fraud under A.1387, NCC. There has to be a valuable consideration and the transaction must have been made bona fide.   In the instant case, the presumption of fraudulent conveyance has not been overcome.

SM: Damages; Willful Misconduct
GR# 135802, March 3, 2000

FACTS: Tan sued NORTHWEST for damages for breach of contract of air carriage when the latter failed to deliver Tan’s baggage on the date of her arrival.
The RTC of Makati City found NORTHWEST liable for damages. In its appeal to the CA, NORTHWEST alleged that it was not guilty of willful misconduct and as such, no damages should be granted to Tan. HELD: NORTHWEST was not guilty of willful misconduct. For willful misconduct to exist there must be showing that the acts complained of were impelled by an intention to violate the law or were in persistent disregard of one’s rights.  It must be evidenced by a flagrantly/shamefully wrong or improper conduct. There was nothing in the respondent’s conduct which showed that they were motivated by malice or bad faith in loading her baggage in another plane. Due to weight and balance restrictions, as a safety measure, respondent had to transport the baggage on a different  flight, but with the same expected date and time of arrival in the Philippines.          Admittedly, NORTHWEST failed to deliver Tan’s luggage on time but there was no showing of malice in such failure. By its concern for safety, respondent had to ship the baggage in another flight with the same date of arrival. Thus, it did not act in bad faith.         Where in breaching the contract of carriage, defendant airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach of obligation which the parties had foreseen.  In that case, such liability does not include moral and exemplary damages.

SM: Persons and Family Relations; A. 83, NCC; bigamous marriages
GR#136467, April 6, 2000

FACTS: Teodorico Calisterio died intestate leaving parcels of land worth P604, 750. He was survived by his wife, herein respondent Marietta Calisterio. Marietta was previously married to James Williams Bounds on January 13, 1946 in Caloocan City. Bounds disappeared without a trace and subsequently, the Calisterio couple was married 11 years later without Marietta having priorly secured a court declaration that James was presumptively dead. Petitioner Antonia Armas, Teodorico’s sister, filed with the RTC of Quezon City a petition claiming that she is the sole surviving heir of Teodorico since his marriage to Marietta was allegedly bigamous and thus, null and void. Marietta opposed the petition stating that by virtue of Bound’s disappearance, her 1st marriage had been dissolved. HELD: When the couple was married in 1958, the law in force was the New Civil Code and not the Family Code which only took effect on August 3, 1988. Thus, A.83, NCC applies. In case whereby the 1st spouse had been absent for 7 consecutive years at the time of the 2nd marriage, the spouse present so contracting the later marriage must have done so in good faith. Further, a judicial declaration of absence of the absentee spouse is not necessary as long as the prescribed period of time has been met. In the instant case, Marietta’s 1st husband has been absent or has disappeared for more than 11 years before she entered into a 2nd marriage in 1958 with the decedent. This 2nd marriage having been contracted during the regime of the Civil Code should thus be deemed valid notwithstanding the absence of a judicial declaration of presumptive death of James Bounds.

SM: A.148, Family Code
GR# 137650, April 12, 2000

FACTS: Petitioner and Mario Fernandez cohabitated for sometime as husband and wife and eventually stayed in the subject property. Thereafter, petitioner was sued for an ejectment case by Mario and his legal wife, Lourdes. Petitioner alleged that she is legally married to Mario and presented a Contract to Sell which showed her claim.  Thus, she asserted that she is the co-owner of the property pursuant to A. 144, NCC. HELD: A. 144, NCC applies only to a relationship between a man and a woman who are both not incapacitated to marry each other, or to one in which the marriage of the parties is void form the beginning. It does not apply to a cohabitation that amounts to adultery or concubinage, for it would be absurd to create a co-ownership where there exists a prior conjugal partnership/ absolute community between the man and his lawful wife. Evidence showed that Mario was incapacitated to marry petitioner for he is legally married to Lourdes. The petitioner thus cohabitated with Mario in a state of concubinage and as such, A.144, NCC is inapplicable. What governs petitioner and Mario’s relationship is A.148, of the Family. In the case at bar, petitioner failed to show any vested right over the subject property. Under A.148, FC, only the properties acquired by both parties thru their actual joint contribution of money, property or industry shall be owned by them in common in proportion to their respective contributions. Actual contribution is required to be proven, otherwise, there will be no co-ownership and no presumption of equal shares.

SM: Property; Easement, A. 637, NCC in relation to A.50 of the Water Code; damages
GR#125018, April 06, 2000

FACTS:          Petitioner Corporation and Crispin E. Lat are adjoining landowners.  Lat’s land is agricultural and planted mostly with fruit trees.  REMMAN’s land is devoted to its piggery business and is 1 ½ meters higher in elevation than that of Lat. REMMAN’s waste disposal lagoon was already overflowing and inundating ¼ of Lat’s plantation. Almost 1 hectare of Lat’s plantation was already inundated with water containing pig manure, as a result of which the trees growing on the flooded portion started to wither and die. Lat alleged that the acidity of the soil in his plantation increased because of the overflow of the water heavy with manure from REMMAN’s piggery farm.  REMMAN raised the defense that he adopted measures to contain the waste water coming from its piggery to prevent any damage to the adjoining estates. HELD: The ocular inspection showed that the waste water containing pig manure was indeed continuously flowing from REMMAN‘s piggery farm to Lat’s plantation. Such overflow went on for a year destroying several fruit trees on Lat’s plantation. Art. 637, NCC and Art. 50, Water Code impose a natural easement upon the lower estate to receive the waters which naturally and without the intervention of man descend from higher states.  However, where the waters which flow from a higher state are those which are artificially collected in man-made lagoons, any damage occasioned thereby entitles the owner of the lower or servient state to compensation. REMMAN was negligent in its maintenance of level waste water in its lagoons.  As such, even assuming that the heavy rains constituted as an act of God, by reason of their negligence, the fortuitous event became humanized and thus, petitioner is liable for the ensuing damages.

SM: Contracts; Lease, A.1196, NCC
GR # 136913, May 12, 2000

FACTS: Petitioner leased from private respondents their 56 sq. meter lot in Manila for the purpose of turning it into a commercial establishment.  Their contract provides, among others, that the period for the lease shall be 15 years effective June 01, 1979, subject to renewal for another 10 years. Private respondents reminded petitioner the expiration of the contract on June 01, 1994 and demanded payment of the rentals in arrears.  Consequently, petitioner refused to pay the increased rental of P1k as early as 1991. The respondents meanwhile refused to accept the P400 monthly rental of petitioners.
HELD: The contract between the parties did not indicate specifically who may exercise the option to renew, neither was it stated that the option was given for the petitioner’s benefit. Pursuant to A.1196, NCC, the period of the lease contract is deemed to have been set for the benefit of both parties.  Renewal of the contract maybe had only upon their mutual agreement or at the will of them both.  Since the respondents were not amenable to a renewal, they can not be compelled to execute a new contract when the old contract terminated on June 01, 1994. It is the owner-lessor’s prerogative to terminate the lease at its expiration.  The continuance, effectivity and fulfillment of a contract of lease can not be made to depend exclusively upon the free ad uncontrolled choice of the lessee between continuing payment  the payment of the rentals or not, completely depriving the owner of any say in the matter.  Mutuality does not obtain in such a contract of lease and no equality exists between the lessor and the lessee since the life of the contract would be dictated solely by the lessee.

SM:  Sales, Legal redemption, A.1523, NCC
GR # 137677, May 31, 2000

FACTS: Petitioner Adalia Francisco and 3 of her sisters were co-owners of 4 parcels of registered lands on which stands the Ten Commandments Building @ 689 Rizal Avenue Extension, Caloocan City.  They sold 1/5 of their undivided share in said realty to their mother, Adela Blas, for P10k, thus making the latter a co-owner of said property to the extent of the share sold. Unknown to her children-co-owners, Blas sold her 1/5 share for P10k to respondent, another sister of petitioner.  Thereafter, petitioner received summons from respondent demanding her share in the rentals being collected by petitioner from the building’s tenants.  Petitioner then informed respondent she was exercising her right of redemption as a co-owner of said property and thus, she deposited the P10k as redemption price with the Clerk of Court. The case was however dismissed. Petitioner filed her own case alleging that the 30-day period for redemption under A.1623; NCC had not begun to run against her since Blas never informed her and the other owners of the sale to the respondent.  It was only on August 5, 1992, after she received summons, did she learn of said sale.  Respondent said that petitioner already knew of the sale, the deed of which was attached, as early as May 30, 1992 when she wrote a demand letter.
 HELD: Art.1623, NCC is clear in requiring that the written notification should come from the vendor/prospective vendor, not from any other person. The vendor of an undivided interest is in the best position to know who his co-owners are, who, under the law, must be notified of the sale.  By not immediately notifying the co-owner, a vendor can delay or even effectively prevent the meaningful exercise of the right of redemption.    In the case at bar, the sale took place in 1986 but it was kept secret till 1992 when vendee, private respondent, needed to notify t petitioner about the sale to demand 1/5 rentals from the property sold. However, to prevent injustice, the SC held that the receipt by petitioner of summons on August 05, 1992 constitutes actual knowledge on the basis of which petitioner may now exercise her right of redemption within 30 days from finality of the SC’s decision.

SM: Contracts; mortgage; property; possession in bad faith
GR# 138053, May 31, 2000

FACTS: In a previously decided case between the same parties, the SC affirmed respondent’s title over the subject property. It also affirmed the validity of the OCT in respondent’s name while at the same time nullifying the original certificate of title in petitioner’s name.         As a consequence, the trial court issued a writ of possession against petitioner. The latter refused to vacate alleging that he was a builder in good faith and is entitled to reimbursement for the improvements he introduced on the property.  He further argued that the prior decision of the SC did not direct his immediate ouster from the property and its delivery to respondent. HELD: Since respondent has been declared the sole owner of the subject lot she has the right to enjoy it.  Corollary, respondent also has the right to exclude from the possession of her property any other person to whom she has not transmitted such property. Generally, in a mortgage, the mortgagor retains possession of the mortgaged property since title to the property does not pass to the mortgagee. However, though a mortgagee does not have possession of the property, there is no impairment of his security since the mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor maybe, to the fulfillment of the obligation for whose security it was constituted. Regardless of its possessor, the mortgaged property may still be sold, with the prescribed formalities in the event of the debtor’s default in the payment of his loan obligation. Thus the writ of possession in respondent’s favor is correct as it was but a necessary consequence of the SC’s earlier ruling. Possession is an essential attribute of ownership; thus, it would be redundant for respondent to go back to court simply to establish her right to possess the property. Petitioner is indeed a builder on bad faith since it was clear that petitioner knew from the beginning that there really was no sale and that he only held the property as security for the payment of the loan.

SM: Arts. 1733 and 1755, NCC; damages
GR# 122039, May 31, 2000

FACTS: Private respondent Sunga filed an action for breach of contract of carriage against petitioner. Sunga suffered from injuries when the jeepney owned by petitioner where she was riding on collided with a truck driven by Verena and owned by Salva. In fact, in another case against the 2, the negligence of Verena was ruled to be the accident’s proximate cause. HELD: A breach of contract/ culpa contractual is premised upon the negligence in the performance of a contractual obligation. The action can be prosecuted merely by proving the existence of the contract and the fact that the obligor, the common carrier in this case, failed to transport his passenger safely to his destination. It is immaterial that the proximate cause of the collision between the jeepney and the truck was the truck driver’s negligence.  The doctrine of proximate cause is applicable only in actions for quasi-delict, not in actions involving breach of contract. Where there is a pre-existing contractual relation between the parties, it is the parties themselves who create the obligation, and the function of the law is merely to regulate the relation created. In contracts of carriage, the carriers are presumed negligent in cases of death or injury to passengers. In the case at bar, the petitioner has to prove that he had observed extraordinary diligence in the care of his passengers. This it failed to do. Its jeepney was not properly parked; the driver took in more passengers than the allowed seating capacity of the jeepney- both violations of the provisions of the Land Transportation and Traffic Code.

SM: Obligations; when is a contract perfected
GR#s 128066 & 128069, June 19, 2000

FACTS:          Purefoods Corporation (PC) decided to install 2 1500kw generators in its food processing plant in Marikina City due to the 1992 power crisis.3 bidders submitted bid proposals and gave bid bonds equivalent to 5% of their respective bids as required. Far East Mill Supply Corporation (FEMSCO) won the contract and immediately submitted the required performance bond amounting to P1, 841,187.90 and contractor’s all-risk insurance policy totaling P6, 137,293 with PC acknowledged in a letter.  It also made arrangements with its principal and started purchasing the necessary materials. PC meanwhile returned FEMSCO’s Bidder’s Bond of P1M as requested. However, PC unilaterally cancelled the award allegedly due to significant factors. FEMSCO protested the act and before the matter could be resolved, PC already awarded the project and entered into a contract with Jardine Nell, a division of Jardine Davies, Inc (JDI), which was not one of the original bidders.  HELD: Contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror. From that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, maybe in keeping with good faith, usage and law.  For a contract to arise, the acceptance must be made known to the offeror. Accordingly, the acceptance can be withdrawn/ revoked before it is made known to the offeror.  PC started the process on entering into the contract by conducting bidding. The bid proposals/quotations submitted by the bidders which included FEMSCO are the offers and PC’s reply the acceptance / rejection of the same.  The December 12, 1992 letter of PC to FEMSCO constituted acceptance of FEMSCO’s offer notwithstanding the conditions contained in the contract. The conditions were imposed on the performance of the obligation rather than on the perfection of the contract. They were prescriptions on how the obligation was to be performed and implemented, not conditions imposed on the perfection of the contract. PC’s cancellation of its contract with FEMSCO presupposes that the contract has been perfected. Here, the SC awarded moral damages to FEMSCO after it sufficiently showed that its reputation has been tarnished (cf HANIL and ABS-CBN cases).

SM: Contracts; Novation
GR# 116805, June 22, 2000

FACTS: Respondent Diaz originally occupied the subject condo unit in 1987 as a lessee.  While he was its lessee, petitioner agreed to sell the unit to him by installments.  The agreement to sell was provisional as the consideration was payable in installments. Petitioner terminated the provisional deed of sale by a notarial notice of cancellation; Diaz remained the lessee but he failed to pay the rentals due. Diaz subsequently made payment of P100k applicable either to the back rentals or for the purchase of the unit. Nevertheless, petitioner gave Diaz a notice to vacate the premises and to pay his back rentals. Diaz failed to do both and so petitioner filed an action for unlawful detainer against him. Diaz alleged that the provisional deed of sale executed by them novated the original existing contract of lease and thus, petitioner has no cause of action for ejectment against him. HELD:  Novation must be clearly proved; its existence is not presumed. It only takes place if the parties expressly so provide, otherwise, the original contract remain in force. Where there is no clear agreement to create a new contract in place of the existing one, novation cannot be presumed to take place, unless the terms of the new contract are fully incompatible with the former agreement on every point. In the case at bar, after the initial down payment , respondent’s checks in payment of 6 installments all bounced and were dishonored. This led to petitioner’s termination of the provisional deed of sale. Petitioner’s subsequent acceptance of payment did not withdraw the cancellation of the provisional sale. Unless the application of payment is expressly indicated, the payment shall be applied to the most onerous obligation of the debtor, in this case, the unpaid rentals. Since the payment did not fully settle the unpaid rentals, the cause of action for ejectment survives.

SM:  Prescription; Arts.1106 & 554 (4), NCC
GR# 109215, July 11, 2000

FACTS: The parties’ common Ancestor, Doque Catanda acquired a parcel of agricultural land which was declared under Tax Declaration No.6983 in his eldest son Anastacio’s name. Anastacio, who had no children, remained in possession of said land from 1933 till 1968 when he executed a deed of extrajudicial settlement of estate which adjudicated and partitioned said parcel of land among his brothers and sisters. After 1968, his siblings worked on the land, as shown by several tax declarations and subsequently, their children and successors; herein petitioners, remained in actual and peaceful possession of said land until 1988 when private respondents (PRs) filed their action to recover possession.
HELD: PRs’ cause of action is barred by prescription under A.1106, NCC.  Private respondents did not assert ownership over the lands until 1988-55 years after Anastacio possessed the same in 1933. The remedies of accion publiciana/reindivicatoria must be availed of within 10 years from dispossession. Under 555 (4), NCC, the real right of possession is lost after the lapse of 10 years. Thus, PRs’ cause of action was barred not by laches but by extinctive prescription. Further, the facts of the case sufficiently established that Anastacio was in OCEN possession of the land from 1933 till 1968- or a 35 year period. Since his possession began under the former Civil Code, 10 years of actual adverse possession is all that is required regardless of how such occupancy may have commenced or continued, before possession ripened into full and complete title over the land.  Hence, by 1943, 10 years after his possession of the land begun, Anastacio became its owner through acquisitive prescription. As Anastacio had acquired ownership of said land, he could validly adjudicate and partition it among his brothers and sisters who were his only heirs. In turn, petitioners, as children of Anastacio’s siblings, acquired ownership of the land not through prescription but through hereditary succession.

SM: Contracts; A. 1479, NCC
GR# 137290, July 31, 2000

FACTS: The parties in the case at bar executed an instrument involving the sale of the petitioner’s subject real properties to the Huangs. The Huangs wrote petitioner the terms of their offer. Among the conditions given by the Huangs are: (1) that they be given the exclusive option to purchase the property within 30 days from acceptance of the offer; (2) that during the option period, the parties would negotiate the terms and conditions of the purchase; and (3) petitioner would secure the necessary approval while respondents would handle the documents.  The Huangs gave petitioner P1M as “earnest deposit”. However, the couple and petitioner failed to agree on the terms of the payment. Petitioner gave the Huangs a 45-day extension so that a final agreement may be had.  What transpired however was nothing more than offers and counter offers.  Petitioner then offered the properties to another. HELD: Under A.1479, NCC, consideration in an option contract maybe anything of value, unlike in sale where it must be the price certain in money or its equivalent.  In the case at bar, there is no showing of any consideration for the option. Lacking any proof of such consideration, the option is unenforceable. The manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist.  Although the NCC does not expressly state that the minds of the parties must also meet on the terms/manner of payment of the price, the same is needed; otherwise, there is no sale. Agreement on the manner of payment goes into the price such that a disagreement is tantamount to a failure to agree on the price. Thus, it is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale.      In addition, the Huangs did not give the P1M as earnest money as defined by A.1482, NCC. It was only given not as a part of the purchase price and as proof of the perfection of the contract of sale but only as a guarantee that respondents would not back out of the sale.

SM: Obligations and Contracts; Contract to Sell vs. Contract of Sale
GR# 120820, August 01, 2000

FACTS: Private respondents, the Caseda couple, possessed the subject house and lot in Parañaque City. However, the TCT over the same issued by the Register of Deeds of Parañaque has always remained in Rosalinda’s name. Although the parties agreed that the Casedas would assume the mortgage, all amortization, payments made by Carmen Caseda to the bank were in Rosalinda’s name. The bank cancelled and discharged the mortgage in Rosalinda’s favor. Apparently, petitioners thus informally sold with conditions the said realties to the Casedas. The Casedas failed to pay in full. The Santoses thus reposed their property. HELD: A.1458, NCC expressly obliges the vendor in a contract of sale to transfer the ownership of the thing sold as an essential element of such a contract. After a careful examination of the contents of the parties’ unofficial receipt and other proofs, the SC held that there was no valid transfer of ownership was made by the Santoses to the Casedas. Absent this essential element, their agreement can not be deemed a contract of sale. What they had was a mere contract to sell. In contracts to sell, ownership is reserved in the vendor and is not to pass until full payment of the purchase price. In a contract of sale, the vendor has lost ownership of the thing sold and can not recover it, unless the contract of sale is rescinded and set aside. In a contract to sell, however, the vendor remains the owner for as long as the vendee has not complied fully with the condition of paying the purchase. If the vendor should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding it. Such is what the Santoses did in this case.

SM: family Law; Property relations
GR # 119064, August 22, 2000

FACTS: Decedent Hadji Abdula Malang,a  Muslim, had 4 wives at the time he acquired the subject properties. Under Islamic law, the regime of property relationship is complete separation of property, in the absence of any stipulation to the contrary in the marriage settlements or any other contract (A.38, PD 1083).
Petitioner, a Muslim and the decedent’s 4th wife, alleged that the properties are her conjugal property with the decedent since they got married prior to the enactment of PD1083. Thus, the regime of conjugal partnership of gains applies to them in accordance with the Civil Code. The Shari’a District Court held that Islamic law is applicable and thus, the properties are not conjugal since under Islamic laws, the regime of relationship is complete separation of property, in the absence of stipulation to the contrary in the marriage settlement/ any other contract. In this appeal, petitioner contends that the NCC is applicable. Thus, all property of the marriage is presumed to belong to the conjugal partnership. HELD: The validity of the marriages in the case at bar is determined by the NCC. Thus the NCC determines and governs the property relations of the marriage in the instant case. This is because at the time of the celebration of the marriages, the Civil Code was the only law on marriage relations, including property relations between spouses whether Muslim or non-Muslim.  The Family Code which made substantial amendments to the NCC particularly to property acquired from and after August 3, 1988 is also relevant.         Which law would govern depends upon: (1) when the marriages took place; (2) whether the parties lived together as husband and wife; and (3) when and how the subject properties were acquired. A.144, NCC requires that the man and woman living together as husband and wife without the benefit of marriage must not in any way be incapacitated to marry. Thus the co-ownership it contemplates is not applicable to Hadji’s marriages celebrated subsequent to a valid and legally existing marriage, since from the NCC’s point of view; Hadji is not capacitated to marry. The law presumes, absent any proof to the contrary, that property acquired during the subsistence of a valid marriage- and in the NCC, there can be one at any given time- is conjugal property of such subsisting marriage.

SM: Sales; double sale; A.1544 (2), NCC
GR# 138201, September 12, 2000

FACTS: Julia Deocareza bought the subject property from the Canino siblings. She in turn sold it first to respondent Nogales under a Deed of Absolute Sale on April 29, 1968. Nogales thereafter registered with the Register of Deeds said deed.   Meanwhile, petitioner bought a portion of the property from the Canino siblings during the period from June 21, 1971 to October 13, 1989, long after respondent had purchased the property. HELD: To merit protection under A.1544 (2), NCC the 2nd buyer must act in good faith in registering the deed. Thus, it has been held that in cases of double sale of immovable, what finds relevance and materiality is not whether or not the 2nd buyer was a buyer in good faith but whether or not said 2nd buyer registers such 2nd sale in good faith, i.e., without knowledge of any defect in the title of the property sold.  Good faith on petitioner’s part is wanting. The petitioner had the Deed of Absolute Sale registered with the register of deeds and entered in the Registry Records as Entry No. 47052, page 51, vol. 14 of the registry record under Act 33444. The registration of the deed, under Act 3344, constitutes constructive notice to the whole world.    As stated in the Santiago case, registration by the 1st buyer under Act 3344 can have the effect of constructive notice to the 2nd buyer that can defeat his right as such buyer. On account of the undisputed fact of registration under Act 3344 by respondent Nogales as the 1st buyer, necessarily, there is absent good faith in the registration of the sale by petitioners for which they had been issued certificates of title in their names. It follows that their title to the land can not be upheld.  As to the other petitioners, they failed to register the portions of the property sold to them, and merely relied on the fact that they declared the same in their name for taxation purposes. This does not buy itself constitute evidence of ownership and can not likewise prevail over Nogales’ title.

SM: Property; Easements; A.619, NCC
GR# 114348, September 20, 2000

FACTS: The subject property was originally public land awarded to private respondent Manglapus by free patent. Under the Original Certificate of Title, there was a reservation and condition that the land is subject to “all conditions and public easements and servitudes recognized and prescribed by law especially those mentioned in Secs. 109- 114, CA 141 as amended.” Further, Manglapus’ TCT’s annotation imposed on him the duty to refer to the conditions annotated on the back of the OCT. The National Irrigation Administration (NIA) exercised the government’s right of easement and constructed a canal which was only 11 meters in width. Manglapus then filed an action against NIA for just compensation for the taking of his property. HELD: NIA is under no such obligation. The TCT and OCT covering the subject property contained a reservation granting the government a right of way over the land covered therein. The reservation under the OCT was not limited by any time period and is thus a subsisting condition. In the case at bar, the SC declared that a legal easement of a right of way exists in favor of the government. The land was originally public land, and awarded to Manglapus by free patent. Lastly, Manglapus is a transferee with notice of all the liens annotated in the title. One who deals with property registered under the Torrens System is charged with notice of burdens and claims that are annotated on the title.

SM: Partnership
GR# 126881, October 03, 2000

FACTS: Petitioners filed an action against the decedent’s brother Tan Eng Lay for accounting, liquidation and winding up of the alleged partnership formed after WWII between decedent Tan Eng Kee and Tan Eng Lay. After WWII, the brothers, pooling their resources and industry together, entered into a partnership engaged in the business of selling lumber and hardware and construction supplies. They named their business Benguet Lumber which they jointly managed until Tan Eng Kee’s death. However, petitioner claimed that in 1981, Eng Lay and his children converted the partnership into a corporation called BLC allegedly as a ruse to deprive Eng Kee and his heirs of their rightful participation in the profits of the business. HELD: No partnership existed between them. Except for the firm name, there was no firm account, no certificate of partnership, no agreement as to profits and losses, and no time fixed for the duration of the partnership. It had no agreement as to profits and losses, and no time fixed for the duration of the partnership. It had no business book, no written account nor any memo for that matter and no license mentioning the existence of a partnership. What the evidence show is establishment of only a proprietorship. The certification dated March 04, 1971 mentioned Eng Lay as the only registered owner of the Benguet Lumber and hardware.  His application for registration, effective 1954, mentioned that his business started in 1945 till 1985 (thereafter, the incorporation). The deceased, Kee, meanwhile, was merely an employee of the BLC, on the basis of his SSS coverage effective 1958; in the payrolls, Kee was only listed as an employee. It is indeed odd, if not unnatural, that despite the 40 years the partnership was allegedly in existence, Tan Eng Kee never asked for an accounting. The essence of a partnership is that the partners share in the profits and losses. Each has the right to demand an accounting as long as the partnership exists. A demand for periodic accounting is evidence of a partnership. Tan Eng Kee never availed of such right.

SM: Persons; void marriages; psychological incapacity; A. 36, Family Code
GR# 136490, October 19, 2000

FACTS: Petitioner Brenda Marcos and respondent Wilson Marcos were married on September 06, 1982 in Pasig City. Alleging Wilson’s psychological incapacity, Brenda filed with the RTC a petition to declare their marriage null and void. The RTC ruled in Brenda’s favor and declared their marriage null and void. On appeal, the CA reversed the RTC and held that psychological incapacity had not been established by the totality of the evidence presented hence, this appeal.
HELD: Though the personal medical/ psychological examination of Wilson is not a requirement for a declaration of psychological incapacity, nevertheless, the totality of the evidence petitioner presented does not show such incapacity. Although respondent is proven to have failed to provide material support to the family and may have resorted to physical abandonment, the totality of his acts does not lead to a conclusion of psychological incapacity ion his part. There is absolutely no showing that his “defects” were already present at the inception of the marriage or that they are incurable. His alleged psychological illness was traced only within the 6 years period while he was without any job and not to the inception of the marriage.  Equally important, there is no evidence showing that his condition is incurable, especially now that he is gainfully employed as a taxi driver. A. 36, FC refers to a serious psychological illness afflicting a party even before the celebration of the marriage. It is a malady so grave and so permanent as to deprive one of awareness of the duties and responsibilities of the matrimonial bond one is about to assume. At best, the evidence presented by petitioner refers only to grounds for legal separation, not for declaring a marriage void. As ruled in Molina, the root cause of the psychological incapacity must be: (a) medically/clinically identified, (b) alleged in the complaint, (c) sufficiently proven by experts and, (d) clearly explained in the decision. A. 36, FC requires that the incapacity must be psychological- not physical. Petitioner failed to observe this as well as the other requirements.
            SANTOS vs. CA 240 S 34

SM: Family Code; void marriages
TY vs. CA
GR # 127406, November 27, 2000

FACTS: Private respondent contracted in 1977 a marriage with Villanueva without the needed license and consent required. Thereafter, he married petitioner in 1979 in civil and church rites. However, private respondent filed a complaint for annulment of their marriage alleging that he and petitioner did not have a marriage license when they got married and that his first marriage to Villanueva had not been nullified judicially. HELD: Since respondent’s first marriage was void for lack of license and consent there was no need for judicial declaration of its nullity before he could contract a 2nd marriage. The ruling in Odayat vs. Amante (77 S 338) applies to the case. No judicial decree is necessary to establish the nullity of void marriages. Thus, private respondent’s 2nd marriage to petitioner is valid. The parties had complied with all the essential and formal requisites for a valid marriage including the requirement of a valid license.

SM: Wills and Succession; Validity of the will; A.17, NCC
GR # 124371, November 23, 2000

FACTS: The testator-decedent, Lorenzo N. Llorente became an American citizen long before and at the time of: (1) his divorce from Paula; (2) his marriage to Alicia; (3) execution of his will; and (4) at the time of his death. Under Lorenzo’s will, his 2nd wife Alicia and their children get all his properties. The will was contested. The RTC threw out the will, leaving Alicia and her 2 children with nothing. The RTC ruled that the will was intrinsically invalid since it contained depositions favoring Alicia who was thought of as a mere paramour. HELD: Under the VAN DORM doctrine (139 S 139), only Philippine nationals are covered by the policy against absolute divorces. Aliens may obtain divorces abroad provided they are valid according to their national law. The hasty application of Philippine law and the complete disregard of the will already probated as duly executed in accordance with the formalities of Philippine law are fatal.  As held in  Quita vs. CA (300 S 406), once proven that respondent was no longer a FILCIT when he obtained the divorce from petitioner, the Van Dorm ruling applies and the petitioner could “very well lose her right to inherit” from him. In Pilapil vs. Ibay- Somera  (174 s 653), the SC held that divorce and its legal effects maybe recognized in the Philippines insofar as decedent is concerned n view of the nationality principle in our civil law on the status of persons. Lorenzo’s divorce form his 1st wife Paula being valid in New York where he is a resident was valid and recognized in this jurisdiction as a matter of comity. The clear intent of Lorenzo to bequeath his property to his 2nd wife and their children is palpable in the will he executed. His wishes should not be frustrated since he was a foreigner, not covered by our laws on “family rights and duties, status, condition and legal capacity.

SM: Public Land Act; judicial confirmation of imperfect title
GR#112172, November 20, 2000

FACTS: The subject property is being claimed by respondent Bernardo De Leon. Allegedly, he and his predecessors- in – interest has been in OCEN possession of the land for at least 50 years. It was however shown that the survey plan for the land was approved only in 1992 and respondent paid the realty taxes thereon on October 30, 1992, shortly before he filed the suit for damages with injunction against PEA. HELD: An applicant seeking to establish ownership of land must conclusively show that he is the owner in fee simple for the standing presumption is that all lands belong to the public domain of the state, unless acquired from the Government either by purchase or by grant, except land possessed by an occupant and his predecessors since time immemorial. Such possession would justify the presumption that the land had never been part of the public domain, or that it had been private property even before the Spanish conquest. Respondent has no title to Lot 5155 at all. He must be deemed to begin asserting his adverse claim to said lot only in 1992, when he started paying realty taxes thereon. Further, Lot 5155 was certified as alienable and disposable on March 27, 1972, per DENR’s certificate. It is obvious that respondent’s possession has not ripened into ownership. Further, one claiming private rights must prove that he has complied with CA141,as amended/ Public Land Act, which prescribes the substantive as well as the procedural requirement for acquisition of public lands. Under said law, OCEN possession must be since June 12, 1945. Lastly, under CA141as amended, only titles to alienable and disposable lands of the public domain maybe judicially confirmed. Unless a public land is reclassified and declared as such, occupation thereof in the concept of owner, no matter how long ago, can not confer ownership/possessory rights.

SM: Property; accretion; A. 457, NCC
GR# 116290, December 08, 2000

FACTS: Petitioner and respondent are both riparian owners of lots along the Davao River. Due to the decrease in land area of petitioner’s lot, allegedly due to a change in the river’s course, petitioner claimed ownership of the abandoned river bed. She also insisted that Lot 415-C, respondent’s lot, was part of her property since she has acquired it by accretion under A. 457, NCC. The lower courts ruled that the decrease in the land area of petitioner’s property was brought by erosion and not a change in the river’s course. They concluded this after finding out in an ocular inspection that the banks located on petitioner’s land are sharp, craggy and very much higher than the land on the other side of the river. Additionally, the riverbank on respondent’s side is lower and gently sloping. The lower courts held that naturally, the lower land received the alluvial soil carried by the river current. Both courts also ruled that petitioner failed to prove that Lot 415-C neither was within the boundaries of her titled property nor was her private survey plan given probative value. They further held that the corresponding expansion of respondent’s property was due to the combined effect of erosion and accretion respectively. HELD: Petitioner can not claim ownership over the old abandoned river bed because the same is inexistent. The riverbed’s former location can not even be pinpointed with particularity since the Davao River took place gradually over an unspecified period of time, up to the present. The rule is well-settled that accretion benefits a riparian owner when the following requisites are present: (1) that the deposit is gradual and imperceptible; (2) that it resulted from the effects of the current of the water; and (3) that the land where accretion takes place is adjacent to the bank of the river. These requisites were sufficiently proven in respondent’s favor. In the absence of evidence that the change in the course of the river was sudden or that it occurred through avulsion was gradual and was caused by alluvium and erosion. As to Lot 415-C, registration does not protect the riparian owner against the diminution of the area of his land thru gradual changes in the course of the adjoining stream. Accretion which the banks of rivers may gradually receive from the effect of the current became the property of the bank’s owners.

SM: Wills and Succession; Rule on Proximity in Intestate Succession
GR# 140975, December 08, 2000

FACTS: Augusto H. Piedad died without any direct descendants or ascendants. Respondent is the maternal aunt of the decedent, a 3rd degrees relative. Meantime, petitioner is the daughter of a first cousin of the decedent, or a 5th degree relative of the decedent. Citing Articles 1009 and 1010, NCC, petitioner claims that she is also entitled to succeed to the decedent’s estate.HELD: The rule on proximity is a concept that favors the relatives nearest in degree to the decedent and excludes the more distant ones, except when and to the extent that the right of representation can apply. In the direct line, right of representation is proper only in the descending, never in the ascending line. In the collateral line, this right may only take place in favor of the children of the decedent’s siblings when such children survive with their aunts/ uncles. Applying A.966,NCC, respondent, being a relative within the 3rd civil degree of decedent excludes petitioner, a relative of the 5th degree, from succeeding ab intestato to the decedent’s estate. Among other collateral relatives, i.e., the 6th in the line of succession to which the parties belong, no preference or distinction should be observed “by reason of relationship by the whole blood.” In fine, a maternal aunt can inherit alongside a paternal uncle, and a 1st cousin of the full blood can inherit equally with a first cousin of the half blood, but an uncle/ aunt, being a 3rd degree relative, excludes the decedent’s cousin, being in the 4th degree of relationship; the latter, in turn, would have priority in succession to a 5th degree relative.

SM: Obligation and Contracts; Novation
GR# 117660, December 18, 2000

FACTS: The conflict among the parties started from a contract of sale of a farmland between Agro and Wonderland Food Industries.The original plan was that the initial payments would be paid in cash. Subsequently, the parties, with respondent bank’s participation, executed an addendum providing instead, that Agro would secure a loan in its name for the total amount of the initial payments, while the settlement of said loan would be assume by Wonderland. Thereafter, petitioner Soriano signed several promissory notes (PNs) and received the proceeds in Agro’s behalf.          In effect, the parties entered into a subsidiary contract of suretyship since petitioners signed the PNs as makers and accommodation party for Wonderland’s benefit. Petitioners asserted that the addendum provided that their obligation to pay the PNs was novated by “substitution’ of a new debtor, Wonderland, and as such, they were not liable anymore on the PNs.
HELD: In order that a novation can take place, the concurrence of the following requisites is indispensable: (1) there must be a previous valid obligation; (2) there must be an agreement of the parties concerned to a new contract; (3) there must be the extinguishment of the old contract; and (4) there must be the validity of the new contract.       In the case at bar, the 1st requisite for a valid novation is lacking. There was no novation by “substitution” of debtor because there was no prior obligation which was substituted by a new contract. The PNs, which bound petitioners to pay, were executed after the addendum. The addendum modified the contract of sale, not the stipulation in the PNs which pertain to the surety contract. Wonderland apparently assured the payment of future debts to be incurred by petitioners. Consequently, only a contract of surety arose. It was wrong for petitioners to presume that a novation had taken place. Settled is the rule that a novation is never presumed, it must be clearly and unequivocally shown.

SM: land registration; judicial confirmation of title
GR# 116372, January 18, 2001

FACTS: The Director of Lands initiated a cadastral case, pursuant to law, before the RTC of Ligao, Albay. Romeo Divinaflor filed his answer to the petition relative to Lot 10739, claiming ownership of said land by virtue of his possession for over 30 years. The RTC found him, together with his predecessor- in –interest to have been in OCEN possession since 1939 of said lot and ordered the lot’s registration and confirmation in the spouses Divinaflors’ names.     The Director in his appeal to the CA alleged that the RTC’s findings were not sufficiently supported by evidence. He contended that the earliest tax declaration presented by the claimant took effect only in 1980 and the certificate of real estate tax payment is dated 1990. HELD: The SC reiterated its ruling in Republic vs. CA (235 s 567 ) that the Public land Act requires that the applicant must prove the following: (a) that the land is alienable public land and (b) that his OCEN possession of the same must either be since time immemorial or for the period prescribed in the Public Land Act.  When the conditions set by law are complied with, the possessor of the land, by operation of law, acquires a right to grant a government grant, without the necessity of a certificate of title being issued. The subject lot is undoubtedly alienable and disposable tract of public land. The determination of whether claimants were in OCEN possession under a bona fide claim of ownership since 1945 as required by law is a question of fact which was resolved affirmatively by both lower courts.

SM: Obligations and Contracts; Novation as a means to extinguish a contract of surety
GR#s 99398/104625, January 26, 2001

FACTS: Babst alleged that DBP sold ELISCON’s entire asset to the NADECO, for the latter to take over and continue the operation of its business. Thereafter, the DBP’s Board of Governors adopted Resolution# 2817 providing that DBP shall enter into a contractual arrangement with NDC for the latter to pay ELISCON;s creditors, including BPI, amounting to P 4,015,534.54. A Memorandum of Agreement (MOA) between DBP and NDC followed which provided that NDC shall pay to ELISCON’s creditors, through DBP, the amount of P299, 524,700. BPI again was listed as a creditor. Babst further alleged that the ELISCON assets which DBP acquired and later transferred to NADECO (NDC) were placed under the Asset Privatization Trust. Thus, he was not liable. Due to its failure to make payment, BPI commenced an action to enforce payment of the credits of ELISCON with CBTC which was acquired in a merger by BPI. The action was against Pacific Multi Commercial Corporation and Babst as ELISCON’s sureties. HELD: While a surety is solidarily liable with the principal debtor, his obligation to pay only arises upon the principal debtor’s failure/ refusal to pay. In the case at bar, there was no indication that the principal debtor will default in payment.             BPI’s conduct further showed a clear and unmistakable consent to DBP’s substitution for ELISCON as debtor. The authority granted by BPI to its account officer to attend the creditors’ meeting was an authority to represent the bank such that when he failed to object to the substitution of debtors, he did so in behalf of and for the bank. Hence, there was a valid novation which resulted in the release of ELISCON from its obligation to BPI, whose course of action should be directed against DBP as the new debtor. The original obligation having been extinguished, the contracts of suretyship executed separately by Babst and Multi being accessory obligations are likewise extinguished.

SM: Family Code; Void marriages
GR# 132529, February 02, 2001

FACTS: SPO4 Santiago S. Cariño contracted 2 marriages in his lifetime. The first was with petitioner Susan Nicdao Cariño, on jUne 20, 1969 and the second was with respondent, Susan Yee Cariño on November 10, 1992. He and Susan however had been living together since 1982. In 1988 Santiago died under Susan’ care and she spent for his medical and burial expenses. Both parties filed claims for monetary benefits and financial assistance pertaining to the deceased from various government agencies. Petitioner collected P146, 000 while respondent only received P21k. Respondent then filed a case for collection of sum of money against petitioner whop failed to file her answer. HELD: Under the Civil Code which was the law in force when the marriage of petitioner and the deceased was solemnized in 1969, a valid marriage license is a requisite of marriage and the absence thereof, subject to certain exceptions, renders the marriage voi ab initio. Petitioner’s marriage does not fall within those exempt from the license requirement. Thus, a marriage license was indispensable to the validity of their marriage. This petitioner failed to show. However, though petitioner’s marriage is void, the death benefits do not automatically go to respondent. The nullity of Santiago’s previous marriage, without a prior judicial declaration, does not validate the second marriage of Santiago with respondent which is likewise void ab initio. One of the effects of the declaration of nullity of marriage is the separation of property of the spouses.  Considering that both marriages are void ab initio, the applicable property regime would not be absolute community or conjugal partnership of property but Articles 147-148 of the Family Code on Property Regime of Unions without Marriage. The death benefits were earned by the deceased as a police officer. Respondent could not be said to have contributed to it. Thus such money is not owned in common but belonged to Santiago. By intestate succession, the money shall pas to Santiago’s legal heirs; respondent is not included for it is Santiago’s marriage with petitioner that is presumed to be in good faith. Thus, ½ of the death benefits shall go to petitioner as her share and the other half to their 2 children.

SM: Contracts; Unenforceable contracts
GR#140479, March 08, 2001

FACTS: Respondents filed a case against Petitioner Corporation, Rene Joaquin and Eufrocina De Leon. Originally, the complaint was one for annulment of deed of absolute sale but was later amended to rescission of absolute deed of sale. The RTC dismissed the case ruling that the right of redemption on which the case was based was merely an oral one and as such, is unenforceable under the law. The CA, although holding that the statute of frauds governs the right of first refusal claimed by respondents, ruled that the latter had duly proven the same by petitioner’s waiver of the protection of the statute due to their failure to object to the presentation of oral evidence of said right hence, this appeal. HELD: A right of first refusal is not among those listed as unenforceable contracts under the Statute of frauds.  A right of 1st refusal, such as the subject matter in this case, is not by any means a perfected contract of sale of real property. At best, it is a contractual grant, not of the sale of the real property involved, but of the right of 1st refusal over the property sought to be sold. Thus, the statute of frauds does not contemplate cases involving a right of first refusal which need not be written to be enforceable and maybe proven by oral evidence. The respondents however failed to present any evidence that prior to the sale of the  property on November 4, 1990,petitioners were aware or had notice of the oral right of first refusal the respondents have over the property. Since there is no showing of bad faith on petitioners’ part, the CA erred in ordering the rescission of the Deed of Absolute Sale between petitioner R   OSENCOR and the Tiangco heirs. ROSENCOR’s   acquisition of the property subject of the right of first refusal is an obstacle for its rescission where, as in this case, it was shown that ROSENCOR is in lawful possession of the land and that it did not act in bad faith.  Respondents’ remedy for the unjustified violation of their right of first refusal over the property is not an action for the rescission of the Deed of Absolute Sale but an action for damages against the Tiangco heirs.

SM: Succession; Legitime
GR# 138774, March 08, 2001

FACTS: Petitioners, illegitimate children of the deceased, bought their father’s 2 parcels of land covered by a Kasulatan. They alleged that they paid their father P10k andP15k for said properties. However, both of Gregorio’s children did not have any stable source of income. Respondent, Gregorio’s sole legitimate daughter, filed an action to declare the deed of sale void for lack of consideration.
HELD: Petitioners testimonies failed to prove that they paid their father for the 2 lots. Since there was no cause/ consideration for the sale, the same was a simulation and hence, null and void. Further, even if it was not simulated, the sale still violated the law insofar as the transaction affected respondent’s legitime under the Civil Code. The sale was executed to transfer the land to the petitioners at respondent’s expense. Respondent, by law, is entitled to half of the estate of her father as his only legitimate child. She can not be deprived of her share being a compulsory heir save by disinheritance as prescribed by law.

SM: Donation; Articles 745 and 749, NCC
GR# 140487, April 02, 2001

FACTS:  Respondents donated a parcel of land in favor of the Bureau of Public Schools, Municipality of Malangas, Zamboanga del Sur. A school building was immediately constructed after the donation was executed. However, the lot was later on exchanged for a bigger land. Respondents thereafter filed an action to declare the Deed of Donation null and void. Allegedly, the donation was not accepted by the donee or that its acceptance did not reach the donors. However, in the trial court, an affidavit of acceptance/ confirmation was offered in evidence. HELD: There was valid acceptance of the donation. The written acceptance of the donation having been considered by the trial court in arriving at its decision, there is the presumption that this exhibit was properly offered and admitted by the court. Further, the purpose of noting the acceptance in the Deed of Donation as required in Article 749, NCC is to insure that the acceptance of the donation is duly communicated to the donor. In the case at bar, the donor in fact confirmed the donee’s acceptance and even requested that the donated land be not registered during her lifetime. Lastly, since the denotation was made in favor of the Bureau of Public Schools the acceptance without a Special Power of Attorney from the republic of the Philippines was authorized under Section 47 of the 19987 Administrative Code.

SM: Sales; double sales; Art. 1544, NCC
GR# 123457, May 21, 2001

FACTS: Private respondents, Spouses Veneracion, bought the subject lot from private respondent Dela Paz according to a Deed of Sale with Right to Repurchase. The Veneracions did not physically occupy the 3 lots one of which was occupied by Dela Paz and the other by petitioner. After the period to redeem expired, the Dela Paz couple told the Veneracions that they were offering the lots for sale to another person for P200k. The latter did not object. Nevertheless, the respondents executed a 2nd Deed of Sale over the same property. They then filed an action for ejectment of the petitioner who was already in possession of the property at the time the 2nd deed was executed. HELD: A purchaser who is aware of facts which should put a reasonable man upon his guard can not turn a blind eye and later claim that he acted in good faith. Private respondent Reynaldo Veneracion admitted  during the pre-trial conference in the MTC for their ejectment case that petitioner was already in possession of the subject property at the time the 2nd Deed of Sale was executed on January 01, 1983 and recorded on March 03, 1984. He thus knew that there were already occupants on the property as early as 1981. The fact that there are other persons, other than the Dela Paz couple, in actual possession of the lot should have put the Veneracions on inquiry as to the nature of petitioner’s right over the property.  But they never talked with petitioner to verify the nature of his right and instead relied on the assurance of Dela Paz who was not even the owner of said lot. This does not meet the standard of good faith.

SM: Quasi- Contracts; Art. 2141, NCC
GR# 109087, May 09, 2001

FACTS: RODZSSEN applied for and obtained an irrevocable 30- day domestic Letter of Credit from respondent Bank on January 15, 1979, in favor of Ekman & Co. Inc. in order to finance the purchase of 5 units of hydraulic loaders amounting to P190k. After several extensions, the validity was finally granted until October 16, 1979. Far East paid Ekman for the first 3 hydraulic loaders that w ere delivered. The bank however paid Ekman P76k on March 14, 1980 for the last 2 units which petitioner accepted under its trust receipt arrangement with Far East. The latter demanded payment from petitioner which refused the same since the bank paid Ekman when it was no longer bound to do so under the Letter of Credit which expired 5 months prior to the payment of the 2 units.
HELD: The subject Letter of Credit had become invalid upon the lapse of period fixed therein. Thus, respondent should not have paid Ekman since it was not obliged to do so. However, Far East’s right to seek recovery from the petitioner is anchored not upon the inefficacious letter of Credit, but on Art. 2142, NCC. Indeed, equitable considerations should be used to allow recovery by respondent. Thus, it erred in paying Ekman but petitioner itself was not without fault in the transaction. It must be noted that the latter had voluntarily received and kept the loaders since October 1979.

SM: Family Code; Parental authority; Arts. 211, 214, FC
GR# 132223, June 19, 2001

FACTS: Petitioner is Valerie and Vincent’s surviving grandmother while respondent is their mother.  Petitioner alleged that respondent is morally unfit as Valerie;s guardian since her live- in partner raped Valerie several times. Respondent meanwhile claimed that petitioner can not qualify as a substitute guardian for the children since she is an American citizen and a Colorado resident. Since Valerie became of age, the guardianship of Vincent became the focal point of the proceedings. The lower courts ruled that respondent, being the natural mother of the minor has the preferential right over of petitioner to be his guardian, hence, this appeal. HELD: Respondent has the preferential right over that of petitioner to be his guardian. Being Vincent’s natural mother, respondent has the corresponding natural and legal right to his custody.  Settled is the rule that the right of the parents to the custody of their minor children is one of the natural rights incidents to parenthood, a right supported by law and sound public police. The right is an inherent one, which is not created by the state or decisions of the courts, but derives from the nature of the parental relationship. Petitioner, as the surviving grandparent, can exercise substitute parental authority only in case of death, absence/ unsuitability of respondent.  Considering that respondent is very much alive and has exercised continuously parental authority over Vincent, petitioner has to prove, in asserting her right to be the minor’s guardian, respondent’s unsuitability. Petitioner however failed in that score.

SM: Damages; registered owner‘s (of any vehicle) liability
GR# 128705, June 29, 2001

FACTS: Petitioner’s car was damaged due to a collision with another car. The car’s driver Borja was Comsavings Bank employee. Petitioner sued the bank for the damages since the Lancer driven by Borja was registered in the bank’s name. The trial court held in petitioner’s favor. CA reversed the ruling.In this appeal, petitioner asserts that the existence of employer- employee relationship between the bank and Borja is immaterial for the registered owner of a motor vehicle is legally liable for the damages incurred by third persons for injuries sustained in the operation of said vehicle. Respondent claims meanwhile that it is not liable since at the time of the accident, Borja was driving the Lancer in his private capacity and was not performing functions in furtherance of Comsavings Bank’s interest. Further, Borja allegedly had bought the car on installment basis. Thus, at the time of the incident, the bank was no longer the car’s owner.
HELD: The registered owner of any vehicle, even if not for public service, is primarily responsible to third persons for deaths, injuries and damages it cause. This is true even of the vehicle is leased to third persons. The Motor Vehicle Law does not relieve a registered owner directly of the responsibility that the law fixes and places upon him as an incident of registration. Were a registered owner allowed to evade responsibility by proving who the supposed transferee/ owner is, it would be easy for him, by collusion with others, or otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who can not financially shoulder the damage/ injury done. Thus Comsavings, being the registered owner of the car is primarily responsible for the damage caused to petitioner’s car but CSB has a right to indemnified by the real/actual owner of the amount that he may be required to pay as damages.

SM: Succession; Art. 1001, NCC
GR# 143256, August 28, 2001

FACTS: Dr. Jose Fernandez died intestate in 1982. An Extra- Judicial Partition of his properties was executed by his wife Generosa and their son, Rodolfo, herein petitioner. A Deed of Sale of some properties of Generosa was also executed by her in favor of petitioner Eddie Fernandez before she died. Respondents, Dr. Jose’s nephews and nieces, filed an action for the declaration of absolute nullity of the 2 deeds. HELD: Since the lower courts found Rodolfo not a child by nature of the spouses Fernandez and not a legal heir of Dr. Jose, the deed of extra- judicial settlement of Dr. Jose’s estate between him and Generosa is null and void insofar as Rodolfo is concerned pursuant to Article 1105, NCC. However, since the property in question is conjugal, the respondents are entitled to inherit the 1/4 share of the estate while the 3/4 share of the conjugal property still belong to Generosa. Respondents can not thus possess nor demand reconveyance of the said property since they are not related by consanguinity to Generosa. Being the owner of the realty, Generosa can thus sell it as she did in favor of petitioner.

SM: Contracts; Novation as a mode of extinguishing obligations.
GR# 136780, August 16, 2001

FACTS: Danilo Alto is a credit card owner of SDIC. He signed a Surety Undertaking with petitioner to ensure payment of his credit card debts with SDIC.  Under the Undertaking, petitioner bound herself jointly ad severally with Alto to pay SDIC all obligations and charges in the use of the Diners Club Card and that any change or novation in the Agreement or any extension of the time granted by SDIC to pay such obligation shall not release her from the Surety Undertaking. Alto upgraded his card and became Diamond card holder. However, he incurred debts of P166, 408.31 in credit card advances which he failed to pay.  SDIC sued Alto and petitioner as his surety to collect said amount. HELD: The upgrading was a novation of the original agreement covering the 1st credit card issued to Alto, basically since it was committed with the intent of canceling and replacing the said card. But the novation did not serve to release petitioner from her surety obligations because in the Surety Undertaking she expressly waived discharged in case of change/ novation in the agreement governing the use of the 1st credit card. The extent of a surety’s liability is determined by the language of the surety ship contract/ bond itself. Also, the Surety Undertaking expressly provides that petitioner’s liability is solidary. Although the contract of surety is in essence secondary only to a valid principal obligation, his liability to the creditor is direct, primary and absolute; he becomes liable for the debt and duty of another although he possesses no direct or personal interest over the obligations nor does he receive any benefit there from. Petitioner had the option to withdraw her suretyship when Alto upgraded his card to one that permitted unlimited purchases, but instead she approved the upgrading. Hence, her liability subsists.

SM: Human Relations; Abuse of Rights under Art. 19, NCC
GR# 138964, August 09, 2001

FACTS: Respondents were Marta Reyes’ lessees. They had built their houses on the leased land which over the years underwent continuous improvements. When Marta died, her son Victor inherited the land. Sometime in 1986, he informed respondents that they would have a right of first refusal to buy the lot since they have been its lessees for more than 20 years. However, the land was sold in 1989 to petitioner Cynthia Ortega without respondents’ knowledge. She thereafter secured title to the property in her name and proceeded to condemn the structures on the land via a Condemnation Petition with the Office of the Building Official in Manila City. The respondents immediately filed with the Manila RTC a suit for the Declaration of Nullity of the sale in Cynthia’s favor predicated on their right of first refusal. Nevertheless, the office of the Building Official issued an order of demolition of the respondents’ houses which took place after several interventions. HELD: The abuse of rights rule established in Article 19, NCC require every person to act with justice, to give everyone his due and to observe honesty and good faith. When a right is exercised in a manner which discards these norms resulting in damage to another, a legal wrong is committed for which the actor can be held accountable. In the case at bar, the issue is not so much about the existence of the right/validity of the order of demolition as the question of whether or not petitioners have acted in conformity with, and not in disregard of, the standard set by Art. 19, NCC. At the time the petitioners implemented the order of demolition, barely 5 days after respondents received a copy thereof, the same was not yet final and executory. The latter are given 15 days to appeal. Due to petitioners’ premature action of demolishing the houses, the respondents were effectively deprived of this recourse.  The action of petitioners up to the point where they were able to secure an order of demolition was not condemnable but implementing the order unmindful of the respondents’ right to contest the ruling was a different matter and could only be held utterly indefensible.

SM: Contracts; legal compensation
GR# 129598, August 01, 2001

FACTS: Petitioner is indebted to PNEI for P7, 884,921.10 per a promissory note dated October 31, 1982 executed by its precursor NAREDECO in PNEI’s favor. Said amount earns an 18% interest/year in case NAREDECO fails to pay the principal after notice; PNEI’s receivables were thereafter conveyed to PNB in payment of PNEI’s loan obligation to the latter, in accordance with a dacion en pago agreement executed between PNEI and PNB. Allegedly compensation took place between petitioner’s debts to PNEI and the latter’s obligation to it. Nevertheless, PNEI, through respondent, sued petitioner for the latter’s debts. HELD: Legal compensation could not have occurred in the case at bar due to the absence of one requisite: that both debts must be due and demandable. Petitioner’s obligation to PNEI is payable on demand, and there being no demand made, it follows that the obligation is not yet due. Thus, this obligation may not be subject to compensation for lack of a requisite under the law. Without compensation having taking place, petitioner remains obligated to PNEI to the extent stated in the promissory note. This obligation may undoubtedly be garnished in respondent’s favor to satisfy PNEI’s judgment debt.

SM: Contracts; Suretyship
GR# 127261, September 07, 2001

FACTS: Petitioner posted a replevin bond in respondents’ favor. Respondent Dominador Ibajan asserted that as intervenor, he assumed the personality of the original defendants in relation to the plaintiff’s bond for the issuance of a writ of replevin. Petitioner meanwhile claimed that it is not liable to Ibajan because the intervention of the intervenor makes him a party to the suit but not a beneficiary to the plaintiff’s bond. The intervenor was not a party to the contract of surety; hence, he was not bound by the contract. HELD: A contract of surety is an agreement where a party called the surety guarantees the performance by the principal or obligor of an obligation/undertaking , in favor of a 3rd person called the oblige. Specifically, suretyship is a contractual relation resulting from an agreement whereby one person, the surety, engages to be answerable fro the debt, default/miscarriage of the principal. The surety’s obligation can not be extended by implication beyond its specified limits. The extent of a surety’s liability is determined only by the clause of the contract of suretyship. A contract of surety is not presumed; it can not extend to more than what is stipulated. Since the obligation of the surety can not be extended by implication, it follows that the surety can not be held liable to the intervenor when the relationship and obligation of the surety is limited to the defendants specified in the surety contract.

SM: obligations; damages
GR# 135644, September 17, 2001

FACTS: GSIS and the Deangs had a loan agreement secured by a Real Estate Mortgage. The Deangs were able to pay said loan and asked that their duplicate copy of title be released by the GSIS. The latter insisted however that it was not obligated to return said duplicate copy immediately. As a result, the Deangs were not able to secure another loan, resulting to damages to their business. Consequently, they sued GSIS for damages. HELD: Although Article 2180, NCC in inapplicable in the case at bar, GSIS is still liable for damages. Under Articles 1170 and 2001, NCC, GSIS, due to its negligence and refusal to return the duplicate copy of title, should pay the Deangs for the damages they suffered. Since good faith is presumed and bad faith is a matter of fact which should be proved, GSIS was treated by the SC as a party who defaulted in its obligation to return the owner’s duplicate copy of title. As an obligor in good faith, GSIS is liable for all the “natural and probable consequences of the breach of the obligation.” The inability of the Deangs to secure another loan and the damages they suffered thereby has its roots in the failure of GSIS to return the owner’s duplicate copy of title. Hence, award of damage due to the breach of contract is granted.

SM: Partnership
GR# 135813, October 25, 2001

FACTS: Petitioner employed the services of respondent spouses in the money lending venture with Gragera, with Nieves as book keeper and Arsenio as credit investigator. Nieves witnessed the signing of the Partnership Agreement between the two. However, petitioner, Nieves and Zabat were also partners but their partnership ended when Zabat was expelled. The partnership continued lending money to the members of the Monte Marra Community Development Group, Inc. Petitioner alleged that Nieves misappropriated the money intended for Gragera’s commission. Respondents meanwhile asserted that they were in fact partners of petitioner and Gragera, thus, they were entitled to the partnership’s profits. HELD: Evidence showed that Nieves was the “Second Party” named in the Partnership Agreement, making her a partner of the petitioner.  Arsenio meanwhile, on account of his duties replaced Zabat in the partnership. Their partnership was established to engage in a money lending business despite the fact that it was formalized only after the Memorandum of Agreement has been signed by petitioner and Gragera. Since a partnership exists between the parties, the profits thereof should be divided between the partners.

SM: Family Law; Paternity and Filiation
GR# 142877, October 21, 2001

FACTS: The petition involves the case of two illegitimate children who, having been born in lawful wedlock claim to be the illegitimate scions of the decedent in order to enforce their respective shares in the latter’s estate under the rules on succession.       Petitioners however were born during their parents’ marriage. Their certificate of live birth also identified Danilo De Jesus as being their father. Nonetheless, they presented a written acknowledgment made by the decedent that he in effect was their father. HELD:             The filiation of illegitimate children like legitimate children, is established by (1) record of live birth appearing in the civil register/ final judgment; or (2) an admission of legitimate filiation in a public document or a private handwritten instrument and signed by the parties concerned. In the absence thereof, filiation shall be proved by (1) open and continuous possession of the status of a legitimate child; or (3) 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, or a statement before a court of record or in any authentic writing is in itself a consummated act of acknowledgement of the child and no further court action is required. In the case at bar, petitioners were born during their parents’ marriage and Danilo De Jesus was the father in their certificates of live birth. The rule is settled that the presumption of children born in wedlock is legitimate. An attempt to establish petitioners’ illegitimate filiation to the decedent would impugn their legitimate status as being children of Danilo and Carolina De Jesus. This can not be done because the law establishes the legitimacy of children, conceived/born during their parents’ marriage.The presumption of legitimacy fixes a civil status for the child born in a wed lock and only the father or in exceptional instances, the latter’s heirs, can contest in an appropriate action the legitimacy of a child born to his wife. Thus, it is only when the legitimacy of a child has been successfully impugned that the paternity of the husband can be rejected.

SM: Obligation and Contracts RA 6552 (realty Installment Buyer Protection Act); Art. 1169, NCC
GR# 129018, November 15, 2001

FACTS: Petitioner and private respondent Fernando executed a contract to sell over a piece of property. The contract provided that the vendee, herein petitioner, may continue occupying said lot as long as she complies with all the terms and conditions agreed upon. The respondent- vendor meanwhile will only execute a deed of sale after the complete payment of the total purchase price of the property. The parties agreed further that petitioner will pay in monthly installments for a period of 10 years. However, after April 01, 1989, petitioner failed to pay said installments. Respondents thereafter filed an ejectment case against petitioner.  HELD:     Petitioner’s non payment of the installments prevented respondent’s obligation to convey the property from arising. In fact, it brought into effect the provision of the contract on cancellation. Any attempt to cancel the contact to sell would have to comply with the provisions of RA 6552. RA 6552 recognizes on conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon non- payment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. The law also provides for the rights of the buyer in case of cancellation. Sec. 3(b) provides even that If the contract is cancelled, refund to the buyer of the case surrender value of the payments is a must. It also provides that the actual cancellation of the contract shall take place after 30 days from receipt by the buyer of the notice of cancellation/ demand for rescission of the contract. The decision in the ejectment case operated as the notice of cancellation required by Sec. 3 (b). As petitioner was not given the cash surrender value of the payments that she made, there was still no actual cancellation of the contract. Consequently, petitioner may still reinstate the contract by updating her account.

SM: Obligations and Contracts; Double Sale; Art. 1544, NCC
TAN vs. CA
GR# 135038, November 16, 2001

FACTS: Hayden Luzon bought the subject property from Lorenzo Atega on sale by installment, starting form 1957 till 1987. Leoncio Paredes bought a portion of his property in 1977 and the remaining portion in 1990. However, no registration of their claims had been made in their favor, much less any title issued in their name. Petitioner meanwhile bought the lot through Ismael Elloso. Petitioner thereafter registered said sale with the Register of Deeds in November 1979, soon after title was issued in Atega’s name, segregating his share in Lot No. 436-A. petitioner filed a notice of adverse claim which was duly annotated on Atega’s title. HELD:     There is evidence showing not only that respondents knew of the sale of the lot by Elloso to petitioner but also that the latter was ahead in registering his acquisition of the lot with the Register of Deeds. Both the prior registration of the deed of sale in petitioner’s favor, as well as the adverse claim, effectively gave Luzon and Paredes notice of petitioner’s right on the subject land. Before 2nd buyers like Luzon and Paderes can obtain priority over 1st buyers like Elloso, petitioner’s predecessor- in – interest, they must show that they have acted in good faith throughout, having been ignorant of the 1st buyer’s rights from the time of their acquisition until the title was transferred to them by registration. The requirement is such that the 2nd buyer must show continuing good faith and innocence or lack of knowledge of the 1st sale till his contract ripens into full ownership through prior registration as provided by law. Evidently, both respondents’ claim must yield in petitioner’s favor.

SM: Obligation and Contracts; reciprocal Obligations; Consignation
GR# 127695, December 03, 2001

FACTS: Petitioners entered into a lease contract with option to buy with respondents. The private respondents communicated to petitioners’ their intention to buy the property prior to the expiration of their contract. However, petitioners refused to execute the deed of sale and demanded respondents to first deliver the money before they would execute the same. The respondents filed a case for specific performance in the RTC. Before the RTC rendered its decision, respondents issued a cashier’s check in petitioners’ favor purportedly to bolster their claim that they were ready to pay the purchase price. Asserting that the respondents were in delay when they issued the cashier’s check after the contract expired, petitioners filed this petition. HELD: Obligations under an option to buy are reciprocal obligations. In an option to buy, the payment of the purchase price by the creditor is contingent upon the execution and delivery of a deed of sale by the debtor. In the case at bar, when the respondents opted to buy the property, their obligation was to advise petitioners of their decision and their readiness to pay the price. They were not yet obliged to make actual payment. Only upon petitioners’ actual execution and delivery of the deed of sale were acquired to pay. Respondents did not incur in delay when they did not yet deliver payment nor make a consignation before the expiration of the contract. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. Only from the moment one of the parties fulfills his obligation, does delay by the other begin. Accordingly, as there was no compliance yet with what was incumbent upon petitioners under the option to buy, respondents had not incurred in delay when the cashier’s check was issued even after the contract expired.

SM: Family Code; Parental Authority
GR# 140817, December 07, 2001

FACTS: The parties were married under Islam laws. Thereafter, they separated and petitioner converted back to Catholicism. Petitioner took custody of their children and as a result; respondent brought an action with the Shari’ a Court which found petitioner unworthy to care for her children under the principles of Muslim Law. On the other hand, it found respondent capable to look after the best interest of his minor children, thus, this appeal. HELD: Proof of petitioner’s capacity to have custody of her children is not restricted to Muslim laws. The Family Code shall be taken into consideration in deciding whether a non- Muslim woman is incompetent. What determines her capacity is the standard laid down by the Family Code now that she is not a Muslim. Indeed, what determines the fitness of any parent is the ability to see to the physical, educational, social and moral welfare of the children, and the ability to give them a healthy environment as well as physical and financial support taking into consideration the respective resources and social and moral situations of the parents. The minors’ welfare is the controlling consideration on the issue. Article 211, family Code provides joint parental authority over the couple’s children. PD 1083 provides that where the parents are not divorced/legally separated, the father and mother shall jointly exercise parental authority. However, under the circumstances of the parties, petitioner has more capacity and time to see to the children’s needs. Nevertheless, respondent gets visitorial rights.

SM: Donation; Art. 749, NCC
GR# 132681, December 03, 2001

FACTS: Catalino Quilala executed a deed of donation in favor of her alleged daughter Violeta. It stipulated that the cause of donation was the love and affection of the donor toward the donee. The donor, donee and their witnesses affixed their signatures below the terms and stipulations of the donation. The Acknowledgment appearing on the 2nd page mentioned only the donor, Catalina. Consequently, petitioner filed an action questioning the donation asserting that the donation of an immovable, under Art. 749, NCC must be in a public instrument in order to be valid. HELD: Under Sec. 112(2) PD 1529, the specification of the location of the signature is merely directory. The fact that one of the parties signs on the wrong side of the page does not invalidate the document. The requirement is designed to avoid the falsification of the contract after the same has already been duly executed by the parties. Corollary, the back of an acknowledgment by the donee before the notary public does not also render the donation null and void. The fact that it was acknowledged before a notary public converts the deed of donation in its entirety into a public instrument.  The fact that the donee was not mentioned by the notary public in the acknowledgment is of no moment. Surely it is the conveyance that should be acknowledged as a free and voluntary act. In any event, the donees signed on the second page, which contains the Acknowledgment only. Her acceptance, which is explicitly set forth on the 1st page of the notarized deed of donation, was made in a public instrument. Thus, the donation is valid.

SM: Family Law; Art. 285, NCC
GR# 146500, January 21, 2002

FACTS:  The late Fiscal Ernesto A. Bernabe allegedly fathered a son with his secretary, Carolina Alejo, who was born on September 18, 1981 and was named Adrian Bernabe. Fiscal Bernabe died on August 13, 1993 while his wife died on December 03, 1993, leaving Ernestina as the sole surviving heir. On May 05, 1994, Carolina, in Adrian’s behalf, filed the aforesaid complaint praying that Adrian be declared an acknowledged illegitimate son of Ernesto and thus, Adrian should be given his share in Ernesto’s estate being held by Ernestina. The RTC dismissed the complaint ruling that the same was barred under the Family Code. It held that the putative father’s death had barred the action. Since Ernesto had not acknowledged/ recognized Adrian in writing, the action for recognition should have been filed during Ernesto’s lifetime to give him the opportunity to either affirm/deny the child’s filiation. The CA ruled meanwhile that Adrian should be allowed to prove that he was Ernesto’s illegitimate son. Since he was born in 1981, the CA held that A.285, NCC, which allows an action for recognition to be filed within 4 years after the child has attained the age of majority was not repealed by the Family Code, thus, this appeal. HELD: Article 285, NCC is a substantive law which gave Adrian the right to file his petition for recognition within 4 years from obtaining majority age. Thus, the Family Code can not impair or take away Adrian’s right to file an action for recognition, because the right had already vested prior to its enactment. Illegitimate children who were still minors at the time the Family Code took effect and whose putative parent died during their minority are thus given the right to seek recognition for a period of up to 4 years from attaining majority age. This vested right was not impaired or taken away by the passage of the Family Code. The state as parens patriae should protect a minor’s right. Born in 1981, Adrian was only 7 years when the family Code took effect and only 12 when his alleged father died in 1993.The minor, the SC held, must be given his day in court.

SM: Donation Inter Vivos
GR# 106755, February 01, 2002

FACTS: Basilica Comerciante bought a parcel of land with the improvement thereon in Cavite. On December 17, 1975, Basilica executed a document designated as “Kasulatan sa Kaloobpala (donation) “in favor of her 4 children covering said property. However, on February 06, 1979, she also executed a Deed of Absolute Sale of the same property in favor of petitioner Apolinaria Austria- Magat for P5, 000. Basilica’s title was cancelled and a new one was issued in petitioner’s favor HELD: When the deed of donation provides that the donor will not dispose/take away the property donated, thus making the donation irrevocable, he is in effect making a donation inter vivos. He parts away with his naked title but maintains beneficial ownership while he lives. It remains to be a donation inter vivos despite an express provision that the donor continues to be in possession and enjoyment of the donated property while he is alive. The SC, construing together the provisions of the deed of donation, held that the donation is inter vivos, thus, irrevocable. Further, the act of selling the subject property to the petitioner can not be considered as a valid act of revocation of the deed of donation for the reason that a formal case to revoke the donation must be filed in court pursuant to Art. 764, NCC within 4 years from the non- compliance of a condition violated. Lastly, since there was no fraud in the case at bar Art. 1144, NCC governs. The action for reconveyance thus prescribes in 10 years and the filing by respondents of the case in 1983 is well within the period.

SM: Articles 218 & 219, Family Code
GR# 143363, February 06, 2002

FACTS: Some students of petitioner school, during a school activity, rode a jeep brought by one of their classmates, Ched Villanueva and owned by respondent Vicencio Villanueva. While Ched was driving the vehicle, he allowed James Daniel II, a minor, to drive the jeep. The steering wheel guide of the jeep was detached and the jeep figured in an accident resulting in the death of Sherwin Carpitanos, a passenger in the jeep and one of petitioner’s student. His parents sued petitioner school fro his death under Arts. 218 and 219, FC and got a favorable ruling in the lower court. Thus, this appeal. HELD:         For petitioner to be liable there must be a finding that the act/ omission considered as negligent was the proximate cause of the injury caused since the negligence must have a causal connection to the accident.  In the case at bar, the respondents failed to show that the negligence of petitioner was the proximate cause of the victim’s death.  Evidence showed that the immediate cause of the accident was not the negligence of petitioner or the reckless driving of James Daniel II but the detachment of the steering wheel of the jeep. Further, there was no evidence that petitioner allowed James to drive the jeep. Thus the liability for the accident must be pinned on the minor’s parents primarily. The negligence of petitioner was only a remote cause of the accident. Between the remote cause and the injury, there intervened the negligence of the minor’s parents or the steering wheel guide’s detachment. Petitioner is thus not liable. Lastly, the evidence overwhelmingly showed that the registered owner of the vehicle should be held responsible for Sherwin’s death, not the school.

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