2006 Civil Law Case Digests.doc

7/27/2019 2006 Civil Law Case Digests.doc

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2006 Civil Law Case DigestsPERSONS

PRESUMPTIVE DEATH

Republic of the Philippines VS. Bermudez Lorino

G.R. No. 160258. January 19, 2005

Facts: Gloria Bermudez and Francisco Lorino were married in June 1987. The wife was unaware that her

husband was a habitual drinker with violent attitude and character and had the propensity to go out with

his friends to the point of being unable to work. In 1991 she left him and returned to her parents together

with her three children. She went abroad to work for her support her children. From the time she left him,

she had no communication with him or his relatives.

In 2000, nine years after leaving her husband, Gloria filed a verified petition with the RTC under the rules

on Summary Judicial Proceedings in the Family Law. The lower court issued an order for the publication

of the petition in a newspaper of general circulation.

In November 7, 2001, the RTC granted the summary petition. Although the judgment was final and

executors under the provisions of Act. 247 of the Family Code, the OSG for the Republic of the Philippines

filed a notice of appeal.

Issue: Whether or not the factual and legal bases for a judicial declaration of presumptive death under Art

41 of the Family Code were duly established.

Held: Art. 238 of the Family Code under Title XI Summary Judicial Proceeding in the Family Law, sets

the tenor for cases scoured by these rules, to wit:

Art238. Until modified by the Supreme Court, the procedural rules in this Title shall apply in all cases

provided for in this Code requiring summary court proceeding. Such cases shall be decided in an

expeditions manner with out regards technical rules.

The judge of the RTC fully complied with the above-cited provision by expeditiously rending judgment

within ninety (90) days after the formal offer of evidence by the petitioner.


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CO- OWNERSHIP

Buenaventura VS. CA

G.R. Nos. 127358 and G.R. Nos. 127449

March 31, 2005

Facts: Noel Buenaventura filed a position for the declaration of nullity of marriage on the ground that

both he and his wife were psychologically incapacitated.

The RTC in its decision, declared the marriage entered into between petitioner and respondent null and

violation ordered the liquidation of the assets of the conjugal partnership property; ordered petitioner a

regular support in favor of his son in the amount of 15,000 monthly, subject to modification as the

necessity arises, and awarded the care and custody of the minor to his mother.

Petitioner appealed before the CA. While the appeal was pending, the CA, upon respondents motion

issued a resolution increasing the support pendants like to P20, 000.

The CA dismissal petitioner appeal for lack of merit and affirmed in to the RTC decision. Petitioner

motion for reconsideration was denied, hence this petition.

Issue: Whether or not co-ownership is applicable to valid marriage.

Held: Since the present case does not involve the annulment of a bigamous marriage, the provisions of

article 50 in relation to articles 41, 42 and 43 of the Family Code, providing for the dissolution of the

absolute community or conjugal partnership of gains, as the case maybe, do not apply. Rather the general

rule applies, which is in case a marriage is declared void ab initio, the property regime applicable to be

liquidated, partitioned and distributed is that of equal co-ownership.

Since the properties ordered to be distributed by the court a quo were found, both by the RTC and the CA,

to have been acquired during the union of the parties, the same would be covered by the co-ownership. No

fruits of a separate property of one of the parties appear to have been included or involved in said

distribution.

ADOPTION; ILLEGITIMATE CHILD

IN THE MATTER OF THE ADOPTION OF STEPHANIE NATHY ASTORGA GARCIA


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G.R. No. 148311. March 31, 2005

Facts: Honorato B. Catindig filed a petition to adopt his minor illegitimate child Stephanie Astorga Garcia.

He averred that Stephanie was born on June 26, 1994; that Stephanie had been using her mothers middle

name and surname; and that he is now a widower and qualified to be her adopting parent. He prayed that

Stephanies middle name be changedto Garcia, her mothers surname, and that her surname Garcia be

changed to Catindig his surname.

The RTC granted the petition for adoption, and ordered that pursuant to article 189 of the Family Code,

the minor shall be known as Stephanie Nathy Catindig.

Honorato filed a motion for classification and/or reconsideration praying that Stephanie be allowed to use

the surname of her natural mother (Garcia) as her middle name. The lower court denied petitioners

motion for reconsideration holding that there is no law or jurisprudence allowing an adopted child to use

the surname of his biological mother as his middle name.

Issue: Whether or not an illegitimate child may use the surname of her mother as her middle name when

she is subsequently adopted by her natural father.

Held: One of the effects of adoption is that the adopted is deemed to be a legitimate child of the adapter

for all intents and purposes pursuant to Article 189 of the Family Code and Section 17 of Article V of RA

8557.

Being a legitimate by virtue of her adoption, it follows that Stephanie is entitled to all the rights provided

by law to a legitimate child without discrimination of any kind, including the right to bear the surname of

her father and her mother. This is consistent with the intention of the members of the Civil Code and

Family Law Committees. In fact, it is a Filipino custom that the initial or surname of the mother should

immediately precede the surname of the father.

JUDICIAL DECLARATION OF NULLITY

Cojuangco vs Palma

A.C. No. 2474 June 30, 2005

Facts: On June 22, 1982, respondent Atty. Leo J. Palma, despite his subsisting marriage, wed Maria Luisa

Cojuangco, the daughter of complainant Eduardo M. Cojuangco, Jr. Thus, the latter filed on November


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1982, a complaint disbarment against respondent. Palma moved to dismiss the complaint.

On March 2, 1983, the court referred the case to OSG for investigation and recommendation. The

Assistant Solicitor General heard the testimonies of the complainant and his witness in the presence of

respondents counsel.

On March 19, 1984 respondent filed with the OSG an urgent motion to suspend proceedings on the

ground that the final actions of his civil case for the declaration of nullity of marriage between him and his

wife Lisa, poses a prejudicial question to the disbarment proceeding, but it was denied.

The OSG transferred the disbarment case to the IBP, the latter found respondent guilty of gross immoral

conduct and violation of his oath as a lawyer, hence, was suspended from the practice of law for a period

of three years.

In his motion for reconsideration, respondent alleged that he acted under a firm factual and legal

conviction in declaring before the Hong Kong Marriage Registry that he is a bachelor because his first

marriage is void even if there is judicial declaration of nullity.

Issue: Whether or not a subsequent void marriage still needs a judicial declaration of nullity for the

purpose of remarriage.

Held: Respondents arguments that he was of the firm factual and legal conviction when he declared

before the HIC authorities that he was a bachelor since his first marriage is void and does not need

judicial declaration of nullity cannot exonerate him. In Terre vs Terre, the same defense was raised by

respondent lawyer whose disbarment was also sought. We held:

xxx respondent Jordan Terre, being a lawyer, knew or should have known that such an argument ran

counter to the prevailing case law of this court which holds that purposes of determining whether a person

is legally free to contract a second marriage, a judicial declaration that the first marriage was null and void

an initio is essential. Even if we were to assume, arguendo merely, that Jordan Terre held that mistaken

belief in good faith, the same result will follow. For if we are to hold Jordan Terre to his own argument,

his frist marriage to complainant Dorothy Terre must be deemed valid, with the result that his second

marriage must be regarded as bigamous and criminal.

MARITAL CONSENT

Pelayo vs. Perez


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G.R. No. 141323

Facts: David Pelayo through a Deed of Absolute Sale executed a deed of sale and transferred to Melki

Perez two parcel of agricultural lands. Loreza Pelayo and another one whose signature is eligible witnesses

such execution of deed.

Loreza signed only on the third page in the space provided for witnesses, as such, Perez application was

denied.

Perez asked Loreza to sign on the first and should pages of the deed of sale but she refused. He then filed a

complaint for specific performance against the Pelayo spouses.

The spouses moved to dismiss the complaint on the ground for lack of marital consent as provided by

art166 of the Civil Code.

Issue: Whether or not the deed of sale was null and viol for lack of marital consent.

Held: Under Art 173, in relation to Art166, both of the NCC, W/C was still in effect on January 11, 1988

when the deed in question was executed, the lack of marital consent to the disposition of conjugal

property does not make the contract viol of initio but Merely violable. Said provisions of law provide:

Art 166. Unless the wife has been declared a non compass mentis or a spedthriff, or is under civil

interdiction or is confined in a lepresarium, the husband connot alienate or encumber any real property

not the Longugal property w/o the wifes consent. It she refuses nreasonable to give her consent, the court

may compel her to grant the same.

Art 173. The wife may during the marriage and w/in 10 years the transaction questioned, ask the court for

the annulment of any contract of the husband w/c tends to defraud her or impair interest in the conjugal

partnership property. Should the wife fail to exercise this right she her heir, after the dissolution of the

marriage may demand the value of property fraudulently alienated by the husband.

MARITAL CONSENT

BRAVO ET AL. VS. COURT OF APPEALS

Facts: Spouses Mauricio and Simons owned two parcel of land. It contain a large residential dwelling or

smaller house and other improvements.

They had three children Roland, Cesar and Lily, Cesar died. Lily married David and had a son, David


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Jr,, Senia, Benjamin and their half-sister, Ofelia.

Simona executed a General Power of Attorney (GPA) on June 17, 1966, appointing her husband as her

attorney-in-fact. He subsequently mortgaged the land to the PNB and DBP.

On October 25, 1970, Mauricio executed a Deed of Sale with assumption of Real Estate Mortgage

transferring the properties to Roland, Ofelia and Elizabeth. It was conditioned on the payment of P1,000

and on the assumption of the vendees of the PNB and DBP mortgages over the properties.

The deed of sale was notarized but was not annotated on TCT, neither was it presented to DBP and PNB.

The mortgage loans and receipts for loan payment issued by the two banks continued to be in Mauricios

name even after his death November 1973. Simona passed away in 1977.

Issue: Whether or not the deed of sale was void for lack of marital consent.

Held: Art. 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil

interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real property of

the conjugal partnership without the wife's consent. If she refuses unreasonably to give her consent, the

court may compel her to grant the same.

This article shall not apply to property acquired by the conjugal partnerships before the effective date of

this Code.

Article 166 expressly applies only to properties acquired by the conjugal partnership after the effectivity of

the Civil Code of the Philippines ("Civil Code"). The Civil Code came into force on 30 August 1950.1161

Although there is no dispute that the Properties were conjugal properties of Mauricio and Simona, the

records do not show, and the parties did not stipulate, when the Properties were acquired.1171 Under

Article 1413 of the old Spanish Civil Code, the husband could alienate conjugal partnership property for

valuable consideration without the wife's consent.1181

Even under the present Civil Code, however, the Deed of Sale is not void. It is well-settled that contracts

alienating conjugal real property without the wife's consent are merely voidable under the Civil Code -

that is, binding on the parties unless annulled by a competent court - and not void ab initial

Article 166 must be read in conjunction with Article 173 of the Civil Code ("Article 173"). The latter

prescribes certain conditions before a sale of conjugal property can be annulled for lack of the wife's

consent, as follows:

Art. 173. The wife may, during the marriage and within ten years from the transaction questioned, ask the

courts for the annulment of any contract of the husband entered into without her consent, when such


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consent is required, or any act or contract of the husband which tends to defraud her or impair her

interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her heirs

after the dissolution of the marriage, may demand the value of property fraudulently alienated by the

husband. (Emphasis supplied)

Under the Civil Code, only the wife can ask to annul a contract that disposes of conjugal real property

without her consent. The wife must file the action for annulment during the marriage and within ten years

from the questioned transaction. Article 173 is explicit on the remedies available if the wife fails to

exercise this right within the specified period. In such case, the wife or her heir; can only demand the

value of the property provided they prove that the husband fraudulently alienated the property. Fraud is

never presumed, but must be established by clear and convincing evidence.

ILLEGITIMATE CHILDS SURNAME

ALBA vs. COURT OF APPEALS

G.R. No. 164041, July 29, 2005

Facts: Private respondent Rosendo C. Herrera filed a petition for cancellation of the following entries in

the birth certificate of Rosendo Alba Herrera, Jr, to wit: (1) the surname Herrera as appended to the

name of the said child; (2) the reference to private respondent as the father of Rosendo Alba Herrera Jr.;

and (3) the alleged marriage of private respondent to all childs mother, Armi A. Alba He averred that

such challenged entries are false.

Private respondent contended that he married only once, as evidenced by certification from NSO and Civil

Registrar of Mandaluyong.

The RTC, finding the petition to be sufficient in form and substance the hearing was set. On the scheduled

hearing the counsel from the OSG appeared but filed no opposition, Armi was not present.

The court a quo rendered a decision ordering the correction of the entries in the Certification of Live Birth

of Rosendo Alba Herrera, Jr.

Armi filed a petition for the annulment of the judgment, contending that she came to know of the decision

of the RTC where the school where her son was enrolled, was furnished by private respondent with a copy

of a court order directing the change of petitioners surname from Herrera to Alba. Armi contended that

she and private respondent cohabited and after their separation, he continued to give support to their son.

Private respondent denied paternity of petitioner minor and his purported cohabitation with Armi.


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Issue: Whether or not an illegitimate child shall use the surname of their mother.

Held: Under Art. 176 of the Family Code as amended by RA No. 9255, w/c took effect on March 19, 2004,

illegitimate children shall use the surname of their mother , unless their father recognizes their filiation,

in w/c case they may bear the fathers surname. In Wang vs. Cebu Civil Registrar it was held that an

illegitimate child whose filiations is not recognized by the father bears only a given name and his mothers

surname. The name of the unrecognized illegitimate child identifies him as such. It is only when said child

is recognized that he may use his fathers surname, reflecting his status us an acknowledged illegitimate

held.

CHILD CUSTODY

PABLO-GUALBERTO VS. COURT OF APPEALS

G.R. Nos. 154994 and 156254 June 28, 2005

Facts: Crisanto Rafaelito G. Gualberto V filed before the RTC a petition for declaration of nullity of his

marriage to Joycelyn w/ an ancillary prayer for custody pendente lite of their almost 4 year old son,

Rafaello, whom her wife took away w/ her from their conjugal home and his school when she left him.

The RTC granted the ancillary prayer for custody pendente lite, since the wife failed to appear despite

notice. A house helper of the spouses testified that the mother does not care for the child as she very often

goes out of the house and even saw her slapping the child. Another witness testified that after surveillance

he found out that the wife is having lesbian relations.

The judge issued the assailed order reversing her previous order, and this time awarded the custody of the

child to the mother. Finding that the reason stated by Crisanto not to be a compelling reason as provided

in Art 213 of the Family Code.

Issue: Whether or not the custody of the minor child should be awarded to the mother.

Held: Article 213 of the Family Code provided: Art 213. In case of separation of parents parental

authority shall be exercised by the parent des granted by the court. The court shall take into account all

relevant consideration, especially the choice of the child over seven years of age, unless the parent chosen

is unfit.


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No child under seven yrs of age shall be separated from the mother unless the court finds compelling

reasons to order otherwise,

This Court has held that when the parents separated, legally or otherwise, the foregoing provision governs

the custody of their child. Article 213 takes its bearing from Article 363 of the Civil Code, w/c reads:

Art 363. In all question on the care, custody, education and property pf children, the latter welfare shall

be paramount. No mother shall be separated from her child under seven years of age, unless the court

finds compelling reason for such measure.

ANNULMENT OF MARRIAGE; PSYCHOLOGICAL INCAPACITY

DEBEL VS. COURT OF APPEALS, ET AL.

G.R. No. 151867. January 29, 2004

Facts: David Debel met Sharon Corpuz while he was working in the advertising business of his father. The

acquaintance led to courtship and romantic relations, culminating into marriage before the City Court of

Pasay on September 28, 1966. On May 20, 1967, the civil marriage was ratified in a church wedding. The

union produced four children. The petitioner avers that during the marriage Sharon turned out to be an

irresponsible and immature wife and mother. She had an illicit affair with several men and then later to a

Jordanian national named Ibrahim. Sharon was once confined for psychiatric treatment but she didnt

stop her illicit relationship with the Jordanian national whom she married and whom she had two

children. Ibrahim left Sharon so she returned back to the petitioner who had accepted her back. However

on December 9, 1995, Sharon abandoned the petitioner and joined Ibrahim in Jordan with their two

children. After giving up all hope for reconciliation, petitioner filed on April 1, 1997 a petition seeking the

declaration of nullity of his marriage on the ground of psychological incapacity. The RTC granted the

nullity of the marriage. It was appealed in the CA which set aside the decision of RTC and ordered

dismissal of the case. Hence, the instant petition was filed to the Supreme Court.

Issue: Whether or not private respondents sexual infidelity or perversion and abandonment fall within

the term of psychological incapacity.

Held: In this case private respondents sexual infidelity or perversion and abandonment can hardly

qualify as mental or psychological illness to such extent that she could not have known the obligation she


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was assuming. It appears that private respondents promiscuity did not exist prior to or at the inception of

the marriage; in fact, the record disclosed that there was a blissful marital union. It must be shown that

the acts are a manifestation of a disordered personality which makes respondent completely unable to

discharge the essential obligations of marital state, not merely due to her youth, immaturity or sexual

promiscuity.

ACTION FOR RECOGNITION OF ILLEGITIMATE CHILDREN WHO ARE MINORS AT THE TIME OF

THE EFFECTIVITY OF THE FAMILY CODE MAY BE BROUGHT FOR A PERIOD OF 4 YEARS FROM

ATTAINING MAJORITY AGE; SPURIOUS CHILDREN

BERNABE VS. ALEJO

G.R. No. 140500. January 21, 2002

Facts: The late Fiscal Ernesto Bernabe allegedly fathered a son with his secretary Carolina Alejo and was

named Adrian Bernabe who was born on September 18, 1981. After Ernesto Bernabe and Rosalina, his

legal wife died, the only heir left is Erestina. Carolina, in behalf of Adrian, filed a complaint praying that

Adrian be declared an acknowledged illegitimate son of Fiscal Bernabe and be given a share of his fathers

estate.

Issue: Whether or not Adrian Bernabe may be declared an acknowledged illegitimate son.

Held: Under the new law, an action for the recognition of an illegitimate child must be brought within the

lifetime of the alleged parent. The Family Code makes no distinction on whether the former was still a

minor when the latter died. Thus, the putative parent is given by the new code a chance to dispute the

claim, considering that illegitimate children are usually begotten and raised in secrecy and without the

legitimate family being aware of their existence.

OBLIGATIONS AND CONTRACTS

SAN MIGUEL CORPORATION vs. TROY FRANCIS L. MONASTERIO

G.R. No. 151037. June 23, 2005


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Facts: SMC entered into an Exclusive Warehouse Agreement with SMB Warehousing Services,

represented by its manager, Troy Francis L. Monasterio. SMB undertook to provide land, physical

structures, equipment and personnel for storage, warehousing and related services such as, but not

limited to, segregation of empty bottles, stock handling, and receiving SMC products for its route

operations. From September 1993 to September 1997 and May 1995 to November 1997, aside from

rendering service as warehouseman, Monasterio was given the additional task of cashiering in SMCs

Sorsogon and Camarines Norte sales offices for which he was promised a separate fee. But it was only on

December 1, 1997, that petitioner SMC started paying respondent P11,400 per month for his cashiering

services. Monasterio demanded P82,959.32 for warehousing fees, P11,400 for cashiering fees for the

month of September, 1998, as well as exemplary damages, and attorneys fees in the amount of P500,000

and P300,000, respectively. SMC filed a Motion to Dismiss on the ground of improper venue The RTC

denied the motion.

Issue: Did the RTC of Naga City err in denying the motion to dismiss filed by SMC alleging improper

venue?

Held: Exclusive venue stipulation embodied in a contract restricts or confines parties thereto when the

suit relates to breach of the said contract. But where the exclusivity clause does not make it necessarily all

encompassing, such that even those not related to the enforcement of the contract should be subject to the

exclusive venue, the stipulation designating exclusive venues should be strictly confined to the specific

undertaking or agreement. Otherwise, the basic principles of freedom to contract might work to the great

disadvantage of a weak party-suitor who ought to be allowed free access to courts of justice.

GF EQUITY, INC. vs. ARTURO VALENZONA

G.R. No. 156841. June 30, 2005

Facts: GF Equity hired Valenzona as Head Coach of the Alaska basketball team in the Philippine

Basketball Association under a Contract of Employment where GF Equity would pay Valenzona the sum

of P35,000.00 monthly. While the employment period agreed upon was for two years commencing, the

last sentence of paragraph 3 of the contract carried the following condition: 3. x x x If at any time during

the contract, the COACH, in the sole opinion of the CORPORATION, fails to exhibit sufficient skill or

competitive ability to coach the team, the CORPORATION may terminate this contract. The caveat

notwithstanding, Valenzona still acceded to the terms of the contract. Thereafter, Valenzona was

terminated as coach of the Alaska team. Valenzona demanded from GF Equity payment of compensation


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arising from the arbitrary and unilateral termination of his employment. GF Equity, however, refused the

claim. Valenzona thus filed before the RTC Manila a complaint against GF Equity for breach of contract

with damages. The trial court, upholding the validity of the assailed provision of the contract, dismissed

the complaint.

Issue: Whether the questioned last sentence of paragraph 3 is violative of the principle of mutuality of

contracts.

Held: Mutuality is one of the characteristics of a contract, its validity or performance or compliance of

which cannot be left to the will of only one of the parties. The ultimate purpose of the mutuality principle

is thus to nullify a contract containing a condition which makes its fulfillment or pre-termination

dependent exclusively upon the uncontrolled will of one of the contracting parties. In the case at bar, the

contract incorporates in paragraph 3 the right of GF Equity to pre-terminate the contract. The assailed

condition clearly transgresses the principle of mutuality of contracts. GF Equity was given an unbridled

prerogative to pre-terminate the contract irrespective of the soundness, fairness or reasonableness, or

even lack of basis of its opinion. The assailed stipulation being violative of the mutuality principle

underlying Article 1308 of the Civil Code, it is null and void.

NORKIS FREE & INDEPENDENT WORKERS UNION vs. NORKIS TRADING COMPANY, INC.

G.R. No. 157098 June 30, 2005

Facts: On January 27, 1998, a Memorandum of Agreement was forged between the parties wherein

petitioner shall grant a salary increase to all regular and permanent employees Ten pesos per day increase

effective August 1, 1997; Ten pesos per day increase effective August 1, 1998. On March 10, 1998, the

RTWPB of Region VII issued Wage Order ROVII-06 which established the minimum wage of P165.00, by

mandating a wage increase of five (P5.00) pesos per day beginning April 1, 1998, thereby raising the daily

minimum wage to P160.00 and another increase of five (P5.00) pesos per day beginning October 1, 1998,

thereby raising the daily minimum wage to P165.00 per day. In accordance with the Wage Order and

Section 2, Article XII of the CBA, petitioner demanded an across-the-board increase. Respondent,

however, refused to implement the Wage Order, insisting that since it has been paying its workers the new

minimum wage of P165.00 even before the issuance of the Wage Order, it cannot be made to comply with

said Wage Order.


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Issue: Whether respondent violated the CBA in its refusal to grant its employees an across-the-board

increase as a result of the passage of Wage Order No. ROVII-06.

Held: The employees are not entitled to the claimed salary increase, simply because they are not within

the coverage of the Wage Order, as they were already receiving salaries greater than the minimum wage

fixed by the Order. Concededly, there is an increase necessarily resulting from raising the minimum wage

level, but not across-the-board. Indeed, a double burden cannot be imposed upon an employer except

by clear provision of law. It would be unjust, therefore, to interpret Wage Order No. ROVII-06 to mean

that respondent should grant an across-the-board increase. Such interpretation of the Order is not

sustained by its text.

CONCEPCION R. AINZA, substituted by her legal heirs, DR. NATIVIDAD A. TULIAO, CORAZON A.

JALECO and LILIA A. OLAYON vs. SPOUSES ANTONIO PADUA and EUGENIA PADUA

G.R. No. 165420. June 30, 2005

Facts: Spouses Eugenia and Antonio Padua owned a 216.40 sq. m. lot with an unfinished residential

house Thereafter, Concepcion Ainza bought one-half of an undivided portion of the property from her

daughter, Eugenia and the latters husband, Antonio, for P100,000.00. No Deed of Absolute Sale was

executed to evidence the transaction, but cash payment was received by the respondents, and ownership

was transferred to Concepcion through physical delivery to Natividad Tuliao. However, respondents

caused the subdivision of the property into three portions and registered it in their names in violation of

the restrictions annotated at the back of the title. Antonio claimed that his wife, Eugenia, admitted that

Concepcion offered to buy 1/3 of the property who gave her small amounts over several years which

totaled P100,000.00 by 1987 and for which she signed a receipt.

Issue: Whether there was a valid contract of sale between Eugenia and Concepcion.

Held: There was a perfected contract of sale between Eugenia and Concepcion. The records show that

Eugenia offered to sell a portion of the property to Concepcion, who accepted the offer and agreed to pay

P100,000.00 as consideration. The contract of sale was consummated when both parties fully complied

with their respective obligations. Eugenia delivered the property to Concepcion, who in turn, paid Eugenia

the price of P100,000.00, as evidenced by the receipt. The verbal contract of sale between Eugenia and

Concepcion did not violate the provisions of the Statute of Frauds. When a verbal contract has been

completed, executed or partially consummated, as in this case, its enforceability will not be barred by the

Statute of Frauds, which applies only to an executory agreement. However, the sale of the conjugal

property by Eugenia without the consent of her husband is voidable. It is undisputed that the subject


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property was conjugal and sold by Eugenia in April 1987 or prior to the effectivity of the Family Code on

August 3, 1988. Thus, the contract of sale between Eugenia and Concepcion being an oral contract, the

action to annul the same must be commenced within six years from the time the right of action accrued. It

is binding unless annulled. Antonio failed to exercise his right to ask for the annulment within the

prescribed period, hence, he is now barred from questioning the validity of the sale between his wife and

Concepcion.

OLIVERIO LAPERAL& FILIPINAS GOLF & COUNTRY CLUB INC. vs. SOLID HOMES, INC.

G.R. No. 130913. June 21, 2005

Facts: Filipinas Golf Sales and Development Corporation, predecessor-in-interest of Filipinas Golf and

Country Club, Inc., represented by its then President, Oliverio Laperal, entered into a Development and

Management Agreement with respondent Solid Homes, Inc., a registered subdivision developer, involving

several parcels of land owned by Laperal and FGSDC. Under the terms and conditions of the

aforementioned Agreement and the Supplement, respondent undertook to convert at its own expense the

land subject of the agreement into a first-class residential subdivision, in consideration of which

respondent will get 45% of the lot titles of the saleable area in the entire project. The aforementioned

Agreement was cancelled by the parties, and, in lieu thereof, two contracts identically denominated

Revised Development and Management Agreement were entered into by respondent with the two

successors-in-interest of FGSDC. Unlike the original agreement, both Revised Agreements omitted the

obligation of petitioners Laperal and FGCCI to make available to respondent Solid Homes, Inc. the

owners duplicate copies of the titles covering the subject parcels of land. It appears, however, that even as

the Revised Agreements already provided for the non-surrender of the owners duplicate copies of the

titles, respondent persisted in its request for the delivery thereof .Then, petitioners served on respondent

notices of rescission of the Revised Agreements with a demand to vacate the subject properties and yield

possession thereof to them.

Issue: Whether the termination of the Revised Agreement and Addendum, because of the contractual

breach committed by respondent solid homes, carried with it the effect provided under Article 1385 of the

New Civil Code.

Held: Mutual restitution is required in cases involving rescission under Article 1191. Since Article 1385 of

the Civil Code expressly and clearly states that rescission creates the obligation to return the things which


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were the object of the contract, together with their fruits, and the price with its interest, the Court finds

no justification to sustain petitioners position that said Article 1385 does not apply to rescission under

Article 1191.As a consequence of the resolution by petitioners, rights to the lot should be restored to

private respondent or the same should be replaced by another acceptable lot. Applying the clear language

of the law and the consistent jurisprudence on the matter, therefore, the Court rules that rescission under

Article 1191 in the present case, carries with it the corresponding obligation of restitution.

MONDRAGON LEISURE AND RESORTS CORPORATION vs. COURT OF APPEALS, ASIAN BANK

CORPORATION, FAR EAST BANK AND TRUST COMPANY, and UNITED COCONUT PLANTERS BAN

G.R. No. 154188 June 15, 2005

Facts: Mondragon International Philippines, Inc., Mondragon Securities Corporation and herein

petitioner entered into a lease agreement with the Clark Development Corporation for the development of

what is now known as the Mimosa Leisure Estate.To help finance the project, petitioner, entered into an

Omnibus Loan and Security Agreement with respondent banks for a syndicated term loan in the aggregate

principal amount of US$20M. Under the agreement, the proceeds of the loan were to be released through

advances evidenced by promissory notes to be executed by petitioner in favor of each lender-bank, and to

be paid within a six-year period from the date of initial advance inclusive of a one year and two quarters

grace period. Petitioner, which had regularly paid the monthly interests due on the promissory notes until

October 1998, thereafter failed to make payments. Consequently, written notices of default, acceleration

of payment and demand letters were sent by the lenders to the petitioner. Then, respondents filed a

complaint for the foreclosure of leasehold rights against petitioner. Petitioner moved for the dismissal of

the complaint but was denied.

Issue: Whether or not respondents have a cause of action against the petitioner?

Held: Under the foregoing provisions of the Agreement, petitioner may be validly declared in default for

failure to pay the interest. As a consequence of default, the unpaid amount shall earn default interest, and

the respondent-banks have four alternative remedies without prejudice to the application of the

provisions on collaterals and any other steps or action which may be adopted by the majority lender. The

four remedies are alternative, with the right of choice given to the lenders, in this case the respondents.

Under Article 1201 of the Civil Code, the choice shall produce no effect except from the time it has been

communicated. In the present case, we find that written notices were sent to the petitioner by the


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respondents. The notices clearly indicate respondents choice of remedy: to accelerate all payments

payable under the loan agreement It should be noted that the agreement also provides that the choice of

remedy is without prejudice to the action on the collaterals. Thus, respondents could properly file an

action for foreclosure of the leasehold rights to obtain payment for the amount demanded.

SPS. FELIPE AND LETICIA CANNU vs. SPS. GIL AND FERNANDINA GALANG AND NATIONAL

HOME MORTGAGE FINANCE CORPORATION,

G.R. No. 139523. May 26, 2005

Facts: Gil and Fernandina Galang obtained a loan from Fortune Savings & Loan Association for P173,

800.00 to purchase a house and lot located at Pulang Lupa, Las Pias, To secure payment, a real estate

mortgage was constituted on the said house and lot in favor of Fortune Savings & Loan Association. In

early 1990, NHMFC purchased the mortgage loan of respondents-spouses from Fortune Savings & Loan

Association for P173, 800.00. Petitioner Leticia Cannu agreed to buy the property for P120, 000.00 and

to assume the balance of the mortgage obligations with the NHMFC and with CERF Realty. Of the P120,

000. 00, several payments were made leaving a balance of P45, 000.00. A Deed of Sale with Assumption

of Mortgage Obligation was made and entered into by and between spouses Fernandina and Gil Galang

and spouses Leticia and Felipe Cannu over the house and lot. Petitioners immediately took possession and

occupied the house and lot. Despite requests from Adelina R. Timbang and Fernandina Galang to pay the

balance of P45,000.00 or in the alternative to vacate the property in question, petitioners refused to do

so. Issues: 1) Whether or not the breach of the obligation is substantial.

2) Whether or not there was substantial compliance with the obligation to pay the monthly amortization

with NHMFC.

3) Whether or not respondents-spouses Galang demanded from petitioners a strict and/or faithful

compliance of the Deed of Sale with Assumption of Mortgage. 4. Whether or not the action for rescission

is subsidiary.

Held: 1) Rescission may be had only for such breaches that are substantial and fundamental as to defeat

the object of the parties in making the agreement. The question of whether a breach of contract is

substantial depends upon the attending circumstances and not merely on the percentage of the amount

not paid. In the case at bar, we find petitioners failure to pay the remaining balance of P45,000.00 to be


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substantial. Taken together with the fact that the last payment made was on 28 November 1991, eighteen

months before the respondent Fernandina Galang paid the outstanding balance of the mortgage loan with

NHMFC, the intention of petitioners to renege on their obligation is utterly clear.

2) The petitioners were not religious in paying the amortization with the NHMFC. As admitted by them,

in the span of three years from 1990 to 1993, their payments covered only thirty months. This, indeed,

constitutes another breach or violation of the Deed of Sale with Assumption of Mortgage. On top of this,

there was no formal assumption of the mortgage obligation with NHMFC because of the lack of approval

by the NHMFC on account of petitioners non-submission of requirements in order to be considered as

assignees/successors-in-interest over the property covered by the mortgage obligation.

3) There is sufficient evidence showing that demands were made from petitioners to comply with their

obligation. Adelina R. Timbang, attorney-in-fact of respondents-spouses, per instruction of respondent

Fernandina Galang, made constant follow-ups after the last payment made on 28 November 1991, but

petitioners did not pay. Sometime in March 1993, due to the fact that full payment has not been paid and

that the monthly amortizations with the NHMFC have not been fully updated, she made her intentions

clear with petitioner Leticia Cannu that she will rescind or annul the Deed of Sale with Assumption of

Mortgage. 4. The subsidiary character of the action for rescission applies to contracts enumerated in

Articles 1381 of the Civil Code. The contract involved in the case before us is not one of those mentioned

therein. The provision that applies in the case at bar is Article 1191.As a consequence of the rescission or,

more accurately, resolution of the Deed of Sale with Assumption of Mortgage, it is the duty of the court to

require the parties to surrender whatever they may have received from the other. The parties should be

restored to their original situation.

ROMAGO ELECTRIC CO., INC. vs. HONORABLE COURT OF APPEALS, SOLEDAD C. CAC, JOEPHIL

BIEN, RENATO CUNANAN and DELFIN INCIONG

G.R. No. 130721. May 26, 2005

Facts: The National Power Corporation entered into an agreement with ROMAGO ELECTRIC CO., INC.

for the erection and installation of NPCs 69 KV 3-Phase Transmission Lines for P2,657,856.40.

Subsequently, ROMAGO subcontracted the project to BICC Construction, an unregistered loose

partnership composed of Soledad Cac, Delfin Inciong, Joephil Bien and Renato Cunanan, for

P1,614,387.99. When the project was completed, there was an outstanding balance due to BICC

Construction from ROMAGO, part of which was the formers share in the CPA amounting to 70% of the

NPC-ROMAGO contract or P175,545.05. Mrs. Soledad Cac, wrote NPC to hold its payment to ROMAGO of


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the aforementioned CPA amounting to P250,778.65. Payment was nonetheless released to ROMAGO by

virtue of a sworn affidavit executed that there does not exist any lien or encumbrances against the said

NPC-ROMAGO contract. It appears that Mariano Cac, authorized representative and husband of Soledad

Cac, was paid the amount of P38,712.70 in full payment of accounts including retention of various works

at NPC-Isabela under defendants Cash Disbursement Voucher No. 23162 dated 03 October 1983.When

BICCs demands for payment were ignored by ROMAGO, the partners, thru Mrs. Soledad Cac as lone

plaintiff, filed a complaint for collection of sum of money with damages.

Issues: 1) Whether or not the private respondents are entitled to the CPA accorded to the petitioner by

NPC.

2) Whether or not the particulars of petitioners cash disbursement voucher no. 23162 signed by private

respondents authorized representative / agent acknowledging receipt of said amount did not extinguish,

relieve, release any and all claims including contract price adjustment which private respondents may

have against petitioner on the subcontract.

Held: 1. Contrary to the petitioners asseverations that the CPA was not intended to be made applicable to

the Romago-BICC subcontract, it must be remembered that the petitioner and the private respondents

expressly agreed what documents were going to be incorporated in the principal subcontract. We agree

with the appellate court that the qualifying phrase obligations and responsibilities contained in the

Romago-BICC subcontract was applicable only to the NPC-Romago contract. What is more, the CPA is

not found in the NPC-Romago contract, but in the NPC's Plans and Specifications which was expressly

included as part of the Contract Documents.

2. Said pleading expressly states that the CPA is not included in the computation. This is precisely

because the petitioner believes that the private respondents are not entitled to the CPA, hence, there is

no basis for including it. Said CPA not being part of the subcontract price of P1,614,387.99, the release

mentioned in the cash voucher cannot, therefore, be construed as a release of the CPA.

FELIPE O. MAGBANUA, CARLOS DE LA CRUZ, REMY ARNAIZ, BILLY ARNAIZ, ROLLY ARNAIZ,

DOMINGO SALARDA, JULIO CAHILIG and NICANOR LABUEN, vs. RIZALINO UY

G.R. No. 161003. May 6, 2005

Facts: As a final consequence of the final and executory decision of the Supreme Court which affirmed

with modification the decision of the NLRC, hearings were conducted to determine the amount of wage


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differentials due the eight petitioners. The petitioners filed a Motion for Issuance of Writ of Execution.

Rizalino Uy filed a Manifestation requesting that the cases be terminated and closed, stating that the

judgment award as computed had been complied with to the satisfaction of petitioners. Said

Manifestation was also signed by the eight petitioners. Together with the manifestation is a Joint Affidavit

dated May 5, 1997 of petitioners, attesting to the receipt of payment from respondent and waiving all

other benefits due them in connection with their complaint. On October 20, 1997, six of the eight

petitioners filed a Manifestation requesting that the cases be considered closed and terminated as they are

already satisfied of what they have received from respondent. Together with said Manifestation is a Joint

Affidavit in the local dialect, of the six petitioners attesting that they have no more collectible amount

from respondent and if there is any, they are abandoning and waiving the same.

Issues: 1. Whether or not the final and executory judgment of the Supreme Court could be subject to

compromise settlement;

2. Whether or not the petitioners affidavit waiving their awards in the labor case executed without the

assistance of their counsel and labor arbiter is valid.

Held: 1. There is no justification to disallow a compromise agreement, solely because it was entered into

after final judgment. The validity of the agreement is determined by compliance with the requisites and

principles of contracts, not by when it was entered into. Petitioners voluntarily entered into the

compromise agreement. Circumstances also reveal that respondent has already complied with its

obligation pursuant to the compromise agreement. Having already benefited from the agreement,

estoppel bars petitioners from challenging it.

2. The presence or the absence of counsel when a waiver is executed does not determine its validity. There

is no law requiring the presence of a counsel to validate a waiver. The test is whether it was executed

voluntarily, freely and intelligently; and whether the consideration for it was credible and reasonable.

Where there is clear proof that a waiver was wangled from an unsuspecting or a gullible person, the law

must step in to annul such transaction. In the present case, petitioners failed to present any evidence to

show that their consent had been vitiated.

SPOUSES DANILO and CRISTINA DECENA, vs. SPOUSES PEDRO and VALERIA PIQUERO

G.R. No. 155736. March 31, 2005

Facts: Spouses Danilo and Cristina Decena were the owners of a house and lot in Paraaque City. The


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petitioners and the respondents, the Spouses Pedro and Valeria Piquero, executed a Memorandum of

Agreement in which the former sold the property to the latter for P940,250.00 payable in six (6)

installments via postdated checks. The vendees forthwith took possession of the property. It appears in

the MOA that the petitioners obliged themselves to transfer the property to the respondents upon the

execution of the MOA with the condition that if two of the postdated checks would be dishonored by the

drawee bank, the latter would be obliged to reconvey the property to the petitioners. On May 17, 1999, the

petitioners, then residents of Malolos, Bulacan, filed a Complaint against the respondents with the RTC

Malolos, Bulacan, for the annulment of the sale/MOA, recovery of possession and damages. The

petitioners alleged therein that, they did not transfer the property to and in the names of the respondents

as vendees because the first two checks drawn and issued by them in payment for the purchase price of

the property were dishonored by the drawee bank, and were not replaced with cash despite demands

therefor.

Issue: Whether or not venue was properly laid by the petitioners in the RTC of Malolos, Bulacan.

Held: After due consideration of the foregoing, we find and so rule that Section 5(c), Rule 2 of the Rules of

Court does not apply. This is so because the petitioners, as plaintiffs in the court a quo, had only one cause

of action against the respondents, namely, the breach of the MOA upon the latters refusal to pay the first

two installments in payment of the property as agreed upon, and turn over to the petitioners the

possession of the real property, as well as the house constructed thereon occupied by the respondents. The

claim for damages for reasonable compensation for the respondents use and occupation of the property,

in the interim, as well as moral and exemplary damages suffered by the petitioners on account of the

aforestated breach of contract of the respondents are merely incidental to the main cause of action, and

are not independent or separate causes of action. The action of the petitioners for the rescission of the

MOA on account of the respondents breach thereof and the latters failure to return the premises subject

of the complaint to the petitioners, and the respondents eviction therefrom is a real action. As such, the

action should have been filed in the proper court where the property is located, namely, in Paraaque

City, conformably with Section 1, Rule 4 of the Rules of Court. Since the petitioners, who were residents of

Malolos, Bulacan, filed their complaint in the said RTC, venue was improperly laid; hence, the trial court

acted conformably with Section 1(c), Rule 16 of the Rules of Court when it ordered the dismissal of the

complaint.

LIABILITY FOR PRICE ESCALATION FOR LABOR AND MATERIAL COST


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H.L. CARLOS CONSTRUCTION, INC. VS. MARINA PROPERTIES CORPORATION, ET AL.

G.R No. 147614, January 29, 2004

Facts: Marina Properties Corporation entered into a contract with H.L. Carlos Construction, Inc. to

construct a condominium complex for a total consideration of P35.58 million within a period of 365 days

from receipt of notice to proceed. The original completion date of the project was May 16, 1989, but it was

extended to October 31, 1989 with a grace period until November 30, 1989. On December 15, 1989, HLC

instituted a case for sum of money, among others, for costs of labor escalation, change orders and

material price escalation. The Construction Contract contains the provision that no cost escalation shall

be allowed except on the labor component of the work. HLC argues that it is entitled to price escalation for

both labor and material because MPC was delayed for paying its obligations. MPC, on the other hand,

avers that HLC was delayed in finishing its project; hence, it is not entitled to price increases.

Issue: Whether or not MPC is liable for price escalation.

Held: MPC is liable for price escalation, but only for the labor component. The Construction Contract

contains the provision that no cost escalation shall be allowed except on the labor component of the work.

Since the contract allows escalation only of the labor component, the implication is that material cost

escalations are barred. There appears to be no provision, either in the original or in the amended contract

that would justify billing of increased cost of material. HLC attempts to pass off material cost escalation as

a form of damages suffered by it as a natural consequence of the delay in the payment of billings.

However, the contentious billing itself contains no claim for material cost escalation.

STAGES OF CONTRACT; WITHDRAWAL OF OFFER BEFORE ACCEPTANCE

INSURANCE LIFE ASSURANCE COMPANY, LTD. VS. ASSET BUILDERS CORPORATION

G.R. No. 147410, February 5, 2004

Facts: Insular Life Insurance Company, Limited invited companies to participate in the bidding of the

proposed Insular Life building. The Instruction to Bidders prepared by Insular Life expressly required a

formal acceptance and a period within which such acceptance was to be made known to the winner. Asset

Builders Corporation submitted a bid proposal secured by bid bonds valid for 60 days. Under its proposal


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form, Asset Builders bound and obliged itself to enter into a contract with Insular Life within 10 days from

the notice of the award, with good and sufficient securities. The project was awarded to the Asset Builders

and a notice to proceed with the construction was sent by Insular Life to the former. However, Asset

Builders project. Neither did it execute any construction agreement. It informed Insular Life that it will

not proceed with the project.

Issue: Whether or not there is a perfected contract between Insular Life and Asset Builders.

Held: There was indeed no acceptance of the offer by Asset Builders. Such failure to comply with the

condition imposed for the perfection of the contract resulted in the failure of the contract. There are three

distinct stages of a contract- preparation or negotiation, perfection or consummation. Negotiation begins

when the prospective contracting parties manifest their interest in the contract and ends at the moment of

their agreement. Perfection occurs when they agree upon the essential elements thereof. The last stage is

the consummation where they fulfill the terms agreed upon culminating in the extinguishment of the

contract.

CONTACTS ARE PERFECTED BY MERE CONSENT; EFFECTS OF PERFECTION OF CONTRACTS

METROPOLITAN MANILA DEVELOPMENT AUTHORITY VS. JANCOM ENVIRONMENTAL

CORPORATION

GR No. 147465, January 30, 2002

Facts: A build-Operate-Transfer Contract for the waste-to energy project was signed between JANCOM

and the Philippine Government. The BOT Contract was submitted to President Ramos for approval but

was then too close to the end of his term that his term expired without him signing the contract. He,

however, endorsed the same to incoming President Estrada. With the change in administration came

changes in policy and economic environment, thus the BOT contract was not pursued and implemented.

JANCOM appealed to the President for reconsideration and despite the pendency of the appeal, MMDA

caused the publication of an invitation to pre-qualify and submit proposals for solid waste management.

Issue: Whether or not there is a valid and binding contract between the Republic of the Philippines and

JANCOM.


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Held: There is a valid and binding contract between JANCOM and the Republic of the Philippines. Under

Articles 1305 of the Civil Code, A contract is a meeting of the minds between two persons whereby one

binds himself, with respect to the other, to give something or to render some service. Art. 1315 of the Civil

Code provides that a contract is perfected by mere consent. Consent, on the other hand, is manifested by

the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the

contract (Art. 1319, Civil Code). In the case at bar, the signing and execution of the contract by the parties

clearly show that, as between the parties, there was a concurrence of offer and acceptance with respect to

the material details of the contract, thereby giving rise to the perfection of the absence of Presidents

signature is untenable. Significantly, the contract itself provides that the signature of the President is

necessary only for its effectivity, not its perfection.

There being a perfected contract, MMDA cannot revoke or renounce the same without the consent of the

other. From the moment of perfection, 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, may be in keeping

with good faith, usage and law. (Art. 1315) It is a general principle of law that no one may be permitted to

change hid mind or disavow and go back upon his own acts, or to proceed contrary thereto, to the

prejudice of the other party.

PENALTY CLAUSE

LIGUTAN VS. COURT OF APPEALS

G.R. No. 147465, February 12, 2002

Facts: Ligutan and dela Llana obtained a loan from Security Bank and Trust Co. They executed a

promissory note binding themselves jointly and severally to pay the sum borrowed with an interest of

15.89% per annum upon maturity and to pay a penalty of 5% every month on the outstanding principal

and interest in case of default. In addition, they agreed to pay 10% of the total amount due by way of

attorneys fees if the matter were indorsed to a lawyer for collection or if a suit were instituted to enforce

payment. Ligutan and dela Llana failed to settle the debt. A complaint for recovery of the amount due was

filed with the RTC. The court held, among others, the borrowers were liable for a 3% per month penalty

(instead of 5%) and 10% of the total amount of the indebtedness for attorneys fee, in addition to the

principal loan.

Issue: Whether the court is correct in holding the borrowers liable for the penalty.


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Held: A penalty clause, expressly recognized by law, is an accessory undertaking to assume greater

liability on the part of an obligor in case of breach of an obligation. It functions to strengthen the coercive

force of the obligation and to provide for what could be the stipulated indemnity without the necessity of

proof on the existence and on the measure of damages caused by the breach. Although the court may not

at liberty ignore the freedom of the parties to agree on such terms and conditions as they see fit, a

stipulated penalty, nevertheless may be equitably reduced by the courts if iniquitous or unconscionable or

if the principal obligation has been partly or irregularly complied with. The reduction is justified by the

facts that the borrowers were able to partly comply with their obligations.

SIMULATED CONTRACTS

CRUZ VS. BANCOM FINANCE CORPORATION

G.R. No. 147788 March 19, 2002

Facts: Norma Sulit was introduced by Candelaria Sanchez to Edilberto and Simplicio Cruz and offered to

purchase the parcel of land owned by the Cruz brothers. The asking-price for the land was P700, 000, but

Sulit had only P25,000 which Edilberto accepted as earnest money with the agreement that title would

pass to Sulit on the payment of the balance. Sulit failed to pay the balance. Capitalizing on the close

relationship of Sanchez with the brothers, Sulit succeeded in having the brothers execute a document of

sale in favor of Sanchez who would then obtain a bank loan in her name using the said land as collateral.

On the same day, Sanchez executed another Deed of Absolute Sale in favor of Sulit. Sulit assumed all the

obligations of Sanchez to the original owners of the land in a Special Agreement. Unknown to the

brothers, Sulit managed to obtain a loan from Bancom secured by a mortgage over the land. Because Sulit

failed to pay the purchase price stipulated in the Special Agreement, the brothers filed a complaint for

reconveyance. Sulit also defaulted in her payment to the Bank and her mortgage was foreclosed. At the

auction sale, Bancom was declared the highest bidder.

Issue: Whether or not the Deeds of Sale were valid and binding.

Held: Simulation takes place when the parties do not really want the contract they have executed to

produce the legal effects expressed by its wordings. Art. 1345 states that simulation of a contract may be


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absolute or relative. The former takes place when the parties conceal their true agreement while Art.

1346 states that an absolutely simulated contract is void. A relative stimulation, when it does not

prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public

order or pubic policy binds the parties to their agreement. The Deeds of Sale were executed merely to

facilitate the use of the property as collateral to secure a loan from a bank. Although the Deed of Sale

between the brothers and Sanchez stipulated a consideration, there was actually no exchange of money.

Moreover, the failure of Sulit to take possession of the property sold to her was a clear badge of simulation

that rendered the whole transaction void and without force and effect.

NOVATION

PILIPINAS BANK VS. ONG

387 SCRA 97, August 8, 2002

Facts: On April 1991, Baliwag Mahogany Corporation (BMC), through its president, respondent Alfredo T.

Ong, applied for a domestic commercial letter credit with petitioner Pilipinas Bank (the bank) to finance

the purchase of Air Dried, Dark Lauan sawn lumber.

The bank approved the application and issued a Letter of Credit. To secure payment of the amount, BMC,

through respondent Ong, executed two (2) trust receipts providing that it shall turn over the proceeds of

the goods to the bank, if sold, or return the goods, if unsold, upon maturity on July 28, 1991 and August 4,

1981.

On due dates, BMC failed to comply with the trust receipt agreement. On November 22, 1991, it filed with

the Securities and Exchange Commission (SEC) a Petition for Rehabilitation and for a Declaration in a

State of Suspension of Payments. On January 8, 1992, the SEC issued an order creating a Management

Committee wherein the bank is represented.

On October 13, 1992, BMC and a consortium of 14 of its creditor banks entered into a Memorandum of

Agreement (MOA) rescheduling the payment of BMCs existing debts.

On November 27, 1992, the SEC rendered a Decision approving the Rehabilitation Plan of BMC as

contained in the MOA and declaring it in a state of suspension of payments.

However, BMC and respondent Ong defaulted in the payment of the obligations under the rescheduled

payment scheme provided in the MOA. On April 1994, the bank filed a complaint charging respondents

Ong and Leoncia Lim (as president and treasurer of BMC) with violation of the Trust Receipts Law (PD

115). The bank alleged that both respondents failed to pay their obligation under the trust receipt despite


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demand.

The Court of Appeals renders its decision holding that the execution of the MOA constitutes novation

which places petitioner bank in estoppel to insist on the original trust relation and constitutes a bar to the

filing of any criminal information for violation of the trust receipts law. The Motion for Reconsideration

was denied.

Hence this Petition.

Issue: Whether or not the MOA was a novation of the trust agreement between the parties.

Held: Petition is DENIED, MOA novates the trust agreement.

Mere failure to deliver the proceeds of the sale of the goods, if not sold, constitutes violation of PD 115.

However, what is being punished by the law is the dishonesty and abuse of confidence in the handling of

money or goods to the prejudice of another regardless of whether the latter is the owner. It bears

emphasis that when the petitioner bank made a demand upon a BMC on February 11, 1994 to comply with

its obligations under the trust receipts, the latter was already under the control of the Management

Committee created by SEC. The Management Committee took custody of all BMCs assets and liabilities,

including the red lauan lumber subject of trust receipts, and authorized their use in the ordinary course of

business operations. Clearly, it was the Management Committee which could settle BMCs obligations.

In Quinto vs. People, this Court held that there are two ways which could indicate the presence of

novation, thereby producing the effect of extinguishing an obligation by another which substitutes the

same. The first is when novation has been stated and declared in unequivocal terms. The second is when

the old and the new obligations are incompatible on every point. The test of incompatibility is whether or

not the two obligations can stand together. If they cannot, they are incompatible and the latter obligation

novates the first. The incompatibility must take place in any of the essential elements of the obligation,

such as its object, cause or principal conditions.

Contrary to petitioners contention, the MOA did not only reschedule BMCs debts, but more importantly,

it provided principal conditions, which are incompatible with the trust agreement. The execution of the

MOA extinguished respondents obligation under the trust receipts. Respondents liability, if any, would

only be civil in nature since the trust receipts were transformed into mere loan documents after the

execution of the MOA.

CONDITIONAL OBLIGATION; WHERE THE VENDEE DOES NOT COMPLY WITH HIS OBLIGATION

TO PAY THE BALANCE OF THE PURCHASE PRICE, THE VENDORS OBLIGATION TO EXECUTE A


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DEED OF ABSOLUTE SALE WILL NOT ARISE.

CORINTHIAN REALTY, INC. VS. COURT OF APPEALS

349 SCRA 260, December 26, 2002

Facts: Private respondents and petitioner entered into a Deed of Conditional Sale (the deed) of a parcel of

land. Under the deed, the remaining balance will be paid by the vendee to the vendors within the period of

ninety (90) days from the execution of the deed; and if for no justifiable reason, the vendee fails and/ or

refuses to comply with this obligation, the vendors, without prior notice to the vendee, shall forfeit the

earnest money, but as soon as the vendee complies with his obligations under the contract, then the

vendors shall immediately execute the absolute deed of sale.

CONTRACTS

TANONGON VS. SAMSON

382 SCRA 130, May 9, 2002

Facts:

Cayco Marine Service (CAYCO) is engaged in the business of hauling oil. It is operated by Illuminada

Cayco Olizon (Olizon). Resondents Felicidad Samson, Casiano Osin, Alberto Belbes and Luisito Venus

were among the employees of CAYCO and/or Olizon.

On MARCH 9, 1994, respondents filed a complaint against CAYCO and Olixzon for illegal dismissal,

underpayment of wages, non-payment of holiday pay, rest day pay and leave pay. The labor arbiter

dismissed the complaint for lack of merit. On appeal, it was reversed by the NLRC.

On June 25, 1997, the NLRC Research and Investigation Unit submitted to the labor arbiter the judgment

award for each respondent.

On June 24, 1997, a writ of execution was issued directing the NLRC sheriff to collect from CAYCO and

Olizon the responding award due for each respondent

On August 8, 1997, after the notice of levy/sale on execution of personal property was issued, CAYCO nad

Olizons motor tanker was seized, to be sold at public auction on August 19, 1997.

On August 15, 1997, petitioner Doretea Tanongon, filed a third party claim before the labor arbiter,

alleging that she was the owner of the subject motor tanker, having acquired the same from Olizon on July

29, 1997, and in consideration.


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On October 15, 1997, the labor arbiter issued an order dismissing the third party claim for lack of merit.

On appeal, the NLRC reversed that of the labor arbiter

thereby lifting the levy and restrained execution.

The Court of Appeals debunked the claim that the petitioner was a buyer in good faith on the ground thatpurchasers could not close their eyes to facts that should put reasonable persons on guard. The records

show that the sale was hastily concluded; the tanker and the necessary documents were immediately

delivered to the new owner to the new owner. These facts confirmed respondents suspicion that Olizon

had intended to overcome the enforcement of the Writ of Execution.

Hence this Petition.

Issue: Whether or not petitioner Dorotea Tanongon is a buyer in good faith and for value.

Held: Petition is DENIED; Petitioner Dorotea Tanongon is not a purchaser in good faith and for value.

There is sufficient basis to affirm the CA finding that petitioner was a buyer in abs faith. The writ of

Execution was issued by the labor arbiter on July 24, 1997. And the sale of the levied tanker was made

only on July 29, 1997. The CA correctly ruled that the act of Olizon was a cavalier attempt to evade

payment of the judgment debt. She obviously got word of the issuance of these antecedents, petitioner

bought the tanker barely ten days before it was levied upon on August 8, 1997.

Purchaser in good faith or an innocent purchaser for value is one who buys properly and pays a full and

fair price for it at the time of the purchase or before any notice of some other persons claim on or interestin it.

Petitioner should have inquired whether Olizon had other unsettled obligations and encumbrances that

could burden the subject property. Any person engaged in business would be wary of buying from a

company that is closing shop, because it may be dissipating its assets to defraud its creditors.

PROPERTY

ISSUANCE OF WRIT OF POSSESSION; REAL ESTATE MORTGAGE

TERESITA V. IDOLOR VS. HON. COURT OF APPEALS, SPOUSES GUMERSINDO DE GUZMAN and

ILUMINADA DE GUZMAN and HON. JOSE G. PINEDA, Presiding Judge of Regional Trial Court,

National Capital Judicial Region, Branch 220, Quezon City


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G.R. No. 161028. January 31, 2005

Facts: Petitioner Teresita V. Idolor obtained a loan from respondent-spouses Gumersindo and Iluminada

De Guzman secured by a real estate mortgage over a property covered by TCT No. 25659. Upon default by

petitioner in the payment of her obligation, respondent instituted extra-judicial foreclosure proceedings

against the real estate mortgage.During the auction sale, respondents emerged as the highest bidder and

were issued a Certificate of Sale.

On June 25, 1998, petitioner filed a complaint for annulment of the Certificate of Sale with prayer for the

issuance of a TRO and a writ of preliminary injunction. The RTC issued a writ of preliminary injunction,

however, the Court of Appeals annulled the same on the ground of grave abuse of discretion. The

ownership over the subject property having been consolidated in their name, respondent-spouses De

Guzman moved for the issuance of a writ of possession with the Regional Trial Court where the case for

the annulment of the Certificate of Sale was pending.[5] On May 27, 2002, the trial court denied the

motion, ruling that the the lifting of the writ of preliminary injunction does not ipso facto entitle

defendant De Guzman to the issuance of a writ of possession over the property in question. It only allows

the defendant Sheriff to issue a final deed of sale and confirmation sale and the defendant De Guzman to

consolidate the ownership/title over the subject property in his name.

In a petition for certiorari before the Court of Appeals, the appellate court found that the trial court

gravely abused its discretion in denying the motion for the issuance of the writ of possession to the

mortgagee or the winning bidder is a ministerial function of the court and that the pendency of an action

questioning the validity of a mortgage cannot bar the issuance of the writ of possession after title to the

property has been consolidated in the mortgagee.[7] Hence, it reversed and set aside the May 27, 2002

order of the trial court.

Issue: Whether or not the mortgage, by mere motion, not by petition, may apply for a Writ of Possession

in the same case for annulment of the Certificate of Sale of which he is a defendant.

Held: A writ of possession is an order whereby the sheriff is commanded to place a person in possession of

a real or personal property. It may be issued under the following instances: (1) land registration

proceedings under Sec. 17 of Act 496; (2) judicial foreclosure, provided the debtor is in possession of the

mortgaged realty and no third person, not a party to the foreclosure suit, had intervened; and (3)

extrajudicial foreclosure of a real estate mortgage under Sec. 7 of Act 3135 as amended by Act 4118, to

which the present case falls.
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Under the provision cited above, the purchaser in a foreclosure sale may apply for a writ of possession

during the redemption period by filing for that purpose an ex parte motion under oath, in the

corresponding registration or cadastral proceeding in the case of a property with torrens title. Upon the

filing of such motion and the approval of the corresponding bond, the court is expressly directed to issue

the writ.

Upon the expiration of the redemption period, the right of the purchaser to the possession of the

foreclosed property becomes absolute. The basis of this right to possession is the purchasers ownership of

the property. Mere filing of an ex parte motion for the issuance of the writ of possession would suffice, and

the bond required is no longer necessary, since possession becomes an absolute right of the purchaser as

the confirmed owner.

In this case, respondent-spouses acquired an absolute right over the property upon the failure of

petitioner to exercise her right of redemption and upon the consolidation of the title in their name.

An ex-parte petition for issuance of possessory writ under Section 7 of Act No. 3135 is not, strictly

speaking, a judicial process. Even if the same may be considered a judicial proceeding for the

enforcement of ones right of possession as purchaser in a foreclosure sale, it is not an ordinary suit filed

in court, by which one party sues another for the enforcement or protection of a right, or the prevention

or redress of a wrong.[18] It is a non-litigious proceeding and summary in nature as well. As such, the

rigid and technical application of the rules on legal fees may be relaxed in order to avoid manifest injustice

to the respondent This rule is applicable in the present case. Although respondent- spouses have been

declared as the highest bidder and despite having consolidated the title in their name, they still failed to

take possession of the property through numerous legal maneuverings of the petitioner. A simple ex parte

application for the issuance of a writ of possession has become a litigious and protracted proceeding.

SPOUSES JUAN NUGUID AND ERLINDA T. NUGUID VS. HON. COURT OF APPEALS AND PEDRO P.

PECSON

G.R. No. 151815. February 23, 2005

Facts: Pedro P. Pecson owned a commercial lot on which he built a 4-door 2-storey apartment building.

For failure to pay realty taxes, the lot was sold at public auction to Mamerto Nepomuceno, who in turn

sold it to the spouses Juan and Erlinda Nuguid. Pecson challenged the validity of the auction sale before

the RTC of Quezon City, which upheld the spouses title but declared that the apartment building was not

included in the auction sale. This was affirmed in toto by the Court of Appeals and thereafter by this
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Court. On June 23, 1993, by virtue of the Entry of Judgment, the Nuguids became the uncontested owners

of the 256-square meter commercial lot. As a result, the Nuguid spouses moved for delivery of possession

of the lot and the apartment building.

The trial court, relying upon Article 546[1][7] of the Civil Code, ruled that the Spouses Nuguid were to

reimburse Pecson for his construction cost, the spouses Nuguid were entitled to immediate issuance of a

writ of possession over the lot and improvements. The RTC also directed Pecson to pay the same amount

of monthly rentals to the Nuguids as paid by the tenants occupying the apartment units. Pecson duly

moved for reconsideration, the RTC issued a Writ of Possession,directing the deputy sheriff to put the

spouses Nuguid in possession of the subject property with all the improvements thereon and to eject all

the occupants therein.Pecson then filed a special civil action for certiorari and prohibition with the Court

of Appeals, which affirmed the order of payment of construction costs but rendered the issue of

possession moot on appeal.

Frustrated by this turn of events, Pecson filed a petition for review before this Court. On May 26, 1995, the

Court handed down the decision remanding to the trial court for it to determine the current market value

of the apartment building on the lot. The value so determined shall be forthwith paid by Spouses Juan and

Erlinda Nuguid] to Pedro Pecson otherwise the petitioner shall be restored to the possession of the

apartment building until payment of the required indemnity.

On the basis of this Courts decision, Pecson filed a Motion to Restore Possession and a Motion to Render

Accounting, praying respectively for restoration of his possession over the subject 256-square meter

commercial lot and for the spouses Nuguid to be directed to render an accounting under oath, of the

income derived from the subject four-door apartment from November 22, 1993 until possession of the

same was restored to him.

Issue: Whether or not the petitioners are liable to pay rent over and above the current market value of the

improvement and that such increased award of rentals by the RTC was reasonable and equitable.

Held: It is not disputed that the construction of the 4-door 2-storey apartment, subject of this dispute, was

undertaken at the time when Pecson was still the owner of the lot. When the Nuguids became the

uncontested owner of the lot, by virtue of entry of judgment of the Courts decision, the apartment

building was already in existence and occupied by tenants.

Under Article 448, the landowner is given the option, either to appropriate the improvement as his own

upon payment of the proper amount of indemnity or to sell the land to the possessor in good faith.

Relatedly, Article 546 provides that a builder in good faith is entitled to full reimbursement for all the
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necessary and useful expenses incurred; it also gives him right of retention until full reimbursement is

made. As we earlier held, since petitioners opted to appropriate the improvement for themselves as early

as June 1993, when they applied for a writ of execution despite knowledge that the auction sale did not

include the apartment building, they could not benefit from the lots improvement, until they reimbursed

the improver in full, based on the current market value of the property.

Despite the Courts recognition of Pecsons right of ownership over the apartment building, the petitioners

still insisted on dispossessing Pecson by filing for a Writ of Possession to cover both the lot and the

building. Clearly, this resulted in a violation of respondents right of retention. Worse, petitioners took

advantage of the situation to benefit from the highly valued, income-yielding, four-unit apartment

building by collecting rentals thereon, before they paid for the cost of the apartment building. It was only

4 years later that they finally paid its full value to the respondent.

Given the circumstances of the instant case where the builder in good faith has been clearly denied his

right of retention for almost half a decade, we find that the increased award of rentals by the RTC was

reasonable and equitable. The petitioners had reaped all the benefits from the improvement introduced by

the respondent during said period, without paying any amount to the latter as reimbursement for his

construction costs and expenses. They should account and pay for such benefits.

We need not belabor now the appellate courts recognition of herein respondents entitlement to rentals

from the date of the determination of the current market value until its full payment. Respondent is

clearly entitled to payment by virtue of his right of retention over the said improvement.

HEIRS OF JUAN PANGANIBAN & INES PANGANIBAN, namely: ERLINDA B. PACURSA, ERNESTO P.

BACONGA, EVELYN BACONGA, AMY B. BIHAG, SIEGFREDO BACONGA, IMELDA B. PACALDO,

BACONGA, IMELDA B. PACALDO, REBECCA B. LI, OFELIA B. OALIVAR, GEMMA BACONGA, MAR

INES BACONGA, MELANIE BACONGA, and ANITA FUENTES VS. ANGELINA N. DAYRIT.

G.R. No. 151235, July 28, 2005

Facts: The property subject of controversy is a 2,025-square meter portion of a lot denominated as Lot

1436, situated at Kauswagan, Cagayan de Oro City. It constitutes 3/4 of Lot 1436, one of the 3 lots covered

by OCT No. 7864, the other two being Lots 1441 and 1485. Said OCT was registered in the names of Juan

and Ines Panganiban, father and daughter respectively.

Herein petitioners alleged that they are the possessors and owners of Lot 1436 which they inherited from

the late Juan and Ines. They acknowledge that Lot 1436 was the only remaining lot covered by OCT No.


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7864, Lots 1485 and 1441 having been sold in 1949 to Galo Sabanal and Pablo Dagbay respectively.

The owners duplicate copy of OCT No. 7864 covering Lot 1436 had been lost but upon petition with the

trial court in 1977 by Erlinda B. Pacursa, one of the heirs of Ines and a petitioner herein, the trial court

granted the petition. Accordingly, the Register of Deeds of Misamis Oriental issued an owners duplicate

certificate of the OCT Erlinda.

Petitioners further alleged that unknown to them, a certain Cristobal Salcedo asserted ownership over Lot

1436 and believing that it was unregistered, sold a portion of it to respondent. The latter subsequently

discovered that what she had bought was registered land. Unable to annotate the deed of sale at the back

of OCT No. 7864, respondent fraudulently filed a petition for issuance of the owners copy of said title,

alleging that the copy issued to Erlinda was lost in the fire that razed Lapasan, Cagayan de Oro City in

1981.

The petition was granted and the Register of Deeds of Misamis Oriental issued the second owners

duplicate certificate of OCT to respondent which contained an annotation of a Notice of Adverse Claim

filed by Erlinda. The Notice of Adverse Claim alleged in part that Erlinda is one of the lawful heirs of Juan

and Ines, the registered owners of the property, and as such, she has a legitimate claim thereto.

Petitioners further alleged that the newly issued owners duplicate certificate of OCT to respondent was

prejudicial to their previously issued title which is still in existence. Thus, they prayed among others that

they be declared as the rightful owners of the property in question and that the duplicate certificate of

OCT in their possession be deemed valid and subsisting.

In her answer to the amended complaint, respondent denied all the material allegations but alleged that

Lot 1436 was actually sold sometime in 1947 by the petitioners themselves and their father, Mauricio

Baconga. The sale was purportedly covered by a Deed of Definite Sale. Salcedo then came into ownership,

possession and enjoyment of the property in question and sold a portion of Lot 1436 with an area of 2,025

square meters, more or less, to respondent. From then on, the property in question has been in her actual

and physical enjoyment. Respondent further alleged that the complaint was barred by the principles of

estoppel and laches by virtue of the sales executed by petitioners themselves and their father.

After due trial and consideration of the documentary and testimonial evidence adduced by both parties,

the trial court rendered a decision against petitioners and in favor of responden