2014 CIV Jurisprudence

2014 Philippine Supreme Court Decisions on Civil Law

JANUARY

Bad faith cannot be presumed; it is a question of fact that must be proven by clear and convincing evidence. It is worth stressing at this point that bad faith cannot be presumed. “It is a question of fact that must be proven” by clear and convincing evidence. “[T]he burden of proving bad faith rests on the one alleging it.” Sadly, spouses Vilbar failed to adduce the necessary evidence. Thus, this Court finds no error on the part of the CA when it did not find bad faith on the part of Gorospe, Sr. Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion,G.R. No. 176043. January 15, 2014.

Banks; exercise the highest degree of diligence, as well as to observe the high standards of integrity and performance in all its transactions because its business was imbued with public interest. Being a banking institution, DBP owed it to Guariña Corporation to exercise the highest degree of diligence, as well as to observe the high standards of integrity and performance in all its transactions because its business was imbued with public interest. The high standards were also necessary to ensure public confidence in the banking system, for, according to Philippine National Bank v. Pike: “The stability of banks largely depends on the confidence of the people in the honesty and efficiency of banks.” Development Bank of the Philippines (DBP) v. Guariña Agricultural and Realty Development Corporation, G.R. No. 160758. January 15, 2014

Common carrier; cargoes while being unloaded generally remain under the custody of the carrier. It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier. As hereinbefore found by the RTC and affirmed by the CA based on the evidence presented, the goods were damaged even before they were turned over to ATI. Such damage was even compounded by the negligent acts of petitioner and ATI which both mishandled the goods during the discharging operations.Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp., and Mitsui Sumitomo Insurance Co., Ltd.,G.R. No. 193986, January 15, 2014.

Common carrier; extraordinary diligence.Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods transported by them. Subject to certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them. Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they exercised extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such high level of diligence. Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp., and Mitsui Sumitomo Insurance Co., Ltd.,G.R. No. 193986, January 15, 2014.

Contracts; breach of contract; petitioner is guilty of breach of contract when it unjustifiably refused to release respondents’ deposit despite demand; liable for damages. In cases of breach of contract, moral damages may be recovered only if the defendant acted fraudulently or in bad faith, or is “guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations.”

In this case, a review of the circumstances surrounding the issuance of the “Hold Out” order reveals that petitioner issued the “Hold Out” order in bad faith. First of all, the order was issued without any legal basis. Second, petitioner did not inform respondents of the reason for the “Hold Out.” Third, the order was issued prior to the filing of the criminal complaint. Records show that the “Hold Out” order was issued on July 31, 2003, while the criminal complaint was filed only on September 3, 2003. All these taken together lead us to conclude that petitioner acted in bad faith when it breached its contract with respondents. As we see it then, respondents are entitled to moral damages. Metropolitan Bank & Trust Company v. Ana Grace Rosales and Yo Yuk To, G.R. No. 183204, January 13, 2014.

Contracts; buyer in good faith. It is settled that a party dealing with a registered land does not have to inquire beyond the Certificate of Title in determining the true owner thereof, and in guarding or protecting his interest, for all that he has to look into and rely on are the entries in the Certificate of Title.

Inarguably, Opinion acted in good faith in dealing with the registered owners of the properties. He relied on the titles presented to him, which were confirmed by the Registry of Deeds to be authentic, issued in accordance with the law, and without any liens or encumbrances. Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R. No. 176043. January 15, 2014.

Contracts; Doctrine of in pari delicto ; exception . According to Article 1412 (1) of the Civil Code, the guilty parties to an illegal contract cannot recover from one another and are not entitled to an affirmative relief because they are in pari delicto or in equal fault. The doctrine of in pari delicto is a universal doctrine that holds that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation; and where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other.

Nonetheless, the application of the doctrine of in pari delicto is not always rigid. An accepted exception arises when its application contravenes well-established public policy. In this jurisdiction, public policy has been defined as “that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to the public or against the public good.” Domingo Gonzalo v. John Tarnate, Jr., G.R. No. 160600, January 15, 2014.

Contracts; Hold-out clause; applies only if there is a valid and existing obligation arising from any of the sources of obligation enumerated in Article 1157. Considering that respondent Rosales is not liable under any of the five sources of obligation, there was no legal basis for petitioner to issue the “Hold Out” order.

The “Hold Out” clause applies only if there is a valid and existing obligation arising from any of the sources of obligation enumerated in Article 1157 of the Civil Code, to wit: law, contracts, quasi-contracts, delict, and quasi-delict. In this case, petitioner failed to show that respondents

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have an obligation to it under any law, contract, quasi-contract, delict, or quasi-delict. And although a criminal case was filed by petitioner against respondent Rosales, this is not enough reason for petitioner to issue a “Hold Out” order as the case is still pending and no final judgment of conviction has been rendered against respondent Rosales. In fact, it is significant to note that at the time petitioner issued the “Hold Out” order, the criminal complaint had not yet been filed. Thus, considering that respondent Rosales is not liable under any of the five sources of obligation, there was no legal basis for petitioner to issue the “Hold Out” order. Metropolitan Bank & Trust Company v. Ana Grace Rosales and Yo Yuk To, G.R. No. 183204, January 13, 2014.

Contracts; Mortgage; nature of mortgage. It is true that loans are often secured by a mortgage constituted on real or personal property to protect the creditor’s interest in case of the default of the debtor. By its nature, however, a mortgage remains an accessory contract dependent on the principal obligation, such that enforcement of the mortgage contract will depend on whether or not there has been a violation of the principal obligation. While a creditor and a debtor could regulate the order in which they should comply with their reciprocal obligations, it is presupposed that in a loan the lender should perform its obligation – the release of the full loan amount – before it could demand that the borrower repay the loaned amount. Development Bank of the Philippines (DBP) v. Guariña Agricultural and Realty Development Corporation, G.R. No. 160758. January 15, 2014.

Contracts; mortgagee in good faith. Assuming arguendo that the Gorospes’ titles to the subject properties happened to be fraudulent, public policy considers Opinion to still have acquired legal title as a mortgagee in good faith. As held in Cavite Development Bank v. Spouses Lim:

There is, however, a situation where, despite the fact that the mortgagor is not the owner of the mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public policy. This is the doctrine of ‘the mortgagee in good faith’ based on the rule that all persons dealing with property covered by a Torrens Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title. The public interest in upholding the indefeasibility of a certificate of title, as evidence of the lawful ownership of the land or of any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied upon what appears on the face of the certificate of title.

Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R. No. 176043. January 15, 2014.

Sales; proof capacity of seller; difference when there is a special power of attorney and when there is none.The strength of the buyer’s inquiry on the seller’s capacity or legal authority to sell depends on the proof of capacity of the seller. If the proof of capacity consists of a special power of attorney duly notarized, mere inspection of the face of such public document already constitutes sufficient inquiry. If no such special power of attorney is provided or there is one but there appears to be flaws in its notarial acknowledgment, mere inspection of the document will not do; the buyer must show that his investigation went beyond the document and into the circumstances of its execution. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.

Contracts; Principle of quantum merit ; when allowed . Case law instructs that under this principle (quantum meruit), a contractor is allowed to recover the reasonable value of the thing or services rendered despite the lack of a written contract, in order to avoid unjust enrichment. Quantum meruit means that, in an action for work and labor, payment shall be made in such amount as the plaintiff reasonably deserves. The measure of recovery should relate to the reasonable value of the services performed because the principle aims to prevent undue enrichment based on the equitable postulate that it is unjust for a person to retain any benefit without paying for it. Rivelisa Realty, Inc., represented by Ricardo P. Venturina v. First Sta. Clara Builders Corporation, represented by Ramon A. Pangilinan, as President, G.R. No. 189618. January 15, 2014.

Contracts; rescission; proper when there is non-performance of obligation. Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. Fil-Estate Properties, Inc. and Fil-Estate Network, Inc. v. Spouses Conrado and Maria Victoria Ronquillo, G.R. No. 185798, January 13, 2014.

Contracts; void contract; effects. Under Article 1409 (1) of the Civil Code, a contract whose cause, object or purpose is contrary to law is a void or inexistent contract. As such, a void contract cannot produce a valid one. To the same effect is Article 1422 of the Civil Code, which declares that “a contract, which is the direct result of a previous illegal contract, is also void and inexistent.” Domingo Gonzalo v. John Tarnate, Jr., G.R. No. 160600, January 15, 2014.

Damages; moral damages; when awarded.[S]uffice it to say that the dispute over the subject property had caused respondent serious anxiety, mental anguish and sleepless nights, thereby justifying the aforesaid award. Likewise, since respondent was constrained to engage the services of counsel to file this suit and defend his interests, the awards of attorney’s fees and litigation expenses are also sustained. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.

Damages; moral damages; when awarded. Every person is entitled to the physical integrity of his body. Although we have long advocated the view that any physical injury, like the loss or diminution of the use of any part of one’s body, is not equatable to a pecuniary loss, and is not susceptible of exact monetary estimation, civil damages should be assessed once that integrity has been violated. The assessment is but an imperfect estimation of the true value of one’s body. The usual practice is to award moral damages for the physical injuries sustained. Dr. Encarnacion C. Lumantas v. Hanz Calapiz, represented by his parents, Hilario Calapiz, Jr. and Helita Calapiz, G.R. No. 163753. January 15, 2014.

Foreclosure; premature foreclosure; order of restoration of possession and payment of reasonable rentals. Having found and pronounced that the extrajudicial foreclosure by DBP was premature, and that the ensuing foreclosure sale was void and ineffectual, the Court affirms the order for the restoration of possession to Guarifia Corporation and the payment of reasonable rentals for the use of the resort. The CA properly held that the premature and invalid foreclosure had unjustly dispossessed Guarifia Corporation of its properties. Consequently, the restoration of possession and the payment of reasonable rentals were in accordance with Article 561 of the Civil Code, which expressly states that one who

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recovers, according to law, possession unjustly lost shall be deemed for all purposes which may redound to his benefit to have enjoyed it without interruption. Development Bank of the Philippines (DBP) v. Guariña Agricultural and Realty Development Corporation, G.R. No. 160758. January 15, 2014.

Foreclosure; purchaser in foreclosure sale may take possession of the property even before the expiration of the redemption period. A writ of possession is a writ of execution employed to enforce a judgment to recover the possession of land. It commands the sheriff to enter the land and give possession of it to the person entitled under the judgment. It may be issued in case of an extrajudicial foreclosure of a real estate mortgage under Section 7 of Act No. 3135, as amended by Act No. 4118.

Under said provision, the writ of possession may be issued to the purchaser in a foreclosure sale either within the one-year redemption period upon the filing of a bond, or after the lapse of the redemption period, without need of a bond.

We have consistently held that the duty of the trial court to grant a writ of possession is ministerial. Such writ issues as a matter of course upon the filing of the proper motion and the approval of the corresponding bond. No discretion is left to the trial court. Any question regarding the regularity and validity of the sale, as well as the consequent cancellation of the writ, is to be determined in a subsequent proceeding as outlined in Section 8 of Act No. 3135. Such question cannot be raised to oppose the issuance of the writ, since the proceeding is ex parte. The recourse is available even before the expiration of the redemption period provided by law and the Rules of Court. LZK Holdings and Development Corporation v. Planters Development Bank, G.R. No. 187973, January 20, 2014.

Interest; legal interest; interest rate pegged at 6% regardless of the source of obligation. The resulting modification of the award of legal interest is, also, in line with our recent ruling inNacar v. Gallery Frames, embodying the amendment introduced by the Bangko Sentral ng Pilipinas Monetary Board in BSP-MB Circular No. 799 which pegged the interest rate at 6% regardless of the source of obligation. Fil-Estate Properties, Inc. and Fil-Estate Network, Inc. v. Spouses Conrado and Maria Victoria Ronquillo, G.R. No. 185798, January 13, 2014.

Interest; legal interest; proper rate. In Eastern Shipping, it was observed that the commencement of when the legal interest should start to run varies depending on the factual circumstances obtaining in each case. As a rule of thumb, it was suggested that “where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained).”

During the pendency of this case, however, the Monetary Board issued Resolution No. 796 dated May 16, 2013, stating that in the absence of express stipulation between the parties, the rate of interest in loan or forbearance of any money, goods or credits and the rate allowed in judgments shall be 6% per annum. Said Resolution is embodied in Bangko Sentral ng Pilipinas Circular No. 799, Series of2013, which took effect on July 1, 2013. Hence, the 12% annual interest mentioned above shall apply only up to June 30, 2013. Thereafter, or starting July 1, 2013, the applicable rate of interest for both the debited amount and undocumented withdrawals shall be 6% per annum compounded annually, until fully paid. Land Bank of the Philippines v. Emmanuel C. Oñate, G.R. No. 192371, January 15, 2014.

Interest; legal interest; rate. The legal interest rate to be imposed from February 11, 1993, the time of the extrajudicial demand by respondent, should be 6% per annum in the absence of any stipulation in writing in accordance with Article 2209 of the Civil Code, which provides:

Article 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum. First United Constructors Corporation, et al. v. Bayanihan Automotive Corporation, G.R. No. 164985, January 15, 2014.

Interest; legal interest; when awarded. Many years have gone by since Hanz suffered the injury. Interest of 6% per annum should then be imposed on the award as a sincere means of adjusting the value of the award to a level that is not only reasonable but just and commensurate. Unless we make the adjustment in the permissible manner by prescribing legal interest on the award, his sufferings would be unduly compounded. For that purpose, the reckoning of interest should be from the filing of the criminal information on April 1 7, 1997, the making of the judicial demand for the liability of the petitioner. Dr. Encarnacion C. Lumantas v. Hanz Calapiz, represented by his parents, Hilario Calapiz, Jr. and Helita Calapiz, G.R. No. 163753. January 15, 2014.

Obligations; default; borrower would not be in default without demand to pay. Considering that it had yet to release the entire proceeds of the loan, DBP could not yet make an effective demand for payment upon Guariña Corporation to perform its obligation under the loan. According to Development Bank of the Philippines v. Licuanan, it would only be when a demand to pay had been made and was subsequently refused that a borrower could be considered in default, and the lender could obtain the right to collect the debt or to foreclose the mortgage.Development Bank of the Philippines (DBP) v. Guariña Agricultural and Realty Development Corporation, G.R. No. 160758. January 15, 2014.

Obligations; extinguishment of obligations; compensation; requisites. Compensation is defined as a mode of extinguishing obligations whereby two persons in their capacity as principals are mutual debtors and creditors of each other with respect to equally liquidated and demandable obligations to which no retention or controversy has been timely commenced and communicated by third parties.53 The requisites therefor are provided under Article 1279 of the Civil Code which reads as follows:

Art. 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

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(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

The rule on legal compensation is stated in Article 1290 of the Civil Code which provides that “[w]hen all the requisites mentioned in Article 1279 are present, compensation takes effect by operation of law, and extinguishes both debts to the concurrent amount, even though the creditors and debtors are not aware of the compensation.” Union Bank of the Philippines v. Development Bank of the Philippines, G.R. No. 191555, January 20, 2014.

Obligations; legal compensation; requisites. Legal compensation takes place when the requirements set forth in Article 1278 and Article 1279 of the Civil Code are present, to wit:

Article 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.”

Article 1279. In order that compensation may be proper, it is necessary:

(1) That each of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

(2) That both debts consists in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

First United Constructors Corporation, et al. v. Bayanihan Automotive Corporation, G.R. No. 164985, January 15, 2014.

Property; builder in good faith; concept of. To be deemed a builder in good faith, it is essential that a person asserts title to the land on which he builds, i.e. , that he be a possessor in concept of owner, and that he be unaware that there exists in his title or mode of acquisition any flaw which invalidates it. Good faith is an intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, among other things, an honest belief, the absence of malice and the absence of design to defraud or to seek an unconscionable advantage. It implies honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.

Property; ownership; accession; accessory follows the principal; exception. While it is a hornbook doctrine that the accessory follows the principal, that is, the ownership of the property gives the right by accession to everything which is produced thereby, or which is incorporated or attached thereto, either naturally or artificially, such rule is not without exception. In cases where there is a clear and convincing evidence to prove that the principal and the accessory are not owned by one and the same person or entity, the presumption shall not be applied and the actual ownership shall be upheld. In a number of cases, we recognized the separate ownership of the land from the building and brushed aside the rule that accessory follows the principal. Magdalena T. Villasi v. Filomena Garcia, substituted by his heirs, namely, Ermelinda H. Garcia, et al., G.R. No. 190106, January 15, 2014.

Quasi-contracts; Unjust enrichment. Unjust enrichment exists, according to Hulst v. PR Builders, Inc., “when a person unjustly retains a benefit at the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience.” The prevention of unjust enrichment is a recognized public policy of the State, for Article 22 of the Civil Code explicitly provides that “[e]very person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.” Domingo Gonzalo v. John Tarnate, Jr., G.R. No. 160600, January 15, 2014.

Sales; Article 1599 of the Civil Code; recoupment; definition of; when entitled. Recoupment (reconvencion) is the act of rebating or recouping a part of a claim upon which one is sued by means of a legal or equitable right resulting from a counterclaim arising out of the same transaction. It is the setting up of a demand arising from the same transaction as the plaintiff’s claim, to abate or reduce that claim.

The legal basis for recoupment by the buyer is the first paragraph of Article 1599 of the Civil Code, viz:

Article 1599. Where there is a breach of warranty by the seller, the buyer may, at his election:

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(1) Accept or keep the goods and set up against the seller, the breach of warranty by way of recoupment in diminution or extinction of the price;

x x x x

First United Constructors Corporation, et al. v. Bayanihan Automotive Corporation, G.R. No. 164985, January 15, 2014.

Sales; sale of a piece of land or any interest therein is through an agent; authority of the agent shall be in writing; otherwise, the sale shall be void. The due execution and authenticity of the subject SPA are of great significance in determining the validity of the sale entered into by Victorino and Ramon since the latter only claims to be the agent of the purported seller (i.e., respondent). Article 1874 of the Civil Code provides that “[w]hen a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.” In other words, if the subject SPA was not proven to be duly executed and authentic, then it cannot be said that the foregoing requirement had been complied with; hence, the sale would be void. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.

SPECIAL LAWS

Section 23 of Presidential Decree No. 957; non-forfeiture of payments. Section 23 of Presidential Decree No. 957, the rule governing the sale of condominiums, which provides: No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate. Fil-Estate Properties, Inc. and Fil-Estate Network, Inc. v. Spouses Conrado and Maria Victoria Ronquillo, G.R. No. 185798, January 13, 2014.

Section 6 of Presidential Decree No. 1594; right of assignment and subcontract. There is no question that every contractor is prohibited from subcontracting with or assigning to another person any contract or project that he has with the DPWH unless the DPWH Secretary has approved the subcontracting or assignment. This is pursuant to Section 6 of Presidential Decree No. 1594, which provides that “[T]he contractor shall not assign, transfer, pledge, subcontract or make any other disposition of the contract or any part or interest therein except with the approval of the Minister of Public Works, Transportation and Communications, the Minister of Public Highways, or the Minister of Energy, as the case may be. Approval of the subcontract shall not relieve the main contractor from any liability or obligation under his contract with the Government nor shall it create any contractual relation between the subcontractor and the Government.” Domingo Gonzalo v. John Tarnate, Jr., G.R. No. 160600, January 15, 2014.

Family law; conjugal property; all property of the marriage is presumed to be conjugal, unless it is shown that it is owned exclusively by the husband or the wife. There is a presumption that all property of the marriage is conjugal, unless it is shown that it is owned exclusively by the husband or the wife; this presumption is not overcome by the fact that the property is registered in the name of the husband or the wife alone; and the consent of both spouses is required before a conjugal property may be mortgaged. However, we find it iniquitous to apply the foregoing presumption especially since the nature of the mortgaged property was never raised as an issue before the RTC, the CA, and even before this Court. In fact, petitioner never alleged in his Complaint that the said property was conjugal in nature. Hence, respondent had no opportunity to rebut the said presumption. Francisco Lim v. Equitable PCI Bank, now known as Banco De Oro Unibank, Inc., G.R. No. 183918. January 15, 2014.

Family law; exclusive property of spouse; when the property is registered in the name of a spouse only and there is no showing as to when the property was acquired by said spouse, this is an indication that the property belongs exclusively to said spouse. Article 160 of the Civil Code provides as follows: All property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife.”

The presumption applies to property acquired during the lifetime of the husband and wife. In this case, it appears on the face of the title that the properties were acquired by Donata Montemayor when she was already a widow. When the property is registered in the name of a spouse only and there is no showing as to when the property was acquired by said spouse, this is an indication that the property belongs exclusively to said spouse. And this presumption under Article 160 of the Civil Code cannot prevail when the title is in the name of only one spouse and the rights of innocent third parties are involved. Francisco Lim v. Equitable PCI Bank, now known as Banco De Oro Unibank, Inc., G.R. No. 183918. January 15, 2014.

Torrens system; certificate of title; a certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. “[A] certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein.” Having no certificate of title issued in their names, spouses Vilbar have no indefeasible and incontrovertible title over Lot 20 to support their claim. Further, it is an established rule that “registration is the operative act which gives validity to the transfer or creates a lien upon the land.” “Any buyer or mortgagee of realty covered by a Torrens certificate of title x x x is charged with notice only of such burdens and claims as are annotated on the title.” Failing to annotate the deed for the eventual transfer of title over Lot 20 in their names, the spouses Vilbar cannot claim a greater right over Opinion, who acquired the property with clean title in good faith and registered the same in his name by going through the legally required procedure. Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R. No. 176043. January 15, 2014.

Torrens system; Torrens title; a person dealing with a registered land has a right to rely upon the face of the Torrens certificate of title; exceptions. The well-known rule in this jurisdiction is that a person dealing with a registered land has a right to rely upon the face of the torrens certificate of title and to dispense with the need of inquiring further, except when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry.

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A torrens title concludes all controversy over ownership of the land covered by a final decree of registration. Once the title is registered the owner may rest assured without the necessity of stepping into the portals of the court or sitting in the mirador de su casa to avoid the possibility of losing his land. Francisco Lim v. Equitable PCI Bank, now known as Banco De Oro Unibank, Inc., G.R. No. 183918. January 15, 2014.

Torrens title; a person dealing with a registered land has a right to rely upon the face of the Torrens certificate of title; exception in the case of a person who buys from a person who is not the registered owner.The general rule is that every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go beyond the certificate to determine the condition of the property. Where there is nothing in the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore further than what the Torrens Title upon its face indicates in quest for any hidden defects or inchoate right that may subsequently defeat his right thereto.

However, a higher degree of prudence is required from one who buys from a person who is not the registered owner, although the land object of the transaction is registered. In such a case, the buyer is expected to examine not only the certificate of title but all factual circumstances necessary for him to determine if there are any flaws in the title of the transferor. The buyer also has the duty to ascertain the identity of the person with whom he is dealing with and the latter’s legal authority to convey the property. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.

Torrens system;even if the procurement of a certificate of title was tainted with fraud and misrepresentation, such defective title may be the source of a completely legal and valid title in the hands of an innocent purchaser for value. It is well-settled that even if the procurement of a certificate of title was tainted with fraud and misrepresentation, such defective title may be the source of a completely legal and valid title in the hands of an innocent purchaser for value. Where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property, the court cannot disregard such rights and order the total cancellation of the certificate. The effect of such an outright cancellation would be to impair public confidence in the certificate of title, for everyone dealing with property registered under the Torrens system would have to inquire in every instance whether the title has been regularly or irregularly issued. This is contrary to the evident purpose of the law. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.

Torrens system; levy on attachment, duly registered, takes preference over a prior unregistered sale.”[T]he settled rule that levy on attachment, duly registered, takes preference over a prior unregistered sale. This result is a necessary consequence of the fact that the [properties] involved [were] duly covered by the Torrens system which works under the fundamental principle that registration is the operative act which gives validity to the transfer or creates a lien upon the land.” Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R. No. 176043. January 15, 2014.

FEBRUARY

Contract law; principle of relativity. The basic principle of relativity of contracts is that contracts can only bind the parties who entered into it, and cannot favor or prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof “Where there is no privity of contract, there is likewise no obligation or liability to speak about.”Philippine National Bank v. Teresita Tan Dee, et al., G.R. No. 182128, February 19, 2014.

Contract of sale; obligations of the parties; there is nothing in the decision of the HLURB, as affirmed by the OP and the CA, which shows that the petitioner is being ordered to assume the obligation of any of the respondents.In a contract of sale, the parties’ obligations are plain and simple. The law obliges the vendor to transfer the ownership of and to deliver the thing that is the object of sale. On the other hand, the principal obligation of a vendee is to pay the full purchase price at the agreed time. Philippine National Bank v. Teresita Tan Dee, et al., G.R. No. 182128, February 19, 2014.

Contract to sell; ownership; right to mortgage the property by the owner. Note that at the time PEPI mortgaged the property to the petitioner, the prevailing contract between respondents PEPI and Dee was still the Contract to Sell, as Dee was yet to fully pay the purchase price of the property. On this point, PEPI was acting fully well within its right when it mortgaged the property to the petitioner, for in a contract to sell, ownership is retained by the seller and is not to pass until full payment of the purchase price. In other words, at the time of the mortgage, PEPI was still the owner of the property. Thus, in China Banking Corporation v. Spouses Lozada the Court affirmed the right of the owner/developer to mortgage the property subject of development, to wit: “[P.D.] No. 957 cannot totally prevent the owner or developer from mortgaging the subdivision lot or condominium unit when the title thereto still resides in the owner or developer awaiting the full payment of the purchase price by the installment buyer.” Philippine National Bank v. Teresita Tan Dee, et al., G.R. No. 182128, February 19, 2014.

Dacion en pago ; concept of.Dacion en pago or dation in payment is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. It is a mode of extinguishing an existing obligation and partakes the nature of sale as the creditor is really buying the thing or property of the debtor, the payment for which is to be charged against the debtor’s debt. Dation in payment extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement – express or implied, or by their silence – consider the thing as equivalent to the obligation, in which case the obligation is totally extinguished.Philippine National Bank v. Teresita Tan Dee, et al., G.R. No. 182128, February 19, 2014.

Co-ownership; when present.Art . 484 . There is co-ownership whenever the ownership of an undivided thing or right belongs to different persons. Art. 1078. When there are two or more heirs, the whole estate of the decedent is, before its partition, owned in common by such heirs, subject to the payment of debts of the deceased. Teodoro S. Teodoro, et al. v. Danilo Espino, et al., G.R. No. 189248, February 5, 2014 .

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http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/february2014/189248.pdf














Co-ownership; right of possession.Certainly, and as found by the trial courts, the whole of Lot No. 2476 including the portion now litigated is, owing to the fact that it has remained registered in the name of Genaro who is the common ancestor of both parties herein, co-owned property. All, or both Teodoro Teodoro and respondents are entitled to exercise the right of possession as co-owners. Neither party can exclude the other from possession. Although the property remains unpartitioned, the respondents in fact possess specific areas. Teodoro Teodoro can likewise point to a specific area, which is that which was possessed by Petra. Teodoro Teodoro cannot be dispossessed of such area, not only by virtue of Petra’s bequeathal in his favor but also because of his own right of possession that comes from his co-ownership of the property. Teodoro S. Teodoro, et al. v. Danilo Espino, et al., G.R. No. 189248, February 5, 2014 .

Alienable and disposable land; to prove that the land subject of an application for registration is alienable, an applicant must establish the existence of a positive act of the government; annotation in the survey plan is not sufficient. However, Cortez’ reliance on the foregoing annotation in the survey plan is amiss; it does not constitute incontrovertible evidence to overcome the presumption that the subject property remains part of the inalienable public domain. In Republic of the Philippines v. Tri-Plus Corporation, the Court clarified that, the applicant must at the very least submit a certification from the proper government agency stating that the parcel of land subject of the application for registration is indeed alienable and disposable, viz: It must be stressed that incontrovertible evidence must be presented to establish that the land subject of the application is alienable or disposable. In the present case, the only evidence to prove the character of the subject lands as required by law is the notation appearing in the Advance Plan stating in effect that the said properties are alienable and disposable. However, this is hardly the kind of proof required by law. To prove that the land subject of an application for registration is alienable, anapplicant must establish the existence of a positive act of the government such as a presidential proclamation or an executive order, an administrative action, investigation reports of Bureau of Lands investigators, and a legislative act or statute. The applicant may also secure a certification from the Government that the lands applied for are alienable and disposable.Republic of the Philippines v. Emmanuel C. Cortez, G.R. No. 186639. February 5, 2014.

Patrimonial property; susceptible to acquisitive prescription; start of the running of the prescriptive period.The Civil Code makes it clear that patrimonial property of the State may be acquired by private persons through prescription. This is brought about by Article 1113, which states that “[a]ll things which are within the commerce of man are susceptible to prescription,” and that [p]roperty of the State or any of its subdivisions not patrimonial in character shall not be the object of prescription.”Nonetheless, Article 422 of the Civil Code states that “[p]roperty of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State.” It is this provision that controls how public dominion property may be converted into patrimonial property susceptible to acquisition by prescription. After all, Article 420(2) makes clear that those property “which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth” are public dominion property. For as long as the property belongs to the State, although already classified as alienable or disposable, it remains property of the public dominion if when it is “intended for some public service or for the development of the national wealth.” Accordingly, there must be an express declaration by the State that the public dominion property is no longer intended for public service or the development of the national wealth or that the property has been converted into patrimonial. Without such express declaration, the property, even if classified as alienable or disposable, remains property of the public dominion, pursuant to Article 420(2), and thus incapable of acquisition by prescription. It is only when such alienable and disposable lands are expressly declared by the State to be no longer intended for public service or for the development of the national wealth that the period of acquisitive prescription can begin to run. Such declaration shall be in the form of a law duly enacted by Congress or a Presidential Proclamation in cases where the President is duly authorized by law. Republic of the Philippines v. Emmanuel C. Cortez,G.R. No. 186639. February 5, 2014.

Sale; warranties of sellers.Indeed, this Court is convinced – from an examination of the evidence and by the concurring opinions of the courts below – that Bignay purchased the property without knowledge of the pending Civil Case No. Q-52702. Union Bank is therefore answerable for its express undertaking under the December 20, 1989 deed of sale to “defend its title to the Parcel/s of Land with improvement thereon against the claims of any person whatsoever.” By this warranty, Union Bank represented to Bignay that it had title to the property, and by assuming the obligation to defend such title, it promised to do so at least in good faith and with sufficient prudence, if not to the best of its abilities. Bignay EX-IM Philippines, Inc. v. Union Bank of the Philippines / Union Bank of the Philippines v. Bignay EX-IM Philippines, Inc., G.R. No. 171590 & G.R. No. 171598, February 12, 2014.

Breach of contract; gross negligence.The record reveals, however, that Union Bank was grossly negligent in the handling and prosecution of Civil Case No. Q-52702. Its appeal of the December 12, 1991 Decision in said case was dismissed by the CA for failure to file the required appellant’s brief. Next, the ensuing Petition for Review on Certiorari filed with this Court was likewise denied due to late filing and payment of legal fees. Finally, the bank sought the annulment of the December 12, 1991 judgment, yet again, the CA dismissed the petition for its failure to comply with Supreme Court Circular No. 28-91. As a result, the December 12, 1991 Decision became final and executory, and Bignay was evicted from the property. Such negligence in the handling of the case is far from coincidental; it is decidedly glaring, and amounts to bad faith. “[N]egligence may be occasionally so gross as to amount tomalice [or bad faith].” Indeed, in culpa contractual or breach of contract, gross negligence of a party amounting to bad faith is a ground for the recovery of Damages by the injured party.Bignay EX-IM Philippines, Inc. v. Union Bank of the Philippines / Union Bank of the Philippines v. Bignay EX-IM Philippines, Inc., G.R. No. 171590 & G.R. No. 171598, February 12, 2014.

Unenforceable contract; entering into a contract without or beyond authority; sale of property despite objection of laymen’s committee.The Court finds it erroneous for the CA to ignore the fact that the laymen’s committee objected to the sale of the lot in question. The Canons require that ALL the church entities listed in Article IV (a) thereof should give its approval to the transaction. Thus, when the Supreme Bishop executed the contract of sale of petitioner’s lot despite the opposition made by the laymen’s committee, he acted beyond his powers. This case clearly falls under the category of unenforceable contracts mentioned in Article 1403, paragraph (1) of the Civil Code, which provides, thus: Art. 1403. The following contracts are unenforceable, unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; In Mercado v. Allied Banking Corporation, the Court explained that: x x x Unenforceable contracts are those which cannot be enforced by a proper action in court, unless they are ratified, because either they are entered into without or in excess of authority or they do not comply with the statute of frauds or both of the contracting parties do not possess the required legal capacity. x x x. Iglesia Felipina Independiente v. Heirs of Bernardino Taeza,G.R. No. 179597, February 3, 2014.

Unenforceable contract; analogous cases. Closely analogous cases of unenforceable contracts are those where a person signs a deed of extrajudicial partition in behalf of co-heirs without the latter’s authority; where a mother as judicial guardian of her minor children, executes a deed of extrajudicial partition wherein she favors one child by giving him more than his share of the estate to the prejudice of her other

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children; and where a person, holding a special power of attorney, sells a property of his principal that is not included in said special power of attorney. Iglesia Felipina Independiente v. Heirs of Bernardino Taeza,G.R. No. 179597, February 3, 2014.

Article 1456, Civil Code; implied trust; acquiring property through mistake. In the present case, however, respondents’ predecessor-in-interest, Bernardino Taeza, had already obtained a transfer certificate of title in his name over the property in question. Since the person supposedly transferring ownership was not authorized to do so, the property had evidently been acquired by mistake. In Vda. de Esconde v. Court ofAppeals, the Court affirmed the trial court’s ruling that the applicable provision of law in such cases is Article 1456 of the Civil Code which states that “[i]f property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.” Iglesia Felipina Independiente v. Heirs of Bernardino Taeza,G.R. No. 179597, February 3, 2014.

Constructive trust; concept of. A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense for in a typical trust, confidence is reposed in one person who is named a trustee for the benefit of another who is called the cestui que trust, respecting property which is held by the trustee for the benefit of the cestui que trust. A constructive trust, unlike an express trust, does not emanate from, or generate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends holding the property for the beneficiary.Iglesia Felipina Independiente v. Heirs of Bernardino Taeza,G.R. No. 179597, February 3, 2014.

Constructive trust; prescriptive period.A constructive trust having been constituted by law between respondents as trustees and petitioner as beneficiary of the subject property, may respondents acquire ownership over the said property? The Court held in the same case of Aznar, that unlike in express trusts and resulting implied trusts where a trustee cannot acquire by prescription any property entrusted to him unless he repudiates the trust, in constructive implied trusts, the trustee may acquire the property through prescription even if he does not repudiate the relationship. It is then incumbent upon the beneficiary to bring an action for reconveyance before prescription bars the same.An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that an action for reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the property. It has also been ruled that the ten-year prescriptive period begins to run from the date of registration of the deed or the date of the issuance of the certificate of title over the property, Iglesia Felipina Independiente v. Heirs of Bernardino Taeza, G.R. No. 179597, February 3, 2014 .

Surety; concept of. A surety is considered in law as being the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be inseparable. Although the contract of a 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 therefrom. Trade and Investment Development Corporation of the Philippines (Formerly Philippine Export and Foreign Loan Guarantee Corporation) v. Asia Paces Corporation, et al., G.R. No. 187403. February 12, 2014 .

Surety; solidary debtor. The fundamental reason therefor is that a contract of suretyship effectively binds the surety as a solidary debtor. This is provided under Article 2047 of the Civil Code which states: By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I of this Book shall be observed. In such case the contract is called a suretyship. Thus, since the surety is a solidary debtor, it is not necessary that the original debtor first failed to pay before the surety could be made liable; it is enough that a demand for payment is made by the creditor for the surety’s liability to attach. Trade and Investment Development Corporation of the Philippines (Formerly Philippine Export and Foreign Loan Guarantee Corporation) v. Asia Paces Corporation, et al., G.R. No. 187403. February 12, 2014.

Surety; distinguished from guarantor. Comparing a surety’s obligations with that of a guarantor, the Court, in the case of Palmares v. CA, illumined that a surety is responsible for the debt’s payment at once if the principal debtor makes default, whereas a guarantor pays only if the principal debtor is unable to pay, viz. : A surety is an insurer of the debt, whereas a guarantor is an insurer of the solvency of the debtor. A suretyship is an undertaking that the debt shall be paid; a guaranty, an undertaking that the debtor shall pay. Stated differently, a surety promises to pay the principal’s debt if the principal will not pay, while a guarantor agrees that the creditor, after proceeding against the principal, may proceed against the guarantor if the principal is unable to pay. A surety binds himself to perform if the principal does not, without regard to his ability to do so. A guarantor, on the other hand, does not contract that the principal will pay, but simply that he is able to do so. In other words, a surety undertakes directly for the payment and is so responsible at once if the principal debtor makes default, while a guarantor contracts to pay if, by the use of due diligence, the debt cannot be made out of the principal debtor. Trade and Investment Development Corporation of the Philippines (Formerly Philippine Export and Foreign Loan Guarantee Corporation) v. Asia Paces Corporation, et al., G.R. No. 187403. February 12, 2014 .

Surety; extension given to debtor without consent of guarantor; effect of. Despite these distinctions, the Court in Cochingyan, Jr. v. R&B Surety & Insurance Co., Inc., and later in the case of Security Bank, held that Article 2079 of the Civil Code, which pertinently provides that “[a]n extension granted to the debtor by the creditor without the consent of the guarantor extinguishes the guaranty,” equally applies to bothcontracts of guaranty and suretyship. The rationale therefor was explained by the Court as follows: The theory behind Article 2079 is that an extension of time given to the principal debtor by the creditor without the surety’s consent would deprive the surety of his right to pay the creditor and to be immediately subrogated to the creditor’s remedies against the principal debtor upon the maturity date. The surety is said to be entitled to protect himself against the contingency of the principal debtor or the indemnitors becoming insolvent during the extended period. Trade and Investment Development Corporation of the Philippines (Formerly Philippine Export and Foreign Loan Guarantee Corporation) v. Asia Paces Corporation, et al., G.R. No. 187403. February 12, 2014 .

Surety; extension given to debtor without consent of guarantor; the payment extensions granted by Banque Indosuez and PCI Capital to TIDCORP under the Restructuring Agreement did not have the effect of extinguishing the bonding companies’ obligations to TIDCORP under the Surety Bonds, notwithstanding the fact that said extensions were made without their consent. This is because Article 2079 of the Civil Code refers to a payment extension granted by the creditor to the principal debtor without the consent of the guarantor or surety. In this case, the Surety Bonds are suretyship contracts which secure the debt of ASPAC, the principal debtor, under the Deeds of Undertaking to pay TIDCORP, the creditor, the damages and liabilities it may incur under the Letters of Guarantee, within the bounds of the bonds’ respective

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coverage periods and amounts. No payment extension was, however, granted by TIDCORP in favor of ASPAC in this regard; hence, Article 2079 of the Civil Code should not be applied with respect to the bonding companies’ liabilities to TIDCORP under the Surety Bonds.

The payment extensions granted by Banque Indosuez and PCI Capital pertain to TIDCORP’s own debt under the Letters of Guarantee wherein it (TIDCORP) irrevocably and unconditionally guaranteed full payment of ASPAC’s loan obligations to the banks in the event of its (ASPAC) default. In other words, the Letters of Guarantee secured ASPAC’s loan agreements to the banks. Under this arrangement, TIDCORP therefore acted as a guarantor, with ASPAC as the principal debtor, and the banks as creditors. Trade and Investment Development Corporation of the Philippines (Formerly Philippine Export and Foreign Loan Guarantee Corporation) v. Asia Paces Corporation, et al., G.R. No. 187403. February 12, 2014.

Deed of mortgage; effect when the authorized agent failed to indicate in the mortgage that she was acting for and on behalf of her principal. Similarly, in this case, the authorized agent failed to indicate in the mortgage that she was acting for and on behalf of her principal. The Real Estate Mortgage, explicitly shows on its face, that it was signed by Concepcion in her own name and in her own personal capacity. In fact, there is nothing in the document to show that she was acting or signing as an agent of petitioner. Thus, consistent with the law on agency and established jurisprudence, petitioner cannot be bound by the acts of Concepcion.Nicanora G. v. Rural Bank of El Salvador, Inc. et al., G.R. No. 179625. February 24, 2014.

Bank; negligence of. At this point, we find it significant to mention that respondent bank has no one to blame but itself. Not only did it act with undue haste when it granted and released the loan in less than three days, it also acted negligently in preparing the Real Estate Mortgage as it failed to indicate that Concepcion was signing it for and on behalf of petitioner. We need not belabor that the words “as attorney-in-fact of,” “as agent of,” or “for and on behalf of,” are vital in order for the principal to be bound by the acts of his agent. Without these words, any mortgage, although signed by the agent, cannot bind the principal as it is considered to have been signed by the agent in his personal capacity. Nicanora G. v. Rural Bank of El Salvador, Inc. et al., G.R. No. 179625. February 24, 2014 .

Agent; liability when deed of mortgage is signed in personal capacity. Concepcion, on the other hand, is liable to pay respondent bank her unpaid obligation under the Promissory Note dated June 11, 1982, with interest. As we have said, Concepcion signed the Promissory Note in her own personal capacity; thus, she cannot escape liability. She is also liable to reimburse respondent bank for all damages, attorneys’ fees, and costs the latter is adjudged to pay petitioner in this case. Nicanora G. v. Rural Bank of El Salvador, Inc. et al., G.R. No. 179625. February 24, 2014.

Article 1308 of the Civil Code; principle of mutuality of contracts. The credit agreement executed succinctly stipulated that the loan would be subjected to interest at a rate “determined by the Bank to be its prime rate plus applicable spread, prevailing at the current month.” This stipulation was carried over to or adopted by the subsequent renewals of the credit agreement. PNB thereby arrogated unto itself the sole prerogative to determine and increase the interest rates imposed on the Spouses Manalo. Such a unilateral determination of the interest rates contravened the principle of mutuality of contracts embodied in Article 1308 of the Civil Code.Philippine National Bank v. Sps. Enrique Manalo & Rosalinda Jacinto, et al.,G.R. No. 174433, February 24, 2014.

Contracts; a contract where there is no mutuality between the parties partakes of the nature of a contract of adhesion. The Court has declared that a contract where there is no mutuality between the parties partakes of the nature of a contract of adhesion, and any obscurity will be construed against the party who prepared the contract, the latter being presumed the stronger party to the agreement, and who caused the obscurity. PNB should then suffer the consequences of its failure to specifically indicate the rates of interest in the credit agreement. We spoke clearly on this in Philippine Savings Bank v. Castillo, to wit: The unilateral determination and imposition of the increased rates is violative of the principle of mutuality of contracts under Article 1308 of the Civil Code, which provides that ‘[t]he contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.’ A perusal of the Promissory Note will readily show that the increase or decrease of interest rates hinges solely on the discretion of petitioner. It does not require the conformity of the maker before a new interest rate could be enforced. Any contract which appears to be heavily weighed in favor of one of the parties so as to lead to an unconscionable result, thus partaking of the nature of a contract of adhesion, is void. Any stipulation regarding the validity or compliance of the contract left solely to the will of one of the parties is likewise invalid. Philippine National Bank v. Sps. Enrique Manalo & Rosalinda Jacinto, et al., G.R. No. 174433, February 24, 2014.

Interest; interest should be computed from the time of the judicial or extrajudicial demand; rule when there is no demand. Indeed, the Court said in Eastern Shipping Lines, Inc. v. Court of Appeals that interest should be computed from the time of the judicial or extrajudicial demand. However, this case presents a peculiar situation, the peculiarity being that the Spouses Manalo did not demand interest either judicially or extrajudicially. In the RTC, they specifically sought as the main reliefs the nullification of the foreclosure proceedings brought by PNB, accounting of the payments they had made to PNB, and the conversion of their loan into a long term one. In its judgment, the RTC even upheld the validity of the interest rates imposed by PNB. In their appellant’s brief, the Spouses Manalo again sought the nullification of the foreclosure proceedings as the main relief. It is evident, therefore, that the Spouses Manalo made no judicial or extrajudicial demand from which to reckon the interest on any amount to be refunded to them. Such demand could only be reckoned from the promulgation of the CA’s decision because it was there that the right to the refund was first judicially recognized. Nevertheless, pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals, the amount to be refunded and the interest thereon should earn interest to be computed from the finality of the judgment until the full refund has been made.Philippine National Bank v. Sps. Enrique Manalo & Rosalinda Jacinto, et al., G.R. No. 174433, February 24, 2014.

Interest; Monetary Board Circular No. 799 reduced the interest rates from 12% per annum to 6% per annum. Anent the correct rates of interest to be applied on the amount to be refunded by PNB, the Court, in Nacar v. Gallery Frames and S.C. Megaworld Construction v. Parada, already applied Monetary Board Circular No. 799 by reducing the interest rates allowed in judgments from 12% per annum to 6% per annum. Philippine National Bank v. Sps. Enrique Manalo & Rosalinda Jacinto, et al., G.R. No. 174433, February 24, 2014.

Interest; prospective application of Monetary Board Circular No. 799. According to Nacar v. Gallery Frames, MB Circular No. 799 is applied prospectively, and judgments that became final and executory prior to its effectivity on July 1, 2013 are not to be disturbed but continue to be implemented applying the old legal rate of 12% per annum. Hence, the old legal rate of 12% per annum applied to judgments becoming final and executory prior to July 1, 2013, but the new rate of 6% per annum applies to judgments becoming final and executory after said date. Philippine National Bank v. Sps. Enrique Manalo & Rosalinda Jacinto, et al., G.R. No. 174433, February 24, 2014.

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Mortgagee in good faith; doctrine of. In Bank of Commerce v. San Pablo, Jr., the doctrine of mortgagee in good faith was explained:There is, however, a situation where, despite the fact that the mortgagor is not the owner of the mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale arising there from are given effect by reason of public policy. This is the doctrine of “the mortgagee in good faith” based on the rule that all persons dealing with property covered by the Torrens Certificates of Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title. The public interest in upholding indefeasibility of a certificate of title, as evidence of lawful ownership of the land or of any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied upon what appears on the face of the certificate of title. Homeowners Savings and Loan Bank v. Asuncion P. Felonia and Lydia C. De Guzman, rep. by Maribel Frias, et al., G.R. No. 189477. February 26, 2014 .

Mortgagee in good faith; HSLB, as a mortgagee, had a right to rely in good faith on Delgado’s title, and in the absence of any sign that might arouse suspicion, HSLB had no obligation to undertake further investigation.When the property was mortgaged to HSLB, the registered owner of the subject property was Delgado who had in her name TCT No. 44848. Thus, HSLB cannot be faulted in relying on the face of Delgado’s title. The records indicate that Delgado was at the time of the mortgage in possession of the subject property and Delgado’s title did not contain any annotation that would arouse HSLB’s suspicion. HSLB, as a mortgagee, had a right to rely in good faith on Delgado’s title, and in the absence of any sign that might arouse suspicion, HSLB had no obligation to undertake further investigation. As held by this Court in Cebu International Finance Corp. v. CA: The prevailing jurisprudence is that a mortgagee has a right to rely in good faith on the certificate of title of the mortgagor of the property given as security and in the absence of any sign that might arouse suspicion, has no obligation to undertake further investigation. Hence, even if the mortgagor is not the rightful owner of, or does not have a valid title to, the mortgaged property, the mortgagee or transferee in good faith is nonetheless entitled to protection. Homeowners Savings and Loan Bank v. Asuncion P. Felonia and Lydia C. De Guzman, rep. by Maribel Frias, et al., G.R. No. 189477. February 26, 2014 .

Purchaser in good faith; doctrine of; duty of a prospective buyer. purchaser in good faith is defined as one who buys a property without notice that some other person has a right to, or interest in, the property and pays full and fair price at the time of purchase or before he has notice of the claim or interest of other persons in the property.When a prospective buyer is faced with facts and circumstances as to arouse his suspicion, he must take precautionary steps to qualify as a purchaser in good faith. In Spouses Mathay v. CA, we determined the duty of a prospective buyer: Although it is a recognized principle that a person dealing on a registered land need not go beyond its certificate of title, it is also a firmly settled rule that where there are circumstances which would put a party on guard and prompt him to investigate or inspect the property being sold to him, such as the presence of occupants/tenants thereon, it is of course, expected from the purchaser of a valued piece of land to inquire first into the status or nature of possession of the occupants, i.e., whether or not the occupants possess the land en concepto de dueño, in the concept of the owner. As is the common practice in the real estate industry, an ocular inspection of the premises involved is a safeguard a cautious a nd prudent purchaser usually takes. Should he find out that the land he intends to buy is occupied by anybody else other than the seller who, as in this case, is not in actual possession, it would then be incumbent upon the purchaser to verify the extent of the occupant’s possessory rights. The failure of a prospective buyer to take such precautionary steps would mean negligence on his part and would thereby preclude him from claiming or invoking the rights of a purchaser in good faith. Homeowners Savings and Loan Bank v. Asuncion P. Felonia and Lydia C. De Guzman, rep. by Maribel Frias, et al.,G.R. No. 189477. February 26, 2014.

Notice of lis pendens ; definition of; purpose of . Lis pendens is a Latin term which literally means, “a pending suit or a pending litigation” while a notice of lis pendens is an announcement to the whole world that a real property is in litigation, serving as a warning that anyone who acquires an interest over the property does so at his/her own risk, or that he/she gambles on the result of the litigation over the property. It is a warning to prospective buyers to take precautions and investigate the pending litigation.

The purpose of a notice of lis pendens is to protect the rights of the registrant while the case is pending resolution or decision. With the notice of lis pendens duly recorded and remaining uncancelled, the registrant could rest secure that he/she will not lose the property or any part thereof during litigation. Homeowners Savings and Loan Bank v. Asuncion P. Felonia and Lydia C. De Guzman, rep. by Maribel Frias, et al., G.R. No. 189477. February 26, 2014.

Notice of lis pendens ; effect of actual knowledge of the annotated Notice of Lis Pendens . Indeed, at the time HSLB bought the subject property, HSLB had actual knowledge of the annotated Notice of Lis Pendens. Instead of heeding the same, HSLB continued with the purchase knowing the legal repercussions a notice of lis pendens entails. HSLB took upon itself the risk that the Notice of Lis Pendens leads to. As correctly found by the CA, “the notice of lis pendens was annotated on 14 September 1995, whereas the foreclosure sale, where the appellant was declared as the highest bidder, took place sometime in 1997. There is no doubt that at the time appellant purchased the subject property, it was aware of the pending litigation concerning the same property and thus, the title issued in its favor was subject to the outcome of said litigation.” Homeowners Savings and Loan Bank v. Asuncion P. Felonia and Lydia C. De Guzman, rep. by Maribel Frias, et al., G.R. No. 189477. February 26, 2014.

Mortgage; mortgagor must be absolute owner of the thing mortgaged. That the mortgagor be the absolute owner of the thing mortgaged is an essential requisite of a contract of mortgage. Article 2085 (2) of the Civil Code specifically says so: Art. 2085. The following requisites are essential to the contracts of pledge and mortgage: x x x x (2) That the pledgor or mortagagor be the absolute owner of the thing pledged or mortgaged. Succinctly, for a valid mortgage to exist, ownership of the property is an essential requisite. Reyes v. De Leon cited the case of Philippine National Bank v. Rocha where it was pronounced that “a mortgage of real property executed by one who is not an owner thereof at the time of the execution of the mortgage is without legal existence.” Such that, according to DBP v. Prudential Bank, there being no valid mortgage, there could also be no valid foreclosure or valid auction sale. Homeowners Savings and Loan Bank v. Asuncion P. Felonia and Lydia C. De Guzman, rep. by Maribel Frias, et al., G.R. No. 189477. February 26, 2014 .

SPECIAL LAWS

P.D. No. 957; subdivision lots; a bank dealing with a property that is already subject of a contract to sell and is protected by the provisions of P.D. No. 957, is bound by the contract to sell.Thus, in Luzon Development Bank v. Enriquez, the Court reiterated the rule that a bank dealing with a property that is already subject of a contract to sell and is protected by the provisions of P.D. No. 957, is bound by the contract to sell. However, the transferee BANK is bound by the Contract to Sell and has to respect Enriquez’s rights thereunder. This is because the Contract to Sell, involving a subdivision lot, is covered and protected by PD 957. x x x. x x x x x x x Under these circumstances, the BANK knew or should have known of the possibility and risk that the assigned properties were already covered by existing contracts to sell in favor of subdivision lot buyers. As observed by the Court in another case involving a bank regarding a subdivision lot that was already subject of a contract to sell

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with a third party:“[The Bank] should have considered that it was dealing with a property subject of a real estate development project. A reasonable person, particularly a financial institution x x x, should have been aware that, to finance the project, funds other than those obtained from the loan could have been used to serve the purpose, albeit partially. Hence, there was a need to verify whether any part of the property was already intended to be the subject of any other contract involving buyers or potential buyers. In granting the loan, [the Bank] should not have been content merely with a clean title, considering the presence of circumstances indicating the need for a thorough investigation of the existence of buyers x x x. Wanting in care and prudence, the [Bank] cannot be deemed to be an innocent mortgagee. x x x” Philippine National Bank v. Teresita Tan Dee, et al., G.R. No. 182128, February 19, 2014.

Section 14 of P.D. No. 1529; original registration of title to land; who may apply. Applicants for original registration of title to land must establish compliance with the provisions of Section 14 of P.D. No. 1529, which pertinently provides that: Sec.14. Who may apply. The following persons may file in the proper Court of First Instance an application for registration of title to land, whether personally or through their duly authorized representatives:(1) Those who by themselves or through their predecessors-in interest have been in open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of ownership since June 12, 1945, or earlier. (2) Those who have acquired ownership of private lands by prescription under the provision of existing laws.Republic of the Philippines v. Emmanuel C. Cortez, G.R. No. 186639. February 5, 2014.

Section 14 of P.D. No. 1529; original registration of title to land; requisites.Section 14(1) of P.D. No. 1529 refers to the judicial confirmation of imperfect or incomplete titles to public land acquired under Section 48(b)of C.A. No.141, as amended by P.D. No. 1073. “Under Section 14(1) [of P.D. No. 1529], applicants for registration of title must sufficiently establish first, that the subject land forms part of the disposable and alienable lands of the public domain; second, that the applicant and his predecessors-in-interest have been in open, continuous, exclusive, and notorious possession and occupation of the same; and third, that it is under a bona fide claim of ownership since June 12, 1945, or earlier.” Republic of the Philippines v. Emmanuel C. Cortez, G.R. No. 186639. February 5, 2014.

Psychological incapacity; concept of; characterizations. “Psychological incapacity,” as a ground to nullify a marriage under Article 36 of the Family Code, should refer to no less than a mental – not merely 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 which, as so expressed in Article 68 of the Family Code, among others, include their mutual obligations to live together, observe love, respect and fidelity and render help and support.There is hardly any doubt that the intendment of the law has been to confine the meaning of “psychological incapacity” to the most serious cases of personality disorders clearly demonstrative of an utter insensitivity or inability to give meaning and significance to the marriage. Republic of the Philippines v. Rodolfo O. De Gracia, G.R. No. 171557. February 12, 2014 .

Psychological incapacity; emotional immaturity, irresponsibility, or even sexual promiscuity, cannot be equated with psychological incapacity.Keeping with these principles, the Court, in Dedel v. CA, held that therein respondent’s emotional immaturity and irresponsibility could not be equated with psychological incapacity as it was not shown that these acts are manifestations of a disordered personality which make her completely unable to discharge the essential marital obligations of the marital state, not merely due to her youth, immaturity or sexual promiscuity. Republic of the Philippines v. Rodolfo O. De Gracia, G.R. No. 171557. February 12, 2014 .

Psychological incapacity; although expert opinions furnished by psychologists regarding the psychological temperament of parties are usually given considerable weight by the courts, the existence of psychological incapacity must still be proven by independent evidence. Verily, although expert opinions furnished by psychologists regarding the psychological temperament of parties are usually given considerable weight by the courts, the existence of psychological incapacity must still be proven by independent evidence. Republic of the Philippines v. Rodolfo O. De Gracia, G.R. No. 171557. February 12, 2014 .

Psychological incapacity; refusal to live with Rodolfo and to assume her duties as wife and mother as well as her emotional immaturity, irresponsibility and infidelity do not rise to the level of psychological incapacity that would justify the nullification of the parties’ marriage. To the Court’s mind, Natividad’s refusal to live with Rodolfo and to assume her duties as wife and mother as well as her emotional immaturity, irresponsibility and infidelity do not rise to the level of psychological incapacity that would justify the nullification of the parties’ marriage. Indeed, to be declared clinically or medically incurable is one thing; to refuse or be reluctant to perform one’s duties is another. To hark back to what has been earlier discussed, psychological incapacity refers only to the most serious cases of personality disorders clearly demonstrative of an utter insensitivity or inability to give meaning and significance to the marriage. Republic of the Philippines v. Rodolfo O. De Gracia, G.R. No. 171557. February 12, 2014 .

Section 14 (1), Presidential Decree No. 1529; judicial confirmation of imperfect or incomplete titles to public land; requisites. Section 14(1) of P.D. No. 1529 refers to the judicial confirmation of imperfect or incomplete titles to public land acquired under Section 48(b) of Commonwealth Act (C.A.) No. 141, or the Public Land Act, as amended by P.D. No. 1073. Under Section 14(1) of P.D. No. 1529, applicants for registration of title must sufficiently establish: first, that the subject land forms part of the disposable and alienable lands of the public domain; second, that the applicant and his predecessors-in-interest have been in open, continuous, exclusive, and notorious possession and occupation of the same; and third, that it is under a bona fide claim of ownership since June 12, 1945, or earlier. Republic of the Philippines v. Remman Enterprises, Inc. represented by Ronnie P. Inocencio, G.R. No. 199310. February 19, 2014 .

Proof that land is alienable and disposable; certifications insufficient. However, the said certifications presented by the respondent are insufficient to prove that the subject properties are alienable and disposable. In Republic of the Philippines v. T.A.N. Properties, Inc., the Court clarified that, in addition to the certification issued by the proper government agency that a parcel of land is alienable and disposable, applicants for land registration must prove that the DENR Secretary had approved the land classification and released the land of public domain as alienable and disposable. They must present a copy of the original classification approved by the DENR Secretary and certified as true copy by the legal custodian of the records. Republic of the Philippines v. Remman Enterprises, Inc. represented by Ronnie P. Inocencio, G.R. No. 199310. February 19, 2014 .

Possession and occupation; proof of specific acts of ownership must be presented to substantiate the claim of open, continuous, exclusive, and notorious possession and occupation of the land subject of the application. For purposes of land registration under Section 14(1) of P.D. No. 1529, proof of specific acts of ownership must be presented to substantiate the claim of open, continuous, exclusive, and notorious possession and occupation of the land subject of the application. Applicants for land registration cannot just offer general statements which are mere conclusions of law rather than factual evidence of possession. Actual possession consists in the manifestation of acts of dominion over it of

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such a nature as a party would actually exercise over his own property. Republic of the Philippines v. Remman Enterprises, Inc. represented by Ronnie P. Inocencio, G.R. No. 199310. February 19, 2014 .

Possession and occupation; mere casual cultivation of portions of the land by the claimant does not constitute possession under claim of ownership. Although Cerquena testified that the respondent and its predecessors-in-interest cultivated the subject properties, by planting different crops thereon, his testimony is bereft of any specificity as to the nature of such cultivation as to warrant the conclusion that they have been indeed in possession and occupation of the subject properties in the manner required by law. There was no showing as to the number of crops that are planted in the subject properties or to the volume of the produce harvested from the crops supposedly planted thereon. Further, assuming ex gratia argumenti that the respondent and its predecessors-in-interest have indeed planted crops on the subject properties, it does not necessarily follow that the subject properties have been possessed and occupied by them in the manner contemplated by law. The supposed planting of crops in the subject properties may only have amounted to mere casual cultivation, which is not the possession and occupation required by law. “A mere casual cultivation of portions of the land by the claimant does not constitute possession under claim of ownership. For him, possession is not exclusive and notorious so as to give rise to a presumptive grant from the state. The possession of public land, however long the period thereof may have extended, never confers title thereto upon the possessor because the statute of limitations with regard to public land does not operate against the state, unless the occupant can prove possession and occupation of the same under claim of ownership for the required number of years.”Republic of the Philippines v. Remman Enterprises, Inc. represented by Ronnie P. Inocencio, G.R. No. 199310. February 19, 2014 .

MARCH

Action for quieting of title; trial court had no jurisdiction to determine who among the parties have better right over the disputed property which is admittedly still part of the public domain. Having established that the disputed property is public land, the trial court was therefore correct in dismissing the complaint to quiet title for lack of jurisdiction. The trial court had no jurisdiction to determine who among the parties have better right over the disputed property which is admittedly still part of the public domain. As held in Dajunos v. Tandayag (G.R. Nos. L-32651-52, 31 August 1971, 40 SCRA 449):

x x x The Tarucs’ action was for “quieting of title” and necessitated determination of the respective rights of the litigants, both claimants to a free patent title, over a piece of property, admittedly public land. The law, administration, disposition and alienation of public lands with the Director of Lands subject, of course, to the control of the Secretary of Agriculture and Natural Resources.

In sum, the decision rendered in Civil Case No. 1218 on October 28, 1968 is a patent nullity. The lower court did not have power to determine who (the Firmalos or the Tarucs) were entitled to an award of free patent title over that piece of property that yet belonged to the public domain. Neither did it have power to adjudge the Tarucs as entitled to the “true equitable ownership” thereof, the latter’s effect being the same: the exclusion of the Firmalos in favor of the Tarucs. Heirs of Pacifico Pocido, et al. v. Arsenia Avila and Emelinda Chua, G.R. No. 199146, March 19, 2014.

Action for quieting of title. In an action for quieting of title, the complainant is seeking for “an adjudication that a claim of title or interest in property adverse to the claimant is invalid, to free him from the danger of hostile claim, and to remove a cloud upon or quiet title to land where stale or unenforceable claims or demands exist.” Heirs of Pacifico Pocido, et al. v. Arsenia Avila and Emelinda Chua, G.R. No. 199146, March 19, 2014.

Action for quieting of title; two indispensable requisites. Under Articles 476 and 477 of the Civil Code, the two indispensable requisites in an action to quiet title are: (1) that the plaintiff has a legal or equitable title to or interest in the real property subject of the action; and (2) that there is a cloud on his title by reason of any instrument, record, deed, claim, encumbrance or proceeding, which must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity. Heirs of Pacifico Pocido, et al. v. Arsenia Avila and Emelinda Chua, G.R. No. 199146, March 19, 2014.

Co-ownership; Article 493 of the Civil Code; rights of a co-owner of a certain property; each one of the co-owners with full ownership of their parts can sell their fully owned part. Article 493 of the Code defines the ownership of the co-owner, clearly establishing that each co-owner shall have full ownership of his part and of its fruits and benefits. Pertinent to this case, Article 493 dictates that each one of the parties herein as co-owners with full ownership of their parts can sell their fully owned part. The sale by the petitioners of their parts shall not affect the full ownership by the respondents of the part that belongs to them. Their part which petitioners will sell shall be that which may be apportioned to them in the division upon the termination of the co-ownership. With the full ownership of the respondents remaining unaffected by petitioners’ sale of their parts, the nature of the property, as co-owned, likewise stays. In lieu of the petitioners, their vendees shall be co-owners with the respondents. The text of Article 493 says so. Raul V. Arambulo and Teresita Dela Cruz v. Genaro Nolasco and Jeremy Spencer Nolasco, G.R. No. 189420, March 26, 2014.

Co-ownership; Article 494 of the Civil Code; partition. Article 494 of the Civil Code provides that no co-owner shall be obliged to remain in the co-ownership, and that each co-owner may demand at any time partition of the thing owned in common insofar as his share is concerned. Raul V. Arambulo and Teresita Dela Cruz v. Genaro Nolasco and Jeremy Spencer Nolasco, G.R. No. 189420, March 26, 2014.

Co-ownership; Article 498 of the Civil Code; when this may be resorted to. Article 498 of the Civil Code states that whenever the thing is essentially indivisible and the co-owners cannot agree that it be allotted to one of them who shall indemnify the others, it shall be sold and its proceeds accordingly distributed. This is resorted to (a) when the right to partition the property is invoked by any of the co-owners but because of the nature of the property, it cannot be subdivided or its subdivision would prejudice the interests of the co-owners, and (b)

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the co-owners are not in agreement as to who among them shall be allotted or assigned the entire property upon proper reimbursement of the co-owners. Raul V. Arambulo and Teresita Dela Cruz v. Genaro Nolasco and Jeremy Spencer Nolasco, G.R. No. 189420, March 26, 2014.

Damages; actual or compensatory damages. Article 2199 of the Civil Code states that “[e]xcept as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him a he has duly proved. Such compensation is referred to as actual or compensatory damages.” “Actual damages are compensation for an injury that will put the injured party in the position where it was before the injury. They pertain to such injuries or losses that are actually sustained and susceptible of measurement. Except as provided by law or by stipulation, a party is entitled to adequate compensation only for such pecuniary loss as is duly proven. Basic is the rule that to recover actual damages, not only must the amount of loss be capable of proof; it must also be actually proven with a reasonable degree of certainty, premised upon competent proof or the best evidence obtainable.” International Container Terminal Services, Inc. v. Celeste M. Chua, G.R. No. 195031, March 26, 2014.

Damages; Attorney’s fees; when allowed. Article 2208 of the Civil Code does not prohibit recovery of attorney’s fees if there is a stipulation in the contract for payment of the same. Thus, in Asian Construction and Development Corporation v. Cathay Pacific SteelCorporation (CAPASCO), the Court, citing Titan ConstructionCorporation v. Uni-Field Enterprises, Inc., noted that the law allows a party to recover attorney’s fees under a written agreement. In Barons Marketing Corporation v. Court of Appeals, the Court ruled that attorney’s fees are in the nature of liquidated damages and the stipulation therefor is aptly called a penal clause. It has been said that so long as such stipulation does not contravene law, morals, or public order, it is strictly binding upon defendant. The attorney’s fees so provided areawarded in favor of the litigant, not his counsel.On the other hand, the law also allows parties to a contract tostipulate on liquidated damages to be paid in case of breach. A stipulationon liquidated damages is a penalty clause where the obligor assumes agreater liability in case of breach of an obligation. The obligor is bound topay the stipulated amount without need for proof on the existence and onthe measure of damages caused by the breach. However, even if such attorney’s fees are allowed by law, the courts still have the power to reduce the same if it is unreasonable. Mariano Lim v. Security Bank Corporation,G.R. No. 188539, March 12, 2014.

Damages; Attorney’s fees; when proper. An award of attorney’s fees has always been the exception rather than the rule and there must be some compelling legal reason to bring the case within the exception and justify the award. In this case, none of the exceptions applies. “Attorney’s fees are not awarded every time a party prevails in a suit. The policy of the Court is that no premium should be placed on the right to litigate.” “Even when a claimant is compelled to litigate with third persons or to incur expenses to protect his rights, still, attorney’s fees may not be awarded where no sufficient showing of bad faith could be reflected in a party’s persistence in a case other than an erroneous conviction of the righteousness of his cause.” International Container Terminal Services, Inc. v. Celeste M. Chua,G.R. No. 195031, March 26, 2014.

Damages; moral damages. Certainly, an award of moral damages must be anchored on a clear showing that the party claiming the same actually experienced mental anguish, besmirched reputation, sleepless nights, wounded feelings, or similar injury. In the case herein under consideration, the records are bereft of any proof that respondent in fact suffered moral damages as contemplated in the afore-quoted provision of the Civil Code. The ruling of the trial court provides simply that: “[Petitioner’s] outright denial and unjust refusal to heed [respondent’s] claim for payment of the value of her lost/damaged shipment caus[ed] the latter to suffer serious anxiety, mental anguish and wounded feelings warranting the award of moral damages x x x.” The testimony of respondent, on the other hand, merely states that when she failed to recover damages from petitioner, she “was saddened, had sleepless nights and anxiety” without providing specific details of the suffering she allegedly went through. “Since an award of moral damages is predicated on a categorical showing by the claimant that she actually experienced emotional and mental sufferings, it must be disallowed absent any evidence thereon.” International Container Terminal Services, Inc. v. Celeste M. Chua, G.R. No. 195031, March 26, 2014.

Damages; Nominal damages; when awarded; Network Bank did not violate any of Baric’s rights.Nominal damages are recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind or where there has been a breach of contract and no substantial injury or actual damages whatsoever have been or can be shown.

Under Article 2221 of the Civil Code, nominal damages may be awarded to a plaintiff whose right has been violated or invaded by the defendant, for the purpose of vindicating or recognizing that right, not for indemnifying the plaintiff for any loss suffered. Nominal damages are not for indemnification of loss suffered but for the vindication or recognition of a right violated or invaded.

Network Bank did not violate any of Baric’s rights; it was merely a purchaser or transferee of the property. Surely, it is not prohibited from acquiring the property even while the forcible entry case was pending, because as the registered owner of the subject property, Palado may transfer his title at any time and the lease merely follows the property as a lien or encumbrance. Any invasion or violation of Baric’s rights as lessee was committed solely by Palado, and Network Bank may not be implicated or found guilty unless it actually took part in the commission of illegal acts, which does not appear to be so from the evidence on record. On the contrary, it appears that Barie was ousted through Palado’s acts even before Network Bank acquired the subject property or came into the picture. Thus, it was error to hold the bank liable for nominal damages. One Network Rural Bank, Inc. v. Danilo G. Baric,G.R. No. 193684, March 5, 2014.

Damages; Temperate damages. In the absence of competent proof on the amount of actual damages suffered, a party is entitled to receive temperate damages. Article 2224 of the New Civil Code provides that: “Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty.” The amount thereof is usually left to the sound discretion of the courts but the same should be reasonable, bearing in mind that temperate damages should be “more than nominal but less than compensatory.” International Container Terminal Services, Inc. v. Celeste M. Chua, G.R. No. 195031, March 26, 2014.

Fraud; concept of; Article 1338 of the Civil Code. According to Article 1338 of the Civil Code, there is fraud when one of the contracting parties, through insidious words or machinations, induces the other to enter into the contract that, without the inducement, he would not have agreed to. Yet, fraud, to vitiate consent, must be the causal (dolo causante), not merely the incidental (dolo incidente), inducement to the making of the contract. In Samson v. Court of Appeals (G.R. No. 108245, November 25, 1994, 238 SCRA 397), causal fraud is defined as “a deception employed by one party prior to or simultaneous to the contract in order to secure the consent of the other.”

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Fraud cannot be presumed but must be proved by clear and convincing evidence. Whoever alleges fraud affecting a transaction must substantiate his allegation, because a person is always presumed to take ordinary care of his concerns, and private transactions are similarly presumed to have been fair and regular. To be remembered is that mere allegation is definitely not evidence; hence, it must be proved by sufficient evidence. Metropolitan Fabrics, Inc., et al. v. Prosperity Credit Resources, Inc. et al., G.R. No. 154390, March 17, 2014.

Fraud; Article 1390, in relation to Article 1391 of the Civil Code; consent obtained through fraud; action for annulment; prescriptive period. Article 1390, in relation to Article 1391 of the Civil Code, provides that if the consent of the contracting parties was obtained through fraud, the contract is considered voidable and may be annulled within four years from the time of the discovery of the fraud. Metropolitan Fabrics, Inc., et al. v. Prosperity Credit Resources, Inc. et al., G.R. No. 154390, March 17, 2014.

Mortgage; a higher degree of prudence must be exercised by the mortgagee in cases where he does not directly deal with the registered owner of real property. In Bank of Commerce v. Spouses San Pablo, Jr. (550 Phil. 805, 821 (2007)), the court declared that a mortgagee has a right to rely in good faith on the certificate of title of the mortgagor of the property offered as security, and in the absence of any sign that might arouse suspicion, the mortgagee has no obligation to undertake further investigation.

However, in Bank of Commerce v. Spouses San Pablo, Jr. (550 Phil. 805, 821 (2007)), the court also ruled that “[i]n cases where the mortgagee does not directly deal with the registered owner of real property, the law requires that a higher degree of prudence be exercised by the mortgagee.” Specifically, the court cited Abad v. Sps. Guimba (503 Phil. 321, 331-332 (2005)), where it held,

“x x x While one who buys from the registered owner does not need to look behind the certificate of title, one who buys from one who is not the registered owner is expected to examine not only the certificate of title but all factual circumstances necessary for [one] to determine if there are any flaws in the title of the transferor, or in [the] capacity to transfer the land.”

Although the instant case does not involve a sale but only a mortgage, the same rule applies inasmuch as the law itself includes a mortgagee in the term “purchaser.”

Thus, where the mortgagor is not the registered owner of the property but is merely an attorney-in-fact of the same, it is incumbent upon the mortgagee to exercise greater care and a higher degree of prudence in dealing with such mortgagor. Macaria Arguelles and the Heirs of the Deceased Petronio Arguelles v. Malarayat Rural Bank, Inc., G.R. No. 200468, March 19, 2014.

Mortgage; banks are enjoined to exert a higher degree of diligence, care, and prudence than individuals in handling real estate transactions; it cannot rely merely on the certificate of title. In Ursal v. Court of Appeals (509 Phil. 628, 642 (2005)), the court held that where the mortgagee is a bank, it cannot rely merely on the certificate of title offered by the mortgagor in ascertaining the status of mortgaged properties. Since its business is impressed with public interest, the mortgagee-bank is duty-bound to be more cautious even in dealing with registered lands. Indeed, the rule that person dealing with registered lands can rely solely on the certificate of title does not apply to banks. Thus, before approving a loan application, it is a standard operating practice for these institutions to conduct an ocular inspection of the property offered for mortgage and to verify the genuineness of the title to determine the real owners thereof. The apparent purpose of an ocular inspection is to protect the “true owner” of the property as well as innocent third parties with a right, interest or claim thereon from a usurper who may have acquired a fraudulent certificate of title thereto. Macaria Arguelles and the Heirs of the Deceased Petronio Arguelles v. Malarayat Rural Bank, Inc., G.R. No. 200468, March 19, 2014.

1. Negligence, the Court said in Layugan v. Intermediate Appellate Court (G.R. No. L-73998, November 14, 1988), is “the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would not do, or as Judge Cooley defines it, ‘(t)he failure to observe for the protection of the interests of another person, that degree of care, precaution, and vigilance which the circumstances justly demand, whereby such other person suffers injury.’” In order that a party may be held liable for damages for any injury brought about by the negligence of another, the claimant must prove that the negligence was the immediate and proximate cause of the injury. BJDC Construction, represented by its Manager/Proprieto Janet S. Dela Cruz v. Nena E. Lanuzo, et al., G.R. No. 161151, March 24, 2014.

Negligence; Medical negligence; four elements the plaintiff must prove by competent evidence. An action upon medical negligence – whether criminal, civil or administrative – calls for the plaintiff to prove by competent evidence each of the following four elements, namely: (a) the duty owed by the physician to the patient, as created by the physician-patient relationship, to act in accordance with the specific norms or standards established by his profession; (b) the breach of the duty by the physician’s failing to act in accordance with the applicable standard of care; (3) the causation, i.e., there must be a reasonably close and causal connection between the negligent act or omission and the resulting injury; and (4) the damages suffered by thepatient. Dr. Fernando P. Solidum v. People of the Philippines,G.R. No. 192123, March 10, 2014.

Negligence; Medical Negligence; standard of care of the medical profession; standard of care observed by other members of the profession in good standing under similar circumstances. Negligence is defined as the failure to observe for the protection of the interests of another person that degree of care, precaution, and vigilance that the circumstances justly demand, whereby such other person suffers injury. Reckless imprudence, on the other hand, consists of voluntarily doing or failing to do, without malice, an act from which material damage results by reason of an inexcusable lack of precaution on the part of the person performing or failing to perform such act.

The Court aptly explained in Cruz v. Court of Appeals that: Whether or not a physician has committed an “inexcusable lack of precaution” in the treatment of his patient is to be determined according to the standard of care observed by other members of the profession in good standing under similar circumstances bearing in mind the advanced state of the profession at the time of treatment or the present state of medical science. In the recent case of Leonila Garcia-Rueda v. Wilfred L. Pacasio,et. al., this Court stated that in accepting a case, a doctor in effect represents that, having the needed training and skill possessed by physicians and surgeons practicing in the same field, he will employ such training, care and skill in the treatment of his patients. He therefore has a duty to use at least the same level of care that any other reasonably competent doctor would use to treat a condition under the same circumstances. It is in this aspect of medical malpractice that expert testimony is essential to establish not only the standard of care of the profession but also that the physician’s conduct in the treatment

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and care falls below such standard. Further, inasmuch as the causes of the injuries involved in malpractice actions are determinable only in the light of scientific knowledge, it has been recognized that expert testimony is usually necessary to support the conclusion as to causation. Dr. Fernando P. Solidum v. People of the Philippines,G.R. No. 192123, March 10, 2014.

Negligence; Medical negligence; standard of care; an objective standard by which the conduct of a physician sued for negligence or malpractice may be measured.In the medical profession, specific norms or standards to protect the patient against unreasonable risk, commonly referred to as standards of care, set the duty of the physician to act in respect of the patient. Unfortunately, no clear definition of the duty of a particular physician in a particular case exists. Because most medical malpractice cases are highly technical, witnesses with special medical qualifications must provide guidance by giving the knowledge necessary to render a fair and just verdict. As a result, the standard of medical care of aprudent physician must be determined from expert testimony in most cases; and in the case of a specialist (like an anesthesiologist), the standard of care by which the specialist is judged is the care and skill commonly possessed and exercised by similar specialists under similar circumstances. The specialty standard ofcare may be higher than that required of the general practitioner. Dr. Fernando P. Solidum v. People of the Philippines,G.R. No. 192123, March 10, 2014.

Negligence, test to determine its existence. The test by which the existence of negligence in a particular case is determined is aptly stated in the leading case of Picart v. Smith (G.R. No. 12219, March 15, 1918).

According to this case, the test by which to determine the existence of negligence in a particular case may be stated as follows:

“Did the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence. The law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the Roman law. The existence of negligence in a given case is not determined by reference to the personal judgment of the actor in the situation before him. The law considers what would be reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given situation must of course be always determined in the light of human experience and in view of the facts involved in the particular case. Abstract speculation cannot here be of much value but this much can be profitably said: Reasonable men govern their conduct by the circumstances which are before them or known to them. They are not, and are not supposed to be, omniscient of the future. Hence they can be expected to take care only when there is something before them to suggest or warn of danger. Could a prudent man, in the case under consideration, foresee harm as a result of the course actually pursued? If so, it was the duty of the actor to take precautions to guard against that harm. Reasonable foresight of harm, followed by the ignoring of the suggestion born of this prevision, is always necessary before negligence can be held to exist. Stated in these terms, the proper criterion for determining the existence of negligence in a given case is this: Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing the conduct or guarding against its consequences.” BJDC Construction, represented by its Manager/Proprieto Janet S. Dela Cruz v. Nena E. Lanuzo, et al.,G.R. No. 161151, March 24, 2014.

Property; Recovery of possession of real property; three kinds of actions available. In Sps. Bonifacio R. Valdez, Jr. et al. vs. Hon. Court of Appeals, et al. (523 Phil. 39 (2006)), the Court is instructive anent the three kinds of actions available to recover possession of real property, viz: (a) accion interdictal; (b) accion publiciana; and (c) accion reivindicatoria.

Accion interdictal comprises two distinct causes of action, namely, forcible entry (detentacion) and unlawful detainer (desahuico) [sic]. In forcible entry, one is deprived of physical possession of real property by means of force, intimidation, strategy, threats, or stealth whereas in unlawful detainer, one illegally withholds possession after the expiration or termination of his right to hold possession under any contract, express or implied. The two are distinguished from each other in that in forcible entry, the possession of the defendant is illegal from the beginning, and that the issue is which party has prior de facto possession while in unlawful detainer, possession of the defendant is originally legal but became illegal due to the expiration or termination of the right to possess.

The jurisdiction of these two actions, which are summary in nature, lies in the proper municipal trial court or metropolitan trial court. Both actions must be brought within one year from the date of actual entry on the land, in case of forcible entry, and from the date of last demand, in case of unlawful detainer. The issue in said cases is the right to physical possession.

Accion publiciana is the plenary action to recover the right of possession which should be brought in the proper regional trial court when dispossession has lasted for more than one year. It is an ordinary civil proceeding to determine the better right of possession of realty independently of title. In other words, if at the time of the filing of the complaint more than one year had elapsed since defendant had turned plaintiff out of possession or defendant’s possession had become illegal, the action will be, not one of the forcible entry or illegal detainer, but an accion publiciana. On the other hand, accion reivindicatoria is an action to recover ownership also brought in the proper regional trial court in an ordinary civil proceeding. Carmencita Suarez v. Mr. and Mrs. Felix E. Emboy, Jr. and Marilou P. Emboy-Delantar,G.R. No. 187944, March 12, 2014.

Res ipsa loquitor; a mode of proof or a mere procedural convenience.In Jarcia, Jr. v. People, the court has underscored that the doctrine is not a rule of substantive law, but merely a mode of proof or a mere procedural convenience. The doctrine, when applicable to the facts and circumstances of a given case, is not meant to and does not dispense with the requirement of proof of culpable negligence against the party charged. It merely determines and regulates what shall be prima facie evidence thereof, and helps the plaintiff in proving a breach of the duty. The doctrine can be invoked when and only when, under the circumstances involved, direct evidence is absent and not readily available. Dr. Fernando P. Solidum v. People of the Philippines,G.R. No. 192123, March 10, 2014.

Res ipsa loquitor; applicability in medical negligence cases. The applicability of the doctrine of res ipsa loquitur in medical negligence cases was significantly and exhaustively explained in Ramos v. Court of Appeals, where the Court said–Medical malpractice cases do not escape the application of this doctrine. Thus, res ipsa loquitur has been applied when the circumstances attendant upon the harm are themselves of such a character as to justify an inference of negligence as the cause of that harm. The application of resipsa loquitur in medical negligence cases presents a question of law since it is a judicial function to determine whether a certain set of circumstances does, as a matter of law, permit a

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given inference. Although generally, expert medical testimony is relied upon in malpractice suits to prove that a physician has done a negligent act or that he has deviated from the standard medical procedure, when the doctrine of res ipsa loquitur is availed by the plaintiff, the need for expert medical testimony is dispensed with because the injury itself provides the proof of negligence. The reason is that the general rule on the necessity of expert testimony applies only to such matters clearly within the domain of medical science, and not to matters that are within the common knowledge of mankind which may be testified to by anyone familiar with the facts. Ordinarily, only physicians and surgeons of skill and experience are competent to testify as to whether a patient has been treated or operated upon with a reasonable degree of skill and care. However, testimony as to the statements and acts of physicians and surgeons, external appearances, and manifest conditions which are observable by any one may be given by non-expert witnesses. Hence, in cases where the res ipsa loquitur is applicable, the court is permitted to find a physician negligent upon proper proof of injury to the patient, without the aid of expert testimony, where the court from its fund of common knowledge can determine the proper standard of care. Where common knowledge and experience teach that a resulting injury would not have occurred to the patient if due care had been exercised, an inference of negligence may be drawn giving rise to an application of the doctrine of res ipsa loquitur without medical evidence, which is ordinarily required to show not only what occurred but how and why it occurred. When the doctrine is appropriate, all that the patient must do is prove a nexus between the particular act or omission complained of and the injury sustained while under the custody and management of the defendant without need to produce expert medical testimony to establish the standard of care. Resort to res ipsa loquitur is allowed because there is no other way, under usual and ordinary conditions, by which the patient can obtain redress for injury suffered by him. Dr. Fernando P. Solidum v. People of the Philippines,G.R. No. 192123, March 10, 2014.

Res ipsa loquitur; applied in conjunction with the doctrine of common knowledge.It is simply “a recognition of the postulate that, as a matter of common knowledge and experience, the very nature of certain types of occurrences may justify an inference of negligence on the part of the person who controls the instrumentality causing the injury in the absence of some explanation by the defendant who is charged with negligence. It is grounded in the superior logic of ordinary human experience and on the basis of such experience or common knowledge, negligence may be deduced from the mere occurrence of the accident itself. Hence, res ipsa loquitur is applied in conjunction with the doctrine ofcommon knowledge.” Dr. Fernando P. Solidum v. People of the Philippines,G.R. No. 192123, March 10, 2014.

Res ipsa loquitor. Res ipsa loquitur is literally translated as “the thing or the transaction speaks for itself.” The doctrine res ipsa loquitur means that “where the thing which causes injury is shown to be under the management of the defendant, and the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of an explanation by the defendant, thatthe accident arose from want of care.” Dr. Fernando P. Solidum v. People of the Philippines,G.R. No. 192123, March 10, 2014.

Res ipsa loquitur. The doctrine of res ipsa loquitur is “based on the theory that the defendant either knows the cause of the accident or has the best opportunity of ascertaining it and the plaintiff, having no knowledge thereof, is compelled to allege negligence in general terms. In such instance, the plaintiff relies on proof of the happening of the accident alone to establish negligence.” The principle, furthermore, provides a means by which a plaintiff can hold liable a defendant who, if innocent, should be able to prove that he exercised due care to prevent the accident complained of from happening. It is, consequently, the defendant’s responsibility to show that there was no negligence on his part. International Container Terminal Services, Inc. v. Celeste M. Chua, G.R. No. 195031, March 26, 2014.

Res ipsa loquitur; concept of; requirements for the doctrine to apply. In Tan v. JAM Transit, Inc. (G.R. No. 183198, November 25, 2009), the Court noted that res ipsa loquitur is a Latin phrase that literally means “the thing or the transaction speaks for itself.” It is a maxim for the rule that the fact of the occurrence of an injury, taken with the surrounding circumstances, may permit an inference or raise a presumption of negligence, or make out a plaintiff’s prima facie case, and present a question of fact for defendant to meet with an explanation. Where the thing that caused the injury complained of is shown to be under the management of the defendant or his servants; and the accident, in the ordinary course of things, would not happen if those who had management or control used proper care, it affords reasonable evidence—in the absence of a sufficient, reasonable and logical explanation by defendant—that the accident arose from or was caused by the defendant’s want of care. This rule is grounded on the superior logic of ordinary human experience, and it is on the basis of such experience or common knowledge that negligence may be deduced from the mere occurrence of the accident itself. Hence, the rule is applied in conjunction with the doctrine of common knowledge.”

For the doctrine to apply, the following requirements must be shown to exist, namely: (a) the accident is of a kind that ordinarily does not occur in the absence of someone’s negligence; (b) it is caused by an instrumentality within the exclusive control of the defendant or defendants; and (c) the possibility of contributing conduct that would make the plaintiff responsible is eliminated. BJDC Construction, represented by its Manager/Proprieto Janet S. Dela Cruz v. Nena E. Lanuzo, et al., G.R. No. 161151, March 24, 2014.

Res ipsa loquitor; doctrine does not automatically apply to all cases of medical negligence as to mechanically shift the burden of proof to the defendant.Despite the fact that the scope ofres ipsa loquitur has been measurably enlarged, it does not automatically apply to all cases of medical negligence as to mechanically shift the burden of proof to the defendant to show that he is not guilty of the ascribed negligence. Res ipsa loquitur is not a rigid or ordinary doctrine to be perfunctorily used but a rule to be cautiously applied, depending upon the circumstances of each case. It is generally restricted to situations in malpractice cases where a layman is able to say, as a matter of common knowledge and observation, that the consequences of professional care were not as such as would ordinarily have followed if due care had been exercised. A distinction must be made between the failure to secure results, and the occurrence of something more unusual and not ordinarily found if the service or treatment rendered followed the usual procedure of those skilled in that particular practice. It must be conceded that the doctrine of res ipsa loquitur can have no application in a suit against a physician or surgeon which involves the merits of a diagnosis or of a scientific treatment. The physician or surgeon is not required at his peril to explain why any particular diagnosis was not correct, or why any particular scientific treatment did not produce the desired result. Thus, res ipsa loquitur is not available in a malpractice suit if the only showing is that the desired result of an operation or treatment was not accomplished. The real question, therefore, is whether or not in the process of the operation any extraordinary incident or unusual event outside of the routine performance occurred which is beyond the regular scope of customary professional activity in such operations, which, if unexplained would themselves reasonably speak to the average man as the negligent cause or causes of the untoward consequence. If there was such extraneous intervention, the doctrine of res ipsa loquitur may be utilized and the defendant is calledupon to explain the matter, by evidence of exculpation, if he could. Dr. Fernando P. Solidum v. People of the Philippines,G.R. No. 192123, March 10, 2014.

Res ipsa loquitor; essential requisites.In order to allow resort to the doctrine, therefore, the following essential requisites must first be satisfied, to wit: (1) the accident was of a kind that does not ordinarily occur unless someone is negligent; (2) the instrumentality or agency

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that caused the injury was under the exclusive control of the person charged; and (3) the injury suffered must not have been due to any voluntary action or contribution of the person injured. Dr. Fernando P. Solidum v. People of the Philippines,G.R. No. 192123, March 10, 2014.

Res ipsa loquitur; when may be invoked. The doctrine “can be invoked when and only when, under the circumstances involved, direct evidence is absent and not readily available.” Here, there was no evidence as to how or why the fire in the container yard of petitioner started; hence, it was up to petitioner to satisfactorily prove that it exercised the diligence required to prevent the fire from happening. International Container Terminal Services, Inc. v. Celeste M. Chua, G.R. No. 195031, March 26, 2014.

Suretyship; Continuing suretyship; nature of; example of.A Continuing Suretyship, which the Court described in Saludo, Jr. v. Security Bank Corporation as follows:

The essence of a continuing surety has been highlighted in the case of Totanes v. China Banking Corporation in this wise: Comprehensive or continuing surety agreements are, in fact, quite commonplace in present day financial and commercial practice. A bank or financing companywhich anticipates entering into a series of credit transactions with a particular company, normallyrequires the projected principal debtor to execute acontinuing surety agreement along with its sureties. Byexecuting such an agreement, the principal places itselfin a position to enter into the projected series oftransactions with its creditor; with such suretyshipagreement, there would be no need to execute a separatesurety contract or bond for each financing or creditaccommodation extended to the principal debtor.

The terms of the Continuing Suretyship executed by petitioner are very clear. It states that petitioner, as surety, shall, without need for any notice, demand or any other act or deed, immediately become liable and shall pay “all credit accommodations extended by the Bank to the Debtor, including increases, renewals, roll-overs, extensions, restructurings, amendments or novations thereof, as well as (i) all obligations of theDebtor presently or hereafter owing to the Bank, as appears in the accounts, books and records of the Bank, whether direct or indirect, and (ii) any and all expenses which the Bank may incur in enforcing any of its rights, powers and remedies under the Credit Instruments as defined hereinbelow.” Mariano Lim v. Security Bank Corporation,G.R. No. 188539, March 12, 2014.

Suretyship. A contract of suretyship is an agreement whereby a party, called the surety, guarantees the performance by another party, called the principal or obligor, of an obligation or undertaking in favor of another party, called the obligee. Although the contract of a surety is secondary only to a valid principal obligation, the surety becomes liable for the debt or duty of another although it possesses no direct or personal interest over the obligations nor does it receive any benefit therefrom. This was explained in the case of Stronghold Insurance Company, Inc. v. Republic-Asahi Glass Corporation, where it was written: The surety’s obligation is not an original and direct one for the performance of his own act, but merely accessory or collateral to the obligation contracted by the principal. Nevertheless, although the contract of a suretyis in essence secondary only to a valid principalobligation, his liability to the creditor or promisee of theprincipal is said to be direct, primary and absolute; inother words, he is directly and equally bound with theprincipal.

Thus, suretyship arises upon the solidary binding of a person deemed the surety with the principal debtor for the purpose of fulfilling an obligation. A surety is considered in law as being the same party asthe debtor in relation to whatever is adjudged touching the obligationof the latter, and their liabilities are interwoven as to be inseparable. Mariano Lim v. Security Bank Corporation,G.R. No. 188539, March 12, 2014.

SPECIAL LAWS

Comprehensive Agrarian Reform Law (CARL); Section 65 of R.A. 6657; DAR is empowered to authorize, under certain conditions, the reclassification or conversion of agricultural lands . Under Section 65 of R.A. No. 6657, the DAR is empowered to authorize, under certain conditions, the reclassification or conversion of agricultural lands. Pursuant to this authority and in the exercise of its rulemaking power under Section 49 of R.A. No. 6657, the DAR issued Administrative Order No. 12, series of 1994 (DAR A.O. 12-94) (the then prevailing administrative order), providing the rules and procedure governing agricultural land conversion. Item VII of DAR A.O. 12-94 enumerates the documentary requirements for approval of an application for land conversion.35 Notably, Item VI-E provides that no application for conversion shall be given due course if: (1) the DAR has issued a Notice of Acquisition under the compulsory acquisition process; (2) a Voluntary Offer to Sell covering the subject property has been received by the DAR; or (3) there is already a perfected agreement between the landowner and the beneficiaries under Voluntary Land Transfer.Heirs of Teresita Montoya, et al. v. National Housing Authority, et al., G.R. No. 181055, March 19, 2014.

Comprehensive Agrarian Reform Law (CARL); Section 6 of R.A. 6657; retention limits. Section 6 of R.A. No. 6657 specifically governs retention limits. Under its last paragraph, “any sale, disposition, lease, management, contract or transfer of possession of private lands executed by the original landowner in violation of [R.A. No. 6657]” is considered null and void. A plain reading of the last paragraph appears to imply that the CARL absolutely prohibits sales or dispositions of private agricultural lands. The interpretation or construction of this prohibitory clause, however, should be made within the context of Section 6, following the basic rule in statutory construction that every part of the statute be “interpreted with reference to the context, i.e., that every part of the statute must be considered together with the other parts, and kept subservient to the general intent of the whole enactment.” Notably, nothing in this paragraph, when read with the entire section, discloses any legislative intention to absolutely prohibit the sale or other transfer agreements of private agricultural lands after the effectivity of the Act.

In other words, therefore, the sale, disposition, etc. of private lands that Section 6 of R.A. No. 6657 contextually prohibits and considers as null and void are those which the original owner executes in violation of this provision, i.e., sales or dispositions executed with the intention of circumventing the retention limits set by R.A. No. 6657. Consistent with this interpretation, the proscription in Section 6 on sales or dispositions of private agricultural lands does not apply to those that do not violate or were not intended to circumvent the CARL’s retention limits. Heirs of Teresita Montoya, et al. v. National Housing Authority, et al., G.R. No. 181055, March 19, 2014.

Emancipation of Tenants; P.D. 27; CLT; legal effects of issuance; tenant-farmer does not acquire full ownership of the covered landholding simply by the issuance of a CLT. A CLT is a document that the government issues to a tenant-farmer of an agricultural land primarily devoted to rice and corn production placed under the coverage of the government’s OLT program pursuant to P.D. No. 27. It serves as the tenant-farmer’s (grantee of the certificate) proof of inchoate right over the land covered thereby.

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A CLT does not automatically grant a tenant-farmer absolute ownership of the covered landholding. Under PD No. 27, land transfer is effected in two stages: (1) issuance of the CLT to the tenant-farmer in recognition that said person is a “deemed owner”; and (2) issuance of an Emancipation Patent (EP) as proof of full ownership upon the tenant-farmer’s full payment of the annual amortizations or lease rentals.

As a preliminary step, therefore, the issuance of a CLT merely evinces that the grantee thereof is qualified to avail of the statutory mechanism for the acquisition of ownership of the land tilled by him, as provided under P.D. No. 27. The CLT is not a muniment of title that vests in the tenant-farmer absolute ownership of his tillage. It is only after compliance with the conditions which entitle the tenant-farmer to an EP that the tenant-farmer acquires the vested right of absolute ownership in the landholding. Stated otherwise, the tenant-farmer does not acquire full ownership of the covered landholding simply by the issuance of a CLT. The tenant-farmer must first comply with the prescribed conditions and procedures for acquiring full ownership but until then, the title remains with the landowner. Heirs of Teresita Montoya, et al. v. National Housing Authority, et al., G.R. No. 181055, March 19, 2014.

Land registration; Classification of land; evidence of a positive act from the government reclassifying the lot as alienable and disposable agricultural land of the public domain. Accordingly, jurisprudence has required that an applicant for registration of title acquired through a public land grant must present incontrovertible evidence that the land subject of the application is alienable or disposable by establishing the existence of a positive act of the government, such as a presidential proclamation or an executive order; an administrative action; investigation reports of Bureau of Lands investigators; and a legislative act or a statute. Sps. Antonio Fortuna and Erlinda Fortuna v. Republic of the Philippines,G.R. No. 173423, March 5, 2014.

Land registration; Classification of land; Executive prerogative.Under Section 6 of the Public Land Act, the classification and the reclassification of public lands are the prerogative of the Executive Department. The President, through a presidential proclamation or executive order, can classify or reclassify a land to be included or excluded from the public domain. The Department of Environment and Natural Resources Secretary is likewise empowered by law to approve a land classification and declare such land as alienable and disposable. Sps. Antonio Fortuna and Erlinda Fortuna v. Republic of the Philippines,G.R. No. 173423, March 5, 2014.

Land registration; it is essential for any applicant for registration of title to land derived through a public grant to establish foremost the alienable and disposable nature of the land. The Constitution declares that all lands of the public domain are owned by the State. Of the four classes of public land, i.e., agricultural lands, forest or timber lands, mineral lands, and national parks, only agricultural lands may be alienated. Public land that has not been classified as alienable agricultural land remains part of the inalienable public domain. Thus,it is essential for any applicant for registration of title toland derived through a public grant to establish foremost the alienableand disposable nature of the land. The Public Land Act provisions on the grant and disposition of alienable public lands, specifically, Sections 11 and 48(b), will find application only from the time that a public land has been classified as agricultural and declared as alienable and disposable. Sps. Antonio Fortuna and Erlinda Fortuna v. Republic of the Philippines,G.R. No. 173423, March 5, 2014.

Land registration; Judicial confirmation of imperfect or incomplete title; cut-off date for applications. As mentioned, the Public Land Act is the law that governs the grant and disposition of alienable agricultural lands. Under Section 11 of the PLA, alienable lands of the public domain may be disposed of, among others, by judicial confirmation of imperfect or incomplete title. This mode of acquisition of title is governed by Section 48(b) of the PLA, theoriginal version of which states:

Sec. 48. The following-described citizens of the Philippines, occupying lands of the public domain or claiming to own any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of title therefor, under the Land Registration Act, to wit:

x x x x

(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive, and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition or ownership, except as against the Government, since July twenty-sixth, eighteen hundred and ninety-four, except when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions essential to a government grant and shall be entitled to a certificate of title under the provisions of this chapter. [emphasis supplied]

On June 22, 1957, the cut-off date of July 26, 1894 was replaced by a 30-year period of possession under RA No. 1942. Section 48(b) of the PLA, as amended by RA No. 1942, read:

(b) Those who by themselves or through their predecessors in interest have been in open, continuous, exclusive and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition of ownership, for at least thirty yearsimmediately preceding the filing of the application for confirmation of title, except when prevented by war or force majeure.

On January 25, 1977, PD No. 1073 replaced the 30-year period of possession by requiring possession since June 12, 1945. Section 4 of PD No. 1073 reads:

SEC. 4. The provisions of Section 48(b) and Section 48(c), Chapter VIII of the Public Land Act are hereby amended in the sense that these provisions shall apply only to alienable and disposable lands of the public domain which have been in open, continuous, exclusive and notorious possession and occupation by the applicant himself or thru his predecessor-in-interest, under a bona fide claim of acquisition of ownership, since June 12, 1945.

Under the P.D. No. 1073 amendment, possession of at least 32 years – from 1945 up to its enactment in 1977 – is required. This effectively impairs the vested rights of applicants who had complied with the 30-year possession required under the RA No. 1942 amendment, but whose possession commenced only after the cut-off date of June 12, 1945 was established by the PD No. 1073 amendment. To remedy this, the Court ruled in Abejaron v. Nabasa that “Filipino citizens who by themselves or their predecessors-in-interest have been, prior to the effectivity of P.D. 1073on January 25, 1977, in open, continuous, exclusive and notorious possession and occupation of agricultural lands of the public

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domain, under a bona fide claim of acquisition of ownership, for at least 30 years, or atleast since January 24, 1947 may apply for judicial confirmation of their imperfect or incomplete title under Sec. 48(b) of the [PLA].”January 24,1947 was considered as the cut off date as this was exactly 30 yearscounted backward from January 25, 1977 – the effectivity date of PDNo. 1073.

It appears, however, that January 25, 1977 was the date PD No. 1073 was enacted; based on the certification from the National PrintingOffice, PD No. 1073 was published in Vol. 73, No. 19 of the Official Gazette, months later than its enactment or on May 9, 1977.Thisuncontroverted fact materially affects the cut-off date for applications forjudicial confirmation of incomplete title under Section 48(b) of the PLA.Although Section 6 of PD No. 1073 states that “[the] Decree shalltake effect upon its promulgation,” the Court has declared in Tañada, et al.v. Hon. Tuvera, etc., et al. that the publication of laws is an indispensablerequirement for its effectivity. “[A]ll statutes, including those of localapplication and private laws, shall be published as a condition for theireffectivity, which shall begin fifteen days after publication unless a differenteffectivity date is fixed by the legislature.” Accordingly, Section 6 of PDNo. 1073 should be understood to mean that the decree took effect onlyupon its publication, or on May 9, 1977. This, therefore, moves the cut-off date for applications for judicial confirmation of imperfect or incomplete title under Section 48(b) of the PLA to May 8, 1947. In otherwords, applicants must prove that they have been in open, continuous,exclusive and notorious possession and occupation of agricultural lands ofthe public domain, under a bona fide claim of acquisition of ownership,for at least 30 years, or at least since May 8, 1947. Sps. Antonio Fortuna and Erlinda Fortuna v. Republic of the Philippines,G.R. No. 173423, March 5, 2014.

Land registration; Possession; as a requirement for the application for registration of title.Notably, Section 48(b) of the PLA speaks of possession and occupation. “Since these words are separated by the conjunction and, the clear intention of the law is not to make one synonymous with the other. Possession is broader than occupation because it includes constructive possession. When, therefore, the law adds the word occupation, it seeks to delimit the all-encompassing effect of constructive possession. Taken together with the words open, continuous, exclusive and notorious, the word occupation serves to highlight the fact that for an applicant to qualify, his possession must not be a mere fiction.” Nothing in Tax Declaration No. 8366 shows that Pastora exercised acts of possession and occupation such as cultivation of or fencing off the land. Indeed, the lot was described as “cogonal.” Sps. Antonio Fortuna and Erlinda Fortuna v. Republic of the Philippines,G.R. No. 173423, March 5, 2014.

Public Land Act; Sec 48(b), as amended by P.D. 1073; requirements for judicial confirmation of title. The requirements for judicial confirmation of imperfect title are found in Section 48(b) of the Public Land Act, as amended by Presidential Decree No. 1073, as follows:

“Sec. 48. The following described citizens of the Philippines, occupying lands of the public domain or claiming to own any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of title therefor, under the Land Registration Act, to wit:

x x x x

(b) Those who by themselves or through their predecessors in interest have been in the open, continuous, exclusive, and notorious possession and occupation of alienable and disposable lands of the public domain, under a bona fide claim of acquisition or ownership, since June 12, 1945, or earlier, immediately preceding the filing of the application for confirmation of title except when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of this chapter.”

Republic of the Philippines represented by Aklan National Colleges of Fisheries (ANCF) and Dr. Elenita R. Adrade, in her capacity as ANCF Superintendent v. Heirs of Maxima Lachica Sin, namely: Salvacion L. Sin, Rosario S. Enriquez, Francisco L. Sin, Maria S. Yuchintat, Manuel L. Sin, Jaime Cardinal Sin, Ramon L. Sin, and Ceferina S. Vita,G.R. No. 157485, March 26, 2014.

Regalian Doctrine; all lands of the public domain belong to the State and that lands not appearing to be clearly within private ownership are presumed to belong to the State. As this Court held in the fairly recent case of Valiao v. Republic (G.R. No. 170757, November 28, 2011,): “Under the Regalian doctrine, which is embodied in our Constitution, all lands of the public domain belong to the State, which is the source of any asserted right to any ownership of land. All lands not appearing to be clearly within private ownership are presumed to belong to the State. Accordingly, public lands not shown to have been reclassified or released as alienable agricultural land or alienated to a private person by the State remain part of the inalienable public domain. Unless public land is shown to have been reclassified as alienable or disposable to a private person by the State, it remains part of the inalienable public domain. Property of the public domain is beyond the commerce of man and not susceptible of private appropriation and acquisitive prescription. Occupation thereof in the concept of owner no matter how long cannot ripen into ownership and be registered as a title. The burden of proof in overcoming the presumption of State ownership of the lands of the public domain is on the person applying for registration (or claiming ownership), who must prove that the land subject of the application is alienable or disposable. To overcome this presumption, incontrovertible evidence must be established that the land subject of the application (or claim) is alienable or disposable.” Republic of the Philippines represented by Aklan National Colleges of Fisheries (ANCF) and Dr. Elenita R. Adrade, in her capacity as ANCF Superintendent v. Heirs of Maxima Lachica Sin, namely: Salvacion L. Sin, Rosario S. Enriquez, Francisco L. Sin, Maria S. Yuchintat, Manuel L. Sin, Jaime Cardinal Sin, Ramon L. Sin, and Ceferina S. Vita, G.R. No. 157485, March 26, 2014.

Public Land Act; two requisites for judicial confirmation of title. The two requisites for judicial confirmation of imperfect or incomplete title under CA No. 141, namely: (1) open, continuous, exclusive, and notorious possession and occupation of the subject land by himself or through his predecessors-in-interest under a bona fide claim of ownership since time immemorial or from June 12, 1945; and (2) the classification of the land as alienable and disposable land of the public domain. Republic of the Philippines represented by Aklan National Colleges of Fisheries (ANCF) and Dr. Elenita R. Adrade, in her capacity as ANCF Superintendent v. Heirs of Maxima Lachica Sin, namely: Salvacion L. Sin, Rosario S. Enriquez, Francisco L. Sin, Maria S. Yuchintat, Manuel L. Sin, Jaime Cardinal Sin, Ramon L. Sin, and Ceferina S. Vita, G.R. No. 157485, March 26, 2014.

Regalian Doctrine; failure of Republic to show competent evidence that the subject land was declared a timberland before its formal classification as such in 1960 does not lead to the presumption that said land was alienable and disposable prior to said date. Accordingly, in the case at bar, the failure of petitioner Republic to show competent evidence that the subject land was declared a timberland before its formal classification as such in 1960 does not lead to the presumption that said land was alienable and disposable prior to said date. On

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the contrary, the presumption is that unclassified lands are inalienable public lands. It is therefore the respondents which have the burden to identify a positive act of the government, such as an official proclamation, declassifying inalienable public land into disposable land for agricultural or other purposes. Since respondents failed to do so, the alleged possession by them and by their predecessors-in-interest is inconsequential and could never ripen into ownership. Republic of the Philippines represented by Aklan National Colleges of Fisheries (ANCF) and Dr. Elenita R. Adrade, in her capacity as ANCF Superintendent v. Heirs of Maxima Lachica Sin, namely: Salvacion L. Sin, Rosario S. Enriquez, Francisco L. Sin, Maria S. Yuchintat, Manuel L. Sin, Jaime Cardinal Sin, Ramon L. Sin, and Ceferina S. Vita, G.R. No. 157485, March 26, 2014.

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Documents

2014 CIV Jurisprudence