CASE DIGESTS

OLIVERIO LAPERAL& FILIPINAS GOLF & COUNTRY CLUB INC. vs. SOLID HOMES, INC.
G.R. No. 130913. June 21, 2005

Facts: Filipinas Golf Sales and Development Corporation, predecessor-in-interest of Filipinas Golf and Country Club, Inc., represented by its then President, Oliverio Laperal, entered into a Development and Management Agreement with respondent Solid Homes, Inc., a registered subdivision developer, involving several parcels of land owned by Laperal and FGSDC. Under the terms and conditions of the aforementioned Agreement and the Supplement, respondent undertook to convert at its own expense the land subject of the agreement into a first-class residential subdivision, in consideration of which respondent will get 45% of the lot titles of the saleable area in the entire project. The aforementioned Agreement was cancelled by the parties, and, in lieu thereof, two contracts identically denominated Revised Development and Management Agreement were entered into by respondent with the two successors-in-interest of FGSDC. Unlike the original agreement, both Revised Agreements omitted the obligation of petitioners Laperal and FGCCI to make available to respondent Solid Homes, Inc. the owner’s duplicate copies of the titles covering the subject parcels of land. It appears, however, that even as the Revised Agreements already provided for the non-surrender of the owner’s duplicate copies of the titles, respondent persisted in its request for the delivery thereof .Then, petitioners served on respondent notices of rescission of the Revised Agreements with a demand to vacate the subject properties and yield possession thereof to them.

Issue: Whether the termination of the Revised Agreement and Addendum, because of the contractual breach committed by respondent solid homes, carried with it the effect provided under Article 1385 of the New Civil Code.

Held: Mutual restitution is required in cases involving rescission under Article 1191. Since Article 1385 of the Civil Code expressly and clearly states that “rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest,” the Court finds no justification to sustain petitioners’ position that said Article 1385 does not apply to rescission under Article 1191.As a consequence of the resolution by petitioners, rights to the lot should be restored to private respondent or the same should be replaced by another acceptable lot. Applying the clear language of the law and the consistent jurisprudence on the matter, therefore, the Court rules that rescission under Article 1191 in the present case, carries with it the corresponding obligation of restitution.

MONDRAGON LEISURE AND RESORTS CORPORATION vs. COURT OF APPEALS, ASIAN BANK CORPORATION, FAR EAST BANK AND TRUST COMPANY, and UNITED COCONUT PLANTERS BANK
G.R. No. 154188 June 15, 2005

Facts: Mondragon International Philippines, Inc., Mondragon Securities Corporation and herein petitioner entered into a lease agreement with the Clark Development Corporation for the development of what is now known as the Mimosa Leisure Estate.To help finance the project, petitioner, entered into an Omnibus Loan and Security Agreement with respondent banks for a syndicated term loan in the aggregate principal amount of US$20M. Under the agreement, the proceeds of the loan were to be released through advances evidenced by promissory notes to be executed by petitioner in favor of each lender-bank, and to be paid within a six-year period from the date of initial advance inclusive of a one year and two quarters grace period. Petitioner, which had regularly paid the monthly interests due on the promissory notes until October 1998, thereafter failed to make payments. Consequently, written notices of default, acceleration of payment and demand letters were sent by the lenders to the petitioner. Then, respondents filed a complaint for the foreclosure of leasehold rights against petitioner. Petitioner moved for the dismissal of the complaint but was denied.

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

Held: Under the foregoing provisions of the Agreement, petitioner may be validly declared in default for failure to pay the interest. As a consequence of default, the unpaid amount shall earn default interest, and the respondent-banks have four alternative remedies without prejudice to the application of the provisions on collaterals and any other steps or action which may be adopted by the majority lender. The four remedies are alternative, with the right of choice given to the lenders, in this case the respondents. Under Article 1201 of the Civil Code, the choice shall produce no effect except from the time it has been communicated. In the present case, we find that written notices were sent to the petitioner by the respondents. The notices clearly indicate respondents’ choice of remedy: to accelerate all payments payable under the loan agreement It should be noted that the agreement also provides that the choice of remedy is without prejudice to the action on the collaterals. Thus, respondents could properly file an action for foreclosure of the leasehold rights to obtain payment for the amount demanded.

SPS. FELIPE AND LETICIA CANNU vs. SPS. GIL AND FERNANDINA GALANG AND NATIONAL HOME MORTGAGE FINANCE CORPORATION,
G.R. No. 139523. May 26, 2005

Facts: Gil and Fernandina Galang obtained a loan from Fortune Savings & Loan Association for P173, 800.00 to purchase a house and lot located at Pulang Lupa, Las Piñas, To secure payment, a real estate mortgage was constituted on the said house and lot in favor of Fortune Savings & Loan Association. In early 1990, NHMFC purchased the mortgage loan of respondents-spouses from Fortune Savings & Loan Association for P173, 800.00. Petitioner Leticia Cannu agreed to buy the property for P120, 000.00 and to assume the balance of the mortgage obligations with the NHMFC and with CERF Realty. Of the P120, 000. 00, several payments were made leaving a balance of P45, 000.00. A Deed of Sale with Assumption of Mortgage Obligation was made and entered into by and between spouses Fernandina and Gil Galang and spouses Leticia and Felipe Cannu over the house and lot. Petitioners immediately took possession and occupied the house and lot. Despite requests from Adelina R. Timbang and Fernandina Galang to pay the balance of P45,000.00 or in the alternative to vacate the property in question, petitioners refused to do so. Issues: 1) Whether or not the breach of the obligation is substantial.

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

3) Whether or not respondents-spouses Galang demanded from petitioners a strict and/or faithful compliance of the Deed of Sale with Assumption of Mortgage. 4. Whether or not the action for rescission is subsidiary.

Held: 1) Rescission may be had only for such breaches that are substantial and fundamental as to defeat the object of the parties in making the agreement. The question of whether a breach of contract is substantial depends upon the attending circumstances and not merely on the percentage of the amount not paid. In the case at bar, we find petitioners’ failure to pay the remaining balance of P45,000.00 to be substantial. Taken together with the fact that the last payment made was on 28 November 1991, eighteen months before the respondent Fernandina Galang paid the outstanding balance of the mortgage loan with NHMFC, the intention of petitioners to renege on their obligation is utterly clear.
2) The petitioners were not religious in paying the amortization with the NHMFC. As admitted by them, in the span of three years from 1990 to 1993, their payments covered only thirty months. This, indeed, constitutes another breach or violation of the Deed of Sale with Assumption of Mortgage. On top of this, there was no formal assumption of the mortgage obligation with NHMFC because of the lack of approval by the NHMFC on account of petitioners’ non-submission of requirements in order to be considered as assignees/successors-in-interest over the property covered by the mortgage obligation.
3) There is sufficient evidence showing that demands were made from petitioners to comply with their obligation. Adelina R. Timbang, attorney-in-fact of respondents-spouses, per instruction of respondent Fernandina Galang, made constant follow-ups after the last payment made on 28 November 1991, but petitioners did not pay. Sometime in March 1993, due to the fact that full payment has not been paid and that the monthly amortizations with the NHMFC have not been fully updated, she made her intentions clear with petitioner Leticia Cannu that she will rescind or annul the Deed of Sale with Assumption of Mortgage. 4. The subsidiary character of the action for rescission applies to contracts enumerated in Articles 1381 of the Civil Code. The contract involved in the case before us is not one of those mentioned therein. The provision that applies in the case at bar is Article 1191.As a consequence of the rescission or, more accurately, resolution of the Deed of Sale with Assumption of Mortgage, it is the duty of the court to require the parties to surrender whatever they may have received from the other. The parties should be restored to their original situation.

ROMAGO ELECTRIC CO., INC. vs. HONORABLE COURT OF APPEALS, SOLEDAD C. CAC, JOEPHIL BIEN, RENATO CUNANAN and DELFIN INCIONG
G.R. No. 130721. May 26, 2005

Facts: The National Power Corporation entered into an agreement with ROMAGO ELECTRIC CO., INC. for the erection and installation of NPC’s 69 KV 3-Phase Transmission Lines for P2,657,856.40. Subsequently, ROMAGO subcontracted the project to BICC Construction, an unregistered loose partnership composed of Soledad Cac, Delfin Inciong, Joephil Bien and Renato Cunanan, for P1,614,387.99. When the project was completed, there was an outstanding balance due to BICC Construction from ROMAGO, part of which was the former’s share in the CPA amounting to 70% of the NPC-ROMAGO contract or P175,545.05. Mrs. Soledad Cac, wrote NPC to hold its payment to ROMAGO of the aforementioned CPA amounting to P250,778.65. Payment was nonetheless released to ROMAGO by virtue of a sworn affidavit executed that “there does not exist any lien or encumbrances against” the said NPC-ROMAGO contract. It appears that Mariano Cac, authorized representative and husband of Soledad Cac, was paid the amount of P38,712.70 “in full payment of accounts including retention of various works at NPC-Isabela” under defendant’s Cash Disbursement Voucher No. 23162 dated 03 October 1983.When BICC’s demands for payment were ignored by ROMAGO, the partners, thru Mrs. Soledad Cac as lone plaintiff, filed a complaint for collection of sum of money with damages.

Issues: 1) Whether or not the private respondents are entitled to the CPA accorded to the petitioner by NPC.
2) Whether or not the particulars of petitioner’s cash disbursement voucher no. 23162 signed by private respondent’s authorized representative / agent acknowledging receipt of said amount did not extinguish, relieve, release any and all claims including contract price adjustment which private respondents may have against petitioner on the subcontract.

Held: 1. Contrary to the petitioner’s asseverations that the CPA was not intended to be made applicable to the Romago-BICC subcontract, it must be remembered that the petitioner and the private respondents expressly agreed what documents were going to be incorporated in the principal subcontract. We agree with the appellate court that the qualifying phrase “obligations and responsibilities” contained in the Romago-BICC subcontract was applicable only to the NPC-Romago contract. What is more, the CPA is not found in the NPC-Romago contract, but in the NPC's “Plans and Specifications” which was expressly included as part of the “Contract Documents”.
2. Said pleading expressly states that “…the CPA is not included in the computation.” This is precisely because the petitioner believes that the private respondents are not entitled to the CPA, hence, “there is no basis for including it.” Said CPA not being part of the subcontract price of P1,614,387.99, the release mentioned in the cash voucher cannot, therefore, be construed as a release of the CPA.

FELIPE O. MAGBANUA, CARLOS DE LA CRUZ, REMY ARNAIZ, BILLY ARNAIZ, ROLLY ARNAIZ, DOMINGO SALARDA, JULIO CAHILIG and NICANOR LABUEN, vs. RIZALINO UY
G.R. No. 161003. May 6, 2005

Facts: As a final consequence of the final and executory decision of the Supreme Court which affirmed with modification the decision of the NLRC, hearings were conducted to determine the amount of wage differentials due the eight petitioners. The petitioners filed a Motion for Issuance of Writ of Execution. Rizalino Uy filed a Manifestation requesting that the cases be terminated and closed, stating that the judgment award as computed had been complied with to the satisfaction of petitioners. Said Manifestation was also signed by the eight petitioners. Together with the manifestation is a Joint Affidavit dated May 5, 1997 of petitioners, attesting to the receipt of payment from respondent and waiving all other benefits due them in connection with their complaint. On October 20, 1997, six of the eight petitioners filed a Manifestation requesting that the cases be considered closed and terminated as they are already satisfied of what they have received from respondent. Together with said Manifestation is a Joint Affidavit in the local dialect, of the six petitioners attesting that they have no more collectible amount from respondent and if there is any, they are abandoning and waiving the same.

Issues: 1. Whether or not the final and executory judgment of the Supreme Court could be subject to compromise settlement;
2. Whether or not the petitioners’ affidavit waiving their awards in the labor case executed without the assistance of their counsel and labor arbiter is valid.

Held: 1. There is no justification to disallow a compromise agreement, solely because it was entered into after final judgment. The validity of the agreement is determined by compliance with the requisites and principles of contracts, not by when it was entered into. Petitioners voluntarily entered into the compromise agreement. Circumstances also reveal that respondent has already complied with its obligation pursuant to the compromise agreement. Having already benefited from the agreement, estoppel bars petitioners from challenging it.
2. The presence or the absence of counsel when a waiver is executed does not determine its validity. There is no law requiring the presence of a counsel to validate a waiver. The test is whether it was executed voluntarily, freely and intelligently; and whether the consideration for it was credible and reasonable. Where there is clear proof that a waiver was wangled from an unsuspecting or a gullible person, the law must step in to annul such transaction. In the present case, petitioners failed to present any evidence to show that their consent had been vitiated.

SPOUSES DANILO and CRISTINA DECENA, vs. SPOUSES PEDRO and VALERIA PIQUERO
G.R. No. 155736. March 31, 2005

Facts: Spouses Danilo and Cristina Decena were the owners of a house and lot in Parañaque City. The petitioners and the respondents, the Spouses Pedro and Valeria Piquero, executed a Memorandum of Agreement in which the former sold the property to the latter for P940,250.00 payable in six (6) installments via postdated checks. The vendees forthwith took possession of the property. It appears in the MOA that the petitioners obliged themselves to transfer the property to the respondents upon the execution of the MOA with the condition that if two of the postdated checks would be dishonored by the drawee bank, the latter would be obliged to reconvey the property to the petitioners. On May 17, 1999, the petitioners, then residents of Malolos, Bulacan, filed a Complaint against the respondents with the RTC Malolos, Bulacan, for the annulment of the sale/MOA, recovery of possession and damages. The petitioners alleged therein that, they did not transfer the property to and in the names of the respondents as vendees because the first two checks drawn and issued by them in payment for the purchase price of the property were dishonored by the drawee bank, and were not replaced with cash despite demands therefor.

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

Held: After due consideration of the foregoing, we find and so rule that Section 5(c), Rule 2 of the Rules of Court does not apply. This is so because the petitioners, as plaintiffs in the court a quo, had only one cause of action against the respondents, namely, the breach of the MOA upon the latter’s refusal to pay the first two installments in payment of the property as agreed upon, and turn over to the petitioners the possession of the real property, as well as the house constructed thereon occupied by the respondents. The claim for damages for reasonable compensation for the respondents’ use and occupation of the property, in the interim, as well as moral and exemplary damages suffered by the petitioners on account of the aforestated breach of contract of the respondents are merely incidental to the main cause of action, and are not independent or separate causes of action. The action of the petitioners for the rescission of the MOA on account of the respondents’ breach thereof and the latter’s failure to return the premises subject of the complaint to the petitioners, and the respondents’ eviction therefrom is a real action. As such, the action should have been filed in the proper court where the property is located, namely, in Parañaque City, conformably with Section 1, Rule 4 of the Rules of Court. Since the petitioners, who were residents of Malolos, Bulacan, filed their complaint in the said RTC, venue was improperly laid; hence, the trial court acted conformably with Section 1(c), Rule 16 of the Rules of Court when it ordered the dismissal of the complaint.

LIABILITY FOR PRICE ESCALATION FOR LABOR AND MATERIAL COST

H.L. CARLOS CONSTRUCTION, INC. VS. MARINA PROPERTIES CORPORATION, ET AL.
G.R No. 147614, January 29, 2004

Facts: Marina Properties Corporation entered into a contract with H.L. Carlos Construction, Inc. to construct a condominium complex for a total consideration of P35.58 million within a period of 365 days from receipt of notice to proceed. The original completion date of the project was May 16, 1989, but it was extended to October 31, 1989 with a grace period until November 30, 1989. On December 15, 1989, HLC instituted a case for sum of money, among others, for costs of labor escalation, change orders and material price escalation. The Construction Contract contains the provision that no cost escalation shall be allowed except on the labor component of the work. HLC argues that it is entitled to price escalation for both labor and material because MPC was delayed for paying its obligations. MPC, on the other hand, avers that HLC was delayed in finishing its project; hence, it is not entitled to price increases.

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

Held: MPC is liable for price escalation, but only for the labor component. The Construction Contract contains the provision that no cost escalation shall be allowed except on the labor component of the work. Since the contract allows escalation only of the labor component, the implication is that material cost escalations are barred. There appears to be no provision, either in the original or in the amended contract that would justify billing of increased cost of material. HLC attempts to pass off material cost escalation as a form of damages suffered by it as a natural consequence of the delay in the payment of billings. However, the contentious billing itself contains no claim for material cost escalation.

STAGES OF CONTRACT; WITHDRAWAL OF OFFER BEFORE ACCEPTANCE

INSURANCE LIFE ASSURANCE COMPANY, LTD. VS. ASSET BUILDERS CORPORATION
G.R. No. 147410, February 5, 2004

Facts: Insular Life Insurance Company, Limited invited companies to participate in the bidding of the proposed Insular Life building. The Instruction to Bidders prepared by Insular Life expressly required a formal acceptance and a period within which such acceptance was to be made known to the winner. Asset Builders Corporation submitted a bid proposal secured by bid bonds valid for 60 days. Under its proposal form, Asset Builders bound and obliged itself to enter into a contract with Insular Life within 10 days from the notice of the award, with good and sufficient securities. The project was awarded to the Asset Builders and a notice to proceed with the construction was sent by Insular Life to the former. However, Asset Builders project. Neither did it execute any construction agreement. It informed Insular Life that it will not proceed with the project.

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

Held: There was indeed no acceptance of the offer by Asset Builders. Such failure to comply with the condition imposed for the perfection of the contract resulted in the failure of the contract. There are three distinct stages of a contract- preparation or negotiation, perfection or consummation. Negotiation begins when the prospective contracting parties manifest their interest in the contract and ends at the moment of their agreement. Perfection occurs when they agree upon the essential elements thereof. The last stage is the consummation where they fulfill the terms agreed upon culminating in the extinguishment of the contract.

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

METROPOLITAN MANILA DEVELOPMENT AUTHORITY VS. JANCOM ENVIRONMENTAL CORPORATION
GR No. 147465, January 30, 2002

Facts: A build-Operate-Transfer Contract for the waste-to energy project was signed between JANCOM and the Philippine Government. The BOT Contract was submitted to President Ramos for approval but was then too close to the end of his term that his term expired without him signing the contract. He, however, endorsed the same to incoming President Estrada. With the change in administration came changes in policy and economic environment, thus the BOT contract was not pursued and implemented. JANCOM appealed to the President for reconsideration and despite the pendency of the appeal, MMDA caused the publication of an invitation to pre-qualify and submit proposals for solid waste management.

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

Held: There is a valid and binding contract between JANCOM and the Republic of the Philippines. Under Articles 1305 of the Civil Code, “A contract is a meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.” Art. 1315 of the Civil Code provides that a contract is perfected by mere consent. Consent, on the other hand, is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract (Art. 1319, Civil Code). In the case at bar, the signing and execution of the contract by the parties clearly show that, as between the parties, there was a concurrence of offer and acceptance with respect to the material details of the contract, thereby giving rise to the perfection of the absence of President’s signature is untenable. Significantly, the contract itself provides that the signature of the President is necessary only for its effectivity, not its perfection.
There being a perfected contract, MMDA cannot revoke or renounce the same without the consent of the other. From the moment of perfection, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. (Art. 1315) It is a general principle of law that no one may be permitted to change hid mind or disavow and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party.

PENALTY CLAUSE

LIGUTAN VS. COURT OF APPEALS
G.R. No. 147465, February 12, 2002

Facts: Ligutan and dela Llana obtained a loan from Security Bank and Trust Co. They executed a promissory note binding themselves jointly and severally to pay the sum borrowed with an interest of 15.89% per annum upon maturity and to pay a penalty of 5% every month on the outstanding principal and interest in case of default. In addition, they agreed to pay 10% of the total amount due by way of attorney’s fees if the matter were indorsed to a lawyer for collection or if a suit were instituted to enforce payment. Ligutan and dela Llana failed to settle the debt. A complaint for recovery of the amount due was filed with the RTC. The court held, among others, the borrowers were liable for a 3% per month penalty (instead of 5%) and 10% of the total amount of the indebtedness for attorney’s fee, in addition to the principal loan.

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

Held: A penalty clause, expressly recognized by law, is an accessory undertaking to assume greater liability on the part of an obligor in case of breach of an obligation. It functions to strengthen the coercive force of the obligation and to provide for what could be the stipulated indemnity without the necessity of proof on the existence and on the measure of damages caused by the breach. Although the court may not at liberty ignore the freedom of the parties to agree on such terms and conditions as they see fit, a stipulated penalty, nevertheless may be equitably reduced by the courts if iniquitous or unconscionable or if the principal obligation has been partly or irregularly complied with. The reduction is justified by the facts that the borrowers were able to partly comply with their obligations.


SIMULATED CONTRACTS

CRUZ VS. BANCOM FINANCE CORPORATION
G.R. No. 147788 March 19, 2002

Facts: Norma Sulit was introduced by Candelaria Sanchez to Edilberto and Simplicio Cruz and offered to purchase the parcel of land owned by the Cruz brothers. The asking-price for the land was P700, 000, but Sulit had only P25,000 which Edilberto accepted as earnest money with the agreement that title would pass to Sulit on the payment of the balance. Sulit failed to pay the balance. Capitalizing on the close relationship of Sanchez with the brothers, Sulit succeeded in having the brothers execute a document of sale in favor of Sanchez who would then obtain a bank loan in her name using the said land as collateral. On the same day, Sanchez executed another Deed of Absolute Sale in favor of Sulit. Sulit assumed all the obligations of Sanchez to the original owners of the land in a Special Agreement. Unknown to the brothers, Sulit managed to obtain a loan from Bancom secured by a mortgage over the land. Because Sulit failed to pay the purchase price stipulated in the Special Agreement, the brothers filed a complaint for reconveyance. Sulit also defaulted in her payment to the Bank and her mortgage was foreclosed. At the auction sale, Bancom was declared the highest bidder.

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

Held: Simulation takes place when the parties do not really want the contract they have executed to produce the legal effects expressed by its wordings. Art. 1345 states that “simulation of a contract may be absolute or relative.” The former takes place when the parties conceal their true agreement” while Art. 1346 states that “an absolutely simulated contract is void. A relative stimulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or pubic policy binds the parties to their agreement.” The Deeds of Sale were executed merely to facilitate the use of the property as collateral to secure a loan from a bank. Although the Deed of Sale between the brothers and Sanchez stipulated a consideration, there was actually no exchange of money. Moreover, the failure of Sulit to take possession of the property sold to her was a clear badge of simulation that rendered the whole transaction void and without force and effect.

NOVATION

PILIPINAS BANK VS. ONG
387 SCRA 97, August 8, 2002

Facts: On April 1991, Baliwag Mahogany Corporation (BMC), through its president, respondent Alfredo T. Ong, applied for a domestic commercial letter credit with petitioner Pilipinas Bank (the bank) to finance the purchase of “Air Dried, Dark Lauan” sawn lumber.
The bank approved the application and issued a Letter of Credit. To secure payment of the amount, BMC, through respondent Ong, executed two (2) trust receipts providing that it shall turn over the proceeds of the goods to the bank, if sold, or return the goods, if unsold, upon maturity on July 28, 1991 and August 4, 1981.
On due dates, BMC failed to comply with the trust receipt agreement. On November 22, 1991, it filed with the Securities and Exchange Commission (SEC) a Petition for Rehabilitation and for a Declaration in a State of Suspension of Payments. On January 8, 1992, the SEC issued an order creating a Management Committee wherein the bank is represented.
On October 13, 1992, BMC and a consortium of 14 of its creditor banks entered into a Memorandum of Agreement (MOA) rescheduling the payment of BMC’s existing debts.
On November 27, 1992, the SEC rendered a Decision approving the Rehabilitation Plan of BMC as contained in the MOA and declaring it in a state of suspension of payments.
However, BMC and respondent Ong defaulted in the payment of the obligations under the rescheduled payment scheme provided in the MOA. On April 1994, the bank filed a complaint charging respondents Ong and Leoncia Lim (as president and treasurer of BMC) with violation of the Trust Receipts Law (PD 115). The bank alleged that both respondents failed to pay their obligation under the trust receipt despite demand.
The Court of Appeals renders its decision holding that the execution of the MOA constitutes novation which places petitioner bank in estoppel to insist on the original trust relation and constitutes a bar to the filing of any criminal information for violation of the trust receipts law. The Motion for Reconsideration was denied.
Hence this Petition.

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

Held: Petition is DENIED, MOA novates the trust agreement.
Mere failure to deliver the proceeds of the sale of the goods, if not sold, constitutes violation of PD 115. However, what is being punished by the law is the dishonesty and abuse of confidence in the handling of money or goods to the prejudice of another regardless of whether the latter is the owner. It bears emphasis that when the petitioner bank made a demand upon a BMC on February 11, 1994 to comply with its obligations under the trust receipts, the latter was already under the control of the Management Committee created by SEC. The Management Committee took custody of all BMC’s assets and liabilities, including the red lauan lumber subject of trust receipts, and authorized their use in the ordinary course of business operations. Clearly, it was the Management Committee which could settle BMC’s obligations.
In Quinto vs. People, this Court held that there are two ways which could indicate the presence of novation, thereby producing the effect of extinguishing an obligation by another which substitutes the same. The first is when novation has been stated and declared in unequivocal terms. The second is when the old and the new obligations are incompatible on every point. The test of incompatibility is whether or not the two obligations can stand together. If they cannot, they are incompatible and the latter obligation novates the first. The incompatibility must take place in any of the essential elements of the obligation, such as its object, cause or principal conditions.
Contrary to petitioner’s contention, the MOA did not only reschedule BMC’s debts, but more importantly, it provided principal conditions, which are incompatible with the trust agreement. The execution of the MOA extinguished respondent’s obligation under the trust receipts. Respondent’s liability, if any, would only be civil in nature since the trust receipts were transformed into mere loan documents after the execution of the MOA.

CONDITIONAL OBLIGATION; WHERE THE VENDEE DOES NOT COMPLY WITH HIS OBLIGATION TO PAY THE BALANCE OF THE PURCHASE PRICE, THE VENDOR’S OBLIGATION TO EXECUTE A DEED OF ABSOLUTE SALE WILL NOT ARISE.

CORINTHIAN REALTY, INC. VS. COURT OF APPEALS
349 SCRA 260, December 26, 2002
Facts: Private respondents and petitioner entered into a Deed of Conditional Sale (the deed) of a parcel of land. Under the deed, the remaining balance will be paid by the vendee to the vendors within the period of ninety (90) days from the execution of the deed; and if for no justifiable reason, the vendee fails and/ or refuses to comply with this obligation, the vendors, without prior notice to the vendee, shall forfeit the earnest money, but as soon as the vendee complies with his obligations under the contract, then the vendors shall immediately execute the absolute deed of sale.

CONTRACTS

TANONGON VS. SAMSON
382 SCRA 130, May 9, 2002

Facts:
Cayco Marine Service (CAYCO) is engaged in the business of hauling oil. It is operated by Illuminada Cayco Olizon (Olizon). Resondents Felicidad Samson, Casiano Osin, Alberto Belbes and Luisito Venus were among the employees of CAYCO and/or Olizon.
On MARCH 9, 1994, respondents filed a complaint against CAYCO and Olixzon for illegal dismissal, underpayment of wages, non-payment of holiday pay, rest day pay and leave pay. The labor arbiter dismissed the complaint for lack of merit. On appeal, it was reversed by the NLRC.
On June 25, 1997, the NLRC Research and Investigation Unit submitted to the labor arbiter the judgment award for each respondent.
On June 24, 1997, a writ of execution was issued directing the NLRC sheriff to collect from CAYCO and Olizon the responding award due for each respondent
On August 8, 1997, after the notice of levy/sale on execution of personal property was issued, CAYCO nad Olizon’s motor tanker was seized, to be sold at public auction on August 19, 1997.
On August 15, 1997, petitioner Doretea Tanongon, filed a third party claim before the labor arbiter, alleging that she was the owner of the subject motor tanker, having acquired the same from Olizon on July 29, 1997, and in consideration.
On October 15, 1997, the labor arbiter issued an order dismissing the third party claim for lack of merit. On appeal, the NLRC reversed that of the labor arbiter thereby lifting the levy and restrained execution.
The Court of Appeals debunked the claim that the petitioner was a buyer in good faith on the ground that purchasers could not close their eyes to facts that should put reasonable persons on guard. The records show that the sale was hastily concluded; the tanker and the necessary documents were immediately delivered to the new owner to the new owner. These facts confirmed respondent’s suspicion that Olizon had intended to overcome the enforcement of the Writ of Execution.
Hence this Petition.

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

Held: Petition is DENIED; Petitioner Dorotea Tanongon is not a purchaser in good faith and for value.
There is sufficient basis to affirm the CA finding that petitioner was a buyer in abs faith. The writ of Execution was issued by the labor arbiter on July 24, 1997. And the sale of the levied tanker was made only on July 29, 1997. The CA correctly ruled that the act of Olizon was a “cavalier attempt to evade payment of the judgment debt.” She obviously got word of the issuance of these antecedents, petitioner bought the tanker barely ten days before it was levied upon on August 8, 1997.
Purchaser in good faith or an innocent purchaser for value is one who buys properly and pays a full and fair price for it at the time of the purchase or before any notice of some other person’s claim on or interest in it.
Petitioner should have inquired whether Olizon had other unsettled obligations and encumbrances that could burden the subject property. Any person engaged in business would be wary of buying from a company that is closing shop, because it may be dissipating its assets to defraud its creditors.

PROPERTY
ISSUANCE OF WRIT OF POSSESSION; REAL ESTATE MORTGAGE


TERESITA V. IDOLOR VS. HON. COURT OF APPEALS, SPOUSES GUMERSINDO DE GUZMAN and ILUMINADA DE GUZMAN and HON. JOSE G. PINEDA, Presiding Judge of Regional Trial Court, National Capital Judicial Region, Branch 220, Quezon City
G.R. No. 161028. January 31, 2005

Facts: Petitioner Teresita V. Idolor obtained a loan from respondent-spouses Gumersindo and Iluminada De Guzman secured by a real estate mortgage over a property covered by TCT No. 25659. Upon default by petitioner in the payment of her obligation, respondent instituted extra-judicial foreclosure proceedings against the real estate mortgage.During the auction sale, respondents emerged as the highest bidder and were issued a Certificate of Sale.
On June 25, 1998, petitioner filed a complaint for annulment of the Certificate of Sale with prayer for the issuance of a TRO and a writ of preliminary injunction. The RTC issued a writ of preliminary injunction, however, the Court of Appeals annulled the same on the ground of grave abuse of discretion. The ownership over the subject property having been consolidated in their name, respondent-spouses De Guzman moved for the issuance of a writ of possession with the Regional Trial Court where the case for the annulment of the Certificate of Sale was pending.[5] On May 27, 2002, the trial court denied the motion, ruling that the “the lifting of the writ of preliminary injunction does not ipso facto entitle defendant De Guzman to the issuance of a writ of possession over the property in question. It only allows the defendant Sheriff to issue a final deed of sale and confirmation sale and the defendant De Guzman to consolidate the ownership/title over the subject property in his name.”
In a petition for certiorari before the Court of Appeals, the appellate court found that the trial court gravely abused its discretion in denying the motion for the issuance of the “writ of possession to the mortgagee or the winning bidder is a ministerial function of the court and that the pendency of an action questioning the validity of a mortgage cannot bar the issuance of the writ of possession after title to the property has been consolidated in the mortgagee.”[7] Hence, it reversed and set aside the May 27, 2002 order of the trial court.

Issue: Whether or not the mortgage, by mere motion, not by petition, may apply for a Writ of Possession in the same case for annulment of the Certificate of Sale of which he is a defendant.

Held: A writ of possession is an order whereby the sheriff is commanded to place a person in possession of a real or personal property. It may be issued under the following instances: (1) land registration proceedings under Sec. 17 of Act 496; (2) judicial foreclosure, provided the debtor is in possession of the mortgaged realty and no third person, not a party to the foreclosure suit, had intervened; and (3) extrajudicial foreclosure of a real estate mortgage under Sec. 7 of Act 3135 as amended by Act 4118, to which the present case falls.
Under the provision cited above, the purchaser in a foreclosure sale may apply for a writ of possession during the redemption period by filing for that purpose an ex parte motion under oath, in the corresponding registration or cadastral proceeding in the case of a property with torrens title. Upon the filing of such motion and the approval of the corresponding bond, the court is expressly directed to issue the writ.
Upon the expiration of the redemption period, the right of the purchaser to the possession of the foreclosed property becomes absolute. The basis of this right to possession is the purchaser’s ownership of the property. Mere filing of an ex parte motion for the issuance of the writ of possession would suffice, and the bond required is no longer necessary, since possession becomes an absolute right of the purchaser as the confirmed owner.
In this case, respondent-spouses acquired an absolute right over the property upon the failure of petitioner to exercise her right of redemption and upon the consolidation of the title in their name.
An ex-parte petition for issuance of possessory writ under Section 7 of Act No. 3135 is not, strictly speaking, a “judicial process”. Even if the same may be considered a judicial proceeding for the enforcement of one’s right of possession as purchaser in a foreclosure sale, it is not an ordinary suit filed in court, by which one party “sues another for the enforcement or protection of a right, or the prevention or redress of a wrong.”[18] It is a non-litigious proceeding and summary in nature as well. As such, the rigid and technical application of the rules on legal fees may be relaxed in order to avoid manifest injustice to the respondent This rule is applicable in the present case. Although respondent- spouses have been declared as the highest bidder and despite having consolidated the title in their name, they still failed to take possession of the property through numerous legal maneuverings of the petitioner. A simple ex parte application for the issuance of a writ of possession has become a litigious and protracted proceeding.


SPOUSES JUAN NUGUID AND ERLINDA T. NUGUID VS. HON. COURT OF APPEALS AND PEDRO P. PECSON
G.R. No. 151815. February 23, 2005

Facts: Pedro P. Pecson owned a commercial lot on which he built a 4-door 2-storey apartment building. For failure to pay realty taxes, the lot was sold at public auction to Mamerto Nepomuceno, who in turn sold it to the spouses Juan and Erlinda Nuguid. Pecson challenged the validity of the auction sale before the RTC of Quezon City, which upheld the spouses’ title but declared that the apartment building was not included in the auction sale. This was affirmed in toto by the Court of Appeals and thereafter by this Court. On June 23, 1993, by virtue of the Entry of Judgment, the Nuguids became the uncontested owners of the 256-square meter commercial lot. As a result, the Nuguid spouses moved for delivery of possession of the lot and the apartment building.
The trial court, relying upon Article 546[1][7] of the Civil Code, ruled that the Spouses Nuguid were to reimburse Pecson for his construction cost, the spouses Nuguid were entitled to immediate issuance of a writ of possession over the lot and improvements. The RTC also directed Pecson to pay the same amount of monthly rentals to the Nuguids as paid by the tenants occupying the apartment units. Pecson duly moved for reconsideration, the RTC issued a Writ of Possession,directing the deputy sheriff to put the spouses Nuguid in possession of the subject property with all the improvements thereon and to eject all the occupants therein.Pecson then filed a special civil action for certiorari and prohibition with the Court of Appeals, which affirmed the order of payment of construction costs but rendered the issue of possession moot on appeal.
Frustrated by this turn of events, Pecson filed a petition for review before this Court. On May 26, 1995, the Court handed down the decision remanding to the trial court for it to determine the current market value of the apartment building on the lot. The value so determined shall be forthwith paid by Spouses Juan and Erlinda Nuguid] to Pedro Pecson otherwise the petitioner shall be restored to the possession of the apartment building until payment of the required indemnity.
On the basis of this Court’s decision, Pecson filed a Motion to Restore Possession and a Motion to Render Accounting, praying respectively for restoration of his possession over the subject 256-square meter commercial lot and for the spouses Nuguid to be directed to render an accounting under oath, of the income derived from the subject four-door apartment from November 22, 1993 until possession of the same was restored to him.

Issue: Whether or not the petitioners are liable to pay rent over and above the current market value of the improvement and that such increased award of rentals by the RTC was reasonable and equitable.

Held: It is not disputed that the construction of the 4-door 2-storey apartment, subject of this dispute, was undertaken at the time when Pecson was still the owner of the lot. When the Nuguids became the uncontested owner of the lot, by virtue of entry of judgment of the Court’s decision, the apartment building was already in existence and occupied by tenants.
Under Article 448, the landowner is given the option, either to appropriate the improvement as his own upon payment of the proper amount of indemnity or to sell the land to the possessor in good faith. Relatedly, Article 546 provides that a builder in good faith is entitled to full reimbursement for all the necessary and useful expenses incurred; it also gives him right of retention until full reimbursement is made. As we earlier held, since petitioners opted to appropriate the improvement for themselves as early as June 1993, when they applied for a writ of execution despite knowledge that the auction sale did not include the apartment building, they could not benefit from the lot’s improvement, until they reimbursed the improver in full, based on the current market value of the property.
Despite the Court’s recognition of Pecson’s right of ownership over the apartment building, the petitioners still insisted on dispossessing Pecson by filing for a Writ of Possession to cover both the lot and the building. Clearly, this resulted in a violation of respondent’s right of retention. Worse, petitioners took advantage of the situation to benefit from the highly valued, income-yielding, four-unit apartment building by collecting rentals thereon, before they paid for the cost of the apartment building. It was only 4 years later that they finally paid its full value to the respondent.
Given the circumstances of the instant case where the builder in good faith has been clearly denied his right of retention for almost half a decade, we find that the increased award of rentals by the RTC was reasonable and equitable. The petitioners had reaped all the benefits from the improvement introduced by the respondent during said period, without paying any amount to the latter as reimbursement for his construction costs and expenses. They should account and pay for such benefits.
We need not belabor now the appellate court’s recognition of herein respondent’s entitlement to rentals from the date of the determination of the current market value until its full payment. Respondent is clearly entitled to payment by virtue of his right of retention over the said improvement.


HEIRS OF JUAN PANGANIBAN & INES PANGANIBAN, namely: ERLINDA B. PACURSA, ERNESTO P. BACONGA, EVELYN BACONGA, AMY B. BIHAG, SIEGFREDO BACONGA, IMELDA B. PACALDO, BACONGA, IMELDA B. PACALDO, REBECCA B. LI, OFELIA B. OALIVAR, GEMMA BACONGA, MARIE INES BACONGA, MELANIE BACONGA, and ANITA FUENTES VS. ANGELINA N. DAYRIT.
G.R. No. 151235, July 28, 2005

Facts: The property subject of controversy is a 2,025-square meter portion of a lot denominated as Lot 1436, situated at Kauswagan, Cagayan de Oro City. It constitutes 3/4 of Lot 1436, one of the 3 lots covered by OCT No. 7864, the other two being Lots 1441 and 1485. Said OCT was registered in the names of Juan and Ines Panganiban, father and daughter respectively.
Herein petitioners alleged that they are the possessors and owners of Lot 1436 which they inherited from the late Juan and Ines. They acknowledge that Lot 1436 was the only remaining lot covered by OCT No. 7864, Lots 1485 and 1441 having been sold in 1949 to Galo Sabanal and Pablo Dagbay respectively.
The owner’s duplicate copy of OCT No. 7864 covering Lot 1436 had been lost but upon petition with the trial court in 1977 by Erlinda B. Pacursa, one of the heirs of Ines and a petitioner herein, the trial court granted the petition. Accordingly, the Register of Deeds of Misamis Oriental issued an owner’s duplicate certificate of the OCT Erlinda.
Petitioners further alleged that unknown to them, a certain Cristobal Salcedo asserted ownership over Lot 1436 and believing that it was unregistered, sold a portion of it to respondent. The latter subsequently discovered that what she had bought was registered land. Unable to annotate the deed of sale at the back of OCT No. 7864, respondent fraudulently filed a petition for issuance of the owner’s copy of said title, alleging that the copy issued to Erlinda was lost in the fire that razed Lapasan, Cagayan de Oro City in 1981.
The petition was granted and the Register of Deeds of Misamis Oriental issued the second owner’s duplicate certificate of OCT to respondent which contained an annotation of a Notice of Adverse Claim filed by Erlinda. The Notice of Adverse Claim alleged in part that Erlinda is one of the lawful heirs of Juan and Ines, the registered owners of the property, and as such, she has a legitimate claim thereto.
Petitioners further alleged that the newly issued owner’s duplicate certificate of OCT to respondent was prejudicial to their previously issued title which is still in existence. Thus, they prayed among others that they be declared as the rightful owners of the property in question and that the duplicate certificate of OCT in their possession be deemed valid and subsisting.
In her answer to the amended complaint, respondent denied all the material allegations but alleged that Lot 1436 was actually sold sometime in 1947 by the petitioners themselves and their father, Mauricio Baconga. The sale was purportedly covered by a Deed of Definite Sale. Salcedo then came into ownership, possession and enjoyment of the property in question and sold a portion of Lot 1436 with an area of 2,025 square meters, more or less, to respondent. From then on, the property in question has been in her actual and physical enjoyment. Respondent further alleged that the complaint was barred by the principles of estoppel and laches by virtue of the sales executed by petitioners themselves and their father.
After due trial and consideration of the documentary and testimonial evidence adduced by both parties, the trial court rendered a decision against petitioners and in favor of respondent which declared defendant as the true and real owner of the lot in question; and thatthe owner’s duplicate copy of Original Certificate of Title No. 7864 null and void same being obtained by plaintiffs when they were not owners anymore of Lot 1436; the owner’s duplicate copy of OCT obtained by defendant as the one valid.
The Regional Trial Court Decision was modified by the CA on appeal by petitioners. The appellate court held that contrary to the ruling of the trial court, the valid and subsisting duplicate certificate of OCT No. 7864 was the one issued to Erlinda, not to respondent, considering that respondent had failed to comply with the mandatory jurisdictional requirements of law for the reconstitution of title under Sec. 13 of Republic Act No. 26.
The CA invoked the doctrine that a trial court does not acquire jurisdiction over a petition for the issuance of a new owner’s duplicate certificate of title if the original is in fact not lost. Nonetheless, the CA affirmed in all other respects the ruling of the trial court, including the critical holding that respondent was the owner of the subject property. The decision of the trial court is modified so as to order the cancellation of the owner’s duplicate copy of OCT No. 7864 issued to defendant Angelina Dayrit and declaring the owner’s duplicate copy of OCT No. 7864 to be still valid for all intents and purposes.

Issues: 1. Who between petitioners and respondent is the rightful owner of the property in dispute.
2. Whether petitioners’ right to recover the property is barred by laches assuming they are the rightful owners thereof as they claim.
3. Which owner’s duplicate certificate of title is valid and subsisting, the one in petitioners’ possession or the one issued to respondent.

Held: The resolution of the foregoing issues hinges on the question of What appears on the face of the title is controlling in questions of ownership since the certificate of title is an absolute and indefeasible evidence of ownership of the property in favor of the person whose name appears therein.
The CA correctly ruled that the duplicate certificate of title in petitioners’ possession is valid and subsisting. This Court had already ruled in Serra Serra v. Court of Appeals that if a certificate of title has not been lost but is in fact in the possession of another person, the reconstituted title is void and the court rendering the decision has not acquired jurisdiction over the petition for issuance of a new title. Since the owner’s duplicate copy of OCT No. 7864 earlier issued to Erlinda is still in existence, the lower court did not acquire jurisdiction over respondent’s petition for reconstitution of title. The duplicate certificate of title subsequently issued to respondent is therefore void and of no effect.
The registered owners of OCT No. 7864 on the face of the valid and subsisting duplicate certificate of title are still Juan and Ines, petitioners’ predecessors in interest. Per Section 46 of the Land Registration Act, no title to registered land in derogation to that of the registered owner shall be acquired by prescription or adverse possession. This rule taken in conjunction with the indefeasibility of a Torrens title leads to the conclusion that the rightful owners of the property in dispute are petitioners.
These premises considered, it was error on the part of the trial court to rule that respondent was the owner of the subject property and for the CA to have affirmed such holding. We rule instead that the successors-in-interest of Juan and Ines are the legal owners of the subject property, namely petitioners herein.
Petitioners’ ownership of the property having been established, the question now is whether they are entitled to its possession. On this point, the Court rules in the negative. Petitioners are no longer entitled to recover possession of the property by virtue of the equitable defense of laches. Thus, petitioners’ argument that laches is not applicable to them has no merit. By laches is meant: …the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier, it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. The defense of laches is an equitable one and does not concern itself with the character of the defendant’s title but only with whether or not by reason of plaintiff’s long inaction or inexcusable neglect, he should be barred from asserting his claim at all, because to allow him to do so would be inequitable and unjust to defendant.
In our jurisdiction, it is an enshrined rule that even a registered owner of property may be barred from recovering possession of property by virtue of laches. In this case, both the lower court and the appellate court found that contrary to respondent’s claim of possession, it was Salcedo, respondent’s predecessor-in-interest who had been in actual possession of the property. Salcedo was the owner and the one in possession of the land until 1978 when respondent became the possessor thereof based from the ocular inspection by the lower court.
It was only 45 years from the time Salcedo took possession of the property that petitioners made an attempt to claim it as their own. Petitioners declared the property for tax purposes, registered their adverse claim to respondent’s title, and filed the instant case all in 1992. These actuations of petitioners point to the fact that for forty-five (45) years, they did nothing to assert their right of ownership and possession over the subject property. Given the circumstances in the case at bar, the application of the equitable defense of laches is more than justified.
All the four (4) elements of laches prescribed by this Court in the case of Go Chi Gun, et al. v. Co Cho, et al.[42] and reiterated in the cases of Mejia de Lucas v. Gamponia, Miguel v. Catalino and Claverias v. Quingco are present in the case at bar, to wit:

(1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made for which the complaint seeks a remedy;
(2) delay in asserting the complainant’s rights, the complainant having had knowledge or notice, of the defendant’s conduct and having been afforded an opportunity to institute a suit;
(3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and
(4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be barred.

RUBEN S. SIA VS. HEIRS OF JOSE P. MARIANO (Helen S. Mariano, Jose M.S. Mariano, Danilo D.S. Mariano, Ma. Sofia C.S. Mariano, Ma. Leonor S. Mariano), TESTATE ESTATE OF IRENE P. MARIANO, and ERLINDA MARIANO-VILLANUEVA
G.R. No. 143606. June 29, 2005

Facts: Spouses Macario and Irene P. Mariano during their lifetime owned the following six parcels of land covered by five titles: Lot 15-A (TCT No. 1962), Lot 15-B (TCT No. 1963), Lot 15-C (TCT No. 1964), Lots 545 and 2348 (TCT No. 259)[2] and Lot 612 (TCT No. 219). On December 1, 1972, Macario died and the surviving heirs, spouse Irene and children, Jose and Erlinda, were issued new titles in their names. On December 9, 1974, Irene married Rolando S. Relucio Four months later, Irene executed a Deed of Absolute Sale covering the six parcels of land in favor of Raul Santos, Rolando’s first cousin, for a total consideration of P150,000.00.
On June 7, 1979, Irene sold Lot 612 to Greta Tinga de los Reyes. On March 10, 1982, Irene executed another Deed of Absolute Sale in favor of Raul covering Lots 545 and 2348. On October 2, 1987, the three remaining lots were transferred in the name of Raul. Previously, on November 24, 1986, Lot 15-C was levied upon in favor of Francisco Bautista in Civil Case No. R-570 before Branch 22 of the Regional Trial Court of Camarines Sur. On December 9, 1988, it was sold at public auction to Ruben Sia.
On June 26, 1988, Irene died. Three weeks later, Jose and Erlinda filed a complaint against Rolando, Raul and the Register of Deeds of Naga City before the RTC of Naga City for annulment of sale with damages, docketed as Civil Case No. 88-1506. They sought the annulment of the Deed of Absolute Sale on grounds of forgery and simulated sale, the reconveyance of the properties, and damages.
When Jose died on December 2, 1989 he was substituted by his surviving heirs, likewise, when Rolando died, he was substituted by his surviving heirs. Meanwhile, on August 9, 1990, Lot 15-A was transferred to Amado Sanao under a Deed of Sale with Real Estate Mortgage. Heirs of Jose and the Testate Estate of Irene filed a complaint for annulment of title and deed with damages. Such Civil Case was consolidated for joint trial with former Civil Case and a Joint Judgment was rendered by the trial court dismissing the complaints and counterclaims and upholding the validity of the Deeds of Absolute Sale executed by Irene in favor of Raul.
On appeal, the CA held that: only four lots are subject of the case; despite the execution of the two Deeds of Absolute Sale in favor of Raul, Irene continued to possess, exercise management and control over the subject properties. Irene constructed a building on Lots 545 and 2348; such acts of dominion demonstrate that the two Deeds of Absolute Sale executed by Irene in favor of Raul are simulated or fictitious contracts. Accordingly, TCT issued in the name of Raul Santos and Amado Sanao are ordered cancelled. A Motion for Reconsideration was filed by Raul. The Heirs of Jose and Erlinda M. Mariano filed a Motion for Partial Reconsideration/Clarification. Thus, the assailed Resolution, and Motion for Reconsideration filed separately by Raul Santos and as well as the Motion for Reconsideration/Clarification filed by Heirs of Jose P. Mariano and Erlinda were denied, while the Supplemental Motion to Restore Possession and Administration to Plaintiffs-Appellants was granted. Finally, plaintiffs-appellants are declared to have the right to redeem Lot 15-C from Ruben Sia.

Issue: Whether or not the Court of Appeals erred in having declared in its resolution that plaintiffs-appellants have the right to redeem Lot 15-C from herein petitioner.

Held: Three undisputed facts are prominent in the present petition which have great bearing in the disposition thereof: (1) petitioner is neither a party before the trial court nor in the CA; (2) Lot 15-C is not a subject matter of the case; and (3) our decision in G.R. Nos. 94617 and 95281, wherein herein respondent Erlinda Villanueva and petitioner Sia are parties, had expressly declared that respondents have the right to redeem the lot covered by TCT No. 17745 which refers to Lot 15-C.
There is no question that Lot 15-C is not one of the parcels of land involved in the appeal before the CA. In its decision, it specifically mentioned only Lot 15-A, Lot 15-B, Lot 545 and Lot 2348 as the lots subject of the case. Thus, this fact and the fact that petitioner is not a party to the case, militate against the propriety of declaring in the assailed Resolution that respondents have the right to redeem Lot 15-C.
Finally, there is no longer any actual case or controversy between the parties insofar as the issue of redemption of Lot 15-C is concerned. This is settled by the decision of this Court which orders the Provincial Sheriff of Camarines Sur to accept payment of redemption money for the property levied in Civil Case No. R-570 from petitioner Erlinda Mariano, to execute and deliver to Erlinda Mariano a duly accomplished certificate of redemption of said property. The Definite Deed of Sale and writ of execution issued in favor of Ruben Sia are nullified.

MODE OF ACQUIRING OWNERSIP; PRESCRIPTION; A POSSESSOR IN THE CONCEPT OF OWNER

SOLEDAD CALICDAN, ETC. VS. SILVERIO CENDANA, ETC.
G.R. No.155080, February 5, 2004

Facts: On August 25, 1947, Fermina, widow of Sixto Calicdan, who died intestate, executed a deed of donation intervivos whereby she conveyed a 750-square meter of unregistered land located in Mangaldan, Pangasinan formerly owned by Sixto to respondent Silverio Cendana who immediately entered into possession of the land. Sometime in 1949, Cendana constructed a two-storey residential house thereon where he resided until his death in 1998.
On June 19, 1992, petitioner Soledad, daughter of Fermina, through her legal guardian, Guadalupe Castillo, filed a Complaint for Recovery of Ownership, Possession and Damages against the respondent alleging that; 1) the donation was void; 2) the respondent took advantage of her incompetence in acquiring the land; and 3) she merely tolerated respondent’s possession of the land as well as the construction of his house thereon.
In his answer with Motion to dismiss, respondent contended that; 1)the land was donated to him by Fermina in 1947; 2) he had been publicly, peacefully, continuously and adversely in possession of the land for a period of 45 years; and 3) the complaint was barred by prior judgment in the special proceedings.
In its decision dated November 12, 1996, the trial court ordered Silverio Cendana to vacate the land and surrender ownersip and possession of the same to petitioner. On appeal, the Court of Appeals reversed the trial court’s decision and declared that the donation was valid and that the petitioner lost her ownership of the property by prescription.

Issue: Whether or not the deed of donation inter vivos executed on August 25, 1947 was void.

Held: Prescription is another mode of acquiring ownersip and other real right over immovable property. It is concerned with lapse of time in the manner and uner conditions laid down by law, namely, that the possession should be in the concept of an owner, public, peaceful, uninterrupted and adverse. The good failth of the possessor consists in the reasonable belief that the person from whom he received the thing was the owner thereof, and could transmit his ownership. For purposes of prescription, there is just title when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not transmit any right.
In this case at bar, as it demands that the possession be in good faith and with just title and there is no evidence on record to prove respondent’s good faith, nevertheless, his adverse possession of the land for more than 45 years aptly shows he has met the requirements for extraordinary acquisitive prescription to set in.

DONATION MORTIS CAUSA OR INTER VIVOS

MA. ESTELA MAGLASANG VS. THE HEIRS OF CORAZON CABATINGAN
G.R. No.131953, June 5, 2002

Facts: Conchita Cabatingan executed in favor of her brother, Nicolas Cabatingan, a “Deed of Conditional Donation Inter Vivos for House and Lot”. Four other deeds of donation were subsequently executed by Conchita Cabatingan bestowing parcels of land upon Estela Maglasang, Nicolas Cabatingan and Merly Cabatingan. These deeds of donation contain similar provisions, which state that the donation, will become effective upon the death of the donor; provided, however, that in the event that the donee should die before the donor, the present donation shall be deemed automatically rescinded and of no further force and effect.
Later, Conchita Cabatingan died.

Issue: Whether or not the donations were inter vivos or mortis causa.

Held: In a donation mortis causa, the right of disposition is not transferred to the donee while the donor is still alive. In determining whether a donation is one of mortis causa, the following characteristics must be taken into account:
1.) It conveys no title or ownership to the transferee before the death of the transferor; or what amounts to the same thing, that the transferor should retain the ownership and control of the property while alive;
2.) That before his death, the transfer should be revocable by the transferor at will, ad nutum; but the revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed; and
3.) That the transfer should be void if the transferor should survive the transferee.

The disputed donations are donations mortis causa. In the present case, the nature of the donations as mortis causa is confirmed by the fact that the donations do not contain any clear provision that intends to pass propriety rights to donee prior to Cabatingan’s dearh. Cabatingan did not intend to transfer the ownership of the properties to the donee during her lifetime.

SALES

SALE BY A CO-OWNER; CO-OWNERSHIP

AGUIRRE ET, AL. VS. COURT OF APPEALS, ET AL.
G.R. No. 122249. January 29, 2004

Facts: Leocadio Medrano and his first wife Emilia owned a piece of land. After the death of Emilia, Leocadio married his second wife Miguela. When Leocadio died, all his heirs agreed that Sixto Medrano, a child of the first marriage, should manage and administer the said property. After Sixto died, his heirs learned that he had executed an Affidavit of Transfer of Real Property in which he falsely stated that he was only heirs of Leocadio. Sixto, then living, was able to sell the property to Maria Bacong a portion of the property, and another portion to Tiburcio Balitaan. Maria Bacong later sold the said portion to Rosendo Bacong.
Petitioners, all heirs of Leocadio who were affected by the sale demanded reconveyance of the portions sold by Sixto but the 3 vendees refused. So, petitioners sued them seeking the nullity of the documents and partition. The vendees contended that they acquired the property under the valid deed of sale and petitioners ‘cause of action was bared by laches and prescription. Tiburcio also contended that he is an innocent purchaser for value.

Issue: Whether there was a valid sale made by a co-owner ( Sixto) without the consent of the other co-owners.

Held: A sale by a co-owner of the whole property as his will affect only his own share but not those of the other co-owners who did not consent to the sale ( Art. 493, NCC). It clearly provides that the sale or other disposition affects only the seller’s share pro indiviso, and the transferee gets only what corresponds to his grantor’s share in the partition of the property owned in common. Since a co-owner is entitled to sell his undivided share, a sale of the entire property by one co-owner without the consent of the other co-owner is NOT NULL AND VOID; only the rights of the co-owner-seller are transferred, thereby making the buyer a co-owner of the property. The proper action in cases like this is not for the nullification of the sale or for the recovery of possession of the things owned in common from the third person who substituted the co-owner or co-owners who alienated their shares, but the DIVISION of the common property as if it continued to remain in the possession of the co-owners who possessed and administered it. ( Mainit v. Bandoy). It is clear therefore that the deed of sale executed by Sixto in favor of Tiburcio Balitaan is valid conveyance only insofar as the share of Sixto in the co-ownership is concerned.
As we have enunciated in Salvador v. CA (1995), to wit: this Court has held that the possession of a co-owner is like that of a trustee and shall not be regarded as adverse to the other co-owners but in fact beneficial to all of them. Acts which may be considered adverse to strangers may not be considered adverse in so far as co-owners are concerned. A mere silent possession by a co-owner, his receipts of rentals, fruits or profits from the property, the erection of buildings and fences and planting of trees thereon, and the payment of land taxes, cannot serve as proof of exclusive ownership, if it is not borne out by clear and convincing evidence that he exercised such acts of possession which unequivocally constituted an ouster or deprivation of the rights of the other co-owners.
Thus, in order that a co-owner’s possession may be deemed adverse to the cetui que trust or the other co-owners, the following elements must concur: (1) that he has performed unequivocal acts of repudiation amounting to an ouster of the cetui que trust or the other co-owners; (2) that such positive acts of repudiation have been known to the cestui que trust or the other co-owners; and (3) that the evidence thereon must be clear and convincing. Tested against these guidelines, the respondents failed to present competent evidence that the acts of Sixto adversely and clearly repudiate the existing co-ownership among the heirs of Leocadio Medrano.
Respondent’s reliance on the tax declaration in the name of Sixto Medrano is unworthy of credit since we have held on several occasions that tax declarations by themselves do not conclusively prove title to land. Further, respondents failed to show that the Affidavit executed by Sixto to the effect that he is the sole owner of the subject property was known or made known to the other co-heirs of Leocadio Medrano.


RESCISION OF “CONTRACT TO BUY”

ANAMA VS. COURT OF APPEALS, ET AL.
GR. No. 128609. January 29, 2004

Facts: The property was previously owned by Douglas Anama’s parents, who mortgaged it to Philippine Savings Bank and later was foreclosed. Douglas and the PSBank entered into an agreement denominated as a Contract to Buy whereby the bank agreed to sell to Douglas the said land with all the improvements thereon. The Contract to Buy provides that Anama shall purchase the property of a certain amount and shall pay to the PSBank; it also provides that (1) Anama shall apply with the bank for a loan, the proceeds of which answer for the balance of the purchase price; (2) should the petitioner fail to comply with any of the terms of contract, all amounts paid are forfeited in favor of PSBank, the latter having the option either to demand full payment of total price or to rescind the contract.
Anama was able to pay the first and second installments; however, he failed to pay the third installment when it became due. There were several transactions between them to settle the amount due. But later, the bank executed an Affidavit of Cancellation rescinding the contract, and forfeited the payments made by Anama which were applied as rentals of the use of the property. Anama was then advised to vacate the property despite his opposition to the rescission of the Contract to Buy. The bank sold the property to spouses Co, in whose favor TCT was issued. Anama then filed a case for Declaration of Nullity of Deed of Sale, Cancellation of TCT, and Specific Performance with Damages.

Issue: Whether the rescission of the Contract to Buy was valid.

Held: Since Anama failed to pay the third installment, PSBank was entitled to rescind the Contract to Buy. The contract provides the Bank two options in the event that petitioner fails to pay any of the installments. This was either (1) to rescind the contract outright and forfeit all amounts paid by the petitioner, or (2) to demand the satisfaction of the contract and insist on the full payment of the total price. After petitioner repeatedly failed to pay the third installment, the Bank chose to exercise the first option.
The Contract to Buy is actually a contract to sell whereby the vendor reserves ownership of the property and is not to pass until full payment. Such payment is a positive suspensive condition, the failure of which is not a breach but simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. Since ownership of the subject property was not pass to petitioner until fill payment of the purchase price, his failure to pay on the date stipulated, or in the extension granted, prevented the obligation for the Bank to pass title of the property to Anama. The bank could validly sell the property to the spouses Co, the right of the bank to sell the property being unequivocal.


IMPOSTION OF 12% ANNUAL INTEREST RATE

ALMEDA VS. CARIÑO ET AL.
GR. No. 152143. January 13, 2003

Facts: Ponciano L. Almeda (vendee) and Avelino Cariño (vendor), predecessors-in-interest of petitioners and respondents, entered into two agreements to sell, one covering eight titled properties, and the other, three untitled properties. The agreed price of the eight titled properties was P 1,743,800.00, twenty percent (20%) of which was to be paid upon the signing and execution of the agreement and the balance to be paid in four equal semi-annual installments, beginning six (6) months from the signing thereof, with the balance earning twelve percent (12%) interest per annum. On the other hand, the purchase price of the three untitled properties was P1,208,580.00, fifteen percent (15%) of which was to be paid upon the signing and execution of the agreement, and the balance, bearing a twelve percent (12%) annual interest from the signing thereof, to be paid as follows: fifteen percent (15%) of the purchase price plus interest to be paid upon the issuance of titles to the lots, and the balance plus interests to be paid in semi-annual installments starting form the date of issuance of the respective certificates of title to the lots involved, which must not be later than March 30, 1982.
Later, Cariño and Almeda executed an amendment to their agreements to sell (a) extending the deadline for the production of the titles to the untitled properties, (b) providing for a partial payment of P300,000.00 for the titled properties, (c) requiring Cariño to render an accounting of the proceeds of the sugar cane crop on the properties subject of the sale up to the 1982 harvest season, and (d) obliging Cariño to pay Almeda the sum of P10,000.00 a month in case of the failure of the former to produce the certificates of title to the untitled properties by June 30, 1982.
Almeda asked Cariño for the execution of a Deed of Absolute Sale over the eight titled properties although they had not been fully paid. Cariño granted the request and executed the Deed of Sale over the eight titled lots in favor of Almeda. The latter executed an undertaking to pay Cariño the balance of the purchase price. Deeds of Sale for two of the three untitled lots were also executed.
Cariño made demands for the full and final payment of the balance due him in the amount of P477,589.47 and the interest thereon. Despite demand letters sent to Almeda, the balance was not paid. Hence, Cariño filed before the RTC a complaint against Almeda. Cariño prayed that Almeda be ordered to pay him the balance, the legal interests thereon from demand to full payment, fifteen percent (15%) of all the amounts due, including interests as attorney’s fees, litigation expenses, moral, exemplary, and nominal damages and the costs of the suit.
The RTC found the claim of Cariño to be well founded and gave judgment in his favor. The CA subsequently affirmed the lower court’s decision.
The Almedas claim that the imposition of a 12% annual interest is erroneous because it is contrary to law and jurisprudence. According to them, the applicable rate is 6% since the case does not involve a loan or forbearance of money, as provided for under Central Bank Circular No. 416.

Issue: Whether or not the contention of Almeda is meritorious.

Held: This contention is without merit. Art. 2209, NCC provides: 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 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.
The contracts to sell of the parties stipulated that the balance of the purchase price shall earn an interest rate of 12% per annum upon signing of the contract. Such stipulations have the force of law between the contracting parties and should be complied with in good faith. The interest in this case should be allowed to run from March 9, 1993, respondents’ extrajudicial demand for payment of the remaining balance plus interest having begun on said date.
In addition, in accordance with our decision in Eastern Shipping Lines, Inc. vs. Court of Appeals, when the judgment of the court awarding the sum of money becomes final and executory, a 12% interest per annum shall also be imposed from such finality until satisfaction thereof, this interim period by deemed to be by then an equivalent to a forbearance of credit.

EQUITABLE MORTGAGE

HILADO VS. HEIRS OF RAFAEL MEDALLA
377 SCRA 257. February 15, 2002

Facts: Gorgonio Macainan was the owner of the several properties. After his death, his estate was divided among his heirs, including his children by his first wife, a contract ( Anita, Rosita & Berbonio) As Berbonio had predeceased Gorgonio, her children ( Rafael, Lourdes&Teresita surnamed Medalla) succeeded to her inheritance. Respondents herein are the heirs of Rafael Medalla.
Rafael Medalla executed a Deed of Absolute Sale purporting to sell his share in the inheritance to Gorgonio Hilado. Later, he executed another”Deed of Absolute Sale in favor of Hilado over his share in another inherited property. Over the next 2 years, Hilado and Medalla executed 3 more contracts concerning the sold properties;”(1) “ Memorandum of Agreement,”(2) “Deed of Resale,” whereby Hilado resold to Medalla two of the 5 hectares a lot, and (3)”Agreement.”
Anita Macainan (his aunt) tried to redeem the first property that was sold from Hilado but she failed, so she filed a suit against Rafael and Hilado for Legal redemption before the RTC. So, Rafael filed a cross-claim against Hilado, alleging that the first deed of sale was in fact an equitable mortgage to secure a loan from Hilado. The latter denied that the agreement between them was a loan but a Deed of Sale, reflecting their true agreement.

Issue: Whether the Deed of Absolute Sale executed by Medalla and Hilado is in fact an equitable mortgage.

Held: Under Art. 1602 in relation to Art. 1604, NCC, a contract purporting to be an absolute sale is presumed to be an equitable mortgage--- (1) when the price of a sale….is unusually inadequate; (2) when the vendor remains in possession as lessee or otherwise;(3) when after the expiration of the right to repurchase another instrument extending the period of the redemption or granting a new period is executed;(4) when the purchaser retains for himself a part of the purchase price;(5) when the vendor binds himself to pay the taxes on the thing sold;(6) in any other case where it may be fairly inferred that theh real intention of the parties is that the presence of any of these circumstances is sufficient for a contract to be presumed as an equitable mortgage.
In view of the conclusions we have reached, it is unnecessary to pass upon Hilado’s contention that respondents are bound by the terms of the “Deed of Sale” in question as the law between the parties. It will suffice to say that even if a document appears on its face to be a sale, the owner of the property may prove that the contract is really a loan with a mortgage that the document does not express the true intent and agreement of the parties.

CONTRACTS OF SALE; ELEMENTS;CONTRACT WHERE CONSENT IS VITIATED IS VOIDABLE;ANNULMENT AND RESTITUTION OF THE PROPERTY AND ITS FRUITS TO THE RESPONDENT IS JUST AND PROPER.

KATIPUNAN VS. KATIPUNAN, JR.
3537 SCRA 199. January 30, 2002


Facts: Respondent Braulio Katipunan Jr. is the registered owner of a lot and a five-door apartment constructed thereon, which were occupied by lessees. Respondent assisted by his brother petitioner Miguel entered into a Deed of Absolute Sale with brothers Edardo Balguma and Leopoldo Balguma, Jr. ( co-petitioners), represented by their lawyer-father involving the subject property for a consideration of P187,000.00. So, the title was registered in the names of the Balguma brothers and they started collecting rentals thereon.
Later, Braulio filed a complaint for annulment of the Deed of Absolute Sale, contending that his brother Miguel, Atty. Balguma and Inocencio Valdez ( one of the petitioners) convinced him to work abroad. Through insidious words and machinations, they made him sign a document purportedly a contract of employment, which document turned out to be a Deed of Absolute Sale. He further alleged that he did not receive the consideration stated in the contract. He claimed that there was evident bad faith and conspiracy in taking advantage of his ignorance, he being only a third grader.
The RTC dismissed the complaint because Braulio failed to prove his cause of action since he admitted that he obtained loans from the Balgumas, he signed the Deed of Absolute Sale, and he acknowledged selling the property and stopped collecting the rentals. But when the case was elevated, the decision of RTC was reversed and it was held that Braulio was incompetent, has very low I.Q., illiterate and has a slow comprehension. The CA based its decision on Arts.1332 and 1390 of NCC and Sec. 2, Rule 92 of the Rules of Court, concerning the incompetence of a party in contract.

Issue: Whether there was a valid contract of sale between the parties.

Held: The Supreme Court found the petition devoid of merit. There was a vitiated consent on the part of the respondent as he signed the Deed of Absolute Sale without the remotest idea of what it was and received no consideration thereof. The contract entered into by the parties being voidable contract, was correctly annulled on appeal.
A contract of sale is born from the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. This meeting of minds speaks of the intent of the parties in entering the contract respecting the subject matter and the consideration thereof. Thus, the elements of a contract of a sale are consent, object, and price in money or its equivalent. Under Art. 1330 of NCC, consent may be vitiated by any of the following: mistake, violence, intimidation, undue influence, and fraud. The presence of any of these vices renders the contract voidable.
A contract where one of the parties is incapable of giving consent or where consent is vitiated by mistake, fraud, or intimidation is not void ab initio but only voidable and is binding upon the parties unless annulled proper court action. The effect of annulment is to restore the parties to the status quo ante insofar as legally and equitably possible---this much is dictated by Art. 1398 provides that when the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution, except when he has been benefited by the things or price received by him. Thus, since the Deed of Absolute Sale between respondent and Balguma brothers is voidable and hereby annulled, then the restitution of the property and its fruits to respondent is just and proper.


SALE BY AN AGENT;SPECIAL POWER OF ATTORNEY

PINEDA VS. COURT OF APPEALS
367 SCRA 222. February 6,2002

Facts: Nelson and Mercedez Bañez are the original owners of a parcel of land together with its improvements located at White Plains, Q.C.(Q.C. Property) while Alejandria Pineda is the owner of a house located at Los Angeles, California (California Property), the two parties executed an “Agreement to Exchange Real Properties.” In the agreement, they agreed to: 1) exchange their respective properties, 2) Pineda to pay an earnest money of $ 12,000 on February 1983, and 3) to consummate the exchange of properties not later than June 1983. It was agreed also that both should undertake to clear the mortgages over their respective properties.
The Bañez were allowed to occupy or lease to a tenant the California property, and Pineda was authorized to occupy the Q.C. property. Pursuant to the agreement, Pineda paid the earnest money of $12,000, but the latter failed to clear the mortgages over her California property. Later, unknown to the Bañezes, Pineda and spouses Duque executed an “Agreement to Sell” over the Q.C. property whereby Pineda sold the property to the spouse Duque for 1.6 M.
The record shows that pursuant to the agreement to sell, there were payments that occupying their Q.C. property. The latter were interested in the property so the Bañezes did not insist on the return of said property. So, there were negotiations for the purchase of the property that was held between them, but the same failed which resulted in the Bañezes’ demanding for the Duques to vacate the property and later filed a case before the court.

Issue: Whether the Duques validly acquired the Q.C. property.

Held: Pineda’s sale of the property to Duques was not authorized by the real owners of the land Bañez. The Civil Code provides that in a sale of a parcel of land or any interest therein made through an agent, a special power of attorney is essential. This authority must be in writing; otherwise the sale shall be void. In his testimony, Duque confirmed that at the time he purchased the property from Pineda, the latter had no special power of attorney to sell the property.
A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired for a valuable consideration. Without an authority in writing, Pineda could not validly sell the subject property to Duque. Hence, any sale in favor of Duque is void.
As the consent of the real owner of the property was not obtained, no contract was perfected (Art. 1318 of the Civil Code)


LAND TITLES AND DEEDS
JURISDICTION

MATEO vs. COURT OF APPEALS
G.R. No. 128392 April 29, 2005

Facts: Casimiro Development Corporation (CDC) alleged that it was the owner of a parcel of registered land since it acquired the same from the previous owner, China Banking Corporation (CBC). After the sale CDC advised the petitioners that it was the new owner and that they had failed to pay the rentals due to it and to its predecessors-in-interest. The petitioners refused to pay and vacate the premises despite demands to settle their obligations and notice to vacate were served upon them. This prompted CDC to file a complaint for Unlawful Detainer against the petitioners before the Metropolitan Trial Court (MeTC). The petitioners maintained that since the land was classified as agricultural as evidenced by a Tax Declaration Certificate, it is the Department of Agrarian Reform Adjudication Board (DARAB) that has jurisdiction over the case. It should be noted that the land is covered by a Transfer Certificate of Title in the name of CDC’s predecessor-in-interest CBC.

Issue: Whether or not jurisdiction over the subject matter lies with the DARAB or with the Metropolitan Trial Court.

Held: For the DARAB to have jurisdiction over the case, there must be a tenancy relationship between the parties. One of the indispensable elements in order for a tenancy agreement to take hold over a dispute is that the parties are the landowner and the tenant or agricultural lessee. It must be noted that the petitioners failed to adequately prove ownership of the land. They merely showed tax declarations. As against a transfer certificate of title, tax declarations or receipts are not adequate proofs of ownership. Hence, it is the MeTC that has jurisdiction over the subject matter there being no proof of tenancy relationship.


RECONVEYANCE

HEIRS OF POMPOSA SALUDARES VS. COURT OF APPEALS
G.R. No. 128254. January 16, 2004

Facts: The heirs and their father, Juan Dator executed a Deed of Extrajudicial Partition of the share of Pomposa in the Tanza estate with the eastern portion thereof going to Juan and the western half to the children. Juan remained in possession of his share until his death. Isabel Dator applied for a free patent over the entire Tanza estate in behalf of the heirs thus it was awarded. Private respondents filed an action for reconveyance against petitioner heirs. They alleged that they were the owners in fee simple and they were in possession of the land, and Isabel Dator obtained free patent in favor of the heirs by means of fraud and misrepresentation. Petitioners alleged that they and their predecessors in interest had been in actual, continuous, adverse and public possession of the land in the concept of owners since time immemorial, and the title to the lot was issued to them after faithful compliance with the requirements for the issuance of a free patent.

Issues: 1) Whether or not the reconveyance is still available notwithstanding the indefeasibility of the Torrens Title.

2) Whether or not the heirs have been in open and continuous possession of the disputed lot.

Held: 1) The registered owner may still be compelled to reconvey the registered property to its true owner. Reconveyance does not set aside or re-subject to review the findings of fact of the Bureau of Lands. Thus, the decree of registration is respected as incontrovertible. What is sought is the transfer of the property or its title, which has been wrongfully or erroneously registered in another person’s name, to its rightful or legal owner or to the one with a better right.

2) The heirs convincingly established their open and continuous occupation of the entire Tanza estate. The farm was under the administration of Beata and Isabel Dator who took over its management after Petra Dator died; heir’s tenant Miguel Dahilig had been consistently tending the land since 1947 and was the one who planted the various crops and trees on the lot.

EXTRINSIC FRAUD

REXLON REALTY GROUP, INC. VS. COURT OF APPEALS
G.R. No. 128412. March 15, 2002

Facts: Respondent Alex David was the registered owner of two parcel of land. Petitioner Rexlon Realty Group, Inc. (Rexlon) entered into an agreement with respondent for the purchase of the two parcels of land as evidenced by an “absolute deed of sale.” Respondent filed with the Regional Trial Court a petition for the issuance of the owner’s duplicate copies which were allegedly lost; petition granted by the court. Rexlon then filed with the Court of Appeals a petition for annulment of the decision of the trial court on the ground that David allegedly employed fraud and deception in securing the replacement owner’s duplicate copies.

Issue: Whether or not such misrepresentation or fraud of respondent David can be characterized as an extrinsic fraud as to merit the annulment of the trial court’s decision.

Held: Extrinsic fraud contemplates a situation where a litigant commits acts outside the trial of the case; the effect of which prevents a party from having a trial, a real contest, or from presenting all of his case to the court, or where it operates upon matters pertaining to the judgment itself, but to the manner in which it was produced so that there is not a fair submission of the controversy. It is well settled that the use of forged instrument or prejudiced testimonials during trial is not an extrinsic fraud, because such evidence does not preclude the participation of any party in the proceedings. While a perjured testimony may prevent a fair and just determination of a case, it does not bar the adverse party from rebutting or opposing the use of such evidence. Furthermore, it should be stressed that extrinsic fraud pertains to an act committed outside of the trial. The alleged fraud in this case was perpetrated during the trial.

PRESCRIPTION DOES NOT RUN AGAINST THE STATE

PAGKATIPUNAN VS. COURT OF APPEALS
G.R. No. 129682. March 21, 2002

Facts: On June 15, 1967, the Court of First Instance of Gumaca, Quezon promulgated a decision confirming petitioner’s title to properties located in San Narciso, Quezon. Almost eighteen (18) years later, the Republic of the Philippines filed with the Intermediate Appellate Court an action to declare the proceedings in the LRC case null and void and to cancel the original certificate of title and to confirm the subject land as part of the public domain. The Republic claimed that the subject land was classified as timberland; hence, inalienable and not subject to registration. On the other hand, petitioners raised the special defense of indefeasibility of title and res judicata.

Issues: 1) Whether or not prescription runs against the state.

2) Whether or not occupation will ripen into ownership.

Held: 1) Prescription does not run against the state. The lengthy occupation of the disputed land by petitioners cannot be counted in their favor, as it remained part of the patrimonial property of the state which is inalienable and not disposable.

2) Unless public land is shown to have been reclassified or alienated to a private person by the state it remains part of the inalienable public domain. Occupation thereof in the concept of owner, no matter how long, cannot ripen into ownership and be registered as a title.




A TORRENS TITLE, ONCE REGISTERED, SERVES AS NOTICE TO THE WHOLE WORLD

ALVARICO VS. SOLA
G.R. No. 138953. June 6, 2002

Facts: Fermina Lopez executed a Deed of Self-Adjudication and Transfer of Rights over lot 5 in favor of Amelita Sola, who agreed to assume all the obligations, duties and conditions imposed which was approved by the Bureau of Lands. Castorio Alvarico filed a civil case for reconveyance against Amelita. He claimed that Fermina donated the land to him and immediately thereafter, he took possession of the same. He averred that the donations to him had the effect of withdrawing the earlier transfer to Amelita. Amelita maintained that the donation to petitioner was void because Fermina was no longer the owner of the property when it was allegedly donated to petitioner, the property having been transferred earlier to her. She added that the donation was void because of lack of approval from the Bureau of Lands and that she had validly acquired the land as Fermina’s rightful heir.

Issue: Who between the petitioner and respondent has a better claim to the land?

Held: The execution of public documents, as in the case of Affidavits of Adjudication is entitled to the presumption of regularity, hence convincing evidence is required to assail and controvert them. A Torrens title, once registered, serves as notice to the whole world. All persons must take notice and no one can plead ignorance of its registration. Clearly then, petitioner has no standing at all to question the validity of Amelita’s title. It follows that he cannot recover the property because he has not shown that he is the rightful owner thereof.

OPEN, CONTINUOUS, AND NOTORIOUS POSSESSION OF THE LAND

DEL ROSARIO VS. REPUBLIC
G.R. No. 148338. June 6, 2002

Facts: Petitioner filed an application for registration of a parcel of land. The clerk of court transmitted to the Land Registration Authority (LRA) the duplicate copy of petitioner’s application for registration, the original tracing cloth plan, and the other documents submitted by petitioner in support of his application. During the initial hearing, no oppositor appeared except for the provincial prosecutor who appeared on behalf of the Solicitor General in representation of the Republic of the Philippines. The trial court granted the application. Respondent appealed for failure of petitioner to submit in evidence the original tracing cloth plan and to establish that he and his predecessors in interest had been in open, continuous, and notorious possession of the land.

Issues: 1) Whether or not the submission in evidence of the original tracing cloth plan is a mandatory requirement.

2) Whether or not petitioners had been in open, continuous, and notorious possession of the land.

Held: 1) The submission in evidence of the original tracing cloth plan duly approved by the Bureau of Lands in cases for application of original registration of land is mandatory requirement. The reason for the rule is to establish the true identity of the land to ensure that it does not overlap a parcel of land or portion thereof already covered by a previous land registration, and to forestall the possibility that it will be overlapped by a subsequent registration.

2) 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 the 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 the claim of ownership for the required number of years.







REDEMPTION PERIOD OF THE PROPERTY

RECAÑA VS. COURT OF APPEALS
G.R. No. 123850. January 5, 2001

Facts: Lot 6 of Block 2 of the Tondo Foreshore Land of the Land Tenure Administration was sold to Macario Arboleda, petitioner-spouses’ predecessor in interest. The land was covered by an original certificate in the name of Arboleda. The city treasurer of Manila auctioned the lot at a public auction sale due to tax delinquency. Spouses Cirilo and Miguela Montejo sold the property to petitioner-spouses who refunded the amount equivalent to the delinquent taxes and other expenses entailed. Private respondents, the other children and heirs of Macarion Arboleda filed for declaration of co-ownership and partition against petitioner. They asserted that the repurchase by the petitioner of the lot redounded to their benefit as co-heirs and now as co-owners. Petitioners contended that Section 4 of R.A. 1597, the law governing the subdivision of the Tondo Foreshore Lands from which the subject property emanated does not apply to the attendant facts in this case. Instead they instead that it was Section 78 of P.D. 464 which was applicable.

Issue: Which of the two laws, Section 4 of R.A. 1597 or Section 78 of P.D. 464, should apply in so far as the redemption period of the subject property is concerned?

Held: A special statute, provided for a particular case or class of cases, is not repealed by a subsequent statute, general in its terms, provisions and applications, unless the intent to repeal or alter is manifest although the terms of the general law are broad enough to include the cases embraced in the special law. Repeal of laws should be made clear and express. The failure to add a specific repealing clause indicates that the intent was not to repeal any existing law unless there is an irreconcilable or repugnancy between Section 4 of R.A. 1597 and Section 78 of P.D. 464. The former law is of special and exclusive application to lots acquired from the Tondo Foreshore Land only. The latter is a law or decree of general application. Petitioner’s repurchase of the subject lot within the five-year redemption period of Section 4 of R.A. 1597 is within the purview of redemption by a co-owner which inures to the benefit of all the other co-owners of the property.

INNOCENT PURCHASER FOR VALUE

NAZARENO VS. COURT OF APPEALS
G.R. No. 138842. October 18, 2000

Facts: Petitioners and respondent Romeo Nazareno are three of the five children of spouses Maximino and Aurea Nazareno, who during their marriage had acquired properties. After the death of Maximino, Sr., Romeo filed for intestate proceedings and he was thereafter appointed administrator of his father’s estate. Romeo discovered a deed o f sale selling petitioner Natividad six lots including Lot-3b occupied by Romeo but which was sold to petitioner Maximino, Jr. Maximino, Jr. filed an action for recovery of possession which was favored by the court. Romeo in turn filed an annulment of the sales on the ground of lack of consideration in that the transfer was merely to avoid inheritance tax and that Natividad was only to hold the said lots in trust for her siblings. Petitioners on the other hand filed a third party complaint against Romeo and his wife Eliza seeking the annulment of the transfer to Romeo of Lot 3 which is granted by the trial court except as to Lots 3, 13-b, 13 and 14 which had passed on to third persons.

Issue: Whether or not a person dealing with a registered land may rely on the certificate of title.

Held: The sale of Lots 13 and 14 to Ros-Alva Marketing will have to be upheld for Ros-Alva Marketing is an innocent purchaser for value which relied on the title of Natividad. The rule is settled that “every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefore and the law will in no way oblige him to go behind the certificate to determine the condition of the property.”

TORTS AND DAMAGES

YHT Realty Corp, et al vs. Court of Appeals
G.R. No. 126780. February 17, 2005
Facts: MAURICE McLaughlin is an Australian national who comes to the Philippines for business. During his trips he stays in Tropicana, a hotel recommended to him by Brunhilda Tan. McLaughlin deposited cash and jewelry to the safety deposit box of the Hotel. The safety deposit box cannot be opened unless the key of the guest and that of the management are present. Lainez and Payam are employees of Tropicana who is charged with the custody of the keys. Thereafter, McLaughlin found out that some of the money and jewelry he deposited were missing. Lainez and Payam admitted that they assisted Tan to open his deposit box. Tan admitted that she stole McLaughlin’s keys. Tan executed a promissory note to cover the amount of the stolen money and jewelry. McLaughlin wanted to make the management liable.
Issue: Whether or not a hotel may evade liability for the loss of items left with it for safekeeping by its guests, by having these guests execute written waivers holding the establishment or its employees free from blame for such loss in light of Article 2003 of the Civil Code which voids such waivers.
Held: The issue of whether the “Undertaking For The Use of Safety Deposit Box” executed by McLoughlin is tainted with nullity presents a legal question appropriate for resolution in this petition. Notably, both the trial court and the appellate court found the same to be null and void. We find no reason to reverse their common conclusion. Article 2003 is controlling, thus:
Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former as set forth in Articles 1998 to 2001[37] is suppressed or diminished shall be void.
Article 2003 was incorporated in the New Civil Code as an expression of public policy precisely to apply to situations such as that presented in this case. The hotel business like the common carrier’s business is imbued with public interest. Catering to the public, hotelkeepers are bound to provide not only lodging for hotel guests and security to their persons and belongings. The twin duty constitutes the essence of the business. The law in turn does not allow such duty to the public to be negated or diluted by any contrary stipulation in so-called “undertakings” that ordinarily appear in prepared forms imposed by hotel keepers on guests for their signature.

Nikko Hotel Manila Garden & Ruby Lim vs. Reyes
G.R. No. 154259. February 28, 2005
Facts: Robeto Reyes known as “Amay Bisaya” saw in a hotel lobby his friend Dr. Violeta Filart who he said to have invite him the party of the hotel’s outgoing manager. So Reyes carried the fruit basket of Filart to the penthuse where the party is. However, Ruby Lim, the coordinator of the party asked him to leave since it is an exclusive party and he is not one of those invited. Reyes did not leave the party as was instructed but created a scene, thereby he was escorted out. He sued the hotel and Ruby Lim for damages.
Issue: Whether or not Ruby Lim acted abusively in asking Roberto Reyes, a.k.a. “Amay Bisaya,” to leave the party where he was not invited by the celebrant thereof thereby becomes liable under Articles 19 and 21 of the Civil Code.
Held: The Supreme Court ruled that Ruby Lim did not act abusively in asking Roberto Reyes in leaving the party to which he is not invited. In the absence of any proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and expose him to ridicule and shame, it is highly unlikely that she would shout at him from a very close distance. Ms. Lim having been in the hotel business for twenty years wherein being polite and discreet are virtues to be emulated, the testimony of Mr. Reyes that she acted to the contrary does not inspire belief and is indeed incredible. Thus, the lower court was correct in observing that –Considering the closeness of defendant Lim to plaintiff when the request for the latter to leave the party was made such that they nearly kissed each other, the request was meant to be heard by him only and there could have been no intention on her part to cause embarrassment to him. It was plaintiff’s reaction to the request that must have made the other guests aware of what transpired between them, had plaintiff simply left the party as requested; there was no need for the police to take him out.
Article 19 involves a legal wrong committed for which the wrongdoer must be responsible. The object of this article, therefore, is to set certain standards which must be observed not only in the exercise of one’s rights but also in the performance of one’s duties. Its elements are the following: (1) There is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another. When Article 19 is violated, an action for damages is proper under Articles 20 or 21 of the Civil Code. Article 20 pertains to damages arising from a violation of law which does not obtain herein as Ms. Lim was perfectly within her right to ask Mr. Reyes to leave. Article 21refers to acts contra bonus mores and has the following elements: (1) There is an act which is legal; (2) but which is contrary to morals, good custom, public order, or public policy; and (3) it is done with intent to injure. Under the above mentioned articles the act must be intentional. Absent such intention and as the Court observed the conduct of Lim of asking Reyes to leave was in an exemplary manner, there can be no damages to be awarded. Any damage suffered by Reyes must be borne by him alone.

Quezon City Government vs. Dacara
G R No. 150304 June 15, 2005
Facts: Dacara Jr.’s car turned turtle upon hitting a rammed into a pile of earth/street diggings found at Matahimik St., Quezon City, which was then being repaired by the Quezon City government. As a result, Dacarra (sic), Jr. allegedly sustained bodily injuries and the vehicle suffered extensive damage. Thus his father Fulgencio Dacara Senior (Fulgencio) filed a calim for damages against the Local Government. The LGU contended that the fault is with the driver, since the LGU have out up warning signs. The trial court ruled that the LGU is liable.
Issue: Whether or not the Quezon City Government is liable for moral and exemplary damges due to the injuries suffered by Dacara Jr.
Held: To award moral damages, a court must be satisfied with proof of the following requisites: (1) an injury -- whether physical mental, or psychological -- clearly sustained by the claimant; (2) a culpable act or omission factually established; (3) a wrongful act or omission of the defendant as the proximate cause of the injury sustained by the claimant; and (4) the award of damages predicated on any of the cases stated in Article 2219. In the present case, the Complaint alleged that respondent’s son Fulgencio Jr. sustained physical injuries. The son testified that he suffered a deep cut on his left arm when the car overturned after hitting a pile of earth that had been left in the open without any warning device whatsoever. It is apparent from the Decisions of the trial and the appellate courts, however, that no other evidence (such as a medical certificate or proof of medical expenses) was presented to prove Fulgencio Jr.’s bare assertion of physical injury. Thus, there was no credible proof that would justify an award of moral damages based on Article 2219(2) of the Civil Code. Moreover, the Decisions are conspicuously silent with respect to the claim of respondent that his moral sufferings were due to the negligence of petitioners. The Decision of the trial court, which summarizes the testimony of respondent’s four witnesses, makes no mention of any statement regarding moral suffering, such as mental anguish, besmirched reputation, wounded feelings, social humiliation and the like. well-settled is the rule that moral damages cannot be awarded -- whether in a civilor a criminal case, in the absence of proof of physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, or similar injury. The award of moral damages must be solidly anchored on a definite showing that respondent actually experienced emotional and mental sufferings. Mere allegations do not suffice; they must be substantiated by clear and convincing proof.
Article 2231 of the Civil Code mandates that in cases of quasi-delicts, exemplary damages may be recovered if the defendant acted with gross negligence. Gross negligence means such utter want of care as to raise a presumption that the persons at fault must have been conscious of the probable consequences of their carelessness, and that they must have nevertheless been indifferent (or worse) to the danger of injury to the person or property of others. The negligence must amount to a reckless disregard for the safety of persons or property. Such a circumstance obtains in the instant case. A finding of gross negligence can be discerned from the Decisions of both the CA and the trial court. We quote from the RTC Decision: “Sad to state that the City Government through its instrumentalities have failed to show the modicum of responsibility, much less, care expected of them (sic) by the constituents of this City. It is even more deplorable that it was a case of a street digging in a side street which caused the accident in the so-called ‘premier city.’ Article 2229 of the Civil Code provides that exemplary damages may be imposed by way of example or correction for the public good. The award of these damages is meant to be a deterrent to socially deleterious actions. Public policy requires such imposition to suppress wanton acts of an offender. It must be emphasized that local governments and their employees should be responsible not only for the maintenance of roads and streets, but also for the safety of the public. Thus, they must secure construction areas with adequate precautionary measures.

SUCCESSION

AZNAR BROTHERS REALTY COMPANY VS. LAURENCIO AYING
G.R. No. 144773. May 16, 2005
Facts: The disputed property is Lot No. 4399 with an area of 34,325 square meters located at Dapdap, Lapu-Lapu City. Crisanta Maloloy-on petitioned for the issuance of a cadastral decree in her favor over said parcel of land. After her death in 1930, the Cadastral Court issued a Decision directing the issuance of a decree in the name of Crisanta Maloloy-on’s eight children, namely: Juan, Celedonio, Emiliano, Francisco, Simeon, Bernabe, Roberta and Fausta, all surnamed Aying. The certificate of title was, however, lost during the war. The siblings extra-judicially sold the lot however, three siblings, namely, Roberta, Emiliano and Simeon Aying did not participate in the extra-judicial partition. After the partition the lot was sold. 29 years after, the Roberta, Emiliano and Simen filed a case for the ejectment of the present occupants.
Issue: Whether or not respondents’ cause of action is imprescriptible
Held: The facts on record show that petitioner acquired the entire parcel of land with the mistaken belief that all the heirs have executed the subject document. Thus, the trial court is correct that the provision of law applicable to this case is Article 1456 of the Civil Code which states: ART. 1456. If 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. The rule that a trustee cannot acquire by prescription ownership over property entrusted to him until and unless he repudiates the trust, applies to express trusts and resulting implied trusts. However, in constructive implied trusts, prescription may supervene even if the trustee does not repudiate the relationship. Necessarily, repudiation of said trust is not a condition precedent to the running of the prescriptive period. 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. With regard to petitioner’s argument that the provision of Article 1104 of the Civil Code, stating that a partition made with preterition of any of the compulsory heirs shall not be rescinded, should be applied, suffice it to say that the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale is not being rescinded. In fact, its validity had been upheld but only as to the parties who participated in the execution of the same. As discussed above, what was conveyed to petitioner was ownership over the shares of the heirs who executed the subject document. Thus, the law, particularly, Article 1456 of the Civil Code, imposed the obligation upon petitioner to act as a trustee for the benefit of respondent heirs of Emiliano and Simeon Aying who, having brought their action within the prescriptive period, are now entitled to the reconveyance of their share in the land in dispute.

TESTATE ESTATE OF THE LATE ALIPIO ABADA, BELINDA CAPONONG-NOBLE, petitioner, vs. ALIPIO ABAJA and NOEL ABELLAR
G.R. No. 147145. January 31, 2005
Facts: This is a case of the probate of the will of Alipio Abada. Thereafter, the probate of the will of Paula Toray was also filed with the court. The oppositors in the will of Abada nand Toray are their nephews and nieces. The ground for opposition is that decedent left no will or if there is a will it was executed not in consonance with the law. Belinda Caponong-Noble was assigned as the administratix of the estate of Abada by the trial court. Thereafter, Abellar was appointed administratix of Toray’s property. The RTC ruled only on , whether the will of Abada has an attestation clause as required by law. The RTC-Kabankalan further held that the failure of the oppositors to raise any other matter forecloses all other issues. Unsatisfied with the decision Caponong-Noble appealed.
Issue: Whether or not the will of Abada has an attestation clause, and if so, whether the attestation clause complies with the requirements of the applicable laws.
Held: The Court of Appeals did not err in sustaining the RTC-Kabankalan in admitting to probate the will of Abada. Abada executed his will on 4 June 1932. The laws in force at that time are the Civil Code of 1889 or the Old Civil Code, and Act No. 190 or the Code of Civil Procedurewhich governed the execution of wills before the enactment of the New Civil Code. The matter in dispute in the present case is the attestation clause in the will of Abada. Section 618 of the Code of Civil Procedure, as amended by Act No. 2645 governs the form of the attestation clause of Abada’s will.
There is no statutory requirement to state in the will itself that the testator knew the language or dialect used in the will. This is a matter that a party may establish by proof aliunde. Caponong-Noble further argues that Alipio, in his testimony, has failed, among others, to show that Abada knew or understood the contents of the will and the Spanish language used in the will. However, Alipio testified that Abada used to gather Spanish-speaking people in their place. In these gatherings, Abada and his companions would talk in the Spanish language. This sufficiently proves that Abada speaks the Spanish language. An attestation clause is made for the purpose of preserving, in permanent form, a record of the facts attending the execution of the will, so that in case of failure of the memory of the subscribing witnesses, or other casualty, they may still be proved. (Thompson on Wills, 2d ed., sec. 132.) A will, therefore, should not be rejected where its attestation clause serves the purpose of the law. We rule to apply the liberal construction in the probate of Abada’s will. Abada’s will clearly shows four signatures: that of Abada and of three other persons. It is reasonable to conclude that there are three witnesses to the will. The question on the number of the witnesses is answered by an examination of the will itself and without the need for presentation of evidence aliunde. The Court explained the extent and limits of the rule on liberal construction. Precision of language in the drafting of an attestation clause is desirable. However, it is not imperative that a parrot-like copy of the words of the statute be made. It is sufficient if from the language employed it can reasonably be deduced that the attestation clause fulfills what the law expects of it.

PRESCRIPTIVE PERIOD TO RECOVER PROPERTY OBTAINED BY FRAUD GIVING RISE TO AN IMPLIED TRUST; PROBATE FOR WILL
SPOUSES RICARDO PASCUAL AND CONSOLACION SISON VS. COURT OF APPEALS AND REMEDIOS EGUENIO-GINO
G.R. No. 115925. August 15, 2003

Facts: Petitioner Sison and respondent Eugenio-Gino are the niece and granddaughter , respectively of the late Canuto Sison. Canuto and 11 other individuals including his sister Catalina and his brother Victoriano were co-owners of a property known as Lot 2 covered by an original certificate of title.
On September 26, 1956, Canuto and Consolacion executed a Kasulatan ng Bilihang Tuluyan under which, Canuto sold his share in Lot 2 in favor of Consolacion.
On October 23, 1968, the surviving children of Canuto, namely Felicidad and Beatriz, executed a joint affidavit affirming the Kasulatan in favor of Consolacion, which the latter registered with the Office of the Register of Deeds.
On February 4, 1988, Remedios filed a complaint against Consolacion and her spouse, Ricardo Pascual for annulment of transfer of certificate of title because the former claimed that she is the owner of the lots since Catalina devised the land to her in Catalina’s last will. Remedies also added that the lots were obtained through fraudulent means since the area covered by the TCT is twice the size of Canuto.
Petitioner sought to dismiss the complaint on the ground of prescription. Petitioners claim that the basis of the action is fraud and the action should have been filed within four years from the registration of Consolacion’s title on October 28, 1968 and not some 19 years later on February 4, 1988.
The trial court denied petitioner’s motion to dismiss holding that the reckoning of the prescriptive period for filing complaint is evidentiary in nature and must await the presentation of the parties’ evidence during the trial.
Issue: Whether or not the action for annulment or cancellation of transfer of certificate of title by Remedios has prescribed.
Held: The four-year prescriptive period relied upon by the trial court applies only if the fraud does not give rise to an implied trust and the action is to annul a voidable contract under Article 1390 of the Civil Code. In such a case, the four-year prescriptive period begins to run from the time of the discovery of the mistake, violence, intimidation, undue influence or fraud.
It is now well-settled that the prescriptive period to recover property obtained by fraud or mistake, giving rise to an implied trust under Article 1456 of the Civil Code is ten years pursuant to Article 1144. this ten-year prescriptive period begins to run from the date the adverse party repudiates the implied trust which repudiation takes place when the adverse party registers the land.
Remedies filed her complaint on February 4, 1988 or more than 19 years after Consolacion registered her title over the lot on October 28, 1968. Unquestionably, Remedios filed the complaint late thus warranting its dismissal.
Remedies anchors her right in filing the suit on her being a devisee of Catalina’s last will. However, since the probate court has not admitted Catalina’s last will, Remedios has not acquired any right under the last will. Remedies is thus without any cause of action either to seek reconveyance of Lot 2 or to enforce an implied trust over these lots.
It was inappropriate to order the reconveyance of the subject lots to Remedios in her capacity as executrix of Catalina’s last will because she sued petitioners not in such capacity but as the alleged owner of the disputed lots.

SUCCESSION; PARTITION INTER VIVOS MAY BE DONE FOR AS LONG AS LEGITIMATES ARE NOT PRECLUDED; LEGITIME OF COMPULSORY HEIRS IS DETERMINED AFTER COLLATION; PROPERTY CERTIFICATE NOT SUBJECT TO COLLATERAL ATTACK
SPOUSES FLORENTINO ZARAGOZA AND ERLINDA ENRIQUEZ-ZARAGOZA VS. THE HONORABLE COURT OF APPEALS
G.R. No. 106401. September 29, 2000
Facts: Flavio Zaragoza Cano was the registered owner of certain parcels of land. He had four children namely: Gloria, Zacariaz, Florentino and Alberta, all surnamed Zaragoza. On December 9, 1964, he died without a will and was survived by his four children.
On December 28, 1981, private respondent Alberta Zaragoza-Morgan filed a complaint with the Court of First Instance against petitioner-spouses Florentino and Erlinda for delivery of her inheritance share and for payment of damages. She claims that she is a natural-born Filipino citizen and the youngest child of the late Flavio. She further alleged that her father in his lifetime partitioned the properties among his four children. The shares of her brothers and sister were given to them in advance by way of deed of sale, but without valid consideration, while her share was not conveyed by way of deed of sale then.
Petitioners denied knowledge of an alleged distribution by way of deeds of sale to them by their father. They denied knowledge of the alleged intention of their father to convey the cited lots to Alberta, much more, the reason for his failure to do so because she became an American citizen. They denied that there was partitioning of the estate of their father during his lifetime.
The Regional Trial Court rendered judgment adjudicating Lot 471 in the name of Flavio Zaragoza Cano to Alberta Zaragoza-Morgan as appertaining her share in his estate.
Issues: (1) Whether the partition inter vivos by Flavio Zaragoza Cano of his properties is valid.
(2) Whether the validity of the deed of sale and consequently, the transfer certificate of title over the lot registered in the name of petitioners can be a valid subject matter of the entire proceeding for the delivery of inheritance share.
Held: Both the trial court and the public respondent found that during the lifetime of Flavio, he already partitioned and distributed his properties among his three children, excepting private respondent through deeds of sale. A deed of sale was not executed in favor of private respondent because she had become an American citizen and the Constitution prohibited a sale in her favor.
It is basic in the law of succession that a partition inter vivos may be done for as long as legitimes are not prejudiced. Unfortunately, collation cannot be done in this case where the original petition for delivery of inheritance share only impleaded one of the other compulsory heirs. The petition must therefore be dismissed without prejudice to the institution of a new proceeding where all the indispensable parties are present for the rightful determination of their respective legitime and if the legitimes were prejudiced by the partitioning inter vivos.
Private respondent, in submitting her petition for the delivery of inheritance share, was in effect questioning the validity of the deed of sale in favor of petitioner and consequently, the transfer of certificate of title issued in the latter’s name. although the trial court, as an obiter, made a finding of validity of the conveyance of the said lot, since according to it, private respondent did not question the genuineness of the signature of the deceased, nevertheless, when the case was elevated to the Court of Appeals, the latter declared the sale to be fictitious because of finding of marked differences in the signature of Flavio in the deed of sale vis-à-vis signatures found in earlier documents. Could this be done? The petition is a collateral attack. A certificate of title shall not be subject to collateral attack. It cannot be altered, modified or cancelled except in a direct proceeding in accordance with law.

CREDIT TRANSACTIONS
FIRST FIL-SIN LENDING CORPORATION VS. GLORIA PADILLO
G.R. No. 160533. January 12, 2005

Facts: Respondent Gloria D. Padillo obtained a P500,000.00 loan from petitioner First Fil-Sin Lending Corp. and subsequently obtained another P500,000.00 loan from the same. In both instances, respondent executed a promissory note and disclosure statement. For the first loan, respondent made 13 monthly interest payments of P22,500.00 each before she settled the P500,000.00 outstanding principal obligation. As regards the second loan, respondent made 11 monthly interest payments of P25,000.00 each before paying the principal loan of P500,000.00. In sum, respondent paid a total of P792,500.00 for the first loan and P775,000.00 for the second loan. Thereafter, respondent filed an action for sum of money against petitioner alleging that she only agreed to pay interest at the rates of 4.5% and 5% per annum, respectively, for the two loans, and not 4.5% and 5% per month. The trial court dismissed respondent’s complaint. On appeal, the appellate court ruled that, based on the disclosure statements executed by respondent, the interest rates should be imposed on a monthly basis but only for the 3-month term of the loan. Thereafter, the legal interest rate will apply. The court also found the penalty charges pegged at 1% per day of delay highly unconscionable as it would translate to 365% per annum. Thus, it was reduced to 1% per month or 12% per annum.
Petitioner maintains that the interest rates are to be imposed on a monthly and not on a per annum basis. However, it insists that the 4.5% and 5% monthly interest shall be imposed until the outstanding obligations have been fully paid.
As to the penalty charges, petitioner argues that the 12% per annum penalty imposed by the Court of Appeals in lieu of the 1% per day as agreed upon by the parties violates their freedom to stipulate terms and conditions as they may deem proper.
Respondent avers that the interest on the loans is per annum as expressly stated in the promissory notes and disclosure statements. The provision as to annual interest rate is clear and requires no room for interpretation. Respondent asserts that any ambiguity in the promissory notes and disclosure statements should not favor petitioner since the loan documents were prepared by the latter.
Issue: Whether or not the applicable interest should be the legal interest of twelve percent (12%) per annum despite the clear agreement of the parties on another applicable rate.
Held: Perusal of the promissory notes and the disclosure statements pertinent to the loan obligations of respondent clearly and unambiguously provide for interest rates of 4.5% per annum and 5% per annum, respectively. Nowhere was it stated that the interest rates shall be applied on a monthly basis. Thus, when the terms of the agreement are clear and explicit that they do not justify an attempt to read into it any alleged intention of the parties, the terms are to be understood literally just as they appear on the face of the contract. It is only in instances when the language of a contract is ambiguous or obscure that courts ought to apply certain established rules of construction in order to ascertain the supposed intent of the parties.

PHILIPPINE NATIONAL BANK VS. COURT OF APPEALS
G.R. No. 126908. January 16, 2003
Facts: Spouses Mateo and Carlita Cruz owned a parcel of land. They obtained a loan from the Philippine National Bank (PNB) in the amount of Php70,000 and constituted a real estate mortgage using their parcel of land to secure said loan. Subsequently, Mateo Cruz obtained an agricultural crop loan from PNB in the amount of Php156,000 which was also secured by a real estate mortgage. After Land Bank remitted to PNB Php359, 500 in bonds, Php174.43 in cash and transferred Php25,500 in bonds, PNB issued a Deed of Release of Real Estate Mortgage in favor of the Spouses Cruz. Consequently, PNB released all titles to them. Later Spouses Cruz loaned again from PNB and secured it with another real estate mortgage. Spouses Antonio and Soledad So Hu paid for the release of the mortgaged property since they were interested in it. Thus a Deed of Absolute Sale was entered into by Spouses So Hu and Spouses Cruz, conveying the property to the former. PNB conducted a public auction sale covering the property in question under the contention that Spouses Cruz failed to pay their loan. Since it was the sole and highest bidder, it now claimed the property. When PNB found Spouses So Hu In possession of the property, they were asked to vacate the property.
Issue: Is the extra judicial foreclosure of the third mortgage valid?
Held: It is manifested in records that Spouses So Hu had already paid the principal obligation secured by the third mortgage. A contract of mortgage is an accessory contract which derives its existence from the principal contract. Thus, if the principal ceases to be it also ceases. In this case, with the extinguishment of the loan, the mortgage is also extinguished.
Note that the loan secured by the mortgage was already paid prior to the foreclosure. Thus, the property can no longer be validly foreclosed since it would be a foreclosure that satisfies an extinguished obligation.

RAMIREZ VS. COURT OF APPEALS
G.R. No. 133841. August 15, 2003
Facts: On December 29, 1965, private respondent spouses Loreto Claravall and Victoria Claravall executed a deed of sale in favor of spouses Francisco and Carolina Ramirez covering a parcel of land including the improvements thereon with an option to repurchase within a period of two years. At the expiration of the two-year period, the Claravalls failed to redeem the property, prompting them to file a complaint against the spouses Ramirez to compel the latter to sell the property back to them. The Supreme Court found that the Deed of Absolute sale with option to repurchase was one of equitable mortgage.
Following the death of Francisco Ramirez, the spouses Claravall filed a complaint for accounting and damages against the Intestate Estate of Francisco Ramirez alleging among others that the spouses Ramirez acted fraudulently and in bad faith in refusing and obstructing the redemption of the property by the private respondents from January 2, 1968 to December 31, 1993 during which petitioners were receiving rentals from the tenants of the property which must be accounted for and returned to private respondents.
Issue: Whether or not petitioners were entitled to the fruits of the property as prior to the redemption thereof, they were the registered owners and not private respondents.
Held: The declaration by the Supreme Court in the first case that the deed of sale with option to repurchase entered into by the spouses Ramirez and private respondents was an equitable mortgage necessarily takes the deed out of the ambit of the law on sales and puts into operation the law on mortgage.
It is a well-established doctrine that the mortgagor’s default does not operate to vest the mortgagee the ownership of the encumbered property and the act of the mortgagee in registering the mortgaged property in his own name upon the mortgagor’s failure to redeem the property amounts to pactum commissorium, a forfeiture clause declared by the Court as contrary to good morals and public policy and, therefore, void. Before perfect title over a mortgaged property may thus be secured by the mortgagee, he must, in case of non-payment of the debt, foreclose the mortgage first and thereafter purchase the mortgaged property at the foreclosure sale.

CONTRACT OF LOAN; REAL CONTRACT; RECIPROCAL OBLIGATION

BPI INVESTMENT CORPORATION VS. COURT OF APPEALS
377 SCRA 177. February 15, 2002

Facts: Frank Roa obtained a loan Ayala Investment and Development Corporation (AIDC), the predecessor of BPIIC, for the construction of a house on his lot in Muntinlupa. Said house and lot were mortgaged to AIDC to secure the loan. In 1980, Roa sold the house and lot to respondents ALS Management and Development Corporation (ALS) and Antonio Litonjua. As paty of the purchase price, ALS and Litonjua assumed the balance of the Roa’s indebtedness with AIDC. Thereafter, AIDC granted the respondents a new loan of P500 000 to be applied to Roa’s debt and such loan to be secured by the property, at an interest rate of 20% per annum and service fee of 1% per annum on the outstanding principal balance payable within ten years. On March 31, 1981, respondents executed a mortgage deed containing the above stipulations with the provision that payments of monthly amortization shall commence on May 1, 1981. On September 13, 1982, BPIIC released to respondents P&146.87 purporting to be what was left of the latter5’s loan after fully paying the loan of Roa.
On June 1984, BPIIC instituted foreclosure proceedings against the respondents because of their failure to pay the mortgage indebtedness. However, respondents filed a civil case against BPIIC opposing the foreclosure proceedings. In the said case, BPIIC claims that a contract of loan is a consensual contract and a contract of loan is perfected at the time the contract of mortgage is executed conformably with the ruling in Bonnevie vs. CA (125 SCRA 122). In the present case, the loan contract was perfected on March 31, 1981, the date when the mortgage deed was executed; hence, the amortization and interests on the loan should be computed from the said date. On the other hand, respondents argue that based on Article 1934 of the NCC, a simple loan was perfected upon the delivery of the contract, hence a real contract. In this case, it was only on September 13, 1982 that the loan contract was perfected, the date when the full loan was released to the respondents. The trial court rendered a decision in favor of the respondents, which was subsequently affirmed by the Court of Appeals.

Issue: Whether or not a contract of loan is a consensual contract or real contract.

Held: A contract of loan is not a consensual contract but a real contract. It is perfected only upon the delivery of the object of the contract. Petitioner misapplied the Bonnevie case. The contract in Bonnevie declared by this Court as a perfected consensual contract falls under the first clause of Art. 1934 of the NCC. It is an accepted promise to deliver something by way of a simple loan.
Also, a contract of loan involves a reciprocal obligation wherein the obligation of each party is the consideration for that of the other. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him; only when a party has performed his part if the contract can he demand that the other party also fulfill his own obligation an if the latter fails, default sets in. Consequently, petitioner could not demand for the payment of the monthly amortization after September 134, 1982 for it was only then when it complied with its obligation under the loan contract. Therefore, in computing the amount due, the starting date is October 13, 1982 not May 1981.

MORTGAGE; BANKING INSTITUTION

BENJAMIN NAVARRO VS. SECOND LAGUNA DEV’T. BANK
G.R. No. 129428. February 27, 2003

Facts: Spouse Catalino and Consuelo Navarro owned a certain registered land and sold 5/6 of the said lot to their five children. By virtue of the sale, petitioners Benjamin and Rosita Navarro are listed as co-owners of the property. Without the knowledge and consent of the petitioners, the other owners of the property executed a falsified deed of absolute sale wherein they made it appear that the entire lot was sold to spouses Donalito Velasco and Esther Navarro. Thus a new TCT was issued in the name of the spouses Velasco. Subsequently, spouses Velasco mortgaged the property to respondent Laguna Development Bank to secure payment of a loan. Thereafter, the bank had the mortgaged foreclosed. On two occasions, petitioners wrote the bank, offering to redeem the property which petitioner failed to do and led to the consolidation of the ownership over the property in favor of the respondent bank. Petitioners filed a complaint praying, inter alia, the annulment of the mortgage. They alleged that the sale of the lot with respect to their 1/6 share is void ab initio considering the signatures appearing in the Deed of Absolute Sale were falsified and as such the mortgage contract involving their share executed by spouses alleging that the respondent spouses were purchasers in bad faith because they knew of the pending litigation concerning the property.

Issue: Whether or not the respondent bank acted in bad faith when it accepted said mortgage the property subject of a falsified Deed of Sale and when it subsequently sold property to respondent spouses Guzman.

Held: Respondent did not act in bad faith. This Court stressed that a mortgagee-bank is expected to exercise greater care and prudence before entering into a mortgage contract, even those involving registered land. The ascertainment of the status or the consdition of a property offered to it as a security for a loan must be a standard and indispensable part of its operation.
In entering into a mortgage contract with spouses Velasco, there was no indication that respondent bank acted in bad faith. Spouses Velasco presented to the bank their TCT showing they were then the absolute owners thereof. Indeed there was no circumstances or indications that aroused respondent bank’s suspicion that the title was defective. Moreover, it is a settled jurisprudence that whoever alleges bad faith in any transaction must substantiate his allegation, since, it is presumed that a person takes ordinary care of his concerns and that private transactions are entered into in good faith. Clearly, petitioners are wanting in this respect. In this connection, it bears reiterating that in their two letters to respondent bank earlier mentioned, petitioners did not state that spouses Velasco falsified their signatures appearing in the Deed of Absolute Sale. Nor did they question the validity of the mortgage and its foreclosure. Indeed, those letters could have led the bank to believe that petitioners recognize the validity of the Deed of Absolute Sale and the mortgage as well as its subsequent foreclosure.