August 2009 Philippine Supreme Court Decisions on Civil Law

Here are selected August 2009 Philippine Supreme Court decisions on civil law:

Contracts;  binding effect.  As a general rule, obligations derived from a contract are transmissible (see Article 1311, par.1 of the Civil Code).  The loan in this case was contracted by respondent. He died while the case was pending before the Court of Appeals. While he may no longer be compelled to pay the loan, the debt subsists against his estate. No property or portion of the inheritance may be transmitted to his heirs unless the debt has first been satisfied.  William Ong Genato vs. Benjamin Bayhon, et al., G.R. No. 171035, August 24, 2009.

Contracts;  breach.  CCC defaulted in the payment of its obligation to FILSYSTEMS under the Compromise Agreement. On the other hand, FILSYSTEMS was not in default; however, considering that it failed to perform the obligation incumbent upon it under the Compromise Agreement, it must be held liable for the cost of completion of the unfinished portion of the project.  Continental Cement Corp., vs. Filipinas (PREFAB) Systems, Inc./Filipinas (PREFAB) Systems, inc. vs. Continental Cement Corp., G.R. No. 176917/G.R. No. 176919, August 4, 2009.

Contracts; due and demandable obligations.  Petitioner does not deny that she obtained a loan from respondent. She, however, contends that the loan is not yet due and demandable because the suspensive condition – the completion of the renovation of the apartment units – has not yet been fulfilled. She also assails the award of attorney’s fees to respondent as baseless.

For his part, respondent admits that initially, they agreed that payment of the loan shall be made upon completion of the renovations. However, respondent claims that during their meeting with some family members in the house of their brother Genaro sometime in the second quarter of 1997, he and petitioner entered into a new agreement whereby petitioner was to start making monthly payments on her loan, which she did from June to October of 1997. 

Evidently, by virtue of the subsequent agreement, the parties mutually dispensed with the condition that petitioner shall only begin paying after the completion of all renovations. There was, in effect, a modificatory or partial novation, of petitioner’s obligation under Article 1291 of the Civil Code. Maria Soledad Tomimbang vs. Atty. Jose Tomimbang, G.R. No. 165116, August 4, 2009.

Contracts; extrajudicial settlement. The Extrajudicial Settlement of Estate with Absolute Sale executed by Corazon and Epitacio through the latter’s attorney-in-fact, Vicente Angeles, partakes of the nature of a contract. To be precise, the said document contains two contracts, to wit: the extrajudicial adjudication of the estate of Julian Angeles between Corazon and Epitacio as Julian’s compulsory heirs, and the absolute sale of the adjudicated properties to Cornelia. While contained in one document, the two are severable and each can stand on its own. Hence, for its validity, each must comply with the requisites prescribed in Article 1318 of the Civil Code, namely (1) consent of the contracting parties; (2) object certain, which is the subject matter of the contract; and (3) cause of the obligation which is established. Cornelia Baladad (Represented by Heinrich M. Angeles and Rex Aaron A. Baladad) vs. Sergio A. Rublico and Spouses Laureano E. Yupano, G.R. No. 160743. August 4, 2009

Contracts; loan. Since the obligation in this case involves a loan and there is no stipulation in writing as to interest due, the rate of interest shall be 12% per annum computed from the date of extrajudicial demand.  Maria Soledad Tomimbang vs. Atty. Jose Tomimbang, G.R. No. 165116, August 4, 2009.

Contract; perfection. Article 1318 of the Civil Code declares that no contract exists unless the following requisites concur: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation established. Since the object of the parties’ agreement involves properties co-owned by Consuelo and her children, the petitioners-heirs insist that their approval of the sale initiated by their mother, Consuelo, was essential to its perfection. Accordingly, their refusal amounted to the absence of the required element of consent.

That a thing is sold without the consent of all the co-owners does not invalidate the sale or render it void. Article 493 of the Civil Code recognizes the absolute right of a co-owner to freely dispose of his pro indiviso share as well as the fruits and other benefits arising from that share, independently of the other co-owners. Thus, when Consuelo agreed to sell to the respondents the subject properties, what she in fact sold was her undivided interest that, as quantified by the RTC, consisted of one-half interest, representing her conjugal share, and one-sixth interest, representing her hereditary share.

The petitioners-heirs nevertheless argue that Consuelo’s consent was predicated on their consent to the sale, and that their disapproval resulted in the withdrawal of Consuelo’s consent. Yet, we find nothing in the parties’ agreement or even conduct – save Consuelo’s self-serving testimony – that would indicate or from which we can infer that Consuelo’s consent depended on her children’s approval of the sale. The explicit terms of the June 8, 1989 receipt provide no occasion for any reading that the agreement is subject to the petitioners-heirs’ favorable consent to the sale.

The presence of Consuelo’s consent and, corollarily, the existence of a perfected contract between the parties are further evidenced by the payment and receipt of P20,000.00, an earnest money by the contracting parties’ common usage. The law on sales, specifically Article 1482 of the Civil Code, provides that whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract. Although the presumption is not conclusive, as the parties may treat the earnest money differently, there is nothing alleged in the present case that would give rise to a contrary presumption. In cases where the Court reached a conclusion contrary to the presumption declared in Article 1482, we found that the money initially paid was given to guarantee that the buyer would not back out from the sale, considering that the parties to the sale have yet to arrive at a definite agreement as to its terms – that is, a situation where the contract has not yet been perfected. These situations do not obtain in the present case, as neither of the parties claimed that the P20,000.00 was given merely as guarantee by the respondents, as vendees, that they would not back out from the sale. As we have pointed out, the terms of the parties’ agreement are clear and explicit; indeed, all the essential elements of a perfected contract are present in this case. While the respondents required that the occupants vacate the subject properties prior to the payment of the second installment, the stipulation does not affect the perfection of the contract, but only its execution.

In sum, the case contains no element, factual or legal, that negates the existence of a perfected contract between the parties.  Heirs of Cayetano Pangan and Consuelo Pangan vs. Spouses Rogelio Perreras and Priscilla G. Perreras, G.R. No. 157374, August 27, 2009

Contract;  Maceda Law.  As in the rescission of a contract of sale for nonpayment of the price, the defaulting vendee in a contract to sell may defeat the vendor’s right to cancel by invoking the rights granted to him under Republic Act No. 6552 or the Realty Installment Buyer Protection Act (also known as the Maceda Law); this law provides for a 60-day grace period within which the defaulting vendee (who has paid less than two years of installments) may still pay the installments due. Only after the lapse of the grace period with continued nonpayment of the amounts due can the actual cancellation of the contract take place. 

Significantly, the Court has consistently held that the Maceda Law covers not only sales on installments of real estate, but also financing of such acquisition; its Section 3 is comprehensive enough to include both contracts of sale and contracts to sell, provided that the terms on payment of the price require at least two installments. The contract entered into by the parties herein can very well fall under the Maceda Law.

Based on the above discussion, we conclude that the respondents’ payment on June 15, 1989 of the installment due on June 14, 1989 effectively defeated the petitioners-heirs’ right to have the contract rescinded or cancelled. Whether the parties’ agreement is characterized as one of sale or to sell is not relevant in light of the respondents’ payment within the grace period provided under Article 1592 of the Civil Code and Section 4 of the Maceda Law. The petitioners-heirs’ obligation to accept the payment of the price and to convey Consuelo’s conjugal and hereditary shares in the subject properties subsists.  Heirs of Cayetano Pangan and Consuelo Pangan vs. Spouses Rogelio Perreras and Priscilla G. Perreras, G.R. No. 157374, August 27, 2009

Contract; novation. The obligation to pay a sum of money is not novated by an instrument that expressly recognizes the old, changes only the terms of payment, adds other obligations not incompatible with the old ones or the new contract merely supplements the old one.
The grant by Betonval to FSI of a 45-day credit extension did not novate the contracts so as to extinguish the latter. There was no incompatibility between them. There was no intention by the parties to supersede the obligations under the contracts. In fact, the intention of the 45-day credit extension was precisely to revive the old obligation after the original period expired with the obligation unfulfilled. The grant of a 45-day credit period merely modified the contracts by extending the period within which FSI was allowed to settle its obligation. Since the contracts remained the source of FSI’s obligation to Betonval, the stipulation to pay 30% p.a. interest likewise remained. Foundation Specialist, Inc. vs. Betonval Ready Concrete, Inc., et al., G.R. No. 170674, August 24, 2009.

Contracts; void contract. The subject dacion en pago is a simulated or fictitious contract, and hence void. The evidence shows that at the time it was allegedly signed by the wife of the respondent, his wife was already dead. This finding of fact cannot be reversed. William Ong Genato vs. Benjamin Bayhon, et al., G.R. No. 171035, August 24, 2009.

Contracts; waiver. Neither did Betonval waive the stipulated interest rate of 30% p.a., as FSI erroneously claims. A waiver is a voluntary and intentional relinquishment or abandonment of a known legal right or privilege. A waiver must be couched in clear and unequivocal terms which leave no doubt as to the intention of a party to give up a right or benefit which legally pertains to him. FSI did not adduce proof that a valid waiver was made by Betonval.  FSI’s claim is therefore baseless.

On the other hand, there can be no other conclusion but that Betonval had reduced the imposable interest rate from 30% to 24% p.a. and this reduced interest rate was accepted, albeit impliedly, by FSI when it proposed a new schedule of payments and, in fact, actually made payments to Betonval with 24% p.a. interest. By its own actions, therefore, FSI is estopped from questioning the imposable rate of interest.  Foundation Specialist, Inc. vs. Betonval Ready Concrete, Inc., et al., G.R. No. 170674, August 24, 2009.

Damages; attorney’s fees.   As to attorney’s fees, award therefor cannot be allowed by the Court.  It is an oft-repeated rule that the trial court is required to state the factual, legal or equitable justification for awarding attorney’s fees.  In the present case, where it is understandable that some misunderstanding could arise as to when the obligation was indeed due and demandable, the Court must likewise disallow the award of attorney’s fees.  Maria Soledad Tomimbang vs. Atty. Jose Tomimbang, G.R. No. 165116, August 4, 2009.

Damages; attorney’s fees.  Article 2208 of the Civil Code enumerates the instances justifying the grant of attorney’s fees; in all cases, the award must be reasonable, just and equitable. Attorney’s fees as part of damages are not meant to enrich the winning party at the expense of the losing litigant. They are not awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate. The award of attorney’s fees is the exception rather than the general rule. Thus, findings reflecting the conditions imposed by Article 2208 are necessary to justify an award; attorney’s fees mentioned only in the dispositive portion of the decision without any prior justification in the body of the decision is a baseless award that must be struck down.  Francisco Madrid and Edgardo Bernardo vs. Spouses Bonifacio Mapoy and Felicidad MartinezG.R. No. 150887, August 14, 2009.

Damages;  attorney’s fees.  No premium should be placed on the right to litigate. Attorney’s fees are not to be awarded every time a party wins a suit. Even when a claimant is compelled to litigate or to incur expenses to protect his rights, still attorney’s fees may not be awarded where there is no sufficient showing of bad faith in a party’s persistence in a case other than an erroneous conviction of the righteousness of his cause.   Dart Philippines, Inc. vs. Spouses Francisco and Erlinda Calogcog, G.R. No. 149241, August 24, 2009.

Damages;  crime.  When death occurs due to a crime, the following damages may be awarded: (1) civil indemnity ex delicto for the death of the victim; (2) actual or compensatory damages; (3) moral damages; (4) exemplary damages; and (5) temperate damages.  People of the Philippines vs. Ismael Diaz @ Maeng and Rodolfo Diaz @ Nanding, G.R .No. 185841, August 4, 2009.

Damages;  interest.  The interest has been pegged at 5% per month, or 60% per annum. This is unconscionable, hence cannot be enforced. In light of this, the rate of interest for this kind of loan transaction has been fixed in the case of Eastern Shipping Lines v. Court of Appeals, at 12% per annum, calculated from October 3, 1989, the date of extrajudicial demand.  William Ong Genato vs. Benjamin Bayhon, et al., G.R. No. 171035, August 24, 2009.  See Maria Soledad Tomimbang vs. Atty. Jose Tomimbang, G.R. No. 165116, August 4, 2009.

Damages;  liquidated damages.  In the present case, the factors considered by the Court of Appeals were the absence of bad faith on the part of Urban and the fact that the project was 97% complete at the time it was turned over to Insular.  In addition, we noted that Insular is likewise not entirely blameless considering that it failed to pay Urban P1,144,030.94 representing the balance of unpaid change orders and to return the retention money in the amount of P2,134,908.80, or a total of P3,578,939.74.  Had Insular released said amount upon demand, the same could have been used by Urban to comply with its obligation to purchase the needed construction materials and to expedite the completion of the project.  Under the circumstances, we find that this omission on the part of Insular justifies a further reduction of the liquidated damages decreed against Urban from P2,940,000.00 to P1,940,000.00.

As a general rule, courts are not at liberty to ignore the freedom of the parties to agree on such terms and conditions as they see fit as long as they are not contrary to law, morals, and good custom, public policy or public order.  Nevertheless courts may equitably reduce a stipulated penalty in the contract where, as in the instant case, the principal obligation has been partly performed (97%) and where the penalty is iniquitous. Urban Consolidated Constructors Philippines, Inc. vs. The Insular Life Assurance Co., Inc., G.R. No. 180824, August 28, 2009.

Damages; proximate cause. Proximate cause is defined as that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred. And more comprehensively, the proximate legal cause is that acting first and producing the injury, either immediately or by setting other events in motion, all constituting a natural and continuous chain of events, each having a close causal connection with its immediate predecessor, the final event in the chain immediately effecting the injury as a natural and probable result of the cause which first acted, under such circumstances that the person responsible for the first event should, as an ordinary prudent and intelligent person, have reasonable ground to expect at the moment of his act or default that an injury to some person might probably result therefrom.

If Aquilino heeded the MMDA prohibition against crossing Katipunan Avenue from Rajah Matanda, the accident would not have happened. This specific untoward event is exactly what the MMDA prohibition was intended for. Thus, a prudent and intelligent person who resides within the vicinity where the accident occurred, Aquilino had reasonable ground to expect that the accident would be a natural and probable result if he crossed Katipunan Avenue since such crossing is considered dangerous on account of the busy nature of the thoroughfare and the ongoing construction of the Katipunan-Boni Avenue underpass. It was manifest error for the Court of Appeals to have overlooked the principle embodied in Article 2179 of the Civil Code, that when the plaintiff’s own negligence was the immediate and proximate cause of his injury, he cannot recover damages.  Lambert S. Ramos vs. C.O.L. Realty Corporation, G.R. No. 184905, August 28, 2009

Tort; abuse of right.  We find that bad faith cannot be attributed to the acts of petitioner. Petitioner’s exercise of its rights under the agreement to conduct an audit, to vary the manner of processing purchase orders, and to refuse the renewal of the agreement was supported by legitimate reasons, principally, to protect its own business. The exercise of its rights was not impelled by any evil motive designed, whimsically and capriciously, to injure or prejudice respondents. The rights exercised were all in accord with the terms and conditions of the distributorship agreement, which has the force of law between them. Clearly, petitioner could not be said to have committed an abuse of its rights. It may not be amiss to state at this juncture that a complaint based on Article 19 of the Civil Code must necessarily fail if it has nothing to support it but innuendos and conjectures.
Given that petitioner has not abused its rights, it should not be held liable for any of the damages sustained by respondents. The law affords no remedy for damages resulting from an act which does not amount to a legal wrong. Situations like this have been appropriately denominated damnum absque injuria.   Dart Philippines, Inc. vs. Spouses Francisco and Erlinda Calogcog, G.R. No. 149241, August 24, 2009.

Property Registration Decree and related laws

Free patent.  A Free Patent may be issued where the applicant is a natural-born citizen of the Philippines; is not the owner of more than twelve (12) hectares of land; has continuously occupied and cultivated, either by himself or through his predecessors-in-interest, a tract or tracts of agricultural public land subject to disposition, for at least 30 years prior to the effectivity of Republic Act No. 6940; and has paid the real taxes thereon while the same has not been occupied by any other person.

Once a patent is registered and the corresponding certificate of title is issued, the land covered thereby ceases to be part of public domain, becomes private property, and the Torrens Title issued pursuant to the patent becomes indefeasible upon the expiration of one year from the date of such issuance. However, a title emanating from a free patent which was secured through fraud does not become indefeasible, precisely because the patent from whence the title sprung is itself void and of no effect whatsoever.

No actual and extrinsic fraud existed in this case; at least, no convincing proof of such fraud was adduced. Other than his bare allegations, petitioner failed to prove that there was fraud in the application, processing and grant of the Free Patent, as well as in the issuance of OCT No. P-23505. Neither was it proven that respondent actually took part in the alleged fraud.     Eugenio Encinares vs. Dominga Achero, G.R. No. 161419, August 25, 2009.

Torrens system; collateral attack on title. Registration of land under the Torrens system, aside from perfecting the title and rendering it indefeasible after the lapse of the period allowed by law, also renders the title immune from collateral attack. A collateral attack transpires when, in another action to obtain a different relief and as an incident of the present action, an attack is made against the judgment granting the title. This manner of attack is to be distinguished from a direct attack against a judgment granting the title, through an action whose main objective is to annul, set aside, or enjoin the enforcement of such judgment if not yet implemented, or to seek recovery if the property titled under the judgment had been disposed of. To permit a collateral attack on respondents-plaintiffs’ title is to water down the integrity and guaranteed legal indefeasibility of a Torrens title. 

The petitioners-defendants’ attack on the validity of respondents-plaintiffs’ title, by claiming that fraud attended its acquisition, is a collateral attack on the title. It is an attack incidental to their quest to defend their possession of the properties in an “accion publiciana,” not in a direct action whose main objective is to impugn the validity of the judgment granting the title. This is the attack that possession of a Torrens Title specifically guards against; hence, we cannot entertain, much less accord credit to, the petitioners-defendants’ claim of fraud to impugn the validity of the respondents-plaintiffs’ title to their property.  Francisco Madrid and Edgardo Bernardo vs. Spouses Bonifacio Mapoy and Felicidad MartinezG.R. No. 150887, August 14, 2009.

Torrens system;  registration of title. Section 14(1) of the Property Registration Decree lays down the following requisites for registration of title thereunder: (1) that the property in question is alienable and disposable land of the public domain; (2) that the applicants by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation; and (3) that such possession is under a bona fide claim of ownership since 12 June 1945 or earlier. Javier was able to comply with all these requirements.
To prove that the land subject of an application for registration is alienable, an applicant must establish the existence of a positive act of the government, such as a presidential proclamation or an executive order; an administrative action; investigation reports of Bureau of Lands investigators; and a legislative act or statute.  Republic of the Philippines vs. Neptuna G. Javier, G.R. No. 179905, August 19, 2009.

Torrens system;  Torrens title. Indubitably, a certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. The real purpose of the Torrens System of land registration is to quiet title to land and put stop forever to any question as to the legality of the title.

It is true that both trial and appellate courts actually maintained the indefeasibility of the certificate of title and desisted from annulling or modifying the same. But by declaring that the property is not located in Antipolo City, the location stated in the certificate of title, they, in effect, modified the same to the prejudice of the petitioner. Worse, they did so based on incomplete information. Notably, in Odsigue v. Court of Appeals, this Court, indeed, held that a certificate of title is conclusive evidence not only of ownership but also the location of the property. Pioneer Insurance and Surety Corporation vs. Heirs of Vicente Coronado, et al., G.R. No. 180357, August 4, 2009.

Torrens system;  Torrens title.  As a matter of law, a Torrens Certificate of Title is evidence of indefeasible title of property in favor of the person in whose name the title appears. The title holder is entitled to all the attributes of ownership of the property, including possession, subject only to limits imposed by law. In the present case, the respondents-plaintiffs are indisputably the holders of a certificate of title against which the petitioners-defendants’ claim of oral sale cannot prevail. As registered titleholders, they are entitled to possession of the properties. Francisco Madrid and Edgardo Bernardo vs. Spouses Bonifacio Mapoy and Felicidad MartinezG.R. No. 150887, August 14, 2009.

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