November 2010 Philippine Supreme Court Decisions on Civil Law

Here are selected November 2010 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Damages; attorney’s fees.  On the award of attorney’s fees, attorney’s fees and expenses of litigation were awarded because Alfredo was compelled to litigate due to the unjust refusal of Land Bank to refund the amount he paid. There are instances when it is just and equitable to award attorney’s fees and expenses of litigation.  Art. 2208 of the Civil Code pertinently states:

In the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except:

x x x x

(2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest.

Given that Alfredo was indeed compelled to litigate against Land Bank and incur expenses to protect his interest, we find that the award falls under the exception above and is, thus, proper given the circumstances. Land Bank of the Philippines vs. Alfredo Ong, G.R. No. 190755, November 24, 2010.

Damages; attorney’s fees.  Regarding the grant of attorney’s fees, the Court agrees with the RTC that said award is justified. Losin refused to pay Vitarich despite the latter’s repeated demands.  It was left with no recourse but to litigate and protect its interest. We, however, opt to reduce the same to P10,000.00 from P20,000.00. Vitarich Corporation vs. Chona Locsin, G.R. No. 181560, November 15, 2010.

Damages; for loss of earning capacity.  The award of damages for loss of earning capacity is concerned with the determination of losses or damages sustained by respondents, as dependents and intestate heirs of the deceased. This consists not of the full amount of his earnings, but of the support which they received or would have received from him had he not died as a consequence of the negligent act. Thus, the amount recoverable is not the loss of the victim’s entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have received.

Indemnity for loss of earning capacity is determined by computing the net earning capacity of the victim as follows:

Net Earning Capacity = life expectancy x (gross annual income -reasonable and necessary living expenses).

Life expectancy shall be computed by applying the formula (2/3 x [80 – age at death]) adopted from the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality. On the other hand, gross annual income requires the presentation of documentary evidence for the purpose of proving the victim’s annual income. The victim’s heirs presented in evidence Señora’s pay slip from the PNP, showing him to have had a gross monthly salary of P12,754.00. Meanwhile, the victim’s net income was correctly pegged at 50% of his gross income in the absence of proof as regards the victim’s living expenses. Constancia G. Tamayo, et al. vs. Rosalia Abad Señora, et al., G.R. No. 176946, November 15, 2010.

Damages; moral and exemplary; standard of diligence applicable to a bank.  The award of moral damages should be granted in reasonable amounts depending on the facts and circumstances of the case.  Moral damages are meant to compensate the claimant for any physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injuries unjustly caused.

As to the award of exemplary damages, the law allows it by way of example for the public good. The business of banking is impressed with public interest and great reliance is made on the bank’s sworn profession of diligence and meticulousness in giving irreproachable service.  Thus, the Court affirms the award as a way of setting an example for the public good. In addition, it also provided for attorney’s fees.  Both are subject to legal interest.

In any event, Citibank should have been more cautious in dealing with its clients since its business is imbued with public interest.  Banks must always act in good faith and must win the confidence of clients and people in general.  It is irrelevant whether the client is a lawyer or not. Citibank, N.A. vs. Atty. Ernesto S. Dinopol, G.R. No. 188412, November 22, 2010.

Filiation; cannot be collaterally attacked. It is settled law that filiation cannot be collaterally attacked. Well-known civilista Dr. Arturo M. Tolentino, in his book “Civil Code of the Philippines, Commentaries and Jurisprudence,” noted that the aforecited doctrine is rooted from the provisions of the Civil Code of the Philippines. He explained thus:

The legitimacy of the child cannot be contested by way of defense or as a collateral issue in another action for a different purpose.  The necessity of an independent action directly impugning the legitimacy is more clearly expressed in the Mexican code (article 335) which provides: “The contest of the legitimacy of a child by the husband or his heirs must be made by proper complaint before the competent court; any contest made in any other way is void.”  This principle applies under our Family Code.  Articles 170 and 171 of the code confirm this view, because they refer to “the action to impugn the legitimacy.” This action can be brought only by the husband or his heirs and within the periods fixed in the present articles. Eugenio R. Reyes, joined by Timothy Joseph M. Reyes, et al. vs. Librada F. Maurico and Leonida F. Mauricio, G.R. No. 175080, November 24, 2010

Lease; term; month-to-month basis. The well-entrenched principle is that a lease from month-to-month is with a definite period and expires at the end of each month upon the demand to vacate by the lessor.  As held by the Court of Appeals in the assailed Amended Decision, the above-mentioned lease contract was duly terminated by DBP by virtue of its letter dated June 18, 1987.  We reiterate that the letter explicitly directed the petitioners to come to the office of the DBP if they wished to enter into a new lease agreement with the said bank.  Otherwise, if no contract of lease was executed within 30 days from the date of the letter, petitioners were to be considered uninterested in entering into a new contract and were thereby ordered to vacate the property.  As no new contract was in fact executed between petitioners and DBP within the 30-day period, the directive to vacate, thus, took effect.  DBP’s letter dated June 18, 1987, therefore, constituted the written notice that was required to terminate the lease agreement between petitioners and Rudy Robles.  From then on, the petitioners’ continued possession of the subject property could be deemed to be without the consent of DBP.

Thusly, petitioners’ assertion that Article 1670 of the Civil Code is not applicable to the instant case is correct.  The reason, however, is not that the existing contract was continued by DBP, but because the lease was terminated by DBP, which termination was accompanied by a demand to petitioners to vacate the premises of the subject property.

Article 1670 states that “[i]f at the end of the contract the lessee should continue enjoying the thing leased for fifteen days with the acquiescence of the lessor, and unless a notice to the contrary by either party has previously been given, it is understood that there is an implied new lease, not for the period of the original contract, but for the time established in Articles 1682 and 1687.  The other terms of the original contract shall be revived.”

In view of the order to vacate embodied in the letter of DBP dated June 18, 1987 in the event that no new lease contract is entered into, the petitioners’ continued possession of the subject properties was without the acquiescence of DBP, thereby negating the constitution of an implied lease. Cebu Bionic Builders Supply, Inc. and Lydia Sia vs. Development Bank of the Philippines, et al., G.R. No. 154366, November 17, 2010.

Legal interest.  With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1.     When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing.  Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty.  Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. Land Bank of the Philippines vs. Alfredo Ong, G.R. No. 190755, November 24, 2010.

Legal interest. Inasmuch as the case at bar involves an obligation not arising from a loan or forbearance of money, but consists in the payment of a sum of money, the legal rate of interest is 6% per annum of the amount demanded. Interest shall continue to run from February 12, 1997, the date when Vitarich demanded payment of the sum amounting to P921,083.10 from Locsin (and not from the time of the filing of the Complaint) until finality of the Decision (not until fully paid). The rate of interest shall increase to 12% per annum only from such finality until its satisfaction, the interim period being deemed to be equivalent to a forbearance of credit. Vitarich Corporation vs. Chona Locsin, G.R. No. 181560, November 15, 2010.

Loan; no period for payment. There is no date of payment in the promissory notes. Accordingly, the creditor has the right to demand immediate payment. Article 1178 of the Civil Code applies. The fact that the creditor was content with the prior monthly check-off from the debtor’s salary is of no moment. Once the debot defaulted, the creditor could make a demand to enforce a pure obligation. Hongkong and Shanghai Banking Corp., Ltd. Staff Retirement Plan vs. Sps. Bienvenido and Editha Broqueza, G.R. No. 178610, November 17, 2010.

Novation.  Novation must be expressly consented to.  Moreover, the conflicting intention and acts of the parties underscore the absence of any express disclosure or circumstances with which to deduce a clear and unequivocal intent by the parties to novate the old agreement. Land Bank of the Philippines vs. Alfredo Ong, G.R. No. 190755, November 24, 2010.

Payment; from a third person.   Land Bank contends that Art. 1236 of the Civil Code backs their claim that Alfredo should have sought recourse against the Spouses Sy instead of Land Bank.  Art. 1236 provides:

The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.

Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor.

We agree with Land Bank on this point as to the first part of paragraph 1 of Art. 1236.  Land Bank was not bound to accept Alfredo’s payment, since as far as the former was concerned, he did not have an interest in the payment of the loan of the Spouses Sy.  However, in the context of the second part of said paragraph, Alfredo was not making payment to fulfill the obligation of the Spouses Sy.  Alfredo made a conditional payment so that the properties subject of the Deed of Sale with Assumption of Mortgage would be titled in his name.  It is clear from the records that Land Bank required Alfredo to make payment before his assumption of mortgage would be approved.  He was informed that the certificate of title would be transferred accordingly.  He, thus, made payment not as a debtor but as a prospective mortgagor.  But the trial court stated:

[T]he contract was not perfected or consummated because of the adverse finding in the credit investigation which led to the disapproval of the proposed assumption. There was no evidence presented that plaintiff was informed of the disapproval. What he received was a letter dated May 22, 1997 informing him that the account of spouses Sy had matured but there [were] no payments. This was sent even before the conduct of the credit investigation on June 20, 1997 which led to the disapproval of the proposed assumption of the loans of spouses Sy.

Alfredo, as a third person, did not, therefore, have an interest in the fulfillment of the obligation of the Spouses Sy, since his interest hinged on Land Bank’s approval of his application, which was denied.  The circumstances of the instant case show that the second paragraph of Art. 1236 does not apply.  As Alfredo made the payment for his own interest and not on behalf of the Spouses Sy, recourse is not against the latter.  And as Alfredo was not paying for another, he cannot demand from the debtors, the Spouses Sy, what he has paid. Land Bank of the Philippines vs. Alfredo Ong, G.R. No. 190755, November 24, 2010.

Payment; promissory note. Article 1249, paragraph 2 of the Civil Code provides “[T] he delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.”  [Emphasis supplied]

In the case at bar, no cash payment was proved. It was neither confirmed that the checks issued by Losin were actually encashed by Vitarich. Thus, the Court cannot consider that payment, much less overpayment, made by Locsin. Vitarich Corporation vs. Chona Locsin, G.R. No. 181560, November 15, 2010.

Property of the marriage; presumed conjugal.  All property of the marriage is presumed to be conjugal. However, for this presumption to apply, the party who invokes it must first prove that the property was acquired during the marriage.  Proof of acquisition during the coverture is a condition sine qua non to the operation of the presumption in favor of the conjugal partnership. Thus, the time when the property was acquired is material. Evangeline D. Imani vs.  Metropolitan Bank and Trust Company, G.R. No. 187023, November 17, 2010.

Property registration; proof of alienable character; proof of possession. Under the Regalian doctrine, all lands of the public domain belong to the State. All lands not appearing to be clearly within private ownership are presumed to belong to the State. The burden of proof in overcoming the presumption of State ownership of the lands of the public domain is on the person applying for registration (or claiming ownership).  To overcome this presumption, incontrovertible evidence must be established that the land subject of the application (or claim) is alienable or disposable.

To support its contention that the land subject of the application for registration is alienable, respondents presented the survey plan with the following annotation:

This survey is inside L.C. Map No. 2623 Proj. No. 27-B clasified as alienable/disposable by the Bureau of Forest Development, Quezon City on Jan. 03, 1968.

The surveyor’s annotation presented by respondents is not the kind of proof required by law to prove that the subject land falls within the alienable and disposable zone.  Respondents failed to submit a certification from the proper government agency to establish that the subject land are part of the alienable and disposable portion of the public domain. In the absence of incontrovertible evidence to prove that the subject property is already classified as alienable and disposable, we must consider the same as still inalienable public domain.

Anent respondents’ possession and occupation of the subject property, a reading of the records failed to show that the respondents by themselves or through their predecessors-in-interest possessed and occupied the subject land since June 12, 1945 or earlier. The evidence submitted by respondents to prove their possession and occupation over the subject property consists of the testimonies of Jose and Amado Geronimo (Amado), the tenant of the adjacent lot. However, their testimonies failed to establish respondents’ predecessors-in-interest’ possession and occupation of subject property since June 12, 1945 or earlier. But Jose and Amado’s testimonies consist merely of general statements with no specific details as to when respondents’ predecessors-in-interest began actual occupancy of the land subject of this case. It is a rule that general statements that are mere conclusions of law and not factual proof of possession are unavailing and cannot suffice. An applicant in a land registration case cannot just harp on mere conclusions of law to embellish the application but must impress thereto the facts and circumstances evidencing the alleged ownership and possession of the land.

Respondents’ earliest evidence can be traced back to a tax declaration issued in the name of their predecessors-in-interest only in the year 1949. At best, respondents can only prove possession since said date. What is required is open, exclusive, continuous and notorious possession by respondents and their predecessors-in-interest, under a bona fide claim of ownership, since June 12, 1945 or earlier. Well settled is the rule that tax declarations and receipts are not conclusive evidence of ownership or of the right to possess land when not supported by any other evidence. Vitarich Corporation vs. Chona Locsin, G.R. No. 171631, November 15, 2010.

Property; buyer in good faith. To prove good faith, the rule is that the buyer of registered land needs only show that he relied on the title that covers the property.  But this is true only when, at the time of the sale, the buyer was unaware of any adverse claim to the property. Otherwise, the law requires the buyer to exercise a higher degree of diligence before proceeding with his purchase.  He must examine not only the certificate of title, but also the seller’s right and capacity to transfer any interest in the property.  In such a situation, the buyer must show that he exercised reasonable precaution by inquiring beyond the four corners of the title.  Failing in these, he may be deemed a buyer in bad faith. Filinvest Development Corporation vs. Golden Haven Memorial Park, Inc. / Golden Haven Memorial Park, Inc. vs. Filinvest Development Corporation, G.R. No. 187824 / G.R. No. 188265. November 17, 2010.

Succession. Considering that Roman died on August 9, 1976, the provisions of the Civil Code on succession, then the law in force, should apply, particularly Articles 979 and 980, viz.

Art. 979. Legitimate children and their descendants succeed the parents and other ascendants, without distinction as to sex or age, and even if they should come from different marriages. x x x.

Art. 980.  The children of the deceased shall always inherit from him in their own right, dividing the inheritance in equal shares.

Thus, the RTC correctly ruled that Lot No. 1-P rightfully belongs to the 11 children of Roman, seven from his first marriage with Flavia and four from his second marriage with Ceferina, in equal shares.  As there was no partition among Roman’s children, the lot was owned by them in common.  And inasmuch as Flavia did not successfully repudiate her sale of her aliquot share to Cresencia, the transfer stands as valid and effective.  Consequently, what Cresencia sold to petitioner spouses was her own share and Flavia’s share in the property that she acquired by virtue of the notarized deed of sale, which is only 2/11 of Lot No. 1-P.  Therefore, the restitution of the property in excess of that portion by petitioner spouses is clearly warranted. Sps. Mariano and Emma Bolaños vs. Roscef Zuñga Bernarte, et al., G.R. No. 180997, November 17, 2010.

Unjust enrichment.  Land Bank maintains that the trial court erroneously applied the principle of equity and justice in ordering it to return the PhP 750,000 paid by Alfredo. Alfredo was allegedly in bad faith and in estoppel. Land Bank contends that it enjoyed the presumption of regularity and was in good faith when it accepted Alfredo’s tender of PhP 750,000. It reasons that it did not unduly enrich itself at Alfredo’s expense during the foreclosure of the mortgaged properties, since it tendered its bid by subtracting PhP 750,000 from the Spouses Sy’s outstanding loan obligation. Alfredo’s recourse then, according to Land Bank, is to have his payment reimbursed by the Spouses Sy.

We rule that Land Bank is still liable for the return of the PhP 750,000 based on the principle of unjust enrichment. Land Bank is correct in arguing that it has no obligation as creditor to recognize Alfredo as a person with interest in the fulfillment of the obligation. But while Land Bank is not bound to accept the substitution of debtors in the subject real estate mortgage, it is estopped by its action of accepting Alfredo’s payment from arguing that it does not have to recognize Alfredo as the new debtor. By accepting Alfredo’s payment and keeping silent on the status of Alfredo’s application, Land Bank misled Alfredo to believe that he had for all intents and purposes stepped into the shoes of the Spouses Sy.

We turn then on the principle upon which Land Bank must return Alfredo’s payment. Unjust enrichment exists “when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience.” There is unjust enrichment under Art. 22 of the Civil Code when (1) a person is unjustly benefited, and (2) such benefit is derived at the expense of or with damages to another.

Additionally, unjust enrichment has been applied to actions called accion in rem verso. In order that the accion in rem verso may prosper, the following conditions must concur: (1) that the defendant has been enriched; (2) that the plaintiff has suffered a loss; (3) that the enrichment of the defendant is without just or legal ground; and (4) that the plaintiff has no other action based on contract, quasi-contract, crime, or quasi-delict. The principle of unjust enrichment essentially contemplates payment when there is no duty to pay, and the person who receives the payment has no right to receive it.

The principle applies to the parties in the instant case, as, Alfredo, having been deemed disqualified from assuming the loan, had no duty to pay petitioner bank and the latter had no right to receive it.

Moreover, the Civil Code likewise requires under Art. 19 that “[e]very person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.”  Land Bank, however, did not even bother to inform Alfredo that it was no longer approving his assumption of the Spouses Sy’s mortgage. Yet it acknowledged his interest in the loan when the branch head of the bank wrote to tell him that his daughter’s loan had not been paid. Land Bank made Alfredo believe that with the payment of PhP 750,000, he would be able to assume the mortgage of the Spouses Sy. The act of receiving payment without returning it when demanded is contrary to the adage of giving someone what is due to him. The outcome of the application would have been different had Land Bank first conducted the credit investigation before accepting Alfredo’s payment. He would have been notified that his assumption of mortgage had been disapproved; and he would not have taken the futile action of paying PhP 750,000. The procedure Land Bank took in acting on Alfredo’s application cannot be said to have been fair and proper.

As to the claim that the trial court erred in applying equity to Alfredo’s case, we hold that Alfredo had no other remedy to recover from Land Bank and the lower court properly exercised its equity jurisdiction in resolving the collection suit. As we have held in one case:

Equity, as the complement of legal jurisdiction, seeks to reach and complete justice where courts of law, through the inflexibility of their rules and want of power to adapt their judgments to the special circumstances of cases, are incompetent to do so.  Equity regards the spirit and not the letter, the intent and not the form, the substance rather than the circumstance, as it is variously expressed by different courts.

Land Bank of the Philippines vs. Alfredo Ong, G.R. No. 190755, November 24, 2010

Special Laws

Agricultural Tenancy Act; tenancy. We agree with the Court of Appeals that a tenancy relationship cannot be extinguished by mere expiration of term or period in a leasehold contract; or by the sale, alienation or the transfer of legal possession of the landholding.   Section 9 of Republic Act No. 1199 or the Agricultural Tenancy Act provides:

SECTION 9. Severance of Relationship. — The tenancy relationship is extinguished by the voluntary surrender of the land by, or the death or incapacity of, the tenant, but his heirs or the members of his immediate farm household may continue to work the land until the close of the agricultural year. The expiration of the period of the contract as fixed by the parties, and the sale or alienation of the land does not of themselves extinguish the relationship. In the latter case, the purchaser or transferee shall assume the rights and obligations of the former landholder in relation to the tenant. In case of death of the landholder, his heir or heirs shall likewise assume his rights and obligations. (Emphasis supplied)

Moreover, Section 10 of Republic Act No. 3844 (Code of Agrarian Reforms of the Philippines) likewise provides:

SEC. 10.  Agricultural Leasehold Relation Not Extinguished by Expiration of Period, etc. — The agricultural leasehold relation under this Code shall not be extinguished by mere expiration of the term or period in a leasehold contract nor by the sale, alienation or transfer of the legal possession of the landholding. In case the agricultural lessor sells, alienates or transfers the legal possession of the landholding, the purchaser or transferee thereof shall be subrogated to the rights and substituted to the obligations of the agricultural lessor. (Emphasis supplied)

Eugenio R. Reyes, joined by Timothy Joseph M. Reyes, et al. vs. Librada F. Maurico and Leonida F. Mauricio, G.R. No. 175080, November 24, 2010.

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