January 2013 Philippine Supreme Court Decisions on Civil Law

Here are select January 2013 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Compromise Agreement; definition and nature; distinction between judicial and extrajudicial. Under Article 2028 of the Civil Code, a compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. Accordingly, a compromise is either judicial, if the objective is to put an end to a pending litigation, or extrajudicial, if the objective is to avoid a litigation. As a contract, a compromise is perfected by mutual consent. However, a judicial compromise, while immediately binding between the parties upon its execution, is not executory until it is approved by the court and reduced to a judgment. The validity of a compromise is dependent upon its compliance with the requisites and principles of contracts dictated by law. Also, the terms and conditions of a compromise must not be contrary to law, morals, good customs, public policy and public order. Land Bank of the Philippines vs. Heirs of Spouses Jorja Rigor Soriano and Magin Soriano; G.R. No. 178312. January 30, 2013

Contract; contract of suretyship; definition; nature of liability of surety; surety’s liability is direct, primary and absolute as well as joint and several. A contract of suretyship is defined as “an agreement whereby a party, called the surety, guarantees the performance by another party, called the principal or obligor, of an obligation or undertaking in favor of a third party, called the obligee. It includes official recognizances, stipulations, bonds or undertakings issued by any company by virtue of and under the provisions of Act No. 536, as amended by Act No. 2206 (An Act Relative to Recognizances, Stipulations, Bonds and Undertakings, and to Allow Certain Corporations to be Accepted as Surety Thereon).” We have consistently held that a surety’s liability is joint and several, limited to the amount of the bond, and determined strictly by the terms of contract of suretyship in relation to the principal contract between the obligor and the obligee. It bears stressing, however, that although the contract of suretyship is secondary to the principal contract, the surety’s liability to the obligee is nevertheless direct, primary, and absolute. The Manila Insurance Company, Inc. vs. Spouses Roberto and Aida Amurao; G.R. No. 179628. January 16, 2013

Contract; law between the parties; rules on interpretation; easement of right of way; just compensation; attorney’s fees; exception rather than the general rule. Indeed, the rule is settled that a contract constitutes the law between the parties who are bound by its stipulations which, when couched in clear and plain language, should be applied according to their literal tenor. Courts cannot supply material stipulations, read into the contract words it does not contain or, for that matter, read into it any other intention that would contradict its plain import. Neither can they rewrite contracts because they operate harshly or inequitably as to one of the parties, or alter them for the benefit of one party and to the detriment of the other, or by construction, relieve one of the parties from the terms which he voluntarily consented to, or impose on him those which he did not.

Where the right of way easement, as in this case, similarly involves transmission lines which not only endangers life and limb but restricts as well the owner’s use of the land traversed thereby, the ruling in Gutierrez remains doctrinal and should be applied. It has been ruled that the owner should be compensated for the monetary equivalent of the land if, as here, the easement is intended to perpetually or indefinitely deprive the owner of his proprietary rights through the imposition of conditions that affect the ordinary use, free enjoyment and disposal of the property or through restrictions and limitations that are inconsistent with the exercise of the attributes of ownership, or when the introduction of structures or objects which, by their nature, create or increase the probability of injury, death upon or destruction of life and property found on the land is necessary. Measured not by the taker’s gain but the owner’s loss, just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator.

The determination of just compensation in eminent domain proceedings is a judicial function and no statute, decree, or executive order can mandate that its own determination shall prevail over the court’s findings. Any valuation for just compensation laid down in the statutes may serve only as a guiding principle or one of the factors in determining just compensation, but it may not substitute the court’s own judgment as to what amount should be awarded and how to arrive at such amount. Hence, Section 3A of R.A. No. 6395, as amended (An Act Revising the Charter of the National Power Corporation), is not binding upon this Court.

For want of a statement of the rationale for the award in the body of the RTC’s 14 March 2000 Decision, we are constrained, however, to disallow the grant of attorney’s fees in favor of the Spouses Cabahug in an amount equivalent to 5% of the just compensation due as well as the legal interest thereon. Considered the exception rather than the general rule, the award of attorney’s fees is not due every time a party prevails in a suit because of the policy that no premium should be set on the right to litigate. Jesus L. Cabahug and Coronacion M. Cabahug vs. National Power Corporation; G.R. No. 186069. January 30, 2013

Contract; perfection of contracts; consent; offer and acceptance; contract of sale; consensual in nature. Contracts are perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The requisite acceptance of the offer is expressed in Article 1319 of the Civil Code which states:

ART. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.

In Palattao v. Court of Appeals, this Court held that if the acceptance of the offer was not absolute, such acceptance is insufficient to generate consent that would perfect a contract. Thus:

Contracts that are consensual in nature, like a contract of sale, are perfected upon mere meeting of the minds. Once there is concurrence between the offer and the acceptance upon the subject matter, consideration, and terms of payment, a contract is produced. The offer must be certain. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional, and without variance of any sort from the proposal. A qualified acceptance, or one that involves a new proposal, constitutes a counter-offer and is a rejection of the original offer. Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to generate consent because any modification or variation from the terms of the offer annuls the offer.

The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds. Where a party sets a different purchase price than the amount of the offer, such acceptance was qualified which can be at most considered as a counter-offer; a perfected contract would have arisen only if the other party had accepted this counteroffer. In Villanueva v. Philippine National Bank this Court further elucidated on the meaning of unqualified acceptance, as follows:

 …While it is impossible to expect the acceptance to echo every nuance of the offer, it is imperative that it assents to those points in the offer which, under the operative facts of each contract, are not only material but motivating as well. Anything short of that level of mutuality produces not a contract but a mere counter-offer awaiting acceptance. More particularly on the matter of the consideration of the contract, the offer and its acceptance must be unanimous both on the rate of the payment and on its term. An acceptance of an offer which agrees to the rate but varies the term is ineffective. (Emphasis supplied)

A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is merely an offer by one party without acceptance of the other, there is no contract. When the contract of sale is not perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties. Heirs of Fausto C. Ignacio vs. Home Bankers Savings and Trust Co., et al.; G.R. No. 177783. January 23, 2013

Damages; moral damages; requisites; granted when rights of individuals are violated; exemplary damages; actual damages; nature; in the absence of proof, temperate damages may be awarded; attorney’s fees; exception rather than the general rule. Moral damages are awarded to compensate the claimant for physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury. Jurisprudence has established the following requisites for the award of moral damages: (1) there is an injury whether physical, mental or psychological, which was clearly sustained by the claimant; (2) there is a culpable act or omission factually established; (3) the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) the award of damages is predicated on any of the cases stated in Article 2219 of the Civil Code.

Pertinent to the case at hand, Article 32 of the Civil Code provides for the award of moral damages in cases where the rights of individuals, including the right against deprivation of property without due process of law, are violated. In Quisumbing v. Manila Electric Company, this Court treated the immediate disconnection of electricity without notice as a form of deprivation of property without due process of law, which entitles the subscriber aggrieved to moral damages. We stressed:

More seriously, the action of the defendant in maliciously disconnecting the electric service constitutes a breach of public policy. For public utilities, broad as their powers are, have a clear duty to see to it that they do not violate nor transgress the rights of the consumers. Any act on their part that militates against the ordinary norms of justice and fair play is considered an infraction that gives rise to an action for damages. Such is the case at bar.

In addition to moral damages, exemplary damages are imposed by way of example or correction for the public good. In this case, to serve as an example – that before disconnection of electric supply can be effected by a public utility, the requisites of law must be complied with – we sustain the award of exemplary damages to respondents.

Actual damages are compensation for an injury that will put the injured party in the position where it was before the injury. They pertain to such injuries or losses that are actually sustained and susceptible of measurement. Except as provided by law or by stipulation, a party is entitled to adequate compensation only for such pecuniary loss as is duly proven. Basic is the rule that to recover actual damages, not only must the amount of loss be capable of proof; it must also be actually proven with a reasonable degree of certainty premised upon competent proof or the best evidence obtainable.

Actual or compensatory damages cannot be presumed, but must be duly proved with a reasonable degree of certainty. The award is dependent upon competent proof of the damage suffered and the actual amount thereof. The award must be based on the evidence presented, not on the personal knowledge of the court; and certainly not on flimsy, remote, speculative and unsubstantial proof.

Nonetheless, in the absence of competent proof on the amount of actual damages suffered, a party is entitled to temperate damages. Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty. The amount thereof is usually left to the discretion of the courts but the same should be reasonable, bearing in mind that temperate damages should be more than nominal but less than compensatory.

An award of attorney’s fees has always been the exception rather than the rule. Attorney’s fees are not awarded every time a party prevails in a suit. The policy of the Court is that no premium should be placed on the right to litigate. The trial court must make express findings of fact and law that bring the suit within the exception. What this demands is that factual, legal or equitable justifications for the award must be set forth not only in the fallo but also in the text of the decision, or else, the award should be thrown out for being speculative and conjectural. Manila Electric Company (MERALCO) vs. Atty. P.M. Castillo, doing business under the trade name and style of Permanent Light Manufacturing Enterprises, et al.; G.R. No. 182976. January 14, 2013

Damages; moral damages; when awarded. The Court has awarded moral damages in termination cases when bad faith, malice or fraud attend the employee’s dismissal or where the act oppresses labor, or where it was done in a manner contrary to morals, good customs or public policy. General Milling Corporation vs. Violeta L. Viajar; G.R. No. 181738. January 30, 2013

Effectivity of laws; generally, no retroactive effect; exception, when law is procedural. As a general rule, laws shall have no retroactive effect. However, exceptions exist, and one such exception concerns a law that is procedural in nature. The reason is that a remedial statute or a statute relating to remedies or modes of procedure does not create new rights or take away vested rights but only operates in furtherance of the remedy or the confirmation of already existing rights. A statute or rule regulating the procedure of the courts will be construed as applicable to actions pending and undetermined at the time of its passage. All procedural laws are retroactive in that sense and to that extent. The retroactive application is not violative of any right of a person who may feel adversely affected, for, verily, no vested right generally attaches to or arises from procedural laws. Spouses Augusto G. Dacudao and Ofelia R. Dacudao vs. Secretary of Justice Raul M. Gonzales of the Department of Justice; G.R. No. 188056. January 8, 2013

Ejectment; unlawful detainer; estoppel against tenants; conclusive presumption; foreclosure of mortgage; title to land remains in the mortgagor until expiration of redemption period; inchoate character of purchaser’s right. [T]he only question that the courts resolve in ejectment proceedings is: who is entitled to the physical possession of the premises, that is, to the possession de facto and not to the possession de jure. It does not even matter if a party’s title to the property is questionable.

In an unlawful detainer case, the sole issue for resolution is the physical or material possession of the property involved, independent of any claim of ownership by any of the party litigants. Where the issue of ownership is raised by any of the parties, the courts may pass upon the same in order to determine who has the right to possess the property. The adjudication is, however, merely provisional and would not bar or prejudice an action between the same parties involving title to the property.

[I]n unlawful detainer, one unlawfully withholds possession thereof after the expiration or termination of his right to hold possession under any contract, express or implied. In such case, the possession was originally lawful but became unlawful by the expiration or termination of the right to possess; hence, the issue of rightful possession is decisive for, in such action, the defendant is in actual possession and the plaintiff’s cause of action is the termination of the defendant’s right to continue in possession.

The conclusive presumption found in Section 2 (b), Rule 131 of the Rules of Court, known as estoppel against tenants, provides as follows:

Sec. 2. Conclusive presumptions. – The following are instances of conclusive presumptions:

(b) The tenant is not permitted to deny the title of his landlord at the time of the commencement of the relation of landlord and tenant between them. (Emphasis supplied).

It is clear from the abovequoted provision that what a tenant is estopped from denying is the title of his landlord at the time of the commencement of the landlord-tenant relation. If the title asserted is one that is alleged to have been acquired subsequent to the commencement of that relation, the presumption will not apply. Hence, the tenant may show that the landlord’s title has expired or been conveyed to another or himself; and he is not estopped to deny a claim for rent, if he has been ousted or evicted by title paramount.

It is settled that during the period of redemption, it cannot be said that the mortgagor is no longer the owner of the foreclosed property, since the rule up to now is that the right of a purchaser at a foreclosure sale is merely inchoate until after the period of redemption has expired without the right being exercised. The title to land sold under mortgage foreclosure remains in the mortgagor or his grantee until the expiration of the redemption period and conveyance by the master’s deed. Indeed, the rule has always been that it is only upon the expiration of the redemption period, without the judgment debtor having made use of his right of redemption, that the ownership of the land sold becomes consolidated in the purchaser.

Stated differently, under Act. No. 3135 (An Act to Regulate the Sale of Property Under Special Powers Inserted in or Annexed to Real Estate Mortgages), the purchaser in a foreclosure sale has, during the redemption period, only an inchoate right and not the absolute right to the property with all the accompanying incidents. He only becomes an absolute owner of the property if it is not redeemed during the redemption period. Juanita Ermitaño, represented by her Attorney-in-fact, Isabelo Ermitaño vs. Lailanie M. Paglas; G.R. No. 174436. January 23, 2013

Interest; 12% interest rate doctrine in Eastern Shipping Lines vs. CA. [T]he imposition of 12% interest is still warranted in the case at bar, not from the date of sale on November 9, 1994, as the respondents insist; but from the finality of the decision up to the satisfaction of judgment in line with the doctrine laid down in Eastern Shipping Lines, Inc. v. Court of Appeals. … [T]he payment of 12% interest from the finality of judgment is in order pursuant to Eastern Shippings Lines, Inc. where the Court held that:

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.

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.

Spouses Ricardo and Elena Golez vs. Spouses Carlos and Amelita Navarro; G.R. No. 192532. January 30, 2013

Legal Compensation; mode of extinguishing obligations; difference with conventional compensation; requisites. Compensation is a mode of extinguishing to the concurrent amount the obligations of persons who in their own right and as principals are reciprocally debtors and creditors of each other. Legal compensation takes place by operation of law when all the requisites are present, as opposed to conventional compensation which takes place when the parties agree to compensate their mutual obligations even in the absence of some requisites. Legal compensation requires the concurrence of the following conditions:

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

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

(3) That the two debts be due;

(4) That they be liquidated and demandable;

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

Mondragon Personal Sales, Inc. vs. Victoriano S. Sola, Jr.; G.R. No. 174882. January 21, 2013 

Marriage; essential and formal requisites; marriage license; certification of non-issuance by civil registrar; diligent search requirement compared to presumption of regularity in performance of official duties; effect of absence of marriage license. As the marriage of Gloria and Syed was solemnized on January 9, 1993, Executive Order No. 209, or the Family Code of the Philippines, is the applicable law. The pertinent provisions that would apply to this particular case are Articles 3, 4 and 35(3), which read as follows:

Art. 3. The formal requisites of marriage are:

(1) Authority of the solemnizing officer;

(2) A valid marriage license except in the cases provided for in Chapter 2 of this Title; and

(3) A marriage ceremony which takes place with the appearance of the contracting parties before the solemnizing officer and their personal declaration that they take each other as husband and wife in the presence of not less than two witnesses of legal age.

Art. 4. The absence of any of the essential or formal requisites shall render the marriage void ab initio, except as stated in Article 35(2).

A defect in any of the essential requisites shall render the marriage voidable as provided in Article 45.

An irregularity in the formal requisites shall not affect the validity of the marriage but the party or parties responsible for the irregularity shall be civilly, criminally and administratively liable.

Art. 35. The following marriages shall be void from the beginning:

x x x x

(3) Those solemnized without a license, except those covered by the preceding Chapter.

Under Sec. 3(m), Rule 131 of the Rules of Court, it is a disputable presumption that an official duty has been regularly performed, absent contradiction or other evidence to the contrary. We held, “The presumption of regularity of official acts may be rebutted by affirmative evidence of irregularity or failure to perform a duty.” No such affirmative evidence was shown that the Municipal Civil Registrar was lax in performing her duty of checking the records of their office, thus the presumption must stand. In fact, proof does exist of a diligent search having been conducted, as Marriage License No. 996967 was indeed located and submitted to the court. The fact that the names in said license do not correspond to those of Gloria and Syed does not overturn the presumption that the registrar conducted a diligent search of the records of her office.

In the case of Cariño v. Cariño, following the case of Republic, it was held that the certification of the Local Civil Registrar that their office had no record of a marriage license was adequate to prove the non-issuance of said license. The case of Cariño further held that the presumed validity of the marriage of the parties had been overcome, and that it became the burden of the party alleging a valid marriage to prove that the marriage was valid, and that the required marriage license had been secured.

Article 4 of the Family Code is clear when it says, “The absence of any of the essential or formal requisites shall render the marriage void ab initio, except as stated in Article 35(2).” Article 35(3) of the Family Code also provides that a marriage solemnized without a license is void from the beginning, except those exempt from the license requirement under Articles 27 to 34, Chapter 2, Title I of the same Code. Syed Azhar Abbas vs. Gloria Goo Abbas; G.R. No. 183896. January 30, 2013

Marriage; psychological incapacity; definition; burden of proof; sexual infidelity and abandonment do not necessarily constitute psychological incapacity; psychological fitness as a wife not equated with professional relationship; doubts are resolved in favor of marriage. Article 36 of the Family Code governs psychological incapacity as a ground for declaration of nullity of marriage. It provides that “[a] marriage contracted by any party who, at the time of the celebration, was psychologically incapacitated to comply with the essential marital obligations of marriage, shall likewise be void even if such incapacity becomes manifest only after its solemnization.” In interpreting this provision, we have repeatedly stressed that psychological incapacity contemplates “downright incapacity or inability to take cognizance of and to assume the basic marital obligations”; not merely the refusal, neglect or difficulty, much less ill will, on the part of the errant spouse. The plaintiff bears the burden of proving the juridical antecedence (i.e., the existence at the time of the celebration of marriage), gravity and incurability of the condition of the errant spouse.

In any event, sexual infidelity and abandonment of the conjugal dwelling, even if true, do not necessarily constitute psychological incapacity; these are simply grounds for legal separation. To constitute psychological incapacity, it must be shown that the unfaithfulness and abandonment are manifestations of a disordered personality that completely prevented the erring spouse from discharging the essential marital obligations.

Aside from the time element involved, a wife’s psychological fitness as a spouse cannot simply be equated with her professional/work relationship; workplace obligations and responsibilities are poles apart from their marital counterparts. While both spring from human relationship, their relatedness and relevance to one another should be fully established for them to be compared or to serve as measures of comparison with one another.

Once again, we stress that marriage is an inviolable social institution protected by the State. Any doubt should be resolved in favor of its existence its existence and continuation and against its dissolution and nullity. It cannot be dissolved at the whim of the parties nor by transgressions made by one party to the other during the marriage. Republic of the Philippines vs. Cesar Encelan; G.R. No. 170022. January 9, 2013

Possession; de jure vs. de facto nature of possession; elements of forcible entry. Ownership carries the right of possession, but the possession contemplated by the concept of ownership is not exactly the same as the possession in issue in a forcible entry case. Possession in forcible entry suits refers only to possession de facto, or actual or material possession, and not possession flowing out of ownership; these are different legal concepts for which the law provides different remedies for recovery of possession. As the court explained in Pajuyo v. Court of Appeals, and again in the more recent cases of Gonzaga v. Court of Appeals, De Grano v. Lacaba, and Lagazo v. Soriano, the word “possession” in forcible entry suits refers to nothing more than prior physical possession or possession de facto, not possession de jure or legal possession in the sense contemplated in civil law. Title is not the issue, and its absence “is not a ground for the courts to withhold relief from the parties in an ejectment case.” Thus, in a forcible entry case, “a party who can prove prior possession can recover such possession even against the owner himself.

Whatever may be the character of his possession, if he has in his favor prior possession in time, he has the security that entitles him to remain on the property until a person with a better right lawfully ejects him.” He cannot be ejected by force, violence or terror — not even by its owners. For these reasons, an action for forcible entry is summary in nature aimed only at providing an expeditious means of protecting actual possession. Ejectment suits are intended to “prevent breach of x x x peace and criminal disorder and to compel the party out of possession to respect and resort to the law alone to obtain what he claims is his.” Thus, lest the purpose of these summary proceedings be defeated, any discussion or issue of ownership is avoided unless it is necessary to resolve the issue of de facto possession.

Under Section 1, Rule 70 of the Rules of Court, for a forcible entry suit to prosper, the plaintiff must allege and prove: (1) prior physical possession of the property; and (2) unlawful deprivation of it by the defendant through force, intimidation,  strategy, threat or stealth. As in any civil case, the burden of proof lies with the complainants (the respondents in this case) who must establish their case by preponderance of evidence. Nenita Quality Foods Corporation vs. Crisostomo Galabo, et al.; G.R. No. 174191. January 30, 2013

Quasi-contracts; definition; requisites of solutio indebiti. A quasi-contract involves a juridical relation that the law creates on the basis of certain voluntary, unilateral and lawful acts of a person, to avoid unjust enrichment. The Civil Code provides an enumeration of quasi-contracts, but the list is not exhaustive and merely provides examples.

Article 2154 embodies the concept “solutio indebiti” which arises when something is delivered through mistake to a person who has no right to demand it. It obligates the latter to return what has been received through mistake. Solutio indebiti, as defined in Article 2154 of the Civil Code, has two indispensable requisites: first, that something has been unduly delivered through mistake; and second, that something was received when there was no right to demand it. Metropolitan Bank & Trust Company vs. Absolute Management Corporation; G.R. No. 170498. January 9, 2013

Torts; abuse of rights; elements; award of damages. While the Court mindfully notes that damages may be recoverable due to an abuse of right under Article 21 in conjunction with Article 19 of the Civil Code of the Philippines, the following elements must, however, obtain: (1) there is a legal right or duty; (2) exercised in bad faith; and (3) for the sole intent of prejudicing or injuring another. Records reveal that none of these elements exists in the case at bar and thus, no damages on account of abuse of right may he recovered. Eleazar S. Padillo vs. Rural Bank of Nabunturan, Inc., et al.; G.R. No. 199338. January 21, 2013

Torts; proximate cause; vicarious liability is not applicable in the absence of employer-employee or principal-agent relationship; contracts; requisites of stipulation pour autrui; Lease; act of parking a vehicle in a garage upon payment of a fixed amount, is a lease; obligations of lessor; contracts of adhesion; actual damages must be proved with reasonable degree of certainty. Proximate cause has been defined as that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury or loss, and without which the result would not have occurred.

Neither will the vicarious liability of an employer under Article 2180 of the Civil Code apply in this case. It is uncontested that Peña and Gaddi were assigned as security guards by AIB to BSP pursuant to the Guard Service Contract. Clearly, therefore, no employer-employee relationship existed between BSP and the security guards assigned in its premises. Consequently, the latter’s negligence cannot be imputed against BSP but should be attributed to AIB, the true employer of Peña and Gaddi. In the case of Soliman, Jr. v. Tuazon, the Court enunciated thus:

It is settled that where the security agency, as here, recruits, hires and assigns the work of its watchmen or security guards, the agency is the employer of such guards and watchmen. Liability for illegal or harmful acts committed by the security guards attaches to the employer agency, and not to the clients or customers of such agency. As a general rule, a client or customer of a security agency has no hand in selecting who among the pool of security guards or watchmen employed by the agency shall be assigned to it; the duty to observe the diligence of a good father of a family in the selection of the guards cannot, in the ordinary course of events, be demanded from the client whose premises or property are instructions or directions to the security guards assigned to it, does not, by itself, render the client responsible as an employer of the security guards concerned and liable for their wrongful acts or omissions. Those instructions or directions are ordinarily no more than requests commonly envisaged in the contract for services entered into with the security agency.

Nor can it be said that a principal-agent relationship existed between BSP and the security guards Peña and Gaddi as to make the former liable for the latter’s complained act. Article 1868 of the Civil Code states that “[b]y the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.” The basis for agency therefore is representation, which element is absent in the instant case. Records show that BSP merely hired the services of AIB, which, in turn, assigned security guards, solely for the protection of its properties and premises. Nowhere can it be inferred in the Guard Service Contract that AIB was appointed as an agent of BSP. Instead, what the parties intended was a pure principal-client relationship whereby for a consideration, AIB rendered its security services to BSP.

[I]n order that a third person benefited by the second paragraph of Article 1311, referred to as a stipulation pour autrui, may demand its fulfillment, the following requisites must concur: (1) There is a stipulation in favor of a third person; (2) The stipulation is a part, not the whole, of the contract; (3) The contracting parties clearly and deliberately conferred a favor to the third person – the favor is not merely incidental; (4) The favor is unconditional and uncompensated; (5) The third person communicated his or her acceptance of the favor before its revocation; and (6) The contracting parties do not represent, or are not authorized, by the third party.

It has been held that the act of parking a vehicle in a garage, upon payment of a fixed amount, is a lease. Even in a majority of American cases, it has been ruled that where a customer simply pays a fee, parks his car in any available space in the lot, locks the car and takes the key with him, the possession and control of the car, necessary elements in bailment, do not pass to the parking lot operator, hence, the contractual relationship between the parties is one of lease.

Article 1654 of the Civil Code provides that “[t]he lessor (BSP) is obliged: (1) to deliver the thing which is the object of the contract in such a condition as to render it fit for the use intended; (2) to make on the same during the lease all the necessary repairs in order to keep it suitable for the use to which it has been devoted, unless there is a stipulation to the contrary; and (3) to maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract.” In relation thereto, Article 1664 of the same Code states that “[t]he lessor is not obliged to answer for a mere act of trespass which a third person may cause on the use of the thing leased; but the lessee shall have a direct action against the intruder.”

[C]ontracts of adhesion are not void per se. It is binding as any other ordinary contract and a party who enters into it is free to reject the stipulations in its entirety. If the terms thereof are accepted without objection, as in this case, where plaintiffs-appellants have been leasing BSP’s parking space for more or less 20 years, then the contract serves as the law between them.

It is axiomatic that actual damages must be proved with reasonable degree of certainty and a party is entitled only to such compensation for the pecuniary loss that was duly proven. Thus, absent any competent proof of the amount of damages sustained, the CA properly deleted the said awards. Spouses Benjamin C. Mamaril and Sonia P. Mamaril vs. The Boy Scout of the Philippines, et al.; G.R. No. 179382. January 14, 2013

Special laws

Usury Law; CB Circular No. 905; suspension of ceilings for interest rates does not authorize excessive and unconscionable interest rates; effect of void stipulation of usurious interest. The power of the Central Bank to effectively suspend the Usury Law pursuant to P.D. No. 1684 (Amending Further Act No. 2655, as amended, Otherwise Known As “The Usury Law) has long been recognized and upheld in many cases. As the Court explained in the landmark case of Medel v. CA, citing several cases, CB Circular No. 905 (Amendment of Books I to IV of the Manual of  Regulations for Banks and Other Financial Intermediaries) “did not repeal nor in anyway amend the Usury Law but simply suspended the latter’s effectivity;” that “a [CB] Circular cannot repeal a law, [for] only a law can repeal another law;” that “by virtue of CB Circular No. 905, the Usury Law has been rendered ineffective;” and “Usury has been legally non-existent in our jurisdiction. Interest can now be charged as lender and borrower may agree upon.” … [B]y lifting the interest ceiling, CB Circular No. 905 merely upheld the parties’ freedom of contract to agree freely on the rate of interest. It cited Article 1306 of the New Civil Code, under which the contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.

It is settled that nothing in CB Circular No. 905 grants lenders a carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. As held in Castro v. Tan:

The imposition of an unconscionable rate of interest on a money debt, even if knowingly and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant spoliation and an iniquitous deprivation of property, repulsive to the common sense of man. It has no support in law, in principles of justice, or in the human conscience nor is there any reason whatsoever which may justify such imposition as righteous and as one that may be sustained within the sphere of public or private morals.

Stipulations authorizing iniquitous or unconscionable interests have been invariably struck down for being contrary to morals, if not against the law. Indeed, under Article 1409 of the Civil Code, these contracts are deemed inexistent and void ab initio, and therefore cannot be ratified, nor may the right to set up their illegality as a defense be waived.

Nonetheless, the nullity of the stipulation of usurious interest does not affect the lender’s right to recover the principal of a loan, nor affect the other terms thereof. Thus, in a usurious loan with mortgage, the right to foreclose the mortgage subsists, and this right can be exercised by the creditor upon failure by the debtor to pay the debt due. The debt due is considered as without the stipulated excessive interest, and a legal interest of 12% per annum will be added in place of the excessive interest formerly imposed, following the guidelines laid down in the landmark case of Eastern Shipping Lines, Inc. v. Court of Appeals, regarding the manner of computing legal interest. Advocates for Truth in Lending, Inc. vs. Bangko Sentral Monetary Board, Represented by its Chairman, Governor Armando M. Tatangco, Jr., etc.; G.R. No. 192986. January 15, 2013

(Rose thanks Frances Domingo, Rory Lambino and Earla Langit for their assistance in the preparation of this post.)

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