October 2012 Philippine Supreme Court Decisions on Civil Law

Here are select October 2012 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Assignment of credit; dation in payment. An assignment of credit is an agreement by virtue of which the owner of a credit, known as the assignor, by a legal cause, such as sale, dation in payment, exchange or donation, and without the consent of the debtor, transfers his credit and accessory rights to another, known as the assignee, who acquires the power to enforce it to the same extent as the assignor could enforce it against the debtor. It may be in the form of sale, but at times it may constitute a dation in payment, such as when a debtor, in order to obtain a release from his debt, assigns to his creditor a credit he has against a third person. As a dation in payment, the assignment of credit operates as a mode of extinguishing the obligation; the delivery and transmission of ownership of a thing (in this case, the credit due from a third person) by the debtor to the creditor is accepted as the equivalent of the performance of the obligation.

The terms of the compromise judgment of the parties, however, did not convey an intent to equate the assignment of Magdalena’s retirement benefits as the equivalent of the payment of the debt due the spouses Serfino. There was actually no assignment of credit; if at all, the compromise judgment merely identified the fund from which payment for the judgment debt would be sourced. Only when Magdalena has received and turned over to the spouses Serfino the portion of her retirement benefits corresponding to the debt due would the debt be deemed paid. Since no valid assignment of credit took place, the spouses Serfino cannot validly claim ownership of the retirement benefits that were deposited with FEBTC. Without ownership rights over the amount, they suffered no pecuniary loss that has to be compensated by actual damages. Sps. Godfrey and Gerardina Serfino vs. Far East Bank and Trust Company, Inc., now Bank of the Philippine Islands.G.R. No. 171845. October 10, 2012

Compromise agreement; relation to original agreement; interest. Petitioner argues that the compromise agreement created an obligation separate from the original loan, for which respondent is now liable. By stating that the compromise agreement and the original loan transaction are distinct, petitioner would now attempt to exact payment on both. This goes against the very purpose of the parties entering into a compromise agreement, which was to extinguish the obligation under the loan. Petitioner may not seek the enforcement of both the compromise agreement and payment of the loan, even in the event that the compromise agreement remains unfulfilled.

The Court had previously tagged a 5% monthly interest rate agreed upon as “excessive, iniquitous, unconscionable and exorbitant, contrary to morals, and the law.” We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3% per month and higher are excessive, iniquitous, unconscionable, and exorbitant. Arthur F. Mechavez vs. Marlyn M, Bermudez G.R. No. 185368. October 11, 2012

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June 2012 Philippine Supreme Court Decisions on Civil Law

Here are select June 2012 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Agency; ratification. The complaint was anchored on the supposed failure of FEBTC to duly investigate the authority of Antonio in contracting the “exceptionally and relatively immense” loans amounting to P5,000,000.00. Marcos alleged therein that his property had thereby become “unlawfully burdened by unauthorized real estate mortgage contracts,” because the loans and the mortgage contracts had been incurred by Antonio and his wife only for themselves, to the exclusion of petitioner. Yet, Marcos could not deny that under the express terms of the SPA, he had precisely granted to Antonio as his agent the authority to borrow money, and to transfer and convey the property by way of mortgage to FEBTC; to sign, execute and deliver promissory notes; and to receive the proceeds of the loans on the former’s behalf. In other words, the mortgage contracts were valid and enforceable against petitioner, who was consequently fully bound by their terms.

Moreover, even if it was assumed that Antonio’s obtaining the loans in his own name, and executing the mortgage contracts also in his own name had exceeded his express authority under the SPA, Marcos was still liable to FEBTC by virtue of his express ratification of Antonio’s act. Under Article 1898 of the Civil Code, the acts of an agent done beyond the scope of his authority do not bind the principal unless the latter expressly or impliedly ratifies the same.

In agency, ratification is the adoption or confirmation by one person of an act performed on his behalf by another without authority. The substance of ratification is the confirmation after the act, amounting to a substitute for a prior authority. Here, there was such a ratification by Marcos, as borne out by his execution of the letter of acknowledgement on September 12, 1996.

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April 2012 Philippine Supreme Court Decisions on Civil Law

Here are select April 2012 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Compensation/set-off; requisites. The applicable provisions of law are Articles 1278, 1279 and 1290 of the Civil Code of the Philippines:

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

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

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

(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.

Art. 1290. When all the requisites mentioned in Article 1279 are present, compensation takes effect by operation of law, and extinguishes both debts to the concurrent amount, even though the creditors and debtors are not aware of the compensation.

Based on the foregoing, in order for compensation to be valid, the five requisites mentioned in the above-quoted Article 1279 should be present, as in the case at bench. Insular Investment and Trust Corporation vs. Capital One Equities Corp. and Planters Development Bank; G.R. No. 183308, April 25, 2012

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January 2012 Philippine Supreme Court Decisions on Civil Law

Here are select January 2012 rulings of the Supreme Court of the Philippines on civil law:

CIVIL CODE

Agency; principal-agent relationship.  The relationship of agency is one where one party called the principal (mandante), authorizes another, called the agent (mandatario), to act for and in his behalf in transactions with third persons. The essential elements of agency are: (1) there is consent, express or implied of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself, and (4) the agent acts within the scope of his authority.

Agency is basically personal, representative, and derivative in nature. The authority of the agent to act emanates from the powers granted to him by his principal; his act is the act of the principal if done within the scope of the authority. Qui facit per alium facit se. He who acts through another acts himself.

As provided under Article 1869 of the Civil Code, agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.

The guidelines that would aid in differentiating sale and an agency has been formulated by the Court since 1970. The primordial differentiating consideration between the two (2) contracts is the transfer of ownership or title over the property subject of the contract. In an agency, the principal retains ownership and control over the property and the agent merely acts on the principal’s behalf and under his instructions in furtherance of the objectives for which the agency was established. On the other hand, the contract is clearly a sale if the parties intended that the delivery of the property will effect a relinquishment of title, control and ownership in such a way that the recipient may do with the property as he pleases. Sps. Fernando and Lourdes Viloria vs. Continental Airlines, Inc.,G.R. No. 188288. January 16, 2012.

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July 2011 Philippine Supreme Court Decisions on Civil Law

Here are select July 2011 rulings of the Supreme Court of the Philippines on civil law:

Compensation. For legal compensation to take place, the requirements set forth in Articles 1278 and 1279 of the Civil Code, quoted below, must be present.

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

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

(1) That each 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.

A debt is liquidated when its existence and amount are determined. It is not necessary that it be admitted by the debtor. Nor is it necessary that the credit appear in a final judgment in order that it can be considered as liquidated; it is enough that its exact amount is known. And a debt is considered liquidated, not only when it is expressed already in definite figures which do not require verification, but also when the determination of the exact amount depends only on a simple arithmetical operation.

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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.

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October 2010 Philippine Supreme Court Decisions on Civil Law

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

Agency. The sale of the DMCI shares made by EIB is null and void for lack of authority to do so, for petitioners never gave their consent or permission to the sale. Moreover, Article 1881 of the Civil Code provides that “the agent must act within the scope of his authority.” Pursuant to the authority given by the principal, the agent is granted the right “to affect the legal relations of his principal by the performance of acts effectuated in accordance with the principal’s manifestation of consent.”  In the case at bar, the scope of authority of EIB as agent of petitioners is “to retain, apply, sell or dispose of all or any of the client’s [petitioners’] property,” if all or any indebtedness or other obligations of petitioners to EIB are not discharged in full by petitioners “when due or on demand in or towards the payment and discharge of such obligation or liability.” The right to sell or dispose of the properties of petitioners by EIB is unequivocally confined to payment of the obligations and liabilities of petitioners to EIB and none other. Thus, when EIB sold the DMCI shares to buy back the KKP shares, it paid the proceeds to the vendees of said shares, the act of which is clearly an obligation to a third party and, hence, is beyond the ambit of its authority as agent. Such act is surely illegal and does not bind petitioners as principals of EIB. Pacific Rehouse Corporation, et al. vs. EIB Securities, Inc.;G.R. No. 184036, October 13, 2010.

Attorney’s fees. It is settled that the award of attorney’s fees is the exception rather than the general rule; counsel’s fees 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. Attorney’s fees, as part of damages, are not necessarily equated to the amount paid by a litigant to a lawyer. In the ordinary sense, attorney’s fees represent the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter; while in its extraordinary concept, they may be awarded by the court as indemnity for damages to be paid by the losing party to the prevailing party. Attorney’s fees as part of damages are awarded only in the instances specified in Article 2208 of the Civil Code. As such, it is necessary for the court to make findings of fact and law that would bring the case within the ambit of these enumerated instances to justify the grant of such award, and in all cases it must be reasonable. Filomena R. Benedicto vs. Antonio Villaflores; G.R. No. 185020. October 6, 2010.

Attorney’s fees. We have stressed that the award of attorney’s fees is the exception rather than the rule, as they are not always awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate.  Attorney’s fees as part of damages is awarded only in the instances specified in Article 2208 of the Civil Code. Financial Building Corporation vs. Rudlin International Corporation, et al./Rudlin International Corporation, et al.  vs. Financial Building Corporation; G.R. No. 164186/G.R. No. 164347. October 4, 2010.

Attorney’s fees. An award of attorney’s fees is the exception rather than the rule.  The right to litigate is so precious that a penalty should not be charged on those who may exercise it erroneously.  It is not given merely because the defendant prevails and the action is later declared to be unfounded unless there was a deliberate intent to cause prejudice to the other party. Spouses Ramy and Zenaida Pudadera vs. Ireneo Magallanes and the late Daisy Teresa cortel Magallanes, substituted by her children, Nelly M. Marquez, et al.;G.R. No. 170073, October 18, 2010.

Compensation; partial set-off. Under the circumstances, fairness and reason dictate that we simply order the set-off of the petitioners’ contractual liabilities totaling P575,922.13 against the repair cost for the defective gutter, pegged at P717,524.00, leaving the amount of P141,601.87 still due from the respondent. Support in law for this ruling for partial legal compensation proceeds from Articles 1278, 1279, 1281, and 1283 of the Civil Code. In short, both parties are creditors and debtors of each other, although in different amounts that are already due and demandable. Spouses Victoriano chung and Debbie Chung vs. Ulanday Construction, Inc.;G.R. No. 156038, October 11, 2010.

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