October 2009 Philippine Supreme Court Decisions on Civil Law

Here are selected October 2009 Philippine Supreme Court decisions on civil law and related laws:

Civil Code

Contract; binding effect. Article 1311 of the New Civil Code states that, “contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law.” In this case, the rights and obligations between petitioner and Alfonso are transmissible. There was no mention of a contractual stipulation or provision of law that makes the rights and obligations under the original sales contract for Lot 3, Block 4, Phase IIintransmissible . Hence, Alfonso can transfer her ownership over the said lot to respondents and petitioner is bound to honor its corresponding obligations to the transferee or new lot owner in its subdivision project.

Having transferred all rights and obligations over Lot 3, Block 4, Phase II to respondents, Alfonso could no longer be considered as an indispensable party. An indispensable party is one who has such an interest in the controversy or subject matter that a final adjudication cannot be made in his absence, without injuring or affecting that interest. Contrary to petitioner’s claim, Alfonso no longer has an interest on the subject matter or the present controversy, having already sold her rights and interests on Lot 3, Block 4, Phase II to herein respondents.   Sta. Lucia Realty & Development, Inc. vs. Spouses Francisco & Emelia Buenaventura, as represented by Ricardo Segismundo, G.R. No. 177113, October 2, 2009.

Contract; compromise agreement. A compromise agreement is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. It contemplates mutual concessions and mutual gains to avoid the expenses of litigation; or when litigation has already begun, to end it because of the uncertainty of the result.

The validity of a compromise agreement is dependent upon its fulfillment of the requisites and principles of contracts dictated by law; and its terms and conditions must not be contrary to law, morals, good customs, public policy and public order. Gov. Antonio P. Calingin vs. Civil Service Commission and Grace L. Anayron, G.R. No. 183322, October 30, 2009.

Contract;  contract to sell. The very essence of a contract of sale is the transfer of ownership in exchange for a price paid or promised.

In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the property despite delivery thereof to the prospective buyer, binds himself to sell the property exclusively to the prospective buyer upon fulfillment of the condition agreed,i.e., full payment of the purchase price. A contract to sell may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of asuspensive condition, because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. Delfin Tan vs. Erlinda C. Benolirao, Andrew C. Benolirao, Romano C. Benolirao, Dion C. Benolirao, Sps. Reynaldo Taningco and Norma D. Benolirao, Evelyn T. Monreal and Ann Karina Taningco, G.R. No. 153820, October 16, 2009.

Contract; equitable mortgage. An equitable mortgage has been defined “as one which although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, there being no impossibility nor anything contrary to law in this intent.”

For the presumption of an equitable mortgage to arise under Article 1602, two (2) requisites must concur: (a) that the parties entered into a contract denominated as a contract of sale; and, (b) that their intention was to secure an existing debt by way of a mortgage. Any of the circumstances laid out in Article 1602, not the concurrence nor an overwhelming number of the enumerated circumstances, is sufficient to support the conclusion that a contract of sale is in fact an equitable mortgage. In several cases, we have not hesitated to declare a purported contract of sale to be an equitable mortgage based solely on one of the enumerated circumstances under Article 1602. This approach follows the rule that when doubt exists on the nature of the parties’ transaction, the law favors the least transmission of property rights.  Rockville Excel International Exim Corporation vs. Spouses Oligario Culla and Bernardita Miranda, G.R. No. 155716, October 2, 2009.

Contract;  prescription.  It is true that an action for reconveyance of real property resulting from fraud may be barred by the statute of limitations, which requires that the action shall be filed within four (4) years from the discovery of the fraud. TheRTC, however, seemed to have overlooked the fact that the basis of respondents’ complaint for reconveyance is not fraud but threat, duress and intimidation, allegedly employed by Marcos’ cronies upon the relatives of the Montanos while the latter were on self-exile. In fact, fraud was neither specifically alleged nor remotely implied in the complaint.

Article 1391 of the Civil Code provides:  “Art. 1391. An action for annulment shall be brought within four years.  This period shall begin: In case of intimidation, violence or undue influence, from the time the defect of the consent ceases.  In case of mistake or fraud, from the time of the discovery of the same.  And when the action refers to contracts entered into by minors or other incapacitated persons, from the time the guardianship ceases.”

In the circumstances prevailing in this case, the threat or intimidation upon respondents is deemed to have ceased only upon the ouster of then President Marcos from power on February 21, 1986. The four-year prescriptive period must, therefore, be reckoned from the said date. Thus, when respondents filed their complaint forreconveyance on September 15, 1989, the period provided for by law had not yet prescribed. Therefore, petitioner’s motion to dismiss should be denied.   Associated Bank vs. Spouses Justiniano S. Montano, Sr. and Ligaya Montano, et al. G.R. No. 166383. October 16, 2009

Contract; rescission. The remedy of rescission under Article 1191 cannot apply to mere contracts to sell.  Delfin Tan vs. Erlinda C. Benolirao, Andrew C. Benolirao, Romano C. Benolirao, Dion C. Benolirao, Sps. Reynaldo Taningco and Norma D. Benolirao, Evelyn T. Monreal and Ann Karina Taningco, G.R. No. 153820, October 16, 2009.

Contract; void contract. There can be no doubt that the contract of sale or Kasulatan lacked the essential element of consideration. It is a well-entrenched rule that where the deed of sale states that the purchase price has been paid but in fact has never been paid, the deed of sale is null and void abinitio for lack of consideration. Moreover, Art. 1471 of the Civil Code, which provides that “if the price is simulated, the sale is void,” also applies to the instant case, since the price purportedly paid as indicated in the contract of sale was simulated for no payment was actually made.

Consideration and consent are essential elements in a contract of sale. Where a party’s consent to a contract of sale is vitiated or where there is lack of consideration due to a simulated price, the contract is null and void abinitio.   Sps. Ramon Lequin and Virgina Lequin vs. Sps. Raymundo Vizconde, et al.,  G.R. No. 177710, October 12, 2009.

Contract;  voidable contract. A contract, as defined in the Civil Code, is a meeting of minds, with respect to the other, to give something or to render some service. For a contract to be valid, it must have three essential elements: (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.

The requisites of consent are (1) it should be intelligent or with an exact notion of the matter to which it refers; (2) it should be free; and (3) it should be spontaneous. In De Jesus v. Intermediate Appellate Court, it was explained that intelligence in consent is vitiated by error, freedom by violence, intimidation or undue influence, and spontaneity by fraud.

Article (Art.) 1330 of the Civil Code provides that when consent is given through fraud, the contract is voidable.

Tolentino defines fraud as “every kind of deception whether in the form of insidious machinations, manipulations, concealments or misrepresentations, for the purpose of leading another party into error and thus execute a particular act.” Fraud has a “determining influence” on the consent of the prejudiced party, as he is misled by a false appearance of facts, thereby producing error on his part in deciding whether or not to agree to the offer.

One form of fraud is misrepresentation through insidious words or machinations. Under Art. 1338 of the Civil Code, there is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which without them he would not have agreed to. Insidious words or machinations constituting deceit are those that ensnare, entrap, trick, or mislead the other party who was induced to give consent which he or she would not otherwise have given.

Deceit is also present when one party, by means of concealing or omitting to state material facts, with intent to deceive, obtains consent of the other party without which, consent could not have been given. Art. 1339 of the Civil Code is explicit that failure to disclose facts when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud.  Sps. Ramon Lequin and Virgina Lequin vs. Sps. Raymundo Vizconde, et al.,  G.R. No. 177710, October 12, 2009.

Damages;  attorney’s fees. Tan had a valid reason for refusing to pay the balance of the purchase price for the property. Consequently, there is no basis for the award of attorney’s fees in favor of the respondents.

On the other hand, we award attorney’s fees in favor of Tan, since he was compelled to litigate due to the respondents’ refusal to return his down payment despite the fact that they could no longer comply with their obligation under the contract to sell, i.e., to convey a clean title. Given the facts of this case, we find the award of P50,000.00 as attorney’s fees proper.  Delfin Tan vs. Erlinda C. Benolirao, Andrew C. Benolirao, Romano C. Benolirao, Dion C. Benolirao, Sps. Reynaldo Taningco and Norma D. Benolirao, Evelyn T. Monreal and Ann Karina Taningco, G.R. No. 153820, October 16, 2009.

Damages; attorney’s fees. Article 2208 of the Civil Code provides that in the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered. In this case, however, the charge invoice provides that “25% of the amount due is further charged for attorney’s fees and cost of collection in case of suit.” Thus, we agree that respondent is also entitled to 25% of P108,032 or P27,008 as attorney’s fees.

Damages;  interest. Undoubtedly, Tan made a clear and unequivocal demand on the vendors to return his down payment as early as May 28, 1993. Pursuant to

Our definitive ruling in Eastern Shipping Lines, Inc. v. Court of Appeals, we hold that the vendors should return the P200,000.00 down payment to Tan, subject to the legal interest of 6% perannum computed from May 28, 1993, the date of the first demand letter.   Angelito Colmenares vs. Hand Tractor Parts and Agro-Industrial Corp., G.R. No. 170790, October 23, 2009.

Damages;  interest.  After a judgment has become final and executory, the rate of legal interest, whether the obligation was in the form of a loan or forbearance of money or otherwise, shall be 12% perannum from such finality until its satisfaction. Accordingly, the principal obligation of P200,000.00 shall bear 6% interest from the date of first demand or from May 28, 1993. From the date the liability for the principal obligation and attorney’s fees has become final andexecutory , an annual interest of 12% shall be imposed on these obligations until their final satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.  Delfin Tan vs. Erlinda C. Benolirao, Andrew C. Benolirao, Romano C. Benolirao, Dion C. Benolirao, Sps. Reynaldo Taningco and Norma D. Benolirao, Evelyn T. Monreal and Ann Karina Taningco, G.R. No. 153820, October 16, 2009.

Damages; moral. The award of moral and exemplary damages must be reinstated in view of the fraud or fraudulent machinations employed by respondents on petitioners. The grant of damages in the concept of attorney’s fees in the amount ofPhP 10,000 must be maintained considering that petitioners have to incur litigation expenses to protect their interest in conformity to Art. 2208(2) of the Civil Code.   Sps. Ramon Lequin and Virgina Lequin vs. Sps. Raymundo Vizconde, et al.,  G.R. No. 177710, October 12, 2009

Obligation; dacion. Dacion en pago is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of an existing obligation. It is a special mode of payment where the debtor offers another thing to the creditor who accepts it as equivalent to the payment of an outstanding debt. Fordacion en pago to exist, the following elements must concur: (a) existence of a money obligation; (b) the alienation to the creditor of a property by the debtor with the consent of the former; and (c) satisfaction of the money obligation of the debtor.  Rockville Excel International Exim Corporation vs. Spouses Oligario Culla and Bernardita Miranda, G.R. No. 155716, October 2, 2009.

Obligation; dacion. Dacion en pago is the delivery and transmission of ownership of another thing by the debtor to the creditor as an accepted equivalent of performance of an obligation. It partakes of the nature of a contract of sale, where the thing offered by the debtor is the object of the contract, while the debt is the consideration or purchase price.

The pivotal issue is thus whether respondent Sychinghos had the right to sell or convey title to the subject property at the time of the dacion en pago. The Court finds in the affirmative.

There having been no previous foreclosure of the Real Estate Mortgage on the subject property, respondent Sychinghos’ ownership thereof remained intact. Indeed, a mortgage does not affect the ownership of the property as it is nothing more than a lien thereon serving as security for a debt. The mortgagee does not acquire title to the mortgaged real estate unless he purchases it at a public auction, and it is not redeemed within the period provided for by the Rules of Court. This applies afortiori to the present case where only 1/3, not the whole, of the subject property was actually encumbered to FEBTC.   Joseph Typingco vs. Lina Lim, Jerry Sychingco, et al., G.R. No. 181232, October 23, 2009.

Obligation;  estoppel. By its own act of acknowledging the rights of respondent (in their June 7, 1991 Kasunduan) as a member of MUMI and his entitlement to not less than 2,880 sq m lot in the resettlement area and the corresponding disturbance compensation, petitioner is now estopped from claiming that he is not qualified to avail himself of the benefits in the contract. The Court further notes that it was because of petitioner’s representations that respondent was impelled to peacefully vacate the portion of the estate he was tilling.

Moreover, petitioner’s subsequent act of granting the same contractual benefits to another member of MUMI, who was also a caretaker, defeats any interpretation of the February 14, 1991 Kasunduan that only occupants of the estate in the concept of an owner may avail of such benefits.  Antipolo Properties, Inc. (now Prime East Properties, Inc.) vs. Cesar Nuyda,   G.R. No. 171832, October 12, 2009.

Obligation; extinguishment. Obligations are extinguished, among others, by payment or performance, the mode most relevant to the factual situation in the present case. Under Article 1232 of the Civil Code, payment means not only the delivery of money but also the performance, in any other manner, of an obligation. Article 1233 of the Civil Code states that “a debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered, as the case may be.” In contracts of loan, the debtor is expected to deliver the sum of money due the creditor. These provisions must be read in relation with the other rules on payment under the Civil Code, which rules impliedly require acceptance by the creditor of the payment in order to extinguish an obligation.

In the present case, Manuel sought to pay Ester by authorizing her, through an SPA, to collect the proceeds of the PNB loan – an act that would have led to payment if Ester had collected the loan proceeds as authorized. Admittedly, the delivery of the SPA was not, strictly speaking, a delivery of the sum of money due toMTLC , and Ester could not be compelled to accept it as payment based on Article 1233. Nonetheless, the SPA stood as an authority to collect the proceeds of the already-approvedPNB loan that, upon receipt by Ester, would have constituted as payment of the MTLC loan. Had Ester presented the SPA to the bank and signed the deed of release/cancellation of mortgage, the delivery of the sum of money would have been effected and the obligation extinguished. As the records show, Ester refused to collect and allow the cancellation of the mortgage.

Under these facts, Manuel posits two things: first, that Ester’s refusal was based on completely unjustifiable grounds; and second, that the refusal was equivalent to payment that led to theextinguishment of the obligation.   Manuel Go Cinco and Araceli S. Go Cinco vs. Court of Appeals, et al.,  G.R. No. 151903, October 9, 2009.

Obligation; force majeure. The Court cannot generalize the 1997 Asian financial crisis to be unforeseeable and beyond the control of a business corporation. A real estate enterprise engaged in thepre-selling of condominium units is concededly a master in projections on commodities and currency movements, as well as business risks. The fluctuating movement of the Philippine peso in the foreign exchange market is an everyday occurrence, hence, not an instance ofcaso fortuito. Megaworld’s excuse for its delay does not thus lie .  Megaworld Globus Asia, Inc. vs. Mila S. Tanseco, G.R. No. 181206, October 9, 2009.

Obligations; interest. The applicable interest rate for the amount to be reimbursed to respondents is 6% per annum, reckoned from the time of the filing of the complaint, because the case at bar involves a breach of obligation and not a loan or forbearance of money.  Sta. Lucia Realty & Development, Inc. vs. Spouses Francisco & Emelia Buenaventura, as represented by Ricardo Segismundo, G.R. No. 177113, October 2, 2009.

Obligation; interest. Under the circumstances, the spouses Go Cinco have undertaken, at the very least, the equivalent of a tender of payment that cannot but have legal effect. Since payment was available and was unjustifiably refused, justice and equity demand that the spouses GoCinco be freed from the obligation to pay interest on the outstanding amount from the time the unjust refusal took place; they would not have been liable for any interest from the time tender of payment was made if the payment had only been accepted. Under Article 19 of the Civil Code, they should likewise be entitled to damages, as the unjust refusal was effectively an abusive act contrary to the duty to act with honesty and good faith in the exercise of rights and the fulfillment of duty.  Manuel Go Cinco and Araceli S. Go Cinco vs. Court of Appeals, et al.,  G.R. No. 151903, October 9, 2009.

Obligation; interest. The legal interest is 6% p.a. and it shall be reckoned from April 25, 2007 when the RTC rendered its judgment, not from the time of respondent’s extrajudicial demand. This must be so as it was at the time the RTC rendered its judgment that the quantification of damages may be deemed to have been reasonably ascertained. Then, from the time this decision becomes final andexecutory, the interest rate shall be 12% p.a. until full satisfaction.  Air France Philippines/KLM Air France vs. John Anthony De Camilis, G.R. No. 188961, October 13, 2009.

Obligation; laches. There is no absolute rule on what constitutes laches. It is a rule of equity and applied not to penalize neglect or sleeping on one’s rights, but rather to avoid recognizing a right when to do so would result in a clearly unfair situation. The question of laches is addressed to the sound discretion of the court and each case must be decided according to its particular circumstances. It is the better rule that courts, under the principle of equity, should not be guided or bound strictly by the statute of limitations or the doctrine of laches if wrong or injustice will result.  Bicol Agro-Industrial Producers Cooperative, inc. (BAPCI)  vs. Edmundo O. Obias, et al. G.R. No. 172077. October 9, 2009

Obligation; reciprocal obligations. The Contract to Buy and Sell of the parties contains reciprocal obligations, i.e., to complete and deliver the condominium unit on October 31, 1998 or six months thereafter on the part ofMegaworld, and to pay the balance of the purchase price at or about the time of delivery on the part of Tanseco. Compliance by Megaworld with its obligation is determinative of compliance by Tanseco with her obligation to pay the balance of the purchase price. Megaworld having failed to comply with its obligation under the contract, it is liable therefor.

That Megaworld’s sending of a notice of turnover preceded Tanseco’s demand for refund does not abate her cause. For demand would have been useless under Article 1169, Megaworld admittedly having failed in its obligation to deliver the unit on the agreed date. Megaworld Globus Asia, Inc. vs. Mila S. Tanseco, G.R. No. 181206, October 9, 2009.

Obligation; tender. While Ester’s refusal was unjustified and unreasonable, we cannot agree with Manuel’s position that this refusal had the effect of payment that extinguished his obligation to MTLC. Article 1256 is clear and unequivocal on this point. In short, a refusal without just cause is not equivalent to payment; to have the effect of payment and the consequent extinguishment of the obligation to pay, the law requires the companion acts of tender of payment and consignation.

Tender of payment, as defined in Far East Bank and Trust Company v. Diaz Realty, Inc., is the definitive act of offering the creditor what is due him or her, together with the demand that the creditor accept the same. When a creditor refuses the debtor’s tender of payment, the law allows the consignation of the thing or the sum due. Tender and consignation have the effect of payment, as by consignation, the thing due is deposited and placed at the disposal of the judicial authorities for the creditor to collect.  Manuel Go Cinco and Araceli S. Go Cinco vs. Court of Appeals, et al.,  G.R. No. 151903, October 9, 2009.

Persons;  annulment of marriage. Article 45(5) of the Family Code refers to lack of power to copulate. Incapacity to consummate denotes the permanent inability on the part of the spouses to perform the complete act of sexual intercourse. Non-consummation of a marriage may be on the part of the husband or of the wife and may be caused by a physical or structural defect in the anatomy of one of the parties or it may be due to chronic illness and inhibitions or fears arising in whole or in part frompsychophysical conditions. It may be caused by psychogenic causes, where such mental block or disturbance has the result of making the spouse physically incapable of performing the marriage act.

No evidence was presented in the case at bar to establish that respondent was in any way physically incapable to consummate his marriage with petitioner. Petitioner even admitted during her cross-examination that she and respondent had sexual intercourse after their wedding and before respondent left for abroad. There obviously being no physical incapacity on respondent’s part, then, there is no ground for annulling petitioner’s marriage to respondent. Petitioner’s Complaint was, therefore, rightfully dismissed.  Veronica Cabacungan Alcazar  vs. Rey C. Alcazar, G.R. No. 174451, October 13, 2009.

Persons;  conjugal property. Article 160 of the New Civil Code provides, “All property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife.”

There is no issue with regard to the lot covered by TCT No. T-26471, which was an exclusive property of Pedro, having been acquired by him before his marriage to Mary Ann. However, the lot covered byTCT No. T-88674 was acquired in 1982 during the marriage of Pedro and Mary Ann. No evidence was adduced to show that the subject property was acquired through exchange or barter. The presumption of the conjugal nature of the property subsists in the absence of clear, satisfactory and convincing evidence to overcome said presumption or to prove that the subject property is exclusively owned by Pedro. Petitioners’ bare assertion would not suffice to overcome the presumption thatTCT No. T-88674, acquired during the marriage of Pedro and Mary Ann, is conjugal. Likewise, the house built thereon is conjugal property, having been constructed through the joint efforts of the spouses, who had even obtained a loan fromDBP to construct the house.

Significantly, a sale or encumbrance of conjugal property concluded after the effectivity of the Family Code on August 3, 1988, is governed by Article 124 of the same Code that now treats such a disposition to be void if done (a) without the consent of both the husband and the wife, or (b) in case of one spouse’s inability, the authority of the court. Patronica Ravina and Wilfredo Ravina Vs. Mary Ann P. Villa Abrille, for behalf of Ingrid D’Lyn P. Villa Abrille, et al., G.R. No. 160708, October 16, 2009.

Persons; human relations. Firmly established in our civil law is the doctrine that: “Every 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.” When a right is exercised in a manner that does not conform with such norms and results in damages to another, a legal wrong is thereby committed for which the wrong doer must be held responsible. Similarly, any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damages caused. It is patent in this case that petitioners’ alleged acts fall short of these established civil law standards.  Patronica Ravina and Wilfredo Ravina vs. Mary Ann P. Villa Abrille, for behalf of Ingrid D’Lyn P. Villa Abrille, et al., G.R. No. 160708, October 16, 2009.

Persons;  psychological incapacity. In Santos v. Court of Appeals, the Court declared that “psychological incapacity” under Article 36 of the Family Code is not meant to comprehend all possible cases of psychoses. It should refer, rather, to no less than a mental (not physical) incapacity that causes a party to be trulyincognitive of the basic marital covenants that concomitantly must be assumed and discharged by the parties to the marriage. Psychological incapacity must be characterized by (a) gravity, (b) juridical antecedence, and (c)incurability.   Veronica Cabacungan Alcazar  vs. Rey C. Alcazar, G.R. No. 174451, October 13, 2009.

Persons;  psychological incapacity. It must be stressed that psychological incapacity must be more than just a “difficulty,” “refusal” or “neglect” in the performance of some marital obligations. The intention of the law is to confine the meaning of “psychological incapacity” to the most serious cases of personality disorders clearly demonstrative of an utter insensitivity or inability to give meaning and significance to the marriage.

Noteworthy, as aptly pointed out by the appellate court, Rodolfo and Aurora initially had a blissful marital union for several years. They married in 1982, and later affirmed the ceremony in church rites in 1983, showing love and contentment with one another after a year of marriage. The letter of petitioner dated April 1, 1990addressed to respondent revealed the harmonious relationship of the couple continued during their marriage for about eight years from the time they married each other. From this, it can be inferred that they were able to faithfully comply with their obligations to each other and to their children. Aurora was shown to have taken care of her children and remained faithful to her husband while he was away. She even joined sales activities to augment the family income. She appeared to be a very capable woman who traveled a lot and pursued studies here and abroad. It was only when Rodolfo’s acts of infidelity were discovered that the marriage started to fail.  Rodolfo A. Aspillaga  vs. Aurora A. Aspillaga, G.R. No. 170925, October 26, 2009.

Persons; support. Petitioners’ partial concurrent obligation extends only to their descendants as this word is commonly understood to refer to relatives, by blood of lower degree. As petitioners’ grandchildren by blood, only respondents Lester Edward, Candice Grace and Mariano III belong to this category. Indeed, Cheryl’s right to receive support from theLim family extends only to her husband Edward, arising from their marital bond.   Spouses Prudencio and Filomena Lim vs. Ma. Cheryl S. Lim, for herself and on behalf of her minor children Lester Edward S. Lim, Candice Grace S. Lim, and Mariano S. Lim, III,  G.R. No. 163209, October 30, 2009.

Property; builder in bad faith. If a voidable contract is annulled, the restoration of what has been given is proper. The relationship between the parties in any contract even if subsequently annulled must always be characterized and punctuated by good faith and fair dealing. Hence, in consonance with justice and equity and the salutary principle of non-enrichment atanother’s expense, we sustain the appellate court’s order directing Pedro to return to petitioner spouses the value of the consideration for the lot covered byTCT No. T-88674 and the house thereon.

However, this court rules that petitioners cannot claim reimbursements for improvements they introduced after their good faith had ceased. As correctly found by the Court of Appeals, petitionerPatrocinia Ravina made improvements and renovations on the house and lot at the time when the complaint against them was filed. Ravina continued introducing improvements during the pendency of the action.

Thus, Article 449 of the New Civil Code is applicable. It provides that, “(h)e who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity.” Patronica Ravina and Wilfredo Ravina vs. Mary Ann P. Villa Abrille, for behalf of Ingrid D’Lyn P. Villa Abrille, et al., G.R. No. 160708, October 16, 2009.

Property;  builder in bad faith. The rule that the choice under Article 448 of the Civil Code belongs to the owner of the land is in accord with the principle of accession, i.e., that the accessory follows the principal and not the other way around. Even as the option lies with the landowner, the grant to him, nevertheless, ispreclusive. The landowner cannot refuse to exercise either option and compel instead the owner of the building to remove it from the land.

The raison d’etre for this provision has been enunciated thus: Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of the impracticability of creating a state of forced co-ownership, the law has provided a just solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity, or to oblige the builder or planter to pay for the land and the sower the proper rent. He cannot refuse to exercise either option. It is the owner of the land who is authorized to exercise the option, because his right is older, and because, by the principle of accession, he is entitled to the ownership of the accessory thing. Ophelia L. Tuatis vs. Spouses Eliseo Escol and Visminda Escol, et al., G.R. No. 175399, October 27, 2009.

Property;  builder in good faith.   When the co-ownership is terminated by a partition, and it appears that the house of an erstwhile co-owner has encroached upon a portion pertaining to another co-owner, but the encroachment was in good faith, then the provisions of Article 448 should apply to determine the respective rights of the parties. In this case, the co-ownership was terminated due to the transfer of the title of the whole property in favor of JoaquinLimense.

Under the foregoing provision, petitioners have the right to appropriate said portion of the house of respondents upon payment of indemnity to respondents, as provided for in Article 546 of the Civil Code. Otherwise, petitioners may oblige respondents to pay the price of the land occupied by their house. However, if the price asked for is considerably much more than the value of the portion of the house of respondents built thereon, then the latter cannot be obliged to buy the land. Respondents shall then pay the reasonable rent to petitioners upon such terms and conditions that they may agree. In case of disagreement, the trial court shall fix the terms thereof. Of course, respondents may demolish or remove the said portion of their house, at their own expense, if they so decide.

The choice belongs to the owner of the land, a rule that accords with the principle of accession that the accessory follows the principal and not the other way around. Even as the option lies with the landowner, the grant to him, nevertheless, ispreclusive. He must choose one. He cannot, for instance, compel the owner of the building to instead remove it from the land.

The obvious benefit to the builder under this article is that, instead of being outrightly ejected from the land, he can compel the landowner to make a choice between two options: (1) to appropriate the building by paying the indemnity required by law, or (2) to sell the land to the builder. Heirs of the late Joaquin Limense vs. Rita vda. De Ramos, et al., G.R. No. 152319, October 28, 2009.

Property; easement. Article 622 of the New Civil Code provides: “Art. 622. Continuous non-apparent easements, and discontinuous ones, whether apparent or not, may be acquired only by virtue of a title.” Based on the foregoing, in order for petitioner to acquire the disputed road as an easement of right-of-way, it was incumbent upon petitioner to show its right by title or by an agreement with the owners of the lands that said road traversed. Bicol Agro-Industrial Producers Cooperative, inc. (BAPCI)  vs. Edmundo O. Obias, et al. G.R. No. 172077. October 9, 2009

Property; easement. Petitioner would have this Court re-examine Costabella Corporation v. Court of Appeals (Costabella) where the Court held that, “It is already well-established that a right of way is discontinuous and, as such, cannot be acquired by prescription.” Petitioner contends that some recognized authorities share its view that an easement of right of way may be acquired by prescription.

Be that as it may, this Court finds no reason to re-examine Costabella. This Court is guided by Bogo-Medellin Milling Co., Inc. v. Court of Appeals (Bogo-Medellin), involving the construction of a railroad track to a sugar mill. In Bogo-Medellin, this Court discussed the discontinuous nature of an easement of right of way and the rule that the same cannot be acquired by prescription.

Applying Bogo-Medellin to the case at bar, the conclusion is inevitable that the road in dispute is a discontinuous easement notwithstanding that the same may be apparent. To reiterate, easements are either continuous or discontinuous according to the manner they are exercised, not according to the presence of apparent signs or physical indications of the existence of such easements. Hence, even if the road in dispute has been improved and maintained over a number of years, it will not change its discontinuous nature but simply make the same apparent. To stress, Article 622 of the New Civil Code states that discontinuous easements, whether apparent or not, may be acquired only by virtue of a title.  Bicol Agro-Industrial Producers Cooperative, inc. (BAPCI)  vs. Edmundo O. Obias, et al. G.R. No. 172077. October 9, 2009

Property; easement. Petitioner manifested in the RTC its desire, in the alternative, to avail of a compulsory easement of right of way as provided for under Article 649 the New Civil Code. Said relief was granted by the RTC because of the unavailability of another adequate outlet from the sugar mill to the highway. Despite the grant of a compulsory easement of right of way, petitioner, however, assails both the RTC and CA Decision with regard to the amount of indemnity due respondents.

Petitioner likens the proceedings at bar to an expropriation proceeding where just compensation must be based on the value of the land at the time of taking.[ Petitioner thus maintains that the compensation due to respondents should have been computed in 1974 when the road was constructed.

This Court does not agree. Under Article 649 of the Civil Code, it is clear that the law does not provide for a specific formula for the valuation of the land. Neither does the same state that the value of the land must be computed at the time of taking. The only primordial consideration is that the same should consist of the value of the land and the amount of damage caused to the servient estate. Hence, the same is a question of fact which should be left to the sound discretion of the RTC.  Bicol Agro-Industrial Producers Cooperative, inc. (BAPCI)  vs. Edmundo O. Obias, et al. G.R. No. 172077. October 9, 2009

Property; easement.  Easements may be continuous or discontinuous, apparent or non-apparent.

Continuous easements are those the use of which is or may be incessant, without the intervention of any act of man. Discontinuous easements are those which are used at intervals and depend upon the acts of man. Apparent easements are those which are made known and are continually kept in view by external signs that reveal the use and enjoyment of the same. Non-apparent easements are those which show no external indication of their existence.

In the present case, the easement of right of way is discontinuous and apparent. It is discontinuous, as the use depends upon the acts of respondents and other persons passing through the property. Being an alley that shows a permanent path going to and from Beata Street, the same is apparent.

Being a discontinuous and apparent easement, the same can be acquired only by virtue of a title. Heirs of the late Joaquin Limense vs. Rita vda. De Ramos, et al., G.R. No. 152319, October 28, 2009.

Property; purchaser in good faith. A purchaser in good faith is one who buys the property of another without notice that some other person has a right to, or interest in, such property and pays a full and fair price for the same at the time of such purchase, or before he has notice of the claim or interest of some other person in the property. To establish his status as a buyer for value in good faith, a person dealing with land registered in the name of and occupied by the seller need only show that he relied on the face of the seller’s certificate of title. But for a person dealing with land registered in the name of and occupied by the seller whose capacity to sell is restricted, such as by Articles 166 and 173 of the Civil Code or Article 124 of the Family Code, he must show that he inquired into thelatter’s capacity to sell in order to establish himself as a buyer for value in good faith.   Patronica Ravina and Wilfredo Ravina vs.. Mary Ann P. Villa Abrille, for behalf of Ingrid D’Lyn P. Villa Abrille, et al., G.R. No. 160708, October 16, 2009.

Special Laws

Property Registration Decree; buyer in good faith. Every buyer of a registered land who takes a certificate of title for value and in good faith shall hold the same free of all encumbrances except those noted on said certificate. It has been held, however, that “where the party has knowledge of a prior existing interest that was unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him.”

Good faith is an intangible and abstract quality with no technical meaning or statutory definition; and it encompasses, among other things, an honest belief, the absence of malice and the absence of a design to defraud or to seek an unconscionable advantage. Anindividual’s personal good faith is a concept of his own mind and, therefore, may not conclusively be determined by his protestations alone. It implies honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry. The essence of good faith lies in an honest belief in the validity of one’s right, ignorance of a superior claim, and absence of intention to overreach another. Applied to possession, one is considered in good faith if he is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.

Good faith is always presumed, and upon him who alleges bad faith on the part of the possessor rests the burden of proof.  Heirs of the late Joaquin Limense vs. Rita vda. De Ramos, et al.,  G.R. No. 152319, October 28, 2009.

Property Registration Decree; emancipation patent. Petitioners argue that the Emancipation Patents and Transfer Certificates of Title issued to them which were already registered with the Register of Deeds have already become indefeasible and can no longer be cancelled.
We do not adhere to petitioners’ view. This Court has already ruled that the mere issuance of an emancipation patent does not put the ownership of the agrarian reform beneficiary beyond attack and scrutiny. Emancipation patents issued to agrarian reform beneficiaries may be corrected and cancelled for violations of agrarian laws, rules and regulations. In fact, DAR Administrative Order No. 02, series of 1994, which was issued in March 1994, enumerates the grounds for cancellation of registered Emancipation Patents or Certificates of Landownership Award. Pedro Mago (deceased), represented by his spouse Soledad Mago, et al. vs. Juana Z. Barbin, G.R. No. 173923, October 12, 2009.

Property Registration Decree; registration. In any case, the Court finds no error in the findings of both the RTC and the CA that PNB is indeed an innocent mortgagee for value. When the lots were mortgaged to PNB by Lim, the titles thereto were in the latter’s name, and they showed neither vice nor infirmity. In accepting the mortgage, PNB was not required to make any further investigation of the titles to the properties being given as security, and could rely entirely on what was stated in the aforesaid title. The public interest in upholding theindefeasibility of a certificate of title, as evidence of the lawful ownership of the land or of any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relies upon what appears on the face of the certificate of title.

It is settled that registration in the public registry is notice to the whole world. Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the Office of the Register of Deeds of the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing or entering. Under the rule of notice, it is presumed that the purchaser has examined every instrument of record affecting the title. Such presumption may not be rebutted. He is charged with notice of every fact shown by the record and is presumed to know every fact shown by the record and to know every fact which an examination of the record would have disclosed. This presumption cannot be overcome by any claim of innocence or good faith. Otherwise, the very purpose and object of the law requiring a record would be destroyed. Such presumption cannot be defeated by proof of want of knowledge of what the record contains any more than one may be permitted to show that he was ignorant of the provisions of the law.

The rule that all persons must take notice of the facts which the public record contains is a rule of law. The rule must be absolute; any variation would lead to endless confusion and useless litigation. In the present case, since the mortgage contract was registered, petitioner may not claim lack of knowledge thereof as a valid defense. The subsequent sale of the property to petitioner’s husband cannot defeat the rights ofPNB as the mortgagee and, subsequently, the purchaser at the auction sale whose rights were derived from a prior mortgage validly registered.  Eufemia vda. De Agatep vs. Roberta L. Rodriguez, et al.,  G.R. No. 170540, October 28, 2009.

Property Registration Decree; Torrens title. A title, once registered, cannot be defeated, even by adverse, open and notorious possession. The title, once registered, is notice to the world. All persons must take notice. No one can plead ignorance of the registration.
Hence, while the Picos’ may have been in open, notorious, and continuous possession of the second lot from the time it was purchased in 1977 until the present time, such possession no matter how long could not ripen into ownership as the second lot is part of registered land.

Even the Picos admit the indefeasible nature of Torrens titles; however, they argue that since the second lot was fraudulently included in the survey and registration of Catalina’s land, they may still question the title, pursuant to Section 55 of the Land Registration Act.

We note that the Picos have not shown any evidence to support their claim of fraudulent registration. Also telling is the Picos’ inaction to correct this alleged fraudulent registration. As we observed earlier, OCT No. 5930 was issued in Catalina’s name and transcribed in the Registration Book for the Province ofSurigao del Sur on January 13, 1969. Since then, the Picos have not filed any action to correct the alleged fraudulent inclusion of their property in the land registered in Catalina’s name. In fact, the present case arose from the complaint filed by theSalcedos, not the Picos, to quiet their title over the second lot.   Montano Pico and Rosita Pico vs. Catalina Adalim-Salcedo and Urbano Salcedo, G.R. No. 152006, October 2, 2009.

Property Registration Decree;  Torrens title. Under the Torrens system, registration is the operative act which gives validity to the transfer or creates a lien upon the land. Further, entrenched in our jurisdiction is the doctrine that registration in a public registry creates constructive notice to the whole world.

But, there is nothing in Act No. 496, as amended by P.D. No. 1529, that imposes a period within which to register annotations of “conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land.” If liens were not so registered, then it “shall operate only as a contract between the parties and as evidence of authority to the Registry of Deeds to make registration.” If registered, it “shall be the operative act to convey or affect the land insofar as third persons are concerned.” The mere lapse of time from the execution of the mortgage document to the moment of its registration does not affect the rights of a mortgagee.  “G” Holdings, Inc. vs. National Mines and Allied Workers Union Locan 103 (NAMAWU), Sheriffs Richard H. Aprosta and Alberto Munoz, all acting sheriffs, Department of Labor and Employment, Region VI, Bacolod District Office, Bacolod City, G.R. No. 160236. October 16, 2009