March 2010 Philippine Supreme Court Decisions on Civil Law

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

Civil Code

Conjugal partnership; effects of legal separation; forfeiture of share in profits. Among the effects of the decree of legal separation is that the conjugal partnership is dissolved and liquidated and the offending spouse would have no right to any share of the net profits earned by the conjugal partnership. Thus it is only the offending spouse’s share in the net profits, and not the share in the property, which is forfeited. Article 102(4) of the Family Code provides that “[f]or purposes of computing the net profits subject to forfeiture in accordance with Article 43, No. (2) and 63, No. (2), the said profits shall be the increase in value between the market value of the community property at the time of the celebration of the marriage and the market value at the time of its dissolution.” Mario Siochi vs. Alfredo Gozon, et al./Inter-Dimensional Realty, Inc. Vs. Mario Siochi, et al., G.R. No. 169900/G.R. No. 169977, March 18, 2010

Conjugal partnership; presumption of conjugal nature; need for marital consent. The Civil Code of the Philippines, the law in force at the time of the celebration of the marriage between Martha and Manuel in 1957, 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. This includes property which is acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership, or for only one of the spouses. The court is not persuaded by Titan’s arguments that the property was Martha’s exclusive property because Manuel failed to present before the RTC any proof of his income in 1970, hence he could not have had the financial capacity to contribute to the purchase of the property in 1970; and that Manuel admitted that it was Martha who concluded the original purchase of the property.  In consonance with its ruling in Spouses Castro v. Miat, Manuel was not required to prove that the property was acquired with funds of the partnership. Rather, the presumption applies even when the manner in which the property was acquired does not appear.  Here, we find that Titan failed to overturn the presumption that the property, purchased during the spouses’ marriage, was part of the conjugal partnership. Since the property was undoubtedly part of the conjugal partnership, the sale to Titan required the consent of both spouses.  Article 165 of the Civil Code expressly provides that “the husband is the administrator of the conjugal partnership”.  Likewise, Article 172 of the Civil Code ordains that “(t)he wife cannot bind the conjugal partnership without the husband’s consent, except in cases provided by law”. Titan Construction Corporation Vs. Manuel A. David, Sr. and Martha S. David, G.R. No. 169548, March 15, 2010.

Conjugal partnership; sole administration. In this case, Alfredo was the sole administrator of the property because Elvira, with whom Alfredo was separated in fact, was unable to participate in the administration of the conjugal property. However, as sole administrator of the property, Alfredo still cannot sell the property without the written consent of Elvira or the authority of the court. Without such consent or authority, the sale is void. The absence of the consent of one of the spouse renders the entire sale void, including the portion of the conjugal property pertaining to the spouse who contracted the sale. Even if the other spouse actively participated in negotiating for the sale of the property, that other spouse’s written consent to the sale is still required by law for its validity. The Agreement entered into by Alfredo and Mario was without the written consent of Elvira. Thus, the Agreement is entirely void. As regards Mario’s contention that the Agreement is a continuing offer which may be perfected by Elvira’s acceptance before the offer is withdrawn, the fact that the property was subsequently donated by Alfredo to Winifred and then sold to IDRI clearly indicates that the offer was already withdrawn. Mario Siochi vs. Alfredo Gozon, et al./Inter-Dimensional Realty, Inc. Vs. Mario Siochi, et al., G.R. No. 169900/G.R. No. 169977, March 18, 2010

Contracts; enforceability; Statute of Frauds. The Statute of Frauds found in paragraph (2), Article 1403 of the Civil Code, requires for enforceability certain contracts enumerated therein to be evidenced by some note or memorandum.  The term “Statute of Frauds” is descriptive of statutes that require certain classes of contracts to be in writing; and that do not deprive the parties of the right to contract with respect to the matters therein involved, but merely regulate the formalities of the contract necessary to render it enforceable. In other words, the Statute of Frauds only lays down the method by which the enumerated contracts may be proved.  But it does not declare them invalid because they are not reduced to writing inasmuch as, by law, contracts are obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present.  The object is to prevent fraud and perjury in the enforcement of obligations depending, for evidence thereof, on the unassisted memory of witnesses by requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party to be charged. The effect of noncompliance with this requirement is simply that no action can be enforced under the given contracts.  If an action is nevertheless filed in court, it shall warrant a dismissal under Section 1(i), Rule 16 of the Rules of Court, unless there has been, among others, total or partial performance of the obligation on the part of either party. It has been private respondent’s consistent stand, since the inception of the instant case that she has entered into a contract with petitioners.  As far as she is concerned, she has already performed her part of the obligation under the agreement by undertaking the delivery of the 21 motor vehicles contracted for by Ople in the name of petitioner municipality.  This claim is well substantiated — at least for the initial purpose of setting out a valid cause of action against petitioners — by copies of the bills of lading attached to the complaint, naming petitioner municipality as consignee of the shipment.  Petitioners have not at any time expressly denied this allegation and, hence, the same is binding on the trial court for the purpose of ruling on the motion to dismiss.  In other words, since there exists an indication by way of allegation that there has been performance of the obligation on the part of respondent, the case is excluded from the coverage of the rule on dismissals based on unenforceability under the statute of frauds, and either party may then enforce its claims against the other. The Municipality of Hagonoy, Bulacan, represented by the Hon. Felix V. Ople, Municipal Mayor, and Felix V. Ople, in his capacity vs. Hon. Simeon P. Dumdum, Jr. in his capacity as Presiding Judge of the Regional Trial Court, Branch 7, Cebu City, et al., G.R. No. 168289, March 22, 2010

Contracts; interest rate applicable.  The issue in this case is the interest rate applicable for respondent’s delay in the payment of the balance of the price adjustment.

Petitioners submit that the CA, in awarding the unpaid balance of the price adjustment, erred in fixing the interest rate at 12% instead of the 18% bank lending rate. In this appeal, petitioners allege that the contract between the parties consists of two parts, the Agreement and the General Conditions, both of which provide for interest at the bank lending rate on any unpaid amount due under the contract. Petitioners further claim that there is nothing in the contract which requires the consent of the respondent to be given in order that petitioners can charge the bank lending rate. In this case, the CA already settled that petitioners consulted respondent on the imposition of the price adjustment, and held respondent liable for the balance of P1,516,015.07. Respondent did not appeal from the decision of the CA; hence, respondent is estopped from contesting such fact. However, the CA went beyond the intent of the parties by requiring respondent to give its consent to the imposition of interest before petitioners can hold respondent liable for interest at the current bank lending rate.

This is erroneous. A review of Section 2.6 of the Agreement and Section 60.10 of the General Conditions shows that the consent of the respondent is not needed for the imposition of interest at the current bank lending rate, which occurs upon any delay in payment. When the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its stipulations governs.  In these cases, courts have no authority to alter a contract by construction or to make a new contract for the parties. The Court’s duty is confined to the interpretation of the contract which the parties have made for themselves without regard to its wisdom or folly as the court cannot supply material stipulations or read into the contract words which it does not contain. It is only when the contract is vague and ambiguous that courts are permitted to resort to construction of its terms and determine the intention of the parties. The escalation clause must be read in conjunction with Section 2.5 of the Agreement and Section 60.10 of the General Conditions which pertain to the time of payment. Once the parties agree on the price adjustment after due consultation in compliance with the provisions of the escalation clause, the agreement is in effect an amendment to the original contract, and gives rise to the liability of respondent to pay the adjusted costs. Under Section 60.10 of the General Conditions, the respondent shall pay such liability to the petitioner within 28 days from issuance of the interim certificate. Upon respondent’s failure to pay within the time provided (28 days), then it shall be liable to pay the stipulated interest. This is the logical interpretation of the agreement of the parties on the imposition of interest. To provide a contrary interpretation, as one requiring a separate consent for the imposition of the stipulated interest, would render the intentions of the parties nugatory. As to the applicable rate, under Article 2209 of the Civil Code, the appropriate measure for damages in case of delay in discharging an obligation consisting of the payment of a sum of money is the payment of penalty interest at the rate agreed upon in the contract of the parties. In the absence of a stipulation of a particular rate of penalty interest, payment of additional interest at a rate equal to the regular monetary interest becomes due and payable. Finally, if no regular interest had been agreed upon by the contracting parties, then the damages payable will consist of payment of legal interest which is 6%, or in the case of loans or forbearances of money, 12% per annum. It is only when the parties to a contract have failed to fix the rate of interest or when such amount is unwarranted that the Court will apply the 12% interest per annum on a loan or forbearance of money. The written agreement entered into between petitioners and respondent provides for an interest at the current bank lending rate in case of delay in payment and the promissory note charged an interest of 18%. To prove petitioners’ entitlement to the 18% bank lending rate of interest, petitioners presented the promissory note prepared by respondent bank itself. This promissory note, although declared void by the lower courts because it did not express the real intention of the parties, is substantial proof that the bank lending rate at the time of default was 18% per annum. Absent any evidence of fraud, undue influence or any vice of consent exercised by petitioners against the respondent, the interest rate agreed upon is binding on them. Pan Pacific Service Contractors, Inc. et al. vs. Equitable PCI Bank, etc., G.R. No. 169975, March 18, 2010.

Contracts; rescission. Unless the parties stipulated it, rescission is allowed only when the breach of the contract is substantial and fundamental to the fulfillment of the obligation.  Whether the breach is slight or substantial is largely determined by the attendant circumstances. GG Sportswear anchors its claim for rescission of a reservation agreement (the “Agreement”) for the purchase of units and parking slots in a condominum property being developed by World Class, on two grounds: (a) its dissatisfaction with the completion date; and (b) the lack of a Contract to Sell.  However, GG Sportswear cannot claim that it did not know the time-frame for the project’s completion when it entered into the Agreement with World Class.  As World Class points out, it is absurd and unbelievable that Mr. Gidwani, the president of GG Sportswear and an experienced businessman, did not have an idea of the expected completion date of the condominium project before he bought the condominium units for P89,624,272.82.  The grant, too, to World Class of a first License to Sell up to August 1998 and a second License to Sell up to December 1999, to our mind, served as a clear notice of when the project was to be completed. Moreover, the provisional Contract to Sell that accompanied the second Reservation Agreement explicitly provided that the condominium project would be ready for turnover no later than December 15, 1998, a clear expression of the project’s completion date. Having known the date, the fact of dissatisfaction with it does not constitute a breach so substantial as to render the Agreement rescissible.  GG Sportswear has never alleged that the given December 15, 1998 completion date violates the completion date previously agreed upon by the parties. In fact, nowhere does GG Sportswear allege that the parties ever agreed upon an earlier completion date. Even assuming that GG Sportswear was not aware of the exact completion date, we note that GG Sportswear signed the Agreement despite the Agreement’s omission to expressly state a specific completion date.  This directly implies that a specific completion date was not a material consideration for GG Sportswear when it executed the Agreement. Neither is the initial lack of a License to Sell a basis to cancel the Agreement and has in fact effectively been cured even if it may be considered an initial defect. We therefore find no reason for GG Sportswear to be dissatisfied [Digester’s Note: I guess the court means “to be dissatisfied since a breach had occurred] with the indicated completion date.  Even if it had been unhappy with the completion date, this ground, standing alone, is not sufficient basis to rescind the Agreement; unhappiness is a state of mind, not a defect available in law as a basis to rescind a contract. [Digester’s note: Last line good candidate for car sticker for IBP members.] On GG Sportwear’s second ground, we note that the Agreement expressly provides that GG Sportswear shall be entitled to a Contract to Sell only upon its payment of at least 30% of the total contract price.  Since GG Sportswear had only paid 21% of the total contract price, World Class’s obligation to execute a Contract to Sell had not yet arisen. Accordingly, GG Sportswear had no basis to claim that World Class breached this obligation and to seek the application of Article 1191 of the Civil Code. G.G. Sportswear Mfg. Corp vs. World Class Properties, Inc., G.R. No. 182720, March 2, 2010.

Contracts; lump sum for piece of work. The parties entered into a contract for a piece of work whereby petitioner engaged respondent as contractor to build and provide the necessary materials for the construction of the structural steel works of HJI’s fiber cement plant for a fixed lump-sum price of P44,223,909. The scope of work was defined in the subcontract as the completion of the structural steel works according to the main drawing, technical specifications and the main contract. Thus, to determine whether the roof ridge ventilation and crane beams were included in the scope of work, reference to the main drawing, technical specifications and main contract is necessary. The main contract stated that the structural steel works included Drawing Nos. P302-6200-S-405 and P302-6200-S-402. This, according to petitioner and respondent, referred to the roof ridge ventilation and crane beams. Hence, the said works were clearly included in the sub-contract works. Nevertheless, respondent contends that when Bennett signed the August 12, 1997 progress report, petitioner approved the additional cost estimates, in effect modifying the original agreement in the subcontract. In contracts for a stipulated price like fixed lump-sum contracts, the recovery of additional costs is governed by Article 1724 of the Civil Code. Settled is the rule that a claim for the cost of additional work arising from changes in the scope of work can only be allowed upon the (1) written authority from the developer or project owner ordering or allowing the written changes in work and (2) written agreement of parties with regard to the increase in price or cost due to the change in work or design modification. Furthermore, compliance with the two requisites of Article 1724, a specific provision governing additional works, is a condition precedent for the recovery. The absence of one or the other condition bars the recovery of additional costs. Neither the authority for the changes made nor the additional price to be paid therefor may be proved by any other evidence. Respondent, in this instance, presented the August 12, 1997 progress report signed by Bennett. However, respondent knew that Bennett was not authorized to order any changes in the scope of works or to approve the cost thereof.  It addressed all correspondences relating to the project to (petitioner’s) project manager Michael Dent, not Bennett. Moreover, Bennett did not sign the subcontract for and in behalf of respondent but only as a witness. Respondent was therefore aware of Bennett’s lack of authority. In this respect, aside from respondent’s failure to present the documents required by Article 1724 of the Civil Code, we find that the sub-contract was never modified. Petitioner therefore cannot be liable for the additional costs incurred by respondent. In a fixed lump-sum contract, the project owner agrees to pay the contractor a specified amount for completing a scope of work involving a variety of unspecified items of work without requiring a cost breakdown. The contractor estimates the project cost based on the scope of work and schedule and considers probable errors in measurement and changes in the price of materials. By entering into a fixed lump-sum contract, respondent undertook the risk of incurring a loss due to errors in measurement. The sub-contract explicitly stated that the stipulated price was not subject to remeasurement. Since the roof ridge ventilation and crane beams were included in the scope of work, respondent was presumed to have estimated the quantity of steel (the minimum and maximum amount) needed on the said portions when it made its formal offer on July 5, 1997. Concomitantly, by the very nature of a fixed lump-sum contract, petitioner was only liable to pay the stipulated subcontract price. Leighton Contractors Philippines, Inc. vs. CNP Industries, Inc., G.R. No. 160972, March 9, 2010

Estoppel. We cannot apply the doctrine of estoppel in the present case since the facts and circumstances, as established by the record, negate its application. Under the promissory note, what the petitioners agreed to was the payment of a specific sum of P40,000.00 per month for six months – not a 4% rate of interest per month for six (6) months – on a loan whose principal is P1,000,000.00, for the total amount of P1,240,000.00.  Thus, no reason exists to place the petitioners in estoppel, barring them from raising their present defenses against a 4% per month interest after the six-month period of the agreement.  The board resolution, on the other hand, simply authorizes Pantaleon to contract for a loan with a monthly interest of not more than 4%.  This resolution merely embodies the extent of Pantaleon’s authority to contract and does not create any right or obligation except as between Pantaleon and the board. Again, no cause exists to place the petitioners in estoppel. Prisma Construction and Development Corporation and Rogelio S. Pantaleon vs. Arthur F. Menchavez, G.R. No. 160545, March 9, 2010

Family relations; child support; filiation. Arhbencel’s demand for support, being based on her claim of filiation to petitioner as his illegitimate daughter, falls under Article 195(4).  As such, her entitlement to support from petitioner is dependent on the determination of her filiation. [Digester’s note: The Court cites Herrera v. Alba to summarize the laws, rules, and jurisprudence on establishing filiation.] In the present case, Arhbencel relies, in the main, on the handwritten note executed by petitioner which reads: “I, Ben-Hur C. Nepomuceno, hereby undertake to give and provide financial support in the amount of P1,500.00 every fifteen and thirtieth day of each month for a total of P3,000.00 a month starting Aug. 15, 1999, to Ahrbencel Ann  Lopez, presently in the custody of her mother Araceli Lopez without the necessity of demand, subject to adjustment later depending on the needs of the child and my income.” The note does not contain any statement whatsoever about Arhbencel’s filiation to petitioner.  It is, therefore, not within the ambit of Article 172(2) vis-à-vis Article 175 of the Family Code which admits as competent evidence of illegitimate filiation an admission of filiation in a private handwritten instrument signed by the parent concerned. The note cannot also be accorded the same weight as the notarial agreement to support the child referred to in Herrera. For it is not even notarized.  And Herrera instructs that the notarial agreement must be accompanied by the putative father’s admission of filiation to be an acceptable evidence of filiation.  Here, however, not only has petitioner not admitted filiation through contemporaneous actions.  He has consistently denied it.   The only other documentary evidence submitted by Arhbencel, a copy of her Certificate of Birth, has no probative value to establish filiation to petitioner, the latter not having signed the same. At bottom, all that Arhbencel really has is petitioner’s handwritten undertaking to provide financial support to her which, without more, fails to establish her claim of filiation.  The Court is mindful that the best interests of the child in cases involving paternity and filiation should be advanced.  It is, however, just as mindful of the disturbance that unfounded paternity suits cause to the privacy and peace of the putative father’s legitimate family. Ben-Hur Nepomuceno vs. Archbencel Ann Lopez, represented by her mother Araceli Lopez, G.R. No. 181258, March 18, 2010

Family relations; use of maiden name by married woman; in a passport. In the present case, petitioner, whose marriage is still subsisting and who opted to use her husband’s surname in her old passport, requested to resume her maiden name in the replacement passport arguing that no law prohibits her from using her maiden name. Petitioner cites Yasin as the applicable precedent.  However, Yasin is not squarely in point with this case.  Unlike in Yasin, which involved a Muslim divorcee whose former husband is already married to another woman, petitioner’s marriage remains subsisting. Another point, Yasin did not involve a request to resume one’s maiden name in a replacement passport, but a petition to resume one’s maiden name in view of the dissolution of one’s marriage. The law governing passport issuance is RA 8239 and the applicable provision in this case is Section 5(d) which sets out when a married woman may revert to her maiden name in her passport. None of these instances are present. Petitioner, however, argues that RA 8239 effectively conflicts with and, thus, operates as an implied repeal of Article 370 of the Civil Code. Petitioner is mistaken. RA 8239 does not prohibit a married woman from using her maiden name in her passport. In fact, in recognition of this right, the DFA allows a married woman who applies for a passport for the first time to use her maiden name. Such an applicant is not required to adopt her husband’s surname. In the case of renewal of passport, a married woman may either adopt her husband’s surname or continuously use her maiden name.  If she chooses to adopt her husband’s surname in her new passport, the DFA additionally requires the submission of an authenticated copy of the marriage certificate. Otherwise, if she prefers to continue using her maiden name, she may still do so.  The DFA will not prohibit her from continuously using her maiden name. However, once a married woman adopt’s her husband’s surname in her passport, she may not revet to the use of her maiden name, except in the cases enumerated in Section 5(d) of RA 8239. These cases are (1) death of husband, (2) divorce, (3) annulment, (4) nullity of marriage. Ma. Virginia V. Remo vs. The Honorable Secretary of Foreign Affairs, G.R. No. 169202. March 5, 2010.

Interest; stipulation on interest must be in writing.  In the present case, the borrower obtained a P1,000,000.00 loan payable within six (6) months, or from January 8, 1994 up to June 8, 1994.  During this period, the loan shall earn an interest of P40,000.00 per month, for a total obligation of P1,240,000.00 for the six-month period. This agreed sum can be computed at 4% interest per month, but no such rate of interest was stipulated in the promissory note; rather a fixed sum equivalent to this rate was agreed upon. Article 1956 of the Civil Code specifically mandates that “no interest shall be due unless it has been expressly stipulated in writing.” Under this provision, the payment of interest in loans or forbearance of money is allowed only if: (1) there was an express stipulation for the payment of interest; and (2) the agreement for the payment of interest was reduced in writing. The concurrence of the two conditions is required for the payment of interest at a stipulated rate. Thus, the court held in Tan v. Valdehueza and Ching v. Nicdao that collection of interest without any stipulation in writing is prohibited by law. Applying this provision, we find that the interest of P40,000.00 per month corresponds only to the six (6)-month period of the loan, or from January 8, 1994 to June 8, 1994, as agreed upon by the parties in the promissory note. Thereafter, the interest on the loan should be at the legal interest rate of 12% per annum, consistent with our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals. In other words, the facts show that the parties agreed to the payment of a specific sum of money of P40,000.00 per month for six months, not to a 4% rate of interest payable within a six (6)-month period. Prisma Construction and Development Corporation and Rogelio S. Pantaleon vs. Arthur F. Menchavez, G.R. No. 160545, March 9, 2010

Interest; whether rate is unconscionable.  The court noted in the Prisma case (see above digest) that the case of Medel v. Court of Appeals was not applicable. In Medel, the debtors in a P500,000.00 loan were  required to pay an interest of 5.5% per month,  a service charge of 2% per annum, and a penalty charge of 1% per month, plus attorney’s fee equivalent to 25% of the amount due, until the loan is fully paid. Taken in conjunction with the stipulated service charge and penalty, we found the interest rate of 5.5% to be excessive, iniquitous, unconscionable, exorbitant and hence, contrary to morals, thereby rendering the stipulation null and void. Medel finds no application in the present case where no other stipulation exists for the payment of any extra amount except a specific sum of P40,000.00 per month on the principal of a loan payable within six months. Additionally, no issue on the excessiveness of the stipulated amount of P40,000.00 per month was ever put in issue by the petitioners; they only assailed the application of a 4% interest rate, since it was not agreed upon. It is a familiar doctrine in obligations and contracts that the parties are bound by the stipulations, clauses, terms and conditions they have agreed to, which is the law between them, the only limitation being that these stipulations, clauses, terms and conditions are not contrary to law, morals, public order or public policy. The payment of the specific sum of money of P40,000.00 per month was voluntarily agreed upon by the petitioners and the respondent. There is nothing from the records and, in fact, there is no allegation showing that petitioners were victims of fraud when they entered into the agreement with the respondent. Prisma Construction and Development Corporation and Rogelio S. Pantaleon vs. Arthur F. Menchavez, G.R. No. 160545, March 9, 2010

Lease; right of first refusal; distinguished from option to buy. In the seventies, NDC had entered tinto two contracts of lease with a company called Golden Horizon Realty Corporation (GHRC). These each had a term of 10 years, renewable for another 10 upon the consent of the parties. In addition GHRC was granted an “option” to purchase the leased property. Before the expiration of the second lease contract, GHRC sought to exercise its option to renew the lease and requested priority to negotiate for the property’s purchase should NDC opt to sell. NDC did not respond to this request but even after the expiry of the term kept on accepting the rentals.  GHRC learned that NDC had decided to secretly dispose of the land which prompted GHR to take legal action. Meanwhile, then President Aquino issued a memorandum order ordering the transfer to the National government of that NDC property. The National Government in turn transferred the property to PUP. The issue is whether the transfer of the property violated the “option” that had been granted to GHRC. An option is a contract by which the owner of a property agrees with another that the latter shall have the right to buy the former’s property at a fixed price within a certain time. It binds the party who has given the option, not to enter into a contract with any other person during the period designated, and within that period, to enter into such a contract with the one to whom the option was granted, if the latter decides to use the option. On the other hand, a right of first refusal is a contractual grant, not of a sale of a property, but of first priority to buy the property in the event the owner sells the same. As distinguished from an option contract, in a right of first refusal, while the object might be made determinate, the exercise of the right of first refusal would eb dependent not only on the owner’s eventual intention to enter into a transaction with another, but also on terms, including the price, that are yet to be firmed up. The “option” given to GHRC is obviously a mere right of first refusal and this is not disputed by the parties. What PUP and NDC assail is the conclusion that such right of first refusal subsisted even after the expiration of the original lease period when GHRC was allowed to continue staying in the leased premises under an implied renewal of lease. They argue that the right of first refusal provision was not carried over to such month-to-month lease. The court found this position untenable. Evidence shows that at the time NDC began negotiating for the transfer of the land to PUP, the right of first refusal was subsisting. Hence, whether or not the right of first refusal was carried over to the implied lease, is irrelevant. Polytechnic University of the Philippines Vs. Golden Horizon Realty Corporation/National Development Company Vs. Golden Horizon Realty CorporationG.R. No. 183612/G.R. No. 184260, March 15, 2010

Marriage; grounds for annulment; psychological incapacity. This is another case where the Supreme Court insisted on keeping two unhappy people, who will probably proceed to have relationships outside wedlock, bound hand and foot in marriage. The court found the evidence presented by the wife, Jocelyn, as insufficient to establish the psychological incapacity of her husband. The expert opinion was not considered so expert since the psychologist derived all her conclusions from information provided by Jocelyn whose bias “cannot of course be doubted” (so essentially the court assumed without possibility of error, and without evidence as well, that Jocelyn was a liar). The court clarified that it was not suggesting “that a personal examination of the party alleged to be psychologically incapacitated is mandatory; jurisprudence holds that this type of examination is not a mandatory requirement.  While such examination is desirable, we recognize that it may not be practical in all instances given the oftentimes estranged relations between the parties. For a determination though of a party’s complete personality profile, information coming from persons intimately related to him (such as  the party’s close relatives and friends) may be helpful.  This is an approach in the application of Article 36 that allows flexibility, at the same time that it avoids, if not totally obliterate, the credibility gaps spawned by supposedly expert opinion based entirely on doubtful sources of information.  From these perspectives, we conclude that the psychologist, using meager information coming from a directly interested party, could not have secured a complete personality profile and could not have conclusively formed an objective opinion or diagnosis of Angelito’s psychological condition. While the report or evaluation may be conclusive with respect to Jocelyn’s psychological condition, this is not true for Angelito’s… Other than this credibility or reliability gap, both the psychologist’s report and testimony simply provided a general description of Angelito’s purported anti-social personality disorder, supported by the characterization of this disorder as chronic, grave and incurable.  The psychologist was conspicuously silent, however, on the bases for her conclusion or the particulars that gave rise to the characterization she gave.  These particulars are simply not in the report, and neither can they be found in her testimony. The inadequacy and/or lack of probative value of the psychological report and the psychologist’s testimony impel us to proceed to the evaluation of Jocelyn’s testimony, to find out whether she provided the court with sufficient facts to support a finding of Angelito’s psychological incapacity. Unfortunately, we find Jocelyn’s testimony to be insufficient.  Jocelyn merely testified on Angelito’s habitual drunkenness, gambling, refusal to seek employment and the physical beatings she received from him – all of which occurred after the marriage.  Significantly, she declared in her testimony that Angelito showed no signs of violent behavior, assuming this to be indicative of a personality disorder, during the courtship stage or at the earliest stages of her relationship with him.  She testified on the alleged physical beatings after the marriage, not before or at the time of the celebration of the marriage.  She did not clarify when these beatings exactly took place – whether it was near or at the time of celebration of the marriage or months or years after.  This is a clear evidentiary gap that materially affects her cause, as the law and its related jurisprudence require that the psychological incapacity must exist at the time of the celebration of the marriage.  Habitual drunkenness, gambling and refusal to find a job, while indicative of psychological incapacity, do not, by themselves, show psychological incapacity. All these simply indicate difficulty, neglect or mere refusal to perform marital obligations that, as the cited jurisprudence holds, cannot be considered to be constitutive of psychological incapacity in the absence of proof that these are manifestations of an incapacity rooted in some debilitating psychological condition or illness.  The physical violence allegedly inflicted on Jocelyn deserves a different treatment.  While we may concede that physical violence on women indicates abnormal behavioral or personality patterns, such violence, standing alone, does not constitute psychological incapacity.  Jurisprudence holds that there must be evidence showing a link, medical or the like, between the acts that manifest psychological incapacity and the psychological disorder itself.  The evidence of this nexus is irretrievably lost in the present case under our finding that the opinion of the psychologist cannot be relied upon.  Even assuming, therefore, that Jocelyn’s account of the physical beatings she received from Angelito were true, this evidence does not satisfy the requirement of Article 36 and its related jurisprudence, specifically the Santos requisites.” [Digester’s note: This case is useful in that it mentions important previous cases — the jurisprudential touchstones — on psychological incapacity. But it is also pretty amazing in its complete lack of emphathy or sense that the law is not some separate, cold human construct, but is there to help us live our lives with dignity and a chance at happiness. The court seems to allow for the possibility that Angelito is not only a deadbeat but a wife beater – someone who they would not wish on a daughter or sister and who they would probably threaten with a slow painful death if they tried to come near a loved one – except that since all the drunkenness and good-for-nothingness and violence took place after the wedding, Jocelyn is stuck. Oops, sorry. Here, the court, quite calmly states that “such violence, standing alone, does not constitute psychological incapacity.” One does not have to have a degree in psychology, I think, to see that violence – the ability to injure even a loved one on a repeated basis – does not develop overnight and would have begun germination even before the first blow is struck. In a way, very similar to the GG Sportwear case – unhappiness is a state of mind but not a ground for rescission.]  Jocelyn M. Suazo vs. Angelito Suazo and Republic of the Philippines, G.R. No. 164493, March 12, 2010.

Moral damages; conditions. The following are the conditions for the award of moral damages: (1) there is an injury – whether physical, mental or psychological – clearly sustained by the claimant; (2) the culpable act or omission is 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 the of damages is predicated on any of the cases stated in Article 2219 of the Civil Code. In the present case, Suarez failed to establish that his claimed injury was proximately caused by the erroneous marking of DAIF on the checks. Proximate cause has been defined as “any cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the result complained of and without which would not have occurred.” There is nothing in Suarez’s testimony which convincingly shows that the erroneous marking of DAIF on the checks proximately caused his alleged psychological or social injuries. Suarez merely testified that he suffered humiliation and that the prospective consolidation of the titles to the Tagaytay Properties did not materialize due to the dishonor of his checks, not die to the erroneous marking of the DAIF on his checks. Hence, Suarez has only himself to blame for his hurt feelings and the unsuccessful transaction with his client as these were directly caused by the justified dishonoring of his checks. Bank of the Philippines Islands Vs. Reynald R. Suarez, G.R. No. 167750, March 15, 2010.

Mortgage; redemption period; applicable interest.  The one-year redemption period applied by the CA is the rule that generally applies to foreclosure of mortgage by a bank. The period of redemption is not tolled by the filing of a complaint or petition for annulment of the mortgage and the foreclosure sale conducted pursuant to the said mortgage. However, considering the exceptional circumstances surrounding this case, we will not apply the rule in this instance pro hac vice. In Lipat, this Court upheld the RTC decision giving petitioners five months and 17 days from the finality of the trial court’s decision to redeem their foreclosed property. Lipat, already final and executory, has therefore become the law of the case between the parties, including their heirs who are petitioners and respondents in this case.  Consequently, petitioners had five months and 17 days from the finality of Lipat to exercise their right of redemption, even though this period was beyond one year from the date of registration of the sale. Thus, the CA erred (and even committed a grave abuse of discretion) when it insisted on a contrary ruling. The CA had no power to reverse this Court’s final and executory judgment. The CA overstepped its authority when it held that the right of redemption had already expired one year after the date of the registration of the certificate of sale. Like all other courts in our judicial system, the CA must take its bearings from the rulings and decisions of this Court. Nevertheless, we note that the amount tendered by petitioners to redeem their foreclosed property was determined by the sheriff at the rate of one percent per month for only one year. Section 78 of the General Banking Act requires payment of the amount fixed by the court in the order of execution, with interest thereon at the rate specified in the mortgage contract, and all the costs and other judicial expenses incurred by the bank or institution concerned by reason of the execution and sale and as a result of the custody of said property less the income received from the property. The rate of interest specified in the mortgage contract shall be applied for the one-year period reckoned from the date of registration of the certificate of sale in accordance with the General Banking Act. However, since petitioners effectively had more than one year to exercise the right of redemption, justice, fairness and equity require that they pay 12% p.a. interest beyond the one-year period up to June 16, 2004 when Partas consigned the redemption price with the RTC. Heirs of Estelita Burgos-Lipat namely: Alan B. Lipat and Alfredo B. Lipat, Jr. vs. Heirs of Eugenio D. Trinidad namely: Asuncion R. Trinidad, et al., G.R. No. 185644, March 2, 2010.

Partnership; existence of a partnership. A partnership exists when two or more persons agree to place their money, effects, labor, and skill in lawful commerce or business, with the understanding that there shall be a proportionate sharing of the profits and losses among them. A contract of partnership is defined by the Civil Code as one where two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. Undoubtedly, the best evidence would have been the contract of partnership or the articles of partnership. Unfortunately, there is none in this case, because the alleged partnership was never formally organized. Nonetheless, we are asked to determine who between Jose and Elfledo was the “partner” in the trucking business. The evidence presented by petitioners falls short of the quantum of proof required to establish that: (1) Jose was the partner and not Elfledo; and (2) all the properties acquired by Elfledo and respondent form part of the estate of Jose, having been derived from the alleged partnership. Petitioners heavily rely on Jimmy’s testimony. But that testimony is just one piece of evidence against respondent. Applying the provisions of Article 1769 of the Civil Code (on whether a partnership exists), the following circumstances tend to prove that Elfledo was himself the partner of Jimmy and Norberto: (1) Cresencia testified that Jose gave Elfledo P50,000.00, as share in the partnership, on a date that coincided with the payment of the initial capital in the partnership; (2) Elfledo ran the affairs of the partnership, wielding absolute control,  power and authority, without any intervention or opposition whatsoever from any of petitioners herein; (3) all of the properties, particularly the nine trucks of the partnership, were registered in the name of Elfledo; (4) Jimmy testified that Elfledo did not receive wages or salaries from the partnership, indicating that what he actually received were shares of the profits of the business; and (5) none of the petitioners, as heirs of Jose, the alleged partner, demanded periodic accounting from Elfledo during his lifetime.  Furthermore, petitioners failed to adduce any evidence to show that the real and personal properties acquired and registered in the names of Elfledo and respondent formed part of the estate of Jose, having been derived from Jose’s alleged partnership with Jimmy and Norberto. They failed to refute respondent’s claim that Elfledo and respondent engaged in other businesses.  Edison even admitted that Elfledo also sold Interwood lumber as a sideline.  Petitioners could not offer any credible evidence other than their bare assertions.  The testimonies prove it was through Elfredo’s efforts and hard work that the partnership was able to acquire more trucks and otherwise prosper.  Even the appellant participated in the affairs of the partnership by acting as the bookkeeper sans salary. It is notable too that Jose Lim died when the partnership was barely a year old, and the partnership and its business not only continued but also flourished.  If it were true that it was Jose Lim and not Elfledo who was  the  partner, then  upon  his death  the  partnership  should have been dissolved and its assets liquidated.  On the contrary, these were not done but instead its operation continued under the helm of Elfledo and without any participation from the heirs of Jose Lim.  Heirs of Jose Lim, represented by Elenito Lim vs. Juliet Villa Lim, G.R. No. 172690, March 3, 2010

Sale; buyer in good faith. The party, IDRI, was not a buyer in good faith. It had actual knowledge of facts and circumstances, which should impel a reasonably cautious person to make further inquiries about the vendor’s title to the property. The representative of IDRI testified that he knew about the existence of the notice of lis pendens on the property subject of the sale and the legal separation case that had been filed. Thus IDRI could not feign ignorance of the property being conjugal. Furthermore, if IDRI made further inquiries, it would have known that the cancellation of the notice of lis pendens was highly irregular.  Under Section 77 of Presidential Decree No. 1529, the notice of lis pendens may be cancelled (a) upon order of the court, or (b) by the Register of Deeds upon verified petition of the party who caused the registration of the lis pendens. In this case, the lis pendens was cancelled by the Register of Deeds upon the request of Alfredo. There was no court order for the cancellation of the lis pendens. Neither did Elvira, the party who caused the registration of the lis pendens, file a verified petition for its cancellation. Besides, had IDRI been more prudent before buying the property, it would have discovered that Alfredo’s donation of the property to Winifred was without the consent of Elvira. Under Article 125 of the Family Code, a conjugal property cannot be donated by one spouse without the consent of the other spouse.  Clearly, IDRI was not a buyer in good faith. Mario Siochi vs. Alfredo Gozon, et al./Inter-Dimensional Realty, Inc. Vs. Mario Siochi, et al., G.R. No. 169900/G.R. No. 169977, March 18, 2010.

Sale; land; innocent purchaser for value. This case stemmed from a conflict of ownership (resulting from multiple transactions) over Lot 18026-A. Although it was continuously, openly and adversely possessed by Santiago Ebora, the property was mistakenly included by Chacon Enterprises in its application for original registration. As a result, litigation arose between respondents (the heirs of Ebora) and Chacon Enterprises. During the pendency of this litigation, the heirs of Ebora sold the entire Lot 18026-A to their co-heirs, the Pacardos. On the same day, the Pacardos assigned the property to Digno Roa, married to petitioner Lydia Roa. TCT No. T-24488 was issued in the name of Digno Roa. Meanwhile, the case between Chacon Enterprises and the heirs of Ebora was decided in favor of the latter. By reason of this decision, TCT No. T-48097 was issued in the name of the heirs of Ebora.  New TCTs were issued and the lots were thereafter sold to various respondents, which resulted in the issuance of new TCTs in the names of the respective vendees. All these transactions occurred without petitioner’s knowledge and consent. In the case before the Supreme Court, the petitioner sought that respondents be declared as not innocent purchasers for value and that the subject properties be adjudicated in her favor. The court, however, ruled that respondents are innocent purchasers for value. Nonetheless, without undermining the reason behind this doctrine (of protecting innocent purchasers for value), the court when on to “hold that petitioner is entitled to the property following Sanchez v. Quinio… In this case, as in Sanchez, petitioner’s title was validly issued and had been undisturbed for 10 years before the title of respondents’ predecessor (the Ebora heirs) was issued. Petitioner never relinquished her title to respondents or to anybody else. She therefore possessed a superior right over those of respondents, notwithstanding the fact that respondents were innocent purchasers for value. Moreover, the heirs of Ebora sold and conveyed their rights to and interests in Lot 18026-A to the spouses Pacardo who assigned the property to the husband of petitioner as early as June 3, 1977. From then on, the heirs of Ebora lost all their rights and interest over the property. Indeed, the heirs of Ebora even confirmed the sale to Josefa and the assignment and waiver of rights in favor of petitioner’s husband in an instrument dated January 31, 1983. Thus, the heirs of Ebora had nothing to adjudicate among themselves on October 8, 1987. Neither did they have anything to transfer to the vendees or successors-in-interest. As such, the transferees of the heirs of Ebora acquired no better right than that of the transferors. The spring cannot rise higher than its source.” Lydia L. Roa Vs. Heirs of Santiago Ebora, et al., G.R. No. 161137, March 15, 2010.

Sale; lump sum. In the instant case, the deed of sale is not one of a unit price contract. The parties agreed on the purchase price of P40,000.00 for a predetermined area of 4,000 sq m, more or less, bounded on the North by Lot No. 11903, on the East by Lot No. 11908, on the South by Lot Nos. 11858 & 11912, and on the West by Lot No. 11910. In a contract of sale of land in a mass, the specific boundaries stated in the contract must control over any other statement, with respect to the area contained within its boundaries. Clearly, the discrepancy of 10,475 sq m cannot be considered a slight difference in quantity. The difference in the area is obviously sizeable and too substantial to be overlooked. It is not a reasonable excess or deficiency that should be deemed included in the deed of sale. Carmen Del Prado vs. Spouses Antonio L. Caballero and Leonarda Caballero, G.R. No. 148225, March 3, 2010

Sale; prescription not relevant. The petitioners assert that the lot, being titled in the name of their predecessors-in-interest, could not be acquired by prescription or adverse possession. The assertion is unwarranted.  Prescription, in general, is a mode of acquiring or losing ownership and other real rights through the lapse of time in the manner and under the conditions laid down by law. However, prescription was not relevant to the determination of the dispute herein, considering that Lim did not base his right of ownership on an adverse possession over a certain period. He insisted herein, instead, that title to the land had been voluntarily transferred by the registered owners themselves to Luisa, his predecessor-in-interest.  Lim showed that his mother had derived a just title to the property by virtue of sale; that from the time Luisa had acquired the property in 1937, she had taken over its possession in the concept of an owner, and had performed her obligation by paying real property taxes on the property, as evidenced by tax declarations issued in her name; and that in view of the delivery of the property, coupled with Luisa’s actual occupation of it, all that remained to be done was the issuance of a new transfer certificate of title in her name. Teofisto Oño, et al. vs. Vicente N. Lim, G.R. No. 154270, March 9, 2010.

Special Laws

Mortgage; extra-judicial foreclosure; Act No. 3135; old two-bidder requirement. Petitioners sought the nullification of an extrajudicial foreclosure sale for allegedly having been conducted in contravention of the procedural requirements prescribed in A.M. No. 99-10-05-0 (Re: Procedure in Extrajudicial Foreclosure of Real Estate Mortgages) and in violation of petitioners’ right to due process.  Petitioners argue that A.M. No. 99-10-05-0 which took effect on January 15, 2000, requires that there must be at least two participating bidders in an auction sale.  However, the Court noted that the requirement for at least two participating bidders provided in the original version of paragraph 5 of A.M. No. 99-10-05-0 is not found in Act No. 3135.  Hence, pursuant to the Resolution of the Supreme Court en banc dated January 30, 2001, it is no longer required to have at least two bidders in an extrajudicial foreclosure of mortgage.  It should also be noted that pursuant to A.M. No. 99-10-05-0, as amended by the Resolutions of January 30, 2001 and August 7, 2001, the Court Administrator issued Circular No. 7-2002 dated January 22, 2002 which became effective on April 22, 2002.  Section 5(a) of the said circular states “[T]he bidding shall be made through sealed bids which must be submitted to the Sheriff who shall conduct the sale between the hours of 9 a.m. and 4 p.m. of the date of the auction (Act 3135, Sec. 4).  The property mortgaged shall be awarded to the party submitting the highest bid and in case of a tie, an open bidding shall be conducted between the highest bidders.  Payment of the winning bid shall be made either in cash or in managers check, in Philippine currency, within five (5) days from notice.” The use of the word “bids” (in plural form) does not make it a mandatory requirement to have more than one bidder for an auction sale to be valid.  A.M. No. 99-10-05-0, as amended, no longer prescribes the requirement of at least two bidders for a valid auction sale.  We further held that “except for errors or omissions in the notice of sale which are calculated to deter or mislead bidders, to depreciate the value of the property, or to prevent it from bringing a fair price, simple mistakes or omissions are not considered fatal to the valid*ity of the notice and the sale made pursuant thereto”. Spouses Norman K. Certeza, Jr. et al. vs. Philippines Savings Bank, G.R. No. 190078, March 5, 2010.

Passport law; use by married woman of maiden name.  See Remo case digest above.

Subdivision and Condominium Buyer’s decree; P.D. No. 957; rescission of contract; impact of lack of License to Sell on contract. GG Sportswear, which had entered into a reservation agreement for the purchase of condo units, cannot seek the rescission of the agreement, where the developer had not breached any substantial provision of the agreement. Neither can GG Sportswear find recourse through P.D. No. 957, or the “Subdivision and Condominium Buyers’ Protective Decree.” This law covers all sales and purchases of subdivision or condominium units, and provides that the buyer’s installment payments shall not be forfeited in favor of the developer or owner if the latter fails to develop the subdivision or condominium project. To recall, the completion date of the Antel Global Corporate Center was either in August 1998 (based on World Class’s first License to Sell), on December 15, 1998 (based on the provisional Contract to Sell), or on December 1999 (based on World Class’s second License to Sell).  At the time GG Sportswear filed its complaint against World Class on June 10, 1997, the Antel Global Corporate Center was still in the course of development and none of these projected completion dates had arrived.  Hence, any complaint for refund was premature. Significantly, World Class completed the project in August 1999, or within the time period granted by the HLURB for the completion of the condominium project under the second License to Sell.  This completion, undertaken while the case was pending before the Arbiter, rendered the issue of World Class’s failure to develop the condominium project moot and academic. On a final note, we choose to reiterate, for the benefit of the HLURB, our ruling in Co Chien v. Sta. Lucia Realty & Development, Inc., that the requirements of Sections 4 and 5 of P.D. No. 957 are intended merely for administrative convenience in order to allow for a more effective regulation of the industry and do not go into the validity of the contract such that the absence thereof would automatically render the contract null and void. G.G. Sportswear Mfg. Corp vs. World Class Properties, Inc., G.R. No. 182720, March 2, 2010

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