July 2010 Philippine Supreme Court Decisions on Civil Law

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

Civil Code

Agency; doctrine of apparent authority. The doctrine of apparent authority in respect of government contracts, has been restated to mean that the government is NOT bound by unauthorized acts of its agents, even though within the apparent scope of their authority. Under the law on agency, however, “apparent authority” is defined as the power to affect the legal relations of another person by transactions with third persons arising from the other’s manifestations to such third person such that the liability of the principal for the acts and contracts of his agent extends to those which are within the apparent scope of the authority conferred on him, although no actual authority to do such acts or to make such contracts has been conferred.

Apparent authority, or what is sometimes referred to as the “holding out” theory, or doctrine of ostensible agency, imposes liability, not as the result of the reality of a contractual relationship, but rather because of the actions of a principal or an employer in somehow misleading the public into believing that the relationship or the authority exists. The existence of apparent authority may be ascertained through (1) the general manner in which the corporation holds out an officer or agent as having the power to act or, in other words, the apparent authority to act in general, with which it clothes him; or (2) the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, whether within or beyond the scope of his ordinary powers. It requires presentation of evidence of similar act(s) executed either in its favor or in favor of other parties.

Easily discernible from the foregoing is that apparent authority is determined only by the acts of the principal and not by the acts of the agent. The principal is, therefore, not responsible where the agent’s own conduct and statements have created the apparent authority.

In this case, not a single act of respondent, acting through its Board of Directors, was cited as having clothed its general manager with apparent authority to execute the contract with it. Sargasso Construction & Development Corporation / Pick & Shovel, Inc./Atlantic Erectors, Inc./ Joint Venture vs. Philippine Ports Authority, G.R. No. 170530, July 5, 2010.

Agency; doctrine of apparent authority. Under the doctrine of apparent authority, acts and contracts of the agent, as are within the apparent scope of the authority conferred on him, although no actual authority to do such acts or to make such contracts has been conferred, bind the principal. The principal’s liability, however, is limited only to third persons who have been led reasonably to believe by the conduct of the principal that such actual authority exists, although none was given. In other words, apparent authority is determined only by the acts of the principal and not by the acts of the agent. There can be no apparent authority of an agent without acts or conduct on the part of the principal; such acts or conduct must have been known and relied upon in good faith as a result of the exercise of reasonable prudence by a third party as claimant, and such acts or conduct must have produced a change of position to the third party’s detriment.

In the present case, the decision of the trial court was utterly silent on the manner by which the bank, as supposed principal, has “clothed” or “held out” its branch manager as having the power to enter into an agreement, as claimed by petitioners. Further, we would be unduly stretching the doctrine of apparent authority were we to consider the power to undo or nullify solemn agreements validly entered into as within the doctrine’s ambit. Although a branch manager, within his field and as to third persons, is the general agent and is in general charge of the corporation, with apparent authority commensurate with the ordinary business entrusted him and the usual course and conduct thereof, yet the power to modify or nullify corporate contracts remains generally in the board of directors. Being a mere branch manager alone is insufficient to support the conclusion that Mondigo has been clothed with “apparent authority” to verbally alter terms of written contracts, especially when viewed against the telling circumstances of this case.

It is a settled rule that persons dealing with an agent are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of the agent’s authority, and in case either is controverted, the burden of proof is upon them to establish it. As parties to the mortgage contract, the petitioners are expected to abide by its terms. The subsequent purported agreement is of no moment, and cannot prejudice PCRB, as it is beyond Mondigo’s actual or apparent authority, as above discussed.  Violeta Tudtud Banate, et al. vs. Philippine Countryside Rural Bank (Liloan, Cebu), Inc. and Teofilo Soon, Jr., G.R. No. 163825, July 13, 2010.

Common carrier; liability.  Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they exercised extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such diligence. Mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, loss, or destruction of the goods happened, the transporter shall be held responsible. Unsworth Transportation International (Phils.), Inc. vs. Court of Appeals and Pioneer Insurance and Surety Corporation, G.R. No. 166250, July 26, 2010

Contracts; elements; stages. Every contract has the following essential elements: (i) consent, (ii) object certain and (iii) cause. Consent has been defined as the concurrence of the wills of the contracting parties with respect to the object and cause which shall constitute the contract. In general, contracts undergo three distinct stages, to wit: negotiation, perfection or birth, and consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of their agreement. Perfection or birth of the contract takes place when the parties agree upon the essential elements of the contract, i.e., consent, object and price. Consummation occurs when the parties fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment thereof. The birth or the perfection of the contract, which is the crux of the present controversy, refers to that moment in the life of a contract when there is finally a concurrence of the wills of the contracting parties with respect to the object and the cause of the contract. Sargasso Construction & Development Corporation / Pick & Shovel, Inc./Atlantic Erectors, Inc./ Joint Venture vs. Philippine Ports Authority, G.R. No. 170530, July 5, 2010.

Contracts; government contracts; when perfected. A government or public contract has been defined as a contract entered into by state officers acting on behalf of the state, and in which the entire people of the state are directly interested. It relates wholly to matter of public concern, and affects private rights only so far as the statute confers such rights when its provisions are carried out by the officer to whom it is confided to perform.

A government contract is essentially similar to a private contract contemplated under the Civil Code.  The legal requisites of consent of the contracting parties, an object certain which is the subject matter, and cause or consideration of the obligation must likewise concur. Otherwise, there is no government contract to speak of.  On the matter of entering into negotiated contracts by government-owned and controlled corporations, the provisions of existing laws are crystal clear in requiring the governing board’s approval thereof.

Petitioner neither disputes nor admits the application of the foregoing statutory provisions but insists, nonetheless, that the Notice of Award itself already embodies a perfected contract having passed the negotiation stage] despite the clear absence thereon of a condition requiring the prior approval of respondent’s higher authority.

Petitioner’s argument is untenable. Contracts to which the government is a party are generally subject to the same laws and regulations which govern the validity and sufficiency of contracts between private individuals.  A government contract, however, is perfected only upon approval by a competent authority, where such approval is required. Sargasso Construction & Development Corporation / Pick & Shovel, Inc./Atlantic Erectors, Inc./ Joint Venture vs. Philippine Ports Authority, G.R. No. 170530, July 5, 2010.

Contracts; insufficient consideration. The Supreme Court upheld the finding of the Court of Appeals that there was insufficient of consideration, and that while inadequacy of price does not invalidate a contract, the said rule is not without an exception.  As provided in the Civil Code:

Art. 1355.  Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence.

The Court of Appeals was clear as to its main reason for invalidating the contracts in question – there was fraud.  The inadequacy of price was merely one of the circumstances upon which the Court of Appeals was able to find the existence of fraud and was not the main cause for the invalidation of the subject contracts.

For the reader’s information, here’s a portion of the decision showing the circumstances which led the court to determine there was inadequacy of consideration: “It must be noted that the property in question, subject of the Contract to Sell for the sum of P441,032.00, is a land with a contained area of, more or less, One Thousand Nine Hundred and One (1,901) sq. m. with a two-storey residential building located in Pasay City.  In claiming that the said price of the property is not inadequate, petitioners stated that the payment of Elmer Tan to pre-terminate Hayari’s obligation amounting to Three Million One Hundred Thirty-Four Thousand Nine Hundred Twenty-One Pesos (P3,134,921.00) as part of the consideration paid for the property should be included.  However, as correctly argued by respondent Sierra Grande, the amortizations paid by Elmer Tan to Manphil was for a loan incurred by Hayari and not by respondent Sierra Grande; thus, any payment of the amortizations on the loan of Hayari cannot be considered as part of the consideration for the sale of the land owned by respondent Sierra Grande.  It is then safe to declare that respondent Sierra Grande did not benefit from the loan or from its pre-termination.  Moreover, the records are bereft of any evidence to support the claim of petitioners that the sum of money paid by Elmer Tan, on behalf of Hayari, was part of the consideration for the same property.  What only appears is that the only consideration paid for the sale of the Roberts property was the sum contained in the Contract to Sell, which was P441,032.00 which, considering the size and location of the property, is inadequate.  What prompted Elmer Tan to pay the total amount of P3,134,921.00 cannot be gleaned from the records, except that it was for the loan incurred by Hayari, which is an independent juridical entity, separate and distinct from Sierra Grande.  Hence, the Court of Appeals did not commit any error in declaring that there was an insufficiency of consideration or price as the same is shown on the very face of the Contract to Sell.” Golden Apple Realty & Development Corporation and Rosvibon Realty Corporation vs. Sierra Grande Realty Corporation, Manphil Investment Corporation, Renan V. Santos and Patricio Mamaril, G.R. No. 119857, July 28, 2010.

Contracts; invalidation on ground of notarial infirmity. Petitioners claim that, since the representatives of the corporations which executed the Deed of Absolute Sale appeared before the Notary Public, the acknowledgment was complied with, even if they admitted that the representatives did not present their residence certificates nor indicate the number, date and place of issue of the same residence certificates in the acknowledgment.  As shown in the records and in the testimony of the notary, the requirement of the presentation of the residence certificate was missing. Golden Apple Realty & Development Corporation and Rosvibon Realty Corporation vs. Sierra Grande Realty Corporation, Manphil Investment Corporation, Renan V. Santos and Patricio Mamaril, G.R. No. 119857, July 28, 2010.

Contracts; meaning of “badges of fraud”; ordinary meaning versus Article 1602 meaning. Petitioners claim that the Court of Appeals misused the term badges of fraud in reaching its decision.  According to them, Article 1602, upon which the term badges of fraud refers to, is not applicable, because the said article refers to a sale with a right to repurchase, whereas the subject invalidated contracts were absolute sales.  They cited a case where this Court pronounced that, badges of fraud is a circumstance in Article 1602 of the Civil Code, which, if present in any given transaction, gives rise to the presumption that it is not a sale but an equitable mortgage.  Thus, according to petitioners, the CA confused Article 1602 (1) with that of Article 1470, because both articles deal with sale in general and have inadequacy of price as subject matter. Either way, they argue, the inadequacy of the price does not result in the cancellation or invalidation of contracts.

However, a close reading of the Court of Appeals decision would reveal that the said court used the phrase badges of fraud to refer to certain fraudulent acts that attended the execution of the Contract to Sell and the Deeds of Absolute Sale which would eventually tend to prove that the same transactions were indeed suspicious as the said contracts were antedated, simulated and fraudulent. As used by the Court of Appeals, the phrase did not refer to any particular provision of a law. Hence, the general and ordinary meaning of the phrase prevails.  In the same manner, this Court, in numerous cases concerning various subjects, has used the same phrase in its rulings referring to the said phrase’s general and ordinary meaning.   Golden Apple Realty & Development Corporation and Rosvibon Realty Corporation vs. Sierra Grande Realty Corporation, Manphil Investment Corporation, Renan V. Santos and Patricio Mamaril, G.R. No. 119857, July 28, 2010.

Contracts; payment of debt by a third party. Petitioners’ invocation of Article 1236 of the Civil Code does not help them.  They cannot deny their indebtedness to respondent on the basis of said article since the payment advanced by respondent on petitioners’ behalf redounded to their benefit and petitioner never objected to it when she came to learn of it.  It is thus immaterial that petitioner was unaware of respondent’s action for the law ultimately allows recovery to the extent that the debtors-petitioners were benefited.    Spouses Divina C. Publico and Jose T. Publico vs. Teresa Bautista, G.R. No. 174096, July 20, 2010

Contracts; rescission; reciprocal obligations. The right to rescind a contract arises once the other party defaults in the performance of his obligation. In determining when default occurs, Article 1191 should be taken in conjunction with Article 1169 of the same law.

In reciprocal obligations, as in a contract of sale, the general rule is that the fulfillment of the parties’ respective obligations should be simultaneous.  Hence, no demand is generally necessary because, once a party fulfills his obligation and the other party does not fulfill his, the latter automatically incurs in delay.  But when different dates for performance of the obligations are fixed, the default for each obligation must be determined by the rules given in the first paragraph of Article 1169, that is, the other party would incur in delay only from the moment the other party demands fulfillment of the former’s obligation. Thus, even in reciprocal obligations, if the period for the fulfillment of the obligation is fixed, demand upon the obligee is still necessary before the obligor can be considered in default and before a cause of action for rescission will accrue. Solar Harvest Incorporated vs. Davao Corrugated Carton Corporation, G.R. No. 176686, July 26, 2010.

Damages; actual. Actual damages puts the claimant in the position in which he had been before he was injured.  The award thereof must be based on the evidence presented, not on the personal knowledge of the court; and certainly not on flimsy, remote, speculative and non-substantial proof.  Under the Civil Code, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved.  Adrian Wilson International Associates, Inc. vs. TMX Philippines, Inc., G.R. No. 162608, July 26, 2010.

Contracts; rescission; no right to restitution. This case is a little weird. Petitioners borrowed money from a bank (they contracted several loans) and mortgaged various properties. They asked the bank manager to approve the sale of the property and to release the lien on that property in exchange for payment of one of the loans. The bank manager agreed even though he had no authority to do so and even though the property that was sold actually secured other loans that were still unpaid. The buyer of the land gave the petitioners the purchase price and the petitioners used that to pay off the one loan. Later the bank refused to have the lien on the title of the relevant property cancelled so the petitioners sued. The court held that there could be no novation because the bank manager had no authority to agree to the new terms. The petitioners then argued that if that were the case, the money paid to the bank should be returned. They asked that the “agreement” with the bank manager be rescinded.

I would think that the first response to this was there was no agreement (the supposedly new one with the bank manager) to rescind. But the bank title to the subject properties to the buyer, only to enable the latter to obtain a transfer of title in her own name.” The Supreme Court then said: “countered saying that the “clear agreement of the parties was for the full payment of the subject loan, and in return, the bank would deliver the We agree with PCRB. Even if we were to assume that the purported agreement has been sufficiently established, since it is not binding on the bank for lack of authority of PCRB’s branch manager, then the prayer for restitution of the amount paid would have no legal basis.” I think it would have been clearer if the decision simply stated that the petitioner’s could not ask for rescission because there was nothing to rescind and whether or not the agreement with the bank manager was properly established, there is no legal basis for restitution. The buyer had no claim against the bank because it paid the check to the petitioners. Meanwhile, the petitioners who had paid the money to the bank could not ask the money back because it was applied to the loan that unquestionably existed. In this regard, the court said that Article 2154 of the Civil Code which reads “[I]f something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises,” has no application. Violeta Tudtud Banate, et al. vs. Philippine Countryside Rural Bank (Liloan, Cebu), Inc. and Teofilo Soon, Jr., G.R. No. 163825, July 13, 2010.

Damages; actual. For one to be entitled to actual damages, it is necessary to prove the actual amount of loss with a reasonable degree of certainty, premised upon competent proof and the best evidence obtainable by the injured party. Actual damages are such compensation or damages for an injury that will put the injured party in the position in which he had been before he was injured. They pertain to such injuries or losses that are actually sustained and susceptible of measurement. To justify an award of actual damages, there must be competent proof of the actual amount of loss. Credence can be given only to claims which are duly supported by receipts. OMC Carriers, Inc. and Jerry Añalucas y Pitalino vs. Spouses Roberto C. Nabua and Rosario T. Nabua, G.R. No. 148974, July 2, 2010.

Damages; attorney’s fees. The rule on the award of attorney’s fees is that there must be a justification for the same. In the absence of a statement why attorney’s fees were awarded, the same should be disallowed. OMC Carriers, Inc. and Jerry Añalucas y Pitalino vs. Spouses Roberto C. Nabua and Rosario T. Nabua, G.R. No. 148974, July 2, 2010.

Damages; causal connection. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the ‘natural and probable consequences of the breach of the obligation’. In this case, the trial court and the Court of appeals held AWIA liable for the cost of 11 shoring columns.  The Supreme Court also found that AWIA had breached its duty of contract administration.  It noted that had the effects on the marginal strength of the concrete been promptly disclosed to TMX, the cracks and deflections could have been rectified by the contractor before it was issued its final certification of payment and the owner could have been spared from further expenses.  There is a causal connection between AWIA’s negligence and the expenses incurred by TMX.  The latter was compelled to shutdown the plant during the workdays in December to repair the roof.  In the process, it incurred expenses for the repairs, including the salaries of its workers who were put on forced leave, for which it can ask for reimbursement as actual damages. Adrian Wilson International Associates, Inc. vs. TMX Philippines, Inc., G.R. No. 162608, July 26, 2010.

Damages; compensatory damages. In the case at bar, respondents only testified to the fact that the victim, Reggie Nabua, was a freshman taking up Industrial Engineering at the Technological Institute of the Philippines in Cubao. There was no evidence of good academic record, extra-curricular activities, and varied interests presented in court. Hence, the Court of Appeals was correct when it deleted the award of compensatory damages amounting to P2,000,000.00, as the same is without any basis. OMC Carriers, Inc. and Jerry Añalucas y Pitalino vs. Spouses Roberto C. Nabua and Rosario T. Nabua, G.R. No. 148974, July 2, 2010.

Damages; death indemnity. Death indemnity has been fixed by jurisprudence at P50,000.00. OMC Carriers, Inc. and Jerry Añalucas y Pitalino vs. Spouses Roberto C. Nabua and Rosario T. Nabua, G.R. No. 148974, July 2, 2010.

Damages; diligence; standard of care of banks.  While it is conceded that petitioner had the right to offset the unpaid interests due it against the deposits of respondent, the issue of whether it acted judiciously is an entirely different matter. As business affected with public interest, and because of the nature of their functions, banks are under obligation to treat the accounts of their depositors with meticulous care, always having in mind the fiduciary nature of their relationship. This whole incident would have been avoided had petitioner adhered to the standard of diligence expected of one engaged in the banking business. Metropolitan Bank and Trust Company vs. Larry Mariñas, G.R. No. 179105, July 26, 2010.

Damages; moral. It must be stressed that moral damages are not intended to enrich a plaintiff at the expense of the defendant. They are awarded to allow the plaintiff to obtain means, diversion or amusements that will serve to alleviate the moral suffering he/she has undergone due to the defendant’s culpable action and must, perforce, be proportional to the suffering inflicted. Thus, given the circumstances of the case at bar, an award of P50,000.00 as moral damages is proper. OMC Carriers, Inc. and Jerry Añalucas y Pitalino vs. Spouses Roberto C. Nabua and Rosario T. Nabua, G.R. No. 148974, July 2, 2010.

Damages; moral; exemplary; attorney’s fees. Article 2217 of the Civil Code defines what are included in moral damages while Article 2219 enumerates the cases where they may be recovered.  Moral damages are in the category of an award designed to compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer.  “The person claiming moral damages must prove the existence of bad faith by clear and convincing evidence for the law always presumes good faith.  It is not enough that one merely suffered sleepless nights, mental anguish, serious anxiety as the result of the actuations of the other party. Invariably such action must be shown to have been willfully done in bad faith or with ill motive.” (But see Metropolitan Bank and Trust Company vs. Larry Mariñas, G.R. No. 179105, July 26, 2010.) In the same fashion, to warrant the award of exemplary damages, the wrongful act must be accompanied by bad faith, and an award of damages would be allowed only if the guilty party acted in wanton, fraudulent, reckless or malevolent manner. As regards attorney’s fees, the law is clear that in the absence of stipulation, attorney’s fees may be recovered as actual or compensatory damages under any of the circumstances provided for in Article 2208 of the Civil Code.

Having ruled that Jose committed fraud in obtaining title to the disputed property then he should be liable for both moral and exemplary damages.  Likewise, since petitioners were compelled to litigate to protect their rights and having proved that Jose acted in bad faith, attorney’s fees should likewise be awarded. Spouses Federico Valenzuela and Luz Buena-Valenzuela Vs. Spouses Jose Mano , Jr. and Rosanna Reyes-Mano, G.R. No. 172611, July 9, 2010.

Damages; moral damages need not be attended by bad faith; exemplary damages; attorney’s fees.  A depositor has the right to recover reasonable moral damages even if the bank’s negligence may not have been attended with malice and bad faith, if the former suffered mental anguish, serious anxiety, embarrassment and humiliation. Moral damages are not meant to enrich a complainant at the expense of defendant. It is only intended to alleviate the moral suffering she has undergone. The award of exemplary damages is justified, on the other hand, when the acts of the bank are attended by malice, bad faith or gross negligence. The award of reasonable attorney’s fees is proper where exemplary damages are awarded. It is proper where depositors are compelled to litigate to protect their interest. Metropolitan Bank and Trust Company vs. Larry Mariñas, G.R. No. 179105, July 26, 2010.

Damages; negligence; degree of care; motor vehicle vs. bicycle. Read this because it establishes a greater degree of care on a motorist when he encounters a bicycle. The instant case involved a collision between a taxicab and a bicycle which resulted in serious physical injuries to the bicycle rider, Albayda.  It is a rule in negligence suits that the plaintiff has the burden of proving by a preponderance of evidence the motorist’s breach in his duty of care owed to the plaintiff, that the motorist was negligent in failing to exercise the diligence required to avoid injury to the plaintiff, and that such negligence was the proximate cause of the injury suffered.

Article 2176 of the Civil Code provides that whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a quasi-delict. In this regard, the question of the motorist’s negligence is a question of fact.

It was proven by a preponderance of evidence that Completo failed to exercise reasonable diligence in driving the taxicab because he was over-speeding at the time he hit the bicycle ridden by Albayda. Such negligence was the sole and proximate cause of the serious physical injuries sustained by Albayda. Completo did not slow down even when he approached the intersection of 8th and 11th Streets of VAB. It was also proven that Albayda had the right of way, considering that he reached the intersection ahead of Completo.

The bicycle occupies a legal position that is at least equal to that of other vehicles lawfully on the highway, and it is fortified by the fact that usually more will be required of a motorist than a bicyclist in discharging his duty of care to the other because of the physical advantages the automobile has over the bicycle.

At the slow speed of ten miles per hour, a bicyclist travels almost fifteen feet per second, while a car traveling at only twenty-five miles per hour covers almost thirty-seven feet per second, and split-second action may be insufficient to avoid an accident. It is obvious that a motor vehicle poses a greater danger of harm to a bicyclist than vice versa. Accordingly, while the duty of using reasonable care falls alike on a motorist and a bicyclist, due to the inherent differences in the two vehicles, more care is required from the motorist to fully discharge the duty than from the bicyclist.  Simply stated, the physical advantages that the motor vehicle has over the bicycle make it more dangerous to the bicyclist than vice versa. The Heirs of Redentor Completo and Elpidio Abiad vs. Sgt. Amando C. Albayda, Jr., G.R. No. 172200, July 6, 2010.

Damages; temperate. While the amount of actual damages was not duly established with certainty, the Court recognizes the fact that, indeed, Albayda incurred a considerable amount for the necessary and reasonable medical expenses, loss of salary and wages, loss of capacity to earn increased wages, cost of occupational therapy, and harm from conditions caused by prolonged immobilization. Temperate damages, more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty.  Temperate damages must be reasonable under the circumstances. The Heirs of Redentor Completo and Elpidio Abiad vs. Sgt. Amando C. Albayda, Jr., G.R. No. 172200, July 6, 2010.

Damages; vicarious liability; employer’s degree of diligence.  Under Article 2180 of the Civil Code, the obligation imposed by Article 2176 is demandable not only for one’s own acts or omissions, but also for those persons for whom one is responsible. Employers shall be liable for the damages caused by their employees, but the employers’ responsibility shall cease upon proof that they observed all the diligence of a good father of the family in the selection and supervision of their employees.

When an injury is caused by the negligence of an employee, a legal presumption instantly arises that the employer was negligent. This presumption may be rebutted only by a clear showing on the part of the employer that he exercised the diligence of a good father of a family in the selection and supervision of his employee. If the employer successfully overcomes the legal presumption of negligence, he is relieved of liability. In other words, the burden of proof is on the employer.

The responsibility of two or more persons who are liable for quasi-delict is solidary. The civil liability of the employer for the negligent acts of his employee is also primary and direct, owing to his own negligence in selecting and supervising his employee. The civil liability of the employer attaches even if the employer is not inside the vehicle at the time of the collision.

In the selection of prospective employees, employers are required to examine them as to their qualifications, experience, and service records. On the other hand, with respect to the supervision of employees, employers should formulate standard operating procedures, monitor their implementation, and impose disciplinary measures for breaches thereof. To establish these factors in a trial involving the issue of vicarious liability, employers must submit concrete proof, including documentary evidence. The Heirs of Redentor Completo and Elpidio Abiad vs. Sgt. Amando C. Albayda, Jr., G.R. No. 172200, July 6, 2010.

Damages; vicarious liability; employer’s degree of diligence. It is clear that the employer of a negligent employee is liable for the damages caused by the latter. When an injury is caused by the negligence of an employee, there instantly arises a presumption of the law that there was negligence on the part of the employer, either in the selection of his employee or in the supervision over him after such selection.  However, the presumption may be overcome by a clear showing on the part of the employer that he has exercised the care and diligence of a good father of a family in the selection and supervision of his employee. In other words, the burden of proof is on the employer. Thus, petitioners must prove two things: first, that they had exercised due diligence in the selection of petitioner Añalucas, and second, that after hiring Añalucas, petitioners had exercised due diligence in supervising him. OMC Carriers, Inc. and Jerry Añalucas y Pitalino vs. Spouses Roberto C. Nabua and Rosario T. Nabua, G.R. No. 148974, July 2, 2010.

Deed of restriction; binding effect. In this case the Supreme Court enjoined the owners of property in Ayala Alabang Village from operating a grade school and high school on the property, in light of a deed of restrictions on the use (annotated on the title), allowing only the operation of a preparatory school. This was in spite of the issuance of a municipal ordinance classifying the area as institutional. Here the owners cited previous Supreme Court cases where reclassification made by government trumped deeds of restriction imposed by the land developer, on the ground that they were valid exercises of police power. However, in this case, the court refused to apply those rulings, stating that in those cases, the conditions of the area that had been reclassified truly reflected the new use being permitted by the local government. Thus, in one case involving Ortigas & Co., the Supreme Court took judicial notice of the fact that the area covered by the restriction requiring residential use only, was already in a commercial sector with a great deal of traffic in the vicinity. Thus, “since it is now unprofitable, nay a hazard to the health and comfort, to use Lots Nos. 5 and 6 for strictly residential purposes, defendants-appellees should be permitted, on the strength of the resolution promulgated under the police power of the municipality, to use the same for commercial purposes.” But in the case of Ayala Alabang, the court noted that the area surrounding the school was still largely surrounded by residential lots and remained purely residential. Furthermore, the local government, in explaining the reason why it had reclassified the area as “institutional” stated that it was  simply adopting the classification used in a zoning map purportedly submitted by the land developer itself.  In other words, the municipality was not asserting any interest or zoning purpose contrary to that of the subdivision developer in declaring the subject property as institutional. The Learning Child, Inc. and Sps. Felipe and Mary Anne Alfonso Vs. Ayala Alabang Village Association, Spouses Ernest and Alma Arzaga, et al./Jose Marie V. Aquino, minor and represented by his parents Dr. Errol Aquino and Atty. Marilyn Aquino, et al. Vs. Ayala Alabang Village Association, Spouses Ernesto and Alma Arzaga, et al./Ayala Alabang Village Association, Spouses Ernesto and Alma Arzaga, et al. Vs.Municipality of Muntinlupa, et al., G.R. No. 134269/G.R. No. 134440/G.R. No. 144518, July 7, 2010.

Estoppel. Estoppel by deed is “a bar which precludes one party from asserting as against the other party and his privies any right or title in derogation of the deed, or from denying the truth of any material facts asserted in it.”  Estoppel has been characterized as harsh or odious, and not favored in law.  When misapplied, estoppel becomes a most effective weapon to establish an injustice, inasmuch as it shuts a man’s mouth from speaking the truth and debars the truth in a particular case.  Estoppel cannot be sustained by mere argument or doubtful inference; it must be clearly proved in all its essential elements by clear, convincing and satisfactory evidence. The Learning Child, Inc. and Sps. Felipe and Mary Anne Alfonso Vs. Ayala Alabang Village Association, Spouses Ernest and Alma Arzaga, et al./Jose Marie V. Aquino, minor and represented by his parents Dr. Errol Aquino and Atty. Marilyn Aquino, et al. Vs. Ayala Alabang Village Association, Spouses Ernesto and Alma Arzaga, et al./Ayala Alabang Village Association, Spouses Ernesto and Alma Arzaga, et al. Vs.Municipality of Muntinlupa, et al., G.R. No. 134269/G.R. No. 134440/G.R. No. 144518, July 7, 2010.

Family home; how to constitute; levy and execution. The general rule is that the family home is a real right which is gratuitous, inalienable and free from attachment, constituted over the dwelling place and the land on which it is situated, which confers upon a particular family the right to enjoy such properties, which must remain with the person constituting it and his heirs.  It cannot be seized by creditors except in certain special cases.

The case of Kelley, Jr. v. Planters Products, Inc. lays down the rules relative to the levy on execution over the family home, viz: (i) a family home is generally exempt from execution provided it was duly constituted as such; (ii) there must be proof that the alleged family home was constituted jointly by the husband and wife or by an unmarried head of a family; (iii) it must be the house where they and their family actually reside and the lot on which it is situated, (iv) the family home must be part of the properties of the absolute community or the conjugal partnership, or of the exclusive properties of either spouse with the latter’s consent, or on the property of the unmarried head of the family; and (v) the actual value of the family home shall not exceed, at the time of its constitution, the amount of P300,000 in urban areas and P200,000 in rural areas.

With regard to the need for constituting a residence as a family home in order for the property to be exempt from execution, distinction must be made as to what law applies based on when it was constituted and what requirements must be complied with by the judgment debtor or his successors claiming such privilege.  Hence, two sets of rules are applicable.

If the family home was constructed before the effectivity of the Family Code or before August 3, 1988, then it must have been constituted either judicially or extra-judicially as provided under Articles 225, 229-231 and 233 of the Civil Code.  Judicial constitution of the family home requires the filing of a verified petition before the courts and the registration of the court’s order with the Registry of Deeds of the area where the property is located.  Meanwhile, extrajudicial constitution is governed by Articles 240 to 242 of the Civil Code and involves the execution of a public instrument which must also be registered with the Registry of Property.  Failure to comply with either one of these two modes of constitution will bar a judgment debtor from availing of the privilege.

On the other hand, for family homes constructed after the effectivity of the Family Code on August 3, 1988, there is no need to constitute extrajudicially or judicially. All family homes constructed after the effectivity of the Family Code (August 3, 1988) are constituted as such by operation of law. All existing family residences as of August 3, 1988 are considered family homes and are prospectively entitled to the benefits accorded to a family home under the Family Code. The exemption is effective from the time it was constituted and lasts as long as any of its beneficiaries under Article 154 actually resides therein. Moreover, the family home should belong to the absolute community or conjugal partnership, or if exclusively by one spouse, its constitution must have been with consent of the other, and its value must not exceed certain amounts depending upon the area where it is located.  Further, the debts incurred for which the exemption does not apply as provided under Article 155 for which the family home is made answerable must have been incurred after August 3, 1988.

In both cases, whether under the Civil Code or the Family Code, it is not sufficient that the person claiming exemption merely alleges that such property is a family home.  This claim for exemption must be set up and proved.

In the present case, since petitioners claim that the family home was constituted prior to August 3, 1988, or as early as 1944, they must comply with the procedure mandated by the Civil Code. There being absolutely no proof that the Pandacan property was judicially or extra-judicially constituted as the Ramos’ family home, the law’s protective mantle cannot be availed of by petitioners.   Parenthetically, the records show that the sheriff exhausted all means to execute the judgment but failed because Ramos’ bank accounts were already closed while other properties in his or the company’s name had already been transferred, and the only property left was the Pandacan property. Juanita Trinidad Ramos, et al. vs. Danilo Pangilinan et al., G.R. No. 185920, July 20, 2010.

Implied trust. Petitioners’ submission that respondents merely hold the title to the properties in trust for their predecessor Pedro is without merit. Pedro failed to prove by clear and convincing evidence that the spouses Rosauro and Angelina managed, through fraud, to have the real properties subject of this case registered in their name.  In the absence of fraud, no implied trust was established between Pedro and the spouses Rosauro and Angelina under Article 1456 of the New Civil Code. Heirs Pedro De Guzman vs. Angelina Perona and Heirs of Rosauro De Guzman, Bataan Development Bank and Republic Planters Bank, G.R. No. 152266, July 2, 2010.

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

When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

Since this case before us involves an obligation not arising from a loan or forbearance of money, the applicable interest rate is 6% per annum.  The legal interest rate of 6% shall be computed from 4 October 1999, the date the letter of demand was presumably received by the defendant.  And in accordance with these rules, the rate of 12% per annum shall be charged on the total amount outstanding, from the time the judgment becomes final and executory until its satisfaction. Benny Y. Hung vs. BPI Card Finance Corp., G.R. No. 182398, July 20, 2010.

Interest; unconscionable rate.  It is true that parties to a loan agreement have a wide latitude to stipulate on any interest rate in view of Central Bank Circular No. 905, series of 1982, which suspended the Usury Law ceiling on interest rate effective January 1, 1983.  However, interest rates, whenever unconscionable, may be equitably reduced or even invalidated.   In several cases, this Court had declared as null and void stipulations on interest and charges that were found excessive, iniquitous and unconscionable. Stipulations authorizing the imposition of iniquitous or unconscionable interest are contrary to morals, if not against the law.  Under Article 1409 of the Civil Code, these contracts are inexistent and void from the beginning. They cannot be ratified nor the right to set up their illegality as a defense be waived.

The nullity of the stipulation on the usurious interest does not, however, affect the lender’s right to recover the principal of the loan. Nor would it affect the terms of the real estate mortgage.  The right to foreclose the mortgage remains with the creditors, and said right can be exercised upon the failure of the debtors to pay the debt due.  The debt due is to be considered without the stipulation of the excessive interest.  A legal interest of 12% per annum will be added in place of the excessive interest formerly imposed. The nullification by the CA of the interest rate and the penalty charge and the consequent imposition of an interest rate of 12% and penalty charge of 1% per month cannot, therefore, be considered a reversible error. Asian Cathay Finance and Leasing Corporation vs. Spouses Cesario Gravador and Norma De Vera and Spouses Emma Concepcion G. Dumigpi and Federico L. Dumigpi, G.R. No. 186550, July 5, 2010.

Interest; unconscionable rate. Although the petition is unmeritorious, we find the 5% monthly interest rate stipulated in Clause 4 of the Compromise Agreement to be iniquitous and unconscionable. Accordingly, the legal interest of 12% per annum must be imposed in lieu of the excessive interest stipulated in the agreement.  In several cases, we have ruled that stipulations authorizing iniquitous or unconscionable interests are contrary to morals, if not against the law.  In Medel v. Court of Appeals, we annulled a stipulated 5.5% per month or 66% per annum interest on a P500,000.00 loan and a 6% per month or 72% per annum interest on a P60,000.00 loan, respectively, for being excessive, iniquitous, unconscionable and exorbitant.  In Ruiz v. Court of Appeals, we declared a 3% monthly interest imposed on four separate loans to be excessive.  In both cases, the interest rates were reduced to 12% per annum.

In this case, the 5% monthly interest rate, or 60% per annum, compounded monthly, stipulated in the Kasulatan is even higher than the 3% monthly interest rate imposed in the Ruiz case.  Thus, we similarly hold the 5% monthly interest to be excessive, iniquitous, unconscionable and exorbitant, contrary to morals, and the law.  It is therefore void ab initio for being violative of Article 1306 of the Civil Code. Lazaro Pasco and Lauro Pasco vs. Heirs of Filomena De Guzman, represented by Cresencia De Guzman, G.R. No. 165554, July 26, 2010.

Interest; unconscionable rate.  Aside from the payment of the principal obligation of P1,936,800.00, the parties agreed that respondent pay interest at the rate of 25% from February 17, 1997 until fully paid.  Such rate, however, is excessive and thus, void.  Since the stipulation on the interest rate is void, it is as if there was no express contract thereon.  To be sure, courts may reduce the interest rate as reason and equity demand.  In this case, 12% interest is reasonable. Pentacapital Investment Corporation vs. Makilito Mahinay/Pentacapital Investment Corporation Vs. Mikilito Mahinay, G.R. No. 171736, July 5, 2010

Interest; Usury Law; need for parties to agree on the rate. The Usury Law had been rendered legally ineffective by Resolution No. 224 dated 3 December 1982 of the Monetary Board of the Central Bank, and later by Central Bank Circular No. 905 which took effect on 1 January 1983.  These circulars removed the ceiling on interest rates for secured and unsecured loans regardless of maturity. The effect of these circulars is to allow the parties to agree on any interest that may be charged on a loan. The virtual repeal of the Usury Law is within the range of judicial notice which courts are bound to take into account.  Although interest rates are no longer subject to a ceiling, the lender still does not have an unbridled license to impose increased interest rates.  The lender and the borrower should agree on the imposed rate, and such imposed rate should be in writing.

The stipulations on interest rate repricing in the promissory notes are valid because (1) the parties mutually agreed on said stipulations; (2) repricing takes effect only upon Solidbank’s written notice to Permanent of the new interest rate; and (3) Permanent has the option to prepay its loan if Permanent and Solidbank do not agree on the new interest rate.  The phrases “irrevocably authorize,” “at any time” and  “adjustment of the interest rate shall be effective from the date indicated in the written notice sent to us by the bank, or if no date is indicated, from the time the notice was sent,” emphasize that Permanent should receive a written notice from Solidbank as a condition for the adjustment of the interest rates.

In order that obligations arising from contracts may have the force of law between the parties, there must be a mutuality between the parties based on their essential equality.  A contract containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled will of one of the contracting parties is void.  There was no showing that either Solidbank or Permanent coerced each other to enter into the loan agreements. The terms of the Omnibus Line Agreement and the promissory notes were mutually and freely agreed upon by the parties. Solidbank Corporation vs. Permanent Homes, Inc., G.R. No. 171925, July 23, 2010

Laches. Laches is the failure of or neglect for an unreasonable and unexplained length of time to do that which by exercising due diligence, could or should have been done earlier, or to assert a right within reasonable time, warranting a presumption that the party entitled thereto has either abandoned it or declined to assert it. Amelia B. Hebron vs. Franco L. Loyola, et al., G.R. No. 168960, July 5, 2010.

Lease; lessee “in good faith” versus “builder in good faith”; award of damages. In a case where the lessee made improvements to the leased premises in good faith, the applicable law is not the Civil Code provisions on builder in good faith, because those provisions contemplate a situation where the builder believes himself to be the real owner of the property. Tenants cannot be said to be builders in good faith as they have no pretension to be owners of the property. It is Article 1678 of the Civil Code which should apply.

In this case, the lessees “removed only the improvements they introduced without destroying the principal building, after the lessors refused to pay them the reasonable value of the improvements.” When the lessees demanded reimbursement, the lessors should have offered to pay the lessees Mores one-half of the value of the improvements.  Since the lessors failed to make such offer, the lessees had the right to remove the improvements, and the lessors were not entitled to any moral damages. Alida Mores vs. Shirley M. Yu-Go, Ma. Victoria Yu-Lim and Ma. Estrella M. Yu, G.R. No. 172292, July 23, 2010.

Legal subrogation. The present case exemplifies the circumstance contemplated under paragraph 2, of Article 1302 of the Civil Code which provides:

It is presumed that there is legal subrogation:

(1)  When a creditor pays another creditor who is preferred, even without the debtor’s knowledge;

(2)  When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor;

(3)  When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter’s share.

Metrobank was a third party to the Central Bank-RBG agreement, had no interest except as a conduit, and was not legally answerable for the IBRD loans.  Despite this, it was Metrobank’s demand deposit account, instead of RBG’s, which the Central Bank proceeded against, on the assumption perhaps that this was the most convenient means of recovering the cancelled loans.  That Metrobank’s payment was involuntarily made does not change the reality that it was Metrobank which effectively answered for RBG’s obligations.

Was there express or tacit approval by RBG of the payment enforced against Metrobank?  After Metrobank received the Central Bank’s debit advices in November 1978, it (Metrobank) accordingly debited the amounts it could from RBG’s special savings account without any objection from RBG.  RBG’s President and Manager, Dr. Aquiles Abellar, even wrote Metrobank, on August 14, 1979, with proposals regarding possible means of settling the amounts debited by Central Bank from Metrobank’s demand deposit account.  These instances are all indicative of RBG’s approval of Metrobank’s payment of the IBRD loans.  That RBG’s tacit approval came after payment had been made does not completely negate the legal subrogation that had taken place.

Article 1303 of the Civil Code states that subrogation transfers to the person subrogated the credit with all the rights thereto appertaining, either against the debtor or against third persons.  As the entity against which the collection was enforced, Metrobank was subrogated to the rights of Central Bank and has a cause of action to recover from RBG the amounts it paid to the Central Bank, plus 14% per annum interest.  Metropolitan Bank and Trust Company vs. Rural Bank of Gerona, Inc., G.R. No. 159097, July 5, 2010.

Loan; promissory note: elements. To ascertain whether or not respondent is bound by the promissory notes, it must be established that all the elements of a contract of loan are present. Like any other contract, a contract of loan is subject to the rules governing the requisites and validity of contracts in general. It is elementary in this jurisdiction that what determines the validity of a contract, in general, is the presence of the following 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.

Under Article 1354 of the Civil Code, it is presumed that consideration exists and is lawful unless the debtor proves the contrary. Moreover, under Section 3, Rule 131 of the Rules of Court, the following are disputable presumptions: (1) private transactions have been fair and regular; (2) the ordinary course of business has been followed; and (3) there was sufficient consideration for a contract. Pentacapital Investment Corporation vs. Makilito Mahinay/Pentacapital Investment Corporation Vs. Mikilito Mahinay, G.R. No. 171736, July 5, 2010

Mortgage; blanket or dragnet clause. Before we resolve the issues directly posed, we first dwell on the determination of the nature of the cross-collateral stipulation in the mortgage contract.  As a general rule, a mortgage liability is usually limited to the amount mentioned in the contract. However, the amounts named as consideration in a contract of mortgage do not limit the amount for which the mortgage may stand as security if, from the four corners of the instrument, the intent to secure future and other indebtedness can be gathered.  This stipulation is valid and binding between the parties and is known as the “blanket mortgage clause” (also known as the “dragnet clause).”

In the present case, the mortgage contract indisputably provides that the subject properties serve as security, not only for the payment of the subject loan, but also for “such other loans or advances already obtained, or still to be obtained.”  The cross-collateral stipulation in the mortgage contract between the parties is thus simply a variety of a dragnet clause. After agreeing to such stipulation, the petitioners cannot insist that the subject properties be released from mortgage since the security covers not only the subject loan but the two other loans as well. Violeta Tudtud Banate, et al. vs. Philippine Countryside Rural Bank (Liloan, Cebu), Inc. and Teofilo Soon, Jr., G.R. No. 163825, July 13, 2010.

Mortgage; writ of possession. The right of the purchaser to the possession of the foreclosed property becomes absolute upon the expiration of the redemption period. The basis of this right to possession is the purchaser’s ownership of the property.  After the consolidation of title in the buyer’s name for failure of the mortgagor to redeem, the writ of possession becomes a matter of right and its issuance to a purchaser in an extrajudicial foreclosure is merely a ministerial function.

In this case, petitioners failed to redeem the subject property within one year from the date of registration of the certificate of sale. Hence, respondent consolidated ownership over the subject property and TCT No. 162999 was issued in the name of respondent. Thereafter, respondent filed an Ex-Parte Petition for Issuance of a Writ of Possession over the subject property, and it was ministerial upon the RTC of Parañaque City, Branch 257 to issue the writ of possession in favor of respondent. Hence, it is clear that the RTC of Parañaque City, Branch 257 did not gravely abuse its discretion in issuing the writ of possession, considering that it was the ministerial duty of the RTC to issue the writ of possession in favor of respondent, who had consolidated ownership over the subject property after the redemption period expired. Spouses Edmundo and Lourdes Sarrosa vs. Willy O. Dizon, G.R. No. 183027, July 26, 2010.

Novation. Novation, in its broad concept, may either be extinctive or modificatory. It is extinctive when an old obligation is terminated by the creation of a new obligation that takes the place of the former; it is merely modificatory when the old obligation subsists to the extent that it remains compatible with the amendatory agreement. An extinctive novation results either by changing the object or principal conditions (objective or real), or by substituting the person of the debtor or subrogating a third person in the rights of the creditor (subjective or personal). Under this mode, novation would have dual functions – one to extinguish an existing obligation, the other to substitute a new one in its place – requiring a conflux of four essential requisites: (1) a previous valid obligation; (2) an agreement of all parties concerned to a new contract; (3) the extinguishment of the old obligation; and (4) the birth of a valid new obligation.

The second requisite is lacking in this case. Novation presupposes not only the extinguishment or modification of an existing obligation but, more importantly, the creation of a valid new obligation. For the consequent creation of a new contractual obligation, consent of both parties is, thus, required. As a general rule, no form of words or writing is necessary to give effect to a novation. Nevertheless, where either or both parties involved are juridical entities, proof that the second contract was executed by persons with the proper authority to bind their respective principals is necessary. Violeta Tudtud Banate, et al. vs. Philippine Countryside Rural Bank (Liloan, Cebu), Inc. and Teofilo Soon, Jr., G.R. No. 163825, July 13, 2010.

Prescription; real actions. A real action is one where the plaintiff seeks the recovery of real property or, as indicated in what is now Rule 4, Section 1 of the Rules of Court, a real action is an action affecting title to or recovery of possession of real property.  An action for quieting of title to real property, such as Civil Case No. 4452, is indubitably a real action.

Article 1141 of the Civil Code plainly provides that real actions over immovables prescribe after thirty years.  Doña Demetria died in 1974, transferring by succession, her title to the two parcels of land to her only heir, Vidal.  Teofilo, through Atty. Cabildo, filed a petition for reconstitution of the certificates of title covering said properties in 1978.  This is the first palpable display of Teofilo’s adverse claim to the same properties, supposedly, also as Doña Demetria’s only heir.  When Vidal and AZIMUTH instituted Civil Case No. 4452 in 1998, only 20 years had passed, and the prescriptive period for filing an action for quieting of title had not yet prescribed.

Nevertheless, the Court notes that Article 1411 of the Civil Code also clearly states that the 30-year prescriptive period for real actions over immovables is without prejudice to what is established for the acquisition of ownership and other real rights by prescription.  Thus, the Court must also look into the acquisitive prescription periods of ownership and other real rights.

Acquisitive prescription of dominion and real rights may be ordinary or extraordinary. Ordinary acquisitive prescription requires possession of things in good faith and with just title for the time fixed by law.   In the case of ownership and other real rights over immovable property, they are acquired by ordinary prescription through possession of 10 years.

LANDTRADE cannot insist on the application of the 10-year ordinary acquisitive prescription period since it cannot be considered a possessor in good faith.  The good faith of the possessor consists in the reasonable belief that the person from whom he received the thing was the owner thereof, and could transmit his ownership.     Since the ordinary acquisitive prescription period of 10 years does not apply to LANDTRADE, then the Court turns its attention to the extraordinary acquisitive prescription period of 30 years set by Article 1137 of the Civil Code, which provides that ownership and other real rights over immovables also prescribe through uninterrupted adverse possession thereof for thirty years, without need of title or of good faith.

LANDTRADE adversely possessed the subject properties no earlier than 1996, when it bought the same from Teofilo, and Civil Case No. 4452 was already instituted two years later in 1998.  LANDTRADE cannot tack its adverse possession of the two parcels of land to that of Teofilo considering that there is no proof that the latter, who is already residing in the U.S.A., adversely possessed the properties at all. Republic of the Philippines Vs. Hon. Mamindiara P. Mangotara, in his capacity as Presiding Judge of the Regional Trial Court, Branch 1, Iligan City, Lanao del Norte, and Maria Cristina Fertilizer Corporation, and the Philippines National Bank/Land Trade Realty Corporation Vs. National Power Corporation and National Transmission Corporation (Transco)/National Power Corporation Vs. Hon. Court of Appeals (Special Twenty-Third Division, Cagayan de Oro City) and Land Trade Realty Corporation/National Transmission Corporation Vs. Hon. Court of Appeals (Special Twenty-Third Division, Cagayan de Oro City) and Land Trade Realty Corporation, G.R. No. 170375/G.R. No. 170505/G.R. Nos. 173355-56/G.R. No. 173401/G.R. Nos. 173563-64/G.R. No. 178779/G.R. No. 178894.,July 7, 2010

Property; land included in title by mistake. Settled is the rule that a person, whose certificate of title included by mistake or oversight the land owned by another, does not become the owner of such land by virtue of the certificate alone.  The Torrens System is intended to guarantee the integrity and conclusiveness of the certificate of registration but is not intended to perpetrate fraud against the real owner of the land.  The certificate of title cannot be used to protect a usurper from the true owner. Spouses Federico Valenzuela and Luz Buena-Valenzuela Vs. Spouses Jose Mano , Jr. and Rosanna Reyes-Mano, G.R. No. 172611, July 9, 2010.

Property; ability of mother to dispose of property of minor children. The minor children of Conrado inherited by representation in the properties of their grandparents Remigia and Januario.  These children, not their mother Victorina, were the co-owners of the inherited properties.  Victorina had no authority or had acted beyond her powers in conveying, if she did indeed convey, to the petitioner’s mother the undivided share of her minor children in the property involved in this case. “The powers given to her by the laws as the natural guardian covers only matters of administration and cannot include the power of disposition.   She should have first secured the permission of the court before she alienated that portion of the property in question belonging to her minor children.”  In a number of cases, where the guardians, mothers or grandmothers, did not seek court approval of the sale of properties of their wards, minor children, the Court declared the sales void.  Amelia B. Hebron vs. Franco L. Loyola, et al., G.R. No. 168960, July 5, 2010.

Succession; settlement of the estate. It is true that Filomena’s estate has a different juridical personality than that of the heirs. Nonetheless, her heirs certainly have an interest in the preservation of the estate and the recovery of its properties, for at the moment of Filomena’s death, the heirs start to own the property, subject to the decedent’s liabilities.  In this connection, Article 777 of the Civil Code states that “[t]he rights to the succession are transmitted from the moment of the death of the decedent.”

Unfortunately, the records before us do not show the status of the proceedings for the settlement of the estate of Filomena, if any.  But to allow the release of the funds directly to the heirs would amount to a distribution of the estate; which distribution and delivery should be made only after, not before, the payment of all debts, charges, expenses, and taxes of the estate have been paid.  We thus decree that respondent Cresencia should deposit the amounts received from the petitioners with the MTC of Bocaue, Bulacan and in turn, the MTC of Bocaue, Bulacan should hold in abeyance the release of the amounts to Filomena’s heirs until after a showing that the proper procedure for the settlement of Filomena’s estate has been followed. Lazaro Pasco and Lauro Pasco vs. Heirs of Filomena De Guzman, represented by Cresencia De Guzman, G.R. No. 165554, July 26, 2010.

Unjust enrichment.  The principle of unjust enrichment cannot be validly invoked by a party who, through his own act or omission, took the risk of being denied payment for additional costs by not giving the other party prior notice of such costs and/or by not securing their written consent thereto, as required by law and their contract. Elpidio S. Uy, doing business under the name and style of Edison Development & Construction vs. Public Estates Authority, G.R. Nos. 147925-26, July 7, 2010.

Waiver; validity; with respect to right of redemption.  Settled is the rule that for a waiver to be valid and effective, it must, in the first place, be couched in clear and unequivocal terms which will leave no doubt as to the intention of a party to give up a right or benefit which legally pertains to him. Additionally, the intention to waive a right or an advantage must be shown clearly and convincingly.  Unfortunately, ACFLC failed to convince us that respondents waived their right of redemption voluntarily.

In fine, when the redemptioner chooses to exercise his right of redemption, it is the policy of the law to aid rather than to defeat his right.   Thus, we affirm the CA in nullifying the waiver of the right of redemption provided in the real estate mortgage. Asian Cathay Finance and Leasing Corporation vs. Spouses Cesario Gravador and Norma De Vera and Spouses Emma Concepcion G. Dumigpi and Federico L. Dumigpi, G.R. No. 186550, July 5, 2010.

Special Laws

Late registration of birth; everything you always wanted to know about it! [Digester’s Note: I think this case makes a nice summary of the topic so I’m going to give you most of the case.] Presidential Decree No. 651, otherwise known as An Act Requiring the Registration of Births and Deaths in the Philippines which Occurred from 1 January 1974 and Thereafter, provides:

Sec. 1. Registration of births. All babies born in hospitals, maternity clinics, private homes, or elsewhere within the period starting from January 1, 1974 up to the date when this decree becomes effective, irrespective of the nationality, race, culture, religion or belief of their parents, whether the mother is a permanent resident or transient in the Philippines, and whose births have not yet been registered must be reported for registration in the office of the local civil registrar of the place of birth by the physician, nurse, midwife, hilot, or hospital or clinic administrator who attended the birth or in default thereof, by either parent or a responsible member of the family or a relative, or any person who has knowledge of the birth of the individual child.

The report referred to above shall be accompanied with an affidavit describing the circumstances surrounding the delayed registration. (Emphasis supplied)

Sec. 2. Period of registration of births. The registration of the birth of babies referred to in the preceding section must be done within sixty (60) days from the date of effectivity of this decree without fine or fee of any kind. Babies born after the effectivity of this decree must be registered in the office of the local civil registrar of the place of birth within thirty (30) days after birth, by the attending physician, nurse, midwife, hilot or hospitals or clinic administrator or, in default of the same, by either parent or a responsible member of the family or any person who has knowledge of the birth.

The parents or the responsible member of the family and the attendant at birth or the hospital or clinic administrator referred to above shall be jointly liable in case they fail to register the new born child. If there was no attendant at birth, or if the child was not born in a hospital or maternity clinic, then the parents or the responsible member of the family alone shall be primarily liable in case of failure to register the new born child. (Emphasis supplied)

Presidential Decree No. 766 amended P.D. No. 651 by extending the period of registration up to 31 December 1975. P.D. No. 651, as amended, provided for special registration within a specified period to address the problem of under-registration of births as well as deaths. It allowed, without fine or fee of any kind, the late registration of births and deaths occurring within the period starting from 1 January 1974 up to the date when the decree became effective.

Since Reynaldo was born on 30 October 1948, the late registration of his birth is outside of the coverage of P.D. No. 651, as amended. The late registration of Reynaldo’s birth falls under Act No. 3753, otherwise known as the Civil Registry Law, which took effect on 27 February 1931. As a general law, Act No. 3753 applies to the registration of all births, not otherwise covered by P.D. No. 651, as amended, occurring from 27 February 1931 onwards.  Considering that the late registration of Reynaldo’s birth took place in 1985, National Census Statistics Office (NCSO) Administrative Order No. 1, Series of 1983 governs the implementation of Act No. 3753 in this case.

Under NCSO A.O. No. 1-83, the birth of a child shall be registered in the office of the local civil registrar within 30 days from the time of birth. Any report of birth made beyond the reglementary period is considered delayed. The local civil registrar, upon receiving an application for delayed registration of birth, is required to publicly post for at least ten days a notice of the pending application for delayed registration. If after ten days no one opposes the registration and the local civil registrar is convinced beyond doubt that the birth should be registered, he should register the same.

Reynaldo’s certificate of live birth, as a duly registered public document, is presumed to have gone through the process prescribed by law for late registration of birth.  It was only on 8 March 1995, after the lapse of ten long years from the approval on 11 February 1985 of the application for delayed registration of Reynaldo’s birth, that Nieves registered her opposition. She should have done so within the ten-day period prescribed by law.  Records show that no less than Nieves herself informed the local civil registrar of the birth of Reynaldo. At the time of her application for delayed registration of birth, Nieves claimed that Reynaldo was her son. Between the facts stated in a duly registered public document and the flip-flopping statements of Nieves, we are more inclined to stand by the former.

Applications for delayed registration of birth go through a rigorous process. The books making up the civil register are considered public documents and are prima facie evidence of the truth of the facts stated there.  As a public document, a registered certificate of live birth enjoys the presumption of validity. It is not for Reynaldo to prove the facts stated in his certificate of live birth, but for petitioners who are assailing the certificate to prove its alleged falsity. Petitioners miserably failed to do so. Thus, the trial court and the Court of Appeals correctly denied for lack of merit the petition to cancel the late registration of Reynaldo’s birth. Nieves Estares Baldos, substituted by Francisco Baldos and Martin Baldos vs. Court of Appeals and Reynaldo Pillazar a.k.a. Reynaldo Estares Baldos, G.R. No. 170645, July 9, 2010.

Property registration; requirements. An application for registration of title must, under Section 14(1), P.D. 1529, meet three requirements: a) that the property is alienable and disposable land of the public domain; b) that the applicants by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of the land; and c) that such possession is under a bona fide claim of ownership since June 12, 1945 or earlier.

Under the Regalian doctrine, all lands of the public domain belong to the State and the latter is the source of any asserted right to ownership in land.  Thus, the State presumably owns all lands not otherwise appearing to be clearly within private ownership.  To overcome such presumption, incontrovertible evidence must be shown by the applicant that the land subject of registration is alienable and disposable.

Respecting the third requirement, the applicant bears the burden of proving the status of the land.  In this connection, the Court has held that he must present a certificate of land classification status issued by the Community Environment and Natural Resources Office (CENRO) or the Provincial Environment and Natural Resources Office (PENRO) of the DENR.  He must also prove that the DENR Secretary had approved the land classification and released the land as alienable and disposable, and that it is within the approved area per verification through survey by the CENRO or PENRO.  Further, the applicant must present a copy of the original classification approved by the DENR Secretary and certified as true copy by the legal custodian of the official records.  These facts must be established by the applicant to prove that the land is alienable and disposable. Republic of the Philippines vs. Rosila Roche, G.R. No. 175846, July 6, 2010.

Property registration; who may apply.  As the law now stands, a mere showing of possession and occupation for 30 years or more is not sufficient. Therefore, since the effectivity of P.D. 1073 on January 25, 1977, it must now be shown that possession and occupation of the piece of land by the applicant, by himself or through his predecessors-in-interest, started on June 12, 1945 or earlier. This provision is in total conformity with Section 14 (1) of P.D. 1529.

Thus, pursuant to the aforequoted provisions of law, applicants for registration of title must prove: (1) that the subject land forms part of the disposable and alienable lands of the public domain, and (2) that they have been in open, continuous, exclusive and notorious possession and occupation of the same under a bona fide claim of ownership since June 12, 1945, or earlier. Republic of the Philippines vs. Hanover Worldwide Trading Corporation, G.R. No. 172102, July 2, 2010.

Property registration; Torrens System; inclusion of property in title by error or fraud. See entry for Spouses Federico Valenzuela and Luz Buena-Valenzuela Vs. Spouses Jose Mano , Jr. and Rosanna Reyes-Mano, G.R. No. 172611, July 9, 2010.

Public Land Act. The matter and duration of the petitioners and their predecessors’ possession are relevant in view of the petitioners’ contention that they acquired ownership of Lot 1873 through prescription, i.e., the lapse of the requisite 30-year period provided in Article 1137 of the Civil Code.  Article 1137 states:

Article 1137.  Ownership and other real rights over immovables also prescribe through uninterrupted adverse possession thereof for thirty years, without need of title or of good faith.

The petitioners’ reliance on Article 1137 of the Civil Code is not entirely accurate.  The petitioners alleged that Lot 1873 is an alienable and disposable land of the public domain.  However, acquisition of ownership over alienable public lands is governed, not by the general provisions on prescription in the Civil Code, but more particularly, by Commonwealth Act No. 141 (CA 141) or the Public Land Act.  Article 1137 of the Civil Code authorizes acquisition by prescription only of private lands, not of public lands even though these may have been decreed as alienable and disposable.

Alienable and disposable lands of the public domain may be acquired by private persons, not by virtue of prescription but, through adverse possession, upon compliance with the requirements of Section 48(b) of CA 141. Thus, it is not the mere lapse of time that vests title over the land to the claimant; it is also necessary that the land be an alienable and disposable land of the public domain and that the claimant be in open, continuous, exclusive, and notorious possession of the land.  Listed down, the acquisition through adverse possession of public lands requires the following:

1.     the land applied for must be an alienable and disposable public land; and

2.     the claimants, by themselves or through their predecessors-in-interest, have been in open, continuous, exclusive, and notorious possession and occupation of the land since June 12, 1945 or earlier.

Heirs of Spouses Crispulo Ferrer and Engracia Puhawan, et al. vs. National Power Corporation, et al., G.R. No. 190384, July 5, 2010.

Tenancy relationship.  Tenancy relationship is a juridical tie which arises between a landowner and a tenant once they agree, expressly or impliedly, to undertake jointly the cultivation of a land belonging to the landowner, as a result of which relationship the tenant acquires the right to continue working on and cultivating the land.

The existence of a tenancy relationship cannot be presumed and allegations that one is a tenant do not automatically give rise to security of tenure.  For tenancy relationship to exist, the following essential requisites must be present: (1) the parties are the landowner and the tenant; (2) the subject matter is agricultural land; (3) there is consent between the parties; (4) the purpose is agricultural production; (5) there is personal cultivation by the tenant; and, (6) there is sharing of the harvests between the parties.  All the requisites must concur in order to establish the existence of tenancy relationship, and the absence of one or more requisites is fatal. Vicente Adriano vs. Alice M. Tanco, et al., G.R. No. 168164. July 5, 2010.

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