March 2011 Philippine Supreme Court Decisions on Civil Law

Here are selected March 2011 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Common carrier; breach of contract of carriage. There existed a contract of carriage between G & S, as the owner and operator of the Avis taxicab, and Jose Marcial, as the passenger of said vehicle.   As a common carrier, G & S is bound to carry [Jose Marcial] safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances.  However, Jose Marcial was not able to reach his destination safely as he died during the course of the travel. “In a contract of carriage, it is presumed that the common carrier is at fault or is negligent when a passenger dies or is injured.  In fact, there is even no need for the court to make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence.  Unfortunately, G & S miserably failed to overcome this presumption.  Both the trial court and the CA found that the accident which led to Jose Marcial’s death was due to the reckless driving and gross negligence of G & S’ driver, Padilla, thereby holding G & S liable to the heirs of Jose Marcial for breach of contract of carriage.

That the driver was acquitted in the criminal case for reckless imprudence is immaterial. Article 31 of the Civil Code provides, viz:

When the civil action is based on an obligation not arising from the act or omission complained of as a felony, such civil action may proceed independently of the criminal proceedings and regardless of the result of the latter.

In this case, the action filed by the heirs is primarily for the recovery of damages arising from breach of contract of carriage allegedly committed by G & S.  Clearly, it is an independent civil action arising from contract which is separate and distinct from the criminal action for reckless imprudence resulting in homicide filed by the heirs against Padilla by reason of the same incident.  Hence, regardless of Padilla’s acquittal or conviction in said criminal case, same has no bearing in the resolution of the present case.  Heirs of Jose Marcial K. Ochoa, namely: Ruby B. Ochoa, et al. v. G & S Transport Corporation/G & S Transport Corporation v. Heirs of Jose Marcial K. Ochoa, namely: Ruby B. Ochoa, et al., G.R. No. 170071 & G.R. No. 170125, March 9, 2011.

Contract; voidable. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable. In determining whether consent is vitiated by any of the circumstances mentioned, courts are given a wide latitude in weighing the facts or circumstances in a given case and in deciding in their favor what they believe to have actually occurred, considering the age, physical infirmity, intelligence, relationship, and the conduct of the parties at the time of the making of the contract and subsequent thereto, irrespective of whether the contract is in public or private writing.  And, in order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or those conditions which have principally moved one or both parties to enter the contract.  Cornelia M. Hernandez, substituted by Lourdes H. Castillo v. Cecilio F. Hernandez, G.R. No. 158576, March 9, 2011.

Damages; loss of earning capacity.  Clearly, the CA erred in deleting the award for lost income on the ground that the USAID Certification supporting such claim is self-serving and unreliable.  On the contrary, we find said certification sufficient basis for the court to make a fair and reasonable estimate of Jose Marcial’s loss of earning capacity just like in Tamayo v. Señora where we based the victim’s gross annual income on his pay slip from the Philippine National Police.  Hence, we uphold the trial court’s award for Jose Marcial’s loss of earning capacity. Heirs of Jose Marcial K. Ochoa, namely: Ruby B. Ochoa, et al. v. G & S Transport Corporation/G & S Transport Corporation v. Heirs of Jose Marcial K. Ochoa, namely: Ruby B. Ochoa, et al., G.R. No. 170071 & G.R. No. 170125, March 9, 2011

Damages; moral. While we deemed it proper to modify the amount of moral damages awarded by the trial court as discussed below, we nevertheless agree with the heirs that the CA should not have pegged said award in proportion to the award of exemplary damages. Moral and exemplary damages are based on different jural foundations.  They are different in nature and require separate determination.  The amount of one cannot be made to depend on the other. In Victory Liner Inc. v. Gammad we awarded P100,000.00 by way of moral damages to the husband and three children of the deceased, a 39-year old Section Chief of the Bureau of Internal Revenue, to compensate said heirs for the grief caused by her death.  This is pursuant to the provisions of Articles 1764 and 2206(3) which provide:

 Art. 1764.  Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages.  Articles 2206 shall also apply to the death of a passenger caused by the breach of contract by a common carrier.

Art. 2206.  x x x

(3) The spouse, legitimate and illegitimate descendants and the ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased.

Here, there is no question that the heirs are likewise entitled to moral damages pursuant to the above provisions, considering the mental anguish suffered by them by reason of Jose Marcial’s untimely death. Heirs of Jose Marcial K. Ochoa, namely: Ruby B. Ochoa, et al. v. G & S Transport Corporation/G & S Transport Corporation v. Heirs of Jose Marcial K. Ochoa, namely: Ruby B. Ochoa, et al., G.R. No. 170071 & G.R. No. 170125, March 9, 2011

Damages; vicarious liability. Under Article 2180 of the New Civil Code, when an injury is caused by the negligence of the employee, there instantly arises a presumption of law that there was negligence on the part of the master or employer either in the selection of the servant or employee, or in supervision over him after selection or both. The liability of the employer under Article 2180 is direct and immediate; it is not conditioned upon prior recourse against the negligent employee and a prior showing of the insolvency of such employee. Therefore, it is incumbent upon the private respondents (in this case, the petitioner) to prove that they exercised the diligence of a good father of a family in the selection and supervision of their employee. Filipinas Synthetic Fiber Corporation v.  Wilfredo De Los Santos, et al., G.R. No. 152033. March 16, 2011

Land; alienable and disposable character; sufficient evidence. The Advance Plans and Consolidated Plans are hardly the competent pieces of evidence that the law requires.  The notation by a geodetic engineer on the survey plans that properties are alienable and disposable does not suffice to prove these lands’ classification. Republic v. T.A.N. Properties, Inc. directs that:

 [T]he applicant for registration must present a copy of the original classification approved by the DENR Secretary and certified as a true copy by the legal custodian of the official records.  These facts must be established to prove that the land is alienable and disposable.  Respondent failed to do so because the certifications presented by respondent do not, by themselves, prove that the land is alienable and disposable. (emphasis and underscoring supplied)

Union Leaf Tobacco Corp., Rep. its Pres. Mr. Hilarion P. Uy v. Republic of the Philippines, G.R. No. 185683. March 16, 2011

Loan; valid provision on interest rate. The Court has previously upheld as valid the proviso in loans that the interest rate would be made to depend on the prevailing market rate.   Such provision does not signify an automatic increase in the interest.  It simply means that the bank may adjust the interest according to the prevailing market rate.  This may result to either an increase or a decrease in the interest.  Lotto Restaurant Corporation, represented by SUAT KIM GO, v. BPI Family Savings Bank, Inc.; G.R. No. 177260. March 30, 2011

Mortgage; foreclosure.         As to BPI’s right to foreclose, the records show that Lotto defaulted in its obligation when it unjustifiably stopped paying its amortizations after the first year.  Consequently, there is no question that BPI (which succeeded DBS) had a clear right to foreclose on Lotto’s collateral.   The Court held in Equitable PCI Bank, Inc. v. OJ-Mark Trading, Inc. that foreclosure is but a necessary consequence of non-payment of mortgage indebtedness.  The creditor-mortgagee has the right to foreclose the mortgage, sell the property, and apply the proceeds of the sale to the satisfaction of the unpaid loan. Lotto Restaurant Corporation, represented by SUAT KIM GO, v. BPI Family Savings Bank, Inc.; G.R. No. 177260, March 30, 2011

Mortgage; implied trust. An implied trust arising from mortgage contracts is not among the trust relationships the Civil Code enumerates. The Code itself provides, however, that such listing “does not exclude others established by the general law on trust x x x.” Under the general principles on trust, equity converts the holder of property right as trustee for the benefit of another if the circumstances of its acquisition makes the holder ineligible “in x x x good conscience [to] hold and enjoy [it].” As implied trusts are remedies against unjust enrichment, the “only problem of great importance in the field of constructive trusts is whether in the numerous and varying factual situations presented x x x there is a wrongful holding of property and hence, a threatened unjust enrichment of the defendant.”

Applying these principles, this Court recognized unconventional implied trusts in contracts involving the purchase of housing units by officers of tenants’ associations in breach of their obligations, the partitioning of realty contrary to the terms of a compromise agreement, and the execution of a sales contract indicating a buyer distinct from the provider of the purchase money. In all these cases, the formal holders of title were deemed trustees obliged to transfer title to the beneficiaries in whose favor the trusts were deemed created. We see no reason to bar the recognition of the same obligation in a mortgage contract meeting the standards for the creation of an implied trust. Richard Juan v. Gabriel Yap, Sr., G.R. No. 182177. March 30, 2011

Mortgage; pactum commissoriumPactum commissorium is a stipulation empowering the creditor to appropriate the thing given as guaranty for the fulfillment of the obligation in the event the obligor fails to live up to his undertakings, without further formality, such as foreclosure proceedings, and a public sale.  The elements of pactum commissorium, which enable the mortgagee to acquire ownership of the mortgaged property without the need of any foreclosure proceedings, are: (1) there should be a property mortgaged by way of security for the payment of the principal obligation, and (2) there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation within the stipulated period.

The second element is missing to characterize the Deed of Sale as a form of pactum commissorium. Veterans Bank did not, upon the petitioners’ default, automatically acquire or appropriate the mortgaged property for itself.  On the contrary, the Veterans Bank resorted to extrajudicial foreclosure and was issued a Certificate of Sale by the sheriff as proof of its purchase of the subject property during the foreclosure sale.  That Veterans Bank went through all the stages of extrajudicial foreclosure indicates that there was no pactum commissorium. Spouses Fernando and Angelina Edralin v. Philippine Veterans Bank, G.R. No. 168523, March 9, 2011.

Sale; execution of public instrument equivalent to delivery. Article 1498 of the Civil Code provides that when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. In the instant case, petitioners failed to present any evidence to show that they had no intention of delivering the subject lots to respondent when they executed the said deed of sale. Hence, petitioners’ execution of the deed of sale is tantamount to a delivery of the subject lots to respondent. The fact that petitioners remained in possession of the disputed properties does not prove that there was no delivery, because as found by the lower courts, such possession is only by respondent’s mere tolerance. Anita Monasterio-Pe, et al. v. Jose Juan Tong, herein represented by his Attorney-in-fact, Jose Y. Ong, G.R. No. 151369. March 23, 2011

Surety. A contract of suretyship is an agreement whereby a party, called the surety, guarantees the performance by another party, called the principal or obligor, of an obligation or undertaking in favor of another party, called the obligee. The surety agreement is an accessory contract; and the surety becomes directly, primarily, and equally bound with the principal as the original promissor although the former possesses no direct or personal interest over the latter’s obligations and does not receive any benefit therefrom.   Star Two (SPV-AMC), Inc. v. Howard Ko, et al., G.R. No. 185454. March 23, 2011

Special laws

P.D. No. 1529; alterations to titles. Petitioner is seeking relief under the provisions of Section 108 of PD No. 1529, otherwise known as the Property Registration Decree (formerly Section 112 of Act No. 496, otherwise known as the Land Registration Act) which provides as follows:

Section 108. Amendment and alteration of certificates. No erasure, alteration, or amendment shall be made upon the registration book after the entry of a certificate of title or of a memorandum thereon and the attestation of the same by the Register of Deeds, except by order of the proper Court of First Instance. A registered owner or other person having an interest in registered property, or, in proper cases, the Register of Deeds with the approval of the Commissioner of Land Registration, may apply by petition to the court upon the ground that the registered interests of any description, whether vested, contingent, expectant or inchoate appearing on the certificate, have terminated and ceased; or that new interest not appearing upon the certificate have arisen or been created; or that an omission or error was made in entering a certificate or any memorandum thereon, or, on any duplicate certificate; or that the same or any person on the certificate has been changed; or that the registered owner has married, or, if registered as married, that the marriage has been terminated and no right or interests of heirs or creditors will thereby be affected; or that a corporation which owned registered land and has been dissolved has not convened the same within three years after its dissolution; or upon any other reasonable ground; and the court may hear and determine the petition after notice to all parties in interest, and may order the entry or cancellation of a new certificate, the entry or cancellation of a memorandum upon a certificate, or grant any other relief upon such terms and conditions, requiring security or bond if necessary, as it may consider proper; Provided, however, That this section shall not be construed to give the court authority to reopen the judgment or decree of registration, and that nothing shall be done or ordered by the court which shall impair the title or other interest of a purchaser holding a certificate for value and in good faith, or his heirs and assigns, without his or their written consent. Where the owner’s duplicate certificate is not presented, a similar petition may be filed as provided in the preceding section.

All petitions or motions filed under this Section as well as under any other provision of this Decree after original registration shall be filed and entitled in the original case in which the decree or registration was entered.

While the abovequoted section, among other things, authorizes a person in interest to ask the court for any erasure, alteration, or amendment of a certificate of title or of any memorandum appearing therein, the prevailing rule is that proceedings thereunder are summary in nature, contemplating corrections or insertions of mistakes which are only clerical but certainly not controversial issues.Relief under the said legal provision can only be granted if there is unanimity among the parties, or that there is no adverse claim or serious objection on the part of any party in interest.

In the present case, there is no question that there is a serious objection and an adverse claim on the part of an interested party as shown by respondent’s opposition and motion to dismiss the petition for correction of entry filed by petitioner. The absence of unanimity among the parties is also evidenced by respondent’s action for damages and annulment of petitioner’s title over the subject parcel of land docketed as Civil Case No. 414-M-97. In fact, the RTC, in its decision in Civil Case No. 414-M-97, found partial merit in respondent’s action so much so that it ordered the cancellation of the TCT covering the subject property in the name of petitioner. The RTC made a categorical finding that the subject Certificate of Sale was not registered with the Register of Deeds of Bulacan leading to the conclusion that the one-year period within which respondent may exercise his right of redemption shall begin to run only after the said Certificate of Sale has been registered. Thus, petitioner may not avail of the remedy provided for under Section 108 of P.D. No. 1529.

In view of the established fact that the Certificate of Sale covering the subject property was not registered, and considering that there is nothing which prohibits petitioner from registering the said Certificate of Sale, its most logical and expedient recourse then is to register the same with the Register of Deeds of Bulacan. Philippine Veterans Bank v. Ramon Valenzuela, G.R. No. 163530, March 9, 2011.

P.D. No. 1529; requisites of registration of title. Based on these legal parameters, applicants for registration of title under Section 14(1) must sufficiently establish: (1) that the subject land forms part of the disposable and alienable lands of the public domain; (2) that the applicant and his predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of the same; and (3) that it is under a bona fide claim of ownership since June 12, 1945, or earlier. These the respondents must prove by no less than clear, positive and convincing evidence. Republic of the Philippines vs. Juanito Manimtim, et al., G.R. No. 169599, March 16, 2011

P.D. No. 1529; requisites for registration of title. Existing law and jurisprudence provides that an applicant for judicial confirmation of imperfect title must prove compliance with Section 14 of Presidential Decree (P.D.) No. 1529 or the Property Registration Decree.  The pertinent portions of Section 14 provide:

SEC. 14. Who may apply.—The following persons may file in the proper Court of First Instance an application for registration of title to land, whether personally or through their duly authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of ownership since June 12, 1945, or earlier.

(2) Those who have acquired ownership of private lands by prescription under the provisions of existing laws. x x x x

Under Section 14 (1), applicants for registration of title must sufficiently establish first, that the subject land forms part of the disposable and alienable lands of the public domain; second, that the applicant and his predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of the same; and third, that it is under a bona fide claim of ownership since June 12, 1945, or earlier. Republic of the Philippines v. Teodoro P. Rizalvo, Jr., G.R. No. 172011, March 7, 2011.