September 2011 Philippine Supreme Court Decisions on Civil Law

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

Civil Code

Contracts; both parties at fault; rule not applicable to simulated contract.  The Heirs of Policronio contended that even assuming that the contract was simulated, the Heirs of Alfonso would still be barred from recovering the properties by reason of Article 1412 of the Civil Code, which provides that if the act in which the unlawful or forbidden cause does not constitute a criminal offense, and the fault is both on the contracting parties, neither may recover what he has given by virtue of the contract or demand the performance of the other’s undertaking. As the Heirs of Alfonso alleged that the purpose of the sale was to avoid the payment of inheritance taxes, they cannot take from the Heirs of Policronio what had been given to their father.

On this point, the Court again disagrees. Article 1412 of the Civil Code is as follows:

Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:

(1)     When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other’s undertaking;

(2)     When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply with his promise.

Article 1412 is not applicable to fictitious or simulated contracts, because they refer to contracts with an illegal cause or subject-matter. This article presupposes the existence of a cause, it cannot refer to fictitious or simulated contracts which are in reality non-existent. As it has been determined that the Deed of Sale is a simulated contract, the provision cannot apply to it.

Granting that the Deed of Sale was not simulated, the provision would still not apply. Since the subject properties were included as properties of Alfonso in the Deed of Extra-Judicial Partition, they are covered by corresponding inheritance and estate taxes. Therefore, tax evasion, if at all present, would not arise, and Article 1412 would again be inapplicable. Heirs of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al. vs. Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et al./Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et al. vs. Heirs of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al.; G.R. No. 165748/G.R. No. 165930, September 14, 2011.

Contracts; denominated in foreign currency. Such stipulation of payment in dollars is not prohibited by any prevailing law or jurisprudence at the time the loans were taken. In this regard, Article 1249 of the Civil Code provides:

Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.

Although the Civil Code took effect on August 30, 1950, jurisprudence had upheld the continued effectivity of Republic Act No. 529, which took effect earlier on June 16, 1950. Pursuant to Section 1 of Republic Act No. 529, any agreement to pay an obligation in a currency other than the Philippine currency is void; the most that could be demanded is to pay said obligation in Philippine currency to be measured in the prevailing rate of exchange at the time the obligation was incurred. On June 19, 1964, Republic Act No. 4100 took effect, modifying Republic Act No. 529 by providing for several exceptions to the nullity of agreements to pay in foreign currency.

On April 13, 1993, Central Bank Circular No. 1389 was issued, lifting foreign exchange restrictions and liberalizing trade in foreign currency. In cases of foreign borrowings and foreign currency loans, however, prior Bangko Sentral approval was required. On July 5, 1996, Republic Act No. 8183 took effect, expressly repealing Republic Act No. 529 in Section 2 thereof. The same statute also explicitly provided that parties may agree that the obligation or transaction shall be settled in a currency other than Philippine currency at the time of payment.

Although the Credit Line Agreement between the spouses Tiu and Union Bank was entered into on November 21, 1995, when the agreement to pay in foreign currency was still considered void under Republic Act No. 529, the actual loans, as shown in the promissory notes, were taken out from September 22, 1997 to March 26, 1998, during which time Republic Act No. 8183 was already in effect. In United Coconut Planters Bank v. Beluso, we held that:

[O]pening a credit line does not create a credit transaction of loan or mutuum, since the former is merely a preparatory contract to the contract of loan or mutuum. Under such credit line, the bank is merely obliged, for the considerations specified therefor, to lend to the other party amounts not exceeding the limit provided. The credit transaction thus occurred not when the credit line was opened, but rather when the credit line was availed of. x x x.

Having established that Union Bank and the spouses Tiu validly entered into dollar loans, the conclusion of the Court of Appeals that there were no dollar loans to novate into peso loans must necessarily fail. Union Bank of the Philippines vs. Spouses Rodolfo T. Tiu and Victoria N. Tiu; G.R. Nos. 173090-91. September 7, 2011.

Contracts; issue is lack of consideration and gross inadequacy is not relevant. It is well-settled in a long line of cases that where a deed of sale states that the purchase price has been paid but in fact has never been paid, the deed of sale is null and void for lack of consideration. Thus, although the contract states that the purchase price of ₱2,000.00 was paid by Policronio to Alfonso for the subject properties, it has been proven that such was never in fact paid as there was no money involved. It must, therefore, follow that the Deed of Sale is void for lack of consideration. Given that the Deed of Sale is void, it is unnecessary to discuss the issue on the inadequacy of consideration. Heirs of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al. vs. Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et al./Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et al. vs. Heirs of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al.; G.R. No. 165748/G.R. No. 165930, September 14, 2011.

Contracts; partition not a conveyance of real property; no need for special power of attorney. This Court finds that Article 1878 (5) and (15) is inapplicable to the case at bench. It has been held in several cases that partition among heirs is not legally deemed a conveyance of real property resulting in change of ownership. It is not a transfer of property from one to the other, but rather, it is a confirmation or ratification of title or right of property that an heir is renouncing in favor of another heir who accepts and receives the inheritance. It is merely a designation and segregation of that part which belongs to each heir. The Deed of Extra-Judicial Partition cannot, therefore, be considered as an act of strict dominion. Hence, a special power of attorney is not necessary.

In fact, as between the parties, even an oral partition by the heirs is valid if no creditors are affected. The requirement of a written memorandum under the statute of frauds does not apply to partitions effected by the heirs where no creditors are involved considering that such transaction is not a conveyance of property resulting in change of ownership but merely a designation and segregation of that part which belongs to each heir. Heirs of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al. vs. Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et al./Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et al. vs. Heirs of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al.; G.R. No. 165748/G.R. No. 165930, September 14, 2011.

Contracts; simulation; lack of consent because of a lack of intention to be bound; contract is therefore void. Where a person, in order to place his property beyond the reach of his creditors, simulates a transfer of it to another, he does not really intend to divest himself of his title and control of the property; hence, the deed of transfer is but a sham. Similarly, in this case, Alfonso simulated a transfer to Policronio purely for taxation purposes, without intending to transfer ownership over the subject lands.

The most protuberant index of simulation of contract is the complete absence of an attempt in any manner on the part of the ostensible buyer to assert rights of ownership over the subject properties. Policronio’s failure to take exclusive possession of the subject properties or, in the alternative, to collect rentals, is contrary to the principle of ownership. Such failure is a clear badge of simulation that renders the whole transaction void.Heirs of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al. vs. Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et al./Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et al. vs. Heirs of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al.; G.R. No. 165748/G.R. No. 165930, September 14, 2011.

Damages; attorney’s fees. Article 2208 of the Civil Code enumerates the legal grounds which justify or warrant the grant of attorney’s fees and expenses of litigation, among which is when the defendant’s act or omission has compelled the plaintiff to incur expenses to protect his interest. The reason for the award of attorney’s fees and litigation expenses, however, must be set forth in the decision of the court and not in the dispositive portion only. In this case, the factual and legal bases for the award were set forth in the body of the MTCC Decision dated June 2, 2003, to wit:

x x x As the defendant refused to satisfy plaintiff’s just and valid claim, the latter was compelled to litigate and engage the services of counsel to protect his interest and in the process, incurred litigation expenses.

The award of attorney’s fees in the amount of P5,000.00 is also reasonable and not excessive considering that this case, a simple collection of a measly sum of P7,000.00, has dragged for almost a decade and even had to reach this Court only because petitioner refused to pay. The fact that it is 70% of the principal amount claimed is of no moment as the amount of attorney’s fees is discretionary upon the court as long as it is reasonable. Elena Jane Duarte vs. Miguel Samuel A.E. Duran; G.R. No. 173038. September 14, 2011.

Damages; moral and exemplary. Although PCIB’s act of freezing and debiting Ramos’ account is unlawful, we cannot hold PCIB liable for moral and exemplary damages. Since a contractual relationship existed between Ramos and PCIB as the depositor and the depositary bank, respectively, the award of moral damages depends on the applicability of Article 2220 of the Civil Code, which provides:

Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. [emphasis ours]

Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious commission of a wrong; it partakes of the nature of fraud.

As the facts of this case bear out, PCIB did not act out of malice or bad faith when it froze Ramos’ bank account and subsequently debited the amount of P251,910.96 therefrom. While PCIB may have acted hastily and without regard to its primary duty to treat the accounts of its depositors with meticulous care and utmost fidelity, we find that its actions were propelled more by the need to protect itself, and not out of malevolence or ill will. One may err, but error alone is not a ground for granting moral damages.

We also disallow the award of exemplary damages. Article 2234 of the Civil Code requires a party to first prove that he is entitled to moral, temperate or compensatory damages before he can be awarded exemplary damages. Since no reason exists to award moral damages, so too can there be no reason to award exemplary damages. Philippine Commercial Bank vs. Antonio B. Balmaceda and Rolando N. Ramos; G.R. No. 158143, September 21, 2011.

Human relations; unjust enrichment. To have a cause of action based on unjust enrichment, we explained in University of the Philippines v. Philab Industries, Inc. that:

Unjust enrichment claims do not lie simply because one party benefits from the efforts or obligations of others, but instead it must be shown that a party was unjustly enriched in the sense that the term unjustly could mean illegally or unlawfully.

Moreover, to substantiate a claim for unjust enrichment, the claimant must unequivocally prove that another party knowingly received something of value to which he was not entitled and that the state of affairs are such that it would be unjust for the person to keep the benefit. Unjust enrichment is a term used to depict result or effect of failure to make remuneration of or for property or benefits received under circumstances that give rise to legal or equitable obligation to account for them; to be entitled to remuneration, one must confer benefit by mistake, fraud, coercion, or request. Unjust enrichment is not itself a theory of reconvey. Rather, it is a prerequisite for the enforcement of the doctrine of restitution. (emphasis ours)

Ramos cannot be held liable to PCIB on account of unjust enrichment simply because he received payments out of money secured by fraud from PCIB. To hold Ramos accountable, it is necessary to prove that he received the money from Balmaceda, knowing that he (Ramos) was not entitled to it. PCIB must also prove that Ramos, at the time that he received the money from Balmaceda, knew that the money was acquired through fraud. Knowledge of the fraud is the link between Ramos and PCIB that would obligate Ramos to return the money based on the principle of unjust enrichment.

However, as the evidence on record indicates, Ramos accepted the deposits that Balmaceda made directly into his bank account, believing that these deposits were payments for the fighting cocks that Balmaceda had purchased. Significantly, PCIB has not presented any evidence proving that Ramos participated in, or that he even knew of, the fraudulent sources of Balmaceda’s funds. Philippine Commercial Bank vs. Antonio B. Balmaceda and Rolando N. Ramos; G.R. No. 158143, September 21, 2011.

Marriage; annulment; psychological incapacity. Psychological incapacity is the downright incapacity or inability to take cognizance of and to assume the basic marital obligations. The burden of proving psychological incapacity is on the plaintiff. The plaintiff must prove that the incapacitated party, based on his or her actions or behavior, suffers a serious psychological disorder that completely disables him or her from understanding and discharging the essential obligations of the marital state. The psychological problem must be grave, must have existed at the time of marriage, and must be incurable.

In the case at bar, petitioner failed to prove that his wife (respondent) suffers from psychological incapacity. He presented the testimonies of two supposed expert witnesses who concluded that respondent is psychologically incapacitated, but the conclusions of these witnesses were premised on the alleged acts or behavior of respondent which had not been sufficiently proven. Petitioner’s experts heavily relied on petitioner’s allegations of respondent’s constant mahjong sessions, visits to the beauty parlor, going out with friends, adultery, and neglect of their children. Petitioner’s experts opined that respondent’s alleged habits, when performed constantly to the detriment of quality and quantity of time devoted to her duties as mother and wife, constitute a psychological incapacity in the form of NPD.

But petitioner’s allegations, which served as the bases or underlying premises of the conclusions of his experts, were not actually proven. In fact, respondent presented contrary evidence refuting these allegations of the petitioner.

What transpired between the parties is acrimony and, perhaps, infidelity, which may have constrained them from dedicating the best of themselves to each other and to their children. There may be grounds for legal separation, but certainly not psychological incapacity that voids a marriage. Valerio E. Kalaw vs. Ma. Elena Fernandez; G.R. No. 166357. September 19, 2011.

Marriage; property relations; conjugal partnership of gains. It is clear that conjugal partnership of gains established before and after the effectivity of the Family Code are governed by the rules found in Chapter 4 (Conjugal Partnership of Gains) of Title IV (Property Relations Between Husband And Wife) of the Family Code. Hence, any disposition of the conjugal property after the dissolution of the conjugal partnership must be made only after the liquidation; otherwise, the disposition is void.

Before applying such rules, however, the conjugal partnership of gains must be subsisting at the time of the effectivity of the Family Code. There being no dispute that Protacio, Sr. and Marta were married prior to the effectivity of the Family Code on August 3, 1988, their property relation was properly characterized as one of conjugal partnership governed by the Civil Code. Upon Marta’s death in 1987, the conjugal partnership was dissolved, pursuant to Article 175 (1) of the Civil Code, and an implied ordinary co-ownership ensued among Protacio, Sr. and the other heirs of Marta with respect to her share in the assets of the conjugal partnership pending a liquidation following its liquidation. The ensuing implied ordinary co-ownership was governed by Article 493 of the Civil Code, to wit:

Article 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership. (399)

Protacio, Sr., although becoming a co-owner with his children in respect of Marta’s share in the conjugal partnership, could not yet assert or claim title to any specific portion of Marta’s share without an actual partition of the property being first done either by agreement or by judicial decree. Until then, all that he had was an ideal or abstract quota in Marta’s share. Nonetheless, a co-owner could sell his undivided share; hence, Protacio, Sr. had the right to freely sell and dispose of his undivided interest, but not the interest of his co-owners. Consequently, the sale by Protacio, Sr. and Rito as co-owners without the consent of the other co-owners was not necessarily void, for the rights of the selling co-owners were thereby effectively transferred, making the buyer (Servacio) a co-owner of Marta’s share. This result conforms to the well-established principle that the binding force of a contract must be recognized as far as it is legally possible to do so (quando res non valet ut ago, valeat quantum valere potest).

Article 105 of the Family Code, supra, expressly provides that the applicability of the rules on dissolution of the conjugal partnership is “without prejudice to vested rights already acquired in accordance with the Civil Code or other laws.” This provision gives another reason not to declare the sale as entirely void. Indeed, such a declaration prejudices the rights of Servacio who had already acquired the shares of Protacio, Sr. and Rito in the property subject of the sale. Heirs of Protacio Go and Marta Barola, namely: Leonor Go, et al. vs.Ester L. Servacio and Rito B. Go; G.R. No. 157537. September 7, 2011.

Partnership; joint venture.  Generally understood to mean an organization formed for some temporary purpose, a joint venture is likened to a particular partnership or one which “has for its object determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession or vocation.” The rule is settled that joint ventures are governed by the law on partnerships which are, in turn, based on mutual agency or delectus personae. Insofar as a partner’s conveyance of the entirety of his interest in the partnership is concerned, Article 1813 of the Civil Code provides as follows:

Art. 1813. A conveyance by a partner of his whole interest in the partnership does not itself dissolve the partnership, or, as against the other partners in the absence of agreement, entitle the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership business or affairs, or to require any information or account of partnership transactions, or to inspect the partnership books; but it merely entitles the assignee to receive in accordance with his contracts the profits to which the assigning partners would otherwise be entitled. However, in case of fraud in the management of the partnership, the assignee may avail himself of the usual remedies.

In the case of a dissolution of the partnership, the assignee is entitled to receive his assignor’s interest and may require an account from the date only of the last account agreed to by all the partners.

From the foregoing provision, it is evident that “(t)he transfer by a partner of his partnership interest does not make the assignee of such interest a partner of the firm, nor entitle the assignee to interfere in the management of the partnership business or to receive anything except the assignee’s profits. The assignment does not purport to transfer an interest in the partnership, but only a future contingent right to a portion of the ultimate residue as the assignor may become entitled to receive by virtue of his proportionate interest in the capital.” Since a partner’s interest in the partnership includes his share in the profits, we find that the CA committed no reversible error in ruling that the Spouses Jaso are entitled to Biondo’s share in the profits, despite Juanita’s lack of consent to the assignment of said Frenchman’s interest in the joint venture. Although Eden did not, moreover, become a partner as a consequence of the assignment and/or acquire the right to require an accounting of the partnership business, the CA correctly granted her prayer for dissolution of the joint venture conformably with the right granted to the purchaser of a partner’s interest under Article 1831 of the Civil Code. Josefina P. Realubit vs. Prosencio D. Jaso and Eden G. Jaso; G.R. No. 178782, September 21, 2011.

Prescription.  As the Deed of Sale is a void contract, the action for the declaration of its nullity, even if filed 21 years after its execution, cannot be barred by prescription for it is imprescriptible. Furthermore, the right to set up the defense of inexistence or absolute nullity cannot be waived or renounced. Therefore, the Heirs of Alfonso cannot be precluded from setting up the defense of its inexistence. Heirs of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al. vs. Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et al./Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et al. vs. Heirs of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al.; G.R. No. 165748/G.R. No. 165930, September 14, 2011.

Property; builder in good faith. Article 448 of the Civil Code contemplates a person building, or sowing, or planting in good faith on land owned by another. The law presupposes that the land and the building or plants are owned by different persons, like here. The RTC and CA found and declared Angeles to be a builder in good faith. We cannot veer away from their unanimous conclusion, which can easily be drawn from the fact that Angeles insists until now that he built his house entirely on his own lot. Good faith consists in the belief of the builder that the land he is building on is his and in his ignorance of a defect or flaw in his title.

With the unassailable finding that Angeles’ house straddled the lot of Pascual, and that Angeles had built his house in good faith, Article 448 of the Civil Code, which spells out the rights and obligations of the owner of the land as well as of the builder, is unquestionably applicable. Consequently, the land being the principal and the building the accessory, preference is given to Pascual as the owner of the land to make the choice as between appropriating the building or obliging Angeles as the builder to pay the value of the land. Contrary to the insistence of Angeles, therefore, no inconsistency exists between the finding of good faith in his favor and the grant of the reliefs set forth in Article 448 of the Civil Code. Pedro Angeles, represented by Adelina T. Angeles, attorney-in-fact vs. Estelita B. Pascual, et al.; G.R. No. 157150. September 21, 2011.

Property; principle of accretion; public dominion lands. As for the issue of the ownership of Sapang Bayan, we sustain the appellate court insofar as it ruled that petitioners failed to substantiate their ownership over said area. However, we find that the Court of Appeals erred in ruling that the principle of accretion is applicable. The said principle is embodied in Article 457 of the Civil Code which states that “[t]o the owners of lands adjoining the banks of rivers belong the accretion which they gradually receive from the effects of the current of the waters.” We have held that for Article 457 to apply the following requisites must concur: (1) that the deposit be gradual and imperceptible; (2) that it be made through the effects of the current of the water; and (3) that the land where accretion takes place is adjacent to the banks of rivers. The character of the Sapang Bayan property was not shown to be of the nature that is being referred to in the provision which is an accretion known as alluvion as no evidence had been presented to support this assertion.

In fact from the transcripts of the proceedings, the parties could not agree how Sapang Bayan came about. Whether it was a gradual deposit received from the river current or a dried-up creek bed connected to the main river could not be ascertained.

Even assuming that Sapang Bayan was a dried-up creek bed, under Article 420, paragraph 1 and Article 502, paragraph 1 of the Civil Code, rivers and their natural beds are property of public dominion. In the absence of any provision of law vesting ownership of the dried-up river bed in some other person, it must continue to belong to the State. Jose Fernando, Jr. et al. vs. Leon Acuña, et al.;G.R. No. 161030. September 14, 2011.

Quasi-delict; standard of due diligence of a disabled person. Standard of conduct is the level of expected conduct that is required by the nature of the obligation and corresponding to the circumstances of the person, time and place. The most common standard of conduct is that of a good father of a family or that of a reasonably prudent person. To determine the diligence which must be required of all persons, we use as basis the abstract average standard corresponding to a normal orderly person.

However, one who is physically disabled is required to use the same degree of care that a reasonably careful person who has the same physical disability would use. Physical handicaps and infirmities, such as blindness or deafness, are treated as part of the circumstances under which a reasonable person must act. Thus, the standard of conduct for a blind person becomes that of a reasonable person who is blind.

We note that Francisco, despite being blind, had been managing and operating the Caltex station for 15 years and this was not a hindrance for him to transact business until this time. In this instance, however, we rule that Francisco failed to exercise the standard of conduct expected of a reasonable person who is blind. First, Francisco merely relied on the identification card of Bacsa to determine if he was authorized by CBCI. Francisco did not do any other background check on the identity and authority of Bacsa. Second, Francisco already expressed his misgivings about the diesel fuel, fearing that they might be stolen property, yet he did not verify with CBCI the authority of Bacsa to sell the diesel fuel. Third, Francisco relied on the receipts issued by Bacsa which were typewritten on a half sheet of plain bond paper.  If Francisco exercised reasonable diligence, he should have asked for an official receipt issued by CBCI. Fourth, the delivery to Francisco, as indicated in Petron’s invoice, does not show that CBCI authorized Bacsa to sell the diesel fuel to Francisco. Clearly, Francisco failed to exercise the standard of conduct expected of a reasonable person who is blind.  Antonio Francisco, substituted by his heirs, Nelia E.S. Francisco, et al. vs.Chemical Bulk Carriers, Inc.; G.R. No. 193577. September 7, 2011.

Sale; right of redemption. There is a requirement of notice under Art. 1623 of the New Civil Code. Nothing in the records and pleadings submitted by the parties shows that there was a written notice sent to the respondents. Without a written notice, the period of thirty days within which the right of legal pre-emption may be exercised, does not start. Armando Barcellano vs. Dolores Bañas, represented by her son and Attorney-in-fact Crispino Bermillo; G.R. No. 165287. September 14, 2011.

Sale; right to transfer title; right to recover; exception under estoppel principle. The general principle is that a seller without title cannot transfer a better title than he has. Only the owner of the goods or one authorized by the owner to sell can transfer title to the buyer. Therefore, a person can sell only what he owns or is authorized to sell and the buyer can, as a consequence, acquire no more than what the seller can legally transfer.

Moreover, the owner of the goods who has been unlawfully deprived of it may recover it even from a purchaser in good faith. Thus, the purchaser of property which has been stolen from the owner has been held to acquire no title to it even though he purchased for value and in good faith.

The exception from the general principle is the doctrine of estoppel where the owner of the goods is precluded from denying the seller’s authority to sell.  But in order that there may be estoppel, the owner must, by word or conduct, have caused or allowed it to appear that title or authority to sell is with the seller and the buyer must have been misled to his damage.

In this case, it is clear that Bacsa was not the owner of the diesel fuel. Francisco was aware of this but he claimed that Bacsa was authorized by CBCI to sell the diesel fuel. However, Francisco’s claim that Bacsa was authorized is not supported by any evidence except his self-serving testimony. First, Francisco did not even confirm with CBCI if it was indeed selling its diesel fuel since it is not one of the oil companies known in the market to be selling petroleum products. This fact alone should have put Francisco on guard. Second, it does not appear that CBCI, by some direct and equivocal act, has clothed Bacsa with the indicia of ownership or apparent authority to sell CBCI’s diesel fuel. Francisco did not state if the identification card presented by Bacsa indicated that he was CBCI’s agent or a mere employee. Third, the receipt issued by Bacsa was typewritten on a half sheet of plain bond paper. There was no letterhead or any indication that it came from CBCI. We agree with the Court of Appeals that this was a personal receipt issued by Bacsa and not an official receipt issued by CBCI. Consequently, CBCI is not precluded by its conduct from denying Bacsa’s authority to sell. CBCI did not hold out Bacsa or allow Bacsa to appear as the owner or one with apparent authority to dispose of the diesel fuel.

Clearly, Bacsa cannot transfer title to Francisco as Bacsa was not the owner of the diesel fuel nor was he authorized by CBCI to sell its diesel fuel. CBCI did not commit any act to clothe Bacsa with apparent authority to sell the diesel fuel that would have misled Francisco. Francisco, therefore, did not acquire any title over the diesel fuel. Since CBCI was unlawfully deprived of its property, it may recover from Francisco, even if Francisco pleads good faith. Antonio Francisco, substituted by his heirs, Nelia E.S. Francisco, et al. vs.Chemical Bulk Carriers, Inc.; G.R. No. 193577. September 7, 2011.

Succession. The Heirs of Policronio argued that even assuming that the Heirs of Alfonso have an interest in the Deed of Sale, they would still be precluded from questioning its validity. They posited that the Heirs of Alfonso must first prove that the sale of Alfonso’s properties to Policronio substantially diminished their successional rights or that their legitimes would be unduly prejudiced, considering that under Article 842 of the Civil Code, one who has compulsory heirs may dispose of his estate provided that he does not contravene the provisions of the Civil Code with regard to the legitime of said heirs. Having failed to do so, they argued that the Heirs of Alfonso should be precluded from questioning the validity of the Deed of Sale.

The Court disagrees. Article 842 of the Civil Code provides:

Art. 842. One who has no compulsory heirs may dispose by will of all his estate or any part of it in favor of any person having capacity to succeed.

One who has compulsory heirs may dispose of his estate provided he does not contravene the provisions of this Code with regard to the legitime of said heirs.

This article refers to the principle of freedom of disposition by will. What is involved in the case at bench is not a disposition by will but by Deed of Sale. Hence, the Heirs of Alfonso need not first prove that the disposition substantially diminished their successional rights or unduly prejudiced their legitimes. Heirs of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al. vs. Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et al./Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et al. vs. Heirs of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al.; G.R. No. 165748/G.R. No. 165930, September 14, 2011.

Succession; preterition. Preterition under Article 854 of the Civil Code is as follows:

Art. 854. The preterition or omission of one, some, or all of the compulsory heirs in the direct line, whether living at the time of the execution of the will or born after the death of the testator, shall annul the institution of heir; but the devises and legacies shall be valid insofar as they are not inofficious.

If the omitted compulsory heirs should die before the testator, the institution shall be effectual, without prejudice to the right of representation.

Preterition has been defined as the total omission of a compulsory heir from the inheritance. It consists in the silence of the testator with regard to a compulsory heir, omitting him in the testament, either by not mentioning him at all, or by not giving him anything in the hereditary property but without expressly disinheriting him, even if he is mentioned in the will in the latter case. Preterition is thus a concept of testamentary succession and requires a will. In the case at bench, there is no will involved. Therefore, preterition cannot apply. Heirs of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al. vs. Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et al./Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et al. vs. Heirs of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al.; G.R. No. 165748/G.R. No. 165930, September 14, 2011.

Special Laws

P.D. No. 1529; action to recover registered lands cab be barred because of laches. Section 47 of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, states that “[n]o title to registered land in derogation of the title of the registered owner shall be acquired by prescription or adverse possession.” Thus, the Court has held that the right to recover possession of registered land is imprescriptible because possession is a mere consequence of ownership.

However, in Heirs of Anacleto B. Nieto v. Municipality of Meycauayan, Bulacan, the Court had recognized the jurisprudential thread regarding the exception to the foregoing doctrine that while it is true that a Torrens title is indefeasible and imprescriptible, the registered landowner may lose his right to recover possession of his registered property by reason of laches.

Thus, in Heirs of Batiog Lacamen v. Heirs of Laruan, the Court had held that while a person may not acquire title to the registered property through continuous adverse possession, in derogation of the title of the original registered owner, the heir of the latter, however, may lose his right to recover back the possession of such property and the title thereto, by reason of laches.

In the more recent case of Bartola M. Vda. De Tirona v. Encarnacion, we similarly held that while jurisprudence is settled on the imprescriptibility and indefeasibility of a Torrens title, there is equally an abundance of cases where we unequivocally ruled that registered owners may lose their right to recover possession of property through the equitable principle of laches.

Laches means the failure or neglect for an unreasonable and unexplained length of time to do that which, by observance of due diligence, could or should have been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting the presumption that the party entitled to assert his right either has abandoned or declined to assert it. Laches thus operates as a bar in equity. The essential elements of laches are: (a) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation complained of; (b) delay in asserting complainant’s rights after he had knowledge of defendant’s acts and after he has had the opportunity to sue; (c) lack of knowledge or notice by defendant that the complainant will assert the right on which he bases his suit; and (d) injury or prejudice to the defendant in the event the relief is accorded to the complainant.

In view of respondents’ decades long possession and/or ownership of their respective lots by virtue of a court judgment and the erstwhile registered owners’ inaction and neglect for an unreasonable and unexplained length of time in pursuing the recovery of the land, assuming they retained any right to recover the same, it is clear that respondents’ possession may no longer be disturbed. The right of the registered owners as well as their successors-in-interest to recover possession of the property is already a stale demand and, thus, is barred by laches. Jose Fernando, Jr. et al. vs. Leon Acuña, et al.; G.R. No. 161030. September 14, 2011,

P.D. No. 1529; sale of unregistered lands not binding on third parties. The general rule in dealing with registered land is set forth in Section 51 of P.D. No. 1529:

Section 51. Conveyance and other dealings by registered owner. – An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or other voluntary instrument, except a will purporting to convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Register of Deeds to make registration.

The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or city where the land lies. [emphases ours]

From the standpoint of third parties, a property registered under the Torrens system remains, for all legal purposes, the property of the person in whose name it is registered, notwithstanding the execution of any deed of conveyance, unless the corresponding deed is registered. Simply put, if a sale is not registered, it is binding only between the seller and the buyer, but it does not affect innocent third persons.

Undoubtedly, Veronica’s claim on the properties is rooted in the unregistered Deed of Absolute Sale between Regina and her parents. The Bulaongs do not appear to have had any knowledge that this sale ever took place. To recall, Regina gave the Bulaongs the owner’s duplicate certificates of the properties, which showed that the properties were registered in the names of her parents, Fortunato and Bertha Limpo. It thus appears that the Bulaongs first learned about the sale between Regina and her parents when they received the newly issued titles in Regina’s name which contained the annotation of the levy in Veronica’s favor.

One of the principal features of the Torrens system of registration is that all encumbrances on the land shall be shown, or at least intimated upon the certificate of title and a person dealing with the owner of the registered land is not bound to go behind the certificate and inquire into transactions, the existence of which is not there intimated. Since the Bulaongs had no knowledge of the unregistered sale between Regina and her parents, the Bulaongs can neither be bound by it, nor can they be prejudiced by its consequences. This is but the logical corollary to the rule set forth in Section 51 of P.D. No. 1529, in keeping with the basic legal maxim that what cannot be done directly cannot be done indirectly. Spouses Anselmo and Priscilla Bulaong vs. Veronica Gonzales; G.R. No. 156318. September 5, 2011.

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