October 2011 Philippine Supreme Court Decisions on Civil Law

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

Civil Code

Contracts; consequences of breach. Having breached the contract it entered with petitioner, respondent ABB is liable for damages pursuant to Articles 1167, 1170, and 2201 of the Civil Code. Accordingly, a repairman who fails to perform his obligation is liable to pay for the cost of the execution of the obligation plus damages. Though entitled, petitioner in this case is not claiming reimbursement for the repair allegedly done by Newton Contractor, but is instead asking for damages for the delay caused by respondent ABB.

As per Purchase Order Nos. 17136-37, petitioner is entitled to penalties in the amount of P987.25 per day from the time of delay, August 30, 1990, up to the time the Kiln Drive Motor was finally returned to petitioner. Records show that although the testing of Kiln Drive Motor was done on March 13, 1991, the said motor was actually delivered to petitioner as early as January 7, 1991. The installation and testing was done only on March 13, 1991 upon the request of petitioner because the Kiln was under repair at the time the motor was delivered; hence, the load testing had to be postponed.

Under Article 1226 of the Civil Code, the penalty clause takes the place of indemnity for damages and the payment of interests in case of non-compliance with the obligation, unless there is a stipulation to the contrary. In this case, since there is no stipulation to the contrary, the penalty in the amount of P987.25 per day of delay covers all other damages (i.e. production loss, labor cost, and rental of the crane) claimed by petitioner.

Article 1226 of the Civil Code further provides that if the obligor refuses to pay the penalty, such as in the instant case,damages and interests may still be recovered on top of the penalty. Damages claimed must be the natural and probable consequences of the breach, which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted. Thus, in addition to the penalties, petitioner seeks to recover as damages production loss, labor cost and the rental of the crane. The petitioner, however, was not able to prove with reasonable certainty that it indeed incurred production losses during the relevant period. It may not be amiss to say that competent proof and a reasonable degree of certainty are needed to justify a grant of actual or compensatory damages; speculations, conjectures, assertions or guesswork are not sufficient. Besides, consequential damages, such as loss of profits on account of delay or failure of delivery, may be recovered only if such damages were reasonably foreseen or have been brought within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting. Considering the nature of the obligation in the instant case, respondent ABB, at the time it agreed to repair petitioner’s Kiln Drive Motor, could not have reasonably foreseen that it would be made liable for production loss, labor cost and rental of the crane in case it fails to repair the motor or incurs delay in delivering the same, especially since the motor under repair was a spare motor. For the foregoing reasons, petitioner is not entitled to recover production loss, labor cost and the rental of the crane. Continental Cement Corporation vs. Asea Brown Boveri, et al.;G.R. No. 171660. October 17, 2011.

Contracts; public documents; forms. The necessity of a public document for contracts which transmit or extinguish real rights over immovable property, as mandated by Article 1358 of the Civil Code, is only for convenience; it is not essential for validity or enforceability. As notarized documents, Deeds of Absolute Sale carry evidentiary weight conferred upon them with respect to their due execution and enjoy the presumption of regularity which may only be rebutted by evidence so clear, strong and convincing as to exclude all controversy as to falsity. The presumptions that attach to notarized documents can be affirmed only so long as it is beyond dispute that the notarization was regular. A defective notarization will strip the document of its public character and reduce it to a private instrument. Consequently, when there is a defect in the notarization of a document, the clear and convincing evidentiary standard normally attached to a duly-notarized document is dispensed with, and the measure to test the validity of such document is preponderance of evidence. Adelaida Meneses (deceased), substituted by her heir Marilyn M. Carbonel-Garcia vs. Rosario G. Venturozo; G.R. No. 172196. October 19, 2011.

Damages; actual, temperate; moral; exemplary and attorney’s fees. In determining actual damages, onecannot rely on mere assertions, speculations, conjectures or guesswork, but must depend on competent proof and on the best evidence obtainable regarding specific facts that could afford some basis for measuring compensatory or actual damages.

Nevertheless, De Guzman is indeed entitled to temperate damages as provided under Article 2224 of the Civil Code for the loss she suffered. When pecuniary loss has been suffered but the amount cannot, from the nature of the case, be proven with certainty, temperate damages may be recovered. Temperate damages may be allowed in cases where from the nature of the case, definite proof of pecuniary loss cannot be adduced, although the court is convinced that the aggrieved party suffered some pecuniary loss.

As to the CIAC’s award of ₱100,000.00 as moral damages, this Court is one with the CA that De Guzman is not entitled to such an award. The record is bereft of any proof that she actually suffered moral damages. The award of moral damages must be anchored on a clear showing that she actually experienced mental anguish, besmirched reputation, sleepless nights, wounded feelings, or similar injury.

De Guzman cannot be awarded exemplary damages either, in the absence of any evidence showing that the Contractor acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner as provided in Article 2232 of the Civil Code. The ruling in the case of Nakpil and Sons v. Court of Appeals, relied upon by De Guzman, where it was emphasized that the wanton negligence in effecting the plans, designs, specifications, and construction of a building is equivalent to bad faith in the performance of the assigned task, finds no application in the case at bench. As already pointed out, there is negligence on the part of Contractor, but it is neither wanton, fraudulent, reckless, oppressive, nor malevolent.

As regards the award of attorney’s fees, the Court upholds De Guzman’s entitlement to reasonable attorney’s fees, although it recognizes that it is a sound policy not to set a premium on the right to litigate. Emerita M. De Guzman vs. Antonio M. Tumolva;  G.R. No. 188072. October 19, 2011.

Damages; attorney’s fees. One of the issues in this case is whether the CA erred in ruling that Alcatel is not entitled to an award of attorney’s fees.

Although attorney’s fees are not allowed in the absence of stipulation, the court can award the same when the defendant’s act or omission has compelled the plaintiff to incur expenses to protect his interest or where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just, and demandable claim.

Still, the award of attorney’s fees to the winning party lies within the discretion of the court, taking into account the circumstances of each case. This means that such an award should have factual, legal, and equitable basis, not founded on pure speculation and conjecture. Further, the court should state the reason for the award of attorney’s fees in the body of the decision. Its unheralded appearance in the dispositive portion is, as a rule, not allowed.

Here, however, although the RTC did not specifically discuss in the body of its decision its basis for awarding attorney’s fees, its findings of fact clearly support such an award. For instance, the RTC found, based on the record, that Bongar persistently and clearly violated the terms of its contract with Alcatel. It failed to finish the works by October 29, 1991, the stipulated date. It sought on December 1, 1991, more than a month after it was in violation, to finish its job by May 31, 1992, an extra seven months for just a three-month project. Worse, when Alcatel had to take over the job to save its own undertaking to PLDT, Bongar refused to return to Alcatel the uninstalled materials that it provided for the works. Alcatel was forced to litigate to protect its interest.  Alcatel Philippines, Inc. vs. I.M. Bongar & Co., Inc., et al.; G.R. No. 182946. October 5, 2011.

Damages; attorney’s fees. The petitioner is not entitled to the award of attorney’s fees. Jurisprudence requires that the factual basis for the award of attorney’s fees must be set forth in the body of the decision and not in the dispositive portion only. In this case, no explanation was given by the RTC in awarding attorney’s fees in favor of petitioner. In fact, the award of attorney’s fees was mentioned only in the dispositive portion of the decision. Continental Cement Corporation vs. Asea Brown Boveri, et al.; G.R. No. 171660. October 17, 2011.

Lease; rights of a lessee as to improvements. At this juncture, it would not be amiss to reiterate that the rights of a lessee, like petitioners in the present case, are governed by Article 1678 of the Civil Code.

Under Article 1678, the lessor has the option of paying one-half of the value of the improvements that the lessee made in good faith, which are suitable to the use for which the lease is intended, and which have not altered the form and substance of the land. On the other hand, the lessee may remove the improvements should the lessor refuse to reimburse.

It appears, nonetheless, that in her Complaint, private respondent prayed for the demolition of petitioners’ residential house constructed on the subject lot. It is, thus, clear that private respondent does not want to appropriate the improvements. As such, petitioners cannot compel her to reimburse to them one-half of the value of their house. The sole right of petitioners under Article 1678 then is to remove the improvements without causing any more damage upon the property leased than is necessary. Heirs of Antonio Feraren, rep. by Antonio Feraren, Jr. vs. Court of Appeals and Cecilia Tadiar;  G.R. No. 159328. October 5, 2011.

Nuisance; what constitutes it.   The MMDA claims that the portion of the building in question is a nuisance per se. We disagree.

The fact that in 1966 the City Council gave Justice Gancayco an exemption from constructing an arcade is an indication that the wing walls of the building are not nuisances per se. The wing walls do not per se immediately and adversely affect the safety of persons and property. The fact that an ordinance may declare a structure illegal does not necessarily make that structure a nuisance.

Article 694 of the Civil Code defines nuisance as any act, omission, establishment, business, condition or property, or anything else that (1) injures or endangers the health or safety of others; (2) annoys or offends the senses; (3) shocks, defies or disregards decency or morality; (4) obstructs or interferes with the free passage of any public highway or street, or any body of water; or, (5) hinders or impairs the use of property. A nuisance may be per se or per accidens. A nuisance per se is that which affects the immediate safety of persons and property and may summarily be abated under the undefined law of necessity.

Clearly, when Justice Gancayco was given a permit to construct the building, the city council or the city engineer did not consider the building, or its demolished portion, to be a threat to the safety of persons and property. This fact alone should have warned the MMDA against summarily demolishing the structure. Neither does the MMDA have the power to declare a thing a nuisance. Only courts of law have the power to determine whether a thing is a nuisance. Emilio Gancayco vs. Cito Government of Quezon City and Metro Manila Development Authority/Metro Manila Development Authority vs. Justice Emilio A. Gancayco (Retired); G.R. No. 177807/G.R. No. 177933. October 11, 2011.

Subrogation. Subrogation is either “legal” or “conventional.” Legal subrogation is an equitable doctrine and arises by operation of the law, without any agreement to that effect executed between the parties; conventional subrogation rests on a contract, arising where “an agreement is made that the person paying the debt shall be subrogated to the rights and remedies of the original creditor.” The case at bar is an example of legal subrogation, the petitioner and respondent having no express agreement on the right of subrogation. Thus, it is of no moment that the Contracts of Sale did not expressly state that demurrage shall be paid to respondent. By operation of law, respondent has become the real party-in-interest to pursue the payment of demurrage. Republic Flour Mills Corporation vs. Forbes Factors, Inc. etc.; G.R. No. 152313. October 19, 2011.

Trust; action for reconveyance based on trust; prescription. An action for reconveyance can indeed be barred by prescription. In a long line of cases decided by this Court, we ruled that an action for reconveyance based on implied or constructive trust must perforce prescribe in ten years from the issuance of the Torrens title over the property.

However, there is an exception to this rule. In the case of Heirs of Pomposa Saludares v. Court of Appeals, the Court reiterating the ruling in Millena v. Court of Appeals,heldthat there is but one instance when prescription cannot be invoked in an action for reconveyance, that is, when the plaintiff is in possession of the land to be reconveyed. In Heirs of Pomposa Saludares, this Court explained that the Court in a series of cases, has permitted the filing of an action for reconveyance despite the lapse of more than ten years from the issuance of title to the land and declared that said action, when based on fraud, is imprescriptible as long as the land has not passed to an innocent buyer for value. But in all those cases, the common factual backdrop was that the registered owners were never in possession of the disputed property. The exception was based on the theory that registration proceedings could not be used as a shield for fraud or for enriching a person at the expense of another.

In this case, petitioner’s possession was disturbed in 1983 when respondent Jose filed a case for recovery of possession. The RTC of Iloilo City ruled in respondent Jose’s favor but the CA on November 28, 1991, during the pendency of the present controversy with the court a quo, ruled in favor of petitioner. Petitioner never lost possession of the said properties, and as such, she is in a position to file the complaint with the court a quo to protect her rights and clear whatever doubts has been cast on her title by the issuance of TCTs in respondent Jose’s name.

In the case of Sandoval v. Court of Appeals, the Court defined an innocent purchaser for value as one who buys property of another, without notice that some other person has a right to, or interest in, such property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other persons in the property. He is one who buys the property with the belief that the person from whom he receives the thing was the owner and could convey title to the property. A purchaser cannot close his eyes to facts which should put a reasonable man on his guard and still claim that he acted in good faith.

And while it is settled that every person dealing with a property registered under the Torrens title need not inquire further but only has to rely on the title, this rule has an exception. The exception is when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has some knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation. The presence of anything which excites or arouses suspicion should then prompt the vendee to look beyond the certificate and investigate the title of the vendor appearing on the face of said certificate. One who falls within the exception can neither be denominated an innocent purchaser for value nor a purchaser in good faith and hence does not merit the protection of the law.

In this case, when the subject properties were sold to Catalino Torre and subsequently to Doronila, respondent Jose was not in possession of the said properties. Such fact should have put the vendees on guard and should have inquired on the interest of the respondent Jose regarding the subject properties. But regardless of such defect on transfer to third persons, the properties again reverted back to respondent Jose. Respondent Jose cannot claim lack of knowledge of the defects surrounding the cancellation of the OCTs over the properties and benefit from his fraudulent actions. The subsequent sale of the properties to Catalino Torre and Doronila will not cure the nullity of the certificates of title obtained by respondent Jose on the basis of the false and fraudulent Affidavit of Adjudication. Estrella Tiongco Yared, etc. vs. Jose B. Tiongco, et al.; G.R. No. 161360. October 19, 2011.