April 2012 Philippine Supreme Court Decisions on Civil Law

Here are select April 2012 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Compensation/set-off; requisites. The applicable provisions of law are Articles 1278, 1279 and 1290 of the Civil Code of the Philippines:

Art. 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.

Art. 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

Art. 1290. When all the requisites mentioned in Article 1279 are present, compensation takes effect by operation of law, and extinguishes both debts to the concurrent amount, even though the creditors and debtors are not aware of the compensation.

Based on the foregoing, in order for compensation to be valid, the five requisites mentioned in the above-quoted Article 1279 should be present, as in the case at bench. Insular Investment and Trust Corporation vs. Capital One Equities Corp. and Planters Development Bank; G.R. No. 183308, April 25, 2012

Contracts; double sales; possession; actual and physical delivery. A double sale calls for the application of the rules in Article 1544 of the Civil Code, to wit:

If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.

Jurisprudence has interpreted possession in Article 1544 of the Civil Code to mean both actual physical delivery and constructive delivery. Actual delivery of a thing sold occurs when it is placed under the control and possession of the vendee. Delivery of a thing sold may also be made constructively. Article 1498 of the Civil Code states 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. The Roman Catholic Church vs. Pante; G.R. No. 174118, April 11, 2012.

Contracts; mistake; voidable contract. For mistake as to the qualification of one of the parties to vitiate consent, two requisites must concur:

1.       the mistake must be either with regard to the identity or with regard to the qualification of one of the contracting parties; and

2.       the identity or qualification must have been the principal consideration for the celebration of the contract.

The Roman Catholic Church vs. Pante; G.R. No. 174118, April 11, 2012.

Damages; interest in case of breach of contract; interest rate. Interest may be imposed even in the absence of stipulation in the contract because Article 2210 of the Civil Code expressly provides that “[i]nterest may, in the discretion of the court, be allowed upon damages awarded for breach of contract.”

Anent the interest rate, the general rule is that the applicable rate of interest “shall be computed in accordance with the stipulation of the parties.” Absent any stipulation, the applicable rate of interest shall be 12% per annum “when the obligation arises out of a loan or a forbearance of money, goods or credits. In other cases, it shall be six percent (6%).” In this case, the parties did not stipulate as to the applicable rate of interest.

The contract involved in this case is admittedly not a loan but a Conditional Deed of Sale. However, the contract provides that the seller must return the payment made by the buyer if the conditions are not fulfilled. There is no question that they have in fact, not been fulfilled as the seller has admitted this. Notwithstanding demand by the buyer, the seller has failed to return the money and should be considered in default from the time that demand was made.

Even if the transaction involved a Conditional Deed of Sale, can the stipulation governing the return of the money be considered as a forbearance of money which required payment of interest at the rate of 12%. Forbearance is a contractual obligation of lender or creditor to refrain during a given period of time, from requiring the borrower or debtor to repay a loan or debt then due and payable. ‘Forbearance of money, goods or credits’  refers to arrangements other than loan agreements, where a person acquiesces to the temporary use of his money, goods or credits pending happening of certain events or fulfillment of certain conditions. Hermojina Estores vs. Spouses Arturo and Laura Supangan: G.R. No. 175139,  April 18, 2012.

Damages; liquidated damages. Article 2226 of the Civil Code allows the parties to a contract to stipulate on liquidated damages to be paid in case of breach. It is attached to an obligation in order to insure performance and has a double function: (1) to provide for liquidated damages, and (2) to strengthen the coercive force of the obligation by the threat of greater responsibility in the event of breach. As a general rule, contracts constitute the law between the parties, and they are bound by its stipulations. For as long as they are not contrary to law, morals, good customs, public order, or public policy, the contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient. Philippine Charter Insurance Corporation vs. Petroleum Distributors & Service Corporation; G.R. No. 180898. April 18, 2012.

Damages; negligence; proximate cause. PNB’s act of releasing the proceeds of the check prior to the lapse of the 15-day clearing period was the proximate cause of the loss. Here, while PNB highlights Ofelia’s fault in accommodating a stranger’s check and depositing it to the bank, it remains mum in its release of the proceeds thereof without exhausting the 15-day clearing period, an act which contravened established banking rules and practice. It is worthy of notice that the 15-day clearing period alluded to is construed as 15 banking days. It bears stressing that “the diligence required of banks is more than that of a Roman pater familias or a good father of a family. The highest degree of diligence is expected.” PNB miserably failed to do its duty of exercising extraordinary diligence and reasonable business prudence. The disregard of its own banking policy amounts to gross negligence, which the law defines as “negligence characterized by the want of even slight care, acting or omitting to act in a situation where there is duty to act, not inadvertently but wilfully and intentionally with a conscious indifference to consequences in so far as other persons may be affected.” With regard to collection or encashment of checks, suffice it to say that the law imposes on the collecting bank the duty to scrutinize diligently the checks deposited with it for the purpose of determining their genuineness and regularity. “The collecting bank, being primarily engaged in banking, holds itself out to the public as the expert on this field, and the law thus holds it to a high standard of conduct.” A bank is expected to be an expert in banking procedures and it has the necessary means to ascertain whether a check, local or foreign, is sufficiently funded. Philippine National Bank vs. Spouses Cheah Chee Chong and Ofelia Camacho Cheah/Spouses Cheah Chee Chong and Ofelia Camacho Chea vs. Philippine National Bank; G.R. Nos. 170865/G.R. No. 170892, April 25, 2012.

Damages; requisites. License to operate a cockpit is a mere privilege, and even if he was able to get a business permit from the mayor, this did not give him a license to operate a cockpit. Without any legal right to operate a cockpit in the municipality, petitioner is not entitled to damages. Injury alone does not give petitioner the right to recover damages; he must also have a right of action for the legal wrong inflicted by the respondents. We need not belabor that “in order that the law will give redress for an act causing damage, there must be damnum et injuria – that act must be not only hurtful, but wrongful.” Danilo A. Du vs. Venancio R. Jayoma, et al.; G.R. No. 175042, April 23, 2012.

Damages; res ipsa loquitur; elements; liability of employer. Under the doctrine of res ipsa loquitur, “[w]here the thing that caused the injury complained of is shown to be under the management of the defendant or his servants; and the accident, in the ordinary course of things, would not happen if those who had management or control used proper care, it affords reasonable evidence – in the absence of a sufficient, reasonable and logical explanation by defendant – that the accident arose from or was caused by the defendant’s want of care.” Res ipsa loquitur is “merely evidentiary, a mode of proof, or a mere procedural convenience, since it furnishes a substitute for, and relieves a plaintiff of, the burden of producing a specific proof of negligence.” It “recognizes that parties may establish prima facie negligence without direct proof, thus, it allows the principle to substitute for specific proof of negligence. It permits the plaintiff to present along with proof of the accident, enough of the attending circumstances to invoke the doctrine, create an inference or presumption of negligence and thereby place on the defendant the burden of proving that there was no negligence on his part.” The doctrine is based partly on “the theory that the defendant in charge of the instrumentality which causes the injury either knows the cause of the accident or has the best opportunity of ascertaining it while the plaintiff has no such knowledge, and is therefore compelled to allege negligence in general terms.”

The requisites of the doctrine of res ipsa loquitur as established by jurisprudence are as follows:

1) the accident is of a kind which does not ordinarily occur unless someone is negligent;

2) the cause of the injury was under the exclusive control of the person in charge and

3) the injury suffered must not have been due to any voluntary action or contribution on the part of the person injured.

The aforementioned requisites having been met, there now arises a presumption of negligence which he could have overcome by evidence that he exercised due care and diligence in preventing strangers from using his jeep. Unfortunately, he failed to do so.

The operator on record of a vehicle is primarily responsible to third persons for the deaths or injuries consequent to its operation, regardless of whether the employee drove the registered owner’s vehicle in connection with his employment. Absent the circumstance of unauthorized use48 or that the subject vehicle was stolen which are valid defenses available to a registered owner, he cannot escape liability for quasi-delict resulting from his jeep’s use. Oscar Del Carmen, Jr. vs. Geronimo Bacoy, guradian and representing the children, namely, Mary Marjorie B. Monsalud, et al.; G.R. No. 173870, April 25, 2012.

Property; acquisition by prescription; confirmation of incomplete or imperfect titles; requirements. There must be an express declaration by the State that the public dominion property is no longer intended for public service or the development of the national wealth or that the property has been converted into patrimonial. Without such express declaration, the property, even if classified as alienable or disposable, remains property of the public dominion, pursuant to Article 420(2), and thus incapable of acquisition by prescription. It is only when such alienable and disposable lands are expressly declared by the State to be no longer intended for public service or for the development of the national wealth that the period of acquisitive prescription can begin to run. Such declaration shall be in the form of a law duly enacted by Congress or a Presidential Proclamation in cases where the President is duly authorized by law.

For one to invoke the provisions of Section 14(2) and set up acquisitive prescription against the State, it is primordial that the status of the property as patrimonial be first established. Furthermore, the period of possession preceding the classification of the property as patrimonial cannot be considered in determining the completion of the prescriptive period.

Adverse, continuous, open, public possession in the concept of an owner is a conclusion of law and the burden to prove it by clear, positive and convincing evidence is on the applicant. A claim of ownership will not proper on the basis of tax declarations if unaccompanied by proof of actual possession.

The counting of the thirty (30)-year prescriptive period for purposes of acquiring ownership of a public land under Section 14(2) can only start from the issuance of DARCO Conversion Order. Before the property was declared patrimonial by virtue of such conversion order, it cannot be acquired by prescription. Jean Tan, et al. vs. Republic of the Philippines; G.R. No. 193443, April 16, 2012.

Sale; rescission for breach of obligation to deliver; constructive delivery, execution of public instrument. A party is entitled to demand for the rescission of their contract for the failure to deliver the physical possession of the subject property and the certificate of title covering the same notwithstanding the absence of stipulations in the agreement expressly indicating the consequences of such omission, pursuant to Article 1191 of the NCC, which states that “the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.”

Article 1498 of the NCC generally considers the execution of a public instrument as constructive delivery by the seller to the buyer of the property subject of a contract of sale. The case at bar, however, falls among the exceptions to the foregoing rule since a mere presumptive and not conclusive delivery is created as the respondent failed to take material possession of the subject property.

There is symbolic delivery of the property subject of the sale by the execution of the public instrument, unless from the express terms of the instrument, or by clear inference therefrom, this was not the intention of the parties. Such would be the case, for instance, where the vendor has no control over the thing sold at the moment of the sale, and, therefore, its material delivery could not have been made.

As a general rule, the execution of a public instrument amounts to a constructive delivery of the thing subject of a contract of sale. However, exceptions exist, among which is when mere presumptive and not conclusive delivery is created in cases where the buyer fails to take material possession of the subject of sale. A person who does not have actual possession of the thing sold cannot transfer constructive possession by the execution and delivery of a public instrument. Villamar vs. Mangaoil; G.R. No. 188661, April 11, 2012.

Surety; novation. 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. Although the contract of a surety is secondary only to a valid principal obligation, the surety becomes liable for the debt or duty of another although it possesses no direct or personal interest over the obligations nor does it receive any benefit therefrom. The surety’s obligation is not an original and direct one for the performance of his own act, but merely accessory or collateral to the obligation contracted by the principal. Nevertheless, although the contract of a surety is in essence secondary only to a valid principal obligation, his liability to the creditor or promisee of the principal is said to be direct, primary and absolute; in other words, he is directly and equally bound with the principal.

A surety is released from its obligation when there is a material alteration of the principal contract in connection with which the bond is given, such as a change which imposes a new obligation on the promising party, or which takes away some obligation already imposed, or one which changes the legal effect of the original contract and not merely its form. In this case, however, no new contract was concluded and perfected as only the revision of the work schedule originally agreed upon was the subject thereof. There was no new contract/agreement which could be considered to have substituted the Building Contract. Philippine Charter Insurance Corporation vs. Petroleum Distributors & Service Corporation; G.R. No. 180898. April 18, 2012.

Will, extrinsic validity. The state of being forgetful does not necessarily make a person mentally unsound so as to render him unfit to execute a Will. Forgetfulness is not equivalent to being of unsound mind. Besides, Article 799 of the New Civil Code states: “To be of sound mind, it is not necessary that the testator be in full possession of all his reasoning faculties, or that his mind be wholly unbroken, unimpaired, or unshattered by disease, injury or other cause”. It shall be sufficient if the testator was able at the time of making the will to know the nature of the estate to be disposed of, the proper objects of his bounty, and the character of the testamentary act. Bare allegations of duress or influence of fear or threats, undue and improper influence and pressure, fraud and trickery cannot be used as basis to deny the probate of a will. Baltazar, et. al. vs. Laxa; G.R. No. 174489, April 11, 2012.

Special Laws

Torrens System; registration; action for reconveyance; acquisitive prescription. Registration of a piece of land under the Torrens System does not create or vest title, because it is not a mode of acquiring ownership. A certificate of title is merely an evidence of ownership or title over the particular property described therein. Thus, notwithstanding the indefeasibility of the Torrens title, the registered owner may still be compelled to reconvey the registered property to its true owners.

In an action for reconveyance, the decree of registration is respected as incontrovertible. What is sought instead is the transfer of the property or its title which has been wrongfully or erroneously registered in another person’s name, to its rightful or legal owner, or to the one with a better right. An action for annulment of title or reconveyance based on fraud is imprescriptible where the plaintiff is in possession of the property subject of the acts.

Acquisitive prescription is a mode of acquiring ownership by a possessor through the requisite lapse of time. In order to ripen into ownership, possession must be in the concept of an owner, public, peaceful and uninterrupted. Possession is open when it is patent, visible, apparent, notorious and not clandestine. It is continuous when uninterrupted, unbroken and not intermittent or occasional; exclusive when the adverse possessor can show exclusive dominion over the land and an appropriation of it to his own use and benefit; and notorious when it is so conspicuous that it is generally known and talked of by the public or the people in the neighborhood. The party who asserts ownership by adverse possession must prove the presence of the essential elements of acquisitive prescription.

For civil interruption to take place, the possessor must have received judicial summons. Heirs of Tanyag vs. Gabriel, et. al.; G.R. No. 175763, April 11, 2012.

Free patent; prohibition against alienation. Section 118 of CA 141 requires that before the five year prohibition applies, there should be an alienation or encumbrance of the land acquired under free patent or homestead.

In real property law, alienation is defined as the transfer of the property and possession of lands, tenements, or other things from one person to another. It is the “act by which the title to real estate is voluntarily resigned by one person to another and accepted by the latter, in the forms prescribed by law.” In this case, Comia did not transfer, convey or cede the property; but rather, he relinquished, renounced and “quitclaimed” the property considering that the property already belonged to the spouses. The voluntary renunciation by Comia of that portion was not an act of alienation, but an act of correcting the inclusion of the property in his free patent.

In support of the fact that the alienation transpired prior to the grant of a free patent, it is remarkable that Comia never contested that the spouses had been in actual possession of the subject portion even before his patent application. The private ownership of land – as when there is a prima facie proof of ownership like a duly registered possessory information or a clear showing of open, continuous, exclusive, and notorious possession – is not affected by the issuance of a free patent over the same land. Jose Abelgas, Jr., et al. vs. Servilliano Comia, et al.; G.R. No. 163125,  April 18, 2012.

Emancipation patents; cancellation; land titles; tax declarations; mere tax declarations not conclusive evidence of ownership or possession. Under DAR Administrative Order No. 02, Series of 1994, emancipation patents may be cancelled by the PARAD or the DARAB for violations of agrarian laws, rules and regulations. The same administrative order further states that “administrative corrections may include non-identification of spouse, correction of civil status, corrections of technical descriptions and other matters related to agrarian reform;” and that the DARAB’s decision “may include cancellation of registered EP/CLOA, reimbursement of lease rental as amortization to ARBs, reallocation of the land to qualified beneficiary, perpetual disqualification to become an ARB, and other ancillary matters related to the cancellation of the EP or CLOA.” However, the DAR’s issuance of an Emancipation Patent and the corresponding OCT covering the contested lot carries with it a presumption of regularity. The Petition to correct/cancel Pablo’s Emancipation Patent can prosper only if petitioners are able to present substantial evidence that a portion of their lot was erroneously covered by the patent. Substantial evidence refers to such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.

Well settled is the rule that tax declarations and receipts are not conclusive evidence of ownership or of the right to possess land when not supported by any other evidence. The fact that the disputed property may have been declared for taxation purposes in the names of the applicants for registration or of their predecessors-in-interest does not necessarily prove ownership. They are merely indicia of a claim of ownership. Sps. Magno v. Heirs of Parulan; G.R. No. 183916, April 25, 2012.

(Rose thanks Ma. Luisa D. Manalaysay for assisting in the preparation of this post.)