April 2013 Philippine Supreme Court Decisions on Civil Law

Here are select April 2013 rulings of the Supreme Court of the Philippines on civil law:

Contract; Rescission; effect. Rescission entails a mutual restitution of benefits received. An injured party who has chosen rescission is also entitled to the payment of damages. Sandoval Shipyards, Inc. v. Philippine Merchant Marine Academy (PMMA); G.R. No. 188633. April 10, 2013

Obligation; Extinguishment of obligations; consignation; when tender of payment not necessary; judicial in character; difference between consignation and tender of payment. Under Article 1256 of the Civil Code, the debtor shall be released from responsibility by the consignation of the thing or sum due, without need of prior tender of payment, when the creditor is absent or unknown, or when he is incapacitated to receive the payment at the time it is due, or when two or more persons claim the same right to collect, or when the title to the obligation has been lost.

Consignation is necessarily judicial. Article 1258 of the Civil Code specifically provides that consignation shall be made by depositing the thing or things due at the disposal of judicial authority. The said provision clearly precludes consignation in venues other than the courts.

Elsewhere, what may be made is a valid tender of payment, but not consignation. The two, however, are to be distinguished.

Tender of payment must be distinguished from consignation. Tender is the antecedent of consignation, that is, an act preparatory to the consignation, which is the principal, and from which are derived the immediate consequences which the debtor desires or seeks to obtain. Tender of payment may be extrajudicial, while consignation is necessarily judicial, and the priority of the first is the attempt to make a private settlement before proceeding to the solemnities of consignation. (8 Manresa 325).  

Sps. Cacayorin v. Armed Forces and Police Mutual Benefit Association, Inc.; G.R. No. 171298. April 15, 2013

Property; Ejectment; only issue is who is entitled to physical possession; forcible entry; prior physical possession is vital; judgment conclusive between the parties and their successors-in-interest; effects if prevailing party is a usufructuary; usufruct; death of usufructuary extinguishes usufruct. Ejectment cases – forcible entry and unlawful detainer – are summary proceedings designed to provide expeditious means to protect actual possession or the right to possession of the property involved. The only question that the courts resolve in ejectment proceedings is: who is entitled to the physical possession of the premises, that is, to the possession de facto and not to the possession de jure. It does not even matter if a party’s title to the property is questionable. Thus, “an ejectment case will not necessarily be decided in favor of one who has presented proof of ownership of the subject property.”

Indeed, possession in ejectment cases “means nothing more than actual physical possession, not legal possession in the sense contemplated in civil law.” In a forcible entry case, “prior physical possession is the primary consideration[.]” “A party who can prove prior possession can recover such possession even against the owner himself. Whatever may be the character of his possession, if he has in his favor prior possession in time, he has the security that entitles him to remain on the property until a person with a better right lawfully ejects him.” “[T]he party in peaceable, quiet possession shall not be thrown out by a strong hand, violence, or terror.”

The judgment in an ejectment case is conclusive between the parties and their successors-in interest by title subsequent to the commencement of the action; hence, it is enforceable by or against the heirs of the deceased. This judgment entitles the winning party to: (a) the restitution of the premises, (b) the sum justly due as arrears of rent or as reasonable compensation for the use and occupation of the premises, and (c) attorney’s fees and costs.

[T]he right to the usufruct is now rendered moot by the death of Wilfredo since death extinguishes a usufruct under Article 603(1) of the Civil Code. This development deprives the heirs of the usufructuary the right to retain or to reacquire possession of the property even if the ejectment judgment directs its restitution.

Thus, what actually survives under the circumstances is the award of damages, by way of compensation. Rivera-Calingasan v. Rivera; G.R. No. 171555. April 17, 2013

Property; Public property; public plaza forms part of the public dominion; cannot be the object of appropriation, lease, any other contractual undertaking; void contracts.  [Public plaza is for] public use and thereby, forming part of the public dominion. Accordingly, it cannot be the object of appropriation either by the State or by private persons. Nor can it be the subject of lease or any other contractual undertaking. In Villanueva v. Castañeda, Jr., citing Espiritu v. Municipal Council of Pozorrubio, the Court pronounced that:

x x x Town plazas are properties of public dominion, to be devoted to public use and to be made available to the public in general. They are outside the commerce of man and cannot be disposed of or even leased by the municipality to private parties.

In this relation, Article 1409(1) of the Civil Code provides that a contract whose purpose is contrary to law, morals, good customs, public order or public policy is considered void and as such, creates no rights or obligations or any juridical relations. Land Bank of the Philippines v. Cacayurin; G.R. No. 191667. April 17, 2013

Special Laws

Foreclosure of Mortgage pursuant to P.D. No. 385; when its purpose is served; when hearing is necessary before issuance of writ of possession; foreclosure of mortgage under Section 33, Rule 39 of the Rules on Civil Procedure; when issuance of writ of possession is not ministerial. While the Supreme Court had already declared in Philippine National Bank v. Adil that once the property of a debtor is foreclosed and sold to a GFI, it would be mandatory for the court to place the GFI in the possession and control of the property—pursuant to Section 4 of P.D. No. 385 (Requiring Government Financial Institutions to Foreclose Mandatorily All Loans with Arrearages, Including Interest and Charges Amounting to at Least Twenty (20%) of the Total Outstanding Obligation) — this rule should not be construed as absolute or without exception.

The evident purpose underlying P.D. 385 is sufficiently served by allowing foreclosure proceedings initiated by GFIs to continue until a judgment therein becomes final and executory, without a restraining order, temporary or permanent injunction against it being issued. But if a parcel of land is occupied by a party other than the judgment debtor, the proper procedure is for the court to order a hearing to determine the nature of said adverse possession before it issues a writ of possession. This is because a third party, who is not privy to the debtor, is protected by the law. Such third party may be ejected from the premises only after he has been given an opportunity to be heard, to comply with the time honored principle of due process.

In the same vein, under Section 33 of Rule 39 of the Rules on Civil Procedure, the possession of a mortgaged property may be awarded to a purchaser in the extrajudicial foreclosure, unless a third party is actually holding the property adversely vis-à-vis the judgment debtor.

[T]he obligation of a court to issue a writ of possession in favor of the purchaser in an extrajudicial foreclosure sale ceases to be ministerial, once it appears that there is a third party who is in possession of the property and is claiming a right adverse to that of the debtor/mortgagor. We explained in Philippine National Bank v. Austria that the foregoing doctrinal pronouncements are not without support in substantive law, to wit:

x x x. Notably, the Civil Code protects the actual possessor of a property, to wit:

Art. 433. Actual possession under claim of ownership raises a disputable presumption of ownership. The true owner must resort to judicial process for the recovery of the property.

Under the aforequoted provision, one who claims to be the owner of a property possessed by another must bring the appropriate judicial action for its physical recovery. The term “judicial process” could mean no less than an ejectment suit or reivindicatory action, in which the ownership claims of the contending parties may be properly heard and adjudicated.

Royal Savings Bank v. Asia, et al.; G.R. No. 183658. April 10, 2013

Family Code; Declaration of Presumptive Death; judgment is immediately final and executory; proper remedy is a special civil action for certiorari filed in the Court of Appeals; decision of Court of Appeals reviewable by the Supreme Court via certiorari under Rule 45. [It is improper to avail of] an ordinary appeal as a vehicle for questioning a trial court’s decision in a summary proceeding for the declaration of presumptive death under Article 41 of the Family Code.

As explained in Republic v. Tango, the remedy of a losing party in a summary proceeding is not an ordinary appeal, but a petition for certiorari, to wit:

By express provision of law, the judgment of the court in a summary proceeding shall be immediately final and executory. As a matter of course, it follows that no appeal can be had of the trial court’s judgment in a summary proceeding for the declaration of presumptive death of an absent spouse under Article 41 of the Family Code. It goes without saying, however, that an aggrieved party may file a petition for certiorari to question abuse of discretion amounting to lack of jurisdiction. Such petition should be filed in the Court of Appeals in accordance with the Doctrine of Hierarchy of Courts. To be sure, even if the Court’s original jurisdiction to issue a writ of certiorari is concurrent with the RTCs and the Court of Appeals in certain cases, such concurrence does not sanction an unrestricted freedom of choice of court forum. From the decision of the Court of Appeals, the losing party may then file a petition for review on certiorari under Rule 45 of the Rules of Court with the Supreme Court. This is because the errors which the court may commit in the exercise of jurisdiction are merely errors of judgment which are the proper subject of an appeal.

When the OSG filed its notice of appeal under Rule 42, it availed itself of the wrong remedy. As a result, the running of the period for filing of a Petition for Certiorari continued to run and was not tolled. Upon lapse of that period, the Decision of the RTC could no longer be questioned. Republic of the Philippines v. Narceda; G.R. No. 182760. April 10, 2013

The Subdivision and Condominium Buyers’ Protective Decree; contract to sell; validity is not affected by lack of certificate of registration of subdivision developer and failure to register the contract before the Register of Deeds; Maceda Law. In Spouses Co Chien v. Sta. Lucia Realty and Development Corporation, Inc. this Court has already ruled that the lack of a certificate of registration and a license to sell on the part of a subdivision developer does not result to the nullification or invalidation of the contract to sell it entered into with a buyer. The contract to sell remains valid and subsisting. In said case, the Court upheld the validity of the contract to sell notwithstanding violations by the developer of the provisions of PD 957. We held that nothing in PD 957 provides for the nullity of a contract validly entered into in cases of violation of any of its provisions such as the lack of a license to sell.

Moreover, Flora claims that the contract she entered into with Moldex is void because of the latter’s failure to register the contract to sell/document of conveyance with the Register of Deeds, in violation of Section 1730 of PD 957. However, just like in Section 5 which did not penalize the lack of a license to sell with the nullification of the contract, Section 17 similarly did not mention that the developer’s or Moldex’s failure to register the contract to sell or deed of conveyance with the Register of Deeds resulted to the nullification or invalidity of the said contract or deed… [T]hus, non-registration of an instrument of conveyance will not affect the validity of a contract to sell. It will remain valid and effective between the parties thereto as under PD 1529 or The Property Registration Decree, registration merely serves as a constructive notice to the whole world to bind third parties.

Under the Maceda Law, the defaulting buyer who has paid at least two years of installments has the right of either to avail of the grace period to pay or, the cash surrender value of the payments made:

Section 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act Numbered Thirty-eight Hundred Forty-four, as amended by Republic Act Numbered Sixty-three Hundred Eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any.

(b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made, and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of  the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation of the total number of installment payments made.

Moldex Realty, Inc. v. Saberon; G.R. No. 176289. April 8, 2013

(Rose thanks Earla, Frances and Rory for assisting in the preparation of this post.)

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