January 2014 Philippine Supreme Court Decisions on Civil Law

Here are select January 2014 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Bad faith cannot be presumed; it is a question of fact that must be proven by clear and convincing evidence. It is worth stressing at this point that bad faith cannot be presumed. “It is a question of fact that must be proven” by clear and convincing evidence. “[T]he burden of proving bad faith rests on the one alleging it.” Sadly, spouses Vilbar failed to adduce the necessary evidence. Thus, this Court finds no error on the part of the CA when it did not find bad faith on the part of Gorospe, Sr. Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R. No. 176043. January 15, 2014.

Banks; exercise the highest degree of diligence, as well as to observe the high standards of integrity and performance in all its transactions because its business was imbued with public interest. Being a banking institution, DBP owed it to Guariña Corporation to exercise the highest degree of diligence, as well as to observe the high standards of integrity and performance in all its transactions because its business was imbued with public interest. The high standards were also necessary to ensure public confidence in the banking system, for, according to Philippine National Bank v. Pike: “The stability of banks largely depends on the confidence of the people in the honesty and efficiency of banks.” Development Bank of the Philippines (DBP) v. Guariña Agricultural and Realty Development Corporation, G.R. No. 160758. January 15, 2014

Common carrier; cargoes while being unloaded generally remain under the custody of the carrier. It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier. As hereinbefore found by the RTC and affirmed by the CA based on the evidence presented, the goods were damaged even before they were turned over to ATI. Such damage was even compounded by the negligent acts of petitioner and ATI which both mishandled the goods during the discharging operations. Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp., and Mitsui Sumitomo Insurance Co., Ltd.,G.R. No. 193986, January 15, 2014.

Common carrier; extraordinary diligence.Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods transported by them. Subject to certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them. Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they exercised extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such high level of diligence. Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp., and Mitsui Sumitomo Insurance Co., Ltd.,G.R. No. 193986, January 15, 2014.

Contracts; breach of contract; petitioner is guilty of breach of contract when it unjustifiably refused to release respondents’ deposit despite demand; liable for damages. In cases of breach of contract, moral damages may be recovered only if the defendant acted fraudulently or in bad faith, or is “guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations.”

In this case, a review of the circumstances surrounding the issuance of the “Hold Out” order reveals that petitioner issued the “Hold Out” order in bad faith. First of all, the order was issued without any legal basis. Second, petitioner did not inform respondents of the reason for the “Hold Out.” Third, the order was issued prior to the filing of the criminal complaint. Records show that the “Hold Out” order was issued on July 31, 2003, while the criminal complaint was filed only on September 3, 2003. All these taken together lead us to conclude that petitioner acted in bad faith when it breached its contract with respondents. As we see it then, respondents are entitled to moral damages. Metropolitan Bank & Trust Company v. Ana Grace Rosales and Yo Yuk To, G.R. No. 183204, January 13, 2014.

Contracts; buyer in good faith. It is settled that a party dealing with a registered land does not have to inquire beyond the Certificate of Title in determining the true owner thereof, and in guarding or protecting his interest, for all that he has to look into and rely on are the entries in the Certificate of Title.

Inarguably, Opinion acted in good faith in dealing with the registered owners of the properties. He relied on the titles presented to him, which were confirmed by the Registry of Deeds to be authentic, issued in accordance with the law, and without any liens or encumbrances. Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R. No. 176043. January 15, 2014.

Contracts; Doctrine of in pari delicto; exception. According to Article 1412 (1) of the Civil Code, the guilty parties to an illegal contract cannot recover from one another and are not entitled to an affirmative relief because they are in pari delicto or in equal fault. The doctrine of in pari delicto is a universal doctrine that holds that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation; and where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other.

Nonetheless, the application of the doctrine of in pari delicto is not always rigid. An accepted exception arises when its application contravenes well-established public policy. In this jurisdiction, public policy has been defined as “that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to the public or against the public good.” Domingo Gonzalo v. John Tarnate, Jr., G.R. No. 160600, January 15, 2014.

Contracts; Hold-out clause; applies only if there is a valid and existing obligation arising from any of the sources of obligation enumerated in Article 1157. Considering that respondent Rosales is not liable under any of the five sources of obligation, there was no legal basis for petitioner to issue the “Hold Out” order.

The “Hold Out” clause applies only if there is a valid and existing obligation arising from any of the sources of obligation enumerated in Article 1157 of the Civil Code, to wit: law, contracts, quasi-contracts, delict, and quasi-delict. In this case, petitioner failed to show that respondents have an obligation to it under any law, contract, quasi-contract, delict, or quasi-delict. And although a criminal case was filed by petitioner against respondent Rosales, this is not enough reason for petitioner to issue a “Hold Out” order as the case is still pending and no final judgment of conviction has been rendered against respondent Rosales. In fact, it is significant to note that at the time petitioner issued the “Hold Out” order, the criminal complaint had not yet been filed. Thus, considering that respondent Rosales is not liable under any of the five sources of obligation, there was no legal basis for petitioner to issue the “Hold Out” order. Metropolitan Bank & Trust Company v. Ana Grace Rosales and Yo Yuk To, G.R. No. 183204, January 13, 2014.

Contracts; Mortgage; nature of mortgage. It is true that loans are often secured by a mortgage constituted on real or personal property to protect the creditor’s interest in case of the default of the debtor. By its nature, however, a mortgage remains an accessory contract dependent on the principal obligation, such that enforcement of the mortgage contract will depend on whether or not there has been a violation of the principal obligation. While a creditor and a debtor could regulate the order in which they should comply with their reciprocal obligations, it is presupposed that in a loan the lender should perform its obligation – the release of the full loan amount – before it could demand that the borrower repay the loaned amount. Development Bank of the Philippines (DBP) v. Guariña Agricultural and Realty Development Corporation, G.R. No. 160758. January 15, 2014.

Contracts; mortgagee in good faith. Assuming arguendo that the Gorospes’ titles to the subject properties happened to be fraudulent, public policy considers Opinion to still have acquired legal title as a mortgagee in good faith. As held in Cavite Development Bank v. Spouses Lim:

There is, however, a situation where, despite the fact that the mortgagor is not the owner of the mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public policy. This is the doctrine of ‘the mortgagee in good faith’ based on the rule that all persons dealing with property covered by a Torrens Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title. The public interest in upholding the indefeasibility of a certificate of title, as evidence of the lawful ownership of the land or of any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied upon what appears on the face of the certificate of title.

Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R. No. 176043. January 15, 2014.

Sales; proof capacity of seller; difference when there is a special power of attorney and when there is none.The strength of the buyer’s inquiry on the seller’s capacity or legal authority to sell depends on the proof of capacity of the seller. If the proof of capacity consists of a special power of attorney duly notarized, mere inspection of the face of such public document already constitutes sufficient inquiry. If no such special power of attorney is provided or there is one but there appears to be flaws in its notarial acknowledgment, mere inspection of the document will not do; the buyer must show that his investigation went beyond the document and into the circumstances of its execution. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.

Contracts; Principle of quantum merit; when allowed. Case law instructs that under this principle (quantum meruit), a contractor is allowed to recover the reasonable value of the thing or services rendered despite the lack of a written contract, in order to avoid unjust enrichment. Quantum meruit means that, in an action for work and labor, payment shall be made in such amount as the plaintiff reasonably deserves. The measure of recovery should relate to the reasonable value of the services performed because the principle aims to prevent undue enrichment based on the equitable postulate that it is unjust for a person to retain any benefit without paying for it. Rivelisa Realty, Inc., represented by Ricardo P. Venturina v. First Sta. Clara Builders Corporation, represented by Ramon A. Pangilinan, as President, G.R. No. 189618. January 15, 2014.

Contracts; rescission; proper when there is non-performance of obligation. Article 1191. 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. The injured party may choose between the fulfillment and the rescission of the obligation, with payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. Fil-Estate Properties, Inc. and Fil-Estate Network, Inc. v. Spouses Conrado and Maria Victoria Ronquillo, G.R. No. 185798, January 13, 2014.

Contracts; void contract; effects. Under Article 1409 (1) of the Civil Code, a contract whose cause, object or purpose is contrary to law is a void or inexistent contract. As such, a void contract cannot produce a valid one. To the same effect is Article 1422 of the Civil Code, which declares that “a contract, which is the direct result of a previous illegal contract, is also void and inexistent.” Domingo Gonzalo v. John Tarnate, Jr., G.R. No. 160600, January 15, 2014.

Damages; moral damages; when awarded.[S]uffice it to say that the dispute over the subject property had caused respondent serious anxiety, mental anguish and sleepless nights, thereby justifying the aforesaid award. Likewise, since respondent was constrained to engage the services of counsel to file this suit and defend his interests, the awards of attorney’s fees and litigation expenses are also sustained. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.

Damages; moral damages; when awarded. Every person is entitled to the physical integrity of his body. Although we have long advocated the view that any physical injury, like the loss or diminution of the use of any part of one’s body, is not equatable to a pecuniary loss, and is not susceptible of exact monetary estimation, civil damages should be assessed once that integrity has been violated. The assessment is but an imperfect estimation of the true value of one’s body. The usual practice is to award moral damages for the physical injuries sustained. Dr. Encarnacion C. Lumantas v. Hanz Calapiz, represented by his parents, Hilario Calapiz, Jr. and Helita Calapiz, G.R. No. 163753. January 15, 2014.

Foreclosure; premature foreclosure; order of restoration of possession and payment of reasonable rentals. Having found and pronounced that the extrajudicial foreclosure by DBP was premature, and that the ensuing foreclosure sale was void and ineffectual, the Court affirms the order for the restoration of possession to Guarifia Corporation and the payment of reasonable rentals for the use of the resort. The CA properly held that the premature and invalid foreclosure had unjustly dispossessed Guarifia Corporation of its properties. Consequently, the restoration of possession and the payment of reasonable rentals were in accordance with Article 561 of the Civil Code, which expressly states that one who recovers, according to law, possession unjustly lost shall be deemed for all purposes which may redound to his benefit to have enjoyed it without interruption. Development Bank of the Philippines (DBP) v. Guariña Agricultural and Realty Development Corporation, G.R. No. 160758. January 15, 2014.

Foreclosure; purchaser in foreclosure sale may take possession of the property even before the expiration of the redemption period. A writ of possession is a writ of execution employed to enforce a judgment to recover the possession of land. It commands the sheriff to enter the land and give possession of it to the person entitled under the judgment. It may be issued in case of an extrajudicial foreclosure of a real estate mortgage under Section 7 of Act No. 3135, as amended by Act No. 4118.

Under said provision, the writ of possession may be issued to the purchaser in a foreclosure sale either within the one-year redemption period upon the filing of a bond, or after the lapse of the redemption period, without need of a bond.

We have consistently held that the duty of the trial court to grant a writ of possession is ministerial. Such writ issues as a matter of course upon the filing of the proper motion and the approval of the corresponding bond. No discretion is left to the trial court. Any question regarding the regularity and validity of the sale, as well as the consequent cancellation of the writ, is to be determined in a subsequent proceeding as outlined in Section 8 of Act No. 3135. Such question cannot be raised to oppose the issuance of the writ, since the proceeding is ex parte. The recourse is available even before the expiration of the redemption period provided by law and the Rules of Court. LZK Holdings and Development Corporation v. Planters Development Bank, G.R. No. 187973, January 20, 2014.

Interest; legal interest; interest rate pegged at 6% regardless of the source of obligation. The resulting modification of the award of legal interest is, also, in line with our recent ruling in Nacar v. Gallery Frames, embodying the amendment introduced by the Bangko Sentral ng Pilipinas Monetary Board in BSP-MB Circular No. 799 which pegged the interest rate at 6% regardless of the source of obligation. Fil-Estate Properties, Inc. and Fil-Estate Network, Inc. v. Spouses Conrado and Maria Victoria Ronquillo, G.R. No. 185798, January 13, 2014.

Interest; legal interest; proper rate. In Eastern Shipping, it was observed that the commencement of when the legal interest should start to run varies depending on the factual circumstances obtaining in each case. As a rule of thumb, it was suggested that “where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained).”

During the pendency of this case, however, the Monetary Board issued Resolution No. 796 dated May 16, 2013, stating that in the absence of express stipulation between the parties, the rate of interest in loan or forbearance of any money, goods or credits and the rate allowed in judgments shall be 6% per annum. Said Resolution is embodied in Bangko Sentral ng Pilipinas Circular No. 799, Series of2013, which took effect on July 1, 2013. Hence, the 12% annual interest mentioned above shall apply only up to June 30, 2013. Thereafter, or starting July 1, 2013, the applicable rate of interest for both the debited amount and undocumented withdrawals shall be 6% per annum compounded annually, until fully paid. Land Bank of the Philippines v. Emmanuel C. Oñate, G.R. No. 192371, January 15, 2014.

Interest; legal interest; rate. The legal interest rate to be imposed from February 11, 1993, the time of the extrajudicial demand by respondent, should be 6% per annum in the absence of any stipulation in writing in accordance with Article 2209 of the Civil Code, which provides:

Article 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum. First United Constructors Corporation, et al. v. Bayanihan Automotive Corporation, G.R. No. 164985, January 15, 2014.

Interest; legal interest; when awarded. Many years have gone by since Hanz suffered the injury. Interest of 6% per annum should then be imposed on the award as a sincere means of adjusting the value of the award to a level that is not only reasonable but just and commensurate. Unless we make the adjustment in the permissible manner by prescribing legal interest on the award, his sufferings would be unduly compounded. For that purpose, the reckoning of interest should be from the filing of the criminal information on April 1 7, 1997, the making of the judicial demand for the liability of the petitioner. Dr. Encarnacion C. Lumantas v. Hanz Calapiz, represented by his parents, Hilario Calapiz, Jr. and Helita Calapiz, G.R. No. 163753. January 15, 2014.

Obligations; default; borrower would not be in default without demand to pay. Considering that it had yet to release the entire proceeds of the loan, DBP could not yet make an effective demand for payment upon Guariña Corporation to perform its obligation under the loan. According to Development Bank of the Philippines v. Licuanan, it would only be when a demand to pay had been made and was subsequently refused that a borrower could be considered in default, and the lender could obtain the right to collect the debt or to foreclose the mortgage. Development Bank of the Philippines (DBP) v. Guariña Agricultural and Realty Development Corporation, G.R. No. 160758. January 15, 2014.

Obligations; extinguishment of obligations; compensation; requisites. Compensation is defined as a mode of extinguishing obligations whereby two persons in their capacity as principals are mutual debtors and creditors of each other with respect to equally liquidated and demandable obligations to which no retention or controversy has been timely commenced and communicated by third parties.53 The requisites therefor are provided under Article 1279 of the Civil Code which reads as follows:

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.

The rule on legal compensation is stated in Article 1290 of the Civil Code which provides that “[w]hen 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.” Union Bank of the Philippines v. Development Bank of the Philippines, G.R. No. 191555, January 20, 2014.

Obligations; legal compensation; requisites. Legal compensation takes place when the requirements set forth in Article 1278 and Article 1279 of the Civil Code are present, to wit:

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

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

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

(2) That both debts consists 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.

First United Constructors Corporation, et al. v. Bayanihan Automotive Corporation, G.R. No. 164985, January 15, 2014.

Property; builder in good faith; concept of. To be deemed a builder in good faith, it is essential that a person asserts title to the land on which he builds, i.e. , that he be a possessor in concept of owner, and that he be unaware that there exists in his title or mode of acquisition any flaw which invalidates it. Good faith is an intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, among other things, an honest belief, the absence of malice and the absence of design to defraud or to seek an unconscionable advantage. It implies honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.

Property; ownership; accession; accessory follows the principal; exception. While it is a hornbook doctrine that the accessory follows the principal, that is, the ownership of the property gives the right by accession to everything which is produced thereby, or which is incorporated or attached thereto, either naturally or artificially, such rule is not without exception. In cases where there is a clear and convincing evidence to prove that the principal and the accessory are not owned by one and the same person or entity, the presumption shall not be applied and the actual ownership shall be upheld. In a number of cases, we recognized the separate ownership of the land from the building and brushed aside the rule that accessory follows the principal. Magdalena T. Villasi v. Filomena Garcia, substituted by his heirs, namely, Ermelinda H. Garcia, et al., G.R. No. 190106, January 15, 2014.

Quasi-contracts; Unjust enrichment. Unjust enrichment exists, according to Hulst v. PR Builders, Inc., “when a person unjustly retains a benefit at the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience.” The prevention of unjust enrichment is a recognized public policy of the State, for Article 22 of the Civil Code explicitly provides that “[e]very person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.” Domingo Gonzalo v. John Tarnate, Jr., G.R. No. 160600, January 15, 2014.

Sales; Article 1599 of the Civil Code; recoupment; definition of; when entitled. Recoupment (reconvencion) is the act of rebating or recouping a part of a claim upon which one is sued by means of a legal or equitable right resulting from a counterclaim arising out of the same transaction. It is the setting up of a demand arising from the same transaction as the plaintiff’s claim, to abate or reduce that claim.

The legal basis for recoupment by the buyer is the first paragraph of Article 1599 of the Civil Code, viz:

Article 1599. Where there is a breach of warranty by the seller, the buyer may, at his election:

(1) Accept or keep the goods and set up against the seller, the breach of warranty by way of recoupment in diminution or extinction of the price;

x x x x

First United Constructors Corporation, et al. v. Bayanihan Automotive Corporation, G.R. No. 164985, January 15, 2014.

Sales; sale of a piece of land or any interest therein is through an agent; authority of the agent shall be in writing; otherwise, the sale shall be void. The due execution and authenticity of the subject SPA are of great significance in determining the validity of the sale entered into by Victorino and Ramon since the latter only claims to be the agent of the purported seller (i.e., respondent). Article 1874 of the Civil Code provides that “[w]hen a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.” In other words, if the subject SPA was not proven to be duly executed and authentic, then it cannot be said that the foregoing requirement had been complied with; hence, the sale would be void. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.

SPECIAL LAWS

Section 23 of Presidential Decree No. 957; non-forfeiture of payments. Section 23 of Presidential Decree No. 957, the rule governing the sale of condominiums, which provides: No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate. Fil-Estate Properties, Inc. and Fil-Estate Network, Inc. v. Spouses Conrado and Maria Victoria Ronquillo, G.R. No. 185798, January 13, 2014.

Section 6 of Presidential Decree No. 1594; right of assignment and subcontract. There is no question that every contractor is prohibited from subcontracting with or assigning to another person any contract or project that he has with the DPWH unless the DPWH Secretary has approved the subcontracting or assignment. This is pursuant to Section 6 of Presidential Decree No. 1594, which provides that “[T]he contractor shall not assign, transfer, pledge, subcontract or make any other disposition of the contract or any part or interest therein except with the approval of the Minister of Public Works, Transportation and Communications, the Minister of Public Highways, or the Minister of Energy, as the case may be. Approval of the subcontract shall not relieve the main contractor from any liability or obligation under his contract with the Government nor shall it create any contractual relation between the subcontractor and the Government.”  Domingo Gonzalo v. John Tarnate, Jr., G.R. No. 160600, January 15, 2014.

Family law; conjugal property; all property of the marriage is presumed to be conjugal, unless it is shown that it is owned exclusively by the husband or the wife.  There is a presumption that all property of the marriage is conjugal, unless it is shown that it is owned exclusively by the husband or the wife; this presumption is not overcome by the fact that the property is registered in the name of the husband or the wife alone; and the consent of both spouses is required before a conjugal property may be mortgaged. However, we find it iniquitous to apply the foregoing presumption especially since the nature of the mortgaged property was never raised as an issue before the RTC, the CA, and even before this Court. In fact, petitioner never alleged in his Complaint that the said property was conjugal in nature. Hence, respondent had no opportunity to rebut the said presumption. Francisco Lim v. Equitable PCI Bank, now known as Banco De Oro Unibank, Inc., G.R. No. 183918. January 15, 2014.

Family law; exclusive property of spouse; when the property is registered in the name of a spouse only and there is no showing as to when the property was acquired by said spouse, this is an indication that the property belongs exclusively to said spouse. Article 160 of the Civil Code provides as follows: All property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife.”

The presumption applies to property acquired during the lifetime of the husband and wife. In this case, it appears on the face of the title that the properties were acquired by Donata Montemayor when she was already a widow. When the property is registered in the name of a spouse only and there is no showing as to when the property was acquired by said spouse, this is an indication that the property belongs exclusively to said spouse. And this presumption under Article 160 of the Civil Code cannot prevail when the title is in the name of only one spouse and the rights of innocent third parties are involved. Francisco Lim v. Equitable PCI Bank, now known as Banco De Oro Unibank, Inc., G.R. No. 183918. January 15, 2014.

Torrens system; certificate of title; a certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. “[A] certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein.” Having no certificate of title issued in their names, spouses Vilbar have no indefeasible and incontrovertible title over Lot 20 to support their claim. Further, it is an established rule that “registration is the operative act which gives validity to the transfer or creates a lien upon the land.” “Any buyer or mortgagee of realty covered by a Torrens certificate of title x x x is charged with notice only of such burdens and claims as are annotated on the title.” Failing to annotate the deed for the eventual transfer of title over Lot 20 in their names, the spouses Vilbar cannot claim a greater right over Opinion, who acquired the property with clean title in good faith and registered the same in his name by going through the legally required procedure. Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R. No. 176043. January 15, 2014.

Torrens system; Torrens title; a person dealing with a registered land has a right to rely upon the face of the Torrens certificate of title; exceptions. The well-known rule in this jurisdiction is that a person dealing with a registered land has a right to rely upon the face of the torrens certificate of title and to dispense with the need of inquiring further, except when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry.

A torrens title concludes all controversy over ownership of the land covered by a final decree of registration. Once the title is registered the owner may rest assured without the necessity of stepping into the portals of the court or sitting in the mirador de su casa to avoid the possibility of losing his land. Francisco Lim v. Equitable PCI Bank, now known as Banco De Oro Unibank, Inc., G.R. No. 183918. January 15, 2014.

Torrens title; a person dealing with a registered land has a right to rely upon the face of the Torrens certificate of title; exception in the case of a person who buys from a person who is not the registered owner.The general rule is that every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go beyond the certificate to determine the condition of the property. Where there is nothing in the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore further than what the Torrens Title upon its face indicates in quest for any hidden defects or inchoate right that may subsequently defeat his right thereto.

However, a higher degree of prudence is required from one who buys from a person who is not the registered owner, although the land object of the transaction is registered. In such a case, the buyer is expected to examine not only the certificate of title but all factual circumstances necessary for him to determine if there are any flaws in the title of the transferor. The buyer also has the duty to ascertain the identity of the person with whom he is dealing with and the latter’s legal authority to convey the property. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.

Torrens system;even if the procurement of a certificate of title was tainted with fraud and misrepresentation, such defective title may be the source of a completely legal and valid title in the hands of an innocent purchaser for value. It is well-settled that even if the procurement of a certificate of title was tainted with fraud and misrepresentation, such defective title may be the source of a completely legal and valid title in the hands of an innocent purchaser for value. Where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property, the court cannot disregard such rights and order the total cancellation of the certificate. The effect of such an outright cancellation would be to impair public confidence in the certificate of title, for everyone dealing with property registered under the Torrens system would have to inquire in every instance whether the title has been regularly or irregularly issued. This is contrary to the evident purpose of the law. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.

Torrens system; levy on attachment, duly registered, takes preference over a prior unregistered sale.”[T]he settled rule that levy on attachment, duly registered, takes preference over a prior unregistered sale. This result is a necessary consequence of the fact that the [properties] involved [were] duly covered by the Torrens system which works under the fundamental principle that registration is the operative act which gives validity to the transfer or creates a lien upon the land.” Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R. No. 176043. January 15, 2014.

(Rose thanks Anna Katarina Rodriguez and Amirah Pendatun  for their assistance in the preparation of this post.) 

 

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