November 2012 Philippine Supreme Court Decisions on Civil Law

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

Civil Code

Co-ownership; validity of partition contracts. Contrary to the finding of the Court of Appeals, the subdivision agreements forged by Mendoza and her alleged co-owners were not for the partition of pro-indiviso shares of co-owners of Lot 733 but were actually conveyances, disguised as partitions, of portions of Lot 733 specifically Lots 733-A and 733-B, and portions of the subsequent subdivision of Lot 733-C. It cannot be overemphasized enough that the two deeds of absolute sale over portions of substantially the same parcel of land antedated the subdivision agreements in question and their execution acknowledged too before a notary public. Rupeta Cano Vda. De Viray and Jesus Carlo Gerard Viray v. Spouses Jose Usi and Amelita Usi,  G.R.No.192486. November 21,2012.

Constructive delivery; execution of public instrument only prima facie presumption of delivery. Article 1477 of the Civil Code recognizes that the “ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.” Related to this article is Article 1497 which provides that “[t]he thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee.” With respect to incorporeal property, Article 1498 of the Civil Code lays down the general rule: the execution of a public instrument “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.” However, the execution of a public instrument gives rise only to a prima facie presumption of delivery, which is negated by the failure of the vendee to take actual possession of the land sold. “[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.” In this case, no constructive delivery of the land transpired upon the execution of the deed of sale since it was not the spouses Villamor, Sr. but the respondents who had actual possession of the land. The presumption of constructive delivery is inapplicable and must yield to the reality that the petitioners were not placed in possession and control of the land. Sps. Erosto Santiago and Nelsi Santiago v. Mancer Villamor, et al.; G.R. No. 168499. November 26,2012

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October 2012 Philippine Supreme Court Decisions on Civil Law

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

Civil Code

Assignment of credit; dation in payment. An assignment of credit is an agreement by virtue of which the owner of a credit, known as the assignor, by a legal cause, such as sale, dation in payment, exchange or donation, and without the consent of the debtor, transfers his credit and accessory rights to another, known as the assignee, who acquires the power to enforce it to the same extent as the assignor could enforce it against the debtor. It may be in the form of sale, but at times it may constitute a dation in payment, such as when a debtor, in order to obtain a release from his debt, assigns to his creditor a credit he has against a third person. As a dation in payment, the assignment of credit operates as a mode of extinguishing the obligation; the delivery and transmission of ownership of a thing (in this case, the credit due from a third person) by the debtor to the creditor is accepted as the equivalent of the performance of the obligation.

The terms of the compromise judgment of the parties, however, did not convey an intent to equate the assignment of Magdalena’s retirement benefits as the equivalent of the payment of the debt due the spouses Serfino. There was actually no assignment of credit; if at all, the compromise judgment merely identified the fund from which payment for the judgment debt would be sourced. Only when Magdalena has received and turned over to the spouses Serfino the portion of her retirement benefits corresponding to the debt due would the debt be deemed paid. Since no valid assignment of credit took place, the spouses Serfino cannot validly claim ownership of the retirement benefits that were deposited with FEBTC. Without ownership rights over the amount, they suffered no pecuniary loss that has to be compensated by actual damages. Sps. Godfrey and Gerardina Serfino vs. Far East Bank and Trust Company, Inc., now Bank of the Philippine Islands.G.R. No. 171845. October 10, 2012

Compromise agreement; relation to original agreement; interest. Petitioner argues that the compromise agreement created an obligation separate from the original loan, for which respondent is now liable. By stating that the compromise agreement and the original loan transaction are distinct, petitioner would now attempt to exact payment on both. This goes against the very purpose of the parties entering into a compromise agreement, which was to extinguish the obligation under the loan. Petitioner may not seek the enforcement of both the compromise agreement and payment of the loan, even in the event that the compromise agreement remains unfulfilled.

The Court had previously tagged a 5% monthly interest rate agreed upon as “excessive, iniquitous, unconscionable and exorbitant, contrary to morals, and the law.” We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3% per month and higher are excessive, iniquitous, unconscionable, and exorbitant. Arthur F. Mechavez vs. Marlyn M, Bermudez G.R. No. 185368. October 11, 2012

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September 2012 Philippine Supreme Court Decisions on Civil Law

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

Civil Code

Contracts; capacity. Contracting parties must be juristic entities at the time of the consummation of the contract. Stated otherwise, to form a valid and legal agreement it is necessary that there be a party capable of contracting and a party capable of being contracted with. Hence, if any one party to a supposed contract was already dead at the time of its execution, such contract is undoubtedly simulated and false and, therefore, null and void by reason of its having been made after the death of the party who appears as one of the contracting parties therein. The death of a person terminates contractual capacity. De Belen Vda. de Cabalu, et al. v. Tabu, et al.; G.R. No. 188417. September 24, 2012

Contracts; future inheritance; contractual capacity – Under Article 1347 of the Civil Code, no contract may be entered into upon future inheritance except in cases expressly authorized by law. Paragraph 2 of Article 1347 characterizes a contract entered into upon future inheritance as void. The law applies when the following requisites concur: (1) the succession has not yet been opened; (2) the object of the contract forms part of the inheritance; and (3) the promissor has, with respect to the object, an expectancy of a right which is purely hereditary in nature. De Belen Vda. de Cabalu, et al. v. Tabu, et al.; G.R. No. 188417. September 24, 2012

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August 2012 Philippine Supreme Court Decisions on Civil Law

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

Civil Code

Common carrier; damages. The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to observe extraordinary diligence in the conduct of his business. He is presumed to be negligent when death occurs to a passenger. His liability may include indemnity for loss of earning capacity even if the deceased passenger may only be an unemployed high school student at the time of the accident. Spouses Teodorico and Nanette Pereña v. Spouses Nicolas and Teresita L. Zarate, et al.; G.R. No. 157917. August 29, 2012.

Contracts; rescission; consequences are restitution and in this case, each party will bear its own damage.  As correctly observed by the RTC, the rescissory action taken by GSIS is pursuant to Article 1191 of the Civil Code. In cases involving rescission under the said provision, mutual restitution is required. The parties should be brought back to their original position prior to the inception of the contract. “Accordingly, when a decree of rescission is handed down, it is the duty of the court to require both parties to surrender that which they have respectively received and to place each other as far as practicable in [their] original situation.” Pursuant to this, Goldloop should return to GSIS the possession and control of the property subject of their agreements while GSIS should reimburse Goldloop whatever amount it had received from the latter by reason of the MOA and the Addendum.

Relevant also is the provision of Article 1192 of the Civil Code which reads: “In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages.” (Emphasis suppied.)

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July 2012 Philippine Supreme Court Decisions on Civil Law

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

Civil Code

Contracts; reciprocal obligations. Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other. For one party to demand the performance of the obligation of the other party, the former must also perform its own obligation. Accordingly, petitioner, not having provided the services that would require the payment of service fees as stipulated in the Lease Development Agreement, is not entitled to collect the same. Subic Bay Metropolitan Authority vs. Honorable Court of Appeals and Subic International Hotel Corporation; G.R. No. 192885, July 4, 2012.

Contracts; contract of sale vs. contract to sell. The elements of a contract of sale are, to wit: a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) Determinate subject matter; and c) Price certain in money or its equivalent.  It is the absence of the first element which distinguishes a contract of sale from that of a contract to sell.

In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event, such as, in most cases, the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other words, the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and, thus, ownership is retained by the prospective seller without further remedies by the prospective buyer.

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June 2012 Philippine Supreme Court Decisions on Civil Law

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

Civil Code

Agency; ratification. The complaint was anchored on the supposed failure of FEBTC to duly investigate the authority of Antonio in contracting the “exceptionally and relatively immense” loans amounting to P5,000,000.00. Marcos alleged therein that his property had thereby become “unlawfully burdened by unauthorized real estate mortgage contracts,” because the loans and the mortgage contracts had been incurred by Antonio and his wife only for themselves, to the exclusion of petitioner. Yet, Marcos could not deny that under the express terms of the SPA, he had precisely granted to Antonio as his agent the authority to borrow money, and to transfer and convey the property by way of mortgage to FEBTC; to sign, execute and deliver promissory notes; and to receive the proceeds of the loans on the former’s behalf. In other words, the mortgage contracts were valid and enforceable against petitioner, who was consequently fully bound by their terms.

Moreover, even if it was assumed that Antonio’s obtaining the loans in his own name, and executing the mortgage contracts also in his own name had exceeded his express authority under the SPA, Marcos was still liable to FEBTC by virtue of his express ratification of Antonio’s act. Under Article 1898 of the Civil Code, the acts of an agent done beyond the scope of his authority do not bind the principal unless the latter expressly or impliedly ratifies the same.

In agency, ratification is the adoption or confirmation by one person of an act performed on his behalf by another without authority. The substance of ratification is the confirmation after the act, amounting to a substitute for a prior authority. Here, there was such a ratification by Marcos, as borne out by his execution of the letter of acknowledgement on September 12, 1996.

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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

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