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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August 2009 Philippine Supreme Court Decisions on Civil Law

Here are selected August 2009 Philippine Supreme Court decisions on civil law:

Contracts;  binding effect.  As a general rule, obligations derived from a contract are transmissible (see Article 1311, par.1 of the Civil Code).  The loan in this case was contracted by respondent. He died while the case was pending before the Court of Appeals. While he may no longer be compelled to pay the loan, the debt subsists against his estate. No property or portion of the inheritance may be transmitted to his heirs unless the debt has first been satisfied.  William Ong Genato vs. Benjamin Bayhon, et al., G.R. No. 171035, August 24, 2009.

Contracts;  breach.  CCC defaulted in the payment of its obligation to FILSYSTEMS under the Compromise Agreement. On the other hand, FILSYSTEMS was not in default; however, considering that it failed to perform the obligation incumbent upon it under the Compromise Agreement, it must be held liable for the cost of completion of the unfinished portion of the project.  Continental Cement Corp., vs. Filipinas (PREFAB) Systems, Inc./Filipinas (PREFAB) Systems, inc. vs. Continental Cement Corp., G.R. No. 176917/G.R. No. 176919, August 4, 2009.

Contracts; due and demandable obligations.  Petitioner does not deny that she obtained a loan from respondent. She, however, contends that the loan is not yet due and demandable because the suspensive condition – the completion of the renovation of the apartment units – has not yet been fulfilled. She also assails the award of attorney’s fees to respondent as baseless.

For his part, respondent admits that initially, they agreed that payment of the loan shall be made upon completion of the renovations. However, respondent claims that during their meeting with some family members in the house of their brother Genaro sometime in the second quarter of 1997, he and petitioner entered into a new agreement whereby petitioner was to start making monthly payments on her loan, which she did from June to October of 1997. 

Evidently, by virtue of the subsequent agreement, the parties mutually dispensed with the condition that petitioner shall only begin paying after the completion of all renovations. There was, in effect, a modificatory or partial novation, of petitioner’s obligation under Article 1291 of the Civil Code. Maria Soledad Tomimbang vs. Atty. Jose Tomimbang, G.R. No. 165116, August 4, 2009.

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July 2009 Philippine Supreme Court Decisions on Civil Law

Contracts; agency. It is true that a person dealing with an agent is not authorized, under any circumstances, to trust blindly the agent’s statements as to the extent of his powers. Such person must not act negligently but must use reasonable diligence and prudence to ascertain whether the agent acts within the scope of his authority. The settled rule is that persons dealing with an assumed agent are bound at their peril; and if they would hold the principal liable, they must ascertain not only the fact of agency, but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to prove it.  Soriamont Steamship Agencies, Inc., et al. vs. Sprint Transport Services, Inc. etc., G.R. No. 174610, July 14, 2009.

Contracts; compromise agreement. Compromise agreements are contracts, whereby the parties undertake reciprocal obligations to resolve their differences, thus, avoiding litigation, or put an end to one already commenced. As a contract, when the terms of the agreement are clear and explicit that they do not justify an attempt to read into it any alleged intention of the parties; the terms are to be understood literally, just as they appear on the face of the contract. Considering that Caruff never intended to transfer the subject property to PMO, burdened by the generating set and sump pumps, respondent should remove them from the subject property.  Privatization Management Office vs. Legaspi Towers 300, Inc., G.R. No. 147957, July 22, 2009.

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April 2009 Decisions on Civil Law

Here are selected April 2009 decisions of the Supreme Court on civil law and related laws:

Accretion.  Article 457 of the Civil Code requires the concurrence of the following requisites for accretion: (1) that the deposition of soil or sediment be gradual and imperceptible; (2) that it be the result of the action of the waters of the river; and (3) that the land where accretion takes place is adjacent to the banks of rivers.  Thus, it is not enough to be a riparian owner in order to enjoy the benefits of accretion.  One who claims the right of accretion must show by preponderant evidence that he has met all the conditions provided by law.  New Regent Sources, Inc. vs. Teofilo Victor Tanjuatco, Jr. and Vicente CuevasG.R. No. 168800, April 16, 2009.

Compensation; requisites. Under Article 1279 (1), it is necessary for compensation that the obligors “be bound principally, and that he be at the same time a principal creditor of the other.” There is, concededly, no mutual creditor-debtor relation between APT and UPSUMCO. However, we recognize the concept of conventional compensation, defined as occurring “when the parties agree to compensate their mutual obligations even if some requisite is lacking, such as that provided in Article 1282.” It is intended to eliminate or overcome obstacles which prevent ipso jure extinguishment of their obligations.

Legal compensation takes place by operation of law when all the requisites are present, as opposed to conventional compensation which takes place when the parties agree to compensate their mutual obligations even in the absence of some requisites. The only requisites of conventional compensation are (1) that each of the parties can dispose of the credit he seeks to compensate, and (2) that they agree to the mutual extinguishment of their credits. United Planters Sugar Milling Co., Inc. (UPSUMCO) vs. The Honorable Court of Appeals, et al., G.R. No. 126890, April 2, 2009.

Compromise agreement; binding effect.  A compromise agreement, as a contract, is binding only upon the parties to the compromise, and not upon non-parties.  This is the doctrine of relativity of contracts.  Consistent with this principle, a judgment based entirely on a compromise agreement is binding only on the parties to the compromise the court approved, and not upon the parties who did not take part in the compromise agreement and in the proceedings leading to its submission and approval by the court.  Otherwise stated, a court judgment made solely on the basis of a compromise agreement binds only the parties to the compromise, and cannot bind a party litigant who did not take part in the compromise agreement.   Philippine National Bank Vs. Marcelino Banatao, et al. and Marciano Carag, et al., G.R. No. 149221,  April 7, 2009.

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