September 2013 Philippine Supreme Court Decisions on Commercial Law

Here are select September 2013 rulings of the Supreme Court of the Philippines on commercial law:

Checks; negotiable instruments. The check delivered to was made payable to cash. Under the Negotiable Instruments Law, this type of check was payable to the bearer and could be negotiated by mere delivery without the need of an indorsement. People of the Philippines v. Gilbert Reyes Wagas, G.R. No. 157943, September 4, 2013.

Insurance contracts; contract of adhesion. A contract of insurance is a contract of adhesion. When the terms of the insurance contract contain limitations on liability, courts should construe them in such a way as to preclude the insurer from non-compliance with his obligation. Alpha Insurance and Surety Co. v. Arsenia Sonia Castor, G.R. No. 198174, September 2, 2013.

Sale; subdivision lots. Presidential Decree No. 957 is a law that regulates the sale of subdivision lots and condominiums in view of the increasing number of incidents wherein “real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly” the basic requirements and amenities, as well as of reports of alarming magnitude of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers or titles free from liens and encumbrances.

Presidential Decree No. 957 authorizes the suspension and revocation of the registration and license of the real estate subdivision owners, developers, operators, and/or sellers in certain instances, as well as provides the procedure to be observed in such instances; it prescribes administrative fines and other penalties in case of violation of, or non-compliance with its provisions. San Miguel Properties, Inc. v. Secretary of Justice, et al., G.R. No. 166836, September 4, 2013.

(Hector thanks Carlos Manuel D. Prado for his assistance to Lexoterica.)

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December 2012 Philippine Supreme Court Decisions on Civil Law

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

Civil Code

Damages; When Applicable. It is essential that for damages to be awarded, a claimant must satisfactorily prove during the trial that they have a factual basis, and that the defendant’s acts have a causal connection to them. Article 2229 of the Civil Code provides that exemplary damages may be imposed “by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages.” They are, however, not recoverable as a matter of right. They are awarded only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. Albert M. Ching, et al. vs. Felix M. Bantolo, et al.; G.R. No. 177086. December 5, 2012

Sale of Real Property; Must be in a Public Document; requirement only for convenience. Article 1358 of the Civil Code provides that acts and contracts which have for their object the transmission of real rights over immovable property or the sale of real property must appear in a public document. If the law requires a document or other special form, the contracting parties may compel each other to observe that form, once the contract has been perfected. In Fule v. Court of Appeals, the Court held that Article 1358 of the Civil Code, which requires the embodiment of certain contracts in a public instrument, is only for convenience, and registration of the instrument only adversely affects third parties. Formal requirements are, therefore, for the benefit of third parties. Non-compliance therewith does not adversely affect the validity of the contract nor the contractual rights and obligations of the parties thereunder. Lagrimas de Jesus Zamora v. Spouses Beatriz Zamora et al., G.R. No. 162930. December 5, 2012.

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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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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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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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September 2011 Philippine Supreme Court Decisions on Civil Law

Here are select September 2011 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Contracts; both parties at fault; rule not applicable to simulated contract.  The Heirs of Policronio contended that even assuming that the contract was simulated, the Heirs of Alfonso would still be barred from recovering the properties by reason of Article 1412 of the Civil Code, which provides that if the act in which the unlawful or forbidden cause does not constitute a criminal offense, and the fault is both on the contracting parties, neither may recover what he has given by virtue of the contract or demand the performance of the other’s undertaking. As the Heirs of Alfonso alleged that the purpose of the sale was to avoid the payment of inheritance taxes, they cannot take from the Heirs of Policronio what had been given to their father.

On this point, the Court again disagrees. Article 1412 of the Civil Code is as follows:

Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:

(1)     When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other’s undertaking;

(2)     When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply with his promise.

Article 1412 is not applicable to fictitious or simulated contracts, because they refer to contracts with an illegal cause or subject-matter. This article presupposes the existence of a cause, it cannot refer to fictitious or simulated contracts which are in reality non-existent. As it has been determined that the Deed of Sale is a simulated contract, the provision cannot apply to it.

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July 2011 Philippine Supreme Court Decisions on Civil Law

Here are select July 2011 rulings of the Supreme Court of the Philippines on civil law:

Compensation. For legal compensation to take place, the requirements set forth in Articles 1278 and 1279 of the Civil Code, quoted below, must be present.

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 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.

A debt is liquidated when its existence and amount are determined. It is not necessary that it be admitted by the debtor. Nor is it necessary that the credit appear in a final judgment in order that it can be considered as liquidated; it is enough that its exact amount is known. And a debt is considered liquidated, not only when it is expressed already in definite figures which do not require verification, but also when the determination of the exact amount depends only on a simple arithmetical operation.

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