November 2009 Philippine Supreme Court Decisions on Civil Law

Here are selected November 2009 Philippine Supreme Court decisions on civil law and related laws:

Civil Code

Contract;  contract of adhesion.     A contract of adhesion is defined as one in which one of the parties imposes a ready-made form of contract, which the other party may accept or reject, but which the latter cannot modify. One party prepares the stipulation in the contract, while the other party merely affixes his signature or his “adhesion” thereto, giving no room for negotiation and depriving the latter of the opportunity to bargain on equal footing. Contracts of adhesion are not invalid per se.  Contracts of adhesion, where one party imposes a ready-made form of contract on the other, are not entirely prohibited. The one who adheres to the contract is, in reality, free to reject it entirely; if he adheres, he gives his consent.  Norton Resources and Development Corporation vs. All Asia Bank Corporation, G.R. No. 162523. November 25, 2009

Contract;  freedom of contract. Petitioners allege that the Kasulatan was entered into by the parties freely and voluntarily. They maintain that there was already a meeting of the minds between the parties as regards the principal amount of the loan, the interest thereon and the property given as security for the payment of the loan, which must be complied with in good faith. Hence, they assert that the Court of Appeals should have given due respect to the provisions of the Kasulatan. They also stress that it is a settled principle that the law will not relieve a party from the effects of an unwise, foolish or disastrous contract, entered into with all the required formalities and with full awareness of what he was doing.

Petitioners’ contentions deserve scant consideration. In Abe v. Foster Wheeler Corporation, we held that the freedom of contract is not absolute. The same is understood to be subject to reasonable legislative regulation aimed at the promotion of public health, morals, safety and welfare. One such legislative regulation is found in Article 1306 of the Civil Code which allows the contracting parties to “establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy.”

To reiterate, we fully agree with the Court of Appeals in holding that the compounded interest rate of 5% per month, is iniquitous and unconscionable. Being a void stipulation, it is deemed inexistent from the beginning. The debt is to be considered without the stipulation of the iniquitous and unconscionable interest rate. Accordingly, the legal interest of 12% per annum must be imposed in lieu of the excessive interest stipulated in the agreement, in line with our ruling in Ruiz v. Court of Appeals.  Sps. Isagani & Diosdada Castro vs. Angelina de Leon Tan, G.R. No. 168940, November 24, 2009.

Contract; laches. The essence of laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which, through due diligence, could have been done earlier, thus giving rise to a presumption that the party entitled to assert it had either abandoned or declined to assert it.

Respondent discovered in 1991 that a new owner’s copy of OCT No. 535 was issued to the Eniceo heirs. Respondent filed a criminal case against the Eniceo heirs for false testimony. When respondent learned that the Eniceo heirs were planning to sell the Antipolo property, respondent caused the annotation of an adverse claim. On 16 January 1996, when respondent learned that OCT No. 535 was cancelled and new TCTs were issued, respondent filed a civil complaint with the trial court against the Eniceo heirs and petitioner. Respondent’s actions negate petitioner’s argument that respondent is guilty of laches.  Kings Properties Corporation, Inc. vs. Canuto A. Galido, G.R. No. 170023. November 27, 2009

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June 2009 Philippine Supreme Court Decisions on Civil Law

Here are selected June 2009 Philippine Supreme Court decisions on civil and related laws:

Contract; novation. Article 1292 of the Civil Code provides that “[i]n order that an obligation may be extinguished by another which substitutes the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other.” Novation is never presumed. Parties to a contract must expressly agree that they are abrogating their old contract in favor of a new one. In the absence of an express agreement, novation takes place only when the old and the new obligations are incompatible on every point. The test of incompatibility is whether or not the two obligations can stand together, each one having its independent existence. If they cannot, they are incompatible and the latter obligation novates the first.

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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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