Survey of 2009-2010 SC Decisions on Psychological Incapacity

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Survey of 2009-2010 SC Decisions in

Civil Law
Dean Ed Vincent S. Albano
HUMAN RELATIONS
When there is abuse of right;
legal wrong is committed.
In Ravina, et al. v. Villa Abrille, et al., G.R. No. 160708, October 16, 2009, there was a sale
of a house and lot registered under the names of spouses. The buyer knew that the seller was
married and yet they did not secure the conformity of the spouse. While the wife was outside the
house and the children were in school, the buyer of the husband in connivance with some people
transferred their belongings to an apartment and later on, they were prevented from entering their
house. They waited until evening under the rain. They sought the aid of the police but they were
refused contending that it was a family matter. Are they entitled to damages? Why?
Held: Yes, because the manner by which they were removed from the family home deserves
condemnation. The defendant connived with the buyers and surreptitiously transferred all their
personal belongings to another place while their children were in school. They were not allowed to
enter their rightful home or family abode despite their impassioned pleas.
Firmly established in our civil law is the doctrine that: Every person must, in the exercise of
his rights and in the performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith. (Art. 19, NCC) When a right is exercised in a manner that does not conform
with such norms and results in damages to another, a legal wrong is thereby committed for which
the wrong doer must be held responsible. Similarly, any person who willfully causes loss or injury to
another in a manner that is contrary to morals, good customs or public policy shall compensate the
latter for the damages caused. (Art. 21, NCC) It is patent in this case that petitioners alleged acts
fall short of these established civil law standards.
Along the same vein, in Titus Villanueva v. Emma Rosqueta, G.R. No. 180764, January 19,
2010, Abad, J, Rosqueta, formerly Deputy Commissioner of the Revenue Collection and Monitoring
Group of the Bureau of Customs resigned but withdrew it claiming security of tenure. She was not
able to assume because another person was appointed. An injunctive order was issued to prevent
the Commissioner from implementing the appointment, but the Commissioner refused to obey the
order. He even excluded her from the memorabilla in the centennial celebration of the Bureau and
withheld her salary. The SC held the Commissioner liable for damages because of bad faith.
Her exclusion from the centennial anniversary memorabilia was not an honest mistake by any
reckoning. Indeed, he withheld her salary and prevented her from assuming the duties of the
position. As the Court said in Amonoy v. Spouses Gutierrez, 404 Phil. 586 (2001) a partys refusal
to abide by a court order enjoining him from doing an act, otherwise lawful, constitutes an abuse
and an unlawful exercise of right.
She was awarded moral damages. Such damages may be awarded when the defendants
transgression is the immediate cause of the plaintiffs anguish in the cases specified in Article
2219 of the Civil Code.
Rosquetas colleagues and friends testified that she suffered severe anxiety on account of the
speculation over her employment status. She had to endure being referred to as a squatter in her
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workplace. She had to face inquiries from family and friends about her exclusion from the Bureaus
centennial anniversary memorabilia. She did not have to endure all these affronts and the angst
and depression they produced had Villanueva abided in good faith by the courts order in her
favor. Clearly, she is entitled to moral damages.
Void Marriage
Characteristics of psychological incapacity.
In Jocelyn M. Suazo v. Angelito Suazo, et al., G.R. No. 164493, March 12, 2010, the SC
fortified the doctrinal validity and value of Santos v. Court of Appeals, 310 SCRA 21 (1995) which
declared that psychological incapacity must be characterized by (a) gravity; (b) juridical
antecedence; (c) incurability. This case traces the different cases on the subject that have been
decided.
In Dimayuga-Laurena v. Court of Appeals, G.R. No. 159220, September 22, 2008, 566 SCRA
154, the Supreme Court explained the requisites cited in Santos thus:
(a) gravity it must be grave and serious such that the party would be
incapable of carrying out the ordinary duties required in a marriage;
(b) judicial antecedence it must be rooted in the history of the party
antedating the marriage, although the overt manifestations may emerge only
after the marriage; and
(c) incurability it must be incurable, or even if it were otherwise, the cure
would be beyond the means of the party involved. (Paz v. Paz, G.R. No.
166579, February 18, 2010).
Lim v. Lim, G.R. No. 176464, February 4, 2010, reiterated Santos that the incapacity must be
grave or serious such that the party would be incapable of carrying out the ordinary duties required
in marriage; it must be rooted in the history of the party antedating the marriage, although the
overt manifestations may emerge only after the marriage; and it must be incurable or, even if it
were otherwise, the cure would be beyond the means of the party involved.

Given the foregoing stringent requisites and without going into the non-exclusive list found
in Republic v. Court of Appeals, petitioner, as the party alleging his own psychological incapacity and
that of his spouse, had the special albatross to prove that he and his wife were suffering from the
most serious cases of personality disorders clearly demonstrative of an utter insensitivity or inability
to give meaning and significance to the marriage.
In Suazo v. Suazo, the Supreme Court had the occasion to look back into the evolution of
jurisprudence on psychological incapacity since there is no exact definition or concept as well as
illustration given as by the framers of the Family Code.
A unique feature of this law is its intended open-ended application, as it merely introduced an
abstract concept psychological incapacity that disables compliance with the contractual obligations
of marriage without any concrete definition or, at the very least, an illustrative example. We must
therefore apply the law based on how the concept of psychological incapacity was shaped and
developed in jurisprudence.
Santos v. Court of Appeals declared that psychological incapacity must be characterized by
(a) gravity; (b) juridical antecedence; and (c) incurability. It should refer to no less
than a mental (not physical) incapacity that causes a party to be truly incognitive of the basic
marital covenants that concomitantly must be assumed and discharged by the parties to the

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marriage. It must be confined to the most serious cases of personality disorders clearly
demonstrative of an utter insensitivity or inability to give meaning and significance to the marriage.
A later case, Marcos v. Marcos, further clarified that there is no requirement that the
defendant/respondent spouse should be personally examined by a physician or psychologist as a
condition sine qua non for the declaration of nullity of marriage based on psychological incapacity.
Accordingly, it is no longer necessary to introduce expert opinion in a petition under Article 36 of the
Family Code if the totality of evidence shows that psychological incapacity exists and
its gravity, juridical antecedence, and incurability can be duly established.
Pesca v. Pesca clarifies that the Molina guidelines apply even to cases then already pending,
under the reasoning that the courts interpretation or construction establishes the contemporaneous
legislative intent of the law; the latter as so interpreted and construed would thus constitute a part
of that law as of the date the statute is enacted. It is only when a prior ruling of this Court finds
itself later overruled, and a different view is adopted, that the new doctrine may have to be applied
prospectively in favor of parties who have relied on the old doctrine and have acted in good faith in
accordance therewith under the familiar rule of lex prospicit, non respicit.
On March 15, 2003, the Rule on Declaration of Absolute Nullity of Void Marriages and
Annulment of Voidable Marriages (A.M. No. 08-11-10 SC, Rules) promulgated by the Court took
effect. Section 2(d) of the Rules pertinently provides:
(d) What to allege. A petition under Article 36 of the Family Code shall
specifically allege the complete facts showing that either or both parties were
psychologically incapacitated from complying with the essential marital obligations of
marriage at the time of the celebration of marriage even if such incapacity becomes
manifest only after its celebration.
The complete facts should allege the physical manifestations, if any, as are
indicative of psychological incapacity at the time of the celebration of the
marriage but expert opinion need not be alleged.
Section 12(d) of the Rules requires a pre-trial brief containing all the evidence presented,
including expert opinion, if any, briefly stating or describing the nature and purpose of these pieces
of evidence. Section 14(b) requires the court to consider during the pre-trial conference the
advisability of receiving expert testimony and such other matters as may aid in the prompt
disposition of the petition. Under Section 17 of the Rules, the grounds for the declaration of the
absolute nullity or annulment of marriage must be proved.
All cases involving the application of Article 36 of the Family Code were invariably decided
based on the principles in the cited cases. This was the state of law and jurisprudence on Article 36
when the Court decided Te v. Yu-Te (Te) which revisited the Molina guidelines.
Te begins with the observation that the Committee that drafted the Family Code did not give
any examples of psychological incapacity for fear that by so doing, it would limit the applicability of
the provision under the principle of ejusdem generis; that the Committee desired that the courts
should interpret the provision on a case-to-case basis, guided by experience, by the findings of
experts and researchers in psychological disciplines, and by decisions of church tribunals that,
although not binding on the civil courts, may be given persuasive effect since the provision itself was
taken from the Canon Law. Te thus assumes it a basic premise that the law is so designed to
allow some resiliency in its application.
Te then sustained Santos doctrinal value, saying that its interpretation is consistent with that
of the Canon Law.


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Going back to its basic premise, Te said:
Conscious of the laws intention that it is the courts, on a case-to-case basis,
that should determine whether a party to a marriage is psychologically incapacitated,
the Court, in sustaining the lower courts judgment of annulment in Tuason v. Court of
Appeals, ruled that the findings of the trial court are final and binding on the appellate
courts.
Again, upholding the trial courts findings and declaring that its decision was
not a judgment on the pleadings, the Court, in Tsoi v. Court of Appeals, explained that
when private respondent testified under oath before the lower court and was cross-
examined by the adverse party, she thereby presented evidence in the form of
testimony. Importantly, the Court, aware of parallel decisions of Catholic marriage
tribunals, ruled that the senseless and protracted refusal of one of the parties to fulfill
the marital obligation of procreating children is equivalent to psychological
incapacity.
With this as backdrop, Te launched an attack on Molina. It said that the resiliency with which
the concept should be applied and the case-to-case basis by which the provision should be
interpreted, as so intended by its framers, had, somehow, been rendered ineffectual by the
imposition of a set of strict standards in Molina. Molina, to Te, has become a strait-jacket, forcing
all sizes to fit into and be bound by it; wittingly or unwittingly, the Court, in conveniently
applying Molina, has allowed diagnosed sociopaths, schizophrenics, nymphomaniacs, narcissists and
the like, to continuously debase and pervert the sanctity of marriage.
Te then enunciated the principle that each case must be judged, not on the basis of a
priori assumptions, predilections or generalizations, but according to its own facts. Courts should
interpret the provision on a case-to-case basis, guided by experience, the findings of experts and
researchers in psychological disciplines, and by decisions of church tribunals.
As a final note though, Te expressly stated that it is not suggesting the abandonment
of Molina, but that, following Antonio v. Reyes, it merely looked at other perspectives that should
also govern the disposition of petitions for declaration of nullity under Article 36. The
subsequent Ting v. Velez-Ting follows Tes lead when it reiterated that Te did not
abandon Molina; far from abandoning Molina, it simply suggested the relaxation of its stringent
requirements, cognizant of the explanation given by the Committee on the Revision of the Rules on
the rationale of the Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of
Voidable Marriages:
To require the petitioner to allege in the petition the particular root cause of the
psychological incapacity and to attach thereto the verified written report of an
accredited psychologist or psychiatrist have proved to be too expensive for the
parties. They adversely affect access to justice of poor litigants. It is also a fact that
there are provinces where these experts are not available. Thus, the Committee
deemed it necessary to relax this stringent requirement enunciated in the Molina Case.
The need for the examination of a party or parties by a psychiatrist or clinical
psychologist and the presentation of psychiatric experts shall now be determined by
the court during the pre-trial conference.
Te, therefore, instead of substantially departing from Molina, merely stands for a more
flexible approach in considering petitions for declaration of nullity of marriages based on
psychological incapacity. It is also noteworthy for its evidentiary approach in these cases, which it
expounded on as follows:
By the very nature of Article 36, courts, despite having the primary task and
burden of decision-making, must not discount but, instead, must consider as

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decisive evidence the expert opinion on the psychological and mental
temperaments of the parties.
x x x x
Hernandez v. Court of Appeals emphasizes the importance of presenting expert
testimony to establish the precise cause of a partys psychological incapacity, and to
show that it existed at the inception of the marriage. And as Marcos v.
Marcos asserts, there is no requirement that the person to be declared psychologically
incapacitated be personally examined by a physician, if the totality of evidence
presented is enough to sustain a finding of psychological incapacity. Verily, the
evidence must show a link, medical or the like, between the acts that
manifest psychological incapacity and the psychological disorder itself.
This is not to mention, but we mention nevertheless for emphasis, that
the presentation of expert proof presupposes a thorough and in-depth
assessment of the parties by the psychologist or expert, for a conclusive
diagnosis of a grave, severe and incurable presence of psychological
incapacity.
This evidentiary approach is repeated in Ting v. Velez-Ting.
Under this evolutionary development, as shown by the current string of cases on
Article 36 of the Family Code, what should not be lost on us is the intention of the law to
confine the application of Article 36 to the most serious cases of personality disorders,
clearly demonstrative of an utter insensitivity or inability to give meaning and significance
to the marriage; that the psychological illness that must have afflicted a party at the
inception of the marriage should be a malady so grave and permanent as to deprive one of
awareness of the duties and responsibilities of the matrimonial bond he or she is about to
assume. It is not enough that the respondent, alleged to be psychologically incapacitated, had
difficulty in complying with his marital obligations, or was unwilling to perform these
obligations. Proof of a natal or supervening disabling factor an adverse integral element in the
respondents personality structure that effectively incapacitated him from complying with his
essential marital obligations must be shown. Mere difficulty, refusal or neglect in the performance
of marital obligations or ill will on the part of the spouse is different from incapacity rooted in some
debilitating psychological condition or illness; irreconcilable differences, sexual infidelity or
perversion, emotional immaturity and irresponsibility and the like, do not by themselves warrant a
finding of psychological incapacity under Article 36, as the same may only be due to a persons
refusal or unwillingness to assume the essential obligations of marriage.
In Paz v. Paz, G.R. No. 166579, February 18, 2010, the allegation that husband was
irresponsible, insensitive and emotionally immature does not show that he is suffering from
psychological maladies that paralyzed him from complying with the essential obligations of marriage.
What the law requires to render a marriage void on the ground of psychological incapacity is
downright incapacity, not refusal or neglect or difficulty, much less ill will. The mere showing of
irrevocable differences and conflicting personalities does not constitute psychological incapacity.
In Perez-Ferraris v. Ferraris, it was said:
As all people may have certain quirks and idiosyncrasies, or isolated
characteristics associated with certain personality disorders, there is hardly a doubt that the
intendment of the law has been to confine the meaning of psychological incapacity to the most
serious cases of personality disorders clearly demonstrative of an utter insensitivity or inability to
give meaning and significance to marriage.

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In Republic v. Cabantug-Baguio, it was said:
The constitution sets out a policy of protecting and strengthening the family as the basic
social institution and marriage as the foundation of the family. Marriage, as an inviolable institution
protected by the state, cannot be dissolved at the whim of the parties. In petitions for the
declaration of nullity of marriage, the burden of proof to show the nullity of marriage lies on the
plaintiff. Any doubt should be resolved in favor of the existence and continuation of the marriage
and against its dissolution and nullity.
In Alcazar v. Alcazar, G.R. No. 174451, October 3, 2009, an action for declaration of nullity of
marriage due to psychological incapacity was filed. The evidence showed that respondent left
petitioner soon after their wedding to work in Saudi Arabia; that when respondent returned to the
Philippines a year and a half later, he directly went to live with his parents in San Jose, Occidental
Mindoro, and not with petitioner in Tondo, Manila; and that respondent also did not contact
petitioner at all since leaving for abroad.
In holding that the evidence did not satisfy the requirements for declaration of nullity of the
marriage on the ground of psychological incapacity, the Court ruled that the petitioner has to prove
that respondent suffers from a psychological disorder, but also that such psychological disorder
renders him truly incognitive of the basic marital covenants that concomitantly must be assumed
and discharged by the parties to the marriage. Psychological incapacity must be more than just a
difficulty, a refusal, or a neglect in the performance of some marital obligations.
But this case is just a simple case of a married couple being apart too long, becoming
strangers to each other, with the husband falling out of love and distancing or detaching himself as
much as possible from his wife.
To be tired and give up on ones situation and on ones spouse are not necessarily signs of
psychological illness; neither can falling out of love be so labeled. When these happen, the remedy
for some is to cut the marital knot to allow the parties to go their separate ways. This simple
remedy, however, is not available to under our laws. Ours is a limited remedy that addresses only a
very specific situation a relationship where no marriage could have validly been concluded because
the parties; or where one of them, by reason of a grave and incurable psychological illness existing
when the marriage was celebrated, did not appreciate the obligations of marital life and, thus, could
not have validly entered into a marriage. (Renato reyes So v. Valera, G.R. No. 150677, June 5,
2009).
An unsatisfactory marriage is not a null and void marriage. In Marcos v. Marcos, it was said
that:
Article 36 of the Family Code, we stress, is not to be confused with a
divorce law that cuts the marital bond at the time the causes therefor manifest
themselves. It refers to a serious psychological illness afflicting a party even
before the celebration of the marriage. It is a malady so grave and so
permanent as to deprive one of awareness of the duties and responsibilities of
the matrimonial bond one is about to assume. (Paras v. Paras. G.R. No.
147924, August 2, 2007, 529 SCRA 81; Aspillaga v. Aspillaga, G.R. No.
170925, October 26, 2009).
The mere irreconcilable differences and conflicting personalities in no wise constitute
psychological incapacity.
Effect of sexual infidelity.
Sexual infidelity, per se, however, does not constitute psychological incapacity within the
contemplation of the Family Code. To be a ground, it must be established that respondents

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unfaithfulness is a manifestation of a disordered personality, which makes him completely unable to
discharge the essential obligations of the marital state. (Hernandez v. CA, 377 Phil. 919; Dedel v.
CA, 466 Phil. 223 (2004).
It remains settled that the State has a high stake in the preservation of marriage rooted in its
recognition of the sanctity of married life and its mission to protect and strengthen the family as a
basic autonomous social institution. Hence, any doubt should be resolved in favor of the existence
and continuation of the marriage and against its dissolution and nullity. (Carating-Siayngco v.
Siayngco, 484 Phil. 396 (2004). Presumption is always in favor of the validity of marriage. Semper
praesumitur pro matrimonio. (See also: Aspillaga v. Aspillaga, G.R. No. 170925, October 26, 2009).
Adultery of a woman.
In Silvino A. Ligeralde v. May Ascension A. Patalinhug, et al., G.R. No. 168796, April 15,
2010, it was said that the root cause of the psychological incapacity must be identified as a
psychological illness, its incapacitating nature fully explained and established by the totality of the
evidence presented during trial.
More importantly, the adulterous acts of a woman do not even rise to the level of the
psychological incapacity that the law requires. Private respondent's act of living an adulterous life
cannot automatically be equated with a psychological disorder, especially when no specific evidence
was shown that promiscuity was a trait already existing at the inception of marriage. Petitioner must
be able to establish that respondent's unfaithfulness is a manifestation of a disordered personality,
which makes her completely unable to discharge the essential obligations of the marital state.
Doubtless, the private respondent was far from being a perfect wife and a good mother. She
certainly had some character flaws. But these imperfections do not warrant a conclusion that she
had a psychological malady at the time of the marriage that rendered her incapable of fulfilling her
marital and family duties and obligations. (Navales v. Navales, G.R. No. 167523, June 27, 2008,
556 SCRA 272).
In sum, the variation in the decisions of the Court in nullity of marriage is an evidence of its
compliance with the mandate in the Constitution of preserving the sanctity of marriage as the basis
of the family.
Relationship by affinity is not
extinguished by death.
Affinity is the relation that one spouse has to the blood relatives of the other spouse. It is a
relationship by marriage or a familial relation resulting from marriage. (Blodget v. Brinsmaid, 9Vt.
27, 1837 WL 1956 (Vt.). It is a fictive kinship, a fiction created by law in connection with the
institution of marriage and family relations.
One intriguing question arose in Intestate Estate of Manolita Gonzales Vda. de Carungcong,
et al. v. People, et al., G.R. No. 181409, February 11, 2010 where it was asked:
If marriage gives rise to ones relationship by affinity to the blood relatives of ones spouse,
does the extinguishment of marriage by the death of the spouse dissolve the relationship by affinity?
Answering the query, the Supreme Court said that there are two (2) views on the matter.
Philippine jurisprudence has no previous encounter with the issue. That is why the trial and appellate
courts acknowledged the dearth of jurisprudence and/or commentaries on the matter. In contrast,
in the American legal system, there are two views on the subject. As one Filipino author observed:
In case a marriage is terminated by the death of one of the spouses, there
are conflicting views. There are some who believe that relationship by affinity is not

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terminated whether there are children or not in the marriage (Carman vs. Newell,
N.Y. 1 [Denio] 25, 26). However, the better view supported by most judicial
authorities in other jurisdictions is that, if the spouses have no living issues or
children and one of the spouses dies, the relationship by affinity is dissolved. It
follows the rule that relationship by affinity ceases with the dissolution of the
marriage which produces it (Kelly v. Neely, 12 Ark. 657, 659, 56 Am Dec. 288). On
the other hand, the relationship by affinity is continued despite the death of one of
the spouses where there are living issues or children of the marriage in whose veins
the blood of the parties are commingled, since the relationship of affinity was
continued through the medium of the issue of the marriage (Paddock vs. Wells, 2
Barb. Ch. 331, 333).
The first view (the terminated affinity view) holds that relationship by affinity terminates with
the dissolution of the marriage either by death or divorce which gave rise to the relationship of
affinity between the parties. (Back v. Back, L.R.A. 1916C, 752, 148 Iowa 223, 125 N.W. 1009,
Am.Ann.Cas. 1912B, 1025 citing Bodget v. Brinsmaid, 9 Vt. 27). Under this view, the relationship by
affinity is simply coextensive and coexistent with the marriage that produced it. Its duration is
indispensably and necessarily determined by the marriage that created it. Thus, it exists only for so
long as the marriage subsists, such that the death of a spouse ipso facto ends the relationship by
affinity of the surviving spouse to the deceased spouses blood relatives.
The first view admits of an exception. The relationship by affinity continues even after the
death of one spouse when there is a surviving issue. (Kelly v. Neely, 12 Ark. 6[5]7, 659, 56 AmD
288; Chase v. Jennings, 38 Me. 44, 45; Dearmond v. Dearmond, 10 Ind. 191; Bigelow v. Sprague,
140 Mass. 425, 5 NE 144). The rationale is that the relationship is preserved because of the living
issue of the marriage in whose veins the blood of both parties is commingled. (In Re Bourdeux
Estate, 37 Wash. 2d 561, 225 P. 2d 433, 26 A.L.R. 2d 249).
The second view (the continuing affinity view) maintains that relationship by affinity between
the surviving spouse and the kindred of the deceased spouse continues even after the death of the
deceased spouse, regardless of whether the marriage produced children or not. (Carman v. Newell,
N.R. 1 Denio 25). Under this view, the relationship by affinity endures even after the dissolution of
the marriage that produced it as a result of the death of one of the parties to the said marriage. This
view considers that, where statutes have indicated an intent to benefit step-relatives or in-laws, the
tie of affinity between these people and their relatives-by-marriage is not to be regarded as
terminated upon the death of one of the married parties. (In re Bourdex Estate, supra.).
The Supreme Court held that the second view is more consistent with the language and spirit
of Article 332(1) of the Revised Penal Code.
First, the terminated affinity view is generally applied in cases of jury disqualification and
incest. On the other hand, the continuing affinity view has been applied in the interpretation of laws
that intend to benefit step-relatives or in-laws. Since the purpose of the absolutory cause in Article
332(1) is meant to be beneficial to relatives by affinity within the degree covered under the said
provision, the continuing affinity view is more appropriate.
Second, the language of Article 332(1) which speaks of relatives by affinity in the same line
is couched in general language. The legislative intent to make no distinction between the spouse of
ones living child and the surviving spouse of ones deceased child (in case of a son-in-law or
daughter-in-law with respect to his or her parents-in-law) can be drawn from Article 332(1) of the
Revised Penal Code without doing violence to its language.
Third, the Constitution declares that the protection and strengthening of the family as a basic
autonomous social institution are policies of the State and that it is the duty of the State to
strengthen the solidarity of the family. Congress has also affirmed as a State and national policy that
courts shall preserve the solidarity of the family. In this connection, the spirit of Article 332 is to

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preserve family harmony and obviate scandal. The view that relationship by affinity is not affected
by the death of one of the parties to the marriage that created it is more in accord with family
solidarity and harmony.
Sale of conjugal property by a
spouse without consent of the
other; void, even if separated in
fact.
In Siochi v. Gozon, et al., G.R. No. 169900; Interdimensional Realty, Inc. v. Siochi, et al.,
G.R. No. 169977, March 18, 2010, the SC once again had the occasion to say that sale of the
property forming part of the conjugal partnership without the consent of the other spouse is void.
This is true even if the spouses were separated in fact and Alfredo was the sole administrator of the
property at the time of sale.
Without such consent or authority, the sale is void. The absence of the consent of one of the
spouse renders the entire sale void, including the portion of the conjugal property pertaining to the
spouse who contracted the sale. (Alinas v. Alinas, 551 SCRA 154; Homeowners Savings Bank v.
Dailo, 493 Phil. 436 (2005). Even if the other spouse actively participated in negotiating for the sale
of the property, that other spouses written consent to the sale is still required by law for its validity.
(Jader-Manalo v. Camaisa, 425 Phil. 346 (2002). The Agreement entered into by Alfredo and Mario
was without the written consent of Elvira. Thus, the Agreement is entirely void. As regards Marios
contention that the Agreement is a continuing offer which may be perfected by Elviras acceptance
before the offer is withdrawn, the fact that the property was subsequently donated by Alfredo to
Winifred and then sold to IDRI clearly indicates that the offer was already withdrawn.
(2) It was ruled by the CA that the undivided share of Alfredo in the property was already
forfeited in favor of their daughter based on the ruling of the RTC that the offending spouse in an
action for legal separation is deprived of his share in the net profits of the conjugal properties.
The SC ruled that, that is not quite correct.
Under Article 63 of the Family Code, the absolute community or the conjugal partnership
shall be dissolved and liquidated but the offending spouse shall have no right to any share of the net
profits earned by the absolute community or the conjugal partnership, which shall be forfeited in
accordance with the provisions of article 43(2).
Article 43 of the Family Code likewise provides that, the termination of the subsequent
marriage referred to in the preceding Article shall produce the following effects:
X X X
(2) the absolute community of property or the conjugal partnership, as the
case may be, shall be dissolved and liquidated, but if either spouse contracted
said marriage in bad faith, his or her share of the net profits of the
community property or conjugal partnership property shall be forfeited
in favor of the common children or, if there are none, the children of the
guilty spouse by a previous marriage or, in default of children, the innocent
spouse.
Thus, among the effects of the decree of legal separation is that the conjugal partnership is
dissolved and liquidated and the offending spouse would have no right to any share of the net
profits earned by the conjugal partnership. It is only the share in the net profits which is forfeited in
favor of their daughter. Article 102(4) of the Family Code provides that [f]or purposes of computing
the net profits subject to forfeiture in accordance with Article 43, No. (2) and 63, No. (2), the said
profits shall be the increase in value between the market value of the community property at the
time of the celebration of the marriage and the market value at the time of its dissolution. Clearly,

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what is forfeited in favor of their daughter is not his share in the conjugal partnership property but
merely in the net profits of the conjugal partnership property.
In another case, Fuentes, et al. v. Roca, et al., G.R. No. 178902, April 21, 2010, Abad, J, the
husband of an estranged wife sold a conjugal property without her consent as the affidavit of
consent was forged. After their death, their children questioned the sale. It must be emphasized that
their marriage was contracted under the Civil Code, but the sale was executed under the Family
Code. Ruling that the Family Code applies, the sale could be made by the husband without the
consent of the wife. The SC ruled:
When the spouses got married, the Civil Code put in place the system of conjugal partnership
of gains on their property relations. While its Article 165 made the husband the sole administrator
of the conjugal partnership, Article 166 prohibited him from selling commonly owned real property
without his wifes consent. Still, if he sold the same without his wifes consent, the sale is not void
but merely voidable. Article 173 gave the wife the right to have the sale annulled during the
marriage within ten years from the date of the sale. Failing in that, she or her heirs may demand,
after dissolution of the marriage, only the value of the property that the husband fraudulently sold.
The Family Code took effect on August 3, 1988. Its Chapter 4 on Conjugal Partnership of
Gains expressly superseded Title VI, Book I of the Civil Code on Property Relations Between
Husband and Wife. The Family Code provisions were also made to apply to already existing conjugal
partnerships without prejudice to vested rights. Thus:
Art. 105. x x x The provisions of this Chapter shall also apply to conjugal
partnerships of gains already established between spouses before the effectivity of
this Code, without prejudice to vested rights already acquired in accordance with the
Civil Code or other laws, as provided in Article 256. (n)
Prescriptive period to file action.
In contrast to Article 173 of the Civil Code, Article 124 of the Family Code does not provide a
period within which the wife who gave no consent may assail her husbands sale of the real
property. It simply provides that without the other spouses written consent or a court order
allowing the sale, the same would be void.
Under the provisions of the Civil Code governing contracts, a void or inexistent contract has
no force and effect from the very beginning. And this rule applies to contracts that are declared void
by positive provision of law, as in the case of a sale of conjugal property without the other spouses
written consent. A void contract is equivalent to nothing and is absolutely wanting in civil effects. It
cannot be validated either by ratification or prescription.
But, although a void contract has no legal effects even if no action is taken to set it aside,
when any of its terms have been performed, an action to declare its inexistence is necessary to allow
restitution of what has been given under it. This action, according to Article 1410 of the Civil Code
does not prescribe and the action is imprescriptible.
It was contended that the wife had four (4) years to file an action for declaration of nullity of
the contract counted from the discovery of the fraud. But she was not defrauded, as the sale was
void for lack of consent of the spouse. The ground for annulment is not forgery but lack of consent.
The forgery is a mere evidence of lack of consent.
After the death of the spouses, the ownership of the property passed to the heirs who could
file the action to declare the sale void.

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Presumption of conjugality of
property acquired during
marriage.
Basically, the issue in Navarro v. Hon. Jose Escobido, et al., G.R. No. 153788, November 27,
2009 is the nature of a property acquired during the marriage. Kargo Enterprises is registered under
the name of Karen T. Go alone, a married woman. In a suit for replevin where she sued alone,
hence, the issue of whether the husband should be impleaded since there is presumption of
conjugality of the property. The SC
Held: No. Either of the spouses may bring an action to recover the vehicles they co-owned. Under
Article 24 of the Family Code, either spouse may act on behalf of the conjugal partnership, so long
as they do not dispose of or encumber the property in question without the other spouses consent.
The husband therefore is not an indispensable party in the action to recover the vehicles. He needs
only to be impleaded as a pro-forma party to the suit pursuant to Sec. 4, Rule 3 of the Rules of
Court which provides that the husband and wife shall sue or be sued jointly, except as provided by
law.
The registration of the trade name in the name of one person a woman does not
necessarily lead to the conclusion that the trade name as a property is hers alone, particularly when
the woman is married. By law, all properties acquired during the marriage, whether the acquisition
appears to have been made, contracted or registered in the name of one or both spouses, is
presumed to be conjugal unless the contrary is proved. (Art. 160, NCC; Art. 116, F.C.).
Article 124 of the Family Code, on the administration of the conjugal property, provides:
Art. 124. The administration and enjoyment of the conjugal partnership
property shall belong to both spouses jointly. In case of disagreement, the
husbands decision shall prevail, subject to recourse to the court by the wife for proper
remedy, which must be availed of within five years from the date of the contract
implementing such decision.
xxx
This provision, by its terms, allows either of the spouses to speak and act with authority in
managing their conjugal property, i.e., Kargo Enterprises. No need exists, therefore, for one to
obtain the consent of the other before performing an act of administration or any act that does not
dispose of or encumber their conjugal property.
Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on
the contract of partnership in all that is not in conflict with what is expressly determined in this
Chapter or by the spouses in their marriage settlements. In other words, the property relations of
the husband and wife shall be governed primarily by Chapter 4 on Conjugal Partnership of Gains of
the Family Code and, suppletorily, by the spouses marriage settlement and by the rules on
partnership under the Civil Code. In the absence of any evidence of a marriage settlement
between the spouses, the Civil Code provision on partnership shall be used as guide.
A rule on partnership applicable to the spouses circumstances is Article 1811 of the Civil
Code, which states:
Art. 1811. A partner is a co-owner with the other partners of specific partnership
property.
The incidents of this co-ownership are such that:

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(1) A partner, subject to the provisions of this Title and to any agreement between
the partners, has an equal right with his partners to possess specific
partnership property for partnership purposes; xxx

Under this provision, the spouses are effectively co-owners of Kargo Enterprises and the
properties registered under this name; hence, both have an equal right to seek possession of these
properties. Applying Article 484 of the Civil Code, which states that in default of contracts, or
special provisions, co-ownership shall be governed by the provisions of this Title. Furthermore,
Article 487 of the Civil Code that allows any of the co-owners to bring an action in ejectment with
respect to the co-owned property.
CUSTODY OF CHILDREN
Mere production of child in habeas
corpus case does not warrant
outright dismissal.
In Bagtas v. Hon. Ruth C. Santos, et al., G.R. No. 166682, November 27, 2009, a petition for
habeas corpus was filed by the grandparents of a minor, whose mother relinquished her right of
custody in favor of non-relatives. The respondents produced the body of the child, hence, the RTC
dismissed the petition, holding that it has become moot and academic, the sole purpose of the
petition for habeas corpus being the production of the child. The order was affirmed by the CA on
appeal.
The SC disagreed and
Held: Section 1, Rule 102, of the Rules of Court states that the writ of habeas corpus shall extend to
all cases where the rightful custody of any person is withheld from the persons entitled thereto. In
cases involving minors, the purpose of a petition for habeas corpus is not limited to the production of
the child before the court. The main purpose of the petition for habeas corpus is to determine who
has the rightful custody over the child. In Tijing v. Court of Appeals, 406 Phil. 449 (2001), it was
held:
The writ of habeas corpus extends to all cases of illegal confinement or
detention by which any person is deprived of his liberty, or by which the
rightful custody of any person is withheld from the person entitled
thereto. Thus, it is the proper legal remedy to enable parents to regain the
custody of a minor child even if the latter be in the custody of a third person of
his own free will. It may even be said that in custody cases involving minors,
the question of illegal and involuntary restraint of liberty is not the underlying
rationale for the availability of the writ as a remedy. Rather, it is prosecuted
for the purpose of determining the right of custody over a child.
The RTC erred when it hastily dismissed the action for having become moot after the minor
was produced before the trial court. It should have conducted a trial to determine who had the
rightful custody over the child. In dismissing the action, the RTC, in effect, granted the petition for
habeas corpus and awarded the custody of the minor to the petitioners without sufficient
basis. In Laxamana v. Laxamana, it was likewise held:
Mindful of the nature of the case at bar, the court a quo should have
conducted a trial notwithstanding the agreement of the parties to submit the case
for resolution on the basis, inter alia, of the psychiatric report of Dr.
Teresito. Thus, petitioner is not estopped from questioning the absence of a
trial considering that said psychiatric report, which was the courts primary
basis in awarding custody to respondent, is insufficient to justify the
decision. The fundamental policy of the State to promote and protect the welfare of

13

children shall not be disregarded by mere technicality in resolving disputes which
involve the family and the youth. (437 Phil. 104 (2002).
Article 214 of the Civil Code states that in case of absence or unsuitability of the parents,
substitute parental authority shall be exercised by the surviving grandparent. Article 216 states that
in default of parents or a judicially appointed guardian, the surviving grandparent shall exercise
substitute parental authority over the child.
In Sombong, the Court laid down three requisites in petitions for habeas corpus involving
minors: (1) the petitioner has a right of custody over the minor, (2) the respondent is withholding
the rightful custody over the minor, and (3) the best interest of the minor demands that he or she
be in the custody of the petitioner. There must be trial to establish the rightful custody but due to
the dismissal of the petition, the foregoing requisites were not proven.
CO-OWNERSHIP
Requisites of repudiation; effect; manifestation.
In Heirs of Jose Reyes, Jr., et al. v. Amanda Reyes, et al., G.R. No. 158377, August 4, 2010,
Bersamin, J, it was contended that as co-owner, he acquired the property as sole owner by
prescription having repudiated the co-ownership as a title was issued under his name, and paid the
taxes. Is the contention correct? Why?
Answer: No. In order that a co-owners possession may be deemed adverse to that of the cestui
que trust or the other co-owners, the following elements must concur:
1. The co-owner has performed unequivocal acts of repudiation of the co-ownership amounting
to an ouster of the cestui que trust or the other co-owners;
2. Such positive acts of repudiation have been made known to the cestui que trust or the other
co-owners;
3. The evidence on the repudiation is clear and conclusive; and
4. His possession is open, continuous, exclusive and notorious.
The sole fact of a co-owner declaring the land in question in his name for taxation purposes
and paying the land taxes did not constitute an unequivocal act of repudiation amounting to an
ouster of the other co-owner and could not constitute adverse possession as basis for title by
prescription. (laguna v. Levantino, 71 Phil. 566 (1941). Moreover, according to Blatero v.
Intermediate Appellate Court, G.R. No. L-73889, September 30, 1987, 154 SCRA 530, if a sale a
retro is construed as an equitable mortgage, then the execution of an affidavit of consolidation by
the purported buyer to consolidate ownership of the parcel of land is of no consequence and the
constructive possession of the parcel of land will not ripen into ownership, because only possession
acquired and enjoyed in the concept of owner can serve as title for acquiring dominion.
SUCCESSION/PROPERTY
Effect if will provides for
indivision of property among
heirs; contrary to public policy.
The will of Basilio Santiago stated that a house and lot in the City of Manila shall be
transferred in the names of Maria Pilar and Clemente, the children, for purposes of administration
only but no one shall be the owner of the same. Is the condition in the will valid? Why?
Answer: No, it is contrary to law and public policy. When a will provides for indivision of a property,
it is subject to statutory limitation as the law provides that the prohibition to divide a property in a
co-ownership can only last for twenty (20) years. (Arts. 494, 870 and 1083, NCC). While the Civil

14

Code is silent as to the effect of the indivision of a property for more than 20 years, it would be
contrary to public policy to sanction co-ownership beyond the period expressly mandated by the Civil
Code. (In Re: Petition for Probate of Last Will & Testament of Basilio Santiago, Ma. Pilar Santiago, et
al. v. Zoilo Santiago, et al., G.R. No. 179859, August 9, 2010).
OBLIGATIONS AND CONTRACTS
Claim for reimbursement is one
for rescission; when rescission
can be availed of.
In Solar Harvest, Inc. v. Davao Corrugated Carton Corp., G.R. No. 176868, July 26, 2010,
Nachura, J, there was a contract for the purchase of 36,000 cartons specifically designed for the
business of exporting bananas. The plaintiff paid US$40,000.00. Allegedly, the defendant failed to
manufacture and deliver the boxes and that it repeatedly followed-up the immediate production of
the boxes, but to no avail. Hence, it filed a complaint for reimbursement of the amount paid. The
defendant contended that it has completed the manufacture of the boxes. The complaint was
dismissed which was affirmed on appeal. Will the action prosper? Why?
Answer: No. The claim for reimbursement is actually one for rescission or resolution of contract
under Art. 1191, NCC, where the law provides that 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 right to rescind a contract arises once the other party defaults in the performance of his
obligation. In determining when default occurs, Art. 1191 should be taken in conjunction with Art.
1169 of the same law.
In reciprocal obligations, as in a contract of sale, the general rule is that the fulfillment of the
parties respective obligations should be simultaneous. Hence, no demand is generally necessary
because, once a party fulfills his obligation and the other party does not fulfill his, the latter
automatically incurs in delay. But when different dates for performance of the obligations are fixed,
the default for each obligation must be determined by the rules given in the first paragraph of Article
1169 of the Civil Code, that is, the other party would incur in delay only from the moment the other
party demands fulfillment of the formers obligation. Thus, even in reciprocal obligations, if the
period for the fulfillment of the obligation is fixed, demand upon the obligee is still necessary before
the obligor can be considered in default and before a cause of action for rescission will accrue.
Evident from the records and even from the allegations in the complaint was the lack of
demand by petitioner upon respondent to fulfill its obligation to manufacture and deliver the boxes.
The Complaint only alleged that petitioner made a follow-up upon respondent, which, however,
would not qualify as a demand for the fulfillment of the obligation.
Tender of payment; unjustified
refusal to accept payment is not
extinguishment of obligation.
Q If an obligation is due and demandable and there is unjustified refusal to accept payment, does
such act constitute extinguishment of the obligation by payment? Why?
Answer: No. To have the effect of payment, the law requires the twin acts of tender of payment and
consignation. If there is tender of payment but there is no consignation, it does not have the effect
of payment. If at all there is an effect of the tender, the debtor must be freed from the obligation to
pay interest on the outstanding amount from the time the unjust refusal took place. (Go Sinco v. CA,
et al., G.R. No. 151903, October 9, 2009).

15

Q State the effect of an unjustified refusal of the creditor to accept payment. Explain.
Answer: The creditor can be liable for damages under Article 19 of the Civil Code which requires a
person to act with honesty and good faith in the exercise of rights and in the fulfillment of his duties.
(Go Sinco v. CA, et al., G.R. No. 151903, October 9, 2009).
COMPENSATION
When compensation is proper;
obligations must be liquidated.
Facts: A contract of lease was entered into between Lao and Manansala and SPI over the latters
building to be used as karaoke and restaurant. For failure to pay the rents, SPI sent a demand letter
for payment, but despite demand, they failed to pay, hence, a complaint for sum of money was filed.
In their answer, they alleged that the lessor did not deliver the building in a condition fit for the
intended use, hence, they incurred expenses for necessary repairs as well as expenses for structural
repairs. They prayed for the dismissal of the complaint and that judgment be rendered on their
counterclaims. After trial, the MTC dismissed the action for lack of cause of action. It held that while
the rental stood at P95,000.00, the lessees, however spent P125,000.00 for the repair of the
structural defects, applying the rule on compensation. The RTC affirmed the decision and the CA
affirmed it too. Before the SC, they contended that compensation should be applied considering that
the amount of P545,000.00 for repairs, P125,000.00 of which was spent for structural repairs. The
lessor, however contended that they were not able to prove that they spent the said amounts. Can
compensation be applied? Why?
Answer: No. Compensation shall take place when two persons, in their own right, are creditors and
debtors of each other. In order for compensation to be proper, it is necessary that:
1. Each one of the obligors be bound principally and that he be at the same time a
principal creditor of the other;
2. 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. The two debts are due:
4. The debts are liquidated and demandable;
5. Over neither of them be any retention or controversy, commenced by third parties
and communicated in due time to the debtor. (Art. 1279, NCC).
A claim is liquidated when the amount and time of payment is fixed. If acknowledged by
the debtor, although not in writing, the claim must be treated as liquidated. When the defendant,
who has an unliquidated claim, sets it up by way of counterclaim, and a judgment is rendered
liquidating such claim, it can be compensated against the plaintiffs claim from the moment it is
liquidated by judgment. In Solinap v. Hon. Del Rosario, 208 Phil. 561 (1983) compensation takes
place only if both obligations are liquidated.
Under the contract necessary repairs shall be undertaken by the lessee, while repairs of the
structural defects shall be borne by the lessor.
As the contract contrastingly treats necessary repairs, which are on the account of the lessee,
and repairs of structural defects, which are the responsibility of the lessor, the onus of the
petitioners is two-fold: (1) to establish the existence, amount and demandability of their claim; and
(2) to show that these expenses were incurred in the repair of structural defects.

16

The lessees failed to prove that the repairs undertaken by them were on structural defects. In
fact, the lessor was never informed of the structural repairs, hence, unliquidated and legal
compensation is inapplicable. (Lao, et al. v. Special Plans, Inc., G.R. No. 164791, June 29, 2010).
Lease with option of lessee to
renew; it must be exercised.
A lease contract was entered into between Cornelio as lessor and Orlando, as lessee. It
provided for a prohibition against sale to a third person and option to renew. During the period of
the contract Orlando died on November 7, 1983. The contract was set to expire on December 3,
1983 when Orlando died unless renewed by Orlandos heirs for another four (4) years. The heirs
never renewed the contract. The sale was made on January 29, 1987. The heirs of Orlando
questioned the validity of the sale contending that it violated the prohibition against sale to third
person. Is the contention correct? Why?
Answer: No, because the heirs of Orlando to whom the right to renew the contract was transmitted
after his death did not exercise the option to renew the lease. As a result, there was no obstacle for
Orlando to sell, since the prohibitory clause was no longer existing at the time of the sale.
It does not follow, however, that the lease subsisted at the time of the sale of the subject lot
on January 29, 1987. When Orlando died on November 7, 1983, the lease contract was set to
expire 26 days later or on December 3, 1983, unless renewed by Orlandos heirs for another four
years. While the option to renew is an enforceable right, it must necessarily be first exercised to be
given effect. (Mercys Inc. v. Verde, 18 SCRA 171 (1966). As the Court explained in Dioquino v.
Intermediate Appellate Court, G.R. No. 68580-81, November 7, 1989, 179 SCRA 163:
A clause found in an agreement relative to the renewal of the lease
agreement at the option of the lessee gives the latter an enforceable right to renew
the contract in which the clause is found for such time as provided for. The
agreement is understood as being in favor of the lessee, and the latter is authorized
to renew the contract and to continue to occupy the leased property after notifying
the lessor to that effect. A lessors covenant or agreement to renew gives a
privilege to the tenant, but is nevertheless an executory contract, and until the
tenant has exercised the privilege by way of some affirmative act, he cannot be held
for the additional term. In the absence of a stipulation in the lease requiring notice
of the exercise of an option or an election to renew to be given within a certain time
before the expiration of the lease, which of course, the lessee must comply with, the
general rule is that a lessee must exercise an option or election to renew his lease
andnotify the lessor thereof before, or at least at the time of the expiration of his
original term, unless there is a waiver or special circumstances warranting equitable
relief.
There is no dispute that in the instant case, the lessees (private respondents)
were granted the option to renew the lease for another five (5) years after the
termination of the original period of fifteen years. Yet, there was never any positive
act on the part of private respondents before or after the termination of the original
period to show their exercise of such option. The silence of the lessees after the
termination of the original period cannot be taken to mean that they opted to renew
the contract by virtue of the promise by the lessor, as stated in the original contract of
lease, to allow them to renew. Neither can the exercise of the option to renew be
inferred from their persistence to remain in the premises despite petitioners demand
for them to vacate. (Estate of Orlando Llenado, et al. v. Eduardo Llenado, et al., G.R.
No. 145736, March 4, 2009).

17

Payment by interested party; effect.

The Acua spouses obtained a loan from Prudential secured by a real estate mortgage on
Cecillevilles property. The Acua spouses defaulted on their loan, and Prudential initiated
foreclosure proceedings. Cecilleville tried to annul the real estate mortgage but failed when the Court
ruled that Cecilleville had ratified the real estate mortgage. In effect, Cecilleville became a third-
party accommodation mortgagor. Cecilleville paid Prudential to avoid foreclosure of its mortgaged
properties. Cecilleville repeatedly asked the Acua spouses to reimburse what it paid Prudential,
but the Acua spouses refused to do so. Is their refusal proper? Why?
Answer: No. Cecilleville paid the debt of the Acua spouses to Prudential as an interested third
party. The second paragraph of Article 1236 of the Civil Code reads:
Whoever pays for another may demand from the debtor what he has
paid, except that if he paid without the knowledge or against the will of the
debtor, he can recover only insofar as the payment has been beneficial to the
debtor.
Even if the Acua spouses insist that Cecillevilles payment to Prudential was without their
knowledge or against their will, Article 1302(3) of the Civil Code states that Cecilleville still has a
right to reimbursement, thus:
When, even without the knowledge of the debtor, a person interested in
the fulfillment of the obligation pays, without prejudice to the effects of
confusion as to the latters share.
Cecilleville clearly has an interest in the fulfillment of the obligation because it owns the properties
mortgaged to secure the Acua spouses loan. When an interested party pays the obligation, he is
subrogated in the rights of the creditor. Because of its payment of the Acua spouses
loan, Cecilleville actually steps into the shoes of Prudential and becomes entitled, not only to
recover what it has paid, but also to exercise all the rights which Prudential could have
exercised. There is, in such cases, not a real extinguishment of the obligation, but a change in the
active subject. (Cecilleville Realty and Service Corp. v. Sps. Acua, G.R. No. 162074, July 13, 2009).
Waiver of hereditary right is not
valid; mere expectancy.
In Atty. Pedro Ferrer v. Sps. Diaz, et al., G.R. No. 165300, April 23, 2010, there was a
contract of loan secured by a Real Estate Mortgage. The mortgagor further executed an instrument
entitled Waiver of Hereditary Rights and Interests Over a Real Property (Still Undivided) or a future
inheritance. On the basis of the affidavit, the creditor executed a document of adverse claim and
annotated it at the back of the title. At the time of the execution of the Waiver of Hereditary Rights,
the parents of the affiant were still alive. Is the waiver valid? Is the adverse claim valid? Why?
Held: No. Pursuant to the second paragraph of Article 1347 of the Civil Code, no contract may be
entered into upon a future inheritance except in cases expressly authorized by law. For the
inheritance to be considered future, the succession must not have been opened at the time of the
contract. A contract may be classified as a contract upon future inheritance, prohibited under the
second paragraph of Article 1347, where the following requisites concur:
(1) That the succession has not yet been opened.
(2) That the object of the contract forms part of the inheritance; and,
(3) That the promissor has, with respect to the object, an expectancy of a right which
is purely hereditary in nature. (J.L.T. Agro, Inc. v. Balansag, 493 Phi. 365 (2005)

18

In this case, there is no question that at the time of execution of Comandantes Waiver of
Hereditary Rights and Interest Over a Real Property (Still Undivided), succession to either of her
parents properties has not yet been opened since both of them are still living. With respect to the
other two requisites, both are likewise present considering that the property subject matter of
affiants waiver concededly forms part of the properties that she expect to inherit from her parents
upon their death and, such expectancy of a right, as shown by the facts, is undoubtedly purely
hereditary in nature. Hence, the waiver is void. (Taedo v. Court of Appeals, 322 Phil. 84 (1996).
When there is subrogation.
In Metropolitan Bank & Trust Co. v. Rural Bank of Gerona, Inc. (RBG), G.R. No. 157097, July
5, 2010, Brion, J, the Central Bank & RBG entered into an agreement where RBG would facilitate the
loan application of farmers-borrowers under the CB-IBRD program. The agreement required RBG to
open an account where the IBRD loan proceeds shall be deposited, which it did with Metrobank. The
latter was designated to receive the credit advice released by the CB representing the loans and
Metrobank in turn credited the proceeds to RBGs account to be released to the farmers-borrowers.
There were loans that were approved and hence, CB released the credit advice to Metrobank and the
latter credited it for the account of RBG. Later, however, after RBG made withdrawals from its
account with Metrobank the CB issued debit advices reversing all the approved IBRD loans and
debited from Metrobanks demand deposit account the amounts corresponding to all the IBRD loans.
Metrobank then debited from the account of RBG the amounts withdrawn but it claimed that they
were insufficient to cover all the credit advices, hence, it filed a complaint for sum of money against
RBG. After trial, the RTC held that there was legal subrogation in favor of Metrobank. The CA
reversed the ruling and ruled that there was no legal subrogation under Art. 1302, NCC, but
recognized the right of the bank to be reimbursed. It ruled that the CB should be impleaded to shed
light on the IBRD loan reversals. Was there subrogation of Metrobank against RBG? Why?
Answer: Yes. Under the law, it is presumed that there is legal subrogation:
1. When a creditor pays another creditor who is preferred, even without the
debtors knowledge;
2. When a third person, not interested in the obligation, pays with the
express or tacit approval of the debtor;
3. When, even without the knowledge of the debtor, a person interested in the fulfillment
of the obligation pays, without prejudice to the effects of confusion as to the latters
share. (Art. 1302, NCC)
Metrobank was a third party to the Central Bank-RBG agreement, had no interest except as a
conduit, and was not legally answerable for the IBRD loans. Despite this, it was Metrobanks
demand deposit account, instead of RBGs, which the Central Bank proceeded against, on the
assumption perhaps that this was the most convenient means of recovering the cancelled
loans. That Metrobanks payment was involuntarily made does not change the reality that it was
Metrobank which effectively answered for RBGs obligations.
Article 1303 of the Civil Code states that subrogation transfers to the person subrogated the
credit with all the rights thereto appertaining, either against the debtor or against third persons. As
the entity against which the collection was enforced, Metrobank was subrogated to the rights of
Central Bank and has a cause of action to recover from RBG the amounts it paid to the Central Bank,
plus 14% per annum interest.
Under this situation, impleading the Central Bank as a party is completely unnecessary. In so
far as Metrobank is concerned, however, the Central Banks presence and the reasons for its
reversals of the IBRD loans are immaterial after subrogation has taken place; Metrobanks interest is
simply to collect the amounts it paid the Central Bank. Whatever cause of action RBG may have
against the Central Bank for the unexplained reversals and any undue deductions is for RBG to
ventilate as a third-party claim; if it has not done so at this point, then the matter should be dealt

19

with in a separate case that should not in any way further delay the disposition of the present case
that had been pending before the courts since 1980.
STATUTE OF FRAUDS/TRUST
Statute of frauds is inapplicable if
oral compromise has been
performed.
The case of Mactan-Cebu International Airport Authority, et al. v. Lozada, Sr., et al., G.R.No.
176625, February 25, 2010, Nachura, J, started as an expropriation proceedings. The property of
the respondent was declared condemned for public use to expand the Lahug International Airport.
On appeal, there was a compromise to stop the respondent from pursuing with the appeal, but with
an oral assurance that if the purpose would not be pursued, the property would be resold to him.
The public use was not pursued, hence, there was a demand for the resale of the property,
especially so that it has been converted to a commercial area, but the petitioner contended that it is
not bound by the oral assurance that it would be resold, using the Statute of Frauds as basis. In
brushing aside the contention, the SC
Held: The Statute of Frauds operates only with respect to executory contracts, and does not apply to
contracts which have been completely or partially performed, the rationale thereof being as follows:
In executory contracts there is a wide field for fraud because unless they be in
writing there is no palpable evidence of the intention of the contracting parties. The
statute has precisely been enacted to prevent fraud. However, if a contract has been
totally or partially performed, the exclusion of parol evidence would promote fraud or
bad faith, for it would enable the defendant to keep the benefits already delivered by
him from the transaction in litigation, and, at the same time, evade the obligations,
responsibilities or liabilities assumed or contracted by him thereby. (Mactan-Cebu
International Airport Authority v. Tudtud, G.R. No. 174012, November 14, 2008, 571
SCRA 165).
The Statute of Frauds cannot apply, the oral compromise settlement having been partially
performed. By reason of such assurance made in their favor, respondents relied on the same by not
pursuing their appeal before the CA.
Constructive trust as basis for
right to repurchase.
The right of respondents to repurchase the property may be enforced based on a constructive
trust constituted on the property held by the government in favor of the former. The ruling in Heirs
of Timoteo Moreno is instructive, viz.:
Mactan-Cebu International Airport Authority is correct in stating that one
would not find an express statement in the Decision in Civil Case No. R-1881 to the
effect that the [condemned] lot would return to [the landowner] or that [the
landowner] had a right to repurchase the same if the purpose for which it was
expropriated is ended or abandoned or if the property was to be used other than as
the Lahug Airport. This omission notwithstanding, and while the inclusion of this
pronouncement in the judgment of condemnation would have been ideal, such
precision is not absolutely necessary nor is it fatal to the cause of petitioners
herein. No doubt, the return or repurchase of the condemned properties of petitioners
could be readily justified as the manifest legal effect or consequence of the trial courts
underlying presumption that Lahug Airport will continue to be in operation when it
granted the complaint for eminent domain and the airport discontinued its activities.

20

The predicament of petitioners involves a constructive trust, one that is akin
to the implied trust referred to in Art. 1454 of the Civil Code, If an absolute
conveyance of property is made in order to secure the performance of an obligation of
the grantor toward the grantee, a trust by virtue of law is established. If the
fulfillment of the obligation is offered by the grantor when it becomes due, he may
demand the reconveyance of the property to him. In the case at bar, petitioners
conveyed Lots No. 916 and 920 to the government with the latter obliging itself to use
the realties for the expansion of Lahug Airport; failing to keep its bargain, the
government can be compelled by petitioners to reconvey the parcels of land to them,
otherwise, petitioners would be denied the use of their properties upon a state of
affairs that was not conceived nor contemplated when the expropriation was
authorized.
Although the symmetry between the instant case and the situation
contemplated by Art. 1454 is not perfect, the provision is undoubtedly applicable. For,
as explained by an expert on the law of trusts: The only problem of great importance
in the field of constructive trust is to decide whether in the numerous and varying
factual situations presented to the courts there is a wrongful holding of property and
hence a threatened unjust enrichment of the defendant. Constructive trusts are
fictions of equity which are bound by no unyielding formula when they are used by
courts as devices to remedy any situation in which the holder of legal title may not in
good conscience retain the beneficial interest.
In constructive trusts, the arrangement is temporary and passive in which the
trustees sole duty is to transfer the title and possession over the property to the
plaintiff-beneficiary. Of course, the wronged party seeking the aid of a court of
equity in establishing a constructive trust must himself do equity. Accordingly, the
court will exercise its discretion in deciding what acts are required of the plaintiff-
beneficiary as conditions precedent to obtaining such decree and has the obligation to
reimburse the trustee the consideration received from the latter just as the plaintiff-
beneficiary would if he proceeded on the theory of rescission. In the good judgment
of the court, the trustee may also be paid the necessary expenses he may have
incurred in sustaining the property, his fixed costs for improvements thereon, and the
monetary value of his services in managing the property to the extent that plaintiff-
beneficiary will secure a benefit from his acts.
The rights and obligations between the constructive trustee and the
beneficiary, in this case, respondent MCIAA and petitioners over Lots Nos. 916 and
920, are echoed in Art. 1190 of the Civil Code, When the conditions have for their
purpose the extinguishment of an obligation to give, the parties, upon the fulfillment
of said conditions, shall return to each other what they have received x x x In case of
the loss, deterioration or improvement of the thing, the provisions which, with respect
to the debtor, are laid down in the preceding article shall be applied to the party who
is bound to return x x x. (Heirs of Moreno v. Mactan-Cebu International Airport
Authority, G.R. No. 156273, October 15, 2003, 413 SCRA 502).
How much to pay in repurchasing
the property.
On the matter of the repurchase price, while petitioners are obliged to reconvey Lot No. 88 to
respondents, the latter must return to the former what they received as just compensation for the
expropriation of the property, plus legal interest to be computed from default, which in this case
runs from the time petitioners comply with their obligation to respondents.

21

Respondents must likewise pay petitioners the necessary expenses they may have incurred in
maintaining Lot No. 88, as well as the monetary value of their services in managing it to the extent
that respondents were benefited thereby.
Following Article 1187 of the Civil Code, petitioners may keep whatever income or fruits they
may have obtained from Lot No. 88, and respondents need not account for the interests that the
amounts they received as just compensation may have earned in the meantime.
In accordance with Article 1190 of the Civil Code vis--vis Article 1189, which provides that
(i)f a thing is improved by its nature, or by time, the improvement shall inure to the benefit of the
creditor x x x, respondents, as creditors, do not have to pay, as part of the process of restitution,
the appreciation in value of Lot No. 88, which is a natural consequence of nature and time.
VOID CONTRACTS
Grantee of a market stall has no right to sell.
Basically, the issue in Magayag v. Maruhom, G.R. No. 179743, August 2, 2010, Nachura, J, is
this: May the grantee of a market stall in Marawi City sell the same without the consent of the
government? The SC
Held: No, since she is not the owner of the same. She cannot sell, donate or alienate the same
without the consent of the owner, otherwise it is void.
A void contract is equivalent to nothing; it produces no civil effect. It does not create, modify,
or extinguish a juridical relation. Parties to a void agreement cannot expect the aid of the law; the
courts leave them as they are, because they are deemed inpari delicto or in equal fault. To this rule,
however, there are exceptions that permit the return of that which may have been given under a
void contract. One of the exceptions is found in Article 1412 of the Civil Code, which states:
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.
Since the buyer was not aware of the status of the ownership by the seller, he can recover
the amount given by him under the contract.
In Cavite Development Bank v. Spouses Lim, 381 Phil 355 (2000) and Castillo, et al. v.
Abalayan, 141 Phil. 57 (1969)it was held that in case of a void sale, the seller has no right
whatsoever to keep the money paid by virtue thereof, and should refund it, with interest at the legal
rate, computed from the date of filing of the complaint until fully paid.

22

ESTOPPEL
Requisites of estoppel.
In Dizon v. Phil. Veterans Bank, G.R. No. 165938, November 25, 2009, Peralta, J, the SC said
that a party who obtained a loan secured by a TCT cannot question the authenticity of the same
because of estoppel.
Settled is the rule that a person, who by his deed or conduct has induced another to act in a
particular manner, is barred from adopting an inconsistent position, attitude or course of conduct
that thereby causes loss or injury to the latter. The doctrine of estoppel is based upon the grounds
of public policy, fair dealing, good faith and justice, and its purpose is to forbid one to speak against
his own act, representations, or commitments to the injury of one to whom they were directed and
who reasonably relied thereon.
Article 1431 of the Civil Code states that [t]hrough estoppel an admission or representation
is rendered conclusive upon the person making it, and cannot be denied or disproved as against the
person relying thereon.
The essential elements of estoppel are: (1) conduct of a party amounting to false
representation or concealment of material facts or at least calculated to convey the impression that
the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to
assert; (2) intent, or at least expectation, that this conduct shall be acted upon by, or at least
influence, the other party; and (3) knowledge, actual or constructive, of the real facts.
SALES
Payment is positive suspensive
condition in contract to sell.
In Sps. Garcia, et al. v. CA, et al., G.R.No. 172036, April 23, 2010, the terms and conditions
of the contract between the parties were: (1) failure of the vendees to comply with the conditions of
payment shall cause the rescission of this contract; (2) upon the fulfillment of the terms and
conditions, a Deed of Absolute Sale shall be executed; (3) possession and ownership are reserved by
the seller until full payment.
The SC held that this is a contract to sell, hence, there is no need to rescind.
Payment of the price is a positive suspensive condition, failure of which is not a breach but an
event that prevents the obligation of the vendor to convey title from becoming effective. Strictly
speaking, there can be no rescission or resolution of an obligation that is still non-existent due to the
non-happening of the suspensive condition. (Jacinto v. Kaparaz, G.R. No. 811558, May 22, 192, 209
SCRA 246). The owner is thus not obliged to execute a Deed of Absolute Sale in the buyers favor
because of petitioners failure to make full payment on the stipulated date.
In Pangilinan v. Court of Appeals, 345 Phil. 93 (1997), it was held:
Article 1592 of the New Civil Code, requiring demand by suit or by notarial act
in case the vendor of realty wants to rescind does not apply to a contract to sell but
only to contract of sale. In contracts to sell, where ownership is retained by the seller
and is not to pass until the full payment, such payment, as we said, is a positive
suspensive condition, the failure of which is not a breach, casual or serious, but simply
an event that prevented the obligation of the vendor to convey title from acquiring
binding force. To argue that there was only a casual breach is to proceed from the
assumption that the contract is one of absolute sale, where non-payment is a
resolutory condition, which is not the case.

23

The applicable provision of law in instant case is Article 1191 of the New Civil
Code which provides as follows:
Art. 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 the payment of damages in either
case. He may also seek rescission, even after he has chosen fulfillment,
if the latter should become impossible.
The Court shall decree the rescission claimed, unless there be
just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with Articles 1385
and 1388 and the Mortgage Law. (1124)
Pursuant to the above, the law makes it available to the injured party
alternative remedies such as the power to rescind or enforce fulfillment of the
contract, with damages in either case if the obligor does not comply with what is
incumbent upon him. There is nothing in this law which prohibits the parties from
entering into an agreement that a violation of the terms of the contract would cause
its cancellation even without court intervention. The rationale for the foregoing is that
in contracts providing for automatic revocation, judicial intervention is necessary not
for purposes of obtaining a judicial declaration rescinding a contract already deemed
rescinded by virtue of an agreement providing for rescission even without judicial
intervention, but in order to determine whether or not the rescission was proper.
Where such propriety is sustained, the decision of the court will be merely declaratory
of the revocation, but it is not in itself the revocatory act. Moreover, the vendors
right in contracts to sell with reserved title to extrajudicially cancel the sale upon
failure of the vendee to pay the stipulated installments and retain the sums and
installments already received has long been recognized by the well-established
doctrine of 39 years standing. The validity of the stipulation in the contract providing
for automatic rescission upon non-payment cannot be doubted. It is in the nature of
an agreement granting a party the right to rescind a contract unilaterally in case of
breach without need of going to court. Thus, rescission under Article 1191 was
inevitable due to petitioners failure to pay the stipulated price within the original
period fixed in the agreement.
Obligation of seller to transfer ownership.
In De Leon v. Ong, G.R. No. 170405, February 2, 2010, Corona, J, there was contract of sale
where the seller sold properties in a manner absolute and irrevocable requiring the buyer to pay
P415,000.00 upon the execution of the deed of sale with the balance payable directly to the
mortgagee bank within a reasonable time. Nothing in the contract showed that the seller reserved
the right of ownership. There was a conflict between the buyer and seller since the seller sold it
again on the contention that the first contract was a contract to sell. The buyer contended that it
was a contract of absolute sale. Whose contention is correct? Why?
Answer: The contention of the buyer is correct that it is a contract of absolute sale. The terms and
conditions of the contract only affected the manner of payment, not the immediate transfer of
ownership upon the execution of the notarized contract. The terms and conditions pertained to the
performance of the contract and not the perfection therefore or the transfer of ownership.

24

Settled is the rule that the seller is obliged to transfer title over the properties and deliver the
same to the buyer. In this regard, Article 1498 of the Civil Code provides that, as a rule, the
execution of a notarized deed of sale is equivalent to the delivery of a thing sold.
Note:
Furthermore, even assuming arguendo that the agreement of the parties was subject to the
condition that RSLAI had to approve the assumption of mortgage, the said condition was considered
fulfilled as petitioner prevented its fulfillment by paying his outstanding obligation and taking back
the certificates of title without even notifying respondent. In this connection, Article 1186 of the Civil
Code provides:
Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment.
Because petitioner surreptitiously paid his outstanding obligation and took back her
certificates of title, petitioner himself rendered respondents obligation to assume petitioners
indebtedness to RSLAI impossible to perform.
Article 1266 of the Civil Code provides:
Article 1266. The debtor in obligations to do shall be released when the
prestation become legally or physically impossible without the fault of the obligor.
Since respondents obligation to assume petitioners outstanding balance with RSLAI became
impossible without her fault, she was released from the said obligation. Moreover, because petitioner
himself willfully prevented the condition vis--vis the payment of the remainder of the purchase
price, the said condition is considered fulfilled pursuant to Article 1186 of the Civil Code. For
purposes, therefore, of determining whether respondent was a purchaser in good faith, she is
deemed to have fully complied with the condition of the payment of the remainder of the purchase
price.
Double sale; when a buyer is in
good faith/bad faith.
In Sps. Pudadera v. Magallanes, et al., G.R. No. 170073, October 18, 2010, Del Castillo, J, at
the time the buyer bought the property, there was already an occupant who fenced it and has been
in actual physical possession. Before they bought it, they visited the same. They claimed to be
buyers in good faith, but the Supreme Court ruled otherwise. The first buyer, therefore is the owner.
In case of a double sale of immovables, ownership shall belong to (1) the first registrant in
good faith; (2) then, the first possessor in good faith; and (3) finally, the buyer who in good faith
presents the oldest title. However, mere registration is not enough to confer ownership. The law
requires that the second buyer must have acquired and registered the immovable property in good
faith. In order for the second buyer to displace the first buyer, the following must be shown: (1) the
second buyer must show that he acted in good faith (i.e., in ignorance of the first sale and of the
first buyers rights) from the time of acquisition until title is transferred to him by registration or
failing registration, by delivery of possession; and (2) the second buyer must show continuing good
faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership
through prior registration as provided by law.
One is considered a purchaser in good faith if he buys the property without notice that some
other person has a right to or interest in such property and pays its fair price before he has notice of
the adverse claims and interest of another person in the same property. Well-settled is the rule 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

25

condition of the property. However, this rule shall not apply when the party has actual knowledge of
facts and circumstances that would impel a reasonably cautious man to make such inquiry or when
the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to
induce a reasonably prudent man to inquire into the status of the title of the property in
litigation. His mere refusal to believe that such defect exists, or his willful closing of his eyes to
the possibility of the existence of a defect in his vendors title will not make him an innocent
purchaser for value if it later develops that the title was in fact defective, and it appears that he had
such notice of the defect had he acted with that measure of precaution which may reasonably be
required of a prudent man in a like situation.
In the case at bar, both the trial court and CA found that petitioners were not buyers and
registrants in good faith owing to the fact that Magallanes constructed a fence and small hut on the
subject lot and has been in actual physical possession since 1979. The buyer were aware or should
have been aware of the first buyers prior physical possession and claim of ownership over the
subject lot when they visited the lot on several occasions prior to the sale thereof, considering that
the first buyer was in actual possession of the property and fenced it.
Meaning of the phrase more or
less in a contract of sale of land.
Q A contract over a parcel of land was entered into with an area of 4,000 sq.m. more or less.
When the title was issued, it was 14,475 sq.m. with an excess of 14,475 sq.m. The buyer contended
that it was sale in lump sum and hence, the seller is bound to deliver the property citing Article
1542, NCC. Is the contention correct? Why?
Answer: No, because the excess in the phrase more or less covers only a reasonable excess or
deficiency. In this case, it is quite a big excess. This is especially so that the contract provides for
the boundaries of the land, hence, the owner intended to sell merely the area described in the
contract. The 10,475 sq.m. excess is not slight difference in quantity. The difference in the area is
obviously sizeable and too substantial to be overlooked. It is not a reasonable excess or deficiency
that should be deemed included in the deed of sale. (Del Prado v. Sps. Caballero, G.R. No. 148225,
March 3, 2010, Nachura, J).
Case reference:
In Esguerra v. Trinidad, G.R. No. 169890, March 12, 2007, 518 SCRA 186, the Court had the
occasion to pronounce:
In sales involving real estate, the parties may choose between two types of
pricing agreement: a unit price contract wherein the purchase price is determined
by way of reference to a stated rate per unit area (e.g., P1,000 per square meter),
or a lump sum contract which states a full purchase price for an immovable the area
of which may be declared based on the estimate or where both the area and
boundaries are stated (e.g.,P1 million for 1,000 square meters, etc.). In Rudolf Lietz,
Inc. v. Court of Appeals (478 SCRA 451), the Court discussed the distinction:
In a unit price contract, the statement of area of immovable is not
conclusive and the price may be reduced or increased depending on the
area actually delivered. If the vendor delivers less than the area agreed
upon, the vendee may oblige the vendor to deliver all that may be
stated in the contract or demand for the proportionate reduction of the
purchase price if delivery is not possible. If the vendor delivers more
than the area stated in the contract, the vendee has the option to
accept only the amount agreed upon or to accept the whole area,
provided he pays for the additional area at the contract rate.
x x x x

26

In the case where the area of an immovable is stated in the
contract based on an estimate, the actual area delivered may not
measure up exactly with the area stated in the contract. According to
Article 1542 of the Civil Code, in the sale of real estate, made for a lump
sum and not at the rate of a certain sum for a unit of measure or
number, there shall be no increase or decrease of the price, although
there be a greater or less areas or number than that stated in the
contract. . . .

x x x x

Where both the area and the boundaries of the immovable are
declared, the area covered within the boundaries of the
immovable prevails over the stated area. In cases of conflict between
areas and boundaries, it is the latter which should prevail. What really
defines a piece of ground is not the area, calculated with more or less
certainty, mentioned in its description, but the boundaries therein laid
down, as enclosing the land and indicating its limits. In a contract of
sale of land in a mass, it is well established that the specific boundaries
stated in the contract must control over any statement with respect to
the area contained within its boundaries. It is not of vital consequence
that a deed or contract of sale of land should disclose the area with
mathematical accuracy. It is sufficient if its extent is objectively
indicated with sufficient precision to enable one to identify it. An error
as to the superficial area is immaterial. Thus, the obligation of the
vendor is to deliver everything within the boundaries, inasmuch as it is
the entirety thereof that distinguishes the determinate object.

The Court, however, clarified that the rule laid down in Article 1542 is not hard and fast and
admits of an exception. It held:
A caveat is in order, however. The use of more or less or similar
words in designating quantity covers only a reasonable excess or
deficiency. A vendee of land sold in gross or with the description more or
less with reference to its area does not thereby ipso facto take all risk of
quantity in the land..
Numerical data are not of course the sole gauge of unreasonableness of
the excess or deficiency in area. Courts must consider a host of other
factors. In one case (see Roble v. Arbasa, 414 Phil. 343 [2001]), the Court
found substantial discrepancy in area due to contemporaneous circumstances.
Citing change in the physical nature of the property, it was therein established
that the excess area at the southern portion was a product of reclamation,
which explained why the lands technical description in the deed of sale
indicated the seashore as its southern boundary, hence, the inclusion of the
reclaimed area was declared unreasonable.
In the instant case, the deed of sale is not one of a unit price contract. The parties agreed on
the purchase price of P40,000.00 for a predetermined area of 4,000 sq m, more or less, bounded on
the North by Lot No. 11903, on the East by Lot No. 11908, on the South by Lot Nos. 11858 &
11912, and on the West by Lot No. 11910. In a contract of sale of land in a mass, the specific
boundaries stated in the contract must control over any other statement, with respect to the area
contained within its boundaries. (Salinas v. Faustino, G.R. No. 153077, September 19, 2008, 566
SCRA 18).

27

Purpose of the law governing
equitable mortgage disguised as a
sale contract.
In Heirs of Jose Reyes, et al. v. Amanda Reyes, et al., G.R. No. 158377, August 4, 2010,
Bersamin, J, the SC had the occasion to say that the provisions of the Civil Code governing equitable
mortgages disguised as sale contracts are primarily designed to curtail the evils brought about by
contracts of sale with right to repurchase, particularly the circumvention of the usury law
and pactum commissorium. Courts have taken judicial notice of the well-known fact that contracts of
sale with right to repurchase have been frequently resorted to in order to conceal the true nature of
a contract, that is, a loan secured by a mortgage. It is a reality that grave financial distress renders
persons hard-pressed to meet even their basic needs or to respond to an emergency, leaving no
choice to them but to sign deeds of absolute sale of property or deeds of sale with pacto de retro if
only to obtain the much-needed loan from unscrupulous money lenders. (Santos v. Duata, G.R. No.
L-20901, August 31, 1965, 14 SCRA 1041). This reality precisely explains why the pertinent
provision of the Civil Codeincludes a peculiar rule concerning the period of redemption, to wit:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of
the following cases:
(3) When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period is
executed;

Ostensibly, the law allows a new period of redemption to be agreed upon or granted even
after the expiration of the equitable mortgagors right to repurchase, and treats such extension as
one of the indicators that the true agreement between the parties is an equitable mortgage, not a
sale with right to repurchase.
Art. 1623, NCC, the right of legal redemption.
In Grace Gosiengfiao Guillen, et al. v. CA, et al., G.R. No. 159755, June 18, 2009, Francisco
Gosiengfiao was the owner of a property which he mortgaged to a bank. Due to his failure to pay the
bank, it was foreclosed. Amparro Gosiengfiao-Ibarra redeemed the property. One of the children,
Antonia in her behalf and that of her minor children executed a document waiving their right of
redemption in favor of Amparo who later on sold it to Leonardo Mariano. Grace Gosiengfiao filed a
complaint for reconveyance and with legal redemption against Leonardo and Avelina Mariano as well
as the subsequent buyers, Lazaro Mariano and Dionicia Aquino. The RTC dismissed the case ruling
that when Amparo redeemed the property, it was only herself who became the sole owner. The CA
reversed and declared that plaintiffs as co-heirs have the right to redeem. The SC in a decision
promulgated on May 8, 1993 affirmed the decision, and ruled that the plaintiffs co-heirs have not
lost their right to redeem for in the absence of a written notification of the sale by the vendors, the
30-day period has not yet begun to run.
Subsequent events happened when the motion for execution was filed where the lower courts
ruled that they have lost their right to redeem since the 30-day redemption period should run from
August 2, 1993, date of the entry of the judgment, hence, this petition. Is the ruling correct? Why?
Held: No. The plaintiffs have the right to redeem. It cited its ruling in Mariano v. CA, G.R. No.
101522, May 28, 1993, 222 SCRA 736, thus:
The requirement of a written notice has long been settled as early as in the
case of Castillo v. Samonte (106 Phil. 1023 [1960]) where it was held reiterating the
ruling in Hernaez v. Hernaez (32 Phil. 214), thus:

28

Both the letter and spirit of the New Civil Code argue against any
attempt to widen the scope of the notice specified in Article 1088 by
including therein any other kind of notice, such as verbal or by
registration. If the intention of the law had been to include verbal notice
or any other means of information as sufficient to give the effect of this
notice, then there would have been no necessity or reasons to specify
in Article 1088 of the New Civil Code that the said notice be made in
writing for, under the old law, a verbal notice or information was
sufficient.
x x x
The ruling in Castillo v. Samonte, was reiterated in the case of Garcia v.
Calaliman (G.R. No. 26855, April 17, 1989, 172 SCRA 201) where the reason for the
requirement of the written notice was explained, thus:
Consistent with aforesaid ruling, in the interpretation of a related
provision (Article 1623 of the New Civil Code) this Court had stressed
that written notice is indispensable, actual knowledge of the sale
acquired in some other manners by the redemptioner, notwithstanding.
He or she is still entitled to written notice, as exacted by the code to
remove all uncertainty as to the sale, its terms and its validity, and to
quiet any doubt that the alienation is not definitive. The law not having
provided for any alternative, the method of notifications remains
exclusive, though the Code does not prescribe any particular form of
written notice nor any distinctive method for written notification of
redemption (Conejero et al. v. Court of Appeals et al., 16 SCRA 775
[1966]; Etcuban v. Court of Appeals, 148 SCRA 507 [1987]; Cabrera v.
Villanueva, G.R. No. 75069, April 15, 1988).
The records of the present petition, however, show no written notice of the sale
being given whatsoever to private respondents [petitioner-heirs]. Although,
petitioners allege that sometime on October 31, 1982 private respondent, Grace
Gosiengfiao was given a copy of the questioned deed of sale and shown a copy of the
document at the Office of the Barangay Captain sometime November 18, 1982, this
was not supported by the evidence presented. x x x
From these premises, petitioner-heirs have not lost their right to redeem, for in the absence
of a written notification of the sale by the vendors, the 30-day period has not even begun to
run. These premises and conclusion leave no doubt about the thrust of Mariano: The right of the
petitioner-heirs to exercise their right of legal redemption exists, and the running of the
period for its exercise has not even been triggered because they have not been notified in
writing of the fact of sale.
The computation of the 30-day period to exercise the legal right of redemption did not start
to run from the finality of the Mariano Decision, and that the petitioner-heirs seasonably filed, via a
writ of execution, their notice of redemption, although they applied for the issuance of the writ some
eight (8) months after the finality of the Decision.
LEASE
Lease with option to buy.
In Polytechnic Univ. of the Phils. v. Golden Horizon Realty Corp., G.R. No. 183612; National
Dev. Co. v. Golden Horizon Realty Corp., G.R. No. 184260, March 15, 2010, there was a contract of
lease with option to buy, the price to be negotiated and determined at the time the option to

29

purchase is exercised. The property was however sold to PUP by NDC upon order of the President.
Before however the sale was made, the lessee wrote a letter to the lessor manifesting the exercise
of the option to buy. There was, however, no action on the offer to buy, hence, the contract expired
without exercising the right. The lessee contended that NDC, the lessor violated its right of first
refusal by the sale of the property to PUP. It was contended on the other hand by the lessor that
since the contract has already expired, with the right of first refusal not being carried over into the
impliedly renewed contract, there was no violation. Is the contention correct? Why?
Held: No, because the right of first refusal was exercised before the contract of lease expired and
before it was sold to PUP by the lessor.
An option is a contract by which the owner of the property agrees with another person that
the latter shall have the right to buy the formers property at a fixed price within a certain time. It is
a condition offered or contract by which the owner stipulates with another that the latter shall have
the right to buy the property at a fixed price within a certain time, or under, or in compliance with
certain terms and conditions; or which gives to the owner of the property the right to sell or demand
a sale. (Eulogio v. Apeles, G.R. No. 167884, January 20, 2009, 576 SCRA 561,
citing Tayag v. Lacson, G.R. No. 134971, March 25, 2004, 426 SCRA 282, 304). It binds the
party, who has given the option, not to enter into the principal contract with any other person during
the period designated, and, within that period, to enter into such contract with the one to whom the
option was granted, if the latter should decide to use the option. (Carcellar v. Court of Appeals, G.R.
No. 124791, February 10, 1999, 302 SCRA 718, 724).

Right of first refusal not impliedly renewed.
It was contended that the right of first refusal was not impliedly renewed when the lease
contract expired. Is the contention correct? Why?
Held: No, because the right was exercised before the contract of lease expired. Hence, whether it
was carried over into the impliedly renewed contract is irrelevant. As the right was still existing when
it was exercised and when the property was sold to PUP, the lessor violated the right of first refusal.
When a lease contract contains a right of first refusal, the lessor has the legal duty to the
lessee not to sell the leased property to anyone at any price until after the lessor has made an offer
to sell the property to the lessee and the lessee has failed to accept it. Only after the lessee has
failed to exercise his right of first priority could the lessor sell the property to other buyers under the
same terms and conditions offered to the lessee, or under terms and conditions more favorable to
the lessor.
Nature of right of first refusal; consideration.
The contractual grant of a right of first refusal is enforceable, and following an earlier ruling
in Equatorial Realty Development, Inc. v. Mayfair Theater, Inc., G.R. No. 106063, November 21,
1996, 264 SCRA 483, the execution of such right consists in directing the grantor to comply with his
obligation according to the terms at which he should have offered the property in favor of the
grantee and at that price when the offer should have been made.
Consideration in right of first refusal.
Indeed, basic is the rule that a party to a contract cannot unilaterally withdraw a right of first
refusal that stands upon valuable consideration. It is not correct to say that there is no consideration
for the grant of the right of first refusal if such grant is embodied in the same contract of
lease. Since the stipulation forms part of the entire lease contract, the consideration for the lease
includes the consideration for the grant of the right of first refusal. In entering into the contract, the
lessee is in effect stating that it consents to lease the premises and to pay the price agreed upon

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provided the lessor also consents that, should it sell the leased property, then, the lessee shall be
given the right to match the offered purchase price and to buy the property at that price.
Not even the avowed public welfare or the constitutional priority accorded to education,
invoked by petitioner PUP in the Firestone case, would serve as license for the Court, and any party
for that matter, to destroy the sanctity of binding obligations. While education may be prioritized for
legislative and budgetary purposes, it is doubtful if such importance can be used to confiscate
private property such as the right of first refusal granted to a lessee.
LEASE
Lessee cannot be a builder in good faith.
Once again, it was said in Amores v. Yu-Go, et al., G.R. No. 172292, July 23, 2010, Carpio, J,
tenants cannot be said to be builders in good faith as they have no pretension to be owners of the
property. (Quemel & Solis v. Olaes, et al., 111 Phil. 797 (1961). Indeed, full reimbursement of
useful improvements and retention of the premises until reimbursement is made applies only to a
possessor in good faith, i.e., one who builds on land with the belief that he is the owner thereof. It
does not apply where ones only interest is that of a lessee under a rental contract; otherwise, it
would always be in the power of the tenant to improve his landlord out of his property. (Geminiano
v. CA, 328 Phil. 682 (1996).
PARTNERSHIP
Demand for periodic accounting is
evidence of partnership.
Q Petitioners filed a complaint for Partition, Accounting and Damages against the respondent,
alleging that their father Jose Lim entered into a contract of partnership with Jimmy and Norberto
Uy. The respondent denied the claim, contending that her husband Elfledo, the son of Jose Lim was
the partner, not their father. In fact, their mother testified that Jose gave P50,000.00 to Elfledo
which was contributed into the partnership. He ran the affairs of the partnership without intervention
of the petitioners; all the properties were registered under his name; Jimmy testified that Elfledo
managed the partnership without salaries, but received his shares of the partnership business.
Petitioners never demanded for periodic accounting from Elfledo. Who is the partner, Jose or Elfledo?
Explain.
Answer: Elfledo is the partner. As early as Tan Eng Kee v. CA, 396 Phil. 68 (2000), the SC has ruled
that a demand for periodic accounting is evidence of a partnership, (citing Art. 1769, NCC). Elfledo
received shares in the profits of the business which is a prima facie evidence that he was a partner.
There was no evidence presented by petitioners to prove that the receipt of share did not amount to
partnership. Bare allegation is not proof.
If it were true that it was Jose Lim and not Elfledo who was the partner, then upon his death
the partnership should have been dissolved and its assets liquidated. On the contrary, these were
not done but instead its operation continued under the helm of Elfledo and without any participation
from the heirs of Jose Lim. (Heirs of Jose Lim v. Juliet Villa Lim, G.R. No. 172690, March 3, 2010,
Nachura, J).

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AGENCY
Hospitals liability for negligence
of a doctor under the doctrine of
ostensible agency.
In Professional Services, Inc. v. CA, et al., G.R. No. 126467; Agana v. CA, et al., G.R. No.
127590; Ampil v. Agana, G.R.No. 127590, February 2, 2010, Corona, J, the SC held PSI directly
liable to the Aganas for the negligence of Dr. Ampil in not removing from the body of Natividad
Agana the two (2) gauzes which were used in the surgery performed on her. The direct liability was
premised on the following facts and law.
First, there existed between PSI and Dr. Ampil an employer-employee relationship as
contemplated in the December 29, 1999 decision in Ramos v. Court of Appeals that for purposes of
allocating responsibility in medical negligence cases, an employer-employee relationship exists
between hospitals and their consultants. Although the Court in Ramos later issued a Resolution
dated April 11, 2002 reversing its earlier finding on the existence of an employment relationship
between hospital and doctor, a similar reversal was not warranted in the present case because the
defense raised by PSI consisted of a mere general denial of control or responsibility over the actions
of Dr. Ampil.
Second, by accrediting Dr. Ampil and advertising his qualifications, PSI created the public
impression that he was its agent. Enrique testified that it was on account of Dr. Ampil's accreditation
with PSI that he conferred with said doctor about his wife's (Natividad's) condition. After his meeting
with Dr. Ampil, Enrique asked Natividad to personally consult Dr. Ampil. In effect, when Enrigue and
Natividad engaged the services of Dr. Ampil, at the back of their minds was that the latter was a
staff member of a prestigious hospital. Thus, under the doctrine of apparent authority applied
in Nogales, et al. v. Capitol MedicalCenter, et al., PSI was liable for the negligence of Dr. Ampil.
Finally, as owner and operator of Medical City General Hospital, PSI was bound by its duty to
provide comprehensive medical services to Natividad Agana, to exercise reasonable care to protect
her from harm, to oversee or supervise all persons who practiced medicine within its walls, and to
take active steps in fixing any form of negligence committed within its premises. PSI committed a
serious breach of its corporate duty when it failed to conduct an immediate investigation into the
reported missing gauzes.
In their respective memoranda, intervenors raised parallel arguments that the Court's ruling
on the existence of an employer-employee relationship between private hospitals and consultants
will force a drastic and complex alteration in the long-established and currently prevailing
relationships among patient, physician and hospital, with burdensome operational and financial
consequences and adverse effects on all three parties.
After gathering its thoughts on the issues, the Supreme Court
Held: PSI is liable to the Aganas, not under the principle of respondeat superior for lack of evidence
of an employment relationship with Dr. Ampil but under the principle of ostensible agency for the
negligence of Dr. Ampil and, pro hac vice, under the principle of corporate negligence for its failure
to perform its duties as a hospital.
While in theory a hospital as a juridical entity cannot practice medicine, in reality it utilizes
doctors, surgeons and medical practitioners in the conduct of its business of facilitating medical and
surgical treatment. Within that reality, three legal relationships crisscross: (1) between the hospital
and the doctor practicing within its premises; (2) between the hospital and the patient being treated
or examined within its premises and (3) between the patient and the doctor. The exact nature of
each relationship determines the basis and extent of the liability of the hospital for the negligence of
the doctor.

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Where an employment relationship exists, the hospital may be held vicariously liable under
Article 2176 in relation to Article 2180 of the Civil Code or the principle of respondeat superior. Even
when no employment relationship exists but it is shown that the hospital holds out to the patient
that the doctor is its agent, the hospital may still be vicariously liable under Article 2176 in relation
to Article 1431 and Article 1869 of the Civil Code or the principle of apparent authority. Moreover,
regardless of its relationship with the doctor, the hospital may be held directly liable to the patient
for its own negligence or failure to follow established standard of conduct to which it should conform
as a corporation.
The modification of the ruling that there is no employee-employee relationship is anchored on
the fact that the trial court did not find the existence of such relationship which became final and
executory as it was not appealed from. Hence, PSI cannot be liable under the principle of respondeat
superior.
Doctor as agent of hospital.
There is, however, ample evidence that the hospital (PSI) held out to the patient
(Natividad) that the doctor (Dr. Ampil) was its agent. Present are the two factors that determine
apparent authority: first, the hospital's implied manifestation to the patient which led the latter to
conclude that the doctor was the hospital's agent; and second, the patients reliance upon the
conduct of the hospital and the doctor, consistent with ordinary care and prudence. (Nogales v.
Capitol Medical Center), hence, PSI is vicariously liable for negligence of the doctor as its ostensible
agent.
Such ostensible agency is confirmed and reinforced by the fact that PSI required a consent
for hospital care to be signed preparatory to the surgery. PSI virtually reinforced the public
impression that the doctor was a physician of the hospital rather than one independently practicing
in it.
Effects of the admission of PSI.
PSI reiterated its admission when it stated that had Natividad Agana informed the hospital of
her discomfort and pain, the hospital would have been obliged to act on it.
The significance of the foregoing statements is critical.
First, they constitute judicial admission by PSI that while it had no power to control the
means or method by which Dr. Ampil conducted the surgery on Natividad Agana, it had the power
to review or cause the review of what may have irregularly transpired within its walls strictly for
the purpose of determining whether some form of negligence may have attended any procedure
done inside its premises, with the ultimate end of protecting its patients.
Second, it is a judicial admission that, by virtue of the nature of its business as well as its
prominence in the hospital industry, it assumed a duty to tread on the captain of the ship role of
any doctor rendering services within its premises for the purpose of ensuring the safety of the
patients availing themselves of its services and facilities.
Third, by such admission, PSI defined the standards of its corporate conduct under the
circumstances of this case, specifically: (a) that it had a corporate duty to Natividad even after her
operation to ensure her safety as a patient; (b) that its corporate duty was not limited to having its
nursing staff note or record the two missing gauzes and (c) that its corporate duty extended to
determining Dr. Ampil's role in it, bringing the matter to his attention, and correcting his
negligence.

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And finally, by such admission, PSI barred itself from arguing in its second motion for
reconsideration that the concept of corporate responsibility was not yet in existence at the time
Natividad underwent treatment; and that if it had any corporate responsibility, the same was limited
to reporting the missing gauzes and did not include taking an active step in fixing the negligence
committed. An admission made in the pleading cannot be controverted by the party making such
admission and is conclusive as to him, and all proofs submitted by him contrary thereto or
inconsistent therewith should be ignored, whether or not objection is interposed by a party.
Excuse of PSI; doctrine of
corporate negligence applied.
PSI excuses itself from fulfilling its corporate duty on the ground that Dr. Ampil assumed the
personal responsibility of informing Natividad about the two missing gauzes.
PSI claimed that there was no reason for it to act on the report on the two missing gauzes
because Natividad Agana showed no signs of complications. She did not even inform the hospital
about her discomfort.
The excuses are totally unacceptable.
PSI could not simply wave off the problem and nonchalantly delegate to Dr. Ampil the duty to
review what transpired during the operation. The purpose of such review would have been to
pinpoint when, how and by whom two surgical gauzes were mislaid so that necessary remedial
measures could be taken to avert any jeopardy to Natividads recovery. Certainly, PSI could not
have expected that purpose to be achieved by merely hoping that the person likely to have mislaid
the gauzes might be able to retrace his own steps. By its own standard of corporate conduct, PSI's
duty to initiate the review was non-delegable.
While Dr. Ampil may have had the primary responsibility of notifying Natividad about the
missing gauzes, PSI imposed upon itself the separate and independent responsibility of initiating the
inquiry into the missing gauzes. The purpose of the first would have been to apprise Natividad of
what transpired during her surgery, while the purpose of the second would have been to pinpoint
any lapse in procedure that led to the gauze count discrepancy, so as to prevent a recurrence
thereof and to determine corrective measures that would ensure the safety of Natividad. That Dr.
Ampil negligently failed to notify Natividad did not release PSI from its self-imposed separate
responsibility.
Corollary to its non-delegable undertaking to review potential incidents of negligence
committed within its premises, PSI had the duty to take notice of medical records prepared by its
own staff and submitted to its custody, especially when these bear earmarks of a surgery gone
awry. Thus, the record taken during the operation of Natividad which reported a gauze count
discrepancy should have given PSI sufficient reason to initiate a review. It should not have waited
for Natividad to complain.
As it happened, PSI took no heed of the record of operation and consequently did not initiate
a review of what transpired during Natividads operation. Rather, it shirked its responsibility and
passed it on to others to Dr. Ampil whom it expected to inform Natividad, and to Natividad herself
to complain before it took any meaningful step. By its inaction, therefore, PSI failed its own standard
of hospital care. It committed corporate negligence.
It should be borne in mind that the corporate negligence ascribed to PSI is different from the
medical negligence attributed to Dr. Ampil. The duties of the hospital are distinct from those of the
doctor-consultant practicing within its premises in relation to the patient; hence, the failure of PSI to
fulfill its duties as a hospital corporation gave rise to a direct liability to the Aganas distinct from that
of Dr. Ampil.

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All this notwithstanding, PSIs hospital liability based on ostensible agency and corporate
negligence applies only to this case, pro hac vice. It is not intended to set a precedent and should
not serve as a basis to hold hospitals liable for every form of negligence of their doctors-consultants
under any and all circumstances. The ruling is unique to this case, for the liability of PSI arose from
an implied agency with Dr. Ampil and an admitted corporate duty to Natividad.
Effect if agent does not act for
and in behalf of principal;
principal is not bound.
In FEBTC, (now BPI), et al. v. Sps. Cayetano, G.R. No. 179909, January 25, 2010, the owner
of a property executed a special power of attorney in favor of her daughter to secure a loan and
mortgage her property for not more than P300,000.00. The contract however did not indicate that
she was acting on behalf of the principal. The binding effect of the contract was the basic issue
where the SC
Held: The principal is not bound. In fact, the issue is not something novel, as the case is similar to
other cases where, the real estate mortgages on the principals properties were executed in the
name of the agent but did not indicate the agent was acting on behalf of the principal. The
mortgages were not binding on the principal and as to them, they were void. In Coster, the SC said:
It is a general rule in the law of agency that, in order to bind the principal by a mortgage on
real property executed by an agent, it must upon its face purport to be made, signed and sealed in
the name of the principal, otherwise, it will bind the agent only. It is not enough merely that the
agent was in fact authorized to make the mortgage, if he has not acted in the name of the
principal. Neither is it ordinarily sufficient that in the mortgage the agent describes himself as
acting by virtue of a power of attorney, if in fact the agent has acted in his own name and has set
his own hand and seal to the mortgage. This is especially true where the agent himself is a party to
the instrument. However clearly the body of the mortgage may show and intend that it shall
be the act of the principal, yet, unless in fact it is executed by the agent for and on behalf
of his principal and as the act and deed of the principal, it is not valid as to the
principal. (See also: Gozum v. Mercado, G.R. No. 167812, December 19, 2006, 511 SCRA 305).
Laches applied in this case.
Inspite of the non-binding effect of the REM, and its invalidity as to the principal, laches has
set in because of the failure to question it for quite sometime or for five (5) years despite the
annotation on the titles. There was failure to oppose the foreclosure, etc.,
Laches is negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or declined to assert it. Its
essential elements are: (1) conduct on the part of the defendant, or of one under whom he claims,
giving rise to the situation complained of; (2) delay in asserting complainants right after he had
knowledge of the defendants conduct and after he has an opportunity to sue; (3) lack of knowledge
or notice on the part of the defendant that the complainant would assert the right on which he bases
his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the
complainant.
Sale by agent without a written
authority is void.
Once again in Sps. Alcantara, et al. v. Nido, G.R. No. 165133, April 19, 2010, Carpio, J, the
SC had the occasion to rule that Article 1874 of the Civil Code explicitly requires a written authority
before an agent can sell an immovable property.

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Consequently, the sale of the lot by a person who did not have a written authority from the
owner is void. A void contract produces no effect either against or in favor of anyone and cannot be
ratified.
A special power of attorney is also necessary to enter into any contract by which the
ownership of an immovable is transmitted or acquired for a valuable consideration. Without an
authority in writing, respondent cannot validly sell the lot to petitioners. Hence, any sale in favor of
the petitioners is void.
Further, Article 1318 of the Civil Code enumerates the requisites for a valid contract, namely:
1. consent of the contracting parties;
2. object certain which is the subject matter of the contract;
3. cause of the obligation which is established.
Respondent did not have the written authority to enter into a contract to sell the lot. As the
consent of the owner, the real owner of the lot, was not obtained in writing as required by law, no
contract was perfected. Consequently, petitioners failed to validly acquire the lot.
Q Is not a general power of attorney executed before a notary public in the USA sufficient to
authorize an agent to sell the property? Explain.
Answer: No. In Teoco v. Metropolitan Bank and Trust Company, quoting Lopez v. Court of
Appeals, we explained:
From the foregoing provision, when the special power of attorney is executed
and acknowledged before a notary public or other competent official in a foreign
country, it cannot be admitted in evidence unless it is certified as such in accordance
with the foregoing provision of the rules by a secretary of embassy or legation, consul
general, consul, vice consul, or consular agent or by any officer in the foreign service
of the Philippines stationed in the foreign country in which the record is kept of said
public document and authenticated by the seal of his office. A city judge-notary who
notarized the document, as in this case, cannot issue such certification.
Since the General Power of Attorney was executed and acknowledged in the United States of
America, it cannot be admitted in evidence unless it is certified as such in accordance with the Rules
of Court by an officer in the foreign service of the Philippines stationed in the United States of
America. Hence, this document has no probative value.
LOANS
No interest unless expressly agreed upon.
Once again, in Prisma Construction & Dev. Corp., et al. v. Menchavez, G.R. No. 160545,
March 9, 2010, the SC had the occasion to rule that interest due should be stipulated in writing,
otherwise, 12% per annum shall be imposed. In this case there was a loan amounting to P1M, but
there was no agreement on interest put into writing.
Art. 1956, NCC mandates that no interest shall be due unless it has been expressly
stipulated in writing. Under this provision, the payment of interest in loans or forbearance of money
is allowed only if: (1) there was an express stipulation for the payment of interest; and (2) the
agreement for the payment of interest was reduced in writing. The concurrence of the two conditions
is required for the payment of interest at a stipulated rate. In Tan v. Valdehueza, 160 Phil. 760
(1975) and Ching v. Nicdao,G.R. No. 141181, April 27, 2007, 522 SCRA 316 it was held that
collection of interest without any stipulation in writing is prohibited by law. Hence, if there is no
express agreement, the interest on the loan should be only 12% per annum.

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Unconscionable interest rates:
(1) Medel v. CA, 359 SCRA 820 (1998) 5.5% per month
(2) Sps. Solangon v. Salazar, 412 Phil. 816 (2001) 6% per annum
(3) Imperial v. Jaucian, 471 Phil. 484 (2004) 16% per annum
(4) Arofo v. Quio, 490 Phil. 179 (2005) 7%
(5) Chua v. Timan, G.R. No. 170452, August 13, 2008 7%
In this case the issue of excessiveness of the interest rate was not raised. (Sps. Pascual v.
Ramos, 433 Phil. 449 (2002).
The agreement was that the loan shall earn interest of P40,000.00 per month for 6 months.
That is valid. After that, 12% interest per annum shall be earned by the loan.
It is a familiar doctrine in obligations and contracts that the parties are bound by the
stipulations, clauses, terms and conditions they have agreed to, which is the law between them, the
only limitation being that these stipulations, clauses, terms and conditions are not contrary to law,
morals, public order or public policy. The payment of the specific sum of money of P40,000.00 per
month was voluntarily agreed upon by the petitioners and the respondent.
Unconscionable interest is void
even if parties may stipulate on
the interest rate in a loan.
In Asian Cathay Finance & Leasing Corp. v. Sps. Gravador, et al., G.R. No. 186550, July 5,
2010, Nachura, J, the SC once again echoed the well-settled principle that it is true that parties to a
loan agreement have a wide latitude to stipulate on any interest rate in view of Central Bank Circular
No. 905, series of 1982, which suspended the Usury Law ceiling on interest rate effective January 1,
1983. However, interest rates, whenever unconscionable, may be equitably reduced or even
invalidated. In several cases, this Court had declared as null and void stipulations on interest and
charges that were found excessive, iniquitous and unconscionable.
In this case, an obligation amounting to P800,000.00 ballooned by more than P1,000,000.00
in a span of 3 months but the creditor failed to show any computation on how much interest was
imposed and on the penalties charged.
In Spouses Isagani and Diosdada Castro v. Angelina de Leon Tan, et al., the SC ruled:
The imposition of an unconscionable rate of interest on a money debt, even if
knowingly and voluntarily assumed, is immoral and unjust. It is tantamount to a
repugnant spoliation and an iniquitous deprivation of property, repulsive to the
common sense of man. It has no support in law, in principles of justice, or in the
human conscience nor is there any reason whatsoever which may justify such
imposition as righteous and as one that may be sustained within the sphere of public
or private morals. (G.R. No. 168940, November 2, 2009).
Stipulations authorizing the imposition of iniquitous or unconscionable interest are contrary to
morals, if not against the law. Under Article 1409 of the Civil Code, these contracts are inexistent and
void from the beginning. They cannot be ratified nor the right to set up their illegality as a defense be
waived. The nullity of the stipulation on the usurious interest does not, however, affect the lenders
right to recover the principal of the loan. Nor would it affect the terms of the real estate
mortgage. The right to foreclose the mortgage remains with the creditors, and said right can be
exercised upon the failure of the debtors to pay the debt due. The debt due is to be considered
without the stipulation of the excessive interest. A legal interest of 12% per annum will be added in
place of the excessive interest formerly imposed. The nullification by the CA of the interest rate and

37

the penalty charge and the consequent imposition of an interest rate of 12% and penalty charge of
1% per month cannot, therefore, be considered a reversible error.
TORTS AND DAMAGES
Presumption of negligence; failure
to exercise diligence of good
father of family.
In Phil. Hawk Corp. v. Lee, G.R. No. 166869, February 16, 2010, Peralta, J, the SC once
again ruled that whenever an employees negligence causes damage or injury to another, there
instantly arises a presumption that the employer failed to exercise the due diligence of a good father
of the family in the selection or supervision of its employees. To avoid liability for a quasi-delict
committed by his employee, an employer must overcome the presumption by presenting convincing
proof that he exercised the care and diligence of a good father of a family in the selection and
supervision of his employee.
Duties and liabilities of a gun store owner,
etc.
In Alfredo P. Pacis, et al. v. Jerome Jovanne Morales, G.R. No. 169467, February 25, 2010, a
minor was killed inside a gun store, fired from a gun brought by the owner for repair. The gun was
kept inside a drawer by the owner. The caretaker left the store and requested two (2) sales agents
to take care of the store and entrusted a bunch of keys including the key of the drawer where the
gun was kept. The sales agents brought out the gun and placed it on top of the table and attracted
by the sight of the gun, the minor Alfredo Pacis got hold of it. He was asked to return it but when he
did, it went off and a bullet hit his head, killing him. A criminal case was filed against the owner but
he was acquitted because of accident under Art. 12, par. 4, RPC. A complaint for damages was filed
by the parents where by agreement of the parties, the evidence in the criminal case was reproduced
and adopted in the civil action. The defendant was held liable for damages. The CA reversed it and
absolved him pursuant to Art. 2180, NCC.
The trial court held respondent civilly liable for the death of Alfred under Article 2180 in
relation to Article 2176 of the Civil Code. The trial court held that the accidental shooting of Alfred
which caused his death was partly due to the negligence of respondents employee Aristedes Matibag
(Matibag). Matibag and Jason Herbolario (Herbolario) were employees of respondent even if they
were only paid on a commission basis. Under the Civil Code, respondent is liable for the damages
caused by Matibag on the occasion of the performance of his duties, unless respondent proved that
he observed the diligence of a good father of a family to prevent the damage. The trial court held
that respondent failed to observe the required diligence when he left the key to the drawer
containing the loaded defective gun without instructing his employees to be careful in handling the
loaded gun.

It was found by the CA that the defendant exercised the diligence of a good father of a family
to prevent the accident by keeping the gun inside his drawer which was locked which was taken
away without his knowledge, hence, what happened to the deceased was purely accidental. In
reversing the CA, the SC and holding that the defendant was negligent, for failure to comply with the
PNP Circular, the SC
Held: Under the PNP Circular No. 9, entitled Policy on Firearms and Ammunition Dealership/Repair,
a person who is in the business of purchasing and selling firearms and ammunitions must maintain
basic security and safety requirements of a gun dealer, otherwise his license to Operate Dealership
will be suspended or cancelled.
Indeed, a higher degree of care is required of someone who has in his possession or under
his control an instrumentality extremely dangerous in character, such as dangerous weapons or

38

substances. Such person in possession or control of dangerous instrumentalities has the duty to take
exceptional precautions to prevent any injury being done thereby. Unlike the ordinary affairs of life
or business which involve little or no risk, a business dealing with dangerous weapons requires the
exercise of a higher degree of care.
As a gun store owner, respondent is presumed to be knowledgeable about firearms safety and
should have known never to keep a loaded weapon in his store to avoid unreasonable risk of harm
or injury to others. Respondent has the duty to ensure that all the guns in his store are not loaded.
Firearms should be stored unloaded and separate from ammunition when the firearms are not
needed for ready-access defensive use. With more reason, guns accepted by the store for repair
should not be loaded precisely because they are defective and may cause an accidental discharge
such as what happened in this case. Respondent was clearly negligent when he accepted the gun for
repair and placed it inside the drawer without ensuring first that it was not loaded. In the first place,
the defective gun should have been stored in a vault. Before accepting the defective gun for repair,
respondent should have made sure that it was not loaded to prevent any untoward accident. Indeed,
respondent should never accept a firearm from another person, until the cylinder or action is open
and he has personally checked that the weapon is completely unloaded. For failing to insure that the
gun was not loaded, respondent himself was negligent. Furthermore, it was not shown in this case
whether respondent had a License to Repair which authorizes him to repair defective firearms to
restore its original composition or enhance or upgrade firearms.

Clearly, respondent did not exercise the degree of care and diligence required of a good
father of a family, much less the degree of care required of someone dealing with dangerous
weapons, as would exempt him from liability in this case.
DAMAGES
Compensatory Damages
When compensatory damages may be awarded.
In People v. Asis, et al., G.R. No. 177573, July 7, 2010, Leonardo-De Castro, J, the SC once
again said that when death occurs due to a crime, the following may be awarded: (1) civil indemnity
ex delicto for the death of the victim; (2) actual or compensatory damages; (3) moral damages; (4)
exemplary damages; and (5) temperate damages.
Conformably with existing jurisprudence, the heirs are entitled to civil indemnity in the
amount of P75,000.00 where the crime is murder and the penalty of reclusion perpetua is imposed,
which is mandatory and is granted to the heirs of the victim without need of proof other than the
commission of the crime. Likewise, moral damages shall be awarded in favor of the heirs of the
victim. Moral dmages are awarded despite the absence of proof of mental and emotional suffering of
the victims heirs. As borne out by human nature and experience, a violent death invariably and
necessarily brings about emotional pain and anguish on the part of the victims family.
As to the award of loss of earnings the Court did not do so because the prosecution failed to
adduce evidence for the grant of the same. In People v. Mallari, 452 Phil. 210 (2003), the rule is
that documentary evidence should be presented to substantiate a claim for damages for loss of
earning capacity. By way of exception, damages therefore may be awarded despite the absence of
documentary evidence provided that there is testimony that the victim was either (1) self-employed
earning less than the minimum wage under current labor laws, and judicial notice may be taken of
the fact that in the victims line of work no documentary evidence is available; or (2) employed as a
daily-wage worker earning less than the minimum wage under current labor laws. (See also: Phil.
Hawk Corp. v. Lee, G.R. no. 166869, February 16, 2010, Peralta, J).
The victim was earning P700.00 as jeepney driver, hence, there is a need to prove loss of
earnings by documentary evidence.

39

EXEMPLARY DAMAGES
Two (2) legal bases for the award
of exemplary damages.
In People v. Reyes, G.R. No. 184809, March 29, 2010, Perez, J, the SC had the occasion to
rule that the rich jurisprudence in rape cases shows that there are two legal bases for awarding
exemplary damages. People v. Dalisay, G.R. No. 188106, November 25, 2009 is instructive. Thus:
[B]y focusing only on Article 2230 as the legal basis for the grant of
exemplary damagestaking into account simply the attendance of an aggravating
circumstance in the commission of a crime, courts have lost sight of the very reason
why exemplary damages are awarded. Catubig is enlightening on this point, thus
Also known as punitive or vindictive damages, exemplary or
corrective damages are intended to serve as a deterrent to serious
wrong doings, and as a vindication of undue sufferings and wanton
invasion of the rights of an injured or a punishment for those guilty of
outrageous conduct. These terms are generally, but not always, used
interchangeably. In common law, there is preference in the use of
exemplary damages when the award is to account for injury to feelings
and for the sense of indignity and humiliation suffered by a person as a
result of an injury that has been maliciously and wantonly inflicted, the
theory being that there should be compensation for the hurt caused by
the highly reprehensible conduct of the defendantassociated with such
circumstances as willfulness, wantonness, malice, gross negligence or
recklessness, oppression, insult or fraud or gross fraudthat intensifies
the injury. The terms punitive or vindictive damages are often used to
refer to those species of damages that may be awarded against a
person to punish him for his outrageous conduct. In either case, these
damages are intended in good measure to deter the wrongdoer and
others like him from similar conduct in the future.
Being corrective in nature, exemplary damages, therefore, can be
awarded, not only in the presence of an aggravating circumstance, but also where
the circumstances of the case show the highly reprehensible or outrageous
conduct of the offender. In much the same way as Article 2230 prescribes an
instance when exemplary damages may be awarded, Article 2229, the main
provision, lays down the very basis of the award. Recently, in People of the
Philippines v. Cristino Caada, People of the Philippines v. Pepito Neverio, G.R.
No. 182792, August 25, 2009; and The People of the Philippines v. Lorenzo Layco,
Sr., G.R No. 182191, May 8, 2009, the Court awarded exemplary damages to
set a public example, to serve as deterrent to elders who abuse and corrupt
the youth, and to protect the latter from sexual abuse.
In People v. Caada, G.R. No. 175317, October 2, 2009, the relationship of appellant,
common law spouse of the mother of the fifteen-year old victim, was never alleged in the
Information nor proven in court. Citing People v. Canares, G.R. No. 174065, February 18, 2009, a
case of statutory rape perpetrated by a househelper, the Court awarded exemplary damages in the
amount of P30,000.00 justified under Article 2229 of the Civil Code to set a public example and
serve as deterrent against elders who abuse and corrupt the youth.

40

Brothers and sisters of a deceased
are not entitle to moral damages.
The basic issue in Sulpicio Lines, Inc. v. Curso, et al., G.R. No. 157000, March 17, 2010,
Bersamin, J, is whether the surviving brothers and sisters of a passenger of a vessel that sinks
during a voyage are entitled to recover moral damages from the common carrier. The SC
Held: No, because only the spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of the deceased.
(Art. 2206(3), NCC).
The foregoing legal provisions set forth the persons entitled to moral damages. The omission
from Article 2206 (3) of the brothers and sisters of the deceased passenger reveals the legislative
intent to exclude them from the recovery of moral damages for mental anguish by reason of the
death of the deceased. Inclusio unius est exclusio alterius. The solemn power and duty of the courts
to interpret and apply the law do not include the power to correct the law by reading into it what is
not written therein.

Essentially, the purpose of moral damages is indemnity or reparation, that is, to enable the
injured party to obtain the means, diversions, or amusements that will serve to alleviate the moral
suffering he has undergone by reason of the tragic event. According to Villanueva v. Salvador, the
conditions for awarding moral damages are: (a) there must be an injury, whether physical, mental,
or psychological, clearly substantiated by the claimant; (b) there must be a culpable act or omission
factually established; (c) the wrongful act or omission of the defendant must be the proximate cause
of the injury sustained by the claimant; and (d) the award of damages is predicated on any of the
cases stated in Article 2219 of the Civil Code.
To be entitled to moral damages, the respondents must have a right based upon law. It is
true that under Article 1003 of the Civil Code they succeeded to the entire estate of the late
Dr. Curso in the absence of the latters descendants, ascendants, illegitimate children, and surviving
spouse. However, they were not included among the persons entitled to recover moral damages, as
enumerated in Article 2219 of the Civil Code.
Article 2219 circumscribes the instances in which moral damages may be awarded. The
provision does not include succession in the collateral line as a source of the right to recover moral
damages. The usage of the phrase analogous cases in the provision means simply that the situation
must be held similar to those expressly enumerated in the law in question following
the ejusdemgeneris rule. Hence, Article 1003 of the Civil Code is not concerned with recovery of
moral damages.
In fine, moral damages may be recovered in an action upon breach of contract of carriage
only when: (a) where death of a passenger results, or (b) it is proved that the carrier was guilty of
fraud and bad faith, even if death does not result. Article 2206 of the Civil Code entitles the
descendants, ascendants, illegitimate children, and surviving spouse of the deceased passenger to
demand moral damages for mental anguish by reason of the death of the deceased.
Malicious prosecution; mere filing
and dismissal of a suit does not
warrant a complaint for malicious
prosecution.
In Limanch-O Hotel & Leasing Corp., et al. v. City of Olangapo, et al., January 18, 2010, G.R.
No. 185121, Abad, J, there was a complaint for damages due to malicious prosecution. It was
alleged that the respondents filed a complaint for theft of electricity against petitioner Tiu alleging
that he committed the crimes of theft of electricity and tampering with electric meter resulting in
zero-zero power consumption. The cases were dismissed which was even affirmed by the Supreme

41

Court, hence, the suit for malicious prosecution. Tiu alleged that he suffered mental anguish, serious
anxiety, besmirched reputation, wounded feelings, moral shock and social humiliation and that
petitioner Limanch-O Hotel suffered loss of business goodwill, financial reverses, and injured
reputation.
In its answer, the respondent City alleged that there was no ill motive in filing the criminal
complaint. A demurrer to evidence was filed after plaintiff presented evidence and it was granted,
dismissing the complaint, as there was no showing of legal malice. The order was affirmed by the
CA, hence, a petition for review was filed with the SC which affirmed the CA decision and
Held: To entitle the petitioners to damages for malicious prosecution, they needed to prove the
following elements: (1) that the respondent had caused their prosecution; (2) that the criminal
action ended in their acquittal; (3) that, in bringing the action, the complaint had no probable cause;
and (4) that it was impelled by legal malicean improper or a sinister motive.
The burden in suits for malicious prosecution is being able to prove the complainants
deliberate initiation of a criminal action knowing the charge to be false and groundless. The
respondent did not concoct out of thin air the criminal charge for theft of electricity against
petitioners. It filed the case based on the result of an investigation carried out at Tius premises
which indicated a tampering of the electric meter. Indeed, petitioners never claimed that the
inspection of Tius premises was just a farce. The City did not merely conjure the charge with the
intention of vexing the petitioners. It acted within its right to bring up the result of that
investigation to the authorities for evaluation and resolution.
It is not enough to say that, since the Supreme Court sustained the Secretary of Justices
finding that no probable cause for electricity theft existed against petitioners, a case for malicious
prosecution already exists against the complainant.
The test should be whether sufficient facts exist which show that, in bringing the criminal
action, complainant acted without probable cause, defined as the existence of such facts and
circumstances as would excite the belief in a reasonable mind that the person charged and
prosecuted in a criminal case is probably guilty of the crime or wrongdoing. Here, the fact that the
filing of the complaint was prompted by the result of an investigation shows that the City had a
reasonable ground to believe that a crime had probably been committed.
No evidence was shown that there had been bad blood between respondent and petitioners
prior to the filing of the criminal charge, which circumstance if present could justify a malicious
motive in filing the charge. Resort to judicial processes, by itself, is not an evidence of ill will which
would automatically make the complainant liable for malicious prosecution. Otherwise, peaceful
recourse to the courts will be greatly discouraged and the exercise of ones right to litigate would
become meaningless and empty.

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