November 2010 Philippine Supreme Court

Decisions on Civil Law

Posted on December 21, 2010 by Rose Marie M. King-Dominguez Posted in Civil Law,
Philippines - Cases, Philippines - Law Tagged attorney's fees, conjugal property, damages,
interest, lease, loan, moral damages, novation, sale, tena
Here are selected November 2010 rulings of the Supreme Court of the Philippines on civil law:
Civil Code
Damages; attorneys fees. On the award of attorneys fees, attorneys fees and expenses of
litigation were awarded because Alfredo was compelled to litigate due to the unjust refusal of
Land Bank to refund the amount he paid. There are instances when it is just and equitable to
award attorneys fees and expenses of litigation. Art. 2208 of the Civil Code pertinently states:
In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs,
cannot be recovered, except:
x x x x
(2) When the defendants act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest.
Given that Alfredo was indeed compelled to litigate against Land Bank and incur expenses to
protect his interest, we find that the award falls under the exception above and is, thus, proper
given the circumstances. Land Bank of the Philippines vs. Alfredo Ong, G.R. No. 190755,
November 24, 2010.
Damages; attorneys fees. Regarding the grant of attorneys fees, the Court agrees with the RTC
that said award is justified. Losin refused to pay Vitarich despite the latters repeated
demands. It was left with no recourse but to litigate and protect its interest. We, however, opt to
reduce the same to P10,000.00 from P20,000.00. Vitarich Corporation vs. Chona Locsin, G.R.
No. 181560, November 15, 2010.
Damages; for loss of earning capacity. The award of damages for loss of earning capacity is
concerned with the determination of losses or damages sustained by respondents, as dependents
and intestate heirs of the deceased. This consists not of the full amount of his earnings, but of the
support which they received or would have received from him had he not died as a consequence
of the negligent act. Thus, the amount recoverable is not the loss of the victims entire earnings,
but rather the loss of that portion of the earnings which the beneficiary would have received.
Indemnity for loss of earning capacity is determined by computing the net earning capacity of
the victim as follows:
Net Earning Capacity = life expectancy x (gross annual income -reasonable and necessary living
expenses).
Life expectancy shall be computed by applying the formula (2/3 x [80 - age at death]) adopted
from the American Expectancy Table of Mortality or the Actuarial of Combined Experience
Table of Mortality. On the other hand, gross annual income requires the presentation of
documentary evidence for the purpose of proving the victims annual income. The victims heirs
presented in evidence Seoras pay slip from the PNP, showing him to have had a gross monthly
salary of P12,754.00. Meanwhile, the victims net income was correctly pegged at 50% of his
gross income in the absence of proof as regards the victims living expenses. Constancia G.
Tamayo, et al. vs. Rosalia Abad Seora, et al., G.R. No. 176946, November 15, 2010.
Damages; moral and exemplary; standard of diligence applicable to a bank. The award of moral
damages should be granted in reasonable amounts depending on the facts and circumstances of
the case. Moral damages are meant to compensate the claimant for any physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock,
social humiliation and similar injuries unjustly caused.
As to the award of exemplary damages, the law allows it by way of example for the public good.
The business of banking is impressed with public interest and great reliance is made on the
banks sworn profession of diligence and meticulousness in giving irreproachable service. Thus,
the Court affirms the award as a way of setting an example for the public good. In addition, it
also provided for attorneys fees. Both are subject to legal interest.
In any event, Citibank should have been more cautious in dealing with its clients since its
business is imbued with public interest. Banks must always act in good faith and must win the
confidence of clients and people in general. It is irrelevant whether the client is a lawyer or not.
Citibank, N.A. vs. Atty. Ernesto S. Dinopol, G.R. No. 188412, November 22, 2010.
Filiation; cannot be collaterally attacked. It is settled law that filiation cannot be collaterally
attacked. Well-known civilista Dr. Arturo M. Tolentino, in his book Civil Code of the
Philippines, Commentaries and Jurisprudence, noted that the aforecited doctrine is rooted from
the provisions of the Civil Code of the Philippines. He explained thus:
The legitimacy of the child cannot be contested by way of defense or as a collateral issue in
another action for a different purpose. The necessity of an independent action directly
impugning the legitimacy is more clearly expressed in the Mexican code (article 335) which
provides: The contest of the legitimacy of a child by the husband or his heirs must be made by
proper complaint before the competent court; any contest made in any other way is void. This
principle applies under our Family Code. Articles 170 and 171 of the code confirm this view,
because they refer to the action to impugn the legitimacy. This action can be brought only by
the husband or his heirs and within the periods fixed in the present articles. Eugenio R. Reyes,
joined by Timothy Joseph M. Reyes, et al. vs. Librada F. Maurico and Leonida F. Mauricio, G.R.
No. 175080, November 24, 2010
Lease; term; month-to-month basis. The well-entrenched principle is that a lease from month-to-
month is with a definite period and expires at the end of each month upon the demand to vacate
by the lessor. As held by the Court of Appeals in the assailed Amended Decision, the above-
mentioned lease contract was duly terminated by DBP by virtue of its letter dated June 18,
1987. We reiterate that the letter explicitly directed the petitioners to come to the office of the
DBP if they wished to enter into a new lease agreement with the said bank. Otherwise, if no
contract of lease was executed within 30 days from the date of the letter, petitioners were to be
considered uninterested in entering into a new contract and were thereby ordered to vacate the
property. As no new contract was in fact executed between petitioners and DBP within the 30-
day period, the directive to vacate, thus, took effect. DBPs letter dated June 18, 1987, therefore,
constituted the written notice that was required to terminate the lease agreement between
petitioners and Rudy Robles. From then on, the petitioners continued possession of the subject
property could be deemed to be without the consent of DBP.
Thusly, petitioners assertion that Article 1670 of the Civil Code is not applicable to the instant
case is correct. The reason, however, is not that the existing contract was continued by DBP, but
because the lease was terminated by DBP, which termination was accompanied by a demand to
petitioners to vacate the premises of the subject property.
Article 1670 states that [i]f at the end of the contract the lessee should continue enjoying the
thing leased for fifteen days with the acquiescence of the lessor, and unless a notice to the
contrary by either party has previously been given, it is understood that there is an implied new
lease, not for the period of the original contract, but for the time established in Articles 1682 and
1687. The other terms of the original contract shall be revived.
In view of the order to vacate embodied in the letter of DBP dated June 18, 1987 in the event that
no new lease contract is entered into, the petitioners continued possession of the subject
properties was without the acquiescence of DBP, thereby negating the constitution of an implied
lease. Cebu Bionic Builders Supply, Inc. and Lydia Sia vs. Development Bank of the Philippines,
et al., G.R. No. 154366, November 17, 2010.
Legal interest. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest
on the amount of damages awarded may be imposed at the discretion of the court at the rate of
6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages
except when or until the demand can be established with reasonable certainty. Accordingly,
where the demand is established with reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual base
for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this interim period being deemed to be
by then an equivalent to a forbearance of credit. Land Bank of the Philippines vs. Alfredo Ong,
G.R. No. 190755, November 24, 2010.
Legal interest. Inasmuch as the case at bar involves an obligation not arising from a loan or
forbearance of money, but consists in the payment of a sum of money, the legal rate of interest is
6% per annum of the amount demanded. Interest shall continue to run from February 12, 1997,
the date when Vitarich demanded payment of the sum amounting to P921,083.10 from Locsin
(and not from the time of the filing of the Complaint) until finality of the Decision (not until fully
paid). The rate of interest shall increase to 12% per annum only from such finality until its
satisfaction, the interim period being deemed to be equivalent to a forbearance of credit. Vitarich
Corporation vs. Chona Locsin, G.R. No. 181560, November 15, 2010.
Loan; no period for payment. There is no date of payment in the promissory notes. Accordingly,
the creditor has the right to demand immediate payment. Article 1178 of the Civil Code applies.
The fact that the creditor was content with the prior monthly check-off from the debtors salary is
of no moment. Once the debot defaulted, the creditor could make a demand to enforce a pure
obligation. Hongkong and Shanghai Banking Corp., Ltd. Staff Retirement Plan vs. Sps.
Bienvenido and Editha Broqueza, G.R. No. 178610, November 17, 2010.
Novation. Novation must be expressly consented to. Moreover, the conflicting intention and
acts of the parties underscore the absence of any express disclosure or circumstances with which
to deduce a clear and unequivocal intent by the parties to novate the old agreement. Land Bank of
the Philippines vs. Alfredo Ong, G.R. No. 190755, November 24, 2010.
Payment; from a third person. Land Bank contends that Art. 1236 of the Civil Code backs their
claim that Alfredo should have sought recourse against the Spouses Sy instead of Land
Bank. Art. 1236 provides:
The creditor is not bound to accept payment or performance by a third person who has no
interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.
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.
We agree with Land Bank on this point as to the first part of paragraph 1 of Art. 1236. Land
Bank was not bound to accept Alfredos payment, since as far as the former was concerned, he
did not have an interest in the payment of the loan of the Spouses Sy. However, in the context of
the second part of said paragraph, Alfredo was not making payment to fulfill the obligation of
the Spouses Sy. Alfredo made a conditional payment so that the properties subject of the Deed
of Sale with Assumption of Mortgage would be titled in his name. It is clear from the records
that Land Bank required Alfredo to make payment before his assumption of mortgage would be
approved. He was informed that the certificate of title would be transferred accordingly. He,
thus, made payment not as a debtor but as a prospective mortgagor. But the trial court stated:
[T]he contract was not perfected or consummated because of the adverse finding in the credit
investigation which led to the disapproval of the proposed assumption. There was no evidence
presented that plaintiff was informed of the disapproval. What he received was a letter dated
May 22, 1997 informing him that the account of spouses Sy had matured but there [were] no
payments. This was sent even before the conduct of the credit investigation on June 20, 1997
which led to the disapproval of the proposed assumption of the loans of spouses Sy.
Alfredo, as a third person, did not, therefore, have an interest in the fulfillment of the obligation
of the Spouses Sy, since his interest hinged on Land Banks approval of his application, which
was denied. The circumstances of the instant case show that the second paragraph of Art. 1236
does not apply. As Alfredo made the payment for his own interest and not on behalf of the
Spouses Sy, recourse is not against the latter. And as Alfredo was not paying for another, he
cannot demand from the debtors, the Spouses Sy, what he has paid. Land Bank of the Philippines
vs. Alfredo Ong, G.R. No. 190755, November 24, 2010.
Payment; promissory note. Article 1249, paragraph 2 of the Civil Code provides [T] he delivery
of promissory notes payable to order, or bills of exchange or other mercantile documents shall
produce the effect of payment only when they have been cashed, or when through the fault of
the creditor they have been impaired. [Emphasis supplied]
In the case at bar, no cash payment was proved. It was neither confirmed that the checks issued
by Losin were actually encashed by Vitarich. Thus, the Court cannot consider that payment,
much less overpayment, made by Locsin. Vitarich Corporation vs. Chona Locsin, G.R. No.
181560, November 15, 2010.
Property of the marriage; presumed conjugal. All property of the marriage is presumed to be
conjugal. However, for this presumption to apply, the party who invokes it must first prove that
the property was acquired during the marriage. Proof of acquisition during the coverture is a
condition sine qua non to the operation of the presumption in favor of the conjugal partnership.
Thus, the time when the property was acquired is material. Evangeline D. Imani
vs. Metropolitan Bank and Trust Company, G.R. No. 187023, November 17, 2010.
Property registration; proof of alienable character; proof of possession. Under the Regalian
doctrine, all lands of the public domain belong to the State. All lands not appearing to be clearly
within private ownership are presumed to belong to the State. The burden of proof in overcoming
the presumption of State ownership of the lands of the public domain is on the person applying
for registration (or claiming ownership). To overcome this presumption, incontrovertible
evidence must be established that the land subject of the application (or claim) is alienable or
disposable.
To support its contention that the land subject of the application for registration is alienable,
respondents presented the survey plan with the following annotation:
This survey is inside L.C. Map No. 2623 Proj. No. 27-B clasified as alienable/disposable by the
Bureau of Forest Development, Quezon City on Jan. 03, 1968.
The surveyors annotation presented by respondents is not the kind of proof required by law to
prove that the subject land falls within the alienable and disposable zone. Respondents failed to
submit a certification from the proper government agency to establish that the subject land are
part of the alienable and disposable portion of the public domain. In the absence of
incontrovertible evidence to prove that the subject property is already classified as alienable and
disposable, we must consider the same as still inalienable public domain.
Anent respondents possession and occupation of the subject property, a reading of the records
failed to show that the respondents by themselves or through their predecessors-in-interest
possessed and occupied the subject land since June 12, 1945 or earlier. The evidence submitted
by respondents to prove their possession and occupation over the subject property consists of the
testimonies of Jose and Amado Geronimo (Amado), the tenant of the adjacent lot. However,
their testimonies failed to establish respondents predecessors-in-interest possession and
occupation of subject property since June 12, 1945 or earlier. But Jose and Amados testimonies
consist merely of general statements with no specific details as to when respondents
predecessors-in-interest began actual occupancy of the land subject of this case. It is a rule that
general statements that are mere conclusions of law and not factual proof of possession are
unavailing and cannot suffice. An applicant in a land registration case cannot just harp on mere
conclusions of law to embellish the application but must impress thereto the facts and
circumstances evidencing the alleged ownership and possession of the land.
Respondents earliest evidence can be traced back to a tax declaration issued in the name of their
predecessors-in-interest only in the year 1949. At best, respondents can only prove possession
since said date. What is required is open, exclusive, continuous and notorious possession by
respondents and their predecessors-in-interest, under a bona fide claim of ownership, since June
12, 1945 or earlier. Well settled is the rule that tax declarations and receipts are not conclusive
evidence of ownership or of the right to possess land when not supported by any other evidence.

Vitarich Corporation vs. Chona Locsin, G.R. No. 171631, November 15, 2010.
Property; buyer in good faith. To prove good faith, the rule is that the buyer of registered land
needs only show that he relied on the title that covers the property. But this is true only when, at
the time of the sale, the buyer was unaware of any adverse claim to the property.

Otherwise, the
law requires the buyer to exercise a higher degree of diligence before proceeding with his
purchase. He must examine not only the certificate of title, but also the sellers right and
capacity to transfer any interest in the property. In such a situation, the buyer must show that he
exercised reasonable precaution by inquiring beyond the four corners of the title. Failing in
these, he may be deemed a buyer in bad faith. Filinvest Development Corporation vs. Golden
Haven Memorial Park, Inc. / Golden Haven Memorial Park, Inc. vs. Filinvest Development
Corporation, G.R. No. 187824 / G.R. No. 188265. November 17, 2010.
Succession. Considering that Roman died on August 9, 1976, the provisions of the Civil Code on
succession, then the law in force, should apply, particularly Articles 979 and 980, viz.
Art. 979. Legitimate children and their descendants succeed the parents and other ascendants,
without distinction as to sex or age, and even if they should come from different marriages. x x
x.
Art. 980. The children of the deceased shall always inherit from him in their own right, dividing
the inheritance in equal shares.
Thus, the RTC correctly ruled that Lot No. 1-P rightfully belongs to the 11 children of Roman,
seven from his first marriage with Flavia and four from his second marriage with Ceferina, in
equal shares. As there was no partition among Romans children, the lot was owned by them in
common. And inasmuch as Flavia did not successfully repudiate her sale of her aliquot share to
Cresencia, the transfer stands as valid and effective. Consequently, what Cresencia sold to
petitioner spouses was her own share and Flavias share in the property that she acquired by
virtue of the notarized deed of sale, which is only 2/11 of Lot No. 1-P. Therefore, the restitution
of the property in excess of that portion by petitioner spouses is clearly warranted. Sps. Mariano
and Emma Bolaos vs. Roscef Zuga Bernarte, et al., G.R. No. 180997, November 17, 2010.
Unjust enrichment. Land Bank maintains that the trial court erroneously applied the principle of
equity and justice in ordering it to return the PhP 750,000 paid by Alfredo. Alfredo was allegedly
in bad faith and in estoppel. Land Bank contends that it enjoyed the presumption of regularity
and was in good faith when it accepted Alfredos tender of PhP 750,000. It reasons that it did not
unduly enrich itself at Alfredos expense during the foreclosure of the mortgaged properties,
since it tendered its bid by subtracting PhP 750,000 from the Spouses Sys outstanding loan
obligation. Alfredos recourse then, according to Land Bank, is to have his payment reimbursed
by the Spouses Sy.
We rule that Land Bank is still liable for the return of the PhP 750,000 based on the principle of
unjust enrichment. Land Bank is correct in arguing that it has no obligation as creditor to
recognize Alfredo as a person with interest in the fulfillment of the obligation. But while Land
Bank is not bound to accept the substitution of debtors in the subject real estate mortgage, it is
estopped by its action of accepting Alfredos payment from arguing that it does not have to
recognize Alfredo as the new debtor. By accepting Alfredos payment and keeping silent on the
status of Alfredos application, Land Bank misled Alfredo to believe that he had for all intents
and purposes stepped into the shoes of the Spouses Sy.
We turn then on the principle upon which Land Bank must return Alfredos payment. Unjust
enrichment exists when a person unjustly retains a benefit to the loss of another, or when a
person retains money or property of another against the fundamental principles of justice, equity
and good conscience. There is unjust enrichment under Art. 22 of the Civil Code when (1) a
person is unjustly benefited, and (2) such benefit is derived at the expense of or with damages to
another.
Additionally, unjust enrichment has been applied to actions called accion in rem verso. In order
that the accion in rem verso may prosper, the following conditions must concur: (1) that the
defendant has been enriched; (2) that the plaintiff has suffered a loss; (3) that the enrichment of
the defendant is without just or legal ground; and (4) that the plaintiff has no other action based
on contract, quasi-contract, crime, or quasi-delict. The principle of unjust enrichment essentially
contemplates payment when there is no duty to pay, and the person who receives the payment
has no right to receive it.
The principle applies to the parties in the instant case, as, Alfredo, having been deemed
disqualified from assuming the loan, had no duty to pay petitioner bank and the latter had no
right to receive it.
Moreover, the Civil Code likewise requires under Art. 19 that [e]very 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. Land Bank, however, did not even bother to inform
Alfredo that it was no longer approving his assumption of the Spouses Sys mortgage. Yet it
acknowledged his interest in the loan when the branch head of the bank wrote to tell him that his
daughters loan had not been paid. Land Bank made Alfredo believe that with the payment of
PhP 750,000, he would be able to assume the mortgage of the Spouses Sy. The act of receiving
payment without returning it when demanded is contrary to the adage of giving someone what is
due to him. The outcome of the application would have been different had Land Bank first
conducted the credit investigation before accepting Alfredos payment. He would have been
notified that his assumption of mortgage had been disapproved; and he would not have taken the
futile action of paying PhP 750,000. The procedure Land Bank took in acting on Alfredos
application cannot be said to have been fair and proper.
As to the claim that the trial court erred in applying equity to Alfredos case, we hold that
Alfredo had no other remedy to recover from Land Bank and the lower court properly exercised
its equity jurisdiction in resolving the collection suit. As we have held in one case:
Equity, as the complement of legal jurisdiction, seeks to reach and complete justice where courts
of law, through the inflexibility of their rules and want of power to adapt their judgments to the
special circumstances of cases, are incompetent to do so. Equity regards the spirit and not the
letter, the intent and not the form, the substance rather than the circumstance, as it is variously
expressed by different courts.
Land Bank of the Philippines vs. Alfredo Ong, G.R. No. 190755, November 24, 2010
Special Laws
Agricultural Tenancy Act; tenancy. We agree with the Court of Appeals that a tenancy
relationship cannot be extinguished by mere expiration of term or period in a leasehold contract;
or by the sale, alienation or the transfer of legal possession of the landholding. Section 9 of
Republic Act No. 1199 or the Agricultural Tenancy Act provides:
SECTION 9. Severance of Relationship. The tenancy relationship is extinguished by the
voluntary surrender of the land by, or the death or incapacity of, the tenant, but his heirs or the
members of his immediate farm household may continue to work the land until the close of the
agricultural year. The expiration of the period of the contract as fixed by the parties, and the
sale or alienation of the land does not of themselves extinguish the relationship. In the latter
case, the purchaser or transferee shall assume the rights and obligations of the former
landholder in relation to the tenant. In case of death of the landholder, his heir or heirs shall
likewise assume his rights and obligations. (Emphasis supplied)
Moreover, Section 10 of Republic Act No. 3844 (Code of Agrarian Reforms of the Philippines)
likewise provides:
SEC. 10. Agricultural Leasehold Relation Not Extinguished by Expiration of Period, etc. The
agricultural leasehold relation under this Code shall not be extinguished by mere expiration of
the term or period in a leasehold contract nor by the sale, alienation or transfer of the legal
possession of the landholding. In case the agricultural lessor sells, alienates or transfers the
legal possession of the landholding, the purchaser or transferee thereof shall be subrogated
to the rights and substituted to the obligations of the agricultural lessor. (Emphasis supplied)
Eugenio R. Reyes, joined by Timothy Joseph M. Reyes, et al. vs. Librada F. Maurico and
Leonida F. Mauricio, G.R. No. 175080, November 24, 2010.