April 2011 Philippine Supreme Court

Decisions on Civil Law

Posted on May 17, 2011 by Rose Marie M. King-Dominguez Posted in Civil Law, Philippines -
Cases, Philippines - Law Tagged conjugal property, contract, moral damages, sale, trust, unjust
enrichment
Here are selected April 2011 rulings of the Supreme Court of the Philippines on civil law:
Civil Code
Conjugal partnership property; mortgage; consent of spouse. The husband cannot alienate or
encumber any conjugal real property without the consent, express or implied, of the wife. Should
the husband do so, then the contract is voidable. Article 173 of the Civil Code allows Aguete to
question Ros encumbrance of the subject property. However, the same article does not
guarantee that the courts will declare the annulment of the contract. Annulment will be declared
only upon a finding that the wife did not give her consent. In the present case, we follow the
conclusion of the appellate court and rule that Aguete gave her consent to Ros encumbrance of
the subject property.
The application for loan shows that the loan would be used exclusively for additional working
[capital] of buy & sell of garlic & virginia tobacco. In her testimony, Aguete confirmed that Ros
engaged in such business, but claimed to be unaware whether it prospered. Aguete was also
aware of loans contracted by Ros, but did not know where he wasted the money. Debts
contracted by the husband for and in the exercise of the industry or profession by which he
contributes to the support of the family cannot be deemed to be his exclusive and private debts.
Joe A. Ros and Estrella Aguete v. Philippine National Bank, Laoag Branch, G.R. No.
170166. April 6, 2011.
Contract; determinacy of object. That the kasunduan did not specify the technical boundaries of
the property did not render the sale a nullity. The requirement that a sale must have for its object
a determinate thing is satisfied as long as, at the time the contract is entered into, the object of the
sale is capable of being made determinate without the necessity of a new or further agreement
between the parties. As portion of the kasunduan shows, there is no doubt that the object of the
sale is determinate. Domingo Carabeo v. Spouses Dingco, G.R. No. 190823, April 4, 2011.
Loan; remedies of mortgage-creditor; unjust enrichment defeats rule prohibiting multiplicity of
suits. In Chieng v. Santos, this Court ruled that a mortgage-creditor may institute against the
mortgage-debtor either a personal action for debt or a real action to foreclose the mortgage. The
Court ruled that the remedies are alternative and not cumulative and held that the filing of a
criminal action for violation of Batas Pambansa Blg. 22 was in effect a collection suit or a suit
for the recovery of the mortgage-debt. In that case, however, this Court pro hac vice, ruled that
respondents could still be held liable for the balance of the loan, applying the principle that no
person may unjustly enrich himself at the expense of another.
The principle of unjust enrichment is provided under Article 22 of the Civil Code which
provides:
Art. 22. Every person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter without just or legal
ground, shall return the same to him.
There is unjust enrichment 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. The principle of unjust enrichment requires two conditions: (1) that
a person is benefited without a valid basis or justification, and (2) that such benefit is derived at
the expense of another.
The main objective of the principle against unjust enrichment is to prevent one from enriching
himself at the expense of another without just cause or consideration. The principle is applicable
in this case considering that Edna admitted obtaining a loan from petitioners, and the same has
not been fully paid without just cause. The Deed was declared void erroneously at the instance of
Edna, first when she raised it as a defense before the RTC, Branch 33 and second, when she filed
an action for declaratory relief before the RTC, Branch 93. Petitioner could not be expected to
ask the RTC, Branch 33 for an alternative remedy, as what the Court of Appeals ruled that he
should have done, because the RTC, Branch 33 already stated that it had no jurisdiction over any
personal action that petitioner might have against Edna.
Considering the circumstances of this case, the principle against unjust enrichment, being a
substantive law, should prevail over the procedural rule on multiplicity of suits. The Court of
Appeals, in the assailed decision, found that Edna admitted the loan, except that she claimed it
only amounted to P340,000. Edna should not be allowed to unjustly enrich herself because of the
erroneous decisions of the two trial courts when she questioned the validity of the Deed.
Moreover, Edna still has an opportunity to submit her defenses before the RTC, Branch 42 on
her claim as to the amount of her indebtedness. Arturo Sarte Flores v. Spouses Enrico L. Lindo,
Jr. and Edna C. Lindo, G.R. No. 183984. April 13, 2011
Moral damages; pre-requisites for an award. In prayers for moral damages, recovery is more an
exception rather than the rule. Moral damages are not meant to be punitive but are designed to
compensate and alleviate the physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar harm
unjustly caused to a person. To be entitled to such an award, the claimant must satisfactorily
prove that he has suffered damages and that the injury causing it has sprung from any of the
cases listed in Articles 2219 and 2220 of the Civil Code. Moreover, the damages must be shown
to be the proximate result of a wrongful act or omission. The claimant must thus establish the
factual basis of the damages and its causal tie with the acts of the defendant.
In fine, an award of moral damages calls for the presentation of 1) evidence of besmirched
reputation or physical, mental or psychological suffering sustained by the claimant; 2) a culpable
act or omission factually established; 3) proof that the wrongful act or omission of the defendant
is the proximate cause of the damages sustained by the claimant; and 4) the proof that the act is
predicated on any of the instances expressed or envisioned by Article 2219 and Article 2220 of
the Civil Code.
In the present case, respondent failed to establish by clear and convincing evidence that the
injuries he sustained were the proximate effect of petitioners act or omission. It thus becomes
necessary to instead look into the manner by which petitioner carried out his renovations to
determine whether this was directly responsible for any distress respondent may have suffered
since the law requires that a wrongful or illegal act or omission must have preceded the damages
sustained by the claimant.
It bears noting that petitioner was engaged in the lawful exercise of his property rights to
introduce renovations to his abode. While he initially did not have a building permit and may
have misrepresented his real intent when he initially sought respondents consent, the lack of the
permit was inconsequential since it only rendered petitioner liable to administrative sanctions or
penalties.
The testimony of petitioner and his witnesses, specifically Architect Punzalan, demonstrates that
they had actually taken measures to prevent, or at the very least, minimize the damage to
respondents property occasioned by the construction work. Architect Punzalan details how upon
reaching an agreement with petitioner for the construction of the second floor, he (Punzalan)
surveyed petitioners property based on the Transfer Certificate of Title (TCT) and Tax
Declarations and found that the perimeter wall was within the confines of petitioners property;
that he, together with petitioner, secured the consent of the neighbors (including respondent)
prior to the start of the renovation as reflected in a Neighbors Consent dated June 12, 1998;
before the construction began, he undertook measures to prevent debris from falling into
respondents property such as the installation of GI sheet strainers, the construction of
scaffoldings on respondents property, the instructions to his workers to clean the area before
leaving at 5:00 p.m; and that the workers conducted daily clean-up of respondents property
with his consent, until animosity developed between the parties.
Malice or bad faith implies a conscious and intentional design to do a wrongful act for a
dishonest purpose or moral obliquity; it is different from the negative idea of negligence in that
malice or bad faith contemplates a state of mind affirmatively operating with furtive design or ill
will. While the Court harbors no doubt that the incidents which gave rise to this dispute have
brought anxiety and anguish to respondent, it is unconvinced that the damage inflicted upon
respondents property was malicious or willful, an element crucial to merit an award of moral
damages under Article 2220 of the Civil Code. Rodolfo N. Regala v. Federico P. Carin, G.R. No.
188715, April 6, 2011.
Sale; purchaser in good faith. A purchaser in good faith is one who buys the property of
another, without notice that some other person has a right to, or interest in, such property, and
pays the full and fair price for it at the time of such purchase or before he has notice of the claim
or interest of some other persons in the property. He buys the property with the belief that the
person from whom he receives the thing was the owner and could convey title to the property.
He cannot close his eyes to facts that should put a reasonable man on his guard and still claim he
acted in good faith. It is undisputed that respondents were neighbors of petitioners and even co-
owners of land under TCT No. 8582. Respondents have also dealt with the Tamanis in the past,
having mortgaged their property together when respondents availed of a loan from the
Government Service Insurance System. Thus, it is inconceivable for respondents not to know
that petitioners had been exercising open, continuous and notorious possession over the property.
Like Cruz, respondents should have ascertained the lands identity and character given that
houses were standing on the land in dispute and petitioners had been leasing the same to
tenants. Maria Lourdes Tamani, et al. v. Ramon Salvador, et al., G.R. No. 171497. April 4, 2011
Trust; fiduciary obligation. In seeking to establish a fiduciary obliation on the part of Cojuangco,
the Republic invokes the following provisions of the Civil Code:
Article 1455. When any trustee, guardian or other person holding a fiduciary relationship uses
trust funds for the purchase of property and causes the conveyance to be made to him or to a
third person, a trust is established by operation of law in favor of the person to whom the funds
belong.
Article 1456. If property is acquired through mistake or fraud, the person obtaining its by force
of law, considered a trustee of an implied trust for the benefit of the person from whom the
property comes.
and the Corporation Code, as follows:
Section 31. Liability of directors, trustees or officers.Directors or trustees who willfully and
knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of
gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or
pecuniary interest in conflict with their duty as such directors, or trustees shall be liable jointly
and severally for all damages resulting therefrom suffered by the corporation, its stockholders or
members and other persons.
When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any
interest adverse to the corporation in respect of any matter which has been reposed in him in
confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall
be liable as a trustee for the corporation and must account for the profits which otherwise would
have accrued to the corporation.
Did Cojuangco breach his fiduciary duties as an officer and member of the Board of Directors
of the UCPB? Did his acquisition and holding of the contested SMC shares come under a
constructive trust in favor of the Republic? The answers to these queries are in the negative.
The conditions for the application of Articles 1455 and 1456 of the Civil Code (like the trustee
using trust funds to purchase, or a person acquiring property through mistake or fraud), and
Section 31 of the Corporation Code (like a director or trustee willfully and knowingly voting for
or assenting to patently unlawful acts of the corporation, among others) require factual
foundations to be first laid out in appropriate judicial proceedings. Concluding that Cojuangco
breached fiduciary duties as an officer and member of the Board of Directors of the UCPB
without competent evidence thereon would be unwarranted and unreasonable.
For one, the Amended Complaint contained no clear factual allegation on which to predicate the
application of Articles 1455 and 1456 of the Civil Code, and Section 31 of the Corporation
Code. Although the trust relationship supposedly arose from Cojuangcos being an officer and
member of the Board of Directors of the UCPB, the link between this alleged fact and the
borrowings or advances was not established. Nor was there evidence on the loans or borrowings,
their amounts, the approving authority, etc.
The thrust of the Republic that the funds were borrowed or lent might even preclude any
consequent trust implication. In a contract of loan, one of the parties (creditor) delivers money or
other consumable thing to another (debtor) on the condition that the same amount of the same
kind and quality shall be paid. Owing to the consumable nature of the thing loaned, the resulting
duty of the borrower in a contract of loan is to pay, not to return, to the creditor or lender the
very thing loaned. This explains why the ownership of the thing loaned is transferred to the
debtor upon perfection of the contract. Ownership of the thing loaned having transferred, the
debtor enjoys all the rights conferred to an owner of property, including the right to use and
enjoy (jus utendi), to consume the thing by its use (jus abutendi), and to dispose (jus disponendi),
subject to such limitations as may be provided by law. Evidently, the resulting relationship
between a creditor and debtor in a contract of loan cannot be characterized as fiduciary.
To say that a relationship is fiduciary when existing laws do not provide for such requires
evidence that confidence is reposed by one party in another who exercises dominion and
influence. Absent any special facts and circumstances proving a higher degree of responsibility,
any dealings between a lender and borrower are not fiduciary in nature. This explains why, for
example, a trust receipt transaction is not classified as a simple loan and is characterized as
fiduciary, because the Trust Receipts Law (P.D. No. 115) punishes the dishonesty and abuse of
confidence in the handling of money or goods to the prejudice of another regardless of whether
the latter is the owner.
Based on the foregoing, a debtor can appropriate the thing loaned without any responsibility or
duty to his creditor to return the very thing that was loaned or to report how the proceeds were
used. Nor can he be compelled to return the proceeds and fruits of the loan, for there is nothing
under our laws that compel a debtor in a contract of loan to do so. As owner, the debtor can
dispose of the thing borrowed and his act will not be considered misappropriation of the thing.
The only liability on his part is to pay the loan together with the interest that is either stipulated
or provided under existing laws. Republic of the Philippines v. Sandiganbayan, Eduardo M.
Cojuangco, et al., G.R. No. 166859, G.R. No. 169203, G.R. No. 180702. April 12, 2011