CIVIL CODE BRION.docx

8/10/2019 CIVIL CODE BRION.docx

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bond between the spouses. The Court reasoned inVan Dorn v. Romillo that:

To maintain x x x that, under our laws, [the Filipinospouse] has to be considered still married to [thealien spouse] and still subject to a wife's obligations

x x x cannot be just. [The Filipino spouse] shouldnot be obliged to live together with, observe respectand fidelity, and render support to [the alienspouse]. The latter should not continue to be one ofher heirs with possible rights to conjugal property.She should not be discriminated against in her owncountry if the ends of justice are to be served.[22]

As the RTC correctly stated, the provision wasincluded in the law "to avoid the absurd situationwhere the Filipino spouse remains married to thealien spouse who, after obtaining a divorce, is no

longer married to the Filipino spouse."[23] Thelegislative intent is for the benefit of the Filipinospouse, by clarifying his or her marital status,settling the doubts created by the divorce decree.Essentially, the second paragraph of Article 26 ofthe Family Code provided the Filipino spouse asubstantive right to have his or her marriage to thealien spouse considered as dissolved, capacitatinghim or her to remarry.[24] Without the second

paragraph of Article 26 of the Family Code, thejudicial recognition of the foreign decree of divorce,whether in a proceeding instituted precisely for that

purpose or as a related issue in another proceeding,would be of no significance to the Filipino spousesince our laws do not recognize divorce as a modeof severing the marital bond;[25] Article 17 of theCivil Code provides that the policy against absolutedivorces cannot be subverted by judgments

promulgated in a foreign country. The inclusion ofthe second paragraph in Article 26 of the FamilyCode provides the direct exception to this rule andserves as basis for recognizing the dissolution of themarriage between the Filipino spouse and his or heralien spouse.

Additionally, an action based on the secondparagraph of Article 26 of the Family Code is notlimited to the recognition of the foreign divorcedecree. If the court finds that the decree capacitatedthe alien spouse to remarry, the courts can declarethat the Filipino spouse is likewise capacitated tocontract another marriage. No court in this

jurisdiction, however, can make a similardeclaration for the alien spouse (other than that

already established by the decree), whose status andlegal capacity are generally governed by hisnational law.[26]

Given the rationale and intent behind the enactment,and the purpose of the second paragraph of Article

26 of the Family Code, the RTC was correct inlimiting the applicability of the provision for the

benefit of the Filipino spouse. In other words, onlythe Filipino spouse can invoke the second paragraphof Article 26 of the Family Code; the alien spousecan claim no right under this provision.

The foreign divorce decree is presumptive evidenceof a right that clothes the party with legal interest to

petition for its recognition in this jurisdiction

We qualify our above conclusion - i.e., that the

second paragraph of Article 26 of the Family Codebestows no rights in favor of aliens - with thecomplementary statement that this conclusion is notsufficient basis to dismiss Gerbert's petition beforethe RTC. In other words, the unavailability of thesecond paragraph of Article 26 of the Family Codeto aliens does not necessarily strip Gerbert of legalinterest to petition the RTC for the recognition ofhis foreign divorce decree. The foreign divorcedecree itself, after its authenticity and conformitywith the alien's national law have been duly provenaccording to our rules of evidence, serves as a

presumptive evidence of right in favor of Gerbert,pursuant to Section 48, Rule 39 of the Rules ofCourt which provides for the effect of foreign

judgments. This Section states:

SEC. 48. Effect of foreign judgments or finalorders.--The effect of a judgment or final order of atribunal of a foreign country, having jurisdiction torender the judgment or final order is as follows:

(a) In case of a judgment or final order upona specific thing, the judgment or final order

is conclusive upon the title of the thing; and

(b) In case of a judgment or final orderagainst a person, the judgment or final orderis presumptive evidence of a right as

between the parties and their successors ininterest by a subsequent title.

In either case, the judgment or final order may berepelled by evidence of a want of jurisdiction, want


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of notice to the party, collusion, fraud, or clearmistake of law or fact.

To our mind, direct involvement or being thesubject of the foreign judgment is sufficient toclothe a party with the requisite interest to institute

an action before our courts for the recognition of theforeign judgment. In a divorce situation, we havedeclared, no less, that the divorce obtained by analien abroad may be recognized in the Philippines,

provided the divorce is valid according to his or hernational law.[27]

The starting point in any recognition of a foreigndivorce judgment is the acknowledgment that ourcourts do not take judicial notice of foreign

judgments and laws. Justice Herrera explained that,as a rule, "no sovereign is bound to give effect

within its dominion to a judgment rendered by atribunal of another country."[28] This means thatthe foreign judgment and its authenticity must be

proven as facts under our rules on evidence,together with the alien's applicable national law toshow the effect of the judgment on the alien himselfor herself.[29] The recognition may be made in anaction instituted specifically for the purpose or inanother action where a party invokes the foreigndecree as an integral aspect of his claim or defense.

In Gerbert's case, since both the foreign divorce

decree and the national law of the alien, recognizinghis or her capacity to obtain a divorce, purport to beofficial acts of a sovereign authority, Section 24,Rule 132 of the Rules of Court comes into play.This Section requires proof, either by (1) official

publications or (2) copies attested by the officerhaving legal custody of the documents. If thecopies of official records are not kept in thePhilippines, these must be (a) accompanied by acertificate issued by the proper diplomatic orconsular officer in the Philippine foreign servicestationed in the foreign country in which the record

is kept and (b) authenticated by the seal of hisoffice.

The records show that Gerbert attached to hispetition a copy of the divorce decree, as well as therequired certificates proving its authenticity,[30] butfailed to include a copy of the Canadian law ondivorce.[31] Under this situation, we can, at this

point, simply dismiss the petition for insufficiencyof supporting evidence, unless we deem it more

appropriate to remand the case to the RTC todetermine whether the divorce decree is consistentwith the Canadian divorce law.

We deem it more appropriate to take this lattercourse of action, given the Article 26 interests that

will be served and the Filipina wife's (Daisylyn's)obvious conformity with the petition. A remand, atthe same time, will allow other interested parties tooppose the foreign judgment and overcome a

petitioner's presumptive evidence of a right byproving want of jurisdiction, want of notice to aparty, collusion, fraud, or clear mistake of law orfact. Needless to state, every precaution must betaken to ensure conformity with our laws before arecognition is made, as the foreign judgment, oncerecognized, shall have the effect of res judicata[32]

between the parties, as provided in Section 48, Rule

39 of the Rules of Court.[33]

In fact, more than the principle of comity that isserved by the practice of reciprocal recognition offoreign judgments between nations, the res judicataeffect of the foreign judgments of divorce serves asthe deeper basis for extending judicial recognitionand for considering the alien spouse bound by itsterms. This same effect, as discussed above, willnot obtain for the Filipino spouse were it not for thesubstantive rule that the second paragraph of Article26 of the Family Code provides.

Considerations beyond the recognition of theforeign divorce decree

As a matter of "housekeeping" concern, we notethat the Pasig City Civil Registry Office has alreadyrecorded the divorce decree on Gerbert andDaisylyn's marriage certificate based on the mere

presentation of the decree.[34] We consider therecording to be legally improper; hence, the need todraw attention of the bench and the bar to what had

been done.

Article 407 of the Civil Code states that "[a]cts,events and judicial decrees concerning the civilstatus of persons shall be recorded in the civilregister." The law requires the entry in the civilregistry of judicial decrees that produce legalconsequences touching upon a person's legalcapacity and status, i.e., those affecting "all his

personal qualities and relations, more or lesspermanent in nature, not ordinarily terminable at his


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own will, such as his being legitimate orillegitimate, or his being married or not."[35]

A judgment of divorce is a judicial decree, althougha foreign one, affecting a person's legal capacity andstatus that must be recorded. In fact, Act No. 3753

or the Law on Registry of Civil Status specificallyrequires the registration of divorce decrees in thecivil registry:

Sec. 1. Civil Register. - A civil register isestablished for recording the civil status of persons,in which shall be entered:

(a) births;(b) deaths;(c) marriages;(d) annulments of marriages;

(e) divorces;(f) legitimations;(g) adoptions;(h) acknowledgment of natural children;(i) naturalization; and(j) changes of name.

x x x x

Sec. 4. Civil Register Books. -- The local registrarsshall keep and preserve in their offices the following

books, in which they shall, respectively make the

proper entries concerning the civil status of persons:

(1) Birth and death register;

(2) Marriage register, in which shall beentered not only the marriages solemnized

but also divorces and dissolved marriages.

(3) Legitimation, acknowledgment,adoption, change of name and naturalizationregister.

But while the law requires the entry of the divorcedecree in the civil registry, the law and thesubmission of the decree by themselves do not ipsofacto authorize the decree's registration. The lawshould be read in relation with the requirement of a

judicial recognition of the foreign judgment beforeit can be given res judicata effect. In the context ofthe present case, no judicial order as yet existsrecognizing the foreign divorce decree. Thus, thePasig City Civil Registry Office acted totally out of

turn and without authority of law when it annotatedthe Canadian divorce decree on Gerbert andDaisylyn's marriage certificate, on the strengthalone of the foreign decree presented by Gerbert.

Evidently, the Pasig City Civil Registry Office was

aware of the requirement of a court recognition, as itcited NSO Circular No. 4, series of 1982,[36] andDepartment of Justice Opinion No. 181, series of1982[37] - both of which required a final order froma competent Philippine court before a foreign

judgment, dissolving a marriage, can be registeredin the civil registry, but it, nonetheless, allowed theregistration of the decree. For being contrary tolaw, the registration of the foreign divorce decreewithout the requisite judicial recognition is patentlyvoid and cannot produce any legal effect.

Another point we wish to draw attention to is thatthe recognition that the RTC may extend to theCanadian divorce decree does not, by itself,authorize the cancellation of the entry in the civilregistry. A petition for recognition of a foreign

judgment is not the proper proceeding,contemplated under the Rules of Court, for thecancellation of entries in the civil registry.

Article 412 of the Civil Code declares that "no entryin a civil register shall be changed or corrected,without judicial order." The Rules of Court

supplements Article 412 of the Civil Code byspecifically providing for a special remedialproceeding by which entries in the civil registrymay be judicially cancelled or corrected. Rule 108of the Rules of Court sets in detail the jurisdictionaland procedural requirements that must be compliedwith before a judgment, authorizing the cancellationor correction, may be annotated in the civil registry.It also requires, among others, that the verified

petition must be filed with the RTC of the provincewhere the corresponding civil registry islocated;[38] that the civil registrar and all persons

who have or claim any interest must be made partiesto the proceedings;[39] and that the time and placefor hearing must be published in a newspaper ofgeneral circulation.[40] As these basic jurisdictionalrequirements have not been met in the present case,we cannot consider the petition Gerbert filed withthe RTC as one filed under Rule 108 of the Rules ofCourt.


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We hasten to point out, however, that this rulingshould not be construed as requiring two separate

proceedings for the registration of a foreign divorcedecree in the civil registry - one for recognition ofthe foreign decree and another specifically forcancellation of the entry under Rule 108 of the

Rules of Court. The recognition of the foreigndivorce decree may be made in a Rule 108

proceeding itself, as the object of specialproceedings (such as that in Rule 108 of the Rulesof Court) is precisely to establish the status or rightof a party or a particular fact. Moreover, Rule 108of the Rules of Court can serve as the appropriateadversarial proceeding[41] by which theapplicability of the foreign judgment can bemeasured and tested in terms of jurisdictionalinfirmities, want of notice to the party, collusion,fraud, or clear mistake of law or fact.

WHEREFORE, we GRANT the petition for reviewon certiorari, and REVERSE the October 30, 2008decision of the Regional Trial Court of Laoag City,Branch 11, as well as its February 17, 2009 order.We order the REMAND of the case to the trial courtfor further proceedings in accordance with ourruling above. Let a copy of this Decision befurnished the Civil Registrar General. No costs.

[ G.R. No.153788, November 27, 2009 ]ROGER V. NAVARRO,PETITIONER, VS. HON.

JOSE L. ESCOBIDO, PRESIDING JUDGE, RTCBRANCH 37, CAGAYAN DE ORO CITY, ANDKAREN T. GO, DOING BUSINESS UNDER THE

NAME KARGO ENTERPRISES,RESPONDENTS.

BRION, J.:

xxx

THE PETITION

Navarro alleges that even if the lease agreementswere in the name of Kargo Enterprises, since it didnot have the requisite juridical personality to sue,the actual parties to the agreement are himself andGlenn Go. Since it was Karen Go who filed thecomplaints and not Glenn Go, she was not a real

party-in-interest and the complaints failed to state acause of action.

Navarro posits that the RTC erred when it orderedthe amendment of the complaint to include GlennGo as a co-plaintiff, instead of dismissing thecomplaint outright because a complaint which doesnot state a cause of action cannot be converted intoone with a cause of action by a mere amendment or

a supplemental pleading. In effect, the lower courtcreated a cause of action for Karen Go when therewas none at the time she filed the complaints.

Even worse, according to Navarro, the inclusion ofGlenn Go as co-plaintiff drastically changed thetheory of the complaints, to his great prejudice.

Navarro claims that the lower court gravely abusedits discretion when it assumed that the leasedvehicles are part of the conjugal property of Glennand Karen Go. Since Karen Go is the registeredowner of Kargo Enterprises, the vehicles subject of

the complaint are her paraphernal properties and theRTC gravely erred when it ordered the inclusion ofGlenn Go as a co-plaintiff.

Navarro likewise faults the lower court for settingthe trial of the case in the same order that requiredKaren Go to amend her complaints, claiming that byissuing this order, the trial court violated Rule 10 ofthe Rules.

Even assuming the complaints stated a cause ofaction against him, Navarro maintains that the

complaints were premature because no priordemand was made on him to comply with theprovisions of the lease agreements before thecomplaints for replevin were filed.

Lastly, Navarro posits that since the two writs ofreplevin were issued based on flawed complaints,the vehicles were illegally seized from his

possession and should be returned to himimmediately.

Karen Go, on the other hand, claims that it is

misleading for Navarro to state that she has no realinterest in the subject of the complaint, even if thelease agreements were signed only by her husband,Glenn Go; she is the owner of Kargo Enterprisesand Glenn Go signed the lease agreements merelyas the manager of Kargo Enterprises. Moreover,Karen Go maintains that Navarro's insistence thatKargo Enterprises is Karen Go's paraphernal

property is without basis. Based on the law andjurisprudence on the matter, all property acquired


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during the marriage is presumed to be conjugalproperty. Finally, Karen Go insists that hercomplaints sufficiently established a cause of actionagainst Navarro. Thus, when the RTC ordered her toinclude her husband as co-plaintiff, this was merelyto comply with the rule that spouses should sue

jointly, and was not meant to cure the complaints'lack of cause of action.

THE COURT'S RULING

We find the petition devoid of merit.

Karen Go is the real party-in-interest

The 1997 Rules of Civil Procedure requires thatevery action must be prosecuted or defended in thename of the real party-in-interest, i.e., the party who

stands to be benefited or injured by the judgment inthe suit, or the party entitled to the avails of thesuit.[15]

Interestingly, although Navarro admits that KarenGo is the registered owner of the business nameKargo Enterprises, he still insists that Karen Go isnot a real party-in-interest in the case. According to

Navarro, while the lease contracts were in KargoEnterprises' name, this was merely a trade namewithout a juridical personality, so the actual partiesto the lease agreements were Navarro and Glenn

Go, to the exclusion of Karen Go.

As a corollary, Navarro contends that the RTC actedwith grave abuse of discretion when it ordered theinclusion of Glenn Go as co-plaintiff, since this ineffect created a cause of action for the complaintswhen in truth, there was none.

We do not find Navarro's arguments persuasive.

The central factor in appreciating the issuespresented in this case is the business name Kargo

Enterprises.The name appears in the title of theComplaint where the plaintiff was identified as"KAREN T. GO doing business under the nameKARGO ENTERPRISES," and this identificationwas repeated in the first paragraph of theComplaint. Paragraph 2 defined the businessKARGO ENTERPRISES undertakes.Paragraph 3continued with the allegation that the defendant"leased from plaintiff a certain motor vehicle" thatwas thereafter described.Significantly, the

Complaint specifies and attaches as its integral partthe Lease Agreement that underlies the transaction

between the plaintiff and the defendant.Again, thename KARGO ENTERPRISES entered the pictureas this Lease Agreement provides:

This agreement, made and entered into by andbetween:

GLENN O. GO, of legal age, married, with postoffice address at xxx, herein referred to as theLESSOR-SELLER; representing KARGOENTERPRISES as its Manager,

xxx

thus, expressly pointing to KARGOENTERPRISES as the principal that Glenn O. Go

represented. In other words, by the express terms ofthis Lease Agreement, Glenn Go did sign theagreement only as the manager of Kargo Enterprisesand the latter is clearly the real party to the leaseagreements.

As Navarro correctly points out, Kargo Enterprisesis a sole proprietorship, which is neither a natural

person, nor a juridical person, as defined by Article44 of the Civil Code:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;(2) Other corporations, institutions andentities for public interest or purpose,created by law; their personality begins assoon as they have been constitutedaccording to law;(3) Corporations, partnerships andassociations for private interest or purposeto which the law grants a juridical

personality, separate and distinct from thatof each shareholder, partner or member.

Thus, pursuant to Section 1, Rule 3 of theRules,[16] Kargo Enterprises cannot be a party to acivil action. This legal reality leads to the question:who then is the proper party to file an action basedon a contract in the name of Kargo Enterprises?

We faced a similar question in Juasing Hardware v.Mendoza,[17] where we said:


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Finally, there is no law authorizing soleproprietorships like petitioner to bring suit in court.The law merely recognizes the existence of a sole

proprietorship as a form of business organizationconducted for profit by a single individual, andrequires the proprietor or owner thereof to secure

licenses and permits, register the business name,and pay taxes to the national government. It doesnot vest juridical or legal personality upon the sole

proprietorship nor empower it to file or defend anaction in court.

Thus, the complaint in the court below should havebeen filed in the name of the owner of JuasingHardware. The allegation in the body of thecomplaint would show that the suit is brought bysuch person as proprietor or owner of the businessconducted under the name and style Juasing

Hardware. The descriptive words "doing business asJuasing Hardware" may be added to the title of thecase, as is customarily done.[18] [Emphasissupplied.]

This conclusion should be read in relation withSection 2, Rule 3 of the Rules, which states:

SEC. 2. Parties in interest. - A real party in interestis the party who stands to be benefited or injured bythe judgment in the suit, or the party entitled to theavails of the suit. Unless otherwise authorized by

law or these Rules, every action must be prosecutedor defended in the name of the real party in interest.

As the registered owner of Kargo Enterprises, KarenGo is the party who will directly benefit from or beinjured by a judgment in this case. Thus, contrary to

Navarro's contention, Karen Go is the real party-in-interest, and it is legally incorrect to say that herComplaint does not state a cause of action becauseher name did not appear in the Lease Agreementthat her husband signed in behalf of KargoEnterprises. Whether Glenn Go can legally sign the

Lease Agreement in his capacity as a manager ofKargo Enterprises, a sole proprietorship, is aquestion we do not decide, as this is a matter for thetrial court to consider in a trial on the merits.

Glenn Go's Role in the Case

We find it significant that the business name KargoEnterprises is in the name of Karen T. Go,[19] whodescribed herself in the Complaints to be "a

Filipino, of legal age, married to GLENN O. GO, aresident of Cagayan de Oro City, and doing

business under the trade name KARGOENTERPRISES."[20] That Glenn Go and Karen Goare married to each other is a fact never brought inissue in the case. Thus, the business name KARGO

ENTERPRISES is registered in the name of amarried woman, a fact material to the side issue ofwhether Kargo Enterprises and its properties are

paraphernal or conjugal properties.To restate theparties' positions, Navarro alleges that KargoEnterprises is Karen Go's paraphernal property,emphasizing the fact that the business is registeredsolely in Karen Go's name.On the other hand, KarenGo contends that while the business is registered inher name, it is in fact part of their conjugal property.

The registration of the trade name in the name of

one person - a woman - does not necessarily lead tothe conclusion that the trade name as a property ishers alone, particularly when the woman is married.By law, all property acquired during the marriage,whether the acquisition appears to have been made,contracted or registered in the name of one or bothspouses, is presumed to be conjugal unless thecontrary is proved.[21] Our examination of therecords of the case does not show any proof thatKargo Enterprises and the properties or contracts inits name are conjugal. If at all, only the bareallegation of Navarro to this effect exists in the

records of the case.As we emphasized in Castro v.Miat:[22]

Petitioners also overlook Article 160 of the NewCivil Code. It provides that "all property of themarriage is presumed to be conjugal partnership,unless it be prove[n] that it pertains exclusively tothe husband or to the wife."This article does notrequire proof that the property was acquired withfunds of the partnership.The presumption applieseven when the manner in which the property wasacquired does not appear.[23] [Emphasis supplied.]

Thus, for purposes solely of this case and ofresolving the issue of whether Kargo Enterprises asa sole proprietorship is conjugal or paraphernal

property, we hold that it is conjugal property.

Article 124 of the Family Code, on theadministration of the conjugal property, provides:

Art. 124.The administration and enjoyment of theconjugal partnership property shall belong to both


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spouses jointly.In case ofdisagreement, thehusband's decision shall prevail, subject to recourseto the court by the wife for proper remedy, whichmust be availed of within five years from the date ofthe contract implementing such decision.

xxx

This provision, by its terms, allows either Karen orGlenn Go to speak and act with authority inmanaging their conjugal property, i.e., KargoEnterprises.No need exists, therefore, for one toobtain the consent of the other before performing anact of administration or any act that does notdispose of or encumber their conjugal property.

Under Article 108 of the Family Code, the conjugalpartnership is governed by the rules on the contract

of partnership in all that is not in conflict with whatis expressly determined in this Chapter or by thespouses in their marriage settlements.In otherwords, the property relations of the husband andwife shall be governed primarily by Chapter 4 onConjugal Partnership of Gains of the Family Codeand, suppletorily, by the spouses' marriagesettlement and by the rules on partnership under theCivil Code.In the absence of any evidence of amarriage settlement between the spouses Go, welook at the Civil Code provision on partnership forguidance.

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 otherpartners of specific partnership property.

The incidents of this co-ownership are such that:

(1) A partner, subject to the provisions of this Titleand to any agreement between the partners, has an

equal right with his partners to possess specificpartnership property for partnership purposes; xxx

Under this provision, Glenn and Karen Go areeffectively co-owners of Kargo Enterprises and the

properties registered under this name; hence, bothhave 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," we find further support inArticle 487 of the Civil Code that allows any of theco-owners to bring an action in ejectment withrespect to the co-owned property.

While ejectment is normally associated with actions

involving real property, we find that this rule can beapplied to the circumstances of the present case,following our ruling in Carandang v. Heirs of DeGuzman.[24] In this case, one spouse filed an actionfor the recovery of credit, a personal propertyconsidered conjugal property, without including theother spouse in the action. In resolving the issue ofwhether the other spouse was required to beincluded as a co-plaintiff in the action for therecovery of the credit, we said:

Milagros de Guzman, being presumed to be a co-

owner of the credits allegedly extended to thespouses Carandang, seems to be either anindispensable or a necessary party.If she is anindispensable party, dismissal would be proper.Ifshe is merely a necessary party, dismissal is notwarranted, whether or not there was an order for herinclusion in the complaint pursuant to Section 9,Rule 3.

Article 108 of the Family Code provides:

Art. 108.The conjugal partnership shall be governed

by the rules on the contract of partnership in all thatis not in conflict with what is expressly determinedin this Chapter or by the spouses in their marriagesettlements.

This provision is practically the same as the CivilCode provision it superseded:

Art. 147.The conjugal partnership shall be governedby the rules on the contract of partnership in all thatis not in conflict with what is expressly determinedin this Chapter.

In this connection, Article 1811 of the Civil Codeprovides that "[a] partner is a co-owner with theother partners of specific partnership property."Taken with the presumption of the conjugal natureof the funds used to finance the four checks used to

pay for petitioners' stock subscriptions, and with thepresumption that the credits themselves are part ofconjugal funds, Article 1811 makes Quirino and


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Milagros de Guzman co-owners of the allegedcredit.

Being co-owners of the alleged credit, Quirino andMilagros de Guzman may separately bring an actionfor the recovery thereof. In the fairly recent cases of

Baloloy v. Hular and Adlawan v. Adlawan, we heldthat, in a co-ownership, co-owners may bringactions for the recovery of co-owned propertywithout the necessity of joining all the other co-owners as co-plaintiffs because the suit is presumedto have been filed for the benefit of his co-owners.In the latter case and in that of De Guia v. Court ofAppeals, we also held that Article 487 of the CivilCode, which provides that any of the co-ownersmay bring an action for ejectment, covers all kindsof action for the recovery of possession.

In sum, in suits to recover properties, all co-ownersare real parties in interest. However, pursuant toArticle 487 of the Civil Code and relevant

jurisprudence, any one of them may bring an action,any kind of action, for the recovery of co-owned

properties. Therefore, only one of the co-owners,namely the co-owner who filed the suit for therecovery of the co-owned property, is anindispensable party thereto. The other co-owners arenot indispensable parties. They are not evennecessary parties, for a complete relief can beaccorded in the suit even without their participation,

since the suit is presumed to have been filed for thebenefit of all co-owners.[25] [Emphasis supplied.]

Under this ruling, either of the spouses Go maybring an action against Navarro to recoverpossession of the Kargo Enterprises-leased vehicleswhich they co-own.This conclusion is consistentwith Article 124 of the Family Code, supporting asit does the position that either spouse may act on

behalf of the conjugal partnership, so long as theydo not dispose of or encumber the property inquestion without the other spouse's consent.

On this basis, we hold that since Glenn Go is notstrictly an indispensable party in the action torecover possession of the leased vehicles, he onlyneeds to be impleaded as a pro-forma party to thesuit, based on Section 4, Rule 4 of the Rules, whichstates:

Section 4. Spouses as parties. - Husband and wifeshall sue or be sued jointly, except as provided bylaw.

Non-joinder of indispensable parties not ground todismiss action

Even assuming that Glenn Go is an indispensableparty to the action, we have held in a number ofcases[26] that the misjoinder or non-joinder ofindispensable parties in a complaint is not a groundfor dismissal of action. As we stated in Macababbadv. Masirag:[27]

Rule 3, Section 11 of the Rules of Court providesthat neither misjoinder nor nonjoinder of parties is aground for the dismissal of an action, thus:

Sec. 11. Misjoinder and non-joinder of parties.Neither misjoinder nor non-joinder of parties isground for dismissal of an action. Parties may bedropped or added by order of the court on motion ofany party or on its own initiative at any stage of theaction and on such terms as are just. Any claimagainst a misjoined party may be severed and

proceeded with separately.

In Domingo v. Scheer, this Court held that theproper remedy when a party is left out is to impleadthe indispensable party at any stage of the

action.The court, either motu proprio or upon themotion of a party, may order the inclusion of theindispensable party or give the plaintiff opportunityto amend his complaint in order to includeindispensable parties.If the plaintiff to whom theorder to include the indispensable party is directedrefuses to comply with the order of the court, thecomplaint may be dismissed upon motion of thedefendant or upon the court's own motion.Onlyupon unjustified failure or refusal to obey the orderto include or to amend is the action dismissed.

In these lights, the RTC Order of July 26, 2000requiring plaintiff Karen Go to join her husband as aparty plaintiff is fully in order.

Demand not required priorto filing of replevin action

In arguing that prior demand is required before anaction for a writ of replevin is filed, Navarro


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apparently likens a replevin action to an unlawfuldetainer.

For a writ of replevin to issue, all that the applicantmust do is to file an affidavit and bond, pursuant toSection 2, Rule 60 of the Rules, which states:

Sec. 2. Affidavit and bond.

The applicant must show by his own affidavit orthat of some other person who personally knows thefacts:

(a) That the applicant is the owner of the propertyclaimed, particularly describing it, or is entitled tothe possession thereof;

(b) That the property is wrongfully detained by the

adverse party, alleging the cause of detentionthereof according to the best of his knowledge,information, and belief;

(c) That the property has not been distrained ortaken for a tax assessment or a fine pursuant to law,or seized under a writ of execution or preliminaryattachment, or otherwise placed under custodialegis, or if so seized, that it is exempt from suchseizure or custody; and

(d) The actual market value of the property.

The applicant must also give a bond, executed to theadverse party in double the value of the property asstated in the affidavit aforementioned, for the returnof the property to the adverse party if such return beadjudged, and for the payment to the adverse partyof such sum as he may recover from the applicant inthe action.

We see nothing in these provisions which requiresthe applicant to make a prior demand on the

possessor of the property before he can file an

action for a writ of replevin. Thus, prior demand isnot a condition precedent to an action for a writ ofreplevin.

More importantly, Navarro is no longer in theposition to claim that a prior demand is necessary,as he has already admitted in his Answers that hehad received the letters that Karen Go sent him,demanding that he either pay his unpaid obligationsor return the leased motor vehicles.Navarro's

position that a demand is necessary and has notbeen made is therefore totally unmeritorious.

WHEREFORE, premises considered, we DENYthepetition for review for lack of merit.Costs against

petitioner Roger V. Navarro.

DECISIONS OF JUSTICE BRION GOVERNEDBY THE CIVIL CODE

[ G.R. No. 174118, April 11, 2012 ]THE ROMAN CATHOLIC CHURCH,REPRESENTED BY THE ARCHBISHOP OFCACERES, PETITIONER, VS. REGINO PANTE,RESPONDENT.

BRION, J.:

THE PETITION

The Church contends that the sale of the lot to Panteis voidable under Article 1390 of the Civil Code,which states:

Article 1390. The following contracts are voidableor annullable, even though there may have been nodamage to the contracting parties:

(1) Those where one of the parties is incapable ofgiving consent to a contract;

(2) Those where the consent is vitiated by mistake,violence, intimidation, undue influence or fraud.

These contracts are binding, unless they areannulled by a proper action in court. They aresusceptible of ratification. [Emphasis ours.]

It points out that, during trial, Pante alreadyadmitted knowing that the spouses Rubi have been

residing on the lot. Despite this knowledge, Pantemisrepresented himself as an occupant because heknew of the Churchs policy to sell lands only to

occupants or residents thereof. It thus claims thatPantes misrepresentation effectively vitiated itsconsent to the sale; hence, the contract should benullified.

For the Church, the presence of fraud andmisrepresentation that would suffice to annul the


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sale is the primary issue that the tribunals belowshould have resolved. Instead, the CA opted tocharacterize the contract between the Church andPante, considered it as a contract of sale, and, aftersuch characterization, proceeded to resolve the casein Pantes favor. The Church objects to this

approach, on the principal argument that there couldnot have been a contract at all considering that itsconsent had been vitiated.

THE COURTS RULING

The Court resolves to deny the petition.

No misrepresentation existed vitiating thesellers consent and invalidating the contract

Consent is an essential requisite of contracts[12] asit pertains to the meeting of the offer and theacceptance upon the thing and the cause whichconstitute the contract.[13] To create a validcontract, the meeting of the minds must be free,voluntary, willful and with a reasonableunderstanding of the various obligations the partiesassumed for themselves.[14] Where consent,however, is given through mistake, violence,intimidation, undue influence, or fraud, the contractis deemed voidable.[15] However, not every

mistake renders a contract voidable. The CivilCode clarifies the nature of mistake that vitiatesconsent:

Article 1331. In order that mistake may invalidateconsent, it should refer to the substance of the thingwhich is the object of the contract, or to thoseconditions which have principally moved one or

both parties to enter into the contract.

Mistake as to the identity or qualifications of one of

the parties will vitiate consent only when suchidentity or qualifications have been the principalcause of the contract.

A simple mistake of account shall give rise to itscorrection. [Emphasis ours.]

For mistake as to the qualification of one of theparties to vitiate consent, two requisites mustconcur:

the mistake must be either with regard to theidentity or with regard to the qualification of one ofthe contracting parties; and

the identity or qualification must have been theprincipal consideration for the celebration of thecontract.[16]

In the present case, the Church contends that itsconsent to sell the lot was given on the mistakenimpression arising from Pantes fraudulentmisrepresentation that he had been the actualoccupant of the lot. Willful misrepresentationexisted because of its policy to sell its lands only totheir actual occupants or residents. Thus, it

considers the buyers actual occupancy or residenceover the subject lot a qualification necessary toinduce it to sell the lot.

Whether the facts, established during trial, supportthis contention shall determine if the contract

between the Church and Pante should be annulled.In the process of weighing the evidentiary value ofthese established facts, the courts should consider

both the parties objectives and the subjectiveaspects of the transaction, specifically, the partiescircumstances their condition, relationship, and

other attributes and their conduct at the time ofand subsequent to the contract. These considerationswill show what influence the alleged error exertedon the parties and their intelligent, free, andvoluntary consent to the contract.[17]

Contrary to the Churchs contention, the actualoccupancy or residency of a buyer over the landdoes not appear to be a necessary qualification thatthe Church requires before it could sell its land.Had this been indeed its policy, then neither Pantenor the spouses Rubi would qualify as buyers of the

32-square meter lot, as none of them actuallyoccupied or resided on the lot. We note in thisregard that the lot was only a 2x16-meter strip ofrural land used as a passageway from Pantes houseto the municipal road.

We find well-taken Pantes argument that, given thesize of the lot, it could serve no other purpose thanas a mere passageway; it is unthinkable to considerthat a 2x16-meter strip of land could be mistaken as


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anyones residence. In fact, the spouses Rubi were

in possession of the adjacent lot, but they neverasserted possession over the 2x16-meter lot whenthe 1994 sale was made in their favor; it was onlythen that they constructed the concrete fence

blocking the passageway.

We find it unlikely that Pante could successfullymisrepresent himself as the actual occupant of thelot; this was a fact that the Church (which has a

parish chapel in the same barangay where the lotwas located) could easily verify had it conducted anocular inspection of its own property. Thesurrounding circumstances actually indicate that theChurch was aware that Pante was using the lotmerely as a passageway.

The above view is supported by the sketch plan,[18]

attached to the contract executed by the Church andPante, which clearly labeled the 2x16-meter lot as aRIGHT OF WAY; below these words was writtenthe name of Mr. Regino Pante. Asked duringcross-examination where the sketch plan camefrom, Pante answered that it was from theArchbishops Palace; neither the Church nor the

spouses Rubi contradicted this statement.[19]

The records further reveal that the sales of theChurchs lots were made after a series ofconferences with the occupants of the lots.[20] The

then parish priest of Canaman, Fr. Marcaida, wasapparently aware that Pante was not an actualoccupant, but nonetheless, he allowed the sale ofthe lot to Pante, subject to the approval of theArchdioceses Oeconomous. Relying on Fr.

Marcaidas recommendation and finding nothingobjectionable, Fr. Ragay (the ArchdiocesesOeconomous) approved the sale to Pante.

The above facts, in our view, establish that therecould not have been a deliberate, willful, orfraudulent act committed by Pante that misled the

Church into giving its consent to the sale of thesubject lot in his favor. That Pante was not an actualoccupant of the lot he purchased was a fact that theChurch either ignored or waived as a requirement.In any case, the Church was by no means led to

believe or do so by Pantes act; there had been novitiation of the Churchs consent to the sale of thelot to Pante.

From another perspective, any finding of bad faith,if one is to be made, should be imputed to theChurch. Without securing a court ruling on thevalidity of its contract with Pante, the Church soldthe subject property to the spouses Rubi. Article1390 of the Civil Code declares that voidable

contracts are binding, unless annulled by a propercourt action. From the time the sale to Pante wasmade and up until it sold the subject property to thespouses Rubi, the Church made no move to rejectthe contract with Pante; it did not even return thedown payment he paid. The Churchs bad faith inselling the lot to Rubi without annulling its contractwith Pante negates its claim for damages.

In the absence of any vitiation of consent, thecontract between the Church and Pante stands validand existing. Any delay by Pante in paying the full

price could not nullify the contract, since (ascorrectly observed by the CA) it was a contract ofsale. By its terms, the contract did not provide astipulation that the Church retained ownership untilfull payment of the price.[21] The right torepurchase given to the Church in case Pante fails to

pay within the grace period provided[22] wouldhave been unnecessary had ownership not already

passed to Pante.

The rule on double sales

The sale of the lot to Pante and later to the spousesRubi resulted in a double sale that called for theapplication of the rules in Article 1544 of the CivilCode:

Article 1544. If the same thing should have beensold to different vendees, the ownership shall betransferred to the person who may have first taken

possession thereof in good faith, if it should bemovable property.

Should it be immovable property, the ownershipshall belong to the person acquiring it who in goodfaith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shallpertain to the person who in good faith was first inthe possession; and, in the absence thereof, to the

person who presents the oldest title, provided thereis good faith. [Emphasis ours.]


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As neither Pante nor the spouses Rubi registered thesale in their favor, the question now is who,

between the two, was first in possession of theproperty in good faith.

Jurisprudence has interpreted possession in Article

1544 of the Civil Code to mean both actual physicaldelivery and constructive delivery.[23] Undereither mode of delivery, the facts show that Pantewas the first to acquire possession of the lot.

Actual delivery of a thing sold occurs when it isplaced under the control and possession of thevendee.[24] Pante claimed that he had been usingthe lot as a passageway, with the Churchs

permission, since 1963. After purchasing the lot in1992, he continued using it as a passageway until hewas prevented by the spouses Rubis concrete fence

over the lot in 1994. Pantes use of the lot as apassageway after the 1992 sale in his favor was aclear assertion of his right of ownership that

preceded the spouses Rubis claim of ownership.

Pante also stated that he had placed electricconnections and water pipes on the lot, even beforehe purchased it in 1992, and the existence of theseconnections and pipes was known to the spousesRubi.[25] Thus, any assertion of possession over thelot by the spouses Rubi (e.g., the construction of aconcrete fence) would be considered as made in bad

faith because works had already existed on the lotindicating possession by another. [A] buyer ofreal property in the possession of persons other thanthe seller must be wary and should investigate therights of those in possession. Without such inquiry,the buyer can hardly be regarded as a buyer in goodfaith and cannot have any right over the

property."[26]

Delivery of a thing sold may also be madeconstructively. Article 1498 of the Civil Codestates that:

Article 1498. When the sale is made through apublic instrument, the execution thereof shall beequivalent to the delivery of the thing which is theobject of the contract, if from the deed the contrarydoes not appear or cannot clearly be inferred.

Under this provision, the sale in favor of Pantewould have to be upheld since the contract executed

between the Church and Pante was duly notarized,converting the deed into a public instrument.[27] In

Navera v. Court of Appeals,[28] the Court ruledthat:

[A]fter the sale of a realty by means of a publicinstrument, the vendor, who resells it to another,does not transmit anything to the second vendee,and if the latter, by virtue of this second sale, takesmaterial possession of the thing, he does it as meredetainer, and it would be unjust to protect thisdetention against the rights of the thing lawfullyacquired by the first vendee.

Thus, under either mode of delivery, Pante acquiredprior possession of the lot.

WHEREFORE, we DENY the petition for reviewon certiorari, and AFFIRM the decision of the Courtof Appeals dated May 18, 2006, and its resolutiondated August 11, 2006, issued in CA-G.R.-CV No.65069. Costs against the Roman Catholic Church.

[ G.R. No. 156125, August 25, 2010 ]FRANCISCO MUOZ, JR., PETITIONER, VS.ERLINDA RAMIREZ AND ELISEO CARLOS,RESPONDENTS.

BRION, J.:

THE PETITION

The petitioner argues that the CA misapplied thesecond paragraph of Article 158 of the Civil Codeand Calimlim-Canullas [28] because therespondents admitted in the complaint that it wasthe petitioner who gave the money used to cancelthe GSIS mortgage on TCT No. 1427; Article 120[29] of the Family Code is the applicable rule, andsince the value of the house is less than the value of

the lot, then Erlinda retained ownership of thesubject property. He also argues that the contractbetween the parties was a sale, not a mortgage,because (a) Erlinda did not deny her signature in thedocument; [30] (b) Erlinda agreed to sign a contractof lease over the subject property; [31] and, (c)Erlinda executed a letter, dated April 30, 1992,confirming the conversion of the loan application toa deed of sale. [32]


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THE CASE FOR THE RESPONDENTS

The respondents submit that it is unnecessary tocompare the respective values of the house and of

the lot to determine ownership of the subjectproperty; it was acquired during their marriage and,therefore, considered conjugal property. They alsosubmit that the transaction between the parties wasnot a sale, but an equitable mortgage because (a)they remained in possession of the subject propertyeven after the execution of the deed of absolute sale,(b) they paid the 1993 real property taxes due on thesubject property, and (c) they received P200,000.00only of the total stated price of P602,000.00.

THE ISSUE

The issues in the present case boil down to (1)whether the subject property is paraphernal orconjugal; and, (2) whether the contract between the

parties was a sale or an equitable mortgage.

OUR RULING

We deny the present Petition but for reasons otherthan those advanced by the CA.

This Court is not a trier of facts. However, if theinference, drawn by the CA, from the facts ismanifestly mistaken, as in the present case, we canreview the evidence to allow us to arrive at thecorrect factual conclusions based on the record. [33]

First Issue:

Paraphernal or Conjugal?

As a general rule, all property acquired during themarriage, whether the acquisition appears to have

been made, contracted or registered in the name ofone or both spouses, is presumed to be conjugalunless the contrary is proved. [34]

In the present case, clear evidence that Erlindainherited the residential lot from her father hassufficiently rebutted this presumption of conjugalownership. [35] Pursuant to Articles 92 [36] and109 [37] of the Family Code, properties acquired bygratuitous title by either spouse, during the

marriage, shall be excluded from the communityproperty and be the exclusive property of eachspouse.[38] The residential lot, therefore, isErlinda's exclusive paraphernal property.

The CA, however, held that the residential lotbecame conjugal when the house was built thereonthrough conjugal funds, applying the second

paragraph of Article 158 of the Civil Code andCalimlim-Canullas. [39] Under the second

paragraph of Article 158 of the Civil Code, a landthat originally belonged to one spouse becomes

conjugal upon the construction of improvementsthereon at the expense of the partnership. Weapplied this provision in Calimlim-Canullas, [40]where we held that when the conjugal house isconstructed on land belonging exclusively to thehusband, the land ipso facto becomes conjugal, butthe husband is entitled to reimbursement of thevalue of the land at the liquidation of the conjugal

partnership.

The CA misapplied Article 158 of theCivil Code and Calimlim-Canullas

We cannot subscribe to the CA's misplaced relianceon Article 158 of the Civil Code and Calimlim-Canullas.

As the respondents were married during theeffectivity of the Civil Code, its provisions onconjugal partnership of gains (Articles 142 to 189)should have governed their property relations.However, with the enactment of the Family Code onAugust 3, 1989, the Civil Code provisions onconjugal partnership of gains, including Article 158,

have been superseded by those found in the FamilyCode (Articles 105 to 133). Article 105 of theFamily Code states:

x x x x

The provisions of this Chapter [on the ConjugalPartnership of Gains] shall also apply to conjugal


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partnerships of gains already established betweenspouses before the effectivity of this Code, without

prejudice to vested rights already acquired inaccordance with the Civil Code or other laws, as

provided in Article 256.

Thus, in determining the nature of the subjectproperty, we refer to the provisions of the FamilyCode, and not the Civil Code, except with respect torights then already vested.

Article 120 of the Family Code, which supersedesArticle 158 of the Civil Code, provides the solutionin determining the ownership of the improvementsthat are made on the separate property of thespouses, at the expense of the partnership or throughthe acts or efforts of either or both spouses. Under

this provision, when the cost of the improvementand any resulting increase in value are more thanthe value of the property at the time of theimprovement, the entire property of one of thespouses shall belong to the conjugal partnership,subject to reimbursement of the value of the

property of the owner-spouse at the time of theimprovement; otherwise, said property shall beretained in ownership by the owner-spouse, likewisesubject to reimbursement of the cost of theimprovement. [41]

In the present case, we find that Eliseo paid aportion only of the GSIS loan through monthlysalary deductions. From April 6, 1989 [42] to April30, 1992, [43] Eliseo paid about P60,755.76, [44]not the entire amount of the GSIS housing loan plusinterest, since the petitioner advanced theP176,445.27 [45] paid by Erlinda to cancel themortgage in 1992. Considering the P136,500.00amount of the GSIS housing loan, it is fairlyreasonable to assume that the value of theresidential lot is considerably more than theP60,755.76 amount paid by Eliseo through monthly

salary deductions.

Thus, the subject property remained the exclusiveparaphernal property of Erlinda at the time shecontracted with the petitioner; the written consent ofEliseo to the transaction was not necessary. The

NBI finding that Eliseo's signatures in the specialpower of attorney and affidavit were forgeries wasimmaterial.

Nonetheless, the RTC and the CA apparently failedto consider the real nature of the contract betweenthe parties.

Second Issue:

Sale or Equitable Mortgage?

Jurisprudence has defined an equitable mortgage "asone which although lacking in some formality, orform or words, or other requisites demanded by astatute, nevertheless reveals the intention of the

parties to charge real property as security for a debt,there being no impossibility nor anything contraryto law in this intent." [46]

Article 1602 of the Civil Code enumerates theinstances when a contract, regardless of itsnomenclature, may be presumed to be an equitablemortgage: (a) when the price of a sale with right torepurchase is unusually inadequate; (b) when thevendor remains in possession as lessee or otherwise;(c) when upon or after the expiration of the right torepurchase another instrument extending the periodof redemption or granting a new period is executed;(d) when the purchaser retains for himself a part ofthe purchase price; (e) when the vendor bindshimself to pay the taxes on the thing sold; and, (f) in

any other case where it may be fairly inferred thatthe real intention of the parties is that the transactionshall secure the payment of a debt or the

performance of any other obligation. Theseinstances apply to a contract purporting to be anabsolute sale. [47]

For the presumption of an equitable mortgage toarise under Article 1602 of the Civil Code, two (2)requisites must concur: (a) that the parties enteredinto a contract denominated as a contract of sale;and, (b) that their intention was to secure an existing

debt by way of a mortgage. Any of thecircumstances laid out in Article 1602 of the CivilCode, not the concurrence nor an overwhelmingnumber of the enumerated circumstances, issufficient to support the conclusion that a contractof sale is in fact an equitable mortgage. [48]

Contract is an equitable mortgage


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In the present case, there are four (4) tellingcircumstances pointing to the existence of anequitable mortgage.

First, the respondents remained in possession aslessees of the subject property; the parties, in fact,

executed a one-year contract of lease, effective May1, 1992 to April 30, 1993. [49]

Second, the petitioner retained part of the "purchaseprice," the petitioner gave a P200,000.00 advance tosettle the GSIS housing loan, but refused to give theP402,000.00 balance when Erlinda failed to submitEliseo's signed affidavit of waiver of rights.

Third, respondents paid the real property taxes onJuly 8, 1993, despite the alleged sale on April 30,1992; [50] payment of real property taxes is a usual

burden attaching to ownership and when, as here,such payment is coupled with continuous possessionof the property, it constitutes evidence of greatweight that the person under whose name the realtytaxes were declared has a valid and rightful claimover the land. [51]

Fourth, Erlinda secured the payment of the principaldebt owed to the petitioner with the subject

property. The records show that the petitioner, infact, sent Erlinda a Statement of Account showingthat as of February 20, 1993, she owed

P384,660.00, and the daily interest, startingFebruary 21, 1993, was P641.10. [52] Thus, theparties clearly intended an equitable mortgage andnot a contract of sale.

That the petitioner advanced the sum ofP200,000.00 to Erlinda is undisputed. Thisadvance, in fact, prompted the latter to transfer thesubject property to the petitioner. Thus, before therespondents can recover the subject property, theymust first return the amount of P200,000.00 to the

petitioner, plus legal interest of 12% per annum,

computed from April 30, 1992.

We cannot sustain the ballooned obligation ofP384,660.00, claimed in the Statement of Accountsent by the petitioner, [53] sans any evidence ofhow this amount was arrived at. Additionally, adaily interest of P641.10 or P19,233.00 per monthfor a P200,000.00 loan is patently unconscionable.While parties are free to stipulate on the interest to

be imposed on monetary obligations, we can step in

to temper the interest rates if they areunconscionable. [54]

In Lustan v. CA, [55] where we established thereciprocal obligations of the parties under anequitable mortgage, we ordered the reconveyance of

the property to the rightful owner therein upon thepayment of the loan within ninety (90) days fromthe finality of the decision. [56]

WHEREFORE, in light of all the foregoing, wehereby DENY the present petition. The assaileddecision and resolution of the Court of Appeals inCA-G.R. CV No. 57126 are AFFIRMED with thefollowing MODIFICATIONS:

1. The Deed of Absolute Sale dated April 30, 1992is hereby declared an equitable mortgage; and

2. The petitioner is obligated to RECONVEY to therespondents the property covered by TransferCertificate of Title No. 7650 of the Register ofDeeds of Mandaluyong City, UPON THEPAYMENT OF P200,000.00, with 12% legalinterest from April 30, 1992, by respondents within

NINETY DAYS FROM THE FINALITY OF THISDECISION.

[ G.R. No. 174156, June 20, 2012 ]FILCAR TRANSPORT SERVICES,

PETITIONER, VS. JOSE A. ESPINAS,RESPONDENT.

BRION, J.:

Filcar, as registered owner, is deemed the employerof thedriver, Floresca, and is thus vicariously liable underArticle2176 in relation with Article 2180 of the Civil Code

It is undisputed that Filcar is the registered owner of

the motor vehicle which hit and caused damage toEspinas car; and it is on the basis of this fact thatwe hold Filcar primarily and directly liable toEspinas for damages.

As a general rule, one is only responsible for hisown act or omission.[9] Thus, a person willgenerally be held liable only for the torts committed

by himself and not by another. This general rule is


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laid down in Article 2176 of the Civil Code, whichprovides to wit:

Article 2176. Whoever by act or omission causesdamage to another, there being fault or negligence,

is obliged to pay for the damage done. Such fault ornegligence, if there is no pre-existing contractualrelation between the parties, is called a quasi-delictand is governed by the provisions of this Chapter.

Based on the above-cited article, the obligation toindemnify another for damage caused by ones act

or omission is imposed upon the tortfeasor himself,i.e., the person who committed the negligent act oromission. The law, however, provides forexceptions when it makes certain persons liable forthe act or omission of another.

One exception is an employer who is madevicariously liable for the tort committed by hisemployee. Article 2180 of the Civil Code states:

Article 2180. The obligation imposed by Article2176 is demandable not only for ones own acts oromissions, but also for those of persons for whomone is responsible.

x x x x

Employers shall be liable for the damages caused bytheir employees and household helpers acting withinthe scope of their assigned tasks, even though theformer are not engaged in any business or industry.

x x x x

The responsibility treated of in this article shallcease when the persons herein mentioned prove thatthey observed all the diligence of a good father of afamily to prevent damage.

Under Article 2176, in relation with Article 2180, ofthe Civil Code, an action predicated on anemployees act or omission may be instituted

against the employer who is held liable for the

negligent act or omission committed by hisemployee.

Although the employer is not the actual tortfeasor,the law makes him vicariously liable on the basis ofthe civil law principle of pater familias for failure to

exercise due care and vigilance over the acts ofones subordinates to prevent damage to

another.[10] In the last paragraph of Article 2180 ofthe Civil Code, the employer may invoke thedefense that he observed all the diligence of a goodfather of a family to prevent damage.

As its core defense, Filcar contends that Article2176, in relation with Article 2180, of the CivilCode is inapplicable because it presupposes theexistence of an employer-employee relationship.According to Filcar, it cannot be held liable under

the subject provisions because the driver of itsvehicle at the time of the accident, Floresca, is notits employee but that of its Corporate Secretary,Atty. Flor.

We cannot agree. It is well settled that in case ofmotor vehicle mishaps, the registered owner of themotor vehicle is considered as the employer of thetortfeasor-driver, and is made primarily liable forthe tort committed by the latter under Article 2176,in relation with Article 2180, of the Civil Code.

In Equitable Leasing Corporation v. Suyom,[11]we ruled that in so far as third persons areconcerned, the registered owner of the motorvehicle is the employer of the negligent driver, andthe actual employer is considered merely as anagent of such owner.

In that case, a tractor registered in the name ofEquitable Leasing Corporation (Equitable) figuredin an accident, killing and seriously injuring several

persons. As part of its defense, Equitable claimedthat the tractor was initially leased to Mr. Edwin

Lim under a Lease Agreement, which agreementhas been overtaken by a Deed of Sale entered intoby Equitable and Ecatine Corporation (Ecatine).Equitable argued that it cannot be held liable fordamages because the tractor had already been soldto Ecatine at the time of the accident and thenegligent driver was not its employee but ofEcatine.


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In upholding the liability of Equitable, as registeredowner of the tractor, this Court said that regardlessof sales made of a motor vehicle, the registeredowner is the lawful operator insofar as the publicand third persons are concerned; consequently, it isdirectly and primarily responsible for the

consequences of its operation.[12] The Courtfurther stated that [i]n contemplation of law, theowner/operator of record is the employer of thedriver, the actual operator and employer beingconsidered as merely its agent.[13] Thus,

Equitable, as the registered owner of the tractor, wasconsidered under the law on quasi delict to be theemployer of the driver, Raul Tutor; Ecatine, Tutorsactual employer, was deemed merely as an agent ofEquitable.

Thus, it is clear that for the purpose of holding the

registered owner of the motor vehicle primarily anddirectly liable for damages under Article 2176, inrelation with Article 2180, of the Civil Code, theexistence of an employer-employee relationship, asit is understood in labor relations law, is notrequired. It is sufficient to establish that Filcar is theregistered owner of the motor vehicle causingdamage in order that it may be held vicariouslyliable under Article 2180 of the Civil Code.

Rationale for holding the registered ownervicariously liable

The rationale for the rule that a registered owner isvicariously liable for damages caused by theoperation of his motor vehicle is explained by the

principle behind motor vehicle registration, whichhas been discussed by this Court in Erezo, and cited

by the CA in its decision:

The main aim of motor vehicle registration is toidentify the owner so that if any accident happens,or that any damage or injury is caused by the

vehicle on the public highways, responsibilitytherefor can be fixed on a definite individual, theregistered owner. Instances are numerous wherevehicles running on public highways causedaccidents or injuries to pedestrians or other vehicleswithout positive identification of the owner ordrivers, or with very scant means of identification.It is to forestall these circumstances, soinconvenient or prejudicial to the public, that themotor vehicle registration is primarily ordained, in

the interest of the determination of personsresponsible for damages or injuries caused on publichighways. [emphasis ours]

Thus, whether there is an employer-employeerelationship between the registered owner and the

driver is irrelevant in determining the liability of theregistered owner who the law holds primarily anddirectly responsible for any accident, injury or deathcaused by the operation of the vehicle in the streetsand highways.

As explained by this Court in Erezo, the generalpublic policy involved in motor vehicle registrationis the protection of innocent third persons who mayhave no means of identifying public roadmalefactors and, therefore, would find it difficult if not impossibleto seek redress for damages they

may sustain in accidents resulting in deaths, injuriesand other damages; by fixing the person held

primarily and directly liable for the damagessustained by victims of road mishaps, the lawensures that relief will always be available to them.

To identify the person primarily and directlyresponsible for the damages would also prevent asituation where a registered owner of a motorvehicle can easily escape liability by passing on the

blame to another who may have no means to answerfor the damages caused, thereby defeating the

claims of victims of road accidents. We take notethat some motor vehicles running on our roads aredriven not by their registered owners, but byemployed drivers who, in most instances, do nothave the financial means to pay for the damagescaused in case of accidents.

These same principles apply by analogy to the caseat bar. Filcar should not be permitted to evade itsliability for damages by conveniently passing on the

blame to another party; in this case, its CorporateSecretary, Atty. Flor and his alleged driver,

Floresca. Following our reasoning in Equitable, theagreement between Filcar and Atty. Flor to assignthe motor vehicle to the latter does not bind Espinaswho was not a party to and has no knowledge of theagreement, and whose only recourse is to the motorvehicle registration.

Neither can Filcar use the defenses available underArticle 2180 of the Civil Code - that the employeeacts beyond the scope of his assigned task or that it


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exercised the due diligence of a good father of afamily to prevent damage - because the motorvehicle registration law, to a certain extent,modified Article 2180 of the Civil Code by makingthese defenses unavailable to the registered ownerof the motor vehicle. Thus, for as long as Filcar is

the registered owner of the car involved in thevehicular accident, it could not escape primaryliability for the damages caused to Espinas.

The public interest involved in this case must not beunderestimated. Road safety is one of the mostcommon problems that must be addressed in thiscountry. We are not unaware of news of roadaccidents involving reckless drivers victimizing ourcitizens. Just recently, such pervasive recklessnessamong most drivers took the life of a professor ofour state university.[14] What is most disturbing is

that our existing laws do not seem to deter theseroad malefactors from committing acts ofrecklessness.

We understand that the solution to the problem doesnot stop with legislation. An effectiveadministration and enforcement of the laws must beensured to reinforce discipline among drivers and toremind owners of motor vehicles to exercise duediligence and vigilance over the acts of their driversto prevent damage to others.

Thus, whether the driver of the motor vehicle,Floresca, is an employee of Filcar is irrelevant inarriving at the conclusion that Filcar is primarilyand directly liable for the damages sustained byEspinas. While Republic Act No. 4136 or the LandTransportation and Traffic Code does not containany provision on the liability of registered owners incase of motor vehicle mishaps, Article 2176, inrelation with Article 2180, of the Civil Codeimposes an obligation upon Filcar, as registeredowner, to answer for the damages caused toEspinas car. This interpretation is consistent with

the strong public policy of maintaining road safety,thereby reinforcing the aim of the State to promotethe responsible operation of motor vehicles by itscitizens.

This does not mean, however, that Filcar is leftwithout any recourse against the actual employer ofthe driver and the driver himself. Under the civillaw principle of unjust enrichment, the registeredowner of the motor vehicle has a right to be

indemnified by the actual employer of the driver ofthe amount that he may be required to pay asdamages for the injury caused to another.

The set-up may be inconvenient for the registeredowner of the motor vehicle, but the inconvenience

cannot outweigh the more important public policybeing advanced by the law in this case which is theprotection of innocent persons who may be victimsof reckless drivers and irresponsible motor vehicleowners.

WHEREFORE, the petition is DENIED. Thedecision dated February 16, 2006 and the resolutiondated July 6, 2006 of the Court of Appeals areAFFIRMED. Costs against petitioner FilcarTransport Services.

[ G.R. No. 156038, October 11, 2010 ]SPOUSES VICTORIANO CHUNG AND DEBBIECHUNG, PETITIONERS, VS. ULANDAYCONSTRUCTION, INC.,* RESPONDENT.

BRION, J.:

THE PETITION

The petitioners insist that the CA should havequantified the cost of the repairs on the defective

gutter and simply ordered the respondent toreimburse the petitioners' expenses becauserepairing the defective gutter requires thedemolition of the existing cement gutter, theremoval of the entire roofing and the dismantling ofthe second floor steel trusses; they are entitled toliquidated damages for the unjust delay in thecompletion of the construction within the 150-daycontract period; the award of P629,819.84 for

progress billings is unwarranted since onlyP545,920.00 is supported by the respondent'sevidence; the respondent's construction errors

should set-off or limit the petitioners' liability, ifany; the CA misinterpreted Article 1724 of the CivilCode and misapplied the principle of estoppel in

pais since the contract specifically provides thepetitioners' prior written approval for change orders;the respondent is not entitled to exemplary damagesand attorney's fees since the respondent was at faultfor the defective gutter.


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THE CASE FOR THE RESPONDENT

The respondent submits that the petition is merelydilatory since it seeks to review the lower courts'factual findings and conclusions, and it raised no

legal issue cognizable by this Court.[37]

THE ISSUE

The core issue is whether the CA erred in: (a)affirming the RTC decision for payment of progress

billings; (b) in increasing the amount due for changeorders; and, (c) in awarding exemplary damages andattorney's fees to the respondent.

OUR RULING

We find the petition meritorious.

This Court is not a trier of facts. However, when theinference drawn by the CA from the facts ismanifestly mistaken, as in the present case, we canreview the evidence to allow us to arrive at thecorrect factual conclusions based on the record.[38]

Contract is the law between the parties

In contractual relations, the law allows the partiesleeway and considers their agreement as the law

between them.[39] Contract stipulations that are notcontrary to law, morals, good customs, public orderor public policy shall be binding[40] and should becomplied with in good faith.[41] No party is

permitted to change his mind or disavow and goback upon his own acts, or to proceed contrarythereto, to the prejudice of the other party.[42] Inthe present case, we find that both parties failed to

comply strictly with their contractual stipulations onthe progress billings and change orders that causedthe delays in the completion of the project.

Amount awarded for unpaid progressbillings is unsupported by evidence

There is no dispute that the petitioners failed to payprogress billings nos. 8 to 12. However, we find nobasis to hold the petitioners liable for P629,819.84,

the balance of the total contract price, withoutdeducting the discount of P18,000.00 granted by therespondent. The petitioners likewise cannot be heldliable for the balance of the total contract price

because that amount is clearly unsupported by theevidence; only P545,922.13[43] is actually

supported by progress billings nos. 8 to 12.Deducting the respondent's P100,000.00 cashadvance,[44] the unpaid progress billings amount toonly P445,922.13.

Article 1724 of the Civil Code applies

The CA erred in ruling that Article 1724 of the CivilCode does not apply because the provision pertainsto disputes arising from the higher cost of labor andmaterials and there was no demand for increase inthe costs of labor and materials.

Article 1724[45] governs the recovery of additionalcosts in contracts for

a stipulated price (such as fixed lump-sumcontracts), and the increase in price for additionalwork due to change in plans and specifications.Such added cost can only be allowed upon the: (a)written authority from the developer or projectowner ordering or allowing the written changes inwork, and (b) written agreement of parties withregard to the increase in price or cost due to the

change in work or design modification. Compliancewith these two requisites is a condition precedentfor the recovery. The absence of one or the othercondition bars the recovery of additional costs.

Neither the authority for the changes made nor theadditional price to be paid therefor may be proved

by any other evidence.[46]

In the present case, Article I, paragraph 6, of theContract incorporates this provision:

The CONTRACTOR shall make no change oralteration in the plans, and specifications as well asin the works subject hereof without the prior writtenapproval of the OWNER. A mere act of toleranceshall not constitute approval.[47]

Significantly, the respondent did not secure therequired written approval of the petitioners beforemaking the changes in the plans, specifications and


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works. Thus, for undertaking change orders withoutthe stipulated written approval of the petitioners, therespondent cannot claim the additional costs itincurred, save for the change orders the petitionersaccepted and paid for as discussed below.

CA misapplied the principle of estoppel in pais

The petitioners' payment of Change Order Nos. 1,16, and 17 and their non-objection to the otherchange orders effected by the respondent cannotgive rise to estoppel in pais that would render the

petitioners liable for the payment of all changeorders.

Estoppel in pais, or equitable estoppel, arises whenone, by his acts, representations or admissions or byhis silence when he ought to speak out, intentionally

or through culpable negligence, induces another tobelieve certain facts to exist and the other rightfullyrelies and acts on such beliefs so that he will be

prejudiced if the former is permitted to deny theexistence of such facts.[48] The real office of theequitable norm of estoppel is limited to supplyingdeficiency in the law, but it should not supplant

positive law.[49]

In this case, the requirement for the petitioners'written consent to any change or alteration in thespecifications, plans and works is explicit in Article

1724 of the Civil Code and is deemed written in thecontract between the parties.[50] The contract alsoexpressly provides that a mere act of tolerance doesnot constitute approval. Thus, the petitioners didnot, by accepting and paying for Change Order Nos.1, 16, and 17, do away with the contractual term onchange orders nor with the application of Article1724. The payments for Change Order Nos. 1, 16,and 17 are, at best, acts of tolerance on the

petitioners' part that could not modify the contract.

Consistent with this ruling, the petitioners are still

liable for the P130,000.00 balance on Change OrderNos. 16 and 17 that, to date, remainunpaid.[51]

Accordingly, the petitioners' outstanding liabilitiesamount to P445,922.13 for the unpaid progress

billings and P130,000.00 for the ratified changeorders, or a total of P575,922.13.

Award of exemplary damages and attorney's fees isunwarranted.

We cannot allow the award for exemplary damagesand attorney's fees. It is a requisite in the grant ofexemplary damages that the act of the offender must

be accompanied by bad faith or done in a wanton,fraudulent, or malevolent manner.[52] On the otherhand, attorney's fees may be awarded only when a

party is compelled to litigate or to incur expenses toprotect his interest by reason of an unjustified act ofthe other party, as when the defendant acted in grossand evident bad faith in refusing the plaintiff's

plainly valid, just and demandable claim.[53] We donot see the presence of these circumstances in the

present case. As previously discussed, thepetitioners' refusal to pay the change orders wasbased on a valid ground - lack of their prior written

approval. There, too, is the matter of defectiveconstruction discussed below.

Petitioners' liability is set-off by respondent'sconstruction defect

We cannot sustain the lower courts' order to repairthe defective concrete gutter. The considerable lapseof time between the filing of the complaint in May1996 and the final resolution of the present caserenders the order to repair at this time highlyimpractical, if not manifestly absurd. Besides, under

the contract, the respondent's repair of constructiondefects, at its expense, pertains to the 12-monthwarranty period after the petitioners' issuance of thefinal acceptance of work.[54] This provision doesnot apply since the petitioners have not even issueda certificate of completion and final acceptance ofwork.

Under the circumstances, fairness and reason dictatethat we simply order the set-off of the petitioners'contractual liabilities totaling P575,922.13 againstthe repair cost for the defective gutter, pegged at

P717,524.00,[55] leaving the amount ofP141,601.87 still due from the respondent. Supportin law for this ruling for partial legal compensation

proceeds from Articles 1278,[56] 1279,[57]1281,[58] and 1283[59] of the Civil Code. In short,

both parties are creditors and debtors of each other,although in different amounts that are already dueand demandable.

Monetary award is subject to legal interest


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Finding merit in the petitioners' arguments, wepartly grant the petition.

Procedural Issue

As both the RTC and the CA found that therespondents' gross negligence led to the death ofCeledonio Tan, as well as to the destruction of the

petitioners' home and tailoring shop, we see noreason to disturb this factual finding. We, thus,concentrate on the sole issue of what damages the

petitioners are entitled to.

We are generally precluded from resolving a Rule45 petition that solely raises the issue of damages,an essentially factual question, because Section 1,

Rule 45 of the Rules of Court, expressly states that -

Section 1. Filing of petition with Supreme Court. -A party desiring to appeal by certiorari from a

judgment or final order or resolution of the Court ofAppeals, the Sandiganbayan, the Regional TrialCourt or other courts whenever authorized by law,may file with the Supreme Court a verified petitionfor review on certiorari. The petition shall raise onlyquestions of law which must be distinctly set forth.

In light, however of the RTC's and the CA's

conflicting findings on the kind and amount ofdamages suffered which must be compensated, weare compelled to consider the case as one of therecognized exceptions.[19] We look into the parties'

presented evidence to resolve this appeal.

Temperate damages in lieuof actual damages

We begin by discussing the petitioners' claim foractual damages arising from the damage inflicted on

petitioner Leticia Tan's house and tailoring shop,

taking into account the sewing machines andvarious household appliances affected. Our basiclaw tells us that to recover damages there must be

pleading and proof of actual damages suffered.[20]As we explained in Viron Transportation Co., Inc.v. Delos Santos:[21]

Actual damages, to be recoverable, must not only becapable of proof, but must actually be proved with a

reasonable degree of certainty. Courts cannotsimply rely on speculation, conjecture or guessworkin determining the fact and amount of damages. To

justify an award of actual damages, there must becompetent proof of the actual amount of loss,credence can be given only to claims which are duly

supported by receipts.[22]

The petitioners do not deny that they did not submitany receipt to support their claim for actual damagesto prove the monetary value of the damage causedto the house and tailoring shop when the truckrammed into them. Thus, no actual damages for thedestruction to petitioner Leticia Tan's house andtailoring shop can be awarded.

Nonetheless, absent competent proof on the actualdamages suffered, a party still has the option of

claiming temperate damages, which may be allowedin cases where, from the nature of the case, definite

proof of pecuniary loss cannot be adduced althoughthe court is convinced that the aggrieved partysuffered some pecuniary loss.[23] As defined inArticle 2224 of the Civil Code:

Article 2224. Temperate or moderate damages,which are more than nominal but less thancompensatory damages, may be recovered when thecourt finds that some pecuniary loss has been

suffered but its amount can not, from the nature ofthe case, be proved with certainty.

In Canada v. All Commodities MarketingCorporation,[24] we disallowed the award of actualdamages arising from breach of contract, where therespondent merely alleged that it was entitled toactual damages and failed to adduce proof tosupport its plea. In its place, we awarded temperatedamages, in recognition of the pecuniary losssuffered.

The photographs the petitioners presented asevidence show the extent of the damage done to thehouse, the tailoring shop and the petitioners'appliances and equipment.[25] Irrefutably, thisdamage was directly attributable to Arambala'sgross negligence in handling OMC's truck.Unfortunately, these photographs are not enough toestablish the amount of the loss with certainty.From the attendant circumstances and given the

property destroyed,[26] we find the amount of


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P200,000.00 as a fair and sufficient award by wayof temperate damages.

Temperate damages in lieu ofloss of earning capacity

Similarly, the CA was correct in disallowing theaward of actual damages for loss of earningcapacity. Damages for loss of earning capacity areawarded pursuant to Article 2206 of the Civil Code,which states that:

Article 2206. The amount of damages for deathcaused by a crime or quasi-delict shall be at leastthree thousand pesos, even though there may have

been mitigating circumstances. In addition:

(1) The defendant shall be liable for the loss of theearning capacity of the deceased, and the indemnityshall be paid to the heirs of the latter; suchindemnity shall in every case be assessed andawarded by the court, unless the deceased onaccount of permanent physical disability not caused

by the defendant, had no earning capacity at thetime of his death[.]

As a rule, documentary evidence should bepresented to substantiate the claim for loss of

earning capacity.[27] By way of exception, damagesfor loss of earning capacity may be awarded despitethe absence of documentary evidence when: (1) thedeceased is self-employed and earning less than theminimum wage under current labor laws, in whichcase, judicial notice may be taken of the fact that inthe deceased's line of work, no documentaryevidence is available; or (2) the deceased isemployed as a daily wage worker earning less thanthe minimum wage under current labor laws.[28]

According to the petitioners, prior to his death,

Celedonio was a self-employed tailor who earnedapproximately P156,000.00 a year, or P13,000.00 amonth. At the time of his death in 1995, the

prevailing daily minimum wage was P145.00,[29]or P3,770.00 per month, provided

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