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Assignment of credits. Was Reyes sale of the property tothe Vegas binding on PDC (one of Reyes creditors) whichtried to enforce the judgment credit against Reyes in itsfavor on the property? The CA ruled that Reyesassignment of the property to the Vegas did not bind PDC,which had a judgment credit against Reyes, since suchassignment neither appeared in a public document nor wasregistered with the register of deeds as Article 1625 of theCivil Code required. Article 1625 reads:

Art. 1625. An assignment of a credit, right or action

shall produce no effect as against third persons, unless itappears in a public instrument, or the instrument isrecorded in the Registry of Property in case the assignmentinvolves real property. (1526)

But Article 1625 referred to assignment of credits andother incorporeal rights. Reyes did not assign any credit orincorporeal right to the Vegas. She sold the Vegas herhouse and lot. They became owner of the property fromthe time she executed the deed of assignment coveringthe same in their favor. PDC had a judgment for moneyagainst Reyes only. A courts power to enforce its judgmentapplies only to the properties that are indisputably owned

by the judgment obligor. Here, the property had longceased to belong to Reyes when she sold it to the Vegas in1981. Sps. Antonio and Leticia Vega vs. Social SecuritySystem, et al., G.R. No. 181672, September 20, 2010

Attorneys fees. Article 2208(2) of the Civil Code allowsthe award of attorneys fees in cases where thedefendants act or omission has compelled the plaintiff tolitigate with third persons or to incur expenses to protecthis interest. Attorneys fees may be awarded by a court toone who was compelled to litigate with third persons or toincur expenses to protect his or her interest by reason ofan unjustified act or omission of the party from whom it is

sought. Metropolitan Bank & trust Company, Inc. vs. TheBoard of Trustees of Riverside Mills Corp. Provident andRetirement Fund, et al., G.R. No. 176959, September 8,2010

Conjugal property and sale thereof; various rules. (1) Whatlaw applies to a sale or purported sale of a conjugalproperty entered into after the Family Codes effectivity?The Family Code, even if the couple owning the conjugalproperty were married before the Family Code tookeffect. (2) Under the Family Code, conjugal property canonly be sold with the consent of both spouses. (3) For abuyer of conjugal property to be considered a purchaser in

good faith, he must observe two kinds of requisitediligence, namely: (a) the diligence in verifying thevalidity of the title covering the property; and (b) thediligence in inquiring into the authority of the transactingspouse to sell conjugal property in behalf of the otherspouse. Sps. Rex and Concepcion Aggabao vs. Dionisio Z.Parulan, Jr. and Ma. Elena Parulan, G.R. No. 165803,September 1, 2010.

Contract; void contract; consequences. It is settled that avoid contract is equivalent to nothing; it produces no civileffect. It does not create, modify, or extinguish a juridicalrelation. Parties to a void agreement cannot expect the

aid of the law; the courts leave them as they are, because

they are deemed in pari delicto or in equal fault. Thisrule, however, is not absolute. Article 1412 of the CivilCode provides an exception, and permits the return ofthat which may have been given under a void contract.Thus:

Art. 1412. If the act in which the unlawful or forbiddencause consists does not constitute a criminal offense, thefollowing rules shall be observed:

(1) When the fault is on the part of both contracting

parties, neither may recover what he has given by virtueof the contract, or demand the performance of the othersundertaking;

(2) When only one of the contracting parties is at fault,he cannot recover what he has given by reason of thecontract, or ask for the fulfillment of what has beenpromised him. The other, who is not at fault, may demandthe return of what he has given without any obligation tocomply with his promise.

The evidence on record established that petitionersindeed permitted an unlicensed trader and salesman, like

Mendoza, to handle respondents account. On the otherhand, the record is bereft of proof that respondent hadknowledge that the person handling his account was not alicensed trader. Respondent can, therefore, recover theamount he had given under the contract. The SEC HearingOfficer and the CA, therefore, committed no reversibleerror in holding that respondent is entitled to a fulrecovery of his investments. Queensland-TokyoCommodities, Inc., et al. vs. Thomas George, G.R. No.172727, September 8, 2010

Damages; moral; exemplary. Moral damages are meant tocompensate the claimant for any physical suffering

mental anguish, fright, serious anxiety, besmirchedreputation, wounded feelings, moral shock, sociahumiliation, and similar injuries unjustly caused. Althoughincapable of pecuniary estimation, the amount mustsomehow be proportional to and in approximation of thesuffering inflicted. Moral damages are not punitive innature and were never intended to enrich the claimant atthe expense of the defendant.

As for exemplary damages, Article 2229 of the Civil Codeprovides that such damages may be imposed by way ofexample or correction for the public good. Whileexemplary damages cannot be recovered as a matter of

right, they need not be proved, although plaintiff mustshow that he is entitled to moral, temperate, ocompensatory damages before the court may consider thequestion of whether or not exemplary damages should beawarded. Exemplary damages are imposed not to enrichone party or impoverish another, but to serve as adeterrent against or as a negative incentive to curbsocially deleterious actions.

However, the same statutory and jurisprudential standardsdictate reduction of the amounts of moral and exemplarydamages fixed by the SEC. Certainly, there is no hard-and-fast rule in determining what would be a fair and

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since each case must be governed by its own peculiarfacts. Courts are given discretion in determining theamount, with the limitation that it should not be palpablyand scandalously excessive. Indeed, it must becommensurate to the loss or injury suffered. Queensland-Tokyo Commodities, Inc., et al. vs. Thomas George, G.R.No. 172727, September 8, 2010

Donation mortis causa vs. donation inter vivos. That adocument is captioned Donation Mortis Causa is notcontrolling. If a donation by its terms is inter vivos, this

character is not altered by the fact that the donor styles itmortis causa.

Irrevocability is a quality absolutely incompatible withthe idea of conveyances mortis causa, whererevocability is precisely the essence of the act. Adonation mortis causa has the following characteristics:

1. It conveys no title or ownership to the transferee beforethe death of the transferor; or, what amounts to the samething, that the transferor should retain the ownership (fullor naked) and control of the property while alive;

2. That before his death, the transfer should be revocableby the transferor at will, ad nutum; but revocability maybe provided for indirectly by means of a reserved power inthe donor to dispose of the properties conveyed; and

3. That the transfer should be void if the transferor shouldsurvive the transferee.

In this case, the donors plainly said that it is our will thatthis Donation Mortis Causa shall be irrevocable and shallbe respected by the surviving spouse. The intent to makethe donation irrevocable becomes even clearer by theproviso that a surviving donor shall respect the

irrevocability of the donation. Consequently, the donationwas in reality a donation inter vivos.

The donors in this case of course reserved the right,ownership, possession, and administration of theproperty and made the donation operative upon theirdeath. But this Court has consistently held that suchreservation (reddendum) in the context of an irrevocabledonation simply means that the donors parted with theirnaked title, maintaining only beneficial ownership of thedonated property while they lived.

Notably, the three donees signed their acceptance of the

donation, which acceptance the deed required. This Courthas held that an acceptance clause indicates that thedonation is inter vivos, since acceptance is a requirementonly for such kind of donations. Donations mortis causa,being in the form of a will, need not be accepted by thedonee during the donors lifetime.

Finally, as Justice J. B. L. Reyes said in Puig v. Peaflorida,in case of doubt, the conveyance should be deemed adonation inter vivos rather than mortis causa, in order toavoid uncertainty as to the ownership of the propertysubject of the deed.

Since the donation in this case was one made inter vivos,

it was immediately operative and final. The reason is thatsuch kind of donation is deemed perfected from themoment the donor learned of the donees acceptance ofthe donation. The acceptance makes the donee theabsolute owner of the property donated. Jarabini G. DeRosario vs. Asuncion F. Ferrer, et al., G.R. No. 187056,September 20, 2010.

Lease; return of leased property in the leased premises.Here is the first paragraph of this case, with Digestersresponses in capitals: What happens when persona

properties inside leased premises are stipulated asincluded in the contract of lease? THE PARTIES CAN DOTHIS UNDER FREEDOM TO CONTRACT. Does a judgment ona suit for unlawful detainer ejecting the lessees from thesubject property carry with it the return of these personalproperties as well? YES, BECAUSE UPON THE ISSUANCE OFTHE EJECTMENT ORDER, THE LEASE TERMINATES ANDCLAUSE REQURING RETURN OR REPLACEMENT OF CERTAINPERSONAL PROPERTIES FOUND IN THE LEASED PREMISES, ISTRIGGERED. Finally, the trickier part which is the crux ofthis petition: what if some of these personal propertiesare lost, destroyed or sold by the lessor? May the ejectedlessees still be ordered to pay for their value? YES

University Physicians Services, Inc. vs. Marian Clinics,Inc. and Dr. Lourdes Mabanta, G.R. No. 152303,September 1, 2010.

Mortgaged property; what happens when mortgagor sellsproperty without mortgagees consent. The question iswas Reyes disposal of the property in favor of the Vegasvalid given a provision in the mortgage agreement(between Reyes and SSS) that she could not do so withoutthe written consent of the SSS? The CA ruled that, underArticle 1237 of the Civil Code, the Vegas who paidamortizations to the SSS except the last on behalf ofReyes, without the latters knowledge or against her

consent, cannot compel the SSS to subrogate them in herrights arising from the mortgage. Further, said the CA, theVegas claim of subrogation was invalid because it wasdone without the knowledge and consent of the SSS asrequired under the mortgage agreement. But Article 1237cannot apply in this case since Reyes consented to thetransfer of ownership of the mortgaged property to theVegas. Reyes also agreed for the Vegas to assume themortgage and pay the balance of her obligation to SSS.

Of course, paragraph 4 of the mortgage contract coveringthe property required Reyes to secure SSS consent beforeselling the property. But, although such a stipulation is

valid and binding, in the sense that the SSS cannot becompelled while the loan was unpaid to recognize thesale, it cannot be interpreted as absolutely forbidding her,as owner of the mortgaged property, from selling the samewhile her loan remained unpaid. Such stipulationcontravenes public policy, being an undue impediment orinterference on the transmission of property.

Besides, when a mortgagor sells the mortgaged property toa third person, the creditor may demand from such thirdperson the payment of the principal obligation. The reasonfor this is that the mortgage credit is a real right, whichfollows the property wherever it goes, even if its

ownership changes. Article 2129 of the Civil Code gives the2

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mortgagee, here the SSS, the option of collecting from thethird person in possession of the mortgaged property inthe concept of owner. More, the mortgagor-owners sale ofthe property does not affect the right of the registeredmortgagee to foreclose on the same even if its ownershiphad been transferred to another person. The latter isbound by the registered mortgage on the title heacquired.

After the mortgage debt to SSS had been paid, however,the latter had no further justification for withholding the

release of the collateral and the registered title to theparty to whom Reyes had transferred her right as owner.Under the circumstance, the Vegas had the right to sue forthe conveyance to them of that title, having been validlysubrogated to Reyes rights. Sps. Antonio and Leticia Vegavs. Social Security System, et al., G.R. No. 181672,September 20, 2010.

Mortgaged Property; what happens when a person sellsproperty, and then borrows, and lender seeks to recoveron loan by attaching the property that had been sold. Aparty with a judgment for money can only go againstproperties that undisputably belong to the borrower. If

prior to the judgment, the borrower had sold the property,a creditor can no longer go after that property. Sps.Antonio and Leticia Vega vs. Social Security System, etal., G.R. No. 181672, September 20, 2010

Obligations; solidary liability with a corporation. Doctrinedictates that a corporation is invested by law with apersonality separate and distinct from those of the personscomposing it, such that, save for certain exceptions,corporate officers who entered into contracts in behalf ofthe corporation cannot be held personally liable for theliabilities of the latter. Personal liability of a corporatedirector, trustee, or officer, along (although not

necessarily) with the corporation, may validly attach, as arule, only when (1) he assents to a patently unlawful actof the corporation, or when he is guilty of bad faith orgross negligence in directing its affairs, or when there is aconflict of interest resulting in damages to thecorporation, its stockholders, or other persons; (2) heconsents to the issuance of watered down stocks or who,having knowledge thereof, does not forthwith file with thecorporate secretary his written objection thereto; (3) heagrees to hold himself personally and solidarily liable withthe corporation; or (4) he is made by a specific provisionof law personally answerable for his corporate action.Queensland-Tokyo Commodities, Inc., et al. vs. Thomas

George, G.R. No. 172727. September 8, 2010

Prescription. Petitioners argue that the CA erroneouslytreated the action they filed at the trial court as one (1)for annulment of the extrajudicial settlement and appliedthe four (4)-year prescriptive period in dismissing thesame. They contend that the action they filed was one (1)for Declaration of Nullity of Documents and Titles,Recovery of Real Property and Damages, and as such, theiraction was imprescriptible pursuant to Article 1410 of theCivil Code.

Respondents, for their part, maintain that the CA did not

err in holding that the deed of extrajudicial partition

executed without including some of the heirs, who had noknowledge of the partition and did not consent thereto, ismerely fraudulent and not void. They stress that theaction to rescind the partition based on fraud prescribes infour (4) years counted from the date of registration, whichis constructive notice to the whole world.

We affirm the ruling of the CA. As the records show, theheirs of Doroteo and Esteban did not participate in theextrajudicial partition executed by Salina with the othercompulsory heirs, Leona, Maria and Pedro. Undeniably, the

said deed was fraudulently obtained as it deprived theknown heirs of Doroteo and Esteban of their shares in theestate. A deed of extrajudicial partition executed withoutincluding some of the heirs, who had no knowledge of andconsent to the same, is fraudulent and vicious. Hence, anaction to set it aside on the ground of fraud could beinstituted. Such action for the annulment of the saidpartition, however, must be brought within four (4) yearsfrom the discovery of the fraud. Eugenio Feliciano, et al.vs. Pedro Canoza, et al., G.R. No. 161746, September 12010.

Property; co-ownership; prescription. Co-heirs or co

owners cannot acquire by acquisitive prescription theshare of the other co-heirs or co-owners absent a clearrepudiation of the co-ownership, as expressed in Article494 of the Civil Code which states:

Art. 494. x x x No prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs as longas he expressly or impliedly recognizes the co-ownership.

Since possession of co-owners is like that of a trustee, inorder that a co-owners possession may be deemedadverse to the cestui que trust or other co-owners, thefollowing requisites must concur: (1) that he has

performed unequivocal acts of repudiation amounting toan ouster of the cestui que trust or other co-owners, (2)that such positive acts of repudiation have been madeknown to the cestui que trust or other co-owners, and (3that the evidence thereon must be clear and convincing.Heirs of Juanita Padilla, represented by Claudio Padillavs. Dominador Magdua, G.R. No. 176858, September 15,2010

Retirement funds; trust. RMC was a company that set up afund for its employees called RMCPRF. Petitioner contendsthat RMCs closure in 1984 rendered the RMCPRF Board ofTrustees functus officio and devoid of authority to act on

behalf of RMCPRF. It thus belittles the RMCPRF BoardResolution dated June 2, 1998, authorizing the release ofthe Fund to several of its supposed beneficiaries. Withoutknown claimants of the fund for 11 years since RMC closedshop, it claims that fund had technically reverted to,and formed part of RMCs assets. Hence, it could beapplied to satisfy RMCs debts to Philbank. The courtdisagreed with the petitioner in this case.

A trust is a fiduciary relationship with respect to propertywhich involves the existence of equitable duties imposedupon the holder of the title to the property to deal with itfor the benefit of another. A trust is either express or

implied. Express trusts are those which the direct and3

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positive acts of the parties create, by some writing ordeed, or will, or by words evincing an intention to create atrust.

Here, an express trust was created to provide retirementbenefits to the regular employees of RMC. RMC retainedlegal title to the Fund but held the same in trust for theemployees-beneficiaries. Employees trusts or benefitplans are intended to provide economic assistance toemployees upon the occurrence of certain contingencies,particularly, old age retirement, death, sickness, or

disability. They give security against certain hazards towhich members of the Plan may be exposed. They areindependent and additional sources of protection for theworking group and established for their exclusive benefitand for no other purpose. Here, while the plan providesfor a reversion of the fund to RMC, this cannot be doneuntil all the liabilities of the plan have been paid. Andwhen RMC ceased operations in 1984, the fund becameliable for the payment not only of the benefits of qualifiedretirees at the time of RMCs closure but also of those whowere separated from work as a consequence of theclosure. Metropolitan Bank & trust Company, Inc. vs. TheBoard of Trustees of Riverside Mills Corp. Provident and

Retirement Fund, et al., G.R. No. 176959, September 8,2010.

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