Recent rulings on land titles/Torrens Titles

See - January 2014 Philippine Supreme Court Decisions on Civil Law | LEXOTERICA: A PHILIPPINE BLAWG





"x x x.

Torrens system; certificate of title; a certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. “[A] certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein.” Having no certificate of title issued in their names, spouses Vilbar have no indefeasible and incontrovertible title over Lot 20 to support their claim. Further, it is an established rule that “registration is the operative act which gives validity to the transfer or creates a lien upon the land.” “Any buyer or mortgagee of realty covered by a Torrens certificate of title x x x is charged with notice only of such burdens and claims as are annotated on the title.” Failing to annotate the deed for the eventual transfer of title over Lot 20 in their names, the spouses Vilbar cannot claim a greater right over Opinion, who acquired the property with clean title in good faith and registered the same in his name by going through the legally required procedure. Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R. No. 176043. January 15, 2014.

Torrens system; Torrens title; a person dealing with a registered land has a right to rely upon the face of the Torrens certificate of title; exceptions. The well-known rule in this jurisdiction is that a person dealing with a registered land has a right to rely upon the face of the torrens certificate of title and to dispense with the need of inquiring further, except when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry.

A torrens title concludes all controversy over ownership of the land covered by a final decree of registration. Once the title is registered the owner may rest assured without the necessity of stepping into the portals of the court or sitting in the mirador de su casa to avoid the possibility of losing his land. Francisco Lim v. Equitable PCI Bank, now known as Banco De Oro Unibank, Inc., G.R. No. 183918. January 15, 2014.

Torrens title; a person dealing with a registered land has a right to rely upon the face of the Torrens certificate of title; exception in the case of a person who buys from a person who is not the registered owner.The general rule is that every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go beyond the certificate to determine the condition of the property. Where there is nothing in the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore further than what the Torrens Title upon its face indicates in quest for any hidden defects or inchoate right that may subsequently defeat his right thereto.

However, a higher degree of prudence is required from one who buys from a person who is not the registered owner, although the land object of the transaction is registered. In such a case, the buyer is expected to examine not only the certificate of title but all factual circumstances necessary for him to determine if there are any flaws in the title of the transferor. The buyer also has the duty to ascertain the identity of the person with whom he is dealing with and the latter’s legal authority to convey the property. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.

Torrens system;even if the procurement of a certificate of title was tainted with fraud and misrepresentation, such defective title may be the source of a completely legal and valid title in the hands of an innocent purchaser for value. It is well-settled that even if the procurement of a certificate of title was tainted with fraud and misrepresentation, such defective title may be the source of a completely legal and valid title in the hands of an innocent purchaser for value. Where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property, the court cannot disregard such rights and order the total cancellation of the certificate. The effect of such an outright cancellation would be to impair public confidence in the certificate of title, for everyone dealing with property registered under the Torrens system would have to inquire in every instance whether the title has been regularly or irregularly issued. This is contrary to the evident purpose of the law. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.

Torrens system; levy on attachment, duly registered, takes preference over a prior unregistered sale.”[T]he settled rule that levy on attachment, duly registered, takes preference over a prior unregistered sale. This result is a necessary consequence of the fact that the [properties] involved [were] duly covered by the Torrens system which works under the fundamental principle that registration is the operative act which gives validity to the transfer or creates a lien upon the land.” Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R. No. 176043. January 15, 2014.

x x x."

Proper legal interest rate under new 2013 rule of Monetary Board.

See - January 2014 Philippine Supreme Court Decisions on Civil Law | LEXOTERICA: A PHILIPPINE BLAWG





"x x x.

Interest; legal interest; interest rate pegged at 6% regardless of the source of obligation. 

The resulting modification of the award of legal interest is, also, in line with our recent ruling in Nacar v. Gallery Frames, embodying the amendment introduced by the Bangko Sentral ng Pilipinas Monetary Board in BSP-MB Circular No. 799 which pegged the interest rate at 6% regardless of the source of obligation. 

-Fil-Estate Properties, Inc. and Fil-Estate Network, Inc. v. Spouses Conrado and Maria Victoria Ronquillo, G.R. No. 185798, January 13, 2014.

Interest; legal interest; proper rate. -

In Eastern Shipping, it was observed that the commencement of when the legal interest should start to run varies depending on the factual circumstances obtaining in each case. As a rule of thumb, it was suggested that “where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained).”

During the pendency of this case, however, the Monetary Board issued Resolution No. 796 dated May 16, 2013, stating that in the absence of express stipulation between the parties, the rate of interest in loan or forbearance of any money, goods or credits and the rate allowed in judgments shall be 6% per annum. Said Resolution is embodied in Bangko Sentral ng Pilipinas Circular No. 799, Series of2013, which took effect on July 1, 2013. Hence, the 12% annual interest mentioned above shall apply only up to June 30, 2013. Thereafter, or starting July 1, 2013, the applicable rate of interest for both the debited amount and undocumented withdrawals shall be 6% per annum compounded annually, until fully paid. 

Land Bank of the Philippines v. Emmanuel C. Oñate, G.R. No. 192371, January 15, 2014.

x x x."

Extrajudicial foreclosure sale; writ of possession.

See - January 2014 Philippine Supreme Court Decisions on Civil Law | LEXOTERICA: A PHILIPPINE BLAWG





"x x x.

Foreclosure; purchaser in foreclosure sale may take possession of the property even before the expiration of the redemption period. 

A writ of possession is a writ of execution employed to enforce a judgment to recover the possession of land. It commands the sheriff to enter the land and give possession of it to the person entitled under the judgment. It may be issued in case of an extrajudicial foreclosure of a real estate mortgage under Section 7 of Act No. 3135, as amended by Act No. 4118.

Under said provision, the writ of possession may be issued to the purchaser in a foreclosure sale either within the one-year redemption period upon the filing of a bond, or after the lapse of the redemption period, without need of a bond.

We have consistently held that the duty of the trial court to grant a writ of possession is ministerial. Such writ issues as a matter of course upon the filing of the proper motion and the approval of the corresponding bond. No discretion is left to the trial court. Any question regarding the regularity and validity of the sale, as well as the consequent cancellation of the writ, is to be determined in a subsequent proceeding as outlined in Section 8 of Act No. 3135. Such question cannot be raised to oppose the issuance of the writ, since the proceeding is ex parte. The recourse is available even before the expiration of the redemption period provided by law and the Rules of Court. 

- LZK Holdings and Development Corporation v. Planters Development Bank, G.R. No. 187973, January 20, 2014.

x x x."

Quantum meruit

See - January 2014 Philippine Supreme Court Decisions on Civil Law | LEXOTERICA: A PHILIPPINE BLAWG





"x x x.



Contracts; Principle of quantum merit; when allowed. -



Case law instructs that under this principle (quantum meruit), a contractor is allowed to recover the reasonable value of the thing or services rendered despite the lack of a written contract, in order to avoid unjust enrichment. 



Quantum meruit means that, in an action for work and labor, payment shall be made in such amount as the plaintiff reasonably deserves. 



The measure of recovery should relate to the reasonable value of the services performed because the principle aims to prevent undue enrichment based on the equitable postulate that it is unjust for a person to retain any benefit without paying for it. 



- Rivelisa Realty, Inc., represented by Ricardo P. Venturina v. First Sta. Clara Builders Corporation, represented by Ramon A. Pangilinan, as President, G.R. No. 189618. January 15, 2014.



x x x."

In pari delicto; exceptions.

See - January 2014 Philippine Supreme Court Decisions on Civil Law | LEXOTERICA: A PHILIPPINE BLAWG





"x x x.

Contracts; Doctrine of in pari delicto; exception. 

According to Article 1412 (1) of the Civil Code, the guilty parties to an illegal contract cannot recover from one another and are not entitled to an affirmative relief because they are in pari delicto or in equal fault. 

The doctrine of in pari delicto is a universal doctrine that holds that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation; and where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other.

Nonetheless, the application of the doctrine of in pari delicto is not always rigid. An accepted exception arises when its application contravenes well-established public policy. In this jurisdiction, public policy has been defined as “that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to the public or against the public good.” 

Domingo Gonzalo v. John Tarnate, Jr., G.R. No. 160600, January 15, 2014.

x x x."

Extraordinary diligence required of common carriers.

See - January 2014 Philippine Supreme Court Decisions on Civil Law | LEXOTERICA: A PHILIPPINE BLAWG





"x x x.

Common carrier; cargoes while being unloaded generally remain under the custody of the carrier. -

It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier. As hereinbefore found by the RTC and affirmed by the CA based on the evidence presented, the goods were damaged even before they were turned over to ATI. Such damage was even compounded by the negligent acts of petitioner and ATI which both mishandled the goods during the discharging operations. Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp., and Mitsui Sumitomo Insurance Co., Ltd.,G.R. No. 193986, January 15, 2014.

Common carrier; extraordinary diligence.-

Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods transported by them. Subject to certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are responsible for the loss, destruction, or deterioration of the goods. 

The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them. 

Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they exercised extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such high level of diligence. 

-Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp., and Mitsui Sumitomo Insurance Co., Ltd.,G.R. No. 193986, January 15, 2014.

x x x."

Application for land registration

See - November 2013 Philippine Supreme Court Decisions on Civil Law | LEXOTERICA: A PHILIPPINE BLAWG





"x x x.

Land registration; application for land registration requires that the names and addresses of all adjoining owners and occupants be stated, if known, and if not known, to state the search made to find them; omission thereof constitutes fraud. 

The governing rule in the application for registration of lands at that time was Section 21 of Act 496 which provided for the form and content of an application for registration, and it provides that the application shall be in writing, signed and sworn to by applicant, or by some person duly authorized in his behalf. It shall also state the name in full and the address of the applicant, and also the names and addresses of all adjoining owners and occupants, if known; and, if not known, it shall state what search has been made to find them.

The reason behind the law was explained in the case of Fewkes vs. Vasquez,where it was noted that under Section 21 of the Land Registration Act an application for registration of land is required to contain, among others, a description of the land subject of the proceeding, the name, status and address of the applicant, as well as the names and addresses of all occupants of the land and of all adjoining owners, if known, or if unknown, of the steps taken to locate them. When the application is set by the court for initial hearing, it is then that notice (of the hearing), addressed to all persons appearing to have an interest in the lot being registered and the adjoining owners, and indicating the location, boundaries and technical description of the land being registered, shall be published in the Official Gazette for two consecutive times. It is this publication of the notice of hearing that is considered one of the essential bases of the jurisdiction of the court in land registration cases, for the proceedings being in rem, it is only when there is constructive seizure of the land, effected by the publication and notice, that jurisdiction over the res is vested on the court. Furthermore, it is such notice and publication of the hearing that would enable all persons concerned, who may have any rights or interests in the property, to come forward and show to the court why the application for registration thereof is not to be granted.

- Republic of the Philippines v. Antonio Bacas, et al., G.R. No. 182913, November 20, 2013.

Land registration; any title to inalienable public land is void ab initio; all proceedings of the Land Registration Court involving the such property is without legal effect, hence cannot attain finality.

 In Collado v. Court of Appeals and the Republic, the Court declared that any title to an inalienable public land is void ab initio. Any procedural infirmities attending the filing of the petition for annulment of judgment are immaterial since the LRC never acquired jurisdiction over the property. All proceedings of the LRC involving the property are null and void and, hence, did not create any legal effect. A judgment by a court without jurisdiction can never attain finality. The Land Registration Court has no jurisdiction over non-registrable properties, such as public navigable rivers which are parts of the public domain, and cannot validly adjudge the registration of title in favor of private applicant. 

- Republic of the Philippines v. Antonio Bacas, et al., G.R. No. 182913, November 20, 2013.

Land registration; confirmation and registration of imperfect and incomplete title; qualifications. 

C.A. No. 141 governs the classification and disposition of lands of the public domain. Section 11 of C.A. No. 141 provides, as one of the modes of disposing public lands that are suitable for agriculture, the “confirmation of imperfect or incomplete titles.” Section 48, on the other hand, enumerates those who are considered to have acquired an imperfect or incomplete title over public lands and, therefore, entitled to confirmation and registration under the Land Registration Act.

As amended by P.D. No. 1073 on January 25, 1977, Section 48(b) of C.A. No. 141 provides:

Section 48. The following described citizens of the Philippines, occupying lands of the public domain or claiming to own any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance [now Regional Trial Court] of the province where the land is located for confirmation of their claims and the issuance of a certificate of title therefor, under the Land Registration Act, to wit:

x x x x

(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive, and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition or ownership, since June 12, 1945, or earlier, immediately preceding the filing of the application for confirmation of title except when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of this chapter.

Prior to the amendment introduced by P.D. No. 1073, Section 48(b) of C.A. No. 141, then operated under the Republic Act (R.A.) No. 1942 (June 22, 1957) amendment, which reads:

(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition or ownership, for at least thirty years, immediately preceding the filing of the application for confirmation of title except when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of this chapter.

xxx

In relation to C.A. No. 141, Section 14 of Presidential Decree P.D.) No. 1529 or the Property Registration Decree specifies those who are qualified to register their incomplete title over an alienable and disposable public land under the Torrens system. P.D. No. 1529, which was approved on June 11, 1978, superseded and codified all laws relative to the registration of property.

The pertinent portion of Section 14 of P.D. No. 1529 reads:

Section 14. Who may apply. The following persons may file in the proper Court of First Instance [now Regional Trial Court] an application for registration of title to land, whether personally or through their duly authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of ownership since June 12, 1945, or earlier.

Roman Catholic Archbishop of Manila v. Cresencia Sta. Teresa Ramos, assisted by her husband, Ponciano Francisco, G.R. No. 179181, November 18, 2013.

x x x.

Land registration; confirmation and registration of imperfect and incomplete title; open, continuous, exclusive and notorious possession. 

The possession contemplated by Section 48(b) of C.A. No. 141 is actual, not fictional or constructive. In Carlos v Republic of the Philippines,the Court explained the character of the required possession, as follows:

The law speaks of possession and occupation. Since these words are separated by the conjunction and, the clear intention of the law is not to make one synonymous with the other. Possession is broader than occupation because it includes constructive possession. When, therefore, the law adds the word occupation, it seeks to delimit the all-encompassing effect of constructive possession. Taken together with the words open, continuous, exclusive and notorious, the word occupation serves to highlight the fact that for an applicant to qualify, his possession must not be a mere fiction. Actual possession of a land consists in the manifestation of acts of dominion over it of such a nature as a party would naturally exercise over his own property.

Proof of actual possession of the property at the time of the filing of the application is required because the phrase adverse, continuous, open, public, and in concept of owner,” the RCAM used to describe its alleged possession, is a conclusion of law,not an allegation of fact. Possession is open when it is patent, visible, apparent [and] notorious x x x continuous when uninterrupted, unbroken and not intermittent or occasional; exclusive when [the possession is characterized by acts manifesting] exclusive dominion over the land and an appropriation of it to [the applicant's] own use and benefit; and notorious when it is so conspicuous that it is generally known and talked of by the public or the people in the neighborhood.”

- Roman Catholic Archbishop of Manila v. Cresencia Sta. Teresa Ramos, assisted by her husband, Ponciano Francisco, G.R. No. 179181, November 18, 2013.

x x x."

Rights of realty buyers in default

See - November 2013 Philippine Supreme Court Decisions on Civil Law | LEXOTERICA: A PHILIPPINE BLAWG





"x x x.

Sales; sale of real property on installment; grace period. Section 3(a) of R.A. 6552 provides that the total grace period corresponds to one month for every one year of installment payments made, provided that the buyer may exercise this right only once in every five years of the life of the contract and its extensions. The buyer’s failure to pay the installments due at the expiration of the grace period allows the seller to cancel the contract after 30 days from the buyer’s receipt of the notice of cancellation or demand for rescission of the contract by a notarial act.

Sale of real property on installment; cash surrender value; when the buyer is entitled thereto. Republic Act No. 6552, also known as the Maceda Law, or the Realty Installment Buyer Protection Act, has the declared public policy of “protecting buyers of real estate on installment payments against onerous and oppressive conditions.”

Section 3 of R.A. 6552 provides for the rights of a buyer who has paid at least two years of installments but defaults in the payment of succeeding installments. Section 3 provides that in all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under R.A. No. 3844, as amended by R.A. No. 6389, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any.

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made, and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation of the total number of installment payments made. 

- Gatchalian Realty, Inc. v. Evelyn Angeles, G.R. No. 202358, November 27, 2013.

x x x."

Sale of property thru an agent/broker.

See - November 2013 Philippine Supreme Court Decisions on Civil Law | LEXOTERICA: A PHILIPPINE BLAWG





"x x x.

Sales; sale of real property; authority of the agent must be in writing; otherwise the sale is null and void. Articles 1874 of the Civil Code provides:

Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.

Likewise, Article 1878 paragraph 5 of the Civil Code specifically mandates that the authority of the agent to sell a real property must be conferred in writing, to wit:

Art. 1878. Special powers of attorney are necessary in the following cases:

(1) x x x

x x x

(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration;

x x x.

The foregoing provisions explicitly require a written authority when the sale of a piece of land is through an agent, whether the sale is gratuitously or for a valuable consideration. Absent such authority in writing, the sale is null and void.Spouses Eliseo R. Bautista and Emperatriz C. Bautista v. Spouses Mila Jalandoni and Antonio Jalandoni and Manila Credit Corporation, G.R. No. 171464/G.R. No. 199341, November 27, 2013.

Sales; sale of real property; buyer in good faith; conditions to prove good faith; failure to verify extent and nature of agent’s authority. A buyer in good faith is one who buys the property of another without notice that some other person has a right to or interest in such property. He is a buyer for value if he pays a full and fair price at the time of the purchase or before he has notice of the claim or interest of some other person in the property. “Good faith connotes an honest intention to abstain from taking unconscientious advantage of another.”To prove good faith, the following conditions must be present: (a) the seller is the registered owner of the land; (b) the owner is in possession thereof; and (3) at the time of the sale, the buyer was not aware of any claim or interest of some other person in the property, or of any defect or restriction in the title of the seller or in his capacity to convey title to the property. All these conditions must be present, otherwise, the buyer is under obligation to exercise extra ordinary diligence by scrutinizing the certificates of title and examining all factual circumstances to enable him to ascertain the seller’s title and capacity to transfer any interest in the property. Spouses Eliseo R. Bautista and Emperatriz C. Bautista v. Spouses Mila Jalandoni and Antonio Jalandoni and Manila Credit Corporation, G.R. No. 171464/G.R. No. 199341, November 27, 2013."

Fraud in breach of contract

See  -  November 2013 Philippine Supreme Court Decisions on Civil Law | LEXOTERICA: A PHILIPPINE BLAWG





"x x x.

Contracts; fraud; quantum of evidence required to prove existence of; clear and convincing evidence. 

Neither law nor jurisprudence distinguishes whether it is dolo incidente or dolo causante that must be proven by clear and convincing evidence. It stands to reason that both dolo incidente and dolo causante must be proven by clear and convincing evidence. The only question is whether this fraud, when proven, may be the basis for making a contract voidable (dolo causante), or for awarding damages (dolo incidente), or both.

The standard of proof required is clear and convincing evidence. This standard of proof is derived from American common law. It is less than proof beyond reasonable doubt (for criminal cases) but greater than preponderance of evidence (for civil cases). The degree of believability is higher than that of an ordinary civil case. Civil cases only require a preponderance of evidence to meet the required burden of proof. However, when fraud is alleged in an ordinary civil case involving contractual relations, an entirely different standard of proof needs to be satisfied. The imputation of fraud in a civil case requires the presentation of clear and convincing evidence. Mere allegations will not suffice to sustain the existence of fraud. The burden of evidence rests on the part of the plaintiff or the party alleging fraud. The quantum of evidence is such that fraud must be clearly and convincingly shown. 

- Alejandro V. Tankeh v. Development Bank of the Philippines, et al., G.R. No. 171428, November 11, 2013."

Exemplary damages in breach of contrract.

See - November 2013 Philippine Supreme Court Decisions on Civil Law | LEXOTERICA: A PHILIPPINE BLAWG





"x x x.

Contracts; breach of; damages; exemplary damages; concept. Exemplary damages are discussed in Article 2229 of the Civil Code, as follows:

ART. 2229. Exemplary or corrective damages are imposed, by way of example or correction of the public good, in addition to moral, temperate, liquidated or compensatory damages.

Exemplary damages are further discussed in Articles 2233 and 2234, particularly regarding the pre-requisites of ascertaining moral damages and the fact that it is discretionary upon this Court to award them or not:

ART. 2233. Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they should be adjudicated.

ART. 2234. While the amount of the exemplary damages need not be proven, the plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded x x x

The purpose of exemplary damages is to serve as a deterrent to future and subsequent parties from the commission of a similar offense. The case of People v. Rante citing People v. Dalisay held that:

Also known as ‘punitive’ or ‘vindictive’ damages, exemplary or corrective damages are intended to serve as a deterrent to serious wrong doings, and as a vindication of undue sufferings and wanton invasion of the rights of an injured or a punishment for those guilty of outrageous conduct. These terms are generally, but not always, used interchangeably. In common law, there is preference in the use of exemplary damages when the award is to account for injury to feelings and for the sense of indignity and humiliation suffered by a person as a result of an injury that has been maliciously and wantonly inflicted, the theory being that there should be compensation for the hurt caused by the highly reprehensible conduct of the defendant—associated with such circumstances as willfulness, wantonness, malice, gross negligence or recklessness, oppression, insult or fraud or gross fraud—that intensifies the injury. The terms punitive or vindictive damages are often used to refer to those species of damages that may be awarded against a person to punish him for his outrageous conduct. In either case, these damages are intended in good measure to deter the wrongdoer and others like him from similar conduct in the future.

To justify an award for exemplary damages, the wrongful act must be accompanied by bad faith, and an award of damages would be allowed only if the guilty party acted in a wanton, fraudulent, reckless or malevolent manner.

- Alejandro V. Tankeh v. Development Bank of the Philippines, et al., G.R. No. 171428, November 11, 2013."

Moral damages based on breach of contract.

See - November 2013 Philippine Supreme Court Decisions on Civil Law | LEXOTERICA: A PHILIPPINE BLAWG





"x x x.

Contracts; breach of; when moral damages may be awarded. In Francisco v. Ferrer,this Court ruled that moral damages may be awarded on the following bases:

To recover moral damages in an action for breach of contract, the breach must be palpably wanton, reckless, malicious, in bad faith, oppressive or abusive.

Under the provisions of this law, in culpa contractual or breach of contract, moral damages may be recovered when the defendant acted in bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton disregard of his contractual obligation and, exceptionally, when the act of breach of contract itself is constitutive of tort resulting in physical injuries.

Moral damages may be awarded in breaches of contracts where the defendant acted fraudulently or in bad faith.

Bad faith does not simply connote bad judgment or negligence, it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of known duty through some motive or interest or ill will that partakes of the nature of fraud.

The person claiming moral damages must prove the existence of bad faith by clear and convincing evidence for the law always presumes good faith. It is not enough that one merely suffered sleepless nights, mental anguish, serious anxiety as the result of the actuations of the other party. Invariably such action must be shown to have been willfully done in bad faith or will ill motive. Mere allegations of besmirched reputation, embarrassment and sleepless nights are insufficient to warrant an award for moral damages. It must be shown that the proximate cause thereof was the unlawful act or omission of the [private respondent] petitioners.

An award of moral damages would require certain conditions to be met, to wit: (1) first, there must be an injury, whether physical, mental or psychological, clearly sustained by the claimant; (2) second, there must be culpable act or omission factually established; (3) third, the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) fourth, the award of damages is predicated on any of the cases stated in Article 2219 of the Civil Code. 

- Alejandro V. Tankeh v. Development Bank of the Philippines, et al., G.R. No. 171428, November 11, 2013. "

Contract of sale vs. contract to sell

Sales; contract of sale; elements; distinguished from contract to sell. -

Corollary thereto, a contract of sale is classified as a consensual contract, which means that the sale is perfected by mere consent. No particular form is required for its validity. Upon perfection of the contract, the parties may reciprocally demand performance, i.e., the vendee may compel transfer of ownership of the object of the sale, and the vendor may require the vendee to pay the thing sold.

In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the property despite delivery thereof to the prospective buyer, binds himself to sell the property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, i.e., the full payment of the purchase price. A contract to sell may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. 

- ACE Foods, Inc. v. Micro Pacific Technologies Co., Ltd., G.R. No. 200602,  December 11, 2013.

See - http://lexoterica.wordpress.com/2014/01/15/december-2013-philippine-supreme-court-decisions-on-civil-law/