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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

113564 June 20, 2001

INOCENCIA YU DINO and her HUSBAND doing business under the trade name "CANDY CLAIRE FASHION GARMENTS", petitioners, vs. COURT OF APPEALS and ROMAN SIO, doing business under the name "UNIVERSAL TOY MASTER MANUFACTURING", respondents. PUNO, J.: Though people say, "better late than never", the law frowns upon those who assert their rights past the eleventh hour. For failing to timely institute their action, the petitioners are forever barred from claiming a sum of money from the respondent. This is a petition for review on certiorari to annul and set aside the amended decision of the respondent court dated January 24, 1994 reversing its April 30, 1993 decision and dismissing the plaintiff-petitioners' Complaint on the ground of prescription.The following undisputed facts gave rise to the case at bar: Petitioners spouses Dino, doing business under the trade name "Candy Claire Fashion Garment" are engaged in the business of manufacturing and selling shirts.1 Respondent Sio is part owner and general manager of a manufacturing corporation doing business under the trade name "Universal Toy Master Manufacturing."2 Petitioners and respondent Sio entered into a contract whereby the latter would manufacture for the petitioners 20,000 pieces of vinyl frogs and 20,000 pieces of vinyl mooseheads at P7.00 per piece in accordance with the sample approved by the petitioners. These frogs and mooseheads were to be attached to the shirts petitioners would manufacture and sell.3 Respondent Sio delivered in several installments the 40,000 pieces of frogs and mooseheads. The last delivery was made on September 28, 1988. Petitioner fully paid the agreed price.4 Subsequently, petitioners returned to respondent 29,772 pieces of frogs and mooseheads for failing to comply with the approved sample.5 The return was made on different dates: the initial one on December 12, 1988 consisting of 1,720 pieces,6 the second on January 11, 1989,7 and the last on January 17, 1989.8 Petitioners then demanded from the respondent a refund of the purchase price of the returned goods in the amount of P208,404.00. As respondent Sio refused to pay,9 petitioners filed on July 24, 1989 an action for collection of a sum of money in the Regional Trial Court of Manila, Branch 38. The trial court ruled in favor of the petitioners, viz: "WHEREFORE, judgment is hereby rendered in favor of the plaintiffs Vicente and Inocencia Dino and against defendant Toy Master Manufacturing, Inc. ordering the latter to pay the former:

1. The amount of Two Hundred Eight Thousand Four Hundred Four (P208,404.00) Pesos with legal interest thereon from July 5, 1989, until fully paid; and 2. The amount of Twenty Thousand (P20,000.00) Pesos as attorney's fees and the costs of this suit. The counterclaim on the other hand is hereby dismissed for lack of merit."10 Respondent Sio sought recourse in the Court of Appeals. In its April 30, 1993 decision, the appellate court affirmed the trial court decision. Respondent then filed a Motion for Reconsideration and a Supplemental Motion for Reconsideration alleging therein that the petitioners' action for collection of sum of money based on a breach of warranty had already prescribed. On January 24, 1994, the respondent court reversed its decision and dismissed petitioners' Complaint for having been filed beyond the prescriptive period. The amended decision read in part, viz: "Even if there is failure to raise the affirmative defense of prescription in a motion to dismiss or in an appropriate pleading (answer, amended or supplemental answer) and an amendment would no longer be feasible, still prescription, if apparent on the face of the complaint may be favorably considered (Spouses Matias B. Aznar, III, et al. vs. Hon. Juanito A. Bernad, etc., supra, G.R. 81190, May 9, 1988). The rule in Gicano vs. Gegato (supra) was reiterated in Severo v. Court of Appeals, (G.R. No. 84051, May 19, 1989). WHEREFORE the Motion For Reconsideration is granted. The judgment of this Court is set aside and judgment is hereby rendered REVERSING the judgment of the trial court and dismissing plaintiff's complaint."11 Hence, this petition with the following assignment of errors: I. The respondent Court of Appeals seriously erred in dismissing the complaint of the Petitioners on the ground that the action had prescribed. II. The respondent Court of Appeals seriously erred in holding that the defense of prescription would still be considered despite the fact that it was not raised in the answer, if apparent on the face of the complaint. We first determine the nature of the action filed in the trial court to resolve the issue of prescription. Petitioners claim that the Complaint they filed in the trial court on July 24, 1989 was one for the collection of a sum of money. Respondent contends that it was an action for breach of warranty as the sum of money petitioners sought to collect was actually a refund of the purchase price they paid for the alleged defective goods they bought from the respondent. We uphold the respondent's contention. The following provisions of the New Civil Code are apropos: "Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether

the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work." "Art. 1713. By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material." As this Court ruled in Engineering & Machinery Corporation v. Court of Appeals, et al.,12 "a contract for a piece of work, labor and materials may be distinguished from a contract of sale by the inquiry as to whether the thing transferred is one not in existence and which would never have existed but for the order of the person desiring it. In such case, the contract is one for a piece of work, not a sale. On the other hand, if the thing subject of the contract would have existed and been the subject of a sale to some other person even if the order had not been given then the contract is one of sale."13 The contract between the petitioners and respondent stipulated that respondent would manufacture upon order of the petitioners 20,000 pieces of vinyl frogs and 20,000 pieces of vinyl mooseheads according to the samples specified and approved by the petitioners. Respondent Sio did not ordinarily manufacture these products, but only upon order of the petitioners and at the price agreed upon.14Clearly, the contract executed by and between the petitioners and the respondent was a contract for a piece of work. At any rate, whether the agreement between the parties was one of a contract of sale or a piece of work, the provisions on warranty of title against hidden defects in a contract of sale apply to the case at bar, viz: "Art. 1714. If the contractor agrees to produce the work from material furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. This contract shall be governed by the following articles as well as by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale." "Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them." Petitioners aver that they discovered the defects in respondent's products when customers in their (petitioners') shirt business came back to them complaining that the frog and moosehead figures attached to the shirts they bought were torn. Petitioners allege that they did not readily see these hidden defects upon their acceptance. A hidden defect is one which is unknown or could not have been known to the vendee.15 Petitioners then returned to the respondent 29,772 defective pieces of vinyl products and demanded a refund of their purchase price in the amount of P208,404.00. Having failed to collect this amount, they filed an action for collection of a sum of money. Article 1567 provides for the remedies available to the vendee in case of hidden defects, viz: "Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either case."

By returning the 29,772 pieces of vinyl products to respondent and asking for a return of their purchase price, petitioners were in effect "withdrawing from the contract" as provided in Art. 1567. The prescriptive period for this kind of action is provided in Art. 1571 of the New Civil Code, viz: "Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six monthsfrom the delivery of the thing sold." (Emphasis supplied) There is no dispute that respondent made the last delivery of the vinyl products to petitioners on September 28, 1988. It is also settled that the action to recover the purchase price of the goods petitioners returned to the respondent was filed on July 24, 1989,16 more than nine months from the date of last delivery. Petitioners having filed the action three months after the six-month period for filing actions for breach of warranty against hidden defects stated in Art. 1571,17 the appellate court dismissed the action. Petitioners fault the ruling on the ground that it was too late in the day for respondent to raise the defense of prescription. The law then applicable to the case at bar, Rule 9, Sec. 2 of the Rules of Court, provides: "Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived; except the failure to state a cause of action . . . " Thus, they claim that since the respondent failed to raise the defense of prescription in a motion to dismiss or in its answer, it is deemed waived and cannot be raised for the first time on appeal in a motion for reconsideration of the appellate court's decision. As a rule, the defense of prescription cannot be raised for the first time on appeal. Thus, we held in Ramos v. Osorio,18 viz: "It is settled law in this jurisdiction that the defense of prescription is waivable, and that if it was not raised as a defense in the trial court, it cannot be considered on appeal, the general rule being that the appellate court is not authorized to consider and resolve any question not properly raised in the lower court (Subido vs. Lacson, 55 O.G. 8281, 8285; Moran, Comments on the Rules of Court, Vol. I, p. 784, 1947 Edition)." However, this is not a hard and fast rule. In Gicano v. Gegato,19 we held: ". . .(T)rial courts have authority and discretion to dimiss an action on the ground of prescription when the parties' pleadings or other facts on record show it to be indeed timebarred; (Francisco v. Robles, Feb, 15, 1954; Sison v. McQuaid, 50 O.G. 97; Bambao v. Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958; Convets, Inc. v. NDC, Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA 408); and it may do so on the basis of a motion to dismiss (Sec. 1,f, Rule 16, Rules of Court), or an answer which sets up such ground as an affirmative defense (Sec. 5, Rule 16), or even if the ground is alleged after judgment on the merits, as in a motion for reconsideration (Ferrer v. Ericta, 84 SCRA 705); or even if the defense has not been asserted at all, as where no statement thereof is found in the pleadings (Garcia v. Mathis, 100 SCRA 250; PNB v. Pacific Commission House, 27 SCRA 766; Chua Lamco v. Dioso, et al., 97 Phil. 821); or where a defendant has been declared in default (PNB v. Perez, 16 SCRA 270). What is essential only, to repeat, is that the facts demonstrating the lapse of the prescriptive period be otherwise sufficiently and satisfactorily apparent on the record; either in the averments of the plaintiff's complaint, or otherwise established by the evidence." (emphasis supplied)

In Aldovino, et al. v. Alunan, et al.,20 the Court en banc reiterated the Garcia v. Mathis doctrine cited in the Gicano case that when the plaintiff's own complaint shows clearly that the action has prescribed, the action may be dismissed even if the defense of prescription was not invoked by the defendant. It is apparent in the records that respondent made the last delivery of vinyl products to the petitioners on September 28, 1988. Petitioners admit this in their Memorandum submitted to the trial court and reiterate it in their Petition for Review.21 It is also apparent in the Complaint that petitioners instituted their action on July 24, 1989. The issue for resolution is whether or not the respondent Court of Appeals could dismiss the petitioners' action if the defense of prescription was raised for the first time on appeal but is apparent in the records. Following the Gicano doctrine that allows dismissal of an action on the ground of prescription even after judgment on the merits, or even if the defense was not raised at all so long as the relevant dates are clear on the record, we rule that the action filed by the petitioners has prescribed. The dates of delivery and institution of the action are undisputed. There are no new issues of fact arising in connection with the question of prescription, thus carving out the case at bar as an exception from the general rule that prescription if not impleaded in the answer is deemed waived.22 Even if the defense of prescription was raised for the first time on appeal in respondent's Supplemental Motion for Reconsideration of the appellate court's decision, this does not militate against the due process right of the petitioners. On appeal, there was no new issue of fact that arose in connection with the question of prescription, thus it cannot be said that petitioners were not given the opportunity to present evidence in the trial court to meet a factual issue. Equally important, petitioners had the opportunity to oppose the defense of prescription in their Opposition to the Supplemental Motion for Reconsideration filed in the appellate court and in their Petition for Review in this Court. This Court's application of the Osorio and Gicano doctrines to the case at bar is confirmed and now enshrined in Rule 9, Sec. 1 of the 1997 Rules of Civil Procedure, viz: "Section 1. Defense and objections not pleaded. - Defenses and objections not pleaded whether in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim." (Emphasis supplied) WHEREFORE, the petition is DENIED and the impugned decision of the Court of Appeals dated January 24, 1994 is AFFIRMED. No costs. SO ORDERED. Davide, Jr., C.J., (Chairman), Kapunan, Pardo, and Ynares-Santiago, JJ., concur. * This case was transferred to the ponente on March 14, 2001 pursuant to Resolution in A.M. No. 00-9-03-SC. Re: Creation of Special Committee on Case Backlog dated February 27, 2001.

Footnotes
1

Rollo, p. 20; Complaint, p. 1. TSN, April 27, 1990, pp. 3-4. Rollo, p. 37; Memorandum for the Plaintiff in the RTC, p. 1; Exhibit "1".

Rollo, pp. 13, 37-38; Petition for Review, p. 13; Original Records, pp. 71-72; Memorandum for the Plaintiff in the Regional Trial Court, pp. 1-2; TSN, Venerando dela Cruz, September 3, 1990, p. 27.
5

Rollo, p. 31; Plaintiff's Pre-trial Brief, p. 1. Exhibit "F". Exhibit "F-1". Exhibit "F-2". Rollo, p. 38; Memorandum for the Plaintiff, Regional Trial Court, p. 2. Original Records, p. 105. Rollo, pp. 12-13. 252 SCRA 156 (1996). Id., p. 164, footnotes omitted. Rollo, p. 36; Exhibit "1"; TSN, Roman Sio, April 27, 1990, pp. 6-15, 21. Knecht v. Court of Appeals, et al., 158 SCRA 80 (1988).

10

11

12

13

14

15

16

Original Records, p. 1; Complaint, p. 1; TSN, Venerando dela Cruz, September 3, 1990, p. 37; Rollo, p. 13; Petition for Review, p. 7.
17

G.A. Machineries, Inc. v. Yaptinchay, et al., 126 SCRA 78 (1983); Moles v. IAC, et al., 169 SCRA 777 (1989).
18

38 SCRA 469 (1971). 157 SCRA 140 (1988). 230 SCRA 825 (1994).

19

20

21

Original Records, p. 76; Memorandum for the Plaintiff in the Regional Trial Court, p. 6; Rollo, p. 13; Petition for Review, p. 7.

22

Luzon Surety Company, Inc. v. IAC, et al., 151 SCRA 652 (1987), citing Ferrer v. Ericta, 84 SCRA 706 and Garcia v. Mathis, 100 SCRA 250. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. NO. 140608 September 23, 2004

PERMANENT SAVINGS AND LOAN BANK, petitioner, vs. MARIANO VELARDE, respondent. DECISION AUSTRIA-MARTINEZ, J.: In a complaint for sum of money filed before the Regional Trial Court of Manila (Branch 37), docketed as Civil Case No. 94-71639, petitioner Permanent Savings and Loan Bank sought to recover from respondent Mariano Velarde, the sum of P1,000,000.00 plus accrued interests and penalties, based on a loan obtained by respondent from petitioner bank, evidenced by the following: (1) promissory note dated September 28, 1983;1 (2) loan release sheet dated September 28, 1983;2 and (3) loan disclosure statement dated September 28, 1983.3 Petitioner bank, represented by its Deputy Liquidator after it was placed under liquidation, sent a letter of demand to respondent on July 27, 1988, demanding full payment of the loan.4 Despite receipt of said demand letter,5respondent failed to settle his account. Another letter of demand was sent on February 22, 1994,6 and this time, respondents counsel replied, stating that the obligation "is not actually existing but covered by contemporaneous or subsequent agreement between the parties "7 In his Answer, respondent disclaims any liability on the instrument, thus: 2. The allegations in par. 2, Complaint, on the existence of the alleged loan of P1-Million, and the purported documents evidencing the same, only the signature appearing at the back of the promissory note, Annex "A" seems to be that of herein defendant. However, as to any liability arising therefrom, the receipt of the said amount of P1-Million shows that the amount was received by another person, not the herein defendant. Hence, no liability attaches and as further stated in the special and affirmative defenses that, assuming the promissory note exists, it does not bind much less is there the intention by the parties to bind the herein defendant. In other words, the documents relative to the loan do not express the true intention of the parties.8 Respondents Answer also contained a denial under oath, which reads: I, MARIANO Z. VELARDE, of age, am the defendant in this case, that I caused the preparation of the complaint and that all the allegations thereat are true and correct; that the promissory note sued upon, assuming that it exists and bears the genuine signature of herein defendant, the same does not bind him and that it did not truly express the real intention of the parties as stated in the defenses; 9

During pre-trial, the issues were defined as follows: 1. Whether or not the defendant has an outstanding loan obligation granted by the plaintiff; 2. Whether or not the defendant is obligated to pay the loan including interests and attorneys fees; 3. Whether or not the defendant has really executed the Promissory Note considering the doubt as to the genuineness of the signature and as well as the non-receipt of the said amount; 4. Whether or not the obligation has prescribed on account of the lapse of time from date of execution and demand for enforcement; and 5. Whether or not the defendant is entitled to his counterclaim and other damages.10 On September 6, 1995, petitioner bank presented its sole witness, Antonio Marquez, the Assistant Department Manager of the Philippine Deposit Insurance Corporation (PDIC) and the designated Deputy Liquidator for petitioner bank, who identified the Promissory Note11 dated September 28, 1983, the Loan Release Sheet12dated September 28, 1983, and the Disclosure Statement of Loan Credit Transaction.13 After petitioner bank rested its case, respondent, instead of presenting evidence, filed with leave of court his demurrer to evidence, alleging the grounds that: (a) PLAINTIFF FAILED TO PROVE ITS CASE BY PREPONDERANCE OF EVIDENCE. (b) THE CAUSE OF ACTION, CONCLUDING ARGUENTI THAT IT EXISTS, IS BARRED BY PRESCRIPTION AND/OR LACHES.14 The trial court, in its Decision dated January 26, 1996, found merit in respondents demurrer to evidence and dismissed the complaint including respondents counterclaims, without pronouncement as to costs.15 On appeal, the Court of Appeals agreed with the trial court and affirmed the dismissal of the complaint in its Decision16 dated October 27, 1999.17 The appellate court found that petitioner failed to present any evidence to prove the existence of respondents alleged loan obligations, considering that respondent denied petitioners allegations in its complaint. It also found that petitioner banks cause of action is already barred by prescription.18 Hence, the present petition for review on certiorari under Rule 45 of the Rules Court, with the following assignment of errors: 4.1 THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER FAILED TO ESTABLISH THE GENUINENESS, DUE EXECUTION AND AUTHENTICITY OF THE SUBJECT LOAN DOCUMENTS. 4.2

THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONERS CAUSE OF ACTION IS ALREADY BARRED BY PRESCRIPTION AND OR LACHES.19 Before going into the merits of the petition, the Court finds it necessary to reiterate the well-settled rule that only questions of law may be raised in a petition for review on certiorari under Rule 45 of the Rules of Court, as "the Supreme Court is not a trier of facts."20 It is not our function to review, examine and evaluate or weigh the probative value of the evidence presented.21 There are, however, exceptions to the rule, e.g., when the factual inferences of the appellate court are manifestly mistaken; the judgment is based on a misapprehension of facts; or the CA manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a different legal conclusion.22 This case falls under said exceptions. The pertinent rule on actionable documents is found in Rule 8, Section 7 of the Rules of Court which provides that when the cause of action is anchored on a document, the genuineness or due execution of the instrument shall be deemed impliedly admitted unless the defendant, under oath, specifically denies them, and sets forth what he claims to be the facts. It was the trial courts opinion that: The mere presentation of supposed documents regarding the loan, but absent the testimony of a competent witness to the transaction and the documentary evidence, coupled with the denial of liability by the defendant does not suffice to meet the requisite preponderance of evidence in civil cases. The documents, standing alone, unsupported by independent evidence of their existence, have no legal basis to stand on. They are not competent evidence. Such failure leaves this Court without ample basis to sustain the plaintiffs cause of action and other reliefs prayed for. The loan document being challenged. (sic) Plaintiff did not exert additional effort to strengthen its case by the required preponderance of evidence. On this score, the suit must be dismissed.23 The Court of Appeals concurred with the trial courts finding and affirmed the dismissal of the complaint, viz.: The bank should have presented at least a single witness qualified to testify on the existence and execution of the documents it relied upon to prove the disputed loan obligations of Velarde. This falls short of the requirement that (B)efore any private writing may be received in evidence, its due execution and authenticity must be proved either: (a) By anyone who saw the writing executed; (b) By evidence of the genuineness of the handwriting of the maker; or (c) By a subscribing witness. (Rule 132, Sec. 21, Rules of Court) It is not true, as the Bank claims, that there is no need to prove the loan and its supporting papers as Velarde has already admitted these. Velarde had in fact denied these in his responsive pleading. And consistent with his denial, he objected to the presentation of Marquez as a witness to identify the Exhibits of the Bank, and objected to their admission when these were offered as evidence. Though these were grudgingly admitted anyway, still admissibility of evidence should not be equated with weight of evidence.24 A reading of respondents Answer, however, shows that respondent did not specifically deny that he signed the loan documents. What he merely stated in his Answer was that the signature appearing at the back of the promissory note seems to be his. Respondent also denied any liability on the promissory note as he allegedly did not receive the amount stated

therein, and the loan documents do not express the true intention of the parties.25 Respondent reiterated these allegations in his "denial under oath," stating that "the promissory note sued upon, assuming that it exists and bears the genuine signature of herein defendant, the same does not bind him and that it did not truly express the real intention of the parties as stated in the defenses "26 Respondents denials do not constitute an effective specific denial as contemplated by law. In the early case ofSongco vs. Sellner,27 the Court expounded on how to deny the genuineness and due execution of an actionable document, viz.: This means that the defendant must declare under oath that he did not sign the document or that it is otherwise false or fabricated. Neither does the statement of the answer to the effect that the instrument was procured by fraudulent representation raise any issue as to its genuineness or due execution. On the contrary such a plea is an admission both of the genuineness and due execution thereof, since it seeks to avoid the instrument upon a ground not affecting either. In fact, respondents allegations amount to an implied admission of the due execution and genuineness of the promissory note. The admission of the genuineness and due execution of a document means that the party whose signature it bears admits that he voluntarily signed the document or it was signed by another for him and with his authority; that at the time it was signed it was in words and figures exactly as set out in the pleading of the party relying upon it; that the document was delivered; and that any formalities required by law, such as a seal, an acknowledgment, or revenue stamp, which it lacks, are waived by him.28 Also, it effectively eliminated any defense relating to the authenticity and due execution of the document, e.g., that the document was spurious, counterfeit, or of different import on its face as the one executed by the parties; or that the signatures appearing thereon were forgeries; or that the signatures were unauthorized.29 Clearly, both the trial court and the Court of Appeals erred in concluding that respondent specifically denied petitioners allegations regarding the loan documents, as respondents Answer shows that he failed to specifically deny under oath the genuineness and due execution of the promissory note and its concomitant documents. Therefore, respondent is deemed to have admitted the loan documents and acknowledged his obligation with petitioner; and with respondents implied admission, it was not necessary for petitioner to present further evidence to establish the due execution and authenticity of the loan documents sued upon. While Section 22, Rule 132 of the Rules of Court requires that private documents be proved of their due execution and authenticity before they can be received in evidence, i.e., presentation and examination of witnesses to testify on this fact; in the present case, there is no need for proof of execution and authenticity with respect to the loan documents because of respondents implied admission thereof.30 Respondent claims that he did not receive the net proceeds in the amount of P988,333.00 as stated in the Loan Release Sheet dated September 23, 1983.31 The document, however, bears respondents signature as borrower.32 Res ipsa loquitur.33 The document speaks for itself. Respondent has already impliedly admitted the genuineness and due execution of the loan documents. No further proof is necessary to show that he undertook the obligation with petitioner. "A person cannot accept and reject the same instrument."34 The Court also finds that petitioners claim is not barred by prescription.

Petitioners action for collection of a sum of money was based on a written contract and prescribes after ten years from the time its right of action arose.35 The prescriptive period is interrupted when there is a written extrajudicial demand by the creditors.36 The interruption of the prescriptive period by written extrajudicial demand means that the said period would commence anew from the receipt of the demand.37 Thus, in the case of The Overseas Bank of Manila vs. Geraldez,38 the Court categorically stated that the correct meaning of interruption as distinguished from mere suspension or tolling of the prescriptive period is that said period would commence anew from the receipt of the demand. In said case, the respondents Valenton and Juan, on February 16, 1966, obtained a credit accommodation from the Overseas Bank of Manila in the amount ofP150,000.00. Written extrajudicial demands dated February 9, March 1 and 27, 1968, November 13 and December 8, 1975 and February 7 and August 27, 1976 were made upon the respondents but they refused to pay. When the bank filed a case for the recovery of said amount, the trial court dismissed the same on the ground of prescription as the bank's cause of action accrued on February 16, 1966 (the date of the manager's check forP150,000.00 issued by the plaintiff bank to the Republic Bank) and the complaint was filed only on October 22, 1976. Reversing the ruling of the trial court, the Court ruled: An action upon a written contract must be brought within ten years from the time the right of action accrues (Art. 1144[1], Civil Code). "The prescription of actions is interrupted when they are filed before the court, when there is a written extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor" (Art. 1155, Ibid, applied in Gonzalo Puyat & Sons, Inc. vs. City of Manila, 117 Phil. 985, 993; Philippine National Bank vs. Fernandez, L-20086, July 10, 1967, 20 SCRA 645, 648; Harden vs. Harden, L-22174, July 21, 1967, 20 SCRA 706, 711). A written extrajudicial demand wipes out the period that has already elapsed and starts anew the prescriptive period. Giorgi says: "La interrupcion difiere de la suspension porque borra el tiempo transcurrido anteriormente y obliga a la prescripcion a comenzar de nuevo" (9 Teoria de las Obligaciones, 2nd Ed., p. 222). "La interrupcion . . . quita toda eficacia al tiempo pasado y abre camino a un computo totalmente nuevo, que parte del ultimo momento del acto interruptivo, precisamente, como si en aquel momento y no antes hubiese nacido el credito" (8 Giorgi, ibid pp. 390-2). That same view as to the meaning of interruption was adopted in Florendo vs. Organo, 90 Phil. 483, 488, where it ruled that the interruption of the ten-year prescriptive period through a judicial demand means that "the full period of prescription commenced to run anew upon the cessation of the suspension". "When prescription is interrupted by a judicial demand, the full time for the prescription must be reckoned from the cessation of the interruption" (Spring vs. Barr, 120 So. 256 cited in 54 C.J.S. 293, note 27). That rule was followed in Nator and Talon vs. CIR, 114 Phil. 661, Sagucio vs. Bulos, 115 Phil. 786 and Fulton Insurance Co. vs. Manila Railroad Company, L-24263, November 18, 1967, 21 SCRA 974, 981. Interruption of the prescriptive period as meaning renewal of the original term seems to be the basis of the ruling in Ramos vs. Condez, L-22072, August 30, 1967, 20 SCRA 1146, 1151. In that case the cause of action accrued on June 25, 1952. There was a written acknowledgment by the vendors on November 10, 1956 of the validity of the deed of sale.

In National Marketing Corporation vs. Marquez, L-25553, January 31, 1969, 26 SCRA 722, it appears that Gabino Marquez executed on June 24, 1950 a promissory note wherein he bound himself to pay to the Namarco P12,000 in installments within the one-year period starting on June 24, 1951 and ending on June 25, 1952. After making partial payments on July 7, 1951 and February 23, 1952, Marquez defaulted. His total obligation, including interest, as of October 31, 1964, amounted to P19,990.91. Written demands for the payment of the obligation were made upon Marquez and his surety on March 22, 1956, February 16, 1963, June 10, September 18 and October 13, 1964. Marquez did not make any further payment. The Namarco sued Marquez and his surety on December 16, 1964. They contended that the action had prescribed because the ten-year period for suing on the note expired on June 25, 1962. That contention was not sustained. It was held that the prescriptive period was interrupted by the written demands, copies of which were furnished the surety. Respondents obligation under the promissory note became due and demandable on October 13, 1983. On July 27, 1988, petitioners counsel made a written demand for petitioner to settle his obligation. From the time respondents obligation became due and demandable on October 13, 1983, up to the time the demand was made, only 4 years, 9 months and 14 days had elapsed. The prescriptive period then commenced anew when respondent received the demand letter on August 5, 1988.39 Thus, when petitioner sent another demand letter on February 22, 1994,40 the action still had not yet prescribed as only 5 years, 6 months and 17 days had lapsed. While the records do not show when respondent received the second demand letter, nevertheless, it is still apparent that petitioner had the right to institute the complaint on September 14, 1994, as it was filed before the lapse of the ten-year prescriptive period. Lastly, if a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant shall be deemed to have waived the right to present evidence.41 The movant who presents a demurrer to the plaintiffs evidence retains the right to present their own evidence, if the trial court disagrees with them; if the trial court agrees with them, but on appeal, the appellate court disagrees with both of them and reverses the dismissal order, the defendants lose the right to present their own evidence. The appellate court shall, in addition, resolve the case and render judgment on the merits, inasmuch as a demurrer aims to discourage prolonged litigations.42 Thus, respondent may no longer offer proof to establish that he has no liability under the loan documents sued upon by petitioner. The promissory note signed and admitted by respondent provides for the loan amount of P1,000,000.00, to mature on October 13, 1983, with interest at the rate of 25% per annum. The note also provides for a penalty charge of 24% per annum of the amount due and unpaid, and 25% attorneys fees. Hence, respondent should be held liable for these sums. WHEREFORE, the petition is GRANTED. The Decisions of the Regional Trial Court of Manila (Branch 37) dated January 26, 1996, and the Court of Appeals dated October 27, 1999 are SET ASIDE. Respondent is ordered to pay One Million Pesos (P1,000,000.00) plus 25% interest and 24% penalty charge per annum beginning October 13, 1983 until fully paid, and 25% of the amount due as attorneys fees. Costs against respondent.

SO ORDERED. Puno, Callejo, Sr., Tinga, and Chico-Nazario*, JJ., concur. Footnotes
*

On Leave. Records, p. 4, Annex "A." Id., p. 5, Annex "B." Id., p. 6, Annex "C." Id., p. 7, Annex "D." Id., p. 8, Annex "D-1." Id., p. 9, Annex "E." Id., p. 10, Annex "F." Id., p. 23. Id., p. 27. Id., p. 61. Id., p. 4, Exhibit "A." Id., p. 5, Exhibit "B." Id., p. 6, Exhibit "C." Id., p. 87. Id., p. 106.

10

11

12

13

14

15

16

Penned by Justice Roberto A. Barrios, concurred in by Justices Godardo A. Jacinto and Mercedes Gozo-Dadole.
17

CA Rollo, pp. 103-104. Id., pp. 102-103. Rollo, p. 32.

18

19

20

New Sampaguita Builders Construction, Inc. vs. Philippine National Bank, G.R. No. 148753, July 30, 2004.

21

Philippine Lawin Bus Co. vs. Court of Appeals, G.R. No. 130972, January 23, 2002, 374 SCRA 332, 337.
22

Supra., New Sampaguita Builders Construction, Inc. case, note 20. Records, pp. 105-106. CA Rollo, pp. 102-103. Records, p. 23. Id., p. 27. 37 Phil. 254, 256 (1917). Filipinas Textile Mills vs. Court of Appeals, G.R. No. 119800, November 12, 2003. Velasquez vs. Court of Appeals, G.R. No. 124049, June 30, 1999, 309 SCRA 539, 547. Chua vs. Court of Appeals, G.R. No. 88383, February 19, 1992, 206 SCRA 339, 346. Records, p. 23. Id., p. 5, Exhibit "B-1."

23

24

25

26

27

28

29

30

31

32

33

Associated Bank vs. Court of Appeals, G.R. No. 123793, June 29, 1998, 291 SCRA 511, 527.
34

Id., at page 528. Article 1144, Civil Code. Article 1155, Civil Code. Ledesma vs. Court of Appeals, G.R. No. 106646, June 30, 1993, 224 SCRA 175, 177-178. G.R. No. L-46541, December 28, 1979 (94 SCRA 937). Records, p. 8, Exhibit "D-1." Id., p. 9, Exhibit "E."

35

36

37

38

39

40

41

FGU Insurance Corporation vs. G.P. Sarmiento Trucking Corporation, G.R. No. 141910, August 6, 2002, 386 SCRA 312, 322-323.
42

Radiowealth Finance Company vs. Del Rosario, G.R. No. 138739, July 6, 2000, 335 SCRA 288, 297.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 165552 January 23, 2007

PABLO R. ANTONIO, JR., Petitioner, vs. ENGR. EMILIO M. MORALES as Sole Proprietor of E. M. MORALES & ASSOCIATES, Respondent. DECISION SANDOVAL-GUTIERREZ, J.: For our resolution is the instant Petition for Review on Certiorari assailing the Decision1 of the Court of Appeals dated June 11, 2004 in CA-G.R. SP No. 80001 and its Resolution2 of September 21, 2004 denying the motion for reconsideration. Records show that on December 18, 1995, E. M. Morales & Associates filed with the Regional Trial Court (RTC), Branch 56, Makati City a complaint for a sum of money (based upon an oral contract) against Pablo R. Antonio, Jr., petitioner, and Design Consultancy, Inc., docketed as Civil Case No. 95-1796. Petitioner filed a motion to dismiss the complaint on two grounds: (1) plaintiffs failure to attach to the complaint a certificate of non-forum shopping; and (2) plaintiffs lack of legal capacity to sue, plaintiff being a sole proprietorship. On September 30, 1996, respondent Engr. Emilio M. Morales, as plaintiff, filed an Amended Complaint, attaching thereto a certificate of non-forum shopping. The RTC issued an Order admitting the amended complaint and denying petitioners motion to dismiss. Petitioner then filed a motion for reconsideration but it was denied, prompting him to file with the Court of Appeals a petition for certiorari, docketed as CA-G.R. SP No. 59309, which remained pending for more than six years. Feeling that the pendency of CA-G.R. SP No. 59309 would be indefinite, respondent filed with the RTC a motion to dismiss his complaint.
lavvphil.net

On August 1, 2001, the RTC dismissed Civil Case No. 95-1796 without prejudice pursuant to Section 2, Rule 17 of the 1997 Rules of Civil Procedure, as amended. On August 3, 2001, respondent filed with the Court of Appeals a manifestation that the RTC dismissed without prejudice Civil Case No. 95-1796. However, it was only on August 27, 2002, or after more than one year, that the Court of Appeals issued a Resolution directing petitioner to comment on respondents manifestation. On September 17, 2002, petitioner filed his comment.

On June 11, 2004, the Court of Appeals rendered its Decision dismissing his petition in CA-G.R. SP No. 59309. Meanwhile, on September 23, 2002, respondent filed anew a complaint for the collection of a sum of money, this time with Branch 215 of the Quezon City RTC, docketed as Civil Case No. Q-02-47835. Forthwith, petitioner filed a motion to dismiss the complaint on the ground of prescription considering that under Article 1145 of the Civil Code, actions based on oral contracts prescribe in six years. Petitioner maintains that from August 14, 1995, when he received respondents last letter of demand, to September 23, 2002, when respondent filed Civil Case No. Q-02-47835, more than seven years had elapsed; and that the first case, Civil Case No. 95-1796, did not interrupt the running of the period. However, the RTC denied petitioners motion to dismiss and his subsequent motion for reconsideration. Petitioner seasonably filed with the Court of Appeals a petition for certiorari, docketed as CA-G.R. SP No. 80001. On June 11, 2004, the Court of Appeals promulgated its Decision dismissing the petition in CA-G.R. SP No. 80001. Petitioner filed a motion for reconsideration but was denied in a Resolution dated September 21, 2004. Hence, the present petition raising the sole issue of whether the Court of Appeals erred in holding that the trial court did not gravely abuse its discretion in denying petitioners motion to dismiss the complaint by reason of prescription. The petition lacks merit. Articles 1139, 1145 and 1155 of the Civil Code provide: ART. 1139. Actions prescribe by the mere lapse of time fixed by law. xxx ART. 1145. The following actions must be commenced within six years: (1) Upon an oral-contract (2) Upon a quasi-contract. xxx ART. 1155. The prescription of actions is interrupted when they are filed before the court, when there is written extra-judicial demand by the creditors, and when there is any written acknowledgement of the debt by the debtor. In the early case of US v. Serapio,3 this Court held that under the Civil Code, the prescription of an action refers to the time within which an action must be brought after the right of action has accrued. The prescriptive statutes serve to protect those who are diligent and vigilant, not those who sleep on their rights. The rationale behind the prescription of actions is to prevent fraudulent and stale claims from springing up at great distances of time, thus surprising the parties or their representatives when

the facts have become obscure from the lapse of time or the defective memory or death or removal of the witnesses.4 Prescription applies even to the most meritorious claims. Prescription as understood and used in this jurisdiction does not simply mean a mere lapse of time. Rather, there must be a categorical showing that due to plaintiffs negligence, inaction, lack of interest, or intent to abandon a lawful claim or cause of action, no action whatsoever was taken, thus allowing the statute of limitations to bar any subsequent suit.
1avvphi1.net

Petitioners invocation of prescription is misplaced. We recall that on December 18, 1995, respondent initially filed with the RTC of Makati City Civil Case No. 95-1796. While it was later dismissed without prejudice to his own motion, we note that the dismissal sought was not for the purpose of voluntarily abandoning his claim. On the contrary, respondents intention was to expedite the enforcement of his rights. Understandably, he felt frustrated at the snails pace at which his case was moving. As mentioned earlier, CA-G.R. SP No. 59309 remained pending before the Court of Appeals for six (6) long years. We further observe that respondent acted swiftly after the dismissal of his case without prejudice by the Makati RTC. He immediately filed with the Court of Appeals a manifestation that Civil Case No. 95-1796 was dismissed by the lower court. But the Court of Appeals acted on his manifestation only after one year. This delay, beyond respondents control, in turn further caused delay in the filing of his new complaint with the Quezon City RTC. Clearly, there was no inaction or lack of interest on his part. The statute of limitations was devised to operate primarily against those who slept on their rights and not against those desirous to act but could not do so for causes beyond their control.5 Verily, the Court of Appeals did not err in holding that the RTC, Branch 215, Quezon City did not gravely abuse its discretion when it denied petitioners motion to dismiss respondents complaint and ruled that respondents filing of the complaint in Civil Case No. Q-02-47835 is not barred by prescription. WHEREFORE, we DENY the petition and AFFIRM the assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 80001. Costs against petitioner. SO ORDERED. ANGELINA SANDOVAL-GUTIERREZ Associate Justice WE CONCUR: REYNATO S. PUNO Chief Justice Chairperson RENATO C. CORONA Associate Justice CANCIO C. GARCIA Associate Justice CERTIFICATION ADOLFO S. AZCUNA Asscociate Justice

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice

Footnotes
1

Rollo, pp. 36-43. Penned by Associate Justice Conrado M. Vasquez, Jr. and concurred in by Associate Justices Rebecca De Guia-Salvador and Jose C. Reyes, Jr.
2

Ibid., pp. 45-46. 23 Phil. 584 (1912).

Sinaon v. Sorogon, G.R. No. 59879, May 13, 1985, 136 SCRA 407, 410; Peales v. Intermediate Appellate Court, G.R. No. 73611, October 27, 1986, 145 SCRA 223, 228.
5

Republic v. Court of Appeals, G.R. No. 43179, June 27, 1985, 137 SCRA 220, 228.

The Lawphil Project - Arellano Law Foundation


Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 183984 April 13, 2011

ARTURO SARTE FLORES, Petitioner, vs. SPOUSES ENRICO L. LINDO, JR. and EDNA C. LINDO, Respondents. DECISION CARPIO, J.: The Case Before the Court is a petition for review1 assailing the 30 May 2008 Decision2 and the 4 August 2008 Resolution3of the Court of Appeals in CA-G.R. SP No. 94003. The Antecedent Facts

The facts, as gleaned from the Court of Appeals Decision, are as follows: On 31 October 1995, Edna Lindo (Edna) obtained a loan from Arturo Flores (petitioner) amounting to P400,000 payable on 1 December 1995 with 3% compounded monthly interest and 3% surcharge in case of late payment. To secure the loan, Edna executed a Deed of Real Estate Mortgage4 (the Deed) covering a property in the name of Edna and her husband Enrico (Enrico) Lindo, Jr. (collectively, respondents). Edna also signed a Promissory Note5 and the Deed for herself and for Enrico as his attorney-in-fact. Edna issued three checks as partial payments for the loan. All checks were dishonored for insufficiency of funds, prompting petitioner to file a Complaint for Foreclosure of Mortgage with Damages against respondents. The case was raffled to the Regional Trial Court of Manila, Branch 33 (RTC, Branch 33) and docketed as Civil Case No. 00-97942. In its 30 September 2003 Decision,6 the RTC, Branch 33 ruled that petitioner was not entitled to judicial foreclosure of the mortgage. The RTC, Branch 33 found that the Deed was executed by Edna without the consent and authority of Enrico. The RTC, Branch 33 noted that the Deed was executed on 31 October 1995 while the Special Power of Attorney (SPA) executed by Enrico was only dated 4 November 1995. The RTC, Branch 33 further ruled that petitioner was not precluded from recovering the loan from Edna as he could file a personal action against her. However, the RTC, Branch 33 ruled that it had no jurisdiction over the personal action which should be filed in the place where the plaintiff or the defendant resides in accordance with Section 2, Rule 4 of the Revised Rules on Civil Procedure. Petitioner filed a motion for reconsideration. In its Order7 dated 8 January 2004, the RTC, Branch 33 denied the motion for lack of merit. On 8 September 2004, petitioner filed a Complaint for Sum of Money with Damages against respondents. It was raffled to Branch 42 (RTC, Branch 42) of the Regional Trial Court of Manila, and docketed as Civil Case No. 04-110858. Respondents filed their Answer with Affirmative Defenses and Counterclaims where they admitted the loan but stated that it only amounted to P340,000. Respondents further alleged that Enrico was not a party to the loan because it was contracted by Edna without Enricos signature. Respondents prayed for the dismissal of the case on the grounds of improper venue, res judicata and forumshopping, invoking the Decision of the RTC, Branch 33. On 7 March 2005, respondents also filed a Motion to Dismiss on the grounds of res judicata and lack of cause of action. The Decision of the Trial Court On 22 July 2005, the RTC, Branch 42 issued an Order8 denying the motion to dismiss. The RTC, Branch 42 ruled that res judicata will not apply to rights, claims or demands which, although growing out of the same subject matter, constitute separate or distinct causes of action and were not put in issue in the former action. Respondents filed a motion for reconsideration. In its Order9 dated 8 February 2006, the RTC, Branch 42 denied respondents motion. The RTC, Branch 42 ruled that the RTC, Branch 33 expressly stated that its decision did not mean that petitioner could no longer recover the loan petitioner extended to Edna. Respondents filed a Petition for Certiorari and Mandamus with Prayer for a Writ of Preliminary Injunction and/or Temporary Restraining Order before the Court of Appeals.

The Decision of the Court of Appeals In its 30 May 2008 Decision, the Court of Appeals set aside the 22 July 2005 and 8 February 2006 Orders of the RTC, Branch 42 for having been issued with grave abuse of discretion. The Court of Appeals ruled that while the general rule is that a motion to dismiss is interlocutory and not appealable, the rule admits of exceptions. The Court of Appeals ruled that the RTC, Branch 42 acted with grave abuse of discretion in denying respondents motion to dismiss. The Court of Appeals ruled that under Section 3, Rule 2 of the 1997 Rules of Civil Procedure, a party may not institute more than one suit for a single cause of action. If two or more suits are instituted on the basis of the same cause of action, the filing of one on a judgment upon the merits in any one is available ground for the dismissal of the others. The Court of Appeals ruled that on a nonpayment of a note secured by a mortgage, the creditor has a single cause of action against the debtor, that is recovery of the credit with execution of the suit. Thus, the creditor may institute two alternative remedies: either a personal action for the collection of debt or a real action to foreclose the mortgage, but not both. The Court of Appeals ruled that petitioner had only one cause of action against Edna for her failure to pay her obligation and he could not split the single cause of action by filing separately a foreclosure proceeding and a collection case. By filing a petition for foreclosure of the real estate mortgage, the Court of Appeals held that petitioner had already waived his personal action to recover the amount covered by the promissory note. Petitioner filed a motion for reconsideration. In its 4 August 2008 Resolution, the Court of Appeals denied the motion. Hence, the petition before this Court. The Issue The sole issue in this case is whether the Court of Appeals committed a reversible error in dismissing the complaint for collection of sum of money on the ground of multiplicity of suits. The Ruling of this Court The petition has merit. The rule is that a mortgage-creditor has a single cause of action against a mortgagor-debtor, that is, to recover the debt.10 The mortgage-creditor has the option of either filing a personal action for collection of sum of money or instituting a real action to foreclose on the mortgage security.11 An election of the first bars recourse to the second, otherwise there would be multiplicity of suits in which the debtor would be tossed from one venue to another depending on the location of the mortgaged properties and the residence of the parties.12 The two remedies are alternative and each remedy is complete by itself.13 If the mortgagee opts to foreclose the real estate mortgage, he waives the action for the collection of the debt, and vice versa.14 The Court explained: x x x in the absence of express statutory provisions, a mortgage creditor may institute against the mortgage debtor either a personal action for debt or a real action to foreclose the mortgage. In other words, he may pursue either of the two remedies, but not both. By such election, his cause of action can by no means be impaired, for each of the two remedies is complete in itself. Thus, an election to

bring a personal action will leave open to him all the properties of the debtor for attachment and execution, even including the mortgaged property itself. And, if he waives such personal action and pursues his remedy against the mortgaged property, an unsatisfied judgment thereon would still give him the right to sue for deficiency judgment, in which case, all the properties of the defendant, other than the mortgaged property, are again open to him for the satisfaction of the deficiency. In either case, his remedy is complete, his cause of action undiminished, and any advantages attendant to the pursuit of one or the other remedy are purely accidental and are all under his right of election. On the other hand, a rule that would authorize the plaintiff to bring a personal action against the debtor and simultaneously or successively another action against the mortgaged property, would result not only in multiplicity of suits so offensive to justice (Soriano v. Enriques, 24 Phil. 584) and obnoxious to law and equity (Osorio v. San Agustin, 25 Phil. 404), but also in subjecting the defendant to the vexation of being sued in the place of his residence or of the residence of the plaintiff, and then again in the place where the property lies.15 The Court has ruled that if a creditor is allowed to file his separate complaints simultaneously or successively, one to recover his credit and another to foreclose his mortgage, he will, in effect, be authorized plural redress for a single breach of contract at so much costs to the court and with so much vexation and oppressiveness to the debtor.16 In this case, however, there are circumstances that the Court takes into consideration. Petitioner filed an action for foreclosure of mortgage. The RTC, Branch 33 ruled that petitioner was not entitled to judicial foreclosure because the Deed of Real Estate Mortgage was executed without Enricos consent. The RTC, Branch 33 stated: All these circumstances certainly conspired against the plaintiff who has the burden of proving his cause of action. On the other hand, said circumstances tend to support the claim of defendant Edna Lindo that her husband did not consent to the mortgage of their conjugal property and that the loan application was her personal decision. Accordingly, since the Deed of Real Estate Mortgage was executed by defendant Edna Lindo lacks the consent or authority of her husband Enrico Lindo, the Deed of Real Estate Mortgage is void pursuant to Article 96 of the Family Code. This does not mean, however, that the plaintiff cannot recover the P400,000 loan plus interest which he extended to defendant Edna Lindo. He can institute a personal action against the defendant for the amount due which should be filed in the place where the plaintiff resides, or where the defendant or any of the principal defendants resides at the election of the plaintiff in accordance with Section 2, Rule 4 of the Revised Rules on Civil Procedure. This Court has no jurisdiction to try such personal action.17 Edna did not deny before the RTC, Branch 33 that she obtained the loan. She claimed, however, that her husband did not give his consent and that he was not aware of the transaction.18 Hence, the RTC, Branch 33 held that petitioner could still recover the amount due from Edna through a personal action over which it had no jurisdiction. Edna also filed an action for declaratory relief before the RTC, Branch 93 of San Pedro Laguna (RTC, Branch 93), which ruled: At issue in this case is the validity of the promissory note and the Real Estate Mortgage executed by Edna Lindo without the consent of her husband.

The real estate mortgage executed by petition Edna Lindo over their conjugal property is undoubtedly an act of strict dominion and must be consented to by her husband to be effective. In the instant case, the real estate mortgage, absent the authority or consent of the husband, is necessarily void. Indeed, the real estate mortgage is this case was executed on October 31, 1995 and the subsequent special power of attorney dated November 4, 1995 cannot be made to retroact to October 31, 1995 to validate the mortgage previously made by petitioner. The liability of Edna Lindo on the principal contract of the loan however subsists notwithstanding the illegality of the mortgage. Indeed, where a mortgage is not valid, the principal obligation which it guarantees is not thereby rendered null and void. That obligation matures and becomes demandable in accordance with the stipulation pertaining to it. Under the foregoing circumstances, what is lost is merely the right to foreclose the mortgage as a special remedy for satisfying or settling the indebtedness which is the principal obligation. In case of nullity, the mortgage deed remains as evidence or proof of a personal obligation of the debtor and the amount due to the creditor may be enforced in an ordinary action. In view of the foregoing, judgment is hereby rendered declaring the deed of real estate mortgage as void in the absence of the authority or consent of petitioners spouse therein. The liability of petitioner on the principal contract of loan however subsists notwithstanding the illegality of the real estate mortgage.19 The RTC, Branch 93 also ruled that Ednas liability is not affected by the illegality of the real estate mortgage. Both the RTC, Branch 33 and the RTC, Branch 93 misapplied the rules. Article 124 of the Family Code provides: Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the husbands decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of contract implementing such decision. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. (Emphasis supplied) Article 124 of the Family Code of which applies to conjugal partnership property, is a reproduction of Article 96 of the Family Code which applies to community property. Both Article 96 and Article 127 of the Family Code provide that the powers do not include disposition or encumbrance without the written consent of the other spouse. Any disposition or encumbrance without the written consent shall be void. However, both provisions also state that "the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse x x x before the offer is withdrawn by either or both offerors."

In this case, the Promissory Note and the Deed of Real Estate Mortgage were executed on 31 October 1995. The Special Power of Attorney was executed on 4 November 1995. The execution of the SPA is the acceptance by the other spouse that perfected the continuing offer as a binding contract between the parties, making the Deed of Real Estate Mortgage a valid contract. However, as the Court of Appeals noted, petitioner allowed the decisions of the RTC, Branch 33 and the RTC, Branch 93 to become final and executory without asking the courts for an alternative relief. The Court of Appeals stated that petitioner merely relied on the declarations of these courts that he could file a separate personal action and thus failed to observe the rules and settled jurisprudence on multiplicity of suits, closing petitioners avenue for recovery of the loan. Nevertheless, petitioner still has a remedy under the law. In Chieng v. Santos,20 this Court ruled that a mortgage-creditor may institute against the mortgagedebtor either a personal action for debt or a real action to foreclose the mortgage. The Court ruled that the remedies are alternative and not cumulative and held that the filing of a criminal action for violation of Batas Pambansa Blg. 22 was in effect a collection suit or a suit for the recovery of the mortgage-debt.21 In that case, however, this Courtpro hac vice, ruled that respondents could still be held liable for the balance of the loan, applying the principle that no person may unjustly enrich himself at the expense of another.22 The principle of unjust enrichment is provided under Article 22 of the Civil Code which provides: Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him. There is unjust enrichment "when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience."23The principle of unjust enrichment requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at the expense of another.24
1avvphi1

The main objective of the principle against unjust enrichment is to prevent one from enriching himself at the expense of another without just cause or consideration.25 The principle is applicable in this case considering that Edna admitted obtaining a loan from petitioners, and the same has not been fully paid without just cause. The Deed was declared void erroneously at the instance of Edna, first when she raised it as a defense before the RTC, Branch 33 and second, when she filed an action for declaratory relief before the RTC, Branch 93. Petitioner could not be expected to ask the RTC, Branch 33 for an alternative remedy, as what the Court of Appeals ruled that he should have done, because the RTC, Branch 33 already stated that it had no jurisdiction over any personal action that petitioner might have against Edna. Considering the circumstances of this case, the principle against unjust enrichment, being a substantive law, should prevail over the procedural rule on multiplicity of suits. The Court of Appeals, in the assailed decision, found that Edna admitted the loan, except that she claimed it only amounted to P340,000. Edna should not be allowed to unjustly enrich herself because of the erroneous decisions of the two trial courts when she questioned the validity of the Deed. Moreover, Edna still has an opportunity to submit her defenses before the RTC, Branch 42 on her claim as to the amount of her indebtedness.

WHEREFORE, the 30 May 2008 Decision and the 4 August 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 94003 are SET ASIDE. The Regional Trial Court of Manila, Branch 42 is directed to proceed with the trial of Civil Case No. 04-110858. SO ORDERED. ANTONIO T. CARPIO Associate Justice WE CONCUR: ANTONIO EDUARDO B. NACHURA Associate Justice DIOSDADO M. PERALTA Associate Justice JOSE C. MENDOZA Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. ANTONIO T. CARPIO Associate Justice Chairperson CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. RENATO C. CORONA Chief Justice ROBERTO A. ABAD Associate Justice

Footnotes
1

Under Rule 45 of the 1997 Rules of Civil Procedure.

Rollo, pp. 7-16. Penned by Associate Justice Noel G. Tijam with Associate Justices Martin S. Villarama, Jr. (now Supreme Court Justice) and Andres B. Reyes, Jr., concurring.
3

Id. at 18-20.

Id. at 53-60. Id. at 52. Id. at 84-88. Penned by Judge Reynaldo G. Ros. Id. at 89-90. Id. at 48-50. Penned by Judge Guillermo G. Purganan. Id. at 51. Penned by Judge Vedasto R. Marco.

10

Tanchan v. Allied Banking Corporation, G.R. No. 164510, 25 November 2008, 571 SCRA 512.
11

Id. Id.

12

13

BPI Family Savings Bank, Inc. v. Vda. De Coscolluela, G.R. No. 167724, 27 June 2006, 493 SCRA 472.
14

Id.

15

Id. at 493 citing Bachrach Motor Co., Inc. v. Esteban Icaragal and Oriental Commercial Co., Inc., 68 Phil. 287 (1939).
16

Id. Rollo, pp. 87-88. Id. at 86. Id. at 81-82. G.R. No. 169647, 31 August 2007, 531 SCRA 730. Id. Id.

17

18

19

20

21

22

23

Republic v. Court of Appeals, G.R. No. 160379, 14 August 2009, 596 SCRA 57 citing Benguet Corporation v. Department of Environment and Natural Resources-Mines Adjudication Board, G.R. No. 163101, 13 February 2008, 545 SCRA 196 and Cool Car Philippines, Inc. v. Ushio Realty and Development Corporation, G.R. No. 138088, 23 Janaury 2006, 479 SCRA 404.
24

Republic v. Court of Appeals, supra. P.C. Javier & Sons, Inc. v. Court of Appeals, 500 Phil. 419 (2005).

25

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 79385 February 28, 1990 STASA INCORPORATED, petitioner, vs. HON. COURT OF APPEALS AND MARIA LOURDES R. LICUANAN, respondents. Efren B. Tienzo for petitioner. Ven v. Paculan for private respondent.

PARAS, J.: In this petition for review on certiorari, petitioner corporation seeks the reversal of the decision dated April 14,1987 of respondent Court of Appeals * which allowed private respondent's petition for certiorari and prohibition and reversed the Orders of September 16, 1985 and March 7, 1986 of the Regional Trial Court of Manila, Branch 42. Petitioner filed the within petition on August 18, 1987. On October 6, 1987, private respondent filed her Manifestation submitting the Entry of Judgment of respondent Court of Appeals which certifies that the assailed decision of April 14, 1987 became final and executory on August 8, 1987. The facts as found by the Court of Appeals on the basis of the records and pleadings appear to be: On February 19, 1975, a complaint for ejectment, docketed as Civil Case No. 0239933, was filed by plaintiff Delfin San Jose, against defendant Mariano Aquino, alleging non-payment of rentals and conversion of the premises, located at No. 2684 Down, New Panaderos, Sta. Ana, Manila, from residential to commercial purposes (page 37, rollo). The City Court of Manila, Branch 13 in said case, rendered a decision, dated June 20, 1982, in favor of plaintiff and against defendant, ordering the latter and all persons claiming under him to vacate the subject leased premises and to pay plaintiff rentals for the occupation of the same. Subsequent to the filing of Civil Case No. 0239933 plaintiff Delfin San Jose assigned the leased premises to STASA, Inc. The said leased premises were later transferred to and acquired by herein respondent STASA, INC. from Delfin San Jose.

On January 26, 1981, plaintiff STASA, INC. (a family corporation, represented by Delfin San Jose, as President and General Manager), filed another ejectment suit, docketed as Civil Case No. 061208, over the same apartment house located at No. 2684 Down, New Panaderos, Sta. Ana, Manila, against defendant Mariano Aquino, but this time, joining therein as party-defendants Ricardo Licuanan, Jr. and one 'Fortuna.' The City Court of Manila, Branch 2, rendered a judgment, dated January 6, 1983, in favor of plaintiff STASA, INC. and against defendants Ricardo Licuanan and 'Fortuna,' excluding defendant Mariano Aquino who had already vacated the premises, and all persons claiming right under said defendants, ordering them to vacate the said premises and to pay the arrears in rentals and reasonable compensation for the use of the property. Thereafter, on October 12, 1983, plaintiff STASA, INC. filed a complaint for a sum of money with the Regional Trial Court of Manila, Branch 42, docketed as Civil Case No. 83-20734 against defendant Mariano Aquino and defendant Maria Lourdes Licuanan. An amended answer, dated September 11, 1984 was filed by defendant Mariano Aquino and defendant Maria Lourdes Licuanan, contending that the complaint should be dismissed upon the ground of res judicata in view of the decisions of the RTCManila in the ejectment cases, Civil Cases Nos. 0239933 and 061208. On February 20, 1985, the parties in civil case for sum of money submitted a Joint Stipulation of Facts and Statement of Issues. Pertinent provisions thereof are as follows: l. That Delfin M. San Jose, Sr. was the previous owner and lessor of the premises known as 2634-Down New Panaderos St., Sta. Ana, Manila; 2. That title thereto was later transferred to and acquired by Stasa, Inc., plaintiff in the instant case; 3. That plaintiff Stasa, Inc. is a family corporation and Delfin San Jose, Sr. is the President, General Manager and Chairman of the Board of Directors, and his children are the Board Members; xxx xxx xxx 15. That defendant Maria Lourdes Licuanan was never made defendant and neither was she impleaded in Civil Case Nos. 239933 and 061208-IV, but she was the actual occupant of the said premises; 16. That in the two aforementioned cases, defendant Maria Licuanan testified in open court as the wife and/or common-law-wife of defendant Mariano Aquino; 17. That on 12 October 1983, the present action was filed with this Honorable Court, again by plaintiff Stasa, Incorporated, based on the same lease contract over the same premises, 2684 Down New Panaderos St., Sta. Ana, Manila, for the collection of the same unpaid

rentals, twice litigated before the defunct City Court of Manila and both won by herein plaintiff but which had remained unexecuted up to date hereof. On August 28, 1985, plaintiff STASA, INC. filed a Manifestation with the RTC-Manila praying that the execution or satisfaction of the decisions in Civil Cases Nos. 0239933 and 061208 against the defendant Maria Lourdes Licuanan, the wife of defendant Mariano Aquino, be allowed. On September 12, 1985, defendant Maria Lourdes Licuanan filed a motion to dismiss the complaint contending that the instant case is in fact an action to enforce collection of rentals per decision of the City Court of Manila, Branch 13, for ejectment, in Civil Case No. 0239933; that the instant action for execution should have been filed before the City Court of Manila and not before the RTC; that the decision in Civil Case No. 0239933 cannot be enforced in this complaint for collection of sum of money (Civil Case No. 83-20734) against defendant Licuanan, not being a party in Civil Case No. 0239933; that Civil Case No. 83-20734 is barred by prior judgment under Sec.1 (f) Rule 13 of the Rules of Court. On September 13, 1985, plaintiff STASA, INC. opposed the motion to dismiss, alleging that the questioned decisions of the defunct City Court of Manila in Civil Case No. 0239923 and 061208 are ejectment cases, separate and distinct from the present actions for collection of sum of money. On September 16, 1985, the RTC-Manila issued an order denying the motion to dismiss for lack of merit, it appearing that the same is not indubitable. On December 18, 1985, defendant Maria Lourdes Licuanan filed a motion for reconsideration of the order dated September 16, 1985 on the following grounds; lack of jurisdiction of the RTC over the nature of the case; lack of cause of action and res judicata. On January 21, 1986, plaintiff STASA, INC. filed its opposition to the motion for reconsideration, and, in the order of March 7, 1986, the RTC-Manila denied the motion for reconsideration, for lack of merit. (pp. 12-14, Rollo) Private respondent (the petitioner) brought this case before respondent appellate court on a petition for certiorari and prohibition as the aforecited Order of September 16, 1985 which denied her motion to dismiss the complaint for collection of sum of money for lack of merit and the Order of March 7, 1986 which denied the motion for reconsideration. Respondent Court of Appeals handed down the questioned decision granting the petition and reversing and setting aside the aforecited orders of the trial court. Petitioner thus resorted to this petition. Petitioner corporation anchors this petition on these averments: 1. The respondent Court of Appeals erred in reversing the orders of the trial court and in dismissing Civil Case No. 83-20734. Said civil action is separate from the two previous cases and private respondent was not impleaded as a party defendant in

these cases because then defendant Mariano Aquino and herein private respondent misrepresented themselves before and during the occupancy of subject premises that they were legally married and for which reason, petitioner filed the ejectment cases against Aquino, the alleged head of the family, for arrears in rentals and for the illegal conversion of the residential apartment into a commercial one. It was only during the hearing of the two ejectment cases when private respondent revealed that they were merely common law husband and wife and, that when a decision was rendered in favor of petitioner and when a writ of execution was issued, the same could not be enforced against the alleged couple. Neither could the writ be enforced against their properties because they had been conveniently transferred in the name of private respondent. 2. Respondent appellate court also erred in concluding that Civil Case No. 83-20734 (for collection of sum of money) is barred by the prior judgment in Civil Cases Nos. 0239933 and 061208 for ejectment. Petitioner also alleges that respondent court absolved private respondent from the payment of rental arrears alleged in the complaint for ejectment despite the fact that she was the lessee-occupant of the subject apartment, the administrator of Trading housed in the said apartment and that she was the only one who testified in the cases for ejectment. Private respondent, on the other hand, contends that in the two ejectment cases, she was neither named a party defendant nor held liable for unpaid rentals; that not having been impleaded in the two ejectment cases she cannot be held liable in the third case for collection of rentals, and that under the principle of res judicata, issues and matters already raised, discussed and passed upon in the ejectment cases cannot again be raised and litigated in the third civil case for collection of money. The sole issue for the Court's resolution is: Whether or not the judgment in the previous two ejectment cases would bar the third case of the collection of sum of money. The answer is definitely and clearly in the negative. For the principle of res judicata to apply in any given case, four requisites must be fully satisfied as enunciated inArguson v. Miclat, 133 SCRA 678, and in other cases and these are: (1) the presence of a final former judgment; (2) the former judgment was rendered by a court having jurisdiction over the subject matter and the parties; (3) the former judgment is a judgment on the merits; and (4) there is, between the first and the second action identity of parties, of subject matter, and of cause of action. These four elements must be complied with; otherwise, res judicata would not be sustained. The established facts clearly reveal that there has never been any identity of parties between the two ejectment cases and the case for collection of money. Private respondent herself has asserted that she was never impleaded in the ejectment cases nor was she held responsible for the unpaid rentals. It should be noted that in the "Stipulation of Facts and Statement of Issues" submitted by both parties in the civil case for collection of sum of money, private respondent declared that she "was never made defendant and neither was she impleaded in Civil Case Nos. 0239933 and 061208-IV, but she was the actual occupant of the said premises." (No. 15 of Stipulation of Facts) It cannot even be assumed that she was impliedly impleaded as defendants in the ejectment cases because she and Mariano Aquino revealed their misrepresentation as lawful husband and wife. There never was a conjugal partnership against which the writ of execution could be enforced. Note that in the case of G. Tractors, Inc. v. Court of Appeals, 57402, 135 SCRA 192, this Court ruled that there is no need to include the name of the wife where husband is sued in order to bind the conjugal

partnership. Conversely speaking, therefore, there is a need to include the name of the commonlaw-wife, as in this case, in order to bind her property or make her answerable for any liability. It should also be noted that in the case of Martinez v. Court of Appeals, 139 SCRA 558, this Court declared that the fact alone that the parties in both actions may be the same persons will not spell identity of parties, which presupposes that they are adversary-parties in both first and second cases litigating in the same capacity.(Emphasis supplied). Evidently and indubitably, therefore, there is no identity of parties between the ejectment cases and the case for a sum of money filed against private respondent. At this juncture, this Court cannot pass judgment in this case without making an observation on the manner with which private respondent and her common-law husband pursued the previous cases. It appears that private respondent and her live-in partner indulged in an orchestrated and manipulative handling of the ejectment cases considering that initially, they posed as a legally married coupled but during the litigation, sensing perhaps that they would lose in the cases, suddenly revealed that they were not legally married but were merely living together as husband and wife. They obviously planned and made use of such a scheme in order to avoid the adjudged liability resulting from losing in the cases. Their manipulation of the two cases is even confirmed by the consequent transfer of the properties in the name of private respondent against whom the writ of execution could never be enforced since she was never a party defendant. Then suddenly conveniently she now takes refuge in the principle of "identity of parties", a posture so inconsistent with her attempt to hide her true and real status when it served her deceitful intention. WHEREFORE, the decision of the Court of Appeals is hereby REVERSED and SET ASIDE and the Orders dated September 16, 1985 and March 7, 1986 of Branch 42, Regional Trial Court of Manila are hereby REINSTATED. Let this case be remanded to the trial court for the implementation of the orders. SO ORDERED. Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ., concur.

Footnotes * Penned by Justice Jaime M. Lantin and concurred in by Justices Carolina C. GrioAquino and Nathanael P. de Pano, Jr.