G.R. No.

L-27876 April 22, 1992

ADELAIDA S. MANECLANG, in her capacity as Administrator of the Intestate Estate of the late
Margarita
Suri
Santos,
plaintiff-appellee,
vs.
JUAN T. BAUN and AMPARO S. BAUN, ET AL., defendants. CITY OF DAGUPAN, defendant-appellant.
DAVIDE, JR., J.:
The issue presented in this case is the validity of a sale of a parcel of land by the administrator of an
intestate estate made pursuant to a petition for authority to sell and an order granting it which were filed
and entered, respectively, without notice to the heirs of the decedents.
The records disclose that on 12 June 1947, Margarita Suri Santos died intestate. She was survived by her
husband Severo Maneclang and nine (9) children. On 30 July 1947, a petition for the settlement of her
estate was filed by Hector S. Maneclang, one of her legitimate children, with the Court of First Instance at
Dagupan City, Pangasinan; the case was docketed as Special Proc. No. 3028. At the time of the filing of the
petition, the ages of her children were as follows:
Hector
Maneclang

Cesar
Maneclang
Oscar
Maneclang
Amanda
Maneclang
Adelaida
Meneclang
Linda
Maneclang
Priscila
Maneclang
Natividad
Maneclang
Teresita Maneclang 2

21

years

old
19
17
16
13
7
6
3

No guardian ad litem was appointed by the court for the minor children.
Margarita left several parcels of land, among which is Lot No. 203 of the Cadastral Survey of Dagupan City
containing an area of 7, 401 square meters, more or less , and covered by Transfer Certificate of Title No.
1393.
On 2 September 1949, Pedro M. Feliciano, the administrator of the intestate estate of Margarita, filed a
petition in SP Proc. No. 3028 asking the court to give him "the authority to dispose of so much of the estate
that is necessary to meet the debts enumerated" in the petition. While notice thereof was given to the
surviving spouse, Severo Maneclang, through his counsel, Atty. Teofilo Guadiz, no such notice was sent to
the heirs of Margarita.
On 9 September 1949, despite the absence of notice to the heirs, the intestate court issued an Order
"authorizing the administrator to mortgage or sell so much of the properties of the estate for the purposes
(sic) of paying off the obligations" referred to in the petition.
Pursuant to this Order, Oscar Maneclang, the new administrator of the intestate estate, executed on 4
October 1952 a deed of sale 1 in favor of the City of Dagupan, represented by its mayor, Angel B.
Fernandez, of a portion consisting of 4,415 square meters of the aforementioned Lot No. 203 for and in
consideration of P11,687.50. This sale was approved by the intestate court on 15 March 1954.
The City of Dagupan immediately took possession of the land and constructed thereon a public market,
known as the Perez Boulevard Public Market, at a cost of P100,00.00, more or less. It has been in
continuous and uninterrupted possession of the property since the construction of the market. 2
Some other parcels of land belonging to the intestate estate were sold by the administrator pursuant of
the same authority granted by the 9 September 1949 Order. 3
On 28 September 1965, the new judicial administratrix of the intestate estate, Adelaida S. Maneclang,
daughter of the late Margarita Suri Santos, filed with the Court of First Instance of Pangasinan an action for
the annulment of the sales made by the previous administrator pursuant to the order of 9 September
1949, cancellation of titles, recovery of possession and damages against the vendees Juan T. Baun and
Amparo Baun, Marcelo Operaa and Aurora Pagurayan, Crispino Tandoc and Brigida Tandoc, Jose Infante
and Mercedes Uy Santos, Roberto Cabugao, Basilisa Callanta and Fe Callanta, Ricardo Bravo and Francisca
Estrada, the City of Dagupan, and Constantino Daroya and Marciana Caramat. 4 The complaint was
docketed as Civil Case No. D-1785. The cause of action against the City of Dagupan centers around the
deed of sale executed in its favor on 4 October 1952 by former judicial administrator Oscar S. Maneclang.
In its Answer filed on 5 November 1965, 5 the City of Dagupan interposed the following affirmative
defenses: (a) the sale in its favor is valid, legal and above board; (b) plaintiff has no cause of action against
it, or that the same, if any, had prescribed since the complaint was filed thirteen (13) years after the

execution of the sale; (c) plaintiff is barred by estoppel and laches; (d) it is a buyer in good faith; and (e) it
has introduced necessary and useful improvements and contructed a supermarket worth P200,000.00;
hence, assuming arguendo that the sale was illegal, it has the right to retain the land and the
improvements until it is reimbursed for the said improvements.
On 30 March 1966, plaintiff and the City of Dagupan entered into a Stipulation of Facts wherein they
agreed on the facts earlier adverted to. They, however, agreed: (a) to adduce evidence concerning the
reasonable rental of the property in question and other facts not embodied therein but which are material
and vital to the final determination of the case, and (b) to request the court to take judicial notice of SP
Proc. No. 3028.
The evidence adduced by plaintiff discloses that Oscar Maneclang was induced by its then incumbent
Mayor, Atty. Angel B. Fernandez, to sell the property to the City of Dagupan and that the said City has been
leasing the premises out to numerous tenants at the rate of P0.83 per square meter per month, or a total
monthly rental of P3,747.45, since 4 October 1952. 6
On 9 November 1966, the trial court rendered a partial decision in Civil Case No. D-1785 against the City of
Dagupan, the dispositive portion of which reads as follows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment:
(a) Annulling (sic) the Deed of Sale executed by the Administrator on October 4, 1952 (Exh.
F) being null and void ab initio;
(b) Ordering the cancellation of the Certificate of Title issued in favor of the defendant City
of Dagupan by virtue of said Deed of Sale, and directing the Register of Deeds of said City to
issue a new Certificate of Title in favor of the plaintiff as Administratrix covering the property
in question;
(c) Ordering the defendant City of Dagupan to restore the possession to the plaintiff in her
capacity as Judicial Administratrix of the Intestate Estate of Margarita Suri Santos of the
parcel of land in question, together with all the improvements thereon existing;
(d) Ordering the defendant City of Dagupan City to pay the plaintiff the sum of P584,602.20
as accumulated rentals or reasonable value of the use of the property in question from
October 4, 1952 up to the filing of the complaint in 1985, plus interest thereon at the rate of
6% per annum from the later date;
(e) Ordering the defendant City of Dagupan to pay a monthly rental or reasonable value of
its occupation of the premises in the amount of P3,747.45 from October 9, 1985 up to the
date the possession of the premises is delivered (sic) the plaintiff by said defendant, and
(f) Ordering the plaintiff to reimburse the defendant City of Dagupan the sums of
P100,000.00 and P11,687.50 both amounts to be deducted from the amount due the plaintiff
from said defendant.
Defendant shall also pay the costs.
SO ORDERED.

In arriving at the said disposition, the trial court held that:

(a) Under Rule 90 of the Rules of Court, 8 which is similar to the provisions of Section 722 of
the Code of Civil Procedure, it is essential and mandatory that the interested parties be
given notices of the application for authority to sell the estate or any portion thereof which is
pending settlement in a probate court. As held in the early case of Estate of Gamboa vs.
Floranza, 9 an order issued by a probate court for the sale of real property belonging to the
estate of a deceased person would be void if no notice for the hearing of the petition for
such sale is given as required by said Section 722. Under this section, when such a petition
is made, the court shall designate a time and place for the hearing and shall require notice
of such hearing to be given in a newspaper of general circulation; moreover, the court may
require the giving of such further notice as it deems proper.
In the instant case, no notice of the application was given to the heirs; hence, both the order
granting authority to sell and the deed of sale executed in favor of the City of Dagupan
pursuant thereto, are null and void.
(b) Estoppel does not lie against plaintiff as no estoppel can be predicated on an illegal act
and estoppel is founded on ignorance. In the instant case, the nullity is by reason of the non-

observance of the requirements of law regarding notice; this legal defect or deficiency
deprived the probate court of its jurisdiction to dispose of the property of the estate.
Besides, the City of Dagupan was represented in the transaction by lawyers who are
presumed to know the law. This being the case, they should not be allowed to plead
estoppel; finally, estoppel cannot give validity to an act which is prohibited by law or is
against public policy. 10
(c) Laches and prescription do not apply. The deed of sale being void ab initio, it is in
contemplation of law inexistent and therefore the right of the plaintiff to bring the action for
the declaration of inexistence of such contract does not prescribe. 11
(d) The City of Dagupan is not a purchaser in good faith and for value as the former judicial
administrator, Oscar Maneclang, testified that he was induced by then incumbent Mayor of
the City Councilor Atty. Teofilo Guadiz, Sr. to sell the property; moreover, the City Fiscal
signed as witness to the deed of sale. These lawyers are presumed to know the law.
Not satisfied with the decision, the City of Dagupan appealed to this Court 12 alleging that said decision is
contrary to law, the facts and the evidence on record, and that the amount involved exceeds P500,000.00.
In its Brief, the City of Dagupan submits the following assigned errors:
FIRST ERROR
THE LOWER COURT ERRED IN HOLDING THAT THE SALE EXECUTED BY THE JUDICIAL
ADMINISTRATOR TO THE CITY OF DAGUPAN IS NULL AND VOID AB INITIO.
SECOND ERROR
THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF IS NOT IN ESTOPPEL FROM
ASSAILING THE LEGALITY OF THE SALE.
THIRD ERROR
THE LOWER COURT ERRED IN HOLDING THAT THE INSTANT ACTION IS NOT BARRED BY
LACHES AND PRESCRIPTION.
FOURTH ERROR
THE LOWER COURT ERRED IN DECLARING THAT DEFENDANT CITY OF DAGUPAN IS NOT A
PURCHASER IN GOOD FAITH AND FOR VALUE.
FIFTH ERROR
THE LOWER COURT ERRED IN ORDERING DEFENDANT CITY OF DAGUPAN TO PAY THE
PLAINTIFF THE SUM OF P584,602.20 AS ACCUMULATED RENTALS OR REASONABLE VALUE OF
(sic) THE USE OF THE PROPERTY IN QUESTION FROM OCTOBER 4, 1952 UP TO THE FILING OF
THE COMPLAINT IN 1965, PLUS INTEREST THEREON AT THE RATE OF 6% PER ANNUM FROM
THE LATER DATE.
SIXTH ERROR
THE LOWER COURT ERRED IN ORDERING THE DEFENDANT CITY OF DAGUPAN TO PAY A
MONTHLY RENTAL OR REASONABLE VALUE OF (sic) ITS OCCUPATION OF THE PREMISES IN
THE AMOUNT OF P3,747,45 FROM OCTOBER 9, 1965 UP TO THE DATE THE POSSESSION OF
THE PREMISES IS DELIVERED TO THE PLAINTIFF BY SAID DEFENDANT.
We shall consider these assigned errors sequentially.
1. In support of the first, appellant maintains that notice of the application for authority to sell was given to
Severo Maneclang, surviving spouse of Margarita. As the designated legal representative of the minor
children in accordance with Article 320 of the Civil Code, notice to him is deemed sufficient notice to the
latter; moreover, after Oscar Maneclang signed the deed of sale 13 in his capacity as judicial administrator,
he "sent copies of his annual report and the deed of sale to Severo Maneclang, and his brothers Hector
Maneclang and Oscar Maneclang and sister Amanda Maneclang, all of legal ages (sic), while the other
minor heirs received theirs through his lawyer." 14 Besides, per Flores vs. Ang Bansing, 15 the sale of
property by the judicial administrator cannot be set aside on the sole ground of lack of notice.
These contentions are without merit.

Article 320 of the Civil Code does not apply. While the petition for authority to sell was filed on 2
September 1949, the Civil Code took effect only on 30 August 1950. 16 Thus, the governing law at the time
of the filing of the petition was Article 159 of the Civil Code of Spain which provides as follows:
The father, or in his default, the mother, shall be the legal administrator of the property of
the children who are subject to parental authority.
However, the provisions of the Code of Civil Procedure on guardianship impliedly repealed those of the Civil
Code relating to that portion of the patria potestad (parental authority) which gave to the parents the
administration and usufruct of their minor children's property; said parents were however entitled, under
normal conditions, to the custody and care of the persons of their minor children. 17
Article 320 of the present Civil Code, taken from the aforesaid Article 159, incorporates the amendment
that if the property under administration is worth more than two thousand pesos (P2,000.00), the father or
the mother shall give a bond subject to the approval of the Court of First Instance. This provision then
restores the old rule 18 which made the father or mother, as such, the administrator of the child's property.
Be that as it may, it does not follow that for purposes of complying with the requirement of notice under
Rule 89 of the Rules of the Court, notice to the father is notice to the children. Sections 2, 4 and 7 of said
Rule state explicitly that the notice, which must be in be writing, must be given to the heirs, devisees, and
legatees and that the court shall fix a time and place for hearing such petition and cause notice to be
given to the interested parties.
There can be no dispute that if the heirs were duly represented by counsel or by a guardian ad litem in the
case of the minors, the notice may be given to such counsel or guardian ad litem. In this case, however,
only the surviving spouse, Severo Maneclang, was notified through his counsel. Two of the heirs, Hector
Maneclang and Oscar Maneclang, who were then of legal age, were not represented by counsel. The
remaining seven (7) children were still minors with no guardian ad litem having been appointed to
represent them. Obviously then, the requirement of notice was not satisfied. The requisite set forth in the
aforesaid sections of Rule 89 are mandatory and essential. Without them, the authority to sell, the sale
itself and the order approving it would be null and void ab initio. 19 The reason behind this requirement is
that the heirs, as the presumptive owners 20 since they succeed to all the rights and obligations of the
deceased from the moment of the latter's death, 21 are the persons directly affected by the sale or
mortage and therefore cannot be deprived of the property except in the manner provided by law.
Consequently, for want of notice to the children, the Order of 9 September 1949 granting the application,
the sale in question of 4 October 1952 and the Order of 15 March 1954 approving the sale are all void ab
initio as against said children. Severo Maneclang, however, stands on different ground altogether. Having
been duly notified of the application, he was bound by the said order, sale and approval of the latter.
However, the only interest which Severino Maneclang would have over the property is his right of usufruct
which is equal to that corresponding by way of legitime pertaining to each of the surviving children
pursuant to Article 834 of the Civil Code of Spain, the governing law at that time since Margarita Suri
Santos died before the effectivity of the Civil Code of the Philippines.
2 Estoppel is unavailable as an argument against the administratrix of the estate and against the children.
As to the former, this Court, in Boaga vs. Soler, supra, reiterated the rule "that a decedent's
representative is not estopped to question the validity of his own void deed purporting to convey land; 22
and if this be true of the administrator as to his own acts, a fortiori, his successor can not be estopped to
question the acts of his predecessor are not conformable to law." 23 Not being the party who petitioned the
court for authority to sell and who executed the sale, she cannot be held liable for any act or omission
which could give rise to estoppel. Under Article 1431 of the Civil Code, through estoppel an admission or
representation is rendered conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon. In estoppel by pais, as related to the party sought to be estopped, it is
necessary that there be a concurrence of the following requisites: (a) conduct amounting to false
representation or concealment of material facts or at least calculated to convey the impression that the
facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (b)
intent, or at least expectation that this conduct shall be acted upon, or at least influenced by the other
party; and (c) knowledge, actual or constructive of the actual facts. 24 In estoppel by conduct, on the other
hand, (a) there must have been a representation or concealment of material facts; (c) the party to whom it
was made must have been ignorant of the truth of the matter; and (d) it must have been made with the
intention that the other party would act upon it. 25
As to the latter, considering that, except as to Oscar Maneclang who executed the deed of sale in his
capacity as judicial administrator, the rest of the heirs did not participate in such sale, and considering
further that the action was filed solely by the administratrix without the children being impleaded as
parties plaintiffs or intervenors, there is neither rhyme nor reason to hold these heirs in estoppel. For
having executed the deed of sale, Oscar Maneclang is deemed to have assented to both the motion for
and the actual order granting the authority to sell. Estoppel operates solely against him.

3 As to prescription, this Court ruled in the Boaga case that "[a]ctions to declare the inexsistence of
contracts do not prescribe (Art. 1410, N.C.C.), a principle applied even before the effectivity of the new
Civil Code (Eugenio, et al. vs. Perdido, et al., supra, citing Tipton vs. Velasco, 6 Phil. 67, and Sabas vs.
Germa , 66 Phil. 471 )."
4. Laches is different from prescription. As the court held in Nielsen & Co. Inc . vs. Lepanto Consolidated
Mining Co., 26 the defense of laches applies independently of prescription. While prescription is concerned
with the fact of delay, laches is concerned with the effect of delay. Prescription is a matter of time; laches
is principally a question of inequity of permitting a claim to be enforced, this inequity being founded on
some change in the condition of the property or the relation of the parties. Prescription is statutory; laches
is not. Laches applies in equity, whereas prescription applies at law. Prescription is based on fixed time,
laches is not.
The essential elements of laches are the following: (1) conduct on the part of the defendant, or of one
under whom he claims, giving rise to the situation of which complaint is made and for which the complaint
seeks a remedy; (2) delay in asserting the complainant's rights, the complainant having been afforded an
opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the
complainant would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant
in the event relief is accorded to the complainant, or the suit is not held barred. 27
In the instant case, from time the deed of sale in favor of the City of Dagupan was executed on 4 October
1952, up to the time of the filing of the complaint for annulment on 28 September 1965, twelve (12) years,
ten (10) months and twenty-four (24) days had elapsed.
The respective ages of the children of Margarita Suri Santos on these two dates were, more or less, as
follows:
Upon
execution
of the deed of sale of the complaint
Hector
Cesar
Oscar
Amanda
Adelaida
Linda
Priscila
Natividad
Teresita Maneclang 7 20

Maneclang
Maneclang
Maneclang
Maneclang
Maneclang
Maneclang
Maneclang
Maneclang

At

the

26
24
22
21
18
12
11
8

filing

39
37
35
34
31
25
24
20

It is an undisputed fact that the City of Dagupan immediately took possession of the property and
constructed thereon a public market; such possession was open, uninterrupted and continuous. Obviously,
Hector, Cesar, Oscar and Amanda were already of legal age when the deed of sale was executed. As it was
Oscar who executed the deed of sale, he cannot be expected to renounce his own act. With respect to
Hector, Cesar and Amanda, they should have taken immediate steps to protect their rights. Their failure to
do so for thirteen (13) years amounted to such inaction and delay as to constitute laches. This conclusion,
however, cannot apply to the rest of the children who were then minors and not represented by any
legal representative. They could not have filed an action to protect their interests; hence, neither delay nor
negligence could be attributed to them as a basis for laches. Accordingly, the estate is entitled to recover
5/9 of the questioned property.
5. In ruling out good faith, the trial court took into account the testimony of Oscar Maneclang to the effect
that it was Mayor Fernandez of Dagupan City and Councilor Teofilo Guadiz, Sr., both lawyers, who induced
him to sell the property and that the execution of the sale was witnessed by the City Fiscal.
We are unable to agree.
While the order granting the motion for authority to sell was actually issued on 9 September 1949, the
same was secured during the incumbency of the then judicial administrator Pedro Feliciano. Even if it is to
be assumed that Mayor Fernandez and Councilor Guadiz induced Oscar Maneclang to sell the property, the
fact remains that there was already the order authorizing the sale. Having been issued by a Judge who was
lawfully appointed to his position, he was disputably presumed to have acted in the lawful exercise of
jurisdiction and that his official duty was regularly performed. 28 It was not incumbent upon them to go
beyond the order to find out if indeed there was a valid motion for authority to sell. Otherwise, no order of
any court can be relied upon by the parties. Under Article 526 of the Civil Code, a possessor in good faith is
one who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it;
furthermore, mistake upon a doubtful or difficult question of law may be the basis of good faith. It implies
freedom from knowledge and circumstances which ought to put a person on inquiry. 29 We find no
circumstance in this case to have alerted the vendee, the City of Dagupan, to a possible flaw or defect in

the authority of the judicial administrator to sell the property. Since good faith is always presumed, and
upon him who alleges bad faith on the part of the possessor rests the burden of proof, 30 it was incumbent
upon the administrator to established such proof, which We find to be wanting. However, Article 528 of the
Civil Code provides that: "Possession acquired in good faith does not lose this character except in the case
and from the moment facts exist which show that the possessor is not unaware that he possesses the
thing improperly or wrongfully." The filing of a case alleging bad faith on the part of a vendee gives cause
for cessation of good faith.
In Tacas vs. Tobon, 31 this Court held that if there are no other facts from which the interruption of good
faith may be determined, and an action is filed to recover possession, good faith ceases from the date of
receipt of the summons to appear at the trial and if such date does not appear in the record, that of the
filing of the answer would control. 32
The date of service of summons to the City of Dagupan in Civil Case No. D-1785 is not clear from the
record. Its Answer, however, was filed on 5 November 1965. Accordingly, its possession in good faith must
be considered to have lasted up to that date. As a possessor in good faith, it was entitled to all the fruits of
the property and was under no obligation to pay rental to the intestate of Margarita for the use thereof.
Under Article 544 of the Civil Code, a possessor in good faith is entitled to the fruits received before the
possession is legally interrupted. Thus, the trial court committed an error when it ordered the City of
Dagupan to pay accumulated rentals in the amount of P584,602.20 from 4 October 1952 up to the filing of
the complaint.
6. However, upon the filing of the Answer, the City of Dagupan already became a possessor in bad faith.
This brings Us to the issue of reasonable rentals, which the trial court fixed at P3,747.45 a month. The
basis thereof is the monthly earnings of the city from the lessees of the market stalls inside the Perez
Boulevard Supermarket. The lesses were paying rental at the rate of P0.83 per square meter. Appellant
maintains that this is both unfair and unjust. The property in question is located near the Chinese
cemetery and at the time of the questioned sale, it had no access to the national road, was located "in the
hinterland" and, as admitted by the former judicial administrator, Oscar Maneclang, the persons who built
houses thereon prior to the sale paid only P6.00 to P8.00 as monthly rentals and the total income from
them amounted only to P40.00 a month. Appellant contends that it is this income which should be made
the basis for determining the reasonable rental for the use of the property.
There is merit in this contention since indeed, if the rental value of the property had increased, it would be
because of the construction by the City of Dagupan of the public market and not as a consequence of any
act imputable to the intestate estate. It cannot, however, be denied that considering that the property is
located within the city, its value would never decrease; neither can it be asserted that its price remained
constant. On the contrary, the land appreciated in value at least annually, if not monthly. It is the opinion
of this Court that the reasonable compensation for the use of the property should be fixed at P1,000.00 a
month. Taking into account the fact that Severo Maneclang, insofar as his usufructuary right is concerned,
but only until his death, is precluded from assailing the sale, having been properly notified of the motion
for authority to sell and considering further that the heirs, Hector, Cesar, Oscar and Amanda, all surnamed
Maneclang, are, as discussed above, barred by laches, only those portions of the monthly rentals which
correspond to the presumptive shares of Adelaida, Linda, Priscila, Natividad and Teresita, all surnamed
Maneclang, to the extent untouched by the usufructuary right of Severo Maneclang, should be paid by the
City of Dagupan. There is no showing as to when Severo Maneclang died; this date of death is necessary to
be able to determine the cessation of his usufructuary right and the commencement of the full enjoyment
of the fruits of the property by the unaffected heirs. Under the circumstances, and for facility of
computation, We hereby fix the presumptive shares in the rentals of the aforenamed unaffected heirs at
P500.00 a month, or at P100.00 each, effective 5 November 1965 until the City of Dagupan shall have
effectively delivered to the intestate estate 5/9 of the property in question. The latter, however, shall
reimburse the City of Dagupan of that portion of the real estate taxes it had paid on the land
corresponding to 5/9 of the lot commencing from taxable year 1965 until said 5/9 part is effectively
delivered to the intestate estate.
Pursuant to Article 546 of the Civil Code, the City of Dagupan may retain possession of the property until it
shall have been fully reimbursed the value of the building in the amount of P100,000.00 and 5/9 of the
purchase price amounting to P6,493.05
WHEREFORE, judgment is hereby rendered AFFIRMING the decision in all respects, except to the extent as
above modified. As modified, (a) the sale in favor of the City of Dagupan, executed on 4 October 1952
(Exhibit "F"), is hereby declared null and void; however, by reason of estoppel and laches as abovestated,
only 5/9 of the subject property representing the presumptive shares of Adelaida, Linda, Priscila, Natividad
and Teresita, all surnamed Maneclang, may be recovered; (b) subject, however, to its right to retain the
property until it shall have been refunded the amounts of P100,000.00 and P6,493.05, the City of Dagupan
is hereby ordered to reconvey to the intestate estate of Margarita Suri Santos 5/9 of the property in
question, for which purpose said parties shall cause the appropriate partition thereof, expenses for which
shall be borne by them proportionately; and (c) the City of Dagupan is further ordered to pay reasonable
compensation for the use of 5/9 of the property in question at the rate of P500.00 a month from 5

November 1965 until it shall have effectively delivered the possession of the property to the intestate
estate of Margarita Suri Santos. Upon the other hand, said intestate estate is hereby ordered to refund to
the City of Dagupan that portion of the real estate taxes the latter had paid for the lot corresponding to 5/9
thereof effective taxable year 1965 and until the latter shall have delivered to said intestate estate. SO
ORDERED.
[G.R. No. 129428. February 27, 2003]
BENJAMIN NAVARRO and ROSITA FORTEA, petitioners, vs. SECOND LAGUNA DEVELOPMENT
BANK, and SPOUSES ISAAC GUZMAN and VILMA ESPORLAS, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari[1] assailing the Decision[2] of the Court of Appeals dated
April 21, 1997 in CA-G.R. CV No. 44240 affirming with modification the Decision of the Regional Trial Court
(RTC), Branch 148, Makati City in Civil Case No. 90-849, Spouses Benjamin Navarro and Rosita Fortea vs.
Second Laguna Development Bank, spouses Domalito Velasco and Esther Navarro, Luciana Navarro and
spouses Isaac Guzman and Vilma Esporlas, for annulment of foreclosure of mortgage and consolidation of
ownership and damages.
Subject of this suit is the 1/6 portion of a parcel of land located in Alabang, Muntinlupa, known as Lot No.
1513-A, Plan Psd-51043, consisting of 345 square meters and covered by TCT No. (244200) 114525 of the
Registry of Deeds of Makati City.
Records show that the late Catalino Navarro and his wife Consuelo Hernandez originally owned Lot No.
1513-A. On December 4, 1968, they sold 5/6 of the unsegregated portion of the lot to their children,
namely, Leticia, Esther, Benjamin, Luciana and Leoniza, all surnamed Navarro. By virtue of the sale, TCT
No. 244200 was issued in their names. Spouses Benjamin and Rosita Navarro, herein petitioners, are listed
therein as co-owners of the property.
On March 18, 1978, without the knowledge and consent of petitioners, spouses Donalito Velasco and
Esther Navarro, conspiring with the latters sister Luciana Navarro, executed a falsified Deed of Absolute
Sale wherein they made it appear that the entire lot was sold to said spouses Velasco for P35,000.00. TCT
No. 244200 was thus cancelled and in lieu thereof, TCT No. 114526 was issued in the names of spouses
Velasco. Subsequently, they mortgaged the property to respondent Second Laguna Development Bank to
secure payment of a loan.
On June 30, 1987, upon failure of spouses Velasco to pay their loan, respondent bank had the mortgage
foreclosed. On August 8, 1988 and January 5, 1990, petitioners, introducing themselves as attorneys-infact of Esther Navarro-Velasco, wrote respondent bank, offering to redeem the property for P450,000.00.
However, they failed to do so. Hence, ownership thereof was consolidated in the name of respondent bank
under TCT No. 168230 issued on February 1, 1990.
On March 26, 1990, petitioners filed with the RTC a complaint against respondent bank and spouses
Velasco (docketed as Civil Case No. 90-849) praying for the (a) annulment of the mortgage; (b)
cancellation of TCT No. 168230 in the name of respondent bank; and (c) award of damages and attorneys
fees. In their complaint, petitioners alleged that the sale of the lot with respect to their 1/6 share (59
square meters) is void ab initio considering that their signatures appearing in the Deed of Absolute Sale
dated March 18, 1978 were falsified. Consequently, the mortgage contract involving their share executed
by spouses Velasco and respondent bank is likewise void.
On April 3, 1990, respondent bank sold the lot to respondent spouses Isaac Guzman and Vilma Esporlas
and on May 18, 1990, TCT No. 169929[3] was issued in their names. Thereupon, petitioners impleaded
spouses Guzman as additional defendants in Civil Case No. 90-849. Petitioners alleged that said spouses
were purchasers in bad faith because they knew of the pending litigation concerning the property.
On July 29, 1991, the trial court declared spouses Velasco in default for their failure to file an answer.
On September 29, 1993, the trial court rendered its Decision[4] dismissing petitioners complaint;
upholding the validity of the foreclosure of mortgage and declaring respondent spouses Guzman the lawful
owners of the property; ordering petitioners to pay said spouses P50,000.00 as actual damages,
P30,000.00 as moral damages and P35,000.00 as attorneys fees; ordering petitioners to pay respondent
bank P25,000.00 as attorneys fees; and ordering spouses Velasco to pay petitioners P268,000.00
corresponding to the value of the latters 1/6 share in the property and P20,000.00 as attorneys fees.
On appeal, the Court of Appeals affirmed with modification the RTC decision, thus:

WHEREFORE, the decision appealed from is hereby MODIFIED by deleting the awards of actual and moral
damages as well as attorneys fees in favor of defendant spouses Vilma Esporlas Guzman and Isaac
Guzman, and the award of attorneys fees in favor of defendant Second Laguna Development Bank.
With the above modifications, the judgment below is AFFIRMED in all other respects.
No pronouncement as to costs.
SO ORDERED.[5]
The Court of Appeals ratiocinated as follows:
Inevitably, the core of the controversy is the determination of whether or not defendant spouses Vilma
Esporlas and Isaac Guzman are purchasers in good faith.
Apart from appellants bare assertion, we find no evidence to establish appellees bad faith. It is settled
jurisprudence that whoever alleges bad faith in any transaction must substantiate his allegation, since it is
presumed that a person takes ordinary care of his concerns and that private transactions have been
entered in good faith.
Clearly, we find appellants wanting in this respect.
In this connection, it is essential to point out that prior to the foreclosure sale, appellants had the
opportunity to object to the validity of the mortgage over the property in controversy.
It is beyond dispute, as disclosed by evidence, that on June 4, 1986, appellant Benjamin Navarro wrote a
certain Oscar of defendant-appellee bank, asking for the Statement of Accounts of defendant Esther
Navarro.
On August 8, 1988, appellant spouses wrote defendant-appellee bank, introducing themselves as the
attorneys-in-fact of defendant Esther Navarro.
Again, on January 5, 1990, appellant Benjamin Valerio (believed to be Benjamin Navarro by the court a
quo per his signature) wrote the Far East Bank & Trust Company, the owner of defendant bank, requesting
the latter to allow redemption of the land for (P450,000.00).
On all these occasions, appellants did not even bother to question the validity of the purchasers title over
the property. Hence, we agree with the court a quo that these acts of appellants were tainted with laches
and estoppel. They failed for an unreasonable length of time to do that which by exercising due diligence
could or should have been done earlier. They neglected or omitted to assert their right within a time
reasonable under the premises, thereby warranting a presumption that they have abandoned such right.
However, we find no sufficient justification for the awards of actual and moral damages as well as
attorneys fees by the court a quo.
Needless to emphasize, actual damages refer to those recoverable because of pecuniary loss, which
include the value of the loss suffered and unrealized profits (8 Manresa 100). Actual damages must be
proved and the amount of damages must possess at least some degree of certainty (Tomassi vs. VillaAbrillee, L-7047, August 21, 1958, in relation to Chua Teck Hee vs. Philippine Publishing House, 34 Phil.
447).
Reviewing the records, we find no evidence whatsoever adduced by defendants-appellees to prove the
actual loss suffered by them. All the court a quo did, in awarding actual damages in the amount of
P50,000.00, is to state that defendants-appellees Isaac Guzman and Vilma Esporlas are entitled to actual
damages for they were not able to enjoy their lawfully acquired property. This reason is simply not enough
basis to award actual damages.
As regards the claim for moral damages and attorneys fees, the court a quo likewise erred in awarding
them. In Dela Pena vs. Court of Appeals, 231 SCRA 456, it was held that it is improper to award them on
the sole basis of an action later declared to be unfounded in the absence of deliberate intent to cause
prejudice to the other. No proof has been introduced that the action filed by appellant spouses was
deliberately intended to prejudice defendants-appellees. At the most, what we see here is appellants
legitimate and genuine desire to seek redress through the judicial system and to obtain complete relief by
including spouses Vilma Esporlas and Isaac Guzman and the Second Laguna Development Bank as party
defendants.[6]
Petitioners filed a partial motion for reconsideration of the Court of Appeals Decision but it was denied in
the Resolution[7] dated June 11, 1997.

Hence, the instant petition.

Petitioners contend that the Court of Appeals erred in upholding the validity of the sale of the property
between respondent bank and spouses Guzman and declaring that they are estopped from questioning the
validity of the mortgage and its foreclosure.
In their separate comments, respondents practically reiterated the findings and conclusion of the Court of
Appeals in its assailed Decision.
The petition lacks merit.
In Rural Bank of Compostela vs. Court of Appeals,[8] this Court held that the rule that persons dealing with
registered lands can rely solely on the certificate of title does not apply to banks because their business is
one affected with public interest, keeping in trust money belonging to their depositors, which they should
guard against loss by not committing any act of negligence which amounts to lack of good faith. Thus, in
Cruz vs. Bancom Finance Corporation,[9] this Court stressed that a mortgagee-bank is expected to exercise
greater care and prudence before entering into a mortgage contract, even those involving registered
lands. The ascertainment of the status or condition of a property offered to it as security for a loan must
be a standard and indispensable part of its operations.
In entering into the mortgage contract with spouses Velasco, there was no indication that respondent bank
acted in bad faith. Spouses Velasco presented to the bank their TCT No. 114256 showing they were then
the absolute owners thereof. Indeed, there were no circumstances or indications that aroused respondent
banks suspicion that the title was defective.
As to the validity of the sale of the property to respondent spouses Guzman, this Court agrees with the
finding of the Court of Appeals that petitioners are estopped from assailing the same.
Article 1431 of the Civil Code states that through estoppel an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as against the person relying
thereon.
A person, who by his deed or conduct has induced another to act in a particular manner, is barred from
adopting an inconsistent position, attitude or course of conduct that thereby causes loss or injury to
another.[10]
It bears reiterating that in their two letters to respondent bank earlier mentioned, petitioners did not state
that spouses Velasco falsified their signatures appearing in the Deed of Absolute Sale. Nor did they
question the validity of the mortgage and its foreclosure. Indeed, those letters could have led respondent
bank to believe that petitioners recognized the validity of the Deed of Absolute Sale and the mortgage as
well as its subsequent foreclosure.
WHEREFORE, the instant petition is DISMISSED. The challenged Decision dated April 21, 1997 of the Court
of Appeals in CA-G.R. CV No. 44240 is AFFIRMED.
SO ORDERED.

G.R. No. 74553 June 8, 1989

SERVICEWIDE
SPECIALISTS,
INCORPORATED,
petitioner,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT, GALICANO SITON AND JUDGE JUSTINIANO
DE DUMO respondents.
MEDIALDEA, J.:
This is a petition for review on certiorari of a decision of the Intermediate Appellate Court (now Court of
Appeals) in ACG.R. CV No. 03876 affirming in toto the decision of the Regional Trial Court of Manila in Civil
Case No. 82-4364 entitled, "Servicewide Specialists, Inc. vs. Galicano Siton and John Doe."
The antecedent facts in this case as found by the lower court are as follows:
The private respondent Galicano Siton purchased from Car Traders Philippines, Inc. a vehicle described as
Mitsubishi Celeste two-door with air-conditioning, Engine 2M-62799, Serial No. A73-2652 and paid P
25,000.00 as downpayment of the price. The remaining balance of P 68,400.00, includes not only the
remaining principal obligation but also advance interests and premiums for motor vehicle insurance
policies.

On August 14, 1979, Siton executed a promissory note in favor of Car Traders Philippines, Inc. expressly
stipulating that the face value of the note which is P 68,400. 00, shall "be payable, without need of notice
of demand, in installments of the amounts following and at the dates hereinafter set forth, to wit: P
1,900.00 monthly for 36 months due and payable on the 14th day of each month starting September 14,
1979, thru and inclusive of August 14, 1982" (p. 84, Rollo). There are additional stipulations in the
Promissory Note consisting of, among others:
1 Interest at the rate of 14% per annum to be added on each unpaid installment from
maturity;
2 If default is made in the payment of any of the installments or interest thereon, the total
principal sum then remaining unpaid, together with accrued interest thereon shall at once
become due and demandable;
3 In case of default, and attorney's services are availed of, there shall be added a sum equal
to 25% of the total sum due thereon to cover attorney's fees, aside from expenses of
collection and legal costs (p. 84, Rollo).
As further security, Siton executed a Chattel Mortgage over the subject motor vehicle in favor of Car
Traders Philippines, Inc. (pp. 85-88, Rollo). The Chattel Mortgage Contract provides additional stipulations,
such as: a) the waiver by the mortgagor of his rights under Art. 1252 of the Civil Code to designate the
application of his payments and authorize the mortgagee or its assigns to apply such payments to either
his promissory note or to any of his existing obligations to the mortgagee or its assigns at the latter's
discretion; and b) concerning the insurance of the subject motor vehicle, the mortgagor is under obligation
to secure the necessary policy in an amount not less than the outstanding balance of the mortgage
obligation and that loss thereof shall be made payable to the mortgagee or its assigns as its interest may
appear, with the further obligation of the mortgagor to deliver the policy to the mortgagee. The mortgagor
further agrees that in default of his effecting or renewing the insurance and delivering the policy as
endorsed to the mortgagee within five (5) days after the execution of the mortgage or the expiry date of
the insurance, the mortgagee may, at his option but without any obligation to do so, effect such insurance
or obtain such renewal for the account of the mortgagor.
The credit covered by the promissory note and chattel mortgage executed by respondent Galicano Siton
was first assigned by Car Traders Philippines, Inc. in favor of Filinvest Credit Corporation. Subsequently,
Filinvest Credit Corporation likewise reassigned said credit in favor of petitioner Servicewide Specialists,
Inc. and respondent Siton was advised of this second assignment.
Alleging that Siton failed to pay the part of the installment which fell due on November 2, 1981 as well as
the subsequent installments which fell due on December 2, 1981 and January 2, 1982, respectively, the
petitioner filed this action against Galicano Siton and "John Doe."
The relief sought by the plaintiff is a Writ of Replevin over subject motor vehicle or, in the alternative, for a
sum of money of P 20,319.42 plus interest thereon at the rate of 14% per annum from January 11, 1982
until fully paid; and in either case, for defendants to pay certain sum of money for attorney's fees,
liquidated damages, bonding fees and other expenses incurred in the seizure of the motor vehicle plus
costs of suit.
After the service of summons, Justiniano de Dumo, identifying himself as the "John Doe" in the Complaint,
inasmuch as he is in possession of the subject vehicle, filed his Answer with Counterclaim and with
Opposition to the prayer for a Writ of Replevin. Said defendant, alleged the fact that he has bought the
motor vehicle from Galicano Siton on November 24, 1979; that as such successor, he stepped into the
rights and obligations of the seller; that he has religiously paid the installments as stipulated upon in the
promissory note. He also manifested that the Answer he has filed in his behalf should likewise serve as a
responsive pleading for his co-defendant Galicano Siton.
On January 12, 1984, the Regional Trial Court rendered a decision, the dispositive portion of which states:
WHEREFORE, judgment is hereby rendered as follows:
1. Denying the issuance of a Writ of Replevin in this case;
2. Ordering defendants to pay jointly and severally, the plaintiff, the remaining balance on
the motor vehicle reckoned as of January 25, 1982, without additional interest and charges,
and the same to be paid by installments, per the terms of the Promissory Note, payable on
the 14th day of each month starting the month after this Decision shall have become final,
until the full payment of the remaining obligation;

3. The Chattel Mortgage contract is deemed to cover the obligation petition stated in par. 2,
supra, without prejudice to the parties, including defendant de Dumo, to now execute a new
promissory note and/or chattel mortgage contract;
4. Ordering defendants to pay, jointly and severally, the sum of another P 3,859.90 to the
plaintiff by way of refunding the premium payments in the past on insurance policies over
subject car;
5. Each party shall bear his own expenses and attorney's fees; and
6. The claim of one party against the other(s) for damages, and vice-versa are hereby
denied and dismissed. There is no pronouncement as to costs.
SO ORDERED. (pp. 95-96, Rollo)
Not satisfied with the decision of the trial court, the petitioner appealed to the Intermediate Appellate
Court.
On April 25, 1986, the respondent Appellate Court rendered judgment affirming in toto the decision of the
trial court. The dispositive portion of the judgment states:
WHEREFORE, the appealed judgment is in full accord with the evidence and the law is
hereby therefore affirmed in all its parts. Costs against plaintiff-appellant.
SO ORDERED. (p. 42, Rollo).
Hence, the instant petition was filed, praying for a reversal of the above-mentioned decision in favor of
private respondents, with the petitioner assigning the following errors:
2.1 The Honorable Respondent, the Intermediate Appellate Court erred and gravely abused
its discretion in concluding that there was a valid sale of the mortgaged vehicle between
Siton and De Dumo;
2.2 The Honorable Respondent, the Intermediate Appellate Court erred and gravely abused
its discretion in holding that the petitioner (plaintiff) and its predecessors-in-interest are
bound by the questionable and invalid unnotarized Deed of Sale between Siton and De
Dumo, even as neither petitioner (plaintiff) nor its predecessors-in-interest had knowledge
nor had they given their written or verbal consent thereto;
2.3 The Honorable Respondent, the Intermediate Appellate Court erred and gravely abused
its discretion in ruling that the mortgagee (petitioner) has the obligation to make demands
to De Dumo for payment on the Promissory Note when De Dumo is not privy thereto;
2.4 The Honorable Respondent, the Intermediate Appellate Court erred and acted with grave
abuse of discretion in refusing to issue the Writ of Replevin despite due compliance by
petitioner of the requirements of Rule 60, Sections 1 and 2 of REVISED RULES OF COURT;
2.5 The Honorable Respondent, the Intermediate Appellate Court acted with grave abuse of
discretion in ruling that petitioner (creditor-mortgagee) is obliged to inform respondent De
Dumo (not privy to the mortgage) to submit the insurance policy over the mortgaged "res"
and to demand the payor-third-party (De Dumo) to redeem his rubber check; (pp. 4-5, Rollo).
In its first assigned error, petitioner alleges that the sale of the mortgaged vehicle between the mortgagor
Siton and De Dumo was void, as the sale is prohibited under the provisions of the Deed of Chattel
Mortgage, the Chattel Mortgage Act (Act 1508) and the Revised Penal Code. The Deed of Chattel Mortgage
executed by the petitioner and Siton stipulates:
The Mortgagor shall not sell, mortgage or in any other way, encumber or dispose of the
property herein mortgaged without the previous written consent of the Mortgagee. (p. 85,
Rollo).
The rule is settled that the chattel mortgagor continues to be the owner of the property, and therefore, has
the power to alienate the same; however, he is obliged under pain of penal liability, to secure the written
consent of the mortgagee. (Francisco, Vicente, Jr., Revised Rules of Court in the Philippines, (1972), Volume
IV-B Part I, p. 525). Thus, the instruments of mortgage are binding, while they subsist, not only upon the
parties executing them but also upon those who later, by purchase or otherwise, acquire the properties
referred to therein.

The absence of the written consent of the mortgagee to the sale of the mortgaged property in favor of a
third person, therefore, affects not the validity of the sale but only the penal liability of the mortgagor
under the Revised Penal Code and the binding effect of such sale on the mortgagee under the Deed of
Chattel Mortgage.
Anent its second, third and fifth assigned errors, petitioner submits that it is not bound by the deed of sale
made by Siton in favor of De Dumo, as neither petitioner nor its predecessor has given their written or
verbal consent thereto pursuant to the Deed of Chattel Mortgage.
On this matter, the appellate court upheld the findings of the trial court, as follows, to wit:
The first issue is whether or not the sale and transfer of the motor vehicle, subject matter of
the chattel mortgage, made by Siton in favor of Atty. de Dumo is illegal and violative of the
Chattel Mortgage Law. The supposition is that if it were illegal, then plaintiff has all the right
to file this action and to foreclose on the chattel mortgage. Both defendants testified that,
before the projected sale, they went to a certain. Atty. Villa of Filinvest Credit Corporation
advising the latter of the intended sale and transfer. Defendants were accordingly advised
that the verbal information given to the corporation would suffice, and that it would be
tedious and impractical to effect a change of transfer of ownership as that would require a
new credit investigation as to the capacity and worthiness of Atty. De Dumo, being the new
debtor. The further suggestion given by Atty. Villa is that the account should be maintained
in the name of Galicano Siton. Plaintiff claims that it and its predecessor had never been
notified of the sale much less were they notified in writing as required by the contract. On
this particular issue, it would really appear that, since the transfer, it was Atty. de Dumo who
had been paying said account, almost invariably with his personal checks. In fact, one of the
checks that supposedly bounced, marked Exhibit J and the relative receipt as Exhibit 16, was
Atty. de Dumo's personal check. Note that plaintiff has been accepting such payments by
defendant de Dumo. It would appear, therefore, that there was an implied acceptance by the
plaintiff and its predecessor of the transfer. Another reasonable conclusion is that, while
there was failure on the part of defendants to comply strictly and literaly with their contract,
there was substantial compliance therewith. (pp. 92-93, Rollo)
We agree with the aforequoted findings and conclusions of the lower court which were affirmed on appeal
by the Court of Appeals. The conclusions and findings of facts by the trial court are entitled to great weight
and will not be disturbed on appeal unless for strong and cogent reasons because the trial court is in a
better position to examine real evidence as well as to observe the demeanor of witnesses while testifying
on the case. (Macua vs. Intermediate Appellate Court, No. L-70810, October 26, 1987,155 SCRA 29)
There is no dispute that the Deed of Chattel Mortgage executed between Siton and the petitioner requires
the written consent of the latter as mortgagee in the sale or transfer of the mortgaged vehicle. We cannot
ignore the findings, however, that before the sale, prompt inquiries were made by private respondents with
Filinvest Credit Corporation regarding any possible future sale of the mortgaged property; and that it was
upon the advice of the company's credit lawyer that such a verbal notice is sufficient and that it would be
convenient if the account would remain in the name of the mortgagor Siton.
Even the personal checks of de Dumo were accepted by petitioner as payment of some of the installments
under the promissory note (p. 92, Rollo). If it is true that petitioner has not acquiesced in the sale, then, it
should have inquired as to why de Dumo's checks were being used to pay Siton's obligations.
Based on the foregoing circumstances, the petitioner is bound by its predecessor company's
representations. This is based on the doctrine of estoppel, through which, "an admission or representation
is rendered conclusive upon the person making it, and cannot be denied or disproved as against the
person relying thereon" (Art. 1431, Civil Code). Like the related principles of volenti non lit injuria (consent
to injury), waiver and acquiescence, estoppel finds its origin generally in the equitable notion that one may
not change his position, and profit from his own wrongdoing when he has caused another to rely on his
former representations (Sy vs. Central Bank, No. L-41480, April 30, 1976, 70 SCRA 570).
Further, it is worthy to note that despite the arguments of petitioner that it is not bound by the sale of the
vehicle to de Dumo, and that the latter is a stranger to the transaction between Filinvest and Siton,
nevertheless, it admitted de Dumo's obligation as purchaser of the property when it named the latter as
one of the defendants in the lower court. Petitioner even manifested in its prayer in the appellant's brief
and in the petition before Us, that de Dumo be ordered to pay petitioner, jointly and severally with Siton
the unpaid balance on the promissory note (pp. 32 and 72, Rollo).
In the fourth assigned error by petitioner, the latter claims that the appellate court gravely erred in
upholding the trial court's refusal to issue that Writ of Replevin despite compliance with the requirements
of the Rules. This contention is devoid of merit.

Article 1484 of the New Civil Code prescribes three remedies which a vendor may pursue in a contract of
sale of personal property the price of which is payable in installments, to wit: 1) to exact fulfillment of the
obligation; 2) cancel the sale; and 3) foreclose the mortgage on the thing sold. These remedies are
alternative and the vendor cannot avail of them at the same time.
It is clear from the prayer of petitioner in its brief on appeal to the appellate court that it had chosen the
remedy of fulfillment when it asked the appellate court to order private respondents to pay the remaining
unpaid sums under the promissory note (p. 31, Rollo). By having done so, it has deemed waived the third
remedy of foreclosure, and it cannot therefore ask at the same time for a Writ of Replevin as preparatory
remedy to foreclosure of mortgage. In a similar case, where the vendor filed an action containing three
remedies: to collect the purchase price; to seize the property purchased by suing for replevin and to
foreclose the mortgage executed thereon, We held that such a scheme is not only irregular but is a flagrant
circumvention of the prohibition of the law (Luneta Motor Company vs. Dimagiba No. L-17061, December
30, 1961, 3 SCRA 884).
Finally, the petitioner argues that the judgment of the appellate court was not in accordance with its own
findings and those of the trial court showing private respondents' default in the payment of three monthly
installments as a result of the dishonor of three checks issued as payments; and that as a consequence
thereof, the full amount of the unpaid balance under the promissory note became due and demandable
pursuant to the terms of the promissory note.
This contention is impressed with merit. The findings of the trial court on this issue, which were affirmed by
the appellate court, state, as follows:
The second point of issue is whether or not defendants were in arrears when the complaint
was filed on January 25, 1982. Plaintiff claims that there were three payments by checks
made by defendants, which are ineffective (Art. 1249, Civil Code) as said checks bounced for
insufficient finding. .... The debtor/obligor is allegedly obliged, as per the Chattel Mortgage
Contract, to have the motor vehicle insured and, failing which, the creditor may insure the
same for the account of the debtor. Such payments, therefore, together with the value of the
three checks that had been dishonored, are the reasons for defendants' delinquency. On
defendant's part, more particularly Atty. de Dumo's, they submit that there was no
delinquency as, in fact, defendants have receipts to evidence payment for the months of
November 1981 (Exhibit 18 dated November 3, 1981), December 1981 (Exhibit 17 dated
December 2, 1981), and January, 1982 (Exhibit 30, dated January 5, 1982).
On cross-examination, Atty. de Dumo admitted that really one of his checks (Exhibit J) was
dishonored. There is no evidence on way [or] the other whether said check was replaced
subsequently with a good one. Likewise, there is no clarification in the record as to whether
the two other dishonored checks had been replaced. As to the insurance policies, defendants
claimed on the witness stand that they were the ones who had the vehicle insured, for,
otherwise, defendant de Dumo could not have registered the motor vehicle for the years
1980 up to 1982. Defendants further contend that they complied with their undertaking by
notifying verbally the creditor of that fact. There is no denying the fact however, that the
insurance policies obtained were not endorsed, much less surrendered, to the plaintiff; in
fact such policies were not shown in court to evidence the proper indorsement of the policies
in favor of the creditor. (pp. 93-94, Rollo). (Emphasis supplied)
It is evident from the foregoing findings that the checks issued by the defendants as payment for the
installments for November and December, 1981 and January, 1982 were dishonored and were not shown
to have been replaced. The delivery of promissory notes payable to order, or bills of exchange or other
mercantile documents shall produce the effect of payment only when they have been cashed. (Art. 1249,
Civil Code). When the existence of the debt is fully established by the evidence contained in the record,
the burden of proving that it has been extinguished by payment devolves upon the debtor who offers such
a defense to the claim of the creditor. (Chua Chienco vs. Vargas, 11 Phil. 219). In the absence of any
showing that the aforestated checks were replaced and subsequently cashed, We can only infer that the
monthly installments for November, 1981, December, 1981 and January, 1982 have not been paid. In view
of the above, it is not correct for the appellate court to ignore the evidence on record showing the default
of private respondents in their obligations. The fact that Siton and de Dumo were not advised or notified of
their failure to comply with their obligations under the note and under the Deed of Chattel Mortgage is of
no importance. Article 1169 of the Civil Code provides:
Those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order that delay may exist:
1. When the obligation or the law expressly so declares;

xxx xxx xxx

The promissory note executed by Siton in favor of Car Traders Philippines, Inc. expressly stipulates that the
unpaid balance shall be payable, without need of notice or demand, in fixed monthly installments; and that
if default be made in the payment of any of the installments or interest thereon as and when the same
becomes due and payable as specified above, the total principal sum then remaining unpaid, together with
accrued interest thereon, shall at once become due and payable (p. 84, Rollo). The parties are bound by
this agreement.
In view of the foregoing, We find it correct to hold both the respondents Galicano Siton and Justiniano de
Dumo liable for their obligations to petitioner herein. In the case at bar, the purchase of the car by
respondent de Dumo from respondent Siton does not necessarily imply the extinguishment of the liability
of the latter. Since it was neither established nor shown that Siton was released from responsibility under
the promissory note, the same does not constitute novation by substitution of debtors under Article 1293
of the Civil Code. Likewise, the fact that petitioner company accepts payments from a third person like
respondent de Dumo, who has assumed the obligation, will result merely to the addition of debtors and not
novation. Hence, the creditor may therefore enforce the obligation against both debtors. (Straight vs.
Hashell, 49 Phil. 614; Mata vs. Serra, 47 Phil. 464; McCullough vs. Veloso, 46 Phil. 1; Pacific Commercial vs.
Sotto, 34 Phil. 237). If there is no agreement as to solidarity, the first and new debtors are considered
obligated jointly. (Lopez vs. Court of Appeals, et al., No. L-33157, June 29, 1982, 114 SCRA 671; Dungo vs.
Lopena, et al., L-18377, December 29, 1962, 6 SCRA 1007).
ACCORDINGLY, the petition is GRANTED and the assailed decision of the Court of Appeals dated April 25,
1986 is hereby REVERSED and SET ASIDE, and a new one entered, ordering the private respondents
Galicano Siton and Justiniano de Dumo, jointly to pay to petitioner Servicewide Specialists, Incorporated,
the total sum of the remaining unpaid balance on the promissory note with interest thereon at fourteen
percent per annum from January 25, 1982 until fully paid, as well as stipulated attorney's fees and
liquidated damages; and to reimburse to petitioner the sum of P 3,859.90 for the premium payments on
the insurance policies over the subject vehicle. Costs against private respondents.
SO ORDERED.

SECOND DIVISION
JOSE MARQUES and MAXILITE

G.R. No. 171379

TECHNOLOGIES, INC.,
Petitioners,
- versus FAR EAST BANK AND TRUST COMPANY,
FAR EAST BANK INSURANCE BROKERS,
INC., and MAKATI INSURANCE COMPANY,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
FAR EAST BANK AND TRUST COMPANY G.R. No. 171419
and MAKATI INSURANCE COMPANY,
Petitioners, Present:
CARPIO, J., Chairperson
- versus - BRION,*
PERALTA,
ABAD, and
MENDOZA, JJ.

JOSE MARQUES and MAXILITE Promulgated

TECHNOLOGIES, INC.,
Respondents. January 10, 2011
x-----------------------------------------------------------------------------------------x
DECISION
CARPIO, J.:
The Case
These consolidated petitions for review1 assail the 31 May 2005 Decision2 and the 26 January 2006
Resolution3 of the Court of Appeals-Cebu City in CA-G.R. CV No. 62105. The Court of Appeals affirmed with
modifications the 4 September 1998 Decision4 of the Regional Trial Court of Cebu City, Branch 58, in Civil
Case No. CEB-18979.
The Facts
Maxilite Technologies, Inc. (Maxilite) is a domestic corporation engaged in the importation and trading of
equipment for energy-efficiency systems. Jose N. Marques (Marques) is the President and controlling
stockholder of Maxilite.
Far East Bank and Trust Co. (FEBTC)5 is a local bank which handled the financing and related requirements
of Marques and Maxilite. Marques and Maxilite maintained accounts with FEBTC. Accordingly, FEBTC
financed Maxilites capital and operational requirements through loans secured with properties of Marques
under the latters name. Among Maxilites and Marques transactions with FEBTC were:
a. A straight loan in the name of Jose N. Marques for Maxilite at the original principal amount of P1 million.
This is secured by real estate mortgage. From said original principal amount, the bank increased it by
P300,000.00 about 26 October 1994 to enable the wiping out of Maxilites Trust Receipts Account and
simplify the remaining accounts into straight loan accounts.
b. A straight loan in the name of Maxilite Technologies, Inc. for a principal amount of P2 million. This is
secured with a Real Estate Mortgage of Marques residential property.
c. Master Card transactions covering two (2) Master Card Accounts of Marques, and
d. Local credit card transactions covering one credit card account of Marques.6
Far East Bank Insurance Brokers, Inc. (FEBIBI) is a local insurance brokerage corporation while Makati
Insurance Company7 is a local insurance company. Both companies are subsidiaries of FEBTC.8
On 17 June 1993, Maxilite and Marques entered into a trust receipt transaction with FEBTC, in the sum of
US$80,765.00, for the shipment of various high-technology equipment from the United States,9 with the
merchandise serving as collateral. The foregoing importation was covered by a trust receipt document
signed by Marques on behalf of Maxilite, which pertinently reads:
The undersigned (Marques) further agree(s) to keep said merchandise insured against fire to its full value,
payable to the said bank, at the cost and expense of the undersigned, who hereby further agree(s) to pay
all charges for storage on said merchandise or any or other expenses incurred thereon.
x x x x10
Sometime in August 1993, FEBIBI, upon the advice of FEBTC, facilitated the procurement and processing
from Makati Insurance Company of four separate and independent fire insurance policies over the trust
receipted merchandise: (1) Policy No. BR-F-1016333, issued on 15 September 1993, covering the period 12
August 1993 to 12 November 1993 in the amount of P1,000,000.00;11 (2) Policy No. BR-F-1016888, issued
on 15 September 1993 covering the period 8 September 1993 to 8 December 1993 in the amount of
P605,494.28;12 (3) Policy No. BR-F-1016930, issued on 18 October 1993, covering the period 14 October
1993 to 12 January 1994 in the amount of P527,723.66;13 and (4) Policy No. BR-F-1018392, issued on 14
December 1993, covering the period 1 December 1993 to 1 March 1994 in the amount of P725,000.00.14
Maxilite paid the premiums for these policies through debit arrangement. FEBTC would debit Maxilites
account for the premium payments, as reflected in statements of accounts sent by FEBTC to Maxilite.
On 19 August 1994, Insurance Policy No. 1024439, covering the period 24 June 1994 to 24 June 1995, was
released to cover the trust receipted merchandise. The policy relevantly provides:

2.
This policy including any renewal thereof and/or any endorsement thereon is not in force until the
premium has been fully paid to and duly receipted by the Company in the manner provided herein.
Any supplementary agreement seeking to amend this condition prepared by agent, broker or Company
official, shall be deemed invalid and of no effect.15
Finding that Maxilite failed to pay the insurance premium in the sum of P8,265.60 for Insurance Policy No.
1024439 covering the period 24 June 1994 to 24 June 1995, FEBIBI sent written reminders to FEBTC, dated
19 October 1994,16 24 January 1995,17 and 6 March 1995, to debit Maxilites account.18
On 24 and 26 October 1994, Maxilite fully settled its trust receipt account.
On 9 March 1995, a fire gutted the Aboitiz Sea Transport Building along M.J. Cuenco Avenue, Cebu City,
where Maxilites office and warehouse were located. As a result, Maxilite suffered losses amounting to at
least P2.1 million, which Maxilite claimed against the fire insurance policy with Makati Insurance Company.
Makati Insurance Company denied the fire loss claim on the ground of non-payment of premium. FEBTC
and FEBIBI disclaimed any responsibility for the denial of the claim.
Maxilite and Marques sued FEBTC, FEBIBI, and Makati Insurance Company. Maxilite prayed for (1) actual
damages totaling P2.3 million representing full insurance coverage and business opportunity losses, (2)
moral damages, and (3) exemplary damages.19 On the other hand, Marques sought payment of actual,
moral and exemplary damages, attorneys fees, and litigation expenses. Maxilite and Marques also sought
the issuance of a preliminary injunction or a temporary restraining to enjoin FEBTC from (1) imposing
penalties on their obligations; (2) foreclosing the real estate mortage securing their straight loan accounts;
and (3) initiating actions to collect their obligations.
FEBTC, FEBIBI, and Makati Insurance Company countered that Maxilite and Marques have no cause of
action against them and essentially denied the allegations in the complaint.
The Ruling of the Trial Court
In ruling in favor of Maxilite and Marques, the Regional Trial Court of Cebu City, Branch 58, explained:
Considering the interest of the defendant FEBTC in the property insured, hence, its concern that the
insurance policy therefor has to be effected and enforceable, and considering that the payment of the
premium thereof was the procedure adopted by debiting the plaintiffs account, the Court is of the view
that the non-payment of the premium of the insurance policy in question was due to the fault or
negligence of the defendant FEBTC. What could have happened to the interest of the defendant FEBTC in
the insurance policy in question had the fire occurred prior to the full settlement and payment of plaintiffs
Maxilite trust receipt account? Would defendant FEBTC have tossed the blame on the non-payment of
premium to the plaintiffs?
Although there were reminders by defendant FEBIBI of the non-payment of the premium, the same were
made by said defendant through the defendant FEBTC and not to the plaintiffs directly. Despite said
reminders, the first of which was made on October 19, 1994 when plaintiff Maxilite has sufficient fund in its
trust receipt account, defendant FEBTC did not heed the same and more so did it not care to pay the
premium after the plaintiff Maxilite fully and finally settled its trust receipt account with defendant FEBTC
as the latter has already lost its interest in the insurance policy in question by virtue of said full payment.
But despite the non-payment of the insurance premium, the defendant Makati Insurance did not cancel the
policy in question nor informed plaintiffs of its cancellation if the insurance premium should not be paid.
Just as defendant FEBIBI failed to notify directly the plaintiffs of the said non-payment. Considering the
relationship of the three (3) defendants herein, as undeniably sister companies, the non-payment of the
premium of the insurance policy in question should be imputable to their fault or negligence. Under the
factual milieu in the case at bar, the Court finds it just and equitable to hold said defendants liable to pay
all the consequent damages suffered by the plaintiffs and their liability is solidary (Art. 2194, Civil Code).20
The trial court disposed of the case as follows:
WHEREFORE, premises considered, judgment is hereby rendered ordering the defendants to pay jointly
and severally to the plaintiff Maxilite the sum of Two Million One Hundred Thousand Pesos (P2,100,000.00),
Philippine Currency, representing the full coverage of Insurance Policy No. 1024439 (Exh. A), as actual
damages, plus interest of 12% per annum from filing of Complaint on July 11, 1996 until fully paid, to the
plaintiff Marque[s] the sum of P400,000.00 as moral damages, to both plaintiffs the sum of P500,000.00 as
exemplary damages, the sum of P50,000.00 as attorneys fees, the sum of P23,082.50, representing the
filing fees, as litigation expenses, and to pay the costs.
The counter-claims are hereby dismissed.
The writ of preliminary injunction is hereby made permanent.

SO ORDERED.21
The Ruling of the Court of Appeals
The Court of Appeals affirmed the trial courts decision, with modifications, on the following grounds:
First, the relations among defendants with each other are closely related and so intertwined. The said three
defendants, FEBTC, FEBIBI and MICI, are sister companies. This was never denied by the defendants
themselves.
Second, the insurance coverage was the business of sister companies FEBIBI and Makati Insurance, not
with FEBTC, which has been the bank of plaintiffs which handled the latters financing and related
transactions. Stated a bit differently, defendant FEBTC handled the financing and related requirements of
plaintiffs; defendant FEBIBI on the other hand is an insurance brokerage company of defendant FEBTC,
while Makati Insurance is the insurance (arm) company of both defendants FEBIBI and FEBTC.
Third, defendant FEBTC caused FEBIBI to facilitate the insurance coverage of plaintiffs. FEBIBI then asked
Makati Insurance to issue the subject policy. Makati Insurance delivered the policy to FEBIBI which it tasked
with the collection of premium. FEBIBI in turn delivered the policy to FEBTC from where it sought the
payment of the premiums.
Fourth, it must be noted that the cover note and policy was supposedly issued and made effective on June
24, 1994, when the trust receipt account was still outstanding and the insured merchandise was still
theoretically owned by the bank. Thus, for all intents and purposes, it was to the best interest and
protection of the bank to see to it that the goods were properly covered by insurance.
Fifth, the payment of premium has never been made an issue when the subject policy was still separated
into three. Or even after the said consolidation into one policy (No. 1024439), still, payment of the
premium has never become an issue.
xxxx
For another, if We were to believe defendants claim that the premium for the subject policy was not paid,
then defendants should have cancelled the policy long before. But even up to the time the fire gutted
plaintiffs warehouse in March 1995, defendants acknowledged that the subject policy remained effective.
xxx
Furthermore, there was no notice of cancellation or any communication from defendants sent to plaintiffs
that the policy shall be cancelled because of non-payment of premiums. Thus, the more reasonable and
logical conclusion is that the subject policy was still fully in force because plaintiffs are still paying its
premiums and defendants are collecting the same through debit account.22
The Court of Appeals disposed of the case as follows:
UPON THE VIEW WE TAKE OF THIS CASE, judgment appealed from is hereby MODIFIED in such that:
a. the interest shall be at the rate of six percent (6%) per annum to run from the time of demand on April
11, 1995, in accordance with Article 1589 of the Civil Code, until the finality of this decision;
b. the moral damages of P400,000.00 is reduced to P50,000.00;
c. the exemplary damages of P500,000.00 is reduced to P50,000.00; and
d. the writ of preliminary injunction previously issued lifted and set aside.
In all other respects, judgment appealed from is AFFIRMED. Without pronouncement as to costs.
SO ORDERED.23
Hence, these petitions.
The Issues
In G.R. No. 171379, petitioners assail the Court of Appeals reduction of (1) the interest rate from 12% to
6% per annum to be imposed on respondents liabilities; and (2) the award of moral and exemplary
damages. Petitioners also question the portion of the Court of Appeals judgment allowing FEBTC to
foreclose the real estate mortgage securing petitioners loans and disallowing legal compensation for the
parties mutual obligations.

In G.R. No. 171419, petitioners challenge the Court of Appeals findings that (1) the premium for the
subject insurance policy has in fact been paid; (2) FEBTC, FEBIBI and Makati Insurance Company are jointly
and severally liable to pay respondents the full coverage of the subject insurance policy despite (a) their
separate juridical personalities; (b) the absence of any fault or negligence on their part; and (c)
respondents failure to prove the extent of the alleged loss. Petitioners further impugn the award of
damages and attorneys fees.
The Courts Ruling
The petition in G.R. No. 171319 lacks merit, whereas the petition in G.R. No. 171419 is partially
meritorious.
Essentially, Maxilite and Marques invoke estoppel in claiming against FEBTC, FEBIBI, and Makati Insurance
Company the face value of the insurance policy. In their complaint, Maxilite and Marques alleged they were
led to believe and they in fact believed that the settlement of Maxilites trust receipt account included the
payment of the insurance premium.24 Maxilite and Marques faulted FEBTC if it failed to transmit the
premium payments on subject insurance coverage contrary to its represented standard operating
procedure of solely handling the insurance coverage and past practice of debiting [Maxilites] account.25
Article 1431 of the Civil Code defines estoppel as follows:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person relying thereon.
Meanwhile, Section 2(a), Rule 131 of the Rules of Court provides:
SEC. 2. Conclusive presumptions. The following are instances of conclusive presumptions:
(a) Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led
another to believe a particular thing is true, and to act upon such belief, he cannot, in any litigation arising
out of such declaration, act or omission, be permitted to falsify it.
In estoppel, a party creating an appearance of fact, which is false, is bound by that appearance as against
another person who acted in good faith on it.26 Estoppel is based on public policy, fair dealing, good faith
and justice.27 Its purpose is to forbid one to speak against his own act, representations, or commitments
to the injury of one who reasonably relied thereon.28 It springs from equity, and is designed to aid the law
in the administration of justice where without its aid injustice might result.29
In Santiago Syjuco, Inc. v. Castro,30 the Court stated that estoppel may arise from silence as well as from
words. Estoppel by silence arises where a person, who by force of circumstances is obliged to another to
speak, refrains from doing so and thereby induces the other to believe in the existence of a state of facts
in reliance on which he acts to his prejudice.31 Silence may support an estoppel whether the failure to
speak is intentional or negligent.32
Both trial and appellate courts basically agree that FEBTC is estopped from claiming that the insurance
premium has been unpaid. That FEBTC induced Maxilite and Marques to believe that the insurance
premium has in fact been debited from Maxilites account is grounded on the the following facts: (1) FEBTC
represented and committed to handle Maxilites financing and capital requirements, including the related
transactions such as the insurance of the trust receipted merchandise; (2) prior to the subject Insurance
Policy No. 1024439, the premiums for the three separate fire insurance policies had been paid through
automatic debit arrangement; (3) FEBIBI sent FEBTC, not Maxilite nor Marques, written reminders dated 19
October 1994, 24 January 1995, and 6 March 1995 to debit Maxilites account, establishing FEBTCs
obligation to automatically debit Maxilites account for the premium amount; (4) there was no written
demand from FEBTC or Makati Insurance Company for Maxilite or Marques to pay the insurance premium;
(5) the subject insurance policy was released to Maxilite on 19 August 1994; and (6) the subject insurance
policy remained uncancelled despite the alleged non-payment of the premium, making it appear that the
insurance policy remained in force and binding.
Moreover, prior to the full settlement of the trust receipt account on 24 and 26 October 1994, FEBTC had
insurable interest over the merchandise, and thus had greater reason to debit Maxilites account. Further,
as found by the trial court, and apparently undisputed by FEBTC, FEBIBI and Makati Insurance Company,
Maxilite had sufficient funds at the time the first reminder, dated 19 October 1994, was sent by FEBIBI to
FEBTC to debit Maxilites account for the payment of the insurance premium. Since (1) FEBTC committed to
debit Maxilites account corresponding to the insurance premium; (2) FEBTC had insurable interest over
the property prior to the settlement of the trust receipt account; and (3) Maxilites bank account had
sufficient funds to pay the insurance premium prior to the settlement of the trust receipt account, FEBTC
should have debited Maxilites account as what it had repeatedly done, as an established practice, with
respect to the previous insurance policies. However, FEBTC failed to debit and instead disregarded the
written reminder from FEBIBI to debit Maxilites account. FEBTCs conduct clearly constitutes negligence in

handling Maxilites and Marques accounts. Negligence is defined as the omission to do something which
a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human
affairs, would do, or the doing of something which a prudent man and reasonable man could not do.33
As a consequence of its negligence, FEBTC must be held liable for damages pursuant to Article 2176 of the
Civil Code which states whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Indisputably, had the insurance premium been paid,
through the automatic debit arrangement with FEBTC, Maxilites fire loss claim would have been approved.
Hence, Maxilite suffered damage to the extent of the face value of the insurance policy or the sum of P2.1
million.
Contrary to Maxilites and Marques view, FEBTC is solely liable for the payment of the face value of the
insurance policy and the monetary awards stated in the Court of Appeals decision. Suffice it to state that
FEBTC, FEBIBI, and Makati Insurance Company are independent and separate juridical entities, even if
FEBIBI and Makati Insurance Company are subsidiaries of FEBTC. Absent any showing of its illegitimate or
illegal functions, a subsidiarys separate existence shall be respected, and the liability of the parent
corporation as well as the subsidiary shall be confined to those arising in their respective business.34
Besides, the records are bereft of any evidence warranting the piercing of corporate veil in order to treat
FEBTC, FEBIBI, and Makati Insurance Company as a single entity. Likewise, there is no evidence showing
FEBIBIs and Makati Insurance Companys negligence as regards the non-payment of the insurance
premium.
The Court agrees with the Court of Appeals in reducing the interest rate from 12% to 6% as the obligation
to pay does not arise from a loan or forbearance of money. In Eastern Shipping Lines, Inc. v. Court of
Appeals,35 the Court laid down the following guidelines for the application of the proper interest rates:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts
is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on
Damages of the Civil Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the
rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, 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).
The actual base for the computation of legal interest shall, in any case, be . . . the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum
from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to
forbearance of credit. (Emphasis supplied)
With respect to Maxilites and Marques invocation of legal compensation, we find the same devoid of
merit. Aside from their bare allegations, there is no clear and convincing evidence that legal compensation
exists in this case. In other words, Maxilite and Marques failed to establish the essential elements of legal
compensation. Therefore, Maxilites and Marques claim of legal compensation must fail.
WHEREFORE, we AFFIRM with MODIFICATION the 31 May 2005 Decision and the 26 January 2006
Resolution of the Court of Appeals-Cebu City in CA-G.R. CV No. 62105. Only Far East Bank and Trust
Company, and not Far East Bank Insurance Brokers, Inc. or Makati Insurance Company, is ORDERED to PAY
the face value of the subject insurance policy and the monetary awards stated in the Court of Appeals
decision.
SO ORDERED.

MANILA INTERNATIONAL AIRPORT AUTHORITY,

Petitioner,
- versus DING VELAYO SPORTS CENTER, INC.,
Respondent.
G.R. No. 161718
Promulgated:
December 14, 2011
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
LEONARDO-DE CASTRO, J.:
Before Us is a Petition for Review under Rule 45 of the Rules of Court of the Decision[1] dated January 8,
2004 of the Court Appeals in CA-G.R. CV No. 68787, affirming the Decision[2] dated October 29, 1999 of
Branch 111 of the Regional Trial Court (RTC) of Pasay City in Civil Case No. 8847, which granted the
Complaint for Injunction, Consignation, and Damages with prayer for a Temporary Restraining Order filed
by respondent Ding Velayo Sports Center, Inc. against petitioner Manila International Airport Authority
(MIAA), and essentially compelled petitioner to renew the lease of respondent over a parcel of land within
the airport premises.
Below are the facts as culled from the records of the case:
On February 15, 1967, petitioner (then still called the Civil Aeronautics Administration or CAA) and Salem
Investment Corporation (Salem) entered into a Contract of Lease whereby petitioner leased in favor of
Salem a parcel of land known as Lot 2-A, with an area of 76,328 square meters, located in front of the
Manila International Airport (MIA) in Pasay City, and registered under Transfer Certificate of Title (TCT) No.
6735 in the name of the Republic (Lot 2-A). Petitioner and Salem entered into said Contract of Lease for
the following reasons:
WHEREAS, this particular portion of land is presently an eyesore to the airport premises due to the fact
that a major portion of it consists of swampy and talahib infested silt and abandoned fishponds and
occupied by squatters and some [petitioners] employees with ungainly makeshift dwellings;
WHEREAS, the LESSOR, in accordance with its general plan to improve and beautify the airport premises, is
interested in developing this particular area by providing such facilities and conveniences as may be
necessary for the comfort, convenience and relaxation of transients, tourists and the general public;
WHEREAS, the LESSEE, a corporation engaged in hostelry and other allied business, is ready, willing and
able to cooperate with the LESSOR in the implementation of this general development plan for the airport
premises;
x xxx
WHEREAS, the LESSEEs main interest is to have a sufficient land area within which to construct a modern
hotel with such facilities as would ordinarily go with modern hostelry, including recreation halls, facilities
for banks, tourist agencies, travel bureaus, laundry shops, postal stations, curio and native shops and
other allied business calculated to make the hotel and its facilities comfortable, convenient and attractive,
and for this purpose, an initial land area of some Thirty[-]Five Thousand Ten (35,010) square meters would
be first utilized.[3]
The term of the lease and renewal thereof as stipulated upon by petitioner and Salem are as follows:
3.
That the term of the lease shall be for a period of Twenty-Five (25) years, commencing from
the date of receipt of approval of this Contract by the Secretary of Public Works and Communications, and
at the option of the LESSEE, renewable for another Twenty-Five (25) years. It is understood, that after the
first 25 years lease, the ownership of, and full title to, all the buildings and permanent improvements
introduced by the LESSEE on the leased premises including those introduced on the Golf Driving Range
shall automatically vest in the LESSOR, without cost.

Upon the termination of the lease or should the LESSEE not exercise this option for renewal, the
LESSEE shall deliver the peaceful possession of all the building and other permanent improvements herein
above referred to, with the understanding that the LESSEE shall have the right to remove from the
premises such equipment, furnitures, accessories and other articles as would ordinarily be classified as
movable property under pertinent provisions of law.
4.
That the renewal of this lease contract shall be for another period of Twenty-Five (25) years,
under the same terms and conditions herein stipulated; provided, however that, since the ownership of the
hotel building and permanent improvement have passed on the LESSOR, the LESSEE shall pay as rental, in
addition to the rentals herein agreed upon, an amount equivalent to One percent (1%) of the appraised
value of the hotel building and permanent improvements at the time of expiration of Twenty-Five (25)
years lease period, payable annually.[4]
Subsequently, in a Transfer of Lease Rights and Existing Improvements dated September 30, 1974, Salem
conveyed in favor of Ding Velayo Export Corporation (Velayo Export), for the consideration of
P1,050,000.00, its leasehold rights over a portion of Lot 2-A, measuring about 15,534 square meters, with
the improvements thereon, consisting of an unfinished cinema-theater. Accordingly, petitioner and Velayo
Export executed a Contract of Lease dated November 26, 1974 pertaining to the aforementioned leased
portion of Lot 2-A.
In turn, Velayo Export executed a Transfer of Lease Rights dated April 27, 1976 by which it conveyed to
respondent, for the consideration of P500,000.00, its leasehold rights over an 8,481-square meter area
(subject property) out of the 15,534-square meter portion it was leasing from petitioner. As a result,
petitioner and respondent executed another Contract of Lease[5] dated May 14, 1976 covering the subject
property.
The Contract of Lease dated May 14, 1976 between petitioner (as lessor) and respondent (as lessee)
specified how respondent shall develop and use the subject property:
2.
That the LESSEE shall utilize the premises as the site for the construction of a Sports Complex
facilities and shopping centers in line with the Presidential Decree for Sports Development and Physical
Fitness, including the beautification of the premises and providing cemented parking areas.
3.
That the LESSEE shall construct at its expense on the leased premises a parking area parallel to
and fronting the Domestic Airport Terminal to be open to the traveling public free of charge to ease the
problem of parking congestion at the Domestic Airport.[6]
Pursuant to the aforequoted objectives, respondent agreed to the following:
9.
Physical improvements on building spaces and areas subject of this agreement may be undertaken
by and at the expenses of the LESSEE. However, no improvements may be commenced without prior
approval of the plans by the LESSOR and, whenever deemed necessary a cash deposit shall be made in
favor of the LESSOR which shall be equivalent to the cost of restoration of any portion affected by such
alteration or improvements;
10.
The LESSEE agrees and binds himself to complete the physical improvements or contemplated
structures within the leased premises for a period of one (1) year. Failure on the part of the LESSEE to do
so within said period shall automatically revoke the Contract of Lease without necessity of judicial process.
[7]
The lease rental shall be computed as follows:
5.
That the LESSEE shall pay to the LESSOR as monthly rentals for the leased premises the rate of
P0.45 per square meter for the first 300 square meters, P0.30 per square meter for the next 500 square
meters, and P0.25 per square meter for the remaining area pursuant to Part VIII, Section 4 of
Administrative Order No. 4, Series of 1970, which in the case of the 8,481 square meters herein leased
shall amount to P2,205.25 per month, or a royalty equivalent to one percent (1%) of the monthly gross
income of the LESSEE, whichever is higher.
6.
That for the purpose of accurately determining the monthly gross income, the LESSEE hereby gives
its consent for the examination of the books by authorized representatives of the LESSOR or the
Commission on Audit;
xxxx
13.
If, during the lifetime of this agreement and upon approval by the LESSOR, the leased area
is increased or diminished, or the LESSEE is relocated to another area, rentals, fees, and charges imposed
shall be amended accordingly. Subsequent amendments to the Administrative Order which will affect an

increase of the rates of fees, charges and rentals agreed upon in this contract shall automatically amend
this contract to the extent that the rates of fees, rentals, and charges are increased.
In the event of relocation of the LESSEE to other areas, the cost of relocation shall be shouldered by
the LESSEE.[8]
Nonpayment of lease rentals shall have the following consequence:
8.
Failure on the part of the LESSEE TO PAY ANY fees, charges, rentals or the royalty of one
percent (1%) within thirty (30) days after receipt of written demand, the LESSOR shall deny the LESSEE of
the further use of the leased premises and /or any of its facilities, utilities and services. x x x.[9]
The Contract of Lease prohibits respondent from transferring its leasehold rights, engaging in any other
business outside those mentioned in said Contract, and subletting the premises whether in whole or in
part, thus:
16.
The LESSEE agrees not to assign, sell, transfer or mortgage his rights under this agreement
or sublet the whole or part of premises covered by it to a third party or parties nor engage in any other
business outside of those mentioned in this contract. Violation of this provision shall also be a ground for
revocation of the lease contract without need of judicial process.[10]
Period of the lease and renewal thereof are governed by paragraphs 4 and 17 of the Contract of Lease that
read:
4.
That the period of this lease shall take effect from June 1, 1976 up to February 15, 1992
which is equivalent to the unexpired portion of the lease contract executed between [petitioner] and Ding
Velayo Export Corporation.
xxxx
17.
The LESSEE, if desirous of continuing his lease, should notify the LESSOR sixty (60) days
prior to expiration of the period agreed upon for the renewal of the Contract of Lease.[11]
The lease may be revoked/terminated under the following conditions:
15.
This contract of lease may be terminated by other party upon thirty (30) days notice in
writing. Failure on the part of the LESSEE to comply with any of the provisions of this lease contract or any
violation of any rule or regulations of the Airport shall give the LESSOR the right to revoke this contract
effective thirty (30) days after notice of revocation without need of judicial demand. However, the LESSEE
shall remain liable and obligated to pay rentals and other fees and charges due and in arrears with interest
at the rate of twelve percent (12%) per annum;
xxxx
18.
Upon termination or revocation of this contract of lease as herein provided, the LESSEE
shall deliver possession of the premises to the LESSOR in the same condition that they were received
giving allowance to normal wear and tear and to damage or destruction caused by act of God. All
permanent improvements, however, which the LESSEE might have constructed in the premises by virtue
hereof shall upon the termination of this lease automatically become the absolute property of the LESSOR
without cost;
19.
In the event that the LESSOR shall need the leased premises in its airport development
program, the LESSEE agrees to vacate the premises within thirty (30) days from receipt of notice. All
improvements not removed by the LESSEE within the thirty (30) day period shall become the property of
the LESSOR without cost.[12]
Respondent began occupying the subject property and paying petitioner the amount of P2,205.25 per
month as rental fee. Respondent then constructed a multi-million plaza with a three-storey building on
said property. Respondent leased spaces in the building to various business proprietors.
In a Letter[13] dated April 11, 1979, petitioner requested respondent for a copy of the latters Gross
Income Statement from December 1977 to December 1978, duly certified by a certified public accountant,
for the purpose of computing the royalty equivalent to 1% of the monthly gross income of respondent.
Acceding to this request, respondent sent petitioner a Letter[14] dated May 31, 1979 and appended
therewith the requested income statements which disclosed that the total gross income of respondent for
the period in question amounted to P1,972,968.11. Respondent also submitted to petitioner and the
Commission on Audit (COA) its duly audited financial statements[15] for the years 1984 to 1988.
Meanwhile, petitioner had continued billing respondent the amount of P2,205.25 as monthly rental fee,
which the latter obediently paid.

Petitioner eventually issued Administrative Order (AO) No. 4, series of 1982,[16] and AO No. 1, series of
1984, fixing various rates for the lease rentals of its properties. AO No. 4, series of 1982, and AO No. 1,
series of 1984, allegedly effected an increase in the lease rental of respondent for the subject property, as
provided for in paragraph 13 of the Contract of Lease dated May 14, 1976 between petitioner and
respondent.
However, said issuances were subjected to review for revision purposes and their
implementation was suspended. Still, petitioner, through a letter dated September 23, 1986, required
respondent to pay a moratorium rental at the rate of P5.00 per square meter rate per month or a total of
P42,405.00 every month.
In a Letter[17] dated October 18, 1986, respondent opposed the implementation of any increase in its
lease rental for the subject property. Respondent wrote:
We believe that an increase in rental of a property which does not form part of the Airport or its immediate
premises, like the premises leased to DVSC, although owned by MIAA is not covered by Batas Pambansa
Blg. 325 or Finance Ministry Order No. 6-83. Furthermore, the language of B.P. No. 325 and Ministry Order
No. 6-83 authorizes the fixing or revision of fees and charges only for services and functions.
xxxx
Assuming that the increase in rental of MIAA property is authorized by B.P. No. 325 and Ministry Order No.
6-83, such increase as ordered in your moratorium rental rate insofar as it is made applicable to DVSC is
not valid.
The increase which is around 2,000 percent or 20 times above present rental rate is unreasonably high.
Both B.P. No. 325 and Ministry Order No. 6-83 prescribed only just and reasonable rates sufficient to cover
administrative costs.
Such increase in rental is uncalled for considering that:
Upon termination of the lease, all the improvements on the property shall belong to MIAA without costs.
The original cost of the buildings and other improvements on the land we have leased is P10,600,000.00.
Said improvements would now cost over P30,000,000.00. In effect the Government would be collecting
another P2.0 million a year.
We, therefore, request that the moratorium rate be not applied to us.
Following the foregoing exchange, petitioner had kept on charging respondent the original monthly rental
of P2,205.25.
More than 60 days prior to the expiration of the lease between petitioner and respondent, the latter,
through its President, Conrado M. Velayo (Velayo), sent the former a Letter[18] dated December 2, 1991
stating that respondent was interested in renewing the lease for another 25 years.
Petitioner, through its General Manager, Eduardo O. Carrascoso, in a Letter[19] dated February 24, 1992,
declined to renew the lease, ordered respondent to vacate the subject property within five days, and
demanded respondent to pay arrears in lease rentals as of January 1992 in the sum of P15,671,173.75.
Velayo, on behalf of respondent, replied to petitioner through a Letter[20] dated March 3, 1992 that reads:
This refers to your letters which we received on 26 February 1992 and 27 February 1992, respectively, the
first as a response to our letter of 2 December 1991 where we informed you of our intention to renew our
lease contract, and the second wherein you asked us to vacate within five (5) days the leased premises.
Your second letter surprised us inasmuch as we have been negotiating with you for the renewal of our
lease. In addition, your sudden decision gave us no time to discuss your terms and conditions with our
Board considering that the issues involved major decision.
For a smoother transition and for the mutual interest of the government, the tenants and ourselves, may
we request for a reconsideration of your decision, and we be given up to the end of March 1992 to
peacefully turn-over to you the leased premises. This will enable you to create a committee that will takeover the leased property and its operations.
Likewise, consistent with our previous stand as communicated to you by our legal counsel, copy of which is
hereto attached, we deny any liability on rental increases.
In Letters[21] all dated March 10, 1992, Velayo informed petitioner that he already sent individual letters
to Manila Electric Company, Philippine Long Distance Telephone Company, and Manila Waterworks and
Sewerage System, instructing the said utility companies that succeeding billings for electric, telephone,

and water consumptions should already be transferred to the account of petitioner in light of the expected
turn-over of the subject property and improvements thereon from respondent to petitioner.
However, around the same time, Samuel Alomesen (Alomesen) became the new President and General
Manager of respondent, replacing Velayo. Alomesen, acting on behalf of respondent, sent petitioner a
Letter[22] dated March 25, 1992, revoking the aforementioned Letters dated March 3 and 10, 1992 since
these were purportedly sent by Velayo without authority from respondents Board of Directors.
Respondent expressed its interest in continuing the lease of the subject property for another 25 years and
tendered to petitioner a managers check in the amount of P8,821.00 as payment for the lease rentals for
the subject property from December 1991 until March 1992.
Petitioner entirely disregarded the claims of respondent and threatened to take-over the subject property.
On March 30, 1992, respondent filed against petitioner before the RTC a Complaint for Injunction,
Consignation, and Damages with a Prayer for a Temporary Restraining Order.[23] Respondent essentially
prayed for the RTC to order the renewal of the Contract of Lease between the parties for another 25-year
term counted from February 15, 1992. On even date, the RTC issued a Temporary Restraining Order[24]
preventing petitioner and all persons acting on its behalf from taking possession of the entire or any
portion of the subject property, from administering the said property, from collecting rental payments from
sub-lessees, and from taking any action against respondent for the collection of alleged arrears in rental
payments until further orders from the trial court.
In its Answer,[25] petitioner contended that its Contract of Lease with respondent was already terminated
on February 15, 1992, the expiration date explicitly stated under paragraph 4 of the same Contract.
Petitioner was not bound to renew the Contract of Lease with respondent. The renewal provision under
paragraph 17 of the Contract was not automatic but merely directory and procedural and that, in any
event, Velayo, the former President of respondent, already conceded to the non-renewal of the Contract.
Petitioner likewise invoked paragraph 15 of the Contract of Lease, i.e., its right to revoke the said Contract
in case of violation of any of the provisions thereof by respondent. Petitioner averred that respondent
committed the following violations: (1) respondent failed to fulfill the conditions set forth under paragraphs
2 and 3 of the Contract as it did not establish a shopping center on the subject property and did not help
ease the problems of parking congestion at the Domestic Airport; (2) respondent sub-leased the subject
property in defiance of the prohibition under paragraph 16 of the Contract; and (3) respondent did not pay
the lease rentals in accordance with paragraphs 5 and 13 of the Contract, thus, incurring a total
outstanding balance of P15,671,173.75 as of February 1992.
By way of counter-claim, petitioner demanded that respondent pay the total outstanding balance of its
lease rentals for the subject property and turn-over lease rentals it had collected from sub-lessees
beginning February 15, 1992.
After the preliminary hearing, the RTC issued a Writ of Preliminary Injunction[26] against petitioner on April
30, 1992 upon the posting by respondent of a bond in the amount of P100,000.00.
In an Order[27] dated June 11, 1996, the RTC denied the Omnibus Motion of petitioner for the dissolution of
the writ of injunction and appointment of a receiver for the fruits of the subject property; and at the same
time, granted the motion of respondent for the consignment of their monthly lease rentals for the subject
property with the RTC.
The RTC terminated the pre-trial proceedings in an Order[28] dated October 23, 1997 for failure of the
parties to amicably settle the dispute. Thereafter, trial on the merits ensued.
Respondent presented the testimonies of Mariano Nocom, Jr.,[29] Gladioluz Segundo,[30] Mariano Nocom,
Sr.,[31] and Rosila Mabanag.[32] The RTC admitted all the documentary evidence of respondent in an
Order[33] dated December 14, 1998.
Petitioner, on the other hand, presented the lone testimony of their accounting manager, Arlene Britanico.
[34] Among the numerous documents submitted by petitioner as evidence were its own issuances
imposing various rates for the lease of its properties, which allegedly effected an increase in the lease
rentals of respondent for the subject property, specifically, AO No. 4, series of 1982;[35] AO No. 1, series of
1984;[36] AO No. 1, series of 1990;[37] AO No. 1, series of 1993;[38] Resolution No. 94-74,[39] Resolution
No. 96-32,[40] and Resolution No. 97-51,[41] all amending AO No. 1, series of 1993; and AO No. 1, series of
1998.[42] All of the documentary evidence of petitioner were admitted by the RTC in an Order[43] dated
May 28, 1999.
In its Decision dated October 29, 1999, the RTC ruled in favor of respondent, disposing thus:
WHEREFORE, judgment is hereby rendered in favor of [respondent] and against [petitioner].

Accordingly, [petitioner] is hereby ordered to:

1.
Grant renewal of the lease contract for the same term as stipulated in the old contract and
the rental to be based on the applicable rate of the time or renewal;
2.

To respect and maintain [respondents] peaceful possession of the premises;

3.
To accept the rental payment consigned by the [respondent] to the court beginning
December 1991 onward until and after a renewal has been duly executed by both parties;
4.

To pay [respondent] as and by way of attorneys fees the sum of P500,000.00; and

5.

To pay the cost of suit.[44]

Petitioner appealed the RTC judgment before the Court of Appeals and assigned these errors:
I.
The trial court gravely erred in declaring that [respondent] is entitled to a renewal of the
contract of lease.
II.
The trial court gravely erred in ordering the renewal of the contract of lease despite of the fact
that it has no legal authority to do so.
III.
The trial court gravely erred in declaring that [respondent] did not violate the terms and
conditions of the contract.
IV.
The trial court gravely erred in declaring that [petitioners] act of effecting the increase in the
rental during the stipulated lifetime of the contract has no valid basis.
V.

The trial court gravely erred in not finding that [petitioner] is entitled to its counterclaim.[45]

The Court of Appeals promulgated its Decision on January 8, 2004, finding no reversible error in the
appealed judgment of the RTC and decreeing as follows:
WHEREFORE, finding no reversible error committed by the trial court, the instant appeal is hereby
DISMISSED, and the assailed decision is hereby AFFIRMED.[46]
Hence, the instant Petition for Review, wherein petitioner basically attributed to the Court of Appeals the
very same errors it assigned to the RTC.
Petitioner argues that the renewal of the Contract of Lease cannot be made to depend on the sole will of
respondent for the same would then be void for being a potestative condition.
We do not agree. As we have already explained in Allied Banking Corporation v. Court of Appeals [47]:
Article 1308 of the Civil Code expresses what is known in law as the principle of mutuality of contracts. It
provides that "the contract must bind both the contracting parties; its validity or compliance cannot be left
to the will of one of them." This binding effect of a contract on both parties is based on the principle that
the obligations arising from contracts have the force of law between the contracting parties, and there
must be mutuality between them based essentially on their equality under which it is repugnant to have
one party bound by the contract while leaving the other free therefrom. The ultimate purpose is to render
void a contract containing a condition which makes its fulfillment dependent solely upon the uncontrolled
will of one of the contracting parties.
An express agreement which gives the lessee the sole option to renew the lease is frequent and subject to
statutory restrictions, valid and binding on the parties. This option, which is provided in the same lease
agreement, is fundamentally part of the consideration in the contract and is no different from any other
provision of the lease carrying an undertaking on the part of the lessor to act conditioned on the
performance by the lessee. It is a purely executory contract and at most confers a right to obtain a
renewal if there is compliance with the conditions on which the right is made to depend. The right of
renewal constitutes a part of the lessee's interest in the land and forms a substantial and integral part of
the agreement.
The fact that such option is binding only on the lessor and can be exercised only by the lessee does not
render it void for lack of mutuality. After all, the lessor is free to give or not to give the option to the
lessee. And while the lessee has a right to elect whether to continue with the lease or not, once he
exercises his option to continue and the lessor accepts, both parties are thereafter bound by the new lease
agreement. Their rights and obligations become mutually fixed, and the lessee is entitled to retain
possession of the property for the duration of the new lease, and the lessor may hold him liable for the
rent therefor. The lessee cannot thereafter escape liability even if he should subsequently decide to

abandon the premises. Mutuality obtains in such a contract and equality exists between the lessor and the
lessee since they remain with the same faculties in respect to fulfillment.[48]
Paragraph 17 of the Contract of Lease dated May 14, 1976 between petitioner and respondent solely
granted to respondent the option of renewing the lease of the subject property, the only express
requirement was for respondent to notify petitioner of its decision to renew the lease within 60 days prior
to the expiration of the original lease term. It has not been disputed that said Contract of Lease was
willingly and knowingly entered into by petitioner and respondent. Thus, petitioner freely consented to
giving respondent the exclusive right to choose whether or not to renew the lease. As we stated in Allied
Banking, the right of renewal constitutes a part of the interest of respondent, as lessee, in the subject
property, and forms a substantial and integral part of the lease agreement with petitioner. Records show
that respondent had duly complied with the only condition for renewal under Section 17 of the Contract of
Lease by notifying petitioner 60 days prior to the expiration of said Contract that it chooses to renew the
lease. We cannot now allow petitioner to arbitrarily deny respondent of said right after having previously
agreed to the grant of the same.
Equally unmeritorious is the assertion of petitioner that paragraph 17 of the Contract of Lease dated May
14, 1976 merely provides a procedural basis for a negotiation for renewal of the lease and the terms
thereof. The exercise by respondent of its option to renew the lease need no longer be subject to
negotiations. We reiterate the point we made in Allied Banking that:
[I]f we were to adopt the contrary theory that the terms and conditions to be embodied in the renewed
contract were still subject to mutual agreement by and between the parties, then the option - which is an
integral part of the consideration for the contract - would be rendered worthless. For then, the lessor could
easily defeat the lessee's right of renewal by simply imposing unreasonable and onerous conditions to
prevent the parties from reaching an agreement, as in the case at bar. As in a statute, no word, clause,
sentence, provision or part of a contract shall be considered surplusage or superfluous, meaningless, void,
insignificant or nugatory, if that can be reasonably avoided. To this end, a construction which will render
every word operative is to be preferred over that which would make some words idle and nugatory.[49]
In case the lessee chooses to renew the lease but there are no specified terms and conditions for the new
contract of lease, the same terms and conditions as the original contract of lease shall continue to govern,
as the following survey of cases in Allied Banking would show:
In Ledesma v. Javellana this Court was confronted with a similar problem. In that case the lessee was
given the sole option to renew the lease, but the contract failed to specify the terms and conditions that
would govern the new contract. When the lease expired, the lessee demanded an extension under the
same terms and conditions. The lessor expressed conformity to the renewal of the contract but refused to
accede to the claim of the lessee that the renewal should be under the same terms and conditions as the
original contract. In sustaining the lessee, this Court made the following pronouncement:
x x x [i]n the case of Hicks v. Manila Hotel Company, a similar issue was resolved by this Court. It was held
that 'such a clause relates to the very contract in which it is placed, and does not permit the defendant
upon the renewal of the contract in which the clause is found, to insist upon different terms than those
embraced in the contract to be renewed'; and that 'a stipulation to renew always relates to the contract in
which it is found and the rights granted thereunder, unless it expressly provides for variations in the terms
of the contract to be renewed.'
The same principle is upheld in American Law regarding the renewal of lease contracts. In 50 Am. Jur. 2d,
Sec. 1159, at p. 45, we find the following citations: 'The rule is well-established that a general covenant
to renew or extend a lease which makes no provision as to the terms of a renewal or extension implies a
renewal or extension upon the same terms as provided in the original lease.'
In the lease contract under consideration, there is no provision to indicate that the renewal will be subject
to new terms and conditions that the parties may yet agree upon. It is to renewal provisions of lease
contracts of the kind presently considered that the principles stated above squarely apply. We do not
agree with the contention of the appellants that if it was intended by the parties to renew the contract
under the same terms and conditions stipulated in the contract of lease, such should have expressly so
stated in the contract itself. The same argument could easily be interposed by the appellee who could
likewise contend that if the intention was to renew the contract of lease under such new terms and
conditions that the parties may agree upon, the contract should have so specified. Between the two
assertions, there is more logic in the latter.
The settled rule is that in case of uncertainty as to the meaning of a provision granting extension to a
contract of lease, the tenant is the one favored and not the landlord. 'As a general rule, in construing
provisions relating to renewals or extensions, where there is any uncertainty, the tenant is favored, and
not the landlord, because the latter, having the power of stipulating in his own favor, has neglected to do
so; and also upon the principle that every man's grant is to be taken most strongly against himself
(50 Am Jur. 2d, Sec. 1162, p. 48; see also 51 C.J.S. 599).'[50] (Emphases supplied.)

Being consistent with the foregoing principles, we sustain the interpretation of the RTC of paragraph 17 of
the Contract of Lease dated May 14, 1976 between petitioner and respondent, to wit:
[Paragraph 17 of the Contract of Lease dated May 14, 1976] admits several meanings. In simpler terms,
the phrase, i.e., if desirous of continuing his lease, may be simply restated, i.e., if he wants to go on with
his lease, considering the word `CONTINUE in its verb form ordinarily means to go on in present state, or
even restated in another way if desirous of extending his lease, because the word `continue in its verb
form also means extend uniformly. Thus, if we are to adopt the interpretation of [petitioner] that the
stipulation merely established the procedural basis for a negotiation for renewal then the aforequoted
phrase would be rendered a mere surplusage, meaningless and insignificant. But if we are to prod deeper
to the very context of the entire stipulations setforth in the contract and from what is obvious with respect
to the intentions of the contracting parties based on their contemporaneous and subsequent acts including
but not limited to the historical antecedents of the agreement then an interpretation invariably different
from that of [petitioner] becomes inevitable.
Specifically, the extraneous source of the lease contract in question could be the original and renewed
contract of lease by and between Salem Investment Corporation and CAA the predecessor-in-interest of
[petitioner] executed on February 10, 1967 (Exh. M). Under the said lease contract between CAA and
Salem, the term is for a period of twenty-five (25) years renewable for another 25 years at the option of
the lessee Salem (Exh. Y-1). Later, with the approval of CAA, Salem transferred its leasehold rights
over a portion of the land leased to Ding Velayo Export Corporation on September 30, 1974 (Exh. N) and
in turn Velayo Export transferred its leasehold rights over a portion of the leased land transferred to it by
Salem to Velayo Sports Complex, Inc. [respondent] herein on April 29, 1976 (Exh. O). Thus, on May
14, 1976, [respondent] and CAA, predecessor-in-interest of [petitioner], concluded the lease agreement in
question with a term equivalent to the unexpired portion of the lease between Velayo Export and CAA.
As culled from the transfers effected prior to the May 14, 1976 agreement of [respondent] and
[petitioner]s predecessor-in-interest, the renewal of the contract was clearly at the option of the lessee.
Considering that there was no evidence positively showing that [respondent] and CAA expressly intended
the removal of the option for the renewal of the lease contract from the lessee, it is but logical to conclude,
although the stipulation setforth in paragraph 17 appears to have been worded or couched in somewhat
uncertain terms, that the parties agreed that the option should remain with the lessee. This must be so
because based on the context of their agreements and bolstered by the testimony of Mr. Mariano Nocom of
Salem Investment and particularly Rosila Mabanag, one of the signatory witness to the contract and a
retired employee of CAAs Legal Division the parties really intended a renewal for the same term as it was
then the usual practice of CAA to have the term of leases on lands where substantial amount will be
involved in the construction of the improvements to be undertaken by the lessee to give a renewal. In
fact, it clearly appears that the right of renewal constitutes a part of the lessees interest in the land
considering the multimillion investments it made relative to the construction of the building and facilities
thereon and forms a substantial and integral part of the agreement.[51] (Emphases supplied.)
In sum, the renewed contract of lease of the subject property between petitioner and respondent shall be
based on the same terms and conditions as the original contract of lease. The original contract of lease
does not pertain to the Contract of Lease dated May 14, 1976 between petitioner and respondent alone,
but also to the Contract of Lease dated February 15, 1967 between petitioner (then still called CAA) and
Salem, as well as the Contract of Lease dated November 26, 1974 between petitioner and Velayo Export
all three contracts being inextricably connected. Since the Contract of Lease between petitioner and
Salem was for a term of 25 years, then the renewed contract of lease of between petitioner and
respondent shall be for another term of 25 years. This construction of the renewal clause under paragraph
17 of the Contract of Lease dated May 14, 1976 between petitioner and respondent is most consistent with
the intent of the parties at the time of the execution of said Contract and most effectual in implementing
the same.
In addition to challenging the exclusive right of respondent to renew the Contract of Lease over the subject
property, petitioner insists on its right to refuse the renewal because of purported violations of the said
Contract by respondent, particularly: (1) subleasing of the premises; (2) failure to ease the problems of
parking congestion at the Domestic Airport and to provide a shopping center and sports facilities, such as
an oval track and a swimming pool; and (3) failure to pay monthly lease rentals in the form of royalties
equivalent to 1% of the gross income of respondent or in accordance with the rates fixed in the
administrative orders of petitioner.
We find no violations by the respondent of the Contract of Lease dated May 14, 1976 as to justify the
revocation or refusal to renew of said Contract by petitioner.
The RTC is once again correct in its construal that paragraph 16 of the Contract of Lease, prohibiting the
subleasing of the premises, refers only to the subject property. We stress that when the said Contract
was executed on May 14, 1976, the premises leased by petitioner to respondent, and which respondent
was not allowed to sublease, is the subject property, i.e., an idle piece of land with an area of 8,481 square
meters.
More importantly, being the builder of the improvements on the subject property, said

improvements are owned by respondent until their turn-over to petitioner at the end of the 25-year lease
in 1992. As respondent is not leasing the improvements from petitioner, then it is not subleasing the same
to third parties.
While the Contract of Lease expressly obligated respondent to build certain improvements, such as
parking, shopping mall, and sports facilities, the belated insistence by petitioner on compliance with the
same appears to be a mere afterthought.
Article 1235 of the Civil Code states that [w]hen the obligee accepts the performance, knowing its
incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed
fully complied with.
As aptly observed by the RTC, paragraphs 9 and 10 of the Contract of Lease likewise expressly require
respondent to submit, for prior approval by petitioner, all construction plans on the subject property; and
to complete the contemplated improvements thereon within a year. The Contract of Lease was executed
on May 14, 1976, and the one-year period expired on May 14, 1977. Yet, petitioner did not register any
protest or objection to the alleged incompleteness of or irregularity in the performance by respondent of its
obligation to build and develop improvements on the subject property. In fact, upon the expiration of the
original 25-year lease period in February 1992, petitioner was already ready and willing to accept and
appropriate as its own the improvements built on the subject property in 1992. Petitioner only raised the
issue of the purported incompleteness/irregularity of the said improvements when it was brought to court
by respondent for refusing to renew the lease.
Just as the RTC adjudged, no fault could be attributed to respondent for deficient payment of lease rentals.
Lease rentals were based on either the rates fixed by AO No. 4, series of 1970, or 1% of the monthly gross
income of respondent, whichever is higher. At the very beginning of the lease, respondent had been
paying monthly lease rentals based on the rates fixed by AO No. 4, series of 1970, which amounted to
P2,205.25 per month. When requested, respondent submitted to petitioner its gross income statements,
so petitioner could very well compute the 1% royalty. However, petitioner continued to charge respondent
only P2,205.25 monthly lease rental, which the latter faithfully paid.
Petitioner later demanded an increase in lease rentals based on subsequent administrative issuances
raising the rates for the rental of its properties. But the RTC found that the adverted administrative orders
were not published in full, thus, the same were legally invalid within the context of Article 2 of the Civil
Code which provides that [l]aws shall take effect after fifteen days following the completion of their
publication in the Official Gazette, unless it is otherwise provided. x x x In Taada v. Tuvera,[52] we
enunciated that publication is indispensable in order that all statutes, including administrative rules that
are intended to enforce or implement existing laws, attain binding force and effect, to wit:
We hold therefore that all statutes, including those of local application and private laws, shall be
published as a condition for their effectivity, which shall begin fifteen days after publication unless a
different effectivity date is fixed by the legislature.
Covered by this rule are presidential decrees and executive orders promulgated by the President in the
exercise of legislative powers whenever the same are validly delegated by the legislature or, at present,
directly conferred by the Constitution. Administrative rules and regulations must also be published if their
purpose is to enforce or implement existing law pursuant also to a valid delegation.[53]
There is no basis for the argument of petitioner that the validity of its administrative orders cannot be
collaterally attacked.
To the contrary, we have previously declared that a party may raise the
unconstitutionality or invalidity of an administrative regulation on every occasion that said regulation is
being enforced.[54] Since it is petitioner which first invoked its administrative orders to justify the increase
in lease rentals of respondent, then respondent may raise before the court the invalidity of said
administrative orders on the ground of non-publication thereof.
Finally, petitioner cannot oppose the renewal of the lease because of estoppel. Our following disquisition
in Kalalo v. Luz[55] is relevant herein:
Under Article 1431 of the Civil Code, in order that estoppel may apply the person, to whom representations
have been made and who claims the estoppel in his favor must have relied or acted on such
representations. Said article provides:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person relying thereon.
An essential element of estoppel is that the person invoking it has been influenced and has relied on the
representations or conduct of the person sought to be estopped, and this element is wanting in the instant
case. In Cristobal vs. Gomez, this Court held that no estoppel based on a document can be invoked by one
who has not been misled by the false statements contained therein. And in Republic of the Philippines vs.

Garcia, et al., this Court ruled that there is no estoppel when the statement or action invoked as its basis
did not mislead the adverse party. Estoppel has been characterized as harsh or odious, and not favored in
law. When misapplied, estoppel becomes a most effective weapon to accomplish an injustice, inasmuch as
it shuts a man's mouth from speaking the truth and debars the truth in a particular case. Estoppel cannot
be sustained by mere argument or doubtful inference; it must be clearly proved in all its essential
elements by clear, convincing and satisfactory evidence. No party should be precluded from making out
his case according to its truth unless by force of some positive principle of law, and, consequently,
estoppel in pais must be applied strictly and should not be enforced unless substantiated in every
particular.
The essential elements of estoppel in pais may be considered in relation to the party sought to be
estopped, and in relation to the party invoking the estoppel in his favor. As related to the party to be
estopped, the essential elements are: (1) conduct amounting to false representation or concealment of
material facts; or at least calculated to convey the impression that the facts are otherwise than, and
inconsistent with, those which the party subsequently attempts to assert; (2) intent, or at least expectation
that his conduct shall be acted upon by, or at least influence, the other party; and (3) knowledge, actual or
constructive, of the real facts. As related to the party claiming the estoppel, the essential elements are (1)
lack of knowledge and of the means of knowledge of the truth as the facts in questions; (2) reliance, in
good faith, upon the conduct or statements of the party to be estopped; (3) action or inaction based
thereon of such character as to change the position or status of the party claiming the estoppel, to his
injury, detriment or prejudice.[56] (Emphases ours.)
Indeed, Velayos Letters dated March 3 and 10, 1992 to petitioner may have already expressed
acquiescence to the non-renewal of the lease and turn-over of the improvements on the subject property
to petitioner. But not long thereafter, Alomesen, the new President of respondent, already wrote another
Letter dated March 25, 1992, which revoked Velayos earlier Letters for having been sent without authority
of the Board of Directors of respondent, insisted on the renewal of the lease, and tendered payment of past
due lease rentals. Respondent, through Alomesen, timely acted to correct Velayos mistakes. In the 15day interval between Velayos Letter dated March 10, 1992 and Alomesens Letter dated March 25, 1992,
there is no showing that petitioner, relying in good faith on Velayos Letters, acted or did not act as to have
caused it injury, detriment, or prejudice. There is an utter lack of clear, convincing, and satisfactory
evidence on the part of petitioner, as the party claiming estoppel, of the second and third elements for the
application of said principle against respondent.
WHEREFORE, the instant Petition is hereby DENIED for lack of merit. The Decision dated January 8, 2004
of the Court Appeals in CA-G.R. CV No. 68787, which affirmed the Decision dated October 29, 1999 of
Branch 111 of the RTC of Pasay City in Civil Case No. 8847, is hereby AFFIRMED.
SO ORDERED.

G.R. No. 70403 July 7, 1989

SANTIAGO
SYJUCO,
INC.,
petitioner,
vs.
HON. JOSE P. CASTRO, AS PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF THE NATIONAL
CAPITAL JUDICIAL REGION, BRANCH LXXXV, QUEZON CITY, THE CITY SHERIFF OF THE CITY OF
MANILA, THE CITY REGISTER OF DEEDS OF THE CITY OF MANILA, EUGENIO LIM, ARAMIS LIM,
MARIO LIM, PAULINO LIM, LORENZO LIM, NILA LIM and/ or THE PARTNERSHIP OF THE HEIRS OF
HUGO LIM and ATTORNEY PATERNO P. CANLAS, respondents.
NARVASA, J.:
This case may well serve as a textbook example of how judicial processes, designed to promote the swift
and efficient disposition of disputes at law, can be so grossly abused and manipulated as to produce
precisely the opposite result; how they can be utilized by parties with small scruples to forestall for an
unconscionably long time so essentially simple a matter as making the security given for a just debt
answer for its payment.
The records of the present proceedings and of two other cases already decided by this Court expose how
indeed the routine procedure of an extrajudicial foreclosure came by dint of brazen forum shopping and
other devious maneuvering to grow into a veritable thicket of litigation from which the mortgagee has
been trying to extricate itself for the last twenty years.
Back in November 1964, Eugenio Lim, for and in his own behalf and as attorney-in-fact of his mother, the
widow Maria Moreno (now deceased) and of his brother Lorenzo, together with his other brothers, Aramis,
Mario and Paulino, and his sister, Nila, all hereinafter collectively called the Lims, borrowed from petitioner
Santiago Syjuco, Inc. (hereinafter, Syjuco only) the sum of P800,000.00. The loan was given on the security

of a first mortgage on property registered in the names of said borrowers as owners in common under
Transfer Certificates of Title Numbered 75413 and 75415 of the Registry of Deeds of Manila. Thereafter
additional loans on the same security were obtained by the Lims from Syjuco, so that as of May 8, 1967,
the aggregate of the loans stood at P2,460,000.00, exclusive of interest, and the security had been
augmented by bringing into the mortgage other property, also registered as owned pro indiviso by the
Lims under two titles: TCT Nos. 75416 and 75418 of the Manila Registry.
There is no dispute about these facts, nor about the additional circumstance that as stipulated in the
mortgage deed the obligation matured on November 8, 1967; that the Lims failed to pay it despite
demands therefor; that Syjuco consequently caused extra-judicial proceedings for the foreclosure of the
mortgage to be commenced by the Sheriff of Manila; and that the latter scheduled the auction sale of the
mortgaged property on December 27, 1968. 1 The attempt to foreclose triggered off a legal battle that has
dragged on for more than twenty years now, fought through five (5) cases in the trial courts, 2 two (2) in
the Court of Appeals, 3 and three (3) more in this Court, 4 with the end only now in sight.
1. CIVIL CASE NO. 75180, CFI MANILA, BR.5; CA-G.R. NO. 00242-R; G.R. NO. L34683
To stop the foreclosure, the Lims through Atty. Marcial G. Mendiola, who was later joined by Atty. Raul
Correa filed Civil Case No. 75180 on December 24,1968 in the Court of First Instance of Manila (Branch
5). In their complaint they alleged that their mortgage was void, being usurious for stipulating interest of
23% on top of 11 % that they had been required to pay as "kickback." An order restraining the auction sale
was issued two days later, on December 26,1968, premised inter alia on the Lims' express waiver of "their
rights to the notice and re-publication of the notice of sale which may be conducted at some future date." 5
On November 25,1970, the Court of First Instance (then presided over by Judge Conrado M. Vasquez 6
rendered judgment finding that usury tained the mortgage without, however, rendering it void, declaring
the amount due to be only Pl,136,235.00 and allowing the foreclosure to proceed for satisfaction of the
obligation reckoned at only said amount . 7
Syjuco moved for new trial to enable it to present additional evidence to overthrow the finding of usury,
and the Court ordered the case reopened for that purpose. The Lims tried to negate that order of
reopening in the Court of Appeals, the proceedings being docketed as CA-G.R. No. 00242-R. They failed.
The Court of Appeals upheld the Trial Court. The Lims then sought to nullify this action of the Appellate
Court; towards that end, they filed with this Court a petition for certiorari and prohibition, docketed as G.R.
No. L-34683. But here, too, they failed; their petition was dismissed. 8
Thereafter, and on the basis of the additional evidence adduced by Syjuco on remand of the case from this
Court, the Trial Court promulgated an amended decision on August 16, 1972, reversing its previous holding
that usury had flawed the Lims' loan obligation. It declared that the principal of said obligation indeed
amounted to P2,460,000.00, exclusive of interest at the rate of 12% per annum from November 8, 1967,
and, that obligation being already due, the defendants (Syjuco and the Sheriff of Manila) could proceed
with the extrajudicial foreclosure of the mortgage given to secure its satisfaction. 9
2. APPEAL FROM CIVIL CASE NO. 75180; CA-G.R. NO. 51752; G.R. NO. L-45752
On September 9, 1972, Atty. Paterno R. Canlas entered his appearance in Civil Case No. 75180 as counsel
for the Lims in collaboration with Atty. Raul Correa, and on the same date appealed to the Court of Appeals
from the amended decision of August 16, 1972. 10 In that appeal, which was docketed as CA G.R. No.
51752, Messrs. Canlas and Correa prayed that the loans be declared usurious; that the principal of the
loans be found to be in the total amount of Pl,269,505.00 only, and the interest thereon fixed at only 6%
per annum from the filing of the complaint; and that the mortgage be also pronounced void ab initio. 11
The appeal met with no success. In a decision promulgated on October 25,1976, the Court of Appeals
affirmed in toto the Trial Court's amended decision. 12
The Lims came to this Court seeking reversal of the appellate Court's decision. However, their petition for
review-filed in their behalf by Canlas, and Atty. Pio R. Marcos, and docketed as G.R. No. L-45752-was
denied for lack of merit in a minute resolution dated August 5, 1977. The Lims' motion for reconsideration
was denied and entry of judgment was made on September 24,1977. 13 Here the matter should have
ended; it marked only the beginning of Syjuco's travails.
3. CIVIL CASE NO.112762, CFI MANILA BRANCH 9
Syjuco then resumed its efforts to proceed with the foreclosure. It caused the auction sale of the
mortgaged property to be scheduled on December 20, 1977, only to be frustrated again by another action
filed by the Lims on December 19, 1977, docketed as Civil Case No. 112762 of the Court of First Instance of
Manila. 14 The action sought to stop the sale on the ground that the notice of foreclosure had not been
republished; this, notwithstanding that as earlier stressed, the restraining order of December 26, 1968

issued in Civil Case No 75180 explicitly declared itself to be predicated on the Lims' waiver of "their rights
to the notice and republication of the notice of sale which may be conducted at some future date." 15 An
order restraining the sale issued in the case, although the petition for preliminary injunction was
subsequently denied. A supplemental complaint was also filed by the Lims seeking recovery of some Pl
million in damages allegedly suffered by reason of said lack of republication. 16
4. CIVIL CASE NO. 75180
That very same claim that there had been no republication of the notice of sale, which was the
foundation of the Lims' action in Civil Case No. 112762 as aforesaid was made by the Lims the basis of
an urgent motion filed on December 15, 1977 in Civil Case No. 75180, in which, as earlier narrated, the
judgement authorizing the foreclosure had been affirmed by both the Court of Appeals and this Court, and
had become final and executory. And that motion sought exactly the same remedy prayed for in Civil Case
No. 112762 (filed by the Lims four [4] days later, on December 19, 1977), i.e., the prevention of the
auction sale. The Court -- Branch 5, then presided over by Judge Jose H. Tecson granted the restraining
order on December 19, 1977, 17 the very same day that the Lims commenced Civil Case No. 112762 in the
same Court and in which subsequent action they asked for and obtained a similar restraining order.
The Lims' counsel thus brought about the anomalous situation of two (2) restraining orders directed
against the same auction sale, based on the same ground, issued by different courts having cognizance of
two (2) separate proceedings instituted for identical objectives. This situation lasted for all of three (3)
years, despite the republication of the notice of sale caused by Syjuco in January, 1978 in an effort to end
all dispute about the matter, and despite Judge Tecson's having been made aware of Civil Case No.
112762. It should have been apparent to Judge Tecson that there was nothing more to be done in Civil
Case No. 75180 except to enforce the judgment, already final and executory, authorizing the extrajudicial
foreclosure of the mortgage, a judgment sanctioned, to repeat, by both the Court of Appeals and the
Supreme Court; that there was in truth no need for another publication of the notice since the Lims had
precisely waived such republication, this waiver having been the condition under which they had earlier
obtained an order restraining the first scheduled sale; that, in any event, the republication effected by
Syjuco had removed the only asserted impediment to the holding of the same; and that, finally, the Lims
were acting in bad faith: they were maintaining proceedings in two (2) different courts for essentially the
same relief. 18 Incredibly, not only did Judge Tecson refuse to allow the holding of the auction sale, as was
the only just and lawful course indicated by the circumstances, 19 he authorized the Lims to sell the
mortgaged property in a private sale, 20 with the evident intention that the proceeds of the sale, which he
directed to be deposited in court, would be divided between Syjuco and the Lims; this, in line with the
patently specious theory advocated by the Lims' counsel that the bond flied by them for the postponement
of the sale, set at P6 million by the Court (later increased by P 3 million) had superseded and caused
novation of the mortgage. 21 The case lay fallow for a year, certain other, incidents arising and remaining
unresolved on account of numerous postponements.
5. G.R. No. L-56014
Finally, on January 28, 1981, Syjuco betook itself to this Court, presumably no longer disposed to await
Judge Tecson's pleasure or the Lims' convenience. It filed a petition for certiorari and prohibition, docketed
as G.R. No. L-56014, alleging that in Civil Case No. 75180, Judge Tecson had gravely abused discretion in:
(1) unreasonably delaying the foreclosure of the mortgage;
(2) entertaining the Lims' motion to discharge said mortgage grounded on the theory that it
had been superseded and novated by the Lims' act of filing the bond required by Judge
Tecson in connection with the postponement of the foreclosure sale, and unreasonably
delaying resolution of the issue; and
(3) authorizing the Lims to negotiate and consummate the private sale of the mortgaged
property and motu proprio extending the period granted the Lims for the purpose, in
disregard of the final and executory judgment rendered in the case.
By judgment rendered on September 21, 1982, after due proceedings, this Court 22 issued
the writ prayed for and nullified the orders and actuations of Judge Tecson in Civil Case No.
75180. The judgment declared that:
(1) the republication by Syjuco of the notice of foreclosure sale rendered the complaint in
Civil Case No. 112762 moot and academic; hence, said case could not operate to bar the
sale;
(2) the Lims' bonds (of P 6 million and P 3 million), having by the terms thereof been given
to guarantee payment of damages to Syjuco and the Sheriff of Manila resulting from the
suspension of the auction sale, could not in any sense and from any aspect have the effect
of superseding the mortgage or novating it;

(3) in fact, the bonds had become worthless when, as shown by the record, the bondsman's
authority to transact non-life insurance business in the Philippines was not renewed, for
cause, as of July 1, 1981.
The decision consequently decreed that the Sheriff of Manila should proceed with the mortgage sale, there
being no further impediment thereto. 23
Notice of the decision was served on the Lims, through Atty. Canlas, on October 2, 1982. A motion for
reconsideration was filed, 24 but the same was denied with finality for lack of merit and entry of final
judgment was made on March 22,1983. 25
6. THE SECRET ACTION CIVIL CASE NO. Q-36845 OF THE REGIONAL TRIAL
COURT, QUEZON CITY, JUDGE JOSE P. CASTRO, PRESIDING
Twelve (12) days after the Lims were served, as above mentioned, with notice of this Court's judgment in
G.R. No. 56014, or on October 14,1982, they caused the filing with the Regional Trial Court of Quezon City
of still another action, the third, also designed, like the first two, to preclude enforcement of the mortgage
held by Syjuco.
This time the complaint was presented, not in their individual names, but in the name of a partnership of
which they themselves were the only partners: "Heirs of Hugo Lim." The complaint advocated the theory
that the mortgage which they, together with their mother, had individually constituted (and thereafter
amended during the period from 1964 to 1967) over lands standing in their names in the Property Registry
as owners pro indiviso, in fact no longer belonged to them at that time, having been earlier deeded over
by them to the partnership, "Heirs of Hugo Lim", more precisely, on March 30, 1959, hence, said mortgage
was void because executed by them without authority from the partnership.
The complaint was signed by a lawyer other than Atty. Canlas, but the records disclose that Atty. Canlas
took over as counsel as of November 4,1982. The case, docketed as Civil Case No. Q-39295, was assigned
to Branch 35 of the Quezon City Regional Trial Court, then presided over by Judge Jose P. Castro.
Judge Castro issued a restraining order on October 15, 1982. Then, Sheriff Perfecto G. Dalangin submitted
a return of summons to the effect that on December 6, 1982 he
.. served personally and left a copy of summons together with a copy of Complaint and its
annexes x x upon defendant's office formerly at 313 Quirino Ave., Paranaque, Metro-Manila
and now at 407 Dona Felisa Syjuco Building, Remedios St., corner Taft Avenue, Manila,
through the Manager, a person of sufficient age and discretion duly authorized to receive
service of such nature, but who refused to accept service and signed receipt thereof. 26
A vaguer return will be hard to find. It is impossible to discern from it where precisely the summons was
served, whether at Quirino Avenue, Paranaque, or Taft Avenue, Manila; and it is inexplicable that the name
of the person that the sheriff had been able to identify as the manager is not stated, the latter being
described merely as "a person of sufficient age and discretion." In any event, as it was to claim later,
Syjuco asserts that it was never so served with summons, or with any other notice, pleading, or motion
relative to the case, for that matter.
On February 10, 1983, Atty. Canlas filed an ex-parte motion to declare Syjuco in default. The order of
default issued the next day, also directing the plaintiff partnership to present evidence ex parte within
three (3) days. On February 22, 1983, judgment by default was rendered, declaring void the mortgage in
question because executed by the Lims without authority from the partnership which was and had been
since March 30,1959 the exclusive owner of the mortgaged property, and making permanent an injunction
against the foreclosure sale that had issued on January 14,1983. 27 Service of notice of the default
judgment was, according to the return of the same Sheriff Perfecto Dalangin, effected on the following day,
February 23, 1983. His return is a virtual copy of his earlier one regarding service of summons: it also
states the place of service as the defendant's office, either at its former location, 313 Quirino Avenue,
Paranaque, or at the later address, 407 Dona Felisa, Syjuco Building, Taft Avenue, Manila; and it also fails to
identify the person on whom service was made, describing him only as "the clerk or person in charge" of
the office. 28
Unaccountably, and contrary to what might be expected from the rapidity with which it was decided-twelve
(12) days from February 10, 1983, when the motion to declare defendant Syjuco in default was filed-the
case was afterwards allowed by Atty. Canlas to remain dormant for seventeen (17) months. He made no
effort to have the judgment executed, or to avail of it in other actions instituted by him against Syjuco. The
judgment was not to be invoked until sometime in or after July, 1984, again to stop the extrajudicial
mortgage sale scheduled at or about that time at the instance of Syjuco, as shall presently be recounted.
7. Other Actions in the Interim:

a. CIVIL CASE No. 83-19018, RTC MANILA

While the Lims, through their partnership ("Heirs of Hugo Lim"), were prosecuting their action in the sala of
Judge Castro, as above narrated, Syjuco once again tried to proceed with the foreclosure after entry of
judgment had been made in G.R. No. 56014 on March 22, 1983. It scheduled the auction sale on July 30,
1983. But once again it was frustrated. Another obstacle was put up by the Lims and their counsel, Atty.
Canlas. This was Civil Case No. 83-19018 of the Manila Regional Trial Court. The case was filed to stop the
sale on the theory that what was sought to be realized from the sale was much in excess of the judgment
in Civil Case No. 75180, and that there was absence of the requisite notice. It is significant that the
judgment by default rendered by Judge Castro in Civil Case No. Q-36485 was not asserted as additional
ground to support the cause of action. Be this as it may, a restraining order was issued on July 20,1983 in
said Civil Case No. 83-9018. 29
b. CIVIL CASE NO. Q-32924, RTC QUEZON CITY
What the outcome of this case, No. 83-19018, is not clear. What is certain is (1) that the auction sale was
re-scheduled for September 20, 1983, (2) that it was aborted because the Lims managed to obtain still
another restraining order in another case commenced by their lawyer, Atty. Canlas: Civil Case No. Q-32924
of the Court of First Instance of Quezon City, grounded on the proposition that the publication of the notice
of sale was defective; and (3) that the action was dismissed by the Regional Trial Court on February 3,
1984. 30
No other salient details about these two (2) cases are available in the voluminous records before the Court,
except that it was Atty. Canlas who had filed them. He admits having done so unequivocally: "Thus, the
undersigned counsel filed injunction cases in Civil Case No. 83-19018 and Civil Case No. 39294, Regional
Trial Courts of Manila and Quezon City. ... " 31
7. RE-ACTIVATION OF CIVIL CASE NO. Q-36485, RTC, Q QUEZON CITY, BRANCH
XXXV
Upon the dismissal of Civil Case No. 39294, Syjuco once more resumed its efforts to effect the mortgage
sale which had already been stymied for more than fifteen (15) years. At its instance, the sheriff once
again set a date for the auction sale. But on the date of the sale, a letter of Atty. Canlas was handed to the
sheriff drawing attention to the permanent injunction of the sale embodied in the judgment by default
rendered by Judge Castro in Civil Case No. Q- 36485. 32 Syjuco lost no time in inquiring about Civil Case No.
Q-36485, and was very quickly made aware of the judgment by default therein promulgated and the
antecedent events leading thereto. It was also made known that on July 9, 1984, Judge Castro had ordered
execution of the judgment; that Judge Castro had on July 16, 1984 granted Atty. Canlas' motion to declare
cancelled the titles to the Lims' mortgaged properties and as nun and void the annotation of the mortgage
and its amendments on said titles, and to direct the Register of Deeds of Manila to issue new titles, in lieu
of the old, in the name of the partnership, "Heirs of Hugo Lim." 33
On July 17,1984, Syjuco filed in said Civil Case No. Q-36485 a motion for reconsideration of the decision
and for dismissal of the action, alleging that it had never been served with summons; that granting
arguendo that service had somehow been made, it had never received notice of the decision and therefore
the same had not and could not have become final; and that the action should be dismissed on the ground
of bar by prior judgment premised on the final decisions of the Supreme Court in G.R. No. L-45752 and G.R.
No. 56014.
Two other motions by Syjuco quickly followed. The first, dated July 20, 1984, prayed for abatement of Judge
Castro's order decreeing the issuance of new certificates of title over the mortgaged lands in the name of
the plaintiff partnership. 34 The second, filed on July 24, 1984, was a supplement to the motion to dismiss
earlier filed, asserting another ground for the dismissal of the action, i.e., failure to state a cause of action,
it appearing that the mortgaged property remained registered in the names of the individual members of
the Lim family notwithstanding that the property had supposedly been conveyed to the plaintiff
partnership long before the execution of the mortgage and its amendments,-and that even assuming
ownership of the property by the partnership, the mortgage executed by all the partners was valid and
binding under Articles 1811 and 1819 of the Civil Code. 35
The motions having been opposed in due course by the plaintiff partnership, they remained pending until
January 31, 1985 when Syjuco moved for their immediate resolution. Syjuco now claims that Judge Castro
never acted on the motions. The latter however states that that he did issue an order on February 22, 1985
declaring that he had lost jurisdiction to act thereon because, petitio principii, his decision had already
become final and executory.
8. G.R.NO.L-70403; THE PROCEEDING AT BAR
For the third time Syjuco is now before this Court on the same matter. It filed on April 3, 1985 the instant
petition for certiorari, prohibition and mandamus. It prays in its petition that the default judgment rendered

against it by Judge Castro in said Civil Case No. Q-36485 be annulled on the ground of lack of service of
summons, res judicata and laches, and failure of the complaint to state a cause of action; that the sheriff
be commanded to proceed with the foreclosure of the mortgage on the property covered by Transfer
Certificates of Title Numbered 75413, 75415, 75416 and 75418 of the Manila Registry; and that the
respondents the Lims, Judge Castro, the Sheriff and the Register of Deeds of Manila, the partnership known
as "Heirs of Hugo Lim," and Atty. Paterno R. Canlas, counsel for-the Lims and their partnership-be
perpetually enjoined from taking any further steps to prevent the foreclosure.
The comment filed for the respondents by Atty. Canlas in substance alleged that (a) Syjuco was validly
served with summons in Civil Case No. Q-36485, hence, that the decision rendered by default therein was
also valid and, having been also duly served on said petitioner, became final by operation of law after the
lapse of the reglementary appeal period; (b) finality of said decision removed the case from the jurisdiction
of the trial court, which was powerless to entertain and act on the motion for reconsideration and motion
to dismiss; (c) the petition was in effect an action to annul a judgment, a proceeding within the original
jurisdiction of the Court of Appeals; (d) the plea of res judicata came too late because raised after the
decision had already become final; moreover, no Identity of parties existed between the cases invoked, on
the one hand, and Civil Case No. Q-36485, on the other, the parties in the former being the Lims in their
personal capacities and in the latter, the Lim Partnership, a separate and distinct juridical entity; and the
pleaded causes of action being different, usury in the earlier cases and authority of the parties to
encumber partnership property in the case under review; (e) the plea of laches also came too late, not
having been invoked in the lower court; and (f) the property involved constituted assets of the Lim
partnership, being registered as such with the Securities and Exchange Commission. 36
On his own behalf Atty. Canlas submitted that he had no knowledge of the institution of Civil Case No. Q36485 (though he admitted being collaborating counsel in said case); that he did not represent the Lims in
all their cases against Syjuco, having been counsel for the former only since 1977, not for the last
seventeen years as claimed by Syjuco; and that he had no duty to inform opposing counsel of the
pendency of Civil Case No. Q-36485. 37
Respondent Judge Castro also filed a comment 38 disclaiming knowledge of previous controversies
regarding the mortgaged property. He asserted that Syjuco had been properly declared in default for
having failed to answer the complaint despite service of summons upon it, and that his decision in said
case which was also properly served on Syjuco became final when it was not timely appealed, after which
he lost jurisdiction to entertain the motion for reconsideration and motion to dismiss. He also denied
having failed to act on said motions, adverting to an alleged order of February 22, 1985 where he declared
his lack of jurisdiction to act thereon.
The respondent Register of Deeds for his part presented a comment wherein he stated that by virtue of an
order of execution in Civil Case No. Q-36485, he had cancelled TCTs Nos. 75413, 75415, 75416 and 75418
of his Registry and prepared new certificates of title in lieu thereof, but that cancellation had been held in
abeyance for lack of certain registration requirements and by reason also of the motion of Syjuco's Atty.
Formoso to hold in abeyance enforcement of the trial court's order of July 16, 1984 as well as of the
temporary restraining order subsequently issued by the Court. 39
It is time to write finis to this unedifying narrative which is notable chiefly for the deception, deviousness
and trickery which have marked the private respondents' thus far successful attempts to avoid the
payment of a just obligation. The record of the present proceeding and the other records already referred
to, which the Court has examined at length, make it clear that the dispute should have been laid to rest
more than eleven years ago, with entry of judgment of this Court (on September 24, 1977) in G.R. No. L45752 sealing the fate of the Lims' appeal against the amended decision in Civil Case No. 75180 where
they had originally questioned the validity of the mortgage and its foreclosure. That result, the records also
show, had itself been nine (9) years in coming, Civil Case No. 75180 having been instituted in December
1968 and, after trial and judgment, gone through the Court of Appeals (in CA-G.R. No. 00242-R) and this
Court (in G.R. No. 34683), both at the instance of the Lims, on the question of reopening before the
amended decision could be issued.
Unwilling, however, to concede defeat, the Lims moved (in Civil Case No. 75180) to stop the foreclosure
sale on the ground of lack of republication. On December 19,1977 they obtained a restraining order in said
case, but this notwithstanding, on the very same date they filed another action (Civil Case No. 117262) in
a different branch of the same Court of First Instance of Manila to enjoin the foreclosure sale on the same
ground of alleged lack of republication. At about this time, Syjuco republished the notice of sale in order, as
it was later to manifest, to end all further dispute.
That move met with no success. The Lims managed to persuade the judge in Civil Case No. 75180,
notwithstanding his conviction that the amended decision in said case had already become final, not only
to halt the foreclosure sale but also to authorize said respondents to dispose of the mortgaged property at
a private sale upon posting a bond of P6,000,000.00 (later increased by P3,000,000.00) to guarantee
payment of Syjuco's mortgage credit. This gave the Lims a convenient excuse for further suspension of the

foreclosure sale by introducing a new wrinkle into their contentions-that the bond superseded the
mortgage which should, they claimed, therefore be discharged instead of foreclosed.
Thus from the final months of 1977 until the end of 1980, a period of three years, Syjuco found itself
fighting a legal battle on two fronts: in the already finally decided Civil Case No. 75180 and in Civil Case
No. 117262, upon the single issue of alleged lack of republication, an issue already mooted by the Lims'
earlier waiver of republication as a condition for the issuance of the original restraining order of December
26,1968 in Civil Case No. 75180, not to mention the fact that said petitioner had also tried to put an end to
it by actually republishing the notice of sale.
With the advent of 1981, its pleas for early resolution having apparently fallen on deaf ears, Syjuco went to
this Court (in G.R. No. L-56014) from which, on September 21, 1982, it obtained the decision already
referred to holding, in fine, that there existed no further impediment to the foreclosure sale and that the
sheriff could proceed with the same.
Said decision, instead of deterring further attempts to derail the foreclosure, apparently gave the signal for
the clandestine filing this time by the Partnership of the Heirs of Hugo Lim -on October 14,1982 of Civil
Case No. Q-36485, the subject of the present petition, which for the first time asserted the claim that the
mortgaged property had been contributed to the plaintiff partnership long before the execution of the
Syjuco's mortgage in order to defeat the foreclosure.
Syjuco now maintains that it had no actual knowledge of the existence and pendency of Civil Case No. Q36485 until confronted, in the manner already adverted to, with the fait accompli of a "final" judgment with
permanent injunction therein, and nothing in the record disabuses the Court about the truth of this
disclaimer. Indeed, considering what had transpired up to that denouement, it becomes quite evident that
actuations of the Lims and their lawyer had been geared to keeping Syjuco in the dark about said case.
Their filing of two other cases also seeking to enjoin the foreclosure sale (Civil Case No. 83-19018, Regional
Trial Court of Manila in July 1983, and Civil Case No. Q-32924, Regional Trial Court of Quezon City in
September of the same year) after said sale had already been permanently enjoined by default judgment
in Civil Case No. Q-36485, appears in retrospect to be nothing but a brace of feints calculated to keep
Syjuco in that state of ignorance and to lull any apprehensions it mat may have harbored about
encountering further surprises from any other quarter.
Further credence is lent to this appraisal by the unusually rapid movement of Civil Case No. Q-36485 itself
in its earlier stages, which saw the motion to declare Syjuco in default filed, an order of default issued,
evidence ex parte for the plaintiffs received and judgment by default rendered, all within the brief span of
twelve days, February 10-22, 1983. Notice of said judgment was "served" on February 23, 1983, the day
after it was handed down, only to be followed by an unaccountable lull of well over a year before it was
ordered executed on July 9, 1984 unaccountable, considering that previous flurry of activity, except in
the context of a plan to rush the case to judgment and then divert Syjuco's attention to the Lims' moves in
other directions so as to prevent discovery of the existence of the case until it was too late.
The Court cannot but condemn in the strongest terms this trifling with the judicial process which degrades
the administration of justice, mocks, subverts and misuses that process for purely dilatory purposes, thus
tending to bring it into disrepute, and seriously erodes public confidence in the will and competence of the
courts to dispense swift justice.
Upon the facts, the only defense to the foreclosure that could possibly have merited the full-blown trial and
appeal proceedings it actually went through was that of alleged usury pleaded in Civil Case No. 75180 and
finally decided against the respondent Lims in G.R. No. L-45752 in September 1977. The other issues of
failure to republish and discharge of mortgage by guarantee set up in succeeding actions were sham
issues, questions without substance raised only for purposes of delay by the private respondents, in which
they succeeded only too well. The claim urged in this latest case: that the mortgaged property had been
contributed to the respondent partnership and was already property of said partnership when the
individual Lims unauthorizedly mortgaged it to Syjuco, is of no better stripe, and this, too, is clear from the
undisputed facts and the legal conclusions to be drawn therefrom.
The record shows that the respondent partnership is composed exclusively of the individual Lims in whose
name all the cases herein referred to, with the sole exception of Civil Case No. Q-36485, were brought and
prosecuted, their contribution to the partnership consisting chiefly, if not solely, of the property subject of
the Syjuco mortgage. It is also a fact that despite its having been contributed to the partnership, allegedly
on March 30, 1959, the property was never registered with the Register of Deeds in the name of the
partnership, but to this date remains registered in the names of the Lims as owners in common. The
original mortgage deed of November 14,1964 was executed by the Lims as such owners, as were all
subsequent amendments of the mortgage. There can be no dispute that in those circumstances, the
respondent partnership was chargeable with knowledge of the mortgage from the moment of its execution.
The legal fiction of a separate juridical personality and existence will not shield it from the conclusion of
having such knowledge which naturally and irresistibly flows from the undenied facts. It would violate all
precepts of reason, ordinary experience and common sense to propose that a partnership, as commonly

known to all the partners or of acts in which all of the latter, without exception, have taken part, where
such matters or acts affect property claimed as its own by said partnership.
If, therefore, the respondent partnership was inescapably chargeable with knowledge of the mortgage
executed by all the partners thereof, its silence and failure to impugn said mortgage within a reasonable
time, let alone a space of more than seventeen years, brought into play the doctrine of estoppel to
preclude any attempt to avoid the mortgage as allegedly unauthorized.
The principles of equitable estoppel, sometimes called estoppel in pais, are made part of our law by Art.
1432 of the Civil Code. Coming under this class is estoppel by silence, which obtains here and as to which
it has been held that:
... an estoppel may arise from silence as well as from words. 'Estoppel by silence' arises
where a person, who by force of circumstances is under a duty to another to speak, refrains
from doing so and thereby leads the other to believe in the existence of a state of facts in
reliance on which he acts to his prejudice. Silence may support an estoppel whether the
failure to speak is intentional or negligent.
Inaction or silence may under some circumstances amount to a misrepresentation and
concealment of the facts, so as to raise an equitable estoppel. When the silence is of such a
character and under such circumstances that it would become a fraud on the other party to
permit the party who has kept silent to deny what his silence has induced the other to
believe and act on, it will operate as an estoppel. This doctrine rests on the principle that if
one maintains silence, when in conscience he ought to speak, equity will debar him from
speaking when in conscience he ought to remain silent. He who remains silent when he
ought to speak cannot be heard to speak when he should be silent. 40
And more to the point:
A property owner who knowingly permits another to sell or encumber the property, without
disclosing his title or objecting to the transaction, is estopped to set up his title or interest as
against a person who has been thereby misled to his injury.
xxx
An owner of real property who stands by and sees a third person selling or mortgaging it
under claim of title without asserting his own title or giving the purchaser or mortgagee any
notice thereof is estopped, as against such purchaser or mortgagee, afterward to assert his
title; and, although title does not pass under these circumstances, a conveyance will be
decreed by a court of equity. Especially is the rule applicable where the party against whom
the estoppel is claimed, in addition to standing by, takes part in malting the sale or
mortgage. 41
More specifically, the concept to which that species of estoppel which results from the nondisclosure of an estate or interest in real property has ordinarily been referred is fraud,
actual or constructive. ... Although fraud is not an essential element of the original conduct
working the estoppel, it may with perfect property be said that it would be fraudulent for the
party to repudiate his conduct, and to assert a right or claim in contravention thereof. 42
Equally or even more preclusive of the respondent partnership's claim to the mortgaged property is the
last paragraph of Article 1819 of the Civil Code, which contemplates a situation duplicating the
circumstances that attended the execution of the mortgage in favor of Syjuco and therefore applies
foursquare thereto:
Where the title to real property is in the names of all the partners a conveyance executed by
all the partners passes all their rights in such property.
The term "conveyance" used in said provision, which is taken from Section 10 of the American Uniform
Partnership Act, includes a mortgage.
Interpreting Sec. 10 of the Uniform Partnership Act, it has been held that the right to
mortgage is included in the right to convey. This is different from the rule in agency that a
special power to sell excludes the power to mortgage (Art. 1879). 43
As indisputable as the propositions and principles just stated is that the cause of action in Civil Case No. Q36485 is barred by prior judgment. The right subsumed in that cause is the negation of the mortgage,
postulated on the claim that the parcels of land mortgaged by the Lims to Syjuco did not in truth belong to
them but to the partnership. Assuming this to be so, the right could have been asserted at the time that
the Lims instituted their first action on December 24, 1968 in the Manila Court of First Instance, Civil Case

No. 75180, or when they filed their subsequent actions: Civil Case No. 112762, on December 19, 1977;
Civil Case No. 83-19018, in 1983, and Civil Case No. Q-39294, also in 1983. The claim could have been set
up by the Lims, as members composing the partnership, "Heirs of Hugo Lim." It could very well have been
put forth by the partnership itself, as co-plaintiff in the corresponding complaints, considering that the
actions involved property supposedly belonging to it and were being prosecuted by the entire membership
of the partnership, and therefore, the partnership was in actuality, the real party in interest. In fact,
consistently with the Lims' theory, they should be regarded, in all the actions presented by them, as
having sued for vindication, not of their individual rights over the property mortgaged, but those of the
partnership. There is thus no reason to distinguish between the Lims, as individuals, and the partnership
itself, since the former constituted the entire membership of the latter. In other words, despite the
concealment of the existence of the partnership, for all intents and purposes and consistently with the
Lims' own theory, it was that partnership which was the real party in interest in all the actions; it was
actually represented in said actions by all the individual members thereof, and consequently, those
members' acts, declarations and omissions cannot be deemed to be simply the individual acts of said
members, but in fact and in law, those of the partnership.
What was done by the Lims or by the partnership of which they were the only members-was to split
their cause of action in violation of the well known rule that only one suit may be instituted for a single
cause of action. 44 The right sought to be enforced by them in all their actions was, at bottom, to strike
down the mortgage constituted in favor of Syjuco, a right which, in their view, resulted from several
circumstances, namely that the mortgage was constituted over property belonging to the partnership
without the latter's authority; that the principal obligation thereby secured was usurious; that the
publication of the notice of foreclosure sale was fatally defective, circumstances which had already taken
place at the time of the institution of the actions. They instituted four (4) actions for the same purpose on
one ground or the other, making each ground the subject of a separate action. Upon these premises,
application of the sanction indicated by law is caned for, i.e., the judgment on the merits in any one is
available as a bar in the others. 45
The first judgment-rendered in Civil Case No. 75180 and affirmed by both the Court of Appeals (CA-G.R. No.
51752) and this Court (G.R. No. L-45752) should therefore have barred all the others, all the requisites of
res judicata being present. The judgment was a final and executory judgment; it had been rendered by a
competent court; and there was, between the first and subsequent cases, not only identity of subjectmatter and of cause of action, but also of parties. As already pointed out, the plaintiffs in the first four (4)
actions, the Lims, were representing exactly the same claims as those of the partnership, the plaintiff in
the fifth and last action, of which partnership they were the only members, and there was hence no
substantial difference as regards the parties plaintiff in all the actions. Under the doctrine of res judicata,
the judgment in the first was and should have been regarded as conclusive in all other, actions not only
"with respect to the matter directly adjudged," but also "as to any other matter that could have been
raised in relation thereto. " 46 It being indisputable that the matter of the partnership's being the owner of
the mortgaged properties "could have been raised in relation" to those expressly made issuable in the first
action, it follows that that matter could not be re-litigated in the last action, the fifth.
Though confronted with the facts thus precluding the respondent partnership's claim to the property under
both the principle of estoppel and the provisions of Article 1819, last paragraph, of the Civil Code, as well
as the familiar doctrine of res judicata, the respondent Judge refused to act on Syjuco's motions on the
ground that he no longer had jurisdiction to do so because they were filed after judgment by default
against Syjuco, which failed to answer the complaint despite valid service of summons, had been rendered
and become final. The sheriffs return, however, creates grave doubts about the correctness of the Judge's
basic premise that summons had been validly served on Syjuco. For one thing, the return 47 is unspecific
about where service was effected. No safe conclusion about the place of service can be made from its
reference to a former and a present office of Syjuco in widely separate locations, with nothing to indicate
whether service was effected at one address or the other, or even at both. A more serious defect is the
failure to name the person served who is, with equal ambiguity, identified only as "the Manager" of the
defendant corporation (petitioner herein). Since the sheriffs return constitutes primary evidence of the
manner and incidents of personal service of a summons, the Rules are quite specific about what such a
document should contain:
SEC. 20. Proof of service. The proof of service of a summons shall be made in writing by
the server and shall set forth the manner, place and date of service; shall specify any papers
which have been served with the process and the name of the person who received the
same; and shall be sworn to when made by a person other than a sheriff or his deputy. 48
In the case of Delta Motor Sales Corporation vs. Mangosing

49

it was held that:"

(a) strict compliance with the mode of service is necessary to confer jurisdiction of the court over a
corporation. The officer upon whom service is made must be one who is named in the statute; otherwise
the service is insufficient. So, where the statute requires that in the case of a domestic corporation
summons should be served on 'the president or head of the corporation, secretary, treasurer, cashier or
managing agent thereof, service of summons on the secretary's wife did not confer jurisdiction over the

corporation in the foreclosure proceeding against it. Hence, the decree of foreclosure and the deficiency
judgment were void and should be vacated (Reader vs. District Court, 94 Pacific 2nd 858).
The purpose is to render it reasonably certain that the corporation will receive prompt and
proper notice in an action against it or to insure that the summons be served on a
representative so integrated with the corporation that such person will know what to do with
the legal papers served on him. In other words, 'to bring home to the corporation notice of
the filing of the action'. (35 A C.J.S. 288 citing Jenkins vs. Lykes Bros. S.S. Co., 48 F. Supp.
848; MacCarthy vs. Langston, D.C. Fla., 23 F.R.D. 249).
The liberal construction rule cannot be invoked and utilized as a substitute for the plain legal
requirements as to the manner in which summons should be served on a domestic
corporation (U.S. vs. Mollenhauer Laboratories, Inc., 267 Fed. Rep. 2nd 260).'
The rule cannot be any less exacting as regards adherence to the requirements of proof of service, it being
usually by such proof that sufficiency of compliance with the prescribed mode of service is measured. Here
the only proof of service of summons is the questioned sheriff's return which, as already pointed out, is not
only vague and unspecific as to the place of service, but also neglects to Identify by name the recipient of
the summons as required by Rule 20, Section 14, of the Rules of Court. Where the sheriffs return is
defective the presumption of regularity in the performance of official functions will not lie. 50 The defective
sheriffs return thus being insufficient and incompetent to prove that summons was served in the manner
prescribed for service upon corporations, there is no alternative to affirming the petitioner's claim that it
had not been validly summoned in Civil Case No. Q-36485. It goes without saying that lacking such valid
service, the Trial Court did not acquire jurisdiction over the petitioner Syjuco, rendering null and void all
subsequent proceedings and issuances in the action from the order of default up to and including the
judgment by default and the order for its execution. 51
The respondents' contention that the petition is in effect an action to annul a judgment which is within the
exclusive original jurisdiction of the Court of Appeals 52 has already been answered in Matanguihan vs.
Tengco 53 where, by declaring that an action for annulment of judgment is not a plain, speedy and
adequate remedy, this Court in effect affirmed that certiorari is an appropriate remedy against judgments
or proceedings alleged to have been rendered or had without valid service of summons. 54
Respondent Judge Castro begged the question when, instead of resolving on the merits the issue of the
invalidity of his default judgment and of the proceedings leading thereto because of absence of valid
service of summons on the defendant, which had been expressly raised in the defendant's motion for
reconsideration, he simply refused to do so on the excuse that he had lost jurisdiction over the case. This
refusal was, in the premises, a grave abuse of judicial discretion which must be rectified.
What has been said makes unnecessary any further proceedings in the Court below, which might
otherwise be indicated by the consideration that two of the postulates of petitioner's unresolved motions
which the Court considers equally as decisive as res judicata, to wit: estoppel by silence and Article 1819,
last paragraph, of the Civil Code, do not constitute grounds for a motion to dismiss under rule 16, of the
Rules of Court. Such a step would only cause further delay. And delay has been the bane of petitioner's
cause, defying through all these years all its efforts to collect on a just debt.
The undenied and undisputable facts make it perfectly clear that the claim to the mortgaged property
belatedly and in apparent bad faith pressed by the respondent partnership is foreclosed by both law and
equity. Further proceedings will not make this any clearer than it already is. The Court is clothed with
ample authority, in such a case, to call a halt to all further proceedings and pronounce judgment on the
basis of what is already manifestly of record.
So much for the merits; the consequences that should attend the inexcusable and indefensible conduct of
the respondents Lims, the respondent partnership and their counsel, Atty. Paterno R. Canlas, should now
be addressed. That the Lims and their partnership acted in bad faith and with intent to defraud is manifest
in the record of their actuations, presenting as they did, piecemeal and in one case after another, defenses
to the foreclosure or claims in derogation thereof that were available to them from the very beginning
actuations that were to stave off the liquidation of an undenied debt for more than twenty years and
culminated in the clandestine filing and prosecution of the action subject of the present petition.
What has happened here, it bears repeating, is nothing less than an abuse of process, a trifling with the
courts and with the rights of access thereto, for which Atty. Canlas must share responsibility equally with
his clients. The latter could not have succeeded so well in obstructing the course of justice without his aid
and advice and his tireless espousal of their claims and pretensions made in the various cases chronicled
here. That the cause to which he lent his advocacy was less than just or worthy could not have escaped
him, if not at the start of his engagement, in the years that followed when with his willing assistance, if not
instigation, it was shuttled from one forum to another after each setback. This Court merely stated what is
obvious and cannot be gainsaid when, in Surigao Mineral Reservation Board vs. Cloribel, 55 it held that a

party's lawyer of record has control of the proceedings and that '(w)hatever steps his client takes should
be within his knowledge and responsibility."
In Prudential Bank vs. Castro, 56 strikingly similar actuations in a case, which are described in the following
paragraph taken from this Court's decision therein:
Respondents' foregoing actuations reveal an 'unholy alliance' between them and a clear
indication of partiality for the party represented by the other to the detriment of the
objective dispensation of justice. Writs of Attachment and Execution were issued and
implemented with lightning speed; the case itself was railroaded to a swift conclusion
through a similar judgment; astronomical sums were awarded as damages and attorney's
fees; and topping it all, the right to appeal was foreclosed by clever maneuvers," and which,
the Court found, followed a pattern of conduct in other cases of which judicial notice was
taken, were deemed sufficient cause for disbarment.
Atty. Canlas even tried to mislead this Court by claiming that he became the Lims' lawyer only in 1977, 57
when the record indubitably shows that he has represented them since September 9, 1972 when he first
appeared for them to prosecute their appeal in Civil Case No. 75180. 58 He has also quite impenitently
disclaimed a duty to inform opposing counsel in Civil Case No. Q-39294 of the existence of Civil Case No.
Q-36485, as plaintiffs' counsel in both actions, even while the former, which involved the same mortgage,
was already being litigated when the latter was filed, although in the circumstances such disclosure was
required by the ethics of his profession, if not indeed by his lawyer's oath.
A clear case also exists for awarding at least nominal damages to petitioner, though damages are not
expressly prayed for, under the general prayer of the petition for "such other reliefs as may be just and
equitable under the premises," and the action being not only of certiorari and prohibition, but also of
mandamus-in which the payment of "damages sustained by the petitioner by reason of the wrongful acts
of the defendant' is expressly authorized. 59
There is no question in the Court's mind that such interests as may have accumulated on the mortgage
loan will not offset the prejudice visited upon the petitioner by the excruciatingly long delay in the
satisfaction of said debt that the private respondents have engineered and fomented.
These very same considerations dictate the imposition of exemplary damages in accordance with Art. 2229
of the Civil Code.
WHEREFORE, so that complete justice may be dispensed here and, as far as consistent with that end, all
the matters and incidents with which these proceedings are concerned may be brought to a swift
conclusion:
(1) the assailed judgment by default in Civil Case No.Q-36485, the writ of execution and all
other orders issued in implementation thereof, and all proceedings in the case leading to
said judgment after the filing of the complaint are DECLARED null and void and are hereby
SET ASIDE; and the complaint in said case is DISMISSED for being barred by prior judgment
and estoppel, and for lack of merit;
(2) the City Sheriff of Manila is ORDERED, upon receipt of this Decision, to schedule forthwith
and thereafter conduct with all due dispatch the sale at public auction of the mortgaged
property in question for the satisfaction of the mortgage debt of the respondents Lims to
petitioner, in the principal amount of P2,460,000.00 as found in the amended decision in
Civil Case No. 75180 of the Court of First Instance of Manila, interests thereon at the rate of
twelve (12%) percent per annum from November 8, 1967 until the date of sale, plus such
other and additional sums for commissions, expenses, fees, etc. as may be lawfully
chargeable in extrajudicial foreclosure and sale proceedings;
(3) the private respondents, their successors and assigns, are PERPETUALLY ENJOINED from
taking any action whatsoever to obstruct, delay or prevent said auction sale;
(4) the private respondents (the Lims, the Partnership of the Heirs of Hugo Lim and Atty.
Paterno R. Canlas) are sentenced, jointly and severally, to pay the petitioner P25,000.00 as
nominal damages and P100,000.00 as exemplary damages, as well as treble costs; and
(5) let this matter be referred to the Integrated Bar of the Philippines for investigation,
report, and recommendation insofar as the conduct of Atty. Canlas as counsel in this case
and in the other cases hereinabove referred to is concerned.
SO ORDERED.

JOCELYN M. TOLEDO ,
G.R. No. 172139
Petitioner,
- versus MARILOU M. HYDEN,
Promulgated:
Respondent.
December 8, 2010
x-------------------------------------------------------------------x
DECISION
DEL CASTILLO, J.:
It is true that the imposition of an unconscionable rate of interest on a money debt is immoral
and unjust and the court may come to the aid of the aggrieved party to that contract. However, before
doing so, courts have to consider the settled principle that the law will not relieve a party from the effects
of an unwise, foolish or disastrous contract if such party had full awareness of what she was doing.
This Petition for Review on Certiorari[1] assails the Decision[2] dated August 24, 2005 of the Court
of Appeals (CA) in CA-G.R. CV No. 79805, which affirmed the Decision dated March 10, 2003[3] of the
Regional Trial Court (RTC), Branch 22, Cebu City in Civil Case No. CEB-22867. Also assailed is the
Resolution dated March 8, 2006 denying the motion for reconsideration.
Factual Antecedents
Petitioner Jocelyn M. Toledo (Jocelyn), who was then the Vice-President of the College Assurance
Plan (CAP) Phils., Inc., obtained several loans from respondent Marilou M. Hyden (Marilou). The
transactions are briefly summarized below:
1) August 15, 1993

P 30,000.00
2) April 21, 1994

100,000.00
3) October 2, 1995

30,000.00
4) October 9, 1995

30,000.00
5) May 22, 1997

100,000.00

with 7% monthly interest

TOTAL AMOUNT OF LOAN

P 290,000.00[4]
From August 15, 1993 up to December 31, 1997, Jocelyn had been religiously paying Marilou the
stipulated monthly interest by issuing checks and depositing sums of money in the bank account of the
latter. However, the total principal amount of P290,000.00 remained unpaid. Thus, in April 1998, Marilou
visited Jocelyn in her office at CAP in Cebu City and asked Jocelyn and the other employees who were
likewise indebted to her to acknowledge their debts. A document entitled Acknowledgment of Debt[5] for
the amount of P290,000.00 was signed by Jocelyn with two of her subordinates as witnesses. The said
amount represents the principal consolidated amount of the aforementioned previous debts due on
December 25, 1998. Also on said occasion, Jocelyn issued five checks to Marilou representing renewal
payment of her five previous loans, viz:
Check No. 0010761 dated September 2, 1998
.........
P 30,000.00
Check No. 0010762 dated September 9, 1998
.........
30,000.00
Check No. 0010763 dated September 15, 1998
........
30,000.00
Check No. 0010764 dated September 22, 1998
.........
100,000.00
Check No. 0010765 dated September 25, 1998
.........
100,000.00
TOTAL
P 290,000.00
In June 1998, Jocelyn asked Marilou for the recall of Check No. 0010761 in the amount of P30,000.00 and
replaced the same with six checks, in staggered amounts, namely:
Check No. 0010494 dated July 2, 1998
.........
P

6,625.00

Check No. 0010495 dated August 2, 1998

.........
6,300.00
Check No. 0010496 dated September 2, 1998
.........

5,975.00
Check No. 0010497 dated October 2, 1998
.........
6,500.00
Check No. 0010498 dated November 2, 1998
........
5,325.00
Check No. 0010499 dated December 2, 1998
.........
5,000.00
TOTAL
P 35,725.00
After honoring Check Nos. 0010494, 0010495 and 0010496, Jocelyn ordered the stop payment on
the remaining checks and on October 27, 1998, filed with the RTC of Cebu City a complaint[6] against
Marilou for Declaration of Nullity and Payment, Annulment, Sum of Money, Injunction and Damages.
Jocelyn averred that Marilou forced, threatened and intimidated her into signing the
Acknowledgment of Debt and at the same time forced her to issue the seven postdated checks. She
claimed that Marilou even threatened to sue her for violation of Batas Pambansa (BP) Blg. 22 or the
Bouncing Checks Law if she will not sign the said document and draw the above-mentioned checks.
Jocelyn further claimed that the application of her total payment of P528,550.00 to interest alone is illegal,
unfounded, unjust, oppressive and contrary to law because there was no written agreement to pay
interest.
On November 23, 1998, Marilou filed an Answer[7] with Special Affirmative Defenses and Counterclaim
alleging that Jocelyn voluntarily obtained the said loans knowing fully well that the interest rate was at 6%
to 7% per month. In fact, a 6% to 7% advance interest was already deducted from the loan amount given
to Jocelyn.
Ruling of the Regional Trial Court
The court a quo did not find any showing that Jocelyn was forced, threatened, or intimidated in signing the
document referred to as Acknowledgment of Debt and in issuing the postdated checks. Thus, in its March
10, 2003 Decision the trial court ruled in favor of Marilou, viz:
WHEREFORE, premised on the foregoing, the Court hereby declares the document Acknowledgment of
Debt valid and binding. PLAINTIFF is indebted to DEFENDANT [for] the amount of TWO HUNDRED NINETY
THOUSAND (P290,000.00) PESOS since December 25, 1998 less the amount of EIGHTEEN THOUSAND NINE
HUNDRED (P18,900.00) PESOS, equivalent to the three checks made good (P6,625.00 dated 07-02-1998;
P6,300.00 dated 08-02-1998; and P5,975.00 dated 09-02-1998).
Consequently, PLAINTIFF is hereby ordered to pay DEFENDANT the amount of TWO HUNDRED SEVENTY
ONE THOUSAND ONE HUNDRED (P271,100.00) PESOS due on December 25, 1998 with a 12% interest per
annum or 1% interest per month until such time that the said amount shall have been fully paid.
No pronouncement as to costs.
SO ORDERED.[8]
On March 26, 2003, Jocelyn filed an Earnest Motion for Reconsideration,[9] which was denied by the
trial court in its Order[10] dated April 29, 2003 stating that it finds no sufficient reason to disturb its March
10, 2003 Decision.
Ruling of the Court of Appeals
On appeal, Jocelyn asserts that she had made payments in the total amount of P778,000.00 for a principal
amount of loan of only P290,000.00. What is appalling, according to Jocelyn, was that such payments

covered only the interest because of the excessive, iniquitous, unconscionable and exorbitant imposition of
the 6% to 7% monthly interest.
On August 24, 2005, the CA issued its Decision which provides:
WHEREFORE, premises considered, the Decision dated March 10, 2003 and the Order dated April 29, 2003,
of the Regional Trial Court, 7th Judicial Region, Branch 22, Cebu City, in Civil Case No. CEB-22867 are
hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.[11]
The Motion for Reconsideration[12] filed by Jocelyn was denied by the CA through its Resolution[13]
dated March 8, 2006.
Issues
Hence, this petition raising the following issues:
I.
Whether the CA gravely erred when it held that the imposition of interest at the rate of six percent (6%) to
seven percent (7%) is not contrary to law, morals, good customs, public order or public policy.
II.
Whether the CA gravely erred when it failed to declare that the Acknowledgment of Debt is an inexistent
contract that is void from the very beginning pursuant to Article 1409 of the New Civil Code.
Petitioners Arguments
Jocelyn posits that the CA erred when it held that the imposition of interest at the rates of 6% to 7%
per month is not contrary to law, not unconscionable and not contrary to morals. She likewise contends
that the CA erred in ruling that the Acknowledgment of Debt is valid and binding. According to Jocelyn,
even assuming that the execution of said document was not attended with force, threat and intimidation,
the same must nevertheless be declared null and void for being contrary to law and public policy. This is
borne out by the fact that the payments in the total amount of P778,000.00 was applied to interest
payment alone.
This only proves that the transaction was iniquitous, excessive, oppressive and
unconscionable.
Respondents Arguments
On the other hand, Marilou would like this Court to consider the fact that the document referred to as
Acknowledgment of Debt was executed in the safe surroundings of the office of Jocelyn and it was
witnessed by two of her staff. If at all there had been coercion, then Jocelyn could have easily prevented
her staff from affixing their signatures to said document. In fact, petitioner had admitted that she was the
one who went to the tables of her staff to let them sign the said document.
Our Ruling
The petition is without merit.
The 6% to 7% interest per month paid by Jocelyn is not excessive under the circumstances of this case.
In view of Central Bank Circular No. 905 s. 1982, which suspended the Usury Law ceiling on interest
effective January 1, 1983, parties to a loan agreement have wide latitude to stipulate interest rates.
Nevertheless, such stipulated interest rates may be declared as illegal if the same is unconscionable.[14]
There is certainly nothing in said circular which grants lenders carte blanche authority to raise interest
rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets.[15] In
fact, in Medel v. Court of Appeals,[16] we annulled a stipulated 5.5% per month or 66% per annum interest
with additional service charge of 2% per annum and penalty charge of 1% per month on a P500,000.00
loan for being excessive, iniquitous, unconscionable and exorbitant.
In this case, however, we cannot consider the disputed 6% to 7% monthly interest rate to be
iniquitous or unconscionable vis--vis the principle laid down in Medel. Noteworthy is the fact that in
Medel, the defendant-spouses were never able to pay their indebtedness from the very beginning and
when their obligations ballooned into a staggering sum, the creditors filed a collection case against them.
In this case, there was no urgency of the need for money on the part of Jocelyn, the debtor, which
compelled her to enter into said loan transactions. She used the money from the loans to make advance
payments for prospective clients of educational plans offered by her employer. In this way, her sales

production would increase, thereby entitling her to 50% rebate on her sales. This is the reason why she
did not mind the 6% to 7% monthly interest. Notably too, a business transaction of this nature between
Jocelyn and Marilou continued for more than five years. Jocelyn religiously paid the agreed amount of
interest until she ordered for stop payment on some of the checks issued to Marilou. The checks were in
fact sufficiently funded when she ordered the stop payment and then filed a case questioning the
imposition of a 6% to 7% interest rate for being allegedly iniquitous or unconscionable and, hence,
contrary to morals.
It was clearly shown that before Jocelyn availed of said loans, she knew fully well that the same
carried with it an interest rate of 6% to 7% per month, yet she did not complain. In fact, when she availed
of said loans, an advance interest of 6% to 7% was already deducted from the loan amount, yet she never
uttered a word of protest.
After years of benefiting from the proceeds of the loans bearing an interest rate of 6% to 7% per month
and paying for the same, Jocelyn cannot now go to court to have the said interest rate annulled on the
ground that it is excessive, iniquitous, unconscionable, exorbitant, and absolutely revolting to the
conscience of man. This is so because among the maxims of equity are (1) he who seeks equity must do
equity, and (2) he who comes into equity must come with clean hands. The latter is a frequently stated
maxim which is also expressed in the principle that he who has done inequity shall not have equity. It
signifies that a litigant may be denied relief by a court of equity on the ground that his conduct has been
inequitable, unfair and dishonest, or fraudulent, or deceitful as to the controversy in issue. [17]
We are convinced that Jocelyn did not come to court for equitable relief with equity or with clean
hands. It is patently clear from the above summary of the facts that the conduct of Jocelyn can by no
means be characterized as nobly fair, just, and reasonable. This Court likewise notes certain acts of
Jocelyn before filing the case with the RTC. In September 1998, she requested Marilou not to deposit her
checks as she can cover the checks only the following month. On the next month, Jocelyn again requested
for another extension of one month. It turned out that she was only sweet-talking Marilou into believing
that she had no money at that time. But as testified by Serapio Romarate,[18] an employee of the Bank of
Commerce where Jocelyn is one of their clients, there was an available balance of P276,203.03 in the
latters account and yet she ordered for the stop payments of the seven checks which can actually be
covered by the available funds in said account. She then caught Marilou by surprise when she
surreptitiously filed a case for declaration of nullity of the document and for damages.
The document Acknowledgment of Debt is valid and binding.
Jocelyn seeks for the nullification of the document entitled Acknowledgment of Debt and wants
this Court to declare that she is no longer indebted to Marilou in the amount of P290,000.00 as she had
already paid a total amount of P778,000.00. She claims that said document is an inexistent contract that
is void from the very beginning as clearly provided for by Article 1409[19] of the New Civil Code.
Jocelyn further claims that she signed the said document and issued the seven postdated checks
because Marilou threatened to sue her for violation of BP Blg. 22.
Jocelyn is misguided. Even if there was indeed such threat made by Marilou, the same is not considered as
threat that would vitiate consent. Article 1335 of the New Civil Code is very specific on this matter. It
provides:
Art. 1335. There is violence when in order to wrest consent, serious or irresistible force is employed.
xxxx
A threat to enforce ones claim through competent authority, if the claim is just or legal, does not vitiate
consent. (Emphasis supplied.)
Clearly, we cannot grant Jocelyn the relief she seeks.
As can be seen from the records of the case, Jocelyn has failed to prove her claim that she was
made to sign the document Acknowledgment of Debt and draw the seven Bank of Commerce checks
through force, threat and intimidation. As earlier stressed, said document was signed in the office of
Jocelyn, a high ranking executive of CAP, and it was Jocelyn herself who went to the table of her two
subordinates to procure their signatures as witnesses to the execution of said document. If indeed, she
was forced to sign said document, then Jocelyn should have immediately taken the proper legal remedy.
But she did not. Furthermore, it must be noted that after the execution of said document, Jocelyn honored
the first three checks before filing the complaint with the RTC. If indeed she was forced she would never
have made good on the first three checks.
It is provided, as one of the conclusive presumptions under Rule 131, Section 2(a), of the Rules of
Court that, Whenever a party has, by his own declaration, act or omission, intentionally and deliberately

led another to believe a particular thing to be true, and to act upon such belief, he cannot, in any litigation
arising out of such declaration, act or omission, be permitted to falsify it. This is known as the principle of
estoppel.
The essential elements of estoppel are: (1) conduct amounting to false representation or
concealment of material facts or at least calculated to convey the impression that the facts are otherwise
than, and inconsistent with, those which the party subsequently attempts to assert; (2) intent, or at least
expectation, that this conduct shall be acted upon by, or at least influence, the other party; and, (3)
knowledge, actual or constructive, of the real facts.[20]
Here, it is uncontested that Jocelyn had in fact signed the Acknowledgment of Debt in April 1998
and two of her subordinates served as witnesses to its execution, knowing fully well the nature of the
contract she was entering into. Next, Jocelyn issued five checks in favor of Marilou representing renewal
payment of her loans amounting to P290,000.00. In June 1998, she asked to recall Check No. 0010761 in
the amount of P30,000.00 and replaced the same with six checks, in staggered amounts. All these are
indicia that Jocelyn treated the Acknowledgment of Debt as a valid and binding contract.
More significantly, Jocelyn already availed herself of the benefits of the Acknowledgment of Debt,
the validity of which she now impugns. As aptly found by the RTC and the CA, Jocelyn was making a
business out of the loaned amounts. She was actually using the money to make advance payments for her
prospective clients so that her sales production would increase. Accordingly, she did not mind the 6% to
7% interest per month as she was getting a 50% rebate on her sales.
Clearly, by her own acts, Jocelyn is estopped from impugning the validity of the Acknowledgment
of Debt. [A] party to a contract cannot deny the validity thereof after enjoying its benefits without
outrage to ones sense of justice and fairness.[21] It is a long established doctrine that the law does not
relieve a party from the effects of an unwise, foolish or disastrous contract, entered into with all the
required formalities and with full awareness of what she was doing. Courts have no power to relieve
parties from obligations voluntarily assumed, simply because their contracts turned out to be disastrous or
unwise investments.[22]
WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision of the Court of
Appeals in CA-G.R. CV No. 79805 dated August 24, 2005 affirming the Decision dated March 10, 2003 of
the Regional Trial Court, Branch 22, Cebu City, in Civil Case No. CEB-22867 is AFFIRMED.
SO ORDERED.

G.R. No. 132803

August 31, 1999

JESSIE
V.
PISUEA,
petitioner,
vs.
HEIRS OF PETRA UNATING and AQUILINO VILLAR Represented by Salvador Upod and Dolores
Bautista, respondents.
PANGANIBAN, J.:
Real property acquired during marriage is presumed to be conjugal. Such prima facie presumption,
however, can be overturned by a cadastral courts' specific finding, which has long become final, that the
lot in question was paraphernal in character. The title to the entire property shall pass by operation of law
to the buyer once the seller acquires title over it by hereditary succession, even if at the time of the
execution of the deed of sale, the seller owned only a portion of the property.
The Case
Before us is a Petition for Review on Certiorari seeking to set aside the February 26, 1997 Decision of the
Court of Appeals1 (CA) in CA-GR CV No. 39955,2 as well as its February 12, 1998 Resolution denying
reconsideration. The assailed Decision affirmed in toto the ruling3 of the Regional Trial Court (RTC) of Roxas
City in Civil Case No. V-5462, which disposed as follows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the court renders judgment:
1. Declaring the "Escritura de Venta Absoluta" by Felix Villar and Catalina Villar in favor of Agustin
Navarra, defendant's predecessor-in-interest, as valid with respect to the one-half share of the
whole Lot. No. 1201, Cadastral 228 of the Cadastral of Ivisan, Capiz, located at Barangay Cabugao,
Municipality of Ivisan, Province of Capiz, which is registered in the name of Petra Unating married to
Aquilino Villar under Original Certificate of Title No. RO-6316 (18422) while the other half belongs to
the plaintiffs as Heirs of Aquilino Villar;

2. Dismissing the complaint for lack of merits;

3. Dismissing parties' claim for damages and attorney's fees.
No costs.
The Facts
The present case is rooted in an action for recovery of (1) possession and ownership of a parcel of land, as
well as (2) a sum of money and damages. Before the RTC of Roxas City on May 15, 1989, this case was
originally filed against herein petitioner, Jessie Pisuea, by herein respondents, the heirs of Petra Unating
and Aquilino Villar represented by Salvador Upod and Dolores Bautista. 4
The CA adopted the trial court's summation of the facts as follows: 5
The lot in dispute, known as Lot 1201, Cadastral 228 of the Cadastral of Ivisan, Capiz, located at
Barangay Cabugao, Municipality of Ivisan, Province of Capiz, is a registered land in the name of
Petra Unating married to Aquilino Villar under Original Certificate of Title No. 18422, containing an
area of 83,536 square meters, more or less. Petra Unating died on October 1, 1948 while Aquilino
Villar died on January 14, 1953. The spouses had two [legitimate] children, namely Felix Villar and
Catalina Villar. Felix Villar died on October 24, 1962, while Catalina Villar died on February 21,
1967.1wphi1.nt
For the purpose of this case, Felix Villar is represented by Dolores Villar Bautista, the eldest of his
four children while Catalina Villar is represented by Salvador Villar Upod, the eldest of her three (3)
children, all as plaintiffs [herein respondents].
Defendant [herein petitioner], Jessie Pisuea, is the son-in-law of Agustin Navarra who was once a
[m]unicipal [m]ayor of the Municipality of Ivisan. Agustin Navarra died on October 30, 1958.
The land in question was a subject of court litigations between Dolores Bautista and Salvador Upod
on one hand, and defendant Jessie Pisuea on the other. Thus, when Salvador Upod filed a petition
for reconstitution of its title in Reconstitution Case No. 1408 before Branch I, then Court of First
Instance of Capiz, defendant Jessie Pisuea filed his opposition. Nevertheless, the title was
reconstituted in the name of the registered owners pursuant to the resolution of the court dated
August 6, 1980 and it now has a reconstituted title under OCT No. RO-6316 (18422) in the name of
the original registered owners.
Defendant Jessie Pisuea filed a petition for the surrender of withheld owner's duplicate certificate
of title under Special Case No. 4610 against Salvador Upod, et. al. for [Quieting] of Title and
Damages with Writ of Preliminary Prohibitory Injunction before this court then presided by Hon.
Odon C. Yrad, Jr. who dismissed said complaint on August 27, 1984.
Plaintiffs' evidence further show[s] that Salvador Upod and Dolores Bautista filed a complaint for
ejectment with damages against defendant Jessie, Pisuea and Norberto Tugna before, the
Municipal Court of Ivisan as Civil Case No. 94.
xxx

xxx

xxx

Plaintiffs [respondents herein] contend that during the lifetime of the registered owners, Petra
Unating and Aquilino Villar, they enjoyed the absolute ownership and possession of Lot No. 1201.
However, sometime in 1950 (after the death of Petra Unating on October 1, 1948) Aquilino Villar
entered into an oral partnership agreement for ten (10) years with Agustin Navarra involving the
swampy portion of the lot in question consisting of around four (4) hectares. It was agreed that the
area of around three (3) hectares shall further be developed into a fishpond while about one (1)
hectare shall be converted into a fishpond with the investment capital of Agustin Navarra. Whatever
excess there was in the capital so invested shall be used to make the fishpond productive. Parties
agreed that the net income after deducting expenses shall be divided equally between Aquilino
Villar and his co-heirs on one hand and Agustin Navarra on the other. The upland portion of the land
was not included in the transaction, hence it remained in the possession of the plaintiffs. While
alive, Agustin Navarra, who managed the partnership, religiously gave Aquilino Villar and his coheirs their share. This arrangement continued until Aquilino Villar died on January 14, 1953.
Thereafter, his share in the income of the partnership was delivered by Agustin Navarra to Felix
Villar and Catalina Villar.
Since Agustin Navarra died in 1958, Felix and Catalina Villar repossessed the land in question. They
maintained their possession up to the time Felix and Catalina Villar died. Thereafter, the children of
Felix and Catalina Villar continued the possession of their predecessor-in-interest until the
defendant disturbed their possession sometime in 1974. However, in 1975, they regained physical

possession of the disputed area. From 1975, there were intermittent disturbances and intrusions of
their physical possession of the land in dispute by the defendant particularly the fishpond portion
consisting of about four (4) hectares more or less which resulted [in] the filing of cases against one
and the other as earlier stated.
Sometime in 1982, the defendant in the company of several men including policemen, wrested
physical possession from the plaintiffs which possession of the defendant continued up to the
present. Hence, this complaint for its recovery particularly the fishpond portion.
On the other hand, defendant counters that the whole land in dispute was sold by Felix Villar and
Catalina Villar to Agustin Navarra on February 2, 1949. The contract in Spanish captioned
"ESCRITURA DE VENTA ABSOLUTA" to evidence such sale was duly notarized by Jose Villagracia,
Notary Public, and was entered in his Notarial Register as Document No. 517; Page 7; Book IV;
Series of 1949.
On December 31, 1968, which [was] more than ten (10) years after the death of Agustin Navarra on
October 30, 1958, his heirs executed a Deed of Extra Judicial Partition and Deed of Sale of the land
in question in favor of the Spouses Jessie Pisuea and Rosalie Navarra. The document was notarized
by Jose P. Brotarly, Notary Public, and docketed in his notarial register as Document No. 409; Page
83; Book No. VI; Series of 1968. From the time of the sale up to the present, the fishpond portion
was in the possession of the spouses Jessie Pisuea and Rosalie Navarra. However, the upland
portion is in the possession of Salvador Upod and Dolores Bautista by mere tolerance of the
defendant. The latter denies any partnership agreement o[n] the fishpond portion by Agustin
Navarra, their predecessor-in-interest, and the plaintiffs.
xxx

xxx

xxx

On June 24, 1992, the trial court ruled that since the disputed lot was the conjugal property of Spouses
Petra Unating and Aquilino Villar, its purported sale by Felix and Catalina Villar to Agustin Navarra could be
considered valid. The court, however, ruled that its validity pertained only to the share of the late Petra
Unating, considering that at the time of the sale, Aquilino Villar was still alive. It likewise held that the
respondents, as heirs of Aquilino Villar, were entitled to his one-half share in the disputed lot.
Before the Court of Appeals, Dolores Bautista, and Salvador Upod assailed the trial court's ruling upholding
the validity of the Escritura de Venta Absoluta. Jessie Pisuea, on the other hand, questioned the court's
conclusion that the subject lot was conjugal. He claimed that it was paraphernal, and that the Deed of Sale
transferred the whole lot to Agustin Navarra, his predecessor-in-interest.
Ruling of the Court of Appeals
The appellate court affirmed the trial court's ruling in toto, holding that the disputed lot belonged to the
conjugal partnership of Petra Unating and Aquilino Villar, viz.:
Anent the first issue, defendant argues that Lot. 1201 was a paraphernal property of Petra Unating.
In support of his argument, he mentions the decision of the Court of First Instance of Capiz in
Reconstitution Case No. 1408, where in the dispositive portion thereof, said court ordered the
reconstitution of the Original and Owner's copy of the Original Certificate of Title covering Lot 1201
"in the name of Petra Unating, 40 years old, married to Aquilino Villar, Filipino and residents of
Ivisan, Capiz, having inherited said lot from her mother Margarita Argamaso." He further argues
that the mention of the name Aquilino Villar in the certificate of title is merely descriptive of the civil
status of Petra Unating and the same could not convert the property into a conjugal one.
We are not persuaded. The lower court rejected the statement of the Court of First Instance of Capiz
in Reconstitution Case No. 1408 that Lot 1201 was inherited by Petra Unating from her mother. We
agree with the lower court when it found the phrase "having inherited said lot from her mother
Margarita Argamaso" as a mere obiter, a finding of fact which we find no justifiable reason to set
aside. It must be considered that the authority of the Court of First Instance of Capiz to declare Lot
1201 as having been inherited by Petra Unating from her mother is doubtful. We quote the
pertinent ruling of the lower court, thus:
Reconstitution of a certificate of title [denotes] restoration of the instrument which is
supposed to have been lost or destroyed in its original form and condition. It is limited to the
reconstitution of the certificate as it stood at the time of its loss or destruction and should
not be stretched to include later changes which alter or affect the title of the registered
owner. The original registered owner of Lot 1201 being Petra Unating married to Aquilino
Villar. [That t]he title should be reconstituted in the same names and findings of said court
as to the ownership of the land as paraphernal property of Petra Unating is an obiter. It
therefore did not decide whether Lot 1201 is a paraphernal or a conjugal property of the
registered owners.

We further agree with the lower court when it held that "in the absence [o]f any evidence o[f] any
system [o]f property relation between Petra Unating and Aquilino Villar, it is presumed that it is one
of conjugal partnership." Besides, it appears that Lot 1201 was acquired during the marriage of the
Spouses Petra Unating and Aquilino Villar, since the Original Certificate of Title indicates that Lot
1201 was registered in the name of Petra Unating, married to Aquilino Villar. Thus, the property is
presumed conjugal.
In resolving the question of presumption of conjugality, the Supreme Court had occasion to rule
that:
The presumption is a strong one. As stated in Camia de Reyes v. Reyes de Ilano (63 Phil.
629, 639), "it is sufficient to prove that the property was acquired during the marriage in
order that the same may be deemed conjugal property." And in Laluan v. Malpaya (65 Phil
494, 504), we stated, "proof of acquisition of the property in dispute during the marriage
suffices to render the statutory presumption operative." (Mendoza vs. Reyes, 124 SCRA 154;
emphasis supplied).
Additionally, defendant Pisuea, who brought up the question of Lot 1201 being the paraphernal
property of Petra Unating failed to adduce convincing and concrete evidence that would rebut the
presumption of conjugality of the subject lot. Moreover, it is settled that registration alone of the
property in the name of one of the spouses does not destroy the conjugal nature of the property.
(Mendoza vs. Reyes, supra and Bucoy vs. Paulino, 23 SCRA 248).
The Court of Appeals also rejected Salvador Upod's attack on the Escritura de Venta Absoluta, reasoning
that the Deed of Sale was duly notarized and that no evidence was presented to rebut its due execution,
validity and admissibility as evidence. Furthermore, the appellate court noted that the respondents were
aware of the nature and the content of the assailed Deed, and that they did not object to its translation
given in the trial court.
Likewise, the CA debunked Upod's contention that Pisuea's cause of action had prescribed. It ruled:
On the fourth issue, plaintiff Salvador Upod contends that defendant Pisuea could no longer
enforce his right since Article 1144 of the Civil Code provides that an action based upon a written
contract must be brought within ten years from the time the right of action accrues.
The contention is not meritorious. It is obvious that the above-mentioned article does not apply in
the case at bench since defendant Pisueas [was] not the one who filed the complaint.
Furthermore, defendant is in possession of the fishpond portion of the property in dispute.
Assuming ex gratia argumenti that the aforementioned article is applicable, the claim of defendant
Pisuea has not yet prescribed. Defendant Pisuea obtained his right over Lot 1201 by virtue of the
Deed of Extrajudicial Partition and Deed of Sale dated December 31, 1968. In 1974, within the ten
year prescriptive period, he filed his Answer to the complaint for ejectment filed by plaintiffs[,] (Exh.
"G") raising therein his ownership over Lot 1201. Also, he filed his Opposition (Exh. "U") to the
petition for reconstitution filed by plaintiff Salvador Upod. To our minds, this action and [the]
leadings filed by defendant Pisuea interrupted the prescriptive period.
Anent the fifth issue, plaintiff Salvador Upod posits that the trial court failed to consider the decision
of this court dated January 31, 1985 in AC-UDK Sp. No. 2273 which passed upon the defendantappellant's rights over the subject property.
A perusal of this Court's decision in said case (Exh. "P") shows that, contrary to plaintiffs[']
allegation, this Court thru Mr. Justice Purisima did not pass upon the rights of defendant Pisuea
over Lot 1201. We take note that while the "petition for Review" of the defendant was dismissed by
this Court, the dismissal was anchored on the ground that 1) Petition for Review was not the
appropriate remedy; 2) the summary proceedings for the surrender of the owner's duplicate
provided for under Section 107 of P.D. 1529 or Section 112 of Act 496 is unavailing as there [exist]
serious conflicting claims of ownership; and 3) the ordinary civil action for quieting of title to Lot
1201 is not the proper remedy, since it is only the registered owner of the property affected who
can sue as plaintiff. Clearly, the dismissal of said petition did not have any effect on the present
case.
xxx

xxx

xxx

However, we agree with the plaintiffs' statement that the law applicable is the Old Civil Code,
considering that Petra Unating died in 1948 before the effectivity in 1950 of the New Civil Code.
Suffice it to say that we agree with the lower court when it ruled citing Prades vs. Tecson (49 Phil
479) and Rodriguez v. Borromeo (43 Phil 479) that "when a spouse dies and the conjugal assets are
not liquidated, a co-ownership over said assets may be formed among the surviving spouse and the
heirs of the decedent." Absent any showing that there are debts and charges against the conjugal

assets, we therefore declare Aquilino Villar, the surviving spouse of Petra Unating, as the owner of
the undivided one-half of their conjugal property, while their children, Felix and Catalina Villar, are
the owners of the other undivided half, pursuant to Article 1426 of the Old Civil Code. . . .
In all, the CA agreed with the trial court that the disputed lot should be divided equally between the heirs
of Petra Unating on the one hand, and Jessie Pisuea on the other.
Asserting full ownership over the disputed property and claiming that the CA erred in ruling that Felix and
Catalina could have sold only their one-half share in the property, Petitioner Pisuea filed this Petition for
Review.6
Issues
Petitioner ascribes to the Court of Appeals the following specific errors:
I. The Honorable Court of Appeals erred in affirming the ruling of the lower court that the phrase
"having inherited said lot from her mother Margarita Argamaso" [i]s a mere obiter.
II. The Honorable Court of Appeals erred in ruling that Lot 1201 belongs to the conjugal
[partnership] of Petra Unating and Aquilino Villar.
The Court's Ruling
The Petition is meritorious.
First Issue:
Paraphernal or Conjugal?
Both the CA and the RTC held that the disputed lot was conjugal and dismissed, as obiter, the phrase
"having inherited said lot from her [Petra Unating's] mother, Margarita Argamaso" found in the dispositive
portion of the Decision of the Court of First Insurance (CFI) of Capiz in Reconstitution Case No. 1408. They
explained that the CFI had no authority to include the phrase, because the only objective of reconstitution
was to "restore the certificate covering the property as it stood at the time of its loss or destruction, and
should not be stretched to include later changes which alter of affect the title of the registered owner." 7
We do not agree. It must be emphasized that the dispositive portion of the 1930 Decision, which was
rendered by the same CFI of Capiz acting as a cadastral court, already contained the questioned phrase.
Therefore, it cannot be said that the CFI in 1980 exceeded its authority when it ordered the reconstitution,
in Petra Unating's name, of the original certificate of title covering the disputed lot or in stating therein that
she had inherited it from her mother. After all, such disposition was copied from the same court's 1930
Decision, as evidenced by an authentic copy of it on file with the Bureau of Lands in Capiz.
Cadastral proceedings are proceedings in rem; like ordinary registration proceedings, they are governed by
the usual rules of practice, procedure and evidence. 8 A cadastral decree and a certificate of title are issued
only after the applicants prove that they are entitled to the claimed lots, all parties are heard, and
evidence is considered.
Thus, the finding of the cadastral court that Petra Unating inherited the lot in question from her mother
cannot be dismissed as an obiter, which is "an observation by the court not necessary to the decision
rendered."9 The conclusion of the cadastral court was found in the dispositive portion of its Decision, and it
was material to the nature of Petra Unating's ownership of the lot. Furthermore, it was based on the
evidence presented by the parties and considered by the said court. In any event, it must be pointed out
that the Decision became final a long time ago, and a final judgment in a cadastral proceeding, or any
other in rem proceeding for that matter, is binding and conclusive upon the whole world. 10 Therefore, the
lot in dispute can properly be considered as a paraphernal property of Petra Unating. 11
Concededly, properties acquired during the marriage are presumed to be conjugal. However, this prima
facie presumption cannot prevail over the cadastral court's specific finding, reached in adversarial
proceedings, that the lot was inherited by Petra Unating from her mother. Noteworthy is the fact that the
parties do not assail the validity of the cadastral court's Decision. The 1980 reconstitution of the title to the
lot in the name of "Petra Unating, 40 years old, married to Aquilino Villar, Filipino and resident of Ivisan,
Capiz, having inherited said lot from her mother Margarita Argamaso . . ." was notice to the world,
including her heirs and successors-in-interest, that it belonged to Petra as her paraphernal property. Thus,
the words "married to" were merely descriptive of Petra Unating's status at the time the lot was awarded
and registered in her name.12
Second Issue:

Efficacy of the Escritura de Venta Absoluta

Petitioner Jessie Pisuea traces his claim over the disputed lot to his father-in-law, Agustin Navarra, who in
turn acquired it on February 4, 1949 from Felix and Catalina Villar, Petra Unating's children. His claim is
evidenced by a notarized Deed of Sale written in Spanish, captioned Escritura de Venta Absoluta. Private
Respondent Salvador Upod, on the other hand, asserts that both the trial and the appellate courts erred in
admitting the Deed, citing Section 33, Rule 132 of the Rules of Court, which provides:
Documents written in an unofficial language shall not be admitted as evidence, unless accompanied
with a translation into English or Filipino. To avoid interruption of the proceedings, parties or their
attorneys are directed to have such translation prepared before trial.
We do not agree. Instead, we uphold the Court of Appeals' disquisition, which we quote:
The assertion is without merit. The aforementioned rule is not always taken literally so long as there
was no prejudice caused to the opposing party (People v. Salison, G.R. No. 115690, February 20,
1996). The records show that there was no prejudice caused to the plaintiffs who appear to be
familiar with the contents or the nature of Exhibit "1". As proof thereof, they even questioned the
defendant on the subject document. Importantly, when required by the court to comment on the
English translation of Exhibit "1" (p. 316, records) plaintiffs did not bother to comment giving rise to
the presumption that the translation submitted was correct (p. 340, records). Hence, the court a
quo did not err in admitting the Escritura de Venta Absoluta.13
Furthermore, the respondents were not able to impugn the due execution and validity of the notarized
Deed.
Neither are we persuaded by Upod's argument that the petitioner's right has prescribed under Article 1144
of the Civil Code.14 It is undisputed that he was already in possession of the fishpond when the present
case was filed.
Petitioner and His Wife Are Owners of the Disputed Lot
As already shown, the disputed lot was paraphernal. Since Petra Unating did not leave any other property,
will or debt upon her demise in 1948, the property in question was thus inherited by her children, Felix and
Catalina Villar; and her husband, Aquilino Villar. 15 The two children were entitled to the two-thirds of their
mother's estate,16 while the husband was entitled to the remaining one-third.17
By virtue of the Deed of Sale they executed, Felix and Catalina effectively transferred to Agustin Navarra
on February 4, 1949, their title over their two-thirds share in the disputed lot. However, they could not
have disposed of their father's share in the same property at the time, as they were not yet its owners. At
the most, being the only children, they had an inchoate interest in their father's share.
When Aquilino Villar died in 1953 without disposing of his one-third share in the disputed property, Felix
and Catalina's inchoate interest in it was actualized, because succession vested in them the title to their
father's share and, consequently, to the entire lot. Thus, that title passed to Agustin Navarra, pursuant to
Article 1434 of the present Civil Code, which was already in force at the time of Aquilino's death in 1953.
This provision reads:
When a person who is not the owner of the thing sells or alienates or delivers it, and later, the seller
or grantor acquires title thereto, such title passes by operation of law to the buyer or grantee.
The aforequoted article was applied in Llacer v. Muoz,18 Estoque v. Pajimula,19 Bucton v. Gabar20 and
Quijada v. Court of Appeal.21 In each of these cases, the Court upheld the validity of the sale by one who
previously did not have, but who subsequently acquired, title to the property sold.
Thus, although Felix and Catalina Villar were not yet the owners of the remaining one third of the disputed
lot when they sold to Agustin Navarra on February 4, 1949, they became its owners upon their father's
death on January 14, 1953. Pursuant to Article 1434, the title to the lot passed to Agustin Navarra. 22 It must
be noted that at the time Felix and Catalina executed the Deed of Sale covering the disputed lot, they
intended to sell the entire lot, not just their interest therein, as can be gleaned from a pertinent portion of
the Deed, the English translation of which reads:
xxx

xxx

xxx

DESCRIPTION
A piece of mangrove and coconut grove land (Lot. No. 1201 of Cadastre of Ivisan), and its
improvements, situated in the Municipality of Ivisan, Capiz; that is bounded N to Dapdap Creek; E.
to Lot No. 1196, Sunsunan Creek; and S to Lots Nos. 1239 and 1151; and W to Dapdap Creek YB

B.M. No. 21; and containing an area of Eighty Three Thousand Five Hundred Thirty Six square
meters (83,536 sq. mts.) more or less; declared under Tax No. 609 and valued/appraised at
P490.00.
xxx

xxx

xxx

And finally, we make known, that from/on this date we hand over the said property, its
possession/holding and absolute dominion of the aforesaid piece of land to the buyer, namely Mr.
Agustin Navarra, his heirs and assignees, free from liens and liabilities/obligations, and of such title
we promise and assure to defend now and always against all possible just claims/demands and
claimants or those that may present them.
xxx

xxx

x x x23

Consequently, upon the death of Aquilino Villar, the ownership of the whole of Lot No. 1201 became vested
in Jessie Pisuea and his wife.
WHEREFORE, the Petition is hereby GRANTED and the assailed Decision is SET ASIDE. Petitioner Jessie
Pisuea and his wife, Rosalie Navarra, are hereby declared the owners of Lot. No. 1201, Cadastral 228 of
the Cadastral of Ivisan, Capiz. The Register of Deeds of Capiz is AUTHORIZED to cancel the Original
Certificate of Title in the name of Petra Unating and to issue a new Transfer Certificate of Title in the name
of Spouses Jessie Pisuea and Rosalie Navarra. No costs.
SO ORDERED.