THIRD DIVISION

[G.R. No. 156098. June 27, 2005.]

HOLY CROSS OF DAVAO COLLEGE, INC., petitioner, vs. HOLY

CROSS OF DAVAO FACULTY UNION KAMAPI, respondent.

DECISION

SANDOVAL-GUTIERREZ, J : p

At bar is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the Decision 1 dated June 5, 2002 and Resolution 2
dated October 18, 2002 rendered by the Court of Appeals in CA-G.R. SP No. 65507,
entitled "Holy Cross of Davao College, Inc. vs. Holy Cross of Davao Faculty Union
KAMAPI."

The facts as borne by the records are:

Holy Cross of Davao College, Inc., petitioner, is a tertiary level educational institution at
Sta. Ana Avenue, Davao City.

Sometime in June 1997, petitioner and Holy Cross of Davao College Faculty Union
KAMAPI, 3 respondent, executed a collective bargaining agreement (CBA) providing for
a faculty development scholarship for academic teaching personnel.

On January 16, 1998, petitioner received a letter of invitation for the 1999 Monbusho
scholarship grant (In-Service Training for Teachers) 4 offered and sponsored by the
Japanese Government, through the Japan Information and Cultural Center (JICC).

This prompted Jean Legaspi, a permanent English teacher in petitioner's high school
department, to submit her application.

Meantime, on March 31, 1999, petitioner issued policy statement and guidelines on
educational trips abroad for the school year 1998 to 1999.

In a letter dated August 25, 1999, JICC informed Jean Legaspi that she was selected as a
recipient of the scholarship. Consequently, she requested petitioner to allow her to be on
study leave with grant-in aid equivalent to her 18 months salary and allowance, pursuant
to Section 1, Article XIII of the CBA. However, petitioner denied her request, claiming
that she is not entitled to grant-in aid under its "Policy Statement and Guidelines for Trips
Abroad for Professional Growth." Nevertheless, petitioner granted her 12 months study
leave without pay from October 1999 to September 2000.

Before she left for Japan, she asked respondent union KAMPI to submit to the Grievance
Committee petitioner's refusal to grant her claim for grant-in aid, but the same was not
settled.

Thus, respondent filed with the National Conciliation and Mediation Board (NCMB),
Regional Office No. XI, Davao City, a complaint for payment of grant-in aid against
petitioner. In a Submission Agreement dated June 23, 2000, the parties stipulated to
submit the case for voluntary arbitration. HSTCcD

On March 26, 2001, after the parties submitted their pleadings and position papers, the
Voluntary Arbitrator rendered a Decision ordering petitioner to pay respondent's member,
Jean A. Legaspi, her grant-in aid benefits, the dispositive portion of which reads:

"WHEREFORE, premises considered, decision is hereby rendered:

1. Declaring that there is non-implementation of Article XIII, Section 1 of the

existing collective bargaining agreement (CBA) in the case of Miss Jean A.
Legaspi, a bonafide member of the complainant faculty union;

2. Ordering respondent Holy Cross of Davao College to pay Miss Jean A.

Legaspi her grant-in aid benefit equivalent to her salary, COLA and other
benefits under the law and collective bargaining agreement during the period of
her scholarship grant; and

3. Directing respondent to cease and desist from committing a similar offense to

prevent another dispute in the future, thus, ensure industrial peace.

SO ORDERED."

Petitioner then filed a motion for reconsideration but the same was denied in a Resolution
dated June 20, 2001.

Thereafter, petitioner filed with the Court of Appeals a petition for review under Rule 43
of the 1997 Rules of Civil Procedure, as amended.

On June 5, 2002, the Appellate Court promulgated its Decision affirming the Voluntary
Arbitrator's assailed Decision. The Court of Appeals held:

"The terms of the CBA are clear and leave little room for further interpretation.
In this case, the provision on faculty development operated both to grant and
limit the rights of the parties. As such, while the provision obliges petitioner to
provide grant-in aid programs to its faculty, it also requires such faculty to be
bound in employment to petitioner for a certain period of time, all in the
recognized need to increase the competence of the school's faculty. Legaspi
satisfied all the requirements under the CBA. She agreed to keep her part of the
bargain under the terms of the CBA. Despite her increased professional
competence after undergoing foreign training, she bound herself to continue
working for petitioner for at least two years for every year of scholarship study.

Since the collective bargaining agreement is considered the law between the
parties, containing as it does the agreed terms of employment of the employee
with his employer, unilaterally imposed orders or rules qualifying the terms
contained in the agreement are subordinate to the CBA. At most, such rules,
such as the rules on trips abroad formulated by petitioner a few months before
Legaspi's application, are merely suppletory and can neither contradict nor
undermine the terms found in the CBA.

xxx xxx xxx

Of course, petitioner asseverates that far from deviating from the terms of the
CBA, petitioner in fact merely enforces its terms, in that Section 1 of Article
XIII specifies what petitioner calls the 'substantive conditions' for availment of
the benefit, to wit: that the course must be related to her functions with
petitioner and that it must be in the pursuit of a higher degree. None of these
conditions, according to petitioner, was satisfied by the Monbusho scholarship
because the training will be conducted in a foreign language and will only lead
to the grant of a certificate of completion and not a masters or higher degree.

Even on these ratiocinations, however, petitioner still fails to persuade this

court. Contrary to petitioner's insistence, Legaspi's foreign training is clearly
related to her work with petitioner and will lead to an advancement in her
qualifications for her job.

First of all, we stress that it is petitioner's president herself who, presumably

after determining the worth of allowing its faculty to undergo an in-service
training in a premier foreign institution, immediately advertised the availability
of the scholarship. That petitioner itself encouraged its faculty to apply for the
scholarship effectively demonstrates that petitioner believed that availment of
the training will contribute not only to the professional advancement of its
faculty but also to the development of the quality of education in the school. cEISAD

Second, and more importantly, a cursory examination of the contents of the

course manifests its relevance to Legaspi's work with petitioner. The training
program which focuses on areas such as '(a) Educational Management (e.g.
Educational Administration and Finance, School Management), (b) Methods of
Education (e.g. Teaching-Learning Process System, Curriculum Development,
 Educational Evaluation), (c) Study of Special Subjects (e.g. Mathematics,
Physics, Chemistry, Physical Education), and (d) Observation Study (e.g.
Inspection of a Class Participation in Special Extra-curricular Practice,
Inspection of Various Educational Research Services)' obviously relates to
enhancing Legaspi's effectiveness as a teacher. The fact that the medium of
instruction is Japanese does not negate the program's relevance to Legaspi's
work as an English teacher because the course contents were designed to hone
her skills in effectively teaching her students.

Further, while no degree but only a certificate will be conferred on Legaspi, she
should not be barred from availing of the benefits under the CBA. Indeed, the
CBA merely states 'higher studies' and did not specify to which trainings the
benefit will apply. If the CBA intended that such trainings be confined to those
which will formally grant degrees as petitioner contends, the agreement should
have so stated. Contrary thereto, however, the CBA provides the award of grant-
in aid benefits to faculty members who will pursue 'higher studies.' The term is
so broad as to include programs that would grant certificates and not degrees. In
any case, the unassailable truth is that the certificate which is granted by a
premier foreign institute, is an added higher qualification in favor of Legaspi in
recognition of her increased competence in handling her classes under
petitioner's auspices.

In any event, the construction of any ambiguity in the CBA, such as which
course would be relevant to Legaspi's job, and whether such course comprises
'higher studies' should be made in favor of the employee, Legaspi, in
consonance with the rule that labor laws and agreements should be construed in
favor of the working man.

WHEREFORE, the assailed decision is hereby AFFIRMED. Costs against

petitioner.

SO ORDERED."

On October 18, 2002, the Court of Appeals issued a Resolution denying petitioner's
motion for reconsideration.

Hence, this petition for review on certiorari.

Petitioner contends that the Appellate Court erred in interpreting the parties' CBA,
thereby, restricting its exercise of academic freedom; that it is not obliged to grant Jean
Legaspi a grant-in aid considering that she failed to comply with the substantive
requirements set forth in their CBA, such as (1) that the course is within her area of
competence; and (2) that she will acquire higher academic degree; and that the
Monbusho scholarship is a non-degree program outside her area of competence (English).

Petitioner's contentions lack merit.

The basic issue for our resolution is whether Jean Legaspi is entitled to grant-in aid
benefits in light of the CBA between the parties.

To begin with, any doubt or ambiguity in the contract (CBA) between management and
the union members should be resolved in favor of the latter. This is pursuant to Article
1702 of the Civil Code which provides: "(I)n case of doubt, all labor legislation and all
labor contracts shall be construed in favor of the safety and decent living for the laborer."
5

Section 1, Article XIII of the CBA provides:

"Section 1. FACULTY DEVELOPMENT. It has always been the policy of the

Holy Cross of Davao College that academic teaching personnel must develop
within their areas of competence and in so doing have exercised its prerogative
to demand that academic teaching personnel take the necessary measure to
effect their upgrading in acquiring higher academic degree. In view thereof, the
Management shall grant to all academic personnel a grant-in-aid program,
where the academic teaching personnel, whenever scholarship opportunities
should arise, be afforded a leave of absence to further their studies in
Institutions of Higher Learning with a grant-in-aid equivalent to their salary
and allowance (when there is a mandated wage order) that the concerned
academic teaching personnel is receiving at the time of the scholarship grant,
under the following conditions:

That whenever the school wishes to grant faculty development scholarships,

notice to the entire faculty of the department concerned shall be made through a
public announcement in the bulletin board. In cases where there are two (2) or
more applicants, the Department Head shall set a committee chosen from
among the regular and permanent faculty of the department composed of at least
three (3) but not more than five (5) members. HIaTDS

That the academic teaching personnel grantee shall finish his/her scholarship
grant within time frame of the scholarship grant unless prevented by some
causes over, above and beyond his/her control.

That the academic teaching personnel grantee shall sign a contract with the
Holy Cross of Davao College to serve therein for at least two (2) years for every
year of scholarship study.

That should he/she fail to comply with the conditions of the scholarship grant,
he/she shall reimburse the Holy Cross of Davao College with all the amount
he/she has received during the pendency of the grant together with all interest
thereon allowed by law. No clearance shall be given until full reimbursement
plus interest would have been made."
Along the same line, paragraph 2 of petitioner's Policy Statement and Guidelines for
Trips Abroad for Professional Growth (SY 1998-1999) reads:

"The school recognizes that educational trips abroad promote both personal and
professional growth. Hence, employees may travel abroad for study tours and to
attend seminars, conferences, and other related academic pursuits. The school
may provide financial assistance subject to the following guidelines:

xxx xxx xxx

2. That the employee is the official representative of the school upon

recommendation of the office head. As such, he/she receives regular
salary.

xxx xxx xxx"

The above provisions state that academic teaching personnel, like Jean Legaspi, as
recipient of a scholarship grant are entitled to a leave of absence with a grant-in-aid
equivalent to their monthly salary and allowance, provided such grant is to promote their
professional growth or to enhance their studies in institutions of higher learning. Such
provisions need no interpretation for they are clear. Contracts which are not ambiguous
are to be interpreted according to their literal meaning and not beyond their obvious
intendment. 6

In Mactan Workers Union vs. Aboitiz, 7 we held that "the terms and conditions of a
collective bargaining contract constitute the law between the parties. Those who are
entitled to its benefits can invoke its provisions. In the event that an obligation therein
imposed is not fulfilled, the aggrieved party has the right to go to court for redress."

Thus, the Court of Appeals did not err in its assailed Decision and Resolution.

WHEREFORE, the petition is DENIED. The assailed Decision dated June 5, 2002 and
Resolution dated October 18, 2002 of the Court of Appeals in CA-G.R. SP No. 65507 are
AFFIRMED. Costs against petitioner.

SO ORDERED.

Panganiban, Corona, Carpio Morales and Garcia, JJ., concur.

(Holy Cross of Davao College Inc. v. Holy Cross of Davao Faculty Union - KAMAPI,
|||

G.R. No. 156098, [June 27, 2005], 500 PHIL 104-112)

 SECOND DIVISION

[G.R. No. 156447. April 26, 2005.]

JUAN AGAS and RUSTICA AGAS, petitioners, vs. CARIDAD

SABICO, respondent.

DECISION

CALLEJO, SR., J : p

This is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure,
as amended, of the Decision 1 of the Court of Appeals (CA) in CA-G.R. CV No. 25980,
as well as its resolution denying the motion for reconsideration thereof. The CA affirmed
in toto the Decision 2 of the Regional Trial Court (RTC) of Quezon City, Branch 85, in
Civil Case No. Q-49506. 3

Respondent Caridad Sabico and the spouses Ulpiano and Concordia Paulo (spouses
Paulo) filed an application to acquire a parcel of land, Lot 24, Block 151, Psd-68807,
before the now defunct People's Homesite and Housing Corporation (PHHC). The
subject lot had an area of 400 square meters, located at East Avenue Subdivision, Quezon
City, covered by Transfer Certificate of Title (TCT) No. 66994. The respondent had her
house constructed on the property. She was widowed and worked as a laundrywoman of
the petitioners, Juan Agas, a lawyer, and his wife Rustica Agas. The respondent
considered Rustica's mother, Irene dela Pea, as her second mother. Petitioner Juan Agas
was also one of the wedding sponsors of Thelma Sabico, one of the respondent's
daughters, and the latter even borrowed P141.00 from petitioner Juan Agas on October 1,
1963. 4

The PHHC granted the application of the respondent and that of the spouses Paulo, and
awarded the lot to them. However, they were required to make a downpayment of
P420.00 for the lot upon the execution of a conditional contract to sell, and the balance
thereof payable in installments.

Since the respondent had no means to pay the required downpayment for the property,
she went to the house of the petitioners at Gastambide, Sampaloc, Manila, to borrow the
money. The respondent was with her daughter, Maria Luz. Petitioner Juan Agas agreed to
lend P250.00 to Sabico, but required her to sign an unnotarized "Agreement/Kasunduan"
in which she obliged herself to sell to the lawyer the undivided one-half portion of the
subject property for P2,500.00, payable on such terms and conditions as they may agree
upon, but not less than P50.00 a month. The following principal terms and conditions
were, likewise, stated in the agreement: (a) petitioner Juan Agas would remit to the
respondent the total amount of P250.00 upon the execution of the deed; (b) the
respondent would return the amount she received from the petitioner to the PHHC, and in
case she refused to consummate the agreement, she would be liable for the interest and
liquidated damages; and (c) the respondent would continue to reside in the property for a
period of ten years. The agreement also contained the following stipulation:

9. That once ownership becomes absolute in the first party to said lot, which
shall be done at the earliest opportunity, said first party will, within the thirty-
day from issuance of ownership papers to her, execute an absolute CONTRACT
OF SALE IN FAVOR OF SECOND PARTY OR HIS LEGAL
REPRESENTATIVES PAYMENTS WHATSOEVER EXCEPT EXPENSES
FOR the issuance of the corresponding torrens title and its registration in the
name of first party. 5

The respondent had not finished first grade, could write only her name and did not know
how to read nor understand the English language. Nevertheless, she signed the
agreement. 6

On May 14, 1964, the PHHC executed a Conditional Contract to Sell 7 in favor of the
respondent and the spouses Paulo over Lot 24, Block 151, Psd-68807 for the price of
P4,200.00. The transferees bound and obliged themselves, jointly and severally, to make
a downpayment of P420.00 upon the execution of the contract, the balance of the
purchase price payable within a period of 10 years, in 120 equal monthly installments of
P41.97 at an annual interest of 6%. They also agreed not to sell, assign, encumber,
mortgage, lease or sublease, the property without the written consent of the PHHC. HaIATC

The respondent had been borrowing money from Agas from time to time, and her
indebtedness had totalled to P5,000.00. 8 In August 1964, a Contract to Sell was executed
by and between the respondent and the petitioners which was duly notarized by Notary
Public Efren Barangan. 9 The contract, however, was merely a reiteration of the
agreement previously entered, with a modification that the respondent bound herself to
mortgage her undivided share of the property to the petitioners later as security of the
payment of the amount remitted by Agas to the PHHC, as well as damages and interest:

g) That to secure or guarantee the payment of principal, interest and damages as

mentioned in the two preceding paragraphs (e and f) VENDOR binds herself to
MORTGAGE THE LOT described above or any reasonable real or personal
property owned or may be owned by VENDOR at the selection or discretion of
PURCHASER in favor of PURCHASER or her legal representatives without
additional obligation of PURCHASER in the proper execution or
accomplishment of required documents. 10
After full payment of the purchase price of the property by Sabico and the spouses Paulo,
the PHHC executed a Deed of Sale 11 dated August 5, 1975 over the property in their
favor. On November 14, 1975, TCT No. 215624 12 was issued in the names of the
respondent and the spouses Paulo as pro indiviso owners thereof. 13 At the dorsal portion
of the title was an annotation prohibiting the registered owners from selling, leasing or
encumbering the property within one year from the issuance of the said title.

Almost a month after the issuance of TCT No. 215624, the respondent delivered her
owner's duplicate copy of the said title to petitioner Juan Agas. Notwithstanding this, the
property was still declared for taxation purposes in the names of the respondent and the
spouses Paulo from 1978 until 1986. 14

Meanwhile, on October 3, 1978, the respondent executed an Absolute Deed of Sale of

Real Property 15 in favor of petitioner Juan Agas over the south portion of the property,
her one-half undivided share, with a total area of 200 square meters for the price of
P20,000.00. The contract of sale was notarized by Atty. Evelyn Respicio. However, the
deed was not filed with the Office of the Register of Deeds.

On June 12, 1979, petitioner Juan Agas notified the respondent of his desire to construct
a two-unit residential apartment on the property and required the latter to pay a nominal
monthly rental of P25.00 in exchange for her continued stay in the subject premises. 16
The petitioner claimed that a portion of the rental fee was to be applied to the payment of
realty taxes since the tax declarations were still in the names of the respondent and the
spouses Paulo.

Thereafter, in a Letter 17 dated January 8, 1980, petitioner Juan Agas informed the
respondent of the construction of the apartment building, with a request that she move her
house ("barong-barong") to the eastern rear portion of the property. The area of the lot
given to the respondent was four meters in width and eight meters in length. She was told
that she could use the said lot for the next 15 years subject to renewal upon mutual
agreement. The petitioner asked the respondent to affix her signature on the said letter,
but the latter refused to do so. 18 The respondent likewise refused to move her house as
requested by the petitioner. The petitioner then executed an Affidavit of Adverse Claim
over the property and had it annotated at the dorsal portion of TCT No. 215624. 19 The
construction of a two-door apartment building on the property proceeded in 1981, and
another four-unit apartment structure was built on the lot in 1985.

In the meantime, the respondent continued paying the realty taxes on the property. On
October 9, 1986, the Deed of Absolute Sale executed by her on October 3, 1978 was filed
with the Office of the Register of Deeds. TCT No. 215624 was cancelled, and TCT No.
350542 20 was thereafter issued in the names of the spouses Paulo and the petitioners as
co-owners.
On December 4, 1986, the respondent instituted an action against the petitioners for
Declaration of Nullity of Deeds and Title with Damages before the RTC of Quezon City,
Branch 85. In her complaint, the respondent alleged that she was the true and lawful
owner of the undivided one-half portion of the disputed property, and that practically all
the installment payments for it were procured by way of loan from the petitioners. She
also declared that she was the petitioners' laundrywoman and that she had known and
trusted the petitioners for many years; however, by means of deceit, insidious
machinations, cajolery and other fraudulent devices, they were able to inveigle her into
signing several documents, which ostensibly caused the transfer of ownership of her
share over the subject real property in their favor. She also alleged that the petitioners
took advantage of her credulity and illiteracy, and employed undue moral pressure and
influence on her.HAECID

In their answer with counterclaim, 21 the petitioners maintained that the respondent
knowingly and voluntarily sold the questioned property for adequate and valuable
consideration, and that they did not engage in fraud or undue influence. Moreover, the
respondent was not as gullible as her counsel pictured her to be. In fact, the terms of the
deed of sale had been fully explained to her by the notary public before she affixed her
signature thereto. Moreover, the loans that the respondent secured from them actually
constituted part of the consideration for the sale of the subject property. They also
averred that they had been in open, peaceful, and uninterrupted possession of the subject
property in the concept of owners, and that the respondent's continued occupation of a
small portion of the disputed property was merely by virtue of their "compassion,
accommodation, and tolerance."

After trial on the merits, judgment was rendered in favor of the respondent. The
dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring the document denominated as Agreement (Kasunduan) dated

January 17, 1964 (Exh. H); Contract to Sell (Exh. I) and the Deed of Absolute
Sale dated October 3, 1978 (Exh. 5) void ab initio and of no legal force and
effect;

2. Ordering the Register of Deeds of Quezon City to cancel TCT No. 350542
and issue a new Transfer Certificate of Title over the same property in the name
of Caridad Sabico, widow, and Ulpiano Paulo, married to Concordia Paulo;

3. Ordering the plaintiff to pay defendants the sum of P5,000.00 with interest
thereon at 12% per annum, computed from January 16, 1964 until fully paid;
and
 4. Ordering the defendants to pay plaintiff the sum of P10,000.00 as attorney's
fees, plus costs.

SO ORDERED. 22

The trial court ruled that the deed of absolute sale 23 executed by the respondent in favor
of the petitioners did not reflect on its face the intention of the parties, and as such, there
was no sale of the subject property. Moreover, the execution of the agreement, the
conditional contract to sell and deed of absolute sale was patently illegal and void,
because the lot in question could not possibly have been alienated by the respondent as it
was still owned by the PHHC at the time of their execution. Her right over the subject lot,
according to the trial court, could not be assigned nor transmitted inasmuch as it would
violate the terms and conditions contained in the conditional contract to sell, and is
furthermore contrary to public policy. The trial court opined that there was no showing
that the respondent was fully appraised of the contents of the agreement and the contract
to sell at the time of their execution. The trial court, likewise, sustained the testimony of
the respondent that she had a very low educational attainment, unable to read, and that
her understanding was that the transaction entered into by her was merely one of loan in
the total amount of P5,000.00. Lastly, the trial court held that her delivery of the title to
the petitioners only created an equitable mortgage thereon and was not a result of the sale
of the subject land.

The petitioners appealed the decision to the CA. On September 13, 1999, the CA
rendered judgment affirming in toto the appealed decision. The CA ruled that the
transaction between the respondent and the petitioners was only an equitable mortgage of
the property as shown by the following: first, the respondent remained in possession of
the property even after the execution of the deed of absolute sale on October 3, 1978;
second, she continued to pay the taxes on the property sold up to the second quarter of
1986 as evidenced by the official receipts; 24 and third, the respondent obtained a series
of loans from the petitioners.

On January 15, 2003, the petitioners filed with this Court the instant petition for review.
They raise the following issues:

WHETHER OR NOT THE RESTRICTION PROHIBITING THE VENDOR

(RESPONDENT) FROM SELLING, ENCUMBERING, MORTGAGING OR
LEASING THE QUESTIONED PROPERTY NO LONGER EXISTED.

II

IF THE RESTRICTION NO LONGER EXISTED, AS IN FACT IT NO

LONGER EXISTED, WHETHER OR NOT THE SALE OF THE SUBJECT
 PROPERTY TO THE PETITIONERS WAS VALID, SINCE THE
TRANSACTION WAS ALLEGEDLY AN EQUITABLE MORTGAGE AND
NOT A SALE. 25

The threshold issue in this case is whether the transaction between the petitioners and the
respondent over the undivided one-half portion of the subject property is an equitable
mortgage or a sale thereof.

The issue raised by the petitioners pervade into the factual findings of the RTC and the
appellate court. 26 It bears stressing that a review by certiorari under Rule 45 of the
Revised Rules of Court is a matter of discretion. 27 The jurisdiction of the Supreme
Court is limited to reviewing only errors of law, not of fact. When supported by
substantial evidence, findings of fact of the trial court as affirmed by the CA are
conclusive and binding on the parties, and are not reviewable by this Court unless the
presence of any exceptional circumstances is established. 28 The petitioners failed to
establish any of the exceptional circumstances which would warrant such review.

The petitioners aver that the CA erred in declaring the deed of absolute sale null and void
on the ground that the PHHC did not consent thereto. They insist that the one-year period
prohibiting the sale of the property was to be reckoned from November 14, 1975, when
TCT No. 350542 was issued in their names. The bare fact that the respondent was unable
to read and did not know the English language will not even render the deed of absolute
sale voidable because the respondent did not complain that the deeds executed by her in
their favor were written in English. Moreover, the petitioners assert that the respondent is
estopped from assailing the sale, considering that she kept silent when they had their
building constructed on the property. Additionally, the respondent told the notary public
that she had executed the deed of absolute sale voluntarily and knew its contents. AaEcHC

The petitioners also assert that, contrary to the ruling of the trial court and the CA, the
deed of absolute sale is precisely what it is, a sale and not an equitable mortgage. The
amounts received by the respondent from them were partial payments for the property
and not mere loans. They posit that the respondent admitted that they never demanded for
the repayment of the amounts. Moreover, the realty tax payments were made by the
respondent pursuant to their agreement that such taxes would be taken from the
respondent's monthly rentals. They insist that their compassion and close personal
relationship with the respondent was the reason why the latter continued to be in
possession of the property.

The petition has no merit.

It is settled that the clarity of contract terms and the name given to it do not bar the Court
from ascertaining the true interest of the parties. In Aguirre v. Court of Appeals, 29 the
Court declared:
 In determining the nature of a contract, courts are not bound by the title or name
given by the parties. The decisive factor in evaluating such agreement is the
intention of the parties, as shown not necessarily by the terminology used in the
contract but by their conduct, words, actions and deeds prior to, during and
immediately after executing the agreement. As such, therefore, documentary
and parol evidence may be submitted and admitted to prove such intention. 30

In Reyes v. Court of Appeals, 31 this Court emphasized that:

In determining whether a deed absolute in form is a mortgage, the court is not

limited to the writing memorials of the transaction. The decisive factor in
evaluating such agreement is the intention of the parties, as shown not
necessarily by the terminology used in the contract but by all the surrounding
circumstances, such as the relative situation of the parties at that time, the
attitude, acts, conduct, declarations of the parties, the negotiations between them
leading to the deed, and generally, all pertinent facts having a tendency to fix
and determine the real nature of their design and understanding. As such,
documentary and parol evidence may be submitted and admitted to prove the
intention of the parties.

It must be stressed, however, that there is no conclusive test to determine

whether a deed absolute on its face is really a simple loan accommodation
secured by a mortgage. In fact, it is often a question difficult to resolve and is
frequently made to depend on the surrounding circumstances of each case.
When in doubt, courts are generally inclined to construe a transaction
purporting to be a sale as an equitable mortgage, which involves a lesser
transmission of rights and interests over the property in controversy. 32

Thus, if both parties offer a conflicting interpretation of a contract or several contracts,

then judicial determination of the intention of the parties' intention is inevitable. 33

A contract may be embodied in two or more separate writings, in which event the
writings should be read and interpreted together in such a way as to eliminate seeming
inconsistencies and render the parties' intention effectual. 34 In construing a written
contract, the reason behind and the circumstances surrounding its execution are of
paramount importance to place the interpreter in the situation occupied by the parties
concerned at the time the writing was executed. 35 Construction of the terms of a
contract, which would amount to impairment or loss of right, is not favored. Conservation
and preservation, not waiver, abandonment or forfeiture of a right, is the rule. 36 In case
of doubts in contracts, the same should be settled in favor of the greatest reciprocity of
interests. 37 Moreover, such doubts must be resolved against the person who drafted the
deed and who is responsible for the ambiguities in the deed. 38

In the present case, the respondent signed the following deeds in favor of the petitioner:
(1) the Agreement/Kasunduan, which on its face is dated January 17, 1964; (2) the
Contract to Sell dated August 1964; and (3) the Deed of Absolute Sale dated October 3,
1978 over the respondent's undivided one-half share over the property.

In declaring that the transaction between the petitioners and the respondent on the subject
property was an equitable mortgage, the CA applied Articles 1602 and 1604 of the New
Civil Code, which read:

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of

the following cases:

1. When the price of a sale with right to repurchase is unusually

inadequate;

2. When the vendor remains in possession as lessee or otherwise;

3. When upon or after the expiration of the right to repurchase another

instrument extending the period of redemption or granting a new period
is executed;

4. When the purchaser retains for himself a part of the purchase price;

5. When the vendor binds himself to pay the taxes on the thing sold;

6. In any other case where it may be fairly inferred that the real intention
of the parties is that the transaction shall secure the payment of a debt or
the performance of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received
by the vendee as rent or, otherwise, shall be considered as interest which shall
be subject to the usury laws.

xxx xxx xxx

Art. 1604. The provisions of Article 1602 shall also apply to a contract
purporting to be an absolute sale.

The appellate court relied on the following indicia in concluding that the agreement,
contract to sell and deed of absolute sale executed by the respondent in favor of the
petitioners was an equitable mortgage:

There are at least three indicia of an equitable mortgage in the transaction. First,
vendor Caridad Sabico remained in possession of the property even after the
deed of sale (Exhs. "5" and "5-A") was executed on October 3, 1978. When
Atty. Juan Agas started the construction of the two-door apartment in 1981,
 Caridad Sabico and her children were still residing on the land. Atty. Agas
allowed them to stay on the front part of the land after his carpenters dismantled
their house.

Second, Caridad Sabico continued to pay the taxes on the property "sold" even
after the execution of the deed of sale up to the second quarter of 1986. This is
evidenced by official receipts marked as "B," "B-1" up to "B-25." Upon the
other hand, Tax Declaration No. 13-084-01647 in the name of Ulpiano Paulo
and Juan L. Agas (Exh. "17") was released to the declared property owners on
October 3, 1986 and the real estate tax on the second quarter of 1986 was paid
only on June 30, 1986, as reflected on the back page of the said tax declaration.

As held in Lazatin v. Court of Appeals: ". . . As is well-known, it is only where

payment of taxes is accompanied by actual possession of the land covered by
the tax declaration that such circumstance may be material in supporting a claim
of ownership."

Third, the existence of an equitable mortgage is shown by the fact that appellee
obtained a series of loans from appellant. The records show that the transaction
of the plaintiff-appellee and appellant is not one that transpired in a day or
week. The so-called "purchase price" which were paid on installment was
actually a series of loans used by appellee in defraying her amortization to
PHHC.

These circumstances, taken together, clearly manifest that the real intention of
the parties in the series of transaction is to secure the payment of a debt. 39

We agree with the appellate court.

In addition to the appellate court's findings, the following facts and circumstances further
fortify the said ruling:

First. The respondent was the laundrywoman of the petitioners. Petitioner Juan Agas was
even the godfather of the respondent's daughter Thelma Sabico when the latter got
married.

Second. The respondent was in dire need of money to pay her share of the downpayment
for the property, including the monthly amortizations to the PHHC. She then had to
borrow money from the petitioners, until she was indebted to the latter in the amount of
P5,000.00. In the process, the respondent executed the Agreement/Kasunduan, Contract
to Sell and Deed of Absolute Sale, all drafted by the petitioners. The nature,
consequences and legal effects of the deeds were not explained to the respondent. As
testified to by Notary Public Marilyn Respicio, she merely asked the respondent if the
latter knew the contents of the deed of absolute sale, and the respondent purportedly
replied in the affirmative. The notary public never even bothered to explain to the
respondent the nature and the rights and obligations of the parties under the deed, as
mandated by Article 1332 of the New Civil Code which reads:

When one of the parties is unable to read, and if the contract is in a language not
understood by him and mistake and fraud is alleged, the person enforcing the
contract must show that the terms thereof have been fully explained to the
former.

Necessitous men are not, truly speaking, free men; but to answer a present emergency,
will submit to any terms that the crafty may impose upon them. 40

Third. Despite the execution of the said deeds, the respondent remained in possession of
the property and continued residing in her house which was constructed thereon. If the
agreement between the parties had been one of sale as claimed by the petitioners, it
behooved the latter to have immediately taken possession of the subject lot as soon as the
respondent had executed the deed of absolute sale on October 3, 1978. The petitioners,
however, did no such thing. This circumstance is a badge of the fictitiousness of the deed
of absolute sale. Instead, on June 12, 1979, the petitioners asked the respondent to pay a
nominal monthly rental of P25.00 to which the respondent did not agree. Even if the
respondent had agreed to do so, case law has it that where the vendor remains in physical
possession of the land as lessee or otherwise, the contract should be treated as an
equitable mortgage. 41

Fourth. On November 14, 1975, TCT No. 215624 was issued by the Office of the
Register of Deeds to the respondent and the spouses Paulo. As the registered owner,
notwithstanding the delivery of her owner's duplicate of title to the petitioners sometime
in December 1975, the respondent paid the realty taxes over the property and continued
to do so even after she had executed a deed of absolute sale over her undivided share in
the property in favor of the petitioners on October 3, 1978, until 1986.

Fifth. The petitioners did not immediately file the deed of absolute sale with the Office of
the Register of Deeds, executed by the respondent in their favor on October 3, 1978 or
immediately thereafter. They did so only on October 9, 1986, or after the lapse of eight
years, and were then able to secure title over the property in their names. During all this
time, the respondent remained in possession of the property. ACDIcS

Sixth. The respondent filed a complaint against the petitioners in the RTC soon after the
petitioners registered the deed of absolute sale covering the property in their favor and
secured a title over the property as the registered owners thereof.

The petitioners claim that the total amount of P5,000.00 they remitted to the respondent
was partial payment for the sale of the property. This is, however, belied by the
Agreement executed by the respondent where she transferred her rights over the property
in their favor for P2,500.00, and where the petitioners bound and obliged themselves to
pay, at the rate of P50.00 a month at the very least, inclusive of the P141.00 secured on
October 1, 1963 and the supposed downpayment of P250.00. The petitioners did not
explain why they remitted only P5,000.00 to the respondent, when the consideration for
the transfer of the respondent's rights under the agreement was only P2,500.00.
Moreover, the petitioners did not explain why they bought the property for P20,000.00 as
was made to appear in the deed of absolute sale when, under the agreement and the
contract to sell which the respondent executed in their favor, the consideration only
appears to be P2,500.00.

We believe that the petitioners did not remit to the respondent the P20,000.00, the
purchase price of the property indicated in the deed of absolute sale, for the simple reason
that the respondent did not and never intended to sell her property to the petitioners.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs
against the petitioners.

SO ORDERED.

Puno, Austria-Martinez, Tinga and Chico-Nazario, JJ., concur.

||| (Spouses Agas v. Sabico, G.R. No. 156447, [April 26, 2005], 496 PHIL 729-746)
 SECOND DIVISION

[G.R. No. 154630. May 6, 2005.]

BERMAN MEMORIAL PARK, INC. 1 and LUISA CHONG,

petitioners, vs. FRANCISCO CHENG, respondent.

DECISION

CALLEJO, SR., J : p

Berman Memorial Park, Inc. (BMPI) is the owner and operator of the Iloilo Memorial
Park (IMP) located in Jaro, Iloilo City. One of the sales counselors of the corporation was
Luisa Chong.

Francisco Cheng had been a businessman for 50 years, engaged in the purchase and sale
of salt, monggo, soya and other commodities under the business name "Timberland
Native Products and Supplies." 2 Among his employees was an accountant.

On January 18, 1994, Conchita Cheng, Francisco Cheng's wife, died. On January 20,
1994, Cheng purchased from BMPI a memorial lot, identified as 12-Lot Family Estate,
Jr., in the IMP for the interment of his wife. He and BMPI executed, on the said date, At-
Need Purchase Agreement No. 2280 in which he bound and obliged himself to pay its
purchase price of P150,000.00, thus: P50,000.00 as downpayment; P50,000.00 on or
before March 7, 1994; and P50,000.00 on or before April 22, 1994. 3 The remains of
Conchita were interred in the said lot.

Cheng made a downpayment of P50,000.00 and executed a promissory note, obliging

himself to pay the balance of P100,000.00 on or before the said due date. 4 Cheng was
able to pay the P100,000.00 via postdated check, 5 less P1,000.00 representing Chong's
cash offer for the deceased which she and BMPI had agreed would be deducted from her
future commissions. 6 However, Cheng remitted to BMPI, on April 22, 1994, the amount
of P49,750.00 as additional payment of the said lot although he had already paid the price
in full. 7

Sometime in May 1994, Cheng purchased from the BMPI a bigger lot in the IMP where
the remains of his wife would be transferred. He was shown a price list of the lots in the
said park, including 24-Lot Family Estate, Sr., with an at-need price of P350,000.00,
inclusive of the cost of perpetual care. BMPI offered to sell the said lot to Cheng at a pre-
need price of P250,000.00, less P110,000.00 of his payment of P150,000.00 for Lot 12,
or in the net price of P140,000.00. He was given a computation of the price for his
consideration and approval. Cheng agreed to purchase 24-Lot Family Estate, Sr. for the
price of P250,000.00, inclusive of P8,100.00 for perpetual care, less P110,000.00 of the
P150,000.00 paid by him for 12-Lot, or the net price of P140,000.00, inclusive of the cost
of perpetual care for the lot. Cheng and BMPI executed, on May 11, 1994, Pre-Need
Purchase Agreement No. 2318 covering the transaction. 8 Cheng bound and obliged
himself to pay on the following terms: P50,000.00 as downpayment, the balance payable
in 24 monthly installments of P4,625.00, commencing on May 31, 1994, with 21%
interest on the unpaid balance. Cheng remitted the downpayment of P50,000.00, and was
able to pay 17 of the 24 monthly installments due from June 30, 1994 to November 17,
1995, or in the total amount of P78,625.00. 9

Subsequently, Cheng received a statement of account from BMPI showing that he still
had a balance of P32,375.00. 10 In a Letter dated January 3, 1996, Cheng, through
counsel, informed BMPI that he had, in fact, made an overpayment of P77,375.00 for the
two lots, demanded that the excess payment be refunded to him, and that the Certificate
of Ownership for 24-Lot be issued to him. 11 In a statement of account Cheng prepared,
he declared that he had a net balance due from BMPI in the amount of P57,414.82,
inclusive of interest of P12,414.82. 12 He stated therein that the cost of the two lots was
P250,000.00, and that he had made a total payment of P327,375.00.

BMPI came out with its statement of account dated March 22, 1996, showing that the
purchase price of 24-Lot was P140,000.00 13 and that Cheng had an outstanding account
of P33,875.62 for the said lot. In his Reply-Letter dated April 2, 1996, Cheng insisted that
even if the two lots cost P311,000.00, he still had a balance, in his favor, amounting to
P26,375.00. 14 In an effort to reconcile their differences, a conference among Cheng,
Chong and the accountant of BMPI was held, to no avail. SCaITA

On July 24, 1996, Cheng filed a Complaint against the IMP, not against BMPI, and Luisa
Chong in the Regional Trial Court (RTC) of Iloilo City, for specific performance with
damages. He alleged that the IMP was a corporation duly organized and existing in the
Philippines and that he had purchased 24-Lot from the IMP for P250,000.00, less the
amount of P150,000.00 he had paid for 12-Lot, or a net price of P100,000.00. He asserted
that he had made an overpayment of P77,375.00 for the said lot. He prayed that, after due
proceedings, judgment be rendered in his favor:

WHEREFORE, it is most respectfully prayed of this Honorable Court that, after

due notice and hearing, judgment be rendered, to wit:

1. Declaring that the 24-Lot Family Estate, Sr. (an interest space) as
having been fully paid and ordering defendant to convey to
plaintiff the Certificate of Ownership over it;
 2. Ordering defendant to return to plaintiff the total sum of P77,375.00
representing overpayment made by plaintiff on his purchase of
the aforedescribed interment space plus interest at the legal rate;

3. Ordering defendant to pay plaintiff the sum of P5,000.00 as actual

expenses, P30,000.00 as attorney's fees, and P20,000.00 as
exemplary damages;

4. Ordering defendant to pay plaintiff the sum of P100,000.00 as moral

damages;

5. To pay the costs of suit;

6. For such other reliefs and remedies that are just deemed and equitable
in the premises. 15

In her answer with counterclaim, Chong admitted the allegation in the complaint that the
IMP was a corporation duly registered and organized in the Philippines (although it was
not). She further alleged that the price of 24-Lot was actually P350,000.00, but that the
IMP had agreed to sell the lot to Cheng for P250,000.00, less P110,000.00 of the
P150,000.00 price of 12-Lot; as was the standard operating procedure, out of the amount
of P150,000.00 which was the total price of 12-Lot, only P110,000.00 was to be credited
to Cheng because the said amount was the pre-need price. Chong alleged that the
difference of P40,000.00 (P150,000.00 less P110,000.00) belonged to the IMP. 16
Appended to their answer was a copy of the Pre-Need Purchase Agreement of the parties
as Annex "1" thereof.

During the pre-trial, the parties agreed to reset the same to give time to Atty. Florecita B.
Gelvezon, a certified public accountant, to determine whether or not Cheng had overpaid,
or whether he still had a balance due for the purchase of the two lots. 17 On January 22,
1997, the trial court granted the motion and gave Atty. Gelvezon two weeks to submit her
report. 18 She submitted her report on February 6, 1997, showing that Cheng still had a
balance of P32,375.00 due in favor of BMPI for 24-Lot, based on the purchase price of
P140,000.00 for the said lots. 19 Cheng filed his comments/observations/objections to the
report. He appended thereto the handwritten computation of BMPI on the cost of the two
lots and the computations thereof. 20 For their part, Chong and BMPI agreed to the report
of Atty. Gelvezon. 21

During the trial, Cheng testified that he purchased 24-Lot for P250,000.00 and that he
discovered his overpayment during the first week of November 1994. 22 He signed a
blank document in printed form which turned out to be the Pre-Need Purchase
Agreement because he was sick with hernia and had to be operated on in five days. 23 He
was not given a copy of the Pre-Need Purchase Agreement. 24 He knew that the purchase
price of a lot under a Pre-Need Purchase Agreement was P250,000.00. 25
Carmen S. Majarocon, the bookkeeper and accountant of BMPI, testified that on January
19, 1994, Cheng and his brother Santiago Cheng arrived in the office to buy a lot at the
IMP. 26 She showed them the price list of the lots. 27 She explained to them that the at-
need price of 12-Lot was P150,000.00, while the at-need price of 24-Lot, which was
bigger than Lot 12, was P350,000.00. Cheng opted to buy 12-Lot, and signed the At-
Need Purchase Agreement 28 and Promissory Note. 29 Cheng then returned to BMPI on
May 11, 1994 and agreed to purchase 24-Lot at the pre-need price of P250,000.00, less
P110,000.00 of the P150,000.00 he had paid for 12-Lot, or the net price of P140,000.00.
30 She averred that the difference of P40,000.00 between the price of P150,000.00 for
12-Lot and the price of P110,000.00 credited to Cheng belonged to BMPI. She also
testified that Cheng signed the Pre-Need Purchase Agreement on May 11, 1994, 31 and
was given a copy of the contract, and her computations of the purchase price of 24-Lot.
32 As of September 1996, Cheng had a balance on his account in the amount of
P38,634.75. 33 Chong corroborated Majarocon's testimony.

On January 8, 1998, the trial court rendered judgment in favor of Cheng. The fallo of the
decision reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor

of the plaintiff and against the defendants.

1. Ordering defendants to return or reimburse plaintiff the amount of

P28,625.00 representing the overpayment that the latter made in purchasing the
24-Lot Family Estate, Sr. to earn legal interest from the filing of the complaint
until fully paid or returned.

2. Ordering defendants to pay plaintiff, jointly and severally:

a) P20,000.00 as and for attorney's fees;

b) P30,000.00 as moral damages;

c) Dismissing the counterclaim.

Costs against the defendants.

SO ORDERED. 34

The trial court ruled that since Cheng purchased 24-Lot to upgrade 12-Lot where the
remains of his wife were interred, the total amount of P150,000.00 which he paid for 12-
Lot should be deducted from P250,000.00 (the purchase price of 24-Lot), instead of only
P110,000.00 as claimed by Chong and BMPI. DEcTCa
The decision was appealed by Chong and BMPI to the Court of Appeals (CA), which
rendered judgment on January 18, 2001 affirming the decision of the RTC. 35 Their
motion for reconsideration was also denied by the appellate court. 36

Chong and BMPI, now the petitioners, filed their petition for review on certiorari of the
decision and resolution of the CA. The petitioners aver that:

I.

RESPONDENT KNEW AND UNDERSTOOD THE TWO (2)

TRANSACTIONS HE ENTERED INTO AND WAS BENEFITED BY THE
PROCESS CALLED UPGRADING.

II.

THERE IS BASIS FOR THE PETITIONERS TO CREDIT ONLY P110,000.00

OUT OF THE P150,000.00 PAYMENTS MADE BY RESPONDENT AT THE
TIME HE DECIDED TO PURCHASE THE BIGGER LOT.

III.

THERE IS NO BASIS FOR DECLARING THAT RESPONDENT HAS

ALREADY MADE AN OVERPAYMENT OF P28,625.00. ON THE
CONTRARY, HE IS STILL LIABLE TO PAY PETITIONERS THE SUM OF
P38,634.75 REPRESENTING THE BALANCE OF HIS PRINCIPAL
ACCOUNT PLUS SURCHARGES AS OF SEPTEMBER 11, 1996. 37

The petitioners assert that the at-need price of 12-Lot was P150,000.00, while that of 24-
Lot was P350,000.00. BMPI sold 24-Lot for the pre-need price of P250,000.00, less
P110,000.00 of his payment for 12-Lot, or the net price of P140,000.00 inclusive of costs
for perpetual care, and to which the respondent agreed. The petitioners explained why
only P110,000.00 of the price of P150,000.00 for 12-Lot was credited to the respondent
for the purchase price of 24-Lot, thus:

Under this practice of upgrading which the petitioner corporation allows, when
a client purchases an At-Need 12-Lot Family Estate, Jr. and after paying the
price he upgrades it to a 24-Lot Family Estate, Sr., the former labels it not as an
At-Need 24-Lot Family Estate, Sr. but a Pre-Need 24-Lot Family Estate, Sr.
which has a lower price of P250,000.00. However, since at the time of the
purchase, he gets it at the at-need price, his payment of P150,000.00 is not fully
credited to his next purchase. He is charged the at-need cost of P40,000.00
because the at-need price of a 12-Lot Family Estate, Jr. is P150,000.00 while its
pre-need price is P110,000.00. The P40,000.00 serves as a cost for the burden
imposed on the corporation which is in charge for all these arrangements and
predicaments for the change of burial lot from a smaller At-Need 12-Lot Family
 Estate, Jr. to Pre-Need 24-Lot Family Estate, Sr., a different burial lot. It should
be noted that when a client made his first purchase, it was at an at-need price.
When he made his second purchase in a process called upgrading, the price is
already a pre-need one.

It would have been different should a client made (sic) his first purchase of the
lot at a pre-need price and after payment of the pre-need price, he changes the
lot to a bigger one at a pre-need price because, by then, there would be no at-
need cost. The whole pre-need price paid by him in the contract is credited to
his second upgraded contract. However, he pays a bigger price with a total of
P350,000.00.

Respondent was benefited by this upgrading of the contract from At-Need 12-
Lot Family Estate, Jr. to Pre-Need 24-Lot Family Estate, Sr. 38

The petitioners maintained that the CA failed to consider the evidence on record,
including the acts of the parties, simultaneously with and subsequent to their execution of
the Pre-Need Purchase Agreement on May 11, 1994, and the incredibility of the
respondent's lone testimony.

In his comment on the petition, the respondent alleged that the issues raised by the
petitioners are factual; hence, improper under Rule 45 of the Rules of Court. Moreover,
the respondent pointed out, the issues presented by the petitioners are unsubstantial
matters.

The petition is meritorious.

Before resolving the merits of the petition, however, we have to address and resolve the
issue as to whether or not the IMP has the capacity to sue as petitioner and be sued as
defendant in the RTC; and whether or not BMPI is an indispensable party in the RTC,
and in this case.

The rule is that only natural or juridical persons or entities authorized by law may be
parties in a civil case. 39 A sole proprietorship is not vested with juridical personality and
cannot sue or file or defend an action. There is no law authorizing sole proprietorship to
file a suit. A sole proprietorship does not possess a judicial personality separate and
distinct from the personality of the owner of the enterprise. 40

In this case, the IMP is not a corporation and does not have a juridical personality that
could enable it to be a party defendant in the RTC. It is only a business name used by
BMPI for the memorial park it owned and operated. In fact, it is clearly indicated in the
At-Need Purchase Agreement and Pre-Need Purchase Agreement dated January 20 and
May 11, 1994, respectively, that the seller of the lots is BMPI, and that the IMP is owned
and operated by it. It is BMPI which has the juridical personality to be sued by the
respondent as the plaintiff in the RTC. Indeed, the real party-in-interest as party-
defendant in the RTC is BMPI, the signatory to the said agreements which the respondent
sought to enforce therein. Since a contract may be enforced only by the parties thereto as
against each other, the real parties-in-interest, either as plaintiff or defendant in an action
based on the said contract, must be the parties to the said contract. If the real party-in-
interest as defendant is not impleaded as such, then the complaint must be dismissed on
the ground that it states no cause of action, unless the complaint is later amended to
implead the said party-defendant in substitution. In this case, petitioner Chong did not
pursue the issue in the RTC and in the CA. In fact, she erroneously declared in her
answer to the complaint that the IMP was a corporation. However, it is not too late for the
Court to order the impleading of the BMPI as party-defendant in the RTC, and party-
petitioner in this case, conformably with the following ruling:

The complaint then should have been amended to implead Yao Ka Sin as
plaintiff in substitution of Yao Ka Sin Trading. However, it is now too late in
the history of this case to dismiss this petition and, in effect, nullify all
proceedings had before the trial court and the respondent Court on the sole
ground of petitioner's lack of capacity to sue. Considering that private
respondent did not pursue this issue before the respondent Court and this Court;
that, as We held in Juasing, the defect is merely formal and not substantial, and
an amendment to cure such defect is expressly authorized by Section 4, Rule 10
of the Rules of Court which provides that "[a] defect in the designation of the
parties may be summarily corrected at any stage of the action provided no
prejudice is caused thereby to the adverse party;" and that "[a] sole
proprietorship does not, of course, possess any juridical personality separate and
apart from the personality of the owner of the enterprise and the personality of
the persons acting in the name of such proprietorship," We hold and declare that
Yao Ka Sin should be deemed as the plaintiff in Civil Case No. 5064 and the
petitioner in the instant case. As this Court stated nearly eighty (80) years ago in
Alonso v. Villamor:

No one has been misled by the error in the name of the party-plaintiff. If
we should, by reason of this error, send this case back for amendment
and new trial, there would be on the retrial the same complaint, the same
answer, the same defense, the same interests, the same witnesses, and
the same evidence. The name of the plaintiff would constitute the only
difference between the old trial and the new. In our judgment, there is
not enough in a name to justify such action. 41

Resultably, then, the complaint in the RTC and the petition at bench are amended to
implead BMPI as party-defendant/respondent in substitution of the IMP. AHCTEa

And now on the merits of the petition.

We agree with the respondent that the threshold issue in this case whether the
petitioners and the respondent had agreed that the net price of 24-Lot was only
P140,000.00 as it appears in the Pre-Need Purchase Agreement 42 is factual. We,
likewise, agree with his contention that under Rule 45 of the Rules of Court, only issues
of law may be raised in this Court. However, the said rule is without exception. In Josefa
v. Zhandong Trading Corporation, 43 the Court held that, under Rule 45 of the Rules of
Court, it may delve into and resolve factual issues on the following reasons: (1) the
conclusion is grounded on speculations, surmises or conjectures; (2) the inference is
manifestly mistaken, absurd or impossible; (3) there is grave abuse of discretion; (4) the
judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting;
(6) there is no citation of specific evidence on which the factual findings are based; (7)
the finding of absence of facts is contradicted by the presence of evidence on record; (8)
the findings of the CA are contrary to those of the trial court; (9) the CA manifestly
overlooked certain relevant and undisputed facts that, if properly considered, would
justify a different conclusion; (10) the findings of the CA are beyond the issues of the
case; and (11) such findings are contrary to the admissions of both parties.

In this case, the May 11, 1994 Pre-Need Purchase Agreement 44 between the BMPI and
the respondent plainly and unequivocally states that the purchase price of 24-Lot is
P140,000.00, payable as follows:

That the consideration of the above shall be as follows:

Price P131,900.00

Perpetual Care P8,100.00

Total P140,000.00

Down Payment P50,000.00

Balance Due P90,000.00

PURCHASER agrees to pay to the SELLER therefore the sum of ONE

HUNDRED FORTY THOUSAND ONLY (P140,000.00) in Philippine
Currency as follows: P50,000.00 upon the signing of this agreement by
PURCHASER receipt of which is hereby acknowledged, and the remainder in
installments of P4,625.00 on the 31st day of each and every month for 2
yrs/(24) months, commencing on May 31, 1994, until the entire balance has
been paid. Interest shall be charged at the rate of 21% per annum on the unpaid
balance. All payments for interment space shall be applied first to interest, next
to the purchase price and the balance to the Perpetual Care Fund. 45
The respondent signed the agreement and was furnished with a copy. Indeed, the
respondent confirmed in his complaint that he signed the agreement.

The respondent cannot feign ignorance of the terms of the agreement by alleging that he
affixed his signature on a blank form, and on his barefaced and self-serving pretext that
he was suffering from hernia and had to be operated on in five days.

First. At the bottom of the agreement is the advice given to the respondent: "Please Read
This Contract." 46

Second. The respondent had been a businessman for 50 years before he signed the
agreement. The Court cannot believe that he would sign a blank agreement without first
reading and reviewing the terms and conditions contained therein. The respondent is
presumed to take ordinary care of his concerns; 47 that the private transaction was fair
and regular; 48 that the ordinary course of business has been followed; 49 and that the
respondent intended the ordinary consequences of his voluntary act. 50

Third. The respondent admitted in his Comment dated February 13, 1997 that he had
agreed to the conversion of 12-Lot to 24-Lot, and that the petitioner furnished him a
computation which he appended to his pleading. The computation shows that the net
price of 24-Lot is P140,000.00, thus:

Conversion of 12-Lot Jr. F.E. to 24-Lot Sr. F.E.

Cost of 24-Lot Sr. F.E. P250,000.00

Less: Cost of 12-Lot Jr. F.E. P110,000.00

Balance P140,000.00

Less: Downpayment 50,000.00

Balance P90,000.00

Monthly Installment on Balance of P90,000.00

1 yr. P8,380.00/mo.

2 yrs. P4,625.00/mo. 51

Fourth. The respondent complied with the terms and conditions of the Pre-Need Purchase
Agreement and made the requisite downpayment and the monthly installments for 17
months without any plaint. He never demanded for a copy of the said agreement, or
complained to the petitioners that the contents thereof did not reflect their arrangement,
or demanded that the said agreement be reformed to reflect their true agreement. It was
only when the respondent received the statement of his account from BMPI sometime in
March 1996 that he alleged for the first time that he had overpaid BMPI for 24-Lot.

Fifth. The respondent failed to adduce evidence that he was suffering from hernia and
that he was to be operated on in five days after signing the May 11, 1994 Pre-Need
Purchase Agreement.

Article 1370 of the New Civil Code provides that if the terms of a contract are clear and
leave no doubt upon the intention of the contracting parties, the literal meaning of its
stipulation shall control. No amount of extrinsic aids are required and no further
extraneous sources are necessary in order to ascertain the parties' intent, determinable as
it is, from the contract itself. The records are clear that the respondent understood the
nature of the contract he entered into. TcaAID

If, indeed, the stipulations as embodied in the aforementioned Pre-Need Purchase

Agreement were not the true intention of the parties, the respondent should have filed the
corresponding action for reformation of the contract. But he did not.

The hornbook rule on interpretation of contracts gives primacy to the intention of the
parties, which is the law among them. Ultimately, their intention is to be deciphered not
from the unilateral post facto assertions of one of the parties, but from the language used
in the contract. And when the terms of the agreement, as expressed in such language, are
clear, they are to be understood literally, just as they appear on the face of the contract. 52

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decisions of

the Regional Trial Court and the Court of Appeals are SET ASIDE. Another judgment is
rendered, ORDERING the respondent to pay to Berman Memorial Park, Inc. the amount
of P32,375.00, representing his unpaid installments plus the corresponding surcharge,
with interest at 12% per annum to be computed from May 1996, when the total amount of
the principal obligation became due and demandable, until actual payment thereof. No
costs.

SO ORDERED.

Puno, Austria-Martinez, Tinga and Chico-Nazario, JJ., concur.

(Berman Memorial Park Inc. v. Cheng, G.R. No. 154630, [May 6, 2005], 497 PHIL
|||

441-457)
 THIRD DIVISION

[G.R. No. 148235. August 11, 2005.]

ROSALINA TAGLE, petitioner, vs. COURT OF APPEALS, FAST

INTERNATIONAL CORPORATION and/or KUO TUNG YU
HUANG, respondents.

Acosta Aguirre & Fernandez Law Firm for petitioner.

Abraham Alejo for private respondents.

SYLLABUS

1. STATUTORY CONSTRUCTION; "COMPENSATION BENEFITS"; THE SAID

PROVISION IN THE EMPLOYMENT CONTRACT BEING CLEAR AND
UNAMBIGUOUS, ITS LITERAL MEANING CONTROLS. Death is defined as
"loss of life resulting from injury or sickness." Death could be a result of accident, but
accident does not necessarily result to death. Compensation benefits for illness, death,
accident which does not result to death, and partial or total disability are treated
separately and differently in the 3-paragraph provision of Article II, Section 10 of the
employment contract. The said provision in the employment contract being clear and
unambiguous, its literal meaning controls.

2. LABOR LAW; ACCIDENT INSURANCE; TO UPHOLD PETITIONER'S CLAIM

FOR ADDITIONAL INSURANCE FOR ACCIDENT, AFTER RECEIVING
INSURANCE BENEFITS FOR DEATH ARISING FROM ACCIDENT, WOULD
VIOLATE THE CLEAR PROVISION OF ARTICLE II, SECTION 10 OF THE
EMPLOYMENT CONTRACT. To uphold petitioner's claim for additional insurance
for accident, assuming that one for the purpose was secured, after receiving insurance
benefits for death arising from accident, would violate the clear provision of Article II,
Section 10 of the employment contract, the law between the parties. And it would trifle
with the Release, Waiver and Quitclaim, another contract between the parties, barring
petitioner from claiming other or additional benefits arising from petitioner's husband's
death-basis of the release of the insurance proceeds to her.

3. ID.; RELEASE, WAIVER AND QUITCLAIM; PETITIONER'S ARGUMENT THAT

THE RELEASE, WAIVER AND QUITCLAIM WAS EXECUTED IN FAVOR ONLY
OF THE INSURANCE COMPANY DOES NOT LIE. Petitioner's argument that the
Release, Waiver and Quitclaim was executed in favor only of the insurance company
does not lie, for it is therein clearly stated that she was releasing and discharging the
insurance company "and all other persons having interest therein or thereby" which
therefore includes agent and policy holder respondent FIC from all claims, demands,
causes of action and the like "aris[ing] therefrom and/or incidentally connected
therewith."

DECISION

CARPIO MORALES, J : p

Wilfredo P. Tagle, husband of petitioner Rosalina Tagle, was recruited by respondent

Fast International Corporation (FIC), a corporation organized under the laws of the
Republic of the Philippines, to work as fisherman at Taiwan for its principal, respondent
Kuo Tung Yu Huang.

On May 9, 1995, Wilfredo Tagle and respondent Kuo Tung Yu Huang concluded an
employment contract 1 for one (1) year, extendible for another year upon mutual
agreement of the parties.

During the duration of the contract or on November 12, 1995, the fishing vessel boarded
by Wilfredo Tagle in Taiwan collided with another and thereafter sank. Despite efforts to
look for Tagle's corpus, the same proved futile. He was, therefore, presumed dead.

His widow, herein petitioner, thus filed a claim for death benefits with respondent FIC.
The claim was approved and Philippine Prudential Life Insurance Co., Inc., the local
insurer of FIC, issued a check in the amount of P650,000.00. Upon receipt by petitioner
of the check, she accomplished on March 8, 1996 a Release, Waiver and Quitclaim 2
reading:

For and in consideration of the payment of the sum of PESOS: SIX HUNDRED
FIFTY THOUSAND PESOS (P650,000.00) representing

Philippine Prudential Life Inc. Co., Inc.

Cert./Policy No. GART-743

receipt of which is hereby acknowledged, I, ROSALINA C. TAGLE of legal

age, Filipino and a resident of Sariaya, Quezon, for myself and on behalf of my
legitimate children/grandchildren/relatives/husband/wife, my heirs, assigns and
successors in interest, do hereby release and discharge the Philippine Prudential
Life Ins. Co., Inc., and all other persons having interest therein and thereby
from all claims, demands, causes of action, etc., and all such other claims,
demands, causes of action, etc., that may arise therefrom and/or incidentally
connected therewith.
 I hereby warrant that this Quitclaim may be pleaded as an absolute bar to any
suit that either is now pending or may be henceforth prosecuted concerning
matters referred to in the preceding paragraph. And in connection herewith,
I promise to defend the right and to answer all costs of suits, of the Philippine
Prudential Life Insurance Co., Inc., and all other persons having interest therein
or thereby.

I further hereby warrant that I fully understand the terms and conditions of this
Quitclaim, that the effects hereof had been explained to me in the
language/dialect I understand, and that I have executed this document
voluntarily and of my free will and that I was not under fraud, mistake, undue
influence, intimidation, violence or any other vice or consent." (Emphasis and
underscoring supplied)

Petitioner, however, subsequently filed before the National Labor Relations Commission
(NLRC), National Capital Region, a complaint for additional "labor insurance" in the
amount of NT$300,000.00, invoking Article II, Section 10 of the employment contract
reading:

10. Compensation and Benefits: If after repatriation, the FISHERMAN still

requires medical attention for work connected illness, he shall be so
provided at cost to the EMPLOYER. The Employer shall pay the
FISHERMAN 100% of his basic wages from the time he leaves the
vessel for medical treatment until he is declared fit to work or the degree
of permanent disability has been assessed by company-physician, but in
no case shall this period exceed 120 days.

Benefits for the FISHERMAN include compensation for service connected

illness/injuries or death in accordance with social insurance laws and
other pertinent provisions of the Taiwan Labor Law. Additional
insurance coverage are in accordance with the POEA Standards for
overseas fishermen. Additional Labor Insurance shall be provided to the
FISHERMAN by the EMPLOYER with a limit of NT$300,000.00 per
person (or its equivalent) for accident insurance covering fishermen
regardless of whether accident occurred within and/or beyond work
hours.

In case of permanent total or partial disability of the FISHERMAN during the

term of employment caused by either injury or illness, the FISHERMAN
shall be compensated according to POEA Standard. The computation of
the total permanent/partial disability of the FISHERMAN caused by
injury sustained within a war zone area shall be based in the
computation rate payable for death within the war zone area per POEA
Standard. 3 (Underscoring supplied)
On motion of FIC, the Labor Arbiter, by Order of September 19, 1996, 4 dismissed the
complaint of petitioner on the ground that by her prior execution of the Release, Waiver
and Quitclaim she is barred from filing any subsequent action against FIC.

Petitioner appealed to the National Labor Relations Commission (NLRC).

By Resolution promulgated on July 20, 1998, 5 the NLRC dismissed petitioner's appeal
and affirmed the Labor Arbiter's decision.

In affirming the Labor Arbiter's decision, the NLRC held

xxx xxx xxx

Records of this case show that respondent recruitment agency (FAST) is the
Policy Holder of the aforesaid Insurance Policy of the deceased fisherman
(Annex "A" of Complainants' Manifestation and Comment/Opposition). Its
purpose therefore of insuring the decedent is not hard to discern i.e., to insulate
itself from any eventuality which may arise during the effectivity of the
employment contract for which the services of the deceased fisherman was
contracted. Nothing on record would indicate that the P650,000.00 paid by
Philippine Prudential Life Insurance Co. Inc. under Cert./Policy No. GART-743
is separate and distinct from the obligation of the respondent FAST and its
principal (Huo Tung Yu Huang) arising from the employment contract. A
careful reading and scrutiny of the particular provision of the employment
contract now at issue simply provides that in addition to the benefits already
mentioned, the Employer is mandated to provide the fisherman insurance
coverage for accident in an amount not to exceed NT$300,000.00 per person.
Considering that the risk insured against had happened, the insurance proceeds
which was even more than double the amount of the policy was paid to herein
complainant-appellant. On the basis of the complainant's-appellant's receipt of
said insurance proceeds. Release Waiver and Quitclaim was executed in
respondent's favor. We are therefore in full accord with the Labor Arbiter a quo
that this release and quitclaim forever barred the filing of any subsequent
action against respondent.

xxx xxx xxx 6 (Emphasis and underscoring supplied)

Petitioner's Motion for Reconsideration of the NLRC Resolution having been denied by
Resolution of September 11, 1998, 7 she elevated the case to this Court via Petition for
Certiorari filed on December 15, 1998, docketed as G.R. No. 136416. 8

By Resolution of February 3, 1999, 9 this Court, consistent with its pronouncement in St.
Martin Funeral Home v. NLRC et al., 10 referred petitioner's petition bearing docket G.R.
No. 136416 to the Court of Appeals (CA) for appropriate action and disposition.
In her original Petition for Certiorari, petitioner proffered as sole issue

WHETHER OR NOT THE RELEASE, WAIVER AND QUITCLAIM

EXECUTED BY THE PETITIONER INCLUDED THE ADDITIONAL
LABOR INSURANCE SHE IS ENTITLED TO AS PROVIDED FOR IN
SECTION 10, ARTICLE II OF HER DECEASED HUSBAND'S
EMPLOYMENT CONTRACT.

By Decision promulgated on October 17, 2000, 11 the CA, quoting with approval the
earlier-quoted portion of the NLRC resolution, dismissed petitioner's petition, it finding
"no shred of capriciousness or arbitrariness on the part of the respondent [NLRC]" in
dismissing her appeal.

Respecting petitioner's reliance on Principe v. Philippine-Singapore Transport Services,

Inc. 12 in support of her submission that "it is apparent that the Release, Waiver and
Quitclaim signed by the petitioner in favor of Prudential Life was not intended to
foreclose her right over the death benefits of her husband as against the principal
employer, Kuo Tung, represented by its local agent, Fast International," the CA correctly
held that Principe stands on a factual milieu different from the case at bar. Held the CA:

One. In Principe, the Motion to Dismiss filed by petitioner with POEA stated
that the dismissal of the case would be without prejudice as regards private
respondents. That situation did not take place in the case at bench.

Two. In Principe, the release paper signed by petitioner was only with regard to
her claims against PSTSI. The second claim of Principe is against Chuan Hup
who was not a party to the release document. The second claim was based upon
the joint and solidary undertaking of PSTSI and Chuan Hup. No such
circumstance existed in the case at bench.

Three. In Principe, in the release document, what was paid to petitioner for the
death of her husband was only P7,000.00 which was an unconscionable amount
while in the case at bench, the petitioner received P650,000.00. 13 (Emphasis in
the original, underscoring supplied)

Petitioner's Motion for Reconsideration of the CA decision having been denied by

Resolution of March 16, 2001, 14 she filed the present Petition for Certiorari under Rule
65 of the Rules of Civil Procedure, instead of a Petition for Review on Certiorari under
Rule 45, hence, a wrong remedy. On this score alone, the petition is dismissible.

Why petitioner filed a Petition for Certiorari and cited cases decided in 1996 and earlier
as "judicial precedents," to assail a decision of the CA, given her awareness, as she
alleged in the present petition, of the referral of her original petition to the CA consistent
with the 1998 pronouncement of this Court in St. Martin, can only mean two things:
Either her counsel is not versed on the Rules, or he is resorting to certiorari because the
remedy of appeal had been lost. For, when her counsel received the CA Resolution
denying her Motion for Reconsideration, she had fifteen (15) days or up to April 26, 2001
to file the same. She filed her present petition, however, on the 61st day, June 11, 2001, a
Monday.

Technicality aside, on the merits, the petition just the same must be dismissed.

The present Petition for Certiorari filed by petitioner is an almost verbatim reproduction
of the original Petition for Certiorari she filed. Petitioner merely dropped NLRC as one
of the respondents and impleaded in its stead the CA, and she accordingly amended the
petition to reflect that it is the decision of the CA which is being assailed.

Raising the same issue she raised in her original petition,

WHETHER OR NOT THE RELEASE, WAIVER AND QUITCLAIM

EXECUTED BY THE PETITIONER INCLUDED THE ADDITIONAL
LABOR INSURANCE SHE IS ENTITLED TO AS PROVIDED FOR IN
SECTION 10, ARTICLE II OF HER DECEASED HUSBAND'S
EMPLOYMENT CONTRACT,

she likewise reiterates the position she proffered in arguing in the negative.

The second paragraph of the earlier-quoted Article II, Section 10 of the employment
contract 15 explicitly states that "Benefits . . . include compensation for . . . death in
accordance with social insurance laws and other pertinent provisions of the Taiwan Labor
Law. . . Additional Labor Insurance shall be provided to the Fisherman with a limit of
NT$300,000.00 per person (or its equivalent) for accident insurance covering fisherman
regardless of whether accident occurs within and/or beyond work hours."

Death is defined as "loss of life resulting from injury or sickness." 16

Death could be a result of accident, but accident does not necessarily result to death.

Compensation benefits for illness, death, accident which does not result to death, and
partial or total disability are treated separately and differently in the 3-paragraph
provision of Article II, Section 10 of the employment contract. The said provision in the
employment contract being clear and unambiguous, its literal meaning controls. 17

To uphold petitioner's claim for additional insurance for accident, assuming that one for
the purpose was secured, after receiving insurance benefits for death arising from
accident, would violate the clear provision of Article II, Section 10 of the employment
contract, the law between the parties. And it would trifle with the Release, Waiver and
Quitclaim, another contract between the parties, barring petitioner from claiming other or
additional benefits arising from petitioner's husband's death-basis of the release of the
insurance proceeds to her.

Petitioner's argument that the Release, Waiver and Quitclaim was executed in favor only
of the insurance company does not lie, for it is therein clearly stated that she was
releasing and discharging the insurance company "and all other persons having interest
therein or thereby" which therefore includes agent and policy holder respondent FIC
18 from all claims, demands, causes of action and the like "aris[ing] therefrom and/or
incidentally connected therewith."

WHEREFORE, in light of the foregoing discussions, the Petition for Certiorari is hereby
DISMISSED.

Costs against petitioner.

SO ORDERED.

Panganiban, Sandoval-Gutierrez and Garcia, JJ., concur.

Corona, J., is on leave.

||| (Tagle v. Court of Appeals, G.R. No. 148235, [August 11, 2005], 504 PHIL 42-50)
 THIRD DIVISION

[G.R. No. 148411. November 29, 2005.]

MARTHA R. HORRIGAN, petitioner, vs. TROIKA COMMERCIAL,

INC., respondent.

Ponce Enrile Reyes & Manalastas for petitioner.

Saludo Agpalo Fernandez & Aquino for respondent.

SYLLABUS

1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; INTERPRETATION OF

CONTRACTS; OBSCURE WORDS SHALL BE CONSTRUED AGAINST THE
PARTY WHO DRAWS UP THE CONTRACT; CASE AT BAR. Article 1377 of the
Civil Code provides: "ART. 1377. The interpretation of obscure words or stipulations in a
contract shall not favor the party who caused the obscurity." In a long line of cases, we
have consistently held that the party who draws up the contract, in which obscure words
or phrases appear, bears the responsibility for causing the ambiguity or obscurity, and
hence, these must be construed against him. In this case, it was petitioner's spouse who
prepared the sub-lease contract in question. Consequently, the ambiguity must be
construed against herein petitioner as she is presumed to have confirmed the same.

2. REMEDIAL LAW; EVIDENCE; INTERPRETATION OF DOCUMENTS UNDER

SEC. 17, RULE 130; WHERE DIFFERENT CONSTRUCTIONS OF A PROVISION
ARE PROPER, THAT IS TO BE TAKEN WHICH FAVORS THE PARTY IN WHOSE
FAVOR THE PROVISION WAS MADE; CASE AT BAR. There is also no question
that the 10% guaranteed yearly increase of rents provided for in sub-paragraph 2.2 of the
sub-lease agreement is for the benefit of respondent herein, being the sub-lessor of the
premises. As such, any doubt in its interpretation must be interpreted in its favor. This is
in line with Section 17, Rule 130 of the Revised Rules of Court.

DECISION

SANDOVAL-GUTIERREZ, J : p

Before us is a petition for review on certiorari seeking to reverse the Decision 1 of the
Court of Appeals dated May 31, 2001 in CA-G.R. CV No. 50330.
The facts of this case are not in dispute.

Troika Commercial, Inc., (Troika), herein respondent, is the lessee of the entire ground
floor of a two-story building located at 53-A Annapolis St., San Juan, Metro Manila.
Respondent then sub-let a portion of the ground floor to Martha Horrigan, petitioner, to
be used for her restaurant Tia Maria. The contract of sub-lease dated April 20, 1983
between the parties was prepared by Martha's husband. It provides, among others, the
following stipulations:

"2. In consideration thereof, Martha R. Horrigan undertakes, promises and

guarantees payment to Troika of the following:

2.1. P12,500 monthly starting March 15, 1983 and every month thereafter until
December 31, 1989 payable every ___ day of the month.

2.2. In addition to the above (sub-par 2.1), P4,500 monthly starting August 1,
1983 and every month thereafter for seven (7) years until December 31, 1989
plus a guaranteed yearly increase equivalent to 10% thereof."

The instant case stemmed from the parties' different interpretations of the phrase "a
guaranteed yearly increase equivalent to 10% thereof" in relation to sub-paragraphs 2.1
and 2.2 of their agreement.

Respondent construed the 10% guaranteed yearly increase to apply to both the original
monthly rental of P12,500.00 under sub-paragraph 2.1 and the P4,500.00 additional rental
under sub-paragraph 2.2. For her part, petitioner claimed that the 10% "guaranteed yearly
increase" is applicable only to the additional P4,500.00 rental contained in sub-paragraph
2.2 of the sub-lease contract.

Respondent sent petitioner letters, together with its billing statements, explaining the
application of the 10% yearly increase of rental rates. But petitioner ignored them. On
May 3, 1991, respondent sent petitioner a final demand letter asking her to pay
P318,489.00 corresponding to the unpaid rental adjustments. TEaADS

When petitioner refused to pay, respondent filed with the Regional Trial Court, Branch
148, Makati City, a complaint for sum of money, docketed as Civil Case No. 91-2410.

In her answer, petitioner averred that the 10% yearly guaranteed increase applies only to
her additional rental of P4,500.00 starting August 1, 1983 and that she has been paying
the corresponding amounts since 1984. She admitted that from June 1984, she has been
giving respondent "P1,200.00 monthly ex-gratis" in appreciation of its efforts to improve
her business. She denied, however, that these sums are rental adjustments. She also
claimed that even assuming that she still owed respondent, under sub-paragraph 2.2, the
amount due is only P58,485.50. She stopped paying the yearly increase since August
1986 because of respondent's demand that she should also pay the yearly increase
equivalent to 10% of the original P12,500.00 monthly rental.

On May 18, 1995, the trial court rendered its Decision in favor of respondent. It ordered
petitioner to pay respondent her unpaid rental adjustments in the sum of P318,489.00
with interest at 12% per annum from September 2, 1991 until the obligation is fully paid.

On appeal, the Court of Appeals, in its assailed Decision, affirmed the trial court's
judgment in toto.

Hence, the instant petition for review on certiorari.

The sole issue for our resolution is whether the Court of Appeals erred in ruling that the
10% guaranteed yearly increase of rental rates applies to both the original monthly rental
of P12,500.00 and the additional monthly rental of P4,500.00.

Article 1377 of the Civil Code provides:

"ART. 1377. The interpretation of obscure words or stipulations in a contract

shall not favor the party who caused the obscurity."

In a long line of cases, 2 we have consistently held that the party who draws up the
contract, in which obscure words or phrases appear, bears the responsibility for causing
the ambiguity or obscurity, and hence, these must be construed against him. In this case,
it was petitioner's spouse who prepared the sub-lease contract in question. Consequently,
the ambiguity must be construed against herein petitioner as she is presumed to have
confirmed the same.

There is also no question that the 10% guaranteed yearly increase of rents provided for in
sub-paragraph 2.2 of the sub-lease agreement is for the benefit of respondent herein,
being the sub-lessor of the premises. As such, any doubt in its interpretation must be
interpreted in its favor. This is in line with Section 17, Rule 130 of the Revised Rules of
Court which states:

"SEC. 17. Of two constructions, which preferred. When the terms of an

agreement have been intended in a different sense by the different parties to it,
that sense is to prevail against either party in which he supposed the other
understood it, and when different constructions of a provision are otherwise
equally proper, that is to be taken which is the most favorable to the party
in whose favor the provision was made (stress supplied)."

WHEREFORE, the petition is DENIED. The challenged Decision of the Court of

Appeals in CA-G.R. CV No. 50330 is AFFIRMED IN TOTO. Costs against the
petitioner.TDAcCa
SO ORDERED.

Panganiban, Corona, Carpio Morales and Garcia, JJ., concur.

(Horrigan v. Troika Commercial Inc., G.R. No. 148411, [November 29, 2005], 512
|||

PHIL 782-786)
 SECOND DIVISION

[G.R. No. 137549. February 11, 2005.]

AURELIO P. ALONZO and TERESITA A. SISON, petitioners, vs.

SPS. JAIME AND PERLITA SAN JUAN, respondents.

DECISION

CHICO-NAZARIO, J : p

A complaint for recovery of possession was filed by Aurelio P. Alonzo and Teresita A.
Sison against Jaime and Perlita San Juan docketed as Civil Case No. Q-96-29415 before
the Regional Trial Court (RTC) of Quezon City, Branch 77. In their Complaint, plaintiffs
alleged that they are the registered owners of a parcel of land located at Lot 3, Block 11,
M. Agoncillo St., Novaliches, Quezon City, with an area of four hundred twenty-five
(425) square meters, more or less, evidenced by Transfer Certificate of Title (TCT) No.
N-152153 issued by the Register of Deeds of Quezon City. At around June of 1996,
plaintiffs discovered that a portion on the left side of the said parcel of land with an area
of one hundred twenty-five (125) square meters, more or less, was occupied by the
defendants for more than a year, without their prior knowledge or consent. A demand
letter was sent to the defendants in August of 1996 requiring them to vacate the property
but they refused to comply; hence, the filing of the Complaint. During the pendency of
the case, the parties agreed to enter into a Compromise Agreement which the trial court
approved in a Judgment by Compromise dated 07 May 1997. 1

Alleging that they failed to abide by the provisions of the Compromise Agreement by
their failure to pay the amounts due thereon, plaintiffs sent a letter demanding that the
defendants vacate the premises. 2 Plaintiffs subsequently filed an Amended Motion for
Execution. 3 Acting on the motion, the trial court 4 issued its Order dated 11 August
1998 5 now assailed before this Court.

The Order reads:

Before the Court for resolution is the plaintiffs' "Amended Motion For
Execution," dated July 7, 1998.

Records show that, on May 5, 1997, the parties herein together with spouses
Elbert and Susan Manalili, assisted by Atty. Victor Rey Santos, submitted a
"Compromise Agreement," which was approved by the Court on May 7, 1997.
On July 9, 1998, the plaintiff, through counsel, filed an "Amended Motion For
 Execution," praying, pursuant to the Judgment by Compromise Agreement,
dated May 7, 1997, for the issuance of a writ of execution for the ejectment of
the defendants-spouses Jaime and Perlita San Juan and of the spouses Elbert and
Susan Manalili from the property in question, and for the payment to the
plaintiff of the sum of P50,000.00 as attorney's fees, and another sum of
P50,000.00 as moral damages.

In the "Compromise Agreement," it was expressly stipulated that should any

two of the installments of the purchase price be not paid by the defendants, the
said agreement (Compromise Agreement) shall be considered null and void.

The plaintiffs expressly admitted in their amended motion for execution that the
defendants failed to pay the installments for July 31, 1997 and August 31, 1997
on their due dates; hence, the "Compromise Agreement" submitted by the
parties became null and void. The Court, therefore, has no basis to direct the
issuance of a writ of execution.

WHEREFORE, premises considered, the plaintiffs' amended motion for

execution should be, as it is hereby, denied.

Plaintiffs filed a motion for reconsideration 6 which the defendants opposed. 7

Maintaining that the trial court correctly declared that the compromise agreement has
been rendered null and void, defendants likewise remonstrated that they have fully paid
their obligation to the plaintiffs.
ISCcAT

In an Order of the trial court dated 17 February 1999, plaintiffs' motion for
reconsideration was denied in this wise:

After a careful consideration of the respective contentions of the parties, the

Court finds no cogent reason to disturb its Order of August 11, 1998.

It is the well-considered opinion of this court that there is no need to interpret

the provisions of the "Compromise Agreement" entered into by the parties,
because paragraph 11 thereof clearly states that: "Should any two (2) of the
subsequent amounts be not paid on the date fixed in the foregoing schedule,
then this Agreement shall be considered as automatically and without any
further formality null and void and the amount of P44,117.65 initially paid
hereunder shall be considered as penalty as well as rentals and forfeited in favor
of the plaintiffs."

The "Compromise Agreement" submitted by the parties having been rendered

null and void, the Court has no basis to direct the issuance of a writ of
execution.

WHEREFORE, premises considered, plaintiffs' motion for reconsideration is

hereby denied. 8
Understandably aggrieved, plaintiffs (petitioners) filed directly to this Court the instant
petition for review on certiorari to assail the Orders of the trial court dated 11 August
1998 and 17 February 1999 arguing that:

The instant petition ought to be allowed and given due course by this Honorable
Court because the aforementioned Orders dated August 11, 1998 and February
17, 1999 are both grossly erroneous, invalid and unlawful as the same directly
contravene and violate the express provisions of paragraph 12 of the Judgment
by Compromise Agreement. 9

In a resolution rendered by this Court dated 23 June 1999, defendants (respondents) were
required to Comment on the petition. 10 Respondents submitted their compliance on 11
October 1999. 11 Per the Court's resolution dated 18 October 1999, 12 petitioners were
required to file their Reply which they did on 03 December 1999. 13

On 14 June 2000, this Court resolved to give due course to the petition and required the
parties to submit their respective memorandum within thirty days from notice. 14 The
petitioners and respondents submitted their memorandum on 01 September 2000 15 and
06 April 2001, 16 respectively.

The jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the
Revised Rules of Court is limited to reviewing only errors of law 17 and factual issues
are not within its province 18 unless the factual findings complained of are devoid of
support by the evidence on record or the assailed judgment is based on misapprehension
of facts.

It is at once apparent that the determination of the correctness of the trial court's
interpretation of the provisions of the Compromise Agreement involves a question of
law. 19 However, the claim of payments raised by the respondents entails a review of the
evidences on record which is not proper in a petition for review under Rule 45. Be that as
it may, the Court in the exercise of its discretion, may set aside procedural rules and
proceed to determine and resolve factual matters 20 to put all issues to rest and avoid
further delay. With this, we deem it necessary to first settle the issue of payment.

The terms and conditions of the Compromise Agreement are quoted as follows:

1. The Spouses Jaime San Juan and Perlita San Juan as well as the Spouses
Elbert and his wife, Susan Y. Manalili have occupied and continue to occupy a
portion consisting of one hundred twenty-five (125) square meters, more or less,
of that parcel of land identified as Lot 3, Block 11 of the consolidation and
subdivision plan PCS-4682, located along M. Agoncillo Street, Doa Rosario
Heights, Nova Proper, Novaliches, Quezon City, which is owned by and
registered in the names of the plaintiffs under Transfer Certificate of Title No.
N-152153 issued by the Registry of Deeds for Quezon City;
2. Spouses Jaime and Perlita San Juan are occupying the front area, while
Spouses Elbert and Susan Manalili are occupying the rear area of the aforesaid
125 square meters portion of Plaintiffs' parcel of land; IcSHTA

3. Said parties have occupied said portion of the Plaintiffs' parcel of land
without the knowledge or consent of the Plaintiffs;

4. By way of amicably settling the dispute in the instant case, the said parties
have offered to purchase the said portion of Plaintiffs' parcel of land being
occupied by them, to which the Plaintiffs had acceded, under the following
terms and conditions:

a. The purchase price for the said portion consisting of one hundred
twenty-five (125) square meters, more [or] less, shall be Two Hundred
Thirty Five Thousand Two Hundred Ninety-Four Pesos (P235,294.00),
Philippine Currency;

5. The aforesaid purchase price shall be paid in the following manner:

a. The sum of P44,117.65, Philippine Currency, upon the signing of this

Agreement;

b. The sum of P44,117.65, Philippine Currency, on or before May 31,

1997;

c. The sum of P29,411.75, Philippine Currency, on or before June 30,

1997;

d. The sum of P58,823.50, Philippine Currency, on or before July 31,

1997;

e. The sum of P58,823.50, Philippine Currency, on or before August 31,

1997.

6. Upon full payment of the said purchase price, the herein Plaintiffs shall
execute in favor of the Spouses Elbert Manalili and Susan Manalili a Deed of
Absolute Sale over the aforementioned portion subject of the instant
Agreement;

7. The said Spouses Elbert Manalili and Susan Manalili shall take care of all
expenses and taxes corresponding to the said transaction, such as the capital
gains tax, documentary stamps tax, notarial fees, registration fees and other
expenses of the said Deed of Absolute Sale, the registration thereof with the
Registry of Deeds and the issuance of a new certificate of title in favor of said
spouses, as well [as] the expenses for the relocation and subdivision survey of
 the said parcel of land and the real estate taxes due on the said property starting
the year 1997;

8. It is agreed that the title to the said portion of Plaintiffs' parcels of land shall
remain with the Plaintiffs and shall pass to and be transferred to the Spouses
Elbert Manalili and Susan Manalili only upon complete payment of the full
purchase price agreed upon;

9. Before the purchase price shall have been paid in full, said Spouses Elbert
Manalili and Susan Manalili hereby agree not to alienate, encumber, assign or
otherwise dispose in any manner of their rights under this Agreement without
the prior written consent of the Plaintiffs;

10. Should any two (2) of the subsequent amounts be not paid on the date fixed
in the foregoing schedule, then this Agreement shall be considered as
automatically and without any further formality null and void and the amount of
P44,117.65 initially paid hereunder shall be considered as penalty as well as
rentals and forfeited in favor of the Plaintiffs;

11. In the event of such non-payment, herein Defendants Jaime and Perlita San
Juan and Spouses Elbert Manalili and Susan Manalili hereby agree to vacate
and surrender the possession of said portion of the parcel of land being occupied
by them within thirty (30) days upon demand by the Plaintiffs; DISHEA

12. Should any of said parties fail and/or refuse to vacate and surrender the said
parcel of land being occupied by them to the Plaintiffs, the latter shall be
entitled to obtain immediately from this Honorable Court the corresponding writ
of execution for the ejectment of the said party or parties, or other persons
occupying said property for and on their behalf or upon their authority from the
said property in question. 21

Indubitably, the schedule of payments as contained in the Compromise Agreement

provides that initial payment in the amount of P44,117.65 is due on 07 May 1997, the
date when the agreement was signed. Respondents, to prove payment, showed Equitable
Bank Check No. 1050783228 payable to Petitioner Aurelio Alonzo, in the amount of
P100,000 issued by a certain Cirila C. Cruz and dated 23 September 1994. 22 A
perfunctory examination of the check shows that it bears a date so much earlier than the
time the Compromise Agreement took place on 14 May 1997. Necessarily, in this
instance, the claim of payment is inconsequential and cannot be credited in favor of the
respondents.

The next payment for the same amount of P44,117.65 was due on or before 31 May
1997, a little less than a month after the date of the Compromise Agreement. To prove
payment, respondents presented a check dated 30 April 1997, 23 payable to Petitioner
Aurelio Alonzo, again issued by a certain Cirila Cruz for the amount of P150,000. The
voucher particulars state that "the same is for partial payment and/or 1st installment re:
Compromise Agreements entered by Sps. Antonio and Leonor B. Lazaro and Engr. and
Mrs. Elbert Manalili and Mr. And Mrs. Jaime San Juan (respondents herein) re: Lot 3,
Block 11, Q.C."

The next check dated 24 June 1997 24 again issued by Cirila Cruz in the amount of
P150,000 payable to Aurelio P. Alonzo provides in the cash voucher particulars that the
same is an additional partial payment due on 31 May 1997 "Re: Compromise Agreement
entered by the Sps. Lazaro, Manalili and San Juan."

Another check again issued by Cirila Cruz dated 29 July 1997 25 in the amount of
P100,000 payable to Mr. Aurelio P. Alonzo, is accompanied by the same voucher
particulars, i.e., it is an additional partial payment of the Compromise Agreement entered
into by the spouses Antonio and Leonor Lazaro and Mr. and Mrs. Elbert Manalili and Mr.
and Mrs. Jaime San Juan.

A subsequent check 26 again issued by Cirila Cruz dated 24 December 1997, payable to
Aurelio Alonzo in the amount of P50,000 is accompanied by a receipt stating that the
amount "RECEIVED from Cirila C. Cruz is an additional partial payment for the account
of Perlita San [Juan] and Mr. and Mrs. Lazaro."

Finally, a check 27 this time unaccompanied by any voucher or receipt, again issued by
Cirila Cruz, payable to cash in the amount of P25,000 was dated 25 July 1998, way past
the period to make payments as specified in the Compromise Agreement for which
reason it cannot be credited to the account of the respondents.

The law requires in civil cases that the party who alleges a fact has the burden of proving
it. 28 Section 1, Rule 131 of the Rules of Court provides that the burden of proof is the
duty of a party to prove the truth of his claim or defense, or any fact in issue by the
amount of evidence required by law. 29 In this case, the burden of proof is on the
respondents because they allege an affirmative defense, namely payment. 30 As a rule,
one who pleads payment has the burden of proving it. 31 Even where the plaintiff must
allege nonpayment, the general rule is that the burden rests on the defendant to prove
payment, rather than on the plaintiff to prove nonpayment. The debtor has the burden of
showing with legal certainty that the obligation has been discharged by payment. 32

In Jimenez v. NLRC, 33 this Court held that where one, sued for a debt, admits that the
debt was originally owed, and pleads payment in whole or in part, it is incumbent upon
him to prove such payment. Indeed, though the plaintiff may admit that some payments
have been made, this admission does not change the burden of proof. The defendant still
has the burden of establishing payments beyond those admitted by the plaintiff. cEHSIC
In herein case, the respondents failed to discharge their burden of proving payment.

Apropos is the rule so well-settled that a receipt of payment is the best evidence of the
fact of payment. 34 In Monfort v. Aguinaldo, 35 the receipts of payment, although not
exclusive, were deemed to be the best evidence.

A receipt is a written and signed acknowledgment that money has or goods have been
delivered, 36 while a voucher is a documentary record of a business transaction. 37 The
references to alleged check payments in the vouchers presented do not vest them with the
character of receipts.

It should be noted that a voucher is not necessarily an evidence of payment. It is merely a

way or method of recording or keeping track of payments made. It must be supported by
an actual payment of cash duly receipted for as is customary among businessmen or the
issuance of a check subsequently encashed. 38 The law provides that the delivery of
mercantile documents including checks "shall produce the effect of payment only when
they have been cashed." 39 In this case, it was not shown that the checks were encashed
by the petitioners.

Even assuming that payments were made, it has not been shown to the full satisfaction of
this Court whether the payments were made specifically to satisfy respondents' obligation
under the Compromise Agreement, nor were the circumstances under which the
payments were made explained, taking into consideration the conditions of the
Compromise Agreement. The dates, amounts and the person issuing the checks, which
respondents claim were made in their behalf and were issued in satisfaction of their
obligation, do not really reconcile with the dates and amount due as to convince this
Court that the payments were really for the respondents' obligation under the
Compromise Agreement as intended. The checks were all issued by a certain Cirila Cruz
whose identity and relation to them the respondents never explained and each check
reflected an amount so much greater than what was due from the respondents.
Respondents never endeavored to rationalize or explain the disparity.

Verily, an obligation may be extinguished by payment. 40 However, two requisites must

concur: (1) identity of the prestation, and (2) its integrity. The first means that the very
thing due must be delivered or released; and the second, that the prestation be fulfilled
completely. 41 In this case the creditor must "receive and acknowledge full payment"
from the debtor. 42 No such acknowledgment nor proof of full payment was shown to the
satisfaction of the court. For this reason, claim of payment made by the respondents must
fail. What was due from the respondents was the payment of a sum of money. Not only
that, respondents must also pay the amount due in its entirety for their obligation to be
considered extinguished by payment.
The issue of payment having been put to rest, we now proceed to determine the
correctness of the trial court's interpretation of the compromise agreement entered into by
the parties.

Compromise agreements are contracts, whereby the parties undertake reciprocal

obligations to resolve their differences 43 thus avoiding litigation, 44 or put an end to one
already commenced. 45

It is a cardinal rule in contract interpretation that the ascertainment of the intention of the
contracting parties is to be discharged by looking to the words they used to project that
intention in their contract, that is, all the words, not just a particular word or two, and
words in context, not words standing alone. 46

Article 1374 of the Civil Code requires that the various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which may result from all
of them taken jointly. 47

In this case, we find it was error on the part of the trial court to have interpreted the
compromise agreement in the manner it has done so. CHTAIc

Applying the rule that the various stipulations of a contract should be taken together, the
trial court should have interpreted paragraph 10, in relation to paragraphs 11 and 12. If
we were to follow the interpretation of the trial court, the respondents would only have to
default in the payment of their obligation and the contract would be rendered null and
void to their benefit and advantage leaving the petitioners without any recourse at all.
This surely was not what was envisioned when the parties entered into the compromise.
The Court itself would not have approved the same for being contrary to law, morals and
public policy. Certainly, to sustain the interpretation of the trial court would be to
sanction an absurdity as it would go against the very rationale of entering into a
Compromise Agreement, i.e., to put an end to litigation. If we were to follow the
argument of the trial court to its logical conclusion, then it would mean that the parties
would have to go back to square one and re-litigate what they had already put to rest
when they entered into the subject Compromise Agreement.

This is a good time as any to re-echo the fact that reciprocal concessions are the very
heart and life of every compromise agreement. By the nature of a compromise agreement,
it brings the parties to agree to something which neither of them may actually want, but
for the peace it will bring them without a protracted litigation. Essentially, the parties to it
have to bend a little or else break in the process. 48 In Raneses v. Teves, 49 it was stated
"it is the trial court's duty to examine and study the compromise agreement with utmost
attention and caution and to assure itself that the stipulations thereof are valid and proper
so as to avoid misunderstanding and controversies. A casual or superficial perusal of the
compromise agreement should be eschewed." A watchful fidelity to this doctrinal
yardstick has always been enjoined to arrive at a peaceful settlement of a mired
justiciable issue.

In the same vein, the principle of autonomy of contracts must be respected. 50

Respondents' contract with the petitioners have the force of law between them. 51
Respondents are thus bound to fulfill what has been expressly stipulated therein. 52 Items
11 and 12 of the Compromise Agreement provided, in clear terms, that in case of failure
to pay on the part of the respondents, they shall vacate and surrender possession of the
land that they are occupying and the petitioners shall be entitled to obtain immediately
from the trial court the corresponding writ of execution for the ejectment of the
respondents. This provision must be upheld, because the Agreement supplanted the
Complaint itself. When the parties entered into a Compromise Agreement, the original
action for recovery of possession was set aside and the action was changed to a monetary
obligation. Once approved judicially, the Compromise Agreement can not and must not
be disturbed except for vices of consent or forgery. 53

Courts do not have the power to relieve parties of obligations voluntarily assumed. 54

For failure of the respondents to abide by the judicial compromise, petitioners are vested
with the absolute right under the law and the agreement to enforce it by asking for the
issuance of the writ of execution. Doctrinally, a Compromise Agreement is immediately
final and executory. 55 Petitioners' course of action, asking for the issuance of a writ of
execution was in accordance with the very stipulation in the agreement that the lower
court could not change.

In Abinujar v. Court of Appeals, 56 this Court even went further and declared that the
nonfulfillment of the terms and conditions of a Compromise Agreement approved by the
court justifies execution thereof and the issuance of the writ for the said purpose is the
court's ministerial duty enforceable by Mandamus.

WHEREFORE, the Petition is GRANTED. The Orders of the Regional Trial Court,
Branch 77, Quezon City, dated 11 August 1998 and 17 February 1999 are hereby
declared null and void and set aside and a new one entered directing the trial court to
issue the writ of execution prayed for by the Petitioners in accordance with the
Compromise Agreement. With costs. HAICET

SO ORDERED.

Puno, Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.

 (Alonzo v. Spouses San Juan, G.R. No. 137549, [February 11, 2005], 491 PHIL 232-
|||

248)
 SECOND DIVISION

[G.R. No. 131408. July 31, 2006.]

VICENTE L. GO, petitioner, vs. PURA V. KALAW, INC., respondent.

DECISION

SANDOVAL-GUTIERREZ, J : p

For our resolution is the instant Petition for Review on Certiorari seeking to reverse the
Decision 1 and Resolution 2 of the Court of Appeals dated July 8, 1997 and November
14, 1997, respectively, in CA-G.R. CV No. 43785, entitled "Vicente L. Go, plaintiff-
appellee, v. Pura V. Kalaw, Inc. and Metropolitan Trial Court, Branch 13, Manila and
Hon. Escolastico Cruz, Jr., Presiding Judge, defendants-appellants."

Pura V. Kalaw, Inc., a domestic corporation, herein respondent, is the registered owner of
a parcel of land located at Quezon Boulevard, Quiapo, Manila with an area of 143.60
square meters. Constructed thereon is a building intended to be a commercial/residential
condominium (PVK Condominium).

On July 13, 1980, while respondent was constructing the PVK Condominium, Vicente
Go, petitioner, agreed to purchase Unit 1-A for P665,200.00. Unit 1-A comprises one-
half (1/2) of the ground floor and mezzanine of the building. The parties then executed a
Contract to Sell providing, among others, that the down payment is 1/2 of the purchase
price. The balance is payable upon completion of Unit 1-A and upon written notice to the
buyer that the unit has been completed and ready for occupancy.

Petitioner then paid the down payment of P327,600.00. He moved in to the unit and has
occupied it since February 1982.

On February 25, 1982, respondent sent a letter to petitioner demanding payment of the
balance of P327,600.00. Petitioner replied that he was applying for a bank loan in order
to settle his obligation.

On June 5, 1982, respondent informed petitioner that its request with the Human
Settlement Regulatory Board for approval of its building as a condominium was denied
for lack of parking spaces. Respondent then asked petitioner to sign a "waiver of parking
space" in order that the building can be approved as a condominium.
However, petitioner refused to sign the waiver, citing defects in the building. Respondent
then sent petitioner a letter dated December 8, 1982 suggesting to reimburse his down
payment with interest, as provided for in their Contract to Sell.CAcEaS

Since petitioner refused to sign a waiver and to pay the balance of the purchase price,
respondent sent him a letter dated March 14, 1983 rescinding the Contract to Sell and
considering all his payments as rentals.

Subsequently, respondent sent petitioner two letters dated December 6, 1988 and
February 15, 1989 offering to sell the building and lot for P3,023,000.00. But the latter
did not respond. This prompted respondent's counsel to send petitioner another letter
(dated April 24, 1989) asking him to pay rentals and vacate the premises. Thereafter,
respondent offered the building for sale to third persons.

Petitioner replied that since respondent violated the terms of their agreement, it could not
unilaterally rescind the Contract to Sell. Respondent responded by sending petitioner a
computation of his overdue rentals. However, he refused to pay, prompting respondent to
file a Complaint for Illegal Detainer against petitioner with the Metropolitan Trial Court
(MeTC), Branch 13, Manila, docketed as Civil Case No. 132536-CV.

In turn, petitioner filed with the Regional Trial Court (RTC), Branch 23, Manila, a
complaint for Specific Performance or Rescission of Contract, docketed as Civil Case
No. 90-53744. Forthwith, upon petitioner's application, the RTC issued an Order
enjoining the MeTC from hearing the illegal detainer case.

Later, petitioner amended his complaint by alleging that respondent failed to complete
the construction of the condominium unit and deliver it to him in accordance with their
Contract to Sell; and that the filing of the complaint for illegal detainer and respondent's
intention to sell the unit to third persons caused him injury and prejudice. He thus prayed
that respondent be ordered to sell the unit, or, in the alternative, that the contract be
rescinded. In either case, he asked for an award of P100,000.00 as exemplary damages,
and P50,000.00 as attorney's fees.

In its Answer, respondent alleged that due to petitioner's refusal to sign the "waiver of
parking space," the building could not be declared as a condominium. Moreover,
petitioner has resided in the unit for eight (8) years without paying either the balance of
the purchase price or the realty taxes thereon. Respondent prayed that petitioner's down
payment be applied as rentals; and that petitioner be ordered to vacate the unit and pay
exemplary and moral damages, as well as attorney's fees.

On May 17, 1993, the RTC rendered its Decision, the dispositive portion of which is
quoted below:
 WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against
the defendant as follows:

1. Declaring and holding the contract to sell, Exh. A and Exh. 1, as rescinded
and consequently, plaintiff is hereby directed to turn over and surrender
the premises covered by said contract to defendant, and simultaneously
with such turnover, defendant is ordered as follows:

A. To refund and pay plaintiff the sum of P327,600.00 representing the

initial payment of 50% of the purchase price of the condominium
unit purchased by plaintiff with interest at the rate of 1% per
month from July 30, 1980, the date of execution of the contract
to sell until said amount is fully paid as provided for in the
Contract to Sell;

B. To pay plaintiff the sum of P1,000,000.00 as actual or compensatory

damages suffered by plaintiff for the loss of the condominium
unit he purchased; DAcSIC

C. To pay plaintiff the sum of P1,000,000.00 as moral damages for his

sufferings, embarrassment, and the mental anguish he suffered
brought about or as a result of the Contract to Sell he executed
with the defendant, resulting to the filing of an ejectment suit
against him, for the threats and harassment contained in the
letters of the defendant's lawyer and his fear of losing his shoes
and bags business;

D. To pay the sum of P50,000.00 as exemplary damages;

E. To pay the sum of P30,000.00 for and as attorney's fees;

F. To pay the cost of litigation.

The injunction previously issued by this Court is ordered made permanent.

The counterclaim is ordered dismissed.

SO ORDERED.

On appeal, the Court of Appeals, on July 8, 1997, promulgated its Decision affirming the
RTC judgment with modification, thus:

WHEREFORE, judgment is hereby rendered:

1. Affirming the decision appealed from only insofar as it declared the

"Contract to Sell" rescinded and directed appellee "to turn over
 and surrender the premises" to appellant, the other dispositions
being deleted (underscoring in the original);

2. Declaring the downpayment of P327,600.00 as rentals for the use of

the premises in accordance with the Contract to Sell;

3. Ordering appellee to pay appellant attorney's fees of P200,000.00 and

the costs of suit.

SO ORDERED.

Petitioner filed a motion for reconsideration, but it was denied by the Court of Appeals in
its Resolution of November 14, 1997.

Hence, the present petition.

The issue before us is whether the Court of Appeals erred in rescinding the parties'
Contract to Sell.

Article 1370 of the Civil Code governs the interpretation of the terms of agreement in a
written contract, thus:

ART. 1370. If the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of the stipulation shall
control.

If the words appear to be contrary to the evident intention of the parties, the
latter shall prevail over the former.

Simply put, the literal meaning of the stipulations shall control the intention of the
parties, to be deciphered not from the unilateral post facto assertions of one of the parties,
but from the language used in the contract. 3 The language is to be understood literally,
just as it so appears in the contract.

Here, the pertinent provisions of the Contract to Sell between the parties are:

a) The PURCHASER agrees to buy from the DEVELOPER and the

DEVELOPER agrees to sell to said PURCHASER the following described unit,
together with such parking space assigned for the exclusive use of such Unit if
such parking space is allotted to it in the plans of the Project, together with such
share in the common areas which may be described in the Master Deed. ICAcaH

xxx xxx xxx

c) . . .
 (2) The balance of the purchase price shall be paid by the PURCHASER
to the DEVELOPER upon final completion of the Condominium Unit
covered by this Contract to Sell and upon written notice to the
PURCHASER that said Unit has been completed and ready for delivery
to him, irrespective of whether said PURCHASER may accept delivery
of said Unit or not.

d) The Unit herein purchased shall be completed and delivered to the

PURCHASER within two hundred forty (240) working days from and after the
signing of this Contract subject however to such delays which may be caused by
fire, earthquake, acts of God, the elements of war or civil disturbances,
economic controls making it impossible or difficult to obtain the necessary
materials, acts of third persons or other matters, cause of circumstances beyond
the control of the DEVELOPER.

xxx xxx xxx

f) Upon full payment by the PURCHASER of the full amount of the purchase
price stipulated in paragraph (c) hereof and otherwise upon full compliance by
the PURCHASER of all its obligations herein, the DEVELOPER will convey to
the PURCHASER all the rights and interests of the former in and to the Unit
subject hereof, together with the interest in the Common Areas and in the
Condominium Corporation appurtenant to such Unit. The rights and interests so
conveyed shall be subject to the provisions of the Condominium Act, the Master
Deed, the Declaration of Restrictions, the Articles and By-Laws of the
Condominium Corporation.

g) In the event the PURCHASER should fail to pay for a period of thirty (30)
days from the date of completion of the Unit and written notice to said
PURCHASER that said Unit is ready for delivery to him/it, this Contract shall,
by the mere fact of nonpayment, expire by itself and become null and void, and
any and all sums of money paid under this Contract, together with all the
improvements made on the premises, shall be considered and become rentals on
the property.

. . . Immediately after the expiration of the 30-day period provided for under this
clause, the DEVELOPER shall be at liberty to dispose of and sell said Unit and
its appurtenances to any interested third person or persons.

We draw the following conclusions from the foregoing stipulations.

First, the agreement between the parties is a contract to sell, not a contract of sale. In a
contract to sell, ownership is reserved by the vendor, not to pass to the vendee until full
payment of the purchase price. On the other hand, in a contract of sale, the vendor loses
ownership over of the property and cannot recover it unless and until the contract is
rescinded. 4

We note that paragraph (c) (2) of the contract states: "The balance of the purchase price
shall be paid by the PURCHASER upon final completion of the Condominium Unit
covered by this Contract to Sell." This must be read in relation to the first sentence of
paragraph (f), thus: "Upon full payment by the PURCHASER of the full amount of the
purchase price stipulated in paragraph (c) hereof and otherwise upon full compliance by
the PURCHASER of all its obligations herein, the DEVELOPER will convey to the
PURCHASER all the rights and interests of the former in and to the Unit subject hereof. .
." From these stipulations, it is clear that respondent intended to reserve ownership of the
property until petitioner shall have paid in full the purchase price. In turn, petitioner
cannot demand delivery of the Certificate of Title as he has not yet fully paid the
purchase price.

Second, paragraph (g) gives respondent two (2) remedies should petitioner fail to pay the
balance of the purchase price when due. These remedies are unilateral rescission of the
contract and application of the down payment to the unpaid rentals.

There is no dispute that petitioner did not pay the balance of the purchase price. He
occupied the unit for eight (8) years without paying any rent. Thus, respondent has the
right to avail of the said remedies. Moreover, it can also offer the unit for sale to third
persons pursuant to the contract. cSDHEC

Third, respondent alleged that petitioner violated the contract when it asked him to sign a
"waiver of parking space." There is no provision in the Contract to Sell that a parking
space will be provided for the unit occupied by petitioner. The contract clearly states that
the inclusion of a parking space is subject to availability. The record likewise shows that
petitioner never complained about the lack of parking space. In his letter of December 2,
1992 to respondent, the only reason he cited for refusing to sign the waiver is an alleged
defect in the construction of the building.

A contract is the law between the parties. Both are bound to comply with its provisions.
Its validity cannot be left to the will of one of them. 5

As to the denial of petitioner's claim for damages and attorney's fees, suffice it to say that
he did not come to court with clean hands. Because of his violations of the contract,
respondent was compelled to go to court and hire the services of a lawyer to protect its
rights and interests. Thus, the award of attorney's fees in its favor is in order.

WHEREFORE, we DENY the petition. The assailed Decision and Resolution of the
Court of Appeals in CA-G.R. CV No. 43785 are AFFIRMED IN TOTO.
Costs against the petitioner.

SO ORDERED.

Puno, Corona, Azcuna and Garcia, JJ., concur.

||| (Go v. Pura V. Kalaw, Inc., G.R. No. 131408, [July 31, 2006], 529 PHIL 150-159)
 FIRST DIVISION

[G.R. No. 166183. January 20, 2006.]

SPS. TITO ALVARO and MARIA VALELO, petitioners, vs. SPS.

OSMUNDO TERNIDA and JULITA RETURBAN, COURT OF
APPEALS, respondents.

Fernando P. Cabrera for petitioners.

Edgardo Y. Pascua for respondents.

SYLLABUS

1. CIVIL LAW; SPECIAL CONTRACTS; SALES; EXTINGUISHMENT;

CONVENTIONAL REDEMPTION; EQUITABLE MORTGAGE; ELUCIDATED.
An equitable mortgage is defined as one which although lacking in some formality, or
form or words, or other requisites demanded by a statute, nevertheless reveals the
intention of the parties to charge real property as security for a debt, and contains nothing
impossible or contrary to law. For the presumption of an equitable mortgage to arise, two
requisites must concur: (1) that the parties entered into a contract denominated as a sale;
and (2) that their intention was to secure an existing debt by way of a mortgage.
Consequently, the nonpayment of the debt when due gives the mortgagee the right to
foreclose the mortgage, sell the property and apply the proceeds of the sale to the
satisfaction of the loan obligation. While there is no single conclusive test to determine
whether a deed absolute on its face is really a simple loan accommodation secured by a
mortgage, however, the Civil Code enumerates several instances when a contract is
clothed with the presumption that it is an equitable mortgage, to wit: Article 1602. The
contract shall be presumed to be an equitable mortgage, in any of the following cases: (1)
When the price of a sale with right to repurchase is unusually inadequate; (2) When the
vendor remains in possession as lessee or otherwise; (3) When upon or after the
expiration of the right to repurchase another instrument extending the period of
redemption or granting a new period is executed; (4) When the purchaser retains for
himself a part of the purchase price; (5) When the vendor binds himself to pay the taxes
on the thing sold; (6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation. In any of the foregoing cases, any money, fruits, or
other benefit to be received by the vendee as rent or otherwise shall be considered as
interest which shall be subject to the usury laws. It is an established rule that the presence
of even one of the circumstances set forth in Article 1602 is sufficient to declare a
contract of sale with right to repurchase an equitable mortgage. Thus, under the wise, just
and equitable presumption in Article 1602, a document which appears on its face to be a
sale absolute or with pacto de retro may be proven by the vendor or vendor-a-retro
to be one of a loan with mortgage. In such case, parol evidence becomes competent and
admissible to prove that the instrument was in truth and in fact given merely as a security
for the payment of a loan. And upon proof of the truth of such allegations, the court will
enforce the agreement or understanding in consonance with the true intent of the parties
at the time of the execution of the contract. The conditions which give rise to a
presumption of equitable mortgage, as set out in Article 1602 of the Civil Code, apply
with equal force to a contract purporting to be one of absolute sale. Moreover, the
presence of even one of the circumstances in Article 1602 is sufficient basis to declare a
contract as one of equitable mortgage. This is in consonance with the rule that the law
favors the least transmission of rights.

2. ID.; CONTRACTS; NATURE THEREOF DETERMINED BY THE INTENTION OF

THE PARTIES. We find no merit in petitioners' contention that in the Deed of
Absolute Sale executed between them and Julita, the latter totally conveyed her
ownership over the disputed property. We have consistently decreed that the
nomenclature used by the contracting parties to describe a contract does not determine its
nature. The decisive factor is the intention of the parties to the contract as shown by
their conduct, words, actions and deeds prior to, during and after executing the
agreement.

DECISION

YNARES-SANTIAGO, J : p

Assailed in this petition for review on certiorari under Rule 45 of the Rules of Court are
the July 30, 2004 Decision 1 of the Court of Appeals in CA-G.R. CV No. 61985 and the
November 3, 2004 Resolution 2 which denied petitioners' motion for reconsideration.

The antecedent facts are as follows:

Respondent-spouses Osmundo Ternida and Julita Returban are the owners of the
contested property, an 8,450 sq. m. parcel of non-irrigated riceland situated at Barangay
Labney, San Jacinto, Pangasinan.

On May 26, 1986, Julita mortgaged the land to the spouses Salvador de Vera and Juanita
Orinion for P28,000.00. As testified 3 to by Julita, she was made to sign a Deed of Pacto
de Retro Sale 4 with Salvador who explained to her that what she signed was a mortgage
document. As worded, the document provided that Julita has three years from the date of
the execution of the document to repurchase the land.
After a year, Salvador executed a Deed of Transfer of Mortgage 5 in favor of the spouses
Jose Calpito and Zoraida Valelo for a consideration of P32,000.00. Thereafter, Julita
requested from the latter for an additional amount of P3,000.00, at which point, she was
asked 6 to sign a Deed of Sale with Right to Repurchase. 7

On May 22, 1990, Julita again asked for an additional amount of P1,000.00 but she was
informed by Jose Calpito that they have transferred the mortgage to the spouses Tito
Alvaro and Maria Valelo, herein petitioners. Julita thus went to the petitioners who gave
her the additional amount of P1,000.00. Julita claimed that petitioners asked her to sign a
document that she believed was a mortgage document but later on turned out to be a
Deed of Absolute Sale 8 over the contested property.

When Julita tried to redeem the property from the petitioners, the latter refused and
claimed that they had purchased the property and were in fact issued Tax Declaration No.
2747. 9

Consequently, on October 1, 1997, respondents filed a complaint for Annulment of Deed

of Sale Documents and Tax Declaration No. 2747 with the Regional Trial Court of
Dagupan City, docketed as Civil Case No. 97-01876-D. 10 After trial on the merits, the
trial court dismissed the complaint for lack of cause of action. 11 Respondents filed a
motion for reconsideration which was however denied. 12

On appeal, the Court of Appeals reversed the decision of the trial court, thus:

WHEREFORE, the appeal is granted and the Decision dated September 10,
1998 of the trial court is reversed and set aside. The Deed of Absolute Sale
dated May 22, 1990 between plaintiff-appellant Julita Returban and defendants-
appellees spouses Tito Alvaro and Maria Valelo shall be construed as an
equitable mortgage and the Tax Declaration 2747 issued in the name of spouses
Tito Alvaro and Maria Valelo is annulled. Consequently, plaintiffs-appellants
are entitled to redeem the property which shall be effected upon payment of
their mortgage debt to defendants-appellees.
cdasiajur

SO ORDERED. 13

Hence this petition for review on the following grounds:

1. THAT THE HONORABLE COURT OF APPEALS COMMITTED AN

ERROR IN LAW WHEN IT DECLARED THE TRANSACTION
BETWEEN THE PARTIES AS EQUITABLE MORTGAGE AND
NOT AN ABSOLUTE SALE;

2. THAT THE HONORABLE COURT OF APPEALS COMMITTED AN

ERROR IN LAW WHEN IT DECLARED THE ANNULMENT OF
 TAX DECLARATION 2747 IN THE NAMES OF THE
PETITIONERS;

3. THAT THE HONORABLE COURT OF APPEALS COMMITTED AN

ERROR IN LAW WHEN IT FAILED TO APPLY THE
JURISPRUDENTIAL RULE LAID DOWN IN ABILLA VS.
GOBONSENG, JR., 374 SCRA 51;

4. THAT THE HONORABLE COURT OF APPEALS COMMITTED AN

ERROR IN LAW WHEN IT FAILED TO APPLY THE PRINCIPLE
OF LACHES AND ESTOPPEL;

5. THAT THE HONORABLE COURT OF APPEALS COMMITTED AN

ERROR IN LAW WHEN IT FAILED TO AWARD DAMAGES IN
FAVOR OF THE PETITIONERS. 14

Primarily, petitioners contend that the Court of Appeals erred when it declared the
transaction between the parties to be an equitable mortgage instead of an absolute sale.

The petition lacks merit.

An equitable mortgage is defined as one which although lacking in some formality, or

form or words, or other requisites demanded by a statute, nevertheless reveals the
intention of the parties to charge real property as security for a debt, and contains nothing
impossible or contrary to law. 15 For the presumption of an equitable mortgage to arise,
two requisites must concur: (1) that the parties entered into a contract denominated as a
sale; and (2) that their intention was to secure an existing debt by way of a mortgage. 16

Consequently, the nonpayment of the debt when due gives the mortgagee the right to
foreclose the mortgage, sell the property and apply the proceeds of the sale to the
satisfaction of the loan obligation. 17

We find no merit in petitioners' contention that in the Deed of Absolute Sale executed
between them and Julita, the latter totally conveyed her ownership over the disputed
property. We have consistently decreed that the nomenclature used by the contracting
parties to describe a contract does not determine its nature. The decisive factor is the
intention of the parties to the contract as shown by their conduct, words, actions and
deeds prior to, during and after executing the agreement. 18

While there is no single conclusive test to determine whether a deed absolute on its face
is really a simple loan accommodation secured by a mortgage, 19 however, the Civil
Code enumerates several instances when a contract is clothed with the presumption that it
is an equitable mortgage, to wit:
 Article 1602. The contract shall be presumed to be an equitable mortgage, in
any of the following cases:

(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period is
executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation. CSTDIE

In any of the foregoing cases, any money, fruits, or other benefit to be received
by the vendee as rent or otherwise shall be considered as interest which shall be
subject to the usury laws.

It is an established rule that the presence of even one of the circumstances set forth in
Article 1602 is sufficient to declare a contract of sale with right to repurchase an
equitable mortgage. 20 Thus, under the wise, just and equitable presumption in Article
1602, a document which appears on its face to be a sale absolute or with pacto de
retro may be proven by the vendor or vendor-a-retro to be one of a loan with
mortgage. In such case, parol evidence becomes competent and admissible to prove that
the instrument was in truth and in fact given merely as a security for the payment of a
loan. And upon proof of the truth of such allegations, the court will enforce the
agreement or understanding in consonance with the true intent of the parties at the time of
the execution of the contract. 21

Applying the foregoing considerations to the instant case, we find that the true intention
of the parties in the execution of the Deed of Absolute Sale was never to convey the
ownership of the disputed property but merely to secure the loan obtained by Julita. As
correctly observed by the Court of Appeals: 22

The circumstances surrounding the execution and performance of the terms of

the contracts which plaintiff-appellant Julita Returban was made to sign
involving the subject property, are inconsistent with the theory that the property
was sold.
 When plaintiff-appellant Julita Returban first mortgaged the land in favor of
spouses Salvador de Vera and Juanita Orinion for the amount of P28,000.00,
she was made to sign a Deed of Pacto de Retro Sale. Salvador de Vera himself
was aware that the subject property was merely mortgaged, not sold, because he
himself subsequently executed a Deed of Transfer Mortgage in favor of spouses
Jose Calpito and Zoraida Valelo . . . .

xxx xxx xxx

When plaintiff-appellant went to spouses Jose Calpito and Zoraida Valelo to

request an additional P3,000.00, she was made to sign a Deed of Sale with Right
to Repurchase in favor of Jose Calpito and Zoraida Valelo for a purported
consideration of P35,000.00. But it was admitted by defendant-appellee Maria
Valelo during her direct examination that:

ATTY. DE JESUS:

Q. You said that the amount of P35,000.00 was given to Jose Calpito
and Zoraida Valelo as redemption price of the land mortgaged by Julita
Returban?

A: Yes, sir. (Underlining supplied.)

Actually, plaintiff-appellant Julita Returban was given P28,000.00 at first and

subsequently, she was given the additional amounts of P3,000.00 by Jose
Calpito and Zoraida Valelo and P1,000.00 by Tito Alvaro and Maria Valelo.
The Supreme Court, in an analogous case, said that:

If the transactions were a true pacto de retro, the purchase price had been
fixed (at P3,600.00) not a centavo more and respondents' giving of
additional amounts on (three) different occasions to be aggregated to the
redemption price "was absolutely inconsistent" with the concept of a
"true sale with pacto de retro."

For her part, Julita testified that during all the times that she was asked to sign a
document evidencing the release of additional sums of money to her, she always
believed, as she was made to believe, that she was signing a mortgage document. 23

Verily, the conduct of Julita before, during and after the mortgage of the disputed
property negates petitioners' allegation that she intended to sell the land in their favor.
Otherwise, she would have not exerted earnest efforts to redeem the same. cIETHa

The conditions which give rise to a presumption of equitable mortgage, as set out in
Article 1602 of the Civil Code, apply with equal force to a contract purporting to be one
of absolute sale. Moreover, the presence of even one of the circumstances in Article 1602
is sufficient basis to declare a contract as one of equitable mortgage. This is in
consonance with the rule that the law favors the least transmission of rights. 24

WHEREFORE, the petition is DENIED. The assailed Decision dated July 30, 2004 of the
Court of Appeals in CA-G.R. CV No. 61985 and its November 3, 2004 Resolution, are
AFFIRMED.

SO ORDERED.

Panganiban, C.J., Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur.

(Spouses Alvaro v. Spouses Ternida, G.R. No. 166183, [January 20, 2006], 515 PHIL
|||

267-275)
 SECOND DIVISION

[G.R. No. 163075. January 23, 2006.]

AYALA LIFE ASSURANCE, INC., petitioner, vs. RAY BURTON

DEVELOPMENT CORPORATION, respondent.

Benedicto Verzosa Gealogo Burkley & Associates for petitioner.

Britanico Sarmiento & Franco Law Office for respondent.

SYLLABUS

1. CIVIL LAW; CONTRACTS; THE REAL NATURE OF A CONTRACT MAY BE

DETERMINED FROM THE EXPRESS TERMS OF THE WRITTEN AGREEMENT
AND FROM THE CONTEMPORANEOUS AND SUBSEQUENT ACTS OF THE
CONTRACTING PARTIES. The real nature of a contract may be determined from
the express terms of the written agreement and from the contemporaneous and
subsequent acts of the contracting parties. In the construction or interpretation of an
instrument, the intention of the parties is primordial and is to be pursued. If the terms of
the contract are clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of its stipulations shall control. If the words appear to be contrary to the
evident intention of the parties, the latter shall prevail over the former. The denomination
or title given by the parties in their contract is not conclusive of the nature of its contents.

2. ID.; ID.; SALES; QUESTIONED AGREEMENT IS A CONTRACT TO SELL.

The questioned agreement clearly indicates that it is a contract to sell, not a contract of
sale. Paragraph 4 of the contract provides: 4. TITLE AND OWNERSHIP OF THE
PROPERTY. The title to the property shall transfer to the PURCHASER upon
payment of the balance of the Purchase Price and all expenses, penalties and other costs
which shall be due and payable hereunder or which may have accrued thereto.
Thereupon, the SELLER shall execute a Deed of Absolute Sale in favor of the
PURCHASER conveying all the SELLER'S rights, title and interest in and to the
Property to the PURCHASER. As correctly stated by the Court of Appeals in its assailed
Decision, "The ruling of the Supreme Court in Lim v. Court of Appeals (182 SCRA 564
[1990]) is most illuminating. In the said case, a contract to sell and a contract of sale were
clearly and thoroughly distinguished from each other, with the High Tribunal stressing
that in a contract of sale, the title passes to the buyer upon the delivery of the thing sold.
In a contract to sell, the ownership is reserved in the seller and is not to pass until the full
payment of the purchase price is made. In the first case, non-payment of the price is a
negative resolutory condition; in the second case, full payment is a positive suspensive
condition. In the first case, the vendor has lost and cannot recover the ownership of the
property until and unless the contract of sale is itself resolved and set aside. In the second
case, the title remains in the vendor if the vendee does not comply with the condition
precedent of making payment at the time specified in the contract."

3. ID.; ID.; ID.; ID.; CAUSE OF ACTION FOR SPECIFIC PERFORMANCE WILL
NOT LIE IN CASE AT BAR; NON-PAYMENT OF PURCHASE PRICE RENDERS
CONTRACT TO SELL INEFFECTIVE AND WITHOUT FORCE AND EFFECT.
Black's Law Dictionary defined specific performance as "(t)he remedy of requiring exact
performance of a contract in the specific form in which it was made, or according to the
precise terms agreed upon. The actual accomplishment of a contract by a party bound to
fulfill it." Evidently, before the remedy of specific performance may be availed of, there
must be a breach of the contract. Under a contract to sell, the title of the thing to be sold
is retained by the seller until the purchaser makes full payment of the agreed purchase
price. Such payment is a positive suspensive condition, the non-fulfillment of which is
not a breach of contract but merely an event that prevents the seller from conveying title
to the purchaser. The non-payment of the purchase price renders the contract to sell
ineffective and without force and effect. Thus, a cause of action for specific performance
does not arise.

4. ID.; ID.; ID.; ID.; NO REFUND FOR AMOUNT PAID UNDER THE CONTRACT
TO SELL. The provisions of the contract to sell categorically indicate that
respondent's default in the payment of the purchase price is considered merely as an
"event," the happening of which gives rise to the respective obligations of the parties
mentioned therein. Therefore, in the event of respondent's default in payment, petitioner,
under the provisions of the contract, has the right to retain an amount equivalent to 25%
of the total payments. As stated by the Court of Appeals, petitioner having been informed
in writing by respondent of its intention not to proceed with the contract on August 12,
1998, or prior to incurring delay in payment of succeeding installments, the provisions in
the contract relative to penalties and interest find no application.

DECISION

SANDOVAL-GUTIERREZ, J : p

Before us for resolution is the petition for review on certiorari 1 assailing the Decision 2
dated January 21, 2004 of the Court of Appeals in CA-G.R. CV No. 74635, 3 as well as
its Resolution dated April 2, 2004 denying petitioner's motion for reconsideration.

The facts are:

On December 22, 1995, Ayala Life Assurance, Inc., petitioner, and Ray Burton
Development Corporation, respondent, entered into a contract denominated as a
"Contract to Sell," with a "Side Agreement" of even date. In these contracts, petitioner
agreed to sell to respondent a parcel of land, with an area of 1,691 square meters, situated
at Madrigal Business Park, Ayala Alabang Village, Muntinlupa City, covered by Transfer
Certificate of Title No. 186485 of the Registry of Deeds of Makati City. The purchase
price of the land is P55,000.00 per square meter or a total of P93,005,000.00, payable as
follows:

(a) On contract date P24,181,300.00 representing 26 percent of the purchase

price, inclusive of the P1,000,000.00 option money;

(b) Not later than January 6, 1996 P3,720,200.00 representing 4 percent of

the purchase price to complete 30 percent down payment; and

(c) In consecutive quarterly installments for a period of 5 years from December

22, 1995 P65,103,500.00 representing the 70 percent balance of the purchase
price.

The contract contains a stipulation in paragraphs 3 and 3.1 for an "Event of Default." It
provides that in case the purchaser (respondent) fails to pay any installment for any
reason not attributable to the seller (petitioner), the latter has the right to assess the
purchaser a late penalty interest on the unpaid installment at two (2%) percent per month,
computed from the date the amount became due until full payment thereof. And if such
default continues for a period of six (6) months, the seller has the right to cancel the
contract without need of court declaration by giving the purchaser a written notice of
cancellation. In case of such cancellation, the seller shall return to the purchaser the
amount he received, less penalties, unpaid charges and dues on the property. ICAcaH

Respondent paid thirty (30%) down payment and the quarterly amortization, including
the one that fell due on June 22, 1998.

However, on August 12, 1998, respondent notified petitioner in writing that it will no
longer continue to pay due to the adverse effects of the economic crisis to its business.
Respondent then asked for the immediate cancellation of the contract and for a refund of
its previous payments as provided in the contract.

Petitioner refused to cancel the contract to sell. Instead, on November 25, 1999, it filed
with the Regional Trial Court, Branch 66, Makati City, a complaint for specific
performance against respondent, docketed as Civil Case No. 99-2014, demanding from
the latter the payment of the remaining unpaid quarterly installments beginning
September 21, 1999 in the total sum of P33,242,382.43, inclusive of interest and
penalties.
Respondent, in its answer, denied any further obligation to petitioner, asserting that on
August 12, 1998, it (respondent) notified the latter of its inability to pay the remaining
installments. Respondent invoked the provisions of paragraphs 3 and 3.1 of the contract
to sell providing for the refund to it of the amounts paid, less interest and the sum of 25%
of all sums paid as liquidated damages.

After pre-trial, petitioner moved for a summary judgment on the ground that respondent's
answer failed to tender any genuine issue as to any material fact, except as to the amount
of damages. The trial court granted the motion and ordered the parties to submit their
memoranda.

On December 10, 2001, the trial court rendered a Decision holding that respondent
transgressed the law in obvious bad faith. The dispositive portion reads:

WHEREFORE, defendant (now respondent) is hereby sentenced and ordered to

pay plaintiff (now petitioner) the sum of P33,242,383.43, representing the
unpaid balance of the principal amount owing under the contract, interest agreed
upon, and penalties. Defendant is further ordered to pay plaintiff the sum of
P200,000.00 as attorney' s fees and the costs of suit.

Upon full payment of the aforementioned amounts by defendant, plaintiff shall,

as it is hereby ordered, execute the appropriate deed of absolute sale conveying
and transferring full title and ownership of the parcel of land subject of the sale
to and in favor of defendant.

On appeal, the Court of Appeals rendered a Decision dated January 21, 2004 in CA-G.R.
CV No. 74635, reversing the trial court's Decision, thus:

WHEREFORE, the decision appealed from is hereby REVERSED and SET

ASIDE. Ayala Life is hereby ordered to refund all sums paid under the
Contract to Sell, with interest of twelve percent (12%) per annum from 12
August 1998 until fully paid, less the amount equivalent to 25% of the total
amount paid as liquidated damages.

SO ORDERED.

The Court of Appeals ruled that the parties' transaction in question is in the nature of a
contract to sell, as distinguished from a contract of sale. Under their contract, ownership
of the land is retained by petitioner until respondent shall have fully paid the purchase
price. Its failure to pay the price in full is not a breach of contract but merely an event that
prevents petitioner from conveying the title to respondent. Under such a situation, a cause
of action for specific performance does not arise. What should govern the parties' relation
are the provisions of their contract on the "Event of Default" stated earlier.

Hence, the instant petition for review on certiorari.

Petitioner contends that the Court of Appeals committed a reversible error in holding
that: (a) the remedy of specific performance is not available in a contract to sell, such as
the one at bar; and (b) petitioner is liable to refund respondent all the sums the latter paid
under the contract to sell, with interest at 12% per annum from August 12, 1998 until
fully paid, less the amount equivalent to 25% of the total amount paid as liquidated
damages. cEaTHD

Petitioner argues that by virtue of the contract to sell, it has the right to choose between
fulfillment and rescission of the contract, with damages in either case. Thus, it is
immaterial to determine whether the parties' subject agreement is a contract to sell or a
contract of sale.

In its comment, respondent disputed petitioner's allegations and prayed that the petition
be denied for lack of merit.

The issues are:

1. Whether respondent's non-payment of the balance of the purchase price gave

rise to a cause of action on the part of petitioner to demand full payment of the
purchase price; and

2. Whether petitioner should refund respondent the amount the latter paid under
the contract to sell.

At the outset, it is significant to note that petitioner does not dispute that its December 22,
1995 transaction with respondent is a contract to sell. It bears stressing that the exact
nature of the parties' contract determines whether petitioner has the remedy of specific
performance.

It is thus imperative that we first determine the nature of the parties' contract.

The real nature of a contract may be determined from the express terms of the written
agreement and from the contemporaneous and subsequent acts of the contracting parties.
4 In the construction or interpretation of an instrument, the intention of the parties is
primordial and is to be pursued. 5 If the terms of the contract are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of its stipulations shall
control. 6 If the words appear to be contrary to the evident intention of the parties, the
latter shall prevail over the former. 7 The denomination or title given by the parties in
their contract is not conclusive of the nature of its contents. 8

Here, the questioned agreement clearly indicates that it is a contract to sell, not a contract
of sale. Paragraph 4 of the contract provides:
 4. TITLE AND OWNERSHIP OF THE PROPERTY. The title to the
property shall transfer to the PURCHASER upon payment of the balance of the
Purchase Price and all expenses, penalties and other costs which shall be due
and payable hereunder or which may have accrued thereto. Thereupon, the
SELLER shall execute a Deed of Absolute Sale in favor of the PURCHASER
conveying all the SELLER'S rights, title and interest in and to the Property to
the PURCHASER. 9

As correctly stated by the Court of Appeals in its assailed Decision, "The ruling of the
Supreme Court in Lim v. Court of Appeals (182 SCRA 564 [1990]) is most illuminating.
In the said case, a contract to sell and a contract of sale were clearly and thoroughly
distinguished from each other, with the High Tribunal stressing that in a contract of sale,
the title passes to the buyer upon the delivery of the thing sold. In a contract to sell, the
ownership is reserved in the seller and is not to pass until the full payment of the
purchase price is made. In the first case, non-payment of the price is a negative resolutory
condition; in the second case, full payment is a positive suspensive condition. In the first
case, the vendor has lost and cannot recover the ownership of the property until and
unless the contract of sale is itself resolved and set aside. In the second case, the title
remains in the vendor if the vendee does not comply with the condition precedent of
making payment at the time specified in the contract." 10

Considering that the parties' transaction is a contract to sell, can petitioner, as seller,
demand specific performance from respondent, as buyer?

Black's Law Dictionary defined specific performance as "(t)he remedy of requiring exact
performance of a contract in the specific form in which it was made, or according to the
precise terms agreed upon. The actual accomplishment of a contract by a party bound to
fulfill it." 11

Evidently, before the remedy of specific performance may be availed of, there must be a
breach of the contract.

Under a contract to sell, the title of the thing to be sold is retained by the seller until the
purchaser makes full payment of the agreed purchase price. Such payment is a positive
suspensive condition, the non-fulfillment of which is not a breach of contract but merely
an event that prevents the seller from conveying title to the purchaser. The non-payment
of the purchase price renders the contract to sell ineffective and without force and effect.
Thus, a cause of action for specific performance does not arise.

In Rayos v. Court of Appeals, 12 we held:

 . . . . Under the two contracts, the petitioners bound and obliged themselves to
execute a deed of absolute sale over the property and transfer title thereon to the
respondents after the payment of the full purchase price of the property,
inclusive of the quarterly installments due on the petitioners' loan with the PSB:

xxx xxx xxx

Construing the contracts together, it is evident that the parties executed a

contract to sell and not a contract of sale. The petitioners retained ownership
without further remedies by the respondents until the payment of the purchase
price of the property in full. Such payment is a positive suspensive condition,
failure of which is not really a breach, serious or otherwise, but an event
that prevents the obligation of the petitioners to convey title from arising,
in accordance with Article 1184 of the Civil Code (Leano v. Court of
Appeals, 369 SCRA 36 [2001]; Lacanilao v. Court of Appeals, 262 SCRA 486
[1996]).

The non-fulfillment by the respondent of his obligation to pay, which is a

suspensive condition to the obligation of the petitioners to sell and deliver
the title to the property, rendered the contract to sell ineffective and
without force and effect (Agustin v. Court of Appeals, 186 SCRA 375 [1990]).
The parties stand as if the conditional obligation had never existed. Article
1191 13 of the New Civil Code will not apply because it presupposes an
obligation already extant (Padilla v. Posadas, 328 SCRA 434 [2001]. There
can be no rescission of an obligation that is still non-existing, the suspensive
condition not having happened (Rillo v. Court of Appeals, 274 SCRA 461
[1997]). (Underscoring supplied) cSHIaA

Here, the provisions of the contract to sell categorically indicate that respondent's default
in the payment of the purchase price is considered merely as an "event," the happening of
which gives rise to the respective obligations of the parties mentioned therein, thus:

3. EVENT OF DEFAULT. The following event shall constitute an Event of

Default under this contract: the PURCHASER fails to pay any installment on
the balance, for any reason not attributable to the SELLER, on the date it is due,
provided, however, that the SELLER shall have the right to charge the
PURCHASER a late penalty interest on the said unpaid interest at the rate of
2% per month computed from the date the amount became due and payable
until full payment thereof.

3.1. If the Event of Default shall have occurred, then at any time thereafter, if
any such event shall then be continuing for a period of six (6) months, the
SELLER shall have the right to cancel this Contract without need of court
declaration to that effect by giving the PURCHASER a written notice of
cancellation sent to the address of the PURCHASER as specified herein by
registered mail or personal delivery. Thereafter, the SELLER shall return to the
 PURCHASER the aggregate amount that the SELLER shall have received as of
the cancellation of this Contract, less: (i) penalties accrued as of the date of such
cancellation, (ii) an amount equivalent to twenty five percent (25%) of the total
amount paid as liquidated damages, and (iii) any unpaid charges and dues on the
Property. Any amount to be refunded to the PURCHASER shall be collected by
the PURCHASER at the office of the SELLER. Upon notice to the
PURCHASER of such cancellation, the SELLER shall be free to dispose of the
Property covered hereby as if this Contract had not been executed. Notice to the
PURCHASER sent by registered mail or by personal delivery to its address
stated in this Contract shall be considered as sufficient compliance with all
requirements of notice for purposes of this Contract. 14

Therefore, in the event of respondent's default in payment, petitioner, under the above
provisions of the contract, has the right to retain an amount equivalent to 25% of the total
payments. As stated by the Court of Appeals, petitioner having been informed in writing
by respondent of its intention not to proceed with the contract on August 12, 1998, or
prior to incurring delay in payment of succeeding installments, 15 the provisions in the
contract relative to penalties and interest find no application.

The Court of Appeals further held that with respect to the award of interest, petitioner is
liable to pay interest of 12% per annum upon the net refundable amount due from the
time respondent made the extrajudicial demand upon it on August 12, 1998 to refund
payment under the Contract to Sell, 16 pursuant to our ruling in Eastern Shipping Lines,
Inc. v. Court of Appeals. 17

In sum, we find that the Court of Appeals, in rendering the assailed Decision and
Resolution, did not commit any reversible error.

WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the
Court of Appeals are AFFIRMED. Costs against petitioner.

SO ORDERED.

Puno, Corona, Azcuna and Garcia, JJ., concur.

(Ayala Life Assurance, Inc. v. Ray Burton Development Corp., G.R. No. 163075,
|||

[January 23, 2006], 515 PHIL 431-441)

 SECOND DIVISION

[G.R. No. 150128. August 31, 2006.]

LAUREANO T. ANGELES, petitioner, vs. PHILIPPINE NATIONAL

RAILWAYS (PNR) AND RODOLFO FLORES, 1 respondents.

DECISION

GARCIA, J : p

Under consideration is this petition for review under Rule 45 of the Rules of Court
assailing and seeking to set aside the following issuances of the Court of Appeals (CA) in
CA-G.R. CV No. 54062, to wit:

1. Decision 2 dated June 4, 2001, affirming an earlier decision of the Regional

Trial Court (RTC) of Quezon City, Branch 79, which dismissed the
complaint for specific performance and damages thereat commenced by
the petitioner against the herein respondents; and

2. Resolution 3 dated September 17, 2001, denying the petitioner's motion for
reconsideration.

The facts:

On May 5, 1980, the respondent Philippine National Railways (PNR) informed a certain
Gaudencio Romualdez (Romualdez, hereinafter) that it has accepted the latter's offer to
buy, on an "AS IS, WHERE IS" basis, the PNR's scrap/unserviceable rails located in Del
Carmen and Lubao, Pampanga at P1,300.00 and P2,100.00 per metric ton, respectively,
for the total amount of P96,600.00. After paying the stated purchase price, Romualdez
addressed a letter to Atty. Cipriano Dizon, PNR's Acting Purchasing Agent. Bearing date
May 26, 1980, the letter reads:

Dear Atty. Dizon:

This is to inform you as President of San Juanico Enterprises, that I have

authorized the bearer, LIZETTE R. WIJANCO of No. 1606 Aragon St., Sta.
Cruz, Manila, to be my lawful representative in the withdrawal of the
scrap/unserviceable rails awarded to me.
 For this reason, I have given her the ORIGINAL COPY of the AWARD, dated
May 5, 1980 and O.R. No. 8706855 dated May 20, 1980 which will indicate my
waiver of rights, interests and participation in favor of LIZETTE R. WIJANCO.

Thank you for your cooperation.

Very truly yours,

(Sgd.) Gaudencio Romualdez

The Lizette R. Wijanco mentioned in the letter was Lizette Wijanco-Angeles, petitioner's
now deceased wife. That very same day May 26, 1980 Lizette requested the PNR
to transfer the location of withdrawal for the reason that the scrap/unserviceable rails
located in Del Carmen and Lubao, Pampanga were not ready for hauling. The PNR
granted said request and allowed Lizette to withdraw scrap/unserviceable rails in Murcia,
Capas and San Miguel, Tarlac instead. However, the PNR subsequently suspended the
withdrawal in view of what it considered as documentary discrepancies coupled by
reported pilferages of over P500,000.00 worth of PNR scrap properties in Tarlac.

Consequently, the spouses Angeles demanded the refund of the amount of P96,000.00.
The PNR, however, refused to pay, alleging that as per delivery receipt duly signed by
Lizette, 54.658 metric tons of unserviceable rails had already been withdrawn which, at
P2,100.00 per metric ton, were worth P114,781.80, an amount that exceeds the claim for
refund.

On August 10, 1988, the spouses Angeles filed suit against the PNR and its corporate
secretary, Rodolfo Flores, among others, for specific performance and damages before
the Regional Trial Court of Quezon City. In it, they prayed that PNR be directed to
deliver 46 metric tons of scrap/unserviceable rails and to pay them damages and
attorney's fees.

Issues having been joined following the filing by PNR, et al., of their answer, trial
ensued. Meanwhile, Lizette W. Angeles passed away and was substituted by her heirs,
among whom is her husband, herein petitioner Laureno T. Angeles.

On April 16, 1996, the trial court, on the postulate that the spouses Angeles are not the
real parties-in-interest, rendered judgment dismissing their complaint for lack of cause of
action. As held by the court, Lizette was merely a representative of Romualdez in the
withdrawal of scrap or unserviceable rails awarded to him and not an assignee to the
latter's rights with respect to the award.DASCIc

Aggrieved, the petitioner interposed an appeal with the CA, which, as stated at the
threshold hereof, in its decision of June 4, 2001, dismissed the appeal and affirmed that of
the trial court. The affirmatory decision was reiterated by the CA in its resolution of
September 17, 2001, denying the petitioner's motion for reconsideration.

Hence, the petitioner's present recourse on the submission that the CA erred in affirming
the trial court's holding that petitioner and his spouse, as plaintiffs a quo, had no cause of
action as they were not the real parties-in-interest in this case.

We DENY the petition.

At the crux of the issue is the matter of how the aforequoted May 26, 1980 letter of
Romualdez to Atty. Dizon of the PNR should be taken: was it meant to designate, or has
it the effect of designating, Lizette W. Angeles as a mere agent or as an assignee of his
(Romualdez's) interest in the scrap rails awarded to San Juanico Enterprises? The CA's
conclusion, affirmatory of that of the trial court, is that Lizette was not an assignee, but
merely an agent whose authority was limited to the withdrawal of the scrap rails, hence,
without personality to sue.

Where agency exists, the third party's (in this case, PNR's) liability on a contract is to the
principal and not to the agent and the relationship of the third party to the principal is the
same as that in a contract in which there is no agent. Normally, the agent has neither
rights nor liabilities as against the third party. He cannot thus sue or be sued on the
contract. Since a contract may be violated only by the parties thereto as against each
other, the real party-in-interest, either as plaintiff or defendant in an action upon that
contract must, generally, be a contracting party.

The legal situation is, however, different where an agent is constituted as an assignee. In
such a case, the agent may, in his own behalf, sue on a contract made for his principal, as
an assignee of such contract. The rule requiring every action to be prosecuted in the name
of the real party-in-interest recognizes the assignment of rights of action and also
recognizes that when one has a right assigned to him, he is then the real party-in-interest
and may maintain an action upon such claim or right. 4

Upon scrutiny of the subject Romualdez's letter to Atty. Cipriano Dizon dated May 26,
1980, it is at once apparent that Lizette was to act just as a "representative" of Romualdez
in the "withdrawal of rails," and not an assignee. For perspective, we reproduce the
contents of said letter:

This is to inform you as President of San Juanico Enterprises, that I have

authorized the bearer, LIZETTE R. WIJANCO . . . to be my lawful
representative in the withdrawal of the scrap/unserviceable rails awarded
to me.

For this reason, I have given her the ORIGINAL COPY of the AWARD, dated
May 5, 1980 and O.R. No. 8706855 dated May 20, 1980 which will indicate my
 waiver of rights, interests and participation in favor of LIZETTE R. WIJANCO.
(Emphasis added)

If Lizette was without legal standing to sue and appear in this case, there is more reason
to hold that her petitioner husband, either as her conjugal partner or her heir, is also
without such standing.

Petitioner makes much of the fact that the terms "agent" or "attorney-in-fact" were not
used in the Romualdez letter aforestated. It bears to stress, however, that the words
"principal" and "agent," are not the only terms used to designate the parties in an agency
relation. The agent may also be called an attorney, proxy, delegate or, as here,
representative.

It cannot be over emphasized that Romualdez's use of the active verb "authorized,"
instead of "assigned," indicated an intent on his part to keep and retain his interest in the
subject matter. Stated a bit differently, he intended to limit Lizette's role in the scrap
transaction to being the representative of his interest therein.

Petitioner submits that the second paragraph of the Romualdez letter, stating "I have
given [Lizette] the original copy of the award . . . which will indicate my waiver of rights,
interests and participation in favor of Lizette R. Wijanco" clarifies that Lizette was
intended to be an assignee, and not a mere agent.

We are not persuaded. As it were, the petitioner conveniently omitted an important

phrase preceding the paragraph which would have put the whole matter in context. The
phrase is "For this reason," and the antecedent thereof is his (Romualdez) having
appointed Lizette as his representative in the matter of the withdrawal of the scrap items.
In fine, the key phrase clearly conveys the idea that Lizette was given the original copy of
the contract award to enable her to withdraw the rails as Romualdez's authorized
representative.

Article 1374 of the Civil Code provides that the various stipulations of a contract shall be
read and interpreted together, attributing to the doubtful ones that sense which may result
from all of them taken jointly. In fine, the real intention of the parties is primarily to be
determined from the language used and gathered from the whole instrument. When put
into the context of the letter as a whole, it is abundantly clear that the rights which
Romualdez waived or ceded in favor of Lizette were those in furtherance of the agency
relation that he had established for the withdrawal of the rails.

At any rate, any doubt as to the intent of Romualdez generated by the way his letter was
couched could be clarified by the acts of the main players themselves. Article 1371 of the
Civil Code provides that to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered. In other words, in
case of doubt, resort may be made to the situation, surroundings, and relations of the
parties.

The fact of agency was, as the trial court aptly observed, 5 confirmed in subsequent
letters from the Angeles spouses in which they themselves refer to Lizette as "authorized
representative" of San Juanico Enterprises. Mention may also be made that the
withdrawal receipt which Lizette had signed indicated that she was doing so in a
representative capacity. One professing to act as agent for another is estopped to deny his
agency both as against his asserted principal and third persons interested in the
transaction which he engaged in.

Whether or not an agency has been created is a question to be determined by the fact that
one represents and is acting for another. The appellate court, and before it, the trial court,
had peremptorily determined that Lizette, with respect to the withdrawal of the scrap in
question, was acting for Romualdez. And with the view we take of this case, there were
substantial pieces of evidence adduced to support this determination. The desired reversal
urged by the petitioner cannot, accordingly, be granted. For, factual findings of the trial
court, adopted and confirmed by the CA, are, as a rule, final and conclusive and may not
be disturbed on appeal. 6 So it must be here. IDaCcS

Petitioner maintains that the Romualdez letter in question was not in the form of a special
power of attorney, implying that the latter had not intended to merely authorize his wife,
Lizette, to perform an act for him (Romualdez). The contention is specious. In the
absence of statute, no form or method of execution is required for a valid power of
attorney; it may be in any form clearly showing on its face the agent's authority. 7

A power of attorney is only but an instrument in writing by which a person, as principal,

appoints another as his agent and confers upon him the authority to perform certain
specified acts on behalf of the principal. The written authorization itself is the power of
attorney, and this is clearly indicated by the fact that it has also been called a "letter of
attorney." Its primary purpose is not to define the authority of the agent as between
himself and his principal but to evidence the authority of the agent to third parties with
whom the agent deals. 8 The letter under consideration is sufficient to constitute a power
of attorney. Except as may be required by statute, a power of attorney is valid although
no notary public intervened in its execution. 9

A power of attorney must be strictly construed and pursued. The instrument will be held
to grant only those powers which are specified therein, and the agent may neither go
beyond nor deviate from the power of attorney. 10 Contextually, all that Lizette was
authorized to do was to withdraw the unserviceable/scrap railings. Allowing her authority
to sue therefor, especially in her own name, would be to read something not intended, let
alone written in the Romualdez letter.

Finally, the petitioner's claim that Lizette paid the amount of P96,000.00 to the PNR
appears to be a mere afterthought; it ought to be dismissed outright under the estoppel
principle. In earlier proceedings, petitioner himself admitted in his complaint that it was
Romualdez who paid this amount.

WHEREFORE, the petition is DENIED and the assailed decision of the CA is

AFFIRMED.

Costs against the petitioner.

SO ORDERED.

Puno, Sandoval-Gutierrez and Azcuna, JJ., concur.

Corona, J., is on leave.

(Angeles v. Philippine National Railways, G.R. No. 150128, [August 31, 2006], 532
|||

PHIL 147-158)
 SECOND DIVISION

[G.R. No. 136260. July 28, 2006.]

ELENITA C. ISHIDA and CONTINENT JAPAN CO., INC.,

petitioners, vs. ANTUSA DE MESA-MAGNO, FIRMO DE MESA,
MERCED LORENZA DE MESA, TEODORO DE MESA, and
LOURDES DE MESA-MENDOZA, respondents.

DECISION

GARCIA, J : p

Assailed and sought to be set aside in this petition for review under Rule 45 of the Rules
of Court is the Decision 1 dated October 15, 1996 of the Court of Appeals (CA) in CA-
G.R. CV No. 441550, as reiterated in its Resolution 2 of October 28, 1998 denying herein
petitioners' motion for reconsideration. The basic CA Decision reversed that of the
Regional Trial Court (RTC) of Quezon City, Branch 106, in an action for annulment of
sale thereat commenced by the petitioners against the herein respondents.

Reviewed, the records reveal the following factual antecedents:

Sometime in June 1987, the spouses Francisco Magno and Antusa de Mesa-Magno, the
latter acting in her own behalf and in behalves of her co-respondent brothers and sisters,
namely, Firmo de Mesa, Merced Lorenza de Mesa, Teodoro de Mesa and Lourdes de
Mesa-Mendoza, executed a Deed of Sale with Mortgage 3 in favor of petitioner
Continent Japan Co., Inc., represented in the deed by its co-petitioner Elenita Ishida.

Subject of the deed were a fishpond, a residential lot and a horticular land, all located in
Lubao, Pampanga and registered under three separate transfer certificates of title (TCTs)
in the names of respondent Antusa de Mesa-Magno and her co-respondents. The
consideration for the sale was Five Million, One Hundred Fifty Thousand
(P5,150,000.00) Pesos, of which Two Million, Seven Hundred Fifty Thousand
(P2,750,000.00) Pesos was paid at the time the deed was executed, with the balance of
Two Million, Four Hundred Thousand (P2,400,000.00) Pesos being secured by a
mortgage of the properties sold. As agreed, the aforesaid balance of P2,400,000.00 in the
purchase price shall be paid, as follows: P500,000.00, on or before October 31, 1987; and
P1,900,000.00, on or before December 31, 1987.
Despite the sale, titles to the properties were not immediately transferred to the vendee-
mortgagor Continent Japan Company, Inc., because its Articles of Incorporation which is
required to effect the transfer was not readily available. It was only sometime in October
1987, after the vendee had submitted its Articles of Incorporation showing it to be a
domestic corporation, that three (3) TCTs over the properties sold were issued in its
name, to wit: TCT Nos. 249756-R, 249757-R and 2497-R. DTIACH

Meanwhile, due to the alleged failure of the respondents to immediately effect the
transfer of titles to the corporation, the latter's alleged financial partners withdrew their
financial commitments. On account thereof, the corporation was not able to make
payments of the balance in the purchase price, by reason of which the respondents
foreclosed the mortgage in accordance with the terms and conditions of the parties' Deed
of Sale With Mortgage. Thereafter, foreclosure proceedings ensued. Ultimately, the
respondents acquired the mortgaged properties in a public auction and obtained new
TCTs in their names.

It was against the foregoing backdrop of events that, on January 11, 1988, in the RTC of
Quezon City, the petitioners filed against the respondents their complaint 4 in this case,
which was docketed as Civil Case No. Q-Q-52656 and raffled to Branch 106 of the court.

After the issues were joined and all preliminary incidents resolved, the trial court came
out with its decision 5 on October 4, 1993, rendering judgment for the petitioners, as
plaintiffs, thus:

WHEREFORE, by preponderance of evidence, judgment is hereby rendered

declaring the contract of sale of the fishpond property entered into by and
between Sps. Francisco Magno and Antusa de Mesa Magno and Continent
Japan Co. Inc. represented by Alenita Ishida annulled. Defendants are ordered
to return to plaintiff the amount of Four Million Five Hundred Thousand
(P4,500,000.00) Pesos plus interest at the rate of 12% per annum from August
1, 1987 until fully paid. The titles over the property subject of the sale having
been registered back to the name of defendants/vendors, the plaintiff is under no
obligation to restore anything to the defendant.

Further, defendant is hereby ordered to pay plaintiff the following:

1. The amount of One Hundred Thousand (P100,000.00) or actual and

moral damages;

2. The amount of Fifty (P50,000.00) Thousand Pesos as attorney's fees,

and

3. Costs of suit.

SO ORDERED.
Therefrom, the respondents went on appeal to the CA in CA-G.R. CV No. 441550. As
stated at the threshold hereof, the appellate court, in its Decision 6 dated October 15,
1996, reversed that of the RTC and dismissed the petitioners' complaint, to wit: HTDcCE

WHEREFORE, premises considered, the appeal is GRANTED. The decision

appealed from is hereby REVERSED and SET ASIDE and new judgment is
hereby rendered DISMISSING the complaint.

Counter-claim is likewise DISMISSED.

Costs against plaintiff-appellees.

SO ORDERED.

Their motion for reconsideration having been denied by the CA in its equally challenged
Resolution 7 of October 28, 1998, petitioners are now with this Court via the present
recourse, arguing that the CA acted with patent grave abuse of discretion

. . . IN FAILING TO RULE THAT THE TRIAL COURT CORRECTLY

DECREED THE ANNULMENT OF THE SALE OF THE FISHPOND
PROPERTY.

II

. . . IN FAILING TO RULE THAT THE COMPLAINT WAS NOT

RENDERED MOOT AND ACADEMIC BY THE FORECLOSURE AND
CONSOLIDATION OF THE SUBJECT PROPERTIES BY RESPONDENTS.

III

. . . IN FAILING TO RULE THAT THE TRIAL COURT CORRECTLY

RENDERED JUDGMENT IN FAVOR OF PETITIONERS. 8

The petition lacks merit.

As we see it, the forefront issue is whether, under the facts obtaining in this case, the CA
committed an error in reversing the trial court's decision annulling the parties' Deed of
Sale with Mortgage.

We rule and so hold that the CA did not.

From the very allegations of petitioners' initiatory pleading before the trial court which
they simply styled as a Complaint without specifying what their complaint was for, it is
crystal clear that petitioners as plaintiffs in the suit never asked the trial court to annul the
subject Deed of Sale with Mortgage. Instead, in their complaint, petitioners merely
prayed for a judgment ordering the respondents, as defendants:

1. to effect the transfer of the titles over the property to Continent Japan Co.,
Inc. and to deliver the same;

2. to pay actual damages in the amount of One Million Five Hundred

(P1,500,000.00) Pesos which was sustained by plaintiffs due to the
failure by defendants to immediately effect the transfer and delivery of
the titles over the land, causing the former's financial partners to
withdraw their financial commitments; DITEAc

3. to restore of the piggery property or in the alternative, the reduction of the

consideration in the amount of Three Hundred Fifty Thousand
(P350,000.00) Pesos;

4. to compensate the plaintiffs in the amount of One Hundred Thousand

(P100,000.00) Pesos for the fruits harvested from the property as well as
the fixtures removed from the property bought;

5. to compensate the plaintiffs in the amount of One Million (P1,000,000.00)

Pesos for the difference in the actual number of prawns harvested from
the fishpond;

6. to compensate Elenita Ishida the amount of Two Hundred Fifty Thousand

(P250,000.00) Pesos as and by was of moral damages;

7. to pay exemplary damages in the amount of Two Hundred Fifty Thousand

(P250,000.00) Pesos;

8. to pay attorney's fees in the amount of Two Hundred Fifty Thousand

(P250,000.00) Pesos; and

9. to pay the costs of suit.

Clear it is from the above that petitioners never asked for the annulment of the contract of
sale with mortgage. For sure, the reliefs prayed for are even inconsistent with what the
trial court decreed, i.e., annulment of the parties' basic contract. The Court, as did the CA
before it, is thus at a loss to understand why the trial court, instead of focusing itself to
the reliefs sought by the petitioners, proceeded to annul the basic contract itself, a course
of action which, to stress, is even inconsistent with the very existence of the contract
from whence the reliefs asked merely sprung. As aptly pointed out by the CA in the
decision under review:
 A careful perusal of the complaint will show as clearly appearing in the
discussion of the facts of the case that nowhere in its prayer nor in the body of
the complaint did [petitioners] ask for the annulment of the contract of sale with
the [respondents]. Evidence is wanting for such a relief to be granted. (Words in
brackets supplied). aCTcDH

Evidently, in veering away from what the complaint prayed for, the trial court was of the
view that there was no meeting of the minds of the parties vis a vis their Deed of Sale
with Mortgage. In the words of the trial court, "[E]vident is the existence of the
documents executed prior to, at the time or subsequent to the alleged transaction and
agreement to sell and to buy the subject property."

The records indeed show that after the execution of the Deed of Sale with Mortgage, the
parties executed an Addendum thereto (Exh. "6"), enumerating therein certain properties
within the area of the real properties subject of the sale, which were excluded therefrom.
As correctly observed by the CA, however, the Addendum was not even necessary
because the excluded properties were already enumerated in pages 2 and 3 of the Deed of
Sale with Mortgage.

In any event, and, again, as correctly pointed out by the CA, to which we are in full
accord: IEHScT

It is error for the court a quo to hold that there was no meeting of the minds
between the parties. It must be borne in mind that the principal object of the
contract of sale with mortgage are the three adjoining parcels of land, and that
the confusion as to the exclusion of the piggery as well as the fruits harvested
does not warrant the annulment of the contract. They are merely incidental to
the contract.

To warrant a declaration of nullity of the contract, the doubts or obscurities

must be cast upon the principal object of the contract (which in this case are
three parcels of land) in such a way that the true intention of the parties cannot
be known. Par. 2, Art. 1378 of the Civil Code provides:

xxx xxx xxx

If the doubts are cast upon the principal object of the contract in such a
way that it cannot be known what may have been the intention or will of
the parties, the contract shall be null and void.

If the doubt refers to the incidental circumstances of an onerous contract, the

doubt shall be settled in favor of the greatest reciprocity. For this purpose, par. 1
of the abovecited articles provides:
 When it is absolutely impossible to settle doubts by the rules established
in the preceding articles, and the doubts refer to incidental circumstances
of a gratuitous contract, the least transmission of rights and interests
shall prevail. If the contract is onerous, the doubt shall be settled in favor
of the greatest reciprocity of interest.

Such a confusion merely led to the failure of the parties to express in the
contract the true intention of their agreement, the proper remedy of which is
reformation of the contact under Chapter 4, Title 2, Book IV (Obligations and
Contracts) of the Civil Code.

This brings us to petitioners' second submission that the CA committed grave abuse of
discretion in failing to rule that their complaint was not rendered moot and academic by
the foreclosure proceedings and the resulting consolidation of titles over the mortgaged
assets in the names of the respondents. Put differently but with the same sense, it is
petitioners' contention that despite the foreclosure proceedings and the consolidation of
titles in respondents' name, the viability of their complaint was never affected. EDHTAI

We disagree.

First, with the reality that the properties subject of the suit were already sold at a public
auction and titles thereto already registered in the names of the respondents there is
simply no rhyme nor reason to hold that the complaint had not thereby been rendered
moot and academic, more so in the light of the prayers therein embodied.

Second, and as explained by the CA in its Resolution of October 28, 1998 which denied
petitioners' motion for reconsideration:

. . . To ask for the annulment or rescission of the transaction between the parties
at this time will be iniquitous considering that [petitioners] had a hand in the
delay in the transfer of the titles to the properties in the name of the [petitioner]
Continent Japan Co. Besides, as [respondent] correctly pointed out, no evidence
was adduced during the proceedings before the trial court tending to prove that
[petitioners] are entitled to the annulment of the contract between them as a
relief. 9

With the view we take of this case, we find it unnecessary to address petitioners' third
lament.

WHEREFORE, the petition is DENIED and the assailed Decision and Resolution of the
CA in CA-G.R. CV No. 441550 are AFFIRMED.

Costs against petitioners.

SO ORDERED.
Puno, Sandoval-Gutierrez, Corona and Azcuna, JJ., concur.

||| (Ishida v. de Mesa-Magno, G.R. No. 136260, [July 28, 2006], 529 PHIL 43-52)
 FIRST DIVISION

[G.R. No. 146428. January 19, 2009.]

HEIRS OF THE DECEASED CARMEN CRUZ-ZAMORA,

petitioners, vs. MULTIWOOD INTERNATIONAL, INC., respondent.

DECISION

LEONARDO-DE CASTRO, J : p

Before us is a petition for review on certiorari of the Court of Appeals' (CA)

Decision 1 dated October 19, 2000 and Resolution 2 dated December 18, 2000 in CA-
G.R. CV No. 53451 which reversed and set aside the decision of the Regional Trial
Court (RTC), National Capital Judicial Region, Makati City, Branch 59, and denied
petitioners' motion for reconsideration respectively.DaTEIc

The facts as culled from the records are as follows:

On November 18, 1993, the late Carmen Cruz-Zamora (Zamora) filed a
Complaint against respondent Multiwood International, Inc. (Multiwood). The
complaint alleged that sometime in 1987, Zamora signed a Marketing Agreement to act
as an agent of Multiwood. As agent, Zamora claimed that she obtained certain contracts
on behalf of Multiwood and in renumeration for her services, she was to be paid ten
percent (10%) commission for the said projects. Zamora claimed that Multiwood
defaulted in the payment of her commission for the contracts with Edsa Shangrila,
Makati Shangrila and Diamond Hotel. She was compelled to file an action for the
collection of her commission in the amount of Two Hundred Fifty Four Thousand
Eighty-Nine Pesos and Fifty Two Centavos (P254,089.52) when her repeated demands
for payment remained unheeded.
In its Answer with Counterclaim, Multiwood asserted that Zamora was not
entitled to receive commissions for the Edsa Shangrila, Makati Shangrila and Diamond
Hotel projects on the ground that those projects were "construction contracts" while
their Marketing Agreement spoke only of the sale of Multiwood products. By way of
counterclaim, Multiwood claimed, among others, that Zamora had unliquidated
advances in the amount of Thirty Seven Thousand Three Hundred Ninety-Seven Pesos
and Seventy One Centavos (P37,397.71). 3
During pre-trial, the parties entered into a stipulation of facts and limited the
issues to the following:
 1. Whether or not the projects indicated in the agreement are contracts for services
(or construction contracts) and not contracts for the sale of products;

2. Whether or not the defendant is liable to pay the amount of P254,089.52 and
damages;

3. Whether or not the plaintiff may be held liable on the defendant's counterclaim.
4

On April 15, 1996, the RTC rendered a decision in favor of Zamora. The trial
court interpreted the Marketing Agreement as to include construction contracts and
allowed Zamora to claim the ten percent (10%) commission granted in the said
agreement. In arriving at the decision, the trial court took into consideration the alleged
intention of the contracting parties purportedly evidenced by Multiwood's
contemporaneous and subsequent acts of making "partial payments" of the commission
on the disputed projects as evidenced by various vouchers (Exhibits K-2 to K-7) which,
however, were not offered in evidence by either party and marked for exhibit only
during the testimony of defense witness, Adrian Guerrero. 5 The dispositive portion of
the said decision reads: TAacCE

WHEREFORE, premises considered, judgment is hereby rendered in favor of the

plaintiff and against the defendant, as follows:

1. Ordering the defendant (respondent) to pay the plaintiff (petitioner) the

following amounts:

a. P165,941.78 plus legal interest thereon at the rate of twelve

percent (12%) per annum starting November 18, 1993, the
date when the complaint was filed until the amount is fully
paid;

b. P40,000.00 representing moral damages;

c. P40,000.00 as and for reasonable attorney's fees.

2. Ordering the dismissal of defendant's (respondent's) counterclaim, for

lack of merit; and

3. With costs against the defendant (respondent).

SO ORDERED. 6

Multiwood appealed to the CA insisting that based on the Marketing Agreement,

Zamora's commissions were due only on contracts for the sale of its products, and not
for construction contracts. Multiwood argued that the trial court erred in its
 interpretation of the Marketing Agreement and ultimately revised and amended its
terms despite the absence of any ambiguity as to the intent of the parties.
On October 19, 2000, the CA rendered its decision reversing and setting aside
the decision of the RTC. The CA ruled that Zamora could not validly claim
commissions from the Edsa Shangrila, Makati Shangrila and Diamond Hotel contracts
on the basis of the Marketing Agreement because these contracts were limited only to
the solicitation of the products of prospective foreign or local buyers of Multiwood,
excluding other services offered by the latter such as construction services. Thus, the
CA decided in this wise:

WHEREFORE, premises considered, the appealed Decision of the Regional Trial

Court of Makati City, Branch 59 in Civil Case No. 93-4292 is hereby
REVERSED AND SET ASIDE and a new one entered DISMISSING the
Complaint for lack of merit.

The plaintiff-appellee (petitioner) is also declared LIABLE to pay the

unliquidated advances she obtained from the defendant-appellant (respondent) in
the amount of Thirty Seven Thousand Three Hundred Ninety Seven Pesos and
Seventy One Centavos (P37,397.71) with legal interest at six percent (6%) per
annum computed from August 4, 1994 until fully paid. AaEcHC

No pronouncement as to costs.

SO ORDERED. 7

Zamora's subsequent motion for reconsideration having been likewise denied by the CA
in the Resolution dated December 18, 2000, she elevated the case to this Court through
the instant petition for review which raises the following arguments:

(1) The Hon. Court of Appeals erred in adjudging that private respondent is not
liable to compensate petitioner for her services in soliciting construction
contracts on the ground that petitioner's counsel failed to offer in
evidence Exhs. K to K-7.

(2) The Hon. Court of Appeals erred in not holding that under Exhs. B to H,
with sub-markings in relation to Exh. A, private respondent
acknowledged or admitted its liability for a rate of 10% commission to
petitioner for the latter's solicitation of construction contracts.

(3) The Hon. Court of Appeals erred in not holding that, even if the solicitation
of construction contracts was not covered by the Marketing Agreement
(Exh. A), a new separate contract was deemed perfected between the
parties as evidenced by Exhs. B to H, with submarkings.
 (4) The Hon. Court of Appeals erred in not holding that private respondent would
be unjustly enriched at the expense of petitioner if the latter is not
compensated for her valuable services.

(5) The Hon. Court of Appeals erred in not affirming in toto the trial court's
Decision.

On October 3, 2002, Zamora's counsel filed a Motion to Substitute Deceased

Petitioner 8 informing the Court that Zamora had passed away on September 30, 2002
and asking that her heirs be substituted as petitioners pursuant to Section 16, Rule 3 of
the Rules of Court. Accordingly, in the Resolution 9 dated January 22, 2003, the Court
granted the motion.
Petitioners maintain that the interior construction projects solicited by Zamora,
i.e., the renovation/improvement of the coffee shop, health clubs, Chinese restaurant
and barbeque pavilions of the Edsa Shangrila; the renovation of the ballroom, meeting
room, lobby and elevator interior of the Makati Shangrila; and, the renovation of
Presidential Suite of the Diamond Hotel, fell within the scope of the Marketing
Agreement. The identification, "solicitation, finding or introduction for negotiation of
buyers, dealers and customers" for Multiwood's product as stated in the agreement is
an encompassing term as to include the solicitation of interior construction projects.
Besides the construction projects, it afforded Multiwood the opportunity to sell and
supply its products to the project owner to implement the overall interior design.
Petitioners advert to their interpretation of the text of the Marketing Agreement, as well
as Multiwood's subsequent alleged acquiescence in Zamora's solicitation of the
disputed construction contracts and supposed partial payment of her commission
therefor as indicia of the parties' intention to include the said solicitation of construction
contracts within the coverage of the Marketing Agreement. These operative acts
purportedly lead to the perfection of a new contract between the parties, albeit not
reduced in writing. Hence, Multiwood is estopped from denying its obligation as the
same would unjustly enrich the latter at Zamora's expense.
We deny the petition. DHcEAa

At the outset, the Court notes that Zamora's cause of action is anchored solely
on the parties' Marketing Agreement, the due execution and authenticity of which are
undisputed.
When the terms of the agreement are clear and explicit, such that they do not
justify an attempt to read into them any alleged intention of the parties, the terms are to
be understood literally just as they appear on the face of the contract. It is only in
instances when the language of a contract is ambiguous or obscure that courts ought to
apply certain established rules of construction in order to ascertain the supposed intent
of the parties. However, these rules will not be used to make a new contract for the
parties or to rewrite the old one, even if the contract is inequitable or harsh. They are
applied by the court merely to resolve doubts and ambiguities within the framework of
the agreement. 10
Bearing in mind the aforementioned guidelines, we find that the CA committed
no reversible error when it ruled that the construction projects solicited by Zamora for
Multiwood were outside the coverage of the Marketing Agreement so as preclude the
former from claiming a ten percent (10%) commission. The plain import of the text of
the Marketing Agreement leaves no doubt as to the true intention of the parties in
executing the Marketing Agreement. The pertinent provisions of the said Marketing
Agreement 11 are as follows:

WHEREAS, the principal is engaged in the manufacture and export of

furniture and such other related products using various types of suitable raw
materials;

WHEREAS, the principal needs the services of the agent in soliciting and
finding buyers, customers, or dealers, whether individuals or entities, for the
products of the principal and agent has represented that she has the capability and
competence to provide the said services;

NOW, THEREFORE, for and in consideration of the foregoing and of the

covenants hereinafter specified, the parties hereto have agreed as follows:

1. That principal hereby grants the agent the non-exclusive right to identify,
solicit, find or introduce for negotiation, prospective local and foreign buyers,
dealers, or customers for the products of the principal.

xxx xxx xxx

4. That for the services of the agent under this agreement, the principal agrees
to pay her Ten Percent (10%) of the face value of the invoice price, covering the
letter of credit, or such similar instrument representing the actual purchase price
for the products sold or shipped by the principal. . . . . (emphasis ours)
EaHDcS

Both the trial court and the CA found that the Marketing Agreement quoted
above does not mention construction contracts among the contemplated services of
Zamora that would be compensable with a ten percent (10%) commission. The lower
courts, however, differed with respect to the evidentiary weight that should be accorded
to Exhibits K to K-7 which were never formally offered in evidence by any party.
After a consideration of the evidence, we agree with the CA that the trial court
committed an error in interpreting the Marketing Agreement to include construction
contracts based solely on Exhibits K-2 to K-7 which were allegedly contemporaneous
acts of Multiwood of paying in part Zamora's commissions on construction contracts.
As borne by the records, these exhibits were only marked as such during the testimony
of the defense witness, Adrian Guerrero, but not offered in evidence by either party.
Section 34, Rule 132 of the Rules of Court states:

SEC. 34. Offer of evidence. The court shall consider no evidence which has
not been formally offered. The purpose for which the evidence is offered must be
specified.

The trial court's reliance on Exhibits "K-2" to "K-7" is thus, misplaced. It has no
evidentiary value in this case because it was not offered in evidence before the trial
court. The rule is that the court shall not consider any evidence which has not been
formally offered. The purpose for which the evidence is offered must be specified. The
offer of evidence is necessary because it is the duty of the court to rest its findings of
fact and its judgment only and strictly upon the evidence offered by the parties. Unless
and until admitted by the court in evidence for the purpose or purposes for which such
document is offered, the same is merely a scrap of paper barren of probative weight.
Mere identification of documents and the markings thereof as exhibits do not confer
any evidentiary weight on documents unless formally offered. 12
Plainly, the trial court should not have read terms into the Marketing Agreement
that were not expressly in the agreement itself. The agreement is clear, plain and simple
that it leaves no room for interpretation. It explicitly provides that for the services of
Zamora, as agent under the agreement, Multiwood agreed to pay her in the amount
equivalent to ten percent (10%) of the face value of the invoice price, covering the letter
of credit or such other instrument representing the actual purchase price for the products
sold or shipped by Multiwood. In other words, Zamora's commission under the
Marketing Agreement was to be paid only for products sold or supplied by Multiwood
and not for services rendered by the latter. As admitted by Zamora herself during cross-
examination, the Edsa Shangrila, Makati Shangrila and Diamond Hotel projects were
"interior construction" projects 13 and not simply contracts for sale or supply of
Multiwood products. SIcCEA

As mandated by Article 1370 of the Civil Code, if the terms of the contract are
clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control.
Moreover, Section 9, Rule 130 of the Revised Rules of Court is also in point:

SEC. 9. Evidence of written agreements. When the terms of an agreement

have been reduced in writing, it is considered as containing all the terms agreed
upon and there can be, between the parties and their successors in interest, no
evidence of such terms other than the contents of the written agreement.

However, a party may present evidence to modify, explain, or add to the terms
of the written agreement if he puts in issue in his pleading:
 (a) An intrinsic ambiguity, mistake, or imperfection in the written agreement;

(b) The failure of the written agreement to express the true intent and agreement
of the parties thereto;

(c) The validity of the written agreement; or

(d) The existence of other terms agreed to by the parties or their successors in
interest after the execution of the written agreement.

The "parol evidence rule" forbids any addition to or contradiction of the terms
of a written instrument by testimony or other evidence purporting to show that, at or
before the execution of the parties' written agreement, other or different terms were
agreed upon by the parties, varying the purport of the written contract. When an
agreement has been reduced to writing, the parties cannot be permitted to adduce
evidence to prove alleged practices which to all purposes would alter the terms of the
written agreement. Whatever is not found in the writing is understood to have been
waived and abandoned. 14 None of the above-cited exceptions finds application to the
instant case, more particularly, the alleged failure of the contract to express the true
intent and agreement of the parties nor did Zamora raise any of the issues at the
proceedings before the trial court.
With more reason, documentary evidence which was not formally offered cannot
be used to modify, explain or add to the terms of an agreement.
In any event, even assuming purely for the sake of argument that Exhibits K-2
to K-7 are admissible evidence, they do not support Zamora's contention that she is
entitled to a ten percent (10%) commission even on construction contracts she has
solicited pursuant to the Marketing Agreement. A perusal of Exhibits K-2 to K-7 does
not clearly show that these commissions were being paid for construction contracts or
services. Moreover, most of the commissions purportedly paid to Zamora under
Exhibits K-2 to K-7 were computed at a much lower rate of three percent (3%) and not
the ten percent (10%) stipulated in the Marketing Agreement. We cannot simply accept,
as the trial court did, Zamora's assertion that the lower rate of three percent (3%)
commission was a partial payment of her commissions under the Marketing Agreement
since there is nothing in Exhibits K-2 to K-7 to indicate that the commissions mentioned
therein were only partial payments. The circumstances that Zamora did not include
Exhibits K-2 to K-7 in her Complaint and that she did not demand payment of the
alleged balance of the commissions therein from Multiwood further militate against her
claim that these were partial payments of her commission under the Marketing
Agreement subject of the present case. CcaASE

An examination of even Exhibits B to H which were formally offered by Zamora

do not substantiate her assertion that Multiwood agreed to pay her a ten percent (10%)
commission on construction contracts whether under the Marketing Agreement or any
 other contract. We cannot subscribe to petitioners' view that mere silence or
acquiescence of Multiwood to Zamora's solicitation of construction contracts is
tantamount to agreement to payment of the ten percent (10%) commission under the
Marketing Agreement. To be sure, Multiwood's defense is precisely that the issuance
of the vouchers and checks (Exhibits B to H) attached to the complaint are not
authorized under the Marketing Agreement and that there is no agreement authorizing
Zamora to collect ten percent (10%) commissions on construction contracts. This Court
notes that even Exhibits B to H show a discrepancy in the alleged agreed rate of
commission since Exhibit H mentions a five percent (5%) commission and not a ten
percent (10%) commission.
It is a basic rule in civil cases that the party having the burden of proof must
establish his case by a preponderance of evidence, which simply means evidence which
is of greater weight, or more convincing than that which is offered in opposition to it.
15 However, although the evidence adduced by the plaintiff is stronger than that
presented by the defendant, a judgment cannot be entered in favor of the former, if his
evidence is not sufficient to sustain his cause of action. The plaintiff must rely on the
strength of his own evidence and not upon the weakness of the defendant's. 16 Whether
or not Exhibits K to K-7 are considered or admitted in evidence, the Court finds that
Zamora failed to prove by preponderant evidence her cause of action for collection of
ten percent (10%) commission on her solicitations of interior construction contracts
whether under the Marketing Agreement or any other agreement with the defendant.
All told, we find no reversible error committed by the CA in rendering the
assailed Decision dated October 19, 2000 and Resolution dated December 18, 2000.
WHEREFORE, the petition is DENIED. The assailed Decision and Resolution
of the Court of Appeals are AFFIRMED.
Costs against petitioners.

SO ORDERED.

Puno, C.J., Carpio, Corona and Azcuna, JJ., concur.

(Heirs of Cruz-Zamora v. Multiwood International, Inc., G.R. No. 146428, [January 19,
|||

2009], 596 PHIL 150-162)

 THIRD DIVISION

[G.R. No. 171832. October 12, 2009.]

ANTIPOLO PROPERTIES, INC. (now PRIME EAST

PROPERTIES, INC.), petitioner, vs. CESAR NUYDA, respondent.

RESOLUTION

NACHURA, J : p

Assailed in this petition for review on certiorari under Rule 45 are the August
31, 2005 Decision 1 and the March 6, 2006 Resolution 2 of the Court of Appeals (CA)
in CA-G.R. CV No. 72194. CDHacE

The antecedent facts and proceedings follow.

On February 14, 1991, petitioner, a realty development company, and Magtanim
Upang Mabuhay, Inc. (MUMI), an association of alleged illegal settlers in the Melitona
estate and the Ozaeta lots in Binangonan, Rizal, entered into a contract denominated as
Kasunduan. 3 As agreed, the MUMI members were to vacate the aforementioned estate
and move to a resettlement area, so that petitioner could develop the same into a
residential and commercial complex. Petitioner, for its part, was, among others, tasked
to provide and develop a resettlement area, award the subdivided lots therein to the
members of the association, and pay the displaced members disturbance compensation.
Four months thereafter or on June 7, 1991, petitioner and respondent Cesar
Nuyda, a member of the association, entered into an agreement likewise denominated
as Kasunduan, 4 in which petitioner, among others, recognized respondent's
membership in MUMI, awarded to him not less than 2,880 sq m lot in the resettlement
area, and guaranteed that he be paid disturbance compensation. In turn, respondent was
to vacate the portion of the estate he occupied and transfer to the resettlement area.
Consequently, in 1998, after it had demolished the improvements in the estate,
including those of respondent, petitioner reneged on its obligation as stated in the June
7, 1991 Kasunduan, prompting respondent to institute a complaint for specific
performance and damages with the Regional Trial Court (RTC) of Pasig City. The case
was docketed as Civil Case No. 66967. 5
In its Answer, 6 petitioner traversed the allegations in the complaint and
countered in the main that respondent was not a member of MUMI, and even if he was,
he did not measure up to the qualifications of a member as contemplated in the February
14, 1991 Kasunduan. aCASEH
 After trial on the merits, the RTC rendered its May 20, 2001 Decision, 7
declaring the February 14, 1991 and the June 7, 1991 Kasunduan as valid agreements
which had the force of law between the contracting parties. Petitioner was, therefore,
directed to comply with its obligations as stated therein. The trial court disposed of the
case as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the

plaintiff and against the defendant, ordering the latter:

a. To transfer to plaintiff the ownership, title and possession of 2,880 sq.

m. lot in the resettlement area;

b. To pay to the plaintiff disturbance compensation in the amount of

PhP22,875.00 in accordance with the agreement;

c. To pay plaintiff the amount of PhP200,000.00 for the destroyed plants

and trees[;]

d. To pay to the plaintiff attorney's fees in the amount of PhP50,000.00;

[and]

e. [C]osts of suit.

SO ORDERED. 8

Dissatisfied, petitioner appealed to the CA. In the assailed August 31, 2005
Decision 9 in CA G.R. CV No. 72194, the appellate court affirmed in toto the ruling of
the RTC. The CA found as unavailing, for being contrary to the evidence presented,
petitioner's argument that respondent was not a member of MUMI. It further refused to
sustain petitioner's claim that the June 7, 1991 Kasunduan was invalid because it
contained the rubber-stamp signature of the company president. The appellate court
rather lent credence to the undisputed facts that the deed was prepared by the company
and notarized by the in-house counsel and that the original copy thereof was personally
signed by the president while, in the other copies, his signature was only rubber-
stamped. The appellate court further ruled that the clear terms of the contract were not
contrary to law, morals and public policy. Accordingly, in the absence of any showing
that the stipulations thereof were objectionable or that the parties' consent thereto was
vitiated, the contract must be enforced. ACcDEa

In the further challenged March 6, 2006 Resolution, 10 the CA denied

petitioner's motion for reconsideration.
Not giving up despite the successive rejections of its cause, petitioner filed the
instant petition for review on certiorari, arguing in the main that to be entitled to the
benefits stated in the agreement, the claimant must not only be a member of MUMI but
must also be an occupant in the concept of an owner of the subject property. Petitioner
then contends that respondent was a mere caretaker; hence, he could not avail himself
of the benefits in the Kasunduan. 11
The Court denies the petition.
The June 7, 1991 Kasunduan executed by the parties pertinently contains the
following unmistakable terms:

Na ang mga nakatira at umaangkin ng ilang bahagi ng mga nasabing lupain ay

pawang mga kasapi ng samahang MAGTANIM UPANG MABUHAY, INC.
(SAMAHAN kung tawagin dito sa kasulatang ito), at ang kanikanilang mga
pamilya.

Na si CESAR NUYDA (kasapi kong tawagin dito sa kasulatang ito) ay isang

kinikilala at karapatdapat na kasapi ng Samahan at ang bahagi ng mga lupain na
kanyang inaangkin ay may sukat na 57,603 metro cuadrado, humigit kumulang;

Na alinsunod sa isang "KASUNDUAN" na ipinagtibay ng Samahan at ng API

noong ika 14 ng Febrero 1991, at nakatala sa talaan ni Notario Publico Ateneones
S. Bacale bilang Doc. No. 416, Page No. 85, Book No. III, Series of 1991, na
kinikilala bilang isang bahagi at karugtong nitong kasulatang ito, ang kasapi at
ang kanyang angkan ay pumayag lisanin ang bahagi ng lupain na kanyang
inaangkin at lumipat sa "resettlement area" na binabanggit sa nasabing
kasunduan. TcHEaI

SAMAKATUWID, ipinagtibay ng API at ng kasapi ang mga sumusunod:

1. Ang kasapi at ang kanyang angkan ay pinagkakalooban ng API dito sa

kasulatang ito ng lote o mga loteng bahayan sa nasabeng "resettlement area" na
hindi kukulangin sa Two Thousand Eight Hundred Eighty (2,880) metro
cuadrado;

2. Na ang lote o mga lote sa "resettlement area" para sa kasapi ay ituturo ng

Samahan sangayon at alinsunod sa nasab[i]ng kasunduan;

3. Na maliban sa nasab[i]ng mga lote, ang kasapi ay pagkakalooban din ng API

ng isang halaga ng pera na tinatawag dito at sa kasunduang nabanggit na
"disturbance compensation" na titiyakin o totuosin alinsunod sa mga alituntunin
ng nasabeng kasunduan;

4. Na malinaw sa API at kasapi na ang kasapi ay tuloyan mananatili diyan sa

bahagi ng lupain na kanyang inaangkin hanggang hindi pa hinihiling ng API ang
paglisan; hanggang hindi inaabot ng pagdebelop ang bahagi ng lupa na kanyang
inaangkin; hanggang hindi pa handa ang lote o mga loteng bahayan sa
"resettlement area" na nakalaan sa kanya; at hanggang hindi pa siya nababayaran
ng kanyang "disturbance compensation";
 5. Na sabay sa pagbayad ng nasabeng "disturbance compensation" ang API ay
gagawa at pipirma ng kaukulang kasulatan na maglilipat sa kasapi, ng
pagmamayari ng lote o mga loteng bahayan na nabanggit pero ang gastos ng
pagpatala ng kasulatang . . . kasama ang bayad ng kaukulang silyo documentaryo
ay sagot na ng kasapi. 12

The said agreement prepared by petitioner and notarized by its in-house counsel
clearly recognizes respondent's entitlement to the benefits stated therein. Petitioner
moreover unequivocally obligated itself to extend the said benefits to respondent.
Rudimentary is the principle that a contract is the law between the contracting parties.
13 Further, when the language of the contract is clear and plain or readily
understandable by any ordinary reader, there is absolutely no room for interpretation or
construction and the literal meaning of its stipulations shall control. 14 The Court then
fully agrees with the CA's declaration that the contract "leaves no other recourse for the
courts than to enforce the contractual stipulations therein, in the exact manner agreed
upon and written". 15
To evade its contractual obligations, petitioner invokes a provision in the earlier
February 14, 1991 Kasunduan entered into by and between it and MUMI, viz.:

Na ang mga nakatira at umaangkin ng ilang bahagi ng mga nasabing lupain ay

pawang mga kasapi ng SAMAHAN at ang kanikanilang mga pamilya.
Samakatuwid, ang salitang kasapi ay i-intindihin dito sa kasulatang ito bilang
mga kasapi ng samahan na nakatira sa, at umaan[g]kin ng mga bahagi ng mga
lupain na nabanggit sa itaas. 16

Petitioner contends that, following this provision, respondent is disqualified from

claiming, among others, a lot in the resettlement area and the disturbance compensation,
because he was a mere caretaker and not a settler in the concept of an owner in the
subject estate.
The Court cannot subscribe to such proposition. By its own act of
acknowledging the rights of respondent (in their June 7, 1991 Kasunduan) as a member
of MUMI and his entitlement to not less than 2,880 sq m lot in the resettlement area
and the corresponding disturbance compensation, petitioner is now estopped from
claiming that he is not qualified to avail himself of the benefits in the contract. 17 The
Court further notes that it was because of petitioner's representations that respondent
was impelled to peacefully vacate the portion of the estate he was tilling. ICTHDE

Moreover, petitioner's subsequent act of granting the same contractual benefits

to another member of MUMI, who was also a caretaker, 18 defeats any interpretation
of the February 14, 1991 Kasunduan that only occupants of the estate in the concept of
an owner may avail of such benefits. 19
 WHEREFORE, premises considered, the petition is DENIED. The August 31,
2005 Decision and the March 6, 2006 Resolution of the Court of Appeals in CA-G.R.
CV No. 72194 are AFFIRMED.

SO ORDERED.

Carpio, Chico-Nazario, Velasco, Jr. and Abad, * JJ., concur.

(Antipolo Properties, Inc. v. Nuyda, G.R. No. 171832 (Resolution), [October 12, 2009],
|||

618 PHIL 376-383)

 THIRD DIVISION

[G.R. No. 187838. December 23, 2009.]

ADRIATICO CONSORTIUM, INC., PRIMARY REALTY

CORPORATION, and BENITO CU-UY-GAM, petitioners, vs. LAND
BANK OF THE PHILIPPINES, respondent.

DECISION

VELASCO, JR., J : p

The Case Before us is a Petition for Review on Certiorari under Rule 45 assailing
and seeking to set aside the Decision 1 and Resolution 2 dated October 16, 2008 and
May 13, 2009, respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 103717.
The CA nullified and set aside the Orders dated February 29, 2008, March 5, 2008,
March 17, 2008, and April 21, 2008, with the assailed March 5, 2008 Writ of Execution
and March 14, 2008 Writ of Preliminary Injunction, issued by the Regional Trial Court
(RTC), Branch 51 in Manila, in Civil Case No. 00-97648.
The Facts
Sometime in 1997, William A. Siy, the president of Adriatico Consortium, Inc.
(ACI), applied for a credit line of PhP200 million with Land Bank of the Philippines as
additional funding to finish the construction of the Pan Pacific Hotel and the Adriatico
Square, both owned by ACI. The lands on which the buildings were built belonged to
Primary Realty Corporation (PRC).
The loan was approved and a Mortgage Trust Indenture (MTI) dated January 15,
1998 was created to secure the loan. Under the MTI, Land Bank was constituted as
trustee of the lands of PRC and the buildings of ACI mortgaged to it.
On April 28, 1998, the MTI was amended increasing the maximum amount
secured by it from PhP200 million to PhP600 million. Metropolitan Bank and Trust
Company (Metrobank) and Land Bank participated in the MTI. Land Bank was then
issued Mortgage Participation Certificate (MPC) No. 0001 for PhP200 million, while
Metrobank was issued MPC No. 0003 for PhP100 million. aTCAcI

On July 8, 1998, the MTI was amended for the second time at the initiative of
Siy, without the knowledge of other ACI officials and Board of Directors, to include
J.V. Williams Realty and Development Corporation (JVWRDC) as borrower.
JVWRDC is a majority-owned corporation of Siy. Consequently, Land Bank issued
MPC No. 0002 dated July 17, 1998 for PhP200 million and MPC No. 0004 for PhP100
million to cover the loans of JVWRDC.
Subsequently, ACI fully paid the PhP200 million under MPC No. 0001 and
PhP100 million under MPC No. 0003. ACI then requested the cancellation of the MTI
but Land Bank refused. At this point, Land Bank revealed it never received any payment
from the entire PhP200 million-loan availed of by Siy sometime in 1997 under MPC
No. 0001. This prompted ACI to investigate.
In the course of its investigation, ACI discovered that its former president, Siy,
did not remit ACI's payments. What is more, ACI and PRC, with Benito Cu-Uy-Gam,
ACI's new president, were obliged by Land Bank to pay the maturing obligations of
JVWRDC. Likewise, it was discovered that the second amendment to the MTI was
made possible by the submission of two secretary's certificates from ACI and PRC,
which the National Bureau of Investigation (NBI) found to be forged. 3
On June 6, 2000, petitioners filed a Petition for Declaration of Nullity, Specific
Performance, Injunction, and Damages with Prayer for a Temporary Restraining Order
(TRO) against Land Bank and Siy with the Manila RTC, docketed as Civil Case No.
00-97648. 4
On November 14, 2000, the parties entered into a Partial Compromise
Agreement. Under the said agreement, ACI agreed, among others, to pay and actually
paid to Land Bank the total sum of PhP289,656,868.97 representing the principal
amount of PhP201,233,891.38 plus interest in the amount of PhP88,422,977.59 on
November 28, 2000 as full and complete payment of MPC No. 0001 for PhP200
million. Accordingly, the RTC issued a Partial Decision 5 approving the compromise
agreement on January 31, 2001.
Trial of the case proceeded in the RTC for the purpose of determining who the
parties liable under MPC Nos. 0002 and 0004 are.
On January 15, 2008, Land Bank, however, informed ACI through a letter that
the JVWRDC loans were included in a sealed-bid public auction of Land Bank Non-
Performing Assets under the Special Purpose Vehicle Act. Petitioners viewed this as a
violation of the Partial Compromise Agreement by Land Bank, particularly its Section
5, which states: EcTDCI

5. With the submission of this compromise agreement and payment by petitioner

Adriatico Consortium, Inc. of the amounts stated in paragraph 2 hereof, the herein
parties agree to unconditionally apply said payment in full satisfaction and
extinguishment of the loan obligations of petitioner Adriatico Consortium, Inc.
with the respondent Land Bank of the Philippines and to suspend all actions
against each other with respect to the liabilities represented by Mortgage
Participation Certificate No. 0002 for PhP200,000,000 dated July 17, 1998 and
Mortgage Participation No. 0004 for PhP100,000,000 dated July 29, 1998
covered under the Second Amendment to the Mortgage Trust Indenture dated
 July 6, 1998. It is understood, however, that said mortgage participation
certificates (Certificate Nos. 0002 and 0004) shall continue to secure the
outstanding obligations of J.V. Williams until said outstanding obligations have
been fully settled and satisfied or until it is finally adjudged and determined who
are the parties liable thereto; toward this end, the parties herein agree to
cooperate with each other in order for respondent Land Bank of the Philippines
to recover the same as against the person/s liable thereon. 6 (Emphasis supplied.)

This prompted petitioners to file a Motion for Execution 7 before the RTC on January
24, 2008.
Likewise, petitioners started to receive verbal demands for payment of the MPCs
with a threat to foreclose the MPCs from a supposed highest winning bidder. Hence, on
January 30, 2008, petitioners filed a Reiteration of Prayer for TRO and/or Writ of
Preliminary Injunction 8 before the RTC to enjoin the threatened foreclosure
proceedings.
Despite opposition from Land Bank, the RTC issued an Order 9 granting the
Motion for Execution on February 29, 2008. The fallo reads:

Wherefore, the Motion for Execution is granted. Let a Writ of Execution be issued
directing respondent Land Bank of the Philippines and respondent William Siy
to suspend all actions against petitioner and particularly with respect to Mortgage
Participation Certificate No. 0002 and 0004 including the transfer of the same to
the buyer at the public auction.

SO ORDERED.

The corresponding Writ of Execution 10 was issued on March 5, 2008.

Subsequently, the Motion for Reconsideration and to Quash Writ of Execution 11 filed
by Land Bank was denied by the RTC in an Order 12 dated March 17, 2008. The RTC,
in interpreting Sec. 5 of the Partial Compromise Agreement, reasoned as follows:

The paragraph is clear and does not need further interpretation. It does not
[connote] of any other things. Action is viewed by the Court as any action, deed,
act, contemplated by the parties as not to disturb the status quo of the terms and
condition in the compromise agreement. The provision in the partial decision
specifically prohibit[s] the sale at public auction of liabilities represented by MPC
No. 0002 and 0004. So, whatever is done to, or disturbed in the terms and
condition which is prohibited is a violation of the partial decision. If the parties
[refer] to action stated in the partial decision, it is no other, and if it refers to other
action it should have specifically placed in the partial decision which the parties
did not.
 Likewise, on March 5, 2008, the RTC issued an Order 13 granting petitioner's
Reiteration of Prayer for TRO and/or Writ of Preliminary Injunction, and accordingly
issuing the corresponding Writ of Preliminary Injunction. 14
Land Bank filed a Motion for Reconsideration, which was later denied by the
RTC in its Order 15 dated April 21, 2008. TAcCDI

Dissatisfied, Land Bank filed a Petition for Certiorari and Prohibition with
Prayer for TRO and/or Preliminary Injunction 16 before the CA docketed as CA-G.R.
SP No. 103717. Land Bank argued that the sale of the MPCs is not prohibited by the
Partial Compromise Agreement, reasoning that it was well within its legal rights to
assign its credits to a third person.
Ruling of the Appellate Court
On October 16, 2008, the CA promulgated its Decision as follows:

WHEREFORE, premises considered, the petition is GRANTED and public

respondent's Orders dated February 29, 2008, March 5, 2008, March 17, 2008
and April 21, 2008, together with the assailed March 5, 2008 Writ of Execution
and March 14, 2008 writ of preliminary injunction are, accordingly, NULLIFIED
and SET ASIDE.

SO ORDERED. 17

Unlike the RTC, the CA found that the compromise agreement sought to prohibit
only legal actions, e.g., litigation, and rejected the interpretation of the lower court.
Further, it ruled that there is nothing in the said compromise agreement which prohibits
Land Bank from transferring or assigning its obligations to third persons, necessarily
suggesting that such transfer or assignment does not constitute "action" within the
context of the compromise agreement.
Aggrieved by the ruling of the CA, petitioners filed a motion for reconsideration,
which was subsequently denied in its likewise assailed resolution dated May 13, 2009
Hence, this petition is before us.

The Issues

I
The Honorable [CA] seriously erred and committed grave abuse of discretion in
not holding [that] the Land Bank's actuation in selling the receivables during the
litigation is a violation of its obligation under the partial compromise agreement
to cooperate with petitioners to determine the parties liable under Mortgage
Participation Nos. 0002 and 0004.
II
 The [CA] seriously erred and gravely abused its discretion in holding that the
sale of credit or receivables is beyond the scope of the term "action" proscribed
under the partial compromise agreement.

III
The [CA] seriously erred and gravely abused its discretion in setting aside the
writ of execution issued by the trial court due to the violations of the compromise
agreement committed by Land Bank.
Our Ruling
The petition is meritorious. CcTIAH

Petitioners contend that the act of Land Bank in selling the receivables during
the litigation violates its obligations under the Partial Compromise Agreement to
cooperate with petitioners in the determination of the parties ultimately liable under
MPC Nos. 0002 and 0004. Furthermore, they maintain that the sale of the receivables
falls under the term "action" as found in the Partial Compromise Agreement.
In their Comment, 18 however, respondent argues that the Partial Compromise
Agreement aimed to suspend only legal actions against each other with respect to the
obligations covered by MPC Nos. 0002 and 0004. It invoked its legal and contractual
rights to transfer the MPCs and that such transfer cannot be construed as an action
against petitioners.
Essentially, the issues in this case can be summed up into one basic question:
Whether or not the act of Land Bank in selling the receivables violated the Partial
Compromise Agreement, specifically the aforequoted Sec. 5.
This Court believes that it did.
For a better understanding of the Partial Compromise Agreement in question, its
entire text is hereby reproduced below:

1. To avoid a protracted litigation for the mutual benefit of the parties herein, the
petitioners and the respondent bank enter into the following compromise
agreement whereby petitioners Adriatico Consortium, Inc. and Primary
Realty Corporation are represented by its President, Benito Cu-Uy-Gam
while respondent Land Bank of the Philippines is herein represented by
its President and Chief Executive Officer, MARGARITO B. TEVES;

2. Parties agree that the petitioner Adriatico Consortium, Inc. will pay to
respondent Land Bank of the Philippines the total amount [of]
PhP289,656,868.97 representing the principal amount of
PhP201,233,891.38 plus interest in the amount of PhP88,422,977.59 on
November 28, 2000 as full and complete payment of Mortgage
 Participation Certificate No. 0001 for PhP200,000,000 issued under
Mortgage Trust Indenture dated January 5, 1998; Penalties, fees and other
expenses are hereby waived. Within fifteen (15) days from receipt of the
aforesaid payment, respondent Land Bank of the Philippines will release
to petitioner Adriatico Consortium, Inc. the Mortgage Participation No.
0001 as confirmation that Adriatico Consortium, Inc. has no more
obligations to respondent Land Bank of the Philippines with respect
thereto;

3. Parties agree that the respondent Land Bank of the Philippines shall furnish to
petitioner Adriatico Consortium, Inc. on or before November 28, 2000 the
following:

a. Debit memo records for ACI LandBank account 0052-1198-20 as

follows:

xxx xxx xxx

b. Microfilm copies of check pertinent to the withdrawal/disbursement of

Php139,671,991.00 issued from ACI LandBank account 0052-
1198-20. The particulars of which are as follows:

xxx xxx xxx

4. Within fifteen (15) days from submission of the above-mentioned documents,

petitioner Adriatico Consortium, Inc. and respondent Land Bank of the
Philippines shall reconcile ACI Land bank account under 0052-1198-20
in such a manner and procedure as may be mutually agreed upon by the
parties.

5. With the submission of this compromise agreement and payment by petitioner

Adriatico Consortium, Inc. of the amounts stated in paragraph 2 hereof,
the herein parties agree to unconditionally apply said payment in full
satisfaction and extinguishment of the loan obligations of petitioner
Adriatico Consortium, Inc. with the respondent Land Bank of the
Philippines and to suspend all actions against each other with respect
to the liabilities represented by Mortgage Participation Certificate
No. 0002 for PhP200,000,000 dated July 17, 1998 and Mortgage
Participation No. 0004 for PhP100,000,000 dated July 29, 1998
covered under the Second Amendment to the Mortgage Trust
Indenture dated July 6, 1998. It is understood, however, that said
mortgage participation certificates (Certificate Nos. 0002 and 0004) shall
continue to secure the outstanding obligations of J.V. Williams until said
outstanding obligations have been fully settled and satisfied or until it is
finally adjudged and determined who are the parties liable thereto; toward
this end, the parties herein agree to cooperate with each other in order for
 respondent Land Bank of the Philippines to recover the same as against
the person/s liable thereon.

6. It is expressly agreed that either party is not precluded from pursuing their legal
action against the respondent William Siy or his company, JV Williams,
Inc. notwithstanding this compromise agreement.

WHEREFORE, it is respectfully prayed of this Honorable Court that this partial

compromise agreement be approved and that a partial judgment based hereon be
rendered. 19 (Emphasis supplied.)

The Intent of the Parties Governs

in the Interpretation of Contracts
A compromise is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced. 20 It is an
agreement intended to terminate a pending suit by making reciprocal concessions. 21
ASEcHI

In the construction or interpretation of a compromise agreement, the Court is

guided by the fundamental and cardinal rule that the intention of the parties is to be
ascertained from the contract and effect should be given to that intention. 22 Likewise,
it must be construed so as to give effect to all the provisions of the contract. 23 In
essence, the contract must be read as a whole.
Accordingly, after a careful review of all the provisions of the Partial
Compromise Agreement, this Court finds that the term "all actions" found in Sec. 5 of
the Partial Compromise Agreement is broad enough to cover all acts in relation to MPC
Nos. 0002 and 0004 and is not limited only to legal actions.
First, it should be pointed out that Sec. 1 of the Partial Compromise Agreement
talks about a "litigation." As defined, litigation is the process of carrying on a lawsuit
or the lawsuit itself. 24 Here, it is evident that the parties intended to use a specific term
to describe a legal action.
Likewise, in Section 6 of the Partial Compromise Agreement, the parties
stipulated, "It is expressly agreed that either party is not precluded from pursuing their
legal action . . . ." 25 Again, the parties here purposefully used the phrase "legal action"
and not just the word "action."
Evidently, had the parties intended to limit the application of Sec. 5 to legal
actions only, they would have written a specific word or phrase to pertain to legal
actions and not just the word "actions" alone.
Moreover, in cases of doubt as to the intention of the parties, their
contemporaneous and subsequent acts can be considered in ascertaining their
intentions. 26
In justifying its interpretation of the intention of the parties, the CA reasoned:
 Given that the parties' intention to avoid protracted litigation is clearly enunciated
in the first paragraph thereof, we find that petitioner [Land Bank] correctly take
exception to public respondent's conclusion that the inclusion of the subject
obligations in the sealed public auction of petitioner's non-performing assets to
be violative of the January 31, 2001 partial decision rendered in Civil Case No.
00-97648. 27 . . .

The parties, however, never meant to avoid protracted litigation with respect to
MPC Nos. 0002 and 0004. That particular phrase was confined to MPC No. 0001 as
unmistakably shown by the subsequent acts of the parties in proceeding with the
litigation with respect to MPC Nos. 0002 and 0004 despite the approval of the Partial
Compromise Agreement and the rendition of the Partial Decision.
More importantly, a contract must be interpreted from the language of the
contract itself 28 according to its plain and ordinary meaning. 29 This was elucidated
by this Court in Abad v. Goldloop Properties, Inc., to wit:

The cardinal rule in the interpretation of contracts is embodied in the first

paragraph of Article 1370 of the Civil Code: "[i]f the terms of a contract are clear
and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control." This provision is akin to the "plain
meaning rule" applied by Pennsylvania courts, which assumes that the intent of
the parties to an instrument is "embodied in the writing itself, and when the words
are clear and unambiguous the intent is to be discovered only from the express
language of the agreement." It also resembles the "four corners" rule, a principle
which allows courts in some cases to search beneath the semantic surface for
clues to meaning. A court's purpose in examining a contract is to interpret the
intent of the contracting parties, as objectively manifested by them. The process
of interpreting a contract requires the court to make a preliminary inquiry as to
whether the contract before it is ambiguous. A contract provision is ambiguous if
it is susceptible of two reasonable alternative interpretations. Where the written
terms of the contract are not ambiguous and can only be read one way, the court
will interpret the contract as a matter of law. If the contract is determined to be
ambiguous, then the interpretation of the contract is left to the court, to resolve
the ambiguity in the light of the intrinsic evidence. 30

In the case at bar, the word "action" should be defined according to its plain and
ordinary meaning, i.e., as the process of doing something; conduct or behavior; a thing
done. 31 It is not limited to actions before a court or a judicial proceeding. Therefore,
the only logical conclusion that can be derived from the use of the word "action" in Sec.
5 is that the parties intentionally used it in its plain and ordinary sense and did not limit
it to mean any specific legal term.
Moreover, a compromise agreement compromises not only those objects
definitely stated in it, but also those, which by necessary implication, should be deemed
to have been included in it. 32 Ergo, the term "action" includes the sale of the
receivables as a necessary implication.
Consequently, any act made by any of the parties with regard to MPC Nos. 0002
and 0004 specified in Section 5 of the Partial Compromise Agreement falls under the
generally accepted meaning of the word "action," including the act of Land Bank in
transferring or selling the MPCs to a third party.
Furthermore, Sec. 5 of the Partial Compromise Agreement speaks of cooperation
between the parties to determine the person or persons ultimately liable. It states, " . . .
until it is finally adjudged and determined who are the parties liable thereto; toward this
end, the parties herein agree to cooperate with each other in order for respondent Land
Bank of the Philippines to recover the same as against the person/s liable thereon."
In other words, the parties agreed to cooperate and collaborate with each other
in order to determine the person or persons who are ultimately liable. By selling the
receivables, Land Bank did not cooperate with petitioners.
Thus, it can be safely concluded that the act of Land Bank is a clear and patent
violation of Sec. 5 of the Partial Compromise Agreement.
Partial Compromise Agreement Constitutes
Novation to the Loan Agreement
Additionally, respondent Land Bank argues that the transfer of the MPCs is in
accordance with the transferability clause in the loan agreement with JVWRDC, which
provides that Land Bank has the legal authority to encumber, assign, transfer, or sell
any right which it may have under the Loan/Line Agreement.
We do not agree.
Novation is the extinguishment of an obligation by the substitution or change of
the obligation by a subsequent one which extinguishes or modifies the first, either by
changing the object or principal conditions, or by substituting another in place of the
debtor, or by subrogating a third person in the rights of the creditor. 33
Novation may be extinctive or modificatory. It is extinctive when an old
obligation is terminated by the creation of a new one that takes the place of the former;
it is merely modificatory when the old obligation subsists to the extent that it remains
compatible with the amendatory agreement. 34
For novation to take place, the following requisites must concur:

1) There must be a previous valid obligation.

2) The parties concerned must agree to a new contract.

3) The old contract must be extinguished.

 4) There must be a valid new contract. 35

Novation may either be express, when the new obligation declares in

unequivocal terms that the old obligation is extinguished; or implied, when the new
obligation is on every point incompatible with the old one. 36 The test of
incompatibility is whether the two obligations can stand together, each one with its own
independent existence. 37
In the instant case, the Court finds that the Partial Compromise Agreement
entered into by petitioners and Land Bank constitutes as an implied modificatory
novation or amendment to the Loan/Line Agreement. As such, any provision in the
Loan/Line Agreement inconsistent with the provisions of the Partial Compromise
Agreement is deemed amended or waived by the parties.
In other words, by entering into the Partial Compromise Agreement and agreeing
to "suspend all actions," Land Bank effectively waived all its rights regarding MPC
Nos. 0002 and 0004. This necessarily includes its right to assign under the Loan/Line
Agreement.
Moreover, ACI and Land Bank entered into the Partial Compromise Agreement
freely and voluntarily. And this Partial Compromise Agreement was approved by the
RTC in its Partial Decision giving it more weight.
Furthermore, the Civil Code provides that obligations arising from contracts
have the force of law between the contracting parties and should be complied with in
good faith. 38
In the case at bar, the payment made by ACI in the Partial Compromise
Agreement was done in good faith. As culled from the facts, Siy did not remit the
payments made by ACI to Land Bank. Upon recommendation of its legal counsel and
despite the fact that it already paid, ACI, however, settled the loan and paid again. This
substantial amount is the consideration for which ACI and Land Bank agreed to suspend
all actions. Thus, just as ACI acted in good faith, Land Bank is also expected to act in
good faith in following the covenants it entered into in the Partial Compromise
Agreement.
On a final note, the sale or transfer of the MPCs to a third party, if declared as
legal, would allow respondent Land Bank to circumvent its obligations found in the
Partial Compromise Agreement and, in turn, diminish the rights of petitioners. Such a
move cannot be countenanced. The principle of what cannot be done directly, cannot
be done indirectly is applicable.
WHEREFORE, the appeal is GRANTED. The Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 103717 dated October 16, 2008 and May 13,
2009, respectively are NULLIFIED and SET ASIDE. The Orders of the RTC dated
February 29, 2008, March 17, 2008 and April 21, 2008, together with the March 5,
2008 Writ of Execution are REINSTATED.
 No costs.
SO ORDERED. SHADEC

Corona, Nachura, Peralta and Del Castillo, * JJ., concur.

(Adriatico Consortium, Inc. v. Land Bank of the Phils., G.R. No. 187838, [December 23,
|||

2009], 623 PHIL 1027-1044)

 THIRD DIVISION

[G.R. No. 180168. February 27, 2012.]

MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner,

vs. AVIA FILIPINAS INTERNATIONAL, INC., respondent.

DECISION

PERALTA, J : p

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court,
seeking the reversal and setting aside of the June 19, 2007 Decision 1 and the October 11,
2007 Resolution 2 of the Court of Appeals (CA) in CA-G.R. CV No. 79325. The assailed
CA Decision affirmed with modification the Decision 3 dated March 21, 2003 of the
Regional Trial Court (RTC) of Quezon City, Branch 224, in Civil Case No. Q-98-34395,
while the CA Resolution denied petitioner's Motion for Reconsideration. IETCAS

The factual and procedural antecedents are as follows:

In September 1990, herein petitioner Manila International Airport Authority (MIAA)

entered into a contract of lease with herein respondent Avia Filipinas International, Inc.
(AFIC), wherein MIAA allowed AFIC to use specific portions of land as well as facilities
within the Ninoy Aquino International Airport exclusively for the latter's aircraft repair
station and chartering operations. The contract was for one (1) year, beginning September
1, 1990 until August 31, 1991, with a monthly rental of P6,580.00.

In December 1990, MIAA issued Administrative Order No. 1, Series of 1990, which
revised the rates of dues, charges, fees or assessments for the use of its properties, facilities
and services within the airport complex. The Administrative Order was made effective on
December 1, 1990. As a consequence, the monthly rentals due from AFIC was increased
to P15,996.50. Nonetheless, MIAA did not require AFIC to pay the new rental fee. Thus,
it continued to pay the original fee of P6,580.00.

After the expiration of the contract, AFIC continued to use and occupy the leased premises
giving rise to an implied lease contract on a monthly basis. AFIC kept on paying the
original rental fee without protest on the part of MIAA.

Three years after the expiration of the original contract of lease, MIAA informed AFIC,
through a billing statement dated October 6, 1994, that the monthly rental over the subject
premises was increased to P15,966.50 beginning September 1, 1991, which is the date
immediately following the expiration of the original contract of lease. MIAA sought
recovery of the difference between the increased rental rate and the original rental fee
amounting to a total of P347,300.50 covering thirty-seven (37) months between September
1, 1991 and September 31, 1994. Beginning October 1994, AFIC paid the increased rental
fee. However, it refused to pay the lump sum of P347,300.50 sought to be recovered by
MIAA. For the continued refusal of AFIC to pay the said lump sum, its employees were
denied access to the leased premises from July 1, 1997 until March 11, 1998. This,
notwithstanding, AFIC continued paying its rentals. Subsequently, AFIC was granted
temporary access to the leased premises.

AFIC then filed with the RTC of Quezon City a Complaint for damages with injunction
against MIAA and its General Manager seeking uninterrupted access to the leased
premises, recovery of actual and exemplary damages, refund of its monthly rentals with
interest at the time that it was denied access to the area being rented as well as attorney's
fees.

In its Answer with Counterclaim, MIAA contended that under its lease contract with AFIC,
MIAA is allowed to either increase or decrease the monthly rental; AFIC has rental arrears
in the amount of P347,300.50; AFIC was wrong in claiming that MIAA took the law into
its own hands in denying AFIC and its employees access to the leased premises, because
under the lease contract, in case of failure on the part of AFIC to pay rentals for at least
two (2) months, the contract shall become automatically terminated and canceled without
need of judicial action or process and it shall be lawful for MIAA or any person or persons
duly authorized on its behalf to take possession of the property either by padlocking the
premises or posting its guards to prevent the entry of any person. MIAA prayed for the
award of exemplary damages as well as attorney's fees and litigation expenses.

On March 21, 2003, the RTC rendered its Decision, the dispositive portion of which reads
as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor

of the plaintiff [AFIC] and as against the defendants [MIAA] ordering the latter
to pay plaintiff the following:
DcaECT

a) the amount of P2,000,000.00 as actual damages;

b) the amount of P200,000.00 as exemplary damages;

c) to refund the monthly rental payments beginning July 1, 1997 up [to]

March 11, 1998 with interest at twelve (12%) percent;

d) the amount of P100,000.00 as attorney's fees;

 e) cost of suit.

IT IS SO ORDERED. 4

MIAA filed an appeal with the CA contending that the RTC erred in: (1) finding that MIAA
is not entitled to apply the increase in rentals as against AFIC; (2) finding that MIAA is not
entitled to padlock the leased premises or post guards to prevent entry of AFIC therein; and
(3) awarding actual and exemplary damages and attorney's fees.

On June 19, 2007, the CA rendered its assailed Decision, the dispositive portion of which
reads, thus:

WHEREFORE, premises considered, the decision of the Regional Trial Court of

Quezon City in Civil Case No. Q-98-34395 is hereby AFFIRMED with
MODIFICATION. The awards of actual/compensatory damages and exemplary
damages are deleted. The refund of monthly rental payments from July 1, 1997
to March 11, 1998 shall earn interest of six percent (6%) per annum from the date
of the filing of the complaint until the finality of this decision. An interest of
twelve percent (12%) per annum shall be imposed upon any unpaid balance from
such finality until the judgment amount is fully satisfied.

The award of attorney's fees stands.

SO ORDERED. 5

MIAA filed a Motion for Reconsideration, but the CA denied it via its Resolution dated
October 11, 2007.

Hence, the present petition for review on certiorari raising the following issues:

WHETHER THE HONORABLE COURT OF APPEALS CORRECTLY

INTERPRETED THE PROVISIONS OF THE LEASE CONTRACT IN LINE
WITH THE PROVISIONS OF THE CIVIL CODE AND EXISTING
JURISPRUDENCE ON CONTRACTS.

WHETHER THE PRINCIPLE OF UNJUST ENRICHMENT IS APPLICABLE

TO THE INSTANT CASE. STIHaE

WHETHER RESPONDENT IS ENTITLED TO ATTORNEY'S FEES. 6

Petitioner MIAA contends that, as an administrative agency possessed of quasi-legislative

and quasi-judicial powers as provided for in its charter, it is empowered to make rules and
regulations and to levy fees and charges; that its issuance of Administrative Order No. 1,
Series of 1990 is pursuant to the exercise of the abovementioned powers; that by signing
the lease contract, respondent AFIC already agreed and gave its consent to any further
increase in rental rates; as such, the provisions of the lease contract being cited by the CA
which provides that "any amendment, alteration or modification [of the lease contract] shall
not be valid and binding, unless and until made in writing and signed by the parties thereto"
is deemed complied with because respondent already consented to having any subsequent
amendments to Administrative Order No. 1 automatically incorporated in the lease
contract; that the above-quoted provisions should not also be interpreted as having the
effect of limiting the authority of MIAA to impose new rental rates in accordance with its
authority under its charter.

Petitioner also argues that it is not guilty of unjust enrichment when it denied respondent
access to the leased premises, because there is nothing unlawful in its act of imposing
sanctions against respondent for the latter's failure to pay the increased rental.

Lastly, petitioner avers that respondent is not entitled to attorney's fees, considering that it
was not compelled to litigate and incur expenses to protect its interest by reason of any
unjustified act on the part of petitioner. Petitioner reiterates that it was merely exercising
its right as the owner and administrator of the leased property and, as such, its acts may not
be deemed unwarranted.

The petition lacks merit.

Article 1306 of the Civil Code provides that "[t]he contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided they are
not contrary to law, morals, good customs, public order, or public policy."

Moreover, Article 1374 of the Civil Code clearly provides that "[t]he various stipulations
of a contract shall be interpreted together, attributing to the doubtful ones that sense which
may result from all of them taken jointly." Indeed, in construing a contract, the provisions
thereof should not be read in isolation, but in relation to each other and in their entirety so
as to render them effective, having in mind the intention of the parties and the purpose to
be achieved. 7 In other words, the stipulations in a contract and other contract documents
should be interpreted together with the end in view of giving effect to all. 8

In the present case, the Court finds nothing repugnant to law with respect to the questioned
provision of the contract of lease between petitioner and respondent. It is true that Article
II, Paragraph 2.04 of the Contract of Lease states that "[a]ny subsequent amendment to
Administrative Order No. 4, Series of 1982, which will effect a decrease or escalation of
the monthly rental or impose new and additional fees and charges, including but not limited
to government/MIAA circulars, rules and regulation to this effect, shall be deemed
incorporated herein and shall automatically amend this Contract insofar as the monthly
rental is concerned." 9 However, the Court agrees with the CA that the abovequoted
provision of the lease contract should not be read in isolation. Rather, it should be read
together with the provisions of Article VIII, Paragraph 8.13, which provide that "[a]ny
amendment, alteration or modification of th[e] Contract shall not be valid and binding,
unless and until made in writing and signed by the parties thereto." 10 It is clear from the
foregoing that the intention of the parties is to subject such amendment to the conformity
of both petitioner and respondent. In the instant case, there is no showing that respondent
gave his acquiescence to the said amendment or modification of the contract. TcIaHC

The situation is different with respect to the payments of the increased rental fee made by
respondent beginning October 1994 because by then the amendment to the contract was
made in writing through a bill sent by petitioner to respondent. 11 The fact that respondent
subsequently settled the said bill proves that it acceded to the increase in rental fee. The
same may not be said with respect to the questioned rental fees sought to be recovered by
petitioner between September 1991 and September 1994 because no bill was made and
forwarded to respondent on the basis of which it could have given or withheld its
conformity thereto.

It may not be amiss to point out that during the abovementioned period, respondent
continued to pay and petitioner kept on receiving the original rental fee of P6,580.00
without any reservations or protests from the latter. 12 Neither did petitioner indicate in
the official receipts it issued that the payments made by respondent constitute only partial
fulfillment of the latter's obligations. Article 1235 of the Civil Code clearly 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." For failing to make any protest or objection, petitioner is already estopped from
seeking recovery of the amount claimed.

Anent the second issue, since it has been established that petitioner has no legal basis in
requiring respondent to pay additional rental fees from September 1, 1991 to September
30, 1994, it, thus, follows that petitioner's act of denying respondent and its employees
access to the leased premises from July 1, 1997 until March 11, 1998, by reason of
respondent's non-payment of the said additional fees, is likewise unjustified.

Under Paragraph 3, Article 1654 of the Civil Code, the lessor is obliged "[t]o maintain the
lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the
contract."

Moreover, Article 1658 of the same Code provides that "[t]he lessee may suspend the
payment of the rent in case the lessor fails to make the necessary repairs or to maintain the
lessee in peaceful and adequate enjoyment of the property leased."

Furthermore, as correctly cited by the RTC, Article 19 of the Civil Code provides that
"[e]very person must, in the exercise of his rights and in the performance of his duties, act
with justice, give everyone his due, and observe honesty and good faith."
Article 22 of the same Code also states that "[e]very person who through an act of
performance by another, or any other means, acquires or comes into possession of
something at the expense of the latter without just or legal ground, shall return the same to
him." In accordance with jurisprudence, there is unjust enrichment when a person unjustly
retains a benefit to the loss of another, or when a person retains money or property of
another against the fundamental principles of justice, equity and good conscience. 13 The
principle of unjust enrichment essentially contemplates payment when there is no duty to
pay, and the person who receives the payment has no right to receive it. 14

In the instant case, it is clear that petitioner failed to maintain respondent in the peaceful
and adequate enjoyment of the leased premises by unjustifiably preventing the latter access
thereto. Consequently, in accordance with Article 1658 of the Civil Code, respondent had
no duty to make rent payments. Despite that, respondent still continued to pay the rental
fees agreed upon in the original contract. Thus, it would be the height of inequity and
injustice as well as unjust enrichment on the part of petitioner if the rental fees paid by
respondent during the time that it was denied access to and prevented from using the leased
premises be not returned to it.IEaATD

With respect to attorney's fees, the Court finds no error on the part of the CA in sustaining
such award on the ground that petitioner's act of denying respondent and its employees
access to the leased premises has compelled respondent to litigate and incur expenses to
protect its interest. 15 The Court likewise agrees with the CA that, under the circumstances
prevailing in the present case, attorney's fees may be granted on grounds of justice and
equity. 16

Finally, the Court deems it proper to reiterate the provisions of Supreme Court
Administrative Circular No. 10-2000 which enjoins all judges of lower courts to observe
utmost caution, prudence and judiciousness in the issuance of writs of execution to satisfy
money judgments against government agencies and local government units.

WHEREFORE, the petition is DENIED. The June 19, 2007 Decision and October 11,
2007 Resolution of the Court of Appeals in CA-G.R. CV No. 79325 are AFFIRMED. The
Regional Trial Court of Quezon City, Branch 224 is ORDERED to comply with the
directives of Supreme Court Administrative Circular No. 10-2000.

SO ORDERED.

Velasco, Jr., Abad, Mendoza and Perlas-Bernabe, JJ., concur.

(Manila International Airport Authority v. Avia Filipinas International, Inc., G.R. No.
|||

180168, [February 27, 2012], 683 PHIL 34-45)