1
1 - ART. 1157
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
ROGELIO BAYOTAS y CORDOVA, accused-appellant.
The Solicitor General for plaintiff-appellee.
Public Attorney's Office for accused-appellant.
ROMERO, J.:
In Criminal Case No. C-3217 filed before Branch 16, RTC Roxas City, Rogelio Bayotas y Cordova
was charged with Rape and eventually convicted thereof on June 19, 1991 in a decision penned
by Judge Manuel E. Autajay. Pending appeal of his conviction, Bayotas died on February 4, 1992
at
the National Bilibid Hospital due to cardio respiratory arrest secondary to hepatic
encephalopathy secondary to hipato carcinoma gastric malingering. Consequently, the Supreme
Court in its Resolution of May 20, 1992 dismissed the criminal aspect of the appeal. However, it
required the Solicitor General to file its comment with regard to Bayotas' civil liability arising
from his commission of the offense charged.
In his comment, the Solicitor General expressed his view that the death of accused-appellant
did not extinguish his civil liability as a result of his commission of the offense charged. The
Solicitor General, relying on the case of People v. Sendaydiego 1 insists that the appeal should
still be resolved for the purpose of reviewing his conviction by the lower court on which the
civil liability is based.
Counsel for the accused-appellant, on the other hand, opposed the view of the Solicitor General
arguing that the death of the accused while judgment of conviction is pending appeal
extinguishes both his criminal and civil penalties. In support of his position, said counsel
invoked the ruling of the Court of Appeals in People v. Castillo and Ocfemia 2 which held that the
civil obligation in a criminal case takes root in the criminal liability and, therefore, civil liability
is extinguished if accused should die before final judgment is rendered.
We are thus confronted with a single issue: Does death of the accused pending appeal of his
conviction extinguish his civil liability?
In the aforementioned case of People v. Castillo, this issue was settled in the affirmative. This
same issue posed therein was phrased thus: Does the death of Alfredo Castillo affect both his
criminal responsibility and his civil liability as a consequence of the alleged crime?
It resolved this issue thru the following disquisition:
Article 89 of the Revised Penal Code is the controlling statute. It reads, in part:
Art. 89. How criminal liability is totally extinguished. — Criminal liability is totally extinguished:
1. By the death of the convict, as to the personal penalties; and as to the pecuniary penalties
liability therefor is extinguished only when the death of the offender occurs before final
judgment;
With reference to Castillo's criminal liability, there is no question. The law is plain. Statutory
construction is unnecessary. Said liability is extinguished.
The civil liability, however, poses a problem. Such liability is extinguished only when the death
of the offender occurs before final judgment. Saddled upon us is the task of ascertaining the
legal import of the term "final judgment." Is it final judgment as contradistinguished from an
interlocutory order? Or, is it a judgment which is final and executory?
We go to the genesis of the law. The legal precept contained in Article 89 of the Revised Penal
Code heretofore transcribed is lifted from Article 132 of the Spanish El Codigo Penal de 1870
which, in part, recites:
La responsabilidad penal se extingue.
1. Por la muerte del reo en cuanto a las penas personales siempre, y respecto a las pecuniarias,
solo cuando a su fallecimiento no hubiere recaido sentencia firme.
xxx xxx xxx
The code of 1870 . . . it will be observed employs the term "sentencia firme." What is "sentencia
firme" under the old statute?
XXVIII Enciclopedia Juridica Española, p. 473, furnishes the ready answer: It says:
SENTENCIA FIRME. La sentencia que adquiere la fuerza de las definitivas por no haberse
utilizado por las partes litigantes recurso alguno contra ella dentro de los terminos y plazos
legales concedidos al efecto.
"Sentencia firme" really should be understood as one which is definite. Because, it is only when
judgment is such that, as Medina y Maranon puts it, the crime is confirmed — "en condena
determinada;" or, in the words of Groizard, the guilt of the accused becomes — "una verdad
legal." Prior thereto, should the accused die, according to Viada, "no hay legalmente, en tal caso,
ni reo, ni delito, ni responsabilidad criminal de ninguna clase." And, as Judge Kapunan well
explained, when a defendant dies before judgment becomes executory, "there cannot be any
determination by final judgment whether or not the felony upon which the civil action might
2
arise exists," for the simple reason that "there is no party defendant." (I Kapunan, Revised Penal
Code, Annotated, p. 421. Senator Francisco holds the same view. Francisco, Revised Penal Code,
Book One, 2nd ed., pp. 859-860)
The legal import of the term "final judgment" is similarly reflected in the Revised Penal Code.
Articles 72 and 78 of that legal body mention the term "final judgment" in the sense that it is
already enforceable. This also brings to mind Section 7, Rule 116 of the Rules of Court which
states that a judgment in a criminal case becomes final "after the lapse of the period for
perfecting an appeal or when the sentence has been partially or totally satisfied or served, or
the defendant has expressly waived in writing his right to appeal."
By fair intendment, the legal precepts and opinions here collected funnel down to one positive
conclusion: The term final judgment employed in the Revised Penal Code means judgment
beyond recall. Really, as long as a judgment has not become executory, it cannot be truthfully
said that defendant is definitely guilty of the felony charged against him.
Not that the meaning thus given to final judgment is without reason. For where, as in this case,
the right to institute a separate civil action is not reserved, the decision to be rendered must, of
necessity, cover "both the criminal and the civil aspects of the case." People vs. Yusico
(November 9, 1942), 2 O.G., No. 100, p. 964. See also: People vs. Moll, 68 Phil., 626, 634;
Francisco, Criminal Procedure, 1958 ed., Vol. I, pp. 234, 236. Correctly, Judge Kapunan observed
that as "the civil action is based solely on the felony committed and of which the offender might
be found guilty, the death of the offender extinguishes the civil liability." I Kapunan, Revised
Penal Code, Annotated, supra.
Here is the situation obtaining in the present case: Castillo's criminal liability is out. His civil
liability is sought to be enforced by reason of that criminal liability. But then, if we dismiss, as
we must, the criminal action and let the civil aspect remain, we will be faced with the
anomalous situation whereby we will be called upon to clamp civil liability in a case where the
source thereof — criminal liability — does not exist. And, as was well stated in Bautista, et al. vs.
Estrella, et al., CA-G.R.
No. 19226-R, September 1, 1958, "no party can be found and held criminally liable in a civil
suit," which solely would remain if we are to divorce it from the criminal proceeding."
This ruling of the Court of Appeals in the Castillo case 3 was adopted by the Supreme Court in
the cases of People of the Philippines v. Bonifacio Alison, et al., 4 People of the Philippines v. Jaime
Jose, et al. 5 and People of the Philippines v. Satorre 6 by dismissing the appeal in view of the
death of the accused pending appeal of said cases.
As held by then Supreme Court Justice Fernando in the Alison case:
The death of accused-appellant Bonifacio Alison having been established, and considering that
there is as yet no final judgment in view of the pendency of the appeal, the criminal and civil
liability of the said accused-appellant Alison was extinguished by his death (Art. 89, Revised
Penal Code; Reyes' Criminal Law, 1971 Rev. Ed., p. 717, citing People v. Castillo and Ofemia C.A.,
56 O.G. 4045); consequently, the case against him should be dismissed.
On the other hand, this Court in the subsequent cases of Buenaventura Belamala v. Marcelino
Polinar 7 and Lamberto Torrijos v. The Honorable Court of Appeals 8 ruled differently. In the
former, the issue decided by this court was: Whether the civil liability of one accused of
physical injuries who died before final judgment is extinguished by his demise to the extent of
barring any claim therefore against his estate. It was the contention of the administrator-
appellant therein that the death of the accused prior to final judgment extinguished all criminal
and civil liabilities resulting from the offense, in view of Article 89, paragraph 1 of the Revised
Penal Code. However, this court ruled therein:
We see no merit in the plea that the civil liability has been extinguished, in view of the
provisions of the Civil Code of the Philippines of 1950 (Rep. Act No. 386) that became operative
eighteen years after the revised Penal Code. As pointed out by the Court below, Article 33 of the
Civil Code establishes a civil action for damages on account of physical injuries, entirely
separate and distinct from the criminal action.
Art. 33. In cases of defamation, fraud, and physical injuries, a civil action for damages, entirely
separate and distinct from the criminal action, may be brought by the injured party. Such civil
action shall proceed independently of the criminal prosecution, and shall require only a
preponderance of evidence.
Assuming that for lack of express reservation, Belamala's civil action for damages was to be
considered instituted together with the criminal action still, since both proceedings were
terminated without final adjudication, the civil action of the offended party under Article 33
may yet be enforced separately.
In Torrijos, the Supreme Court held that:
xxx xxx xxx
It should be stressed that the extinction of civil liability follows the extinction of the criminal
liability under Article 89, only when the civil liability arises from the criminal act as its only
basis. Stated differently, where the civil liability does not exist independently of the criminal
responsibility, the extinction of the latter by death, ipso facto extinguishes the former, provided,
of course, that death supervenes before final judgment. The said principle does not apply in
instant case wherein the civil liability springs neither solely nor originally from the crime itself
but from a civil contract of purchase and sale. (Emphasis ours)
xxx xxx xxx
In the above case, the court was convinced that the civil liability of the accused who was
charged with estafa could likewise trace its genesis to Articles 19, 20 and 21 of the Civil Code
3
since said accused had swindled the first and second vendees of the property subject matter of
the contract of sale. It therefore concluded: "Consequently, while the death of the accused
herein extinguished his criminal liability including fine, his civil liability based on the laws of
human relations remains."
Thus it allowed the appeal to proceed with respect to the civil liability of the accused,
notwithstanding the extinction of his criminal liability due to his death pending appeal of his
conviction.
To further justify its decision to allow the civil liability to survive, the court relied on the
following ratiocination: Since Section 21, Rule 3 of the Rules of Court 9 requires the dismissal of
all money claims against the defendant whose death occurred prior to the final judgment of the
Court of First Instance (CFI), then it can be inferred that actions for recovery of money may
continue to be heard on appeal, when the death of the defendant supervenes after the CFI had
rendered its judgment. In such case, explained this tribunal, "the name of the offended party
shall be included in the title of the case as plaintiff-appellee and the legal representative or the
heirs of the deceased-accused should be substituted as defendants-appellants."
It is, thus, evident that as jurisprudence evolved from Castillo to Torrijos, the rule established
was that the survival of the civil liability depends on whether the same can be predicated on
sources of obligations other than delict. Stated differently, the claim for civil liability is also
extinguished together with the criminal action if it were solely based thereon, i.e., civil liability
ex delicto.
However, the Supreme Court in People v. Sendaydiego, et al. 10 departed from this long-
established principle of law. In this case, accused Sendaydiego was charged with and convicted
by the lower court of malversation thru falsification of public documents. Sendaydiego's death
supervened during the pendency of the appeal of his conviction.
This court in an unprecedented move resolved to dismiss Sendaydiego's appeal but only to the
extent of his criminal liability. His civil liability was allowed to survive although it was clear that
such claim thereon was exclusively dependent on the criminal action already extinguished. The
legal import of such decision was for the court to continue exercising appellate jurisdiction over
the entire appeal, passing upon the correctness of Sendaydiego's conviction despite dismissal of
the criminal action, for the purpose of determining if he is civilly liable. In doing so, this Court
issued a Resolution of July 8, 1977 stating thus:
The claim of complainant Province of Pangasinan for the civil liability survived Sendaydiego
because his death occurred after final judgment was rendered by the Court of First Instance of
Pangasinan, which convicted him of three complex crimes of malversation through falsification
and ordered him to indemnify the Province in the total sum of P61,048.23 (should be
P57,048.23).
The civil action for the civil liability is deemed impliedly instituted with the criminal action in
the absence of express waiver or its reservation in a separate action (Sec. 1, Rule 111 of the
Rules of Court). The civil action for the civil liability is separate and distinct from the criminal
action (People and Manuel vs. Coloma, 105 Phil. 1287; Roa vs. De la Cruz, 107 Phil. 8).
When the action is for the recovery of money and the defendant dies before final judgment in
the Court of First Instance, it shall be dismissed to be prosecuted in the manner especially
provided in Rule 87 of the Rules of Court (Sec. 21, Rule 3 of the Rules of Court).
The implication is that, if the defendant dies after a money judgment had been rendered against
him by the Court of First Instance, the action survives him. It may be continued on appeal
(Torrijos vs. Court of Appeals, L-40336, October 24, 1975; 67 SCRA 394).
The accountable public officer may still be civilly liable for the funds improperly disbursed
although he has no criminal liability (U.S. vs. Elvina, 24 Phil. 230; Philippine National Bank vs.
Tugab, 66 Phil. 583).
In view of the foregoing, notwithstanding the dismissal of the appeal of the deceased
Sendaydiego insofar as his criminal liability is concerned, the Court Resolved to continue
exercising appellate jurisdiction over his possible civil liability for the money claims of the
Province of Pangasinan arising from the alleged criminal acts complained of, as if no criminal
case had been instituted against him, thus making applicable, in determining his civil liability,
Article 30 of the Civil Code . . . and, for that purpose, his counsel is directed to inform this Court
within ten (10) days of the names and addresses of the decedent's heirs or whether or not his
estate is under administration and has a duly appointed judicial administrator. Said heirs or
administrator will be substituted for the deceased insofar as the civil action for the civil liability
is concerned (Secs. 16 and 17, Rule 3, Rules of Court).
Succeeding cases 11 raising the identical issue have maintained adherence to our ruling in
Sendaydiego; in other words, they were a reaffirmance of our abandonment of the settled rule
that a civil liability solely anchored on the criminal (civil liability ex delicto) is extinguished
upon dismissal of the entire appeal due to the demise of the accused.
But was it judicious to have abandoned this old ruling? A re-examination of our decision in
Sendaydiego impels us to revert to the old ruling.
To restate our resolution of July 8, 1977 in Sendaydiego: The resolution of the civil action
impliedly instituted in the criminal action can proceed irrespective of the latter's extinction due
to death of the accused pending appeal of his conviction, pursuant to Article 30 of the Civil Code
and Section 21, Rule 3 of the Revised Rules of Court.
Article 30 of the Civil Code provides:
4
When a separate civil action is brought to demand civil liability arising from a criminal offense,
and no criminal proceedings are instituted during the pendency of the civil case, a
preponderance of evidence shall likewise be sufficient to prove the act complained of.
Clearly, the text of Article 30 could not possibly lend support to the ruling in Sendaydiego.
Nowhere in its text is there a grant of authority to continue exercising appellate jurisdiction
over the accused's civil liability ex delicto when his death supervenes during appeal. What
Article 30 recognizes is an alternative and separate civil action which may be brought to
demand civil liability arising from a criminal offense independently of any criminal action. In
the event that no criminal proceedings are instituted during the pendency of said civil case, the
quantum of evidence needed to prove the criminal act will have to be that which is compatible
with civil liability and that is, preponderance of evidence and not proof of guilt beyond
reasonable doubt. Citing or invoking Article 30 to justify the survival of the civil action despite
extinction of the criminal would in effect merely beg the question of whether civil liability ex
delicto survives upon extinction of the criminal action due to death of the accused during appeal
of his conviction. This is because whether asserted in
the criminal action or in a separate civil action, civil liability ex delicto is extinguished by the
death of the accused while his conviction is on appeal. Article 89 of the Revised Penal Code is
clear on this matter:
Art. 89. How criminal liability is totally extinguished. — Criminal liability is totally extinguished:
1. By the death of the convict, as to the personal penalties; and as to pecuniary penalties,
liability therefor is extinguished only when the death of the offender occurs before final
judgment;
xxx xxx xxx
However, the ruling in Sendaydiego deviated from the expressed intent of Article 89. It allowed
claims for civil liability ex delicto to survive by ipso facto treating the civil action impliedly
instituted with the criminal, as one filed under Article 30, as though no criminal proceedings
had been filed but merely a separate civil action. This had the effect of converting such claims
from one which is dependent on the outcome of the criminal action to an entirely new and
separate one, the prosecution of which does not even necessitate the filing of criminal
proceedings. 12 One would be hard put to pinpoint the statutory authority for such a
transformation. It is to be borne in mind that in recovering civil liability ex delicto, the same has
perforce to be determined in the criminal action, rooted as it is in the court's pronouncement of
the guilt or innocence of the accused. This is but to render fealty to the intendment of Article
100 of the Revised Penal Code which provides that "every person criminally liable for a felony
is also civilly liable." In such cases, extinction of the criminal action due to death of the accused
pending appeal inevitably signifies the concomitant extinction of the civil liability. Mors Omnia
Solvi. Death dissolves all things.
In sum, in pursuing recovery of civil liability arising from crime, the final determination of the
criminal liability is a condition precedent to the prosecution of the civil action, such that when
the criminal action is extinguished by the demise of accused-appellant pending appeal thereof,
said civil action cannot survive. The claim for civil liability springs out of and is dependent upon
facts which, if true, would constitute a crime. Such civil liability is an inevitable consequence of
the criminal liability and is to be declared and enforced in the criminal proceeding. This is to be
distinguished from that which is contemplated under Article 30 of the Civil Code which refers
to the institution of a separate civil action that does not draw its life from a criminal proceeding.
The Sendaydiego resolution of July 8, 1977, however, failed to take note of this fundamental
distinction when it allowed the survival of the civil action for the recovery of civil liability ex
delicto by treating the same as a separate civil action referred to under Article 30. Surely, it will
take more than just a summary judicial pronouncement to authorize the conversion of said civil
action to an independent one such as that contemplated under Article 30.
Ironically however, the main decision in Sendaydiego did not apply Article 30, the resolution of
July 8, 1977 notwithstanding. Thus, it was held in the main decision:
Sendaydiego's appeal will be resolved only for the purpose of showing his criminal liability
which is the basis of the civil liability for which his estate would be liable. 13
In other words, the Court, in resolving the issue of his civil liability, concomitantly made a
determination on whether Sendaydiego, on the basis of evidenced adduced, was indeed guilty
beyond reasonable doubt of committing the offense charged. Thus, it upheld Sendaydiego's
conviction and pronounced the same as the source of his civil liability. Consequently, although
Article 30 was not applied in the final determination of Sendaydiego's civil liability, there was a
reopening of the criminal action already extinguished which served as basis for Sendaydiego's
civil liability. We reiterate: Upon death of the accused pending appeal of his conviction, the
criminal action is extinguished inasmuch as there is no longer a defendant to stand as the
accused; the civil action instituted therein for recovery of civil liability ex delicto is ipso facto
extinguished, grounded as it is on the criminal.
Section 21, Rule 3 of the Rules of Court was also invoked to serve as another basis for the
Sendaydiego resolution of July 8, 1977. In citing Sec. 21, Rule 3 of the Rules of Court, the Court
made the inference that civil actions of the type involved in Sendaydiego consist of money
claims, the recovery of which may be continued on appeal if defendant dies pending appeal of
his conviction by holding his estate liable therefor. Hence, the Court's conclusion:
"When the action is for the recovery of money" "and the defendant dies before final judgment in
the court of First Instance, it shall be dismissed to be prosecuted in the manner especially
provided" in Rule 87 of the Rules of Court (Sec. 21, Rule 3 of the Rules of Court).
The implication is that, if the defendant dies after a money judgment had been rendered against
him by the Court of First Instance, the action survives him. It may be continued on appeal.
5
Sadly, reliance on this provision of law is misplaced. From the standpoint of procedural law,
this course taken in Sendaydiego cannot be sanctioned. As correctly observed by Justice
Regalado:
xxx xxx xxx
I do not, however, agree with the justification advanced in both Torrijos and Sendaydiego which,
relying on the provisions of Section 21, Rule 3 of the Rules of Court, drew the strained
implication therefrom that where the civil liability instituted together with the criminal
liabilities had already passed beyond the judgment of the then Court of First Instance (now the
Regional Trial Court), the Court of Appeals can continue to exercise appellate jurisdiction
thereover despite the extinguishment of the component criminal liability of the deceased. This
pronouncement, which has been followed in the Court's judgments subsequent and consonant
to Torrijos and Sendaydiego, should be set aside and abandoned as being clearly erroneous and
unjustifiable.
Said Section 21 of Rule 3 is a rule of civil procedure in ordinary civil actions. There is neither
authority nor justification for its application in criminal procedure to civil actions instituted
together with and as part of criminal actions. Nor is there any authority in law for the summary
conversion from the latter category of an ordinary civil action upon the death of the offender. . .
. only to purely personal obligations other than those which have their source in delict or tort.
Moreover, the civil action impliedly instituted in a criminal proceeding for recovery of civil
liability ex delicto can hardly be categorized as an ordinary money claim such as that referred to
in Sec. 21, Rule 3 enforceable before the estate of the deceased accused.
Ordinary money claims referred to in Section 21, Rule 3 must be viewed in light of the
provisions of Section 5, Rule 86 involving claims against the estate, which in Sendaydiego was
held liable for Sendaydiego's civil liability. "What are contemplated in Section 21 of Rule 3, in
relation to Section 5 of Rule 86, 14 are contractual money claims while the claims involved in
civil liability ex delicto may include even the restitution of personal or real property." 15 Section
5, Rule 86 provides an exclusive enumeration of what claims may be filed against the estate.
These are: funeral expenses, expenses for the last illness, judgments for money and claim
arising from contracts, expressed or implied. It is clear that money claims arising from delict do
not form part of this exclusive enumeration. Hence, there could be no legal basis in (1) treating
a civil action ex delicto as an ordinary contractual money claim referred to in Section 21, Rule 3
of the Rules of Court and (2) allowing it to survive by filing a claim therefor before the estate of
the deceased accused. Rather, it should be extinguished upon extinction of the criminal action
engendered by the death of the accused pending finality of his conviction.
Accordingly, we rule: if the private offended party, upon extinction of the civil liability ex delicto
desires to recover damages from the same act or omission complained of, he must subject to
Section 1, Rule 111 16 (1985 Rules on Criminal Procedure as amended) file a separate civil
action, this time predicated not on the felony previously charged but on other sources of
obligation. The source of obligation upon which the separate civil action is premised
determines against whom the same shall be enforced.
If the same act or omission complained of also arises from quasi-delict or may, by provision of
law, result in an injury to person or property (real or personal), the separate civil action must
be filed against the executor or administrator 17 of the estate of the accused pursuant to Sec. 1,
Rule 87 of the Rules of Court:
Sec. 1. Actions which may and which may not be brought against executor or administrator. — No
action upon a claim for the recovery of money or debt or interest thereon shall be commenced
against the executor or administrator; but actions to recover real or personal property, or an
interest therein, from the estate, or to enforce a lien thereon, and actions to recover damages for
an injury to person or property, real or personal, may be commenced against him.
This is in consonance with our ruling in Belamala 18 where we held that, in recovering damages
for injury to persons thru an independent civil action based on Article 33 of the Civil Code, the
same must be filed against the executor or administrator of the estate of deceased accused and
not against the estate under Sec. 5, Rule 86 because this rule explicitly limits the claim to those
for funeral expenses, expenses for the last sickness of the decedent, judgment for money and
claims arising from contract, express or implied. Contractual money claims, we stressed, refers
Conversely, if the same act or omission complained of also arises from contract, the separate
civil action must be filed against the estate of the accused, pursuant to Sec. 5, Rule 86 of the
Rules of Court.
From this lengthy disquisition, we summarize our ruling herein:
1. Death of the accused pending appeal of his conviction extinguishes his criminal liability as
well as the civil liability based solely thereon. As opined by Justice Regalado, in this regard, "the
death of the accused prior to final judgment terminates his criminal liability and only the civil
liability directly arising from and based solely on the offense committed, i.e., civil liability ex
delicto in senso strictiore."
2. Corollarily, the claim for civil liability survives notwithstanding the death of accused, if the
same may also be predicated on a source of obligation other than delict. 19 Article 1157 of the
Civil Code enumerates these other sources of obligation from which the civil liability may arise
as a result of the same act or omission:
a) Law
b) Contracts
6

c) Quasi-contracts 2 - ART. 1157

d) . . . Republic of the Philippines

SUPREME COURT
e) Quasi-delicts Baguio City

3. Where the civil liability survives, as explained in Number 2 above, an action for recovery SECOND DIVISION
therefor may be pursued but only by way of filing a separate civil action and subject to Section
1, Rule 111 of the 1985 Rules on Criminal Procedure as amended. This separate civil action may
be enforced either against the executor/administrator or the estate of the accused, depending
on the source of obligation upon which the same is based as explained above. G.R. No. 82562 April 11, 1997

4. Finally, the private offended party need not fear a forfeiture of his right to file this separate LYDIA VILLEGAS, MA TERESITA VILLEGAS, ANTONIO VILLEGAS, JR., and ANTONIETTE
civil action by prescription, in cases where during the prosecution of the criminal action and VILLEGAS, petitioners,
prior to its extinction, the private-offended party instituted together therewith the civil action. vs.
In such case, the statute of limitations on the civil liability is deemed interrupted during the THE COURT OF APPEALS, PEOPLE OF THE PHILIPPINES and ANTONIO V. RAQUIZA,
pendency of the criminal case, conformably with provisions of Article 1155 21 of the Civil Code, respondents.
that should thereby avoid any apprehension on a possible privation of right by prescription. 22
G.R. No. 82592 April 11, 1997
Applying this set of rules to the case at bench, we hold that the death of appellant Bayotas
extinguished his criminal liability and the civil liability based solely on the act complained of,
i.e., rape. Consequently, the appeal is hereby dismissed without qualification. ANTONIO V. RAQUIZA, petitioner,
vs.
COURT OF APPEALS, LYDIA A. VILLEGAS, ANTONIO VILLEGAS, JR., MA. ANTONETTE VILLEGAS,
WHEREFORE, the appeal of the late Rogelio Bayotas is DISMISSED with costs de oficio. MA. LYDIA VILLEGAS and ESTATE OF ANTONIO J. VILLEGAS, respondents.

SO ORDERED.

ROMERO, J.:

This case originated from a libel suit filed by then Assemblyman Antonio V. Raquiza against
then Manila Mayor Antonio J. Villegas, who allegedly publicly imputed to him acts constituting
violations of the Anti-Graft and Corrupt Practices Act. He did this on several occasions in August
1968 through (a) a speech before the Lion's Club of Malasiqui, Pangasinan on August 10; (b)
public statements in Manila on August 13 and in Davao on August 17, which was coupled with a
radio-TV interview; and (c) a public statement shortly prior to his appearance before the
Senate Committee on Public Works (the Committee) on August 20 to formally submit a letter-
complaint implicating Raquiza, among other government officials.

The Committee, however, observed that all the allegations in the complaint were based mainly
on the uncorroborated testimony of a certain Pedro U. Fernandez, whose credibility turned out
to be highly questionable. Villegas also failed to submit the original copies of his documentary
evidence. Thus, after thorough investigation, Raquiza was cleared of all charges by the
Committee. 1 All these acts of political grandstanding received extensive media coverage.
7
On July 25, 1969, an information for libel was filed by the Office of the City Fiscal of Manila with
the then Court of First Instance of Manila against Villegas who denied the charge. After losing in
the 1971 elections, Villegas left for the United States where he stayed until his death on
November 16, 1984. Nevertheless, trial proceeded on absentia by the time of his death the in
1984, the prosecution had already rested its case Two months after notice of his death, the
court issued an order dismissing the crimal aspect of the case but reserving the right to resolve
its civil aspect. No memorandum was ever filed in his behalf.
Judge Marcelo R. Obien 2 rendered judgment on March 7, 1985, the dispositive portion of which
was amended on March 26 to read as follows:
WHEREFORE, and in view of the foregoing considerations, judgment is hereby rendered as
follows:
1. The dismissal of the criminal case against Antonio J. Vlllegas, on account of his death on
November 16, 1984. is hereby reiterated.
2. Ordenng the estate of Antonio J. Villegas, represented herein by his legal heirs, namely: Lydia
A Villegas, Ma. Teresita Villegas, Antonio Villegas, Jr., Ma. Anton(i)ette Villegas, and Ma. Lydia
Villegas (sic), to pay plaintiff Antonio V. Raquiza Two Hundred Million Pesos
(P200,000,000.00), itemized as follows:
a) One Hundred Fifty Million Pesos (P150.000.000.00) as moral damages:
b) Two Hundred Thousand Pesos (P200.000.00) as actual damages:
c) Forty-nine Million Eight Hundred Thousand Pesos (P49,800,000.00) as exemplary damages;
and
d) The cost of suit.
SO ORDERED. 3 (Amendments underscored)
The heirs of Villegas (the Heirs), through their father's counsel, Atty. Norberto, Quisumbing
appealed the decision on these three main grounds:
1. Whether the trial court, three months after notice of the death of the accused and before his
counsel could file a memorandum in his behalf, could validly render judgment in the case?
2. Whether in the absence of formal substitution of parties, the trial court could validly render
judgment against the heirs and estate of a deceased accused?
3 Whether, under the facts of the instant case, deceased Villegas was liable for libel, and
assuming he was, whether the damages awarded by the trial court were just and reasonable?
On March 15, 1988, the Court of Appeals rendered a decision affirming the trial court's
judgment modified only with respect to the award of damages which was reduced to P2 million
representing P1.5 million, P300,000.00, and P200,000.00 in moral exemplary and actual
damages, respectively. Both parties elevated said decision to this Court for review
In their petition (G.R. No. 82562), the Heirs once again raise the very same issues brought
before the Court of Appeals, albeit reworded. On the other hand, petitioner Requiza (G.R. No.
82592) questions the extensions of time to file appellant's brief granted by the appellate court
to the Heirs, as well as the drastic reduction in the award of damages.
It is immediately apparent that the focal issue in these petitions is the effect of the death of
Villegas before the case was decided by the trial court. Stated otherwise, did the death of the
accused before final judgment extinguish his civil liability?
Fortunately, this Court has already settled this issue with the promulgation of the case of People
v. Bayotas (G.R. No. 102007) on September 2, 1994, 4 viz.:
It is thus evident that as jurisprudence evolved from Castillo 5 to Torrijos, 6 the rule established
was that the survival of the civil liability depends on whether the same can be predicated on
sources of obligations other than delict. Stated differently, the claim for civil liability is also
extinguished together with the criminal action if it were solely based thereon, i.e., civil liability
ex delicto.
xxx xxx xxx
(I)n recovering damages for injury to persons thru an independent civil action based on Article 33
of the Civil Code, the same must be filed against the executor or administrator of the estate of
deceased accused (undet Sec. 1, Rule 87, infra.) and not against the estate under Sec. 5, Rule 86
because this rule explicitly limits the claim to those for funeral expenses, expenses for the last
sickness of the decedent, judgment for money and claims arising from contract, express or
implied. 7
xxx xxx xxx
From this lengthy dlsquisition, we summarize our ruling herein:
1 Death of the accused pending appeal of his conviction extinguishes hiscriminal liability as
well as the civil liability based solely thereon As opined by Justice Regalado, in this regard, "the
death of the accused prior to final judgment terminates his criminal liability and only the civil
8
liability directly arising from and based solely on the offense committed, i.e., civil liability ex
delicto in senso strictiore."
2 Corollarily the claim for civil liability survives notwithstanding the death of (the) accused, if the
same may also be predicated on a source of obligation other than delict. Article 1157 of the Civil
Code enumerates these other sources of obligation from which the civil liability may arise as a
result of the same act or omission:
a) Law
b) Contracts
c) Quasi-contracts
d) x x x x x x x x x
e) Quasi-delicts
3. Where the civil liability survives, as explained in Number 2 above, an action for recovery
therefor may be pursued but only by way of filing a separate civil action and subject to Section 1,
Rule 111 of the 1985 Rules on Criminal Procedure as amended. 8 This separate civil action may be
enforced either against the executor/administrator o(f) the estate of the accused, depending on
the source of obligation upon which the same is based as explained above.
4. Finally, the private offended party need not fear a forfeiture of his right to file this separate
civil action by prescription, in cases where during the prosecution of the criminal action and
prior to its extinction, the private offended party instituted together therewith the civil action.
In such case, the statute of limitations on the civil liability is deemed interrupted during the
pendency of the criminal case, conformably with (the) provisions of Article 1155 of the Civil
Code, that should thereby avoid any apprehension on a possible privation of right by
prescription. (Emphasis supplied).
The source of Villegas' civil liability in the present case is the felonious act of libel he allegedly
committed. Yet, this act could also be deemed a quasi-delict within the purview of Article 33 9 in
relation to Article 1157 of the Civil Code. If the Court ruled in Bayotas that the death of an
accused during the pendency of his appeal extinguishes not only his criminal but also his civil
liability unless the latter can be predicated on a source of obligation other than the act or
omission complained of, with more reason should it apply to the case at bar where the accused
died shortly after the prosecution had rested its case and before he was able to submit his
memorandum and all this before any decision could even be reached by the trial court.
The Bayotas ruling, however, makes the enforcement of a deceased accused's civil liability
dependent on two factors, namely, that it be pursued by filing a separate civil action and that it
be made subject to Section 1, Rule 111 of the 1985 Rules on Criminal Procedure, as amended.
Obviously, in the case at bar, the civil action was deemed instituted with the criminal. There
was no waiver of the civil action and no reservation of the right to institute the same, nor was it
instituted prior to the criminal action. What then is the recourse of the private offended party in
a criminal case such as this which must be dismissed in accordance with the Bayotas doctrine,
where the civil action was impliedly instituted with it?
The answer is likewise provided in Bayatas, thus:
Assuming that for lack of express reservation, Belamala's civil civil for damages was to be
considered instituted together with the crinimal action still, since both proceedings were
terminated without finals adjudication the civil action of the offended party under Article 33 may
yet be enforced separately 10 (Emphasis supplied)
Hence, logically, the court a quo should have dismissed both actions against Vilegas which
dismissal will not, however, bar Raquiza as the private offended party from pursuing his claim
for damages against the executor or administrator of the former's estate, notwitnstanding the
fact that he did not reserve the right to institute a civil separate civil action based on Article 33
of the Civil Code.
It cannot be argued either that to follow Bayotas would result in further delay in this protracted
litigation. This is because the resolution of the civil aspect of the case after the dismissal of the
main criminal action by the trial court was technically defective There was no proper
substitution of parties, as correctly pointed out by the Heirs and repeatedly put in issue by Atty.
Quisumbing. What should have been followed by the court a quo was the procedure laid down
in the Rules of Court, specifically, Section 17, Rule 3, in connection with Section 1, Rule 87. The
pertinent provisions state as follws:
Rule 3
Sec.17. Death of party. — After a party dies and the claim is not there extinguished, the court
shall order upon proper notice the legal representative of the deceased to appear and to be
substituted for the deceased, within a period of thirty (30) days, or within such time as may
be·granted. . . . The heirs of the deceased may be allowed to be for the deceased, without
requiring the appointment of an executor or administrator and the court may appoint guardian
ad litem for the minor heirs.
Rule 87
Sec. 1. Actions which may and which may not be brought against or executor or administrator. —
No action upon a claim for the recovery of money or debt or interest thereon shall be
commenced against the executor or administrator; but actions to recover real or personal
property, or an interest therein, from the estate, or to enforce a lien thereon, and actions to
9

recover damages for an injury to person or property, real or personal may be commenced 3 - Art. 1158
against him.
ARTURO PELAYO, plaintiff-appellant,
Accordingly, the Court sees no more necessity in resolving the other issues used by both parties
in these petitions. vs.

WHEREFORE, the petition in G.R. No. 82562 is GRANTED and the petition in G.R. No. 82592 is MARCELO LAURON, ET AL., defendants-appellees.
DENIED. The decisions of the Court of Appeals in CA-G.R. CR No. 82186 dated March 15, 1988,
and of the Manila Regional Trial Court, Branch 44, dated March 7, 1985, as amended, are hereby
REVERSED and SET ASIDE, without prejudice to the right of the private offended party Antonio V. J.H. Junquera, for appellant.
Raquiza, to file the appropriate civil action for damages against the executor or administrator of
the estate or the heirs of the late Antonto J. Villegas in accordance with the foregoing procedure. Filemon Sotto, for appellee.

SO ORDERED. TORRES, J.:

On the 23rd of November, 1906, Arturo Pelayo, a physician residing in Cebu, filed a complaint
against Marcelo Lauron and Juana Abella setting forth that on or about the 13th of October of
said year, at night, the plaintiff was called to the house of the defendants, situated in San
Nicolas, and that upon arrival he was requested by them to render medical assistance to their
daughter-in-law who was about to give birth to a child; that therefore, and after consultation
with the attending physician, Dr. Escaño, it was found necessary, on account of the difficult
birth, to remove the fetus by means of forceps which operation was performed by the plaintiff,
who also had to remove the afterbirth, in which services he was occupied until the following
morning, and that afterwards, on the same day, he visited the patient several times; that the just
and equitable value of the services rendered by him was P500, which the defendants refuse to
pay without alleging any good reason therefor; that for said reason he prayed that the judgment
be entered in his favor as against the defendants, or any of them, for the sum of P500 and costs,
together with any other relief that might be deemed proper.

In answer to the complaint counsel for the defendants denied all of the allegation therein
contained and alleged as a special defense, that their daughter-in-law had died in consequence
of the said childbirth, and that when she was alive she lived with her husband independently
and in a separate house without any relation whatever with them, and that, if on the day when
she gave birth she was in the house of the defendants, her stay their was accidental and due to
fortuitous circumstances; therefore, he prayed that the defendants be absolved of the complaint
with costs against the plaintiff.

The plaintiff demurred to the above answer, and the court below sustained the demurrer,
directing the defendants, on the 23rd of January, 1907, to amend their answer. In compliance
with this order the defendants presented, on the same date, their amended answer, denying
each and every one of the allegations contained in the complaint, and requesting that the same
be dismissed with costs.
10
As a result of the evidence adduced by both parties, judgment was entered by the court below
on the 5th of April, 1907, whereby the defendants were absolved from the former complaint, on
account of the lack of sufficient evidence to establish a right of action against the defendants,
with costs against the plaintiff, who excepted to the said judgment and in addition moved for a
new trial on the ground that the judgment was contrary to law; the motion was overruled and
the plaintiff excepted and in due course presented the corresponding bill of exceptions. The
motion of the defendants requesting that the declaration contained in the judgment that the
defendants had demanded therefrom, for the reason that, according to the evidence, no such
request had been made, was also denied, and to the decision the defendants excepted.
Assuming that it is a real fact of knowledge by the defendants that the plaintiff, by virtue of
having been sent for by the former, attended a physician and rendered professional services to
a daughter-in-law of the said defendants during a difficult and laborious childbirth, in order to
decide the claim of the said physician regarding the recovery of his fees, it becomes necessary
to decide who is bound to pay the bill, whether the father and mother-in-law of the patient, or
the husband of the latter.
According to article 1089 of the Civil Code, obligations are created by law, by contracts, by
quasi-contracts, and by illicit acts and omissions or by those in which any kind of fault or
negligence occurs.
Obligations arising from law are not presumed. Those expressly determined in the code or in
special laws, etc., are the only demandable ones. Obligations arising from contracts have legal
force between the contracting parties and must be fulfilled in accordance with their
stipulations. (Arts. 1090 and 1091.)
The rendering of medical assistance in case of illness is comprised among the mutual
obligations to which the spouses are bound by way of mutual support. (Arts. 142 and 143.)
If every obligation consists in giving, doing or not doing something (art. 1088), and spouses are
mutually bound to support each other, there can be no question but that, when either of them
by reason of illness should be in need of medical assistance, the other is under the unavoidable
obligation to furnish the necessary services of a physician in order that health may be restored,
and he or she may be freed from the sickness by which life is jeopardized; the party bound to
furnish such support is therefore liable for all expenses, including the fees of the medical expert
for his professional services. This liability originates from the above-cited mutual obligation
which the law has expressly established between the married couple.
In the face of the above legal precepts it is unquestionable that the person bound to pay the fees
due to the plaintiff for the professional services that he rendered to the daughter-in-law of the
defendants during her childbirth, is the husband of the patient and not her father and mother-
in-law, the defendants herein. The fact that it was not the husband who called the plaintiff and
requested his assistance for his wife is no bar to the fulfillment of the said obligation, as the
defendants, in view of the imminent danger, to which the life of the patient was at that moment
exposed, considered that medical assistance was urgently needed, and the obligation of the
husband to furnish his wife in the indispensable services of a physician at such critical
moments is specially established by the law, as has been seen, and compliance therewith is
unavoidable; therefore, the plaintiff, who believes that he is entitled to recover his fees, must
direct his action against the husband who is under obligation to furnish medical assistance to
his lawful wife in such an emergency.
From the foregoing it may readily be understood that it was improper to have brought an
action against the defendants simply because they were the parties who called the plaintiff and
requested him to assist the patient during her difficult confinement, and also, possibly, because
they were her father and mother-in-law and the sickness occurred in their house. The
defendants were not, nor are they now, under any obligation by virtue of any legal provision, to
pay the fees claimed, nor in consequence of any contract entered into between them and the
plaintiff from which such obligation might have arisen.
In applying the provisions of the Civil Code in an action for support, the supreme court of Spain,
while recognizing the validity and efficiency of a contract to furnish support wherein a person
bound himself to support another who was not his relative, established the rule that the law
does impose the obligation to pay for the support of a stranger, but as the liability arose out of a
contract, the stipulations of the agreement must be held. (Decision of May 11, 1897.)
Within the meaning of the law, the father and mother-in-law are strangers with respect to the
obligation that devolves upon the husband to provide support, among which is the furnishing of
medical assistance to his wife at the time of her confinement; and, on the other hand, it does not
appear that a contract existed between the defendants and the plaintiff physician, for which
reason it is obvious that the former cannot be compelled to pay fees which they are under no
liability to pay because it does not appear that they consented to bind themselves.
The foregoing suffices to demonstrate that the first and second errors assigned to the judgment
below are unfounded, because, if the plaintiff has no right of action against the defendants, it is
needless to declare whether or not the use of forceps is a surgical operation.
Therefore, in view of the consideration hereinbefore set forth, it is our opinion that the
judgment appealed from should be affirmed with the costs against the appellant. So ordered.
11
4 - Art. 1158
LEUNG BEN, plaintiff,
vs.
P. J. O'BRIEN, JAMES A OSTRAND and GEO. R. HARVEY, judges of First Instance of city of Manila,
defendants.
Thos. D. Aitken and W. A. Armstrong for plaintiff.
Kincaid & Perkins for defendants.
STREET, J.:
This is an application for a writ of certiorari, the purpose of which is to quash an attachment
issued from the Court of First Instance of the City of Manila under circumstances herein below
stated.
Upon December 12, 1917, an action was instituted in the Court of First Instance of the city of
Manila by P. J. O'Brien to recover of Leung Ben the sum of P15,000 alleged to have been lost by
the plaintiff (leung ben) to the defendant P.j Obrien) in a series of gambling, banking and
percentage games conducted ruing the two or three months prior to the institution of the suit.
In his verified complaint the plaintiff asked for an attachment, under section 424, and 412 (1) of
the Code of Civil Procedure, against the property of the defendant, on the ground that the latter
was about to depart from the Philippine islands with intent to defraud his creditors. This
attachment was issued; and acting under the authority thereof, the sheriff attached the sum of
P15,000 which had been deposited by the defendant with the International Banking
Corporation.
The defendant thereupon appeared by his attorney and moved the court to quash the
attachment. Said motion having dismissed in the Court of First Instance, the petitioner, Leung
Ben, the defendant in that action, presented to this court, upon January 8, 1918 his petition for
the writ of certiorari directed against P. J. O'Brien and the judges of the Court of First Instance
of the city of Manila whose names are mentioned in the caption hereof. The prayer is that the
Honorable James A. Ostrand, as the judge having cognizance of the action in said court be
required to certify the record to this court for review and that the order of attachment which
had been issued should be revoked and discharged with costs. Upon the filing of said petition in
this court the usual order was entered requiring the defendants to show cause why the writ
should not issue. The response of the defendants, in the nature of a demurrer, was filed upon
January 21, 1918; and the matter is now heard upon the pleadings thus presented.
The provision of law under which this attachment was issued requires that there should be
accuse of action arising upon contract, express or implied. The contention of the
petitioner(Leung ben) is that the statutory action to recover money lost at gaming is that the
statutory action to recover money lost at gaming is no such an action as is contemplated in this
provision, and he therefore insists that the original complaint shows on its face that the remedy
of attachment is not available in aid thereof; that the Court of First Instance acted in excess of
its jurisdiction in granting the writ of attachment; that the petitioner has no plain, speedy, and
adequate remedy by appeal or otherwise; and that consequently the writ of certiorari supplies
the appropriate remedy for his relief.
The case presents the two following questions of law, either of which, if decided unfavorably to
the petitioner, will be fatal to his application:
(1) Supposing that the Court of First Instance has granted an attachment for which there is no
statutory authority, can this court entertain the present petition and grant the desired relief?
(2) Is the statutory obligation to restore money won at gaming an obligation arising from
"contract, express or implied?"
We are of the opinion that the answer to the first question should be in the affirmative. Under
section 514 of the Code of Civil Procedure the Supreme Court has original jurisdiction by the
writ of certiorari over the proceedings of Courts of First Instance, wherever said courts have
exceeded their jurisdiction and there is no plaint, speedy, and adequate remedy. In the same
section, it is further declared that the proceedings in the Supreme Court in such cases hall be as
prescribed for Courts of First Instance in section 217-221, inclusive, of said Code. This Supreme
Court, so far as applicable, the provisions contained in those section to the same extent as if
they had been reproduced verbatim immediately after section 514. Turning to section 217, we
find that, in defining the conditions under which certiorari can be maintained in a Court of First
Instance substantially the same language is used as is the same remedy can be maintained in
the Supreme Court of First Instance, substantially the same language is used as is found in
section 514 relative to the conditions under which the same remedy can be maintained in the
Supreme Court, namely, when the inferior tribunal has exceeded its jurisdiction and there is no
appeal, nor any plain, speedy and adequate remedy. In using these expressions the author of
the Code of Civil Procedure merely adopted the language which, in American jurisdictions at
least, had long ago reached the stage of stereotyped formula.
In section 220 of the same Code, we have a provision relative to the final proceedings in
certiorari, and herein it is stated that the court shall determine whether the inferior tribunal
has regularly pursued its authority it shall give judgment either affirming annulling, or
modifying the proceedings below, as the law requires. The expression, has not regularly
pursued its authority as here used, is suggestive, and we think it should be construed in
connection with the other expressions have exceeded their jurisdiction, as used in section 514,
and has exceeded their jurisdiction as used in section 217. Taking the three together, it results
in our opinion that any irregular exercise of juridical power by a Court of First Instance, in
excess of its lawful jurisdiction, is remediable by the writ of certiorari, provided there is no
12
other plain, speedy, and adequate remedy; and in order to make out a case for the granting of
the writ it is not necessary that the court should have acted in the matter without any
jurisdiction whatever. Indeed the repeated use of expression excess of jurisdiction shows that
the lawmaker contemplated the situation where a court, having jurisdiction should irregularly
transcend its authority as well as the situation where the court is totally devoid of lawful
power.
It may be observed in this connection that the word jurisdiction as used in attachment cases,
has reference not only to the authority of the court to entertain the principal action but also to
its authority to issue the attachment, as dependent upon the existence of the statutory ground.
(6 C. J., 89.) This distinction between jurisdiction to issue the attachment as an ancillary remedy
incident to the principal litigation is of importance; as a court's jurisdiction over the main
action may be complete, and yet it may lack authority to grant an attachment as ancillary to
such action. This distinction between jurisdiction over the ancillary has been recognized by this
court in connection with actions involving the appointment of a receiver. Thus in Rocha & Co.
vs. Crossfield and Figueras (6 Phil. Rep., 355), a receiver had been appointed without legal
justification. It was held that the order making the appointment was beyond the jurisdiction of
the court; and though the court admittedly had jurisdiction of the main cause, the order was
vacated by this court upon application a writ of certiorari. (See Blanco vs. Ambler, 3 Phil. Rep.,
358, Blanco vs. Ambler and McMicking 3 Phil. Rep., 735, Yangco vs. Rohde, 1 Phil. Rep., 404.)
By parity of reasoning it must follow that when a court issues a writ of attachment for which
there is no statutory authority, it is acting irregularly and in excess of its jurisdiction, in the
sense necessary to justify the Supreme Court in granting relief by the writ of certiorari. In
applying this proposition it is of course necessary to take account of the difference between a
ground of attachment based on the nature of the action and a ground of attachment based on
the acts or the conditions of the defendant. Every complaint must show a cause of action some
sort; and when the statue declares that the attachment may issue in an action arising upon
contract, the express or implied, it announces a criterion which may be determined from an
inspection of the language of the complaint. The determination of this question is purely a
matter of law. On the other hand, when the stature declares that an attachment may be issued
when the defendant is about to depart from the Islands, a criterion is announced which is
wholly foreign to the cause of action; and the determination of it may involve a disputed
question of fact which must be decided by the court. In making this determination, the court
obviously acts within its powers; and it would be idle to suppose that the writ of certiorari
would be available to reverse the action of a Court of First Instance in determining the
sufficiency of the proof on such a disputed point, and in granting or refusing the attachment
accordingly.
We should not be understood, in anything that has been said, as intending to infringe the
doctrine enunciated by this court in Herrera vs. Barretto and Joaquin (25 Phil. Rep., 245), when
properly applied. It was there held that we would not, upon application for a writ of certiorari,
dissolve an interlocutory mandatory injunction that had been issued in a Court of First Instance
as an incident in an action of mandamus. The issuance of an interlocutory injunction depends
upon conditions essentially different from those involved in the issuance of an attachment. The
injunction is designed primarily for the prevention of irreparable injury and the use of the
remedy is in a great measure dependent upon the exercise of discretion. Generally, it may be
said that the exercise of the injunctive powers is inherent in judicial authority; and ordinarily it
would be impossible to distinguish between the jurisdiction of the court in the main litigation
and its jurisdiction to grant an interlocutory injunction, for the latter is involved in the former.
That the writ of certiorari cannot be used to reverse an order denying a motion for a
preliminary injunction is of course not to cavil. (Somes vs. Crossfield and Molina, 8 Phil. Rep.,
284.)
But it will be said that the writ of certiorari is not available in this case, because the petitioner is
protected by the attachment bond, and that he has a plain, speedy, and adequate remedy
appeal. This suggestion seems to be sufficiently answered in the case of Rocha & Co vs.
Crossfield and Figueras (6 Phil. Rep., 355), already referred to, and the earlier case there cited.
The remedy by appeal is not sufficiently speedy to meet the exigencies of the case. An
attachment is extremely violent, and its abuse may often result in infliction of damage which
could never be repaired by any pecuniary award at the final hearing. To postpone the granting
of the writ in such a case until the final hearing and to compel the petitioner to bring the case
here upon appeal merely in order to correct the action of the trial court in the matter of
allowing the attachment would seem both unjust and unnecessary.
Passing to the problem propounded in the second question it may be observed that, upon
general principles,. recognize both the civil and common law, money lost in gaming and
voluntarily paid by the loser to the winner cannot in the absence of statue, be recovered in a
civil action. But Act No. 1757 of the Philippine Commission, which defines and penalizes several
forms of gambling, contains numerous provisions recognizing the right to recover money lost in
gambling or in the playing of certain games (secs. 6, 7, 8, 9, 11). The original complaint in the
action in the Court of First Instance is not clear as to the particular section of Act No. 1757
under which the action is brought, but it is alleged that the money was lost at gambling,
banking, and percentage game in which the defendant was banker. It must therefore be
assumed that the action is based upon the right of recovery given in Section 7 of said Act, which
declares that an action may be brought against the banker by any person losing money at a
banking or percentage game.
Is this a cause arising upon contract, express or implied, as this term is used in section 412 of
the Code of Civil Procedure? To begin the discussion, the English version of the Code of Civil
Procedure is controlling (sec. 15, Admin. Code, ed. of 1917). Furthermore it is universally
admitted to be proper in the interpretation of any statute, to consider its historical antecedents
and its jurisprudential sources. The Code of Civil Procedure, as is well known, is an American
contribution to Philippine legislation. It therefore speaks the language of the common-law and
for the most part reflects its ideas. When the draftsman of this Code used the expression
contract, express or implied, he used a phrase that has been long current among writers on
American and English law; and it is therefore appropriate to resort to that system of law to
discover the appropriate to resort to that system of law to discover the meaning which the
legislator intended to convey by those meaning which the legislator intended to convey by
those terms. We remark in passing that the expression contrato tracito, used in the official
translation of the Code of Civil Procedure as the Spanish equivalent of implied contract, does
not appear to render the full sense of the English expression.
13
The English contract law, so far as relates to simple contracts is planted upon two foundations,
which are supplied by two very different conceptions of legal liability. These two conceptions
are revealed in the ideas respectively underlying (1) the common- law debt and (2) the
assumptual promise. In the early and formative stages of the common-law the only simple
contract of which the courts took account was the real contract or contract re, in which the
contractual duty imposed by law arises upon the delivery of a chattle, as in the mutuum,
commodatum, depositum, and the like; and the purely consensual agreements of the Roman
Law found no congenial place in the early common law system.
In course of time the idea underlying the contract re was extended so as to include from one
person to another under such circumstances as to constitute a justa cuas debendi. The
obligation thereby created was a debt. The constitutive element in this litigation is found in the
fact that the debtor has received something from the creditor, which he is bound by the
obligation of law to return or pay for. From an early day this element was denominated the
quid pro quo, an ungainly phrase coined by Mediaeval Latinity. The quid pro quo was primarily
a materials or physical object, and its constituted the recompense or equivalent acquired by the
debtor. Upon the passage of the quid pro quo from one party to the other, the law imposed that
real contractual duty peculiar to the debt. No one conversant with the early history of English
law would ever conceive of the debt as an obligation created by promise. It is the legal duty to
pay or deliver a sum certain of money or an ascertainable quantity of ponderable or
measurable chattels.
The ordinary debt, as already stated, originates in a contract in which a quid pro quo passes to
the debtor at the time of the creation of the debt, but the term is equally applicable to duties
imposed by custom or statute, or by judgment of a court.
The existence of a debt supposes one person to have possession of thing (res) which he owes
and hence ought to turn over the owner. This obligation is the oldest conception of contract
with which the common law is familiar; and notwithstanding the centuries that have rolled
over Westminster Hall that conception remains as one of the fundamental bases of the
common-law contract.
Near the end of the fifteenth century there was evolved in England a new conception of
contractual liability, which embodied the idea of obligation resulting from promise and which
found expression in the common law assumpsit, or parol promise supported by a
consideration. The application of this novel conception had the effect of greatly extending the
field of contractual liability and by this means rights of action came to be recognized which had
been unknown before. The action of assumpsit which was the instrument for giving effect to
this obligation was found to be a useful remedy; and presently this action came to be used for
the enforcement of common-law debts. The result was to give to our contract law the
superficial appearance of being based more or less exclusively upon the notion of the obligation
of promise.
An idea is widely entertained to the effect that all simple contracts recognized in the common-
law system are referable to a singly category. They all have their roots, so many of us imagine,
in one general notion of obligation; and of course the obligation of promise is supposed to
supply this general notion, being considered a sort of menstruum in which all other forms of
contractual obligation have been dissolved. This a mistake. The idea of contractual duty
embodied in the debt which was the first conception of contract liability revealed in the
common law, has remained, although it was detained to be in a measure obscured by the more
modern conception of obligation resulting from promise.
What has been said is intended to exhibit the fact that the duty to pay or deliver a sum certain
of money or an ascertainable quantity of ponderable or measurable chattels — which is
indicated by them debt — has ever been recognized, in the common-law system, as a true
contract, regardless, of the source of the duty or the manner in which it is create — whether
derived from custom, statue or some consensual transaction depending upon the voluntary acts
of the parties. the form of contract known as the debt is of the most ancient lineage; and when
reference is had to historical antecedents, the right of the debt to be classed as a contract
cannot be questioned. Indeed when the new form of engagement consisting of the parol
promise supported by a consideration first appeared, it was looked upon as an upstart and its
right to be considered a true contract was questioned. It was long customary to refer to it
exclusively as an assumpsit, agreement, undertaking, or parol promise, in fact anything but a
contract. Only in time did the new form of engagement attain the dignity of being classed
among true contract.
The term implied takers us into shadowy domain of those obligations the theoretical
classification of which has engaged the attention of scholars from the time of Gaius until our
own day and has been a source of as much difficulty to the civilian as to the common-law jurist.
There we are concerned with those acts which make one person debtor to another without
there having intervened between them any true agreement tending to produce a legal bond
(vinculum juris). Of late years some American and English writers have adopted the term quasi-
contract as descriptive of these obligations or some of them; but the expression more
commonly used is implied contract.
Upon examination of these obligations, from the view point of the common-law jurisprudence,
it will be found that they fall readily into two divisions according as they bear an analogy to the
common-law debt or to the common law assumpsit. To exhibit the scope of these different
classes of obligations is here impracticable. It is only necessary in this connection to observe
that the most conspicuous division is that which comprises duties in the nature of debt. The
characteristic feature of these obligations is that upon certain states of fact the law imposes an
obligation to pay a sum certain of money; and it is characteristic of this obligation that the
money in respect to which the duty is raised is conceived as being equivalent of something
taken or detained under circumstances giving rise to the duty to return or compensate
therefore. The proposition that no one shall be allowed to enrich himself unduly at the expense
of another embodies the general principle here lying at the basis of obligation. The right to
recover money improperly paid (repeticion de lo indebido) is also recognized as belong to this
class of duties.
14
It will observed that according to the Civil Code obligations are supposed to be derived either
from (1) the law, (2) contracts and quasi-contracts, (3) illicit acts and omission, or (4) acts in
which some sort of blame or negligence is present. This enumeration of sources of obligations
and the obligation imposed by law are different types. The learned Italian jurist, Jorge Giorgi,
criticises this assumption and says that the classification embodied in the code is theoretically
erroneous. His conclusion is that one or the other of these categories should have been
suppressed and merged in the other. (Giorgi, Teoria de las Obligaciones, Spanish ed., vol. 5 arts.
5, 7, 9.) The validity of this criticism is, we thin, self-evident; and it is of interest to note that the
common law makes no distinction between the two sources of liability. The obligations which
in the Code are indicated as quasi-contracts, as well as those arising ex lege, are in the common
law system, merged into the category of obligations imposed by law, and all are denominated
implied contracts.
Many refinements, more or less illusory, have been attempted by various writers in
distinguishing different sorts of implied contracts, as for example, the contract implied as of fact
and the contract implied as of law. No explanation of these distinctions will be here attempted.
Suffice it to say that the term contract, express or implied, is used to by common-law jurists to
include all purely personal obligations other than those which have their source in delict, or
tort. As to these it may be said that, generally speaking, the law does not impose a contractual
duty upon a wrongdoer to compensate for injury done. It is true that in certain situations where
a wrongdoer unjustly acquired something at the expense of another, the law imposes on him a
duty to surrender his unjust acquisitions, and the injured party may here elect to sue upon this
contractual duty instead of suing upon the tort; but even here the distinction between the two
liabilities, in contract and in tort, is never lost to sight; and it is always recognized that the
liability arising out of the tort is delictual and not of a contractual or quasi-contractual nature.
In the case now under consideration the duty of the defendant to refund the money which he
won from the plaintiff at gaming is a duty imposed by statute. It therefore arises ex lege.
Furthermore, it is a duty to return a certain sum which had passed from the plaintiff to the
defendant. By all the criteria which the common law supplies, this a duty in the nature of debt
and is properly classified as an implied contract. It is well- settled by the English authorities
that money lost in gambling or by lottery, if recoverable at all, can be recovered by the loser in
an action of indebitatus assumpsit for money had and received. (Clarke vs. Johnson. Lofft, 759;
Mason vs. Waite, 17 Mass., 560; Burnham vs. Fisher, 25 Vt., 514.) This means that in the
common law the duty to return money won in this way is an implied contract, or quasi-
contract.
It is no argument to say in reply to this that the obligation here recognized is called an implied
contract merely because the remedy commonly used in suing upon ordinary contract can be
here used, or that the law adopted the fiction of promise in order to bring the obligation within
the scope of the action of assumpsit (promised). Such statements fail to express the true import
of the phenomenon. Before the remedy was the idea; and the use of the remedy could not have
been approved if it had not been for historical antecedents which made the recognition of this
remedy at one logical and proper. Furthermore, it should not be forgotten that the question is
not how this duty but what sort of obligation did the author of the Code of Civil Procedure
intend to describe when he sued the term implied contract in section 412.
In what has been said we have assumed that the obligation which is at the foundation of the
original action in the court below is not a quasi-contract, when judge by the principles of the
civil law. A few observations will show that this assumption is not by any means free from
doubt. The obligation in question certainly does not fall under the definition of either of the
two-quasi- contracts which are made the subject of special treatment in the Civil Code, for its
does not arise from a licit act as contemplated in article 1895. The obligation is clearly a
creation of the positive law — a circumstance which brings it within the purview of article
1090, in relation with article, 1089; and it is also derived from an illicit act, namely, the playing
of a prohibited game. It is thus seen that the provisions of the Civil Code which might be
consulted with a view to the correct theoretical classification of this obligation are
unsatisfactory and confusing.
The two obligations treated in the chapter devoted to quasi-contracts in the Civil Code are (1)
the obligation incident to the officious management of the affairs of other person (gestion de
negocios ajenos) and (2) the recovery of what has been improperly paid (cabro de lo indebido).
That the authors of the Civil Code selected these two obligations for special treatment does not
signify an intention to deny the possibility of the existence of other quasi-contractual
obligations. As is well said by the commentator Manresa.
The number of the quasi-contracts may be indefinite as may be the number of lawful facts, the
generations of the said obligations; but the Code, just as we shall see further on, in the
impracticableness of enumerating or including them all in a methodical and orderly
classification, has concerned itself with two only — namely, the management of the affairs of
other person and the recovery of things improperly paid — without attempting by this to
exclude the others. (Manresa, 2d ed., vol. 12, p. 549.)
It would indeed have been surprising if the authors of the Code, in the light of the jurisprudence
of more than a thousand years, should have arbitrarily assumed to limit the quasi-contract to
two obligations. The author from whom we have just quoted further observes that the two
obligations in question were selected for special treatment in the Code not only because they
were the most conspicuous of the quasi-contracts, but because they had not been the subject of
consideration in other parts of the Code. (Opus citat., 550.)
It is well recognized among civilian jurists that the quasi- contractual obligations cover a wide
range. The Italian jurist, Jorge Giorgi, to whom we have already referred, considers under this
head, among other obligations, the following: payments made upon a future consideration
which is not realized or upon an existing consideration which fails; payments wrongfully made
upon a consideration which is contrary to law, or opposed to public policy; and payments made
upon a vicious consideration or obtained by illicit means (Giorgi, Teoria de las Obligaciones, vol.
5, art. 130.)
In permitting the recovery of money lost at play, Act No. 1757 has introduced modifications in
the application of articles 1798, 180`, and 1305 of the Civil Code. The first two of these articles
15

relate to gambling contracts, while article 1305 treats of the nullity of contracts proceeding 5 - ART. 1159
from a vicious or illicit consideration. Taking all these provisions together, it must be apparent
that the obligation to return money lost at play has a decided affinity to contractual obligations; G.R. No. 72110. November 16, 1990.*
and we believe that it could, without violence to the doctrines of the civil law, be held that such
obligations is an innominate quasi-contract. It is, however, unnecessary to place the decision on
this ground. ROMAN CATHOLIC BISHOP OF MALOLOS, INC., petitioner, vs. INTERMEDIATE APPELLATE
COURT, and ROBES-FRANCISCO REALTY AND DEVELOPMENT CORPORATION, respondents.
From what has been said it follows that in our opinion the cause of action stated in the
complaints in the court below is based on a contract, express or implied and is therefore of such PETITION for certiorari to review the decision of the Court of Appeals.
nature that the court had authority to issue writ of attachment. The application for the writ of
certiorari must therefore be denied and the proceedings dismissed. So ordered. The facts are stated in the opinion of the Court.

Rodrigo Law Office for petitioner.

Antonio P. Barredo and Napoleon M. Malinas for private respondent.

SARMIENTO, J.:

This is a petition for review on certiorari which seeks the reversal and setting aside of the
decision of the Court of Appeals, the dispositive portion of which reads:

WHEREFORE, the decision appealed from is hereby reversed

2 AC-G.R. CV No. 69626, Robes-Francisco Realty & Development Corporation vs. Roman
Catholic Bishop of Malolos, Inc. and set aside and another one entered for the plaintiff ordering
the defendant-appellee Roman Catholic Bishop of Malolos, Inc. to accept the balance of
P124,000.00 being paid by plaintiff-appellant and thereafter to execute in favor of Robes-
Francisco Realty Corporation a registerable Deed of Absolute Sale over 20,655 square meters
portion of that parcel of land situated in San Jose del Monte, Bulacan described in OCT No. 575
(now Transfer Certificates of Title Nos. T-169493, 169494, 169495 and 169496) of the Register
of Deeds of Bulacan. In case of refusal of the defendant to execute the Deed of Final Sale, the
clerk of court is directed to execute the said document. Without pronouncement as to damages
and attorney’s fees. Costs against the defendant-appellee.

The case at bar arose from a complaint filed by the private respondent, then plaintiff, against
the petitioner, then defendant, in the Court of First Instance (now Regional Trial Court) of
Bulacan, at Sta. Maria, Bulacan,4 for specific performance with damages, based on a contract5
executed on July 7, 1971.

The property subject matter of the contract consists of a 20,655 sq.m.-portion, out of the 30,655
sq.m. total area, of a parcel of land covered by Original Certificate of Title No. 575 of the
16
Province of Bulacan, issued and registered in the name of the petitioner which it sold to the
private respondent for and in consideration of P123,930.00.
The crux of the instant controversy lies in the compliance or non-compliance by the private
respondent with the provision for payment to the petitioner of the principal balance of
P100,000.00 and the accrued interest of P24,000.00 within the grace period.
A chronological narration of the antecedent facts is as follows:
On July 7, 1971, the subject contract over the land in question was executed between the
petitioner as vendor and the private respondent through its then president, Mr. Carlos F. Robes,
as vendee, stipulating for a downpayment of P23,930.00 and the balance of P100,000.00 plus
12% interest per annum to be paid within four (4) years from execution of the contract, that is,
on or before July 7, 1975. The contract likewise provides for cancellation, forfeiture of previous
payments, and reconveyance of the land in question in case the private respondent would fail to
complete payment within the said period.
On March 12, 1973, the private respondent, through its new president, Atty. Adalia Francisco,
addressed a letter to Father Vasquez, parish priest of San Jose Del Monte, Bulacan, requesting to
be furnished with a copy of the subject contract and the supporting documents.
On July 17, 1975, admittedly after the expiration of the stipulated period for payment, the same
Atty. Francisco wrote the petitioner a formal request that her company be allowed to pay the
principal amount of P100,000.00 in three (3) equal installments of six (6) months each with the
first installment and the accrued interest of P24,000.00 to be paid immediately upon approval
of the said request.
On July 29, 1975, the petitioner, through its counsel, Atty. Carmelo Fernandez, formally denied
the said request of the private respondent, but granted the latter a grace period of five (5) days
from the receipt of the denial to pay the total balance of P124,000.00, otherwise, the provisions
of the contract regarding cancellation, forfeiture, and reconveyance would be implemented.
On August 4, 1975, the private respondent, through its president, Atty. Francisco, wrote the
counsel of the petitioner requesting an extension of 30 days from said date to fully settle its
account. The counsel for the petitioner, Atty. Fernandez, received the said letter on the same
day. Upon consultation with the petitioner in Malolos, Bulacan, Atty. Fernandez, as instructed,
wrote the private respondent a letter dated August.
Consequently, Atty. Francisco, the private respondent’s president, wrote a letter dated August
22, 1975, directly addressed to the petitioner, protesting the alleged refusal of the latter to
accept tender of payment purportedly made by the former on August 5, 1975, the last day of
the grace period. In the same letter of August 22, 1975, received on the following day by the
petitioner, the private respondent demanded the execution of a deed of absolute sale over the
land in question and after which it would pay its account in full, otherwise, judicial action
would be resorted to.
On August 27, 1975, the petitioner’s counsel, Atty. Fernandez, wrote a reply to the private
respondent stating the refusal of his client to execute the deed of absolute sale due to its
(private respondent’s) failure to pay its full obligation. Moreover, the petitioner denied that the
private respondent had made any tender of payment whatsoever within the grace period. In
view of this alleged breach of contract, the petitioner cancelled the contract and considered all
previous payments forfeited and the land as ipso facto reconveyed.
From a perusal of the foregoing facts, we find that both the contending parties have conflicting
versions on the main question of tender of payment.
The trial court, in its ratiocination, preferred not to give credence to the evidence presented by
the private respondent. According to the trial court:
x x x What made Atty. Francisco suddenly decide to pay plaintiff’s obligation on August 5, 1975,
go to defendant’s office at Malolos, and there tender her payment, when her request of August
4, 1975 had not yet been acted upon until August 7, 1975? If Atty. Francisco had decided to pay
the obligation and had available funds for the purpose on August 5, 1975, then there would
have been no need for her to write defendant on August 4, 1975 to request an extension of time.
Indeed, Atty. Francisco’s claim that she made a tender of payment on August 5, 1975—such
alleged act, considered in relation to the circumstances both antecedent and subsequent
thereto, being not in accord with the normal pattern of human conduct—is not worthy of
credence.13
The trial court likewise noted the inconsistency in the testimony of Atty. Francisco, president of
the private respondent, who earlier testified that a certain Mila Policarpio accompanied her on
August 5, 1975 to the office of the petitioner. Another person, however, named Aurora Oracion,
was presented to testify as the secretary-companion of Atty. Francisco on that same occasion.
Furthermore, the trial court considered as fatal the failure of Atty. Francisco to present in court
the certified personal check allegedly tendered as payment or, at least, its xerox copy, or even
bank records thereof. Finally, the trial court found that the private respondent had insufficient
funds available to fulfill the entire obligation considering that the latter, through its president,
Atty. Francisco, only had a savings account deposit of P64,840.00, and although the latter had a
money-market placement of P300,000.00. the same was to mature only after the expiration of
the 5-day grace period.
Based on the above considerations, the trial court rendered a decision in favor of the petitioner,
the dispositive portion of which reads:
17
WHEREFORE, finding plaintiff to have failed to make out its case, the court hereby declares the
subject contract cancelled and plaintiff’s down payment of P23,930.00 forfeited in favor of
defendant, and hereby dismisses the complaint; and on the counterclaim, the Court orders
plaintiff to pay defendant.
(1) Attorney’s fees of P10,000.00;
(2) Litigation expenses of P2,000.00; and
(3) Judicial costs.
SO ORDERED.
Not satisfied with the said decision, the private respondent appealed to the respondent
Intermediate Appellate Court (now Court of Appeals) assigning as reversible errors, among
others, the findings of the trial court that the available funds of the private respondent were
insufficient and that the latter did not effect a valid tender of payment and consignation.
The respondent court, in reversing the decision of the trial court, essentially relies on the
following findings:
x x x We are convinced from the testimony of Atty. Adalia Francisco and her witnesses that in
behalf of the plaintiff-appellant they have a total available sum of P364,840.00 at her and at the
plaintiff’s disposal on or before August 4, 1975 to answer for the obligation of the plaintiff-
appellant. It was not correct for the trial court to conclude that the plaintiff-appellant had only
about P64,840.00 in savings deposit on or before August 5, 1975, a sum not enough to pay the
outstanding account of P124,000.00. The plaintiff-appellant, through Atty. Francisco proved
and the trial court even acknowledged that Atty. Adalia Francisco had about P300,000.00 in
money market placement. The error of the trial court lies in concluding that the money market
placement of P300,000.00 was out of reach of Atty. Francisco. But as testified to by Mr. Catalino
Estrella, a representative of the Insular Bank of Asia and America, Atty. Francisco could
withdraw anytime her money market placement and place it at her disposal, thus proving her
financial capability of meeting more than the whole of P124,000.00 then due per contract. This
situation, We believe, proves the truth that Atty. Francisco apprehensive that her request for a
30-day grace period would be denied, she tendered payment on August 4, 1975 which offer
defendant through its representative and counsel refused to receive.
In other words, the respondent court, finding that the private respondent had sufficient
available funds, ipso facto concluded that the latter had tendered payment. Is such conclusion
warranted by the facts proven? The petitioner submits that it is not.
Hence, this petition.16
The petitioner presents the following issues for resolution:
A. Is a finding that private respondent had sufficient available funds on or before the grace
period for the payment of its obligation proof that it (private respondent) did tender of (sic)
payment for its said obligation within said period?
xxx xxx xxx
B. Is it the legal obligation of the petitioner (as vendor) to execute a deed of absolute sale in
favor of the private respondent (as vendee) before the latter has actually paid the complete
consideration of the sale—where the contract between and executed by the parties stipulates—
“That upon complete payment of the agreed consideration by the herein VENDEE, the VENDOR
shall cause the execution of a Deed of Absolute Sale in favor of the VENDEE.”
xxx xxx xxx
C. Is an offer of a check a valid tender of payment of an obligation under a contract which
stipulates that the consideration of the sale is in Philippine Currency?17
We find the petition impressed with merit.
With respect to the first issue, we agree with the petitioner that a finding that the private
respondent had sufficient available funds on or before the grace period for the payment of its
obligation does not constitute proof of tender of payment by the latter for its obligation within
the said period. Tender of payment involves a positive and unconditional act by the obligor of
offering legal tender currency as payment to the obligee for the former’s obligation and
demanding that the latter accept the same. Thus, tender of payment cannot be presumed by a
mere inference from surrounding circumstances. At most, sufficiency of available funds is only
affirmative of the capacity or ability of the obligor to fulfill his part of the bargain. But whether
or not the obligor avails himself of such funds to settle his outstanding account remains to be
proven by independent and credible evidence. Tender of payment presupposes not only that
the obligor is able, ready, and willing, but more so, in the act of performing his obligation. Ab
posse ad actu non vale illatio. “A proof that an act could have been done is no proof that it was
actually done.”
The respondent court was therefore in error to have concluded from the sheer proof of
sufficient available funds on the part of the private respondent to meet more than the total
obligation within the grace period, the alleged truth of tender of payment. The same is a classic
case of non-sequitur.
18
On the contrary, the respondent court finds itself remiss in overlooking or taking lightly the
more important findings of fact made by the trial court which we have earlier mentioned and
which as a rule, are entitled to great weight on appeal and should be accorded full
consideration and respect and should not be disturbed unless for strong and cogent reasons.
While the Court is not a trier of facts, yet, when the findings of fact of the Court of Appeals are at
variance with those of the trial court, or when the inference of the Court of Appeals from its
findings of fact is manifestly mistaken, the Court has to review the evidence in order to arrive at
the correct findings based on the record.
Apropos the second issue raised, although admittedly the documents for the deed of absolute
sale had not been prepared, the subject contract clearly provides that the full payment by the
private respondent is an a priori condition for the execution of the said documents by the
petitioner.
That upon complete payment of the agreed consideration by the herein VENDEE, the VENDOR
shall cause the execution of a Deed of Absolute Sale in favor of the VENDEE.
The private respondent is therefore in estoppel to claim otherwise as the latter did in the
testimony in cross-examination of its president, Atty. Francisco, which reads:
Q Now, you mentioned, Atty. Francisco, that you wanted the defendant to execute the final deed
of sale before you would given the personal certified check in payment of your balance, is that
correct?
A Yes, sir.22
xxx xxx xxx
Art. 1159 of the Civil Code of the Philippines provides that “obligations arising from contracts
have the force of law between the contracting parties and should be complied with in good
faith.” And unless the stipulations in said contract are contrary to law, morals, good customs,
public order, or public policy, the same are binding as between the parties.
What the private respondent should have done if it was indeed desirous of complying with its
obligations would have been to pay the petitioner within the grace period and obtain a receipt
of such payment duly issued by the latter. Thereafter, or, allowing a reasonable time, the
private respondent could have demanded from the petitioner the execution of the necessary
documents. In case the petitioner refused, the private respondent could have had always
resorted to judicial action for the legitimate enforcement of its right. For the failure of the
private respondent to undertake this more judicious course of action, it alone shall suffer the
consequences.
With regard to the third issue, granting arguendo that we would rule affirmatively on the two
preceding issues, the case of the private respondent still cannot succeed in view of the fact that
the latter used a certified personal check which is not legal tender nor the currency stipulated,
and therefore, cannot constitute valid tender of payment. The first paragraph of Art. 1249 of the
Civil Code provides that “the payment of debts in money shall be made in the currency
stipulated, and if it is not possible to deliver such currency, then in the currency which is legal
tender in the Philippines.
The Court en banc in the recent case of Philippine Airlines v. Court of Appeals,24 G.R. No. L-
49188, stated thus:
Since a negotiable instrument is only a substitute for money and not money, the delivery of
such an instrument does not, by itself, operate as payment (citing Sec. 189, Act 2031 on Negs.
Insts.; Art. 1249, Civil Code; Bryan London Co. v. American Bank, 7 Phil. 255; Tan Sunco v.
Santos, 9 Phil. 44; 21 R.C.L. 60, 61). A check, whether a manager’s check or ordinary check, is
not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment
and may be refused receipt by the obligee or creditor.
Hence, where the tender of payment by the private respondent was not valid for failure to
comply with the requisite payment in legal tender or currency stipulated within the grace
period and as such, was validly refused receipt by the petitioner, the subsequent consignation
did not operate to discharge the former from its obligation to the latter.
In view of the foregoing, the petitioner in the legitimate exercise of its rights pursuant to the
subject contract, did validly order therefore the cancellation of the said contract, the forfeiture
of the previous payment, and the reconveyance ipso facto of the land in question.
WHEREFORE, the petition for review on certiorari is GRANTED and the DECISION of the
respondent court promulgated on April 25, 1985 is hereby SET ASIDE and ANNULLED and the
DECISION of the trial court dated May 25, 1981 is hereby REINSTATED. Costs against the
private respondent.
SO ORDERED.
19
6 - Art. 1159
WILLIAM OLLENDORFF, plaintiff-appellee,
vs.
IRA ABRAHAMSON, defendant-appellant.
Lawrence & Ross for appellant.
Wolfson & Wolfson for appellee.
FISHER, J.:
This is an appeal by defendant from a judgment of the Court of First Instance of Manila by
which he was enjoined for a term of five years, from September 10, 1915, from engaging in the
Philippine Islands in any business similar to or competitive with that of plaintiff.
The record discloses that plaintiff is and for a long time past has been engaged in the city of
Manila and elsewhere in the Philippine Islands in the business of manufacturing ladies
embroidered underwear for export. Plaintiff imports the material from which this underwear is
made and adopts decorative designs which are embroidered upon it by Filipino needle workers
from patterns selected and supplied by him. Most of the embroidery work is done in the homes
of the workers. The embroidered material is then returned to plaintiff's factory in Manila where
it is made into finished garments and prepared for export. The embroiderers employed by
plaintiff are under contract to work for plaintiff exclusively. Some fifteen thousand home
workers and eight hundred factory workers are engaged in this work for plaintiff, and some
two and a half million pesos are invested in his business.
On September 10, 1915, plaintiff and defendant entered into a contract in the following terms:
Contract of agreement made and entered into this date by and between William Ollendorff, of
Manila, Philippine Islands, party of the first part, and Ira Abrahamson, of Manila, Philippine
Islands, party of the second part:
The party of first part hereby agrees to employ the party of the second part, and the party of the
second part hereby obligates and binds himself to work for the party of the first part for a term
of two years from date commencing from the sixth of September, one thousand nine hundred
and fifteen and ending on the fifth day of September, one thousand nine hundred seventeen, at
a salary of fifty peso (50) per week payable at the end of each week.
The party of the second part hereby obligates and binds himself to devote his entire time,
attention, energies and industry to the promotion of the furtherance of the business and
interest of the party of the first part and to perform during the term of this contract such duties
as may be assigned to him by the party of the first part, and failure by the said party of the
second part to comply with these conditions to the satisfaction of the party of the first shall
entitle the party of the first part to discharge and dismiss the said party of the second part from
the employ of the party of the first part.
It is mutually understood and agreed by the parties hereto that this contract, upon its
termination, may be extended for a like for a longer or a shorter period by the mutual consent
of both contracting parties.
The said party of the second part hereby further binds and obligates himself, his heirs,
successors and assigns, that he will not enter into or engage himself directly or indirectly, nor
permit any other person under his control to enter in or engage in a similar or competitive
business to that of the said party of the first part anywhere within the Philippine Islands for a
period of five years from this date.
Under the terms of this agreement defendant entered the employ of plaintiff and worked for
him until April, 1916, when defendant, on account of ill health, left plaintiff's employ and went
to the United States. While in plaintiff's establishment, and had full opportunity to acquaint
himself with plaintiff's business method and business connection. The duties performed by him
were such as to make it necessary that he should have this knowledge of plaintiff's business.
Defendant had a general knowledge of the Philippine embroidery business before his
employment by plaintiff, having been engaged in similar work for several years.
Some months after his departure for the United States, defendant returned to Manila as the
manager of the Philippine Underwear Company, a corporation. This corporation does not
maintain a factory in the Philippine Islands, but send material and embroidery designs from
New York to its local representative here who employs Filipino needle workers to embroider
the designs and make up the garments in their homes. The only difference between plaintiff's
business and that of the firm by which the defendant is employed, is the method of doing the
finishing work -- the manufacture of the embroidered material into finished garments.
Defendant admits that both firms turn out the same class of goods and that they are exported to
the same market. It also clearly appears from the evidence that defendant has employed to
work his form some of the same workers employed by the plaintiff.
Shortly after defendant's return to Manila and the commencement by him of the discharge of
the duties of his position as local manager of the Philippine Embroidery Company, as local
manager of the Philippine Embroidery Company, plaintiff commenced this action, the principal
purpose of which is to prevent by injunction, any further breach of that part of defendant's
contract of employment by plaintiff, by which he agreed that he would not "enter into or engage
himself directly or indirectly . . . in a similar or competitive business to that of (plaintiff)
anywhere within the Philippine Islands for a period of five years . . ." from the date of the
agreement. The lower court granted a preliminary injunction, and upon trial the injunction was
made perpetual.
20
Defendant, as appellant, argues that plaintiff failed to substantiate the averments of his
complaints to the effect that the business in which the defendant is employed is competitive
with that of plaintiff. The court below found from the evidence that the business was "very
similar." We have examined the evidence and rare of the opinion that the business in which
defendant is engaged is not only very similar to that of plaintiff, but that it is conducted in open
competition with that business within the meaning of the contract in question. Defendant
himself expressly admitted, on cross-examination, that the firm by which he is now employed
puts out the same class of foods as that which plaintiff is engaged in producing. When two
concerns operate in the same field, produce the same class of goods and dispose them in the
same market, their businesses are of necessity competitive. Defendant having engaged in the
Philippine Islands in a business directly competitive with that of plaintiff, within five years from
the date of his contract of employment by plaintiff, under the terms of which he expressly
agreed that he would refrain form doing that very thing, his conduct constitutes a breach of that
agreement.
Defendant argues that even assuming that there has been a breach of the agreement, the
judgment of the court below is nevertheless erroneous, contending that (1) the contract is void
for lack of mutuality; (2) that the contract is void as constituting an unreasonable restraint of
trade; (3) that plaintiff has failed to show that he has suffered any estimable pecuniary damage;
and (4) that even assuming that such damage as to warrant the court in restraining by
injunction its continuance.
The contention that the contract is void for lack of mutuality is based upon that part of the
agreement which authorizes plaintiff to discharge the defendant before the expiration of the
stipulated term, should defendant fail to comply with its conditions to plaintiff's satisfaction. It
is argued that by this contracts it was sought to impose upon defendant the absolute obligation
of rendering service, while reserving to plaintiff the right to rescind it at will. We are of the
opinion that this question is largely academic. It is admitted that defendant left plaintiff's
employ at his own request before the expiration of the stipulated terms of the contract. Had
plaintiff sought to discharge defendant without just cause, before the expiration of the term of
the employment, it might have been a serious question whether he could lawfully do so,
notwithstanding the terms in which the contract was drawn. (Civil Code, art. 1256.) But even
assuming this particular clause of the contract to be invalid, this would not necessarily affect
the rest of the agreement. The inclusion is an agreement of one or more pacts which are invalid
does not of necessity invalidate the whole contract.
We are of the opinion that the contract was not void as constituting an unreasonable restraint
of trade. We have been cited to no statutory expression of the legislative will to which such an
agreement is directly obnoxious. The rule in this jurisdiction is that the obligations created by
contracts have the force of law between the contracting parties and must be enforce in
accordance with their tenor. (Civil Code, art 1091.) The only limitation upon the freedom of
contractual agreement is that the pacts (MUTUAL AGREEMENT) established shall not be
contrary to "law, morals or public order." (Civil Code, Art. 1255.) The industry of counsel has
failed to discover any direct expression of the legislative will which prohibits such a contract as
that before us. It certainly is not contrary to any recognized moral precept or principle, and it
therefore only remains to consider whether it is contrary to "public order." This term, as
correctly stated by Manresa (Commentaries, vol. 8, p. 606) "does not mean, as here used, the
actual keeping of the public peace, but signifies the public weal . . . that which is permanent, and
essential in institutions . . . ." It is the equivalent, as here used and as defined by Manresa, of the
term "public policy" as used in the law of the United States. Public policy has been defined as
being that principle under which freedom of contract or private dealing is restricted for the
freedom of contract or private dealing is restricted for the good of the community. (People's
Bank vs. Dalton, 2 Okla., 476.) It is upon this theory that contracts between private individuals
which result in an unreasonable restraint of trade have frequently being recognized by article
1255 of our Civil Code, the court of these Islands are vested with like authority.
In the nature of things, it is impossible to frame a general rule by which to determine in
advance the precise point at which the right of freedom of contract must yield to the superior
interest of community in keeping trade and commerce free from unreasonable restrictions.
Originally the English courts adopted the view that any agreement which imposed restrictions
upon a man's right to exercise his trade or calling was void as against public policy. (Cyc. vol. 9,
p. 525.) In the course of time this opinion was abandoned and the American and English courts
adopted the doctrine that where the restraint was unlimited as to space but unlimited as to
time were valid. In recent years there has been a tendency on the part of the courts of England
and America to discard these fixed rules and to decide each case according to its peculiar
circumstances, and make the validity of the restraint depend upon its reasonableness. If the
restraint is no greater than is reasonably necessary for the protection of the party in whose
favor it is imposed it is upheld, but if it goes beyond this is declared void. This is the principle
followed in such cases by the Supreme Court of the United States. In the case of Gibbs vs.
Consolidated Gas Co. of Baltimore (130 U.S., 396) the court said:
The decision in Mitchel vs. Reynolds (1P. Wms. 181 [Smith's Leading Cases, Vol. 1, Pt. II, 508]),
is the foundation of rule in relation to the invalidity of contracts in restraint of trade; but as it
was made under a condition of things, and a state of society, different from those which now
prevail, the rule laid down is not regarded as inflexible, and has been considerably modified.
Public welfare is first considered, and if it be not involved, and the restraint upon one party is
not greater than protection to the other party requires, the contract may be sustained. The
question is, whether, under the particular circumstances of the case and the nature of the
particular contract involved in it, the contract is, or is not, unreasonable. (Rousillon vs.
Rousillon, L. R. 14 Ch. Div., 351; Leather Cloth Co. vs. Lorsont, L. R. 9 Eq., 345.)
Following this opinion, we adopt the modern rule that the validity of restraints upon trade or
employment is to be determined by the intrinsic reasonableness of restriction in each case,
rather than by any fixed rule, and that such restrictions may be upheld when not contrary to
afford a fair and reasonable protection to the party in whose favor it is imposed.
Examining the contract here in question from this stand point, it does not seem so with respect
to an employee whose duties are such as of necessity to give him an insight into the general
scope and details of his employers business. A business enterprise may and often does depend
for its success upon the owner's relations with other dealers, his skill in establishing favorable
connections, his methods of buying and selling -- a multitude of details, none vital if considered
21
alone, but which in the aggregate constitute the sum total of the advantages which the result of
the experience or individual aptitude and ability of the man or men by whom the business has
been built up. Failure or success may depend upon the possession of these intangible but all
important assets, and it is natural that their possessor should seek to keep them from falling
into the hands of his competitors. It is with this object in view that such restrictions as that now
under consideration are written into contracts of employment. Their purpose is the protection
of the employer, and if they do not go beyond what is reasonably necessary to effectuate this
purpose they should be upheld. We are of the opinion, and so hold, that in the light of the
established facts the restraint imposed upon defendant by his contract is not unreasonable. As
was well said in the case of Underwood vs. Barker (68 Law J. Ch., 201). "If there is one thing
more than another which is essential to the trade and commerce of this country, it is the
inviolability of contract deliberately entered into; and to allow a person of mature age, and not
imposed upon, to enter into a contract, to obtain the benefit of it, and then to repudiate it and
the obligation which he has undertaken, is prima facie, at all events, contrary to the interest of
any and every country . . . . The public policy which allows a person to obtain employment on
certain terms understood by and agreed to by him, and to repudiate his contract, conflicts with,
and must, to avail the defendant, for some sufficient reason, prevail over, the manifest public
policy, which, as a rule holds him to his bond . . . .
Having held that the contract is valid, we pass to a consideration of defendant's objections to its
enforcement by injunction.
It is contended that plaintiff has not proved that he has suffered any estimable pecuniary
damage by reason of defendant's breach of the contract, and that for that reason his action must
fail. It is further contended that in no event is it proper to enforce such a contract as this by
injunction, because it has not been alleged and proved that the continuance of the acts
complained of will cause plaintiff "irreparable damage." These objections can conveniently be
considered together.
The obligation imposed upon defendant by the particular clause of his contract now under
consideration is negative in character. Unless defendant voluntarily complies with his
undertaking there is no way by which the contract can be enforced except by the injunctive
power of judicial process. Such negative obligations have long been enforced by the courts in
this manner. As stated by High in his well-known work on Injunctions (vol. 2, pp. 877-878):
The remedy by injunction to prevent the violation of negative agreements, or contracts not to
do a particular thing, is closely akin to the remedy by way of specific performance of
agreements of an affirmative nature. In both cases the object sought is substantially one and the
same, and by enjoining the violation of a negative agreement the court of equity in effect
decrees its specific performance. (Lumley vs. Wagner, 1 DeGex, M. & G., 604.)
Where by the terms of a contract imposing a positive obligation the obligor is entitled to a
specific performance, it will not avail the defendant to show that plaintiff will suffer no
pecuniary damage if the contract is not performed. Upon like reasons, when the undertaking is
negative in character and defendant is violating the obligation imposed upon him the court may
interfere without requiring proof of actual damage. (High on Injunctions, par. 1135, citing
Dickenson vs. Grand Junction Canal Co., 15 Beav., 270.)
The admitted fact that plaintiff has failed to establish proof of pecuniary damage by reason of
the breach of the contract by defendant by the acts committed prior to the issuance of the
preliminary injunction is, of course, a bar or nay money judgment for damages for the breach of
the contract, but will not justify us in permitting defendant to continue to break his contract
over plaintiff's objection. The injury is a continuous one. The fact that the court may not be able
to give damages for that part of the breach of the contract which had already taken place when
its aid was invoked is no reason why it should countenance a continuance of such disregard of
plaintiff's rights.
With respect to the contention that an injunction may only be granted to prevent irreparable
injury, the answer is that any continuing breach of a valid negative covenant is irreparable by
the ordinary process of courts of law. As stated by High, (vol. 2, p. 906) injunctive relief is
granted in cases like this "upon the ground that the parties cannot be placed in statu quo, and
that damages at law can afford no adequate compensation, the injury being a continuous one
irreparable by the ordinary process of courts of law."
In the case of Gilchrist vs. Cuddy (29 Phil. rep., 542), at page 552, this court said, citing with
approval the case of Wahle vs. Reinbach (76 Ill., 322):
By "irreparable injury" is not meant such injury as is beyond the possibility of repair, or beyond
possible compensation in damages, nor necessarily great injury or great damage, but that
species of injury, whether great or small, that ought not be submitted to on the one hand or
inflicted on the other; and, because it is so large on the one hand, or so small on the other, is of
such constant and frequent recurrence that no fair or reasonable redress can be had therefor in
a court of law.
This definition was quoted with approval by the Supreme Court of the United States in the case
of Donovan vs. Pennsylvania Co., (199 U.S., 279), in which the injury complained of was
continuous in its nature.
It is true, as held in the case of Liongson vs. Martinez (36 Phil. Rep., 948) that "an injunction
should never issue when an action for damages would adequately compensate the injuries
caused" But it frequently happens that the acts of the defendant, while constituting a very
substantial invasion of plaintiff's rights are of such a character that the damages which result
therefrom "cannot be measured by any certain pecuniary standard." (Eau Claire Water Co. vs.
City of Eau Claire, 127 Wis., 154.) The Civil Code (art. 1908) casts upon real estate owners
liability in damages for the emission, upon their premises, of excessive smoke, which may be
noxious to person or property. The injury caused by such a nuisance might bring about a
depreciation in the value of adjoining properties, but there is no "certain pecuniary standard"
by which such damages can be measured, and in that sense the threatened injury is
"irreparable" and may appropriately be restrained by injunction.
22

. . . If the nuisance is a continuing one, invading substantial rights of the complainant in such a 7 - Art. 1159
manner that he would thereby lose such rights entirely but for the assistance of a court of
equity he will entitled but for the assistance of a court of equity he will be entitled to an THE CITY OF CEBU, petitioner,
injunction upon a proper showing, notwithstanding the fact the he might recover some
damages in an action at law. (Tise vs. Whitaker-Harvey Co., 144 N. C., 507.)
vs.
The injury done the business of a merchant by illegal or unfair competition is exceedingly
difficult to measure. A diminution of the volume of a business may be due to so many different SPOUSES APOLONIO and BLASA DEDAMO, respondents.
causes that it is often impossible to demonstrate that it has in fact been caused by the illegal
competition of the defendant. This is frequently the case in suit for the infringement of DAVIDE, JR., C.J.:
trademark rights, in which the courts may enjoin the continued use of the infringing mark,
although unable to assess damages for the past injury. In its petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
petitioner City of Cebu assails the decision of 11 October 1999 of the Court of Appeals in CA-
The judgment of the trial court is affirmed with costs. So ordered. G.R. CV No. 592041 affirming the judgment of 7 May 1996 of the Regional Trial Court, Branch
13, Cebu City, in Civil Case No. CEB-14632, a case for eminent domain, which fixed the valuation
of the land subject thereof on the basis of the recommendation of the commissioners appointed
by it.

The material operation facts are not disputed.

On 17 September 1993, petitioner City of Cebu filed in Civil Case No. CEB-14632 a complaint for
eminent domain against respondents spouses Apolonio and Blasa Dedamo. The petitioner
alleged therein that it needed the following parcels of land of respondents, to wit:

Lot No. 1527

Area------------------------------------------------ 1,146 square meters

Tax Declaration---------------------------------- 03472

Title No. ------------------------------------------ 31833

Market value------------------------------------- P240,660.00

Assessed Value---------------------------------- P72,200.00

Lot No. 1528

Area------------------------------------------------ 793 square meters

23
Area sought to be expropriated ---------------- 478 square meters
Tax Declaration ----------------------------------- 03450
Title No. -------------------------------------------- 31832
Market value for the whole lot ----------------- P1,666,530.00
Market value of the Area to be expropriated -- P100,380.00
Assessed Value ------- P49,960.00
for a public purpose, i.e., for the construction of a public road which shall serve as an
access/relief road of Gorordo Avenue to extend to the General Maxilum Avenue and the back of
Magellan International Hotel Roads in Cebu City. The lots are the most suitable site for the
purpose. The total area sought to be expropriated is 1,624 square meters with an assessed
value of P1,786.400. Petitioner deposited with the Philippine National Bank the amount of
P51,156 representing 15% of the fair market value of the property to enable the petitioner to
take immediate possession of the property pursuant to Section 19 of R.A. No. 7160.2
Respondents, filed a motion to dismiss the complaint because the purpose for which their
property was to be expropriated was not for a public purpose but for benefit of a single private
entity, the Cebu Holdings, Inc. Petitioner could simply buy directly from them the property at
its fair market value if it wanted to, just like what it did with the neighboring lots. Besides, the
price offered was very low in light of the consideration of P20,000 per square meter, more or
less, which petitioner paid to the neighboring lots. Finally, respondents alleged that they have
no other land in Cebu City.
A pre-trial was thereafter had.
On 23 August 1994, petitioner filed a motion for the issuance of a writ of possession pursuant
to Section 19 of R.A. No. 7160. The motion was granted by the trial court on 21 September
1994.3
On 14 December 1994, the parties executed and submitted to the trial court an Agreement4
wherein they declared that they have partially settled the case and in consideration thereof
they agreed:
1. That the SECOND PARTY hereby conforms to the intention to [sic] the FIRST PARTY in
expropriating their parcels of land in the above-cited case as for public purpose and for the
benefit of the general public;
2. That the SECOND PARTY agrees to part with the ownership of the subject parcels of land in
favor of the FIRST PARTY provided the latter will pay just compensation for the same in the
amount determined by the court after due notice and hearing;
3. That in the meantime the SECOND PARTY agrees to receive the amount of ONE MILLION
SEVEN HUNDRED EIGHTY SIX THOUSAND FOUR HUNDRED PESOS (1,786,400.00) as
provisional payment for the subject parcels of land, without prejudice to the final valuation as
maybe determined by the court;
4. That the FIRST PARTY in the light of the issuance of the Writ of Possession Order dated
September 21, 1994 issued by the Honorable Court, agreed to take possession over that portion
of the lot sought to be expropriated where the house of the SECOND PARTY was located only
after fifteen (15) days upon the receipt of the SECOND PARTY of the amount of P1,786,400.00;
5. That the SECOND PARTY upon receipt of the aforesaid provisional amount, shall turn over to
the FIRST PARTY the title of the lot and within the lapse of the fifteen (15) days grace period
will voluntarily demolish their house and the other structure that may be located thereon at
their own expense;
6. That the FIRST PARTY and the SECOND PARTY jointly petition the Honorable Court to render
judgment in said Civil Case No. CEB-14632 in accordance with this AGREEMENT;
7. That the judgment sought to be rendered under this agreement shall be followed by a
supplemental judgment fixing the just compensation for the property of the SECOND PARTY
after the Commissioners appointed by this Honorable Court to determine the same shall have
rendered their report and approved by the court.
Pursuant to said agreement, the trial court appointed three commissioners to determine the
just compensation of the lots sought to be expropriated. The commissioners were Palermo M.
Lugo, who was nominated by petitioner and who was designated as Chairman; Alfredo
Cisneros, who was nominated by respondents; and Herbert E. Buot, who was designated by the
trial court. The parties agreed to their appointment.
Thereafter, the commissioners submitted their report, which contained their respective
assessments of and recommendation as to the valuation of the property.1âwphi1.nêt
On the basis of the commissioners' report and after due deliberation thereon, the trial court
rendered its decision on 7 May 1996,5 the decretal portion of which reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in accordance with the
report of the commissioners.
24
Plaintiff is directed to pay Spouses Apolonio S. Dedamo and Blasa Dedamo the sum of pesos:
TWENTY FOUR MILLION EIGHT HUNDRED SIXTY-FIVE THOUSAND AND NINE HUNDRED
THIRTY (P24,865.930.00) representing the compensation mentioned in the Complaint.
Plaintiff and defendants are directed to pay the following commissioner's fee;
1. To Palermo Lugo - P21,000.00
2. To Herbert Buot - P19,000.00
3. To Alfredo Cisneros - P19,000.00
Without pronouncement as to cost.
SO ORDERED.
Petitioner filed a motion for reconsideration on the ground that the commissioners' report was
inaccurate since it included an area which was not subject to expropriation. More specifically, it
contended that Lot No. 1528 contains 793 square meters but the actual area to be expropriated
is only 478 square meters. The remaining 315 square meters is the subject of a separate
expropriation proceeding in Civil Case No. CEB-8348, then pending before Branch 9 of the
Regional Trial Court of Cebu City.
On 16 August 1996, the commissioners submitted an amended assessment for the 478 square
meters of Lot No. 1528 and fixed it at P12,824.10 per square meter, or in the amount of
P20,826,339.50. The assessment was approved as the just compensation thereof by the trial
court in its Order of 27 December 1996.6 Accordingly, the dispositive portion of the decision
was amended to reflect the new valuation.
Petitioner elevated the case to the Court of Appeals, which docketed the case as CA-G.R. CV No.
59204. Petitioner alleged that the lower court erred in fixing the amount of just compensation
at P20,826,339.50. The just compensation should be based on the prevailing market price of the
property at the commencement of the expropriation proceedings.
The petitioner did not convince the Court of Appeals. In its decision of 11 October 1999,7 the
Court of Appeals affirmed in toto the decision of the trial court.
Still unsatisfied, petitioner filed with us the petition for review in the case at bar. It raises the
sole issue of whether just compensation should be determined as of the date of the filing of the
complaint. It asserts that it should be, which in this case should be 17 September 1993 and not
at the time the property was actually taken in 1994, pursuant to the decision in "National
Power Corporation vs. Court of Appeals."8
In their Comment, respondents maintain that the Court of Appeals did not err in affirming the
decision of the trial court because (1) the trial court decided the case on the basis of the
agreement of the parties that just compensation shall be fixed by commissioners appointed by
the court; (2) petitioner did not interpose any serious objection to the commissioners' report of
12 August 1996 fixing the just compensation of the 1,624-square meter lot at P20,826,339.50;
hence, it was estopped from attacking the report on which the decision was based; and (3) the
determined just compensation fixed is even lower than the actual value of the property at the
time of the actual taking in 1994.
Eminent domain is a fundamental State power that is inseparable from sovereignty. It is the
Government's right to appropriate, in the nature of a compulsory sale to the State, private
property for public use or purpose.9 However, the Government must pay the owner thereof
just compensation as consideration therefor.
In the case at bar, the applicable law as to the point of reckoning for the determination of just
compensation is Section 19 of R.A. No. 7160, which expressly provides that just compensation
shall be determined as of the time of actual taking. The Section reads as follows:
SECTION 19. Eminent Domain. – A local government unit may, through its chief executive and
acting pursuant to an ordinance, exercise the power of eminent domain for public use, or
purpose or welfare for the benefit of the poor and the landless, upon payment of just
compensation, pursuant to the provisions of the Constitution and pertinent laws: Provided,
however, That the power of eminent domain may not be exercised unless a valid and definite
offer has been previously made to the owner, and such offer was not accepted: Provided,
further, That the local government unit may immediately take possession of the property upon
the filing of the expropriation proceedings and upon making a deposit with the proper court of
at least fifteen percent (15%) of the fair market value of the property based on the current tax
declaration of the property to be expropriated: Provided finally, That, the amount to be paid for
the expropriated property shall be determined by the proper court, based on the fair market
value at the time of the taking of the property.
The petitioner has misread our ruling in The National Power Corp. vs. Court of Appeals.10 We
did not categorically rule in that case that just compensation should be determined as of the
filing of the complaint. We explicitly stated therein that although the general rule in
determining just compensation in eminent domain is the value of the property as of the date of
the filing of the complaint, the rule "admits of an exception: where this Court fixed the value of
the property as of the date it was taken and not at the date of the commencement of the
expropriation proceedings."
Also, the trial court followed the then governing procedural law on the matter, which was
Section 5 of Rule 67 of the Rules of Court, which provided as follows:
SEC. 5. Ascertainment of compensation. – Upon the entry of the order of condemnation, the
court shall appoint not more than three (3) competent and disinterested persons as
commissioners to ascertain and report to the court the just compensation for the property
25
sought to be taken. The order of appointment shall designate the time and place of the first
session of the hearing to be held by the commissioners and specify the time within which their
report is to be filed with the court.
More than anything else, the parties, by a solemn document freely and voluntarily agreed upon
by them, agreed to be bound by the report of the commission and approved by the trial court.
The agreement is a contract between the parties. It has the force of law between them and
should be complied with in good faith. Article 1159 and 1315 of the Civil Code explicitly
provides:
Art. 1159. Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith.
Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and
law.
Furthermore, during the hearing on 22 November 1996, petitioner did not interpose a serious
objection.11 It is therefore too late for petitioner to question the valuation now without
violating the principle of equitable estoppel. Estoppel in pais arises when one, by his acts,
representations or admissions, or by his own silence when he ought to speak out, intentionally
or through culpable negligence, induces another to believe certain facts to exist and such other
rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted
to deny the existence of such facts.12 Records show that petitioner consented to conform with
the valuation recommended by the commissioners. It cannot detract from its agreement now
and assail correctness of the commissioners' assessment.1âwphi1.nêt
Finally, while Section 4, Rule 67 of the Rules of Court provides that just compensation shall be
determined at the time of the filing of the complaint for expropriation,13 such law cannot
prevail over R.A. 7160, which is a substantive law.14
WHEREFORE, finding no reversible error in the assailed judgment on the Court of Appeals in
CA-G.R. CV No. 59204, the petition in this case is hereby DENIED.
No pronouncement as to costs.
SO ORDERED.
8 - ART. 1163
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-6913 November 21, 1913
THE ROMAN CATHOLIC BISHOP OF JARO, plaintiff-appellee,
vs.
GREGORIO DE LA PEÑA, administrator of the estate of Father Agustin de la Peña, defendant-
appellant.
J. Lopez Vito, for appellant.
Arroyo and Horrilleno, for appellee.
MORELAND, J.:
This is an appeal by the defendant from a judgment of the Court of First Instance of Iloilo,
awarding to the plaintiff the sum of P6,641, with interest at the legal rate from the beginning of
the action.
It is established in this case that the plaintiff is the trustee of a charitable bequest made for
the construction of a leper hospital and that father Agustin de la Peña was the duly authorized
representative of the plaintiff to receive the legacy. The defendant is the administrator of the
estate of Father De la Peña.
In the year 1898 the books Father De la Peña, as trustee, showed that he had on hand as
such trustee the sum of P6,641, collected by him for the charitable purposes aforesaid. In the
same year he deposited in his personal account P19,000 in the Hongkong and Shanghai Bank at
Iloilo. Shortly thereafter and during the war of the revolution, Father De la Peña was arrested
by the military authorities as a political prisoner, and while thus detained made an order on
said bank in favor of the United States Army officer under whose charge he then was for the
sum thus deposited in said bank. The arrest of Father De la Peña and the confiscation of the
funds in the bank were the result of the claim of the military authorities that he was an
26

insurgent and that the funds thus deposited had been collected by him for revolutionary
purposes. The money was taken from the bank by the military authorities by virtue of such
order, was confiscated and turned over to the Government.
While there is considerable dispute in the case over the question whether the P6,641 of
trust funds was included in the P19,000 deposited as aforesaid, nevertheless, a careful
examination of the case leads us to the conclusion that said trust funds were a part of the funds
deposited and which were removed and confiscated by the military authorities of the United
States.
The court, therefore, finds and declares that the money which is the subject matter of this
action was deposited by Father De la Peña in the Hongkong and Shanghai Banking Corporation
of Iloilo; that said money was forcibly taken from the bank by the armed forces of the United
States during the war of the insurrection; and that said Father De la Peña was not responsible
for its loss.
The judgment is therefore reversed, and it is decreed that the plaintiff shall take nothing
by his complaint.

That branch of the law known in England and America as the law of trusts had no exact
counterpart in the Roman law and has none under the Spanish law. In this jurisdiction,
therefore, Father De la Peña's liability is determined by those portions of the Civil Code which
relate to obligations. (Book 4, Title 1.)

Although the Civil Code states that "a person obliged to give something is also bound to
preserve it with the diligence pertaining to a good father of a family" (art. 1094), it also
provides, following the principle of the Roman law, major casus est, cui humana infirmitas
resistere non potest, that "no one shall be liable for events which could not be foreseen, or
which having been foreseen were inevitable, with the exception of the cases expressly
mentioned in the law or those in which the obligation so declares." (Art. 1105.)

By placing the money in the bank and mixing it with his personal funds De la Peña did not
thereby assume an obligation different from that under which he would have lain if such
deposit had not been made, nor did he thereby make himself liable to repay the money at all
hazards. If he had been forcibly taken from his pocket or from his house by the military forces
of one of the combatants during a state of war, it is clear that under the provisions of the Civil
Code he would have been exempt from responsibility. The fact that he placed the trust fund in
the bank in his personal account does not add to his responsibility. Such deposit did not make
him a debtor who must respond at all hazards.

We do not enter into a discussion for the purpose of determining whether he acted more
or less negligently by depositing the money in the bank than he would if he had left it in his
home; or whether he was more or less negligent by depositing the money in his personal
account than he would have been if he had deposited it in a separate account as trustee. We
regard such discussion as substantially fruitless, inasmuch as the precise question is not one of
negligence. There was no law prohibiting him from depositing it as he did and there was no law
which changed his responsibility be reason of the deposit. While it may be true that one who is
under obligation to do or give a thing is in duty bound, when he sees events approaching the
results of which will be dangerous to his trust, to take all reasonable means and measures to
escape or, if unavoidable, to temper the effects of those events, we do not feel constrained to
hold that, in choosing between two means equally legal, he is culpably negligent in selecting one
whereas he would not have been if he had selected the other.
27
9 – ART. 1163
ENGRACIO OBEJERA and MERCEDES INTAK, plaintiffs-appellees,
vs.
IGA SY, defendant-appellant.
Pedro Panganiban for appellant.
Jose Mayo Librea for appellees.
JARANILLA, J.:
By virtue of the appeal filed against the decision of the Court of First Instance of Batangas
annulling, on the ground of force and intimidation, the deed of transfer executed on April 9,
1942 (Exhibit Y), whereby the plaintiffs and appellees agreed to transfer to the defendant and
appellant their property assessed at P2,230 in case they failed to return to the defendant on
December 31, 1942 the balance of P3,697 and pieces of jewelry worth P400 allegedly deposited
with the plaintiffs on January 2, 1942, the above-entitled case was submitted to this court for
review.
On December 13, 1941, plaintiffs and defendant sought refuge in the house of Leon Villena,
barrio lieutenant of Dalig, Batangas, Batangas, on account of the Japanese invasion of the
Philippines.
On January 2, 1942, news having spread that the Japanese forces were closing in and were
committing barbarous acts, which gripped the people in terror, plaintiffs and defendant, after
consultation with their host Leon Villena, decided to hide their things and valuables in a dug-
out belonging to Leon Villena about thirty meters away from his house. The defendant placed in
said dug-out her money allegedly amounting to P5,021 and jewelry worth P400 in her own
container; Leon Villena and his wife also placed therein their own things; the plaintiffs also
placed their things and money allegedly amounting to P3,000. They did this at night and
covered the dug-out with palay belonging to Leon Villena and the defendant Iga Sy.
On February 18, 1942, at the instance of the defendant who desired to move to another house,
the plaintiffs and the defendant, together with Leon Villena, among others, went to the dug-out
to take out the defendant's container and discovered, to their consternation, that their money
and things, except for a few papers, had been lost.
One day during the first week of April, 1942, the defendant reported the loss of her money and
jewels, causing the arrest and investigation of Leon Villena, two others and the plaintiff
Engracio Obejera, who where released shortly after, except Engracio Obejera who was released
only on April 19, 1942 after he, with his wife, had consented to execute Exhibit Y which
document was sought to be annulled by the plaintiffs and appellees herein.
The defendant and appellant contends that she deposited her money and jewelry with the
plaintiffs and that the plaintiffs, acknowledging liability for the loss of her money and jewelry,
offered to transfer their property under Transfer Certificate of Title No. 666 and accordingly
executed the document in question. On the other hand, the plaintiffs deny the alleged deposit,
deny knowledge of the loss of the defendant's money and jewelry, and claim that their consent
to the deed of transfer was obtained through violence and intimidation.
After a careful consideration of the nine assignments of error and examination of the evidence
of this case, the contention of the defendant and appellant cannot be sustained. The alleged
deposit cannot be believed and is contrary to the ordinary course of nature and the ordinary
habits of life (section 69 [z], Rule 123, Rules of Court). Leon Villena, the barrio lieutenant,
policemen Ruperto Buenafe and Apolonio Corpuz, and Mayor Berberabe were uniform in their
testimony that in their investigation of the case, the plaintiff Engracio Obejera admitted that he
agreed to keep and be responsible for the defendant's things. It appears, however, that Leon
Villena himself and his son Balbino participated in the hiding, and acknowledged liability for
the loss, of the defendant's things. Exhibit 1, apparently prepared for the benefit of the
defendant, reads as follows, "I, Mercedes Intak, wife of Engracio Obejera who was the
companion of chief Leon Villena and the latter's son Balbino Villena in hiding (under ground)
the money and jewels of Iga Sy ...," and mentions nothing regarding the alleged deposit. And the
deed of the transfer (Exhibit Y) states, "... and we, on the other hand, the said Leon Villena and
Balbino Villena, because we are responsible for one-half of the money and jewels still
unrecovered, I, Leon Villena, promise to transfer to Engracio Obejera my four parcels of land ...."
Now, if Leon Villena and his son had taken part in the hiding of the defendant's money and
jewelry and acknowledged responsibility therefor, as evidenced by the said documents, then
his claim and the defendant's claim that Engracio Obejera alone agreed to keep and be
responsible for those things is false; and it follows that the same claim of policemen Ruperto
Buenafe and Apolonio Corpus and Mayor Berberabe are likewise false.
It should also be considered, in this connection, that the dug-out into which the plaintiffs and
the defendant hid their money and valuables belongs to Leon Villena; that the plaintiffs and the
defendant only sought refuge in his house; that neither the plaintiffs nor the defendant had,
therefore, control over, or absolute and exclusive access, to the dug-out, as proved by the fact
that when the defendant decided to take her things with her because she was going to move to
another house, two days before the discovery of the loss, she asked their host Leon Villena to
allow and help her removed her things. Under these circumstances, it is hard to believe that
plaintiff Engracio Obejera would assume responsibility over the defendant's things hidden in a
place not belonging to him but to Leon Villena, in whose house they only sought refuge and
were like guests, and especially at a time when the confusion and fear resulting from the
Japanese invasion and fast advance so gripped everyone that nobody could be sure of his own
things and even of his life. The more natural conclusion is that plaintiffs and defendant decided
to hide their things in the dug-out of their host Leon Villena, thinking it to be the safest place,
and hoping, like many and all others, in those horrible days, that they might recover them, if at
all, after the confusion and uncertainty. This, in case Leon Villena himself, as was the most
natural thing to happen, did not offer to his guests to take care of their things by hiding them in
28
his dug-out, for he and his son, as a matter of fact, took part in the safekeeping and they even
covered the dug-out afterwards with their own palay together with the palay of the defendant;
later he had to give his consent and actually accompanied the plaintiffs and the defendant when
the latter wanted to take out her things from the dug-out; and then, after the discovery of the
loss, he and his son admitted liability for the loss of the defendant's things as evidenced by both
Exhibits 1 and Y.
Even if the defendant's theory of deposit were sustained, any obligation arising therefrom was
extinguished upon the loss, without the fault of the depositee and under circumstances which at
the time were inevitable (article 1182 in connection with article 1766, and article 1105, Civil
Code), of the things allegedly deposited. The evidence of record, in this regard, uniformly shows
that the plaintiffs were not in any way responsible for the loss of the defendant's money and
jewelry. Both Mayor Roman L. Perez and Chief of Police Apolonio Corpus testified that they did
not find any evidence that the plaintiffs, who also lost their own valuables, could be in any
manner connected with the loss. Even the documents, Exhibits 1 and Y, so much relied upon by
the defendant and evidently prepared for her benefit, having been written on the same
typewriter, do not state any such connection.
In the case of Lizares vs. Hernaez and Alunan (40 Phil., 981, 991), the Supreme Court held:
In this bailment ordinary care and diligence are required of the bailee and he is not liable for
the inevitable loss or destruction of the chattel, not attributable to his fault. If while the
bailment continues, the chattel is destroyed, or stolen, or perishes, without negligence on the
bailee's part, the loss as in other hirings, falls upon the owner, in accordance with the maxim
res perit domino . . . .
To the same effect are the cases of Crame Sy Panco vs. Gonzaga (10 Phil., 646, 648), in which it
was held that the death of the carabaos in that case being fortuitous, the obligation of the
defendants therein to return them was extinguished as a matter of fact and of law; of Insular
Government vs. Bingham (13 Phil., 558, 571), in which the defendant therein was absolved
from the obligation to deliver to the Government of the Philippine Islands a revolver with
ammunition which went down and were lost when his boat was sunk in a storm through no
fault of his or his crew; and of Yap Kim Chuan vs. Tiaoqui (31 Phil., 433, 440), in which the
defendant therein was held not responsible for the wetting sustained by the goods and
merchandise of the plaintiffs therein as a result of the torrential rainfall.
It necessarily follows that the deed of transfer dated April 19, 1942 (Exhibit Y), whereby the
plaintiffs paid P500 to the defendant and further promised to transfer their property under
Transfer Certificate of Title No. 666 in case they failed to return on December 31, 1942 the
balance of the loss for which, as already stated, they cannot be held liable, is null and void for
lack of cause or consideration (article 1275, Civil Code). This also applies to the document
dated April 11, 1942, Exhibit 1.
But these two documents are also null and void upon the other ground that the consent of the
plaintiffs therein was obtained through duress and intimidation. The continued detention of the
plaintiff Engracio Obejera from April 11 to 19, 1942 by the mayor and policemen of Batangas, in
spite of the fact that they had not found any evidence against the plaintiffs; the fact that the
municipal policemen applied continuous pressure on the plaintiffs to make good the loss, so
that the plaintiff's wife, accompanied by policeman Ruperto Buenafe, had to raise, with much
difficulty, the amount of P500 to secure the settlement of the case; the fact that Mayor Roman L.
Perez, although he never intended to keep the plaintiff Engracio Obejera in detention as he did
not believe him guilty at all and did not consider himself empowered to order his detention, did
not, nevertheless, release the plaintiff until he and his wife consented to execute the deed of
transfer, Exhibit Y, in spite of their continuous protestations of innocence and supplications of
mercy; and the fear created in the minds of the plaintiffs that they would be delivered to the
Japanese soldiers and suffer cruel punishment, if not death, in their hands, unless they executed
the said deed of transfer, all show very clearly the irresistible force and intimidation employed,
in this case, to coerce the plaintiffs into executing the said document, rendering it, therefore,
null and void for lack of free consent (articles 1265, 1267, 1268, Civil Code).
In Jalbuena vs. Ledesma (8 Phil., 601, 605), we held:
In this instance the signing of an undertaking appears to have been insisted upon by the judge
in the presence and at the instance of the opposing party, and to have been expressly made the
condition of non-imprisonment, amid circumstances of procedure quite unusual in courts of
justice, in a tribunal convened under military auspices and exercising extraordinary powers. So
that there would be reason to say that the consent of the surety was obtained by coercion, even
if the judge had jurisdiction over the case.
In this connection, we reaffirm what we declared in Vales vs. Villa (35 Phil., 769, 789, 790),
thus:
But when his sense, judgment, and his will rebel and he refuses absolutely to act as requested,
but is nevertheless overcome by force or intimidation to such an extent that he becomes a mere
automaton and acts mechanically only, a new element enters, namely, a disappearance of the
personality of the actor. He ceases to exist as an independent entity with faculties and
judgment, and in his place is substituted another--the one exercising the force or making use of
the intimidation. While his hand signs, the will which moves it is another's. While a contract is
made, it has, in reality and in law, only one party to it; and, there being only one party, the one
using the force or the intimidation, it is unreasonable for lack of a second party.
The contention that plaintiffs offered to transfer their property in acknowledgment of their
responsibility for the loss of her things appears groundless. Aside from the fact that it cannot be
believed, as already stated, that there was constituted in this case a deposit, we are of the
opinion that such an offer, made by way of compromise in order that plaintiff Engracio Obejera
might only escape continued detention and grueling punishment or even death in the hands of
the Japanese soldiers, for the alleged loss for which he was not in any way criminally liable, is
not an admission of debt and is not admissible in evidence against the plaintiffs (section 9, Rule
123, Rules of Court).
29
An offer to compromise is not a confession of debt and is not admissible in evidence (Code of
Civ. Proc., section 346). In a criminal causes for theft (U. S. vs. Maqui, 27 Phil., Rep., 97) this
court said that the weight both of authority and reason sustains the rule which admits evidence
of offers to compromise, in criminal cases, but permits the accused to show that such offers
were not made under the consciousness of guilt, but merely to avoid the inconvenience of
imprisonment or for some other reason which would justify a claim by the accused that the
offer to compromise was not in truth an admission of his guilt and an attempt to avoid the legal
consequences which would ordinarily ensue therefrom. (United States vs. Torres and Padilla,
34 Phil., 994, 999.) .
On account of its consensual character a compromise, to be valid and effective requires in its
performance meeting of the minds in a certain, spontaneous, and free way with regard to a
definite object or objects; and in case it be shown and proved that there was error, deceit,
violence, or intimidation the compromise would be null, because the consent given therein is
null and void through lack of the indispensable requisites for its validity and effectiveness."
(Hernandez vs. Barcelon, 23 Phil., 599, 608.) .
Wherefore, the decision of the court a quo is hereby affirmed in toto with costs against the
defendant and appellant. So ordered.
10 - ART. 1167
[G.R. No. 127206. September 12, 2003]
PERLA PALMA GIL, VICENTE HIZON, JR., and ANGEL PALMA GIL, petitioners, vs. HON. COURT
OF APPEALS, HEIRS OF EMILIO MATULAC, CONSTANCIO MAGLANA, AGAPITO PACETES & The
REGISTER OF DEEDS OF DAVAO CITY, respondents.
DECISION
CALLEJO, SR., J.:
For review on appeal by certiorari are the Decision [1] of the Court of Appeals in CA-G.R. CV. No.
43188 promulgated on March 19, 1996, and its Resolution [2] dated October 17, 1996, denying
the petitioners’ Motion for Reconsideration of the said decision.
The appealed decision affirmed in toto the judgment of the Regional Trial Court, Davao City,
Branch 16, in Civil Case No. 15,356 which dismissed the complaint of the herein petitioners.
The Antecedents
Concepcion Palma Gil, and her sister, Nieves Palma Gil, married to Angel Villarica, were the co-
owners of a parcel of commercial land with an area of 829 square meters, identified as Lot No.
59-C, covered by Transfer Certificate of Title (TCT) No. 432 located in Davao City. The spouses
Angel and Nieves Villarica had constructed a two-storey commercial building on the property.
On October 13, 1953, Concepcion filed a complaint against her sister Nieves with the then
Court of First Instance of Davao City, docketed as Civil Case No. 1160 for specific performance,
to compel the defendant to cede and deliver to her an undivided portion of the said property
with an area of 256.2 square meters. After due proceedings, the court rendered judgment on
April 7, 1954 in favor of Concepcion, ordering the defendant to deliver to the plaintiff an
undivided portion of the said property with an area of 256.2 square meters:
A la vista de los datos expuestos, el Juzgado dicta sentencia condenando a la demanda, Nieves
Palma Gil de Villarica, cumpla con los terminos del documento (Exh. “A”) ordenando a aquella
que otogue los documentos necesarios traspasando a favor de la demandante (CONCEPCION
PALMA GIL), 256 metros cuadrados con 20 centimetros” del Lote No. 56-C descrito mas
particularmente en el Certificado de Titulo No. 432. [3]
Nieves appealed to the Court of Appeals which affirmed the assailed decision. In due course, the
decision became final and executory. On motion of the plaintiff (Concepcion), the court issued a
writ of execution. Nieves, however, refused to execute the requisite deed in favor of her sister.
On April 27, 1956, the court issued an order authorizing ex-officio Sheriff Eriberto Unson to
execute the requisite deed of transfer to the plaintiff over an undivided portion of the property
with a total area of 256.2 square meters. Instead of doing so, the sheriff had the property
subdivided into four lots namely, Lot 59-C-1, with an area of 218 square meters; Lot 59-C-2,
with an area of 38 square meters; Lot 59-C-3, with an area of 14 square meters; and Lot 59-C-4,
30
with an area of 560 square meters, all covered by a subdivision plan. The sheriff thereafter
executed a Deed of Transfer to Concepcion over Lot 59-C-1 and Lot 59-C-2 with a total area of
256.2 square meters.
On October 24, 1956, Concepcion executed a deed of absolute sale over Lot 59-C-1 in favor of
Iluminada Pacetes. In the said deed, the area of Lot 59-C-1 appeared as “256 square meters”
although under the subdivision plan, the area of the property was only 218 square meters. The
vendee obliged herself to pay the said amount, to wit:
1. The purchase price of P21,600.00 shall be paid as follows: P7,500.00 to be paid upon the
signing of this instrument; and the balance of P14,100.00 to be paid upon the delivery of the
corresponding Certificate of Title in the name of the VENDEE. [4]
Under the deed of absolute sale, the parties further agreed as follows:
2. That the VENDOR shall, within the period of ONE HUNDRED TWENTY (120) DAYS, from
the signing of this agreement, undertake and work for the issuance of the corresponding
Certificate of Title of the said Lot No. 59-C-1 in her favor with the proper government office or
offices, to the end that the same can be duly transferred in the name of the herein VENDEE, by
virtue thereof.
3. That pending the full and complete payment of the purchase price to the VENDOR, the
VENDEE shall collect and receive any and all rentals and such other income from the land
above-described for her own account and benefit, this right of the VENDEE to begin from
December 1, 1956. [5]
In the meantime, Nieves filed a motion in Civil Case No. 1160 to compel the sheriff to report on
his compliance with the court’s Order dated April 27, 1956. The motion was denied. A motion
for reconsideration of the denial met the same fate. Nieves appealed to the Court of Appeals,
which appeal was docketed as CA-G.R. No. 22438-R.
In a parallel development, Concepcion filed a complaint for unlawful detainer against the
spouses Angel and Nieves Villarica with the Municipal Trial Court docketed as Civil Case No.
2246. On October 4, 1956, the court rendered judgment in favor of the plaintiff and against the
defendants, the decretal portion of which reads as follows:
From the foregoing, it is indeed evident and clear that the herein defendants have been
unlawfully withholding possession of the land from the plaintiff, and hereby finds in favor of
the plaintiff, and against the defendants, ordering the latter to vacate the premises described in
the complaint, removing whatever improvements they have constructed thereon. The
defendants are further judged to pay the plaintiff the amount of ONE HUNDRED FIFTY PESOS
(P150.00) a month from the time of the filing of this complaint until the lot is finally vacated in
concept of rentals, deprived of the plaintiff due to the unlawful possession of the defendants,
and to pay the costs of this suit. [6]
The decision became final and executory but the plaintiff did not file any motion for a writ of
execution.
The spouses Angel and Nieves Villarica filed a complaint on October 24, 1956 against the sheriff
and Concepcion with the Court of First Instance of Davao City, docketed as Civil Case No. 2151
for the nullification of the deed of transfer executed by the sheriff. [7]
On December 21, 1956, Iluminada Pacetes filed a motion to intervene in Civil Case No. 2151, as
vendee of the property subject of the case, which was granted by the court. She then filed a
motion to dismiss the complaint. The court granted the motion. Nieves appealed to the Court of
Appeals which appeal was docketed as CA-G.R. No. 22008-R. Nieves’ appeals in Civil Cases Nos.
1160 and 2151 were certified by the CA to this Court, docketed as G.R. No. L-15799 and G.R. No.
L-15801.
On the basis of the deed of transfer executed by Sheriff Iriberto A. Unson, the Register of Deeds
issued TCT No. 7450 over Lot 59-C-1 and 59-C-2 on July 17, 1957 in the name of Concepcion,
with a total area of 256.2 square meters. However, the latter failed to transfer title to the
property to and under the name of Iluminada Pacetes. Consequently, the latter did not remit the
balance of the purchase price of the property to Concepcion.
In the interim, the spouses Angel and Nieves Villarica executed a real estate mortgage over Lot
59-C-4 in favor of Prudential Bank as security for a loan. On August 4, 1959, Concepcion died
intestate and was survived by Nieves Villarica and her nephews and nieces. Iluminada filed a
motion in Civil Case No. 1160 for her substitution as party-plaintiff in lieu of the deceased
Concepcion. On August 2, 1961, the court issued an order granting the motion.
On August 31, 1961, this Court rendered judgment in G.R. Nos. L-15799 and L-15801 setting
aside the deed of transfer executed by the sheriff in favor of Concepcion Palma Gil, and
remanding the records to the trial court for further proceedings. [8] In compliance with the
Decision of this Court in G.R. No. L-15801, the trial court conducted further proceedings in Civil
Case No. 1160 and discovered that the defendant had mortgaged Lot 59-C-4 to the Prudential
Bank. Consequently, the court issued an order on February 17, 1964, declaring that the
defendant had waived the benefits of the Decision of the Court on August 31, 1961 in G.R. No. L-
15801; thus, the conveyance of the property made by Concepcion in favor of Iluminada on
October 24, 1956 must stand. Nieves filed a motion for the reconsideration of the said order but
the court denied the same in an Order dated February 29, 1964. Nieves appealed the order to
the CA which dismissed the appeal for her failure to file a record on appeal. Nieves filed a
petition for review with this Court docketed as G.R. No. L-28363.
More than five years having elapsed without the decision in Civil Case No. 2246 being enforced,
Iluminada filed a complaint docketed as Civil Case No. 4413 in the Court of First Instance of
Davao City, for the revival and execution of the decision of the Municipal Trial Court in Civil
Case No. 2246 (the unlawful detainer case). The plaintiff therein averred that, as Concepcion’s
successor-in-interest, she acquired the right of action to enforce the decision in Civil Case No.
2246. The defendants, on the other hand, averred that Iluminada had not yet paid the balance
31
of the purchase price of Lot 59-C-1; hence, she had not acquired title over the lot and the right
to evict the defendant. The deed of absolute sale executed by Concepcion in favor of the plaintiff
was an executory, not an executed deed. On January 26, 1965, the court rendered judgment in
favor of the defendants and dismissed the complaint. The decretal portion reads:
IN VIEW OF THE FOREGOING, the Court believes that the plaintiff herein has not been properly
and legally subrogated to the rights and action of deceased Concepcion Palma Gil and, hence,
for these reasons the Court dismisses this case without pronouncement as to costs.
The counterclaim is also hereby ordered dismissed. [9]
On March 16, 1966, Iluminada Pacetes and Agapito Pacetes executed a deed of absolute sale
over Lot 59-C-1 and Lot 59-C-2 in favor of Constancio B. Maglana for P110,000.00, covered by
TCT No. 7450. [10] The spouses-vendors undertook to secure title over the lots under the name
of the vendee within ninety days.
On May 15, 1974, this Court denied the petition for certiorari filed by Nieves in G.R. No. L-
28363. [11] The Court, in part, ruled:
But while the issue at bar exclusively involves the timeliness of the appeal of the petitioners to
the Court of Appeals, this Court has nonetheless examined and analyzed the substantive aspects
of this case and is satisfied that the ORDERS of the trial court complained of are morally just.
Accordingly, the instant appeal is dismissed and the resolution of the Court of Appeals dated
July 31, 1967 and its resolution dated October 18, 1967 are affirmed. [12]
The decision of the Court became final and executory.
On May 5, 1975, the spouses Agapito and Iluminada Pacetes filed a complaint against Nieves in
the Court of First Instance of Davao City, docketed as Civil Case No. 8836 for the recovery of
possession of Lot 59-C-1 and Lot 59-C-2. The Pacetes spouses claimed that Lot 59-C-2 was
included in TCT No. 7450 under the name of Concepcion. The spouses prayed that judgment be
rendered in their favor after due proceedings thus:
PRAYER
PREMISES CONSIDERED, it is most respectfully prayed that:
1. During the pendency of this case, Defendant be ordered:
a. To refrain from collecting rentals from the tenants or occupants of the building
erected in said Lot 59-C-1; in that the tenants be directed to pay their rental to the plaintiff;
b. To demolish her aforesaid building of strong materials and vacate the premises of Lot
59-C-1 and Lot 59-C-2.
2. After hearing, Defendant be ordered to:
a. Pay the Plaintiffs the amount consisting of compensation for the use of the land they
have been depribed (sic) of to receive and enjoy since October 24, 1956 due to the unwarranted
and illegal occupation of the said lots by defendant;
b. Pay Plaintiffs moral and exemplary damages in such amount as the Honorable Court
may fix considering the facts and the law;
c. Pay Plaintiffs such expenses of litigation as may be proven during the trial, and
d. Pay Plaintiffs expenses for services of counsel they had to incurr (sic) in this
complaint.
3. OTHER RELIEFS consonant with justice and equity are prayed for. [13]
On May 10, 1977, Nieves Villarica executed a lease agreement with Virginia Jorge and Anita
Vergara over Lots 59-C-1 and 59-C-2. The lessees took actual possession of the leased property.
In their Answer to the complaint in Civil Case No. 8836, the defendants averred, by way of
defense, that the complaint was barred by the decision of the CFI in Civil Case No. 4413, which
ruled that the Deed of Absolute Sale executed by Concepcion in favor of Iluminada was merely
an executory, but not an executed contract. After the plaintiffs had rested their case, the
defendants filed a motion to dismiss (demurrer to evidence). On October 29, 1975, the court
issued an order dismissing the complaint on the ground that the action was barred by the
decision of the court in Civil Case No. 4413. [14] Thus, Virginia Jorge and Anita Vergara
continued to be in physical possession of the property.
In the meantime, on August 8, 1977, Iluminada consigned with the court in Civil Case No. 1160
the amount of P11,983.00 only as payment of the purchase price of the property. Iluminada was
issued receipts for the amount. [15] As successor-in-interest of Concepcion, she likewise filed a
motion for execution in Civil Case No. 1160 for the eviction of the defendant Nieves Villarica
and all those acting for and in her behalf. The court issued an order on August 19, 1977
granting the motion. The defendants filed a motion for reconsideration of the order claiming
that Iluminada was not a party to the case which the court denied on September 2, 1977. The
defendant filed another motion for reconsideration which was likewise denied on September
16, 1977. The defendant filed a petition for certiorari with the Court of Appeals docketed as
CA-G.R. No. 62957-R, which petition was dismissed on August 26, 1980. The CA ruled that
Iluminada Pacetes was the real party-in-interest as the vendee of the property. The defendant
filed a petition with this Court docketed as G.R. No. L-56399.
In the meantime, Iluminada filed a petition with the RTC docketed as Miscellaneous Case No.
4715 for the issuance of an owner’s duplicate of TCT No. 7450. On March 22, 1978, the court
granted the petition and ordered the Register of Deeds to issue an owner’s duplicate of the said
title under the name of Concepcion Gil. Iluminada presented the said order and the deed of
absolute sale executed by Concepcion in her favor. On May 9, 1978, the Register of Deeds issued
TCT No. 61514 over Lot 59-C-1, with an area of 218 square meters, in the name of Iluminada
Pacetes. [16]
32
On April 21, 1980, TCT No. 73412 was issued by the Register of Deeds of Davao City in favor of
Constancio Maglana over Lot 59-C-1 only. [17] The next day, Constancio Maglana executed a
deed of sale not only over Lot 59-C-1 but also Lot 59-C-2, in favor of Emilio Matulac for the
purchase price of P150,000.00. [18] On the basis of the said deed, the Register of Deeds issued
TCT No. 80631 to and under the name of Emilio Matulac over the two lots.
In the meantime, Angel Villarica had died on April 20, 1974. On July 7, 1981, his heirs, including
his widow Nieves, executed an Extra-Judicial Settlement of Estate of Deceased in which the
latter waived, ceded and transferred to her children Teresita Magpantay, Antero P.G. Villarica,
Zenaida V. Alovera, Emperatriz V. Garcia, Napoleon P.G. Villarica and Rupendo P.G. Villarica her
rights and interests over the property covered by TCT No. 7450. [19]
On January 13, 1982, this Court affirmed the resolution of the Court of Appeals, in CA-G.R. No.
62975-R and dismissed the petition for certiorari in G.R. No. L-56399, thus, paving the way for
the execution of the decision of the trial court in Civil Case No. 1160, per its Order dated August
19, 1977. Emilio Matulac filed a motion for the issuance of a writ of execution. The Court
granted the motion on February 18, 1982. Nieves filed a motion for the reconsideration of the
order which the court denied in its Order dated March 17, 1982. Virginia Jorge and Anita
Vergara, the lessees, filed a motion for reconsideration but the court denied the motion.
Nonetheless, the lessees were allowed to stay in the property until April 9, 1982. However, the
lessees refused to vacate the property after said date.
On April 10, 1982, Emilio Matulac filed a motion in Civil Case No. 1160 for the issuance of a writ
of execution and an order of demolition. On April 20, 1982, the trial court issued an order
granting the motion for a writ of execution on April 30, 1982. The court also issued a special
order for the demolition of the buildings on the property. The buildings on the property,
including the properties owned by Virginia Jorge and Anita Vergara, were demolished on June
14, 1982. Emilio Matulac thereafter commenced the construction of a building thereon. The
defendant Nieves Villarica, in the meantime, filed a motion in Civil Case No. 1160 to annul the
proceedings, including the writ of execution issued by the court, and the issuance of a
restraining order.
For their part, Virginia Jorge and Anita Vergara filed a petition for certiorari with this Court
docketed as G.R. No. L-60690 for the nullification of the aforesaid orders and the writ of
demolition issued by the trial court in Civil Case No. 1160.
Three of the surviving heirs of Concepcion Gil, namely, Perla Palma Gil, Vicente Hizon, Jr. and
Angel Palma Gil, through their first cousin, Atty. Vicente Villarica, one of Nieves Villarica’s
children, filed on June 17, 1982, a complaint against Emilio Matulac, Constancio Maglana,
Agapito Pacetes, and the Register of Deeds, with the Court of First Instance, docketed as Civil
Case No. 15,356 for the cancellation of the deed of sale executed by Concepcion in favor of
Iliminada Pacetes; the deed of sale executed by the latter in favor of Constancio Maglana; the
deed of sale executed by the latter in favor of Emilio Matulac, as well as TCT Nos. 61514, 73412
and 80631 under the respective names of the vendees.
The plaintiffs alleged, inter alia, that the deed of absolute sale executed by Concepcion in favor
of Iluminada over Lots 59-C-1 and 59-C-2 was a contract to sell, an executory contract, as
declared by the Court of First Instance in Civil Cases Nos. 4413 and 8836, and not an executed
contract; the defendant spouses Agapito and Iluminada Pacetes failed to pay the balance of the
purchase price of the property during the lifetime of Concepcion; hence, what was embodied in
the said deed was not fulfilled by the vendee. Consequently, the sale is null and void.
The plaintiffs prayed for the issuance of a temporary restraining order and a writ of
preliminary injunction to enjoin the defendant Emilio Matulac from continuing with the
construction of a building on the property. The plaintiffs likewise prayed that after due
proceedings, judgment be rendered in their favor and against the defendants, thus:
WHEREFORE, in view of the aforecited reasons it is most respectfully prayed that:
1) An order be rendered immediately enjoining defendant Matulac from doing further
work in the construction of the building and enjoining him from entering the premises and the
land subject of this complaint and after trial making the injunction above-mentioned
permanent, ordering the removal of any structure and other construction within the plaintiffs’
above-described property and thereafter, upon said defendant’s failure to do so authorizing
plaintiffs to order said removal at defendant’s expense.
2) Judgment be rendered ordering:
a. Defendant Register of Deeds to cancel TCT No. T-61514, T-73412 and T-80631 and issued
(sic) a new Transfer Certificate of Title in the name of the above-mentioned heirs of the late
Concepcion Palma Gil nullifying the deeds of sale, Annexes “B,” “C,” and “D” hereof;
b. Defendants Pacetes, Maglana and Matulac jointly and solidarily liable to plaintiffs for moral
and exemplary damages as may be granted by this Honorable Court and the amount of
P25,000.00 as attorney’s fees; and
c. Litigation expenses and other reliefs as may be justified under this case. [20]
In his answer to the complaint, defendant Emilio Matulac interposed the following special and
affirmative defenses: (a) he is the lawful owner of the property; (b) the action is barred by the
Decision of this Court in G.R. No. L-56399; (c) the plaintiffs are estopped from assailing the sale
to him of the property; and (d) he is a purchaser in good faith.
On November 29, 1982, the court issued an order in Civil Case No. 1160, denying the motion for
the nullification of the proceedings and for a writ of preliminary injunction. Nieves filed a
motion for reconsideration of the order. On February 18, 1983, the court issued an order
denying the motion. Nieves filed a petition with the Court of Appeals for the nullification of the
same.
In the meantime, Emilio Matulac died intestate and was substituted by his heirs Sonia Matulac,
Josephine Matulac and Gregorio Matulac. [21] A petition was filed with the RTC of Davao City
33
for the settlement of his estate docketed as SP-No. 2747. The Court appointed Sonia Matulac as
administratrix of the estate.
The CA rendered a decision granting the petition and ordering the trial court to conduct further
proceedings to implement the August 19, 1977 Order. Sonia Matulac filed a petition for review
on certiorari with this Court docketed as G.R. No. 85538 for the nullification of the decision of
the CA.
On November 24, 1989, this Court rendered a Decision dismissing the petition in G.R. No. L-
60690. This Court said:
When We dismissed on September 16, 1974, the petition for certiorari filed by defendants
questioning the orders, dated December 7, 1961 and December 17, 1964, in effect We had
confirmed the sale by plaintiff in Civil case No. 1160, Concepcion Palma Gil, of Lot 59-C-1 and
59-C-2 to Illuminada Pacetes and affirmed the ruling of the trial court that defendants had
waived the benefit of Our Resolution rendered on August 31, 1961. [22]
Meanwhile, one of the plaintiffs, Perla Palma Gil in Civil Case No. 15,356, was appointed by the
court as administratrix of the estate of Concepcion on December 29, 1989, [23] and filed in the
said case a motion to intervene as plaintiff in her capacity as administratrix in behalf of all the
heirs of Concepcion. [24] The heirs of Emilio Matulac opposed the motion considering that they,
and not the estate of Concepcion, owned the subject property; thus the claim of the plaintiff
should be filed in SP-No. 2747. On April 7, 1990, the said motion was denied by the trial court.
[25] The said court declared:
Being already a plaintiff together with the other plaintiffs in thise (sic) case, said intervention
by plaintiff Perla Palma Gil is not absolutely necessary and imperative. It would only delay the
early disposition of the case if allowed.
On January 8, 1990, this Court dismissed the petition in G.R. No. 85538. The petitioners filed a
motion for reconsideration and on July 2, 1992, this Court granted the motion and reversed the
decision of the CA. This Court ruled in the said case as follows:
When Concepcion Palma Gil, plaintiff in Civil Case No. 1160 sold the land in question to
Iluminada Pacetes on October 24, 1956, the latter became the new owner of the property. By
virtue of the order of substitution issued by the court, said new owner (Pacetes) became a
formal party---the party plaintiff. As the new party plaintiff, Pacetes had the right to move for
the issuance of a writ of execution, which was correctly granted by the trial court in the
questioned Order dated August 19, 1977.
The subsequent transfers of the property from Pacetes to Maglana, and then from Maglana to
herein movant Matulac, was acquired pendente lite. The latter (Matulac) as the latest owner of
the property, was, as aptly put by the trial court, subrogated to all the rights and obligations of
Pacetes. He is thus the party who now has a substantial interest in the property. Matulac is a
real party-in- interest subrogated to all the rights of Iluminada Pacetes, including the right to
the issuance of a writ of execution in his name. Hence, the questioned orders of the lower court
dated November 29, 1982 and February 18, 1983 as well as the Writ of Possession issued
pursuant to the aforementioned orders are valid. They do not in any way run counter to the
order of the lower court dated August 19, 1977, which granted the motion for execution filed by
Pacetes, who, as earlier pointed out, was succeeded in all his rights and interests, by herein
petitioner, Matulac.
Although the dispositive portion of the judgment rendered in Civil Case No. 1160 did not award
the parties their respective shares in the property, the power of the court to issue the order of
execution cannot be limited to what is stated in the dispositive portion of the judgment. As held
in Paylago vs. Nicolas (189 SCRA 728 [1990]), the body of the decision must be consulted in
case of ambiguity in the dispositive portion. Hence, in Jorge vs. Consolacion (supra), we ruled
that the execution of the judgment cannot be limited to its dispositive portion, considering the
continued failure of the defendant Nieves Palma Gil-Villarica, to comply with what was required
of her in the judgment. Respondents deprived petitioner Concepcion Palma Gil and her
successors-in-interest of their legal right to possess the land. [26] (Underscoring supplied)
On June 11, 1993, the trial court rendered judgment in Civil Case No. 15,356 in favor of the
defendants. The trial court ruled that this Court had affirmed, in G.R. No. 85538 and G.R. No. L-
60690, the sales of the property from Concepcion Palma Gil to Iluminada Pacetes, then to
Constancio Maglana and to Emilio Matulac; hence, the trial court was barred by the rulings of
this Court. The plaintiffs appealed to the CA with the following assignment of errors:
I. The trial court erred in not holding that Iluminada Pacetes had no right to sell or
transfer the two (2) parcels of land to Constancio Maglana;
II. That the trial court erred in not declaring the sale of the properties in question from
Iluminada Pacetes to Constancio Maglana, thence, from Constancio Maglana to Emilio Matulac
NULL and VOID;
III. That the trial court erred in dismissing the complaint;
IV. That the trial court erred in not ordering the cancellation of transfer Certificate of
Title No. T-80631 in the name of Emilio Matulac and the issuance of a new title in the name of
Concepcion Palma Gil;
V. That the trial court erred in not holding the appellees liable for damages to the
appellants. [27]
In the meantime, on June 29, 1994, the estate of Emilio Matulac executed a deed of sale of real
estate in which the estate sold Lots 59-C-1 and 59-C-2 and the building thereon to the
Prudential Education Plan, Inc. for P7,000,000.00. [28] On March 19, 1996, the CA rendered a
decision affirming the decision assailed therein and dismissing the appeal. The CA ruled that
the deed of absolute sale executed by Concepcion in favor of Iluminada Pacetes was a deed of
absolute sale over Lots 59-C-1 and 59-C-2, under which the ownership over the property
subject thereof was transferred to the vendee. Moreover, the validity of the sales of the subject
lots by Concepcion to Iluminada, by the latter to Constancio Maglana, and by the latter to Emilio
34
Matulac, had been confirmed by this Court in G.R. No. L-60690 and G.R. No. 85538. Although
Iluminada paid the balance of the purchase price of the property only on August 8, 1977, the
payment was still timely, in light of Article 1592 of the New Civil Code. Besides, the property
had already been sold to the respondents Constancio Maglana and Emilio Matulac.
The appellants, now petitioners in this case, assert that private respondents Agapito and
Iluminada Pacetes failed to pay the balance of the purchase price in the amount of P14,100.00.
They did consign and deposit the amount of P11,983.00, but only on August 8, 1977, twenty
one years from the execution of the Deed of Absolute Sale in favor of the said spouses, without
the latter instituting an action for the cancellation of their obligation. According to the
petitioners, the consignation made by Iluminada Pacetes of the amount did not produce any
legal effect. Furthermore, private respondents Constancio Maglana and Emilio Matulac were
not purchasers in good faith because at the time they purchased the respective properties, the
two-storey building constructed by the spouses Angel and Nieves Villarica on the said property
was still existing. Hence, the decision of the CA should be reversed and set aside.
In their Comment on the petition, private respondents Constancio Maglana and Agapito Pacetes
averred that the action of the petitioners in the court a quo was barred by the Decision of this
Court in G.R. No. L-60690 on November 24, 1989.
THE RULING OF THE COURT
The petition is denied due course.
We note that the petitioners failed to implead all the compulsory heirs of the deceased
Concepcion Gil in their complaint. When she died intestate, Concepcion Gil, a spinster, was
survived by her sister Nieves, and her nephews and nieces, three of whom are the petitioners
herein.
Upon Concepcion’s demise, all her rights and interests over her properties, and the rights and
obligations under the Deed of Absolute Sale executed in favor of Iluminada Pacetes, were
transmitted to her sister, and her nephews and nieces [29] by way of succession, a mode of
acquiring the property, rights and obligation of the decedent to the extent of the value of the
inheritance of the heirs. The heirs stepped into the shoes of the decedent upon the latter’s
death. [30]
In their complaint, the petitioners alleged that:
7. That upon the death of the late Concepcion Palma Gil, her heirs namely: A. Children of the
deceased Pilar Palma Gil Rodriguez; B. Children of the deceased Asuncion Palma Gil Hizon one
of whom is plaintiff Vicente Hizon, Jr.; C. Nieves Palma Gil Villarica; D. David Palma Gil one of
whom is plaintiff Angel Palma Gil; E. Perla Palma Gil; and F. Children of the deceased Jose Palma
Gil, ipso facto became co-owners of the said subject property by operation of law; [31]
When she testified, petitioner Palma Gil stated that:
ATTY. GALLARDO:
With the Court’s permission.
Q You said that you are one of the 3 plaintiffs in this case?
A Yes, sir.
Q Now, aside from these 3 plaintiffs who are supposed to be the heirs of the late
Concepcion Palma Gil, there are also other heirs who were not included as plaintiffs in this
case?
A Yes, because that time when they demolished the building and I accompanied Atty.
Villarica at the site where they had the demolition, we found out that during the confrontation
that we have to hurry and file the case right away. So we were not able to contact all the heirs
and I have contacted . . .since 3 of us were there during the demolition, so we decided that I will
be one, and Angel Palma Gil was also there and also Vicente Hizon Jr. whom I contacted at the
Apo View Hotel and I contacted also Julian Rodriguez, another cousin thru telephone and he
told us to go ahead and file the case. We cannot get all the heirs. We cannot gather all of them
and we will have a hard time asking them to sign, so we just filed the case.
Q You are telling the court that the other heirs were not included because they were not
available to sign the complaint?
A They were not there during the demolition.
Q When was the case filed?
A June 14, the demolition was on June 14, 1982.
ATTY. QUITAIN:
The best evidence would be the complaint, Your Honor.
ATTY. GALLARDO:
Q It appears in the complaint that it was filed sometime on June 16, 1982?
A We had it on June 14 the demolition, and we filed it right away because we were in a
hurry.
Q Since June 16, 1982 up to the present the other heirs did not do anything to be
included in the complaint?
ATTY. QUITAIN:
35
The best evidence would be the motion for intervention and it would seem that
compañero is contending that there is a need to include all heirs. Under the civil law on
property even one co-owner may file a case. [32]
Although the petitioners sought leave from the trial court to amend their complaint to implead
the intestate estate of the deceased Concepcion Gil through her administratrix Perla Palma Gil,
as party plaintiff, the trial court denied the petitioners’ plea. The petitioners manifested to the
trial court that they would assign the denial of their plea as one of the assigned errors in case of
appeal to the CA. They failed to do so. The petitioners were duty bound to implead all their
cousins as parties-plaintiffs; otherwise, the trial court could not validly grant relief as to the
present parties and as to those who were not impleaded. [33]
Being indispensable parties, the absence of the surviving sister, nephews and nieces of the
decedent in the complaint as parties-plaintiffs, and in this case, as parties-petitioners, renders
all subsequent actions of the trial court null and void for want of authority to act, not only as to
the absent parties, but even as to those present. Hence, the petition at bar should be dismissed.
[34]
Even if we were to brush aside this procedural lapse and delve into the merits of the case, a
denial in due course is inevitable.
Article 1191 [35] in tandem with Article 1592 [36] of the New Civil Code are central to the
issues at bar. Under the last paragraph of Article 1169 of the New Civil Code, in reciprocal
obligations, neither party incurs in delay if the other does not comply or is not ready to comply
in a proper manner with what is incumbent upon him. From the moment one of the parties
fulfils his obligation, delay in the other begins. Thus, reciprocal obligations are to be performed
simultaneously so that the performance of one is conditioned upon the simultaneous fulfillment
of the other. [37] The right of rescission of a party to an obligation under Article 1191 of the
New Civil Code is predicated on a breach of faith by the other party that violates the reciprocity
between them. [38]
That the deed of absolute sale executed by Concepcion Gil in favor of Iluminada Pacetes is an
executory contract and not an executed contract is a settled matter. In a perfected contract of
sale of realty, the right to rescind the said contract depends upon the fulfillment or non-
fulfillment of the prescribed condition. We ruled that the condition pertains in reality to the
compliance by one party of an undertaking the fulfillment of which would give rise to the
demandability of the reciprocal obligation pertaining to the other party. [39] The reciprocal
obligation envisaged would normally be, in the case of the vendee, the payment by the vendee
of the agreed purchase price and in the case of the vendor, the fulfillment of certain express
warranties. [40]
In another case, we ruled that the non-payment of the purchase price of property constitutes a
very good reason to rescind a sale for it violates the very essence of the contract of sale. In
Central Bank of the Philippines v. Bichara, [41] we held that the non-payment of the purchase
price of property is a resolutory condition for which the remedy is either rescission or specific
performance under Article 1191 of the New Civil Code. This is true for reciprocal obligations
where the obligation is a resolutory condition of the other. [42] The vendee is entitled to retain
the purchase price or a part of the purchase price of realty if the vendor fails to perform any
essential obligation of the contract. Such right is premised on the general principles of
reciprocal obligations. [43]
In this case, Concepcion Gil sold Lot 59-C-1 to Iluminada Pacetes for P21,600.00 payable as
follows:
1. The purchase price of P21,600.00 shall be paid as follows: P7,500.00, to be paid upon the
signing of this instrument; and the balance of P14,100.00, to be paid upon the delivery of the
corresponding Certificate of Title in the name of the VENDEE.
Concepcion Gil obliged herself to transfer title over the property to and under the name of the
vendee within 120 days from the execution of the deed.
2. That the VENDOR shall, within the period of ONE HUNDRED TWENTY (120) DAYS, from the
signing of this agreement, undertake and work for the issuance of the corresponding Certificate
of Title of the said Lot No. 59-C-1 in her favor with the proper government office or offices, to
the end that the same can be duly transferred in the name of the herein VENDEE, by virtue
thereof.
3. That pending the full and complete payment of the purchase price to the VENDOR, the
VENDEE shall collect and receive any and all rentals and such other income from the land
above-described for her own account and benefit, this right of the VENDEE to begin from
December 1, 1956.
That it is further stipulated that this contract shall be binding upon the heirs, executors and
administrators of the respective parties hereof.
And I, CONCEPCION PALMA GIL, with all the personal circumstances above-stated, hereby
confirm all the terms and conditions stipulated in this instrument. [44]
The vendee paid the downpayment of P7,500.00. By the terms of the contract, the obligation of
the vendee to pay the balance of the purchase price ensued only upon the issuance of the
certificate of title by the Register of Deeds over the property sold to and under the name of the
vendee, and the delivery thereof by the vendor Concepcion Gil to the latter. Concepcion failed to
secure a certificate of title over the property. When she died intestate on August 4, 1959, her
obligation to deliver the said title to the vendee devolved upon her heirs, including the
petitioners. The said heirs, including the petitioners failed to do so, despite the lapse of eighteen
years since Concepcion’s death.
Iluminada was not yet obliged on August 8, 1977 to pay the balance of the purchase price of the
property, but as a sign of good faith, she nevertheless consigned the amount of P11,983.00, part
of the balance of the purchase price of P14,000.00, with the court in Civil Case No. 1160. The
court accepted the consignation and she was issued receipts therefor. Still, the heirs of
36

Concepcion Gil, including the petitioners, failed to deliver the said title to the vendee. Iluminada 11 - ART. 1668
was compelled to file, at her expense, a petition with the RTC docketed as Miscellaneous Case
No. 4715 for the issuance of an owner’s duplicate of TCT No. 7450 covering the property sold G.R. No. 107737 October 1, 1999
which was granted by the court on March 22, 1978. It was only on May 9, 1978 that Iluminada
JUAN L. PEREZ, LUIS KEH, CHARLIE LEE and ROSENDO G. TANSINSIN, JR., petitioners,
managed to secure TCT No. 61514 over the property under her name. Upon the failure of the
heirs to comply with the decedent’s prestation, Iluminada Pacetes was impelled to resort to vs.
legal means to protect her rights and interests.
COURT OF APPEALS, LUIS CRISOSTOMO and VICENTE ASUNCION, respondents.
The petitioners, as successors-in-interest of the vendor, are not the injured parties entitled to a
rescission of the deed of absolute sale. It was Concepcion’s heirs, including the petitioners, who GONZAGA-REYES, J.:
were obliged to deliver to the vendee a certificate of title over the property under the latter’s
This is a petition for review on certiorari of the Decision 1 of the Court of Appeals affirming the
name, free from all liens and encumbrances within 120 days from the execution of the deed of
decision of the Regional Trial Court of Bulacan, Branch 9 2 that disposed of Civil Case No. 5610-
absolute sale on October 24, 1956, but had failed to comply with the obligation.
M (Luis Crisostomo v. Luis Keh, Juan Perez, Charlie lee and Atty. Rosendo G. Tansinsin, Jr.) as
The consignation by the vendee of the purchase price of the property is sufficient to defeat the follows:
right of the petitioners to demand for a rescission of the said deed of absolute sale. [45]
WHEREFORE, premises considered, judgment is hereby rendered:
It bears stressing that when the vendee consigned part of the purchase price with the Court and
a) directing defendant JUAN PEREZ to allow plaintiff LUIS CRISOSTOMO to occupy and operate
secured title over the property in her name, the heirs of Concepcion, including the petitioners,
the "Papaya Fishpond" for a period of 5 1/2 years at the rental rates of P150,000.00 for the first
had not yet sent any notarial demand for the rescission of the deed of absolute sale to the
six months and P175,000.00 for the remaining five years (the same rates provided for in Exh.
vendee, or filed any action for the rescission of the said deed with the appropriate court.
4);
Although the vendee consigned with the Court only the amount of P11,983.00, P2,017.00 short
b) ordering defendants LUIS KEH, CHARLIE LEE, JUAN PEREZ and Atty. ROSENDO TANSINSIN,
of the purchase price of P14,000.00, it cannot be claimed that Concepcion was an unpaid seller
JR. to pay unto the plaintiff the amounts of P150,000.00 as actual damages; P20,000.00 as moral
because under the deed of sale, she was still obligated to transfer the property in the name of
damages; P20,000.00 as exemplary damages; and P10,000.00 as attorney's fees, plus the costs
the vendee, which she failed to do so. According to Article 1167 of the New Civil Code:
of the suit;
Art. 1167. If a person obliged to do something fails to do it, the same shall be executed at his
c) directing the release, delivery or payment directly to plaintiff LUIS CRISOSTOMO of the
cost.
amounts of P128,572.00 and P123,993.85, including the interests which may have already
This same rule shall be observed if he does it in contravention of the tenor of the obligation. accrued thereon, deposited with the Paluwagan ng Bayan Savings Bank (Paombong, Bulacan
Furthermore, it may be decreed that what has been poorly done be undone. (1098) Branch) in the name of the Clerk of Courtand/or Deputy Clerk of Court Rodrigo C. Libunao
under this Court's Order dated February 14, 1980; however, the plaintiff is required to pay
The vendee (Iluminada) had to obtain the owner’s duplicate of TCT No. 7450 and thereafter defendant Perez the corresponding rental on the fishpond for the period June 1979-January
secure its transfer in her name. Pursuant to Article 1167, the expenses incurred by the vendee 1980 based on the rate of P150,000.00 per annum, deducting therefrom the amount of
should be charged against the amount of P2,617.00 due to the heirs of Concepcion Gil as the P21,428.00 already paid to and received by then co-usufructuary Maria Perez (Exh. E);
vendor’s successors-in-interest.
d) dismissing the defendants' separate counter-claims for damages, for lack of merit; and
In sum, the decision of the CA affirming the decision of the RTC dismissing the complaint of the
petitioners is affirmed. e) dismissing the Pleading in Intervention Pro Interesse Suo filed by VICENTE ASUNCION on
the ground of lis pendens.
IN LIGHT OF ALL THE FOREGOING, the petition for review is DENIED for lack of merit.
SO ORDERED.
SO ORDERED.
The facts upon which the Court of Appeals based its Decision are the following:
37
Along with Maria Perez, Fructuosa Perez, Victoria Perez, Apolonio Lorenzo and Vicente
Asuncion, petitioner Juan Perez is a usufructuary of a parcel of land popularly called the
"Papaya Fishpond." Covered by Transfer Certificate of Title No. 8498 of the Registry of Deeds
for the Province of Bulacan, the fishpond is located in Sto. Rosario, Hagonoy, Bulacan and has an
area of around 110 hectares. On June 5, 1975, the usufructuaries entered into a contract leasing
the fishpond to Luis Keh for a period of five (5) years and renewable for another five (5) years
by agreement of the parties, under the condition that for the first five-year period the annual
rental would be P150,000.00 and for the next five years, P175,000.00. Paragraph 5 of the lease
contract states that the lessee "cannot sublease" the fishpond "nor assign his rights to anyone."
3 JUAN L. PEREZ ET AL.
Private respondent Luis Crisostomo, who reached only the 5th grade, is a businessman engaged
in the operation of fishponds. On September 20, 1977, while he was at his fishpond in Almazar,
Hermosa, Bataan, his bosom friend named Ming Cosim arrived with petitioner Charlie Lee. The
two persuaded private respondent to take over the operation of "Papaya Fishpond" as
petitioner Lee and his partner, petitioner Luis Keh, were allegedly losing money in its
operation. Private respondent having acceded to the proposal, sometime in December of that
year, he and petitioners Lee and Keh executed a written agreement denominated as "pakiao
buwis" whereby private respondent would take possession of the "Papaya Fishpond" from
January 6, 1978 to June 6, 1978 in consideration of the amount of P128,000.00 broken down as
follows: P75,000.00 as rental, P50,000.00 for the value of milkfish in the fishpond and P3,000
for labor expenses. Private respondent paid the P75,000.00 to petitioner Keh at the house of
petitioner Lee in Sta. Cruz, Hagonoy, Bulacan in the presence of Lee's wife, brother-in-law and
other persons. He paid the balance to petitioner Lee sometime in February or March 1978
because he was uncertain as to the right of petitioners Keh and Lee to transfer possession over
the fishpond to him. Private respondent made that payment only after he had received a copy of
a written agreement dated January 9, 1978 4 whereby petitioner Keh ceded, conveyed and
transferred all his "rights and interests" over the fishpond to petitioner Lee, "up to June 1985."
From private respondent's point of view, that document assured him of continuous possession
of the property for as long as he paid the agreed rentals of P150,000.00 until 1980 and
P175,000.00 until 1985.
For the operation of the fishpond from June 1978 to May 1979, private respondent,
accompanied by Ming Cosim and Ambrocio Cruz, paid the amount of P150,000.00 at the
Malabon, Metro Manila office of petitioner Keh. The following receipt was issued to him:
RECEIPT
June 6, 1978
P150.000,00
Received from Mr. LUIS KEH the sum of ONE HUNDRED FIFTY THOUSAND PESOS
(P150,000.00), Philippine Currency, as full payment of the yearly leased rental of the Papaya
Fishpond for the year beginning June 1978 and ending on May 1979. The next payment shall be
made on June 6, 1979.
Said sum was paid in Producers Bank of the Philippines Check No. (illegible) 164595 dated June
6, 1978.
Mr. Luis Keh has not transferred his rights over the fishpond to any person.
Caloocan City, June 6, 1978.
By:
Rosendo G. Tansinsin, Jr.
CONFORME TO THE ABOVE:
LUIS KEH
Handwritten below that receipt but above the signature of petitioner Charlie Lee, are the
following: "Rec'd from Luis Crisostomo sum of one hundred fifty-four thousand P154,000.00
for above payment. 5
Private respondent incurred expenses for repairs in and improvement of the fishpond in the
total amount of P486,562.65. 6 However, sometime in June 1979, petitioners Tansinsin and
Juan Perez, in the company of men bearing armalites, went to the fishpond and presented
private respondent with a letter dated June 7, 1979 showing that petitioner Luis Keh had
surrendered possession of the fishpond to the usufructuaries.
Because of the threat to deprive him of earnings of around P700,000.00 that the 700,000
milkfish in the fishpond would yield, and the refusal of petitioners Keh, Juan Perez and Lee to
accept the rental for June 5, 1979 to June 6, 1980, private respondent filed on June 14, 1979
with the then Court of First Instance of Bulacan an action for injunction and damages. He
prayed for the issuance of a restraining order enjoining therein defendants Keh, Perez and Lee
from entering the premises and taking possession of the fishpond. He also prayed for actual
damages of P50,000.00, moral damages of P20,000.00, exemplary damages in an amount that
the court might award, and attorney's fees of P10,000.00. 7
That same day, June 14, 1979, the lower court granted the prayer for a restraining order. On
November 13, 1979, Crisostomo paid one of the usufructuaries, Maria Perez (who died in
1984), the amount of P21,428.00 as her 1/7 share of the annual rental of the fishpond for 1979-
80. Maria Perez issued a notarized receipt for that amount. 8
On January 11, 1980, the court lifted the restraining order thereby effectively depriving private
respondent of possession over the fishpond. On February 14, 1980, the parties submitted a
partial compromise agreement with the following stipulations:
38
1. The amount of P128,572.00 that private respondent deposited as rental with the Office of the
Clerk of Court under O.R. No. 21630 dated November 15, 1979 be withdrawn from that office
and deposited with the Paluwagan ng Bayan Savings & Loan Association, Inc. (Paombong,
Bulacan branch) and which deposit shall not be withdrawn unless authorized by the court; and
2. The plaintiff could personally harvest milkfish "with commercial value" in the presence of
Perez and under the supervision of the deputy clerk of court within the appointed period and
that the net proceeds of the sale (P123,993.85 per the Report dated March 4, 1980 of the
deputy clerk of court) be deposited in the name of the deputy clerk of court of Branch 6 of the
then Court of First Instance of Bulacan with the same branch of the Paluwagan ng Bayan
Savings & Loan Association, Inc. and which deposit shall not be withdrawn unless upon order of
the court after hearing.
The court approved that agreement on that same date.
Thereafter, the usufructuaries entered into a contract of lease with Vicente Raymundo and
Felipe Martinez for the six-year period of June 1, 1981 to May 30, 1987 in consideration of the
annual rentals of P550,000.00 for the first two years and P400,000.00 for the next four years.
Upon expiration of that lease, the same property was leased to Pat Laderas for P1 million a
year.
The complaint was later amended to include petitioner Tansinsin, the alleged administrator of
the fishpond, as one of the defendants. 9 Except in the joint answer that the defendants had
filed, petitioners Keh and Lee did not appear before the court. Neither did they testify.
In their defense, petitioners Juan Perez and Tansinsin presented evidence to prove that they
had negotiated for the lease of the property with Benito Keh in 1975. However, they averred,
for reasons unknown to petitioner Perez, in the contract of lease that petitioner Tansinsin
prepared, petitioner Luis Keh was named as lessee. Petitioner Perez had never met Keh or Lee
but according to petitioner Tansinsin, petitioner Luis Keh was substituted for Benito Keh
because the latter was preoccupied with his other businesses. Sometime in 1979, petitioner
Keh's agent named Catalino Alcantara relayed to petitioner Perez, Keh's intention to surrender
possession of the fishpond to the usufructuaries. Because petitioner Perez demanded that said
intention should be made in writing, on June 5, 1979, Perez received from Keh a letter to that
effect.
When private respondent received a copy of that letter of petitioner Keh, he took the position
that petitioner Perez had no right to demand possession of the fishpond from him because
Perez had no contract with him. Private respondent was allowed four (4) months within which
to vacate the premises but he immediately filed the complaint for injunction and damages.
Thereafter, private respondent's counsel, Atty. Angel Cruz and other persons tried to prevail
upon petitioner Perez to allow private respondent to occupy the property for three (3) more
years. Petitioner Perez declined that proposition.
On September 6, 1989, the lower court rendered the aforesaid decision. It arrived at the
conclusion that the defendants therein "conspired with one another to exploit the plaintiff's
naivete and educational inadequacies and, in the process, to defraud him by inducing him into
taking possession of the "Papaya Fishpond" in their fond hope that, as soon as the plaintiff —
applying his known expertise as a successful fishpond operator — shall have considerably
improved the fishpond, they will regain possession of the premises and offer the lease thereof
to other interested parties at much higher rental rates as laid bare by supervening realities."
That conclusion was founded on the following:
1. The plaintiffs (private respondent Crisostomo's) testimony bears the "hallmarks of truth:
candid, straightforward and uncontrived." He had proven himself a "much more credible
witness than his opponents."
2. The notarized receipt of Maria Perez of her share as a usufructuary in the rental for 1979-80
is a "clear avowal of plaintiff’s legitimate operation of the "Papaya Fishpond" as assignee or
transferee thereof." It was impossible for the other usufructuaries, especially Juan Perez who
was residing in the same locality and actively involved in the "affairs of the fishpond," not to
have known that plaintiff occupied the fishpond for one and a half years as assignee of Keh and
Lee. It was unbelievable that both Tansinsin and Perez would only perceive the plaintiff as a
mere encargado of Keh and Lee.
3. The receipt whereby Tansinsin acknowledged payment of P150,000.00 as rental for June
1978-May 1979 bears "tell-tale signs" of the conspiracy. Firstly, the statement "Mr. Luis Keh has
not transferred his rights over the fishpond to any person" is entirely irrelevant to that receipt
unless it was intended "to pre-empt plaintiff's claim of rights and interests over the said
property as either sub-lessee or assignee." Secondly, Keh's having signified "Conforme to the
above" is a gratuitous notation as it actually indicates that the money came from the plaintiff.
Thirdly, Atty. Tansinsin's receipt of the amount for and in behalf of "JUAN L. PEREZ ET AL."
illustrates his "active and dominant role in the affairs" of the fishpond whether as administrator
thereof or as beneficiary of a share from its fruits.
4. Service upon plaintiff of Keh's letter surrendering possession of the fishpond implied that
defendants knew that plaintiff was in possession thereof. That they resorted to the intimidating
presence of armed men is proof that they expected the plaintiff to refuse to give up possession
of the property. These circumstances "completely belie the protestations of Perez and
Tansinsin of lack of knowledge of the contract entered into" between the plaintiff, and Lee and
Keh.
5. The non-presentation of Lee and Keh on the witness stand by Atty. Tansinsin "can very well
be construed as a smart maneuver to cover up the sinister cabal for deception inferrable from
the attendant facts and circumstances." In their joint answer, Keh and Lee tried to relieve Perez
of any liability in favor of the plaintiff. That is understandable "because, should the Court
disregard the reliance of Perez on the prohibition against sub-lease or assignment of the
"Papaya Fishpond", then all the defendants shall have exposed themselves to unavoidable
liability for the acts complained of by the plaintiff."
39
6. Atty. Tansinsin was the common legal counsel of all the defendants and, by his testimony,
even the plaintiff. Atty. Tansinsin's denial that he was plaintiffs’ counsel was his way of
"deflecting plaintiff’s imputations of professional improprieties against him." Plaintiff must
have assumed that Atty. Tansinsin was also his lawyer considering that they were "on very
friendly terms" and therefore Atty. Tansinsin might have been instrumental in dispelling
whatever fears plaintiff had entertained as regards the business transactions involved.
7. The fact that the fishpond was subsequently rented out for astronomical amounts is proof
that the plaintiff had considerably improved the fishpond. 10
The lower court added:
Bluntly yet succinctly put, the foregoing circumstances when viewed collectively with other
cogent aspects of the instant case inexorably lead to the Court's well-considered view that the
defendants — tempted by the bright prospect of a lucrative business coup — embarked
themselves in an egregious scheme to take undue advantage of the gullibility of the plaintiff
who, as borne by ensuing events, proved himself an ideal victim to prey upon: pathetically
unsuspecting yet only too eager to invest his material resources and self-acquired technical
know-how to redeem what was then a dwindling business enterprise from total collapse.
Plaintiff’s impressive performance, alas, only redounded ultimately to the supreme benefit
exclusively of the defendants. A classic case of "ako ang nagsaing, iba ang kumain!"
The defendants elevated the case to the Court of Appeals which, as earlier mentioned, affirmed
the decision of the trial court and disposed of the appeal on February 18, 1992 as follows:
WHEREFORE, in view of all the foregoing, judgment appealed from, is hereby AFFIRMED.
However, intervenor-appellant is hereby declared co-usufructuary of the Papaya fishpond, and
is, therefore, entitled to all rights and interest due to the usufructuaries of the said fishpond.
SO ORDERED.
On the defendant-appellants' contention that the principle of res judicata should be applied
because the Court of Appeals had ruled on the issue of possession in CA-G.R. No. 10415-R, a
petition for certiorari and injunction with preliminary mandatory injunction, the Court of
Appeals held that said principle was unavailing. The petition in CA-G.R. No. 10415-R involved a
writ of injunction "which presupposes the pendency of a principal or main action." Moreover,
the decision in that case did not resolve the issue of who should be in possession of the Papaya
Fishpond as findings of fact of the trial court cannot be reviewed in a certiorari proceeding.
The Court of Appeals ruled further that appellee Crisostomo "cannot be considered a possessor
in bad faith, considering that he took possession of the fishpond when appellants Keh and Lee
assigned to him appellant Keh's leasehold right." It held that appellant Perez knew of the
transfer of possession of the fishpond to appellee and that the receipt evidencing payment of
the 1978-1979 rental even bears an expressed admission by Lee that the payment came from
appellee Crisostomo.
Agreeing with the court a quo that "defendants-appellants employed fraud to the damage and
prejudice of plaintiff-appellee," the Court of Appeals held that appellants should be held liable
for damages. As regards the intervention pro interesse suo, the appellate court ruled that the
same should be allowed because, even if the litigation would not be technically binding upon
him, complications might arise that would prejudice his rights. Pointing out that a usufruct may
be transferred, assigned or disposed of the Court of Appeals ruled that the intervenor cannot be
excluded as a usufructuary because he had acquired his right as such from a sale in execution of
the share of Jorge Lorenzo, one of the usufructuaries of the fishpond.
Herein petitioners filed a motion for the reconsideration of that Decision of the Court of
Appeals. They alleged that the Decision was premature because it was rendered when they had
not yet even received a copy of the intervenor's brief wherein assignments of errors that
directly affected their rights and interests were made. They insisted that the principle of res
judicata was applicable because in G.R. No. 64354, this Court upheld the Decision of the Court of
Appeals in CA-G.R. No. 10415. They added that appellee Crisostomo was guilty of forum
shopping because the issue of possession had been "squarely decided" in CA-G.R. No. 10415.
They stressed that the contract of lease between Keh and the usufructuaries prohibited
subleasing of the fishpond; that by the receipt dated June 6, 1978, it was Keh who paid the
rental; that appellee Crisostomo was a perjured witness because in the notebook showing his
expenses, the amount of P150,000.00 for rentals does not appear; that the term of the contract
had expired and there was no renewal thereof, and that the consideration of P150,000.00 was
grossly inadequate. They averred that the Court of Appeals erred in awarding damages that
were not prayed for in the second amended complaint and that amounts not specified in the
complaint were awarded as damages. They disclaimed that Atty. Tansinsin was the
administrator of the fishpond.
On October 30, 1992, the Court of Appeals denied the motion for reconsideration for lack of
merit. It ruled that the Decision was not prematurely promulgated "considering that the
intervention proceeding is solely between intervenor and defendants-appellants, which is
completely separable and has nothing to do with the merits of the appeal."
In the instant petition for review on certiorari, petitioners raise six (6) grounds for giving due
course to it. 11 Those grounds may be distilled into the following: (a) the applicability of the
principle of res judicata; (b) the premature promulgation of the Decision of the Court of
Appeals, and (c) private respondent was not a sublesee of the fishpond under the law.
In arguing that the principle of res judicata applies in this case, petitioners rely on the portion
of the Decision 12 of the Court of Appeals in CA-G.R. No. 10415 that states:
We find no basis for declaring respondent Judge guilty of grave abuse of discretion on this
regard. The trial court's finding that petitioner does not appear entitled to any contract or law
to retain possession of the fishpond in question since he is neither an assignee or sub-lessee
and, therefore, merely a stranger to the contract of lease is a finding of fact review of which is
not proper in a certiorari proceedings. Not only is petitioner not a party to the lease agreement
over the fishpond in question but also the very authority upon which he predicates his
40
possession over the fishpond — that the leasehold right of Luis Keh had been assigned to him
— undoubtedly lacks basis for the very contract between Luis Keh and the lessors expressly
provides —
That the lessee cannot sub-lease above-described fishpond nor assign his rights to anyone.
xxx xxx xxx
(Emphasis supplied by petitioners.) 13
Petitioners assert that said Decision of the Court of Appeals which was in effect upheld by this
Court when it denied the petition for review on certiorari in G.R. No. 64354 (Luis Crisostomo v.
Intermediate Appellate Court), 14 is "res judicata to the issue of possession in this case." 15
However, as expressed in that quoted portion of the Decision in CA-G.R. No. 10415, the issue of
whether private respondent is an assignee or a sub-lessee "is a finding of fact review of which is
not proper in a certiorari proceeding" or the proceeding in that case.
CA-G.R. No. 10415 was spawned by the lifting on January 11, 1980 of the restraining order
previously issued by the trial court on June 14, 1979. Private respondent filed a special civil
action of certiorari and injunction with preliminary mandatory injunction and/or mandatory
restraining order to question the order of January 11, 1980. Thus, the issue in that petition was
whether or not the trial court gravely abused its discretion in lifting the restraining order. The
statement in that Decision of the Court of Appeals that a writ of preliminary injunction may be
denied "if the party applying for it has insufficient title or interest to sustain it and no claim to
an ultimate relief (is) sought" by no means resolved the issue of who is entitled to possess the
fishpond. In denying the petition for certiorari, the Court of Appeals was simply saying that
there was no reason to restore private respondent to the possession of the fishpond pursuant
to the restraining order that he had earlier obtained. The issue of possession was collaterally
discussed only to resolve the propriety of the lifting of the restraining order based on evidence
available at that time. Hence, there was no judgment on the merits in the main case or in Civil
Case No. 5610-M. Simply put, the Decision in CA-G.R. No. 10415 involves an interlocutory order
on the propriety of the lifting of the restraining order and not a judgment on the merits of Civil
Case No. 5610-M.
For res judicata to apply, the following requisites must concur: (a) the former judgment must
be final; (b) the court which rendered it had jurisdiction over the subject matter and the
parties; (c) the judgment must be on the merits, and (d) there must be between the first and
second actions identity of parties, subject matter and causes of action. 16 The Decision in CA-
G.R. No. 10415 having resolved only an interlocutory matter, the principle of res judicata
cannot be applied in this case. There can be no res judicata where the previous order in
question was not an order or judgment determinative of an issue of fact pending before the
court but was only an interlocutory order because it required the parties to perform certain
acts for final adjudication. 17 In this case, the lifting of the restraining order paved the way for
the possession of the fishpond on the part of petitioners and/or their representatives pending
the resolution of the main action for injunction. In other words, the main issue of whether or
not private respondent may be considered a sublessee or a transferee of the lease entitled to
possess the fishpond under the circumstances of the case had yet to be resolved when the
restraining order was lifted.
Petitioners assail the Court of Appeals' Decision as "premature" and therefore null and void,
because prior to the promulgation of that Decision, private respondent-intervenor Vicente
Asuncion failed to furnish them with a copy of his brief the assignment of errors of which
allegedly "directly" affected their rights and interests. 18 While it is true that petitioners were
deprived of the opportunity to contravene the allegations of the intervenor in his brief, that fact
can not result in the nullity of the Decision of the Court of Appeals. 19 Vicente Asuncion
intervened pro interesse suo or "according to his interest." 20 Intervention pro interessse suo
is a mode of intervention in equity wherein a stranger desires to intervene for the purpose of
asserting a property right in the res, or thing, which is the subject matter of the litigation,
without becoming a formal plaintiff or defendant, and without acquiring control over the
course of a litigation, which is conceded to the main actors therein. 21 In this case, intervenor
Vicente Asuncion aimed to protect his right as a usufructuary. Inasmuch as he has the same
rights and interests as petitioner Juan Perez, any judgment rendered in the latter's favor
entitled him to assert his right as such usufructuary against his co-usufructuary. Should said
intervenor claim his share in the usufruct, no rights of the petitioners other than those of Juan
Perez would be prejudiced thereby.
Worth noting is the fact that after the trial court had allowed Vicente Asuncion's intervention
pro interesse suo, petitioner Juan Perez filed a petition for certiorari docketed as CA-G.R. No.
13519 to set aside the order denying his motion to dismiss the pleading in intervention. In its
Decision of January 27, 1988, the Seventh Division of the Court of Appeals 22 denied the
petition for certiorari for lack of merit. It upheld the trial court's ruling to allow the
intervention pro interesse suo to protect Vicente Asuncion's right as a co-usufructuary in the
distribution or disposition of the amounts representing the rentals that were deposited with
the court. That Vicente Asuncion had filed Civil Case No. 8215-M seeking recovery of his alleged
share in the fruits of the Papaya Fishpond from 1978 would not be a reason for the dismissal of
the motion for intervention pursuant to Rule 16, Sec. 1 (e) of the Rules of Court. 23 The Court of
Appeals explained as follows:
Indeed, if by means of intervention a stranger to a lawsuit is permitted to intervene without
thereby becoming a formal plaintiff or defendant (Joaquin v. Herrera, 37 Phil. 705, 723 [1918]),
then there is in the case at bar no identity of parties to speak of. Lis pendens as a ground for a
motion to dismiss requires as a first element identity of parties in the two cases.
Nor is there an identity of relief sought. Civil Case No. 8295-M seeks an accounting of the
proceeds of the fishpond while Civil Case No. 5610-M is for injunction to prevent the petitioner
from retaking the fishpond from Luis Crisostomo. The herein private respondent sought to
intervene in the latter case simply to protect his right as usufructuary in the money deposited
in the court by the plaintiff Luis Crisostomo. We hold that in allowing the intervention in this
case the trial court acted with prudence and exercised its discretion wisely. 24
41
Unconvinced by the Court of Appeals' Decision in CA-G.R. SP No. 13519, petitioner Juan Perez
filed a petition for review on certiorari with this Court under G.R. No. 82096. On May 9, 1988,
this Court denied the petition on the grounds that the issues raised are factual and that there is
no sufficient showing that the findings of the respondent court are not supported by substantial
evidence or that the court had committed any reversible error in the questioned judgment. 25
The Resolution of the Court dated May 9, 1988 became final and executory on August 26, 1988.
26
Moreover, granting that the intervention be considered as Vicente Asuncion's "appeal," a
litigant's failure to furnish his opponent with a copy of his appeal does not suffice to warrant
dismissal of that appeal. In such an instance, all that is needed is for the court to order the
litigant to furnish his opponent with a copy of his appeal. 27 This is precisely what happened in
this case. On May 13, 1992, the Court of Appeals issued a Resolution directing counsel for
intervenor to furnish herein petitioners with a copy of intervenor Vicente Asuncion's brief
within a 10-day period. It also granted petitioners an opportunity to file a reply-brief or
memorandum and the intervenor, a reply to said memorandum. 28 That Resolution is proper
under the premises because, by the nature of an intervention pro interesse suo, it can proceed
independently of the main action. Thus, in the Resolution of October 30, 1992, in resolving the
issue of the alleged prematurity of its Decision, the Court of Appeals held that "the proceeding is
solely between intervenor and defendants-appellants, which is completely separable and has
nothing to do with the merits of the appeal." 29
At the hearing of Civil Case No. 5610-M, petitioner Juan Perez attempted to establish the death
on October 14, 1979 of Jorge Lorenzo, 30 the usufructuary from whom Vicente Asuncion
derived his right to intervene pro interesse suo. Since under Article 603 of the Civil Code a
usufruct is extinguished "by the death of the usufructuary, unless a contrary intention clearly
appears," there is no basis by which to arrive at the conclusion that the usufruct originally
exercised by Jorge Lorenzo has indeed been extinguished or, on the contrary, has survived
Lorenzo's demise on account of provisions in the document constituting the usufruct. That
matter is best addressed in Civil Case No. 8215-M wherein Vicente Asuncion seeks his share as
a transferee of the usufruct established for Jorge Lorenzo. All that is discussed here is the
matter of intervention pro interesse suo vis-a-vis the issue of prematurity of the Decision of the
Court of Appeals.
Petitioners' principal argument against the Court of Appeals' Decision in favor of private
respondent Crisostomo is that he could not have been an assignee or sub-lessee of the fishpond
because no contract authorized him to be so. Petitioners' argument is anchored on factual
issues that, however, have no room for discussion before this Court. It is well-entrenched
doctrine that questions of fact are not proper subjects of appeal by certiorari under Rule 45 of
the Rules of Court as this mode of appeal is confined to questions of law. 31 Factual findings of
the Court of Appeals are conclusive on the parties and carry even more weight when said court
affirms the factual findings of the trial
court. 32 Accordingly, this review shall be limited to questions of law arising from the facts as
found by both the Court of Appeals and the trial court.
Admittedly, the contract between the usufructuaries and petitioner Keh has a provision barring
the sublease of the fishpond. However, it was petitioner Keh himself who violated that
provision in offering the operation of the fishpond to private respondent. Apparently on
account of private respondent's apprehensions as regards the right of petitioners Keh and Lee
to transfer operation of the fishpond to him, on January 9, 1978, petitioner Keh executed a
document ceding and transferring his rights and interests over the fishpond to petitioner Lee.
That the same document might have been a ruse to inveigle private respondent to agree to their
proposal that he operate the fishpond is of no moment. The fact is, petitioner Keh did transfer
his rights as a lessee to petitioner Lee in writing and that, by virtue of that document, private
respondent acceded to take over petitioner Keh's rights as a lessee of the fishpond.
Although no written contract to transfer operation of the fishpond to private respondent was
offered in evidence, the established facts further show that petitioner Juan Perez and his
counsel, petitioner Tansinsin, knew of and acquiesced to that arrangement by their act of
receiving from the private respondent the rental for 1978-79. By their act of receiving rental
from private respondent through the peculiarly written receipt dated June 6, 1978, petitioners
Perez and Tansinsin were put in estoppel to question private respondent's right to possess the
fishpond as a lessee. Estoppel in pais arises when one, by his acts, representations or
admissions, or by his own silence when he ought to speak out, intentionally or through culpable
negligence, induces another to believe certain facts to exist and such other rightfully relies and
acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence
of such facts. 34
Nevertheless, we hesitate to grant private respondent's prayer that he should be restored to the
possession of the fishpond as a consequence of his unjustified ejectment therefrom. To restore
possession of the fishpond to him would entail violation of contractual obligations that the
usufructuaries have entered into over quite a long period of time now. Supervening events,
such as the devaluation of the peso as against the dollar as well as the addition of
improvements in the fishpond that the succeeding lessees could have introduced, have
contributed to the increase in rental value of the property. To place private respondent in the
same position he was in before the lifting of the restraining order in 1980 when he was
deprived the right to operate the fishpond under the contract that already expired in 1985 shall
be to sanction injustice and inequity. This Court, after all, may not supplant the right of the
usufructuaries to enter into contracts over the fishpond through this Decision. Nonetheless,
under the circumstances of the case, it is but proper that private respondent should be properly
compensated for the improvements he introduced in the fishpond.
Art. 1168 of the Civil Code provides that when an obligation "consists in not doing and the
obligor does what has been forbidden him, it shall also be undone at his expense." The lease
contract prohibited petitioner Luis Keh, as lessee, from subleasing the fishpond. In entering into
the agreement for pakiao-buwis with private respondent, not to mention the apparent artifice
42

that was his written agreement with petitioner Lee on January 9, 1978, petitioner Keh did 12 - ART. 1169
exactly what was prohibited of him under the contract — to sublease the fishpond to a third
party. That the agreement for pakiao-buwis was actually a sublease is borne out by the fact that G.R. No. 77648 August 7, 1989
private respondent paid petitioners Luis Keh and Juan Perez, through petitioner Tansinsin the
CETUS DEVELOPMENT, INC., petitioner,
amount of annual rental agreed upon in the lease contract between the usufructuaries and
petitioner Keh. Petitioner Keh led private respondent to unwittingly incur expenses to improve vs.
the operation of the fishpond. By operation of law, therefore, petitioner Keh shall be liable to
private respondent for the value of the improvements he had made in the fishpond or for COURT OF APPEALS and ONG TENG, respondents.
P486,562.65 with interest of six percent (6%) per annum from the rendition of the decision of
G.R. No. 77647 August 7, 1989
the trial court on September 6, 1989. 35
CETUS DEVELOPMENT, INC., petitioner,
The law supports the awards of moral and exemplary damages in favor of private respondent
and against the petitioners. Their conspiratorial scheme to utilize private respondent's vs.
expertise in the operation of fishponds to bail themselves out of financial losses has been
satisfactorily established to warrant a ruling that they violated Article 21 of the Civil Code and COURT OF APPEALS and EDERLINA NAVALTA, respondents.
therefore private respondent should be entitled to an award of moral damages. Article 21 states
that "(a)ny person who wilfully causes loss or injury to another in a manner that is contrary to G.R. No. 77649 August 7, 1989
morals, good customs or public policy shall compensate the latter for the damage." Exemplary CETUS DEVELOPMENT, INC., petitioner,
damages shall likewise be awarded pursuant to Article 2229 of the Civil Code. 36 Because
private respondent was compelled to litigate to protect his interest, attorney's fees shall also be vs.
awarded. 37
COURT OF APPEALS and JOSE LIWANAG, respondents.
WHEREFORE, in light of the foregoing premises, the decision of the Court of Appeals is
AFFIRMED insofar as it (a) directs the release to private respondent of the amounts of G.R. No. 77650 August 7, 1989
P128,572.00 and P123,993.85 deposited with the Paluwagan ng Bayan Savings Bank in
CETUS DEVELOPMENT, INC., petitioner,
Paombong, Bulacan and (b) requires private respondent Crisostomo to pay petitioner Juan
Perez the rental for the period June 1979 to January 1980 at the rate of P150,000.00 per annum vs.
less the amount of P21,428.00 already paid to usufructuary Maria Perez. It should, however, be
subject to the MODIFICATIONS that: COURT OF APPEALS and LEANDRO CANLAS, respondents.

1. Petitioner Luis Keh shall pay private respondent Luis Crisostomo in the amount of G.R. No. 77651 August 7, 1989
P486,562.25 with legal interest from the rendition of the judgment in Civil Case No. 5610-M or
CETUS DEVELOPMENT, INC., petitioner,
on September 6, 1989, and
vs.
2. Petitioners be made liable jointly and severally liable for moral damages of P50,000.00,
exemplary damages of P20,000 and attorney's fees of P10,000.00. COURT OF APPEALS and VICTORIA SUDARIO respondents.
No costs. G.R. No.77652 August 7, 1989
SO ORDERED. CETUS DEVELOPMENT, INC., petitioner,

vs.

COURT OF APPEALS and FLORA NAGBUYA respondents.

MEDIALDEA, J.:
43

This is a petition for review on certiorari of the decision dated January 30, 1987 of the Court of
Appeals in CA-GR Nos. SP-07945-50 entitled, "Cetus Development, Inc., Petitioner vs. Hon.
Conrado T. Limcaoco, Presiding Judge, Regional Trial Court of Manila, Branch Ederlina Navalta,
et. al., respondents.
The following facts appear in the records:
The private respondents, Ederlina Navalta, Ong Teng, Jose Liwanag, Leandro Canlas, Victoria
Sudario, and Flora Nagbuya were the lessees of the premises located at No. 512 Quezon
Boulevard, Quiapo, Manila, originally owned by the Susana Realty. These individual verbal
leases were on a month-to month basis at the following rates: Ederlina Navalta at the rate of
P80.50; Ong Teng at the rate of P96.10; Jose Liwanag at the rate of P40.35; Leandro Canlas at
the rate of P80.55; Victoria Sudario at the rate of P50.45 and Flora Nagbuya at the rate of
P80.55. The payments of the rentals were paid by the lessees to a collector of the Susana Realty
who went to the premises monthly.
Sometime in March, 1984, the Susana Realty sold the leased premises to the petitioner, Cetus
Development, Inc., a corporation duly organized and existing under the laws of the Philippines.
From April to June, 1984, the private respondents continued to pay their monthly rentals to a
collector sent by the petitioner. In the succeeding months of July, August and September 1984,
the respondents failed to pay their monthly individual rentals as no collector came.
On October 9, 1984, the petitioner sent a letter to each of the private respondents demanding
that they vacate the subject premises and to pay the back rentals for the months of July, August
and September, 1984, within fifteen (15) days from the receipt thereof. Immediately upon the
receipt of the said demand letters on October 10, 1984, the private respondents paid their
respective arrearages in rent which were accepted by the petitioner subject to the unilateral
condition that the acceptance was without prejudice to the filing of an ejectment suit.
Subsequent monthly rental payments were likewise accepted by the petitioner under the same
condition.
For failure of the private respondents to vacate the premises as demanded in the letter dated
October 9, 1984, the petitioner filed with the Metropolitan Trial Court of Manila complaints for
ejectment against the manner, as follows: (1) 105972-CV, against Ederlina Navalta (2) 105973-
CV, against Jose Liwanag; (3) 105974-CV, against Flora Nagbuya; (4) 105975-CV, against
Leandro Canlas; (5) 105976-CV, against Victoria Sudario and (6) 105977-CV, against Ong Teng.
In their respective answers, the six (6) private respondents interposed a common defense.
They claimed that since the occupancy of the premises they paid their monthly rental regularly
through a collector of the lessor; that their non-payment of the rentals for the months of July,
August and September, 1984, was due to the failure of the petitioner (as the new owner) to
send its collector; that they were at a loss as to where they should pay their rentals; that
sometime later, one of the respondents called the office of the petitioner to inquire as to where
they would make such payments and he was told that a collector would be sent to receive the
same; that no collector was ever sent by the petitioner; and that instead they received a
uniform demand letter dated October 9, 1984.
The private respondents, thru counsel, later filed a motion for consolidation of the six cases and
as a result thereof, the said cases were consolidated in the Metropolitan Trial Court of Manila,
Branch XII, presided over by Judge Eduardo S. Quintos, Jr. On June 4, 1985, the trial court
rendered its decision dismissing the six cases, a pertinent portion of which reads, as follows:
The records of this case show that at the time of the filing of this complaint, the rentals had all
been paid. Hence, the plaintiff cannot eject the defendants from the leased premises, because at
the time these cases were instituted, there are no rentals in arrears.
The acceptance of the back rental by the plaintiff before the filing of the complaint, as in these
case, the alleged rental arrearages were paid immediately after receipt of the demand letter,
removes its cause of action in an unlawful detainer case, even if the acceptance was without
prejudice.
x x x.
Furthermore, the court has observed that the account involved which constitutes the rentals of
the tenants are relatively small to which the ejectment may not lie on grounds of equity and for
humanitarian reasons.
Defendants' counterclaim for litigation expenses has no legal and factual basis for assessing the
same against plaintiff.
WHEREFORE, judgment is hereby rendered dismissing these cases, without pronouncement as
to costs.
Defendants' counterclaim is likewise dismissed.
SO ORDERED. (pp. 32-33, Rollo, G.R. No. 77647)
Not satisfied with the decision of the Metropolitan Trial Court, the petitioner appealed to the
Regional Trial Court of Manila and the same was assigned to Branch IX thereof presided over by
Judge Conrado T. Limcaoco (now Associate Justice of the Court of Appeals).lâwphî1.ñèt In its
decision dated November 19, 1985, the Regional Trial Court dismissed the appeal for lack of
merit.
In due time, a petition for review of the decision of the Regional Trial Court was filed by the
petitioner with the Court of Appeals. Said petition was dismissed on January 30, 1987, for lack
of merit.
Aggrieved by the decision of the Court of Appeals, petitioner now comes to Us in this petition,
assigning the following errors:
ASSIGNMENT OF ERRORS
44
I that entitles the lessor to bring an action for unlawful detainer. In other words, the demand
RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION,
AMOUNTING TO LACK OF JURISDICTION, WHEN IT ERRED IN HOLDING THAT THE CAUSE OF
ACTION FOR UNLAWFUL DETAINER IN THESE CASES DID NOT EXIST WHEN THE
COMPLAINTS WERE FILED BECAUSE PRIVATE RESPONDENTS TENDERED, AND PETITIONER
ACCEPTED, THE PAYMENT OF THE THREE (3) MONTHS RENTAL IN ARREARS WITHIN THE
FIFTEEN (15) DAY PERIOD FROM PRIVATE RESPONDENTS' RECEIPT OF PETITIONER'S
DEMAND LETTERS TO VACATE THE SUBJECT PREMISES AND TO PAY THE RENTALS IN
ARREARS.
II
RESPONDENT COURT OF APPEALS COMMITTED A GRAVEABUSE OF DISCRETION,
AMOUNTING TO LACK OF JURISDICTION COMMITTED A GRAVE WHEN IT ERRED IN
AFFIRMING THE DISMISSAL OF THE COMPLAINTS IN THESE CASES NOTWITHSTANDING THE
EXISTENCE OF VALID GROUNDS FOR THE JUDICIAL EJECTMENT OF PRIVATE RESPONDENT.
III
RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION,
AMOUNTING TO LACK OF JURISDICTION, WHEN IT ERRED IN HOLDING THAT THESE CASES
ARE CLASSIC EXAMPLES TO CIRCUMVENT THE RENT CONTROL LAW. (pp. 164-165, Rollo, G.R.
No. 77647)
The Court of Appeals defined the basic issue in this case as follows: whether or not there exists
a cause of action when the complaints for unlawful detainer were filed considering the fact that
upon demand by petitioner from private respondents for payment of their back rentals, the
latter immediately tendered payment which was accepted by petitioner.
In holding that there was no cause of action, the respondent Court relied on Section 2, Rule 70
of the Rules of Court, which provides:
Sec. 2. Landlord to proceed against tenant only after demand. — No landlord or his legal
representative or assign, shall be such action against a tenant for failure to pay rent due or to
comply with the conditions of his lease, unless the tenant shall have failed to pay such rent or
comply with such conditions for a period of fifteen (15) days or five (5) days in case of building,
after demand therefor, made upon qqqm personally, or by serving written notice of such
demand upon the person found on the premises, or by posting such notice on the premises if no
persons be found thereon.
It interpreted the said provision as follows:
.....the right to bring an action of ejectment or unlawful detainer must be counted from the time
the defendants failed to pay rent after the demand therefor. It is not the failure per se to pay
rent as agreed in the contract, but the failure to pay the rent after a demand therefor is made,
contemplated by the above-quoted provision is not a demand to vacate, but a demand made by
the landlord upon his tenant for the latter to pay the rent due if the tenant fails to comply with
the said demand with the period provided, his possession becomes unlawful and the landlord
may then bring the action for ejectment. (p. 28, , G.R. No. 77647)
We hold that the demand required and contemplated in Section 2, aforequoted, is a
jurisdictional requirement for the purpose of bringing an unlawful detainer suit for failure to
pay rent or comply with the conditions of lease. It partakes of an extrajudicial remedy that must
be pursued before resorting for judicial action so much so that when there is full compliance
with the demand, there arises no necessity for court action.
As to whether this demand is merely a demand to pay rent or comply with the conditions of the
lease or also a demand to vacate, the answer can be gleaned from said Section 2. This section
presupposes the existence of a cause of action for unlawful detainer as it speaks of "failure to
pay rent due or comply with the conditions of the lease." The existence of said cause of action
gives the lessor the right under Article 1659 of the New Civil Code to ask for the rescission of
the contract of lease and indemnification for damages, or only the latter, allowing the contract
to remain in force. Accordingly, if the option chosen is for specific performance, then the
demand referred to is obviously to pay rent or to comply with the conditions of the lease
violated. However, if rescission is the option chosen, the demand must be for the lessee to pay
rents or to comply with the conditions of the lease and to vacate. Accordingly, the rule that has
been followed in our jurisprudence where rescission is clearly the option taken, is that both
demands to pay rent and to vacate are necessary to make a lessee a deforciant in order that an
ejectment suit may be filed (Casilan et al. vs. Tomassi, L-16574, February 28,1964, 10 SCRA
261; Rickards vs. Gonzales, 109 Phil. 423, Dikit vs. Icasiano, 89 Phil. 44).lâwphî1.ñèt
Thus, for the purpose of bringing an ejectment suit, two requisites must concur, namely: (1)
there must be failure to pay rent or comply with the conditions of the lease and (2) there must
be demand both to pay or to comply and vacate within the periods specified in Section 2, Rule
70, namely 15 days in case of lands and 5 days in case of buildings. The first requisite refers to
the existence of the cause of action for unlawful detainer while the second refers to the
jurisdictional requirement of demand in order that said cause of action may be pursued.
It is very clear that in the case at bar, no cause of action for ejectment has accrued. There was
no failure yet on the part of private respondents to pay rents for three consecutive months. As
the terms of the individual verbal leases which were on a month-to-month basis were not
alleged and proved, the general rule on necessity of demand applies, to wit: there is default in
the fulfillment of an obligation when the creditor demands payment at the maturity of the
obligation or at anytime thereafter. This is explicit in Article 1169, New Civil Code which
provides that "(t)hose obliged to deliver or to do something incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation."
Petitioner has not shown that its case falls on any of the following exceptions where demand is
not required: (a) when the obligation or the law so declares; (b) when from the nature and
45

circumstances of the obligation it can be inferred that time is of the essence of the contract; and accipiendi and warrant consignation. There was simply lack of demand for payment of the
(c) when demand would be useless, as when the obligor has rendered it beyond his power to rentals.
perform.
In sum, We hold that respondent Court of Appeals did not commit grave abuse of discretion
The demand required in Article 1169 of the Civil Code may be in any form, provided that it can amounting to lack of jurisdiction in its conclusion affirming the trial court's decision dismissing
be proved. The proof of this demand lies upon the creditor. Without such demand, oral or petitioner's complaint for lack of cause of action. We do not agree, however, with the reasons
written, the effects of default do not arise. This demand is different from the demand required relied upon.
under Section 2, Rule 70, which is merely a jurisdictional requirement before an existing cause
of action may be pursued. ACCORDINGLY, the petition for review on certiorari is hereby DENIED for lack of merit and the
decision dated January 30, 1987 of respondent Court of Appeals is hereby AFFIRMED.
The facts on record fail to show proof that petitioner demanded the payment of the rentals
when the obligation matured. Coupled with the fact that no collector was sent as previously SO ORDERED.
done in the past, the private respondents cannot be held guilty of mora solvendi or delay in the
payment of rentals. Thus, when petitioner first demanded the payment of the 3-month
arrearages and private respondents lost no time in making tender and payment, which
petitioner accepted, no cause of action for ejectment accrued. Hence, its demand to vacate was
premature as it was an exercise of a non-existing right to rescind.

In contradistinction, where the right of rescission exists, payment of the arrearages in rental
after the demand to pay and to vacate under Section 2, Rule 70 does not extinguish the cause of
action for ejectment as the lessor is not only entitled to recover the unpaid rents but also to
eject the lessee.

Petitioner correctly argues that acceptance of tendered payment does not constitute a waiver of
the cause of action for ejectment especially when accepted with the written condition that it
was "without prejudice to the filing of an ejectment suit". Indeed, it is illogical or ridiculous not
to accept the tender of payment of rentals merely to preserve the right to file an action for
unlawful detainer. However, this line of argument presupposes that a cause of action for
ejectment has already accrued, which is not true in the instant case.

Petitioner likewise claims that its failure to send a collector to collect the rentals cannot be
considered a valid defense for the reason that sending a collector is not one of the obligations of
the lessor under Article 1654. While it is true that a lessor is not obligated to send a collector, it
has been duly established that it has been customary for private respondents to pay the rentals
through a collector. Besides Article 1257, New Civil Code provides that where no agreement has
been designated for the payment of the rentals, the place of payment is at the domicile of the
defendants. Hence, it could not be said that they were in default in the payment of their rentals
as the delay in paying the same was not imputable to them. Rather, it was attributable to
petitioner's omission or neglect to collect.

Petitioner also argues that neither is its refused to accept the rentals a defense for non-payment
as Article 1256 provides that "[i]f the creditor to whom the tender of payment has been made
refuses without just cause to accept it, the debtor shall be released from responsibility by the
consignation of the thing due." It bears emphasis that in this case there was no unjustified
refusal on the part of petitioner or non-acceptance without reason that would constitute mora
46
13- ART. 1169
G.R. No. 103577 October 7, 1996
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C.
GONZALES (for herself and on behalf of Florida C. Tupper, as attorney-in-fact), CIELITO A.
CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS MABANAG, petitioners,
vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONA PATRICIA ALCARAZ,
assisted by GLORIA F. NOEL as attorney-in-fact, respondents.
MELO, J.:p
The petition before us has its roots in a complaint for specific performance to compel herein
petitioners (except the last named, Catalina Balais Mabanag) to consummate the sale of a parcel
of land with its improvements located along Roosevelt Avenue in Quezon City entered into by
the parties sometime in January 1985 for the price of P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter referred to as
Coronels) executed a document entitled "Receipt of Down Payment" (Exh. "A") in favor of
plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is reproduced
hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 — Total amount
50,000 — Down payment
———————————
P1,190,000.00 — Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 119627 of
the Registry of Deeds of Quezon City, in the T55 total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased father, Constancio P.
Coronel, the transfer certificate of title immediately upon receipt of the down payment above-
stated.
On our presentation of the TCT already in or name, We will immediately execute the deed of
absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the
balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos upon execution of
the document aforestated;
2. The Coronels will cause the transfer in their names of the title of the property registered in
the name of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down
payment;
3. Upon the transfer in their names of the subject property, the Coronels will execute the deed
of absolute sale in favor of Ramona and the latter will pay the former the whole balance of One
Million One Hundred Ninety Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter
referred to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand
(P50,000.00) Pesos (Exh. "B", Exh. "2").
On February 6, 1985, the property originally registered in the name of the Coronels' father was
transferred in their names under TCT
No. 327043 (Exh. "D"; Exh. "4")
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to
intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million
Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred
Thousand (P300,000.00) Pesos (Exhs. "F-3"; Exh. "6-C")
For this reason, Coronels canceled and rescinded the contract (Exh. "A") with Ramona by
depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia
Alcaraz.
On February 22, 1985, Concepcion, et al., filed a complaint for specific performance against the
Coronels and caused the annotation of a notice of lis pendens at the back of TCT No. 327403
(Exh. "E"; Exh. "5").
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same
property with the Registry of Deeds of Quezon City (Exh. "F"; Exh. "6").
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in
favor of Catalina (Exh. "G"; Exh. "7").
On June 5, 1985, a new title over the subject property was issued in the name of Catalina under
TCT No. 351582 (Exh. "H"; Exh. "8").
(Rollo, pp. 134-136)
47
In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties
agreed to submit the case for decision solely on the basis of documentary exhibits. Thus,
plaintiffs therein (now private respondents) proffered their documentary evidence accordingly
marked as Exhibits "A" throutgh "J", inclusive of their corresponding submarkings. Adopting
these same exhibits as their own, then defendants (now petitioners) accordingly offered and
marked them as Exhibits "1" through "10", likewise inclusive of their corresponding
submarkings. Upon motion of the parties, the trial court gave them thirty (30) days within
which to simultaneously submit their respective memoranda, and an additional 15 days within
which to submit their corresponding comment or reply thereof, after which, the case would be
deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who
was then temporarily detailed to preside over Branch 82 of the RTC of Quezon City. On March 1,
1989, judgment was handed down by Judge Roura from his regular bench at Macabebe,
Pampanga for the Quezon City branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to
execute in favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in
and covered by Transfer Certificate of Title No. 327403 (now TCT No. 331582) of the Registry
of Deeds for Quezon City, together with all the improvements existing thereon free from all
liens and encumbrances, and once accomplished, to immediately deliver the said document of
sale to plaintiffs and upon receipt thereof, the said document of sale to plaintiffs and upon
receipt thereof, the plaintiffs are ordered to pay defendants the whole balance of the purchase
price amounting to P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the
Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and declared to
be without force and effect. Defendants and intervenor and all other persons claiming under
them are hereby ordered to vacate the subject property and deliver possession thereof to
plaintiffs. Plaintiffs' claim for damages and attorney's fees, as well as the counterclaims of
defendants and intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioner before the new presiding judge of the
Quezon City RTC but the same was denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to render anew
decision by the undersigned Presiding Judge should be denied for the following reasons: (1)
The instant case became submitted for decision as of April 14, 1988 when the parties
terminated the presentation of their respective documentary evidence and when the Presiding
Judge at that time was Judge Reynaldo Roura. The fact that they were allowed to file
memoranda at some future date did not change the fact that the hearing of the case was
terminated before Judge Roura and therefore the same should be submitted to him for decision;
(2) When the defendants and intervenor did not object to the authority of Judge Reynaldo
Roura to decide the case prior to the rendition of the decision, when they met for the first time
before the undersigned Presiding Judge at the hearing of a pending incident in Civil Case No. Q-
46145 on November 11, 1988, they were deemed to have acquiesced thereto and they are now
estopped from questioning said authority of Judge Roura after they received the decision in
question which happens to be adverse to them; (3) While it is true that Judge Reynaldo Roura
was merely a Judge-on-detail at this Branch of the Court, he was in all respects the Presiding
Judge with full authority to act on any pending incident submitted before this Court during his
incumbency. When he returned to his Official Station at Macabebe, Pampanga, he did not lose
his authority to decide or resolve such cases submitted to him for decision or resolution
because he continued as Judge of the Regional Trial Court and is of co-equal rank with the
undersigned Presiding Judge. The standing rule and supported by jurisprudence is that a Judge
to whom a case is submitted for decision has the authority to decide the case notwithstanding
his transfer to another branch or region of the same court (Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989
rendered in the instant case, resolution of which now pertains to the undersigned Presiding
Judge, after a meticulous examination of the documentary evidence presented by the parties,
she is convinced that the Decision of March 1, 1989 is supported by evidence and, therefore,
should not be disturbed.
IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to Annul Decision and
Render Anew Decision by the Incumbent Presiding Judge" dated March 20, 1989 is hereby
DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals
(Buena, Gonzaga-Reyes, Abad Santos (P), JJ.) rendered its decision fully agreeing with the trial
court.
Hence, the instant petition which was filed on March 5, 1992. The last pleading, private
respondents' Reply Memorandum, was filed on September 15, 1993. The case was, however, re-
raffled to undersigned ponente only on August 28, 1996, due to the voluntary inhibition of the
Justice to whom the case was last assigned.
While we deem it necessary to introduce certain refinements in the disquisition of respondent
court in the affirmance of the trial court's decision, we definitely find the instant petition bereft
of merit.
48
The heart of the controversy which is the ultimate key in the resolution of the other issues in
the case at bar is the precise determination of the legal significance of the document entitled
"Receipt of Down Payment" which was offered in evidence by both parties. There is no dispute
as to the fact that said document embodied the binding contract between Ramona Patricia
Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the other, pertaining to a
particular house and lot covered by TCT No. 119627, as defined in Article 1305 of the Civil Code
of the Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself,
with respect to the other, to give something or to render some service.
While, it is the position of private respondents that the "Receipt of Down Payment" embodied a
perfected contract of sale, which perforce, they seek to enforce by means of an action for
specific performance, petitioners on their part insist that what the document signified was a
mere executory contract to sell, subject to certain suspensive conditions, and because of the
absence of Ramona P. Alcaraz, who left for the United States of America, said contract could not
possibly ripen into a contract absolute sale.
Plainly, such variance in the contending parties' contentions is brought about by the way each
interprets the terms and/or conditions set forth in said private instrument. Withal, based on
whatever relevant and admissible evidence may be available on record, this, Court, as were the
courts below, is now called upon to adjudge what the real intent of the parties was at the time
the said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The
essential elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the
price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the
first essential element is lacking. In a contract to sell, the prospective seller explicity reserves
the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet
agree or consent to transfer ownership of the property subject of the contract to sell until the
happening of an event, which for present purposes we shall take as the full payment of the
purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the
subject property when the entire amount of the purchase price is delivered to him. In other
words the full payment of the purchase price partakes of a suspensive condition, the non-
fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained
by the prospective seller without further remedies by the prospective buyer. In Roque vs. Lapuz
(96 SCRA 741 [1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the respondent was a contract to
sell where the ownership or title is retained by the seller and is not to pass until the full
payment of the price, such payment being a positive suspensive condition and failure of which
is not a breach, casual or serious, but simply an event that prevented the obligation of the
vendor to convey title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition which is the full payment of
the purchase price, the prospective seller's obligation to sell the subject property by entering
into a contract of sale with the prospective buyer becomes demandable as provided in Article
1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from the
price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller,
while expressly reserving the ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said property exclusively to the prospective buyer
upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a conditional contract
of sale where the seller may likewise reserve title to the property subject of the sale until the
fulfillment of a suspensive condition, because in a conditional contract of sale, the first element
of consent is present, although it is conditioned upon the happening of a contingent event
which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the
contract of sale is completely abated (cf. Homesite and housing Corp. vs. Court of Appeals, 133
SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the contract of sale is
thereby perfected, such that if there had already been previous delivery of the property subject
of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of
law without any further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment
of the purchase price, ownership will not automatically transfer to the buyer although the
property may have been previously delivered to him. The prospective seller still has to convey
title to the prospective buyer by entering into a contract of absolute sale.
49
It is essential to distinguish between a contract to sell and a conditional contract of sale
specially in cases where the subject property is sold by the owner not to the party the seller
contracted with, but to a third person, as in the case at bench. In a contract to sell, there being
no previous sale of the property, a third person buying such property despite the fulfillment of
the suspensive condition such as the full payment of the purchase price, for instance, cannot be
deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance
of the property. There is no double sale in such case. Title to the property will transfer to the
buyer after registration because there is no defect in the owner-seller's title per se, but the
latter, of course, may be used for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the
sale becomes absolute and this will definitely affect the seller's title thereto. In fact, if there had
been previous delivery of the subject property, the seller's ownership or title to the property is
automatically transferred to the buyer such that, the seller will no longer have any title to
transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the
property who may have had actual or constructive knowledge of such defect in the seller's title,
or at least was charged with the obligation to discover such defect, cannot be a registrant in
good faith. Such second buyer cannot defeat the first buyer's title. In case a title is issued to the
second buyer, the first buyer may seek reconveyance of the property subject of the sale.
With the above postulates as guidelines, we now proceed to the task of deciphering the real
nature of the contract entered into by petitioners and private respondents.
It is a canon in the interpretation of contracts that the words used therein should be given their
natural and ordinary meaning unless a technical meaning was intended (Tan vs. Court of
Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the said "Receipt of Down
Payment" that they —
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 1199627 of
the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.
without any reservation of title until full payment of the entire purchase price, the natural and
ordinary idea conveyed is that they sold their property.
When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest
that there was a clear intent on the part of petitioners to transfer title to the buyer, but since the
transfer certificate of title was still in the name of petitioner's father, they could not fully effect
such transfer although the buyer was then willing and able to immediately pay the purchase
price. Therefore, petitioners-sellers undertook upon receipt of the down payment from private
respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names
from that of their father, after which, they promised to present said title, now in their names, to
the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay the
entire balance of the purchase price.
The agreement could not have been a contract to sell because the sellers herein made no
express reservation of ownership or title to the subject parcel of land. Furthermore, the
circumstance which prevented the parties from entering into an absolute contract of sale
pertained to the sellers themselves (the certificate of title was not in their names) and not the
full payment of the purchase price. Under the established facts and circumstances of the case,
the Court may safely presume that, had the certificate of title been in the names of petitioners-
sellers at that time, there would have been no reason why an absolute contract of sale could not
have been executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to
sell the properly to private respondent upon the fulfillment of the suspensive condition. On the
contrary, having already agreed to sell the subject property, they undertook to have the
certificate of title changed to their names and immediately thereafter, to execute the written
deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance
by the buyer with certain terms and conditions, promised to sell the property to the latter.
What may be perceived from the respective undertakings of the parties to the contract is that
petitioners had already agreed to sell the house and lot they inherited from their father,
completely willing to transfer full ownership of the subject house and lot to the buyer if the
documents were then in order. It just happened, however, that the transfer certificate of title
was then still in the name of their father. It was more expedient to first effect the change in the
certificate of title so as to bear their names. That is why they undertook to cause the issuance of
a new transfer of the certificate of title in their names upon receipt of the down payment in the
amount of P50,000.00. As soon as the new certificate of title is issued in their names,
petitioners were committed to immediately execute the deed of absolute sale. Only then will the
obligation of the buyer to pay the remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most commonly entered into so as to
protect the seller against a buyer who intends to buy the property in installment by
withholding ownership over the property until the buyer effects full payment therefor, in the
contract entered into in the case at bar, the sellers were the one who were unable to enter into
a contract of absolute sale by reason of the fact that the certificate of title to the property was
still in the name of their father. It was the sellers in this case who, as it were, had the
impediment which prevented, so to speak, the execution of an contract of absolute sale.
What is clearly established by the plain language of the subject document is that when the said
"Receipt of Down Payment" was prepared and signed by petitioners Romeo A. Coronel, et al.,
the parties had agreed to a conditional contract of sale, consummation of which is subject only
to the successful transfer of the certificate of title from the name of petitioners' father,
Constancio P. Coronel, to their names.
The Court significantly notes this suspensive condition was, in fact, fulfilled on February 6,
1985 (Exh. "D"; Exh. "4"). Thus, on said date, the conditional contract of sale between
petitioners and private respondent Ramona P. Alcaraz became obligatory, the only act required
50
for the consummation thereof being the delivery of the property by means of the execution of
the deed of absolute sale in a public instrument, which petitioners unequivocally committed
themselves to do as evidenced by the "Receipt of Down Payment."
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case
at bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price.
From the moment, the parties may reciprocally demand performance, subject to the provisions
of the law governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or
loss of those already acquired, shall depend upon the happening of the event which constitutes
the condition.
Since the condition contemplated by the parties which is the issuance of a certificate of title in
petitioners' names was fulfilled on February 6, 1985, the respective obligations of the parties
under the contract of sale became mutually demandable, that is, petitioners, as sellers, were
obliged to present the transfer certificate of title already in their names to private respondent
Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the
buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to
P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their petition, petitioners
conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves "to effect the transfer in our names from
our deceased father Constancio P. Coronel, the transfer certificate of title immediately upon
receipt of the downpayment above-stated". The sale was still subject to this suspensive
condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale subject to a
suspensive condition. Only, they contend, continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first transferring the title to the
property under their names, there could be no perfected contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they set their own trap for themselves, for Article 1186 of the Civil Code
expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment.
Besides, it should be stressed and emphasized that what is more controlling than these mere
hypothetical arguments is the fact that the condition herein referred to was actually and
indisputably fulfilled on February 6, 1985, when a new title was issued in the names of
petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4").
The inevitable conclusion is that on January 19, 1985, as evidenced by the document
denominated as "Receipt of Down Payment" (Exh. "A"; Exh. "1"), the parties entered into a
contract of sale subject only to the suspensive condition that the sellers shall effect the issuance
of new certificate title from that of their father's name to their names and that, on February 6,
1985, this condition was fulfilled (Exh. "D"; Exh. "4").
We, therefore, hold that, in accordance with Article 1187 which pertinently provides —
Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled,
shall retroact to the day of the constitution of the obligation . . .
In obligation to do or not to do, the courts shall determine, in each case, the retroactive effect of
the condition that has been complied with.
the rights and obligations of the parties with respect to the perfected contract of sale became
mutually due and demandable as of the time of fulfillment or occurrence of the suspensive
condition on February 6, 1985. As of that point in time, reciprocal obligations of both seller and
buyer arose.
Petitioners also argue there could been no perfected contract on January 19, 1985 because they
were then not yet the absolute owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and
obligations to be extent and value of the inheritance of a person are transmitted through his
death to another or others by his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P.
Coronel are compulsory heirs who were called to succession by operation of law. Thus, at the
point their father drew his last breath, petitioners stepped into his shoes insofar as the subject
property is concerned, such that any rights or obligations pertaining thereto became binding
and enforceable upon them. It is expressly provided that rights to the succession are
transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison vs.
Villanueva, 90 Phil. 850 [1952]).
51
Be it also noted that petitioners' claim that succession may not be declared unless the creditors
have been paid is rendered moot by the fact that they were able to effect the transfer of the title
to the property from the decedent's name to their names on February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter
into an agreement at that time and they cannot be allowed to now take a posture contrary to
that which they took when they entered into the agreement with private respondent Ramona P.
Alcaraz. The Civil Code expressly states that:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against the person relying thereon.
Having represented themselves as the true owners of the subject property at the time of sale,
petitioners cannot claim now that they were not yet the absolute owners thereof at that time.
Petitioners also contend that although there was in fact a perfected contract of sale between
them and Ramona P. Alcaraz, the latter breached her reciprocal obligation when she rendered
impossible the consummation thereof by going to the United States of America, without leaving
her address, telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer
with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason,
so petitioners conclude, they were correct in unilaterally rescinding rescinding the contract of
sale.
We do not agree with petitioners that there was a valid rescission of the contract of sale in the
instant case. We note that these supposed grounds for petitioners' rescission, are mere
allegations found only in their responsive pleadings, which by express provision of the rules,
are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules
of Court). The records are absolutely bereft of any supporting evidence to substantiate
petitioners' allegations. We have stressed time and again that allegations must be proven by
sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA
598 [1961]. Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on
February 6, 1985, we cannot justify petitioner-sellers' act of unilaterally and extra judicially
rescinding the contract of sale, there being no express stipulation authorizing the sellers to
extrajudicial rescind the contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs.
Vda. de Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz
because although the evidence on record shows that the sale was in the name of Ramona P.
Alcaraz as the buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramona's
mother, who had acted for and in behalf of her daughter, if not also in her own behalf. Indeed,
the down payment was made by Concepcion D. Alcaraz with her own personal check (Exh. "B";
Exh. "2") for and in behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners
ever questioned Concepcion's authority to represent Ramona P. Alcaraz when they accepted
her personal check. Neither did they raise any objection as regards payment being effected by a
third person. Accordingly, as far as petitioners are concerned, the physical absence of Ramona
P. Alcaraz is not a ground to rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation
to pay the full purchase price is concerned. Petitioners who are precluded from setting up the
defense of the physical absence of Ramona P. Alcaraz as above-explained offered no proof
whatsoever to show that they actually presented the new transfer certificate of title in their
names and signified their willingness and readiness to execute the deed of absolute sale in
accordance with their agreement. Ramona's corresponding obligation to pay the balance of the
purchase price in the amount of P1,190,000.00 (as buyer) never became due and demandable
and, therefore, she cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations
may be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.
xxx xxx xxx
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him. From the moment one
of the parties fulfill his obligation, delay by the other begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale between petitioners
and respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise
to a case of double sale where Article 1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should
be movable property.
Should if be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof to the person who presents the oldest title,
provided there is good faith.
The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the
second contract of sale was registered with the Registry of Deeds of Quezon City giving rise to
the issuance of a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985.
Thus, the second paragraph of Article 1544 shall apply.
52

The above-cited provision on double sale presumes title or ownership to pass to the first buyer,
the exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the
first buyer, and (b) should there be no inscription by either of the two buyers, when the second
buyer, in good faith, acquires possession of the property ahead of the first buyer. Unless, the
second buyer satisfies these requirements, title or ownership will not transfer to him to the
prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the subject, now a
distinguished member of the Court, Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in time, stronger in right).
Knowledge by the first buyer of the second sale cannot defeat the first buyer's rights except
when the second buyer first registers in good faith the second sale (Olivares vs. Gonzales, 159
SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats his rights
even if he is first to register, since knowledge taints his registration with bad faith (see also
Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No.
56232, 22 June 1984, 129 SCRA 656), it has held that it is essential, to merit the protection of
Art. 1544, second paragraph, that the second realty buyer must act in good faith in registering
his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No.
95843, 02 September 1992).
(J. Vitug Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).
Petitioner point out that the notice of lis pendens in the case at bar was annotated on the title of
the subject property only on February 22, 1985, whereas, the second sale between petitioners
Coronels and petitioner Mabanag was supposedly perfected prior thereto or on February 18,
1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer, bought the
property under a clean title, she was unaware of any adverse claim or previous sale, for which
reason she is buyer in good faith.
This Court had occasions to rule that:
If a vendee in a double sale registers that sale after he has acquired knowledge that there was a
previous sale of the same property to a third party or that another person claims said property
in a pervious sale, the registration will constitute a registration in bad faith and will not confer
upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of
Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz,
perfected on February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on
February 18, 1985, was correctly upheld by both the courts below.
Although there may be ample indications that there was in fact an agency between Ramona as
principal and Concepcion, her mother, as agent insofar as the subject contract of sale is
concerned, the issue of whether or not Concepcion was also acting in her own behalf as a co-
buyer is not squarely raised in the instant petition, nor in such assumption disputed between
mother and daughter. Thus, We will not touch this issue and no longer disturb the lower courts'
ruling on this point.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed
judgment AFFIRMED.
SO ORDERED.

We are not persuaded by such argument.

In a case of double sale, what finds relevance and materiality is not whether or not the second
buyer was a buyer in good faith but whether or not said second buyer registers such second
sale in good faith, that is, without knowledge of any defect in the title of the property sold.

As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good
faith, registered the sale entered into on February 18, 1985 because as early as February 22,
1985, a notice of lis pendens had been annotated on the transfer certificate of title in the names
of petitioners, whereas petitioner Mabanag registered the said sale sometime in April, 1985. At
the time of registration, therefore, petitioner Mabanag knew that the same property had
already been previously sold to private respondents, or, at least, she was charged with
knowledge that a previous buyer is claiming title to the same property. Petitioner Mabanag
cannot close her eyes to the defect in petitioners' title to the property at the time of the Republic of the Philippines
registration of the property.
SUPREME COURT
53

14 – ART 1169 This is to confirm our agreement to supply your Sulfuric Acid requirement under the following
terms and conditions:
G.R. No. 108129 September 23, 1999
A. Commodity : Sulfuric Acid in Bulk
AEROSPACE CHEMICAL INDUSTRIES, INC., petitioner,
B. Concentration : 98-99% H2SO4
vs.
C. Quantity : 500 MT-100 MT Ex-Basay
COURT OF APPEALS, PHILIPPINE PHOSPHATE FERTILIZER, CORP., respondents.
400 MT Ex-Sangi
QUISUMBING, J.:
D. Price : US$ 50.00/MT-FOB Cotcot,
This petition for review assails the Decision 1 dated August 19, 1992, of the Court of Appeals,
which set aside the judgment of the Regional Trial Court of Pasig, Branch 151. The case Basay, Negros Or.
stemmed from a complaint filed by the buyer (herein petitioner) against the seller (private
respondent) for alleged breach of contract. Although petitioner prevailed in the trial court, the US$ 54.00/MT-FOB Sangi, Cebu
appellate court reversed and instead found petitioner guilty of delay and therefore liable for
E. Payment : Cash in Philippine currency
damages, as follows:
payable to Philippine Phosphate
WHEREFORE, the Decision of the court a quo is SET ASIDE and a new one rendered, dismissing
the complaint with costs against the plaintiff (herein petitioner) and, on the counterclaim, Fertilizer Corp. (MAKATI) at
ordering the plaintiff Aerospace Chemical Industries, Inc. to pay the defendant, Philippine
Phosphate Fertilizer Corporation the sum of P324,516.63 representing the balance of the PCIB selling rate at the time of
maintenance cost and tank rental charges incurred by the defendant for the failure of the
payment at least five (5) days prior
plaintiff to haul the rest of the rest of the sulfuric acid on the designated date.
to shipment date.
Costs against plaintiff-appellee. 2
F. Shipping Conditions
As gleaned from the records, the following are the antecedents:
1. Laycan : July
On June 27, 1986, petitioner Aerospace Industries, Inc. (Aerospace) purchased five hundred
(500) metric tons of sulfuric acid from private respondent Philippine Phosphate Fertilizer 2. Load port : Cotcot, Basay, Negros Or. and
Corporation (Philphos). The contract 3 was in letter-form as follows:
Atlas Pier, Sangi, Cebu
27 June 1986
xxx xxx xxx
AEROSPACE INDUSTRIES INC.
11. Other terms and Conditions: To be mutually agreed upon.
203 E. Fernandez St.
Very truly yours,
San Juan, Metro Manila
Philippine Phosphate Fertilizer Corp.
Attention: Mr. Melecio Hernandez
Signed: Herman J. Rustia
Manager
Sr. Manager, Materials & Logistics
Subject : Sulfuric Acid Shipment
CONFORME:
Gentlemen:
54
AEROSPACE INDUSTRIES, INC.
Signed: Mr. Melecio Hernandez
Manager
Initially set beginning July 1986, the agreement provided that the buyer shall pay its purchases
in equivalent Philippine currency value, five days prior to the shipment date. Petitioner as
buyer committed to secure the means of transport to pick-up the purchases from private
respondent's loadports. Per agreement, one hundred metric tons (100 MT) of sulfuric acid
should be taken from Basay, Negros Oriental storage tank, while the remaining four hundred
metric tons (400 MT) should be retrieved from Sangi, Cebu.
On August 6, 1986, private respondent sent an advisory letter 4 to petitioner to withdraw the
sulfuric acid purchased at Basay because private respondent had been incurring incremental
expense of two thousand (P2,000.00) pesos for each day of delay in shipment.
On October 3, 1986, petitioner paid five hundred fifty-three thousand, two hundred eighty
(P553,280.00) pesos for 500 MT of sulfuric acid.
On November 19, 1986, petitioner chartered (hired) M/T Sultan Kayumanggi, owned by Ace
Bulk Head Services. The vessel was assigned to carry the agreed volumes of freight from
designated loading areas. M/T Kayumanggi withdrew only 70.009 MT of sulfuric acid from
Basay because said vessel heavily tilted on its port side. Consequently, the master of the ship
stopped further loading. Thereafter, the vessel underwent repairs.
In a demand letter 5 dated December 12, 1986, private respondent asked petitioner to retrieve
the remaining sulfuric acid in Basay tanks so that said tanks could be emptied on or before
December 15, 1986. Private respondent said that it would charge petitioner the storage and
consequential costs for the Basay tanks, including all other incremental expenses due to loading
delay, if petitioner failed to comply.
On December 18, 1986, M/T Sultan Kayumanggi docked at Sangi, Cebu, but withdrew only
157.51 MT of sulfuric acid. Again, the vessel tilted. Further loading was aborted. Two survey
reports conducted by the Societe Generale de Surveillance (SGS) Far East Limited, dated
December 17, 1986 and January 2, 1987, attested to these occurrences.
Later, on a date not specified in the record, M/T Sultan Kayumanggi sank with a total of 227.51
MT of sulfuric acid on board.1âwphi1.nêt
Petitioner chartered another vessel, M/T Don Victor, with a capacity of approximately 500 MT.
6 On January 26 and March 20, 1987, Melecio Hernandez, acting for the petitioner, addressed
letters to private respondent, concerning additional orders of sulfuric acid to replace its sunken
purchases, which letters are hereunder excerpted:
January 26, 1987
xxx xxx xxx
We recently charter another vessel M/T DON VICTOR who will be authorized by us to lift the
balance approximately 272.49 MT.
We request your good selves to grant us for another Purchase Order with quantity of 227.51
MT and we are willing to pay the additional order at the prevailing market price, provided the
lifting of the total 500 MT be centered/confined to only one safe berth which is Atlas Pier, Sangi,
Cebu. 7
March 20, 1987
This refers to the remaining balance of the above product quantity which were not loaded to
the authorized cargo vessel, M/T Sultan Kayumanggi at your load port — Sangi, Toledo City.
Please be advised that we will be getting the above product quantity within the month of April
1987 and we are arranging for a 500 MT Sulfuric Acid inclusive of which the remaining balance:
272.49 MT an additional product quantity thereof of 227.51 MT. 8
Petitioner's letter 9 dated May 15, 1987, reiterated the same request to private respondent.
On January 25, 1988, petitioner's counsel, Atty. Pedro T. Santos, Jr., sent a demand letter 10 to
private respondent for the delivery of the 272.49 MT of sulfuric acid paid by his client, or the
return of the purchase price of three hundred seven thousand five hundred thirty
(P307,530.00) pesos. Private respondent in reply, 11 on March 8, 1988, instructed petitioner to
lift the remaining 30 MT of sulfuric acid from Basay, or pay maintenance and storage expenses
commencing August 1, 1986.
On July 6, 1988, petitioner wrote another letter, insisting on picking up its purchases consisting
of 272.49 MT and an additional of 227.51 MT of sulfuric acid. According to petitioner it had paid
the chartered vessel for the full capacity of 500 MT, stating that:
With regard to our balance of sulfuric acid — product at your shore tank/plant for 272.49
metric ton that was left by M/T Sultana Kayumanggi due to her sinking, we request for an
additional quantity of 227.51 metric ton of sulfuric acid, 98% concentration.
The additional quantity is requested in order to complete the shipment, as the chartered vessel
schedule to lift the high grade sulfuric acid product is contracted for her full capacity/load
which is 500 metric tons more or less.
We are willing to pay the additional quantity — 227.51 metric tons high grade sulfuric acid in
the prevailing price of the said product. 12
xxx xxx xxx
By telephone, petitioner requested private respondent's Shipping Manager, Gil Belen, to get its
additional order of 227.51 MT of sulfuric acid at Isabel, Leyte. 13 Belen relayed the information
55

to his associate, Herman Rustia, the Senior Manager for Imports and International Sales of Receivable/Counterclaim (P324,516.63)
private respondent. In a letter dated July 22, 1988, Rustia replied:
===========
Subject: Sulfuric Acid Ex-Isabel
Trial ensued and after due proceedings, judgment was rendered by the trial court in
Gentlemen: petitioner's favor, disposing as follows:

Confirming earlier telcon with our Mr. G.B. Belen, we regret to inform you that we cannot
accommodate your request to lift Sulfuric Acid ex-Isabel due to Pyrite limitation and delayed
arrival of imported Sulfuric Acid from Japan. 14
On July 25, 1988, petitioner's counsel wrote to private respondent another demand letter for
the delivery of the purchases remaining, or suffer tedious legal action his client would
commence.
On May 4, 1989, petitioner filed a complaint for specific performance and/or damages before
the Regional Trial Court of Pasig, Branch 151. Private respondent filed its answer with
counterclaim, stating that it was the petitioner who was remiss in the performance of its
obligation in arranging the shipping requirements of its purchases and, as a consequence,
should pay damages as computed below:
Advanced Payment by Aerospace (Oct. 3, 1986) P553,280.00
Less Shipments
70.009 MT sulfuric acid P72,830.36
151.51 MT sulfuric acid 176,966.27 (249,796.63)
—————— ——————
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant, directing
the latter to pay the former the following sums:
1. P306,060.77 — representing the value of the undelivered 272.49 metric tons of sulfuric acid
plaintiff paid to defendant;
2. P91,818.23 — representing unrealized profits, both items with 12% interest per annum from
May 4, 1989, when the complaint was filed until fully paid;
3. P30,000.00 — as exemplary damages; and
4. P30,000.00 — as attorney's fees and litigation expenses, both last items also with 12%
interest per annum from date hereof until fully paid.
Defendant's counterclaims are hereby dismissed for lack of merit.
Costs against defendant. 15
In finding for the petitioner, the trial court held that the petitioner was absolved in its
obligation to pick-up the remaining sulfuric acid because its failure was due to force majeure.
According to the trial court, it was private respondent who committed a breach of contract
when it failed to accommodate the additional order of the petitioner, to replace those that sank
in the sea, thus:

Balance P303,483.37 To begin with, even if we assume that it is incumbent (necessary) upon the plaintiff to "lift" the
sulfuric acid it ordered from defendant, the fact that force majeure intervened when the vessel
Less Charges which was previously (sic) listing, but which the parties, including a representative of the
defendant, did not mind, sunk, has the effect of absolving plaintiff from "lifting" the sulfuric acid
Basay Maintenance Expense
at the designated load port. But even assuming the plaintiff cannot be held entirely blameless,
from Aug. 15 to Dec. 15, 1986 the allegation that plaintiff agreed to a payment of a 2,000-peso incremental expenses per day
to defendant for delayed "lifting has not been proven." . . .
(P2,000.00/day x 122 days) P244,000.00
Also, if it were true that plaintiff is indebted to defendant, why did defendant accept a second
Sangi — Tank Rental additional order after the transaction in litigation? Why also, did defendant not send plaintiff
statements of account until after 3 years?
from Aug. 15, 1986 to Aug. 15, 1987
All these convince the Court that indeed, defendant must return what plaintiff has paid it for the
(P32,000.00/mo. x 12 mos.) 384,000.00 (628,000.00)
goods which the latter did not actually receive. 16
—————— ——————
56
On appeal by private respondent, the Court of Appeals reversed the decision of the trial court,
as follows:
Based on the facts of this case as hereinabove set forth, it is clear that the plaintiff had the
obligation to withdraw the full amount of 500 MT of sulfuric acid from the defendant's loadport
at Basay and Sangi on or before August 15, 1986. As early as August 6, 1986 it had been
accordingly warned by the defendant that any delay in the hauling of the commodity would
mean expenses on the part of the defendant amounting to P2,000.00 a day. The plaintiff sent its
vessel, the "M/T Sultan Kayumanggi", only on November 19, 1987. The vessel, however; was
not capable of loading the entire 500 MT and in fact, with its load of only 227.519 MT, it sank.
Contrary to the position of the trial court, the sinking of the "M/T Sultan Kayumanggi" did not
absolve the plaintiff from its obligation to lift the rest of the 272.481 MT of sulfuric acid at the
agreed time. It was the plaintiff's duty to charter another vessel for the purpose. It did contract
for the services of a new vessel, the "M/T Don Victor", but did not want to lift the balance of
272.481 MT only but insisted that its additional order of 227.51 MT be also given by the
defendant to complete 500 MT. apparently so that the vessel may be availed of in its full
capacity.
xxx xxx xxx
We find no basis for the decision of the trial court to make the defendant liable to the plaintiff
not only for the cost of the sulfuric acid, which the plaintiff itself failed to haul, but also for
unrealized profits as well as exemplary damages and attorney's fees. 17
Respondent Court of Appeals found the petitioner guilty of delay and negligence in the
performance of its obligation. It dismissed the complaint of petitioner and ordered it to pay
damages representing the counterclaim of private respondent.
The motion for reconsideration filed by petitioner was denied by respondent court in its
Resolution dated December 21, 1992, for lack of merit.
Petitioner now comes before us, assigning the following errors:
I.
RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING PRIVATE RESPONDENT TO HAVE
COMMITTED A BREACH OF CONTRACT WHEN IT IS NOT DISPUTED THAT PETITIONER PAID
IN FULL THE VALUE OF 500 MT OF SULFURIC ACID TO PRIVATE RESPONDENT BUT THE
LATTER WAS ABLE TO DELIVER TO PETITIONER ONLY 227.51 M.T.
II.
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING PETITIONER LIABLE FOR
DAMAGES TO PRIVATE RESPONDENT ON THE BASIS OF A XEROX COPY OF AN ALLEGED
AGREEMENT TO HOLD PETITIONER LIABLE FOR DAMAGES FOR THE DELAY WHEN PRIVATE
RESPONDENT FAILED TO PRODUCE THE ORIGINAL IN CONTRAVENTION OF THE RULES ON
EVIDENCE.
III.
RESPONDENT COURT OF APPEALS ERRED IN FAILING TO CONSIDER THE UNDISPUTED
FACTS THAT PETITIONER'S PAYMENT FOR THE GOODS WAS RECEIVED BY PRIVATE
RESPONDENT WITHOUT ANY QUALIFICATION AND THAT PRIVATE RESPONDENT ENTERED
INTO ANOTHER CONTRACT TO SUPPLY PETITIONER 227.519 MT OF SULFURIC ACID IN
ADDITION TO THE UNDELIVERED BALANCE AS PROOF THAT ANY DELAY OF PETITIONER
WAS DEEMED WAIVED BY SAID ACTS OF RESPONDENT.
IV.
RESPONDENT COURT OF APPEALS ERRED IN NOT CONSIDERING THE LAW THAT WHEN THE
SALE INVOLVES FUNGIBLE GOODS AS IN THIS CASE THE EXPENSES FOR STORAGE AND
MAINTENANCE ARE FOR THE ACCOUNT OF THE SELLER (ARTICLE 1504 CIVIL CODE).
V.
RESPONDENT COURT OF APPEALS ERRED IN FAILING TO RENDER JUDGMENT FOR
PETITIONER AFFIRMING THE DECISION OF THE TRIAL COURT.
From the assigned errors, we synthesize the pertinent issues raised by the petitioner as
follows:
1. Did the respondent court err in holding that the petitioner committed breach of contract,
considering that:
a) the petitioner allegedly paid the full value of its purchases, yet received only a portion of said
purchases?
b) petitioner and private respondent allegedly had also agreed for the purchase and supply of
an additional 227.519 MT of sulfuric acid, hence prior delay, if any, had been waived?
2. Did the respondent court err in awarding damages to private respondent?
3. Should expenses for the storage and preservation of the purchased fungible goods, namely
sulfuric acid, be on seller's account pursuant to Article 1504 of the Civil Code?
To resolve these issues, petitioner urges us to review factual findings of respondent court and
its conclusion that the petitioner was guilty of delay in the performance of its obligation.
According to petitioner, that conclusion is contrary to the factual evidence. It adds that
respondent court disregarded the rule that findings of the trial court are given weight, with the
highest degree of respect. Claiming that respondent court's findings conflict with those of the
trial court, petitioner prays that the trial court's findings be upheld over those of the appellate
court.
57

Petitioner argues that it paid the purchase price of sulfuric acid, five (5) days prior to the
withdrawal thereof, or on October 3, 1986, hence, it had complied with the primary condition
set in the sales contract. Petitioner claims its failure to pick-up the remaining purchases on time
was due to a storm, a force majeure, which sank the vessel. It thus claims exemption from
liability to pay damages. Petitioner also contends that it was actually the private respondent's
shipping officer, who advised petitioner to buy the additional 227.51 MT of sulfuric acid, so as
to fully utilize the capacity of the vessel it chartered. Petitioner insists that when its ship was
ready to pick-up the remaining balance of 272.49 MT of sulfuric acid, private respondent could
not comply with the contract commitment due to "pyrite limitation."
While we agree with petitioner that when the findings of the Court of Appeals are contrary to
those of the trial court, 18 this Court may review those findings, we find the appellate court's
conclusion that petitioner violated the subject contract amply supported by preponderant
evidence. Petitioner's claim was predicated merely on the allegations of its employee, Melecio
Hernandez, that the storm or force majeure caused the petitioner's delay and failure to lift the
cargo of sulfuric acid at the designated loadports. In contrast, the appellate court discounted
Hernandez' assertions. For on record, the storm was not the proximate cause of petitioner's
failure to transport its purchases on time. The survey report submitted by a third party
surveyor, SGS Far East Limited, revealed that the vessel, which was unstable, was incapable of
carrying the full load of sulfuric acid. Note that there was a premature termination of loading in
Basay, Negros Oriental. The vessel had to undergo several repairs before continuing its voyage
to pick-up the balance of cargo at Sangi, Cebu. Despite repairs, the vessel still failed to carry the
whole lot of 500 MT of sulfuric acid due to ship defects like listing to one side. Its unfortunate
sinking was not due to force majeure. It sunk because it was, based on SGS survey report,
unstable and unseaworthy.
Witness surveyor Eugenio Rabe's incident report, dated December 13, 1986 in Basay, Negros
Oriental, elucidated(explain) this point:
Loading was started at 1500hrs. November 19. At 1600Hrs. November 20, loading operation
was temporarily stopped by the vessel's master due to ships stability was heavily tilted to port
side, ship's had tried to transfer the loaded acid to stbdside but failed to do so, due to their
auxiliary pump on board does not work out for acid.
xxx xxx xxx
Note. Attending surveyor arrived BMC Basay on November 22, due to delayed advice of said
vessel Declared quantity loaded onboard based on data's provided by PHILPHOS
representative.
On November 26, two representative of shipping company arrived Basay to assist the situation,
at 1300Hrs repairing and/or welding of tank number 5 started at 1000Hrs November 27,
repairing and/or welding was suspended due to the explosion of tank no. 5. Explosion ripped
about two feet of the double bottom tank.
November 27 up to date no progress of said vessel. 19
While at Sangi, Cebu, the vessel's condition (listing) did not improve as the survey report
therein noted:
Declared quantity loaded on board was based on shore tank withdrawal due to ship's
incomplete tank calibration table. Barge displacement cannot be applied due to ship was listing
to Stboard side which has been loaded with rocks to control her stability. 20
These two vital pieces of information were totally ignored by trial court. The appellate court
correctly took these into account, significantly. As to the weather condition in Basay, the
appellate court accepted surveyor Rabe's testimony, thus:
Q. Now, Mr. Witness, what was the weather condition then at Basay, Negros Oriental during the
loading operation of sulfuric acid on board the Sultana Kayumanggi?
A. Fair, sir. 21
Since the third party surveyor was neither petitioner's nor private respondent's employee, his
professional report should carry more weight than that of Melecio Hernandez, an employee of
petitioner. Petitioner, as the buyer, was obligated under the contract to undertake the shipping
requirements of the cargo from the private respondent's loadports to the petitioner's
designated warehouse. It was petitioner which chartered M/T Sultan Kayumanggi. The vessel
was petitioner's agent. When it failed to comply with the necessary loading conditions of
sulfuric acid, it was incumbent upon petitioner to immediately replace M/T Sultan Kayumanggi
with another seaworthy vessel. However, despite repeated demands, petitioner did not comply
seasonably.
Additionally, petitioner claims that private respondent's employee, Gil Belen, had
recommended to petitioner to fully utilize the vessel, hence petitioner's request for additional
order to complete the vessel's 500 MT capacity. This claim has no probative pertinence nor
solid basis. A party who asserts that a contract of sale has been changed or modified has the
burden of proving the change or modification by clear and convincing evidence. 22 Repeated
requests and additional orders were contained in petitioner's letters to private respondent. In
contrast, Belen's alleged action was only verbal; it was not substantiated at all during the trial.
Note that, using the vessel to full capacity could redound to petitioner's advantage, not the
other party's. If additional orders were at the instance of private respondent, the same must be
properly proved together with its relevance to the question of delay. Settled is the principle in
law that proof of verbal agreements offered to vary the terms of written agreements is
inadmissible, under the parol evidence rule. 23 Belen's purported recommendation could not
be taken at face value and, obviously, cannot excuse petitioner's default.
Respondent court found petitioner's default unjustified, and on this conclusion we agree:
It is not true that the defendant was not in a position to deliver the 272.481 MT which was the
balance of the original 500 MT purchased by the plaintiff. The whole lot of 500 MT was ready
58
for lifting as early as August 15, 1986. What the defendant could not sell to the plaintiff was the
additional 227.51 MT which said plaintiff was ordering, for the reason that the defendant was
short of the supply needed. The defendant, however, had no obligation to agree to this
additional order and may not be faulted for its inability to meet the said additional
requirements of the plaintiff. And the defendant's incapacity to agree to the delivery of another
227.51 MT is not a legal justification for the plaintiffs refusal to lift the remaining 272.481.
It is clear from the plaintiff's letters to the defendant that it wanted to send the "M/T Don
Victor" only if the defendant would confirm that it was ready to deliver 500 MT. Because the
defendant could not sell another 227.51 MT to the plaintiff, the latter did not send a new vessel
to pick up the balance of the 500 MT originally contracted for by the parties. This, inspite the
representations made by the defendant for the hauling thereof as scheduled and its reminders
that any expenses for the delay would be for the account of the plaintiff. 24
We are therefore constrained to declare that the respondent court did not err when it absolved
private respondent from any breach of contract.
Our next inquiry is whether damages have been properly awarded against petitioner for its
unjustified delay in the performance of its obligation under the contract. Where there has been
breach of contract by the buyer, the seller has a right of action for damages. Following this rule,
a cause of action of the seller for damages may arise where the buyer refuses to remove the
goods, such that buyer has to remove them. 25 Article 1170 of the Civil Code provides:
Those who in the performance of their obligations are guilty of fraud, negligence, or delay and
those who in any manner contravene the tenor thereof, are liable for damages.
Delay begins from the time the obligee judicially or extrajudicially demands from the obligor
the performance of the obligation. 26 Art. 1169 states:
Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.
In order that the debtor may be in default, it is necessary that the following requisites be
present: (1) that the obligation be demandable and already liquidated; (2) that the debtor
delays performance; and (3) that the creditor requires the performance judicially or
extrajudicially. 27
In the present case, private respondent required petitioner to ship out or lift the sulfuric acid as
agreed, otherwise petitioner would be charged for the consequential damages owing to any
delay. As stated in private respondent's letter to petitioner, dated December 12, 1986:
Subject: M/T "KAYUMANGGI"
Gentlemen:
This is to reiterate our telephone advice and our letter HJR-8612-031 dated 2 December 1986
regarding your sulfuric acid vessel, M/T "KAYUMANGGI".
As we have, in various instances, advised you, our Basay wharf will have to be vacated 15th
December 1986 as we are expecting the arrival of our chartered vessel purportedly to haul our
equipments and all other remaining assets in Basay. This includes our sulfuric acid tanks. We
regret, therefore, that if these tanks are not emptied on or before the 15th of December, we
either have to charge you for the tanks waiting time at Basay and its consequential costs (i.e.
chartering of another vessel for its second pick-up at Basay, handling, etc.) as well as all other
incremental costs on account of the protracted loading delay. 28 (Emphasis supplied)
Indeed the above demand, which was unheeded, justifies the finding of delay. But when did
such delay begin? The above letter constitutes private respondent's extrajudicial demand for
the petitioner to fulfill its obligation, and its dateline is significant. Given its date, however, we
cannot sustain the finding of the respondent court that petitioner's delay started on August 6,
1986. The Court of Appeals had relied on private respondent's earlier letter to petitioner of that
date for computing the commencement of delay. But as averred by petitioner, said letter of
August 6th is not a categorical demand. What it showed was a mere statement of fact, that
"[F]for your information any delay in Sulfuric Acid withdrawal shall cost us incremental
expenses of P2,000.00 per day." Noteworthy, private respondent accepted the full payment by
petitioner for purchases on October 3, 1986, without qualification, long after the August 6th
letter. In contrast to the August 6th letter, that of December 12th was a categorical demand.
Records reveal that a tanker ship had to pick-up sulfuric acid in Basay, then proceed to get the
remaining stocks in Sangi, Cebu. A period of three days appears to us reasonable for a vessel to
travel between Basay and Sangi. Logically, the computation of damages arising from the
shipping delay would then have to be from December 15, 1986, given said reasonable period
after the December 12th letter. More important, private respondent was forced to vacate Basay
wharf only on December 15th. Its Basay expenses incurred before December 15, 1986, were
necessary and regular business expenses for which the petitioner should not be obliged to pay.
Note that private respondent extended its lease agreement for Sangi, Cebu storage tank until
August 31, 1987, solely for petitioner's sulfuric acid. It stands to reason that petitioner should
reimburse private respondent's rental expenses of P32,000 monthly, commencing December
15, 1986, up to August 31, 1987, the period of the extended lease. Note further that there is
nothing on record refuting the amount of expenses abovecited. Private respondent presented in
court two supporting documents: first, the lease agreement pertaining to the equipment, and
second a letter dated June 15, 1987, sent by Atlas Fertilizer Corporation to private respondent
representing the rental charges incurred. Private respondent is entitled to recover the payment
for these charges. It should be reimbursed the amount of two hundred seventy two thousand
(P272,000.00) 29 pesos, corresponding to the total amount of rentals from December 15, 1986
to August 31, 1987 of the Sangi, Cebu storage tank.
Finally, we note also that petitioner tries to exempt itself from paying rental expenses and other
damages by arguing that expenses for the preservation of fungible goods must be assumed by
the seller. Rental expenses of storing sulfuric acid should be at private respondent's account
until ownership is transferred, according to petitioner. However, the general rule that before
59

delivery, the risk of loss is borne by the seller who is still the owner, is not applicable in this prejudicing the right of any party. 33 Set-off in this case is proper and reasonable. It involves
case because petitioner had incurred delay in the performance of its obligation. Article 1504 of deducting P272,000.00 (rentals) from P303,483.37 (advance payment), which will leave the
the Civil Code clearly states: amount of P31,483.37 refundable to petitioner.

Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is
transferred to the buyer, but when the ownership therein is transferred to the buyer the goods
are at the buyer's risk whether actual delivery has been made or not, except that:
xxx xxx xxx
(2) Where actual delivery has been delayed through the fault of either the buyer or seller the
goods are at the risk of the party at fault. (emphasis supplied)
On this score, we quote with approval the findings of the appellate court, thus:
WHEREFORE, the petition is hereby DENIED. The assailed decision of the Court of Appeals in
CA G.R. CV No. 33802 is AFFIRMED, with MODIFICATION that the amount of damages awarded
in favor of private respondent is REDUCED to Two hundred seventy two thousand pesos
(P272,000.00). It is also ORDERED that said amount of damages be OFFSET against petitioner's
advance payment of Three hundred three thousand four hundred eighty three pesos and thirty-
seven centavos (P303,483.37) representing the price of the 272.481 MT of sulfuric acid not
lifted. Lastly, it is ORDERED that the excess amount of thirty one thousand, four hundred eighty
three pesos and thirty seven centavos (P31,483.37) be RETURNED soonest by private
respondent to herein petitioner.1âwphi1.nêt

. . . The defendant [herein private respondent] was not remiss in reminding the plaintiff that it Costs against the petitioner.
would have to bear the said expenses for failure to lift the commodity for an unreasonable
SO ORDERED.
length of time.

But even assuming that the plaintiff did not consent to be so bound, the provisions of Civil Code
come in to make it liable for the damages sought by the defendant.

Art. 1170 of the Civil Code provides:

Those who in the performance of their obligations are guilty of fraud, negligence, or delay and
those who in any manner contravene the tenor thereof, are liable for damages.

Certainly, the plaintiff [herein petitioner] was guilty of negligence and delay in the performance
of its obligation to lift the sulfuric acid on August 15, 1986 and had contravened the tenor of its
letter-contract with the defendant. 30

As pointed out earlier, petitioner is guilty of delay, after private respondent made the necessary
extrajudicial demand by requiring petitioner to lift the cargo at its designated loadports. When
petitioner failed to comply with its obligations under the contract it became liable for its
shortcomings. Petitioner is indubitably liable for proven damages.

Considering, however, that petitioner made an advance payment for the unlifted sulfuric acid in
the amount of three hundred three thousand, four hundred eighty three pesos and thirty seven
centavos (P303,483.37), it is proper to set-off this amount against the rental expenses initially
paid by private respondent. It is worth noting that the adjustment and allowance of private
respondent's counterclaim or set-off in the present action, rather than by another independent
action, is encouraged by the law. Such practice serves to avoid circuitry of action, multiplicity of
suits, inconvenience, expense, and unwarranted consumption of the court's time. 31 The trend
of judicial decisions is toward a liberal extension of the right to avail of counterclaims or set-
offs. 32 The rules on counterclaims are designed to achieve the disposition of a whole
controversy involving the conflicting claims of interested parties at one time and in one action,
provided all parties can be brought before the court and the matter decided without
60
15 – ART 1169
G.R. No. 154017 December 8, 2003
DESAMPARADOS M. SOLIVA, Substituted by Sole Heir PERLITA SOLIVA GALDO, petitioner,
vs.
The INTESTATE ESTATE of MARCELO M. VILLALBA and VALENTA BALICUA VILLALBA,
respondents.
DECISION
PANGANIBAN, J.:
There is a valid sale even though the purchase price is not paid in full. The unpaid seller’s
remedy is an action to collect the balance or to rescind the contract within the time allowed by
law. In this case, laches barring the claim of petitioner to recover the property has already set
in. However, in the interest of substantial justice, and pursuant to the equitable principle
proscribing unjust enrichment, she is entitled to receive the unpaid balance of the purchase
price plus legal interest thereon.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to nullify the
November 9, 2001 Decision2 and the May 23, 20023 Resolution of the Court of Appeals (CA) in
CA-GR CV No. 42024. The assailed Decision disposed as follows:
"WHEREFORE, the Decision appealed from is AFFIRMED."4
The assailed Resolution denied petitioner’s Motion for Reconsideration.
The Facts
The facts are narrated by the CA, as follows:
"On May 5, 1982, [Petitioner] Desamparados M. Soliva filed a complaint for recovery of
ownership, possession and damages against [Respondent] Valenta Balicua Villalba x x x alleging
that she is the owner of a parcel of agricultural land situated at Hinaplanan, Claveria, Misamis
Oriental, containing an area of 16,542 square meters and covered by Original Certificate of Title
No. 8581; that on January 4, 1966, the late Capt. Marcelo Villalba asked her permission to
occupy her house on said land, promised to buy the house and lot upon receipt of his money
from Manila and gave her P600.00 for the occupation of the house; that Capt. Villalba died in
1978 without having paid the consideration for the house and lot; and that after [the] death of
Capt. Villalba, his widow, [Respondent Valenta], refused to vacate the house and lot despite
demands, destroyed the house thereon and constructed a new one.
"For failure to file an answer, [Respondent Valenta] was declared in default and [petitioner]
was allowed to present her evidence ex-parte.
"On March 26, 1984, the court a quo rendered judgment restoring to [petitioner] her right of
ownership and possession of the property and ordering [Respondent Valenta] to pay [her]
P25,000.00 as actual damages and P5,000.00 as attorney’s fees. Said decision became final and
[petitioner] was placed in possession of the subject property.
"A petition for relief from judgment was filed by [Respondent Valenta] on June 5, 1984 alleging
that her failure to file an answer to the complaint was caused by her confusion as to whether
the property formed part of the estate of her late husband, Marcelo Villalba; that she referred
the matter to Atty. Eleno Kabanlit, the administrator of the estate, but the latter informed her
that the property was not included in the inventory of the estate; and that she has a meritorious
defense as her late husband had already paid the amount of P2,250.00 out of the purchase price
of P3,500.00 for the house and lot.
"The petition for relief was denied by the court a quo in an Order dated September 3, 1984 on
the grounds that the failure of [Respondent Valenta] to file an answer was not due to excusable
negligence and that she does not seem to have a valid and meritorious defense.
"[Respondent Valenta] appealed to [the CA], which rendered a Decision on February 21, 1990
finding that the failure of [Respondent Valenta] to file an answer to the complaint was due to
excusable negligence; that she has a meritorious defense, and that the complaint should have
been filed not against her but against the administrator of the estate of deceased Marcelo
Villalba. The dispositive portion of said Decision reads:
‘WHEREFORE, the order appealed from is hereby REVERSED; the judgment by default in Civil
Case No. 8515, subject matter of the petition for relief, is SET ASIDE; the trial court is ORDERED
to continue with the proceedings in said case; and [Petitioner] Desamparados M. Soliva x x x is
ORDERED to amend [her] complaint by substituting the administrator of the intestate testate
(sic) of the late Marcelo M. Villalba for Valenta Baricua-Villalba [respondent] as defendant in
said amended complaint. No pronouncement as to costs.
‘SO ORDERED.’
"Consequently, an amended complaint was filed in Civil Case No. 8515 by substituting the
Intestate Estate of Marcelo M. Villalba, represented by its Administrator, Atty. Eleno M.
Kabanlit, for [Respondent Valenta], as defendant therein.
"Answering the complaint, the Administrator alleged that the house and lot were sold to the
late Marcelo Villalba by Magdaleno Soliva, the late husband of [petitioner], on December 18,
1965 for P3,500.00 on installment basis and that Marcelo Villalba had paid the total amount of
P2,250.00; that no demands were made on [Respondent Valenta] to vacate the property prior
to the filing of the original complaint in 1982; and that [Respondent Valenta] has been in
continuous, public and uninterrupted possession of the property for seventeen (17) years, i.e.,
from 1965 to 1982, so that [petitioner’s] claim of ownership has already prescribed.
61
"An answer-in-intervention was filed by [Respondent Valenta] alleging that the original
transaction between her late husband and the late husband of [petitioner] covered seventy
[two] (72) hectares of land, twenty-nine (29) heads of cattle and the subject house and lot; that
[petitioner] and her husband delivered to them only twenty-seven (27) hectares and twelve
(12) heads of cattle and they had to pay separately for the house and lot; and that she
renovated the house and lot at a cost of not less than P30,000.00 and planted numerous fruit
trees and permanent crops, all valued at not less than P50,000.00.
"On March 11, 1993, the court a quo rendered a Decision, the dispositive portion of which
reads:
‘WHEREFORE, judgment is hereby rendered dismissing the complaint and the counterclaims
without special pronouncement as to costs, and ordering the reconveyance of subject lot to
[respondent] and intervenor.’"5
Ruling of the Court of Appeals
Affirming the RTC, the CA held that laches had already set in. The inaction of petitioner for
almost 16 years had barred her action to recover the disputed property from the Villalbas. The
appellate court found that 1) until the death of Marcelo Villalba in 1978, his payment of the full
purchase price of the disputed house and lot was never demanded; 2) no evidence was
presented to show when petitioner had made a verbal demand on Valenta Villalba to vacate the
premises; and 3) the complaint for recovery of ownership and possession was filed only on May
5, 1982 -- 16 years after the former’s cause of action had accrued.
Hence, this Petition.6
Issues
Petitioner submits the following issues for our consideration:
"1. Whether or not Capt. Marcelo M. Villalba who died in 1978 after declaring that he would not
pay anymore the full consideration of the price of the house and lot and after exhausting
extrajudicial remedies would bar Desamparados M. Soliva or her successor-in-interest from
asserting her claim over her titled property.
"2. Whether or not the Decision of the Court of Appeals affirming the Decision of the Regional
Trial Court ordering the reconveyance of the subject lot to defendant and intervenor although
Capt. Marcelo Villalba nor his wife Valenta Balicua Villalba had not yet paid the full
consideration of the price of the house and lot would unjustly enrich spouses Marcelo and
Valenta Villalba at the expense of Desamparados M. Soliva."7
Simply put, the issues boil down to the following: (1) whether petitioner is barred from
recovering the disputed property; and (2) whether the conveyance ordered by the court a quo
would unjustly enrich respondents at her expense.
The Court’s Ruling
The Petition is partly meritorious.
First Issue:
Petitioner’s Claim Already Barred
Petitioner contests the appellate court’s finding that she slept on her rights for 16 years and
thereby allowed prescription and laches to set in and bar her claim. She avers that she
undertook extrajudicial measures to collect the unpaid balance of the purchase price from the
Villalbas. She also emphasizes that as a result of her original action, the trial court restored her
to the possession of the disputed house and lot on March 26, 1984.
It is readily apparent that petitioner is raising issues of fact that have amply been ruled upon by
the appellate court. The CA’s findings of fact are generally binding upon this Court and will not
be disturbed on appeal -- especially when, as in this case, they are the same as those of the trial
court.8 Petitioner has failed to show sufficient reason for us to depart from this rule.
Accordingly, we shall review only questions of law that have been distinctly set forth.9
No Invalidation of Sale Due
to Nonpayment of Full Price
Petitioner argues that the transaction between the parties was a contract to sell rather than a
contract of sale. This argument was properly brushed aside by the appellate court, which held
that she was bound by her admission in her Complaint10 and during the hearings11 that she
had sold the property to the Villalbas.
Petitioner further contends that the oral contract of sale between the parties was invalid,
because the late Captain Marcelo Villalba and his wife had failed to comply with their obligation
to pay in full the purchase price of the house and lot. She is mistaken.
Under Article 1318 of the Civil Code, the following are the essential requisites of a valid
contract: 1) the consent of the contracting parties, 2) the object certain which is the subject
matter of the contract, and 3) the cause of the obligation which is established. When all the
essential requisites are present, a contract is obligatory in whatever form it may have been
entered into, save in cases where the law requires that it be in a specific form to be valid and
enforceable.12
With respect to real property, Article 1358(1) of the Civil Code specifically requires that a
contract of sale thereof be in a public document. However, an otherwise unenforceable oral
contract of sale of realty under Article 1403(2) of the Civil Code may be ratified by the failure to
object to the presentation of oral evidence to prove it or by the acceptance of benefits granted
by it.13
All the essential elements of a valid contract are present in this case. No issue was raised by
petitioner on this point. Moreover, while the contract between the parties might have been
unenforceable under Article 1403(2) of the Civil Code, the admission14 by petitioner that she
62

had accepted payments under the oral contract of sale took the case out of the scope of the allowed their claims to become stale.21 Vigilantibus, sed non dormientibus, jura subveniunt.
Statute of Frauds.15 The ratification of the contract rendered it valid and enforceable. The laws aid the vigilant, not those who slumber on their rights.22

Furthermore, contrary to petitioner’s submission, the nonpayment of the full consideration did The following are the essential elements of laches:
not invalidate the contract of sale. Under settled doctrine, nonpayment is a resolutory condition
that extinguishes the transaction existing for a time and discharges the obligations created (1) Conduct on the part of the defendant that gave rise to the situation complained of; or the
thereunder.16 The remedy of the unpaid seller is to sue for collection17 or, in case of a conduct of another which the defendant claims gave rise to the same;
substantial breach, to rescind the contract.18 These alternative remedies of specific
(2) Delay by the complainant in asserting his right after he has had knowledge of the
performance and rescission are provided under Article 1191 of the Civil Code as follows:
defendant’s conduct and after he has had an opportunity to sue;
"Art.1191. -- The power to rescind obligations is implied in reciprocal ones, in case one of the
(3) Lack of knowledge by or notice to the defendant that the complainant will assert the right
obligors should not comply with what is incumbent upon him.
on which he bases his suit; and
"The injured party may choose between fulfillment and the rescission of the obligation, with the
(4) Injury or prejudice to the defendant in the event relief is accorded to the complainant.23
payment of damages in either case. He may also seek rescission even after he has chosen
fulfillment, if the latter should become impossible. Petitioner complied with her obligation to deliver the property in 1966.24 However,
respondent’s husband failed to comply with his reciprocal obligation to pay, when the money
"The Court shall decree the rescission claimed, unless there be just cause authorizing the fixing
he had been expecting from Manila never materialized.25 He also failed to make further
of a period.
installments after May 13, 1966.26 As early as 1966, therefore, petitioner already had the right
"x x x xxx x x x." to compel payment or to ask for rescission, pursuant to Article 1169 of the Civil Code, which
reads:
The rescission of a sale of immovables, on the other hand, is governed by Article 1592 of the
Civil Code as follows: "Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.
"Article 1592. In the sale of immovable property, even though it may have been stipulated that
upon failure to pay the price at the time agreed upon the rescission of the contract shall of right "However, the demand by the creditor shall not be necessary in order that delay may exist:
take place, the vendee may pay, even after the expiration of the period, as long as no demand
xxx xxx xxx
for rescission of the contract has been made upon him either judicially or extrajudicially or by a
notarial act. After the demand, the court may not grant him a new term." "In reciprocal obligations, neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him. From the moment one
Upon the facts found by the trial and the appellate courts, petitioner did not exercise her right
of the parties fulfills his obligation, delay by the other begins." (Italics supplied)
either to seek specific performance or to rescind the verbal contract of sale until May 1982,
when she filed her complaint for recovery of ownership and possession of the property. This Nonetheless, petitioner failed to sue for collection or rescission. Due to insufficiency of
factual finding brings to the fore the question of whether by 1982, she was already barred from evidence, the lower courts brushed aside her assertions that she had availed herself of
recovering the property due to laches and prescription. extrajudicial remedies to collect the balance or to serve an extrajudicial demand on Villalba,
prior to her legal action in 1982. Meanwhile, respondent had spent a considerable sum in
Action Barred by Laches
renovating the house and introducing improvements on the premises.27
In general, laches is the failure or neglect, for an unreasonable and unexplained length of time,
In view thereof, the appellate court aptly ruled that petitioner’s claim was already barred by
to do that which -- by the exercise of due diligence -- could or should have been done earlier.19
laches. It has been consistently held that laches does not concern itself with the character of the
It is the negligence or omission to assert a right within a reasonable period, warranting the
defendant’s title, but only with the issue of whether or not the plaintiff -- by reason of long
presumption that the party entitled to assert it has either abandoned or declined to assert it.20
inaction or inexcusable neglect -- should be barred entirely from asserting the claim, because to
Under this time-honored doctrine, relief has been denied to litigants who, by sleeping on their allow such action would be inequitable and unjust to the defendant.28
rights for an unreasonable length of time -- either by negligence, folly or inattention -- have
63
Likewise, it must be stressed that unlike prescription, laches is not concerned merely with the
fact of delay, but even more with the effect of unreasonable delay.29 In Vda. de Cabrera v. CA,30
we explained:
"In our jurisdiction, it is an enshrined rule that even a registered owner of property may be
barred from recovering possession of property by virtue of laches. Under the Land Registration
Act (now the Property Registration Decree), no title to registered land in derogation to that of
the registered owner shall be acquired by prescription or adverse possession. The same is not
true with regard to laches. As we have stated earlier in Mejia de Lucas vs. Gamponia, while the
defendant may not be considered as having acquired title by virtue of his and his predecessor’s
long continued possession (37 years) the original owner’s right to recover x x x the possession
of the property and the title thereto from the defendant has, by the latter’s long period of
possession and by patentee’s inaction and neglect, been converted into a stale demand."31
The contention of petitioner that her right to recover is imprescriptible because the property
was registered under the Torrens system32 also fails to convince us. It was the finding of the
trial court that the property was not yet covered by a free patent on January 4, 1966, when
Captain Villalba acquired possession thereof. Indeed, the evidence shows that as of that date,
the documents relating to the property were still in the name of Pilar Castrence, from whom
petitioner purchased the property on April 27, 1966;33 that she applied for a free patent
therefor between January 4 and April 27, 1966;34 and that the original certificate of title over
the lot was issued to her under Free Patent No. (x-1) 3732 only on August 16, 1974.35
It is apparent, then, that petitioner sold the house and lot to respondent on January 4, 1966,
before she had even acquired the title to convey it. Moreover, she applied for a free patent after
she lost, by operation of law,36 the title she had belatedly acquired from Castrence. These
circumstances raise serious questions over the former’s good faith in delaying the assertion of
her rights to the property. They bar her from seeking relief under the principle that "one who
comes to court must come with clean hands."37
Action Barred by Prescription
Moreover, we find that the RTC and the CA correctly appreciated the operation of ordinary
acquisitive prescription in respondent’s favor.1âwphi1 To acquire ownership and other real
rights over immovables under Article 1134 of the Civil Code, possession must be for 10 years. It
must also be in good faith and with just title.38
Good faith consists of the reasonable belief that the person from whom the possessor received
the thing was its owner, but could not transmit the ownership thereof.39 On the other hand,
there is just title when the adverse claimant came into possession of the property through one
of the modes recognized by law for the acquisition of ownership or other real rights, but the
grantor was not the owner or could not transmit any right.40
The RTC and the CA held that the Villalbas’ had continuously possessed the property from
January 4, 1966 until May 5, 198241 or for a total of 16 years. Capt. Villalba came into
possession through a sale by petitioner, whom he believed was the owner, though -- at the time
of the sale -- she was not. Clearly, all the elements of ordinary acquisitive prescription were
present.
Petitioner is thus precluded from invoking the 30-year prescriptive period for commencing real
action over immovables. Prescription of the action is without prejudice to acquisitive
prescription, according to Article 1141 of the Civil Code, which we quote:
"Art. 1141. Real actions over immovables prescribe after thirty years.
"This provision is without prejudice to what is established for the acquisition of ownership and
other real rights by prescription." (Italics supplied)
Second Issue:
Unjust Enrichment
While petitioner is now barred from recovering the subject property, all is not lost for her. By
Respondent Villalba’s own admission,42 a balance of P1,250 of the total purchase price remains
unpaid. Reason and fairness suggest that petitioner be allowed to collect this sum. It is a basic
rule in law that no one shall unjustly enrich oneself at the expense of another. Niguno non deue
enriquecerse tortizamente condaño de otro. For indeed, to allow respondent to keep the
property without paying fully for it amounts to unjust enrichment on her part.
Since the obligation consists of the payment of a sum of money, and Respondent Villalba has
incurred delay in satisfying that obligation, legal interest at six percent (6%) per annum43 is
hereby imposed on the balance of P1,250, to be computed starting May 5, 1982 -- when the
claim was made judicially -- until the finality of this Court’s judgment. Following our ruling in
Eastern Shipping Lines, Inc. v. CA,44 the sum so awarded shall likewise bear interest at the rate
of 12 percent per annum from the time this judgment becomes final and executory until its
satisfaction.
WHEREFORE, the Petition is partly GRANTED. The Decision of the Court of Appeals is
AFFIRMED, with the MODIFICATION that respondent is ordered to pay the balance of the
purchase price of P1,250 plus 6 percent interest per annum, from May 5, 1982 until the finality
of this judgment. Thereafter, interest of 12 percent per year shall then be imposed on that
amount upon the finality of this Decision until the payment thereof. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
64
16 – ART 1169
G.R. No. 174269 August 25, 2010
POLO S. PANTALEON, Petitioner,
vs.
AMERICAN EXPRESS INTERNATIONAL, INC., Respondent.
RESOLUTION
BRION, J.:
We resolve the motion for reconsideration filed by respondent American Express International,
Inc. (AMEX) dated June 8, 2009,1 seeking to reverse our Decision dated May 8, 2009 where we
ruled that AMEX was guilty of culpable delay in fulfilling its obligation to its cardholder –
petitioner Polo Pantaleon. Based on this conclusion, we held AMEX liable for moral and
exemplary damages, as well as attorney’s fees and costs of litigation.2
FACTUAL ANTECEDENTS
The established antecedents of the case are narrated below.
AMEX is a resident foreign corporation engaged in the business of providing credit services
through the operation of a charge card system. Pantaleon has been an AMEX cardholder since
1980.3
In October 1991, Pantaleon, together with his wife (Julialinda), daughter (Regina), and son
(Adrian Roberto), went on a guided European tour. On October 25, 1991, the tour group arrived
in Amsterdam. Due to their late arrival, they postponed the tour of the city for the following
day.4
The next day, the group began their sightseeing at around 8:50 a.m. with a trip to the Coster
Diamond House (Coster). To have enough time for take a guided city tour of Amsterdam before
their departure scheduled on that day, the tour group planned to leave Coster by 9:30 a.m. at
the latest.
While at Coster, Mrs. Pantaleon decided to purchase some diamond pieces worth a total of
US$13,826.00. Pantaleon presented his American Express credit card to the sales clerk to pay
for this purchase. He did this at around 9:15 a.m. The sales clerk swiped the credit card and
asked Pantaleon to sign the charge slip, which was then electronically referred to AMEX’s
Amsterdam office at 9:20 a.m.5
At around 9:40 a.m., Coster had not received approval from AMEX for the purchase so
Pantaleon asked the store clerk to cancel the sale. The store manager, however, convinced
Pantaleon to wait a few more minutes. Subsequently, the store manager informed Pantaleon
that AMEX was asking for bank references; Pantaleon responded by giving the names of his
Philippine depository banks.
At around 10 a.m., or 45 minutes after Pantaleon presented his credit card, AMEX still had not
approved the purchase. Since the city tour could not begin until the Pantaleons were onboard
the tour bus, Coster decided to release at around 10:05 a.m. the purchased items to Pantaleon
even without AMEX’s approval.
When the Pantaleons finally returned to the tour bus, they found their travel companions
visibly irritated. This irritation intensified when the tour guide announced that they would have
to cancel the tour because of lack of time as they all had to be in Calais, Belgium by 3 p.m. to
catch the ferry to London.6
From the records, it appears that after Pantaleon’s purchase was transmitted for approval to
AMEX’s Amsterdam office at 9:20 a.m.; was referred to AMEX’s Manila office at 9:33 a.m.; and
was approved by the Manila office at 10:19 a.m. At 10:38 a.m., AMEX’s Manila office finally
transmitted the Approval Code to AMEX’s Amsterdam office. In all, it took AMEX a total of 78
minutes to approve Pantaleon’s purchase and to transmit the approval to the jewelry store.7
After the trip to Europe, the Pantaleon family proceeded to the United States. Again, Pantaleon
experienced delay in securing approval for purchases using his American Express credit card
on two separate occasions. He experienced the first delay when he wanted to purchase golf
equipment in the amount of US$1,475.00 at the Richard Metz Golf Studio in New York on
October 30, 1991. Another delay occurred when he wanted to purchase children’s shoes worth
US$87.00 at the Quiency Market in Boston on November 3, 1991.
Upon return to Manila, Pantaleon sent AMEX a letter demanding an apology for the humiliation
and inconvenience he and his family experienced due to the delays in obtaining approval for his
credit card purchases. AMEX responded by explaining that the delay in Amsterdam was due to
the amount involved – the charged purchase of US$13,826.00 deviated from Pantaleon’s
established charge purchase pattern. Dissatisfied with this explanation, Pantaleon filed an
action for damages against the credit card company with the Makati City Regional Trial Court
(RTC).
On August 5, 1996, the RTC found AMEX guilty of delay, and awarded Pantaleon P500,000.00 as
moral damages, P300,000.00 as exemplary damages, P100,000.00 as attorney’s fees, and
P85,233.01 as litigation expenses.
On appeal, the CA reversed the awards.8 While the CA recognized that delay in the nature of
mora accipiendi or creditor’s default attended AMEX’s approval of Pantaleon’s purchases, it
disagreed with the RTC’s finding that AMEX had breached its contract, noting that nature of
mora accipiendi or creditor’s default attended AMEX’s approval of Pantaleon’s purchases the
delay was not attended by bad faith, malice or gross negligence. The appellate court found that
AMEX exercised diligent efforts to effect the approval of Pantaleon’s purchases; the purchase at
Coster posed particularly a problem because it was at variance with Pantaleon’s established
65
charge pattern. As there was no proof that AMEX breached its contract, or that it acted in a
wanton, fraudulent or malevolent manner, the appellate court ruled that AMEX could not be
held liable for any form of damages.
Pantaleon questioned this decision via a petition for review on certiorari with this Court.
In our May 8, 2009 decision, we reversed the appellate court’s decision and held that AMEX was
guilty of mora solvendi, or debtor’s default. AMEX, as debtor, had an obligation as the credit
provider to act on Pantaleon’s purchase requests, whether to approve or disapprove them, with
"timely dispatch." Based on the evidence on record, we found that AMEX failed to timely act on
Pantaleon’s purchases.
Based one ly, tual obligations. 271,ct; moral damages le. uitable that attorney'workers;plaitniff'
the testimony of AMEX’s credit authorizer Edgardo Jaurique, the approval time for credit card
charges would be three to four seconds under regular circumstances. In Pantaleon’s case, it
took AMEX 78 minutes to approve the Amsterdam purchase. We attributed this delay to
AMEX’s Manila credit authorizer, Edgardo Jaurique, who had to go over Pantaleon’s past credit
history, his payment record and his credit and bank references before he approved the
purchase. Finding this delay unwarranted, we reinstated the RTC decision and awarded
Pantaleon moral and exemplary damages, as well as attorney’s fees and costs of litigation.
THE MOTION FOR RECONSIDERATION
In its motion for reconsideration, AMEX argues that this Court erred when it found AMEX guilty
of culpable delay in complying with its obligation to act with timely dispatch on Pantaleon’s
purchases. While AMEX admits that it normally takes seconds to approve charge purchases, it
emphasizes that Pantaleon experienced delay in Amsterdam because his transaction was not a
normal one. To recall, Pantaleon sought to charge in a single transaction jewelry items
purchased from Coster in the total amount of US$13,826.00 or P383,746.16. While the total
amount of Pantaleon’s previous purchases using his AMEX credit card did exceed
US$13,826.00, AMEX points out that these purchases were made in a span of more than 10
years, not in a single transaction.
Because this was the biggest single transaction that Pantaleon ever made using his AMEX credit
card, AMEX argues that the transaction necessarily required the credit authorizer to carefully
review Pantaleon’s credit history and bank references. AMEX maintains that it did this not only
to ensure Pantaleon’s protection (to minimize the possibility that a third party was fraudulently
using his credit card), but also to protect itself from the risk that Pantaleon might not be able to
pay for his purchases on credit. This careful review, according to AMEX, is also in keeping with
the extraordinary degree of diligence required of banks in handling its transactions. AMEX
concluded that in these lights, the thorough review of Pantaleon’s credit record was motivated
by legitimate concerns and could not be evidence of any ill will, fraud, or negligence by AMEX.
AMEX further points out that the proximate cause of Pantaleon’s humiliation and
embarrassment was his own decision to proceed with the purchase despite his awareness that
the tour group was waiting for him and his wife. Pantaleon could have prevented the
humiliation had he cancelled the sale when he noticed that the credit approval for the Coster
purchase was unusually delayed.
In his Comment dated February 24, 2010, Pantaleon maintains that AMEX was guilty of mora
solvendi, or delay on the part of the debtor, in complying with its obligation to him. Based on
jurisprudence, a just cause for delay does not relieve the debtor in delay from the consequences
of delay; thus, even if AMEX had a justifiable reason for the delay, this reason would not relieve
it from the liability arising from its failure to timely act on Pantaleon’s purchase.
In response to AMEX’s assertion that the delay was in keeping with its duty to perform its
obligation with extraordinary diligence, Pantaleon claims that this duty includes the timely or
prompt performance of its obligation.
As to AMEX’s contention that moral or exemplary damages cannot be awarded absent a finding
of malice, Pantaleon argues that evil motive or design is not always necessary to support a
finding of bad faith; gross negligence or wanton disregard of contractual obligations is
sufficient basis for the award of moral and exemplary damages.
OUR RULING
We GRANT the motion for reconsideration.
Brief historical background
A credit card is defined as "any card, plate, coupon book, or other credit device existing for the
purpose of obtaining money, goods, property, labor or services or anything of value on credit."9
It traces its roots to the charge card first introduced by the Diners Club in New York City in
1950.10 American Express followed suit by introducing its own charge card to the American
market in 1958.11
In the Philippines, the now defunct Pacific Bank was responsible for bringing the first credit
card into the country in the 1970s.12 However, it was only in the early 2000s that credit card
use gained wide acceptance in the country, as evidenced by the surge in the number of credit
card holders then.13
Nature of Credit Card Transactions
To better understand the dynamics involved in credit card transactions, we turn to the United
States case of Harris Trust & Savings Bank v. McCray14 which explains:
The bank credit card system involves a tripartite relationship between the issuer bank, the
cardholder, and merchants participating in the system. The issuer bank establishes an account
on behalf of the person to whom the card is issued, and the two parties enter into an agreement
which governs their relationship. This agreement provides that the bank will pay for
cardholder’s account the amount of merchandise or services purchased through the use of the
credit card and will also make cash loans available to the cardholder. It also states that the
66
cardholder shall be liable to the bank for advances and payments made by the bank and that
the cardholder’s obligation to pay the bank shall not be affected or impaired by any dispute,
claim, or demand by the cardholder with respect to any merchandise or service purchased.
The merchants participating in the system agree to honor the bank’s credit cards. The bank
irrevocably agrees to honor and pay the sales slips presented by the merchant if the merchant
performs his undertakings such as checking the list of revoked cards before accepting the card.
x x x.
These slips are forwarded to the member bank which originally issued the card. The cardholder
receives a statement from the bank periodically and may then decide whether to make payment
to the bank in full within a specified period, free of interest, or to defer payment and ultimately
incur an interest charge.
We adopted a similar view in CIR v. American Express International, Inc. (Philippine branch),15
where we also recognized that credit card issuers are not limited to banks. We said:
Under RA 8484, the credit card that is issued by banks in general, or by non-banks in particular,
refers to "any card x x x or other credit device existing for the purpose of obtaining x x x goods x
x x or services x x x on credit;" and is being used "usually on a revolving basis." This means that
the consumer-credit arrangement that exists between the issuer and the holder of the credit
card enables the latter to procure goods or services "on a continuing basis as long as the
outstanding balance does not exceed a specified limit." The card holder is, therefore, given "the
power to obtain present control of goods or service on a promise to pay for them in the future."
Business establishments may extend credit sales through the use of the credit card facilities of a
non-bank credit card company to avoid the risk of uncollectible accounts from their customers.
Under this system, the establishments do not deposit in their bank accounts the credit card
drafts that arise from the credit sales. Instead, they merely record their receivables from the
credit card company and periodically send the drafts evidencing those receivables to the latter.
The credit card company, in turn, sends checks as payment to these business establishments,
but it does not redeem the drafts at full price. The agreement between them usually provides
for discounts to be taken by the company upon its redemption of the drafts. At the end of each
month, it then bills its credit card holders for their respective drafts redeemed during the
previous month. If the holders fail to pay the amounts owed, the company sustains the loss.
Simply put, every credit card transaction involves three contracts, namely: (a) the sales
contract between the credit card holder and the merchant or the business establishment which
accepted the credit card; (b) the loan agreement between the credit card issuer and the credit
card holder; and lastly, (c) the promise to pay between the credit card issuer and the merchant
or business establishment.16
Credit card issuer – cardholder relationship
When a credit card company gives the holder the privilege of charging items at establishments
associated with the issuer,17 a necessary question in a legal analysis is – when does this
relationship begin? There are two diverging views on the matter. In City Stores Co. v.
Henderson,18 another U.S. decision, held that:
The issuance of a credit card is but an offer to extend a line of open account credit. It is
unilateral and supported by no consideration. The offer may be withdrawn at any time, without
prior notice, for any reason or, indeed, for no reason at all, and its withdrawal breaches no duty
– for there is no duty to continue it – and violates no rights.
Thus, under this view, each credit card transaction is considered a separate offer and
acceptance.
Novack v. Cities Service Oil Co.19 echoed this view, with the court ruling that the mere issuance
of a credit card did not create a contractual relationship with the cardholder.
On the other end of the spectrum is Gray v. American Express Company20 which recognized
the card membership agreement itself as a binding contract between the credit card issuer and
the card holder. Unlike in the Novack and the City Stores cases, however, the cardholder in Gray
paid an annual fee for the privilege of being an American Express cardholder.
In our jurisdiction, we generally adhere to the Gray ruling, recognizing the relationship
between the credit card issuer and the credit card holder as a contractual one that is governed
by the terms and conditions found in the card membership agreement.21 This contract
provides the rights and liabilities of a credit card company to its cardholders and vice versa.
We note that a card membership agreement is a contract of adhesion as its terms are prepared
solely by the credit card issuer, with the cardholder merely affixing his signature signifying his
adhesion to these terms.22 This circumstance, however, does not render the agreement void;
we have uniformly held that contracts of adhesion are "as binding as ordinary contracts, the
reason being that the party who adheres to the contract is free to reject it entirely."23 The only
effect is that the terms of the contract are construed strictly against the party who drafted it.24
On AMEX’s obligations to Pantaleon
We begin by identifying the two privileges that Pantaleon assumes he is entitled to with the
issuance of his AMEX credit card, and on which he anchors his claims. First, Pantaleon
presumes that since his credit card has no pre-set spending limit, AMEX has the obligation to
approve all his charge requests. Conversely, even if AMEX has no such obligation, at the very
least it is obliged to act on his charge requests within a specific period of time.
i. Use of credit card a mere offer to enter into loan agreements
Although we recognize the existence of a relationship between the credit card issuer and the
credit card holder upon the acceptance by the cardholder of the terms of the card membership
agreement (customarily signified by the act of the cardholder in signing the back of the credit
67
card), we have to distinguish this contractual relationship from the creditor-debtor relationship
which only arises after the credit card issuer has approved the cardholder’s purchase request.
The first relates merely to an agreement providing for credit facility to the cardholder. The
latter involves the actual credit on loan agreement involving three contracts, namely: the sales
contract between the credit card holder and the merchant or the business establishment which
accepted the credit card; the loan agreement between the credit card issuer and the credit card
holder; and the promise to pay between the credit card issuer and the merchant or business
establishment.
From the loan agreement perspective, the contractual relationship begins to exist only upon the
meeting of the offer25 and acceptance of the parties involved. In more concrete terms, when
cardholders use their credit cards to pay for their purchases, they merely offer to enter into
loan agreements with the credit card company. Only after the latter approves the purchase
requests that the parties enter into binding loan contracts, in keeping with Article 1319 of the
Civil Code, which provides:
Article 1319. Consent is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter-offer.
This view finds support in the reservation found in the card membership agreement itself,
particularly paragraph 10, which clearly states that AMEX "reserve[s] the right to deny
authorization for any requested Charge." By so providing, AMEX made its position clear that it
has no obligation to approve any and all charge requests made by its card holders.
ii. AMEX not guilty of culpable delay
Since AMEX has no obligation to approve the purchase requests of its credit cardholders,
Pantaleon cannot claim that AMEX defaulted in its obligation. Article 1169 of the Civil Code,
which provides the requisites to hold a debtor guilty of culpable delay, states:
Article 1169. Those obliged to deliver or to do something incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation. x x x.
The three requisites for a finding of default are: (a) that the obligation is demandable and
liquidated; (b) the debtor delays performance; and (c) the creditor judicially or extrajudicially
requires the debtor’s performance.26
Based on the above, the first requisite is no longer met because AMEX, by the express terms of
the credit card agreement, is not obligated to approve Pantaleon’s purchase request. Without a
demandable obligation, there can be no finding of default.
Apart from the lack of any demandable obligation, we also find that Pantaleon failed to make
the demand required by Article 1169 of the Civil Code.
As previously established, the use of a credit card to pay for a purchase is only an offer to the
credit card company to enter a loan agreement with the credit card holder. Before the credit
card issuer accepts this offer, no obligation relating to the loan agreement exists between them.
On the other hand, a demand is defined as the "assertion of a legal right; xxx an asking with
authority, claiming or challenging as due."27 A demand presupposes the existence of an
obligation between the parties.
Thus, every time that Pantaleon used his AMEX credit card to pay for his purchases, what the
stores transmitted to AMEX were his offers to execute loan contracts. These obviously could not
be classified as the demand required by law to make the debtor in default, given that no
obligation could arise on the part of AMEX until after AMEX transmitted its acceptance of
Pantaleon’s offers. Pantaleon’s act of "insisting on and waiting for the charge purchases to be
approved by AMEX"28 is not the demand contemplated by Article 1169 of the Civil Code.
For failing to comply with the requisites of Article 1169, Pantaleon’s charge that AMEX is guilty
of culpable delay in approving his purchase requests must fail.
iii. On AMEX’s obligation to act on the offer within a specific period of time
Even assuming that AMEX had the right to review his credit card history before it approved his
purchase requests, Pantaleon insists that AMEX had an obligation to act on his purchase
requests, either to approve or deny, in "a matter of seconds" or "in timely dispatch." Pantaleon
impresses upon us the existence of this obligation by emphasizing two points: (a) his card has
no pre-set spending limit; and (b) in his twelve years of using his AMEX card, AMEX had always
approved his charges in a matter of seconds.
Pantaleon’s assertions fail to convince us.
We originally held that AMEX was in culpable delay when it acted on the Coster transaction, as
well as the two other transactions in the United States which took AMEX approximately 15 to
20 minutes to approve. This conclusion appears valid and reasonable at first glance, comparing
the time it took to finally get the Coster purchase approved (a total of 78 minutes), to AMEX’s
"normal" approval time of three to four seconds (based on the testimony of Edgardo Jaurigue,
as well as Pantaleon’s previous experience). We come to a different result, however, after a
closer look at the factual and legal circumstances of the case.
AMEX’s credit authorizer, Edgardo Jaurigue, explained that having no pre-set spending limit in
a credit card simply means that the charges made by the cardholder are approved based on his
ability to pay, as demonstrated by his past spending, payment patterns, and personal
resources.29 Nevertheless, every time Pantaleon charges a purchase on his credit card, the
credit card company still has to determine whether it will allow this charge, based on his past
credit history. This right to review a card holder’s credit history, although not specifically set
out in the card membership agreement, is a necessary implication of AMEX’s right to deny
authorization for any requested charge.
68
As for Pantaleon’s previous experiences with AMEX (i.e., that in the past 12 years, AMEX has
always approved his charge requests in three or four seconds), this record does not establish
that Pantaleon had a legally enforceable obligation to expect AMEX to act on his charge
requests within a matter of seconds. For one, Pantaleon failed to present any evidence to
support his assertion that AMEX acted on purchase requests in a matter of three or four
seconds as an established practice. More importantly, even if Pantaleon did prove that AMEX, as
a matter of practice or custom, acted on its customers’ purchase requests in a matter of
seconds, this would still not be enough to establish a legally demandable right; as a general rule,
a practice or custom is not a source of a legally demandable or enforceable right.30
We next examine the credit card membership agreement, the contract that primarily governs
the relationship between AMEX and Pantaleon. Significantly, there is no provision in this
agreement that obligates AMEX to act on all cardholder purchase requests within a specifically
defined period of time. Thus, regardless of whether the obligation is worded was to "act in a
matter of seconds" or to "act in timely dispatch," the fact remains that no obligation exists on
the part of AMEX to act within a specific period of time. Even Pantaleon admits in his testimony
that he could not recall any provision in the Agreement that guaranteed AMEX’s approval of his
charge requests within a matter of minutes.31
Nor can Pantaleon look to the law or government issuances as the source of AMEX’s alleged
obligation to act upon his credit card purchases within a matter of seconds. As the following
survey of Philippine law on credit card transactions demonstrates, the State does not require
credit card companies to act upon its cardholders’ purchase requests within a specific period of
time.
Republic Act No. 8484 (RA 8484), or the Access Devices Regulation Act of 1998, approved on
February 11, 1998, is the controlling legislation that regulates the issuance and use of access
devices,32 including credit cards. The more salient portions of this law include the imposition
of the obligation on a credit card company to disclose certain important financial information33
to credit card applicants, as well as a definition of the acts that constitute access device fraud.
As financial institutions engaged in the business of providing credit, credit card companies fall
under the supervisory powers of the Bangko Sentral ng Pilipinas (BSP).34 BSP Circular No. 398
dated August 21, 2003 embodies the BSP’s policy when it comes to credit cards –
The Bangko Sentral ng Pilipinas (BSP) shall foster the development of consumer credit through
innovative products such as credit cards under conditions of fair and sound consumer credit
practices. The BSP likewise encourages competition and transparency to ensure more efficient
delivery of services and fair dealings with customers. (Emphasis supplied)
Based on this Circular, "x x x [b]efore issuing credit cards, banks and/or their subsidiary credit
card companies must exercise proper diligence by ascertaining that applicants possess good
credit standing and are financially capable of fulfilling their credit commitments."35 As the
above-quoted policy expressly states, the general intent is to foster "fair and sound consumer
credit practices."
Other than BSP Circular No. 398, a related circular is BSP Circular No. 454, issued on September
24, 2004, but this circular merely enumerates the unfair collection practices of credit card
companies – a matter not relevant to the issue at hand.
In light of the foregoing, we find and so hold that AMEX is neither contractually bound nor
legally obligated to act on its cardholders’ purchase requests within any specific period of time,
much less a period of a "matter of seconds" that Pantaleon uses as his standard. The standard
therefore is implicit and, as in all contracts, must be based on fairness and reasonableness, read
in relation to the Civil Code provisions on human relations, as will be discussed below.
AMEX acted with good faith
Thus far, we have already established that: (a) AMEX had neither a contractual nor a legal
obligation to act upon Pantaleon’s purchases within a specific period of time; and (b) AMEX has
a right to review a cardholder’s credit card history. Our recognition of these entitlements,
however, does not give AMEX an unlimited right to put off action on cardholders’ purchase
requests for indefinite periods of time. In acting on cardholders’ purchase requests, AMEX must
take care not to abuse its rights and cause injury to its clients and/or third persons. We cite in
this regard Article 19, in conjunction with Article 21, of the Civil Code, which provide:
Article 19. Every 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 21. Any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the damage.
Article 19 pervades the entire legal system and ensures that a person suffering damage in the
course of another’s exercise of right or performance of duty, should find himself without
relief.36 It sets the standard for the conduct of all persons, whether artificial or natural, and
requires that everyone, in the exercise of rights and the performance of obligations, must: (a)
act with justice, (b) give everyone his due, and (c) observe honesty and good faith. It is not
because a person invokes his rights that he can do anything, even to the prejudice and
disadvantage of another.37
While Article 19 enumerates the standards of conduct, Article 21 provides the remedy for the
person injured by the willful act, an action for damages. We explained how these two provisions
correlate with each other in GF Equity, Inc. v. Valenzona:38
[Article 19], known to contain what is commonly referred to as the principle of abuse of rights,
sets certain standards which must be observed not only in the exercise of one's rights but also
in the performance of one's duties. These standards are the following: to act with justice; to give
everyone his due; and to observe honesty and good faith. The law, therefore, recognizes a
primordial limitation on all rights; that in their exercise, the norms of human conduct set forth
in Article 19 must be observed. A right, though by itself legal because recognized or granted by
law as such, may nevertheless become the source of some illegality. When a right is exercised in
a manner which does not conform with the norms enshrined in Article 19 and results in
69
damage to another, a legal wrong is thereby committed for which the wrongdoer must be held
responsible. But while Article 19 lays down a rule of conduct for the government of human
relations and for the maintenance of social order, it does not provide a remedy for its violation.
Generally, an action for damages under either Article 20 or Article 21 would be proper.
In the context of a credit card relationship, although there is neither a contractual stipulation
nor a specific law requiring the credit card issuer to act on the credit card holder’s offer within
a definite period of time, these principles provide the standard by which to judge AMEX’s
actions.
According to Pantaleon, even if AMEX did have a right to review his charge purchases, it abused
this right when it unreasonably delayed the processing of the Coster charge purchase, as well as
his purchase requests at the Richard Metz’ Golf Studio and Kids’ Unlimited Store; AMEX should
have known that its failure to act immediately on charge referrals would entail inconvenience
and result in humiliation, embarrassment, anxiety and distress to its cardholders who would be
required to wait before closing their transactions.39
It is an elementary rule in our jurisdiction that good faith is presumed and that the burden of
proving bad faith rests upon the party alleging it.40 Although it took AMEX some time before it
approved Pantaleon’s three charge requests, we find no evidence to suggest that it acted with
deliberate intent to cause Pantaleon any loss or injury, or acted in a manner that was contrary
to morals, good customs or public policy. We give credence to AMEX’s claim that its review
procedure was done to ensure Pantaleon’s own protection as a cardholder and to prevent the
possibility that the credit card was being fraudulently used by a third person.
Pantaleon countered that this review procedure is primarily intended to protect AMEX’s
interests, to make sure that the cardholder making the purchase has enough means to pay for
the credit extended. Even if this were the case, however, we do not find any taint of bad faith in
such motive. It is but natural for AMEX to want to ensure that it will extend credit only to
people who will have sufficient means to pay for their purchases. AMEX, after all, is running a
business, not a charity, and it would simply be ludicrous to suggest that it would not want to
earn profit for its services. Thus, so long as AMEX exercises its rights, performs its obligations,
and generally acts with good faith, with no intent to cause harm, even if it may occasionally
inconvenience others, it cannot be held liable for damages.
We also cannot turn a blind eye to the circumstances surrounding the Coster transaction which,
in our opinion, justified the wait. In Edgardo Jaurigue’s own words:
Q 21: With reference to the transaction at the Coster Diamond House covered by Exhibit H, also
Exhibit 4 for the defendant, the approval came at 2:19 a.m. after the request was relayed at 1:33
a.m., can you explain why the approval came after about 46 minutes, more or less?
A21: Because we have to make certain considerations and evaluations of [Pantaleon’s] past
spending pattern with [AMEX] at that time before approving plaintiff’s request because
[Pantaleon] was at that time making his very first single charge purchase of US$13,826 [this is
below the US$16,112.58 actually billed and paid for by the plaintiff because the difference was
already automatically approved by [AMEX] office in Netherland[s] and the record of
[Pantaleon’s] past spending with [AMEX] at that time does not favorably support his ability to
pay for such purchase. In fact, if the foregoing internal policy of [AMEX] had been strictly
followed, the transaction would not have been approved at all considering that the past
spending pattern of the plaintiff with [AMEX] at that time does not support his ability to pay for
such purchase.41
xxxx
Q: Why did it take so long?
A: It took time to review the account on credit, so, if there is any delinquencies [sic] of the
cardmember. There are factors on deciding the charge itself which are standard measures in
approving the authorization. Now in the case of Mr. Pantaleon although his account is single
charge purchase of US$13,826. [sic] this is below the US$16,000. plus actually billed x x x we
would have already declined the charge outright and asked him his bank account to support his
charge. But due to the length of his membership as cardholder we had to make a decision on
hand.42
As Edgardo Jaurigue clarified, the reason why Pantaleon had to wait for AMEX’s approval was
because he had to go over Pantaleon’s credit card history for the past twelve months.43 It
would certainly be unjust for us to penalize AMEX for merely exercising its right to review
Pantaleon’s credit history meticulously.
Finally, we said in Garciano v. Court of Appeals that "the right to recover [moral damages]
under Article 21 is based on equity, and he who comes to court to demand equity, must come
with clean hands. Article 21 should be construed as granting the right to recover damages to
injured persons who are not themselves at fault."44 As will be discussed below, Pantaleon is
not a blameless party in all this.
Pantaleon’s action was the proximate cause for his injury
Pantaleon mainly anchors his claim for moral and exemplary damages on the embarrassment
and humiliation that he felt when the European tour group had to wait for him and his wife for
approximately 35 minutes, and eventually had to cancel the Amsterdam city tour. After
thoroughly reviewing the records of this case, we have come to the conclusion that Pantaleon is
the proximate cause for this embarrassment and humiliation.
As borne by the records, Pantaleon knew even before entering Coster that the tour group would
have to leave the store by 9:30 a.m. to have enough time to take the city tour of Amsterdam
before they left the country. After 9:30 a.m., Pantaleon’s son, who had boarded the bus ahead of
his family, returned to the store to inform his family that they were the only ones not on the bus
and that the entire tour group was waiting for them. Significantly, Pantaleon tried to cancel the
sale at 9:40 a.m. because he did not want to cause any inconvenience to the tour group.
However, when Coster’s sale manager asked him to wait a few more minutes for the credit card
70

approval, he agreed, despite the knowledge that he had already caused a 10-minute delay and
that the city tour could not start without him.
In Nikko Hotel Manila Garden v. Reyes,45 we ruled that a person who knowingly and
voluntarily exposes himself to danger cannot claim damages for the resulting injury:
The doctrine of volenti non fit injuria ("to which a person assents is not esteemed in law as
injury") refers to self-inflicted injury or to the consent to injury which precludes the recovery of
damages by one who has knowingly and voluntarily exposed himself to danger, even if he is not
negligent in doing so.
This doctrine, in our view, is wholly applicable to this case. Pantaleon himself testified that the
most basic rule when travelling in a tour group is that you must never be a cause of any delay
because the schedule is very strict.46 When Pantaleon made up his mind to push through with
his purchase, he must have known that the group would become annoyed and irritated with
him. This was the natural, foreseeable consequence of his decision to make them all wait.
We do not discount the fact that Pantaleon and his family did feel humiliated and embarrassed
when they had to wait for AMEX to approve the Coster purchase in Amsterdam. We have to
acknowledge, however, that Pantaleon was not a helpless victim in this scenario – at any time,
he could have cancelled the sale so that the group could go on with the city tour. But he did not.
More importantly, AMEX did not violate any legal duty to Pantaleon under the circumstances
under the principle of damnum absque injuria, or damages without legal wrong, loss without
injury.47 As we held in BPI Express Card v. CA:48
We do not dispute the findings of the lower court that private respondent suffered damages as
a result of the cancellation of his credit card. However, there is a material distinction between
damages and injury. Injury is the illegal invasion of a legal right; damage is the loss, hurt, or
harm which results from the injury; and damages are the recompense or compensation
awarded for the damage suffered. Thus, there can be damage without injury in those instances
in which the loss or harm was not the result of a violation of a legal duty. In such cases, the
consequences must be borne by the injured person alone, the law affords no remedy for
damages resulting from an act which does not amount to a legal injury or wrong. These
situations are often called damnum absque injuria.
Because AMEX neither breached its contract with Pantaleon, nor acted with culpable delay or
the willful intent to cause harm, we find the award of moral damages to Pantaleon
unwarranted.
Similarly, we find no basis to award exemplary damages. In contracts, exemplary damages can
only be awarded if a defendant acted "in a wanton, fraudulent, reckless, oppressive or
malevolent manner."49 The plaintiff must also show that he is entitled to moral, temperate, or
compensatory damages before the court may consider the question of whether or not
exemplary damages should be awarded.50
As previously discussed, it took AMEX some time to approve Pantaleon’s purchase requests
because it had legitimate concerns on the amount being charged; no malicious intent was ever
established here. In the absence of any other damages, the award of exemplary damages clearly
lacks legal basis.1avvphi1
Neither do we find any basis for the award of attorney’s fees and costs of litigation. No premium
should be placed on the right to litigate and not every winning party is entitled to an automatic
grant of attorney's fees.51 To be entitled to attorney’s fees and litigation costs, a party must
show that he falls under one of the instances enumerated in Article 2208 of the Civil Code.52
This, Pantaleon failed to do. Since we eliminated the award of moral and exemplary damages,
so must we delete the award for attorney's fees and litigation expenses.
Lastly, although we affirm the result of the CA decision, we do so for the reasons stated in this
Resolution and not for those found in the CA decision.
WHEREFORE, premises considered, we SET ASIDE our May 8, 2009 Decision and GRANT the
present motion for reconsideration. The Court of Appeals Decision dated August 18, 2006 is
hereby AFFIRMED. No costs.
SO ORDERED.

In other words, in order that a plaintiff may maintain an action for the injuries of which he
complains, he must establish that such injuries resulted from a breach of duty which the
defendant owed to the plaintiff - a concurrence of injury to the plaintiff and legal responsibility
by the person causing it. The underlying basis for the award of tort damages is the premise that
an individual was injured in contemplation of law. Thus, there must first be a breach of some
duty and the imposition of liability for that breach before damages may be awarded; and the
breach of such duty should be the proximate cause of the injury.

Pantaleon is not entitled to damages

71
17 – ART 1169
G.R. No. 123552 February 27, 2003
TWIN TOWERS CONDOMINIUM CORPORATION, petitioner,
vs.
THE COURT OF APPEALS, ALS MANAGEMENT & DEVELOPMENT CORPORATION, ANTONIO
LITONJUA and SECURITIES AND EXCHANGE COMMISSION, respondents.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review on certiorari1 to nullify the Decision2 dated August 31, 1995
of the Court of Appeals and its Resolution3 dated January 16, 1996 denying petitioner’s motion
for reconsideration. The Court of Appeals dismissed petitioner’s appeal from the Decision en
banc4 of the Securities and Exchange Commission, which reversed the order of the SEC Hearing
Officer.5 The Court of Appeals dismissed the appeal for lack of merit and for non-compliance
with the requirement on certification of non-forum shopping.6
The Antecedent Facts
On June 30, 1988, petitioner Twin Towers Condominium Corporation ("petitioner" for brevity)
filed a complaint7 with the Securities and Exchange Commission ("SEC" for brevity) against
respondents ALS Management & Development Corporation ("ALS" for brevity) and Antonio
Litonjua ("Litonjua" for brevity). The complaint prayed that ALS and Litonjua be ordered to pay
solidarily the unpaid condominium assessments and dues with interests and penalties covering
the four quarters of 1986 and 1987 and the first quarter of 1988.
The complaint alleged, among others, that petitioner, a non-stock corporation, is organized for
the sole purpose of holding title to and managing the common areas of Twin Towers
Condominium ("Condominium" for brevity). Membership in Petitioner Corporation is
compulsory and limited to all registered owners of units in the Condominium. ALS, as
registered owner of Unit No. 4-A ("Unit" for brevity) of the Condominium, is a member of
petitioner. Litonjua, who is the corporate president of ALS, occupies the Unit.
Petitioner collects from all its members quarterly assessments and dues as authorized by its
Master Deed and Declaration of Restrictions ("Master Deed" for brevity) and its By-Laws. As of
the filing of the complaint with the SEC, petitioner’s records of account show that ALS failed to
pay assessments and dues starting 1986 up to the first quarter of 1988. Petitioner claimed
against both ALS and Litonjua P118,923.20 as unpaid assessments and dues. This amount
includes accrued interests of P30,808.33 and penalty charges of P7,793.34, plus P 1,500.00 as
unpaid contingency fund assessment for 1987.8
In their joint Answer with Counterclaim, ALS and Litonjua asserted that petitioner failed to
state a cause of action against Litonjua. ALS and Litonjua argued that petitioner’s admission
that ALS and not Litonjua is the registered owner of the Unit and member of petitioner
exonerates (free) Litonjua from any liability to petitioner. While ALS is a juridical person that
cannot by itself physically occupy the Unit, the natural person who physically occupies the Unit
does not assume the liability of ALS to petitioner. Neither does the agent who acts for the
corporation become personally liable for the corporation’s obligation.
As counterclaim, ALS claimed damages against petitioner arising from petitioner’s act of
repeatedly preventing ALS, its agents and guests from using the parking space, swimming pool,
gym, and other facilities of the Condominium. In addition, Litonjua claimed damages against
petitioner for the latter’s act of including Litonjua’s name in the list of delinquent unit owners
which was posted on petitioner’s bulletin board.9
On December 11, 1991, the SEC Hearing Officer ordered petitioner to pay Litonjua moral and
exemplary damages for maliciously including Litonjua’s name in the list of delinquent unit
owners and for impleading him as a respondent. On the other hand, the SEC Hearing Officer
ordered ALS to pay the assessments and dues to petitioner.10 However, the Hearing Officer did
not determine the exact amount to be paid by ALS because petitioner failed to lay down the
basis for computing the unpaid assessments and dues.11 The dispositive portion of the decision
reads thus:
"WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering respondent ALS to pay the legal assessments/dues due the complainant within
thirty (30) days from finality of this Decision; and
2. Ordering the complainant to pay respondent Antonio Litonjua the sum of THREE HUNDRED
THOUSAND PESOS (P300,000.00) as moral damages, FIFTY THOUSAND PESOS (P50,000.00) as
exemplary damages, and TWO HUNDRED THOUSAND PESOS (P200,000.00) as and by way of
attorney’s fees.
SO ORDERED."12
Not satisfied with the SEC Hearing Officer’s decision, both parties filed their respective appeals
to the SEC en banc.13 Petitioner assailed the award of moral and exemplary damages as well as
attorney’s fees in favor of Litonjua. On the other hand, ALS appealed that portion of the decision
ordering it to pay to petitioner the assessments and dues.
In a decision dated July 30, 1993, the SEC en banc nullified the award of damages and attorney’s
fees to Litonjua on the ground that the SEC had no jurisdiction over Litonjua. The SEC en banc
held that there is no intra-corporate relationship between petitioner and Litonjua who is not
the registered owner of the Unit and thus, not a member of petitioner. The SEC en banc stated
that petitioner could not invoke the doctrine of piercing the veil of ALS’ corporate fiction since
disregarding the corporate entity is a function of the regular courts.
72
Furthermore, the SEC en banc remanded the case to the Hearing Officer to determine the value
of the services petitioner failed to render to ALS because of the latter’s non-use of the
Condominium facilities. The SEC en banc ruled that the value of these services could be
deducted from the unpaid assessments and dues that ALS owes petitioner.
Thus, the SEC en banc declared:
"WHEREFORE, in view of the foregoing, the order appealed from is hereby reversed insofar as
it awards moral and exemplary damages and attorney’s fees to respondent Litonjua as the same
is null and void for lack of jurisdiction of this Commission over the said party.14
As regards that portion of the appealed Order directing respondent ALS to pay the legal
assessment/dues to the complainant TTC within thirty (30) [days] from finality of the said
decision, the same is hereby modified by remanding the case to the hearing officer for
determination of the value of the services withheld by the complainant TTC from respondent
ALS in order that the same may be deducted from the amount of legal assessments and dues
which the respondent corporation shall pay to the complainant.
SO ORDERED."15 (Emphasis supplied)
Petitioner appealed the SEC en banc Decision to the Court of Appeals contending grave error or
grave abuse of discretion by the SEC en banc.
The Ruling of the Court of Appeals
The Court of Appeals dismissed petitioner’s appeal on both procedural and substantive
grounds. Procedurally, the Court of Appeals found the petition defective for failure to contain a
sworn certification of non-forum shopping as required by Section 6 of Administrative Circular
No. 1-95 and Section 2 of Revised Circular No. 28-91.
On the merits, the Court of Appeals substantially affirmed the decision of the SEC en banc that
there is no ground to pierce the veil of ALS’ corporate fiction. The Court of Appeals held that
there is nothing in the records to show that ALS is engaged in unlawful, business or that
Litonjua is using ALS to defraud third parties. The fact alone that ALS is in arrears in paying its
assessments and dues does not make ALS or Litonjua guilty of fraud which would warrant
piercing the corporate veil of ALS. Thus, it was improper for petitioner to post Litonjua’s name
instead of ALS’ in the list of delinquent unit owners since Litonjua is not a member of petitioner.
The Court of Appeals also sustained the claim of petitioner against ALS for unpaid assessments
and dues but found that petitioner failed to substantiate by preponderance of evidence the
basis for computing the unpaid assessments and dues. Thus, the Court of Appeals remanded the
case to the SEC Hearing Officer for further reception of evidence and for determination of the
exact amount of ALS’ liability to petitioner. The Court of Appeals, however, directed the SEC
Hearing Officer to deduct from ALS’ unpaid assessments and dues the value of the services
denied to ALS because of the latter’s non-use of the Condominium facilities. In allowing the
deduction, the Court of Appeals declared the Condominium’s House Rule 26.3 as ultra vires.
House Rule 26.3, which petitioner claims as its basis for denying the use of the Condominium
facilities to ALS, authorizes withholding of the use of the Condominium facilities from
delinquent unit owners. The Court of Appeals, however, ruled that petitioner is not expressly
authorized by its Master Deed and By-Laws to prohibit delinquent members from using the
facilities of the Condominium.
The Court of Appeals went further and declared the interest and penalty charges prescribed by
House Rule 26.516 on delinquent accounts as exorbitant or grossly excessive, although this was
not raised as an issue. While in its complaint, petitioner sought to recover P118,923.20 as
unpaid assessments and dues, in its amended petition for review, petitioner sought
P994,529.75, more than eight times the amount it originally claimed from ALS.17
In the dispositive portion of its assailed decision, the Court of Appeals declared:
"WHEREFORE, the instant petition is hereby DENIED and is accordingly DISMISSED."18
Hence, this petition.
The Issues
In its Memorandum, petitioner assigns the following errors in the decision of the Court of
Appeals:
1. "IN DISMISSING THE PETITION ALLEGEDLY BECAUSE OF PETITIONER’S FAILURE TO
COMPLY WITH THE PERTINENT PROVISIONS OF SUPREME COURT CIRCULAR NOS. 1-95 AND
28-91 ON THE CERTIFICATION AGAINST FORUM SHOPPING;"
2. "IN ORDERING A REMAND OF THE CASE BACK TO THE HEARING OFFICER FOR THE
RECEPTION OF EVIDENCE FOR SERVICES SUPPOSEDLY NOT RENDERED BY PETITIONER;"
3. "IN DECLARING HOUSE RULE NO. 26.3 AS ULTRA VIRES;"
4. "IN FINDING THE PENALTIES AND INTERESTS PRESCRIBED IN HOUSE RULE 26.519 AS
EXORBITANT AND GROSSLY EXCESSIVE;"
5. "IN REFUSING TO RECOGNIZE THE FACT THAT RESPONDENT LITONJUA AND NOT ALS IS
THE REAL OWNER OF APARTMENT UNIT 4-A;" and
6. "IN FAILING TO FIND THAT THERE IS ON RECORD OVERWHELMING EVIDENCE TO SHOW
THE BASIS OF THE DUES AND ASSESSMENTS BEING COLLECTED FROM THE PRIVATE
RESPONDENTS."20
The Ruling of the Court
The petition is partly meritorious.
A perusal of the foregoing issues readily reveals that petitioner raises two aspects of the case
for consideration - the procedural aspect and the substantive aspect.
73
We will discuss the procedural aspect first.
Non-compliance with Supreme Court Circular No. 1-95 and Revised Circular No. 28-91.
Petitioner submits that the Court of Appeals erred in dismissing its appeal for non-compliance
with Supreme Court Circular No. 1-95 and Revised Circular No. 28-91. Petitioner asserts that
when it filed its petition, both circulars were not yet in full force.
Petitioner filed its petition for review with the Court of Appeals on August 18, 1993 and its
amended petition on September 3, 1993. Both the original and amended petitions were filed
before the effectivity of Revised Administrative Circular No. 1-95 on June 1, 1995. However,
contrary to petitioner’s claim, before the issuance of Revised Administrative Circular No. 1-95,
there was already an existing circular requiring a sworn certification of non-forum shopping
from a party filing a petition for review with the Court of Appeals.1a\^/phi1.net
Circular No. 28-91, which took effect on January 1, 1992, required a sworn certification of non-
forum shopping in cases filed with the Court of Appeals and the Supreme Court. Circular No. 28-
91 specifically provides for summary dismissal of petitions which do not contain a sworn
certification of non-forum shopping. Sections 2 and 3 of Circular No. 28-91 state:
"2. Certification - The party must certify under oath that he has not commenced any other
action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or
different Divisions thereof, or any other tribunal or agency, and that to the best of his
knowledge, no such action or proceeding is pending in the Supreme Court, the Court of Appeals,
or different Divisions thereof, or any other tribunal or agency. If there is any action pending, he
must state the status of the same.1awphi1.nét If he should learn that a similar action or
proceeding has been filed or is pending before the Supreme Court, the Court of Appeals, or
different Divisions thereof, or any other tribunal or agency, he should notify the court, tribunal
or agency within five (5) days from such notice.
3. Penalties -
a. Any violation of this Circular shall be a cause for the summary dismissal of the multiple
petition or complaint.
x x x."
Clearly, petitioner cannot claim that at the time of the filing of its petitions with the Court of
Appeals, it was not required under any existing Supreme Court Circular to include in its
petitions a sworn certification of non-forum shopping. Circular No. 28-91 applies in the instant
case, being the Circular in force at the time. Petitioner cannot even feign ignorance of Circular
No. 28-91 as its petitions were filed more than one year after the Circular’s effectivity. The rule
against forum shopping has long been established and Circular No. 28-91 merely formalized the
prohibition and provided the appropriate penalties against violators.21
The Court of Appeals did not err in dismissing the petition for this procedural lapse. However,
special circumstances or compelling reasons may justify relaxing the rule requiring certification
on non-forum shopping.22 Technical rules of procedure should be used to promote, not
frustrate justice. While the swift unclogging of court dockets is a laudable objective, granting
substantial justice is an even more urgent ideal.23 The certificate of non-forum shopping is a
mandatory requirement. Nonetheless, this requirement must not be interpreted too literally to
defeat the ends of justice.24
In the instant case, the merits of petitioner’s case should be considered special circumstances
or compelling reasons that justify tempering the hard consequence of the procedural
requirement on non-forum shopping. In the interest of justice, we reinstate the petition.
Essentially, the substantive issues for resolution in the instant petition can be summarized into
four, as follows:
1. Whether petitioner can collect assessments and dues despite its denial to ALS of the use of
the Condominium facilities pursuant to House Rule 26.3;
2. Whether ALS can validly offset against its unpaid assessments and dues the value of the
services withheld by petitioner;
3. Whether a remand of the case to the proper trial court is necessary to determine the amounts
involved; and
4. Whether the penalties prescribed in House Rule 26.2 are grossly excessive and exorbitant.
First Issue: Payment of assessments and dues.
Petitioner’s authority to assess dues.
Petitioner was organized to hold title to the common areas of the Condominium and to act as its
management body. The Condominium Act, the law governing condominiums, states that:
"Title to the common areas, including the land, or the appurtenant interests in such areas, may
be held by a corporation specially formed for the purpose (hereinafter known as the
"condominium corporation") in which the holders of separate interests shall automatically be
members or shareholders, to the exclusion of others, in proportion to the appurtenant interest
of their respective units in the common areas. xxx"25
The Condominium Act provides that the Master Deed may authorize the condominium
corporation to collect "reasonable assessments to meet authorized expenditures."26 For this
purpose, each unit owner "may be assessed separately for its share of such expenditures in
proportion (unless otherwise provided) to its owner’s fractional interest in the common
areas."27 Also, Section 20 of the Condominium Act declares:
74
"Section 20. An assessment upon any condominium made in accordance with a duly registered
declaration of restrictions shall be an obligation of the owner thereof at the ‘time the
assessment is made. xxx" (Emphasis supplied)
Petitioner is expressly authorized by its Master Deed to impose reasonable assessments on its
members to maintain the common areas and facilities of the Condominium. Section 4, Part II of
petitioner’s Master Deed provides:
"Section 4. ASSESSMENTS. From and after date Ayala Investment & Development Corporation
formally conveys the condominium project to the Condominium Corporation, the owner of each
unit shall be proportionately liable for the common expenses of the condominium project,
which shall be assessed against each unit owner in the project and paid to the Condominium
Corporation as provided in Part I Section 8 (b) hereof at such times and in such manner as shall
be provided in the By-Laws of the Condominium Corporation,
a.) Regular assessments for such amounts as shall be necessary to meet the operating expenses
of the Condominium Corporation as well as such amounts, determined in accordance with the
provisions of the By-Laws, to be made for the purpose of creating and maintaining a special
fund for capital expenditures on the common areas of the project; including the cost of
extraordinary repairs, reconstruction or restoration necessitated by damage, depreciation,
obsolescence, expropriation or condemnation of the common areas or part thereof, as well as
the cost of improvements or additions thereto authorized in accordance with the provisions of
the By-Laws;
b.) xxx
c.) There may be assessed against the unit owners, in the manner prescribed herein or in the
By-Laws of the Condominium Corporation, such other assessments as are not specifically
provided for herein;
d.) The amount of any such assessment, plus interest penalties, attorney’s fees and other
charges incurred for the collection of such assessment, shall constitute a lien upon the unit and
on the appurtenant interest of the unit owner in the Condominium Corporation. Such lien shall
be constituted in the manner provided in the By-Laws of the Condominium Corporation. The
foreclosure, transfer of conveyance, as well as redemption of the unit shall include the unit
owner’s appurtenant interest in the Condominium Corporation. The Condominium Corporation
shall have the power to bid at the foreclosure sale."28
Thus, petitioner’s right to collect assessments and dues from its members and the corollary
obligation of its members to pay are beyond dispute.
There is also no question that ALS is a member of petitioner considering that ALS is the
registered owner of the Unit. Under the automatic exclusive membership clause in the Master
Deed,29 ALS became a regular member of petitioner upon its acquisition of a unit in the
Condominium.
As a member of petitioner, ALS assumed the compulsory obligation to share in the common
expenses of the Condominium. This compulsory obligation is further emphasized in Section 8,
paragraph c, Part I of the Master Deed, to wit:
"Each member of the Condominium Corporation shall share in the common expenses of the
condominium project in the same sharing or percentage stated xxx"30 (Emphasis supplied)
Undoubtedly, as a member of petitioner, ALS is legally bound to pay petitioner assessments and
dues LO maintain the common areas and facilities of the Condominium. ALS’ obligation arises
from both the law and its contract with the Condominium developer and other unit owners.
Petitioner’s Master Deed provides that a member of the Condominium corporation shall share
in the common expenses of the condominium project.31 This obligation does not depend on the
use or non-use by the member of the common areas and facilities of the Condominium.
Whether or not a member uses the common areas or facilities, these areas and facilities will
have to be maintained. Expenditures must be made to maintain the common areas and facilities
whether a member uses them frequently, infrequently or never at all.
ALS asserts that the denial by petitioner to ALS and Litonjua of the use of the Condominium
facilities deprived petitioner of any right to demand from ALS payment of any condominium
assessments and dues. ALS contends that the right to demand payment of assessments and
dues carries with it the correlative obligation to allow the use of the Condominium facilities.
ALS is correct if it had not defaulted on its assessment and dues before the denial of the use of
the facilities. However, the records clearly show that petitioner denied ALS and Litonjua the use
of the facilities only after ALS had defaulted on its obligation to pay the assessments and dues.
The denial of the use of the facilities was the sanction for the prior default incurred by ALS.
In essence, what ALS wants is to use its own prior non-payment as a justification for its future
non-payment of its assessments and dues. Stated another way, ALS advances the argument that
a contracting party who is guilty of first breaching his obligation is excused from such breach if
the other party retaliates by refusing to comply with his own obligation.
This obviously is not the law. In reciprocal obligations, when one party’ fulfills his obligation,
and the other does not, delay by the other begins. Moreover, when one party does not comply
with his obligation, the other party does not incur delay if he does not perform his own
reciprocal obligation because of the first party’s non-compliance. This is embodied in Article
1169 of the Civil Code, the relevant provision of which reads:
"In reciprocal obligations, neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him. From the moment one
of the parties fulfills his obligation, delay by the other begins."
Thus, before ALS incurred its arrearages, petitioner allowed ALS to use the facilities. However,
ALS subsequently defaulted and thus incurred delay. It was only then that petitioner disallowed
ALS and Litonjua from using the facilities. Clearly, petitioner’s denial to ALS of the
75
Condominium facilities, after ALS had defaulted, does not constitute a valid ground on the part
of ALS to refuse paying its assessments and dues.
Validity of House Rule 26.3.
Petitioner’s House Rules and Regulations ("House Rules" for brevity) expressly authorize denial
of the use of condominium facilities to delinquent members. Specifically, House Rule 26.3
provides that:
"26. ASSESSMENTS:
xxx
26.3 Names of unit owners with delinquent accounts who fail to pay two consecutive quarters
shall be posted in the bulletin board. Unit owners with delinquent accounts, their tenants,
guests/visitors and relatives shall not be allowed the use of all facilities of the condominium
such as the swimming pool, gym, social hall, etc." (Emphasis supplied)
The issue on the validity of House Rule 26.3 was raised for the first time on appeal. It is settled
that an issue not raised during trial could not be raised for the first time on appeal as to do so
would be offensive to the basic rules of fair play, justice, and due process.32 Nonetheless, the
Court of Appeals opted to address this issue.
Petitioner justifies House Rule 26.3 by invoking Section 36, paragraph 11 of the Corporation
Code which grants every corporation the power "to exercise such powers as may be essential or
necessary to carry out its purpose or purposes as stated in its Articles of Incorporation."
Petitioner was organized for the main purpose of holding title to and managing the common
areas of the Condominium. Petitioner claims that there is here implied the power to enact such
measures as may be necessary to carry out the provisions of the Articles of Incorporation, By-
Laws and Master Deed to deal with delinquent members. This, asserts petitioner, includes the
power to enact House Rule 26.3 to protect and safeguard the interests not only of petitioner but
also of its members.
For their part, ALS and Litonjua assail the validity of House Rule 26.3 alleging that it is ultra
vires. ALS and Litonjua maintain that neither the Master Deed nor the By-Laws of petitioner
expressly authorizes petitioner to prohibit delinquent members from using the Condominium
facilities. Being ultra vires, House Rule 26.3 binds no one. Even assuming that House Rule 26.3
is intra vires, the same is iniquitous, unconscionable, and contrary to morals, good customs and
public policy. Thus, ALS claims it can validly deduct the value of the services withheld from the
assessments and dues since it was barred from using the Condominium facilities for which the
assessments and dues were being collected.
The Court of Appeals sustained respondents’ argument and declared House Rule 26.3 ultra
vires on the ground that petitioner is not expressly authorized by its Master Deed or its By-
Laws to promulgate House Rule 26.3.
House Rule 26.3 clearly restricts delinquent members from the use and enjoyment of the
Condominium facilities. The question is whether petitioner can validly adopt such a sanction to
enforce the collection of Condominium assessments and dues.
We rule that House Rule 26.3 is valid.
Section 45 of the Corporation Code provides:
"Sec. 45. Ultra vires acts of corporations. - No corporation under this code shall possess or
exercise any corporate powers except those conferred by this Code or by its articles of
incorporation and except such as are necessary or incidental to the exercise of the powers so
conferred."
The term ultra vires refers to an act outside or beyond corporate powers, including those that
may ostensibly be within such powers but are, by general or special laws, prohibited or
declared illegal.33 The Corporation Code defines an ultra vires act as one outside the powers
conferred by the Code or by the Articles of Incorporation, or beyond what is necessary or
incidental to the exercise of the powers so conferred. Moreover, special laws governing certain
classes of corporations, like the Condominium Act, also grant specific corporate powers to
corporations falling under such special laws.
The Condominium Act, petitioner’s By-Laws and the Master Deed expressly empower
petitioner to promulgate House Rule 26.3. Section 9 of the Condominium Act provides:
"Section 9. The owner of a project shall, prior to the conveyance of any condominium therein,
register a declaration of restrictions relating to such project, which restrictions xxx shall inure
to and bind all condominium owners in the project. xxx The Register of Deeds shall enter and
annotate the declaration of restrictions upon the certificate of title covering the land included
within the project, if the land is patented or registered under the Land Registration or Cadastral
acts.
xxx
Such declaration of restrictions, among other things, may also provide:
(a) As to any management body-
1. For the powers thereof, Including power to enforce the provisions of the declaration of
restrictions;
xxx
3. Provisions for maintenance xxx and other services benefiting the common areas, xxx"
(Emphasis supplied)
76
The Condominium Act clearly provides that the Master Deed may expressly empower the
management body, petitioner in the instant case, to enforce all provisions in the Master Deed
and Declaration of Restrictions.
Pursuant to Section 9 (a) (1) and (3) of the Condominium Act, the Master Deed expressly
authorizes petitioner to exercise all the powers granted to the management body by the
Condominium Act, petitioner’s Articles of Incorporation and By-Laws, the Master Deed, and the
Corporation Code. Section 3, Part II of the Master Deed reads:
"Section 3. MANAGEMENT BODY. - The Condominium Corporation to be formed and organized
pursuant to Section 7 of Part I, above, shall constitute the management body of the project. As
such management body, the powers of the Condominium Corporation shall be such as are
provided by the Condominium Act, by the Articles of Incorporation and the By-Laws of the
Corporation, by this instrument and by the applicable provisions of the Corporation Code as are
not inconsistent with the Condominium Act. Among such powers but not by way of limitation, it
shall have the power to enforce the provisions thereof in accordance with the By-Laws of the
corporation." (Emphasis supplied)
Thus, the Master Deed clearly empowers petitioner to enforce the provisions of the Master
Deed in accordance with petitioner’s By-Laws.
Petitioner’s By-Laws expressly authorize petitioner’s Board of Directors to promulgate rules
and regulations on the use and enjoyment of the common areas. Thus, paragraph 2, Section 2 of
petitioner’s By-Laws states:
"Without limiting the general nature of the foregoing powers, the Board of Directors shall have
the power to enforce the limitations, restrictions, and conditions contained in the Master Deed
and Declaration of Restrictions of the project; promulgate rules and regulations concerning the
use, enjoyment and occupancy of the units, common areas and other properties in the
condominium project, to make and collect assessments against members as unit owners to
defray the costs and expenses of the condominium project and the corporation and to secure by
legal means the observance of the provisions of the Condominium Act, the Master Deed, the
Articles of Incorporation, these By-Laws, and the rules and regulations promulgated by it in
accordance herewith. The members of the corporation bind themselves to comply faithfully
with all these provisions."34 (Emphasis supplied)
Evidently, the Condominium Act, the Master Deed and petitioner’s By-Laws grant petitioner the
express power to promulgate rules and regulations concerning the use, enjoyment and
occupancy of the common areas.
Moreover, House Rule 26.3, which prohibits delinquent members from using the common
areas, is necessary to ensure maintenance of the common areas. Petitioner’s purpose in
enacting House Rule 26.3 is to enforce effectively the provisions of the Master Deed. House Rule
26.3 is well within the powers of petitioner to adopt as the same is reasonably necessary to
attain the purpose for which both petitioner and the Condominium project were created. Thus,
Section 7 of the Master Deed declares:
"Section 7. CONDOMINIUM CORPORATION. - A corporation to be known as THE TWIN TOWERS
CONDOMINIUM (hereinafter referred to as the "Condominium Corporation"), shall be formed
and organized pursuant to the Condominium Act and the Corporation Code to hold title to all
the aforestated common areas of the condominium project including the land, to manage THE
TWIN TOWERS CONDOMINIUM and to do such other things as may be necessary, incidental
and convenient to the accomplishment of said purposes xxx"35 (Emphasis supplied)
Petitioner would be unable to carry out its main purpose of maintaining the Condominium
common areas and facilities if members refuse to pay their dues and yet continue to use these
areas and facilities. To impose a temporary ban on the use of the common areas and facilities
until the assessments and dues in arrears are paid is a reasonable measure that petitioner may
undertake to compel the prompt payment of assessments and dues.
Second Issue: Offsetting the value of services withheld against ALS’ unpaid assessments and
dues.
ALS’ claim for reduction of its assessments and dues because of its non-use of the Condominium
facilities.
We rule that ALS has no right to a reduction of its assessments and dues to the extent of its non-
use of the Condominium facilities. ALS also cannot offset damages against its assessments and
dues because ALS is not entitled to damages for alleged injury arising from its own violation of
its contract. Such a breach of contract cannot be the source of rights or the basis of a cause of
action.36 To recognize the validity of such claim would be to legalize ALS’ breach of its contract.
ALS’ claim for unrendered repair services barred by estoppel.
ALS also justifies its non-payment of dues on the ground of the alleged failure of petitioner to
repair the defects in ALS’ Unit. However, this claim for unrendered repairs was never raised
before the SEC Hearing Officer or the SEC en banc. The issue on these alleged unrendered
repairs, which supposedly caused ALS’ Unit to deteriorate, was raised for the first time on
appeal. The Court of Appeals did not pass upon the same.
Neither in the proceedings in the SEC nor in the appellate court did ALS present evidence to
substantiate its allegation that petitioner failed to render the repair services. Also, ALS failed to
establish whether it claimed for the costs of the repair because ALS advanced these expenses,
or for the value of damages caused to the Unit by the water leakage.
ALS is therefore barred at this late stage to interpose this claim. In Del Rosario v. Bonga,37 the
Court held:
"As a rule, no question will be entertained on appeal unless it has been raised in the court
below. Points of law, theories, issues and arguments not brought to the attention of the lower
77
court need not be, and ordinarily will not be, considered by a reviewing court, as they cannot be
raised for the first time at that late stage. Basic considerations of due process impel this rule."
As this claim was a separate cause of action which should have been raised in ALS’ Answer with
Counterclaim, ALS’ failure to raise this claim is deemed a waiver of the claim.
Third Issue: Remand of the case to the proper trial court.
Question of fact.
The Court of Appeals ruled that there is a need to remand the case considering that there is no
sufficient evidence on record to establish the amount of petitioner’s claim against ALS for
unpaid assessments and dues.
The question of whether petitioner’s claim of P994,529.75 for unpaid assessments and dues
against ALS is supported by sufficient evidence is a purely factual issue and inevitably requires
the weighing of evidence. This Court is not a trier of facts, and it is not the function of this Court
to re-examine the evidence submitted by the parties.38 In cases brought before this Court from
the Court of Appeals under Rule 45 of the Rules of Court, this Court’s jurisdiction is limited to
reviewing errors of law which must be distinctly set forth.39 In this mode of appeal, the
findings of fact of the Court of Appeals and other courts of origin are conclusive.40
Jurisprudence is settled that:
"(a)s a rule, the jurisdiction of this Court in cases brought to it from the Court of Appeals xxx is
limited to the review and revision of errors of law allegedly committed by the appellate court,
as its findings of fact are deemed conclusive. As such this Court is not duty-bound to analyze
and weigh all over again the evidence already considered in the proceedings below."41
This rule admits of several exceptions. This Court may review the findings of fact of the Court of
Appeals:
"(a) where there is grave abuse of discretion;
(b) when the finding is grounded entirely on speculations, surmises or conjectures;
(c) when the inference made is manifestly mistaken, absurd or impossible;
(d) when the judgment of the Court of Appeals was based on a misapprehension of facts;
(e) when the factual findings are conflicting;
(F) when the Court of Appeals, in making its findings, went beyond the issues of the case and
the same are contrary to the admissions of both appellant and appellee;
(g) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the
parties and which, if properly considered, would justify a different conclusion; and,
(h) where the findings of fact of the Court of Appeals are contrary to those of the trial court, or
are mere conclusions without citation of specific evidence, or where the facts set forth by the
petitioner are not disputed by the respondent, or where the findings of fact of the Court of
Appeals are premised on the absence of evidence and are contradicted by the evidence on
record."42
However, none of these exceptions exists in the instant case.
The SEC Hearing Officer found that, while petitioner is entitled to collect the unpaid
assessments and dues from ALS, petitioner has failed to establish clearly the basis for
computing the correct amount of the unpaid assessments and dues. Indeed, there is no
evidence laying down the basis of petitioner’s claim other than allegations of previous demands
and statements of accounts. Whether petitioner has sufficiently established its claim by
preponderance of evidence requires an examination of the probative weight of the evidence
presented by the parties. Evidently, this is a question of fact the resolution of which is beyond
the purview of the petition for review where only errors of law may be raised. On the other
hand, the decision of the Court of Appeals, finding insufficient evidence on record, was made
under its power to review both questions of fact and law.
Remand to the proper trial court.
While we sustain the ruling of the Court of Appeals, the case can no longer be remanded to the
SEC Hearing Officer. Republic Act No. 8799, which took effect on August 8, 2000, transferred
SEC’s jurisdiction over cases involving intra-corporate disputes to courts of general jurisdiction
or the appropriate regional trial courts. Section 5.2 of R.A. No. 8799 reads:
"5.2. The Commission’s jurisdiction over all cases enumerated under Section 5 of Presidential
Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate
Regional Trial Court; Provided, That the Supreme Court in the exercise of its authority may
designate the Regional Trial Court branches that shall exercise jurisdiction over these cases.
The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes
submitted for final resolution which should be resolved within one (1) year from the enactment
of this Code. The Commission shall retain jurisdiction over pending suspension of
payments/rehabilitation cases filed as of 30 June 2000 until finally disposed."
Based on the Resolution issued by this Court in AM No. 00-8-10-SC,43 the Court Administrator
and the Securities and Exchange Commission should cause the transfer of the records of SEC-AC
Nos. 377 and 378 to the proper regional trial court for further reception of evidence and
computation of the correct amount of assessments and dues that ALS shall pay to petitioner.
Fourth Issue: Penalties prescribed in House Rule 26.2.
ALS and Litonjua did not question before either the SEC or the Court of Appeals the validity of
the penalties prescribed in the Condominium’s House Rule 26.2. Nevertheless, the Court of
Appeals ruled that House Rule 26.2 prescribes grossly excessive penalties and interests. The
resolution of this issue is not necessary in arriving at a complete and just resolution of this case.
78

At any rate, we find the interest and penalties prescribed under House Rule 26.2 reasonable
considering the premier location of the Condominium at the heart of Makati City. It is inevitable
that ALS’ unpaid assessments and dues would escalate because ALS’ delinquency started since
1986.
House Rule 26.2 clearly provides for a 24% interest and an 8% penalty, both running annually,
on the total amount due in case of failure to pay, to wit:
"26.2. Late payment of accounts of members shall be charged an interest rate of 24% per
annum. In addition, a penalty at the rate of 8% per annum shall be charged on delinquent
accounts. The 24% interest shall be imposed on unpaid accounts starting with the 21st day of
the quarter until fully paid."
WHEREFORE, the petition is GRANTED and the assailed Decision of the Court of Appeals is SET
ASIDE. ALS Management & Development Corporation is ordered to pay Twin Towers
Condominium Corporation all overdue assessments and dues, including interest and penalties
from date of default, as shall be determined by the proper Regional Trial Court in accordance
with this Decision. The proper Regional Trial Court shall complete the computation within sixty
(60) days from its receipt of this Decision and the records of SEC-AC Nos. 377 and 378. Costs of
suit against ALS Management & Development Corporation.
SO ORDERED.

To reiterate, the Condominium Act expressly provides that the Master Deed may empower the
management body of the Condominium "to enforce the provisions of the declaration of
restrictions."44 The Master Deed authorizes petitioner, as the management body, to enforce the
provisions of the Master Deed in accordance with petitioner’s By-Laws. Thus, petitioner’s Board
of Directors is authorized to determine the reasonableness of the penalties and interests to be
imposed against those who violate the Master Deed. Petitioner has validly done this by
adopting the House Rules.

The Master Deed binds ALS since the Master Deed is annotated on the condominium certificate
of title of ALS’ Unit. The Master Deed is ALS’ contract with all Condominium members who are
all co-owners of the common areas and facilities of the Condominium. Contracts have the force
of law between the parties and are to be complied with in good faith.45 From the moment the
contract is perfected, the parties are bound to comply with what is expressly stipulated as well
as with what is required by the nature of the obligation in keeping with good faith, usage and
the law.46 Thus, when ALS purchased its Unit from petitioner, ALS was bound by the terms and
conditions set forth in the contract, including the stipulations in the House Rules of petitioner,
such as House Rule 26.2.

In sum, as a member of petitioner, ALS is indisputably bound by the Condominium’s House

Rules which are authorized by the By-Laws, the Master Deed and the Condominium Act.

Award of attorney’s fees.

The award of attorney’s fees as damages is the exception rather than the rule. The general rule
is that attorney’s fees cannot be recovered as part of damages because of the policy that no
premium should be placed on the right to litigate.47 Counsel’s fees are not awarded every time
a party prevails in a suit.48 An award of attorney’s fees and expenses of litigation is proper
under the instances provided for in Article 2208 of the Civil Code, one of which is where the
defendant acted in gross and evident bad faith. In this case, however, we find no cogent reason
to award attorney’s fees in the absence of showing of gross and evident bad faith on the part of
ALS in refusing to satisfy petitioner’s claim.
79
18 - ART. 1170
G.R. No. 81551 April 27, 1989
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, petitioner,
vs.
PHILIPPINE NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION) AND NICOLAS
SACEDA, respondents.
Apolo, Anasco & Associates for petitioner.
The Solicitor General for public respondent.
Citizens Legal Assistance Office for private respondent.
GRIÑO-AQUINO, J.:
Assailed in this petition for certiorari is the resolution promulgated on November 16, 1987 by
the NLRC in POEA CASE NO. (L) 84-07-660 affirming the decision of the POEA Officer-In-
Charge, Honesto Cueva, who granted private respondent Nicolas Saceda's claims for stand-by
pay and withheld allotments. The following undisputed facts were lifted from the Solicitor
General's Comment on the petition:
1. In the first week of December, 1981, petitioner Philippine National Construction Corporation
(hereinafter called PNCC), a duly registered construction company, through its predecessor-in-
interest Construction and Development Corporation of the Philippines (CDCP), hired private
respondent Nicolas L. Saceda as HT Driver I (Actg. Scraper Operator) for its Suyallil North Port
road project in the Kingdom of Saudi Arabia. Respondent Saceda was hired at an hourly rate of
US$1.55 for 24 months contract period to be effective upon his departure. He left the
Philippines on January 8, 1982.
2. On January 8, 1984, private respondent Saceda completed his two (2) years overseas
contract. However, it was extended by petitioner up to January 27, 1984.
3. On February 9,1984,private respondent was dispatched to Jeddah, Saudi Arabia for
immediate repatriation to the Philippines. He was first booked for departure on February 21,
1984.
4. However, private respondent refused to depart because he wanted to await the final
disposition on the complaint he filed against petitioner PNCC for payment of his completion
bonus, unused vacation/sick leave and unpaid wages from December 1, 1983 up to January 27,
1984. The decision of the Saudi labor authorities which was favorable to private respondent
was rendered on March 24, 1984. Private respondent agreed to be repatriated on March 27,
1984, after petitioner PNCC paid him the award granted by the Saudi labor authorities.
5. Upon his arrival in the Philippines, private respondent Saceda found out that the allotment
representing 70% of his salary for the period November 16,1983 to January 15,1984,
amounting to $408.00 was not paid by petitioner PNCC to bis designated beneficiary in the
Philippines. Despite repeated demands, petitioner failed to pay said claim without justifiable
reason.
6. On August l6,1984,private respondent Saceda filed a complaint with the Workers
Adjudication and Assistance Office, Philippine Overseas Employment Administration (POEA),
docketed as POEA Case No. L-84- 07-660, for non-payment of withheld salary/allotment and
stand-by pay corresponding to the period January 27, 1984 to March 27,1984 in the sum of
US$744.00. He claimed that he was not repatriated soon upon the termination of his contract
but was made to wait and remain Idle for two months. (pp. 27-29, Rollo.)
On April 30, 1986, Honesto Cueva, officer-in-charge of the POEA, rendered a decision, the
dispositive portion of which reads as follows:
WHEREFORE, in view of the foregoing considerations, this Office hereby ordered herein
respondent Philippine National Construction Corporation (PNCC) to pay herein complainant
Nicolas Saceda the peso equivalent based on the prevailing exchange rate at the time of actual
payment of the following amounts:
1. US$206.40 representing stand-by pay for the period covered from January 27, 1984 to
February 21, 1984;
2. US$408.00 representing the withheld allotment within ten (10) calendar days upon receipt of
this DECISION." (Annex A, pp. 8, 13, Rollo.)
As mentioned earlier, the NLRC affirmed the above decision of the POEA in toto.
In its petition for certiorari, the petitioner questions only the award of stand- by pay to Saceda
for being allegedly devoid of legal basis.
The petition has no merit.
The legal basis of the NLRC's award of "stand-by" pay to Saceda during the period that he was
made to wait while his employer worked for the ticketing, booking and processing of his exit
visa and travel documents for his return trip to the Philippines, is the employment contract.
Under the contract, the PNCC was obliged to notify the employee "two months before the end of
the term of the contract" whether his contract would be extended or he would be repatriated.
Within that two-month period, the employer, which keeps in its possession the employee's
passport and travel documents for the duration of his employment, is supposed to work for the
ticketing and processing of the employee's travel documents so that he may immediately return
to the Philippines upon the expiration of his contract.
Petitioner alleged that it takes at least one month to have travel papers processed by the Saudi
Arabian authorities. Clearly, the two-month period stipulated in the contract is more than
80
enough for the purpose. Hence, petitioner alone is to blame for its failure to obtain Saceda's
travel papers within the two-month period before his contract came to an end. Since it was
through its fault that Saceda's departure was delayed, it must give him stand-by pay.
The stand-by compensation which the employer is required to pay the employee while the
latter waits for his travel papers, is actually the damages caused to him by the employer's delay
in getting his travel papers ready. As correctly pointed out by the Solicitor General in his
Comment, the basis of the employer's liability for such damages is Article 1170 of the Civil Code
which provides:
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof, are liable for damages.
As it was the petitioners obligation to get Saceda's travel documents ready for his repatriation
to the Philippines upon the termination of his overseas contract, the petitioner must answer in
damages for the delay in Saceda's departure which compelled him to "stand-by," idle and
jobless in a foreign land, while waiting for his employer to hand him his ticket and travel papers
for his trip home. The measure of those damages is the income he could have earned if he were
repatriated promptly in order that he could work again in his country.
The fact that Saceda refused to depart on February 21, 1984 because he wanted to wait for the
outcome of the complaint which he filed against petitioner for the payment of his completion
bonus, unused vacation/sick leaves, and unpaid wages from December 1, 1983 up to January
27, 1984 (when his extended contract of employment expired) does not shift to him the blame
for his delayed departure, for, as it turned out, his suit was justified. The decision promulgated
by the Saudi Labor Authorities on March 24,1984 upheld his claims.
Since Saceda was compelled to litigate by reason of the petitioner's unjust refusal to pay his
valid and demandable claims, the petitioner is answerable for the damages he suffered by
having to stay on to see his case through. The petitioner should, therefore, pay him stand-by
compensation from January 28, 1984 up to March 27, 1984 when he was repatriated after the
petitioner paid the judgment in his favor.
WHEREFORE, the petition is dismissed. As above modified, We affirm the decision of the NLRC
in POEA Case No. (L) 84-07-660, with costs against the petitioner.
SO ORDERED.
19 – ART 1170
G.R. No. 98695 January 27, 1993
JUAN J. SYQUIA, CORAZON C. SYQUIA, CARLOTA C. SYQUIA, CARLOS C. SYQUIA and ANTHONY
C. SYQUIA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, and THE MANILA MEMORIAL PARK CEMETERY, INC.,
respondents.
Pacis & Reyes Law Offices for petitioners.
Augusto S. San Pedro & Ari-Ben C. Sebastian for private respondents.
CAMPOS, JR., J.:
Herein petitioners, Juan J. Syquia and Corazon C. Syquia, Carlota C. Syquia, Carlos C. Syquia, and
Anthony Syquia, were the parents and siblings, respectively, of the deceased Vicente Juan
Syquia. On March 5, 1979, they filed a complaint 1 in the then Court of First Instance against
herein private respondent, Manila Memorial Park Cemetery, Inc. for recovery of damages
arising from breach of contract and/or quasi-delict. The trial court dismissed the complaint.
The antecedent facts, as gathered by the respondent Court, are as follows:
On March 5, 1979, Juan, Corazon, Carlota and Anthony all surnamed Syquia, plaintiff-appellants
herein, filed a complaint for damages against defendant-appellee, Manila Memorial Park
Cemetery, Inc.
The complaint alleged among others, that pursuant to a Deed of Sale (Contract No. 6885) dated
August 27, 1969 and Interment Order No. 7106 dated July 21, 1978 executed between plaintiff-
appellant Juan J. Syquia and defendant-appellee, the former, father of deceased Vicente Juan J.
Syquia authorized and instructed defendant-appellee to inter the remains of deceased in the
Manila Memorial Park Cemetery in the morning of July 25, 1978 conformably and in accordance
with defendant-appellant's (sic) interment procedures; that on September 4, 1978, preparatory
to transferring the said remains to a newly purchased family plot also at the Manila Memorial
Park Cemetery, the concrete vault encasing the coffin of the deceased was removed from its
niche underground with the assistance of certain employees of defendant-appellant (sic); that
as the concrete vault was being raised to the surface, plaintiffs-appellants discovered that the
concrete vault had a hole approximately three (3) inches in diameter near the bottom of one of
the walls closing out the width of the vault on one end and that for a certain length of time (one
hour, more or less), water drained out of the hole; that because of the aforesaid discovery,
81
plaintiffs-appellants became agitated and upset with concern that the water which had
collected inside the vault might have risen as it in fact did rise, to the level of the coffin and
flooded the same as well as the remains of the deceased with ill effects thereto; that pursuant to
an authority granted by the Municipal Court of Parañaque, Metro Manila on September 14,
1978, plaintiffs-appellants with the assistance of licensed morticians and certain personnel of
defendant-appellant (sic) caused the opening of the concrete vault on September 15, 1978; that
upon opening the vault, the following became apparent to the plaintiffs-appellants: (a) the
interior walls of the concrete vault showed evidence of total flooding; (b) the coffin was entirely
damaged by water, filth and silt causing the wooden parts to warp and separate and to crack
the viewing glass panel located directly above the head and torso of the deceased; (c) the entire
lining of the coffin, the clothing of the deceased, and the exposed parts of the deceased's
remains were damaged and soiled by the action of the water and silt and were also coated with
filth.
Due to the alleged unlawful and malicious breach by the defendant-appellee of its obligation to
deliver a defect-free concrete vault designed to protect the remains of the deceased and the
coffin against the elements which resulted in the desecration of deceased's grave and in the
alternative, because of defendant-appellee's gross negligence conformably to Article 2176 of
the New Civil Code in failing to seal the concrete vault, the complaint prayed that judgment be
rendered ordering defendant-appellee to pay plaintiffs-appellants P30,000.00 for actual
damages, P500,000.00 for moral damages, exemplary damages in the amount determined by
the court, 20% of defendant-appellee's total liability as attorney's fees, and expenses of
litigation and costs of suit. 2
In dismissing the complaint, the trial court held that the contract between the parties did not
guarantee that the cement vault would be waterproof; that there could be no quasi-delict
because the defendant was not guilty of any fault or negligence, and because there was a pre-
existing contractual relation between the Syquias and defendant Manila Memorial Park
Cemetery, Inc.. The trial court also noted that the father himself, Juan Syquia, chose the
gravesite despite knowing that said area had to be constantly sprinkled with water to keep the
grass green and that water would eventually seep through the vault. The trial court also
accepted the explanation given by defendant for boring a hole at the bottom side of the vault:
"The hole had to be bored through the concrete vault because if it has no hole the vault will
(sic) float and the grave would be filled with water and the digging would caved (sic) in the
earth, the earth would caved (sic) in the (sic) fill up the grave." 3
From this judgment, the Syquias appealed. They alleged that the trial court erred in holding that
the contract allowed the flooding of the vault; that there was no desecration; that the boring of
the hole was justifiable; and in not awarding damages.
The Court of Appeals in the Decision 4 dated December 7, 1990 however, affirmed the
judgment of dismissal. Petitioner's motion for reconsideration was denied in a Resolution dated
April 25, 1991. 5
Unsatisfied with the respondent Court's decision, the Syquias filed the instant petition. They
allege herein that the Court of Appeals committed the following errors when it:
1. held that the contract and the Rules and Resolutions of private respondent allowed the
flooding of the vault and the entrance thereto of filth and silt;
2. held that the act of boring a hole was justifiable and corollarily, when it held that no act of
desecration was committed;
3. overlooked and refused to consider relevant, undisputed facts, such as those which have
been stipulated upon by the parties, testified to by private respondent's witnesses, and
admitted in the answer, which could have justified a different conclusion;
4. held that there was no tort because of a pre-existing contract and the absence of
fault/negligence; and
5. did not award the P25,000.00 actual damages which was agreed upon by the parties, moral
and exemplary damages, and attorney's fees.
At the bottom of the entire proceedings is the act of boring a hole by private respondent on the
vault of the deceased kin of the bereaved petitioners. The latter allege that such act was either a
breach of private respondent's contractual obligation to provide a sealed vault, or, in the
alternative, a negligent act which constituted a quasi-delict. Nonetheless, petitioners claim that
whatever kind of negligence private respondent has committed, the latter is liable for
desecrating the grave of petitioners' dead.
In the instant case, We are called upon to determine whether the Manila Memorial Park
Cemetery, Inc., breached its contract with petitioners; or, alternatively, whether private
respondent was guilty of a tort.
We understand the feelings of petitioners and empathize with them. Unfortunately, however,
We are more inclined to answer the foregoing questions in the negative. There is not enough
ground, both in fact and in law, to justify a reversal of the decision of the respondent Court and
to uphold the pleas of the petitioners.
With respect to herein petitioners' averment that private respondent has committed culpa
aquiliana, the Court of Appeals found no negligent act on the part of private respondent to
justify an award of damages against it. Although a pre-existing contractual relation between the
parties does not preclude the existence of a culpa aquiliana, We find no reason to disregard the
respondent's Court finding that there was no negligence.
Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-delict . . . . (Emphasis
supplied).
82
In this case, it has been established that the Syquias and the Manila Memorial Park Cemetery,
Inc., entered into a contract entitled "Deed of Sale and Certificate of Perpetual Care" 6 on August
27, 1969. That agreement governed the relations of the parties and defined their respective
rights and obligations. Hence, had there been actual negligence on the part of the Manila
Memorial Park Cemetery, Inc., it would be held liable not for a quasi-delict or culpa aquiliana,
but for culpa contractual as provided by Article 1170 of the Civil Code, to wit:
Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are liable for damages.
The Manila Memorial Park Cemetery, Inc. bound itself to provide the concrete box to be send in
the interment. Rule 17 of the Rules and Regulations of private respondent provides that:
Rule 17. Every earth interment shall be made enclosed in a concrete box, or in an outer wall of
stone, brick or concrete, the actual installment of which shall be made by the employees of the
Association. 7
Pursuant to this above-mentioned Rule, a concrete vault was provided on July 27, 1978, the day
before the interment, and was, on the same day, installed by private respondent's employees in
the grave which was dug earlier. After the burial, the vault was covered by a cement lid.
Petitioners however claim that private respondent breached its contract with them as the latter
held out in the brochure it distributed that the . . . lot may hold single or double internment (sic)
underground in sealed concrete vault." 8 Petitioners claim that the vault provided by private
respondent was not sealed, that is, not waterproof. Consequently, water seeped through the
cement enclosure and damaged everything inside it.
We do not agree. There was no stipulation in the Deed of Sale and Certificate of Perpetual Care
and in the Rules and Regulations of the Manila Memorial Park Cemetery, Inc. that the vault
would be waterproof. Private respondent's witness, Mr. Dexter Heuschkel, explained that the
term "sealed" meant "closed." 9 On the other hand, the word "seal" is defined as . . . any of
various closures or fastenings . . . that cannot be opened without rupture and that serve as a
check against tampering or unauthorized opening." 10 The meaning that has been given by
private respondent to the word conforms with the cited dictionary definition. Moreover, it is
also quite clear that "sealed" cannot be equated with "waterproof". Well settled is the rule that
when the terms of the contract are clear and leave no doubt as to the intention of the
contracting parties, then the literal meaning of the stipulation shall control. 11 Contracts should
be interpreted according to their literal meaning and should not be interpreted beyond their
obvious intendment. 12 As ruled by the respondent Court:
When plaintiff-appellant Juan J. Syquia affixed his signature to the Deed of Sale (Exhibit "A")
and the attached Rules and Regulations (Exhibit "1"), it can be assumed that he has accepted
defendant-appellee's undertaking to merely provide a concrete vault. He can not now claim that
said concrete vault must in addition, also be waterproofed (sic). It is basic that the parties are
bound by the terms of their contract, which is the law between them (Rizal Commercial
Banking Corporation vs. Court of Appeals, et al. 178 SCRA 739). Where there is nothing in the
contract which is contrary to law, morals, good customs, public order, or public policy, the
validity of the contract must be sustained (Phil. American Insurance Co. vs. Judge Pineda, 175
SCRA 416). Consonant with this ruling, a contracting party cannot incur a liability more than
what is expressly specified in his undertaking. It cannot be extended by implication, beyond the
terms of the contract (Rizal Commercial Banking Corporation vs. Court of Appeals, supra). And
as a rule of evidence, where the terms of an agreement are reduced to writing, the document
itself, being constituted by the parties as the expositor of their intentions, is the only instrument
of evidence in respect of that agreement which the law will recognize, so long as its (sic) exists
for the purpose of evidence (Starkie, Ev., pp. 648, 655, Kasheenath vs. Chundy, 5 W.R. 68 cited
in Francisco, Revised Rules of Court in the Phil. p. 153, 1973 Ed.). And 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 (Santos vs. CA, et al., G. R. No. 83664, Nov. 13, 1989;
Prudential Bank & Trust Co. vs. Community Builders Co., Inc., 165 SCRA 285; Balatero vs. IAC,
154 SCRA 530). 13
We hold, therefore, that private respondent did not breach the tenor of its obligation to the
Syquias. While this may be so, can private respondent be liable for culpa aquiliana for boring
the hole on the vault? It cannot be denied that the hole made possible the entry of more water
and soil than was natural had there been no hole.
The law defines negligence as the "omission of that diligence which is required by the nature of
the obligation and corresponds with the circumstances of the persons, of the time and of the
place." 14 In the absence of stipulation or legal provision providing the contrary, the diligence
to be observed in the performance of the obligation is that which is expected of a good father of
a family.
The circumstances surrounding the commission of the assailed act — boring of the hole —
negate the allegation of negligence. The reason for the act was explained by Henry Flores,
Interment Foreman, who said that:
Q It has been established in this particular case that a certain Vicente Juan Syquia was interred
on July 25, 1978 at the Parañaque Cemetery of the Manila Memorial Park Cemetery, Inc., will
you please tell the Hon. Court what or whether you have participation in connection with said
internment (sic)?
A A day before Juan (sic) Syquia was buried our personnel dug a grave. After digging the next
morning a vault was taken and placed in the grave and when the vault was placed on the grave
a hole was placed on the vault so that water could come into the vault because it was raining
heavily then because the vault has no hole the vault will float and the grave would be filled with
water and the digging would caved (sic) in and the earth, the earth would (sic) caved in and fill
up the grave. 15 (Emphasis ours)
Except for the foreman's opinion that the concrete vault may float should there be a heavy
rainfall, from the above-mentioned explanation, private respondent has exercised the diligence
83

of a good father of a family in preventing the accumulation of water inside the vault which 20 – ART 1170
would have resulted in the caving in of earth around the grave filling the same with earth.
G.R. No. 96505 July 1, 1993
Thus, finding no evidence of negligence on the part of private respondent, We find no reason to
award damages in favor of petitioners. LEGASPI OIL CO., INC., petitioner,

In the light of the foregoing facts, and construed in the language of the applicable laws and vs.
jurisprudence, We are constrained to AFFIRM in toto the decision of the respondent Court of
THE COURT OF APPEALS and BERNARD OSERAOS, respondent.
Appeals dated December 7, 1990. No costs.
Duran, Lanuzo & Associates for petitioner.
SO ORDERED.
Leovigildo Mijares III for private respondent.

MELO, J.:

The petition for review on certiorari before us seeks to set aside the decision dated March 23,
1990 of the Court of Appeals in CA-G.R. CV No. 05828, penned by the Honorable Justice
Abelardo Dayrit with whom Justices Javellana and Kalalo concurred, which dismissed
petitioner's complaint for damages (p. 48, Rollo).

Petitioner does not dispute the facts of the case, as found by respondent Court of Appeals. The
findings of the respondent Court are thus adopted, to wit:

From the evidence presented by the plaintiff-appellee [now petitioner Legaspi Oil Company,
Inc.], it appears that defendant-appellant [now private respondent Bernard Oseraos] acting
through his authorized agents, had several transactions with appellee Legaspi Oil Co. for the
sale of copra to the latter. The price at which appellant sells the copra varies from time to time,
depending on the prevailing market price when the contract is entered into. One of his
authorized agents, Jose Llover, had previous transactions with appellee for the sale and
delivery of copra. The records show that he concluded a sale for 70 tons of copra at P95.00 per
100 kilos on May 27, 1975 (Exhibit G-5) and another sale for 30 tons of P102.00 per 100 kilos
on September 23, 1975 (Exhibit G-3). Subsequently, on November 6, 1975, another designated
agent signed a contract in behalf of appellant for the sale of 100 tons of copra at P79.00 per 100
kilos with the delivery terms of 25 days effective December 15, 1975 (Exhibit G-2). At this
point, it must be noted that the price of copra had been fluctuating (going up and down),
indicating its unsteady position in the market.

On February 16, 1976, appellant's agent Jose Llover signed contract No. 3804 for the sale of 100
tons of copra at P82.00 per 100 kilos with delivery terms of 20 days effective March 8, 1976
(Exhibit G, for the plaintiff). As compared to appellant's transaction on November 6, 1975, the
current price agreed upon is slightly higher than the last contract. In all these contracts though,
the selling price had always been stated as "total price" rather than per 100 kilos. However, the
parties had understood the same to be per 100 kilos in their previous transactions.
84
After the period to deliver had lapsed, appellant sold only 46,334 kilos of copra thus leaving a
balance of 53,666 kilos as per running account card (Exhibit "F"). Accordingly, demands were
made upon appellant to deliver the balance with a final warning embodied in a letter dated
October 6, 1976, that failure to deliver will mean cancellation of the contract, the balance to be
purchased at open market and the price differential to be charged against appellant. On October
22, 1976, since there was still no compliance, appellee exercised its option under the contract
and purchased the undelivered balance from the open market at the prevailing price of P168.00
per 100 kilos, or a price differential of P86.00 per 100 kilos, a net loss of P46,152.76 chargeable
against appellant.
(pp. 43-44, Rollo)
On November 3, 1976, petitioner filed a complaint against private respondent for breach of a
contract and for damages.
After trial, the then Court of First Instance (now Regional Trial Court) of Albay in Civil Case No.
5529 rendered a decision holding herein private respondent (then defendant) Oseraos liable
for damages in the amount of P48,152.76, attorney's fees (P2,000), and litigation costs.
Oseraos appealed to respondent Court which thereafter rendered a reversal decision on March
23, 1990, ordering the dismissal of the complaint.
Hence, the instant petition for review on certiorari.
The sole issued posed by the petition is whether or not private respondent Oseraos is liable for
damages arising from fraud or bad faith in deliberately breaching the contract of sale entered
into by the parties.
After a review of the case, we believe and thus hold, that private respondent is guilty of fraud in
the performance of his obligation under the sales contract where under he bound himself to
deliver to petitioner 100 metric tons of copra within twenty (20) days from March 8, 1976.
However within the delivery period, Oseraos delivered only 46,334 kilograms of copra to
petitioner, leaving an undelivered balance of 53,666 kilograms. Petitioner made repeated
demands upon private respondent to comply with his contractual undertaking to deliver the
balance of 53,666 kilograms but private respondent elected to ignore the same. In a letter dated
October 6, 1976, petitioner made a final demand with a warning that, should private
respondent fail to complete delivery of the balance of 53,666 kilograms of copra, petitioner
would purchase the balance at the open market and charge the price differential to private
respondent. Still private respondent failed to fulfill his contractual obligation to deliver the
remaining 53,666 kilograms of copra. On October 22, 1976, since there was still no compliance
by private respondent, petitioner exercised its right under the contract and purchased 53,666
kilograms of copra, the undelivered balance, at the open market at the then prevailing price of
P168.00 per 100 kilograms, a price differential of P86.00 per 100 kilograms or a total price
differential of P46,152.76.
Under the foregoing undisputed circumstances, the actuality of private respondent's fraud
cannot be gainsaid (denied). In general, fraud may be defined as the voluntary execution of a
wrongful act, or a wilfull omission, knowing and intending the effects which naturally and
necessarily arise from such act or omission; the fraud referred to in Article 1170 of the Civil
Code of the Philippines is the deliberate and intentional evasion of the normal fulfillment of
obligation; it is distinguished from negligence by the presence of deliberate intent, which is
lacking in the latter (Tolentino's Civil Code of the Philippines, Vol. IV, p. 110). The conduct of
private respondent clearly manifests his deliberate fraudulent intent to evade his contractual
obligation for the price of copra had in the meantime more than doubled from P82.00 to P168
per 100 kilograms. Under Article 1170 of the Civil Code of the Philippines, those who in the
performance of their obligation are guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor thereof, are liable for damages. Pursuant to said article, private
respondent is liable for damages.
The next point of inquiry, therefore, is the amount of damages which private respondent is
liable to pay petitioner. As aforementioned, on account of private respondent's deliberate
breach of his contractual obligation, petitioner was compelled to buy the balance of 53,666
kilos of copra in the open market at the then prevailing price of P168 per 100 kilograms
thereby paying P46,152.76 more than he would have paid had private respondent completed
delivery of the copra as agreed upon. Thus, private respondent is liable to pay respondent the
amount of P46,152.76 as damages. In case of fraud, bad faith, malice, or wanton attitude, the
guilty party is liable for all damages which may be reasonably attributed to the non
performance of the obligation (Magat vs. Medialdea, 121 SCRA 418 [1983]). Article 1101 of the
old Civil Code, later to be reproduced as Article 1170 of our present Civil Code, was the basis of
our decision in an old case, Acme Films, Inc. vs. Theaters Supply Corporation, (63 Phil, 657
[1936]), wherein we held:
It is not denied that the plaintiff company failed to supply the defendant with the
cinematographic films which were the subject matter of the contracts entered into on March
20, 1934 (Exhibits 1 and 2), and two films under the contract of March 24, 1934 (Exhibit 3), one
of said films being a serial entitled "Whispering Shadow". Guillermo Garcia Bosque testified that
because the plaintiff company had failed to supply said films, the defendants had to resort to
the Universal Pictures Corporation and ask for films to replace those which said plaintiff had
failed to supply under the contract, having had to pay therefor five per cent more than for those
films contracted with said plaintiff Acme Films, Inc., and that the total cost thereof, including
the printing of programs, posters paraded through the streets with bands of music to announce
the showing of the films which the plaintiff company failed to supply, amount to from P400 to
P550. The plaintiff company did not submit evidence to rebut the testimony of said witness and
the fact that the estimate of the expenses is approximate does not make said estimate
inadmissible. It was incumbent upon the plaintiff company to submit evidence in rebuttal, or at
least ascertain the amount of the different items in cross-examination. There being no evidence
to the contrary, it is logical to admit that the defendant company spent at least the sum of P400.
85

Inasmuch as the plaintiff company had failed to comply with a part of its booking contract, and 21 – ART 1170
as the defendant company had suffered damages as a result thereof, the former is liable to
indemnify the damages caused to the latter, in accordance with the provisions of Article 1101 of G.R. No. 133107 March 25, 1999
the Civil Code.
RIZAL COMMERCIAL BANKING CORPORATION, petitioner,
(at page 663.)
vs.
WHEREFORE, the instant petition is hereby GRANTED. The decision of the respondent Court of
COURT OF APPEALS and FELIPE LUSTRE, respondents.
Appeals in CA-G.R. CV No. 05828 is ANNULLED and SET ASIDE and the decision of the trial
court in Civil Case No. 5529 REINSTATED, with costs against private respondent.

SO ORDERED. KAPUNAN, J.:

A simple telephone call and an ounce of good faith on the part of petitioner could have
prevented the present controversy.

On March 10, 1993, private respondent Atty. Felipe Lustre purchased a Toyota Corolla from
Toyota Shaw, Inc. for which he made a down payment of P164,620.00, the balance of the
purchase price to be paid in 24 equal monthly installments. Private respondent thus issued 24
postdated checks for the amount of P14,976.00 each. The first was dated April 10, 1991;
subsequent checks were dated every 10th day of each succeeding month.

To secure the balance, private respondent executed a promissory note 1 and a contract of
chattel mortgage 2 over the vehicle in favor of Toyota Shaw, Inc. The contract of chattel
mortgage, in paragraph 11 thereof, provided for an acceleration clause stating that should the
mortgagor default in the payment of any installment, the whole amount remaining unpaid shall
become due. In addition, the mortgagor shall be liable for 25% of the principal due as liquidated
damages.

On March 14, 1991, Toyota Shaw, Inc. assigned all its rights and interests in the chattel
mortgage to petitioner Rizal Commercial Banking Corporation (RCBC).

All the checks dated April 10, 1991 to January 10, 1993 were thereafter encashed and debited
by RCBC from private respondent's account, except for RCBC Check No. 279805 representing
the payment for August 10, 1991, which was unsigned. Previously, the amount represented by
RCBC Check No. 279805 was debited from private respondent's account but was later recalled
and re-credited, to him. Because of the recall, the last two checks, dated February 10, 1993 and
March 10, 1993, were no longer presented for payment. This was purportedly in conformity
with petitioner bank's procedure that once a client's account was forwarded to its account
representative, all remaining checks outstanding as of the date the account was forwarded
were no longer presented for patent.

On the theory that respondent defaulted in his payments, the check representing the payment
for August 10, 1991 being unsigned, petitioner, in a letter dated January 21, 1993, demanded
from private respondent the payment of the balance of the debt, including liquidated damages.
86
The latter refused, prompting petitioner to file an action for replevin and damages before the
Pasay City Regional Trial Court (RTC). Private respondent, in his Answer, interposed a
counterclaim for damages.
After trial, the. RTC 3 rendered a decision disposing of the case as follows:
WHEREFORE, in view of the foregoing, judgment is hereby, rendered as follows:
I. The complaint; for lack of cause of action, is hereby DISMISSED and plaintiff RCBC is hereby
ordered,
A. To accept the payment equivalent to the three checks amounting to a total of P44,938.00,
without interest.
B. To release/cancel the mortgage on the car . . . upon payment of the amount of P44,938.00,
without interest.
C. To pay the cost of suit.
II. On The Counterclaim.
A. Plaintiff RCBC to pay Atty. Lustre the amount of P200,000.00 as moral damages.
B. RCBC to pay P100,000.00 as exemplary damages.
C. RCBC to pay Atty. Obispo P50,000.00 as Attorney's fees. Atty. Lustre is not entitled to any fee
for lawyering for himself.
All awards for damages are subject to payment of fees to be assessed by the Clerk of Court, RTC,
Pasay City.
SO ORDERED.
On appeal by petitioner, the Court of Appeals affirmed the decision of the RTC, thus:
We . . . concur with the trial court's ruling that the Chattel Mortgage contract being a contract of
adhesion — that is, one wherein a party, usually a corporation, prepares the stipulations in the
contract, while the other party merely affixes his signature or his "adhesion" thereto . . . — is to
be strictly construed against appellant bank which prepared the form Contract . . . Hence . . .
paragraph 11 of the Chattel Mortgage contract [containing the acceleration clause] should be
construed to cover only deliberate and advertent failure on the part of the mortgagor to pay an
amortization as it became due in line with the consistent holding of the Supreme Court
construing obscurities and ambiguities in the restrictive sense against the drafter thereof . . . in
the light of Article 1377 of the Civil Code.
In the case at bench, plaintiff-appellant's imputation of default to defendant-appellee rested
solely on the fact that the 5th check issued by appellee . . . was recalled for lack of signature.
However, the check was recalled only after the amount covered thereby had been deducted
from defendant-appellee's account, as shown by the testimony of plaintiff's own witness
Francisco Bulatao who was in charge of the preparation of the list and trial balances of bank
customers . . . . The "default" was therefore not a case of failure to pay, the check being
sufficiently funded, and which amount was in fact already debited [sic] from appellee's account
by the appellant bank which subsequently re-credited the amount to defendant-appelle's
account for lack of signature. All these actions RCBC did on its own without notifying defendant
until sixteen (16) months later when it wrote its demand letter dated January 21, 1993.
Clearly, appellant bank was remiss in the performance, of its functions for it could have easily
called the defendant's attention to the lack of signature on the check and sent the check to or
summoned, the latter to affix his signature. It is also to be noted that the demand letter contains
no explanation as to how defendant-appellee incurred arrearages in the amount of P66,255.70,
which is why defendant-appellee made a protest notation thereon.
Notably, all the other checks issued by the appellee dated subsequent to August 10, 1991 and
dated earlier than the demand letter, were duly encashed. This fact should have already
prompted the appellant bank to review its action relative to the unsigned check. . . . 4
We take exception to the application by both the trial and appellate courts of Article 1377 of the
Civil Code, which states:
The interpretation of obscure words or stipulations in a contract shall not favor the party who
caused the obscurity.
It bears stressing that a contract of adhesion is just as binding as ordinary contracts. 5 It is true
that we have, on occasion, struck down such contracts as void when the weaker party is
imposed upon in dealing with the dominant bargaining party and is reduced to the alternative
of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing. 6
Nevertheless, contracts of adhesion are not invalid per se; 7 they are not entirely prohibited. 8
The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives
his consent. 9
While ambiguities in a contract of adhesion are to be construed against the party that prepared
the same, 10 this rule applies only if the stipulations in such contract are obscure or ambiguous.
If the terms thereof are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of its stipulations shall control. 11 In the latter case, there would be no need
for construction. 12
Here, the terms of paragraph 11 of the Chattel Mortgage Contract 13 are clear. Said paragraph
states:
11. In case the MORTGAGOR fails to pay any of the installments, or to pay the interest that may
be due as provided in the said promissory note, the whole amount remaining unpaid therein
shall immediately become due and payable and the mortgage on the property (ies) herein-
above described may be foreclosed by the MORTGAGEE, or the MORTGAGEE may take any
other legal action to enforce collection of the obligation hereby secured, and in either case the
87
MORTGAGOR further agrees to pay the MORTGAGEE an additional sum of 25% of the principal
due and unpaid, as liquidated damages, which said sum shall become part thereof. The
MORTGAGOR hereby waives reimbursement of the amount heretofore paid by him/it to the
MORTGAGEE.
The above terms leave no room for construction. All that is required is the application thereof.
Petitioner claims that private respondent's check representing the fifth installment was "not
encashed," 14 such that the installment for August 1991 was not paid. By virtue of paragraph
11 above, petitioner submits that it "was justified in treating the entire balance of the obligation
as due and
demandable." 15 Despite demand by petitioner, however, private respondent refused to pay
the balance of the debt. Petitioner, in sum imputes delay on the part of private respondent.
We do not subscribe to petitioner's theory.
Art. 1170 of the Civil Code states that those who in the performance of their obligations are
guilty of delay are liable for damages. The delay in the performance of the obligation, however,
must be either malicious or negligent. 16 Thus, assuming that private respondent was guilty of
delay in the payment of the value of unsigned check, private respondent cannot be held liable
for damages. There is no imputation, much less evidence, that private respondent acted with
malice or negligence in failing to sign the check. Indeed, we agree with the Court of Appeals
finding that such omission was mere "in advertence" on the part of private respondent. Toyota
salesperson Jorge Geronimo testified that he even verified whether private respondent had
signed all the checks and in fact returned three or four unsigned checks to him for signing:
Atty. Obispo:
After these receipts were issued, what else did you do about the transaction?
A: During our transaction with Atty. Lustre, I found out when he issued to me the 24 checks, I
found out 3 to 4 checks are unsigned and I asked him to signed these checks.
Atty. Obispo:
What did you do?
A: I asked him to sign the checks. After signing the checks, I reviewed again all the documents,
after I reviewed all the documents and found out that all are completed and the down payments
was completed, we realed to him the car. 17
Even when the checks were delivered to petitioner, it did not object to the unsigned check. In
view of the lack of malice or negligence on the part of private respondent, petitioner's blind and
mechanical invocation of paragraph 11 of the contract of chattel mortgage was unwarranted.
Petitioner's conduct, in the light of the circumstances of this case, can only be described as
mercenary. Petitioner had already debited the value of the unsigned check from private
respondent's account only to re-credit it much later to him. Thereafter, petitioner encashed
checks subsequently dated, then abruptly refused to encash the last two. More than a year after
the date of the unsigned check, petitioner, claiming delay and invoking paragraph 11,
demanded from private respondent payment of the value of said check and that of the last two
checks, including liquidated damages. As pointed out by the trial court, this whole controversy
could have been avoided if only petitioner bothered to call up private respondent and ask him
to sign the check. Good faith not only in compliance with its contractual obligations, 18 but also
in observance of the standard in human relations, for every person "to act with justice, give
everyone his due, and observe honesty and good faith." 19 behooved the bank to do so.
Failing thus, petitioner is liable for damages caused to private respondent. 20 These include
moral damages for the mental anguish, serious anxiety, besmirched reputation, wounded
feelings and social humiliation suffered by the latter. 21 The trial court found that private
respondent was:
[a] client who has shared transactions for over twenty years with a bank . . ..The shabby
treatment given the defendant is unpardonable since he was put to shame and embarrassment
after the case was filed in Court. He is a lawyer in his own right, married to another member of
the bar. He sired children who are all professionals in their chosen field. He is known to the
community of golfers with whom he gravitates. Surely the filing of the case made defendant feel
so bad and bothered.
To deter others from emulating petitioner's callous example, we affirm the award of exemplary
damages. 22 As exemplary damages are warranted, so are attorney's fees. 23
We, however, find excessive the amount of damages awarded by the trial court in favor of
private respondent with respect to his counterclaims and, accordingly, reduce the same as
follows:
(a) Moral damages — from P200,000.00 to P100,000.00
(b) Exemplary damages — from P100,000.00 to P75,000.00
(c) Attorney's fees — from P50,000.00 to P 30,000.00
WHEREFORE, subject to these modifications, the decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
88
22 – ART 1170
G.R. No. 190601 February 7, 2011
SPOUSES LUIGI M. GUANIO and ANNA HERNANDEZ-GUANIO, Petitioners,
vs.
MAKATI SHANGRI-LA HOTEL and RESORT, INC., also doing business under the name of
SHANGRI-LA HOTEL MANILA, Respondent.
DECISION
CARPIO MORALES, J.:
For their wedding reception on July 28, 2001, spouses Luigi M. Guanio and Anna Hernandez-
Guanio (petitioners) booked at the Shangri-la Hotel Makati (the hotel).
Prior to the event, Makati Shangri-La Hotel & Resort, Inc. (respondent) scheduled an initial food
tasting. Petitioners claim that they requested the hotel to prepare for seven persons ─ the two
of them, their respective parents, and the wedding coordinator. At the scheduled food tasting,
however, respondent prepared for only six.
Petitioners initially chose a set menu which included black cod, king prawns and angel hair
pasta with wild mushroom sauce for the main course which cost P1,000.00 per person. They
were, however, given an option in which salmon, instead of king prawns, would be in the menu
at P950.00 per person. They in fact partook of the salmon.
Three days before the event, a final food tasting took place. Petitioners aver that the salmon
served was half the size of what they were served during the initial food tasting; and when
queried about it, the hotel quoted a much higher price (P1,200.00) for the size that was initially
served to them. The parties eventually agreed on a final price ─ P1,150 per person.
A day before the event or on July 27, 2001, the parties finalized and forged their contract.1
Petitioners claim that during the reception, respondent’s representatives, Catering Director Bea
Marquez and Sales Manager Tessa Alvarez, did not show up despite their assurance that they
would; their guests complained of the delay in the service of the dinner; certain items listed in
the published menu were unavailable; the hotel’s waiters were rude and unapologetic when
confronted about the delay; and despite Alvarez’s promise that there would be no charge for
the extension of the reception beyond 12:00 midnight, they were billed and paid P8,000 per
hour for the three-hour extension of the event up to 4:00 A.M. the next day.
Petitioners further claim that they brought wine and liquor in accordance with their open bar
arrangement, but these were not served to the guests who were forced to pay for their drinks.
Petitioners thus sent a letter-complaint to the Makati Shangri-la Hotel and Resort, Inc.
(respondent) and received an apologetic reply from Krister Svensson, the hotel’s Executive
Assistant Manager in charge of Food and Beverage. They nevertheless filed a complaint for
breach of contract and damages before the Regional Trial Court (RTC) of Makati City.
In its Answer, respondent claimed that petitioners requested a combination of king prawns and
salmon, hence, the price was increased to P1,200.00 per person, but discounted at P1,150.00;
that contrary to petitioners’ claim, Marquez and Alvarez were present during the event, albeit
they were not permanently stationed thereat as there were three other hotel functions; that
while there was a delay in the service of the meals, the same was occasioned by the sudden
increase of guests to 470 from the guaranteed expected minimum number of guests of 350 to a
maximum of 380, as stated in the Banquet Event Order (BEO);2 and that Isaac Albacea, Banquet
Service Director, in fact relayed the delay in the service of the meals to petitioner Luigi’s father,
Gil Guanio.
Respecting the belated service of meals to some guests, respondent attributed it to the
insistence of petitioners’ wedding coordinator that certain guests be served first.
On Svensson’s letter, respondent, denying it as an admission of liability, claimed that it was
meant to maintain goodwill to its customers.
By Decision of August 17, 2006, Branch 148 of the Makati RTC rendered judgment in favor of
petitioners, disposing as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and
against the defendant ordering the defendants to pay the plaintiff the following:
1) The amount of P350,000.00 by way of actual damages;
2) The amount of P250,000.00 for and as moral damages;
3) The amount of P100,000.00 as exemplary damages;
4) The amount of P100,000.00 for and as attorney’s fees.
With costs against the defendant.
SO ORDERED.3
In finding for petitioners, the trial court relied heavily on the letter of Svensson which is partly
quoted below:
Upon receiving your comments on our service rendered during your reception here with us, we
are in fact, very distressed. Right from minor issues pappadums served in the soup instead of
the creutons, lack of valet parkers, hard rolls being too hard till a major one – slow service, rude
and arrogant waiters, we have disappointed you in all means.
89
Indeed, we feel as strongly as you do that the services you received were unacceptable and
definitely not up to our standards. We understand that it is our job to provide excellent service
and in this instance, we have fallen short of your expectations. We ask you please to accept our
profound apologies for causing such discomfort and annoyance. 4 (underscoring supplied)
The trial court observed that from "the tenor of the letter . . . the defendant[-herein respondent]
admits that the services the plaintiff[-herein petitioners] received were unacceptable and
definitely not up to their standards."5
On appeal, the Court of Appeals, by Decision of July 27, 2009,6 reversed the trial court’s
decision, it holding that the proximate cause of petitioners’ injury was an unexpected increase
in their guests:
x x x Hence, the alleged damage or injury brought about by the confusion, inconvenience and
disarray during the wedding reception may not be attributed to defendant-appellant Shangri-la.
We find that the said proximate cause, which is entirely attributable to plaintiffs-appellants, set
the chain of events which resulted in the alleged inconveniences, to the plaintiffs-appellants.
Given the circumstances that obtained, only the Sps. Guanio may bear whatever consequential
damages that they may have allegedly suffered.7 (underscoring supplied)
Petitioners’ motion for reconsideration having been denied by Resolution of November 19,
2009, the present petition for review was filed.
The Court finds that since petitioners’ complaint arose from a contract, the doctrine of
proximate cause finds no application to it:
The doctrine of proximate cause is applicable only in actions for quasi-delicts, not in actions
involving breach of contract. x x x The doctrine is a device for imputing liability to a person
where there is no relation between him and another party. In such a case, the obligation is
created by law itself. But, where there is a pre-existing contractual relation between the parties,
it is the parties themselves who create the obligation, and the function of the law is merely to
regulate the relation thus created.8 (emphasis and underscoring supplied)
What applies in the present case is Article 1170 of the Civil Code which reads:
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence or
delay, and those who in any manner contravene the tenor thereof, are liable for damages.
RCPI v. Verchez, et al. 9 enlightens:
In culpa contractual x x x the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief. The law, recognizing the
obligatory force of contracts, will not permit a party to be set free from liability for any kind of
misperformance of the contractual undertaking or a contravention of the tenor thereof. A
breach upon the contract confers upon the injured party a valid cause for recovering that which
may have been lost or suffered. The remedy serves to preserve the interests of the promissee
that may include his "expectation interest," which is his interest in having the benefit of his
bargain by being put in as good a position as he would have been in had the contract been
performed, or his "reliance interest," which is his interest in being reimbursed for loss caused
by reliance on the contract by being put in as good a position as he would have been in had the
contract not been made; or his "restitution interest," which is his interest in having restored to
him any benefit that he has conferred on the other party. Indeed, agreements can accomplish
little, either for their makers or for society, unless they are made the basis for action. The effect
of every infraction is to create a new duty, that is, to make RECOMPENSE to the one who has
been injured by the failure of another to observe his contractual obligation unless he can show
extenuating circumstances, like proof of his exercise of due diligence x x x or of the attendance
of fortuitous event, to excuse him from his ensuing liability. (emphasis and underscoring in the
original; capitalization supplied)
The pertinent provisions of the Banquet and Meeting Services Contract between the parties
read:
4.3 The ENGAGER shall be billed in accordance with the prescribed rate for the minimum
guaranteed number of persons contracted for, regardless of under attendance or non-
appearance of the expected number of guests, except where the ENGAGER cancels the Function
in accordance with its Letter of Confirmation with the HOTEL. Should the attendance exceed
the minimum guaranteed attendance, the ENGAGER shall also be billed at the actual rate per
cover in excess of the minimum guaranteed attendance.
xxxx
4.5. The ENGAGER must inform the HOTEL at least forty eight (48) hours before the scheduled
date and time of the Function of any change in the minimum guaranteed covers. In the absence
of such notice, paragraph 4.3 shall apply in the event of under attendance. In case the actual
number of attendees exceed the minimum guaranteed number by ten percent (10%), the
HOTEL shall not in any way be held liable for any damage or inconvenience which may be
caused thereby. The ENGAGER shall also undertake to advise the guests of the situation and
take positive steps to remedy the same.10 (emphasis, italics and underscoring supplied)
Breach of contract is defined as the failure without legal reason to comply with the terms of a
contract. It is also defined as the [f]ailure, without legal excuse, to perform any promise which
forms the whole or part of the contract.11
The appellate court, and even the trial court, observed that petitioners were remiss in their
obligation to inform respondent of the change in the expected number of guests. The
observation is reflected in the records of the case. Petitioners’ failure to discharge such
obligation thus excused, as the above-quoted paragraph 4.5 of the parties’ contract provide,
respondent from liability for "any damage or inconvenience" occasioned thereby.
90
As for petitioners’ claim that respondent departed from its verbal agreement with petitioners,
the same fails, given that the written contract which the parties entered into the day before the
event, being the law between them.
Respecting the letter of Svensson on which the trial court heavily relied as admission of
respondent’s liability but which the appellate court brushed aside, the Court finds the appellate
court’s stance in order. It is not uncommon in the hotel industry to receive comments,
criticisms or feedback on the service it delivers. It is also customary for hotel management to
try to smooth ruffled feathers to preserve goodwill among its clientele.
Kalalo v. Luz holds:12
Statements which are not estoppels nor judicial admissions have no quality of conclusiveness,
and an opponent whose admissions have been offered against him may offer any evidence
which serves as an explanation for his former assertion of what he now denies as a fact.
Respondent’s Catering Director, Bea Marquez, explained the hotel’s procedure on receiving and
processing complaints, viz:
ATTY. CALMA:
Q You mentioned that the letter indicates an acknowledgement of the concern and that there
was-the first letter there was an acknowledgment of the concern and an apology, not
necessarily indicating that such or admitting fault?
A Yes.
Q Is this the letter that you are referring to?
If I may, Your Honor, that was the letter dated August 4, 2001, previously marked as plaintiff’s
exhibits, Your Honor. What is the procedure of the hotel with respect to customer concern?
A Upon receipt of the concern from the guest or client, we acknowledge receipt of such concern,
and as part of procedure in service industry particularly Makati Shangri-la we apologize for
whatever inconvenience but at the same time saying, that of course, we would go through
certain investigation and get back to them for the feedback with whatever concern they may
have.
Q Your Honor, I just like at this point mark the exhibits, Your Honor, the letter dated August 4,
2001 identified by the witness, Your Honor, to be marked as Exhibit 14 and the signature of Mr.
Krister Svensson be marked as Exhibit 14-A.13
xxxx
Q In your opinion, you just mentioned that there is a procedure that the hotel follows with
respect to the complaint, in your opinion was this procedure followed in this particular
concern?
A Yes, ma’am.
Q What makes you say that this procedure was followed?
A As I mentioned earlier, we proved that we did acknowledge the concern of the client in this
case and we did emphatize from the client and apologized, and at the same time got back to
them in whatever investigation we have.
Q You said that you apologized, what did you apologize for?
A Well, first of all it is a standard that we apologize, right? Being in the service industry, it is a
practice that we apologize if there is any inconvenience, so the purpose for apologizing is
mainly to show empathy and to ensure the client that we are hearing them out and that we will
do a better investigation and it is not in any way that we are admitting any fault.14
(underscoring supplied)
To the Court, the foregoing explanation of the hotel’s Banquet Director overcomes any
presumption of admission of breach which Svensson’s letter might have conveyed.
The exculpatory clause notwithstanding, the Court notes that respondent could have managed
the "situation" better, it being held in high esteem in the hotel and service industry. Given
respondent’s vast experience, it is safe to presume that this is not its first encounter with
booked events exceeding the guaranteed cover. It is not audacious to expect that certain
measures have been placed in case this predicament crops up. That regardless of these
measures, respondent still received complaints as in the present case, does not amuse.1avvphil
Respondent admitted that three hotel functions coincided with petitioners’ reception. To the
Court, the delay in service might have been avoided or minimized if respondent exercised
prescience in scheduling events. No less than quality service should be delivered especially in
events which possibility of repetition is close to nil. Petitioners are not expected to get married
twice in their lifetimes.
In the present petition, under considerations of equity, the Court deems it just to award the
amount of P50,000.00 by way of nominal damages to petitioners, for the discomfiture that they
were subjected to during to the event.15 The Court recognizes that every person is entitled to
respect of his dignity, personality, privacy and peace of mind.16 Respondent’s lack of prudence
is an affront to this right.
WHEREFORE, the Court of Appeals Decision dated July 28, 2009 is PARTIALLY REVERSED.
Respondent is, in light of the foregoing discussion, ORDERED to pay the amount of P50,000.00
to petitioners by way of nominal damages.
SO ORDERED.