Republic of the Philippines 1/13/1993 SR 108 32,566 eggs February 3, 1993

SUPREME COURT 1/20/1993 SR 109 21,485 eggs February 10, 1993

Manila 1/22/1993 SR 110 7,213 eggs February 12, 1993
SECOND DIVISION 1/28/1993 SR 111 14,495 eggs February 18, 1993
G.R. No. 158086 February 14, 2008 1/30/1993 SR 112 15,346 eggs February 20, 1993
ASJ CORPORATION and ANTONIO SAN JUAN, petitioners, 2/3/1993 SR 113 7
10,24[5] eggs February 24, 1993
vs. TOTAL 101,350 eggs
SPS. EFREN & MAURA EVANGELISTA, respondents. On February 3, 1993, respondent Efren went to the hatchery to pick up the chicks and by-products covered
DECISION by Setting Report No. 108, but San Juan refused to release the same due to respondents’ failure to settle
QUISUMBING, J.: accrued service fees on several setting reports starting from Setting Report No. 90. Nevertheless, San Juan
For review on certiorari is the Decision1 dated April 30, 2003 of the Court of Appeals in CA-G.R. CV No. accepted from Efren 10,245 eggs covered by Setting Report No. 113 and P15,000.008 in cash as partial
2
56082, which had affirmed the Decision dated July 8, 1996 of the Regional Trial Court (RTC) of Malolos, payment for the accrued service fees.
Bulacan, Branch 9 in Civil Case No. 745-M-93. The Court of Appeals, after applying the doctrine of On February 10, 1993, Efren returned to the hatchery to pick up the chicks and by-products covered by
piercing the veil of corporate fiction, held petitioners ASJ Corporation (ASJ Corp.) and Antonio San Juan Setting Report No. 109, but San Juan again refused to release the same unless respondents fully settle their
solidarily liable to respondents Efren and Maura Evangelista for the unjustified retention of the chicks and accounts. In the afternoon of the same day, respondent Maura, with her son Anselmo,
egg by-products covered by Setting Report Nos. 108 to 113.3 tendered P15,000.009 to San Juan, and tried to claim the chicks and by-products. She explained that she
The pertinent facts, as found by the RTC and the Court of Appeals, are as follows: was unable to pay their balance because she was hospitalized for an undisclosed ailment. San Juan accepted
Respondents, under the name and style of R.M. Sy Chicks, are engaged in the large-scale business of the P15,000.00, but insisted on the full settlement of respondents’ accounts before releasing the chicks and
4
buying broiler eggs, hatching them, and selling their hatchlings (chicks) and egg by-products in Bulacan by-products. Believing firmly that the total value of the eggs delivered was more than sufficient to cover
and Nueva Ecija. For the incubation and hatching of these eggs, respondents availed of the hatchery the outstanding balance, Maura promised to settle their accounts only upon proper accounting by San Juan.
services of ASJ Corp., a corporation duly registered in the name of San Juan and his family. San Juan disliked the idea and threatened to impound their vehicle and detain them at the hatchery
Sometime in 1991, respondents delivered to petitioners various quantities of eggs at an agreed service fee compound if they should come back unprepared to fully settle their accounts with him.
of 80 centavos per egg, whether successfully hatched or not. Each delivery was reflected in a "Setting On February 11, 1993, respondents directed their errand boy, Allan Blanco, to pick up the chicks and by-
Report" indicating the following: the number of eggs delivered; the date of setting or the date the eggs products covered by Setting Report No. 110 and also to ascertain if San Juan was still willing to settle
were delivered and laid out in the incubators; the date of candling or the date the eggs, through a lighting amicably their differences. Unfortunately, San Juan was firm in his refusal and reiterated his threats on
system, were inspected and determined if viable or capable of being hatched into chicks; and the date of respondents. Fearing San Juan’s threats, respondents never went back to the hatchery.
hatching, which is also the date respondents would pick-up the chicks and by-products. Initially, the service The parties tried to settle amicably their differences before police authorities, but to no avail. Thus,
fees were paid upon release of the eggs and by-products to respondents. But as their business went along, respondents filed with the RTC an action for damages based on petitioners’ retention of the chicks and by-
respondents’ delays on their payments were tolerated by San Juan, who just carried over the balance, as products covered by Setting Report Nos. 108 to 113.
there may be, into the next delivery, out of keeping goodwill with respondents. On July 8, 1996, the RTC ruled in favor of respondents and made the following findings: (1) as of Setting
From January 13 to February 3, 1993, respondents had delivered to San Juan a total of 101,3[50] 5 eggs, Report No. 107, respondents owed petitioners P102,336.80;10 (2) petitioners withheld the release of the
6
detailed as follows: chicks and by-products covered by Setting Report Nos. 108-113;11 and (3) the retention of the chicks and
Date Set SR Number No. of eggs delivered Date hatched/ by-products was unjustified and accompanied by threats and intimidations on respondents. 12 The RTC
Pick-up date
disregarded the corporate fiction of ASJ Corp.,13 and held it and San Juan solidarily liable to respondents
for P529,644.80 as actual damages, P100,000.00 as moral damages, P50,000.00 as attorney’s fees, plus
interests and costs of suit. The decretal portion of the decision reads:
WHEREFORE, based on the evidence on record and the laws/jurisprudence applicable thereon, judgment
is hereby rendered ordering the defendants to pay, jointly and severally, unto the plaintiffs the amounts
of P529,644.80, representing the value of the hatched chicks and by-products which the plaintiffs on the
average expected to derive under Setting Reports Nos. 108 to 113, inclusive, with legal interest thereon
from the date of this judgment until the same shall have been fully paid, P100,000.00 as moral damages
and P50,000.00 as attorney’s fees, plus the costs of suit.
14
SO ORDERED.
Both parties appealed to the Court of Appeals. Respondents prayed for an additional award of P76,139.00
as actual damages for the cost of other unreturned by-products and P1,727,687.52 as unrealized profits,
while petitioners prayed for the reversal of the trial court’s entire decision.
On April 30, 2003, the Court of Appeals denied both appeals for lack of merit and affirmed the trial court’s
decision, with the slight modification of including an award of exemplary damages of P10,000.00 in favor
of respondents. The Court of Appeals, applying the doctrine of piercing the veil of corporate fiction,
considered ASJ Corp. and San Juan as one entity, after finding that there was no bona fide intention to
treat the corporation as separate and distinct from San Juan and his wife Iluminada. The fallo of the Court
of Appeals’ decision reads:
WHEREFORE, in view of the foregoing, the Decision appealed from is hereby AFFIRMED, with the
slight modification that exemplary damages in the amount of P10,000.00 are awarded to plaintiffs.
Costs against defendants.
15
SO ORDERED.
Hence, the instant petition, assigning the following errors:
I.
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING, AS DID THE
COURT A QUO, THAT PETITIONERS WITHHELD/OR FAILED TO RELEASE THE CHICKS AND
BY-PRODUCTS COVERED BY SETTING REPORT NOS. 108 AND 109.
II.
THE HONORABLE COURT OF APPEALS ERRED IN ADMITTING THE HEARSAY TESTIMONY
OF MAURA EVANGELISTA SUPPORTIVE OF ITS FINDINGS THAT PETITIONERS
WITHHELD/OR FAILED TO RELEASE THE CHICKS AND BY-PRODUCTS COVERED BY
SETTING REPORT NOS. 108 AND 109.
III.
THE HONORABLE COURT OF APPEALS, AS DID THE COURT A QUO, ERRED IN NOT FINDING
THAT RESPONDENTS FAILED TO RETURN TO THE PLANT TO GET THE CHICKS AND BY-
PRODUCTS COVERED BY SETTING REPORT NOS. 110, 111, 112 AND 113.
IV.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING, AS DID THE COURT A QUO,
THAT THE PIERCING OF THE VEIL OF CORPORATE ENTITY IS JUSTIFIED, AND
CONSEQUENTLY HOLDING PETITIONERS JOINTLY AND SEVERALLY LIABLE TO PAY
RESPONDENTS THE SUM OF P529,644.[80].
V.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONERS HAVE
VIOLATED THE PRINCIPLES ENUNCIATED IN ART. 19 OF THE NEW CIVIL CODE AND
CONSEQUENTLY IN AWARDING MORAL DAMAGES, EXEMPLARY DAMAGES AND
ATTORNEY’S FEES.
VI.
THE HONORABLE COURT OF APPEALS ERRED IN NOT AWARDING PETITIONERS’
COUNTERCLAIM.16
Plainly, the issues submitted for resolution are: First, did the Court of Appeals err when (a) it ruled that
petitioners withheld or failed to release the chicks and by-products covered by Setting Report Nos. 108
and 109; (b) it admitted the testimony of Maura; (c) it did not find that it was respondents who failed to
return to the hatchery to pick up the chicks and by-products covered by Setting Report Nos. 110 to 113;
and (d) it pierced the veil of corporate fiction and held ASJ Corp. and Antonio San Juan as one
entity? Second, was it proper to hold petitioners solidarily liable to respondents for the payment
of P529,644.80 and other damages?
In our view, there are two sets of issues that the petitioners have raised.
The first set is factual. Petitioners seek to establish a set of facts contrary to the factual findings of the trial
and appellate courts. However, as well established in our jurisprudence, only errors of law are reviewable
by this Court in a petition for review under Rule 45.17 The trial court, having had the opportunity to
personally observe and analyze the demeanor of the witnesses while testifying, is in a better position to
pass judgment on their credibility.18 More importantly, factual findings of the trial court, when amply
supported by evidence on record and affirmed by the appellate court, are binding upon this Court and will
not be disturbed on appeal.19 While there are exceptional circumstances20 when these findings may be set
aside, none of them is present in this case.
Based on the records, as well as the parties’ own admissions, the following facts were uncontroverted: (1)
As of Setting Report No. 107, respondents were indebted to petitioners for P102,336.80 as accrued service
fees for Setting Report Nos. 90 to 107;21 (2) Petitioners, based on San Juan’s own admission,22 did not
release the chicks and by-products covered by Setting Report Nos. 108 and 109 for failure of respondents
to fully settle their previous accounts; and (3) Due to San Juan’s threats, respondents never returned to the
23
hatchery to pick up those covered by Setting Report Nos. 110 to 113.
Furthermore, although no hard and fast rule can be accurately laid down under which the juridical
personality of a corporate entity may be disregarded, the following probative factors of identity justify the
24
application of the doctrine of piercing the veil of corporate fiction in this case: (1) San Juan and his wife
own the bulk of shares of ASJ Corp.; (2) The lot where the hatchery plant is located is owned by the San
Juan spouses; (3) ASJ Corp. had no other properties or assets, except for the hatchery plant and the lot
where it is located; (4) San Juan is in complete control of the corporation; (5) There is no bona fide
intention to treat ASJ Corp. as a different entity from San Juan; and (6) The corporate fiction of ASJ Corp.
was used by San Juan to insulate himself from the legitimate claims of respondents, defeat public
convenience, justify wrong, defend crime, and evade a corporation’s subsidiary liability for
damages.25 These findings, being purely one of fact,26 should be respected. We need not assess and
evaluate the evidence all over again where the findings of both courts on these matters coincide.
On the second set of issues, petitioners contend that the retention was justified and did not constitute an
abuse of rights since it was respondents who failed to comply with their obligation. Respondents, for their
part, aver that all the elements on abuse of rights were present. They further state that despite their offer to
partially satisfy the accrued service fees, and the fact that the value of the chicks and by-products was
more than sufficient to cover their unpaid obligations, petitioners still chose to withhold the delivery.
The crux of the controversy, in our considered view, is simple enough. Was petitioners’ retention of the
chicks and by-products on account of respondents’ failure to pay the corresponding service fees
unjustified? While the trial and appellate courts had the same decisions on the matter, suffice it to say that
a modification is proper. Worth stressing, petitioners’ act of withholding the chicks and by-products is
entirely different from petitioners’ unjustifiable acts of threatening respondents. The retention had legal
basis; the threats had none.
To begin with, petitioners’ obligation to deliver the chicks and by-products corresponds to three dates: the
date of hatching, the delivery/pick-up date and the date of respondents’ payment. On several setting
reports, respondents made delays on their payments, but petitioners tolerated such delay. When
respondents’ accounts accumulated because of their successive failure to pay on several setting reports,
petitioners opted to demand the full settlement of respondents’ accounts as a condition precedent to the
delivery. However, respondents were unable to fully settle their accounts.
Respondents’ offer to partially satisfy their accounts is not enough to extinguish their obligation. Under
27
Article 1248 of the Civil Code, the creditor cannot be compelled to accept partial payments from the
debtor, unless there is an express stipulation to that effect. More so, respondents cannot substitute or apply
as their payment the value of the chicks and by-products they expect to derive because it is necessary that
all the debts be for the same kind, generally of a monetary character. Needless to say, there was no valid
application of payment in this case.
Furthermore, it was respondents who violated the very essence of reciprocity in contracts, consequently
giving rise to petitioners’ right of retention. This case is clearly one among the species of non-performance
of a reciprocal obligation. Reciprocal obligations are those which arise from the same cause, wherein each
party is a debtor and a creditor of the other, such that the performance of one is conditioned upon the
simultaneous fulfillment of the other.28 From the moment one of the parties fulfills his obligation, delay
by the other party begins.29
Since respondents are guilty of delay in the performance of their obligations, they are liable to pay
petitioners actual damages of P183,416.80, computed as follows: From respondents’ outstanding balance
of P102,336.80, as of Setting Report No. 107, we add the corresponding services fees of P81,080.0030 for
Setting Report Nos. 108 to 113 which had remain unpaid.
Nonetheless, San Juan’s subsequent acts of threatening respondents should not remain among those treated
with impunity. Under Article 1931 of the Civil Code, an act constitutes an abuse of right if the following
elements are present: (a) the existence of a legal right or duty; (b) which is exercised in bad faith; and (c)
for the sole intent of prejudicing or injuring another. 32 Here, while petitioners had the right to withhold
delivery, the high-handed and oppressive acts of petitioners, as aptly found by the two courts below, had
no legal leg to stand on. We need not weigh the corresponding pieces of evidence all over again because
factual findings of the trial court, when adopted and confirmed by the appellate court, are binding and
conclusive and will not be disturbed on appeal.33
Since it was established that respondents suffered some pecuniary loss anchored on petitioners’ abuse of
rights, although the exact amount of actual damages cannot be ascertained, temperate damages are
recoverable. In arriving at a reasonable level of temperate damages of P408,852.10, which is equivalent
to the value of the chicks and by-products, which respondents, on the average, are expected to derive, this
Court was guided by the following factors: (a) award of temperate damages will cover only Setting Report
Nos. 109 to 113 since the threats started only on February 10 and 11, 1993, which are the pick-up dates
for Setting Report Nos. 109 and 110; the rates of (b)41% and (c) 17%, representing the average rates of
conversion of broiler eggs into hatched chicks and egg by-products as tabulated by the trial court based on
available statistical data which was unrebutted by petitioners; (d)68,784 eggs,34 or the total number of
broiler eggs under Setting Report Nos. 109 to 113; and (e) P14.00 and (f)P1.20, or the then unit market
price of the chicks and by-products, respectively.
Thus, the temperate damages of P408,852.10 is computed as follows:
[b X (d X e) + c X (d X f)] = Temperate Damages
41% X (68,784 eggs X P14) = P394,820.16 Franco L. Loyola and Sabas Cacananta for petitioner.
17% X (68,784 eggs X P1.20) = P 14,031.94 The Solicitor General for respondents.

[P394,820.16 + P14,031.94] = P408,852.10

ABAD SANTOS, J.:
At bottom, we agree that petitioners’ conduct flouts the norms of civil society and justifies the award of
This is a petition to review the decision of the Sandiganbayan in Criminal Case No. 873.
moral and exemplary damages. As enshrined in civil law jurisprudence: Honeste vivere, non alterum
Hilario Jaravata was accused of violating Section 3(b) of Republic Act No. 3019, as amended, said to have
laedere et jus suum cuique tribuere. To live virtuously, not to injure others and to give everyone his
been committed in the following manner:
due.35 Since exemplary damages are awarded, attorney’s fees are also proper. Article 2208 of the Civil
That on or about the period from April 30, 1979 to May 25, 1979, in the Municipality of Tubao, Province
Code provides that:
of La Union, Philippines, and within the jurisdiction of this Honorable Court, the abovenamed accused,
In the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be
being then the Assistant Principal of the Leones Tubao, La Union Barangay High School and with the use
recovered, except:
of his influence as such public official and taking advantage of his moral and official ascendancy over his
(1) When exemplary damages are awarded;
classroom teachers, with deliberate intent did then and there wilfully, unlawfully and feloniously made
xxxx
demand and actually received payments from other classroom teachers, ROMEO DACAYANAN,
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 30, 2003 of the Court of
DOMINGO LOPEZ, MARCELA BAUTISTA, and FRANCISCO DULAY various sums of money,
Appeals in CA-G.R. CV No. 56082 is hereby MODIFIED as follows:
namely: P118.00, P100.00, P50.00 and P70.00 out of their salary differentials, in consideration of accused
a. Respondents are ORDERED to pay petitioners P183,416.80 as actual damages, with interest of 6%
having officially intervened in the release of the salary differentials of the six classroom teachers, to the
from the date of filing of the complaint until fully paid, plus legal interest of 12% from the finality of this
prejudice and damage of the said classroom teachers, in the total amount of THREE HUNDRED THIRTY
decision until fully paid.
EIGHT (P338.00) PESOS, Philippine Currency. (Decision, p.1-2.)
b. The award of actual damages of P529,644.80 in favor of respondents is hereby REDUCED
After trial, the Sandiganbayan rendered the following judgment:
to P408,852.10, with legal interest of 12% from the date of finality of this judgment until fully paid.
WHEREFORE, accused is hereby found guilty beyond reasonable doubt for Violation of Section 3(b),
c. The award of moral damages, exemplary damages and attorney’s fees
Republic Act No. 3019, as amended, and he is hereby sentenced to suffer an indeterminate imprisonment
of P100,000.00, P10,000.00, P50,000.00, respectively, in favor of respondents is hereby AFFIRMED.
ranging from ONE (1) YEAR, is minimum, to FOUR (4) YEARS, as maximum, to further suffer perpetual
d. All other claims are hereby DENIED.
special disqualification from public office and to pay the costs.
No pronouncement as to costs.
No pronouncement as to the civil liability it appearing that the money given to the accused was already
SO ORDERED.
refunded by him. (Id. pp, 16-17.)
————————-
The petition raises factual and legal issues but for obvious reasons Our decision shall deal with the legal
issue only.
Republic of the Philippines
The Sandiganbayan states in its decision the following:
SUPREME COURT
A perusal of the conflicting versions of the prosecution and the defense shows that there is no dispute that
Manila
[complainants] Ramos, Lloren, Lopez, Dacayanan, Dulay and Bautista are classroom teachers of the
EN BANC
Leones Barangay High School with accused as their assistant principal and [Conrado Baltazar as the
G.R. No. L-56170 January 31, 1984
administrator; that on January 5, 1979, accused informed the classroom teachers of the approval of the
HILARIO JARAVATA petitioner,
release of their salary differentials for 1978 and to facilitate its payment accused and the classroom teachers
vs.
agreed that accused follow-up the papers in Manila with the obligation on the part of the classroom teachers
THE HON. SANDIGANBAYAN and THE PEOPLE OF THE PHILIPPINES, respondents.
to reimburse the accused of his expenses; that accused incurred expenses in the total amount of P220.00 complainants. It should be noted that the arrangement was "to facilitate its [salary differential] payment
and there being six classroom teachers, he divided said amount by six or at the rate of P36.00 each; that accused and the classroom teachers agreed that accused follow-up the papers in Manila with the obligation
the classroom teachers actually received their salary differentials and pursuant to said agreement, they, on the part of the classroom teachers to reimburse the accused of his expenses.
with the exception of Lloren and Ramos, gave the accused varying amounts but as Baltazar did not approve In Our opinion, Sec. 3(b) of R.A. No. 3019, refers to a public officer whose official intervention is required
it, he ordered the accused to return the money given to him by Lopez, Dacayanan, Dulay and Bautista, and by law in a contract or transaction.
accused complied (Pp. 7-8.) There is no law which invests the petitioner with the power to intervene in the payment of the salary
The decision also recites that "the evidence is overwhelming to show that accused received more than the differentials of the complainants or anyone for that matter. Far from exercising any power, the petitioner
rightful contribution of P36.00 from four classroom teachers, namely: Lopez, Dulay, Dacayanan and played the humble role of a supplicant whose mission was to expedite payment of the salary differentials.
Bautista. Lopez categorically declared that he gave the accused P100.00 (TSN, p. 5, August 21, 1980 In his official capacity as assistant principal he is not required by law to intervene in the payment of the
hearing) after he received his salary differential or an excess of P64.00. So with Dulay, that he gave P70.00 salary differentials. Accordingly, he cannot be said to have violated the law afore-cited although he exerted
to the accused (TSN, p. 16, supra) or an excess of P34.00; Dacayanan, that he gave to the accused P118.00 efforts to facilitate the payment of the salary differentials.
(TSN, p. 26, supra) or an excess of P82.00, and Bautista, that he gave to the accused P50.00 (TSN, p. 38, WHEREFORE, the petition is hereby granted and the judgment of the Sandiganbayan convicting the
supra) or an excess of P14.00. In short, the total amount received by the accused in excess of the share of petitioner is set aside. Costs de oficio.
the classroom teachers in the reimbursement of his expenses is P194.00. " (P. 9.) SO ORDERED.
Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act provides, inter Fernando, C.J., Teehankee, Makasiar, Aquino, Concepcion, Jr., Guerrero, De Castro, Melencio-Herrera,
alia the following: Plana, Escolin, Relova and Gutierrez, Jr., JJ., concur.
Sec. 3. Corrupt practices of public officers. — In addition to acts or omissions of public officers already
penalized by existing law, the following shall constitute corrupt practices of any public officer and are —————————————-
hereby declared to be unlawful:
xxx xxx xxx Republic of the Philippines
(b) Directly or indirectly requesting or receiving any gift, present, share, percentage, or benefit, for himself SUPREME COURT
or for any other person in connection with any contract or transaction between the Government and any Manila
other party, wherein the public officer in his official capacity has to intervene under the law. EN BANC
xxx xxx xxx G.R. No. L-6913 November 21, 1913
The legal issue is whether or not, under the facts stated, petitioner Jaravata violated the above-quoted THE ROMAN CATHOLIC BISHOP OF JARO, plaintiff-appellee,
provision of the statute. vs.
A simple reading of the provision has to yield a negative answer. GREGORIO DE LA PEÑA, administrator of the estate of Father Agustin de la Peña, defendant-
There is no question that Jaravata at the time material to the case was a "public officer" as defined by appellant.
Section 2 of R.A. No. 3019, i.e. "elective and appointive officials and employees, permanent or temporary, J. Lopez Vito, for appellant.
whether in the classified or unclassified or exempt service receiving compensation, even normal from the Arroyo and Horrilleno, for appellee.
government." It may also be said that any amount which Jaravata received in excess of P36.00 from each
of the complainants was in the concept of a gift or benefit. The pivotal question, however, is whether MORELAND, J.:
Jaravata, an assistant principal of a high school in the boondocks of Tubao, La Union, "in his official This is an appeal by the defendant from a judgment of the Court of First Instance of Iloilo, awarding to the
capacity has to intervene under the law" in the payment of the salary differentials for 1978 of 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
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.
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 the 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.
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.
Arellano, C.J., Torres and Carson, JJ., concur.
Separate Opinions
TRENT, J., dissenting:
I dissent. Technically speaking, whether Father De la Peña was a trustee or an agent of the plaintiff his
books showed that in 1898 he had in his possession as trustee or agent the sum of P6,641 belonging to the
plaintiff as the head of the church. This money was then clothed with all the immunities and protection
with which the law seeks to invest trust funds. But when De la Peña mixed this trust fund with his own
and deposited the whole in the bank to hispersonal account or credit, he by this act stamped on the said
fund his own private marks and unclothed it of all the protection it had. If this money had been deposited
in the name of De la Peña as trustee or agent of the plaintiff, I think that it may be presumed that the
military authorities would not have confiscated it for the reason that they were looking for insurgent funds
only. Again, the plaintiff had no reason to suppose that De la Peña would attempt to strip the fund of its
identity, nor had he said or done anything which tended to relieve De la Peña from the legal reponsibility
which pertains to the care and custody of trust funds.
The Supreme Court of the United States in the United State vs. Thomas (82 U. S., 337), at page 343, said:
"Trustees are only bound to exercise the same care and solicitude with regard to the trust property which
they would exercise with regard to their own. Equity will not exact more of them. They are not liable for
a loss by theft without their fault. But this exemption ceases when they mix the trust-money with their
own, whereby it loses its identity, and they become mere debtors."
If this proposition is sound and is applicable to cases arising in this jurisdiction, and I entertain no doubt No appearance for appellee.
on this point, the liability of the estate of De la Peña cannot be doubted. But this court in the majority
opinion says: "The fact that he (Agustin de la Peña) placed the trust fund in the bank in his personal account STREET, J.:
does not add to his responsibility. Such deposit did not make him a debtor who must respond at all This is a suit for the recovery of a sum of money claimed as a balance due to the plaintiff on a promissory
hazards. . . . There was no law prohibiting him from depositing it as he did, and there was no law which note. From a judgment in favor of the plaintiff for the sum of P8461, as principal, with interest thereon at
changed his responsibility, by reason of the deposit." the rate of 8 per cent per annum from the 10th day of July, 1916, until paid, and for the further sum of
I assume that the court in using the language which appears in the latter part of the above quotation meant P2,115.25, as a stipulated attorney's fee, the defendant has appealed.
to say that there was no statutory law regulating the question. Questions of this character are not usually The note in question represents the purchase price of an automobile truck which the plaintiff sold to the
governed by statutory law. The law is to be found in the very nature of the trust itself, and, as a general defendant at the time the note was executed. As security for the payment of said indebtedness, the plaintiff
rule, the courts say what facts are necessary to hold the trustee as a debtor. took a chattel mortgage on the truck; and after the note had matured this chattel mortgage was foreclosed.
If De la Peña, after depositing the trust fund in his personal account, had used this money for speculative At the foreclosure sale the plaintiff himself became the purchaser for the sum of P539, which amount was
purposes, such as the buying and selling of sugar or other products of the country, thereby becoming a credited upon the indebtedness.
debtor, there would have been no doubt as to the liability of his estate. Whether he used this money for Of the questions raised by the defense only two in our opinion require serious consideration. The first has
that purpose the record is silent, but it will be noted that a considerable length of time intervened from the reference to irregularities in the foreclosure of the chattel mortgage; the second to the validity of the
time of the deposit until the funds were confiscated by the military authorities. In fact the record shows agreement for 25 per cent as an attorney's fee for collection.
that De la Peña deposited on June 27, 1898, P5,259, on June 28 of that year P3,280, and on August 5 of We find that the requirements of section 14 of Act No. 1508 (the Chattel Mortgage of Law) were not
the same year P6,000. The record also shows that these funds were withdrawn and again deposited all observed in the sale of the truck. The irregularity consists in the fact the truck was brought by Bachrach
together on the 29th of May, 1900, this last deposit amounting to P18,970. These facts strongly indicate from Albay (which was the place of residence of the mortgagor) to the city of Manila and here sold by the
that De la Peña had as a matter of fact been using the money in violation of the trust imposed in sheriff of the city at the instance of the plaintiff. There is no evidence that the mortgagor consented to the
him. lawph!1.net removal of the truck to Manila or to the sale that was effected in the city; and it must therefore be held that
If the doctrine announced in the majority opinion be followed in cases hereafter arising in this jurisdiction the sale was improperly accomplished. The statute requires that the mortgage chattel shall be sold in the
trust funds will be placed in precarious condition. The position of the trustee will cease to be one of trust. municipality where the mortgagor resides, or where the property is situated; and the latter expression has
reference to the place where the thing is being kept for use by the mortgagor, not any place where the
——————————————- mortgagee may choose to carry it when he takes it out of the custody of the mortgagor. It is admitted that
notice of the same was not posted anywhere in the municipality of Albay, as required in the section cited;
Republic of the Philippines and of course publication there would have of little or no value when the sale was to be made in Manila.
SUPREME COURT The effect of this irregularity was, in our opinion, to make the plaintiff liable to the defendant for the full
Manila value of the truck at the time the plaintiff thus carried it off to be sold; and of course the burden is on the
EN BANC defendant to prove the amount of the damage to which he was thus subjected. With reference to the
G.R. No. L-13660 November 13, 1918 condition of the truck when it was sold, we find the following statement in the testimony of Bachrach:
E. M. BACHRACH, plaintiff-appellee, Q. What was the condition of the truck at the time it was sold? — At the time of the sale, everything that
vs. wasn't actually built on the truck was removed; tires removed, generator, lamps, dynamo, everything that
VICENTE GOLINGCO, defendant-appellant. could be taken off with a monkeywrench was removed. It was in a criminal condition.
Ramon Diokno for appellant. Q. Was the body of the truck, or the chassis, and the motor on at the time you purchased it at the sheriff's
sale? — A. No.lawphil.net
Q. Had it been removed? — A. Yes. We had a telegram from the sheriff of Tabaco, saying that the day he
was to load the truck for Manila, he had a protest from Golingco demanding the body, and I telegraphed
the sheriff to deliver the body to Golingco, and send the truck.
There is no evidence to contradict Bachrach's testimony on this point; and we are bound to credit him
when he states his conclusion that the value of the truck at the time it was sold was the amount he paid for
it. In the absence of proof to the contrary this must also be taken to be its value at the time it was brought
away from Albay. It results that the defendant has failed to prove that he suffered any damage whatever
by the irregular manner in which the sale was conducted.
This brings us to the question of the amount of the attorney's fee allowed by the trial court. It is provided
in the note given by the defendant for the purchase price of the truck that, in the event it becoming
necessary to employ counsel to enforce its collection, the maker is to pay an additional twenty-five per
cent "as fees for the attorney collecting the same." The trial court gave judgment for the full amount due
on the note and for an additional sum of P2,115.25, for attorney's fees. The appellant assigns this as error
and argues that the agreement to pay an attorney's fee, in addition to the principal and stipulated interest,
is void as usurious and as being grossly excessive.
We are of the opinion that it may lawfully be stipulated in favor of the creditor, whether the obligation be
evidenced by promissory note or otherwise, that in the event that it becomes necessary, by reason of the
delinquency of the debtor, to employ counsel to enforce payment of the obligation, a reasonable attorney's
fee shall be paid by the debtor, in addition to the amount due for principal and interest. The legality of such
a stipulation, when annexed to a negotiate instrument is expressly recognized by the Negotiable
Instruments Law ((Act No. 2031, sec. 2, par. E). Inasmuch as the statutory allowance for attorney's fees,
as costs, is notoriously less than the amount which attorneys are entitled to receive from their clients,
unless such a stipulation is made and enforced, it follows that a creditor may be compelled to pay, out of
the money due him, a considerable sum as the necessary cost of enforcing payment by the delinquent
debtor.
Such a stipulation is not void as usurious, even when added to a contract for the payment of the highest
rate of interest permissible. The purpose of such a stipulation is not to increase in any respect the benefits
ultimately to accrue to the creditor. It is true that such a stipulation may be made for the purpose of
concealing usury; but that is a matter of proof to be determined in each case upon the evidence.
We cite, with approval, the ruling of the supreme court of Georgia upon this question, as follows:
A contract to pay attorney's fees for collecting, in addition to principal and interest, is not, on its face,
usurious; nor does it become usurious by reducing the debt to judgment, and including in the judgment ten
per cent for attorney's fees.
The law . . . recognizes the validity of such a stipulation, and it meets the justice of the case very frequently
for the debtor to pay for the collection rather than the creditor, . . . We do not mean to intimate that usury
might not be covered up by such a stipulation, that it might not be a disguise, or contrivance for the
concealment of usury; but there is no such indication in this case. There is no evidence that it was not a
bona fide stipulation to cover the contingency of having to incur expense in collecting this debt. (National
bank of Athens vs. Danforth, 80 Ga., 55.)
But the principle that it may be lawfully stipulated that the legal expense involved in the collection of a
debt shall be defrayed by the debtor does not imply that such stipulations must be enforced in accordance
with their terms, no matter how injurious or oppressive they may be. The lawful purpose to be
accomplished by such a stipulation is to permit the creditor to receive the whole amount due him under
his contract without the deduction of the expenses caused by the delinquency of the debtor. It should not
be permitted for him to convert such a stipulation into a source of speculative profit at the expense of the
debtor.
Contracts for attorney's services in this jurisdiction stand upon an entirely different footing from contracts
for the payment of compensation for any other services. By the express provision of section 29 of the Code
of Civil Procedure, an attorney is not entitled in the absence of express contract to recover more than a
reasonable compensation for his services; and even where an express contract is made the court can ignore
it and limit the recovery to reasonable compensation if the amount of the stipulated fee is found by the
court to be unreasonable. This is a very different rule from that announced in section 1091 of the Civil
Code with reference to the obligation of contract in general, where it is said that such obligation has the
force of law between the contracting parties. Had the plaintiff herein made an express contract to pay his
attorney an uncontingent fee of P2,115.25, for the services to be rendered in reducing the note here in suit
to judgment, it would not have been enforceable against him had he seen fit to oppose it, as such a fee is
obviously far greater than is necessary to remunerate the attorney for the work involved and is therefore
unreasonable. In order to enable the court to ignore an express contract for an attorney's fees, it is not
necessary to show, as in other contracts, that it is contrary to morality or public policy (art. 1255, Civil
Code). It is enough that it is unreasonable or unconscionable.
We are not unmindful of the fact that the question as to the propriety of the stipulation for attorney's fee
does not here arise directly between the creditor in this note and the attorney into whose hands he might
place the note for collection. The stipulation is contained in the contract between the creditor and his
debtor; and the attorney could not be held bound thereby. Nevertheless we think the same rule applies as
if the question had arisen directly between attorney and client. As the court has power to fix the fee as
between the attorney and the client, it must necessarily have the right to say whether a stipulation, like
this, inserted in a promissory note is valid. A different ruling, as may be readily seen, would make it
exceedingly easy to evade the usury laws. As stated at the beginning of this discussion, the lawful purpose the plaintiff against the defendant for the recovery of wages due and unpaid, gave judgment against the
to be accomplished by such stipulation is to permit the creditor to receive the amount due without the latter for the sum of $600 and the costs of suit, less the sum of $50, Mexican.
deduction of the expenses caused by the delinquency of the debtor. It must not be used as a cloak for an On August 27, 1902, Don Vicente Perez filed in the Court of First Instance of Laguna a complaint, which
exorbitant exaction. was amended on the 17th of January of this year, asking that the court determine the amount due the
We are therefore of the opinion that we are authorized to reduce the amount in question to a sum which plaintiff, at the customary rate of compensation for interpreting in these Islands, for services rendered in
will enable the plaintiff to pay a reasonable compensation to his attorney; and we think that P800 is the Tabacalera Company, and that, in view of the circumstances of the case, judgment be rendered in his
sufficient for this purpose. It is possible that, as a matter of fact, the plaintiff may have contracted with his favor for such sum. The complaint also asked that the defendant be condemned to the payment of damages
attorney for the performances of the services to be rendered him in this matter for a sum less than P800, in the sum of $3,200, gold, together with the costs of suit. In this complaint it was alleged that Don Eugenio
and had it been so made to appear, we would have reduced the amount recoverable, under this particular Pomar, as general agent of the Compañia General de Tabacos in the said province, verbally requested the
clause of the note, to the corresponding sum. No evidence having been adduced upon this point, however, plaintiff on the 8th of December, 1901, to act as interpreter between himself and the military authorities;
we are compelled to exercise our discretion and make use of our professional knowledge as to the that after the date mentioned the plaintiff continued to render such services up to and including May 31,
reasonable compensation to which an attorney would be entitled for the performance of such services as 1902; that he had accompanied the defendant, Pomar, during that time at conferences between the latter
those which the plaintiff in this case has had occasion to require from his counsel. and the colonel commanding the local garrison, and with various officers and doctors residing in the
Wherefore it is ordered that the plaintiff have and recover of the defendant the sum of P8,461, with interest capital, and at conferences with Captain Lemen in the town of Pilar, and with the major in command at the
thereon at the rate of 8 per centum per annum, from the tenth day of July, 1916, until paid, and for the town of Pagsanjan, concerning the shipment of goods from Manila, and with respect to Pagsanjan to this
further sum of P800 as attorney's fees, and for the statutory costs of both instances, exclusive of the city; that the plaintiff during this period held himself in readiness to render services whenever required;
statutory allowance for attorney's fees. So ordered. that on this account his private business, and especially a soap factory established in the capital, was
Torres, Johnson, Araullo, Malcolm and Fisher, JJ., concur. entirely abandoned; that to the end that such services might be punctually rendered, the agent, Pomar,
assured him that the Tabacalera Company always generously repaid services rendered it, and that he
————————————- therefore did not trouble himself about his inability to devote the necessary amount of time to his business,
the defendant going so far as to make him flattering promises of employment with the company, which he
Republic of the Philippines did not accept; that these statements were made in the absence of witnesses and that therefore his only
SUPREME COURT proof as to the same was Mr. Pomar's word as a gentleman; that the employees of the company did not
Manila understand English, and by reason of the plaintiff's mediation between the agent, and the military
EN BANC authorities large profits were obtained, as would appear from the account and letterpress books of the
G.R. No. L-1299 November 16, 1903 agency corresponding to those dates. In the amended complaint it was added that the defendant, on behalf
VICENTE PEREZ, plaintiff-appellee, of the company, offered to renumerate the plaintiff for the services rendered in the most advantageous
vs. manner in which such services are compensated, in view of the circumstances under which they were
EUGENIO POMAR, Agent of the Compañia General de Tabacos, defendant-appellant. requested; and that the plaintiff, by rendering the company such services, was obliged to abandon his own
Francisco Dominguez for appellant. business, the manufacture of soap, and thereby suffered damages in the sum of $3,200, United States
Ledesma, Sumulong and Quintos for appellee. currency.
The defendant, on the 25th of September, 1902, filed an answer asking for the dismissal of the complaint,
TORRES, J.: with costs to the plaintiff. In his answer the defendant denied the allegation in the first paragraph of the
In a decision dated February 9, 1903, the judge of the Sixth Judicial District, deciding a case brought by complaint, stating that it was wholly untrue that the company, and the defendant as its agent, had solicited
the services of the plaintiff as interpreter before the military authorities for the period stated, or for any
other period, or that the plaintiff had accompanied Pomar at the conferences mentioned, concerning
shipments from Manila and exports from some of the towns of the province to this capital. He stated that
he especially denied paragraphs 2 of the complaint, as it was absolutely untrue that the plaintiff had been
at the disposal of the defendant for the purpose of rendering such services; that he therefore had not been
obliged to abandon his occupation or his soap factory, and that the statement that an offer of employment
with the company had been made to him was false. The defendant also denied that through the mediation
of the plaintiff the company and himself had obtained large profits. The statements in paragraphs 6, 7, 8,
and 9 of the complaint were also denied. The defendant stated that, on account of the friendly relations
which sprang up between the plaintiff and himself, the former borrowed from him from time to time money
amounting to $175 for the purposes of his business, and that he had also delivered to the plaintiff 36 arrobas
of oil worth $106, and three packages of resin for use in coloring his soap; that the plaintiff accompanied
the defendant to Pagsanjan, Pilar, and other towns when the latter made business trips to them for the
purpose of extending his business and mercantile relations therein; that on these excursions, as well as on
private and official visits which he had to make, the plaintiff occasionally accompanied him through
motives of friendship, and especially because of the free transportation given him, and not on behalf of the
company of which he was never interpreter and for which he rendered no services; that the plaintiff in
these conferences acted as interpreter of his own free will, without being requested to do so by the
defendant and without any offer of payment or compensation; that therefore there existed no legal relation
whatever between the company and the plaintiff, and that the defendant, when accepting the spontaneous,
voluntary and officious services of the plaintiff, did so in his private capacity and not as agent of the
company, and that it was for this reason that he refused to enter into negotiations with the plaintiff, he
being in no way indebted to the latter. The defendant concluded by saying that he answered in his
individual capacity.
A complaint having been filed against the Compañia General de Tabacos and Don Eugenio Pomar, its
agent in the Province of Laguna, the latter, having been duly summoned, replied to the complaint, which
was subsequently amended, and stated that he made such reply in his individual capacity and not as agent
of the company, with which the plaintiff had had no legal relations. The suit was instituted between the
plaintiff and Pomar, who, as such, accepted the issue and entered into the controversy without objection,
opposed the claim of the plaintiff, and concluded by asking that the complaint be dismissed, with the costs
to the plaintiff. Under these circumstances and construing the statutes liberally, we think it proper to decide
the case pending between both parties in accordance with law and the strict principles of justice.
From the oral testimony introduced at the trial, it appears that the plaintiff, Perez, did on various occasions
render Don Eugenio Pomar services as interpreter of English; and that he obtained passes and accompanied
the defendant upon his journeys to some of the towns in the Province of Laguna. It does not appear from
the evidence, however, that the plaintiff was constantly at the disposal of the defendant during the period
of six months, or that he rendered services as such interpreter continuously and daily during that period of
time.
It does not appear that any written contract was entered into between the parties for the employment of the
plaintiff as interpreter, or that any other innominate contract was entered into; but whether the plaintiff's
services were solicited or whether they were offered to the defendant for his assistance, inasmuch as these
services were accepted and made use of by the latter, we must consider that there was a tacit and mutual
consent as to the rendition of the services. This gives rise to the obligation upon the person benefited by
the services to make compensation therefor, since the bilateral obligation to render services as interpreter,
on the one hand, and on the other to pay for the services rendered, is thereby incurred. (Arts. 1088, 1089,
and 1262 of the Civil Code). The supreme court of Spain in its decision of February 12, 1889, holds,
among other things, "that not only is there an express and tacit consent which produces real contract but
there is also a presumptive consent which is the basis of quasi contracts, this giving rise to the multiple
juridical relations which result in obligations for the delivery of a thing or the rendition of a service."
Notwithstanding the denial of that defendant, it is unquestionable that it was with his consent that the
plaintiff rendered him services as interpreter, thus aiding him at a time when, owing to the existence of an
insurrection in the province, the most disturbed conditions prevailed. It follows, hence, that there was
consent on the part of both in the rendition of such services as interpreter. Such service not being contrary
to law or to good custom, it was a perfectly licit object of contract, and such a contract must necessarily
have existed between the parties, as alleged by the plaintiff. (Art. 1271, Civil Code.)
The consideration for the contract is also evident, it being clear that a mutual benefit was derived in
consequence of the service rendered. It is to be supposed that the defendant accepted these services and
that the plaintiff in turn rendered them with the expectation that the benefit would be reciprocal. This
shows the concurrence of the three elements necessary under article 1261 of the Civil Code to constitute
a contract of lease of service, or other innominate contract, from which an obligation has arisen and whose
fulfillment is now demanded.
Article 1254 of the Civil Code provides that a contract exists the moment that one or more persons consent
to be bound, with respect to another or others, to deliver some thing or to render some service. Article
1255 provides that the contracting parties may establish such covenants, terms, and conditions as they
deem convenient, provided they are not contrary to law, morals or public policy. Whether the service was
solicited or offered, the fact remains that Perez rendered to Pomar services as interpreter. As it does not
appear that he did this gratuitously, the duty is imposed upon the defendant, having accepted the benefit
of the service, to pay a just compensation therefor, by virtue of the innominate contract of facio ut
des implicitly established. Code; nor is it included within the provisions of section 335 of the Code of Civil Procedure, as this
The obligations arising from this contract are reciprocal, and, apart from the general provisions with innominate contract is not covered by that section. The contract of lease of services is not included in any
respect to contracts and obligations, the special provisions concerning contracts for lease of services are of the cases expressly designated by that section of the procedural law, as affirmed by the appellant. The
applicable by analogy. interpretation of the other articles of the Code alleged to have been infringed has also been stated fully in
In this special contract, as determined by article 1544 of the Civil Code, one of the parties undertakes to this opinion.
render the other a service for a price certain. The tacit agreement and consent of both parties with respect For the reasons stated, we are of the opinion that judgment should be rendered against Don Eugenio Pomar
to the service rendered by the plaintiff, and the reciprocal benefits accruing to each, are the best evidence for the payment to the plaintiff of the sum of 200 Mexican pesos, from which will be deducted the sum of
of the fact that there was an implied contract sufficient to create a legal bond, from which arose enforceable 50 pesos is made as to the costs of this instance. The judgment below is accordingly affirmed in so far as
rights and obligations of a bilateral character.lawphi1.net it agrees with this opinion, and reversed in so far as it may be in conflict therewith. Judgment will be
In contracts the will of the contracting parties is law, this being a legal doctrine based upon the provisions entered accordingly twenty days after this decision is filed.
of articles 1254, 1258, 1262, 1278, 1281, 1282, and 1289 of the Civil Code. If it is a fact sufficiently Arellano, C.J., Willard, and Mapa, JJ., concur.
proven that the defendant, Pomar, on various occasions consented to accept an interpreter's services,
rendered in his behalf and not gratuitously, it is but just that he should pay a reasonable remuneration Separate Opinions
therefor, because it is a well-known principle of law that no one should be permitted to enrich himself to
the damage of another. MCDONOUGH, J., dissenting:
With respect to the value of the services rendered on different occasions, the most important of which was I dissent from the opinion of the majority. In my opinion there is no legal evidence in the case from which
the first, as it does not appear that any salary was fixed upon by the parties at the time the services were the court may conclude that the recovery should be 200 Mexican pesos. I am therefore in favor of affirming
accepted, it devolves upon the court to determine, upon the evidence presented, the value of such services, the judgment.
taking into consideration the few occasions on which they were rendered. The fact that no fixed or Cooper, J., concurs.
determined consideration for the rendition of the services was agreed upon does not necessarily involve a Johnson, J., did not sit in this case.
violation of the provisions of article 1544 of the Civil Code, because at the time of the agreement this
consideration was capable of being made certain. The discretionary power of the court, conferred upon it ————————————
by the law, is also supported by the decisions of the supreme court of Spain, among which may be cited
that of October 18, 1899, which holds as follows: "That as stated in the article of the Code cited, which Republic of the Philippines
follows the provisions of law 1, title 8, of the fifth partida, the contract for lease of services is one in which SUPREME COURT
one of the parties undertakes to make some thing or to render some service to the other for a certain price, Manila
the existence of such a price being understood, as this court has held not only when the price has been EN BANC
expressly agreed upon but also when it may be determined by the custom and frequent use of the place in G.R. No. L-13602 April 6, 1918
which such services were rendered." LEUNG BEN, plaintiff,
No exception was taken to the judgment below by the plaintiff on account of the rejection of his claim for vs.
damages. The decision upon this point is, furthermore, correct. P. J. O'BRIEN, JAMES A OSTRAND and GEO. R. HARVEY, judges of First Instance of city of
Upon the supposition that the recovery of the plaintiff should not exceed 200 Mexican pesos, owing to the Manila,defendants.
inconsiderable number of times he acted as interpreter, it is evident that the contract thus implicitly entered Thos. D. Aitken and W. A. Armstrong for plaintiff.
into was not required to be in writing and that therefore it does not fall within article 1280 of the Civil 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 hereinbelow 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 to the
defendant 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 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 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 can not 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 cae, 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 can not 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 juris prudential 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.
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 chattles.
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 filed 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 chattles — 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.
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 ob lame
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 la
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. 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.)
Im 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 relate to
gambling contracts, while article 1305 treats of the nullity of contracts proceeding 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; 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.
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 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.
Arellano, C.J., Torres, Johnson and Carson, JJ., concur.
———————————-
FIRST DIVISION
[G.R. No. 71929 : December 4, 1990.]
192 SCRA 9
ALITALIA, Petitioner, vs. INTERMEDIATE APPELLATE COURT and FELIPA E. PABLO,
Respondents.
DECISION
NARVASA, J.:
Dr. Felipa Pablo — an associate professor in the University of the Philippines, 1 and a research grantee of
the Philippine Atomic Energy Agency — was invited to take part at a meeting of the Department of
Research and Isotopes of the Joint FAO-IAEA Division of Atomic Energy in Food and Agriculture of the
United Nations in Ispra, Italy. 2 She was invited in view of her specialized knowledge in "foreign
substances in food and the agriculture environment." She accepted the invitation, and was then scheduled
by the organizers, to read a paper on "The Fate of Radioactive Fusion Products Contaminating Vegetable
Crops." 3 The program announced that she would be the second speaker on the first day of the meeting. 4
To fulfill this engagement, Dr. Pablo booked passage on petitioner airline, ALITALIA.
She arrived in Milan on the day before the meeting in accordance with the itinerary and time table set for
her by ALITALIA. She was however told by the ALITALIA personnel there at Milan that her luggage
was "delayed inasmuch as the same . . . (was) in one of the succeeding flights from Rome to Milan." 5 Her
luggage consisted of two (2) suitcases: one contained her clothing and other personal items; the other, her
scientific papers, slides and other research material. But the other flights arriving from Rome did not have
her baggage on board.
By then feeling desperate, she went to Rome to try to locate her bags herself. There, she inquired about
her suitcases in the domestic and international airports, and filled out the forms prescribed by ALITALIA
for people in her predicament. However, her baggage could not be found. Completely distraught and
discouraged, she returned to Manila without attending the meeting in Ispra, Italy. : nad
Once back in Manila she demanded that ALITALIA make reparation for the damages thus suffered by
her. ALITALIA offered her "free airline tickets to compensate her for any alleged damages. . . ." She
rejected the offer, and forthwith commenced the action 6 which has given rise to the present appellate
proceedings.
As it turned out, Prof. Pablo's suitcases were in fact located and forwarded to Ispra, 7 Italy, but only on
the day after her scheduled appearance and participation at the U.N. meeting there. 8 Of course Dr. Pablo
was no longer there to accept delivery; she was already on her way home to Manila. And for some reason
or other, the suitcases were not actually restored to Prof. Pablo by ALITALIA until eleven (11) months
later, and four (4) months after institution of her action. 9
After appropriate proceedings and trial, the Court of First Instance rendered judgment in Dr. Pablo's favor:
10
"(1) Ordering the defendant (ALITALIA) to pay . . . (her) the sum of TWENTY THOUSAND PESOS
(P20,000.00), Philippine Currency, by way of nominal damages;
(2) Ordering the defendant to pay . . . (her) the sum of FIVE THOUSAND PESOS (P5,000.00), Philippine
Currency, as and for attorney's fees; (and)
(3) Ordering the defendant to pay the costs of the suit."
ALITALIA appealed to the Intermediate Appellate Court but failed to obtain a reversal of the judgment.
11 Indeed, the Appellate Court not only affirmed the Trial Court's decision but also increased the award
of nominal damages payable by ALITALIA to P40,000.00. 12 That increase it justified as follows: 13
"Considering the circumstances, as found by the Trial Court and the negligence committed by defendant,
the amount of P20,000.00 under present inflationary conditions as awarded . . . to the plaintiff as nominal
damages, is too little to make up for the plaintiff's frustration and disappointment in not being able to
appear at said conference; and for the embarrassment and humiliation she suffered from the academic
community for failure to carry out an official mission for which she was singled out by the faculty to
represent her institution and the country. After weighing carefully all the considerations, the amount
awarded to the plaintiff for nominal damages and attorney's fees should be increased to the cost of her
round trip air fare or at the present rate of peso to the dollar at P40,000,00."
ALITALIA has appealed to this Court on Certiorari. Here, it seeks to make basically the same points it
tried to make before the Trial Court and the Intermediate Appellate Court, i.e.:
1) that the Warsaw Convention should have been applied to limit ALITALIA'S liability; and
2) that there is no warrant in fact or in law for the award to Dr. Pablo of nominal damages and attorney's
fees. 14
In addition, ALITALIA postulates that it was error for the Intermediate Appellate Court to have refused
to pass on all the assigned errors and in not stating the facts and the law on which its decision is based. 15
Under the Warsaw Convention, 16 an air carrier is made liable for damages for:
1) the death, wounding or other bodily injury of a passenger if the accident causing it took place on board
the aircraft or in the course of its operations of embarking or disembarking; 17
2) the destruction or loss of, or damage to, any registered luggage or goods, if the occurrence causing it
took place during the carriage by air;" 18 and
3) delay in the transportation by air of passengers, luggage or goods. 19
In these cases, it is provided in the Convention that the "action for damages, however, founded, can only
be brought subject to conditions and limits set out" therein. 20
The Convention also purports to limit the liability of the carriers in the following manner: 21
1. In the carriage of passengers the liability of the carrier for each passenger is limited to the sum of
250,000 francs . . . Nevertheless, by special contract, the carrier and the passenger may agree to a higher
limit of liability.: nad
2. a) In the carriage of registered baggage and of cargo, the liability of the carrier is limited to a sum of
250 francs per kilogramme, unless the passenger or consignor has made, at the time when the package was
handed over to the carrier, a special declaration of interest in delivery at destination and has paid a
supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding
the declared sum, unless he proves that sum is greater than the actual value to the consignor at delivery.
b) In the case of loss, damage or delay of part of registered baggage or cargo, or of any object contained
therein, the weight to be taken into consideration in determining the amount to which the carrier's liability
is limited shall be only the total weight of the package or packages concerned. Nevertheless, when the
loss, damage or delay of a part of the registered baggage or cargo, or of an object contained therein, affects
the value of other packages covered by the same baggage check or the same air way bill, the total weight
of such package or packages shall also be taken into consideration in determining the limit of liability.
3. As regards objects of which the passenger takes charge himself the liability of the carrier is limited to
5000 francs per passenger.
4. The limits prescribed . . shall not prevent the court from awarding, in accordance with its own law, in
addition, the whole or part of the court costs and of the other expenses of litigation incurred by the plaintiff.
The foregoing provision shall not apply if the amount of the damages awarded, excluding court costs and
other expenses of the litigation, does not exceed the sum which the carrier has offered in writing to the
plaintiff within a period of six months from the date of the occurrence causing the damage, or before the
commencement of the action, if that is later.
The Warsaw Convention however denies to the carrier availment "of the provisions which exclude or limit
his liability, if the damage is caused by his wilful misconduct or by such default on his part as, in
accordance with the law of the court seized of the case, is considered to be equivalent to wilful
misconduct," or "if the damage is (similarly) caused . . by any agent of the carrier acting within the scope
of his employment." 22 The Hague Protocol amended the Warsaw Convention by removing the provision
that if the airline took all necessary steps to avoid the damage, it could exculpate itself completely, 23 and
declaring the stated limits of liability not applicable "if it is proved that the damage resulted from an act
or omission of the carrier, its servants or agents, done with intent to cause damage or recklessly and with
knowledge that damage would probably result." The same deletion was effected by the Montreal
Agreement of 1966, with the result that a passenger could recover unlimited damages upon proof of wilful
misconduct. 24
The Convention does not thus operate as an exclusive enumeration of the instances of an airline's liability,
or as an absolute limit of the extent of that liability. Such a proposition is not borne out by the language of
the Convention, as this Court has now, and at an earlier time, pointed out. 25 Moreover, slight reflection
readily leads to the conclusion that it should be deemed a limit of liability only in those cases where the
cause of the death or injury to person, or destruction, loss or damage to property or delay in its transport
is not attributable to or attended by any wilful misconduct, bad faith, recklessness, or otherwise improper
conduct on the part of any official or employee for which the carrier is responsible, and there is otherwise
no special or extraordinary form of resulting injury. The Convention's provisions, in short, do not "regulate
or exclude liability for other breaches of contract by the carrier" 26 or misconduct of its officers and
employees, or for some particular or exceptional type of damage. Otherwise, "an air carrier would be
exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a
contract of carriage, which is absurd." 27 Nor may it for a moment be supposed that if a member of the
aircraft complement should inflict some physical injury on a passenger, or maliciously destroy or damage
the latter's property, the Convention might successfully be pleaded as the sole gauge to determine the
carrier's liability to the passenger. Neither may the Convention be invoked to justify the disregard of some
extraordinary sort of damage resulting to a passenger and preclude recovery therefor beyond the limits set
by said Convention. It is in this sense that the Convention has been applied, or ignored, depending on the
peculiar facts presented by each case.:-cralaw
In Pan American World Airways, Inc. v. I.A.C., 28 for example, the Warsaw Convention was applied as
regards the limitation on the carrier's liability, there being a simple loss of baggage without any otherwise
improper conduct on the part of the officials or employees of the airline or other special injury sustained Appeals correctly set the amount thereof at P40,000.00. As to the purely technical argument that the award
by the passenger. to her of such nominal damages is precluded by her omission to include a specific claim therefor in her
On the other hand, the Warsaw Convention has invariably been held inapplicable, or as not restrictive of complaint, it suffices to draw attention to her general prayer, following her plea for moral and exemplary
the carrier's liability, where there was satisfactory evidence of malice or bad faith attributable to its officers damages and attorney's fees, "for such other and further just and equitable relief in the premises," which
and employees. 29 Thus, an air carrier was sentenced to pay not only compensatory but also moral and certainly is broad enough to comprehend an application as well for nominal damages. Besides, petitioner
exemplary damages, and attorney's fees, for instance, where its employees rudely put a passenger holding should have realized that the explicit assertion, and proof, that Dr. Pablo's right had been violated or
a first-class ticket in the tourist or economy section, 30 or ousted a brown Asiatic from the plane to give invaded by it — absent any claim for actual or compensatory damages, the prayer thereof having been
his seat to a white man, 31 or gave the seat of a passenger with a confirmed reservation to another, 32 or voluntarily deleted by Dr. Pablo upon the return to her of her baggage — necessarily raised the issue of
subjected a passenger to extremely rude, even barbaric treatment, as by calling him a "monkey." 33 nominal damages.: rd
In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the employees of This Court also agrees that respondent Court of Appeals correctly awarded attorney's fees to Dr. Pablo,
petitioner airline; and Dr. Pablo's luggage was eventually returned to her, belatedly, it is true, but without and the amount of P5,000.00 set by it is reasonable in the premises. The law authorizes recovery of
appreciable damage. The fact is, nevertheless, that some special species of injury was caused to Dr. Pablo attorney's fees inter alia where, as here, "the defendant's act or omission has compelled the plaintiff to
because petitioner ALITALIA misplaced her baggage and failed to deliver it to her at the time appointed litigate with third persons or to incur expenses to protect his interest," 34 or "where the court deems it just
— a breach of its contract of carriage, to be sure — with the result that she was unable to read the paper and equitable." 35
and make the scientific presentation (consisting of slides, autoradiograms or films, tables and tabulations) WHEREFORE, no error being perceived in the challenged decision of the Court of Appeals, it appearing
that she had painstakingly labored over, at the prestigious international conference, to attend which she on the contrary to be entirely in accord with the facts and the law, said decision is hereby AFFIRMED,
had traveled hundreds of miles, to her chagrin and embarrassment and the disappointment and annoyance with costs against the petitioner.
of the organizers. She felt, not unreasonably, that the invitation for her to participate at the conference, SO ORDERED.
extended by the Joint FAO/IAEA Division of Atomic Energy in Food and Agriculture of the United Cruz, Gancayco, Griño-Aquino and Medialdea, JJ., concur.
Nations, was a singular honor not only to herself, but to the University of the Philippines and the country ——————————————
as well, an opportunity to make some sort of impression among her colleagues in that field of scientific
activity. The opportunity to claim this honor or distinction was irretrievably lost to her because of Alitalia's Republic of the Philippines
breach of its contract. SUPREME COURT
Apart from this, there can be no doubt that Dr. Pablo underwent profound distress and anxiety, which Manila
gradually turned to panic and finally despair, from the time she learned that her suitcases were missing up EN BANC
to the time when, having gone to Rome, she finally realized that she would no longer be able to take part G.R. No. L-21438 September 28, 1966
in the conference. As she herself put it, she "was really shocked and distraught and confused." AIR FRANCE, petitioner,
Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the circumstances be vs.
restricted to that prescribed by the Warsaw Convention for delay in the transport of baggage. RAFAEL CARRASCOSO and the HONORABLE COURT OF APPEALS, respondents.
She is not, of course, entitled to be compensated for loss or damage to her luggage. As already mentioned, Lichauco, Picazo and Agcaoili for petitioner.
her baggage was ultimately delivered to her in Manila, tardily but safely. She is however entitled to Bengzon Villegas and Zarraga for respondent R. Carrascoso.
nominal damages — which, as the law says, is adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated and recognized, and not for the purpose of SANCHEZ, J.:
indemnifying the plaintiff for any loss suffered — and this Court agrees that the respondent Court of The Court of First Instance of Manila 1 sentenced petitioner to pay respondent Rafael Carrascoso
P25,000.00 by way of moral damages; P10,000.00 as exemplary damages; P393.20 representing the
difference in fare between first class and tourist class for the portion of the trip Bangkok-Rome, these
various amounts with interest at the legal rate, from the date of the filing of the complaint until paid; plus
P3,000.00 for attorneys' fees; and the costs of suit.
2
On appeal, the Court of Appeals slightly reduced the amount of refund on Carrascoso's plane ticket from
P393.20 to P383.10, and voted to affirm the appealed decision "in all other respects", with costs against
petitioner.
The case is now before us for review on certiorari.
The facts declared by the Court of Appeals as " fully supported by the evidence of record", are:
Plaintiff, a civil engineer, was a member of a group of 48 Filipino pilgrims that left Manila for Lourdes on
March 30, 1958.
On March 28, 1958, the defendant, Air France, through its authorized agent, Philippine Air Lines, Inc.,
issued to plaintiff a "first class" round trip airplane ticket from Manila to Rome. From Manila to Bangkok,
plaintiff travelled in "first class", but at Bangkok, the Manager of the defendant airline forced plaintiff to
vacate the "first class" seat that he was occupying because, in the words of the witness Ernesto G. Cuento,
there was a "white man", who, the Manager alleged, had a "better right" to the seat. When asked to vacate
his "first class" seat, the plaintiff, as was to be expected, refused, and told defendant's Manager that his
seat would be taken over his dead body; a commotion ensued, and, according to said Ernesto G. Cuento,
"many of the Filipino passengers got nervous in the tourist class; when they found out that Mr. Carrascoso
was having a hot discussion with the white man [manager], they came all across to Mr. Carrascoso and
pacified Mr. Carrascoso to give his seat to the white man" (Transcript, p. 12, Hearing of May 26, 1959);
and plaintiff reluctantly gave his "first class" seat in the plane.3
4
1. The trust of the relief petitioner now seeks is that we review "all the findings" of respondent Court of
Appeals. Petitioner charges that respondent court failed to make complete findings of fact on all the issues
properly laid before it. We are asked to consider facts favorable to petitioner, and then, to overturn the
appellate court's decision.
Coming into focus is the constitutional mandate that "No decision shall be rendered by any court of record
5
without expressing therein clearly and distinctly the facts and the law on which it is based". This is echoed
in the statutory demand that a judgment determining the merits of the case shall state "clearly and distinctly
the facts and the law on which it is based"; 6 and that "Every decision of the Court of Appeals shall contain
7
complete findings of fact on all issues properly raised before it".
8
A decision with absolutely nothing to support it is a nullity. It is open to direct attack. The law, however,
solely insists that a decision state the "essential ultimate facts" upon which the court's conclusion is
9
drawn. A court of justice is not hidebound to write in its decision every bit and piece of
evidence 10 presented by one party and the other upon the issues raised. Neither is it to be burdened with
the obligation "to specify in the sentence the facts" which a party "considered as proved". 11 This is but a
part of the mental process from which the Court draws the essential ultimate facts. A decision is not to be
so clogged with details such that prolixity, if not confusion, may result. So long as the decision of the Court
of Appeals contains the necessary facts to warrant its conclusions, it is no error for said court to withhold
therefrom "any specific finding of facts with respect to the evidence for the defense". Because as this Court
well observed, "There is no law that so requires". 12 Indeed, "the mere failure to specify (in the decision)
the contentions of the appellant and the reasons for refusing to believe them is not sufficient to hold the
same contrary to the requirements of the provisions of law and the Constitution". It is in this setting that
in Manigque, it was held that the mere fact that the findings "were based entirely on the evidence for the
prosecution without taking into consideration or even mentioning the appellant's side in the controversy
as shown by his own testimony", would not vitiate the judgment. 13 If the court did not recite in the decision
the testimony of each witness for, or each item of evidence presented by, the defeated party, it does not
14
mean that the court has overlooked such testimony or such item of evidence. At any rate, the legal
presumptions are that official duty has been regularly performed, and that all the matters within an issue
in a case were laid before the court and passed upon by it. 15
Findings of fact, which the Court of Appeals is required to make, maybe defined as "the written statement
of the ultimate facts as found by the court ... and essential to support the decision and judgment rendered
thereon". 16They consist of the court's "conclusions" with respect to the determinative facts in issue". 17 A
question of law, upon the other hand, has been declared as "one which does not call for an examination of
the probative value of the evidence presented by the parties." 18
2. By statute, "only questions of law may be raised" in an appeal by certiorari from a judgment of the Court
of Appeals. 19 That judgment is conclusive as to the facts. It is not appropriately the business of this Court
to alter the facts or to review the questions of fact. 20
With these guideposts, we now face the problem of whether the findings of fact of the Court of Appeals
support its judgment.
3. Was Carrascoso entitled to the first class seat he claims?
It is conceded in all quarters that on March 28, 1958 he paid to and received from petitioner a first class
ticket. But petitioner asserts that said ticket did not represent the true and complete intent and agreement
of the parties; that said respondent knew that he did not have confirmed reservations for first class on any
specific flight, although he had tourist class protection; that, accordingly, the issuance of a first class ticket
was no guarantee that he would have a first class ride, but that such would depend upon the availability of
first class seats.
These are matters which petitioner has thoroughly presented and discussed in its brief before the Court of
Appeals under its third assignment of error, which reads: "The trial court erred in finding that plaintiff had
confirmed reservations for, and a right to, first class seats on the "definite" segments of his journey,
21
particularly that from Saigon to Beirut".
And, the Court of Appeals disposed of this contention thus:
Defendant seems to capitalize on the argument that the issuance of a first-class ticket was no guarantee
that the passenger to whom the same had been issued, would be accommodated in the first-class
compartment, for as in the case of plaintiff he had yet to make arrangements upon arrival at every station
for the necessary first-class reservation. We are not impressed by such a reasoning. We cannot understand
how a reputable firm like defendant airplane company could have the indiscretion to give out tickets it
never meant to honor at all. It received the corresponding amount in payment of first-class tickets and yet
it allowed the passenger to be at the mercy of its employees. It is more in keeping with the ordinary course
22
of business that the company should know whether or riot the tickets it issues are to be honored or not.
Not that the Court of Appeals is alone. The trial court similarly disposed of petitioner's contention, thus:
On the fact that plaintiff paid for, and was issued a "First class" ticket, there can be no question. Apart from
his testimony, see plaintiff's Exhibits "A", "A-1", "B", "B-1," "B-2", "C" and "C-1", and defendant's own
witness, Rafael Altonaga, confirmed plaintiff's testimony and testified as follows:
Q. In these tickets there are marks "O.K." From what you know, what does this OK mean?
A. That the space is confirmed.
Q. Confirmed for first class?
A. Yes, "first class". (Transcript, p. 169)
xxx xxx xxx
Defendant tried to prove by the testimony of its witnesses Luis Zaldariaga and Rafael Altonaga that
although plaintiff paid for, and was issued a "first class" airplane ticket, the ticket was subject to
confirmation in Hongkong. The court cannot give credit to the testimony of said witnesses. Oral evidence
cannot prevail over written evidence, and plaintiff's Exhibits "A", "A-l", "B", "B-l", "C" and "C-1" belie
the testimony of said witnesses, and clearly show that the plaintiff was issued, and paid for, a first class
ticket without any reservation whatever.
Furthermore, as hereinabove shown, defendant's own witness Rafael Altonaga testified that the reservation
for a "first class" accommodation for the plaintiff was confirmed. The court cannot believe that after such
confirmation defendant had a verbal understanding with plaintiff that the "first class" ticket issued to him
23
by defendant would be subject to confirmation in Hongkong.
We have heretofore adverted to the fact that except for a slight difference of a few pesos in the amount
refunded on Carrascoso's ticket, the decision of the Court of First Instance was affirmed by the Court of
Appeals in all other respects. We hold the view that such a judgment of affirmance has merged the
judgment of the lower court. 24Implicit in that affirmance is a determination by the Court of Appeals that
the proceeding in the Court of First Instance was free from prejudicial error and "all questions raised by
the assignments of error and all questions that might have been raised are to be regarded as finally
adjudicated against the appellant". So also, the judgment affirmed "must be regarded as free from all
error". 25 We reached this policy construction because nothing in the decision of the Court of Appeals on
this point would suggest that its findings of fact are in any way at war with those of the trial court. Nor
was said affirmance by the Court of Appeals upon a ground or grounds different from those which were
made the basis of the conclusions of the trial court. 26
If, as petitioner underscores, a first-class-ticket holder is not entitled to a first class seat, notwithstanding
the fact that seat availability in specific flights is therein confirmed, then an air passenger is placed in the
hollow of the hands of an airline. What security then can a passenger have? It will always be an easy matter
for an airline aided by its employees, to strike out the very stipulations in the ticket, and say that there was
a verbal agreement to the contrary. What if the passenger had a schedule to fulfill? We have long learned
that, as a rule, a written document speaks a uniform language; that spoken word could be notoriously
unreliable. If only to achieve stability in the relations between passenger and air carrier, adherence to the
ticket so issued is desirable. Such is the case here. The lower courts refused to believe the oral evidence
intended to defeat the covenants in the ticket.
The foregoing are the considerations which point to the conclusion that there are facts upon which the
Court of Appeals predicated the finding that respondent Carrascoso had a first class ticket and was entitled
to a first class seat at Bangkok, which is a stopover in the Saigon to Beirut leg of the flight. 27 We perceive
no "welter of distortions by the Court of Appeals of petitioner's statement of its position", as charged by
petitioner. 28 Nor do we subscribe to petitioner's accusation that respondent Carrascoso "surreptitiously
took a first class seat to provoke an issue". 29And this because, as petitioner states, Carrascoso went to see
the Manager at his office in Bangkok "to confirm my seat and because from Saigon I was told again to see
the Manager". 30 Why, then, was he allowed to take a first class seat in the plane at Bangkok, if he had no
seat? Or, if another had a better right to the seat?
4. Petitioner assails respondent court's award of moral damages. Petitioner's trenchant claim is that
Carrascoso's action is planted upon breach of contract; that to authorize an award for moral damages there
must be an averment of fraud or bad faith;31 and that the decision of the Court of Appeals fails to make a
finding of bad faith. The pivotal allegations in the complaint bearing on this issue are:
3. That ... plaintiff entered into a contract of air carriage with the Philippine Air Lines for a valuable
consideration, the latter acting as general agents for and in behalf of the defendant, under which said
contract, plaintiff was entitled to, as defendant agreed to furnish plaintiff, First Class passage on
defendant's plane during the entire duration of plaintiff's tour of Europe with Hongkong as starting point
up to and until plaintiff's return trip to Manila, ... .
4. That, during the first two legs of the trip from Hongkong to Saigon and from Saigon to Bangkok,
defendant furnished to the plaintiff First Class accommodation but only after protestations, arguments
and/or insistence were made by the plaintiff with defendant's employees.
5. That finally, defendant failed to provide First Class passage, but instead furnished plaintiff
only Tourist Class accommodations from Bangkok to Teheran and/or Casablanca, ... the plaintiff has
been compelled by defendant's employees to leave the First Class accommodation berths at Bangkok after
he was already seated.
6. That consequently, the plaintiff, desiring no repetition of the inconvenience and embarrassments brought
by defendant's breach of contract was forced to take a Pan American World Airways plane on his return
32
trip from Madrid to Manila.
xxx xxx xxx
2. That likewise, as a result of defendant's failure to furnish First Class accommodations aforesaid, plaintiff
suffered inconveniences, embarrassments, and humiliations, thereby causing plaintiff mental anguish,
serious anxiety, wounded feelings, social humiliation, and the like injury, resulting in moral damages in
33
the amount of P30,000.00.
xxx xxx xxx
The foregoing, in our opinion, substantially aver: First, That there was a contract to furnish plaintiff a first
class passage covering, amongst others, the Bangkok-Teheran leg; Second, That said contract was
breached when petitioner failed to furnish first class transportation at Bangkok; and Third, that there was
bad faith when petitioner's employee compelled Carrascoso to leave his first class accommodation
berth "after he was already, seated" and to take a seat in the tourist class, by reason of which he suffered
inconvenience, embarrassments and humiliations, thereby causing him mental anguish, serious anxiety,
wounded feelings and social humiliation, resulting in moral damages. It is true that there is no specific
mention of the term bad faith in the complaint. But, the inference of bad faith is there, it may be drawn
34
from the facts and circumstances set forth therein. The contract was averred to establish the relation
between the parties. But the stress of the action is put on wrongful expulsion.
Quite apart from the foregoing is that (a) right the start of the trial, respondent's counsel placed petitioner
on guard on what Carrascoso intended to prove: That while sitting in the plane in Bangkok, Carrascoso
was ousted by petitioner's manager who gave his seat to a white man; 35 and (b) evidence of bad faith in
the fulfillment of the contract was presented without objection on the part of the petitioner. It is, therefore,
unnecessary to inquire as to whether or not there is sufficient averment in the complaint to justify an award
for moral damages. Deficiency in the complaint, if any, was cured by the evidence. An amendment thereof
36
to conform to the evidence is not even required. On the question of bad faith, the Court of Appeals
declared:
That the plaintiff was forced out of his seat in the first class compartment of the plane belonging to the
defendant Air France while at Bangkok, and was transferred to the tourist class not only without his consent
but against his will, has been sufficiently established by plaintiff in his testimony before the court,
corroborated by the corresponding entry made by the purser of the plane in his notebook which notation
reads as follows:
"First-class passenger was forced to go to the tourist class against his will, and that the captain refused to
intervene",
and by the testimony of an eye-witness, Ernesto G. Cuento, who was a co-passenger. The captain of the
plane who was asked by the manager of defendant company at Bangkok to intervene even refused to do
so. It is noteworthy that no one on behalf of defendant ever contradicted or denied this evidence for the
plaintiff. It could have been easy for defendant to present its manager at Bangkok to testify at the trial of
the case, or yet to secure his disposition; but defendant did neither. 37
The Court of appeals further stated —
Neither is there evidence as to whether or not a prior reservation was made by the white man. Hence, if
the employees of the defendant at Bangkok sold a first-class ticket to him when all the seats had already
been taken, surely the plaintiff should not have been picked out as the one to suffer the consequences and
to be subjected to the humiliation and indignity of being ejected from his seat in the presence of others.
Instead of explaining to the white man the improvidence committed by defendant's employees, the
manager adopted the more drastic step of ousting the plaintiff who was then safely ensconsced in his
rightful seat. We are strengthened in our belief that this probably was what happened there, by the
testimony of defendant's witness Rafael Altonaga who, when asked to explain the meaning of the letters
"O.K." appearing on the tickets of plaintiff, said "that the space is confirmed for first class. Likewise,
Zenaida Faustino, another witness for defendant, who was the chief of the Reservation Office of defendant,
testified as follows:
"Q How does the person in the ticket-issuing office know what reservation the passenger has arranged
with you?
A They call us up by phone and ask for the confirmation." (t.s.n., p. 247, June 19, 1959)
In this connection, we quote with approval what the trial Judge has said on this point:
Why did the, using the words of witness Ernesto G. Cuento, "white man" have a "better right" to the seat
occupied by Mr. Carrascoso? The record is silent. The defendant airline did not prove "any better", nay,
any right on the part of the "white man" to the "First class" seat that the plaintiff was occupying and for
which he paid and was issued a corresponding "first class" ticket.
If there was a justified reason for the action of the defendant's Manager in Bangkok, the defendant could
have easily proven it by having taken the testimony of the said Manager by deposition, but defendant did
not do so; the presumption is that evidence willfully suppressed would be adverse if produced [Sec. 69,
par (e), Rules of Court]; and, under the circumstances, the Court is constrained to find, as it does find, that
the Manager of the defendant airline in Bangkok not merely asked but threatened the plaintiff to throw
him out of the plane if he did not give up his "first class" seat because the said Manager wanted to
38
accommodate, using the words of the witness Ernesto G. Cuento, the "white man".
It is really correct to say that the Court of Appeals in the quoted portion first transcribed did not use the
term "bad faith". But can it be doubted that the recital of facts therein points to bad faith? The manager not
only prevented Carrascoso from enjoying his right to a first class seat; worse, he imposed his arbitrary
will; he forcibly ejected him from his seat, made him suffer the humiliation of having to go to the tourist
class compartment - just to give way to another passenger whose right thereto has not been established.
Certainly, this is bad faith. Unless, of course, bad faith has assumed a meaning different from what is
understood in law. For, "bad faith" contemplates a "state of mind affirmatively operating with furtive
39
design or with some motive of self-interest or will or for ulterior purpose."
And if the foregoing were not yet sufficient, there is the express finding of bad faith in the judgment of
the Court of First Instance, thus:
The evidence shows that the defendant violated its contract of transportation with plaintiff in bad faith,
with the aggravating circumstances that defendant's Manager in Bangkok went to the extent of threatening
the plaintiff in the presence of many passengers to have him thrown out of the airplane to give the "first
class" seat that he was occupying to, again using the words of the witness Ernesto G. Cuento, a "white
man" whom he (defendant's Manager) wished to accommodate, and the defendant has not proven that this
"white man" had any "better right" to occupy the "first class" seat that the plaintiff was occupying, duly
40
paid for, and for which the corresponding "first class" ticket was issued by the defendant to him.
5. The responsibility of an employer for the tortious act of its employees need not be essayed. It is well
41
settled in law. For the willful malevolent act of petitioner's manager, petitioner, his employer, must
answer. Article 21 of the Civil Code says:
ART. 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.
In parallel circumstances, we applied the foregoing legal precept; and, we held that upon the provisions of
Article 2219 (10), Civil Code, moral damages are recoverable. 42
6. A contract to transport passengers is quite different in kind and degree from any other contractual
43
relation. And this, because of the relation which an air-carrier sustains with the public. Its business is
mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The
contract of air carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance
of the carrier's employees, naturally, could give ground for an action for damages.
Passengers do not contract merely for transportation. They have a right to be treated by the carrier's
employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against
personal misconduct, injurious language, indignities and abuses from such employees. So it is, that any
rule or discourteous conduct on the part of employees towards a passenger gives the latter an action for
damages against the carrier. 44
Thus, "Where a steamship company 45 had accepted a passenger's check, it was a breach of contract and a
tort, giving a right of action for its agent in the presence of third persons to falsely notify her that the check
was worthless and demand payment under threat of ejection, though the language used was not insulting
and she was not ejected." 46 And this, because, although the relation of passenger and carrier is "contractual
both in origin and nature" nevertheless "the act that breaks the contract may be also a tort". 47 And in
another case, "Where a passenger on a railroad train, when the conductor came to collect his fare tendered
him the cash fare to a point where the train was scheduled not to stop, and told him that as soon as the train
reached such point he would pay the cash fare from that point to destination, there was nothing in the
conduct of the passenger which justified the conductor in using insulting language to him, as by calling
him a lunatic," 48 and the Supreme Court of South Carolina there held the carrier liable for the mental
suffering of said passenger.1awphîl.nèt
Petitioner's contract with Carrascoso is one attended with public duty. The stress of Carrascoso's action as
we have said, is placed upon his wrongful expulsion. This is a violation of public duty by the petitioner air
carrier — a case of quasi-delict. Damages are proper.
7. Petitioner draws our attention to respondent Carrascoso's testimony, thus —
Q You mentioned about an attendant. Who is that attendant and purser?
A When we left already — that was already in the trip — I could not help it. So one of the flight attendants
approached me and requested from me my ticket and I said, What for? and she said, "We will note that
you transferred to the tourist class". I said, "Nothing of that kind. That is tantamount to accepting my
transfer." And I also said, "You are not going to note anything there because I am protesting to this
transfer".
Q Was she able to note it?
A No, because I did not give my ticket.
Q About that purser?
A Well, the seats there are so close that you feel uncomfortable and you don't have enough leg room, I
stood up and I went to the pantry that was next to me and the purser was there. He told me, "I have recorded
the incident in my notebook." He read it and translated it to me — because it was recorded in French —
"First class passenger was forced to go to the tourist class against his will, and that the captain refused to
intervene." interfere with the same. The dictates of good sense suggest that we give our imprimatur thereto. Because,
Mr. VALTE — the facts and circumstances point to the reasonableness thereof.57
I move to strike out the last part of the testimony of the witness because the best evidence would be the On balance, we say that the judgment of the Court of Appeals does not suffer from reversible error. We
notes. Your Honor. accordingly vote to affirm the same. Costs against petitioner. So ordered.
COURT — Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Zaldivar and Castro, JJ., concur.
49
I will allow that as part of his testimony. Bengzon, J.P., J., took no part.
Petitioner charges that the finding of the Court of Appeals that the purser made an entry in his notebook
reading "First class passenger was forced to go to the tourist class against his will, and that the captain —————————————
refused to intervene" is predicated upon evidence [Carrascoso's testimony above] which is incompetent.
We do not think so. The subject of inquiry is not the entry, but the ouster incident. Testimony on the entry Republic of the Philippines
49a
does not come within the proscription of the best evidence rule. Such testimony is admissible. SUPREME COURT
Besides, from a reading of the transcript just quoted, when the dialogue happened, the impact of the Manila
startling occurrence was still fresh and continued to be felt. The excitement had not as yet died down. EN BANC
50
Statements then, in this environment, are admissible as part of the res gestae. For, they grow "out of the G.R. No. 34840 September 23, 1931
51
nervous excitement and mental and physical condition of the declarant". The utterance of the purser NARCISO GUTIERREZ, plaintiff-appellee,
regarding his entry in the notebook was spontaneous, and related to the circumstances of the ouster vs.
52
incident. Its trustworthiness has been guaranteed. It thus escapes the operation of the hearsay rule. It BONIFACIO GUTIERREZ, MARIA V. DE GUTIERREZ, MANUEL GUTIERREZ, ABELARDO
forms part of the res gestae. VELASCO, and SATURNINO CORTEZ, defendants-appellants.
At all events, the entry was made outside the Philippines. And, by an employee of petitioner. It would have L.D. Lockwood for appellants Velasco and Cortez.
been an easy matter for petitioner to have contradicted Carrascoso's testimony. If it were really true that San Agustin and Roxas for other appellants.
no such entry was made, the deposition of the purser could have cleared up the matter. Ramon Diokno for appellee.
We, therefore, hold that the transcribed testimony of Carrascoso is admissible in evidence. MALCOLM, J.:
8. Exemplary damages are well awarded. The Civil Code gives the court ample power to grant exemplary This is an action brought by the plaintiff in the Court of First Instance of Manila against the five defendants,
damages — in contracts and quasi- contracts. The only condition is that defendant should have "acted in to recover damages in the amount of P10,000, for physical injuries suffered as a result of an automobile
53
a wanton, fraudulent, reckless, oppressive, or malevolent manner." The manner of ejectment of accident. On judgment being rendered as prayed for by the plaintiff, both sets of defendants appealed.
respondent Carrascoso from his first class seat fits into this legal precept. And this, in addition to moral On February 2, 1930, a passenger truck and an automobile of private ownership collided while attempting
54
damages. to pass each other on the Talon bridge on the Manila South Road in the municipality of Las Piñas, Province
9. The right to attorney's fees is fully established. The grant of exemplary damages justifies a similar of Rizal. The truck was driven by the chauffeur Abelardo Velasco, and was owned by Saturnino Cortez.
judgment for attorneys' fees. The least that can be said is that the courts below felt that it is but just and The automobile was being operated by Bonifacio Gutierrez, a lad 18 years of age, and was owned by
equitable that attorneys' fees be given. 55 We do not intend to break faith with the tradition that discretion Bonifacio's father and mother, Mr. and Mrs. Manuel Gutierrez. At the time of the collision, the father was
well exercised — as it was here — should not be disturbed. not in the car, but the mother, together will several other members of the Gutierrez family, seven in all,
10. Questioned as excessive are the amounts decreed by both the trial court and the Court of Appeals, thus: were accommodated therein. A passenger in the autobus, by the name of Narciso Gutierrez, was en route
P25,000.00 as moral damages; P10,000.00, by way of exemplary damages, and P3,000.00 as attorneys' from San Pablo, Laguna, to Manila. The collision between the bus and the automobile resulted in Narciso
56
fees. The task of fixing these amounts is primarily with the trial court. The Court of Appeals did not Gutierrez suffering a fracture right leg which required medical attendance for a considerable period of
time, and which even at the date of the trial appears not to have healed properly.
It is conceded that the collision was caused by negligence pure and simple. The difference between the
parties is that, while the plaintiff blames both sets of defendants, the owner of the passenger truck blames
the automobile, and the owner of the automobile, in turn, blames the truck. We have given close attention
to these highly debatable points, and having done so, a majority of the court are of the opinion that the
findings of the trial judge on all controversial questions of fact find sufficient support in the record, and so
should be maintained. With this general statement set down, we turn to consider the respective legal
obligations of the defendants.
In amplification of so much of the above pronouncement as concerns the Gutierrez family, it may be
explained that the youth Bonifacio was in incompetent chauffeur, that he was driving at an excessive rate
of speed, and that, on approaching the bridge and the truck, he lost his head and so contributed by his
negligence to the accident. The guaranty given by the father at the time the son was granted a license to
operate motor vehicles made the father responsible for the acts of his son. Based on these facts, pursuant
to the provisions of article 1903 of the Civil Code, the father alone and not the minor or the mother, would
be liable for the damages caused by the minor.
We are dealing with the civil law liability of parties for obligations which arise from fault or negligence.
At the same time, we believe that, as has been done in other cases, we can take cognizance of the common
law rule on the same subject. In the United States, it is uniformly held that the head of a house, the owner
of an automobile, who maintains it for the general use of his family is liable for its negligent operation by
one of his children, whom he designates or permits to run it, where the car is occupied and being used at
the time of the injury for the pleasure of other members of the owner's family than the child driving it. The
theory of the law is that the running of the machine by a child to carry other members of the family is
within the scope of the owner's business, so that he is liable for the negligence of the child because of the
relationship of master and servant. (Huddy On Automobiles, 6th ed., sec. 660; Missell vs. Hayes [1914],
91 Atl., 322.) The liability of Saturnino Cortez, the owner of the truck, and of his chauffeur Abelardo
Velasco rests on a different basis, namely, that of contract which, we think, has been sufficiently
demonstrated by the allegations of the complaint, not controverted, and the evidence. The reason for this
conclusion reaches to the findings of the trial court concerning the position of the truck on the bridge, the
speed in operating the machine, and the lack of care employed by the chauffeur. While these facts are not
as clearly evidenced as are those which convict the other defendant, we nevertheless hesitate to disregard
the points emphasized by the trial judge. In its broader aspects, the case is one of two drivers approaching
a narrow bridge from opposite directions, with neither being willing to slow up and give the right of way
to the other, with the inevitable result of a collision and an accident.
The defendants Velasco and Cortez further contend that there existed contributory negligence on the part
of the plaintiff, consisting principally of his keeping his foot outside the truck, which occasioned his injury.
In this connection, it is sufficient to state that, aside from the fact that the defense of contributory
negligence was not pleaded, the evidence bearing out this theory of the case is contradictory in the extreme
and leads us far afield into speculative matters.
The last subject for consideration relates to the amount of the award. The appellee suggests that the amount
could justly be raised to P16,517, but naturally is not serious in asking for this sum, since no appeal was
taken by him from the judgment. The other parties unite in challenging the award of P10,000, as excessive.
All facts considered, including actual expenditures and damages for the injury to the leg of the plaintiff,
which may cause him permanent lameness, in connection with other adjudications of this court, lead us to
conclude that a total sum for the plaintiff of P5,000 would be fair and reasonable. The difficulty in
approximating the damages by monetary compensation is well elucidated by the divergence of opinion
among the members of the court, three of whom have inclined to the view that P3,000 would be amply
sufficient, while a fourth member has argued that P7,500 would be none too much.
In consonance with the foregoing rulings, the judgment appealed from will be modified, and the plaintiff
will have judgment in his favor against the defendants Manuel Gutierrez, Abelardo Velasco, and Saturnino
Cortez, jointly and severally, for the sum of P5,000, and the costs of both instances.
Avanceña, C.J., Johnson, Street, Villamor, Ostrand, Romualdez, and Imperial, JJ., concur.
Addison vs. Felix, 38 Phil. 404 (August 3, 1918)
March 16, 2016
FACTS
Petitioner Addison sold four parcels of land to Defendant spouses Felix and Tioco located in LucenaCity.
Respondents paid P3,000.00 for the purchase price and promised to pay the remaining by installment. The
contract provides that the purchasers may rescind the contract within one year after the issuance of title on
their name.
The petitioner went to Lucena for the survey designaton and delivery of the land but only 2 parcels were
designated and 2/3 of it was in possession of a Juan Villafuerte.
The other parcels were not surveyed and designated by Addison.
Addison demanded from petitioner the payment of the first installment but the latter contends that there
was no delivery and as such, they are entitled to get back the 3K purchase price they gave upon the
execution of the contract.
ISSUE
WON there was a valid delivery.
HELD
The record shows that the plaintiff did not deliver the thing sold. With respect to two of the parcels of land,
he was not even able to show them to the purchaser; and as regards the other two, more than two-thirds of
their area was in the hostile and adverse possession of a third person.
It is true that the same article declares that the execution of a public instruments is equivalent to the delivery
of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the
effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the
moment of the sale, its material delivery could have been made. It is not enough to confer upon the
purchaser the ownership and the right of possession. The thing sold must be placed in his control. When
there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the
sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if
there is an impediment, delivery cannot be deemed effected.
—————————————-
Chavez vs. Gonzales
March 25, 2016
Case Digest
G.R. No. L-27454 April 30, 1970
Rosendo O. Chavez, plaintiff-appellant
vs.
Fructuoso Gonzales, defendant-appellee
REYES, J.B.L., J.:
Facts: On July 1963, Rosendo Chavez brought his typewriter to Fructuoso Gonzales a typewriter
repairman for the cleaning and servicing of the said typewriter but the latter was not able to finish the job.
During October 1963, the plaintiff gave the amount of P6.00 to the defendant which the latter asked from
the plaintiff for the purchase of spare parts, because of the delay of the repair the plaintiff decided to
recover the typewriter to the defendant which he wrapped it like a package. When the plaintiff reached
their home he opened it and examined that some parts and screws was lost. That on October 29, 1963 the
plaintiff sent a letter to the defendant for the return of the missing parts, the interior cover and the sum of
P6.00 (Exhibit D). The following day, the defendant returned to the plaintiff some of the missing parts, the
interior cover and the P6.00. The plaintiff brought his typewriter to Freixas Business Machines and the
repair cost the amount of P89.85. He commenced this action on August 23, 1965 in the City Court of
Manila, demanding from the defendant the payment of P90.00 as actual and compensatory damages,
P100.00 for temperate damages, P500.00 for moral damages, and P500.00 as attorney’s fees. The
defendant made no denials of the facts narrated above, except the claim of the plaintiff that the cost of the
repair made by Freixas Business Machines be fully chargeable against him.
Issue: Whether or not the defendant is liable for the total cost of the repair made by Freixas Business
Machines with the plaintiff typewriter?
Ruling: No, he is not liable for the total cost of the repair made by Freixas Business Machines instead he
is only liable for the cost of the missing parts and screws. The defendant contravened the tenor of his
obligation in repairing the typewriter of the plaintiff that he fails to repair it and returned it with the missing
parts, he is liable under “ART. 1167. If a person obliged to do something fails to do it, the same shall be
executed at his cost.
This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore
it may be decreed that what has been poorly done he undone.”
——————————————-
G.R. No. 141968 February 12, 2001
THE INTERNATIONAL CORPORATE BANK (now UNION BANK OF THE
PHILIPPINES), petitioner,
vs.
SPS. FRANCIS S. GUECO and MA. LUZ E. GUECO, respondents.
KAPUNAN, J.:
The respondent Gueco Spouses obtained a loan from petitioner International Corporate Bank (now Union
Bank of the Philippines) to purchase a car - a Nissan Sentra 1600 4DR, 1989 Model. In consideration
thereof, the Spouses executed promissory notes which were payable in monthly installments and chattel
mortgage over the car to serve as security for the notes.1âwphi1.nêt
The Spouses defaulted in payment of installments. Consequently, the Bank filed on August 7, 1995 a civil
action docketed as Civil Case No. 658-95 for "Sum of Money with Prayer for a Writ of Replevin" 1 before
the Metropolitan Trial Court of Pasay City, Branch 45.2 On August 25, 1995, Dr. Francis Gueco was served
summons and was fetched by the sheriff and representative of the bank for a meeting in the bank premises.
Desi Tomas, the Bank's Assistant Vice President demanded payment of the amount of P184,000.00 which
represents the unpaid balance for the car loan. After some negotiations and computation, the amount was
lowered to P154,000.00, However, as a result of the non-payment of the reduced amount on that date, the
car was detained inside the bank's compound.
On August 28, 1995, Dr. Gueco went to the bank and talked with its Administrative Support, Auto
Loans/Credit Card Collection Head, Jefferson Rivera. The negotiations resulted in the further reduction of
the outstanding loan to P150,000.00.
On August 29, 1995, Dr. Gueco delivered a manager's check in amount of P150,000.00 but the car was not
released because of his refusal to sign the Joint Motion to Dismiss. It is the contention of the Gueco spouses
and their counsel that Dr. Gueco need not sign the motion for joint dismissal considering that they had not
yet filed their Answer. Petitioner, however, insisted that the joint motion to dismiss is standard operating
procedure in their bank to effect a compromise and to preclude future filing of claims, counterclaims or
suits for damages.
After several demand letters and meetings with bank representatives, the respondents Gueco spouses
initiated a civil action for damages before the Metropolitan Trial Court of Quezon City, Branch 33. The
3
Metropolitan Trial Court dismissed the complaint for lack of merit.
On appeal to the Regional Trial Court, Branch 227 of Quezon City, the decision of the Metropolitan Trial
Court was reversed. In its decision, the RTC held that there was a meeting of the minds between the parties
as to the reduction of the amount of indebtedness and the release of the car but said agreement did not
include the signing of the joint motion to dismiss as a condition sine qua non for the effectivity of the
compromise. The court further ordered the bank:
1. to return immediately the subject car to the appellants in good working condition; Appellee may deposit
the Manager's check - the proceeds of which have long been under the control of the issuing bank in favor
of the appellee since its issuance, whereas the funds have long been paid by appellants to .secure said
Manager's Check, over which appellants have no control;
2. to pay the appellants the sum of P50,000.00 as moral damages; P25,000.00 as exemplary damages, and
P25,000.00 as attorney's fees, and
3. to pay the cost of suit.
4
In other respect, the decision of the Metropolitan Trial Court Branch 33 is hereby AFFIRMED.
The case was elevated to the Court of Appeals, which on February 17, 2000, issued the assailed decision,
the decretal portion of which reads:
WHEREFORE, premises considered, the petition for review on certiorari is hereby DENIED and the
Decision of the Regional Trial Court of Quezon City, Branch 227, in Civil Case No. Q-97-31176, for lack
of any reversible error, is AFFIRMED in toto. Costs against petitioner.
SO ORDERED.5
The Court of Appeals essentially relied on the respect accorded to the finality of the findings of facts by
the lower court and on the latter's finding of the existence of fraud which constitutes the basis for the award
of damages.
The petitioner comes to this Court by way of petition for review on certiorari under Rule 45 of the Rules
of Court, raising the following assigned errors:
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO AGREEMENT WITH
RESPECT TO THE EXECUTION OF THE JOINT MOTION TO DISMISS AS A CONDITION FOR
THE COMPROMISE AGREEMENT.
II
THE COURT OF APPEALS ERRED IN GRANTING MORAL AND EXEMPLARY DAMAGES AND
ATTORNEY'S FEES IN FAVOR OF THE RESPONDENTS.
III
THE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER RETURN THE
SUBJECT CAR TO THE RESPONDENTS, WITHOUT MAKING ANY PROVISION FOR THE
ISSUANCE OF THE NEW MANAGER'S/CASHIER'S CHECK BY THE RESPONDENTS IN FAVOR
OF THE PETITIONER IN LIEU OF THE ORIGINAL CASHIER'S CHECK THAT ALREADY
BECAME STALE.6
As to the first issue, we find for the respondents. The issue as to what constitutes the terms of the oral
compromise or any subsequent novation is a question of fact that was resolved by the Regional Trial Court
and the Court of Appeals in favor of respondents. It is well settled that the findings of fact of the lower
court, especially when affirmed by the Court of Appeals, are binding upon this Court. 7 While there are
exceptions to this rule,8 the present case does not fall under anyone of them, the petitioner's claim to the
contrary, notwithstanding.
Being an affirmative allegation, petitioner has the burden of evidence to prove his claim that the oral
compromise entered into by the parties on August 28, 1995 included the stipulation that the parties would
jointly file a motion to dismiss. This petitioner failed to do. Notably, even the Metropolitan Trial Court,
while ruling in favor of the petitioner and thereby dismissing the complaint, did not make a factual finding
that the compromise agreement included the condition of the signing of a joint motion to dismiss.
The Court of Appeals made the factual findings in this wise:
In support of its claim, petitioner presented the testimony of Mr. Jefferson Rivera who related that
respondent Dr. Gueco was aware that the signing of the draft of the Joint Motion to Dismiss was one of
the conditions set by the bank for the acceptance of the reduced amount of indebtedness and the release of
the car. (TSN, October 23, 1996, pp. 17-21, Rollo, pp. 18, 5). Respondents, however, maintained that no
such condition was ever discussed during their meeting of August 28, 1995 (Rollo, p. 32).
The trial court, whose factual findings are entitled to respect since it has the 'opportunity to directly observe
the witnesses and to determine by their demeanor on the stand the probative value of their testimonies'
(People vs. Yadao, et al. 216 SCRA 1, 7 [1992]), failed to make a categorical finding on the issue. In
dismissing the claim of damages of the respondents, it merely observed that respondents are not entitled
to indemnity since it was their unjustified reluctance to sign of the Joint Motion to Dismiss that delayed
the release of the car. The trial court opined, thus:
'As regards the third issue, plaintiffs' claim for damages is unavailing. First, the plaintiffs could have
avoided the renting of another car and could have avoided this litigation had he signed the Joint Motion to
Dismiss. While it is true that herein defendant can unilaterally dismiss the case for collection of sum of
money with replevin, it is equally true that there is nothing wrong for the plaintiff to affix his signature in
the Joint Motion to Dismiss, for after all, the dismissal of the case against him is for his own good and
benefit. In fact, the signing of the Joint Motion to Dismiss gives the plaintiff three (3) advantages. First,
he will recover his car. Second, he will pay his obligation to the bank on its reduced amount of P150,000.00
instead of its original claim of P184,985.09. And third, the case against him will be dismissed. Plaintiffs,
likewise, are not entitled to the award of moral damages and exemplary damages as there is no showing
that the defendant bank acted fraudulently or in bad faith.' (Rollo, p. 15)
The Court has noted, however, that the trial court, in its findings of facts, clearly indicated that the
agreement of the parties on August 28, 1995 was merely for the lowering of the price, hence -
'xxx On August 28, 1995, bank representative Jefferson Rivera and plaintiff entered into an oral
compromise agreement, whereby the original claim of the bank of P184,985.09 was reduced to
P150,000.00 and that upon payment of which, plaintiff was informed that the subject motor vehicle would
be released to him.' (Rollo, p. 12)
The lower court, on the other hand, expressly made a finding that petitioner failed to include the aforesaid
signing of the Joint Motion to Dismiss as part of the agreement. In dismissing petitioner's claim, the lower
court declared, thus:
'If it is true, as the appellees allege, that the signing of the joint motion was a condition sine qua non for
the reduction of the appellants' obligation, it is only reasonable and logical to assume that the joint motion
should have been shown to Dr. Gueco in the August 28, 1995 meeting. Why Dr. Gueco was not given a
copy of the joint motion that day of August 28, 1995, for his family or legal counsel to see to be brought
signed, together with the P150,000.00 in manager's check form to be submitted on the following day on
August 29, 1995? (sic) [I]s a question whereby the answer up to now eludes this Court's comprehension.
The appellees would like this Court to believe that Dr Gueco was informed by Mr. Rivera Rivera of the
bank requirement of signing the joint motion on August 28, 1995 but he did not bother to show a copy
thereof to his family or legal counsel that day August 28, 1995. This part of the theory of appellee is too
complicated for any simple oral agreement. The idea of a Joint Motion to Dismiss being signed as a
condition to the pushing through a deal surfaced only on August 29, 1995.
'This Court is not convinced by the appellees' posturing. Such claim rests on too slender a frame, being
inconsistent with human experience. Considering the effect of the signing of the Joint Motion to Dismiss
on the appellants' substantive right, it is more in accord with human experience to expect Dr. Gueco, upon
being shown the Joint Motion to Dismiss, to refuse to pay the Manager's Check and for the bank to refuse
to accept the manager's check. The only logical explanation for this inaction is that Dr. Gueco was not
shown the Joint Motion to Dismiss in the meeting of August 28, 1995, bolstering his claim that its signing
was never put into consideration in reaching a compromise.' xxx. 9
We see no reason to reverse.
Anent the issue of award of damages, we find the claim of petitioner meritorious. In finding the petitioner
liable for damages, both .the Regional Trial Court and the Court of Appeals ruled that there was fraud on
the part of the petitioner. The CA thus declared:
The lower court's finding of fraud which became the basis of the award of damages was likewise
sufficiently proven. Fraud under Article 1170 of the Civil Code of the Philippines, as amended is the
'deliberate and intentional evasion of the normal fulfillment of obligation' When petitioner refused to
release the car despite respondent's tender of payment in the form of a manager's check, the former
intentionally evaded its obligation and thereby became liable for moral and exemplary damages, as well
as attorney's fees.10
We disagree.
Fraud has been defined as the deliberate intention to cause damage or prejudice. It is the voluntary
execution of a wrongful act, or a willful 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 is the
deliberate and intentional evasion of the normal fulfillment of obligation. 11 We fail to see how the act of
the petitioner bank in requiring the respondent to sign the joint motion to dismiss could constitute as fraud.
True, petitioner may have been remiss in informing Dr. Gueco that the signing of a joint motion to dismiss
is a standard operating procedure of petitioner bank. However, this can not in anyway have prejudiced Dr.
Gueco. The motion to dismiss was in fact also for the benefit of Dr. Gueco, as the case filed by petitioner
against it before the lower court would be dismissed with prejudice. The whole point of the parties entering
into the compromise agreement was in order that Dr. Gueco would pay his outstanding account and in
return petitioner would return the car and drop the case for money and replevin before the Metropolitan
Trial Court. The joint motion to dismiss was but a natural consequence of the compromise agreement and
simply stated that Dr. Gueco had fully settled his obligation, hence, the dismissal of the case. Petitioner's
act of requiring Dr. Gueco to sign the joint motion to dismiss can not be said to be a deliberate attempt on
the part of petitioner to renege on the compromise agreement of the parties. It should, likewise, be noted
that in cases of breach of contract, moral damages may only be awarded when the breach was attended by
fraud or bad faith.12 The law presumes good faith. Dr. Gueco failed to present an iota of evidence to
overcome this presumption. In fact, the act of petitioner bank in lowering the debt of Dr. Gueco from
P184,000.00 to P150,000.00 is indicative of its good faith and sincere desire to settle the case. If respondent
did suffer any damage, as a result of the withholding of his car by petitioner, he has only himself to blame.
Necessarily, the claim for exemplary damages must fait. In no way, may the conduct of petitioner be
13
characterized as "wanton, fraudulent, reckless, oppressive or malevolent."
We, likewise, find for the petitioner with respect to the third assigned error. In the meeting of August 29,
1995, respondent Dr. Gueco delivered a manager's check representing the reduced amount of P150,000.00.
Said check was given to Mr. Rivera, a representative of respondent bank. However, since Dr. Gueco
refused to sign the joint motion to dismiss, he was made to execute a statement to the effect that he was
withholding the payment of the check.14 Subsequently, in a letter addressed to Ms. Desi Tomas, vice
president of the bank, dated September 4, 1995, Dr. Gueco instructed the bank to disregard the 'hold order"
15
letter and demanded the immediate release of his car, to which the former replied that the condition of
signing the joint motion to dismiss must be satisfied and that they had kept the check which could be
claimed by Dr. Gueco anytime.16 While there is controversy as to whether the document evidencing the
17
order to hold payment of the check was formally offered as evidence by petitioners, it appears from the
pleadings that said check has not been encashed.
The decision of the Regional Trial Court, which was affirmed in toto by the Court of Appeals, orders the
petitioner:
1. to return immediately the subject car to the appellants in good working condition. Appellee may deposit
the Manager's Check - the proceeds of which have long been under the control of the issuing bank in favor
of the appellee since its issuance, whereas the funds have long been paid by appellants to secure said
18
Manager's Check over which appellants have no control.
Respondents would make us hold that petitioner should return the car or its value and that the latter,
because of its own negligence, should suffer the loss occasioned by the fact that the check had become
19 20
stale. It is their position that delivery of the manager's check produced the effect of payment and, thus,
petitioner was negligent in opting not to deposit or use said check. Rudimentary sense of justice and fair
play would not countenance respondents' position.
A stale check is one which has not been presented for payment within a reasonable time after its issue. It
is valueless and, therefore, should not be paid. Under the negotiable instruments law, an instrument not
payable on demand must be presented for payment on the day it falls due. When the instrument is payable
on demand, presentment must be made within a reasonable time after its issue. In the case of a bill of
21
exchange, presentment is sufficient if made within a reasonable time after the last negotiation thereof.
22
A check must be presented for payment within a reasonable time after its issue, and in determining what
is a "reasonable time," regard is to be had to the nature of the instrument, the usage of trade or business
with respect to such instruments, and the facts of the particular case.23 The test is whether the payee
employed such diligence as a prudent man exercises in his own affairs. 24 This is because the nature and
theory behind the use of a check points to its immediate use and payability. In a case, a check payable on
demand which was long overdue by about two and a half (2-1/2) years was considered a stale
check.25 Failure of a payee to encash a check for more than ten (10) years undoubtedly resulted in the
check becoming stale.26 Thus, even a delay of one (1) week27 or two (2) days,28 under the specific
circumstances of the cited cases constituted unreasonable time as a matter of law.
In the case at bar, however, the check involved is not an ordinary bill of exchange but a manager's check.
A manager's check is one drawn by the bank's manager upon the bank itself. It is similar to a cashier's
check both as to effect and use. A cashier's check is a check of the bank's cashier on his own or another
check. In effect, it is a bill of exchange drawn by the cashier of a bank upon the bank itself, and accepted
in advance by the act of its issuance.29 It is really the bank's own check and may be treated as a promissory
note with the bank as a maker.30The check becomes the primary obligation of the bank which issues it and
constitutes its written promise to pay upon demand. The mere issuance of it is considered an acceptance
thereof. If treated as promissory note, the drawer would be the maker and in which case the holder need
not prove presentment for payment or present the bill to the drawee for acceptance.31
Even assuming that presentment is needed, failure to present for payment within a reasonable time will
result to the discharge of the drawer only to the extent of the loss caused by the delay. 32 Failure to present
on time, thus, does not totally wipe out all liability. In fact, the legal situation amounts to an
acknowledgment of liability in the sum stated in the check. In this case, the Gueco spouses have not
alleged, much less shown that they or the bank which issued the manager's check has suffered damage or
loss caused by the delay or non-presentment. Definitely, the original obligation to pay certainly has not
been erased.
It has been held that, if the check had become stale, it becomes imperative that the circumstances that
caused its non-presentment be determined.33 In the case at bar, there is no doubt that the petitioner bank
held on the check and refused to encash the same because of the controversy surrounding the signing of
the joint motion to dismiss. We see no bad faith or negligence in this position taken by the
Bank.1âwphi1.nêt
WHEREFORE, premises considered, the petition for review is given due course. The decision of the
Court of Appeals affirming the decision of the Regional Trial Court is SET ASIDE. Respondents are
further ordered to pay the original obligation amounting to P150,000.00 to the petitioner upon surrender
or cancellation of the manager's check in the latter's possession, afterwhich, petitioner is to return the
subject motor vehicle in good working condition.
SO ORDERED.
 dimly by a single light located some distance away, objects on the platform where the accident occurred
—————————————— were difficult to discern especially to a person emerging from a lighted car.
The explanation of the presence of a sack of melons on the platform where the plaintiff alighted is found
Republic of the Philippines in the fact that it was the customary season for harvesting these melons and a large lot had been brought
SUPREME COURT to the station for the shipment to the market. They were contained in numerous sacks which has been piled
Manila on the platform in a row one upon another. The testimony shows that this row of sacks was so placed of
EN BANC melons and the edge of platform; and it is clear that the fall of the plaintiff was due to the fact that his foot
G.R. No. L-12191 October 14, 1918 alighted upon one of these melons at the moment he stepped upon the platform. His statement that he
JOSE CANGCO, plaintiff-appellant, failed to see these objects in the darkness is readily to be credited.
vs. The plaintiff was drawn from under the car in an unconscious condition, and it appeared that the injuries
MANILA RAILROAD CO., defendant-appellee. which he had received were very serious. He was therefore brought at once to a certain hospital in the city
Ramon Sotelo for appellant. of Manila where an examination was made and his arm was amputated. The result of this operation was
Kincaid & Hartigan for appellee. unsatisfactory, and the plaintiff was then carried to another hospital where a second operation was
performed and the member was again amputated higher up near the shoulder. It appears in evidence that
FISHER, J.: the plaintiff expended the sum of P790.25 in the form of medical and surgical fees and for other expenses
At the time of the occurrence which gave rise to this litigation the plaintiff, Jose Cangco, was in the in connection with the process of his curation.
employment of Manila Railroad Company in the capacity of clerk, with a monthly wage of P25. He lived Upon August 31, 1915, he instituted this proceeding in the Court of First Instance of the city of Manila to
in the pueblo of San Mateo, in the province of Rizal, which is located upon the line of the defendant recover damages of the defendant company, founding his action upon the negligence of the servants and
railroad company; and in coming daily by train to the company's office in the city of Manila where he employees of the defendant in placing the sacks of melons upon the platform and leaving them so placed
worked, he used a pass, supplied by the company, which entitled him to ride upon the company's trains as to be a menace to the security of passenger alighting from the company's trains. At the hearing in the
free of charge. Upon the occasion in question, January 20, 1915, the plaintiff arose from his seat in the Court of First Instance, his Honor, the trial judge, found the facts substantially as above stated, and drew
second class-car where he was riding and, making, his exit through the door, took his position upon the therefrom his conclusion to the effect that, although negligence was attributable to the defendant by reason
steps of the coach, seizing the upright guardrail with his right hand for support. of the fact that the sacks of melons were so placed as to obstruct passengers passing to and from the cars,
On the side of the train where passengers alight at the San Mateo station there is a cement platform which nevertheless, the plaintiff himself had failed to use due caution in alighting from the coach and was
begins to rise with a moderate gradient some distance away from the company's office and extends along therefore precluded form recovering. Judgment was accordingly entered in favor of the defendant
in front of said office for a distance sufficient to cover the length of several coaches. As the train slowed company, and the plaintiff appealed.
down another passenger, named Emilio Zuñiga, also an employee of the railroad company, got off the It can not be doubted that the employees of the railroad company were guilty of negligence in piling these
same car, alighting safely at the point where the platform begins to rise from the level of the ground. When sacks on the platform in the manner above stated; that their presence caused the plaintiff to fall as he
the train had proceeded a little farther the plaintiff Jose Cangco stepped off also, but one or both of his feet alighted from the train; and that they therefore constituted an effective legal cause of the injuries sustained
came in contact with a sack of watermelons with the result that his feet slipped from under him and he fell by the plaintiff. It necessarily follows that the defendant company is liable for the damage thereby
violently on the platform. His body at once rolled from the platform and was drawn under the moving car, occasioned unless recovery is barred by the plaintiff's own contributory negligence. In resolving this
where his right arm was badly crushed and lacerated. It appears that after the plaintiff alighted from the problem it is necessary that each of these conceptions of liability, to-wit, the primary responsibility of the
train the car moved forward possibly six meters before it came to a full stop. defendant company and the contributory negligence of the plaintiff should be separately examined.
The accident occurred between 7 and 8 o'clock on a dark night, and as the railroad station was lighted It is important to note that the foundation of the legal liability of the defendant is the contract of carriage,
and that the obligation to respond for the damage which plaintiff has suffered arises, if at all, from the
breach of that contract by reason of the failure of defendant to exercise due care in its performance. That
is to say, its liability is direct and immediate, differing essentially, in legal viewpoint from that presumptive
responsibility for the negligence of its servants, imposed by article 1903 of the Civil Code, which can be
rebutted by proof of the exercise of due care in their selection and supervision. Article 1903 of the Civil
Code is not applicable to obligations arising ex contractu, but only to extra-contractual obligations — or
to use the technical form of expression, that article relates only to culpa aquiliana and not to culpa
contractual.
Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of the Civil Code, clearly points
out this distinction, which was also recognized by this Court in its decision in the case of
Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil. rep., 359). In commenting upon article 1093 Manresa
clearly points out the difference between "culpa, substantive and independent, which of itself constitutes
the source of an obligation between persons not formerly connected by any legal tie" and culpa considered
as an accident in the performance of an obligation already existing . . . ."
In the Rakes case (supra) the decision of this court was made to rest squarely upon the proposition that
article 1903 of the Civil Code is not applicable to acts of negligence which constitute the breach of a
contract.
Upon this point the Court said:
The acts to which these articles [1902 and 1903 of the Civil Code] are applicable are understood to be
those not growing out of pre-existing duties of the parties to one another. But where relations already
formed give rise to duties, whether springing from contract or quasi-contract, then breaches of those duties
are subject to article 1101, 1103, and 1104 of the same code. (Rakes vs. Atlantic, Gulf and Pacific Co., 7
Phil. Rep., 359 at 365.)
This distinction is of the utmost importance. The liability, which, under the Spanish law, is, in certain cases
imposed upon employers with respect to damages occasioned by the negligence of their employees to
persons to whom they are not bound by contract, is not based, as in the English Common Law, upon the
principle of respondeat superior — if it were, the master would be liable in every case and unconditionally
— but upon the principle announced in article 1902 of the Civil Code, which imposes upon all persons
who by their fault or negligence, do injury to another, the obligation of making good the damage caused.
One who places a powerful automobile in the hands of a servant whom he knows to be ignorant of the
method of managing such a vehicle, is himself guilty of an act of negligence which makes him liable for
all the consequences of his imprudence. The obligation to make good the damage arises at the very instant
that the unskillful servant, while acting within the scope of his employment causes the injury. The liability
of the master is personal and direct. But, if the master has not been guilty of any negligence whatever in
the selection and direction of the servant, he is not liable for the acts of the latter, whatever done within
the scope of his employment or not, if the damage done by the servant does not amount to a breach of the
contract between the master and the person injured.
It is not accurate to say that proof of diligence and care in the selection and control of the servant relieves
the master from liability for the latter's acts — on the contrary, that proof shows that the responsibility has
never existed. As Manresa says (vol. 8, p. 68) the liability arising from extra-contractual culpa is always
based upon a voluntary act or omission which, without willful intent, but by mere negligence or inattention,
has caused damage to another. A master who exercises all possible care in the selection of his servant,
taking into consideration the qualifications they should possess for the discharge of the duties which it is
his purpose to confide to them, and directs them with equal diligence, thereby performs his duty to third
persons to whom he is bound by no contractual ties, and he incurs no liability whatever if, by reason of
the negligence of his servants, even within the scope of their employment, such third person suffer damage.
True it is that under article 1903 of the Civil Code the law creates a presumption that he has been negligent
in the selection or direction of his servant, but the presumption is rebuttable and yield to proof of due care
and diligence in this respect.
The supreme court of Porto Rico, in interpreting identical provisions, as found in the Porto Rico Code, has
held that these articles are applicable to cases of extra-contractual culpa exclusively. (Carmona vs. Cuesta,
20 Porto Rico Reports, 215.)
This distinction was again made patent by this Court in its decision in the case of Bahia vs. Litonjua and
Leynes, (30 Phil. rep., 624), which was an action brought upon the theory of the extra-contractual liability
of the defendant to respond for the damage caused by the carelessness of his employee while acting within
the scope of his employment. The Court, after citing the last paragraph of article 1903 of the Civil Code,
said:
From this article two things are apparent: (1) That when an injury is caused by the negligence of a servant
or employee there instantly arises a presumption of law that there was negligence on the part of the master
or employer either in selection of the servant or employee, or in supervision over him after the selection,
or both; and (2) that that presumption is juris tantum and not juris et de jure, and consequently, may be
rebutted. It follows necessarily that if the employer shows to the satisfaction of the court that in selection
and supervision he has exercised the care and diligence of a good father of a family, the presumption is
overcome and he is relieved from liability.
This theory bases the responsibility of the master ultimately on his own negligence and not on that of his
servant. This is the notable peculiarity of the Spanish law of negligence. It is, of course, in striking contrast
to the American doctrine that, in relations with strangers, the negligence of the servant in conclusively the
negligence of the master.
The opinion there expressed by this Court, to the effect that in case of extra-contractual culpa based upon
negligence, it is necessary that there shall have been some fault attributable to the defendant personally,
and that the last paragraph of article 1903 merely establishes a rebuttable presumption, is in complete
accord with the authoritative opinion of Manresa, who says (vol. 12, p. 611) that the liability created by
article 1903 is imposed by reason of the breach of the duties inherent in the special relations of authority
or superiority existing between the person called upon to repair the damage and the one who, by his act or
omission, was the cause of it.
On the other hand, the liability of masters and employers for the negligent acts or omissions of their
servants or agents, when such acts or omissions cause damages which amount to the breach of a contact,
is not based upon a mere presumption of the master's negligence in their selection or control, and proof of
exercise of the utmost diligence and care in this regard does not relieve the master of his liability for the
breach of his contract.
Every legal obligation must of necessity be extra-contractual or contractual. Extra-contractual obligation
has its source in the breach or omission of those mutual duties which civilized society imposes upon it
members, or which arise from these relations, other than contractual, of certain members of society to
others, generally embraced in the concept of status. The legal rights of each member of society constitute
the measure of the corresponding legal duties, mainly negative in character, which the existence of those
rights imposes upon all other members of society. The breach of these general duties whether due to willful
intent or to mere inattention, if productive of injury, give rise to an obligation to indemnify the injured
party. The fundamental distinction between obligations of this character and those which arise from
contract, rests upon the fact that in cases of non-contractual obligation it is the wrongful or negligent act
or omission itself which creates the vinculum juris, whereas in contractual relations the vinculum exists
independently of the breach of the voluntary duty assumed by the parties when entering into the contractual
relation.
With respect to extra-contractual obligation arising from negligence, whether of act or omission, it is
competent for the legislature to elect — and our Legislature has so elected — whom such an obligation is
imposed is morally culpable, or, on the contrary, for reasons of public policy, to extend that liability,
without regard to the lack of moral culpability, so as to include responsibility for the negligence of those
person who acts or mission are imputable, by a legal fiction, to others who are in a position to exercise an
absolute or limited control over them. The legislature which adopted our Civil Code has elected to limit
extra-contractual liability — with certain well-defined exceptions — to cases in which moral culpability
can be directly imputed to the persons to be charged. This moral responsibility may consist in having failed
to exercise due care in the selection and control of one's agents or servants, or in the control of persons
who, by reason of their status, occupy a position of dependency with respect to the person made liable for
their conduct.
The position of a natural or juridical person who has undertaken by contract to render service to another,
is wholly different from that to which article 1903 relates. When the sources of the obligation upon which
plaintiff's cause of action depends is a negligent act or omission, the burden of proof rests upon plaintiff
to prove the negligence — if he does not his action fails. But when the facts averred show a contractual
undertaking by defendant for the benefit of plaintiff, and it is alleged that plaintiff has failed or refused to
perform the contract, it is not necessary for plaintiff to specify in his pleadings whether the breach of the
contract is due to willful fault or to negligence on the part of the defendant, or of his servants or agents.
Proof of the contract and of its nonperformance is sufficient prima facie to warrant a recovery.
As a general rule . . . it is logical that in case of extra-contractual culpa, a suing creditor should assume the
burden of proof of its existence, as the only fact upon which his action is based; while on the contrary, in
a case of negligence which presupposes the existence of a contractual obligation, if the creditor shows that
it exists and that it has been broken, it is not necessary for him to prove negligence. (Manresa, vol. 8, p.
71 [1907 ed., p. 76]).
As it is not necessary for the plaintiff in an action for the breach of a contract to show that the breach was
due to the negligent conduct of defendant or of his servants, even though such be in fact the actual cause
of the breach, it is obvious that proof on the part of defendant that the negligence or omission of his servants
or agents caused the breach of the contract would not constitute a defense to the action. If the negligence
of servants or agents could be invoked as a means of discharging the liability arising from contract, the
anomalous result would be that person acting through the medium of agents or servants in the performance
of their contracts, would be in a better position than those acting in person. If one delivers a valuable watch
to watchmaker who contract to repair it, and the bailee, by a personal negligent act causes its destruction,
he is unquestionably liable. Would it be logical to free him from his liability for the breach of his contract,
which involves the duty to exercise due care in the preservation of the watch, if he shows that it was his
servant whose negligence caused the injury? If such a theory could be accepted, juridical persons would
enjoy practically complete immunity from damages arising from the breach of their contracts if caused by
negligent acts as such juridical persons can of necessity only act through agents or servants, and it would
no doubt be true in most instances that reasonable care had been taken in selection and direction of such
servants. If one delivers securities to a banking corporation as collateral, and they are lost by reason of the
negligence of some clerk employed by the bank, would it be just and reasonable to permit the bank to
relieve itself of liability for the breach of its contract to return the collateral upon the payment of the debt
by proving that due care had been exercised in the selection and direction of the clerk?
This distinction between culpa aquiliana, as the source of an obligation, and culpa contractual as a mere
incident to the performance of a contract has frequently been recognized by the supreme court of Spain.
(Sentencias of June 27, 1894; November 20, 1896; and December 13, 1896.) In the decisions of November
20, 1896, it appeared that plaintiff's action arose ex contractu, but that defendant sought to avail himself
of the provisions of article 1902 of the Civil Code as a defense. The Spanish Supreme Court rejected
defendant's contention, saying:
These are not cases of injury caused, without any pre-existing obligation, by fault or negligence, such as
those to which article 1902 of the Civil Code relates, but of damages caused by the defendant's failure to
carry out the undertakings imposed by the contracts . . . .
A brief review of the earlier decision of this court involving the liability of employers for damage done by
the negligent acts of their servants will show that in no case has the court ever decided that the negligence
of the defendant's servants has been held to constitute a defense to an action for damages for breach of
contract.
In the case of Johnson vs. David (5 Phil. Rep., 663), the court held that the owner of a carriage was not
liable for the damages caused by the negligence of his driver. In that case the court commented on the fact
that no evidence had been adduced in the trial court that the defendant had been negligent in the
employment of the driver, or that he had any knowledge of his lack of skill or carefulness.
In the case of Baer Senior & Co's Successors vs. Compania Maritima (6 Phil. Rep., 215), the plaintiff sued
the defendant for damages caused by the loss of a barge belonging to plaintiff which was allowed to get
adrift by the negligence of defendant's servants in the course of the performance of a contract of towage.
The court held, citing Manresa (vol. 8, pp. 29, 69) that if the "obligation of the defendant grew out of a
contract made between it and the plaintiff . . . we do not think that the provisions of articles 1902 and 1903
are applicable to the case."
In the case of Chapman vs. Underwood (27 Phil. Rep., 374), plaintiff sued the defendant to recover
damages for the personal injuries caused by the negligence of defendant's chauffeur while driving
defendant's automobile in which defendant was riding at the time. The court found that the damages were
caused by the negligence of the driver of the automobile, but held that the master was not liable, although
he was present at the time, saying:
. . . unless the negligent acts of the driver are continued for a length of time as to give the owner a
reasonable opportunity to observe them and to direct the driver to desist therefrom. . . . The act complained
of must be continued in the presence of the owner for such length of time that the owner by his
acquiescence, makes the driver's acts his own.
In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage & Taxicab Co. (33 Phil. Rep., 8), it
is true that the court rested its conclusion as to the liability of the defendant upon article 1903, although
the facts disclosed that the injury complaint of by plaintiff constituted a breach of the duty to him arising
out of the contract of transportation. The express ground of the decision in this case was that article 1903,
in dealing with the liability of a master for the negligent acts of his servants "makes the distinction between
private individuals and public enterprise;" that as to the latter the law creates a rebuttable presumption of
negligence in the selection or direction of servants; and that in the particular case the presumption of
negligence had not been overcome.
It is evident, therefore that in its decision Yamada case, the court treated plaintiff's action as though founded
in tort rather than as based upon the breach of the contract of carriage, and an examination of the pleadings
and of the briefs shows that the questions of law were in fact discussed upon this theory. Viewed from the
standpoint of the defendant the practical result must have been the same in any event. The proof disclosed
beyond doubt that the defendant's servant was grossly negligent and that his negligence was the proximate
cause of plaintiff's injury. It also affirmatively appeared that defendant had been guilty of negligence in its
failure to exercise proper discretion in the direction of the servant. Defendant was, therefore, liable for the
injury suffered by plaintiff, whether the breach of the duty were to be regarded as constituting culpa
aquiliana or culpa contractual. As Manresa points out (vol. 8, pp. 29 and 69) whether negligence occurs
an incident in the course of the performance of a contractual undertaking or its itself the source of an extra-
contractual undertaking obligation, its essential characteristics are identical. There is always an act or
omission productive of damage due to carelessness or inattention on the part of the defendant.
Consequently, when the court holds that a defendant is liable in damages for having failed to exercise due
care, either directly, or in failing to exercise proper care in the selection and direction of his servants, the
practical result is identical in either case. Therefore, it follows that it is not to be inferred, because the court
held in the Yamada case that defendant was liable for the damages negligently caused by its servants to a
person to whom it was bound by contract, and made reference to the fact that the defendant was negligent
in the selection and control of its servants, that in such a case the court would have held that it would have
been a good defense to the action, if presented squarely upon the theory of the breach of the contract, for
defendant to have proved that it did in fact exercise care in the selection and control of the servant.
The true explanation of such cases is to be found by directing the attention to the relative spheres of
contractual and extra-contractual obligations. The field of non- contractual obligation is much more
broader than that of contractual obligations, comprising, as it does, the whole extent of juridical human
relations. These two fields, figuratively speaking, concentric; that is to say, the mere fact that a person is
bound to another by contract does not relieve him from extra-contractual liability to such person. When
such a contractual relation exists the obligor may break the contract under such conditions that the same
act which constitutes the source of an extra-contractual obligation had no contract existed between the
parties.
The contract of defendant to transport plaintiff carried with it, by implication, the duty to carry him in
safety and to provide safe means of entering and leaving its trains (civil code, article 1258). That duty,
being contractual, was direct and immediate, and its non-performance could not be excused by proof that
the fault was morally imputable to defendant's servants.
The railroad company's defense involves the assumption that even granting that the negligent conduct of
its servants in placing an obstruction upon the platform was a breach of its contractual obligation to
maintain safe means of approaching and leaving its trains, the direct and proximate cause of the injury
suffered by plaintiff was his own contributory negligence in failing to wait until the train had come to a
complete stop before alighting. Under the doctrine of comparative negligence announced in the Rakes case
(supra), if the accident was caused by plaintiff's own negligence, no liability is imposed upon defendant's
negligence and plaintiff's negligence merely contributed to his injury, the damages should be apportioned.
It is, therefore, important to ascertain if defendant was in fact guilty of negligence.
It may be admitted that had plaintiff waited until the train had come to a full stop before alighting, the
particular injury suffered by him could not have occurred. Defendant contends, and cites many authorities
in support of the contention, that it is negligence per se for a passenger to alight from a moving train. We
are not disposed to subscribe to this doctrine in its absolute form. We are of the opinion that this proposition
is too badly stated and is at variance with the experience of every-day life. In this particular instance, that
the train was barely moving when plaintiff alighted is shown conclusively by the fact that it came to stop
within six meters from the place where he stepped from it. Thousands of person alight from trains under
these conditions every day of the year, and sustain no injury where the company has kept its platform free
from dangerous obstructions. There is no reason to believe that plaintiff would have suffered any injury
whatever in alighting as he did had it not been for defendant's negligent failure to perform its duty to
provide a safe alighting place.
We are of the opinion that the correct doctrine relating to this subject is that expressed in Thompson's work
on Negligence (vol. 3, sec. 3010) as follows:
The test by which to determine whether the passenger has been guilty of negligence in attempting to alight
from a moving railway train, is that of ordinary or reasonable care. It is to be considered whether an
ordinarily prudent person, of the age, sex and condition of the passenger, would have acted as the passenger
acted under the circumstances disclosed by the evidence. This care has been defined to be, not the care
which may or should be used by the prudent man generally, but the care which a man of ordinary prudence
would use under similar circumstances, to avoid injury." (Thompson, Commentaries on Negligence, vol.
3, sec. 3010.)
Or, it we prefer to adopt the mode of exposition used by this court in Picart vs. Smith (37 Phil. rep., 809),
we may say that the test is this; Was there anything in the circumstances surrounding the plaintiff at the
time he alighted from the train which would have admonished a person of average prudence that to get off
the train under the conditions then existing was dangerous? If so, the plaintiff should have desisted from
alighting; and his failure so to desist was contributory negligence.1awph!l.net
As the case now before us presents itself, the only fact from which a conclusion can be drawn to the effect
that plaintiff was guilty of contributory negligence is that he stepped off the car without being able to
discern clearly the condition of the platform and while the train was yet slowly moving. In considering the
situation thus presented, it should not be overlooked that the plaintiff was, as we find, ignorant of the fact
that the obstruction which was caused by the sacks of melons piled on the platform existed; and as the
defendant was bound by reason of its duty as a public carrier to afford to its passengers facilities for safe
egress from its trains, the plaintiff had a right to assume, in the absence of some circumstance to warn him
to the contrary, that the platform was clear. The place, as we have already stated, was dark, or dimly lighted,
and this also is proof of a failure upon the part of the defendant in the performance of a duty owing by it
to the plaintiff; for if it were by any possibility concede that it had right to pile these sacks in the path of
alighting passengers, the placing of them adequately so that their presence would be revealed.
As pertinent to the question of contributory negligence on the part of the plaintiff in this case the following
circumstances are to be noted: The company's platform was constructed upon a level higher than that of
the roadbed and the surrounding ground. The distance from the steps of the car to the spot where the
alighting passenger would place his feet on the platform was thus reduced, thereby decreasing the risk
incident to stepping off. The nature of the platform, constructed as it was of cement material, also assured
to the passenger a stable and even surface on which to alight. Furthermore, the plaintiff was possessed of
the vigor and agility of young manhood, and it was by no means so risky for him to get off while the train
was yet moving as the same act would have been in an aged or feeble person. In determining the question
of contributory negligence in performing such act — that is to say, whether the passenger acted prudently
or recklessly — the age, sex, and physical condition of the passenger are circumstances necessarily
affecting the safety of the passenger, and should be considered. Women, it has been observed, as a general
rule are less capable than men of alighting with safety under such conditions, as the nature of their wearing
apparel obstructs the free movement of the limbs. Again, it may be noted that the place was perfectly
familiar to the plaintiff as it was his daily custom to get on and of the train at this station. There could,
therefore, be no uncertainty in his mind with regard either to the length of the step which he was required
to take or the character of the platform where he was alighting. Our conclusion is that the conduct of the
plaintiff in undertaking to alight while the train was yet slightly under way was not characterized by
imprudence and that therefore he was not guilty of contributory negligence.
The evidence shows that the plaintiff, at the time of the accident, was earning P25 a month as a copyist
clerk, and that the injuries he has suffered have permanently disabled him from continuing that
employment. Defendant has not shown that any other gainful occupation is open to plaintiff. His
expectancy of life, according to the standard mortality tables, is approximately thirty-three years. We are
of the opinion that a fair compensation for the damage suffered by him for his permanent disability is the treatment. She used her savings in the Bank of the Philippine Islands (BPI) to pay for the trip and for her
sum of P2,500, and that he is also entitled to recover of defendant the additional sum of P790.25 for husbands medical expenses.[8] In January 1993, her husband died and Estrella returned to
medical attention, hospital services, and other incidental expenditures connected with the treatment of his the Philippines. She went to petitioner FEBTC to withdraw her deposit but, to her dismay, she was told
injuries. that her husband had withdrawn the money in deposit.[9] Through counsel, respondent sent a demand letter
The decision of lower court is reversed, and judgment is hereby rendered plaintiff for the sum of P3,290.25, to petitioner FEBTC. In another letter, respondent reiterated her request for updating and payment of the
and for the costs of both instances. So ordered. certificates of deposit, including interest earned.[10] As petitioner FEBTC refused respondents demands,
Arellano, C.J., Torres, Street and Avanceña, JJ., concur. the latter filed a complaint, joining in the action Edgardo F. Blanco, Branch Manager of FEBTC Harrison
Plaza Branch, and Octavio Espiritu, FEBTC President.[11]
—————————————— Petitioner FEBTC alleged that it had given respondents late husband Dominador an accommodation to
SECOND DIVISION allow him to withdraw Estrellas deposit.[12] Petitioner presented certified true copies of documents
[G.R. No. 148582. January 16, 2002] showing that payment had been made, to wit:
FAR EAST BANK AND TRUST COMPANY, petitioner, vs. ESTRELLA O. 1. Four FEBTC Harrison Plaza Branch Dollar Demand Drafts Nos. 886694903, 886694904, 886694905
QUERIMIT, respondent. and 886694906 for US$15,110.96 each, allegedly issued by petitioner to respondents
[13]
DECISION husband Dominador after payment on the certificates of deposit;
MENDOZA, J.: 2. A letter of Alicia de Bustos, branch cashier of FEBTC at Harrison Plaza, dated January 23, 1987, which
This is a petition for review on certiorari seeking review of the decision, dated March 6, 2001, and was sent to Citibank, N.A., Citibank Center, Paseo de Roxas, Makati, Metro Manila, informing the latter
[1]
resolution, dated June 19, 2001, of the Court of Appeals in CA-G.R. CV No. 67147, that FEBTC had issued the four drafts and requesting Citibank New York to debit from petitioners account
entitled Estrella O. Querimit v. Far East Bank and Trust Company, which affirmed with modification the $60,443.84, the aggregate value of the four drafts;[14]
decision of the Regional Trial Court, Branch 38, Manila,[2] ordering petitioner Far East Bank and Trust Co. 3. Citicorp Remittance Service: Daily Summary and Payment Report dated January 23, 1987;[15]
(FEBTC) to allow respondent Estrella O. Querimit to withdraw her time deposit with the FEBTC. 4. Debit Ticket dated January 23, 1987, showing the debit of US$60,443.84 or its equivalent at the time
The facts are as follows: of P1,240,912.04 from the FEBTC Harrison Plaza Branch;[16] and
Respondent Estrella O. Querimit worked as internal auditor of the Philippine Savings Bank (PSB) for 19 5. An Interbranch Transaction Ticket Register or Credit Ticket dated January 23, 1987 showing that
[3]
years, from 1963 to 1992. On November 24, 1986, she opened a dollar savings account in petitioners US$60,443.84 or P1,240,912.04 was credited to petitioners International Operation Division (IOD). [17]
Harrison Plaza branch,[4] for which she was issued four (4) Certificates of Deposit (Nos. 79028, 79029, On May 6, 2000, the trial court rendered judgment for respondent. The dispositive portion of the decision
79030, and 79031), each certificate representing the amount of $15,000.00, or a total amount of stated:
$60,000.00. The certificates were to mature in 60 days, on January 23, 1987, and were payable to bearer WHEREFORE, judgment is hereby rendered in favor of plaintiff [Estrella O. Querimit] and against
at 4.5% interest per annum. The certificates bore the word accrued, which meant that if they were not defendants [FEBTC et al.]:
presented for encashment or pre-terminated prior to maturity, the money deposited with accrued interest 1. ORDERING defendants to allow plaintiff to withdraw her U.S.$ Time Deposit of $60,000.00 plus
would be rolled over by the bank and annual interest accrued interests;
would accumulateautomatically.[5] The petitioner banks manager assured respondent that her deposit 2. ORDERING defendants to pay moral damages in the amount of P50,000.00;
would be renewed and earn interest upon maturity even without the surrender of the certificates if these 3. ORDERING defendants to pay exemplary damages in the amount of P50,000.00;
[6]
were not indorsed and withdrawn. Respondent kept her dollars in the bank so that they would earn 4. ORDERING defendants to pay attorneys fees in the amount of P100,000.00 plus P10,000.00 per
[7]
interest and so that she could use the fund after she retired. appearance of counsel; and
In 1989, respondent accompanied her husband Dominador Querimit to the United States for medical 5. ORDERING defendants to pay the costs of the suit.
SO ORDERED.[18]
On May 15, 2000, petitioner appealed to the Court of Appeals which, on March 6, 2001, affirmed through
its Fourteenth Division the decision of the trial court, with the modification that FEBTC was declared
solely liable for the amounts adjudged in the decision of the trial court. The appeals court stated that
petitioner FEBTC failed to prove that the certificates of deposit had been paid out of its funds, since the
evidence by the [respondent] stands unrebutted that the subject certificates of deposit until now
[19]
remain unindorsed, undelivered and unwithdrawn by [her]. But the Court of Appeals held that the
individual defendants, Edgardo F. Blanco, FEBTC-Harrison Plaza Branch Manager, and Octavio Espiritu,
FEBTC President, could not be held solidarily liable with the FEBTC because the latter has a personality
separate from its officers and stockholders.[20]
Hence this appeal.
As stated by the Court of Appeals, the main issue in this case is whether the subject certificates of deposit
[21]
have already been paid by petitioner. Petitioner contends that-
I. Petitioner is not liable to respondent for the value of the four (4) Certificates of Deposit, including the
interest thereon as well as moral and exemplary damages, attorneys and appearance fees.
II. The aggregate value - both principal and interest earned at maturity - of the four (4) certificates of
deposit was already paid to or withdrawn at maturity by the late Dominador Querimit who was the
respondents deceased husband.
III. Respondent is guilty of laches since the four (4) certificates of deposit were all issued on 24 November
1986 but she attempted to withdraw their aggregate value on 29 July 1996 only on or after the lapse of
more than nine (9) years and eight (8) months.
IV. Respondent is not liable to petitioner for attorneys fees.[22]
After reviewing the records, we find the petition to be without merit.
First. Petitioner bank failed to prove that it had already paid Estrella Querimit, the bearer and lawful holder
of the subject certificates of deposit. The finding of the trial court on this point, as affirmed by the Court
of Appeals, is that petitioner did not pay either respondent Estrella or her husband the amounts evidenced
by the subject certificates of deposit. This Court is not a trier of facts and generally does not weigh anew
the evidence already passed upon by the Court of Appeals.[23] The finding of respondent court which shows
that the subject certificates of deposit are still in the possession of Estrella Querimit and have not been
indorsed or delivered to petitioner FEBTC is substantiated by the record and should therefore stand. [24]
A certificate of deposit is defined as a written acknowledgment by a bank or banker of the receipt of a sum
of money on deposit which the bank or banker promises to pay to the depositor, to the order of the
depositor, or to some other person or his order, whereby the relation of debtor and creditor between the
bank and the depositor is created. The principles governing other types of bank deposits are applicable to
certificates of deposit,[25] as are the rules governing promissory notes when they contain an unconditional
promise to pay a sum certain of money absolutely.[26] The principle that payment, in order to discharge a
debt, must be made to someone authorized to receive it is applicable to the payment of certificates of
deposit. Thus, a bank will be protected in making payment to the holder of a certificate indorsed by the
payee, unless it has notice of the invalidity of the indorsement or the holders want of title.[27] A bank acts
at its peril when it pays deposits evidenced by a certificate of deposit, without its production and surrender
after properindorsement.[28] As a rule, one who pleads payment has the burden of proving it. Even where
the plaintiff must allege non-payment, the general rule is that the burden rests on the defendant to prove
payment, rather than on the plaintiff to prove payment. The debtor has the burden of showing with legal
certainty that the obligation has been discharged by payment.[29]
In this case, the certificates of deposit were clearly marked payable to bearer, which means, to [t]he
person in possession of an instrument, document of title or security payable to bearer or indorsed in
blank.[30] Petitioner should not have paid respondents husband or any third party without requiring the
surrender of the certificates of deposit.
Petitioner claims that it did not demand the surrender of the subject certificates of deposit since respondents
husband, DominadorQuerimit, was one of the banks senior managers. But even long after respondents
husband had allegedly been paid respondents deposit and before his retirement from service, the FEBTC
never required him to deliver the certificates of deposit in question.[31]Moreover, the accommodation given
to respondents husband was made in violation of the banks policies and procedures. [32]
Petitioner FEBTC thus failed to exercise that degree of diligence required by the nature of its
business.[33] Because the business of banks is impressed with public interest, the degree of diligence
required of banks is more than that of a good father of the family or of an ordinary business firm. The
fiduciary nature of their relationship with their depositors requires them to treat the accounts of their clients
with the highest degree of care.[34] A bank is under obligation to treat the accounts of its depositors with
meticulous care whether such accounts consist only of a few hundred pesos or of millions of
pesos. Responsibility arising from negligence in the performance of every kind of obligation is
demandable.[35] Petitioner failed to prove payment of the subject certificates of deposit issued to the
respondent and, therefore, remains liable for the value of the dollar deposits indicated thereon with accrued
interest.
Second. The equitable principle of laches is not sufficient to defeat the rights of respondent over the subject
certificates of deposit.
Laches is the failure or neglect, for an unreasonable length of time, to do that which, by exercising due
diligence, could or should have been done earlier. It is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or
declined to assert it.[36]
There is no absolute rule as to what constitutes laches or staleness of demand; each case is to be determined
according to its particular circumstances. The question of laches is addressed to the sound discretion of
the court and, being an equitable doctrine, its application is controlled by equitable considerations. It
cannot be used to defeat justice or perpetrate fraud and injustice. Courts will not be guided or bound strictly
by the statute of limitations or the doctrine of laches when to do so, manifest wrong or injustice would
[37]
result.
In this case, it would be unjust to allow the doctrine of laches to defeat the right of respondent to recover
her savings which she deposited with the petitioner. She did not withdraw her deposit even after the
maturity date of the certificates of deposit precisely because she wanted to set it aside for her retirement.
She relied on the banks assurance, as reflected on the face of the instruments themselves, that interest
[38]
would accrue or accumulate annually even after their maturity.
Third. Respondent is entitled to moral damages because of the mental anguish and humiliation she suffered
as a result of the wrongful refusal of the FEBTC to pay her even after she had delivered the certificates of
[39]
deposit. In addition, petitioner FEBTC should pay respondent exemplary damages, which the trial court
[40]
imposed by way of example or correction for the public good. Finally, respondent is entitled to attorneys
fees since petitioners act or omission compelled her to incur expenses to protect her interest, making such
[41]
award just and equitable. However, we find the award of attorneys fees to be excessive and accordingly
[42]
reduce it to P20,000.00.
WHEREFORE, premises considered, the present petition is hereby DENIED and the Decision in CA-
G.R. CV No. 67147 AFFIRMED, with the modification that the award of attorneys fees is reduced
to P20,000.00.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur.
Medel vs Court of Appeals, 299 SCRA 481; GR No. 131622, November 27, 1998, digested
Posted by Pius Morados on November 30, 2011
(Credit Transactions – Loans, Usury Law, Interest Rates)
Facts: Defendants obtained a loan from Plaintiff in the amount P50, 000.00, payable in 2 months and
executed a promissory note. Plaintiff gave only the amount of P47, 000.00 to the borrowers and retained
P3, 000.00 as advance interest for 1 month at 6% per month.
Defendants obtained another loan from Defendant in the amount of P90, 000.00, payable in 2 months, at
6% interest per month. They executed a promissory note to evidence the loan and received only P84,
000.00 out of the proceeds of the loan.
For the third time, Defendants secured from Plaintiff another loan in the amount of P300, 000.00, maturing
in 1 month, and secured by a real estate mortgage. They executed a promissory note in favor of the Plaintiff.
However, only the sum of P275, 000.00, was given to them out of the proceeds of the loan.
Upon maturity of the three promissory notes, Defendants failed to pay the indebtedness.
Defendants consolidated all their previous unpaid loans totalling P440, 000.00, and sought from Plaintiff
another loan in the amount of P60, 000.00, bringing their indebtedness to a total of P50,000.00. They
executed another promissory note in favor of Plaintiff to pay the sum of P500, 000.00 with a 5.5% interest
per month plus 2% service charge per annum, with an additional amount of 1% per month as penalty
charges.
On maturity of the loan, the Defendants failed to pay the indebtedness which prompt the Plaintiffs to file
with the RTC a complaint for collection of the full amount of the loan including interests and other charges.
Declaring that the due execution and genuineness of the four promissory notes has been duly proved, the
RTC ruled that although the Usury Law had been repealed, the interest charged on the loans was
unconscionable and “revolting to the conscience” and ordered the payment of the amount of the first 3
loans with a 12% interest per annum and 1% per month as penalty.
On appeal, Plaintiff-appellants argued that the promissory note, which consolidated all the unpaid loans of
the defendants, is the law that governs the parties.
The Court of Appeals ruled in favor of the Plaintiff-appellants on the ground that the Usury Law has
become legally inexistent with the promulgation by the Central Bank in 1982 of Circular No. 905, the
lender and the borrower could agree on any interest that may be charged on the loan, and ordered the
Defendants to pay the Plaintiffs the sum of P500,000, plus 5.5% per month interest and 2& service charge
per annum , and 1% per month as penalty charges.
Defendants filed the present case via petition for review on certiorari.
Issue: WON the stipulated 5.5% interest rate per month on the loan in the sum of P500, 000.00 is usurious.
Held: No.
A stipulated rate of interest at 5.5% per month on the P500, 000.00 loan is excessive, iniquitous,
unconscionable and exorbitant, but it cannot be considered “usurious” because Central Bank Circular No.
905 has expressly removed the interest ceilings prescribed by the Usury Law and that the Usury Law is
now “legally inexistent.”
Doctrine: A CB Circular cannot repeal a law. Only a law can repeal another law.
Jurisprudence provides that CB Circular did not repeal nor in a way amend the Usury Law but simply
suspended the latter’s effectivity (Security Bank and Trust Co vs RTC). Usury has been legally non-
existent in our jurisdiction. Interest can now be charged as lender and borrower may agree upon.
Law: Article 2227, Civil Code
The courts shall reduce equitably liquidated damages, whether intended as an indemnity or a penalty if that the original term fixed for the redemption was not extended and, therefore, dismissed the complaint.
they are iniquitous or unconscionable. The case was appealed to the Court of Appeals, but this court affirmed the judgment of the trial court. It
Note: While the Usury Law ceiling on interest rates was lifted by the CB Circular 905, nothing in the found that the transaction was a true sale with right to repurchase, that there was no extension of the period
said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates of redemption, and that no tender of the purchase was in due time. It, therefore, affirmed the judgment in
to levels which would either enslave their borrowers or lead to a haemorrhaging of their assets (Almeda so far as the denial of the right to redeem was concerned, although it modified it in the sense of making
vs. CA, 256 SCRA 292 [1996]). the sale ineffective with respect to the share of two co-owners of the property, who had not participated in
the sale.
———————— The present action was filed on October 14, 1951, exactly one day after the judgment rendered by the
Republic of the Philippines Court of Appeals in the previous action had become final. The complaint alleges that the Court of Appeals
SUPREME COURT found that the contract entered into by the parties was a sale with right to repurchase, but that the plaintiffs
Manila were confused and were not clear about the date when the repurchase should have been made. The
EN BANC complaint further alleges that on October 9, 1951, plaintiffs herein had demanded that the defendant allow
G.R. No. L-5515 April 24, 1953 them to repurchase the land, offering the full amount of the price, but that the defendant ignored the said
FELIPA FERIA, CARLOS F. CRUZ, CLARA DE LA CRUZ, LEONILA DE LA CRUZ, offer. The action is evidently brought under the provision of the last paragraph of article 1606 of the Civil
PETRONILA DE LA CRUZ, ROSARIO DE LA CRUZ, FAUSTINO DE LA CRUZ AND RUFINO Code of the Philippines, which is as follows:
DE LA CRUZ, plaintiffs-appellants, ART. 1606. . . . .
vs. However, the vendor may still exercise the right to repurchase within thirty days from the time final
GERONIMO T. SUVA, defendant-appellee. judgment was rendered in a civil action on the basis that the contract was a true sale with right to
Francisco Lavides for appellants. repurchase.
Angel S. Alvir for appellee. After the complaint was filed, the defendant presented a motion to dismiss on the ground that the action is
LABRADOR, J.: barred by the prior judgment of the Court of Appeals. The court sustained the motion and dismissed the
This is an appeal from a judgment of the Court of First Instance of Nueva Ecija dismissing a complaint complaint, and the plaintiffs-appellants have appealed. It is contended on their behalf that the Court of
filed by plaintiffs-appellants on the ground of res adjudicata, i.e., that the right sought to be enforced has Appeals did not pass upon the applicability of Article 1606 of the Civil Code of the Philippines. It is further
already been previously decided adversely against them in a judgment of the Court of Appeals. claimed that the above provision may be invoked, in view of the express provision of article 2253 ordaining
The record discloses that plaintiff herein conveyed to the defendant on April 18, 1938, by way of sale with that rights declared for the first time shall be effective at once.
the right to repurchase, a parcel of land, together with its improvements, situated in the District of Cruz, The pertinent part of the decision of the Court of Appeals is as follows:
Municipality of Quezon, Province of Nueva Ecija, executing to that effect a deed of sale with pacto de As to the nature of the original transaction represented by Exhibit A, not only are its terms clear beyond
retro. On September 14, 1944, plaintiffs, who were the vendors a retro, brought an action in the Court of doubt, but it is noteworthy that the complaint expressly avers that plaintiffs executed a pacto de retro sale
First Instance of Nueva Ecija alleging the existence of said pacto de retro sale, and praying that they be in favor of defendant, with option on the part of herein plaintiffs to repurchase said parcel of land within
allowed to redeem the property, as the defendant had agreed to re-sell the property after the harvest of five years from April 18, 1938 (Rec. on App., pp. 2-3), and that a copy of the deed was made part of the
1943-1944. The defendant in that previous action, who is also the defendant herein, admitted the existence complaint as Annex A (Rec. on App., p. 12 et seq.), without any allegation that it did not express the true
of the contract of pacto de retro, but denied that he had ever allowed the plaintiffs to make a redemption intent of the parties; and the answer expressly admitted such pacto de retro sale. The case was tried on that
of the property in the year 1944, after the expiration of the period fixed for the repurchase, as claimed by theory, and the counsel for defendant in fact objeced at the trial to any reference to the transaction as
the plaintiffs. Trial having been had on the above issue, the Court of First Instance of Nueva Ecija found "mortgage."
xxx xxx xxx EN BANC
As to article 1602, 1605 and 1606 of the New Civil Code, we find no reason for applying their G.R. No. L-24190 July 13, 1926
presumptions retroactively to a transaction that took place in 1938 which both parties have specifically GEORGE L. PARKS, plaintiff-appellant,
pleaded to be a sale with pacto de retro, and which was tried on that one year before the new Code became vs.
operative. PROVINCE OF TARLAC, MUNICIPALITY OF TARLAC, CONCEPCION CIRER, and JAMES
(Record on Appeal, pp. 19-20, 21-22.) HILL, her husband,defendants-appellees.
A cursory study of the decision readily shows that the Court of Appeals did not refuse to apply the Jos. N. Wolfson for appellant.
provisions of the New Civil Code. It expressly applied article 1606 but it denied the right granted Provincial Fiscal Lopez de Jesus for the Province and Municipality of Tarlac.
thereunder because the transaction was, in the very words of the decision, "specifically pleaded to be a No appearance for the other appellees.
sale with pacto de retro and was tried on the theory." The last paragraph of said article 1606 provides that AVANCEÑA, C. J.:
"the vendor may still exercise the right to repurchase within thirty days from the time final judgment was On October 18, 1910, Concepcion Cirer and James Hill, the owners of parcel of land No. 2 referred to in
rendered in civil action on the basis that the contract was a true sale with right to repurchase." One of the the complaint, donated it perpetually to the municipality of Tarlac, Province of Tarlac, under certain
members of the Code Committee, commenting on the aforequoted provision, says: conditions specified in the public document in which they made this donation. The donation was accepted
Paragraph three of the article is a new provision formulated by the Code Commission. It is intended to by Mr. Santiago de Jesus in the same document on behalf of the municipal council of Tarlac of which he
cover suits where the seller claims that the real intention was a loan with equitable mortgage, but the court was the municipal president. The parcel thus donated was later registered in the name of the donee, the
decides otherwise. (IV Capistrano on the Civil Code, p. 1507). municipality of Tarlac. On January 15, 1921, Concepcion Cirer and James Hill sold this parcel to the herein
The refusal of the Court of Appeals to grant the plaintiffs-appellants the privilege of redemption under the plaintiff George L. Parks. On August 24, 1923, the municipality of Tarlac transferred the parcel to the
above-quoted provision of article 1606 of the New Civil Code was based on the fact that the nature and Province of Tarlac which, by reason of this transfer, applied for and obtained the registration thereof in its
character of the transaction as a pacto de retro sale or as an equitable mortgage was never in question name, the corresponding certificate of title having been issued to it.
before the trial court, the transaction being admittedly one of sale with pacto de retro. The plaintiff, George L. Parks, alleging that the conditions of the donation had not been complied with
But even if the decision of the Court of Appeals be interpreted in the sense indicated by appellants, i.e., and invoking the sale of this parcel of land made by Concepcion Cirer and James Hill in his favor, brought
that the transaction is not covered by the provisions of article 1606 of the New Civil Code because it took this action against the Province of Tarlac, the municipality of Tarlac, Concepcion Cirer and James Hill and
place before the latter took effect, and the action thereon brought before the said code took effect, a claim prayed that he be declared the absolute owner entitled to the possession of this parcel, that the transfer of
which we do not now decide being unnecessary, the said decision would still bar the present action. The the same by the municipality of Tarlac to the Province of Tarlac be annulled, and the transfer certificate
finality of decisions of court is not dependent upon their correctness, but upon the expiration of the period issued to the Province of Tarlac cancelled.
fixed by the rule therefor. (Layda vs.Legazpi, 39 Phil., 83) Evidently, as indicated in appellee's brief, the The lower court dismissed the complaint.
question now raised was actually passed upon adversely by the Court of Appeals in a resolution on a The plaintiff has no right of action. If he has any, it is only by virtue of the sale of this parcel made by
motion for reconsideration, and also by this Court in G.R. No. L-5025. From whatever point the decision Concepcion Cirer and James Hill in his favor on January 15, 1921, but that sale cannot have any effect.
of the Court of Appeals may be considered, it is evident that the present action is barred thereby. This parcel having been donated by Concepcion Cirer and James Hill to the municipality of Tarlac, which
The order appealed from is hereby affirmed, with costs against the plaintiffs-appellants. donation was accepted by the latter, the title to the property was transferred to the municipality of Tarlac.
————————- It is true that the donation might have been revoked for the causes, if any, provided by the law, but the fact
Republic of the Philippines is that it was not revoked when Concepcion Cirer and James Hill made the sale of this parcel to the plaintiff.
SUPREME COURT Even supposing that causes existed for the revocation of this donation, still, it was necessary, in order to
Manila consider it revoked, either that the revocation had been consented to by the donee, the municipality of
Tarlac, or that it had been judicially decreed. None of these circumstances existed when Concepcion Cirer By virtue of the foregoing, the judgment appealed from is affirmed, with the costs against the appellant.
and James Hill sold this parcel to the plaintiff. Consequently, when the sale was made Concepcion Cirer So ordered.
and James Hill were no longer the owners of this parcel and could not have sold it to the plaintiff, nor Street, Villamor, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.
could the latter have acquired it from them.
But the appellant contends that a condition precedent having been imposed in the donation and the same ————————————-
not having been complied with, the donation never became effective. We find no merit in this contention. Republic of the Philippines
The appellant refers to the condition imposed that one of the parcels donated was to be used absolutely SUPREME COURT
and exclusively for the erection of a central school and the other for a public park, the work to commence Manila
in both cases within the period of six months from the date of the ratification by the partes of the document EN BANC
evidencing the donation. It is true that this condition has not been complied with. The allegation, however, G.R. No. L-9935 February 1, 1915
that it is a condition precedent is erroneous. The characteristic of a condition precedent is that the YU TEK and CO., plaintiff-appellant,
acquisition of the right is not effected while said condition is not complied with or is not deemed complied vs.
with. Meanwhile nothing is acquired and there is only an expectancy of right. Consequently, when a BASILIO GONZALES, defendant-appellant.
condition is imposed, the compliance of which cannot be effected except when the right is deemed Beaumont, Tenney and Ferrier for plaintiff.
acquired, such condition cannot be a condition precedent. In the present case the condition that a public Buencamino and Lontok for defendant.
school be erected and a public park made of the donated land, work on the same to commence within six TRENT, J.:
months from the date of the ratification of the donation by the parties, could not be complied with except The basis of this action is a written contract, Exhibit A, the pertinent paragraphs of which follow:
after giving effect to the donation. The donee could not do any work on the donated land if the donation 1. That Mr. Basilio Gonzalez hereby acknowledges receipt of the sum of P3,000 Philippine currency from
had not really been effected, because it would be an invasion of another's title, for the land would have Messrs. Yu Tek and Co., and that in consideration of said sum be obligates himself to deliver to the said
continued to belong to the donor so long as the condition imposed was not complied with. Yu Tek and Co., 600 piculs of sugar of the first and second grade, according to the result of the polarization,
The appellant also contends that, in any event, the condition not having been complied with, even within the period of three months, beginning on the 1st day of January, 1912, and ending on the 31st day
supposing that it was not a condition precedent but subsequent, the non-compliance thereof is sufficient of March of the same year, 1912.
cause for the revocation of the donation. This is correct. But the period for bringing an action for the 2. That the said Mr. Basilio Gonzales obligates himself to deliver to the said Messrs. Yu Tek and Co., of
revocation of the donation has prescribed. That this action is prescriptible, there is no doubt. There is no this city the said 600 piculs of sugar at any place within the said municipality of Santa Rosa which the said
legal provision which excludes this class of action from the statute of limitations. And not only this, — the Messrs. Yu Tek and Co., or a representative of the same may designate.
law itself recognizes the prescriptibility of the action for the revocation of a donation, providing a special 3. That in case the said Mr. Basilio Gonzales does not deliver to Messrs. Yu Tek and Co. the 600 piculs of
period of five years for the revocation by the subsequent birth of children (art. 646, Civil Code), and one sugar within the period of three months, referred to in the second paragraph of this document, this contract
year for the revocation by reason of ingratitude. If no special period is provided for the prescription of the will be rescinded and the said Mr. Basilio Gonzales will then be obligated to return to Messrs. Yu Tek and
action for revocation for noncompliance of the conditions of the donation (art. 647, Civil Code), it is Co. the P3,000 received and also the sum of P1,200 by way of indemnity for loss and damages.
because in this respect the donation is considered onerous and is governed by the law of contracts and the Plaintiff proved that no sugar had been delivered to it under this contract nor had it been able to recover
general rules of prescription. Under the law in force (sec. 43, Code of Civ. Proc.) the period of prescription the P3,000. Plaintiff prayed for judgment for the P3,000 and, in addition, for P1,200 under paragraph 4,
of this class of action is ten years. The action for the revocation of the donation for this cause arose on supra. Judgment was rendered for P3,000 only, and from this judgment both parties appealed.
April 19, 1911, that is six months after the ratification of the instrument of donation of October 18, 1910. The points raised by the defendant will be considered first. He alleges that the court erred in refusing to
The complaint in this action was presented July 5, 1924, more than ten years after this cause accrued. permit parol evidence showing that the parties intended that the sugar was to be secured from the crop
which the defendant raised on his plantation, and that he was unable to fulfill the contract by reason of the
almost total failure of his crop. This case appears to be one to which the rule which excludes parol evidence
to add to or vary the terms of a written contract is decidedly applicable. There is not the slightest intimation
in the contract that the sugar was to be raised by the defendant. Parties are presumed to have reduced to
writing all the essential conditions of their contract. While parol evidence is admissible in a variety of
ways to explain the meaning of written contracts, it cannot serve the purpose of incorporating into the
contract additional contemporaneous conditions which are not mentioned at all in the writing, unless there
has been fraud or mistake. In an early case this court declined to allow parol evidence showing that a party
to a written contract was to become a partner in a firm instead of a creditor of the firm. (Pastor vs. Gaspar,
2 Phil. Rep., 592.) Again, in Eveland vs. Eastern Mining Co. (14 Phil. Rep., 509) a contract of employment
provided that the plaintiff should receive from the defendant a stipulated salary and expenses. The
defendant sought to interpose as a defense to recovery that the payment of the salary was contingent upon
the plaintiff's employment redounding to the benefit of the defendant company. The contract contained no
such condition and the court declined to receive parol evidence thereof.
In the case at bar, it is sought to show that the sugar was to be obtained exclusively from the crop raised
by the defendant. There is no clause in the written contract which even remotely suggests such a condition.
The defendant undertook to deliver a specified quantity of sugar within a specified time. The contract
placed no restriction upon the defendant in the matter of obtaining the sugar. He was equally at liberty to
purchase it on the market or raise it himself. It may be true that defendant owned a plantation and expected
to raise the sugar himself, but he did not limit his obligation to his own crop of sugar. Our conclusion is
that the condition which the defendant seeks to add to the contract by parol evidence cannot be considered.
The rights of the parties must be determined by the writing itself.
The second contention of the defendant arises from the first. He assumes that the contract was limited to
the sugar he might raise upon his own plantation; that the contract represented a perfected sale; and that
by failure of his crop he was relieved from complying with his undertaking by loss of the thing due. (Arts.
1452, 1096, and 1182, Civil Code.) This argument is faulty in assuming that there was a perfected sale.
Article 1450 defines a perfected sale as follows:
The sale shall be perfected between vendor and vendee and shall be binding on both of them, if they have
agreed upon the thing which is the object of the contract and upon the price, even when neither has been
delivered.
Article 1452 reads: "The injury to or the profit of the thing sold shall, after the contract has been perfected,
be governed by the provisions of articles 1096 and 1182."
This court has consistently held that there is a perfected sale with regard to the "thing" whenever the article
of sale has been physically segregated from all other articles Thus, a particular tobacco factory with its
contents was held sold under a contract which did not provide for either delivery of the price or of the
thing until a future time. McCullough vs. Aenlle and Co. (3 Phil. Rep., 295). Quite similar was the recent
case of Barretto vs. Santa Marina (26 Phil. Rep., 200) where specified shares of stock in a tobacco factory
were held sold by a contract which deferred delivery of both the price and the stock until the latter had
been appraised by an inventory of the entire assets of the company. In Borromeo vs. Franco (5 Phil. Rep.,
49) a sale of a specific house was held perfected between the vendor and vendee, although the delivery of
the price was withheld until the necessary documents of ownership were prepared by the vendee. In Tan
Leonco vs. Go Inqui (8 Phil. Rep., 531) the plaintiff had delivered a quantity of hemp into the warehouse
of the defendant. The defendant drew a bill of exchange in the sum of P800, representing the price which
had been agreed upon for the hemp thus delivered. Prior to the presentation of the bill for payment, the
hemp was destroyed. Whereupon, the defendant suspended payment of the bill. It was held that the hemp
having been already delivered, the title had passed and the loss was the vendee's. It is our purpose to
distinguish the case at bar from all these cases.
In the case at bar the undertaking of the defendant was to sell to the plaintiff 600 piculs of sugar of the first
and second classes. Was this an agreement upon the "thing" which was the object of the contract within
the meaning of article 1450, supra? Sugar is one of the staple commodities of this country. For the purpose
of sale its bulk is weighed, the customary unit of weight being denominated a "picul." There was no
delivery under the contract. Now, if called upon to designate the article sold, it is clear that the defendant
could only say that it was "sugar." He could only use this generic name for the thing sold. There was no
"appropriation" of any particular lot of sugar. Neither party could point to any specific quantity of sugar
and say: "This is the article which was the subject of our contract." How different is this from the contracts
discussed in the cases referred to above! In the McCullough case, for instance, the tobacco factory which
the parties dealt with was specifically pointed out and distinguished from all other tobacco factories. So,
in the Barretto case, the particular shares of stock which the parties desired to transfer were capable of
designation. In the Tan Leonco case, where a quantity of hemp was the subject of the contract, it was
shown that that quantity had been deposited in a specific warehouse, and thus set apart and distinguished
from all other hemp.
A number of cases have been decided in the State of Louisiana, where the civil law prevails, which confirm
our position. Perhaps the latest is Witt Shoe Co. vs. Seegars and Co. (122 La., 145; 47 Sou., 444). In this
case a contract was entered into by a traveling salesman for a quantity of shoes, the sales having been
made by sample. The court said of this contract:
But it is wholly immaterial, for the purpose of the main question, whether Mitchell was authorized to make
a definite contract of sale or not, since the only contract that he was in a position to make was an agreement
to sell or an executory contract of sale. He says that plaintiff sends out 375 samples of shoes, and as he
was offering to sell by sample shoes, part of which had not been manufactured and the rest of which were
incorporated in plaintiff's stock in Lynchburg, Va., it was impossible that he and Seegars and Co. should
at that time have agreed upon the specific objects, the title to which was to pass, and hence there could
have been no sale. He and Seegars and Co. might have agreed, and did (in effect ) agree, that the
identification of the objects and their appropriation to the contract necessary to make a sale should
thereafter be made by the plaintiff, acting for itself and for Seegars and Co., and the legend printed in red
ink on plaintiff's billheads ("Our responsibility ceases when we take transportation Co's. receipt `In good
order'" indicates plaintiff's idea of the moment at which such identification and appropriation would
become effective. The question presented was carefully considered in the case of State vs. Shields, et al.
(110 La., 547, 34 Sou., 673) (in which it was absolutely necessary that it should be decided), and it was
there held that in receiving an order for a quantity of goods, of a kind and at a price agreed on, to be
supplied from a general stock, warehoused at another place, the agent receiving the order merely enters
into an executory contract for the sale of the goods, which does not divest or transfer the title of any
determinate object, and which becomes effective for that purpose only when specific goods are thereafter
appropriated to the contract; and, in the absence of a more specific agreement on the subject, that such
appropriated takes place only when the goods as ordered are delivered to the public carriers at the place
from which they are to be shipped, consigned to the person by whom the order is given, at which time and
place, therefore, the sale is perfected and the title passes.
This case and State vs. Shields, referred to in the above quotation are amply illustrative of the position
taken by the Louisiana court on the question before us. But we cannot refrain from referring to the case of
Larue and Prevost vs.Rugely, Blair and Co. (10 La. Ann., 242) which is summarized by the court itself in
the Shields case as follows:
. . . It appears that the defendants had made a contract for the sale, by weight, of a lot of cotton, had
received $3,000 on account of the price, and had given an order for its delivery, which had been presented
to the purchaser, and recognized by the press in which the cotton was stored, but that the cotton had been
destroyed by fire before it was weighed. It was held that it was still at the risk of the seller, and that the
buyer was entitled to recover the $3,000 paid on account of the price.
We conclude that the contract in the case at bar was merely an executory agreement; a promise of sale and
not a sale. At there was no perfected sale, it is clear that articles 1452, 1096, and 1182 are not applicable.
The defendant having defaulted in his engagement, the plaintiff is entitled to recover the P3,000 which it
advanced to the defendant, and this portion of the judgment appealed from must therefore be affirmed.
The plaintiff has appealed from the judgment of the trial court on the ground that it is entitled to recover
the additional sum of P1,200 under paragraph 4 of the contract. The court below held that this paragraph
was simply a limitation upon the amount of damages which could be recovered and not liquidated damages
as contemplated by the law. "It also appears," said the lower court, "that in any event the defendant was
prevented from fulfilling the contract by the delivery of the sugar by condition over which he had no
control, but these conditions were not sufficient to absolve him from the obligation of returning the money
which he received."
The above quoted portion of the trial court's opinion appears to be based upon the proposition that the
sugar which was to be delivered by the defendant was that which he expected to obtain from his own
hacienda and, as the dry weather destroyed his growing cane, he could not comply with his part of the
contract. As we have indicated, this view is erroneous, as, under the contract, the defendant was not limited
to his growth crop in order to make the delivery. He agreed to deliver the sugar and nothing is said in the
contract about where he was to get it.
We think is a clear case of liquidated damages. The contract plainly states that if the defendant fails to
deliver the 600 piculs of sugar within the time agreed on, the contract will be rescinded and he will be
obliged to return the P3,000 and pay the sum of P1,200 by way of indemnity for loss and damages. There
cannot be the slightest doubt about the meaning of this language or the intention of the parties. There is no
room for either interpretation or construction. Under the provisions of article 1255 of the Civil Code
contracting parties are free to execute the contracts that they may consider suitable, provided they are not
in contravention of law, morals, or public order. In our opinion there is nothing in the contract under
consideration which is opposed to any of these principles.
For the foregoing reasons the judgment appealed from is modified by allowing the recovery of P1,200
under paragraph 4 of the contract. As thus modified, the judgment appealed from is affirmed, without costs
in this instance.
——————————————
Obligations and Contracts: Usurious Transactions – Article 1175
Facts:
On or about September 7, 1957, the petitioner loaned P10,000.00, without interest, to the respondent. The
loan became ultimately due on January 31, 1960 but was not paid. The petitioner asked for a 3-month
extension, or up to April 30, 1960. On March 17, 1960, the parties executed another loan document for
the payment of P10, 000.00 extended up to April 30, 1960 but the obligation was increased by P6,000.00
to answer for the attorney’s fees, legal interest, and other cost incident thereto. The petitioner again failed
to pay their obligation by April 30, 1960. On September 23, 1957, the respondent instituted a collection
case. The petitioner admitted the P10, 000.00 principal obligation but claimed that the additional P6,
000.00 constituted usurious interest.
Issue:
Whether or not the additional P6, 000.00 constituted usurious interest.
Held:
No. Usury has been legally non-existent. Interest can now be charged as lender and borrower may agree
upon. In the present case, the petitioner had not proven that the P6, 000.00 additional obligation was
illegal.
THIRD DIVISION
[G.R. No. 107737. October 1, 1999]
JUAN L. PEREZ, LUIS KEH, CHARLIE LEE and ROSENDO G. TANSINSIN, JR., petitioners, vs.
COURT OF APPEALS, LUIS CRISOSTOMO and VICENTE ASUNCION, respondents.
DECISION
GONZAGA-REYES, J.:
[1]
This is a petition for review on certiorari of the Decision of the Court of Appeals affirming the decision
[2]
of the Regional Trial Court of Bulacan, Branch 9 that disposed of Civil Case No. 5610-M (Luis
Crisostomo v. Luis Keh, Juan Perez, Charlie Kee and Atty. Rosendo G. Tansinsin, Jr.) as follows:
WHEREFORE, premises considered, judgment is hereby rendered:
a) directing defendant JUAN PEREZ to allow plaintiff LUIS CRISOSTOMO to occupy and operate the
`Papaya Fishpond for a period of 5 years at the rental rates of P150,000.00 for the first six months and
P175,000.00 for the remaining five years (the same rates provided for in Exh. 4);
b) ordering defendants LUIS KEH, CHARLIE LEE, JUAN PEREZ and ATTY. ROSENDO TANSINSIN,
JR. to pay unto the plaintiff the amounts of P150,000.00 as actual damages; P20,000.00 as moral damages;
P20,000.00 as exemplary damages; and P10,000.00 as attorneys fees, plus the costs of the suit;
c) directing the release, delivery or payment directly to plaintiff LUIS CRISOSTOMO of the amounts of
P128,572.00 and P123,993.85, including the interests which may have already accrued thereon, deposited
with the Paluwagan ng Bayan Savings Bank (Paombong, Bulacan Branch) in the name of the Clerk of
Court and/or Deputy Clerk of Court Rodrigo C. Libunao under this Courts Order dated February 14, 1980;
however, the plaintiff is required to pay defendant Perez the corresponding rental on the fishpond for the
period June 1979-January 1980 based on the rate of P150,000.00 per annum, deducting therefrom the
amount of P21,428.00 already paid to and received by then co-usufructuary Maria Perez (Exh. E);
d) dismissing the defendants separate counter-claims for damages, for lack of merit; and
e) dismissing the Pleading in Intervention Pro Interesse Suo filed by VICENTE ASUNCION on the ground
of lis pendens.
SO ORDERED.
The facts upon which the Court of Appeals based its Decision are the following:
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]
Private respondent Luis Crisostomo, who reached only the 5 th 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 Lees 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 respondents 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.
JUAN L. PEREZ ET AL.
By:
(Sgd.)
Rosendo G. Tansinsin, Jr.
CONFORME TO THE ABOVE:
(Sgd.)
LUIS KEH
Handwritten below that receipt but above the signature of petitioner Charlie Lee, are the following: Recd
[5]
from Luis Crisostomo sum of one hundred fifty-four thousand P154,000.00 for above payment.
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 attorneys 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:
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 Kehs agent named Catalino Alcantara relayed to petitioner Perez,
Kehs 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 respondents 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 plaintiffs 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 Crisostomos) 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 plaintiffs 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 preempt
plaintiffs claim of rights and interests over the said property as either sub-lessee or assignee. Secondly,
Kehs having signified Conforme to the above is a gratuitous notation as it actually indicates that the money
came from the plaintiff. Thirdly, Atty. Tansinsins 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 Kehs 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 nonpresentation 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.
6. Atty. Tansinsin was the common legal counsel of all the defendants and, by his testimony, even the
plaintiff. Atty. Tansinsins denial that he was plaintiffs counsel was his way of deflecting plaintiffs
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 Courts 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. Plaintiffs 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
Kehs 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 intervenors 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 courts 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 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.
X x x x x x x x x.
(Underscoring 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
[16]
matter and causes of action. 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
[18]
interests. 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
interesse 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
[21]
conceded to the main actors therein. 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 latters 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 Asuncions 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 courts ruling to allow the intervention pro interesse suo to protect Vicente Asuncions 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]
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 Asuncions appeal, a litigants 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
Asuncions 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 Lorenzos 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--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 certiorariunder Rule 45 of the Rules of Court as this mode of appeal is confined to questions
[31]
of law. Factual findings of the Court of Appeals are conclusive on the parties and carry even more
[32]
weight when said court affirms the factual findings of the trial court. 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 respondents
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 Kehs rights as a lessee of the fishpond.
Although no written contract to transfer operation of the fishpond to private respondent was offered in
[33]
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
respondents 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 respondents 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.
Article 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 that was his written agreement with petitioner Lee
on January 9, 1978, petitioner Keh did 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 private respondent paid petitioners Luis Keh and Juan Perez, through petitioner Tansinsin the
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 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 P486,562.65 with interest of six percent (6%) per
annum from the rendition of the decision of the trial court on September 6, 1989. [35]
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 respondents 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 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 morals, good customs or public policy shall compensate the latter for the
damage. Exemplary 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, attorneys fees shall
also be awarded.[37]
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 P128,572.00 and P123,993.85
deposited with the Paluwagan ng Bayan Savings Bank in 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 less the amount of P21,428.00 already paid to usufructuary Maria
Perez. It should, however, be subject to the MODIFICATIONS that:
1. Petitioner Luis Keh shall pay private respondent Luis Crisostomo in the amount of P486,562.25 with
legal interest from the rendition of the judgment in Civil Case No. 5610-M or on September 6, 1989, and
2. Petitioners be made liable jointly and severally liable for moral damages of P50,000.00, exemplary
damages of P20,000 and attorneys fees of P10,000.00.
No costs.
SO ORDERED.
Melo (Chairman), Vitug, Panganiban, and Purisima, JJ., concur.