B.

Personal Obligation
1. Obligation to do (positive personal obligation)
a. Remedies available to the creditor
G.R. No. L-27454 April 30, 1970
ROSENDO O. CHAVES, PLAINTIFF-APPELLANT, VS. FRUCTUOSO GONZALES, DEFENDANT-
APPELLEE.
DECISION
REYES, J.B.L., J.:
This is a direct appeal by the party who prevailed in a suit for breach of oral contract and recovery of
damages but was unsatisfied with the decision rendered by the Court of First Instance of Manila, in its
Civil Case No. 65138, because it awarded him only P31.10 out of his total claim of P690.00 for actual,
temperate and moral damages and attorney's fees.
The appealed judgment, which is brief, is hereunder quoted in full:
In the early part of July, 1963, the plaintiff delivered to the defendant, who is a typewriter repairer, a
portable typewriter for routine cleaning and servicing. The defendant was not able to finish the job after
some time despite repeated reminders made by the plaintiff. The defendant merely gave assurances, but
failed to comply with the same. In October, 1963, the defendant asked from the plaintiff the sum of
P6.00 for the purchase of spare parts, which amount the plaintiff gave to the defendant. On October 26,
1963, after getting exasperated with the delay of the repair of the typewriter, the plaintiff went to the
house of the defendant and asked for the return of the typewriter. The defendant delivered the typewriter
in a wrapped package. On reaching home, the plaintiff examined the typewriter returned to him by the
defendant and found out that the same was in shambles, with the interior cover and some parts and
screws missing. On October 29, 1963, the plaintiff sent a letter to the defendant formally demanding 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.
"On August 29, 1964, the plaintiff had his type-writer repaired by Freixas Business Machines, and the
repair Job cost him a total of P89.85, including labor and materials (Exhibit C).
"On August 23, 1965, the plaintiff commenced this action before 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.
"In his answer as well as in his testimony given before this court, the defendant made no denials of the
facts narrated above, except the claim of the plaintiff that the typewriter was delivered to the de-fendant
through a certain Julio Bocalin, which the de-fendant denied allegedly because the typewriter was
delivered to him personally by the plaintiff.
"The repair done on the typewriter by Freixas Business Machines with the total cost of P89.85 should not,
however, be fully chargeable against the defendant. The repair invoice, Exhibit C, shows that the missing
parts had a total value of only P31.10.
"WHEREFORE, judgment is hereby rendered ordering the defendant to pay the plaintiff the sum of P31.10,
and the costs of suit.
"SO ORDERED."
The error of the court a quo according to the plaintiff-appellant, Rosendo O. Chaves is that it awarded only
the value of the missing parts of the typewriter, instead of the whole cost of labor and materials that went
into the repair of the machine, as provided for in Article 1167 of the Civil Code, reading as follows:
"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 be undone."
On the other hand, the position of the defendant-appellee, Fructuoso Gonzales, is that he is not liable at
all, not even for the sum of P31.10, because his contract with plaintiff-appellant did not contain a period,
so that plaintiff-appellant should have first filed a petition for the court to fix the period, under Article
1197 of the Civil Code, within which the defendant-appellee was to comply with the contract before said
defend-ant-appellee could be held liable for breach of contract.
Because the plaintiff appealed directly to the Supreme Court and the appellee did not interpose any
appeal, the facts, as found by the trial court, are now conclusive and non-reviewable.[1]
The appealed judgment states that the "plaintiff delivered to the defendant ……..a portable typewriter for
routine cleaning and servicing"; that the "defendant was not able to finish the job after some time despite
repeated reminders made by the plaintiff"; that the "defendant merely gave assurances, but failed to
comply with the same"; and that "after getting exasperated with the delay of the repair of the typewriter"
, the plaintiff went to the house of the defendant and asked for its return, which, was done. The
inferences derivable from these findings of fact, are that the appellant and the appellee had a perfected
1
contract for cleaning and servicing a typewriter; that they intended that the defendant was to finish it at
some future time although such time was not specified; and that such time had passed without the work
having been accomplished, for the defendant returned the typewriter cannibalized and unrepaired, which
in itself is a breach of his obligation, without demanding that he should be given more time to finish the
job, or compensa-tion for the work he had already done. The time for compliance having evidently
expired, and there being a breach of contract by non-performance, it was academic for the plaintiff to
have first petitioned the court to fix a period for the performance of the contract before filing his complaint
in this case. Defendant cannot invoke Article 1197 of the Civil Code for he virtually admitted non-
performance by returning the typewriter that he was obliged to repair in a non-working condition, with
essential parts missing. The fixing of a period would thus be a mere formality and would serve no purpose
than to delay (of. Tiglao, et al. v. Manila Railroad Co., 98 Phil. 181).
It is clear that the defendant-appellee contravened the tenor of his obligation because he not only did not
repair the typewriter but returned it "in shambles", according to the appealed decision. For such
con-travention, as appellant contends, he is liable under Article 1167 of the Civil Code, jam quot, for the
cost of executing the obligation in a proper manner. The cost of the execution of the obligation in this
case should be the cost of the labor or service expended in the repair of the typewriter, which is in the
amount of P58.75, because the obligation or contract was to repair it.
In addition, the defendant-appellee is likewise liable, under Article 1170 of the Code, for the cost of the
missing parts, in the amount of P31.10, for in his obligation to repair the typewriter he was bound, but
failed or neglected, to return it in the same condition it was when he received it.
Appellant's claims for moral and temperate damages and attorney's fees were, however, correctly rejected
by the trial court, for these were not alleged in his complaint (Record on Appeal, pages 1-5). Claims for
damages and attorney's fees must be pleaded, and the existence of the actual basis thereof must be
proved.[2] The appealed judgment thus made no findings on these claims, nor on the fraud or malice
charged to the appellee. As no findings of fact were made on the claims for damages and attorney's fees,
there is no factual basis upon which to make an award therefor. Appellant is bound by such judgment of
the court, a quo, by reason of his having resorted directly to the Supreme Court on questions of law.
IN VIEW OF THE FOREGOING REASONS the appealed judgment is hereby modified, by ordering the
defendant?appellee to pay, as he is hereby ordered to pay, the plaintiff-appellant the sum of P89.85, with
interest at the legal rate from the filing of the complaint. Costs in all instances against appellee Fructuoso
Gonzales.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Ruiz Castro, Fernando, Teehankee, and Villamor, JJ., concur.
Barredo, J., did not take part.
x---------------------------------------------------------------------------------------------------x
G.R. No. L-44349 October 29, 1976
JESUS V. OCCENA and EFIGENIA C. OCCENA, petitioners, vs.
HON. RAMON V. JABSON, Presiding Judge of the Court Of First Instance of Rizal, Branch XXVI;
COURT OF APPEALS and TROPICAL HOMES, INC., respondents.
TEEHANKEE, J.:
The Court reverses the Court of Appeals appealed resolution. The Civil Code authorizes the release of an
obligor when the service has become so difficult as to be manifestly beyond the contemplation of the
parties but does not authorize the courts to modify or revise the subdivision contract between the parties
or fix a different sharing ratio from that contractually stipulated with the force of law between the parties.
Private respondent's complaint for modification of the contract manifestly has no basis in law and must
therefore be dismissed for failure to state a cause of action. On February 25, 1975 private respondent
Tropical Homes, Inc. filed a complaint for modification of the terms and conditions of its subdivision
contract with petitioners (landowners of a 55,330 square meter parcel of land in Davao City), making the
following allegations:
"That due to the increase in price of oil and its derivatives and the concomitant worldwide spiralling of
prices, which are not within the control of plaintiff, of all commodities including basis raw materials
required for such development work, the cost of development has risen to levels which are unanticipated,
unimagined and not within the remotest contemplation of the parties at the time said agreement was
entered into and to such a degree that the conditions and factors which formed the original basis of said
contract, Annex 'A', have been totally changed; 'That further performance by the plaintiff under the
contract.
That further performance by the plaintiff under the contract,Annex 'S', will result in situation where
defendants would be unustly enriched at the expense of the plaintiff; will cause an inequitous distribution
of proceeds from the sales of subdivided lots in manifest actually result in the unjust and intolerable
exposure of plaintiff to implacable losses, all such situations resulting in an unconscionable, unjust and
2
immoral situation contrary to and in violation of the primordial concepts of good faith, fairness and equity
which should pervade all human relations.
Under the subdivision contract, respondent "guaranteed (petitioners as landowners) as the latter's fixed
and sole share and participation an amount equivalent to forty (40%) percent of all cash receifpts fromthe
sale of the subdivision lots"
Respondent pray of the Rizal court of first instance that "after due trial, this Honorable Court render
judgment modifying the terms and conditions of the contract ... by fixing the proer shares that shouls
pertain to the herein parties out of the gross proceeds from the sales of subdivided lots of subjects
subdivision".
Petitioners moved to dismiss the complaint principally for lack of cause of action, and upon denial thereof
and of reconsideration by the lower court elevated the matter on certiorari to respondent Court of
Appeals.
Respondent court in its questioned resolution of June 28, 1976 set aside the preliminary injunction
previously issued by it and dimissed petition on the ground that under Article 1267 of the Civil Code which
provides that
ART. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the
parties, the obligor may also be released therefrom, in whole or in part.
... a positive right is created in favor of the obligor to be released from the performance of an obligation in
full or in part when its performance 'has become so difficult as to be manifestly beyond the contemplation
of the parties.
Hence, the petition at abar wherein petitioners insist that the worldwide increase inprices cited by
respondent does not constitute a sufficient casue of action for modification of the subdivision contrct. After
receipt of respondent's comment, the Court in its Resolution of September 13, 1976 resolved to treat the
petition as special civil actionand declared the case submitted for decision.
The petition must be granted.
While respondent court correctly cited in its decision the Code Commission's report giving the rationale for
Article 1267 of the Civil Code, to wit;
The general rule is that impossibility of performance releases the obligor. However, it is submitted that
when the service has become so difficult as to be manifestly beyond the contemplation of the parties, the
court should be authorized to release the obligor in whole or in part. The intention of the parties should
govern and if it appears that the service turns out to be so difficult as have been beyond their
contemplation, it would be doing violence to that intention to hold the obligor still responsible. ...
It misapplied the same to respondent's complaint.
If respondent's complaint were to be released from having to comply with the subdivision contract,
assuming it could show at the trial that the service undertaken contractually by it had "become so difficult
as to be manifestly beyond the contemplation of the parties", then respondent court's upholding of
respondet's complaint and dismissal of the petition would be justifiable under the cited codal article.
Without said article, respondent would remain bound by its contract under the theretofore prevailing
doctrine that performance therewith is ot excused "by the fact that the contract turns out to be hard and
improvident, unprofitable, or unespectedly burdensome", 3 since in case a party desires to be excuse from
performance in the event of such contingencies arising, it is his duty to provide threfor in the contract.
But respondent's complaint seeks not release from the subdivision contract but that the court "render
judgment I modifying the terms and Conditions of the Contract by fixing the proper shares that should
pertain to the herein parties out of the gross proceed., from the sales of subdivided lots of subject
subdivision". The cited article does not grant the courts this authority to remake, modify or revise the
contract or to fix the division of shares between the parties as contractually stipulated with the force of
law between the parties, so as to substitute its own terms for those covenanted by the partiesthemselves.
Respondent's complaint for modification of contract manifestly has no basis in law and therefore states no
cause of action. Under the particular allegations of respondent's complaint and the circumstances therein
averred, the courts cannot even in equity grant the relief sought.
A final procedural note. Respondent cites the general rule that an erroneous order denying a motion to
dismiss is interlocutory and should not be corrected by certiorari but by appeal in due course. This case
however manifestly falls within the recognized exception that certiorari will lie when appeal would not
prove to be a speedy and adequate remedy.' Where the remedy of appeal would not, as in this case,
promptly relieve petitioners from the injurious effects of the patently erroneous order maintaining
respondent's baseless action and compelling petitioners needlessly to go through a protracted trial and
clogging the court dockets by one more futile case, certiorari will issue as the plain, speedy and adequate
remedy of an aggrieved party.

3
ACCORDINGLY, the resolution of respondent appellate court is reversed and the petition for certiorari is
granted and private respondent's complaint in the lower court is ordered dismissed for failure to state a
sufficient cause of action. With costs in all instances against private respondent.
Makasiar, Muñoz Palma, Concepcion, Jr., and Martin JJ., concur.
x--------------------------------------------------------------------------------------------------------------x
G.R. No. 118749 April 25, 2003
SPOUSES LORENZO G. FRANCISCO and LORENZA D. FRANCISCO, petitioners, vs.
HONORABLE COURT OF APPEALS, and BIENVENIDO C. MERCADO, respondents.
CARPIO, J.:
The Case
Before this Court is a petition for review1 assailing the Decision2 of 21 November 1994 as well as the
Resolution of 17 January 1995 of the Court of Appeals in CA-G.R. CV No. 34084. The Court of Appeals
upheld the Decision of 10 June 1991 of the Regional Trial Court3 of San Fernando, Pampanga, in Civil
Case No. 7909 rescinding the subdivision development contract between the parties and awarding
damages to respondent Bienvenido C. Mercado.
Antecedent Facts
On 3 February 1984, the spouses Lorenzo and Lorenza Francisco ("petitioners") and Engineer Bienvenido
C. Mercado ("respondent") entered into a Contract of Development4 ("Contract") for the development into
a subdivision of several parcels of land in Pampanga.
Under the Contract, respondent agreed to undertake at his expense the development work for the Franda
Village Subdivision. Respondent committed to complete the construction within 27 months. Respondent
also advanced P200,000.00 for the initial expenses of the development work. In return, respondent would
receive 50% of the total gross sales of the subdivision lots and other income of the subdivision.
Respondent also enjoyed the exclusive and irrevocable authority to manage, control and supervise the
sales of the lots within the subdivision. The Contract required respondent to submit to petitioners, within
the first 15 days of every month, a report on payments collected from lot buyers with copies of all the
contracts to sell. However, respondent failed to submit the monthly report.
From 16 October 1985 to sometime in March 1986, within the 27-month period granted to respondent,
petitioners also contracted a certain Nicasio Rosales, Sr. ("Rosales") to undertake the partial development
of the subdivision. On 16 July 1986, Rosales submitted his accomplishment report. On the same day,
petitioners demanded that respondent submit within 15 days an accounting of his operation of the
subdivision from the beginning of the project up to 15 July 1986. Petitioners also requested for copies of
contracts to sell, receipts of collections and receipts of disbursements for development expenses.
On 5 August 1986, respondent secured from the Human Settlements Regulatory Commission ("HSRC") an
extension of time to finish the subdivision development until 30 July 1987. On 8 August 1986, petitioners
instructed respondent to stop selling subdivision lots and collecting payments from lot buyers. Petitioners
also demanded the turnover to them of all official receipts in the name of Franda Village Subdivision.5
Nonetheless, respondent continued to collect payments from lot buyers until September 1986.
On 18 September 1986, petitioners wrote respondent that their accountant was not satisfied with
respondent's report which did not include the necessary supporting documents. Petitioners required
respondent to submit a proper statement of collections with supporting receipts and documents, and
reiterated that respondent should stop selling subdivision lots and collecting payments from lot buyers.
For the first time, petitioners also alleged that respondent violated certain provisions of the Contract.
Petitioners mentioned the complaint of lot buyers that respondent was not developing the subdivision
within the agreed period. Another complaint was that respondent issued two kinds of receipts, one in the
name of B. C. Mercado and the other in the name of Franda Subdivision.6
On 7 October 1986, petitioners informed the HSRC of the lot buyers' complaints that respondent
completed only 5% of the development work and that he was issuing two kinds of receipts. Petitioners
also claimed that respondent was in serious violation of the Contract because he did not properly remit to
petitioners the proceeds from the lot sales.
In a letter dated 25 November 1986,7 respondent requested petitioners to provide him with the format of
the statement of collections they wanted or, alternatively, to send an accountant to audit his records. He
assured them that he could account for all the proceeds from the lot sales. He countered that he could
have finished the development of the subdivision on time had petitioners not hampered him with their
verbal demands to stop the development and "fill up" the lots first. Respondent suggested that he and
petitioners settle their differences either by mutually canceling the Contract and giving to each party its
corresponding share, or by continuing with the arrangement. In the meantime, respondent informed
petitioners that he would continue the operation of the subdivision in accordance with the Contract.

4
On 20 January 1987, petitioners granted respondent an authority8 to resume the sale of subdivision lots
and the collection of payments subject to the following conditions: (1) all collections shall be deposited in
a joint account with China Banking Corporation, San Fernando, Pampanga branch; (2) withdrawals shall
be limited to 50% of the total collections or to respondent's share, which can only be used for
development expenses, and any withdrawal shall be subject to the approval of petitioners; (3) only Franda
Village Subdivision receipts, duly countersigned by petitioners, shall be used; (4) collections shall be
subject to a weekly or monthly audit; and (5) any violation of these conditions shall result in the
automatic cancellation of the authority.
On 28 January 1987, respondent informed HSRC that he had stopped development work on the
subdivision because the conditional authority issued by petitioners violated the Contract. Specifically,
respondent referred to the following provisions of the Contract that the conditional authority contravened:
(1) his exclusive and irrevocable right to manage, control, and supervise the sale of lots; (2) his authority
to issue receipts as the developer without the participation of the landowners; and (3) his right to
withdraw his 50% share without the approval of the landowners.9 Respondent attributed the delay in the
development of the subdivision to petitioners who contracted the services of another person during the
effectivity of the Contract. Petitioners also stopped respondent, without justification, from selling the lots
and collecting payments from lot buyers.
On 27 February 1987, respondent filed with the trial court an action to rescind the Contract with a prayer
for damages. Petitioners countered that respondent breached the Contract by failing to finish the
subdivision within the 27 months agreed upon, and therefore respondent was in delay. Petitioners also
alleged that respondent sold one subdivision lot to two different buyers.
Subsequently, petitioners obtained permission from the Housing and Land Use Regulatory Board to
takeover the development of the subdivision.
The Ruling of the Trial Court
After trial on the merits, the trial court found for respondent. The trial court ruled that petitioners
breached the Contract by: (1) hiring Rosales to do development work on the subdivision within the 27-
month period exclusively granted to respondent; (2) interfering with the latter's development work; and
(3) stopping respondent from managing the sale of lots and collection of payments.
Because petitioners were the first to breach the Contract and even interfered with the development work,
the trial court declared that respondent did not incur delay even if he completed only 28% of the
development work. Further, the HSRC extended the Contract up to July 1987. Since the Contract had not
expired at the time respondent filed the action for rescission, petitioners' defense that respondent did not
finish the development work on time was without basis.
The trial court also found that respondent did not fail to pay the 50% share of petitioners from the
proceeds of the lot sales. The trial court viewed respondent's failure to submit the required report as only
a slight infraction not warranting petitioners' interference with respondent's right to sell the lots and
collect payments from sales pursuant to Article X (3) of the Contract. The trial court noted that petitioners
had tolerated the non-submission of the monthly report until petitioners made the demand for accounting
on 16 July 1986, which respondent readily complied. The trial court stressed that respondent's right under
the Contract to sell lots and collect payments was exclusive and irrevocable.
The trial court found unproven the charge that respondent sold one subdivision lot to two buyers. The trial
court considered the issue of a double sale immaterial, as respondent did not violate any provision of the
Contract and the aggrieved parties in such event would be the buyers and not petitioners.
In its Decision10 of 10 June 1991, the trial court decreed the rescission of the Contract and awarded
damages to respondent, as follows:
Premises considered, judgement is hereby rendered in favor of plaintiff granting the rescission of the
Contract of Development between him and defendants' and ordering defendants to pay unto plaintiff the
following:
1. Expenses of operation of the subdivision in the total amount of P1,808,756.01 and return of advance
payment of P200,000.00;
2. Attorney's fees of P25,000.00;
3. P50,000.00 and P30,000.00 as temperate and exemplary damages; and
4. Cost of suit.
SO ORDERED.
The Ruling of the Court of Appeals
On appeal to the Court of Appeals, petitioners presented for the first time a supplemental Memorandum of
Agreement dated 9 October 1985 allegedly entered into by petitioners and Rosales with the conformity of
respondent. However, the appellate court refused to take cognizance of the Memorandum of Agreement,
as petitioners did not formally offer it in evidence.
5
The Court of Appeals adopted the findings of fact of the trial court. Declaring that there was no reversible
error, the appellate court in its Decision of 21 November 199411 affirmed the ruling of the trial court in
toto.
Petitioners filed a motion for reconsideration, which the Court of Appeals denied in its Resolution of 17
January 1995.
On 21 March 1995, petitioners filed with the Supreme Court a petition for review assailing the appellate
court's decision and resolution. Petitioners prayed that the Court: (1) reverse the decision of the Court of
Appeals; (2) award to petitioners P4,403,895.00 as additional cost of the development of the subdivision,
P57,864.00 as their unremitted share, P304,152.00 to reimburse them for the amounts paid to Rosales,
P50,000.00 as attorney's fees, P10,000.00 as appearance fees, and moral and exemplary damages; and
(3) other equitable reliefs and remedies.
The Issues
Petitioners assign the following errors:
1. THE COURT OF APPEALS ERRED WHEN IT HELD THAT DELAY IS NOT AN ISSUE IN THIS CASE;
2. THE COURT OF APPEALS ERRED WHEN IT HELD THAT THE CONTRACT OF DEVELOPMENT HAS NOT
EXPIRED AND WAS EXTENDED UP TO JULY 30, 1997 BY PETITIONER;
3. THE COURT OF APPEALS ERRED WHEN IT HELD THAT PRIVATE RESPONDENT WAS ENTITLED TO THE
RESCISSION OF THE CONTRACT OF DEVELOPMENT AND DAMAGES BECAUSE OF INTERVENTION OF
NICASIO ROSALES, SR. IN THE DEVELOPMENT OF THE SUBDIVISION DURING THE EXISTENCE OF THE
CONTRACT, AND THAT THE MEMORANDUM OF AGREEMENT OR SUPPLEMENTAL AGREEMENT WHICH
BEARS THE CONFORMITY OF PLAINTIFF WAS NOT OFFERED OR PRODUCED IN THE TRIAL COURT AND
THEREFORE COULD NOT BE CONSIDERED ON APPEAL, WHEN IN FACT IT WAS REFERENCED AND MADE
PART OF THE EVIDENCE OF THE PRIVATE RESPONDENT;
4. THE COURT OF APPEALS ERRED WHEN IT HELD THAT PRIVATE RESPONDENT WAS ENTITLED TO THE
RESCISSION OF THE CONTRACT AND DAMAGES BECAUSE PRIVATE RESPONDENT'S NON-SUBMISSION OF
THE MONTHLY COLLECTION REPORT WAS NOT A SERIOUS AND SUBSTANTIAL BREACH OF THE
CONTRACT OF DEVELOPMENT;
5. THE COURT OF APPEALS ERRED WHEN IT HELD THAT PRIVATE RESPONDENT WAS ENTITLED TO THE
RESCISSION OF THE CONTRACT AND DAMAGES BECAUSE PRIVATE RESPONDENT'S EXECUTION OF
DOUBLE SALE OF A LOT IN THE SUBDIVISION SUBJECT OF THE CONTRACT OF DEVELOPMENT IN FAVOR
OF TWO DIFFERENT PERSONS IS AT BEST A PERIPHERAL ISSUE TO THE MAIN ISSUE OF RESCISSION.
6. THE COURT OF APPEALS ERRED WHEN IT HELD THAT IT AFFIRMED THE DECISION DATED JUNE 10,
1991 OF THE TRIAL COURT INSTEAD OF REVERSING THE SAME AND AWARDING DAMAGES TO
PETITIONERS.
The Ruling of the Court
It is evident from the assigned errors that petitioners are asking the Court to reexamine certain findings of
fact of the trial court. Petitioners submit that this case constitutes an exception to Rule 45 of the Rules of
Court limiting to questions of law the issues that may be raised in an appeal by certiorari to this Court.
To bolster this argument, the petition for review, prepared by Atty. Pedro D. Diwa as counsel for
petitioners, cited what is supposed to be the Court's ruling in Misa v. Court of Appeals.15 However,
petitioner's counsel misquoted the ruling in Misa. We reproduce the erroneous excerpt - which petitioner's
counsel even underscored – as follows:
And finally, Mr. Justice Medialdea of this COURT in the case of Misa vs. Court of Appeals, G.R. No. 97291,
August 5, 1992, by way of exception to the settled rule that only questions of law may be raised in a
petition for review on certiorari under Rule 45 of the Rules of Court, held as follows:
"It is firmly settled that only questions of law may be raised in a petition for review on certiorari under
Rule 45 of the Rules of Court. However, there are several instances when findings of fact may be passed
upon and reviewed by the Supreme Court, to wit: xxx"16
Contrary to the quotation made in the petition for review, the Court in Misa refused to review the factual
findings of the lower court. There the Court merely acknowledged the exceptional circumstances which
may warrant such a review, thus:
It is readily discernible that petitioners are asking Us to re-examine all the evidence already presented
before the respondent court and trial court and evaluated by them. These evidence served as basis in
arriving at their findings of fact. We shall not analyze such evidence all over again. Instead, We put finis to
the factual findings in this case. It is firmly settled that only questions of law may be raised in a petition
for review on certiorari under Rule 45 of the Rules of Court. Certainly, We recognize exceptions to this
rule. The case of Medina, et. al. v. Asistio, etc., et al., G.R. No. 75450, November 8, 1990, 191 SCRA 218,
223-224 enumerates several instances when findings of fact may be passed upon and reviewed by this
Court, none of which obtain herein:
6
"(1) When the conclusion is a finding grounded entirely on speculation, surmises or conjecture (Joaquin v.
Navarro, 93 Phil. 257 [1953]; (2) When the inference made is manifestly mistaken, absurd or impossible
(Luna v. Linatok, 74 Phil. 14 [1942]; (3) Where there is a grave abuse of discretion (Buyco v. People, 95
Phil. 453 [1955]; (4) When judgment is based on a misapprehension of facts (Cruz v. Sosing, L-4875,
Nov. 27, 1953); (5) When the findings of fact are conflicting (Casica v. Villaseca, L-9590 Ap. 30, 1957;
unrep.);** (6) When the Court of Appeals, in making its findings, went beyond the issues of the case and
the same is contrary to the admissions of both appellant and appellee (Evangelista v. Alto Surety and
Insurance Co., 103 Phil. 401 [1958]; (7) The findings of the Court of Appeals are contrary to those of the
trial court (Garcia v. Court of Appeals, 33 SCRA 622 [1970]; Sacay v. Sandiganbayan, 142 SCRA 593
[1986]) ** (8) When the findings of fact are conclusions without citation of specific evidence on which
they are based (Ibid.,); (9) When the facts set forth in the petition as well as in the petitioners' main and
reply briefs are not disputed by the respondents (Ibid.,); and (10) The finding of fact of the Court of
Appeals is premised on the supposed absence of evidence and is contradicted by the evidence on record
(Salazar v. Gutierrez, 33 SCRA 242 [1970]).17 (Emphasis and underscoring supplied)
We frown on the obvious carelessness of Atty. Diwa. Since only decisions of the Court establish
jurisprudence and doctrines in this jurisdiction,18 it is the duty of all officers of the court to cite the rulings
and decisions of the Supreme Court accurately, even "word-for-word and punctuation mark-for-
punctuation mark."19 Otherwise, "if not faithfully and exactly quoted, the decisions and rulings of this
Court may lose their proper and correct meaning, to the detriment of other courts, lawyers and the public
who may thereby be misled."
In any event, the issues about the alleged extension of the Contract, the double sale, the interference with
the development of the subdivision, are matters requiring the introduction and evaluation of evidence.
They are questions of fact, which arise when doubt or difference exists about the truth or falsehood of
alleged facts.
As a rule, only questions of law may be appealed to the Court by certiorari. The Court is not a trier of
facts, its jurisdiction being limited to errors of law.22 Moreover, where as in this case the Court of Appeals
affirms the factual findings of the trial court, such findings generally become conclusive and binding upon
the Court.23 The Court will not disturb the factual findings of the trial and appellate courts unless there
are compelling or exceptional reasons, and there is none in the instant petition.
The trial and appellate courts found that the HSRC granted respondent an extension of up to 30 July 1987
to complete the development work under the Contract. Petitioners did not contest HSRC's extension of
time to respondent. Thus, the Court finds no merit in petitioner's claim that respondent incurred delay in
the performance of his obligation under the Contract. At that time, the law authorized HSRC to grant
extensions of time for completion of subdivision projects.24
The law provides that delay may exist when the obligor fails to fulfill his obligation within the time
expressly stipulated.25 In this case, the HSRC extended the period for respondent to finish the
development work until 30 July 1987. Respondent did not incur delay since the period granted him to
fulfill his obligation had not expired at the time respondent filed the action for rescission on 27 February
1987.
Petitioners argue the Court of Appeals naively assumed that respondent could complete the development
work in five months when he only finished 28.67% of the work in some 36 months.26 This argument is
speculative and deserves scant consideration. It cannot prevail over the express grant to respondent of a
period within which to fulfill his obligation.
Moreover, as the trial and appellate courts found, petitioners hampered and interfered with respondent's
development work. Petitioners also stopped respondent from selling lots and collecting payments from lot
buyers, which was the primary source of development funds. In effect, petitioners rendered respondent
incapable, or at least made it difficult for him, to develop the subdivision within the allotted period. In
reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply
with what is incumbent upon him. It is only when one of the parties fulfills his obligation that delay by the
other begins.
Petitioners argue that the alleged Memorandum of Agreement may be treated as a judicial admission in
accordance with Geagonia v. Court of Appeals.28 We do not agree. In Geagonia, the Court of Appeals
considered a letter written by Geagonia, although not formally offered in evidence, because it was
originally annexed to Geagonia's initial complaint filed with the Insurance Commissioner. The Court upheld
the appellate court's reversal of the Insurance Commissioner's decision on the ground that the letter
constituted a judicial admission by Geagonia. Findings of the Insurance Commissioner and the Court of
Appeals were divergent in Geagonia, an exceptional circumstance that allowed the Court to reexamine the
factual findings of the Insurance Commissioner.

7
In the instant case, petitioners never presented the Memorandum of Agreement before the trial court.
Petitioners merely annexed to their petition for review before the Court of Appeals an unauthenticated
photocopy of the alleged Memorandum of Agreement. Petitioners argue that this agreement was
"referenced and testified to" by respondent during his cross-examination on 1 August 1989 before the trial
court. However, in that testimony, respondent merely admitted to signing an amended or supplemental
agreement, the contents of which he could not recall.29 Respondent's testimony does not identify or admit
that the Memorandum of Agreement presented by petitioners was the agreement or contract respondent
had signed. Atty. Gorospe, then counsel for petitioners, even manifested during the cross-examination of
respondent that no supplemental agreement or contract was appended to the complaint.30
Further, petitioners failed to explain adequately why the alleged Memorandum of Agreement was never
presented before the trial court. As succinctly explained by the Court of Appeals:
Appellants' advertence to an alleged supplemental Memorandum of Agreement (Annex "A", Appellant's
brief) to prop up their cause deserves scant consideration. The said document was neither produced nor
offered in evidence in the proceedings below, although it could have been easily produced in court by
compulsory process. This lapse has not been satisfactorily explained by appellants. xxx31 (Emphasis
supplied)
On the fourth assigned error, we find no reversible error in the ruling of the trial and appellate courts that
respondent's non-submission of the monthly report was merely a slight infraction of the Contract.
Respondent's failure to submit the monthly report cannot serve as sufficient basis for the cancellation of
the Contract. The cancellation of a contract will not be permitted for a slight or casual breach. Only a
substantial and fundamental breach, which defeats the very object of the parties in making the contract,
will justify a cancellation.32 In the instant case, the development work continued for more than two years
despite the lack of a monthly report.
Petitioners further contend that, considering respondent's non-submission of collection reports, they were
merely enforcing their rights under Article X (3) of the Contract33 in demanding that respondent stop
selling the subdivision lots and collecting payments from lot buyers.
Whether petitioners could have justifiably invoked Article X (3) of the Contract based on respondent's
failure to submit the required reports is beside the point. It is clear from the records that petitioners did
not seek to stop respondent's activities due to the latter's failure to submit the required reports. The non-
submission of the required reports was never mentioned in any of petitioners' letters. Indeed, petitioners'
letter of 8 August 1986, which first instructed respondent to stop selling the lots and collecting payments,
did not mention any violation at all,34 while the subsequent letters referred only to the complaints of lot
buyers. Article X (3) of the Contract required the "innocent party" to serve a written notice of "a violation
of the terms and conditions of this contract."35 Absent such written notice, this provision cannot be
invoked, much less enforced.
On the fifth assigned error, it is unnecessary for this Court to rule on the materiality of the alleged double
sale in the face of the trial and appellate courts' finding that no double sale took place.
On the award of damages, however, we find some modification is in order. The trial court awarded
P50,000.00 in temperate damages to respondent for his "besmirched reputation on his goodwill and image
as a good and able engineer and contractor."36 Under the law, however, moral and not temperate
damages may be awarded for besmirched reputation and similar injury.37 Temperate damages may be
awarded only when pecuniary loss has been suffered but the amount cannot be proved with certainty from
the nature of the case.38 Hence, the award of P50,000.00 in temperate damages should be deleted for
lack of legal basis.
We likewise find without basis the trial court's award of exemplary damages. In contracts, exemplary
damages may be awarded if the defendant acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner.39 Nothing in the trial and appellate courts' decisions indicates that petitioners
behaved in such manner as to warrant the grant of exemplary damages.
On the award of attorney's fees, the general rule is that attorney's fees cannot be recovered as part of
damages because no premium should be placed on the right to litigate.40 Article 2208 of the Civil Code
provides that attorney's fees and expenses of litigation should not be granted unless stipulated, except in
certain cases where "the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's
plainly valid, just and demandable claim."
That petitioners required respondent to submit a statement of collection on the same day that Rosales
submitted his accomplishment report does not sufficiently show, by itself, gross and evident bad faith. The
Contract itself required the submission of a collection report. Although early on petitioners may have
tolerated the non-submission of the report, they should not be penalized for demanding later on that
respondent comply with a condition of the Contract.

8
WHEREFORE, the Decision of 21 November 1994 of the Court of Appeals in CA-G.R. CV No. 34084
upholding the Decision of 10 June 1991 of the Regional Trial Court of San Fernando, Pampanga, Branch
XLV, in Civil Case No. 7909 is AFFIRMED, with the MODIFICATION that the award of attorney's fees,
temperate and exemplary damages is DELETED.
SO ORDERED.
x---------------------------------------------------------------------------------------------------------x
G.R. No. 117190 January 2, 1997
JACINTO TANGUILIG doing business under the name and style J.M.T. ENGINEERING AND
GENERAL MERCHANDISING, Petitioner, v. COURT OF APPEALS and VICENTE HERCE JR.,
Respondents.
BELLOSILLO, J.:
This case involves the proper interpretation of the contract entered into between the parties.
Sometime in April 1987 petitioner Jacinto M. Tanguilig doing business under the name and style J.M.T.
Engineering and General Merchandising proposed to respondent Vicente Herce Jr. to construct a windmill
system for him. After some negotiations they agreed on the construction of the windmill for a
consideration of P60,000.00 with a one-year guaranty from the date of completion and acceptance by
respondent Herce Jr. of the project. Pursuant to the agreement respondent paid petitioner a down
payment of P30,000.00 and an installment payment of P15,000.00, leaving a balance of P15,000.00.
On 14 March 1988, due to the refusal and failure of respondent to pay the balance, petitioner filed a
complaint to collect the amount. In his Answer before the trial court respondent denied the claim saying
that he had already paid this amount to the San Pedro General Merchandising Inc. (SPGMI) which
constructed the deep well to which the windmill system was to be connected. According to respondent,
since the deep well formed part of the system the payment he tendered to SPGMI should be credited to
his account by petitioner. Moreover, assuming that he owed petitioner a balance of P15,000.00, this
should be offset by the defects in the windmill system which caused the structure to collapse after a
strong wind hit their place.
Petitioner denied that the construction of a deep well was included in the agreement to build the windmill
system, for the contract price of P60,000.00 was solely for the windmill assembly and its installation,
exclusive of other incidental materials needed for the project. He also disowned any obligation to repair or
reconstruct the system and insisted that he delivered it in good and working condition to respondent who
accepted the same without protest. Besides, its collapse was attributable to a typhoon, a force majeure,
which relieved him of any liability.
In finding for plaintiff, the trial court held that the construction of the deep well was not part of the
windmill project as evidenced clearly by the letter proposals submitted by petitioner to respondent. 2 It
noted that "[i]f the intention of the parties is to include the construction of the deep well in the project,
the same should be stated in the proposals. In the absence of such an agreement, it could be safely
concluded that the construction of the deep well is not a part of the project undertaken by the plaintiff." 3
With respect to the repair of the windmill, the trial court found that "there is no clear and convincing proof
that the windmill system fell down due to the defect of the construction."
The Court of Appeals reversed the trial court. It ruled that the construction of the deep well was included
in the agreement of the parties because the term "deep well" was mentioned in both proposals. It also
gave credence to the testimony of respondent's witness Guillermo Pili, the proprietor of SPGMI which
installed the deep well, that petitioner Tanguilig told him that the cost of constructing the deep well would
be deducted from the contract price of P60,000.00. Upon these premises the appellate court concluded
that respondent's payment of P15,000.00 to SPGMI should be applied to his remaining balance with
petitioner thus effectively extinguishing his contractual obligation. However, it rejected petitioner's claim
of force majeure and ordered the latter to reconstruct the windmill in accordance with the stipulated one-
year guaranty.
His motion for reconsideration having been denied by the Court of Appeals, petitioner now seeks relief
from this Court. He raises two issues: firstly, whether the agreement to construct the windmill system
included the installation of a deep well and, secondly, whether petitioner is under obligation to reconstruct
the windmill after it collapsed.
We reverse the appellate court on the first issue but sustain it on the second.
The preponderance of evidence supports the finding of the trial court that the installation of a deep well
was not included in the proposals of petitioner to construct a windmill system for respondent. There were
in fact two (2) proposals: one dated 19 May 1987 which pegged the contract price at P87,000.00 (Exh.
"1"). This was rejected by respondent. The other was submitted three days later, i.e., on 22 May 1987
which contained more specifications but proposed a lower contract price of P60,000.00 (Exh. "A"). The

9
latter proposal was accepted by respondent and the construction immediately followed. The pertinent
portions of the first letter-proposal (Exh. "1") are reproduced hereunder -
In connection with your Windmill System and Installation, we would like to quote to you as follows:
One (1) Set - Windmill suitable for 2 inches diameter deepwell, 2 HP, capacity, 14 feet in diameter, with
20 pieces blade, Tower 40 feet high, including mechanism which is not advisable to operate during extra-
intensity wind. Excluding cylinder pump.
UNIT CONTRACT PRICE P87,000.00
The second letter-proposal (Exh. "A") provides as follows:
In connection with your Windmill system, Supply of Labor Materials and Installation, operated water
pump, we would like to quote to you as
follows -
One (1) set - Windmill assembly for 2 inches or 3 inches deep-well pump, 6 Stroke, 14 feet diameter, 1-
lot blade materials, 40 feet Tower complete with standard appurtenances up to Cylinder pump, shafting
U.S. adjustable International Metal.
One (1) lot - Angle bar, G.I. pipe, Reducer Coupling, Elbow Gate valve, cross Tee coupling.
One (1) lot - Float valve.
One (1) lot - Concreting materials foundation.
F. O. B. Laguna
Contract Price P60,000.00
Notably, nowhere in either proposal is the installation of a deep well mentioned, even remotely. Neither is
there an itemization or description of the materials to be used in constructing the deep well. There is
absolutely no mention in the two (2) documents that a deep well pump is a component of the proposed
windmill system. The contract prices fixed in both proposals cover only the features specifically described
therein and no other. While the words "deep well" and "deep well pump" are mentioned in both, these do
not indicate that a deep well is part of the windmill system. They merely describe the type of deep well
pump for which the proposed windmill would be suitable. As correctly pointed out by petitioner, the words
"deep well" preceded by the prepositions "for" and "suitable for" were meant only to convey the idea that
the proposed windmill would be appropriate for a deep well pump with a diameter of 2 to 3 inches. For if
the real intent of petitioner was to include a deep well in the agreement to construct a windmill, he would
have used instead the conjunctions "and" or "with." Since the terms of the instruments are clear and leave
no doubt as to their meaning they should not be disturbed.
Moreover, it is a cardinal rule in the interpretation of contracts that the intention of the parties shall be
accorded primordial consideration 5 and, in case
of doubt, their contemporaneous and subsequent acts shall be principally considered. 6 An examination of
such contemporaneous and subsequent acts of respondent as well as the attendant circumstances does
not persuade us to uphold him.
Respondent insists that petitioner verbally agreed that the contract price of P60,000.00 covered the
installation of a deep well pump. He contends that since petitioner did not have the capacity to install the
pump the latter agreed to have a third party do the work the cost of which was to be deducted from the
contract price. To prove his point, he presented Guillermo Pili of SPGMI who declared that petitioner
Tanguilig approached him with a letter from respondent Herce Jr. asking him to build a deep well pump as
"part of the price/contract which Engineer (Herce) had with Mr. Tanguilig." 7
We are disinclined to accept the version of respondent. The claim of Pili that Herce Jr. wrote him a letter is
unsubstantiated. The alleged letter was never presented in court by private respondent for reasons known
only to him. But granting that this written communication existed, it could not have simply contained a
request for Pili to install a deep well; it would have also mentioned the party who would pay for the
undertaking. It strains credulity that respondent would keep silent on this matter and leave it all to
petitioner Tanguilig to verbally convey to Pili that the deep well was part of the windmill construction and
that its payment would come from the contract price of P60,000.00.
We find it also unusual that Pili would readily consent to build a deep well the payment for which would
come supposedly from the windmill contract price on the mere representation of petitioner, whom he had
never met before, without a written commitment at least from the former. For if indeed the deep well
were part of the windmill project, the contract for its installation would have been strictly a matter
between petitioner and Pili himself with the former assuming the obligation to pay the price. That it was
respondent Herce Jr. himself who paid for the deep well by handing over to Pili the amount of P15,000.00
clearly indicates that the contract for the deep well was not part of the windmill project but a separate
agreement between respondent and Pili. Besides, if the price of P60,000.00 included the deep well, the
obligation of respondent was to pay the entire amount to petitioner without prejudice to any action that
Guillermo Pili or SPGMI may take, if any, against the latter. Significantly, when asked why he tendered
10
payment directly to Pili and not to petitioner, respondent explained, rather lamely, that he did it "because
he has (sic) the money, so (he) just paid the money in his possession." 8
Can respondent claim that Pili accepted his payment on behalf of petitioner? No. While the law is clear that
"payment shall be made to the person in whose favor the obligation has been constituted, or his successor
in interest, or any person authorized to receive it," 9 it does not appear from the record that Pili and/or
SPGMI was so authorized.
Respondent cannot claim the benefit of the law concerning "payments made by a third person." 10 The
Civil Code provisions do not apply in the instant case because no creditor-debtor relationship between
petitioner and Guillermo Pili and/or SPGMI has been established regarding the construction of the deep
well. Specifically, witness Pili did not testify that he entered into a contract with petitioner for the
construction of respondent's deep well. If SPGMI was really commissioned by petitioner to construct the
deep well, an agreement particularly to this effect should have been entered into.
The contemporaneous and subsequent acts of the parties concerned effectively belie respondent's
assertions. These circumstances only show that the construction of the well by SPGMI was for the sole
account of respondent and that petitioner merely supervised the installation of the well because the
windmill was to be connected to it. There is no legal nor factual basis by which this Court can impose upon
petitioner an obligation he did not expressly assume nor ratify.
The second issue is not a novel one. In a long line of cases 11 this Court has consistently held that in
order for a party to claim exemption from liability by reason of fortuitous event under Art. 1174 of the
Civil Code the event should be the sole and proximate cause of the loss or destruction of the object of the
contract. In Nakpil vs. Court of Appeals, 12 four (4) requisites must concur: (a) the cause of the breach of
the obligation must be independent of the will of the debtor; (b) the event must be either unforeseeable
or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation
in a normal manner; and, (d) the debtor must be free from any participation in or aggravation of the
injury to the creditor.
Petitioner failed to show that the collapse of the windmill was due solely to a fortuitous event.
Interestingly, the evidence does not disclose that there was actually a typhoon on the day the windmill
collapsed. Petitioner merely stated that there was a "strong wind." But a strong wind in this case cannot
be fortuitous - unforeseeable nor unavoidable. On the contrary, a strong wind should be present in places
where windmills are constructed, otherwise the windmills will not turn.
The appellate court correctly observed that "given the newly-constructed windmill system, the same would
not have collapsed had there been no inherent defect in it which could only be attributable to the
appellee." 13 It emphasized that respondent had in his favor the presumption that "things have happened
according to the ordinary course of nature and the ordinary habits of life." 14 This presumption has not
been rebutted by petitioner.
Finally, petitioner's argument that private respondent was already in default in the payment of his
outstanding balance of P15,000.00 and hence should bear his own loss, is untenable. In reciprocal
obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. 15 When the windmill failed to function properly it became
incumbent upon petitioner to institute the proper repairs in accordance with the guaranty stated in the
contract. Thus, respondent cannot be said to have incurred in delay; instead, it is petitioner who should
bear the expenses for the reconstruction of the windmill. Article 1167 of the Civil Code is explicit on this
point that if a person obliged to do something fails to do it, the same shall be executed at his cost.
WHEREFORE, the appealed decision is MODIFIED. Respondent VICENTE HERCE JR. is directed to pay
petitioner JACINTO M. TANGUILIG the balance of P15,000.00 with interest at the legal rate from the date
of the filing of the complaint. In return, petitioner is ordered to "reconstruct subject defective windmill
system, in accordance with the one-year guaranty" 16 and to complete the same within three (3) months
from the finality of this decision.
SO ORDERED.
x--------------------------------------------------------------------------------------------------------------x
2. Obligation not to do (negative personal obligation)
a. Remedies available to the creditor
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.
GONZAGA-REYES, J.:
This is a petition for review on certiorari of the Decision 1 of the Court of Appeals affirming the decision of
the Regional Trial Court of Bulacan, Branch 9 2 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:
11
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 1/2 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 attorney's 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 Court's 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 5th grade, is a businessman engaged in the
operation of fishponds. On September 20, 1977, while he was at his fishpond in Almazar, Hermosa,
Bataan, his bosom friend named Ming Cosim arrived with petitioner Charlie Lee. The two persuaded
private respondent to take over the operation of "Papaya Fishpond" as petitioner Lee and his partner,
petitioner Luis Keh, were allegedly losing money in its operation. Private respondent having acceded to
the proposal, sometime in December of that year, he and petitioners Lee and Keh executed a written
agreement denominated as "pakiao buwis" whereby private respondent would take possession of the
"Papaya Fishpond" from January 6, 1978 to June 6, 1978 in consideration of the amount of P128,000.00
broken down as follows: P75,000.00 as rental, P50,000.00 for the value of milkfish in the fishpond and
P3,000 for labor expenses. Private respondent paid the P75,000.00 to petitioner Keh at the house of
petitioner Lee in Sta. Cruz, Hagonoy, Bulacan in the presence of Lee's wife, brother-in-law and other
persons. He paid the balance to petitioner Lee sometime in February or March 1978 because he was
uncertain as to the right of petitioners Keh and Lee to transfer possession over the fishpond to him.
Private respondent made that payment only after he had received a copy of a written agreement dated
January 9, 1978 4 whereby petitioner Keh ceded, conveyed and transferred all his "rights and interests"
over the fishpond to petitioner Lee, "up to June 1985." From private respondent's point of view, that
document assured him of continuous possession of the property for as long as he paid the agreed rentals
of P150,000.00 until 1980 and P.175,000.00 until 1985.1âwphi1.nêt
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.
12
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: "Rec'd
from Luis Crisostomo sum of one hundred fifty-four thousand P154,000.00 for above payment. 5
Private respondent incurred expenses for repairs in and improvement of the fishpond in the total amount
of P486,562.65. 6 However, sometime in June 1979, petitioners Tansinsin and Juan Perez, in the company
of men bearing armalites, went to the fishpond and presented private respondent with a letter dated June
7, 1979 showing that petitioner Luis Keh had surrendered possession of the fishpond to the
usufructuaries.
Because of the threat to deprive him of earnings of around P700,000.00 that the 700,000 milkfish in the
fishpond would yield, and the refusal of petitioners Keh, Juan Perez and Lee to accept the rental for June
5, 1979 to June 6, 1980, private respondent filed on June 14, 1979 with the then Court of First Instance of
Bulacan an action for injunction and damages. He prayed for the issuance of a restraining order enjoining
therein defendants Keh, Perez and Lee from entering the premises and taking possession of the fishpond.
He also prayed for actual damages of P50,000.00, moral damages of P20,000.00, exemplary damages in
an amount that the court might award, and attorney's fees of P10,000.00.
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 Keh's agent named Catalino Alcantara relayed to
petitioner Perez, Keh's intention to surrender possession of the fishpond to the usufructuaries. Because
petitioner Perez demanded that said intention should be made in writing, on June 5, 1979, Perez received
from Keh a letter to that effect.
When private respondent received a copy of that letter of petitioner Keh, he took the position that
petitioner Perez had no right to demand possession of the fishpond from him because Perez had no
contract with him. Private respondent was allowed four (4) months within which to vacate the premises
but he immediately filed the complaint for injunction and damages. Thereafter, private respondent's

13
counsel, Atty. Angel Cruz and other persons tried to prevail upon petitioner Perez to allow private
respondent to occupy the property for three (3) more years. Petitioner Perez declined that proposition.
On September 6, 1989, the lower court rendered the aforesaid decision. It arrived at the conclusion that
the defendants therein "conspired with one another to exploit the plaintiff's naivete and educational
inadequacies and, in the process, to defraud him by inducing him into taking possession of the "Papaya
Fishpond" in their fond hope that, as soon as the plaintiff — applying his known expertise as a successful
fishpond operator — shall have considerably improved the fishpond, they will regain possession of the
premises and offer the lease thereof to other interested parties at much higher rental rates as laid bare by
supervening realities." That conclusion was founded on the following:
1. The plaintiffs (private respondent Crisostomo's) testimony bears the "hallmarks of truth: candid,
straightforward and uncontrived." He had proven himself a "much more credible witness than his
opponents."
2. The notarized receipt of Maria Perez of her share as a usufructuary in the rental for 1979-80 is a "clear
avowal of 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 plaintiff's claim of rights and interests over the said property as either sub-lessee or assignee."
Secondly, Keh's having signified "Conforme to the above" is a gratuitous notation as it actually indicates
that the money came from the plaintiff. Thirdly, Atty. Tansinsin's receipt of the amount for and in behalf of
"JUAN L. PEREZ ET AL." illustrates his "active and dominant role in the affairs" of the fishpond whether as
administrator thereof or as beneficiary of a share from its fruits.
4. Service upon plaintiff of Keh's letter surrendering possession of the fishpond implied that defendants
knew that plaintiff was in possession thereof. That they resorted to the intimidating presence of armed
men is proof that they expected the plaintiff to refuse to give up possession of the property. These
circumstances "completely belie the protestations of Perez and Tansinsin of lack of knowledge of the
contract entered into" between the plaintiff, and Lee and Keh.
5. The 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. Tansinsin's 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.
The lower court added:
Bluntly yet succinctly put, the foregoing circumstances when viewed collectively with other cogent aspects
of the instant case inexorably lead to the Court's well-considered view that the defendants — tempted by
the bright prospect of a lucrative business coup — embarked themselves in an egregious scheme to take
undue advantage of the gullibility of the plaintiff who, as borne by ensuing events, proved himself an ideal
victim to prey upon: pathetically unsuspecting yet only too eager to invest his material resources and self-
acquired technical know-how to redeem what was then a dwindling business enterprise from total
collapse. 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.
14
SO ORDERED.
On the defendant-appellants' contention that the principle of res judicata should be applied because the
Court of Appeals had ruled on the issue of possession in CA-G.R. No. 10415-R, a petition for certiorari and
injunction with preliminary mandatory injunction, the Court of Appeals held that said principle was
unavailing. The petition in CA-G.R. No. 10415-R involved a writ of injunction "which presupposes the
pendency of a principal or main action." Moreover, the decision in that case did not resolve the issue of
who should be in possession of the Papaya Fishpond as findings of fact of the trial court cannot be
reviewed in a certiorari proceeding.
The Court of Appeals ruled further that appellee Crisostomo "cannot be considered a possessor in bad
faith, considering that he took possession of the fishpond when appellants Keh and Lee assigned to him
appellant Keh's leasehold right." It held that appellant Perez knew of the transfer of possession of the
fishpond to appellee and that the receipt evidencing payment of the 1978-1979 rental even bears an
expressed admission by Lee that the payment came from appellee Crisostomo.
Agreeing with the court a quo that "defendants-appellants employed fraud to the damage and prejudice of
plaintiff-appellee," the Court of Appeals held that appellants should be held liable for damages. As regards
the intervention pro interesse suo, the appellate court ruled that the same should be allowed because,
even if the litigation would not be technically binding upon him, complications might arise that would
prejudice his rights. Pointing out that a usufruct may be transferred, assigned or disposed of, the Court of
Appeals ruled that the intervenor cannot be excluded as a usufructuary because he had acquired his right
as such from a sale in execution of the share of Jorge Lorenzo, one of the usufructuaries of the fishpond.
Herein petitioners filed a motion for the reconsideration of that Decision of the Court of Appeals. They
alleged that the Decision was premature because it was rendered when they had not yet even received a
copy of the intervenor's brief wherein assignments of errors that directly affected their rights and interests
were made. They insisted that the principle of res judicata was applicable because in G.R. No. 64354, this
Court upheld the Decision of the Court of Appeals in CA-G.R. No. 10415. They added that appellee
Crisostomo was guilty of forum shopping because the issue of possession had been "squarely decided" in
CA-G.R. No. 10415. They stressed that the contract of lease between Keh and the usufructuaries
prohibited subleasing of the fishpond; that by the receipt dated June 6, 1978, it was Keh who paid the
rental; that appellee Crisostomo was a perjured witness because in the notebook showing his expenses,
the amount of P150,000.00 for rentals does not appear; that the term of the contract had expired and
there was no renewal thereof, and that the consideration of P150,000.00 was grossly inadequate. They
averred that the Court of Appeals erred in awarding damages that were not prayed for in the second
amended complaint and that amounts not specified in the complaint were awarded as damages. They
disclaimed that Atty. Tansinsin was the administrator of the fishpond.
On October 30, 1992, the Court of Appeals denied the motion for reconsideration for lack of merit. It ruled
that the Decision was not prematurely promulgated "considering that the intervention proceeding is solely
between intervenor and defendants-appellants, which is completely separable and has nothing to do with
the merits of the appeal."
In the instant petition for review on certiorari, petitioners raise six (6) grounds for giving due course to it.
11 Those grounds may be distilled into the following: (a) the applicability of the principle of res judicata;
(b) the premature promulgation of the Decision of the Court of Appeals, and (c) private respondent was
not a sublesee of the fishpond under the law.
In arguing that the principle of res judicata applies in this case, petitioners rely on the portion of the
Decision 12 of the Court of Appeals in CA-G.R. No. 10415 that states:
We find no basis for declaring respondent Judge guilty of grave abuse of discretion on this regard. The
trial court's finding that petitioner does not appear entitled to any contract or law to retain possession of
the fishpond in question since he is neither an assignee or sub-lessee and, therefore, merely a stranger to
the contract of lease is a finding of fact review of which is not proper in a certiorari proceedings. Not only
is petitioner not a party to the lease agreement over the fishpond in question but also the very authority
upon which he predicates his possession over the fishpond — that the leasehold right of Luis Keh had been
assigned to him — undoubtedly lacks basis for the very contract between Luis Keh and the lessors
expressly provides —
That the lessee cannot sub-lease above-described fishpond nor assign his rights to anyone.
xxx xxx xxx
(Emphasis supplied by petitioners.)
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
15
assignee or a sub-lessee "is a finding of fact review of which is not proper in a certiorari proceeding" or
the proceeding in that case.
CA-G.R. No. 10415 was spawned by the lifting on January 11, 1980 of the restraining order previously
issued by the trial court on June 14, 1979. Private respondent filed a special civil action of certiorari and
injunction with preliminary mandatory injunction and/or mandatory restraining order to question the order
of January 11, 1980. Thus, the issue in that petition was whether or not the trial court gravely abused its
discretion in lifting the restraining order. The statement in that Decision of the Court of Appeals that a writ
of preliminary injunction may be denied "if the party applying for it has insufficient title or interest to
sustain it and no claim to an ultimate relief (is) sought" by no means resolved the issue of who is entitled
to possess the fishpond. In denying the petition for certiorari, the Court of Appeals was simply saying that
there was no reason to restore private respondent to the possession of the fishpond pursuant to the
restraining order that he had earlier obtained. The issue of possession was collaterally discussed only to
resolve the propriety of the lifting of the restraining order based on evidence available at that time. Hence,
there was no judgment on the merits in the main case or in Civil Case No. 5610-M. Simply put, the
Decision in CA-G.R. No. 10415 involves an interlocutory order on the propriety of the lifting of the
restraining order and not a judgment on the merits of Civil Case No. 5610-M.
For res judicata to apply, the following requisites must concur: (a) the former judgment must be final; (b)
the court which rendered it had jurisdiction over the subject matter and the parties; (c) the judgment
must be on the merits, and (d) there must be between the first and second actions identity of parties,
subject matter and causes of action. 16 The Decision in CA-G.R. No. 10415 having resolved only an
interlocutory matter, the principle of res judicata cannot be applied in this case. There can be no res
judicata where the previous order in question was not an order or judgment determinative of an issue of
fact pending before the court but was only an interlocutory order because it required the parties to
perform certain acts for final adjudication. 17 In this case, the lifting of the restraining order paved the
way for the possession of the fishpond on the part of petitioners and/or their representatives pending the
resolution of the main action for injunction. In other words, the main issue of whether or not private
respondent may be considered a sublessee or a transferee of the lease entitled to possess the fishpond
under the circumstances of the case had yet to be resolved when the restraining order was lifted.
Petitioners assail the Court of Appeals' Decision as "premature" and therefore null and void, because prior
to the promulgation of that Decision, private respondent-intervenor Vicente Asuncion failed to furnish
them with a copy of his brief the assignment of errors of which allegedly "directly" affected their rights and
interests. 18 While it is true that petitioners were deprived of the opportunity to contravene the
allegations of the intervenor in his brief, that fact can not result in the nullity of the Decision of the Court
of Appeals. 19 Vicente Asuncion intervened pro interesse suo or "according to his interest." 20
Intervention pro interessse suo is a mode of intervention in equity wherein a stranger desires to intervene
for the purpose of asserting a property right in the res, or thing, which is the subject matter of the
litigation, without becoming a formal plaintiff or defendant, and without acquiring control over the course
of a litigation, which is conceded to the main actors therein. 21 In this case, intervenor Vicente Asuncion
aimed to protect his right as a usufructuary. Inasmuch as he has the same rights and interests as
petitioner Juan Perez, any judgment rendered in the latter's favor entitled him to assert his right as such
usufructuary against his co-usufructuary. Should said intervenor claim his share in the usufruct, no rights
of the petitioners other than those of Juan Perez would be prejudiced thereby.
Worth noting is the fact that after the trial court had allowed Vicente Asuncion's intervention pro interesse
suo, petitioner Juan Perez filed a petition for certiorari docketed as CA-G.R. No. 13519 to set aside the
order denying his motion to dismiss the pleading in intervention. In its Decision of January 27, 1988, the
Seventh Division of the Court of Appeals 22 denied the petition for certiorari for lack of merit. It upheld
the trial court's ruling to allow the intervention pro interesse suo to protect Vicente Asuncion's right as a
co-usufructuary in the distribution or disposition of the amounts representing the rentals that were
deposited with the court. That Vicente Asuncion had filed Civil Case No. 8215-M seeking recovery of his
alleged share in the fruits of the Papaya Fishpond from 1978 would not be a reason for the dismissal of
the motion for intervention pursuant to Rule 16, Sec. 1 (e) of the Rules of Court. 23 The Court of Appeals
explained as follows:
Indeed, if by means of intervention a stranger to a lawsuit is permitted to intervene without thereby
becoming a formal plaintiff or defendant (Joaquin v. Herrera, 37 Phil. 705, 723 [1918]), then there is in
the case at bar no identity of parties to speak of. Lis pendens as a ground for a motion to dismiss requires
as a first element identity of parties in the two cases.
Nor is there an identity of relief sought. Civil Case No. 8295-M seeks an accounting of the proceeds of the
fishpond while Civil Case No. 5610-M is for injunction to prevent the petitioner from retaking the fishpond
from Luis Crisostomo. The herein private respondent sought to intervene in the latter case simply to
16
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.
Unconvinced by the Court of Appeals' Decision in CA-G.R. SP No. 13519, petitioner Juan Perez filed a
petition for review on certiorari with this Court under G.R. No. 82096. On May 9, 1988, this Court denied
the petition on the grounds that the issues raised are factual and that there is no sufficient showing that
the findings of the respondent court are not supported by substantial evidence or that the court had
committed any reversible error in the questioned judgment. 25 The Resolution of the Court dated May 9,
1988 became final and executory on August 26, 1988. 26
Moreover, granting that the intervention be considered as Vicente Asuncion's "appeal," a litigant's failure
to furnish his opponent with a copy of his appeal does not suffice to warrant dismissal of that appeal. In
such an instance, all that is needed is for the court to order the litigant to furnish his opponent with a copy
of his appeal. 27 This is precisely what happened in this case. On May 13, 1992, the Court of Appeals
issued a Resolution directing counsel for intervenor to furnish herein petitioners with a copy of intervenor
Vicente Asuncion's brief within a 10-day period. It also granted petitioners an opportunity to file a reply-
brief or memorandum and the intervenor, a reply to said memorandum. 28 That Resolution is proper
under the premises because, by the nature of an intervention pro interesse suo, it can proceed
independently of the main action. Thus, in the Resolution of October 30, 1992, in resolving the issue of
the alleged prematurity of its Decision, the Court of Appeals held that "the proceeding is solely between
intervenor and defendants-appellants, which is completely separable and has nothing to do with the
merits of the appeal."
At the hearing of Civil Case No. 5610-M, petitioner Juan Perez attempted to establish the death on
October 14, 1979 of Jorge Lorenzo, 30 the usufructuary from whom Vicente Asuncion derived his right to
intervene pro interesse suo. Since under Article 603 of the Civil Code a usufruct is extinguished "by the
death of the usufructuary, unless a contrary intention clearly appears," there is no basis by which to arrive
at the conclusion that the usufruct originally exercised by Jorge Lorenzo has indeed been extinguished or,
on the contrary, has survived Lorenzo's demise on account of provisions in the document constituting the
usufruct. That matter is best addressed in Civil Case No. 8215-M wherein Vicente Asuncion seeks his share
as a transferee of the usufruct established for Jorge Lorenzo. All that is discussed here is the matter of
intervention pro interesse suo vis-a-vis the issue of prematurity of the Decision of the Court of Appeals.
Petitioners' principal argument against the Court of Appeals' Decision in favor of private respondent
Crisostomo is that he could not have been an assignee or sub-lessee of the fishpond because no contract
authorized him to be so. Petitioners' argument is anchored on factual issues that, however, have no room
for discussion before this Court. It is well-entrenched doctrine that questions of fact are not proper
subjects of appeal by certiorari under Rule 45 of the Rules of Court as this mode of appeal is confined to
questions of law. 31 Factual findings of the Court of Appeals are conclusive on the parties and carry even
more weight when said court affirms the factual findings of the trial
court. 32 Accordingly, this review shall be limited to questions of law arising from the facts as found by
both the Court of Appeals and the trial court.
Admittedly, the contract between the usufructuaries and petitioner Keh has a provision barring the
sublease of the fishpond. However, it was petitioner Keh himself who violated that provision in offering the
operation of the fishpond to private respondent. Apparently on account of private respondent's
apprehensions as regards the right of petitioners Keh and Lee to transfer operation of the fishpond to him,
on January 9, 1978, petitioner Keh executed a document ceding and transferring his rights and interests
over the fishpond to petitioner Lee. That the same document might have been a ruse to inveigle private
respondent to agree to their proposal that he operate the fishpond is of no moment. The fact is, petitioner
Keh did transfer his rights as a lessee to petitioner Lee in writing and that, by virtue of that document,
private respondent acceded to take over petitioner Keh's rights as a lessee of the fishpond.
Although no written contract to transfer operation of the fishpond to private respondent was offered in
evidence, 33 the established facts further show that petitioner Juan Perez and his counsel, petitioner
Tansinsin, knew of and acquiesced to that arrangement by their act of receiving from the private
respondent the rental for 1978-79. By their act of receiving rental from private respondent through the
peculiarly written receipt dated June 6, 1978, petitioners Perez and Tansinsin were put in estoppel to
question private respondent's right to possess the fishpond as a lessee. Estoppel in pais arises when one,
by his acts, representations or admissions, or by his own silence when he ought to speak out, intentionally
or through culpable negligence, induces another to believe certain facts to exist and such other rightfully
relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence
of such facts.

17
Nevertheless, we hesitate to grant private respondent's prayer that he should be restored to the
possession of the fishpond as a consequence of his unjustified ejectment therefrom. To restore possession
of the fishpond to him would entail violation of contractual obligations that the usufructuaries have
entered into over quite a long period of time now. Supervening events, such as the devaluation of the
peso as against the dollar as well as the addition of improvements in the fishpond that the succeeding
lessees could have introduced, have contributed to the increase in rental value of the property. To place
private respondent in the same position he was in before the lifting of the restraining order in 1980 when
he was deprived the right to operate the fishpond under the contract that already expired in 1985 shall be
to sanction injustice and inequity. This Court, after all, may not supplant the right of the usufructuaries to
enter into contracts over the fishpond through this Decision. Nonetheless, under the circumstances of the
case, it is but proper that private respondent should be properly compensated for the improvements he
introduced in the fishpond.
Art. 1168 of the Civil Code provides that when an obligation "consists in not doing and the obligor does
what has been forbidden him, it shall also be undone at his expense." The lease contract prohibited
petitioner Luis Keh, as lessee, from subleasing the fishpond. In entering into the agreement for pakiao-
buwis with private respondent, not to mention the apparent artifice 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.
The law supports the awards of moral and exemplary damages in favor of private respondent and against
the petitioners. Their conspiratorial scheme to utilize private respondent's 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, attorney's fees shall also be
awarded.
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 attorney's fees of P10,000.00.
No costs.
SO ORDERED.

18