In General

John F. Villaroel v Bernardino EstradaGR No. L-4736212/19/1940

Facts of the case:On 5/9/1912, Alejandra Callao contracted a loan of 1,000 from spouses
Mariano Estrada andSeverina. It was payable after 7 years. Alejandra died leaving his son,
John Villaroel, as soleheir. The Spouses also died leaving Estrada Bernardino as sole heir.
On 8/9/1930, John Villaroel gave a document to Estrada Bernardino stating that he owed
anamount of 1,000 to latter with 12% interest PA. After paying such amount, John now seeks
therecovery of the amount paid claiming that the period of prescription has already lapsed.
Issue:Whether or not John can reclaim the amount recovered?
Held:No.
Ratio:The obligation of John Villaroel to pay 1,000 to Estrada did not arise from the loan of the
formers mother, but instead, from the document John executed that he owed an amount of
1,000 + interest to Estrada

Ansay, et al. vs. Nat'l Development Co., et al., 107 Phil. 997 , No. L-
13667, April 29, 1960
G.R. No. L-13667 April 29, 1960
PRIMITIVO ANSAY, ETC., ET AL., plaintiffs-appellants,
vs.
THE BOARD OF DIRECTORS OF THE NATIONAL DEVELOPMENT COMPANY, ET AL.,
defendants-appellees.
Celso A. Fernandez for appellants.
Juan C. Jimenez, for appellees.
PARAS, C. J.:
On July 25, 1956, appellants filed against appellees in the Court of First Instance of Manila a
complaint praying for a 20% Christmas bonus for the years 1954 and 1955. The court a quo on
appellees' motion to dismiss, issued the following order:
Considering the motion to dismiss filed on 15 August, 1956, set for this morning; considering
that at the hearing thereof, only respondents appeared thru counsel and there was no
appearance for the plaintiffs although the court waited for sometime for them; considering,
however, that petitioners have submitted an opposition which the court will consider together
with the arguments presented by respondents and the Exhibits marked and presented, namely,
Exhibits 1 to 5, at the hearing of the motion to dismiss; considering that the action in brief is one
to compel respondents to declare a Christmas bonus for petitioners workers in the National
Development Company; considering that the Court does not see how petitioners may have a
cause of action to secure such bonus because:
(a) A bonus is an act of liberality and the court takes it that it is not within its judicial powers to
command respondents to be liberal;
(b) Petitioners admit that respondents are not under legal duty to give such bonus but that they
had only ask that such bonus be given to them because it is a moral obligation of respondents
to give that but as this Court understands, it has no power to compel a party to comply with a
moral obligation (Art. 142, New Civil Code.).
IN VIEW WHEREOF, dismissed. No pronouncement as to costs.
A motion for reconsideration of the afore-quoted order was denied. Hence this appeal.
Appellants contend that there exists a cause of action in their complaint because their claim
rests on moral grounds or what in brief is defined by law as a natural obligation.
Since appellants admit that appellees are not under legal obligation to give such claimed bonus;
that the grant arises only from a moral obligation or the natural obligation that they discussed in
their brief, this Court feels it urgent to reproduce at this point, the definition and meaning of
natural obligation.
Article 1423 of the New Civil Code classifies obligations into civil or natural. "Civil obligations are
a right of action to compel their performance. Natural obligations, not being based on positive
law but on equity and natural law, do not grant a right of action to enforce their performance, but
after voluntary fulfillment by the obligor, they authorize the retention of what has been delivered
or rendered by reason thereof".
It is thus readily seen that an element of natural obligation before it can be cognizable by the
court is voluntary fulfillment by the obligor. Certainly retention can be ordered but only after
there has been voluntary performance. But here there has been no voluntary performance. In
fact, the court cannot order the performance.
At this point, we would like to reiterate what we said in the case of Philippine Education Co. vs.
CIR and the Union of Philippine Education Co., Employees (NUL) (92 Phil., 381; 48 Off. Gaz.,
5278)
x x x x x x x x x
From the legal point of view a bonus is not a demandable and enforceable obligation. It is so
when it is made a part of the wage or salary compensation.
And while it is true that the subsequent case of H. E. Heacock vs. National Labor Union, et al.,
95 Phil., 553; 50 Off. Gaz., 4253, we stated that:
Even if a bonus is not demandable for not forming part of the wage, salary or compensation of
an employee, the same may nevertheless, be granted on equitable consideration as when it
was given in the past, though withheld in succeeding two years from low salaried employees
due to salary increases.
still the facts in said Heacock case are not the same as in the instant one, and hence the ruling
applied in said case cannot be considered in the present action.
Premises considered, the order appealed from is hereby affirmed, without pronouncement as to
costs.
Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia Barrera and
Gutierrez David, JJ., concur.

Development Bank of the Philippines (DBP) vs. Adil, 161 SCRA 307,
No. L-48889, May 11, 1989
G.R. No. L-48889 May 11, 1989
DEVELOPMENT BANK OF THE PHILIPPINES (DBP), petitioner,
vs.
THE HONORABLE MIDPAINTAO L. ADIL, Judge of the Second Branch of the Court of First
Instance of Iloilo and SPOUSES PATRICIO CONFESOR and JOVITA VILLAFUERTE,
respondents.

GANCAYCO, J.:
The issue posed in this petition for review on certiorari is the validity of a promissory note which
was executed in consideration of a previous promissory note the enforcement of which had
been barred by prescription.
On February 10, 1940 spouses Patricio Confesor and Jovita Villafuerte obtained an agricultural
loan from the Agricultural and Industrial Bank (AIB), now the Development of the Philippines
(DBP), in the sum of P2,000.00, Philippine Currency, as evidenced by a promissory note of said
date whereby they bound themselves jointly and severally to pay the account in ten (10) equal
yearly amortizations. As the obligation remained outstanding and unpaid even after the lapse of
the aforesaid ten-year period, Confesor, who was by then a member of the Congress of the
Philippines, executed a second promissory note on April 11, 1961 expressly acknowledging said
loan and promising to pay the same on or before June 15, 1961. The new promissory note
reads as follows
I hereby promise to pay the amount covered by my promissory note on or before June 15, 1961.
Upon my failure to do so, I hereby agree to the foreclosure of my mortgage. It is understood that
if I can secure a certificate of indebtedness from the government of my back pay I will be
allowed to pay the amount out of it.
Said spouses not having paid the obligation on the specified date, the DBP filed a complaint
dated September 11, 1970 in the City Court of Iloilo City against the spouses for the payment of
the loan.
After trial on the merits a decision was rendered by the inferior court on December 27, 1976, the
dispositive part of which reads as follows:
WHEREFORE, premises considered, this Court renders judgment, ordering the defendants
Patricio Confesor and Jovita Villafuerte Confesor to pay the plaintiff Development Bank of the
Philippines, jointly and severally, (a) the sum of P5,760.96 plus additional daily interest of P l.04
from September 17, 1970, the date Complaint was filed, until said amount is paid; (b) the sum of
P576.00 equivalent to ten (10%) of the total claim by way of attorney's fees and incidental
expenses plus interest at the legal rate as of September 17,1970, until fully paid; and (c) the
costs of the suit.
Defendants-spouses appealed therefrom to the Court of First Instance of Iloilo wherein in due
course a decision was rendered on April 28, 1978 reversing the appealed decision and
dismissing the complaint and counter-claim with costs against the plaintiff.
A motion for reconsideration of said decision filed by plaintiff was denied in an order of August
10, 1978. Hence this petition wherein petitioner alleges that the decision of respondent judge is
contrary to law and runs counter to decisions of this Court when respondent judge (a) refused to
recognize the law that the right to prescription may be renounced or waived; and (b) that in
signing the second promissory note respondent Patricio Confesor can bind the conjugal
partnership; or otherwise said respondent became liable in his personal capacity. The petition is
impressed with merit. The right to prescription may be waived or renounced. Article 1112 of Civil
Code provides:
Art. 1112. Persons with capacity to alienate property may renounce prescription already
obtained, but not the right to prescribe in the future.
Prescription is deemed to have been tacitly renounced when the renunciation results from acts
which imply the abandonment of the right acquired.
There is no doubt that prescription has set in as to the first promissory note of February 10,
1940. However, when respondent Confesor executed the second promissory note on April 11,
1961 whereby he promised to pay the amount covered by the previous promissory note on or
before June 15, 1961, and upon failure to do so, agreed to the foreclosure of the mortgage, said
respondent thereby effectively and expressly renounced and waived his right to the prescription
of the action covering the first promissory note.
This Court had ruled in a similar case that
... when a debt is already barred by prescription, it cannot be enforced by the creditor. But a
new contract recognizing and assuming the prescribed debt would be valid and enforceable ... .
1
Thus, it has been held
Where, therefore, a party acknowledges the correctness of a debt and promises to pay it after
the same has prescribed and with full knowledge of the prescription he thereby waives the
benefit of prescription. 2
This is not a mere case of acknowledgment of a debt that has prescribed but a new promise to
pay the debt. The consideration of the new promissory note is the pre-existing obligation under
the first promissory note. The statutory limitation bars the remedy but does not discharge the
debt.
A new express promise to pay a debt barred ... will take the case from the operation of the
statute of limitations as this proceeds upon the ground that as a statutory limitation merely bars
the remedy and does not discharge the debt, there is something more than a mere moral
obligation to support a promise, to wit a pre-existing debt which is a sufficient consideration for
the new the new promise; upon this sufficient consideration constitutes, in fact, a new cause of
action. 3
... It is this new promise, either made in express terms or deduced from an acknowledgement as
a legal implication, which is to be regarded as reanimating the old promise, or as imparting
vitality to the remedy (which by lapse of time had become extinct) and thus enabling the creditor
to recover upon his original contract. 4
However, the court a quo held that in signing the promissory note alone, respondent Confesor
cannot thereby bind his wife, respondent Jovita Villafuerte, citing Article 166 of the New Civil
Code which provides:
Art. 166. Unless the wife has been declared a non compos mentis or a spend thrift, or is under
civil interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any
real property of the conjugal partnership without, the wife's consent. If she ay compel her to
refuses unreasonably to give her consent, the court m grant the same.
We disagree. Under Article 165 of the Civil Code, the husband is the administrator of the
conjugal partnership. As such administrator, all debts and obligations contracted by the husband
for the benefit of the conjugal partnership, are chargeable to the conjugal partnership. 5 No
doubt, in this case, respondent Confesor signed the second promissory note for the benefit of
the conjugal partnership. Hence the conjugal partnership is liable for this obligation.
WHEREFORE, the decision subject of the petition is reversed and set aside and another
decision is hereby rendered reinstating the decision of the City Court of Iloilo City of December
27, 1976, without pronouncement as to costs in this instance. This decision is immediately
executory and no motion for extension of time to file motion for reconsideration shall be granted.
SO ORDERED.
Narvasa and Cruz, JJ., concur.
Grio-Aquino, J., took no part.
Footnotes
1 Villaroel vs. Estrada, 71 Phil. 140.
2 Tauch vs. Gondram, 20 Labor. Ann. 156, cited on page 7, Vol. 4, Tolentino's New Civil Code
of the Philippines.
3 Johnsons vs. Evasions, 50 Am. Dec. 669.
4 Mattingly vs. Boyd, 20 How (US) 128, 15 Led 845; St. John vs. Garrow, 4 Port. (Ala) 223, 29
Am. Dec. 280. American Jurisprudence Vol. 34, page 233 (Statute of Limitations).
5 Article 161(l), Civil Code.

B. Sources of Civil Obligations
Cruz vs. J. M. Tuason & Co., Inc., 76 SCRA 543, G.R. No. L-23749,
April 29, 1977

Cruz v. Tuazon & Co., 76 SCRA 543

G.R. No. L-23749 April 29, 1977

FAUSTINO CRUZ, plaintiff-appellant,
vs.
J. M. TUASON & COMPANY, INC., and GREGORIO ARANETA, INC., defendants-appellees.

BARREDO, J.:

Appeal from the order dated August 13, 1964 of the Court of First Instance of Quezon City in Civil Case No. Q-7751,
Faustino Cruz vs. J.M. Tuason & Co., Inc., and Gregorio Araneta, Inc., dismissing the complaint of appellant Cruz for
the recovery of improvements he has made on appellees' land and to compel appellees to convey to him 3,000
square meters of land on three grounds: (1) failure of the complaint to state a cause of action; (2) the cause of action
of plaintiff is unenforceable under the Statute of Frauds; and (3) the action of the plaintiff has already prescribed.

Actually, a perusal of plaintiff-appellant's complaint below shows that he alleged two separate causes of action,
namely: (1) that upon request of the Deudors (the family of Telesforo Deudor who laid claim on the land in question
on the strength of an "informacion posesoria" ) plaintiff made permanent improvements valued at P30,400.00 on said
land having an area of more or less 20 quinones and for which he also incurred expenses in the amount of
P7,781.74, and since defendants-appellees are being benefited by said improvements, he is entitled to
reimbursement from them of said amounts and (2) that in 1952, defendants availed of plaintiff's services as an
intermediary with the Deudors to work for the amicable settlement of Civil Case No. Q-135, then pending also in the
Court of First Instance of Quezon City, and involving 50 quinones of land, of Which the 20 quinones aforementioned
form part, and notwithstanding his having performed his services, as in fact, a compromise agreement entered into on
March 16, 1963 between the Deudors and the defendants was approved by the court, the latter have refused to
convey to him the 3,000 square meters of land occupied by him, (a part of the 20 quinones above) which said
defendants had promised to do "within ten years from and after date of signing of the compromise agreement", as
consideration for his services.

Within the Period allowed by the rules, the defendants filed separate motions to dismiss alleging three Identical
grounds: (1) As regards that improvements made by plaintiff, that the complaint states no cause of action, the
agreement regarding the same having been made by plaintiff with the Deudors and not with the defendants, hence
the theory of plaintiff based on Article 2142 of the Code on unjust enrichment is untenable; and (2) anent the alleged
agreement about plaintiffs services as intermediary in consideration of which, defendants promised to convey to him
3,000 square meters of land, that the same is unenforceable under the Statute of Frauds, there being nothing in
writing about it, and, in any event, (3) that the action of plaintiff to compel such conveyance has already prescribed.

Plaintiff opposed the motion, insisting that Article 2142 of the applicable to his case; that the Statute of Frauds cannot
be invoked by defendants, not only because Article 1403 of the Civil Code refers only to "sale of real property or of an
interest therein" and not to promises to convey real property like the one supposedly promised by defendants to him,
but also because, he, the plaintiff has already performed his part of the agreement, hence the agreement has already
been partly executed and not merely executory within the contemplation of the Statute; and that his action has not
prescribed for the reason that defendants had ten years to comply and only after the said ten years did his cause of
action accrue, that is, ten years after March 16, 1963, the date of the approval of the compromise agreement, and his
complaint was filed on January 24, 1964.

Ruling on the motion to dismiss, the trial court issued the herein impugned order of August 13, 1964:



In the motion, dated January 31, 1964, defendant Gregorio Araneta, Inc. prayed that the complaint against it be
dismissed on the ground that (1) the claim on which the action is founded is unenforceable under the provision of the
Statute of Frauds; and (2) the plaintiff's action, if any has already prescribed. In the other motion of February 11,
1964, defendant J. M. Tuason & Co., Inc. sought the dismissal of the plaintiffs complaint on the ground that it states
no cause of action and on the Identical grounds stated in the motion to dismiss of defendant Gregorio Araneta, Inc.
The said motions are duly opposed by the plaintiff.

From the allegations of the complaint, it appears that, by virtue of an agreement arrived at in 1948 by the plaintiff and
the Deudors, the former assisted the latter in clearing, improving, subdividing and selling the large tract of land
consisting of 50 quinones covered by the informacion posesoria in the name of the late Telesforo Deudor and
incurred expenses, which are valued approximately at P38,400.00 and P7,781.74, respectively; and, for the reasons
that said improvements are being used and enjoyed by the defendants, the plaintiff is seeking the reimbursement for
the services and expenses stated above from the defendants.

Defendant J. M. Tuason & Co., Inc. claimed that, insofar as the plaintiffs claim for the reimbursement of the amounts
of P38,400.00 and P7,781.74 is concerned, it is not a privy to the plaintiff's agreement to assist the Deudors n
improving the 50 quinones. On the other hand, the plaintiff countered that, by holding and utilizing the improvements
introduced by him, the defendants are unjustly enriching and benefiting at the expense of the plaintiff; and that said
improvements constitute a lien or charge of the property itself

On the issue that the complaint insofar as it claims the reimbursement for the services rendered and expenses
incurred by the plaintiff, states no cause of action, the Court is of the opinion that the same is well-founded. It is found
that the defendants are not parties to the supposed express contract entered into by and between the plaintiff and the
Deudors for the clearing and improvement of the 50 quinones. Furthermore in order that the alleged improvement
may be considered a lien or charge on the property, the same should have been made in good faith and under the
mistake as to the title. The Court can take judicial notice of the fact that the tract of land supposedly improved by the
plaintiff had been registered way back in 1914 in the name of the predecessors-in-interest of defendant J. M. Tuason
& Co., Inc. This fact is confirmed in the decision rendered by the Supreme Court on July 31, 1956 in Case G. R. No.
L-5079 entitled J.M. Tuason & Co. Inc. vs. Geronimo Santiago, et al., Such being the case, the plaintiff cannot claim
good faith and mistake as to the title of the land.

On the issue of statute of fraud, the Court believes that same is applicable to the instant case. The allegation in par.
12 of the complaint states that the defendants promised and agreed to cede, transfer and convey unto the plaintiff the
3,000 square meters of land in consideration of certain services to be rendered then. it is clear that the alleged
agreement involves an interest in real property. Under the provisions of See. 2(e) of Article 1403 of the Civil Code,
such agreement is not enforceable as it is not in writing and subscribed by the party charged.

On the issue of statute of limitations, the Court holds that the plaintiff's action has prescribed. It is alleged in par. 11 of
the complaint that, sometime in 1952, the defendants approached the plaintiff to prevail upon the Deudors to enter to
a compromise agreement in Civil Case No. Q-135 and allied cases. Furthermore, par. 13 and 14 of the complaint
alleged that the plaintiff acted as emissary of both parties in conveying their respective proposals and couter-
proposals until the final settlement was effected on March 16, 1953 and approved by Court on April 11, 1953. In the
present action, which was instituted on January 24, 1964, the plaintiff is seeking to enforce the supposed agreement
entered into between him and the defendants in 1952, which was already prescribed.

WHEREFORE, the plaintiffs complaint is hereby ordered DISMISSED without pronouncement as to costs.

SO ORDERED. (Pp. 65-69, Rec. on Appeal,)

On August 22, 1964, plaintiff's counsel filed a motion for reconsideration dated August 20, 1964 as follows:

Plaintiff through undersigned counsel and to this Honorable Court, respectfully moves to reconsider its Order bearing
date of 13 August 1964, on the following grounds:

1. THAT THE COMPLAINT STATES A SUFFICIENT CAUSE OF ACTION AGAINST DEFENDANTS IN SO FAR AS
PLAINTIFF'S CLAIM PAYMENT OF SERVICES AND REIMBURSEMENT OF HIS EXPENSES, IS CONCERNED;

II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE 3,000 SQ. MS., THE SAME HAS NOT PRESCRIBED AND
THE STATUTE OF FRAUDS IS NOT APPLICABLE THERETO;



A R G U M E N T

Plaintiff's complaint contains two (2) causes of action the first being an action for sum of money in the amount of
P7,781.74 representing actual expenses and P38,400.00 as reasonable compensation for services in improving the
50 quinones now in the possession of defendants. The second cause of action deals with the 3,000 sq. ms. which
defendants have agreed to transfer into Plaintiff for services rendered in effecting the compromise between the
Deudors and defendants;

Under its order of August 3, 1964, this Honorable Court dismissed the claim for sum of money on the ground that the
complaint does not state a cause of action against defendants. We respectfully submit:

1. THAT THE COMPLAINT STATES A SUFFICIENT CAUSE OF ACTION AGAINST DEFENDANTS IN SO FAR AS
PLAINTIFF'S CLAIM FOR PAYMENT OF SERVICES AND REIMBURSEMENT OF HIS EXPENSES IS
CONCERNED.

Said this Honorable Court (at p. 2, Order):

O R D E R

xxx xxx xxx

On the issue that the complaint, in so far as it claims the reimbursement for the services rendered and expenses
incurred by the plaintiff, states no cause of action, the Court is of the opinion that the same is well-founded. It is found
that the defendants are not parties to the supposed express contract entered into by and between the plaintiff and the
Deudors for the clearing and improvement of the 50 quinones. Furthermore, in order that the alleged improvement
may he considered a lien or charge on the property, the same should have been made in good faith and under the
mistake as to title. The Court can take judicial notice of the fact that the tract of land supposedly improved by the
plaintiff had been registered way back in 1914 in the name of the predecessors-in-interest of defendant J. M. Tuason
& Co., Inc. This fact is confirmed in the decision rendered by the Supreme Court on July 31, 1956 in case G. R. No.
L-5079 entitled 'J M. Tuason & Co., Inc. vs, Geronimo Santiago, et al.' Such being the case, the plaintiff cannot claim
good faith and mistake as to the title of the land.

The position of this Honorable Court (supra) is that the complaint does not state a cause of action in so far as the
claim for services and expenses is concerned because the contract for the improvement of the properties was solely
between the Deudors and plaintiff, and defendants are not privies to it. Now, plaintiff's theory is that defendants are
nonetheless liable since they are utilizing and enjoying the benefit's of said improvements. Thus under paragraph 16
of "he complaint, it is alleged:

(16) That the services and personal expenses of plaintiff mentioned in paragraph 7 hereof were rendered and in fact
paid by him to improve, as they in fact resulted in considerable improvement of the 50 quinones, and defendants
being now in possession of and utilizing said improvements should reimburse and pay plaintiff for such services and
expenses.

Plaintiff's cause of action is premised inter alia, on the theory of unjust enrichment under Article 2142 of the civil
Code:

ART. 2142. Certain lawful voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end
that no one shill be unjustly enriched or benefited at the expense of another.

In like vein, Article 19 of the same Code enjoins that:

ART. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give
every-one his due and observe honesty and good faith.

We respectfully draw the attention of this Honorable Court to the fact that ARTICLE 2142 (SUPRA) DEALS WITH
QUASI-CONTRACTS or situations WHERE THERE IS NO CONTRACT BETWEEN THE PARTIES TO THE
ACTION. Further, as we can readily see from the title thereof (Title XVII), that the Same bears the designation
'EXTRA CONTRACTUAL OBLIGATIONS' or obligations which do not arise from contracts. While it is true that there
was no agreement between plaintiff and defendants herein for the improvement of the 50 quinones since the latter
are presently enjoying and utilizing the benefits brought about through plaintiff's labor and expenses, defendants
should pay and reimburse him therefor under the principle that 'no one may enrich himself at the expense of another.'
In this posture, the complaint states a cause of action against the defendants.

II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE 3,000 SQ. MS. THE SAME HAS NOT PRESCRIBED AND
THE STATUTE OF FRAUDS IS NOT APPLICABLE THERETO.

The Statute of Frauds is CLEARLY inapplicable to this case:

At page 2 of this Honorable Court's order dated 13 August 1964, the Court ruled as follows:




O R D E R

xxx xxx xxx

On the issue of statute of fraud, the Court believes that same is applicable to the instant Case, The allegation in par.
12 of the complaint states that the defendants promised and agree to cede, transfer and convey unto the plaintiff,
3,000 square meters of land in consideration of certain services to be rendered then. It is clear that the alleged
agreement involves an interest in real property. Under the provisions of Sec. 2(e) of Article 1403 of the Civil Code,
such agreement is not enforceable as it is not in writing and subscribed by the party charged.

To bring this issue in sharper focus, shall reproduce not only paragraph 12 of the complaint but also the other
pertinent paragraphs therein contained. Paragraph 12 states thus:

C O M P L A I N T

xxx xxx xxx

12). That plaintiff conferred with the aforesaid representatives of defendants several times and on these occasions,
the latter promised and agreed to cede, transfer and convey unto plaintiff the 3,000 sq. ms. (now known as Lots 16-B,
17 and 18) which plaintiff was then occupying and continues to occupy as of this writing, for and in consideration of
the following conditions:

(a) That plaintiff succeed in convincing the DEUDORS to enter into a compromise agreement and that such
agreement be actually entered into by and between the DEUDORS and defendant companies;

(b) That as of date of signing the compromise agreement, plaintiff shall be the owner of the 3,000 sq. ms. but the
documents evidencing his title over this property shall be executed and delivered by defendants to plaintiff within ten
(10) years from and after date of signing of the compromise agreement;

(c) That plaintiff shall, without any monetary expense of his part, assist in clearing the 20 quinones of its occupants;

13). That in order to effect a compromise between the parties. plaintiff not only as well acted as emissary of both
parties in conveying their respective proposals and counter- proposals until succeeded in convinzing the DEUDORS
to settle with defendants amicably. Thus, on March 16, 1953, a Compromise Agreement was entered into by and
between the DEUDORS and the defendant companies; and on April 11, 1953, this agreement was approved by this
Honorable Court;

14). That in order to comply with his other obligations under his agreement with defendant companies, plaintiff had to
confer with the occupants of the property, exposing himself to physical harm, convincing said occupants to leave the
premises and to refrain from resorting to physical violence in resisting defendants' demands to vacate;

That plaintiff further assisted defendants' employees in the actual demolition and transfer of all the houses within the
perimeter of the 20 quinones until the end of 1955, when said area was totally cleared and the houses transferred to
another area designated by the defendants as 'Capt. Cruz Block' in Masambong, Quezon City. (Pars. 12, 13 and 14,
Complaint; Emphasis supplied)

From the foregoing, it is clear then the agreement between the parties mentioned in paragraph 12 (supra) of the
complaint has already been fully EXECUTED ON ONE PART, namely by the plaintiff. Regarding the applicability of
the statute of frauds (Art. 1403, Civil Code), it has been uniformly held that the statute of frauds IS APPLICABLE
ONLY TO EXECUTORY CONTRACTS BUT NOT WHERE THE CONTRACT HAS BEEN PARTLY EXECUTED:

SAME ACTION TO ENFORCE. The statute of frauds has been uniformly interpreted to be applicable to executory
and not to completed or contracts. Performance of the contracts takes it out of the operation of the statute. ...

The statute of the frauds is not applicable to contracts which are either totally or partially performed, on the theory
that there is a wide field for the commission of frauds in executory contracts which can only be prevented by requiring
them to be in writing, a facts which is reduced to a minimum in executed contracts because the intention of the
parties becomes apparent buy their execution and execution, in mots cases, concluded the right the parties. ... The
partial performance may be proved by either documentary or oral evidence. (At pp. 564-565, Tolentino's Civil Code of
the Philippines, Vol. IV, 1962 Ed.; Emphasis supplied).

Authorities in support of the foregoing rule are legion. Thus Mr. Justice Moran in his 'Comments on the Rules of
Court', Vol. III, 1974 Ed., at p. 167, states:

2 THE STATUTE OF FRAUDS IS APPLICABLE ONLY TO EXECUTORY CONTRACTS: CONTRACTS WHICH ARE
EITHER TOTALLY OR PARTIALLY PERFORMED ARE WITHOUT THE STATUE. The statute of frauds is applicable
only to executory contracts. It is neither applicable to executed contracts nor to contracts partially performed. The
reason is simple. In executory contracts there is a wide field for fraud because unless they be in writing there is no
palpable evidence of the intention of the contracting parties. The statute has been enacted to prevent fraud. On the
other hand the commission of fraud in executed contracts is reduced to minimum in executed contracts because (1)
the intention of the parties is made apparent by the execution and (2) execution concludes, in most cases, the rights
of the parties. (Emphasis supplied)

Under paragraphs 13 and 14 of the complaint (supra) one can readily see that the plaintiff has fulfilled ALL his
obligation under the agreement between him defendants concerning the 3,000 sq. ms. over which the latter had
agreed to execute the proper documents of transfer. This fact is further projected in paragraph 15 of the complaint
where plaintiff states;

15). That in or about the middle of 1963, after all the conditions stated in paragraph 12 hereof had been fulfilled and
fully complied with, plaintiff demanded of said defendants that they execute the Deed of Conveyance in his favor and
deliver the title certificate in his name, over the 3,000 sq. ms. but defendants failed and refused and continue to fail
and refuse to heed his demands. (par. 15, complaint; Emphasis supplied).

In view of the foregoing, we respectfully submit that this Honorable court erred in holding that the statute of frauds is
applicable to plaintiff's claim over the 3,000 sq. ms. There having been full performance of the contract on plaintiff's
part, the same takes this case out of the context of said statute.

Plaintiff's Cause of Action had NOT Prescribed:

With all due respect to this Honorable court, we also submit that the Court committed error in holding that this action
has prescribed:

O R D E R

xxx xxx xxx

On the issue of the statute of limitations, the Court holds that the plaintiff's action has prescribed. It is alleged in par.
III of the complaint that, sometime in 1952, the defendants approached the plaintiff to prevail upon the Deudors to
enter into a compromise agreement in Civil Case No. Q-135 and allied cases. Furthermore, pars. 13 and 14 of the
complaint alleged that plaintiff acted as emissary of both parties in conveying their respective proposals and counter-
proposals until the final settlement was affected on March 16, 1953 and approved by the Court on April 11, 1953. In
the present actin, which was instituted on January 24, 1964, the plaintiff is seeking to enforce the supposed
agreement entered into between him and the defendants in 1952, which has already proscribed. (at p. 3, Order).

The present action has not prescribed, especially when we consider carefully the terms of the agreement between
plaintiff and the defendants. First, we must draw the attention of this Honorable Court to the fact that this is an action
to compel defendants to execute a Deed of Conveyance over the 3,000 sq. ms. subject of their agreement. In
paragraph 12 of the complaint, the terms and conditions of the contract between the parties are spelled out.
Paragraph 12 (b) of the complaint states:

(b) That as of date of signing the compromise agreement, plaintiff shall be the owner of the 3,000 sq. ms. but the
documents evidencing his title over this property shall be executed and delivered by defendants to plaintiff within ten
(10) years from and after date of signing of the compromise agreement. (Emphasis supplied).

The compromise agreement between defendants and the Deudors which was conclude through the efforts of plaintiff,
was signed on 16 March 1953. Therefore, the defendants had ten (10) years signed on 16 March 1953. Therefore,
the defendants had ten (10) years from said date within which to execute the deed of conveyance in favor of plaintiff
over the 3,000 sq. ms. As long as the 10 years period has not expired, plaintiff had no right to compel defendants to
execute the document and the latter were under no obligation to do so. Now, this 10-year period elapsed on March
16, 1963. THEN and ONLY THEN does plaintiff's cause of action plaintiff on March 17, 1963. Thus, under paragraph
15, of the complaint (supra) plaintiff made demands upon defendants for the execution of the deed 'in or about the
middle of 1963.

Since the contract now sought to be enforced was not reduced to writing, plaintiff's cause of action expires on March
16, 1969 or six years from March 16, 1963 WHEN THE CAUSE OF ACTION ACCRUED (Art. 1145, Civil Code).

In this posture, we gain respectfully submit that this Honorable Court erred in holding that plaintiff's action has
prescribed.

P R A Y E R

WHEREFORE, it is respectfully prayed that " Honorable Court reconsider its Order dated August 13, 1964; and issue
another order denying the motions to dismiss of defendants G. Araneta, Inc. and J. M. Tuason Co. Inc. for lack of
merit. (Pp. 70-85, Record on Appeal.)

Defendants filed an opposition on the main ground that "the arguments adduced by the plaintiff are merely
reiterations of his arguments contained in his Rejoinder to Reply and Opposition, which have not only been refuted in
herein defendant's Motion to Dismiss and Reply but already passed upon by this Honorable Court."

On September 7, 1964, the trial court denied the motion for reconsiderations thus:

After considering the plaintiff's Motion for Reconsideration of August 20, 1964 and it appearing that the grounds relied
upon in said motion are mere repetition of those already resolved and discussed by this Court in the order of August
13, 1964, the instant motion is hereby denied and the findings and conclusions arrived at by the Court in its order of
August 13, 1964 are hereby reiterated and affirmed.

SO ORDERED. (Page 90, Rec. on Appeal.)

Under date of September 24, 1964, plaintiff filed his record on appeal.

In his brief, appellant poses and discusses the following assignments of error:

I. THAT THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT ON THE GROUND THAT APPELLANT'S
CLAIM OVER THE 3,000 SQ. MS. IS ALLEGEDLY UNENFORCEABLE UNDER THE STATUTE OF FRAUDS;

II. THAT THE COURT A QUO FURTHER COMMITTED ERROR IN DISMISSING APPELLANT'S COMPLAINT ON
THE GROUND THAT HIS CLAIM OVER THE 3,000 SQ. MS. IS ALLEGEDLY BARRED BY THE STATUTE OF
LIMITATIONS; and

III. THAT THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT FOR FAILURE TO STATE A CAUSE
OF ACTION IN SO FAR AS APPELLANT'S CLAIM FOR REIMBURSEMENT OF EXPENSES AND FOR SERVICES
RENDERED IN THE IMPROVEMENT OF THE FIFTY (50) QUINONES IS CONCERNED.

We agree with appellant that the Statute of Frauds was erroneously applied by the trial court. It is elementary that the
Statute refers to specific kinds of transactions and that it cannot apply to any that is not enumerated therein. And the
only agreements or contracts covered thereby are the following:

(1) Those entered into in the name of another person by one who has been given no authority or legal representation,
or who has acted beyond his powers;

(2) Those do not comply with the Statute of Frauds as set forth in this number, In the following cases an agreement
hereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in
writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be
received without the writing, or a secondary evidence of its contents:

(a) An agreement that by its terms is not to be performed within a year from the making thereof;

(b) A special promise to answer for the debt, default, or miscarriage of another;

(c) An agreement made in consideration of marriage, other than a mutual promise to marry;

(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos,
unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them of such
things in action, or pay at the time some part of the purchase money; but when a sale is made by auction and entry is
made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of
sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum:

(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest
therein:

(f) a representation as to the credit of a third person.

(3) Those where both parties are incapable of giving consent to a contract. (Art. 1403, civil Code.)

In the instant case, what appellant is trying to enforce is the delivery to him of 3,000 square meters of land which he
claims defendants promised to do in consideration of his services as mediator or intermediary in effecting a
compromise of the civil action, Civil Case No. 135, between the defendants and the Deudors. In no sense may such
alleged contract be considered as being a "sale of real property or of any interest therein." Indeed, not all dealings
involving interest in real property come under the Statute.

Moreover, appellant's complaint clearly alleges that he has already fulfilled his part of the bargains to induce the
Deudors to amicably settle their differences with defendants as, in fact, on March 16, 1963, through his efforts, a
compromise agreement between these parties was approved by the court. In other words, the agreement in question
has already been partially consummated, and is no longer merely executory. And it is likewise a fundamental
principle governing the application of the Statute that the contract in dispute should be purely executory on the part of
both parties thereto.

We cannot, however, escape taking judicial notice, in relation to the compromise agreement relied upon by appellant,
that in several cases We have decided, We have declared the same rescinded and of no effect. In J. M. Tuason &
Co., Inc. vs. Bienvenido Sanvictores, 4 SCRA 123, the Court held:

It is also worthy of note that the compromise between Deudors and Tuason, upon which Sanvictores predicates his
right to buy the lot he occupies, has been validly rescinded and set aside, as recognized by this Court in its decision
in G.R. No. L-13768, Deudor vs. Tuason, promulgated on May 30, 1961.

We repeated this observation in J.M. Tuason & Co., Inc. vs. Teodosio Macalindong, 6 SCRA 938. Thus, viewed from
what would be the ultimate conclusion of appellant's case, We entertain grave doubts as to whether or not he can
successfully maintain his alleged cause of action against defendants, considering that the compromise agreement
that he invokes did not actually materialize and defendants have not benefited therefrom, not to mention the
undisputed fact that, as pointed out by appellees, appellant's other attempt to secure the same 3,000 square meters
via the judicial enforcement of the compromise agreement in which they were supposed to be reserved for him has
already been repudiated by the courts. (pp. 5-7. Brief of Appellee Gregorio Araneta, Inc.)

As regards appellant's third assignment of error, We hold that the allegations in his complaint do not sufficiently
Appellants' reliance. on Article 2142 of Civil Code is misplaced. Said article provides:

Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one
shall be unjustly enriched or benefited at the expense of another.

From the very language of this provision, it is obvious that a presumed qauasi-contract cannot emerge as against one
party when the subject mater thereof is already covered by an existing contract with another party. Predicated on the
principle that no one should be allowed to unjustly enrich himself at the expense of another, Article 2124 creates the
legal fiction of a quasi-contract precisely because of the absence of any actual agreement between the parties
concerned. Corollarily, if the one who claims having enriched somebody has done so pursuant to a contract with a
third party, his cause of action should be against the latter, who in turn may, if there is any ground therefor, seek relief
against the party benefited. It is essential that the act by which the defendant is benefited must have been voluntary
and unilateral on the part of the plaintiff. As one distinguished civilian puts it, "The act is voluntary. because the actor
in quasi-contracts is not bound by any pre-existing obligation to act. It is unilateral, because it arises from the sole will
of the actor who is not previously bound by any reciprocal or bilateral agreement. The reason why the law creates a
juridical relations and imposes certain obligation is to prevent a situation where a person is able to benefit or take
advantage of such lawful, voluntary and unilateral acts at the expense of said actor." (Ambrosio Padilla, Civil Law,
Vol. VI, p. 748, 1969 ed.) In the case at bar, since appellant has a clearer and more direct recourse against the
Deudors with whom he had entered into an agreement regarding the improvements and expenditures made by him
on the land of appellees. it Cannot be said, in the sense contemplated in Article 2142, that appellees have been
enriched at the expense of appellant.

In the ultimate. therefore, Our holding above that appellant's first two assignments of error are well taken cannot save
the day for him. Aside from his having no cause of action against appellees, there is one plain error of omission. We
have found in the order of the trial court which is as good a ground as any other for Us to terminate this case
favorably to appellees. In said order Which We have quoted in full earlier in this opinion, the trial court ruled that "the
grounds relied upon in said motion are mere repetitions of those already resolved and discussed by this Court in the
order of August 13, 1964", an observation which We fully share. Virtually, therefore. appellant's motion for
reconsideration was ruled to be pro-forma. Indeed, a cursory reading of the record on appeal reveals that appellant's
motion for reconsideration above-quoted contained exactly the same arguments and manner of discussion as his
February 6, 1964 "Opposition to Motion to Dismiss" of defendant Gregorio Araneta, Inc. ((pp. 17-25, Rec. on Appeal)
as well as his February 17, 1964 "Opposition to Motion to Dismiss of Defendant J. M. Tuason & Co." (pp. 33-45, Rec.
on Appeal and his February 29, 1964 "Rejoinder to Reply Oil Defendant J. M. Tuason & Co." (pp. 52-64, Rec. on
Appeal) We cannot see anything in said motion for reconsideration that is substantially different from the above
oppositions and rejoinder he had previously submitted and which the trial court had already considered when it
rendered its main order of dismissal. Consequently, appellant's motion for reconsideration did not suspend his period
for appeal. (Estrada vs. Sto. Domingo, 28 SCRA 890, 905-6.) And as this point was covered by appellees'
"Opposition to Motion for Reconsideration" (pp. 8689), hence, within the frame of the issues below, it is within the
ambit of Our authority as the Supreme Court to consider the same here even if it is not discussed in the briefs of the
parties. (Insular Life Assurance Co., Ltd. Employees Association-NATU vs. Insular Life Assurance Co., Ltd.
[Resolution en banc of March 10, 1977 in G. R. No. L-25291).

Now, the impugned main order was issued on August 13, 1964, while the appeal was made on September 24, 1964
or 42 days later. Clearly, this is beyond the 30-day reglementary period for appeal. Hence, the subject order of
dismissal was already final and executory when appellant filed his appeal.

WHEREFORE, the appeal of Faustino Cruz in this case is dismissed. No costs.


Fernando (Chairman), Antonio, Aquino and Martin, .JJ., concur.

Concepcion, Jr., JJ., took no part.

Martin, J., was designated to sit in the Second Division.

Gutierrez Hermanos vs. Orense., 28 Phil. 571 , G.R. No. 9188
December 04, 1914
G.R. No. L-9188 December 4, 1914
GUTIERREZ HERMANOS, plaintiff-appellee,
vs.
ENGRACIO ORENSE, defendant-appellant.
William A. Kincaid, Thos. L. Hartigan, and Ceferino M. Villareal for appellant.
Rafael de la Sierra for appellee.

TORRES, J .:
Appeal through bill of exceptions filed by counsel for the appellant from the judgment on April 14, 1913, by the
Honorable P. M. Moir, judge, wherein he sentenced the defendant to make immediate delivery of the property in
question, through a public instrument, by transferring and conveying to the plaintiff all his rights in the property
described in the complaint and to pay it the sum of P780, as damages, and the costs of the suit.
On March 5, 1913, counsel for Gutierrez Hermanos filed a complaint, afterwards amended, in the Court of First
Instance of Albay against Engacio Orense, in which he set forth that on and before February 14, 1907, the defendant
Orense had been the owner of a parcel of land, with the buildings and improvements thereon, situated in the pueblo
of Guinobatan, Albay, the location, area and boundaries of which were specified in the complaint; that the said
property has up to date been recorded in the new property registry in the name of the said Orense, according to
certificate No. 5, with the boundaries therein given; that, on February 14, 1907, Jose Duran, a nephew of the
defendant, with the latter's knowledge and consent, executed before a notary a public instrument whereby he sold
and conveyed to the plaintiff company, for P1,500, the aforementioned property, the vendor Duran reserving to
himself the right to repurchase it for the same price within a period of four years from the date of the said instrument;
that the plaintiff company had not entered into possession of the purchased property, owing to its continued
occupancy by the defendant and his nephew, Jose Duran, by virtue of a contract of lease executed by the plaintiff to
Duran, which contract was in force up to February 14, 1911; that the said instrument of sale of the property, executed
by Jose Duran, was publicly and freely confirmed and ratified by the defendant Orense; that, in order to perfect the
title to the said property, but that the defendant Orense refused to do so, without any justifiable cause or reason,
wherefore he should be compelled to execute the said deed by an express order of the court, for Jose Duran is
notoriously insolvent and cannot reimburse the plaintiff company for the price of the sale which he received, nor pay
any sum whatever for the losses and damages occasioned by the said sale, aside from the fact that the plaintiff had
suffered damage by losing the present value of the property, which was worth P3,000; that, unless such deed of final
conveyance were executed in behalf of the plaintiff company, it would be injured by the fraud perpetrated by the
vendor, Duran, in connivance with the defendant; that the latter had been occupying the said property since February
14, 1911, and refused to pay the rental thereof, notwithstanding the demand made upon him for its payment at the
rate of P30 per month, the just and reasonable value for the occupancy of the said property, the possession of which
the defendant likewise refused to deliver to the plaintiff company, in spite of the continuous demands made upon him,
the defendant, with bad faith and to the prejudice of the firm of Gutierrez Hermanos, claiming to have rights of
ownership and possession in the said property. Therefore it was prayed that judgment be rendered by holding that
the land and improvements in question belong legitimately and exclusively to the plaintiff, and ordering the defendant
to execute in the plaintiff's behalf the said instrument of transfer and conveyance of the property and of all the right,
interest, title and share which the defendant has therein; that the defendant be sentenced to pay P30 per month for
damages and rental of the property from February 14, 1911, and that, in case these remedies were not granted to the
plaintiff, the defendant be sentenced to pay to it the sum of P3,000 as damages, together with interest thereon since
the date of the institution of this suit, and to pay the costs and other legal expenses.
The demurrer filed to the amended complaint was overruled, with exception on the part of the defendant, whose
counsel made a general denial of the allegations contained in the complaint, excepting those that were admitted, and
specifically denied paragraph 4 thereof to the effect that on February 14, 1907, Jose Duran executed the deed of sale
of the property in favor of the plaintiff with the defendant's knowledge and consent.1awphil.net
As the first special defense, counsel for the defendant alleged that the facts set forth in the complaint with respect to
the execution of the deed did not constitute a cause of action, nor did those alleged in the other form of action for the
collection of P3,000, the value of the realty.
As the second special defense, he alleged that the defendant was the lawful owner of the property claimed in the
complaint, as his ownership was recorded in the property registry, and that, since his title had been registered under
the proceedings in rem prescribed by Act No. 496, it was conclusive against the plaintiff and the pretended rights
alleged to have been acquired by Jose Duran prior to such registration could not now prevail; that the defendant had
not executed any written power of attorney nor given any verbal authority to Jose Duran in order that the latter might,
in his name and representation, sell the said property to the plaintiff company; that the defendant's knowledge of the
said sale was acquired long after the execution of the contract of sale between Duran and Gutierrez Hermanos, and
that prior thereto the defendant did not intentionally and deliberately perform any act such as might have induced the
plaintiff to believe that Duran was empowered and authorized by the defendant and which would warrant him in
acting to his own detriment, under the influence of that belief. Counsel therefore prayed that the defendant be
absolved from the complaint and that the plaintiff be sentenced to pay the costs and to hold his peace forever.
After the hearing of the case and an examination of the evidence introduced by both parties, the court rendered the
judgment aforementioned, to which counsel for the defendant excepted and moved for a new trial. This motion was
denied, an exception was taken by the defendant and, upon presentation of the proper bill of exceptions, the same
was approved, certified and forwarded to the clerk of his court.
This suit involves the validity and efficacy of the sale under right of redemption of a parcel of land and a masonry
house with the nipa roof erected thereon, effected by Jose Duran, a nephew of the owner of the property, Engracio
Orense, for the sum of P1,500 by means of a notarial instrument executed and ratified on February 14, 1907.
After the lapse of the four years stipulated for the redemption, the defendant refused to deliver the property to the
purchaser, the firm of Gutierrez Hermanos, and to pay the rental thereof at the rate of P30 per month for its use and
occupation since February 14, 1911, when the period for its repurchase terminated. His refusal was based on the
allegations that he had been and was then the owner of the said property, which was registered in his name in the
property registry; that he had not executed any written power of attorney to Jose Duran, nor had he given the latter
any verbal authorization to sell the said property to the plaintiff firm in his name; and that, prior to the execution of the
deed of sale, the defendant performed no act such as might have induced the plaintiff to believe that Jose Duran was
empowered and authorized by the defendant to effect the said sale.
The plaintiff firm, therefore, charged Jose Duran, in the Court of First Instance of the said province, with estafa, for
having represented himself in the said deed of sale to be the absolute owner of the aforesaid land and improvements,
whereas in reality they did not belong to him, but to the defendant Orense. However, at the trial of the case Engracio
Orense, called as a witness, being interrogated by the fiscal as to whether he and consented to Duran's selling the
said property under right of redemption to the firm of Gutierrez Hermanos, replied that he had. In view of this
statement by the defendant, the court acquitted Jose Duran of the charge of estafa.
As a result of the acquittal of Jose Duran, based on the explicit testimony of his uncle, Engacio Orense, the owner of
the property, to the effect that he had consented to his nephew Duran's selling the property under right of repurchase
to Gutierrez Hermanos, counsel for this firm filed a complainant praying, among other remedies, that the defendant
Orense be compelled to execute a deed for the transfer and conveyance to the plaintiff company of all the right, title
and interest with Orense had in the property sold, and to pay to the same the rental of the property due from February
14, 1911.itc-alf
Notwithstanding the allegations of the defendant, the record in this case shows that he did give his consent in order
that his nephew, Jose Duran, might sell the property in question to Gutierrez Hermanos, and that he did thereafter
confirm and ratify the sale by means of a public instrument executed before a notary.
It having been proven at the trial that he gave his consent to the said sale, it follows that the defendant conferred
verbal, or at least implied, power of agency upon his nephew Duran, who accepted it in the same way by selling the
said property. The principal must therefore fulfill all the obligations contracted by the agent, who acted within the
scope of his authority. (Civil Code, arts. 1709, 1710 and 1727.)
Even should it be held that the said consent was granted subsequently to the sale, it is unquestionable that the
defendant, the owner of the property, approved the action of his nephew, who in this case acted as the manager of
his uncle's business, and Orense'r ratification produced the effect of an express authorization to make the said sale.
(Civil Code, arts. 1888 and 1892.)
Article 1259 of the Civil Code prescribes: "No one can contract in the name of another without being authorized by
him or without his legal representation according to law.
A contract executed in the name of another by one who has neither his authorization nor legal representation shall be
void, unless it should be ratified by the person in whose name it was executed before being revoked by the other
contracting party.
The sworn statement made by the defendant, Orense, while testifying as a witness at the trial of Duran for estafa,
virtually confirms and ratifies the sale of his property effected by his nephew, Duran, and, pursuant to article 1313 of
the Civil Code, remedies all defects which the contract may have contained from the moment of its execution.
The sale of the said property made by Duran to Gutierrez Hermanos was indeed null and void in the beginning, but
afterwards became perfectly valid and cured of the defect of nullity it bore at its execution by the confirmation
solemnly made by the said owner upon his stating under oath to the judge that he himself consented to his nephew
Jose Duran's making the said sale. Moreover, pursuant to article 1309 of the Code, the right of action for nullification
that could have been brought became legally extinguished from the moment the contract was validly confirmed and
ratified, and, in the present case, it is unquestionable that the defendant did confirm the said contract of sale and
consent to its execution.
On the testimony given by Engacio Orense at the trial of Duran for estafa, the latter was acquitted, and it would not
be just that the said testimony, expressive of his consent to the sale of his property, which determined the acquittal of
his nephew, Jose Duran, who then acted as his business manager, and which testimony wiped out the deception that
in the beginning appeared to have been practiced by the said Duran, should not now serve in passing upon the
conduct of Engracio Orense in relation to the firm of Gutierrez Hermanos in order to prove his consent to the sale of
his property, for, had it not been for the consent admitted by the defendant Orense, the plaintiff would have been the
victim of estafa.
If the defendant Orense acknowledged and admitted under oath that he had consented to Jose Duran's selling the
property in litigation to Gutierrez Hermanos, it is not just nor is it permissible for him afterward to deny that admission,
to the prejudice of the purchaser, who gave P1,500 for the said property.
The contract of sale of the said property contained in the notarial instrument of February 14, 1907, is alleged to be
invalid, null and void under the provisions of paragraph 5 of section 335 of the Code of Civil Procedure, because the
authority which Orense may have given to Duran to make the said contract of sale is not shown to have been in
writing and signed by Orense, but the record discloses satisfactory and conclusive proof that the defendant Orense
gave his consent to the contract of sale executed in a public instrument by his nephew Jose Duran. Such consent
was proven in a criminal action by the sworn testimony of the principal and presented in this civil suit by other sworn
testimony of the same principal and by other evidence to which the defendant made no objection. Therefore the
principal is bound to abide by the consequences of his agency as though it had actually been given in writing
(Conlu vs. Araneta and Guanko, 15 Phil. Rep., 387; Gallemit vs. Tabiliran, 20 Phil. Rep., 241; Kuenzle & Streiff vs.
Jiongco, 22 Phil. Rep., 110.)
The repeated and successive statements made by the defendant Orense in two actions, wherein he affirmed that he
had given his consent to the sale of his property, meet the requirements of the law and legally excuse the lack of
written authority, and, as they are a full ratification of the acts executed by his nephew Jose Duran, they produce the
effects of an express power of agency.
The judgment appealed from in harmony with the law and the merits of the case, and the errors assigned thereto
have been duly refuted by the foregoing considerations, so it should be affirmed.
The judgment appealed from is hereby affirmed, with the costs against the appellant.
Arellano, C.J., Johnson, Carson, Moreland and Araullo, JJ., concur.

Adille vs. Court of Appeals, 157 SCRA 455 , No. L-44546, January 29,
1988

Adille vs. CA, 157 SCRA 455

G.R. No. L-44546 January 29, 1988

RUSTICO ADILLE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, EMETERIA ASEJO, TEODORICA ASEJO, DOMINGO ASEJO, JOSEFA
ASEJO and SANTIAGO ASEJO, respondents.



SARMIENTO, J.:

In issue herein are property and property rights, a familiar subject of controversy and a wellspring of enormous
conflict that has led not only to protracted legal entanglements but to even more bitter consequences, like strained
relationships and even the forfeiture of lives. It is a question that likewise reflects a tragic commentary on prevailing
social and cultural values and institutions, where, as one observer notes, wealth and its accumulation are the basis of
self-fulfillment and where property is held as sacred as life itself. "It is in the defense of his property," says this
modern thinker, that one "will mobilize his deepest protective devices, and anybody that threatens his possessions
will arouse his most passionate enmity." 1

The task of this Court, however, is not to judge the wisdom of values; the burden of reconstructing the social order is
shouldered by the political leadership-and the people themselves.

The parties have come to this Court for relief and accordingly, our responsibility is to give them that relief pursuant to
the decree of law.

The antecedent facts are quoted from the decision 2 appealed from:

xxx xxx xxx

... [T]he land in question Lot 14694 of Cadastral Survey of Albay located in Legaspi City with an area of some 11,325
sq. m. originally belonged to one Felisa Alzul as her own private property; she married twice in her lifetime; the first,
with one Bernabe Adille, with whom she had as an only child, herein defendant Rustico Adille; in her second marriage
with one Procopio Asejo, her children were herein plaintiffs, now, sometime in 1939, said Felisa sold the property
in pacto de retro to certain 3rd persons, period of repurchase being 3 years, but she died in 1942 without being able
to redeem and after her death, but during the period of redemption, herein defendant repurchased, by himself alone,
and after that, he executed a deed of extra-judicial partition representing himself to be the only heir and child of his
mother Felisa with the consequence that he was able to secure title in his name alone also, so that OCT. No. 21137
in the name of his mother was transferred to his name, that was in 1955; that was why after some efforts of
compromise had failed, his half-brothers and sisters, herein plaintiffs, filed present case for partition with accounting
on the position that he was only a trustee on an implied trust when he redeemed,-and this is the evidence, but as it
also turned out that one of plaintiffs, Emeteria Asejo was occupying a portion, defendant counterclaimed for her to
vacate that,

Well then, after hearing the evidence, trial Judge sustained defendant in his position that he was and became
absolute owner, he was not a trustee, and therefore, dismissed case and also condemned plaintiff occupant,
Emeteria to vacate; it is because of this that plaintiffs have come here and contend that trial court erred in:

I. ... declaring the defendant absolute owner of the property;

II. ... not ordering the partition of the property; and

III. ... ordering one of the plaintiffs who is in possession of the portion of the property to vacate the land, p. 1
Appellant's brief.

which can be reduced to simple question of whether or not on the basis of evidence and law, judgment appealed from
should be maintained. 3

xxx xxx xxx

The respondent Court of appeals reversed the trial Court, 4 and ruled for the plaintiffs-appellants, the private
respondents herein. The petitioner now appeals, by way of certiorari, from the Court's decision.

We required the private respondents to file a comment and thereafter, having given due course to the petition,
directed the parties to file their briefs. Only the petitioner, however, filed a brief, and the private respondents having
failed to file one, we declared the case submitted for decision.

The petition raises a purely legal issue: May a co-owner acquire exclusive ownership over the property held in
common?

Essentially, it is the petitioner's contention that the property subject of dispute devolved upon him upon the failure of
his co-heirs to join him in its redemption within the period required by law. He relies on the provisions of Article 1515
of the old Civil Article 1613 of the present Code, giving the vendee a retro the right to demand redemption of the
entire property.

There is no merit in this petition.

The right of repurchase may be exercised by a co-owner with aspect to his share alone. 5 While the records show
that the petitioner redeemed the property in its entirety, shouldering the expenses therefor, that did not make him the
owner of all of it. In other words, it did not put to end the existing state of co-ownership.

Necessary expenses may be incurred by one co-owner, subject to his right to collect reimbursement from the
remaining co-owners. 6 There is no doubt that redemption of property entails a necessary expense. Under the Civil
Code:

ART. 488. Each co-owner shall have a right to compel the other co-owners to contribute to the expenses of
preservation of the thing or right owned in common and to the taxes. Any one of the latter may exempt himself from
this obligation by renouncing so much of his undivided interest as may be equivalent to his share of the expenses and
taxes. No such waiver shall be made if it is prejudicial to the co-ownership.

The result is that the property remains to be in a condition of co-ownership. While a vendee a retro, under Article
1613 of the Code, "may not be compelled to consent to a partial redemption," the redemption by one co-heir or co-
owner of the property in its totality does not vest in him ownership over it. Failure on the part of all the co-owners to
redeem it entitles the vendee a retro to retain the property and consolidate title thereto in his name. 7 But the
provision does not give to the redeeming co-owner the right to the entire property. It does not provide for a mode of
terminating a co-ownership.

Neither does the fact that the petitioner had succeeded in securing title over the parcel in his name terminate the
existing co-ownership. While his half-brothers and sisters are, as we said, liable to him for reimbursement as and for
their shares in redemption expenses, he cannot claim exclusive right to the property owned in common. Registration
of property is not a means of acquiring ownership. It operates as a mere notice of existing title, that is, if there is one.

The petitioner must then be said to be a trustee of the property on behalf of the private respondents. The Civil Code
states:

ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a
trustee of an implied trust for the benefit of the person from whom the property comes.

We agree with the respondent Court of Appeals that fraud attended the registration of the property. The petitioner's
pretension that he was the sole heir to the land in the affidavit of extrajudicial settlement he executed preliminary to
the registration thereof betrays a clear effort on his part to defraud his brothers and sisters and to exercise sole
dominion over the property. The aforequoted provision therefore applies.

It is the view of the respondent Court that the petitioner, in taking over the property, did so either on behalf of his co-
heirs, in which event, he had constituted himself a negotiorum gestor under Article 2144 of the Civil Code, or for his
exclusive benefit, in which case, he is guilty of fraud, and must act as trustee, the private respondents being the
beneficiaries, under the Article 1456. The evidence, of course, points to the second alternative the petitioner having
asserted claims of exclusive ownership over the property and having acted in fraud of his co-heirs. He cannot
therefore be said to have assume the mere management of the property abandoned by his co-heirs, the situation
Article 2144 of the Code contemplates. In any case, as the respondent Court itself affirms, the result would be the
same whether it is one or the other. The petitioner would remain liable to the Private respondents, his co-heirs.

This Court is not unaware of the well-established principle that prescription bars any demand on property (owned in
common) held by another (co-owner) following the required number of years. In that event, the party in possession
acquires title to the property and the state of co-ownership is ended . 8 In the case at bar, the property was registered
in 1955 by the petitioner, solely in his name, while the claim of the private respondents was presented in 1974. Has
prescription then, set in?

We hold in the negative. Prescription, as a mode of terminating a relation of co-ownership, must have been preceded
by repudiation (of the co-ownership). The act of repudiation, in turn is subject to certain conditions: (1) a co-owner
repudiates the co-ownership; (2) such an act of repudiation is clearly made known to the other co-owners; (3) the
evidence thereon is clear and conclusive, and (4) he has been in possession through open, continuous, exclusive,
and notorious possession of the property for the period required by law. 9

The instant case shows that the petitioner had not complied with these requisites. We are not convinced that he had
repudiated the co-ownership; on the contrary, he had deliberately kept the private respondents in the dark by feigning
sole heirship over the estate under dispute. He cannot therefore be said to have "made known" his efforts to deny the
co-ownership. Moreover, one of the private respondents, Emeteria Asejo, is occupying a portion of the land up to the
present, yet, the petitioner has not taken pains to eject her therefrom. As a matter of fact, he sought to recover
possession of that portion Emeteria is occupying only as a counterclaim, and only after the private respondents had
first sought judicial relief.

It is true that registration under the Torrens system is constructive notice of title, 10 but it has likewise been our
holding that the Torrens title does not furnish a shield for fraud. 11 It is therefore no argument to say that the act of
registration is equivalent to notice of repudiation, assuming there was one, notwithstanding the long-standing rule that
registration operates as a universal notice of title.

For the same reason, we cannot dismiss the private respondents' claims commenced in 1974 over the estate
registered in 1955. While actions to enforce a constructive trust prescribes in ten years, 12 reckoned from the date of
the registration of the property, 13 we, as we said, are not prepared to count the period from such a date in this case.
We note the petitioner's sub rosa efforts to get hold of the property exclusively for himself beginning with his
fraudulent misrepresentation in his unilateral affidavit of extrajudicial settlement that he is "the only heir and child of
his mother Feliza with the consequence that he was able to secure title in his name also." 14 Accordingly, we hold
that the right of the private respondents commenced from the time they actually discovered the petitioner's act of
defraudation. 15 According to the respondent Court of Appeals, they "came to know [of it] apparently only during the
progress of the litigation." 16 Hence, prescription is not a bar.

Moreover, and as a rule, prescription is an affirmative defense that must be pleaded either in a motion to dismiss or in
the answer otherwise it is deemed waived, 17 and here, the petitioner never raised that defense. 18 There are
recognized exceptions to this rule, but the petitioner has not shown why they apply.

WHEREFORE, there being no reversible error committed by the respondent Court of Appeals, the petition is
DENIED. The Decision sought to be reviewed is hereby AFFIRMED in toto. No pronouncement as to costs.

SO ORDERED,

Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur.



Footnotes

1 GREENE, FELIX, THE ENEMY 234 (1971).

2 Gatmaitan, Magno, Acting Pres. J.; Domondon, Sixto and Reyes, Samuel, JJ., Concurring.

3 Rollo, 14-15.

4 Solidum, Arsenic, Presiding Judge, Court of First Instance of Albay Civil Case no, 5029.

5 CIVIL CODE, art. 1612; CIVIL CODE (1889), art. 1514.

6 Supra, art. 489.

7 Supra, art. 1607.

8 The modes of terminating a co-ownership other than by prescription are partition (CIVIL CODE, arts. 494; 1079,
1082), merger or consolidation, and loss of the thing (3 Manresa 486).

9 Santos v. Heirs of Crisostomo, 41 Phil. 3342 (1921); Bargayo v. Camumot, 40 Phil. 857 (1920).

10 Pres. Decree No. 1529, sec. 31.

11 Amerol v. Bagumbaran, G.R. No. 33261, September 30, 1987.

12 Supra.

13 Gerona v. De Guzman, No. L-19060, May 29, 1964, 11 SCRA 153 (1964).

14 Rollo, id., 14,

15 Gerona v. De Guzman, supra.

16 Rollo, id., 18.

17 RULES OF COURT, Rule 9, sec. 2. A party need not plead the statute of limitations in a responsive pleading (or
motion to dismiss) where the complaint itself shows that the claims have prescribed [Ferrer v. Ericta, No. L-41767,
August 23, 1978, 84 SCRA 705 (1978)]. Likewise, it has been held that where the defendant had no way of knowing
that the claim advanced by the plaintiff had prescribed, his failure to invoke the statute (in his answer or motion to
dismiss) does not constitute a waiver of such a defense [Guanzo v. Ramirez, 32 Phil. 492 (1914)]. In another case,
we said that prescription need not be pleaded specifically in an answer where the evidence itself shows that
prescription bars the plaintiff's claims [Philippine National Bank v. Perez, No. L-20412, February 28, 1966, 16 SCRA
270 (1966); see also Chua Lanko v. Dioso, 97 [Phil. 821 (1955); Philippine National Bank v. Pacific Commission
House, No. L-22675, March 28, 1969, 27 SCRA 766 (1969)].

18 Rollo, id., 18.


Andres vs. Manufacturers Hanover & Trust Corporation, 177 SCRA
618, G.R. No. 82670 September 15, 1989

Andres v. Mantrust, 177 SCRA 618, G.R. No. 82670 September 15, 1989

DOMETILA M. ANDRES, doing business under the name and style "IRENE'S WEARING APPAREL,"
petitioner,
vs.
MANUFACTURERS HANOVER & TRUST CORPORATION and COURT OF APPEALS, respondents.

Roque A. Tamayo for petitioner.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for private respondent.


CORTES, J.:

Assailed in this petition for review on certiorari is the judgment of the Court of Appeals, which, applying the doctrine of
solutio indebiti, reversed the decision of the Regional Trial Court, Branch CV, Quezon City by deciding in favor of
private respondent.

Petitioner, using the business name "Irene's Wearing Apparel," was engaged in the manufacture of ladies garments,
children's wear, men's apparel and linens for local and foreign buyers. Among its foreign buyers was Facets
Funwear, Inc. (hereinafter referred to as FACETS) of the United States.

In the course of the business transaction between the two, FACETS from time to time remitted certain amounts of
money to petitioner in payment for the items it had purchased. Sometime in August 1980, FACETS instructed the
First National State Bank of New Jersey, Newark, New Jersey, U.S.A. (hereinafter referred to as FNSB) to transfer
$10,000.00 to petitioner via Philippine National Bank, Sta. Cruz Branch, Manila (hereinafter referred to as PNB).

Acting on said instruction, FNSB instructed private respondent Manufacturers Hanover and Trust Corporation to
effect the above- mentioned transfer through its facilities and to charge the amount to the account of FNSB with
private respondent. Although private respondent was able to send a telex to PNB to pay petitioner $10,000.00
through the Pilipinas Bank, where petitioner had an account, the payment was not effected immediately because the
payee designated in the telex was only "Wearing Apparel." Upon query by PNB, private respondent sent PNB
another telex dated August 27, 1980 stating that the payment was to be made to "Irene's Wearing Apparel." On
August 28, 1980, petitioner received the remittance of $10,000.00 through Demand Draft No. 225654 of the PNB.

Meanwhile, on August 25, 1980, after learning about the delay in the remittance of the money to petitioner, FACETS
informed FNSB about the situation. On September 8, 1980, unaware that petitioner had already received the
remittance, FACETS informed private respondent about the delay and at the same time amended its instruction by
asking it to effect the payment through the Philippine Commercial and Industrial Bank (hereinafter referred to as
PCIB) instead of PNB.

Accordingly, private respondent, which was also unaware that petitioner had already received the remittance of
$10,000.00 from PNB instructed the PCIB to pay $10,000.00 to petitioner. Hence, on September 11, 1980, petitioner
received a second $10,000.00 remittance.

Private respondent debited the account of FNSB for the second $10,000.00 remittance effected through PCIB.
However, when FNSB discovered that private respondent had made a duplication of the remittance, it asked for a
recredit of its account in the amount of $10,000.00. Private respondent complied with the request.

Private respondent asked petitioner for the return of the second remittance of $10,000.00 but the latter refused to
pay. On May 12, 1982 a complaint was filed with the Regional Trial Court, Branch CV, Quezon City which was
decided in favor of petitioner as defendant. The trial court ruled that Art. 2154 of the New Civil Code is not applicable
to the case because the second remittance was made not by mistake but by negligence and petitioner was not
unjustly enriched by virtue thereof [Record, p. 234]. On appeal, the Court of Appeals held that Art. 2154 is applicable
and reversed the RTC decision. The dispositive portion of the Court of Appeals' decision reads as follows:

WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE and another one entered in favor of
plaintiff-appellant and against defendant-appellee Domelita (sic) M. Andres, doing business under the name and style
"Irene's Wearing Apparel" to reimburse and/or return to plaintiff-appellant the amount of $10,000.00, its equivalent in
Philippine currency, with interests at the legal rate from the filing of the complaint on May 12, 1982 until the whole
amount is fully paid, plus twenty percent (20%) of the amount due as attomey's fees; and to pay the costs.

With costs against defendant-appellee.

SO ORDERED. [Rollo, pp. 29-30.]

Thereafter, this petition was filed. The sole issue in this case is whether or not the private respondent has the right to
recover the second $10,000.00 remittance it had delivered to petitioner. The resolution of this issue would hinge on
the applicability of Art. 2154 of the New Civil Code which provides that:

Art. 2154. If something received when there is no right to demand it, and it was unduly delivered through mistake, the
obligation to return it arises.

This provision is taken from Art. 1895 of the Spanish Civil Code which provided that:

Art. 1895. If a thing is received when there was no right to claim it and which, through an error, has been unduly
delivered, an obligation to restore it arises.

In Velez v. Balzarza, 73 Phil. 630 (1942), the Court, speaking through Mr. Justice Bocobo explained the nature of this
article thus:

Article 1895 [now Article 2154] of the Civil Code abovequoted, is therefore applicable. This legal provision, which
determines the quasi-contract of solution indebiti, is one of the concrete manifestations of the ancient principle that no
one shall enrich himself unjustly at the expense of another. In the Roman Law Digest the maxim was formulated thus:
"Jure naturae acquum est, neminem cum alterius detrimento et injuria fieri locupletiorem." And the Partidas declared:
"Ninguno non deue enriquecerse tortizeramente con dano de otro." Such axiom has grown through the centuries in
legislation, in the science of law and in court decisions. The lawmaker has found it one of the helpful guides in
framing statutes and codes. Thus, it is unfolded in many articles scattered in the Spanish Civil Code. (See for
example, articles, 360, 361, 464, 647, 648, 797, 1158, 1163, 1295, 1303, 1304, 1893 and 1895, Civil Code.) This
time-honored aphorism has also been adopted by jurists in their study of the conflict of rights. It has been accepted
by the courts, which have not hesitated to apply it when the exigencies of right and equity demanded its assertion. It
is a part of that affluent reservoir of justice upon which judicial discretion draws whenever the statutory laws are
inadequate because they do not speak or do so with a confused voice. [at p. 632.]

For this article to apply the following requisites must concur: "(1) that he who paid was not under obligation to do so;
and, (2) that payment was made by reason of an essential mistake of fact" [City of Cebu v. Piccio, 110 Phil. 558, 563
(1960)].

It is undisputed that private respondent delivered the second $10,000.00 remittance. However, petitioner contends
that the doctrine of solutio indebiti, does not apply because its requisites are absent.

First, it is argued that petitioner had the right to demand and therefore to retain the second $10,000.00 remittance. It
is alleged that even after the two $10,000.00 remittances are credited to petitioner's receivables from FACETS, the
latter allegedly still had a balance of $49,324.00. Hence, it is argued that the last $10,000.00 remittance being in
payment of a pre-existing debt, petitioner was not thereby unjustly enriched.

The contention is without merit.

The contract of petitioner, as regards the sale of garments and other textile products, was with FACETS. It was the
latter and not private respondent which was indebted to petitioner. On the other hand, the contract for the transmittal
of dollars from the United States to petitioner was entered into by private respondent with FNSB. Petitioner, although
named as the payee was not privy to the contract of remittance of dollars. Neither was private respondent a party to
the contract of sale between petitioner and FACETS. There being no contractual relation between them, petitioner
has no right to apply the second $10,000.00 remittance delivered by mistake by private respondent to the outstanding
account of FACETS.

Petitioner next contends that the payment by respondent bank of the second $10,000.00 remittance was not made by
mistake but was the result of negligence of its employees. In connection with this the Court of Appeals made the
following finding of facts:

The fact that Facets sent only one remittance of $10,000.00 is not disputed. In the written interrogatories sent to the
First National State Bank of New Jersey through the Consulate General of the Philippines in New York, Adelaide C.
Schachel, the investigation and reconciliation clerk in the said bank testified that a request to remit a payment for
Facet Funwear Inc. was made in August, 1980. The total amount which the First National State Bank of New Jersey
actually requested the plaintiff-appellant Manufacturers Hanover & Trust Corporation to remit to Irene's Wearing
Apparel was US $10,000.00. Only one remittance was requested by First National State Bank of New Jersey as per
instruction of Facets Funwear (Exhibit "J", pp. 4-5).

That there was a mistake in the second remittance of US $10,000.00 is borne out by the fact that both remittances
have the same reference invoice number which is 263 80. (Exhibits "A-1- Deposition of Mr. Stanley Panasow" and "A-
2-Deposition of Mr. Stanley Panasow").

Plaintiff-appellant made the second remittance on the wrong assumption that defendant-appellee did not receive the
first remittance of US $10,000.00. [Rollo, pp. 26-27.]

It is evident that the claim of petitioner is anchored on the appreciation of the attendant facts which petitioner would
have this Court review. The Court holds that the finding by the Court of Appeals that the second $10,000.00
remittance was made by mistake, being based on substantial evidence, is final and conclusive. The rule regarding
questions of fact being raised with this Court in a petition for certiorari under Rule 45 of the Revised Rules of Court
has been stated in Remalante v. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus:

The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule 45 of the
Revised Rules of Court. "The jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is
limited to reviewing and revising the errors of law imputed to it, its findings of fact being conclusive" [Chan v. Court of
Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions]. This Court has
emphatically declared that "it is not the function of the Supreme Court to analyze or weigh such evidence all over
again, its jurisdiction being limited to reviewing errors of law that might have been committed by the lower court"
[Tiongco v. De la Merced, G.R. No. L-24426, July 25, 1974, 58 SCRA 89; Corona v. Court of Appeals, G.R. No. L-
62482, April 28, 1983, 121 SCRA 865; Baniqued v. Court of Appeals, G. R. No. L-47531, February 20, 1984, 127
SCRA 596]. "Barring, therefore, a showing that the findings complained of are totally devoid of support in the record,
or that they are so glaringly erroneous as to constitute serious abuse of discretion, such findings must stand, for this
Court is not expected or required to examine or contrast the oral and documentary evidence submitted by the parties"
[Santa Ana, Jr. v. Hernandez, G.R. No. L-16394, December 17, 1966, 18 SCRA 9731. [at pp. 144-145.]

Petitioner invokes the equitable principle that when one of two innocent persons must suffer by the wrongful act of a
third person, the loss must be borne by the one whose negligence was the proximate cause of the loss.

The rule is that principles of equity cannot be applied if there is a provision of law specifically applicable to a case
[Phil. Rabbit Bus Lines, Inc. v. Arciaga, G.R. No. L-29701, March 16, 1987,148 SCRA 433; Zabat, Jr. v. Court of
Appeals, G.R. No. L36958, July 10, 1986, 142 SCRA 587; Rural Bank of Paranaque, Inc. v. Remolado, G.R. No.
62051, March 18, 1985, 135 SCRA 409; Cruz v. Pahati, 98 Phil. 788 (1956)]. Hence, the Court in the case of De
Garcia v. Court of Appeals, G.R. No. L-20264, January 30, 1971, 37 SCRA 129, citing Aznar v. Yapdiangco, G.R. No.
L-18536, March 31, 1965, 13 SCRA 486, held:

... The common law principle that where one of two innocent persons must suffer by a fraud perpetrated by another,
the law imposes the loss upon the party who, by his misplaced confidence, has enabled the fraud to be committed,
cannot be applied in a case which is covered by an express provision of the new Civil Code, specifically Article 559.
Between a common law principle and a statutory provision, the latter must prevail in this jurisdiction. [at p. 135.]

Having shown that Art. 2154 of the Civil Code, which embodies the doctrine of solutio indebiti, applies in the case at
bar, the Court must reject the common law principle invoked by petitioner.

Finally, in her attempt to defeat private respondent's claim, petitioner makes much of the fact that from the time the
second $10,000.00 remittance was made, five hundred and ten days had elapsed before private respondent
demanded the return thereof. Needless to say, private respondent instituted the complaint for recovery of the second
$10,000.00 remittance well within the six years prescriptive period for actions based upon a quasi-contract [Art. 1145
of the New Civil Code].

WHEREFORE, the petition is DENIED and the decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr. and Bidin, JJ., concur.

Feliciano, J., is on leave.


Puyat & Sons, Inc. vs. City of Manila, 7 SCRA 970, No. L-17447, April
30, 1963

Puyat & Sons v. Manila, 7 SCRA 970, G.R. No. L-17447 April 30, 1963

GONZALO PUYAT & SONS, INC., plaintiff-appelle,
vs.
CITY OF MANILA AND MARCELO SARMIENTO, as City Treasurer of Manila, defendants-appellants

Feria, Manglapus & Associates for plainttiff-appelle.Asst. City Fiscal Manuel T. Reyes for defendants-
appellants.

PAREDES, J.:

This is an appeal from the judgment of the CFI of Manila, the dispostive portion of which reads:

"xxx Of the payments made by the plaintiff, only that made on October 25, 1950 in the amount of P1,250.00 has
prescribed Payments made in 1951 and thereafter are still recoverable since the extra-judicial demand made on
October 30, 1956 was well within the six-year prescriptive period of the New CivilCode.

In view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiff, ordering the defendants
to refund the amount of P29,824.00, without interest. No costs.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this
Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this
stipulation of facts. 1wph1.t

Defendants' counterclaim is hereby dismissed for not having been substantiated."

On August 11, 1958, the plaintiff Gonzalo Puyat & Sons, Inc., filed an action for refund of Retail DealerlsTaxes paid
by it, corresponding to the first Quarter of 1950 up to the third Quarter of 1956, amounting to P33,785.00, against the
City of Manila and its City Treasurer.The case was submitted on the following stipulation of facts, to wit--

"1. That the plaintiff is a corporation duly organized and existing according to the laws of the Philippines, with offices
at Manila; while defendant City Manila is a Municipal Corporation duly organized in accordance with the laws of the
Philippines, and defendant Marcelino Sarmiento is the dulyqualified incumbent City Treasurer of Manila;

"2. That plaintiff is engaged in the business of manufacturing and selling all kinds of furniture at its factory at 190
Rodriguez-Arias, San Miguel, Manila, and has a display room located at 604-606 Rizal Avenue, Manila, wherein it
displays the various kind of furniture manufactured by it and sells some goods imported by it, such as billiard balls,
bowling balls and other accessories;

"3. That acting pursuant to the provisions of Sec. 1. group II, of Ordinance No. 3364, defendant City Treasurer of
Manilaassessed from plaintiff retail dealer's tax corresponding to the quarters hereunder stated on the sales of
furniture manufactured and sold by it at its factory site, all of which assessments plaintiff paid without protest in the
erroneous belief that it was liable therefor, on the dates and in the amount enumerated herein below:

Period Date Paid O.R. No. Amount
Assessed
and Paid.
First Quarter 1950 Jan. 25, 1950 436271X P1,255.00
Second Quarter 1950 Apr. 25, 1950 215895X 1,250.00
Third Quarter 1950 Jul. 25, 1950 243321X 1,250.00
Fourth Quarter 1950 Oct. 25, 1950 271165X 1,250.00
(Follows the assessment for different quarters in 1951, 1952,
1953, 1954 and 1955, fixing the same amount quarterly.) x x x..

First Quarter 1956 Jan. 25, 1956 823047X 1,250.00
Second Quarter 1956 Apr. 25, 1956 855949X 1,250.00
Third Quarter 1956 Jul. 25, 1956 880789X 1,250.00
T O T A L . . . . . . . . . . . . .
--------------------------------------------------------------------------------
P33,785.00
===========

"4. That plaintiff, being a manufacturer of various kinds of furniture, is exempt from the payment of taxes imposed
under the provisions of Sec. 1, Group II, of Ordinance No. 3364,which took effect on September 24, 1956, on the sale
of the various kinds of furniture manufactured by it pursuant to the provisions of Sec. 18(n) of Republic Act No. 409
(Revised Charter of Manila), as restated in Section 1 of Ordinance No.3816.

"5. That, however, plaintiff, is liable for the payment of taxes prescribed in Section 1, Group II or Ordinance No.
3364mas amended by Sec. 1, Group II of Ordinance No. 3816, which took effect on September 24, 1956, on the
sales of imported billiard balls, bowling balls and other accessories at its displayroom. The taxes paid by the plaintiff
on the sales of said article are as follows:

x x x x x x x x x

"6. That on October 30, 1956, the plaintiff filed with defendant City Treasurer of Manila, a formal request for refund of
the retail dealer's taxes unduly paid by it as aforestated in paragraph 3, hereof.

"7. That on July 24, 1958, the defendant City Treasurer of Maniladefinitely denied said request for refund.

"8. Hence on August 21, 1958, plaintiff filed the present complaint.

"9. Based on the above stipulation of facts, the legal issues to be resolved by this Honorable Court are: (1) the period
of prescription applicable in matters of refund of municipal taxes errenously paid by a taxpayer and (2) refund of taxes
not paid under protest. x x x."

Said judgment was directly appealed to this Court on two dominant issues to wit: (1) Whether or not the amounts paid
by plaintiff-appelle, as retail dealer's taxes under Ordinance 1925, as amended by Ordinance No. 3364of the City of
Manila, without protest, are refundable;(2) Assuming arguendo, that plaintiff-appellee is entitled to the refund of the
retail taxes in question, whether or not the claim for refund filed in October 1956, in so far as said claim refers to
taxes paid from 1950 to 1952 has already prescribed. .

Under the first issue, defendants-appellants contend tht the taxes in question were voluntarily paid by appellee
company and since, in this jurisdiction, in order that a legal basis arise for claim of refund of taxes erroneously
assessed, payment thereof must be made under protest, and this being a condition sine qua non, and no protest
having been made, -- verbally or in writing, therebyindicating that the payment was voluntary, the action must fail.
Cited in support of the above contention, are the cases of Zaragoza vs. Alfonso, 46 Phil. 160-161, and Gavino v.
Municipality of Calapan, 71 Phil. 438..

In refutation of the above stand of appellants, appellee avers tht the payments could not have been voluntary.At
most, they were paid "mistakenly and in good faith"and "without protest in the erroneous belief that it was liable
thereof." Voluntariness is incompatible with protest and mistake. It submits that this is a simple case of "solutio
indebiti"..

Appellants do not dispute the fact that appellee-companyis exempted from the payment of the tax in question.This is
manifest from the reply of appellant City Treasurer stating that sales of manufactured products at the factory site are
not taxable either under the Wholesalers Ordinance or under the Retailers' Ordinance. With this admission, it would
seem clear that the taxes collected from appellee were paid, thru an error or mistake, which places said act of
payment within the pale of the new Civil Code provision on solutio indebiti. The appellant City of Manila, at the very
start, notwithstanding the Ordinance imposing the Retailer's Tax, had no right to demand payment thereof..

"If something is received when there is no right to demand it, and it was unduly delivered through mistake, the
obligationto retun it arises" (Art. 2154, NCC)..

Appelle categorically stated that the payment was not voluntarily made, (a fact found also by the lower court),but on
the erronoues belief, that they were due. Under this circumstance, the amount paid, even without protest is
recoverable. "If the payer was in doubt whether the debt was due, he may recover if he proves that it was not due"
(Art. 2156, NCC). Appellee had duly proved that taxes were not lawfully due. There is, therefore, no doubt that the
provisions of solutio indebtiti, the new Civil Code, apply to the admitted facts of the case..

With all, appellant quoted Manresa as saying: "x x x De la misma opinion son el Sr. Sanchez Roman y el Sr. Galcon,
et cual afirma que si la paga se hizo por error de derecho, ni existe el cuasi-contrato ni esta obligado a la restitucion
el que cobro, aunque no se debiera lo que se pago" (Manresa, Tomo 12, paginas 611-612). This opinion, however,
has already lost its persuasiveness, in view of the provisions of the Civil Code, recognizing "error de derecho" as a
basis for the quasi-contract, of solutio indebiti. .

"Payment by reason of a mistake in the contruction or application of a doubtful or difficult question of law may come
within the scope of the preceding article" (Art. 21555)..

There is no gainsaying the fact that the payments made by appellee was due to a mistake in the construction of a
doubtful question of law. The reason underlying similar provisions, as applied to illegal taxation, in the United States,
is expressed in the case of Newport v. Ringo, 37 Ky. 635, 636; 10 S.W. 2, in the following manner:.

"It is too well settled in this state to need the citation of authority that if money be paid through a clear mistake of law
or fact, essentially affecting the rights of the parties, and which in law or conscience was not payable, and should not
be retained by the party receiving it, it may be recovered. Both law and sound morality so dictate. Especially should
this be the rule as to illegal taxation. The taxpayer has no voice in the impositionof the burden. He has the right to
presume that the taxing power has been lawfully exercised. He should not be required to know more than those in
authority over him, nor should he suffer loss by complying with what he bona fide believe to be his duty as a good
citizen. Upon the contrary, he should be promoted to its ready performance by refunding to him any legal exaction
paid by him in ignorance of its illegality; and, certainly, in such a case, if be subject to a penalty for nonpayment, his
compliance under belief of its legality, and without awaitinga resort to judicial proceedings should not be regrded in
law as so far voluntary as to affect his right of recovery.".

"Every person who through an act or performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal grounds, shall return the same to him"(Art.
22, Civil Code). It would seems unedifying for the government, (here the City of Manila), that knowing it has no right
at all to collect or to receive money for alleged taxes paid by mistake, it would be reluctant to return the same. No one
should enrich itself unjustly at the expense of another (Art. 2125, Civil Code)..

Admittedly, plaintiff-appellee paid the tax without protest.Equally admitted is the fact that section 76 of the Charter of
Manila provides that "No court shall entertain any suit assailing the validity of tax assessed under this article until the
taxpayer shall have paid, under protest the taxes assessed against him, xx". It should be noted, however, that the
article referred to in said section is Article XXI, entitled Department of Assessment and the sections thereunder
manifestly show that said article and its sections relate to asseessment, collection and recovery of real estate taxes
only. Said section 76, therefor, is not applicable to the case at bar, which relates to the recover of retail dealer taxes..

In the opinion of the Secretary of Justice (Op. 90,Series of 1957, in a question similar to the case at bar, it was held
that the requiredment of protest refers only to the payment of taxes which are directly imposed by the charter itself,
that is, real estate taxes, which view was sustained by judicial and administrative precedents, one of which is the
case of Medina, et al., v. City of Baguio, G.R. No. L-4269, Aug. 29, 1952. In other words, protest is not necessary for
the recovery of retail dealer's taxes, like the present, because they are not directly imposed by the charter. In the
Medina case, the Charter of Baguio (Chap. 61, Revised Adm. Code), provides that "no court shall entertain any suit
assailing the validity of a tax assessed unde this charter until the tax-payer shall have paid, under protest, the taxes
assessed against him (sec.25474[b], Rev. Adm. Code), a proviso similar to section 76 of the Manila Charter. The
refund of specific taxes paid under a void ordinance was ordered, although it did not appear that payment thereof was
made under protest..

In a recent case, We said: "The appellants argue that the sum the refund of which is sought by the appellee, was not
paid under protest and hence is not refundable. Again, the trial court correctly held that being unauthorized, it is not a
tax assessed under the Charter of the Appellant City of Davao and for that reason, no protest is necessary for a claim
or demand for its refund" (Citing the Medina case, supra; East Asiatic Co., Ltd. v. City of Davao, G.R. No. L-16253,
Aug. 21, 1962). Lastly, being a case of solutio indebiti, protest is not required as a condition sine qua non for its
application..

The next issue in discussion is that of prescription. Appellants maintain that article 1146 (NCC), which provides for a
period of four (4) years (upon injury to the rights of the plaintiff), apply to the case. On the other hand, appellee
contends that provisions of Act 190 (Code of Civ. Procedure) should apply, insofar as payments made before the
effectivity of the New Civil Code on August 30, 1950, the period of which is ten (10) years, (Sec. 40,Act No. 190;
Osorio v. Tan Jongko, 51 O.G. 6211) and article 1145 (NCC), for payments made after said effectivity, providing for a
period of six (6) years (upon quasi-contracts like solutio indebiti). Even if the provisionsof Act No. 190 should apply to
those payments made before the effectivity of the new Civil Code, because "prescription already runnig before the
effectivity of this Code shall be governed by laws previously in force x x x" (art. 1116, NCC), for payments made after
said effectivity,providing for a period of six (6) years (upon quasi-contracts like solutio indebiti). Even if the provisions
of Act No. 190should apply to those payments made before the effectivity of the new Civil Code, because
"prescription already running before the effectivity of of this Code shall be govern by laws previously in force xxx "
(Art. 1116, NCC), Still payments made before August 30, 1950 are no longer recoverable in view of the second
paragraph of said article (1116), which provides:"but if since the time this Code took effect the entire period herein
required for prescription should elapse the present Code shall be applicable even though by the former laws a longer
period might be required". Anent the payments made after August 30, 1950, it is abvious that the action has
prescribed with respect to those made before October 30, 1950 only, considering the fact that the prescription of
action is interrupted xxx when is a writteen extra-judicial demand x x x" (Art. 1155, NCC), and the written demand in
the case at bar was made on October 30, 1956 (Stipulation of Facts).MODIFIED in the sense that only payments
made on or after October 30, 1950 should be refunded, the decision appealed from is affirmed, in all other respects.
No costs. .

Bengzon, C.J., Bautista Angelo, Labrador, Concepcion,Dizon, Regala and Makalintal, JJ., concur.
Padilla, Reyes, J.B.L., and Barrera, JJ., too no part.
Decision affirmed.

Sagrada Orden de Predicadores del Santisimo Rosario de Filipinas
vs. National Coconut Corporation, 91 Phil. 503 , No. L-3756, June 30,
1952

G.R. No. L-3756 June 30, 1952
SAGRADA ORDEN DE PREDICADORES DEL SANTISMO ROSARIO DE FILIPINAS, plaintiff-appellee,
vs.
NATIONAL COCONUT CORPORATION, defendant-appellant.
First Assistant Corporate Counsel Federico C. Alikpala and Assistant Attorney Augusto Kalaw for appellant.
Ramirez and Ortigas for appellee.
LABRADOR, J .:
This is an action to recover the possession of a piece of real property (land and warehouses) situated in Pandacan
Manila, and the rentals for its occupation and use. The land belongs to the plaintiff, in whose name the title was
registered before the war. On January 4, 1943, during the Japanese military occupation, the land was acquired by a
Japanese corporation by the name of Taiwan Tekkosho for the sum of P140,00, and thereupon title thereto issued in
its name (transfer certificate of title No. 64330, Register of Deeds, Manila). After liberation, more specifically on April
4, 1946, the Alien Property Custodian of the United States of America took possession, control, and custody thereof
under section 12 of the Trading with the Enemy Act, 40 Stat., 411, for the reason that it belonged to an enemy
national. During the year 1946 the property was occupied by the Copra Export Management Company under a
custodianship agreement with United States Alien Property Custodian (Exhibit G), and when it vacated the property it
was occupied by the defendant herein. The Philippine Government made representations with the Office Alien
Property Custodian for the use of property by the Government (see Exhibits 2, 2-A, 2-B, and 1). On March 31, 1947,
the defendant was authorized to repair the warehouse on the land, and actually spent thereon the repairs the sum of
P26,898.27. In 1948, defendant leased one-third of the warehouse to one Dioscoro Sarile at a monthly rental of
P500, which was later raised to P1,000 a month. Sarile did not pay the rents, so action was brought against him. It is
not shown, however, if the judgment was ever executed.
Plaintiff made claim to the property before the Alien Property Custodian of the United States, but as this was denied,
it brought an action in court (Court of First Instance of Manila, civil case No. 5007, entitled "La Sagrada Orden
Predicadores de la Provinicia del Santisimo Rosario de Filipinas," vs. Philippine Alien Property Administrator,
defendant, Republic of the Philippines, intervenor) to annul the sale of property of Taiwan Tekkosho, and recover its
possession. The Republic of the Philippines was allowed to intervene in the action. The case did not come for trial
because the parties presented a joint petition in which it is claimed by plaintiff that the sale in favor of the Taiwan
Tekkosho was null and void because it was executed under threats, duress, and intimidation, and it was agreed that
the title issued in the name of the Taiwan Tekkosho be cancelled and the original title of plaintiff re-issued; that the
claims, rights, title, and interest of the Alien Property Custodian be cancelled and held for naught; that the occupant
National Coconut Corporation has until February 28, 1949, to recover its equipment from the property and vacate the
premises; that plaintiff, upon entry of judgment, pay to the Philippine Alien Property Administration the sum of
P140,000; and that the Philippine Alien Property Administration be free from responsibility or liability for any act of the
National Coconut Corporation, etc. Pursuant to the agreement the court rendered judgment releasing the defendant
and the intervenor from liability, but reversing to the plaintiff the right to recover from the National Coconut
Corporation reasonable rentals for the use and occupation of the premises. (Exhibit A-1.)
The present action is to recover the reasonable rentals from August, 1946, the date when the defendant began to
occupy the premises, to the date it vacated it. The defendant does not contest its liability for the rentals at the rate of
P3,000 per month from February 28, 1949 (the date specified in the judgment in civil case No. 5007), but resists the
claim therefor prior to this date. It interposes the defense that it occupied the property in good faith, under no
obligation whatsoever to pay rentals for the use and occupation of the warehouse. Judgment was rendered for the
plaintiff to recover from the defendant the sum of P3,000 a month, as reasonable rentals, from August, 1946, to the
date the defendant vacates the premises. The judgment declares that plaintiff has always been the owner, as the sale
of Japanese purchaser was void ab initio; that the Alien Property Administration never acquired any right to the
property, but that it held the same in trust until the determination as to whether or not the owner is an enemy citizen.
The trial court further declares that defendant cannot claim any better rights than its predecessor, the Alien Property
Administration, and that as defendant has used the property and had subleased portion thereof, it must pay
reasonable rentals for its occupation.
Against this judgment this appeal has been interposed, the following assignment of error having been made on
defendant-appellant's behalf:
The trial court erred in holding the defendant liable for rentals or compensation for the use and occupation of the
property from the middle of August, 1946, to December 14, 1948.
1. Want to "ownership rights" of the Philippine Alien Property Administration did not render illegal or invalidate its
grant to the defendant of the free use of property.
2. the decision of the Court of First Instance of Manila declaring the sale by the plaintiff to the Japanese purchaser
null and void ab initio and that the plaintiff was and has remained as the legal owner of the property, without legal
interruption, is not conclusive.
3. Reservation to the plaintiff of the right to recover from the defendant corporation not binding on the later;
4. Use of the property for commercial purposes in itself alone does not justify payment of rentals.
5. Defendant's possession was in good faith.
6. Defendant's possession in the nature of usufruct.
In reply, plaintiff-appellee's counsel contends that the Philippine Allien Property Administration (PAPA) was a mere
administrator of the owner (who ultimately was decided to be plaintiff), and that as defendant has used it for
commercial purposes and has leased portion of it, it should be responsible therefore to the owner, who had been
deprived of the possession for so many years. (Appellee's brief, pp. 20, 23.)
We cannot understand how the trial court, from the mere fact that plaintiff-appellee was the owner of the property
and the defendant-appellant the occupant, which used for its own benefit but by the express permission of the Alien
Property Custodian of the United States, so easily jumped to the conclusion that the occupant is liable for the value of
such use and occupation. If defendant-appellant is liable at all, its obligations, must arise from any of the four sources
of obligations, namley, law, contract or quasi-contract, crime, or negligence. (Article 1089, Spanish Civil Code.)
Defendant-appellant is not guilty of any offense at all, because it entered the premises and occupied it with the
permission of the entity which had the legal control and administration thereof, the Allien Property Administration.
Neither was there any negligence on its part. There was also no privity (of contract or obligation) between the Alien
Property Custodian and the Taiwan Tekkosho, which had secured the possession of the property from the plaintiff-
appellee by the use of duress, such that the Alien Property Custodian or its permittee (defendant-appellant) may be
held responsible for the supposed illegality of the occupation of the property by the said Taiwan Tekkosho. The Allien
Property Administration had the control and administration of the property not as successor to the interests of the
enemy holder of the title, the Taiwan Tekkosho, but by express provision of law (Trading with the Enemy Act of the
United States, 40 Stat., 411; 50 U.S.C.A., 189). Neither is it a trustee of the former owner, the plaintiff-appellee
herein, but a trustee of then Government of the United States (32 Op. Atty. Gen. 249; 50 U.S.C.A. 283), in its own
right, to the exclusion of, and against the claim or title of, the enemy owner. (Youghioheny & Ohio Coal Co. vs.
Lasevich [1920], 179 N.W., 355; 171 Wis., 347; U.S.C.A., 282-283.) From August, 1946, when defendant-appellant
took possession, to the late of judgment on February 28, 1948, Allien Property Administration had the absolute
control of the property as trustee of the Government of the United States, with power to dispose of it by sale or
otherwise, as though it were the absolute owner. (U.S vs. Chemical Foundation [C.C.A. Del. 1925], 5 F. [2d], 191; 50
U.S.C.A., 283.) Therefore, even if defendant-appellant were liable to the Allien Property Administration for rentals,
these would not accrue to the benefit of the plaintiff-appellee, the owner, but to the United States Government.
But there is another ground why the claim or rentals cannot be made against defendant-appellant. There was no
agreement between the Alien Property Custodian and the defendant-appellant for the latter to pay rentals on the
property. The existence of an implied agreement to that effect is contrary to the circumstances. The copra Export
Management Company, which preceded the defendant-appellant, in the possession and use of the property, does not
appear to have paid rentals therefor, as it occupied it by what the parties denominated a "custodianship agreement,"
and there is no provision therein for the payment of rentals or of any compensation for its custody and or occupation
and the use. The Trading with the Enemy Act, as originally enacted, was purely a measure of conversation, hence, it
is very unlikely that rentals were demanded for the use of the property. When the National coconut Corporation
succeeded the Copra Export Management Company in the possession and use of the property, it must have been
also free from payment of rentals, especially as it was Government corporation, and steps where then being taken by
the Philippine Government to secure the property for the National Coconut Corporation. So that the circumstances do
not justify the finding that there was an implied agreement that the defendant-appellant was to pay for the use and
occupation of the premises at all.
The above considerations show that plaintiff-appellee's claim for rentals before it obtained the judgment annulling the
sale of the Taiwan Tekkosho may not be predicated on any negligence or offense of the defendant-appellant, or any
contract, express or implied, because the Allien Property Administration was neither a trustee of plaintiff-appellee, nor
a privy to the obligations of the Taiwan Tekkosho, its title being based by legal provision of the seizure of enemy
property. We have also tried in vain to find a law or provision thereof, or any principle in quasi contracts or equity,
upon which the claim can be supported. On the contrary, as defendant-appellant entered into possession without any
expectation of liability for such use and occupation, it is only fair and just that it may not be held liable therefor. And
as to the rents it collected from its lessee, the same should accrue to it as a possessor in good faith, as this Court has
already expressly held. (Resolution, National Coconut Corporation vs. Geronimo, 83 Phil. 467.)
Lastly, the reservation of this action may not be considered as vesting a new right; if no right to claim for rentals
existed at the time of the reservation, no rights can arise or accrue from such reservation alone.
Wherefore, the part of the judgment appealed from, which sentences defendant-appellant to pay rentals from August,
1946, to February 28, 1949, is hereby reversed. In all other respects the judgment is affirmed. Costs of this appeal
shall be against the plaintiff-appellee.
Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Montemayor, and Bautista Angelo, JJ,concur.

PEOPLE'S CAR INC. vs.COMMANDO SECURITY SERVICE
AGENCY G.R. No. L-36840, 51 SCRA 40, May 22, 1973

G.R. No. L-36840 May 22, 1973
PEOPLE'S CAR INC., plaintiff-appellant,
vs.
COMMANDO SECURITY SERVICE AGENCY, defendant-appellee.

TEEHANKEE, J .:
In this appeal from the adverse judgment of the Davao court of first instance limiting plaintiff-appellant's recovery
under its complaint to the sum of P1,000.00 instead of the actual damages of P8,489.10 claimed and suffered by it as
a direct result of the wrongful acts of defendant security agency's guard assigned at plaintiff's premises in pursuance
of their "Guard Service Contract", the Court finds merit in the appeal and accordingly reverses the trial court's
judgment.
The appeal was certified to this Court by a special division of the Court of Appeals on a four-to-one vote as per its
resolution of April 14, 1973 that "Since the case was submitted to the court a quo for decision on the strength of the
stipulation of facts, only questions of law can be involved in the present appeal."
The Court has accepted such certification and docketed this appeal on the strength of its own finding from the
records that plaintiff's notice of appeal was expressly to this Court (not to the appellate court)" on pure questions of
law"
1
and its record on appeal accordingly prayed that" the corresponding records be certified and forwarded to the
Honorable Supreme Court."
2
The trial court so approved the same
3
on July 3, 1971 instead of having required the
filing of a petition for review of the judgment sought to be appealed from directly with this Court, in accordance with
the provisions of Republic Act 5440. By some unexplained and hitherto undiscovered error of the clerk of court,
furthermore, the record on appeal was erroneously forwarded to the appellate court rather than to this Court.
The parties submitted the case for judgment on a stipulation of facts. There is thus no dispute as to the factual bases
of plaintiff's complaint for recovery of actual damages against defendant, to wit, that under the subsisting "Guard
Service Contract" between the parties, defendant-appellee as a duly licensed security service agency undertook in
consideration of the payments made by plaintiff to safeguard and protect the business premises of (plaintiff) from
theft, pilferage, robbery, vandalism and all other unlawful acts of any person or person prejudicial to the interest of
(plaintiff)."
4

On April 5, 1970 at around 1:00 A.M., however, defendant's security guard on duty at plaintiff's premises, "without any
authority, consent, approval, knowledge or orders of the plaintiff and/or defendant brought out of the compound of the
plaintiff a car belonging to its customer, and drove said car for a place or places unknown, abandoning his post as
such security guard on duty inside the plaintiff's compound, and while so driving said car in one of the City streets lost
control of said car, causing the same to fall into a ditch along J.P. Laurel St., Davao City by reason of which the
plaintiff's complaint for qualified theft against said driver, was blottered in the office of the Davao City Police
Department."
5

As a result of these wrongful acts of defendant's security guard, the car of plaintiff's customer, Joseph Luy, which had
been left with plaintiff for servicing and maintenance, "suffered extensive damage in the total amount of
P7,079."
6
besides the car rental value "chargeable to defendant" in the sum of P1,410.00 for a car that plaintiff had to
rent and make available to its said customer to enable him to pursue his business and occupation for the period of
forty-seven (47) days (from April 25 to June 10, 1970) that it took plaintiff to repair the damaged car,
7
or total actual
damages incurred by plaintiff in the sum of P8,489.10.
Plaintiff claimed that defendant was liable for the entire amount under paragraph 5 of their contract whereunder
defendant assumed "sole responsibility for the acts done during their watch hours" by its guards, whereas defendant
contended, without questioning the amount of the actual damages incurred by plaintiff, that its liability "shall not
exceed one thousand (P1,000.00) pesos per guard post" under paragraph 4 of their contract.
The parties thus likewise stipulated on this sole issue submitted by them for adjudication, as follows:
Interpretation of the contract, as to the extent of the liability of the defendant to the plaintiff by reason of the acts of
the employees of the defendant is the only issue to be resolved.
The defendant relies on Par. 4 of the contract to support its contention while the plaintiff relies on Par. 5 of the same
contract in support of its claims against the defendant. For ready reference they are quoted hereunder:
'Par. 4. Party of the Second Part (defendant) through the negligence of its guards, after an investigation has been
conducted by the Party of the First Part (plaintiff) wherein the Party of the Second Part has been duly represented
shall assume full responsibilities for any loss or damages that may occur to any property of the Party of the First Part
for which it is accountable, during the watch hours of the Party of the Second Part, provided the same is reported to
the Party of the Second Part within twenty-four (24) hours of the occurrence, except where such loss or damage is
due to force majeure, provided however that after the proper investigation to be made thereof that the guard on post
is found negligent and that the amount of the loss shall not exceed ONE THOUSAND (P1,000.00) PESOS per guard
post.'
'Par. 5 The party of the Second Part assumes the responsibility for the proper performance by the guards
employed, of their duties and (shall) be solely responsible for the acts done during their watch hours, the Party of the
First Part being specifically released from any and all liabilities to the former's employee or to the third parties arising
from the acts or omissions done by the guard during their tour of
duty.' ...
8

The trial court, misreading the above-quoted contractual provisions, held that "the liability of the defendant in favor of
the plaintiff falls under paragraph 4 of the Guard Service Contract" and rendered judgment "finding the defendant
liable to the plaintiff in the amount of P1,000.00 with costs."
Hence, this appeal, which, as already indicated, is meritorious and must be granted.
Paragraph 4 of the contract, which limits defendant's liability for the amount of loss or damage to any property of
plaintiff to "P1,000.00 per guard post," is by its own terms applicable only for loss or damage 'through
the negligence of its guards ... during the watch hours" provided that the same is duly reported by plaintiff within 24
hours of the occurrence and the guard's negligence is verified after proper investigation with the attendance of both
contracting parties. Said paragraph is manifestly inapplicable to the stipulated facts of record, which involve neither
property of plaintiff that has been lost or damaged at its premises nor mere negligence of defendant's security guard
on duty.
Here, instead of defendant, through its assigned security guards, complying with its contractual undertaking 'to
safeguard and protect the business premises of (plaintiff) from theft, robbery, vandalism and all other unlawful acts of
any person or persons," defendant's own guard on duty unlawfully and wrongfully drove out of plaintiffs premises a
customer's car, lost control of it on the highway causing it to fall into a ditch, thereby directly causing plaintiff to incur
actual damages in the total amount of P8,489.10.
Defendant is therefore undoubtedly liable to indemnify plaintiff for the entire damages thus incurred, since under
paragraph 5 of their contract it "assumed the responsibility for the proper performance by the guards employed of
their duties and (contracted to) be solely responsible for the acts done during their watch hours" and "specifically
released (plaintiff) from any and all liabilities ... to the third parties arising from the acts or omissions done by the
guards during their tour of duty." As plaintiff had duly discharged its liability to the third party, its customer, Joseph
Luy, for the undisputed damages of P8,489.10 caused said customer, due to the wanton and unlawful act of
defendant's guard, defendant in turn was clearly liable under the terms of paragraph 5 of their contract to indemnify
plaintiff in the same amount.
The trial court's approach that "had plaintiff understood the liability of the defendant to fall under paragraph 5, it
should have told Joseph Luy, owner of the car, that under the Guard Service Contract, it was not liable for the
damage but the defendant and had Luy insisted on the liability of the plaintiff, the latter should have challenged him to
bring the matter to court. If Luy accepted the challenge and instituted an action against the plaintiff, it should have
filed a third-party complaint against the Commando Security Service Agency. But if Luy instituted the action against
the plaintiff and the defendant, the plaintiff should have filed a crossclaim against the latter,"
9
was unduly technical
and unrealistic and untenable.
Plaintiff was in law liable to its customer for the damages caused the customer's car, which had been entrusted into
its custody. Plaintiff therefore was in law justified in making good such damages and relying in turn on defendant to
honor its contract and indemnify it for such undisputed damages, which had been caused directly by the unlawful and
wrongful acts of defendant's security guard in breach of their contract. As ordained in Article 1159, Civil Code,
"obligations arising from contracts have the force of law between the contracting parties and should be complied with
in good faith."
Plaintiff in law could not tell its customer, as per the trial court's view, that "under the Guard Service Contract it was
not liable for the damage but the defendant" since the customer could not hold defendant to account for the
damages as he had no privity of contract with defendant. Such an approach of telling the adverse party to go to court,
notwithstanding his plainly valid claim, aside from its ethical deficiency among others, could hardly create any
goodwill for plaintiff's business, in the same way that defendant's baseless attempt to evade fully discharging its
contractual liability to plaintiff cannot be expected to have brought it more business. Worse, the administration of
justice is prejudiced, since the court dockets are unduly burdened with unnecessary litigation.
ACCORDINGLY, the judgment appealed from is hereby reversed and judgment is hereby rendered sentencing
defendant-appellee to pay plaintiff-appellant the sum of P8,489.10 as and by way of reimbursement of the stipulated
actual damages and expenses, as well as the costs of suit in both instances. It is so ordered.
Makalintal, Zaldivar, Castro, Fernando, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.

Footnotes
1 Rec. on appeal, p. 39.
2 Idem, pp. 40-41.
3 Idem, p. 42.
4 Annex A, complaint, Rec. on app., pp. 8-13.
5 Par. 1. Stipulation of Facts, Rec. on app., p. 24.
6 Par. 2, idem.
7 Par. 3, idem.
8 Rec. on app., pp. 26-27; notes in emphasis supplied.
9 Decision, Rec. on App, pp. 29-30.

Cangco vs. Manila Railroad Co., 38 Phil. 768 , No. 12191, October 14,
1918
G.R. No. L-12191 October 14, 1918
JOSE CANGCO, plaintiff-appellant,
vs.
MANILA RAILROAD CO., defendant-appellee.
Ramon Sotelo for appellant.
Kincaid & Hartigan for appellee.
FISHER, J .:
At the time of the occurrence which gave rise to this litigation the plaintiff, Jose Cangco, was in the employment
of Manila Railroad Company in the capacity of clerk, with a monthly wage of P25. He lived in the pueblo of San
Mateo, in the province of Rizal, which is located upon the line of the defendant railroad company; and in coming daily
by train to the company's office in the city of Manila where he worked, he used a pass, supplied by the company,
which entitled him to ride upon the company's trains free of charge. Upon the occasion in question, January 20, 1915,
the plaintiff arose from his seat in the second class-car where he was riding and, making, his exit through the door,
took his position upon the steps of the coach, seizing the upright guardrail with his right hand for support.
On the side of the train where passengers alight at the San Mateo station there is a cement platform which
begins to rise with a moderate gradient some distance away from the company's office and extends along in front of
said office for a distance sufficient to cover the length of several coaches. As the train slowed down another
passenger, named Emilio Zuiga, also an employee of the railroad company, got off the same car, alighting safely at
the point where the platform begins to rise from the level of the ground. When the train had proceeded a little farther
the plaintiff Jose Cangco stepped off also, but one or both of his feet came in contact with a sack of watermelons with
the result that his feet slipped from under him and he fell violently on the platform. His body at once rolled from the
platform and was drawn under the moving car, where his right arm was badly crushed and lacerated. It appears that
after the plaintiff alighted from the train the car moved forward possibly six meters before it came to a full stop.
The accident occurred between 7 and 8 o'clock on a dark night, and as the railroad station was lighted dimly by
a single light located some distance away, objects on the platform where the accident occurred were difficult to
discern especially to a person emerging from a lighted car.
The explanation of the presence of a sack of melons on the platform where the plaintiff alighted is found in the
fact that it was the customary season for harvesting these melons and a large lot had been brought to the station for
the shipment to the market. They were contained in numerous sacks which has been piled on the platform in a row
one upon another. The testimony shows that this row of sacks was so placed of melons and the edge of platform; and
it is clear that the fall of the plaintiff was due to the fact that his foot alighted upon one of these melons at the moment
he stepped upon the platform. His statement that he failed to see these objects in the darkness is readily to be
credited.
The plaintiff was drawn from under the car in an unconscious condition, and it appeared that the injuries which
he had received were very serious. He was therefore brought at once to a certain hospital in the city of Manila where
an examination was made and his arm was amputated. The result of this operation was unsatisfactory, and the
plaintiff was then carried to another hospital where a second operation was performed and the member was again
amputated higher up near the shoulder. It appears in evidence that the plaintiff expended the sum of P790.25 in the
form of medical and surgical fees and for other expenses in connection with the process of his curation.
Upon August 31, 1915, he instituted this proceeding in the Court of First Instance of the city of Manila to
recover damages of the defendant company, founding his action upon the negligence of the servants and employees
of the defendant in placing the sacks of melons upon the platform and leaving them so placed as to be a menace to
the security of passenger alighting from the company's trains. At the hearing in the Court of First Instance, his Honor,
the trial judge, found the facts substantially as above stated, and drew therefrom his conclusion to the effect that,
although negligence was attributable to the defendant by reason of the fact that the sacks of melons were so placed
as to obstruct passengers passing to and from the cars, nevertheless, the plaintiff himself had failed to use due
caution in alighting from the coach and was therefore precluded form recovering. Judgment was accordingly entered
in favor of the defendant company, and the plaintiff appealed.
It can not be doubted that the employees of the railroad company were guilty of negligence in piling these
sacks on the platform in the manner above stated; that their presence caused the plaintiff to fall as he alighted from
the train; and that they therefore constituted an effective legal cause of the injuries sustained by the plaintiff. It
necessarily follows that the defendant company is liable for the damage thereby occasioned unless recovery is
barred by the plaintiff's own contributory negligence. In resolving this problem it is necessary that each of these
conceptions of liability, to-wit, the primary responsibility of the defendant company and the contributory negligence of
the plaintiff should be separately examined.
It is important to note that the foundation of the legal liability of the defendant is the contract of carriage, and
that the obligation to respond for the damage which plaintiff has suffered arises, if at all, from the breach of that
contract by reason of the failure of defendant to exercise due care in its performance. That is to say, its liability is
direct and immediate, differing essentially, in legal viewpoint from that presumptive responsibility for the negligence of
its servants, imposed by article 1903 of the Civil Code, which can be rebutted by proof of the exercise of due care in
their selection and supervision. Article 1903 of the Civil Code is not applicable to obligations arising ex contractu, but
only to extra-contractual obligations or to use the technical form of expression, that article relates only
to culpa aquiliana and not to culpa contractual.
Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of the Civil Code, clearly points out
this distinction, which was also recognized by this Court in its decision in the case of Rakes vs. Atlantic, Gulf and
Pacific Co. (7 Phil. rep., 359). In commenting upon article 1093 Manresa clearly points out the difference between
"culpa, substantive and independent, which of itself constitutes the source of an obligation between persons not
formerly connected by any legal tie" and culpa considered as an accident in the performance of an obligation already
existing . . . ."
In the Rakes case (supra) the decision of this court was made to rest squarely upon the proposition that article
1903 of the Civil Code is not applicable to acts of negligence which constitute the breach of a contract.
Upon this point the Court said:
The acts to which these articles [1902 and 1903 of the Civil Code] are applicable are understood to be those
not growing out of pre-existing duties of the parties to one another. But where relations already formed give rise to
duties, whether springing from contract or quasi-contract, then breaches of those duties are subject to article 1101,
1103, and 1104 of the same code. (Rakes vs. Atlantic, Gulf and Pacific Co., 7 Phil. Rep., 359 at 365.)
This distinction is of the utmost importance. The liability, which, under the Spanish law, is, in certain cases
imposed upon employers with respect to damages occasioned by the negligence of their employees to persons to
whom they are not bound by contract, is not based, as in the English Common Law, upon the principle of respondeat
superior if it were, the master would be liable in every case and unconditionally but upon the principle
announced in article 1902 of the Civil Code, which imposes upon all persons who by their fault or negligence, do
injury to another, the obligation of making good the damage caused. One who places a powerful automobile in the
hands of a servant whom he knows to be ignorant of the method of managing such a vehicle, is himself guilty of an
act of negligence which makes him liable for all the consequences of his imprudence. The obligation to make good
the damage arises at the very instant that the unskillful servant, while acting within the scope of his employment
causes the injury. The liability of the master is personal and direct. But, if the master has not been guilty of any
negligence whatever in the selection and direction of the servant, he is not liable for the acts of the latter, whatever
done within the scope of his employment or not, if the damage done by the servant does not amount to a breach of
the contract between the master and the person injured.
It is not accurate to say that proof of diligence and care in the selection and control of the servant relieves the
master from liability for the latter's acts on the contrary, that proof shows that the responsibility has never existed.
As Manresa says (vol. 8, p. 68) the liability arising from extra-contractual culpa is always based upon a voluntary act
or omission which, without willful intent, but by mere negligence or inattention, has caused damage to another. A
master who exercises all possible care in the selection of his servant, taking into consideration the qualifications they
should possess for the discharge of the duties which it is his purpose to confide to them, and directs them with equal
diligence, thereby performs his duty to third persons to whom he is bound by no contractual ties, and he incurs no
liability whatever if, by reason of the negligence of his servants, even within the scope of their employment, such third
person suffer damage. True it is that under article 1903 of the Civil Code the law creates a presumption that he has
been negligent in the selection or direction of his servant, but the presumption is rebuttable and yield to proof of due
care and diligence in this respect.
The supreme court of Porto Rico, in interpreting identical provisions, as found in the Porto Rico Code, has held
that these articles are applicable to cases of extra-contractual culpa exclusively. (Carmona vs. Cuesta, 20 Porto Rico
Reports, 215.)
This distinction was again made patent by this Court in its decision in the case of Bahia vs. Litonjua and
Leynes, (30 Phil. rep., 624), which was an action brought upon the theory of the extra-contractual liability of the
defendant to respond for the damage caused by the carelessness of his employee while acting within the scope of his
employment. The Court, after citing the last paragraph of article 1903 of the Civil Code, said:
From this article two things are apparent: (1) That when an injury is caused by the negligence of a servant or
employee there instantly arises a presumption of law that there was negligence on the part of the master or employer
either in selection of the servant or employee, or in supervision over him after the selection, or both; and (2) that that
presumption is juris tantum and not juris et de jure, and consequently, may be rebutted. It follows necessarily that if
the employer shows to the satisfaction of the court that in selection and supervision he has exercised the care and
diligence of a good father of a family, the presumption is overcome and he is relieved from liability.
This theory bases the responsibility of the master ultimately on his own negligence and not on that of his
servant. This is the notable peculiarity of the Spanish law of negligence. It is, of course, in striking contrast to the
American doctrine that, in relations with strangers, the negligence of the servant in conclusively the negligence of the
master.
The opinion there expressed by this Court, to the effect that in case of extra-contractual culpa based upon
negligence, it is necessary that there shall have been some fault attributable to the defendant personally, and that the
last paragraph of article 1903 merely establishes a rebuttable presumption, is in complete accord with the
authoritative opinion of Manresa, who says (vol. 12, p. 611) that the liability created by article 1903 is imposed by
reason of the breach of the duties inherent in the special relations of authority or superiority existing between the
person called upon to repair the damage and the one who, by his act or omission, was the cause of it.
On the other hand, the liability of masters and employers for the negligent acts or omissions of their servants or
agents, when such acts or omissions cause damages which amount to the breach of a contact, is not based upon a
mere presumption of the master's negligence in their selection or control, and proof of exercise of the utmost
diligence and care in this regard does not relieve the master of his liability for the breach of his contract.
Every legal obligation must of necessity be extra-contractual or contractual. Extra-contractual obligation has its
source in the breach or omission of those mutual duties which civilized society imposes upon it members, or which
arise from these relations, other than contractual, of certain members of society to others, generally embraced in the
concept of status. The legal rights of each member of society constitute the measure of the corresponding legal
duties, mainly negative in character, which the existence of those rights imposes upon all other members of society.
The breach of these general duties whether due to willful intent or to mere inattention, if productive of injury, give rise
to an obligation to indemnify the injured party. The fundamental distinction between obligations of this character and
those which arise from contract, rests upon the fact that in cases of non-contractual obligation it is the wrongful or
negligent act or omission itself which creates the vinculum juris, whereas in contractual relations the vinculum exists
independently of the breach of the voluntary duty assumed by the parties when entering into the contractual relation.
With respect to extra-contractual obligation arising from negligence, whether of act or omission, it is competent
for the legislature to elect and our Legislature has so elected whom such an obligation is imposed is morally
culpable, or, on the contrary, for reasons of public policy, to extend that liability, without regard to the lack of moral
culpability, so as to include responsibility for the negligence of those person who acts or mission are imputable, by a
legal fiction, to others who are in a position to exercise an absolute or limited control over them. The legislature which
adopted our Civil Code has elected to limit extra-contractual liability with certain well-defined exceptions to
cases in which moral culpability can be directly imputed to the persons to be charged. This moral responsibility may
consist in having failed to exercise due care in the selection and control of one's agents or servants, or in the control
of persons who, by reason of their status, occupy a position of dependency with respect to the person made liable for
their conduct.
The position of a natural or juridical person who has undertaken by contract to render service to another, is
wholly different from that to which article 1903 relates. When the sources of the obligation upon which plaintiff's cause
of action depends is a negligent act or omission, the burden of proof rests upon plaintiff to prove the negligence if
he does not his action fails. But when the facts averred show a contractual undertaking by defendant for the benefit of
plaintiff, and it is alleged that plaintiff has failed or refused to perform the contract, it is not necessary for plaintiff to
specify in his pleadings whether the breach of the contract is due to willful fault or to negligence on the part of the
defendant, or of his servants or agents. Proof of the contract and of its nonperformance is sufficient prima facie to
warrant a recovery.
As a general rule . . . it is logical that in case of extra-contractual culpa, a suing creditor should assume the
burden of proof of its existence, as the only fact upon which his action is based; while on the contrary, in a case of
negligence which presupposes the existence of a contractual obligation, if the creditor shows that it exists and that it
has been broken, it is not necessary for him to prove negligence. (Manresa, vol. 8, p. 71 [1907 ed., p. 76]).
As it is not necessary for the plaintiff in an action for the breach of a contract to show that the breach was due
to the negligent conduct of defendant or of his servants, even though such be in fact the actual cause of the breach, it
is obvious that proof on the part of defendant that the negligence or omission of his servants or agents caused the
breach of the contract would not constitute a defense to the action. If the negligence of servants or agents could be
invoked as a means of discharging the liability arising from contract, the anomalous result would be that person
acting through the medium of agents or servants in the performance of their contracts, would be in a better position
than those acting in person. If one delivers a valuable watch to watchmaker who contract to repair it, and the bailee,
by a personal negligent act causes its destruction, he is unquestionably liable. Would it be logical to free him from his
liability for the breach of his contract, which involves the duty to exercise due care in the preservation of the watch, if
he shows that it was his servant whose negligence caused the injury? If such a theory could be accepted, juridical
persons would enjoy practically complete immunity from damages arising from the breach of their contracts if caused
by negligent acts as such juridical persons can of necessity only act through agents or servants, and it would no
doubt be true in most instances that reasonable care had been taken in selection and direction of such servants. If
one delivers securities to a banking corporation as collateral, and they are lost by reason of the negligence of some
clerk employed by the bank, would it be just and reasonable to permit the bank to relieve itself of liability for the
breach of its contract to return the collateral upon the payment of the debt by proving that due care had been
exercised in the selection and direction of the clerk?
This distinction between culpa aquiliana, as the source of an obligation, andculpa contractual as a mere
incident to the performance of a contract has frequently been recognized by the supreme court of Spain.
(Sentencias of June 27, 1894; November 20, 1896; and December 13, 1896.) In the decisions of November 20, 1896,
it appeared that plaintiff's action arose ex contractu, but that defendant sought to avail himself of the provisions of
article 1902 of the Civil Code as a defense. The Spanish Supreme Court rejected defendant's contention, saying:
These are not cases of injury caused, without any pre-existing obligation, by fault or negligence, such as
those to which article 1902 of the Civil Code relates, but of damages caused by the defendant's failure to carry out
the undertakings imposed by the contracts . . . .
A brief review of the earlier decision of this court involving the liability of employers for damage done by the
negligent acts of their servants will show that in no case has the court ever decided that the negligence of the
defendant's servants has been held to constitute a defense to an action for damages for breach of contract.
In the case of Johnson vs. David (5 Phil. Rep., 663), the court held that the owner of a carriage was not liable
for the damages caused by the negligence of his driver. In that case the court commented on the fact that no
evidence had been adduced in the trial court that the defendant had been negligent in the employment of the driver,
or that he had any knowledge of his lack of skill or carefulness.
In the case of Baer Senior & Co's Successors vs. Compania Maritima (6 Phil. Rep., 215), the plaintiff sued the
defendant for damages caused by the loss of a barge belonging to plaintiff which was allowed to get adrift by the
negligence of defendant's servants in the course of the performance of a contract of towage. The court held, citing
Manresa (vol. 8, pp. 29, 69) that if the "obligation of the defendant grew out of a contract made between it and the
plaintiff . . . we do not think that the provisions of articles 1902 and 1903 are applicable to the case."
In the case of Chapman vs. Underwood (27 Phil. Rep., 374), plaintiff sued the defendant to recover damages
for the personal injuries caused by the negligence of defendant's chauffeur while driving defendant's automobile in
which defendant was riding at the time. The court found that the damages were caused by the negligence of the
driver of the automobile, but held that the master was not liable, although he was present at the time, saying:
. . . unless the negligent acts of the driver are continued for a length of time as to give the owner a reasonable
opportunity to observe them and to direct the driver to desist therefrom. . . . The act complained of must be continued
in the presence of the owner for such length of time that the owner by his acquiescence, makes the driver's acts his
own.
In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage & Taxicab Co. (33 Phil. Rep., 8), it is true
that the court rested its conclusion as to the liability of the defendant upon article 1903, although the facts disclosed
that the injury complaint of by plaintiff constituted a breach of the duty to him arising out of the contract of
transportation. The express ground of the decision in this case was that article 1903, in dealing with the liability of a
master for the negligent acts of his servants "makes the distinction between private individuals and public enterprise;"
that as to the latter the law creates a rebuttable presumption of negligence in the selection or direction of servants;
and that in the particular case the presumption of negligence had not been overcome.
It is evident, therefore that in its decision Yamada case, the court treated plaintiff's action as though founded in
tort rather than as based upon the breach of the contract of carriage, and an examination of the pleadings and of the
briefs shows that the questions of law were in fact discussed upon this theory. Viewed from the standpoint of the
defendant the practical result must have been the same in any event. The proof disclosed beyond doubt that the
defendant's servant was grossly negligent and that his negligence was the proximate cause of plaintiff's injury. It also
affirmatively appeared that defendant had been guilty of negligence in its failure to exercise proper discretion in the
direction of the servant. Defendant was, therefore, liable for the injury suffered by plaintiff, whether the breach of the
duty were to be regarded as constituting culpa aquiliana or culpa contractual. As Manresa points out (vol. 8, pp. 29
and 69) whether negligence occurs an incident in the course of the performance of a contractual undertaking or its
itself the source of an extra-contractual undertaking obligation, its essential characteristics are identical. There is
always an act or omission productive of damage due to carelessness or inattention on the part of the defendant.
Consequently, when the court holds that a defendant is liable in damages for having failed to exercise due care,
either directly, or in failing to exercise proper care in the selection and direction of his servants, the practical result is
identical in either case. Therefore, it follows that it is not to be inferred, because the court held in the Yamada case
that defendant was liable for the damages negligently caused by its servants to a person to whom it was bound by
contract, and made reference to the fact that the defendant was negligent in the selection and control of its servants,
that in such a case the court would have held that it would have been a good defense to the action, if presented
squarely upon the theory of the breach of the contract, for defendant to have proved that it did in fact exercise care in
the selection and control of the servant.
The true explanation of such cases is to be found by directing the attention to the relative spheres of
contractual and extra-contractual obligations. The field of non- contractual obligation is much more broader than that
of contractual obligations, comprising, as it does, the whole extent of juridical human relations. These two fields,
figuratively speaking, concentric; that is to say, the mere fact that a person is bound to another by contract does not
relieve him from extra-contractual liability to such person. When such a contractual relation exists the obligor may
break the contract under such conditions that the same act which constitutes the source of an extra-contractual
obligation had no contract existed between the parties.
The contract of defendant to transport plaintiff carried with it, by implication, the duty to carry him in safety and
to provide safe means of entering and leaving its trains (civil code, article 1258). That duty, being contractual, was
direct and immediate, and its non-performance could not be excused by proof that the fault was morally imputable to
defendant's servants.
The railroad company's defense involves the assumption that even granting that the negligent conduct of its
servants in placing an obstruction upon the platform was a breach of its contractual obligation to maintain safe means
of approaching and leaving its trains, the direct and proximate cause of the injury suffered by plaintiff was his own
contributory negligence in failing to wait until the train had come to a complete stop before alighting. Under the
doctrine of comparative negligence announced in the Rakes case (supra), if the accident was caused by plaintiff's
own negligence, no liability is imposed upon defendant's negligence and plaintiff's negligence merely contributed to
his injury, the damages should be apportioned. It is, therefore, important to ascertain if defendant was in fact guilty of
negligence.
It may be admitted that had plaintiff waited until the train had come to a full stop before alighting, the particular
injury suffered by him could not have occurred. Defendant contends, and cites many authorities in support of the
contention, that it is negligence per se for a passenger to alight from a moving train. We are not disposed to
subscribe to this doctrine in its absolute form. We are of the opinion that this proposition is too badly stated and is at
variance with the experience of every-day life. In this particular instance, that the train was barely moving when
plaintiff alighted is shown conclusively by the fact that it came to stop within six meters from the place where he
stepped from it. Thousands of person alight from trains under these conditions every day of the year, and sustain no
injury where the company has kept its platform free from dangerous obstructions. There is no reason to believe that
plaintiff would have suffered any injury whatever in alighting as he did had it not been for defendant's negligent failure
to perform its duty to provide a safe alighting place.
We are of the opinion that the correct doctrine relating to this subject is that expressed in Thompson's work on
Negligence (vol. 3, sec. 3010) as follows:
The test by which to determine whether the passenger has been guilty of negligence in attempting to alight
from a moving railway train, is that of ordinary or reasonable care. It is to be considered whether an ordinarily prudent
person, of the age, sex and condition of the passenger, would have acted as the passenger acted under the
circumstances disclosed by the evidence. This care has been defined to be, not the care which may or should be
used by the prudent man generally, but the care which a man of ordinary prudence would use under similar
circumstances, to avoid injury." (Thompson, Commentaries on Negligence, vol. 3, sec. 3010.)
Or, it we prefer to adopt the mode of exposition used by this court in Picartvs. Smith (37 Phil. rep., 809), we
may say that the test is this; Was there anything in the circumstances surrounding the plaintiff at the time he alighted
from the train which would have admonished a person of average prudence that to get off the train under the
conditions then existing was dangerous? If so, the plaintiff should have desisted from alighting; and his failure so to
desist was contributory negligence.1awph!l.net
As the case now before us presents itself, the only fact from which a conclusion can be drawn to the effect that
plaintiff was guilty of contributory negligence is that he stepped off the car without being able to discern clearly the
condition of the platform and while the train was yet slowly moving. In considering the situation thus presented, it
should not be overlooked that the plaintiff was, as we find, ignorant of the fact that the obstruction which was caused
by the sacks of melons piled on the platform existed; and as the defendant was bound by reason of its duty as a
public carrier to afford to its passengers facilities for safe egress from its trains, the plaintiff had a right to assume, in
the absence of some circumstance to warn him to the contrary, that the platform was clear. The place, as we have
already stated, was dark, or dimly lighted, and this also is proof of a failure upon the part of the defendant in the
performance of a duty owing by it to the plaintiff; for if it were by any possibility concede that it had right to pile these
sacks in the path of alighting passengers, the placing of them adequately so that their presence would be revealed.
As pertinent to the question of contributory negligence on the part of the plaintiff in this case the following
circumstances are to be noted: The company's platform was constructed upon a level higher than that of the roadbed
and the surrounding ground. The distance from the steps of the car to the spot where the alighting passenger would
place his feet on the platform was thus reduced, thereby decreasing the risk incident to stepping off. The nature of the
platform, constructed as it was of cement material, also assured to the passenger a stable and even surface on which
to alight. Furthermore, the plaintiff was possessed of the vigor and agility of young manhood, and it was by no means
so risky for him to get off while the train was yet moving as the same act would have been in an aged or feeble
person. In determining the question of contributory negligence in performing such act that is to say, whether the
passenger acted prudently or recklessly the age, sex, and physical condition of the passenger are circumstances
necessarily affecting the safety of the passenger, and should be considered. Women, it has been observed, as a
general rule are less capable than men of alighting with safety under such conditions, as the nature of their wearing
apparel obstructs the free movement of the limbs. Again, it may be noted that the place was perfectly familiar to the
plaintiff as it was his daily custom to get on and of the train at this station. There could, therefore, be no uncertainty in
his mind with regard either to the length of the step which he was required to take or the character of the platform
where he was alighting. Our conclusion is that the conduct of the plaintiff in undertaking to alight while the train was
yet slightly under way was not characterized by imprudence and that therefore he was not guilty of contributory
negligence.
The evidence shows that the plaintiff, at the time of the accident, was earning P25 a month as a copyist clerk,
and that the injuries he has suffered have permanently disabled him from continuing that employment. Defendant has
not shown that any other gainful occupation is open to plaintiff. His expectancy of life, according to the standard
mortality tables, is approximately thirty-three years. We are of the opinion that a fair compensation for the damage
suffered by him for his permanent disability is the sum of P2,500, and that he is also entitled to recover of defendant
the additional sum of P790.25 for medical attention, hospital services, and other incidental expenditures connected
with the treatment of his injuries.
The decision of lower court is reversed, and judgment is hereby rendered plaintiff for the sum of P3,290.25,
and for the costs of both instances. So ordered.
Arellano, C.J., Torres, Street and Avancea, JJ., concur.



Separate Opinions

MALCOLM, J ., dissenting:
With one sentence in the majority decision, we are of full accord, namely, "It may be admitted that had plaintiff
waited until the train had come to a full stop before alighting, the particular injury suffered by him could not have
occurred." With the general rule relative to a passenger's contributory negligence, we are likewise in full accord,
namely, "An attempt to alight from a moving train is negligence per se." Adding these two points together, should be
absolved from the complaint, and judgment affirmed.
Johnson, J., concur.

Gutierrez vs. Gutierrez, 56 Phil. 177, No. 34840, September 23, 1931
G.R. No. 34840 September 23, 1931
NARCISO GUTIERREZ, plaintiff-appellee,
vs.
BONIFACIO GUTIERREZ, MARIA V. DE GUTIERREZ, MANUEL GUTIERREZ, ABELARDO VELASCO, and
SATURNINO CORTEZ, defendants-appellants.

L.D. Lockwood for appellants Velasco and Cortez.
San Agustin and Roxas for other appellants.
Ramon Diokno for appellee.

MALCOLM, J.:

This is an action brought by the plaintiff in the Court of First Instance of Manila against the five defendants, to recover
damages in the amount of P10,000, for physical injuries suffered as a result of an automobile accident. On judgment
being rendered as prayed for by the plaintiff, both sets of defendants appealed.

On February 2, 1930, a passenger truck and an automobile of private ownership collided while attempting to pass
each other on the Talon bridge on the Manila South Road in the municipality of Las Pias, Province of Rizal. The
truck was driven by the chauffeur Abelardo Velasco, and was owned by Saturnino Cortez. The automobile was being
operated by Bonifacio Gutierrez, a lad 18 years of age, and was owned by Bonifacio's father and mother, Mr. and
Mrs. Manuel Gutierrez. At the time of the collision, the father was not in the car, but the mother, together will several
other members of the Gutierrez family, seven in all, were accommodated therein. A passenger in the autobus, by the
name of Narciso Gutierrez, was en route from San Pablo, Laguna, to Manila. The collision between the bus and the
automobile resulted in Narciso Gutierrez suffering a fracture right leg which required medical attendance for a
considerable period of time, and which even at the date of the trial appears not to have healed properly.

It is conceded that the collision was caused by negligence pure and simple. The difference between the parties is
that, while the plaintiff blames both sets of defendants, the owner of the passenger truck blames the automobile, and
the owner of the automobile, in turn, blames the truck. We have given close attention to these highly debatable
points, and having done so, a majority of the court are of the opinion that the findings of the trial judge on all
controversial questions of fact find sufficient support in the record, and so should be maintained. With this general
statement set down, we turn to consider the respective legal obligations of the defendants.

In amplification of so much of the above pronouncement as concerns the Gutierrez family, it may be explained that
the youth Bonifacio was in incompetent chauffeur, that he was driving at an excessive rate of speed, and that, on
approaching the bridge and the truck, he lost his head and so contributed by his negligence to the accident. The
guaranty given by the father at the time the son was granted a license to operate motor vehicles made the father
responsible for the acts of his son. Based on these facts, pursuant to the provisions of article 1903 of the Civil Code,
the father alone and not the minor or the mother, would be liable for the damages caused by the minor.

We are dealing with the civil law liability of parties for obligations which arise from fault or negligence. At the same
time, we believe that, as has been done in other cases, we can take cognizance of the common law rule on the same
subject. In the United States, it is uniformly held that the head of a house, the owner of an automobile, who maintains
it for the general use of his family is liable for its negligent operation by one of his children, whom he designates or
permits to run it, where the car is occupied and being used at the time of the injury for the pleasure of other members
of the owner's family than the child driving it. The theory of the law is that the running of the machine by a child to
carry other members of the family is within the scope of the owner's business, so that he is liable for the negligence of
the child because of the relationship of master and servant. (Huddy On Automobiles, 6th ed., sec. 660; Missell vs.
Hayes [1914], 91 Atl., 322.) The liability of Saturnino Cortez, the owner of the truck, and of his chauffeur Abelardo
Velasco rests on a different basis, namely, that of contract which, we think, has been sufficiently demonstrated by the
allegations of the complaint, not controverted, and the evidence. The reason for this conclusion reaches to the
findings of the trial court concerning the position of the truck on the bridge, the speed in operating the machine, and
the lack of care employed by the chauffeur. While these facts are not as clearly evidenced as are those which convict
the other defendant, we nevertheless hesitate to disregard the points emphasized by the trial judge. In its broader
aspects, the case is one of two drivers approaching a narrow bridge from opposite directions, with neither being
willing to slow up and give the right of way to the other, with the inevitable result of a collision and an accident.

The defendants Velasco and Cortez further contend that there existed contributory negligence on the part of the
plaintiff, consisting principally of his keeping his foot outside the truck, which occasioned his injury. In this connection,
it is sufficient to state that, aside from the fact that the defense of contributory negligence was not pleaded, the
evidence bearing out this theory of the case is contradictory in the extreme and leads us far afield into speculative
matters.

The last subject for consideration relates to the amount of the award. The appellee suggests that the amount could
justly be raised to P16,517, but naturally is not serious in asking for this sum, since no appeal was taken by him from
the judgment. The other parties unite in challenging the award of P10,000, as excessive. All facts considered,
including actual expenditures and damages for the injury to the leg of the plaintiff, which may cause him permanent
lameness, in connection with other adjudications of this court, lead us to conclude that a total sum for the plaintiff of
P5,000 would be fair and reasonable. The difficulty in approximating the damages by monetary compensation is well
elucidated by the divergence of opinion among the members of the court, three of whom have inclined to the view
that P3,000 would be amply sufficient, while a fourth member has argued that P7,500 would be none too much.

In consonance with the foregoing rulings, the judgment appealed from will be modified, and the plaintiff will have
judgment in his favor against the defendants Manuel Gutierrez, Abelardo Velasco, and Saturnino Cortez, jointl y and
severally, for the sum of P5,000, and the costs of both instances.

Avancea, C.J., Johnson, Street, Villamor, Ostrand, Romualdez, and Imperial, JJ., concur.

VILLA-REAL, J.:

I vote for an indemnity of P7,500.
C. Compliance with Obligations


D. Kinds of Civil Obligations
Hongkong and Shanghai Banking Corp., Ltd. Staff Retirement Plan vs.
Broqueza, 635 SCRA 226 , G.R. No. 178610, November 17, 2010

G.R. No. 178610 November 17, 2010
HONGKONG AND SHANGHAI BANKING CORP., LTD. STAFF RETIREMENT PLAN, Retirement Trust Fund,
Inc.) Petitioner,
vs.
SPOUSES BIENVENIDO AND EDITHA BROQUEZA, Respondents.
D E C I S I O N
CARPIO, J .:
G.R. No. 178610 is a petition for review
1
assailing the Decision
2
promulgated on 30 March 2006 by the Court of
Appeals (CA) in CA-G.R. SP No. 62685. The appellate court granted the petition filed by Fe Gerong (Gerong) and
Spouses Bienvenido and Editha Broqueza (spouses Broqueza) and dismissed the consolidated complaints filed by
Hongkong and Shanghai Banking Corporation, Ltd. - Staff Retirement Plan (HSBCL-SRP) for recovery of sum of
money. The appellate court reversed and set aside the Decision
3
of Branch 139 of the Regional Trial Court of Makati
City (RTC) in Civil Case No. 00-787 dated 11 December 2000, as well as its Order
4
dated 5 September 2000. The
RTCs decision affirmed the Decision
5
dated 28 December 1999 of Branch 61 of the Metropolitan Trial Court (MeTC)
of Makati City in Civil Case No. 52400 for Recovery of a Sum of Money.
The Facts
The appellate court narrated the facts as follows:
Petitioners Gerong and [Editha] Broqueza (defendants below) are employees of Hongkong and Shanghai Banking
Corporation (HSBC). They are also members of respondent Hongkong Shanghai Banking Corporation, Ltd. Staff
Retirement Plan (HSBCL-SRP, plaintiff below). The HSBCL-SRP is a retirement plan established by HSBC through
its Board of Trustees for the benefit of the employees.
On October 1, 1990, petitioner [Editha] Broqueza obtained a car loan in the amount of Php175,000.00. On December
12, 1991, she again applied and was granted an appliance loan in the amount of Php24,000.00. On the other hand,
petitioner Gerong applied and was granted an emergency loan in the amount of Php35,780.00 on June 2, 1993.
These loans are paid through automatic salary deduction.
Meanwhile [in 1993], a labor dispute arose between HSBC and its employees. Majority of HSBCs employees were
terminated, among whom are petitioners Editha Broqueza and Fe Gerong. The employees then filed an illegal
dismissal case before the National Labor Relations Commission (NLRC) against HSBC. The legality or illegality of
such termination is now pending before this appellate Court in CA G.R. CV No. 56797, entitled Hongkong Shanghai
Banking Corp. Employees Union, et al. vs. National Labor Relations Commission, et al.
Because of their dismissal, petitioners were not able to pay the monthly amortizations of their respective loans. Thus,
respondent HSBCL-SRP considered the accounts of petitioners delinquent. Demands to pay the respective
obligations were made upon petitioners, but they failed to pay.
6

HSBCL-SRP, acting through its Board of Trustees and represented by Alejandro L. Custodio, filed Civil Case No.
52400 against the spouses Broqueza on 31 July 1996. On 19 September 1996, HSBCL-SRP filed Civil Case No.
52911 against Gerong. Both suits were civil actions for recovery and collection of sums of money.
The Metropolitan Trial Courts Ruling
On 28 December 1999, the MeTC promulgated its Decision
7
in favor of HSBCL-SRP. The MeTC ruled that the nature
of HSBCL-SRPs demands for payment is civil and has no connection to the ongoing labor dispute. Gerong and
Editha Broquezas termination from employment resulted in the loss of continued benefits under their retirement
plans. Thus, the loans secured by their future retirement benefits to which they are no longer entitled are reduced to
unsecured and pure civil obligations. As unsecured and pure obligations, the loans are immediately demandable.
The dispositive portion of the MeTCs decision reads:
WHEREFORE, premises considered and in view of the foregoing, the Court finds that the plaintiff was able to prove
by a preponderance of evidence the existence and immediate demandability of the defendants loan obligations as
judgment is hereby rendered in favor of the plaintiff and against the defendants in both cases, ordering the latter:
1. In Civil Case No. 52400, to pay the amount of Php116,740.00 at six percent interest per annum from the time of
demand and in Civil Case No. 52911, to pay the amount of Php25,344.12 at six percent per annum from the time of
the filing of these cases, until the amount is fully paid;
2. To pay the amount of Php20,000.00 each as reasonable attorneys fees;
3. Cost of suit.
SO ORDERED.
8

Gerong and the spouses Broqueza filed a joint appeal of the MeTCs decision before the RTC. Gerongs case was
docketed Civil Case No. 00-786, while the spouses Broquezas case was docketed as Civil Case No. 00-787.
The Regional Trial Courts Ruling
The RTC initially denied the joint appeal because of the belated filing of Gerong and the spouses Broquezas
memorandum. The RTC later reconsidered the order of denial and resolved the issues in the interest of justice.
On 11 December 2000, the RTC affirmed the MeTCs decision in toto.
9

The RTC ruled that Gerong and Editha Broquezas termination from employment disqualified them from availing of
benefits under their retirement plans. As a consequence, there is no longer any security for the loans. HSBCL-SRP
has a legal right to demand immediate settlement of the unpaid balance because of Gerong and Editha Broquezas
continued default in payment and their failure to provide new security for their loans. Moreover, the absence of a
period within which to pay the loan allows HSBCL-SRP to demand immediate payment. The loan obligations are
considered pure obligations, the fulfillment of which are demandable at once.
Gerong and the spouses Broqueza then filed a Petition for Review under Rule 42 before the CA.
The Ruling of the Court of Appeals
On 30 March 2006, the CA rendered its Decision
10
which reversed the 11 December 2000 Decision of the RTC. The
CA ruled that the HSBCL-SRPs complaints for recovery of sum of money against Gerong and the spouses Broqueza
are premature as the loan obligations have not yet matured. Thus, no cause of action accrued in favor of HSBCL-
SRP. The dispositive portion of the appellate courts Decision reads as follows:
WHEREFORE, the assailed Decision of the RTC is REVERSED and SET ASIDE. A new one is hereby rendered
DISMISSING the consolidated complaints for recovery of sum of money.
SO ORDERED.
11

HSBCL-SRP filed a motion for reconsideration which the CA denied for lack of merit in its Resolution
12
promulgated
on 19 June 2007.
On 6 August 2007, HSBCL-SRP filed a manifestation withdrawing the petition against Gerong because she already
settled her obligations. In a Resolution
13
of this Court dated 10 September 2007, this Court treated the manifestation
as a motion to withdraw the petition against Gerong, granted the motion, and considered the case against Gerong
closed and terminated.
Issues
HSBCL-SRP enumerated the following grounds to support its Petition:
I. The Court of Appeals has decided a question of substance in a way not in accord with law and applicable decisions
of this Honorable Court; and
II. The Court of Appeals has departed from the accepted and usual course of judicial proceedings in reversing the
decision of the Regional Trial Court and the Metropolitan Trial Court.
14

The Courts Ruling
The petition is meritorious. We agree with the rulings of the MeTC and the RTC.
The Promissory Notes uniformly provide:
PROMISSORY NOTE
P_____ Makati, M.M. ____ 19__
FOR VALUE RECEIVED, I/WE _____ jointly and severally promise to pay to THE HSBC RETIREMENT PLAN
(hereinafter called the "PLAN") at its office in the Municipality of Makati, Metro Manila, on or before until fully paid the
sum of PESOS ___(P___) Philippine Currency without discount, with interest from date hereof at the rate of Six per
cent (6%) per annum, payable monthly.
I/WE agree that the PLAN may, upon written notice, increase the interest rate stipulated in this note at any time
depending on prevailing conditions.
I/WE hereby expressly consent to any extensions or renewals hereof for a portion or whole of the principal without
notice to the other(s), and in such a case our liability shall remain joint and several.1avvphi1
In case collection is made by or through an attorney, I/WE jointly and severally agree to pay ten percent (10%) of the
amount due on this note (but in no case less than P200.00) as and for attorneys fees in addition to expenses and
costs of suit.
In case of judicial execution, I/WE hereby jointly and severally waive our rights under the provisions of Rule 39,
Section 12 of the Rules of Court.
15

In ruling for HSBCL-SRP, we apply the first paragraph of Article 1179 of the Civil Code:
Art. 1179. Every obligation whose performance does not depend upon a future or uncertain event, or upon a past
event unknown to the parties, is demandable at once.
x x x. (Emphasis supplied.)
We affirm the findings of the MeTC and the RTC that there is no date of payment indicated in the Promissory Notes.
The RTC is correct in ruling that since the Promissory Notes do not contain a period, HSBCL-SRP has the right to
demand immediate payment. Article 1179 of the Civil Code applies. The spouses Broquezas obligation to pay
HSBCL-SRP is a pure obligation. The fact that HSBCL-SRP was content with the prior monthly check-off from Editha
Broquezas salary is of no moment. Once Editha Broqueza defaulted in her monthly payment, HSBCL-SRP made a
demand to enforce a pure obligation.
In their Answer, the spouses Broqueza admitted that prior to Editha Broquezas dismissal from HSBC in December
1993, she "religiously paid the loan amortizations, which HSBC collected through payroll check-off."
16
A definite
amount is paid to HSBCL-SRP on a specific date. Editha Broqueza authorized HSBCL-SRP to make deductions from
her payroll until her loans are fully paid. Editha Broqueza, however, defaulted in her monthly loan payment due to her
dismissal. Despite the spouses Broquezas protestations, the payroll deduction is merely a convenient mode of
payment and not the sole source of payment for the loans. HSBCL-SRP never agreed that the loans will be paid only
through salary deductions. Neither did HSBCL-SRP agree that if Editha Broqueza ceases to be an employee of
HSBC, her obligation to pay the loans will be suspended. HSBCL-SRP can immediately demand payment of the
loans at anytime because the obligation to pay has no period. Moreover, the spouses Broqueza have already
incurred in default in paying the monthly installments.
Finally, the enforcement of a loan agreement involves "debtor-creditor relations founded on contract and does not in
any way concern employee relations. As such it should be enforced through a separate civil action in the regular
courts and not before the Labor Arbiter."
17

WHEREFORE, we GRANT the petition. The Decision of the Court of Appeals in CA-G.R. SP No. 62685 promulgated
on 30 March 2006 is REVERSED and SET ASIDE. The decision of Branch 139 of the Regional Trial Court of Makati
City in Civil Case No. 00-787, as well as the decision of Branch 61 of the Metropolitan Trial Court of Makati City in
Civil Case No. 52400 against the spouses Bienvenido and Editha Broqueza, are AFFIRMED. Costs against
respondents.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
ANTONIO EDUARDO B. NACHURA
Associate Justice
DIOSDADO M. PERALTA
Associate Justice
ROBERTO A. ABAD
Associate Justice
JOSE C. MENDOZA
Associate Justice
A T T E S T A T I O N
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.
RENATO C. CORONA
Chief Justice

Footnotes
1
Under Rule 45 of the 1997 Rules of Civil Procedure.
2
Rollo, pp. 27-41. Penned by Associate Justice Ruben T. Reyes, with Associate Justices Rebecca De Guia-Salvador
and Aurora Santiago-Lagman, concurring.
3
Id. at 49-54. Penned by Judge Florentino A. Tuason, Jr.
4
CA rollo, p. 29.
5
Rollo, pp. 45-48. Penned by Judge Selma Palacio Alaras.
6
Id. at 28-29.
7
Id. at 45-48.
8
Id. at 48.
9
Id. at 49-54.
10
Id. at 27-41.
11
Id. at 41.
12
Id. at 43-44.
13
Id. at 86.
14
Id. at 14.
15
CA rollo, p. 59.
16
CA rollo, p. 50.
17
NDC Guthrie Plantations, Inc. v. NLRC, 414 Phil. 714, 726-727 (2001). See also Nestl Philippines, Inc. v. NLRC,
G.R. No. 85197, 18 March 1991, 195 SCRA 340.

Pay vs. Vda. de Palanca, 57 SCRA 618 , No. L-29900, June 28, 1974

G.R. No. L-29900 June 28, 1974
IN THE MATTER OF THE INTESTATE ESTATE OF JUSTO PALANCA, Deceased, GEORGE PAY, petitioner-
appellant,
vs.
SEGUNDINA CHUA VDA. DE PALANCA, oppositor-appellee.
Florentino B. del Rosario for petitioner-appellant.
Manuel V. San Jose for oppositor-appellee.

FERNANDO, J .:p
There is no difficulty attending the disposition of this appeal by petitioner on questions of law. While several points
were raised, the decisive issue is whether a creditor is barred by prescription in his attempt to collect on a promissory
note executed more than fifteen years earlier with the debtor sued promising to pay either upon receipt by him of his
share from a certain estate or upon demand, the basis for the action being the latter alternative. The lower court held
that the ten-year period of limitation of actions did apply, the note being immediately due and demandable, the
creditor admitting expressly that he was relying on the wording "upon demand." On the above facts as found, and
with the law being as it is, it cannot be said that its decision is infected with error. We affirm.
From the appealed decision, the following appears: "The parties in this case agreed to submit the matter for
resolution on the basis of their pleadings and annexes and their respective memoranda submitted. Petitioner George
Pay is a creditor of the Late Justo Palanca who died in Manila on July 3, 1963. The claim of the petitioner is based on
a promissory note dated January 30, 1952, whereby the late Justo Palanca and Rosa Gonzales Vda. de Carlos
Palanca promised to pay George Pay the amount of P26,900.00, with interest thereon at the rate of 12% per annum.
George Pay is now before this Court, asking that Segundina Chua vda. de Palanca, surviving spouse of the late
Justo Palanca, he appointed as administratrix of a certain piece of property which is a residential dwelling located at
2656 Taft Avenue, Manila, covered by Tax Declaration No. 3114 in the name of Justo Palanca, assessed at
P41,800.00. The idea is that once said property is brought under administration, George Pay, as creditor, can file his
claim against the administratrix."
1
It then stated that the petition could not prosper as there was a refusal on the part
of Segundina Chua Vda. de Palanca to be appointed as administratrix; that the property sought to be administered no
longer belonged to the debtor, the late Justo Palanca; and that the rights of petitioner-creditor had already prescribed.
The promissory note, dated January 30, 1962, is worded thus: " `For value received from time to time since 1947, we
[jointly and severally promise to] pay to Mr. [George Pay] at his office at the China Banking Corporation the sum of
[Twenty Six Thousand Nine Hundred Pesos] (P26,900.00), with interest thereon at the rate of 12% per annum upon
receipt by either of the undersigned of cash payment from the Estate of the late Don Carlos Palanca or upon
demand'. . . . As stated, this promissory note is signed by Rosa Gonzales Vda. de Carlos Palanca and Justo
Palanca."
2
Then came this paragraph: "The Court has inquired whether any cash payment has been received by
either of the signers of this promissory note from the Estate of the late Carlos Palanca. Petitioner informed that he
does not insist on this provision but that petitioner is only claiming on his right under the promissory note ."
3
After
which, came the ruling that the wording of the promissory note being "upon demand," the obligation was immediately
due. Since it was dated January 30, 1952, it was clear that more "than ten (10) years has already transpired from that
time until to date. The action, therefore, of the creditor has definitely prescribed."
4
The result, as above noted, was
the dismissal of the petition.
In an exhaustive brief prepared by Attorney Florentino B. del Rosario, petitioner did assail the correctness of the
rulings of the lower court as to the effect of the refusal of the surviving spouse of the late Justo Palanca to be
appointed as administratrix, as to the property sought to be administered no longer belonging to the debtor, the late
Justo Palanca, and as to the rights of petitioner-creditor having already prescribed. As noted at the outset, only the
question of prescription need detain us in the disposition of this appeal. Likewise, as intimated, the decision must be
affirmed, considering the clear tenor of the promissory note.
From the manner in which the promissory note was executed, it would appear that petitioner was hopeful that the
satisfaction of his credit could he realized either through the debtor sued receiving cash payment from the estate of
the late Carlos Palanca presumptively as one of the heirs, or, as expressed therein, "upon demand." There is nothing
in the record that would indicate whether or not the first alternative was fulfilled. What is undeniable is that on August
26, 1967, more than fifteen years after the execution of the promissory note on January 30, 1952, this petition was
filed. The defense interposed was prescription. Its merit is rather obvious. Article 1179 of the Civil Code provides:
"Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event
unknown to the parties, is demandable at once." This used to be Article 1113 of the Spanish Civil Code of 1889. As
far back as Floriano v. Delgado,
5
a 1908 decision, it has been applied according to its express language. The well-
known Spanish commentator, Manresa, on this point, states: "Dejando con acierto, el caracter mas teorico y grafico
del acto, o sea la perfeccion de este, se fija, para determinar el concepto de la obligacion pura, en el distinctive de
esta, y que es consecuencia de aquel: la exigibilidad immediata."
6

The obligation being due and demandable, it would appear that the filing of the suit after fifteen years was much too
late. For again, according to the Civil Code, which is based on Section 43 of Act No. 190, the prescriptive period for a
written contract is that of ten years.
7
This is another instance where this Court has consistently adhered to the
express language of the applicable norm.
8
There is no necessity therefore of passing upon the other legal questions
as to whether or not it did suffice for the petition to fail just because the surviving spouse refuses to be made
administratrix, or just because the estate was left with no other property. The decision of the lower court cannot be
overturned.
WHEREFORE, the lower court decision of July 24, 1968 is affirmed. Costs against George Pay.
Zaldivar (Chairman), Barredo, Antonio, Fernandez and Aquino, JJ., concur.

Footnotes
1 Decision, Record on Appeal, 46-47.
2 Ibid, 48-49.
3 Ibid, 49.
4 Ibid.
5 11 Phil. 154.
6 VIII Manresa, Codigo Civil Espaol, Quinta edicion, 305 (1950)..
7 Article 1144 of the Civil code provides: "The following actions must be brought within ten years from the time the
right of action accrues:(1) Upon a written contract; (2) Upon an obligation created by law;(3) Upon a judgment."
8 Cf. Azarraga v. Rodriguez, 9 Phil. 637 (1908); Brillantes v. Margarejo, 36 Phil. 202 (1917); Agoncillo v. Javier, 38
Phil. 424 (1918); Sarmiento v. Javellana, 43 Phil. 880 (1922); Ban Kiat and Co. v. Atkins, Kroll and Co., 44 Phil. 4
(1922); F. M. Yap Tico and Co. v. Lopez Vito, 49 Phil. 61 (1926); Parks v. Province of Tarlac, 49 Phil. 142 (1926);
Hospicio de San Jose v. Fidelity and Surety Co., 52 Phil. 926 (1929); Lutero Suiliong and Co., 54 Phil. 272 (1930); De
Borja v. De Borja, 58 Phil. 811 (1933); International Banking Corp. v. Yared, 59 Phil. 72 (1933); Barretto v. Tuason,
59 Phil. 845 (1934); Hijos de F. Escano v. Nazareno, 60 Phil. 104 (1934); Matute v. Matute, 62 Phil. 676 (1935);
Cunanan v. De Antepasado. L-16169. Aug 31, 1962, 5 SCRA 1028; General Insurance and Surety Corp. v. Republic,
L-13873, Jan. 31, 1963, 7 SCRA 4


Smith, Bell & Co. vs. Sotelo Matti, 44 Phil. 874, No. 16570, March 09,
1922

SMITH, BELL & CO., LTD., plaintiff-appellant,
vs.
VICENTE SOTELO MATTI, defendant-appellant.

Ross and Lawrence and Ewald E. Selph for plaintiff-appellant.
Ramon Sotelo for defendant-appellant.

ROMUALDEZ, J.:

In August, 1918, the plaintiff corporation and the defendant, Mr. Vicente Sotelo, entered into contracts whereby the
former obligated itself to sell, and the latter to purchase from it, two steel tanks, for the total price of twenty-one
thousand pesos (P21,000), the same to be shipped from New York and delivered at Manila "within three or four
months;" two expellers at the price of twenty five thousand pesos (P25,000) each, which were to be shipped from San
Francisco in the month of September, 1918, or as soon as possible; and two electric motors at the price of two
thousand pesos (P2,000) each, as to the delivery of which stipulation was made, couched in these words:
"Approximate delivery within ninety days. This is not guaranteed."

The tanks arrived at Manila on the 27th of April, 1919: the expellers on the 26th of October, 1918; and the motors on
the 27th of February, 1919.

The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of these goods, but Mr. Sotelo refused to
receive them and to pay the prices stipulated.

The plaintiff brought suit against the defendant, based on four separate causes of action, alleging, among other facts,
that it immediately notified the defendant of the arrival of the goods, and asked instructions from him as to the
delivery thereof, and that the defendant refused to receive any of them and to pay their price. The plaintiff, further,
alleged that the expellers and the motors were in good condition. (Amended complaint, pages 16-30, Bill of
Exceptions.)

In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila Oil Refining and By-Products Co., Inc.,
denied the plaintiff's allegations as to the shipment of these goods and their arrival at Manila, the notification to the
defendant, Mr. Sotelo, the latter's refusal to receive them and pay their price, and the good condition of the expellers
and the motors, alleging as special defense that Mr. Sotelo had made the contracts in question as manager of the
intervenor, the Manila Oil Refining and By-Products Co., Inc which fact was known to the plaintiff, and that "it was
only in May, 1919, that it notified the intervenor that said tanks had arrived, the motors and the expellers having
arrived incomplete and long after the date stipulated." As a counterclaim or set-off, they also allege that, as a
consequence of the plaintiff's delay in making delivery of the goods, which the intervenor intended to use in the
manufacture of cocoanut oil, the intervenor suffered damages in the sums of one hundred sixteen thousand seven
hundred eighty-three pesos and ninety-one centavos (P116,783.91) for the nondelivery of the tanks, and twenty-one
thousand two hundred and fifty pesos (P21,250) on account of the expellers and the motors not having arrived in due
time.

The case having been tried, the court below absolved the defendants from the complaint insofar as the tanks and the
electric motors were concerned, but rendered judgment against them, ordering them to "receive the aforesaid
expellers and pay the plaintiff the sum of fifty thousand pesos (P50,00), the price of the said goods, with legal interest
thereon from July 26, 1919, and costs."

Both parties appeal from this judgment, each assigning several errors in the findings of the lower court.

The principal point at issue in this case is whether or not, under the contracts entered into and the circumstances
established in the record, the plaintiff has fulfilled, in due time, its obligation to bring the goods in question to Manila. If
it has, then it is entitled to the relief prayed for; otherwise, it must be held guilty of delay and liable for the
consequences thereof.

To solve this question, it is necessary to determine what period was fixed for the delivery of the goods.

As regards the tanks, the contracts A and B (pages 61 and 62 of the record) are similar, and in both of them we find
this clause:

To be delivered within 3 or 4 months The promise or indication of shipment carries with it absolutely no obligation
on our part Government regulations, railroad embargoes, lack of vessel space, the exigencies of the requirement
of the United States Government, or a number of causes may act to entirely vitiate the indication of shipment as
stated. In other words, the order is accepted on the basis of shipment at Mill's convenience, time of shipment being
merely an indication of what we hope to accomplish.

In the contract Exhibit C (page 63 of the record), with reference to the expellers, the following stipulation appears:

The following articles, hereinbelow more particularly described, to be shipped at San Francisco within the month of
September /18, or as soon as possible. Two Anderson oil expellers . . . .

And in the contract relative to the motors (Exhibit D, page 64, rec.) the following appears:

Approximate delivery within ninety days. This is not guaranteed. This sale is subject to our being able to obtain
Priority Certificate, subject to the United States Government requirements and also subject to confirmation of
manufactures.

In all these contracts, there is a final clause as follows:

The sellers are not responsible for delays caused by fires, riots on land or on the sea, strikes or other causes known
as "Force Majeure" entirely beyond the control of the sellers or their representatives.

Under these stipulations, it cannot be said that any definite date was fixed for the delivery of the goods. As to the
tanks, the agreement was that the delivery was to be made "within 3 or 4 months," but that period was subject to the
contingencies referred to in a subsequent clause. With regard to the expellers, the contract says "within the month of
September, 1918," but to this is added "or as soon as possible." And with reference to the motors, the contract
contains this expression, "Approximate delivery within ninety days," but right after this, it is noted that "this is not
guaranteed."

The oral evidence falls short of fixing such period.

From the record it appears that these contracts were executed at the time of the world war when there existed rigid
restrictions on the export from the United States of articles like the machinery in question, and maritime, as well as
railroad, transportation was difficult, which fact was known to the parties; hence clauses were inserted in the
contracts, regarding "Government regulations, railroad embargoes, lack of vessel space, the exigencies of the
requirements of the United States Government," in connection with the tanks and "Priority Certificate, subject to the
United State Government requirements," with respect to the motors. At the time of the execution of the contracts, the
parties were not unmindful of the contingency of the United States Government not allowing the export of the goods,
nor of the fact that the other foreseen circumstances therein stated might prevent it.

Considering these contracts in the light of the civil law, we cannot but conclude that the term which the parties
attempted to fix is so uncertain that one cannot tell just whether, as a matter of fact, those articles could be brought to
Manila or not. If that is the case, as we think it is, the obligations must be regarded as conditional.

Obligations for the performance of which a day certain has been fixed shall be demandable only when the day
arrives.

A day certain is understood to be one which must necessarily arrive, even though its date be unknown.

If the uncertainty should consist in the arrival or non-arrival of the day, the obligation is conditional and shall be
governed by the rules of the next preceding section. (referring to pure and conditional obligations). (Art. 1125, Civ.
Code.)

And as the export of the machinery in question was, as stated in the contract, contingent upon the sellers obtaining
certificate of priority and permission of the United States Government, subject to the rules and regulations, as well as
to railroad embargoes, then the delivery was subject to a condition the fulfillment of which depended not only upon
the effort of the herein plaintiff, but upon the will of third persons who could in no way be compelled to fulfill the
condition. In cases like this, which are not expressly provided for, but impliedly covered, by the Civil Code, the obligor
will be deemed to have sufficiently performed his part of the obligation, if he has done all that was in his power, even
if the condition has not been fulfilled in reality.

In such cases, the decisions prior to the Civil Code have held that the obligee having done all that was in his power,
was entitled to enforce performance of the obligation. This performance, which is fictitious not real is not
expressly authorized by the Code, which limits itself only to declare valid those conditions and the obligation thereby
affected; but it is neither disallowed, and the Code being thus silent, the old view can be maintained as a doctrine.
(Manresa's commentaries on the Civil Code [1907], vol. 8, page 132.)

The decisions referred to by Mr. Manresa are those rendered by the supreme court of Spain on November 19, 1896,
and February 23, 1871.

In the former it is held:

First. That when the fulfillment of the conditions does not depend on the will of the obligor, but on that of a third
person who can in no way be compelled to carry it out, and it is found by the lower court that the obligor has done all
in his power to comply with the obligation, the judgment of the said court, ordering the other party to comply with his
part of the contract, is not contrary to the law of contracts, or to Law 1, Tit. I, Book 10, of the "Novsima Recopilacin,"
or Law 12, Tit. 11, of Partida 5, when in the said finding of the lower court, no law or precedent is alleged to have
been violated. (Jurisprudencia Civil published by the directors of the Revista General de Legislacion y Jurisprudencia
[1866], vol. 14, page 656.)

In the second decision, the following doctrine is laid down:

Second. That when the fulfillment of the condition does not depend on the will of the obligor, but on that of a third
person, who can in no way be compelled to carry it out, the obligor's part of the contract is complied withalf Belisario
not having exercised his right of repurchase reserved in the sale of Basilio Borja mentioned in paragraph (13) hereof,
the affidavit of Basilio Borja for the consolidacion de dominio was presented for record in the registry of deeds and
recorded in the registry on the same date.

(32) The Maximo Belisario left a widow, the opponent Adelina Ferrer and three minor children, Vitaliana, Eugenio,
and Aureno Belisario as his only heirs.

(33) That in the execution and sales thereunder, in which C. H. McClure appears as the judgment creditor, he was
represented by the opponent Peter W. Addison, who prepared and had charge of publication of the notices of the
various sales and that in none of the sales was the notice published more than twice in a newspaper.

The claims of the opponent-appellant Addison have been very fully and ably argued by his counsel but may, we think,
be disposed of in comparatively few words. As will be seen from the foregoing statement of facts, he rest his title (1)
on the sales under the executions issued in cases Nos. 435, 450, 454, and 499 of the court of the justice of the peace
of Dagupan with the priority of inscription of the last two sales in the registry of deeds, and (2) on a purchase from the
Director of Lands after the land in question had been forfeited to the Government for non-payment of taxes under Act
No. 1791.

The sheriff's sales under the execution mentioned are fatally defective for what of sufficient publication of the notice of
sale. Section 454 of the Code of civil Procedure reads in part as follows:

SEC. 454. Before the sale of property on execution, notice thereof must be given, as follows:

1. In case of perishable property, by posing written notice of the time and place of the sale in three public places of
the municipality or city where the sale is to take place, for such time as may be reasonable, considering the character
and condition of the property;

2. * * * * * * *

3. In cases of real property, by posting a similar notice particularly describing the property, for twenty days in three
public places of the municipality or city where the property is situated, and also where the property is to be sold, and
publishing a copy thereof once a week, for the same period, in some newspaper published or having general
circulation in the province, if there be one. If there are newspaper published in the province in both the Spanish and
English languages, then a like publication for a like period shall be made in one newspaper published in the Spanish
language, and in one published in the English language: Provided, however, That such publication in a newspaper
will not be required when the assessed valuation of the property does not exceed four hundred pesos;

4. * * * * * * *

Examining the record, we find that in cases Nos. 435 and 450 the sales took place on October 14, 1916; the notice
first published gave the date of the sale as October 15th, but upon discovering that October 15th was a Sunday, the
date was changed to October 14th. The correct notice was published twice in a local newspaper, the first publication
was made on October 7th and the second and last on October 14th, the date of the sale itself. The newspaper is a
weekly periodical published every Saturday afternoon.

In case No. 454 there were only two publications of the notice in a newspaper, the first publication being made only
fourteen days before the date of the sale. In case No. 499, there were also only two publications, the first of which
was made thirteen days before the sale. In the last case the sale was advertised for the hours of from 8:30 in the
morning until 4:30 in the afternoon, in violation of section 457 of the Code of Civil Procedure. In cases Nos. 435 and
450 the hours advertised were from 9:00 in the morning until 4.30 in the afternoon. In all of the cases the notices of
the sale were prepared by the judgment creditor or his agent, who also took charged of the publication of such
notices.

In the case of Campomanes vs. Bartolome and Germann & Co. (38 Phil., 808), this court held that if a sheriff sells
without the notice prescribe by the Code of Civil Procedure induced thereto by the judgment creditor and the
purchaser at the sale is the judgment creditor, the sale is absolutely void and not title passes. This must now be
regarded as the settled doctrine in this jurisdiction whatever the rule may be elsewhere.

It appears affirmatively from the evidence in the present case that there is a newspaper published in the province
where the sale in question took place and that the assessed valuation of the property disposed of at each sale
exceeded P400. Comparing the requirements of section 454, supra, with what was actually done, it is self-evident
that notices of the sales mentioned were not given as prescribed by the statute and taking into consideration that in
connection with these sales the appellant Addison was either the judgment creditor or else occupied a position
analogous to that of a judgment creditor, the sales must be held invalid.

The conveyance or reconveyance of the land from the Director of Lands is equally invalid. The provisions of Act No.
1791 pertinent to the purchase or repurchase of land confiscated for non-payment of taxes are found in section 19 of
the Act and read:

. . . In case such redemption be not made within the time above specified the Government of the Philippine Islands
shall have an absolute, indefeasible title to said real property. Upon the expiration of the said ninety days, if
redemption be not made, the provincial treasurer shall immediately notify the Director of Lands of the forfeiture and
furnish him with a description of the property, and said Director of Lands shall have full control and custody thereof to
lease or sell the same or any portion thereof in the same manner as other public lands are leased or sold: Provided,
That the original owner, or his legal representative, shall have the right to repurchase the entire amount of his said
real property, at any time before a sale or contract of sale has been made by the director of Lands to a third party, by
paying therefore the whole sum due thereon at the time of ejectment together with a penalty of ten per centum . . . .

The appellant Addison repurchased under the final proviso of the section quoted and was allowed to do so as the
successor in interest of the original owner under the execution sale above discussed. As we have seen, he acquired
no rights under these sales, was therefore not the successor of the original owner and could only have obtained a
valid conveyance of such titles as the Government might have by following the procedure prescribed by the Public
Land Act for the sale of public lands. he is entitled to reimbursement for the money paid for the redemption of the
land, with interest, but has acquired no title through the redemption.

The question of the priority of the record of the sheriff's sales over that of the sale from Belisario to Borja is
extensively argued in the briefs, but from our point of view is of no importance; void sheriff's or execution sales cannot
be validated through inscription in the Mortgage Law registry.

The opposition of Adelina Ferrer must also be overruled. She maintained that the land in question was community
property of the marriage of Eulalio Belisario and Paula Ira: that upon the death of Paula Ira inealed from is modified,
and the defendant Mr. Vicente Sotelo Matti, sentenced to accept and receive from the plaintiff the tanks, the expellers
and the motors in question, and to pay the plaintiff the sum of ninety-six thousand pesos (P96,000), with legal interest
thereon from July 17, 1919, the date of the filing of the complaint, until fully paid, and the costs of both instances. So
ordered.

Araullo, C.J., Johnson, Street, Malcolm, Avancea, Villamor, Ostrand, and Johns, JJ., concur.

Chaves vs. Gonzales, 32 SCRA 547, No. 27454
G.R. No. L-27454, April 30, 1970
ROSENDO O. CHAVES, PLAINTIFF-APPELLANT,
VS. FRUCTUOSO GONZALES, DEFENDANTAPPELLEE.
D E C I S I O N
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
Page 1 of 5
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 typewriter 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 defendant
through a certain Julio Bocalin, which the defendant 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:
Page 2 of 5
"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 defendantappellee
was to comply with the contract before said defendant-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 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
compensation for the work he had already done. The time for compliance
having evidently expired, and there being a breach of contract by nonperformance,
it was academic for the plaintiff to have first petitioned the
Page 3 of 5
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 contravention, 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
Page 4 of 5
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.
[1] Perez v. Araneta, L-18414, 15 July 1968, 24 SCRA 43; Cebu Portland
Cement Co. v. Mun. of Naga, L-24116-17, 22 August 1968, 24 SCRA
708.
[2] Malonzo v. Galang, L-13851, 27 July 1960; Darang v. Belizar, L-22399,
31 March 1967, 19 SCRA 214.
OSJurist.org
Page 5 of 5

Encarnacion vs. Baldomar, No. L-264, 77 Phil. 470 , October 04, 1946

G.R. No. L-264 October 4, 1946
VICENTE SINGSON ENCARNACION, plaintiff-appellee,
vs.
JACINTA BALDOMAR, ET AL., defendants-appellants.
Bausa and Ampil for appellants.
Tolentino and Aguas for appellee.
HILADO, J .:
Vicente Singson Encarnacion, owner of the house numbered 589 Legarda Street, Manila, some six years ago leased
said house to Jacinto Baldomar and her son, Lefrado Fernando, upon a month-to-month basis for the monthly rental
of P35. After Manila was liberated in the last war, specifically on March 16, 1945, and on April 7, of the same year,
plaintiff Singson Encarnacion notified defendants, the said mother and son, to vacate the house above-mentioned on
or before April 15, 1945, because plaintiff needed it for his offices as a result of the destruction of the building where
said plaintiff had said offices before. Despite this demand, defendants insisted on continuing their occupancy. When
the original action was lodged with the Municipal Court of Manila on April 20, 1945, defendants were in arrears in the
payment of the rental corresponding to said month, the agrees rental being payable within the first five days of each
month. That rental was paid prior to the hearing of the case in the municipal court, as a consequence of which said
court entered judgment for restitution and payment of rentals at the rate of P35 a month from May 1, 1945, until
defendants completely vacate the premises. Although plaintiff included in said original complaint a claim for P500
damages per month, that claim was waived by him before the hearing in the municipal court, on account of which
nothing was said regarding said damages in the municipal court's decision.
When the case reached the Court of First Instance of Manila upon appeal, defendants filed therein a motion to
dismiss (which was similar to a motion to dismiss filed by them in the municipal court) based upon the ground that the
municipal court had no jurisdiction over the subject matter due to the aforesaid claim for damages and that, therefore,
the Court of First Instance had no appellate jurisdiction over the subject matter of the action. That motion to dismiss
was denied by His Honor, Judge Mamerto Roxas, by order dated July 21, 1945, on the ground that in the municipal
court plaintiff had waived said claim for damages and that, therefore, the same waiver was understood also to have
been made in the Court of First Instance.lawphil.net
In the Court of First Instance the graveman of the defense interposed by defendants, as it was expressed defendant
Lefrado Fernando during the trial, was that the contract which they had celebrated with plaintiff since the beginning
authorized them to continue occupying the house indefinetly and while they should faithfully fulfill their obligations as
respects the payment of the rentals, and that this agreement had been ratified when another ejectment case between
the parties filed during the Japanese regime concerning the same house was allegedly compounded in the municipal
court. The Court of First Instance gave more credit to plaintiff's witness, Vicente Singson Encarnacion, jr., who
testified that the lease had always and since the beginning been upon a month-to-month basis. The court added in its
decision that this defense which was put up by defendant's answer, for which reason the Court considered it as
indicative of an eleventh-hour theory. We think that the Court of First Instance was right in so declaring. Furthermore,
carried to its logical conclusion, the defense thus set up by defendant Lefrado Fernando would leave to the sole and
exclusive will of one of the contracting parties (defendants in this case) the validity and fulfillment of the contract of
lease, within the meaning of article 1256 of the Civil Code, since the continuance and fulfillment of the contract would
then depend solely and exclusively upon their free and uncontrolled choice between continuing paying the rentals or
not, completely depriving the owner of all say in the matter. If this defense were to be allowed, so long as defendants
elected to continue the lease by continuing the payment of the rentals, the owner would never be able to discontinue
it; conversely, although the owner should desire the lease to continue, the lessees could effectively thwart his
purpose if they should prefer to terminate the contract by the simple expedient of stopping payment of the rentals.
This, of course, is prohibited by the aforesaid article of the Civil Code. (8 Manresa, 3d ed., pp. 626, 627;
Cuyuganvs. Santos, 34 Phil., 100.)
During the pendency of the appeal in the Court of First Instance and before the judgment appealed from was
rendered on October 31, 1945, the rentals in areas were those pertaining to the month of August, 1945, to the date of
said judgment at the rate of P35 a month. During the pendency of the appeal in that court, certain deposits were
made by defendants on account of rentals with the clerk of said court, and in said judgment it is disposed that the
amounts thus deposited should be delivered to plaintiff.
Upon the whole, we are clearly of opinion that the judgment appealed from should be, as it is hereby, affirmed, with
the costs of the three instances to appellants. So ordered.
Paras, Pablo, Perfecto and Padilla, JJ., concur.


Eleizegui vs. Manila Lawn Tennis Club, 2 Phil., 309 , G.R. No. 967 May
19, 1903

G.R. No. 967 May 19, 1903
DARIO AND GAUDENCIO ELEIZEGUI, plaintiffs-appellees,
vs.
THE MANILA LAWN TENNIS CLUB, defendant-appellant.
Pillsburry and Sutro for appellant.
Manuel Torres Vergara for appellee.
ARELLANO, C. J .:
This suit concerns the lease of a piece of land for a fixed consideration and to endure at the will of the lessee. By the
contract of lease the lessee is expressly authorized to make improvements upon the land, by erecting buildings of
both permanent and temporary character, by making fills, laying pipes, and making such other improvements as
might be considered desirable for the comfort and amusement of the members.
With respect to the term of the lease the present question has arisen. In its decision three theories have been
presented: One which makes the duration depend upon the will of the lessor, who, upon one month's notice given to
the lessee, may terminate the lease so stipulated; another which, on the contrary, makes it dependent upon the will of
the lessee, as stipulated; and the third, in accordance with which the right is reversed to the courts to fix the duration
of the term.
The first theory is that which has prevailed in the judgment below, as appears from the language in which the basis of
the decision is expressed: "The court is of the opinion that the contract of lease was terminated by the notice given by
the plaintiff on August 28 of last year . . . ." And such is the theory maintained by the plaintiffs, which expressly rests
upon article 1581 of the Civil Code, the law which was in force at the time the contract was entered into (January 25,
1890). The judge, in giving to this notice the effect of terminating the lease, undoubtedly considers that it is governed
by the article relied upon by the plaintiffs, which is of the following tenor: "When the term has not been fixed for the
lease, it is understood to be for years when an annual rental has been fixed, for months when the rent is monthly. . . ."
The second clause of the contract provides as follows: "The rent of the said land is fixed at 25 pesos per month." (P.
11, Bill of Exceptions.)
In accordance with such a theory, the plaintiffs might have terminated the lease the month following the making of the
contract at any time after the first month, which, strictly speaking, would be the only month with respect to which
they were expressly bound, they not being bound for each successive month except by a tacit renewal (art. 1566)
an effect which they might prevent by giving the required notice.
Although the relief asked for in the complaint, drawn in accordance with the new form of procedure established by the
prevailing Code, is the restitution of the land to the plaintiffs (a formula common to various actions), nevertheless the
action which is maintained can be no other than that of desahucio, in accordance with the substantive law governing
the contract. The lessor says article 1569 of the Civil Code may judicially dispossess the lessee upon the
expiration of the conventional term or of the legal term; the conventional term that is, the one agreed upon by the
parties; the legal term, in defect of the conventional, fixed for leases by articles 1577 and 1581. We have already
seen what this legal term is with respect to urban properties, in accordance with article 1581.
Hence, it follows that the judge has only to determine whether there is or is not conventional term. If there be a
conventional term, he can not apply the legal term fixed in subsidium to cover a case in which the parties have made
no agreement whatsoever with respect to the duration of the lease. In this case the law interprets the presumptive
intention of the parties, they having said nothing in the contract with respect to its duration. "Obligations arising from
contractshave the force of law between the contracting parties and must be complied with according to the tenor of
the contracts." (Art. 1091 of the Civil Code.)
The obligations which, with the force of law, the lessors assumed by the contract entered into, so far as pertaining to
the issues, are the following: "First. . . . They lease the above-described land to Mr. Williamson, who takes it onlease,
. . . for all the time the members of the said club may desire to use it . . . Third. . . . the owners of the land undertake
to maintain the club as tenant as long as the latter shall see fit, without altering in the slightest degree the conditions
of this contract, even though the estate be sold."
It is necessary, therefore, to answer the first question: Was there, or was there not, a conventional term, a duration,
agreed upon in the contract in question? If there was an agreed duration, a conventional term, then the legal term
the term fixed in article 1581 has no application; the contract is the supreme law of the contracting parties. Over
and above the general law is the special law, expressly imposed upon themselves by the contracting parties. Without
these clauses 1 and 3, the contract would contain no stipulation with respect to the duration of the lease, and then
article 1581, in connection with article 1569, would necessarily be applicable. In view of these clauses, however, it
can not be said that there is no stipulation with respect to the duration of the lease, or that, notwithstanding these
clauses, article 1581, in connection with article 1569, can be applied. If this were so, it would be necessary to hold
that the lessors spoke in vain that their words are to be disregarded a claim which can not be advanced by the
plaintiffs nor upheld by any court without citing the law which detracts all legal force from such words or despoils them
of their literal sense.
It having been demonstrated that the legal term can not be applied, there being a conventional term, this destroys the
assumption that the contract of lease was wholly terminated by the notice given by the plaintiffs, this notice being
necessary only when it becomes necessary to have recourse to the legal term. Nor had the plaintiffs, under the
contract, any right to give such notice. It is evident that they had no intention of stipulating that they reserved the right
to give such notice. Clause 3 begins as follows: "Mr. Williamson, or whoever may succeed him as secretary of said
club, may terminate this lease whenever desired without other formality than that of giving a month's notice. The
owners of the land undertake to maintain the club as tenant as long as the latter shall see fit." The right of the one
and the obligation of the others being thus placed in antithesis, there is something more, much more, than
the inclusio unius, exclusio alterius. It is evident that the lessors did not intend to reserve to themselves the right to
rescind that which they expressly conferred upon the lessee by establishing it exclusively in favor of the latter.
It would be the greatest absurdity to conclude that in a contract by which the lessor has left the termination of the
lease to the will of the lessee, such a lease can or should be terminated at the will of the lessor.
It would appear to follow, from the foregoing, that, if such is the force of the agreement, there can be no other mode
of terminating the lease than by the will of the lessee, as stipulated in this case. Such is the conclusion maintained by
the defendant in the demonstration of the first error of law in the judgment, as alleged by him. He goes so far, under
this theory, as to maintain the possibility of a perpetual lease, either as such lease, if the name can be applied, or
else as an innominate contract, or under any other denomination, in accordance with the agreement of the parties,
which is, in fine, the law of the contract, superior to all other law, provided that there be no agreement against any
prohibitive statute, morals, or public policy.
It is unnecessary here to enter into a discussion of a perpetual lease in accordance with the law and doctrine prior to
the Civil Code now in force, and which has been operative since 1889. Hence the judgment of the supreme court of
Spain of January 2, 1891, with respect to a lease made in 1887, cited by the defendant, and a decision stated by him
to have been rendered by the Audiencia of Pamplona in 1885 (it appears to be rather a decision by the head office of
land registration of July 1, 1885), and any other decision which might be cited based upon the constitutions of
Cataluna, according to which a lease of more than ten years is understood to create a life tenancy, or even a
perpetual tenancy, are entirely out of point in this case, in which the subject-matter is a lease entered into under the
provisions of the present Civil Code, in accordance with the principles of which alone can this doctrine be examined.
It is not to be understood that we admit that the lease entered into was stipulated as a life tenancy, and still less as a
perpetual lease. The terms of the contract express nothing to this effect. They do, whatever, imply this idea. If the
lease could last during such time as the lessee might see fit, because it has been so stipulated by the lessor, it would
last, first, as long as the will of the lessee that is, all his life; second, during all the time that he may have
succession, inasmuch as he who contracts does so for himself and his heirs. (Art. 1257 of the Civil Code.) The lease
in question does not fall within any of the cases in which the rights and obligations arising from a contract can not be
transmitted to heirs, either by its nature, by agreement, or by provision of law. Furthermore, the lessee is an English
association.
Usufruct is a right of superior degree to that which arises from a lease. It is a real right and includes all the jus
utendi and jus fruendi. Nevertheless, the utmost period for which a usufruct can endure, if constituted in favor a
natural person, is the lifetime of the usufructuary (art. 513, sec. 1); and if in favor of juridical person, it can not be
created for more than thirty years. (Art. 515.) If the lease might be perpetual, in what would it be distinguished from
an emphyteusis? Why should the lessee have a greater right than the usufructuary, as great as that of an
emphyteuta, with respect to the duration of the enjoyment of the property of another? Why did they not contract for a
usufruct or an emphyteusis? It was repeatedly stated in the document that it was a lease, and nothing but a lease,
which was agreed upon: "Being in the full enjoyment of the necessary legal capacity to enter into this contract
of lease . . . they have agreed upon the lease of said estate . . . They lease to Mr. Williamson, who receives it
as such. . . . The rental is fixed at 25 pesos a month. . . . The owners bind themselves to maintain the club as tenant.
. . . Upon the foregoing conditions they make the present contract of lease. . . ." (Pp. 9, 11, and 12, bill of exceptions.)
If it is a lease, then it must be for a determinate period. (Art. 1543.) By its very nature it must be temporary, just as by
reason of its nature an emphyteusis must be perpetual, or for an unlimited period. (Art. 1608.)
On the other hand, it can not be concluded that the termination of the contract is to be left completely at the will of the
lessee, because it has been stipulated that its duration is to be left to his will.
The Civil Code has made provision for such a case in all kinds of obligations. In speaking in general of obligations
with a term it has supplied the deficiency of the former law with respect to the "duration of the term when it has been
left to the will of the debtor," and provides that in this case the term shall be fixed by the courts. (Art. 1128, sec. 2.) In
every contract, as laid down by the authorities, there is always a creditor who is entitled to demand the performance,
and a debtor upon whom rests the obligation to perform the undertaking. In bilateral contracts the contracting parties
are mutually creditors and debtors. Thus, in this contract of lease, the lessee is the creditor with respect to the rights
enumerated in article 1554, and is the debtor with respect to the obligations imposed by articles 1555 and 1561. The
term within which performance of the latter obligation is due is what has been left to the will of the debtor. This term it
is which must be fixed by the courts.
The only action which can be maintained under the terms of the contract is that by which it is sought to obtain from
the judge the determination of this period, and not the unlawful detainer action which has been brought an action
which presupposes the expiration of the term and makes it the duty of the judge to simply decree an eviction. To
maintain the latter action it is sufficient to show the expiration of the term of the contract, whether conventional or
legal; in order to decree the relief to be granted in the former action it is necessary for the judge to look into the
character and conditions of the mutual undertakings with a view to supplying the lacking element of a time at which
the lease is to expire. In the case of a loan of money or a commodatum of furniture, the payment or return to be made
when the borrower "can conveniently do so" does not mean that he is to be allowed to enjoy the money or to make
use of the thing indefinitely or perpetually. The courts will fix in each case, according to the circumstances, the time
for the payment or return. This is the theory also maintained by the defendant in his demonstration of the fifth
assignment of error. "Under article 1128 of the Civil Code," thus his proposition concludes, "contracts whose term is
left to the will of one of the contracting parties must be fixed by the courts, . . . the conditions as to the term of this
lease has a direct legislative sanction," and he cites articles 1128. "In place of the ruthless method of annihilating a
solemn obligation, which the plaintiffs in this case have sought to pursue, the Code has provided a legitimate and
easily available remedy. . . . The Code has provided for the proper disposition of those covenants, and a case can
hardly arise more clearly demonstrating the usefulness of that provision than the case at bar." (Pp. 52 and 53 of
appellant's brief.)
The plaintiffs, with respect to this conclusion on the part of their opponents, only say that article 1128 "expressly
refers to obligations in contracts in general, and that it is well known that a lease is included among special
contracts." But they do not observe that if contracts, simply because special rules are provided for them, could be
excepted from the provisions of the articles of the Code relative to obligations and contracts in general, such general
provisions would be wholly without application. The system of the Code is that of establishing general rules applicable
to all obligations and contracts, and then special provisions peculiar to each species of contract. In no part of Title VI
of Book IV, which treats of the contract of lease, are there any special rules concerning pure of conditional obligations
which may be stipulated in a lease, because, with respect to these matters, the provisions of section 1, chapter 3,
Title I, on the subject of obligations are wholly sufficient. With equal reason should we refer to section 2, which deals
with obligations with a term, in the same chapter and title, if a question concerning the term arises out of a contract of
lease, as in the present case, and within this section we find article 1128, which decides the question.
The judgment was entered below upon the theory of the expiration of a legal term which does not exist, as the case
requires that a term be fixed by the courts under the provisions of article 1128 with respect to obligations which, as is
the present, are terminable at the will of the obligee. It follows, therefore, that the judgment below is erroneous.
The judgment is reversed and the case will be remanded to the court below with directions to enter a judgment of
dismissal of the action in favor of the defendant, the Manila Lawn Tennis Club, without special allowance as to the
recovery of costs. So ordered.
Mapa and Ladd, JJ., concur.
Torres, J., disqualified.

Separate Opinions
WILLARD, J ., concurring:
I concur in the foregoing opinion so far as it holds that article 1581 has no application to the case and that the action
can not be maintained. But as to the application of article 1128 I do not concur. That article is as follows:
Should the obligation not fix a period, but it can be inferred from its nature and circumstances that there was an
intention to grant it to the debtor, the courts shall fix the duration of the same.
The court shall also fix the duration of the period when it may have been left to the will of the debtor.
The court has applied the last paragraph of the article to the case of a lease. But, applying the first paragraph to
leases, we have a direct conflict between this article and article 1581. Let us suppose the lease of a house for 50
pesos a month. Nothing is said about the number of months during which the lessee shall occupy it. If article 1581 is
applicable to this case, the law fixes the duration of the term and the courts have no power to change it. If article 1128
is applied to it, the courts fix the duration of the lease without reference to article 1581. It will, I think, be agreed by
everyone that article 1581 is the law applicable to the case, and that article 1128 has nothing to do with it.
It seems clear that both parts of the article must refer to the same kind of obligations. The first paragraph relates to
obligations in which the parties have named no period, the second to the same kind of obligations in which the period
is left to the will of the debtor. If the first paragraph is not applicable to leases, the second is not.
The whole article was, I think, intended to apply generally to unilateral contracts to those in which the creditor had
parted with something of value, leaving it to the debtor to say when it should be returned. In such cases the debtor
might never return it, and the creditor might thus be deprived of his property and entirely defeated in his rights. It was
to prevent such a wrong that the article was adopted. But it has no application to this case. The plaintiffs are not
deprived of their rights. They get every month the value which they themselves put upon the use of the property. The
time of the payment of this rent has not been left by the contract to the will of the debtor. It is expressly provided in
the contract that it shall be paid "within the first five days after the expiration of each month."
Article 1255 of the Civil Code is as follows:
The contracting parties may make the agreement and establish the clauses and conditions which they may deem
advisable, provided they are not in contravention of law, morals, or public order.
That the parties to this contract distinctly agreed that the defendant should have this property so long as he was
willing to pay 25 pesos a month for it, is undisputed.
I find nothing in the Code to show that when a natural person is the tenant such an agreement would be contrary to
law, morality, or public policy. In such a case the contract would terminate at the death of the tenant. Such is the
doctrine of the French Cour de Cassation. (Houet vs. Lamarge, July 20, 1840.)
The tenant is the only person who has been given the right to say how long the contract shall continue. That right is
personal to him, and is not property in such a sense as to pass to his heirs.
In this case the question is made more difficult by the fact that the tenant is said to be juridical person, and it is said
that the lease is therefore a perpetual one. Just what kind of a partnership or association the defendant is does not
appear, and without knowing what kind of an entity it is we can not say that this contract is a perpetual lease. Even if
the defendant has perpetual succession, the lease would not necessarily last forever. A breach of any one of the
obligations imposed upon the lessee by article 1555 of the Civil Code would give the landlord the right to terminate it.


Philippine Banking Corporation vs. Lui She, 21 SCRA 52, No. L-17587
September 12, 1967
Phil banking v. Lui She, 21 SCRA 53, G.R. No. L-17587, September 12, 1967

PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINA SANTOS Y CANON FAUSTINO,
deceased, plaintiff-appellant,
vs.
LUI SHE in her own behalf and as administratrix of the intestate estate of Wong Heng, deceased, defendant-
appellant.

Nicanor S. Sison for plaintiff-appellant.
Ozaeta, Gibbs & Ozaeta for defendant-appellant.



CASTRO, J.:

Justina Santos y Canon Faustino and her sister Lorenzo were the owners in common of a piece of land in
Manila. This parcel, with an area of 2,582.30 square meters, is located on Rizal Avenue and opens into Florentino
Torres street at the back and Katubusan street on one side. In it are two residential houses with entrance on
Florentino Torres street and the Hen Wah Restaurant with entrance on Rizal Avenue. The sisters lived in one of the
houses, while Wong Heng, a Chinese, lived with his family in the restaurant. Wong had been a long-time lessee of a
portion of the property, paying a monthly rental of P2,620.

On September 22, 1957 Justina Santos became the owner of the entire property as her sister died with no
other heir. Then already well advanced in years, being at the time 90 years old, blind, crippled and an invalid, she
was left with no other relative to live with. Her only companions in the house were her 17 dogs and 8 maids. Her
otherwise dreary existence was brightened now and then by the visits of Wong's four children who had become the
joy of her life. Wong himself was the trusted man to whom she delivered various amounts for safekeeping, including
rentals from her property at the corner of Ongpin and Salazar streets and the rentals which Wong himself paid as
lessee of a part of the Rizal Avenue property. Wong also took care of the payment; in her behalf, of taxes, lawyers'
fees, funeral expenses, masses, salaries of maids and security guard, and her household expenses.

"In grateful acknowledgment of the personal services of the lessee to her," Justina Santos executed on
November 15, 1957 a contract of lease (Plff Exh. 3) in favor of Wong, covering the portion then already leased to him
and another portion fronting Florentino Torres street. The lease was for 50 years, although the lessee was given the
right to withdraw at any time from the agreement; the monthly rental was P3,120. The contract covered an area of
1,124 square meters. Ten days later (November 25), the contract was amended (Plff Exh. 4) so as to make it cover
the entire property, including the portion on which the house of Justina Santos stood, at an additional monthly rental
of P360. For his part Wong undertook to pay, out of the rental due from him, an amount not exceeding P1,000 a
month for the food of her dogs and the salaries of her maids.


On December 21 she executed another contract (Plff Exh. 7) giving Wong the option to buy the leased premises for
P120,000, payable within ten years at a monthly installment of P1,000. The option, written in Tagalog, imposed on
him the obligation to pay for the food of the dogs and the salaries of the maids in her household, the charge not to
exceed P1,800 a month. The option was conditioned on his obtaining Philippine citizenship, a petition for which was
then pending in the Court of First Instance of Rizal. It appears, however, that this application for naturalization was
withdrawn when it was discovered that he was not a resident of Rizal. On October 28, 1958 she filed a petition to
adopt him and his children on the erroneous belief that adoption would confer on them Philippine citizenship. The
error was discovered and the proceedings were abandoned.

On November 18, 1958 she executed two other contracts, one (Plff Exh. 5) extending the term of the lease to
99 years, and another (Plff Exh. 6) fixing the term of the option of 50 years. Both contracts are written in Tagalog.

In two wills executed on August 24 and 29, 1959 (Def Exhs. 285 & 279), she bade her legatees to respect the
contracts she had entered into with Wong, but in a codicil (Plff Exh. 17) of a later date (November 4, 1959) she
appears to have a change of heart. Claiming that the various contracts were made by her because of machinations
and inducements practiced by him, she now directed her executor to secure the annulment of the contracts.

On November 18 the present action was filed in the Court of First Instance of Manila. The complaint alleged
that the contracts were obtained by Wong "through fraud, misrepresentation, inequitable conduct, undue influence
and abuse of confidence and trust of and (by) taking advantage of the helplessness of the plaintiff and were made to
circumvent the constitutional provision prohibiting aliens from acquiring lands in the Philippines and also of the
Philippine Naturalization Laws." The court was asked to direct the Register of Deeds of Manila to cancel the
registration of the contracts and to order Wong to pay Justina Santos the additional rent of P3,120 a month from
November 15, 1957 on the allegation that the reasonable rental of the leased premises was P6,240 a month.

In his answer, Wong admitted that he enjoyed her trust and confidence as proof of which he volunteered the
information that, in addition to the sum of P3,000 which he said she had delivered to him for safekeeping, another
sum of P22,000 had been deposited in a joint account which he had with one of her maids. But he denied having
taken advantage of her trust in order to secure the execution of the contracts in question. As counterclaim he sought
the recovery of P9,210.49 which he said she owed him for advances.

Wong's admission of the receipt of P22,000 and P3,000 was the cue for the filing of an amended complaint.
Thus on June 9, 1960, aside from the nullity of the contracts, the collection of various amounts allegedly delivered on
different occasions was sought. These amounts and the dates of their delivery are P33,724.27 (Nov. 4, 1957);
P7,344.42 (Dec. 1, 1957); P10,000 (Dec. 6, 1957); P22,000 and P3,000 (as admitted in his answer). An accounting of
the rentals from the Ongpin and Rizal Avenue properties was also demanded.



In the meantime as a result of a petition for guardianship filed in the Juvenile and Domestic Relations Court, the
Security Bank & Trust Co. was appointed guardian of the properties of Justina Santos, while Ephraim G. Gochangco
was appointed guardian of her person.

In his answer, Wong insisted that the various contracts were freely and voluntarily entered into by the parties.
He likewise disclaimed knowledge of the sum of P33,724.27, admitted receipt of P7,344.42 and P10,000, but
contended that these amounts had been spent in accordance with the instructions of Justina Santos; he expressed
readiness to comply with any order that the court might make with respect to the sums of P22,000 in the bank and
P3,000 in his possession.

The case was heard, after which the lower court rendered judgment as follows:

[A]ll the documents mentioned in the first cause of action, with the exception of the first which is the lease
contract of 15 November 1957, are declared null and void; Wong Heng is condemned to pay unto plaintiff thru
guardian of her property the sum of P55,554.25 with legal interest from the date of the filing of the amended
complaint; he is also ordered to pay the sum of P3,120.00 for every month of his occupation as lessee under the
document of lease herein sustained, from 15 November 1959, and the moneys he has consigned since then shall be
imputed to that; costs against Wong Heng.

From this judgment both parties appealed directly to this Court. After the case was submitted for decision, both
parties died, Wong Heng on October 21, 1962 and Justina Santos on December 28, 1964. Wong was substituted by
his wife, Lui She, the other defendant in this case, while Justina Santos was substituted by the Philippine Banking
Corporation.

Justina Santos maintained now reiterated by the Philippine Banking Corporation that the lease contract
(Plff Exh. 3) should have been annulled along with the four other contracts (Plff Exhs. 4-7) because it lacks mutuality;
because it included a portion which, at the time, was in custodia legis; because the contract was obtained in violation
of the fiduciary relations of the parties; because her consent was obtained through undue influence, fraud and
misrepresentation; and because the lease contract, like the rest of the contracts, is absolutely simulated.

Paragraph 5 of the lease contract states that "The lessee may at any time withdraw from this agreement." It is
claimed that this stipulation offends article 1308 of the Civil Code which provides that "the contract must bind both
contracting parties; its validity or compliance cannot be left to the will of one of them."

We have had occasion to delineate the scope and application of article 1308 in the early case of Taylor v. Uy
Tieng Piao.1 We said in that case:

Article 1256 [now art. 1308] of the Civil Code in our opinion creates no impediment to the insertion in a contract
for personal service of a resolutory condition permitting the cancellation of the contract by one of the parties. Such a
stipulation, as can be readily seen, does not make either the validity or the fulfillment of the contract dependent upon
the will of the party to whom is conceded the privilege of cancellation; for where the contracting parties have agreed
that such option shall exist, the exercise of the option is as much in the fulfillment of the contract as any other act
which may have been the subject of agreement. Indeed, the cancellation of a contract in accordance with conditions
agreed upon beforehand is fulfillment.2

And so it was held in Melencio v. Dy Tiao Lay 3 that a "provision in a lease contract that the lessee, at any time
before he erected any building on the land, might rescind the lease, can hardly be regarded as a violation of article
1256 [now art. 1308] of the Civil Code."

The case of Singson Encarnacion v. Baldomar 4 cannot be cited in support of the claim of want of mutuality,
because of a difference in factual setting. In that case, the lessees argued that they could occupy the premises as
long as they paid the rent. This is of course untenable, for as this Court said, "If this defense were to be allowed, so
long as defendants elected to continue the lease by continuing the payment of the rentals, the owner would never be
able to discontinue it; conversely, although the owner should desire the lease to continue the lessees could effectively
thwart his purpose if they should prefer to terminate the contract by the simple expedient of stopping payment of the
rentals." Here, in contrast, the right of the lessee to continue the lease or to terminate it is so circumscribed by the
term of the contract that it cannot be said that the continuance of the lease depends upon his will. At any rate, even if
no term had been fixed in the agreement, this case would at most justify the fixing of a period5 but not the annulment
of the contract.

Nor is there merit in the claim that as the portion of the property formerly owned by the sister of Justina Santos
was still in the process of settlement in the probate court at the time it was leased, the lease is invalid as to such
portion. Justina Santos became the owner of the entire property upon the death of her sister Lorenzo on September
22, 1957 by force of article 777 of the Civil Code. Hence, when she leased the property on November 15, she did so
already as owner thereof. As this Court explained in upholding the sale made by an heir of a property under judicial
administration:

That the land could not ordinarily be levied upon while in custodia legis does not mean that one of the heirs
may not sell the right, interest or participation which he has or might have in the lands under administration. The
ordinary execution of property in custodia legis is prohibited in order to avoid interference with the possession by the
court. But the sale made by an heir of his share in an inheritance, subject to the result of the pending administration,
in no wise stands in the way of such administration.6

It is next contended that the lease contract was obtained by Wong in violation of his fiduciary relationship with
Justina Santos, contrary to article 1646, in relation to article 1941 of the Civil Code, which disqualifies "agents (from
leasing) the property whose administration or sale may have been entrusted to them." But Wong was never an agent
of Justina Santos. The relationship of the parties, although admittedly close and confidential, did not amount to an
agency so as to bring the case within the prohibition of the law.

Just the same, it is argued that Wong so completely dominated her life and affairs that the contracts express
not her will but only his. Counsel for Justina Santos cites the testimony of Atty. Tomas S. Yumol who said that he
prepared the lease contract on the basis of data given to him by Wong and that she told him that "whatever Mr. Wong
wants must be followed."7


The testimony of Atty. Yumol cannot be read out of context in order to warrant a finding that Wong practically
dictated the terms of the contract. What this witness said was:

Q Did you explain carefully to your client, Doa Justina, the contents of this document before she signed it?

A I explained to her each and every one of these conditions and I also told her these conditions were quite onerous
for her, I don't really know if I have expressed my opinion, but I told her that we would rather not execute any contract
anymore, but to hold it as it was before, on a verbal month to month contract of lease.

Q But, she did not follow your advice, and she went with the contract just the same?

A She agreed first . . .

Q Agreed what?

A Agreed with my objectives that it is really onerous and that I was really right, but after that, I was called again by her
and she told me to follow the wishes of Mr. Wong Heng.

x x x x x x x x x

Q So, as far as consent is concerned, you were satisfied that this document was perfectly proper?

x x x x x x x x x

A Your Honor, if I have to express my personal opinion, I would say she is not, because, as I said before, she
told me "Whatever Mr. Wong wants must be followed."8

Wong might indeed have supplied the data which Atty. Yumol embodied in the lease contract, but to say this is
not to detract from the binding force of the contract. For the contract was fully explained to Justina Santos by her own
lawyer. One incident, related by the same witness, makes clear that she voluntarily consented to the lease contract.
This witness said that the original term fixed for the lease was 99 years but that as he doubted the validity of a lease
to an alien for that length of time, he tried to persuade her to enter instead into a lease on a month-to-month basis.
She was, however, firm and unyielding. Instead of heeding the advice of the lawyer, she ordered him, "Just follow Mr.
Wong Heng."9 Recounting the incident, Atty. Yumol declared on cross examination:

Considering her age, ninety (90) years old at the time and her condition, she is a wealthy woman, it is just
natural when she said "This is what I want and this will be done." In particular reference to this contract of lease,
when I said "This is not proper," she said "You just go ahead, you prepare that, I am the owner, and if there is any
illegality, I am the only one that can question the illegality."10



Atty. Yumol further testified that she signed the lease contract in the presence of her close friend, Hermenegilda
Lao, and her maid, Natividad Luna, who was constantly by her side.11 Any of them could have testified on the undue
influence that Wong supposedly wielded over Justina Santos, but neither of them was presented as a witness. The
truth is that even after giving his client time to think the matter over, the lawyer could not make her change her mind.
This persuaded the lower court to uphold the validity of the lease contract against the claim that it was procured
through undue influence.

Indeed, the charge of undue influence in this case rests on a mere inference12 drawn from the fact that Justina
Santos could not read (as she was blind) and did not understand the English language in which the contract is
written, but that inference has been overcome by her own evidence.

Nor is there merit in the claim that her consent to the lease contract, as well as to the rest of the contracts in
question, was given out of a mistaken sense of gratitude to Wong who, she was made to believe, had saved her and
her sister from a fire that destroyed their house during the liberation of Manila. For while a witness claimed that the
sisters were saved by other persons (the brothers Edilberto and Mariano Sta. Ana)13 it was Justina Santos herself
who, according to her own witness, Benjamin C. Alonzo, said "very emphatically" that she and her sister would have
perished in the fire had it not been for Wong.14 Hence the recital in the deed of conditional option (Plff Exh. 7) that
"[I]tong si Wong Heng ang siyang nagligtas sa aming dalawang magkapatid sa halos ay tiyak na kamatayan", and the
equally emphatic avowal of gratitude in the lease contract (Plff Exh. 3).

As it was with the lease contract (Plff Exh. 3), so it was with the rest of the contracts (Plff Exhs. 4-7) the
consent of Justina Santos was given freely and voluntarily. As Atty. Alonzo, testifying for her, said:

[I]n nearly all documents, it was either Mr. Wong Heng or Judge Torres and/or both. When we had
conferences, they used to tell me what the documents should contain. But, as I said, I would always ask the old
woman about them and invariably the old woman used to tell me: "That's okay. It's all right."15

But the lower court set aside all the contracts, with the exception of the lease contract of November 15, 1957,
on the ground that they are contrary to the expressed wish of Justina Santos and that their considerations are
fictitious. Wong stated in his deposition that he did not pay P360 a month for the additional premises leased to him,
because she did not want him to, but the trial court did not believe him. Neither did it believe his statement that he
paid P1,000 as consideration for each of the contracts (namely, the option to buy the leased premises, the extension
of the lease to 99 years, and the fixing of the term of the option at 50 years), but that the amount was returned to him
by her for safekeeping. Instead, the court relied on the testimony of Atty. Alonzo in reaching the conclusion that the
contracts are void for want of consideration.

Atty. Alonzo declared that he saw no money paid at the time of the execution of the documents, but his
negative testimony does not rule out the possibility that the considerations were paid at some other time as the
contracts in fact recite. What is more, the consideration need not pass from one party to the other at the time a
contract is executed because the promise of one is the consideration for the other.16

With respect to the lower court's finding that in all probability Justina Santos could not have intended to part
with her property while she was alive nor even to lease it in its entirety as her house was built on it, suffice it to quote
the testimony of her own witness and lawyer who prepared the contracts (Plff Exhs. 4-7) in question, Atty. Alonzo:

The ambition of the old woman, before her death, according to her revelation to me, was to see to it that these
properties be enjoyed, even to own them, by Wong Heng because Doa Justina told me that she did not have any
relatives, near or far, and she considered Wong Heng as a son and his children her grandchildren; especially her
consolation in life was when she would hear the children reciting prayers in Tagalog.17

She was very emphatic in the care of the seventeen (17) dogs and of the maids who helped her much, and she
told me to see to it that no one could disturb Wong Heng from those properties. That is why we thought of the ninety-
nine (99) years lease; we thought of adoption, believing that thru adoption Wong Heng might acquire Filipino
citizenship; being the adopted child of a Filipino citizen.18

This is not to say, however, that the contracts (Plff Exhs. 3-7) are valid. For the testimony just quoted, while
dispelling doubt as to the intention of Justina Santos, at the same time gives the clue to what we view as a scheme to
circumvent the Constitutional prohibition against the transfer of lands to aliens. "The illicit purpose then becomes the
illegal causa"19 rendering the contracts void.

Taken singly, the contracts show nothing that is necessarily illegal, but considered collectively, they reveal an
insidious pattern to subvert by indirection what the Constitution directly prohibits. To be sure, a lease to an alien for a
reasonable period is valid. So is an option giving an alien the right to buy real property on condition that he is granted
Philippine citizenship. As this Court said in Krivenko v. Register of Deeds:20

[A]liens are not completely excluded by the Constitution from the use of lands for residential purposes. Since
their residence in the Philippines is temporary, they may be granted temporary rights such as a lease contract which
is not forbidden by the Constitution. Should they desire to remain here forever and share our fortunes and
misfortunes, Filipino citizenship is not impossible to acquire.

But if an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of which the
Filipino owner cannot sell or otherwise dispose of his property,21 this to last for 50 years, then it becomes clear that
the arrangement is a virtual transfer of ownership whereby the owner divests himself in stages not only of the right to
enjoy the land ( jus possidendi, jus utendi, jus fruendi and jus abutendi) but also of the right to dispose of it ( jus
disponendi) rights the sum total of which make up ownership. It is just as if today the possession is transferred,
tomorrow, the use, the next day, the disposition, and so on, until ultimately all the rights of which ownership is made
up are consolidated in an alien. And yet this is just exactly what the parties in this case did within the space of one
year, with the result that Justina Santos' ownership of her property was reduced to a hollow concept. If this can be
done, then the Constitutional ban against alien landholding in the Philippines, as announced in Krivenko v. Register
of Deeds,22 is indeed in grave peril.

It does not follow from what has been said, however, that because the parties are in pari delicto they will be left
where they are, without relief. For one thing, the original parties who were guilty of a violation of the fundamental
charter have died and have since been substituted by their administrators to whom it would be unjust to impute their
guilt.23 For another thing, and this is not only cogent but also important, article 1416 of the Civil Code provides, as an
exception to the rule on pari delicto, that "When the agreement is not illegal per se but is merely prohibited, and the
prohibition by law is designed for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover
what he has paid or delivered." The Constitutional provision that "Save in cases of hereditary succession, no private
agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to
acquire or hold lands of the public domain in the Philippines"24 is an expression of public policy to conserve lands for
the Filipinos. As this Court said in Krivenko:

It is well to note at this juncture that in the present case we have no choice. We are construing the Constitution
as it is and not as we may desire it to be. Perhaps the effect of our construction is to preclude aliens admitted freely
into the Philippines from owning sites where they may build their homes. But if this is the solemn mandate of the
Constitution, we will not attempt to compromise it even in the name of amity or equity . . . .

For all the foregoing, we hold that under the Constitution aliens may not acquire private or public agricultural
lands, including residential lands, and, accordingly, judgment is affirmed, without costs.25

That policy would be defeated and its continued violation sanctioned if, instead of setting the contracts aside
and ordering the restoration of the land to the estate of the deceased Justina Santos, this Court should apply the
general rule of pari delicto. To the extent that our ruling in this case conflicts with that laid down in Rellosa v. Gaw
Chee Hun 26 and subsequent similar cases, the latter must be considered as pro tanto qualified.

The claim for increased rentals and attorney's fees, made in behalf of Justina Santos, must be denied for lack
of merit.

And what of the various amounts which Wong received in trust from her? It appears that he kept two classes of
accounts, one pertaining to amount which she entrusted to him from time to time, and another pertaining to rentals
from the Ongpin property and from the Rizal Avenue property, which he himself was leasing.

With respect to the first account, the evidence shows that he received P33,724.27 on November 8, 1957 (Plff
Exh. 16); P7,354.42 on December 1, 1957 (Plff Exh. 13); P10,000 on December 6, 1957 (Plff Exh. 14) ; and
P18,928.50 on August 26, 1959 (Def. Exh. 246), or a total of P70,007.19. He claims, however, that he settled his
accounts and that the last amount of P18,928.50 was in fact payment to him of what in the liquidation was found to be
due to him.

He made disbursements from this account to discharge Justina Santos' obligations for taxes, attorneys' fees,
funeral services and security guard services, but the checks (Def Exhs. 247-278) drawn by him for this purpose
amount to only P38,442.84.27 Besides, if he had really settled his accounts with her on August 26, 1959, we cannot
understand why he still had P22,000 in the bank and P3,000 in his possession, or a total of P25,000. In his answer,
he offered to pay this amount if the court so directed him. On these two grounds, therefore, his claim of liquidation
and settlement of accounts must be rejected.

After subtracting P38,442.84 (expenditures) from P70,007.19 (receipts), there is a difference of P31,564 which,
added to the amount of P25,000, leaves a balance of P56,564.3528 in favor of Justina Santos.

As to the second account, the evidence shows that the monthly income from the Ongpin property until its sale
in Rizal Avenue July, 1959 was P1,000, and that from the Rizal Avenue property, of which Wong was the lessee, was
P3,120. Against this account the household expenses and disbursements for the care of the 17 dogs and the salaries
of the 8 maids of Justina Santos were charged. This account is contained in a notebook (Def. Exh. 6) which shows a
balance of P9,210.49 in favor of Wong. But it is claimed that the rental from both the Ongpin and Rizal Avenue
properties was more than enough to pay for her monthly expenses and that, as a matter of fact, there should be a
balance in her favor. The lower court did not allow either party to recover against the other. Said the court:

[T]he documents bear the earmarks of genuineness; the trouble is that they were made only by Francisco
Wong and Antonia Matias, nick-named Toning, which was the way she signed the loose sheets, and there is no
clear proof that Doa Justina had authorized these two to act for her in such liquidation; on the contrary if the result of
that was a deficit as alleged and sought to be there shown, of P9,210.49, that was not what Doa Justina apparently
understood for as the Court understands her statement to the Honorable Judge of the Juvenile Court . . . the reason
why she preferred to stay in her home was because there she did not incur in any debts . . . this being the case, . . .
the Court will not adjudicate in favor of Wong Heng on his counterclaim; on the other hand, while it is claimed that the
expenses were much less than the rentals and there in fact should be a superavit, . . . this Court must concede that
daily expenses are not easy to compute, for this reason, the Court faced with the choice of the two alternatives will
choose the middle course which after all is permitted by the rules of proof, Sec. 69, Rule 123 for in the ordinary
course of things, a person will live within his income so that the conclusion of the Court will be that there is neither
deficit nor superavit and will let the matter rest here.

Both parties on appeal reiterate their respective claims but we agree with the lower court that both claims
should be denied. Aside from the reasons given by the court, we think that the claim of Justina Santos totalling
P37,235, as rentals due to her after deducting various expenses, should be rejected as the evidence is none too clear
about the amounts spent by Wong for food29 masses30 and salaries of her maids.31 His claim for P9,210.49 must
likewise be rejected as his averment of liquidation is belied by his own admission that even as late as 1960 he still
had P22,000 in the bank and P3,000 in his possession.

ACCORDINGLY, the contracts in question (Plff Exhs. 3-7) are annulled and set aside; the land subject-matter
of the contracts is ordered returned to the estate of Justina Santos as represented by the Philippine Banking
Corporation; Wong Heng (as substituted by the defendant-appellant Lui She) is ordered to pay the Philippine Banking
Corporation the sum of P56,564.35, with legal interest from the date of the filing of the amended complaint; and the
amounts consigned in court by Wong Heng shall be applied to the payment of rental from November 15, 1959 until
the premises shall have been vacated by his heirs. Costs against the defendant-appellant.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Angeles, JJ., concur.



Separate Opinions



FERNANDO, J., concurring:

With the able and well-written opinion of Justice Castro, I am in full agreement. The exposition of the facts
leaves nothing to be desired and the statement of the law is notable for its comprehensiveness and clarity. This
concurring opinion has been written solely to express what I consider to be the unfortunate and deplorable
consequences of applying the pari delicto concept, as was, to my mind, indiscriminately done, to alien landholding
declared illegal under the Krivenko doctrine in some past decisions.

It is to be remembered that in Krivenko v. The Register of Deeds of Manila,1 this Court over strong dissents
held that residential and commercial lots may be considered agricultural within the meaning of the constitutional
provision prohibiting the transfer of any private agricultural land to individuals, corporations or associations not
qualified to acquire or hold lands of the public domain in the Philippines save in cases of hereditary succession.

That provision of the Constitution took effect on November 15, 1935 when the Commonwealth Government
was established. The interpretation as set forth in the Krivenko decision was only handed down on November 15,
1947. Prior to that date there were many who were of the opinion that the phrase agricultural land should be
construed strictly and not be made to cover residential and commercial lots. Acting on that belief, several transactions
were entered into transferring such lots to alien vendees by Filipino-vendors.

After the Krivenko decision, some Filipino vendors sought recovery of the lots in question on the ground that
the sales were null and void. No definite ruling was made by this Court until September of 1953, when on the 29th of
said month, Rellosa v. Gaw Chee Hun,2 Bautista v. Uy Isabelo,3 Talento v. Makiki,4 Caoile v. Chiao Peng5 were
decided.

Of the four decisions in September, 1953, the most extensive discussion of the question is found in Rellosa v.
Gaw Chee Hun, the opinion being penned by retired Justice Bautista Angelo with the concurrence only of one
Justice, Justice Labrador, also retired. Former Chief Justice Paras as well as the former Justices Tuason and
Montemayor concurred in the result. The necessary sixth vote for a decision was given by the then Justice Bengzon,
who had a two-paragraph concurring opinion disagreeing with the main opinion as to the force to be accorded to the
two cases,6 therein cited. There were two dissenting opinions by former Justices Pablo and Alex Reyes. The doctrine
as announced in the Rellosa case is that while the sale by a Filipino-vendor to an alien-vendee of a residential or a
commercial lot is null and void as held in the Krivenko case, still the Filipino-vendor has no right to recover under a
civil law doctrine, the parties being in pari delicto. The only remedy to prevent this continuing violation of the
Constitution which the decision impliedly sanctions by allowing the alien vendees to retain the lots in question is
either escheat or reversion. Thus: "By following either of these remedies, or by approving an implementary law as
above suggested, we can enforce the fundamental policy of our Constitution regarding our natural resources without
doing violence to the principle of pari delicto."7

Were the parties really in pari delicto? Had the sale by and between Filipino-vendor and alien-vendee occurred
after the decision in the Krivenko case, then the above view would be correct that both Filipino-vendor and alien-
vendee could not be considered as innocent parties within the contemplation of the law. Both of them should be held
equally guilty of evasion of the Constitution.

Since, however, the sales in question took place prior to the Krivenko decision, at a time when the assumption
could be honestly entertained that there was no constitutional prohibition against the sale of commercial or residential
lots by Filipino-vendor to alien-vendee, in the absence of a definite decision by the Supreme Court, it would not be
doing violence to reason to free them from the imputation of evading the Constitution. For evidently evasion implies at
the very least knowledge of what is being evaded. The new Civil Code expressly provides: "Mistakes upon a doubtful
or difficult question of law may be the basis of good faith."8

According to the Rellosa opinion, both parties are equally guilty of evasion of the Constitution, based on the
broader principle that "both parties are presumed to know the law." This statement that the sales entered into prior to
the Krivenko decision were at that time already vitiated by a guilty knowledge of the parties may be too extreme a
view. It appears to ignore a postulate of a constitutional system, wherein the words of the Constitution acquire
meaning through Supreme Court adjudication.1awphl.nt

Reference may be made by way of analogy to a decision adjudging a statute void. Under the orthodox theory
of constitutional law, the act having been found unconstitutional was not a law, conferred no rights, imposed no duty,
afforded no protection.9 As pointed out by former Chief Justice Hughes though in Chicot County Drainage District v.
Baxter State Bank:10 "It is quite clear, however, that such broad statements as to the effect of a determination of
unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to such a determination,
is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased
by a new judicial declaration. The effect of subsequent ruling as to invalidity may have to be considered in various
aspects, with respect to particular relations, individual and corporate, and particular conduct, private and official.
Questions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and
acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application,
demand examination."

After the Krivenko decision, there is no doubt that continued possession by alien-vendee of property acquired
before its promulgation is violative of the Constitution. It is as if an act granting aliens the right to acquire residential
and commercial lots were annulled by the Supreme Court as contrary to the provision of the Constitution prohibiting
aliens from acquiring private agricultural land.



The question then as now, therefore, was and is how to divest the alien of such property rights on terms equitable to
both parties. That question should be justly resolved in accordance with the mandates of the Constitution not by a
wholesale condemnation of both parties for entering into a contract at a time when there was no ban as yet arising
from the Krivenko decision, which could not have been anticipated. Unfortunately, under the Rellosa case, it was
assumed that the parties, being in pari delicto, would be left in the situation in which they were, neither being in a
position to seek judicial redress.

Would it not have been more in consonance with the Constitution, if instead the decision compelled the
restitution of the property by the alien-vendee to the Filipino-vendor? Krivenko decision held in clear, explicit and
unambigous language that: "We are deciding the instant case under section 5 of Article XIII of the Constitution which
is more comprehensive and more absolute in the sense that it prohibits the transfer to aliens of any private
agricultural land including residential land whatever its origin might have been . . . . This prohibition [Rep. Act No.
133] makes no distinction between private lands that are strictly agricultural and private lands that are residential or
commercial. The prohibition embraces the sale of private lands of any kind in favor of aliens, which is again a clear
implementation and a legislative interpretation of the constitutional prohibition. . . . It is well to note at this juncture that
in the present case we have no choice. We are construing the Constitution as it is and not as we may desire it to be.
Perhaps the effect of our construction is to preclude aliens, admitted freely into the Philippines, from owning sites
where they may build their homes. But if this is the solemn mandate of the Constitution, we will not attempt to
compromise it even in the name of amity or equity."11

Alien-vendee is therefore incapacitated or disqualified to acquire and hold real estate. That incapacity and that
disqualification should date from the adoption of the Constitution on November 15, 1935. That incapacity and that
disqualification, however, was made known to Filipino-vendor and to alien-vendee only upon the promulgation of the
Krivenko decision on November 15, 1947. Alien-vendee, therefore, cannot be allowed to continue owning and
exercising acts of ownership over said property, when it is clearly included within the Constitutional prohibition. Alien-
vendee should thus be made to restore the property with its fruits and rents to Filipino-vendor, its previous owner, if it
could be shown that in the utmost good faith, he transferred his title over the same to alien-vendee, upon restitution of
the purchase price of course.

The Constitution bars alien-vendees from owning the property in question. By dismissing those suits, the lots
remained in alien hands. Notwithstanding the solution of escheat or reversion offered, they are still at the moment of
writing, for the most part in alien hands. There have been after almost twenty years no proceedings for escheat or
reversion.

Yet it is clear that an alien-vendee cannot consistently with the constitutional provision, as interpreted in the
Krivenko decision, continue owning and exercising acts of ownership over the real estate in question. It ought to
follow then, if such a continuing violation of the fundamental law is to be put an end to, that the Filipino-vendor, who in
good faith entered into, a contract with an incapacitated person, transferring ownership of a piece of land after the
Constitution went into full force and effect, should, in the light of the ruling in the Krivenko case, be restored to the
possession and ownership thereof, where he has filed the appropriate case or proceeding. Any other construction
would defeat the ends and purposes not only of this particular provision in question but the rest of the Constitution
itself.

The Constitution frowns upon the title remaining in the alien-vendees. Restoration of the property upon
payment of price received by Filipino vendor or its reasonable equivalent as fixed by the court is the answer. To give
the constitutional provision full force and effect, in consonance with the dictates of equity and justice, the restoration
to Filipino-vendor upon the payment of a price fixed by the court is the better remedy. He thought he could transfer
the property to an alien and did so. After the Krivenko case had made clear that he had no right to sell nor an alien-
vendee to purchase the property in question, the obvious solution would be for him to reacquire the same. That way
the Constitution would be given, as it ought to be given, respect and deference.

It may be said that it is too late at this stage to hope for such a solution, the Rellosa opinion, although originally
concurred in by only one justice, being too firmly imbedded. The writer however sees a welcome sign in the adoption
by the Court in this case of the concurring opinion of the then Justice, later Chief Justice, Bengzon. Had it been
followed then, the problem would not be still with us now. Fortunately, it is never too late not even in constitutional
adjudication.



Footnotes

143 Phil. 873 (1922).

2Id. at 876.

355 Phil. 99 (1930).

477 Phil. 470 (1946).

5Civ. Code, art. 1197.

6Jakosalem vs. Rafols, 73 Phil. 628 (1942).

7T.s.n., pp. 73-74, June 20, 1960.

8T.s.n., pp. 70-71, 73-74, June 20, 1960 (emphasis added).

9T.s.n., pp. 54-55, June 6, 1960.

10T.s.n., p. 86, June 20, 1960 (emphasis added).

11T.s.n., pp. 69-70, June 20, 1960.

12Article 1332 of the Civil Code provides that "When one of the parties is unable to read or if the contract is in a
language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that
the terms thereof have been fully explained to the former."


13T.s.n., p. 11, June 21, 1960.

14T.s.n., pp. 119-120, June 20, 1960.

15T.s.n., p. 76, June 6, 1960.

16Rodriguez v. Rodriguez, G.R. L-23002, July 31, 1967; Enriquez de la Cavada v. Diaz, 37 Phil. 982 (1918) ; see
also Puato v. Mendoza, 64 Phil. 457 (1937).

17T.s.n., p. 79, June 6, 1960 (emphasis added).

18T.s.n., p. 121, June 20, 1960.

19Rodriguez v. Rodriguez, supra, note 16.

2079 Phil. 461, 480-481 (1947) (emphasis added). The statement in Smith, Bell & Co. v. Register of Deeds, 96 Phil.
53, 61-62 (1954), to the effect that an alien may lease lands in the Philippines for as long as 99 years under article
1643 of the Civil Code, is obiter as the term of the lease in that case for 25 years only, renewable for a like period,
and the character (whether temporary or permanent) of rights under a 99-year lease was not considered.

21The contract (Plff Exh. 6) of November 18, 1958 provides that "Sa loob nang nabanggit na panahon limangpung
(50) taon na hindi pa ginagamit ni WONG o kaniyang kaanak ang karapatan nilang bumili, ay ang nabanggit na lupa
ay hindi maaring ipagbili, ibigay, isangla, o itali ng MAY-ARI sa iba" [Within the said period of fifty (50) years during
which neither WONG nor any of his children has exercised the option to buy, the said piece of land cannot be sold,
donated, mortgaged or encumbered in favor of other persons by the owner].

22Supra, note 20.

23Cf. Rellosa v. Gaw Chee Hun, 93 Phil. 827, 836 (1953) (Cesar Bengzon, J., concurring) : "Perhaps the innocent
spouse of the seller and his creditors are not barred from raising the issue of invalidity."

24Const. art. XIII sec. 5.

25Supra, note 20, at 480-481.

2693 Phil. 827 (1953).

27 According to the lower court the amount should be P38,422.94, but the difference appears to be the result of an
error in addition.

28According to the trial court the amount should be P56,554.25, but the difference appears to be due to the error
pointed out in note 27.

29T.s.n., pp. 6-8, July 26, 1960.

30T.s.n., p. 35, July 26, 1960.

31T.s.n., pp. 31-35, July 26, 1960.

FERNANDO, J., concurring:

179 Phil. 461 (1947).

293 Phil. 827.

393 Phil. 843.

493 Phil. 855.

593 Phil. 861. See also Arambulo v. Cua So, (1954) 95 Phil. 749; Dinglasan v. Lee Bun Ting, (1956) 99 Phil. 427.

6Bough v. Cantiveros, (1919) 40 Phil. 210 and Perez v. Herranz (1902) 7 Phil. 693.

7At p. 835.

8Art. 526, par. 3. The above provision is merely a reiteration of the doctrine announced in the case of Kasilag v.
Rodriguez decided on December 7, 1939 (69 Phil. 217), the pertinent excerpt follows:

"This being the case, the question is whether good faith may be premised upon ignorance of the laws. Manresa,
commenting on article 434 in connection with the preceding article, sustains the affirmative. He says:

"'We do not believe that in real life there are not many cases of good faith founded upon an error of law. When the
acquisition appears in a public document, the capacity of the parties has already been passed upon by competent
authority, and even established by appeals taken from final judgments and administrative remedies against the
qualification of registrars, and the possibility of error is remote under such circumstances; but, unfortunately, private
documents and even verbal agreements far exceed public documents in number, and while no one should be
ignorant of the law, the truth is that even we who are called upon to know and apply it fall into error not infrequently.
However, a clear, manifest, and truly unexcusable ignorance is one thing, to which undoubtedly refers article 2, and
another and different thing is possible and excusable error arising from complex legal principle and from the
interpretation of conflicting doctrines."But even ignorance of the law may be based upon an error of fact, or better still,
ignorance of a fact is possible as to the capacity to transmit and as to the intervention of certain persons, compliance
with certain formalities and appreciation of certain acts, and error of law is possible in the interpretation of doubtful
doctrines.'" (Manresa, Commentaries on the Spanish Civil Code, Volume IV, pp. 100, 101 and 102.)

9Norton v. Shelby County, (1886) 118 U.S. 425.

10308 U.S. 731 (1940).

1179 Phil. 461, 480 (1947).





Lim vs. People, 133 SCRA 333 , No. L-34338, November 21, 1984
G.R. No. L-34338 November 21, 1984
LOURDES VALERIO LIM, petitioner,
vs.
PEOPLE OF THE PHILIPPINES, respondent.
RELOVA, J .:
Petitioner Lourdes Valerio Lim was found guilty of the crime of estafa and was sentenced "to suffer an imprisonment
of four (4) months and one (1) day as minimum to two (2) years and four (4) months as maximum, to indemnify the
offended party in the amount of P559.50, with subsidize imprisonment in case of insolvency, and to pay the costs." (p.
14, Rollo)
From this judgment, appeal was taken to the then Court of Appeals which affirmed the decision of the lower court but
modified the penalty imposed by sentencing her "to suffer an indeterminate penalty of one (1) month and one (1) day
of arresto mayor as minimum to one (1) year and one (1) day of prision correccional as maximum, to indemnify the
complainant in the amount of P550.50 without subsidiary imprisonment, and to pay the costs of suit." (p. 24, Rollo)
The question involved in this case is whether the receipt, Exhibit "A", is a contract of agency to sell or a contract of
sale of the subject tobacco between petitioner and the complainant, Maria de Guzman Vda. de Ayroso, thereby
precluding criminal liability of petitioner for the crime charged.
The findings of facts of the appellate court are as follows:
... The appellant is a businesswoman. On January 10, 1966, the appellant went to the house of Maria Ayroso and
proposed to sell Ayroso's tobacco. Ayroso agreed to the proposition of the appellant to sell her tobacco consisting of
615 kilos at P1.30 a kilo. The appellant was to receive the overprice for which she could sell the tobacco. This
agreement was made in the presence of plaintiff's sister, Salud G. Bantug. Salvador Bantug drew the document, Exh.
A, dated January 10, 1966, which reads:
To Whom It May Concern:
This is to certify that I have received from Mrs. Maria de Guzman Vda. de Ayroso. of Gapan, Nueva Ecija, six
hundred fifteen kilos of leaf tobacco to be sold at Pl.30 per kilo. The proceed in the amount of Seven Hundred Ninety
Nine Pesos and 50/100 (P 799.50) will be given to her as soon as it was sold.
This was signed by the appellant and witnessed by the complainant's sister, Salud Bantug, and the latter's maid,
Genoveva Ruiz. The appellant at that time was bringing a jeep, and the tobacco was loaded in the jeep and brought
by the appellant. Of the total value of P799.50, the appellant had paid to Ayroso only P240.00, and this was paid on
three different times. Demands for the payment of the balance of the value of the tobacco were made upon the
appellant by Ayroso, and particularly by her sister, Salud Bantug. Salud Bantug further testified that she had gone to
the house of the appellant several times, but the appellant often eluded her; and that the "camarin" the appellant was
empty. Although the appellant denied that demands for payment were made upon her, it is a fact that on October 19,
1966, she wrote a letter to Salud Bantug which reads as follows:
Dear Salud,
Hindi ako nakapunta dian noon a 17 nitong nakaraan, dahil kokonte pa ang nasisingil kong pera, magintay ka
hanggang dito sa linggo ito at tiak na ako ay magdadala sa iyo. Gosto ko Salud ay makapagbigay man lang ako ng
marami para hindi masiadong kahiyahiya sa iyo. Ngayon kung gosto mo ay kahit konte muna ay bibigyan kita.
Pupunta lang kami ni Mina sa Maynila ngayon. Salud kung talagang kailangan mo ay bukas ay dadalhan kita ng
pera.
Medio mahirap ang maningil sa palengke ng Cabanatuan dahil nagsisilipat ang mga suki ko ng puesto. Huwag kang
mabahala at tiyak na babayaran kita.
Patnubayan tayo ng mahal na panginoon Dios. (Exh. B).
Ludy
Pursuant to this letter, the appellant sent a money order for P100.00 on October 24, 1967, Exh. 4, and another for
P50.00 on March 8, 1967; and she paid P90.00 on April 18, 1967 as evidenced by the receipt Exh. 2, dated April 18,
1967, or a total of P240.00. As no further amount was paid, the complainant filed a complaint against the appellant for
estafa. (pp. 14, 15, 16, Rollo)
In this petition for review by certiorari, Lourdes Valerio Lim poses the following questions of law, to wit:
1. Whether or not the Honorable Court of Appeals was legally right in holding that the foregoing document (Exhibit
"A") "fixed a period" and "the obligation was therefore, immediately demandable as soon as the tobacco was sold"
(Decision, p. 6) as against the theory of the petitioner that the obligation does not fix a period, but from its nature and
the circumstances it can be inferred that a period was intended in which case the only action that can be maintained
is a petition to ask the court to fix the duration thereof;
2. Whether or not the Honorable Court of Appeals was legally right in holding that "Art. 1197 of the New Civil Code
does not apply" as against the alternative theory of the petitioner that the fore. going receipt (Exhibit "A") gives rise to
an obligation wherein the duration of the period depends upon the will of the debtor in which case the only action that
can be maintained is a petition to ask the court to fix the duration of the period; and
3. Whether or not the honorable Court of Appeals was legally right in holding that the foregoing receipt is a contract of
agency to sell as against the theory of the petitioner that it is a contract of sale. (pp. 3-4, Rollo)
It is clear in the agreement, Exhibit "A", that the proceeds of the sale of the tobacco should be turned over to the
complainant as soon as the same was sold, or, that the obligation was immediately demandable as soon as the
tobacco was disposed of. Hence, Article 1197 of the New Civil Code, which provides that the courts may fix the
duration of the obligation if it does not fix a period, does not apply.
Anent the argument that petitioner was not an agent because Exhibit "A" does not say that she would be paid the
commission if the goods were sold, the Court of Appeals correctly resolved the matter as follows:
... Aside from the fact that Maria Ayroso testified that the appellant asked her to be her agent in selling Ayroso's
tobacco, the appellant herself admitted that there was an agreement that upon the sale of the tobacco she would be
given something. The appellant is a businesswoman, and it is unbelievable that she would go to the extent of going to
Ayroso's house and take the tobacco with a jeep which she had brought if she did not intend to make a profit out of
the transaction. Certainly, if she was doing a favor to Maria Ayroso and it was Ayroso who had requested her to sell
her tobacco, it would not have been the appellant who would have gone to the house of Ayroso, but it would have
been Ayroso who would have gone to the house of the appellant and deliver the tobacco to the appellant. (p. 19,
Rollo)
The fact that appellant received the tobacco to be sold at P1.30 per kilo and the proceeds to be given to complainant
as soon as it was sold, strongly negates transfer of ownership of the goods to the petitioner. The agreement (Exhibit
"A') constituted her as an agent with the obligation to return the tobacco if the same was not sold.
ACCORDINGLY, the petition for review on certiorari is dismissed for lack of merit. With costs.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Gutierrez, Jr. and De la Fuente, JJ., concur. .

Araneta Inc. vs. Phil. Sugar Estates, 20 SCRA 330, G.R. No. L-
22558 May 31, 1967

GREGORIO ARANETA, INC., petitioner,
vs.
THE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO., LTD., respondent.

Araneta and Araneta for petitioner.
Rosauro Alvarez and Ernani Cruz Pao for respondent.

REYES, J.B.L., J.:

Petition for certiorari to review a judgment of the Court of Appeals, in its CA-G.R. No. 28249-R, affirming with
modification, an amendatory decision of the Court of First Instance of Manila, in its Civil Case No. 36303, entitled
"Philippine Sugar Estates Development Co., Ltd., plaintiff, versus J. M. Tuason & Co., Inc. and Gregorio Araneta,
Inc., defendants."

As found by the Court of Appeals, the facts of this case are:

J. M. Tuason & Co., Inc. is the owner of a big tract land situated in Quezon City, otherwise known as the Sta. Mesa
Heights Subdivision, and covered by a Torrens title in its name. On July 28, 1950, through Gregorio Araneta, Inc., it
(Tuason & Co.) sold a portion thereof with an area of 43,034.4 square meters, more or less, for the sum of
P430,514.00, to Philippine Sugar Estates Development Co., Ltd. The parties stipulated, among in the contract of
purchase and sale with mortgage, that the buyer will

Build on the said parcel land the Sto. Domingo Church and Convent

while the seller for its part will

Construct streets on the NE and NW and SW sides of the land herein sold so that the latter will be a block
surrounded by streets on all four sides; and the street on the NE side shall be named "Sto. Domingo Avenue;"

The buyer, Philippine Sugar Estates Development Co., Ltd., finished the construction of Sto. Domingo Church and
Convent, but the seller, Gregorio Araneta, Inc., which began constructing the streets, is unable to finish the
construction of the street in the Northeast side named (Sto. Domingo Avenue) because a certain third-party, by the
name of Manuel Abundo, who has been physically occupying a middle part thereof, refused to vacate the same;
hence, on May 7, 1958, Philippine Sugar Estates Development Co., Lt. filed its complaint against J. M. Tuason & Co.,
Inc., and instance, seeking to compel the latter to comply with their obligation, as stipulated in the above-mentioned
deed of sale, and/or to pay damages in the event they failed or refused to perform said obligation.

Both defendants J. M. Tuason and Co. and Gregorio Araneta, Inc. answered the complaint, the latter particularly
setting up the principal defense that the action was premature since its obligation to construct the streets in question
was without a definite period which needs to he fixed first by the court in a proper suit for that purpose before a
complaint for specific performance will prosper.

The issues having been joined, the lower court proceeded with the trial, and upon its termination, it dismissed
plaintiff's complaint (in a decision dated May 31, 1960), upholding the defenses interposed by defendant Gregorio
Araneta, Inc.1wph1.t

Plaintiff moved to reconsider and modify the above decision, praying that the court fix a period within which
defendants will comply with their obligation to construct the streets in question.

Defendant Gregorio Araneta, Inc. opposed said motion, maintaining that plaintiff's complaint did not expressly or
impliedly allege and pray for the fixing of a period to comply with its obligation and that the evidence presented at the
trial was insufficient to warrant the fixing of such a period.

On July 16, 1960, the lower court, after finding that "the proven facts precisely warrants the fixing of such a period,"
issued an order granting plaintiff's motion for reconsideration and amending the dispositive portion of the decision of
May 31, 1960, to read as follows:

WHEREFORE, judgment is hereby rendered giving defendant Gregorio Araneta, Inc., a period of two (2) years from
notice hereof, within which to comply with its obligation under the contract, Annex "A".

Defendant Gregorio Araneta, Inc. presented a motion to reconsider the above quoted order, which motion, plaintiff
opposed.

On August 16, 1960, the lower court denied defendant Gregorio Araneta, Inc's. motion; and the latter perfected its
appeal Court of Appeals.

In said appellate court, defendant-appellant Gregorio Araneta, Inc. contended mainly that the relief granted, i.e., fixing
of a period, under the amendatory decision of July 16, 1960, was not justified by the pleadings and not supported by
the facts submitted at the trial of the case in the court below and that the relief granted in effect allowed a change of
theory after the submission of the case for decision.

Ruling on the above contention, the appellate court declared that the fixing of a period was within the pleadings and
that there was no true change of theory after the submission of the case for decision since defendant-appellant
Gregorio Araneta, Inc. itself squarely placed said issue by alleging in paragraph 7 of the affirmative defenses
contained in its answer which reads

7. Under the Deed of Sale with Mortgage of July 28, 1950, herein defendant has a reasonable time within which to
comply with its obligations to construct and complete the streets on the NE, NW and SW sides of the lot in question;
that under the circumstances, said reasonable time has not elapsed;

Disposing of the other issues raised by appellant which were ruled as not meritorious and which are not decisive in
the resolution of the legal issues posed in the instant appeal before us, said appellate court rendered its decision
dated December 27, 1963, the dispositive part of which reads

IN VIEW WHEREOF, judgment affirmed and modified; as a consequence, defendant is given two (2) years from the
date of finality of this decision to comply with the obligation to construct streets on the NE, NW and SW sides of the
land sold to plaintiff so that the same would be a block surrounded by streets on all four sides.

Unsuccessful in having the above decision reconsidered, defendant-appellant Gregorio Araneta, Inc. resorted to a
petition for review by certiorari to this Court. We gave it due course.

We agree with the petitioner that the decision of the Court of Appeals, affirming that of the Court of First Instance is
legally untenable. The fixing of a period by the courts under Article 1197 of the Civil Code of the Philippines is sought
to be justified on the basis that petitioner (defendant below) placed the absence of a period in issue by pleading in its
answer that the contract with respondent Philippine Sugar Estates Development Co., Ltd. gave petitioner Gregorio
Araneta, Inc. "reasonable time within which to comply with its obligation to construct and complete the streets."
Neither of the courts below seems to have noticed that, on the hypothesis stated, what the answer put in issue was
not whether the court should fix the time of performance, but whether or not the parties agreed that the petitioner
should have reasonable time to perform its part of the bargain. If the contract so provided, then there was a period
fixed, a "reasonable time;" and all that the court should have done was to determine if that reasonable time had
already elapsed when suit was filed if it had passed, then the court should declare that petitioner had breached the
contract, as averred in the complaint, and fix the resulting damages. On the other hand, if the reasonable time had
not yet elapsed, the court perforce was bound to dismiss the action for being premature. But in no case can it be
logically held that under the plea above quoted, the intervention of the court to fix the period for performance was
warranted, for Article 1197 is precisely predicated on the absence of any period fixed by the parties.

Even on the assumption that the court should have found that no reasonable time or no period at all had been fixed
(and the trial court's amended decision nowhere declared any such fact) still, the complaint not having sought that the
Court should set a period, the court could not proceed to do so unless the complaint in as first amended; for the
original decision is clear that the complaint proceeded on the theory that the period for performance had already
elapsed, that the contract had been breached and defendant was already answerable in damages.

Granting, however, that it lay within the Court's power to fix the period of performance, still the amended decision is
defective in that no basis is stated to support the conclusion that the period should be set at two years after finality of
the judgment. The list paragraph of Article 1197 is clear that the period be set arbitrarily. The law expressly
prescribes that

the Court shall determine such period as may under the circumstances been probably contemplated by the parties.

All that the trial court's amended decision (Rec. on Appeal, p. 124) says in this respect is that "the proven facts
precisely warrant the fixing of such a period," a statement manifestly insufficient to explain how the two period given
to petitioner herein was arrived at.

It must be recalled that Article 1197 of the Civil Code involves a two-step process. The Court must first determine that
"the obligation does not fix a period" (or that the period is made to depend upon the will of the debtor)," but from the
nature and the circumstances it can be inferred that a period was intended" (Art. 1197, pars. 1 and 2). This
preliminary point settled, the Court must then proceed to the second step, and decide what period was "probably
contemplated by the parties" (Do., par. 3). So that, ultimately, the Court fix a period merely because in its opinion it is
or should be reasonable, but must set the time that the parties are shown to have intended. As the record stands, the
trial Court appears to have pulled the two-year period set in its decision out of thin air, since no circumstances are
mentioned to support it. Plainly, this is not warranted by the Civil Code.

In this connection, it is to be borne in mind that the contract shows that the parties were fully aware that the land
described therein was occupied by squatters, because the fact is expressly mentioned therein (Rec. on Appeal,
Petitioner's Appendix B, pp. 12-13). As the parties must have known that they could not take the law into their own
hands, but must resort to legal processes in evicting the squatters, they must have realized that the duration of the
suits to be brought would not be under their control nor could the same be determined in advance. The conclusion is
thus forced that the parties must have intended to defer the performance of the obligations under the contract until
the squatters were duly evicted, as contended by the petitioner Gregorio Araneta, Inc.

The Court of Appeals objected to this conclusion that it would render the date of performance indefinite. Yet, the
circumstances admit no other reasonable view; and this very indefiniteness is what explains why the agreement did
not specify any exact periods or dates of performance.

It follows that there is no justification in law for the setting the date of performance at any other time than that of the
eviction of the squatters occupying the land in question; and in not so holding, both the trial Court and the Court of
Appeals committed reversible error. It is not denied that the case against one of the squatters, Abundo, was still
pending in the Court of Appeals when its decision in this case was rendered.

In view of the foregoing, the decision appealed from is reversed, and the time for the performance of the obligations
of petitioner Gregorio Araneta, Inc. is hereby fixed at the date that all the squatters on affected areas are finally
evicted therefrom.

Costs against respondent Philippine Sugar Estates Development, Co., Ltd. So ordered.

Concepcion, C.J., Dizon, Regala, Makalintal, Bengzon, J.P., Sanchez and Castro, JJ., concur.

Millare vs. Hernando, 151 SCRA 484, No. L-55480, June 30, 1987

Millare v. Hernando, 151 SCRA 484, G.R. No. L-55480 June 30, 1987

PACIFICA MILLARE, petitioner,
vs.
HON. HAROLD M. HERNANDO, In his capacity as Presiding Judge, Court of Instance of Abra, Second
Judicial District, Branch I, ANTONIO CO and ELSA CO, respondents.



FELICIANO, J.:

On 17 June 1975, a five-year Contract of Lease 1 was executed between petitioner Pacifica Millare as lessor and
private respondent Elsa Co, married to Antonio Co, as lessee. Under the written agreement, which was scheduled to
expire on 31 May 1980, the lessor-petitioner agreed to rent out to thelessee at a monthly rate of P350.00 the
"People's Restaurant", a commercial establishment located at the corner of McKinley and Pratt Streets in Bangued,
Abra.

The present dispute arose from events which transpired during the months of May and July in 1980. According to the
Co spouses, sometime during the last week of May 1980, the lessor informed them that they could continue leasing
the People's Restaurant so long as they were amenable to paying creased rentals of P1,200.00 a month. In
response, a counteroffer of P700.00 a month was made by the Co spouses. At this point, the lessor allegedly stated
that the amount of monthly rentals could be resolved at a later time since "the matter is simple among us", which
alleged remark was supposedly taken by the spouses Co to mean that the Contract of Lease had been renewed,
prompting them to continue occupying the subject premises and to forego their search for a substitute place to rent. 2
In contrast, the lessor flatly denied ever having considered, much less offered, a renewal of the Contract of Lease.

The variance in versions notwithstanding, the record shows that on 22 July 1980, Mrs. Millare wrote the Co spouses
requesting them to vacate the leased premises as she had no intention of renewing the Contract of Lease which had,
in the meantime, already expirecl. 3 In reply, the Co spouses reiterated their unwillingness to pay the Pl,200.00
monthly rentals supposedly sought bv Mrs. Millare which they considered "highly excessive, oppressive and contrary
to existing laws". They also signified their intention to deposit the amount of rentals in court, in view of Mrs. Millare's
refusal to accept their counter-offer. 4 Another letter of demand from Mrs. Millare was received on 28 July 1980 by
the Co spouses, who responded by depositing the rentals for June and July (at 700.00 a month) in court.

On 30 August 1980, a Saturday, the Co spouses jumped the gun, as it were, and filed a Complaint 5 (docketed as
Civil Case No. 1434) with the then Court of First Instance of Abra against Mrs. Millare and seeking judgment (a)
ordering the renewal of the Contract of Lease at a rental rate of P700.00 a nionth and for a period of ten years, (b)
ordering the defendant to collect the sum of P1,400.00 deposited by plaintiffs with the court, and (c) ordering the
defendant to pay damages in the amount of P50,000.00. The following Monday, on 1 September 1980, Mrs. Millare
filed an ejectment case against the Co spouses in the Municipal Court of Bangued, Abra, docketed as Civil Case No.
661. The spouses Co, defendants therein, sut)sequently set up lis pendens as a Civil Case No. 661. The spouses
Co, defendants therein, subsequently set up lis pendens as a defense against the complaint for ejectment.

Mrs. Millare, defendant in Civil Case No. 1434, countered with an Omnibus Motion to Dismiss 6 rounded on (a) lack
of cause of action due to plaintiffs' failure to establish a valid renewal of the Contract of Lease, and (b) lack of
jurisdiction by the trial court over the complaint for failure of plaintiffs to secure a certification from the Lupong
Tagapayapa of the barangay wherein both disputants reside attesting that no amicable settlement between them had
been reached despite efforts to arrive at one, as required by Section 6 of Presidential Decree No. 1508. The Co
spouses opposed the motion to dismiss. 7

In an Order dated 15 October 1980, respondent judge denied the motion to dismiss and ordered the renewal of the
Contract of Lease. Furthermore plaintiffs were allowed to deposit all accruing monthly rentals in court, while
defendant Millare was directed to submit her answer to the complaint. 8 A motion for reconsideration 9 was
subsequently filed which, however, was likewise denied. 10 Hence, on 13 November 1980, Mrs. Millare filed the
instant Petition for Certiorari, Prohibition and Mandamus, seeking injunctive relief from the abovementioned orders.
This Court issued a temporary restraining order on 21 November 1980 enjoining respondent, judge from conducting
further proceedings in Civil Case No. 1434. 11 Apparently, before the temporary restraining order could be served on
the respondent judge, he rendered a "Judgment by Default" dated 26 November 1980 ordering the renewal of the
lease contract for a term of 5 years counted from the expiration date of the original lease contract, and fixing monthly
rentals thereunder at P700.00 a month, payable in arrears. On18 March 1981, this Court gave due course to the
Petition for Certiorari, Prohibition and Mandamus. 12

Two issues are presented for resolution: (1) whether or not the trial court acquired jurisdiction over Civil Case No.
1434; and (2) whether or not private respondents have a valid cause of action against petitioner.

Turning to the first issue, petitioner's attack on the jurisdiction of the trial court must fail, though for reasons different
from those cited by the respondent judge. 13 We would note firstly that the conciliation procedure required under P.D.
1508 is not a jurisdictional requirement in the sense that failure to have prior recourse to such procedure would not
deprive a court of its jurisdiction either over the subject matter or over the person of the defendant.14 Secondly, the
acord shows that two complaints were submitted to the barangay authorities for conciliation one by petitioner for
ejectment and the other by private respondents for renewal of the Contract of Lease. It appears further that both
complaints were, in fact, heard by the Lupong Tagapayapa in the afternoon of 30 August 1980. After attempts at
conciliation had proven fruitless, Certifications to File Action authorizing the parties to pursue their respective claims
in court were then issued at 5:20 p.m. of that same aftemoon, as attested to by the Barangay Captain in a
Certification presented in evidence by petitioner herself. 15

Petitioner would, nonetheless, assail the proceedings in the trial court on a technicaety, i.e., private respondents
allegedly filed their complaint at 4:00 p.m. of 30 August 1980, or one hour and twenty minutes before the issuance of
the requisite certification by the Lupng Tagapayapa. The defect in procedure admittedly initially present at that
particular moment when private respondents first filed the complaint in the trial court, was cured by the subsequent
issuance of the Certifications to File Action by the barangay Lupong Tagapayapa Such certifications in any event
constituted substantial comphance with the requirement of P.D. 1508.

We turn to the second issue, that is, whether or not the complaint in Civil Case No. 1434 filed by the respondent Co
spouses claiming renewal of the contract of lease stated a valid cause of action. Paragraph 13 of the Contract of
Lease reads as follows:

13. This contract of lease is subject to the laws and regulations ofthe goverrunent; and that this contract of lease may
be renewed after a period of five (5) years under the terms and conditions as will be mutually agreed upon by the
parties at the time of renewal; ... (Emphasis supplied.)

The respondent judge, in his Answer and Comment to the Petition, urges that under paragraph 13 quoted above.

there was already a consummated and finished mutual agreement of the parties to renew the contract of lease after
five years; what is only left unsettled between the parties to the contract of lease is the amount of the monthly rental;
the lessor insists Pl,200 a month, while the lessee is begging P700 a month which doubled the P350 monthly rental
under the original contract .... In short, the lease contract has never expired because paragraph 13 thereof had
expressly mandated that it is renewable. ... 16

In the "Judgment by Default" he rendered, the respondent Judge elaborated his views obviously highly emotional
in character in the following extraordinary tatements:

However, it is now the negative posture of the defendant-lessor to block, reject and refuse to renew said lease
contract. It is the defendant-lessor's assertion and position that she can at the mere click of her fingers, just throw-out
the plaintiffs-lessees from the leased premises and any time after the original term of the lease contract had already
expired; This negative position of the defendantlessor, to the mind of this Court does not conform to the principles
and correct application of the philosophy underlying the law of lease; for indeed, the law of lease is impressed with
public interest, social justice and equity; reason for which, this Court cannot sanction lot owner's business and
commercial speculations by allowing them with "unbridled discretion" to raise rentals even to the extent of
"extraordinary gargantuan proportions, and calculated to unreasonably and unjustly eject the helpless lessee
because he cannot afford said inflated monthly rental and thereby said lessee is placed without any alternative,
except to surrender and vacate the premises mediately,-" Many business establishments would be closed and the
public would directly suffer the direct consequences; Nonetheless, this is not the correct concept or perspective the
law of lease, that is, to place the lessee always at the mercy of the lessor's "Merchant of Venice" and to agit the
latter's personal whims and caprices; the defendant-lessor's hostile attitude by imposing upon the lessee herein an
"unreasonable and extraordinary gargantuan monthly rental of P1,200.00", to the mind of this Court, is "fly-by night
unjust enrichment" at the expense of said lessees; but, no Man should unjustly enrich himself at the expense of
another; under these facts and circumstances surrounding this case, the action therefore to renew the lease contract!
is "tenable" because it falls squarely within the coverage and command of Articles 1197 and 1670 of the New Civil
Code, to wit:

xxx xxx xxx

The term "to be renewed" as expressly stipulated by the herein parties in the original contract of lease means that the
lease may be renewed for another term of five (5) years; its equivalent to a promise made by the lessor to the lessee,
and as a unilateral stipulation, obliges the lessor to fulfill her promise; of course the lessor is free to comply and honor
her commitment or back-out from her promise to renew the lease contract; but, once expressly stipulated, the lessor
shall not be allowed to evade or violate the obligation to renew the lease because, certainly, the lessor may be held
hable for damages caused to the lessee as a consequence of the unjustifiable termination of the lease or renewal of
the same; In other words, the lessor is guilty of breach of contract: Since the original lease was fixed for five (5)
years, it follows, therefore, that the lease contract is renewable for another five (5) years and the lessee is not
required before hand to give express notice of this fact to the lessor because it was expressly stipulated in the original
lease contract to be renewed; Wherefore, the bare refusal of the lessor to renew the lease contract unless the
monthly rental is P1,200.00 is contrary to law, morals, good customs, public policy, justice and equity because no one
should unjustly enrich herself at the expense of another. Article 1197 and 1670 of the New Civil Code must therefore
govern the case at bar and whereby this Court is authorized to fix the period thereof by ordering the renewal of the
lease contract to another fixed term of five (5) years. 17

Clearly, the respondent judge's grasp of both the law and the Enghsh language is tenuous at best. We are otherwise
unable to comprehend how he arrived at the reading set forth above. Paragraph 13 of the Contract of Lease can only
mean that the lessor and lessee may agree to renew the contract upon their reaching agreement on the terms and
conditions to be embodied in such renewal contract. Failure to reach agreement on the terms and conditions of the
renewal contract will of course prevent the contract from being renewed at all. In the instant case, the lessor and the
lessee conspicuously failed to reach agreement both on the amount of the rental to be payable during the renewal
term, and on the term of the renewed contract.

The respondent judge cited Articles 1197 and 1670 of the Civil Code to sustain the "Judgment by Default" by which
he ordered the renewal of the lease for another term of five years and fixed monthly rentals thereunder at P700.00 a
month. Article 1197 of the Civil Code provides as follows:

If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was
intended, the courts may fix the duration thereof.

The courts shall also fix the duration of the period when it depends upon the will of the debtor.

In every case, the courts shall determine such period as may, under the circumstances, have been probably
contemplated by the parties. Once fixed by the courts, the period cannot be changed by them. (Emphasis supplied.)

The first paragraph of Article 1197 is clearly inapplicable, since the Contract of Lease did in fact fix an original period
of five years, which had expired. It is also clear from paragraph 13 of the Contract of Lease that the parties reserved
to themselves the faculty of agreeing upon the period of the renewal contract. The second paragraph of Article 1197
is equally clearly inapplicable since the duration of the renewal period was not left to the wiu of the lessee alone, but
rather to the will of both the lessor and the lessee. Most importantly, Article 1197 applies only where a contract of
lease clearly exists. Here, the contract was not renewed at all, there was in fact no contract at all the period of which
could have been fixed.

Article 1670 of the Civil Code reads thus:

If at the end of the contract the lessee should continue enjoying the thing left for 15 days with the acquiescence of the
lessor and unless a notice to the contrary by either party has previously been given. It is understood that there is an
implied new lease, not for the period of the original contract but for the time established in Articles 1682 and 1687.
The ther terms of the original contract shall be revived. (Emphasis suplied.)

The respondents themselves, public and private, do not pretend that the continued occupancy of the leased premises
after 31 May 1980, the date of expiration of the contract, was with the acquiescence of the lessor. Even if it be
assumed that tacite reconduccion had occurred, the implied new lease could not possibly have a period of five years,
but rather would have been a month-to-month lease since the rentals (under the original contract) were payable on a
monthly basis. At the latest, an implied new lease (had one arisen) would have expired as of the end of July 1980 in
view of the written demands served by the petitioner upon the private respondents to vacate the previously leased
premises.

It follows that the respondent judge's decision requiring renewal of the lease has no basis in law or in fact. Save in the
limited and exceptional situations envisaged inArticles ll97 and 1670 of the Civil Code, which do not obtain here,
courts have no authority to prescribe the terms and conditions of a contract for the parties. As pointed out by Mr.
Justice J.B.L. Reyes in Republic vs. Philippine Long Distance Telephone,Co., 18

[P]arties cannot be coerced to enter into a contract where no agreement is had between them as to the principal
terms and conditions of the contract. Freedom to stipulate such terms and conditions is of the essence of our
contractual system, and by express provision of the statute, a contract may be annulled if tainted by violence,
intimidation or undue influence (Article 1306, 1336, 1337, Civil Code of the Philippines).

Contractual terms and conditions created by a court for two parties are a contradiction in terms. If they are imposed
by a judge who draws upon his own private notions of what morals, good customs, justice, equity and public policy"
demand, the resulting "agreement" cannot, by definition, be consensual or contractual in nature. It would also follow
that such coerced terms and conditions cannot be the law as between the parties themselves. Contracts spring from
the volition of the parties. That volition cannot be supplied by a judge and a judge who pretends to do so, acts
tyrannically, arbitrarily and in excess of his jurisdiction. 19

WHEREFORE, the Petition for Certiorari, Prohibition and mandamus is granted. The Orders of the respondent judge
in Civil Case No. 1434 dated 26 September 1980 (denying petitioner's motion to dismiss) and 4 November 1980
(denying petitioner's motion for reconsideration), and the "Judgment by Default" rendered by the respondent judge
dated 26 November 1980, are hereby annulled and set aside and Civil Case No. 1434 is hereby dismissed. The
temporary restraining order dated 21 November 1980 issued by this ourt, is hereby made permanent. No
pronouncement as to costs.

SO ORDERED.

Yap (Chairman), Narvasa, Melencio-Herrera, Cruz, Gancayco and Sarmiento, JJ., concur.



Footnotes

1 Rollo, p. 48, Annex "1" of Answer and Comment.

2 Id., pp. 14-17, complaint, Annex "A" of Petition.

3 Id., 66, Annex "A" of Comment.

4 Id., p. 67, Annex "B" of Comment.

5 Id., pp. 14-17, Annex "A" of Petition.

6 Id., pp. 18-23, Annex "B" of Petition.

7 Id., pp. 24-26, Annex "C" of Petition.

8 Id., p. 29, Annex "F" of Petition.

9 Id., pp. 30-33, Annex "G" of Petition.

10 Id.,, pp. 38-39, Annex "I" of Petition.

11 Id., p. 40.

12 Id., p. 93.

13 On the issue of jurisdiction, respondent judge denied the motion of dismiss on the erroneous assumption that
barangay conciliation proceedings need not have been undertaken since the complaint was "coupled with the
provisional remedy of making monthly deposits or consignment (sic) of the due and acruing rentals (with) this Court".
Consignment is not of course a provisional remedy, the Revised Rules of Court enumerating only five such remedies,
namely: attachment, preliminary injuction, receivership, replevin and support pendente lite.

14 Ebol vs. Amin, 135 SCRA 438 (1985); see also Royales vs. Intermediate Appellate Court, 127 SCRA 438 (1984).

15 Rollo, p. 35, Annex "G-1" of Petition.

16 Id., pp. 43-47, at 45.
17 Id., pp. 120-122; underscoring in the original.

18 26 SCRA 620 at 628 (1969).

19 The respondent judge ceased to be a judge in 1983; he was not re-appointed in connection with the 1983
reorganization of hte judiciary, under B.P.Blg.129.

Calang and Philtranco vs. People, G.R. No. 190696 August 3,2010

G.R. No. 190696 August 3, 2010

ROLITO CALANG and PHILTRANCO SERVICE ENTERPRISES, INC., Petitioners,
vs.
PEOPLE OF THE PHILIPPINES, Respondent.

R E S O L U T I O N

BRION, J.:

We resolve the motion for reconsideration filed by the petitioners, Philtranco Service Enterprises, Inc. (Philtranco) and
Rolito Calang, to challenge our Resolution of February 17, 2010. Our assailed Resolution denied the petition for
review on certiorari for failure to show any reversible error sufficient to warrant the exercise of this Courts
discretionary appellate jurisdiction.

Antecedent Facts

At around 2:00 p.m. of April 22, 1989, Rolito Calang was driving Philtranco Bus No. 7001, owned by Philtranco along
Daang Maharlika Highway in Barangay Lambao, Sta. Margarita, Samar when its rear left side hit the front left portion
of a Sarao jeep coming from the opposite direction. As a result of the collision, Cresencio Pinohermoso, the jeeps
driver, lost control of the vehicle, and bumped and killed Jose Mabansag, a bystander who was standing along the
highways shoulder. The jeep turned turtle three (3) times before finally stopping at about 25 meters from the point of
impact. Two of the jeeps passengers, Armando Nablo and an unidentified woman, were instantly killed, while the
other passengers sustained serious physical injuries.

The prosecution charged Calang with multiple homicide, multiple serious physical injuries and damage to property
thru reckless imprudence before the Regional Trial Court (RTC), Branch 31, Calbayog City. The RTC, in its decision
dated May 21, 2001, found Calang guilty beyond reasonable doubt of reckless imprudence resulting to multiple
homicide, multiple physical injuries and damage to property, and sentenced him to suffer an indeterminate penalty of
thirty days of arresto menor, as minimum, to four years and two months of prision correccional, as maximum. The
RTC ordered Calang and Philtranco, jointly and severally, to pay P50,000.00 as death indemnity to the heirs of
Armando; P50,000.00 as death indemnity to the heirs of Mabansag; and P90,083.93 as actual damages to the
private complainants.

The petitioners appealed the RTC decision to the Court of Appeals (CA), docketed as CA-G.R. CR No. 25522. The
CA, in its decision dated November 20, 2009, affirmed the RTC decision in toto. The CA ruled that petitioner Calang
failed to exercise due care and precaution in driving the Philtranco bus. According to the CA, various eyewitnesses
testified that the bus was traveling fast and encroached into the opposite lane when it evaded a pushcart that was on
the side of the road. In addition, he failed to slacken his speed, despite admitting that he had already seen the jeep
coming from the opposite direction when it was still half a kilometer away. The CA further ruled that Calang
demonstrated a reckless attitude when he drove the bus, despite knowing that it was suffering from loose
compression, hence, not roadworthy.

The CA added that the RTC correctly held Philtranco jointly and severally liable with petitioner Calang, for failing to
prove that it had exercised the diligence of a good father of the family to prevent the accident.

The petitioners filed with this Court a petition for review on certiorari. In our Resolution dated February 17, 2010, we
denied the petition for failure to sufficiently show any reversible error in the assailed decision to warrant the exercise
of this Courts discretionary appellate jurisdiction.

The Motion for Reconsideration

In the present motion for reconsideration, the petitioners claim that there was no basis to hold Philtranco jointly and
severally liable with Calang because the former was not a party in the criminal case (for multiple homicide with
multiple serious physical injuries and damage to property thru reckless imprudence) before the RTC.

The petitioners likewise maintain that the courts below overlooked several relevant facts, supported by documentary
exhibits, which, if considered, would have shown that Calang was not negligent, such as the affidavit and testimony of
witness Celestina Cabriga; the testimony of witness Rodrigo Bocaycay; the traffic accident sketch and report; and the
jeepneys registration receipt. The petitioners also insist that the jeeps driver had the last clear chance to avoid the
collision. We partly grant the motion.

Liability of Calang

We see no reason to overturn the lower courts finding on Calangs culpability. The finding of negligence on his part
by the trial court, affirmed by the CA, is a question of fact that we cannot pass upon without going into factual matters
touching on the finding of negligence. In petitions for review on certiorari under Rule 45 of the Revised Rules of
Court, this Court is limited to reviewing only errors of law, not of fact, unless the factual findings complained of are
devoid of support by the evidence on record, or the assailed judgment is based on a misapprehension of facts.

Liability of Philtranco

We, however, hold that the RTC and the CA both erred in holding Philtranco jointly and severally liable with Calang.
We emphasize that Calang was charged criminally before the RTC. Undisputedly, Philtranco was not a direct party in
this case. Since the cause of action against Calang was based on delict, both the RTC and the CA erred in holding
Philtranco jointly and severally liable with Calang, based on quasi-delict under Articles 21761 and 21802 of the Civil
Code. Articles 2176 and 2180 of the Civil Code pertain to the vicarious liability of an employer for quasi-delicts that an
employee has committed. Such provision of law does not apply to civil liability arising from delict.

If at all, Philtrancos liability may only be subsidiary. Article 102 of the Revised Penal Code states the subsidiary civil
liabilities of innkeepers, tavernkeepers and proprietors of establishments, as follows:


In default of the persons criminally liable, innkeepers, tavernkeepers, and any other persons or corporations shall be
civilly liable for crimes committed in their establishments, in all cases where a violation of municipal ordinances or
some general or special police regulations shall have been committed by them or their employees.1avvphil
Innkeepers are also subsidiary liable for the restitution of goods taken by robbery or theft within their houses from
guests lodging therein, or for the payment of the value thereof, provided that such guests shall have notified in
advance the innkeeper himself, or the person representing him, of the deposit of such goods within the inn; and shall
furthermore have followed the directions which such innkeeper or his representative may have given them with
respect to the care of and vigilance over such goods. No liability shall attach in case of robbery with violence against
or intimidation of persons unless committed by the innkeepers employees.

The foregoing subsidiary liability applies to employers, according to Article 103 of the Revised Penal Code, which
reads:

The subsidiary liability established in the next preceding article shall also apply to employers, teachers, persons, and
corporations engaged in any kind of industry for felonies committed by their servants, pupils, workmen, apprentices,
or employees in the discharge of their duties.

The provisions of the Revised Penal Code on subsidiary liability Articles 102 and 103 are deemed written into the
judgments in cases to which they are applicable. Thus, in the dispositive portion of its decision, the trial court need
not expressly pronounce the subsidiary liability of the employer.3 Nonetheless, before the employers subsidiary
liability is enforced, adequate evidence must exist establishing that (1) they are indeed the employers of the convicted
employees; (2) they are engaged in some kind of industry; (3) the crime was committed by the employees in the
discharge of their duties; and (4) the execution against the latter has not been satisfied due to insolvency. The
determination of these conditions may be done in the same criminal action in which the employees liability, criminal
and civil, has been pronounced, in a hearing set for that precise purpose, with due notice to the employer, as part of
the proceedings for the execution of the judgment.4

WHEREFORE, we PARTLY GRANT the present motion. The Court of Appeals decision that affirmed in toto the RTC
decision, finding Rolito Calang guilty beyond reasonable doubt of reckless imprudence resulting in multiple homicide,
multiple serious physical injuries and damage to property, is AFFIRMED, with the MODIFICATION that Philtrancos
liability should only be subsidiary. No costs.

SO ORDERED.

ARTURO D. BRION
Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES
Associate Justice

LUCAS P. BERSAMIN
Associate Justice ROBERTO A. ABAD*
Associate Justice

MARTIN S. VILLARAMA, JR.
Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Resolution had been reached in consultation before the case was assigned
to the writer of the opinion of the Courts Division.

CONCHITA CARPIO MORALES
Associate Justice
Chairperson

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby certified
that the conclusions in the above Resolution were reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice


Footnotes

* Designated additional Member of the Third Division, in view of the retirement of Chief Justice Reynato S. Puno, per
Special Order No. 843 dated May 17, 2010.

1 Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay
for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this Chapter.

2 Art. 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or omissions, but also
for those of persons for whom one is responsible.

x x x x

Employers shall be liable for the damages caused by their employees and household helpers acting within the scope
of their assigned tasks, even though the former are not engaged in any business or industry.

3 Pangonorom v. People, 495 Phil. 195 (2005).

4 Philippine Rabbit Bus Lines, Inc. v. People, G.R. No. 147703, April 14, 2004, 427 SCRA 456.


Ronquillo v. Court of Appeals
132 SCRA 274

Facts: INDIVIDUALLY AND JOINTLY IS SOLIDARY CASE

Ernesto Ronquillo (Ronquillo) was one of four defendants in a Civil Case filed by respondent Antonio So
(So) for the collection of P118,498.98, the value of the check issued by the said defendant in payment for
foodstuffs delivered to and received by them. The said checks were dishonored by the drawee bank.

The lower court rendered a decision based on the compromise agreement by the parities. The agreement
reduced the claim to P110,000 and bound the defendants to initially pay P55,000 of the debt before December
24, 1978. The defendants agreed to pay the balance individually and jointly within a period of six months or
before June 30, 1980.

So filed a Motion for Execution on the ground that the defendants failed to make the initial payment of P55,000
as provided in the abovementioned decision. Ronquillo opposed the motion for execution alleging that his
inability to make the payment was due to Sos own act of making himself inaccessible.

Ronquillo tendered the amount of P13,750 as his share of the P55,000 initial payment. Another defendant, Pilar
Tan (Tan) offered to pay the same amount. Because So refused to accept their payments, demanding the full
initial payment. Ronquillo and Tan deposited the amount with the court. The court ordered the issuance of a
writ of execution for the balance of the initial amount payable to the two other defendants.

So sought the reconsideration of the Order and prayed for the execution of the decision in its entirety against all
defendants, jointly and severally. So opposed the motion arguing that the lower court held that the liability of
the 4 defendants was not expressly declared to be solidary, consequently each defendant is obliged to pay only
his own pro-rata or 1/4 of the amount due and payable.

A writ of execution was issued by the court for the payment of P82,500 [P55,000 (balance from the whole debt)
+ 27500 (unpaid shares of initial payment from two other defendants or P13,750 + P13750)] against the
properties of the defendants including Ronquillo, singly or jointly liable. The sheriff issued a notice for the sale
of certain furniture and appliances found in Ronquillos residence to satisfy the sum of P82,500.

Issue: W/N the liability of the 4 defendants including Ronquillo solidary.

Held: Yes.

The pertinent provisions are Art. 1207
1
and Art. 1208.
2
By the terms of the compromise agreement and the
decision based upon it, the defendants obligated themselves to pay their obligation individually and jointly.

1
Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation
does not imply that each one of the former has a right to demand, or that each one of the latter is bound to

An agreement to be individually liable undoubtedly creates a several obligation. A several obligation is one by
which one individual binds himself to perform the whole obligation.
Malayan Insurance Co., Inc. vs. Court of Appeals, 165 SCRA 536 , G.R.
No. L-36413 September 26, 1988
G.R. No. L-36413 September 26, 1988
MALAYAN INSURANCE CO., INC., petitioner,
vs.
THE HON. COURT OF APPEALS (THIRD DIVISION) MARTIN C. VALLEJOS, SIO CHOY, SAN LEON RICE MILL,
INC. and PANGASINAN TRANSPORTATION CO., INC., respondents.
Freqillana Jr. for petitioner.
B.F. Estrella & Associates for respondent Martin Vallejos.
Vicente Erfe Law Office for respondent Pangasinan Transportation Co., Inc.
Nemesio Callanta for respondent Sio Choy and San Leon Rice Mill, Inc.

PADILLA, J .:
Review on certiorari of the judgment * of the respondent appellate court in CA-G.R. No. 47319-R, dated 22 February
1973, which affirmed, with some modifications, the decision, ** dated 27 April 1970, rendered in Civil Case No. U-
2021 of the Court of First Instance of Pangasinan.
The antecedent facts of the case are as follows:
On 29 March 1967, herein petitioner, Malayan Insurance Co., Inc., issued in favor of private respondent Sio Choy
Private Car Comprehensive Policy No. MRO/PV-15753, effective from 18 April 1967 to 18 April 1968, covering a
Willys jeep with Motor No. ET-03023 Serial No. 351672, and Plate No. J-21536, Quezon City, 1967. The insurance
coverage was for "own damage" not to exceed P600.00 and "third-party liability" in the amount of P20,000.00.
During the effectivity of said insurance policy, and more particularly on 19 December 1967, at about 3:30 o'clock in
the afternoon, the insured jeep, while being driven by one Juan P. Campollo an employee of the respondent San
Leon Rice Mill, Inc., collided with a passenger bus belonging to the respondent Pangasinan Transportation Co., Inc.
(PANTRANCO, for short) at the national highway in Barrio San Pedro, Rosales, Pangasinan, causing damage to the
insured vehicle and injuries to the driver, Juan P. Campollo, and the respondent Martin C. Vallejos, who was riding in
the ill-fated jeep.
As a result, Martin C. Vallejos filed an action for damages against Sio Choy, Malayan Insurance Co., Inc. and the
PANTRANCO before the Court of First Instance of Pangasinan, which was docketed as Civil Case No. U-2021. He
prayed therein that the defendants be ordered to pay him, jointly and severally, the amount of P15,000.00, as

render, entire compliance with the prestation. There is a solidary liability only when the obligation expressly so
states, or when the law or the nature of the obligation requires solidarity.

2
Art. 1208. If from the law, or the nature or the wording of the obligations to which the preceding article refers
the contrary does not appear, the credit or debt shall be presumed to be divided into as many shares as there
are creditors or debtors, the credits or debts being considered distinct from one another, subject to the Rules of
Court governing the multiplicity of suits. (1138a)

reimbursement for medical and hospital expenses; P6,000.00, for lost income; P51,000.00 as actual, moral and
compensatory damages; and P5,000.00, for attorney's fees.
Answering, PANTRANCO claimed that the jeep of Sio Choy was then operated at an excessive speed and bumped
the PANTRANCO bus which had moved to, and stopped at, the shoulder of the highway in order to avoid the jeep;
and that it had observed the diligence of a good father of a family to prevent damage, especially in the selection and
supervision of its employees and in the maintenance of its motor vehicles. It prayed that it be absolved from any and
all liability.
Defendant Sio Choy and the petitioner insurance company, in their answer, also denied liability to the plaintiff,
claiming that the fault in the accident was solely imputable to the PANTRANCO.
Sio Choy, however, later filed a separate answer with a cross-claim against the herein petitioner wherein he alleged
that he had actually paid the plaintiff, Martin C. Vallejos, the amount of P5,000.00 for hospitalization and other
expenses, and, in his cross-claim against the herein petitioner, he alleged that the petitioner had issued in his favor a
private car comprehensive policy wherein the insurance company obligated itself to indemnify Sio Choy, as insured,
for the damage to his motor vehicle, as well as for any liability to third persons arising out of any accident during the
effectivity of such insurance contract, which policy was in full force and effect when the vehicular accident complained
of occurred. He prayed that he be reimbursed by the insurance company for the amount that he may be ordered to
pay.
Also later, the herein petitioner sought, and was granted, leave to file a third-party complaint against the San Leon
Rice Mill, Inc. for the reason that the person driving the jeep of Sio Choy, at the time of the accident, was an
employee of the San Leon Rice Mill, Inc. performing his duties within the scope of his assigned task, and not an
employee of Sio Choy; and that, as the San Leon Rice Mill, Inc. is the employer of the deceased driver, Juan P.
Campollo, it should be liable for the acts of its employee, pursuant to Art. 2180 of the Civil Code. The herein petitioner
prayed that judgment be rendered against the San Leon Rice Mill, Inc., making it liable for the amounts claimed by
the plaintiff and/or ordering said San Leon Rice Mill, Inc. to reimburse and indemnify the petitioner for any sum that it
may be ordered to pay the plaintiff.
After trial, judgment was rendered as follows:
WHEREFORE, in view of the foregoing findings of this Court judgment is hereby rendered in favor of the plaintiff and
against Sio Choy and Malayan Insurance Co., Inc., and third-party defendant San Leon Rice Mill, Inc., as follows:
(a) P4,103 as actual damages;
(b) P18,000.00 representing the unearned income of plaintiff Martin C. Vallejos for the period of three (3) years;
(c) P5,000.00 as moral damages;
(d) P2,000.00 as attomey's fees or the total of P29,103.00, plus costs.
The above-named parties against whom this judgment is rendered are hereby held jointly and severally liable. With
respect, however, to Malayan Insurance Co., Inc., its liability will be up to only P20,000.00.
As no satisfactory proof of cost of damage to its bus was presented by defendant Pantranco, no award should be
made in its favor. Its counter-claim for attorney's fees is also dismissed for not being proved.
1

On appeal, the respondent Court of Appeals affirmed the judgment of the trial court that Sio Choy, the San Leon Rice
Mill, Inc. and the Malayan Insurance Co., Inc. are jointly and severally liable for the damages awarded to the plaintiff
Martin C. Vallejos. It ruled, however, that the San Leon Rice Mill, Inc. has no obligation to indemnify or reimburse the
petitioner insurance company for whatever amount it has been ordered to pay on its policy, since the San Leon Rice
Mill, Inc. is not a privy to the contract of insurance between Sio Choy and the insurance company.
2

Hence, the present recourse by petitioner insurance company.
The petitioner prays for the reversal of the appellate court's judgment, or, in the alternative, to order the San Leon
Rice Mill, Inc. to reimburse petitioner any amount, in excess of one-half (1/2) of the entire amount of damages,
petitioner may be ordered to pay jointly and severally with Sio Choy.
The Court, acting upon the petition, gave due course to the same, but "only insofar as it concerns the alleged liability
of respondent San Leon Rice Mill, Inc. to petitioner, it being understood that no other aspect of the decision of the
Court of Appeals shall be reviewed, hence, execution may already issue in favor of respondent Martin C. Vallejos
against the respondents, without prejudice to the determination of whether or not petitioner shall be entitled to
reimbursement by respondent San Leon Rice Mill, Inc. for the whole or part of whatever the former may pay on the
P20,000.00 it has been adjudged to pay respondent Vallejos."
3

However, in order to determine the alleged liability of respondent San Leon Rice Mill, Inc. to petitioner, it is important
to determine first the nature or basis of the liability of petitioner to respondent Vallejos, as compared to that of
respondents Sio Choy and San Leon Rice Mill, Inc.
Therefore, the two (2) principal issues to be resolved are (1) whether the trial court, as upheld by the Court of
Appeals, was correct in holding petitioner and respondents Sio Choy and San Leon Rice Mill, Inc. "solidarily liable" to
respondent Vallejos; and (2) whether petitioner is entitled to be reimbursed by respondent San Leon Rice Mill, Inc. for
whatever amount petitioner has been adjudged to pay respondent Vallejos on its insurance policy.
As to the first issue, it is noted that the trial court found, as affirmed by the appellate court, that petitioner and
respondents Sio Choy and San Leon Rice Mill, Inc. are jointly and severally liable to respondent Vallejos.
We do not agree with the aforesaid ruling. We hold instead that it is only respondents Sio Choy and San Leon Rice
Mill, Inc, (to the exclusion of the petitioner) that are solidarily liable to respondent Vallejos for the damages awarded
to Vallejos.
It must be observed that respondent Sio Choy is made liable to said plaintiff as owner of the ill-fated Willys jeep,
pursuant to Article 2184 of the Civil Code which provides:
Art. 2184. In motor vehicle mishaps, the owner is solidarily liable with his driver, if the former, who was in the vehicle,
could have, by the use of due diligence, prevented the misfortune it is disputably presumed that a driver was
negligent, if he had been found guilty of reckless driving or violating traffic regulations at least twice within the next
preceding two months.
If the owner was not in the motor vehicle, the provisions of article 2180 are applicable.
On the other hand, it is noted that the basis of liability of respondent San Leon Rice Mill, Inc. to plaintiff Vallejos, the
former being the employer of the driver of the Willys jeep at the time of the motor vehicle mishap, is Article 2180 of
the Civil Code which reads:
Art. 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also for
those of persons for whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their employees and household helpers acting within the scope
of their assigned tasks, even though the former are not engaged ill any business or industry.
xxx xxx xxx
The responsibility treated in this article shall cease when the persons herein mentioned proved that they observed all
the diligence of a good father of a family to prevent damage.
It thus appears that respondents Sio Choy and San Leon Rice Mill, Inc. are the principal tortfeasors who are primarily
liable to respondent Vallejos. The law states that the responsibility of two or more persons who are liable for a quasi-
delict is solidarily.
4

On the other hand, the basis of petitioner's liability is its insurance contract with respondent Sio Choy. If petitioner is
adjudged to pay respondent Vallejos in the amount of not more than P20,000.00, this is on account of its being the
insurer of respondent Sio Choy under the third party liability clause included in the private car comprehensive policy
existing between petitioner and respondent Sio Choy at the time of the complained vehicular accident.
In Guingon vs. Del Monte,
5
a passenger of a jeepney had just alighted therefrom, when he was bumped by another
passenger jeepney. He died as a result thereof. In the damage suit filed by the heirs of said passenger against the
driver and owner of the jeepney at fault as well as against the insurance company which insured the latter jeepney
against third party liability, the trial court, affirmed by this Court, adjudged the owner and the driver of the jeepney at
fault jointly and severally liable to the heirs of the victim in the total amount of P9,572.95 as damages and attorney's
fees; while the insurance company was sentenced to pay the heirs the amount of P5,500.00 which was to be applied
as partial satisfaction of the judgment rendered against said owner and driver of the jeepney. Thus, in
said Guingon case, it was only the owner and the driver of the jeepney at fault, not including the insurance company,
who were held solidarily liable to the heirs of the victim.
While it is true that where the insurance contract provides for indemnity against liability to third persons, such third
persons can directly sue the insurer,
6
however, the direct liability of the insurer under indemnity contracts against
third party liability does not mean that the insurer can be held solidarily liable with the insured and/or the other parties
found at fault. The liability of the insurer is based on contract; that of the insured is based on tort.
In the case at bar, petitioner as insurer of Sio Choy, is liable to respondent Vallejos, but it cannot, as incorrectly held
by the trial court, be made "solidarily" liable with the two principal tortfeasors namely respondents Sio Choy and San
Leon Rice Mill, Inc. For if petitioner-insurer were solidarily liable with said two (2) respondents by reason of the
indemnity contract against third party liability-under which an insurer can be directly sued by a third party this will
result in a violation of the principles underlying solidary obligation and insurance contracts.
In solidary obligation, the creditor may enforce the entire obligation against one of the solidary debtors.
7
On the other
hand, insurance is defined as "a contract whereby one undertakes for a consideration to indemnify another against
loss, damage, or liability arising from an unknown or contingent event."
8

In the case at bar, the trial court held petitioner together with respondents Sio Choy and San Leon Rice Mills Inc.
solidarily liable to respondent Vallejos for a total amount of P29,103.00, with the qualification that petitioner's liability
is only up to P20,000.00. In the context of a solidary obligation, petitioner may be compelled by respondent Vallejos
to pay the entire obligation of P29,013.00, notwithstanding the qualification made by the trial court. But, how can
petitioner be obliged to pay the entire obligation when the amount stated in its insurance policy with respondent Sio
Choy for indemnity against third party liability is only P20,000.00? Moreover, the qualification made in the decision of
the trial court to the effect that petitioner is sentenced to pay up to P20,000.00 only when the obligation to pay
P29,103.00 is made solidary, is an evident breach of the concept of a solidary obligation. Thus, We hold that the trial
court, as upheld by the Court of Appeals, erred in holding petitioner, solidarily liable with respondents Sio Choy and
San Leon Rice Mill, Inc. to respondent Vallejos.
As to the second issue, the Court of Appeals, in affirming the decision of the trial court, ruled that petitioner is not
entitled to be reimbursed by respondent San Leon Rice Mill, Inc. on the ground that said respondent is not privy to
the contract of insurance existing between petitioner and respondent Sio Choy. We disagree.
The appellate court overlooked the principle of subrogation in insurance contracts. Thus
... Subrogation is a normal incident of indemnity insurance (Aetna L. Ins. Co. vs. Moses, 287 U.S. 530, 77 L. ed. 477).
Upon payment of the loss, the insurer is entitled to be subrogatedpro tanto to any right of action which the insured
may have against the third person whose negligence or wrongful act caused the loss (44 Am. Jur. 2nd 745, citing
Standard Marine Ins. Co. vs. Scottish Metropolitan Assurance Co., 283 U.S. 284, 75 L. ed. 1037).
The right of subrogation is of the highest equity. The loss in the first instance is that of the insured but after
reimbursement or compensation, it becomes the loss of the insurer (44 Am. Jur. 2d, 746, note 16, citing Newcomb vs.
Cincinnati Ins. Co., 22 Ohio St. 382).
Although many policies including policies in the standard form, now provide for subrogation, and thus determine the
rights of the insurer in this respect, the equitable right of subrogation as the legal effect of payment inures to the
insurer without any formal assignment or any express stipulation to that effect in the policy" (44 Am. Jur. 2nd 746).
Stated otherwise, when the insurance company pays for the loss, such payment operates as an equitable assignment
to the insurer of the property and all remedies which the insured may have for the recovery thereof. That right is not
dependent upon , nor does it grow out of any privity of contract (emphasis supplied) or upon written assignment of
claim, and payment to the insured makes the insurer assignee in equity (Shambley v. Jobe-Blackley Plumbing and
Heating Co., 264 N.C. 456, 142 SE 2d 18).
9

It follows, therefore, that petitioner, upon paying respondent Vallejos the amount of riot exceeding P20,000.00, shall
become the subrogee of the insured, the respondent Sio Choy; as such, it is subrogated to whatever rights the latter
has against respondent San Leon Rice Mill, Inc. Article 1217 of the Civil Code gives to a solidary debtor who has paid
the entire obligation the right to be reimbursed by his co-debtors for the share which corresponds to each.
Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors
offer to pay, the creditor may choose which offer to accept.
He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest
for the payment already made. If the payment is made before the debt is due, no interest for the intervening period
may be demanded.
xxx xxx xxx
In accordance with Article 1217, petitioner, upon payment to respondent Vallejos and thereby becoming the subrogee
of solidary debtor Sio Choy, is entitled to reimbursement from respondent San Leon Rice Mill, Inc.
To recapitulate then: We hold that only respondents Sio Choy and San Leon Rice Mill, Inc. are solidarily liable to the
respondent Martin C. Vallejos for the amount of P29,103.00. Vallejos may enforce the entire obligation on only one of
said solidary debtors. If Sio Choy as solidary debtor is made to pay for the entire obligation (P29,103.00) and
petitioner, as insurer of Sio Choy, is compelled to pay P20,000.00 of said entire obligation, petitioner would be
entitled, as subrogee of Sio Choy as against San Leon Rice Mills, Inc., to be reimbursed by the latter in the amount of
P14,551.50 (which is 1/2 of P29,103.00 )
WHEREFORE, the petition is GRANTED. The decision of the trial court, as affirmed by the Court of Appeals, is
hereby AFFIRMED, with the modification above-mentioned. Without pronouncement as to costs.
SO ORDERED.
Melencio-Herrera (Chairperson), Paras, Sarmiento and Regalado, JJ., concur.
Footnotes
* Penned by Justice Ramon C. Fernandez, concurred in by Justice Hermogenes Concepcion, Jr. and Emilio A.
Gancayco.
** Penned by Judge Vicente M. Santiago, Jr.
1 Record on Appeal, pp. 202-203.
2 Rollo, p.46.
3 Rollo, p. 67.
4 Article 2194, Civil Code.
5 G. R. No. L-22042, August 17, 1967, 20 SCRA 1043.
6 Coquia vs. Fieldman's Insurance Co., Inc., G.R. No. L-23276, November 29, 1968, 26 SCRA 178.
7 The Imperial Insurance, Inc. vs. David, G.R. No. L-32425, November 21, 1984, 133 SCRA 317.
8 Philippine Phoenix Surety Insurance Co. vs. Woodworks, Inc., G.R. No. L-25317, August 6, 1979, 92 SCRA 419.
9 Fireman's Fund Insurance Company, et al. vs. Jamila & Company, Inc., et al., G.R. No. L- 27427, April 7, 1976, 70
SCRA 323.


Philippine National Bank vs. Independent Planters Association, Inc.,
122 SCRA 113 , No. L-28046, May 16, 1983
G.R. No. L-28046 May 16, 1983
PHILIPPINE NATIONAL BANK, plaintiff-appellant,
vs.
INDEPENDENT PLANTERS ASSOCIATION, INC., ANTONIO DIMAYUGA, DELFIN FAJARDO, CEFERINO
VALENCIA, MOISES CARANDANG, LUCIANO CASTILLO, AURELIO VALENCIA, LAURO LEVISTE, GAVINO
GONZALES, LOPE GEVANA and BONIFACIO LAUREANA,defendants-appellees.
Basa, Ilao, del Rosario Diaz for plaintiff-appellant.
Laurel Law Office for Dimayuga.
Tomas Yumol for Fajardo, defendant-appellee.

PLANA, J .:
Appeal by the Philippine National Bank (PNB) from the Order of the defunct Court of First Instance of Manila (Branch
XX) in its Civil Case No. 46741 dismissing PNB's complaint against several solidary debtors for the collection of a
sum of money on the ground that one of the defendants (Ceferino Valencia) died during the pendency of the case
(i.e., after the plaintiff had presented its evidence) and therefore the complaint, being a money claim based on
contract, should be prosecuted in the testate or intestate proceeding for the settlement of the estate of the deceased
defendant pursuant to Section 6 of Rule 86 of the Rules of Court which reads:
SEC. 6. Solidary obligation of decedent. the obligation of the decedent is solidary with another debtor, the claim
shall be filed against the decedent as if he were the only debtor, without prejudice to the right of the estate to recover
contribution from the other debtor. In a joint obligation of the decedent, the claim shall be confined to the portion
belonging to him.
The appellant assails the order of dismissal, invoking its right of recourse against one, some or all of its solidary
debtors under Article 1216 of the Civil Code
ART. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously.
The demand made against one of them shall not be an obstacle to those which may subsequently be directed against
the others, so long as the debt has not been fully collected.
The sole issue thus raised is whether in an action for collection of a sum of money based on contract against all the
solidary debtors, the death of one defendant deprives the court of jurisdiction to proceed with the case against the
surviving defendants.
It is now settled that the quoted Article 1216 grants the creditor the substantive right to seek satisfaction of his credit
from one, some or all of his solidary debtors, as he deems fit or convenient for the protection of his interests; and if,
after instituting a collection suit based on contract against some or all of them and, during its pendency, one of the
defendants dies, the court retains jurisdiction to continue the proceedings and decide the case in respect of the
surviving defendants. Thus in Manila Surety & Fidelity Co., Inc. vs. Villarama et al., 107 Phil. 891 at 897, this Court
ruled:
Construing Section 698 of the Code of Civil Procedure from whence the aforequoted provision (Sec. 6, Rule 86) was
taken, this Court held that where two persons are bound in solidum for the same debt and one of them dies, the
whole indebtedness can be proved against the estate of the latter, the decedent's liability being absolute and primary;
and if the claim is not presented within the time provided by the rules, the same will be barred as against the estate. It
is evident from the foregoing that Section 6 of Rule 87 (now Rule 86) provides the procedureshould the creditor
desire to go against the deceased debtor, but there is certainly nothing in the said provision making compliance with
such procedure a condition precedent before an ordinary action against the surviving solidary debtors, should the
creditor choose to demand payment from the latter, could be entertained to the extent that failure to observe the
same would deprive the court jurisdiction to take cognizance of the action against the surviving debtors. Upon the
other hand, the Civil Code expressly allows the creditor to proceed against any one of the solidary debtors or some or
all of them simultaneously. There is, therefore, nothing improper in the creditor's filing of an action against the
surviving solidary debtors alone, instead of instituting a proceeding for the settlement of the estate of the deceased
debtor wherein his claim could be filed.
Similarly, in PNB vs. Asuncion, 80 SCRA 321 at 323-324, this Court, speaking thru Mr. Justice Makasiar, reiterated
the doctrine.
A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing therein prevents a creditor
from proceeding against the surviving solidary debtors. Said provision merely sets up the procedure in enforcing
collectionin case a creditor chooses to pursue his claim against the estate of the deceased solidary, debtor.
It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this matter. Said provision gives
the creditor the right to 'proceed against anyone of the solidary debtors or some or all of them simultaneously.' The
choice is undoubtedly left to the solidary, creditor to determine against whom he will enforce collection. In case of the
death of one of the solidary debtors, he (the creditor) may, if he so chooses, proceed against the surviving solidary
debtors without necessity of filing a claim in the estate of the deceased debtors. It is not mandatory for him to have
the case dismissed against the surviving debtors and file its claim in the estate of the deceased solidary debtor . . .
As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules of Court were applied literally, Article
1216 of the New Civil Code would, in effect, be repealed since under the Rules of Court, petitioner has no choice but
to proceed against the estate of Manuel Barredo only. Obviously, this provision diminishes the Bank's right under the
New Civil, Code to proceed against any one, some or all of the solidary debtors. Such a construction is not
sanctioned by the principle, which is too well settled to require citation, that a substantive law cannot be amended by
a procedural rule. Otherwise stared, Section 6, Rule 86 of the Revised Rules of Court cannot be made to prevail over
Article 1216 of the New Civil Code, the former being merely procedural, while the latter, substantive.
WHEREFORE the appealed order of dismissal of the court a quo in its Civil Case No. 46741 is hereby set
aside in respect of the surviving defendants; and the case is remanded to the corresponding Regional Trial
Court for proceedings. proceedings. No costs.
SO ORDERED.
Teehankee (Acta. C.J.), Escolin ** Vasquez and Gutierrez, Jr., JJ., concur.
Melencio-Herrera and Relova, JJ., is on leave.

Footnotes
** Mr. Justice Escolin was designated to sit with the First Division under Special Order No. 241 dated April 28, 1983.

Bachrach Motor Co. vs. Espiritu, 52 Phil. 346 , No. 28497, No. 28498,
November 06, 1928

Bachrach vs. Espiritu, 52 Phil 346

G.R. No. L-28497 November 6, 1928

THE BACHRACH MOTOR CO., INC., plaintiff-appellee,
vs.
FAUSTINO ESPIRITU, defendant-appellant.

------------------------------

G.R. No. L-28498 November 6, 1928

THE BACHRACH MOTOR CO., INC., plaintiff-appellee,
vs.
FAUSTINO ESPIRITU, defendant-appellant, and
ROSARIO ESPIRITU, intervenor-appellant.

Ernesto Zaragoza and Simeon Ramos for defendant-appellant.
Benito Soliven and Jose Varela Calderon for intervenor-appellant.
B. Francisco for appellee.

AVANCEA, C. J.:

These two cases, Nos. 28497 and 28948, were tried together.

It appears, in connection with case 28497; that on July 28, 1925 the defendant Faustino Espiritu purchased of
the plaintiff corporation a two-ton White truck for P11,983.50, paying P1,000 down to apply on account of this price,
and obligating himself to pay the remaining P10,983.50 within the periods agreed upon. To secure the payment of
this sum, the defendants mortgaged the said truck purchased and, besides, three others, two of which are numbered
77197 and 92744 respectively, and all of the White make (Exhibit A). These two trucks had been purchased from the
same plaintiff and were fully paid for by the defendant and his brother Rosario Espiritu. The defendant failed to pay
P10,477.82 of the price secured by this mortgage.

In connection with case 28498, it appears that on February 18, 1925 the defendant bought a one-ton White
truck of the plaintiff corporation for the sum of P7,136.50, and after having deducted the P500 cash payment and the
12 per cent annual interest on the unpaid principal, obligated himself to make payment of this sum within the periods
agreed upon. To secure this payment the defendant mortgaged to the plaintiff corporation the said truck purchased
and two others, numbered 77197 and 92744, respectively, the same that were mortgaged in the purchase of the
other truck referred to in the other case. The defendant failed to pay P4,208.28 of this sum.

In both sales it was agreed that 12 per cent interest would be paid upon the unpaid portion of the price at the
executon of the contracts, and in case of non-payment of the total debt upon its maturity, 25 per cent thereon, as
penalty.

In addition to the mortagage deeds referred to, which the defendant executed in favor of the plaintiff, the
defendant at the same time also signed a promissory note solidarily with his brother Rosario Espiritu for the several
sums secured by the two mortgages (Exhibits B and D).

Rosario Espiritu appeared in these two cases as intervenor, alleging to be the exclusive owner of the two White
trucks Nos. 77197 and 92744, which appear to have been mortgaged by the defendants to the plaintiff. lawphi1.net

While these two cases were pending in the lower court the mortgaged trucks were sold by virtue of the
mortgage, all of them together bringing in, after deducting the sheriff's fees and transportation charges to Manila, the
net sum of P3,269.58.

The judgment appealed from ordered the defendants and the intervenor to pay plaintiff in case 28497 the sum
of P7,732.09 with interest at the rate of 12 per cent per annum from May 1, 1926 until fully paid, and 25 per cent
thereof in addition as penalty. In case 28498, the trial court ordered the defendant and the intervenor to pay plaintiff
the sum of P4,208.28 with interest at 12 per cent per annum from December 1, 1925 until fully paid, and 25 per cent
thereon as penalty.

The appellants contend that trucks 77197 and 92744 were not mortgaged, because, when the defendant
signed the mortgage deeds these trucks were not included in those documents, and were only put in later, without
defendant's knowledge. But there is positive proof that they were included at the time the defendant signed these
documents. Besides, there were presented two of defendant's letters to Hidalgo, an employee of the plaintiff's written
a few days before the transaction, acquiescing in the inclusion of all his White trucks already paid for, in the mortgage
(Exhibit H-I).

Appellants also alleged that on February 4, 1925, the defendant sold his rights in said trucks Nos. 77197 and
92744 to the intervenor, and that as the latter did not sign the mortgage deeds, such trucks cannot be considered as
mortgaged. But the evidence shows that while the intervenor Rosario Espiritu did not sign the two mortgage deeds
(Exhibits A and C), yet, together with the defendants Faustino Espiritu, he signed the two promissory notes (Exhibits
B and D) secured by these two mortgages. All these instruments were executed at the same time, and when the
trucks 77197 and 92744 were included in the mortgages, the intervenor Rosario Espiritu was aware of it and
consented to such inclusion. These facts are supported by the testimony of Bachrach, manager of the plaintiff
corporation, of Agustin Ramirez, who witnessed the execution of all these documents, and of Angel Hidalgo, who
witnessed the execution of Exhibits B and D.

We do not find the statement of the intervenor Rosario Espiritu that he did not sign promissory notes Exhibits B
and C to be sufficient to overthrow this evidence. A comparison of his genuine signature on Exhibit AA with those
appearing on promissory notes B and C, convinces us that the latter are his signatures. And such is our conclusion,
notwithstanding the evidence presented to establish that on the date when Exhibits B appears to have been signed,
that is July 25, 1925, the intervenor was in Batac, Ilocos Norte, many miles away from Manila. And the fact that on
the 24th of said month of July, the plaintiff sent some truck accessory parts by rail to Ilocos for the intervenor does not
necessarily prove that the latter could not have been in Manila on the 25th of that month.

In view of his conclusion that the intervenor signed the promissory notes secured by trucks 77197 and 92744
and consented to the mortgage of the same, it is immaterial whether he was or was not the exclusive owner thereof.

It is finally contended that the 25 per cent penalty upon the debt, in addition to the interest of 12 per cent per
annum, makes the contract usurious. Such a contention is not well founded. Article 1152 of the Civil Code permits the
agreement upon a penalty apart from the interest. Should there be such an agreemnet, the penalty, as was held in
the case of Lopez vs. Hernaez (32 Phil., 631), does not include the interest, and which may be demamded
separetely. According to this, the penalty is not to be added to the interest for the determination of whether the
interest exceeds the rate fixed by the law, since said rate was fixed only for the interest. But considering that the
obligation was partly performed, and making use of the power given to the court by article 1154 of the Civil Code, this
penalty is reduced to 10 per cent of the unpaid debt.

With the sole modification that instead of 25 per cent upon the sum owed, the defendants need pay only 10 per
cent thereon as penalty, the judgment appealed from is affired in all other respects without special pronouncement as
to costs. So ordered.

Malayan Insurance Co., Inc. vs. Court of Appeals, 165 SCRA 536 , G.R.
No. L-36413 September 26, 1988
G.R. No. L-36413 September 26, 1988
MALAYAN INSURANCE CO., INC., petitioner,
vs.
THE HON. COURT OF APPEALS (THIRD DIVISION) MARTIN C. VALLEJOS, SIO CHOY, SAN LEON RICE MILL,
INC. and PANGASINAN TRANSPORTATION CO., INC., respondents.
Freqillana Jr. for petitioner.
B.F. Estrella & Associates for respondent Martin Vallejos.
Vicente Erfe Law Office for respondent Pangasinan Transportation Co., Inc.
Nemesio Callanta for respondent Sio Choy and San Leon Rice Mill, Inc.

PADILLA, J .:
Review on certiorari of the judgment * of the respondent appellate court in CA-G.R. No. 47319-R, dated 22 February
1973, which affirmed, with some modifications, the decision, ** dated 27 April 1970, rendered in Civil Case No. U-
2021 of the Court of First Instance of Pangasinan.
The antecedent facts of the case are as follows:
On 29 March 1967, herein petitioner, Malayan Insurance Co., Inc., issued in favor of private respondent Sio Choy
Private Car Comprehensive Policy No. MRO/PV-15753, effective from 18 April 1967 to 18 April 1968, covering a
Willys jeep with Motor No. ET-03023 Serial No. 351672, and Plate No. J-21536, Quezon City, 1967. The insurance
coverage was for "own damage" not to exceed P600.00 and "third-party liability" in the amount of P20,000.00.
During the effectivity of said insurance policy, and more particularly on 19 December 1967, at about 3:30 o'clock in
the afternoon, the insured jeep, while being driven by one Juan P. Campollo an employee of the respondent San
Leon Rice Mill, Inc., collided with a passenger bus belonging to the respondent Pangasinan Transportation Co., Inc.
(PANTRANCO, for short) at the national highway in Barrio San Pedro, Rosales, Pangasinan, causing damage to the
insured vehicle and injuries to the driver, Juan P. Campollo, and the respondent Martin C. Vallejos, who was riding in
the ill-fated jeep.
As a result, Martin C. Vallejos filed an action for damages against Sio Choy, Malayan Insurance Co., Inc. and the
PANTRANCO before the Court of First Instance of Pangasinan, which was docketed as Civil Case No. U-2021. He
prayed therein that the defendants be ordered to pay him, jointly and severally, the amount of P15,000.00, as
reimbursement for medical and hospital expenses; P6,000.00, for lost income; P51,000.00 as actual, moral and
compensatory damages; and P5,000.00, for attorney's fees.
Answering, PANTRANCO claimed that the jeep of Sio Choy was then operated at an excessive speed and bumped
the PANTRANCO bus which had moved to, and stopped at, the shoulder of the highway in order to avoid the jeep;
and that it had observed the diligence of a good father of a family to prevent damage, especially in the selection and
supervision of its employees and in the maintenance of its motor vehicles. It prayed that it be absolved from any and
all liability.
Defendant Sio Choy and the petitioner insurance company, in their answer, also denied liability to the plaintiff,
claiming that the fault in the accident was solely imputable to the PANTRANCO.
Sio Choy, however, later filed a separate answer with a cross-claim against the herein petitioner wherein he alleged
that he had actually paid the plaintiff, Martin C. Vallejos, the amount of P5,000.00 for hospitalization and other
expenses, and, in his cross-claim against the herein petitioner, he alleged that the petitioner had issued in his favor a
private car comprehensive policy wherein the insurance company obligated itself to indemnify Sio Choy, as insured,
for the damage to his motor vehicle, as well as for any liability to third persons arising out of any accident during the
effectivity of such insurance contract, which policy was in full force and effect when the vehicular accident complained
of occurred. He prayed that he be reimbursed by the insurance company for the amount that he may be ordered to
pay.
Also later, the herein petitioner sought, and was granted, leave to file a third-party complaint against the San Leon
Rice Mill, Inc. for the reason that the person driving the jeep of Sio Choy, at the time of the accident, was an
employee of the San Leon Rice Mill, Inc. performing his duties within the scope of his assigned task, and not an
employee of Sio Choy; and that, as the San Leon Rice Mill, Inc. is the employer of the deceased driver, Juan P.
Campollo, it should be liable for the acts of its employee, pursuant to Art. 2180 of the Civil Code. The herein petitioner
prayed that judgment be rendered against the San Leon Rice Mill, Inc., making it liable for the amounts claimed by
the plaintiff and/or ordering said San Leon Rice Mill, Inc. to reimburse and indemnify the petitioner for any sum that it
may be ordered to pay the plaintiff.
After trial, judgment was rendered as follows:
WHEREFORE, in view of the foregoing findings of this Court judgment is hereby rendered in favor of the plaintiff and
against Sio Choy and Malayan Insurance Co., Inc., and third-party defendant San Leon Rice Mill, Inc., as follows:
(a) P4,103 as actual damages;
(b) P18,000.00 representing the unearned income of plaintiff Martin C. Vallejos for the period of three (3) years;
(c) P5,000.00 as moral damages;
(d) P2,000.00 as attomey's fees or the total of P29,103.00, plus costs.
The above-named parties against whom this judgment is rendered are hereby held jointly and severally liable. With
respect, however, to Malayan Insurance Co., Inc., its liability will be up to only P20,000.00.
As no satisfactory proof of cost of damage to its bus was presented by defendant Pantranco, no award should be
made in its favor. Its counter-claim for attorney's fees is also dismissed for not being proved.
1

On appeal, the respondent Court of Appeals affirmed the judgment of the trial court that Sio Choy, the San Leon Rice
Mill, Inc. and the Malayan Insurance Co., Inc. are jointly and severally liable for the damages awarded to the plaintiff
Martin C. Vallejos. It ruled, however, that the San Leon Rice Mill, Inc. has no obligation to indemnify or reimburse the
petitioner insurance company for whatever amount it has been ordered to pay on its policy, since the San Leon Rice
Mill, Inc. is not a privy to the contract of insurance between Sio Choy and the insurance company.
2

Hence, the present recourse by petitioner insurance company.
The petitioner prays for the reversal of the appellate court's judgment, or, in the alternative, to order the San Leon
Rice Mill, Inc. to reimburse petitioner any amount, in excess of one-half (1/2) of the entire amount of damages,
petitioner may be ordered to pay jointly and severally with Sio Choy.
The Court, acting upon the petition, gave due course to the same, but "only insofar as it concerns the alleged liability
of respondent San Leon Rice Mill, Inc. to petitioner, it being understood that no other aspect of the decision of the
Court of Appeals shall be reviewed, hence, execution may already issue in favor of respondent Martin C. Vallejos
against the respondents, without prejudice to the determination of whether or not petitioner shall be entitled to
reimbursement by respondent San Leon Rice Mill, Inc. for the whole or part of whatever the former may pay on the
P20,000.00 it has been adjudged to pay respondent Vallejos."
3

However, in order to determine the alleged liability of respondent San Leon Rice Mill, Inc. to petitioner, it is important
to determine first the nature or basis of the liability of petitioner to respondent Vallejos, as compared to that of
respondents Sio Choy and San Leon Rice Mill, Inc.
Therefore, the two (2) principal issues to be resolved are (1) whether the trial court, as upheld by the Court of
Appeals, was correct in holding petitioner and respondents Sio Choy and San Leon Rice Mill, Inc. "solidarily liable" to
respondent Vallejos; and (2) whether petitioner is entitled to be reimbursed by respondent San Leon Rice Mill, Inc. for
whatever amount petitioner has been adjudged to pay respondent Vallejos on its insurance policy.
As to the first issue, it is noted that the trial court found, as affirmed by the appellate court, that petitioner and
respondents Sio Choy and San Leon Rice Mill, Inc. are jointly and severally liable to respondent Vallejos.
We do not agree with the aforesaid ruling. We hold instead that it is only respondents Sio Choy and San Leon Rice
Mill, Inc, (to the exclusion of the petitioner) that are solidarily liable to respondent Vallejos for the damages awarded
to Vallejos.
It must be observed that respondent Sio Choy is made liable to said plaintiff as owner of the ill-fated Willys jeep,
pursuant to Article 2184 of the Civil Code which provides:
Art. 2184. In motor vehicle mishaps, the owner is solidarily liable with his driver, if the former, who was in the vehicle,
could have, by the use of due diligence, prevented the misfortune it is disputably presumed that a driver was
negligent, if he had been found guilty of reckless driving or violating traffic regulations at least twice within the next
preceding two months.
If the owner was not in the motor vehicle, the provisions of article 2180 are applicable.
On the other hand, it is noted that the basis of liability of respondent San Leon Rice Mill, Inc. to plaintiff Vallejos, the
former being the employer of the driver of the Willys jeep at the time of the motor vehicle mishap, is Article 2180 of
the Civil Code which reads:
Art. 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also for
those of persons for whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their employees and household helpers acting within the scope
of their assigned tasks, even though the former are not engaged ill any business or industry.
xxx xxx xxx
The responsibility treated in this article shall cease when the persons herein mentioned proved that they observed all
the diligence of a good father of a family to prevent damage.
It thus appears that respondents Sio Choy and San Leon Rice Mill, Inc. are the principal tortfeasors who are primarily
liable to respondent Vallejos. The law states that the responsibility of two or more persons who are liable for a quasi-
delict is solidarily.
4

On the other hand, the basis of petitioner's liability is its insurance contract with respondent Sio Choy. If petitioner is
adjudged to pay respondent Vallejos in the amount of not more than P20,000.00, this is on account of its being the
insurer of respondent Sio Choy under the third party liability clause included in the private car comprehensive policy
existing between petitioner and respondent Sio Choy at the time of the complained vehicular accident.
In Guingon vs. Del Monte,
5
a passenger of a jeepney had just alighted therefrom, when he was bumped by another
passenger jeepney. He died as a result thereof. In the damage suit filed by the heirs of said passenger against the
driver and owner of the jeepney at fault as well as against the insurance company which insured the latter jeepney
against third party liability, the trial court, affirmed by this Court, adjudged the owner and the driver of the jeepney at
fault jointly and severally liable to the heirs of the victim in the total amount of P9,572.95 as damages and attorney's
fees; while the insurance company was sentenced to pay the heirs the amount of P5,500.00 which was to be applied
as partial satisfaction of the judgment rendered against said owner and driver of the jeepney. Thus, in
said Guingon case, it was only the owner and the driver of the jeepney at fault, not including the insurance company,
who were held solidarily liable to the heirs of the victim.
While it is true that where the insurance contract provides for indemnity against liability to third persons, such third
persons can directly sue the insurer,
6
however, the direct liability of the insurer under indemnity contracts against
third party liability does not mean that the insurer can be held solidarily liable with the insured and/or the other parties
found at fault. The liability of the insurer is based on contract; that of the insured is based on tort.
In the case at bar, petitioner as insurer of Sio Choy, is liable to respondent Vallejos, but it cannot, as incorrectly held
by the trial court, be made "solidarily" liable with the two principal tortfeasors namely respondents Sio Choy and San
Leon Rice Mill, Inc. For if petitioner-insurer were solidarily liable with said two (2) respondents by reason of the
indemnity contract against third party liability-under which an insurer can be directly sued by a third party this will
result in a violation of the principles underlying solidary obligation and insurance contracts.
In solidary obligation, the creditor may enforce the entire obligation against one of the solidary debtors.
7
On the other
hand, insurance is defined as "a contract whereby one undertakes for a consideration to indemnify another against
loss, damage, or liability arising from an unknown or contingent event."
8

In the case at bar, the trial court held petitioner together with respondents Sio Choy and San Leon Rice Mills Inc.
solidarily liable to respondent Vallejos for a total amount of P29,103.00, with the qualification that petitioner's liability
is only up to P20,000.00. In the context of a solidary obligation, petitioner may be compelled by respondent Vallejos
to pay the entire obligation of P29,013.00, notwithstanding the qualification made by the trial court. But, how can
petitioner be obliged to pay the entire obligation when the amount stated in its insurance policy with respondent Sio
Choy for indemnity against third party liability is only P20,000.00? Moreover, the qualification made in the decision of
the trial court to the effect that petitioner is sentenced to pay up to P20,000.00 only when the obligation to pay
P29,103.00 is made solidary, is an evident breach of the concept of a solidary obligation. Thus, We hold that the trial
court, as upheld by the Court of Appeals, erred in holding petitioner, solidarily liable with respondents Sio Choy and
San Leon Rice Mill, Inc. to respondent Vallejos.
As to the second issue, the Court of Appeals, in affirming the decision of the trial court, ruled that petitioner is not
entitled to be reimbursed by respondent San Leon Rice Mill, Inc. on the ground that said respondent is not privy to
the contract of insurance existing between petitioner and respondent Sio Choy. We disagree.
The appellate court overlooked the principle of subrogation in insurance contracts. Thus
... Subrogation is a normal incident of indemnity insurance (Aetna L. Ins. Co. vs. Moses, 287 U.S. 530, 77 L. ed. 477).
Upon payment of the loss, the insurer is entitled to be subrogatedpro tanto to any right of action which the insured
may have against the third person whose negligence or wrongful act caused the loss (44 Am. Jur. 2nd 745, citing
Standard Marine Ins. Co. vs. Scottish Metropolitan Assurance Co., 283 U.S. 284, 75 L. ed. 1037).
The right of subrogation is of the highest equity. The loss in the first instance is that of the insured but after
reimbursement or compensation, it becomes the loss of the insurer (44 Am. Jur. 2d, 746, note 16, citing Newcomb vs.
Cincinnati Ins. Co., 22 Ohio St. 382).
Although many policies including policies in the standard form, now provide for subrogation, and thus determine the
rights of the insurer in this respect, the equitable right of subrogation as the legal effect of payment inures to the
insurer without any formal assignment or any express stipulation to that effect in the policy" (44 Am. Jur. 2nd 746).
Stated otherwise, when the insurance company pays for the loss, such payment operates as an equitable assignment
to the insurer of the property and all remedies which the insured may have for the recovery thereof. That right is not
dependent upon , nor does it grow out of any privity of contract (emphasis supplied) or upon written assignment of
claim, and payment to the insured makes the insurer assignee in equity (Shambley v. Jobe-Blackley Plumbing and
Heating Co., 264 N.C. 456, 142 SE 2d 18).
9

It follows, therefore, that petitioner, upon paying respondent Vallejos the amount of riot exceeding P20,000.00, shall
become the subrogee of the insured, the respondent Sio Choy; as such, it is subrogated to whatever rights the latter
has against respondent San Leon Rice Mill, Inc. Article 1217 of the Civil Code gives to a solidary debtor who has paid
the entire obligation the right to be reimbursed by his co-debtors for the share which corresponds to each.
Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors
offer to pay, the creditor may choose which offer to accept.
He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest
for the payment already made. If the payment is made before the debt is due, no interest for the intervening period
may be demanded.
xxx xxx xxx
In accordance with Article 1217, petitioner, upon payment to respondent Vallejos and thereby becoming the subrogee
of solidary debtor Sio Choy, is entitled to reimbursement from respondent San Leon Rice Mill, Inc.
To recapitulate then: We hold that only respondents Sio Choy and San Leon Rice Mill, Inc. are solidarily liable to the
respondent Martin C. Vallejos for the amount of P29,103.00. Vallejos may enforce the entire obligation on only one of
said solidary debtors. If Sio Choy as solidary debtor is made to pay for the entire obligation (P29,103.00) and
petitioner, as insurer of Sio Choy, is compelled to pay P20,000.00 of said entire obligation, petitioner would be
entitled, as subrogee of Sio Choy as against San Leon Rice Mills, Inc., to be reimbursed by the latter in the amount of
P14,551.50 (which is 1/2 of P29,103.00 )
WHEREFORE, the petition is GRANTED. The decision of the trial court, as affirmed by the Court of Appeals, is
hereby AFFIRMED, with the modification above-mentioned. Without pronouncement as to costs.
SO ORDERED.
Melencio-Herrera (Chairperson), Paras, Sarmiento and Regalado, JJ., concur.
Footnotes
* Penned by Justice Ramon C. Fernandez, concurred in by Justice Hermogenes Concepcion, Jr. and Emilio A.
Gancayco.
** Penned by Judge Vicente M. Santiago, Jr.
1 Record on Appeal, pp. 202-203.
2 Rollo, p.46.
3 Rollo, p. 67.
4 Article 2194, Civil Code.
5 G. R. No. L-22042, August 17, 1967, 20 SCRA 1043.
6 Coquia vs. Fieldman's Insurance Co., Inc., G.R. No. L-23276, November 29, 1968, 26 SCRA 178.
7 The Imperial Insurance, Inc. vs. David, G.R. No. L-32425, November 21, 1984, 133 SCRA 317.
8 Philippine Phoenix Surety Insurance Co. vs. Woodworks, Inc., G.R. No. L-25317, August 6, 1979, 92 SCRA 419.
9 Fireman's Fund Insurance Company, et al. vs. Jamila & Company, Inc., et al., G.R. No. L- 27427, April 7, 1976, 70
SCRA 323.

Philippine National Bank vs. Independent Planters Association, Inc.,
122 SCRA 113 , No. L-28046, May 16, 1983
G.R. No. L-28046 May 16, 1983
PHILIPPINE NATIONAL BANK, plaintiff-appellant,
vs.
INDEPENDENT PLANTERS ASSOCIATION, INC., ANTONIO DIMAYUGA, DELFIN FAJARDO, CEFERINO
VALENCIA, MOISES CARANDANG, LUCIANO CASTILLO, AURELIO VALENCIA, LAURO LEVISTE, GAVINO
GONZALES, LOPE GEVANA and BONIFACIO LAUREANA,defendants-appellees.
Basa, Ilao, del Rosario Diaz for plaintiff-appellant.
Laurel Law Office for Dimayuga.
Tomas Yumol for Fajardo, defendant-appellee.

PLANA, J .:
Appeal by the Philippine National Bank (PNB) from the Order of the defunct Court of First Instance of Manila (Branch
XX) in its Civil Case No. 46741 dismissing PNB's complaint against several solidary debtors for the collection of a
sum of money on the ground that one of the defendants (Ceferino Valencia) died during the pendency of the case
(i.e., after the plaintiff had presented its evidence) and therefore the complaint, being a money claim based on
contract, should be prosecuted in the testate or intestate proceeding for the settlement of the estate of the deceased
defendant pursuant to Section 6 of Rule 86 of the Rules of Court which reads:
SEC. 6. Solidary obligation of decedent. the obligation of the decedent is solidary with another debtor, the claim
shall be filed against the decedent as if he were the only debtor, without prejudice to the right of the estate to recover
contribution from the other debtor. In a joint obligation of the decedent, the claim shall be confined to the portion
belonging to him.
The appellant assails the order of dismissal, invoking its right of recourse against one, some or all of its solidary
debtors under Article 1216 of the Civil Code
ART. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously.
The demand made against one of them shall not be an obstacle to those which may subsequently be directed against
the others, so long as the debt has not been fully collected.
The sole issue thus raised is whether in an action for collection of a sum of money based on contract against all the
solidary debtors, the death of one defendant deprives the court of jurisdiction to proceed with the case against the
surviving defendants.
It is now settled that the quoted Article 1216 grants the creditor the substantive right to seek satisfaction of his credit
from one, some or all of his solidary debtors, as he deems fit or convenient for the protection of his interests; and if,
after instituting a collection suit based on contract against some or all of them and, during its pendency, one of the
defendants dies, the court retains jurisdiction to continue the proceedings and decide the case in respect of the
surviving defendants. Thus in Manila Surety & Fidelity Co., Inc. vs. Villarama et al., 107 Phil. 891 at 897, this Court
ruled:
Construing Section 698 of the Code of Civil Procedure from whence the aforequoted provision (Sec. 6, Rule 86) was
taken, this Court held that where two persons are bound in solidum for the same debt and one of them dies, the
whole indebtedness can be proved against the estate of the latter, the decedent's liability being absolute and primary;
and if the claim is not presented within the time provided by the rules, the same will be barred as against the estate. It
is evident from the foregoing that Section 6 of Rule 87 (now Rule 86) provides the procedureshould the creditor
desire to go against the deceased debtor, but there is certainly nothing in the said provision making compliance with
such procedure a condition precedent before an ordinary action against the surviving solidary debtors, should the
creditor choose to demand payment from the latter, could be entertained to the extent that failure to observe the
same would deprive the court jurisdiction to take cognizance of the action against the surviving debtors. Upon the
other hand, the Civil Code expressly allows the creditor to proceed against any one of the solidary debtors or some or
all of them simultaneously. There is, therefore, nothing improper in the creditor's filing of an action against the
surviving solidary debtors alone, instead of instituting a proceeding for the settlement of the estate of the deceased
debtor wherein his claim could be filed.
Similarly, in PNB vs. Asuncion, 80 SCRA 321 at 323-324, this Court, speaking thru Mr. Justice Makasiar, reiterated
the doctrine.
A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing therein prevents a creditor
from proceeding against the surviving solidary debtors. Said provision merely sets up the procedure in enforcing
collectionin case a creditor chooses to pursue his claim against the estate of the deceased solidary, debtor.
It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this matter. Said provision gives
the creditor the right to 'proceed against anyone of the solidary debtors or some or all of them simultaneously.' The
choice is undoubtedly left to the solidary, creditor to determine against whom he will enforce collection. In case of the
death of one of the solidary debtors, he (the creditor) may, if he so chooses, proceed against the surviving solidary
debtors without necessity of filing a claim in the estate of the deceased debtors. It is not mandatory for him to have
the case dismissed against the surviving debtors and file its claim in the estate of the deceased solidary debtor . . .
As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules of Court were applied literally, Article
1216 of the New Civil Code would, in effect, be repealed since under the Rules of Court, petitioner has no choice but
to proceed against the estate of Manuel Barredo only. Obviously, this provision diminishes the Bank's right under the
New Civil, Code to proceed against any one, some or all of the solidary debtors. Such a construction is not
sanctioned by the principle, which is too well settled to require citation, that a substantive law cannot be amended by
a procedural rule. Otherwise stared, Section 6, Rule 86 of the Revised Rules of Court cannot be made to prevail over
Article 1216 of the New Civil Code, the former being merely procedural, while the latter, substantive.
WHEREFORE the appealed order of dismissal of the court a quo in its Civil Case No. 46741 is hereby set
aside in respect of the surviving defendants; and the case is remanded to the corresponding Regional Trial
Court for proceedings. proceedings. No costs.
SO ORDERED.
Teehankee (Acta. C.J.), Escolin ** Vasquez and Gutierrez, Jr., JJ., concur.
Melencio-Herrera and Relova, JJ., is on leave.

Footnotes
** Mr. Justice Escolin was designated to sit with the First Division under Special Order No. 241 dated April 28, 1983.

Robes-Francisco Realty & Development Corporation vs. Court of First
Instance of Rizal (Branch XXXIV), 86 SCRA 59 , G.R. No. 72182,
October 30, 1978

Robes-Francisco v. CFI, 86 SCRA 59, G.R. No. 72182 November 25, 1986

DEE HUA LIONG ELECTRICAL EQUIPMENT CORPORATION, petitioner,
vs.
ROMEO REYES, ET AL., respondents.

Juanitas, Perez, Gonzales and Associates for petitioner.

Romeo P. Pineda for respondents.



NARVASA, J.:p

The Court of First Instance 1 sentenced petitioner to pay to private respondents P50,000.00 as actual damages;
P50,000.00 as moral damages; P50,000.00 as exemplary damages; and P10,000.00 as attomey's fees, as well as to
pay treble Cost. 2 The Intermediate Appellate Court, on appeal, 3 affirmed petitioner's liability but reduced the award
for moral and ex-emplary damages to P10,000.00 and P5,000.00, respectively. Petitioner seasonably appealed to
this Court, impugning the award of damages and claiming that it had been denied due process in the proceedings
before the Trial Court.

Following submission of the private respondents' comment on the petition for review, the Court issued a Resolution
denying the petition for lack of merit. 4 Petitioner then filed a motion for reconsideration, which was likewise denied. 5
A second motion for reconsideration 6 was, however, admitted 7 and the private respondents were required to
comment thereon, which they did. The Court now decides the appeal on the merits.

The Intermediate Appellate Court found that private respondent Romeo Reyes operated "the once thriving and
prosperous Excelite Electronic Center in San Miguel, Bulacan;" 8 that long prior to September,1981, he began
"receiving complaints of irate and dissatisfied customers who complained over the defective repairs done on their
television and stereo units; 9 that he repeated the repair jobs over and over but despite his best efforts, and despite
losing "man hours for over a month," 'he lost the patronage of many customers (and) (h)is once thriving business was
on the verge of uin;" 10 that he finany discovered that "the root cause of all these troubles" was the "low grade
electronic filter capacitor(s) ... (h)e had been buying from ... (petitioner) for the past years;" that he "opened one of the
capacitors ... (and found) that the actual label of 22 micro farad was superimposed by a fake label making it appear to
be 2200 micro farad;" that although the "actual price of one capacitor with 22 micro farad is only P2.00 ... he had
been paying the amount of P6.40 to P7.40 per piece of the supposed 2200 micro farad capacitor;" 11 that what
private respondent thereafter did was to buy three (3) capacitors on September 14, 1981; that although the
corresponding invoice (Exhibit A) stated the capacitors to be "with strength of 2200 ... , in truth and in fact it was
discovered as shown by Exhs. B and C to be only of 22 micro farad." 12 It was "this massive fraudulent scheme
employed by ...(Petitioner) in short selling to plaintiff the capacitors" that allegedly caused damages to private
respondent. 13

These findings of fact were based solely on the testimony of private respondent and his wife. No evidence was
presented in behalf of petitioner because it was declared in default for failure of its counsel or other representative to
appear at tile pre-trial scheduled by the Trial Court, despite notice. 14

On being served with notice of the judgment by default petitioner moved for new trial alleging that it had good cause
to seek postponement of the pre-trial; and claiming moreover, to have a meritorious defense to the complaint,
adverting to a "Component Test Report" of the National Institute of Science and Technology" attesting to the
correctness of the represented capacity of the capacitors in question, and a certification from the Japanese
manufacturer to the effect that there was "merely a misprint" in the labels. 15 The Trial Court denied the motion. On
appeal, the Intermediate Appellate Court sustained that denial of the motion for new trial in view of the demonstrated
falsity of the ground rehed upon for the requested postponement of the pre-trial, to wit: that Atty. Marquinez, the
petitioner's counsel had personally to appear and represent another client at an earlier scheduled hearing of a case
before the Municipal Court of Pasig, when in truth, as certified by the Clerk of the latter Court and as shown by the
minutes of its proceedings, it was another lawyer who appeared, not Atty. Marquinez. 16

It is axiomatic that the findings of fact of the Intermediate Appellate Court are conclusive and may not be reviewed by
this Court. There is no compelling reason to deviate from this well-known rule in this case. Upon those factual
findings, this Court declares that the Trial Court was justified in declaring petitioner in default and rendering judgment
by default against it, for failure to appear at the pre-trial despite notice. 17

However, the adjudgment of damages appears to be quite excessive in the premises. The grant of P50,000.00 as
actual damages is made to rest on nothing more substantial than the sworn declarations of the private respondents
(plaintiff and his wife) that one (1) of the capacitors used in repairing an appliance was of 22 micro farad capacity
instead of 2200 micro farad, and that three (3) other capacitors, subsequently purchased, had "superimposed" labels.
There is no proof whatever that defective capacitors were used in the other numerous repair jobs done by private
respondent, or that the repairs did indeed entail the use of capacitors. There is moreover no evidence of a-defiberate
intent on petitioner's part to foist a fraud on the general public, including private respondents, in the sale of
capacitors. On the contrary, there are indications that there was merely a "misprint" in the labels. The award of
damages to private respondent must, therefore, be struck down for want of adequate foundation. Actual or
compensatory damages cannot be presumed, but must be duly proved, ind proved with a reasonable degree of
certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but
must depend upon competent proof that they have suffered and on evidence of the actual amount thereof. If the proof
is flimsy and unsubstantial, no lamages wiu be awarded. 18

Proof of equivalent character is also necessary to support an award of moral damages, and it does not appear that
any such evidence, was offered here. The decision of the Trial Court, which summarizes the testimony of the only two
witnesses for the private respondent, said respondent himself and his wife, 19 makes no mention of any testimony
being given concerning moral damages, such as of wounded feelings, social humiliation, anxiety and the like, and to
all appearances merely assumes the existence of moral injury from what proof of actual loss was adduced. More
importantly, and as already pointed out, there is also no evidence that petitioner, in selling allegedly mislabelled
capacitors, acted maliciously and with deliberate intent to defraud the private respondent and the general public.

Furthermore, while no proof of pecuniary loss is necessary in order that moral damages may be awarded, the amount
of indemnity being left to the discretion of the Court (Art. 2216), it is, nevertheless, essential that the claimant
satisfactorily prove the existence of the factual basis of the damages (Art. 2217) and its causal relation to defendant's
acts. This is so because moral damages though incapable of pecuniary estimation, are in the category of an award
designed to compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer (Algara
vs. Sandejas, 27 Phil. 284). The trial court and the Court of Appeals both seem to be of the opinion that the mere fact
that respondents were sued without any legal foundation entitled them to an award of moral damages, hence they
made no definite finding as to what the supposed moral damages suffered consist of. Such a conclusion would make
of moral damages a penalty, which they are not, rather than a compensation for actual injury suffered, which they are
intended to be. Moral damages, in other words, are not corrective or exemplary damages. 20

Nor was there error in the appealed decision in denying moral damages, not only on account of the plaintiff's failure to
take the witness stand and testify to her social humiliation, wounded feelings, anxiety, etc., as the decision holds, but
primarily because a breach of contract like that of defendant, not being malicious or fraudulent, does not warrant the
award of moral damages under Article 2220 of the Civil Code.
... 21

Neither may private respondent recover exemplary damages since he is not entitled to moral or compensatory
damages, and again because the petitioner is not shown to have acted in a wanton, fraudulent, reckless or
oppressive manner. 22

Upon the same consideration, and absent any proof that petitioner refused in gross and evident bad faith to satisfy
the private respondent's claim. no counsel fees should be awarded. 23

The Court is of the opinion that an award of nominal damages to private respondent in the amount of P5,000.00 is
sufficient in the premises. 24

WHEREFORE, the appealed Decision is modified an dthe liability of petitioner is hereby declared limited solely and
exclusively to the payment of P5, 000.00 as nominal damages. No pronouncement as to costs.

SO ORDERED.

Yap, Melencio-Herrera, Cruz and Feliciano, JJ., concur.



Footnotes

1 of Bultcan (Branch IV-Baliwag)

2 in Civil Case No. 1318-B

3 A.C.-G.R. CV No. 70042

4 Rollo, p. 172

5 Rollo, P. 180

6 Rollo, pp. 184 et seq

7 Rollo, p. 206

8 Rollo, p. 33

9 Rollo, p. 34

10 Id.

11 Id.

12 Rollo, pp. 33, 34

13 Id, p. 33

14 Id., p. 29

15 Id., pp. 96-111

16 Id., pp. 29,113-114

17 American Insurance Company vs. Manila Port Service, 22 SCRA 482; Home Insurance Co.vs. United States Lines
Co., 21 SCRA 863; Saulog vs. Custombuilt Manufacturing Corp., et al, 26 SCRA 1

18 Art. 2199, Civil Code; Sanz vs. Lavin Bros., 6 Phil. 299; Hieredia vs. Salinas, 10 Phil.157; Chua Teck Hee vs.
Philippine Publishing Co., 24 Phil. 447; Rubiso vs. Rivera, 41 Phil. 39; Jesswani vs. Hassaram Dialdas, 104 Phil. 310;
Suntay Tanjangco vs. Jovellanos, 108 Phil. 713; Malonzo vs. Galang, 109 Phil.16; Lim Kiok vs. Bataan Cigar and
Cigarette Factory, L-15861, April 16, 1960; Abubakar Tan vs. Tan Ho, L-18820, Dec. 20, 1962; Delfin vs. Court of
Agrarian Relations, et al, 19 SCRA 593; Raagas vs. Traya, 22 SCRA 839; De los Santos vs. De la Cruz, 37 SCRA
555; National Power Corporation vs. Court of Appeals, 113 SCRA 560; Siasat vs. Intermediate Appellate Court, 139
SCRA 238.

19 Rollo. pp. 83-86.

20 Malonzo vs. Galang, supra; see also R & B Surety and Ins. Co., Inc. vs. Intermediate Appellate Court,129 SCRA
736; Siasat vs. Intermediate Appellate Court,129 SCRA 238.

21 Francisco vs. Government Service Insurance System, 7 SCRA 577, citing Ventanilla vs. Centeno, L-14333, Jan.
28, 1961, 1 SCRA 215, and Fores vs. Miranda, L-12163, March 4,1959.

22 Art. 2234, Civil Code; Yutuk vs. Manila Electric Co., 2 SCRA 377; Francisco vs. Government Service Insurance
Systerm , supra; Gutierrez vs. Villegas, 8 SCRA 527; Air France vs. Carrascoso, 18 SCRA 155; Pan Pacific (Phil.) vs.
Phil. Advertising Corp., 23 SCRA 977; Marchan vs. Mendoza, 24 SCRA 888.

23 Francisco vs. Goverment Service Insurance System, supra.

24 Art. 2221, Civil Code; Robes-Francisco Realty & Development Corp. vs. CFI of Rizal, 86 SCRA 59; Social Security
System vs. CA, 120 SCRA 707.

Pamintuan vs. Court of Appeals, 94 SCRA 556, No.L-26339, December
14, 1979



Pamintuan v. CA, 94 SCRA 556, G.R. No. 113605 November 27, 1998

ROMULO ROVILLOS, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, FOURTH DIVISION, THE HONORABLE RICARDO T. LINSANGAN,
PRESIDING JUDGE IN BRANCH 38 OF THE REGIONAL TRIAL COURT OF NUEVA ECIJA, SAN JOSE CITY,
AND PRIVATE RESPONDENT MODESTO OBISPO, respondents.


ROMERO, J.:

Petitioner, undaunted by this two previous setbacks, seeks the reversal of the decision of the Court of Appeals dated
January 26, 1994 1 in CA-G.R. No. 31771 affirming the decision 2 of the Regional Trial Court, Branch 38 of San Jose
City, in Civil Case No. C-41 which ruled that he was not a tenant of the private respondent, but was in fact a mere
farm laborer not entitled to the actual possession of the land in question.

Sometime in 1971, petitioner's predecessor started tilling and cultivating a portion of private respondent's land
situated in Carrangalan, Nueva Ecija under a "share-crop" agreement. On December 30, 1979, petitioner and the
private respondent entered into a contract 3 which stipulated that the former was to be contracted as a farm laborer
or helper responsible for the cultivation of two (2) hectares of the four hectare land.

For the next five years, both parties complied with the provisions of their agreement. However, to the dismay of the
private respondent, starting January 1984, petitioner no longer cultivated the land in question in his capacity as a
farm laborer but as tenant, with the corresponding right to exclude the private respondent from the land. To protect
his interest, private respondent demanded from the petitioner to desist from further cultivation of the said land. These
demands proved futile as petitioner continued with his daily undertakings, unmindful of private respondent's
protestations.

Exasperated, private respondent, on April 9, 1984, filed a complaint against the petitioner for Recovery of Possession
with Damages with Motion for Issuance of Writ of Preliminary Injunction. In his Answer, petitioner maintained that on
October 6, 1981, he was granted a Certificate of Land Transfer No. 0-065683 by the then Ministry of Agrarian Reform
pursuant to Presidential Decree No. 27, hence, converting his status from a farm laborer to that of a legitimate tenant
of the private respondent.

On February 20, 1991, the trial court rendered its decision finding that petitioner was not a tenant but a mere farm
helper or laborer of the private respondent. The trial court expounded its position in this wise.

Defendant's contention that he is a tenant of plaintiff (as he tried to picture out in the Tenurial Survey, Exh. 8 the
information of which he personally supplied to Eleanor Quinto on June 14, 1977 that gave rise to the issuance of the
CLT dated October 6, 1981, Exh. 1, which CLT was, however, cancelled on August 12, 1988, Exh. 10, by Director
Aligio Pacis because the subject land is never tenanted, Exh. 10-B), cannot be sustained on the strength and wisdom
of the KASUNDUAN, Exh. A, executed on December 30, 1979, not only because of the reciprocal stipulations
eloquently expressed therein which must be given force and effect (National Rice and Corn Administration vs. Court
of Appeals, 91 SCRA 437), but also because of the well-settled rule that public documents invested with the
solemnities of the law cannot be set aside on light and flimsy evidence. (Mercador vs. Ang, CA-G.R. No. 3940-R,
March 31, 1951). The Kasunduan being a bilateral contract, it necessarily follows that the intention of the parties at
the time of the execution thereof must prevail (Reyes vs. Sierna, 93 SCRA 472), in much the same way that its
validity be maintained even though one of the parties entered into it against his own wish and desires, or even
against his better judgment (Lagunsod vs. Vda. de Guzman, 92 SCRA 476).

In fine, defendant's admission of being a fourth year in high school, and having thoroughly read the contract, Exh. A,
written out in a language he understood very well before he affixed his signature thereto, and the same being a
notarial document guaranteed by public attestation in accordance with law where its provisions are clear and not
forged, their contents must be upheld (Sarayba vs. Reyes, CA-G.R. No. 4008-R, Sept. 26, 1950; Navoa de Ramos
vs. Yu Cochangco, CA-G.R. No. 25-R, July 9, 1947). The defendant having breached the contract, plaintiff is
deserving to recover actual damages. (Pamintuan vs. Court of Appeals, 94 SCRA 556).

The above-quoted ruling of the trial court was affirmed by the Court of Appeals in its decision dated January 26, 1994
which substantially adopted the trial court's finding, thus:

Through the agreement embodied in the "KASUNDUAN", the contention of appellant that he is a tenant should be
dismissed as a tenancy relationship is determined not by the nature of the work involved but by the intention of the
parties (Gelos vs. Court of Appeals, 208 SCRA 608).

Appellant also anchors his claim on the land on the fact that he is the grantee of a Certificate of Land Transfer
covering the land in question.

The Certificate of Land Transfer was, however, subsequently cancelled on August 12, 1988 precisely on the ground
that the land in question is less than seven (7) hectares thus not covered by the provisions of P.D. No. 27.

Although the law looks upon the lowly with favor, the same cannot be used as a shield to perpetrate an injustice. The
appellee herein cannot be said to belong to the landed gentry. As in fact the appellee's only land holding is the four
(4) hectares of riceland of which half is being unjustly claimed by appellant.

Not satisfied with the decision, petitioner is now before this Court assailing the appellate court's pronouncement.
Stripped of inconsequential facts, the thrust of the petition is that petitioner should have been recognized as an
agricultural lessee of the land and thus entitled to the security of tenure under existing agrarian laws.

On the outset, it should be borne in mind that whether the petitioner was indeed a tenant or laborer is a question of
fact. 4 In this regard, jurisprudence has provided the following requisites for tenancy relationship: (1) the parties are
the landowners and the tenant; (2) the subject is agricultural land; (3) there is consent; (4) the purpose is agricultural
production; (5) there is personal cultivation; and (6) there is sharing of harvest. 5

With these precepts as guidelines, we are constrained to reverse the findings of both the appellate court and the trial
court.

First, petitioner was in actual possession of the land and resided in a farmhouse thereon as a farm tenant would
normally do. In Cruz v. Court of Appeals, 6 we stated:

Finally, it is also undisputed that respondent lives on a hut erected on the landholding. This fully supports the
appellate court's conclusion, since only tenants are entitled to a homelot where he can build his house thereon as an
incident to his right as a tenant.

Second, the land was devoted to the production of palay and other related products. Third, there was the element of
consent, for as early as 1971, private respondent had not instituted an action against the petitioner or his
predecessor. In fact, he even allowed them and a certain Conrado Vergara to manage and till the land. Fourth, the
management of the land was for the sole purpose of producing rice or palay. Fifth, cultivation and farm work were
personally done by the petitioner and his predecessor and Sixth, petitioner shared the harvest of the land under a
"share-crop" system. In Hernandez v. IAC, 7 we ruled that when an individual cultivates the land and did not receive
salaries but a share of the produce, the relationship is one of tenancy and not employment. Moreover, if private
respondent's land was indeed non-tenanted, he should have obtained a certification of non-tenancy from the then
Ministry of Agrarian Reform. 8

From the foregoing, the ineluctable conclusion drawn is that a tenancy relationship exists between the parties.

That having been said, it must be pointed out that the land in question is covered by Presidential Decree No. 27,
which, incidentally has not yet been repealed by Republic Act No. 6657 or the Comprehensive Agrarian Reform Law
of 1988. 9 Under the said law, tenant-farmers of rice and corn lands were deemed owners of the land they till. 10 This
policy is intended to be given effect by the following provision of the law.

The tenant farmer, whether in land classified as landed estate or not, shall be DEEMED OWNER of a portion
constituting a family size farm of five (5) hectares if not irrigated and three (3) hectares if irrigated. 11

However, it must be stressed that since the land in question is only four (4) hectares, then the same cannot be
subject to the Operation Land Transfer (OLT) program of P.D. No. 27. This was to mitigate the impact of the decree
on small land owners. 12 Consequently, no transfer of ownership can take place.

Notwithstanding the non-transfer of ownership of the landholding, it bears stressing that when the land is seven
hectares and below, the same is still covered by P.D. No. 27 under its Operation Land Leasehold (OL) program. This
means that the landowners and the tenants are placed in a leasehold relationship as of October 21, 1972, 13 under
an agricultural leasehold agreement. 14 It is worth mentioning that on two occasions, we have already upheld the
validity of this "automatic conversion" provision, from agricultural share tenancy to agricultural leasehold, under our
land reform laws. 15 Thus, while owners of rice and corn lands seven (7) hectares or less are not covered by the land
transfer programs of P.D. No. 27, however, when there are tenants on these lands, the arrangement immediately
shifts to a leasehold relationship. 16

Another notable development is the fact that to give more force to the policy of automatic conversion of share tenancy
to the leasehold system, Presidential Decree No. 1425 17 was enacted in 1978. This law covers tenant-farmers in
rice and/or corn lands not included in P.D. No. 27 18 land transfer program.

Moreover, under Section 12 of R.A. 6657, as implemented by the Department of Agrarian Reform, 19 all tenanted
agricultural lands retained under P.D. No. 27 shall automatically be converted into agricultural leasehold as of June
15, 1988. However, with respect to tenanted rice and corn lands, as in this case, the leasehold relationship shall start
on November 10, 1971. 20

Also, private respondent cannot take comfort from the fact that petitioner had already surrendered the land, and
therefore, whatever tenancy relationship existed between the parties was already severed. In this connection, it is
worthwhile noting that under the rules of the then Ministry of Agrarian Reform, (now Department of Agrarian Reform)
surrender or alleged abandonment of the land by the tenant does not automatically terminate the tenancy
relationship. There must be a proper court declaration of such fact. 21

Having settled the proper agricultural relationship of the parties, private respondent still contends that petitioner
expressly agreed to be hired as a farm laborer under the contract they executed on December 30, 1979. As such, the
contract must be respected as a manifestation of the intention of the contracting parties. 22

Private respondent's argument is unacceptable. Obviously, the purported contract violates the provisions of the law
providing for "automatic conversion" from agricultural tenancy to agricultural leasehold. Thus, it is readily perceivable
that it was a void or inexistent contract from the inception. 23 The fact that both parties complied with the provisions
of the contract is immaterial. It is a stipulation that is contrary to law and public policy; 24 hence, it cannot be cured by
ratification or even compliance by the parties to the contract. 25

Having reached the above conclusions, other incidental issues raised by the petitioner no longer need to be passed
upon.

WHEREFORE, in view of the foregoing, the instant petition is GRANTED. The decision of the Court of Appeals in
C.A. G.R. CV No. 31771 dated January 26, 1994 is hereby REVERSED and SET ASIDE. No costs.

SO ORDERED.

Narvasa, C.J., Kapunan, Purisima and Pardo, JJ., concur.

Footnotes

1 Penned by Justice Corona Ibay-Somera and concurred in by Justice Nathanael P. de Pano Jr. and Justice Asaali
S. Isnani; Rollo, pp. 22-31.

2 Penned by Judge Ricardo T. Linsangan; Rollo, pp. 34-41.

3 The contract is entitled "Kasunduan."

4 Oarde v. Court of Appeals, 280 SCRA 258 (1997).

5 Nisnisan v. Court of Appeals, G.R. No. 126425, August 12, 1998; Sintos v. Court of Appeals, 246 SCRA 223
(1995).

6 129 SCRA 223 (1984).

7 189 SCRA 758 (1990).

8 Ministry of Agrarian Reform Memorandum dated May 8, 1979.

9 Sec. 75 of Republic Act No. 6657.

10 Executive Order No. 228, July 17, 1987; Quiban v. Batulid, 189 SCRA 107 (1990); Locsin v. Valenzuela, 194
SCRA 194 (1991).

11 Presidential Decree No. 27, third paragraph, Torres v. Ventura, 187 SCRA 96 (1990).

12 Circular No. 14, Ministry of Justice dated March 15, 1979.

13 Ministry of Agrarian Reform Circular No. 2-A, June 18, 1973.

14 Ministry of Agrarian Reform Memorandum Circular 4-80 as amended by Memorandum Circular No. 10, Series of
1985.

15 David v. Court of Appeals, 161 SCRA 114 (1988); Dayrit v. Court of Appeals, 163 SCRA 256 (1988).

16 Ministry of Agrarian Reform Circular No. 5, March 5, 1973.

17 Amending Presidential Decree No. 1490 by Strengthening the Prohibition Against Agricultural Share Tenancy and
Providing Penalties For Violation Thereof, June 10, 1978.

18 Id., Section 1.

19 Administrative Order No. 04, Series of 1989 "Rules and Procedure Governing Agricultural Leasehold and the
Determination of Lease Rental for Tenanted Land.

20 Id., par. 4.

21 Memorandum Circular No. 10 Series of 1983.

22 Memorandum, Rollo, pp. 153-154.

23 Art. 1409, Civil Code.

24 Art. 1306, Civil Code.

25 Tolentino, Civil Code of the Philippines, Vol. IV, 1991, pp. 632-633.
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Sicam vs. Jorge, 529 SCRA 443 , G.R. No. 159617, August 08, 2007

Sicam v. Jorge, G.R. No. 159617 August 8, 2007

G.R. No. 159617 August 8, 2007

ROBERTO C. SICAM and AGENCIA de R.C. SICAM, INC., petitioners,
vs.
LULU V. JORGE and CESAR JORGE, respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before us is a Petition for Review on Certiorari filed by Roberto C. Sicam, Jr. (petitioner Sicam) and Agencia de R.C.
Sicam, Inc. (petitioner corporation) seeking to annul the Decision1 of the Court of Appeals dated March 31, 2003, and
its Resolution2 dated August 8, 2003, in CA G.R. CV No. 56633.

It appears that on different dates from September to October 1987, Lulu V. Jorge (respondent Lulu) pawned several
pieces of jewelry with Agencia de R. C. Sicam located at No. 17 Aguirre Ave., BF Homes Paraaque, Metro Manila,
to secure a loan in the total amount of P59,500.00.

On October 19, 1987, two armed men entered the pawnshop and took away whatever cash and jewelry were found
inside the pawnshop vault. The incident was entered in the police blotter of the Southern Police District, Paraaque
Police Station as follows:

Investigation shows that at above TDPO, while victims were inside the office, two (2) male unidentified persons
entered into the said office with guns drawn. Suspects(sic) (1) went straight inside and poked his gun toward Romeo
Sicam and thereby tied him with an electric wire while suspects (sic) (2) poked his gun toward Divina Mata and
Isabelita Rodriguez and ordered them to lay (sic) face flat on the floor. Suspects asked forcibly the case and assorted
pawned jewelries items mentioned above.

Suspects after taking the money and jewelries fled on board a Marson Toyota unidentified plate number.3

Petitioner Sicam sent respondent Lulu a letter dated October 19, 1987 informing her of the loss of her jewelry due to
the robbery incident in the pawnshop. On November 2, 1987, respondent Lulu then wrote a letter4 to petitioner Sicam
expressing disbelief stating that when the robbery happened, all jewelry pawned were deposited with Far East Bank
near the pawnshop since it had been the practice that before they could withdraw, advance notice must be given to
the pawnshop so it could withdraw the jewelry from the bank. Respondent Lulu then requested petitioner Sicam to
prepare the pawned jewelry for withdrawal on November 6, 1987 but petitioner Sicam failed to return the jewelry.

On September 28, 1988, respondent Lulu joined by her husband, Cesar Jorge, filed a complaint against petitioner
Sicam with the Regional Trial Court of Makati seeking indemnification for the loss of pawned jewelry and payment of
actual, moral and exemplary damages as well as attorney's fees. The case was docketed as Civil Case No. 88-2035.

Petitioner Sicam filed his Answer contending that he is not the real party-in-interest as the pawnshop was
incorporated on April 20, 1987 and known as Agencia de R.C. Sicam, Inc; that petitioner corporation had exercised
due care and diligence in the safekeeping of the articles pledged with it and could not be made liable for an event that
is fortuitous.

Respondents subsequently filed an Amended Complaint to include petitioner corporation.

Thereafter, petitioner Sicam filed a Motion to Dismiss as far as he is concerned considering that he is not the real
party-in-interest. Respondents opposed the same. The RTC denied the motion in an Order dated November 8,
1989.5

After trial on the merits, the RTC rendered its Decision6 dated January 12, 1993, dismissing respondents complaint
as well as petitioners counterclaim. The RTC held that petitioner Sicam could not be made personally liable for a
claim arising out of a corporate transaction; that in the Amended Complaint of respondents, they asserted that
"plaintiff pawned assorted jewelries in defendants' pawnshop"; and that as a consequence of the separate juridical
personality of a corporation, the corporate debt or credit is not the debt or credit of a stockholder.

The RTC further ruled that petitioner corporation could not be held liable for the loss of the pawned jewelry since it
had not been rebutted by respondents that the loss of the pledged pieces of jewelry in the possession of the
corporation was occasioned by armed robbery; that robbery is a fortuitous event which exempts the victim from
liability for the loss, citing the case of Austria v. Court of Appeals;7 and that the parties transaction was that of a
pledgor and pledgee and under Art. 1174 of the Civil Code, the pawnshop as a pledgee is not responsible for those
events which could not be foreseen.

Respondents appealed the RTC Decision to the CA. In a Decision dated March 31, 2003, the CA reversed the RTC,
the dispositive portion of which reads as follows:

WHEREFORE, premises considered, the instant Appeal is GRANTED, and the Decision dated January 12, 1993,of
the Regional Trial Court of Makati, Branch 62, is hereby REVERSED and SET ASIDE, ordering the appellees to pay
appellants the actual value of the lost jewelry amounting to P272,000.00, and attorney' fees of P27,200.00.8

In finding petitioner Sicam liable together with petitioner corporation, the CA applied the doctrine of piercing the veil of
corporate entity reasoning that respondents were misled into thinking that they were dealing with the pawnshop
owned by petitioner Sicam as all the pawnshop tickets issued to them bear the words "Agencia de R.C. Sicam"; and
that there was no indication on the pawnshop tickets that it was the petitioner corporation that owned the pawnshop
which explained why respondents had to amend their complaint impleading petitioner corporation.

The CA further held that the corresponding diligence required of a pawnshop is that it should take steps to secure
and protect the pledged items and should take steps to insure itself against the loss of articles which are entrusted to
its custody as it derives earnings from the pawnshop trade which petitioners failed to do; that Austria is not applicable
to this case since the robbery incident happened in 1961 when the criminality had not as yet reached the levels
attained in the present day; that they are at least guilty of contributory negligence and should be held liable for the
loss of jewelries; and that robberies and hold-ups are foreseeable risks in that those engaged in the pawnshop
business are expected to foresee.

The CA concluded that both petitioners should be jointly and severally held liable to respondents for the loss of the
pawned jewelry.

Petitioners motion for reconsideration was denied in a Resolution dated August 8, 2003.

Hence, the instant petition for review with the following assignment of errors:

THE COURT OF APPEALS ERRED AND WHEN IT DID, IT OPENED ITSELF TO REVERSAL, WHEN IT ADOPTED
UNCRITICALLY (IN FACT IT REPRODUCED AS ITS OWN WITHOUT IN THE MEANTIME ACKNOWLEDGING IT)
WHAT THE RESPONDENTS ARGUED IN THEIR BRIEF, WHICH ARGUMENT WAS PALPABLY
UNSUSTAINABLE.

THE COURT OF APPEALS ERRED, AND WHEN IT DID, IT OPENED ITSELF TO REVERSAL BY THIS
HONORABLE COURT, WHEN IT AGAIN ADOPTED UNCRITICALLY (BUT WITHOUT ACKNOWLEDGING IT) THE
SUBMISSIONS OF THE RESPONDENTS IN THEIR BRIEF WITHOUT ADDING ANYTHING MORE THERETO
DESPITE THE FACT THAT THE SAID ARGUMENT OF THE RESPONDENTS COULD NOT HAVE BEEN
SUSTAINED IN VIEW OF UNREBUTTED EVIDENCE ON RECORD.9

Anent the first assigned error, petitioners point out that the CAs finding that petitioner Sicam is personally liable for
the loss of the pawned jewelries is "a virtual and uncritical reproduction of the arguments set out on pp. 5-6 of the
Appellants brief."10

Petitioners argue that the reproduced arguments of respondents in their Appellants Brief suffer from infirmities, as
follows:

(1) Respondents conclusively asserted in paragraph 2 of their Amended Complaint that Agencia de R.C. Sicam, Inc.
is the present owner of Agencia de R.C. Sicam Pawnshop, and therefore, the CA cannot rule against said conclusive
assertion of respondents;

(2) The issue resolved against petitioner Sicam was not among those raised and litigated in the trial court; and

(3) By reason of the above infirmities, it was error for the CA to have pierced the corporate veil since a corporation
has a personality distinct and separate from its individual stockholders or members.

Anent the second error, petitioners point out that the CA finding on their negligence is likewise an unedited
reproduction of respondents brief which had the following defects:

(1) There were unrebutted evidence on record that petitioners had observed the diligence required of them, i.e, they
wanted to open a vault with a nearby bank for purposes of safekeeping the pawned articles but was discouraged by
the Central Bank (CB) since CB rules provide that they can only store the pawned articles in a vault inside the
pawnshop premises and no other place;

(2) Petitioners were adjudged negligent as they did not take insurance against the loss of the pledged jelweries, but it
is judicial notice that due to high incidence of crimes, insurance companies refused to cover pawnshops and banks
because of high probability of losses due to robberies;

(3) In Hernandez v. Chairman, Commission on Audit (179 SCRA 39, 45-46), the victim of robbery was exonerated
from liability for the sum of money belonging to others and lost by him to robbers.

Respondents filed their Comment and petitioners filed their Reply thereto. The parties subsequently submitted their
respective Memoranda.

We find no merit in the petition.

To begin with, although it is true that indeed the CA findings were exact reproductions of the arguments raised in
respondents (appellants) brief filed with the CA, we find the same to be not fatally infirmed. Upon examination of the
Decision, we find that it expressed clearly and distinctly the facts and the law on which it is based as required by
Section 8, Article VIII of the Constitution. The discretion to decide a case one way or another is broad enough to
justify the adoption of the arguments put forth by one of the parties, as long as these are legally tenable and
supported by law and the facts on records.11

Our jurisdiction under Rule 45 of the Rules of Court is limited to the review of errors of law committed by the appellate
court. Generally, the findings of fact of the appellate court are deemed conclusive and we are not duty-bound to
analyze and calibrate all over again the evidence adduced by the parties in the court a quo.12 This rule, however, is
not without exceptions, such as where the factual findings of the Court of Appeals and the trial court are conflicting or
contradictory13 as is obtaining in the instant case.

However, after a careful examination of the records, we find no justification to absolve petitioner Sicam from liability.

The CA correctly pierced the veil of the corporate fiction and adjudged petitioner Sicam liable together with petitioner
corporation. The rule is that the veil of corporate fiction may be pierced when made as a shield to perpetrate fraud
and/or confuse legitimate issues. 14 The theory of corporate entity was not meant to promote unfair objectives or
otherwise to shield them.15

Notably, the evidence on record shows that at the time respondent Lulu pawned her jewelry, the pawnshop was
owned by petitioner Sicam himself. As correctly observed by the CA, in all the pawnshop receipts issued to
respondent Lulu in September 1987, all bear the words "Agencia de R. C. Sicam," notwithstanding that the pawnshop
was allegedly incorporated in April 1987. The receipts issued after such alleged incorporation were still in the name of
"Agencia de R. C. Sicam," thus inevitably misleading, or at the very least, creating the wrong impression to
respondents and the public as well, that the pawnshop was owned solely by petitioner Sicam and not by a
corporation.

Even petitioners counsel, Atty. Marcial T. Balgos, in his letter16 dated October 15, 1987 addressed to the Central
Bank, expressly referred to petitioner Sicam as the proprietor of the pawnshop notwithstanding the alleged
incorporation in April 1987.

We also find no merit in petitioners' argument that since respondents had alleged in their Amended Complaint that
petitioner corporation is the present owner of the pawnshop, the CA is bound to decide the case on that basis.

Section 4 Rule 129 of the Rules of Court provides that an admission, verbal or written, made by a party in the course
of the proceedings in the same case, does not require proof. The admission may be contradicted only by showing
that it was made through palpable mistake or that no such admission was made.

Thus, the general rule that a judicial admission is conclusive upon the party making it and does not require proof,
admits of two exceptions, to wit: (1) when it is shown that such admission was made through palpable mistake, and
(2) when it is shown that no such admission was in fact made. The latter exception allows one to contradict an
admission by denying that he made such an admission.17

The Committee on the Revision of the Rules of Court explained the second exception in this wise:

x x x if a party invokes an "admission" by an adverse party, but cites the admission "out of context," then the one
making the "admission" may show that he made no "such" admission, or that his admission was taken out of context.

x x x that the party can also show that he made no "such admission", i.e., not in the sense in which the admission is
made to appear.

That is the reason for the modifier "such" because if the rule simply states that the admission may be contradicted by
showing that "no admission was made," the rule would not really be providing for a contradiction of the admission but
just a denial.18 (Emphasis supplied).

While it is true that respondents alleged in their Amended Complaint that petitioner corporation is the present owner
of the pawnshop, they did so only because petitioner Sicam alleged in his Answer to the original complaint filed
against him that he was not the real party-in-interest as the pawnshop was incorporated in April 1987. Moreover, a
reading of the Amended Complaint in its entirety shows that respondents referred to both petitioner Sicam and
petitioner corporation where they (respondents) pawned their assorted pieces of jewelry and ascribed to both the
failure to observe due diligence commensurate with the business which resulted in the loss of their pawned jewelry.

Markedly, respondents, in their Opposition to petitioners Motion to Dismiss Amended Complaint, insofar as petitioner
Sicam is concerned, averred as follows:

Roberto C. Sicam was named the defendant in the original complaint because the pawnshop tickets involved in this
case did not show that the R.C. Sicam Pawnshop was a corporation. In paragraph 1 of his Answer, he admitted the
allegations in paragraph 1 and 2 of the Complaint. He merely added "that defendant is not now the real party in
interest in this case."

It was defendant Sicam's omission to correct the pawnshop tickets used in the subject transactions in this case which
was the cause of the instant action. He cannot now ask for the dismissal of the complaint against him simply on the
mere allegation that his pawnshop business is now incorporated. It is a matter of defense, the merit of which can only
be reached after consideration of the evidence to be presented in due course.19

Unmistakably, the alleged admission made in respondents' Amended Complaint was taken "out of context" by
petitioner Sicam to suit his own purpose. Ineluctably, the fact that petitioner Sicam continued to issue pawnshop
receipts under his name and not under the corporation's name militates for the piercing of the corporate veil.

We likewise find no merit in petitioners' contention that the CA erred in piercing the veil of corporate fiction of
petitioner corporation, as it was not an issue raised and litigated before the RTC.

Petitioner Sicam had alleged in his Answer filed with the trial court that he was not the real party-in-interest because
since April 20, 1987, the pawnshop business initiated by him was incorporated and known as Agencia de R.C. Sicam.
In the pre-trial brief filed by petitioner Sicam, he submitted that as far as he was concerned, the basic issue was
whether he is the real party in interest against whom the complaint should be directed.20 In fact, he subsequently
moved for the dismissal of the complaint as to him but was not favorably acted upon by the trial court. Moreover, the
issue was squarely passed upon, although erroneously, by the trial court in its Decision in this manner:

x x x The defendant Roberto Sicam, Jr likewise denies liability as far as he is concerned for the reason that he cannot
be made personally liable for a claim arising from a corporate transaction.

This Court sustains the contention of the defendant Roberto C. Sicam, Jr. The amended complaint itself asserts that
"plaintiff pawned assorted jewelries in defendant's pawnshop." It has been held that " as a consequence of the
separate juridical personality of a corporation, the corporate debt or credit is not the debt or credit of the stockholder,
nor is the stockholder's debt or credit that of a corporation.21

Clearly, in view of the alleged incorporation of the pawnshop, the issue of whether petitioner Sicam is personally
liable is inextricably connected with the determination of the question whether the doctrine of piercing the corporate
veil should or should not apply to the case.

The next question is whether petitioners are liable for the loss of the pawned articles in their possession.

Petitioners insist that they are not liable since robbery is a fortuitous event and they are not negligent at all.

We are not persuaded.

Article 1174 of the Civil Code provides:

Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the
nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could
not be foreseen or which, though foreseen, were inevitable.

Fortuitous events by definition are extraordinary events not foreseeable or avoidable. It is therefore, not enough that
the event should not have been foreseen or anticipated, as is commonly believed but it must be one impossible to
foresee or to avoid. The mere difficulty to foresee the happening is not impossibility to foresee the same. 22

To constitute a fortuitous event, the following elements must concur: (a) the cause of the unforeseen and unexpected
occurrence or of the failure of the debtor to comply with obligations must be independent of human will; (b) it must be
impossible to foresee the event that constitutes the caso fortuito or, if it can be foreseen, it must be impossible to
avoid; (c) the occurrence must be such as to render it impossible for the debtor to fulfill obligations in a normal
manner; and, (d) the obligor must be free from any participation in the aggravation of the injury or loss. 23

The burden of proving that the loss was due to a fortuitous event rests on him who invokes it.24 And, in order for a
fortuitous event to exempt one from liability, it is necessary that one has committed no negligence or misconduct that
may have occasioned the loss. 25

It has been held that an act of God cannot be invoked to protect a person who has failed to take steps to forestall the
possible adverse consequences of such a loss. One's negligence may have concurred with an act of God in
producing damage and injury to another; nonetheless, showing that the immediate or proximate cause of the damage
or injury was a fortuitous event would not exempt one from liability. When the effect is found to be partly the result of
a person's participation -- whether by active intervention, neglect or failure to act -- the whole occurrence is
humanized and removed from the rules applicable to acts of God. 26

Petitioner Sicam had testified that there was a security guard in their pawnshop at the time of the robbery. He
likewise testified that when he started the pawnshop business in 1983, he thought of opening a vault with the nearby
bank for the purpose of safekeeping the valuables but was discouraged by the Central Bank since pawned articles
should only be stored in a vault inside the pawnshop. The very measures which petitioners had allegedly adopted
show that to them the possibility of robbery was not only foreseeable, but actually foreseen and anticipated. Petitioner
Sicams testimony, in effect, contradicts petitioners defense of fortuitous event.

Moreover, petitioners failed to show that they were free from any negligence by which the loss of the pawned jewelry
may have been occasioned.

Robbery per se, just like carnapping, is not a fortuitous event. It does not foreclose the possibility of negligence on the
part of herein petitioners. In Co v. Court of Appeals,27 the Court held:

It is not a defense for a repair shop of motor vehicles to escape liability simply because the damage or loss of a thing
lawfully placed in its possession was due to carnapping. Carnapping per se cannot be considered as a fortuitous
event. The fact that a thing was unlawfully and forcefully taken from another's rightful possession, as in cases of
carnapping, does not automatically give rise to a fortuitous event. To be considered as such, carnapping entails more
than the mere forceful taking of another's property. It must be proved and established that the event was an act of
God or was done solely by third parties and that neither the claimant nor the person alleged to be negligent has any
participation. In accordance with the Rules of Evidence, the burden of proving that the loss was due to a fortuitous
event rests on him who invokes it which in this case is the private respondent. However, other than the police
report of the alleged carnapping incident, no other evidence was presented by private respondent to the effect that
the incident was not due to its fault. A police report of an alleged crime, to which only private respondent is privy,
does not suffice to establish the carnapping. Neither does it prove that there was no fault on the part of private
respondent notwithstanding the parties' agreement at the pre-trial that the car was carnapped. Carnapping does not
foreclose the possibility of fault or negligence on the part of private respondent.28

Just like in Co, petitioners merely presented the police report of the Paraaque Police Station on the robbery
committed based on the report of petitioners' employees which is not sufficient to establish robbery. Such report also
does not prove that petitioners were not at fault.

On the contrary, by the very evidence of petitioners, the CA did not err in finding that petitioners are guilty of
concurrent or contributory negligence as provided in Article 1170 of the Civil Code, to wit:

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who
in any manner contravene the tenor thereof, are liable for damages.29

Article 2123 of the Civil Code provides that with regard to pawnshops and other establishments which are engaged in
making loans secured by pledges, the special laws and regulations concerning them shall be observed, and
subsidiarily, the provisions on pledge, mortgage and antichresis.

The provision on pledge, particularly Article 2099 of the Civil Code, provides that the creditor shall take care of the
thing pledged with the diligence of a good father of a family. This means that petitioners must take care of the pawns
the way a prudent person would as to his own property.

In this connection, Article 1173 of the Civil Code further provides:

Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the
nature of the obligation and corresponds with the circumstances of the persons, of time and of the place. When
negligence shows bad faith, the provisions of Articles 1171 and 2201, paragraph 2 shall apply.

If the law or contract does not state the diligence which is to be observed in the performance, that which is expected
of a good father of a family shall be required.

We expounded in Cruz v. Gangan30 that negligence is the omission to do something which a reasonable man,
guided by those considerations which ordinarily regulate the conduct of human affairs, would do; or the doing of
something which a prudent and reasonable man would not do.31 It is want of care required by the circumstances.

A review of the records clearly shows that petitioners failed to exercise reasonable care and caution that an ordinarily
prudent person would have used in the same situation. Petitioners were guilty of negligence in the operation of their
pawnshop business. Petitioner Sicam testified, thus:

Court:

Q. Do you have security guards in your pawnshop?

A. Yes, your honor.

Q. Then how come that the robbers were able to enter the premises when according to you there was a security
guard?

A. Sir, if these robbers can rob a bank, how much more a pawnshop.

Q. I am asking you how were the robbers able to enter despite the fact that there was a security guard?

A. At the time of the incident which happened about 1:00 and 2:00 o'clock in the afternoon and it happened on a
Saturday and everything was quiet in the area BF Homes Paraaque they pretended to pawn an article in the
pawnshop, so one of my employees allowed him to come in and it was only when it was announced that it was a hold
up.

Q. Did you come to know how the vault was opened?

A. When the pawnshop is official (sic) open your honor the pawnshop is partly open. The combination is off.

Q. No one open (sic) the vault for the robbers?

A. No one your honor it was open at the time of the robbery.

Q. It is clear now that at the time of the robbery the vault was open the reason why the robbers were able to get all
the items pawned to you inside the vault.

A. Yes sir.32

revealing that there were no security measures adopted by petitioners in the operation of the pawnshop. Evidently, no
sufficient precaution and vigilance were adopted by petitioners to protect the pawnshop from unlawful intrusion. There
was no clear showing that there was any security guard at all. Or if there was one, that he had sufficient training in
securing a pawnshop. Further, there is no showing that the alleged security guard exercised all that was necessary to
prevent any untoward incident or to ensure that no suspicious individuals were allowed to enter the premises. In fact,
it is even doubtful that there was a security guard, since it is quite impossible that he would not have noticed that the
robbers were armed with caliber .45 pistols each, which were allegedly poked at the employees.33 Significantly, the
alleged security guard was not presented at all to corroborate petitioner Sicam's claim; not one of petitioners'
employees who were present during the robbery incident testified in court.

Furthermore, petitioner Sicam's admission that the vault was open at the time of robbery is clearly a proof of
petitioners' failure to observe the care, precaution and vigilance that the circumstances justly demanded. Petitioner
Sicam testified that once the pawnshop was open, the combination was already off. Considering petitioner Sicam's
testimony that the robbery took place on a Saturday afternoon and the area in BF Homes Paraaque at that time was
quiet, there was more reason for petitioners to have exercised reasonable foresight and diligence in protecting the
pawned jewelries. Instead of taking the precaution to protect them, they let open the vault, providing no difficulty for
the robbers to cart away the pawned articles.

We, however, do not agree with the CA when it found petitioners negligent for not taking steps to insure themselves
against loss of the pawned jewelries.

Under Section 17 of Central Bank Circular No. 374, Rules and Regulations for Pawnshops, which took effect on July
13, 1973, and which was issued pursuant to Presidential Decree No. 114, Pawnshop Regulation Act, it is provided
that pawns pledged must be insured, to wit:

Sec. 17. Insurance of Office Building and Pawns- The place of business of a pawnshop and the pawns pledged to it
must be insured against fire and against burglary as well as for the latter(sic), by an insurance company accredited by
the Insurance Commissioner.

However, this Section was subsequently amended by CB Circular No. 764 which took effect on October 1, 1980, to
wit:

Sec. 17 Insurance of Office Building and Pawns The office building/premises and pawns of a pawnshop must be
insured against fire. (emphasis supplied).

where the requirement that insurance against burglary was deleted. Obviously, the Central Bank considered it not
feasible to require insurance of pawned articles against burglary.

The robbery in the pawnshop happened in 1987, and considering the above-quoted amendment, there is no statutory
duty imposed on petitioners to insure the pawned jewelry in which case it was error for the CA to consider it as a
factor in concluding that petitioners were negligent.

Nevertheless, the preponderance of evidence shows that petitioners failed to exercise the diligence required of them
under the Civil Code.

The diligence with which the law requires the individual at all times to govern his conduct varies with the nature of the
situation in which he is placed and the importance of the act which he is to perform.34 Thus, the cases of Austria v.
Court of Appeals,35 Hernandez v. Chairman, Commission on Audit36 and Cruz v. Gangan37 cited by petitioners in
their pleadings, where the victims of robbery were exonerated from liability, find no application to the present case.

In Austria, Maria Abad received from Guillermo Austria a pendant with diamonds to be sold on commission basis, but
which Abad failed to subsequently return because of a robbery committed upon her in 1961. The incident became the
subject of a criminal case filed against several persons. Austria filed an action against Abad and her husband (Abads)
for recovery of the pendant or its value, but the Abads set up the defense that the robbery extinguished their
obligation. The RTC ruled in favor of Austria, as the Abads failed to prove robbery; or, if committed, that Maria Abad
was guilty of negligence. The CA, however, reversed the RTC decision holding that the fact of robbery was duly
established and declared the Abads not responsible for the loss of the jewelry on account of a fortuitous event. We
held that for the Abads to be relieved from the civil liability of returning the pendant under Art. 1174 of the Civil Code,
it would only be sufficient that the unforeseen event, the robbery, took place without any concurrent fault on the
debtors part, and this can be done by preponderance of evidence; that to be free from liability for reason of fortuitous
event, the debtor must, in addition to the casus itself, be free of any concurrent or contributory fault or negligence.38

We found in Austria that under the circumstances prevailing at the time the Decision was promulgated in 1971, the
City of Manila and its suburbs had a high incidence of crimes against persons and property that rendered travel after
nightfall a matter to be sedulously avoided without suitable precaution and protection; that the conduct of Maria Abad
in returning alone to her house in the evening carrying jewelry of considerable value would have been negligence per
se and would not exempt her from responsibility in the case of robbery. However we did not hold Abad liable for
negligence since, the robbery happened ten years previously; i.e., 1961, when criminality had not reached the level of
incidence obtaining in 1971.

In contrast, the robbery in this case took place in 1987 when robbery was already prevalent and petitioners in fact
had already foreseen it as they wanted to deposit the pawn with a nearby bank for safekeeping. Moreover, unlike in
Austria, where no negligence was committed, we found petitioners negligent in securing their pawnshop as earlier
discussed.

In Hernandez, Teodoro Hernandez was the OIC and special disbursing officer of the Ternate Beach Project of the
Philippine Tourism in Cavite. In the morning of July 1, 1983, a Friday, he went to Manila to encash two checks
covering the wages of the employees and the operating expenses of the project. However for some reason, the
processing of the check was delayed and was completed at about 3 p.m. Nevertheless, he decided to encash the
check because the project employees would be waiting for their pay the following day; otherwise, the workers would
have to wait until July 5, the earliest time, when the main office would open. At that time, he had two choices: (1)
return to Ternate, Cavite that same afternoon and arrive early evening; or (2) take the money with him to his house in
Marilao, Bulacan, spend the night there, and leave for Ternate the following day. He chose the second option,
thinking it was the safer one. Thus, a little past 3 p.m., he took a passenger jeep bound for Bulacan. While the jeep
was on Epifanio de los Santos Avenue, the jeep was held up and the money kept by Hernandez was taken, and the
robbers jumped out of the jeep and ran. Hernandez chased the robbers and caught up with one robber who was
subsequently charged with robbery and pleaded guilty. The other robber who held the stolen money escaped. The
Commission on Audit found Hernandez negligent because he had not brought the cash proceeds of the checks to his
office in Ternate, Cavite for safekeeping, which is the normal procedure in the handling of funds. We held that
Hernandez was not negligent in deciding to encash the check and bringing it home to Marilao, Bulacan instead of
Ternate, Cavite due to the lateness of the hour for the following reasons: (1) he was moved by unselfish motive for
his co-employees to collect their wages and salaries the following day, a Saturday, a non-working, because to encash
the check on July 5, the next working day after July 1, would have caused discomfort to laborers who were
dependent on their wages for sustenance; and (2) that choosing Marilao as a safer destination, being nearer, and in
view of the comparative hazards in the trips to the two places, said decision seemed logical at that time. We further
held that the fact that two robbers attacked him in broad daylight in the jeep while it was on a busy highway and in the
presence of other passengers could not be said to be a result of his imprudence and negligence.

Unlike in Hernandez where the robbery happened in a public utility, the robbery in this case took place in the
pawnshop which is under the control of petitioners. Petitioners had the means to screen the persons who were
allowed entrance to the premises and to protect itself from unlawful intrusion. Petitioners had failed to exercise
precautionary measures in ensuring that the robbers were prevented from entering the pawnshop and for keeping the
vault open for the day, which paved the way for the robbers to easily cart away the pawned articles.

In Cruz, Dr. Filonila O. Cruz, Camanava District Director of Technological Education and Skills Development
Authority (TESDA), boarded the Light Rail Transit (LRT) from Sen. Puyat Avenue to Monumento when her handbag
was slashed and the contents were stolen by an unidentified person. Among those stolen were her wallet and the
government-issued cellular phone. She then reported the incident to the police authorities; however, the thief was not
located, and the cellphone was not recovered. She also reported the loss to the Regional Director of TESDA, and she
requested that she be freed from accountability for the cellphone. The Resident Auditor denied her request on the
ground that she lacked the diligence required in the custody of government property and was ordered to pay the
purchase value in the total amount of P4,238.00. The COA found no sufficient justification to grant the request for
relief from accountability. We reversed the ruling and found that riding the LRT cannot per se be denounced as a
negligent act more so because Cruzs mode of transit was influenced by time and money considerations; that she
boarded the LRT to be able to arrive in Caloocan in time for her 3 pm meeting; that any prudent and rational person
under similar circumstance can reasonably be expected to do the same; that possession of a cellphone should not
hinder one from boarding the LRT coach as Cruz did considering that whether she rode a jeep or bus, the risk of theft
would have also been present; that because of her relatively low position and pay, she was not expected to have her
own vehicle or to ride a taxicab; she did not have a government assigned vehicle; that placing the cellphone in a bag
away from covetous eyes and holding on to that bag as she did is ordinarily sufficient care of a cellphone while
traveling on board the LRT; that the records did not show any specific act of negligence on her part and negligence
can never be presumed.

Unlike in the Cruz case, the robbery in this case happened in petitioners' pawnshop and they were negligent in not
exercising the precautions justly demanded of a pawnshop.

WHEREFORE, except for the insurance aspect, the Decision of the Court of Appeals dated March 31, 2003 and its
Resolution dated August 8, 2003, are AFFIRMED.

Costs against petitioners.

SO ORDERED.

Ynares-Santiago, Chairperson, Chico-Nazario, Nachura, JJ., concur.



Footnotes

1 CA rollo, pp. 63-73; Penned by Justice Bernardo P. Abesamis (ret.) and concurred in by Justices Sergio L. Pestao
and Noel G. Tijam.

2 Id. at p. 114.

3 Id. at 121; Exhibit "1."

4 Id. at 107-108; Exhibit "I."

5 Id. at 63-65; Per Judge Salvador P. de Guzman, Jr.

6 Id. at 146-147; Penned by Judge Roberto C. Diokno of Branch 62 as the case was unloaded to him.

7 148-A Phil. 462 (1971).

8 CA rollo, p. 72.

9 Rollo, pp. 5-6.

10 Rollo, p. 7.

11 Nuez v. National Labor Relations Commission, G.R. No. 107574, December 28, 1994, 239 SCRA 518, 526.

12 Litonjua v. Fernandez, G.R. No. 148116, April 14, 2004, 427 SCRA 478, 489 citing Roble v. Arbasa, 414 Phil. 343
(2001).

13 Fuentes v. Court of Appeals, 335 Phil. 1163, 1168 (1997).

14 See Jacinto v. Court of Appeals, G.R. No. 80043, June 6, 1991, 198 SCRA 211, 216.

15 See Sibagat Timber Corporation v. Garcia, G.R. No. 98185, December 11, 1992, 216 SCRA 470, 474.

16 Id. at 124-125; Exhibit "4".

17 Atillo III v. Court of Appeals, 334 Phil. 546, 552 (1997).

18 Minutes of the meeting held on October 22, 1986, p. 9.

19 Records, p. 67.

20 Id. at 38.

21 Id. at 147.

22 Republic v. Luzon Stevedoring Corporation, 128 Phil. 313, 318 (1967).

23 Mindex Resources Development Corporation v. Morillo, 428 Phil. 934, 944 (2002).

24 Co v. Court of Appeals, 353 Phil. 305, 313 (1998).

25 Mindex Resources Development Corporation v. Morillo, supra citing Tolentino, Civil Code of the Philippines, Vol.
IV, 1991 ed., p. 126, citing Sian v. Inchausti & Co., 22 Phil. 152 (1912); Juan F. Nakpil & Sons v. Court of Appeals,
228 Phil. 564, 578 (1986). Cf. Metal Forming Corporation v. Office of the President, 317 Phil. 853, 859 (1995).

26 Id. citing Nakpil and Sons v. Court of Appeals, supra note 25, at 578.

27 Supra note 24.

28 Id. at 312-313.

29 Civil Code, Art. 1170.

30 443 Phil. 856, 863 (2003) citing McKee v. Intermediate Appellate Court, 211 SCRA 517 (1992).

31 Cruz v. Gangan, supra note 30, at 863.

32 TSN, January 21, 1992, pp.17-18.

33 Exhibit "1," Excerpt from the Police Blotter dated October 17, 1987 of the Paraaque Police Station, p. 121.

34 Cruz v. Gangan, supra note 30, at 863 citing Sangco, Torts and Damages, Vol. 1, 1993 rev. ed. p. 5.

35 Supra note 7.

36 G.R. No. 71871, November 6, 1989, 179 SCRA 39.

37 Supra note 30.

38 Austria v. Court of Appeals, supra note 7, at 466-467.