Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-47362 December 19, 1940
JUAN F. VILLARROEL, recurrente-apelante,
vs.
BERNARDINO ESTRADA, recurrido-apelado.
D. Felipe Agoncillo en representacion del recurrente-appelante.
D. Crispin Oben en representacion del recurrido-apelado.

AVANCEA, Pres.:
El 9 de mayo de 1912, Alejandro F. Callao, madre del demandado Juan F. Villarroel, obtuvo de
los esposos Mariano Estrada y Severina un prestamo de P1,000 pagadero al cabo de siete aos
(Exhibito A). Alejandra fallecio, dejando como unico heredero al demandado. Los esposos
Mariano Estrada y Severina fallecieron tambien, dejando como unico heredero al demandante
Bernardino Estrada. El 9 de agosto de 1930, el demandado suscribio un documento (Exhibito B)
por el cual declara en deber al demandante la cantidad de P1,000, con un interes de 12 por ciento
al ao. Esta accion versa sobre el cobro de esta cantidad.
El Juzgado de primera Instancia de Laguna, en el cual se interpuso esta accion, condeno al
demandado a pagar al demandante la cantidad reclamada de P1,000 con sus intereses legales de
12 por ciento al ao desde el 9 de agosto de 1930 hasta su completo pago. Se apelo de esta
sentencia.
Se notara que las partes en la presente causa son, respectivamente, los unicos herederos de los
acreedores y de la deudora originales. Esta accion se ejercita en virtud de la obligacion que el
demandado como unico hijo de la primitiva deudora contrajo en favor del demandante, unico
heredero de loa primitivos acreedores. Se admite que la cantidad de P1,000 a que se contrae esta
obligacion es la misma deuda de la madre del demandado a los padres del
demandante.lawphil.net
Aunque la accion para recobrar la deuda original ha prescrito ya cuando se interpuso la demanda
en esta causa, la cuestion que se suscita en esta apelacion es principalmente la de si, no obstante
tal prescripcion, es procedente la accion entablada. Sin embargo, no se funda la presente accion
en la obligacion original contraida por la madre del demandado, que ya ha prescrito, sino en la
que contrajo el demandado el 9 de agosto de 1930 (Exhibito B) al asumir el cumplimiento de
aquella obligacion, ya prescrita. Siendo el demandado el unico herdero de la primitiva deudora,
con derecho a sucederla en su herencia, aquella deuda con traida por su madre legalmente,
aunque perdio su eficacia por prescripcion, ahora es, sin embargo, para el una obligacion moral,
que es consideracion suficiente a crear y hacer eficaz y exigible su obligacion voluntariamente
contraida el 9 de agosto de 1930 en el Exhibito B.
La regla de que una promesa nueva de pagar una deuda prrescrita debe ser hecha por la misma
persona obligada o por otra legalmente autorizada por ella, no es aplicable al caso presente en
que no se exige el cumplimiento de la obligacion de la obligada orignalmente, sino del que des
pues quiso voluntariamente asumir esta obligacion.
Se confirma la sentencia apelada, con las costas al apelante. Asi se ordena.
Imperial, Diaz, Laurel, y Horrilleno, MM., estan conformes.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
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.


Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
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.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
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.



Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
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.
G. R. No. L-17447
[ G. R. No. L-17447, April 30, 1963 ]
GONZALO PUYAT & SONS, INC., PLAINTIFF AND APPELLEE, VS. CITY
OF MANILA AND MARCELINO SARMIENTO, AS CITY TREASURER OF
MANILA, DEFENDANTS AND APPELLANTS.
PAREDES, J.:
This an appeal from the judgment of the CFI of Manila,the dispositive portion of which reads:
"* *. 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 Civil Code.

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.

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
Dealers Taxes 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 of Manila is
a Municipal Corporation duly organized in accordance with the laws of the
Philippines, and defendant Mafcelino Sarmiento is the duly qualified incumbent
City Treasurer of Manila;
2. That the 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 kinds 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 Manila assessed from plaintiff retail dealer's tax
corresponding to the quarters hereunder stated ow 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 pa id O.R. No. Amount assessed and paid

First Quarter 1950 Jan. 25, 1950 436271V P1,255.00

Second Quarter
1950
Apr. 25, 1950 215895X 1,250.00
Third Quarter 1950 July 25, 1950 243321X 1,250.00

Fourth Quarter
1950
Oct. 25, 1850 271165X 1,250.00
4.

(Follows, the assessment for different quarters in 1951, 1&52, 1953, 1954 and
1955, fixing the saine amounts quarterly). * * *.
First Quarter 1956 Jan. 25, 1956 823047X Pl, 250.00

Second Quarter
1956
Apr. 25, 1956 855949X 1,250.00
Third Quarter 1956 July 25, 1956 880789X
1,250.00
=======
TOTAL 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 See.
18(a) of Republic Act No. 409 (Revised Charter of Manila), as restated in Section
1 of Oridnance No. 8816.
5. That, however, plaintiff, is liable for the payment of taxes prescribed in Section 1,
Group II of Ordinance No. 3364, as amended by Sec. 1, Group II of Ordinance
No. 3816, which took effect on September 24, 1056, on the sales of imported
billiard balls, bowling balls and other accessories at its display room. The
taxeppaid by the plaintiff on the sales of said articles are as follows.
* * * * * * *
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 Manila definitely 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 hr resolved by this
Honorable Court are: (1) the period of prescription applicable in matters of
refund of municipal taxes erroneously paid by a taxpayer and (2) refund of taxes
not paid under protest.* * *."
which was the basis of the judgment heretofore recited.

Said judgment was directly appealed to this Court on two dominant issues to wit: (1) Whether or
not the amounts paid by plaintiff-appellee, as retail dealer's taxes under Ordinance 1925, as
amended by Ordinance No. 3364 of the City of Manila, without protest, are refundable; and (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 that 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,
thereby indicating 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 vs.
Municipality of Calapan, 71, Phil., 438.

In refutation of the above stand of appellants, appellee avers that 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-company is 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 provisions 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 duly delivered through
mistake, the obligation to return it arises" (Art. 2154, NCC).
Appellee categorically stated the payment was not voluntarily made, (a fact found also by the
lower court), but on the erroneous 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 Indebiti
in the new Civil Code, apply to the admitted facts of the case.

Withal, appellant quoted Manress as saying:"* * De la misma opinion son el Sr. Sanchez Roman
y el Sr. Galcon, el cual afirma que si la paga so 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 construction or application of a doubtful or difficult
question of law may come within the scope of the preceding article" (Art. 2155).
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 vs. Ringo, 37 Ky.
635, 636; 10 S.W.2, in the following manner:
"It is too well settled in this state to the citation of authority that if money be paid through a clear
mistake of law oi fact, essentially affecting the rights of the parties, and which, in law of
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 imposition of 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
believes 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 awaiting a resort to judicial proceedings, should not be regarded
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 seem 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. 2142, 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 asserting the
validity of tax assessed under this article until the taxpayer shall have paid, under protest, the
taxes assessed against him,* *". It should be noted, however, that the article referred to in said
section is Article XII, entitled Department of Assessment, and the sections thereunder manifestly
show that said article and its sections relate to assessment, collection and recover of real estate
taxes only. Said section 76, therefor, is not applicable to the case at bar, which relates to the
recovery of retail dealer taxes.

In the opinion of the Secretary of Justice (Op. 99, Series of 1957), in a question similar to the
case at bar, it was held that the requirement 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 vs. City of
Baguio, 91 Phil., 854. 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 under this charter until the tax-payer shall have
paid, under protest, the taxes assessed against him (sec. 2574 (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 ft 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. vs. 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 vs. Tan
Jongko, 98 Phil., 55;. 51 Off. Gaz., 8221) and article 1145 (NCC), for payments made after and
effectivity, providing for a period of six (6) years (upon quasi-contracts like solutio indebiti).
Even if the provisions of Act No. 190 should apply to those payments made before the effectivity
of the new Civil Code, because "prescription already running before the effectivity of this Code
shall be governed by laws previously in force * *" (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 obvious that the action has t prescribed with respect to those made before October 30,
1950 only, considering the fact that the prescription of action is interrupted * * * when there is a
written extra-judicial demand * *" (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.


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Republic of the Philippines
SUPREME COURT
Baguio City
THIRD DIVISION
G.R. No. 179337 April 30, 2008
JOSEPH SALUDAGA, petitioner,
vs.
FAR EASTERN UNIVERSITY and EDILBERTO C. DE JESUS in his capacity as
President of FEU, respondents.
D E C I S I O N
YNARES-SANTIAGO, J .:
This Petition for Review on Certiorari
1
under Rule 45 of the Rules of Court assails the June 29,
2007 Decision
2
of the Court of Appeals in CA-G.R. CV No. 87050, nullifying and setting aside
the November 10, 2004 Decision
3
of the Regional Trial Court of Manila, Branch 2, in Civil Case
No. 98-89483 and dismissing the complaint filed by petitioner; as well as its August 23, 2007
Resolution
4
denying the Motion for Reconsideration.
5

The antecedent facts are as follows:
Petitioner Joseph Saludaga was a sophomore law student of respondent Far Eastern University
(FEU) when he was shot by Alejandro Rosete (Rosete), one of the security guards on duty at the
school premises on August 18, 1996. Petitioner was rushed to FEU-Dr. Nicanor Reyes Medical
Foundation (FEU-NRMF) due to the wound he sustained.
6
Meanwhile, Rosete was brought to
the police station where he explained that the shooting was accidental. He was eventually
released considering that no formal complaint was filed against him.
Petitioner thereafter filed a complaint for damages against respondents on the ground that they
breached their obligation to provide students with a safe and secure environment and an
atmosphere conducive to learning. Respondents, in turn, filed a Third-Party Complaint
7
against
Galaxy Development and Management Corporation (Galaxy), the agency contracted by
respondent FEU to provide security services within its premises and Mariano D. Imperial
(Imperial), Galaxy's President, to indemnify them for whatever would be adjudged in favor of
petitioner, if any; and to pay attorney's fees and cost of the suit. On the other hand, Galaxy and
Imperial filed a Fourth-Party Complaint against AFP General Insurance.
8

On November 10, 2004, the trial court rendered a decision in favor of petitioner, the dispositive
portion of which reads:
WHEREFORE, from the foregoing, judgment is hereby rendered ordering:
1. FEU and Edilberto de Jesus, in his capacity as president of FEU to pay jointly
and severally Joseph Saludaga the amount of P35,298.25 for actual damages with
12% interest per annum from the filing of the complaint until fully paid; moral
damages of P300,000.00, exemplary damages of P500,000.00, attorney's fees of
P100,000.00 and cost of the suit;
2. Galaxy Management and Development Corp. and its president, Col. Mariano
Imperial to indemnify jointly and severally 3rd party plaintiffs (FEU and
Edilberto de Jesus in his capacity as President of FEU) for the above-mentioned
amounts;
3. And the 4th party complaint is dismissed for lack of cause of action. No
pronouncement as to costs.
SO ORDERED.
9

Respondents appealed to the Court of Appeals which rendered the assailed Decision, the decretal
portion of which provides, viz:
WHEREFORE, the appeal is hereby GRANTED. The Decision dated November 10,
2004 is hereby REVERSED and SET ASIDE. The complaint filed by Joseph Saludaga
against appellant Far Eastern University and its President in Civil Case No. 98-89483 is
DISMISSED.
SO ORDERED.
10

Petitioner filed a Motion for Reconsideration which was denied; hence, the instant petition based
on the following grounds:
THE COURT OF APPEALS SERIOUSLY ERRED IN MANNER CONTRARY TO
LAW AND JURISPRUDENCE IN RULING THAT:
5.1. THE SHOOTING INCIDENT IS A FORTUITOUS EVENT;
5.2. RESPONDENTS ARE NOT LIABLE FOR DAMAGES FOR THE INJURY
RESULTING FROM A GUNSHOT WOUND SUFFERED BY THE PETITIONER
FROM THE HANDS OF NO LESS THAN THEIR OWN SECURITY GUARD IN
VIOLATION OF THEIR BUILT-IN CONTRACTUAL OBLIGATION TO
PETITIONER, BEING THEIR LAW STUDENT AT THAT TIME, TO PROVIDE HIM
WITH A SAFE AND SECURE EDUCATIONAL ENVIRONMENT;
5.3. SECURITY GAURD, ALEJANDRO ROSETE, WHO SHOT PETITIONER
WHILE HE WAS WALKING ON HIS WAY TO THE LAW LIBRARY OF
RESPONDENT FEU IS NOT THEIR EMPLOYEE BY VIRTUE OF THE CONTRACT
FOR SECURITY SERVICES BETWEEN GALAXY AND FEU
NOTWITHSTANDING THE FACT THAT PETITIONER, NOT BEING A PARTY TO
IT, IS NOT BOUND BY THE SAME UNDER THE PRINCIPLE OF RELATIVITY OF
CONTRACTS; and
5.4. RESPONDENT EXERCISED DUE DILIGENCE IN SELECTING GALAXY AS
THE AGENCY WHICH WOULD PROVIDE SECURITY SERVICES WITHIN THE
PREMISES OF RESPONDENT FEU.
11

Petitioner is suing respondents for damages based on the alleged breach of student-school
contract for a safe learning environment. The pertinent portions of petitioner's Complaint read:
6.0. At the time of plaintiff's confinement, the defendants or any of their representative
did not bother to visit and inquire about his condition. This abject indifference on the part
of the defendants continued even after plaintiff was discharged from the hospital when
not even a word of consolation was heard from them. Plaintiff waited for more than one
(1) year for the defendants to perform their moral obligation but the wait was fruitless.
This indifference and total lack of concern of defendants served to exacerbate plaintiff's
miserable condition.
x x x x
11.0. Defendants are responsible for ensuring the safety of its students while the latter are
within the University premises. And that should anything untoward happens to any of its
students while they are within the University's premises shall be the responsibility of the
defendants. In this case, defendants, despite being legally and morally bound, miserably
failed to protect plaintiff from injury and thereafter, to mitigate and compensate plaintiff
for said injury;
12.0. When plaintiff enrolled with defendant FEU, a contract was entered into between
them. Under this contract, defendants are supposed to ensure that adequate steps are
taken to provide an atmosphere conducive to study and ensure the safety of the plaintiff
while inside defendant FEU's premises. In the instant case, the latter breached this
contract when defendant allowed harm to befall upon the plaintiff when he was shot at
by, of all people, their security guard who was tasked to maintain peace inside the
campus.
12

In Philippine School of Business Administration v. Court of Appeals,
13
we held that:
When an academic institution accepts students for enrollment, there is established a
contract between them, resulting in bilateral obligations which both parties are bound to
comply with. For its part, the school undertakes to provide the student with an education
that would presumably suffice to equip him with the necessary tools and skills to pursue
higher education or a profession. On the other hand, the student covenants to abide by the
school's academic requirements and observe its rules and regulations.
Institutions of learning must also meet the implicit or "built-in" obligation of providing
their students with an atmosphere that promotes or assists in attaining its primary
undertaking of imparting knowledge. Certainly, no student can absorb the intricacies of
physics or higher mathematics or explore the realm of the arts and other sciences when
bullets are flying or grenades exploding in the air or where there looms around the school
premises a constant threat to life and limb. Necessarily, the school must ensure that
adequate steps are taken to maintain peace and order within the campus premises and to
prevent the breakdown thereof.
14

It is undisputed that petitioner was enrolled as a sophomore law student in respondent FEU. As
such, there was created a contractual obligation between the two parties. On petitioner's part, he
was obliged to comply with the rules and regulations of the school. On the other hand,
respondent FEU, as a learning institution is mandated to impart knowledge and equip its students
with the necessary skills to pursue higher education or a profession. At the same time, it is
obliged to ensure and take adequate steps to maintain peace and order within the campus.
It is settled that in culpa contractual, the mere proof of the existence of the contract and the
failure of its compliance justify, prima facie, a corresponding right of relief.
15
In the instant case,
we find that, when petitioner was shot inside the campus by no less the security guard who was
hired to maintain peace and secure the premises, there is a prima facie showing that respondents
failed to comply with its obligation to provide a safe and secure environment to its students.
In order to avoid liability, however, respondents aver that the shooting incident was a fortuitous
event because they could not have reasonably foreseen nor avoided the accident caused by
Rosete as he was not their employee;
16
and that they complied with their obligation to ensure a
safe learning environment for their students by having exercised due diligence in selecting the
security services of Galaxy.
After a thorough review of the records, we find that respondents failed to discharge the burden of
proving that they exercised due diligence in providing a safe learning environment for their
students. They failed to prove that they ensured that the guards assigned in the campus met the
requirements stipulated in the Security Service Agreement. Indeed, certain documents about
Galaxy were presented during trial; however, no evidence as to the qualifications of Rosete as a
security guard for the university was offered.
Respondents also failed to show that they undertook steps to ascertain and confirm that the
security guards assigned to them actually possess the qualifications required in the Security
Service Agreement. It was not proven that they examined the clearances, psychiatric test results,
201 files, and other vital documents enumerated in its contract with Galaxy. Total reliance on the
security agency about these matters or failure to check the papers stating the qualifications of the
guards is negligence on the part of respondents. A learning institution should not be allowed to
completely relinquish or abdicate security matters in its premises to the security agency it hired.
To do so would result to contracting away its inherent obligation to ensure a safe learning
environment for its students.
Consequently, respondents' defense of force majeure must fail. In order for force majeure to be
considered, respondents must show that no negligence or misconduct was committed that may
have occasioned the loss. 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.
17

Article 1170 of the Civil Code provides that those who are negligent in the performance of their
obligations are liable for damages. Accordingly, for breach of contract due to negligence in
providing a safe learning environment, respondent FEU is liable to petitioner for damages. It is
essential in the award of damages that the claimant must have satisfactorily proven during the
trial the existence of the factual basis of the damages and its causal connection to defendant's
acts.
18

In the instant case, it was established that petitioner spent P35,298.25 for his hospitalization and
other medical expenses.
19
While the trial court correctly imposed interest on said amount,
however, the case at bar involves an obligation arising from a contract and not a loan or
forbearance of money. As such, the proper rate of legal interest is six percent (6%) per annum of
the amount demanded. Such interest shall continue to run from the filing of the complaint until
the finality of this Decision.
20
After this Decision becomes final and executory, the applicable
rate shall be twelve percent (12%) per annum until its satisfaction.
The other expenses being claimed by petitioner, such as transportation expenses and those
incurred in hiring a personal assistant while recuperating were however not duly supported by
receipts.
21
In the absence thereof, no actual damages may be awarded. Nonetheless, temperate
damages under Art. 2224 of the Civil Code may be recovered where it has been shown that the
claimant suffered some pecuniary loss but the amount thereof cannot be proved with certainty.
Hence, the amount of P20,000.00 as temperate damages is awarded to petitioner.
As regards the award of moral damages, there is no hard and fast rule in the determination of
what would be a fair amount of moral damages since each case must be governed by its own
peculiar circumstances.
22
The testimony of petitioner about his physical suffering, mental
anguish, fright, serious anxiety, and moral shock resulting from the shooting incident
23
justify the
award of moral damages. However, moral damages 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.
The award is not meant to enrich the complainant at the expense of the defendant, but to enable
the injured party to obtain means, diversion, or amusements that will serve to obviate the moral
suffering he has undergone. It is aimed at the restoration, within the limits of the possible, of the
spiritual status quo ante, and should be proportionate to the suffering inflicted. Trial courts must
then guard against the award of exorbitant damages; they should exercise balanced restrained
and measured objectivity to avoid suspicion that it was due to passion, prejudice, or corruption
on the part of the trial court.
24
We deem it just and reasonable under the circumstances to award
petitioner moral damages in the amount of P100,000.00.
Likewise, attorney's fees and litigation expenses in the amount of P50,000.00 as part of damages
is reasonable in view of Article 2208 of the Civil Code.
25
However, the award of exemplary
damages is deleted considering the absence of proof that respondents acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.
We note that the trial court held respondent De Jesus solidarily liable with respondent FEU. In
Powton Conglomerate, Inc. v. Agcolicol,
26
we held that:
[A] corporation is invested by law with a personality separate and distinct from those of
the persons composing it, such that, save for certain exceptions, corporate officers who
entered into contracts in behalf of the corporation cannot be held personally liable for the
liabilities of the latter. Personal liability of a corporate director, trustee or officer along
(although not necessarily) with the corporation may so validly attach, as a rule, only
when - (1) he assents to a patently unlawful act of the corporation, or when he is guilty of
bad faith or gross negligence in directing its affairs, or when there is a conflict of interest
resulting in damages to the corporation, its stockholders or other persons; (2) he consents
to the issuance of watered down stocks or who, having knowledge thereof, does not
forthwith file with the corporate secretary his written objection thereto; (3) he agrees to
hold himself personally and solidarily liable with the corporation; or (4) he is made by a
specific provision of law personally answerable for his corporate action.
27

None of the foregoing exceptions was established in the instant case; hence, respondent De Jesus
should not be held solidarily liable with respondent FEU.
Incidentally, although the main cause of action in the instant case is the breach of the school-
student contract, petitioner, in the alternative, also holds respondents vicariously liable under
Article 2180 of the Civil Code, which provides:
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.
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.
x x x x
The responsibility treated of in this article shall cease when the persons herein mentioned
prove that they observed all the diligence of a good father of a family to prevent damage.
We agree with the findings of the Court of Appeals that respondents cannot be held liable for
damages under Art. 2180 of the Civil Code because respondents are not the employers of Rosete.
The latter was employed by Galaxy. The instructions issued by respondents' Security Consultant
to Galaxy and its security guards are ordinarily no more than requests commonly envisaged in
the contract for services entered into by a principal and a security agency. They cannot be
construed as the element of control as to treat respondents as the employers of Rosete.
28

As held in Mercury Drug Corporation v. Libunao:
29

In Soliman, Jr. v. Tuazon,
30
we held that where the security agency recruits, hires and
assigns the works of its watchmen or security guards to a client, the employer of such
guards or watchmen is such agency, and not the client, since the latter has no hand in
selecting the security guards. Thus, the duty to observe the diligence of a good father of a
family cannot be demanded from the said client:
[I]t is settled in our jurisdiction that where the security agency, as here,
recruits, hires and assigns the work of its watchmen or security guards, the agency
is the employer of such guards or watchmen. Liability for illegal or harmful acts
committed by the security guards attaches to the employer agency, and not to the
clients or customers of such agency. As a general rule, a client or customer of a
security agency has no hand in selecting who among the pool of security guards
or watchmen employed by the agency shall be assigned to it; the duty to observe
the diligence of a good father of a family in the selection of the guards cannot, in
the ordinary course of events, be demanded from the client whose premises or
property are protected by the security guards.
x x x x
The fact that a client company may give instructions or directions to the security guards
assigned to it, does not, by itself, render the client responsible as an employer of the
security guards concerned and liable for their wrongful acts or omissions.
31

We now come to respondents' Third Party Claim against Galaxy. In Firestone Tire and Rubber
Company of the Philippines v. Tempengko,
32
we held that:
The third-party complaint is, therefore, a procedural device whereby a 'third party' who is
neither a party nor privy to the act or deed complained of by the plaintiff, may be brought
into the case with leave of court, by the defendant, who acts as third-party plaintiff to
enforce against such third-party defendant a right for contribution, indemnity,
subrogation or any other relief, in respect of the plaintiff's claim. The third-party
complaint is actually independent of and separate and distinct from the plaintiff's
complaint. Were it not for this provision of the Rules of Court, it would have to be filed
independently and separately from the original complaint by the defendant against the
third-party. But the Rules permit defendant to bring in a third-party defendant or so to
speak, to litigate his separate cause of action in respect of plaintiff's claim against a third-
party in the original and principal case with the object of avoiding circuitry of action and
unnecessary proliferation of law suits and of disposing expeditiously in one litigation the
entire subject matter arising from one particular set of facts.
33

Respondents and Galaxy were able to litigate their respective claims and defenses in the course
of the trial of petitioner's complaint. Evidence duly supports the findings of the trial court that
Galaxy is negligent not only in the selection of its employees but also in their supervision.
Indeed, no administrative sanction was imposed against Rosete despite the shooting incident;
moreover, he was even allowed to go on leave of absence which led eventually to his
disappearance.
34
Galaxy also failed to monitor petitioner's condition or extend the necessary
assistance, other than the P5,000.00 initially given to petitioner. Galaxy and Imperial failed to
make good their pledge to reimburse petitioner's medical expenses.
For these acts of negligence and for having supplied respondent FEU with an unqualified
security guard, which resulted to the latter's breach of obligation to petitioner, it is proper to hold
Galaxy liable to respondent FEU for such damages equivalent to the above-mentioned amounts
awarded to petitioner.
Unlike respondent De Jesus, we deem Imperial to be solidarily liable with Galaxy for being
grossly negligent in directing the affairs of the security agency. It was Imperial who assured
petitioner that his medical expenses will be shouldered by Galaxy but said representations were
not fulfilled because they presumed that petitioner and his family were no longer interested in
filing a formal complaint against them.
35

WHEREFORE, the petition is GRANTED. The June 29, 2007 Decision of the Court of
Appeals in CA-G.R. CV No. 87050 nullifying the Decision of the trial court and dismissing the
complaint as well as the August 23, 2007 Resolution denying the Motion for Reconsideration are
REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Manila, Branch 2,
in Civil Case No. 98-89483 finding respondent FEU liable for damages for breach of its
obligation to provide students with a safe and secure learning atmosphere, is AFFIRMED with
the following MODIFICATIONS:
a. respondent Far Eastern University (FEU) is ORDERED to pay petitioner actual damages in
the amount of P35,298.25, plus 6% interest per annum from the filing of the complaint until the
finality of this Decision. After this decision becomes final and executory, the applicable rate
shall be twelve percent (12%) per annum until its satisfaction;
b. respondent FEU is also ORDERED to pay petitioner temperate damages in the amount of
P20,000.00; moral damages in the amount of P100,000.00; and attorney's fees and litigation
expenses in the amount of P50,000.00;
c. the award of exemplary damages is DELETED.
The Complaint against respondent Edilberto C. De Jesus is DISMISSED. The counterclaims of
respondents are likewise DISMISSED.
Galaxy Development and Management Corporation (Galaxy) and its president, Mariano D.
Imperial are ORDERED to jointly and severally pay respondent FEU damages equivalent to the
above-mentioned amounts awarded to petitioner.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate Justice

WE CONCUR:
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
MINITA V. CHICO-NAZARIO
Associate Justice
ANTONIO EDUARDO B. NACHURA
Associate Justice
RUBEN T. REYES
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 Court's Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

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 Chairperson's
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 Court's Division.
REYNATO S. PUNO
Chief Justice

Footnotes
1
Rollo, pp. 3-33.
2
Id. at 38-62; penned by Associate Justice Mariano C. Del Castillo and concurred in by
Associate Justices Arcangelita Romilla Lontok and Romeo F. Barza.
3
Id. at 67-75; penned by Judge Alejandro G. Bijasa.
4
Id. at 64-65.
5
Id. at 160-177.
6
Id. at 188.
7
Records, Vol. I, pp. 136-139.
8
Id. at 287-290.
9
Rollo, pp. 74-75.
10
Id. at 61.
11
Id. at 13-14.
12
Records, Vol. I, pp. 1-6.
13
G.R. No. 84698, February 4, 1992, 205 SCRA 729.
14
Id. at 733-734.
15
FGU Insurance Corporation v. G.P. Sarmiento Trucking Corporation, 435 Phil. 333,
341 (2002).
16
Records, Vol. 1, pp. 76-86.
17
Mindex Resources Development v. Morillo, 428 Phil. 934, 944 (2002).
18
Roque, Jr. v. Torres, G.R. No. 157632, December 6, 2006, 510 SCRA 336, 348.
19
TSN, September 20, 1999, pp. 20-21; Records, Vol. I, pp. 316-322; Records, Vol. II, p.
597.
20
Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, July 12, 1994, 234
SCRA 78, 95-97.
21
TSN, September 27, 1999, pp. 5, 9.
22
Roque v. Torres, supra note 18 at 349.
23
TSN, September 20, 1999, pp. 10, 12-13; September 27, 1999, pp. 3, 5-9.
24
ABS-CBN Broadcasting Corporation v. Court of Appeals, 361 Phil. 499, 529-530
(1999).
25
Civil Code, Art. 2208:
In the absence of stipulation, attorney's fees and expenses of litigation, other than
judicial costs, cannot be recovered, except:
(2) when the defendant's act or omission has compelled the plaintiff to litigate
with third persons or to incur expenses to protect his interest;
26
448 Phil. 643 (2003).
27
Id. at 656.
28
Records, Vol. I, pp. 43-55 (FEU) and pp. 56-68 (Galaxy).
29
G.R. No. 144458, July 14, 2004, 434 SCRA 404.
30
G.R. No. 66207, May 18, 1992, 209 SCRA 47.
31
Mercury Drug Corporation v. Libunao, supra at 414-418.
32
137 Phil. 239 (1969).
33
Id. at 243-244.
34
Rollo, p. 74.
35
Records, Vol. I, p. 330.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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 can not 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 can not 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 can not 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.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

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.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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, and culpa contractual
as a mere incident to the performance of a contract has frequently been recognized by the
supreme court of Spain. (Sentencias of June 27, 1894; November 20, 1896; and December 13,
1896.) In the decisions of November 20, 1896, it appeared that plaintiff's action arose ex
contractu, but that defendant sought to avail himself of the provisions of article 1902 of the Civil
Code as a defense. The Spanish Supreme Court rejected defendant's contention, saying:
These are not cases of injury caused, without any pre-existing obligation, by fault or
negligence, such as those to which article 1902 of the Civil Code relates, but of damages
caused by the defendant's failure to carry out the undertakings imposed by the contracts .
. . .
A brief review of the earlier decision of this court involving the liability of employers for
damage done by the negligent acts of their servants will show that in no case has the court ever
decided that the negligence of the defendant's servants has been held to constitute a defense to an
action for damages for breach of contract.
In the case of Johnson vs. David (5 Phil. Rep., 663), the court held that the owner of a carriage
was not liable for the damages caused by the negligence of his driver. In that case the court
commented on the fact that no evidence had been adduced in the trial court that the defendant
had been negligent in the employment of the driver, or that he had any knowledge of his lack of
skill or carefulness.
In the case of Baer Senior & Co's Successors vs. Compania Maritima (6 Phil. Rep., 215), the
plaintiff sued the defendant for damages caused by the loss of a barge belonging to plaintiff
which was allowed to get adrift by the negligence of defendant's servants in the course of the
performance of a contract of towage. The court held, citing Manresa (vol. 8, pp. 29, 69) that if
the "obligation of the defendant grew out of a contract made between it and the plaintiff . . . we
do not think that the provisions of articles 1902 and 1903 are applicable to the case."
In the case of Chapman vs. Underwood (27 Phil. Rep., 374), plaintiff sued the defendant to
recover damages for the personal injuries caused by the negligence of defendant's chauffeur
while driving defendant's automobile in which defendant was riding at the time. The court found
that the damages were caused by the negligence of the driver of the automobile, but held that the
master was not liable, although he was present at the time, saying:
. . . unless the negligent acts of the driver are continued for a length of time as to give the
owner a reasonable opportunity to observe them and to direct the driver to desist
therefrom. . . . The act complained of must be continued in the presence of the owner for
such length of time that the owner by his acquiescence, makes the driver's acts his own.
In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage & Taxicab Co. (33 Phil.
Rep., 8), it is true that the court rested its conclusion as to the liability of the defendant upon
article 1903, although the facts disclosed that the injury complaint of by plaintiff constituted a
breach of the duty to him arising out of the contract of transportation. The express ground of the
decision in this case was that article 1903, in dealing with the liability of a master for the
negligent acts of his servants "makes the distinction between private individuals and public
enterprise;" that as to the latter the law creates a rebuttable presumption of negligence in the
selection or direction of servants; and that in the particular case the presumption of negligence
had not been overcome.
It is evident, therefore that in its decision Yamada case, the court treated plaintiff's action as
though founded in tort rather than as based upon the breach of the contract of carriage, and an
examination of the pleadings and of the briefs shows that the questions of law were in fact
discussed upon this theory. Viewed from the standpoint of the defendant the practical result must
have been the same in any event. The proof disclosed beyond doubt that the defendant's servant
was grossly negligent and that his negligence was the proximate cause of plaintiff's injury. It also
affirmatively appeared that defendant had been guilty of negligence in its failure to exercise
proper discretion in the direction of the servant. Defendant was, therefore, liable for the injury
suffered by plaintiff, whether the breach of the duty were to be regarded as constituting culpa
aquiliana or culpa contractual. As Manresa points out (vol. 8, pp. 29 and 69) whether negligence
occurs an incident in the course of the performance of a contractual undertaking or its itself the
source of an extra-contractual undertaking obligation, its essential characteristics are identical.
There is always an act or omission productive of damage due to carelessness or inattention on the
part of the defendant. Consequently, when the court holds that a defendant is liable in damages
for having failed to exercise due care, either directly, or in failing to exercise proper care in the
selection and direction of his servants, the practical result is identical in either case. Therefore, it
follows that it is not to be inferred, because the court held in the Yamada case that defendant was
liable for the damages negligently caused by its servants to a person to whom it was bound by
contract, and made reference to the fact that the defendant was negligent in the selection and
control of its servants, that in such a case the court would have held that it would have been a
good defense to the action, if presented squarely upon the theory of the breach of the contract,
for defendant to have proved that it did in fact exercise care in the selection and control of the
servant.
The true explanation of such cases is to be found by directing the attention to the relative spheres
of contractual and extra-contractual obligations. The field of non- contractual obligation is much
more broader than that of contractual obligations, comprising, as it does, the whole extent of
juridical human relations. These two fields, figuratively speaking, concentric; that is to say, the
mere fact that a person is bound to another by contract does not relieve him from extra-
contractual liability to such person. When such a contractual relation exists the obligor may
break the contract under such conditions that the same act which constitutes the source of an
extra-contractual obligation had no contract existed between the parties.
The contract of defendant to transport plaintiff carried with it, by implication, the duty to carry
him in safety and to provide safe means of entering and leaving its trains (civil code, article
1258). That duty, being contractual, was direct and immediate, and its non-performance could
not be excused by proof that the fault was morally imputable to defendant's servants.
The railroad company's defense involves the assumption that even granting that the negligent
conduct of its servants in placing an obstruction upon the platform was a breach of its contractual
obligation to maintain safe means of approaching and leaving its trains, the direct and proximate
cause of the injury suffered by plaintiff was his own contributory negligence in failing to wait
until the train had come to a complete stop before alighting. Under the doctrine of comparative
negligence announced in the Rakes case (supra), if the accident was caused by plaintiff's own
negligence, no liability is imposed upon defendant's negligence and plaintiff's negligence merely
contributed to his injury, the damages should be apportioned. It is, therefore, important to
ascertain if defendant was in fact guilty of negligence.
It may be admitted that had plaintiff waited until the train had come to a full stop before
alighting, the particular injury suffered by him could not have occurred. Defendant contends, and
cites many authorities in support of the contention, that it is negligence per se for a passenger to
alight from a moving train. We are not disposed to subscribe to this doctrine in its absolute form.
We are of the opinion that this proposition is too badly stated and is at variance with the
experience of every-day life. In this particular instance, that the train was barely moving when
plaintiff alighted is shown conclusively by the fact that it came to stop within six meters from the
place where he stepped from it. Thousands of person alight from trains under these conditions
every day of the year, and sustain no injury where the company has kept its platform free from
dangerous obstructions. There is no reason to believe that plaintiff would have suffered any
injury whatever in alighting as he did had it not been for defendant's negligent failure to perform
its duty to provide a safe alighting place.
We are of the opinion that the correct doctrine relating to this subject is that expressed in
Thompson's work on Negligence (vol. 3, sec. 3010) as follows:
The test by which to determine whether the passenger has been guilty of negligence in
attempting to alight from a moving railway train, is that of ordinary or reasonable care. It
is to be considered whether an ordinarily prudent person, of the age, sex and condition of
the passenger, would have acted as the passenger acted under the circumstances disclosed
by the evidence. This care has been defined to be, not the care which may or should be
used by the prudent man generally, but the care which a man of ordinary prudence would
use under similar circumstances, to avoid injury." (Thompson, Commentaries on
Negligence, vol. 3, sec. 3010.)
Or, it we prefer to adopt the mode of exposition used by this court in Picart vs. Smith (37 Phil.
rep., 809), we may say that the test is this; Was there anything in the circumstances surrounding
the plaintiff at the time he alighted from the train which would have admonished a person of
average prudence that to get off the train under the conditions then existing was dangerous? If so,
the plaintiff should have desisted from alighting; and his failure so to desist was contributory
negligence.1awph!l.net
As the case now before us presents itself, the only fact from which a conclusion can be drawn to
the effect that plaintiff was guilty of contributory negligence is that he stepped off the car
without being able to discern clearly the condition of the platform and while the train was yet
slowly moving. In considering the situation thus presented, it should not be overlooked that the
plaintiff was, as we find, ignorant of the fact that the obstruction which was caused by the sacks
of melons piled on the platform existed; and as the defendant was bound by reason of its duty as
a public carrier to afford to its passengers facilities for safe egress from its trains, the plaintiff
had a right to assume, in the absence of some circumstance to warn him to the contrary, that the
platform was clear. The place, as we have already stated, was dark, or dimly lighted, and this
also is proof of a failure upon the part of the defendant in the performance of a duty owing by it
to the plaintiff; for if it were by any possibility concede that it had right to pile these sacks in the
path of alighting passengers, the placing of them adequately so that their presence would be
revealed.
As pertinent to the question of contributory negligence on the part of the plaintiff in this case the
following circumstances are to be noted: The company's platform was constructed upon a level
higher than that of the roadbed and the surrounding ground. The distance from the steps of the
car to the spot where the alighting passenger would place his feet on the platform was thus
reduced, thereby decreasing the risk incident to stepping off. The nature of the platform,
constructed as it was of cement material, also assured to the passenger a stable and even surface
on which to alight. Furthermore, the plaintiff was possessed of the vigor and agility of young
manhood, and it was by no means so risky for him to get off while the train was yet moving as
the same act would have been in an aged or feeble person. In determining the question of
contributory negligence in performing such act that is to say, whether the passenger acted
prudently or recklessly the age, sex, and physical condition of the passenger are
circumstances necessarily affecting the safety of the passenger, and should be considered.
Women, it has been observed, as a general rule are less capable than men of alighting with safety
under such conditions, as the nature of their wearing apparel obstructs the free movement of the
limbs. Again, it may be noted that the place was perfectly familiar to the plaintiff as it was his
daily custom to get on and of the train at this station. There could, therefore, be no uncertainty in
his mind with regard either to the length of the step which he was required to take or the
character of the platform where he was alighting. Our conclusion is that the conduct of the
plaintiff in undertaking to alight while the train was yet slightly under way was not characterized
by imprudence and that therefore he was not guilty of contributory negligence.
The evidence shows that the plaintiff, at the time of the accident, was earning P25 a month as a
copyist clerk, and that the injuries he has suffered have permanently disabled him from
continuing that employment. Defendant has not shown that any other gainful occupation is open
to plaintiff. His expectancy of life, according to the standard mortality tables, is approximately
thirty-three years. We are of the opinion that a fair compensation for the damage suffered by him
for his permanent disability is the 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.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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, jointly 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.


Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

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.

44 Phil. 874
[ G. R. No. 16570, March 09, 1922 ]
SMITH, BELL & CO., LTD., PLAINTIFF AND APPELLANT, VS. VICENTE
SOTELO MATTI, DEFENDANT AND APPELLANT.

D E C I S I O N
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 expeliers 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 expeliers and pay the plaintiff the sum of fifty thousand
pesos (P50,000), 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 requirements 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 bejng 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 manufacturers."
In all these contracts, there is a final qlause 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
jn 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 States
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 uncerjmn 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
obligation 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, 1866, and February 23, 1871.
In the former it is held:
"First. 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, 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 'Novisima Recopilacion,' 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 Legislation 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 with if he does all that is in his power, and has the right to demand
performance of the contract by the other party, which is the doctrine laid down also by the
supreme court." (The same publication [1871], vol. 23, page 492.)
It is sufficiently proven in the record that the plaintiff has made all the efforts it could possibly be
expected to make under the circumstances, to bring the goods in question to Manila, as soon as
possible. And, as a matter of fact, through such efforts, it succeeded in importing them and
placing them at the disposal of the defendant, Mr. Sotelo, in April, 1919. Under the doctrine just
cited, which, as we have seen, is of the same juridical origin as our Civil Code, it is obvious that
the plaintiff has complied with its obligation.
In connection with this obligation to deliver, occurring in a contract of sale like those in question,
the rule in North America is that when the time of delivery is not fixed in the contract, time is
regarded unessential.
"When the time of delivery is not fixed or is stated in general and indefinite terms, time is not of
the essence of the contract." (35 Cyc., 179. And see Montgomery vs. Thompson, 152 Cal, 319;
92 Pac, 866; O'Brien vs. Higley, 162 Ind., 316; 70 N. E., 242; Pratt vs. Lincoln [Me. 1888], 13
Atl., 689; White vs. McMillan, 114 N. C, 349; 19 S. E., 234; Ballantyne vs. Watson, 30 U. C. C.
P., 529.)
In such cases, the delivery must be made within a reasonable time.
"The law implies, however, that if no time is fixed, delivery shall be made within a reasonable
time, in the absence of anything to show that an immediate delivery is intended." (35 Cyc, 179,
180.)
"When the contract provides for delivery 'as soon as possible' the seller is entitled to a reasonable
time, in view of all the circumstances, such as the necessities of manufacture, or of putting the
goods in condition for delivery. The term does not mean immediately or that the seller must stop
all his other work and devote himself to that particular order. But the seller must nevertheless act
with all reasonable diligence or without unreasonable delay. It has been held that a requirement
that the shipment of goods should be the 'earliest possible' must be construed as meaning that the
goods should be sent as soon as the seller could possibly send them, and that it signified rather
more than that the goods should be sent within a reasonable time.
"Delivery 'Shortly.'-In a contract for the sale of personal property to be delivered 'shortly/ it is the
duty of the seller to tender delivery within a reasonable time and if he tenders delivery after such
time the buyer may reject.
* * * *
"The question as to what is a reasonable time for the delivery of the goods by the seller is to be
determined by the circumstances attending the particular transaction, such as the character of the
goods, and the purpose for which they are intended, the ability of the seller to produce the goods
if they are to be manufactured, the facilities available for transportation, and the distance the
goods must be carried, and the usual course of business in the particular trade." (35 Cyc, 181-
184.)
Whether or not the delivery of the machinery in litigation was offered to the defendant within a
reasonable time, is a question to be determined by the court.
"Applications of rule.-A contract for delivery 'about Nov. 1' is complied with by delivery on
November 10 (Whilte vs. McMillan, 114 N. C, 349; 19 S. E., 234. And see O'Brien vs. Higley,
162 Ind., 316; 70 N. E., 242); and a contract to deliver 'about the last of May or June' is complied
with by delivery on the last day of June (New Bedford Copper Co. vs. Southard, 95 Me., 209; 49
Atl., 1062, holding also that if the goods were to be used for a ship to arrive 'about April' and the
vessel was delayed, the seller might deliver within a reasonable time after her arrival, although
such reasonable time extended beyond the last of June) ; so under a contract to deliver goods
sold 'about June, 1906', delivery may be made during the month of June, or in a reasonable time
thereafter (Loomis vs. Norman Printers' Supply Co., 81 Conn., 343; 71 Atl., 358)," (35 Cyc.,
18,0, note 16.)
The record shows, as we have stated, that the plaintiff did all within its power to have the
machinery arrive at Manila as soon as possible, and immediately upon its arrival it notified the
purchaser of the fact and offered to deliver it to him. Taking these circumstances into account,
we hold that the said machinery was brought to Manila by the plaintiff within a reasonable time.
Therefore, the plaintiff has not been guilty of any delay in the fulfillment of its obligation, and,
consequently, it could not have incurred any of the liabilities mentioned by the intervenor in its
counterclaim or set-off.
Besides, it does not appear that the intervenor, the Manila Oil Refining and By-Products Co.,
Inc., has in any way taken part in these contracts. These contracts were signed by the defendant,
Mr, Vicente Sotelo, in his individual capacity and own name. If he was then acting as agent of
the intervenor, the latter has no right of action against the herein plaintiff.
"When an agent acts in his own name, the principal shall have no right of action against the
persons with whom the agent has contracted, or such persons against the principal.
"In such case, the agent is directly liable to the person with whom he has contracted, as if the
transaction were his own. Cases involving things belonging to the principal are excepted.
"The provisions of this article shall be understood to be without prejudice to actions between
principal and Agent." (Civil Code, art. 1717.)
"When the agent transacts business in his own name, it shall not be necessary for him to state
who is the principal and he shall be directly liable, as if the business were for his own account, to
the persons with whom he transacts the same, said persons not having any right of action against
the principal, nor the latter against the former, the liabilities of the principal and of the agent to
each other always being reserved." (Code of Com., art. 246.)
"If the agent transacts business in the name of the principal, he must state that fact; and if the
contract is in writing, he must state it therein or in the subscribing clause, giving the name,
surname, and domicile of said principal.
"In the case prescribed in the foregoing paragraph, the contract and the actions arising therefrom
shall be effective between the principal and the persons or person who may have transacted
business with the agent; but the latter shall be liable to the persons with whom he transacted
business during the time he does not prove the commission, if the principal should deny it,
without prejudice to the obligation and proper actions between the principal and agent." (Code of
Com., art. 247.)
The foregoing provisions lead us to the conclusion that the plaintiff is entitled to the relief prayed
for in its complaint, and that the interverior has no right of action, the damages alleged to have
been sustained by it not being imputable to the plaintiff.
Wherefore, the judgment appealed 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.



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Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 168338 February 15, 2008
FRANCISCO CHAVEZ, petitioner,
vs.
RAUL M. GONZALES, in his capacity as the Secretary of the Department of Justice; and
NATIONAL TELECOMMUNICATIONS COMMISSION (NTC), respondents.
D E C I S I O N
PUNO, C.J .:
A. Precis
In this jurisdiction, it is established that freedom of the press is crucial and so inextricably woven
into the right to free speech and free expression, that any attempt to restrict it must be met with
an examination so critical that only a danger that is clear and present would be allowed to curtail
it.
Indeed, we have not wavered in the duty to uphold this cherished freedom. We have struck down
laws and issuances meant to curtail this right, as in Adiong v. COMELEC,
1
Burgos v. Chief of
Staff,
2
Social Weather Stations v. COMELEC,
3
and Bayan v. Executive Secretary Ermita.
4
When
on its face, it is clear that a governmental act is nothing more than a naked means to prevent the
free exercise of speech, it must be nullified.
B. The Facts
1. The case originates from events that occurred a year after the 2004 national and local
elections. On June 5, 2005, Press Secretary Ignacio Bunye told reporters that the opposition was
planning to destabilize the administration by releasing an audiotape of a mobile phone
conversation allegedly between the President of the Philippines, Gloria Macapagal Arroyo, and a
high-ranking official of the Commission on Elections (COMELEC). The conversation was
audiotaped allegedly through wire-tapping.
5
Later, in a Malacaang press briefing, Secretary
Bunye produced two versions of the tape, one supposedly the complete version, and the other, a
spliced, "doctored" or altered version, which would suggest that the President had instructed the
COMELEC official to manipulate the election results in the Presidents favor.
6
It seems that
Secretary Bunye admitted that the voice was that of President Arroyo, but subsequently made a
retraction.
7

2. On June 7, 2005, former counsel of deposed President Joseph Estrada, Atty. Alan Paguia,
subsequently released an alleged authentic tape recording of the wiretap. Included in the tapes
were purported conversations of the President, the First Gentleman Jose Miguel Arroyo,
COMELEC Commissioner Garcillano, and the late Senator Barbers.
8

3. On June 8, 2005, respondent Department of Justice (DOJ) Secretary Raul Gonzales warned
reporters that those who had copies of the compact disc (CD) and those broadcasting or
publishing its contents could be held liable under the Anti-Wiretapping Act. These persons
included Secretary Bunye and Atty. Paguia. He also stated that persons possessing or airing said
tapes were committing a continuing offense, subject to arrest by anybody who had personal
knowledge if the crime was committed or was being committed in their presence.
9

4. On June 9, 2005, in another press briefing, Secretary Gonzales ordered the National Bureau of
Investigation (NBI) to go after media organizations "found to have caused the spread, the
playing and the printing of the contents of a tape" of an alleged wiretapped conversation
involving the President about fixing votes in the 2004 national elections. Gonzales said that he
was going to start with Inq7.net, a joint venture between the Philippine Daily Inquirer and
GMA7 television network, because by the very nature of the Internet medium, it was able to
disseminate the contents of the tape more widely. He then expressed his intention of inviting the
editors and managers of Inq7.net and GMA7 to a probe, and supposedly declared, "I [have]
asked the NBI to conduct a tactical interrogation of all concerned."
10

5. On June 11, 2005, the NTC issued this press release:
11

NTC GIVES FAIR WARNING TO RADIO AND TELEVISION
OWNERS/OPERATORS TO OBSERVE ANTI-WIRETAPPING LAW AND
PERTINENT CIRCULARS ON PROGRAM STANDARDS
xxx xxx xxx
Taking into consideration the countrys unusual situation, and in order not to
unnecessarily aggravate the same, the NTC warns all radio stations and television
network owners/operators that the conditions of the authorization and permits issued to
them by Government like the Provisional Authority and/or Certificate of Authority
explicitly provides that said companies shall not use [their] stations for the broadcasting
or telecasting of false information or willful misrepresentation. Relative thereto, it has
come to the attention of the [NTC] that certain personalities are in possession of alleged
taped conversations which they claim involve the President of the Philippines and a
Commissioner of the COMELEC regarding supposed violation of election laws.
These personalities have admitted that the taped conversations are products of illegal
wiretapping operations.
Considering that these taped conversations have not been duly authenticated nor could it
be said at this time that the tapes contain an accurate or truthful representation of what
was recorded therein, it is the position of the [NTC] that the continuous airing or
broadcast of the said taped conversations by radio and television stations is a continuing
violation of the Anti-Wiretapping Law and the conditions of the Provisional Authority
and/or Certificate of Authority issued to these radio and television stations. It has been
subsequently established that the said tapes are false and/or fraudulent after a prosecution
or appropriate investigation, the concerned radio and television companies are hereby
warned that their broadcast/airing of such false information and/or willful
misrepresentation shall be just cause for the suspension, revocation and/or
cancellation of the licenses or authorizations issued to the said companies.
In addition to the above, the [NTC] reiterates the pertinent NTC circulars on program
standards to be observed by radio and television stations. NTC Memorandum Circular
111-12-85 explicitly states, among others, that "all radio broadcasting and television
stations shall, during any broadcast or telecast, cut off from the air the speech, play, act or
scene or other matters being broadcast or telecast the tendency thereof is to disseminate
false information or such other willful misrepresentation, or to propose and/or incite
treason, rebellion or sedition." The foregoing directive had been reiterated by NTC
Memorandum Circular No. 22-89, which, in addition thereto, prohibited radio,
broadcasting and television stations from using their stations to broadcast or telecast any
speech, language or scene disseminating false information or willful misrepresentation, or
inciting, encouraging or assisting in subversive or treasonable acts.
The [NTC] will not hesitate, after observing the requirements of due process, to
apply with full force the provisions of said Circulars and their accompanying
sanctions on erring radio and television stations and their owners/operators.
6. On June 14, 2005, NTC held a dialogue with the Board of Directors of the Kapisanan ng mga
Brodkaster sa Pilipinas (KBP). NTC allegedly assured the KBP that the press release did not
violate the constitutional freedom of speech, of expression, and of the press, and the right to
information. Accordingly, NTC and KBP issued a Joint Press Statement which states, among
others, that:
12

NTC respects and will not hinder freedom of the press and the right to information on matters
of public concern. KBP & its members have always been committed to the exercise of press
freedom with high sense of responsibility and discerning judgment of fairness and honesty.
NTC did not issue any MC [Memorandum Circular] or Order constituting a restraint of press
freedom or censorship. The NTC further denies and does not intend to limit or restrict the
interview of members of the opposition or free expression of views.
What is being asked by NTC is that the exercise of press freedom [be] done responsibly.
KBP has program standards that KBP members will observe in the treatment of news and public
affairs programs. These include verification of sources, non-airing of materials that would
constitute inciting to sedition and/or rebellion.
The KBP Codes also require that no false statement or willful misrepresentation is made in the
treatment of news or commentaries.
The supposed wiretapped tapes should be treated with sensitivity and handled responsibly
giving due consideration to the process being undertaken to verify and validate the authenticity
and actual content of the same."
C. The Petition
Petitioner Chavez filed a petition under Rule 65 of the Rules of Court against respondents
Secretary Gonzales and the NTC, "praying for the issuance of the writs of certiorari and
prohibition, as extraordinary legal remedies, to annul void proceedings, and to prevent the
unlawful, unconstitutional and oppressive exercise of authority by the respondents."
13

Alleging that the acts of respondents are violations of the freedom on expression and of the
press, and the right of the people to information on matters of public concern,
14
petitioner
specifically asked this Court:
[F]or [the] nullification of acts, issuances, and orders of respondents committed or made
since June 6, 2005 until the present that curtail the publics rights to freedom of
expression and of the press, and to information on matters of public concern specifically
in relation to information regarding the controversial taped conversion of President
Arroyo and for prohibition of the further commission of such acts, and making of such
issuances, and orders by respondents.
15

Respondents
16
denied that the acts transgress the Constitution, and questioned petitioners legal
standing to file the petition. Among the arguments they raised as to the validity of the "fair
warning" issued by respondent NTC, is that broadcast media enjoy lesser constitutional
guarantees compared to print media, and the warning was issued pursuant to the NTCs mandate
to regulate the telecommunications industry.
17
It was also stressed that "most of the [television]
and radio stations continue, even to this date, to air the tapes, but of late within the parameters
agreed upon between the NTC and KBP."
18

D. The Procedural Threshold: Legal Standing
To be sure, the circumstances of this case make the constitutional challenge peculiar. Petitioner,
who is not a member of the broadcast media, prays that we strike down the acts and statements
made by respondents as violations of the right to free speech, free expression and a free press.
For another, the recipients of the press statements have not come forwardneither intervening
nor joining petitioner in this action. Indeed, as a group, they issued a joint statement with
respondent NTC that does not complain about restraints on freedom of the press.
It would seem, then, that petitioner has not met the requisite legal standing, having failed to
allege "such a personal stake in the outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation of issues upon which the Court so largely depends
for illumination of difficult constitutional questions."
19

But as early as half a century ago, we have already held that where serious constitutional
questions are involved, "the transcendental importance to the public of these cases demands that
they be settled promptly and definitely, brushing aside if we must, technicalities of procedure."
20

Subsequently, this Court has repeatedly and consistently refused to wield procedural barriers as
impediments to its addressing and resolving serious legal questions that greatly impact on public
interest,
21
in keeping with the Court's duty under the 1987 Constitution to determine whether or
not other branches of government have kept themselves within the limits of the Constitution and
the laws and that they have not abused the discretion given to them.
Thus, in line with the liberal policy of this Court on locus standi when a case involves an issue of
overarching significance to our society,
22
we therefore brush aside technicalities of procedure
and take cognizance of this petition,
23
seeing as it involves a challenge to the most exalted of all
the civil rights, the freedom of expression. The petition raises other issues like the extent of
the right to information of the public. It is fundamental, however, that we need not address
all issues but only the most decisive one which in the case at bar is whether the acts of the
respondents abridge freedom of speech and of the press.
But aside from the primordial issue of determining whether free speech and freedom of the
press have been infringed, the case at bar also gives this Court the opportunity: (1) to distill
the essence of freedom of speech and of the press now beclouded by the vagaries of
motherhood statements; (2) to clarify the types of speeches and their differing restraints
allowed by law; (3) to discuss the core concepts of prior restraint, content-neutral and
content-based regulations and their constitutional standard of review; (4) to examine the
historical difference in the treatment of restraints between print and broadcast media and
stress the standard of review governing both; and (5) to call attention to the ongoing
blurring of the lines of distinction between print and broadcast media.
E. Re-examining The law on freedom of speech,
of expression and of the press
No law shall be passed abridging the freedom of speech, of expression, or of the press, or
the right of the people peaceably to assemble and petition the government for redress of
grievances.
24

Freedom of expression has gained recognition as a fundamental principle of every democratic
government, and given a preferred right that stands on a higher level than substantive economic
freedom or other liberties. The cognate rights codified by Article III, Section 4 of the
Constitution, copied almost verbatim from the First Amendment of the U.S. Bill of Rights,
25

were considered the necessary consequence of republican institutions and the complement of free
speech.
26
This preferred status of free speech has also been codified at the international level, its
recognition now enshrined in international law as a customary norm that binds all nations.
27

In the Philippines, the primacy and high esteem accorded freedom of expression is a fundamental
postulate of our constitutional system.
28
This right was elevated to constitutional status in the
1935, the 1973 and the 1987 Constitutions, reflecting our own lesson of history, both political
and legal, that freedom of speech is an indispensable condition for nearly every other form of
freedom.
29
Moreover, our history shows that the struggle to protect the freedom of speech,
expression and the press was, at bottom, the struggle for the indispensable preconditions for the
exercise of other freedoms.
30
For it is only when the people have unbridled access to information
and the press that they will be capable of rendering enlightened judgments. In the oft-quoted
words of Thomas Jefferson, we cannot both be free and ignorant.
E.1. Abstraction of Free Speech
Surrounding the freedom of speech clause are various concepts that we have adopted as part and
parcel of our own Bill of Rights provision on this basic freedom.
31
What is embraced under this
provision was discussed exhaustively by the Court in Gonzales v. Commission on Elections,
32
in
which it was held:
At the very least, free speech and free press may be identified with the liberty to
discuss publicly and truthfully any matter of public interest without censorship and
punishment. There is to be no previous restraint on the communication of views or
subsequent liability whether in libel suits, prosecution for sedition, or action for damages,
or contempt proceedings unless there be a clear and present danger of substantive evil
that Congress has a right to prevent.
33

Gonzales further explained that the vital need of a constitutional democracy for freedom of
expression is undeniable, whether as a means of assuring individual self-fulfillment; of attaining
the truth; of assuring participation by the people in social, including political, decision-making;
and of maintaining the balance between stability and change.
34
As early as the 1920s, the trend as
reflected in Philippine and American decisions was to recognize the broadest scope and assure
the widest latitude for this constitutional guarantee. The trend represents a profound commitment
to the principle that debate on public issue should be uninhibited, robust, and wide-open.
35

Freedom of speech and of the press means something more than the right to approve existing
political beliefs or economic arrangements, to lend support to official measures, and to take
refuge in the existing climate of opinion on any matter of public consequence.
36
When atrophied,
the right becomes meaningless.
37
The right belongs as well -- if not more to those who
question, who do not conform, who differ.
38
The ideas that may be expressed under this freedom
are confined not only to those that are conventional or acceptable to the majority. To be truly
meaningful, freedom of speech and of the press should allow and even encourage the articulation
of the unorthodox view, though it be hostile to or derided by others; or though such view
"induces a condition of unrest, creates dissatisfaction with conditions as they are, or even stirs
people to anger."
39
To paraphrase Justice Holmes, it is freedom for the thought that we hate, no
less than for the thought that agrees with us.
40

The scope of freedom of expression is so broad that it extends protection to nearly all forms of
communication. It protects speech, print and assembly regarding secular as well as political
causes, and is not confined to any particular field of human interest. The protection covers
myriad matters of public interest or concern embracing all issues, about which information is
needed or appropriate, so as to enable members of society to cope with the exigencies of their
period. The constitutional protection assures the broadest possible exercise of free speech and
free press for religious, political, economic, scientific, news, or informational ends, inasmuch as
the Constitution's basic guarantee of freedom to advocate ideas is not confined to the expression
of ideas that are conventional or shared by a majority.
The constitutional protection is not limited to the exposition of ideas. The protection afforded
free speech extends to speech or publications that are entertaining as well as instructive or
informative. Specifically, in Eastern Broadcasting Corporation (DYRE) v. Dans,
41
this Court
stated that all forms of media, whether print or broadcast, are entitled to the broad protection of
the clause on freedom of speech and of expression.
While all forms of communication are entitled to the broad protection of freedom of expression
clause, the freedom of film, television and radio broadcasting is somewhat lesser in scope
than the freedom accorded to newspapers and other print media, as will be subsequently
discussed.
E.2. Differentiation: The Limits & Restraints of Free Speech
From the language of the specific constitutional provision, it would appear that the right to free
speech and a free press is not susceptible of any limitation. But the realities of life in a complex
society preclude a literal interpretation of the provision prohibiting the passage of a law that
would abridge such freedom. For freedom of expression is not an absolute,
42
nor is it an
"unbridled license that gives immunity for every possible use of language and prevents the
punishment of those who abuse this freedom."
Thus, all speech are not treated the same. Some types of speech may be subjected to some
regulation by the State under its pervasive police power, in order that it may not be injurious to
the equal right of others or those of the community or society.
43
The difference in treatment is
expected because the relevant interests of one type of speech, e.g., political speech, may vary
from those of another, e.g., obscene speech. Distinctions have therefore been made in the
treatment, analysis, and evaluation of the permissible scope of restrictions on various categories
of speech.
44
We have ruled, for example, that in our jurisdiction slander or libel, lewd and
obscene speech, as well as "fighting words" are not entitled to constitutional protection and may
be penalized.
45

Moreover, the techniques of reviewing alleged restrictions on speech (overbreadth, vagueness,
and so on) have been applied differently to each category, either consciously or unconsciously.
46

A study of free speech jurisprudencewhether here or abroadwill reveal that courts have
developed different tests as to specific types or categories of speech in concrete situations; i.e.,
subversive speech; obscene speech; the speech of the broadcast media and of the traditional print
media; libelous speech; speech affecting associational rights; speech before hostile audiences;
symbolic speech; speech that affects the right to a fair trial; and speech associated with rights of
assembly and petition.
47

Generally, restraints on freedom of speech and expression are evaluated by either or a
combination of three tests, i.e., (a) the dangerous tendency doctrine which permits limitations
on speech once a rational connection has been established between the speech restrained and the
danger contemplated;
48
(b) the balancing of interests tests, used as a standard when courts need
to balance conflicting social values and individual interests, and requires a conscious and
detailed consideration of the interplay of interests observable in a given situation of type of
situation;
49
and (c) the clear and present danger rule which rests on the premise that speech
may be restrained because there is substantial danger that the speech will likely lead to an evil
the government has a right to prevent. This rule requires that the evil consequences sought to be
prevented must be substantive, "extremely serious and the degree of imminence extremely high."
50

As articulated in our jurisprudence, we have applied either the dangerous tendency doctrine or
clear and present danger test to resolve free speech challenges. More recently, we have
concluded that we have generally adhered to the clear and present danger test.
51

E.3. I n Focus: Freedom of the Press
Much has been written on the philosophical basis of press freedom as part of the larger right of
free discussion and expression. Its practical importance, though, is more easily grasped. It is the
chief source of information on current affairs. It is the most pervasive and perhaps most powerful
vehicle of opinion on public questions. It is the instrument by which citizens keep their
government informed of their needs, their aspirations and their grievances. It is the sharpest
weapon in the fight to keep government responsible and efficient. Without a vigilant press, the
mistakes of every administration would go uncorrected and its abuses unexposed. As Justice
Malcolm wrote in United States v. Bustos:
52

The interest of society and the maintenance of good government demand a full discussion of
public affairs. Complete liberty to comment on the conduct of public men is a scalpel in the case
of free speech. The sharp incision of its probe relieves the abscesses of officialdom. Men in
public life may suffer under a hostile and unjust accusation; the wound can be assuaged with the
balm of clear conscience.
Its contribution to the public weal makes freedom of the press deserving of extra protection.
Indeed, the press benefits from certain ancillary rights. The productions of writers are classified
as intellectual and proprietary. Persons who interfere or defeat the freedom to write for the press
or to maintain a periodical publication are liable for damages, be they private individuals or
public officials.
E.4. Anatomy of Restrictions: Prior Restraint, Content-Neutral and Content-Based
Regulations
Philippine jurisprudence, even as early as the period under the 1935 Constitution, has recognized
four aspects of freedom of the press. These are (1) freedom from prior restraint; (2) freedom
from punishment subsequent to publication;
53
(3) freedom of access to information;
54
and (4)
freedom of circulation.
55

Considering that petitioner has argued that respondents press statement constitutes a form of
impermissible prior restraint, a closer scrutiny of this principle is in order, as well as its sub-
specie of content-based (as distinguished from content-neutral) regulations.
At this point, it should be noted that respondents in this case deny that their acts constitute prior
restraints. This presents a unique tinge to the present challenge, considering that the cases in our
jurisdiction involving prior restrictions on speech never had any issue of whether the
governmental act or issuance actually constituted prior restraint. Rather, the determinations were
always about whether the restraint was justified by the Constitution.
Be that as it may, the determination in every case of whether there is an impermissible restraint
on the freedom of speech has always been based on the circumstances of each case, including the
nature of the restraint. And in its application in our jurisdiction, the parameters of this
principle have been etched on a case-to-case basis, always tested by scrutinizing the
governmental issuance or act against the circumstances in which they operate, and then
determining the appropriate test with which to evaluate.
Prior restraint refers to official governmental restrictions on the press or other forms of
expression in advance of actual publication or dissemination.
56
Freedom from prior restraint is
largely freedom from government censorship of publications, whatever the form of censorship,
and regardless of whether it is wielded by the executive, legislative or judicial branch of the
government. Thus, it precludes governmental acts that required approval of a proposal to
publish; licensing or permits as prerequisites to publication including the payment of license
taxes for the privilege to publish; and even injunctions against publication. Even the closure of
the business and printing offices of certain newspapers, resulting in the discontinuation of their
printing and publication, are deemed as previous restraint or censorship.
57
Any law or official
that requires some form of permission to be had before publication can be made, commits an
infringement of the constitutional right, and remedy can be had at the courts.
Given that deeply ensconced in our fundamental law is the hostility against all prior restraints on
speech, and any act that restrains speech is presumed invalid,
58
and "any act that restrains speech
is hobbled by the presumption of invalidity and should be greeted with furrowed brows,"
59
it is
important to stress not all prior restraints on speech are invalid. Certain previous restraints
may be permitted by the Constitution, but determined only upon a careful evaluation of the
challenged act as against the appropriate test by which it should be measured against.
Hence, it is not enough to determine whether the challenged act constitutes some form of
restraint on freedom of speech. A distinction has to be made whether the restraint is (1) a
content-neutral regulation, i.e., merely concerned with the incidents of the speech, or one that
merely controls the time, place or manner, and under well defined standards;
60
or (2) a content-
based restraint or censorship, i.e., the restriction is based on the subject matter of the utterance or
speech.
61
The cast of the restriction determines the test by which the challenged act is assayed
with.
When the speech restraints take the form of a content-neutral regulation, only a substantial
governmental interest is required for its validity.
62
Because regulations of this type are not
designed to suppress any particular message, they are not subject to the strictest form of judicial
scrutiny but an intermediate approachsomewhere between the mere rationality that is
required of any other law and the compelling interest standard applied to content-based
restrictions.
63
The test is called intermediate because the Court will not merely rubberstamp the
validity of a law but also require that the restrictions be narrowly-tailored to promote an
important or significant governmental interest that is unrelated to the suppression of expression.
The intermediate approach has been formulated in this manner:
A governmental regulation is sufficiently justified if it is within the constitutional power
of the Government, if it furthers an important or substantial governmental interest; if the
governmental interest is unrelated to the suppression of free expression; and if the
incident restriction on alleged [freedom of speech & expression] is no greater than is
essential to the furtherance of that interest.
64

On the other hand, a governmental action that restricts freedom of speech or of the press based
on content is given the strictest scrutiny in light of its inherent and invasive impact. Only when
the challenged act has overcome the clear and present danger rule will it pass constitutional
muster,
65
with the government having the burden of overcoming the presumed
unconstitutionality.
Unless the government can overthrow this presumption, the content-based restraint will be
struck down.
66

With respect to content-based restrictions, the government must also show the type of harm the
speech sought to be restrained would bring about especially the gravity and the imminence of
the threatened harm otherwise the prior restraint will be invalid. Prior restraint on speech based
on its content cannot be justified by hypothetical fears, "but only by showing a substantive and
imminent evil that has taken the life of a reality already on ground."
67
As formulated, "the
question in every case is whether the words used are used in such circumstances and are of such
a nature as to create a clear and present danger that they will bring about the substantive evils
that Congress has a right to prevent. It is a question of proximity and degree."
68

The regulation which restricts the speech content must also serve an important or substantial
government interest, which is unrelated to the suppression of free expression.
69

Also, the incidental restriction on speech must be no greater than what is essential to the
furtherance of that interest.
70
A restriction that is so broad that it encompasses more than what is
required to satisfy the governmental interest will be invalidated.
71
The regulation, therefore,
must be reasonable and narrowly drawn to fit the regulatory purpose, with the least restrictive
means undertaken.
72

Thus, when the prior restraint partakes of a content-neutral regulation, it is subjected to an
intermediate review. A content-based regulation,
73
however, bears a heavy presumption of
invalidity and is measured against the clear and present danger rule. The latter will pass
constitutional muster only if justified by a compelling reason, and the restrictions imposed are
neither overbroad nor vague.
74

Applying the foregoing, it is clear that the challenged acts in the case at bar need to be subjected
to the clear and present danger rule, as they are content-based restrictions. The acts of
respondents focused solely on but one objecta specific content fixed as these were on the
alleged taped conversations between the President and a COMELEC official. Undoubtedly these
did not merely provide regulations as to the time, place or manner of the dissemination of speech
or expression.
E.5. Dichotomy of Free Press: Print v. Broadcast Media
Finally, comes respondents argument that the challenged act is valid on the ground that
broadcast media enjoys free speech rights that are lesser in scope to that of print media. We next
explore and test the validity of this argument, insofar as it has been invoked to validate a content-
based restriction on broadcast media.
The regimes presently in place for each type of media differ from one other. Contrasted with
the regime in respect of books, newspapers, magazines and traditional printed matter,
broadcasting, film and video have been subjected to regulatory schemes.
The dichotomy between print and broadcast media traces its origins in the United States. There,
broadcast radio and television have been held to have limited First Amendment protection,
75
and
U.S. Courts have excluded broadcast media from the application of the "strict scrutiny" standard
that they would otherwise apply to content-based restrictions.
76
According to U.S. Courts, the
three major reasons why broadcast media stands apart from print media are: (a) the scarcity of
the frequencies by which the medium operates [i.e., airwaves are physically limited while print
medium may be limitless];
77
(b) its "pervasiveness" as a medium; and (c) its unique accessibility
to children.
78
Because cases involving broadcast media need not follow "precisely the same
approach that [U.S. courts] have applied to other media," nor go "so far as to demand that such
regulations serve compelling government interests,"
79
they are decided on whether the
"governmental restriction" is narrowly tailored to further a substantial governmental
interest,"
80
or the intermediate test.
As pointed out by respondents, Philippine jurisprudence has also echoed a differentiation in
treatment between broadcast and print media. Nevertheless, a review of Philippine case law on
broadcast media will show thatas we have deviated with the American conception of the
Bill of Rights
81
we likewise did not adopt en masse the U.S. conception of free speech as it
relates to broadcast media, particularly as to which test would govern content-based prior
restraints.
Our cases show two distinct features of this dichotomy. First, the difference in treatment, in the
main, is in the regulatory scheme applied to broadcast media that is not imposed on traditional
print media, and narrowly confined to unprotected speech (e.g., obscenity, pornography,
seditious and inciting speech), or is based on a compelling government interest that also has
constitutional protection, such as national security or the electoral process.
Second, regardless of the regulatory schemes that broadcast media is subjected to, the Court has
consistently held that the clear and present danger test applies to content-based restrictions on
media, without making a distinction as to traditional print or broadcast media.
The distinction between broadcast and traditional print media was first enunciated in Eastern
Broadcasting Corporation (DYRE) v. Dans,
82
wherein it was held that "[a]ll forms of media,
whether print or broadcast, are entitled to the broad protection of the freedom of speech and
expression clause. The test for limitations on freedom of expression continues to be the clear and
present danger rule"
83

Dans was a case filed to compel the reopening of a radio station which had been summarily
closed on grounds of national security. Although the issue had become moot and academic
because the owners were no longer interested to reopen, the Court still proceeded to do an
analysis of the case and made formulations to serve as guidelines for all inferior courts and
bodies exercising quasi-judicial functions. Particularly, the Court made a detailed exposition as
to what needs be considered in cases involving broadcast media. Thus:
84

xxx xxx xxx
(3) All forms of media, whether print or broadcast, are entitled to the broad protection of
the freedom of speech and expression clause. The test for limitations on freedom of
expression continues to be the clear and present danger rule, that words are used in
such circumstances and are of such a nature as to create a clear and present danger that
they will bring about the substantive evils that the lawmaker has a right to prevent, In his
Constitution of the Philippines (2nd Edition, pp. 569-570) Chief Justice Enrique M.
Fernando cites at least nine of our decisions which apply the test. More recently, the clear
and present danger test was applied in J.B.L. Reyes in behalf of the Anti-Bases Coalition
v. Bagatsing. (4) The clear and present danger test, however, does not lend itself to a
simplistic and all embracing interpretation applicable to all utterances in all forums.
Broadcasting has to be licensed. Airwave frequencies have to be allocated among
qualified users. A broadcast corporation cannot simply appropriate a certain frequency
without regard for government regulation or for the rights of others.
All forms of communication are entitled to the broad protection of the freedom of
expression clause. Necessarily, however, the freedom of television and radio
broadcasting is somewhat lesser in scope than the freedom accorded to newspaper and
print media.
The American Court in Federal Communications Commission v. Pacifica Foundation
(438 U.S. 726), confronted with a patently offensive and indecent regular radio program,
explained why radio broadcasting, more than other forms of communications, receives
the most limited protection from the free expression clause. First, broadcast media have
established a uniquely pervasive presence in the lives of all citizens, Material presented
over the airwaves confronts the citizen, not only in public, but in the privacy of his home.
Second, broadcasting is uniquely accessible to children. Bookstores and motion picture
theaters may be prohibited from making certain material available to children, but the
same selectivity cannot be done in radio or television, where the listener or viewer is
constantly tuning in and out.
Similar considerations apply in the area of national security.
The broadcast media have also established a uniquely pervasive presence in the lives of
all Filipinos. Newspapers and current books are found only in metropolitan areas and in
the poblaciones of municipalities accessible to fast and regular transportation. Even here,
there are low income masses who find the cost of books, newspapers, and magazines
beyond their humble means. Basic needs like food and shelter perforce enjoy high
priorities.
On the other hand, the transistor radio is found everywhere. The television set is also
becoming universal. Their message may be simultaneously received by a national or
regional audience of listeners including the indifferent or unwilling who happen to be
within reach of a blaring radio or television set. The materials broadcast over the
airwaves reach every person of every age, persons of varying susceptibilities to
persuasion, persons of different I.Q.s and mental capabilities, persons whose reactions to
inflammatory or offensive speech would be difficult to monitor or predict. The impact of
the vibrant speech is forceful and immediate. Unlike readers of the printed work, the
radio audience has lesser opportunity to cogitate analyze, and reject the utterance.
(5) The clear and present danger test, therefore, must take the particular circumstances of
broadcast media into account. The supervision of radio stations-whether by government
or through self-regulation by the industry itself calls for thoughtful, intelligent and
sophisticated handling.
The government has a right to be protected against broadcasts which incite the listeners to
violently overthrow it. Radio and television may not be used to organize a rebellion or to
signal the start of widespread uprising. At the same time, the people have a right to be
informed. Radio and television would have little reason for existence if broadcasts are
limited to bland, obsequious, or pleasantly entertaining utterances. Since they are the
most convenient and popular means of disseminating varying views on public issues,
they also deserve special protection.
(6) The freedom to comment on public affairs is essential to the vitality of a
representative democracy. In the 1918 case of United States v. Bustos (37 Phil. 731) this
Court was already stressing that.
The interest of society and the maintenance of good government demand a full discussion
of public affairs. Complete liberty to comment on the conduct of public men is a scalpel
in the case of free speech. The sharp incision of its probe relieves the abscesses of
officialdom. Men in public life may suffer under a hostile and an unjust accusation; the
wound can be assuaged with the balm of a clear conscience. A public officer must not be
too thin-skinned with reference to comment upon his official acts. Only thus can the
intelligence and dignity of the individual be exalted.
(7) Broadcast stations deserve the special protection given to all forms of media by the
due process and freedom of expression clauses of the Constitution. [Citations omitted]
It is interesting to note that the Court in Dans adopted the arguments found in U.S. jurisprudence
to justify differentiation of treatment (i.e., the scarcity, pervasiveness and accessibility to
children), but only after categorically declaring that "the test for limitations on freedom of
expression continues to be the clear and present danger rule," for all forms of media,
whether print or broadcast. Indeed, a close reading of the above-quoted provisions would
show that the differentiation that the Court in Dans referred to was narrowly restricted to what is
otherwise deemed as "unprotected speech" (e.g., obscenity, national security, seditious and
inciting speech), or to validate a licensing or regulatory scheme necessary to allocate the limited
broadcast frequencies, which is absent in print media. Thus, when this Court declared in Dans
that the freedom given to broadcast media was "somewhat lesser in scope than the freedom
accorded to newspaper and print media," it was not as to what test should be applied, but the
context by which requirements of licensing, allocation of airwaves, and application of norms to
unprotected speech.
85

In the same year that the Dans case was decided, it was reiterated in Gonzales v. Katigbak,
86
that
the test to determine free expression challenges was the clear and present danger, again without
distinguishing the media.
87
Katigbak, strictly speaking, does not treat of broadcast media but
motion pictures. Although the issue involved obscenity standards as applied to movies,
88
the
Court concluded its decision with the following obiter dictum that a less liberal approach would
be used to resolve obscenity issues in television as opposed to motion pictures:
All that remains to be said is that the ruling is to be limited to the concept of obscenity
applicable to motion pictures. It is the consensus of this Court that where television is
concerned, a less liberal approach calls for observance. This is so because unlike motion
pictures where the patrons have to pay their way, television reaches every home where
there is a set. Children then will likely be among the avid viewers of the programs therein
shown..It cannot be denied though that the State as parens patriae is called upon to
manifest an attitude of caring for the welfare of the young.
More recently, in resolving a case involving the conduct of exit polls and dissemination of the
results by a broadcast company, we reiterated that the clear and present danger rule is the test we
unquestionably adhere to issues that involve freedoms of speech and of the press.
89

This is not to suggest, however, that the clear and present danger rule has been applied to
all cases that involve the broadcast media. The rule applies to all media, including broadcast,
but only when the challenged act is a content-based regulation that infringes on free speech,
expression and the press. Indeed, in Osmena v. COMELEC,
90
which also involved broadcast
media, the Court refused to apply the clear and present danger rule to a COMELEC regulation of
time and manner of advertising of political advertisements because the challenged restriction was
content-neutral.
91
And in a case involving due process and equal protection issues, the Court in
Telecommunications and Broadcast Attorneys of the Philippines v. COMELEC
92
treated a
restriction imposed on a broadcast media as a reasonable condition for the grant of the medias
franchise, without going into which test would apply.
That broadcast media is subject to a regulatory regime absent in print media is observed also in
other jurisdictions, where the statutory regimes in place over broadcast media include elements
of licensing, regulation by administrative bodies, and censorship. As explained by a British
author:
The reasons behind treating broadcast and films differently from the print media differ in
a number of respects, but have a common historical basis. The stricter system of controls
seems to have been adopted in answer to the view that owing to their particular impact
on audiences, films, videos and broadcasting require a system of prior restraints, whereas
it is now accepted that books and other printed media do not. These media are viewed as
beneficial to the public in a number of respects, but are also seen as possible sources of
harm.
93

Parenthetically, these justifications are now the subject of debate. Historically, the scarcity of
frequencies was thought to provide a rationale. However, cable and satellite television have
enormously increased the number of actual and potential channels. Digital technology will
further increase the number of channels available. But still, the argument persists that
broadcasting is the most influential means of communication, since it comes into the home, and
so much time is spent watching television. Since it has a unique impact on people and affects
children in a way that the print media normally does not, that regulation is said to be necessary in
order to preserve pluralism. It has been argued further that a significant main threat to free
expressionin terms of diversitycomes not from government, but from private corporate
bodies. These developments show a need for a reexamination of the traditional notions of the
scope and extent of broadcast media regulation.
94

The emergence of digital technology -- which has led to the convergence of broadcasting,
telecommunications and the computer industry -- has likewise led to the question of whether the
regulatory model for broadcasting will continue to be appropriate in the converged
environment.
95
Internet, for example, remains largely unregulated, yet the Internet and the
broadcast media share similarities,
96
and the rationales used to support broadcast regulation
apply equally to the Internet.
97
Thus, it has been argued that courts, legislative bodies and the
government agencies regulating media must agree to regulate both, regulate neither or develop a
new regulatory framework and rationale to justify the differential treatment.
98

F. The Case At Bar
Having settled the applicable standard to content-based restrictions on broadcast media, let us go
to its application to the case at bar. To recapitulate, a governmental action that restricts freedom
of speech or of the press based on content is given the strictest scrutiny, with the government
having the burden of overcoming the presumed unconstitutionality by the clear and present
danger rule. This rule applies equally to all kinds of media, including broadcast media.
This outlines the procedural map to follow in cases like the one at bar as it spells out the
following: (a) the test; (b) the presumption; (c) the burden of proof; (d) the party to discharge the
burden; and (e) the quantum of evidence necessary. On the basis of the records of the case at bar,
respondents who have the burden to show that these acts do not abridge freedom of speech and
of the press failed to hurdle the clear and present danger test. It appears that the great evil which
government wants to prevent is the airing of a tape recording in alleged violation of the anti-
wiretapping law. The records of the case at bar, however, are confused and confusing, and
respondents evidence falls short of satisfying the clear and present danger test. Firstly, the
various statements of the Press Secretary obfuscate the identity of the voices in the tape
recording. Secondly, the integrity of the taped conversation is also suspect. The Press Secretary
showed to the public two versions, one supposed to be a "complete" version and the other, an
"altered" version. Thirdly, the evidence of the respondents on the whos and the hows of the
wiretapping act is ambivalent, especially considering the tapes different versions. The identity
of the wire-tappers, the manner of its commission and other related and relevant proofs are some
of the invisibles of this case. Fourthly, given all these unsettled facets of the tape, it is even
arguable whether its airing would violate the anti-wiretapping law.
We rule that not every violation of a law will justify straitjacketing the exercise of freedom
of speech and of the press. Our laws are of different kinds and doubtless, some of them
provide norms of conduct which even if violated have only an adverse effect on a persons
private comfort but does not endanger national security. There are laws of great significance but
their violation, by itself and without more, cannot support suppression of free speech and free
press. In fine, violation of law is just a factor, a vital one to be sure, which should be weighed
in adjudging whether to restrain freedom of speech and of the press. The totality of the
injurious effects of the violation to private and public interest must be calibrated in light of the
preferred status accorded by the Constitution and by related international covenants protecting
freedom of speech and of the press. In calling for a careful and calibrated measurement of the
circumference of all these factors to determine compliance with the clear and present danger test,
the Court should not be misinterpreted as devaluing violations of law. By all means,
violations of law should be vigorously prosecuted by the State for they breed their own evil
consequence. But to repeat, the need to prevent their violation cannot per se trump the
exercise of free speech and free press, a preferred right whose breach can lead to greater
evils. For this failure of the respondents alone to offer proof to satisfy the clear and present
danger test, the Court has no option but to uphold the exercise of free speech and free press.
There is no showing that the feared violation of the anti-wiretapping law clearly endangers the
national security of the State.
This is not all the faultline in the stance of the respondents. We slide to the issue of whether the
mere press statements of the Secretary of Justice and of the NTC in question constitute a form
of content-based prior restraint that has transgressed the Constitution. In resolving this issue, we
hold that it is not decisive that the press statements made by respondents were not reduced
in or followed up with formal orders or circulars. It is sufficient that the press statements
were made by respondents while in the exercise of their official functions. Undoubtedly,
respondent Gonzales made his statements as Secretary of Justice, while the NTC issued its
statement as the regulatory body of media. Any act done, such as a speech uttered, for and on
behalf of the government in an official capacity is covered by the rule on prior restraint.
The concept of an "act" does not limit itself to acts already converted to a formal order or
official circular. Otherwise, the non formalization of an act into an official order or circular
will result in the easy circumvention of the prohibition on prior restraint. The press
statements at bar are acts that should be struck down as they constitute impermissible forms of
prior restraints on the right to free speech and press.
There is enough evidence of chilling effect of the complained acts on record. The warnings
given to media came from no less the NTC, a regulatory agency that can cancel the Certificate
of Authority of the radio and broadcast media. They also came from the Secretary of Justice, the
alter ego of the Executive, who wields the awesome power to prosecute those perceived to be
violating the laws of the land. After the warnings, the KBP inexplicably joined the NTC in
issuing an ambivalent Joint Press Statement. After the warnings, petitioner Chavez was left alone
to fight this battle for freedom of speech and of the press. This silence on the sidelines on the part
of some media practitioners is too deafening to be the subject of misinterpretation.
The constitutional imperative for us to strike down unconstitutional acts should always be
exercised with care and in light of the distinct facts of each case. For there are no hard and fast
rules when it comes to slippery constitutional questions, and the limits and construct of relative
freedoms are never set in stone. Issues revolving on their construct must be decided on a case to
case basis, always based on the peculiar shapes and shadows of each case. But in cases where the
challenged acts are patent invasions of a constitutionally protected right, we should be swift in
striking them down as nullities per se. A blow too soon struck for freedom is preferred than a
blow too late.
In VIEW WHEREOF, the petition is GRANTED. The writs of certiorari and prohibition are
hereby issued, nullifying the official statements made by respondents on June 8, and 11, 2005
warning the media on airing the alleged wiretapped conversation between the President and other
personalities, for constituting unconstitutional prior restraint on the exercise of freedom of
speech and of the press
SO ORDERED.
REYNATO S. PUNO
Chief Justice

WE CONCUR:
LEONARDO A. QUISUMBING
Associate Justice
CONSUELO YNARES-SANTIAGO
Associate Justice
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
ANTONIO T. CARPIO
Associate Justice
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
RENATO C. CORONA
Associate Justice
CONCHITA CARPIO MORALES
Associate Justice
ADOLFO S. AZCUNA
Associate Justice
DANTE O. TINGA
Associate Justice
MINITA V. CHICO-NAZARIO
Associate Justice
PRESBITERO J. VELASCO, JR.
Associate Justice
ANTONIO EDUARDO B. NACHURA
Associate Justice
RUBEN T. REYES TERESITA
Associate Justice
LEONARDO-DE CASTRO
Associate Justice

C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, 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 Court.
REYNATO S. PUNO
Chief Justice

Footnotes
1
G.R. No. 103956, March 31, 1992, 207 SCRA 712.
2
218 Phil. 754 (1984).
3
G.R. No. 147571, May 5, 2001, 357 SCRA 496.
4
G.R. No. 169838, April 25, 2006, 488 SCRA 226.
5
Rollo, pp. 6-7 (citing the Philippine Daily Inquirer (PDI), June 7, 2005, pp. A1, A18;
PDI, June 14, 2005, p. A1); and p. 58.
6
Id. at 7-8 (citing the Manila Standard, June 10, 2005, p. A2); and 58.
7
Id. at 7-8 and 59.
8
Id.
9
Id. at 8-9 and 59.
10
Id. at 9.
11
Id. at 10-12, 43-44, 60-62.
12
Id. at 62-63, 86-87.
13
Id. at 6.
14
Respondents have "committed blatant violations of the freedom of expression and of
the press and the right of the people to information on matters of public concern
enshrined in Article III, Sections 4 and 7 of the 1987 Constitution. Id. at 18. Petitioner
also argued that respondent NTC acted beyond its powers when it issued the press release
of June 11, 2005. Id.
15
Id. at 6.
16
Through the Comment filed by the Solicitor-General. Id. at 56-83.
17
Id. at 71-73.
18
Id. at 74-75.
19
The Court will exercise its power of judicial review only if the case is brought before it
by a party who has the legal standing to raise the constitutional or legal question. "Legal
standing" means a personal and substantial interest in the case such that the party has
sustained or will sustain direct injury as a result of the government act that is being
challenged. The term "interest" is material interest, an interest in issue and to be affected
by the decree, as distinguished from mere interest in the question involved, or a mere
incidental interest. Pimentel v. Executive Secretary, G.R. No. 158088, July 6, 2005, 462
SCRA 622, citing Joya vs. Presidential Commission on Good Government, G.R. No.
96541, August 24, 1993, 225 SCRA 568. See Kilosbayan, Inc. v. Morato, G.R. No.
118910, July 17, 1995, 246 SCRA 540, 562563; and Agan v. PIATCO (Decision), 450
Phil. 744 (2003).
20
Araneta v. Dinglasan, 84 Phil. 368, 373 (1949), cited in Osmea v. COMELEC, G.R.
No. 100318, July 30, 1991, 199 SCRA 750.
21
See Agan v. PIATCO (Decision), 450 Phil. 744 (2003).
22
Philconsa v. Jimenez, 122 Phil. 894 (1965); Civil Liberties Union v. Executive
Secretary, G.R. No. 83896, February 22, 1991, 194 SCRA 317; Guingona v. Carague,
G.R. No. 94571, April 22, 1991, 196 SCRA 221; Osmea v. COMELEC, G.R. No.
100318, July 30, 1991, 199 SCRA 750; Basco v. PAGCOR, 274 Phil. 323 (1991); Carpio
v. Executive Secretary, G.R. No. 96409, February 14, 1992, 206 SCRA 290; Del Mar v.
PAGCOR, 400 Phil. 307 (2000).
23
Basco v. PAGCOR, 274 Phil. 323 (1991), citing Kapatiran ng mga Naglilingkod sa
Pamahalaan ng Pilipinas Inc. v. Tan, G.R. No. L-81311, June 30, 1988, 163 SCRA 371.
24
1987 Phil. Const. Art. III, 4.
25
U.S. Bill of Rights, First Amendment. ("Congress shall make no lawabridging the
freedom of speech, or of the press, or the right of the people peaceably to assemble, and
to petition the Government for a redress of grievances.")
26
The First Amendment was so crafted because the founders of the American
government believed -- as a matter of history and experience -- that the freedom to
express personal opinions was essential to a free government. See Larry Kramer, The
People Themselves: Popular Constitution and Judicial Review (2004).
27
Article 19 of the 1948 Universal Declaration on Human Rights (UDHR) states:
"Everyone has the right to freedom of opinion and expression; this right includes the right
to hold opinions without interference and to seek, receive and impart information and
ideas through any media and regardless of frontiers." Although the UDHR is not binding
as a treaty, many of its provisions have acquired binding status on States and are now part
of customary international law. Article 19 forms part of the UDHR principles that have
been transformed into binding norms. Moreover, many of the rights in the UDHR were
included in and elaborated on in the International Covenant on Civil and Political Rights
(ICCPR), a treaty ratified by over 150 States, including the Philippines. The recognition
of freedom of expression is also found in regional human rights instruments, namely, the
European Convention on Human Rights (Article 10), the American Convention on
Human Rights (Article 10), and the African Charter on Human and Peoples Rights
(Article 9).
28
Gonzales v. COMELEC, 137 Phil. 471, 492 (1969).
29
Salonga v. Cruz-Pano, G.R. 59524, February 18, 1985, 134 SCRA 458-459; Gonzales
v. COMELEC, 137 Phil. 489, 492-3 (1969); Philippine Blooming Mills Employees
Organization v. Philippine Blooming Mills Co., 151-A Phil. 676-677 (1973); National
Press Club v. COMELEC, G.R. No. 102653, March 5, 1992, 207 SCRA 1, 9; Adiong v.
COMELEC, G.R. No. 103956, March 31, 1992, 207 SCRA 712, 715.
30
Indeed, the struggle that attended the recognition of the value of free expression was
discussed by Justice Malcolm in the early case United States v. Bustos, 37 Phil. 731, 739
(1918). Justice Malcolm generalized that the freedom of speech as cherished in
democratic countries was unknown in the Philippine Islands before 1900. Despite the
presence of pamphlets and books early in the history of the Philippine Islands, the
freedom of speech was alien to those who were used to obeying the words of barangay
lords and, ultimately, the colonial monarchy. But ours was a history of struggle for that
specific right: to be able to express ourselves especially in the governance of this country.
Id.
31
Id.
32
137 Phil. 471, 492 (1969).
33
Id.
34
Id. at 493, citing Thomas I. Emerson, Toward a General Theory of the First
Amendment, 72 Yale Law Journal 877 (1963).
35
Id. citing New York Times Co. v. Sullivan, 376 US 254, 270 (1964).
36
Id.
37
Id.
38
Id.
39
Id. citing Terminiello v. City of Chicago, 337 US 1, 4 (1949).
40
Id. citing U.S. v. Schwimmer, 279 US 644, 655 (1929).
41
G.R. No. L-59329, July 19, 1985, 137 SCRA 628.
42
Gonzales v. COMELEC, 137 Phil. 471, 494(1969).
43
Hector S. De Leon, I Philippine Constitutional Law: Principles and Cases 485 (2003)
[Hereinafter De Leon, Constitutional Law].
44
See John E. Nowak & Ronald D. Rotunda, Constitutional Law 16.1, 1131 (7
th

ed.2000 [Hereinafter Nowak & Rotunda, Constitutional Law].
45
De Leon, Constitutional Law at 485. Laws have also limited the freedom of speech and
of the press, or otherwise affected the media and freedom of expression. The Constitution
itself imposes certain limits (such as Article IX on the Commission on Elections, and
Article XVI prohibiting foreign media ownership); as do the Revised Penal Code (with
provisions on national security, libel and obscenity), the Civil Code (which contains two
articles on privacy), the Rules of Court (on the fair administration of justice and
contempt) and certain presidential decrees. There is also a "shield law," or Republic Act
No. 53, as amended by Republic Act No. 1477. Section 1 of this law provides protection
for non-disclosure of sources of information, without prejudice to ones liability under
civil and criminal laws. The publisher, editor, columnist or duly accredited reporter of a
newspaper, magazine or periodical of general circulation cannot be compelled to reveal
the source of any information or news report appearing in said publication, if the
information was released in confidence to such publisher, editor or reporter unless the
court or a Committee of Congress finds that such revelation is demanded by the security
of the state.
46
See Nowak & Rotunda, Constitutional Law 16.1, 1131 (7
th
ed.2000).
47
Id.
48
Cabansag v. Fernandez, 102 Phil. 151 (1957); Gonzales v. COMELEC, 137 Phil. 471
(1969). See People v. Perez, 4 Phil. 599 (1905); People v. Nabong, 57 Phil. 455 (1933);
People v. Feleo, 57 Phil. 451 (1933).
49
This test was used by J. Ruiz-Castro in his Separate Opinion in Gonzales v.
COMELEC, 137 Phil. 471, 532-537 (1969).
50
Cabansag v. Fernandez, 102 Phil. 151 (1957).
51
ABS-CBN Broadcasting Corp. v. COMELEC, 380 Phil. 780, 794 (2000).
52
See U.S. v. Bustos, 37 Phil. 731 (1918).
53
The aspect of freedom from liability subsequent to publication precludes liability for
completed publications of views traditionally held innocent. Otherwise, the prohibition
on prior restraint would be meaningless, as the unrestrained threat of subsequent
punishment, by itself, would be an effective prior restraint. Thus, opinions on public
issues cannot be punished when published, merely because the opinions are novel or
controversial, or because they clash with current doctrines. This fact does not imply that
publishers and editors are never liable for what they print. Such freedom gives no
immunity from laws punishing scandalous or obscene matter, seditious or disloyal
writings, and libelous or insulting words. As classically expressed, the freedom of the
press embraces at the very least the freedom to discuss truthfully and publicly matters of
public concern, without previous restraint or fear of subsequent punishment. For
discussion to be innocent, it must be truthful, must concern something in which people in
general take a healthy interest, and must not endanger some important social end that the
government by law protects. See Joaquin G. Bernas, S.J., The 1987 Constitution of the
Republic of the Philippines: A Commentary, 225 (2003 ed.).
54
Freedom of access to information regarding matters of public interest is kept real in
several ways. Official papers, reports and documents, unless held confidential and secret
by competent authority in the public interest, are public records. As such, they are open
and subject to reasonable regulation, to the scrutiny of the inquiring reporter or editor.
Information obtained confidentially may be printed without specification of the source;
and that source is closed to official inquiry, unless the revelation is deemed by the courts,
or by a House or committee of Congress, to be vital to the security of the State. Id.
55
Freedom of circulation refers to the unhampered distribution of newspapers and other
media among customers and among the general public. It may be interfered with in
several ways. The most important of these is censorship. Other ways include requiring a
permit or license for the distribution of media and penalizing dissemination of copies
made without it;[55] and requiring the payment of a fee or tax, imposed either on the
publisher or on the distributor, with the intent to limit or restrict circulation. These modes
of interfering with the freedom to circulate have been constantly stricken down as
unreasonable limitations on press freedom. Thus, imposing a license tax measured by
gross receipts for the privilege of engaging in the business of advertising in any
newspaper, or charging license fees for the privilege of selling religious books are
impermissible restraints on the freedom of expression. Id. citing Grosjean v. American
Press Co., 297 U.S. 233 (1936); Murdock v. Pennsylvania, 319 U.S. 105 (1943), and
American Bible Society v. City of Manila, 101 Phil. 386 (1957). It has been held,
however, even in the Philippines, that publishers and distributors of newspapers and
allied media cannot complain when required to pay ordinary taxes such as the sales tax.
The exaction is valid only when the obvious and immediate effect is to restrict
oppressively the distribution of printed matter.
56
Id at 225.
57
Burgos v. Chief of Staff, 218 Phil. 754 (1984).
58
Gonzales v. COMELEC, 137 Phil. 471 (1969); ABS-CBN Broadcasting Corp. v.
COMELEC, 380 Phil. 780, 795 (2000) ("Doctrinally, the Court has always ruled in favor
of the freedom of expression, and any restriction is treated an exemption."); Social
Weather Stations v. COMELEC, G.R. No. 147571, May 5, 2001, 357 SCRA 496 ("[A]ny
system of prior restraint comes to court bearing a heavy burden against its
constitutionality. It is the government which must show justification for enforcement of
the restraint."). See also Iglesia ni Cristo v. Court of Appeals, 328 Phil. 893 (1996)
(religious speech falls within the protection of free speech).
59
Iglesia ni Cristo v. CA, 328 Phil. 893, 928 (1996), citing Near v. Minnesota, 283 US
697 (1931); Bantam Books Inc. v. Sullivan, 372 US 58 (1963); New York Times v. United
States, 403 US 713 (1971).
60
See J.B.L. Reyes v. Bagatsing, 210 Phil. 457 (1983), Navarro v. Villegas, G.R. No. L-
31687, February 18, 1970, 31 SCRA 730; Ignacio v. Ela, 99 Phil. 346 (1956); Primicias
v. Fugosa, 80 Phil. 71 (1948).
61
Determining if a restriction is content-based is not always obvious. A regulation may
be content-neutral on its face but partakes of a content-based restriction in its application,
as when it can be shown that the government only enforces the restraint as to prohibit one
type of content or viewpoint. In this case, the restriction will be treated as a content-based
regulation. The most important part of the time, place, or manner standard is the
requirement that the regulation be content-neutral both as written and applied. See
Nowak & Rotunda, Constitutional Law 16.1, 1133 (7
th
ed.2000).
62
See Osmea v. COMELEC, 351 Phil. 692, 718 (1998). The Court looked to Adiong v.
COMELEC, G.R. No. 103456, March 31, 1992, 207 SCRA 712, which had cited a U.S.
doctrine, viz. "A governmental regulation is sufficiently justified if it is within the
constitutional power of the Government, if it furthers an important or substantial
governmental interest; if the governmental interest is unrelated to the suppression of free
expression; and if the incident restriction on alleged [freedom of speech & expression] is
no greater than is essential to the furtherance of that interest."
63
Nowak & Rotunda, Constitutional Law 16.1, 1133 (7
th
ed.2000). This was also called
a "deferential standard of review" in Osmea v. COMELEC, 351 Phil. 692, 718 (1998). It
was explained that the clear and present danger rule is not a sovereign remedy for all
free speech problems, and its application to content-neutral regulations would be
tantamount to "using a sledgehammer to drive a nail when a regular hammer is all that is
needed." Id. at 478.
64
Osmea v. COMELEC, 351 Phil. 692, 717, citing Adiong v. COMELEC, G.R. No.
103956, March 31, 1992, 207 SCRA 712. It was noted that the test was actually
formulated in United States v. OBrien, 391 U.S. 367 (1968), which was deemed
appropriate for restrictions on speech which are content-neutral.
65
Iglesia ni Cristo v. Court of Appeals, 328 Phil. 893 (1996). In this case, it was found
that the act of respondent Board of Review for Motion Pictures and Television of rating a
TV program with "X" on the ground that it "offend[s] and constitute[s] an attack
against other religions which is expressly prohibited by law" was a form of prior
restraint and required the application of the clear and present danger rule.
66
Iglesia ni Cristo v. Court of Appeals, 328 Phil. 893 (1996); Gonzales v. COMELEC,
137 Phil. 471 (1969); ABS-CBN Broadcasting Corp. v. COMELEC, 380 Phil. 780 (2000);
Social Weather Stations v. COMELEC, G.R. No. 147571, May 5, 2001, 357 SCRA 496.
67
Iglesia ni Cristo v. Court of Appeals, 328 Phil. 893 (1996).
68
Schenke v. United States, 249 U.S. 47, 52 (19191), cited in Cabansag v. Fernandez,
102 Phil. 151 (1957); and ABS-CBN Broadcasting Corp. v. COMELEC, 380 Phil. 780,
794 (2000).
69
Adiong v. COMELEC, G.R. No. 103956, March 31, 1992, 207 SCRA 712, cited in
ABS-CBN Broadcasting Corp. v. COMELEC, 380 Phil. 780, 795 (2000).
70
See Adiong v. COMELEC, G.R. No. 103956, March 31, 1992, 207 SCRA 712, and
Gonzales v. COMELEC, 137 Phil. 471 (1969), cited in ABS-CBN Broadcasting Corp. v.
COMELEC, 380 Phil. 780, 795 (2000).
71
See Adiong v. COMELEC, G.R. No. 103956, March 31, 1992, 207 SCRA 712.
72
See Osmea v. COMELEC, 351 Phil. 692 (1998).
73
Parenthetically, there are two types of content-based restrictions. First, the government
may be totally banning some type of speech for content (total ban). Second, the
government may be requiring individuals who wish to put forth certain types of speech to
certain times or places so that the type of speech does not adversely affect its
environment. See Nowak & Rotunda, Constitutional Law 16.1, 1131 (7
th
ed.2000). Both
types of conten-based regulations are subject to strict scrutiny and the clear and present
danger rule.
74
Iglesia ni Cristo v. Court of Appeals, 328 Phil. 893 (1996); Gonzales v. COMELEC,
137 Phil. 471 (1969); ABS-CBN Broadcasting Corp. v. COMELEC, 380 Phil. 780 (2000);
Social Weather Stations v. COMELEC, G.R. No. 147571, May 5, 2001, 357 SCRA 496.
75
This is based on a finding that "broadcast regulation involves unique considerations,"
and that "differences in the characteristics of new media justify differences in the First
Amendment standards applied to them." Red Lion Broad. Co. v. Federal
Communications Commission [FCC], 395 U.S. 367, 386 (1969). See generally National
Broadcasting Co. v. United States, 319 U.S. 190, 219 (1943) (noting that the public
interest standard denoted to the FCC is an expansive power).
76
See Federal Communications Commission [FCC] v. Pacifica Foundation, 438 U.S.
726 (1978); Sable Communications v. FCC, 492 U.S. 115 (1989); and Reno v. American
Civil Liberties Union [ACLU], 521 U.S. 844, 874 (1997). In these cases, U.S. courts
disregarded the argument that the offended listener or viewer could simply turn the dial
and avoid the unwanted broadcast [thereby putting print and broadcast media in the same
footing], reasoning that because the broadcast audience is constantly tuning in and out,
prior warnings cannot protect the listener from unexpected program content.
77
Red Lion Broad. Co. v. FCC, 395 U.S. 367, 386 (1969). Red Lion involved the
application of the fairness doctrine and whether someone personally attacked had the
right to respond on the broadcast medium within the purview of FCC regulation. The
court sustained the regulation. The Court in Red Lion reasoned that because there are
substantially more individuals who want to broadcast than there are frequencies available,
this "scarcity of the spectrum" necessitates a stricter standard for broadcast media, as
opposed to newspapers and magazines. See generally National Broadcasting v. United
States, 319 U.S. 190, 219 (1943) (noting that the public interest standard denoted to the
FCC is an expansive power).
78
See Federal Communications Commission v. Pacifica Foundation, 438 U.S. 726
(1978); Sable Communications v. FCC, 492 U.S. 115 (1989); and Reno v. American Civil
Liberties Union [ACLU], 521 U.S. 844, 874 (1997). In FCC v. Pacifica Foundation,
involving an FCC decision to require broadcasters to channel indecent programming
away from times of the day when there is a reasonable risk that children may be in the
audience, the U.S. Court found that the broadcast medium was an intrusive and pervasive
one. In reaffirming that this medium should receive the most limited of First Amendment
protections, the U.S. Court held that the rights of the public to avoid indecent speech
trump those of the broadcaster to disseminate such speech. The justifications for this
ruling were two-fold. First, the regulations were necessary because of the pervasive
presence of broadcast media in American life, capable of injecting offensive material into
the privacy of the home, where the right "to be left alone plainly outweighs the First
Amendment rights of an intruder." Second, the U.S. Court found that broadcasting "is
uniquely accessible to children, even those too young to read." The Court dismissed the
argument that the offended listener or viewer could simply turn the dial and avoid the
unwanted broadcast, reasoning that because the broadcast audience is constantly tuning in
and out, prior warnings cannot protect the listener from unexpected program content.
79
FCC v. League of Women Voters, 468 U.S. 364, 376 (1984).
80
Id. at 380.
81
See Estrada v. Escritor (Resolution), A.M. No. P-02-1651, June 22, 2006 (free exercise
of religion); and Osmea v. COMELEC, 351 Phil. 692, 718 (1998) (speech restrictions to
promote voting rights). The Court in Osmea v. COMELEC, for example, noted that it is
a foreign notion to the American Constitution that the government may restrict the speech
of some in order to enhance the relative voice of others [the idea being that voting is a
form of speech]. But this Court then declared that the same does not hold true of the
Philippine Constitution, the notion "being in fact an animating principle of that
document." 351 Phil. 692, 718 (1998).
82
G.R. No. L-59329, July 19, 1985, 137 SCRA 628.
83
Id.
84
Id. at 634-637.
85
There is another case wherein the Court had occasion to refer to the differentiation
between traditional print media and broadcast media, but of limited application to the
case at bar inasmuch as the issues did not invoke a free-speech challenge, but due process
and equal protection. See Telecommunications and Broadcast Attorneys of the
Philippines, Inc. v. COMELEC, 352 Phil. 153 (1998) (challenge to legislation requiring
broadcast stations to provide COMELEC Time free of charge).
86
G.R. No. L-69500, July 22, 1985, 137 SCRA 717. In this case, the classification of a
movie as "For Adults Only" was challenged, with the issue focused on obscenity as basis
for the alleged invasion of the right to freedom on artistic and literary expression
embraced in the free speech guarantees of the Constitution. The Court held that the test to
determine free expression was the clear and present danger rule. The Court found there
was an abuse of discretion, but did not get enough votes to rule it was grave. The decision
specifically stated that the ruling in the case was limited to concept of obscenity
applicable to motion pictures. Id. at 723-729.
87
Id. at 725.
88
Id.
89
ABS-CBN Broadcasting Corp. v. COMELEC, 380 Phil. 780, 794 (COMELEC
Resolution restraining ABS-CBN, a corporation engaged in broadcast media of television
and radio, from conducting exit surveys after the 1998 elections). Although the decision
was rendered after the 1998 elections, the Court proceeded to rule on the case to rule on
the issue of the constitutionality of holding exit polls and the dissemination of data
derived therefrom. The Court ruled that restriction on exit polls must be tested against the
clear and present danger rule, the rule we "unquestionably" adhere to. The framing of the
guidelines issued by the Court clearly showed that the issue involved not only the
conduct of the exit polls but also its dissemination by broadcast media. And yet, the
Court did not distinguish, and still applied the clear and present danger rule.
90
351 Phil. 692 (1998) (challenge to legislation which sought to equalize media access
through regulation).
91
Id. at 718.
92
Telecommunications and Broadcast Attorneys of the Philippines, Inc. v. COMELEC,
352 Phil. 153 (1998) (challenge to legislation requiring broadcast stations to provide
COMELEC Time free of charge).
93
Helen Fenwick, Civil Liberties and Human Rights 296 (3
rd
ed. 2002).
94
Id.
95
Stephen J. Shapiro, How Internet Non-Regulation Undermines The Rationales Used To
Support Broadcast Regulation, 8-FALL Media L. & Pol'y 1, 2 (1999).
96
Technological advances, such as software that facilitates the delivery of live, or real-
time, audio and video over the Internet, have enabled Internet content providers to offer
the same services as broadcasters. Indeed, these advancements blur the distinction
between a computer and a television. Id. at 13.
97
Id.
98
The current rationales used to support regulation of the broadcast media become
unpersuasive in light of the fact that the unregulated Internet and the regulated broadcast
media share many of the same features. Id. In other words, as the Internet and broadcast
media become identical, for all intents and purposes, it makes little sense to regulate one
but not the other in an effort to further First Amendment principles. Indeed, as Internet
technologies advance, broadcasters will have little incentive to continue developing
broadcast programming under the threat of regulation when they can disseminate the
same content in the same format through the unregulated Internet. In conclusion, "the
theory of partial regulation, whatever its merits for the circumstances of the last fifty
years, will be unworkable in the media landscape of the future." Id. at 23.

G.R. No. L-264
[ G.R. No. L-264, October 04, 1946 ]
VICENTE SINGSON ENCARNACION, PLAINTIFF AND APPELLEE, VS.
JACINTA BALDOMAR ET AL., DEFENDANTS AND APPELLANTS.

D E C I S I O N
HILADO, J.:
Vicente Singson Encarnacion, owner of the house numbered 589 Legarda Street, Manila, some
six years ago leased said house to Jacinta 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 l6, 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, 19455 defendants were in arrears in the payment of the rental corresponding
to said month, the agreed rental being payable within tha 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 clam 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 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.
In the Court of First Instance the gravamen of the defense interposed by defendants, as it was
expressed by 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
indefinitely and while they should faithfully fulfill their obligation 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 said 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 ado Fernando during the trial had not been alleged in 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; Cuyugan vs. 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 arrears 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 wers made by defendants on account of
rentals with the Clerk of said Court, and in said judgment it is disposed that the amounts thus
depositad 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.


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Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-9671 August 23, 1957
CESAR L. ISAAC, plaintiff-appellant,
vs.
A. L. AMMEN TRANSPORTATION CO., INC., defendant-appellee.
Angel S. Gamboa for appellant.
Manuel O. Chan for appellee.
BAUTISTA ANGELO, J .:
A. L. Ammen Transportation Co., Inc., hereinafter referred to as defendant, is a corporation
engaged in the business of transporting passengers by land for compensation in the Bicol
provinces and one of the lines it operates is the one connecting Legaspi City, Albay with Naga
City, Camarines Sur. One of the buses which defendant was operating is Bus No. 31. On May
31, 1951, plaintiff boarded said bus as a passenger paying the required fare from Ligao, Albay
bound for Pili, Camarines Sur, but before reaching his destination, the bus collided with a motor
vehicle of the pick-up type coming from the opposite direction, as a result of which plaintiff's left
arm was completely severed and the severed portion fell inside the bus. Plaintiff was rushed to a
hospital in Iriga, Camarines Sur where he was given blood transfusion to save his life. After four
days, he was transferred to another hospital in Tabaco, Albay, where he under went treatment for
three months. He was moved later to the Orthopedic Hospital where he was operated on and
stayed there for another two months. For these services, he incurred expenses amounting to
P623.40, excluding medical fees which were paid by defendant.
As an aftermath, plaintiff brought this action against defendants for damages alleging that the
collision which resulted in the loss of his left arm was mainly due to the gross incompetence and
recklessness of the driver of the bus operated by defendant and that defendant incurred in culpa
contractual arising from its non-compliance with its obligation to transport plaintiff safely to his,
destination. Plaintiff prays for judgment against defendant as follows: (1) P5,000 as expenses for
his medical treatment, and P3,000 as the cost of an artificial arm, or a total of P8,000; (2) P6,000
representing loss of earning; (3) P75,000 for diminution of his earning capacity; (4) P50,000 as
moral damages; and (5) P10,000 as attorneys' fees and costs of suit.
Defendant set up as special defense that the injury suffered by plaintiff was due entirely to the
fault or negligence of the driver of the pick-up car which collided with the bus driven by its
driver and to the contributory negligence of plaintiff himself. Defendant further claims that the
accident which resulted in the injury of plaintiff is one which defendant could not foresee or,
though foreseen, was inevitable.
The after trial found that the collision occurred due to the negligence of the driver of the pick-up
car and not to that of the driver of the bus it appearing that the latter did everything he could to
avoid the same but that notwithstanding his efforts, he was not able to avoid it. As a
consequence, the court dismissed complaint, with costs against plaintiff. This is an appeal from
said decision.
It appears that plaintiff boarded a bus of defendant as paying passenger from Ligao, Albay,
bound for Pili, Camarines Sur, but before reaching his destination, the bus collided with a pick-
up car which was coming from the opposite direction and, as a, result, his left arm was
completely severed and fell inside the back part of the bus. Having this background in view, and
considering that plaintiff chose to hold defendant liable on its contractual obligation to carry him
safely to his place of destination, it becomes important to determine the nature and extent of the
liability of a common carrier to a passenger in the light of the law applicable in this jurisdiction.
In this connection, appellant invokes the rule that, "when an action is based on a contract of
carriage, as in this case, all that is necessary to sustain recovery is proof of the existence of the
contract of the breach thereof by act or omission", and in support thereof, he cites several
Philippine cases.
1
With the ruling in mind, appellant seems to imply that once the contract of
carriage is established and there is proof that the same was broken by failure of the carrier to
transport the passenger safely to his destination, the liability of the former attaches. On the other
hand, appellee claims that is a wrong presentation of the rule. It claims that the decisions of this
Court in the cases cited do not warrant the construction sought to be placed upon, them by
appellant for a mere perusal thereof would show that the liability of the carrier was predicated
not upon mere breach of its contract of carriage but upon the finding that its negligence was
found to be the direct or proximate cause of the injury complained of. Thus, appellee contends
that "if there is no negligence on the part of the common carrier but that the accident resulting in
injuries is due to causes which are inevitable and which could not have been avoided or
anticipated notwithstanding the exercise of that high degree of care and skill which the carrier is
bound to exercise for the safety of his passengers", neither the common carrier nor the driver is
liable therefor.
We believe that the law concerning the liability of a common carrier has now suffered a
substantial modification in view of the innovations introduced by the new Civil Code. These
innovations are the ones embodied in Articles 1733, 1755 and 1756 in so far as the relation
between a common carrier and its passengers is concerned, which, for ready reference, we quote
hereunder:
ART. 1733. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extra ordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by them according to all the circumstances of
each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in
articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the
safety of the passengers is further set forth in articles 1755 and 1756.
ART. 1755. A common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious persons, with
a due regard for all the circumstances.
ART. 1756. In case of death of or injuries to passengers, common carriers are presumed
to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in articles 1733 and 1755.
The Code Commission, in justifying this extraordinary diligence required of a common carrier,
says the following:
A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost deligence of very cautions persons, with due
regard for all circumstances. This extraordinary diligence required of common carriers is
calculated to protect the passengers from the tragic mishaps that frequently occur in
connection with rapid modern transportation. This high standard of care is imperatively
demanded by the precariousness of human life and by the consideration that every person
must in every way be safeguarded against all injury. (Report of the Code Commission,
pp. 35-36)" (Padilla, Civil Code of the Philippines, Vol. IV, 1956 ed., p. 197).
From the above legal provisions, we can make the following restatement of the principles
governing the liability of a common carrier: (1) the liability of a carrier is contractual and arises
upon breach of its obligation. There is breach if it fails to exert extraordinary diligence according
to all circumstances of each case; (2) a carrier is obliged to carry its passenger with the utmost
diligence of a very cautious person, having due regard for all the circumstances; (3) a carrier is
presumed to be at fault or to have acted negligently in case of death of, or injury to, passengers, it
being its duty to prove that it exercised extraordinary diligence; and (4) the carrier is not an
insurer against all risks of travel.
The question that now arises is: Has defendant observed extraordinary diligence or the utmost
diligence of every cautious person, having due regard for all circumstances, in avoiding the
collision which resulted in the injury caused to the plaintiff?
After examining the evidence in connection with how the collision occurred, the lower court
made the following finding:
Hemos examinado muy detenidamente las pruebas presentadas en la vista,
principalmente, las declaraciones que hemos acotado arriba, y hernos Ilegado a la
conclusion de que el demandado ha hecho, todo cuanto estuviere de su parte para evitar el
accidente, pero sin embargo, no ha podido evitarlo.
EI hecho de que el demandado, antes del choque, tuvo que hacer pasar su truck encima de
los montones de grava que estaban depositados en la orilla del camino, sin que haya ido
mas alla, por el grave riesgo que corrian las vidas de sus pasajeros, es prueba concluyente
de lo que tenemos dicho, a saber: que el cuanto esuba de su parte, para evitar el
accidente, sin que haya podidoevitardo, por estar fuera de su control.
The evidence would appear to support the above finding. Thus, it appears that Bus No. 31,
immediately prior to the collision, was running at a moderate speed because it had just stopped at
the school zone of Matacong, Polangui, Albay. The pick-up car was at full speed and was
running outside of its proper lane. The driver of the bus, upon seeing the manner in which the
pick-up was then running, swerved the bus to the very extreme right of the road until its front
and rear wheels have gone over the pile of stones or gravel situated on the rampart of the road.
Said driver could not move the bus farther right and run over a greater portion of the pile, the
peak of which was about 3 feet high, without endangering the safety of his passengers. And
notwithstanding all these efforts, the rear left side of the bus was hit by the pick-up car.
Of course, this finding is disputed by appellant who cannot see eye to eye with the evidence for
the appellee and insists that the collision took place because the driver of the bus was going at a
fast speed. He contends that, having seen that a car was coming from the opposite direction at a
distance which allows the use of moderate care and prudence to avoid an accident, and knowing
that on the side of the road along which he was going there was a pile of gravel, the driver of the
bus should have stopped and waited for the vehicle from the opposite direction to pass, and
should have proceeded only after the other vehicle had passed. In other words, according to
appellant, the act of the driver of the bus in squeezing his way through of the bus in squeezing
his way through between the oncoming pick-up and the pile of gravel under the circumstances
was considered negligent.
But this matter is one of credibility and evaluation of the evidence. This is evidence. This is the
function of the trial court. The trial court has already spoken on this matter as we have pointed
out above. This is also a matter of appreciation of the situation on the part of the driver. While
the position taken by appellant appeals more to the sense of caution that one should observe in a
given situation to avoid an accident or mishap, such however can not always be expected from
one who is placed suddenly in a predicament where he is not given enough time to take the
course of action as he should under ordinary circumstances. One who is placed in such a
predicament cannot exercise such coolness or accuracy of judgment as is required of him under
ordinary circumstances and he cannot therefore be expected to observe the same judgment, care
and precaution as in the latter. For this reason, authorities abound where failure to observe the
same degree of care that as ordinary prudent man would exercise under ordinary circumstances
when confronted with a sadden emergency was held to be warranted and a justification to
exempt the carrier from liability. Thus, it was held that "where a carrier's employee is confronted
with a sudden emergency, the fact that he is obliged to act quickly and without a chance for
deliberation must be taken into account, and he is held to the some degree of care that he would
otherwise be required to exercise in the absence of such emergency but must exercise only such
care as any ordinary prudent person would exercise under like circumstances and conditions, and
the failure on his part to exercise the best judgement the case renders possible does not establish
lack of care and skill on his part which renders the company, liable. . . . (13 C. J. S., 1412; 10 C.
J.,970). Considering all the circumstances, we are persuaded to conclude that the driver of the
bus has done what a prudent man could have done to avoid the collision and in our opinion this
relieves appellee from legibility under our law.
A circumstances which miliates against the stand of appellant is the fact borne out by the
evidence that when he boarded the bus in question, he seated himself on the left side thereof
resting his left arm on the window sill but with his left elbow outside the window, this being his
position in the bus when the collision took place. It is for this reason that the collision resulted in
the severance of said left arm from the body of appellant thus doing him a great damage. It is
therefore apparent that appellant is guilty of contributory negligence. Had he not placed his left
arm on the window sill with a portion thereof protruding outside, perhaps the injury would have
been avoided as is the case with the other passenger. It is to be noted that appellant was the only
victim of the collision.
It is true that such contributory negligence cannot relieve appellee of its liability but will only
entitle it to a reduction of the amount of damage caused (Article 1762, new Civil Code), but this
is a circumstance which further militates against the position taken by appellant in this case.
It is the prevailing rule that it is negligence per se for a passenger on a railroad
voluntarily or inadvertently to protrude his arm, hand, elbow, or any other part of his
body through the window of a moving car beyond the outer edge of the window or outer
surface of the car, so as to come in contact with objects or obstacles near the track, and
that no recovery can be had for an injury which but for such negligence would not have
been sustained. (10 C. J. 1139)
Plaintiff, (passenger) while riding on an interurban car, to flick the ashes, from his cigar,
thrust his hand over the guard rail a sufficient distance beyond the side line of the car to
bring it in contact with the trunk of a tree standing beside the track; the force of the blow
breaking his wrist. Held, that he was guilty of contributory negligence as a matter of law.
(Malakia vs. Rhode Island Co., 89 A., 337.)
Wherefore, the decision appealed from is affirmed, with cost against appellant.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Labrador, Concepcion, Endencia and
Felix, JJ., concur.

Footnotes
1
Cangco contra Manila Railroad Co., 38 Jur. Fil., p. 825; Juan Castro vs. Arco, Taxicab
Co., 82 Phil. 359, 46 Off. Gaz., (No. 3), pp. 2023, 2028-2029; and Enrique Layda vs. The
Hon. Court of Appeals, et al, 90 Phil., 724.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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 period
5
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 inference
12
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 P56,564.35
28
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 food
29

masses
30
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 Peng
5
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
1
43 Phil. 873 (1922).
2
Id. at 876.
3
55 Phil. 99 (1930).
4
77 Phil. 470 (1946).
5
Civ. Code, art. 1197.
6
Jakosalem vs. Rafols, 73 Phil. 628 (1942).
7
T.s.n., pp. 73-74, June 20, 1960.
8
T.s.n., pp. 70-71, 73-74, June 20, 1960 (emphasis added).
9
T.s.n., pp. 54-55, June 6, 1960.
10
T.s.n., p. 86, June 20, 1960 (emphasis added).
11
T.s.n., pp. 69-70, June 20, 1960.
12
Article 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."
13
T.s.n., p. 11, June 21, 1960.
14
T.s.n., pp. 119-120, June 20, 1960.
15
T.s.n., p. 76, June 6, 1960.
16
Rodriguez 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).
17
T.s.n., p. 79, June 6, 1960 (emphasis added).
18
T.s.n., p. 121, June 20, 1960.
19
Rodriguez v. Rodriguez, supra, note 16.
20
79 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.
21
The 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].
22
Supra, note 20.
23
Cf. 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."
24
Const. art. XIII sec. 5.
25
Supra, note 20, at 480-481.
26
93 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.
28
According 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.
29
T.s.n., pp. 6-8, July 26, 1960.
30
T.s.n., p. 35, July 26, 1960.
31
T.s.n., pp. 31-35, July 26, 1960.

FERNANDO, J., concurring:
1
79 Phil. 461 (1947).
2
93 Phil. 827.
3
93 Phil. 843.
4
93 Phil. 855.
5
93 Phil. 861. See also Arambulo v. Cua So, (1954) 95 Phil. 749; Dinglasan v. Lee Bun
Ting, (1956) 99 Phil. 427.
6
Bough v. Cantiveros, (1919) 40 Phil. 210 and Perez v. Herranz (1902) 7 Phil. 693.
7
At p. 835.
8
Art. 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.)
9
Norton v. Shelby County, (1886) 118 U.S. 425.
10
308 U.S. 731 (1940).
11
79 Phil. 461, 480 (1947).
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
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).
L
u
d
y

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.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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 can not 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 can not 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.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
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.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
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 2176
1
and 2180
2
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.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-55138 September 28, 1984
ERNESTO V. RONQUILLO, petitioner,
vs.
HONORABLE COURT OF APPEALS AND ANTONIO P. SO, respondents.
Gloria A. Fortun for petitioner.
Roselino Reyes Isler for respondents.

CUEVAS, J .:
This is a petition to review the Resolution dated June 30, 1980 of the then Court of
Appeals (now the Intermediate Appellate Court) in CA-G.R. No. SP-10573, entitled
"Ernesto V. Ronquillo versus the Hon. Florellana Castro-Bartolome, etc." and the Order
of said court dated August 20, 1980, denying petitioner's motion for reconsideration of
the above resolution.
Petitioner Ernesto V. Ronquillo was one of four (4) defendants in Civil Case No. 33958
of the then Court of First Instance of Rizal (now the Regional Trial Court), Branch XV
filed by private respondent Antonio P. So, on July 23, 1979, for the collection of the sum
of P17,498.98 plus attorney's fees and costs. The other defendants were Offshore
Catertrade Inc., Johnny Tan and Pilar Tan. The amount of P117,498.98 sought to be
collected represents the value of the checks issued by said defendants in payment for
foodstuffs delivered to and received by them. The said checks were dishonored by the
drawee bank.
On December 13, 1979, the lower court rendered its Decision 1 based on the compromise agreement
submitted by the parties, the pertinent portion of which reads as follows:
1. Plaintiff agrees to reduce its total claim of P117,498-95 to only P11,000 .00 and defendants agree to acknowledge
the validity of such claim and further bind themselves to initially pay out of the total indebtedness of P10,000.00 the
amount of P55,000.00 on or before December 24, 1979, the balance of P55,000.00, defendants individually and jointly
agree to pay within a period of six months from January 1980, or before June 30, 1980; (Emphasis supplied)
xxx xxx xxx
4. That both parties agree that failure on the part of either party to comply with the foregoing terms and conditions, the
innocent party will be entitled to an execution of the decision based on this compromise agreement and the defaulting
party agrees and hold themselves to reimburse the innocent party for attorney's fees, execution fees and other fees
related with the execution.
xxx xxx xxx
On December 26, 1979, herein private respondent (then plaintiff filed a Motion for Execution on the ground that defendants failed to make
the initial payment of P55,000.00 on or before December 24, 1979 as provided in the Decision. Said motion for execution was opposed by
herein petitioner (as one of the defendants) contending that his inability to make the payment was due to private respondent's own act of
making himself scarce and inaccessible on December 24, 1979. Petitioner then prayed that private respondent be ordered to accept his
payment in the amount of P13,750.00.
2

During the hearing of the Motion for Execution and the Opposition thereto on January 16, 1980,
petitioner, as one of the four defendants, tendered the amount of P13,750.00, as his prorata share in the
P55,000.00 initial payment. Another defendant, Pilar P. Tan, offered to pay the same amount. Because
private respondent refused to accept their payments, demanding from them the full initial installment of P
55,000.00, petitioner and Pilar Tan instead deposited the said amount with the Clerk of Court. The
amount deposited was subsequently withdrawn by private respondent.
3

On the same day, January 16, 1980, the lower court ordered the issuance of a writ of execution for the
balance of the initial amount payable, against the other two defendants, Offshore Catertrade Inc. and
Johnny Tan
4
who did not pay their shares.
On January 22, 1980, private respondent moved for the reconsideration and/or modification of the
aforesaid Order of execution and prayed instead for the "execution of the decision in its entirety against
all defendants, jointly and severally."
5
Petitioner opposed the said motion arguing that under the decision
of the lower court being executed which has already become final, the liability of the four (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.
On March 17, 1980, the lower court issued an Order reading as follows:
ORDER
Regardless of whatever the compromise agreement has intended the payment whether
jointly or individually, or jointly and severally, the fact is that only P27,500.00 has been
paid. There appears to be a non-payment in accordance with the compromise agreement
of the amount of P27,500.00 on or before December 24, 1979. The parties are reminded
that the payment is condition sine qua non to the lifting of the preliminary attachment and
the execution of an affidavit of desistance.
WHEREFORE, let writ of execution issue as prayed for
On March 17, 1980, petitioner moved for the reconsideration of the above order, and the same was set
for hearing on March 25,1980.
Meanwhile, or more specifically on March 19, 1980, a writ of execution was issued for the satisfaction of
the sum of P82,500.00 as against the properties of the defendants (including petitioner), "singly or jointly
hable."
6

On March 20, 1980, Special Sheriff Eulogio C. Juanson of Rizal, issued a notice of sheriff's sale, for the
sale of certain furnitures and appliances found in petitioner's residence to satisfy the sum of P82,500.00.
The public sale was scheduled for April 2, 1980 at 10:00 a.m.
7

Petitioner's motion for reconsideration of the Order of Execution dated March 17, 1980 which was set for
hearing on March 25, 1980, was upon motion of private respondent reset to April 2, 1980 at 8:30 a.m.
Realizing the actual threat to property rights poised by the re-setting of the hearing of s motion for
reconsideration for April 2, 1980 at 8:30 a.m. such that if his motion for reconsideration would be denied
he would have no more time to obtain a writ from the appellate court to stop the scheduled public sale of
his personal properties at 10:00 a.m. of the same day, April 2, 1980, petitioner filed on March 26, 1980 a
petition for certiorari and prohibition with the then Court of Appeals (CA-G.R. No. SP-10573), praying at
the same time for the issuance of a restraining order to stop the public sale. He raised the question of the
validity of the order of execution, the writ of execution and the notice of public sale of his properties to
satisfy fully the entire unpaid obligation payable by all of the four (4) defendants, when the lower court's
decision based on the compromise agreement did not specifically state the liability of the four (4)
defendants to be solidary.
On April 2, 1980, the lower court denied petitioner's motion for reconsideration but the scheduled public
sale in that same day did not proceed in view of the pendency of a certiorari proceeding before the then
Court of Appeals.
On June 30, 1980, the said court issued a Resolution, the pertinent portion of which reads as follows:
This Court, however, finds the present petition to have been filed prematurely. The rule is
that before a petition for certiorari can be brought against an order of a lower court, all
remedies available in that court must first be exhausted. In the case at bar, herein
petitioner filed a petition without waiting for a resolution of the Court on the motion for
reconsideration, which could have been favorable to the petitioner. The fact that the
hearing of the motion for reconsideration had been reset on the same day the public sale
was to take place is of no moment since the motion for reconsideration of the Order of
March 17, 1980 having been seasonably filed, the scheduled public sale should be
suspended. Moreover, when the defendants, including herein petitioner, defaulted in their
obligation based on the compromise agreement, private respondent had become entitled
to move for an execution of the decision based on the said agreement.
WHEREFORE, the instant petition for certiorari and prohibition with preliminary injunction
is hereby denied due course. The restraining order issued in our resolution dated April 9,
1980 is hereby lifted without pronouncement as to costs.
SO ORDERED.
Petitioner moved to reconsider the aforesaid Resolution alleging that on April 2, 1980, the lower court had
already denied the motion referred to and consequently, the legal issues being raised in the petition were
already "ripe" for determination.
8
The said motion was however denied by the Court of Appeals in its
Resolution dated August 20, 1980.
Hence, this petition for review, petitioner contending that the Court of Appeals erred in
(a) declaring as premature, and in denying due course to the petition to restrain implementation of a writ
of execution issued at variance with the final decision of the lower court filed barely four (4) days before
the scheduled public sale of the attached movable properties;
(b) denying reconsideration of the Resolution of June 30, 1980, which declared as premature the filing of
the petition, although there is proof on record that as of April 2, 1980, the motion referred to was already
denied by the lower court and there was no more motion pending therein;
(c) failing to resolve the legal issues raised in the petition and in not declaring the liabilities of the
defendants, under the final decision of the lower court, to be only joint;
(d) not holding the lower court's order of execution dated March 17, 1980, the writ of execution and the
notice of sheriff's sale, executing the lower court's decision against "all defendants, singly and jointly", to
be at variance with the lower court's final decision which did not provide for solidary obligation; and
(e) not declaring as invalid and unlawful the threatened execution, as against the properties of petitioner
who had paid his pro-rata share of the adjudged obligation, of the total unpaid amount payable by his joint
co-defendants.
The foregoing assigned errors maybe synthesized into the more important issues of
1. Was the filing of a petition for certiorari before the then Court of Appeals against the Order of Execution
issued by the lower court, dated March 17, 1980, proper, despite the pendency of a motion for
reconsideration of the same questioned Order?
2. What is the nature of the liability of the defendants (including petitioner), was it merely joint, or was it
several or solidary?
Anent the first issue raised, suffice it to state that while as a general rule, a motion for reconsideration
should precede recourse to certiorari in order to give the trial court an opportunity to correct the error that
it may have committed, the said rule is not absolutes
9
and may be dispensed with in instances where the
filing of a motion for reconsideration would serve no useful purpose, such as when the motion for
reconsideration would raise the same point stated in the motion 10 or where the error is patent for the order is void 11
or where the relief is extremely urgent, as in cases where execution had already been ordered 12 where the issue raised is one purely of law.
13
In the case at bar, the records show that not only was a writ of execution issued but petitioner's properties were already scheduled to be sold
at public auction on April 2, 1980 at 10:00 a.m. The records likewise show that petitioner's motion for reconsideration of the questioned Order
of Execution was filed on March 17, 1980 and was set for hearing on March 25, 1980 at 8:30 a.m., but upon motion of private respondent,
the hearing was reset to April 2, 1980 at 8:30 a.m., the very same clay when petitioner's properties were to be sold at public auction.
Needless to state that under the circumstances, petitioner was faced with imminent danger of his properties being immediately sold the
moment his motion for reconsideration is denied. Plainly, urgency prompted recourse to the Court of Appeals and the adequate and speedy
remedy for petitioner under the situation was to file a petition for certiorari with prayer for restraining order to stop the sale. For him to wait
until after the hearing of the motion for reconsideration on April 2, 1980 before taking recourse to the appellate court may already be too late
since without a restraining order, the public sale can proceed at 10:00 that morning. In fact, the said motion was already denied by the lower
court in its order dated April 2, 1980 and were it not for the pendency of the petition with the Court of Appeals and the restraining order
issued thereafter, the public sale scheduled that very same morning could have proceeded.
The other issue raised refers to the nature of the liability of petitioner, as one of the defendants in Civil Case No. 33958, that is whether or not
he is liable jointly or solidarily.
In this regard, Article 1207 and 1208 of the Civil Code provides
Art. 1207. The concurrence 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 render, entire compliance with the prestation.
Then is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation
requires solidarity.
Art. 1208. If from the law,or the nature or the wording of the obligation to which the preceding article refers the contrary
does not appear, the credit or debt shall be presumed to be divided into as many equal shares as there are creditors
and debtors, the credits or debts being considered distinct from one another, subject to the Rules of Court governing
the multiplicity of quits.
The decision of the lower court based on the parties' compromise agreement, provides:
1. Plaintiff agrees to reduce its total claim of P117,498.95 to only P110,000.00 and defendants agree to acknowledge
the validity of such claim and further bind themselves to initially pay out of the total indebtedness of P110,000.00, the
amount of P5,000.00 on or before December 24, 1979, the balance of P55,000.00, defendants individually and jointly
agree to pay within a period of six months from January 1980 or before June 30, 1980. (Emphasis supply)
Clearly then, by the express term of the compromise agreement and the decision based upon it, the defendants obligated themselves to pay
their obligation "individually and jointly".
The term "individually" has the same meaning as "collectively", "separately", "distinctively", respectively or "severally". An agreement to be
"individually liable" undoubtedly creates a several obligation, 14 and a "several obligation is one by which one individual binds himself to
perform the whole obligation. 15
In the case of Parot vs. Gemora 16 We therein ruled that "the phrase juntos or separadamente or in the promissory note is an express
statement making each of the persons who signed it individually liable for the payment of the fun amount of the obligation contained therein."
Likewise in Un Pak Leung vs. Negorra 17 We held that "in the absence of a finding of facts that the defendants made themselves individually
hable for the debt incurred they are each liable only for one-half of said amount
The obligation in the case at bar being described as "individually and jointly", the same is therefore enforceable against one of the numerous
obligors.
IN VIEW OF THE FOREGOING CONSIDERATIONS, the instant petition is hereby DISMISSED. Cost against petitioner.
SO ORDERED.
Makasiar (Chairman), Abad Santos and Escolin, JJ., concur.
Aquino, J., concurs in the result.
Concepcion, Jr. and Guerrero, JJ., are on leave.

Footnotes
1 Annex "B".
2 Annex "C".
3 Annex "D".
4 Annex "E".
5 Annex "F".
6 Annex "G".
7 Annex "H".
8 Annex "J".
9 Vda. de Sayman vs. Court of Appeals, 121 SCRA 650.
10 Fortich Celdran, et al. vs. Celdran, et al, 19 SCRA 502.
11 Iligan Electric Light Co. vs. Public Service Commission, 10 SCRA 46; Matute vs. Court of Appeals, 26 SCRA 768;
Locsin vs. Limaco, 26 SCRA 816.
12 Suco vs. Vda. de Leary, 12 SCRA 326.
13 Central Bank of the Philippines vs. Cloribel, 44 SCRA 307.
14 21 Words & Phrases, Permanent Ed., p. 194.
15 39 Words & Phrases, Permanent Ed., p. 72.
16 7 Phil. 94, 97.
17 9 Phil. 381.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
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
subrogated pro 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.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
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 procedure should 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
collection in 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

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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.
Malcolm, Villamor, Ostrand, Romualdez and Villa-Real, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-41093 October 30, 1978
ROBES-FRANCISCO REALTY & DEVELOPMENT CORPORATION, petitioner,
vs.
COURT OF FIRST INSTANCE OF RIZAL (BRANCH XXXIV), and LOLITA MILLAN,
respondents.
Purugganan & Bersamin for petitioner.
Salvador N. Beltran for respondent.

MUOZ PALMA, J .:
This is a direct appeal on questions of law from a decision of the Court of First Instance
of Rizal, Branch XXXIV, presided by the Honorable Bernardo P. Pardo, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered commanding the defendant
to register the deed of absolute sale it had executed in favor of plaintiff
with the Register of Deeds of Caloocan City and secure the corresponding
title in the name of plaintiff within ten (10) days after finality of this
decision; if, for any reason, this not possible, defendant is hereby
sentenced to pay plaintiff the sum of P5,193.63 with interest at 4% per
annum from June 22, 1972 until fully paid.
In either case, defendant is sentenced to pay plaintiff nominal damages in
the amount of P20,000.00 plus attorney's fee in the amount of P5,000.00
and costs.
SO ORDERED.
Caloocan City, February 11, 1975. (rollo, p. 21)
Petitioner corporation questions the award for nominal damages of P20,000.00 and
attorney's fee of P5,000.00 which are allegedly excessive and unjustified.
In the Court's resolution of October 20, 1975, We gave due course to the Petition only
as regards the portion of the decision awarding nominal damages.
1

The following incidents are not in dispute:
In May 1962 Robes-Francisco Realty & Development Corporation, now petitioner, agreed to sell to
private respondent Lolita Millan for and in consideration of the sum of P3,864.00, payable in installments,
a parcel of land containing an area of approximately 276 square meters, situated in Barrio Camarin,
Caloocan City, known as Lot No. 20, Block No. 11 of its Franville Subdivision.
2

Millan complied with her obligation under the contract and paid the installments stipulated therein, the
final payment having been made on December 22, 1971. The vendee made a total payment of P5,193.63
including interests and expenses for registration of title.
3

Thereafter, Lolita Millan made repeated demands upon the corporation for the execution of the final deed
of sale and the issuance to her of the transfer certificate of title over the lot. On March 2, 1973, the parties
executed a deed of absolute sale of the aforementioned parcel of land. The deed of absolute sale
contained, among others, this particular provision:
That the VENDOR further warrants that the transfer certificate of title of the above-
described parcel of land shall be transferred in the name of the VENDEE within the
period of six (6) months from the date of full payment and in case the VENDOR fails to
issue said transfer certificate of title, it shall bear the obligation to refund to the VENDEE
the total amount already paid for, plus an interest at the rate of 4% per annum. (record on
appeal, p. 9)
Notwithstanding the lapse of the above-mentioned stipulated period of six (6) months, the corporation
failed to cause the issuance of the corresponding transfer certificate of title over the lot sold to Millan,
hence, the latter filed on August 14, 1974 a complaint for specific performance and damages against
Robes-Francisco Realty & Development Corporation in the Court of First Instance of Rizal, Branch
XXXIV, Caloocan City, docketed therein as Civil Case No. C-3268.
4

The complaint prayed for judgment (1) ordering the reformation of the deed of absolute sale; (2) ordering
the defendant to deliver to plaintiff the certificate of title over the lot free from any lien or encumbrance; or,
should this be not possible, to pay plaintiff the value of the lot which should not be less than P27,600.00
(allegedly the present estimated value of the lot); and (3) ordering the defendant to pay plaintiff damages,
corrective and actual in the sum of P15 000.00.
5

The corporation in its answer prayed that the complaint be dismissed alleging that the deed of absolute
sale was voluntarily executed between the parties and the interest of the plaintiff was amply protected by
the provision in said contract for payment of interest at 4% per annum of the total amount paid, for the
delay in the issuance of the title.
6

At the pretrial conference the parties agreed to submit the case for decision on the pleadings after
defendant further made certain admissions of facts not contained in its answer.
7

Finding that the realty corporation failed to cause the issuance of the corresponding transfer certificate of
title because the parcel of land conveyed to Millan was included among other properties of the
corporation mortgaged to the GSIS to secure an obligation of P10 million and that the owner's duplicate
certificate of title of the subdivision was in the possession of the Government Service Insurance System
(GSIS), the trial court, on February 11, 1975, rendered judgment the dispositive portion of which is quoted
in pages 1 and 2 of this Decision. We hold that the trial court did not err in awarding nominal damages;
however, the circumstances of the case warrant a reduction of the amount of P20,000.00 granted to
private respondent Millan.
There can be no dispute in this case under the pleadings and the admitted facts that petitioner
corporation was guilty of delay, amounting to nonperformance of its obligation, in issuing the transfer
certificate of title to vendee Millan who had fully paid up her installments on the lot bought by her. Article
170 of the Civil Code expressly provides that 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.
Petitioner contends that the deed of absolute sale executed between the parties stipulates that should the
vendor fail to issue the transfer certificate of title within six months from the date of full payment, it shall
refund to the vendee the total amount paid for with interest at the rate of 4% per annum, hence, the
vendee is bound by the terms of the provision and cannot recover more than what is agreed upon.
Presumably, petitioner in invoking Article 1226 of the Civil Code which provides that in obligations with a
penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case
of noncompliance, if there is no stipulation to the contrary.
The foregoing argument of petitioner is totally devoid of merit. We would agree with petitioner if the clause
in question were to be considered as a penal clause. Nevertheless, for very obvious reasons, said clause
does not convey any penalty, for even without it, pursuant to Article 2209 of the Civil Code, the vendee
would be entitled to recover the amount paid by her with legal rate of interest which is even more than the
4% provided for in the clause.
7
-A
It is therefore inconceivable that the aforecited provision in the deed of sale is a penal clause which will
preclude an award of damages to the vendee Millan. In fact the clause is so worded as to work to the
advantage of petitioner corporation.
Unfortunately, the vendee, now private respondent, submitted her case below without presenting
evidence on the actual damages suffered by her as a result of the nonperformance of petitioner's
obligation under the deed of sale. Nonetheless, the facts show that the right of the vendee to acquire title
to the lot bought by her was violated by petitioner and this entitles her at the very least to nominal
damages.
The pertinent provisions of our Civil Code follow:
Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which
has been violated or invaded by the defendant, may be vindicated or recognized, and not
for the purpose of indemnifying the plaintiff for any loss suffered by him.
Art. 2222. The court may award nominal damages in every obligation arising from any
source enumerated in article 1157, or in every case where any property right has been
invaded.
Under the foregoing provisions nominal damages are not intended for indemnification of loss suffered but
for the vindication or recognition of a right violated or invaded. They are recoverable where some injury
has been done the amount of which the evidence fails to show, the assessment of damages being left to
the discretion of the court according to the circumstances of the case.
8

It is true as petitioner claims that under American jurisprudence nominal damages by their very nature are
small sums fixed by the court without regard to the extent of the harm done to the injured party.
It is generally held that a nominal damage is a substantial claim, if based upon the
violation of a legal right; in such case, the law presumes a damage, although actual or
compensatory damages are not proven; in truth nominal damages are damages in name
only and not in fact, and are allowed, not as an equivalent of a wrong inflicted, but simply
in recogniton of the existence of a technical injury. (Fouraker v. Kidd Springs Boating and
Fishing Club, 65 S. W. 2d 796-797, citing 17 C.J. 720, and a number of authorities).
9

In this jurisdiction, in Vda. de Medina, et al. v. Cresencia, et al. 1956, which was an action for damages
arising out of a vehicular accident, this Court had occasion to eliminate an award of P10,000.00 imposed
by way of nominal damages, the Court stating inter alia that the amount cannot, in common sense, be
demeed "nominal".
10

In a subsequent case, viz: Northwest Airlines, Inc. v. Nicolas L. Cuenca, 1965, this Court, however,
through then Justice Roberto Concepcion who later became Chief Justice of this Court, sustained an
award of P20,000.00 as nominal damages in favor of respnodent Cuenca. The Court there found special
reasons for considering P20,000.00 as "nominal". Cuenca who was the holder of a first class ticket from
Manila to Tokyo was rudely compelled by an agent of petitioner Airlines to move to the tourist class
notwithstanding its knowledge that Cuenca as Commissioner of Public Highways of the Republic of the
Philippines was travelling in his official capacity as a delegate of the country to a conference in Tokyo."
11

Actually, as explained in the Court's decision in Northwest Airlines, there is no conflict between that case
and Medina, for in the latter, the P10,000.00 award for nominal damages was eliminated principally
because the aggrieved party had already been awarded P6,000.00 as compensatory damages,
P30,000.00 as moral damages and P10,000.00 as exemplary damages, and "nominal damages cannot
coexist with compensatory damages," while in the case of Commissioner Cuenca, no such
compensatory, moral, or exemplary damages were granted to the latter.
12

At any rate, the circumstances of a particular case will determine whether or not the amount assessed as
nominal damages is within the scope or intent of the law, more particularly, Article 2221 of the Civil Code.
In the situation now before Us, We are of the view that the amount of P20,000.00 is excessive. The
admitted fact that petitioner corporation failed to convey a transfer certificate of title to respondent Millan
because the subdivision property was mortgaged to the GSIS does not in itself show that there was bad
faith or fraud. Bad faith is not to be presumed. Moreover, there was the expectation of the vendor that
arrangements were possible for the GSIS to make partial releases of the subdivision lots from the overall
real estate mortgage. It was simply unfortunate that petitioner did not succeed in that regard.
For that reason We cannot agree with respondent Millan Chat the P20,000.00 award may be considered
in the nature of exemplary damages.
In case of breach of contract, exemplary damages may be awarded if the guilty party acted in wanton,
fraudulent, reckless, oppressive or malevolent manner.
13
Furthermore, exemplary or corrective damages
are to be imposed by way of example or correction for the public good, only if the injured party has shown
that he is entitled to recover moral, temperate or compensatory damages."
Here, respondent Millan did not submit below any evidence to prove that she suffered actual or
compensatory damages.
14

To conclude, We hold that the sum of Ten Thousand Pesos (P10,000.00) by way of nominal damages is
fair and just under the following circumstances, viz: respondent Millan bought the lot from petitioner in
May, 1962, and paid in full her installments on December 22, 1971, but it was only on March 2, 1973, that
a deed of absolute sale was executed in her favor, and notwithstanding the lapse of almost three years
since she made her last payment, petitioner still failed to convey the corresponding transfer certificate of
title to Millan who accordingly was compelled to file the instant complaint in August of 1974.
PREMISES CONSIDERED, We modify the decision of the trial court and reduce the nominal damages to
Ten Thousand Pesos (P10,000.00). In all other respects the aforesaid decision stands.
Without pronouncement as to costs.
SO ORDERED.
Teehankee (Chairman), Makasiar, Fernandez and Guerrero, JJ., concur.

Footnotes
1 rollo, p. 33
2 record on appeal, p. 2
3 ibid., p. 3
4 ibid., p. 1
5 ibid., pp. 6-7
6 ibid., pp. 11 - 1 4.
7 ibid., pp. 15-16
7-A Art. 2209. Civil Code: If the obligation consists in the payment of a sum of money, and the debtor incurs in delay,
the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon
and in the absence of stipulation, the legal which is six per cent per annum (Emphasis supplied)
8 Ventanilla v. Centeno, 1961, 1 SCRA 215
9 See also Mathis v. State, Dept. of Roads, 135 N.W. 2d, 17 20 Quillet, et al. v. Johnson, et al., 71 N.E. 2d. 488,
among others.
10 99 Phil. 506, 510, per Justice J.B.L. Reyes.
11 14 SCRA 1063, 1066.
12 ibid., p. 1065.
13 Article 2232, Civil Code Tolentino, on the Civil Code, 1959 ed., Vol. V p. 561.
14 Articles 2229, 2234, Civil Code.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-26339 December 14, 1979
MARIANO C. PAMINTUAN, petitioner-appellant,
vs.
COURT OF APPEALS and YU PING KUN CO., INC., respondent-appellees.
V. E. del Rosario & Associates for appellant.
Sangco & Sangalang for private respondent.

AQUINO, J .:
This case is about the recovery compensatory, damages for breach of a contract of sale
in addition to liquidated damages.
Mariano C. Pamintuan appealed from the judgment of the Court of Appeals wherein he
was ordered to deliver to Yu Ping Kun Co., Inc. certain plastic sheetings and, if he could
not do so, to pay the latter P100,559.28 as damages with six percent interest from the
date of the filing of the complaint. The facts and the findings of the Court of Appeals are
as follows:
In 1960, Pamintuan was the holder of a barter license wherein he was authorized to
export to Japan one thousand metric tons of white flint corn valued at forty-seven
thousand United States dollars in exchange for a collateral importation of plastic
sheetings of an equivalent value.
By virtue of that license, he entered into an agreement to ship his corn to Tokyo Menka
Kaisha, Ltd. of Osaka, Japan in exchange for plastic sheetings. He contracted to sell the
plastic sheetings to Yu Ping Kun Co., Inc. for two hundred sixty-five thousand five
hundred fifty pesos. The company undertook to open an irrevocable domestic letter of
credit for that amount in favor of Pamintuan.
It was further agreed that Pamintuan would deliver the plastic sheetings to the company
at its bodegas in Manila or suburbs directly from the piers "within one month upon
arrival of" the carrying vessels. Any violation of the contract of sale would entitle the
aggreived party to collect from the offending party liquidated damages in the sum of ten
thousand pesos (Exh. A).
On July 28, 1960, the company received a copy of the letter from the Manila branch of
Toyo Menka Kaisha, Ltd. confirming the acceptance by Japanese suppliers of firm
offers for the consignment to Pamintuan of plastic sheetings valued at forty-seven
thousand dollars. Acting on that information, the company lost no time in securing in
favor of Pamintuan an irrevocable letter of credit for two hundred sixty-five thousand five
hundred fifty pesos.
Pamintuan was apprised by the bank on August 1, 1960 of that letter of credit which
made reference to the delivery to Yu Ping Kun Co., Inc. on or before October 31, 1960
of 336, 360 yards of plastic sheetings (p. 21, Record on Appeal).
On September 27 and 30 and October 4, 1960, the Japanese suppliers shipped to
Pamintuan, through Toyo Menka Kaisha, Ltd., the plastic sheetings in four shipments to
wit: (1) Firm Offer No. 327 for 50,000 yards valued at $9,000; (2) Firm Offer No. 328 for
70,000 yards valued at $8,050; (3) Firm Offers Nos. 329 and 343 for 175,000 and
18,440 yards valued at $22,445 and $2,305, respectively, and (4) Firm Offer No. 330 for
26,000 yards valued at $5,200, or a total of 339,440 yards with an aggregate value of
$47,000 (pp. 4-5 and 239-40, Record on Appeal).
The plastic sheetings arrived in Manila and were received by Pamintuan. Out of the
shipments, Pamintuan delivered to the company's warehouse only the following
quantities of plastic sheetings:
November 11, 1960 140 cases, size 48 inches by 50 yards. November
14, 1960 258 cases out of 352 cases. November 15, 1960 11 cases
out of 352 cases. November 15, 1960 10 cases out of 100 cases.
November 15, 1960 30 cases out of 100 cases.
Pamintuan withheld delivery of (1) 50 cases of plastic sheetings containing 26,000
yards valued at $5,200; (2) 37 cases containing 18,440 yards valued at $2,305; (3) 60
cases containing 30,000 yards valued at $5,400 and (4) 83 cases containing 40,850
yards valued at $5,236.97. While the plastic sheetings were arriving in Manila,
Pamintuan informed the president of Yu Ping Kun Co., Inc. that he was in dire need of
cash with which to pay his obligations to the Philippine National Bank. Inasmuch as the
computation of the prices of each delivery would allegedly be a long process,
Pamintuan requested that he be paid immediately.
Consequently, Pamintuan and the president of the company, Benito Y.C. Espiritu,
agreed to fix the price of the plastic sheetings at P0.782 a yard, regardless of the kind,
quality or actual invoice value thereof. The parties arrived at that figure by dividing the
total price of P265,550 by 339,440 yards, the aggregate quantity of the shipments.
After Pamintuan had delivered 224,150 yards of sheetings of interior quality valued at
P163,.047.87, he refused to deliver the remainder of the shipments with a total value of
P102,502.13 which were covered by (i) Firm Offer No. 330, containing 26,000 yards
valued at P29,380; (2) Firm Offer No. 343, containing 18,440 yards valued at
P13,023.25; (3) Firm Offer No. 217, containing 30,000 yards valued at P30,510 and (4)
Firm Offer No. 329 containing 40,850 yards valued at P29,588.88 (See pp. 243-2,
Record on Appeal).
As justification for his refusal, Pamintuan said that the company failed to comply with
the conditions of the contract and that it was novated with respect to the price.
On December 2, 1960, the company filed its amended complaint for damages against
Pamintuan. After trial, the lower court rendered the judgment mentioned above but
including moral damages.
The unrealized profits awarded as damages in the trial court's decision were computed
as follows (pp. 248-9, Record on Appeal):
(1) 26,000 yards with a contract price of Pl.13 per yard and a selling price
at the time of delivery of Pl.75 a yard...........................................................
P16,120.00
(2) 18,000 yards with a contract price of P0.7062 per yard and selling
price of Pl.20 per yard at the time of delivery.........................................
9,105.67
(3) 30,000 yards with a contract price of Pl.017 per yard and a selling price
of Pl.70 per yard. 20,490.00
(4) 40,850 yards with a contract price of P0.7247 per yard and a selling
price of P1.25 a yard at the time of delivery..............................................
21,458.50 Total unrealized profits....................... P67,174.17
The overpayment of P12,282.26 made to Pamintuan by Yu Ping Kun Co., Inc. for the
224,150 yards, which the trial court regarded as an item of damages suffered by the
company, was computed as follows (p. 71, Record on Appeal):
Liquidation value of 224,150 yards at P0.7822 a yard
.............................................................................. P175,330.13
Actual peso value of 224,150 yards as per firm offers or as per
contract............................................ 163,047.87
Overpayment................................................................ P 12,282.26
To these two items of damages (P67,174.17 as unrealized profits and P12,282.26 as
overpayment), the trial court added (a) P10,000 as stipulated liquidated damages, (b)
P10,000 as moral damages, (c) Pl,102.85 as premium paid by the company on the
bond of P102,502.13 for the issuance of the writ of preliminary attachment and (d)
P10,000 as attorney's fees, or total damages of P110,559.28) p. 250, Record on
Appeal). The Court of Appeals affirmed that judgment with the modification that the
moral damages were disallowed (Resolution of June 29, 1966).
Pamintuan appealed. The Court of Appeals in its decision of March 18, 1966 found that
the contract of sale between Pamintuan and the company was partly consummated.
The company fulfilled its obligation to obtain the Japanese suppliers' confirmation of
their acceptance of firm offers totalling $47,000. Pamintuan reaped certain benefits from
the contract. Hence, he is estopped to repudiate it; otherwise, he would unjustly enrich
himself at the expense of the company.
The Court of Appeals found that the writ of attachment was properly issued. It also
found that Pamintuan was guilty of fraud because (1) he was able to make the company
agree to change the manner of paying the price by falsely alleging that there was a
delay in obtaining confirmation of the suppliers' acceptance of the offer to buy; (2) he
caused the plastic sheetings to be deposited in the bonded warehouse of his brother
and then required his brother to make him Pamintuan), his attorney-in-fact so that he
could control the disposal of the goods; (3) Pamintuan, as attorney-in-fact of the
warehouseman, endorsed to the customs broker the warehouse receipts covering the
plastic sheetings withheld by him and (4) he overpriced the plastic sheetings which he
delivered to the company.
The Court of Appeals described Pamintuan as a man "who, after having succeeded in
getting another to accommodate him by agreeing to liquidate his deliveries on the basis
of P0.7822 per yard, irrespective of invoice value, on the pretense that he would deliver
what in the first place he ought to deliver anyway, when he knew all the while that he
had no such intention, and in the process delivered only the poorer or cheaper kind or
those which he had predetermined to deliver and did not conceal in his brother's name
and thus deceived the unwary party into overpaying him the sum of P 1 2,282.26 for the
said deliveries, and would thereafter refuse to make any further delivery in flagrant
violation of his plighted word, would now ask us to sanction his actuation" (pp. 61-62,
Rollo).
The main contention of appellant Pamintuan is that the buyer, Yu Ping Kun Co., Inc., is
entitled to recover only liquidated damages. That contention is based on the stipulation
"that any violation of the provisions of this contract (of sale) shall entitle the aggrieved
party to collect from the offending party liquidated damages in the sum of P10,000 ".
Pamintuan relies on the rule that a penalty and liquidated damages are the same
(Lambert vs. Fox 26 Phil. 588); that "in obligations with a penal clause, the penalty shall
substitute the indemnity for damages and the payment of interests in case of non-
compliance, if there is no stipulation to the contrary " (1st sentence of Art. 1226, Civil
Code) and, it is argued, there is no such stipulation to the contrary in this case and that
"liquidated damages are those agreed upon by the parties to a contract, to be paid in
case of breach thereof" (Art. 2226, Civil Code).
We hold that appellant's contention cannot be sustained because the second sentence
of article 1226 itself provides that I nevertheless, damages shall be paid if the obligor ...
is guilty of fraud in the fulfillment of the obligation". "Responsibility arising from fraud is
demandable in all obligations" (Art. 1171, Civil Code). "In case of fraud, bad faith,
malice or wanton attitude, the obligor shall be responsible for an damages which may
be reasonably attributed to the non-performance of the obligation" (Ibid, art. 2201).
The trial court and the Court of Appeals found that Pamintuan was guilty of fraud
because he did not make a complete delivery of the plastic sheetings and he overpriced
the same. That factual finding is conclusive upon this Court.
There is no justification for the Civil Code to make an apparent distinction between
penalty and liquidated damages because the settled rule is that there is no difference
between penalty and liquidated damages insofar as legal results are concerned and that
either may be recovered without the necessity of proving actual damages and both may
be reduced when proper (Arts. 1229, 2216 and 2227, Civil Code. See observations of
Justice J.B.L. Reyes, cited in 4 Tolentino's Civil Code, p. 251).
Castan Tobeas notes that the penal clause in an obligation has three functions: "1.
Una funcion coercitiva o de garantia, consistente en estimular al deudor al complimiento
de la obligacion principal, ante la amenaza de tener que pagar la pena. 2. Una funcion
liquidadora del dao, o sea la de evaluar por anticipado los perjuicios que habria de
ocasionar al acreedor el incumplimiento o cumplimiento inadecuado de la obligacion. 3.
Una funcion estrictamente penal, consistente en sancionar o castigar dicho
incumplimiento o cumplimiento inadecuado, atribuyendole consecuencias mas
onerosas para el deudor que las que normalmente lleva aparejadas la infraccion
contractual. " (3 Derecho Civil Espanol, 9th Ed., p. 128).
The penalty clause is strictly penal or cumulative in character and does not partake of
the nature of liquidated damages (pena sustitutiva) when the parties agree "que el
acreedor podra pedir, en el supuesto incumplimiento o mero retardo de la obligacion
principal, ademas de la pena, los danos y perjuicios. Se habla en este caso de pena
cumulativa, a differencia de aquellos otros ordinarios, en que la pena es sustitutiva de
la reparacion ordinaria." (Ibid, Castan Tobenas, p. 130).
After a conscientious consideration of the facts of the case, as found by Court of
Appeals and the trial court, and after reflecting on the/tenor of the stipulation for
liquidated damages herein, the true nature of which is not easy to categorize, we further
hold that justice would be adequately done in this case by allowing Yu Ping Kun Co.,
Inc. to recover only the actual damages proven and not to award to it the stipulated
liquidated damages of ten thousand pesos for any breach of the contract. The proven
damages supersede the stipulated liquidated damages.
This view finds support in the opinion of Manresa (whose comments were the bases of
the new matter found in article 1226, not found in article 1152 of the old Civil Code) that
in case of fraud the difference between the proven damages and the stipulated penalty
may be recovered (Vol. 8, part. 1, Codigo Civil, 5th Ed., 1950, p. 483).
Hence, the damages recoverable by the firm would amount to ninety thousand five
hundred fifty-nine pesos and twenty-eight centavos (P90,559.28), with six percent
interest a year from the filing of the complaint.
With that modification the judgment of the Court of Appeals is affirmed in all respects.
No costs in this instance.
SO ORDERED.
Barredo, Concepcion, Jr., and Santos, JJ., concur.
Abad Santos, J., concur in the result.

Separate Opinions

ANTONIO, J ., concurring:
As a general rule, the penalty takes the place of the indemnity for damages and the
payment of interest.
1
This was also the rule under the Old Civil Code. Thus, Article 1152 of the
Spanish Civil Code provided that in "obligations with a penal clause the penalty shall substitute indemnity
for damages and the payment of interest in case of non-performance should there be no agreement to
the contrary. " As an exception to this rule, the penalty and the indemnity for damages and payment of
interest may be recovered when there is an express stipulation to that effect. Aside from incorporating the
provisions of Article 1152 of the Spanish Civil Code, Article 1226 of the New Civil Code also added two
other exceptions when indemnity for damages, in addition to and part from the penalty for damages, in
addition to and apart from the penalty stipulated, may be recovered: (1) when the obligor having failed to
comply with the principal obligation also refuses to pay the penalty, in which case the creditor is entitled to
interest in the amount of the penalty, in accordance with Article 2209; or (2) when the obligor is guilty of
fraud in the fulfillment of the obligation.
2
The reason for the third exception is based on the principle that
an action to enforce is based on the principle that an action to enforce liability for future fraud cannot be
renounced, as that would be against public policy and would contravene the express provisions of Article
1171 of the Civil Code which states that "any waiver of an action for future fraud is void. "
On this matter, Manresa commented, thus:
La pena y la indemnizacion por dolo. Es en nuestra opinion, otrocaso de excepcion a
la regla general de incompatibilidad y lo entendemos asi, no ya por el primer parrafo del
articulo 1.102, que declara exigible la responsibilidad del dolo procedente en toda clase
de obligaciones, sino principalmente por la segunda parte de dicho articulo, que se
opone a la validez de toda renuncia anticipada de la accion para exigir tal
responsibilidad. En efecto, este supone que la ley no autoriza en modo alguno la
impunidad del dolo por cause de convenios anteriores, y por tanto, rechaza lo mismo la
impunidad completa que la parcial ,es decir referira a aquellos perjuicios que no quedan
satisfechos con el importe de la pena convenida. Limitada asi la cuestion, y no olividando
que, a falta de convenio especial, tiene la pena asignado el fin de reparar los perjuicios,
concretamos asi nuestra opinion: 1.0, que en caso de dolo de una obligacion con
clausula penal, la prueba de de aquel para reclamar mas indemnizacion corresponde al
actor; 2. 0, que tambien, caso pedirla, le corresponde la de existencia y cuantra los
perjuicio; y 3.0, que probando ambos extremos, podra pedir la differencia de dicha sobre
el importe de la pena estipulada.
3

It is evident from tile foregoing that in case of fraud in the fulfillment of an obligation with a penal clause,
proof of such fraud is incumbent upon the creditor, and in case he demands indemnity in addition to the
penalty stipulated, proof of the existence and amount of the damages shall also correspond to him.
However, the creditor may demand only the difference of such amount over the amount of the penalty
stipulated as the creditor cannot recover both the proven damages and the stipulated penalty. In the case
at bar, he is only entitled to the stipulated penalty plus the difference between the proven damages and
the stipulated penalty.




# Separate Opinions
ANTONIO, J ., concurring:
As a general rule, the penalty takes the place of the indemnity for damages and the payment of interest.
1
This was also the rule
under the Old Civil Code. Thus, Article 1152 of the Spanish Civil Code provided that in "obligations with a
penal clause the penalty shall substitute indemnity for damages and the payment of interest in case of
non-performance should there be no agreement to the contrary. " As an exception to this rule, the penalty
and the indemnity for damages and payment of interest may be recovered when there is an express
stipulation to that effect. Aside from incorporating the provisions of Article 1152 of the Spanish Civil Code,
Article 1226 of the New Civil Code also added two other exceptions when indemnity for damages, in
addition to and part from the penalty for damages, in addition to and apart from the penalty stipulated,
may be recovered: (1) when the obligor having failed to comply with the principal obligation also refuses
to pay the penalty, in which case the creditor is entitled to interest in the amount of the penalty, in
accordance with Article 2209; or (2) when the obligor is guilty of fraud in the fulfillment of the obligation.
2

The reason for the third exception is based on the principle that an action to enforce is based on the
principle that an action to enforce liability for future fraud cannot be renounced, as that would be against
public policy and would contravene the express provisions of Article 1171 of the Civil Code which states
that "any waiver of an action for future fraud is void. "
On this matter, Manresa commented, thus:
La pena y la indemnizacion por dolo. Es en nuestra opinion, otrocaso de excepcion a
la regla general de incompatibilidad y lo entendemos asi, no ya por el primer parrafo del
articulo 1.102, que declara exigible la responsibilidad del dolo procedente en toda clase
de obligaciones, sino principalmente por la segunda parte de dicho articulo, que se
opone a la validez de toda renuncia anticipada de la accion para exigir tal
responsibilidad. En efecto, este supone que la ley no autoriza en modo alguno la
impunidad del dolo por cause de convenios anteriores, y por tanto, rechaza lo mismo la
impunidad completa que la parcial ,es decir referira a aquellos perjuicios que no quedan
satisfechos con el importe de la pena convenida. Limitada asi la cuestion, y no olividando
que, a falta de convenio especial, tiene la pena asignado el fin de reparar los perjuicios,
concretamos asi nuestra opinion: 1.0, que en caso de dolo de una obligacion con
clausula penal, la prueba de de aquel para reclamar mas indemnizacion corresponde al
actor; 2. 0, que tambien, caso pedirla, le corresponde la de existencia y cuantra los
perjuicio; y 3.0, que probando ambos extremos, podra pedir la differencia de dicha sobre
el importe de la pena estipulada.
3

It is evident from tile foregoing that in case of fraud in the fulfillment of an obligation with a penal clause,
proof of such fraud is incumbent upon the creditor, and in case he demands indemnity in addition to the
penalty stipulated, proof of the existence and amount of the damages shall also correspond to him.
However, the creditor may demand only the difference of such amount over the amount of the penalty
stipulated as the creditor cannot recover both the proven damages and the stipulated penalty. In the case
at bar, he is only entitled to the stipulated penalty plus the difference between the proven damages and
the stipulated penalty.
#Footnotes
1 Article 1126, first sentence; Araneta v. Paterno L-2886, August 22, 1952, 91 Phil. 786.
2 Cabarrogais v. Vicente, L-14304, March 23, 1960, 107 Phil. 340, 343.
3 VIII Manresa, Codigo Civil, pp. 482-483.