Resp

onde
nt

Parking Fees

Ayala
Land

On weekdays, P25.00 for the first four hours andP10.00 for every
succeeding hour; on weekends, flat rate of P25.00 per day

Robin
sons

P20.00 for the first three hours and P10.00 for every succeeding hour

Shan
gri-la

Flat rate of P30.00 per day

SM
Prime

P10.00 to P20.00 (depending on whether the parking space is outdoors or

indoors) for the first three hours and 59 minutes, and P10.00 for every
succeeding hour or fraction thereof
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 177056

September 18, 2009
THE OFFICE OF THE SOLICITOR GENERAL, Petitioner,
vs.
AYALA LAND INCORPORATED, ROBINSON'S LAND CORPORATION, SHANGRI-LA PLAZA CORPORATION and SM PRIME
HOLDINGS, INC., Respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari,1 under Rule 45 of the Revised Rules of Court, filed by petitioner Office of
the Solicitor General (OSG), seeking the reversal and setting aside of the Decision2 dated 25 January 2007 of the Court of
Appeals in CA-G.R. CV No. 76298, which affirmed in toto the Joint Decision3 dated 29 May 2002 of the Regional Trial Court
(RTC) of Makati City, Branch 138, in Civil Cases No. 00-1208 and No. 00-1210; and (2) the Resolution4 dated 14 March 2007 of
the appellate court in the same case which denied the Motion for Reconsideration of the OSG. The RTC adjudged that
respondents Ayala Land Incorporated (Ayala Land), Robinsons Land Corporation (Robinsons), Shangri-la Plaza Corporation
(Shangri-la), and SM Prime Holdings, Inc. (SM Prime) could not be obliged to provide free parking spaces in their malls to their
patrons and the general public.
Respondents Ayala Land, Robinsons, and Shangri-la maintain and operate shopping malls in various locations in Metro Manila.
Respondent SM Prime constructs, operates, and leases out commercial buildings and other structures, among which, are SM
City, Manila; SM Centerpoint, Sta. Mesa, Manila; SM City, North Avenue, Quezon City; and SM Southmall, Las Pias.
The shopping malls operated or leased out by respondents have parking facilities for all kinds of motor vehicles, either by way
of parking spaces inside the mall buildings or in separate buildings and/or adjacent lots that are solely devoted for use as
parking spaces. Respondents Ayala Land, Robinsons, and SM Prime spent for the construction of their own parking facilities.
Respondent Shangri-la is renting its parking facilities, consisting of land and building specifically used as parking spaces, which
were constructed for the lessors account.
Respondents expend for the maintenance and administration of their respective parking facilities. They provide security
personnel to protect the vehicles parked in their parking facilities and maintain order within the area. In turn, they collect the
following parking fees from the persons making use of their parking facilities, regardless of whether said persons are mall
patrons or not:
The parking tickets or cards issued by respondents to vehicle owners contain the stipulation that respondents shall not be
responsible for any loss or damage to the vehicles parked in respondents parking facilities.
In 1999, the Senate Committees on Trade and Commerce and on Justice and Human Rights conducted a joint investigation for

the following purposes: (1) to inquire into the legality of the prevalent practice of shopping malls of charging parking fees; (2)
assuming arguendo that the collection of parking fees was legally authorized, to find out the basis and reasonableness of the
parking rates charged by shopping malls; and (3) to determine the legality of the policy of shopping malls of denying liability
in cases of theft, robbery, or carnapping, by invoking the waiver clause at the back of the parking tickets. Said Senate
Committees invited the top executives of respondents, who operate the major malls in the country; the officials from the
Department of Trade and Industry (DTI), Department of Public Works and Highways (DPWH), Metro Manila Development
Authority (MMDA), and other local government officials; and the Philippine Motorists Association (PMA) as representative of
the consumers group.
After three public hearings held on 30 September, 3 November, and 1 December 1999, the afore-mentioned Senate
Committees jointly issued Senate Committee Report No. 2255 on 2 May 2000, in which they concluded:
In view of the foregoing, the Committees find that the collection of parking fees by shopping malls is contrary to the National
Building Code and is therefor [sic] illegal. While it is true that the Code merely requires malls to provide parking spaces,
without specifying whether it is free or not, both Committees believe that the reasonable and logical interpretation of the
Code is that the parking spaces are for free. This interpretation is not only reasonable and logical but finds support in the
actual practice in other countries like the United States of America where parking spaces owned and operated by mall owners
are free of charge.
Figuratively speaking, the Code has "expropriated" the land for parking something similar to the subdivision law which
require developers to devote so much of the land area for parks.
Moreover, Article II of R.A. No. 9734 (Consumer Act of the Philippines) provides that "it is the policy of the State to protect the
interest of the consumers, promote the general welfare and establish standards of conduct for business and industry."
Obviously, a contrary interpretation (i.e., justifying the collection of parking fees) would be going against the declared policy of
R.A. 7394.
Section 201 of the National Building Code gives the responsibility for the administration and enforcement of the provisions of
the Code, including the imposition of penalties for administrative violations thereof to the Secretary of Public Works. This set
up, however, is not being carried out in reality.
In the position paper submitted by the Metropolitan Manila Development Authority (MMDA), its chairman, Jejomar C. Binay,
accurately pointed out that the Secretary of the DPWH is responsible for the implementation/enforcement of the National
Building Code. After the enactment of the Local Government Code of 1991, the local government units (LGUs) were tasked to
discharge the regulatory powers of the DPWH. Hence, in the local level, the Building Officials enforce all rules/ regulations
formulated by the DPWH relative to all building plans, specifications and designs including parking space requirements. There
is, however, no single national department or agency directly tasked to supervise the enforcement of the provisions of the
Code on parking, notwithstanding the national character of the law.6
Senate Committee Report No. 225, thus, contained the following recommendations:
In light of the foregoing, the Committees on Trade and Commerce and Justice and Human Rights hereby recommend the
following:
1. The Office of the Solicitor General should institute the necessary action to enjoin the collection of parking fees as well as to
enforce the penal sanction provisions of the National Building Code. The Office of the Solicitor General should likewise study
how refund can be exacted from mall owners who continue to collect parking fees.
2. The Department of Trade and Industry pursuant to the provisions of R.A. No. 7394, otherwise known as the Consumer Act of
the Philippines should enforce the provisions of the Code relative to parking. Towards this end, the DTI should formulate the
necessary implementing rules and regulations on parking in shopping malls, with prior consultations with the local
government units where these are located. Furthermore, the DTI, in coordination with the DPWH, should be empowered to
regulate and supervise the construction and maintenance of parking establishments.
3. Finally, Congress should amend and update the National Building Code to expressly prohibit shopping malls from collecting
parking fees by at the same time, prohibit them from invoking the waiver of liability.7
Respondent SM Prime thereafter received information that, pursuant to Senate Committee Report No. 225, the DPWH
Secretary and the local building officials of Manila, Quezon City, and Las Pias intended to institute, through the OSG, an action
to enjoin respondent SM Prime and similar establishments from collecting parking fees, and to impose upon said

establishments penal sanctions under Presidential Decree No. 1096, otherwise known as the National Building Code of the
Philippines (National Building Code), and its Implementing Rules and Regulations (IRR). With the threatened action against it,
respondent SM Prime filed, on 3 October 2000, a Petition for Declaratory Relief8 under Rule 63 of the Revised Rules of Court,
against the DPWH Secretary and local building officials of Manila, Quezon City, and Las Pias. Said Petition was docketed as
Civil Case No. 00-1208 and assigned to the RTC of Makati City, Branch 138, presided over by Judge Sixto Marella, Jr. (Judge
Marella). In its Petition, respondent SM Prime prayed for judgment:
a) Declaring Rule XIX of the Implementing Rules and Regulations of the National Building Code as ultra vires, hence,
unconstitutional and void;
b) Declaring [herein respondent SM Prime]s clear legal right to lease parking spaces appurtenant to its department stores,
malls, shopping centers and other commercial establishments; and
c) Declaring the National Building Code of the Philippines Implementing Rules and Regulations as ineffective, not having been
published once a week for three (3) consecutive weeks in a newspaper of general circulation, as prescribed by Section 211 of
Presidential Decree No. 1096.
[Respondent SM Prime] further prays for such other reliefs as may be deemed just and equitable under the premises.9
The very next day, 4 October 2000, the OSG filed a Petition for Declaratory Relief and Injunction (with Prayer for Temporary
Restraining Order and Writ of Preliminary Injunction)10 against respondents. This Petition was docketed as Civil Case No.
00-1210 and raffled to the RTC of Makati, Branch 135, presided over by Judge Francisco B. Ibay (Judge Ibay). Petitioner prayed
that the RTC:
1. After summary hearing, a temporary restraining order and a writ of preliminary injunction be issued restraining respondents
from collecting parking fees from their customers; and
2. After hearing, judgment be rendered declaring that the practice of respondents in charging parking fees is violative of the
National Building Code and its Implementing Rules and Regulations and is therefore invalid, and making permanent any
injunctive writ issued in this case.
Other reliefs just and equitable under the premises are likewise prayed for.11
On 23 October 2000, Judge Ibay of the RTC of Makati City, Branch 135, issued an Order consolidating Civil Case No. 00-1210
with Civil Case No. 00-1208 pending before Judge Marella of RTC of Makati, Branch 138.
As a result of the pre-trial conference held on the morning of 8 August 2001, the RTC issued a Pre-Trial Order12of even date
which limited the issues to be resolved in Civil Cases No. 00-1208 and No. 00-1210 to the following:
1. Capacity of the plaintiff [OSG] in Civil Case No. 00-1210 to institute the present proceedings and relative thereto whether the
controversy in the collection of parking fees by mall owners is a matter of public welfare.
2. Whether declaratory relief is proper.
3. Whether respondent Ayala Land, Robinsons, Shangri-La and SM Prime are obligated to provide parking spaces in their malls
for the use of their patrons or the public in general, free of charge.
4. Entitlement of the parties of [sic] award of damages.13
On 29 May 2002, the RTC rendered its Joint Decision in Civil Cases No. 00-1208 and No. 00-1210.
The RTC resolved the first two issues affirmatively. It ruled that the OSG can initiate Civil Case No. 00-1210 under Presidential
Decree No. 478 and the Administrative Code of 1987.14 It also found that all the requisites for an action for declaratory relief
were present, to wit:
The requisites for an action for declaratory relief are: (a) there is a justiciable controversy; (b) the controversy is between
persons whose interests are adverse; (c) the party seeking the relief has a legal interest in the controversy; and (d) the issue
involved is ripe for judicial determination.
SM, the petitioner in Civil Case No. 001-1208 [sic] is a mall operator who stands to be affected directly by the position taken by
the government officials sued namely the Secretary of Public Highways and the Building Officials of the local government units
where it operates shopping malls. The OSG on the other hand acts on a matter of public interest and has taken a position
adverse to that of the mall owners whom it sued. The construction of new and bigger malls has been announced, a matter
which the Court can take judicial notice and the unsettled issue of whether mall operators should provide parking facilities,
free of charge needs to be resolved.15
As to the third and most contentious issue, the RTC pronounced that:

The Building Code, which is the enabling law and the Implementing Rules and Regulations do not impose that parking spaces
shall be provided by the mall owners free of charge. Absent such directive[,] Ayala Land, Robinsons, Shangri-la and SM [Prime]
are under no obligation to provide them for free. Article 1158 of the Civil Code is clear:
"Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are
demandable and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen,
by the provisions of this Book (1090).["]
xxxx
The provision on ratios of parking slots to several variables, like shopping floor area or customer area found in Rule XIX of the
Implementing Rules and Regulations cannot be construed as a directive to provide free parking spaces, because the enabling
law, the Building Code does not so provide. x x x.
To compel Ayala Land, Robinsons, Shangri-La and SM [Prime] to provide parking spaces for free can be considered as an
unlawful taking of property right without just compensation.
Parking spaces in shopping malls are privately owned and for their use, the mall operators collect fees. The legal relationship
could be either lease or deposit. In either case[,] the mall owners have the right to collect money which translates into income.
Should parking spaces be made free, this right of mall owners shall be gone. This, without just compensation. Further, loss of
effective control over their property will ensue which is frowned upon by law.
The presence of parking spaces can be viewed in another light. They can be looked at as necessary facilities to entice the
public to increase patronage of their malls because without parking spaces, going to their malls will be inconvenient. These
are[,] however[,] business considerations which mall operators will have to decide for themselves. They are not sufficient to
justify a legal conclusion, as the OSG would like the Court to adopt that it is the obligation of the mall owners to provide
parking spaces for free.16
The RTC then held that there was no sufficient evidence to justify any award for damages.
The RTC finally decreed in its 29 May 2002 Joint Decision in Civil Cases No. 00-1208 and No. 00-1210 that:
FOR THE REASONS GIVEN, the Court declares that Ayala Land[,] Inc., Robinsons Land Corporation, Shangri-la Plaza Corporation
and SM Prime Holdings[,] Inc. are not obligated to provide parking spaces in their malls for the use of their patrons or public in
general, free of charge.
All counterclaims in Civil Case No. 00-1210 are dismissed.
No pronouncement as to costs.17CA-G.R. CV No. 76298 involved the separate appeals of the OSG18 and respondent SM
Prime19 filed with the Court of Appeals. The sole assignment of error of the OSG in its Appellants Brief was:
THE TRIAL COURT ERRED IN HOLDING THAT THE NATIONAL BUILDING CODE DID NOT INTEND MALL PARKING SPACES TO BE
FREE OF CHARGE[;]20
while the four errors assigned by respondent SM Prime in its Appellants Brief were:
I
THE TRIAL COURT ERRED IN FAILING TO DECLARE RULE XIX OF THE IMPLEMENTING RULES AS HAVING BEEN ENACTED ULTRA
VIRES, HENCE, UNCONSTITUTIONAL AND VOID.
II
THE TRIAL COURT ERRED IN FAILING TO DECLARE THE IMPLEMENTING RULES INEFFECTIVE FOR NOT HAVING BEEN PUBLISHED
AS REQUIRED BY LAW.
III
THE TRIAL COURT ERRED IN FAILING TO DISMISS THE OSGS PETITION FOR DECLARATORY RELIEF AND INJUNCTION FOR
FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES.
IV
THE TRIAL COURT ERRED IN FAILING TO DECLARE THAT THE OSG HAS NO LEGAL CAPACITY TO SUE AND/OR THAT IT IS NOT A
REAL PARTY-IN-INTEREST IN THE INSTANT CASE.21
Respondent Robinsons filed a Motion to Dismiss Appeal of the OSG on the ground that the lone issue raised therein involved a
pure question of law, not reviewable by the Court of Appeals.
The Court of Appeals promulgated its Decision in CA-G.R. CV No. 76298 on 25 January 2007. The appellate court agreed with

respondent Robinsons that the appeal of the OSG should suffer the fate of dismissal, since "the issue on whether or not the
National Building Code and its implementing rules require shopping mall operators to provide parking facilities to the public
for free" was evidently a question of law. Even so, since CA-G.R. CV No. 76298 also included the appeal of respondent SM
Prime, which raised issues worthy of consideration, and in order to satisfy the demands of substantial justice, the Court of
Appeals proceeded to rule on the merits of the case.
In its Decision, the Court of Appeals affirmed the capacity of the OSG to initiate Civil Case No. 00-1210 before the RTC as the
legal representative of the government,22 and as the one deputized by the Senate of the Republic of the Philippines through
Senate Committee Report No. 225.
The Court of Appeals rejected the contention of respondent SM Prime that the OSG failed to exhaust administrative remedies.
The appellate court explained that an administrative review is not a condition precedent to judicial relief where the question in
dispute is purely a legal one, and nothing of an administrative nature is to be or can be done.
The Court of Appeals likewise refused to rule on the validity of the IRR of the National Building Code, as such issue was not
among those the parties had agreed to be resolved by the RTC during the pre-trial conference for Civil Cases No. 00-1208 and
No. 00-1210. Issues cannot be raised for the first time on appeal. Furthermore, the appellate court found that the controversy
could be settled on other grounds, without touching on the issue of the validity of the IRR. It referred to the settled rule that
courts should refrain from passing upon the constitutionality of a law or implementing rules, because of the principle that bars
judicial inquiry into a constitutional question, unless the resolution thereof is indispensable to the determination of the case.
Lastly, the Court of Appeals declared that Section 803 of the National Building Code and Rule XIX of the IRR were clear and
needed no further construction. Said provisions were only intended to control the occupancy or congestion of areas and
structures. In the absence of any express and clear provision of law, respondents could not be obliged and expected to provide
parking slots free of charge.
The fallo of the 25 January 2007 Decision of the Court of Appeals reads:
WHEREFORE, premises considered, the instant appeals are DENIED. Accordingly, appealed Decision is hereby AFFIRMED in
toto.23
In its Resolution issued on 14 March 2007, the Court of Appeals denied the Motion for Reconsideration of the OSG, finding that
the grounds relied upon by the latter had already been carefully considered, evaluated, and passed upon by the appellate
court, and there was no strong and cogent reason to modify much less reverse the assailed judgment.
The OSG now comes before this Court, via the instant Petition for Review, with a single assignment of error:
THE COURT OF APPEALS SERIOUSLY ERRED IN AFFIRMING THE RULING OF THE LOWER COURT THAT RESPONDENTS ARE NOT
OBLIGED TO PROVIDE FREE PARKING SPACES TO THEIR CUSTOMERS OR THE PUBLIC.24
The OSG argues that respondents are mandated to provide free parking by Section 803 of the National Building Code and Rule
XIX of the IRR.
According to Section 803 of the National Building Code:
SECTION 803. Percentage of Site Occupancy
(a) Maximum site occupancy shall be governed by the use, type of construction, and height of the building and the use, area,
nature, and location of the site; and subject to the provisions of the local zoning requirements and in accordance with the rules
and regulations promulgated by the Secretary.
In connection therewith, Rule XIX of the old IRR,25 provides:
RULE XIX PARKING AND LOADING SPACE REQUIREMENTS
Pursuant to Section 803 of the National Building Code (PD 1096) providing for maximum site occupancy, the following
provisions on parking and loading space requirements shall be observed:
1. The parking space ratings listed below are minimum off-street requirements for specific uses/occupancies for
buildings/structures:
1.1 The size of an average automobile parking slot shall be computed as 2.4 meters by 5.00 meters for perpendicular or
diagonal parking, 2.00 meters by 6.00 meters for parallel parking. A truck or bus parking/loading slot shall be computed at a
minimum of 3.60 meters by 12.00 meters. The parking slot shall be drawn to scale and the total number of which shall be

indicated on the plans and specified whether or not parking accommodations, are attendant-managed. (See Section 2 for
computation of parking requirements).
xxxx
1.7 Neighborhood shopping center 1 slot/100 sq. m. of shopping floor area
The OSG avers that the aforequoted provisions should be read together with Section 102 of the National Building Code, which
declares:
SECTION 102. Declaration of Policy
It is hereby declared to be the policy of the State to safeguard life, health, property, and public welfare, consistent with the
principles of sound environmental management and control; and to this end, make it the purpose of this Code to provide for
all buildings and structures, a framework of minimum standards and requirements to regulate and control their location, site,
design, quality of materials, construction, use, occupancy, and maintenance.
The requirement of free-of-charge parking, the OSG argues, greatly contributes to the aim of safeguarding "life, health,
property, and public welfare, consistent with the principles of sound environmental management and control." Adequate
parking spaces would contribute greatly to alleviating traffic congestion when complemented by quick and easy access
thereto because of free-charge parking. Moreover, the power to regulate and control the use, occupancy, and maintenance of
buildings and structures carries with it the power to impose fees and, conversely, to control -- partially or, as in this case,
absolutely -- the imposition of such fees.
The Court finds no merit in the present Petition.
The explicit directive of the afore-quoted statutory and regulatory provisions, garnered from a plain reading thereof, is that
respondents, as operators/lessors of neighborhood shopping centers, should provide parking and loading spaces, in
accordance with the minimum ratio of one slot per 100 square meters of shopping floor area. There is nothing therein
pertaining to the collection (or non-collection) of parking fees by respondents. In fact, the term "parking fees" cannot even be
found at all in the entire National Building Code and its IRR. Statutory construction has it that if a statute is clear and
unequivocal, it must be given its literal meaning and applied without any attempt at interpretation.26 Since Section 803 of the
National Building Code and Rule XIX of its IRR do not mention parking fees, then simply, said provisions do not regulate the
collection of the same. The RTC and the Court of Appeals correctly applied Article 1158 of the New Civil Code, which states:
Art. 1158. Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are
demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen,
by the provisions of this Book. (Emphasis ours.)
Hence, in order to bring the matter of parking fees within the ambit of the National Building Code and its IRR, the OSG had to
resort to specious and feeble argumentation, in which the Court cannot concur.
The OSG cannot rely on Section 102 of the National Building Code to expand the coverage of Section 803 of the same Code
and Rule XIX of the IRR, so as to include the regulation of parking fees. The OSG limits its citation to the first part of Section 102
of the National Building Code declaring the policy of the State "to safeguard life, health, property, and public welfare,
consistent with the principles of sound environmental management and control"; but totally ignores the second part of said
provision, which reads, "and to this end, make it the purpose of this Code to provide for all buildings and structures, a
framework of minimum standards and requirements to regulate and control their location, site, design, quality of materials,
construction, use, occupancy, and maintenance." While the first part of Section 102 of the National Building Code lays down
the State policy, it is the second part thereof that explains how said policy shall be carried out in the Code. Section 102 of the
National Building Code is not an all-encompassing grant of regulatory power to the DPWH Secretary and local building officials
in the name of life, health, property, and public welfare. On the contrary, it limits the regulatory power of said officials to
ensuring that the minimum standards and requirements for all buildings and structures, as set forth in the National Building
Code, are complied with.
Consequently, the OSG cannot claim that in addition to fixing the minimum requirements for parking spaces for buildings,
Rule XIX of the IRR also mandates that such parking spaces be provided by building owners free of charge. If Rule XIX is not
covered by the enabling law, then it cannot be added to or included in the implementing rules. The rule-making power of
administrative agencies must be confined to details for regulating the mode or proceedings to carry into effect the law as it
has been enacted, and it cannot be extended to amend or expand the statutory requirements or to embrace matters not

covered by the statute. Administrative regulations must always be in harmony with the provisions of the law because any
resulting discrepancy between the two will always be resolved in favor of the basic law.27
From the RTC all the way to this Court, the OSG repeatedly referred to Republic v. Gonzales28 and City of Ozamis v. Lumapas29
to support its position that the State has the power to regulate parking spaces to promote the health, safety, and welfare of
the public; and it is by virtue of said power that respondents may be required to provide free parking facilities. The OSG,
though, failed to consider the substantial differences in the factual and legal backgrounds of these two cases from those of the
Petition at bar.
In Republic, the Municipality of Malabon sought to eject the occupants of two parcels of land of the public domain to give way
to a road-widening project. It was in this context that the Court pronounced:
Indiscriminate parking along F. Sevilla Boulevard and other main thoroughfares was prevalent; this, of course, caused the build
up of traffic in the surrounding area to the great discomfort and inconvenience of the public who use the streets. Traffic
congestion constitutes a threat to the health, welfare, safety and convenience of the people and it can only be substantially
relieved by widening streets and providing adequate parking areas.
The Court, in City of Ozamis, declared that the City had been clothed with full power to control and regulate its streets for the
purpose of promoting public health, safety and welfare. The City can regulate the time, place, and manner of parking in the
streets and public places; and charge minimal fees for the street parking to cover the expenses for supervision, inspection and
control, to ensure the smooth flow of traffic in the environs of the public market, and for the safety and convenience of the
public.
Republic and City of Ozamis involved parking in the local streets; in contrast, the present case deals with privately owned
parking facilities available for use by the general public. In Republic and City of Ozamis, the concerned local governments
regulated parking pursuant to their power to control and regulate their streets; in the instant case, the DPWH Secretary and
local building officials regulate parking pursuant to their authority to ensure compliance with the minimum standards and
requirements under the National Building Code and its IRR. With the difference in subject matters and the bases for the
regulatory powers being invoked, Republic and City of Ozamis do not constitute precedents for this case.
Indeed, Republic and City of Ozamis both contain pronouncements that weaken the position of the OSG in the case at bar. In
Republic, the Court, instead of placing the burden on private persons to provide parking facilities to the general public,
mentioned the trend in other jurisdictions wherein the municipal governments themselves took the initiative to make more
parking spaces available so as to alleviate the traffic problems, thus:
Under the Land Transportation and Traffic Code, parking in designated areas along public streets or highways is allowed which
clearly indicates that provision for parking spaces serves a useful purpose. In other jurisdictions where traffic is at least as
voluminous as here, the provision by municipal governments of parking space is not limited to parking along public streets or
highways. There has been a marked trend to build off-street parking facilities with the view to removing parked cars from the
streets. While the provision of off-street parking facilities or carparks has been commonly undertaken by private enterprise,
municipal governments have been constrained to put up carparks in response to public necessity where private enterprise
had failed to keep up with the growing public demand. American courts have upheld the right of municipal governments to
construct off-street parking facilities as clearly redounding to the public benefit.30
In City of Ozamis, the Court authorized the collection by the City of minimal fees for the parking of vehicles along the streets:
so why then should the Court now preclude respondents from collecting from the public a fee for the use of the mall parking
facilities? Undoubtedly, respondents also incur expenses in the maintenance and operation of the mall parking facilities, such
as electric consumption, compensation for parking attendants and security, and upkeep of the physical structures.
It is not sufficient for the OSG to claim that "the power to regulate and control the use, occupancy, and maintenance of
buildings and structures carries with it the power to impose fees and, conversely, to control, partially or, as in this case,
absolutely, the imposition of such fees." Firstly, the fees within the power of regulatory agencies to impose are regulatory fees.
It has been settled law in this jurisdiction that this broad and all-compassing governmental competence to restrict rights of
liberty and property carries with it the undeniable power to collect a regulatory fee. It looks to the enactment of specific
measures that govern the relations not only as between individuals but also as between private parties and the political

society.31 True, if the regulatory agencies have the power to impose regulatory fees, then conversely, they also have the
power to remove the same. Even so, it is worthy to note that the present case does not involve the imposition by the DPWH
Secretary and local building officials of regulatory fees upon respondents; but the collection by respondents of parking fees
from persons who use the mall parking facilities. Secondly, assuming arguendo that the DPWH Secretary and local building
officials do have regulatory powers over the collection of parking fees for the use of privately owned parking facilities, they
cannot allow or prohibit such collection arbitrarily or whimsically. Whether allowing or prohibiting the collection of such
parking fees, the action of the DPWH Secretary and local building officials must pass the test of classic reasonableness and
propriety of the measures or means in the promotion of the ends sought to be accomplished.32
Keeping in mind the aforementioned test of reasonableness and propriety of measures or means, the Court notes that Section
803 of the National Building Code falls under Chapter 8 on Light and Ventilation. Evidently, the Code deems it necessary to
regulate site occupancy to ensure that there is proper lighting and ventilation in every building. Pursuant thereto, Rule XIX of
the IRR requires that a building, depending on its specific use and/or floor area, should provide a minimum number of parking
spaces. The Court, however, fails to see the connection between regulating site occupancy to ensure proper light and
ventilation in every building vis--vis regulating the collection by building owners of fees for the use of their parking spaces.
Contrary to the averment of the OSG, the former does not necessarily include or imply the latter. It totally escapes this Court
how lighting and ventilation conditions at the malls could be affected by the fact that parking facilities thereat are free or paid
for.
The OSG attempts to provide the missing link by arguing that:
Under Section 803 of the National Building Code, complimentary parking spaces are required to enhance light and ventilation,
that is, to avoid traffic congestion in areas surrounding the building, which certainly affects the ventilation within the building
itself, which otherwise, the annexed parking spaces would have served. Free-of-charge parking avoids traffic congestion by
ensuring quick and easy access of legitimate shoppers to off-street parking spaces annexed to the malls, and thereby
removing the vehicles of these legitimate shoppers off the busy streets near the commercial establishments.33
The Court is unconvinced. The National Building Code regulates buildings, by setting the minimum specifications and
requirements for the same. It does not concern itself with traffic congestion in areas surrounding the building. It is already a
stretch to say that the National Building Code and its IRR also intend to solve the problem of traffic congestion around the
buildings so as to ensure that the said buildings shall have adequate lighting and ventilation. Moreover, the Court cannot
simply assume, as the OSG has apparently done, that the traffic congestion in areas around the malls is due to the fact that
respondents charge for their parking facilities, thus, forcing vehicle owners to just park in the streets. The Court notes that
despite the fees charged by respondents, vehicle owners still use the mall parking facilities, which are even fully occupied on
some days. Vehicle owners may be parking in the streets only because there are not enough parking spaces in the malls, and
not because they are deterred by the parking fees charged by respondents. Free parking spaces at the malls may even have
the opposite effect from what the OSG envisioned: more people may be encouraged by the free parking to bring their own
vehicles, instead of taking public transport, to the malls; as a result, the parking facilities would become full sooner, leaving
more vehicles without parking spaces in the malls and parked in the streets instead, causing even more traffic congestion.
Without using the term outright, the OSG is actually invoking police power to justify the regulation by the State, through the
DPWH Secretary and local building officials, of privately owned parking facilities, including the collection by the
owners/operators of such facilities of parking fees from the public for the use thereof. The Court finds, however, that in totally
prohibiting respondents from collecting parking fees from the public for the use of the mall parking facilities, the State would
be acting beyond the bounds of police power.
Police power is the power of promoting the public welfare by restraining and regulating the use of liberty and property. It is
usually exerted in order to merely regulate the use and enjoyment of the property of the owner. The power to regulate,
however, does not include the power to prohibit. A fortiori, the power to regulate does not include the power to confiscate.
Police power does not involve the taking or confiscation of property, with the exception of a few cases where there is a
necessity to confiscate private property in order to destroy it for the purpose of protecting peace and order and of promoting
the general welfare; for instance, the confiscation of an illegally possessed article, such as opium and firearms. 34
When there is a taking or confiscation of private property for public use, the State is no longer exercising police power, but
another of its inherent powers, namely, eminent domain. Eminent domain enables the State to forcibly acquire private lands

intended for public use upon payment of just compensation to the owner.35
Normally, of course, the power of eminent domain results in the taking or appropriation of title to, and possession of, the
expropriated property; but no cogent reason appears why the said power may not be availed of only to impose a burden upon
the owner of condemned property, without loss of title and possession.36 It is a settled rule that neither acquisition of title nor
total destruction of value is essential to taking. It is usually in cases where title remains with the private owner that inquiry
should be made to determine whether the impairment of a property is merely regulated or amounts to a compensable taking.
A regulation that deprives any person of the profitable use of his property constitutes a taking and entitles him to
compensation, unless the invasion of rights is so slight as to permit the regulation to be justified under the police power.
Similarly, a police regulation that unreasonably restricts the right to use business property for business purposes amounts to a
taking of private property, and the owner may recover therefor.371avvphi1
Although in the present case, title to and/or possession of the parking facilities remain/s with respondents, the prohibition
against their collection of parking fees from the public, for the use of said facilities, is already tantamount to a taking or
confiscation of their properties. The State is not only requiring that respondents devote a portion of the latters properties for
use as parking spaces, but is also mandating that they give the public access to said parking spaces for free. Such is already an
excessive intrusion into the property rights of respondents. Not only are they being deprived of the right to use a portion of
their properties as they wish, they are further prohibited from profiting from its use or even just recovering therefrom the
expenses for the maintenance and operation of the required parking facilities.
The ruling of this Court in City Government of Quezon City v. Judge Ericta38 is edifying. Therein, the City Government of
Quezon City passed an ordinance obliging private cemeteries within its jurisdiction to set aside at least six percent of their total
area for charity, that is, for burial grounds of deceased paupers. According to the Court, the ordinance in question was null and
void, for it authorized the taking of private property without just compensation:
There is no reasonable relation between the setting aside of at least six (6) percent of the total area of all private cemeteries for
charity burial grounds of deceased paupers and the promotion of' health, morals, good order, safety, or the general welfare of
the people. The ordinance is actually a taking without compensation of a certain area from a private cemetery to benefit
paupers who are charges of the municipal corporation. Instead of' building or maintaining a public cemetery for this purpose,
the city passes the burden to private cemeteries.
'The expropriation without compensation of a portion of private cemeteries is not covered by Section 12(t) of Republic Act 537,
the Revised Charter of Quezon City which empowers the city council to prohibit the burial of the dead within the center of
population of the city and to provide for their burial in a proper place subject to the provisions of general law regulating burial
grounds and cemeteries. When the Local Government Code, Batas Pambansa Blg. 337 provides in Section 177(q) that a
sangguniang panlungsod may "provide for the burial of the dead in such place and in such manner as prescribed by law or
ordinance" it simply authorizes the city to provide its own city owned land or to buy or expropriate private properties to
construct public cemeteries. This has been the law, and practise in the past. It continues to the present. Expropriation,
however, requires payment of just compensation. The questioned ordinance is different from laws and regulations requiring
owners of subdivisions to set aside certain areas for streets, parks, playgrounds, and other public facilities from the land they
sell to buyers of subdivision lots. The necessities of public safety, health, and convenience are very clear from said
requirements which are intended to insure the development of communities with salubrious and wholesome environments.
The beneficiaries of the regulation, in turn, are made to pay by the subdivision developer when individual lots are sold to
homeowners.
In conclusion, the total prohibition against the collection by respondents of parking fees from persons who use the mall
parking facilities has no basis in the National Building Code or its IRR. The State also cannot impose the same prohibition by
generally invoking police power, since said prohibition amounts to a taking of respondents property without payment of just
compensation.
Given the foregoing, the Court finds no more need to address the issue persistently raised by respondent SM Prime concerning
the unconstitutionality of Rule XIX of the IRR. In addition, the said issue was not among those that the parties, during the
pre-trial conference for Civil Cases No. 12-08 and No. 00-1210, agreed to submit for resolution of the RTC. It is likewise

axiomatic that the constitutionality of a law, a regulation, an ordinance or an act will not be resolved by courts if the
controversy can be, as in this case it has been, settled on other grounds.39
WHEREFORE, the instant Petition for Review on Certiorari is hereby DENIED. The Decision dated 25 January 2007 and
Resolution dated 14 March 2007 of the Court of Appeals in CA-G.R. CV No. 76298, affirming in toto the Joint Decision dated 29
May 2002 of the Regional Trial Court of Makati City, Branch 138, in Civil Cases No. 00-1208 and No. 00-1210 are hereby
AFFIRMED. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-18719
October 31, 1964
PILAR JOAQUIN, ET AL., plaintiffs-appellants,
vs.
FELIX ANICETO, ET AL., defendants-appellee.
Arturo B. Atienza & F. B. del Rosario for plaintiff appellants.
D. A. Karganilla for defendants-appellees.
REGALA, J.:
This case comes to Us for review directly from the Court of First Instance of Manila. The facts are not in dispute. They are as
follows:
While Pilar Joaquin was on the sidewalk of Aviles Street, Manila, on April 27, 1960, a taxicab driven by Felix Aniceto and owned
by Ruperto Rodelas bumped her As a result, she suffered physical injuries.
Aniceto was charged with serious physical injuries through reckless imprudence in the Municipal Court (now the City Court) of
Manila. He was subsequently found guilty and sentenced to imprisonment. However, no ruling was made on his civil liability to
the offended party in view of the latter's reservation to file a separate civil action for damages for the injuries suffered by her.
Aniceto appealed the judgment of conviction to the Court of First Instance of Manila. While the criminal case was thus pending
appeal, Pilar Joaquin, the injured party, filed this case for damages in the Court of First Instance of Manila, in accordance with
the reservation which she had earlier made. Felix Aniceto and Ruperto Rodelas, driver and owner, respectively, of the taxicab
were made party defendants.
At the trial of this case, the plaintiff blocked all attempts of Rodelas to prove that, as employer, he had exercised due diligence
in the selection and supervision of his employee, on the ground that such a defense is not available in a civil action brought
under the Penal Code to recover the subsidiary civil liability arising from the crime. The lower court sustained plaintiff's
objection. However, it dismissed the case on the ground that in the absence of a final judgment of conviction against the
driver in the criminal case, any action to enforce the employer's subsidiary civil liability would be premature. Such liability, the
trial court added, may only be enforced on proof of the insolvency of the employee. Hence, this appeal.
The issue in this case is: May an employee's primary civil liability for crime and his employer's subsidiary liability therefor be
proved in a separate civil action even while the criminal case against the employee is still pending?
To begin with, obligations arise from law, contract, quasi-contract, crime and quasi-delict.1According to appellant, her action is
one to enforce the civil liability arising from crimes. With respect to obligations arising from crimes, Article 1161 of the New
Civil Code provides:
Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to the provisions of article 2177, and
of the pertinent provisions of Chapter 2, Preliminary, Title, on Human Relations, and of Title XVIII of this Book, regulating
damages. (Emphasis supplied)
The Revised Penal Code provides in turn that "every person criminally liable for a felony is also civilly liable"2and that in default

of the persons criminally liable, employers, teachers persons and corporations engaged in any kind of industry shall be civilly
liable for felonies committed by their servants, pupils, workmen, apprentices or employees in the discharge of their duties.3
As this Court held in City of Manila v. Manila Electric Co., 52 Phil. 586:
... The Penal Code authorizes the determination of subsidiary liability. The Civil Code negatives its applicability providing that
civil obligations arising from crimes or misdemeanors shall be governed by the provisions of the Penal Code. In other words,
the Penal Code affirms its jurisdiction while the Civil Code negatives its jurisdiction.
It is now settled that for an employer to be subsidiarily liable, the following requisites must be present: (1) That an employee
has committed a crime in the discharge of his duties; (2) that said employee is insolvent and has not satisfied his civil liability;
(3) that the employer is engaged in some kind of industry. (1 Padilla, Criminal Law, Revised Penal Code 794 [1964])
Without the conviction of the employee, the employer cannot be subsidiarily liable.
Now, it is no reason to bring such action against the employer on the ground that in cases of defamation, fraud and physical
injuries, Article 33 of the Civil Code authorizes a civil action that is "entirely separate, and distinct from the criminal action,"
(Carangdang v. Santiago, 51 O.G. 2878; Reyes v. De la Rosa, 52 O.G. 6548; Dyogi v. Yatco, G. R. No. L-9623, January 22, 1957).
Can Article 33 above cited be made applicable to an employer in a civil action for subsidiary liability? The answer to this
question is undoubtedly in the negative.
What this article 33 authorizes is an action against the employee on his primary civil liability. It cannot apply to an action
against the employer to enforce his subsidiary civil liability as stated above, because such liability arises only after conviction of
the employee in the criminal case. Any action brought against him before the conviction of his employee is premature.
In cases of negligence, the injured party or his heirs has the choice, between an action to enforce the civil liability arising from
crime under Article 100 of the Revised Penal Code and an action for quasi-delict under Articles 2176-2194 of the Civil Code.
(See Barredo v. Garcia and Almario, 73 Phil. 607; Parker v. Panlilio, et al., 91 Phil. 1)
If he chooses an action for quasi-delict, he may hold an employer liable for the negligent act of the employee subject, however,
to the employer's defense of exercise of the diligence of a good father of the family. (Art. 2180, Civil Code)
On the other hand, should he choose to prosecute his action under Article 100 of the Penal Code, he can hold the employer
subsidiarily liable only upon prior conviction of the employee. While a separate and independent civil action for damages may
be brought against the employee under Article 33 of the Civil Code, no such action may be filed against the employer on the
latter's subsidiary civil liability because such liability is governed not by the Civil Code but by the Penal Code, under which
conviction of the employee is a condition sine qua non for the employer's subsidiary liability. If the court trying the employee's
liability adjudges the employee liable, but the court trying the criminal action acquits the employee, the subsequent
insolvency of the employee cannot make the employer subsidiary liable to the offended party or to the latter's heirs.
WHEREFORE, the decision appealed from is affirmed, without pronouncement as to costs.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 169467
February 25, 2010
ALFREDO P. PACIS and CLEOPATRA D. PACIS, Petitioners,
vs.
JEROME JOVANNE MORALES, Respondent.
DECISION
CARPIO, J.:
The Case
This petition for review1 assails the 11 May 2005 Decision2 and the 19 August 2005 Resolution of the Court of Appeals in

CA-G.R. CV No. 60669.

The Facts
On 17 January 1995, petitioners Alfredo P. Pacis and Cleopatra D. Pacis (petitioners) filed with the trial court a civil case for
damages against respondent Jerome Jovanne Morales (respondent). Petitioners are the parents of Alfred Dennis Pacis, Jr.
(Alfred), a 17-year old student who died in a shooting incident inside the Top Gun Firearms and Ammunitions Store (gun store)
in Baguio City. Respondent is the owner of the gun store.
The facts as found by the trial court are as follows:
On January 19, 1991, Alfred Dennis Pacis, then 17 years old and a first year student at the Baguio Colleges Foundation taking
up BS Computer Science, died due to a gunshot wound in the head which he sustained while he was at the Top Gun Firearm[s]
and Ammunition[s] Store located at Upper Mabini Street, Baguio City. The gun store was owned and operated by defendant
Jerome Jovanne Morales.
With Alfred Pacis at the time of the shooting were Aristedes Matibag and Jason Herbolario. They were sales agents of the
defendant, and at that particular time, the caretakers of the gun store.
The bullet which killed Alfred Dennis Pacis was fired from a gun brought in by a customer of the gun store for repair.
The gun, an AMT Automag II Cal. 22 Rimfire Magnum with Serial No. SN-H34194 (Exhibit "Q"), was left by defendant Morales in
a drawer of a table located inside the gun store.
Defendant Morales was in Manila at the time. His employee Armando Jarnague, who was the regular caretaker of the gun store
was also not around. He left earlier and requested sales agents Matibag and Herbolario to look after the gun store while he and
defendant Morales were away. Jarnague entrusted to Matibag and Herbolario a bunch of keys used in the gun store which
included the key to the drawer where the fatal gun was kept.
It appears that Matibag and Herbolario later brought out the gun from the drawer and placed it on top of the table. Attracted
by the sight of the gun, the young Alfred Dennis Pacis got hold of the same. Matibag asked Alfred Dennis Pacis to return the
gun. The latter followed and handed the gun to Matibag. It went off, the bullet hitting the young Alfred in the head.
A criminal case for homicide was filed against Matibag before branch VII of this Court. Matibag, however, was acquitted of the
charge against him because of the exempting circumstance of "accident" under Art. 12, par. 4 of the Revised Penal Code.
By agreement of the parties, the evidence adduced in the criminal case for homicide against Matibag was reproduced and
adopted by them as part of their evidence in the instant case.3
On 8 April 1998, the trial court rendered its decision in favor of petitioners. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs [Spouses Alfredo P. Pacis and
Cleopatra D. Pacis] and against the defendant [Jerome Jovanne Morales] ordering the defendant to pay plaintiffs
(1) P30,000.00 as indemnity for the death of Alfred Pacis;
(2) P29,437.65 as actual damages for the hospitalization and burial expenses incurred by the plaintiffs;
(3) P100,000.00 as compensatory damages;
(4) P100,000.00 as moral damages;
(5) P50,000.00 as attorneys fees.
SO ORDERED.4
Respondent appealed to the Court of Appeals. In its Decision5 dated 11 May 2005, the Court of Appeals reversed the trial
courts Decision and absolved respondent from civil liability under Article 2180 of the Civil Code.6
Petitioners filed a motion for reconsideration, which the Court of Appeals denied in its Resolution dated 19 August 2005.
Hence, this petition.
The Trial Courts Ruling
The trial court held respondent civilly liable for the death of Alfred under Article 2180 in relation to Article 2176 of the Civil
Code.7 The trial court held that the accidental shooting of Alfred which caused his death was partly due to the negligence of

respondents employee Aristedes Matibag (Matibag). Matibag and Jason Herbolario (Herbolario) were employees of
respondent even if they were only paid on a commission basis. Under the Civil Code, respondent is liable for the damages
caused by Matibag on the occasion of the performance of his duties, unless respondent proved that he observed the diligence
of a good father of a family to prevent the damage. The trial court held that respondent failed to observe the required
diligence when he left the key to the drawer containing the loaded defective gun without instructing his employees to be
careful in handling the loaded gun.
The Court of Appeals Ruling
The Court of Appeals held that respondent cannot be held civilly liable since there was no employer-employee relationship
between respondent and Matibag. The Court of Appeals found that Matibag was not under the control of respondent with
respect to the means and methods in the performance of his work. There can be no employer-employee relationship where
the element of control is absent. Thus, Article 2180 of the Civil Code does not apply in this case and respondent cannot be held
liable.
Furthermore, the Court of Appeals ruled that even if respondent is considered an employer of Matibag, still respondent cannot
be held liable since no negligence can be attributed to him. As explained by the Court of Appeals:
Granting arguendo that an employer-employee relationship existed between Aristedes Matibag and the defendant-appellant,
we find that no negligence can be attributed to him.
Negligence is best exemplified in the case of Picart vs. Smith (37 Phil. 809). The test of negligence is this:
"x x x. Could a prudent man, in the position of the person to whom negligence is attributed, foresee harm to the person injured
as a reasonable consequence of the course about to be pursued? If so, the law imposes a duty on the actor to refrain from that
course or take precaution against its mischievous results, and the failure to do so constitutes negligence. x x x."
Defendant-appellant maintains that he is not guilty of negligence and lack of due care as he did not fail to observe the
diligence of a good father of a family. He submits that he kept the firearm in one of his table drawers, which he locked and
such is already an indication that he took the necessary diligence and care that the said gun would not be accessible to
anyone. He puts [sic] that his store is engaged in selling firearms and ammunitions. Such items which are per se dangerous are
kept in a place which is properly secured in order that the persons coming into the gun store would not be able to take hold of
it unless it is done intentionally, such as when a customer is interested to purchase any of the firearms, ammunitions and other
related items, in which case, he may be allowed to handle the same.
We agree. Much as We sympathize with the family of the deceased, defendant-appellant is not to be blamed. He exercised due
diligence in keeping his loaded gun while he was on a business trip in Manila. He placed it inside the drawer and locked it. It
was taken away without his knowledge and authority. Whatever happened to the deceased was purely accidental.8
The Issues
Petitioners raise the following issues:
I. THE APPELLATE COURT COMMITTED SERIOUS ERROR IN RENDERING THE DECISION AND RESOLUTION IN QUESTION IN
DISREGARD OF LAW AND JURISPRUDENCE BY REVERSING THE ORDER OF THE REGIONAL TRIAL COURT (BRANCH 59) OF
BAGUIO CITY NOTWITHSTANDING CLEAR, AUTHENTIC RECORDS AND TESTIMONIES PRESENTED DURING THE TRIAL WHICH
NEGATE AND CONTRADICT ITS FINDINGS.
II. THE APPELLATE COURT COMMITTED GRAVE, REVERSIBLE ERROR IN RENDERING THE DECISION AND RESOLUTION IN
QUESTION BY DEPARTING FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS THEREBY IGNORING THE
FACTUAL FINDINGS OF THE REGIONAL TRIAL COURT (BRANCH 59) OF BAGUIO CITY SHOWING PETITIONERS CLEAR RIGHTS TO
THE AWARD OF DAMAGES.9
The Ruling of the Court
We find the petition meritorious.
This case for damages arose out of the accidental shooting of petitioners son. Under Article 116110 of the Civil Code,
petitioners may enforce their claim for damages based on the civil liability arising from the crime under Article 10011 of the
Revised Penal Code or they may opt to file an independent civil action for damages under the Civil Code. In this case, instead

of enforcing their claim for damages in the homicide case filed against Matibag, petitioners opted to file an independent civil
action for damages against respondent whom they alleged was Matibags employer. Petitioners based their claim for damages
under Articles 2176 and 2180 of the Civil Code.
Unlike the subsidiary liability of the employer under Article 10312 of the Revised Penal Code,13 the liability of the employer, or
any person for that matter, under Article 2176 of the Civil Code is primary and direct, based on a persons own negligence.
Article 2176 states:
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
quasi-delict and is governed by the provisions of this Chapter.
This case involves the accidental discharge of a firearm inside a gun store.1avvphi1 Under PNP Circular No. 9, entitled the
"Policy on Firearms and Ammunition Dealership/Repair," a person who is in the business of purchasing and selling of firearms
and ammunition must maintain basic security and safety requirements of a gun dealer, otherwise his License to Operate
Dealership will be suspended or canceled.14
Indeed, a higher degree of care is required of someone who has in his possession or under his control an instrumentality
extremely dangerous in character, such as dangerous weapons or substances. Such person in possession or control of
dangerous instrumentalities has the duty to take exceptional precautions to prevent any injury being done thereby.15 Unlike
the ordinary affairs of life or business which involve little or no risk, a business dealing with dangerous weapons requires the
exercise of a higher degree of care.
As a gun store owner, respondent is presumed to be knowledgeable about firearms safety and should have known never to
keep a loaded weapon in his store to avoid unreasonable risk of harm or injury to others. Respondent has the duty to ensure
that all the guns in his store are not loaded. Firearms should be stored unloaded and separate from ammunition when the
firearms are not needed for ready-access defensive use.16With more reason, guns accepted by the store for repair should not
be loaded precisely because they are defective and may cause an accidental discharge such as what happened in this case.
Respondent was clearly negligent when he accepted the gun for repair and placed it inside the drawer without ensuring first
that it was not loaded. In the first place, the defective gun should have been stored in a vault. Before accepting the defective
gun for repair, respondent should have made sure that it was not loaded to prevent any untoward accident. Indeed,
respondent should never accept a firearm from another person, until the cylinder or action is open and he has personally
checked that the weapon is completely unloaded.17 For failing to insure that the gun was not loaded, respondent himself was
negligent. Furthermore, it was not shown in this case whether respondent had a License to Repair which authorizes him to
repair defective firearms to restore its original composition or enhance or upgrade firearms.18
Clearly, respondent did not exercise the degree of care and diligence required of a good father of a family, much less the
degree of care required of someone dealing with dangerous weapons, as would exempt him from liability in this case.
WHEREFORE, we GRANT the petition. We SET ASIDE the 11 May 2005 Decision and the 19 August 2005 Resolution of the Court
of Appeals in CA-G.R. CV No. 60669. We REINSTATE the trial courts Decision dated 8 April 1998.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 133879
November 21, 2001
EQUATORIAL REALTY DEVELOPMENT, INC., petitioner,
vs.
MAYFAIR THEATER, INC., respondent.
PANGANIBAN, J.:

General propositions do not decide specific cases. Rather, laws are interpreted in the context of the peculiar factual situation of
each proceeding. Each case has its own flesh and blood and cannot be ruled upon on the basis of isolated clinical classroom
principles.
While we agree with the general proposition that a contract of sale is valid until rescinded, it is equally true that ownership of
the thing sold is not acquired by mere agreement, but by tradition or delivery. The peculiar facts of the present controversy as
found by this Court in an earlier relevant Decision show that delivery was not actually effected; in fact, it was prevented by a
legally effective impediment. Not having been the owner, petitioner cannot be entitled to the civil fruits of ownership like
rentals of the thing sold. Furthermore, petitioner's bad faith, as again demonstrated by the specific factual milieu of said
Decision, bars the grant of such benefits. Otherwise, bad faith would be rewarded instead of punished.
The Case
Filed before this Court is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the March 11, 1998 Order2 of
the Regional Trial Court of Manila (RTC), Branch 8, in Civil Case No. 97-85141. The dispositive portion of the assailed Order reads
as follows:
"WHEREFORE, the motion to dismiss filed by defendant Mayfair is hereby GRANTED, and the complaint filed by plaintiff
Equatorial is hereby DISMISSED."3
Also questioned is the May 29, 1998 RTC Order4 denying petitioner's Motion for Reconsideration.
The Facts
The main factual antecedents of the present Petition are matters of record, because it arose out of an earlier case decided by
this Court on November 21, 1996, entitled Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.5 (henceforth referred to as
the "mother case"), docketed as G.R No. 106063.
Carmelo & Bauermann, Inc. ("Camelo" ) used to own a parcel of land, together with two 2-storey buildings constructed
thereon, located at Claro M. Recto Avenue, Manila, and covered by TCT No. 18529 issued in its name by the Register of Deeds
of Manila.
On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair Theater Inc. ("Mayfair") for a period of 20 years. The
lease covered a portion of the second floor and mezzanine of a two-storey building with about 1,610 square meters of floor
area, which respondent used as a movie house known as Maxim Theater.
Two years later, on March 31, 1969, Mayfair entered into a second Contract of Lease with Carmelo for the lease of another
portion of the latter's property namely, a part of the second floor of the two-storey building, with a floor area of about 1,064
square meters; and two store spaces on the ground floor and the mezzanine, with a combined floor area of about 300 square
meters. In that space, Mayfair put up another movie house known as Miramar Theater. The Contract of Lease was likewise for a
period of 20 years.
Both leases contained a provision granting Mayfair a right of first refusal to purchase the subject properties. However, on July
30, 1978 within the 20-year-lease term the subject properties were sold by Carmelo to Equatorial Realty Development,
Inc. ("Equatorial") for the total sum of P11,300,000, without their first being offered to Mayfair.
As a result of the sale of the subject properties to Equatorial, Mayfair filed a Complaint before the Regional Trial Court of Manila
(Branch 7) for (a) the annulment of the Deed of Absolute Sale between Carmelo and Equatorial, (b) specific performance, and
(c) damages. After trial on the merits, the lower court rendered a Decision in favor of Carmelo and Equatorial. This case, entitled
"Mayfair" Theater, Inc. v. Carmelo and Bauermann, Inc., et al.," was docketed as Civil Case No. 118019.
On appeal (docketed as CA-GR CV No. 32918), the Court of Appeals (CA) completely reversed and set aside the judgment of
the lower court.
The controversy reached this Court via G.R No. 106063. In this mother case, it denied the Petition for Review in this wise:
"WHEREFORE, the petition for review of the decision of the Court of Appeals, dated June 23, 1992, in CA-G.R. CV No. 32918, is
HEREBY DENIED. The Deed of Absolute Sale between petitioners Equatorial Realty Development, Inc. and Carmelo &

Bauermann, Inc. is hereby deemed rescinded; Carmelo & Bauermann is ordered to return to petitioner Equatorial Realty
Development the purchase price. The latter is directed to execute the deeds and documents necessary to return ownership to
Carmelo & Bauermann of the disputed lots. Carmelo & Bauermann is ordered to allow Mayfair Theater, Inc. to buy the aforesaid
lots for P11,300,000.00."6
The foregoing Decision of this Court became final and executory on March 17, 1997. On April 25, 1997, Mayfair filed a Motion
for Execution, which the trial court granted.
However, Carmelo could no longer be located. Thus, following the order of execution of the trial court, Mayfair deposited with
the clerk of court a quo its payment to Carmelo in the sum of P11,300,000 less; P847,000 as withholding tax. The lower court
issued a Deed of Reconveyance in favor of Carmelo and a Deed of Sale in favor of Mayfair. On the basis of these documents,
the Registry of Deeds of Manila canceled Equatorial's titles and issued new Certificates of Title7 in the name of Mayfair.
Ruling on Equatorial's Petition for Certiorari and Petition contesting the foregoing manner of execution, the CA in its
Resolution of November 20, 1998, explained that Mayfair had no right to deduct the P847,000 as withholding tax. Since
Carmelo could no longer be located, the appellate court ordered Mayfair to deposit the said sum with the Office of the Clerk of
Court, Manila, to complete the full amount of P11,300,000 to be turned over to Equatorial.
Equatorial questioned the legality of the above CA ruling before this Court in G.R No. 136221 entitled "Equatorial Realty
Development, Inc. v. Mayfair Theater, Inc." In a Decision promulgated on May 12, 2000,8 this Court directed the trial court to
follow strictly the Decision in GR. No. 106063, the mother case. It explained its ruling in these words:
"We agree that Carmelo and Bauermann is obliged to return the entire amount of eleven million three hundred thousand
pesos (P11,300,000.00) to Equatorial. On the other hand, Mayfair may not deduct from the purchase price the amount of eight
hundred forty-seven thousand pesos (P847,000.00) as withholding tax. The duty to withhold taxes due, if any, is imposed on
the seller Carmelo and Bauermann, Inc."9
Meanwhile, on September 18, 1997 barely five months after Mayfair had submitted its Motion for Execution before the RTC
of Manila, Branch 7 Equatorial filed with the Regional Trial Court of Manila, Branch 8, an action for the collection of a sum of
money against Mayfair, claiming payment of rentals or reasonable compensation for the defendant's use of the subject
premises after its lease contracts had expired. This action was the progenitor of the present case.
In its Complaint, Equatorial alleged among other things that the Lease Contract covering the premises occupied by Maxim
Theater expired on May 31, 1987, while the Lease Contract covering the premises occupied by Miramar Theater lapsed on
March 31, 1989.10 Representing itself as the owner of the subject premises by reason of the Contract of Sale on July 30, 1978, it
claimed rentals arising from Mayfair's occupation thereof.
Ruling of the RTC Manila, Branch 8
As earlier stated, the trial court dismissed the Complaint via the herein assailed Order and denied the Motion for
Reconsideration filed by Equatorial.11
The lower court debunked the claim of petitioner for unpaid back rentals, holding that the rescission of the Deed of Absolute
Sale in the mother case did not confer on Equatorial any vested or residual proprietary rights, even in expectancy.
In granting the Motion to Dismiss, the court a quo held that the critical issue was whether Equatorial was the owner of the
subject property and could thus enjoy the fruits or rentals therefrom. It declared the rescinded Deed of Absolute Sale as avoid
at its inception as though it did not happen."
The trial court ratiocinated as follows:
"The meaning of rescind in the aforequoted decision is to set aside. In the case of Ocampo v. Court of Appeals, G.R. No. 97442,
June 30, 1994, the Supreme Court held that, 'to rescind is to declare a contract void in its inception and to put an end as
though it never were. It is not merely to terminate it and release parties from further obligations to each other but to abrogate
it from the beginning and restore parties to relative positions which they would have occupied had no contract ever been
made.'

"Relative to the foregoing definition, the Deed of Absolute Sale between Equatorial and Carmelo dated July 31, 1978 is void at
its inception as though it did not happen.
"The argument of Equatorial that this complaint for back rentals as 'reasonable compensation for use of the subject property
after expiration of the lease contracts presumes that the Deed of Absolute Sale dated July 30, 1978 from whence the fountain of
Equatorial's all rights flows is still valid and existing.
xxx
xxx
xxx
"The subject Deed of Absolute Sale having been rescinded by the Supreme Court, Equatorial is not the owner and does not
have any right to demand backrentals from the subject property. . .12
The trial court added: "The Supreme Court in the Equatorial case, G.R No. 106063, has categorically stated that the Deed of
Absolute Sale dated July 31, 1978 has been rescinded subjecting the present complaint to res judicata."13
Hence, the present recourse.14
Issues
Petitioner submits, for the consideration of this Court, the following issues:15
"A
The basis of the dismissal of the Complaint by the Regional Trial Court not only disregards basic concepts and principles in the
law on contracts and in civil law, especially those on rescission and its corresponding legal effects, but also ignores the
dispositive portion of the Decision of the Supreme Court in G.R. No. 106063 entitled 'Equatorial Realty Development, Inc. &
Carmelo & Bauermann, Inc. vs. Mayfair Theater, Inc.'
"B.
The Regional Trial Court erred in holding that the Deed of Absolute Sale in favor of petitioner by Carmelo & Bauermann, Inc.,
dated July 31, 1978, over the premises used and occupied by respondent, having been 'deemed rescinded' by the Supreme
Court in G.R. No. 106063, is 'void at its inception as though it did not happen.'
"C.
The Regional Trial Court likewise erred in holding that the aforesaid Deed of Absolute Sale, dated July 31, 1978, having been
'deemed rescinded' by the Supreme Court in G.R. No. 106063, petitioner 'is not the owner and does not have any right to
demand backrentals from the subject property,' and that the rescission of the Deed of Absolute Sale by the Supreme Court
does not confer to petitioner 'any vested right nor any residual proprietary rights even in expectancy.'
"D.
The issue upon which the Regional Trial Court dismissed the civil case, as stated in its Order of March 11, 1998, was not raised
by respondent in its Motion to Dismiss.
"E.
The sole ground upon which the Regional Trial Court dismissed Civil Case No. 97-85141 is not one of the grounds of a Motion
to Dismiss under Sec. 1 of Rule 16 of the 1997 Rules of Civil Procedure."
Basically, the issues can be summarized into two: (1) the substantive issue of whether Equatorial is entitled to back rentals; and
(2) the procedural issue of whether the court a quo's dismissal of Civil Case No. 97-85141 was based on one of the grounds
raised by respondent in its Motion to Dismiss and covered by Rule 16 of the Rules of Court.
This Court's Ruling
The Petition is not meritorious.
First
Issue:
Ownership of Subject Properties
We hold that under the peculiar facts and circumstances of the case at bar, as found by this Court en banc in its Decision
promulgated in 1996 in the mother case, no right of ownership was transferred from Carmelo to Equatorial in view of a patent
failure to deliver the property to the buyer.
Rental

a
Civil
Fruit of Ownership
To better understand the peculiarity of the instant case, let us begin with some basic parameters. Rent is a civil fruit16 that
belongs to the owner of the property producing it17 by right of accession.18 Consequently and ordinarily, the rentals that fell

due from the time of the perfection of the sale to petitioner until its rescission by final judgment should belong to the owner of
the property during that period.
By a contract of sale, "one of the contracting parties obligates himself to transfer ownership of and to deliver a determinate
thing and the other to pay therefor a price certain in money or its equivalent."19
Ownership of the thing sold is a real right,20 which the buyer acquires only upon delivery of the thing to him "in any of the ways
specified in articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the
vendor to the vendee."21 This right is transferred, not merely by contract, but also by tradition or delivery.22 Non nudis pactis
sed traditione dominia rerum transferantur. And there is said to be delivery if and when the thing sold "is placed in the control
and possession of the vendee."23 Thus, it has been held that while the execution of a public instrument of sale is recognized
by law as equivalent to the delivery of the thing sold,24 such constructive or symbolic delivery, being merely presumptive, is
deemed negated by the failure of the vendee to take actual possession of the land sold.25
Delivery has been described as a composite act, a thing in which both parties must join and the minds of both parties concur.
It is an act by which one party parts with the title to and the possession of the property, and the other acquires the right to and
the possession of the same. In its natural sense, delivery means something in addition to the delivery of property or title; it
means transfer of possession.26 In the Law on Sales, delivery may be either actual or constructive, but both forms of delivery
contemplate "the absolute giving up of the control and custody of the property on the part of the vendor, and the assumption
of the same by the vendee."27
Possession
Never
Acquired by Petitioner
Let us now apply the foregoing discussion to the present issue. From the peculiar facts of this case, it is clear that petitioner
never took actual control and possession of the property sold, in view of respondent's timely objection to the sale and the
continued actual possession of the property. The objection took the form of a court action impugning the sale which, as we
know, was rescinded by a judgment rendered by this Court in the mother case. It has been held that the execution of a
contract of sale as a form of constructive delivery is a legal fiction. It holds true only when there is no impediment that may
prevent the passing of the property from the hands of the vendor into those of the vendee.28 When there is such impediment,
"fiction yields to reality the delivery has not been effected."29
Hence, respondent's opposition to the transfer of the property by way of sale to Equatorial was a legally sufficient impediment
that effectively prevented the passing of the property into the latter's hands.
This was the same impediment contemplated in Vda. de Sarmiento v. Lesaca,30 in which the Court held as follows:
"The question that now arises is: Is there any stipulation in the sale in question from which we can infer that the vendor did not
intend to deliver outright the possession of the lands to the vendee? We find none. On the contrary, it can be clearly seen
therein that the vendor intended to place the vendee in actual possession of the lands immediately as can be inferred from the
stipulation that the vendee 'takes actual possession thereof . . . with full rights to dispose, enjoy and make use thereof in such
manner and form as would be most advantageous to herself.' The possession referred to in the contract evidently refers to
actual possession and not merely symbolical inferable from the mere execution of the document.
"Has the vendor complied with this express commitment? she did not. As provided in Article 1462, the thing sold shall be
deemed delivered when the vendee is placed in the control and possession thereof, which situation does not here obtain
because from the execution of the sale up to the present the vendee was never able to take possession of the lands due to the
insistent refusal of Martin Deloso to surrender them claiming ownership thereof. And although it is postulated in the same
article that the execution of a public document is equivalent to delivery, this legal fiction only holds true when there is no
impediment that may prevent the passing of the property from the hands of the vendor into those of the vendee. x x x."31
The execution of a public instrument gives rise, therefore, only to a prima facie presumption of delivery. Such presumption is
destroyed when the instrument itself expresses or implies that delivery was not intended; or when by other means it is shown
that such delivery was not effected, because a third person was actually in possession of the thing. In the latter case, the sale cannot
be considered consummated.
However, the point may be raised that under Article 1164 of the Civil Code, Equatorial as buyer acquired a right to the fruits of

the thing sold from the time the obligation to deliver the property to petitioner arose.32 That time arose upon the perfection
of the Contract of Sale on July 30, 1978, from which moment the laws provide that the parties to a sale may reciprocally
demand performance.33 Does this mean that despite the judgment rescinding the sale, the right to the fruits34 belonged to,
and remained enforceable by, Equatorial?
Article 1385 of the Civil Code answers this question in the negative, because "[r]escission creates the obligation to return the
things which were the object of the contract, together with their fruits, and the price with its interest; x x x" Not only the land
and building sold, but also the rental payments paid, if any, had to be returned by the buyer.
Another point. The Decision in the mother case stated that "Equatorial x x x has received rents" from Mayfair "during all the
years that this controversy has been litigated." The Separate Opinion of Justice Teodoro Padilla in the mother case also said
that Equatorial was "deriving rental income" from the disputed property. Even hereinponente's Separate Concurring Opinion in
the mother case recognized these rentals. The question now is: Do all these statements concede actual delivery?
The answer is "No." The fact that Mayfair paid rentals to Equatorial during the litigation should not be interpreted to mean
either actual delivery or ipso facto recognition of Equatorial's title.
The CA Records of the mother case 35 show that Equatorial as alleged buyer of the disputed properties and as alleged
successor-in-interest of Carmelo's rights as lessor submitted two ejectment suits against Mayfair. Filed in the Metropolitan
Trial Court of Manila, the first was docketed as Civil Case No. 121570 on July 9, 1987; and thesecond, as Civil Case No. 131944 on
May 28, 1990. Mayfair eventually won them both. However, to be able to maintain physical possession of the premises while
awaiting the outcome of the mother case, it had no choice but to pay the rentals.
The rental payments made by Mayfair should not be construed as a recognition of Equatorial as the new owner. They were
made merely to avoid imminent eviction. It is in this context that one should understand the aforequoted factual statements in
the ponencia in the mother case, as well as the Separate Opinion of Mr. Justice Padilla and the Separate Concurring Opinion of
the herein ponente.
At bottom, it may be conceded that, theoretically, a rescissible contract is valid until rescinded. However, thisgeneral principle
is not decisive to the issue of whether Equatorial ever acquired the right to collect rentals. What is decisive is the civil law rule
that ownership is acquired, not by mere agreement, but by tradition or delivery. Under the factual environment of this
controversy as found by this Court in the mother case, Equatorial was never put in actual and effective control or possession of
the property because of Mayfair's timely objection.
As pointed out by Justice Holmes, general propositions do not decide specific cases. Rather, "laws are interpreted in the
context of the peculiar factual situation of each case. Each case has its own flesh and blood and cannot be decided on the basis
of isolated clinical classroom principles."36
In short, the sale to Equatorial may have been valid from inception, but it was judicially rescinded before it could be
consummated. Petitioner never acquired ownership, not because the sale was void, as erroneously claimed by the trial court,
but because the sale was not consummated by a legally effective delivery of the property sold.
Benefits Precluded by
Petitioner's Bad Faith
Furthermore, assuming for the sake of argument that there was valid delivery, petitioner is not entitled to any benefits from
the "rescinded" Deed of Absolute Sale because of its bad faith. This being the law of the mother case decided in 1996, it may
no longer be changed because it has long become final and executory. Petitioner's bad faith is set forth in the following
pertinent portions of the mother case:
"First and foremost is that the petitioners acted in bad faith to render Paragraph 8 'inutile.'
xxx
xxx
xxx
"Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in question rescissible. We agree with
respondent Appellate Court that the records bear out the fact that Equatorial was aware of the lease contracts because its

lawyers had, prior to the sale, studied the said contracts. As such, Equatorial cannot tenably claim to be a purchaser in good
faith, and, therefore, rescission lies.
xxx
xxx
xxx
"As also earlier emphasized, the contract of sale between Equatorial and Carmelo is characterized by bad faith, since it was
knowingly entered into in violation of the rights of and to the prejudice of Mayfair. In fact, as correctly observed by the Court of
Appeals, Equatorial admitted that its lawyers had studied the contract of lease prior to the sale. Equatorial's knowledge of the
stipulations therein should have cautioned it to look further into the agreement to determine if it involved stipulations that
would prejudice its own interests.
xxx
xxx
xxx
"On the part of Equatorial, it cannot be a buyer in good faith because it bought the property with notice and full knowledge that
Mayfair had a right to or interest in the property superior to its own. Carmelo and Equatorial took unconscientious advantage
of Mayfair."37 (Italics supplied)
Thus, petitioner was and still is entitled solely to he return of the purchase price it paid to Carmelo; no more, no less. This Court
has firmly ruled in the mother case that neither of them is entitled to any consideration of equity, as both "took
unconscientious advantage of Mayfair."38
In the mother case, this Court categorically denied the payment of interest, a fruit of ownership. By the same token, rentals, another
fruit of ownership, cannot be granted without mocking this Court's en banc Decision, which has long become final.
Petitioner's claim of reasonable compensation for respondent's use and occupation of the subject property from the time the
lease expired cannot be countenanced. If it suffered any loss, petitioner must bear it in silence, since it had wrought that loss
upon itself. Otherwise, bad faith would be rewarded instead of punished.@lawphil.net
We uphold the trial court's disposition, not for the reason it gave, but for (a) the patent failure to deliver the property and (b)
petitioner's bad faith, as above discussed.
Second
Issue:itc-alf
Ground in Motion to Dismiss
Procedurally, petitioner claims that the trial court deviated from the accepted and usual course of judicial proceedings when it
dismissed Civil Case No. 97-85141 on a ground not raised in respondent's Motion to Dismiss. Worse, it allegedly based its
dismissal on a ground not provided for in a motion to dismiss as enunciated in the Rules of Court.@lawphil.net
We are not convinced A review of respondent's Motion to Dismiss Civil Case No. 97-85141 shows that there were two grounds
invoked, as follows:
"(A)
Plaintiff is guilty of forum-shopping.itc-alf
"(B)
Plaintiff's cause of action, if any, is barred by prior judgment."39
The court a quo ruled, inter alia, that the cause of action of petitioner plaintiff in the case below) had been barred by a prior
judgment of this Court in G.R No. 106063, the mother case.
Although it erred in its interpretation of the said Decision when it argued that the rescinded Deed of Absolute Sale was avoid,"
we hold, nonetheless, that petitioner's cause of action is indeed barred by a prior judgment of this Court. As already discussed,
our Decision in G.R No. 106063 shows that petitioner is not entitled to back rentals, because it never became the owner of the
disputed properties due to a failure of delivery. And even assuming arguendo that there was a valid delivery, petitioner's bad
faith negates its entitlement to the civil fruits of ownership, like interest and rentals.
Under the doctrine of res judicata or bar by prior judgment, a matter that has been adjudicated by a court of competent
jurisdiction must be deemed to have been finally and conclusively settled if it arises in any subsequent litigation between the
same parties and for the same cause.40 Thus, "[a] final judgment on the merits rendered by a court of competent jurisdiction is
conclusive as to the rights of the parties and their privies and constitutes an absolute bar to subsequent actions involving the
same claim, demand, or cause of action."41 Res judicata is based on the ground that the "party to be affected, or some other
with whom he is in privity, has litigated the same matter in a former action in a court of competent jurisdiction, and should not

be permitted to litigate it again.42

It frees the parties from undergoing all over again the rigors of unnecessary suits and repetitive trials. At the same time, it
prevents the clogging of court dockets. Equally important, it stabilizes rights and promotes the rule of law.@lawphil.net
We find no need to repeat the foregoing disquisitions on the first issue to show satisfaction of the elements of res judicata.
Suffice it to say that, clearly, our ruling in the mother case bars petitioner from claiming back rentals from respondent.
Although the court a quo erred when it declared "void from inception" the Deed of Absolute Sale between Carmelo and
petitioner, our foregoing discussion supports the grant of the Motion to Dismiss on the ground that our prior judgment in G.R
No. 106063 has already resolved the issue of back rentals.
On the basis of the evidence presented during the hearing of Mayfair's Motion to Dismiss, the trial court found that the issue of
ownership of the subject property has been decided by this Court in favor of Mayfair. We quote the RTC:
"The Supreme Court in the Equatorial case, G.R. No. 106063 has categorically stated that the Deed of Absolute Sale dated July
31, 1978 has been rescinded subjecting the present complaint to res judicata."43(Emphasis in the original)
Hence, the trial court decided the Motion to Dismiss on the basis of res judicata, even if it erred in interpreting the meaning of
"rescinded" as equivalent to "void" In short, it ruled on the ground raised; namely, bar by prior judgment. By granting the
Motion, it disposed correctly, even if its legal reason for nullifying the sale was wrong. The correct reasons are given in this
Decision.
WHEREFORE, the Petition is hereby DENIED. Costs against petitioner.itc-alf
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 91029 February 7, 1991
NORKIS DISTRIBUTORS, INC., petitioner,
vs.
THE COURT OF APPEALS & ALBERTO NEPALES, respondents.
Jose D. Palma for petitioner.
Public Attorney's Office for private respondent.
GRIO-AQUINO, J.:p
Subject of this petition for review is the decision of the Court of Appeals (Seventeenth Division) in CA-G.R. No. 09149, affirming
with modification the judgment of the Regional Trial Court, Sixth (6th) Judicial Region, Branch LVI. Himamaylan, Negros
Occidental, in Civil Case No. 1272, which was private respondent Alberto Nepales' action for specific performance of a contract
of sale with damages against petitioner Norkis Distributors, Inc.
The facts borne out by the record are as follows:
Petitioner Norkis Distributors, Inc. (Norkis for brevity), is the distributor of Yamaha motorcycles in Negros Occidental with office
in Bacolod City with Avelino Labajo as its Branch Manager. On September 20, 1979, private respondent Alberto Nepales
bought from the Norkis-Bacolod branch a brand new Yamaha Wonderbike motorcycle Model YL2DX with Engine No.
L2-329401K Frame No. NL2-0329401, Color Maroon, then displayed in the Norkis showroom. The price of P7,500.00 was
payable by means of a Letter of Guaranty from the Development Bank of the Philippines (DBP), Kabankalan Branch, which
Norkis' Branch Manager Labajo agreed to accept. Hence, credit was extended to Nepales for the price of the motorcycle
payable by DBP upon release of his motorcycle loan. As security for the loan, Nepales would execute a chattel mortgage on the
motorcycle in favor of DBP. Branch Manager Labajo issued Norkis Sales Invoice No. 0120 (Exh.1) showing that the contract of
sale of the motorcycle had been perfected. Nepales signed the sales invoice to signify his conformity with the terms of the sale.
In the meantime, however, the motorcycle remained in Norkis' possession.

On November 6, 1979, the motorcycle was registered in the Land Transportation Commission in the name of Alberto Nepales.
A registration certificate (Exh. 2) in his name was issued by the Land Transportation Commission on November 6, 1979 (Exh.
2-b). The registration fees were paid by him, evidenced by an official receipt, Exhibit 3.
On January 22, 1980, the motorcycle was delivered to a certain Julian Nepales who was allegedly the agent of Alberto Nepales
but the latter denies it (p. 15, t.s.n., August 2, 1984). The record shows that Alberto and Julian Nepales presented the unit to
DBP's Appraiser-Investigator Ernesto Arriesta at the DBP offices in Kabankalan, Negros Occidental Branch (p. 12, Rollo). The
motorcycle met an accident on February 3, 1980 at Binalbagan, Negros Occidental. An investigation conducted by the DBP
revealed that the unit was being driven by a certain Zacarias Payba at the time of the accident (p. 33, Rollo). The unit was a total
wreck (p. 36, t.s.n., August 2,1984; p. 13, Rollo), was returned, and stored inside Norkis' warehouse.
On March 20, 1980, DBP released the proceeds of private respondent's motorcycle loan to Norkis in the total sum of P7,500. As
the price of the motorcycle later increased to P7,828 in March, 1980, Nepales paid the difference of P328 (p. 13, Rollo) and
demanded the delivery of the motorcycle. When Norkis could not deliver, he filed an action for specific performance with
damages against Norkis in the Regional Trial Court of Himamaylan, Negros Occidental, Sixth (6th) Judicial Region, Branch LVI,
where it was docketed as Civil Case No. 1272. He alleged that Norkis failed to deliver the motorcycle which he purchased,
thereby causing him damages.
Norkis answered that the motorcycle had already been delivered to private respondent before the accident, hence, the risk of
loss or damage had to be borne by him as owner of the unit.
After trial on the merits, the lower court rendered a decision dated August 27, 1985 ruling in favor of private respondent (p. 28,
Rollo.) thus:
WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendants. The defendants are ordered to pay
solidarity to the plaintiff the present value of the motorcycle which was totally destroyed, plus interest equivalent to what the
Kabankalan Sub-Branch of the Development Bank of the Philippines will have to charge the plaintiff on fits account, plus
P50.00 per day from February 3, 1980 until full payment of the said present value of the motorcycle, plus P1,000.00 as
exemplary damages, and costs of the litigation. In lieu of paying the present value of the motorcycle, the defendants can
deliver to the plaintiff a brand-new motorcycle of the same brand, kind, and quality as the one which was totally destroyed in
their possession last February 3, 1980. (pp. 28-29,Rollo.)
On appeal, the Court of appeals affirmed the appealed judgment on August 21, 1989, but deleted the award of damages "in
the amount of Fifty (P50.00) Pesos a day from February 3, 1980 until payment of the present value of the damaged vehicle"
(p35, Rollo). The Court of Appeals denied Norkis' motion for reconsideration. Hence, this Petition for Review.
The principal issue in this case is who should bear the loss of the motorcycle. The answer to this question would depend on
whether there had already been a transfer of ownership of the motorcycle to private respondent at the time it was destroyed.
Norkis' theory is that:
. . . After the contract of sale has been perfected (Art. 1475) and even before delivery, that is, even before the ownership is
transferred to the vendee, the risk of loss is shifted from the vendor to the vendee. Under Art. 1262, the obligation of the
vendor to deliver a determinate thing becomes extinguished if the thing is lost by fortuitous event (Art. 1174), that is, without
the fault or fraud of the vendor and before he has incurred in delay (Art. 11 65, par. 3). If the thing sold is generic, the loss or
destruction does not extinguish the obligation (Art. 1263). A thing is determinate when it is particularly designated or
physically segregated from all others of the same class (Art. 1460). Thus, the vendor becomes released from his obligation to
deliver the determinate thing sold while the vendee's obligation to pay the price subsists. If the vendee had paid the price in
advance the vendor may retain the same. The legal effect, therefore, is that the vendee assumes the risk of loss by fortuitous
event (Art. 1262) after the perfection of the contract to the time of delivery. (Civil Code of the Philippines, Ambrosio Padilla, Vol.
5,1987 Ed., p. 87.)
Norkis concedes that there was no "actual" delivery of the vehicle. However, it insists that there was constructive delivery of
the unit upon: (1) the issuance of the Sales Invoice No. 0120 (Exh. 1) in the name of the private respondent and the affixing of

his signature thereon; (2) the registration of the vehicle on November 6, 1979 with the Land Transportation Commission in
private respondent's name (Exh. 2); and (3) the issuance of official receipt (Exh. 3) for payment of registration fees (p. 33, Rollo).
That argument is not well taken. As pointed out by the private respondent, the issuance of a sales invoice does not prove
transfer of ownership of the thing sold to the buyer. An invoice is nothing more than a detailed statement of the nature,
quantity and cost of the thing sold and has been considered not a bill of sale (Am. Jur. 2nd Ed., Vol. 67, p. 378).
In all forms of delivery, it is necessary that the act of delivery whether constructive or actual, be coupled with the intention of
delivering the thing. The act, without the intention, is insufficient (De Leon, Comments and Cases on Sales, 1978 Ed., citing
Manresa, p. 94).
When the motorcycle was registered by Norkis in the name of private respondent, Norkis did not intend yet to transfer the title
or ownership to Nepales, but only to facilitate the execution of a chattel mortgage in favor of the DBP for the release of the
buyer's motorcycle loan. The Letter of Guarantee (Exh. 5) issued by the DBP, reveals that the execution in its favor of a chattel
mortgage over the purchased vehicle is a pre-requisite for the approval of the buyer's loan. If Norkis would not accede to that
arrangement, DBP would not approve private respondent's loan application and, consequently, there would be no sale.
In other words, the critical factor in the different modes of effecting delivery, which gives legal effect to the act, is the actual
intention of the vendor to deliver, and its acceptance by the vendee. Without that intention, there is no tradition (Abuan vs.
Garcia, 14 SCRA 759).
In the case of Addison vs. Felix and Tioco (38 Phil. 404, 408), this Court held:
The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered when it is
"placed in the hands and possession of the vendee." (Civil Code, Art. 1462). It is true that the same article declares that the
execution of a public instrument is equivalent to the delivery of the thing which is the object of the contract, but, in order that
this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the
thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the
purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment
whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery
through the execution of a public instrument is sufficient. But if notwithstanding the execution of the instrument, the purchaser
cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because
such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to reality-the delivery has riot been
effects .(Emphasis supplied.)
The Court of Appeals correctly ruled that the purpose of the execution of the sales invoice dated September 20, 1979 (Exh. B)
and the registration of the vehicle in the name of plaintiff-appellee (private respondent) with the Land Registration
Commission (Exhibit C) was not to transfer to Nepales the ownership and dominion over the motorcycle, but only to comply
with the requirements of the Development Bank of the Philippines for processing private respondent's motorcycle loan. On
March 20, 1980, before private respondent's loan was released and before he even paid Norkis, the motorcycle had already
figured in an accident while driven by one Zacarias Payba. Payba was not shown by Norkis to be a representative or relative of
private respondent. The latter's supposed relative, who allegedly took possession of the vehicle from Norkis did not explain
how Payba got hold of the vehicle on February 3, 1980. Norkis' claim that Julian Nepales was acting as Alberto's agent when he
allegedly took delivery of the motorcycle (p. 20, Appellants' Brief), is controverted by the latter. Alberto denied having
authorized Julian Nepales to get the motorcycle from Norkis Distributors or to enter into any transaction with Norkis relative to
said motorcycle. (p. 5, t.s.n., February 6, 1985). This circumstances more than amply rebut the disputable presumption of
delivery upon which Norkis anchors its defense to Nepales' action (pp. 33-34,Rollo).
Article 1496 of the Civil Code which provides that "in the absence of an express assumption of risk by the buyer, the things sold
remain at seller's risk until the ownership thereof is transferred to the buyer," is applicable to this case, for there was neither an
actual nor constructive delivery of the thing sold, hence, the risk of loss should be borne by the seller, Norkis, which was still
the owner and possessor of the motorcycle when it was wrecked. This is in accordance with the well-known doctrine of res
perit domino.
WHEREFORE, finding no reversible error in the decision of the Court of Appeals in CA-G.R. No. 09149, we deny the petition for
review and hereby affirm the appealed decision, with costs against the petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-10244
February 29, 1916
SANTIAGO CRUZADO, plaintiff-appellant,
vs.
ESTEFANIA BUSTOS and MANUEL ESCALER, defendants-appellees.
Felix Ferrer for appellant.
Augusto Gonzalez for appellees.
TORRES, J.:
This appeal, by bill of exceptions, was taken from the judgment of June 17, 1914, in which the trial judge absolved defendants
from the complaint and plaintiff from the cross-complaint, without express finding as to costs. Counsel for plaintiff appealed
from this judgment and moved for a new trial. This motion was denied, exception was taken by appellant, and, on the filing of
the proper bill of exceptions, the same was approved, certified, and transmitted to the clerk of this court, together with a
transcript of the evidence introduced at the trial.
Counsel for the plaintiff Santiago Cruzado filed a written complaint on October 8, 1910, amended on September 25, 1913, in
which he alleged that plaintiff was the owner of certain rural property situated in the barrio of Dolores, formerly San Isidro, of
the municipality of Bacolor, Pampanga, containing an area of 65 balitas and bounded as set forth in the complaint; that
Estafania Bustos, during her lifetime, and now the administrator of her estate, together with the other defendant, Manuel
Escaler, had, since the year 1906 up to the present, been detaining the said parcel of land, and had refused to deliver the
possession thereof to plaintiff and to recognize his ownership of the same, notwithstanding the repeated demands made
upon them; that by such detention, the plaintiff had suffered losses and damages to the amount of P3,500. He therefore asked
for judgment declaring plaintiff to be the owner of the said parcel of land and ordering defendants to return it to plaintiff and
to pay the latter P3,500 for losses and damages, and the costs.
The demurrer filed by the defendant Bustos having been overruled, in her answer she made a general denial of each and all of
the allegations of the complaint, and of each and all of the paragraphs thereof, and, as a special defense, alleged that the title
to the said land, produced by the plaintiff, was not a lawful one, for the reason that only a simulated sale of the land was made
by the between herself and the deceased Agapito Geronimo Cruzado, plaintiff's father, and that for more than thirty years
preceding the present time she had been the sole, exclusive, and lawful owner of the said parcel of land in question; that she
had been holding it quietly, peaceably, publicly and in good faith; that it formed an integral part of another larger parcel of
land, both parcels aggregating a total area of 100 balitas, 9 loanes, and 41 square brazas; that in September, 1891, with
plaintiff's knowledge, the defendant Bustos sold and conveyed all the said property to the other defendant Manuel Escaler
who then acquired the possession and ownership of the said parcel of land, and had retained such ownership and possession
up to the present time; that at no time and on no account whatever had plaintiff or any other person except defendants
acquired possession of the said parcel of land or any part thereof, nor any right or title therein. She therefore prayed to be
absolved from the complaint, with the costs against plaintiff.
The other defendant, Manuel Escaler, in an amended answer to the aforementioned complaint, denied each and all of the
allegations therein contained and each and all of its clauses, and, as a special defense, alleged that plaintiff's title to the said
land was illegal as only a simulated sale was made by and between Agapito Geronimo Cruzado, plaintiff's predecessor in
interest, and Bernardino Dizon; that defendants had been in possession of the said parcel of land for more than thirty years;
that the defendant Escaler in good faith purchased the land in question from Estefania Bustos, widow of Dizon, without ever
having had any notice of any defect in the vendor's title; that plaintiff had knowledge of the contract of sale of the land in
question yet did nothing to oppose its purchase by the defendant Escaler, wherefore the latter, in acquiring the property, did
so under the belief that the plaintiff Santiago Cruzado had no right or interest therein. He therefore prayed that the complaint
be dismissed, with the costs against plaintiff, and that an injunction issue to restrain the latter from interfering with the
defendant Escaler in the enjoyment of his property and rights and from performing any act prejudicial to his interests.

On the case coming to trial, both parties adduced evidence, among which was included the deposition of Inocencio Rosete.
Counsel for defendants, in a cross-complaint set forth: that as shown by the evidence, the defendant Escaler acquired in good
faith from Estefania Bustos the land in question at a time when there was no record whatever in the property registry to show
that this land belonged to a third person or any other than the vendor; that, on entering into possession of the property,
Escaler spent P4,000 in-improvements and in the repair of a long dike to prevent the erosion of the land by the frequent
overflows of the adjoining estuary; that of this sum P2,000 was paid by Escaler and the remaining P2,000 by Estafania Bustos, in
her capacity as lessee of the land; and that in case the judgment of the court should be adverse to defendants, these latter, as
owners in good faith, were entitled to be indemnified by plaintiff for the said expenses. He therefore asked that plaintiff be
ordered to reimburse half of the said P4,000 to each of the defendants in case judgment should be rendered favorable to
plaintiff.
The latter's counsel, in answer to the said cross-complaint, specifically denied each and all of the allegations thereof and, in
special defense, reproduced plaintiff's amended complaint in all its parts and alleged that the facts set forth in the
cross-complaint did not constitute a cause of action. He therefore prayed that plaintiff be absolved from the cross-complaint
and that judgment be rendered against defendants, in conformity with the prayer of his complaint.
After the evidence was all in, counsel for the defendant Escaler moved that the deposition of the witness Inocencio Espanol
Rosete be admitted into the record, and in support of his motion stated that with the authorization of the court the said
deposition had been taken on November 21, 1913, in the municipality of Arayat in the presence of plaintiff's attorney; that the
said declaration of the deponent was duly forwarded to the clerk of the court, and there attached to the record, but through
an unintentional oversight of defendant's attorney, it was not presented in evidence at the trial; that this deposition was very
important for the defendants' defense; and that the deponent was and continued to be unable to appear before the court on
account of a threatened attack of brain fever which might develop during the journey from Arayat to San Fernando.
Plaintiff's counsel asked that the foregoing motion be overruled and that the deposition of the witness Rosete be stricken from
the record, because defendants' motion was made out of time and was contrary to the rules of procedure, and there was no
reason for altering the order of procedure, as requested by defendants, for, when the period for the reception of the evidence
of both parties is closed, an alteration in the order of procedure such as asked by defendants would be improper and illegal,
counsel citing the decision of this court in the case ofGarcia vs. Reyes.1 He alleged, moreover, that the said deposition
necessarily affected the main issue in controversy and that to allow the motion would be in contravention of the provisions of
section 364 of the Code of Civil Procedure. He therefore asked that the said motion be overruled. The court, however, ordered
that the deposition of the witness Inocencio Rosete be admitted in evidence, and that plaintiff's exception be noted. In view of
the foregoing, the judgment aforementioned was rendered.
The questions herein submitted for the decision of this court are:
1. Is it or is it not true that the deed of sale, Exhibit A, (p. 40 of the record) of 65 balitas of land situated in the municipality of
Bacolor, Pampanga, executed by Estefania Bustos, with the assistance of her husband Bernardino Dizon, in favor of Agapito
Geronimo Cruzado, for the sum of P2,200, was simulated, not with intent to defraud any third person, but for the sole purpose
of making it appear that the vendee, Cruzado, then a candidate for the position of procurador on the date of the said deed,
September 7,1875, possessed real estate to the value of P2,200 with which to guarantee the faithful discharge of the duties of
the office of procurador?
2. It is or is it not true that, notwithstanding such apparent alienation of the 65 balitas of land, the supposed vendee continued
in possession thereof, without the supposed purchaser having taken possession of the property until September 10, 1891,
when its owner Bustos sold to Escaler, not only the said 65 balitas of land, but also all the remainder of a large tract of
agricultural land of which the portion appearing as sold to Agapito G. Cruzado formed and forms a part, and that Escaler was
then and, until the date of plaintiff's claim, continued to be in peaceable, uninterrupted possession of the said whole tract of
land, including the aforementioned portion of 65balitas?
3. Has the right of ownership prescribed which Manuel Escaler is and has been enjoying in the land which Estefania Bustos had
sold to him and which includes the parcel of 65 balitas claimed by plaintiff, Santiago Cruzado, or has the right of any real or
personal action he might exercise by reason of the sale to Cruzado prescribed on account of the lapse of the respective periods
fixed by law, between the 7th of September, 1875, the date of said sale, and the 8th of October, 1910, that of the filing of the
complaint?

To judge from the evidence adduced in this case, there is ample ground for holding that the said deed of sale of a parcel of 65
balitas of land was simulated, not to defraud any creditor or other person interested in the land nor for the purpose of eluding
any lawful obligation on the part of its owner, Estafania Bustos, but for the sole purpose of doing a favor, of rendering a special
service to Agapito Geronimo Cruzado, father of the plaintiff Santiago Cruzado.
During his lifetime Agapito G. Cruzado aspired to hold the office of procurador in the Court of First Instance of Pampanga, but
notwithstanding that he possessed the required ability for the discharge of the duties of that position, he was unable to give
the required bond, an indispensable condition for his appointment, as he was possessed of no means or real property
wherewith to guarantee the proper discharge of his duties in the manner prescribed by the laws then in force.
In the certified copy of the record of the case tried in the Secretaria de Gobierno of the abolished Real Audiencia de Manila,
issued by the Assistant Executive Secretary and chief of the division of archives, there appears on page 178 a decree by the
presidencia of this latter tribunal, issued by virtue of the resolution passed by the sala de gobierno on November 24, 1875,
whereby it was ordered that Agapito Geronimo Cruzado should be noticed that within the period of 30 days he must show
proof of having furnished a bond of P700 in cash or of P2,100 in real property as security for the position of procurador to
which he had been appointed, with the understanding that should be fail to furnish such bond he would not be issued the
certificate entitling him to practice the profession of procurador.
After complying with the requirements of the said court and executing the mortgage deed of the land purchased by the
procurador elect Cruzado from Estefania Bustos, on March 18, 1876, the mortgage was recorded in the old mortgage registry
then kept in the office of the Ayuntamiento of Manila during the former sovereignty, and thereafter Agapito G. Cruzado
received his appointment and commenced to discharge the duties of his position.
The above-related facts conclusively prove that Estefania Bustos executed the deed of sale Exhibit A in favor of the deceased
Cruzado in order to enable the latter, by showing that he was a property owner, to hold the office ofprocurador. This position
he held for many years, thanks to the liberality of the pretended vendor, who, notwithstanding the statements contained in
the deed of sale, does not appear to have been paid anything as a result of the sham sale, a sale which was affected, not in
prejudice or fraud of any person, nor those who were entitled to hold Cruzado liable for the proper discharge of the duties of
his office, because, had the need arisen, any liability of his could have been covered by the value of the land, the sale of which
was fictitiously set forth in that deed as lawfully belonging to Cruzado, and then Estefania Bustos would have had no right
either to object to or escape the consequences of that alienation, although simulated.
The simulation of the said sale was effected by making a pretended contract which bore the appearance of truth, when really
and truly there was no contract, because the contracting parties did not in fact intend to execute one, but only to formulate a
sale in such a manner that, for the particular purposes sought by Bustos and Cruzado, it would appear to have been celebrated
solely that Cruzado might hold his office of procurador on the strength of the security afforded by the value of the land
feignedly sold.
The record does not show when the procurador Cruzado died, but it is unquestionable that he was still living during the last
months of 1882, judging from the certificate which he himself issued to Norberto Decena (Exhibit 3). He must have died
sometime between the years 1882 and 1890, to judge from the contents of the letters plaintiff addressed to Natalio Dizon, one
of the children of Estefania Bustos, on July 7, 1891, and July 4, 1896, and from the fact that in the said year 1890 Agapito G.
Cruzado was no longer a practicing procurador in the Court of First Instance of Pampanga..
It is true that even after the death of the aforesaid procurador, any liability he might have incurred in connection with the
exercise of his office could have been, upon presentation of the proper claim, collected out of the value of the land apparently
sold by Estafania Bustos and pledged as security for the proper discharge of the duties of his office. On October 8, 1910, when
his son Santiago Cruzado filed his complaint, already more than twenty years had elapsed since 1889, if plaintiff's father died in
1889 and not between 1883 and 1889; therefore, any right of action to foreclose the mortgage, or any personal action with
regard to the value of the encumbered land, as the result of any liability incurred in the performance of his duties as
procurador, has more than prescribed. (Art. 1964, Civil Code, and secs. 38, 39 and 43, Act. No. 190.).
On the termination of the sovereignty of Spain over this Archipelago, the Spanish courts here established went out of

existence on January 31, 1899, the Pampanga court indeed being abolished about the middle of 1897 as a result of the
revolution against the former sovereignty. The personnel of those courts also ceased to render service as such. It may therefore
be affirmed that, if the said lien on the land in question has not terminated by its no longer having any object, it is at least
undeniable that prescription has already run with respect to any action that might have been brought against the pledged
land to recover for any liability which might have been incurred by the procurador Cruzado during his lifetime in connection
with his office, so that this real estate may now be considered as free from that hypothecary encumbrance.
At the present time we have only to explain what rights Agapito G. Cruzado transmitted at his death to his son, the herein
plaintiff, by virtue of the deed of sale of the land in litigation, executed by its owner Estefania Bustos.
It is unquestionable that the contract of sale of the 65 balitas of land was perfect and binding upon both contracting parties,
since they both appear in that instrument to have agreed upon the thing sold, to wit, the 65balitas of land, and upon the price,
P2,200; but it is also undeniable that the said contract was not consummated, inasmuch as, notwithstanding that the deed of
sale Exhibit A was accomplished and this document was kept by the pretended purchaser, it is positively certain that the latter
did not pay the purchase price of P2,200, and never took possession of the land apparently sold in the said deed. All that this
vendee afterwards did was to pledge the land on March 14, 1876, that is, six months and some days after the 7th of
September, 1875, the date when he purchased it as security for the faithful discharge of the duties of his office of procurador
of the Court of First Instance of Pampanga.
The plaintiff, Santiago Cruzado, a son of the vendee, claiming that the said land was being detained by the vendor, or by the
administrator of the latter's estate or her death after the commencement of these proceedings, and by the other defendant
Manuel Escaler, prayed the court to declare him to be the owner thereof, to order the defendants to return it to him and to pay
him for losses and damages, and the costs.
The action brought by the plaintiff is evidently one for recovery of possession, founded on the right transmitted to him by his
father at his death, a right arising from the said simulated deed of sale of the land in question. This action is of course
improper, not only because the sale was simulated, but also because it was not consummated. The price of the land was not
paid nor did the vendee take possession of the property from the 7th of September, 1875, when the said sale was feigned,
until the time of his death; nor did any of his successors, nor the plaintiff himself until the date of his claim, enter into
possession of the land.
It is indeed true that it is not necessary that the thing sold or its price should have been delivered in order that the contract of
purchase and sale be deemed perfect on account of its being consensual, and from it reciprocal obligations arise mutually to
compel the parties to effect its fulfillment; but there is no transmission of ownership until the thing, as in the case at bar, the
land, has been delivered, and the moment such delivery is made the contract of purchase and sale is regarded as
consummated. Article 1450 of the Civil Code, relied upon in this connection by the appellant, refers solely to the perfection of
the contract and not to its consummation.
The purchaser is also a creditor with respect to the products of the thing sold, and article 1095 of the Civil Code prescribes as
follows:
A creditor has a right to the fruits of a thing from the time the obligation to deliver it arises. However, he shall not acquire a
property right thereto until it has been delivered to him.
The provisions of this article are in agreement with that of the second paragraph of article 609 of the same Code, which is of
the following tenor:
Ownership is acquired by retention.
Ownership and other property rights are required and transmitted by law, by gift, by testate or intestate succession, and, in
consequence of certain contracts, by tradition.
They can also be acquired by prescription.
The provisions of the said article 1095 are also in accord with those of article 1462 which reads:
A thing sold shall be considered as delivered, when it is placed in the hands and possession of the vendee.
When the sale should be made by means of a public instrument, the execution thereof shall be equivalent to the delivery of

the thing which is the object of the contract, if in said instrument the contrary does not appear or may be clearly inferred.
It is true that the deed of sale Exhibit A remained in possession of the vendee Cruzado, but the sale is not to be considered as
consummated by this because the said vendee never entered into possession of the land and neither did his son the plaintiff.
The latter, moreover, was unable to prove that at any time as owner of the land he collected the fruits harvested thereon, or
that any other person cultivated the said land in the name and representation of his deceased father or of the plaintiff himself.
The fiction created by means of the execution and delivery of a public instrument produces no effect if the person acquiring it
never takes possession of the thing sold or acquired, as happened in the case at bar.
If, as prescribed by the preinserted article 1095, the creditor, and in the present case the vendee, does not acquire a property
right in the land purchased until the property has been delivered to him or he has taken possession of it, it is unquestionable
that, as neither the plaintiff nor his predecessor in interest took possession of the land in litigation, neither of them acquired
any property right therein and, consequently, could not and cannot now bring an action for recovery of possession which
arises out of a property right in a thing which belongs to them and not a mere right productive of a personal obligation. The
plaintiff Santiago Cruzado could only, in a proper case, exercise the personal right of action flowing from the right possessed
by his father to compel the vendor to fulfill the contract made in a public instrument to deliver the land sold or to give him
possession of it, in consequence of the said contract, though simulated and executed for the sole purpose that the deceased
Cruzado in default of P700 in cash might appear to own real estate with which to insure the proper performance of his duties
as procurador, an office he then desired to hold.
The supreme court of Spain in a decision of cassation of June 1, 1990, established the following doctrine:
That articles 1258 and 1450 of the Civil Code and the decisions of cassation of June 30, 1854, April 13 and December 13, 1861,
June 30, 1864, and April 19 and December 15, 1865, do not warrant the conclusion that whoever purchases personal or real
property may exercise with respect thereto all rights of action inherent in its ownership, without it having, in some way or
another, been placed at his disposal. On the contrary, the distinction between the perfecting and the consummation of a
contract marks the diversity of relations of the contracting parties among themselves and of the owner with respect to what
constitutes this property.
This principle is in harmony with those set up by the same high tribunal in its decision of January 19, 1898, and March 8, 1901.
In this last decision, also rendered on an appeal in cassation, the doctrine enunciated in the excerpt copied here below was
established:
That the contract of purchase and sale, as consensual, is perfected by consent as to the price and the thing and is
consummated by the reciprocal delivery of the one and the other, the full ownership of the thing sold being conveyed to the
vendee, from which moment the rights of action derived from this right may be exercised.
It is, then, of the utmost importance to examine whether in the said sale the purchase price was paid and whether the vendee
took possession of the land supposed to have been sold.
The record discloses that Cruzado during his lifetime was, before he became a procurador, an official escribienteor clerk
charged with the duty of coursing records and proceedings in the Court of Pampanga; that his salary was hardly sufficient to
maintain him and his family; that on account of the insufficiency of his monthly stipend, he was frequently obliged to borrow
money from his friends, notwithstanding that he with his family lodged in the house of Bernardino Dizon, the husband of the
vendor Bustos, situated in the municipality of Bacolor, with whom Cruzado maintained intimate relations of friendship, and on
this account the said couple were content to live in a country house they owned on one of their rice fields. Such was the
testimony of several witnesses who lived in that municipality, and who knew and had considerable dealings with the plaintiff's
father for many years. It was the opinion of these witnesses that the deceased Agapito G. Cruzado was a poor man, for the
reason that his monthly salary scarcely provided for the needs of himself and his family, and they therefore believed that he
could not have furnished the sum of P2,200 to purchase the land in question, and, furthermore, if the plaintiff's father had
possessed this sum, he would have made the deposit of the sum of P700, the amount of security required by the Presidencia of
the former Real Audiencia de Manila for his appointment as procurador, since, having the means, he would have preferred to
deposit this smaller sum rather than to have used P2,200 in acquiring a piece of land from which he would derive no benefit
whatever, as in fact he never did, as he must have known that in spite of the simulated sale of the property its owner would
continue in its possession and would cultivate it, as she did do until her death. It is, therefore, unquestionable that the price of
the sale was not paid, an omission which would indicate that it was in effect simulated.

Aside from the fact that the spouses Estafania Bustos and Bernardino Dizon had no need to sell the said 65balitas of land, or of
fencing or separating this parcel from the large tract of land that belonged to them and of which it formed a part, for the
reason that they were rich and at that time were not in need of money to cultivate their extensive landholdings, it is also to be
noted that the portion of land sold was worth very much more than the P2,200 which, in the said instrument, purported to be
its price.
In addition to the foregoing, the proceedings in the case at bar furnish ample proof that Agapito Geronimo Cruzado during his
lifetime stated to various persons that he succeeded in giving bond for his appointment as procurador by means of the said
instrument of simulated sale, executed in his favor by the spouses Dizon and Bustos, as he did not have the money to make
the deposit required for his appointment. So close were the relations that then existed between the Cruzado family and that of
Dizon and Bustos, that later on the plaintiff married a daughter of these latter; hence, plaintiff, in the beginning of his letters
Exhibits 8 and 9 addressed to Natalio Dizon, a son of the vendor Estefania Bustos, calls his correspondent his "dear and
esteemed brother-in-law." It is therefore not stranger that these spouses should have wished to help plaintiff's predecessor in
interest by assisting him to obtain the office of procurador, even to the extent of making a feigned sale.
However, years afterwards, prompted by an intuition of possible future difficulties, Dizon and his wife Bustos went to the office
of Agapito G. Cruzado and required him to cancel the said deed of sale, in order to avoid any lawsuit after their death. Cruzado
promised to look for money wherewith to substitute the mortgage bond. This demand had to be repeated several times,
because Cruzado did not cancel the deed as he promised.
Furthermore, it is shown that the instrument Exhibit A is merely a second copy obtained by the plaintiff from the chief of
division of archives, without prior summons or notification of the vendor Estefania Bustos, who was still living, in conformity
with the provisions contained in article 18 of the Notarial Law of February 15, 1889, and without the plaintiff's having
explained what became of the first copy. Besides, the clerk and notary who certified that instrument did not attest therein that
in his presence the vendee Cruzado paid over the sum of P2,200, the price of the land sold, and as the vendor denied having
received this sum, the obligation devolved upon plaintiff to prove that his deceased father had paid the price stated in that
instrument. By this not having done so, his omission constitutes additional proof that the sale of the land, the recovery of
possession of which plaintiff now seeks, was really simulated.
The supreme court of Spain, in a decision dated February 20, 1899, rendered on an appeal in cassation, laid down the doctrine
that, in accordance with the provisions of article 40 of the Mortgage Law, in the alienation of real property it is understood that
no price has been paid if the notary does not attest its delivery or the contracting parties do not prove that it was previously
paid.
The courts are allowed full latitude to accept the presumption that the purchase price has not been paid when the notary
before whom the instrument was executed does not attest the delivery of the money, and when, such delivery being denied
by one of the contracting parties, the other does not adduce proof of its payment, especially when such presumption is
corroborated by other circumstantial evidence which, all together, undoubtedly prove that the sale was feigned and simulated
for certain purposes sought to be attained by the parties, though, as in the case at bar, the simulation was not effected in fraud
of creditors.
Besides the failure to pay the purchase price, the record discloses another very important fact, to wit, that neither the vendee
nor his heirs, among these latter, the plaintiff, had at any time taken possession of the land which in the said instrument Exhibit
A appeared to have been sold, for, by the testimony of seven competent witnesses examined at the trial it is decisively and
conclusively proven that the alleged vendor, Estefania Bustos, and her husband while he was living, notwithstanding the said
alienation, continued to possess the said land supposedly sold to plaintiff's father, and cultivated it, as she had done long
before the sale of September, 1875, and continued to do so up to the date of the complaint filed by Santiago Cruzado; in the
first period, until September 10, 1891, as the owner of the land, and from this date, when the whole of the large tract of land of
which the said portion apparently sold forms a part was sold to the other defendant Manuel Escaler, the original owner
Estefania Bustos continued in the material possession of the land, but now as the lessee of the new owner, until 1908, when
she was substituted by Marcelo Rodriguez as the new lessee of the property. The plaintiff at no time after his father's death
occupied the land in litigation, notwithstanding his allegation that he has been collecting rentals from Estefania Bustos, his
mother-in-law, by reason of his having leased the land to her.

The plaintiff endeavored to prove that during the years 1882 and 1883 he personally took charge of and tilled the disputed
land on shares through his tenants named Florentino de los Reyes, Lino Cortes, Macario de los Reyes and Regino de los Reyes,
all of whom corroborated plaintiff's testimony in this regard. However, six of the defendants' witnesses positively stated that
they never were aware that the said tenants had worked on the land in question during either the said two years or in any
other, for these latter were working on the adjacent lands belonging to other owners. Pablo Angeles, one of the defendants'
witnesses, testified that Regino and Florentino de los Reyes were his tenants on shares and were employed on his land
adjoining that in question. He was positively certain that they never worked on the disputed land during or about the years
aforementioned, because the carabaos used by his said two tenants belonged to him and he never would have permitted
them to use these animals in working land that did not belong to him. He added that Regino's children, Macario and Basilio,
were at that time so young, being about eight years of age, that they were not yet able to work in the fields.
The plaintiff must have been well convinced that he had no right whatever in the land supposedly purchased by his father. The
latter never demanded its possession from its owner Estefania Bustos and never thought of declaring the property as
belonging to him, for the purposes of the land tax, from the time this tax was established in this country, notwithstanding that
the plaintiff, knowing his obligation, filed a sworn declaration relative to a lot he owned in the municipality of Bacolor. This
procedure of plaintiff's proves that he did not believe himself to be the owner of the land he claims and which its present
owner Manuel Escaler has constantly declared for the purpose of assessment.
Moreover, about the middle of the year 1891, the plaintiff Santiago Cruzado begged his brother-in-law Natalio Dizon to tell the
latter's mother, plaintiff's mother-in-law, that Cruzado desired the lease four balitas of the land in question, and some days
afterwards, possibly because he received no reply from his said brother-in-law, he addressed a letter to Dizon (Exhibit 9, page
152 of the record, translated on page 154) in which he repeated his request and asked for a reply; but notwithstanding that his
brother-in-law Dizon told him that he could not dispose of any part of the said land for the reason that his mother Estefania
Bustos was negotiating for the sale of all the land she possessed in the sitio of Sicat to Manuel Escaler, plaintiff went to Dizon's
house on an occasion when Paulino de la Cruz was there. Cruz was a representative of Escaler and had been charged to inform
himself of the situation, condition and quality of the land which Bustos was about to sell to his principal and was at the said
house for the purpose of being shown the land offered for sale. On this occasion plaintiff learned that negotiations were being
made for the sale of all the land owned by Estefania Bustos of which the 65 balitas in litigation formed a part. Plaintiff did not
then or afterwards make any statement or objection whatever in defense of his rights and interest, if he really believed that he
was entitled to the land shown in the instrument Exhibit A to have been purchased by his father.
Plaintiff made no protest whatsoever, because he well knew that the said sale was simulated and that his father had acquired
no right whatever in the property; he was therefore anxious to lease four balitas of the same land, a purpose in which he was
unsuccessful because a deal was then already going forward for the sale of the said land to its present owner, Manuel Escaler,
who in fact did but it on September 10, 1891. If plaintiff were convinced that he was the owner of the land, as he rashly
asserted that he was in his complaint for recovery of possession, it is not understood why about the middle of the year 1891 he
wished to lease, not all the 65 balitas, but only four of them, as stated in his said letter, Exhibit 9.
From that time the new owner Manuel Escaler took possession of all the land sold by Estefania Bustos, including the 65 balitas
in litigation, and continued in its possession as the owner thereof until October 8, 1910, when plaintiff filed his claim. Thus,
more than the ten years required by law for ordinary prescription had already elapsed, as Escaler purchased the land and was
holding it in good faith under a lawful title and was not disturbed in his continuous and peaceable possession, one that was
adverse to the whole world. It is therefore unquestionable that he has absolutely acquired by prescription the ownership of
the disputed land, and the action brought by plaintiff, founded solely on a simulated sale executed by the original owner of
the land, not to the prejudice, but to the benefit, of the pretended vendee, cannot prevail against Escaler's rights.
The registration obtained by the plaintiff in the property registry of the second copy of the said instrument Exhibit A, about
two months before filing his action for recovery, to wit, on August 23, 1910, has not improved the deed of sale nor made it
more effective, nor could it affect the rights held by the original owner and the present proprietor of the land in question,
inasmuch as their predecessor in interest, by default of payment of the price of the sale and on account of his never having
taken possession of the land sold, was not the owner thereof, nor did he acquire any property right whatever therein.
Consequently at his death he could not have transmitted to the plaintiff as his successor any greater right than a personal right
to exact the fulfillment of a contract, and as plaintiff was not the owner of the land, he could not validly register it.

Article 1473 of the Civil Code prescribes:

If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have
first taken possession thereof in good faith, if it should be personal property.
Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry.
Should there be no entry, the property shall belong to the person who first took possession of it in good faith, and, in the
absence thereof, to the person who presents the oldest title, provided there is good faith.
On the sale of the land to the defendant Escaler, neither he nor the plaintiff had had it entered in the property registry, but the
said new owner, Escaler, took possession of the land on the date of its acquisition, September 10,1891, and has retained
possession thereof up to the present time. So that when plaintiff registered the land he was not in possession thereof and no
longer had any right whatever therein, because it already belonged to the defendant Escaler, its lawful owner.
However, even though it were proper for plaintiff to bring the real action for recovery derived, though we do not admit that it
could be, from the simulated sale before mentioned, both this action as well as the personal action the only one available in
a proper case, as before demonstrated, pursuant to the provisions of article 1095 of the Civil Code have both certainly
prescribed, for the reason that the periods fixed by law for filing such actions have much more than elapsed.
Article 1939 of the Civil Code says:
Prescription, which began to run before the publication of this code, shall be governed by the prior laws; but if, after this code
became operative, all the time required in the same for prescription has elapsed, it shall be effectual, even if according to said
prior laws a longer period of time may be required.
Personal actions prescribe after ten years; and the same with the writ of execution therein issued, after twenty years; while real
actions prescribe after thirty years: according to Law 5, Title 8, Book 1 of the Novisima Recopilacion, and Law 21, Title 29, Partida
3, which were those in force on the date of the execution of the deed of sale, Exhibit A.
From September 7, 1875, to October 8, 1910, when the complaint was filed, thirty-five years have elapsed. Therefore, not only
in accordance with the laws aforecited, but also pursuant to the provisions of articles 1963 and 1964 of the Civil Code, the
periods fixed for the prescription of the personal action which could, in a proper case, have been exercised, as well as for the
real action for recovery of possession brought by the plaintiff without right so to do, have more than prescribed.
For all the foregoing reasons, whereby the errors assigned to the judgment appealed from have been duly refuted, the said
judgment should be, as it is hereby, affirmed, with the costs against the appellant. So ordered.