Miguel v Catalino

Direct appeal from the judgment in Civil Case No. 1090 of the Court of First Instance of Baguio, dismissing the plaintiffs'
complaint for recovery of possession of a parcel of land, registered under Act 496, in the name of one Bacaquio,1 a longdeceased illiterate non-Christian resident of Mountain Province, and declaring the defendant to be the true owner thereof.
On January 22, 1962, appellants Simeon, Emilia and Marcelina Miguel, and appellant Grace Ventura brought suit in the
Court below against Florendo Catalino for the recovery of the land above-described, plaintiffs claiming to be the children
and heirs of the original registered owner, and averred that defendant, without their knowledge or consent, had unlawfully
taken possession of the land, gathered its produce and unlawfully excluded plaintiffs therefrom. Defendant answered
pleading ownership and adverse possession for 30 years, and counterclaimed for attorney's fees. After trial the Court
dismissed the complaint, declared defendant to be the rightful owner, and ordered the Register of Deeds to issue a
transfer certificate in lieu of the original. Plaintiffs appealed directly to this Court, assailing the trial Court's findings of fact
and law.
As found by the trial Court, the land in dispute is situated in the Barrio of San Pascual, Municipality of Tuba, Benguet,
Mountain Province and contains an area of 39,446 square meters, more or less. It is covered by Original Certificate of
Title No. 31, which was issued on 28 December 1927 in the name of Bacaquio (or Bakakew), a widower. No encumbrance
or sale has ever been annotated in the certificate of title.
The plaintiff-appellant Grace Ventura2 is the only child of Bacaquio by his first wife, Debsay, and the other plaintiffsappellants, Simeon, Emilia and Marcelina, all surnamed "Miguel", are his children by his third wife, Cosamang. He begot
no issue with his second wife, Dobaney. The three successive wives have all died.
Bacaquio, who died in 1943, acquired the land when his second wife died and sold it to Catalino Agyapao, father of the
defendant Florendo Catalino, for P300.00 in 1928. Of the purchase price P100.00 was paid and receipted for when the
land was surveyed, but the receipt was lost; the balance was paid after the certificate of title was issued. No formal deed
of sale was executed, but since the sale in 1928, or for more than 30 years, vendee Catalino Agyapao and his son,
defendant-appellee Florendo Catalino, had been in possession of the land, in the concept of owner, paying the taxes
thereon and introducing improvements.
On 1 February 1949, Grace Ventura, by herself alone, "sold" (as per her Transferor's Affidavit, Exhibit "6") anew the same
land for P300.00 to defendant Florendo Catalino.
In 1961, Catalino Agyapao in turn sold the land to his son, the defendant Florendo Catalino.
This being a direct appeal from the trial court, where the value of the property involved does not exceed P200,000.00,
only the issues of law are reviewable by the Supreme Court, the findings of fact of the court a quo being deemed
conceded by the appellant (Jacinto v. Jacinto, 105 Phil. 1218; Del Castillo v. Guerro, L-11994, 25 July 1960; Abuyo, et al.
v. De Suazo, L-21202, 29 Oct. 1966; 18 SCRA 600, 601). We are thus constrained to discard appellant's second and third
assignments of error.
In their first assignment, appellants assail the admission in evidence over the objection of the appellant of Exhibit "3". This
exhibit is a decision in favor of the defendant-appellee against herein plaintiff-appellant Grace Ventura, by the council of
Barrio of San Pascual, Tuba, Benguet, in its Administrative Case No. 4, for the settlement of ownership and possession of
the land. The decision is ultra vires because barrio councils, which are not courts, have no judicial powers (Sec. 1, Art.
VIII, Constitution; see Sec. 12, Rep. Act 2370, otherwise known as the Barrio Charter). Therefore, as contended by
appellants, the exhibit is not admissible in a judicial proceeding as evidence for ascertaining the truth respecting the fact
of ownership and possession (Sec. 1, Rule 128, Rules of Court).
Appellants are likewise correct in claiming that the sale of the land in 1928 by Bacaquio to Catalino Agyapao, defendant's
father, is null and void ab initio, for lack of executive approval (Mangayao et al. vs. Lasud, et al., L-19252, 29 May 1964).
However, it is not the provisions of the Public Land Act (particularly Section 118 of Act 2874 and Section 120 of
Commonwealth Act 141) that nullify the transaction, for the reason that there is no finding, and the contending parties
have not shown, that the land titled in the name of Bacaquio was acquired from the public domain (Palad vs. Saito, 55
Phil. 831). The laws applicable to the said sale are: Section 145(b) of the Administrative Code of Mindanao and Sulu,
providing that no conveyance or encumbrance of real property shall be made in that department by any non-christian
inhabitant of the same, unless, among other requirements, the deed shall bear indorsed upon it the approval of the
provincial governor or his representative duly authorized in writing for the purpose; Section 146 of the same Code,
declaring that every contract or agreement made in violation of Section 145 "shall be null and void"; and Act 2798, as
amended by Act 2913, extending the application of the above provisions to Mountain Province and Nueva Vizcaya.
Since the 1928 sale is technically invalid, Bacaquio remained, in law, the owner of the land until his death in 1943, when
his title passed on, by the law on succession, to his heirs, the plaintiffs-appellants.

Notwithstanding the errors aforementioned in the appealed decision, we are of the opinion that the judgment in favor of
defendant-appellee Florendo Catalino must be sustained. For despite the invalidity of his sale to Catalino Agyapao, father
of defendant-appellee, the vendor Bacaquio suffered the latter to enter, possess and enjoy the land in question without
protest, from 1928 to 1943, when the seller died; and the appellants, in turn, while succeeding the deceased, also
remained inactive, without taking any step to reivindicate the lot from 1944 to 1962, when the present suit was
commenced in court. Even granting appellants' proposition that no prescription lies against their father's recorded title,
their passivity and inaction for more than 34 years (1928-1962) justifies the defendant-appellee in setting up the equitable
defense of laches in his own behalf. As a result, the action of plaintiffs-appellants must be considered barred and the
Court below correctly so held. Courts can not look with favor at parties who, by their silence, delay and inaction, knowingly
induce another to spend time, effort and expense in cultivating the land, paying taxes and making improvements thereon
for 30 long years, only to spring from ambush and claim title when the possessor's efforts and the rise of land values offer
an opportunity to make easy profit at his expense. In Mejia de Lucas vs. Gamponia, 100 Phil. 277, 281, this Court laid
down a rule that is here squarely applicable:
Upon a careful consideration of the facts and circumstances, we are constrained to find, however, that while no legal
defense to the action lies, an equitable one lies in favor of the defendant and that is, the equitable defense of laches. We
hold that the defense of prescription or adverse possession in derogation of the title of the registered owner Domingo
Mejia does not lie, but that of the equitable defense of laches. Otherwise stated, we hold that while defendant may not be
considered as having acquired title by virtue of his and his predecessors' long continued possession for 37 years, the
original owner's right to recover back the possession of the property and title thereto from the defendant has, by the long
period of 37 years and by patentee's inaction and neglect, been converted into a stale demand.
As in the Gamponia case, the four elements of laches are present in the case at bar, namely: (a) conduct on the part of
the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made and for which the
complaint seeks a remedy; (b) delay in asserting the complainant's rights, the complainant having had knowledge or
notice, of the defendant's conduct and having been afforded an opportunity to institute a suit; (c) lack of knowledge or
notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and (d) injury or
prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be barred. In the
case at bar, Bacaquio sold the land in 1928 but the sale is void for lack of the governor's approval. The vendor, and also
his heirs after him, could have instituted an action to annul the sale from that time, since they knew of the invalidity of the
sale, which is a matter of law; they did not have to wait for 34 years to institute suit. The defendant was made to feel
secure in the belief that no action would be filed against him by such passivity, and also because he "bought" again the
land in 1949 from Grace Ventura who alone tried to question his ownership; so that the defendant will be plainly
prejudiced in the event the present action is not held to be barred.
The difference between prescription and laches was elaborated in Nielsen & Co., Inc. vs. Lepanto Consolidated Mining
Co., L-21601, 17 December 1966, 18 SCRA p. 1040, as follows:
Appellee is correct in its contention that the defense of laches applies independently of prescription. Laches is different
from the statute of limitations. Prescription is concerned with the fact of delay, whereas laches is concerned with the effect
of delay. Prescription is a matter of time; laches is principally a question of inequity of permitting a claim to be enforced,
this inequity being founded on some change in the condition of the property or the relation of the parties. Prescription is
statutory; laches is not. Laches applies in equity, whereas prescription applies at law. Prescription is based on fixed time
laches is not, (30 C.J.S., p. 522. See also Pomeroy's Equity Jurisprudence, Vol. 2, 5th ed., p. 177) (18 SCRA 1053).
With reference to appellant Grace Ventura, it is well to remark that her situation is even worse than that of her co-heirs
and co-plaintiffs, in view of her executing an affidavit of transfer (Exh. 6) attesting under oath to her having sold the land in
controversy to herein defendant-appellee, and the lower Court's finding that in 1949 she was paid P300.00 for it, because
she, "being a smart woman of enterprise, threatened to cause trouble if the defendant failed to give her P300.00 more,
because her stand (of being the owner of the land) was buttressed by the fact that Original Certificate of Title No. 31 is still
in the name of her father, Bacaquio" (Decision, Record on Appeal, p. 24). This sale, that was in fact a quitclaim, may not
be contested as needing executive approval; for it has not been shown that Grace Ventura is a non-christian inhabitant
like her father, an essential fact that cannot be assumed (Sale de Porkan vs. Yatco, 70 Phil. 161, 175).
Since the plaintiffs-appellants are barred from recovery, their divestiture of all the elements of ownership in the land is
complete; and the Court a quo was justified in ordering that Bacaquio's original certificate be cancelled, and a new
transfer certificate in the name of Florendo Catalino be issued in lieu thereof by the Register of Deeds.
FOR THE FOREGOING REASONS, the appealed decision is hereby affirmed, with costs against the plaintiffs-appellants.
Agra v PNB
Laches is a recourse in equity. Equity, however, is applied only in the absence, never in contravention, of statutory law.
Thus, laches cannot, as a rule, abate a collection suit filed within the prescriptive period mandated by the Civil Code.

The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the November 26, 1997
Decision of the Court of Appeals,[1] which disposed as follows:
IN VIEW OF THE FOREGOING, the decision of the lower court is hereby AFFIRMED, with the modification that the award
of attorneys fees is hereby DELETED and the twelve percent (12%) interest on the P2,500,000.00 the defendantappellants are to pay PNB should start from August 30, 1976, the date when the complaint was filed.[2]
The decretal portion of the aforementioned trial court ruling reads:
WHEREFORE, in view of the foregoing, in the interest of justice, judgment is rendered in favor of the plaintiff ordering all
the sureties jointly and severally, to pay PNB as follows:
a) the amount of P2,500,000.00 plus twelve per centum (12%) accrued interest from August 1, 1976;
b) ten percent (10%) of the total amount due as attorneys fees and cost of the suit.
SO ORDERED.
Also assailed by petitioners is the April 2, 1998 Resolution of the Court of Appeals, which denied their Motion for
Reconsideration.[3]
The Facts
The facts are summarized by the Court of Appeals (CA) in this wise:[4]
On August 30, 1976, an action for collection of a sum of money was filed by the Philippine National Bank (PNB, for
brevity) against Fil-Eastern Wood Industries, Inc. (Fil-Eastern, for short) in its capacity as principal debtor and against
Cayetano Ferreria, Pedro Atienza, Vicente O. Novales, Antonio R. Agra, and Napoleon M. Gamo in their capacity as
sureties.
In its complaint, plaintiff PNB alleged that on July 17, 1967 Fil-Eastern was granted a loan in the amount of [t]wo [m]illion
[f]ive [h]undred [t]housand [p]esos (P2,500,000.00) with interest at twelve percent (12%) per annum. Drawings from said
demand loan were made on different dates as evidenced by several promissory notes and were credited to the account of
Fil-Eastern. To secure the payment of the said loan Fil-Eastern as principal and sureties Ferreria, Atienza, Novales, Agra,
and Gamo executed a Surety Agreement whereby the sureties, jointly and severally with the principal, guaranteed and
warranted to PNB, its successors or assigns, prompt payment of subject obligation including notes, drafts, bills of
exchange, overdrafts and other obligations of every kind, on which Fil-Eastern was indebted or may thereafter become
indebted to PNB. It was further alleged that as of May 31, 1976 the total indebtedness of Fil-Eastern and its sureties on
subject loan amounted to [f]ive [m]illion [t]wo [h]undred [n]inety-[s]even [t]housand, [n]ine [h]undred [s]eventy-[s]ix [p]esos
and [s]eventeen [c]entavos (P5,297,976.17), excluding attorneys fees. Notwithstanding repeated demands, the
defendants refused and failed to pay their loans.
The defendants (herein sureties) filed separate answers (pp. 49, 68, 205, 208 and 231). Collating these, We drew the
following: All of them claimed that they only signed the Surety Agreement with the understanding that the same was a
mere formality required of the officers of the corporation. They did not in any way or manner receive a single cent from the
proceeds of said loan and/or derive any profit therefrom. Neither did they receive any consideration valuable or otherwise,
from defendant Fil-Eastern. They further claim that the loan in question was negotiated and approved under highly
irregular, anomalous and suspicious circumstances to the point that the Surety Agreement executed thereafter is invalid,
null and void and without force and effect. The extension of time of payment of the loan in question released and
discharged the answering defendants from any liability under the Surety Agreement. The Surety Agreement is null and
void from the beginning due to a defect in the consent of the defendants and that their liabilities under the Surety
Agreement, if any, has been extinguished by novation. The cause of action of the complainant is barred by laches and
estoppel in that the plaintiff with full knowledge of the deteriorating financial condition of Fil-Eastern did not take steps to
collect from said defendant corporation while still solvent. They also maintained that if anyone is liable for the payment of
said loan, it is Felipe Ysmael, Jr. and not them or it is only Fil-Eastern and the controlling officers who profited and made
use of the proceeds of the loan. Defendant Agra likewise said that he was made to sign the Surety Agreement and he did
it because of the moral influence and pressure exerted upon him by Felipe Ysmael, Jr. (their employer at the time of
signing), thereby arousing strong fears of losing a much needed employment to support his family should he refuse to
sign as Surety.
In the order of the trial court dated October 30, 1978, defendant Fil-Eastern was declared in default for its failure to
answer the complaint within the reglementary period and the case was scheduled for pre-trial conference. The individual
defendants with the courts approval thereafter filed an amended third-party complaint against Felipe Ysmael, Jr.

The amended third-party complaint alleged that at the time of execution of the alleged Surety Agreement subject matter of
the principal complaint, third-party plaintiffs were but employees of Ysmael Steel Manufacturing Co., owned by third-partydefendant. Third-party-plaintiffs were in no financial position to act as sureties to a P2.5 million loan. They became
incorporators of original defendant Fil-Eastern because of fear of losing their employment brought about by the
tremendous pressure and moral influence exerted upon them by their employer-third-party-defendant. They signed the
Surety Agreement upon the order of the third-party-defendant. In signing the said document, the third-party-plaintiffs were
assured by the third-party-defendant that they had nothing to fear and worry about because the latter will assume all
liabilities as well as profits therefrom and that the loan subject of the Surety Agreement was with the prior approval and
blessing of a high government official. They were likewise assured that the surety agreement was but a formality and that
because of such pressure, influence as well as assurances, third-party-plaintiffs signed the Surety Agreement.
Third-party-defendant Felipe Ysmael, Jr. in his answer alleged that the Surety Agreement was freely and voluntarily
signed and executed by third-party-plaintiffs without any intimidation, undue, improper or fraudulent representations.
Further, granting arguendo that the consent of third-party plaintiffs in signing said Surety Agreement was vitiated with
intimidation, undue influence or fraudulent representation on the part of third-party-defendant, said Surety Agreement is
only voidable and therefore binding unless annulled by a proper action in court. The third-party-plaintiffs did not file the
proper court action for the annulment of said agreement. They are now barred from filing an action for annulment of said
agreement, the prescriptive period therefor being only four (4) years from the time the defect of the consent had ceased,
and from the discovery of the all[e]ged fraud. In addition, third-party plaintiffs had ratified said agreement which they
signed in July 1967 by signing their names on and execution of several promissory thereafter.
At the pre-trial conference held on March 21, 1980, the parties failed to agree on a possible amicable settlement hence
the case was set for trial on the merits. On July 5, 1984, during the pendency of the trial, third-party defendant Felipe
Ysmael, Jr. died. He was substituted by his legal heirs Patrick Ysmael and Jeanne Ysmael as third-party defendants.
Defendant Pedro Atienza died on January 4, 1987. It appearing that he has no legal heirs, the case against him was
dismissed.
After trial, the regional trial court (RTC) ruled against herein petitioners. On appeal, the CA modified the RTC ruling by
deleting the award of attorneys fees. Hence, this recourse to this Court.
Ruling of the Court of Appeals
In ruling that petitioners were liable under the surety agreement, the Court of Appeals rejected their defense of laches. It
held that the lapse of seven years and eight months from December 31, 1968 until the judicial demand on August 30,
1976 cannot be considered as unreasonable delay which would necessitate the application of laches. The action filed by
the plaintiff has not yet prescribed. It is well within the ten-year prescriptive period provided for by law wherein actions
based on written contracts can be instituted.[5]
The Court of Appeals also noted that the prescriptive period did not begin to run from December 31, 1968 as [herein
petitioners] presupposed. It was only from the time of the judicial demand on August 30, 1976 that the cause of action
accrued. Thus, [private respondent] was well within the prescriptive period of ten years when it instituted the case in court.
The Court of Appeals further ruled that placing the blame on [PNB] for its failure to immediately pounce upon its debtors
the moment the loan matured is grossly unfair for xxx demand upon the sureties to pay is not necessary.
The appellate court also held that petitioners proved only the first of the following four essential elements of laches: (1)
conduct on the part of the defendant, or one under whom he claims, giving rise to the situation of which complaint is made
and for which the complainant seeks a remedy; (2) delay in asserting the complainants rights, the complainant having had
knowledge or notice of the defendants conduct and having been afforded an opportunity to institute a suit; (3) lack of
knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit;
and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred.
Issues
In their Memorandum, petitioners raise the following issues:[6]
1. WHETHER OR NOT THE CLAIM OF THE PNB AGAINST THE PETITIONERS IS ALREADY BARRED BY THE
EQUITABLE DEFENSE OF LACHES?
2. WHETHER OR NOT THE RESPECTIVE CONJUGAL PARTNERSHIPS OF THE PETITIONERS COULD BE HELD
LIABLE FOR ANY LIABILITY OF THE PETITIONERS UNDER THE SURETY AGREEMENT IN FAVOR OF THE PNB?
Under the first issue, petitioners submit four other questions:
1-a WHETHER OR NOT THE EQUITABLE DEFENSE OF LACHES APPLIES INDEPENDENTLY OF PRESCRIPTION?

1-b WHETHER OR NOT THE CAUSE OF ACTION OF THE PNB AGAINST THE PETITIONERS ACCRUED ONLY FROM
THE TIME OF THE JUDICIAL DEMAND ON AUGUST 30, 1976?
1-c WHETHER OR NOT THE FOUR (4) WELL-SETTLED ELEMENTS OF LACHES ARE PRESENT IN THIS CASE?
1-d WHETHER OR NOT THE RULING IN THE CASE OF PHILIPPINE NATIONAL BANK VS. COURT OF APPEALS, 217
SCRA 347, IS APPLICABLE IN THIS INSTANT CASE?
In the main, the issue is whether petitioners may raise the defense of laches in order to avoid their liability under the
surety agreement. Preliminarily, we shall also take up the question of petitioners liability as sureties.
The Courts Ruling
The appeal is not meritorious.
Preliminary Matter: Liability of Petitioners as Sureties
The present controversy began when the Philippine National Bank (PNB) sought to enforce the Surety Agreement. The
pertinent provisions of said Agreement are as follows:
WHEREAS, FIL-EASTERN WOOD INDUSTRIES, INC. herein referred to as the Principal, has obtained and/or desires to
obtain certain credits, loans, overdrafts, discounts, etc., from the Creditor, for all of which the Creditor requires security;
and the Surety, on account of valuable consideration received from the Principal, has agreed and undertake to assist the
principal by becoming such Surety.
NOW THEREFORE, for the purpose above mentioned, the Surety, jointly and severally with the Principal, hereby
guarantees and warrants to the Creditor, its successors or assigns, the prompt payment at maturity of all the notes, drafts,
bills of exchange, overdrafts and other obligations of every kind, on which the Principal may now be indebted or may
hereafter become indebted to the Creditor, but the liability of the Surety shall not at any time exceed the sum of TWO
MILLION FIVE HUNDRED THOUSAND ONLY (P2,500,000.00) (demand loan of P2,500,000.00), Philippine Currency,
plus the interest thereon at the rate of (___%) per cent per annum, and the cost and expenses of the Creditor incurred in
connection with the granting of the credits, loans, overdrafts, etc., covered by this surety agreement, including those for
the custody, maintenance and preservation of the securities given therefor and also for the collection thereof.
Both the Principal and the Surety shall be considered in default when they fail to pay the obligation upon maturity with or
without demand and in such case the Surety agrees to pay to the creditor, its [successors] or assigns, all outstanding
obligations of the Principal, whether due or not due and whether held by the Creditor as principal or agent, and it is agreed
that a certified statement by the Creditor as to the amount due from the Principal shall be accepted as correct by the
Surety without question.
The Surety expressly waives all rights to demand for payment and notice of non-payment and protest, and agrees that the
securities of every kind, that are now and may hereafter be left with the Creditor, its successors, indorsees or assigns, as
collateral to any evidence of debt or obligations or upon which a lien may exist thereon may be withdrawn or surrendered
at any time, and the time of payment thereof extended, without notice to, or consent by the Surety; and that the liability on
this guaranty shall be solidary, direct and immediate and not contingent upon the pursuit by the Creditor, its successors,
indorsees or assigns, of whatever remedies it or they have against the Principal or the securities or liens it or they may
possess and the Surety will at any time, whether due or not due, pay to the Creditor with or without demand upon the
Principal, any obligation or indebtedness of the Principal not in excess of the amount abovementioned.
This instrument is intended to be a complete and perfect indemnity to the Creditor to the extent above stated, for any
indebtedness or liability of any kind owing by the Principal to the Creditor from time to time, and to be valid and continuous
without further notice to the Surety, and may be revoked by the Surety at any time, but only after forty-eight hours notice in
writing to the Creditor, and such revocation shall not operate to relieve the Surety from responsibility for obligations
incurred by the Principal prior to the termination of such period. (Emphasis supplied.)
It must be stressed that petitioners, as sureties, bound themselves solidarily for the obligation of Fil-Eastern to PNB.
Petitioners admit that they signed the Surety Agreement, but they challenge their liability thereon on the ground that they
were allegedly coerced by their employer into signing the deed. The argument is too late at best.
As pointed out by the Court of Appeals, petitioners failed to challenge their consent to the Agreement within the
prescriptive period. Article 1391 of the Civil Code provides that the action to annul a contract vitiated by intimidation,
violence or undue influence shall be filed within four years from the cessation of such defects. In this case, Petitioners
Agra, Gamo and Novales resigned from Fil-Eastern in 1967, 1968 and 1969, respectively. It was only in 1976, when PNB
sought to enforce the contract, that they alleged a defect in their consent. By their inaction, their alleged cause of action
based on vitiated consent had precribed. There was no question that petitioners, in their capacity as sureties, were
answerable for the obligations of Fil-Eastern to PNB.

We shall now go to the main issue of this case: Whether petitioners may invoke the defense of laches, considering that
PNBs claim had not yet prescribed.
Main Issue: Laches
Petitioners admit that PNBs claim, though filed more than seven years from the maturity of the obligation, fell within the
ten-year prescriptive period. They argue, however, that the cause was already barred by laches, which is defined as the
failure or neglect for an unreasonable or unexplained length of time to do that which by exercising due diligence, could or
should have been done earlier warranting a presumption that he has abandoned his right or declined to assert it.[7] In
arguing that the appellate court erred in rejecting the defense of laches, petitioners cite four reasons: (1) the defense of
laches applies independently of prescription; (2) the cause of action against petitioners accrued from the maturity of the
obligation, not from the time of judicial demand; (3) the four well-settled elements of laches were duly proven; and (4) PNB
v. CA applies in the instant case. As will be shown below, all these arguments are devoid of merit.
Application of Laches
Assailing the CA ruling that laches was inapplicable because the claim was brought within the ten-year prescriptive period,
petitioners stress that the defense of laches differs from and is applied independently of prescription. In support, they cite,
among others, Nielson & Co., Inc. v. Lepanto Consolidated Mining Co.,[8] in which the Supreme Court ruled:
[T]he defense of laches applies independently of prescription. Laches is different from the statute of limitations.
Prescription is concerned with the fact of delay, whereas laches is concerned with the effect of delay. Prescription is a
matter of time; laches is principally a question of inequity of permitting a claim to be enforced, this inequity being founded
on some change in the condition of the property or the relation of the parties. Prescription is statutory; laches is not.
Laches applies in equity; whereas prescription applies at law. Prescription is based on fixed time, laches is not.
True, prescription is different from laches, but petitioners reliance on Nielson is misplaced. As held in the aforecited case,
laches is principally a question of equity. Necessarily, there is no absolute rule as to what constitutes laches or staleness
of demand; each case is to be determined according to its particular circumstances. The question of laches is addressed
to the sound discretion of the court and since laches is an equitable doctrine, its application is controlled by equitable
considerations.[9] Petitioners, however, failed to show that the collection suit against herein sureties was inequitable.
Remedies in equity address only situations tainted with inequity, not those expressly governed by statutes. Indeed, the
petitioners failed to prove the presence of all the four established requisites of laches, viz:
(1) conduct on the part of the defendant or one under whom he claims, giving rise to the situation of which complaint is
made and for which the complainant seeks a remedy;
(2) delay in asserting the complainants right, the complainant having had knowledge or notice of defendants conduct and
having been afforded an opportunity to institute a suit;
(3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases
his claim; and
(4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred.[10]
That the first element exists is undisputed. Neither Fil-Eastern nor the sureties, herein petitioners, paid the obligation
under the Surety Agreement.
The second element cannot be deemed to exist. Although the collection suit was filed more than seven years after the
obligation of the sureties became due, the lapse was within the prescriptive period for filing an action. In this light, we find
immaterial petitioners insistence that the cause of action accrued on December 31, 1968, when the obligation became
due, and not on August 30, 1976, when the judicial demand was made. In either case, both submissions fell within the
ten-year prescriptive period. In any event, the fact of delay, standing alone, is insufficient to constitute laches.[11]
Petitioners insist that the delay of seven years was unreasonable and unexplained, because demand was not necessary.
Again we point that, unless reasons of inequitable proportions are adduced, a delay within the prescriptive period is
sanctioned by law and is not considered to be a delay that would bar relief. In Chavez v. Bonto-Perez,[12] the Court
reiterated an earlier holding, viz:
Laches is a doctrine in equity while prescription is based on law. Our courts are basically courts of law and not courts of
equity. Thus, laches cannot be invoked to resist the enforcement of an existing legal right. We have ruled in Arsenal v.
Intermediate Appellate Court x x x that it is a long standing principle that equity follows the law. Courts exercising equity
jurisdiction are bound by rules of law and have no arbitrary discretion to disregard them. In Zabat, Jr. v. Court of Appeals x
x x, this Court was more emphatic in upholding the rules of procedure. We said therein:

As for equity, which has been aptly described as justice outside legality, this is applied only in the absence of, and never
against, statutory law or, as in this case, judicial rules of procedure. Aequetas nunquam contravenit legis. This pertinent
positive rules being present here, they should preempt and prevail over all abstract arguments based only on equity.
Thus, where the claim was filed within the three-year statutory period, recovery therefore cannot be barred by laches.
Petitioners also failed to prove the third element of laches. It is absurd to maintain that petitioners did not know that PNB
would assert its right under the Surety Agreement. It is unnatural, if not unheard of, for banks to condone debts without
adequate recompense in some other form. Petitioners have not given us reason why they assumed that PNB would not
enforce the Agreement against them.
Finally, petitioners maintain that the fourth element is present because they would suffer damage or injury as a result of
PNBs claim. This is the crux of the controversy. In addition to the payment of the amount stipulated in the Agreement,
other equitable grounds were enumerated by petitioners, viz:
1. Petitioners acted as sureties under pressure from Felipe Baby Ysmael, Jr., the headman of the Ysmael Group of
Companies where the petitioners were all employed in various executive positions.
2. Petitioners did not receive a single centavo in consideration of their acting as sureties.
3. The surety agreement was not really a requisite for the grant of the loan to FIL-EASTERN because the first release on
the loan was made on July 17, 1967, or even before the Surety Agreement was executed by petitioners on July 21, 1967.
4. Petitioners were assured that the Surety Agreement was merely a formality, and they had reason to believe that
assurance because the loan was principally secured by an assignment of 15% of the proceeds of the sale of logs of FILEASTERN to Iwai & Co., Ltd., and such assignment was clearly stated in PNB Board Resolution No. 407. In fact, while it
was expressly stated in all of the eight (8) promissory notes covering the releases of the loan that the said loan was
secured by 15% of the contract of sale with Iwai & Co., Ltd., only three (3) promissory notes stated that the loan was also
secured by the joint and several signatures of the officers of the corporation. It is to be noted that no mention was even
made of the joint and several signatures of petitioners as sureties. In other words, the principal security was the
assignment of 15% of the contract for the sale of logs to Iwai & Co., Ltd.
5. For reasons not explained by PNB, PNB did not collect the 15% of the proceeds of the sale of the logs to Iwai & Co.,
Ltd., and such failure resulted in the non-collection of the P2,500,000.00 demand loan, or at least a portion of it.
6. For reasons likewise unexplained by PNB, PNB did not make any demand upon petitioners to pay the unpaid loan of
FIL-EASTERN until after FIL-EASTERN had become bankrupt, and PNB was aware of this fact because it foreclosed the
chattel mortgages on the other loans of FIL-EASTERN which were secured by said chattel mortgages.[13] (Emphasis
found in the original.)
These circumstances do not justify the application of laches. Rather, they disclose petitioners failure to understand the
language and the nature of the Surety Arrangement. They cannot now argue that the Surety Agreement was merely a
formality, secondary to the assignment of 15 percent of the proceeds of the sale of Fil-Easterns logs to Iwai and Co., Ltd.
Neither can they rely on PNBs failure to collect the assigned share in the sale of the logs or to make a demand on
petitioners until after Fil-Eastern had become bankrupt. The Court stresses that the obligation of a surety is direct, primary
and absolute. Thus, the Court has held:
[A]lthough the contract of a surety is in essence secondary only to a valid principal obligation, his liability to the creditor or
promisee of the principal is said to be direct, primary, and absolute; in other words, he is directly and equally bound with
the principal. The surety therefore becomes liable for the debt or duty of another although he possesses no direct or
personal interest over the obligations nor does he receive any benefit therefrom.[14]
When petitioners signed as sureties, they expressly and unequivocally agreed to the stipulation that the liability on this
guaranty shall be solidary, direct and immediate and not contingent upon the pursuit by the creditor, its successors,
indorsees or assigns, of whatever remedies it or they have against the principal or the securities or liens it or they may
possess.
If they had mistaken the import of the Surety Agreement, they could have easily asked for its revocation. The Agreement
stipulates that it may be revoked by the Surety at any time, but only after forty-eight hours notice in writing to the Creditor,
and such revocation shall not operate to relieve the Surety from responsibility for obligations incurred by the Principal prior
to the termination of such period. This they did not do.
Equally unavailing is petitioners allegation that the Surety Agreement was not a requisite for the grant of the loan. Even if
their assertion is true, the fact remains that they signed the contract and voluntarily bound themselves to be solidarily
liable for the loan amounting to P2,500,000.

The other equitable circumstances above enumerated fail to support petitioners cause. As earlier stated, petitioners are
already barred from questioning the voluntariness of their consent. Furthermore, this Court has categorically ruled that a
surety is liable for the debt of another, although he or she received no benefit therefrom.[15]
Clearly, aside from the fact that the collection suit was filed only after the lapse of seven years from the date the obligation
became due and demandable, petitioners failed to adduce any showing of inequity. Hence, the rules on equity cannot
protect them.
Applicability of PNB v. CA
Petitioners allege that the CA committed grave error in failing to apply PNB v. Court of Appeals,[16] which they insist to be
analogous to the present case. The facts in said case are as follows:
Private Respondent B.P. Mata & Co. Inc. (Mata), is a private corporation engaged in providing goods and services to
shipping companies. Since 1966, it has acted as a manning or crewing agent for several foreign firms, one of which is
Star Kist foods, Inc., USA (Star Kist). As part of their agreement, Mata makes advances for the crews basic personal
needs. Subsequently, Mata sends monthly billings to its foreign principal Star Kist, which in turn reimburses Mata by
sending a telegraphic transfer through banks for credit to the latters account.
Against this background, on February 21, 1975, Security Pacific National Bank (SEPAC) of Los Angeles which had an
agency arrangement with Philippine National Bank (PNB), transmitted a cable message to the International Department of
PNB to pay the amount of US$14,000 to Mata by crediting the latters account with the Insular Bank of Asia and America
(IBAA), per order of Star Kist. Upon receipt of this cabled message on February 24, 1975, PNBs International Department
noticed an error and sent a service message to SEPAC Bank. The latter replied with the instructions that the amount of
US$14,000 should only be for US$1,400.
On the basis of the cable message dated February 24, 1975, Cashiers Check No. 269522 in the amount of US$1,400
(P9,772.96) representing reimbursement from Star Kist, was issued by the Star Kist for the account of Mata on February
25, 1975 through the Insular Bank of Asia and America (IBAA).
However, fourteen days after or on March 11, 1975, PNB effected another payment through Cashiers Check No. 270271
in the amount of US$14,000 (P97,878.60) purporting to be another transmittal of reimbursement from Star Kist, private
respondents foreign principal.
Six years later, or more specifically, on May 13, 1981, PNB requested Mata for refund of US$14,000 (P97,878.60) after it
discovered its error in effecting the second payment.
On February 4, 1982, PNB filed a civil case for collection and refund of US$14,000 against Mata arguing that based on a
constructive trust under Article 1456 of the Civil Code, it has a right to recover the said amount it erroneously credited to
respondent Mata.[17]
On the ground of laches, the Court decided against the claim of PNB, stating that:
[i]t is amazing that it took petitioner almost seven years before it discovered that it had erroneously paid private
respondent. Petitioner would attribute its mistake to the heavy volume of international transactions handled by the Cable
and Remittance Division of the International Department of PNB. Such specious reasoning is not persuasive. It is
unbelievable for a bank, and a government bank at that, which regularly publishes its balanced financial statements
annually or more frequently, by the quarter, to notice its error only seven years later. As a universal bank with worldwide
operations, PNB cannot afford to commit such costly mistakes. Moreover, as between parties where negligence is
imputable to one and not to the other, the former must perforce bear the consequences of its neglect. Hence, petitioner
should bear the cost of its own negligence.
Petitioners maintain that the delay in PNB v. CA was even shorter than that in the present case. If the bank in the
aforesaid case was negligent in not discovering the overpayment, herein petitioners assert that the negligence was even
more culpable in the present case. They add that, given the standard practice of banks to flag delinquent accounts, the
inaction for almost seven years of herein respondent bank was gross and inexcusable.
We are not persuaded. There are no absolute rules in the application of equity, and each case must be examined in the
light of its peculiar facts. In PNB v. CA, there was a mistake, an inexcusable one, on the part of petitioner bank in making
an overpayment and repeating the same error fourteen days later. If the bank could not immediately discover the mistake
despite all its agents and employees, the beneficiary of the amount could not be expected to do so. It is, thus, inequitable
to allow PNB to collect the amount, after such a long delay, from the beneficiary who had assumed, after all those years,
that the amount really belonged to it.
In the present case, there is no showing of any mistake or any inequity. The fact alone that seven years had lapsed before
PNB filed the collection suit does not mean that it discovered the obligation of the sureties only then. There was a Surety

Arrangement, and the law says that the said contract can be enforced by action within ten years. The bank and the
sureties all knew that the action to enforce the contract did not have to be filed immediately. In other words, the bank
committed no mistake or inequitable conduct that needed correction, and the sureties had no misconception about their
liabilities under the contract.
Clearly, petitioners have no recourse in equity, because they failed to show any inequity on the part of PNB.
Additional Issue: Liability of Conjugal Assets
In their Memorandum, petitioners belatedly ask the Court to rule that, in case of a court ruling adverse to them, the
conjugal properties would not be liable for the husbands debts that did not redound to the benefit of the conjugal
partnership.[18]
This issue cannot be allowed, for it is being raised for the first time only in petitioners Memorandum. Issues, arguments,
theories and causes of action not raised below may no longer be posed on appeal.[19] Furthermore, petitioners are
asking the Court to issue a ruling on a hypothetical situation. In effect, they are asking the Court to render an advisory
opinion, a task which is beyond its constitutional mandate.
WHEREFORE, the petition is hereby DENIED and the assailed Decision of the Court of Appeals is AFFIRMED. Costs
against petitioners.
SO ORDERED.

Imuan v Cereno
Before us is a petition for review on certiorari which seeks to set aside the Decision[1] dated August 24, 2004 of the Court
of Appeals (CA) in3 CA-G.R. CV No. 69446, which reversed the Decision of the Regional Trial Court (RTC), Branch 41,
Dagupan City, in Civil Case No. 99-02910-D. Also assailed is the CA Resolution[2] dated April 29, 2005 denying
petitioners' motion for reconsideration.
The facts are as follows:
During his lifetime, Pablo de Guzman (Pablo) contracted two marriages. His first marriage was with Teodora Soriano
(Teodora), with whom he had three children, namely, Alfredo de Guzman (Alfredo), Cristita G. Velasquez (Cristita), and
Inday G. Soriano (Inday). His second marriage was in 1919 with Juana Velasquez (Juana), with whom he also had three
children, namely: Nena De Guzman (Nena), Teodora de Guzman (Teodora), and Soledad G. Cereno (Soledad). All these
children are now dead.
Petitioners are Pablo's grandchildren by his first marriage, while respondent Juanito Cereno (Juanito) is Soledad's
husband and the other respondents are their children.
On July 15, 1936, Pablo died intestate leaving two parcels of land, to wit: (1) a parcel of coconut land located at Salaan
Mangaldan, Pangasinan, containing an area of nine hundred eighty-six (986) square meters, more or less, declared under
Tax Declaration No. 8032; and (2) a parcel of cornland located at (Inlambo) Palua, Mangaldan, Pangasinan, containing an
area of three thousand three hundred thirty-four (3,334) square meters, more or less, declared under Tax Declaration No.
5155.
After Pablo's death in 1936, his second wife Juana and their children continued to be in possession of the parcel of land
located at Salaan, Mangaldan, Pangasinan (the disputed property), where they lived since they were married in 1919.
On January 24, 1970, Juana executed a Deed of Absolute Sale[3] in favor of respondents-spouses, Soledad, Juana and
Pablo's daughter, and her husband Juanito conveying the subject property. The deed was duly registered with the
Register of Deeds of Lingayen, Pangasinan.
On January 26, 1970, a Joint Affidavit[4] was executed by Alfredo de Guzman and Teofilo Cendana attesting to the fact
that Pablo ceded the property in favor of Juana on the occasion of their marriage, but the document was lost.
Subsequently, Tax Declaration No. 23803[5] was issued in the names of respondents-spouses who religiously paid the
taxes due on the property. Since then respondents-spouses enjoyed exclusive, open and uninterrupted possession of the
property. Later, the disputed property which originally consisted of one whole lot was traversed by a barangay road
dividing it into two (2) lots, namely, Lot 3533, with an area of 690 square meters covered by Tax Declaration No. 21268[6];
and Lot 3559, with an area of 560 square meters covered by Tax declaration No. 21269.[7] Respondents-spouses Cereno
built their house on Lot 3559 and had planted fruit-bearing trees on Lot 3533. Meanwhile, the parcel of cornland in Palua,
Mangaldan, Pangasinan has never been in possession of any of the parties since it eroded and was submerged under
water, eventually forming part of the riverbed.

Sometime in January 1999, petitioners entered and took possession of Lot 3533 by building a small nipa hut thereon.
Respondents then filed before the Municipal Trial Court (MTC) of Mangaldan, Pangasinan an ejectment case against
petitioners. In an Order[8] dated December 9, 1999, the MTC dismissed the case as both parties prayed for its dismissal
considering that petitioners had already left Lot 3533 immediately after the filing of the complaint.
On April 5, 1999, petitioners filed with the RTC of Dagupan City a Complaint for annulment of document, reconveyance
and damages against respondents alleging that: (1) the estate of their grandfather Pablo has not yet been settled or
partitioned among his heirs nor had Pablo made disposition of his properties during his lifetime; (2) it was only through
their tolerance that Juana and his children constructed their house on Lot 3559; (3) the sale of the disputed property made
by Juana to respondents-spouses Cereno and the issuance of tax declarations in the latter's names are null and void.
Petitioners prayed for the annulment of the deed of sale, cancellation of Tax Declaration Nos. 21268 and 21269, the
reconveyance of the property to them and damages.
In their Answer, respondents claimed that after the death of Pablo's first wife, Pablo partitioned his property among his
children and that spouses Nicomedes and Cristita Velasquez acquired most of the properties as they were more
financially capable; that at the time Pablo married Juana, the properties he had were his exclusive share in the partition;
that of the two parcels of land Pablo had at that time, he donated the subject property to Juana in a donation propter
nuptias when they married; that the deed of donation was lost during the Japanese occupation and such loss was
evidenced by the Joint Affidavit executed by Alfredo de Guzman and Teofilo Cendana attesting to such donation; that
Juana could validly convey the property to the Spouses Cereno at the time of the sale because she was the owner; and
that they have been in public and uninterrupted possession of the disputed lot since its acquisition and have been paying
the realty taxes due thereon. As affirmative defense, respondents contended that petitioners' rights over the property were
already barred by the statute of limitations.
After trial, the RTC rendered its Decision[9] dated November 10, 2000, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants:
(a) Declaring as null and void the Deed of Absolute Sale; Tax Declaration Nos. 21268 for Lot 3533 & 21269 for Lot 3559 in
the names of Juanito Cereno and Soledad de Guzman;
(b) Ordering the defendants (1) to reconvey the property in question to the plaintiffs and to peacefully surrender the
possession of the premises to the plaintiffs; and (2) to pay plaintiffs litigation expenses in the amount of P10,000.00.
SO ORDERED.[10]
The RTC found that Juana and her children of the second nuptial built their house on the disputed property by tolerance of
Pablos children of the first marriage; that Juana alone sold the property to respondents Spouses Cereno and such sale
was not valid because she was not the owner of the property at the time she sold the same; that the estate of Pablo has
not been settled among the heirs since the property was still in the name of Pablo at the time Juana sold the same; that
respondents Spouses Cerenos claim that the property was donated to Juana by Pablo by way of donation propter nuptias
was not supported by evidence; that Pablo could not have donated the property to Juana because Pablos children were
the legal heirs of his first wife, and have rights and interests over the property. The RTC found the Joint Affidavit dated
January 26, 1970 executed by Alfredo, Pablos son by first marriage, and Teofilo Cendana, a former Chief of Police of
Mangaldan, Pangasinan, attesting that the donation propter nuptias executed by Pablo in favor of Juana was lost during
the Japanese occupation was inconsequential, since it cannot substitute for the donation which validity was highly
questionable; that petitioners were able to prove that the property was the conjugal property of Pablo and his first wife
which has not been divided between Pablo and his children of the first nuptial.
On appeal, the CA rendered its assailed Decision, the dispositive portion of which reads as follows:
WHEREFORE, premises considered, we hereby GRANT the appeal. The assailed decision dated November 10, 2000, of
the Regional Trial Court (RTC), Branch 41, Dagupan City, in Civil Case No. 99-02910-D is consequently REVERSED and
SET ASIDE. Costs against the plaintiffs-appellees.
SO ORDERED.[11]
While the CA agreed with the findings of the RTC that there was no evidence that Pablo undertook a partition of the
properties of his first marriage before he contracted his second marriage and that the Joint Affidavit dated January 26,
1970 could not be considered as conclusive proof of the transfer of the property by Pablo to Juana, it was not a sufficient
basis for Juana to validly transfer the property to respondent Spouses Cereno, however, the CA gave probative value to
the joint affidavit as it was executed long before the present controversy arose. The CA found that the joint affidavit was
executed by Alfredo, one of Pablos children by his first marriage who was necessarily affected by the claimed donation
propter nuptias and who ought to know the facts attested to; that the affidavit was evidence of the basis of Juana's own
good faith belief that the property was hers to dispose of when she sold it to respondents Spouses Cereno; that the same
affidavit can also be the basis of respondents Spouses Cereno's good faith belief that Juana, who had undisputably been

in possession of the disputed property at the time of the sale, was the owner and could transfer the property to them by
sale.
The CA also gave probative value to the deed of sale executed by Juana in favor of respondents Spouses Cereno as it is
still an evidence of the fact of transaction between Juana and respondents Spouses Cereno for the sale of the disputed
property. The CA found that the deed of sale and the joint affidavit assumed great importance on the issue of prescription.
The CA found that Juana possessed the property in the concept of an owner, which is a sufficient basis for the belief that
Juana was the owner of the property she conveyed by sale and respondents Spouses Cereno had the good faith that
acquisition by prescription requires when they became the purchasers in the contract of sale with her . The CA further
stated that a sale, coupled with the delivery of the property sold, is one of the recognized modes of acquiring ownership of
real property and that respondents Spouses Cereno immediately took possession of the property which showed that
respondent Spouses Cereno have just title to the property.
The CA further found that respondents Spouses Cereno are in peaceful possession of the property for 29 years and, thus,
have satisfied the ten-year period of open, public and adverse possession in the concept of an owner that the law on
prescription requires. The CA added that petitioners are now barred by laches from claiming ownership of the disputed
property as they have been negligent in asserting their rights.
Petitioners motion for reconsideration was denied in a Resolution dated April 29, 2005.
Petitioners raise the following issues for our consideration:
WHETHER THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE REGIONAL TRIAL COURT,
BRANCH 41, DAGUPAN CITY.
WHETHER THE COURT OF APPEALS ERRED IN DISREGARDING THE NATURE OF THE PROPERTY IN ISSUE
WHEN IT RENDERED ITS DECISION.
WHETHER LACHES/PRESCRIPTION BARRED HEREIN PETITIONERS FROM CLAIMING THEIR RIGHTFUL SHARE
IN THE PROPERTY IN ISSUE.[12]
Petitioners contend that since the CA and the RTC found that there was no partition of the property and no valid donation
propter nuptias was made by Pablo to Juana, the rule on co-ownership among Pablos heirs should govern the property;
that when Juana sold the property to respondents Cerenos, the rights of petitioners as co-owners should not have been
affected; that the CAs finding that the joint affidavit attesting to the donation propter nuptias can be the basis of a belief in
good faith that Juana was the owner of the disputed property is erroneous, since Juana had knowledge from the time she
got married to Pablo that the property was acquired during the latter's first marriage; that respondents Spouses Cereno
could not be considered in good faith since Soledad is the daughter of Juana with her marriage to Pablo and could not be
considered a third party to the dispute without knowledge of the nature of the property; that being co-owners, neither
prescription nor laches can be used against them to divest them of their property rights.
In their Comment, respondents argue that Juana in her own right had acquired the property by prescription; that the CA
correctly considered respondents 29 years of actual and peaceful possession of the property aside from their purchase of
the property from Juana in finding them as the true owners.
Petitioners and respondents submitted their respective memoranda.
The petition has no merit.
We agree with the CA that respondents have acquired the disputed property by acquisitive prescription.
Prescription is another mode of acquiring ownership and other real rights over immovable property.[13] It is concerned
with lapse of time in the manner and under conditions laid down by law, namely, that the possession should be in the
concept of an owner, public, peaceful, uninterrupted and adverse.[14] Possession is open when it is patent, visible,
apparent, notorious and not clandestine.[15] It is continuous when uninterrupted, unbroken and not intermittent or
occasional;[16] exclusive when the adverse possessor can show exclusive dominion over the land and an appropriation of
it to his own use and benefit; and notorious when it is so conspicuous that it is generally known and talked of by the public
or the people in the neighborhood.[17] The party who asserts ownership by adverse possession must prove the presence
of the essential elements of acquisitive prescription.[18]
Acquisitive prescription of real rights may be ordinary or extraordinary.[19] Ordinary acquisitive prescription requires
possession in good faith and with just title for ten years.[20] In extraordinary prescription, ownership and other real rights
over immovable property are acquired through uninterrupted adverse possession for thirty years without need of title or of
good faith.[21]

The good faith of the possessor consists in the reasonable belief that the person from whom he received the thing was the
owner thereof, and could transmit his ownership.[22] For purposes of prescription, there is just title when the adverse
claimant came into possession of the property through one of the modes recognized by law for the acquisition of
ownership or other real rights, but the grantor was not the owner or could not transmit any right.[23]
Records show that as early as 1970, when the property was sold by Juana to respondents Spouses Cereno, the latter
immediately took possession of the property. Since then, respondents possessed the property continuously, openly,
peacefully, in the concept of an owner, exclusively and in good faith with just title, to the exclusion of the petitioners and
their predecessors-in-interest until the filing of the complaint in 1999 which is the subject of this present petition.
Notably, the property was traversed by a barangay road, thus, it was divided into two lots. The house of respondents is
located on the eastern part of the road, while the lot on the western part of the road was planted to fruit- bearing trees by
respondents.[24] It was admitted by petitioners that they saw the house of respondents constructed on the lot and yet
never questioned the same.[25] It was also established that respondents are the ones gathering the fruits of the land and
enjoying the same[26] to the exclusion of petitioners and yet the latter never prevented them from doing so. In fact, while
petitioners learned of the sale of the property by Juana to the Spouses Cereno in 1980, they never took any action to
protect whatever rights they have over the property nor raised any objection on respondents' possession of the property.
Petitioners' inaction is aggravated by the fact that petitioners just live a mere 100 meters away from the property.[27]
Moreover, immediately after the sale of the property to the Spouses Cereno, they declared the property in their names for
taxation purposes[28] and since then religiously paid the taxes[29] due on the property. Petitioners admitted that they
knew that the Spouses Cerenos are the ones paying the taxes;[30] yet, they never challenged the same for a long period
of time which clearly establishes respondents' claim as owners of the property. Jurisprudence is clear that although tax
declarations or realty tax payments of property are not conclusive evidence of ownership, nevertheless, they are good
indicia of possession in the concept of owner, for no one in his right mind would be paying taxes for a property that is not
in his actual or at least constructive possession.[31] They constitute at least proof that the holder has a claim of title over
the property.[32] As is well known, the payment of taxes, coupled with actual possession of the land covered by the tax
declaration, strongly supports a claim of ownership.[33]
Respondent Juanito also exercised dominion over the property by mortgaging the same to Manaoag Rural Bank in
1994[34] and the mortgage was cancelled only in January 1999.[35]
While there is a question regarding the alleged donation propter nuptias at the time Juana executed the deed of sale in
favor of the Spouses Cereno in 1970, however, the requirement of just title and good faith are still satisfied in this case. As
the CA said:
x x x [T]he joint affidavit that the defendants-appellants presented, attesting to the donation propter nuptias of the disputed
property by Pablo to Juana, can be the basis of the belief in good faith that Juana was the owner of the disputed property.
Related to this, it is undisputed that Pablo and Juana had lived in the disputed property from the time of their marriage in
1919, and Juana continued to live and to possess this property in the concept of an owner from the time of Pablo's death
in 1936 up to the time she sold it to spouses Cereno in 1970. These circumstances, in our view, are sufficient bases for
the belief that Juana was the owner of the property she conveyed by sale, and leave us convinced that the spouses
Cereno had the good faith that acquisition by prescription requires when they became the purchasers in the contract of
sale with Juana.[36]
Notably, one of the affiants in the joint affidavit which was executed in 1970 was Alfredo, Pablo's son by his first marriage,
where he attested that the property was given by his father Pablo to Juana by donation propter nuptias. Not one among
Alfredo's children had ever come out to assail the validity of the affidavit executed by their father. In fact, not one of
Alfredo's heirs joined petitioners in this case.[37] Moreover, not one among the children of the first marriage when they
were still alive ever made a claim on their successional rights over the property by asking for its partition. Such joint
affidavit could constitute a legal basis for Juana's adverse and exclusive character of the possession of the property[38]
and would show the Spouses Cereno's good faith belief that Juana was the owner of the property. Thus, when petitioners
filed the instant case, more than 29 years had already elapsed, thus, the ten-year period for acquisitive prescription has
already been satisfied.
We likewise agree with the CA when it found that petitioners are guilty of laches that would bar them from belatedly
asserting their claim.
Laches is defined as the failure to assert a right for an unreasonable and unexplained length of time, warranting a
presumption that the party entitled to assert it has either abandoned or declined to assert it. This equitable defense is
based upon grounds of public policy, which requires the discouragement of stale claims for the peace of society.[39]
Juana sold the property to the Spouses Cereno in 1970 and since then have possessed the property peacefully and
publicly without any opposition from petitioners. While petitioners claim that they knew about the sale only in 1980 yet they
did not take any action to recover the same and waited until 1999 to file a suit without offering any excuse for such delay.

Records do not show any justifiable reason for petitioners' inaction for a long time in asserting whatever rights they have
over the property given the publicity of respondents' conduct as owners of the property.
WHEREFORE, the petition is DENIED. The Decision dated August 24, 2004 and the Resolution dated April 29, 2005 of
the Court of Appeals in CA-G.R. CV No. 69446 are AFFIRMED.
SO ORDERED.

Abalos v Torio
Before the Court is a petition for review on certiorari seeking to set aside the Decision1 dated June 30, 2006 and
Resolution2 dated November 13, 2006 by the Court of Appeals (CA) in CA-G.R. SP No. 91887. The assailed Decision
reversed and set aside the Decision3 dated June 14, 2005 of the Regional Trial Court (RTC) of Lingayen, Pangasinan,
Branch 69, while the questioned Resolution denied petitioners' Motion for Reconsideration.
The factual and procedural antecedents of the case are as follows:
On July 24, 1996, herein respondents filed a Complaint for Recovery of Possession and Damages with the Municipal Trial
Court (MTC) of Binmaley, Pangasinan against Jaime Abalos (Jaime) and the spouses Felix and Consuelo Salazar.
Respondents contended that: they are the children and heirs of one Vicente Torio (Vicente) who died intestate on
September 11, 1973; at the time of the death of Vicente, he left behind a parcel of land measuring 2,950 square meters,
more or less, which is located at San Isidro Norte, Binmaley, Pangasinan; during the lifetime of Vicente and through his
tolerance, Jaime and the Spouses Salazar were allowed to stay and build their respective houses on the subject parcel of
land; even after the death of Vicente, herein respondents allowed Jaime and the Spouses Salazar to remain on the
disputed lot; however, in 1985, respondents asked Jaime and the Spouses Salazar to vacate the subject lot, but they
refused to heed the demand of respondents forcing respondents to file the complaint.4
Jaime and the Spouses Salazar filed their Answer with Counterclaim, denying the material allegations in the Complaint
and asserting in their Special and Affirmative Defenses that: respondents' cause of action is barred by acquisitive
prescription; the court a quo has no jurisdiction over the nature of the action and the persons of the defendants; the
absolute and exclusive owners and possessors of the disputed lot are the deceased predecessors of defendants;
defendants and their predecessors-in-interest had been in actual, continuous and peaceful possession of the subject lot
as owners since time immemorial; defendants are faithfully and religiously paying real property taxes on the disputed lot
as evidenced by Real Property Tax Receipts; they have continuously introduced improvements on the said land, such as
houses, trees and other kinds of ornamental plants which are in existence up to the time of the filing of their Answer.5
On the same date as the filing of defendants' Answer with Counterclaim, herein petitioners filed their Answer in
Intervention with Counterclaim. Like the defendants, herein petitioners claimed that their predecessors-in-interest were the
absolute and exclusive owners of the land in question; that petitioners and their predecessors had been in possession of
the subject lot since time immemorial up to the present; they have paid real property taxes and introduced improvements
thereon.6
After the issues were joined, trial ensued.
On December 10, 2003, the MTC issued a Decision, the dispositive portion of which reads as follows:
WHEREFORE, in view of the foregoing consideration[s], the Court adjudged the case in favor of the plaintiffs and against
the defendants and defendants-intervenors are ordered to turn over the land in question to the plaintiffs (Lot Nos. 869 and
870, Cad. 467-D. Binmaley Cadastre located in Brgy. San Isidro Norte, Binmaley, Pangasinan with an area of 2,950 sq.
m., more or less, bounded and described in paragraph 3 of the Complaint[)]; ordering the defendants and defendantsintervenors to remove their respective houses standing on the land in dispute; further ordering the defendants and
defendants-intervenors, either singly or jointly to pay the plaintiffs land rent in the amount of P12,000.00 per year to be
reckoned starting the year 1996 until defendants and defendants-intervenors will finally vacate the premises; furthermore,
defendants and defendants-intervenors are also ordered to pay, either singly or jointly, the amount of P10,000.00 as and
by way of attorney's fees and costs of suit.
SO ORDERED.7
Jaime and the Spouses Salazar appealed the Decision of the MTC with the RTC of Lingayen, Pangasinan.8 Herein
petitioners, who were intervenors, did not file an appeal.
In its Decision dated June 14, 2005, the RTC ruled in favor of Jaime and the Spouses Salazar, holding that they have
acquired the subject property through prescription. Accordingly, the RTC dismissed herein respondents' complaint.
Aggrieved, herein respondents filed a petition for review with the CA assailing the Decision of the RTC.

On June 30, 2006, the CA promulgated its questioned Decision, the dispositive portion of which reads, thus:
WHEREFORE, the petition is GRANTED. The Decision dated June 14, 2005 of the Regional Trial Court, Branch 69,
Lingayen, Pangasinan is hereby REVERSED and SET ASIDE. In its stead, a new one is entered reinstating the Decision
dated December 10, 2003 of the Municipal Trial Court of Binmaley, Pangasinan.
SO ORDERED.
Jaime and the Spouses Salazar filed a Motion for Reconsideration, but the same was denied by the CA in its Resolution
dated November 13, 2006.
Hence, the instant petition based on a sole assignment of error, to wit:
THE COURT OF APPEALS ERRED IN NOT APPRECIATING THAT THE PETITIONERS HEREIN ARE NOW THE
ABSOLUTE AND EXCLUSIVE OWNERS OF THE LAND IN QUESTION BY VIRTUE OF ACQUISITIVE
PRESCRIPTION.10
The main issue raised by petitioners is whether they and their predecessors-in-interest possessed the disputed lot in the
concept of an owner, or whether their possession is by mere tolerance of respondents and their predecessors-in-interest.
Corollarily, petitioners claim that the due execution and authenticity of the deed of sale upon which respondents'
predecessors-in-interest derived their ownership were not proven during trial.
The petition lacks merit.
Preliminarily, the Court agrees with the observation of respondents that some of the petitioners in the instant petition were
the intervenors11 when the case was filed with the MTC. Records would show that they did not appeal the Decision of the
MTC.12 The settled rule is that failure to perfect an appeal renders the judgment final and executory.13 Hence, insofar as
the intervenors in the MTC are concerned, the judgment of the MTC had already become final and executory.
It also bears to point out that the main issue raised in the instant petition, which is the character or nature of petitioners'
possession of the subject parcel of land, is factual in nature.
Settled is the rule that questions of fact are not reviewable in petitions for review on certiorari under Rule 45 of the Rules
of Court.14 Section 1 of Rule 45 states that petitions for review on certiorari shall raise only questions of law which must
be distinctly set forth.
Doubtless, the issue of whether petitioners possess the subject property as owners, or whether they occupy the same by
mere tolerance of respondents, is a question of fact. Thus, it is not reviewable.
Nonetheless, the Court has, at times, allowed exceptions from the abovementioned restriction. Among the recognized
exceptions are the following:
(a) When the findings are grounded entirely on speculation, surmises, or conjectures;
(b) When the inference made is manifestly mistaken, absurd, or impossible;
(c) When there is grave abuse of discretion;
(d) When the judgment is based on a misapprehension of facts;
(e) When the findings of facts are conflicting;
(f) When in making its findings the CA went beyond the issues of the case, or its findings are contrary to the admissions of
both the appellant and the appellee;
(g) When the CAs findings are contrary to those by the trial court;
(h) When the findings are conclusions without citation of specific evidence on which they are based;
(i) When the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by the
respondent;
(j) When the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on
record; or
(k) When the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered,
would justify a different conclusion.15

In the present case, the findings of fact of the MTC and the CA are in conflict with those of the RTC.
After a review of the records, however, the Court finds that the petition must fail as it finds no error in the findings of fact
and conclusions of law of the CA and the MTC.
Petitioners claim that they have acquired ownership over the disputed lot through ordinary acquisitive prescription.
Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary.16 Ordinary acquisitive
prescription requires possession in good faith and with just title for ten (10) years.17 Without good faith and just title,
acquisitive prescription can only be extraordinary in character which requires uninterrupted adverse possession for thirty
(30) years.18
Possession in good faith consists in the reasonable belief that the person from whom the thing is received has been the
owner thereof, and could transmit his ownership.19 There is just title when the adverse claimant came into possession of
the property through one of the modes recognized by law for the acquisition of ownership or other real rights, but the
grantor was not the owner or could not transmit any right.20
In the instant case, it is clear that during their possession of the property in question, petitioners acknowledged ownership
thereof by the immediate predecessor-in-interest of respondents. This is clearly shown by the Tax Declaration in the name
of Jaime for the year 1984 wherein it contains a statement admitting that Jaime's house was built on the land of Vicente,
respondents' immediate predecessor-in-interest.21 Petitioners never disputed such an acknowledgment. Thus, having
knowledge that they nor their predecessors-in-interest are not the owners of the disputed lot, petitioners' possession could
not be deemed as possession in good faith as to enable them to acquire the subject land by ordinary prescription. In this
respect, the Court agrees with the CA that petitioners' possession of the lot in question was by mere tolerance of
respondents and their predecessors-in-interest. Acts of possessory character executed due to license or by mere
tolerance of the owner are inadequate for purposes of acquisitive prescription.22 Possession, to constitute the foundation
of a prescriptive right, must be en concepto de dueo, or, to use the common law equivalent of the term, that possession
should be adverse, if not, such possessory acts, no matter how long, do not start the running of the period of
prescription.23
Moreover, the CA correctly held that even if the character of petitioners' possession of the subject property had become
adverse, as evidenced by their declaration of the same for tax purposes under the names of their predecessors-ininterest, their possession still falls short of the required period of thirty (30) years in cases of extraordinary acquisitive
prescription. Records show that the earliest Tax Declaration in the name of petitioners was in 1974. Reckoned from such
date, the thirty-year period was completed in 2004. However, herein respondents' complaint was filed in 1996, effectively
interrupting petitioners' possession upon service of summons on them.24 Thus, petitioners possession also did not ripen
into ownership, because they failed to meet the required statutory period of extraordinary prescription.
This Court has held that the evidence relative to the possession upon which the alleged prescription is based, must be
clear, complete and conclusive in order to establish the prescription.25 In the present case, the Court finds no error on the
part of the CA in holding that petitioners failed to present competent evidence to prove their alleged good faith in neither
possessing the subject lot nor their adverse claim thereon. Instead, the records would show that petitioners' possession
was by mere tolerance of respondents and their predecessors-in-interest.
Finally, as to the issue of whether the due execution and authenticity of the deed of sale upon which respondents anchor
their ownership were not proven, the Court notes that petitioners did not raise this matter in their Answer as well as in their
Pre-Trial Brief. It was only in their Comment to respondents' Petition for Review filed with the CA that they raised this
issue. Settled is the rule that points of law, theories, issues, and arguments not adequately brought to the attention of the
trial court need not be, and ordinarily will not be, considered by a reviewing court.26 They cannot be raised for the first
time on appeal. To allow this would be offensive to the basic rules of fair play, justice and due process.27
Even granting that the issue of due execution and authenticity was properly raised, the Court finds no cogent reason to
depart from the findings of the CA, to wit:
Based on the foregoing, respondents [Jaime Abalos and the Spouses Felix and Consuelo Salazar] have not inherited the
disputed land because the same was shown to have already been validly sold to Marcos Torio, who, thereupon, assigned
the same to his son Vicente, the father of petitioners [herein respondents]. A valid sale was amply established and the
said validity subsists because the deed evidencing the same was duly notarized.
There is no doubt that the deed of sale was duly acknowledged before a notary public. As a notarized document, it has in
its favor the presumption of regularity and it carries the evidentiary weight conferred upon it with respect to its due
execution. It is admissible in evidence without further proof of its authenticity and is entitled to full faith and credit upon its
face.28

Indeed, settled is the rule in our jurisdiction that a notarized document has in its favor the presumption of regularity, and to
overcome the same, there must be evidence that is clear, convincing and more than merely preponderant; otherwise, the
document should be upheld.29 In the instant case, petitioners' bare denials will not suffice to overcome the presumption of
regularity of the assailed deed of sale.
WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No.
91887 are AFFIRMED.
SO ORDERED.

Mercado v Espinocilla
Petitioner Celerino E. Mercado appeals the Decision[1] dated April 28, 2008 and Resolution[2] dated July 22, 2008 of the
Court of Appeals (CA) in CA-G.R. CV No. 87480. The CA dismissed petitioners complaint[3] for recovery of possession,
quieting of title, partial declaration of nullity of deeds and documents, and damages, on the ground of prescription.
The antecedent facts
Doroteo Espinocilla owned a parcel of land, Lot No. 552, with an area of 570 sq. m., located at Magsaysay Avenue, Zone
5, Bulan, Sorsogon. After he died, his five children, Salvacion, Aspren, Isabel, Macario, and Dionisia divided Lot No. 552
equally among themselves. Later, Dionisia died without issue ahead of her four siblings, and Macario took possession of
Dionisias share. In an affidavit of transfer of real property[4] dated November 1, 1948, Macario claimed that Dionisia had
donated her share to him in May 1945.
Thereafter, on August 9, 1977, Macario and his daughters Betty Gullaba and Saida Gabelo sold[5] 225 sq. m. to his son
Roger Espinocilla, husband of respondent Belen Espinocilla and father of respondent Ferdinand Espinocilla. On March 8,
1985, Roger Espinocilla sold[6] 114 sq. m. to Caridad Atienza. Per actual survey of Lot No. 552, respondent Belen
Espinocilla occupies 109 sq. m., Caridad Atienza occupies 120 sq. m., Caroline Yu occupies 209 sq. m., and petitioner,
Salvacion's son, occupies 132 sq. m.[7]
The case for petitioner
Petitioner sued the respondents to recover two portions: an area of 28.5[8] sq. m. which he bought from Aspren and
another 28.5 sq. m. which allegedly belonged to him but was occupied by Macarios house.[9] His claim has since been
modified to an alleged encroachment of only 39 sq. m. that he claims must be returned to him. He avers that he is entitled
to own and possess 171 sq. m. of Lot No. 552, having inherited 142.5 sq. m. from his mother Salvacion and bought 28.5
sq. m. from his aunt Aspren. According to him, his mothers inheritance is 142.5 sq. m., that is, 114 sq. m. from Doroteo
plus 28.5 sq. m. from Dionisia. Since the area he occupies is only 132 sq. m.,[10] he claims that respondents encroach on
his share by 39 sq. m.[11]
The case for respondents
Respondents agree that Doroteos five children each inherited 114 sq. m. of Lot No. 552. However, Macarios share
increased when he received Dionisias share. Macarios increased share was then sold to his son Roger, respondents
husband and father. Respondents claim that they rightfully possess the land they occupy by virtue of acquisitive
prescription and that there is no basis for petitioners claim of encroachment.[12]
The trial courts decision
On May 15, 2006, the Regional Trial Court (RTC) ruled in favor of petitioner and held that he is entitled to 171 sq. m. The
RTC found that petitioner inherited 142.5 sq. m. from his mother Salvacion and bought 28.5 sq. m. from his aunt Aspren.
The RTC computed that Salvacion, Aspren, Isabel and Macario each inherited 142.5 sq. m. of Lot No. 552. Each inherited
114 sq. m. from Doroteo and 28.5 sq. m. from Dionisia. The RTC further ruled that Macario was not entitled to 228 sq. m.
Thus, respondents must return 39 sq. m. to petitioner who occupies only 132 sq. m.[13]
There being no public document to prove Dionisias donation, the RTC also held that Macarios 1948 affidavit is void and is
an invalid repudiation of the shares of his sisters Salvacion, Aspren, and Isabel in Dionisias share. Accordingly, Macario
cannot acquire said shares by prescription. The RTC further held that the oral partition of Lot No. 552 by Doroteos heirs
did not include Dionisias share and that partition should have been the main action. Thus, the RTC ordered partition and
deferred the transfer of possession of the 39 sq. m. pending partition.[14] The dispositive portion of the RTC decision
reads:
WHEREFORE, in view of the foregoing premises, the court issues the following ORDER, thus -

a) Partially declaring the nullity of the Deed of Absolute Sale of Property dated August 9, 1977 x x x executed by Macario
Espinocilla, Betty E. Gullaba and Saida E. Gabelo in favor of Roger Espinocilla, insofar as it affects the portion or the
share belonging to Salvacion Espinocilla, mother of [petitioner,] relative to the property left by Dionisia Espinocilla,
including [Tax Declaration] No. 13667 and other documents of the same nature and character which emanated from the
said sale;
b) To leave as is the Deeds of Absolute Sale of May 11, 1983 and March 8, 1985, it having been determined that they did
not involve the portion belonging to [petitioner] x x x.
c) To effect an effective and real partition among the heirs for purposes of determining the exact location of the share (114
sq. m.) of the late Dionisia Espinocilla together with the 28.5 sq. m. belonging to [petitioners] mother Salvacion, as well as,
the exact location of the 39 sq. m. portion belonging to the [petitioner] being encroached by the [respondents], with the
assistance of the Commissioner (Engr. Fundano) appointed by this court.
d) To hold in abeyance the transfer of possession of the 39 sq. m. portion to the [petitioner] pending the completion of the
real partition above-mentioned.[15]
The CA decision
On appeal, the CA reversed the RTC decision and dismissed petitioners complaint on the ground that extraordinary
acquisitive prescription has already set in in favor of respondents. The CA found that Doroteos four remaining children
made an oral partition of Lot No. 552 after Dionisias death in 1945 and occupied specific portions. The oral partition
terminated the co-ownership of Lot No. 552 in 1945. Said partition also included Dionisias share because the lot was
divided into four parts only. And since petitioners complaint was filed only on July 13, 2000, the CA concluded that
prescription has set in.[16] The CA disposed the appeal as follows:
WHEREFORE, the appeal is GRANTED. The assailed May 15, 2006 Decision of the Regional Trial Court (RTC) of Bulan,
Sorsogon is hereby REVERSED and SET ASIDE. The Complaint of the [petitioner] is hereby DISMISSED. No costs.[17]
The instant petition
The core issue to be resolved is whether petitioners action to recover the subject portion is barred by prescription.
Petitioner confirms oral partition of Lot No. 552 by Doroteo's heirs, but claims that his share increased from 114 sq. m. to
171 sq. m. and that respondents encroached on his share by 39 sq. m. Since an oral partition is valid, the corresponding
survey ordered by the RTC to identify the 39 sq. m. that must be returned to him could be made.[18] Petitioner also
alleges that Macario committed fraud in acquiring his share; hence, any evidence adduced by him to justify such
acquisition is inadmissible. Petitioner concludes that if a person obtains legal title to property by fraud or concealment,
courts of equity will impress upon the title a so-called constructive trust in favor of the defrauded party.[19]
The Courts ruling
We affirm the CA ruling dismissing petitioners complaint on the ground of prescription.
Prescription, as a mode of acquiring ownership and other real rights over immovable property, is concerned with lapse of
time in the manner and under conditions laid down by law, namely, that the possession should be in the concept of an
owner, public, peaceful, uninterrupted, and adverse. Acquisitive prescription of real rights may be ordinary or
extraordinary. Ordinary acquisitive prescription requires possession in good faith and with just title for 10 years. In
extraordinary prescription, ownership and other real rights over immovable property are acquired through uninterrupted
adverse possession for 30 years without need of title or of good faith.[20]
Here, petitioner himself admits the adverse nature of respondents possession with his assertion that Macarios fraudulent
acquisition of Dionisias share created a constructive trust. In a constructive trust, there is neither a promise nor any
fiduciary relation to speak of and the so-called trustee (Macario) neither accepts any trust nor intends holding the property
for the beneficiary (Salvacion, Aspren, Isabel). The relation of trustee and cestui que trust does not in fact exist, and the
holding of a constructive trust is for the trustee himself, and therefore, at all times adverse.[21] Prescription may
supervene even if the trustee does not repudiate the relationship.[22]
Then, too, respondents uninterrupted adverse possession for 55 years of 109 sq. m. of Lot No. 552 was established.
Macario occupied Dionisias share in 1945 although his claim that Dionisia donated it to him in 1945 was only made in a
1948 affidavit. We also agree with the CA that Macarios possession of Dionisias share was public and adverse since his
other co-owners, his three other sisters, also occupied portions of Lot No. 552. Indeed, the 1977 sale made by Macario
and his two daughters in favor of his son Roger confirms the adverse nature of Macarios possession because said sale of
225 sq. m.[23] was an act of ownership over Macarios original share and Dionisias share. In 1985, Roger also exercised
an act of ownership when he sold 114 sq. m. to Caridad Atienza. It was only in the year 2000, upon receipt of the
summons to answer petitioners complaint, that respondents peaceful possession of the remaining portion (109 sq. m.)

was interrupted. By then, however, extraordinary acquisitive prescription has already set in in favor of respondents. That
the RTC found Macarios 1948 affidavit void is of no moment. Extraordinary prescription is unconcerned with Macarios title
or good faith. Accordingly, the RTC erred in ruling that Macario cannot acquire by prescription the shares of Salvacion,
Aspren, and Isabel, in Dionisias 114-sq. m. share from Lot No. 552.
Moreover, the CA correctly dismissed petitioners complaint as an action for reconveyance based on an implied or
constructive trust prescribes in 10 years from the time the right of action accrues.[24] This is the other kind of prescription
under the Civil Code, called extinctive prescription, where rights and actions are lost by the lapse of time.[25] Petitioners
action for recovery of possession having been filed 55 years after Macario occupied Dionisias share, it is also barred by
extinctive prescription. The CA while condemning Macarios fraudulent act of depriving his three sisters of their shares in
Dionisias share, equally emphasized the fact that Macarios sisters wasted their opportunity to question his acts.
WHEREFORE, we DENY the petition for review on certiorari for lack of merit and AFFIRM the assailed Decision dated
April 28, 2008 and Resolution dated July 22, 2008 of the Court of Appeals in CA-G.R. CV No. 87480.
No pronouncement as to costs.
SO ORDERED.

Heirs of Ureta v Heirs of Ureta

These consolidated petitions for review on certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure assail
the April 20, 2004 Decision[1] of the Court of Appeals (CA), and its October 14, 2004 Resolution[2] in C.A.-G.R. CV No.
71399, which affirmed with modification the April 26, 2001 Decision[3] of the Regional Trial Court, Branch 9, Kalibo, Aklan
(RTC) in Civil Case No. 5026.
The Facts
In his lifetime, Alfonso Ureta (Alfonso) begot 14 children, namely, Policronio, Liberato, Narciso, Prudencia, Vicente,
Francisco, Inocensio, Roque, Adela, Wenefreda, Merlinda, Benedicto, Jorge, and Andres. The children of Policronio (Heirs
of Policronio), are opposed to the rest of Alfonsos children and their descendants (Heirs of Alfonso).
Alfonso was financially well-off during his lifetime. He owned several fishpens, a fishpond, a sari-sari store, a passenger
jeep, and was engaged in the buying and selling of copra. Policronio, the eldest, was the only child of Alfonso who failed
to finish schooling and instead worked on his fathers lands.
Sometime in October 1969, Alfonso and four of his children, namely, Policronio, Liberato, Prudencia, and Francisco, met
at the house of Liberato. Francisco, who was then a municipal judge, suggested that in order to reduce the inheritance
taxes, their father should make it appear that he had sold some of his lands to his children. Accordingly, Alfonso executed
four (4) Deeds of Sale covering several parcels of land in favor of Policronio,[4] Liberato,[5] Prudencia,[6] and his
common-law wife, Valeriana Dela Cruz.[7] The Deed of Sale executed on October 25, 1969, in favor of Policronio,
covered six parcels of land, which are the properties in dispute in this case.
Since the sales were only made for taxation purposes and no monetary consideration was given, Alfonso continued to
own, possess and enjoy the lands and their produce.
When Alfonso died on October 11, 1972, Liberato acted as the administrator of his fathers estate. He was later succeeded
by his sister Prudencia, and then by her daughter, Carmencita Perlas. Except for a portion of parcel 5, the rest of the
parcels transferred to Policronio were tenanted by the Fernandez Family. These tenants never turned over the produce of
the lands to Policronio or any of his heirs, but to Alfonso and, later, to the administrators of his estate.
Policronio died on November 22, 1974. Except for the said portion of parcel 5, neither Policronio nor his heirs ever took
possession of the subject lands.
On April 19, 1989, Alfonsos heirs executed a Deed of Extra-Judicial Partition,[8] which included all the lands that were
covered by the four (4) deeds of sale that were previously executed by Alfonso for taxation purposes. Conrado,
Policronios eldest son, representing the Heirs of Policronio, signed the Deed of Extra-Judicial Partition in behalf of his coheirs.
After their fathers death, the Heirs of Policronio found tax declarations in his name covering the six parcels of land. On
June 15, 1995, they obtained a copy of the Deed of Sale executed on October 25, 1969 by Alfonso in favor of Policronio.
Not long after, on July 30, 1995, the Heirs of Policronio allegedly learned about the Deed of Extra-Judicial Partition
involving Alfonsos estate when it was published in the July 19, 1995 issue of the Aklan Reporter.

Believing that the six parcels of land belonged to their late father, and as such, excluded from the Deed of Extra-Judicial
Partition, the Heirs of Policronio sought to amicably settle the matter with the Heirs of Alfonso. Earnest efforts proving
futile, the Heirs of Policronio filed a Complaint for Declaration of Ownership, Recovery of Possession, Annulment of
Documents, Partition, and Damages[9] against the Heirs of Alfonso before the RTC on November 17, 1995 where the
following issues were submitted: (1) whether or not the Deed of Sale was valid; (2) whether or not the Deed of ExtraJudicial Partition was valid; and (3) who between the parties was entitled to damages.
The Ruling of the RTC
On April 26, 2001, the RTC dismissed the Complaint of the Heirs of Policronio and ruled in favor of the Heirs of Alfonso in
a decision, the dispositive portion of which reads:
WHEREFORE, the Court finds that the preponderance of evidence tilts in favor of the defendants, hence the instant case
is hereby DISMISSED.
The counterclaims are likewise DISMISSED.
With costs against plaintiffs.
SO ORDERED.
The RTC found that the Heirs of Alfonso clearly established that the Deed of Sale was null and void. It held that the Heirs
of Policronio failed to rebut the evidence of the Heirs of Alfonso, which proved that the Deed of Sale in the possession of
the former was one of the four (4) Deeds of Sale executed by Alfonso in favor of his 3 children and second wife for
taxation purposes; that although tax declarations were issued in the name of Policronio, he or his heirs never took
possession of the subject lands except a portion of parcel 5; and that all the produce were turned over by the tenants to
Alfonso and the administrators of his estate and never to Policronio or his heirs.
The RTC further found that there was no money involved in the sale. Even granting that there was, as claimed by the
Heirs of Policronio, 2,000.00 for six parcels of land, the amount was grossly inadequate. It was also noted that the
aggregate area of the subject lands was more than double the average share adjudicated to each of the other children in
the Deed of Extra-Judicial Partition; that the siblings of Policronio were the ones who shared in the produce of the land;
and that the Heirs of Policronio only paid real estate taxes in 1996 and 1997. The RTC opined that Policronio must have
been aware that the transfer was merely for taxation purposes because he did not subsequently take possession of the
properties even after the death of his father.
The Deed of Extra-Judicial Partition, on the other hand, was declared valid by the RTC as all the heirs of Alfonso were
represented and received equal shares and all the requirements of a valid extra-judicial partition were met. The RTC
considered Conrados claim that he did not understand the full significance of his signature when he signed in behalf of his
co-heirs, as a gratutitous assertion. The RTC was of the view that when he admitted to have signed all the pages and
personally appeared before the notary public, he was presumed to have understood their contents.
Lastly, neither party was entitled to damages. The Heirs of Alfonso failed to present testimony to serve as factual basis for
moral damages, no document was presented to prove actual damages, and the Heirs of Policronio were found to have
filed the case in good faith.
The Ruling of the CA
Aggrieved, the Heirs of Policronio appealed before the CA, which rendered a decision on April 20, 2004, the dispositive
portion of which reads as follows:
WHEREFORE, the appeal is PARTIALLY GRANTED. The appealed Decision, dated 26 April 2001, rendered by Hon.
Judge Dean R. Telan of the Regional Trial Court of Kalibo, Aklan, Branch 9, is hereby AFFIRMED with MODIFICATION:
1.) The Deed of Sale in favor of Policronio Ureta, Sr., dated 25 October 1969, covering six (6) parcels of land is hereby
declared VOID for being ABSOLUTELY SIMULATED;
2.) The Deed of Extra-Judicial Partition, dated 19 April 1989, is ANNULLED;
3.) The claim for actual and exemplary damages are DISMISSED for lack of factual and legal basis.
The case is hereby REMANDED to the court of origin for the proper partition of ALFONSO URETAS Estate in accordance
with Rule 69 of the 1997 Rules of Civil Procedure. No costs at this instance.
SO ORDERED.

The CA affirmed the finding of the RTC that the Deed of Sale was void. It found the Deed of Sale to be absolutely
simulated as the parties did not intend to be legally bound by it. As such, it produced no legal effects and did not alter the
juridical situation of the parties. The CA also noted that Alfonso continued to exercise all the rights of an owner even after
the execution of the Deed of Sale, as it was undisputed that he remained in possession of the subject parcels of land and
enjoyed their produce until his death.
Policronio, on the other hand, never exercised any rights pertaining to an owner over the subject lands from the time they
were sold to him up until his death. He never took or attempted to take possession of the land even after his fathers death,
never demanded delivery of the produce from the tenants, and never paid realty taxes on the properties. It was also noted
that Policronio never disclosed the existence of the Deed of Sale to his children, as they were, in fact, surprised to
discover its existence. The CA, thus, concluded that Policronio must have been aware that the transfer was only made for
taxation purposes.
The testimony of Amparo Castillo, as to the circumstances surrounding the actual arrangement and agreement between
the parties prior to the execution of the four (4) Deeds of Sale, was found by the CA to be unrebutted. The RTCs
assessment of the credibility of her testimony was accorded respect, and the intention of the parties was given the primary
consideration in determining the true nature of the contract.
Contrary to the finding of the RTC though, the CA annulled the Deed of Extra-Judicial Partition due to the incapacity of
one of the parties to give his consent to the contract. It held that before Conrado could validly bind his co-heirs to the
Deed of Extra-Judicial Partition, it was necessary that he be clothed with the proper authority. The CA ruled that a special
power of attorney was required under Article 1878 (5) and (15) of the Civil Code. Without a special power of attorney, it
was held that Conrado lacked the legal capactiy to give the consent of his co-heirs, thus, rendering the Deed of ExtraJudicial Partition voidable under Article 1390 (1) of the Civil Code.
As a consequence, the CA ordered the remand of the case to the RTC for the proper partition of the estate, with the option
that the parties may still voluntarily effect the partition by executing another agreement or by adopting the assailed Deed
of Partition with the RTCs approval in either case. Otherwise, the RTC may proceed with the compulsory partition of the
estate in accordance with the Rules.
With regard to the claim for damages, the CA agreed with the RTC and dismissed the claim for actual and compensatory
damages for lack of factual and legal basis.
Both parties filed their respective Motions for Reconsideration, which were denied by the CA for lack of merit in a
Resolution dated October 14, 2004.
In their Motion for Reconsideration, the Heirs of Policronio argued that the RTC violated the best evidence rule in giving
credence to the testimony of Amparo Castillo with regard to the simulation of the Deed of Sale, and that prescription had
set in precluding any question on the validity of the contract.
The CA held that the oral testimony was admissible under Rule 130, Section 9 (b) and (c), which provides that evidence
aliunde may be allowed to explain the terms of the written agreement if the same failed to express the true intent and
agreement of the parties thereto, or when the validity of the written agreement was put in issue. Furthermore, the CA
found that the Heirs of Policronio waived their right to object to evidence aliunde having failed to do so during trial and for
raising such only for the first time on appeal. With regard to prescription, the CA ruled that the action or defense for the
declaration of the inexistence of a contract did not prescribe under Article 1410 of the Civil Code.
On the other hand, the Heirs of Alfonso argued that the Deed of Extra-Judicial Partition should not have been annulled,
and instead the preterited heirs should be given their share. The CA reiterated that Conrados lack of capacity to give his
co-heirs consent to the extra-judicial settlement rendered the same voidable.
Hence, the present Petitions for Review on Certiorari.
The Issues
The issues presented for resolution by the Heirs of Policronio in G.R. No. 165748 are as follows:
I. Whether the Court of Appeals is correct in ruling that the Deed of Absolute Sale of 25 October 1969 is void for being
absolutely fictitious and in relation therewith, may parol evidence be entertained to thwart its binding effect after the parties
have both died?
Assuming that indeed the said document is simulated, whether or not the parties thereto including their successors in
interest are estopped to question its validity, they being bound by Articles 1412 and 1421 of the Civil Code?
II. Whether prescription applies to bar any question respecting the validity of the Deed of Absolute Sale dated 25 October
1969? Whether prescription applies to bar any collateral attack on the validity of the deed of absolute sale executed 21
years earlier?

III. Whether the Court of Appeals correctly ruled in nullifying the Deed of Extrajudicial Partition because Conrado Ureta
signed the same without the written authority from his siblings in contravention of Article 1878 in relation to Article 1390 of
the Civil Code and in relation therewith, whether the defense of ratification and/or preterition raised for the first time on
appeal may be entertained?
The issues presented for resolution by the Heirs of Alfonso in G.R. No. 165930 are as follows:
I. Whether or not grave error was committed by the Trial Court and Court of Appeals in declaring the Deed of Sale of
subject properties as absolutely simulated and null and void thru parol evidence based on their factual findings as to its
fictitious nature, and there being waiver of any objection based on violation of the parol evidence rule.
II. Whether or not the Court of Appeals was correct in holding that Conrado Uretas lack of capacity to give his co-heirs
consent to the Extra-Judicial Partition rendered the same voidable.
III. Granting arguendo that Conrado Ureta was not authorized to represent his co-heirs and there was no ratification,
whether or not the Court of Appeals was correct in ordering the remand of the case to the Regional Trial Court for partition
of the estate of Alfonso Ureta.
IV. Since the sale in favor of Policronio Ureta Sr. was null and void ab initio, the properties covered therein formed part of
the estate of the late Alfonso Ureta and was correctly included in the Deed of Extrajudicial Partition even if no prior action
for nullification of the sale was filed by the heirs of Liberato Ureta.
V. Whether or not the heirs of Policronio Ureta Sr. can claim that estoppel based on Article 1412 of the Civil Code as well
as the issue of prescription can still be raised on appeal.
These various contentions revolve around two major issues, to wit: (1) whether the Deed of Sale is valid, and (2) whether
the Deed of Extra-Judicial Partition is valid. Thus, the assigned errors shall be discussed jointly and in seriatim.
The Ruling of the Court
Validity of the Deed of Sale
Two veritable legal presumptions bear on the validity of the Deed of Sale: (1) that there was sufficient consideration for the
contract; and (2) that it was the result of a fair and regular private transaction. If shown to hold, these presumptions infer
prima facie the transactions validity, except that it must yield to the evidence adduced.[10]
As will be discussed below, the evidence overcomes these two presumptions.
Absolute Simulation
First, the Deed of Sale was not the result of a fair and regular private transaction because it was absolutely simulated.
The Heirs of Policronio argued that the land had been validly sold to Policronio as the Deed of Sale contained all the
essential elements of a valid contract of sale, by virtue of which, the subject properties were transferred in his name as
evidenced by the tax declaration. There being no invalidation prior to the execution of the Deed of Extra-Judicial Partition,
the probity and integrity of the Deed of Sale should remain undiminished and accorded respect as it was a duly notarized
public instrument.
The Heirs of Policronio posited that his loyal services to his father and his being the eldest among Alfonsos children, might
have prompted the old man to sell the subject lands to him at a very low price as an advance inheritance. They explained
that Policronios failure to take possession of the subject lands and to claim their produce manifests a Filipino family
practice wherein a child would take possession and enjoy the fruits of the land sold by a parent only after the latters death.
Policronio simply treated the lands the same way his father Alfonso treated them - where his children enjoyed
usufructuary rights over the properties, as opposed to appropriating them exclusively to himself. They contended that
Policronios failure to take actual possession of the lands did not prove that he was not the owner as he was merely
exercising his right to dispose of them. They argue that it was an error on the part of the CA to conclude that ownership by
Policronio was not established by his failure to possess the properties sold. Instead, emphasis should be made on the fact
that the tax declarations, being indicia of possession, were in Policronios name.
They further argued that the Heirs of Alfonso failed to appreciate that the Deed of Sale was clear enough to convey the
subject parcels of land. Citing jurisprudence, they contend that there is a presumption that an instrument sets out the true
agreement of the parties thereto and that it was executed for valuable consideration,[11] and where there is no doubt as to
the intention of the parties to a contract, the literal meaning of the stipulation shall control.[12] Nowhere in the Deed of
Sale is it indicated that the transfer was only for taxation purposes. On the contrary, the document clearly indicates that
the lands were sold. Therefore, they averred that the literal meaning of the stipulation should control.
The Court disagrees.

The Court finds no cogent reason to deviate from the finding of the CA that the Deed of Sale is null and void for being
absolutely simulated. The Civil Code provides:
Art. 1345. Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to
be bound at all; the latter, when the parties conceal their true agreement.
Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third
person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the
parties to their real agreement.
Valerio v. Refresca[13] is instructive on the matter of simulation of contracts:
In absolute simulation, there is a colorable contract but it has no substance as the parties have no intention to be bound
by it. The main characteristic of an absolute simulation is that the apparent contract is not really desired or intended to
produce legal effect or in any way alter the juridical situation of the parties. As a result, an absolutely simulated or fictitious
contract is void, and the parties may recover from each other what they may have given under the contract. However, if
the parties state a false cause in the contract to conceal their real agreement, the contract is relatively simulated and the
parties are still bound by their real agreement. Hence, where the essential requisites of a contract are present and the
simulation refers only to the content or terms of the contract, the agreement is absolutely binding and enforceable
between the parties and their successors in interest.
Lacking, therefore, in an absolutely simulated contract is consent which is essential to a valid and enforceable contract.
[14] Thus, where a person, in order to place his property beyond the reach of his creditors, simulates a transfer of it to
another, he does not really intend to divest himself of his title and control of the property; hence, the deed of transfer is but
a sham.[15] Similarly, in this case, Alfonso simulated a transfer to Policronio purely for taxation purposes, without
intending to transfer ownership over the subject lands.
The primary consideration in determining the true nature of a contract is the intention of the parties. If the words of a
contract appear to contravene the evident intention of the parties, the latter shall prevail. Such intention is determined not
only from the express terms of their agreement, but also from the contemporaneous and subsequent acts of the parties.
[16] The true intention of the parties in this case was sufficiently proven by the Heirs of Alfonso.
The Heirs of Alfonso established by a preponderance of evidence[17] that the Deed of Sale was one of the four (4)
absolutely simulated Deeds of Sale which involved no actual monetary consideration, executed by Alfonso in favor of his
children, Policronio, Liberato, and Prudencia, and his second wife, Valeriana, for taxation purposes.
Amparo Castillo, the daughter of Liberato, testified, to wit:
Q: Now sometime in the year 1969 can you recall if your grandfather and his children [met] in your house?
A: Yes sir, that was sometime in October 1969 when they [met] in our house, my grandfather, my late uncle Policronio
Ureta, my late uncle Liberato Ureta, my uncle Francisco Ureta, and then my auntie Prudencia Ureta they talk[ed] about,
that idea came from my uncle Francisco Ureta to [sell] some parcels of land to his children to lessen the inheritance tax
whatever happened to my grandfather, actually no money involved in this sale.
Q: Now you said there was that agreement, verbal agreement. [W]here were you when this Alfonso Ureta and his children
gather[ed] in your house?
A: I was near them in fact I heard everything they were talking [about]
Q: Were there documents of sale executed by Alfonso Ureta in furtherance of their verbal agreement?
A: Yes sir.
Q: To whom in particular did your grandfather Alfonso Ureta execute this deed of sale without money consideration
according to you?
A: To my uncle Policronio Ureta and to Prudencia Ureta Panadero.
Q: And who else?
A: To Valeriana dela Cruz.
Q: How about your father?
A: He has.[18]

The other Deeds of Sale executed by Alfonso in favor of his children Prudencia and Liberato, and second wife Valeriana,
all bearing the same date of execution, were duly presented in evidence by the Heirs of Alfonso, and were uncontested by
the Heirs of Policronio. The lands which were the subject of these Deeds of Sale were in fact included in the Deed of
Extra-Judicial Partition executed by all the heirs of Alfonso, where it was expressly stipulated:
That the above-named Amparo U. Castillo, Prudencia U. Paradero, Conrado B. Ureta and Merlinda U. Rivera do hereby
recognize and acknowledge as a fact that the properties presently declared in their respective names or in the names of
their respective parents and are included in the foregoing instrument are actually the properties of the deceased Alfonso
Ureta and were transferred only for the purpose of effective administration and development and convenience in the
payment of taxes and, therefore, all instruments conveying or affecting the transfer of said properties are null and void
from the beginning.[19]
As found by the CA, Alfonso continued to exercise all the rights of an owner even after the execution of the Deeds of Sale.
It was undisputed that Alfonso remained in possession of the subject lands and enjoyed their produce until his death. No
credence can be given to the contention of the Heirs of Policrionio that their father did not take possession of the subject
lands or enjoyed the fruits thereof in deference to a Filipino family practice. Had this been true, Policronio should have
taken possession of the subject lands after his father died. On the contrary, it was admitted that neither Policronio nor his
heirs ever took possession of the subject lands from the time they were sold to him, and even after the death of both
Alfonso and Policronio.
It was also admitted by the Heirs of Policronio that the tenants of the subject lands never turned over the produce of the
properties to Policronio or his heirs but only to Alfonso and the administrators of his estate. Neither was there a demand
for their delivery to Policronio or his heirs. Neither did Policronio ever pay real estate taxes on the properties, the only
payment on record being those made by his heirs in 1996 and 1997 ten years after his death. In sum, Policronio never
exercised any rights pertaining to an owner over the subject lands.
The most protuberant index of simulation of contract is the complete absence of an attempt in any manner on the part of
the ostensible buyer to assert rights of ownership over the subject properties. Policronios failure to take exclusive
possession of the subject properties or, in the alternative, to collect rentals, is contrary to the principle of ownership. Such
failure is a clear badge of simulation that renders the whole transaction void. [20]
It is further telling that Policronio never disclosed the existence of the Deed of Sale to his children. This, coupled with
Policronios failure to exercise any rights pertaining to an owner of the subject lands, leads to the conclusion that he was
aware that the transfer was only made for taxation purposes and never intended to bind the parties thereto.
As the above factual circumstances remain unrebutted by the Heirs of Policronio, the factual findings of the RTC, which
were affirmed by the CA, remain binding and conclusive upon this Court.[21]
It is clear that the parties did not intend to be bound at all, and as such, the Deed of Sale produced no legal effects and
did not alter the juridical situation of the parties. The Deed of Sale is, therefore, void for being absolutely simulated
pursuant to Article 1409 (2) of the Civil Code which provides:
Art. 1409. The following contracts are inexistent and void from the beginning:
(2) Those which are absolutely simulated or fictitious;
For guidance, the following are the most fundamental characteristics of void or inexistent contracts:
1) As a general rule, they produce no legal effects whatsoever in accordance with the principle "quod nullum est nullum
producit effectum."
2) They are not susceptible of ratification.
3) The right to set up the defense of inexistence or absolute nullity cannot be waived or renounced.
4) The action or defense for the declaration of their inexistence or absolute nullity is imprescriptible.
5) The inexistence or absolute nullity of a contract cannot be invoked by a person whose interests are not directly
affected.[22]
Since the Deed of Sale is void, the subject properties were properly included in the Deed of Extra-Judicial Partition of the
estate of Alfonso.
Absence and Inadequacy of Consideration
The second presumption is rebutted by the lack of consideration for the Deed of Sale.

In their Answer,[23] the Heirs of Alfonso initially argued that the Deed of Sale was void for lack of consideration, and even
granting that there was consideration, such was inadequate. The Heirs of Policronio counter that the defenses of absence
or inadequacy of consideration are not grounds to render a contract void.
The Heirs of Policronio contended that under Article 1470 of the Civil Code, gross inadequacy of the price does not affect
a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some
other act or contract. Citing jurisprudence, they argued that inadequacy of monetary consideration does not render a
conveyance inexistent as liberality may be sufficient cause for a valid contract, whereas fraud or bad faith may render it
either rescissible or voidable, although valid until annulled.[24] Thus, they argued that if the contract suffers from
inadequate consideration, it remains valid until annulled, and the remedy of rescission calls for judicial intervention, which
remedy the Heirs of Alfonso failed to take.
It is further argued that even granting that the sale of the subject lands for a consideration of 2,000.00 was inadequate,
absent any evidence of the fair market value of the land at the time of its sale, it cannot be concluded that the price at
which it was sold was inadequate.[25] As there is nothing in the records to show that the Heirs of Alfonso supplied the true
value of the land in 1969, the amount of 2,000.00 must thus stand as its saleable value.
On this issue, the Court finds for the Heirs of Alfonso.
For lack of consideration, the Deed of Sale is once again found to be void. It states that Policronio paid, and Alfonso
received, the 2,000.00 purchase price on the date of the signing of the contract:
That I, ALFONSO F. URETA, x x x for and in consideration of the sum of TWO THOUSAND ( 2,000.00) PESOS,
Philippine Currency, to me in hand paid by POLICRONIO M. URETA, x x x, do hereby CEDE, TRANSFER, and CONVEY,
by way of absolute sale, x x x six (6) parcels of land x x x.[26] [Emphasis ours]
Although, on its face, the Deed of Sale appears to be supported by valuable consideration, the RTC found that there was
no money involved in the sale.[27] This finding was affirmed by the CA in ruling that the sale is void for being absolutely
simulated. Considering that there is no cogent reason to deviate from such factual findings, they are binding on this Court.
It is well-settled in a long line of cases that where a deed of sale states that the purchase price has been paid but in fact
has never been paid, the deed of sale is null and void for lack of consideration.[28] Thus, although the contract states that
the purchase price of 2,000.00 was paid by Policronio to Alfonso for the subject properties, it has been proven that such
was never in fact paid as there was no money involved. It must, therefore, follow that the Deed of Sale is void for lack of
consideration.
Given that the Deed of Sale is void, it is unnecessary to discuss the issue on the inadequacy of consideration.
Parol Evidence and Hearsay
The Heirs of Policronio aver that the rules on parol evidence and hearsay were violated by the CA in ruling that the Deed
of Sale was void.
They argued that based on the parol evidence rule, the Heirs of Alfonso and, specifically, Amparo Castillo, were not in a
position to prove the terms outside of the contract because they were not parties nor successors-in-interest in the Deed of
Sale in question. Thus, it is argued that the testimony of Amparo Castillo violates the parol evidence rule.
Stemming from the presumption that the Heirs of Alfonso were not parties to the contract, it is also argued that the parol
evidence rule may not be properly invoked by either party in the litigation against the other, where at least one of the
parties to the suit is not a party or a privy of a party to the written instrument in question and does not base a claim on the
instrument or assert a right originating in the instrument or the relation established thereby.[29]
Their arguments are untenable.
The objection against the admission of any evidence must be made at the proper time, as soon as the grounds therefor
become reasonably apparent, and if not so made, it will be understood to have been waived. In the case of testimonial
evidence, the objection must be made when the objectionable question is asked or after the answer is given if the
objectionable features become apparent only by reason of such answer.[30] In this case, the Heirs of Policronio failed to
timely object to the testimony of Amparo Castillo and they are, thus, deemed to have waived the benefit of the parol
evidence rule.
Granting that the Heirs of Policronio timely objected to the testimony of Amparo Castillo, their argument would still fail.
Section 9 of Rule 130 of the Rules of Court provides:

Section 9. Evidence of written agreements. When the terms of an agreement have been reduced to writing, it is
considered as containing all the terms agreed upon and there can be, between the parties and their successors in
interest, no evidence of such terms other than the contents of the written agreement.
However, a party may present evidence to modify, explain or add to the terms of written agreement if he puts in issue in
his pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;
(b) The failure of the written agreement to express the true intent and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their successors in interest after the execution of the written
agreement.
The term "agreement" includes wills.
[Emphasis ours]
Paragraphs (b) and (c) are applicable in the case at bench.
The failure of the Deed of Sale to express the true intent and agreement of the parties was clearly put in issue in the
Answer[31] of the Heirs of Alfonso to the Complaint. It was alleged that the Deed of Sale was only made to lessen the
payment of estate and inheritance taxes and not meant to transfer ownership. The exception in paragraph (b) is allowed to
enable the court to ascertain the true intent of the parties, and once the intent is clear, it shall prevail over what the
document appears to be on its face.[32] As the true intent of the parties was duly proven in the present case, it now
prevails over what appears on the Deed of Sale.
The validity of the Deed of Sale was also put in issue in the Answer, and was precisely one of the issues submitted to the
RTC for resolution.[33] The operation of the parol evidence rule requires the existence of a valid written agreement. It is,
thus, not applicable in a proceeding where the validity of such agreement is the fact in dispute, such as when a contract
may be void for lack of consideration.[34] Considering that the Deed of Sale has been shown to be void for being
absolutely simulated and for lack of consideration, the Heirs of Alfonso are not precluded from presenting evidence to
modify, explain or add to the terms of the written agreement.
The Heirs of Policronio must be in a state of confusion in arguing that the Heirs of Alfonso may not question the Deed of
Sale for not being parties or successors-in-interest therein on the basis that the parol evidence rule may not be properly
invoked in a proceeding or litigation where at least one of the parties to the suit is not a party or a privy of a party to the
written instrument in question and does not base a claim on the instrument or assert a right originating in the instrument or
the relation established thereby. If their argument was to be accepted, then the Heirs of Policronio would themselves be
precluded from invoking the parol evidence rule to exclude the evidence of the Heirs of Alfonso.
Indeed, the applicability of the parol evidence rule requires that the case be between parties and their successors-ininterest.[35] In this case, both the Heirs of Alfonso and the Heirs of Policronio are successors-in-interest of the parties to
the Deed of Sale as they claim rights under Alfonso and Policronio, respectively. The parol evidence rule excluding
evidence aliunde, however, still cannot apply because the present case falls under two exceptions to the rule, as
discussed above.
With respect to hearsay, the Heirs of Policronio contended that the rule on hearsay was violated when the testimony of
Amparo Castillo was given weight in proving that the subject lands were only sold for taxation purposes as she was a
person alien to the contract. Even granting that they did not object to her testimony during trial, they argued that it should
not have been appreciated by the CA because it had no probative value whatsoever.[36]
The Court disagrees.
It has indeed been held that hearsay evidence whether objected to or not cannot be given credence for having no
probative value.[37] This principle, however, has been relaxed in cases where, in addition to the failure to object to the
admissibility of the subject evidence, there were other pieces of evidence presented or there were other circumstances
prevailing to support the fact in issue. In Top-Weld Manufacturing, Inc. v. ECED S.A.,[38] this Court held:
Hearsay evidence alone may be insufficient to establish a fact in an injunction suit (Parker v. Furlong, 62 P. 490) but, when
no objection is made thereto, it is, like any other evidence, to be considered and given the importance it deserves. (Smith
v. Delaware & Atlantic Telegraph & Telephone Co., 51 A 464). Although we should warn of the undesirability of issuing
judgments solely on the basis of the affidavits submitted, where as here, said affidavits are overwhelming, uncontroverted
by competent evidence and not inherently improbable, we are constrained to uphold the allegations of the respondents
regarding the multifarious violations of the contracts made by the petitioner.

In the case at bench, there were other prevailing circumstances which corroborate the testimony of Amparo Castillo. First,
the other Deeds of Sale which were executed in favor of Liberato, Prudencia, and Valeriana on the same day as that of
Policronios were all presented in evidence. Second, all the properties subject therein were included in the Deed of ExtraJudicial Partition of the estate of Alfonso. Third, Policronio, during his lifetime, never exercised acts of ownership over the
subject properties (as he never demanded or took possession of them, never demanded or received the produce thereof,
and never paid real estate taxes thereon). Fourth, Policronio never informed his children of the sale.
As the Heirs of Policronio failed to controvert the evidence presented, and to timely object to the testimony of Amparo
Castillo, both the RTC and the CA correctly accorded probative weight to her testimony.
Prior Action Unnecessary
The Heirs of Policronio averred that the Heirs of Alfonso should have filed an action to declare the sale void prior to
executing the Deed of Extra-Judicial Partition. They argued that the sale should enjoy the presumption of regularity, and
until overturned by a court, the Heirs of Alfonso had no authority to include the land in the inventory of properties of
Alfonsos estate. By doing so, they arrogated upon themselves the power of invalidating the Deed of Sale which is
exclusively vested in a court of law which, in turn, can rule only upon the observance of due process. Thus, they
contended that prescription, laches, or estoppel have set in to militate against assailing the validity of the sale.
The Heirs of Policronio are mistaken.
A simulated contract of sale is without any cause or consideration, and is, therefore, null and void; in such case, no
independent action to rescind or annul the contract is necessary, and it may be treated as non-existent for all purposes.
[39] A void or inexistent contract is one which has no force and effect from the beginning, as if it has never been entered
into, and which cannot be validated either by time or ratification. A void contract produces no effect whatsoever either
against or in favor of anyone; it does not create, modify or extinguish the juridical relation to which it refers.[40] Therefore,
it was not necessary for the Heirs of Alfonso to first file an action to declare the nullity of the Deed of Sale prior to
executing the Deed of Extra-Judicial Partition.
Personality to Question Sale
The Heirs of Policronio contended that the Heirs of Alfonso are not parties, heirs, or successors-in-interest under the
contemplation of law to clothe them with the personality to question the Deed of Sale. They argued that under Article 1311
of the Civil Code, contracts take effect only between the parties, their assigns and heirs. Thus, the genuine character of a
contract which personally binds the parties cannot be put in issue by a person who is not a party thereto. They posited
that the Heirs of Alfonso were not parties to the contract; neither did they appear to be beneficiaries by way of assignment
or inheritance. Unlike themselves who are direct heirs of Policronio, the Heirs of Alfonso are not Alfonsos direct heirs. For
the Heirs of Alfonso to qualify as parties, under Article 1311 of the Civil Code, they must first prove that they are either
heirs or assignees. Being neither, they have no legal standing to question the Deed of Sale.
They further argued that the sale cannot be assailed for being barred under Article 1421 of the Civil Code which provides
that the defense of illegality of a contract is not available to third persons whose interests are not directly affected.
Again, the Court disagrees.
Article 1311 and Article 1421 of the Civil Code provide:
Art. 1311. Contracts take effect only between the parties, their assigns and heirs, x x x
Art. 1421. The defense of illegality of contracts is not available to third persons whose interests are not directly affected.
The right to set up the nullity of a void or non-existent contract is not limited to the parties, as in the case of annullable or
voidable contracts; it is extended to third persons who are directly affected by the contract. Thus, where a contract is
absolutely simulated, even third persons who may be prejudiced thereby may set up its inexistence.[41] The Heirs of
Alfonso are the children of Alfonso, with his deceased children represented by their children (Alfonsos grandchildren). The
Heirs of Alfonso are clearly his heirs and successors-in-interest and, as such, their interests are directly affected, thereby
giving them the right to question the legality of the Deed of Sale.
Inapplicability of Article 842
The Heirs of Policronio further argued that even assuming that the Heirs of Alfonso have an interest in the Deed of Sale,
they would still be precluded from questioning its validity. They posited that the Heirs of Alfonso must first prove that the
sale of Alfonsos properties to Policronio substantially diminished their successional rights or that their legitimes would be
unduly prejudiced, considering that under Article 842 of the Civil Code, one who has compulsory heirs may dispose of his
estate provided that he does not contravene the provisions of the Civil Code with regard to the legitime of said heirs.
Having failed to do so, they argued that the Heirs of Alfonso should be precluded from questioning the validity of the Deed
of Sale.

Still, the Court disagrees.

Article 842 of the Civil Code provides:
Art. 842. One who has no compulsory heirs may dispose by will of all his estate or any part of it in favor of any person
having capacity to succeed.
One who has compulsory heirs may dispose of his estate provided he does not contravene the provisions of this Code
with regard to the legitime of said heirs.
This article refers to the principle of freedom of disposition by will. What is involved in the case at bench is not a
disposition by will but by Deed of Sale. Hence, the Heirs of Alfonso need not first prove that the disposition substantially
diminished their successional rights or unduly prejudiced their legitimes.
Inapplicability of Article 1412
The Heirs of Policronio contended that even assuming that the contract was simulated, the Heirs of Alfonso would still be
barred from recovering the properties by reason of Article 1412 of the Civil Code, which provides that if the act in which
the unlawful or forbidden cause does not constitute a criminal offense, and the fault is both on the contracting parties,
neither may recover what he has given by virtue of the contract or demand the performance of the others undertaking. As
the Heirs of Alfonso alleged that the purpose of the sale was to avoid the payment of inheritance taxes, they cannot take
from the Heirs of Policronio what had been given to their father.
On this point, the Court again disagrees.
Article 1412 of the Civil Code is as follows:
Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following
rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the
contract, or demand the performance of the others undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or
ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he
has given without any obligation to comply with his promise.
Article 1412 is not applicable to fictitious or simulated contracts, because they refer to contracts with an illegal cause or
subject-matter.[42] This article presupposes the existence of a cause, it cannot refer to fictitious or simulated contracts
which are in reality non-existent.[43] As it has been determined that the Deed of Sale is a simulated contract, the provision
cannot apply to it.
Granting that the Deed of Sale was not simulated, the provision would still not apply. Since the subject properties were
included as properties of Alfonso in the Deed of Extra-Judicial Partition, they are covered by corresponding inheritance
and estate taxes. Therefore, tax evasion, if at all present, would not arise, and Article 1412 would again be inapplicable.
Prescription
From the position that the Deed of Sale is valid and not void, the Heirs of Policronio argued that any question regarding its
validity should have been initiated through judicial process within 10 years from its notarization in accordance with Article
1144 of the Civil Code. Since 21 years had already elapsed when the Heirs of Alfonso assailed the validity of the Deed of
Sale in 1996, prescription had set in. Furthermore, since the Heirs of Alfonso did not seek to nullify the tax declarations of
Policronio, they had impliedly acquiesced and given due recognition to the Heirs of Policronio as the rightful inheritors and
should, thus, be barred from laying claim on the land.
The Heirs of Policronio are mistaken.
Article 1410 of the Civil Code provides:
Art. 1410. The action for the declaration of the inexistence of a contract does not prescribe.
This is one of the most fundamental characteristics of void or inexistent contracts.[44]
As the Deed of Sale is a void contract, the action for the declaration of its nullity, even if filed 21 years after its execution,
cannot be barred by prescription for it is imprescriptible. Furthermore, the right to set up the defense of inexistence or
absolute nullity cannot be waived or renounced.[45] Therefore, the Heirs of Alfonso cannot be precluded from setting up
the defense of its inexistence.

Validity of the Deed of Extra-Judicial Partition

The Court now resolves the issue of the validity of the Deed of Extra-Judicial Partition.
Unenforceability
The Heirs of Alfonso argued that the CA was mistaken in annulling the Deed of Extra-Judicial Partition due to the
incapacity of Conrado to give the consent of his co-heirs for lack of a special power of attorney. They contended that what
was involved was not the capacity to give consent in behalf of the co-heirs but the authority to represent them. They argue
that the Deed of Extra-Judicial Partition is not a voidable or an annullable contract under Article 1390 of the Civil Code, but
rather, it is an unenforceable or, more specifically, an unauthorized contract under Articles 1403 (1) and 1317 of the Civil
Code. As such, the Deed of Extra-Judicial Partition should not be annulled but only be rendered unenforceable against the
siblings of Conrado.
They further argued that under Article 1317 of the Civil Code, when the persons represented without authority have
ratified the unauthorized acts, the contract becomes enforceable and binding. They contended that the Heirs of Policronio
ratified the Deed of Extra-Judicial Partition when Conrado took possession of one of the parcels of land adjudicated to him
and his siblings, and when another parcel was used as collateral for a loan entered into by some of the Heirs of
Policronio. The Deed of Extra-Judicial Partition having been ratified and its benefits accepted, the same thus became
enforceable and binding upon them.
The Heirs of Alfonso averred that granting arguendo that Conrado was not authorized to represent his co-heirs and there
was no ratification, the CA should not have remanded the case to the RTC for partition of Alfonsos estate. They argued
that the CA should not have applied the Civil Code general provision on contracts, but the special provisions dealing with
succession and partition. They contended that contrary to the ruling of the CA, the extra-judicial parition was not an act of
strict dominion, as it has been ruled that partition of inherited land is not a conveyance but a confirmation or ratification of
title or right to the land.[46] Therefore, the law requiring a special power of attorney should not be applied to partitions.
On the other hand, the Heirs of Policronio insisted that the CA pronouncement on the invalidity of the Deed of ExtraJudicial Partition should not be disturbed because the subject properties should not have been included in the estate of
Alfonso, and because Conrado lacked the written authority to represent his siblings. They argued with the CA in ruling that
a special power of attorney was required before Conrado could sign in behalf of his co-heirs.
The Heirs of Policronio denied that they ratified the Deed of Extra-Judicial Partition. They claimed that there is nothing on
record that establishes that they ratified the partition. Far from doing so, they precisely questioned its execution by filing a
complaint. They further argued that under Article 1409 (3) of the Civil Code, ratification cannot be invoked to validate the
illegal act of including in the partition those properties which do not belong to the estate as it provides another mode of
acquiring ownership not sanctioned by law.
Furthermore, the Heirs of Policronio contended that the defenses of unenforceability, ratification, and preterition are being
raised for the first time on appeal by the Heirs of Alfonso. For having failed to raise them during the trial, the Heirs of
Alfonso should be deemed to have waived their right to do so.
The Court agrees in part with the Heirs of Alfonso.
To begin, although the defenses of unenforceability, ratification and preterition were raised by the Heirs of Alfonso for the
first time on appeal, they are concomitant matters which may be taken up. As long as the questioned items bear relevance
and close relation to those specifically raised, the interest of justice would dictate that they, too, must be considered and
resolved. The rule that only theories raised in the initial proceedings may be taken up by a party thereto on appeal should
refer to independent, not concomitant matters, to support or oppose the cause of action.[47]
In the RTC, the Heirs of Policronio alleged that Conrados consent was vitiated by mistake and undue influence, and that
he signed the Deed of Extra-Judicial Partition without the authority or consent of his co-heirs.
The RTC found that Conrados credibility had faltered, and his claims were rejected by the RTC as gratuitous assertions.
On the basis of such, the RTC ruled that Conrado duly represented his siblings in the Deed of Extra-Judicial Partition.
On the other hand, the CA annulled the Deed of Extra-Judicial Partition under Article 1390 (1) of the Civil Code, holding
that a special power of attorney was lacking as required under Article 1878 (5) and (15) of the Civil Code. These articles
are as follows:
Art. 1878. Special powers of attorney are necessary in the following cases:
(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for
a valuable consideration;
(15) Any other act of strict dominion.

Art. 1390. The following contracts are voidable or annullable, even though there may have been no damage to the
contracting parties:
(1) Those where one of the parties is incapable of giving consent to a contract;
(2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification.
This Court finds that Article 1878 (5) and (15) is inapplicable to the case at bench. It has been held in several cases[48]
that partition among heirs is not legally deemed a conveyance of real property resulting in change of ownership. It is not a
transfer of property from one to the other, but rather, it is a confirmation or ratification of title or right of property that an
heir is renouncing in favor of another heir who accepts and receives the inheritance. It is merely a designation and
segregation of that part which belongs to each heir. The Deed of Extra-Judicial Partition cannot, therefore, be considered
as an act of strict dominion. Hence, a special power of attorney is not necessary.
In fact, as between the parties, even an oral partition by the heirs is valid if no creditors are affected. The requirement of a
written memorandum under the statute of frauds does not apply to partitions effected by the heirs where no creditors are
involved considering that such transaction is not a conveyance of property resulting in change of ownership but merely a
designation and segregation of that part which belongs to each heir.[49]
Neither is Article 1390 (1) applicable. Article 1390 (1) contemplates the incapacity of a party to give consent to a contract.
What is involved in the case at bench though is not Conrados incapacity to give consent to the contract, but rather his lack
of authority to do so. Instead, Articles 1403 (1), 1404, and 1317 of the Civil Code find application to the circumstances
prevailing in this case. They are as follows:
Art. 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority or legal representation, or
who has acted beyond his powers;
Art. 1404. Unauthorized contracts are governed by Article 1317 and the principles of agency in Title X of this Book.
Art. 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law a
right to represent him.
A contract entered into in the name of another by one who has no authority or legal representation, or who has acted
beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it
has been executed, before it is revoked by the other contracting party.
Such was similarly held in the case of Badillo v. Ferrer:
The Deed of Extrajudicial Partition and Sale is not a voidable or an annullable contract under Article 1390 of the New Civil
Code. Article 1390 renders a contract voidable if one of the parties is incapable of giving consent to the contract or if the
contracting partys consent is vitiated by mistake, violence, intimidation, undue influence or fraud. x x x
The deed of extrajudicial parition and sale is an unenforceable or, more specifically, an unauthorized contract under
Articles 1403(1) and 1317 of the New Civil Code.[50]
Therefore, Conrados failure to obtain authority from his co-heirs to sign the Deed of Extra-Judicial Partition in their behalf
did not result in his incapacity to give consent so as to render the contract voidable, but rather, it rendered the contract
valid but unenforceable against Conrados co-heirs for having been entered into without their authority.
A closer review of the evidence on record, however, will show that the Deed of Extra-Judicial Partition is not unenforceable
but, in fact, valid, binding and enforceable against all the Heirs of Policronio for having given their consent to the contract.
Their consent to the Deed of Extra-Judicial Partition has been proven by a preponderance of evidence.
This Court finds no cogent reason to reverse the finding of the RTC that Conrados explanations were mere gratuitous
assertions not entitled to any probative weight. The RTC found Conrados credibility to have faltered when he testified that
perhaps his siblings were already aware of the Deed of Extra-Judicial Partition. The RTC was in the best position to judge
the credibility of the witness testimony. The CA also recognized that Conrados consent was not vitiated by mistake and
undue influence as it required a special power of attorney in order to bind his co-heirs and, as such, the CA thereby
recognized that his signature was binding to him but not with respect to his co-heirs. Findings of fact of the trial court,
particularly when affirmed by the CA, are binding to this Court.[53]
Furthermore, this Court notes other peculiarities in Conrados testimony. Despite claims of undue influence, there is no
indication that Conrado was forced to sign by his aunt, Prudencia Paradero. In fact, he testified that he was happy to sign

because his grandfathers estate would be partitioned. Conrado, thus, clearly understood the document he signed. It is
also worth noting that despite the document being brought to him on three separate occasions and indicating his intention
to inform his siblings about it, Conrado failed to do so, and still neglected to inform them even after he had signed the
partition. All these circumstances negate his claim of vitiated consent. Having duly signed the Deed of Extra-Judicial
Partition, Conrado is bound to it. Thus, it is enforceable against him.
Although Conrados co-heirs claimed that they did not authorize Conrado to sign the Deed of Extra-Judicial Partition in
their behalf, several circumstances militate against their contention.
First, the Deed of Extra-Judicial Partition was executed on April 19, 1989, and the Heirs of Policronio claim that they only
came to know of its existence on July 30, 1995 through an issue of the Aklan Reporter. It is difficult to believe that
Conrado did not inform his siblings about the Deed of Extra-Judicial Partition or at least broach its subject with them for
more than five years from the time he signed it, especially after indicating in his testimony that he had intended to do so.
Second, Conrado retained possession of one of the parcels of land adjudicated to him and his co-heirs in the Deed of
Extra-Judicial Partition.
Third, after the execution of the partition on April 19, 1989 and more than a year before they claimed to have discovered
the existence of the Deed of Extra-Judicial Partition on July 30, 1995, some of the Heirs of Policronio, namely, Rita
Solano, Macario Ureta, Lilia Tayco, and Venancio Ureta executed on June 1, 1994, a Special Power of Attorney[54] in
favor of their sister Gloria Gonzales, authorizing her to obtain a loan from a bank and to mortgage one of the parcels of
land adjudicated to them in the Deed of Extra-Judicial Partition to secure payment of the loan. They were able to obtain
the loan using the land as collateral, over which a Real Estate Mortgage[55] was constituted. Both the Special Power of
Attorney and the Real Estate Mortgage were presented in evidence in the RTC, and were not controverted or denied by
the Heirs of Policronio.
Fourth, in the letter dated August 15, 1995, sent by the counsel of the Heirs of Policronio to the Heirs of Alfonso
requesting for amicable settlement, there was no mention that Conrados consent to the Deed of Extra-Judicial Partition
was vitiated by mistake and undue influence or that they had never authorized Conrado to represent them or sign the
document on their behalf. It is questionable for such a pertinent detail to have been omitted.
Based on the foregoing, this Court concludes that the allegation of Conrados vitiated consent and lack of authority to sign
in behalf of his co-heirs was a mere afterthought on the part of the Heirs of Policronio. It appears that the Heirs of
Policronio were not only aware of the existence of the Deed of Extra-Judicial Partition prior to June 30, 1995 but had, in
fact, given Conrado authority to sign in their behalf. They are now estopped from questioning its legality, and the Deed of
Extra-Judicial Partition is valid, binding, and enforceable against them.
In view of the foregoing, there is no longer a need to discuss the issue of ratification.
Preterition
The Heirs of Alfonso were of the position that the absence of the Heirs of Policronio in the partition or the lack of authority
of their representative results, at the very least, in their preterition and not in the invalidity of the entire deed of partition.
Assuming there was actual preterition, it did not render the Deed of Extra-Judicial Partition voidable. Citing Article 1104 of
the Civil Code, they aver that a partition made with preterition of any of the compulsory heirs shall not be rescinded, but
the heirs shall be proportionately obliged to pay the share of the person omitted. Thus, the Deed of Extra-Judicial Partition
should not have been annulled by the CA. Instead, it should have ordered the share of the heirs omitted to be given to
them.
The Heirs of Alfonso also argued that all that remains to be adjudged is the right of the preterited heirs to represent their
father, Policronio, and be declared entitled to his share. They contend that remand to the RTC is no longer necessary as
the issue is purely legal and can be resolved by the provisions of the Civil Code for there is no dispute that each of
Alfonsos heirs received their rightful share. Conrado, who received Policronios share, should then fully account for what
he had received to his other co-heirs and be directed to deliver their share in the inheritance.
These arguments cannot be given credence.
Their posited theory on preterition is no longer viable. It has already been determined that the Heirs of Policronio gave
their consent to the Deed of Extra-Judicial Partition and they have not been excluded from it. Nonetheless, even granting
that the Heirs of Policronio were denied their lawful participation in the partition, the argument of the Heirs of Alfonso
would still fail.
Preterition under Article 854 of the Civil Code is as follows:

Art. 854. The preterition or omission of one, some, or all of the compulsory heirs in the direct line, whether living at the
time of the execution of the will or born after the death of the testator, shall annul the institution of heir; but the devises and
legacies shall be valid insofar as they are not inofficious.
If the omitted compulsory heirs should die before the testator, the institution shall be effectual, without prejudice to the
right of representation.
Preterition has been defined as the total omission of a compulsory heir from the inheritance. It consists in the silence of
the testator with regard to a compulsory heir, omitting him in the testament, either by not mentioning him at all, or by not
giving him anything in the hereditary property but without expressly disinheriting him, even if he is mentioned in the will in
the latter case.[57] Preterition is thus a concept of testamentary succession and requires a will. In the case at bench, there
is no will involved. Therefore, preterition cannot apply.
Remand Unnecessary
The Deed of Extra-Judicial Partition is in itself valid for complying with all the legal requisites, as found by the RTC, to wit:
A persual of the Deed of Extra-judicial Partition would reveal that all the heirs and children of Alfonso Ureta were
represented therein; that nobody was left out; that all of them received as much as the others as their shares; that it
distributed all the properties of Alfonso Ureta except a portion of parcel 29 containing an area of 14,000 square meters,
more or less, which was expressly reserved; that Alfonso Ureta, at the time of his death, left no debts; that the heirs of
Policronio Ureta, Sr. were represented by Conrado B. Ureta; all the parties signed the document, was witnessed and duly
acknowledged before Notary Public Adolfo M. Iligan of Kalibo, Aklan; that the document expressly stipulated that the heirs
to whom some of the properties were transferred before for taxation purposes or their children, expressly recognize and
acknowledge as a fact that the properties were transferred only for the purpose of effective administration and
development convenience in the payment of taxes and, therefore, all instruments conveying or effecting the transfer of
said properties are null and void from the beginning (Exhs. 1-4, 7-d).[58]
Considering that the Deed of Sale has been found void and the Deed of Extra-Judicial Partition valid, with the consent of
all the Heirs of Policronio duly given, there is no need to remand the case to the court of origin for partition.
WHEREFORE, the petition in G.R. No. 165748 is DENIED. The petition in G.R. No. 165930 is GRANTED. The assailed
April 20, 2004 Decision and October 14, 2004 Resolution of the Court of Appeals in CA-G.R. CV No. 71399, are hereby
MODIFIED in this wise:
(1)

The Deed of Extra-Judicial Partition, dated April 19, 1989, is VALID, and

(2)

The order to remand the case to the court of origin is hereby DELETED.

SO ORDERED.

Brito v Dianala
Before the Court is a petition for review on certiorari seeking to annul and set aside the Decision1 dated January 12, 2005
and Resolution2 dated February 13, 2006 of the Court of Appeals (CA) in CA-G.R. CV No. 70009. The assailed Decision
set aside the Joint Orders3 dated June 29, 2000 of the Regional Trial Court (RTC) of Negros Occidental, Branch 60,
Cadiz City, while the questioned Resolution denied petitioner's Motion for Reconsideration.
The factual and procedural antecedents of the case are as follows:
Subject of the present petition is a parcel of land located at Barrio Sicaba, Cadiz City, Negros Occidental. The said tract of
land is a portion of Lot No. 1536-B, formerly known as Lot No. 591-B, originally owned by a certain Esteban Dichimo and
his wife, Eufemia Dianala, both of whom are already deceased.
On September 27, 1976, Margarita Dichimo, assisted by her husband, Ramon Brito, Sr., together with Bienvenido
Dichimo, Francisco Dichimo, Edito Dichimo, Maria Dichimo, Herminia Dichimo, assisted by her husband, Angelino
Mission, Leonora Dechimo, assisted by her husband, Igmedio Mission, Felicito, and Merlinda Dechimo, assisted by her
husband, Fausto Dolleno, filed a Complaint for Recovery of Possession and Damages with the then Court of First
Instance (now Regional Trial Court) of Negros Occidental, against a certain Jose Maria Golez. The case was docketed as
Civil Case No. 12887.
Petitioner's wife, Margarita, together with Bienvenido and Francisco, alleged that they are the heirs of a certain Vicente
Dichimo, while Edito, Maria, Herminia, Leonora, Felicito and Merlinda claimed to be the heirs of one Eusebio Dichimo;
that Vicente and Eusebio are the only heirs of Esteban and Eufemia; that Esteban and Eufemia died intestate and upon
their death Vicente and Eusebio, as compulsory heirs, inherited Lot No. 1536-B; that, in turn, Vicente and Eusebio, and

their respective spouses, also died intestate leaving their pro indiviso shares of Lot No. 1536-B as part of the inheritance
of the complainants in Civil Case No. 12887.
On July 29, 1983, herein respondents filed an Answer-in-Intervention claiming that prior to his marriage to Eufemia,
Esteban was married to a certain Francisca Dumalagan; that Esteban and Francisca bore five children, all of whom are
already deceased; that herein respondents are the heirs of Esteban and Francisca's children; that they are in open,
actual, public and uninterrupted possession of a portion of Lot No. 1536-B for more than 30 years; that their legal interests
over the subject lot prevails over those of petitioner and his co-heirs; that, in fact, petitioner and his co-heirs have already
disposed of their shares in the said property a long time ago.
On November 26, 1986, the trial court issued an Order dismissing without prejudice respondents' Answer-in-Intervention
for their failure to secure the services of a counsel despite ample opportunity given them.
Civil Case No. 12887 then went to trial.
Subsequently, the parties in Civil Case No. 12887 agreed to enter into a Compromise Agreement wherein Lot No. 1536-B
was divided between Jose Maria Golez, on one hand, and the heirs of Vicente, namely: Margarita, Bienvenido, and
Francisco, on the other. It was stated in the said agreement that the heirs of Eusebio had sold their share in the said lot to
the mother of Golez. Thus, on September 9, 1998, the Regional Trial Court (RTC) of Bacolod City, Branch 45 rendered a
decision approving the said Compromise Agreement.
Thereafter, TCT No. T-12561 was issued by the Register of Deeds of Cadiz City in the name of Margarita, Bienvenido and
Francisco.
On January 18, 1999, herein petitioner and his co-heirs filed another Complaint for Recovery of Possession and
Damages, this time against herein respondents. The case, filed with the RTC of Cadiz City, Branch 60, was docketed as
Civil Case No. 548-C. Herein respondents, on the other hand, filed with the same court, on August 18, 1999, a Complaint
for Reconveyance and Damages against petitioner and his co-heirs. The case was docketed as Civil Case No. 588-C.
The parties filed their respective Motions to Dismiss. Thereafter, the cases were consolidated.
On June 29, 2000, the RTC issued Joint Orders, disposing as follows:
WHEREFORE, in view of the foregoing, this Court hereby orders the following:
1. The Motion to Dismiss Civil Case No. 548-C is hereby GRANTED and Civil Case No. 548[-C] is hereby ordered
DISMISSED for violation of the rule on forum shopping;
2. The Motion to Dismiss Civil Case No. 588-C is likewise hereby GRANTED and the Complaint dated August 13, 1999 is
hereby DISMISSED for want of jurisdiction.
3. All counterclaims in both cases, Civil Case No. 548-C and 588-C are likewise ordered DISMISSED.
SO ORDERED.4
The parties filed their respective motions for reconsideration, but both were denied by the RTC in an Order dated October
5, 2000.
Herein respondents then appealed the case to the CA praying that the portion of the RTC Joint Orders dismissing Civil
Case No. 588-C be declared null and void and that the case be decided on the merits.
On January 12, 2005, the CA rendered judgment disposing as follows:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us GRANTING the appeal filed in this
case and SETTING ASIDE, as we hereby set aside, the Joint Order[s] dated June 29, 2000 of the RTC of Cadiz City,
Branch 60, dismissing Civil Case No. 588-C. Further, let the entire records of this case be remanded to the court a quo for
the trial and hearing on the merits of Civil Case No. 588-C.
SO ORDERED.5
Petitioner filed a Motion for Reconsideration, but the CA denied it in a Resolution dated February 13, 2006.
Hence, the instant petition with the following assigned errors:
I. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT THE LOWER COURT HAS THE
JURISDICTION TO HEAR THE RECONVEYANCE CASE OF THE HEREIN PLAINTIFFS-APPELLANTS BEFORE THE
REGIONAL TRIAL COURT OF NEGROS OCCIDENTAL, BRANCH 60, CADIZ CITY.

II. THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE AMENDMENT OF THE DECISION IN
CIVIL CASE NO. 12887 IS NOT TANTAMOUNT TO ANNULMENT OF THE SAID DECISION. THE HONORABLE COURT
IS WITHOUT JURISDICTION TO TAKE COGNIZANCE OF THIS CASE.6
In his first assigned error, petitioner claims that the CA erred in holding that respondents are not parties in Civil Case No.
12887 contending that, since their Answer-in-Intervention was admitted, respondents should be considered parties in the
said case. Petitioner also avers that, being parties in Civil Case No. 12887, respondents are bound by the judgment
rendered therein.
The Court is not persuaded.
It is true that the filing of motions seeking affirmative relief, such as, to admit answer, for additional time to file answer, for
reconsideration of a default judgment, and to lift order of default with motion for reconsideration, are considered voluntary
submission to the jurisdiction of the court.7 In the present case, when respondents filed their Answer-in-Intervention they
submitted themselves to the jurisdiction of the court and the court, in turn, acquired jurisdiction over their persons.
Respondents, thus, became parties to the action. Subsequently, however, respondents' Answer-in-Intervention was
dismissed without prejudice. From then on, they ceased to be parties in the case so much so that they did not have the
opportunity to present evidence to support their claims, much less participate in the compromise agreement entered into
by and between herein petitioner and his co-heirs on one hand and the defendant in Civil Case No. 12887 on the other.
Stated differently, when their Answer-in-Intervention was dismissed, herein respondents lost their standing in court and,
consequently, became strangers to Civil Case No. 12887. It is basic that no man shall be affected by any proceeding to
which he is a stranger, and strangers to a case are not bound by judgment rendered by the court.8 Thus, being strangers
to Civil Case No. 12887, respondents are not bound by the judgment rendered therein.
Neither does the Court concur with petitioner's argument that respondents are barred by prescription for having filed their
complaint for reconveyance only after more than eight years from the discovery of the fraud allegedly committed by
petitioner and his co-heirs, arguing that under the law an action for reconveyance of real property resulting from fraud
prescribes in four years, which period is reckoned from the discovery of the fraud.
In their complaint for reconveyance and damages, respondents alleged that petitioner and his co-heirs acquired the
subject property by means of fraud.
Article 1456 of the Civil Code provides that a person acquiring property through fraud becomes, by operation of law, a
trustee of an implied trust for the benefit of the real owner of the property. An action for reconveyance based on an implied
trust prescribes in ten years, the reckoning point of which is the date of registration of the deed or the date of issuance of
the certificate of title over the property.9 Thus, in Caro v. Court of Appeals,10 this Court held as follows:
x x x The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No. L-33261, September 30, 1987,154 SCRA 396,
illuminated what used to be a gray area on the prescriptive period for an action to reconvey the title to real property and,
corollarily, its point of reference:
x x x It must be remembered that before August 30, 1950, the date of the effectivity of the new Civil Code, the old Code of
Civil Procedure (Act No. 190) governed prescription. It provided:
SEC. 43. Other civil actions; how limited.- Civil actions other than for the recovery of real property can only be brought
within the following periods after the right of action accrues:
3. Within four years: xxx An action for relief on the ground of fraud, but the right of action in such case shall not be
deemed to have accrued until the discovery of the fraud;
In contrast, under the present Civil Code, we find that just as an implied or constructive trust is an offspring of the law (Art.
1456, Civil Code), so is the corresponding obligation to reconvey the property and the title thereto in favor of the true
owner. In this context, and vis-a-vis prescription, Article 1144 of the Civil Code is applicable.
Article 1144. The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not
otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it is
now well settled that an action for reconveyance based on an implied or constructive trust prescribes in ten years from the
issuance of the Torrens title over the property. The only discordant note, it seems, is Balbin vs. Medalla, which states that
the prescriptive period for a reconveyance action is four years. However, this variance can be explained by the erroneous

reliance on Gerona vs. de Guzman. But in Gerona, the fraud was discovered on June 25, 1948, hence Section 43(3) of
Act No. 190, was applied, the new Civil Code not coming into effect until August 30, 1950 as mentioned earlier. It must be
stressed, at this juncture, that article 1144 and article 1456, are new provisions. They have no counterparts in the old Civil
Code or in the old Code of Civil Procedure, the latter being then resorted to as legal basis of the four-year prescriptive
period for an action for reconveyance of title of real property acquired under false pretenses.
An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential Decree No. 1529, which provides:
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the
parties to such fraud without prejudice, however, to the rights of any innocent holder of the decree of registration on the
original petition or application, x x x.
This provision should be read in conjunction with Article 1456 of the Civil Code, x x x
The law thereby creates the obligation of the trustee to reconvey the property and the title thereto in favor of the true
owner. Correlating Section 53, paragraph 3 of Presidential Decree No. 1529 and Article 1456 of the Civil Code with Article
1144(2) of the Civil Code, supra, the prescriptive period for the reconveyance of fraudulently registered real property is ten
(10) years reckoned from the date of the issuance of the certificate of title. x x x11
In the instant case, TCT No. T-12561 was obtained by petitioner and his co-heirs on September 28, 1990, while
respondents filed their complaint for reconveyance on August 18, 1999. Hence, it is clear that the ten-year prescriptive
period has not yet expired.
The Court, likewise, does not agree with petitioner's contention that respondents are guilty of laches and are already
estopped from questioning the decision of the RTC in Civil Case No. 12887 on the ground that they slept on their rights
and allowed the said decision to become final.
In the first place, respondents cannot be faulted for not appealing the decision of the RTC in Civil Case No. 12887 simply
because they are no longer parties to the case and, as such, have no personality to assail the said judgment.
Secondly, respondents' act of filing their action for reconveyance within the ten-year prescriptive period does not
constitute an unreasonable delay in asserting their right. The Court has ruled that, unless reasons of inequitable
proportions are adduced, a delay within the prescriptive period is sanctioned by law and is not considered to be a delay
that would bar relief.12 Laches is recourse in equity.13 Equity, however, is applied only in the absence, never in
contravention, of statutory law.14
Moreover, the prescriptive period applies only if there is an actual need to reconvey the property as when the plaintiff is
not in possession thereof.15 Otherwise, if the plaintiff is in possession of the property, prescription does not commence to
run against him.16 Thus, when an action for reconveyance is nonetheless filed, it would be in the nature of a suit for
quieting of title, an action that is imprescriptible.17 The reason for this is that one who is in actual possession of a piece of
land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps
to vindicate his right, the rationale for the rule being, that his undisturbed possession provides him a continuing right to
seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on
his own title, which right can be claimed only by the one who is in possession.18
In the present case, there is no dispute that respondents are in possession of the subject property as evidenced by the
fact that petitioner and his co-heirs filed a separate action against respondents for recovery of possession thereof. Thus,
owing to respondents' possession of the disputed property, it follows that their complaint for reconveyance is, in fact,
imprescriptible. As such, with more reason should respondents not be held guilty of laches as the said doctrine, which is
one in equity, cannot be set up to resist the enforcement of an imprescriptible legal right.
In his second assignment of error, petitioner argues that the objective of respondents in filing Civil Case No. 588-C with
the RTC of Cadiz City was to have the decision of the RTC of Bacolod City in Civil Case No. 12887 amended, which is
tantamount to having the same annulled. Petitioner avers that the RTC of Cadiz City has no jurisdiction to act on Civil
Case No. 588-C, because it cannot annul the decision of the RTC of Bacolod City which is a co-equal court.
The Court does not agree.
The action filed by respondents with the RTC of Cadiz City is for reconveyance and damages.1awphi1 They are not
seeking the amendment nor the annulment of the Decision of the RTC of Bacolod City in Civil Case No. 12887. They are
simply after the recovery of what they claim as their rightful share in the subject lot as heirs of Esteban Dichimo.
As earlier discussed, respondents' Answer-in-Intervention was dismissed by the RTC of Bacolod City without prejudice.
This leaves them with no other option but to institute a separate action for the protection and enforcement of their rights
and interests. It will be the height of inequity to declare herein petitioner and his co-heirs as exclusive owners of the
disputed lot without giving respondents the opportunity to prove their claims that they have legal interest over the subject

parcel of land, that it forms part of the estate of their deceased predecessor and that they are in open, and uninterrupted
possession of the same for more than 30 years. Much more, it would be tantamount to a violation of the constitutional
guarantee that no person shall be deprived of property without due process of law.19
WHEREFORE, the instant petition is DENIED. The assailed Decision dated January 12, 2005 and Resolution dated
February 13, 2006 of the Court of Appeals in CA-G.R. CV No. 70009 are AFFIRMED.
SO ORDERED.
Navales v Rias
On the 18th of November, 1904, Vicente Navales filed a complaint with the Court of First Instance of Cebu against Eulogia
Rias and Maximo Requiroso, claiming that the latter should be sentenced to pay him the sum of 1,200 pesos, Philippine
currency, as damages, together with costs and such other expenses as the court might consider just and equitable. To this
end he alleged that the said defendants, without due cause, ordered the pulling down and destruction of his house
erected in Daanbuangan, town of Naga, Island of Cebu, which was 6 meters in height with an area of 8.70 square meters,
built of wood with a nipa roof, and worth 1,000 pesos, which amount he expended in its construction. He further alleged
that the destruction took place in the month of April, 1904, and that, notwithstanding his efforts, he had not obtained any
reimbursement from the defendants, and that by reason of their refusal he had been prejudiced to the extent of 200
pesos, Philippine currency.
The defendant, in answer to the foregoing complaint, denied all and each one of the allegations therein contained, and
asked that judgment be entered dismissing the complaint with costs against the plaintiff.
After considering the proofs submitted by both parties and the proceedings upon the trial, the judge, on the 17th of
January, 1906, rendered judgment declaring that the decision entered by the justice of the peace of Naga, and the order
given by virtue thereof were illegal, as well as the action of the deputy sheriff Luciano Bacayo, that the defendant were
thereby liable for the damages caused to the plaintiff, which amounted to 500 pesos, and that the defendants were
sentenced to pay the said sum to the plaintiff, with costs. The defendant upon being informed of this decision, asked that it
be set aside, and also moved for a new trial on the ground that the decision was not in accordance with the weight of the
evidence. The motion was denied, to which exception was taken, and at the request of the interested party, the
corresponding bill of exceptions was limited.
The aim of this litigation, therefore, is to obtain payment through a judicial decision, of the damages said to have been
caused by the execution of a judgment rendered by the justice of the peace, in an action for ejectment.
It is undeniable that, in order to remove from the land of Eulogia Rias, situated within the jurisdiction of the town of Naga,
the house which Vicente Navales had constructed thereon, by virtue of the decision of the justice in the action instituted by
the said Eulogia Rias against the owner of the house , Vicente Navales, the deputy sheriff who carried the judgment into
execution was obliged to destroy the said house and removed it from the land, according to the usual procedure in the
action for ejectment.
In the order of execution issued to the deputy sheriff, the directive portion of the judgment of the justice of the peace was
inserted, and it contained the essential statement that the said judgment, by reason of its not having been appealed from,
had become final, and from the contents of the same may be inferred that there had been an action for ejectment between
the above-named parties, and that there was no reason why it should not be enforced when it had already become final
and acquired the nature of res adjudicata.
Section 72 of the Code of Civil Procedure reads:
Execution. If no appeal from a judgment of a justice of the peace shall be perfected as herein provided, the justice of
the peace shall, at the request of the successful party, issue execution for the enforcement of the judgment, and the
expiration of the time limited by law for the perfection of an appeal.
Assuming that the order for execution of final judgment was issued in accordance with the law, and in view of the fact that
it has not been alleged nor proven that the sheriff when complying with the same had committed trespass or exceeded his
functions, it must be presumed according to section 334 (14) of the said Code of Procedure, that the official duty was
regularly performed. Therefore, it is not possible to impute liability to the plaintiff who obtained the judgment and the
execution thereof, when the same was not disputed nor alleged to be null or illegal, and much less to compel the payment
of damages to the person who was defeated in the action and sentenced to be ejected from the land which he improperly
occupied with his house.
No proof has been submitted that a contract had been entered into between the plaintiff and the defendants, or that the
latter had committed illegal acts or omissions or incurred in any kind of fault or negligence, from any of which an obligation
might have arisen on the part of the defendants to indemnify the plaintiff. For this reason, the claim for indemnity, on

account of acts performed by the sheriff while enforcing a judgment, can not under any consideration be sustained. (Art.
1089, Civil Code.)
The illegality of the judgment of the justice of the peace, that of the writ of execution thereunder, or of the acts performed
by the sheriff for the enforcement of the judgment, has not been shown. Therefore, for the reasons hereinbefore set forth,
the judgment appealed from is hereby reversed, and the complaint for damages filed by Vicente Navales against Eulogia
Rias and Maximo Requiroso is dismissed without special ruling as to costs. So ordered.
Virata v Ochoa
This is an appeal by certiorari, from the order of the Court of First Instance of Cavite, Branch V, in Civil Case No. B-134
granting the motion of the defendants to dismiss the complaint on the ground that there is another action pending between
the same parties for the same cause. 1
The record shows that on September 24, 1975 one Arsenio Virata died as a result of having been bumped while walking
along Taft Avenue, Pasay City by a passenger jeepney driven by Maximo Borilla and registered in the name Of Victoria
Ochoa; that Borilla is the employer of Ochoa; that for the death of Arsenio Virata, a action for homicide through reckless
imprudence was instituted on September 25, 1975 against Maximo Borilla in the Court of First Instance of Rizal at Pasay
City, docketed as C Case No. 3162-P of said court; that at the hearing of the said criminal case on December 12, 1975,
Atty. Julio Francisco, the private prosecutor, made a reservation to file a separate civil action for damages against the
driver on his criminal liability; that on February 19, 1976 Atty. Julio Francisco filed a motion in said c case to withdraw the
reservation to file a separate civil action; that thereafter, the private prosecutor actively participated in the trial and
presented evidence on the damages; that on June 29, 1976 the heirs of Arsenio Virata again reserved their right to
institute a separate civil action; that on July 19, 1977 the heirs of Arsenio Virata, petitioners herein, commenced Civil No.
B-134 in the Court of First Instance of Cavite at Bacoor, Branch V, for damages based on quasi-delict against the driver
Maximo Borilla and the registered owner of the jeepney, Victorio Ochoa; that on August 13, 1976 the defendants, private
respondents filed a motion to dismiss on the ground that there is another action, Criminal Case No. 3162-P, pending
between the same parties for the same cause; that on September 8, 1976 the Court of First Instance of Rizal at Pasay
City a decision in Criminal Case No. 3612-P acquitting the accused Maximo Borilla on the ground that he caused an injury
by name accident; and that on January 31, 1977, the Court of First Instance of Cavite at Bacoor granted the motion to
Civil Case No. B-134 for damages. 2
The principal issue is weather or not the of the Arsenio Virata, can prosecute an action for the damages based on quasidelict against Maximo Borilla and Victoria Ochoa, driver and owner, respectively on the passenger jeepney that bumped
Arsenio Virata.
It is settled that in negligence cases the aggrieved parties may choose between an action under the Revised Penal Code
or of quasi-delict under Article 2176 of the Civil Code of the Philippines. What is prohibited by Article 2177 of the Civil
Code of the Philippines is to recover twice for the same negligent act.
The Supreme Court has held that:
According to the Code Commission: 'The foregoing provision (Article 2177) though at first sight startling, is not so novel or
extraordinary when we consider the exact nature of criminal and civil negligence. The former is a violation of the criminal
law, while the latter is a 'culpa aquiliana' or quasi-delict, of ancient origin, having always had its own foundation and
individuality, separate from criminal negligence. Such distinction between criminal negligence and 'culpa extra-contractual'
or quasi-delito has been sustained by decision of the Supreme Court of Spain and maintained as clear, sound and
perfectly tenable by Maura, an outstanding Spanish jurist. Therefore, under the proposed Article 2177, acquittal from an
accusation of criminal negligence, whether on reasonable doubt or not, shall not be a bar to a subsequent civil action, not
for civil liability arising from criminal negligence, but for damages due to a quasi-delict or 'culpa aquiliana'. But said article
forestalls a double recovery. (Report of the Code Commission, p. 162.)
Although, again, this Article 2177 does seem to literally refer to only acts of negligence, the same argument of Justice
Bocobo about construction that upholds 'the spirit that given life' rather than that which is literal that killeth the intent of the
lawmaker should be observed in applying the same. And considering that the preliminary chapter on human relations of
the new Civil Code definitely establishes the separability and independence of liability in a civil action for acts criminal in
character (under Articles 29 to 32) from the civil responsibility arising from crime fixed by Article 100 of the Penal Code,
and, in a sense, the Rules of Court, under Sections 2 and 3(c), Rule 111, contemplate also the same separability, it is
'more congruent' with the spirit of law, equity and justice, and more in harmony with modern progress', to borrow the
felicitous language in Rakes vs. Atlantic Gulf and Pacific Co., 7 Phil. to 359, to hod as We do hold, that Article 2176, where
it refers to 'fault covers not only acts 'not punishable by law' but also criminal in character, whether intentional and
voluntary or consequently, a separate civil action lies against the in a criminal act, whether or not he is criminally
prosecuted and found guilty and acquitted, provided that the offended party is not allowed, if he is actually charged also
criminally, to recover damages on both scores, and would be entitled in such eventuality only to the bigger award of the,
two assuming the awards made in the two cases vary. In other words the extinction of civil liability refereed to in Par. (c) of

Section 13, Rule 111, refers exclusively to civil liability founded on Article 100 of the Revised Penal Code, whereas the
civil liability for the same act considered as a quasi-delict only and not as a crime is not extinguished even by a
declaration in the criminal case that the criminal act charged has not happened or has not been committed by the
accused. Brief stated, We hold, in reitration of Garcia, that culpa aquilina includes voluntary and negligent acts which may
be punishable by law. 3
The petitioners are not seeking to recover twice for the same negligent act. Before Criminal Case No. 3162-P was
decided, they manifested in said criminal case that they were filing a separate civil action for damages against the owner
and driver of the passenger jeepney based on quasi-delict. The acquittal of the driver, Maximo Borilla, of the crime
charged in Criminal Case No. 3162-P is not a bar to the prosecution of Civil Case No. B-134 for damages based on quasidelict The source of the obligation sought to be enforced in Civil Case No. B-134 is quasi-delict, not an act or omission
punishable by law. Under Article 1157 of the Civil Code of the Philippines, quasi-delict and an act or omission punishable
by law are two different sources of obligation.
Moreover, for the petitioners to prevail in the action for damages, Civil Case No. B-134, they have only to establish their
cause of action by preponderance of the evidence.
WHEREFORE, the order of dismissal appealed from is hereby set aside and Civil Case No. B-134 is reinstated and
remanded to the lower court for further proceedings, with costs against the private respondents.
SO ORDERED.

Hospicio de San Jose v Department of Agrarian Reform

At the core of this case is an obscure old special law. The issue is whether a provision in the law prohibiting the sale of the
properties donated to the charitable organization that was incorporated by the same law bars the implementation of
agrarian reform laws as regards said properties.
Petitioner Hospicio de San Jose de Barili (Hospicio) is a charitable organization created as a body corporate in 1925 by
Act No. 3239. The law was enacted in order to formally accept the offer made by Pedro Cui and Benigna Cui to establish
a home for the care and support, free of charge, of indigent invalids and incapacitated and helpless persons.[1] The
Hospicio was to be maintained with the revenues of the personal and real properties to be endowed by the Cuis and other
donors.[2]
Section 4 of Act No. 3239 provides that [t]he personal and real property donated to the [Hospicio] by its founders or by
other persons shall not be sold under any consideration.[3]
On 10 October 1987, the Department of Agrarian Reform Regional Office (DARRO) Region VII issued an order ordaining
that two parcels of land owned by the Hospicio be placed under Operation Land Transfer in favor of twenty-two (22) tillers
thereof as beneficiaries. Presidential Decree (P.D.) No. 27, a land reform law, was cited as legal basis for the order. The
Hospicio filed a motion for the reconsideration of the order with the Department of Agrarian Reform (DAR) Secretary, citing
the aforementioned Section 4 of Act No. 3239. It argued that Act No. 3239 is a special law, which could not have been
repealed by P.D. No. 27, a general law, or by the latters general repealing clause.
The DAR Secretary rejected the motion for reconsideration in an Order dated 30 March 1997. Therein, the DAR Secretary
held that P.D. No. 27 was a special law, as it applied only to particular individuals in the State, specifically the tenants of
rice and corn lands. Moreover, P.D. No. 27, which covered all rice and corn lands, provides no exemptions based on the
manner of acquisition of the land by the landowner.[4]
The Order of the DAR Secretary was assailed in a Petition for Certiorari filed with the Court of Appeals. In a Decision[5]
dated 9 July 1999, the Court of Appeals Special Eleventh Division affirmed the DAR Secretarys issuance. It sustained the
position of the Office of the Solicitor General (OSG) position that Section 4 of Act No. 3239 was expressly repealed not
only by P.D. No. 27, but also by Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of
1988, both laws being explicit in mandating the distribution of agricultural lands to qualified beneficiaries. The Court of
Appeals further noted that the subject lands did not fall among the exemptions provided under Section 10 of Rep. Act No.
6657. Finally, the appellate court brought into play the aims of land reform, affirming as it did the need to distribute and
create an economic equilibrium among the inhabitants of this land, most especially those with less privilege in life, our
peasant farmer.[6]
Unsatisfied with the Court of Appeals Decision, the Hospicio lodged the present Petition for Review. The Hospicio alleges
that P.D. No. 27, the CARL, and Executive Order No. 407[7] all violate Section 10, Article III of the Constitution, which
provides that no law impairing the obligation of contracts shall be passed. More sedately, the Hospicio also argues that Act
No. 3239 was not repealed either by P.D. No. 27 or Rep. Act No. 6657 and that the forced disposition of the Hospicios

landholdings would incapacitate the discharge of its charitable functions, which equally promote social justice and the
upliftment of the lives of the less fortunate.
On the other hand, the OSG, representing respondent DAR, bluntly replies that Act No. 3239 was repealed by P.D. No. 27
and Rep. Act No. 6657, which do not exempt lands owned by eleemosynary or charitable institutions from the coverage of
those agrarian reform laws.
A brief recapitulation of the relevant laws is in order.
P.D. No. 27, "Decreeing the Emancipation of Tenants from the Bondage of the Soil, Transferring to Them Ownership of the
Land they Till, and Providing the Instrument and Mechanism Therefor, has once been touted as perhaps a radical solution
in its pristine sense, one that goes at the root [of the problem of land tenancy].[8] Its constitutionality was upheld in De
Chavez v. Zobel.[9] The law generally ordains the emancipation of tenants and confers on them ownership of the lands
they till.[10] The following provisions of P.D. No. 27 have concretized this policy:
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by
the Constitution as Commander-in-Chief of all the Armed Forces of the Philippines, and pursuant to Proclamation No.
1081, dated September 21, 1972, and General Order No. 1 dated September 22, 1972, as amended do hereby decree
and order the emancipation of all tenant farmers as of this day, October 21, 1972;
This shall apply to tenant farmers of private agricultural lands[[11]] primarily devoted to rice and corn under a system of
sharecrop or lease-tenancy, whether classified as landed estate or not;
The tenant farmer, whether in land classified as landed estate or not, shall be deemed owner of a portion constituting a
family-size farm of five (5) hectares if not irrigated and three (3) hectares if irrigated;
In all cases, the landowner may retain an area of not more than seven (7) hectares if such landowner is cultivating such
area or will now cultivate it;
The CARL was not yet in effect when the DARRO and the DAR issued their respective orders. Said law vests P.D. No. 27
with suppletory effect insofar as the earlier law does not run inconsistent with the later law.[12] Under Section 4 of the
CARL, placed under coverage are all public and private agricultural lands regardless of tenurial arrangement and
commodity produced, subject to the exempted lands listed in Section 10 thereof.
We agree with the Court of Appeals that neither P.D. No. 27 nor the CARL exempts the lands of the Hospicio or other
charitable institutions from the coverage of agrarian reform. Ultimately, the result arrived at in the assailed issuances
should be affirmed. Nonetheless, both the DAR Secretary and the appellate court failed to appreciate what to this Court is
indeed the decisive legal dimension of the case.
Section 4 of Act No. 3239 prohibits the sale under any consideration of the lands donated to the Hospicio. But the land
transfers mandated under P.D. No. 27 cannot be considered a conventional sale under our civil laws.
Generally, sale arises out of a contractual obligation. Thus, it must meet the first essential requisite of every contract that
is the presence of consent.[13] Consent implies an act of volition in entering into the agreement.[14] The absence or
vitiation of consent renders the sale either void or voidable.
In this case, the deprivation of the Hospicios property did not arise as a consequence of the Hospicios consent to the
transfer. There was no meeting of minds between the Hospicio, on one hand, and the DAR or the tenants, on the other, on
the properties and the cause which are to constitute the contract[15] that is to serve ultimately as the basis for the transfer
of ownership of the subject lands.[16] Instead, the obligation to transfer arises by compulsion of law, particularly P.D. No.
27.[17]
Agrarian reform is justified under the States inherent power of eminent domain that enables it to forcibly acquire private
lands intended for public use upon payment of just compensation to the owner.[18] It has even been characterized as
beyond the traditional exercise of eminent domain, but a revolutionary kind of expropriation. As expounded in the
landmark case of Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, thus:
. . . . However, we do not deal here with the traditional exercise of the power of eminent domain. This is not an ordinary
expropriation where only a specific property of relatively limited area is sought to be taken by the State from its owner for
a specific and perhaps local purpose. What we deal with here is a revolutionary kind of expropriation.
The expropriation before us affects all private agricultural lands whenever found and of whatever kind as long as they are
in excess of the maximum retention limits allowed their owners. This kind of expropriation is intended for the benefit not
only of a particular community or of a small segment of the population but of the entire Filipino nation, from all levels of our
society, from the impoverished farmer to the land-glutted owner. Its purpose does not cover only the whole territory of this
country but goes beyond in time to the foreseeable future, which it hopes to secure and edify with the vision and the
sacrifice of the present generation of Filipinos. Generations yet to come are as involved in this program as we are today,

although hopefully only as beneficiaries of a richer and more fulfilling life we will guarantee to them tomorrow through our
thoughtfulness today. And, finally, let it not be forgotten that it is no less than the Constitution itself that has ordained this
revolution in the farms, calling for "a just distribution" among the farmers of lands that have heretofore been the prison of
their dreams but can now become the key at least to their deliverance.[19]
This characterization is warranted whether the expropriation is operative under the CARL or P.D. No. 27, as both laws are
keyed into the same governmental objective. Moreover, under both laws, the landowner is entitled to just compensation
for the properties taken.
The twin process of expropriation of lands under agrarian reform and the payment of just compensation is akin to a forced
sale, which has been aptly described in common law jurisdictions as sale made under the process of the court, and in the
mode prescribed by law, and which is not the voluntary act of the owner, such as to satisfy a debt, whether of a mortgage,
judgment, tax lien, etc.[20] The term has not been precisely defined in this jurisdiction, but reference to the phrase itself is
made in Articles 223, 232, 237 and 243 of the Civil Code, which uniformly exempt the family home from execution, forced
sale, or attachment.[21] Yet a forced sale is clearly different from the sales described under Book V of the Civil Code
which are conventional sales, as it does not arise from the consensual agreement of the vendor and vendee, but by
compulsion of law. Still, since law is recognized as one of the sources of obligation, there can be no dispute on the
efficacy of a forced sale, so long as it is authorized by law.
The crucial question now arises, whether the sale prohibited under Section 4 of Act No. 3239 includes even a forced sale.
Of course an overly literal reading of the provision would justify such inclusion, but appropriately a more sophisticated
approach to statutory construction is warranted.
No sance is required to discern the intent of Section 4. It ensures that the properties received by the Hospicio are not
alienated for profit by the officers or administrators, in contravention of the charitable purpose for which the Hospicio was
created. To an extent, it makes possible the perpetual operation of the Hospicio, which was empowered by law to operate
for an indefinite period, by assuring the existence of the property on which the Hospicio could operate. We also do not
doubt that whatever fruits of the forcibly retained property would also serve a source of funding for the operations of the
Hospicio.
The salutariness of these objectives is beyond doubt. The interests they seek to protect are present whether the
prohibition encompasses only conventional sales, or even forced sales. Yet to insist that Section 4 likewise prohibits sales
or dispositions by operation of law would necessarily imply that the Hospicio is also beyond the reach of any form of
judicial execution. The charitable nature of the Hospicio does not shield it from susceptibility to civil liability, and an
absolute prohibition on sales, whether forced or conventional, deprives whatever judgment creditors of the Hospicio from
any effective means of enforcing relief.
Was it the intent of the framers of Act No. 3239 to exempt the Hospicio from all judicial processes, even those arising from
civil transactions? We do not think so. The contemporaneous construction of Section 4 indicates that the prohibition
intended by the crafters of the law pertained only to conventional sales, and not forced sales. The law was promulgated in
1925, or when the Spanish Civil Code of 1889 was in effect. The provisions in the Civil Code referring to forced sales were
not derived from the Spanish Civil Code. On the other hand, the consensual nature of the contract of sale, and of
contracts in general, is recognized under the Spanish Civil Code. Under Article 1261 of the Spanish Civil Code, there is no
contract unless the consent of the contracting parties exists.[22]
Evidently, the word sale, as contemplated by the framers of the law in 1925, pertains to its concept in civil law, with the
requisite of consent being present. It cannot refer to sales or dispositions that arise by operation of law, such as through
judicial execution, or, as in this case, expropriation.
Thus, we can hardly characterize the acquisition of the subject properties from the Hospicio for the benefit of the tenants
as a sale, within the contemplation of Section 4 of Act No. 3239. The transfer arises from compulsion of law, and not the
desire of any parties. Even if the Hospicio had voluntarily offered to surrender its properties to agrarian reform, the
resulting transaction would not be considered as a conventional sale, since the obligation is created not out of the
mandate of the parties, but the will of the law.
The DARRO Order did note that Section 4 of Act No. 3239 is not applicable in this case, since the transfer is compulsory
on the part of the landowner, unlike in ordinary sale.[23] Regrettably, the DAR Secretary and the Court of Appeals failed to
apply that sound principle, preferring to rely instead on the conclusion that Section 4 was repealed by P.D. No. 27 and the
CARL.
Nonetheless, even assuming for the nonce that Section 4 contemplates even forced sales such as those through
expropriation, we would agree with the DAR Secretary and the Court of Appeals that Section 4 is deemed repealed by
P.D. No. 27 and the CARL.
The scope of lands subjected to agrarian reform under these two laws is overwhelming. P.D. No. 27 applies to all private
agricultural lands primarily devoted to rice and corn with tenant farmers under a system of sharecrop or lease-tenancy,[24]

while the CARL is even broader in scope, generally covering all public and private agricultural lands regardless of tenurial
arrangement and commodity produced. Under Section 10 of the CARL, the only exempted lands are:
Lands actually, directly and exclusively used and found to be necessary for parks, wildlife, forest reserves, reforestation,
fish sanctuaries and breeding grounds, watersheds, and mangroves, national defense, school sites and campuses
including experimental farm stations operated by public or private schools for educational purposes, seeds and seedlings
research and pilot production centers, church sites and convents appurtenant thereto, mosque sites and Islamic centers
appurtenant thereto, communal burial grounds and cemeteries, penal colonies and penal farms actually worked by the
inmates, government and private research and quarantine centers and all lands with eighteen percent (18%) slope and
over, except those already developed . . . .
Arguing against too literal an interpretation of Section 10, the Hospicio claims that a serious reading of the provision is
revelatory of the spirit and intent of the exemptions. It argues that there are three categories of exemption as: (1) those
needed by the nation, such as parks, wildlife and forest reserves, fishponds and for national defense, etc.; (2) those for
educational purposes such as school sites; and (3) for religious and charitable purposes like church sites, etc.[25] The
Hospicio then claims it falls under the third category of religious and charitable purposes.[26]
To begin with, the terms charitable purposes and charitable organizations do not appear in Section 10 of the CARL. For its
part, Hospicio unduly assumes that charity is integrally wedded to religiosity, despite the fact that there are charitable
institutions that are avowedly secular in orientation. We disagree that there is a clear intent or spirit to include properties
held by charitable institutions, even those directly utilized for charitable purposes, in the list of exempted properties under
the CARL. Section 10 does not include properties which are generally used for charitable purposes, such as orphanages,
from the exemption. Not even all properties owned by religious institutions are exempt, save for those places of worship
and the convents/Islamic centers appurtenant thereto. Even assuming that the Hospicio were actually owned and
operated by the Catholic Church, it still would not be exempted from the CARL.
It is axiomatic that where a general rule is established by a statute with exceptions, the Court will not curtail nor add to the
latter by implication, and it is a rule that an express exception excludes all others.[27] We cannot simply impute into a
statute an exception which the Congress did not incorporate. Moreover, general welfare legislation such as land reform
laws is to be construed in favor of the promotion of social justice to ensure the well-being and economic security of the
people.[28] Since a broad construction of the provision listing the properties exempted under the CARL would tend to
denigrate the aims of agrarian reform, a strict application of these exceptions is in order.
The crafters of P.D. No. 27 and the CARL were presumably aware of the radical scale of the intended legislation, and the
massive effects on property relations nationwide. Considering the magnitude of the changes ordained in these laws, it
would be foolhardy to require or expect the legislature to denominate each and every law that would be consequently or
logically amended or repealed by the new laws. Hence, the viability of general repealing clauses, which are existent in
both P.D. No. 27[29] and the CARL,[30] as a means of repealing all previous enactments inconsistent with revolutionary
new laws. The presence of such general repealing clause in a later statute clearly indicates the legislative intent to repeal
all prior inconsistent laws on the subject matter, whether the prior law is a general law or a special law, or as in this case,
a special private law. Without such clause, a later general law will ordinarily not repeal a prior special law on the same
subject. But with such clause contained in the subsequent general law, the prior special law will be deemed repealed, as
the clause is a clear legislative intent to bring about that result.[31]
Should we construe Section 4 of Act No. 3239 as barring forced sales through expropriation of the properties of the
Hospicio, such prohibition would irreconcilably countermand both P.D. No. 27 and the CARL and their mandate to subject
the properties to agrarian reform. The general repealing clauses of the two later laws would then sufficiently repeal
Section 4 of Act No. 3239, to the extent that it may prohibit expropriation of agricultural lands for agrarian reform.
Still, in light of our earlier determinative pronouncement that Section 4 of Act No. 3239 does not contemplate forced sales
as part of the prohibition therein, there ultimately is no need to make an abject declaration that Section 4 has indeed been
repealed. Indeed, the Court considers the prohibition on Section 4 as still effectual, but only insofar as it relates to
conventional sales under the Civil Code.
The other arguments raised by the Hospicio are similarly bereft of merit. It wants us to hold that P.D. No. 27 and the
CARL, both enacted to implement the urgently needed policy of agrarian reform, violate the non-impairment of contracts
clause under the Bill of Rights. Yet the broad sweep of this argument ignores the nuances adopted by this Court in
interpreting Section 10 of Article III. We have held that the States exercise of police powers may prevail over obligations
imposed by private contracts.[32] Especially in point is Kabiling v. NHA,[33] wherein a law authorizing the expropriation of
properties in favor of qualified squatter families was challenged on the basis of the non-impairment clause. The Court
held:
The stated objective of the decree, namely, to resolve the land tenure problem in the Agno-Leveriza area to allow the
implementation of the comprehensive development plans for this depressed community, provides the justification for the
exercise of the police power of the State. The police power of the State has been described as "the most essential,

insistent and illimitable of powers." It is a power inherent in the State, plenary, "suitably vague and far from precisely
defined, rooted in the conception that man in organizing the state and imposing upon the government limitations to
safeguard constitutional rights did not intend thereby to enable individual citizens or group of citizens to obstruct
unreasonably the enactment of such salutary measure to ensure communal peace, safety, good order and welfare.
The objection raised by petitioners that P.D. No. 1808 impairs the obligations of contract is without merit. The
constitutional guaranty of non-impairment of obligations of contract is limited by and subject to the exercise of the police
power of the State in the interest of public health, safety, morals and general welfare.[34]
More pertinently, what the Hospicio alleges would be impaired is not actually a contract, but a legislative act, Act No. 3239.
The Hospicio admits just as much in its petition, [Act No. 3239] is not merely an ordinary contract but a contract enacted
into law . . . Act No. 3239 is thus a contract within the purview of the impairment clause of the Constitution.[35]
The inanity of this argument is palpable. The non-impairment clause reads: No law impairing the obligation of contracts
shall be passed. If, as the Hospicio argues, the constitutional provision applies as well to the impairment of obligations
created by law, then Section 10, Article III operates to bar the legislature from amending or repealing its own enactments.
This is of course not the case, as the provision was intended to shield the impairment of obligations created by private
agreements, and not by legislative fiat. Certainly, Congress can at any time expressly amend or repeal any and all
sections of Act No. 3239 without fear of violating the non-impairment clause of the Constitution. In fine, Section 10[36] of
Act 3239 provides that the privileges granted by the Act to the Hospicio are subject to the conditions on the grant of
franchises as provided in the Jones Law. Section 28 of the Jones Law in turn provides in part, thus:
No franchise or right shall be granted to any individual, firm, or corporation except under the conditions that it shall be
subject to amendment, alteration, or repeal by the Congress of the United States, and that lands or right of use and
occupation of lands thus granted shall revert to the government by which they were respectively granted upon the
termination of the franchises and rights under which they were granted or upon their revocation or repeal. (Emphasis
supplied.)
Finally, the Hospicio alludes to its functions as a charitable institution, which equally promote social justice and the
upliftment of lives of the less fortunate. It notes that these purposes are no less noble than giving land to the landless,
whom they, with perhaps a touch of contempt, suggest are perfectly healthy to care for themselves.[37]
The rationale for holding that the properties of the Hospicio are covered by P.D. No. 27 and Rep. Act No. 6657 is so wellgrounded in law that it obviates any resort to the sordid game of choosing which of the two competing aspirations is
nobler. The body which would have unquestionable discretion in assigning hierarchical values on the modalities by which
social justice may be implemented is the legislature. Land reform affords the opportunity for the landless to break away
from the vicious cycle of having to perpetually rely on the kindness of others. By refusing to exempt properties owned by
charitable institutions or maintained for charitable purposes from agrarian reform, the legislature has indicated a policy
choice which the Court is bound to implement.
WHEREFORE, the Petition is DENIED. No pronouncement as to costs.
SO ORDERED.

People v Paniterce
Before Us is an appeal filed by Domingo Paniterce y Martinez (Paniterce) assailing the Decision[1] dated August 22, 2008
of the Court of Appeals in CA-G.R. CR-H.C. No. 01001, entitled People of the Philippines v. Domingo Paniterce, which
affirmed with modification the Decision dated March 2, 2005 of the Regional Trial Court (RTC) of Iriga City, Branch 37, in
Criminal Case Nos. 6076, 6077, 6078, 6079, 6080 and 6081.[2] The RTC found Paniterce guilty beyond reasonable doubt
of the crimes of Rape and Acts of Lasciviousness.
In four Informations, all dated February 11, 2002, 4th Assistant Provincial Prosecutor Hedy S. Aganan charged Paniterce
with four counts of rape of his daughter AAA. Except for the dates[3] of the commission of the rapes, the four Informations
identically read:
Criminal Case Nos. 6076, 6077, 6078 and 6079
That sometime in the year 1997 in x x x Philippines and within the jurisdiction of this Honorable Court, the above-named
accused, with grave abuse of confidence being the father of the offended party with lewd designs by means of force and
intimidation, did then and there willfully, unlawfully and feloniously succeed in having carnal knowledge with his daughter
AAA, a 10 year-old minor, against her will and without her consent, to her damage and prejudice in such amount as may
be awarded by the Honorable Court.[4]

In two Amended Informations, both dated December 3, 2002, Assistant Provincial Prosecutor Daniel M. Salvadora
charged Paniterce with two counts of rape of his other daughter BBB. Aside from the dates[5] of the commission of the
rapes, the Informations similarly state:
Criminal Case Nos. 6080 and 6081
That on or about 6:00 oclock in the morning of August 26, 2000 x x x Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, with grave abuse of confidence being the father of the offended party with
lewd designs by means of force and intimidation, did then and there willfully, unlawfully and feloniously committed RAPE
upon his 12- year old daughter BBB by then and there, caressing and inserting his finger inside her vagina against her will
and without her consent, to her damage and prejudice in such amount as may be awarded by the Honorable Court.[6]
When arraigned, Paniterce pleaded not guilty to all the charges.
After trial on the merits, the RTC rendered a Decision on March 2, 2005, with the following dispositive portion:
WHEREFORE, in view of all the foregoing, the prosecution having proved the guilt of accused Domingo Paniterce of the
crimes of Rape as charged in the aforementioned Informations, he is hereby sentenced to suffer the penalties of
imprisonment, to wit:
In Criminal Case No. 6076, he is hereby sentenced to suffer the penalty of imprisonment ranging from FOUR (4)
MONTHS and ONE (1) DAY of arresto mayor as minimum to FOUR (4) YEARS, TWO (2) MONTHS AND ONE (1) DAY of
prision correccional as maximum for Acts of Lasciviousness under Article 336 of the Revised Penal Code as the alleged
molestation took place in April 1997 and RA 8353 took effect only on October 22, 1997;
In Criminal Cases Nos. 6077, 6078, 6080 and 6081, he is hereby sentenced to suffer in each every case the penalty of
imprisonment ranging from FOUR (4) YEARS, TWO (2) MONTHS and ONE (1) DAY of prision correccional as minimum
to EIGHT (8) YEARS and ONE (1) DAY of prision mayor as maximum and to pay AAA and BBB Fifty Thousand Pesos
(P50,000.00) each as moral damages and Fifty Thousand Pesos (P50,000.00) as exemplary damages;
In Criminal Case No. 6079, he is hereby sentenced to suffer the penalty of DEATH and to pay AAA the amount of Fifty
Thousand Pesos (P50,000.00) as moral damages and Fifty Thousand Pesos (P50,000.00) as exemplary damages.[7]
On June 4, 2005, Paniterce was committed to the Bureau of Corrections in Muntinlupa City.
Paniterce filed an appeal with the Court of Appeals, which was docketed as CA-G.R. CR-H.C. No. 01001. The appellate
court rendered a Decision on August 22, 2008 affirming the RTC judgment with modifications, to wit:
WHEREFORE, the Decision of the trial court convicting DOMINGO PANITERCE is hereby AFFIRMED with the following
modifications:
1.
For Acts of Lasciviousness, in Criminal Cases Nos. 6077, 6078, 6080 and 6081, appellant is hereby sentenced to
suffer in each [and] every case an indeterminate prison term of six (6) months of arresto mayor, as minimum, to six (6)
years of prision correccional, as maximum and to pay AAA and BBB Fifty Thousand Pesos (P50,000.00) each as moral
damages and Fifty Thousand Pesos (P50,000.00) as exemplary damages; and
2.
For Rape, in Criminal Case No. 6079, appellant is hereby sentenced to suffer the penalty of Reclusion Perpetua and
to pay AAA the amount of Fifty Thousand Pesos (P50,000.00) as moral damages and Fifty Thousand Pesos (P50,000.00)
as exemplary damages.
The decision of the trial court finding appellant guilty for Acts of Lasciviousness in Criminal Case No. 6076 is AFFIRMED
without any modification.[8]
On 16 September 2008, Paniterce, through counsel, filed a Notice of Appeal with the Court of Appeals conveying his
intention to appeal to us the aforementioned Decision dated August 22, 2008 of the appellate court. The Court of Appeals
gave due course to Paniterces Notice of Appeal on September 23, 2008,[9] and directed its Judicial Records Division to
elevate to us the original records in CA-G.R. CR-H.C. No. 01001.
On 15 April 2009, we required[10] the parties to file their supplemental briefs, and the Director of the Bureau of
Corrections to confirm the commitment of Paniterce at the Bureau of Corrections and submit his report thereon within 10
days from notice.
Paniterce filed his Supplemental Brief[11] on June 16, 2009, while the Office of the Solicitor General filed a
Manifestation[12] on June 18, 2009 stating that it would no longer file a supplemental brief considering that Paniterce did
not raise any new issue in his appeal. On July 22, 2009, we submitted G.R. No. 186382 for resolution.

However, in a letter dated October 12, 2009, Julio A. Arciaga, the Assistant Director for Prisons and Security of the Bureau
of Corrections, informed us that Paniterce had died on August 22, 2009 at the New Bilibid Prison Hospital. Paniterces
Death Certificate was attached to said letter.
Given Paniterces death, we are now faced with the question of the effect of such death on the present appeal.
Paniterces death on August 22, 2009, during the pendency of his appeal, extinguished not only his criminal liabilities for
the rape and acts of lasciviousness committed against his daughters, but also his civil liabilities solely arising from or
based on said crimes.
According to Article 89(1) of the Revised Penal Code, criminal liability is totally extinguished:
1. By the death of the convict, as to the personal penalties; and as to pecuniary penalties, liability therefor is extinguished
only when the death of the offender occurs before final judgment.
Applying the foregoing provision, we laid down the following guidelines in People v. Bayotas[13]:
1. Death of the accused pending appeal of his conviction extinguishes his criminal liability as well as the civil liability
based solely thereon. As opined by Justice Regalado, in this regard, the death of the accused prior to final judgment
terminates his criminal liability and only the civil liability directly arising from and based solely on the offense committed,
i.e., civil liability ex delicto in senso strictiore.
2. Corollarily, the claim for civil liability survives notwithstanding the death of (the) accused, if the same may also be
predicated on a source of obligation other than delict. Article 1157 of the Civil Code enumerates these other sources of
obligation from which the civil liability may arise as a result of the same act or omission:
a) Law
b) Contracts
c) Quasi-contracts
e) Quasi-delicts
3. Where the civil liability survives, as explained in Number 2 above, an action for recovery therefor may be pursued but
only by way of filing a separate civil action and subject to Section 1, Rule 111 of the 1985 Rules on Criminal Procedure as
amended. This separate civil action may be enforced either against the executor/administrator or the estate of the
accused, depending on the source of obligation upon which the same is based as explained above.
4. Finally, the private offended party need not fear a forfeiture of his right to file this separate civil action by prescription, in
cases where during the prosecution of the criminal action and prior to its extinction, the private-offended party instituted
together therewith the civil action. In such case, the statute of limitations on the civil liability is deemed interrupted during
the pendency of the criminal case, conformably with the provisions of Article 1155 of the Civil Code that should thereby
avoid any apprehension on a possible privation of right by prescription.[14]
Clearly, it is unnecessary for the Court to rule on Paniterces appeal. Whether or not he was guilty of the crimes charged
has become irrelevant since, following Article 89(1) of the Revised Penal Code and our disquisition in Bayotas, even
assuming Paniterce had incurred criminal liabilities, they were totally extinguished by his death. Moreover, because
Paniterces appeal was still pending and no final judgment of conviction had been rendered against him when he died, his
civil liabilities arising from the crimes, being civil liabilities ex delicto, were likewise extinguished by his death.
Consequently, the appealed Decision dated August 22, 2008 of the Court of Appeals finding Paniterce guilty of rape and
acts of lasciviousness, sentencing him to imprisonment, and ordering him to indemnify his victims had become ineffectual.
WHEREFORE, in view of the death of accused-appellant Domingo Paniterce y Martinez, the Decision dated August 22,
2008 of the Court of Appeals in CA-G.R. CR-H.C. No. 01001 is SET ASIDE and Criminal Case Nos. 6076, 6077, 6078,
6079, 6080, and 6081 before the Regional Trial Court of Iriga City are DISMISSED. Costs de oficio.
SO ORDERED.

Metrobank v Rosales Yu Yuk To

Bank deposits, which are in the nature of a simple loan or mutuum,1 must be paid upon demand by the depositor.2

This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the April 2, 2008 Decision4 and the
May 30, 2008 Resolution5 of he Court of Appeals CA) in CA-G.R. CV No. 89086.
Factual Antecedents
Petitioner Metropolitan Bank and Trust Company is a domestic banking corporation duly organized and existing under the
laws of the Philippines.6 Respondent Ana Grace Rosales (Rosales) is the owner of China Golden Bridge Travel
Services,7 a travel agency.8 Respondent Yo Yuk To is the mother of respondent Rosales.9
In 2000, respondents opened a Joint Peso Account10 with petitioners Pritil-Tondo Branch.11 As of August 4, 2004,
respondents Joint Peso Account showed a balance of P2,515,693.52.12
In May 2002, respondent Rosales accompanied her client Liu Chiu Fang, a Taiwanese National applying for a retirees
visa from the Philippine Leisure and Retirement Authority (PLRA), to petitioners branch in Escolta to open a savings
account, as required by the PLRA.13 Since Liu Chiu Fang could speak only in Mandarin, respondent Rosales acted as an
interpreter for her.14
On March 3, 2003, respondents opened with petitioners Pritil-Tondo Branch a Joint Dollar Account15 with an initial
deposit of US$14,000.00.16
On July 31, 2003, petitioner issued a "Hold Out" order against respondents accounts.17
On September 3, 2003, petitioner, through its Special Audit Department Head Antonio Ivan Aguirre, filed before the Office
of the Prosecutor of Manila a criminal case for Estafa through False Pretences, Misrepresentation, Deceit, and Use of
Falsified Documents, docketed as I.S. No. 03I-25014,18 against respondent Rosales.19 Petitioner accused respondent
Rosales and an unidentified woman as the ones responsible for the unauthorized and fraudulent withdrawal of
US$75,000.00 from Liu Chiu Fangs dollar account with petitioners Escolta Branch.20 Petitioner alleged that on February
5, 2003, its branch in Escolta received from the PLRA a Withdrawal Clearance for the dollar account of Liu Chiu Fang;21
that in the afternoon of the same day, respondent Rosales went to petitioners Escolta Branch to inform its Branch Head,
Celia A. Gutierrez (Gutierrez), that Liu Chiu Fang was going to withdraw her dollar deposits in cash;22 that Gutierrez told
respondent Rosales to come back the following day because the bank did not have enough dollars;23 that on February 6,
2003, respondent Rosales accompanied an unidentified impostor of Liu Chiu Fang to the bank;24 that the impostor was
able to withdraw Liu Chiu Fangs dollar deposit in the amount of US$75,000.00;25 that on March 3, 2003, respondents
opened a dollar account with petitioner; and that the bank later discovered that the serial numbers of the dollar notes
deposited by respondents in the amount of US$11,800.00 were the same as those withdrawn by the impostor.26
Respondent Rosales, however, denied taking part in the fraudulent and unauthorized withdrawal from the dollar account
of Liu Chiu Fang.27 Respondent Rosales claimed that she did not go to the bank on February 5, 2003.28 Neither did she
inform Gutierrez that Liu Chiu Fang was going to close her account.29 Respondent Rosales further claimed that after Liu
Chiu Fang opened an account with petitioner, she lost track of her.30 Respondent Rosales version of the events that
transpired thereafter is as follows:
On February 6, 2003, she received a call from Gutierrez informing her that Liu Chiu Fang was at the bank to close her
account.31 At noon of the same day, respondent Rosales went to the bank to make a transaction.32 While she was
transacting with the teller, she caught a glimpse of a woman seated at the desk of the Branch Operating Officer, Melinda
Perez (Perez).33 After completing her transaction, respondent Rosales approached Perez who informed her that Liu Chiu
Fang had closed her account and had already left.34 Perez then gave a copy of the Withdrawal Clearance issued by the
PLRA to respondent Rosales.35 On June 16, 2003, respondent Rosales received a call from Liu Chiu Fang inquiring
about the extension of her PLRA Visa and her dollar account.36 It was only then that Liu Chiu Fang found out that her
account had been closed without her knowledge.37 Respondent Rosales then went to the bank to inform Gutierrez and
Perez of the unauthorized withdrawal.38 On June 23, 2003, respondent Rosales and Liu Chiu Fang went to the PLRA
Office, where they were informed that the Withdrawal Clearance was issued on the basis of a Special Power of Attorney
(SPA) executed by Liu Chiu Fang in favor of a certain Richard So.39 Liu Chiu Fang, however, denied executing the
SPA.40 The following day, respondent Rosales, Liu Chiu Fang, Gutierrez, and Perez met at the PLRA Office to discuss
the unauthorized withdrawal.41 During the conference, the bank officers assured Liu Chiu Fang that the money would be
returned to her.42
On December 15, 2003, the Office of the City Prosecutor of Manila issued a Resolution dismissing the criminal case for
lack of probable cause.43 Unfazed, petitioner moved for reconsideration.
On September 10, 2004, respondents filed before the Regional Trial Court (RTC) of Manila a Complaint44 for Breach of
Obligation and Contract with Damages, docketed as Civil Case No. 04110895 and raffled to Branch 21, against petitioner.
Respondents alleged that they attempted several times to withdraw their deposits but were unable to because petitioner
had placed their accounts under "Hold Out" status.45 No explanation, however, was given by petitioner as to why it issued
the "Hold Out" order.46 Thus, they prayed that the "Hold Out" order be lifted and that they be allowed to withdraw their
deposits.47 They likewise prayed for actual, moral, and exemplary damages, as well as attorneys fees.48

Petitioner alleged that respondents have no cause of action because it has a valid reason for issuing the "Hold Out"
order.49 It averred that due to the fraudulent scheme of respondent Rosales, it was compelled to reimburse Liu Chiu Fang
the amount of US$75,000.0050 and to file a criminal complaint for Estafa against respondent Rosales.51
While the case for breach of contract was being tried, the City Prosecutor of Manila issued a Resolution dated February
18, 2005, reversing the dismissal of the criminal complaint.52 An Information, docketed as Criminal Case No. 05236103,53 was then filed charging respondent Rosales with Estafa before Branch 14 of the RTC of Manila.54
Ruling of the Regional Trial Court
On January 15, 2007, the RTC rendered a Decision55 finding petitioner liable for damages for breach of contract.56 The
RTC ruled that it is the duty of petitioner to release the deposit to respondents as the act of withdrawal of a bank deposit is
an act of demand by the creditor.57 The RTC also said that the recourse of petitioner is against its negligent employees
and not against respondents.58 The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering [petitioner] METROPOLITAN BANK &
TRUST COMPANY to allow [respondents] ANA GRACE ROSALES and YO YUK TO to withdraw their Savings and Time
Deposits with the agreed interest, actual damages of P50,000.00, moral damages of P50,000.00, exemplary damages of
P30,000.00 and 10% of the amount due [respondents] as and for attorneys fees plus the cost of suit.
The counterclaim of [petitioner] is hereby DISMISSED for lack of merit.
SO ORDERED.59
Ruling of the Court of Appeals
Aggrieved, petitioner appealed to the CA.
On April 2, 2008, the CA affirmed the ruling of the RTC but deleted the award of actual damages because "the basis for
[respondents] claim for such damages is the professional fee that they paid to their legal counsel for [respondent]
Rosales defense against the criminal complaint of [petitioner] for estafa before the Office of the City Prosecutor of Manila
and not this case."60 Thus, the CA disposed of the case in this wise:
WHEREFORE, premises considered, the Decision dated January 15, 2007 of the RTC, Branch 21, Manila in Civil Case
No. 04-110895 is AFFIRMED with MODIFICATION that the award of actual damages to [respondents] Rosales and Yo
Yuk To is hereby DELETED.
SO ORDERED.61
Petitioner sought reconsideration but the same was denied by the CA in its May 30, 2008 Resolution.62
Issues
Hence, this recourse by petitioner raising the following issues:
A. THE [CA] ERRED IN RULING THAT THE "HOLD-OUT" PROVISION IN THE APPLICATION AND AGREEMENT FOR
DEPOSIT ACCOUNT DOES NOT APPLY IN THIS CASE.
B. THE [CA] ERRED WHEN IT RULED THAT PETITIONERS EMPLOYEES WERE NEGLIGENT IN RELEASING LIU
CHIU FANGS FUNDS.
C. THE [CA] ERRED IN AFFIRMING THE AWARD OF MORAL DAMAGES, EXEMPLARY DAMAGES, AND
ATTORNEYS FEES.63
Petitioners Arguments
Petitioner contends that the CA erred in not applying the "Hold Out" clause stipulated in the Application and Agreement for
Deposit Account.64 It posits that the said clause applies to any and all kinds of obligation as it does not distinguish
between obligations arising ex contractu or ex delictu.65 Petitioner also contends that the fraud committed by respondent
Rosales was clearly established by evidence;66 thus, it was justified in issuing the "Hold-Out" order.67 Petitioner likewise
denies that its employees were negligent in releasing the dollars.68 It claims that it was the deception employed by
respondent Rosales that caused petitioners employees to release Liu Chiu Fangs funds to the impostor.69
Lastly, petitioner puts in issue the award of moral and exemplary damages and attorneys fees. It insists that respondents
failed to prove that it acted in bad faith or in a wanton, fraudulent, oppressive or malevolent manner.70
Respondents Arguments

Respondents, on the other hand, argue that there is no legal basis for petitioner to withhold their deposits because they
have no monetary obligation to petitioner.71 They insist that petitioner miserably failed to prove its accusations against
respondent Rosales.72 In fact, no documentary evidence was presented to show that respondent Rosales participated in
the unauthorized withdrawal.73 They also question the fact that the list of the serial numbers of the dollar notes
fraudulently withdrawn on February 6, 2003, was not signed or acknowledged by the alleged impostor.74 Respondents
likewise maintain that what was established during the trial was the negligence of petitioners employees as they allowed
the withdrawal of the funds without properly verifying the identity of the depositor.75 Furthermore, respondents contend
that their deposits are in the nature of a loan; thus, petitioner had the obligation to return the deposits to them upon
demand.76 Failing to do so makes petitioner liable to pay respondents moral and exemplary damages, as well as
attorneys fees.77
Our Ruling
The Petition is bereft of merit.
At the outset, the relevant issues in this case are (1) whether petitioner breached its contract with respondents, and (2) if
so, whether it is liable for damages. The issue of whether petitioners employees were negligent in allowing the withdrawal
of Liu Chiu Fangs dollar deposits has no bearing in the resolution of this case. Thus, we find no need to discuss the
same.
The "Hold Out" clause does not apply to the instant case.
Petitioner claims that it did not breach its contract with respondents because it has a valid reason for issuing the "Hold
Out" order. Petitioner anchors its right to withhold respondents deposits on the Application and Agreement for Deposit
Account, which reads:
Authority to Withhold, Sell and/or Set Off:
The Bank is hereby authorized to withhold as security for any and all obligations with the Bank, all monies, properties or
securities of the Depositor now in or which may hereafter come into the possession or under the control of the Bank,
whether left with the Bank for safekeeping or otherwise, or coming into the hands of the Bank in any way, for so much
thereof as will be sufficient to pay any or all obligations incurred by Depositor under the Account or by reason of any other
transactions between the same parties now existing or hereafter contracted, to sell in any public or private sale any of
such properties or securities of Depositor, and to apply the proceeds to the payment of any Depositors obligations
heretofore mentioned.
JOINT ACCOUNT
The Bank may, at any time in its discretion and with or without notice to all of the Depositors, assert a lien on any balance
of the Account and apply all or any part thereof against any indebtedness, matured or unmatured, that may then be owing
to the Bank by any or all of the Depositors. It is understood that if said indebtedness is only owing from any of the
Depositors, then this provision constitutes the consent by all of the depositors to have the Account answer for the said
indebtedness to the extent of the equal share of the debtor in the amount credited to the Account.78
Petitioners reliance on the "Hold Out" clause in the Application and Agreement for Deposit Account is misplaced.
The "Hold Out" clause applies only if there is a valid and existing obligation arising from any of the sources of obligation
enumerated in Article 115779 of the Civil Code, to wit: law, contracts, quasi-contracts, delict, and quasi-delict. In this case,
petitioner failed to show that respondents have an obligation to it under any law, contract, quasi-contract, delict, or quasidelict. And although a criminal case was filed by petitioner against respondent Rosales, this is not enough reason for
petitioner to issue a "Hold Out" order as the case is still pending and no final judgment of conviction has been rendered
against respondent Rosales. In fact, it is significant to note that at the time petitioner issued the "Hold Out" order, the
criminal complaint had not yet been filed. Thus, considering that respondent Rosales is not liable under any of the five
sources of obligation, there was no legal basis for petitioner to issue the "Hold Out" order. Accordingly, we agree with the
findings of the RTC and the CA that the "Hold Out" clause does not apply in the instant case.
In view of the foregoing, we find that petitioner is guilty of breach of contract when it unjustifiably refused to release
respondents deposit despite demand. Having breached its contract with respondents, petitioner is liable for damages.
Respondents are entitled to moral and exemplary damages and attorneys fees.
In cases of breach of contract, moral damages may be recovered only if the defendant acted fraudulently or in bad
faith,80 or is "guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations."81
In this case, a review of the circumstances surrounding the issuance of the "Hold Out" order reveals that petitioner issued
the "Hold Out" order in bad faith. First of all, the order was issued without any legal basis. Second, petitioner did not
inform respondents of the reason for the "Hold Out."82 Third, the order was issued prior to the filing of the criminal

complaint. Records show that the "Hold Out" order was issued on July 31, 2003,83 while the criminal complaint was filed
only on September 3, 2003.84 All these taken together lead us to conclude that petitioner acted in bad faith when it
breached its contract with respondents. As we see it then, respondents are entitled to moral damages.
As to the award of exemplary damages, Article 222985 of the Civil Code provides that exemplary damages may be
imposed "by way of example or correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages." They are awarded only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner.86
In this case, we find that petitioner indeed acted in a wanton, fraudulent, reckless, oppressive or malevolent manner when
it refused to release the deposits of respondents without any legal basis. We need not belabor the fact that the banking
industry is impressed with public interest.87 As such, "the highest degree of diligence is expected, and high standards of
integrity and performance are even required of it."88 It must therefore "treat the accounts of its depositors with meticulous
care and always to have in mind the fiduciary nature of its relationship with them."89 For failing to do this, an award of
exemplary damages is justified to set an example.
The award of attorney's fees is likewise proper pursuant to paragraph 1, Article 220890 of the Civil Code.
In closing, it must be stressed that while we recognize that petitioner has the right to protect itself from fraud or suspicions
of fraud, the exercise of his right should be done within the bounds of the law and in accordance with due process, and
not in bad faith or in a wanton disregard of its contractual obligation to respondents.
WHEREFORE, the Petition is hereby DENIED. The assailed April 2, 2008 Decision and the May 30, 2008 Resolution of
the Court of Appeals in CA-G.R. CV No. 89086 are hereby AFFIRMED. SO ORDERED.

Serrano v Central Bank

Petition for mandamus and prohibition, with preliminary injunction, that seeks the establishment of joint and solidary
liability to the amount of Three Hundred Fifty Thousand Pesos, with interest, against respondent Central Bank of the
Philippines and Overseas Bank of Manila and its stockholders, on the alleged failure of the Overseas Bank of Manila to
return the time deposits made by petitioner and assigned to him, on the ground that respondent Central Bank failed in its
duty to exercise strict supervision over respondent Overseas Bank of Manila to protect depositors and the general public.
1 Petitioner also prays that both respondent banks be ordered to execute the proper and necessary documents to
constitute all properties fisted in Annex "7" of the Answer of respondent Central Bank of the Philippines in G.R. No. L29352, entitled "Emerita M. Ramos, et al vs. Central Bank of the Philippines," into a trust fund in favor of petitioner and all
other depositors of respondent Overseas Bank of Manila. It is also prayed that the respondents be prohibited permanently
from honoring, implementing, or doing any act predicated upon the validity or efficacy of the deeds of mortgage,
assignment. and/or conveyance or transfer of whatever nature of the properties listed in Annex "7" of the Answer of
respondent Central Bank in G.R. No. 29352. 2
A sought for ex-parte preliminary injunction against both respondent banks was not given by this Court.
Undisputed pertinent facts are:
On October 13, 1966 and December 12, 1966, petitioner made a time deposit, for one year with 6% interest, of One
Hundred Fifty Thousand Pesos (P150,000.00) with the respondent Overseas Bank of Manila. 3 Concepcion Maneja also
made a time deposit, for one year with 6-% interest, on March 6, 1967, of Two Hundred Thousand Pesos (P200,000.00)
with the same respondent Overseas Bank of Manila. 4
On August 31, 1968, Concepcion Maneja, married to Felixberto M. Serrano, assigned and conveyed to petitioner Manuel
M. Serrano, her time deposit of P200,000.00 with respondent Overseas Bank of Manila. 5
Notwithstanding series of demands for encashment of the aforementioned time deposits from the respondent Overseas
Bank of Manila, dating from December 6, 1967 up to March 4, 1968, not a single one of the time deposit certificates was
honored by respondent Overseas Bank of Manila. 6
Respondent Central Bank admits that it is charged with the duty of administering the banking system of the Republic and
it exercises supervision over all doing business in the Philippines, but denies the petitioner's allegation that the Central
Bank has the duty to exercise a most rigid and stringent supervision of banks, implying that respondent Central Bank has
to watch every move or activity of all banks, including respondent Overseas Bank of Manila. Respondent Central Bank
claims that as of March 12, 1965, the Overseas Bank of Manila, while operating, was only on a limited degree of banking
operations since the Monetary Board decided in its Resolution No. 322, dated March 12, 1965, to prohibit the Overseas
Bank of Manila from making new loans and investments in view of its chronic reserve deficiencies against its deposit
liabilities. This limited operation of respondent Overseas Bank of Manila continued up to 1968. 7

Respondent Central Bank also denied that it is guarantor of the permanent solvency of any banking institution as claimed
by petitioner. It claims that neither the law nor sound banking supervision requires respondent Central Bank to advertise
or represent to the public any remedial measures it may impose upon chronic delinquent banks as such action may
inevitably result to panic or bank "runs". In the years 1966-1967, there were no findings to declare the respondent
Overseas Bank of Manila as insolvent. 8
Respondent Central Bank likewise denied that a constructive trust was created in favor of petitioner and his predecessor
in interest Concepcion Maneja when their time deposits were made in 1966 and 1967 with the respondent Overseas Bank
of Manila as during that time the latter was not an insolvent bank and its operation as a banking institution was being
salvaged by the respondent Central Bank. 9
Respondent Central Bank avers no knowledge of petitioner's claim that the properties given by respondent Overseas
Bank of Manila as additional collaterals to respondent Central Bank of the Philippines for the former's overdrafts and
emergency loans were acquired through the use of depositors' money, including that of the petitioner and Concepcion
Maneja. 10
In G.R. No. L-29362, entitled "Emerita M. Ramos, et al. vs. Central Bank of the Philippines," a case was filed by the
petitioner Ramos, wherein respondent Overseas Bank of Manila sought to prevent respondent Central Bank from closing,
declaring the former insolvent, and liquidating its assets. Petitioner Manuel Serrano in this case, filed on September 6,
1968, a motion to intervene in G.R. No. L-29352, on the ground that Serrano had a real and legal interest as depositor of
the Overseas Bank of Manila in the matter in litigation in that case. Respondent Central Bank in G.R. No. L-29352
opposed petitioner Manuel Serrano's motion to intervene in that case, on the ground that his claim as depositor of the
Overseas Bank of Manila should properly be ventilated in the Court of First Instance, and if this Court were to allow
Serrano to intervene as depositor in G.R. No. L-29352, thousands of other depositors would follow and thus cause an
avalanche of cases in this Court. In the resolution dated October 4, 1968, this Court denied Serrano's, motion to
intervene. The contents of said motion to intervene are substantially the same as those of the present petition. 11
This Court rendered decision in G.R. No. L-29352 on October 4, 1971, which became final and executory on March 3,
1972, favorable to the respondent Overseas Bank of Manila, with the dispositive portion to wit:
WHEREFORE, the writs prayed for in the petition are hereby granted and respondent Central Bank's resolution Nos.
1263, 1290 and 1333 (that prohibit the Overseas Bank of Manila to participate in clearing, direct the suspension of its
operation, and ordering the liquidation of said bank) are hereby annulled and set aside; and said respondent Central Bank
of the Philippines is directed to comply with its obligations under the Voting Trust Agreement, and to desist from taking
action in violation therefor. Costs against respondent Central Bank of the Philippines. 12
Because of the above decision, petitioner in this case filed a motion for judgment in this case, praying for a decision on
the merits, adjudging respondent Central Bank jointly and severally liable with respondent Overseas Bank of Manila to the
petitioner for the P350,000 time deposit made with the latter bank, with all interests due therein; and declaring all assets
assigned or mortgaged by the respondents Overseas Bank of Manila and the Ramos groups in favor of the Central Bank
as trust funds for the benefit of petitioner and other depositors. 13
By the very nature of the claims and causes of action against respondents, they in reality are recovery of time deposits
plus interest from respondent Overseas Bank of Manila, and recovery of damages against respondent Central Bank for its
alleged failure to strictly supervise the acts of the other respondent Bank and protect the interests of its depositors by
virtue of the constructive trust created when respondent Central Bank required the other respondent to increase its
collaterals for its overdrafts said emergency loans, said collaterals allegedly acquired through the use of depositors
money. These claims shoud be ventilated in the Court of First Instance of proper jurisdiction as We already pointed out
when this Court denied petitioner's motion to intervene in G.R. No. L-29352. Claims of these nature are not proper in
actions for mandamus and prohibition as there is no shown clear abuse of discretion by the Central Bank in its exercise of
supervision over the other respondent Overseas Bank of Manila, and if there was, petitioner here is not the proper party to
raise that question, but rather the Overseas Bank of Manila, as it did in G.R. No. L-29352. Neither is there anything to
prohibit in this case, since the questioned acts of the respondent Central Bank (the acts of dissolving and liquidating the
Overseas Bank of Manila), which petitioner here intends to use as his basis for claims of damages against respondent
Central Bank, had been accomplished a long time ago.
Furthermore, both parties overlooked one fundamental principle in the nature of bank deposits when the petitioner
claimed that there should be created a constructive trust in his favor when the respondent Overseas Bank of Manila
increased its collaterals in favor of respondent Central Bank for the former's overdrafts and emergency loans, since these
collaterals were acquired by the use of depositors' money.
Bank deposits are in the nature of irregular deposits. They are really loans because they earn interest. All kinds of bank
deposits, whether fixed, savings, or current are to be treated as loans and are to be covered by the law on loans. 14
Current and savings deposit are loans to a bank because it can use the same. The petitioner here in making time deposits
that earn interests with respondent Overseas Bank of Manila was in reality a creditor of the respondent Bank and not a

depositor. The respondent Bank was in turn a debtor of petitioner. Failure of the respondent Bank to honor the time
deposit is failure to pay its obligation as a debtor and not a breach of trust arising from depositary's failure to return the
subject matter of the deposit
WHEREFORE, the petition is dismissed for lack of merit, with costs against petitioner.
SO ORDERED.

Santos v CA
Appeal by certiorari from the decision of the then Court of Appeals in CA-G.R. No. SP-13056, affirming the one rendered
by the then Court of First Instance of Manila, Branch XVI, in Civil Case No. 138472.
Records show that herein private respondent Aurora Gutierrez instituted an unlawful detainer case in the then City Court
of Manila against herein petitioners Arturo P. Santos and Adelina Y. Santos on grounds that she needs the premises for
her personal use and the necessity of repairs thereon, and that the petitioners were delinquent in the payment of rentals.
In their Answer with Counterclaim, Petitioners, among others, admitted that they are "the legitimate tenants and/or lessees
of the subject apartment with the present rental rate of P250.00 a month on a month-to-month contract of lease." (p. 62,
Rollo)
After trial, the City Court rendered judgment
"Premises considered, this Court hereby renders judgment for the plaintiff and against the defendants and hereby orders
the defendants and all persons claiming under them to vacate the premises in question known as No. 1836 Cavite St.,
Sta. Cruz, Manila and surrender its possession to the plaintiff.
"The defendants are further ordered to pay the plaintiff P2,500.00 as rentals for the period December 1978 through
September 1979, and, further to pay the plaintiff rentals at the rate of P250.00 per month from October 1979 until such
time as possession of the premises in question shall have been restored to the plaintiff minus whatever amount may have
been already received by the plaintiff from deposits made in Court. The defendants are further ordered to pay the plaintiff
P1,000.00 as and for attorneys fees plus costs of suit. All claims by the defendants against the plaintiff are dismissed, for
lack of merit." (p. 74, Rollo).
Petitioners appealed the foregoing judgment to the then Court of First Instance which found the same "in accordance with
both the evidence and the law" and affirmed the decision. Thereafter, petitioners went to the Court of Appeals on a petition
for review and the latter, on January 29, 1982, rendered judgment as follows:chanrobles lawlibrary : rednad
"PREMISES CONSIDERED, there being substantial evidence to support the decision under review, the instant petition is
hereby DENIED DUE COURSE and is resultantly hereby DISMISSED." (p. 22, Rollo)
Hence, this petition for review on certiorari, the Santoses submitting that (1) they were never delinquent in the payment of
rentals only the collector failed to get the money and since the whereabouts of private respondent was unknown, they
were forced to deposit them to the bank; (2) the mere sending of a notice to vacate by registered mail which the postal
clerk refused to deliver to them for the reason of wrong name cannot be considered sufficient compliance with the
jurisdictional requirement of notice; (3) they have been leasing the apartment for 28 years and are therefore entitled to
preferential right to purchase their unit under Presidential Decree No. 1517; (4) there is no real need of the premises by
private respondent; (5) it was an error to order their ejectment without complying with the mandatory requirements of
Batas Pambansa Blg. 25 and the ruling in Rantael v. Llave, 97 SCRA 453; (6) respondent court erred in stating that a
contract of lease of residential apartment involving a rental of P250.00 a month may be terminated at the end of the month
without default on the part of the lessee; (7) there was improper change of theory on appeal on the part of private
respondent; and, (8) there was error in affirming the decision of the lower court.
We find no merit in the petition.
1.
Petitioners, in their "Answer with Counterclaim" (Annex "B", Petition, page 62, Rollo) admit that they are "the
legitimate tenants and/or lessees of the subject apartment with the present rental rate of P250.00 a month on a month-tomonth contract of lease." (Emphasis supplied)
The aforequoted provision of the agreement on occupancy of the apartment cannot but mean as providing for a definite
period of the lease. The parties expressly agreed that upon proper notice, one may terminate the agreement. As stated in
Rantael v. Court of Appeals, 97 SCRA 453, 459
". . . The contractual relations between petitioner Rantael and respondent Llave ceased after the expiration of the first
thirty days reckoned from August 1, 1974 but continued for the next thirty-day period and expired after the last day

thereof, repeating the same cycle for the succeeding thirty-day periods, until the said respondent Llave exercised her
express prerogative under the agreement to terminate the same."cralaw virtua1aw library
2.
Paragraph 1 of Article 1673 of the Civil Code is an exception to Section 4 of Presidential Decree No. 20. Said
Section 1 of Article 1673 provides
"Art. 1673.

The lessor may judicially eject the lessee for any of the following causes:chanrob1es virtual 1aw library

(1)
When the period agreed upon, or that which is fixed for the duration of lease under article 1682 and 1687, has
expired;"
Thus, judicial ejectment lies when the lease is for a definite period or when the fixed or definite period agreed upon has
expired. The lease in the case at bar having a definite period, it follows that private respondents right to judicially eject
petitioners from the premises may be enforced. As aptly stated by respondent Court of Appeals," [e]ven on the strength
alone of the Rantael ruling, the petitioners can be lawfully ejected, regardless of the motive or intent of the lessor-private
Respondent. We thus see no point in discussing the other issues raised except to state that P.D. No. 1517, in referring to
the pre-emptive or redemptive right of a lease speaks only of urban land under lease on which a tenant has built his home
and in which he has resided for ten years or more. If both land and the building belong to the lessor, the right referred to
hereinabove does not apply." (p. 22, Rollo).
ACCORDINGLY, judgment is hereby rendered DISMISSING the instant petition for review and AFFIRMING the decision of
respondent Court of Appeals. With costs.
SO ORDERED.

Office of Solicitor General v Ayala Land

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 Decision[2] dated 25 January 2007 of
the Court of Appeals in CA-G.R. CV No. 76298, which affirmed in toto the Joint Decision[3] 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
Resolution[4] 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. 225[5] 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 Relief[8] 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. 001210 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 Order[12] of 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).[]
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.[17]
CA-G.R. CV No. 76298 involved the separate appeals of the OSG[18] and respondent SM Prime[19] 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. 001208 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).
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. Gonzales[28] and City of Ozamis v.
Lumapas[29] 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.[37]
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 Ericta[38] 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.

Inocencio v CA
This is a petition for review seeking the reversal of the decision[1] dated April 28, 1995, of the Court of Appeals in CA-G.R.
SP No. 35271 affirming the orders dated May 5, 1994,[2] July 12, 1994[3] and September 1, 1994,[4] respectively, of the
Regional Trial Court of Malolos Bulacan, Branch 22, granting the motion for execution of compromise judgment dated
September 22, 1993 in Civil Case No. 233-M-92.
The facts, as culled from the records, are as follows:
Private respondents spouses Mario and Gregoria Geronimo obtained a loan in the amount of One Million Twenty Eight
Thousand Pesos (P1,028,000) from petitioners, the spouses Inocencio and Adoracion San Antonio. To secure the loan,
private respondents mortgaged two parcels of land covered by TCT No. RT-6653 with an area of 10,390 square meters
and TCT No. RT-6652 with an area of 2,556 square meters, both situated in Barrio Tabe, Guiguinto, Bulacan.
Subsequently, private respondents obtained an additional loan of Nine Hundred Ninety One Thousand Eight Hundred Fifty
Nine Pesos (P991,859) with an interest of 3.33% per month, thus making their total obligation in the amount of Two Million
Nineteen Thousand Eight Hundred Fifty Nine Pesos (P2,019,859), payable on or before February 15, 1991. Private
respondents failed to pay the loan and the interest on the due date, hence, the mortgage was extrajudicially foreclosed.
During the auction sale, petitioners, being the highest bidder bought the two parcels of land.
Before the one-year redemption period expired, private respondents filed a complaint for annulment of extrajudicial
foreclosure with preliminary mandatory injunction, docketed as Civil Case No. 233-M-92, with the Regional Trial Court of
Bulacan, Branch 22. After the parties presented their respective evidence, they submitted to the court on September 16,
1993, a compromise agreement dated August 25, 1993, the terms and conditions of which are quoted as follows:
COME NOW parties assisted by their respective counsels and before the Honorable Court most respectfully submit this
compromise agreement, the terms and conditions of which are:
1. For a consideration of TWO MILLION PESOS (P2,000,000.00), Philippine Currency, in hand received today by the
defendants spouses Inocencio and Adoracion San Antonio from the plaintiffs, defendants San Antonio will execute a deed
of resale/reconveyance/redemption of that subject property covered by TCT No. RT-6653 (T-209250) of the Registry of
Deeds of Bulacan including its improvements;
2. For the release/resale/reconveyance of the other property involved in the case described in TCT No. RT-6652 (T296744) of the Registry of Deeds of Bulacan together with its improvements, plaintiffs obligate themselves to transfer the
ownership of the following to the defendants San Antonio.
a. That lot including its improvements situated in Brgy. Tuctucan, Municipality of Guiguinto, Bulacan, covered by TCT No.
29832, Blk. 4, Lot No. 3 consisting of 135 square meters;
b. That lot situated in Brgy. Tuctucan, Municipality of Guiguinto, Bulacan covered by TCT No. 30078, Blk. 9, Lot 27
consisting of 78 square meters;

c. Another lot situated in Brgy. Tuctucan, Municipality of Guiguinto, Bulacan, covered by TCT No. 30079, Blk. No. 38
consisting of 75 square meters.
within six (6) months from signing of this compromise agreement simultaneous to which delivery of the title to the aforementioned properties in the names of the defendants San Antonio, the defendants San Antonio will execute the
corresponding instrument of resale/reconveyance/redemption over that property together with its improvements covered
by TCT No. RT-6652 (T-296744), for the purpose of the cancellation of the annulment of the sale in the title subject to the
condition that should plaintiffs fail to deliver the titles to the three lots heretofore mentioned to the defendants San Antonio,
the said plaintiffs shall be deemed to have waived and renounced any all rights, claims and demands whatsoever they
may have over that property covered by TCT No. RT-6652 (T-296744) including its improvements and thenceforth bind
themselves to respect the right of ownership, and possession of the defendants San Antonio over said property, or to pay
Two Million Pesos (P2,000,000.00) within the same period;
3. That the parties further agree to set aside any claim, damages and counterclaims they may have against each other;
4. That in the meantime, the possession of the plaintiffs of the subject property covering TCT No. 6652 (T-296744) and
TCT No. RT-6653 (T-209250) shall it be respect; (SIC)
5. This compromise agreement shall be in full settlement of the obligations of the plaintiffs with respect to Kasulatan ng
Sanglaan dated February 14, 1989 and the Susog ng Kasulatan ng Sanglaan dated July 16, 1990, subject matter of the
complaint, and those related therein;
6. This compromise agreement is immediately executory. (underscoring supplied).[5]
Finding the above to be in order, the trial court approved the same in its order dated September 22, 1993, thus:
A careful perusal of the Compromise Agreement dated August 25, 1993 reveals that the terms and conditions thereof are
not contrary to law, morals and public policy.
ACCORDINGLY, the compromise agreement dated August 25, 1993 is hereby APPROVED. The parties are enjoined to
comply faithfully with their obligation under said agreement.
SO ORDERED.[6]
In accordance with the stipulations in paragraph 1 of the Compromise Agreement, petitioners executed a Certificate of
Redemption and Cancellation of Sale covering TCT No. RT-6653 after private respondents paid them Two Million Pesos
(P2,000,000). Private respondents, however, failed to transfer the ownership and deliver the titles of the three parcels of
land described in paragraph 2 of the agreement or to pay 2 Million Pesos within the six-month period from August 25,
1993. It was only on March 4, 1994, after the lapse of six months that private respondents delivered the three titles to
petitioners. As the delivery was beyond the agreed six-month period, petitioners refused to accept the same or execute an
instrument for the resale, reconveyance or redemption of the property covered by TCT No. RT-6652. Consequently, TCT
No. RT-6652 was cancelled and in lieu thereof, TCT No. T-47229 was issued in the names of petitioners.
Private respondents filed a motion for execution of the September 22, 1993 order with the trial court. This was granted on
May 5, 1994. Petitioners filed a motion for reconsideration but this was denied on July 12, 1994. A second motion for
reconsideration by petitioners was likewise denied in an order dated September 1, 1994.
Petitioners filed a Petition for Certiorari with application for a Temporary Restraining Order and/or Writ of Preliminary
Injunction with the Court of Appeals. As said earlier, the Court of Appeals denied the petition on April 28, 1995, thus:
WHEREFORE, the petition for certiorari is hereby DENIED DUE COURSE, and is DISMISSED. The Orders of respondent
court dated May 1[5], July 12, and September 1, 1994 are AFFIRMED.
SO ORDERED.[7]
Hence this petition for review wherein petitioners aver that the Court of Appeals erred in:
I. RULING THAT THE ORDER DATED MAY 5, 1994 DID NOT SUBSTANTIALLY AMEND THE FINAL AND EXECUTORY
JUDGMENT RENDERED BASED ON A COMPROMISE AGREEMENT.
II. RULING THAT THE PRINCIPLE OF EQUITY IS A GROUND TO JUSTIFY THE AMENDMENT OF A FINAL AND
EXECUTORY JUDGMENT.
III. RULING THAT THE DELAY IN THE DELIVERY OF THE TITLES IS ATTRIBUTABLE TO THE REGISTER OF DEEDS
OF BULACAN.
IV. APPLYING ARTICLE 1191 OF THE NEW CIVIL CODE.

V. NOT RULING THAT THE COMPROMISE AGREEMENT IS IMMEDIATELY EXECUTORY AS PROVIDED IN

PARAGRAPH 6 THEREOF.
VI. NOT RULING THAT PETITIONERS HAVE ALREADY COMPLIED WITH PARAGRAPH 1 OF THE COMPROMISE
AGREEMENT.[8]
In sum, petitioners raise the following issues for our resolution:
1. Did the trial court err in granting the writ to execute the compromise judgment?
2. Is Article 1191 of the New Civil Code applicable in this case?
On the first issue, did the trial court err in granting the writ to execute the compromise judgment? Petitioners claim that the
trial court did. The compromise agreement approved by the trial court in its order dated September 22, 1993, provided that
private respondents had six months within which to deliver the titles. If they failed, ownership of the land covered by TCT
No. RT-6652 would be transferred to petitioners. Petitioners contend that judgement based on a compromise is conclusive
upon the parties and is immediately executory. It has the force and effect of res judicata, hence it cannot be modified. The
trial court therefore, cannot compel petitioners, via a writ of execution, to accept the three titles beyond the six-month
period, because it is in effect an amendment to the compromise agreement, petitioners said. They explain that even on
equitable considerations this was not allowed because once a decision becomes final, the court which rendered it loses
jurisdiction over the case and it can no longer be modified except for clerical errors.
Petitioners also contend that private respondents should not blame the Register of Deeds for the delay in the delivery of
the three titles since private respondents submitted the registration documents to the Register of Deeds only on March 2,
1994, beyond the six-month period deadline.
Further, petitioners deny that they are guilty of delay for not executing the deed of resale, reconveyance or redemption
despite their receipt of two million pesos. They said that as early as August 25, 1993, they already executed a Certificate
of Redemption and Cancellation of Sale of the land covered by TCT No. RT-6653.
Private respondents counter that there has been no modification of the final judgment when the trial judge issued the writ
of execution, as the judge was merely performing a ministerial duty. Also, private respondents deny that they delivered the
three titles late and if ever the delivery was delayed it was the Register of Deeds who was to blame. Private respondents
additionally point out that in reciprocal obligations, like the ones in this case, delay sets in only when one party fulfills his
obligation and the other is unable to perform his part of the obligation. Likewise, a person obligated to deliver something
incurs in delay only after demand. As herein petitioners have not yet made the demand and as they have not yet
performed their part of the agreement, which was the execution of the deed of reconveyance, delay by private
respondents has not yet occurred.
We find petitioners petition impressed with merit.
A compromise agreement, once approved by final order of the court, has the force of res judicata between the parties and
should not be disturbed except for vices of consent or forgery.[9] In this case, the compromise agreement clearly provided
private respondents six months, i.e. from August 25, 1993 to February 25, 1994, to deliver the titles to the three parcels of
land described in the agreement. If after the lapse of the said period and no delivery is yet made by private respondents,
ownership over the land covered by TCT No. RT-6652 would be transferred to petitioners. As the facts of this case show,
private respondents failed to deliver the titles on February 25, 1994, as it was only on March 4, 1994, when they gave the
titles to petitioners. Hence, pursuant to the terms of the compromise agreement, petitioners could rightfully refuse
acceptance of the titles. It was error therefore for the trial court to grant the writ of execution in favor of private
respondents because it effectively compelled petitioners to accept delivery of the three titles in exchange for the release of
the land covered by TCT No. RT-6652 even after the lapse of the six-month period.
Private respondents claim that the trial court, in issuing the writ, was merely performing a ministerial duty. While it
becomes the trial courts ministerial duty to issue a writ of execution when a judgment or order becomes final and
executory, a writ of execution may be refused on equitable grounds.[10] In this case, it will be unjust to petitioners if we
compel them to accept the three titles despite the lapse of the agreed period. Contractual obligations between parties
have the force of law between them and absent any allegation that the same are contrary to law, morals, good customs,
public order or public policy, they must be complied with in good faith.[11]
Both the trial court and the Court of Appeals attributed to the Register of Deeds private respondents delay in the delivery
of the three titles. But as shown in their decisions, private respondents submitted to the Register of Deeds the pertinent
documents for registration of the three titles in petitioners name only on March 2, 1994, beyond the six-month period.[12]
Private respondents could have done so earlier, but they did not. This only shows that private respondents did not intend
to truly comply with their obligations.

As to the alleged delay on the part of petitioners in executing the Deed of Resale and Reconveyance, we find that this
point serves only to confuse the Court on the real facts of the case. Despite the fact that the compromise agreement
involved two parcels of land up for redemption, private respondents did not indicate as to which parcel of land petitioners
did not execute a deed of resale.[13] Nevertheless, private respondents admitted that petitioners already executed a
Certificate of Redemption.[14] For us, this was sufficient compliance of petitioners duty under the Compromise
Agreement.
Lastly, is Article 1191 of the New Civil Code[15] applicable in this case? According to petitioners, the Court of Appeals
erred when it found that private respondents delay did not constitute substantial breach to warrant rescission of the
compromise agreement. They assert that they were not seeking rescission of the compromise agreement but its full
enforcement regardless of whether the delay is slight or substantial.
While indeed private respondents did not meet head on this issue, we find that it should be properly addressed. In filing
the petition before the Court of Appeals, petitioners sought the appellate courts declaration that the trial court committed
grave abuse of discretion. In their view, the trial court should have enforced the compromise agreement instead of
rescinding it. Thus, it was error for the Court of Appeals to apply Article 1191 of the New Civil Code which concerns
rescission of contract. Applicable here is Article 1159 which enjoins compliance in good faith by the parties who entered
into a valid contract.[16] Compromise agreements are contracts, whereby the parties undertake reciprocal obligations to
avoid litigation, or put an end to one already commenced.[17]
WHEREFORE, the petition is GRANTED. The decision dated April 28, 1995, and resolution dated September 11, 1995, of
the Court of Appeals in CA-G.R. SP No. 35271 are REVERSED AND SET ASIDE. Accordingly, the orders dated May 5,
1994, July 12, 1994 and September 1, 1994, of the Regional Trial Court of Malolos, Bulacan, Branch 22, are hereby
declared NULL AND VOID. Private respondents are ordered to cease and desist from disturbing the ownership and
possession by petitioners of the parcel of land covered by TCT No. RT-6652. Costs against private respondents.
SO ORDERED.

William Golangco v PCIB

William Golangco Construction Corporation (WGCC) and the Philippine Commercial International Bank (PCIB) entered
into a contract for the construction of the extension of PCIB Tower II (denominated as PCIB Tower II, Extension Project
[project])2 on October 20, 1989. The project included, among others, the application of a granitite wash-out finish3 on the
exterior walls of the building.
PCIB, with the concurrence of its consultant TCGI Engineers (TCGI), accepted the turnover of the completed work by
WGCC in a letter dated June 1, 1992. To answer for any defect arising within a period of one year, WGCC submitted a
guarantee bond dated July 1, 1992 issued by Malayan Insurance Company, Inc. in compliance with the construction
contract.4
The controversy arose when portions of the granitite wash-out finish of the exterior of the building began peeling off and
falling from the walls in 1993. WGCC made minor repairs after PCIB requested it to rectify the construction defects. In
1994, PCIB entered into another contract with Brains and Brawn Construction and Development Corporation to re-do the
entire granitite wash-out finish after WGCC manifested that it was "not in a position to do the new finishing work," though it
was willing to share part of the cost. PCIB incurred expenses amounting to P11,665,000 for the repair work.
PCIB filed a request for arbitration with the Construction Industry Arbitration Commission (CIAC) for the reimbursement of
its expenses for the repairs made by another contractor. It complained of WGCCs alleged non-compliance with their
contractual terms on materials and workmanship. WGCC interposed a counterclaim for P5,777,157.84 for material cost
adjustment.
The CIAC declared WGCC liable for the construction defects in the project.5 WGCC filed a petition for review with the
Court of Appeals (CA) which dismissed it for lack of merit.6 Its motion for reconsideration was similarly denied.7
In this petition for review on certiorari, WGCC raises this main question of law: whether or not petitioner WGCC is liable
for defects in the granitite wash-out finish that occurred after the lapse of the one-year defects liability period provided in
Art. XI of the construction contract.8
We rule in favor of WGCC.
The controversy pivots on a provision in the construction contract referred to as the defects liability period:
ARTICLE XI GUARANTEE

Unless otherwise specified for specific works, and without prejudice to the rights and causes of action of the OWNER
under Article 1723 of the Civil Code, the CONTRACTOR hereby guarantees the work stipulated in this Contract, and shall
make good any defect in materials and workmanship which [becomes] evident within one (1) year after the final
acceptance of the work. The CONTRACTOR shall leave the work in perfect order upon completion and present the final
certificate to the ENGINEER promptly.
If in the opinion of the OWNER and ENGINEER, the CONTRACTOR has failed to act promptly in rectifying any defect in
the work which appears within the period mentioned above, the OWNER and the ENGINEER may, at their own discretion,
using the Guarantee Bond amount for corrections, have the work done by another contractor at the expense of the
CONTRACTOR or his bondsmen.
However, nothing in this section shall in any way affect or relieve the CONTRACTORS responsibility to the OWNER. On
the completion of the [w]orks, the CONTRACTOR shall clear away and remove from the site all constructional plant,
surplus materials, rubbish and temporary works of every kind, and leave the whole of the [s]ite and [w]orks clean and in a
workmanlike condition to the satisfaction of the ENGINEER and OWNER.9 (emphasis ours)
Although both parties based their arguments on the same stipulations, they reached conflicting conclusions. A careful
reading of the stipulations, however, leads us to the conclusion that WGCCs arguments are more tenable.
Autonomy of contracts
The autonomous nature of contracts is enunciated in Article 1306 of the Civil Code.
Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
Obligations arising from contracts have the force of law between the parties and should be complied with in good faith.10
In characterizing the contract as having the force of law between the parties, the law stresses the obligatory nature of a
binding and valid agreement.
The provision in the construction contract providing for a defects liability period was not shown as contrary to law, morals,
good customs, pubic order or public policy. By the nature of the obligation in such contract, the provision limiting liability
for defects and fixing specific guaranty periods was not only fair and equitable; it was also necessary. Without such
limitation, the contractor would be expected to make a perpetual guarantee on all materials and workmanship.
The adoption of a one-year guarantee, as done by WGCC and PCIB, is established usage in the Philippines for private
and government construction contracts.11 The contract did not specify a different period for defects in the granitite washout finish; hence, any defect therein should have been brought to WGCCs attention within the one-year defects liability
period in the contract.
We cannot countenance an interpretation that undermines a contractual stipulation freely and validly agreed upon. The
courts will not relieve a party from the effects of an unwise or unfavorable contract freely entered into.12
[T]he inclusion in a written contract for a piece of work [,] such as the one in question, of a provision defining a warranty
period against defects, is not uncommon. This kind of a stipulation is of particular importance to the contractor, for as a
general rule, after the lapse of the period agreed upon therein, he may no longer be held accountable for whatever
defects, deficiencies or imperfections that may be discovered in the work executed by him.13
Interpretation of contracts
To challenge the guarantee period provided in Article XI of the contract, PCIB calls our attention to Article 62.2 which
provides:
62.2 Unfulfilled Obligations
Notwithstanding the issue of the Defects Liability Certificate[,] the Contractor and the Owner shall remain liable for the
fulfillment of any obligation[,] incurred under the provisions of the Contract prior to the issue of the Defects Liability
Certificate[,] which remains unperformed at the time such Defects Liability Certificate is issued[. And] for the purpose of
determining the nature and extent of any such obligation, the Contract shall be deemed to remain in force between the
parties of the Contract. (emphasis ours)
The defects in the granitite wash-out finish were not the "obligation" contemplated in Article 62.2. It was not an obligation
that remained unperformed or unfulfilled at the time the defects liability certificate was issued. The alleged defects
occurred more than a year from the final acceptance by PCIB.
An examination of Article 1719 of the Civil Code is enlightening:

Art. 1719. Acceptance of the work by the employer relieves the contractor of liability for any defect in the work, unless:
(1) The defect is hidden and the employer is not, by his special knowledge, expected to recognize the same; or
(2) The employer expressly reserves his rights against the contractor by reason of the defect.
The lower courts conjectured that the peeling off of the granitite wash-out finish was probably due to "defective materials
and workmanship." This they characterized as hidden or latent defects. We, however, do not agree with the conclusion
that the alleged defects were hidden.
First, PCIBs team of experts14 (who were specifically employed to detect such defects early on) supervised WGCCs
workmanship. Second, WGCC regularly submitted progress reports and photographs. Third, WGCC worked under fair
and transparent circumstances. PCIB had access to the site and it exercised reasonable supervision over WGCCs work.
Fourth, PCIB issued several "punch lists" for WGCCs compliance before the issuance of PCIBs final certificate of
acceptance. Fifth, PCIB supplied the materials for the granitite wash-out finish. And finally, PCIBs team of experts gave
their concurrence to the turnover of the project.
The purpose of the defects liability period was precisely to give PCIB additional, albeit limited, opportunity to oblige
WGCC to make good any defect, hidden or otherwise, discovered within one year.
Contrary to the CAs conclusion, the first sentence of the third paragraph of Article XI on guarantee previously quoted did
not operate as a blanket exception to the one-year guarantee period under the first paragraph. Neither did it modify,
extend, nullify or supersede the categorical terms of the defects liability period.
Under the circumstances, there were no hidden defects for which WGCC could be held liable. Neither was there any other
defect for which PCIB made any express reservation of its rights against WGCC. Indeed, the contract should not be
interpreted to favor the one who caused the confusion, if any. The contract was prepared by TCGI for PCIB.15
WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 41152 is
ANNULED and SET ASIDE.
SO ORDERED.

Metrobank v marinas
This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to annul and set aside the Court of
Appeals (CA) Decision[1] dated July 31, 2007, affirming with modification the Regional Trial Court (RTC) decision[2] dated
October 14, 2004.
The factual and procedural antecedents are as follows:
Sometime in April 1998, respondent Larry Marias returned to the Philippines from the United States of America. He
opened a personal dollar savings account[3] by depositing US$100,000.00 with petitioner Metropolitan Bank and Trust
Company. On April 13, 1998, respondent obtained a loan from petitioner in the amount of P2,300,000.00, evidenced by
Promissory Note No. 355873.[4] From the initial deposit of US$100,000.00, respondent withdrew[5] US$67,227.95,[6]
then deposited it under Account No. 0-26400171-6 (Foreign Currency Deposit [FCD] No. 505671),[7] which he used as
security[8] for the P2,300,000.00 loan.
Respondent subsequently opened two more foreign currency accounts Account No. 0-26400244-5 (FCD No. 505688)
[9] and Account No. 0-264-00357-3 (FCD No. 739809)[10] depositing therein US$25,000.00 and US$17,000.00,
respectively. On April 30, 1999, respondent obtained a second loan of P645,150.00,[11] secured[12] by Account No. 0264-00357-3 (FCD No. 739809).
When he inquired about his dollar deposits, respondent discovered that petitioner made deductions against the formers
accounts. On May 31, 1999, respondent, through his counsel, demanded from petitioner a proper and complete
accounting of his dollar deposits, and the restoration of his deposits to their proper amount without the deductions.[13] In
response, petitioner explained that the deductions made from respondents dollar accounts were used to pay the interest
due on the latters loan with the former. These deductions, according to petitioner, were authorized by respondent through
the Deeds of Assignment with Power of Attorney voluntarily executed by respondent.[14]
Unsatisfied, and believing that the deductions were unauthorized, respondent commenced an action for Damages against
petitioner and its Kabihasnan, Paraaque City Branch Manager Expedito Fernandez (Fernandez) before the RTC, Las Pias
City. The case was docketed as Civil Case No. 99-0172 and was raffled to Branch 255. While admitting the existence of
the P2,300,000.00 and P645,150.00 loans, respondent claimed that when he signed the loan documents, they were all in
blank and they were actually filled up by petitioner. Aside from the complete accounting of his dollar accounts and the

restoration of the true amounts of his deposits, respondent sought the payment of P400,000.00 as moral damages,
P100,000.00 as exemplary damages, and P100,000.00 as attorneys fees.[15]
On its part, petitioner insisted that respondent freely and voluntarily signed the loan documents. While admitting the full
payment of respondents P2,300,000.00 and P645,150.00 loans, petitioner claimed that the payments were made using
the formers US$67,227.95, US$25,000.00, and US$17,000.00 time deposits. Accordingly, there was nothing to account
for and restore. By way of counterclaim, petitioner prayed for the payment of P200,000.00 as attorneys fees,
P1,000,000.00 as moral damages, and P500,000.00 as exemplary damages.[16]
As no amicable settlement was reached, trial on the merits ensued.
On October 14, 2004, the RTC rendered a decision in favor of respondent, the dispositive portion of which reads:
WHEREFORE, the foregoing considered, judgment is hereby rendered in favor of plaintiff Larry Mari[]as, and against the
defendants Metropolitan Bank and Trust Company and Expedito Fernandez, ordering the said defendants to account for
the dollar deposits of the plaintiff in the amounts of US$30,000.00 and US$25,000.00, respectively, and then return the
same, including the interests due thereon reckoned from 31 May 1999 until fully paid.
Likewise, the defendants are hereby directed to pay to the herein plaintiff the following amounts, to wit:
1.

P100,000.00 in moral damages;

2.

P50,000.00 in exemplary damages;

3.

P50,000.00 as and by way of attorneys fees; and

4.

Costs of suit.

SO ORDERED.[17]
The RTC sustained the validity and regularity of the loan documents signed by respondent, and consequently the
existence of the P2,300,000.00 and P645,150.00 loans obtained from petitioner. Acknowledging the full payment of both
loans, the trial court found that the payments were made from respondents foreign currency deposits, particularly Account
Numbers 0-26400171-6 (FCD No. 505671) and 0-264-00357-3 (FCD No. 739809), amounting to US$67,227.95 and
US$17,000.00, respectively. There is no doubt that respondent specifically assigned these accounts to secure the
payment of his loans pursuant to the Deeds of Assignment with Power of Attorney. Hence, the deductions made from such
accounts were valid. However, the RTC found that petitioner should account for and eventually return the US$30,000.00
and US$25,000.00 deposits of respondent since they were not assigned to answer for the latters loans, and that any
deductions made from these accounts were, therefore, illegal. Consequently, petitioner was made to answer for damages
suffered by respondent.[18] Being the petitioners Kabihasnan Branch Manager, Fernandez was declared solidarily liable
with petitioner.
On appeal, the CA modified the RTC decision by absolving Fernandez from liability. The appellate court held that
Fernandez could not be made to answer for acts done in the performance of his duty absent any showing that he
assented to patently unlawful acts of the corporation or was guilty of bad faith or gross negligence in directing its affairs, or
that he agreed to hold himself personally and solidarily liable with the corporation.[19] No proof was adduced in this
regard.
Hence, the instant petition raising the following issues:
1.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN ORDERING PETITIONER TO

2.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING PETITIONER LIABLE TO
RESPONDENT FOR MORAL AND EXEMPLARY DAMAGES, AS WELL AS ATTORNEYS FEES AND COSTS OF SUIT.
[20]
Petitioner assails the CA Decision affirming the formers culpability for making unlawful deductions from respondents dollar
accounts without the latters consent. Additionally, it questions the award of moral and exemplary damages, as well as
attorneys fees.
We agree with the CAs factual findings as to the deposits and withdrawals made and loans obtained by respondent. We
do not, however, agree with its conclusion that petitioner absolutely lacked the authority to make deductions from
respondents deposits for the payment of his outstanding obligations.
It is apt to stress the well-settled principle that factual findings of the trial court, affirmed by the CA, are binding and
conclusive upon this Court.[21] In the absence of any showing that the findings complained of are totally devoid of support
in the evidence on record, or that they are so glaringly erroneous as to constitute serious abuse of discretion, such

findings must stand.[22] The Court is not a trier of facts, its jurisdiction being limited to reviewing only errors of law that
may have been committed by the lower courts.[23] It is not the function of the Court to analyze or weigh all over again the
evidence or premises supportive of such factual determination.[24] The law creating the CA was intended mainly to take
away from the Supreme Court the work of examining the evidence, so that it may confine its task to the determination of
questions which do not call for the reading and study of transcripts containing the testimony of witnesses.[25]
In the present case, we find no justification to deviate from the factual findings of the trial court and the appellate court.
Petitioner has utterly failed to convince us that the assailed findings are devoid of basis or are not supported by
substantial evidence.
It is noteworthy that respondent opened four accounts with petitioner: 1) Account No. 2264-00145-0 for US$100,000.00;
2) Account No. 0-26400171-6 (FCD No. 505671) for US$67,227.95; 3) Account No. 0-26400244-5 (FCD No. 505688) for
US$25,000.00; and 4) Account No. 0-264-00357-3 (FCD No. 739809) for US$17,000.00. Admittedly, respondent withdrew
$70,000.00 from Account No. 2264-00145-0, leaving a balance of $30,000.00.
It is likewise undisputed that respondent obtained two separate loans from petitioner in amounts of P2,300,000.00 and
P645,150.00. These were evidenced by promissory notes and secured by respondents two dollar accounts Account
Numbers 0-26400171-6 (FCD No. 505671) and 0-264-00357-3 (FCD No. 739809) for US$67,227.95 and
US$17,000.00, respectively. Respondents first loan of P2,300,000.00, obtained on April 13, 1998, was payable on April 8,
1999; while the second loan of P645,150.00, obtained on April 30, 1999, was payable on April 24, 2000. Records show
that the first loan was paid on April 21, 1999, with the payment therefor taken from Account No. 0-26400171-6. The
second loan, on the other hand, was paid on May 10, 1999, out of respondents Account No. 0-264-00357-3. It should be
clarified, though, that these payments referred only to the payment of the principal (P2,300,000.00 and P645,150.00) of
respondents loans, exclusive of interests stipulated in the promissory notes executed by the latter.
Aside from obligating himself to pay P2,300,000.00 as principal, respondent also agreed to pay interest at the rate of
22.929% per annum (not monthly) from April 13, 1998 until full payment. As respondent made full payment of the principal
on April 21, 1999, respondent was also obliged to pay interest until that date. As to the P645,150.00 loan, respondent
agreed to pay interest at the rate of 16.987% per annum.
Respondent later discovered that his accounts with petitioner were all depleted. Upon inquiry from petitioner, it explained
that pursuant to the Deeds of Assignment with Power of Attorney executed by respondent, it deducted from respondents
accounts the interest due on his loans.
Contrary to the conclusions of the RTC and the CA, we find that petitioner is empowered to make lawful deductions from
respondents accounts for such amounts due it. This is authorized in the Promissory Notes and Deeds of Assignment with
Power of Attorney executed by respondent, to wit:
I/We hereby give the Bank a general lien upon, and/or right of set-off and/or right to hold and/or apply to the loan account,
or any claim of the Bank against any of us, all my/our rights, title and interest in and to the balance of every deposit
account, money, negotiable instruments, commercial papers, notes, bonds, stocks, dividends, securities, interest, credits,
chose in action, claims, demands, funds or any interest in any thereof, and in any other property, rights and interest of any
of us or any evidence thereof, which have been, or at any time shall be delivered to, or otherwise come into the
possession, control or custody of the Bank or any of its subsidiaries, affiliates, agents or correspondents now or anytime
hereafter, for any purpose, whether or not accepted for the purpose or purposes for which they are delivered or intended.
For this purpose, I/We hereby appoint the Bank as my/our irrevocable Attorney-in-fact with full power of
substitution/delegation to sign or endorse any and all documents and perform any and all acts and things required or
necessary in the premises.[26]
Effective upon default in the payment of CREDIT, or any part thereof, the ASSIGNOR hereby grants to the ASSIGNEE, full
power and authority to collect/withdraw the deposit/proceeds/receivables/ investments/securities and apply the
collection/deposit to the payment of the outstanding principal, interest and other charges on the CREDIT. For this
purpose, the ASSIGNOR hereby names, constitutes and appoints the ASSIGNEE as his/its true and lawful Attorney-inFact, with powers of substitution, to ask, demand, collect, sue for, recover and receive the
deposit/proceeds/receivables/investments/securities or any part thereof, as well as to encash, negotiate and endorse
checks, drafts and other commercial papers/instruments received by and paid to the ASSIGNEE, incident thereto and to
execute all instruments and agreements connected therewith. A written Certification by the ASSIGNEE of the amount of its
claims from the ASSIGNOR and/or the BORROWER shall be conclusive on the ASSIGNOR and/or the BORROWER
absent manifest error.[27]
As provided in Article 1159 of the Civil Code, obligations arising from contract have the force of law between the
contracting parties and should be complied with in good faith. Verily, parties may freely stipulate their duties and
obligations which perforce would be binding on them. Not being repugnant to any legal proscription, the agreement
entered into between petitioner and respondent must be respected and given the force of law between them.[28]

Upon the maturity of the first loan on April 8, 1999, petitioner was authorized to automatically deduct, by way of offsetting,
respondents outstanding debt (including interests) to it from the latters deposit accounts and their accumulated interest.
Respondent did not object to the deduction made from the proceeds of Account No. 0-26400171-6, but would limit such
deduction only to the payment of the principal of P2,300,000.00. However, it should be borne in mind that in addition to
the authority to effect the said deduction for the principal loan amount, petitioner was authorized to make further
deductions for interest payments at the rate of 22.929% per annum until April 21, 1999.
With respect to the second loan, barely a month after the execution of the promissory note and definitely prior to the
maturity date, respondent already paid the principal of P645,150.00 out of the deposited amount in Account No. 0-26400357-3. Pursuant to the promissory note, respondent agreed to pay interest at the rate of 16.987% per annum. While it is
conceded that petitioner had the right to offset the unpaid interests due it against the deposits of respondent, the issue of
whether it acted judiciously is an entirely different matter.[29] As business affected with public interest, and because of the
nature of their functions, banks are under obligation to treat the accounts of their depositors with meticulous care, always
having in mind the fiduciary nature of their relationship.[30]
Pursuant to the above disquisition, it is clear that despite such authority, petitioner should still account for whatever excess
deductions made on respondents deposits and return to respondent such amounts taken from him. To be sure,
respondent had interest-earning deposits with petitioner in accordance with their agreement. On the other hand, after
respondent paid the principal on April 21, 1999 and May 10, 1999 on the two loans which he obtained from petitioner, the
latter had the authority to make deductions for the payment of interest as stipulated in respondents promissory notes.
When we consider the total amount of respondents deposits in his dollar accounts inclusive of interests earned vis--vis his
total obligations to petitioner, we find that the total depletion of his accounts is not warranted. Hence, we find no reason to
disturb the CA conclusion on the award of damages. As aptly explained in Bank of the Philippine Islands v. Court of
Appeals:
For the above reasons, the Court finds no reason to disturb the award of damages granted by the CA against petitioner.
This whole incident would have been avoided had petitioner adhered to the standard of diligence expected of one
engaged in the banking business. A depositor has the right to recover reasonable moral damages even if the banks
negligence may not have been attended with malice and bad faith, if the former suffered mental anguish, serious anxiety,
embarrassment and humiliation. Moral damages are not meant to enrich a complainant at the expense of defendant. It is
only intended to alleviate the moral suffering she has undergone. The award of exemplary damages is justified, on the
other hand, when the acts of the bank are attended by malice, bad faith or gross negligence. The award of reasonable
attorneys fees is proper where exemplary damages are awarded. It is proper where depositors are compelled to litigate to
protect their interest.[31]
WHEREFORE, premises considered, the Court of Appeals Decision dated July 31, 2007 is hereby AFFIRMED with
MODIFICATION. Petitioner is ordered to account for respondents dollar deposits inclusive of interests, subject to its right
to deduct from the said deposits his loan obligations amounting to P2,300,000.00, plus interest at 22.929% per annum
until full payment on April 21, 1999; and P645,150.00, plus interest at 16.987% per annum until full payment on May 10,
1999. After such accounting, petitioner shall restore to respondent whatever excess amounts may have been deducted
from such deposits, together with the earned interests.
All other aspects of the assailed decision STAND.
SO ORDERED.

Philippine Charter Insurance v Philippine Commerce International Bank

Petitioner Philippine Charter Insurance Corporation (PCIC) submits the present motion for the reconsideration[1] of our
Resolution dated December 17, 2008, which denied due course to its petition for review on certiorari.[2] It seeks to
reinstate the petition and effect a reversal of the Court of Appeals (CA) Decision[3] and Resolution[4] dated January 7,
2008 and October 29, 2008, respectively, in CA-G.R. CV No. 86948. In its petition, the petitioner imputes reversible error
on the appellate court for ruling that it is liable under PCIC Bond No. 27547 and under PCIC Bond No. 27546, as the latter
bond was not covered by the complaint for collection of sum of money filed by respondent Philippine National
Construction Corporation (PNCC).[5]
The facts, as drawn from the records, are briefly summarized below.
PNCC is engaged in the construction business and tollway operations. On October 16, 1997, PNCC conducted a public
bidding for the supply of labor, materials, tools, supervision, equipment, and other incidentals necessary for the fabrication
and delivery of 27 tollbooths to be used for the automation of toll collection along the expressways. Orlando Kalingo
(Kalingo) won in the bidding and was awarded the contract.

On November 13, 1997, PNCC issued in favor of Kalingo Purchase Order (P.O.) No. 71024L for 25 units of tollbooths for a
total of P2,100,000.00, and P.O. No. 71025L for two units of tollbooths amounting to P168,000.00. These issuances were
subject to the condition, among others, that each P.O. shall be covered by a surety bond equivalent to 100% of the total
down payment (50% of the total cost reflected on the P.O.), and that the surety bond shall continue in full force until the
supplier shall have complied with all the undertakings and covenants to the full satisfaction of PNCC.
Kalingo, hence, posted surety bonds Surety Bond Nos. 27546 and 27547 issued by the PCIC and whose terms and
conditions read:
Surety Bond No. 27546
To supply labor, materials, tools, supervision equipment, and other incidentals necessary for the fabrication and delivery of
Two (2) Units Toll Booth at San Fernando Interchange SB Entry as per Purchase Order No. 71025L, copy of which is
attached as Annex A. This bond also guarantees the repayment of the down payment or whatever balance thereof in the
event of failure on the part of the Principal to finish the project due to his own fault.
It is understood that the liability of the Surety under this bond shall in no case exceed the sum of P84,000.00, Philippine
Currency.[6]
Surety Bond No. 27547
To supply labor, materials, tools, supervision equipment, and other incidentals necessary for the fabrication and delivery of
Twenty-five (25) Units Toll Booth at designated Toll Plaza as per Purchase Order No. 71024L, copy of which is attached
as Annex A. This bond also guarantees the repayment of the down payment or whatever balance thereof in the event of
failure on the part of the Principal to finish the project due to his own fault.
It is understood that the liability of the Surety under this bond shall in no case exceed the sum of P1,050,000.00,
Philippine Currency.[7]
To illustrate, the PCIC surety bonds are in the amounts corresponding to down payments on each P.O., as follows:
Both surety bonds also contain the following conditions: (1) the liability of PCIC under the bonds expires on March 16,
1998; and (2) a written extrajudicial demand must first be tendered to the surety, PCIC, within 15 days from the expiration
date; otherwise PCIC shall not be liable thereunder and the obligee waives the right to claim or file any court action to
collect on the bond. The following stipulation appears in the last paragraph of these bonds:
The liability of PHILIPPINE CHARTER INSURANCE CORPORATION under this bond will expire on March 16, 1998.
Furthermore, it is hereby agreed and understood that PHILIPPINE CHARTER INSURANCE CORPORATION will not be
liable for any claim not presented to it in writing within FIFTEEN (15) DAYS from the expiration of this bond, and that the
Obligee hereby waives its right to claim or file any court action against the Surety after the termination of FIFTEEN (15)
DAYS from the time its cause of action accrues.[8] (Emphasis supplied.)
PNCC released two checks to Kalingo representing the down payment of 50% of the total project cost, which were
properly receipted by Kalingo.[9] Kalingo in turn submitted the two PCIC surety bonds securing the down payments, which
bonds were accepted by PNCC.
On March 3, 4, and 5, 1998, Kalingo made partial/initial delivery of four units of tollbooths under P.O. No. 71024L.
However, the tollbooths delivered were incomplete or were not fabricated according to PNCC specifications. Kalingo failed
to deliver the other 23 tollbooths up to the time of filing of the complaint; despite demands, he failed and refused to comply
with his obligation under the POs.
On March 9, 1998, six days before the expiration of the surety bonds and after the expiration of the delivery period
provided for under the award, PNCC filed a written extrajudicial claim against PCIC notifying it of Kalingos default and
demanding the repayment of the down payment on P.O. No. 71024L as secured by PCIC Bond No. 27547, in the amount
of P1,050,000.00. The claim went unheeded despite repeated demands. For this reason, on April 24, 2001, PNCC filed
with the Regional Trial Court (RTC), Mandaluyong City a complaint for collection of a sum of money against Kalingo and
PCIC.[10] PNCC's complaint against PCIC called solely on PCIC Bond No. 27547; it did not raise or plead collection
under PCIC Bond No. 27546 which secured the down payment of P84,000.00 on P.O. No. 71025L.
PCIC, in its answer, argued that the partial delivery of four out of the 25 units of tollbooth by Kalingo under P.O. No.
71024L should reduce Kalingo's obligation.
The RTC, by Decision of October 31, 2005, ruled in favor of PNCC and ordered PCIC and Kalingo to jointly and severally
pay the latter P1,050,000.00, representing the value of PCIC Bond No. 27547, plus legal interest from last demand, and
P50,000.00 as attorney's fees. Reconsideration of the trial court's decision was denied. The trial court made no ruling on
PCICs liability under PCIC Bond No. 27546, a claim that was not pleaded in the complaint.

On appeal, the CA, by Decision[11] of January 7, 2008, held that the RTC erred in ruling that PCIC's liability is limited only
to the payment of P1,050,000.00 under PCIC Bond No. 27547 which secured the down payment on P.O. No. 71024L. The
appellate court held that PCIC, as surety, is liable jointly and severally with Kalingo for the amount of the two bonds
securing the two POs to Kalingo; thus, the CA also held PCIC liable under PCIC Bond No. 27546 which secured the
P84,000.00 down payment on P.O. No. 71025L.
Reconsideration having been denied by the appellate court in its Resolution[12] of October 29, 2008, the PCIC lodged a
petition for review on certiorari[13] before this Court.
The Court, by Resolution of December 17, 2008, denied due course to the petition.[14] Hence, the PCIC filed the present
motion for reconsideration submitting the following issues for our resolution:
I.
WHETHER THE APPELLATE COURT ERRED IN RULING THAT PCIC SHOULD ALSO BE HELD LIABLE UNDER
BOND NO. 27546, COLLECTION UNDER WHICH WAS NOT SUBJECT OF RESPONDENT PNCC's COMPLAINT FOR
COLLECTION OF SUM OF MONEY;
II. WHETHER THE CHECKS ISSUED IN 1997 BY RESPONDENT PNCC TO KALINGO WERE GIVEN 10 MONTHS
PRIOR TO THE AWARD OF THE PROJECT AND AMOUNTS TO CONCEALMENT OF MATERIAL FACT VITIATING THE
SURETY BONDS ISSUED BY THE PETITIONER; and
III. WHETHER THE APPELLATE COURT ERRED IN HOLDING PETITIONER PCIC LIABLE FOR ATTORNEY'S FEES.
The second issue is a factual matter not proper in proceedings before this Court. The PCICs position that the checks were
issued 10 months prior to the award had already been rejected by both the RTC and the CA; both found that the year
1997 appearing on the checks was a mere typographical error which should have been written as 1998.[15]
Consequently, we shall no longer discuss the PCIC's allegation of material concealment; the factual findings of the RTC,
as affirmed by the CA, are conclusive on us.
Our consideration shall focus on the remaining two issues.
The PCIC presents, as its first issue, the argument that [w]hen the Court of Appeals rendered judgment on Bond No.
27546, which was not subject of respondent's complaint, on the ground that respondent was incorrect in not filing suit for
Bond No. 27546, the Court of Appeals virtually acted as lawyer for respondent.[16]
We find the PCICs position meritorious.
The issue before us calls for a discussion of a courts basic appreciation of allegations in a complaint. The fundamental
rule is that reliefs granted a litigant are limited to those specifically prayed for in the complaint; other reliefs prayed for may
be granted only when related to the specific prayer(s) in the pleadings and supported by the evidence on record.
Necessarily, any such relief may be granted only where a cause of action therefor exists, based on the complaint, the
pleadings, and the evidence on record.
Section 2, Rule 2 of the 1997 Rules of Civil Procedure defines a cause of action as the act or omission by which a party
violates the right of another. It is the delict or the wrongful act or omission committed by the defendant in violation of the
primary right of the plaintiff.[17] Its essential elements are as follows:
1. A right in favor of the plaintiff by whatever means and under whatever law it arises or is created;
2. An obligation on the part of the named defendant to respect or not to violate such right; and
3. Act or omission on the part of such defendant in violation of the right of the plaintiff or constituting a breach of the
obligation of the defendant to the plaintiff for which the latter may maintain an action for recovery of damages or other
appropriate relief.[18]
Only upon the occurrence of the last element does a cause of action arise, giving the plaintiff the right to maintain an
action in court for recovery of damages or other appropriate relief.[19]
Each of the surety bonds issued by PCIC created a right in favor of PNCC to collect the repayment of the bonded down
payments made on the two POs if contractor Kalingo defaults on his obligation under the award to fabricate and deliver to
PNCC the tollbooths contracted for. Concomitantly, PCIC, as surety, had the obligation to comply with its undertaking
under the bonds to repay PNCC the down payments the latter made on the POs if Kalingo defaults.
It must be borne in mind that each of the two bonds is a distinct contract by itself, subject to its own terms and conditions.
They each contain a provision that the surety, PCIC, will not be liable for any claim not presented to it in writing within 15
days from the expiration of the bond, and that the obligee (PNCC) thereby waives its right to claim or file any court action
against the surety (PCIC) after the termination of 15 days from the time its cause of action accrues. This written claim
provision creates a condition precedent for the accrual of: (1) PCICs obligation to comply with its promise under the

particular bond, and of (2) PNCC's right to collect or sue on these bonds. PCICs liability to repay the bonded down
payments arises only upon PNCC's filing of a written claim notifying PCIC of principal Kalingos default and demanding
collection under the bond within 15 days from the bonds expiry date. PNCCs failure to comply with the written claim
provision has the effect of extinguishing PCICs liability and constitutes a waiver by PNCC of the right to claim or sue under
the bond.
Liability on a bond is contractual in nature and is ordinarily restricted to the obligation expressly assumed therein. We
have repeatedly held that the extent of a surety's liability is determined only by the clause of the contract of suretyship and
by the conditions stated in the bond. It cannot be extended by implication beyond the terms of the contract.[20] Equally
basic is the principle that obligations arising from contracts have the force of law between the parties and should be
complied with in good faith.[21] Nothing can stop the parties from establishing stipulations, clauses, terms and conditions
as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
[22] Here, nothing in the records shows the invalidity of the written claim provision; therefore, the parties must strictly and
in good faith comply with this requirement.
The records reveal that PNCC complied with the written claim provision, but only with respect to PCIC Bond No. 27547.
PNCC filed an extrajudicial demand with PCIC informing it of Kalingos default under the award and demanding the
repayment of the bonded down payment on P.O. No. 71024L. Conversely, nothing in the records shows that PNCC ever
complied with the provision with respect to PCIC Bond No. 27546. Why PNCC complied with the written claim provision
with respect to PCIC Bond No. 27547, but not with respect to PCIC Bond No. 27546, has not been explained by PNCC.
Under the circumstances, PNCCs cause of action with respect to PCIC Bond No. 27546 did not and cannot exist, such
that no relief for collection thereunder may be validly awarded.
Hence, the trial courts decision finding PCIC liable solely under PCIC Bond No. 27547 is correct not only because
collection under the other bond, PCIC Bond No. 27546, was not raised or pleaded in the complaint, but for the more
important reason that no cause of action arose in PNCCs favor with respect to this bond. Consequently, the appellate
court was in error for including liability under PCIC Bond No. 27546.
PNCC insists that conformably with the ruling of the CA, it should be entitled to collection under PCIC Bond No. 27546,
although collection thereunder was not specifically raised or pleaded in its complaint, because the bond was attached to
the complaint and formed part of the records. Also, considering that PCICs liability as surety has been duly proven before
the trial and appellate courts, PNCC posits that it is entitled to repayment under PCIC Bond No. 27546.
PNCC might be alluding to Section 2(c), Rule 7 of the Rules of Court, which provides that a pleading shall specify the
relief sought, but may add a general prayer for such further or other reliefs as may be deemed just and equitable. Under
this rule, a court can grant the relief warranted by the allegation and the proof even if it is not specifically sought by the
injured party;[23] the inclusion of a general prayer may justify the grant of a remedy different from or together with the
specific remedy sought,[24] if the facts alleged in the complaint and the evidence introduced so warrant.[25]
We find PNCCs argument to be misplaced. A general prayer for other reliefs just and equitable appearing on a complaint
or pleading normally enables the court to award reliefs supported by the complaint or other pleadings, by the facts
admitted at the trial, and by the evidence adduced by the parties, even if these reliefs are not specifically prayed for in the
complaint. We cannot, however, grant PNCC the other relief of recovering under PCIC Bond No. 27546 because of the
respect due the contractual stipulations of the parties. While it is true that PCICs liability under PCIC Bond No. 27546
would have been clear under ordinary circumstances (considering that Kalingo's default under his contract with PNCC is
now beyond dispute), it cannot be denied that the bond contains a written claim provision, and compliance with it is
essential for the accrual of PCICs liability and PNCCs right to collect under the bond.
As already discussed, this provision is the law between the parties on the matter of liability and collection under the bond.
Knowing fully well that PCIC Bond No. 27546 is a matter of record, duly proven and susceptible of the courts scrutiny, the
trial and appellate courts must respect the terms of the bond and cannot just disregard its terms and conditions in the
absence of any showing that they are contrary to law, morals, good customs, public order, or public policy. For its failure to
file a written claim with PCIC within 15 days from the bonds expiry date, PNCC clearly waived its right to collect under
PCIC Bond No. 27546. That, wittingly or unwittingly, PNCC did not collect under one bond in favor of calling on the other
creates no other conclusion than that the right to collect under the former had been lost. Consequently, PNCCs cause of
action with respect to PCIC Bond No. 27546 cannot juridically exist and no relief therefore may be validly given. Hence,
the CA invalidly rendered judgment with respect to PCIC Bond No. 27546, and its award based on this bond must be
deleted.
On the third issue, we hold that PCIC should be held liable for the attorney's fees PNCC incurred in bringing suit. PCICs
unjust refusal to pay despite PNCCs written claim compelled the latter to hire the services of an attorney to collect on
PCIC Bond No. 27547.
WHEREFORE, premises considered, we SET ASIDE our Resolution of December 17, 2008 and GRANT the present
motion for reconsideration. The petition for review on certiorari is PARTLY GRANTED. The assailed Court of Appeals

Decision of January 7, 2008 and Resolution of October 29, 2008 are hereby AFFIRMED with MODIFICATION, deleting
petitioner PCIC's liability under PCIC Bond No. 27546. All other matters in the assailed Court of Appeals decision and
resolution are AFFIRMED.
SO ORDERED.

Delos Reyes v Alojado

On or about January 22, 1905, Veronica Alojado received, as a loan, from Benito de los Reyes that the sum P67 .60, for
the purpose of paying a debt she owed to Olimpia Zaballa. It was agreed between Alojado and Reyes that the debtor
should remain as a servant in the house and in the service of her creditor, without any renumeration whatever, until she
should find some one who would furnish her with the said sum where with to repeat the loan. The defendant, Veronica
Alojado, afterwards left the house of the plaintiff, on March 12, 1906, without having paid him her debt, nor did she do so
at any subsequent date, notwithstanding his demands. The plaintiff, therefore, on the 15th of march, 1906, filed suit in the
court of the justice of the peace of Santa Rosa, La Laguna, against Veronica Alojado to recover the said sum or, in a
contrary case, to compel her to return to his service. The trial having been had, the justice of the peace, on April 14, 1906,
rendered judgment whereby he sentenced the defendant to pay to the plaintiff the sum claimed and declared that, in case
the debtor should be insolvent, she should be obliged to fulfill the agreement between her and the plaintiff. The costs of
the trial were assessed against the defendant.
The defendant appealed from the said judgment to the Court of First Instance to which the plaintiff, after the case had
been docketed by the clerk of court, made a motion on May 4, 1906, requesting that the appeal interposed by the
defendant be disallowed, with the costs of both instances against her. The grounds alleged in support of this motion. were
that the appeal had been filed on the sixth day following that when judgment was rendered in the trial, on April 14th, and
that it, therefore, did not come within the period of the five days prescribed by section 76 of the Code of Civil Procedure,
as proven by the certificate issued by the justice of the peace of Santa Rosa. The Court of First Instance, however, by
order of July 16, 1906, overruled the motion of the plaintiff-appellee, for the reasons therein stated, namely, that the
defendant was not notified of the judgment rendered in the case on April 14th of that year until the 16th of the same
month, and the appeal having been filed four days later, on the 20th, it could having seen that the five days specified by
section 76 of the Code of Civil Procedure had not expired. The plaintiff was advised to reproduce his complaint within ten
days, in order that due procedure might he had thereupon.
The plaintiff took exception to the aforementioned order and at the same time reproduced the complaint he had filed in the
court of the justice of the peace, in which, after relating to the facts hereinbefore stated, added that the defendant, besides
the sum above-mentioned, had also received from the plaintiff, under the same conditions, various small amounts
between the dates of January 22, 1905, and March 10, 1906, aggregating altogether P11.97, and that they had not been
repaid to him. He therefore asked that judgment be rendered sentencing the defendant to comply with the said contract
and to pay to the plaintiff the sums referred to, amounting in all to P79.57, and that until this amount should have been in
paid, the defendant should remain gratuitously in the service of plaintiff's household, and that she should pay the costs of
the trial.
The defendant, in her written answer of August 15, 1906, to the aforesaid complaint, denied the allegations contained in
paragraphs 1 and 2 of the complaint and alleged that, although she had left the plaintiff's service, it was because the latter
had paid her no sum whatever for the services she had rendered in his house. The defendant likewise denied the
conditions expressed in paragraph 4 of the complaint, averring that the effects purchased, to the amount of P11.97, were
in the possession of the plaintiff, who refused to deliver them to her. She therefore asked that she be absolved from the
complaint and that the plaintiff be absolved from the complaint the wages due her for the services she had rendered.
The case came to trial on October 19, 1906, and, after the production of testimony by both parties, the judge, on
November 21st of the same year, rendered judgment absolving the defendant from the complain, with the costs against
the plaintiff, and sentencing the latter to pay to the former the sum of P2.43, the balance found to exist between the
defendant's debt of P79.57 and the wages due her by the plaintiff, which amounted to P82. The plaintiff, on the 6th of
December, filed a written exception to the judgment aforesaid through the regular channels, and moved for a new trial on
the ground that the findings of fact set forth in the judgment were manifestly contrary to the weight of the evidence. This
motion was overruled on the 17th of the same month, to which exception was taken by the appellant, who afterwards filed
the proper bill of exceptions, which was approved, certified, and forwarded to the clerk of this court.
The present suit, initiated in a justice of the peace court and appealed to the Court of First Instance of La Laguna at a time
prior to the enactment of Act No. 1627, which went into effect on July 1, 1907, which limited to two instances the
procedure to be observed in verbal actions, concerns the collection of certain sum received as a loan by the defendant
from the plaintiff, and of the wages earned by the former for services rendered as a servant in the said plaintiff's house.

Notwithstanding the denial of the defendant, it is a fact clearly proven, as found in the judgment appealed from, that the
plaintiff did deliver to Hermenegildo de los Santos the sum of P67.60 to pay a debt was paid by De los Santos with the
knowledge and in behalf of the said defendant who, of her free will, entered the service of the plaintiff and promised to pay
him as soon as she should find the money wherewith to do so.
The duty to pay the said sum, as well as that of P11.97 delivered to the defendant in small amounts during the time that
she was in the plaintiff's house, is unquestionable, inasmuch as it is a positive debt demandable of the defendant by her
creditor. (Arts. 1754, 1170, Civil Code.) However, the reason alleged by the plaintiff as a basis for the loan is untenable, to
wit, that the defendant was obliged to render service in his house as a servant without remuneration whatever and to
remain therein so long as she had not paid her debt, inasmuch as this condition is contrary to law and morality. (Art. 1255,
Civil Code.)
Domestic services are always to be remunerated, and no agreement may subsist in law in which it is stipulated that any
domestic service shall be absolutely gratuitous, unless it be admitted that slavery may be established in this country
through a covenant entered into between the interested parties.
Articles 1583, 1584, and 1585 of the Civil Code prescribe rules governing the hiring of services of domestics servants, the
conditions of such hire, the term during which the service may rendered and the wages that accrue to the servant, also
the duties of the latter and of the master. The first of the articles cited provides that a hiring for life by either of the
contracting parties is void, and, according to the last of three articles just mentioned, besides what is prescribed in the
preceding articles with regard to masters and servants, the provisions of special laws and local ordinances shall be
observed.
During the regime of the former sovereignty, the police regulations governing domestic service, of the date of September
9, 1848, were in force, article 19 of which it is ordered that all usurious conduct toward the servants and employees of
every class is prohibited, and the master who, under pretext of an advance of pay or of having paid the debts or the taxes
of his servant, shall have succeeded in retaining the latter in his service at his house, shall be compelled to pay to such
servant all arrears due him and any damages he may have occasioned him, and the master shall also be fined.
The aforementioned article 1585 of the Civil Code undoubtedly refers to the provisions of the regulations just cited.
When legal regulations prohibit even a usurious contract and all abuses prejudicial to subordinates and servant, in
connection with their salaries and wages, it will be understood at once that the compact whereby service rendered by a
domestic servant in the house of any inhabitant of this country is to be gratuitous, is in all respects reprehensible and
censurable; and consequently, the contention of the plaintiff, that until the defendant shall have paid him her debt she
must serve him in his house gratuitously is absolutely inadmissible.
The trial record discloses no legal reason for the rejection of the findings of fact and of law contained in the judgment
appealed from, nor for an allowance of the errors attributed appealed from, nor for an allowance of the errors attributed
thereto; on the contrary, the reasons hereinabove stated show the propriety of the said judgment.
For the foregoing reasons, and accepting those set forth in the judgment appealed from, it is proper, in our opinion, to
affirm and we hereby affirm the said judgment, with the costs against the appellant.

Molina v De La Riva
In Molina vs. De la Riva (6 Phil., Rep., 12) a judgment in this case in favor of the plaintiff and against De la Riva was
affirmed and the case remanded for execution of the judgment. Upon the return of the record to the court below, a motion
was made that Somes and Spalding, the sureties upon the appeal bond, be cited to appear and show cause why
execution should not be issued against them as well as against the defendant, De la Riva. They appeared and showed
cause and a judgment or order was entered holding them liable upon the bond and ordering an execution to issue against
them. From this order they appealed to this court, where the order was affirmed. (Molina vs. De la Riva, 7 Phil., Rep.,
345.)
The order made by this court upon that appeal is as follows:
We accordingly affirm the order of the court below, with the costs of this instance. After the expiration of ten days let
judgment be entered in accordance herewith, and the case be remanded to the court below for execution.
Judgment was entered in this court in accordance with such order and the case remanded to the court below on the 6th of
February, 1907.
The case is now before us upon a proceeding brought by Somes and Spalding, the sureties, under section 499 of the
Code of Civil Procedure, for the purpose of compelling the judge of the court below to sign a bill of exceptions containing
the proceedings which took place in the case after it was remanded in pursuance of the order of this court reported in 7

Phil. Rep., 345. An order was issued by this court requiring the judge of the court below to state his reasons for refusing to
sign the bill of exceptions.
The court has answered, stating its reasons, and the question to be determined is, whether such reasons are sufficient.
An original suit in this court for a mandamus to compel that court to sign a bill of exceptions has been dismissed. (Somes
et al., vs. Crossfield et al.,1 5 Off. Gaz., 462.)
On the 6th day of February an order of that court was made directing an execution to issue against De la Riva and the
sureties for the collection of the judgment. On the same day the defendant and the sureties made a motion for a
modification of this order; this motion was granted on the 9th of February, and on the 26th of February the court, upon
motion of the plaintiff, Molina, vacated its order of modification, and ordered an execution to issue against the sureties as
directed by the judgment of this court.
To this order Somes and Spalding excepted, and this is one of the exceptions which they claim the right to have reviewed
by this court. In substance it is nothing more than an exception to the order of the Court of First Instance directing the
execution of the judgment of this court. It is very apparent that no exception lies to such an order. If it did, a case could
never end, for as often as an order for the execution of the judgment was made, it could be excepted to and the case
brought here for review.
On the 27th day of February, after the sureties had excepted to the order above mentioned, they presented a motion in
which they claim that, by reason of acts executed by the creditor Molina, they had been relieved of their responsibility as
sureties in accordance with the provisions of article 1852 of the Civil Code, and they asked that the order of the 26th of
February be modified so as to declare that they had been released from all obligation upon the bond in question. This
motion was denied, and to the order denying it the sureties excepted. This is the other exception which they seek now to
have reviewed in this court. Their claim is that after a case has been tried in this court, a judgment ordered for the plaintiff,
and the case remanded to the court below for the execution of the judgment, and an order made by that court such
purpose, they can, by motion, present new issues of fact and law upon the question of whether they are liable at all or not
upon their obligation and that stage of the case have a further trial upon such issues. This contention can not be
sustained. Some of the facts set out in their motion took place before any judgment was rendered against the,. These
facts they by amended or supplemental answer. Some the facts set out in the petition seem to have occurred after the
judgment of this court dated in February, 1907. The Code of Civil Procedure (sec. 105) allows supplemental pleadings to
be filed, by that section does not allow supplemental answer to be filed and a trial thereon had after the case has passed
to final judgment and an order made for the execution of the sentence. In such circumstances a defendant must
commence an original action asking that the proceedings for the execution of the sentence be enjoined.
It is true that in this very case we allowed a bill of exceptions relating to matter occurring after final judgment had been
entered herein against the defendant De la Riva, but that bill of exceptions related exclusively to the liability of the sureties
Somes and Spalding, who were brought into case for the first time after the final judgment against De la Riva, and who, as
we held, were entitled to have the question of their liability for this debt passed upon by court. That has been done and it
has been finally determined that they are so liable. No further bill of exceptions relating to that liability can be allowed in
this case.
We hold that the reasons given by the court below for refusing to sign the bill of exceptions are sufficient, and this
proceeding is hereby dismissed. So ordered.

Maniago v CA
Petitioner Ruben Maniago was the owner of shuttle buses which were used in transporting employees of the Texas
Instruments, (Phils.), Inc. from Baguio City proper to its plant site at the Export Processing Authority in Loakan, Baguio
City.

On January 7, 1990, one of his buses figured in a vehicular accident with a passenger jeepney owned by private
respondent Alfredo Boado along Loakan Road, Baguio City. As a result of the accident, a criminal case for reckless
imprudence resulting in damage to property and multiple physical injuries was filed on March 2, 1990 against petitioners
driver, Herminio Andaya, with the Regional Trial Court of Baguio City, Branch III, where it was docketed as Criminal Case
No. 7514-R. A month later, on April 19, 1990, a civil case for damages was filed by private respondent Boado against
petitioner himself The complaint, docketed as Civil Case No. 2050-R, was assigned to Branch IV of the same court.

Petitioner moved for the suspension of the proceedings in the civil case against him, citing the pendency of the criminal
case against his driver. But the trial court, in its order dated August 30, 1991, denied petitioners motion on the ground that

pursuant to the Civil Code, the action could proceed independently of the criminal action, in addition to the fact that the
petitioner was not the accused in the criminal case.

Petitioner took the matter on certiorari and prohibition to the Court of Appeals, maintaining that the civil action could not
proceed independently of the criminal case because no reservation of the right to bring it separately had been made in the
criminal case.

On January 31, 1992, the Court of Appeals dismissed his petition on the authority of Garcia v. Florido,1 and Abellana v.
Marave,2 which it held allowed a civil action for damages to be filed independently of the criminal action even though no
reservation to file the same has been made. Therefore, it was held, the trial court correctly denied petitioners motion to
suspend the proceedings in the civil case.3

Hence this petition for review on certiorari. There is no dispute that private respondent, as offended party in the criminal
case, did not reserve the right to bring a separate civil action, based on the same accident, either against the driver,
Herminio Andaya, or against the latters employer, herein petitioner Ruben Maniago. The question is whether despite the
absence of such reservation, private respondent may nonetheless bring an action for damages against petitioner under
the following provisions of the Civil Code:

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

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

xxx xxx xxx

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

Art. 2177 states that responsibility for fault or negligence under the above-quoted provisions is entirely separate and
distinct from the civil liability arising from negligence under the Revised Penal Code.

However, Rule 111 of the Revised Rules of Criminal Procedure, while reiterating that a civil action under these provisions
of the Civil Code may be brought separately from the criminal action, provides that the right to bring it must be reserved.
This Rule reads:

Section 1. Institution of criminal and civil actions. - When a criminal action is instituted, the civil action for the recovery of
civil liability is impliedly instituted with the criminal action, unless the offended party waives the civil action, reserves his
right to institute it separately, or institutes the civil action prior to the criminal action.

Such civil action includes recovery of indemnity under the Revised Penal Code, and damages under Articles 32, 33, 34
and 2176 of the Civil Code of the Philippines arising from the same act or omission of the accused.

xxx xxx xxx

The reservation of the right to institute the separate civil actions shall be made before the prosecution starts to present its
evidence and under circumstances affording the offended party a reasonable opportunity to make such reservation.

xxx xxx xxx

Sec. 3. When civil action may proceed independently. - In the cases provided for in Articles 32, 33, 34 and 2176 of the
Civil Code of the Philippines, the independent civil action which has been reserved may be brought by the offended party,
shall proceed independently of the criminal action, and shall require only a preponderance of evidence.

Based on these provisions, petitioner argues that the civil action against him was impliedly instituted in the criminal action
previously filed against his employee because private respondent did not reserve his right to bring this action separately.
(The records show that while this case was pending in the Court of Appeals, the criminal action was dismissed on July 10,
1992 for failure of the prosecution to file a formal offer of its evidence, with the consequence that the prosecution failed to
prosecute its case. Accordingly, it seems to be petitioners argument that since the civil action to recover damages was
impliedly instituted with the criminal action, the dismissal of the criminal case brought with it the dismissal of the civil
action.)

Private respondent admits that he did not reserve the right to institute the present civil action against Andayas employer.
He contends, however, that the rights provided in Arts. 2176 and 2177 of the Civil Code are substantive rights and, as
such, their enforcement cannot be conditioned on a reservation to bring the action to enforce them separately. Private
respondent cites in support of his position statements made in Abellana v. Marave,4 Tayag v. Alcantara,5 Madeja v. Caro,6
and Jarantilla v. Court of Appeals,7 to the effect that the requirement to reserve the civil action is substantive in character
and, therefore, is beyond the rulemaking power of this Court under the Constitution.8

After considering the arguments of the parties, we have reached the conclusion that the right to bring an action for
damages under the Civil Code must be reserved as required by Rule 111, 1, otherwise it should be dismissed.

I.

A. To begin with, 1 quite clearly requires that a reservation must be made to institute separately all civil actions for the
recovery of civil liability, otherwise they will be deemed to have been instituted with the criminal case. Such civil actions
are not limited to those which arise from the offense charged, as originally provided in Rule 111 before the amendment of
the Rules of Court in 1988. In other words the right of the injured party to sue separately for the recovery of the civil
liability whether arising from crimes (ex delicto) or from quasi delict under Art. 2176 of the Civil Code must be reserved
otherwise they will be deemed instituted with the criminal action.9

Thus Rule 111, 1 of the Revised Rules of Criminal Procedure expressly provides:

Section 1. Institution of criminal and civil actions.- When a criminal action is instituted, the civil action for the recovery of
civil liability is impliedly instituted with the criminal action, unless the offended party waives the civil action, reserves his
right to institute it separately, or institutes the civil action prior to the criminal action.

Such civil action includes recovery of indemnity under the Revised Penal Code, and damages under Articles 32, 33, 34
and 2176 of the Civil Code of the Philippines arising from the same act or omission of the accused.

B. There are statements in some cases implying that Rule 111, 1 and 3 are beyond the rulemaking power of the Supreme
Court under the Constitution. A careful examination of the cases, however, will show that approval of the filing of separate
civil action for damages even though no reservation of the right to institute such civil action had been reserved rests on
considerations other than that no reservation is needed.

In Garcia v. Florido10 the right of an injured person to bring an action for damages even if he did not make a reservation
of his action in the criminal prosecution for physical injuries through reckless imprudence was upheld on the ground that
by bringing the civil action the injured parties had in effect abandoned their right to press for recovery of damages in the
criminal case. . .. Undoubtedly an offended party loses his right to intervene in the prosecution of a criminal case, not only
when he has waived the civil action or expressly reserved his right to institute, but also when he has actually instituted the
civil action. For by either of such actions his interest in the criminal case has disappeared.11 The statement that Rule 111,
1 of the 1964 Rules is an unauthorized amendment of substantive law, Articles 32, 33 and 34 of the Civil Code, which do
not provide for the reservation is not the ruling of the Court but only an aside, quoted from an observation made in the
footnote of a decision in another case.12

Another case cited by private respondent in support of his contention that the civil case need not be reserved in the
criminal case is Abellana v. Marave13 in which the right of persons injured in a vehicular accident to bring a separate
action for damages was sustained despite the fact that the right to bring it separately was not reserved. But the basis of
the decision in that case was the fact that the filing of the civil case was equivalent to a reservation because it was made
after the decision of the City Court convicting the accused had been appealed. Pursuant to Rule 123, 7 of the 1964 Rules,
this had the effect of vacating the decision in the criminal case so that technically, the injured parties could still reserve
their right to institute a civil action while the criminal case was pending in the Court of First Instance. The statement the
right of a party to sue for damages independently of the criminal action is a substantive right which cannot be frittered
away by a construction that could render it nugatory without raising a serious constitutional question14 was thrown in only
as additional support for the ruling of the Court.

On the other hand, in Madeja v. Caro15 the Court held that a civil action for damages could proceed even while the
criminal case for homicide through reckless imprudence was pending and did not have to await the termination of the
criminal case precisely because the widow of the deceased had reserved her right to file a separate civil action for
damages. We do not see how this case can lend support to the view of private respondent.

In Jarantilla v. Court of Appeals16 the ruling is that the acquittal of the accused in the criminal case for physical injuries
through reckless imprudence on the ground of reasonable doubt is not a bar to the filing of an action for damages even
though the filing of the latter action was not reserved. This is because of Art. 29 of the Civil Code which provides that
when an accused is acquitted on the ground that his guilt has not been proved beyond reasonable doubt, a civil action for
damages for the same act or omission may be instituted. This ruling obviously cannot apply to this case because the basis
of the dismissal of the criminal case against the driver is the fact that the prosecution failed to prove its case as a result of
its failure to make a formal offer of its evidence. Rule 132, 34 of the Revised Rules on Evidence provides that The court
shall consider no evidence which has not been formally offered. The purpose for which the evidence is offered must be
specified.

To the same effect are the holdings in Tayag, Sr. v. Alcantara,17 Bonite v. Zosa18 and Diong Bi Chu v. Court of Appeals.19
Since Art. 29 of the Civil Code authorizes the bringing of a separate civil action in case of acquittal on reasonable doubt
and under the Revised Rules of Criminal Procedure such action is not required to be reserved, it is plain that the
statement in these cases that to require a reservation to be made would be to sanction an unauthorized amendment of
the Civil Code provisions is a mere dictum. As already noted in connection with the case of Garcia v. Florido, that
statement was not the ruling of the Court but only an observation borrowed from another case.20

The short of it is that the rulings in these cases are consistent with the proposition herein made that, on the basis of Rule
111, 1-3, a civil action for the recovery of civil liability is, as a general rule, impliedly instituted with the criminal action,
except only (1) when such action arising from the same act or omission, which is the subject of the criminal action, is
waived; (2) the right to bring it separately is reserved or (3) such action has been instituted prior to the criminal action.
Even if an action has not been reserved or it was brought before the institution of the criminal case, the acquittal of the

accused will not bar recovery of civil liability unless the acquittal is based on a finding that the act from which the civil
liability might arise did not exist because of Art. 29 of the Civil Code.

Indeed the question on whether the criminal action and the action for recovery of the civil liability must be tried in a single
proceeding has always been regarded a matter of procedure and, since the rulemaking power has been conferred by the
Constitution on this Court, it is in the keeping of this Court. Thus the subject was provided for by G.O. No. 58, the first
Rules of Criminal Procedure under the American rule. Sec. 107 of these Orders provided:

The privileges now secured by law to the person claiming to be injured by the commission of an offense to take part in the
prosecution of the offense and to recover damages for the injury sustained by reason of the same shall not be held to be
abridged by the provisions of this order; but such person may appear and shall be heard either individually or by attorney
at all stages of the case, and the court upon conviction of the accused may enter judgment against him for the damages
occasioned by his wrongful act. It shall, however, be the duty of the promotor fiscal to direct the prosecution, subject to the
right of the person injured to appeal from any decision of the court denying him a legal right.

This was superseded by the 1940 Rules of Court, Rule 106 of which provided:

SEC. 15. Intervention of the offended party in criminal action. - Unless the offended party has waived the civil action or
expressly reserved the right to institute it after the termination of the criminal case, and subject to the provisions of Section
4 hereof, he may intervene, personally or by attorney, in the prosecution of the offense.

This Rule was amended thrice, in 1964, in 1985 and lastly in 1988. Through all the shifts or changes in policy as to the
civil action arising from the same act or omission for which a criminal action is brought, one thing is clear: The change has
been effected by this Court. Whatever contrary impression may have been created by Garcia v. Florid21 and its
progeny22 must therefore be deemed to have been clarified and settled by the new rules which require reservation of the
right to recover the civil liability, otherwise the action will be deemed to have been instituted with the criminal action.

Contrary to private respondents contention, the requirement that before a separate civil action may be brought it must be
reserved does not impair, diminish or defeat substantive rights, but only regulates their exercise in the general interest of
orderly procedure. The requirement is merely procedural in nature. For that matter the Revised Penal Code, by providing
in Art. 100 that any person criminally liable is also civilly liable, gives the offended party the right to bring a separate civil
action, yet no one has ever questioned the rule that such action must be reserved before it may be brought separately.

Indeed, the requirement that the right to institute actions under the Civil Code separately must be reserved is not
incompatible with the independent character of such actions. There is a difference between allowing the trial of civil
actions to proceed independently of the criminal prosecution and requiring that, before they may be instituted at all, a
reservation to bring them separately must be made. Put in another way, it is the conduct of the trial of the civil action - not
its institution through the filing of a complaint - which is allowed to proceed independently of the outcome of the criminal
case.

C. There is a practical reason for requiring that the right to bring an independent civil action under the Civil Code
separately must be reserved. It is to avoid the filing of more than one action for the same act or omission against the
same party. Any award made against the employer, whether based on his subsidiary civil liability under Art. 103 of the
Revised Penal Code or his primary liability under Art. 2180 of the Civil Code, is ultimately recoverable from the
accused.23

In the present case, the criminal action was filed against the employee, bus driver. Had the driver been convicted and
found insolvent, his employer would have been held subsidiarily liable for damages. But if the right to bring a separate civil
action (whether arising from the crime or from quasi-delict) is reserved, there would be no possibility that the employer

would be held liable because in such a case there would be no pronouncement as to the civil liability of the accused. In
such a case the institution of a separate and independent civil action under the Civil Code would not result in the
employee being held liable for the same act or omission. The rule requiring reservation in the end serves to implement the
prohibition against double recovery for the same act or omission.24 As held in Barredo v. Garcia,25 the injured party must
choose which of the available causes of action for damages he will bring. If he fails to reserve the filing of a separate civil
action he will be deemed to have elected to recover damages from the bus driver on the basis of the crime. In such a case
his cause of action against the employer will be limited to the recovery of the latters subsidiary liability under Art. 103 of
the Revised Penal Code.

II.

Nor does it matter that the action is against the employer to enforce his vicarious liability under Art. 2180 of the Civil Code.
Though not an accused in the criminal case, the employer is very much a party, as long as the right to bring or institute a
separate action (whether arising from crime or from quasi delict) is not reserved.26 The ruling that a decision convicting
the employee is binding and conclusive upon the employer not only with regard to its civil liability but also with regard to its
amount because the liability of an employer cannot be separated but follows that of his employee27 is true not only with
respect to the civil liability arising from crime but also with respect to the civil liability under the Civil Code. Since whatever
is recoverable against the employer is ultimately recoverable by him from the employee, the policy against double
recovery requires that only one action be maintained for the same act or omission whether the action is brought against
the employee or against his employer. Thus in Dulay v. Court of Appeals28 this Court held that an employer may be sued
under Art. 2180 of the Civil Code and that the right to bring the action did not have to be reserved because, having
instituted before the criminal case against the employee, the filing of the civil action against the employer constituted an
express reservation of the right to institute its separately.

WHEREFORE, the decision appealed from is RESERVED and the complaint against petitioner is DISMISSED.

SO ORDERED.

San Ildefonso Lines v CA

At around 3:30 in the afternoon of June 24, 1991, a Toyota Lite Ace Van being driven by its owner Annie U. Jao and a
passenger bus of herein petitioner San Ildefonso Lines, Inc. (hereafter, SILI) figured in a vehicular mishap at the
intersection of Julia Vargas Avenue and Rodriguez Lanuza Avenue in Pasig, Metro Manila, totally wrecking the Toyota van
and injuring Ms. Jao and her two (2) passengers in the process.

A criminal case was thereafter filed with the Regional Trial Court of Pasig on September 18, 1991 charging the driver of
the bus, herein petitioner Eduardo Javier, with reckless imprudence resulting in damage to property with multiple physical
injuries.

About four (4) months later, or on January 13, 1992, herein private respondent Pioneer Insurance and Surety Corporation
(PISC), as insurer of the van and subrogee, filed a case for damages against petitioner SILI with the Regional Trial Court
of Manila, seeking to recover the sums it paid the assured under a motor vehicle insurance policy as well as other
damages, totaling P564,500.00 (P454,000.00 as actual/compensatory damages; P50,000.00 as exemplary damages;
P50,000.00 as attorney's fees; P10,000.00 as litigation expenses; and P500.00 as appearance fees.)[1]

With the issues having been joined upon the filing of the petitioners' answer to the complaint for damages and after
submission by the parties of their respective pre-trial briefs, petitioners filed on September 18, 1992 a Manifestation and
Motion to Suspend Civil Proceedings grounded on the pendency of the criminal case against petitioner Javier in the Pasig
RTC and the failure of respondent PISC to make a reservation to file a separate damage suit in said criminal action. This
was denied by the Manila Regional Trial Court in its Order dated July 21, 1993,[2] ruling thus:

"Answering the first question thus posed, the court holds that plaintiff may legally institute the present civil action even in
the absence of a reservation in the criminal action. This is so because it falls among the very exceptions to the rule cited
by the movant.

"It is true that the general rule is that once a criminal action has been instituted, then civil action based thereon is deemed
instituted together with the criminal action, such that if the offended party did not reserve the filing of the civil action when
the criminal action was filed, then such filing of the civil action is therefore barred; on the other hand, if there was such
reservation, still the civil action cannot be instituted until final judgment has been rendered in the criminal action;

"But, this rule (Section 2, Rule 111, Revised Rules of Court) is subject to exemptions, the same being those provided for in
Section 3 of the same rule which states:

'Section 3. When civil action may proceed independently. - In the cases provided for in Articles 32, 33, 34 and 2176 of the
Civil Code of the Philippines, the independent civil action which was been reserved may be brought by the offended party,
shall proceed independently of the criminal action, and shall require only a preponderance of evidence.'

"Besides, the requirement in Section 2 of Rule 111 of the former Rules on Criminal Procedure that there be a reservation
in the criminal case of the right to institute an independent civil action has been declared as not in accordance with law. It
is regarded as an unauthorized amendment to our substantive law, i.e., the Civil Code which does not require such
reservation. In fact, the reservation of the right to file an independent civil action has been deleted from Section 2, Rule
111 of the 1985 Rules on Criminal Procedure, in consonance with the decisions of this Court declaring such requirement
of a reservation as ineffective. (Bonite vs. Zosa, 162 SCRA 180)

"Further, the Court rules that a subrogee-plaintiff may institute and prosecute the civil action, it being allowed by Article
2207 of the Civil Code."

After their motion for reconsideration of said July 21, 1993 Order was denied, petitioners elevated the matter to this Court
via petition for certiorari which was, however, referred to public respondent Court of Appeals for disposition. On February
24, 1995, a decision adverse to petitioners once again was rendered by respondent court, upholding the assailed Manila
Regional Trial Court Order in this wise:

"A separate civil action lies against the offender in a criminal act, whether or not he is criminally prosecuted and found
guilty or acquitted, provided that the offended party is not allowed (if the tortfeasor is actually charged also criminally), to
recover damages on both scores, and would be entitled in such eventuality only to the bigger award of the two, assuming
the awards made in the two cases vary.

"To subordinate the civil action contemplated in the said articles to the result of the criminal prosecution - whether it be
conviction or acquittal - would render meaningless the independent character of the civil action and the clear injunction in
Art. 31, that this action may proceed independently of the criminal proceedings and regardless of the result of the latter.

"In Yakult Phil. vs. CA, the Supreme Court said:

'Even if there was no reservation in the criminal case and that the civil action was not filed before the filing of the criminal
action but before the prosecution presented evidence in the criminal action, and the judge handling the criminal case was
informed thereof, then the actual filing of the civil action is even far better than a compliance with the requirement of an
express reservation that should be made by the offended party before the prosecution presented its evidence.'

"The purpose of this rule requiring reservation is to prevent the offended party from recovering damages twice for the
same act or omission.

"Substantial compliance with the reservation requirement may, therefore, be made by making a manifestation in the
criminal case that the private respondent has instituted a separate and independent civil action for damages.

"Oft-repeated is the dictum that courts should not place undue importance on technicalities when by so doing, substantial
justice is sacrificed. While the rules of procedure require adherence, it must be remembered that said rules of procedure
are intended to promote, not defeat, substantial justice, and therefore, they should not be applied in a very rigid and
technical sense."

Hence, this petition for review after a motion for reconsideration of said respondent court judgment was denied.

The two (2) crucial issues to be resolved, as posited by petitioners, are:

1) If a criminal case was filed, can an independent civil action based on quasi-delict under Article 2176 of the Civil Code
be filed if no reservation was made in the said criminal case?

2) Can a subrogee of an offended party maintain an independent civil action during the pendency of a criminal action
when no reservation of the right to file an independent civil action was made in the criminal action and despite the fact that
the private complainant is actively participating through a private prosecutor in the aforementioned criminal case?

We rule for petitioners.

On the chief issue of "reservation", at the fore is Section 3, Rule 111 of the Rules of Court which reads:

"Sec. 3. When civil action may proceed independently. -- In the cases provided for in Articles 32, 33, 34 and 2176 of the
Civil Code of the Philippines, the independent civil action which has been reserved may be brought by the offended party,
shall proceed independently of the criminal action, and shall require only a preponderance of evidence."

There is no dispute that these so-called "independent civil actions" based on the aforementioned Civil Code articles are
the exceptions to the primacy of the criminal action over the civil action as set forth in Section 2 of Rule 111.[3] However, it
is easily deducible from the present wording of Section 3 as brought about by the 1988 amendments to the Rules on
Criminal Procedure -- particularly the phrase " which has been reserved" -- that the "independent" character of these civil
actions does not do away with the reservation requirement. In other words, prior reservation is a condition sine qua non
before any of these independent civil actions can be instituted and thereafter have a continuous determination apart from
or simultaneous with the criminal action. That this should now be the controlling procedural rule is confirmed by no less
than retired Justice Jose Y. Feria, remedial law expert and a member of the committee which drafted the 1988
amendments, whose learned explanation on the matter was aptly pointed out by petitioners, to wit:

"The 1988 amendment expands the scope of the civil action which is deemed impliedly instituted with the criminal action
unless waived, reserved or previously instituted xxx.

Under the present Rule as amended, such a civil action includes not only recovery of indemnity under the Revised Penal
Code and damages under Articles 32, 33, 34 of the Civil Code of the Philippines, but also damages under Article 2176 of
the said code. xxx

Objections were raised to the inclusion in this Rule of quasi-delicts under Article 2176 of the Civil Code of the Philippines.
However, in view of Article 2177 of the said code which provides that the offended party may not recover twice for the
same act or omission of the accused, and in line with the policy of avoiding multiplicity of suits, these objections were
overruled. In any event, the offended party is not precluded from filing a civil action to recover damages arising from
quasi-delict before the institution of the criminal action, or from reserving his right to file such a separate civil action, just
as he is not precluded from filing a civil action for damages under Articles 32, 33 and 34 before the institution of the
criminal action, or from reserving his right to file such a separate civil action. It is only in those cases where the offended
party has not previously filed a civil action or has not reserved his right to file a separate civil action that his civil action is
deemed impliedly instituted with the criminal action.

It should be noted that while it was ruled in Abella vs. Marave (57 SCRA 106) that a reservation of the right to file an
independent civil action is not necessary, such a reservation is necessary under the amended rule. Without such
reservation, the civil action is deemed impliedly instituted with the criminal action, unless previously waived or instituted.
(Underscoring ours. Justice Jose Y. Feria [Ret.], 1988 Amendments to the 1985 Rules on Criminal Procedure, a pamphlet,
published by Central Lawbook Publishing Co., Inc., Philippine Legal Studies, Series No. 3, 5-6).[4]

Sharing the same view on the indispensability of a prior reservation is Mr. Justice Florenz D. Regalado, whose analysis of
the historical changes in Rule 111 since the 1964 Rules of Court is equally illuminating. Thus,

"1. Under Rule 111 of the 1964 Rules of Court, the civil liability arising from the offense charged was impliedly instituted
with the criminal action, unless such civil action was expressly waived or reserved. The offended party was authorized to
bring an independent civil action in the cases provided for in Articles 31, 32, 33, 34 and 2177 of the Civil Code provided
such right was reserved.

In the 1985 Rules on Criminal Procedure, the same Rule 111 thereof reiterated said provision on the civil liability arising
from the offense charged. The independent civil actions, however, were limited to the cases provided for in Articles 32, 33
and 34 of the Civil Code, obviously because the actions contemplated in Articles 31 and 2177 of said Code are not
liabilities ex delicto. Furthermore, no reservation was required in order the civil actions in said Articles 32, 33 and 34 may
be pursued separately.

2. The present amendments introduced by the Supreme Court have the following notable features on this particular
procedural aspect, viz:

a. The civil action which is impliedly instituted with the criminal action, barring a waiver, reservation or prior institution
thereof, need not arise from the offense charged, as the phrase 'arising from the offense charged' which creates that
nexus has been specifically eliminated.

b. The independent civil actions contemplated in the present Rule 111 include the quasi-delicts provided for in Art. 2176 of
the Civil Code, in addition to the cases provided in Arts. 32, 33 and 34 thereof. It is necessary, however, that the civil
liability under all the said articles arise 'from the same act or omission of the accused.' Furthermore, a reservation of the
right to institute these separate civil actions is again required, otherwise, said civil actions are impliedly instituted with the
criminal action, unless the former are waived or filed ahead of the criminal action." (Emphasis supplied.)[5]

In fact, a deeper reading of the "Yakult Phils. vs. CA" case[6] relied upon by respondent court reveals an
acknowledgement of the reservation requirement. After recognizing that the civil case instituted by private respondent

therein Roy Camaso (represented by his father David Camaso) against petitioner Yakult Phils. (the owner of the
motorcycle that sideswiped Roy Camaso, only five years old at the time of the accident) and Larry Salvado (the driver of
the motorcycle) during the pendency of the criminal case against Salvado for reckless imprudence resulting to slight
physical injuries, as one based on tort, this Court said:

"The civil liability sought arising from the act or omission of the accused in this case is a quasi-delict as defined under
Article 2176 of the Civil Code as follows:

xxxxxxxxx

"The aforecited rule [referring to the amended Section 1, Rule111] requiring such previous reservation also covers quasidelict as defined under Article 2176 of the Civil Code arising from the same act or omission of the accused"(Underscoring
supplied).

But what prompted the Court to validate the institution and non-suspension of the civil case involved in "Yakult" was the
peculiar facts attendant therein. Thus,

"Although the separate civil action filed in this case was without previous reservation in the criminal case, nevertheless
since it was instituted before the prosecution presented evidence in the criminal action, and the judge handling the
criminal case was informed thereof, then the actual filing of the civil action is even far better than a compliance with the
requirement of an express reservation that should be made by the offended party before the prosecution presents its
evidence"

The distinct factual scenario in "Yakult" simply does not obtain in this case. No satisfactory proof exists to show that
private respondent PISC's damage suit was instituted before the prosecution presented its evidence in the criminal case
pending in the Pasig Regional Trial Court. Neither is there any indication that the judge presiding over the criminal action
has been made aware of the civil case. It is in this light that reliance on the "Yakult" case is indeed misplaced.

Now that the necessity of a prior reservation is the standing rule that shall govern the institution of the independent civil
actions referred to in Rule 111 of the Rules of Court, past pronouncements that view the reservation requirement as an
"unauthorized amendment" to substantive law - i.e., the Civil Code, should no longer be controlling. There must be a
renewed adherence to the time-honored dictum that procedural rules are designed, not to defeat, but to safeguard the
ends of substantial justice. And for this noble reason, no less than the Constitution itself has mandated this Court to
promulgate rules concerning the enforcement of rights with the end in view of providing a simplified and inexpensive
procedure for the speedy disposition of cases which should not diminish, increase or modify substantive rights.[7] Far
from altering substantive rights, the primary purpose of the reservation is, to borrow the words of the Court in "Caos v.
Peralta":[8]

" to avoid multiplicity of suits, to guard against oppression and abuse, to prevent delays, to clear congested dockets, to
simplify the work of the trial court; in short, the attainment of justice with the least expense and vexation to the partieslitigants."

Clearly then, private respondent PISC, as subrogee under Article 2207 of the Civil Code,[9] is not exempt from the
reservation requirement with respect to its damages suit based on quasi-delict arising from the same act or omission of
petitioner Javier complained of in the criminal case. As private respondent PISC merely stepped into the shoes of Ms. Jao
(as owner of the insured Toyota van), then it is bound to observe the procedural requirements which Ms. Jao ought to
follow had she herself instituted the civil case.

WHEREFORE, premises considered, the assailed decision of the Court of Appeals dated February 24, 1995 and the
Resolution dated April 3, 1995 denying the motion for reconsideration thereof are hereby REVERSED and SET ASIDE.
The "MANIFESTATION AND MOTION TO SUSPEND CIVIL PROCEEDINGS" filed by petitioners is GRANTED.

SO ORDERED.

Joaquin v Aniceto
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. L9623, 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.

Pacis v Morales
The Case

This petition for review[1] assails the 11 May 2005 Decision[2] 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 Decision[5] 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 defendantappellant, 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 1161[10] of the Civil Code,
petitioners may enforce their claim for damages based on the civil liability arising from the crime under Article 100[11] 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 103[12] 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 quasidelict and is governed by the provisions of this Chapter.

This case involves the accidental discharge of a firearm inside a gun store. 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.[16] With 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.

People v Galicia
This petition for certiorari assails the Court of Appeals Decision1 dated May 22, 2003 in CA-G.R. CR No. 23605, entitled
"People of the Philippines v. Ramon Galicia y Manresa," on the ground that said decision was issued with grave abuse of
discretion. The decision reversed the trial courts conviction of herein private respondent Ramon Galicia, and acquitted
him.

The informations against the private respondent as one of the accused in two cases for homicide before the Regional Trial
Court (RTC) of Oriental Mindoro, Branch 43, read:

Criminal Case No. R-725

The undersigned accuses RAMON GALICIA, ROBERTO [U]RETA, JOJO MANITO, NESTOR VICENTE, JUN BANANG
and MERL[I]N VICENTE of the crime of homicide committed as follows:

That on or about the 16th day of August, 1995, at 10:00 oclock in the evening, more or less, in the Barangay of San
Antonio, Municipality of Mansalay, Province of Oriental Mindoro, Philippines and within the jurisdiction of this Honorable
Court, the above-named accused, with intent to kill and conspiring, confederating and mutually aiding one another, did
then and there wilfully, unlawfully and feloniously attack, assault and stab one THELMO ABENIR thereby inflicting upon
the latter stab wounds on the different parts of his body resultant therewith caused his death shortly thereafter.

Contrary to Article 249 of the Revised Penal Code.2

Criminal Case No. R-726

The undersigned accuses "JUN" BANANG, JOJO MANITO RAMON GALICIA, [R]OBERTO [U]RETA, NESTOR VICENTE
and MERL[I]N VICENTE of the crime of homicide committed as follows:

That on or about the 16th day of August, 1995, at 10:00 oclock in the evening, more or less, in the Barangay of San
Antonio, Municipality of Mansalay, Province of Oriental Mindoro, Philippines and within the jurisdiction of this Honorable
Court, the above-named accused, with intent to kill and conspiring, confederating and mutually aiding one another, did
then and there wilfully, unlawfully and feloniously attack, assault and stab one RAMON ABENIR thereby inflicting upon the
latter stab wounds on the different parts of his body resultant therewith caused his death shortly thereafter.

Contrary to Article 249 of the Revised Penal Code.3

On arraignment, all accused entered pleas of not guilty and thereafter a joint trial ensued.1awphi1.net

The Office of the Solicitor General (OSG) summed up the prosecutions version4 of the incident at bar, as follows:

At about 10:00 p.m. on August 16, 1995, Ramon Abenir (Ramon) arrived at the house of his parents, Thelmo and Dolores,
in San Antonio, Mansalay, Oriental Mindoro. Once inside, Ramon shouted "Lumabas kayo Kapitan, Barangay Tanod."5
Someone who was later identified as Brgy. Captain Ramon Galicia (Galicia) retorted, "Ramon, lumabas ka diyan, labas,

babarilin kita."6 Thereafter, Galicia fired two shots, destroyed the perimeter fence, broke the kitchen door and entered the
house.7 A fight ensued between Ramon and Galicia. The two wrestled for possession of a bladed weapon. Galicia pulled
Ramon towards the bed where the spouses Thelmo and Dolores were seated. Dolores saw Roberto Ureta, a companion
of Galicia, stab Ramon. According to Dolores, her husband and she were only an arms length away8 and they witnessed
what happened.

Another companion of Galicia, namely Vicente "Jun" Banang, Jr., also entered the house and then dragged Thelmo
towards the back of the house.9 Ureta joined Banang in the assault on Thelmo, and banged Thelmos head against the
wall of the house. And then, uttering "Kunsintidor sa iyong anak," Ureta stabbed Thelmo.10

At about the same time, Audie Abenir, the brother of Ramon, testified that he was about ten meters away from their
parents house. He also heard his brother, Ramon, shouting, "Mga tanod, Kapitan, lumabas kayo." Thereafter, according
to Audie, he saw Galicia arrived with some men. He saw Galicia fired shots and call out, "Ramon, lumabas ka, babarilin
kita." Suddenly, he heard a commotion from his parents kitchen and heard his mother saying, "[Roding], tulungan mo
kami, pinasok kami nina Kapitan." 11 From his childrens room, Audie said, he witnessed his brother Ramon and Galicia
fighting. He also saw Ureta in the kitchen. He sought help, and with SPO2 Nolito "Noli" Maning and Felix Maquirang, the
responding policemen, they went to his parents house where he saw his brother Ramon, lying near the front door with a
chest wound, and his father, Thelmo, clutching his intestines that were protruding from an open wound as he sat by
Ramons head.12 Maning rushed Ramon and Thelmo to the hospital. Audie also testified that he had known both Galicia
and Ureta from childhood.

Thelmos son and Ramons brother, Felipe, testified that while attending to his father in the hospital, on August 24, 1995,
his father told him in the vernacular, "Ping, may sasabihin ako sa iyo, iyong pakatandaan at huwag mong kalilimutan."13
Felipe got a pen and paper and wrote the names enumerated by his father as those who entered their house "Kap.
Galicia, Berting Ureta, Jun Banang, Nestor Vicente, Merlin Vicente, Jojo Manito." A few minutes later, Thelmo died.14

Dr. Moises Serdoncillo, medico-legal officer of the Calapan Provincial Hospital, unsuccessfully operated on both Ramon
and Thelmo; both father and son died.

The medical certificate issued by Dr. Serdoncillo showed that Ramon sustained a stab wound which penetrated the
middle portion of his abdomen. The cause of Ramons death was loss of blood and infection. Thelmos medical certificate
showed that he sustained a stab wound at the left portion of his abdomen which injured his spleen and traversed the
colon up to the posterior abdominal wall. Thelmo also had a hematoma at the back, caused by something that hit him.
According to the medical certificate, Thelmo died of cardiorespiratory arrest due to myocardial infarction secondary to stab
wound.

The defenses version15 of the incident was culled mainly from the testimonies of accused Galicia, Jojo Manito and Merlin
Vicente, as follows:

Galicia testified that at around 8:45 p.m. on August 16, 1995, while he was in his sister Benedictas house, he saw Ramon
in front of the Barangay Hall located about five meters from Benedictas house. Ramon was shouting, "Kapitan, mga
Barangay Tanod, lumabas kayo riyan. Kayoy aking papatayin!"16 Galicia approached Ramon and told him to go home.
Ramon relented, and Galicia said he even accompanied Ramon home. Ramon rushed upstairs, straight to the window
and started throwing stones, hitting Galicia in the knee. According to Galicia, as he walked away, he heard the continued
shouts of Thelmo and his wife calling their sons, Audie and Felix, to help. He tried to ignore Thelmos wife calling, but
when he heard Ramon shouting, "Kapitan, huwag kang umalis. Ikaw ay aking papatayin,"17 he turned towards the kitchen
of the house. He was by the broken fence and about two meters from the door of the kitchen when he told Ramon,
"Tukayo, huwag kang lumaban. Maraming tao dito, baka ka madisgrasiya."18 By then, several persons were milling in
front of the gate. But, Ramon suddenly came out of the kitchen and struck him with a scythe. He parried the blow with
both hands and they grappled for the scythe. The scythe hit him in his arms and body. Suddenly, Ramon fell and his head
hit the doorknob of the kitchen door. They continued grappling and Galicia was hit in the nape.19 At this point, Galicia
shouted for assistance, "Mga kasama, kung meron man diyan sa labas, akoy may tama!"20

Accused Jojo Manito, a barangay tanod who heard the call, approached the protagonists. Manito even demonstrated
during trial the position of the two protagonists as they grappled for the scythe. He said that as he entered, Galicia was
crouching, holding Ramons hands. Ramon, still holding on to the scythe, was lying underneath Galicia. Manito said he
tried to grab the scythe from Ramon but he was hit on his left hand near the thumb, upper left forearm, and on his right
hand, near the thumb. Manito recalled he had a tear gas canister in his pocket and told Galicia about it. After instructing
Galicia to cover his face with a towel, Manito sprayed tear gas on Ramon, making Ramon dizzy. Galicia and Manito left. At
the gate, they met accused Merlin Vicente, who was about to enter the yard. As Galicia told Merlin that they were on their
way to get police assistance to bring Ramon to the police station, someone told them that Ureta had already called the
police. Merlin helped Galicia board a tricycle. Galicia with Manito and Banang went to the Medicare Clinic. Manito said
that before they left, he noticed several persons enter the house to assist Ramon. He said he did not see accused Ureta
and Nestor Vicente during the incident.21

Accused Nestor Vicente interposed the defense of alibi,22 saying he was out fishing with Robert Alunsagay and Abelio*
Villanueva from 5:00 p.m. until 10:00 p.m. on August 16, 1995. Later, they sold their catch to Carmen Magadia whose
house was about half a kilometer from the Abenirs. Magadia23 and Villanueva24 were both called as witnesses to support
Nestors alibi.

Merlin Vicente testified that he was in his house which is about forty meters from the house of the Abenirs, at around
10:00 p.m. on August 16, 1995.25 As he rushed to the Abenirs house, he heard shouts of "Tabang kayo mga
kapitbahay."26 On the way, he said he met a certain Norma Cunanan. When they reached Thelmos house, he saw a
bloodied Galicia, aided by Manito, on the way out of the compound. He helped Manito guide Galicia towards a tricycle.27
He also testified that he did not see Ureta nor Thelmo all the time that he was at the gate.28

Dr. Domingo Asis corroborated the testimony of Galicia. He said he treated Galicia at around 9:30 p.m. on August 16,
1995. He described the eleven incised wounds Galicia sustained.29 He also said that the injuries sustained by Galicia
could have been inflicted while grappling for possession of a sharp bladed instrument like a scythe.30 He added that he
treated a companion of Galicia whose name he could not recall.31

Accused Ureta and Banang jumped bail during trial and were tried in absentia. 32

On August 19, 1999, the RTC rendered a joint decision. The decretal portion of the said decision reads:

WHEREFORE, judgment is hereby rendered as follows:

(a) In Criminal Case No. R-726, accused Ramon Galicia y Manresa and accused Roberto [U]reta y Ortega are hereby
pronounced GUILTY of the crime of Homicide with the aggravating circumstance of dwelling which was off-setted (sic) by
the mitigating circumstance of sufficient provocation and each of them is hereby sentenced to an indeterminate penalty of
imprisonment ranging from eight (8) years and one (1) day of prision mayor as MINIMUM to fourteen (14) years, eight (8)
months and one (1) day of reclusion temporal medium as MAXIMUM and for them to pay in solidum the heirs of the victim
of Ramon Abenir, the sum of P50,000.00 as compensatory damages and the additional sum of P50,000.00 as moral
damages;

(b) The rest of the accused in Criminal Case No. R-726 namely Joseph a.k.a. as Jojo Manito y Galicia, Nestor Vicente y
Gervacio, Vicente "Jun" Banang, Jr. y Buncag and Merl[i]n Vicente y Buncag are ACQUITTED for insufficiency of
evidence and the bailbonds posted by them are hereby ordered discharged;

(c) In accordance with Administrative Circular No. 12-94 entitled "Amendments to Rule 114 of the 1985 Rules of Criminal
Procedure more particularly paragraph a, Section 2 of Rule 114 to the effect that the bail shall be effective upon approval

unless sooner cancelled until the promulgation of judgment by the Regional Trial Court, the bail bond posted by the
accused Ramon Galicia y Manresa is cancelled and he is ordered committed to the Provincial Jail. Pursuant to the ruling
of the Honorable Supreme Court in Jose T. Obosa vs. Court of Appeals, et al., G.R. No. 114350, prom. January 16, 1997
that the grant of bail even in non-capital offenses after conviction of the accused by the Regional Trial Court is now a
matter of discretion and it appearing that none of the circumstances mentioned in paragraph 3, Section 5, Rule 114 of the
Revised Rules of Criminal Procedure which could preclude the grant of bail is present, said accused is allowed to post bail
which is hereby fixed at P90,000.00 should he decide to appeal from the decision for his provisional liberty during the
pendency of the appeal;

(d) Let an alias warrant of arrest be issued against accused Roberto [U]reta y Ortega who has jumped bail during the trial
of the case.

Upon the other hand, in Criminal Case No. R-725, the court pronounced judgment as follows:

(a) Accused Vicente "Jun" Banang, Jr. y Buncag and Roberto [U]reta y Ortega are hereby found GUILTY of the crime of
Homicide with the aggravating circumstance of dwelling without any mitigating circumstance and each of them is hereby
sentenced to an indeterminate penalty of imprisonment ranging from twelve (12) years of prision mayor to seventeen (17)
years, four (4) months and one (1) day of reclusion temporal maximum as MAXIMUM and for them to pay in solidum the
heirs of Thelmo Abenir the sum of P50,000.00 as compensatory damages and the sum of P50,000.00 as moral damages;

(b) The rest of the accused in R-725 namely Ramon Galicia y Manresa, Joseph "Jojo" Manito y Galicia, Nestor Vicente y
Gervacio and Merl[i]n Vicente y Buncag are ACQUITTED for insufficiency of evidence and the bail bonds posted by them
are discharged;

(c) Let an alias warrant of arrest be issued against accused Vicente "Jun" Banang, Jr. y Buncag and Roberto [U]reta y
Ortega.

No award of actual damages could be made in both cases for failure of the prosecution to establish the factual bases for
entitlement to said damages.

For the convicted accused to pay the cost of suit.

SO ORDERED.33

Galicia appealed his conviction for the death of Ramon. He averred that the trial court erred in finding him guilty of
homicide with Ureta, considering that the prosecution failed to prove that he and Ureta conspired to kill Ramon; and that
the prosecutions evidence showed it was only Ureta who stabbed Ramon.

The Court of Appeals acted favorably on Galicias appeal and held:

WHEREFORE, premises considered, the appeal is GRANTED and judgment is hereby rendered reversing the assailed
Decision and ACQUITTING accused-appellant RAMON GALICIA Y MANRESA of the crime charged. The civil liability
pronounced by the Decision as against him is hereby deleted. The bailbond posted by accused-appellant is ordered
cancelled.

SO ORDERED.34

In this petition, the OSG asserts:

I.

PUBLIC RESPONDENT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION BY HOLDING THAT THE TRIAL COURTS FINDING OF CONSPIRACY BETWEEN PRIVATE
RESPONDENT AND ROBERTO [U]RETA HAD NO LEGAL BASIS IN DISREGARD OF THE PLAIN EVIDENCE EXTANT
IN THE RECORD OF THIS CASE THAT PROVED THE PRESENCE OF CONSPIRACY TO INFLICT PHYSICAL HARM
ON RAMON ABENIR, MAKING THE ACT OF ONE, THE ACT OF ALL.

II.

PUBLIC RESPONDENT GRAVELY ERRED IN HOLDING THAT BASED ON THE MEDICAL FINDING, THE VICTIM
RAMON ABENIR SUFFERED ONLY ONE FATAL STAB WOUND AS NO AUTOPSY REPORT WAS CONDUCTED.

III.

PUBLIC RESPONDENT GRAVELY ERRED IN NOT TAKING INTO CONSIDERATION THELMO ABENIRS DYING
DECLARATION; ASSUMING ARGUENDO THAT THELMO ABENIRS STATEMENT IS NOT ADMISSIBLE AS AN ANTE
MORTEM DECLARATION, IT MAY NONETHELESS BE CONSIDERED AS PART OF THE RES GESTAE, AS IT WAS
MADE IMMEDIATELY AFTER A STARTLING OCCURRENCE AND WHEN THE VICTIM DID NOT HAVE TIME TO
CONTRIVE A FALSEHOOD.

IV.

PUBLIC RESPONDENT GRAVELY ERRED IN ACQUITTING PRIVATE RESPONDENT BECAUSE THE PROSECUTION
WAS ABLE TO PROVE BEYOND REASONABLE DOUBT THE GUILT OF PRIVATE RESPONDENT RAMON GALICIA
AND ROBERTO [U]RETA AND THEIR CONSPIRACY TO INFLICT PHYSICAL INJURIES THAT LED TO RAMON
ABENIRS DEATH.35

In sum, the main issues for our resolution are: (1) Did the Court of Appeals commit grave abuse of its discretion when it
declared there was no conspiracy to kill Ramon? (2) Did the appellate court err in its appreciation of the medico-legal
report and ante mortem declaration as res gestae, and then in concluding that the guilt of Galicia had not been proven
beyond reasonable doubt?

Let us now focus on the matter of conspiracy. The OSG contends that conspiracy on the part of Galicia and his
companions to kill Ramon was apparent from the following events and circumstances:

(1) Before the incident, Ramon and Galicia had a heated argument and Ramon threatened to kill Galicia and his
companions, giving reason for Galicia and his companions to conspire to enter the house of the Abenirs and attack
Ramon.

(2) Before breaking into the house, Galicia showed his intention to shoot Ramon when he shouted, "Ramon, lumabas ka
diyan. Labas. Babarilin kita."

(3) Galicia was the leader and active participant in the attack on Ramon and not just a passive bystander.

(4) When Galicia was hurt, he called on his companions for help, prompting Manito to use a tear gas that made Ramon
helpless until Ureta stabbed Ramon.

The OSG argues that even if it was not Galicia who stabbed Ramon but Ureta, Galicia as co-conspirator was as guilty
because it was he who threatened Ramon, destroyed the perimeter fence, and broke the kitchen door. In short, he was
the leader of the attack on Ramon.

Further, the OSG challenges the reliance of the appellate court on the medical certificate showing that Ramon sustained
only one stab wound contrary to Doloress testimony that her son was stabbed twice. The OSG points out that the medical
certificate was issued only for identifying the cause of Ramons death and not to identify all the injuries. The OSG stresses
that Dr. Serdoncillo admitted he did not conduct an autopsy on Ramon because while operating on the victim, he already
knew the cause of death.

In addition, the OSG points out that the appellate court overlooked the dying declaration of Thelmo identifying his
assailants. According to the OSG, at the very least, Thelmos statement should have been considered by the appellate
court as a dying declaration.

Lastly, the OSG concludes that after the prosecution had shown the acts and conduct of Galicia before, during and after
the incident as constituting complicity to attack Ramon, Galicia should be held responsible for the death of Ramon in
accordance with Article 4 of the Revised Penal Code. Article 4 reads:

ART. 4. Criminal liability. Criminal liability shall be incurred:

1. By any person committing a felony (delito) although the wrongful act done be different from that which he intended.

2. By any person performing an act which would be an offense against persons or property, were it not for the inherent
impossibility of its accomplishment or on account of the employment of inadequate or ineffectual means.

In his Comment, Galicia contends that there was no grave abuse on the part of the Court of Appeals, and adds that any
mistake or error in the appreciation of facts, evidence or law is merely an error of judgment and not an error of jurisdiction,
and hence, not a subject of a petition for certiorari.

Most significantly, the defense for private respondent points out that to give due course to the instant petition and review
the acquittal by the appellate court of Galicia would constitute double jeopardy.

Thus, before tackling the two-pronged issues raised by petitioner, we must address first the threshold issue raised by
private respondent: Would a review of the acquittal of Galicia constitute double jeopardy?

Section 21, Article III of the 1987 Constitution states:

Section 21. No person shall be twice put in jeopardy of punishment for the same offense. If an act is punished by a law
and an ordinance, conviction or acquittal under either shall constitute a bar to another prosecution for the same act.

Section 7, Rule 117 of the Revised Rules on Criminal Procedure provides:

SEC. 7.Former conviction or acquittal; double jeopardy. When an accused has been convicted or acquitted, or the
case against him dismissed or otherwise terminated without his express consent by a court of competent jurisdiction,
upon a valid complaint or information or other formal charge sufficient in form and substance to sustain a conviction and
after the accused had pleaded to the charge, the conviction or acquittal of the accused or the dismissal of the case shall
be a bar to another prosecution for the offense charged, or for any attempt to commit the same or frustration thereof, or for
any offense which necessarily includes or is necessarily included in the offense charged in the former complaint or
information.

However, the conviction of the accused shall not be a bar to another prosecution for an offense which necessarily includes
the offense charged in the former complaint or information under any of the following instances:

(a) the graver offense developed due to supervening facts arising from the same act or omission constituting the former
charge;

(b) the facts constituting the graver charge became known or were discovered only after a plea was entered in the former
complaint or information; or

(c) the plea of guilty to the lesser offense was made without the consent of the prosecutor and of the offended party
except as provided in section 1 (f) of Rule 116.

In any of the foregoing cases, where the accused satisfies or serves in whole or in part the judgment, he shall be credited
with the same in the event of conviction for the graver offense.

As we have previously held in People v. Serrano, Sr.:36 A verdict of acquittal is immediately final and a reexamination of
the merits of such acquittal, even in the appellate courts, will put the accused in jeopardy for the same offense. The
finality-of-acquittal doctrine has several avowed purposes. Primarily, it prevents the State from using its criminal processes
as an instrument of harassment to wear out the accused by a multitude of cases with accumulated trials. It also serves the
additional purpose of precluding the State, following an acquittal, from successively retrying the defendant in the hope of
securing a conviction. And finally, it prevents the State, following conviction, from retrying the defendant again in the hope
of securing a greater penalty.37 In People v. Velasco,38 we stressed that an acquitted defendant is entitled to the right of
repose as a direct consequence of the finality of his acquittal. Hence, it cannot be disputed that the verdict of the Court of
Appeals acquitting Ramon Galicia is now final and irreviewable.39

This is not to say that the constitutional guarantee against double jeopardy is without exceptions. For there are two
recognized exceptions: (1) Where there has been deprivation of due process and where there is a finding of a mistrial,40
or (2) Where there has been a grave abuse of discretion under exceptional circumstances.41 However, in this case, we
find that the exceptions do not exist.

Firstly, was there a deprivation of due process, or a mistrial? The records show that during the trial, both parties had more
than sufficient occasions to be heard and to present their evidence. The same is true during the appeal. The State
represented by the prosecution had not been deprived of a fair opportunity to prove its case.

Second, has there been a grave abuse of discretion by the Court of Appeals? Grave abuse of discretion implies such
capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction or, in other words, where the power is
exercised in an arbitrary manner by reason of passion, prejudice, or personal hostility, and it must be so patent or gross as
to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined by law, or to act at all in
contemplation of law.42 Certiorari alleging grave abuse of discretion is an extraordinary remedy. Its use is confined to
extraordinary cases wherein the action of the inferior court is wholly void.43 Its aim is to keep the inferior court within the
parameters of its jurisdiction or to prevent it from committing such a grave abuse of discretion amounting to lack or excess
of jurisdiction.44 No grave abuse of discretion may be attributed to the court simply because of its alleged misappreciation
of facts and evidence.45 While certiorari may be used to correct an abusive acquittal, the petitioner in such extraordinary
proceeding must clearly demonstrate that the lower court blatantly abused its authority to a point so grave as to deprive it
of its very power to dispense justice.46

In its decision, the Court of Appeals, said that it overturned Galicias conviction because the trial court held that Galicia
was in no way involved in Thelmos death, and only Ureta and Banang conspired to kill Thelmo. The Court of Appeals
explained that the finding of the trial court, now final, should be upheld and applied to Galicia insofar as the death of
Ramon was concerned. The Court of Appeals went on to say that the deaths of Ramon and Thelmo happened on the
same occasion, in the same place and involved the same participants; that there was a continuous unbroken chain of
events which meant that the act and intention of each participant could not be split into segments/phases such that there
was conspiracy as to one aspect but none in the other aspect.47 It also held that there is no such thing as partial
conspiracy.

The Court of Appeals also observed that the testimonies of the prosecution witnesses lacked credibility and were filled
with inconsistencies.48 Among them, (1) Dolores and Audie both claimed that Galicia was armed with a gun and fired two
consecutive shots, but surprisingly, the latter did not use his gun when he fought with Ramon. (2) Ureta stabbed Ramon,
yet, Galicia did not finish off Ramon by shooting him. (3) After Ramon was stabbed, Dolores claimed that all the accused
ganged up on her son, and yet, she could not specifically say who kicked, boxed or strangled Ramon. (4) Dolores
categorically testified that Ureta stabbed Ramon twice even pointing out that the first stab was at the right shoulder and
the second at the left chest, but, the medical certificate showed that Ramon sustained only one wound. Lastly, (5) Dolores
said that when Galicia fired his gun, he and his companions were already inside their house, yet, Audie told the court he
heard two shots before the group of Galicia arrived.49 The Court of Appeals observed that Ureta was seemingly on a
rampage, stabbing Ramon first and then Thelmo. It noted that Ureta did not even see what happened to Galicia who was
still locked in a fight with Ramon.50

The Court of Appeals concluded that the RTC based its decision on the weakness of the defense evidence, rather than on
the strength of the prosecutions. It went on to say,

there is no evidence to show unity of purpose and design between appellant and accused [U]reta. The fact that the
fight between appellant and Ramon commenced prior to the actual stabbing of the latter by [U]reta does not of itself
demonstrate concurrence of wills or unity of purpose and action, in the same manner that the fact that the assault on
Ramon was carried out by accused [U]reta while appellant was grappling with Ramon does not conclusively show that
appellant knew that [U]reta intended to stab, much less kill the victim. Simultaneity, it has been held, would not itself
demonstrate the concurrence of will or the unity of action and purpose that could be a basis for collective responsibility of
two or more individuals. Thus, contrary to the findings of the trial court, appellant and accused [U]reta acted independently
of, not in conspiracy with each other. Appellant fought with Ramon in response to the latters challenge to a fight. And
while the two were fighting and grappling for the possession of a scythe, accused [U]reta stabbed Ramon.51

Finally, the Court of Appeals rejected the trial courts finding that the conspiracy between Ureta and Galicia was
strengthened by the formers decision to jump bail and go into hiding, for being contrary to the doctrine of res inter alios
acta. According to the Court of Appeals, this conclusion of the court a quo partakes more of wild conjectures and

speculations which have no probative value whatsoever since there was no evidence that the escape of Ureta was with
the knowledge, much less consent of Galicia.52

In our considered view, the conclusions arrived at by the Court of Appeals cannot by any measure be characterized as
capricious, whimsical nor arbitrary, to constitute grave abuse of discretion under Rule 65. While it may be argued that
there have been instances where the appreciation of facts might have resulted from possible lapses in evaluation of the
evidence, nothing therein detracts from the fact that relevant and material evidence was scrutinized, considered and
evaluated.

We note that while the OSG alleges grave abuse of discretion as the core of its petition, the issues it raises concern errors
of judgment, not errors of jurisdiction, which is tantamount to converting the petition for certiorari into an appeal, contrary
to the express injunction of the Constitution, the Rules of Court, and prevailing jurisprudence.53 Conformably then, we
need not embark upon review of the factual and evidentiary issues raised by the OSG, as these are not within the realm of
the present petition.

WHEREFORE, the instant petition is DISMISSED for lack of merit. The acquittal of herein private respondent by the Court
of Appeals in its Decision dated May 22, 2003 in CA-G.R. CR No. 23605, entitled "People of the Philippines v. Ramon
Galicia y Manresa," is AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Picart v Smith
In this action the plaintiff, Amado Picart, seeks to recover of the defendant, Frank Smith, jr., the sum of P31,000, as
damages alleged to have been caused by an automobile driven by the defendant. From a judgment of the Court of First
Instance of the Province of La Union absolving the defendant from liability the plaintiff has appealed.

The occurrence which gave rise to the institution of this action took place on December 12, 1912, on the Carlatan Bridge,
at San Fernando, La Union. It appears that upon the occasion in question the plaintiff was riding on his pony over said
bridge. Before he had gotten half way across, the defendant approached from the opposite direction in an automobile,
going at the rate of about ten or twelve miles per hour. As the defendant neared the bridge he saw a horseman on it and
blew his horn to give warning of his approach. He continued his course and after he had taken the bridge he gave two
more successive blasts, as it appeared to him that the man on horseback before him was not observing the rule of the
road.

The plaintiff, it appears, saw the automobile coming and heard the warning signals. However, being perturbed by the
novelty of the apparition or the rapidity of the approach, he pulled the pony closely up against the railing on the right side
of the bridge instead of going to the left. He says that the reason he did this was that he thought he did not have sufficient
time to get over to the other side. The bridge is shown to have a length of about 75 meters and a width of 4.80 meters. As
the automobile approached, the defendant guided it toward his left, that being the proper side of the road for the machine.
In so doing the defendant assumed that the horseman would move to the other side. The pony had not as yet exhibited
fright, and the rider had made no sign for the automobile to stop. Seeing that the pony was apparently quiet, the
defendant, instead of veering to the right while yet some distance away or slowing down, continued to approach directly
toward the horse without diminution of speed. When he had gotten quite near, there being then no possibility of the horse
getting across to the other side, the defendant quickly turned his car sufficiently to the right to escape hitting the horse
alongside of the railing where it as then standing; but in so doing the automobile passed in such close proximity to the
animal that it became frightened and turned its body across the bridge with its head toward the railing. In so doing, it as
struck on the hock of the left hind leg by the flange of the car and the limb was broken. The horse fell and its rider was
thrown off with some violence. From the evidence adduced in the case we believe that when the accident occurred the
free space where the pony stood between the automobile and the railing of the bridge was probably less than one and
one half meters. As a result of its injuries the horse died. The plaintiff received contusions which caused temporary
unconsciousness and required medical attention for several days.

The question presented for decision is whether or not the defendant in maneuvering his car in the manner above
described was guilty of negligence such as gives rise to a civil obligation to repair the damage done; and we are of the
opinion that he is so liable. As the defendant started across the bridge, he had the right to assume that the horse and the
rider would pass over to the proper side; but as he moved toward the center of the bridge it was demonstrated to his eyes
that this would not be done; and he must in a moment have perceived that it was too late for the horse to cross with safety
in front of the moving vehicle. In the nature of things this change of situation occurred while the automobile was yet some
distance away; and from this moment it was not longer within the power of the plaintiff to escape being run down by going
to a place of greater safety. The control of the situation had then passed entirely to the defendant; and it was his duty
either to bring his car to an immediate stop or, seeing that there were no other persons on the bridge, to take the other
side and pass sufficiently far away from the horse to avoid the danger of collision. Instead of doing this, the defendant ran
straight on until he was almost upon the horse. He was, we think, deceived into doing this by the fact that the horse had
not yet exhibited fright. But in view of the known nature of horses, there was an appreciable risk that, if the animal in
question was unacquainted with automobiles, he might get exited and jump under the conditions which here confronted
him. When the defendant exposed the horse and rider to this danger he was, in our opinion, negligent in the eye of the
law.

The test by which to determine the existence of negligence in a particular case may be stated as follows: Did the
defendant in doing the alleged negligent act use that person would have used in the same situation? If not, then he is
guilty of negligence. The law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the
discreet paterfamilias of the Roman law. The existence of negligence in a given case is not determined by reference to the
personal judgment of the actor in the situation before him. The law considers what would be reckless, blameworthy, or
negligent in the man of ordinary intelligence and prudence and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given situation must of course be always
determined in the light of human experience and in view of the facts involved in the particular case. Abstract speculations
cannot here be of much value but this much can be profitably said: Reasonable men govern their conduct by the
circumstances which are before them or known to them. They are not, and are not supposed to be, omniscient of the
future. Hence they can be expected to take care only when there is something before them to suggest or warn of danger.
Could a prudent man, in the case under consideration, foresee harm as a result of the course actually pursued? If so, it
was the duty of the actor to take precautions to guard against that harm. Reasonable foresight of harm, followed by
ignoring of the suggestion born of this prevision, is always necessary before negligence can be held to exist. Stated in
these terms, the proper criterion for determining the existence of negligence in a given case is this: Conduct is said to be
negligent when a prudent man in the position of the tortfeasor would have foreseen that an effect harmful to another was
sufficiently probable to warrant his foregoing conduct or guarding against its consequences.

Applying this test to the conduct of the defendant in the present case we think that negligence is clearly established. A
prudent man, placed in the position of the defendant, would in our opinion, have recognized that the course which he was
pursuing was fraught with risk, and would therefore have foreseen harm to the horse and the rider as reasonable
consequence of that course. Under these circumstances the law imposed on the defendant the duty to guard against the
threatened harm.

It goes without saying that the plaintiff himself was not free from fault, for he was guilty of antecedent negligence in
planting himself on the wrong side of the road. But as we have already stated, the defendant was also negligent; and in
such case the problem always is to discover which agent is immediately and directly responsible. It will be noted that the
negligent acts of the two parties were not contemporaneous, since the negligence of the defendant succeeded the
negligence of the plaintiff by an appreciable interval. Under these circumstances the law is that the person who has the
last fair chance to avoid the impending harm and fails to do so is chargeable with the consequences, without reference to
the prior negligence of the other party.

The decision in the case of Rkes vs. Atlantic, Gulf and Pacific Co. (7 Phil. Rep., 359) should perhaps be mentioned in this
connection. This Court there held that while contributory negligence on the part of the person injured did not constitute a
bar to recovery, it could be received in evidence to reduce the damages which would otherwise have been assessed
wholly against the other party. The defendant company had there employed the plaintiff, as a laborer, to assist in
transporting iron rails from a barge in Manila harbor to the company's yards located not far away. The rails were conveyed

upon cars which were hauled along a narrow track. At certain spot near the water's edge the track gave way by reason of
the combined effect of the weight of the car and the insecurity of the road bed. The car was in consequence upset; the
rails slid off; and the plaintiff's leg was caught and broken. It appeared in evidence that the accident was due to the effects
of the typhoon which had dislodged one of the supports of the track. The court found that the defendant company was
negligent in having failed to repair the bed of the track and also that the plaintiff was, at the moment of the accident, guilty
of contributory negligence in walking at the side of the car instead of being in front or behind. It was held that while the
defendant was liable to the plaintiff by reason of its negligence in having failed to keep the track in proper repair
nevertheless the amount of the damages should be reduced on account of the contributory negligence in the plaintiff. As
will be seen the defendant's negligence in that case consisted in an omission only. The liability of the company arose from
its responsibility for the dangerous condition of its track. In a case like the one now before us, where the defendant was
actually present and operating the automobile which caused the damage, we do not feel constrained to attempt to weigh
the negligence of the respective parties in order to apportion the damage according to the degree of their relative fault. It
is enough to say that the negligence of the defendant was in this case the immediate and determining cause of the
accident and that the antecedent negligence of the plaintiff was a more remote factor in the case.

A point of minor importance in the case is indicated in the special defense pleaded in the defendant's answer, to the effect
that the subject matter of the action had been previously adjudicated in the court of a justice of the peace. In this
connection it appears that soon after the accident in question occurred, the plaintiff caused criminal proceedings to be
instituted before a justice of the peace charging the defendant with the infliction of serious injuries (lesiones graves). At
the preliminary investigation the defendant was discharged by the magistrate and the proceedings were dismissed.
Conceding that the acquittal of the defendant at the trial upon the merits in a criminal prosecution for the offense
mentioned would be res adjudicata upon the question of his civil liability arising from negligence -- a point upon which it is
unnecessary to express an opinion -- the action of the justice of the peace in dismissing the criminal proceeding upon the
preliminary hearing can have no effect. (See U. S. vs. Banzuela and Banzuela, 31 Phil. Rep., 564.)

From what has been said it results that the judgment of the lower court must be reversed, and judgment is her rendered
that the plaintiff recover of the defendant the sum of two hundred pesos (P200), with costs of other instances. The sum
here awarded is estimated to include the value of the horse, medical expenses of the plaintiff, the loss or damage
occasioned to articles of his apparel, and lawful interest on the whole to the date of this recovery. The other damages
claimed by the plaintiff are remote or otherwise of such character as not to be recoverable. So ordered.

BPI v CA
The question before this Court is whether private respondent can recover moral damages arising from the cancellation of
his credit card by petitioner credit card corporation.

The facts of the case are as stated in the decision of the respondent court,[1] to wit:

The case arose from the dishonor of the credit card of the plaintiff Atty. Ricardo J. Marasigan by Cafe Adriatico, a business
establishment accredited with the defendant-appellant BPI Express Card Corporation (BECC for brevity) on December 8,
1989 when the plaintiff entertained some guests thereat.

The records of this case show that plaintiff, who is a lawyer by profession was a complimentary member of BECC from
February 1988 to February 1989 and was issued Credit Card No. 100-012-5534 with a credit limit of P3,000.00 and with a
monthly billing every 27th of the month (Exh. N), subject to the terms and conditions stipulated in the contract (Exh. 1-b).
His membership was renewed for another year or until February 1990 and the credit limit was increased to P5,000.00
(Exh. A). The plaintiff oftentimes exceeded his credit limits (Exhs. I, I-1 to I-12) but this was never taken against him by the
defendant and even his mode of paying his monthly bills in check was tolerated. Their contractual relations went on
smoothly until his statement of account for October, 1989 amounting to P8,987.84 was not paid in due time. The plaintiff
admitted having inadvertently failed to pay his account for the said month because he was in Quezon province attending
to some professional and personal commitments. He was informed by his secretary that defendant was demanding
immediate payment of his outstanding account, was requiring him to issue a check for P15,000.00 which would include
his future bills, and was threatening to suspend his credit card. Plaintiff issued Far East Bank and Trust Co. Check No.
494675 in the amount of P15,000.00, postdated December 15, 1989 which was received on November 23, 1989 by Tess

Lorenzo, an employee of the defendant (Exhs. J and J-1), who in turn gave the said check to Jeng Angeles, a coemployee who handles the account of the plaintiff. The check remained in the custody of Jeng Angeles. Mr. Roberto
Maniquiz, head of the collection department of defendant was formally informed of the postdated check about a week
later. On November 28, 1989, defendant served plaintiff a letter by ordinary mail informing him of the temporary
suspension of the privileges of his credit card and the inclusion of his account number in their Caution List. He was also
told to refrain from further use of his credit card to avoid any inconvenience/embarrassment and that unless he settles his
outstanding account with the defendant within 5 days from receipt of the letter, his membership will be permanently
cancelled (Exh. 3). There is no showing that the plaintiff received this letter before December 8, 1989. Confident that he
had settled his account with the issuance of the postdated check, plaintiff invited some guests on December 8, 1989 and
entertained them at Caf Adriatico. When he presented his credit card to Caf Adriatico for the bill amounting to P735.32,
said card was dishonored. One of his guests, Mary Ellen Ringler, paid the bill by using her own credit card, a Unibankard
(Exhs. M, M-1 and M-2).

In a letter addressed to the defendant dated December 12, 1989, plaintiff requested that he be sent the exact billing due
him as of December 15, 1989, to withhold the deposit of his postdated check and that said check be returned to him
because he had already instructed his bank to stop the payment thereof as the defendant violated their agreement that
the plaintiff issue the check to the defendant to cover his account amounting to only P8,987.84 on the condition that the
defendant will not suspend the effectivity of the card (Exh. D). A letter dated December 16, 1989 was sent by the plaintiff
to the manager of FEBTC, Ramada Branch, Manila requesting the bank to stop the payment of the check (Exhs. E, E-1).
No reply was received by plaintiff from the defendant to his letter dated December 12, 1989. Plaintiff sent defendant
another letter dated March 12, 1990 reminding the latter that he had long rescinded and cancelled whatever arrangement
he entered into with defendant and requesting for his correct billing, less the improper charges and penalties, and for an
explanation within five (5) days from receipt thereof why his card was dishonored on December 8, 1989 despite
assurance to the contrary by defendant's personnel-in-charge, otherwise the necessary court action shall be filed to hold
defendant responsible for the humiliation and embarrassment suffered by him (Exh. F). Plaintiff alleged further that after a
few days, a certain Atty. Albano, representing himself to be working with office of Atty. Lopez, called him inquiring as to
how the matter can be threshed out extrajudicially but the latter said that such is a serious matter which cannot be
discussed over the phone. The defendant served its final demand to the plaintiff dated March 21, 1990 requiring him to
pay in full his overdue account, including stipulated fees and charges, within 5 days from receipt thereof or face court
action also to replace the postdated check with cash within the same period or face criminal suit for violation of the
Bouncing Check Law (Exh. G/Exh. 13). The plaintiff, in a reply letter dated April 5, 1990 (Exh. H), demanded defendant's
compliance with his request in his first letter dated March 12, 1990 within three (3) days from receipt, otherwise the
plaintiff will file a case against them, x x x.[2]

Thus, on May 7, 1990 private respondent filed a complaint for damages against petitioner before the Regional Trial Court
of Makati, Branch 150, docketed as Civil Case No. 90-1174.

After trial, the trial court ruled for private respondent, finding that herein petitioner abused its right in contravention of
Article 19 of the Civil Code.[3] The dispositive portion of the decision reads:

Wherefore, judgment is hereby rendered ordering the defendant to pay plaintiff the following:

1. P100,000.00 as moral damages;

2. P50,000.00 as exemplary damages; and
3. P20,000.00 by way of attorney's fees.

On the other hand, plaintiff is ordered to pay defendant its outstanding obligation in the amount of P14,439.41, amount
due as of December 15, 1989.[4]

The trial court's ruling was based on its findings and conclusions, to wit:

There is no question that plaintiff had been in default in the payment of his billings for more than two months, prompting
defendant to call him and reminded him of his obligation. Unable to personally talk with him, this Court is convinced that
somehow one or another employee of defendant called him up more than once.

However, while it is true that, as indicated in the terms and conditions of the application for BPI credit card, upon failure of
the cardholder to pay his outstanding obligation for more than thirty (30) days, the defendant can automatically suspend or
cancel the credit card, that reserved right should not have been abused, as it was in fact abused, in plaintiff's case. What
is more peculiar here is that there have been admitted communications between plaintiff and defendant prior to the
suspension or cancellation of plaintiff's credit card and his inclusion in the caution list. However, nowhere in any of these
communications was there ever a hint given to plaintiff that his card had already been suspended or cancelled. In fact, the
Court observed that while defendant was trying its best to persuade plaintiff to update its account and pay its obligation, it
had already taken steps to suspend/cancel plaintiff's card and include him in the caution list. While the Court admires
defendant's diplomacy in dealing with its clients, it cannot help but frown upon the backhanded way defendant dealt with
plaintiff's case. For despite Tess Lorenzo's denial, there is reason to believe that plaintiff was indeed assured by defendant
of the continued honoring of his credit card so long as he pays his obligation of P15,000.00. Worst, upon receipt of the
postdated check, defendant kept the same until a few days before it became due and said check was presented to the
head of the collection department, Mr. Maniquiz, to take steps thereon, resulting to the embarrassing situation plaintiff
found himself in on December 8, 1989. Moreover, Mr. Maniquiz himself admitted that his request for plaintiff to replace the
check with cash was not because it was a postdated check but merely to tally the payment with the account due.

Likewise, the Court is not persuaded by the sweeping denials made by Tess Lorenzo and her claim that her only
participation was to receive the subject check. Her immediate superior, Mr. Maniquiz testified that he had instructed
Lorenzo to communicate with plaintiff once or twice to request the latter to replace the questioned check with cash, thus
giving support to the testimony of plaintiff's witness, Dolores Quizon, that it was one Tess Lorenzo who she had talked
over the phone regarding plaintiff's account and plaintiff's own statement that it was this woman who assured him that his
card has not yet been and will not be cancelled/suspended if he would pay defendant the sum of P15,000.00.

Now, on the issue of whether or not upon receipt of the subject check, defendant had agreed that the card shall remain
effective, the Court takes note of the following:

1. An employee of defendant corporation unconditionally accepted the subject check upon its delivery, despite its being a
postdated one; and the amount did not tally with plaintiff's obligation;

2. Defendant did not deny nor controvert plaintiff's claim that all his payments were made in checks;

3. Defendant's main witness, Mr. Maniquiz, categorically stated that the request for plaintiff to replace his postdated check
with cash was merely for the purpose of tallying plaintiff's outstanding obligation with his payment and not to question the
postdated check;

4. That the card was suspended almost a week after receipt of the postdated check;

5. That despite the many instances that defendant could have informed plaintiff over the phone of the cancellation or
suspension of his credit card, it did not do so, which could have prevented the incident of December 8, 1989, the notice
allegedly sent thru ordinary mail is not only unreliable but takes a long time. Such action as suspension of credit card must
be immediately relayed to the person affected so as to avoid embarrassing situations.

6. And that the postdated check was deposited on December 20, 1989.

In view of the foregoing observations, it is needless to say that there was indeed an arrangement between plaintiff and the
defendant, as can be inferred from the acts of the defendant's employees, that the subject credit card is still good and
could still be used by the plaintiff as it would be honored by the duly accredited establishment of defendant.[5]

Not satisfied with the Regional Trial Court's decision, petitioner appealed to the Court of Appeals, which, in a decision
promulgated on March 9, 1995 ruled in its dispositive portion:

WHEREFORE, premises considered, the decision appealed from is hereby AFFIRMED with the MODIFICATION that the
defendant-appellant shall pay the plaintiff-appellee the following: P50,000.00 as moral damages; P25,000.00 as
exemplary damages; and P10,000.00 by way of attorney's fees.

SO ORDERED.[6]

Hence, the present petition on the following assignment of errors:

THE LOWER COURT ERRED IN DECLARING THAT THERE WAS INDEED AN AGREEMENT OR ARRANGEMENT
ENTERED INTO BETWEEN THE PARTIES WHEREIN THE DEFENDANT REQUIRED THE PLAINTIFF TO ISSUE A
POSTDATED CHECK IN ITS FAVOR IN THE AMOUNT OF P15,000.00 AS PAYMENT FOR HIS OVERDUE ACCOUNTS,
WITH THE CONDITION THAT THE PLAINTIFF'S CREDIT CARD WILL NOT BE SUSPENDED OR CANCELLED.

II

THE LOWER COURT ERRED IN HOLDING DEFENDANT LIABLE FOR DAMAGES AND ATTORNEY'S FEES ARISING
OUT FROM THE DISHONOR OF THE PLAINTIFF'S CREDIT CARD.[7]

We find the petition meritorious.

The first issue to be resolved is whether petitioner had the right to suspend the credit card of the private respondent.

Under the terms and conditions of the credit card, signed by the private respondent, any card with outstanding balances
after thirty (30) days from original billing/statement shall automatically be suspended, thus:

PAYMENT OF CHARGES - BECC shall furnish the Cardholder a monthly statement of account made through the use of
the CARD and the Cardholder agrees that all charges made through the use of the CARD shall be paid by the Cardholder
on or before the last day for payments, which is twenty (20) days from the date of the said statement of account, and such
payment due date may be changed to an earlier date if the Cardholder's account is considered overdue and/or with
balances in excess of the approved credit limit; or to such other date as may be deemed proper by the CARD issuer with
notice to the Cardholder on the same monthly statement of account. If the last day for payment falls on a Saturday,
Sunday or Holiday, the last day for payment automatically becomes the last working day prior to said payment date.
However, notwithstanding the absence or lack of proof of service of the statement of charges to the Cardholder, the latter
shall pay any or all charges made through the use of the CARD within thirty (30) days from the date or dates thereof.

Failure of Cardholder to pay any and all charges made through the CARD within the payment period as stated in the
statement of charges or within thirty (30) days from actual date or dates whichever occur earlier, shall render him in
default without the necessity of demand from BECC, which the Cardholder expressly waives. These charges or balance
thereof remaining unpaid after the payment due date indicated on the monthly statement of account shall bear interest at
the rate of 3% per month and an additional penalty fee equivalent to another 3% of the amount due for every month or a
fraction of a month's delay. PROVIDED, that if there occurs any change on the prevailing market rates. BECC shall have
the option to adjust the rate of interest and/or penalty fee due on the outstanding obligation with prior notice to the
Cardholder.

xxx xxx xxx

Any CARD with outstanding balances unpaid after thirty (30) days from original billing/statement date shall automatically
be suspended, and those with accounts unpaid after sixty (60) days from said original billing/statement date shall
automatically be cancelled, without prejudice to BECC's right to suspend or cancel any CARD any time and for whatever
reason. In case of default in his obligation as provided for in the preceding paragraph, Cardholder shall surrender his
CARD to BECC and shall in addition to the interest and penalty charges aforementioned, pay the following liquidated
damages and/or fees (a) a collection fee of 25% of the amount due if the account is referred to a collection agency or
attorney; (b) a service fee of P100 for every dishonored check issued by the Cardholder in payment of his account, with
prejudice, however, to BECC's right of considering Cardholder's obligation unpaid, cable cost for demanding payment or
advising cancellation of membership shall also be for Cardholder's account; and (c) a final fee equivalent to 25% of the
unpaid balance, exclusive of litigation expenses and judicial costs, if the payment of the account is enforced through court
action.[8]

The aforequoted provision of the credit card cannot be any clearer. By his own admission, private respondent made no
payment within thirty days for his original billing/statement dated 27 September 1989. Neither did he make payment for his
original billing/statement dated 27 October 1989. Consequently, as early as 28 October 1989, thirty days from the nonpayment of his billing dated 27 September 1989, petitioner corporation could automatically suspend his credit card.

The next issue is whether prior to the suspension of private respondent's credit card on 28 November 1989, the parties
entered into an agreement whereby the card could still be used and would be duly honored by duly accredited
establisments.

We agree with the findings of the respondent court, that there was an arrangement between the parties, wherein the
petitioner required the private respondent to issue a check worth P15,000 as payment for the latter's billings. However, we
find that the private respondent was not able to comply with his obligation.
Clearly, the purpose of the arrangement between the parties on November 22, 1989, was for the immediate payment of
the private respondent's outstanding account, in order that his credit card would not be suspended.

As agreed upon by the parties, on the following day, private respondent did issue a check for P15,000. However, the
check was postdated 15 December 1989. Settled is the doctrine that a check is only a substitute for money and not
money, the delivery of such an instrument does not, by itself operate as payment.[9] This is especially true in the case of a
postdated check.

Thus, the issuance by the private respondent of the postdated check was not effective payment. It did not comply with his
obligation under the arrangement with Miss Lorenzo. Petitioner corporation was therefore justified in suspending his credit
card.

Finally, we find no legal and factual basis for private respondent's assertion that in canceling the credit card of the private
respondent, petitioner abused its right under the terms and conditions of the contract.

To find the existence of an abuse of right under Article 19 the following elements must be present: (1) There is a legal right
or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another.[10]

Time and again this Court has held that good faith is presumed and the burden of proving bad faith is on the party alleging
it.[11] This private respondent failed to do. In fact, the action of the petitioner belies the existence of bad faith. As early as
28 October 1989, petitioner could have suspended private respondent's card outright. Instead, petitioner allowed private
respondent to use his card for several weeks. Petitioner had even notified private respondent of the impending
suspension of his credit card and made special accommodations for him for settling his outstanding account. As such,
petitioner cannot be said to have capriciously and arbitrarily canceled the private respondent's credit card.

We do not dispute the findings of the lower court that private respondent suffered damages as a result of the cancellation
of his credit card. However, there is a material distinction between damages and injury. Injury is the illegal invasion of a
legal right; damage is the loss, hurt, or harm which results from the injury; and damages are the recompense or
compensation awarded for the damage suffered. Thus, there can be damage without injury in those instances in which the
loss or harm was not the result of a violation of a legal duty. In such cases, the consequences must be borne by the
injured person alone, the law affords no remedy for damages resulting from an act which does not amount to a legal injury
or wrong. These situations are often called damnum absque injuria.[12]

In other words, in order that a plaintiff may maintain an action for the injuries of which he complains, he must establish that
such injuries resulted from a breach of duty which the defendant owed to the plaintiff - a concurrence of injury to the
plaintiff and legal responsibility by the person causing it. The underlying basis for the award of tort damages is the premise
that an individual was injured in contemplation of law. Thus, there must first be a breach of some duty and the imposition
of liability for that breach before damages may be awarded;[13] and the breach of such duty should be the proximate
cause of the injury.

We therefore disagree with the ruling of the respondent court that the dishonor of the credit card of the private respondent
by Caf Adriatico is attributable to petitioner for its willful or gross neglect to inform the private respondent of the
suspension of his credit card, the unfortunate consequence of which brought social humiliation and embarrassment to the
private respondent.[14]

It was petitioner's failure to settle his obligation which caused the suspension of his credit card and subsequent dishonor
at Caf Adriatico. He can not now pass the blame to the petitioner for not notifying him of the suspension of his card. As
quoted earlier, the application contained the stipulation that the petitioner could automatically suspend a card whose
billing has not been paid for more than thirty days. Nowhere is it stated in the terms and conditions of the application that
there is a need of notice before suspension may be effected as private respondent claims.[15]

This notwithstanding, on November 28, 1989, the day of the suspension of private respondent's card, petitioner sent a
letter by ordinary mail notifying private respondent that his card had been temporarily suspended. Under the Rules on
Evidence, there is a disputable presumption that letters duly directed and mailed were received on the regular course of
mail.[16] Aside from the private respondent's bare denial, he failed to present evidence to rebut the presumption that he
received said notice.
As it was private respondent's own negligence which was the proximate cause of his embarrassing and humiliating
experience, we find the award of damages by the respondent court clearly unjustified. We take note of the fact that private
respondent has not yet paid his outstanding account with petitioner.

IN VIEW OF THE FOREGOING, the decision of the Court of Appeals ordering petitioner to pay private respondent
P100,000.00 as moral damages, P50,000.00 as exemplary damages and P20,000.00 as attorney's fees, is SET ASIDE.
Private respondent is DIRECTED to pay his outstanding obligation with the petitioner in the amount of P14,439.41.

SO ORDERED.

Urbano v IAC
This is a petition to review the decision of the then Intermediate Appellate Court which affirmed the decision of the then
Circuit Criminal Court of Dagupan City finding petitioner Filomeno Urban guilty beyond reasonable doubt of the crime of
homicide.

The records disclose the following facts of the case.

At about 8:00 o'clock in the morning of October 23, 1980, petitioner Filomeno Urbano went to his ricefield at Barangay
Anonang, San Fabian, Pangasinan located at about 100 meters from the tobacco seedbed of Marcelo Javier. He found
the place where he stored his palay flooded with water coming from the irrigation canal nearby which had overflowed.
Urbano went to the elevated portion of the canal to see what happened and there he saw Marcelo Javier and Emilio Erfe
cutting grass. He asked them who was responsible for the opening of the irrigation canal and Javier admitted that he was
the one. Urbano then got angry and demanded that Javier pay for his soaked palay. A quarrel between them ensued.
Urbano unsheathed his bolo (about 2 feet long, including the handle, by 2 inches wide) and hacked Javier hitting him on
the right palm of his hand, which was used in parrying the bolo hack. Javier who was then unarmed ran away from
Urbano but was overtaken by Urbano who hacked him again hitting Javier on the left leg with the back portion of said
bolo, causing a swelling on said leg. When Urbano tried to hack and inflict further injury, his daughter embraced and
prevented him from hacking Javier.

Immediately thereafter, Antonio Erfe, Emilio Erfe, and Felipe Erfe brought Javier to his house about 50 meters away from
where the incident happened. Emilio then went to the house of Barangay Captain Menardo Soliven but not finding him
there, Emilio looked for barrio councilman Felipe Solis instead. Upon the advice of Solis, the Erfes together with Javier
went to the police station of San Fabian to report the incident. As suggested by Corporal Torio, Javier was brought to a
physician. The group went to Dr. Guillermo Padilla, rural health physician of San Fabian, who did not attend to Javier but
instead suggested that they go to Dr. Mario Meneses because Padilla had no available medicine.

After Javier was treated by Dr. Meneses, he and his companions returned to Dr. Guillermo Padilla who conducted a
medico-legal examination. Dr. Padilla issued a medico-legal certificate (Exhibit "C" dated September 28, 1981) which
reads:

TO WHOM IT MAY CONCERN:

This is to certify that I have examined the wound of Marcelo Javier, 20 years of age, married, residing at Barangay
Anonang, San Fabian, Pangasinan on October 23, 1980 and found the following:

-Incised wound 2 inches in length at the upper portion of the lesser palmar prominence, right.

As to my observation the incapacitation is from (7-9) days period. This wound was presented to me only for medico-legal
examination, as it was already treated by the other doctor. (p. 88, Original Records)

Upon the intercession of Councilman Solis, Urbano and Javier agreed to settle their differences. Urbano promised to pay
P700.00 for the medical expenses of Javier. Hence, on October 27, 1980, the two accompanied by Solis appeared before
the San Fabian Police to formalize their amicable settlement. Patrolman Torio recorded the event in the police blotter
(Exhibit A), to wit:

xxx

xxx

xxx

Entry Nr 599/27 Oct '80/103OH/ Re entry Nr 592 on page 257 both parties appeared before this Station accompanied by
brgy. councilman Felipe Solis and settled their case amicably, for they are neighbors and close relatives to each other.
Marcelo Javier accepted and granted forgiveness to Filomeno Urbano who shoulder (sic) all the expenses in his medical
treatment, and promising to him and to this Office that this will never be repeated anymore and not to harbour any grudge
against each other. (p. 87, Original Records.)

Urbano advanced P400.00 to Javier at the police station. On November 3, 1980, the additional P300.00 was given to
Javier at Urbano's house in the presence of barangay captain Soliven.

At about 1:30 a.m. on November 14, 1980, Javier was rushed to the Nazareth General Hospital in a very serious
condition. When admitted to the hospital, Javier had lockjaw and was having convulsions. Dr. Edmundo Exconde who
personally attended to Javier found that the latter's serious condition was caused by tetanus toxin. He noticed the
presence of a healing wound in Javier's palm which could have been infected by tetanus.

On November 15, 1980 at exactly 4:18 p.m., Javier died in the hospital. The medical findings of Dr. Exconde are as
follows:

Date Diagnosis

11-14-80 ADMITTED due to trismus

adm. at DX TETANUS

1:30 AM Still having frequent muscle spasm. With diffi-

#35, 421 culty opening his mouth. Restless at times. Febrile

11-15-80 Referred. Novaldin 1 amp. inj. IM. Sudden cessa-

tion of respiration and HR after muscular spasm.

02 inhalation administered. Ambo bag resuscita-

tion and cardiac massage done but to no avail.

Pronounced dead by Dra. Cabugao at 4:18 P.M.

PMC done and cadaver brought home by rela-

tives. (p. 100, Original Records)

In an information dated April 10, 1981, Filomeno Urbano was charged with the crime of homicide before the then Circuit
Criminal Court of Dagupan City, Third Judicial District.

Upon arraignment, Urbano pleaded "not guilty." After trial, the trial court found Urbano guilty as charged. He was
sentenced to suffer an indeterminate prison term of from TWELVE (12) YEARS of prision mayor, as minimum to
SEVENTEEN (17) years, FOUR (4) MONTHS and ONE (1) DAY of reclusion temporal, as maximum, together with the
accessories of the law, to indemnify the heirs of the victim, Marcelo Javier, in the amount of P12,000.00 without subsidiary
imprisonment in case of insolvency, and to pay the costs. He was ordered confined at the New Bilibid Prison, in
Muntinlupa, Rizal upon finality of the decision, in view of the nature of his penalty.

The then Intermediate Appellate Court affirmed the conviction of Urbano on appeal but raised the award of indemnity to
the heirs of the deceased to P30,000.00 with costs against the appellant.

The appellant filed a motion for reconsideration and/or new trial. The motion for new trial was based on an affidavit of
Barangay Captain Menardo Soliven (Annex "A") which states:

That in 1980, I was the barrio captain of Barrio Anonang, San Fabian, Pangasinan, and up to the present having been reelected to such position in the last barangay elections on May 17, 1982;

That sometime in the first week of November, 1980, there was a typhoon that swept Pangasinan and other places of
Central Luzon including San Fabian, a town of said province;

That during the typhoon, the sluice or control gates of the Bued irrigation dam which irrigates the ricefields of San Fabian
were closed and/or controlled so much so that water and its flow to the canals and ditches were regulated and reduced;

That due to the locking of the sluice or control gates of the dam leading to the canals and ditches which will bring water to
the ricefields, the water in said canals and ditches became shallow which was suitable for catching mudfishes;

That after the storm, I conducted a personal survey in the area affected, with my secretary Perfecto Jaravata;

That on November 5, 1980, while I was conducting survey, I saw the late Marcelo Javier catching fish in the shallow
irrigation canals with some companions;

That few days there after,or on November l5, l980, I came to know that said Marcelo Javier died of tetanus. (p. 33, Rollo)

The motion was denied. Hence, this petition.

In a resolution dated July 16, 1986, we gave due course to the petition.

The case involves the application of Article 4 of the Revised Penal Code which provides that "Criminal liability shall be
incurred: (1) By any person committing a felony (delito) although the wrongful act done be different from that which he
intended ..." Pursuant to this provision "an accused is criminally responsible for acts committed by him in violation of law
and for all the natural and logical consequences resulting therefrom." (People v. Cardenas, 56 SCRA 631).

The record is clear that Marcelo Javier was hacked by the petitioner who used a bolo as a result of which Javier suffered a
2-inch incised wound on his right palm; that on November 14, 1981 which was the 22nd day after the incident, Javier was
rushed to the hospital in a very serious condition and that on the following day, November 15, 1981, he died from tetanus.

Under these circumstances, the lower courts ruled that Javier's death was the natural and logical consequence of
Urbano's unlawful act. Hence, he was declared responsible for Javier's death. Thus, the appellate court said:

The claim of appellant that there was an efficient cause which supervened from the time the deceased was wounded to
the time of his death, which covers a period of 23 days does not deserve serious consideration. True, that the deceased
did not die right away from his wound, but the cause of his death was due to said wound which was inflicted by the
appellant. Said wound which was in the process of healing got infected with tetanus which ultimately caused his death.

Dr. Edmundo Exconde of the Nazareth General Hospital testified that the victim suffered lockjaw because of the infection
of the wound with tetanus. And there is no other way by which he could be infected with tetanus except through the wound
in his palm (tsn., p. 78, Oct. 5, 1981). Consequently, the proximate cause of the victim's death was the wound which got
infected with tetanus. And the settled rule in this jurisdiction is that an accused is liable for all the consequences of his
unlawful act. (Article 4, par. 1, R.P.C. People v. Red, CA 43 O.G. 5072; People v. Cornel 78 Phil. 418).

Appellant's allegation that the proximate cause of the victim's death was due to his own negligence in going back to work
without his wound being properly healed, and lately, that he went to catch fish in dirty irrigation canals in the first week of
November, 1980, is an afterthought, and a desperate attempt by appellant to wiggle out of the predicament he found
himself in. If the wound had not yet healed, it is impossible to conceive that the deceased would be reckless enough to
work with a disabled hand. (pp. 20-21, Rollo)

The petitioner reiterates his position that the proximate cause of the death of Marcelo Javier was due to his own
negligence, that Dr. Mario Meneses found no tetanus in the injury, and that Javier got infected with tetanus when after two
weeks he returned to his farm and tended his tobacco plants with his bare hands exposing the wound to harmful elements
like tetanus germs.

The evidence on record does not clearly show that the wound inflicted by Urbano was infected with tetanus at the time of
the infliction of the wound. The evidence merely confirms that the wound, which was already healing at the time Javier
suffered the symptoms of the fatal ailment, somehow got infected with tetanus However, as to when the wound was
infected is not clear from the record.

In Vda. de Bataclan, et al. v. Medina (102 Phil. 1181), we adopted the following definition of proximate cause:

xxx

xxx

xxx

... A satisfactory definition of proximate cause is found in Volume 38, pages 695-696 of American Jurisprudence, cited by
plaintiffs-appellants in their brief. It is as follows:

... "that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the
injury, and without which the result would not have occurred."And more comprehensively, "the proximate legal cause is
that acting first and producing the injury, either immediately or by setting other events in motion, all constituting a natural
and continuous chain of events, each having a close causal connection with its immediate predecessor, the final event in
the chain immediately effecting the injury as a natural and probable result of the cause which first acted, under such
circumstances that the person responsible for the first event should, as an ordinarily prudent and intelligent person, have
reasonable ground to expect at the moment of his act or default that an injury to some person might probably result
therefrom." (at pp. 185-186)

The issue, therefore, hinges on whether or not there was an efficient intervening cause from the time Javier was wounded
until his death which would exculpate Urbano from any liability for Javier's death.

We look into the nature of tetanus-

The incubation period of tetanus, i.e., the time between injury and the appearance of unmistakable symptoms, ranges
from 2 to 56 days. However, over 80 percent of patients become symptomatic within 14 days. A short incubation period
indicates severe disease, and when symptoms occur within 2 or 3 days of injury the mortality rate approaches 100
percent.

Non-specific premonitory symptoms such as restlessness, irritability, and headache are encountered occasionally, but the
commonest presenting complaints are pain and stiffness in the jaw, abdomen, or back and difficulty swallowing. As the
progresses, stiffness gives way to rigidity, and patients often complain of difficulty opening their mouths. In fact, trismus in
the commonest manifestation of tetanus and is responsible for the familiar descriptive name of lockjaw. As more muscles
are involved, rigidity becomes generalized, and sustained contractions called risus sardonicus. The intensity and
sequence of muscle involvement is quite variable. In a small proportion of patients, only local signs and symptoms
develop in the region of the injury. In the vast majority, however, most muscles are involved to some degree, and the signs
and symptoms encountered depend upon the major muscle groups affected.

Reflex spasm usually occur within 24 to 72 hours of the first symptom, an interval referred to as the onset time. As in the
case of the incubation period, a short onset time is associated with a poor prognosis. Spasms are caused by sudden
intensification of afferent stimuli arising in the periphery, which increases rigidity and causes simultaneous and excessive
contraction of muscles and their antagonists. Spasms may be both painful and dangerous. As the disease progresses,
minimal or inapparent stimuli produce more intense and longer lasting spasms with increasing frequency. Respiration may
be impaired by laryngospasm or tonic contraction of respiratory muscles which prevent adequate ventilation. Hypoxia may
then lead to irreversible central nervous system damage and death.

Mild tetanus is characterized by an incubation period of at least 14 days and an onset time of more than 6 days. Trismus
is usually present, but dysphagia is absent and generalized spasms are brief and mild. Moderately severe tetanus has a
somewhat shorter incubation period and onset time; trismus is marked, dysphagia and generalized rigidity are present,
but ventilation remains adequate even during spasms. The criteria for severe tetanus include a short incubation time, and
an onset time of 72 hrs., or less, severe trismus, dysphagia and rigidity and frequent prolonged, generalized convulsive
spasms. (Harrison's Principle of Internal Medicine, 1983 Edition, pp. 1004-1005; Emphasis supplied)

Therefore, medically speaking, the reaction to tetanus found inside a man's body depends on the incubation period of the
disease.

In the case at bar, Javier suffered a 2-inch incised wound on his right palm when he parried the bolo which Urbano used in
hacking him. This incident took place on October 23, 1980. After 22 days, or on November 14, 1980, he suffered the
symptoms of tetanus, like lockjaw and muscle spasms. The following day, November 15, 1980, he died.

If, therefore, the wound of Javier inflicted by the appellant was already infected by tetanus germs at the time, it is more
medically probable that Javier should have been infected with only a mild cause of tetanus because the symptoms of
tetanus appeared on the 22nd day after the hacking incident or more than 14 days after the infliction of the wound.
Therefore, the onset time should have been more than six days. Javier, however, died on the second day from the onset
time. The more credible conclusion is that at the time Javier's wound was inflicted by the appellant, the severe form of
tetanus that killed him was not yet present. Consequently, Javier's wound could have been infected with tetanus after the
hacking incident. Considering the circumstance surrounding Javier's death, his wound could have been infected by
tetanus 2 or 3 or a few but not 20 to 22 days before he died.

The rule is that the death of the victim must be the direct, natural, and logical consequence of the wounds inflicted upon
him by the accused. (People v. Cardenas, supra) And since we are dealing with a criminal conviction, the proof that the
accused caused the victim's death must convince a rational mind beyond reasonable doubt. The medical findings,
however, lead us to a distinct possibility that the infection of the wound by tetanus was an efficient intervening cause later
or between the time Javier was wounded to the time of his death. The infection was, therefore, distinct and foreign to the
crime. (People v. Rellin, 77 Phil. 1038).

Doubts are present. There is a likelihood that the wound was but the remote cause and its subsequent infection, for failure
to take necessary precautions, with tetanus may have been the proximate cause of Javier's death with which the
petitioner had nothing to do. As we ruled in Manila Electric Co. v. Remoquillo, et al. (99 Phil. 118).

"A prior and remote cause cannot be made the be of an action if such remote cause did nothing more than furnish the
condition or give rise to the occasion by which the injury was made possible, if there intervened between such prior or
remote cause and the injury a distinct, successive, unrelated, and efficient cause of the injury, even though such injury
would not have happened but for such condition or occasion. If no danger existed in the condition except because of the
independent cause, such condition was not the proximate cause. And if an independent negligent act or defective
condition sets into operation the instances which result in injury because of the prior defective condition, such subsequent
act or condition is the proximate cause." (45 C.J. pp. 931-932). (at p. 125)

It strains the judicial mind to allow a clear aggressor to go scot free of criminal liability. At the very least, the records show
he is guilty of inflicting slight physical injuries. However, the petitioner's criminal liability in this respect was wiped out by
the victim's own act. After the hacking incident, Urbano and Javier used the facilities of barangay mediators to effect a
compromise agreement where Javier forgave Urbano while Urbano defrayed the medical expenses of Javier. This
settlement of minor offenses is allowed under the express provisions of Presidential Decree G.R. No. 1508, Section 2(3).
(See also People v. Caruncho, 127 SCRA 16).

We must stress, however, that our discussion of proximate cause and remote cause is limited to the criminal aspects of
this rather unusual case. It does not necessarily follow that the petitioner is also free of civil liability. The well-settled
doctrine is that a person, while not criminally liable, may still be civilly liable. Thus, in the recent case of People v. Rogelio
Ligon y Tria, et al. (G.R. No. 74041, July 29, 1987), we said:

xxx

xxx

xxx

... While the guilt of the accused in a criminal prosecution must be established beyond reasonable doubt, only a
preponderance of evidence is required in a civil action for damages. (Article 29, Civil Code). The judgment of acquittal
extinguishes the civil liability of the accused only when it includes a declaration that the facts from which the civil liability
might arise did not exist. (Padilla v. Court of Appeals, 129 SCRA 559).

The reason for the provisions of article 29 of the Civil Code, which provides that the acquittal of the accused on the
ground that his guilt has not been proved beyond reasonable doubt does not necessarily exempt him from civil liability for
the same act or omission, has been explained by the Code Commission as follows:

The old rule that the acquittal of the accused in a criminal case also releases him from civil liability is one of the most
serious flaws in the Philippine legal system. It has given use to numberless instances of miscarriage of justice, where the
acquittal was due to a reasonable doubt in the mind of the court as to the guilt of the accused. The reasoning followed is
that inasmuch as the civil responsibility is derived from the criminal offense, when the latter is not proved, civil liability
cannot be demanded.

This is one of those causes where confused thinking leads to unfortunate and deplorable consequences. Such reasoning
fails to draw a clear line of demarcation between criminal liability and civil responsibility, and to determine the logical result
of the distinction. The two liabilities are separate and distinct from each other. One affects the social order and the other,
private rights. One is for the punishment or correction of the offender while the other is for reparation of damages suffered
by the aggrieved party. The two responsibilities are so different from each other that article 1813 of the present (Spanish)
Civil Code reads thus: "There may be a compromise upon the civil action arising from a crime; but the public action for the
imposition of the legal penalty shall not thereby be extinguished." It is just and proper that, for the purposes of the
imprisonment of or fine upon the accused, the offense should be proved beyond reasonable doubt. But for the purpose of
indemnity the complaining party, why should the offense also be proved beyond reasonable doubt? Is not the invasion or
violation of every private right to be proved only by a preponderance of evidence? Is the right of the aggrieved person any
less private because the wrongful act is also punishable by the criminal law?

"For these reasons, the Commission recommends the adoption of the reform under discussion. It will correct a serious
defect in our law. It will close up an inexhaustible source of injustice-a cause for disillusionment on the part of the
innumerable persons injured or wronged."

The respondent court increased the P12,000.00 indemnification imposed by the trial court to P30,000.00. However, since
the indemnification was based solely on the finding of guilt beyond reasonable doubt in the homicide case, the civil liability
of the petitioner was not thoroughly examined. This aspect of the case calls for fuller development if the heirs of the victim
are so minded.

WHEREFORE, the instant petition is hereby GRANTED. The questioned decision of the then Intermediate Appellate
Court, now Court of Appeals, is REVERSED and SET ASIDE. The petitioner is ACQUITTED of the crime of homicide.
Costs de oficio.

SO ORDERED.

Rodriguez v Manila Railroad

This action was instituted jointly by Remigio Rodrigueza and three others in the Court of First Instance of the Province of
Albay to recover a sum of money of the Manila Railroad Company as damages resulting from a fire kindled by sparks
from a locomotive engine under the circumstances set out below. Upon hearing the cause upon the complaint, answer
and an agreed statement of facts, the trial judge rendered judgment against the defendant company in favor of the
plaintiffs and awarded to them the following sums respectively as damages, to wit, (1) to Remigio Rodrigueza, P3,000; (2)
to Domingo Gonzaga, P400; (3) to Cristina Luna, P300; and (4) to Perfecta Losantas, P150; all with lawful interest from
March 21, 1919. From this judgment the defendant appealed.

The facts as appearing from the agreed statement, in relation with the complaint, are to the effect that the defendant
Railroad Company operates a line through the district of Daraga in the municipality of Albay; that on January 29, 1918, as
one of its trains passed over said line, a great quantity of sparks were emitted from the smokestack of the locomotive, and
fire was thereby communicated to four houses nearby belonging to the four plaintiffs respectively, and the same were

entirely consumed. All of these houses were of light construction with the exception of the house of Remigio Rodrigueza,
which was of strong materials, though the roof was covered with nipa and cogon. The fire occurred immediately after the
passage of the train, and a strong wind was blowing at the time. It does not appear either in the complaint or in the agreed
statement whose house caught fire first, though it is stated in the appellant's brief that the fire was first communicated to
the house of Remigio Rodrigueza, from whence it spread to the others.

In the fourth paragraph of the complaint which is admitted to be true it is alleged that the defendant Railroad
Company was conspicuously negligent in relation to the origin of said fire, in the following respects, namely, first, in failing
to exercise proper supervision over the employees in charge of the locomotive; secondly, in allowing the locomotive which
emitted these sparks to be operated without having the smokestack protected by some device for arresting sparks; thirdly,
in using in its locomotive upon this occasion Bataan coal, a fuel of known inferior quality which, upon combustion,
produces sparks in great quantity.

The sole ground upon which the defense is rested is that the house of Remigio Rodrigueza stood partly within the limits of
the land owned by the defendant company, though exactly how far away from the company's track does not appear. It
further appears that, after the railroad track was laid, the company notified Rodrigueza to get his house off the land of the
company and to remove it from its exposed position. Rodrigueza did not comply with this suggestion, though he promised
to put an iron roof on his house, which he never did. Instead, he changed the materials of the main roof to nipa, leaving
the kitchen and media-aguas covered with cogon. Upon this fact it is contended for the defense that there was
contributory negligence on the part of Remigio Rodrigueza in having his house partly on the premises of the Railroad
Company, and that for this reason the company is not liable. This position is in our opinion untenable for the reasons
which we shall proceed to state.

In the first place, it will be noted that the fact suggested as constituting a defense to this action could not in any view of the
case operate as a bar to recovery by the three plaintiffs other than Remigio Rodrigueza, even assuming that the fire was
first communicated to his house; for said three plaintiffs are in nowise implicated in the act which supposedly constitutes
the defense. In this connection it will be observed that the right of action of each of these plaintiffs is totally distinct from
that of his co-plaintiff, so much so that each might have sued separately, and the defendant if it had seen fit to do so,
might in this case have demurred successfully to the complaint for misjoinder of parties plaintiff. The fact that the several
rights of action of the different plaintiffs arose simultaneously out of one act of the defendant is not sufficient of itself to
require, or even permit, the joinder of such parties as coplaintiffs in a single action (30 Cyc., 114) if objection had been
made thereto. Domingo Gonzaga, Cristina Luna, and Perfecta Losantas are therefore entitled to recover upon the
admitted fact that this fire originated in the negligent acts of the defendant; and the circumstance that the fire may have
been communicated to their houses through the house of Remegio Rodrigueza, instead of having been directly
communicated from the locomotive, is immaterial. (See 38 Am. Dec., 64, 77; 1 11 R. C. L., 968-971; Kansas City, etc.
Railroad Co. vs. Blaker, 64 L. R. A., 81 Pennsylvania Railroad Co. vs. Hope, 80 Pa. St., 373; 21 Am. Rep. 100.)

With respect to the case of Remegio Rodrigueza it is to be inferred that his house stood upon this ground before the
Railroad Company laid its line over this course; and at any rate there is no proof that this plaintiff had unlawfully intruded
upon the railroad's property in the act of building his house. What really occurred undoubtedly is that the company, upon
making this extension, had acquired the land only, leaving the owner of the house free to remove it. Hence he cannot be
considered to have been a trespasser in the beginning. Rather, he was there at the sufferance of the defendant company,
and so long as his house remained in this exposed position, he undoubtedly assumed the risk of any loss that might have
resulted from fires occasioned by the defendant's locomotives if operated and managed with ordinary care. But he cannot
be held to have assumed the risk of any damage that might result from the unlawful negligence acts of the defendant.
Nobody is bound to anticipate and defend himself against the possible negligence of another. Rather he has a right to
assume that the other will use the care of the ordinary prudent man. (Philadelphia and Reading Railroad Co. vs.
Hendrickson, 80 Pa. St., 182; 21 Am. Rep., 97.)

In the situation now under consideration the proximate and only cause of the damage that occurred was the negligent act
of the defendant in causing this fire. The circumstance that Remigio Rodrigueza's house was partly on the property of the
defendant company and therefore in dangerous proximity to passing locomotives was an antecedent condition that may in
fact have made the disaster possible, but that circumstance cannot be imputed to him as contributory negligence
destructive of his right of action, because, first, that condition was not created by himself; secondly, because his house
remained on this ground by the toleration, and therefore with the consent of the Railroad Company; and thirdly, because

even supposing the house to be improperly there, this fact would not justify the defendant in negligently destroying it.
(Grand Trunk Railway of Canada vs. Richardson, 91 U. S., 454; 23 L. ed., 356; Norfolk etc. Ry. Co. vs. Perrow, 101 Va.,
345, 350.)lawphil.net

The circumstance that the defendant company, upon planting its line near Remigio Rodrigueza's house, had requested or
directed him to remove it, did not convert his occupancy into a trespass, or impose upon him any additional responsibility
over and above what the law itself imposes in such situation. In this connection it must be remembered that the company
could at any time have removed said house in the exercise of the power of eminent domain, but it elected not to do so.

Questions similar to that now before us have been under the consideration of American courts many times, and their
decisions are found to be uniformly favorable to recovery where the property destroyed has been placed in whole or in
part on the right of way of the railroad company with its express or implied consent. (L. R. Martin Timber Co. vs. Great
Northern Railway Co., 123 Minn., 423; Ann. Cas., 1915A, p. 496, note; Burroughs vs. Housatonic R.R. Co., 15 Conn.,
124; 38 Am. Dec., 64; 74; Southern Ry. Co. vs. Patterson, 105 Va. 6; 8 Ann. Cas., 44.) And the case for the plaintiff is
apparently stronger where the company constructs its line in proximity to a house already built and fails to condemn it and
remove it from its right of way.

From what has been said it is apparent that the judgment appealed from is in all respect in conformity with the law, and
the same is accordingly affirmed, with costs. So ordered.