standard contract made out by petitioner PILTEL to its subscribers, apparently
THIRD DIVISION accepted and signed by respondent, states that the venue of all suits arising from the
[G.R. No. 156966. May 7, 2004]
PILIPINO TELEPHONE CORPORATION, petitioner, vs. DELFINO
TECSON, respondent.
DECISION
VITUG, J.:
The facts, by and large, are undisputed.
On various dates in 1996, Delfino C. Tecson applied for six (6) cellular phone
subscriptions with petitioner Pilipino Telephone Corporation (PILTEL), a company
engaged in the telecommunications business, which applications were each approved
and covered, respectively, by six mobiline service agreements.
On 05 April 2001, respondent filed with the Regional Trial Court of Iligan
City, Lanao Del Norte, a complaint against petitioner for a Sum of Money and
Damages. Petitioner moved for the dismissal of the complaint on the ground of
improper venue, citing a common provision in the mobiline service agreements to the
effect that -
Venue of all suits arising from this Agreement or any other suit directly or indirectly
arising from the relationship between PILTEL and subscriber shall be in the proper
courts of Makati, Metro Manila. Subscriber hereby expressly waives any other
venues.[1]
In an order, dated 15 August 2001, the Regional Trial Court of Iligan City, Lanao
del Norte, denied petitioners motion to dismiss and required it to file an answer within
15 days from receipt thereof.
Petitioner PILTEL filed a motion for the reconsideration, through registered mail,
of the order of the trial court. In its subsequent order, dated 08 October 2001, the trial
court denied the motion for reconsideration.
Petitioner filed a petition for certiorari under Rule 65 of the Revised Rules of Civil
Procedure before the Court of Appeals.
The Court of Appeals, in its decision of 30 April 2002, saw no merit in the petition
and affirmed the assailed orders of the trial court. Petitioner moved for a
reconsideration, but the appellate court, in its order of 21 January 2003, denied the
motion.
There is merit in the instant petition.
Section 4, Rule 4, of the Revised Rules of Civil Procedure[2] allows the parties to
agree and stipulate in writing, before the filing of an action, on the exclusive venue of
any litigation between them. Such an agreement would be valid and binding provided
that the stipulation on the chosen venue is exclusive in nature or in intent, that it is
expressed in writing by the parties thereto, and that it is entered into before the filing of
the suit. The provision contained in paragraph 22 of the Mobile Service Agreement, a
agreement, or any other suit directly or indirectly arising from the relationship between
PILTEL and subscriber, shall be in the proper courts of Makati, Metro Manila. The
added stipulation that the subscriber expressly waives any other venue [3] should
indicate, clearly enough, the intent of the parties to consider the venue stipulation as
being preclusive in character.
The appellate court, however, would appear to anchor its decision on the thesis
that the subscription agreement, being a mere contract of adhesion, does not bind
respondent on the venue stipulation.
Indeed, the contract herein involved is a contract of adhesion. But such an
agreement is not per se inefficacious. The rule instead is that, should there be
ambiguities in a contract of adhesion, such ambiguities are to be construed against the
party that prepared it. If, however, the stipulations are not obscure, but are clear and
leave no doubt on the intention of the parties, the literal meaning of its stipulations must
be held controlling.[4]
A contract of adhesion is just as binding as ordinary contracts. It is true that this
Court has, on occasion, struck down such contracts as being assailable when the
weaker party is left with no choice by the dominant bargaining party and is thus
completely deprived of an opportunity to bargain effectively.Nevertheless, contracts of
adhesion are not prohibited even as the courts remain careful in scrutinizing the factual
circumstances underlying each case to determine the respective claims of contending
parties on their efficacy.
In the case at bar, respondent secured six (6) subscription contracts for cellular
phones on various dates. It would be difficult to assume that, during each of those
times, respondent had no sufficient opportunity to read and go over the terms and
conditions embodied in the agreements. Respondent continued, in fact, to acquire in
the pursuit of his business subsequent subscriptions and remained a subscriber of
petitioner for quite sometime.
In Development Bank of the Philippines vs. National Merchandising
Corporation,[5] the contracting parties, being of age and businessmen of experience,
were presumed to have acted with due care and to have signed the assailed documents
with full knowledge of their import. The situation would be no less true than that which
obtains in the instant suit. The circumstances in Sweet Lines, Inc. vs. Teves,[6] wherein
this Court invalidated the venue stipulation contained in the passage ticket, would
appear to be rather peculiar to that case. There, the Court took note of an acute
shortage in inter-island vessels that left passengers literally scrambling to secure
accommodations and tickets from crowded and congested counters. Hardly, therefore,
were the passengers accorded a real opportunity to examine the fine prints contained
in the tickets, let alone reject them.
A contract duly executed is the law between the parties, and they are obliged to
comply fully and not selectively with its terms. A contract of adhesion is no exception.[7]
WHEREFORE, the instant petition is GRANTED, and the questioned decision and
resolution of the Court of Appeals in CA-G.R. SP No. 68104 are REVERSED and SET
ASIDE. Civil Case No. 5572 pending before the Regional Trial Court of Iligan City,
Branch 4, is DISMISSED without prejudice to the filing of an appropriate complaint by
respondent against petitioner with the court of proper venue. No costs. SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 198174 September 2, 2013
ALPHA INSURANCE AND SURETY CO., PETITIONER,
vs.
ARSENIA SONIA CASTOR, RESPONDENT.
DECISION
PERALTA, J.:
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
assailing the Decision1 dated May 31, 2011 and Resolution2 dated August 10, 2011 of
the Court of Appeals (CA) in CA-G.R. CV No. 93027.
The facts follow.
On February 21, 2007, respondent entered into a contract of insurance, Motor Car
Policy No. MAND/CV-00186, with petitioner, involving her motor vehicle, a Toyota
Revo DLX DSL. The contract of insurance obligates the petitioner to pay the
respondent the amount of Six Hundred Thirty Thousand Pesos (630,000.00) in case
of loss or damage to said vehicle during the period covered, which is from February
26, 2007 to February 26, 2008.
On April 16, 2007, at about 9:00 a.m., respondent instructed her driver, Jose Joel
Salazar Lanuza (Lanuza), to bring the above-described vehicle to a nearby auto-shop
for a tune-up. However, Lanuza no longer returned the motor vehicle to respondent
and despite diligent efforts to locate the same, said efforts proved futile. Resultantly,
respondent promptly reported the incident to the police and concomitantly notified
petitioner of the said loss and demanded payment of the insurance proceeds in the
total sum of 630,000.00.
In a letter dated July 5, 2007, petitioner denied the insurance claim of respondent,
stating among others, thus:
Upon verification of the documents submitted, particularly the Police Report and your
Affidavit, which states that the culprit, who stole the Insure[d] unit, is employed with
you. We would like to invite you on the provision of the Policy under Exceptions to
Section-III, which we quote:
1.) The Company shall not be liable for:
xxxx
(4) Any malicious damage caused by the Insured, any member of his family or by "A
PERSON IN THE INSUREDS SERVICE."
In view [of] the foregoing, we regret that we cannot act favorably on your claim.
In letters dated July 12, 2007 and August 3, 2007, respondent reiterated her claim
and argued that the exception refers to damage of the motor vehicle and not to its
loss. However, petitioners denial of respondents insured claim remains firm.
Accordingly, respondent filed a Complaint for Sum of Money with Damages against
petitioner before the Regional Trial Court (RTC) of Quezon City on September 10,
2007.
In a Decision dated December 19, 2008, the RTC of Quezon City ruled in favor of
respondent in this wise:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiff and against the defendant ordering the latter as follows:
To pay plaintiff the amount of 466,000.00 plus legal interest of 6% per annum from
the time of demand up to the time the amount is fully settled;
To pay attorneys fees in the sum of 65,000.00; and
To pay the costs of suit.
All other claims not granted are hereby denied for lack of legal and factual basis. 3
Aggrieved, petitioner filed an appeal with the CA.
On May 31, 2011, the CA rendered a Decision affirming in toto the RTC of Quezon
Citys decision. The fallo reads:
WHEREFORE, in view of all the foregoing, the appeal is DENIED. Accordingly, the
Decision, dated December 19, 2008, of Branch 215 of the Regional Trial Court of
Quezon City, in Civil Case No. Q-07-61099, is hereby AFFIRMED in toto.
SO ORDERED.4
Petitioner filed a Motion for Reconsideration against said decision, but the same was
denied in a Resolution dated August 10, 2011.
Hence, the present petition wherein petitioner raises the following grounds for the
allowance of its petition:
WITH DUE RESPECT TO THE HONORABLE COURT OF APPEALS, IT ERRED
AND GROSSLY OR GRAVELY ABUSED ITS DISCRETION WHEN IT ADJUDGED
IN FAVOR OF THE PRIVATE RESPONDENT AND AGAINST THE PETITIONER
AND RULED THAT EXCEPTION DOES NOT COVER LOSS BUT ONLY DAMAGE
BECAUSE THE TERMS OF THE INSURANCE POLICY ARE [AMBIGUOUS]
EQUIVOCAL OR UNCERTAIN, SUCH THAT THE PARTIES THEMSELVES
DISAGREE ABOUT THE MEANING OF PARTICULAR PROVISIONS, THE POLICY
WILL BE CONSTRUED BY THE COURTS LIBERALLY IN FAVOR OF THE
ASSURED AND STRICTLY AGAINST THE INSURER.
WITH DUE RESPECT TO THE HONORABLE COURT OF APPEALS, IT ERRED
AND COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT [AFFIRMED] IN
TOTO THE JUDGMENT OF THE TRIAL COURT.5
Simply, the core issue boils down to whether or not the loss of respondents vehicle is
excluded under the insurance policy.
We rule in the negative.
Significant portions of Section III of the Insurance Policy states:
SECTION III LOSS OR DAMAGE
The Company will, subject to the Limits of Liability, indemnify the Insured against loss
of or damage to the Schedule Vehicle and its accessories and spare parts whilst
thereon:
(a)
by accidental collision or overturning, or collision or overturning consequent upon
mechanical breakdown or consequent upon wear and tear;
(b)
by fire, external explosion, self-ignition or lightning or burglary, housebreaking or theft;
(c)
by malicious act;
(d)
whilst in transit (including the processes of loading and unloading) incidental to such
transit by road, rail, inland waterway, lift or elevator.
xxxx
EXCEPTIONS TO SECTION III
The Company shall not be liable to pay for:
Loss or Damage in respect of any claim or series of claims arising out of one event,
the first amount of each and every loss for each and every vehicle insured by this
Policy, such amount being equal to one percent (1.00%) of the Insureds estimate of
Fair Market Value as shown in the Policy Schedule with a minimum deductible
amount of Php3,000.00;
Consequential loss, depreciation, wear and tear, mechanical or electrical
breakdowns, failures or breakages;
Damage to tires, unless the Schedule Vehicle is damaged at the same time;
Any malicious damage caused by the Insured, any member of his family or by a
person in the Insureds service.6
In denying respondents claim, petitioner takes exception by arguing that the word
"damage," under paragraph 4 of "Exceptions to Section III," means loss due to injury
or harm to person, property or reputation, and should be construed to cover malicious
"loss" as in "theft." Thus, it asserts that the loss of respondents vehicle as a result of
it being stolen by the latters driver is excluded from the policy.
We do not agree.
Ruling in favor of respondent, the RTC of Quezon City scrupulously elaborated that
theft perpetrated by the driver of the insured is not an exception to the coverage from
the insurance policy, since Section III thereof did not qualify as to who would commit
the theft. Thus:
Theft perpetrated by a driver of the insured is not an exception to the coverage from
the insurance policy subject of this case. This is evident from the very provision of
Section III "Loss or Damage." The insurance company, subject to the limits of
liability, is obligated to indemnify the insured against theft. Said provision does not
qualify as to who would commit the theft. Thus, even if the same is committed by the
driver of the insured, there being no categorical declaration of exception, the same
must be covered. As correctly pointed out by the plaintiff, "(A)n insurance contract
should be interpreted as to carry out the purpose for which the parties entered into the
contract which is to insure against risks of loss or damage to the goods. Such
interpretation should result from the natural and reasonable meaning of language in
the policy. Where restrictive provisions are open to two interpretations, that which is
most favorable to the insured is adopted." The defendant would argue that if the
person employed by the insured would commit the theft and the insurer would be held
liable, then this would result to an absurd situation where the insurer would also be
held liable if the insured would commit the theft. This argument is certainly flawed. Of
course, if the theft would be committed by the insured himself, the same would be an
exception to the coverage since in that case there would be fraud on the part of the
insured or breach of material warranty under Section 69 of the Insurance Code.7
Moreover, contracts of insurance, like other contracts, are to be construed according
to the sense and meaning of the terms which the parties themselves have used. If
such terms are clear and unambiguous, they must be taken and understood in their
plain, ordinary and popular sense.8 Accordingly, in interpreting the exclusions in an
insurance contract, the terms used specifying the excluded classes therein are to be
given their meaning as understood in common speech. 9
Adverse to petitioners claim, the words "loss" and "damage" mean different things in
common ordinary usage. The word "loss" refers to the act or fact of losing, or failure
to keep possession, while the word "damage" means deterioration or injury to
property.1wphi1
Therefore, petitioner cannot exclude the loss of respondents vehicle under the
insurance policy under paragraph 4 of "Exceptions to Section III," since the same
refers only to "malicious damage," or more specifically, "injury" to the motor vehicle
caused by a person under the insureds service. Paragraph 4 clearly does not
contemplate "loss of property," as what happened in the instant case.
Further, the CA aptly ruled that "malicious damage," as provided for in the subject
policy as one of the exceptions from coverage, is the damage that is the direct result
from the deliberate or willful act of the insured, members of his family, and any person
in the insureds service, whose clear plan or purpose was to cause damage to the
insured vehicle for purposes of defrauding the insurer, viz.:
This interpretation by the Court is bolstered by the observation that the subject policy
appears to clearly delineate between the terms "loss" and "damage" by using both
terms throughout the said policy. x x x
xxxx
If the intention of the defendant-appellant was to include the term "loss" within the
term "damage" then logic dictates that it should have used the term "damage" alone
in the entire policy or otherwise included a clear definition of the said term as part of
the provisions of the said insurance contract. Which is why the Court finds it puzzling
that in the said policys provision detailing the exceptions to the policys coverage in
Section III thereof, which is one of the crucial parts in the insurance contract, the
insurer, after liberally using the words "loss" and "damage" in the entire policy,
suddenly went specific by using the word "damage" only in the policys exception
regarding "malicious damage." Now, the defendant-appellant would like this Court to
believe that it really intended the word "damage" in the term "malicious damage" to
include the theft of the insured vehicle.
The Court does not find the particular contention to be well taken.
True, it is a basic rule in the interpretation of contracts that the terms of a contract are
to be construed according to the sense and meaning of the terms which the parties
thereto have used. In the case of property insurance policies, the evident intention of
the contracting parties, i.e., the insurer and the assured, determine the import of the
various terms and provisions embodied in the policy. However, when the terms of the
insurance policy are ambiguous, equivocal or uncertain, such that the parties
themselves disagree about the meaning of particular provisions, the policy will be
construed by the courts liberally in favor of the assured and strictly against the
insurer.10
Lastly, a contract of insurance is a contract of adhesion. So, when the terms of the
insurance contract contain limitations on liability, courts should construe them in such
a way as to preclude the insurer from non-compliance with his obligation. Thus, in
Eternal Gardens Memorial Park Corporation v. Philippine American Life Insurance
Company,11 this Court ruled
It must be remembered that an insurance contract is a contract of adhesion which
must be construed liberally in favor of the insured and strictly against the insurer in
order to safeguard the latters interest. Thus, in Malayan Insurance Corporation v.
Court of Appeals, this Court held that:
Indemnity and liability insurance policies are construed in accordance with the general
rule of resolving any ambiguity therein in favor of the insured, where the contract or
policy is prepared by the insurer. A contract of insurance, being a contract of
adhesion, par excellence, any ambiguity therein should be resolved against the
insurer; in other words, it should be construed liberally in favor of the insured and
strictly against the insurer. Limitations of liability should be regarded with extreme
jealousy and must be construed in such a way as to preclude the insurer from non-
compliance with its obligations.
In the more recent case of Philamcare Health Systems, Inc. v. Court of Appeals, we
reiterated the above ruling, stating that:
When the terms of insurance contract contain limitations on liability, courts should
construe them in such a way as to preclude the insurer from non-compliance with his
obligation. Being a contract of adhesion, the terms of an insurance contract are to be
construed strictly against the party which prepared the contract, the insurer. By
reason of the exclusive control of the insurance company over the terms and
phraseology of the insurance contract, ambiguity must be strictly interpreted against
the insurer and liberally in favor of the insured, especially to avoid forfeiture. 12
WHEREFORE, premises considered, the instant Petition for Review on Certiorari is
DENIED. Accordingly, the Decision dated May 31, 2011 and Resolution dated August
10, 2011 of the Court of Appeals are hereby AFFIRMED.
SO ORDERED.

FIRST DIVISION
G.R. No. 192099, July 08, 2015
PAULINO M. EJERCITO, JESSIE M. EJERCITO AND JOHNNY D.
CHANG, Petitioners, v. ORIENTAL ASSURANCE CORPORATION, Respondent.
DECISION
SERENO, C.J.:
This is a Petition for Review on Certiorari 1 filed by Paulino M. Ejercito, Jessie M. Ejercito
and Johnny D. Chang (petitioners) under Rule 45 of the 1997 Rules of Civil Procedure
assailing the Court of Appeals (CA) Decision dated 2 October 2009 2 and Resolution dated
14 April 20103 in CA-G.R. CV No. 90828. The Special Third Division of the CA reversed
and set aside the Regional Trial Court (RTC) Decision in Civil Case No. 01-
101999:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the present appeal is hereby GRANTED. The
Decision dated February 2, 2007 of the Regional Trial Court of Manila, Branch 36 in Civil
Case No. 01-101999 is hereby SET ASIDE.
A new judgment is hereby entered ordering the defendants-appellees Merissa C. Somes,
Paulino M. Ejercito, Jessie M. Ejercito and Johnny D. Chang jointly and severally liable to
pay plaintiff-appellant Oriental Assurance Corporation the following
sums:chanRoblesvirtualLawlibrary
1. The principal amount of P3,000,000.00 with interest at the rate of 12% per annum from
the time of the filing of the complaint until the same shall have been fully paid;
2. Attorney's fees in the amount of P30,000.00; and
3. Costs of suit.chanroblesvirtuallawlibrary
SO ORDERED.4
The Facts
The facts of the case, as found by the CA, are as follows:ChanRoblesVirtualawlibrary
On 10 May 1999, respondent Oriental Assurance Corporation, through its Executive Vice
President Luz N. Cotoco issued a Surety Bond in favor of FFV Travel & Tours, Inc.
(Company). The bond was intended to guarantee the Company's payment of airline tickets
purchased on credit from participating members of International Air Transport Association
(IATA) to the extent of P3 million.
On the same day, petitioners and Merissa C. Somes (Somes) executed a Deed of
Indemnity in favor of respondent. The Surety Bond was effective for one year from its
issuance until 10 May 2000. It was renewed for another year, from 10 May 2000 to 10 May
2001, as shown in Bond Endorsement No. OAC-2000/0145 dated 17 April 2000. The
corresponding renewal premium amounting to P15,024.54 was paid by the insured
corporation under Official Receipt No. 100262.
FFV Travel & Tours, Inc. has been declared in default for failure to pay its obligations
amounting to P5,484,086.97 and USD 18,760.98 as of 31 July 2000. Consequently, IATA
demanded payment of the bond, and respondent heeded the demand on 28 November
2000 as evidenced by China Bank Check No. 104949. IATA executed a Release of Claim
on 29 November 2000 acknowledging payment of the surety bond.
Respondent sent demand letters to petitioners and Somes for reimbursement of the P3
million pursuant to the indemnity agreement. For their failure to reimburse respondent, the
latter filed a collection suit.
The RTC Ruling
After trial, the RTC rendered a Decision dismissing the complaint against petitioners for
lack of merit and pronouncing Somes liable to pay the amount of P3 million and interest
per annum at the rate of 12% of the principal obligation from the date the complaint was
filed up to the date the obligation would have been fully paid.
The RTC found that there was no written agreement to show the intention of petitioners to
renew the Deed of Indemnity. The absence thereof was evidenced by the nonappearance
of any signature on the Renewal Notice, which was not signed by Somes. However, she
was held liable to pay the surety value of the cost of tickets as she had paid the premium
for the renewal of the Surety Bond and used the renewed bond by submitting it to IATA.
The CA Ruling
The CA reversed the finding of the RTC and ruled that petitioners could not escape liability,
as they had authorized respondent to grant any renewals or extensions pursuant to the
indemnity agreement. The Deed of Indemnity contained a stipulation that the signatories
(petitioners) were authorizing the Company (respondent) to grant or consent to the grant of
any extension, continuation, increase, modification, change or alteration, and/or renewal of
the original bond. Petitioners voluntarily signed the agreement and, are educated persons
(Paulino, being a lawyer), so they could not have misunderstood the legal effects of the
undertaking they had signed.
Issues
Petitioners raise the following issues:chanRoblesvirtualLawlibrary
Whether or not the Honorable Court of Appeals erred in ruling that petitioners are liable to
indemnify the respondent under the deed of indemnity considering that petitioners did not
give their consent to be bound thereby beyond the one (1) year effectivity period of the
original surety bond.
Whether or not the Honorable Court of Appeals erred in ruling that petitioners are liable to
pay the respondent attorney's fees considering that petitioners did not breach their
obligation under the deed of indemnity to indemnify the respondent during the one (1) year
effectivity period of the original surety bond. 5
The Court's Ruling
We find no merit in the Petition.
The contract of indemnity is the law between the parties. 6 It is a cardinal rule in the
interpretation of a contract that if its terms are clear and leave no doubt on the intention of
the contracting parties, the literal meaning of its stipulation shall control. 7 The CA aptly
found provisions in the contract that could not exonerate petitioners from their liability.
The Deed of Indemnity contains the following stipulations:ChanRoblesVirtualawlibrary
INDEMNITY: - To indemnify the COMPANY for any damages, payments, advances,
prejudices, loss, costs and expenses of whatever kind and nature, including counsel or
attorney's fees, which the Company may at any time, sustain or incur, as a consequence of
having executed the above-mentioned Bond, its renewals, extensions, modifications or
substitutions and said attorney's fees shall not be less than fifteen (15%) per cent of the
amount claimed by the Company in each action, the same to be due and payable,
irrespective of whether the case is settled judicially or extrajudicially.
xxxx
MATURITY OF OUR OBLIGATIONS AS CONTRACTED HEREWITH: - The said
indemnities will be paid to the COMPANY as soon as demand is received from the
Creditor, or as soon as it becomes liable to make payment of any sum under the
terms of the above-mentioned Bond, its renewals, extension, modifications or
substitutions, whether the said sum or sums or part thereof, have been actually paid or not.
We authorize the COMPANY to accept in any case and at its entire discretion, from any of
us, payment on account of the pending obligation, and to grant extensions to any of us, to
liquidate said obligations, without necessity of previous knowledge or consent from the
obligors.
xxxx
INCONTESTABILITY OF PAYMENTS MADE BY THE
COMPANY:ChanRoblesVirtualawlibrary
-- Any payment or disbursement made by the COMPANY on account of the above-
mentioned Bond, its renewals, extensions, modifications or substitutions either in the
belief that the Company was obligated to make such payment or in the belief that said
payment was necessary in order to avoid greater losses or obligation for which the
company might be liable by virtue of the terms of the above-mentioned Bond, its renewals,
extensions, modifications or substitutions shall be final and will not be disputed by the
undersigned who jointly and severally bind themselves to indemnify the COMPANY of
any and all such payments as stated in the preceding clauses.
xxx
WAIVER: The undersigned hereby waive all the rights, privileges, and benefits that they
have or may have under Articles 2077, 2078, 2079, 2080 and 2081 of the Civil Code.
xxx
RENEWALS, ALTERATIONS AND SUBSTITUTIONS: - The undersigned
hereby empower and authorize the Company to grant or consent to the granting of,
any extension, continuation, increase, modifications, change, alteration and/or
renewal of the original bond herein referred to, and to execute or consent to the
execution of any substitution for said bond with the same or different conditions and
parties, and the undersigned hereby hold themselves jointly and severally liable to the
Company for the original bond hereinabove mentioned or for any extension,
continuation, increase, modification, change, alteration, renewal or substitution
thereof until the full amount including principal interests, premiums, costs and other
expenses due to the Company thereunder is fully paid up. 8 (Emphasis on the original)
Clearly, as far as respondent is concerned, petitioners have expressly bound themselves
to the contract, which provides for the terms granting authority to the Company to renew
the original bond. The terms of the contract are clear, explicit and unequivocal. Therefore,
the subsequent acts of the Company, through Somes, that led to the renewal of the surety
bond are binding on petitioners as well.
The intention of Somes to renew the bond cannot be denied, as she paid the renewal
premium and even submitted the renewed bond to IATA.9chanrobleslaw
The claim of petitioners that they only consented to the one-year validity of the surety bond
must be directed against Somes in a separate action. She allegedly convinced them that
the bond was valid for one year only. The allegation of petitioners is an agreement outside
of the contract. In other words, respondent is not privy to the alleged agreement between
Somes and petitioners. For respondent, there was a valid indemnity agreement executed
by the parties, and contained a proviso that became the basis for the authority to renew the
original bond.
With regard to the contention that the Deed of Indemnity is a contract of adhesion, the
Court has consistently held that contracts of adhesion are not invalid per se and that their
binding effects have been upheld on numerous occasions.10 The pretension that
petitioners did not consent to the renewal of the bond is belied by the fact that the terms of
the contract which they voluntarily entered into contained a clause granting authority to the
Company to grant or consent to the renewal of the bond. Having entered into the contract
with full knowledge of its terms and conditions, petitioners are estopped from asserting that
they did so under the ignorance of the legal effect of the contract or the undertaking.
It is true that on some occasions, the Court has struck down such contract as void when
the weaker party is imposed upon in dealing with the dominant party and is reduced to the
alternative of accepting the contract or leaving it, completely deprived of the opportunity to
bargain on equal footing.11 This reasoning cannot be used in the instant case. One of the
petitioners, Paulino M. Ejercito, is a lawyer who cannot feign ignorance of the legal effect
of his undertaking. Petitioners could have easily inserted a remark in the clause granting
authority to the Company to renew the original bond, if the renewal thereof was not their
intention.
The rule that ignorance of the contents of an instrument does not ordinarily affect the
liability of the one who signs it12 may also be applied to this Indemnity Agreement. And the
mistake of petitioners as to the legal effect of their obligation is ordinarily no reason for
relieving them of liability.13chanrobleslaw
WHEREFORE, premises considered, the Petition is DENIED. The Court of Appeals
Decision dated 2 October 2009 and Resolution dated 14 April 2010 in CA-G.R. CV No.
90828 are AFFIRMED.
SO ORDERED.cralawlawlibrary

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 162523 November 25, 2009
NORTON RESOURCES AND DEVELOPMENT CORPORATION, Petitioner,
vs.
ALL ASIA BANK CORPORATION,* Respondent.
DECISION
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari 1 under Rule 45 of the Rules of
Civil Procedure, seeking the reversal of the Court of Appeals (CA) Decision2 dated
November 28, 2002 which set aside the Decision3 of the Regional Trial Court (RTC)
of Davao City, Branch 14, dated August 27, 1999.
The Facts
Petitioner Norton Resources and Development Corporation (petitioner) is a domestic
corporation engaged in the business of construction and development of housing
subdivisions based in Davao City, while respondent All Asia Bank Corporation
(respondent), formerly known as Banco Davao-Davao City Development Bank, is a
domestic banking corporation operating in Davao City.
On April 13, 1982, petitioner applied for and was granted a loan by respondent in the
amount of Three Million Eight Hundred Thousand Pesos (3,800,000.00) as
evidenced by a Loan Agreement.4 The loan was intended for the construction of 160
housing units on a 3.9 hectare property located in Matina Aplaya, Davao City which
was subdivided by petitioner per Subdivision Sketch Plan. 5 To speed up the
processing of all documents necessary for the release of the funds, petitioner
allegedly offered respondent a service/commitment fee of 320,000.00 for the
construction of 160 housing units, or at 2,000.00 per unit. The offer having been
accepted, both parties executed a Memorandum of Agreement 6 (MOA) on the same
date.
As guarantor, the Home Financing Corporation (HFC), a government entity tasked to
encourage lending institutions to participate in the government's housing programs,
extended security coverage obligating itself to pay the said loan upon default of
petitioner. Out of the loan proceeds in the amount of 3,800,000.00, respondent
deducted in advance the amount of 320,000.00 as commitment/service fee.
Unfortunately, petitioner was only able to construct 35 out of the 160 housing units
proposed to be constructed under the contract. In addition, petitioner defaulted in the
payment of its loan obligation. Thus, respondent made a call on the unconditional
cash guarantee of HFC. In order to recover from HFC, respondent assigned to HFC
its interest over the mortgage by virtue of a Deed of Assignment 7 on August 28, 1983
coupled with the delivery of the Transfer Certificate of Title.
As of August 2, 1983, the outstanding obligation of petitioner amounted to
3,240,757.99. HFC paid only 2,990,757.99, withholding the amount of
250,000.00. Upon payment, HFC executed a Deed of Release of Mortgage 8 on
February 14, 1984, thereby canceling the mortgage of all properties listed in the Deed
of Assignment. Respondent made several demands from HFC for the payment of the
amount of 250,000.00 but HFC continued to withhold the same upon the request of
petitioner. Thus, respondent filed an action to recover the 250,000.00 with the RTC,
Branch 15, of Davao City, docketed as Civil Case No. 17048.9 On April 13, 1987, said
RTC rendered a Decision10 in favor of respondent, the dispositive portion thereof
reads as follows:
IN VIEW WHEREOF, judgment is hereby rendered as follows:
1. The defendant shall return to the plaintiff the 250,000.00 with legal
interest to be computed from April 12, 1984 until fully paid.
2. The defendant shall pay the plaintiff fifty thousand pesos (50,000.00) as
attorneys fees and 7,174.82 as collection expenses.
3. The defendant shall pay the costs of this suit.
SO ORDERED.11
HFC appealed to the CA which, in turn, sustained the decision of the RTC. The CA
decision became final and executory.
However, on February 22, 1993, petitioner filed a Complaint12 for Sum of Money,
Damages and Attorneys Fees against respondent with the RTC, docketed as Civil
Case No. 21-880-93. Petitioner alleged that the 320,000.00 commitment/service fee
mentioned in the MOA was to be paid on a per-unit basis at 2,000.00 per unit.
Inasmuch as only 35 housing units were constructed, petitioner posited that it was
only liable to pay 70,000.00 and not the whole amount of 320,000.00, which was
deducted in advance from the proceeds of the loan. As such, petitioner demanded the
return of 250,000.00, representing the commitment fee for the 125 housing units left
unconstructed and unduly collected by respondent.
In its Answer,13 respondent denied that the 320,000.00 commitment/service fee
provided in the MOA was broken down into 2,000.00 per housing unit for 160 units.
Moreover, respondent averred that petitioners action was already barred by res
judicata considering that the present controversy had already been settled in a
previous judgment rendered by RTC, Branch 15, of Davao City in Civil Case No.
17048.
 The RTC's Ruling
After trial on the merits, the RTC rendered a Decision14 on August 27, 1999 in favor of
petitioner. It held that the amount of 320,000.00, as commitment/service fee
provided in the MOA, was based on the 160 proposed housing units at 2,000.00 per
unit. Since petitioner was able to
construct only 35 units, there was overpayment to respondent in the amount of
250,000.00. Thus, the RTC disposed of the case in this wise:
THE FOREGOING CONSIDERED, judgment is hereby rendered for the plaintiff and
against the defendant ordering the said defendant:
1. To pay the plaintiff the amount of TWO HUNDRED FIFTY THOUSAND
PESOS (250,000.00) with interest at the legal rate reckoned from February
22, 1993, the date of the filing of the plaintiffs complaint until the same shall
have been fully paid and satisfied;
2. To pay the plaintiff the sum of THIRTY THOUSAND PESOS (30,000.00)
representing litigation expenses;
3. To pay the plaintiff the sum of SIXTY TWO THOUSAND FIVE HUNDRED
PESOS (62,500.00) as and for attorneys fees; and
4. To pay the costs.
SO ORDERED.15
Aggrieved, respondent appealed to the CA.16
The CA's Ruling
On November 28, 2002, the CA reversed the ruling of the RTC. The CA held that from
the literal import of the MOA, nothing was mentioned about the arrangement that the
payment of the commitment/service fee of 320,000.00 was on a per unit basis
valued at 2,000.00 per housing unit and dependent upon the actual construction or
completion of said units. The CA opined that the MOA duly contained all the terms
agreed upon by the parties.
Undaunted, petitioner filed a Motion for Reconsideration 17 which was, however,
denied by the CA in its Resolution18dated February 13, 2004.
Hence, this Petition which raised the following issues:
1. WHETHER OR NOT THE MEMORANDU[M] OF AGREEMENT (MOA)
REFLECTS THE TRUE INTENTION OF THE PARTIES[;]
2. WHETHER OR NOT HEREIN PETITIONER IS ENTITLED TO RECOVER
THE AMOUNT OF TWO HUNDRED [FIFTY] THOUSAND PESOS
REPRESENTING THE ONE HUNDRED TWENTY FIVE (125)
UNCONSTRUCTED HOUSING UNITS AT TWO THOUSAND PESOS
(PHP. 2,000.00) EACH AS AGREED [; AND]
3. WHETHER OR NOT VICTOR FACUNDO AS THE VICE PRESIDENT
AND GENERAL MANAGER AT THE TIME THE AFOREMENTIONED MOA
WAS EXECUTED, WAS AUTHORIZED TO ENTER INTO [AN]
AGREEMENT AND TO NEGOTIATE THE TERMS AND CONDITIONS
THEREOF TO THEIR CLIENTELE.19
Our Ruling
The instant Petition is bereft of merit.
Our ruling in Benguet Corporation, et al. v. Cesar Cabildo20 is instructive:
The cardinal rule in the interpretation of contracts is embodied in the first paragraph of
Article 1370 of the Civil Code: "[i]f the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties, the literal meaning of its
stipulations shall control." This provision is akin to the "plain meaning rule" applied by
Pennsylvania courts, which assumes that the intent of the parties to an instrument is
"embodied in the writing itself, and when the words are clear and unambiguous the
intent is to be discovered only from the express language of the agreement." It also
resembles the "four corners" rule, a principle which allows courts in some cases to
search beneath the semantic surface for clues to meaning. A court's purpose in
examining a contract is to interpret the intent of the contracting parties, as objectively
manifested by them. The process of interpreting a contract requires the court to make
a preliminary inquiry as to whether the contract before it is ambiguous. A contract
provision is ambiguous if it is susceptible of two reasonable alternative interpretations.
Where the written terms of the contract are not ambiguous and can only be read one
way, the court will interpret the contract as a matter of law. If the contract is
determined to be ambiguous, then the interpretation of the contract is left to the court,
to resolve the ambiguity in the light of the intrinsic evidence.
In our jurisdiction, the rule is thoroughly discussed in Bautista v. Court of Appeals:
The rule is that where the language of a contract is plain and unambiguous, its
meaning should be determined without reference to extrinsic facts or aids. The
intention of the parties must be gathered from that language, and from that language
alone. Stated differently, where the language of a written contract is clear and
unambiguous, the contract must be taken to mean that which, on its face, it purports
to mean, unless some good reason can be assigned to show that the words should
be understood in a different sense. Courts cannot make for the parties better or more
equitable agreements than they themselves have been satisfied to make, or rewrite
contracts because they operate harshly or inequitably as to one of the parties, or alter
them for the benefit of one party and to the detriment of the other, or by construction,
relieve one of the parties from the terms which he voluntarily consented to, or impose
on him those which he did not.21
Moreover, Section 9, Rule 130 of the Revised Rules of Court clearly provides:
SEC. 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 the
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 "parol evidence rule" forbids any addition to or contradiction of the terms of a
written instrument by testimony or other evidence purporting to show that, at or before
the execution of the parties' written agreement, other or different terms were agreed
upon by the parties, varying the purport of the written contract. When an agreement
has been reduced to writing, the parties cannot be permitted to adduce evidence to
prove alleged practices which, to all purposes, would alter the terms of the written
agreement. Whatever is not found in the writing is understood to have been waived
and abandoned.22 None of the above-cited exceptions finds application in this case,
more particularly the alleged failure of the MOA to express the true intent and
agreement of the parties concerning the commitment/service fee of 320,000.00.
In this case, paragraph 4 of the MOA plainly states:
4. That the CLIENT offers and agrees to pay a commitment and service fee of
THREE HUNDRED TWENTY THOUSAND PESOS (320,000.00), which shall be
paid in two (2) equal installments, on the same dates as the first and second partial
releases of the proceeds of the loan.23
As such, we agree with the findings of the CA when it aptly and judiciously held, to
wit:
Unmistakably, the testimonies of Antonio Soriano and Victor Facundo jibed in material
points especially when they testified that the 320,000.00 commitment/service fee
mentioned in Paragraph 4 of Exhibit "B" is not to be paid in lump sum but on a per
unit basis valued at 2,000.00 per housing unit. But a careful scrutiny of such
testimonies discloses that they are not in accord with the documentary evidence on
record. It must be stressed that both Antonio Soriano and Victor Facundo testified that
the 320,000.00 commitment/service fee was arrived at by multiplying 2,000.00, the
cost per housing unit; by 160, the total number of housing units proposed to be
constructed by the [petitioner] as evidenced by a certain subdivision survey plan of
[petitioner] marked as Exhibit "C."
xxxx
Looking closely at Exhibit "C," noticeable are the date of survey of the subdivision
which is May 15-31, 1982 and the date of its approval which is June 25, 1982, which
dates are unmistakably later than the execution of the Loan Agreement (Exhibit "A")
and Exhibit "B" which was on April 13, 1982. With these dates, we cannot lose sight
of the fact that it was impossible for Victor Facundo to have considered Exhibit "C" as
one of the documents presented by [petitioner] to support its proposal that the
commitment/service fee be paid on a per unit basis at 2,000.00 a unit. x x x.
xxxx
To stress, there is not even a slim possibility that said blue print (referring to Exhibit
"C") was submitted to [respondent] bank during the negotiation of the terms of Exhibit
"B" and was made the basis for the computation of 320,000.00 commitment/service
fee. As seen on its face, Exhibit "C" was approved in a much later date than the
execution of Exhibit "B" which was on April 13, 1982. In addition, as viewed from the
foregoing testimony, no less than Victor Facundo himself admitted that there were
only 127 proposed housing units instead of 160. Considering these factual milieus,
there is sufficient justification to discredit the stance of [petitioner] that Exhibit "B" was
not reflective of the true intention or agreement of the parties. Paragraph 4 of Exhibit
"B" is clear and explicit in its terms, leaving no room for different interpretation.
Considering the absence of any credible and competent evidence of the alleged true
and real intention of the parties, the terms of Paragraph 4 of Exhibit "B" remains as it
was written. Therefore, the payment of 320,000.00 commitment/service fee
mentioned in Exhibit "B" must be paid in lump sum and not on a per unit basis.
Consequently, we rule that [petitioner] is not entitled to the return of
250,000.00.241avvphi1
The agreement or contract between the parties is the formal expression of the parties'
rights, duties and obligations. It is the best evidence of the intention of the parties.
Thus, 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 no evidence of such terms
other than the contents of the written agreement between the parties and their
successors in interest. 25 Time and again, we have stressed the rule that a contract is
the law between the parties, and courts have no choice but to enforce such contract
so long as it is not contrary to law, morals, good customs or public policy. Otherwise,
courts would be interfering with the freedom of contract of the parties. Simply put,
courts cannot stipulate for the parties or amend the latter's agreement, for to do so
would be to alter the real intention of the contracting parties when the contrary
function of courts is to give force and effect to the intention of the parties. 26
Finally, as correctly observed by respondent, petitioner's claim that the MOA is a
contract of adhesion was never raised by petitioner before the lower courts. 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. 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

A contract of adhesion is defined as one in which one of the parties imposes a ready-
made form of contract, which the other party may accept or reject, but which the latter
cannot modify. One party prepares the stipulation in the contract, while the other party
merely affixes his signature or his "adhesion" thereto, giving no room for negotiation
and depriving the latter of the opportunity to bargain on equal footing.28 It must be
borne in mind, however, that contracts of adhesion are not invalid per se. Contracts of
adhesion, where one party imposes a ready-made form of contract on the other, are
not entirely prohibited. The one who adheres to the contract is, in reality, free to reject
it entirely; if he adheres, he gives his consent.29

All told, we find no reason to disturb, much less, to reverse the assailed CA Decision.

WHEREFORE, the instant Petition is DENIED and the assailed Court of Appeals
Decision is AFFIRMED. Costs against petitioner.

SO ORDERED.
 THIRD DIVISION On March 9, 1983, Cabildo again wrote Reyes requesting the assignment of a
representative by Benguet Corporation to closely monitor the daily work accomplishments
BENGUET CORPORATION, G.R. No. 151402 of Cabildo and his workers. According to Cabildo, the request was made in order to: (1)
DENNIS R. BELMONTE, EFREN C. REYES and GREGORIO A. preclude doubts on claims of payment; (2) ensure that accomplishment of the job is
FIDER, Present: compliant with Benguet Corporations standards; and (3) guarantee availability of the
Petitioners, required materials to prevent slowdown and/or stoppage of work.
YNARES-SANTIAGO, J.,
Chairperson, On even date, Cabildo submitted his first work accomplishment covering carpentry
AUSTRIA-MARTINEZ, work and installation of the scaffolding for which he received a partial payment
- versus - CHICO-NAZARIO, of P10,776.94.
NACHURA, and
REYES, JJ. Subsequently, on March 23, 1983, Cabildo and Benguet Corporation, represented
by petitioner Belmonte, formally signed the Contract of Work for the painting of
Promulgated: the Mill Buildings and Bunkhouses at the Balatoc mining site including the necessary repair
CESAR CABILDO, works thereon. The Contract of Work, in pertinent part, reads:
Respondent. August 22, 2008
(1) [Cabildo] shall paint the Mill Buildings at Balatoc Mill and all the
x------------------------------------------------------------------------------------x bunkhouses at Balatoc, Itogon, Benguet, including certain repair works
which may be necessary.

DECISION (2) For and in consideration of the work to be done by [Cabildo], [Benguet
Corporation] shall pay [Cabildo] at the rate herein provided, as follows:
NACHURA, J.:
(a) Painting

Steel & Concretes Wood

This is a petition for review on certiorari assailing the Court of Appeals (CA) decision[1] in 1st coat P2.90/sq. m. P2.50/sq.
CA-G.R. CV No. 37123 which affirmed with modification the decision [2] of the Regional Trial 2nd coat 2.50/sq. m. 2.10/sq.
Court (RTC), Branch 6, Baguio City in Civil Case No. 593-R.
(b) Scrapping and Cleaning
Petitioner Benguet Corporation is a mining company with three (3) mining sites: Balatoc,
Antamok and Acupan. Petitioners Dennis R. Belmonte,[3]Efren C. Reyes,[4] and Gregorio A. P1.85/sq. m.
Fider[5] are all officers and employees of Benguet Corporation. [6] On the other hand,
respondent Cesar Cabildo and Rolando Velasco, defendant before the lower courts, were (c) Scaffolding
former employees of Benguet Corporation.
P0.50/sq. m.
At the time of his retirement on August 31, 1981, Cabildo was Department
Manager of Benguet Corporations Transportation and Heavy Equipment Department and (d) De-zincing
had worked there for twenty-five (25) years. Thereafter, Cabildo became a service contractor
of painting jobs. P1.25/sq. m.

Sometime in February 1983, Cabildo submitted his quotation and bid for the (e) Dismantling of sidings & ceilings
painting of Benguet Corporations Mill Buildings and Bunkhouses located at Balatoc mining
site. He then negotiated with petitioners Reyes and Fider, the recommending approval and P2.50/sq. m.
approving authority, respectively, of Benguet Corporation, on the scope of work for the
Balatoc site painting job which included necessary repairs. Reyes and Cabildo discussed (f) Installation of sidings & ceilings
the price schedule, and the parties eventually agreed that Benguet Corporation would
provide the needed materials for the project. P5.50/sq. m.

Upon approval of his quotation and bid, Cabildo forthwith wrote Reyes on March (g) Handling of Lumber & installation
5, 1983 requesting the needed materials, so that he could immediately commence work.
On March 7, 1983, even without a written contract, Cabildo began painting the Mill Buildings P275.00/cu. m.
at Balatoc.
(3) [Cabildo] shall employ his own workers and employees, and shall
have the sole and exclusive obligation to pay their basic wage, overtime
pay, ECOLA, medical treatment, SSS premiums, and other benefits due
them under existing Philippine laws or other Philippine laws which might
be enacted or promulgated during the life of this Contract. If, for any
reason, BENGUET CORPORATION is made to assume any liability of
[Cabildo] on any of his workers and employees, [Cabildo] shall reimburse
[Benguet Corporation] for any such payment.
(4) [Cabildo] shall require all persons before hiring them in the work
subject of this Contract to obtain their clearance from the Security
Department of Baguio District Gold Operations of BENGUET
CORPORATION.
(5) BENGUET CORPORATION shall retain 10% of every performance
payment to [Cabildo] under the terms and conditions of this
Contract. Such retention shall be cumulative and shall be paid to
[Cabildo] only after thirty (30) days from the time BENGUET
CORPORATION finally accepts the works as fully and completely
finished in accord with the requirements of [Benguet Corporation]. Before
the 10% retention of performance payments will, however, be fully paid
to [Cabildo], all his workers and employees shall certify under oath that
they have been fully paid their wages, SSS, medicare, and ECC
premiums, ECOLA, overtime pay, and other benefits due them under
laws in force and effect and that they have no outstanding claim against
[Cabildo]. BENGUET CORPORATION has the right to withhold from the
10% retention any amount equal to the unsatisfied claim of any worker
against [Cabildo] until the claim of the worker is finally settled.
(6) [Cabildo] shall not be allowed to assign or subcontract the works, or
any phase thereof, and any violation of this provision will entitle
BENGUET CORPORATION the sole and exclusive right to declare this
Contract as cancelled and without any further force and effect.
(7) [Cabildo] and his heirs shall be solely and directly liable to the
exclusion of BENGUET CORPORATION, its stockholders, officers,
employees, and agents and representatives for civil damages for any
injury or death of any of his employees, workers, officers, agents and
representatives or to any third person and for any damage to any
property due to faulty or poor workmanship or negligence or willful act of
[Cabildo], his workers, employees, or representatives in the course of,
during or when in any way connected with, the works and construction. If
for any reason BENGUET CORPORATION is made to assume any
liability of [Cabildo], his workers, employees, or representatives in the
course of, during or when in any way connected with, the works and
construction. If for any reason BENGUET CORPORATION is made to
assume any liability of [Cabildo], his workers, employees, or agents or
representatives under this provision, [Cabildo] and his heirs shall
reimburse the CORPORATION for any payment.
(8) [Cabildo] hereby undertakes to complete the work subject of this
Contract within (no period fixed) excluding Sundays and Holidays,
otherwise, [Benguet Corporation] shall have the sole and exclusive right
to cancel this Contract.
IN WITNESS WHEREOF, the parties have hereunto affixed their
signatures on this 23rd day of March, 1983 at Itogon, Benguet Province.
BENGUET CORPORATION
By:
(sgd.) (sgd.)
DENNIS R. BELMONTE CESAR Q. CABILDO
Vice-President Contractor
Benguet Gold Operations
SIGNED IN OUR PRESENCE:
_____sgd.______ Witnesses _____sgd.______[7]
Apart from the price schedule stipulated in the Contract of Work, which only
reproduced the quotation and bid submitted by Cabildo, and the preliminary discussions
undertaken by the parties, all the stipulations were incorporated therein by Benguet
Corporation which solely drafted the contract.
To undertake the project, Cabildo recruited and hired laborers thirty-three (33)
painters and carpenters including petitioner Velasco as his general foreman.
The succeeding events, narrated by the trial court as echoed by the appellate court
in their respective decisions, led to the parties falling out:
[I]t must be pointed out that the Mill Buildings in Balatoc were about 28
buildings in all interconnected with each other grouped into 9 areas with
some buildings very dangerous since it housed the machineries,
agitators and tanks with cyanide solutions to mill the ores while the
bunkhouses, which housed the laborers, were about 38 buildings in all
averaging about 30 to 35 meters in height or more than 100 feet and thus
would take sometime to paint and repair probably for about one and a
half (1) years.
Thus, the need for scaffoldings to paint the Mill buildings and bunkhouses
so that the workers would be safe, can reach the height of the buildings
and avoid the fumes of cyanide and other chemicals used in the Milling
of the ores.
Payment was to be made on the basis of work accomplished at a certain
rate per square meter in accordance with the prices indicated in the
Contract. The procedure followed was that [Cabildo] requested the office
of Reyes for measurement; then Reyes assign[s] an employee to do the
measurement; the employee was accompanied by [Cabildo] or his
authorized representative for the measurement; upon completion of the
measurement, the computations were submitted to Engr. Manuel Flores,
the Supervisor assigned to the work area; if Engr. Flores approved the
computation, it was then recommended to Reyes for liquidation; and
Reyes thereafter issued the Liquidation Memo to schedule payment of
work accomplished.
 [Cabildo] was represented in the measurement by either his foreman or
his son while Mr. Licuben was assigned to do the measurement for the
company.
xxxx
On May 30, 1983, Velasco left [Cabildo] as the latters general foreman
and went on his own as contractor, offering his services for painting jobs.
On June 6, 1983, Velasco entered into a Contract of Work with [Benguet
Corporation], represented by Godofredo Fider, to paint the Breakham
bridge at Antamok Mine, Barangay, Loakan, Itogon Benguet for the sum
of P2,035.00.
x x x Apparently, the above contract of work of Velasco is
in Antamok while the Contract of Work of [Cabildo] is in Balatoc.
On June 9, 1983 (6/9/83), Reyes recommended approval of the
Quotation of Velasco for the painting of the inner mill compound of
Balatoc for Areas 2, 3, 5, 6 & 7 and approved by Fider on June 13,
1983 at a lower price schedule per sq. meter than that of [Cabildo].
Hence, on June 13, 1983, Rolando Velasco entered into another
Contract of Work with [Benguet Corporation], represented by Godofredo
Fider, to paint the underneath of Mill Buildings No. 702 at Balatoc Mill,
Barangay Virac, Itogon, Benguet and install the necessary scaffoldings
for the work for the sum of P5,566.60.
On the same date of June 13, 1983, Velasco entered into another
Contract of Work with [Benguet Corporation], represented by Godofredo
Fider, to scrape, clean and paint the structural steel members at the Mill
crushing plant at Balatoc Mill, Barangay Virac, Itogon, Benguet and
install the necessary scaffoldings for the purpose for the consideration
of P8,866.00.
xxxx
[Cabildo] complained and protested but Reyes said the Contract of Work
of [Cabildo] covers only the painting of exterior of the Mill Buildings in
Balatoc but not the interior although the same was not expressly stated
in the Contract. This caused the souring of relationship of [Cabildo] and
[petitioners] because at that time [Cabildo] had already painted the top
roof and three (3) sidings both interior and exterior of Mill Building 702. [8]
Because of these developments, Cabildo enlisted the services of Atty. Galo Reyes, who
wrote both Fider and Jaime Ongpin, President of Benguet Corporation, regarding the
ostensibly overlapping contracts of Cabildo and Velasco.
Parenthetically, at some point in June 1983, Cabildo was allowed to paint the interiors of
various parts of the Mill Buildings, specifically, the Mill and Security Office, Electrical Office,
Baldemor Office, and Sala Shift Boss.
On June 30, 1983, Cabildo was prevented from continuing work on the job site, as Fider and
Reyes were supposedly investigating Cabildos participation in the incident where a
galvanized iron sheet fell on one of the agitator tanks. For three (3) months, Cabildo was not
allowed to perform work stipulated in the agreement and complete painting of
the Mill Buildings and Bunkhouses at Balatoc. He was only allowed to do repairs for
previously accomplished work. Further, Benguet Corporation continued to withhold payment
of Cabildos last work accomplishment for the period from June 16 to 30, 1983.
On July 2, 1983, Benguet Corporations Group Manager for Legal and Personnel, Atty.
Juanito Mercado, who prepared and notarized the Contract of Work, responded to Cabildos
counsel, declaring that Benguet Corporations Contract of Work with Cabildo only covered
exterior painting of the Mill Buildings and Bunkhouses, whereas the contract with Velasco
covered interior painting of the Mill Buildings, steel structures and underneath the GI
Roofing.
Eventually, upon his visit to Benguet Corporation accompanied by counsel,
Cabildo was paid for the June 16 to 30, 1983 work accomplishment. In this regard, petitioner
Reyes issued Liquidation Memo dated July 25, 1983 which, curiously, had an intercalation
that payment made was for the exterior painting of the Mill Buildings in Balatoc.
As regards the repairs of defects and leaks of previous work accomplishments,
which were the only job Cabildo was allowed to work on, these were repaired satisfactorily
and Cabildo was paid the previously withheld amount of P19,775.00.
Once again, in August of the same year, Cabildo wrote petitioner Belmonte appealing his
preclusion from continuing the Contract of Work and the overlapping contracting jobs
continuously given to Velasco. Yet, Cabildo was still disallowed to perform the job under the
Contract of Work for the month of September up to December 1983.
With respect to the Bunkhouses, the petitioners did not require Cabildo to paint them. Neither
did petitioners provide the materials needed therefor. The petitioners simply claimed that
Cabildo was not at all allowed to perform work on the Bunkhouses due to the rainy season
and because of the financial difficulties Benguet Corporation was then experiencing.
Thus, Cabildo filed a complaint for damages against the petitioners and Velasco before the
RTC, claiming breach by Benguet Corporation of their Contract of Work. Further, Cabildo
sought damages for the petitioners harassment and molestation to thwart him from
performing the job under the Contract of Work. Lastly, Cabildo prayed for damages covering
lack of payments and/or underpayments for various work accomplishments.
The RTC rendered a decision in favor of Cabildo and found the petitioners, as well as
Velasco, defendant before the RTC, jointly and severally liable to Cabildo for: (1) P27,332.60
as actual damages; (2) P300,000.00 as indemnification for unrealized profit;
(3) P100,000.00 as moral damages; (4) P50,000.00 as exemplary damages; (5) P30,000.00
as attorneys fees; and (5) costs of suit.
On appeal, the CA affirmed with modification the RTCs ruling. The appellate court excluded
Velasco from liability for the foregoing damages.
Hence, this appeal by the petitioners positing the following issues:
WHETHER [OR NOT] THERE IS BREACH OF CONTRACT
AS BASIS FOR AWARD OF DAMAGES AND ATTORNEYS FEES[?]
 WHETHER [OR NOT] THE COUNTERCLAIM OF
PETITIONERS SHOULD BE GRANTED[?][9]
We deny the petition. We see no need to disturb the findings of the trial and
appellate courts on the petitioners liability for breach of the subject Contract of Work.
It is a well-entrenched doctrine that factual findings of the trial court, especially
when affirmed by the appellate court, are accorded the highest degree of respect and are
conclusive between the parties and even on this Court. [10] Nonetheless, jurisprudence
recognizes highly meritorious exceptions, such as: (1) when the findings of a trial court are
grounded entirely on speculations, surmises or conjectures; (2) when a lower courts
inference from its factual findings is manifestly mistaken, absurd or impossible; (3) when
there is grave abuse of discretion in the appreciation of facts; (4) when the findings of the
appellate court go beyond the issues of the case or fail to notice certain relevant facts which,
if properly considered, will justify a different conclusion; (5) when there is a misappreciation
of facts; and (6) when the findings of fact are conclusions without mention of the specific
evidence on which they are based, are premised on the absence of evidence, or are
contradicted by evidence on record.[11] It is noteworthy that none of these exceptions which
would warrant a reversal of the assailed decision obtains herein.
The petitioners insist that the CA erred in awarding Cabildo damages because his
Contract of Work with Benguet Corporation only covered painting of the exterior of
the Mill Buildings and Bunkhouses at the Balatoc mining site. In effect, petitioners claim that
their respective contracts with Cabildo and Velasco cover separate and different subject
matters, i.e., painting of the exterior and interior of the Mill Buildings, respectively.
We cannot agree with the petitioners obviously strained reasoning. The Contract
of Work with Cabildo did not distinguish between the exterior and interior painting of the Mill
Buildings. It simply stated that Cabildo shall paint the Mill Buildings at Balatoc Mill and all the
Bunkhouses at Balatoc, Itogon, Benguet. There is nothing in the contract which will serve as
a basis for the petitioners insistence that Cabildos scope of work was merely confined to the
painting of the exterior part of the Mill Buildings.
To bolster their position, the petitioners contend that there is an apparent conflict
between the wording of the contract and the actual intention of the parties on the specific
object of the painting job. The petitioners argue that Cabildo knew of Benguet Corporations
practice to have only the exterior of buildings painted and was, therefore, aware that the
Contract of Work referred only to the exterior painting of the Mill Buildings, excluding the
interior portion thereof. Thus, the petitioners submit that when there is a conflict as regards
the interpretation of a contract, the obvious intention of the parties must prevail.
We reject the petitioners flawed contention. Apart from the petitioners self-serving
assertion, nothing in the record points to the parties intention different from that reflected in
the Contract of Work. To the contrary, the records reveal an unequivocal intention to have
both the exterior and interior of the Mill Buildings painted.
Article 1370 of the Civil Code sets forth the first rule in the interpretation of
contracts. The article reads:
Art. 1370. If the terms of a contract are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning of its
stipulations shall control.
If the words appear to be contrary to the evident intention of the parties,
the latter shall prevail over the former.
In the recent case of Abad v. Goldloop Properties, Inc.,[12] we explained, thus:
The cardinal rule in the interpretation of contracts is embodied in the first
paragraph of Article 1370 of the Civil Code: [i]f the terms of a contract are
clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of its stipulations shall control. This provision is akin to
the plain meaning rule applied by Pennsylvania courts, which assumes
that the intent of the parties to an instrument is embodied in the writing
itself, and when the words are clear and unambiguous the intent is to be
discovered only from the express language of the agreement. It also
resembles the four corners rule, a principle which allows courts in some
cases to search beneath the semantic surface for clues to meaning. A
courts purpose in examining a contract is to interpret the intent of the
contracting parties, as objectively manifested by them. The process of
interpreting a contract requires the court to make a preliminary inquiry as
to whether the contract before it is ambiguous. A contract provision is
ambiguous if it is susceptible of two reasonable alternative
interpretations. Where the written terms of the contract are not
ambiguous and can only be read one way, the court will interpret the
contract as a matter of law. If the contract is determined to be ambiguous,
then the interpretation of the contract is left to the court, to resolve the
ambiguity in the light of the intrinsic evidence.
In our jurisdiction, the rule is thoroughly discussed in Bautista v. Court of
Appeals:
The rule is that where the language of a contract is
plain and unambiguous, its meaning should be
determined without reference to extrinsic facts or
aids. The intention of the parties must be gathered
from that language, and from that language
alone. Stated differently, where the language of
a written contract is clear and unambiguous, the
contract must be taken to mean that which, on its
face, it purports to mean, unless some good
reason can be assigned to show that the words
should be understood in a different sense. Courts
cannot make for the parties better or more
equitable agreements than they themselves have
been satisfied to make, or rewrite contracts
because they operate harshly or inequitably as to
one of the parties, or alter them for the benefit of
one party and to the detriment of the other, or by
construction, relieve one of the parties from the
terms which he voluntarily consented to, or
impose on him those which he did not.
In the case at bench, the Contract of Work leaves no room for equivocation or interpretation
as to the exact intention of the parties. We also note that Benguet Corporations counsel
drafted and prepared the contract. Undoubtedly, the petitioners claimed ambiguity in the
wordings of the contract, if such an ambiguity truly exists, cannot give rise to an interpretation completely agree with the uniform findings of the lower courts that the petitioners waylaid
favorable to Benguet Corporation. Article 1377 of the Civil Code provides: Cabildo and prevented him from performing his obligation under the Contract of Work.

Art. 1377. The interpretation of obscure words or stipulations in a contract
shall not favor the party who caused the obscurity.
Still, the petitioners insist that the parties intention was different, and that Cabildo
knew of, and acquiesced to, the actual agreement.
We remain unconvinced. Even if we were to patronize the petitioners stretched
logic, the supposed intention of the parties is not borne out by the records. Article 1371 of
the same code states:
Art. 1371. In order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered.
With respect to the painting of the Bunkhouses, the petitioners claim that Cabildo
was not allowed to paint them due to the rainy season and because of the financial difficulties
of Benguet Corporation. Suffice it to state that the Contract of Work did not provide for a
suspension clause. Thus, Benguet Corporation cannot unilaterally suspend the Contract of
Work for reasons not stated therein.
Consequent to all these disquisitions, we likewise affirm the lower courts dismissal
of the petitioners counterclaim.
WHEREFORE, premises considered, the petition is hereby DISMISSED. The
Court of Appeals decision in CA-G.R. CV No. 37123 isAFFIRMED. Costs against the
petitioners.
SO ORDERED.

In stark contrast to the petitioners assertions are the following:

First, the procedure for work accomplishments and payments followed by the
parties required representatives and/or employees of Benguet Corporation to closely
monitor Cabildos performance of the job. Notably, when Cabildo painted both the exterior
and interior of the Mill Buildings except for the interior of the refinery buildings where gold is
being minted, he was under the close supervision of petitioners Reyes and Fider. If, as the
petitioners claim, the intention was only to paint the exterior of the Mill Buildings, then Reyes
and Fider, or any of Benguet Corporations representatives assigned to monitor the work of
Cabildo, should have, posthaste, stopped Cabildo from continuing the painting of the
interiors.

Moreover, the materials for the painting work were provided by Benguet
Corporation as listed and requested by Cabildo. The petitioners had the opportunity to
disapprove Cabildos requests for materials needed to paint the interiors of the Mill Buildings,
but they failed to do so.

Second, although Cabildo concedes that he knew of Benguet Corporations

practice to have only the exteriors of buildings painted, he refutes the petitioners claim that
the aforesaid practice extended to the painting of the Mill Buildings. Cabildo asseverates
that the practice of painting only the exterior of buildings was confined to the Bunkhouses.
Evidently, Cabildos knowledge of the claimed practice, as qualified by Cabildo himself, does
not translate to an inference that the parties had intended something other than what is
written in the Contract of Work.

Lastly, a singular document, the Liquidation Memo dated July 25, 1983 issued by
petitioner Reyes, further highlights the petitioners lame attempt to paint an intention different
from the specific language used in the Contract of Work. This belated qualification in the
Liquidation Memo stating that payment was being made for the exterior painting of the Mill
Buildings speaks volumes of the parties actual intention captured in the Contract of Work,
as none of the Liquidation Memos issued by the petitioners for Cabildos previous work
accomplishments qualified the painting performed by Cabildo on the Mill Buildings.

From the foregoing, it is crystal clear that the petitioners breached the Contract of
Work with Cabildo by awarding Velasco a contract covering the same subject matter, quite
understandably, because Velasco offered a price schedule lower than Cabildos. We

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 162090 January 31, 2007
SPOUSES HOWARD T. CO CHIEN and SUSAN Y. CO CHIEN, Petitioners,
vs.
STA. LUCIA REALTY & DEVELOPMENT, INC., and ALSONS LAND
CORPORATION, Respondents.
DECISION
PUNO, CJ.:
This case is a Petition for Certiorari under Rule 45 of the Revised Rules of Court
appealing the decision of the Court of Appeals in CA G.R. SP No. 78161 entitled
"Spouses Howard T. Co Chien & Susan Y. Co Chien v. Sta. Lucia Realty &
Development, Inc. and Alsons Land Corporation."
The facts are undisputed.
Sometime in December 1995, private respondents Sta. Lucia Realty & Development,
Inc. (Sta. Lucia) and Alsons Land Corporation (Alsons) offered for sale to the general
public parcels of land and golf shares to the Eagle Ridge Golf and Residential Estates
(Eagle Ridge) in General Trias, Cavite.1 Sta. Lucia, as the developer, owns 60% of
Eagle Ridge while Alsons, the owner of the land, owns the remaining 40% by virtue of
a joint venture agreement. Fil-Estate Realty Corporation (Fil-Estate) was
commissioned to sell the subdivision lots and/or golf shares under an Exclusive
Marketing Agreement executed on December 5, 1995.2
On December 20, 1995, Sta. Lucia and Alsons entered into a Contract to Sell,
including an addendum to the same, with the petitioners, spouses Howard T. Co
Chien and Susan Y. Co Chien (Spouses Co Chien). According to the Contract to Sell,
Spouses Co Chien shall purchase Lot No. 16, Block No. 1, Phase I of Eagle Ridge
with an area of three hundred one (301) square meters for a lump sum price of one
million two hundred ninety three thousand three hundred pesos (P1,293,300.00), with
one half of the purchase price as down payment to be paid upon signing the contract
and the balance upon delivery of the title to the land to Spouses Co Chien. The
petitioners were also given a 10% discount on the purchase price and thereafter they
paid a down payment of five hundred eighty one thousand five hundred thirty five
pesos (P581,535.00), after the discount. It was also agreed in the addendum to the
Contract to Sell that the 10% discount deducted from the down payment shall be
forfeited and added to the balance, should Spouses Co Chien fail to pay the said
balance within seven (7) days from notice that the title to the subject property is ready
for delivery.3
At the time the Contract to Sell was executed, the private respondents did not
possess a License to Sell and a Certificate of Registration from the Housing and Land
Use Regulatory Board (HLURB) as required under Sections 4 and 5 of Presidential
Decree No. 957 (P.D. 957). The License and Certificate were issued only in July
1997, one year and six months after the execution of the Contract to Sell between the
petitioners and the private respondents.4
On January 19, 1998, Sta. Lucia informed the petitioners that the title to the property
was ready for delivery and demanded the payment of the balance of the purchase
price. Instead of paying the balance, Spouses Co Chien tried to negotiate for a further
discount or, in the alternative, to exchange the property for a better lot in Eagle Ridge.
When Spouses Co Chien failed to pay within seven days from notice of the availability
of the title, the private respondents forfeited the 10% discount previously given to the
petitioners in accordance with the contract and its addendum. 5
On June 16, 1999, Spouses Co Chien sent a written demand to Sta. Lucia for the
refund of their down payment on the ground that the Contract to Sell was void for the
reason that at the time of its execution, December 20, 1995, the private respondents
had no Certificate of Registration and License to Sell as required by Sections 4 and 5
of P.D. 957.6 On July 6, 1999, failing to receive a favorable response from the private
respondents, Spouses Co Chien filed a complaint with the HLURB. 7
On May 30, 2001, the HLURB Arbiter ruled in favor of Spouses Co Chien ordering
Sta. Lucia and Alsons to refund the down payment with legal interest from July 6,
1999 and to further pay the petitioners P10,000.00 as attorneys fees. The HLURB
Arbiter ruled that the lack of Certificate of Registration and License to Sell at the time
of execution of the Contract to Sell resulted in the nullification of the contract. 8
On appeal, the HLURB Board of Commissioners (the HLURB Board) reversed the
HLURB Arbiters decision and held that the Contract to Sell was valid and ordered
Spouses Co Chien to pay the private respondents the balance of P646,150.00 without
penalty interest. The HLURB Board also ordered Sta. Lucia and Alsons to pay jointly
and severally an administrative fine of P20,000.00 for two counts of violation of
Section 4 of P.D. 957 and another P20,000.00 for two counts of violation of Section 5
of the same decree.9
Spouses Co Chien then appealed to the Office of the President. In a decision dated
June 10, 2003, the Office of the President affirmed the decision of the HLURB
Board in toto. Not satisfied with the aforementioned ruling, Spouses Co Chien filed a
Petition for Review with the Court of Appeals.10
On February 10, 2004, the Court of Appeals denied the petition and affirmed the
decision of the Office of the President.11
Hence, this petition.
The primary issues in this case are as follows: (1) whether the absence of the
Certificate of Registration and License to Sell at the time of execution rendered the
Contract to Sell and its addendum null and void; and (2) whether the petitioners are
guilty of laches or estoppel.
We will discuss the issues seriatim.
It is the contention of the petitioners that the lack of Certificate of Registration (the
Certificate) and License to Sell (the License) on the part of the private respondents at
the time the contract was executed rendered the Contract to Sell null and void, thus,
entitling them to a refund of their down payment. Spouses Co Chien aver that the use
of the words "shall not" and the phrase "unless he shall have first obtained a license
to sell within two weeks from the registration of such project" in Section 5 of P.D. 957
indicate that the absence of the Certificate and License render the contract null and
void.12 The private respondents, on the other hand, state that the provision of law
invoked by Spouses Co Chien does not provide that the absence of the Certificate
and License at the time the contract was executed would automatically invalidate the
contract.13 The private respondents assert that the Sec. 5, P.D. 957 is merely
directory as it does not affect substantial rights, does not relate to the essence of a
sale and compliance therewith is simply a matter of administrative convenience.14
Sections 4 and 5 of P.D. 957 state:
Sec. 4. Registration of Projects
....
The owner or the real estate dealer interested in the sale of lots or units, respectively,
in such subdivision project or condominium project shall register the project with
the Authority by filing therewith a sworn registration statement containing the
following information:
....
The subdivision project of the condominium project shall be deemed registered
upon completion of the above publication requirement. The fact of such
registration shall be evidenced by a registration certificate to be issued to the
applicant-owner or dealer.
Sec. 5. License to Sell. - Such owner or dealer to whom has been issued a
registration certificate shall not, however, be authorized to sell any subdivision
lot or condominium unit in the registered project unless he shall have first
obtained a license to sell the project within two weeks from the registration of
such project.
The Authority, upon proper application therefor, shall issue to such owner or
dealer of a registered project a license to sell the project if, after an examination of
the registration statement filed by said owner or dealer and all the pertinent
documents attached thereto, he is convinced that the owner or dealer is of good
repute, that his business is financially stable, and that the proposed sale of the
subdivision lots or condominium units to the public would not be fraudulent.15
The same decree further states:
Sec. 38. Administrative Fines. - The Authority may prescribe and impose fines not
exceeding ten thousand pesos for violations of the provisions of this Decree or of any
rule or regulation thereunder. Fines shall be payable to the Authority and enforceable
through writs of execution in accordance with the provisions of the Rules of Court.
Sec. 39. Penalties. - Any person who shall violate any of the provisions of this Decree
and/or any rule or regulation that may be issued pursuant to this Decree shall, upon
conviction, be punished by a fine of not more than twenty thousand (P20,000.00)
pesos and/or imprisonment of not more than ten years: Provided, That in the case of
corporations, partnership, cooperatives, or associations, the President, Manager or
Administrator or the person who has charge of the administration of the business shall
be criminally responsible for any violation of this Decree and/or the rules and
regulations promulgated pursuant thereto.16
P.D. 957 is a law that seeks to regulate the sale of subdivision lots and condominiums
in view of the increasing number of incidents wherein "real estate subdivision owners,
developers, operators, and/or sellers have reneged on their representations and
obligations to provide and maintain properly" 17 the basic requirements and amenities,
as well as "reports of alarming magnitudeof swindling and fraudulent manipulations
perpetrated by unscrupulous subdivision and condominium sellers and
operators."18 As such, P.D. 957 requires the registration not just of the developers,
sellers, brokers and/or owners of the project but also of the project itself.19 Upon
registration of the project, a license to sell must be obtained prior to the sale of the
subdivision lots or condominium units therein.20The law also provides for the
suspension and revocation of the registration and license in certain instances, as well
as the procedure to be observed in the event thereof.21 Finally, the law provides for
administrative fines and other penalties in case of violation of, or non-compliance with
its provisions.22
A review of the relevant provisions of P.D. 957 reveals that while the law penalizes
the selling of subdivision lots and condominium units without prior issuance of a
Certificate of Registration and License to Sell by the HLURB, it does not provide that
the absence thereof will automatically render a contract, otherwise validly entered,
void. The penalty imposed by the decree is the general penalty provided for the
violation of any of its provisions.23 It is well-settled in this jurisdiction that the clear
language of the law shall prevail.24 This principle particularly enjoins strict compliance
with provisions of law which are penal in nature, or when a penalty is provided for the
violation thereof. With regard to P.D. 957, nothing therein provides for the nullification
of a contract to sell in the event that the seller, at the time the contract was entered
into, did not possess a certificate of registration and license to sell. 25 Absent any
specific sanction pertaining to the violation of the questioned provisions (Secs. 4 and
5), the general penalties provided in the law shall be applied. The general penalties
for the violation of any provisions in P.D. 957 are provided for in Sections 38 and 39.
As can clearly be seen in the aforequoted provisions, the same do not include the
nullification of contracts that are otherwise validly entered.
As found by the Court of Appeals, in the case at bar, the requirements of Sections 4
and 5 of P.D. 957 do not go into the validity of the contract, such that the absence
thereof would automatically render the contract null and void. It is rather more of an
administrative convenience in order to allow for a more effective regulation of the
industry.26 While it is the intent of the prohibition in Section 5 of P.D. 957 "to prevent
cases of swindling and fraudulent manipulations perpetrated by unscrupulous
subdivision and condominium sellers and operators" 27 and to ensure that "penalties
be imposed on fraudulent practices and manipulations committed in connection
therewith,"28 such does not obtain in this case, as it is undisputed that the title to the
subject property has been available for more than a year, and the Eagle Ridge project
was almost 100% completed, before Spouses Co Chien decided to have the Contract
declared void and to seek a refund of their down payment. Contrary to Spouses Co
Chiens bare allegations of bad faith on the part of the private respondents, the Court
of Appeals found that at the time the Contract to Sell was executed, the applications
for the Certificate and the License were already pending with the HLURB but were
only issued several months thereafter.29 More importantly, when Spouses Co Chien
received notice of the availability of the title to the subject property, the private
respondents had long since been issued the Certificate and License. It was in fact
Spouses Co Chien who, instead of paying the balance as required in the contract,
sought to renegotiate the same, and failing therein, sought to nullify the contract a
year and a half after notice that the title to the subject property, free from any liens
and encumbrance, was already available for delivery.
One of the purposes of P.D. 957 is to discourage and prevent unscrupulous owners,
developers, agents and sellers from reneging on their obligations and representations
to the detriment of innocent purchasers. The law mandates HLURB to closely
regulate, supervise and monitor the real estate industry, particularly residential
developments such as subdivisions and condominium projects. To this end, P.D. 957
provides for the issuance, suspension, revocation and even the outright denial of
registration and license to developers, agents and the project itself, as well as
penalties for the non-compliance with the requirements provided therein. It does not,
however, provide for the nullification of a contract, due to the lack of registration and
license at the moment of execution, which in this case was thereafter undisputedly
issued by HLURB. As correctly averred by respondent Alsons, the requirement for
registration and license is primarily directed at preventing fraudulent schemes from
being perpetrated on the public who seek to have their own abode. 30 No fraud has
been alleged, much less proven, by Spouses Co Chien in the present case. The lack
of certificate and registration, without more, while penalized under the law, is not in
and of itself sufficient to render a contract void. Such a deficiency, however, together
with other relevant factors may be duly considered in nullifying a contract, should the
circumstances so demand.
The second issue in the instant petition is whether or not estoppel bars the claim of
Spouses Co Chien. There are generally three kinds of estoppel: (1) estoppel in pais;
(2) estoppel by deed; and (3) estoppel by laches. In the first classification, a person is
considered in estoppel if by his conduct, representations or admissions or silence
when he ought to speak out, whether intentionally or through culpable negligence,
"causes another to believe certain facts to exist and such other rightfully relies and
acts on such belief, as a consequence of which he would be prejudiced if the former
is permitted to deny the existence of such facts."31 Estoppel by deed, on the other
hand, occurs when a party to a deed and his privies are precluded from denying any
material fact stated in the said deed as against the other party and his
privies.32 Estoppel by laches is considered an equitable estoppel wherein a person
who failed or neglected to assert a right for an unreasonable and unexplained length
of time is presumed to have abandoned or otherwise declined to assert such right and
cannot later on seek to enforce the same, to the prejudice of the other party, who has
no notice or knowledge that the former would assert such rights and whose condition
has so changed that the latter cannot, without injury or prejudice, be restored to his
former state.33
In the present case, Spouses Co Chien only demanded a refund and alleged the
nullity of the Contract due to lack of the Certificate and License after it failed to
renegotiate for a better lot or a bigger discount, or three and a half (3-1/2) years after
the execution of the contract, and one and a half (1-1/2) years from notice of the
availability of the title and the demand for full payment. Due to the unexplained delay
in the assertion of their rights despite the opportunity to do so, Spouses Co Chien are
now estopped from raising the issue of lack of the Certificate and License, particularly
since the same have long since been issued to the private respondents. In fact, there
is nothing left for the fulfillment of the obligations set forth in the Contract to Sell and
its addendum, except for the payment of the balance by Spouses Co Chien so that
the title to the property can finally be transferred in their name. Further, the act of
renegotiating the Contract to Sell may be considered a tacit ratification of whatever
defect the contract allegedly suffers from.
It is well-settled that the terms of a contract have the force of law between the
parties.34 As such, the terms thereof shall govern their relationship, rights and
obligations in connection with the same. Obligations arising from contracts should be
complied with in good faith. Unless the stipulations in the contract are contrary to law,
morals, good customs, public order or public policy, the same are binding as between
the parties.35 In the instant case, as previously discussed, the Contract to Sell
between Spouses Co Chien and private respondents Sta. Lucia and Alsons has all
the essential requisites of a valid and binding contract. While there is non-compliance
with the requirements in Sections 4 and 5 of P.D. 957 due to the lack of the Certificate
and License at the moment of execution, such defect does not affect the intrinsic
validity of the contract, particularly in this case wherein the said Certificate and
License have been issued prior to the demand for the payment of the balance of the
purchase price and the project is almost 100% complete and operational.
IN VIEW WHEREOF, the petition is DENIED. The decision of the Court of Appeals in
CA-G.R. SP No. 78161 is AFFIRMED in toto.
Costs against petitioners.
SO ORDERED.

FIRST DIVISION
G.R. No. 202262, July 08, 2015
JOSE C. GO, GOTESCO PROPERTIES, INC., GO TONG ELECTRICAL SUPPLY,
INC., EVER EMPORIUM, INC., EVER GOTESCO RESOURCES AND HOLDINGS,
INC., GOTESCO TYAN MING DEVELOPMENT, INC., EVERCREST CEBU GOLF
CLUB, NASUGBU RESORTS, INC., GMCC UNITED DEVELOPMENT
CORPORATION, AND GULOD RESORT, INC., Petitioners, v. BANGKO SENTRAL
NG PILIPINAS, AND REGISTER OF DEEDS OF NASUGBU
BATANGAS, Respondents.
DECISION
BERSAMIN, J.:
By this appeal, the petitioners businessman Jose C. Go and eight corporations
connected with him, namely: Gotesco Properties, Inc., Go Tong Electrical Supply,
Inc., Ever Emporium, Inc., Ever Gotesco Resources and Holdings, Inc., Gotesco Tyan
Ming Development, Inc., Evercrest Cebu Golf Club, Nasugbu Resorts, Inc., GMCC
United Development Corporation and Gulod Resort, Inc. - challenge the decision
promulgated on December 20, 2011,1 whereby the Court of Appeals (CA) dismissed
their petition for certiorari for being moot and academic, and upheld the orders issued
on June 4, 20092 and August 6, 20093 by the Regional Trial Court, Branch 39, in
Manila (RTC) allowing respondent Bangko Sentral ng Pilipinas (Bangko Sentral) to
levy on execution the properties indicated in the parties' court approved compromise
agreement.
Antecedents
The genesis of this case is traced to the decision of the Court promulgated on June
29, 2011 in G.R. No. 148483 entitled Bangko Sentral ng Pilipinas v. Orient
Commercial Banking Corporation, et. al.4 The facts relevant to our adjudication are
reported therein, as follows:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
On February 13, 1998, herein respondent Orient Commercial Banking Corporation
(OCBC) declared a bank holiday on account of its inability to pay all its obligations to
depositors, creditors and petitioner Bangko Sentral ng Pilipinas (BSP).
On March 17, 1998, OCBC filed a petition for rehabilitation with the Monetary Board.
The bank was placed under receivership and the Philippine Deposit Insurance
Corporation (PDIC) was designated as Receiver. Pursuant to the Monetary Board's
Resolution No. 1427, PDIC took over all the assets, properties, obligations and
operations of OCBC. Respondent Jose C. Go, the principal and biggest stockholder
of OCBC, with his affiliates companies (respondent corporations), challenged the said
action of the PDIC before the RTC of Manila, Branch 44 (Civil Case No. 98-91265).
Said case was dismissed and the dismissal was appealed to the CA.
During the pendency of Civil Case No. 98-91265, the Monetary Board adopted
Resolution No. 602 dated May 1999 directing the Receiver to proceed with the
liquidation of OCBC. In June, 1999, the PDIC instituted Special Proceeding No. 99-
94328 before the RTC of Manila, Branch 51 entitled "In Re: Petition for Assistance in
the Liquidation of Orient Commercial Banking Corporation, Philippine Deposit
Insurance Corporation, Petitioner."
On December 17, 1999, petitioner filed in the RTC of Manila (Branch 12) a complaint
for sum of money with preliminary attachment (Civil Case No. 99-95993) against the
respondents seeking to recover deficiency obligation owed by OCBC which then
stood at P1,273,959,042.97 with interest at 8.894% per annum, overdraft obligation at
P1,028,000,000.00, attorney's fees and cost of suit.
On January 14, 2000, the RTC of Manila, Branch 12 issued an Order in Civil Case
No. 99-95993 granting petitioner's motion for preliminary attachment. On January 19,
2000, following the posting of P50 million attachment bond issued by the Government
Service Insurance System (GSIS), the corresponding writ was issued ordering the
Deputy Sheriffs to attach the real and personal properties of respondents to the value
of petitioner's demand in the amount of P2,301,951,042.97, exclusive of interest and
costs, as security for the said claim.5 (citations omitted)
Eventually, the controversy reached the Court and during the pendency of the appeal,
the parties entered into a compromise agreement, the pertinent provisions of which
were as follows:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
I. AMOUNT TO BE SETTLED
In consideration of this Compromise Agreement and subject to faithful compliance by
the defendants of the terms hereof, the parties herein have agreed that the total
amount of Deficiency Claim and Overdraft payable by defendants to plaintiff shall be
equivalent to PESOS: TWO BILLION NINE HUNDRED SEVENTY-FOUR MILLION
NINE HUNDRED THREE THOUSAND (PhP2,974,903.00) (sic) which amount shall
be paid by the defendants in the following manner:LawlibraryofCRAlaw
A. A down payment shall be made by the defendants through the
DACION of certain real estate properties more particularly
described in Annex "B" hereof.
a ii) The parties shall execute separate DEEDS OF DACION over
the real estate properties described in Annex "B" upon the
execution of the Agreement;
a ii) All Capital Gains Tax on the properties for DACION shall be
payable by the defendants but Documentary Stamp Tax, Transfer
Tax and all registration fees on the DACION shall for the account of
plaintiff.
B. The balance remaining after the DACION of the real estate
properties shall be paid by the defendants within a period of ten
(10) years but extendible for another five (5) years provided
that the defendants shall religiously comply with the amortization
schedule (Annex "C" hereof) for a continuous period of two (2)
 years from date of first amortization.
b i) The foregoing outstanding balance shall be charged interest at
91-day T-Bill rate upon execution of this Compromise Agreement
repriced every three (3) months for a period of 10 years and
payable monthly in arrears.
C. Additional Properties for Execution
c i) To ensure payment of the monthly amortizations due under this
Compromise Agreement, defendants Ever Crest Golf Clob
Resort, Inc., and Mega Heights, Inc., have agreed to have its
real properties with improvements covered by TCT Nos. T-
68963, T-6890, T-68966 and TD ARPN-AA-1702 00582 and AA-
17023-005 shall be subject of existing writ of attachment to
secure the faithful payment of the outstanding obligation
herein mentioned, until such obligation shall have been fully
paid by defendants to plaintiff.
c ii) That all the corporate approvals for the execution of this
Compromise agreement by Ever Crest Golf Club Resort, Inc.,
and Mega Heights, Inc., consisting of stockholders resolution
and Board of Directors approval have already been obtained at
the time of the execution of this Agreement.
c iii) Failure on the part of the defendants to fully settle their
outstanding obligations and to comply with any of the terms of this
Compromise Agreement shall entitle the plaintiff to immediately
ask for a Writ of Execution against all assets of the Ever Crest
Golf Club Resort, Inc., and Mega Heights, Inc., now or hereafter
arising upon the signing of this Compromise Agreement.
I. DISMISSAL OF ALL PENDING CASES
xxxx
II. FUNDS UNDER GARNISHMENT
xxxx
III. REPRESENTATION AND WARRANTIES
LawlibraryofCRAlaw
XXX
It has obtained the respective Board of Directors approval and other corporate
authorizations for its execution, signing and delivery of this Compromise
Agreement and its attachments.
The execution and delivery of this Compromise agreement and all other documents
and deeds related thereto and the performance and observance by the parties of the
respective terms and conditions thereof, shall not contravene or violate any provision
of term of any contract or agreement entered into by the parties with any third party,
nor contravene any provision or term of its Articles of Incorporation and By-Laws.
It shall defend the title and peaceful possession by Bangko Sentral of the
Properties against all claims of third persons, and shall indemnify and hold
Bangko Sentral free and harmless from any and all losses, claims, damages, liabilities
and expenses which it might suffer or incur as a result of this Compromise Agreement
or any document or agreement entered into in connection therewith.
It shall not execute or enter into any agreement or contract with any third party
involving the properties which in any way, diminish, impair, prejudice or affect the
rights, title and interest of Bangko Sentral over the properties acquired by or vested
in Bangko Sentralpursuant to Compromise Agreement and all other documents
executed between the parties in connection therewith.
x x x6 (Emphasis Supplied)
The RTC eventually approved the compromise agreement on December 29,
2003,7 and the approval resulted in the denial of the petition in G.R. No. 148483.
But the controversy was not laid to rest by the execution of the compromise
agreement because Go did not comply with its provisions. This prompted Bangko
Sentral to move for the execution of the compromise agreement 8 against the
properties of Ever Crest Golf Club Resort, Inc. (Ever
Crest) and Mega Heights, Inc. (Mega Heights) which were levied upon by the sheriff.
Initially, the RTC denied Bangko Sentral's motion to execute on December 12,
2008,9 but on Bangko Sentral's motion for reconsideration, the RTC relented and
granted the motion. The writ of execution was issued on July 6, 2009.
The petitioners and Ever Crest then brought a petition for certiorari in the CA,
imputing grave abuse of discretion amounting to lack or excess of jurisdiction to the
RTC for issuing the writ of execution against Ever Crest despite its not having been a
party to the compromise agreement, and for ruling that Go had violated the terms of
the compromise agreement (C.A. G.R. No. SP 109927).10 They further challenged the
following issuances of the sheriff, namely: (a) the notice of levy upon realty pursuant
to the writ of execution dated July 6, 2009; and (b) the notice of sale on execution of
real property dated July 15, 2009.
The CA issued a 60-day temporary restraining order (TRO) in C.A. G.R. No. SP
109927, but did not ultimately issue a writ of preliminary injunction. Upon the lapse of
the period of 60 days, however, the public auction pushed through, and the properties
of Ever Crest were sold to Bangko Sentral as the highest bidder. The transfer
certificates of title (TCTs) in the name of Ever Crest were cancelled, and new TCTs
were then issued to Bangko Sentral as the new owner.
Eventually, the CA dismissed C.A.-G.R. No. SP 109927 through the assailed
judgment promulgated on December 20, 2011,11 disposing
thusly:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, the instant petition is DISMISSED for being
moot and academic.

No pronouncement as to costs.
SO ORDERED.cralawlawlibrary12
The CA later denied the petitioners' motion for reconsideration filed on January 6,
201213 through the resolution promulgated on June 14, 2012.14redarclaw
Issue
Hence, this appeal by the petitioners,15 in which they pose the sole issue of whether
or not the CA correctly dismissed the petition for certiorari for being moot and
academic.
Ruling of the Court
The appeal lacks merit.
The petitioners argue that the issuance of the order of execution was tainted with
grave abuse of discretion because the execution was directed against the properties
of Ever Crest despite Ever Crest being neither a defendant in the cases between
Bangko Sentral and Go, nor a signatory to the compromise agreement.
The argument is bereft of substance.
First of all, the petitioners and Ever Crest themselves firmly committed in the
compromise agreement, supra, to have their properties with their improvements be
made subject to the writ of attachment in order "to secure the faithful payment of the
outstanding obligation herein mentioned, until such obligation shall have been fully
paid by defendants to plaintiff," and expressly assured Bangko Sentral in the same
compromise agreement that "all the corporate approvals for the execution of this
Compromise agreement by Ever Crest Golf Club Resort, Inc., and Mega Heights, Inc.,
consisting of stockholders resolution and Board of Directors approval have already
been obtained at the time of the execution of this Agreement." They warranted in the
compromise agreement that: "Failure on the part of the defendants to fully settle their
outstanding obligations and to comply with any of the terms of this Compromise
Agreement shall entitle the plaintiff to immediately ask for a Writ of Execution against
all assets of the Ever Crest Golf Club Resort, Inc., and Mega Heights, Inc., now or
hereafter arising upon the signing of this Compromise Agreement." 16 By such express
commitments, the petitioners and Ever Crest were estopped from claiming that the
properties of Ever Crest and Mega Heights could not be the subject of levy pursuant
to the writ of execution issued by the RTC. In other words, they could not anymore
assail the RTC for authorizing the enforcement of the judgment on the compromise
agreement against the assets of Ever Crest.
There are three kinds of estoppels, to wit: (1) estoppel in pais; (2) estoppel by deed;
and (3) estoppel by laches. Under the first kind, a person is considered in estoppel if
by his conduct, representations, admissions or silence when he ought to speak out,
whether intentionally or through culpable negligence, "causes another to believe
certain facts to exist and such other rightfully relies and acts on such belief, as a
consequence of which he would be prejudiced if the former is permitted to deny the
existence of such facts." Under estoppel by deed, a party to a deed and his privies
are precluded from denying any material fact stated in the deed as against the other
party and his privies. Under estoppel by laches, an equitable estoppel, a person who
has failed or neglected to assert a right for an unreasonable and unexplained length
of time is presumed to have abandoned or otherwise declined to assert such right and
cannot later on seek to enforce the same, to the prejudice of the other party, who has
no notice or knowledge that the former would assert such rights and whose condition
has so changed that the latter cannot, without injury or prejudice, be restored to his
former state.17redarclaw
Here, the petitioners are estopped by deed by virtue of the execution of the
compromise agreement. They were the ones who had offered the properties of Ever
Crest to Bangko Sentral, and who had also assured that all the legalities and
formalities for that purpose had been obtained. They should not now be allowed to
escape or to evade their responsibilities under the compromise agreement just to
prevent the levy on execution of Ever Crest's properties.
And, secondly, the petitioners as well as Ever Crest and Mega Heights were
contractually prohibited from challenging the levy on the assets of Ever Crest.
Through the compromise agreement, the petitioners warranted that they would
defend Bangko Sentral's title and peaceful possession of such levied properties
against all claims of third persons. Their warranty was expressly made applicable to
the properties subject of the dacion as well as to the properties of Ever Crest and
Mega Heights subject of the preliminary attachment. Considering that the petitioners
asserted that Ever Crest was a third party or stranger to the compromise agreement,
they were contractually mandated to resist the adverse claim of Ever Crest and to
defend the validity and efficacy of the levy on execution. As such, they could not
validly raise any issue that would defeat the rights of Bangko Sentral in such
properties.
The term grave abuse of discretion connoted whimsical and capricious exercise of
judgment as was equivalent to excess, or lack of jurisdiction.18 The abuse must be so
patent and gross as to amount to an evasion of a positive duty or to a virtual refusal to
perform a duty enjoined by law, or to act at all in contemplation of law, as where the
power was exercised in an arbitrary and despotic manner by reason of passion or
hostility.19 In light of this understanding of the term grave abuse of discretion, the CA
did not err in dismissing the petition for certiorari because the petitioners did not show
how the RTC could have been guilty of gravely abusing its discretion amounting to
lack or excess of jurisdiction for allowing the execution of the properties designated as
security for an obligation contracted since 1998.
WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the
decision promulgated on December 20, 2011 in CA-G.R. No. SP 109927 by the Court
of Appeals; and DIRECTSthe petitioners to pay the costs of suit.
SO ORDERED.cralawlawlibrary

FIRST DIVISION
[G.R. No. 106858. September 5, 1997]
PHILIPPINE BANK OF COMMUNICATION, petitioner, vs. COURT OF APPEALS
and GAW LE JA CHUA, respondents.
DECISION
KAPUNAN, J.:
Before us is a petition for review on certiorari assailing the decision of the Court
of Appeals dated August 31, 1992.
The factual background of the instant petition is as follows:
In 1984, Philippine Bank of Communication (PBCom) filed two (2) collection suits
against, among others, Joseph L. G. Chua, husband of herein private respondent, who
acted as one of the sureties for the financial obligations of Fortune Motors (Phils.), Inc.
and the Forte Merchant Finance, Inc., with the petitioner. After the filing of the
complaint, the co-defendants of Joseph L.G. Chua had no more properties left to
answer for their obligations to the bank.Since Joseph L.G. Chua bound himself
solidarily with the two principal debtors, the bank chose to run after Joseph L.G. Chua
who was found to own a property situated in Dasmarinas, Makati. Said property was,
however, discovered to have been earlier transferred to Jaleco Development
Corporation by virtue of a Deed of Exchange dated October 24, 1983 executed by
Joseph L.G. Chua with the conformity of private respondent. The bank considered such
transfer as in fraud of creditors and thereby sought its annulment before the Regional
Trial Court of Makati, docketed as Civil Case No.7889. A notice of Lis Pendens was
thereafter registered on July 17, 1984.
Meanwhile, the collection suits filed by petitioners (Civil Case No. 84-25159 and Civil
Case No. 84-25260) which reached this Court and the Court of Appeals, respectively,
became final in favor of PBCom.
Said decisions could not be executed since petitioner was still awaiting the finality
of the decision in Civil Case No. 7889 which was pending with this Court (docketed as
G.R. No. 92067). Finally, on March 22, 1991, this Court declared the Deed
of Exchange null and void after finding that the transfer of the property to Jaleco
Development Corporation was indeed in fraud of PBCom as creditor.
When said decision became final, the subject property was immediately levied, and
the auction sale was set on July 30, 1991.
On July 24, 1991, private respondent Gaw Le Ja Chua, wife of Joseph L. G. Chua,
filed a Third Party Claim with the Sheriffs of Branches 8 and 9 of RTC, Manila. At the
same time, she initiated two separate reinvindicatory actions on the subject property
in the lower court.
Petitioner, on the other hand, filed an Urgent Motion to Direct the Sheriff to Enforce
the Writ of Execution/Auction Sale.
On August 15, 1991, the RTC denied petitioners motion. The Motion for
Reconsideration with a motion to quash the third party claim was, likewise, denied in
an Order dated October 21, 1991.
Dissatisfied, the petitioner came to this Court assailing the RTCs Orders. The matter
was, however, referred to the Court of Appeals for proper disposition.
On August 31, 1992, the respondent court dismissed the petition in this wise:
Petitioners allegation that private respondent is not the third-party or stranger referred
to under the aforequoted rule is an issue which will properly be resolved by the
Regional Trial Court of Makati where the separate reinvindicatory actions are
pending. It will be premature for Us to pass upon such issue while the same is still
pending before the lower court.
WHEREFORE, there being no abuse of discretion on the part of the public
respondent and there being a plain, speedy and adequate remedy available to
petitioner in the ordinary course of law, this petition is dismissed with costs.
SO ORDERED.[1]
The motion for reconsideration was likewise denied. Hence, the instant petition
with the following assignment of errors:
I.
THE COURT OF APPEALS GRAVELY ERRED IN NOT DECLARING THAT
BRANCH 8, REGIONAL TRIAL COURT OF MANILA, GRAVELY ABUSED ITS
DISCRETION IN NOT QUASHING THE PATENT AND DUBIOUS THIRD-PARTY
CLAIM OF THE HEREIN PRIVATE RESPONDENT.
II.
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT PBCOMS
PETITION IS PREMATURE, THUS, CONVENIENTLY BRUSHING ASIDE THE
FOLLOWING QUESTIONS OF LAW:
II.1 WHETHER OR NOT PRIVATE RESPONDENT CAN BE CONSIDERED A
STRANGER WITHIN THE MEANING OF THE LAW THAT WOULD ENTITLE HER
TO THE RELIEFS PROVIDED IN SECTION 17, RULE 39 OF THE RULES OF
COURT.
II.2WHETHER OR NOT PRIVATE RESPONDENT IS NOW ESTOPPED FROM
FILING A THIRD-PARTY CLAIM AS WELL AS AN INDEPENDENT ACTION
INVOLVING THE PROPERTY IN QUESTION. [2]
The real issue in this case is whether or not private respondent is considered a
stranger within the meaning of Section 17, Rule 39 of the Rules of Court, as to entitle
her to the remedy of a third-party claim or reinvidicatory actions over the subject
property.
We rule in the negative.
A stranger is a third-party who is any person other than the judgment debtor or
his agent. In several cases, [3] we have recognized the right of a third-party claimant to
file an independent action to vindicate his claim of ownership over the properties
seized. This is provided by Section 17, Rule 39 which states:
SEC. 17. Proceedings where property claimed by third person.- If property levied on
be claimed by any other person than the judgment debtor or his agent, and such
person make an affidavit of his title thereto or right to the possession thereof, stating
the grounds of such right or title, and serve the same upon the officer making the levy,
and a copy thereof upon the judgment creditor, the officer shall not be bound to keep
the property, unless such judgment creditor or his agent, on demand of the officer,
indemnify the officer against such claim by a bond in a sum not greater than the value
of the property levied on. In case of disagreement as to such value, the same shall be
determined by the court issuing the writ of execution.
The officer is not liable for damages, for the taking or keeping of the property, to any
third-party claimant unless a claim is made by the latter and unless an action for
damages is brought by him against the officer within one hundred twenty (120) days
from the date of the filing of the bond. But nothing herein contained shall prevent such
claimant or any third person from vindicating his claim to the property by any proper
action.
x x x.
While we are aware of the legal maxim that no man shall be affected by
proceedings to which he is a stranger,[4] the attendant circumstances, however, in the
case at bar constrain us to rule that private respondent cannot be considered a stranger
within the purview of the law.
It must be noted that the sheriffs levied on the subject property on the basis of the
annulment of the Deed of Exchange executed by Chua in favor of Jaleco
Development Inc. as ruled by this Court on March 22, 1991 in Philippine Bank of
Communications v. Court of Appeals, et al., G.R. No. 92067. In said case,
we categorically stated that:
xxx. [T]he evidence clearly shows that Chua and his immediate family control
JALECO. The Deed of Exchange executed by Chua and JALECO had for its subject
matter the sale of the only property of Chua at the time when Chuas financial
obligations became due and demandable. The records also show that despite the
sale, respondent Chua continued to stay in the property, subject matter of the Deed of
Exchange.
These circumstances tend to show that the Deed of Exchange was not what it
purports to be. Instead, they tend to show that the Deed of Exchange was executed
with the sole intention to defraud Chuas creditor -- the petitioner. It was not a bona
fide transaction between JALECO and Chua. Chua entered a sham or simulated
transaction with JALECO for the sole purpose of transferring the title of the property to
JALECO without really divesting himself of the title and control of the said property.
Considering that this Court has ruled that the transaction leading to the execution
of the Deed of Exchange between Chua and Jaleco was actually a transaction between
Chua and himself and not between Chua and Jaleco, such transaction was a sham. As
observed by this Court in G.R. No. 92067, the stockholders of Jaleco were mostly
members of the immediate family of Joseph L.G. Chua, private respondents husband
and the couple continued to stay in the property despite its sale to Jaleco.
For her part, private respondent gave her marital consent or conformity to the
Deed of Exchange and that by that act she became necessarily a party to the
instrument.. She cannot, therefore, feign ignorance to the simulated transaction where
the intention was really to defraud her husbands creditors.
It should be noted that Civil Case No. 7889 which sought the annulment of the
Deed of Exchange was primarily instituted by petitioner to recover the property in
question from Jaleco and the couple. It was an offshoot of the two collection cases filed
against the husband.
In Vda. de Nabong v. Sadang,[5] which is analogous to the case at bar, we ruled
that:
xxx. If property levied on be claimed by any other person that the judgment debtor or
his agent, and such person make an affidavit of his title thereto or right to the
possession thereof, stating the grounds of such right or title, and serve the same upon
the officer making the levy, and a copy thereof upon the judgment creditor, the officer
shall not be bound to keep the property, unless such judgment creditor or his agent,
on demand of the officer, indemnify the officer against such claim by a bond in a sum
not greater that the value of the property levied on. In case of disagreement, as to
such value, the same shall be determined by the court issuing the writ of execution. x
x x From the foregoing provision, it is clear that a third party claim must be filed by a
person other than the judgment debtor (defendant) or his agent. In the present case,
although Ignacio was not named as defendant there is no doubt that as wife of
defendant Sunga she shares a common interest with him in the litigation. Indeed she
represented herself to be the agent of Sunga by signing the answer in their
behalf. She is therefore as much a judgment debtor and agent of the defendant and
not a third party to the litigation.
In a last ditch effort to retain the property, private respondent now contends that
it belongs to the conjugal partnership which should not answer for the obligations of the
husband. Invoking Luzon Surety v. De Garcia,[6] and Ting v. Villarin,[7] private
respondent argues that the property can not be held liable for her husbands obligations
because such obligations never redounded to the benefit of the property regime of the
spouses. In said cases, the Court stated that:
This particular codal provision in question rightfully emphasizes the responsibility of
the husband as administrator. He is supposed to conserve and, if possible, augment
the funds of the conjugal partnership, not dissipate them. If out of friendship or
misplaced generosity on his part the conjugal partnership would be saddled with
financial burden, then the family stands to suffer. No objection need arise if the
obligation thus contracted by him could be shown to be for the benefit of the wife and
the progeny if any there be. That is but fair and just. Certainly, however, to make a
conjugal partnership respond for a liability that should appertain to the husband alone
is to defeat and frustrate the avowed objective of the new Civil Code to show the
utmost concern for the solidarity and well-being of the family as a unit. The husband,
therefore, as is wisely thus made certain, is denied the power to assume unnecessary
and unwarranted risks to the financial stability of the conjugal partnership. [8]
That the ATTACHMENT ordered by the respondent Judge x x x likewise gives
cause for this Court to strike it down for being NULL AND VOID. The ATTACHED
PROPERTY of the spouses Ting are CONJUGAL, the same CANNOT BE VALIDLY
BROUGHT UNDER the painful process of ATTACHMENT because:
xxx.
(b) Secondly, the conjugal partnership cannot possibly be benefitted (again, here,
Consolidated Banks allegation that the act of the husband redounded to the benefit of
the conjugal partnership is mere book form) when the husband binds himself as
guarantor, because this act does not conserve or augment conjugal funds but instead
threatens to dissipate them by unnecessary and unwarranted risks to the partnerships
financial stability. When the husband assumes the obligation of a guarantor, the
presumption that he acts, as administrator, for the benefit of the conjugal partnership,
is lost. (emphasis supplied.)[9]
The aforecited cases are not applicable. While previously in the Deed of
Exchange, private respondent conceded that the property was solely owned by her
husband and that it was ceded to Jaleco Development Corp., after this Court ruled
against the husband, she changed task by claiming that the property is conjugal and,
as an afterthought, she filed a third party claim. Notably, she never intervened in said
case where the validity of the Deed of Exchange was being questioned to protect her
rights and interests if indeed she truly believed that the property belonged to the
conjugal partnership. At the very least,private respondent is now estopped
from claiming that property in question belongs to the conjugal partnership. She cannot
now take an inconsistent stance after an adverse decision in G.R. No.
92067. In Santiago Syjuco, Inc. v. Castro,[10] we had the occasion to reiterate that:
xxx an estoppel may arise from silence as well as from words. Estoppel by silence
arises where a person, who by force of circumstances is under a duty to another to
speak, refrains from doing so and thereby leads the other to believe in the existence
of a state of facts in reliance on which he acts to his prejudice. Silence may support
an estoppel whether the failure to speak is intentional or negligent.
Inaction or silence may under some circumstances amount to a misrepresentation
and concealment of facts, so as to raise an equitable estoppel. When the silence is of
such a character and under such circumstances that it would become a fraud on the
other party to permit the party who has kept silent to deny what his silence has
induced the other to believe and act on, it will operate as an estoppel. This doctrine
rests on the principle that if one maintains silence, when in conscience he ought to
speak, equity will debar him from speaking when in conscience he ought to remain
silent. He who remains silent when he ought to speak cannot be heard to speak when
he should be silent.
Finally, we take special note of the fact that this case has been going on for
several years. Because of a dubious third party claim filed by private respondent,
petitioner has been deprived of the fruits of the judgment in its favor which has become
final and executory since 1991. In Pelayo v. Court of Appeals,[11] we emphasized that:
x x x Litigation must end and terminate sometime and somewhere, and it is essential
to an effective administration of justice that once a judgment has become final, the
winning party be not, through a mere subterfuge, deprived of the fruits of the
verdict. Courts must therefore guard against any scheme calculated to bring about
that result.Constituted as they are to put an end to controversies, courts should frown
upon any attempt to prolong them.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals
is SET ASIDE. This case is REMANDED to the Regional Trial Court, Manila, Branch
8, for execution.
SO ORDERED.

The principles of equitable estoppel, sometimes called estoppel in pais, are made part
of our law by Art. 1432 of the Civil Code. Coming under this class is estoppel by
silence, which obtains here and as to which it has been held that:

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 66715 September 18, 1990
PHILIPPINE NATIONAL BANK, petitioner,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT (First Civil Cases
Division) and ROMEO ALCEDO, respondents.
Juan D. Diaz, Benjamin C. Del Rosario and Pedro R. Lazo for petitioner.
Carlos S. Ayeng, Augustus C. Rallos and Orlando S. Ayeng for private respondent.
GRIO-AQUINO, J.:
This is a petition for certiorari which seeks to set aside: (a) the decision dated
November 29, 1983 of the Intermediate Appellate Court (now Court of Appeals) in
CA-G.R. CV No. 68021 which affirmed the decision of the Court of First Instance of
Negros Occidental (now Regional Trial Court), Branch IV, Bacolod City, in Civil Case
No. 11393; and (b) respondent court's resolution dated February 29, 1984 denying
petitioner Philippine National Bank's (PNB for short) motion for reconsideration.
The facts of the case are the following:
On March 20, 1968, Leticia de la Vina-Sepe executed a real estate mortgage in favor
of PNB, San Carlos Branch, over a lot registered in her name under TCT No.
T-31913 to secure the payment of a sugar crop loan of P3,400. Later, Leticia Sepe,
acting as attorney-in-fact for her brother-in-law, private respondent Romeo Alcedo,
executed an amended real estate mortgage to include his (Alcedo's) Lot No. 1626
(being a portion of Lot No. 1402, covered by TCT 52705 of the Isabela Cadastre) as
additional collateral for Sepe's increased loan of P16,500 (pp. 5-6, PNB's Brief, p. 74,
Rollo). Leticia Sepe and private respondent Alcedo verbally agreed to split fifty-fifty
(50-50) the proceeds of the loan (p. 94, Rollo) but failing to receive his one-half share
from her, Alcedo wrote a letter on May 12, 1970 to the PNB, San Carlos Branch,
revoking the Special Power of Attorney which he had given to Leticia Sepe to
mortgage his Lot No. 1626 (p. 95, Rollo).
Replying on May 22, 1970, the PNB Branch Manager, Jose T. Gellegani advised
Alcedo that his land had already been included as collateral for Sepe's 1970-71 sugar
crop loan, which the latter had already availed of, nevertheless, he assured Alcedo
that the bank would exclude his lot as collateral for Sepe's forthcoming (1971-72)
sugar crop loan (p. 95, Rollo). The letter reads:
May 22, 1970
Mr. Romeo Alcedo
Mamballo, M. Padilla
Negros Occidental
Dear Mr. Alcedo:
This is to acknowledge receipt of your letter dated May 12, 1970,
requesting us to revoke the 'Special Power of Attorney' you have
executed in favor of Mrs. Leticia de la Vina-Sepe, on February 18,
1969, on Lot No. 1402, Isabela Cadastre, covered by Transfer
Certificate of Title No. 52705, with an area of 20.9200 hectares.
In this connection, we wish to advise you that the aforementioned
parcel of land had been included as collateral to secure the 1970-
71 sugar crop loan of Mrs. Leticia de la Vina-Sepe, which she had
already availed of. In view of your late request, please be advised
and assured that we shall exclude the aforementioned lot as a
collateral of Leticia de la Vina-Sepe in our recommendation for her
1971-72 sugar crop loan.
For your information, we enclose a copy of our letter to Mrs. Sepe,
which is self-explanatory,
Thank you.
Very truly yours,
(Sgd.) JOSE T. GELLEGANI Manager
(pp. 6-7, Record on Appeal, p. 75, Rollo.)
On the same day, May 22, 1970, PNB advised Sepe in writing to replace Lot No.
1402 with another collateral of equal or higher value.
May 22, 1970
Mrs. Leticia de la Vina-Sepe
Canla-on City
 Dear Mrs. Sepe:
We wish to advice you that Mr. Romeo Alcedo, in a letter written to
us, has plans to revoke the 'Special Power of Attorney' he executed
in 1969 in your favor, affecting Lot No. 1402, Isabela Cadastre,
covered by Transfer Certificate of Title No. 52705 with an area of
20.9200 Hectares. Our record shows that this parcel of land is
mortgaged to us to secure the agricultural sugar crop loans we
have granted you.
Mr. Alcedo made us understand that this said property shall serve
as security for your 1969/70 sugar crop loan only. As it already
secures your 1970-71 crop loan, which you have already availed,
the same may be excluded as security for future crop loans. In the
meantime, it is requested that you replace Lot No. 1402, above-
mentioned, with the same or more appraised value.
Kindly call on us regarding this matter at your earliest convenience.
Thank you.
Very truly yours,
(Sgd.) JOSE T. GELLEGANI
Manager
(pp. 7-8, Record on Appeal, p. 75, Rollo.)
Despite the above advice from PNB, Sepe was still able to obtain an additional loan
from PNB increasing her debt of P 16,500 to P56,638.69 on the security of Alcedo's
property as collateral. On January 15, 1974, Alcedo received two (2) letters from
PNB: (1) informing him of Sepe's failure to pay her loan in the total amount of P
56,638.69; and (2) giving him six (6) days to settle Sepe's outstanding obligation, as
otherwise, foreclosure proceedings would be commenced against his property (p. 33,
Rollo). Alcedo requested Sepe to pay her accounts to forestall foreclosure
proceedings against his property, but to no avail (p. 15, Rollo).
On April 17, 1974, Alcedo sued Sepe and PNB in the Court of First Instance of
Negros Occidental for collection and injunction with damages (p. 33, Rollo).
During the pendency of the case, PNB filed in the Office of the Sheriff at Pasig, Metro
Manila, a petition for extrajudicial foreclosure of its real estate mortgage on Alcedo's
land. On November 19, 1974, the property was sold to PNB as the highest bidder in
the sale. The corresponding Sheriffs Certificate of Sale was issued to the Bank (p. 33,
Rollo).
On October 18, 1975, Alcedo filed an amended complaint against Leticia and her
husband Elias Sepe, and the Provincial Sheriff of Negros Occidental praying
additionally for annulment of the extrajudicial foreclosure sale and reconveyance of
the land to him free from liens and encumbrances, with damages.
With leave of court, Alcedo filed a second amended complaint withdrawing his action
to collect his one-half share (amounting to P28,319.34) out of the proceeds of the
sugar crop loans obtained by Sepe (p. 34, Rollo).
In its answer, PNB alleged that it had no knowledge of the agreement between Mrs.
Sepe and Alcedo to split the crop loan proceeds between them. It required Sepe to
put up other collaterals when it granted her an additional loan because Alcedo
informed the Bank that he was revoking the Special Power of Attorney he gave Sepe;
that the revocation was not formalized in accordance with law; and that in any event,
the revocation of the Special Power of Attorney on May 12, 1970 by Alcedo did not
impair the real estate mortgage earlier executed on April 28, 1969 by Sepe in favor of
the Bank (p. 36, Rollo).
On March 14, 1980, the trial court rendered judgment in favor of Alcedo-
1. Declaring the public auction sale and the certificate of sale
executed by the Provincial Sheriff of Negros Occidental relative to
Lot No. 1626, Isabela Cadastre (TCT No. T-52705), as null and
void;
2. Ordering the defendant Philippine National Bank to reconvey to
plaintiff the title to aforesaid Lot No. 1626 free from all liens and
encumbrances relative to the loans obtained by defendant Leticia
de la Vina-Sepe;
3. Ordering defendant spouses Leticia de la Vina-Sepe and Elias
Sepe and the Philippine National Bank, in solidum, to pay to the
plaintiff moral damages in the sum of Pl 0,000.00, and another sum
of P5,000.00 as attorney's fees and expenses of litigation;
4. On the cross-claim of defendant PNB against Leticia de la Vina-
Sepe, considering that no evidence has been adduced regarding
the updated actual accountability of the latter with the former, it is
hereby directed that PNB proceed to collect against the cross-
defendant whatever outstanding obligation the latter owes the
former arising from transactions in connection with the instant case.
No pronouncement as to costs. (pp. 10-11, Rollo.)
The bank appealed but to no avail for on November 29,1983, the Intermediate
Appellate Court affirmed in toto the judgment of the trial court (p. 54, Rollo.) The
appellate court reasoned out that the Bank was estopped from foreclosing the
mortgage on Alcedo's lot to pay Sepe's 1971-72 sugar crop loan, after having assured
Alcedo on May 22, 1970 "that we shall exclude the aforementioned lot as a collateral
of Leticia de la Vina-Sepe in our recommendation for her 1971-72 sugar crop loan" (p.
37, Rollo). The Court of Appeals held:
... Plaintiff-appellee's letter was unequivocal and clear to the effect
that defendant Leticia de la Vina Sepe was no longer empowered to
bind, encumber or mortgage his property. Although We may not
hold this revocation to retroact to April 28, 1969 which was the date
of the original mortgage, We can neither interpret it in any other
way than that from the moment of notice to the PNB, it was the
absolute intention of the owner to withdraw all authority from said
defendant to further bind or encumber his property. This was clearly
understood by the defendant-appellant PNB. There was no
question on its part that Leticia de la Vina Sepe was no longer
authorized to offer plaintiff-appellee's property as collateral for her
contract of mortgage with the PNB. Defendant-appellant, therefore,
acknowledged this revocation of the agency and in no uncertain
terms assured the plaintiff-appellee that indeed, the latter's property
will no longer be accepted by it as collateral for the sugar crop loan
of the aforementioned defendant for the year 1971 to 1972. This
meeting of the minds between the plaintiff-appellee and defendant-
appellant took place not through verbal communications only, but in
writing, as shown by their letters dated May 12, 1970 and May 22,
1970, respectively. ...
xxx xxx xxx
... To Our minds, the aforementioned act and declaration of
defendant-appellant PNB as embodied in said letter binds said
bank under the principle of estoppel by deed and defined as
follows:
A doctrine in American jurisprudence whereby a party creating an
appearance of fact which is not true is held bound by that
appearance as against another person who has acted on the faith
of it. (Strong v. Gutierrez Repide, 6 Phil. 685).
which is provided for in Articles 1431 and 1433 of the New Civil
Code in conjunction with Section 3, paragraph (a), Rule 131 of the
Rules of Court, all of which provide:
Art. 1431. Through estoppel an admission or representation is
rendered conclusive upon the person making it, and cannot be
denied or disproved as against the person relying thereon.' '
Art. 1433. Estoppel may be in pais or by deed.
Sec. 3. Conclusive presumptions. The following are instances of
conclusive presumptions:
(a) Whenever a party has,by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular
thing true, and to act upon such belief, he cannot, in any litigation
arising out of such declaration, act, or omission, be permitted to
falsify it.
and which was enunciated in the following decisions of the Supreme Court:
Whenever a party has, by his own declaration, act or omission
intentionally and deliberately led another to believe a particular
thing true and to act upon such belief, he cannot, in any litigation
arising out of such declaration, act, or omission, be permitted to
falsify it.
Estoppel arises when one, by his acts, representations, or
admissions, or by his silence when he ought to speak out,
intentionally or through culpable negligence induces another to
believe certain facts to exist and such other rightfully relies and acts
on such belief, so that he will be prejudiced if the former is
permitted to deny the existence of such facts (Huyatid v. Huyatid
47265-R, Jan. 4, 1978).
The doctrine of estoppel is based upon the grounds of public policy,
fair dealing, good faith and justice, and its purpose is to forbid one
to speak against his own act, representations, or commitments to
the injury of one to whom they were directed and who reasonably
relied thereon. Said doctrine springs from equitable principles and
the equities of the case. It is designed to aid the law in the
administration of justice where without its aid injustice might result.'
(Philippine National Bank v. Court of Appeals, L-30831, November
21, 1979, 94 SCRA 368)
By its letter dated May 22, 1970, defendant-appellant PNB led
plaintiff-appellee to believe that his property covered by TCT T-
52705 would no longer be included as collateral in the sugar crop
loan of defendant Leticia de la Vina Sepe for the year 1971-72. It
led said plaintiff-appellee to believe that his property as of said year
will no longer be encumbered and will be free from any lien or
mortgage. Plaintiff-appellee had the light to rely on said belief,
because of the aforementioned act and declaration of defendant-
appellant bank. Under the laws and jurisprudence aforequoted,
defendant-appellant bank can no longer be allowed to deny or
falsify its act or declaration, or to renege from it. This is one of the
conclusive presumptions provided for by the Rules of Court. (pp.
37, 38-39, Rollo.)
PNB seeks a review of that decision on the grounds that:
1. the doctrine of promissory estoppel does not apply to this case;
2. PNB was a mortgagee in good faith and for value; and
3. PNB adduced substantial evidence in support of its cross-claim against defendant
Leticia Sepe (p. 15, Rollo).
These issues boil down to whether or not PNB validly foreclosed the real estate
mortgage on Alcedo's property despite notice of Alcedo's revocation of the Special
Power of Attorney authorizing Leticia Sepe to mortgage his property as security for
her sugar crop loans and despite the Bank's written assurance to Alcedo that it would
exclude his property as collateral for Sepe's future loan obligations.
After careful deliberation, the Court is not persuaded to disturb the decisions of the
trial court and the Court of Appeals in this case.
Alcedo's property may be held to answer for only the unpaid balance, if any, of Sepe's
1970-71 loan, but not the 1971-72 crop loan.
While Article 1358 of the New Civil Code requires that the revocation of Alcedo's
Special Power of Attorney to mortgage his property should appear in a public
instrument:
Art. 1358. The following must appear in a public document:
(1) Acts or contracts which have for their object the creation,
transmission, modification or extinguishment of real rights over
immovable property; sales of real property or of an interest therein
are governed by Articles 1403, No. 2 and 1405.

We agree with the opinion of the appellate court that under the doctrine of promissory
estoppel enunciated in the case of Republic Flour Mills Inc. vs. Central Bank, L-
23542, August 11, 1979, the act and assurance given by the PNB to Alcedo "that we
shall exclude the aforementioned lot [Lot No. 1402] as a collateral of Leticia de la
Vina-Sepe in our recommendation for her 1971-72 sugar crop loan" (p. 37, Rollo) is
binding on the bank. Having given that assurance, the bank may not turn around and
do the exact opposite of what it said it would not do. One may not take inconsistent
positions (Republic vs. Court of Appeals, 133 SCRA 505). A party may not go back on
his own acts and representations to the prejudice of the other party who relied upon
them (Lazo vs. Republic Surety & Insurance Co., Inc., 31 SCRA 329.)
In the case of Philippine National Bank vs. Court of Appeals (94 SCRA 357), where
the bank manager assured the heirs of the debtor-mortgagor that they would be
allowed to pay the remaining obligation of their deceased parents, the Supreme Court
held that the bank must abide by its representations.
On equitable principles, particularly on the ground of estoppel, we
must rule against petitioner Bank. The doctrine of estoppel is based
upon the grounds of public policy, fair dealing, good faith and
justice, and its purpose is to forbid one to speak against its own act,
representations, or commitments to the injury of one to whom they
were directed and who reasonably relied thereon. The doctrine of
estoppel springs from equitable principles and the equities in the
case. It is designed to aid the law in the administration of justice
where without its aid injustice might result. It has been applied by
this Court wherever and whenever the special circumstances of a
case so demands.
nevertheless, a revocation embodied in a private writing is valid and binding between
the parties (Doliendo v. Depino, 12 Phil. 758; Hawaiian-Philippines Co. vs. Hernaez,
45 Phil. 746) for
The legalization by a public writing and the recording of the same in
the registry are not essential requisites of a contract entered into,
as between the parties, but mere conditions of form or solemnities
which the law imposes in order that such contract may be valid as
against third persons, and to insure that a publicly executed and
recorded agreement shall be respected by the latter. (Alano, et al.
vs. Babasa, 10 Phil. 511.)
The PNB acted with bad faith in proceeding against Alcedo's property to satisfy
Sepe's unpaid 1971-72 sugar crop loan. The extrajudicial foreclosure being null and
void ab initio, the certificate of sale which the Sheriff delivered to PNB as the highest
bidder at the sale is also null and void.
WHEREFORE, finding no reversible error in the decision of the Court of Appeals, the
petition for review is denied for lack of merit.
SO ORDERED.

In the case at bar, since PNB had promised to exclude Alcedo's property as collateral
for Sepe's 1971-72 sugar crop loan, it should have released the property to Alcedo.
The mortgage which Sepe gave to the bank on Alcedo's lot as collateral for her 1971-
72 sugar crop loan was null and void for having been already disauthorized by
Alcedo. Since Alcedo's property secured only P13,100.00 of Sepe's 1970-71 sugar
crop loan of P16,500.00 (because P3,400 was secured by Sepe's own property),

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-27782 July 31, 1970
OCTAVIO A. KALALO, plaintiff-appellee,
vs.
ALFREDO J. LUZ, defendant-appellant.
Amelia K. del Rosario for plaintiff-appellee.
Pelaez, Jalandoni & Jamir for defendant-appellant.
ZALDIVAR, J.:
Appeal from the decision, dated, February 10, 1967, of the Court of First Instance of
Rizal (Branch V, Quezon City) in its Civil Case No. Q-6561.
On November 17, 1959, plaintiff-appellee Octavio A. Kalalo hereinafter referred to
as appellee), a licensed civil engineer doing business under the firm name of O. A.
Kalalo and Associates, entered into an agreement (Exhibit A ) 1 with defendant-
appellant Alfredo J . Luz (hereinafter referred to as appellant), a licensed architect,
doing business under firm name of A. J. Luz and Associates, whereby the former was
to render engineering design services to the latter for fees, as stipulated in the
agreement. The services included design computation and sketches, contract drawing
and technical specifications of all engineering phases of the project designed by O. A.
Kalalo and Associates bill of quantities and cost estimate, and consultation and
advice during construction relative to the work. The fees agreed upon were
percentages of the architect's fee, to wit: structural engineering, 12-%; electrical
engineering, 2-%. The agreement was subsequently supplemented by a
"clarification to letter-proposal" which provided, among other things, that "the
schedule of engineering fees in this agreement does not cover the following: ... D.
Foundation soil exploration, testing and evaluation; E. Projects that are principally
engineering works such as industrial plants, ..." and "O. A. Kalalo and Associates
reserve the right to increase fees on projects ,which cost less than P100,000
...."2 Pursuant to said agreement, appellee rendered engineering services to appellant
in the following projects:
(a) Fil-American Life Insurance Building at Legaspi City;
(b) Fil-American Life Insurance Building at Iloilo City;
(c) General Milling Corporation Flour Mill at Opon Cebu;
(d) Menzi Building at Ayala Blvd., Makati, Rizal;
(e) International Rice Research Institute, Research center Los
Baos, Laguna;
(f) Aurelia's Building at Mabini, Ermita, Manila;
(g) Far East Bank's Office at Fil-American Life Insurance Building at
Isaac Peral Ermita, Manila;
(h) Arthur Young's residence at Forbes Park, Makati, Rizal;
(i) L & S Building at Dewey Blvd., Manila; and
(j) Stanvac Refinery Service Building at Limay, Bataan.
On December 1 1, '1961, appellee sent to appellant a statement of account (Exhibit
"1"),3 to which was attached an itemized statement of defendant-appellant's account
(Exh. "1-A"), according to which the total engineering fee asked by appellee for
services rendered amounted to P116,565.00 from which sum was to be deducted the
previous payments made in the amount of P57,000.00, thus leaving a balance due in
the amount of P59,565.00.
On May 18, 1962 appellant sent appellee a resume of fees due to the latter. Said
fees, according to appellant. amounted to P10,861.08 instead of the amount claimed
by the appellee. On June 14, 1962 appellant sent appellee a check for said amount,
which appellee refused to accept as full payment of the balance of the fees due him.
On August 10, 1962, appellee filed a complaint against appellant, containing four
causes of action. In the first cause of action, appellee alleged that for services
rendered in connection with the different projects therein mentioned there was due
him fees in sum s consisting of $28,000 (U.S.) and P100,204.46, excluding interests,
of which sums only P69,323.21 had been paid, thus leaving unpaid the $28,000.00
and the balance of P30,881.25. In the second cause of action, appellee claimed
P17,000.00 as consequential and moral damages; in the third cause of action claimed
P55,000.00 as moral damages, attorney's fees and expenses of litigation; and in the
fourth cause of action he claimed P25,000.00 as actual damages, and also for
attorney's fees and expenses of litigation.
In his answer, appellant admitted that appellee rendered engineering services, as
alleged in the first cause of action, but averred that some of appellee's services were
not in accordance with the agreement and appellee's claims were not justified by the
services actually rendered, and that the aggregate amount actually due to appellee
was only P80,336.29, of which P69,475.21 had already been paid, thus leaving a
balance of only P10,861.08. Appellant denied liability for any damage claimed by
appellee to have suffered, as alleged in the second, third and fourth causes of action.
Appellant also set up affirmative and special defenses, alleging that appellee had no
cause of action, that appellee was in estoppel because of certain acts,
representations, admissions and/or silence, which led appellant to believe certain
facts to exist and to act upon said facts, that appellee's claim regarding the Menzi
project was premature because appellant had not yet been paid for said project, and
that appellee's services were not complete or were performed in violation of the
agreement and/or otherwise unsatisfactory. Appellant also set up a counterclaim for
actual and moral damages for such amount as the court may deem fair to assess,
and for attorney's fees of P10,000.00.
Inasmuch as the pleadings showed that the appellee's right to certain fees for
services rendered was not denied, the only question being the assessment of the
proper fees and the balance due to appellee after deducting the admitted payments
made by appellant, the trial court, upon agreement of the parties, authorized the case
to be heard before a Commissioner. The Commissioner rendered a report which, in
resume, states that the amount due to appellee was $28,000.00 (U.S.) as his fee in
the International Research Institute Project which was twenty percent (20%) of the
$140,000.00 that was paid to appellant, and P51,539.91 for the other projects, less
the sum of P69,475.46 which was already paid by the appellant. The Commissioner
also recommended the payment to appellee of the sum of P5,000.00 as attorney's
fees.
At the hearing on the Report of the Commissioner, the respective counsel of the
parties manifested to the court that they had no objection to the findings of fact of the
Commissioner contained in the Report, and they agreed that the said Report posed
only two legal issues, namely: (1) whether under the facts stated in the Report, the
doctrine of estoppel would apply; and (2) whether the recommendation in the Report
that the payment of the amount. due to the plaintiff in dollars was legally permissible,
and if not, at what rate of exchange it should be paid in pesos. After the parties had
submitted their respective memorandum on said issues, the trial court rendered its
decision dated February 10, 1967, the dispositive portion of which reads as follows:
WHEREFORE, judgment is rendered in favor of plaintiff and against
the defendant, by ordering the defendant to pay plaintiff the sum of
P51,539.91 and $28,000.00, the latter to be converted into the
Philippine currency on the basis of the current rate of exchange at
the time of the payment of this judgment, as certified to by the
Central Bank of the Philippines, from which shall be deducted the
sum of P69,475.46, which the defendant had paid the plaintiff, and
the legal rate of interest thereon from the filing of the complaint in
the case until fully paid for; by ordering the defendant to pay to
plaintiff the further sum of P8,000.00 by way of attorney's fees
which the Court finds to be reasonable in the premises, with costs
against the defendant. The counterclaim of the defendant is
ordered dismissed.
From the decision, this appeal was brought, directly to this Court, raising only
questions of law.
During the pendency of this appeal, appellee filed a petition for the issuance of a writ
of attachment under Section 1 (f) of Rule 57 of the Rules of Court upon the ground
that appellant is presently residing in Canada as a permanent resident thereof. On
June 3, 1969, this Court resolved, upon appellee's posting a bond of P10,000.00, to
issue the writ of attachment, and ordered the Provincial Sheriff of Rizal to attach the
estate, real and personal, of appellant Alfredo J. Luz within the province, to the value
of not less than P140,000.00.
The appellant made the following assignments of errors:
I. The lower court erred in not declaring and holding that plaintiff-
appellee's letter dated December 11, 1961 (Exhibit "1") and the
statement of account (Exhibit "1-A") therein enclosed, had the
effect, cumulatively or alternatively, of placing plaintiff-appellee in
estoppel from thereafter modifying the representations made in said
exhibits, or of making plaintiff-appellee otherwise bound by said
representations, or of being of decisive weight in determining the
true intent of the parties as to the nature and extent of the
engineering services rendered and/or the amount of fees due.
II. The lower court erred in declaring and holding that the balance
owing from defendant-appellant to plaintiff-appellee on the IRRI
Project should be paid on the basis of the rate of exchange of the
U.S. dollar to the Philippine peso at the time of payment of
judgment. .
III. The lower court erred in not declaring and holding that the
aggregate amount of the balance due from defendant-appellant to
plaintiff-appellee is only P15,792.05.
IV. The lower court erred in awarding attorney's fees in the sum of
P8,000.00, despite the commissioner's finding, which plaintiff-
appellee has accepted and has not questioned, that said fee be
only P5,000.00; and
V. The lower court erred in not granting defendant-appellant relief
on his counter-claim.
1. In support of his first assignment of error appellant argues that in Exhibit 1-A, which
is a statement of accounts dated December 11, 1961, sent by appellee to appellant,
appellee specified the various projects for which he claimed engineering fees, the
precise amount due on each particular engineering service rendered on each of the
various projects, and the total of his claims; that such a statement barred appellee
from asserting any claim contrary to what was stated therein, or from taking any
position different from what he asserted therein with respect to the nature of the
engineering services rendered; and consequently the trial court could not award fees
in excess of what was stated in said statement of accounts. Appellant argues that for
estoppel to apply it is not necessary, contrary to the ruling of the trial court, that the
appellant should have actually relied on the representation, but that it is sufficient that
the representations were intended to make the defendant act there on; that
assuming arguendo that Exhibit 1-A did not put appellee in estoppel, the said Exhibit
1-A nevertheless constituted a formal admission that would be binding on appellee
under the law on evidence, and would not only belie any inconsistent claim but also
would discredit any evidence adduced by appellee in support of any claim
inconsistent with what appears therein; that, moreover, Exhibit 1-A, being a statement
of account, establishes prima facie the accuracy and correctness of the items stated
therein and its correctness can no longer be impeached except for fraud or mistake;
that Exhibit 1-A furthermore, constitutes appellee's own interpretation of the contract
between him and appellant, and hence, is conclusive against him.
On the other hand, appellee admits that Exhibit 1-A itemized the services rendered by
him in the various construction projects of appellant and that the total engineering
fees charged therein was P116,565.00, but maintains that he was not in estoppel:
first, because when he prepared Exhibit 1-A he was laboring under an innocent
mistake, as found by the trial court; second, because appellant was not ignorant of
the services actually rendered by appellee and the fees due to the latter under the
original agreement, Exhibit "A."
We find merit in the stand of appellee.
The statement of accounts (Exh. 1-A) could not estop appellee, because appellant did
not rely thereon as found by the Commissioner, from whose Report we read:
While it is true that plaintiff vacillated in his claim, yet, defendant did
not in anyway rely or believe in the different claims asserted by the
plaintiff and instead insisted on a claim that plaintiff was only
entitled to P10,861.08 as per a separate resume of fees he sent to
the plaintiff on May 18, 1962 (See Exhibit 6).4
The foregoing finding of the Commissioner, not disputed by appellant, was adopted
by the trial court in its decision. Under article 1431 of the Civil Code, in order that
estoppel may apply the person, to whom representations have been made and who
claims the estoppel in his favor must have relied or acted on such representations.
Said article provides:
Art. 1431. Through estoppel an admission or representation is
rendered conclusive upon the person making it, and cannot be
denied or disproved as against the person relying thereon.
An essential element of estoppel is that the person invoking it has been influenced
and has relied on the representations or conduct of the person sought to be estopped,
and this element is wanting in the instant case. In Cristobal vs. Gomez,5 this Court
held that no estoppel based on a document can be invoked by one who has not been
mislead by the false statements contained therein. And in Republic of the Philippines
vs. Garcia, et al.,6 this Court ruled that there is no estoppel when the statement or
action invoked as its basis did not mislead the adverse party-Estoppel has been
characterized as harsh or odious and not favored in law. 7 When misapplied, estoppel
becomes a most effective weapon to accomplish an injustice, inasmuch as it shuts a
man's mouth from speaking the truth and debars the truth in a particular
case.8 Estoppel cannot be sustained by mere argument or doubtful inference: it must
be clearly proved in all its essential elements by clear, convincing and satisfactory
evidence.9 No party should be precluded from making out his case according to its
truth unless by force of some positive principle of law, and, consequently, estoppel in
pains must be applied strictly and should not be enforced unless substantiated in
every particular. 1 0
The essential elements of estoppel in pais may be considered in relation to the party
sought to be estopped, and in relation to the party invoking the estoppel in his favor.
As related to the party to be estopped, the essential elements are: (1) conduct
amounting to false representation or concealment of material facts or at least
calculated to convey the impression that the facts are otherwise than, and
inconsistent with, those which the party subsequently attempts to assert; (2) intent, or
at least expectation that his conduct shall be acted upon by, or at least influence, the
other party; and (3) knowledge, actual or constructive, of the real facts. As related to
the party claiming the estoppel, the essential elements are (1) lack of knowledge and
of the means of knowledge of the truth as the facts in questions; (2) (reliance, in good
faith, upon the conduct or statements of the party to be estopped; (3) action or
inaction based thereon of such character as To change the position or status of the
party claiming the estoppel, to his injury, detriment or prejudice. 1 1
The first essential element in relation to the party sought to be estopped does not
obtain in the instant case, for, as appears in the Report of the Commissioner,
appellee testified "that when he wrote Exhibit 1 and prepared Exhibit 1-A, he had not
yet consulted the services of his counsel and it was only upon advice of counsel that
the terms of the contract were interpreted to him resulting in his subsequent letters to
the defendant demanding payments of his fees pursuant to the contract Exhibit
A." 1 2 This finding of the Commissioner was adopted by the trial court. 1 3 It is
established , therefore, that Exhibit 1-A was written by appellee through ignorance or
mistake. Anent this matter, it has been held that if an act, conduct or
misrepresentation of the party sought to be estopped is due to ignorance founded on
innocent mistake, estoppel will not arise. 1 4 Regarding the essential elements of
estoppel in relation to the party claiming the estoppel, the first element does not
obtain in the instant case, for it cannot be said that appellant did not know, or at least
did not have the means of knowing, the services rendered to him by appellee and the
fees due thereon as provided in Exhibit A. The second element is also wanting, for, as
adverted to, appellant did not rely on Exhibit 1-A but consistently denied the accounts
stated therein. Neither does the third element obtain, for appellant did not act on the
basis of the representations in Exhibit 1-A, and there was no change in his position, to
his own injury or prejudice.
Appellant, however, insists that if Exhibit 1-A did not put appellee in estoppel, it at
least constituted an admission binding upon the latter. In this connection, it cannot be
gainsaid that Exhibit 1-A is not a judicial admission. Statements which are not
estoppels nor judicial admissions have no quality of conclusiveness, and an
opponent. whose admissions have been offered against him may offer any evidence
which serves as an explanation for his former assertion of what he now denies as a
fact. This may involve the showing of a mistake. Accordingly, in Oas vs. Roa, 1 6 it
was held that when a party to a suit has made an admission of any fact pertinent to
the issue involved, the admission can be received against him; but such an admission
is not conclusive against him, and he is entitled to present evidence to overcome the
effect of the admission. Appellee did explain, and the trial court concluded, that
Exhibit 1-A was based on either his ignorance or innocent mistake and he, therefore,
is not bound by it.
Appellant further contends that Exhibit 1-A being a statement of account,
establishes prima facie the accuracy and correctness of the items stated therein. If
prima facie, as contended by appellant, then it is not absolutely conclusive upon the
parties. An account stated may be impeached for fraud, mistake or error. In American
Decisions, Vol. 62, p. 95, cited as authority by appellant himself. we read thus:
An account stated or settled is a mere admission that the account is
correct. It is not an estoppel. The account is still open to
impeachment for mistakes or errors. Its effect is to establish, prima
facie, the accuracy of the items without other proof; and the party
seeking to impeach it is bound to show affirmatively the mistake or
error alleged. The force of the admission and the strength of the
evidence necessary to overcome it will depend upon the
circumstances of the case.
In the instant case, it is Our view that the ignorance mistake that attended the writing
of Exhibit 1-A by appellee was sufficient to overcome the prima facie evidence of
correctness and accuracy of said Exhibit 1-A.
Appellant also urges that Exhibit 1-A constitutes appellee's own interpretation of the
contract, and is, therefore, conclusive against him. Although the practical construction
of the contract by one party, evidenced by his words or acts, can be used against him
in behalf of the other party, 1 7 yet, if one of the parties carelessly makes a wrong
interpretation of the words of his contract, or performs more than the contract requires
(as reasonably interpreted independently of his performance), as happened in the
instant case, he should be entitled to a restitutionary remedy, instead of being bound
to continue to his erroneous interpretation or his erroneous performance and "the
other party should not be permitted to profit by such mistake unless he can establish
an estoppel by proving a material change of position made in good faith. The rule as
to practical construction does not nullify the equitable rules with respect to
performance by mistake." 1 8 In the instant case, it has been shown that Exhibit 1-A
was written through mistake by appellee and that the latter is not estopped by it.
Hence, even if said Exhibit 1-A be considered as practical construction of the contract
by appellee, he cannot be bound by such erroneous interpretation. It has been held
that if by mistake the parties followed a practice in violation of the terms of the
agreement, the court should not perpetuate the error. 1 9
2. In support of the second assignment of error, that the lower court erred in holding
that the balance from appellant on the IRRI project should be paid on the basis of the
rate of exchange of the U.S. dollar to the Philippine peso at the time of payment of the
judgment, appellant contends: first, that the official rate at the time appellant received
his architect's fees for the IRRI project, and correspondingly his obligation to
appellee's fee on August 25, 1961, was P2.00 to $1.00, and cites in support thereof
Section 1612 of the Revised Administrative Code, Section 48 of Republic Act 265 and
Section 6 of Commonwealth Act No. 699; second, that the lower court's conclusion
that the rate of exchange to be applied in the conversion of the $28,000.00 is the
current rate of exchange at the time the judgment shall be satisfied was based solely
on a mere presumption of the trial court that the defendant did not convert, there
being no showing to that effect, the dollars into Philippine currency at the official rate,
when the legal presumption should be that the dollars were converted at the official
rate of $1.00 to P2.00 because on August 25, 1961, when the IRRI project became
due and payable, foreign exchange controls were in full force and effect, and partial
decontrol was effected only afterwards, during the Macapagal administration; third,
that the other ground advanced by the lower court for its ruling, to wit, that appellant
committed a breach of his obligation to turn over to the appellee the engineering fees
received in U.S. dollars for the IRRI project, cannot be upheld, because there was no
such breach, as proven by the fact that appellee never claimed in Exhibit 1-A that he
should be paid in dollars; and there was no provision in the basic contract (Exh. "A")
that he should be paid in dollars; and, finally, even if there were such provision, it
would have no binding effect under the provision of Republic Act 529; that, moreover,
it cannot really be said that no payment was made on that account for appellant had
already paid P57,000.00 to appellee, and under Article 125 of the Civil Code, said
payment could be said to have been applied to the fees due from the IRRI project,
this project being the biggest and this debt being the most onerous.
In refutation of appellant's argument in support of the second assignment of error,
appellee argues that notwithstanding Republic Act 529, appellant can be compelled to
pay the appellee in dollars in view of the fact that appellant received his fees in
dollars, and appellee's fee is 20% of appellant's fees; and that if said amount is be
converted into Philippine Currency, the rate of exchange should be that at the time of
the execution of the judgment. 2 0
We have taken note of the fact that on August 25, 1961, the date when appellant said
his obligation to pay appellee's fees became due, there was two rates of exchange, to
wit: the preferred rate of P2.00 to $1.00, and the free market rate. It was so provided
in Circular No. 121 of the Central Bank of the Philippines, dated March 2, 1961.
amending an earlier Circular No. 117, and in force until January 21, 1962 when it was
amended by Circular No. 133, thus:
1. All foreign exchange receipts shall be surrendered to the Central
Bank of those authorized to deal in foreign exchange as follows:
Percentage of Total to be surrendered at
Preferred: Free Market Rate: Rate:
(a) Export Proceeds, U.S. Government Expenditures invisibles
other than those specifically mentioned below.
................................................ 25 75
(b) Foreign Investments, Gold Proceeds, Tourists and Inward
Remittances of Veterans and Filipino Citizens; and Personal
Expenses of Diplomatic Per personnel ................................. 100" 2 1
The amount of $140,000.00 received by appellant foil the International Rice Research
Institute project is not within the scope of sub-paragraph (a) of paragraph No. 1 of
Circular No. 121. Appellant has not shown that 25% of said amount had to be
surrendered to the Central Bank at the preferred rate because it was either export
proceeds, or U.S. Government expenditures, or invisibles not included in sub-
paragraph (b). Hence, it cannot be said that the trial court erred in presuming that
appellant converted said amount at the free market rate. It is hard to believe that a
person possessing dollars would exchange his dollars at the preferred rate of P2.00
to $1.00, when he is not obligated to do so, rather than at the free market rate which
is much higher. A person is presumed to take ordinary care of his concerns, and that
the ordinary course of business has been
followed. 2 2
Under the agreement, Exhibit A, appellee was entitled to 20% of $140,000.00, or the
amount of $28,000.00. Appellee, however, cannot oblige the appellant to pay him in
dollars, even if appellant himself had received his fee for the IRRI project in dollars.
This payment in dollars is prohibited by Republic Act 529 which was enacted on June
16, 1950. Said act provides as follows:
SECTION 1. Every provision contained in, or made with respect to,
any obligation which provision purports to give the obligee the right
to require payment in gold or in a particular kind of coin or currency
other than Philippine currency or in an amount of money of the
Philippines measured thereby, be as it is hereby declared against
public policy, and null, void and of no effect, and no such provision
shall be contained in, or made with respect to, any obligation
hereafter incurred. Every obligation heretofore or here after
incurred, whether or not any such provision as to payment is
contained therein or made with respect thereto, shall be discharged
upon payment in any coin or currency which at the time of payment
is legal tender for public and private debts: Provided, That, ( a) if
the obligation was incurred prior to the enactment of this Act and
required payment in a particular kind of coin or currency other than
Philippine currency, it shall be discharged in Philippine currency
measured at the prevailing rate of exchange at the time the
obligation was incurred, (b) except in case of a loan made in a
foreign currency stipulated to be payable in the same currency in
which case the rate of exchange prevailing at the time of the
stipulated date of payment shall prevail. All coin and currency,
including Central Bank notes, heretofore or hereafter issued and
declared by the Government of the Philippines shall be legal tender
for all debts, public and private.
Under the above-quoted provision of Republic Act 529, if the obligation was
incurred prior to the enactment of the Act and require payment in a particular kind of
coin or currency other than the Philippine currency the same shall be discharged in
Philippine currency measured at the prevailing rate of exchange at the time the
obligation was incurred. As We have adverted to, Republic Act 529 was enacted on
June 16, 1950. In the case now before Us the obligation of appellant to pay appellee
the 20% of $140,000.00, or the sum of $28,000.00, accrued on August 25, 1961, or
after the enactment of Republic Act 529. It follows that the provision of Republic Act
529 which requires payment at the prevailing rate of exchange when the obligation
was incurred cannot be applied. Republic Act 529 does not provide for the rate of
exchange for the payment of obligation incurred after the enactment of said Act. The
logical Conclusion, therefore, is that the rate of exchange should be that prevailing at
the time of payment. This view finds support in the ruling of this Court in the case
of Engel vs. Velasco & Co. 2 3 where this Court held that even if the obligation
assumed by the defendant was to pay the plaintiff a sum of money expressed in
American currency, the indemnity to be allowed should be expressed in Philippine
currency at the rate of exchange at the time of judgment rather than at the rate of
exchange prevailing on the date of defendant's breach. This is also the ruling of
American court as follows:
The value in domestic money of a payment made in foreign money
is fixed with respect to the rate of exchange at the time of payment.
(70 CJS p. 228)
According to the weight of authority the amount of recovery
depends upon the current rate of exchange, and not the par value
of the particular money involved. (48 C.J. 605-606)
The value in domestic money of a payment made in foreign money
is fixed in reference to the rate of exchange at the time of such
payment. (48 C.J. 605)
It is Our considered view, therefore, that appellant should pay the appellee the
equivalent in pesos of the $28,000.00 at the free market rate of exchange at the time
of payment. And so the trial court did not err when it held that herein appellant should
pay appellee $28,000.00 "to be converted into the Philippine currency on the basis of
the current rate of exchange at the time of payment of this judgment, as certified to by
the Central Bank of the Philippines, ...." 24
Appellant also contends that the P57,000.00 that he had paid to appellee should have
been applied to the due to the latter on the IRRI project because such debt was the
most onerous to appellant. This contention is untenable. The Commissioner who was
authorized by the trial court to receive evidence in this case, however, reports that the
appellee had not been paid for the account of the $28,000.00 which represents the
fees of appellee equivalent to 20% of the $140,000.00 that the appellant received as
fee for the IRRI project. This is a finding of fact by the Commissioner which was
adopted by the trial court. The parties in this case have agreed that they do not
question the finding of fact of the Commissioner. Thus, in the decision appealed from
the lower court says:
At the hearing on the Report of the Commissioner on February 15,
1966, the counsels for both parties manifested to the court that they
have no objection to the findings of facts of the Commissioner in his
report; and agreed that the said report only poses two (2)legal
issues, namely: (1) whether under the facts stated in the Report,
the doctrine of estoppel will apply; and (2) whether the
recommendation in the Report that the payment of amount due to
the plaintiff in dollars is permissible under the law, and, if not, at
 what rate of exchange should it be paid in pesos (Philippine
currency) .... 2 5
In the Commissioner's report, it is spetifically recommended that the appellant be
ordered to pay the plaintiff the sum of "$28,000. 00 or its equivalent as the fee of the
plaintiff under Exhibit A on the IRRI project." It is clear from this report of the
Commissioner that no payment for the account of this $28,000.00 had been made.
Indeed, it is not shown in the record that the peso equivalent of the $28,000.00 had
been fixed or agreed upon by the parties at the different times when the appellant had
made partial payments to the appellee.
3. In his third assignment of error, appellant contends that the lower court erred in not
declaring that the aggregate amount due from him to appellee is only P15,792.05.
Appellant questions the propriety or correctness of most of the items of fees that were
found by the Commissioner to be due to appellee for services rendered. We believe
that it is too late for the appellant to question the propriety or correctness of those
items in the present appeal. The record shows that after the Commissioner had
submitted his report the lower court, on February 15, 1966, issued the following order:
When this case was called for hearing today on the report of the
Commissioner, the counsels of the parties manifested that they
have no objection to the findings of facts in the report. However, the
report poses only legal issues, namely: (1) whether under the facts
stated in the report, the doctrine of estoppel will apply; and (2)
whether the recommendation in the report that the alleged payment
of the defendant be made in dollars is permissible by law and, if
not, in what rate it should be paid in pesos (Philippine Currency).
For the purpose of resolving these issues the parties prayed that
they be allowed to file their respective memoranda which will aid
the court in the determination of said issues. 2 6
In consonance with the afore-quoted order of the trial court, the appellant submitted
his memorandum which opens with the following statements:
As previously manifested, this Memorandum shall be confined to:
(a) the finding in the Commissioner's Report that defendant's
defense of estoppel will not lie (pp. 17-18, Report); and
(b) the recommendation in the Commissioner's Report that
defendant be ordered to pay plaintiff the sum of '$28,000.00 (U.S.)
or its equivalent as the fee of the plaintiff under Exhibit 'A' in the
IRRI project.'
More specifically this Memorandum proposes to demonstrate
the affirmative of three legal issues posed, namely:
First: Whether or not plaintiff's letter dated December 11, 1961
(Exhibit 'I') and/or Statement of Account (Exhibit '1-A') therein
enclosed has the effect of placing plaintiff in estoppel from
thereafter modifying the representations made in said letter and
Statement of Account or of making plaintiff otherwise bound
thereby; or of being decisive or great weight in determining the true
intent of the parties as to the amount of the engineering fees owing
from defendant to plaintiff;
Second: Whether or not defendant can be compelled to pay
whatever balance is owing to plaintiff on the IRRI (International Rice
and Research Institute) project in United States dollars; and
Third: Whether or not in case the ruling of this Honorable Court be
that defendant cannot be compelled to pay plaintiff in United States
dollars, the dollar-to-peso convertion rate for determining the peso
equivalent of whatever balance is owing to plaintiff in connection
with the IRRI project should be the 2 to 1 official rate and not any
other rate. 2 7
It is clear, therefore, that what was submitted by appellant to the lower court for
resolution did not include the question of correctness or propriety of the amounts due
to appellee in connection with the different projects for which the appellee had
rendered engineering services. Only legal questions, as above enumerated, were
submitted to the trial court for resolution. So much so, that the lower court in another
portion of its decision said, as follows:
The objections to the Commissioner's Report embodied in
defendant's memorandum of objections, dated March 18, 1966,
cannot likewise be entertained by the Court because at the hearing
of the Commissioner's Report the parties had expressly manifested
that they had no objection to the findings of facts embodied therein.
We, therefore hold that the third assignment of error of the appellant has no merit.
4. In his fourth assignment of error, appellant questions the award by the lower court
of P8,000.00 for attorney's fees. Appellant argues that the Commissioner, in his
report, fixed the sum of P5,000.00 as "just and reasonable" attorney's fees, to which
amount appellee did not interpose any objection, and by not so objecting he is bound
by said finding; and that, moreover, the lower court gave no reason in its decision for
increasing the amount to P8,000.00.
Appellee contends that while the parties had not objected to the findings of the
Commissioner, the assessment of attorney's fees is always subject to the court's
appraisal, and in increasing the recommended fees from P5,000.00 to P8,000.00 the
trial court must have taken into consideration certain circumstances which warrant the
award of P8,000.00 for attorney's fees.
We believe that the trial court committed no error in this connection. Section 12 of
Rule 33 of the Rules of Court, on which the fourth assignment of error is presumably
based, provides that when the parties stipulate that a commissioner's findings of fact
shall be final, only questions of law arising from the facts mentioned in the report shall WHEREFORE, the decision appealed from is affirmed, with costs against the
thereafter be considered. Consequently, an agreement by the parties to abide by the defendant-appellant. It is so ordered.
findings of fact of the commissioner is equivalent to an agreement of facts binding
upon them which the court cannot disregard. The question, therefore, is whether or
not the estimate of the reasonable fees stated in the report of the Commissioner is a
finding of fact.

The report of the Commissioner on this matter reads as follows:

As regards attorney's fees, under the provisions of Art 2208, par (11), the same may
be awarded, and considering the number of hearings held in this case, the nature of
the case (taking into account the technical nature of the case and the voluminous
exhibits offered in evidence), as well as the way the case was handled by counsel, it
is believed, subject to the Court's appraisal of the matter, that the sum of P5,000.00 is
just and reasonable as attorney's fees." 28

It is thus seen that the estimate made by the Commissioner was an expression of
belief, or an opinion. An opinion is different from a fact. The generally recognized
distinction between a statement of "fact" and an expression of "opinion" is that
whatever is susceptible of exact knowledge is a matter of fact, while that not
susceptible of exact knowledge is generally regarded as an expression of
opinion. 2 9 It has also been said that the word "fact," as employed in the legal sense
includes "those conclusions reached by the trior from shifting testimony, weighing
evidence, and passing on the credit of the witnesses, and it does not denote those
inferences drawn by the trial court from the facts ascertained and settled by it. 3 0 In
the case at bar, the estimate made by the Commissioner of the attorney's fees was
an inference from the facts ascertained by him, and is, therefore, not a finding of
facts. The trial court was, consequently, not bound by that estimate, in spite of the
manifestation of the parties that they had no objection to the findings of facts of the
Commissioner in his report. Moreover, under Section 11 of Rule 33 of the Rules of
Court, the court may adopt, modify, or reject the report of the commissioner, in whole
or in part, and hence, it was within the trial court's authority to increase the
recommended attorney's fees of P5,000.00 to P8,000.00. It is a settled rule that the
amount of attorney's fees is addressed to the sound discretion of the court. 3 1

It is true, as appellant contends, that the trial court did not state in the decision the
reasons for increasing the attorney's fees. The trial court, however, had adopted the
report of the Commissioner, and in adopting the report the trial court is deemed to
have adopted the reasons given by the Commissioner in awarding attorney's fees, as
stated in the above-quoted portion of the report. Based on the reasons stated in the
report, the trial court must have considered that the reasonable attorney's fees should
be P8,000.00. Considering that the judgment against the appellant would amount to
more than P100,000.00, We believe that the award of P8,000.00 for attorney's fees is
reasonable.

5. In his fifth assignment of error appellant urges that he is entitled to relief on his
counterclaim. In view of what We have stated in connection with the preceding four
assignments of error, We do not consider it necessary to dwell any further on this
assignment of error.
 and workmanlike manner and in full conformity with the
THIRD DIVISION corresponding plans and specifications duly prepared therefor and/or
the pertinent contract documents.

PHILIPPINE REALTY G.R. No. 156251 2.0 The work of the CONTRACTOR shall include, but shall
HOLDINGS CORPORATION, not be limited to ordering materials, following-up of orders, checking
Petitioner, the quantity and quality of materials within the premises of the
Present: construction site, and rejecting or returning defective materials.
YNARES-SANTIAGO, J.,
Chairperson, 3.0 The CONTRACTOR is hereby expressly
- versus - AUSTRIA-MARTINEZ, required to refer to all Mechanical, Plumbing, Electrical, Structural
CALLEJO, SR., and Architectural plans and specifications and shall investigate any
CHICO-NAZARIO, and possible interference and conditions affecting its contract work.
NACHURA, JJ.
4.0 All materials supplied by the CONTRACTOR shall be in
Promulgated: conformity with the Sprinkler System specifications prepared by R.
FIREMATIC PHILIPPINES, Villarosa Architects.
INC.,
Respondent. April 27, 2007 5.0 It is not intended that the drawings shall show every
pipe, fittings, and valve. All such items, whether or not those parts
have been specifically mentioned or indicated on the drawings, shall
x--------------------------------------------------x be furnished and installed by CONTRACTOR, if necessary to
complete the system in accordance with the best practice of Sprinker
DECISION System and to the satisfaction of the OWNER.[4]

CALLEJO, SR., J.:

Under Article I of the Contract, the following documents were incorporated into the
agreement:
This is a Petition for Review on Certiorari of the Decision[1] of the Court of
Appeals (CA) in CA-G.R. CV No. 63791 and its Resolution[2]dated November 19, 2002. 1.0 Sprinkler System Plans: FP-1 to FP-18, all consisting of
eighteen (18) sheets as prepared by R. Villarosa Architects.

2.0 Fire Protection Specification consisting of Forty-nine

The Antecedents (49) pages.

On December 12, 1989, Philippine Realty and Holdings Corporation (PRHC), 3.0 Bid Documents consisting of the following:
entered into a Construction Agreement[3] with Firematic Philippines, Inc. (Firematic) for
the installation of a sprinkler system in the proposed Tektite Towers, located at Tektite a) Invitation to Bid One (1) sheet;
Road corner Pearl Avenue, Mandaluyong, Metro Manila. The project had two phases - b) Instruction to Bidders Three (3) sheets;
Phase I (Tower I) and Phase II (Tower II) c) Bid Proposals of Firematic Phils., Inc. consisting of
Three (3) pages dated Oct. 31, 1989;
The scope of the work to be done by Firematic is provided in Article II of the d) Bid Bulletin No. 1 Fourteen (14) sheets;
Contract, thus: e) Letter of Intent dated November 21, 1989 duly
signed by the Owner and the Contractor consisting of
1.0 The CONTRACTOR, in consideration of the Two (2) sheets.[5]
payments to be made by OWNER, of certain sums of money in the
manner hereinafter specified, shall fully and faithfully deliver, perform Article IX of the Contract enumerates the responsibilities of Firematic relative
and undertake to finish and supply all the materials, tools, to the supply and installation of the sprinkler supplies:
equipment, supervision and to do all the skills and labor necessary
or proper for the due completion of the Sprinkler System for the 1.0. The CONTRACTOR shall remove all portions of work
above-mentioned project, and does hereby warrant and guarantee which the OWNER or its representative may condemn as in any way
that the said work and labor shall be performed in the most proper having failed to conform with the corresponding Sprinkler Systems
 plans and specifications, and the CONTRACTOR shall properly
make good all such work so condemned by the OWNER. The cost
of making good any/all work shall be solely borne by the
CONTRACTOR.
xxxx
7.0. The CONTRACTOR warrants the Sprinkler System
installations under this contract to be free from faults or defects in
materials and workmanship for a period of One (1) year from the date
of initial operations. Faults caused by or due to ordinary wear and
tear or those caused by the OWNER or its employees are excluded
from this guarantee.
The CONTRACTOR further warrants all equipment and
accessories thereto to be free from defects in materials and faulty
workmanship for a period of One (1) year from the date of initial
operation.
The equipment or parts thereof which are found defective
within the said period of guarantee shall be replaced by the
CONTRACTOR at no cost to the OWNER.
On December 11, 1990, PRHC informed[6] Firematic that it had decided to
delete Phase II (Tower II) from the original contract, and consequently, the contract
price for Phase I was reduced to P22,153,424.52.[7] However, by reason of the change
orders approved by PRHC, the contract price was increased to P24,773,376.48.[8]
On December 13, 1990, PRHC and Firematic entered into another
Construction Agreement[9] under which the latter undertook to supply, deliver and install
the fire alarm system for Phase I of the Tektite Project for a total contract price
of P3,780,000.00. This agreement contains substantially the same terms and
conditions as the earlier contract for fire sprinklers.
The Technical Specification for Fire Protection [10] (which is an integral part of
the contract) provides, among others:
1.02. QUALIFICATIONS
xxxx
D. LISTED AND APPROVED:
When the words listed and approved appear in the Contract
Documents, or the Standard Specifications and Codes, they shall be
interpreted to require products to bear labels indicating the listing, or
approval of items of equipment, components, devices, assemblies
and apparatus; by an internationally recognized testing laboratory for
the specific service intended.
1.03. STANDARD SPECIFICATIONS AND CODES:
xxxx
1. NFPA-20; Centrifugal Fire Pumps[11]
The contract price and terms of payment for the project are as follows:
The OWNER shall pay the CONTRACTOR for the full,
faithful and complete performance of the works called for under this
agreement, a fixed amount of PESOS: THIRTY THREE MILLION
NINE HUNDRED NINETY FIVE THOUSAND FORTY ONE & 24/100
(P33,995,041.24) ONLY, the manner of payment of which shall be in
accordance with Article V hereof. The contract price shall not be
subject to escalation, except due to work addition approved by the
Owner and the Architect and due to official increase in minimum
wage as covered by the Labor Cost Adjustment Clause below. x x x
It is understood that there shall be no escalation in the price of
materials. x x x.
ARTICLE IV ADJUSTMENT OF CONTRACT PRICE
The OWNER or ARCHITECT may, without invalidating this
Agreement or the Contract Documents, order at anytime in writing
additional work or alterations by correcting, altering or deducting from
the work to be undertaken or being undertaken by the
CONTRACTOR. All such work shall be evidenced by Change Orders
signed by the OWNER and shall be executed under the conditions
hereof and of the Contract Documents.
No claims for additions or deductions to the Contract Price
herein stipulated by reason of extra or alteration shall be valid unless
ordered in writing by the Owner. The value of any extra work or
alterations shall be separately agreed upon by the parties in writing.
Any value of Change Orders approved shall be considered
as part of the Contract and to be included in progress billing.
ARTICLE V TERMS OF PAYMENT
3.0. No payment made hereunder shall be construed as a
waiver of any claim against the CONTRACTOR by the OWNER for
any faulty workmanship, materials used or defect in work completed.
On March 30, 1992, Firematic requested[12] PRHC for financial assistance due
to its tight business credit and rising costs. Consequently, the purchases of materials
for the project were directly paid by PRHC.
 Firematic submitted to PRHC the Catalogue of Peerless Fire Pumps, [13] and
PRHC approved the use of 500 GPM (12 LB-F model) Peerless Vertical Turbine Fire
Pumps.[14] To facilitate the purchase of the approved model and specifications of the
fire pumps from Technotrade Industrial Sales, Inc., and pursuant to the financial
assistance earlier requested by Firematic, the latter presented to PRHC for approval
Purchase Order No. 108[15] dated August 6, 1992. PRHC approved the purchase order.
The subject materials were delivered and eventually installed by Firematic.
On the other hand, the Technical Specifications for Fire Alarm and Detection
System[16] provides:
2.01. FIRE ALARM CONTROL PANEL (FACP):
xxxx
B. The FACP shall be solid state design with full capability
for sensing automatic detectors, and manual stations and have the
provision for integrating with security system.[17]
Paragraph 9 of Bid Bulletin No. 1[18] dated September 10, 1990 provides
that the requirement for interfacing with Security System Section under Section
2.01(B) is actually for interfacing with the Building Management System (BMS).[19]
The materials were installed by Firematic. The project became operational
and was turned over to PRHC, which then issued the Certificate of Completion.[20] The
Municipal Mayor issued a Certificate of Occupancy in favor of PRHC on January 12,
1993.[21]
In the meantime, PRHC requested the Connel Bros. Co., Philippines for a
quotation of the Peerless UL/FU Fire pump similar to those installed by Firematic in
Tektite Tower I.[22] However, Connel Bros. Philippines, Inc. replied by letter dated
September 2, 1993 that it would be difficult for them to trace whether they had records
of transactions with Technotrade-USA, because the pump model and serial number
that PRHC furnished were not of Peerless origin.[23]
Meanwhile, on October 14, 1993, Firematic billed PRHC P1,402,559.93 for
the balance of the amount of the automatic sprinkler supplies installed. [24] However,
PRHC rejected the claim. On October 20, 1993, PRHC, through counsel, sent a
letter[25] to Firematic claiming that, based on its Purchase Order, the brand Peerless
should have been used; however, the manufacturer of the brand (Peerless Pump Co.,
USA), did not have any record of having manufactured the pumps that Firematic
delivered and installed on the Tektite Towers project.
Firematic did not respond to the letter. Instead, its managing director, Ms. Jojie Gador,
went to the Fire Department of the City of Pasig and inquired about the fire incident
that occurred at Tower II while construction was ongoing. [26] In response to the inquiry,
the City Fire Marshall issued a report[27] dated June 10, 1994 stating that said fire could
have turned into a conflagration size without the swift response of the company guards
on duty plus the existing firefighting equipment installed thereat.
In a letter[28] dated March 2, 1994, Connel Bros. stated that Peerless Pump
Co. never had direct negotiation with Technotrade, and as such, the latter is not a
dealer of Peerless pump.
On January 12, 1995, Firematic sent its final billing [29] and a demand
letter[30]
prepared by its counsel to PRHC for the payment of the latters balance of the
contract price amounting to P3,919,283.13, including the unacted charge order
attached thereto.
In answer to the final billing of Firematic, PRHC denied [31] liability for the
following reasons:
1.[The] installation is incomplete and has not been fully
commissioned.
2. [The] Fire Alarm Panels could not be interfaced with
Building Management System as required in [the] contract x x x.
3. [The] Fire Alarm Panels do not follow the specifications
required in the contract.
In a letter[32] dated March 6, 1995, PRHC informed Firematic that all the fire
pumps and accessories supplied by it shall be removed, and the cost of replacement,
including the labor cost of the installation, would be chargeable to its account. Again,
Firematic failed to respond.[33]
In the meantime, PRHC purchased the replacement for the defective materials
installed by Firematic, as evidenced by the following Purchase Orders: (1) P.O. dated
November 15, 1993 for pumps obtained from Connel Bros. Company Pilipinas, Inc.
amounting to US$ 61,925.00;[34] (2) P.O. dated October 25, 1994 for fire and jockey
pumps installation amounting to P318,750.00;[35] and (3) P.O. dated October 4, 1995
for materials purchased from Electro Systems, for a total amount
of P450,000.00.[36] The Peerless pumps bought by PRHC to replace the pumps
Firematic had installed were higher in terms of capacity.[37]
As a result of the continued refusal of PRHC to pay its unpaid obligation,
Firematic filed a Complaint for Collection for Sum of Money plus Damages[38] against
PRHC. The case was raffled to Branch 66 of the Regional Trial Court of Makati, and
was docketed as Civil Case No. 95-394.
Firematic alleged in its complaint that when it followed up its final billings and
retention money, the PRHC, under new management, refused to pay its obligation. It
further claimed that the PRHCs reason, that the sprinkler system and fire alarm system
were defective was so flimsy because the sprinkler and fire alarm systems were
certified to be in good condition. Firematic also asserted that because of PRHCs
continued refusal to settle its valid and outstanding obligations, it suffered actual
damages in the amount of P5,897,736.44; temperate or moderate damages in a
reasonable amount of P500,000.00; and attorneys fees equivalent to 25% of the
amount recoverable. The complaint contained the following prayer:
WHEREFORE, Premises Considered, it is respectfully pray
(sic) of the Honorable Court that after trial a judgment be rendered
ordering the defendant
1. To pay the amount of P5,897,736.44 plus legal interest
of 1% per month until fully paid from the filing of this complaint;
2. To pay temperate or moderate damages of P500,000.00;

3. To pay attorneys fees in the amount equivalent to 25% of
the amount recovered;
4. To pay the cost of suit.
Further prays for such other reliefs and damages under the
premises.[39]
In its Answer,[40] PRHC countered that plaintiff had no cause of action, and
that the complaint is premature because the case should have been submitted first to
arbitration. It also alleged that out of the total amount of P23,400,869.41 billed by
Firematic, it already paid the total sum of P22,098,302.45. However, after such
payment, it discovered that Firematic had violated the terms and conditions of the
contract, and that the actual works completed in accordance with the technical
specifications amounted only to P21,915,869.41. It likewise claimed that there was in
fact an overpayment of P182,433.04 insofar as the fire sprinkler contract was
concerned. As to the fire alarm contract, PRHC alleged that it paid a total sum
of P3,247,966.49, but it turned out that the works actually completed in accordance with
the specifications of the contract amounted only to P2,857,655.10. PRHC insisted that
Firematic committed fraud in the performance of its obligations under the two contracts
in (1) actually delivering and installing pumps that were not genuine Peerless products,
non-UL listed and non-FM approved; (2) supplying and installing Mitech brand instead
of Firescan 5027 as approved during the bidding; (3) installing fire alarm control and
data gathering panels that were not compatible with each other; and (4) installing a fire
alarm system that could not be connected or interfaced with the Building Management
System.
In its Reply,[41] Firematic alleged that the provision on arbitration had force and
effect only during the execution and performance of the agreement or contract and not
after its termination. It further asserted that the total contract price, including the change
orders, increased to P25,277,559.75 but PRHC only paid P21,087,191.89; thus, there
was a balance of P4,190,367.86. It likewise contended that though there was an
approved specification, revisions were made due to unavailability of
materials. Consequently, with the conformity and approval of PRHC of the description
specified under P.O. 108, the latter made direct orders from Technotrade; PRHC also
made direct payments to it. Firematic pointed out that the materials delivered were
under warranty for one (1) year, and since PRHC had no complaints after the lapse of
the warranty, it was under the impression that the materials had met the specifications.
It insisted that PRHC could not complain that the fire alarm system could not be
interfaced with its system because it was the latters responsibility to provide for an
interface device.
On September 1, 1998, PRHC filed a Motion for Leave to Amend Answer to
Conform to Evidence[42] which Firematic opposed. On October 26, 1998, the trial court
granted the motion and thereby admitted the Amended Answer. [43] In its Amended
Answer, PRHC claimed that, with respect to the fire sprinkler system, the actual works
completed by Firematic amounted to
only P20,613,302.45. Thus, it (PRHC) made an overpayment of P1,485,000.00. As to
the fire alarm system, the works actually completed in accordance with the technical
specifications amounted to only P2,597,966.49. Again, there was an overpayment
of P650,000.00.
By way of counterclaim, PRHC averred that Firematics violation of the contract
and its misrepresentation caused the former to suffer actual damages in the amount
of P2,135,000.00, $61,925.00 and P450,000.00; the baseless and unfounded suit
caused it to suffer besmirched reputation, for which Firematic should be ordered to pay
moral damages in the amount of P20,000.00; for the public good and to deter others
similarly minded from committing fraud in the performance of the contract, Firematic
should be ordered to pay exemplary damages in the amount of P10,000.00; and since
the unfounded suit compelled PRHC to obtain the services of counsel, Firematic should
be made to pay 25% of the amount recovered as attorneys fees. [44]
After trial on the merits, the RTC ruled in favor of PRHC. The fallo of the
decision[45] reads:
IN VIEW OF THE FOREGOING, judgment is hereby
rendered dismissing the above complaint and ordering the plaintiff to
pay the defendant the amount of $61,925.00 or P1,610,050.00 (at
P26.00 per dollar exchange rate when the Peerless pump were
bought) representing the purchase price of the genuine Peerless fire
pumps, P318,750.00 representing the amount to install the
replacement fire pumps, P450,000.00 representing the amount of
supply and installation of replacement fire alarm panels
plus P25,000.00 as attorneys fees.
SO ORDERED.[46]
The RTC concluded that in failing to deliver genuine Peerless Pumps as
agreed upon, and to install fire alarm system that could be interfaced with the system,
Firematic failed to comply with the technical specifications of the contracts. [47]
Aggrieved, Firematic appealed to the CA, raising the following errors:
I.
THE HONORABLE COURT ERRED IN FINDING PLAINTIFF-
APPELLANT OF HAVING FAILED TO DELIVER AND TRANSFER
TO DEFENDANT-APPELLEE SPRINKLER SYSTEM AND FIRE
ALARM SYSTEMS IN ACCORDANCE WITH THE CONTRACTS.
II.
THE HONORABLE COURT ERRED IN FINDING THE PEERLESS
FIRE PUMPS AS FAKE.
III.
THE HONORABLE COURT ERRED IN FINDING PLAINTIFF-
APPELLANT OF HAVING FAILED TO COMPLY WITH THE
TECHNICAL SPECIFICATIONS OF THE FIRE ALARM SYSTEM
CONTRACT.

IV.
DEFENDANT IS LIABLE TO PLAINTIFF-APPELLANT FOR THE
DAMAGES PRAYED FOR.[48]
On July 10, 2002, the CA rendered judgment reversing the decision of the
RTC. The fallo reads:
WHEREFORE, the foregoing considered, the Decision
appealed from is hereby ANNULLED. The appellee is hereby
ORDERED to pay, in view of the above premises and computations,
the sum of P852,566.96, with legal interest from 7 March 1995, the
date the complaint was filed.[49]
The CA declared that PRHCs belated claim was highly doubtful since PRHC
had ordered the pumps from Technotrade, albeit through the Firematic, and were
inspected and scrutinized by its consultants who are experts in their fields. [50] The
appellate court likewise agreed with Firematic that the documents presented in
evidence by PRHC to prove that the pumps supplied by Technotrade were not genuine
Peerless pumps are inadmissible for being hearsay.[51] According to the CA, it is
possible that it was not the appellant but Technotrade that was guilty of fraud in
supplying dubious pumps to PRHC.[52]
However, the CA affirmed the findings of the RTC that appellant committed a
breach of contract in installing the fire control panels because of its failure to comply
with the requirement of interfacing with its system. Since PRHC was constrained to
incur P450,000.00 to undo the work of Firematic, it was convinced that the unfinished
work amounted to P1,372,507.07.
Thus, the appellate court held that Firematic was liable to PRHC for a total
amount of P1,822,507.07, while PRHC had an unpaid obligation to Firematic
amounting to P2,675,074.03 representing the balance of the contract price. The
appellate court concluded that PRHC owed Firematic P852,566.96.[53]
On August 2, 2002, Firematic and PRHC filed their Motion for
Reconsideration and Clarification[54] and Motion for Partial
Reconsideration,[55] respectively.
On November 19, 2002, the CA issued the following Resolution:[56]
WHEREFORE, premises considered, the Decision of 10 July 2002 is
hereby MODIFIED, and instead of P852,566.96, the appellee is
hereby ORDERED to pay appellant P762,658.71 with legal interest
from 07 March 1995.
The main Decision STANDS in all other respects.
No costs.
SO ORDERED.[57]
PRHC, now petitioner, seeks to have the appellate courts ruling reversed on the
following grounds:
1. The Court of Appeals committed reversible error when it came out
with a conclusion based on a manifestly mistaken inference or based
on misapprehension of facts, inasmuch as its findings are
contradictory to the evidence on record. Specifically, the Court of
Appeals committed reversible error when it ruled that the fire pumps
supplied and delivered by FIREMATIC to PHILREALTY conformed
to the technical specifications of the sprinkler system contract despite
evidence to the contrary.
2. The Court of Appeals committed reversible error when it again
came out with a conclusion based on a manifestly mistaken
inference. Specifically, the Court of Appeals committed reversible
error when it unjustifiably disregarded petitioners evidence showing
the supplied pumps as fakes and not of Peerless origin, on the
ground that said evidence is hearsay.
3. The Court of Appeals committed reversible error when it came
out with a conclusion based on a manifestly mistaken inference and
based on misapprehension of facts. Specifically, the Court of
Appeals erred that the issuance of a Certificate of Completion proved
the genuineness of fire pumps and the compliance with the technical
specifications of the contract.[58]
The threshold issue raised is whether or not the fire pumps supplied and
delivered by respondent to petitioner conformed to the technical specifications of the
contract.
Petitioner argues that while it is true that the particular model of the pumps
for the fire control system was not specified in the technical specifications for fire
protection, the qualifications of the pumps were nevertheless provided that the pumps
should be listed and approved by an internationally recognized testing laboratory for
the specific service intended.[59] Pursuant to such specification, respondent in fact
submitted for approval the brochure of Peerless Pumps. Petitioner further insists that
it was respondent who brought the source of the fake peerless pumps into the picture,
and as such, it should be the one to return the defective materials. It insists that the
direct payment made by petitioner did not relieve respondent from its responsibility
under the contract. Moreover, petitioner asserts, because respondent failed to dispute
its claim and present proof that the fire pumps delivered were genuine, it had impliedly
admitted that the fire pumps were not original Peerless pumps. Petitioner further
contends that the issuance of the certificate of completion and the fact that the fire
pumps were used did not cure their defects.
For its part, respondent contends that the fire pumps were inspected, examined and
tested by petitioners technical staff, and that the latter found them to be operational.
Thus, it cannot now be permitted to belatedly complain. According to respondent,
petitioner admitted that when the fire pumps were changed, the replacement pumps
installed by the latter were higher in terms of capacity. Respondent likewise reiterates
that the evidence presented by petitioner to prove that the fire pumps were not genuine
is inadmissible in evidence for being hearsay. It claimed that the CA erred in ordering the fire pumps, which respondent supplied and installed, were not genuine. The
petitioner to pay to it the principal amount of aforesaid letters are quoted hereunder:
only P852,566.96. Respondent maintains that, as shown by the evidence on record, Letter No. L/93-272
petitioner owed it P10,399,418.89 for the fire sprinkler supplies and fire alarm system. December 15, 1993
It further contends that the decision of the CA should be modified, and prays for the
following relief: PRHC PROPERTY MANAGERS, INC.
5th Floor, Tektite Towers,
1.) The herein Petition for Review on Certiorari filed by Petitioner Tektite Road, Ortigas Center,
Philippine Realty & Holdings Corporation be dismissed for lack of Pasig, Metro Manila
merit;
Attention: Mr. Ed B. Banaag, Vice President
2.) Petitioner be ordered to pay Respondent the following to wit:
Subject: EXISTING FIRE PUMPS
a.) Ten Million Three Hundred Ninety Nine Thousand Four Hundred AT TEKTITE TOWER I
Eighteen & 87/100 (P10,399,418.89) Pesos, for the fully completed
installation of the Fire Sprinkler System and Fire Alarm System, ten Gentlemen:
(10%) percent retention and (sic) plus legal interest of twelve (12%)
percent per annum from July 10, 2002 as and by way of actual With reference to your letter dated November
damages; 15, 1993, please find attached a (sic) copy of
facsimile message dated December 15,
b.) Five Hundred Thousand (P500,000.00) Pesos as and 1993 from our principal, Peerless Pump, USA.
by way of exemplary, nominal or moderate damages;
c.) Attorneys fees at the rate of Twenty (sic) (25%) Please take note that they normally trace the
percent of the award of actual damages above- authenticity of the pump through the pump
mentioned; model and pump serial number. It would be then
d.) Such other reliefs and remedies as may be just and difficult for the factory to trace whether they have
equitable under the premises.[60] indeed records of transactions with
However, it is an established rule that an appellee (respondent) who is not Technotrade-USA because the pump model and
also an appellant (petitioner) may assign error where the purpose is to maintain the serial number that you furnished us are not of
judgment on other grounds, but he cannot seek modification or reversal of the Peerless origin.
judgment or affirmative relief unless he has also appealed (or filed a separate
petition).[61] Thus, due to respondents failure to institute a separate petition before this We also enclosed a copy of our Letter No. L/93-
Court, the CA decision must perforce be considered final and binding as to it. 063 dated November 16, 1993 for your
reference.
Petitioner insists that the fire pumps supplied and installed by respondent are
not of Peerless origin because of the following: (1) respondent failed to present proofs We hope the above explanation will enlighten
of the genuineness of the pumps; (2) respondent failed to answer petitioners letters your clarification.
requiring it to present the aforesaid proofs, thus, estoppel by silence applies; and (3)
the manufacturer of the Peerless pumps verbally informed Connel Bros. that the Very truly yours,
subject fire pumps are not of Peerless origin.

We do not agree. E.L. STA. MARIA, JR.

Asst. Vice President
Well-settled is the rule that the party alleging fraud or mistake in a transaction Machineries Department
bears the burden of proof. The circumstances evidencing fraud are as varied as the
people who perpetrate it in each case. It may assume different shapes and forms; it ELS:LTV
may be committed in as many different ways.Thus, the law requires that fraud be
established, not just by preponderance of evidence, but by clear and convincing Att.: a/s
evidence.[62]
Letter No. L/94-043
In this case, petitioner relied on the principle of estoppel by silence, as well
as on Letter No. L/93-272[63] and Letter No. L/94-043[64] of Connel Bros. to prove that March 2, 1994
 not given the opportunity to cross-examine him. It also appears that the person who
PRHC PROPERTY MANAGERS, INC. signed the letters had no personal knowledge of the facts stated therein, as he claimed
5/F Tektite Towers, Tektite Road that he had been verbally advised that the manufacturer of Peerless pumps never had
Ortigas Center, Pasig, M.M. direct negotiation with Technotrade, and as such, the latter is not a dealer of the pumps.

Attention: MR. EDUARDO B. BANAAG Well-entrenched is the rule that a private certification is hearsay where the
Vice President person who issued the same was never presented as a witness. The same is true of
letters. While hearsay evidence may be admitted because of lack of objection by the
Subject: EXISTING FIRE PUMPS adverse partys counsel, it is nonetheless without probative value. [65] Stated differently,
AT TEKTITE TOWER I the declarants of written statements pertaining to disputed facts must be presented at
the trial for cross-examination.[66] The lack of objection may make an incompetent
Gentlemen: evidence admissible, but admissibility of evidence should not be equated with weight
of evidence. Indeed, hearsay evidence whether objected to or not has no probative
We apologize for the delay in our reply to your value.[67]
letter of December 16, 1994 regarding your
clarification on the above subject. Petitioner asserts that respondent impliedly admitted that the fire pumps it
installed were not of Peerless origin because of its failure to dispute petitioners
Please find attached a (sic) copy of our Letter accusation and to present proofs that the fire pumps delivered were genuine. Thus,
No. F/93-071 dated December 20, petitioner contends that estoppel by silence applies to respondent.
1993 addressed to our principal wherein we The principle of estoppel in pais applies wherein one, by his acts,
enclosed your above stated letter . representations or admissions, or by his own silence when he ought to speak out,
intentionally or through culpable negligence, induces another to believe certain facts
However, inspite of constant follow-ups and to exist and such other rightfully relies and acts on such belief, so that he will be
reminder, we could not have a confirmation from prejudiced if the former is permitted to deny the existence of such facts. [68]
our principal on your requested information.
We find the principle inapplicable in the present case. Acording to
respondents Managing Director Jojie S. Gador, she did not completely keep silent on
Mr. John Kahren, Peerless Pumps Director for petitioners accusation. She testified that when petitioner refused to pay respondent,
International Sales, verbally advised that they she went to the Fire Department of the City of Pasig and made an inquiry regarding
have no access or capability to verify whether the fire incident that took place at the Tektite project. [69] In answer to this inquiry, the
there is such an organization named Technotrade Fire Department issued a Certification[70] stating, inter alia, that the office[71] was very
operating in the U.S.A. They can only confirm that much delighted because the management of Tektite Tower had substantially complied
they never had direct negotiation with with the safety requirements of Presidential Decree No. 1185. [72] In making such
Technotrade in record and as such, Technotrade inquiry, respondent in effect denied petitioners accusation that the fire pumps it had
is not a dealer of Peerless pump. installed were defective; as such, the principle of estoppel by silence does not apply.

Because good faith is presumed, respondent was not obliged to present proofs of the
We hope the above statement will in any way
genuineness of the fire pumps it supplied and installed. The burden of proof to show
answer your requested clarification.
that the pumps were not genuine fell upon petitioner. However, the records show that
petitioner failed to discharge this burden. Clearly, the evidence relied upon is not
Very truly yours,
sufficient to overturn (1) the presumption of good faith; (2) that private transactions
have been fair and regular;[73] and (3) that the ordinary course of business had been
E.L. STA. MARIA, JR.
followed.[74]
Asst. Vice President
Machineries Department
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The
Decision of the RTC dated July 10, 2002, in CA-G.R. CV No. 63791, and its Resolution
ELS: LTV
dated November 19, 2002, are AFFIRMED.
Att.: a/s
SO ORDERED.
However, petitioner failed to present the signatory of the letters (E.L. Sta.
Maria, Jr.) to testify on the veracity of the contents of the letters; thus, respondent was