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Chapter 1 (General Provisions (Art.

1156-1162)
After trial on the merits a decision was rendered by the inferior court on December 27, 1976,
the dispositive part of which reads as follows:
Republic of the Philippines
SUPREME COURT WHEREFORE, premises considered, this Court renders judgment, ordering
Manila the defendants Patricio Confesor and Jovita Villafuerte Confesor to pay
the plaintiff Development Bank of the Philippines, jointly and severally,
FIRST DIVISION (a) the sum of P5,760.96 plus additional daily interest of P l.04 from
September 17, 1970, the date Complaint was filed, until said amount is
paid; (b) the sum of P576.00 equivalent to ten (10%) of the total claim by
G.R. No. L-48889 May 11, 1989
way of attorney's fees and incidental expenses plus interest at the legal
rate as of September 17,1970, until fully paid; and (c) the costs of the
DEVELOPMENT BANK OF THE PHILIPPINES (DBP), petitioner, suit.
vs.
THE HONORABLE MIDPAINTAO L. ADIL, Judge of the Second Branch of the Court of First
Defendants-spouses appealed therefrom to the Court of First Instance of Iloilo wherein in
Instance of Iloilo and SPOUSES PATRICIO CONFESOR and JOVITA
due course a decision was rendered on April 28, 1978 reversing the appealed decision and
VILLAFUERTE, respondents.
dismissing the complaint and counter-claim with costs against the plaintiff.

GANCAYCO, J.:
A motion for reconsideration of said decision filed by plaintiff was denied in an order of
August 10, 1978. Hence this petition wherein petitioner alleges that the decision of
The issue posed in this petition for review on certiorari is the validity of a promissory note respondent judge is contrary to law and runs counter to decisions of this Court when
which was executed in consideration of a previous promissory note the enforcement of respondent judge (a) refused to recognize the law that the right to prescription may be
which had been barred by prescription. renounced or waived; and (b) that in signing the second promissory note respondent Patricio
Confesor can bind the conjugal partnership; or otherwise said respondent became liable in
On February 10, 1940 spouses Patricio Confesor and Jovita Villafuerte obtained an his personal capacity. The petition is impressed with merit. The right to prescription may be
agricultural loan from the Agricultural and Industrial Bank (AIB), now the Development of the waived or renounced. Article 1112 of Civil Code provides:
Philippines (DBP), in the sum of P2,000.00, Philippine Currency, as evidenced by a promissory
note of said date whereby they bound themselves jointly and severally to pay the account in Art. 1112. Persons with capacity to alienate property may renounce
ten (10) equal yearly amortizations. As the obligation remained outstanding and unpaid even prescription already obtained, but not the right to prescribe in the future.
after the lapse of the aforesaid ten-year period, Confesor, who was by then a member of the
Congress of the Philippines, executed a second promissory note on April 11, 1961 expressly
Prescription is deemed to have been tacitly renounced when the
acknowledging said loan and promising to pay the same on or before June 15, 1961. The new
renunciation results from acts which imply the abandonment of the right
promissory note reads as follows —
acquired.

I hereby promise to pay the amount covered by my promissory note on


There is no doubt that prescription has set in as to the first promissory note of February 10,
or before June 15, 1961. Upon my failure to do so, I hereby agree to the
1940. However, when respondent Confesor executed the second promissory note on April
foreclosure of my mortgage. It is understood that if I can secure a
11, 1961 whereby he promised to pay the amount covered by the previous promissory note
certificate of indebtedness from the government of my back pay I will be
on or before June 15, 1961, and upon failure to do so, agreed to the foreclosure of the
allowed to pay the amount out of it.
mortgage, said respondent thereby effectively and expressly renounced and waived his right
to the prescription of the action covering the first promissory note.
Said spouses not having paid the obligation on the specified date, the DBP filed a complaint
dated September 11, 1970 in the City Court of Iloilo City against the spouses for the payment
This Court had ruled in a similar case that –
of the loan.

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Chapter 1 (General Provisions (Art. 1156-1162)
... when a debt is already barred by prescription, it cannot be enforced by partnership. 5 No doubt, in this case, respondent Confesor signed the second promissory
the creditor. But a new contract recognizing and assuming the prescribed note for the benefit of the conjugal partnership. Hence the conjugal partnership is liable for
debt would be valid and enforceable ... . 1 this obligation.

Thus, it has been held — WHEREFORE, the decision subject of the petition is reversed and set aside and another
decision is hereby rendered reinstating the decision of the City Court of Iloilo City of
Where, therefore, a party acknowledges the correctness of a debt and December 27, 1976, without pronouncement as to costs in this instance. This decision is
promises to pay it after the same has prescribed and with full knowledge immediately executory and no motion for extension of time to file motion for
of the prescription he thereby waives the benefit of prescription. 2 reconsideration shall be granted.

This is not a mere case of acknowledgment of a debt that has prescribed but a new promise SO ORDERED.
to pay the debt. The consideration of the new promissory note is the pre-existing obligation
under the first promissory note. The statutory limitation bars the remedy but does not Republic of the Philippines
discharge the debt. SUPREME COURT
Manila
A new express promise to pay a debt barred ... will take the case from the
operation of the statute of limitations as this proceeds upon the ground EN BANC
that as a statutory limitation merely bars the remedy and does not
discharge the debt, there is something more than a mere moral G.R. No. 109125 December 2, 1994
obligation to support a promise, to wit a – pre-existing debt which is a
sufficient consideration for the new the new promise; upon this sufficient
ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners,
consideration constitutes, in fact, a new cause of action. 3
vs.
THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT
... It is this new promise, either made in express terms or deduced from CORPORATION, respondents.
an acknowledgement as a legal implication, which is to be regarded as
reanimating the old promise, or as imparting vitality to the remedy
Antonio M. Albano for petitioners.
(which by lapse of time had become extinct) and thus enabling the
creditor to recover upon his original contract. 4
Umali, Soriano & Associates for private respondent.
However, the court a quo held that in signing the promissory note alone, respondent
Confesor cannot thereby bind his wife, respondent Jovita Villafuerte, citing Article 166 of the VITUG, J.:
New Civil Code which provides:
Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04
Art. 166. Unless the wife has been declared a non compos mentis or a December 1991, in CA-G.R. SP No. 26345 setting aside and declaring without force and effect
spend thrift, or is under civil interdiction or is confined in a leprosarium, the orders of execution of the trial court, dated 30 August 1991 and 27 September 1991, in
the husband cannot alienate or encumber any real property of the Civil Case No. 87-41058.
conjugal partnership without, the wife's consent. If she ay compel her to
refuses unreasonably to give her consent, the court m grant the same. The antecedents are recited in good detail by the appellate court thusly:

We disagree. Under Article 165 of the Civil Code, the husband is the administrator of the On July 29, 1987 a Second Amended Complaint for Specific Performance
conjugal partnership. As such administrator, all debts and obligations contracted by the was filed by Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu
husband for the benefit of the conjugal partnership, are chargeable to the conjugal Unjieng, Rose Cu Unjieng and Jose Tan before the Regional Trial Court,

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Chapter 1 (General Provisions (Art. 1156-1162)
Branch 31, Manila in Civil Case No. 87-41058, alleging, among others, that Aggrieved by the decision, plaintiffs appealed to this Court in
plaintiffs are tenants or lessees of residential and commercial spaces CA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990
owned by defendants described as Nos. 630-638 Ongpin Street, Binondo, (penned by Justice Segundino G. Chua and concurred in by Justices
Manila; that they have occupied said spaces since 1935 and have been Vicente V. Mendoza and Fernando A. Santiago), this Court affirmed with
religiously paying the rental and complying with all the conditions of the modification the lower court's judgment, holding:
lease contract; that on several occasions before October 9, 1986,
defendants informed plaintiffs that they are offering to sell the premises In resume, there was no meeting of the minds between the
and are giving them priority to acquire the same; that during the parties concerning the sale of the property. Absent such
negotiations, Bobby Cu Unjieng offered a price of P6-million while requirement, the claim for specific performance will not lie.
plaintiffs made a counter offer of P5-million; that plaintiffs thereafter Appellants' demand for actual, moral and exemplary damages
asked the defendants to put their offer in writing to which request will likewise fail as there exists no justifiable ground for its
defendants acceded; that in reply to defendant's letter, plaintiffs wrote award. Summary judgment for defendants was properly
them on October 24, 1986 asking that they specify the terms and granted. Courts may render summary judgment when there is
conditions of the offer to sell; that when plaintiffs did not receive any no genuine issue as to any material fact and the moving party is
reply, they sent another letter dated January 28, 1987 with the same entitled to a judgment as a matter of law (Garcia vs. Court of
request; that since defendants failed to specify the terms and conditions Appeals, 176 SCRA 815). All requisites obtaining, the decision of
of the offer to sell and because of information received that defendants the court a quo is legally justifiable.
were about to sell the property, plaintiffs were compelled to file the
complaint to compel defendants to sell the property to them.
WHEREFORE, finding the appeal unmeritorious, the judgment
appealed from is hereby AFFIRMED, but subject to the
Defendants filed their answer denying the material allegations of the following modification: The court a quo in the aforestated
complaint and interposing a special defense of lack of cause of action. decision gave the plaintiffs-appellants the right of first refusal
only if the property is sold for a purchase price of Eleven Million
After the issues were joined, defendants filed a motion for summary pesos or lower; however, considering the mercurial and
judgment which was granted by the lower court. The trial court found uncertain forces in our market economy today. We find no
that defendants' offer to sell was never accepted by the plaintiffs for the reason not to grant the same right of first refusal to herein
reason that the parties did not agree upon the terms and conditions of appellants in the event that the subject property is sold for a
the proposed sale, hence, there was no contract of sale at all. price in excess of Eleven Million pesos. No pronouncement as
Nonetheless, the lower court ruled that should the defendants to costs.
subsequently offer their property for sale at a price of P11-million or
below, plaintiffs will have the right of first refusal. Thus the dispositive SO ORDERED.
portion of the decision states:
The decision of this Court was brought to the Supreme Court by petition
WHEREFORE, judgment is hereby rendered in favor of the for review on certiorari. The Supreme Court denied the appeal on May 6,
defendants and against the plaintiffs summarily dismissing the 1991 "for insufficiency in form and substances" (Annex H, Petition).
complaint subject to the aforementioned condition that if the
defendants subsequently decide to offer their property for sale
On November 15, 1990, while CA-G.R. CV No. 21123 was pending
for a purchase price of Eleven Million Pesos or lower, then the
consideration by this Court, the Cu Unjieng spouses executed a Deed of
plaintiffs has the option to purchase the property or of first
Sale (Annex D, Petition) transferring the property in question to herein
refusal, otherwise, defendants need not offer the property to the
petitioner Buen Realty and Development Corporation, subject to the
plaintiffs if the purchase price is higher than Eleven Million Pesos.
following terms and conditions:

SO ORDERED.

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Chapter 1 (General Provisions (Art. 1156-1162)
1. That for and in consideration of the sum of FIFTEEN MILLION The gist of the motion is that the Decision of the Court dated
PESOS (P15,000,000.00), receipt of which in full is hereby September 21, 1990 as modified by the Court of Appeals in its
acknowledged, the VENDORS hereby sells, transfers and decision in CA G.R. CV-21123, and elevated to the Supreme
conveys for and in favor of the VENDEE, his heirs, executors, Court upon the petition for review and that the same was
administrators or assigns, the above-described property with all denied by the highest tribunal in its resolution dated May 6,
the improvements found therein including all the rights and 1991 in G.R. No.
interest in the said property free from all liens and L-97276, had now become final and executory. As a
encumbrances of whatever nature, except the pending consequence, there was an Entry of Judgment by the Supreme
ejectment proceeding; Court as of June 6, 1991, stating that the aforesaid modified
decision had already become final and executory.
2. That the VENDEE shall pay the Documentary Stamp Tax,
registration fees for the transfer of title in his favor and other It is the observation of the Court that this property in dispute
expenses incidental to the sale of above-described property was the subject of the Notice of Lis Pendens and that the
including capital gains tax and accrued real estate taxes. modified decision of this Court promulgated by the Court of
Appeals which had become final to the effect that should the
As a consequence of the sale, TCT No. 105254/T-881 in the name of the defendants decide to offer the property for sale for a price of
Cu Unjieng spouses was cancelled and, in lieu thereof, TCT No. 195816 P11 Million or lower, and considering the mercurial and
was issued in the name of petitioner on December 3, 1990. uncertain forces in our market economy today, the same right
of first refusal to herein plaintiffs/appellants in the event that
the subject property is sold for a price in excess of Eleven
On July 1, 1991, petitioner as the new owner of the subject property
Million pesos or more.
wrote a letter to the lessees demanding that the latter vacate the
premises.
WHEREFORE, defendants are hereby ordered to execute the
necessary Deed of Sale of the property in litigation in favor of
On July 16, 1991, the lessees wrote a reply to petitioner stating that
plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the
petitioner brought the property subject to the notice of lis
consideration of P15 Million pesos in recognition of plaintiffs'
pendens regarding Civil Case No. 87-41058 annotated on TCT No.
right of first refusal and that a new Transfer Certificate of Title
105254/T-881 in the name of the Cu Unjiengs.
be issued in favor of the buyer.

The lessees filed a Motion for Execution dated August 27, 1991 of the
All previous transactions involving the same property
Decision in Civil Case No. 87-41058 as modified by the Court of Appeals in
notwithstanding the issuance of another title to Buen Realty
CA-G.R. CV No. 21123.
Corporation, is hereby set aside as having been executed in bad
faith.
On August 30, 1991, respondent Judge issued an order (Annex A,
Petition) quoted as follows:
SO ORDERED.

Presented before the Court is a Motion for Execution filed by


On September 22, 1991 respondent Judge issued another order, the
plaintiff represented by Atty. Antonio Albano. Both defendants
dispositive portion of which reads:
Bobby Cu Unjieng and Rose Cu Unjieng represented by Atty.
Vicente Sison and Atty. Anacleto Magno respectively were duly
notified in today's consideration of the motion as evidenced by WHEREFORE, let there be Writ of Execution issue in the above-
the rubber stamp and signatures upon the copy of the Motion entitled case directing the Deputy Sheriff Ramon Enriquez of
for Execution. this Court to implement said Writ of Execution ordering the
defendants among others to comply with the aforesaid Order

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Chapter 1 (General Provisions (Art. 1156-1162)
of this Court within a period of one (1) week from receipt of stages that include its negotiation or preparation, its perfection and, finally, its
this Order and for defendants to execute the necessary Deed of consummation. Negotiation covers the period from the time the prospective contracting
Sale of the property in litigation in favor of the plaintiffs Ang Yu parties indicate interest in the contract to the time the contract is concluded (perfected).
Asuncion, Keh Tiong and Arthur Go for the consideration of The perfection of the contract takes place upon the concurrence of the essential elements
P15,000,000.00 and ordering the Register of Deeds of the City thereof. A contract which is consensual as to perfection is so established upon a mere
of Manila, to cancel and set aside the title already issued in meeting of minds, i.e., the concurrence of offer and acceptance, on the object and on the
favor of Buen Realty Corporation which was previously cause thereof. A contract which requires, in addition to the above, the delivery of the object
executed between the latter and defendants and to register the of the agreement, as in a pledge or commodatum, is commonly referred to as a real contract.
new title in favor of the aforesaid plaintiffs Ang Yu Asuncion, In a solemn contract, compliance with certain formalities prescribed by law, such as in a
Keh Tiong and Arthur Go. donation of real property, is essential in order to make the act valid, the prescribed form
being thereby an essential element thereof. The stage of consummation begins when the
SO ORDERED. parties perform their respective undertakings under the contract culminating in the
extinguishment thereof.
On the same day, September 27, 1991 the corresponding writ of
execution (Annex C, Petition) was issued.1 Until the contract is perfected, it cannot, as an independent source of obligation, serve as a
binding juridical relation. In sales, particularly, to which the topic for discussion about the
case at bench belongs, the contract is perfected when a person, called the seller, obligates
On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside
himself, for a price certain, to deliver and to transfer ownership of a thing or right to another,
and declared without force and effect the above questioned orders of the court a quo.
called the buyer, over which the latter agrees. Article 1458 of the Civil Code provides:

In this petition for review on certiorari, petitioners contend that Buen Realty can be held
Art. 1458. By the contract of sale one of the contracting parties obligates
bound by the writ of execution by virtue of the notice of lis pendens, carried over on TCT No.
himself to transfer the ownership of and to deliver a determinate thing,
195816 issued in the name of Buen Realty, at the time of the latter's purchase of the
and the other to pay therefor a price certain in money or its equivalent.
property on 15 November 1991 from the Cu Unjiengs.

A contract of sale may be absolute or conditional.


We affirm the decision of the appellate court.

When the sale is not absolute but conditional, such as in a "Contract to Sell" where invariably
A not too recent development in real estate transactions is the adoption of such
the ownership of the thing sold is retained until the fulfillment of a positive suspensive
arrangements as the right of first refusal, a purchase option and a contract to sell. For ready
condition (normally, the full payment of the purchase price), the breach of the condition will
reference, we might point out some fundamental precepts that may find some relevance to
prevent the obligation to convey title from acquiring an obligatory force.2 In Dignos vs. Court
this discussion.
of Appeals (158 SCRA 375), we have said that, although denominated a "Deed of Conditional
Sale," a sale is still absolute where the contract is devoid of any proviso that title is reserved
An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The or the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid.
obligation is constituted upon the concurrence of the essential elements thereof, viz: (a) Ownership will then be transferred to the buyer upon actual or constructive delivery (e.g., by
The vinculum juris or juridical tie which is the efficient cause established by the various the execution of a public document) of the property sold. Where the condition is imposed
sources of obligations (law, contracts, quasi-contracts, delicts and quasi-delicts); (b) upon the perfection of the contract itself, the failure of the condition would prevent such
the object which is the prestation or conduct; required to be observed (to give, to do or not perfection.3 If the condition is imposed on the obligation of a party which is not fulfilled, the
to do); and (c) the subject-persons who, viewed from the demandability of the obligation, are other party may either waive the condition or refuse to proceed with the sale (Art. 1545, Civil
the active (obligee) and the passive (obligor) subjects. Code).4

Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is a meeting of An unconditional mutual promise to buy and sell, as long as the object is made determinate
minds between two persons whereby one binds himself, with respect to the other, to give and the price is fixed, can be obligatory on the parties, and compliance therewith may
something or to render some service (Art. 1305, Civil Code). A contract undergoes various accordingly be exacted.5

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Chapter 1 (General Provisions (Art. 1156-1162)
An accepted unilateral promise which specifies the thing to be sold and the price to (2) If the period has a separate consideration, a contract of "option" is deemed perfected,
be paid, when coupled with a valuable consideration distinct and separate from the price, is and it would be a breach of that contract to withdraw the offer during the agreed period. The
what may properly be termed a perfected contract of option. This contract is legally binding, option, however, is an independent contract by itself, and it is to be distinguished from the
and in sales, it conforms with the second paragraph of Article 1479 of the Civil Code, viz: projected main agreement (subject matter of the option) which is obviously yet to be
concluded. If, in fact, the optioner-offeror withdraws the offer before its acceptance (exercise
of the option) by the optionee-offeree, the latter may not sue for specific performance on the
proposed contract ("object" of the option) since it has failed to reach its own stage of
perfection. The optioner-offeror, however, renders himself liable for damages for breach of
the option. In these cases, care should be taken of the real nature of the consideration given,
for if, in fact, it has been intended to be part of the consideration for the main contract with
Art. 1479. . . . a right of withdrawal on the part of the optionee, the main contract could be deemed
perfected; a similar instance would be an "earnest money" in a contract of sale that can
An accepted unilateral promise to buy or to sell a determinate thing for a evidence its perfection (Art. 1482, Civil Code).
price certain is binding upon the promissor if the promise is supported by
a consideration distinct from the price. (1451a)6 In the law on sales, the so-called "right of first refusal" is an innovative juridical relation.
Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 of
Observe, however, that the option is not the contract of sale itself.7 The optionee has the the Civil Code. Neither can the right of first refusal, understood in its normal concept, per
right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is se be brought within the purview of an option under the second paragraph of Article 1479,
accepted before a breach of the option, a bilateral promise to sell and to buy ensues and aforequoted, or possibly of an offer under Article 13199 of the same Code. An option or an
both parties are then reciprocally bound to comply with their respective undertakings.8 offer would require, among other things,10 a clear certainty on both the object and the cause
or consideration of the envisioned contract. In a right of first refusal, while the object might
Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect be made determinate, the exercise of the right, however, would be dependent not only on
promise (policitacion) is merely an offer. Public advertisements or solicitations and the like the grantor's eventual intention to enter into a binding juridical relation with another but
are ordinarily construed as mere invitations to make offers or only as proposals. These also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto,
relations, until a contract is perfected, are not considered binding commitments. Thus, at any it can at best be so described as merely belonging to a class of preparatory juridical relations
time prior to the perfection of the contract, either negotiating party may stop the governed not by contracts (since the essential elements to establish the vinculum juris would
negotiation. The offer, at this stage, may be withdrawn; the withdrawal is effective still be indefinite and inconclusive) but by, among other laws of general application, the
immediately after its manifestation, such as by its mailing and not necessarily when the pertinent scattered provisions of the Civil Code on human conduct.
offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a period is given to
the offeree within which to accept the offer, the following rules generally govern: Even on the premise that such right of first refusal has been decreed under a final judgment,
like here, its breach cannot justify correspondingly an issuance of a writ of execution under a
(1) If the period is not itself founded upon or supported by a consideration, the offeror is still judgment that merely recognizes its existence, nor would it sanction an action for specific
free and has the right to withdraw the offer before its acceptance, or, if an acceptance has performance without thereby negating the indispensable element of consensuality in the
been made, before the offeror's coming to know of such fact, by communicating that perfection of contracts.11 It is not to say, however, that the right of first refusal would be
withdrawal to the offeree (see Art. 1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 inconsequential for, such as already intimated above, an unjustified disregard thereof, given,
Phil. 948, holding that this rule is applicable to a unilateral promise to sell under Art. 1479, for instance, the circumstances expressed in Article 1912 of the Civil Code, can warrant a
modifying the previous decision in South Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see recovery for damages.
also Art. 1319, Civil Code; Rural Bank of Parañaque, Inc., vs. Remolado, 135 SCRA 409;
Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw, however, must not be exercised The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a
whimsically or arbitrarily; otherwise, it could give rise to a damage claim under Article 19 of "right of first refusal" in favor of petitioners. The consequence of such a declaration entails
the Civil Code which ordains that "every person must, in the exercise of his rights and in the no more than what has heretofore been said. In fine, if, as it is here so conveyed to us,
performance of his duties, act with justice, give everyone his due, and observe honesty and petitioners are aggrieved by the failure of private respondents to honor the right of first
good faith." refusal, the remedy is not a writ of execution on the judgment, since there is none to
execute, but an action for damages in a proper forum for the purpose.

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Chapter 1 (General Provisions (Art. 1156-1162)
Furthermore, whether private respondent Buen Realty Development Corporation, the vs.
alleged purchaser of the property, has acted in good faith or bad faith and whether or not it MIGUEL V. CAMPOS, substituted by JULIA ORTIGAS VDA. DE CAMPOS,1 Respondent.
should, in any case, be considered bound to respect the registration of the lis pendens in Civil
Case No. 87-41058 are matters that must be independently addressed in appropriate DECISION
proceedings. Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot be
held subject to the writ of execution issued by respondent Judge, let alone ousted from the
CHICO-NAZARIO, J.:
ownership and possession of the property, without first being duly afforded its day in court.

This is a Petition for Review on Certiorari under Rule 45 seeking the reversal of the
We are also unable to agree with petitioners that the Court of Appeals has erred in holding
Decision2 dated 11 February 1997 and Resolution dated 18 May 1999 of the Court of Appeals
that the writ of execution varies the terms of the judgment in Civil Case No. 87-41058, later
in CA-G.R. SP No. 38455.
affirmed in CA-G.R. CV-21123. The Court of Appeals, in this regard, has observed:

The facts of the case are as follows:


Finally, the questioned writ of execution is in variance with the decision
of the trial court as modified by this Court. As already stated, there was
nothing in said decision 13 that decreed the execution of a deed of sale SEC Case No. 02-94-4678 was instituted on 10 February 1994 by respondent Miguel V.
between the Cu Unjiengs and respondent lessees, or the fixing of the Campos, who filed with the Securities, Investigation and Clearing Department (SICD) of the
price of the sale, or the cancellation of title in the name of petitioner Securities and Exchange Commission (SEC), a Petition against herein petitioners Makati Stock
(Limpin vs. IAC, 147 SCRA 516; Pamantasan ng Lungsod ng Maynila vs. Exchange, Inc. (MKSE) and MKSE directors, Ma. Vivian Yuchengco, Adolfo M. Duarte, Myron
IAC, 143 SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs. CA, 122 C. Papa, Norberto C. Nazareno, George Uy-Tioco, Antonio A, Lopa, Ramon B. Arnaiz, Luis J.L.
SCRA 885). Virata, and Antonio Garcia, Jr. Respondent, in said Petition, sought: (1) the nullification of the
Resolution dated 3 June 1993 of the MKSE Board of Directors, which allegedly deprived him
of his right to participate equally in the allocation of Initial Public Offerings (IPO) of
It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not have
corporations registered with MKSE; (2) the delivery of the IPO shares he was allegedly
decreed at the time the execution of any deed of sale between the Cu Unjiengs and
deprived of, for which he would pay IPO prices; and (3) the payment of ₱2 million as moral
petitioners.
damages, ₱1 million as exemplary damages, and ₱500,000.00 as attorney’s fees and litigation
expenses.
WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the questioned
Orders, dated 30 August 1991 and 27 September 1991, of the court a quo. Costs against
On 14 February 1994, the SICD issued an Order granting respondent’s prayer for the issuance
petitioners.
of a Temporary Restraining Order to enjoin petitioners from implementing or enforcing the 3
June 1993 Resolution of the MKSE Board of Directors.
SO ORDERED.
The SICD subsequently issued another Order on 10 March 1994 granting respondent’s
Republic of the Philippines application for a Writ of Preliminary Injunction, to continuously enjoin, during the pendency
SUPREME COURT of SEC Case No. 02-94-4678, the implementation or enforcement of the MKSE Board
Manila Resolution in question. Petitioners assailed this SICD Order dated 10 March 1994 in a Petition
for Certiorari filed with the SEC en banc, docketed as SEC-EB No. 393.
THIRD DIVISION
On 11 March 1994, petitioners filed a Motion to Dismiss respondent’s Petition in SEC Case
G.R. No. 138814 April 16, 2009 No. 02-94-4678, based on the following grounds: (1) the Petition became moot due to the
cancellation of the license of MKSE; (2) the SICD had no jurisdiction over the Petition; and (3)
MAKATI STOCK EXCHANGE, INC., MA. VIVIAN YUCHENGCO, ADOLFO M. DUARTE, MYRON the Petition failed to state a cause of action.
C. PAPA, NORBERTO C. NAZARENO, GEORGE UY-TIOCO, ANTONIO A. LOPA, RAMON B.
ARNAIZ, LUIS J.L. VIRATA, and ANTONIO GARCIA, JR. Petitioners,

Page 7 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
The SICD denied petitioner’s Motion to Dismiss in an Order dated 4 May 1994. Petitioners THE COURT OF APPEALS ERRED IN HOLDING THAT THE SEC EN BANC COMMITTED GRAVE
again challenged the 4 May 1994 Order of SICD before the SEC en banc through another ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT MADE
Petition for Certiorari, docketed as SEC-EB No. 403. AN EXTENDED INQUIRY AND PROCEEDED TO MAKE A DETERMINATION AS TO THE TRUTH OF
RESPONDENT’S ALLEGATIONS IN HIS PETITION AND USED AS BASIS THE EVIDENCE ADDUCED
In an Order dated 31 May 1995 in SEC-EB No. 393, the SEC en banc nullified the 10 March DURING THE HEARING ON THE APPLICATION FOR THE WRIT OF PRELIMINARY INJUNCTION
1994 Order of SICD in SEC Case No. 02-94-4678 granting a Writ of Preliminary Injunction in TO DETERMINE THE EXISTENCE OR VALIDITY OF A STATED CAUSE OF ACTION.
favor of respondent. Likewise, in an Order dated 14 August 1995 in SEC-EB No. 403, the SEC
en banc annulled the 4 May 1994 Order of SICD in SEC Case No. 02-94-4678 denying IV.
petitioners’ Motion to Dismiss, and accordingly ordered the dismissal of respondent’s
Petition before the SICD. IPO ALLOCATIONS GRANTED TO BROKERS ARE NOT TO BE BOUGHT BY THE BROKERS FOR
THEMSELVES BUT ARE TO BE DISTRIBUTED TO THE INVESTING PUBLIC. HENCE,
Respondent filed a Petition for Certiorari with the Court of Appeals assailing the Orders of RESPONDENT’S CLAIM FOR DAMAGES IS ILLUSORY AND HIS PETITION A NUISANCE SUIT.3
the SEC en banc dated 31 May 1995 and 14 August 1995 in SEC-EB No. 393 and SEC-EB No.
403, respectively. Respondent’s Petition before the appellate court was docketed as CA-G.R. On 18 September 2001, counsel for respondent manifested to this Court that his client died
SP No. 38455. on 7 May 2001. In a Resolution dated 24 October 2001, the Court directed the substitution of
respondent by his surviving spouse, Julia Ortigas vda. de Campos.
On 11 February 1997, the Court of Appeals promulgated its Decision in CA-G.R. SP No. 38455,
granting respondent’s Petition for Certiorari, thus: Petitioners want this Court to affirm the dismissal by the SEC en banc of respondent’s
Petition in SEC Case No. 02-94-4678 for failure to state a cause of action. On the other hand,
WHEREFORE, the petition in so far as it prays for annulment of the Orders dated May 31, respondent insists on the sufficiency of his Petition and seeks the continuation of the
1995 and August 14, 1995 in SEC-EB Case Nos. 393 and 403 is GRANTED. The said orders are proceedings before the SICD.
hereby rendered null and void and set aside.
A cause of action is the act or omission by which a party violates a right of another.4 A
Petitioners filed a Motion for Reconsideration of the foregoing Decision but it was denied by complaint states a cause of action where it contains three essential elements of a cause of
the Court of Appeals in a Resolution dated 18 May 1999. action, namely: (1) the legal right of the plaintiff, (2) the correlative obligation of the
defendant, and (3) the act or omission of the defendant in violation of said legal right. If
Hence, the present Petition for Review raising the following arguments: these elements are absent, the complaint becomes vulnerable to dismissal on the ground of
failure to state a cause of action.
I.
If a defendant moves to dismiss the complaint on the ground of lack of cause of action, he is
regarded as having hypothetically admitted all the averments thereof. The test of sufficiency
THE SEC EN BANC DID NOT COMMIT GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
of the facts found in a complaint as constituting a cause of action is whether or not admitting
EXCESS OF JURISDICTION WHEN IT DISMISSED THE PETITION FILED BY RESPONDENT
the facts alleged, the court can render a valid judgment upon the same in accordance with
BECAUSE ON ITS FACE, IT FAILED TO STATE A CAUSE OF ACTION.
the prayer thereof. The hypothetical admission extends to the relevant and material facts
well pleaded in the complaint and inferences fairly deducible therefrom. Hence, if the
II. allegations in the complaint furnish sufficient basis by which the complaint can be
maintained, the same should not be dismissed regardless of the defense that may be
THE GRANT OF THE IPO ALLOCATIONS IN FAVOR OF RESPONDENT WAS A MERE assessed by the defendant.5
ACCOMMODATION GIVEN TO HIM BY THE BOARD OF [DIRECTORS] OF THE MAKATI STOCK
EXCHANGE, INC. Given the foregoing, the issue of whether respondent’s Petition in SEC Case No. 02-94-4678
sufficiently states a cause of action may be alternatively stated as whether, hypothetically
III. admitting to be true the allegations in respondent’s Petition in SEC Case No. 02-94-4678, the
SICD may render a valid judgment in accordance with the prayer of said Petition.

Page 8 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
A reading of the exact text of respondent’s Petition in SEC Case No. 02-94-4678 is, therefore, 11. However, on June 3, 1993, during a meeting of the Board of Directors of respondent-
unavoidable. Pertinent portions of the said Petition reads: corporation, individual respondents passed a resolution to stop giving petitioner the IPOs he
is entitled to, based on the ground that these shares were allegedly benefiting Gerardo O.
7. In recognition of petitioner’s invaluable services, the general membership of respondent Lanuza, Jr., who these individual respondents wanted to get even with, for having filed cases
corporation [MKSE] passed a resolution sometime in 1989 amending its Articles of before the Securities and Exchange (SEC) for their disqualification as member of the Board of
Incorporation, to include the following provision therein: Directors of respondent corporation.

"ELEVENTH – WHEREAS, Mr. Miguel Campos is the only surviving incorporator of the Makati 12. Hence, from June 3, 1993 up to the present time, petitioner has been deprived of his
Stock Exchange, Inc. who has maintained his membership; right to subscribe to the IPOs of corporations listing in the stock market at their offering
prices.
"WHEREAS, he has unselfishly served the Exchange in various capacities, as governor from
1977 to the present and as President from 1972 to 1976 and again as President from 1988 to 13. The collective act of the individual respondents in depriving petitioner of his right to a
the present; share in the IPOs for the aforementioned reason, is unjust, dishonest and done in bad faith,
causing petitioner substantial financial damage.6
"WHEREAS, such dedicated service and leadership which has contributed to the
advancement and well being not only of the Exchange and its members but also to the There is no question that the Petition in SEC Case No. 02-94-4678 asserts a right in favor of
Securities industry, needs to be recognized and appreciated; respondent, particularly, respondent’s alleged right to subscribe to the IPOs of corporations
listed in the stock market at their offering prices; and stipulates the correlative obligation of
petitioners to respect respondent’s right, specifically, by continuing to allow respondent to
"WHEREAS, as such, the Board of Governors in its meeting held on February 09, 1989 has
subscribe to the IPOs of corporations listed in the stock market at their offering prices.
correspondingly adopted a resolution recognizing his valuable service to the Exchange,
reward the same, and preserve for posterity such recognition by proposing a resolution to
the membership body which would make him as Chairman Emeritus for life and install in the However, the terms right and obligation in respondent’s Petition are not magic words that
Exchange premises a commemorative bronze plaque in his honor; would automatically lead to the conclusion that such Petition sufficiently states a cause of
action. Right and obligation are legal terms with specific legal meaning. A right is a claim or
title to an interest in anything whatsoever that is enforceable by law.7 An obligation is
"NOW, THEREFORE, for and in consideration of the above premises, the position of the
defined in the Civil Code as a juridical necessity to give, to do or not to do.8 For every right
"Chairman Emeritus" to be occupied by Mr. Miguel Campos during his lifetime and
enjoyed by any person, there is a corresponding obligation on the part of another person to
irregardless of his continued membership in the Exchange with the Privilege to attend all
respect such right. Thus, Justice J.B.L. Reyes offers9 the definition given by Arias Ramos as a
membership meetings as well as the meetings of the Board of Governors of the Exchange, is
more complete definition:
hereby created."

An obligation is a juridical relation whereby a person (called the creditor) may demand from
8. Hence, to this day, petitioner is not only an active member of the respondent corporation,
another (called the debtor) the observance of a determinative conduct (the giving, doing or
but its Chairman Emeritus as well.
not doing), and in case of breach, may demand satisfaction from the assets of the latter.

9. Correspondingly, at all times material to this petition, as an active member and Chairman
The Civil Code enumerates the sources of obligations:
Emeritus of respondent corporation, petitioner has always enjoyed the right given to all the
other members to participate equally in the Initial Public Offerings (IPOs for brevity) of
corporations. Art. 1157. Obligations arise from:

10. IPOs are shares of corporations offered for sale to the public, prior to the listing in the (1) Law;
trading floor of the country’s two stock exchanges. Normally, Twenty Five Percent (25%) of
these shares are divided equally between the two stock exchanges which in turn divide these (2) Contracts;
equally among their members, who pay therefor at the offering price.

Page 9 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
(3) Quasi-contracts; which have ripened into company practice, are considered as rights that cannot be
diminished by the employer.13 Nevertheless, even in such cases, the source of the
(4) Acts or omissions punished by law; and employees’ right is not custom, but ultimately, the law, since Article 100 of the Labor Code
explicitly prohibits elimination or diminution of benefits.
(5) Quasi-delicts.
There is no such law in this case that converts the practice of allocating IPO shares to MKSE
members, for subscription at their offering prices, into an enforceable or demandable right.
Therefore, an obligation imposed on a person, and the corresponding right granted to
Thus, even if it is hypothetically admitted that normally, twenty five percent (25%) of the
another, must be rooted in at least one of these five sources. The mere assertion of a right
IPOs are divided equally between the two stock exchanges -- which, in turn, divide their
and claim of an obligation in an initiatory pleading, whether a Complaint or Petition, without
respective allocation equally among their members, including the Chairman Emeritus, who
identifying the basis or source thereof, is merely a conclusion of fact and law. A pleading
pay for IPO shares at the offering price -- the Court cannot grant respondent’s prayer for
should state the ultimate facts essential to the rights of action or defense asserted, as
damages which allegedly resulted from the MKSE Board Resolution dated 3 June 1993
distinguished from mere conclusions of fact or conclusions of law.10 Thus, a Complaint or
deviating from said practice by no longer allocating any shares to respondent.1avvphi1
Petition filed by a person claiming a right to the Office of the President of this Republic, but
without stating the source of his purported right, cannot be said to have sufficiently stated a
cause of action. Also, a person claiming to be the owner of a parcel of land cannot merely Accordingly, the instant Petition should be granted. The Petition in SEC Case No. 02-94-4678
state that he has a right to the ownership thereof, but must likewise assert in the Complaint should be dismissed for failure to state a cause of action. It does not matter that the SEC en
either a mode of acquisition of ownership or at least a certificate of title in his name. banc, in its Order dated 14 August 1995 in SEC-EB No. 403, overstepped its bounds by not
limiting itself to the issue of whether respondent’s Petition before the SICD sufficiently stated
a cause of action. The SEC en banc may have been mistaken in considering extraneous
In the case at bar, although the Petition in SEC Case No. 02-94-4678 does allege respondent’s
evidence in granting petitioners’ Motion to Dismiss, but its discussion thereof are merely
right to subscribe to the IPOs of corporations listed in the stock market at their offering
superfluous and obiter dictum. In the main, the SEC en banc did correctly dismiss the Petition
prices, and petitioners’ obligation to continue respecting and observing such right, the
in SEC Case No. 02-94-4678 for its failure to state the basis for respondent’s alleged right, to
Petition utterly failed to lay down the source or basis of respondent’s right and/or
wit:
petitioners’ obligation.

Private respondent Campos has failed to establish the basis or authority for his alleged right
Respondent merely quoted in his Petition the MKSE Board Resolution, passed sometime in
to participate equally in the IPO allocations of the Exchange. He cited paragraph 11 of the
1989, granting him the position of Chairman Emeritus of MKSE for life. However, there is
amended articles of incorporation of the Exchange in support of his position but a careful
nothing in the said Petition from which the Court can deduce that respondent, by virtue of
reading of the said provision shows nothing therein that would bear out his claim. The
his position as Chairman Emeritus of MKSE, was granted by law, contract, or any other legal
provision merely created the position of chairman emeritus of the Exchange but it mentioned
source, the right to subscribe to the IPOs of corporations listed in the stock market at their
nothing about conferring upon the occupant thereof the right to receive IPO allocations.14
offering prices.

With the dismissal of respondent’s Petition in SEC Case No. 02-94-4678, there is no more
A meticulous review of the Petition reveals that the allocation of IPO shares was merely
need for this Court to resolve the propriety of the issuance by SCID of a writ of preliminary
alleged to have been done in accord with a practice normally observed by the members of
injunction in said case.
the stock exchange, to wit:

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated 11
IPOs are shares of corporations offered for sale to the public, prior to their listing in the
February 1997 and its Resolution dated 18 May 1999 in CA-G.R. SP No. 38455 are REVERSED
trading floor of the country’s two stock exchanges. Normally, Twenty-Five Percent (25%) of
and SET ASIDE. The Orders dated 31 May 1995 and 14 August 1995 of the Securities and
these shares are divided equally between the two stock exchanges which in turn divide these
Exchange Commission en banc in SEC-EB Case No. 393 and No. 403, respectively, are hereby
equally among their members, who pay therefor at the offering price.11(Emphasis supplied)
reinstated. No pronouncement as to costs.

A practice or custom is, as a general rule, not a source of a legally demandable or enforceable
SO ORDERED.
right.12 Indeed, in labor cases, benefits which were voluntarily given by the employer, and

Page 10 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
115 PM

SA IYO WALANG PAKINABANG DUMATING KA DIYAN-WALA-KANG PADALA DITO


KAHIT BULBUL MO

(p. 19, Annex "A")

Plaintiff-respondent Loreto Dionela alleges that the defamatory words on the telegram sent
to him not only wounded his feelings but also caused him undue embarrassment and
affected adversely his business as well because other people have come to know of said
defamatory words. Defendant corporation as a defense, alleges that the additional words in
Republic of the Philippines
Tagalog was a private joke between the sending and receiving operators and that they were
SUPREME COURT
not addressed to or intended for plaintiff and therefore did not form part of the telegram
Manila
and that the Tagalog words are not defamatory. The telegram sent through its facilities was
received in its station at Legaspi City. Nobody other than the operator manned the teletype
SECOND DIVISION machine which automatically receives telegrams being transmitted. The said telegram was
detached from the machine and placed inside a sealed envelope and delivered to plaintiff,
G.R. No. L-44748 August 29, 1986 obviously as is. The additional words in Tagalog were never noticed and were included in the
telegram when delivered.
RADIO COMMUNICATIONS OF THE PHILS., INC. (RCPI). petitioner,
vs. The trial court in finding for the plaintiff ruled as follows:
COURT OF APPEALS and LORETO DIONELA, respondents.
There is no question that the additional words in Tagalog are libelous.
O. Pythogoras Oliver for respondents. They clearly impute a vice or defect of the plaintiff. Whether or not they
were intended for the plaintiff, the effect on the plaintiff is the same. Any
PARAS, J.: person reading the additional words in Tagalog will naturally think that
they refer to the addressee, the plaintiff. There is no indication from the
face of the telegram that the additional words in Tagalog were sent as a
Before Us, is a Petition for Review by certiorari of the decision of the Court of Appeals, private joke between the operators of the defendant.
modifying the decision of the trial court in a civil case for recovery of damages against
petitioner corporation by reducing the award to private respondent Loreto Dionela of moral
damages from P40,000 to Pl5,000, and attorney's fees from P3,000 to P2,000. The defendant is sued directly not as an employer. The business of the
defendant is to transmit telegrams. It will open the door to frauds and
allow the defendant to act with impunity if it can escape liability by the
The basis of the complaint against the defendant corporation is a telegram sent through its simple expedient of showing that its employees acted beyond the scope
Manila Office to the offended party, Loreto Dionela, reading as follows: of their assigned tasks.

176 AS JR 1215PM 9 PAID MANDALUYONG JUL 22-66 LORETO DIONELA CABANGAN The liability of the defendant is predicated not only on Article 33 of the
LEGASPI CITY Civil Code of the Philippines but on the following articles of said Code:

WIRE ARRIVAL OF CHECK FER ART. 19.- Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
LORETO DIONELA-CABANGAN-WIRE ARRIVAL OF CHECK-PER observe honesty and good faith.

Page 11 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
ART. 20.-Every person who, contrary to law, wilfully or negligently causes After a motion for reconsideration was denied by the appellate court, petitioner came to Us
damage to another, shall indemnify the latter for the same. with the following:

There is sufficient publication of the libelous Tagalog words. The office ASSIGNMENT OF ERRORS
file of the defendant containing copies of telegrams received are open
and held together only by a metal fastener. Moreover, they are open to
view and inspection by third parties.

It follows that the plaintiff is entitled to damages and attorney's fees. The
plaintiff is a businessman. The libelous Tagalog words must have affected
I
his business and social standing in the community. The Court fixes the
amount of P40,000.00 as the reasonable amount of moral damages and
the amount of P3,000.00 as attorney's fee which the defendant should The Honorable Court of Appeals erred in holding that Petitioner-
pay the plaintiff. (pp. 15-16, Record on Appeal) employer should answer directly and primarily for the civil liability arising
from the criminal act of its employee.
The respondent appellate court in its assailed decision confirming the aforegoing findings of
the lower court stated: II

The proximate cause, therefore, resulting in injury to appellee, was the The Honorable Court of Appeals erred in holding that there was sufficient
failure of the appellant to take the necessary or precautionary steps to publication of the alleged libelous telegram in question, as contemplated
avoid the occurrence of the humiliating incident now complained of. The by law on libel.
company had not imposed any safeguard against such eventualities and
this void in its operating procedure does not speak well of its concern for III
their clientele's interests. Negligence here is very patent. This negligence
is imputable to appellant and not to its employees. The Honorable Court of Appeals erred in holding that the liability of
petitioner-company-employer is predicated on Articles 19 and 20 of the
The claim that there was no publication of the libelous words in Tagalog Civil Code, Articles on Human Relations.
is also without merit. The fact that a carbon copy of the telegram was
filed among other telegrams and left to hang for the public to see, open IV
for inspection by a third party is sufficient publication. It would have been
otherwise perhaps had the telegram been placed and kept in a secured
place where no one may have had a chance to read it without appellee's The Honorable Court of Appeals erred in awarding Atty's. fees. (p. 4,
permission. Record)

The additional Tagalog words at the bottom of the telegram are, as Petitioner's contentions do not merit our consideration. The action for damages was filed in
correctly found by the lower court, libelous per se, and from which the lower court directly against respondent corporation not as an employer subsidiarily liable
malice may be presumed in the absence of any showing of good intention under the provisions of Article 1161 of the New Civil Code in relation to Art. 103 of the
and justifiable motive on the part of the appellant. The law implies Revised Penal Code. The cause of action of the private respondent is based on Arts. 19 and
damages in this instance (Quemel vs. Court of Appeals, L-22794, January 20 of the New Civil Code (supra). As well as on respondent's breach of contract thru the
16, 1968; 22 SCRA 44). The award of P40,000.00 as moral damages is negligence of its own employees. 1
hereby reduced to P15,000.00 and for attorney's fees the amount of
P2,000.00 is awarded. (pp. 22-23, record) Petitioner is a domestic corporation engaged in the business of receiving and transmitting
messages. Everytime a person transmits a message through the facilities of the petitioner, a

Page 12 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
contract is entered into. Upon receipt of the rate or fee fixed, the petitioner undertakes to its name (transfer certificate of title No. 64330, Register of Deeds, Manila). After liberation,
transmit the message accurately. There is no question that in the case at bar, libelous more specifically on April 4, 1946, the Alien Property Custodian of the United States of
matters were included in the message transmitted, without the consent or knowledge of the America took possession, control, and custody thereof under section 12 of the Trading with
sender. There is a clear case of breach of contract by the petitioner in adding extraneous and the Enemy Act, 40 Stat., 411, for the reason that it belonged to an enemy national. During
libelous matters in the message sent to the private respondent. As a corporation, the the year 1946 the property was occupied by the Copra Export Management Company under
petitioner can act only through its employees. Hence the acts of its employees in receiving a custodianship agreement with United States Alien Property Custodian (Exhibit G), and
and transmitting messages are the acts of the petitioner. To hold that the petitioner is not when it vacated the property it was occupied by the defendant herein. The Philippine
liable directly for the acts of its employees in the pursuit of petitioner's business is to deprive Government made representations with the Office Alien Property Custodian for the use of
the general public availing of the services of the petitioner of an effective and adequate property by the Government (see Exhibits 2, 2-A, 2-B, and 1). On March 31, 1947, the
remedy. In most cases, negligence must be proved in order that plaintiff may recover. defendant was authorized to repair the warehouse on the land, and actually spent thereon
However, since negligence may be hard to substantiate in some cases, we may apply the the repairs the sum of P26,898.27. In 1948, defendant leased one-third of the warehouse to
doctrine of RES IPSA LOQUITUR (the thing speaks for itself), by considering the presence of one Dioscoro Sarile at a monthly rental of P500, which was later raised to P1,000 a month.
facts or circumstances surrounding the injury. Sarile did not pay the rents, so action was brought against him. It is not shown, however, if
the judgment was ever executed.
WHEREFORE, premises considered, the judgment of the appellate court is hereby AFFIRMED.
Plaintiff made claim to the property before the Alien Property Custodian of the United States,
SO ORDERED. but as this was denied, it brought an action in court (Court of First Instance of Manila, civil
case No. 5007, entitled "La Sagrada Orden Predicadores de la Provinicia del Santisimo Rosario
de Filipinas," vs. Philippine Alien Property Administrator, defendant, Republic of the
Republic of the Philippines
Philippines, intervenor) to annul the sale of property of Taiwan Tekkosho, and recover its
SUPREME COURT
possession. The Republic of the Philippines was allowed to intervene in the action. The case
Manila
did not come for trial because the parties presented a joint petition in which it is claimed by
plaintiff that the sale in favor of the Taiwan Tekkosho was null and void because it was
EN BANC executed under threats, duress, and intimidation, and it was agreed that the title issued in
the name of the Taiwan Tekkosho be cancelled and the original title of plaintiff re-issued;
G.R. No. L-3756 June 30, 1952 that the claims, rights, title, and interest of the Alien Property Custodian be cancelled and
held for naught; that the occupant National Coconut Corporation has until February 28, 1949,
SAGRADA ORDEN DE PREDICADORES DEL SANTISMO ROSARIO DE FILIPINAS, plaintiff- to recover its equipment from the property and vacate the premises; that plaintiff, upon
appellee, entry of judgment, pay to the Philippine Alien Property Administration the sum of P140,000;
vs. and that the Philippine Alien Property Administration be free from responsibility or liability
NATIONAL COCONUT CORPORATION, defendant-appellant. for any act of the National Coconut Corporation, etc. Pursuant to the agreement the court
rendered judgment releasing the defendant and the intervenor from liability, but reversing to
the plaintiff the right to recover from the National Coconut Corporation reasonable rentals
First Assistant Corporate Counsel Federico C. Alikpala and Assistant Attorney Augusto Kalaw for the use and occupation of the premises. (Exhibit A-1.)
for appellant.
Ramirez and Ortigas for appellee.
The present action is to recover the reasonable rentals from August, 1946, the date when the
defendant began to occupy the premises, to the date it vacated it. The defendant does not
LABRADOR, J.: contest its liability for the rentals at the rate of P3,000 per month from February 28, 1949
(the date specified in the judgment in civil case No. 5007), but resists the claim therefor prior
This is an action to recover the possession of a piece of real property (land and warehouses) to this date. It interposes the defense that it occupied the property in good faith, under no
situated in Pandacan Manila, and the rentals for its occupation and use. The land belongs to obligation whatsoever to pay rentals for the use and occupation of the warehouse. Judgment
the plaintiff, in whose name the title was registered before the war. On January 4, 1943, was rendered for the plaintiff to recover from the defendant the sum of P3,000 a month, as
during the Japanese military occupation, the land was acquired by a Japanese corporation by reasonable rentals, from August, 1946, to the date the defendant vacates the premises. The
the name of Taiwan Tekkosho for the sum of P140,00, and thereupon title thereto issued in judgment declares that plaintiff has always been the owner, as the sale of Japanese

Page 13 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
purchaser was void ab initio; that the Alien Property Administration never acquired any right so easily jumped to the conclusion that the occupant is liable for the value of such use and
to the property, but that it held the same in trust until the determination as to whether or occupation. If defendant-appellant is liable at all, its obligations, must arise from any of the
not the owner is an enemy citizen. The trial court further declares that defendant can not four sources of obligations, namley, law, contract or quasi-contract, crime, or negligence.
claim any better rights than its predecessor, the Alien Property Administration, and that as (Article 1089, Spanish Civil Code.) Defendant-appellant is not guilty of any offense at all,
defendant has used the property and had subleased portion thereof, it must pay reasonable because it entered the premises and occupied it with the permission of the entity which had
rentals for its occupation. the legal control and administration thereof, the Allien Property Administration. Neither was
there any negligence on its part. There was also no privity (of contract or obligation) between
Against this judgment this appeal has been interposed, the following assignment of error the Alien Property Custodian and the Taiwan Tekkosho, which had secured the possession of
having been made on defendant-appellant's behalf: the property from the plaintiff-appellee by the use of duress, such that the Alien Property
Custodian or its permittee (defendant-appellant) may be held responsible for the supposed
illegality of the occupation of the property by the said Taiwan Tekkosho. The Allien Property
The trial court erred in holding the defendant liable for rentals or compensation for
Administration had the control and administration of the property not as successor to the
the use and occupation of the property from the middle of August, 1946, to
interests of the enemy holder of the title, the Taiwan Tekkosho, but by express provision of
December 14, 1948.
law (Trading with the Enemy Act of the United States, 40 Stat., 411; 50 U.S.C.A., 189). Neither
is it a trustee of the former owner, the plaintiff-appellee herein, but a trustee of then
1. Want to "ownership rights" of the Philippine Alien Property Administration did Government of the United States (32 Op. Atty. Gen. 249; 50 U.S.C.A. 283), in its own right, to
not render illegal or invalidate its grant to the defendant of the free use of the exclusion of, and against the claim or title of, the enemy owner. (Youghioheny & Ohio
property. Coal Co. vs. Lasevich [1920], 179 N.W., 355; 171 Wis., 347; U.S.C.A., 282-283.) From August,
1946, when defendant-appellant took possession, to the late of judgment on February 28,
2. the decision of the Court of First Instance of Manila declaring the sale by the 1948, Allien Property Administration had the absolute control of the property as trustee of
plaintiff to the Japanese purchaser null and void ab initio and that the plaintiff was the Government of the United States, with power to dispose of it by sale or otherwise, as
and has remained as the legal owner of the property, without legal interruption, is though it were the absolute owner. (U.S vs. Chemical Foundation [C.C.A. Del. 1925], 5 F. [2d],
not conclusive. 191; 50 U.S.C.A., 283.) Therefore, even if defendant-appellant were liable to the Allien
Property Administration for rentals, these would not accrue to the benefit of the plaintiff-
3. Reservation to the plaintiff of the right to recover from the defendant appellee, the owner, but to the United States Government.
corporation not binding on the later;
But there is another ground why the claim or rentals can not be made against defendant-
4. Use of the property for commercial purposes in itself alone does not justify appellant. There was no agreement between the Alien Property Custodian and the
payment of rentals. defendant-appellant for the latter to pay rentals on the property. The existence of an implied
agreement to that effect is contrary to the circumstances. The copra Export Management
Company, which preceded the defendant-appellant, in the possession and use of the
5. Defendant's possession was in good faith. property, does not appear to have paid rentals therefor, as it occupied it by what the parties
denominated a "custodianship agreement," and there is no provision therein for the
6. Defendant's possession in the nature of usufruct. payment of rentals or of any compensation for its custody and or occupation and the use.
The Trading with the Enemy Act, as originally enacted, was purely a measure of conversation,
In reply, plaintiff-appellee's counsel contends that the Philippine Allien Property hence, it is very unlikely that rentals were demanded for the use of the property. When the
Administration (PAPA) was a mere administrator of the owner (who ultimately was decided National coconut Corporation succeeded the Copra Export Management Company in the
to be plaintiff), and that as defendant has used it for commercial purposes and has leased possession and use of the property, it must have been also free from payment of rentals,
portion of it, it should be responsible therefore to the owner, who had been deprived of the especially as it was Government corporation, and steps where then being taken by the
possession for so many years. (Appellee's brief, pp. 20, 23.) Philippine Government to secure the property for the National Coconut Corporation. So that
the circumstances do not justify the finding that there was an implied agreement that the
defendant-appellant was to pay for the use and occupation of the premises at all.
We can not understand how the trial court, from the mere fact that plaintiff-appellee was
the owner of the property and the defendant-appellant the occupant, which used for its own
benefit but by the express permission of the Alien Property Custodian of the United States,

Page 14 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
The above considerations show that plaintiff-appellee's claim for rentals before it obtained their daughter-in-law who was about to give birth to a child; that therefore, and after
the judgment annulling the sale of the Taiwan Tekkosho may not be predicated on any consultation with the attending physician, Dr. Escaño, it was found necessary, on account of
negligence or offense of the defendant-appellant, or any contract, express or implied, the difficult birth, to remove the fetus by means of forceps which operation was performed
because the Allien Property Administration was neither a trustee of plaintiff-appellee, nor a by the plaintiff, who also had to remove the afterbirth, in which services he was occupied
privy to the obligations of the Taiwan Tekkosho, its title being based by legal provision of the until the following morning, and that afterwards, on the same day, he visited the patient
seizure of enemy property. We have also tried in vain to find a law or provision thereof, or several times; that the just and equitable value of the services rendered by him was P500,
any principle in quasi contracts or equity, upon which the claim can be supported. On the which the defendants refuse to pay without alleging any good reason therefor; that for said
contrary, as defendant-appellant entered into possession without any expectation of liability reason he prayed that the judgment be entered in his favor as against the defendants, or any
for such use and occupation, it is only fair and just that it may not be held liable therefor. And of them, for the sum of P500 and costs, together with any other relief that might be deemed
as to the rents it collected from its lessee, the same should accrue to it as a possessor in good proper.
faith, as this Court has already expressly held. (Resolution, National Coconut Corporation vs.
Geronimo, 83 Phil. 467.) In answer to the complaint counsel for the defendants denied all of the allegation therein
contained and alleged as a special defense, that their daughter-in-law had died in
Lastly, the reservation of this action may not be considered as vesting a new right; if no right consequence of the said childbirth, and that when she was alive she lived with her husband
to claim for rentals existed at the time of the reservation, no rights can arise or accrue from independently and in a separate house without any relation whatever with them, and that, if
such reservation alone. on the day when she gave birth she was in the house of the defendants, her stay their was
accidental and due to fortuitous circumstances; therefore, he prayed that the defendants be
Wherefore, the part of the judgment appealed from, which sentences defendant-appellant absolved of the complaint with costs against the plaintiff.
to pay rentals from August, 1946, to February 28, 1949, is hereby reversed. In all other
respects the judgment is affirmed. Costs of this appeal shall be against the plaintiff-appellee. The plaintiff demurred to the above answer, and the court below sustained the demurrer,
directing the defendants, on the 23rd of January, 1907, to amend their answer. In
Republic of the Philippines compliance with this order the defendants presented, on the same date, their amended
SUPREME COURT answer, denying each and every one of the allegations contained in the complaint, and
Manila requesting that the same be dismissed with costs.

EN BANC As a result of the evidence adduced by both parties, judgment was entered by the court
below on the 5th of April, 1907, whereby the defendants were absolved from the former
complaint, on account of the lack of sufficient evidence to establish a right of action against
G.R. No. L-4089 January 12, 1909
the defendants, with costs against the plaintiff, who excepted to the said judgment and in
addition moved for a new trial on the ground that the judgment was contrary to law; the
ARTURO PELAYO, plaintiff-appellant, motion was overruled and the plaintiff excepted and in due course presented the
vs. corresponding bill of exceptions. The motion of the defendants requesting that the
MARCELO LAURON, ET AL., defendants-appellees. declaration contained in the judgment that the defendants had demanded therefrom, for the
reason that, according to the evidence, no such request had been made, was also denied,
J.H. Junquera, for appellant. and to the decision the defendants excepted.
Filemon Sotto, for appellee.
Assuming that it is a real fact of knowledge by the defendants that the plaintiff, by virtue of
TORRES, J.: having been sent for by the former, attended a physician and rendered professional services
to a daughter-in-law of the said defendants during a difficult and laborious childbirth, in
On the 23rd of November, 1906, Arturo Pelayo, a physician residing in Cebu, filed a complaint order to decide the claim of the said physician regarding the recovery of his fees, it becomes
against Marcelo Lauron and Juana Abella setting forth that on or about the 13th of October necessary to decide who is bound to pay the bill, whether the father and mother-in-law of
of said year, at night, the plaintiff was called to the house of the defendants, situated in San the patient, or the husband of the latter.
Nicolas, and that upon arrival he was requested by them to render medical assistance to

Page 15 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
According to article 1089 of the Civil Code, obligations are created by law, by contracts, by In applying the provisions of the Civil Code in an action for support, the supreme court of
quasi-contracts, and by illicit acts and omissions or by those in which any kind of fault or Spain, while recognizing the validity and efficiency of a contract to furnish support wherein a
negligence occurs. person bound himself to support another who was not his relative, established the rule that
the law does impose the obligation to pay for the support of a stranger, but as the liability
Obligations arising from law are not presumed. Those expressly determined in the code or in arose out of a contract, the stipulations of the agreement must be held. (Decision of May 11,
special laws, etc., are the only demandable ones. Obligations arising from contracts have 1897.)
legal force between the contracting parties and must be fulfilled in accordance with their
stipulations. (Arts. 1090 and 1091.) Within the meaning of the law, the father and mother-in-law are strangers with respect to
the obligation that devolves upon the husband to provide support, among which is the
The rendering of medical assistance in case of illness is comprised among the mutual furnishing of medical assistance to his wife at the time of her confinement; and, on the other
obligations to which the spouses are bound by way of mutual support. (Arts. 142 and 143.) hand, it does not appear that a contract existed between the defendants and the plaintiff
physician, for which reason it is obvious that the former can not be compelled to pay fees
which they are under no liability to pay because it does not appear that they consented to
If every obligation consists in giving, doing or not doing something (art. 1088), and spouses
bind themselves.
are mutually bound to support each other, there can be no question but that, when either of
them by reason of illness should be in need of medical assistance, the other is under the
unavoidable obligation to furnish the necessary services of a physician in order that health The foregoing suffices to demonstrate that the first and second errors assigned to the
may be restored, and he or she may be freed from the sickness by which life is jeopardized; judgment below are unfounded, because, if the plaintiff has no right of action against the
the party bound to furnish such support is therefore liable for all expenses, including the fees defendants, it is needless to declare whether or not the use of forceps is a surgical operation.
of the medical expert for his professional services. This liability originates from the above-
cited mutual obligation which the law has expressly established between the married couple. Therefore, in view of the consideration hereinbefore set forth, it is our opinion that the
judgment appealed from should be affirmed with the costs against the appellant. So ordered.
In the face of the above legal precepts it is unquestionable that the person bound to pay the
fees due to the plaintiff for the professional services that he rendered to the daughter-in-law Republic of the Philippines
of the defendants during her childbirth, is the husband of the patient and not her father and SUPREME COURT
mother- in-law, the defendants herein. The fact that it was not the husband who called the Manila
plaintiff and requested his assistance for his wife is no bar to the fulfillment of the said
obligation, as the defendants, in view of the imminent danger, to which the life of the patient SECOND DIVISION
was at that moment exposed, considered that medical assistance was urgently needed, and
the obligation of the husband to furnish his wife in the indispensable services of a physician
G.R. No. 96452 May 7, 1992
at such critical moments is specially established by the law, as has been seen, and
compliance therewith is unavoidable; therefore, the plaintiff, who believes that he is entitled
to recover his fees, must direct his action against the husband who is under obligation to PERLA COMPANIA DE SEGUROS, INC. petitioner,
furnish medical assistance to his lawful wife in such an emergency. vs.
THE COURT OF APPEALS, HERMINIO LIM and EVELYN LIM, respondents.
From the foregoing it may readily be understood that it was improper to have brought an
action against the defendants simply because they were the parties who called the plaintiff G.R. No. 96493 May 7, 1992
and requested him to assist the patient during her difficult confinement, and also, possibly,
because they were her father and mother-in-law and the sickness occurred in their house. FCP CREDIT CORPORATION, petitioner,
The defendants were not, nor are they now, under any obligation by virtue of any legal
provision, to pay the fees claimed, nor in consequence of any contract entered into between vs.
them and the plaintiff from which such obligation might have arisen.

Page 16 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
THE COURT OF APPEALS, Special Third Division, HERMINIO LIM and EVELYN On the same date, Supercars, Inc., with notice to private respondents spouses, assigned to
LIM, respondents. petitioner FCP Credit Corporation (FCP for brevity) its rights, title and interest on said
promissory note and chattel mortgage as shown by the Deed of Assignment. 6
Yolanda Quisumbing-Javellana and Nelson A. Loyola for petitioner.
At around 2:30 P.M. of November 9, 1982, said vehicle was carnapped while parked at the
Wilson L. Tee for respondents Herminio and Evelyn Lim. back of Broadway Centrum along N. Domingo Street, Quezon City. Private respondent Evelyn
Lim, who was driving said car before it was carnapped, immediately called up the Anti-
Carnapping Unit of the Philippine Constabulary to report said incident and thereafter, went
to the nearest police substation at Araneta, Cubao to make a police report regarding said
incident, as shown by the certification issued by the Quezon City police. 7
NOCON, J.:
On November 10, 1982, private respondent Evelyn Lim reported said incident to the Land
These are two petitions for review on certiorari, one filed by Perla Compania de Seguros, Inc. Transportation Commission in Quezon City, as shown by the letter of her counsel to said
in G.R. No. 96452, and the other by FCP Credit Corporation in G.R. No. 96493, both seeking to office, 8 in compliance with the insurance requirement. She also filed a complaint with the
annul and set aside the decision dated July 30, 1990 1 of the Court of Appeals in CA-G.R. No. Headquarters, Constabulary Highway Patrol Group. 9
13037, which reversed the decision of the Regional Trial Court of Manila, Branch VIII in Civil
Case No. 83-19098 for replevin and damages. The dispositive portion of the decision of the
On November 11, 1982, private respondent filed a claim for loss with the petitioner Perla but
Court of Appeals reads, as follows:
said claim was denied on November 18, 1982 10 on the ground that Evelyn Lim, who was
using the vehicle before it was carnapped, was in possession of an expired driver's license at
WHEREFORE, the decision appealed from is reversed; and appellee Perla the time of the loss of said vehicle which is in violation of the authorized driver clause of the
Compania de Seguros, Inc. is ordered to indemnify appellants Herminio insurance policy, which states, to wit:
and Evelyn Lim for the loss of their insured vehicle; while said appellants
are ordered to pay appellee FCP Credit Corporation all the unpaid
AUTHORIZED DRIVER:
installments that were due and payable before the date said vehicle was
carnapped; and appellee Perla Compania de Seguros, Inc. is also ordered
to pay appellants moral damages of P12,000.00 for the latter's mental Any of the following: (a) The Insured (b) Any person driving on the
sufferings, exemplary damages of P20,000.00 for appellee Perla Insured's order, or with his permission. Provided that the person driving
Compania de Seguros, Inc.'s unreasonable refusal on sham grounds to is permitted, in accordance with the licensing or other laws or
honor the just insurance claim of appellants by way of example and regulations, to drive the Scheduled Vehicle, or has been permitted and is
correction for public good, and attorney's fees of P10,000.00 as a just and not disqualified by order of a Court of Law or by reason of any enactment
equitable reimbursement for the expenses incurred therefor by or regulation in that behalf. 11
appellants, and the costs of suit both in the lower court and in this
appeal. 2 On November 17, 1982, private respondents requests from petitioner FCP for a suspension of
payment on the monthly amortization agreed upon due to the loss of the vehicle and, since
The facts as found by the trial court are as follows: the carnapped vehicle insured with petitioner Perla, said insurance company should be made
to pay the remaining balance of the promissory note and the chattel mortgage contract.
On December 24, 1981, private respondents spouses Herminio and Evelyn Lim executed a
promissory note in favor Supercars, Inc. in the sum of P77,940.00, payable in monthly Perla, however, denied private respondents' claim. Consequently, petitioner FCP demanded
installments according to the schedule of payment indicated in said note, 3 and secured by a that private respondents pay the whole balance of the promissory note or to return the
chattel mortgage over a brand new red Ford Laser 1300 5DR Hatchback 1981 model with vehicle 12 but the latter refused.
motor and serial No. SUPJYK-03780, which is registered under the name of private
respondent Herminio Lim 4 and insured with the petitioner Perla Compania de Seguros, Inc.
(Perla for brevity) for comprehensive coverage under Policy No. PC/41PP-QCB-43383. 5

Page 17 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
On July 25, 1983, petitioner FCP filed a complaint against private respondents, who in turn Where a car is admittedly, as in this case, unlawfully and wrongfully taken without the
filed an amended third party complaint against petitioner Perla on December 8, 1983. After owner's consent or knowledge, such taking constitutes theft, and, therefore, it is the
trial on the merits, the trial court rendered a decision, the dispositive portion which reads: "THEFT"' clause, and not the "AUTHORIZED DRIVER" clause that should apply. As correctly
stated by the respondent court in its decision:
WHEREFORE, in view of the foregoing, judgment is hereby rendered as
follows: . . . Theft is an entirely different legal concept from that of accident. Theft
is committed by a person with the intent to gain or, to put it in another
1. Ordering defendants Herminio Lim and Evelyn Lim to pay, jointly and way, with the concurrence of the doer's will. On the other hand, accident,
severally, plaintiff the sum of P55,055.93 plus interest thereon at the rate although it may proceed or result from negligence, is the happening of an
of 24% per annum from July 2, 1983 until fully paid; event without the concurrence of the will of the person by whose agency
it was caused. (Bouvier's Law Dictionary, Vol. I, 1914 ed., p. 101).
2. Ordering defendants to pay plaintiff P50,000.00 as and for attorney's
fees; and the costs of suit. Clearly, the risk against accident is distinct from the risk against theft. The
"authorized driver clause" in a typical insurance policy is in contemplation
or anticipation of accident in the legal sense in which it should be
Upon the other hand, likewise, ordering the DISMISSAL of the Third-Party
understood, and not in contemplation or anticipation of an event such as
Complaint filed against Third-Party Defendant. 13
theft. The distinction — often seized upon by insurance companies in
resisting claims from their assureds — between death occurring as a
Not satisfied with said decision, private respondents appealed the same to the Court of result of accident and death occurring as a result of intent may, by
Appeals, which reversed said decision. analogy, apply to the case at bar. Thus, if the insured vehicle had figured
in an accident at the time she drove it with an expired license, then,
After petitioners' separate motions for reconsideration were denied by the Court of Appeals appellee Perla Compania could properly resist appellants' claim for
in its resolution of December 10, 1990, petitioners filed these separate petitions for review indemnification for the loss or destruction of the vehicle resulting from
on certiorari. the accident. But in the present case. The loss of the insured vehicle did
not result from an accident where intent was involved; the loss in the
Petitioner Perla alleged that there was grave abuse of discretion on the part of the appellate present case was caused by theft, the commission of which was attended
court in holding that private respondents did not violate the insurance contract because the by intent. 15
authorized driver clause is not applicable to the "Theft" clause of said Contract.
It is worthy to note that there is no causal connection between the possession of a valid
For its part, petitioner FCP raised the issue of whether or not the loss of the collateral driver's license and the loss of a vehicle. To rule otherwise would render car insurance
exempted the debtor from his admitted obligations under the promissory note particularly practically a sham since an insurance company can easily escape liability by citing restrictions
the payment of interest, litigation expenses and attorney's fees. which are not applicable or germane to the claim, thereby reducing indemnity to a shadow.

We find no merit in Perla's petition. We however find the petition of FCP meritorious.

The comprehensive motor car insurance policy issued by petitioner Perla undertook to This Court agrees with petitioner FCP that private respondents are not relieved of their
indemnify the private respondents against loss or damage to the car (a) by accidental obligation to pay the former the installments due on the promissory note on account of the
collision or overturning, or collision or overturning consequent upon mechanical breakdown loss of the automobile. The chattel mortgage constituted over the automobile is merely an
or consequent upon wear and tear; (b) by fire, external explosion, self-ignition or lightning or accessory contract to the promissory note. Being the principal contract, the promissory note
burglary, housebreaking or theft; and (c) by malicious act.14 is unaffected by whatever befalls the subject matter of the accessory contract. Therefore, the
unpaid balance on the promissory note should be paid, and not just the installments due and
payable before the automobile was carnapped, as erronously held by the Court of Appeals.

Page 18 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
However, this does not mean that private respondents are bound to pay the interest, Because petitioner Perla had unreasonably denied their valid claim, private respondents
litigation expenses and attorney's fees stipulated in the promissory note. Because of the should not be made to pay the interest, liquidated damages and attorney's fees as stipulated
peculiar relationship between the three contracts in this case, i.e., the promissory note, the in the promissory note. As mentioned above, the contract of indemnity was procured to
chattel mortgage contract and the insurance policy, this Court is compelled to construe all insure the return of the money loaned from petitioner FCP, and the unjustified refusal of
three contracts as intimately interrelated to each other, despite the fact that at first glance petitioner Perla to recognize the valid claim of the private respondents should not in any way
there is no relationship whatsoever between the parties thereto. prejudice the latter.

Under the promissory note, private respondents are obliged to pay Supercars, Inc. the Private respondents can not be said to have unduly enriched themselves at the expense of
amount stated therein in accordance with the schedule provided for. To secure said petitioner FCP since they will be required to pay the latter the unpaid balance of its
promissory note, private respondents constituted a chattel mortgage in favor of Supercars, obligation under the promissory note.
Inc. over the automobile the former purchased from the latter. The chattel mortgage, in turn,
required private respondents to insure the automobile and to make the proceeds thereof In view of the foregoing discussion, We hold that the Court of Appeals did not err in requiring
payable to Supercars, Inc. The promissory note and chattel mortgage were assigned by petitioner Perla to indemnify private respondents for the loss of their insured vehicle.
Supercars, Inc. to petitioner FCP, with the knowledge of private respondents. Private However, the latter should be ordered to pay petitioner FCP the amount of P55,055.93,
respondents were able to secure an insurance policy from petitioner Perla, and the same was representing the unpaid installments from December 30, 1982 up to July 1, 1983, as shown in
made specifically payable to petitioner FCP. 16 the statement of account prepared by petitioner FCP, 18 plus legal interest from July 2, 1983
until fully paid.
The insurance policy was therefore meant to be an additional security to the principal
contract, that is, to insure that the promissory note will still be paid in case the automobile is As to the award of moral damages, exemplary damages and attorney's fees, private
lost through accident or theft. The Chattel Mortgage Contract provided that: respondents are legally entitled to the same since petitioner Perla had acted in bad faith by
unreasonably refusing to honor the insurance claim of the private respondents. Besides,
THE SAID MORTGAGOR COVENANTS AND AGREES THAT HE/IT WILL awards for moral and exemplary damages, as well as attorney's fees are left to the sound
CAUSE THE PROPERTY/IES HEREIN-ABOVE MORTGAGED TO BE INSURED discretion of the Court. Such discretion, if well exercised, will not be disturbed on appeal. 19
AGAINST LOSS OR DAMAGE BY ACCIDENT, THEFT AND FIRE FOR A PERIOD
OF ONE YEAR FROM DATE HEREOF AND EVERY YEAR THEREAFTER UNTIL WHEREFORE, the assailed decision of the Court of Appeals is hereby MODIFIED to require
THE MORTGAGE OBLIGATION IS FULLY PAID WITH AN INSURANCE private respondents to pay petitioner FCP the amount of P55,055.93, with legal interest from
COMPANY OR COMPANIES ACCEPTABLE TO THE MORTGAGEE IN AN July 2, 1983 until fully paid. The decision appealed from is hereby affirmed as to all other
AMOUNT NOT LESS THAN THE OUTSTANDING BALANCE OF THE respects. No pronouncement as to costs.
MORTGAGE OBLIGATION; THAT HE/IT WILL MAKE ALL LOSS, IF ANY,
UNDER SUCH POLICY OR POLICIES, PAYABLE TO THE MORTGAGE OR ITS
SO ORDERED.
ASSIGNS AS ITS INTERESTS MAY APPEAR AND FORTHWITH DELIVER SUCH
POLICY OR POLICIES TO THE MORTGAGEE, . . . . 17
Republic of the Philippines
SUPREME COURT
It is clear from the abovementioned provision that upon the loss of the insured vehicle, the
Manila
insurance company Perla undertakes to pay directly to the mortgagor or to their assignee,
FCP, the outstanding balance of the mortgage at the time of said loss under the mortgage
contract. If the claim on the insurance policy had been approved by petitioner Perla, it would EN BANC
have paid the proceeds thereof directly to petitioner FCP, and this would have had the effect
of extinguishing private respondents' obligation to petitioner FCP. Therefore, private G.R. No. L-21676 February 28, 1969
respondents were justified in asking petitioner FCP to demand the unpaid installments from
petitioner Perla. VICENTE ALDABA, ET AL., petitioners,
vs.
COURT OF APPEALS, CESAR ALDABA, ET AL., respondents.

Page 19 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
Rodas and Almeda for petitioners. herein respondents Cesar Aldaba and Emmanuel Bautista and the Register of Deeds of
Dakila F. Castro and Associates for respondents. Manila, alleging that they had become the owners of the two lots in question, and praying
that the deed of partition entered into by Estanislao Bautista and Cesar Aldaba be declared
ZALDIVAR, J.: null and void with respect to Lot No. 32, covered by Transfer Certificate of Title No. 1334, and
lot No. 34 covered by Transfer Certificate of Title No 1335; that said lots be declared the
property of therein plaintiffs (herein petitioners); and that the Register of Deeds of Manila be
This is a petition to review the decision of the Court of Appeals in case CA-G.R. No. 27561-R,
ordered to cancel TCT Nos. 49996 and 49997 in the name of Emmanuel Bautista and in lieu
entitled "Vicente Aldaba, et al., plaintiffs-appellants, versus Cesar Aldaba, et al., defendants-
thereof issue two new TCTs in the name of therein plaintiffs.
appellees", affirming the decision of the Court of First Instance of Manila in its Civil Case No.
41260.
After hearing, the court a quo rendered a decision dismissing the complaint, and declaring,
among others, that if the deceased Belen Aldaba intended to convey the lots in question to
When Belen Aldaba, a rich woman of Malolos, Bulacan, died on February 25, 1955, she left as
Vicente Aldaba and Jane Aldaba, by way of donation, the conveyance should be considered a
her presumptive heirs her surviving husband Estanislao Bautista, and her brother Cesar
donation inter vivos, for the validity of which a public instrument was necessary pursuant to
Aldaba. Belen Aldaba was childless. Among the properties that she left were the two lots
Article 749 of the Civil Code. The dispositive portion of the decision of the trial court reads as
involved in this case, situated at 427 Maganda Street, Santa Mesa, Manila.
follows:

Petitioners Dr. Vicente Aldaba and Jane Aldaba, father and daughter, respectively, lived
IN VIEW WHEREOF both complaint and counterclaim dismissed; the Court holds
during the last war in their house in Malate, Manila. Belen Aldaba used to go to their house
Emmanuel Bautista to be the absolute owner of the property in question, land and
to seek the advice and medical assistance of Dr. Vicente Aldaba. When the latter's house was
improvement, but with the right of plaintiffs to stay until they should have been
burned during the liberation of Manila in 1945, Belen Aldaba invited Dr. Aldaba and his
reimbursed of P5,000.00 but without any obligation, until such reimbursement, to
daughter, who was then a student in medicine, to live in one of her two houses standing on
pay any rental unto defendant Emmanuel Bautista. No pronouncement as to costs.
the lots in question, and the Aldaba father and daughter accepted the offer of Belen and they
actually lived in one of those two houses until sometime in 1957 when respondent
Emmanuel Bautista filed an ejectment case against them in the city court of Manila. Dr. From this decision, therein plaintiffs appealed to the Court of Appeals, and the latter court
Vicente Aldaba continued to act as a sort of adviser of Belen and Jane, after becoming a rendered a decision, on June 21, 1963, raising from P5,000 to P8,000 the amount to be
qualified doctor of medicine, became the personal physician of Belen until the latter's death reimbursed to plaintiffs-appellants, but affirming in all other respects the decision of the
on February 25, 1955. lower court. Herein petitioners' motion for reconsideration of the decision having been
denied by the Court of Appeals, they forthwith filed the present petition in this Court.
On June 24, 1955, the presumptive heirs Estanislao Bautista and Cesar Aldaba, executed a
deed of extrajudicial partition of the properties left by the deceased Belen Aldaba, by virtue Before this Court, petitioners now contend that the Court of Appeals erred: (1) in affirming
of which deed the two lots in question were alloted to Cesar Aldaba. Subsequently, on the decision of the Court of First Instance; (2) in holding that the donation, as found by the
August 26, 1957, herein respondents Cesar Aldaba and Emmanuel Bautista, the latter being a Court of First Instance of Manila, was a simple donation inter vivos and not a donation "con
grandson of Estanislao Bautista by his first marriage, executed a deed whereby the two lots causa onerosa and so it was void for it did not follow the requirements of Article 749 of the
that were alloted to Cesar Aldaba were ceded to Emmanuel Bautista in exchange of the Civil Code; (3) in not holding that the property in question had already been donated to
latter's lot situated at San Juan, Rizal. By virtue of the deed of extra-judicial partition and the herein petitioners in consideration of the latter's services; (4) in not declaring petitioners to
deed of exchange, Transfer certificates of Title Nos. 1334 and 1335, respectively, covering be the absolute owners of the property in dispute; and (5) in considering testimonies which
lots Nos. 32 and 34 — now in question — both in the name of Belen Aldaba, were cancelled had been stricken out.
by the Register of Deeds of Manila, and Transfer Certificates of Title Nos. 49996 and 49997 in
the name of Emmanuel Bautista were issued in lieu thereof. The errors assigned by petitioners being interrelated, We are going to discuss them together.

Emmanuel Bautista then required Dr. Vicente Aldaba to vacate the lots in question and, upon Petitioners contend that petitioners Dr. Vicente Aldaba and Jane Aldaba had rendered
the latter's refusal, filed an ejectment case against him in the City Court of Manila. Without services to the deceased Belen Aldaba for more than ten years without receiving any
awaiting the final result of the ejectment case, herein petitioners filed, on August 22, 1959, a compensation, and so in compensation for their services Belen Aldaba gave them the lots in
complaint in the Court of First Instance of Manila, docketed as Civil Case No. 41260, against dispute including the improvements thereon. It is the stand of petitioners that the property

Page 20 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
in question was conveyed to them by way of an onerous donation which is governed by Respondents, Cesar Aldaba and Emmanuel Bautista, on the other hand, contend that the
Article 733, and not Article 749, of the Civil Code. Under Article 733 of the Civil Code an evidence of the plaintiff does not disclose clearly that a donation had been made.
onerous donation does not have to be done by virtue of a public instrument. The petitioners Respondents point out that the note, Exhibit 6, as worded, is vague, in that it could not be
point to the note, Exhibit 6, as indicating that a donation had been made, which note reads interpreted as referring to the lots in question, or that which was given therein was given for
as follows: a valuable consideration. And finally, respondents contend that if the property had really
been given to petitioners, why did they not take any step to transfer the property in their
June 18, 1953 names?

Jane, The Court of Appeals, in its decision, made the following findings and conclusions:

Huag kayong umalis diyan. Talagang iyan ay para sa inyo. Alam (1) The note Exhibit 6 did not make any reference to the lots in question, nor to the
nila na iyan ay sa inyo. services rendered, or to be rendered, in favor of Belen. The note was insufficient is
a conveyance, and hence could not be considered as evidence of a donation with
onerous cause. This note can be considered, at most, as indicative of the intention
Belen A. Bautista.
to donate.

Petitioners maintain that the note, although it could not transmit title, showed, nevertheless,
(2) There is no satisfactory explanation why from 1945 to 1955, no notarial
that a donation had already been made long before its writing, in consideration of the
document was executed by Belen in favor of petitioners who were educated
services rendered before the writing and to be rendered after its writing. And the donation
persons. The reason given was "extremada delicadeza" which reason the Court of
being with an onerous cause, petitioners maintain that it was valid even if it was done orally.
Appeals considered as unsatisfactory.
Petitioners further maintain that if Exhibit 6 labors under some ambiguity, this ambiguity is
cured by Exhibit 7, which reads as follows:
(3) The evidence regarding the value of the services (P53,000.00) rendered by
petitioners (father and daughter) to Belen does not improve the proof regarding
June 27, 1956
the alleged donation. If petitioners believed that the gratuitous use of the property
was not sufficient to compensate them for their services, they could have
Dear Nana Tering, presented their claims in the intestate proceedings, which they themselves could
have initiated, if none was instituted.
Narito po ang notice tungkol sa amillaramiento na
pagbabayaran diyan sa lupa at bahay na kinatatayuan ninyo. Sa The conclusion of the Court of Appeals, as well as that of the trial court, that there was no
Malolos po ito tinanggap. Ang pagbabayaran po ng Inkong ay onerous donation made by Belen Aldaba to petitioners is based upon their appreciation of
bayad na. the evidence, and this Court will not disturb the factual findings of those courts.lawphi1.nêt

Gumagalang, The question to be resolved in the instant case is: Was there a disposition of the property in
"Cely." question made by the deceased Belen Aldaba in favor of herein petitioners? The note, Exhibit
6, considered alone, was, as held by the Court of Appeals, confirming the opinion of the
The addressee, Tering, was the wife of Dr. Vicente Aldaba, and the sender, Cely was the wife lower court, only an indication of the intention of Belen Aldaba to donate to the petitioners
of respondent Emmanuel Bautista. This note, petitioners argue, proves that respondents had the property occupied by the latter. We agree with this conclusion of the trial court and the
recognized the ownership of the petitioners of the house and lot, for, otherwise, Cely should Court of Appeals. The note, in fact, expressed that the property was really intended for the
have sent the notice of real estate tax to respondent Cesar Aldaba, to whom was alloted the petitioners, "talagang iyan ay para sa inyo." If the property was only intended for petitioners
property in question by virtue of the extra-judicial partition. then, at the time of its writing, the property had not yet been disposed of in their favor.
There is no evidence in the record that such intention was effectively carried out after the
writing of the note. Inasmuch as the mere expression of an intention is not a promise,
because a promise is an undertaking to carry the intention into effect, 1 We cannot,

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Chapter 1 (General Provisions (Art. 1156-1162)
considering Exhibit 6 alone, conclude that the deceased promised, much less did convey, the property in question in consideration of the services of petitioners. All that petitioners could
property in question to the petitioners. That the note, Exhibit 6, was only an indication of an claim regarding this matter was that "it was impliedly understood" between them.5 How said
intention to give was also the interpretation given by petitioners themselves, when they said agreement was implied and from what facts it was implied, petitioners did not make clear.
in their memorandum, dated February 2, 1960, in the lower court 2 thus: The question of whether or not what is relied upon as a consideration had been knowingly
accepted by the parties as a consideration, is a question of fact, 6and the Court of Appeals
Legally speaking, there was a contractual relation created between Belen Aldaba has not found in the instant case that the lots in question were given to petitioners in
and the plaintiff since 1945 whereby the former would give to the latter the two consideration of the services rendered by them to Belen Aldaba.
parcels of land, together with the house standing thereon, upon the rendition of
said services. This fact can be gleaned from the note (Exh. "6", Plaintiffs) which in We find, therefore, that the conditions to constitute a donation cum causa onerosa are not
part says: TALAGANG IYAN AY PARA SAINYO present in the instant case, and the claim of petitioners that the two lots in question were
donated to them by Belen Aldaba cannot be sustained.
We have said that Exhibit 6 expressed only the intention to donate. Let us suppose, for the
sake of argument, that previous to the writing of the note there had already been a WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against the
disposition of the property in favor of the petitioners. This disposition alone, would not make petitioners. It is so ordered.
the donation a donation for a valuable consideration. We still have to ask: What was the
consideration of such disposition? We do not find in the record that there had been an
express agreement between petitioners and Belen Aldaba that the latter would pay for the EN BANC
services of the former. If there was no express agreement, could it not be at least implied?
There could not be an implied contract for payment because We find in the record that Jane [G.R. No. L-8171. August 16, 1956.]
did not expect to be paid for her services. In the memorandum of counsel for the petitioners
in the trial court We find this statement: EMILIO MANALO and CLARA SALVADOR, Plaintiffs-Appellees, v. ROBLES TRANSPORTATION
COMPANY, INC., Defendant-Appellant.
For all she did to her aunt she expected not to be paid.3
Cornelio S. Ruperto and Lazaro Pormarejo for appellant.
When a person does not expect to be paid for his services, there cannot be a contract
implied in fact to make compensation for said services. San Juan, Africa, Yñiguez & Benedicto for appellees.

SYLLABUS
However, no contract implied in fact to make compensation for personal services
performed for another arises unless the party furnishing the services then expected
1. CRIMINAL PROCEDURE; JUDGMENT OF CONVICTION; BINDING UPON PARTY SUBSIDIARILY
or had reason to expect the payment or compensation by the other party. To give
LIABLE. — The judgment convicting the driver of a vehicle of homicide through reckless
rise to an implied contract to pay for services, they must have been rendered by
imprudence, in the absence of any collusion between the defendant and offended party, is
one party in expectation that the other party would pay for them, and have been
binding upon the party subsidiarily liable.
accepted by the other party with knowledge of that expectation. (58 Am. Jur. p.
512 and cases cited therein).
2. ID.; EVIDENCE; SHERIFF‘S RETURN; PROBATIVE VALUE OF. — A sheriff’s return is an official
statement by a public official in the performance of a duty specially enjoined by law and
In the same manner when the person rendering the services has renounced his fees, the forming part of official records, and is prima facie evidence of the facts stated therein. (Rule
services are not demandable obligations. 4 39, section 11 and Rule 123, section 35, Rules of Court.) The sheriff making the return need
not testify in court as to the facts stated in his entry.
Even if it be assumed for the sake of argument that the services of petitioners constituted a
demandable debt, We still have to ask whether in the instant case this was the consideration 3. DAMAGES; CIVIL LIABILITY ARISING FROM NEGLIGENCE UNDER THE REVISED PENAL CODE
for which the deceased made the (alleged) disposition of the property to the petitioners. As AND NEW CIVIL CODE. — Articles 102 and 103 of the Revised Penal Code have not been
we have adverted to, we have not come across in the record even a claim that there was an repealed by the New Civil Code whose Article 2177 expressly recognizes civil liabilities arising
express agreement between petitioners and Belen Aldaba that the latter would give the from negligence under the Penal Code (Articles 102 and 103), only that it provides that

Page 22 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
plaintiff may not recover damages twice for the same negligence. 1952, plus P600 for attorney’s fees and expenses for litigation, with costs. As aforestated, the
Company is appealing from this decision.
4. PLEADING AND PRACTICE; ACTION BASED UPON JUDGMENT; PRESCRIPTION OF. — An
action based upon a judgment prescribes in ten years. To prove their case against the defendant Company, the plaintiffs introduced a copy of the
decision in the criminal case convicting Hernandez of homicide through reckless imprudence,
the writs of execution to enforce the civil liability, and the returns of the sheriff showing that
DECISION the two writs of execution were not satisfied because of the insolvency of Hernandez, the
sheriff being unable to locate any property in his name. Over the objections of the Company,
the trial court admitted this evidence and based its decision in the present case on the same.
MONTEMAYOR, J.:
Defendant-appellant now contends that this kind of evidence is inadmissible and cites in
support of its contention the cases of City of Manila v. Manila Electric Company (52 Phil.,
Robles Transportation Company, Inc., later referred to as the Company, is appealing from the 586), and Arambulo v. Manila Electric Company (15 Phil., 75). This point has already been
decision of the Court of First Instance of Rizal, civil case No. 2013, ordering it to pay plaintiffs decided by this tribunal in the case of Martinez v. Barredo (81 Phil., 1). After considering the
Emilio Manalo and his wife, Clara Salvador, the sum of P3,000 with interest at 12 per cent per same two cases now cited by appellant, this court held that the judgment of conviction, in
annum from November 14, 1952 plus the amount of P600 for attorney’s fees and expenses the absence of any collusion between the defendant and offended party, is binding upon the
of litigation, with costs. party subsidiarily liable.

The facts involved in this case are simple and without dispute. On August 9, 1947, a taxicab The appellant also claims that in admitting as evidence the sheriff’s return of the writs of
owned and operated by defendant appellant Company and driven by Edgardo Hernandez its execution to prove the insolvency of Hernandez, without requiring said official’s appearance
driver, collided with a passenger truck at Parañaque, Rizal. In the course of and as a result of in court, it was deprived of the opportunity to cross-examine said sheriff. A sheriff’s return is
the accident, the taxicab ran over Armando Manalo, an eleven year old, causing him physical an official statement made by a public official in the performance of a duty specially enjoined
injuries which resulted in his death several days later. Edgardo Hernandez was prosecuted for by law and forming part of official records, and is prima facie evidence of the facts stated
homicide through reckless imprudence and after trial was found guilty of the charge and therein. (Rule 39, section 11 and Rule 123, section 35, Rules of Court.) The sheriff making the
sentenced to one year prision correccional, to indemnify the heirs of the deceased in the return need not testify in court as to the facts stated in his entry. In the case of Antillon v.
amount of P3,000, in case of insolvency to suffer subsidiary imprisonment, and to pay costs. Barcelon, 37 Phil., 151, citing Wigmore on Evidence, this court said:chanroblesvirtual
Edgardo Hernandez served out his sentence but failed to pay the indemnity. Two writs of 1awlibrary
execution were issued against him to satisfy the amount of the indemnity, but both writs
were returned unsatisfied by the sheriff who certified that no property, real or personal, in "To the foregoing rules with reference to the method of proving private documents an
Hernandez’ name could be found. exception is made with reference to the method of proving public documents executed
before and certified to, under the hand and seal of certain public officials. The courts and the
On February 17, 1953, plaintiffs Emilio Manalo and his wife Clara Salvador, father and mother legislature have recognized the valid reason for such an exception. The litigation is unlimited
respectively of Armando, filed the present action against the Company to enforce its in which testimony by officials is daily needed, the occasions in which the officials would be
subsidiary liability, pursuant to Articles 102 and 103 of the Revised Penal Code. The Company summoned from his ordinary duties to declare as a witness are numberless. The public
filed its appearance and answer and later an amended answer with special defenses and officers are few in whose daily work something is not done in which testimony is not needed
counterclaim. It also filed a motion to dismiss the complaint unless and until the convicted from official sources. Were there no exception to official statements, hosts of officials would
driver Hernandez was included as a party defendant, the Company considering him an be found devoting the greater part of their time to attending as witnesses in court or
indispensable party. The trial court denied the motion to dismiss, holding that Hernandez delivering their depositions before an officer. The work of Administration of government and
was not an indispensable party defendant. Dissatisfied with this ruling, the Company the interest of the public having business with officials would alike suffer in
filed certiorari proceedings with the Court of Appeals, but said appellate court held that consequence."chanrob1es virtual 1aw library
Hernandez was not an indispensable party defendant, and consequently, the trial court in
denying the motion to dismiss acted within the proper limits of its discretion. Eventually, the And this Court added:chanroblesvirtual 1awlibrary
trial court rendered judgment sentencing the defendant Company to pay to plaintiffs
damages in the amount of P3,000 with interest at 12 per cent per annum from November 14, "The law reposes a particular confidence in public officers that it presumes they will

Page 23 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
discharge their several trusts with accuracy and fidelity; and, therefore, whatever acts they SECOND DIVISION
do in discharge of their public duty may be given in evidence and shall be taken to be true
under such a degree of caution as the nature and circumstances of each case may appear to G.R. No. 183204 January 13, 2014
require."chanrob1es virtual 1aw library
THE METROPOLITAN BANK AND TRUST COMPANY, Petitioner,
The appellant also contends that Articles 102 and 103 of the Revised Penal Code were
vs.
repealed by the New Civil Code, promulgated in 1950, particularly, by the repealing clause
ANA GRACE ROSALES AND YO YUK TO, Respondents.
under which comes Article 2270 of the said code. We find the contention untenable. Article
2177 of the New Civil Code expressly recognizes civil liabilities arising from negligence under
the Penal Code, only that it provides that plaintiff cannot recover damages twice for the DECISION
same act of omission of the defendant.
DEL CASTILLO, J.:
"ART. 2177. Responsibility for fault or negligence under the preceding article is entirely
separate and distinct from the civil liability arising from negligence under the Penal Code. But Bank deposits, which are in the nature of a simple loan or mutuum,1 must be paid upon
the plaintiff cannot recover damages twice for the same act of omission of the demand by the depositor.2
defendant."chanrob1es virtual 1aw library

Invoking prescription, appellant claims that the present action is barred by the Statute of This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the April 2,
Limitations for the reason that it is an action either upon an injury to the rights of the 2008 Decision4 and the May 30, 2008 Resolution5 of he Court of Appeals CA) in CA-G.R. CV
plaintiff, or upon a quasi delict, and that according to Article 1146 of the New Civil Code, such No. 89086.
action must be instituted within four years. We agree with the appellee that the present
action is based upon a judgment, namely, that in the criminal case, finding Hernandez guilty Factual Antecedents
of homicide through reckless imprudence and sentencing him to indemnify the heirs of the
deceased in the sum of P3,000, and, consequently may be instituted within ten years. Petitioner Metropolitan Bank and Trust Company is a domestic banking corporation duly
organized and existing under the laws of the Philippines.6 Respondent Ana Grace Rosales
As regards the other errors assigned by appellant, we find it unnecessary to discuss and rule (Rosales) is the owner of China Golden Bridge Travel Services,7 a travel agency.8 Respondent
upon them. Yo Yuk To is the mother of respondent Rosales.9

Finding the decision appealed from to be in accordance with law, the same is hereby
In 2000, respondents opened a Joint Peso Account10 with petitioner’s Pritil-Tondo
affirmed, with costs.
Branch.11 As of August 4, 2004, respondents’ Joint Peso Account showed a balance of
₱2,515,693.52.12

In May 2002, respondent Rosales accompanied her client Liu Chiu Fang, a Taiwanese National
applying for a retiree’s visa from the Philippine Leisure and Retirement Authority (PLRA), to
petitioner’s branch in Escolta to open a savings account, as required by the PLRA.13 Since Liu
Chiu Fang could speak only in Mandarin, respondent Rosales acted as an interpreter for
her.14

On March 3, 2003, respondents opened with petitioner’s Pritil-Tondo Branch a Joint Dollar
Republic of the Philippines Account15 with an initial deposit of US$14,000.00.16
SUPREME COURT
Manila On July 31, 2003, petitioner issued a "Hold Out" order against respondents’ accounts.17

Page 24 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
On September 3, 2003, petitioner, through its Special Audit Department Head Antonio Ivan On December 15, 2003, the Office of the City Prosecutor of Manila issued a Resolution
Aguirre, filed before the Office of the Prosecutor of Manila a criminal case for Estafa through dismissing the criminal case for lack of probable cause.43 Unfazed, petitioner moved for
False Pretences, Misrepresentation, Deceit, and Use of Falsified Documents, docketed as I.S. reconsideration.
No. 03I-25014,18 against respondent Rosales.19 Petitioner accused respondent Rosales and an
unidentified woman as the ones responsible for the unauthorized and fraudulent withdrawal On September 10, 2004, respondents filed before the Regional Trial Court (RTC) of Manila a
of US$75,000.00 from Liu Chiu Fang’s dollar account with petitioner’s Escolta Complaint44 for Breach of Obligation and Contract with Damages, docketed as Civil Case No.
Branch.20Petitioner alleged that on February 5, 2003, its branch in Escolta received from the 04110895 and raffled to Branch 21, against petitioner. Respondents alleged that they
PLRA a Withdrawal Clearance for the dollar account of Liu Chiu Fang;21 that in the afternoon attempted several times to withdraw their deposits but were unable to because petitioner
of the same day, respondent Rosales went to petitioner’s Escolta Branch to inform its Branch had placed their accounts under "Hold Out" status.45 No explanation, however, was given by
Head, Celia A. Gutierrez (Gutierrez), that Liu Chiu Fang was going to withdraw her dollar petitioner as to why it issued the "Hold Out" order.46 Thus, they prayed that the "Hold Out"
deposits in cash;22 that Gutierrez told respondent Rosales to come back the following day order be lifted and that they be allowed to withdraw their deposits.47 They likewise prayed
because the bank did not have enough dollars;23 that on February 6, 2003, respondent for actual, moral, and exemplary damages, as well as attorney’s fees.48
Rosales accompanied an unidentified impostor of Liu Chiu Fang to the bank;24 that the
impostor was able to withdraw Liu Chiu Fang’s dollar deposit in the amount of
Petitioner alleged that respondents have no cause of action because it has a valid reason for
US$75,000.00;25 that on March 3, 2003, respondents opened a dollar account with
issuing the "Hold Out" order.49 It averred that due to the fraudulent scheme of respondent
petitioner; and that the bank later discovered that the serial numbers of the dollar notes
Rosales, it was compelled to reimburse Liu Chiu Fang the amount of US$75,000.0050 and to
deposited by respondents in the amount of US$11,800.00 were the same as those withdrawn
file a criminal complaint for Estafa against respondent Rosales.51
by the impostor.26

While the case for breach of contract was being tried, the City Prosecutor of Manila issued a
Respondent Rosales, however, denied taking part in the fraudulent and unauthorized
Resolution dated February 18, 2005, reversing the dismissal of the criminal complaint.52 An
withdrawal from the dollar account of Liu Chiu Fang.27 Respondent Rosales claimed that she
Information, docketed as Criminal Case No. 05-236103,53 was then filed charging respondent
did not go to the bank on February 5, 2003.28Neither did she inform Gutierrez that Liu Chiu
Rosales with Estafa before Branch 14 of the RTC of Manila.54
Fang was going to close her account.29 Respondent Rosales further claimed that after Liu
Chiu Fang opened an account with petitioner, she lost track of her.30 Respondent Rosales’
version of the events that transpired thereafter is as follows: Ruling of the Regional Trial Court

On February 6, 2003, she received a call from Gutierrez informing her that Liu Chiu Fang was On January 15, 2007, the RTC rendered a Decision55 finding petitioner liable for damages for
at the bank to close her account.31 At noon of the same day, respondent Rosales went to the breach of contract.56The RTC ruled that it is the duty of petitioner to release the deposit to
bank to make a transaction.32 While she was transacting with the teller, she caught a glimpse respondents as the act of withdrawal of a bank deposit is an act of demand by the
of a woman seated at the desk of the Branch Operating Officer, Melinda Perez creditor.57 The RTC also said that the recourse of petitioner is against its negligent employees
(Perez).33 After completing her transaction, respondent Rosales approached Perez who and not against respondents.58 The dispositive portion of the Decision reads:
informed her that Liu Chiu Fang had closed her account and had already left.34 Perez then
gave a copy of the Withdrawal Clearance issued by the PLRA to respondent Rosales.35 On WHEREFORE, premises considered, judgment is hereby rendered ordering [petitioner]
June 16, 2003, respondent Rosales received a call from Liu Chiu Fang inquiring about the METROPOLITAN BANK & TRUST COMPANY to allow [respondents] ANA GRACE ROSALES and
extension of her PLRA Visa and her dollar account.36 It was only then that Liu Chiu Fang found YO YUK TO to withdraw their Savings and Time Deposits with the agreed interest, actual
out that her account had been closed without her knowledge.37 Respondent Rosales then damages of ₱50,000.00, moral damages of ₱50,000.00, exemplary damages of ₱30,000.00
went to the bank to inform Gutierrez and Perez of the unauthorized withdrawal.38 On June and 10% of the amount due [respondents] as and for attorney’s fees plus the cost of suit.
23, 2003, respondent Rosales and Liu Chiu Fang went to the PLRA Office, where they were
informed that the Withdrawal Clearance was issued on the basis of a Special Power of The counterclaim of [petitioner] is hereby DISMISSED for lack of merit.
Attorney (SPA) executed by Liu Chiu Fang in favor of a certain Richard So.39 Liu Chiu Fang,
however, denied executing the SPA.40 The following day, respondent Rosales, Liu Chiu Fang,
Gutierrez, and Perez met at the PLRA Office to discuss the unauthorized withdrawal.41 During SO ORDERED.59
the conference, the bank officers assured Liu Chiu Fang that the money would be returned to
her.42 Ruling of the Court of Appeals

Page 25 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
Aggrieved, petitioner appealed to the CA. Lastly, petitioner puts in issue the award of moral and exemplary damages and attorney’s
fees. It insists that respondents failed to prove that it acted in bad faith or in a wanton,
On April 2, 2008, the CA affirmed the ruling of the RTC but deleted the award of actual fraudulent, oppressive or malevolent manner.70
damages because "the basis for [respondents’] claim for such damages is the professional fee
that they paid to their legal counsel for [respondent] Rosales’ defense against the criminal Respondents’ Arguments
complaint of [petitioner] for estafa before the Office of the City Prosecutor of Manila and not
this case."60 Thus, the CA disposed of the case in this wise: Respondents, on the other hand, argue that there is no legal basis for petitioner to withhold
their deposits because they have no monetary obligation to petitioner.71 They insist that
WHEREFORE, premises considered, the Decision dated January 15, 2007 of the RTC, Branch petitioner miserably failed to prove its accusations against respondent Rosales.72 In fact, no
21, Manila in Civil Case No. 04-110895 is AFFIRMED with MODIFICATION that the award of documentary evidence was presented to show that respondent Rosales participated in the
actual damages to [respondents] Rosales and Yo Yuk To is hereby DELETED. unauthorized withdrawal.73 They also question the fact that the list of the serial numbers of
the dollar notes fraudulently withdrawn on February 6, 2003, was not signed or
SO ORDERED.61 acknowledged by the alleged impostor.74Respondents likewise maintain that what was
established during the trial was the negligence of petitioner’s employees as they allowed the
withdrawal of the funds without properly verifying the identity of the
Petitioner sought reconsideration but the same was denied by the CA in its May 30, 2008
depositor.75Furthermore, respondents contend that their deposits are in the nature of a loan;
Resolution.62
thus, petitioner had the obligation to return the deposits to them upon demand.76 Failing to
do so makes petitioner liable to pay respondents moral and exemplary damages, as well as
Issues attorney’s fees.77

Hence, this recourse by petitioner raising the following issues: Our Ruling

A. THE [CA] ERRED IN RULING THAT THE "HOLD-OUT" PROVISION IN THE The Petition is bereft of merit.
APPLICATION AND AGREEMENT FOR DEPOSIT ACCOUNT DOES NOT APPLY IN THIS
CASE.
At the outset, the relevant issues in this case are (1) whether petitioner breached its contract
with respondents, and (2) if so, whether it is liable for damages. The issue of whether
B. THE [CA] ERRED WHEN IT RULED THAT PETITIONER’S EMPLOYEES WERE petitioner’s employees were negligent in allowing the withdrawal of Liu Chiu Fang’s dollar
NEGLIGENT IN RELEASING LIU CHIU FANG’S FUNDS. deposits has no bearing in the resolution of this case. Thus, we find no need to discuss the
same.
C. THE [CA] ERRED IN AFFIRMING THE AWARD OF MORAL DAMAGES, EXEMPLARY
DAMAGES, AND ATTORNEY’S FEES.63 The "Hold Out" clause does not apply

Petitioner’s Arguments to the instant case.

Petitioner contends that the CA erred in not applying the "Hold Out" clause stipulated in the Petitioner claims that it did not breach its contract with respondents because it has a valid
Application and Agreement for Deposit Account.64 It posits that the said clause applies to any reason for issuing the "Hold Out" order. Petitioner anchors its right to withhold respondents’
and all kinds of obligation as it does not distinguish between obligations arising ex contractu deposits on the Application and Agreement for Deposit Account, which reads:
or ex delictu.65 Petitioner also contends that the fraud committed by respondent Rosales was
clearly established by evidence;66 thus, it was justified in issuing the "Hold-Out"
Authority to Withhold, Sell and/or Set Off:
order.67 Petitioner likewise denies that its employees were negligent in releasing the
dollars.68 It claims that it was the deception employed by respondent Rosales that caused
petitioner’s employees to release Liu Chiu Fang’s funds to the impostor.69 The Bank is hereby authorized to withhold as security for any and all obligations with the
Bank, all monies, properties or securities of the Depositor now in or which may hereafter

Page 26 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
come into the possession or under the control of the Bank, whether left with the Bank for Respondents are entitled to moral and
safekeeping or otherwise, or coming into the hands of the Bank in any way, for so much exemplary damages and attorney’s fees.1âwphi1
thereof as will be sufficient to pay any or all obligations incurred by Depositor under the
Account or by reason of any other transactions between the same parties now existing or In cases of breach of contract, moral damages may be recovered only if the defendant acted
hereafter contracted, to sell in any public or private sale any of such properties or securities fraudulently or in bad faith,80 or is "guilty of gross negligence amounting to bad faith, or in
of Depositor, and to apply the proceeds to the payment of any Depositor’s obligations wanton disregard of his contractual obligations."81
heretofore mentioned.
In this case, a review of the circumstances surrounding the issuance of the "Hold Out" order
xxxx reveals that petitioner issued the "Hold Out" order in bad faith. First of all, the order was
issued without any legal basis. Second, petitioner did not inform respondents of the reason
JOINT ACCOUNT for the "Hold Out."82 Third, the order was issued prior to the filing of the criminal complaint.
Records show that the "Hold Out" order was issued on July 31, 2003,83 while the criminal
xxxx complaint was filed only on September 3, 2003.84 All these taken together lead us to
conclude that petitioner acted in bad faith when it breached its contract with respondents.
As we see it then, respondents are entitled to moral damages.
The Bank may, at any time in its discretion and with or without notice to all of the
Depositors, assert a lien on any balance of the Account and apply all or any part thereof
against any indebtedness, matured or unmatured, that may then be owing to the Bank by As to the award of exemplary damages, Article 222985 of the Civil Code provides that
any or all of the Depositors. It is understood that if said indebtedness is only owing from any exemplary damages may be imposed "by way of example or correction for the public good, in
of the Depositors, then this provision constitutes the consent by all of the depositors to have addition to the moral, temperate, liquidated or compensatory damages." They are awarded
the Account answer for the said indebtedness to the extent of the equal share of the debtor only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent
in the amount credited to the Account.78 manner.86

Petitioner’s reliance on the "Hold Out" clause in the Application and Agreement for Deposit In this case, we find that petitioner indeed acted in a wanton, fraudulent, reckless,
Account is misplaced. oppressive or malevolent manner when it refused to release the deposits of respondents
without any legal basis. We need not belabor the fact that the banking industry is impressed
with public interest.87 As such, "the highest degree of diligence is expected, and high
The "Hold Out" clause applies only if there is a valid and existing obligation arising from any
standards of integrity and performance are even required of it."88 It must therefore "treat
of the sources of obligation enumerated in Article 115779 of the Civil Code, to wit: law,
the accounts of its depositors with meticulous care and always to have in mind the fiduciary
contracts, quasi-contracts, delict, and quasi-delict. In this case, petitioner failed to show that
nature of its relationship with them."89 For failing to do this, an award of exemplary damages
respondents have an obligation to it under any law, contract, quasi-contract, delict, or quasi-
is justified to set an example.
delict. And although a criminal case was filed by petitioner against respondent Rosales, this is
not enough reason for petitioner to issue a "Hold Out" order as the case is still pending and
no final judgment of conviction has been rendered against respondent Rosales. In fact, it is The award of attorney's fees is likewise proper pursuant to paragraph 1, Article 220890 of the
significant to note that at the time petitioner issued the "Hold Out" order, the criminal Civil Code.
complaint had not yet been filed. Thus, considering that respondent Rosales is not liable
under any of the five sources of obligation, there was no legal basis for petitioner to issue the In closing, it must be stressed that while we recognize that petitioner has the right to protect
"Hold Out" order. Accordingly, we agree with the findings of the RTC and the CA that the itself from fraud or suspicions of fraud, the exercise of his right should be done within the
"Hold Out" clause does not apply in the instant case. bounds of the law and in accordance with due process, and not in bad faith or in a wanton
disregard of its contractual obligation to respondents.
In view of the foregoing, we find that petitioner is guilty of breach of contract when it
unjustifiably refused to release respondents’ deposit despite demand. Having breached its WHEREFORE, the Petition is hereby DENIED. The assailed April 2, 2008 Decision and the May
contract with respondents, petitioner is liable for damages. 30, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 89086 are hereby AFFIRMED.
SO ORDERED.

Page 27 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
Republic of the Philippines On November 10, 2004, the trial court rendered a decision in favor of petitioner, the
SUPREME COURT dispositive portion of which reads:
Baguio City
WHEREFORE, from the foregoing, judgment is hereby rendered ordering:
THIRD DIVISION
1. FEU and Edilberto de Jesus, in his capacity as president of FEU to pay
G.R. No. 179337 April 30, 2008 jointly and severally Joseph Saludaga the amount of P35,298.25 for actual
damages with 12% interest per annum from the filing of the complaint
JOSEPH SALUDAGA, petitioner, until fully paid; moral damages of P300,000.00, exemplary damages of
vs. P500,000.00, attorney's fees of P100,000.00 and cost of the suit;
FAR EASTERN UNIVERSITY and EDILBERTO C. DE JESUS in his capacity as President of
FEU, respondents. 2. Galaxy Management and Development Corp. and its president, Col.
Mariano Imperial to indemnify jointly and severally 3rd party plaintiffs
DECISION (FEU and Edilberto de Jesus in his capacity as President of FEU) for the
above-mentioned amounts;
YNARES-SANTIAGO, J.:
3. And the 4th party complaint is dismissed for lack of cause of action. No
pronouncement as to costs.
This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assails the June 29,
2007 Decision2 of the Court of Appeals in CA-G.R. CV No. 87050, nullifying and setting aside
the November 10, 2004 Decision3 of the Regional Trial Court of Manila, Branch 2, in Civil Case SO ORDERED.9
No. 98-89483 and dismissing the complaint filed by petitioner; as well as its August 23, 2007
Resolution4 denying the Motion for Reconsideration.5 Respondents appealed to the Court of Appeals which rendered the assailed Decision, the
decretal portion of which provides, viz:
The antecedent facts are as follows:
WHEREFORE, the appeal is hereby GRANTED. The Decision dated November 10,
Petitioner Joseph Saludaga was a sophomore law student of respondent Far Eastern 2004 is hereby REVERSED and SET ASIDE. The complaint filed by Joseph Saludaga
University (FEU) when he was shot by Alejandro Rosete (Rosete), one of the security guards against appellant Far Eastern University and its President in Civil Case No. 98-89483
on duty at the school premises on August 18, 1996. Petitioner was rushed to FEU-Dr. Nicanor is DISMISSED.
Reyes Medical Foundation (FEU-NRMF) due to the wound he sustained.6Meanwhile, Rosete
was brought to the police station where he explained that the shooting was accidental. He SO ORDERED.10
was eventually released considering that no formal complaint was filed against him.
Petitioner filed a Motion for Reconsideration which was denied; hence, the instant petition
Petitioner thereafter filed a complaint for damages against respondents on the ground that based on the following grounds:
they breached their obligation to provide students with a safe and secure environment and
an atmosphere conducive to learning. Respondents, in turn, filed a Third-Party THE COURT OF APPEALS SERIOUSLY ERRED IN MANNER CONTRARY TO LAW AND
Complaint7 against Galaxy Development and Management Corporation (Galaxy), the agency JURISPRUDENCE IN RULING THAT:
contracted by respondent FEU to provide security services within its premises and Mariano
D. Imperial (Imperial), Galaxy's President, to indemnify them for whatever would be
5.1. THE SHOOTING INCIDENT IS A FORTUITOUS EVENT;
adjudged in favor of petitioner, if any; and to pay attorney's fees and cost of the suit. On the
other hand, Galaxy and Imperial filed a Fourth-Party Complaint against AFP General
Insurance.8 5.2. RESPONDENTS ARE NOT LIABLE FOR DAMAGES FOR THE INJURY RESULTING
FROM A GUNSHOT WOUND SUFFERED BY THE PETITIONER FROM THE HANDS OF

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Chapter 1 (General Provisions (Art. 1156-1162)
NO LESS THAN THEIR OWN SECURITY GUARD IN VIOLATION OF THEIR BUILT-IN In Philippine School of Business Administration v. Court of Appeals,13 we held that:
CONTRACTUAL OBLIGATION TO PETITIONER, BEING THEIR LAW STUDENT AT THAT
TIME, TO PROVIDE HIM WITH A SAFE AND SECURE EDUCATIONAL ENVIRONMENT; When an academic institution accepts students for enrollment, there is established
a contract between them, resulting in bilateral obligations which both parties are
5.3. SECURITY GAURD, ALEJANDRO ROSETE, WHO SHOT PETITIONER WHILE HE bound to comply with. For its part, the school undertakes to provide the student
WAS WALKING ON HIS WAY TO THE LAW LIBRARY OF RESPONDENT FEU IS NOT with an education that would presumably suffice to equip him with the necessary
THEIR EMPLOYEE BY VIRTUE OF THE CONTRACT FOR SECURITY SERVICES BETWEEN tools and skills to pursue higher education or a profession. On the other hand, the
GALAXY AND FEU NOTWITHSTANDING THE FACT THAT PETITIONER, NOT BEING A student covenants to abide by the school's academic requirements and observe its
PARTY TO IT, IS NOT BOUND BY THE SAME UNDER THE PRINCIPLE OF RELATIVITY rules and regulations.
OF CONTRACTS; and
Institutions of learning must also meet the implicit or "built-in" obligation of
5.4. RESPONDENT EXERCISED DUE DILIGENCE IN SELECTING GALAXY AS THE providing their students with an atmosphere that promotes or assists in attaining
AGENCY WHICH WOULD PROVIDE SECURITY SERVICES WITHIN THE PREMISES OF its primary undertaking of imparting knowledge. Certainly, no student can absorb
RESPONDENT FEU.11 the intricacies of physics or higher mathematics or explore the realm of the arts
and other sciences when bullets are flying or grenades exploding in the air or
Petitioner is suing respondents for damages based on the alleged breach of student-school where there looms around the school premises a constant threat to life and limb.
contract for a safe learning environment. The pertinent portions of petitioner's Complaint Necessarily, the school must ensure that adequate steps are taken to maintain
read: peace and order within the campus premises and to prevent the breakdown
thereof.14
6.0. At the time of plaintiff's confinement, the defendants or any of their
representative did not bother to visit and inquire about his condition. This abject It is undisputed that petitioner was enrolled as a sophomore law student in respondent FEU.
indifference on the part of the defendants continued even after plaintiff was As such, there was created a contractual obligation between the two parties. On petitioner's
discharged from the hospital when not even a word of consolation was heard from part, he was obliged to comply with the rules and regulations of the school. On the other
them. Plaintiff waited for more than one (1) year for the defendants to perform hand, respondent FEU, as a learning institution is mandated to impart knowledge and equip
their moral obligation but the wait was fruitless. This indifference and total lack of its students with the necessary skills to pursue higher education or a profession. At the same
concern of defendants served to exacerbate plaintiff's miserable condition. time, it is obliged to ensure and take adequate steps to maintain peace and order within the
campus.
xxxx
It is settled that in culpa contractual, the mere proof of the existence of the contract and the
failure of its compliance justify, prima facie, a corresponding right of relief.15 In the instant
11.0. Defendants are responsible for ensuring the safety of its students while the
case, we find that, when petitioner was shot inside the campus by no less the security guard
latter are within the University premises. And that should anything untoward
who was hired to maintain peace and secure the premises, there is a prima facie showing
happens to any of its students while they are within the University's premises shall
that respondents failed to comply with its obligation to provide a safe and secure
be the responsibility of the defendants. In this case, defendants, despite being
environment to its students.
legally and morally bound, miserably failed to protect plaintiff from injury and
thereafter, to mitigate and compensate plaintiff for said injury;
In order to avoid liability, however, respondents aver that the shooting incident was a
fortuitous event because they could not have reasonably foreseen nor avoided the accident
12.0. When plaintiff enrolled with defendant FEU, a contract was entered into
caused by Rosete as he was not their employee;16and that they complied with their
between them. Under this contract, defendants are supposed to ensure that
obligation to ensure a safe learning environment for their students by having exercised due
adequate steps are taken to provide an atmosphere conducive to study and ensure
diligence in selecting the security services of Galaxy.
the safety of the plaintiff while inside defendant FEU's premises. In the instant
case, the latter breached this contract when defendant allowed harm to befall
upon the plaintiff when he was shot at by, of all people, their security guard who After a thorough review of the records, we find that respondents failed to discharge the
was tasked to maintain peace inside the campus.12 burden of proving that they exercised due diligence in providing a safe learning environment

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Chapter 1 (General Provisions (Art. 1156-1162)
for their students. They failed to prove that they ensured that the guards assigned in the by receipts.21 In the absence thereof, no actual damages may be awarded. Nonetheless,
campus met the requirements stipulated in the Security Service Agreement. Indeed, certain temperate damages under Art. 2224 of the Civil Code may be recovered where it has been
documents about Galaxy were presented during trial; however, no evidence as to the shown that the claimant suffered some pecuniary loss but the amount thereof cannot be
qualifications of Rosete as a security guard for the university was offered. proved with certainty. Hence, the amount of P20,000.00 as temperate damages is awarded
to petitioner.
Respondents also failed to show that they undertook steps to ascertain and confirm that the
security guards assigned to them actually possess the qualifications required in the Security As regards the award of moral damages, there is no hard and fast rule in the determination
Service Agreement. It was not proven that they examined the clearances, psychiatric test of what would be a fair amount of moral damages since each case must be governed by its
results, 201 files, and other vital documents enumerated in its contract with Galaxy. Total own peculiar circumstances.22 The testimony of petitioner about his physical suffering,
reliance on the security agency about these matters or failure to check the papers stating the mental anguish, fright, serious anxiety, and moral shock resulting from the shooting
qualifications of the guards is negligence on the part of respondents. A learning institution incident23 justify the award of moral damages. However, moral damages are in the category
should not be allowed to completely relinquish or abdicate security matters in its premises to of an award designed to compensate the claimant for actual injury suffered and not to
the security agency it hired. To do so would result to contracting away its inherent obligation impose a penalty on the wrongdoer. The award is not meant to enrich the complainant at the
to ensure a safe learning environment for its students. expense of the defendant, but to enable the injured party to obtain means, diversion, or
amusements that will serve to obviate the moral suffering he has undergone. It is aimed at
Consequently, respondents' defense of force majeure must fail. In order for force majeure to the restoration, within the limits of the possible, of the spiritual status quo ante, and should
be considered, respondents must show that no negligence or misconduct was committed be proportionate to the suffering inflicted. Trial courts must then guard against the award of
that may have occasioned the loss. An act of God cannot be invoked to protect a person who exorbitant damages; they should exercise balanced restrained and measured objectivity to
has failed to take steps to forestall the possible adverse consequences of such a loss. One's avoid suspicion that it was due to passion, prejudice, or corruption on the part of the trial
negligence may have concurred with an act of God in producing damage and injury to court.24 We deem it just and reasonable under the circumstances to award petitioner moral
another; nonetheless, showing that the immediate or proximate cause of the damage or damages in the amount of P100,000.00.
injury was a fortuitous event would not exempt one from liability. When the effect is found
to be partly the result of a person's participation - whether by active intervention, neglect or Likewise, attorney's fees and litigation expenses in the amount of P50,000.00 as part of
failure to act - the whole occurrence is humanized and removed from the rules applicable to damages is reasonable in view of Article 2208 of the Civil Code.25 However, the award of
acts of God.17 exemplary damages is deleted considering the absence of proof that respondents acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner.
Article 1170 of the Civil Code provides that those who are negligent in the performance of
their obligations are liable for damages. Accordingly, for breach of contract due to negligence We note that the trial court held respondent De Jesus solidarily liable with respondent FEU.
in providing a safe learning environment, respondent FEU is liable to petitioner for damages. In Powton Conglomerate, Inc. v. Agcolicol,26 we held that:
It is essential in the award of damages that the claimant must have satisfactorily proven
during the trial the existence of the factual basis of the damages and its causal connection to [A] corporation is invested by law with a personality separate and distinct from
defendant's acts.18 those of the persons composing it, such that, save for certain exceptions, corporate
officers who entered into contracts in behalf of the corporation cannot be held
In the instant case, it was established that petitioner spent P35,298.25 for his hospitalization personally liable for the liabilities of the latter. Personal liability of a corporate
and other medical expenses.19 While the trial court correctly imposed interest on said director, trustee or officer along (although not necessarily) with the corporation
amount, however, the case at bar involves an obligation arising from a contract and not a may so validly attach, as a rule, only when - (1) he assents to a patently unlawful
loan or forbearance of money. As such, the proper rate of legal interest is six percent (6%) act of the corporation, or when he is guilty of bad faith or gross negligence in
per annum of the amount demanded. Such interest shall continue to run from the filing of directing its affairs, or when there is a conflict of interest resulting in damages to
the complaint until the finality of this Decision.20 After this Decision becomes final and the corporation, its stockholders or other persons; (2) he consents to the issuance
executory, the applicable rate shall be twelve percent (12%) per annum until its satisfaction. of watered down stocks or who, having knowledge thereof, does not forthwith file
with the corporate secretary his written objection thereto; (3) he agrees to hold
The other expenses being claimed by petitioner, such as transportation expenses and those himself personally and solidarily liable with the corporation; or (4) he is made by a
incurred in hiring a personal assistant while recuperating were however not duly supported specific provision of law personally answerable for his corporate action.27

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Chapter 1 (General Provisions (Art. 1156-1162)
None of the foregoing exceptions was established in the instant case; hence, respondent De employer agency, and not to the clients or customers of such agency. As
Jesus should not be held solidarily liable with respondent FEU. a general rule, a client or customer of a security agency has no hand in
selecting who among the pool of security guards or watchmen employed
Incidentally, although the main cause of action in the instant case is the breach of the school- by the agency shall be assigned to it; the duty to observe the diligence of
student contract, petitioner, in the alternative, also holds respondents vicariously liable a good father of a family in the selection of the guards cannot, in the
under Article 2180 of the Civil Code, which provides: ordinary course of events, be demanded from the client whose premises
or property are protected by the security guards.
Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's
own acts or omissions, but also for those of persons for whom one is responsible. xxxx

xxxx The fact that a client company may give instructions or directions to the security
guards assigned to it, does not, by itself, render the client responsible as an
employer of the security guards concerned and liable for their wrongful acts or
Employers shall be liable for the damages caused by their employees and
omissions.31
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.
We now come to respondents' Third Party Claim against Galaxy. In Firestone Tire and Rubber
Company of the Philippines v. Tempengko,32 we held that:
xxxx

The third-party complaint is, therefore, a procedural device whereby a 'third party'
The responsibility treated of in this article shall cease when the persons herein
who is neither a party nor privy to the act or deed complained of by the plaintiff,
mentioned prove that they observed all the diligence of a good father of a family to
may be brought into the case with leave of court, by the defendant, who acts as
prevent damage.
third-party plaintiff to enforce against such third-party defendant a right for
contribution, indemnity, subrogation or any other relief, in respect of the plaintiff's
We agree with the findings of the Court of Appeals that respondents cannot be held liable for claim. The third-party complaint is actually independent of and separate and
damages under Art. 2180 of the Civil Code because respondents are not the employers of distinct from the plaintiff's complaint. Were it not for this provision of the Rules of
Rosete. The latter was employed by Galaxy. The instructions issued by respondents' Security Court, it would have to be filed independently and separately from the original
Consultant to Galaxy and its security guards are ordinarily no more than requests commonly complaint by the defendant against the third-party. But the Rules permit defendant
envisaged in the contract for services entered into by a principal and a security agency. They to bring in a third-party defendant or so to speak, to litigate his separate cause of
cannot be construed as the element of control as to treat respondents as the employers of action in respect of plaintiff's claim against a third-party in the original and principal
Rosete.28 case with the object of avoiding circuitry of action and unnecessary proliferation of
law suits and of disposing expeditiously in one litigation the entire subject matter
As held in Mercury Drug Corporation v. Libunao:29 arising from one particular set of facts.33

In Soliman, Jr. v. Tuazon,30 we held that where the security agency recruits, hires Respondents and Galaxy were able to litigate their respective claims and defenses in the
and assigns the works of its watchmen or security guards to a client, the employer course of the trial of petitioner's complaint. Evidence duly supports the findings of the trial
of such guards or watchmen is such agency, and not the client, since the latter has court that Galaxy is negligent not only in the selection of its employees but also in their
no hand in selecting the security guards. Thus, the duty to observe the diligence of supervision. Indeed, no administrative sanction was imposed against Rosete despite the
a good father of a family cannot be demanded from the said client: shooting incident; moreover, he was even allowed to go on leave of absence which led
eventually to his disappearance.34 Galaxy also failed to monitor petitioner's condition or
… [I]t is settled in our jurisdiction that where the security agency, as here, extend the necessary assistance, other than the P5,000.00 initially given to petitioner. Galaxy
recruits, hires and assigns the work of its watchmen or security guards, and Imperial failed to make good their pledge to reimburse petitioner's medical expenses.
the agency is the employer of such guards or watchmen. Liability for
illegal or harmful acts committed by the security guards attaches to the

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Chapter 1 (General Provisions (Art. 1156-1162)
For these acts of negligence and for having supplied respondent FEU with an unqualified Republic of the Philippines
security guard, which resulted to the latter's breach of obligation to petitioner, it is proper to SUPREME COURT
hold Galaxy liable to respondent FEU for such damages equivalent to the above-mentioned Manila
amounts awarded to petitioner.
THIRD DIVISION
Unlike respondent De Jesus, we deem Imperial to be solidarily liable with Galaxy for being
grossly negligent in directing the affairs of the security agency. It was Imperial who assured G.R. No. 158911 March 4, 2008
petitioner that his medical expenses will be shouldered by Galaxy but said representations
were not fulfilled because they presumed that petitioner and his family were no longer
MANILA ELECTRIC COMPANY, Petitioner,
interested in filing a formal complaint against them.35
vs.
MATILDE MACABAGDAL RAMOY, BIENVENIDO RAMOY, ROMANA RAMOY-RAMOS,
WHEREFORE, the petition is GRANTED. The June 29, 2007 Decision of the Court of Appeals in ROSEMARIE RAMOY, OFELIA DURIAN and CYRENE PANADO, Respondents.
CA-G.R. CV No. 87050 nullifying the Decision of the trial court and dismissing the complaint
as well as the August 23, 2007 Resolution denying the Motion for Reconsideration
DECISION
are REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Manila, Branch 2, in
Civil Case No. 98-89483 finding respondent FEU liable for damages for breach of its obligation
to provide students with a safe and secure learning atmosphere, is AFFIRMED with the AUSTRIA-MARTINEZ, J.:
following MODIFICATIONS:
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court,
a. respondent Far Eastern University (FEU) is ORDERED to pay petitioner actual damages in praying that the Decision1 of the Court of Appeals (CA) dated December 16, 2002, ordering
the amount of P35,298.25, plus 6% interest per annum from the filing of the complaint until petitioner Manila Electric Company (MERALCO) to pay Leoncio Ramoy2 moral and exemplary
the finality of this Decision. After this decision becomes final and executory, the applicable damages and attorney's fees, and the CA Resolution3 dated July 1, 2003, denying petitioner's
rate shall be twelve percent (12%) per annum until its satisfaction; motion for reconsideration, be reversed and set aside.

b. respondent FEU is also ORDERED to pay petitioner temperate damages in the amount of The Regional Trial Court (RTC) of Quezon City, Branch 81, accurately summarized the facts as
P20,000.00; moral damages in the amount of P100,000.00; and attorney's fees and litigation culled from the records, thus:
expenses in the amount of P50,000.00;
The evidence on record has established that in the year 1987 the National Power Corporation
c. the award of exemplary damages is DELETED. (NPC) filed with the MTC Quezon City a case for ejectment against several persons allegedly
illegally occupying its properties in Baesa, Quezon City. Among the defendants in the
ejectment case was Leoncio Ramoy, one of the plaintiffs in the case at bar. On April 28, 1989
The Complaint against respondent Edilberto C. De Jesus is DISMISSED. The counterclaims of
after the defendants failed to file an answer in spite of summons duly served, the MTC
respondents are likewise DISMISSED.
Branch 36, Quezon City rendered judgment for the plaintiff [MERALCO] and "ordering the
defendants to demolish or remove the building and structures they built on the land of the
Galaxy Development and Management Corporation (Galaxy) and its president, Mariano D. plaintiff and to vacate the premises." In the case of Leoncio Ramoy, the Court found that he
Imperial are ORDEREDto jointly and severally pay respondent FEU damages equivalent to the was occupying a portion of Lot No. 72-B-2-B with the exact location of his apartments
above-mentioned amounts awarded to petitioner. indicated and encircled in the location map as No. 7. A copy of the decision was furnished
Leoncio Ramoy (Exhibits 2, 2-A, 2-B, 2-C, pp. 128-131, Record; TSN, July 2, 1993, p. 5).
SO ORDERED.
On June 20, 1990 NPC wrote Meralco requesting for the "immediate disconnection of electric
power supply to all residential and commercial establishments beneath the NPC transmission
lines along Baesa, Quezon City (Exh. 7, p. 143, Record). Attached to the letter was a list of
establishments affected which included plaintiffs Leoncio and Matilde Ramoy (Exh. 9), as well

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Chapter 1 (General Provisions (Art. 1156-1162)
as a copy of the court decision (Exh. 2). After deliberating on NPC's letter, Meralco decided to before complying with the NPC's request. Thus, the CA held MERALCO liable for moral and
comply with NPC's request (Exhibits 6, 6-A, 6-A-1, 6-B) and thereupon issued notices of exemplary damages and attorney's fees. MERALCO's motion for reconsideration of the
disconnection to all establishments affected including plaintiffs Leoncio Ramoy (Exhs. 3, 3-A Decision was denied per Resolution dated July 1, 2003.
to 3-C), Matilde Ramoy/Matilde Macabagdal (Exhibits 3-D to 3-E), Rosemarie Ramoy (Exh. 3-
F), Ofelia Durian (Exh. 3-G), Jose Valiza (Exh. 3-H) and Cyrene S. Panado (Exh. 3-I). Hence, herein petition for review on certiorari on the following grounds:

In a letter dated August 17, 1990 Meralco requested NPC for a joint survey to determine all I
the establishments which are considered under NPC property in view of the fact that "the
houses in the area are very close to each other" (Exh. 12). Shortly thereafter, a joint survey
THE COURT OF APPEALS GRAVELY ERRED WHEN IT FOUND MERALCO NEGLIGENT WHEN IT
was conducted and the NPC personnel pointed out the electric meters to be disconnected
DISCONNECTED THE SUBJECT ELECTRIC SERVICE OF RESPONDENTS.
(Exh. 13; TSN, October 8, 1993, p. 7; TSN, July 1994, p. 8).

II
In due time, the electric service connection of the plaintiffs [herein respondents] was
disconnected (Exhibits D to G, with submarkings, pp. 86-87, Record).
THE COURT OF APPEALS GRAVELY ERRED WHEN IT AWARDED MORAL AND EXEMPLARY
DAMAGES AND ATTORNEY'S FEES AGAINST MERALCO UNDER THE CIRCUMSTANCES THAT
Plaintiff Leoncio Ramoy testified that he and his wife are the registered owners of a parcel of
THE LATTER ACTED IN GOOD FAITH IN THE DISCONNECTION OF THE ELECTRIC SERVICES OF
land covered by TCT No. 326346, a portion of which was occupied by plaintiffs Rosemarie
THE RESPONDENTS. 5
Ramoy, Ofelia Durian, Jose Valiza and Cyrene S. Panado as lessees. When the Meralco
employees were disconnecting plaintiffs' power connection, plaintiff Leoncio Ramoy
objected by informing the Meralco foreman that his property was outside the NPC property The petition is partly meritorious.
and pointing out the monuments showing the boundaries of his property. However, he was
threatened and told not to interfere by the armed men who accompanied the Meralco MERALCO admits6 that respondents are its customers under a Service Contract whereby it is
employees. After the electric power in Ramoy's apartment was cut off, the plaintiffs-lessees obliged to supply respondents with electricity. Nevertheless, upon request of the NPC,
left the premises. MERALCO disconnected its power supply to respondents on the ground that they were
illegally occupying the NPC's right of way. Under the Service Contract, "[a] customer of
During the ocular inspection ordered by the Court and attended by the parties, it was found electric service must show his right or proper interest over the property in order that he will
out that the residence of plaintiffs-spouses Leoncio and Matilde Ramoy was indeed outside be provided with and assured a continuous electric service."7 MERALCO argues that since
the NPC property. This was confirmed by defendant's witness R.P. Monsale III on cross- there is a Decision of the Metropolitan Trial Court (MTC) of Quezon City ruling that herein
examination (TSN, October 13, 1993, pp. 10 and 11). Monsale also admitted that he did not respondents were among the illegal occupants of the NPC's right of way, MERALCO was
inform his supervisor about this fact nor did he recommend re-connection of plaintiffs' justified in cutting off service to respondents.
power supply (Ibid., p. 14).
Clearly, respondents' cause of action against MERALCO is anchored on culpa contractual or
The record also shows that at the request of NPC, defendant Meralco re-connected the breach of contract for the latter's discontinuance of its service to respondents under Article
electric service of four customers previously disconnected none of whom was any of the 1170 of the Civil Code which provides:
plaintiffs (Exh. 14).4
Article 1170. Those who in the performance of their obligations are guilty of fraud,
The RTC decided in favor of MERALCO by dismissing herein respondents' claim for moral negligence, or delay, and those who in any manner contravene the tenor thereof, are liable
damages, exemplary damages and attorney's fees. However, the RTC ordered MERALCO to for damages.
restore the electric power supply of respondents.
In Radio Communications of the Philippines, Inc. v. Verchez,8 the Court expounded on the
Respondents then appealed to the CA. In its Decision dated December 16, 2002, the CA nature of culpa contractual, thus:
faulted MERALCO for not requiring from National Power Corporation (NPC) a writ of
execution or demolition and in not coordinating with the court sheriff or other proper officer

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Chapter 1 (General Provisions (Art. 1156-1162)
"In culpa contractual x x x the mere proof of the existence of the contract and the failure of [B]eing a public utility vested with vital public interest, MERALCO is impressed with certain
its compliance justify, prima facie, a corresponding right of relief. The law, recognizing the obligations towards its customers and any omission on its part to perform such duties would
obligatory force of contracts, will not permit a party to be set free from liability for any kind be prejudicial to its interest. For in the final analysis, the bottom line is that those who do not
of misperformance of the contractual undertaking or a contravention of the tenor thereof. A exercise such prudence in the discharge of their duties shall be made to bear the
breach upon the contract confers upon the injured party a valid cause for recovering that consequences of such oversight.13
which may have been lost or suffered. The remedy serves to preserve the interests of the
promissee that may include his "expectation interest," which is his interest in having the This being so, MERALCO is liable for damages under Article 1170 of the Civil Code.
benefit of his bargain by being put in as good a position as he would have been in had the
contract been performed, or his "reliance interest," which is his interest in being reimbursed
The next question is: Are respondents entitled to moral and exemplary damages and
for loss caused by reliance on the contract by being put in as good a position as he would
attorney's fees?
have been in had the contract not been made; or his "restitution interest," which is his
interest in having restored to him any benefit that he has conferred on the other party.
Indeed, agreements can accomplish little, either for their makers or for society, unless they Article 2220 of the Civil Code provides:
are made the basis for action. The effect of every infraction is to create a new duty, that is, to
make recompense to the one who has been injured by the failure of another to observe his Article 2220. Willful injury to property may be a legal ground for awarding moral damages if
contractual obligation unless he can show extenuating circumstances, like proof of his the court should find that, under the circumstances, such damages are justly due. The same
exercise of due diligence x x x or of the attendance of fortuitous event, to excuse him from his rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.
ensuing liability.9 (Emphasis supplied)
In the present case, MERALCO wilfully caused injury to Leoncio Ramoy by withholding from
Article 1173 also provides that the fault or negligence of the obligor consists in the omission him and his tenants the supply of electricity to which they were entitled under the Service
of that diligence which is required by the nature of the obligation and corresponds with the Contract. This is contrary to public policy because, as discussed above, MERALCO, being a
circumstances of the persons, of the time and of the place. The Court emphasized in Ridjo vital public utility, is expected to exercise utmost care and diligence in the performance of its
Tape & Chemical Corporation v. Court of Appeals10 that "as a public utility, MERALCO has the obligation. It was incumbent upon MERALCO to do everything within its power to ensure that
obligation to discharge its functions with utmost care and diligence."11 the improvements built by respondents are within the NPC’s right of way before
disconnecting their power supply. The Court emphasized in Samar II Electric Cooperative, Inc.
The Court agrees with the CA that under the factual milieu of the present case, MERALCO v. Quijano14 that:
failed to exercise the utmost degree of care and diligence required of it. To repeat, it was not
enough for MERALCO to merely rely on the Decision of the MTC without ascertaining Electricity is a basic necessity the generation and distribution of which is imbued with public
whether it had become final and executory. Verily, only upon finality of said Decision can it interest, and its provider is a public utility subject to strict regulation by the State in the
be said with conclusiveness that respondents have no right or proper interest over the exercise of police power. Failure to comply with these regulations will give rise to the
subject property, thus, are not entitled to the services of MERALCO. presumption of bad faith or abuse of right.15 (Emphasis supplied)

Although MERALCO insists that the MTC Decision is final and executory, it never showed any Thus, by analogy, MERALCO's failure to exercise utmost care and diligence in the
documentary evidence to support this allegation. Moreover, if it were true that the decision performance of its obligation to Leoncio Ramoy, its customer, is tantamount to bad faith.
was final and executory, the most prudent thing for MERALCO to have done was to Leoncio Ramoy testified that he suffered wounded feelings because of MERALCO's
coordinate with the proper court officials in determining which structures are covered by actions.16 Furthermore, due to the lack of power supply, the lessees of his four apartments
said court order. Likewise, there is no evidence on record to show that this was done by on subject lot left the premises.17 Clearly, therefore, Leoncio Ramoy is entitled to moral
MERALCO. damages in the amount awarded by the CA.

The utmost care and diligence required of MERALCO necessitates such great degree of Leoncio Ramoy, the lone witness for respondents, was the only one who testified regarding
prudence on its part, and failure to exercise the diligence required means that MERALCO was the effects on him of MERALCO's electric service disconnection. His co-respondents Matilde
at fault and negligent in the performance of its obligation. In Ridjo Tape,12 the Court Ramoy, Rosemarie Ramoy, Ofelia Durian and Cyrene Panado did not present any evidence of
explained: damages they suffered.

Page 34 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
It is a hornbook principle that damages may be awarded only if proven. In Mahinay v. The Court finds that MERALCO fell short of exercising the due diligence required, but its
Velasquez, Jr.,18 the Court held thus: actions cannot be considered wanton, fraudulent, reckless, oppressive or malevolent.
Records show that MERALCO did take some measures, i.e., coordinating with NPC officials
In order that moral damages may be awarded, there must be pleading and proof of moral and conducting a joint survey of the subject area, to verify which electric meters should be
suffering, mental anguish, fright and the like. While respondent alleged in his complaint that disconnected although these measures are not sufficient, considering the degree of diligence
he suffered mental anguish, serious anxiety, wounded feelings and moral shock, he failed to required of it. Thus, in this case, exemplary damages should not be awarded.
prove them during the trial. Indeed, respondent should have taken the witness stand and
should have testified on the mental anguish, serious anxiety, wounded feelings and other Since the Court does not deem it proper to award exemplary damages in this case, then the
emotional and mental suffering he purportedly suffered to sustain his claim for moral CA's award for attorney's fees should likewise be deleted, as Article 2208 of the Civil Code
damages. Mere allegations do not suffice; they must be substantiated by clear and states that in the absence of stipulation, attorney's fees cannot be recovered except in cases
convincing proof. No other person could have proven such damages except the respondent provided for in said Article, to wit:
himself as they were extremely personal to him.
Article 2208. In the absence of stipulation, attorney’s fees and expenses of litigation, other
In Keirulf vs. Court of Appeals, we held: than judicial costs, cannot be recovered, except:

"While no proof of pecuniary loss is necessary in order that moral damages may be awarded, (1) When exemplary damages are awarded;
the amount of indemnity being left to the discretion of the court, it is nevertheless essential
that the claimant should satisfactorily show the existence of the factual basis of damages and (2) When the defendant’s act or omission has compelled the plaintiff to litigate
its causal connection to defendant’s acts. This is so because moral damages, though with third persons or to incur expenses to protect his interest;
incapable of pecuniary estimation, are in the category of an award designed to compensate
the claimant for actual injury suffered and not to impose a penalty on the wrongdoer.
(3) In criminal cases of malicious prosecution against the plaintiff;
In Francisco vs. GSIS, the Court held that there must be clear testimony on the anguish and
other forms of mental suffering. Thus, if the plaintiff fails to take the witness stand and
testify as to his/her social humiliation, wounded feelings and anxiety, moral damages cannot (4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
be awarded. In Cocoland Development Corporation vs. National Labor Relations Commission,
the Court held that "additional facts must be pleaded and proven to warrant the grant of (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy
moral damages under the Civil Code, these being, x x x social humiliation, wounded feelings, the plaintiff’s plainly valid, just and demandable claim;
grave anxiety, etc. that resulted therefrom."
(6) In actions for legal support;
x x x The award of moral damages must be anchored to a clear showing that respondent
actually experienced mental anguish, besmirched reputation, sleepless nights, wounded (7) In actions for the recovery of wages of household helpers, laborers and skilled
feelings or similar injury. There was no better witness to this experience than respondent workers;
himself. Since respondent failed to testify on the witness stand, the trial court did not have
any factual basis to award moral damages to him.19 (Emphasis supplied)
(8) In actions for indemnity under workmen’s compensation and employer’s
liability laws;
Thus, only respondent Leoncio Ramoy, who testified as to his wounded feelings, may be
awarded moral damages.20
(9) In a separate civil action to recover civil liability arising from a crime;
With regard to exemplary damages, Article 2232 of the Civil Code provides that in contracts
and quasi-contracts, the court may award exemplary damages if the defendant, in this case (10) When at least double judicial costs are awarded;
MERALCO, acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner, while
Article 2233 of the same Code provides that such damages cannot be recovered as a matter (11) In any other case where the court deems it just and equitable that attorney’s
of right and the adjudication of the same is within the discretion of the court.1avvphi1 fees and expenses of litigation should be recovered.

Page 35 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
In all cases, the attorney’s fees and expenses of litigation must be reasonable. 1952, defendants availed of plaintiff's services as an intermediary with the Deudors to work
for the amicable settlement of Civil Case No. Q-135, then pending also in the Court of First
None of the grounds for recovery of attorney's fees are present. Instance of Quezon City, and involving 50 quinones of land, of Which the 20 quinones
aforementioned form part, and notwithstanding his having performed his services, as in fact,
a compromise agreement entered into on March 16, 1963 between the Deudors and the
WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appeals
defendants was approved by the court, the latter have refused to convey to him the 3,000
is AFFIRMED with MODIFICATION. The award for exemplary damages and attorney's fees
square meters of land occupied by him, (a part of the 20 quinones above) which said
is DELETED.
defendants had promised to do "within ten years from and after date of signing of the
compromise agreement", as consideration for his services.
No costs.
Within the Period allowed by the rules, the defendants filed separate motions to dismiss
SO ORDERED. alleging three Identical grounds: (1) As regards that improvements made by plaintiff, that the
complaint states no cause of action, the agreement regarding the same having been made by
Republic of the Philippines plaintiff with the Deudors and not with the defendants, hence the theory of plaintiff based
SUPREME COURT on Article 2142 of the Code on unjust enrichment is untenable; and (2) anent the alleged
Manila agreement about plaintiffs services as intermediary in consideration of which, defendants
promised to convey to him 3,000 square meters of land, that the same is unenforceable
SECOND DIVISION under the Statute of Frauds, there being nothing in writing about it, and, in any event, (3)
that the action of plaintiff to compel such conveyance has already prescribed.

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


Plaintiff opposed the motion, insisting that Article 2142 of the applicable to his case; that the
Statute of Frauds cannot be invoked by defendants, not only because Article 1403 of the Civil
FAUSTINO CRUZ, plaintiff-appellant, Code refers only to "sale of real property or of an interest therein" and not to promises to
vs. convey real property like the one supposedly promised by defendants to him, but also
J. M. TUASON & COMPANY, INC., and GREGORIO ARANETA, INC., defendants-appellees. because, he, the plaintiff has already performed his part of the agreement, hence the
agreement has already been partly executed and not merely executory within the
BARREDO, J.: contemplation of the Statute; and that his action has not prescribed for the reason that
defendants had ten years to comply and only after the said ten years did his cause of action
Appeal from the order dated August 13, 1964 of the Court of First Instance of Quezon City in accrue, that is, ten years after March 16, 1963, the date of the approval of the compromise
Civil Case No. Q-7751, Faustino Cruz vs. J.M. Tuason & Co., Inc., and Gregorio Araneta, Inc., agreement, and his complaint was filed on January 24, 1964.
dismissing the complaint of appellant Cruz for the recovery of improvements he has made on
appellees' land and to compel appellees to convey to him 3,000 square meters of land on Ruling on the motion to dismiss, the trial court issued the herein impugned order of August
three grounds: (1) failure of the complaint to state a cause of action; (2) the cause of action 13, 1964:
of plaintiff is unenforceable under the Statute of Frauds; and (3) the action of the plaintiff has
already prescribed. In the motion, dated January 31, 1964, defendant Gregorio Araneta, Inc.
prayed that the complaint against it be dismissed on the ground that (1)
Actually, a perusal of plaintiff-appellant's complaint below shows that he alleged two the claim on which the action is founded is unenforceable under the
separate causes of action, namely: (1) that upon request of the Deudors (the family of provision of the Statute of Frauds; and (2) the plaintiff's action, if any has
Telesforo Deudor who laid claim on the land in question on the strength of an "informacion already prescribed. In the other motion of February 11, 1964, defendant
posesoria" ) plaintiff made permanent improvements valued at P30,400.00 on said land J. M. Tuason & Co., Inc. sought the dismissal of the plaintiffs complaint on
having an area of more or less 20 quinones and for which he also incurred expenses in the the ground that it states no cause of action and on the Identical grounds
amount of P7,781.74, and since defendants-appellees are being benefited by said stated in the motion to dismiss of defendant Gregorio Araneta, Inc. The
improvements, he is entitled to reimbursement from them of said amounts and (2) that in said motions are duly opposed by the plaintiff.

Page 36 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
From the allegations of the complaint, it appears that, by virtue of an See. 2(e) of Article 1403 of the Civil Code, such agreement is not
agreement arrived at in 1948 by the plaintiff and the Deudors, the former enforceable as it is not in writing and subscribed by the party charged.
assisted the latter in clearing, improving, subdividing and selling the large
tract of land consisting of 50 quinones covered by the informacion On the issue of statute of limitations, the Court holds that the plaintiff's
posesoria in the name of the late Telesforo Deudor and incurred action has prescribed. It is alleged in par. 11 of the complaint that,
expenses, which are valued approximately at P38,400.00 and P7,781.74, sometime in 1952, the defendants approached the plaintiff to prevail
respectively; and, for the reasons that said improvements are being used upon the Deudors to enter to a compromise agreement in Civil Case No.
and enjoyed by the defendants, the plaintiff is seeking the Q-135 and allied cases. Furthermore, par. 13 and 14 of the complaint
reimbursement for the services and expenses stated above from the alleged that the plaintiff acted as emissary of both parties in conveying
defendants. their respective proposals and couter-proposals until the final settlement
was effected on March 16, 1953 and approved by Court on April 11,
Defendant J. M. Tuason & Co., Inc. claimed that, insofar as the plaintiffs 1953. In the present action, which was instituted on January 24, 1964,
claim for the reimbursement of the amounts of P38,400.00 and the plaintiff is seeking to enforce the supposed agreement entered into
P7,781.74 is concerned, it is not a privy to the plaintiff's agreement to between him and the defendants in 1952, which was already prescribed.
assist the Deudors n improving the 50 quinones. On the other hand, the
plaintiff countered that, by holding and utilizing the improvements WHEREFORE, the plaintiffs complaint is hereby ordered DISMISSED
introduced by him, the defendants are unjustly enriching and benefiting without pronouncement as to costs.
at the expense of the plaintiff; and that said improvements constitute a
lien or charge of the property itself
SO ORDERED. (Pp. 65-69, Rec. on Appeal,)

On the issue that the complaint insofar as it claims the reimbursement


On August 22, 1964, plaintiff's counsel filed a motion for reconsideration dated August 20,
for the services rendered and expenses incurred by the plaintiff, states no
1964 as follows:
cause of action, the Court is of the opinion that the same is well-founded.
It is found that the defendants are not parties to the supposed express
contract entered into by and between the plaintiff and the Deudors for Plaintiff through undersigned counsel and to this Honorable Court,
the clearing and improvement of the 50 quinones. Furthermore in order respectfully moves to reconsider its Order bearing date of 13 August
that the alleged improvement may be considered a lien or charge on the 1964, on the following grounds:
property, the same should have been made in good faith and under the
mistake as to the title. The Court can take judicial notice of the fact that 1. THAT THE COMPLAINT STATES A SUFFICIENT CAUSE OF ACTION
the tract of land supposedly improved by the plaintiff had been AGAINST DEFENDANTS IN SO FAR AS PLAINTIFF'S CLAIM PAYMENT OF
registered way back in 1914 in the name of the predecessors-in-interest SERVICES AND REIMBURSEMENT OF HIS EXPENSES, IS CONCERNED;
of defendant J. M. Tuason & Co., Inc. This fact is confirmed in the decision
rendered by the Supreme Court on July 31, 1956 in Case G. R. No. L-5079 II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE 3,000 SQ. MS., THE
entitled J.M. Tuason & Co. Inc. vs. Geronimo Santiago, et al., Such being SAME HAS NOT PRESCRIBED AND THE STATUTE OF FRAUDS IS NOT
the case, the plaintiff cannot claim good faith and mistake as to the title APPLICABLE THERETO;
of the land.

ARGUMENT
On the issue of statute of fraud, the Court believes that same is
applicable to the instant case. The allegation in par. 12 of the complaint
states that the defendants promised and agreed to cede, transfer and Plaintiff's complaint contains two (2) causes of action — the first being an
convey unto the plaintiff the 3,000 square meters of land in consideration action for sum of money in the amount of P7,781.74 representing actual
of certain services to be rendered then. it is clear that the alleged expenses and P38,400.00 as reasonable compensation for services in
agreement involves an interest in real property. Under the provisions of improving the 50 quinones now in the possession of defendants. The
second cause of action deals with the 3,000 sq. ms. which defendants

Page 37 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
have agreed to transfer into Plaintiff for services rendered in effecting (16) That the services and personal expenses of
the compromise between the Deudors and defendants; plaintiff mentioned in paragraph 7 hereof were
rendered and in fact paid by him to improve, as they
Under its order of August 3, 1964, this Honorable Court dismissed the in fact resulted in considerable improvement of the
claim for sum of money on the ground that the complaint does not state 50 quinones, and defendants being now in possession
a cause of action against defendants. We respectfully submit: of and utilizing said improvements should reimburse
and pay plaintiff for such services and expenses.
1. THAT THE COMPLAINT STATES A SUFFICIENT CAUSE OF ACTION
AGAINST DEFENDANTS IN SO FAR AS PLAINTIFF'S CLAIM FOR PAYMENT Plaintiff's cause of action is premised inter alia, on the theory of unjust
OF SERVICES AND REIMBURSEMENT OF HIS EXPENSES IS CONCERNED. enrichment under Article 2142 of the civil Code:

Said this Honorable Court (at p. 2, Order): ART. 2142. Certain lawful voluntary and unilateral
acts give rise to the juridical relation of quasi-contract
to the end that no one shill be unjustly enriched or
ORDER
benefited at the expense of another.

xxx xxx xxx


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

On the issue that the complaint, in so far as it claims the reimbursement


ART. 19. Every person must, in the exercise of his rights and in the
for the services rendered and expenses incurred by the plaintiff, states no
performance of his duties, act with justice, give every-one his due and
cause of action, the Court is of the opinion that the same is well-founded.
observe honesty and good faith.
It is found that the defendants are not parties to the supposed express
contract entered into by and between the plaintiff and the Deudors for
the clearing and improvement of the 50 quinones. Furthermore, in order We respectfully draw the attention of this Honorable Court to the fact
that the alleged improvement may he considered a lien or charge on the that ARTICLE 2142 (SUPRA) DEALS WITH QUASI-CONTRACTS or situations
property, the same should have been made in good faith and under the WHERE THERE IS NO CONTRACT BETWEEN THE PARTIES TO THE ACTION.
mistake as to title. The Court can take judicial notice of the fact that the Further, as we can readily see from the title thereof (Title XVII), that the
tract of land supposedly improved by the plaintiff had been registered Same bears the designation 'EXTRA CONTRACTUAL OBLIGATIONS' or
way back in 1914 in the name of the predecessors-in-interest of obligations which do not arise from contracts. While it is true that there
defendant J. M. Tuason & Co., Inc. This fact is confirmed in the decision was no agreement between plaintiff and defendants herein for the
rendered by the Supreme Court on July 31, 1956 in case G. R. No. L-5079 improvement of the 50 quinones since the latter are presently enjoying
entitled 'J M. Tuason & Co., Inc. vs, Geronimo Santiago, et al.' Such being and utilizing the benefits brought about through plaintiff's labor and
the case, the plaintiff cannot claim good faith and mistake as to the title expenses, defendants should pay and reimburse him therefor under the
of the land. principle that 'no one may enrich himself at the expense of another.' In
this posture, the complaint states a cause of action against the
defendants.
The position of this Honorable Court (supra) is that the complaint does
not state a cause of action in so far as the claim for services and expenses
is concerned because the contract for the improvement of the properties II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE 3,000 SQ. MS. THE
was solely between the Deudors and plaintiff, and defendants are not SAME HAS NOT PRESCRIBED AND THE STATUTE OF FRAUDS IS NOT
privies to it. Now, plaintiff's theory is that defendants are nonetheless APPLICABLE THERETO.
liable since they are utilizing and enjoying the benefit's of said
improvements. Thus under paragraph 16 of "he complaint, it is alleged: The Statute of Frauds is CLEARLY inapplicable to this case:

Page 38 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
At page 2 of this Honorable Court's order dated 13 August 1964, the this property shall be executed and delivered by
Court ruled as follows: defendants to plaintiff within ten (10) years from and
after date of signing of the compromise agreement;
ORDER
(c) That plaintiff shall, without any monetary expense
xxx xxx xxx of his part, assist in clearing the 20 quinones of its
occupants;
On the issue of statute of fraud, the Court believes
that same is applicable to the instant Case, The 13). That in order to effect a compromise between the parties. plaintiff
allegation in par. 12 of the complaint states that the not only as well acted as emissary of both parties in conveying their
defendants promised and agree to cede, transfer and respective proposals and counter- proposals until succeeded in convinzing
convey unto the plaintiff, 3,000 square meters of land the DEUDORS to settle with defendants amicably. Thus, on March 16,
in consideration of certain services to be rendered 1953, a Compromise Agreement was entered into by and between the
then. It is clear that the alleged agreement involves DEUDORS and the defendant companies; and on April 11, 1953, this
an interest in real property. Under the provisions of agreement was approved by this Honorable Court;
Sec. 2(e) of Article 1403 of the Civil Code, such
agreement is not enforceable as it is not in writing 14). That in order to comply with his other obligations under his
and subscribed by the party charged. agreement with defendant companies, plaintiff had to confer with the
occupants of the property, exposing himself to physical harm, convincing
To bring this issue in sharper focus, shall reproduce not only paragraph said occupants to leave the premises and to refrain from resorting to
12 of the complaint but also the other pertinent paragraphs therein physical violence in resisting defendants' demands to vacate;
contained. Paragraph 12 states thus:
That plaintiff further assisted defendants' employees
COMPLAINT in the actual demolition and transferof all the houses
within the perimeter of the 20 quinones until the end
of 1955, when said area was totally cleared and the
xxx xxx xxx
houses transferred to another area designated by the
defendants as 'Capt. Cruz Block' in Masambong,
12). That plaintiff conferred with the aforesaid representatives of Quezon City. (Pars. 12, 13 and 14, Complaint;
defendants several times and on these occasions, the latter promised and Emphasis supplied)
agreed to cede, transfer and convey unto plaintiff the 3,000 sq. ms. (now
known as Lots 16-B, 17 and 18) which plaintiff was then occupying and
From the foregoing, it is clear then the agreement between the parties
continues to occupy as of this writing, for and in consideration of the
mentioned in paragraph 12 (supra) of the complaint has already been
following conditions:
fully EXECUTED ON ONE PART, namely by the plaintiff. Regarding the
applicability of the statute of frauds (Art. 1403, Civil Code), it has been
(a) That plaintiff succeed in convincing the DEUDORS uniformly held that the statute of frauds IS APPLICABLE ONLY TO
to enter into a compromise agreement and that such EXECUTORY CONTRACTS BUT NOT WHERE THE CONTRACT HAS BEEN
agreement be actually entered into by and between PARTLY EXECUTED:
the DEUDORS and defendant companies;
SAME ACTION TO ENFORCE. — The statute of frauds
(b) That as of date of signing the compromise has been uniformly interpreted to be applicable to
agreement, plaintiff shall be the owner of the 3,000 executory and not to completed or contracts.
sq. ms. but the documents evidencing his title over

Page 39 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
Performance of the contracts takes it out of the is further projected in paragraph 15 of the complaint where plaintiff
operation of the statute. ... states;

The statute of the frauds is not applicable to contracts 15). That in or about the middle of 1963, after all the
which are either totally or partially performed, on the conditions stated in paragraph 12 hereof had been
theory that there is a wide field for the commission of fulfilled and fully complied with, plaintiff demanded of
frauds in executory contracts which can only be said defendants that they execute the Deed of
prevented by requiring them to be in writing, a facts Conveyance in his favor and deliver the title
which is reduced to a minimum in executed contracts certificate in his name, over the 3,000 sq. ms. but
because the intention of the parties becomes defendants failed and refused and continue to fail
apparent buy their execution and execution, in mots and refuse to heed his demands. (par. 15, complaint;
cases, concluded the right the parties. ... The partial Emphasis supplied).
performance may be proved by either documentary or
oral evidence. (At pp. 564-565, Tolentino's Civil Code In view of the foregoing, we respectfully submit that this Honorable court
of the Philippines, Vol. IV, 1962 Ed.; Emphasis erred in holding that the statute of frauds is applicable to plaintiff's claim
supplied). over the 3,000 sq. ms. There having been full performance of the
contract on plaintiff's part, the same takes this case out of the context of
Authorities in support of the foregoing rule are legion. Thus Mr. Justice said statute.
Moran in his 'Comments on the Rules of Court', Vol. III, 1974 Ed., at p.
167, states: Plaintiff's Cause of Action had NOT Prescribed:

2 THE STATUTE OF FRAUDS IS APPLICABLE ONLY TO With all due respect to this Honorable court, we also submit that the
EXECUTORY CONTRACTS: CONTRACTS WHICH ARE Court committed error in holding that this action has prescribed:
EITHER TOTALLY OR PARTIALLY PERFORMED ARE
WITHOUT THE STATUE. The statute of frauds is
ORDER
applicable only to executory contracts. It is neither
applicable to executed contracts nor to contracts
partially performed. The reason is simple. In xxx xxx xxx
executory contracts there is a wide field for fraud
because unless they be in writing there is no palpable On the issue of the statute of limitations, the Court
evidence of the intention of the contracting parties. holds that the plaintiff's action has prescribed. It is
The statute has been enacted to prevent fraud. On alleged in par. III of the complaint that, sometime in
the other hand the commission of fraud in executed 1952, the defendants approached the plaintiff to
contracts is reduced to minimum in executed prevail upon the Deudors to enter into a compromise
contracts because (1) the intention of the parties is agreement in Civil Case No. Q-135 and allied cases.
made apparent by the execution and (2) execution Furthermore, pars. 13 and 14 of the complaint
concludes, in most cases, the rights of the parties. alleged that plaintiff acted as emissary of both parties
(Emphasis supplied) in conveying their respective proposals and counter-
proposals until the final settlement was affected on
Under paragraphs 13 and 14 of the complaint (supra) one can readily see March 16, 1953 and approved by the Court on April
that the plaintiff has fulfilled ALL his obligation under the agreement 11, 1953. In the present actin, which was instituted
between him defendants concerning the 3,000 sq. ms. over which the on January 24, 1964, the plaintiff is seeking to enforce
latter had agreed to execute the proper documents of transfer. This fact the supposed agreement entered into between him

Page 40 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
and the defendants in 1952, which has already WHEREFORE, it is respectfully prayed that " Honorable Court reconsider
proscribed. (at p. 3, Order). its Order dated August 13, 1964; and issue another order denying the
motions to dismiss of defendants G. Araneta, Inc. and J. M. Tuason Co.
The present action has not prescribed, especially when we consider Inc. for lack of merit. (Pp. 70-85, Record on Appeal.)
carefully the terms of the agreement between plaintiff and the
defendants. First, we must draw the attention of this Honorable Court to Defendants filed an opposition on the main ground that "the arguments adduced by the
the fact that this is an action to compel defendants to execute a Deed of plaintiff are merely reiterations of his arguments contained in his Rejoinder to Reply and
Conveyance over the 3,000 sq. ms. subject of their agreement. In Opposition, which have not only been refuted in herein defendant's Motion to Dismiss and
paragraph 12 of the complaint, the terms and conditions of the contract Reply but already passed upon by this Honorable Court."
between the parties are spelled out. Paragraph 12 (b) of the complaint
states: On September 7, 1964, the trial court denied the motion for reconsiderations thus:

(b) That as of date of signing the compromise After considering the plaintiff's Motion for Reconsideration of August 20,
agreement, plaintiff shall be the owner of the 3,000 1964 and it appearing that the grounds relied upon in said motion are
sq. ms. but the documents evidencing his title over mere repetition of those already resolved and discussed by this Court in
this property shall be executed and delivered by the order of August 13, 1964, the instant motion is hereby denied and
defendants to plaintiff within ten (10) years from and the findings and conclusions arrived at by the Court in its order of August
after date of signing of the compromise agreement. 13, 1964 are hereby reiterated and affirmed.
(Emphasis supplied).
SO ORDERED. (Page 90, Rec. on Appeal.)
The compromise agreement between defendants and the Deudors which
was conclude through the efforts of plaintiff, was signed on 16 March
Under date of September 24, 1964, plaintiff filed his record on appeal.
1953. Therefore, the defendants had ten (10) years signed on 16 March
1953. Therefore, the defendants had ten (10) years from said date within
which to execute the deed of conveyance in favor of plaintiff over the In his brief, appellant poses and discusses the following assignments of error:
3,000 sq. ms. As long as the 10 years period has not expired, plaintiff had
no right to compel defendants to execute the document and the latter I. THAT THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT ON
were under no obligation to do so. Now, this 10-year period elapsed on THE GROUND THAT APPELLANT'S CLAIM OVER THE 3,000 SQ. MS. IS
March 16, 1963. THEN and ONLY THEN does plaintiff's cause of action ALLEGEDLY UNENFORCEABLE UNDER THE STATUTE OF FRAUDS;
plaintiff on March 17, 1963. Thus, under paragraph 15, of the complaint
(supra) plaintiff made demands upon defendants for the execution of the II. THAT THE COURT A QUO FURTHER COMMITTED ERROR IN DISMISSING
deed 'in or about the middle of 1963. APPELLANT'S COMPLAINT ON THE GROUND THAT HIS CLAIM OVER THE
3,000 SQ. MS. IS ALLEGEDLY BARRED BY THE STATUTE OF LIMITATIONS;
Since the contract now sought to be enforced was not reduced to writing, and
plaintiff's cause of action expires on March 16, 1969 or six years from
March 16, 1963 WHEN THE CAUSE OF ACTION ACCRUED (Art. 1145, Civil III. THAT THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT FOR
Code). FAILURE TO STATE A CAUSE OF ACTION IN SO FAR AS APPELLANT'S CLAIM
FOR REIMBURSEMENT OF EXPENSES AND FOR SERVICES RENDERED IN
In this posture, we gain respectfully submit that this Honorable Court THE IMPROVEMENT OF THE FIFTY (50) QUINONES IS CONCERNED.
erred in holding that plaintiff's action has prescribed.
We agree with appellant that the Statute of Frauds was erroneously applied by the trial
PRAYER court. It is elementary that the Statute refers to specific kinds of transactions and that it

Page 41 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
cannot apply to any that is not enumerated therein. And the only agreements or contracts (3) Those where both parties are incapable of giving consent to a
covered thereby are the following: contract. (Art. 1403, civil Code.)

(1) Those entered into in the name of another person by one who has In the instant case, what appellant is trying to enforce is the delivery to him of 3,000 square
been given no authority or legal representation, or who has acted beyond meters of land which he claims defendants promised to do in consideration of his services as
his powers; mediator or intermediary in effecting a compromise of the civil action, Civil Case No. 135,
between the defendants and the Deudors. In no sense may such alleged contract be
(2) Those do not comply with the Statute of Frauds as set forth in this considered as being a "sale of real property or of any interest therein." Indeed, not all
number, In the following cases an agreement hereafter made shall be dealings involving interest in real property come under the Statute.
unenforceable by action, unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party charged, or by his Moreover, appellant's complaint clearly alleges that he has already fulfilled his part of the
agent; evidence, therefore, of the agreement cannot be received without bargains to induce the Deudors to amicably settle their differences with defendants as, in
the writing, or a secondary evidence of its contents: fact, on March 16, 1963, through his efforts, a compromise agreement between these parties
was approved by the court. In other words, the agreement in question has already been
(a) An agreement that by its terms is not to be partially consummated, and is no longer merely executory. And it is likewise a fundamental
performed within a year from the making thereof; principle governing the application of the Statute that the contract in dispute should be
purely executory on the part of both parties thereto.
(b) A special promise to answer for the debt, default,
or miscarriage of another; We cannot, however, escape taking judicial notice, in relation to the compromise agreement
relied upon by appellant, that in several cases We have decided, We have declared the same
rescinded and of no effect. In J. M. Tuason & Co., Inc. vs. Bienvenido Sanvictores, 4 SCRA 123,
(c) An agreement made in consideration of marriage,
the Court held:
other than a mutual promise to marry;

It is also worthy of note that the compromise between Deudors and


(d) An agreement for the sale of goods, chattels or
Tuason, upon which Sanvictores predicates his right to buy the lot he
things in action, at a price not less than five hundred
occupies, has been validly rescinded and set aside, as recognized by this
pesos, unless the buyer accept and receive part of
Court in its decision in G.R. No. L-13768, Deudor vs. Tuason, promulgated
such goods and chattels, or the evidences, or some of
on May 30, 1961.
them of such things in action, or pay at the time some
part of the purchase money; but when a sale is made
by auction and entry is made by the auctioneer in his We repeated this observation in J.M. Tuason & Co., Inc. vs. Teodosio Macalindong, 6 SCRA
sales book, at the time of the sale, of the amount and 938. Thus, viewed from what would be the ultimate conclusion of appellant's case, We
kind of property sold, terms of sale, price, names of entertain grave doubts as to whether or not he can successfully maintain his alleged cause of
the purchasers and person on whose account the sale action against defendants, considering that the compromise agreement that he invokes did
is made, it is a sufficient memorandum: not actually materialize and defendants have not benefited therefrom, not to mention the
undisputed fact that, as pointed out by appellees, appellant's other attempt to secure the
same 3,000 square meters via the judicial enforcement of the compromise agreement in
(e) An agreement for the leasing for a longer period
which they were supposed to be reserved for him has already been repudiated by the courts.
than one year, or for the sale of real property or of an
(pp. 5-7. Brief of Appellee Gregorio Araneta, Inc.)
interest therein:

As regards appellant's third assignment of error, We hold that the allegations in his complaint
(f) a representation as to the credit of a third person.
do not sufficiently Appellants' reliance. on Article 2142 of Civil Code is misplaced. Said article
provides:

Page 42 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
Certain lawful, voluntary and unilateral acts give rise to the juridical "Opposition to Motion for Reconsideration" (pp. 8689), hence, within the frame of the issues
relation of quasi-contract to the end that no one shall be unjustly below, it is within the ambit of Our authority as the Supreme Court to consider the same
enriched or benefited at the expense of another. here even if it is not discussed in the briefs of the parties. (Insular Life Assurance Co., Ltd.
Employees Association-NATU vs. Insular Life Assurance Co., Ltd. [Resolution en banc of
From the very language of this provision, it is obvious that a presumed qauasi-contract March 10, 1977 in G. R. No. L-25291).
cannot emerge as against one party when the subject mater thereof is already covered by an
existing contract with another party. Predicated on the principle that no one should be Now, the impugned main order was issued on August 13, 1964, while the appeal was made
allowed to unjustly enrich himself at the expense of another, Article 2124 creates the legal on September 24, 1964 or 42 days later. Clearly, this is beyond the 30-day reglementary
fiction of a quasi-contract precisely because of the absence of any actual agreement between period for appeal. Hence, the subject order of dismissal was already final and executory
the parties concerned. Corollarily, if the one who claims having enriched somebody has done when appellant filed his appeal.
so pursuant to a contract with a third party, his cause of action should be against the latter,
who in turn may, if there is any ground therefor, seek relief against the party benefited. It is WHEREFORE, the appeal of Faustino Cruz in this case is dismissed. No costs.
essential that the act by which the defendant is benefited must have been voluntary and
unilateral on the part of the plaintiff. As one distinguished civilian puts it, "The act is
Republic of the Philippines
voluntary. because the actor in quasi-contracts is not bound by any pre-existing obligation to
SUPREME COURT
act. It is unilateral, because it arises from the sole will of the actor who is not previously
Manila
bound by any reciprocal or bilateral agreement. The reason why the law creates a juridical
relations and imposes certain obligation is to prevent a situation where a person is able to
benefit or take advantage of such lawful, voluntary and unilateral acts at the expense of said SECOND DIVISION
actor." (Ambrosio Padilla, Civil Law, Vol. VI, p. 748, 1969 ed.) In the case at bar, since
appellant has a clearer and more direct recourse against the Deudors with whom he had G.R. No. L-44546 January 29, 1988
entered into an agreement regarding the improvements and expenditures made by him on
the land of appellees. it Cannot be said, in the sense contemplated in Article 2142, that RUSTICO ADILLE, petitioner,
appellees have been enriched at the expense of appellant. vs.
THE HONORABLE COURT OF APPEALS, EMETERIA ASEJO, TEODORICA ASEJO, DOMINGO
In the ultimate. therefore, Our holding above that appellant's first two assignments of error ASEJO, JOSEFA ASEJO and SANTIAGO ASEJO, respondents.
are well taken cannot save the day for him. Aside from his having no cause of action against
appellees, there is one plain error of omission. We have found in the order of the trial court SARMIENTO, J.:
which is as good a ground as any other for Us to terminate this case favorably to appellees. In
said order Which We have quoted in full earlier in this opinion, the trial court ruled that "the
grounds relied upon in said motion are mere repetitions of those already resolved and In issue herein are property and property rights, a familiar subject of controversy and a
discussed by this Court in the order of August 13, 1964", an observation which We fully wellspring of enormous conflict that has led not only to protracted legal entanglements but
share. Virtually, therefore. appellant's motion for reconsideration was ruled to be pro-forma. to even more bitter consequences, like strained relationships and even the forfeiture of lives.
Indeed, a cursory reading of the record on appeal reveals that appellant's motion for It is a question that likewise reflects a tragic commentary on prevailing social and cultural
reconsideration above-quoted contained exactly the same arguments and manner of values and institutions, where, as one observer notes, wealth and its accumulation are the
discussion as his February 6, 1964 "Opposition to Motion to Dismiss" of defendant Gregorio basis of self-fulfillment and where property is held as sacred as life itself. "It is in the defense
Araneta, Inc. ((pp. 17-25, Rec. on Appeal) as well as his February 17, 1964 "Opposition to of his property," says this modern thinker, that one "will mobilize his deepest protective
Motion to Dismiss of Defendant J. M. Tuason & Co." (pp. 33-45, Rec. on Appeal and his devices, and anybody that threatens his possessions will arouse his most passionate
February 29, 1964 "Rejoinder to Reply Oil Defendant J. M. Tuason & Co." (pp. 52-64, Rec. on enmity." 1
Appeal) We cannot see anything in said motion for reconsideration that is substantially
different from the above oppositions and rejoinder he had previously submitted and which The task of this Court, however, is not to judge the wisdom of values; the burden of
the trial court had already considered when it rendered its main order of dismissal. reconstructing the social order is shouldered by the political leadership-and the people
Consequently, appellant's motion for reconsideration did not suspend his period for appeal. themselves.
(Estrada vs. Sto. Domingo, 28 SCRA 890, 905-6.) And as this point was covered by appellees'

Page 43 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
The parties have come to this Court for relief and accordingly, our responsibility is to give which can be reduced to simple question of whether or not on the basis of evidence and law,
them that relief pursuant to the decree of law. judgment appealed from should be maintained. 3

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

xxx xxx xxx The respondent Court of appeals reversed the trial Court, 4 and ruled for the plaintiffs-
appellants, the private respondents herein. The petitioner now appeals, by way of certiorari,
... [T]he land in question Lot 14694 of Cadastral Survey of Albay located in from the Court's decision.
Legaspi City with an area of some 11,325 sq. m. originally belonged to
one Felisa Alzul as her own private property; she married twice in her We required the private respondents to file a comment and thereafter, having given due
lifetime; the first, with one Bernabe Adille, with whom she had as an only course to the petition, directed the parties to file their briefs. Only the petitioner, however,
child, herein defendant Rustico Adille; in her second marriage with one filed a brief, and the private respondents having failed to file one, we declared the case
Procopio Asejo, her children were herein plaintiffs, — now, sometime in submitted for decision.
1939, said Felisa sold the property in pacto de retro to certain 3rd
persons, period of repurchase being 3 years, but she died in 1942 without The petition raises a purely legal issue: May a co-owner acquire exclusive ownership over the
being able to redeem and after her death, but during the period of property held in common?
redemption, herein defendant repurchased, by himself alone, and after
that, he executed a deed of extra-judicial partition representing himself
Essentially, it is the petitioner's contention that the property subject of dispute devolved
to be the only heir and child of his mother Felisa with the consequence
upon him upon the failure of his co-heirs to join him in its redemption within the period
that he was able to secure title in his name alone also, so that OCT. No.
required by law. He relies on the provisions of Article 1515 of the old Civil Article 1613 of the
21137 in the name of his mother was transferred to his name, that was in
present Code, giving the vendee a retro the right to demand redemption of the entire
1955; that was why after some efforts of compromise had failed, his half-
property.
brothers and sisters, herein plaintiffs, filed present case for partition with
accounting on the position that he was only a trustee on an implied trust
when he redeemed,-and this is the evidence, but as it also turned out There is no merit in this petition.
that one of plaintiffs, Emeteria Asejo was occupying a portion, defendant
counterclaimed for her to vacate that, — The right of repurchase may be exercised by a co-owner with aspect to his share
alone. 5 While the records show that the petitioner redeemed the property in its entirety,
Well then, after hearing the evidence, trial Judge sustained defendant in shouldering the expenses therefor, that did not make him the owner of all of it. In other
his position that he was and became absolute owner, he was not a words, it did not put to end the existing state of co-ownership.
trustee, and therefore, dismissed case and also condemned plaintiff
occupant, Emeteria to vacate; it is because of this that plaintiffs have Necessary expenses may be incurred by one co-owner, subject to his right to collect
come here and contend that trial court erred in: reimbursement from the remaining co-owners. 6 There is no doubt that redemption of
property entails a necessary expense. Under the Civil Code:
I. ... declaring the defendant absolute owner of the property;
ART. 488. Each co-owner shall have a right to compel the other co-
II. ... not ordering the partition of the property; and owners to contribute to the expenses of preservation of the thing or right
owned in common and to the taxes. Any one of the latter may exempt
himself from this obligation by renouncing so much of his undivided
III. ... ordering one of the plaintiffs who is in possession of the portion of
interest as may be equivalent to his share of the expenses and taxes. No
the property to vacate the land, p. 1 Appellant's brief.
such waiver shall be made if it is prejudicial to the co-ownership.

Page 44 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
The result is that the property remains to be in a condition of co-ownership. While a co-ownership is ended . 8 In the case at bar, the property was registered in 1955 by the
vendee a retro, under Article 1613 of the Code, "may not be compelled to consent to a petitioner, solely in his name, while the claim of the private respondents was presented in
partial redemption," the redemption by one co-heir or co-owner of the property in its totality 1974. Has prescription then, set in?
does not vest in him ownership over it. Failure on the part of all the co-owners to redeem it
entitles the vendee a retro to retain the property and consolidate title thereto in his We hold in the negative. Prescription, as a mode of terminating a relation of co-ownership,
name. 7 But the provision does not give to the redeeming co-owner the right to the entire must have been preceded by repudiation (of the co-ownership). The act of repudiation, in
property. It does not provide for a mode of terminating a co-ownership. turn is subject to certain conditions: (1) a co-owner repudiates the co-ownership; (2) such an
act of repudiation is clearly made known to the other co-owners; (3) the evidence thereon is
Neither does the fact that the petitioner had succeeded in securing title over the parcel in his clear and conclusive, and (4) he has been in possession through open, continuous, exclusive,
name terminate the existing co-ownership. While his half-brothers and sisters are, as we and notorious possession of the property for the period required by law. 9
said, liable to him for reimbursement as and for their shares in redemption expenses, he
cannot claim exclusive right to the property owned in common. Registration of property is The instant case shows that the petitioner had not complied with these requisites. We are
not a means of acquiring ownership. It operates as a mere notice of existing title, that is, if not convinced that he had repudiated the co-ownership; on the contrary, he had deliberately
there is one. kept the private respondents in the dark by feigning sole heirship over the estate under
dispute. He cannot therefore be said to have "made known" his efforts to deny the co-
The petitioner must then be said to be a trustee of the property on behalf of the private ownership. Moreover, one of the private respondents, Emeteria Asejo, is occupying a portion
respondents. The Civil Code states: of the land up to the present, yet, the petitioner has not taken pains to eject her therefrom.
As a matter of fact, he sought to recover possession of that portion Emeteria is occupying
ART. 1456. If property is acquired through mistake or fraud, the person only as a counterclaim, and only after the private respondents had first sought judicial relief.
obtaining it is, by force of law, considered a trustee of an implied trust for
the benefit of the person from whom the property comes. It is true that registration under the Torrens system is constructive notice of title, 10 but it has
likewise been our holding that the Torrens title does not furnish a shield for fraud. 11 It is
We agree with the respondent Court of Appeals that fraud attended the registration of the therefore no argument to say that the act of registration is equivalent to notice of
property. The petitioner's pretension that he was the sole heir to the land in the affidavit of repudiation, assuming there was one, notwithstanding the long-standing rule that
extrajudicial settlement he executed preliminary to the registration thereof betrays a clear registration operates as a universal notice of title.
effort on his part to defraud his brothers and sisters and to exercise sole dominion over the
property. The aforequoted provision therefore applies. For the same reason, we cannot dismiss the private respondents' claims commenced in 1974
over the estate registered in 1955. While actions to enforce a constructive trust prescribes in
It is the view of the respondent Court that the petitioner, in taking over the property, did so ten years, 12 reckoned from the date of the registration of the property, 13 we, as we said, are
either on behalf of his co-heirs, in which event, he had constituted himself a negotiorum not prepared to count the period from such a date in this case. We note the petitioner's sub
gestor under Article 2144 of the Civil Code, or for his exclusive benefit, in which case, he is rosa efforts to get hold of the property exclusively for himself beginning with his fraudulent
guilty of fraud, and must act as trustee, the private respondents being the beneficiaries, misrepresentation in his unilateral affidavit of extrajudicial settlement that he is "the only
under the Article 1456. The evidence, of course, points to the second alternative the heir and child of his mother Feliza with the consequence that he was able to secure title in
petitioner having asserted claims of exclusive ownership over the property and having acted his name also." 14 Accordingly, we hold that the right of the private respondents commenced
in fraud of his co-heirs. He cannot therefore be said to have assume the mere management from the time they actually discovered the petitioner's act of defraudation. 15 According to
of the property abandoned by his co-heirs, the situation Article 2144 of the Code the respondent Court of Appeals, they "came to know [of it] apparently only during the
contemplates. In any case, as the respondent Court itself affirms, the result would be the progress of the litigation." 16 Hence, prescription is not a bar.
same whether it is one or the other. The petitioner would remain liable to the Private
respondents, his co-heirs. Moreover, and as a rule, prescription is an affirmative defense that must be pleaded either in
a motion to dismiss or in the answer otherwise it is deemed waived, 17 and here, the
This Court is not unaware of the well-established principle that prescription bars any demand petitioner never raised that defense. 18 There are recognized exceptions to this rule, but the
on property (owned in common) held by another (co-owner) following the required number petitioner has not shown why they apply.
of years. In that event, the party in possession acquires title to the property and the state of

Page 45 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
WHEREFORE, there being no reversible error committed by the respondent Court of Appeals, Acting on said instruction, FNSB instructed private respondent Manufacturers Hanover and
the petition is DENIED. The Decision sought to be reviewed is hereby AFFIRMED in toto. No Trust Corporation to effect the above- mentioned transfer through its facilities and to charge
pronouncement as to costs. the amount to the account of FNSB with private respondent. Although private respondent
was able to send a telex to PNB to pay petitioner $10,000.00 through the Pilipinas Bank,
SO ORDERED, where petitioner had an account, the payment was not effected immediately because the
payee designated in the telex was only "Wearing Apparel." Upon query by PNB, private
respondent sent PNB another telex dated August 27, 1980 stating that the payment was to
Republic of the Philippines
be made to "Irene's Wearing Apparel." On August 28, 1980, petitioner received the
SUPREME COURT
remittance of $10,000.00 through Demand Draft No. 225654 of the PNB.
Manila

Meanwhile, on August 25, 1980, after learning about the delay in the remittance of the
THIRD DIVISION
money to petitioner, FACETS informed FNSB about the situation. On September 8, 1980,
unaware that petitioner had already received the remittance, FACETS informed private
G.R. No. 82670 September 15, 1989 respondent about the delay and at the same time amended its instruction by asking it to
effect the payment through the Philippine Commercial and Industrial Bank (hereinafter
DOMETILA M. ANDRES, doing business under the name and style "IRENE'S WEARING referred to as PCIB) instead of PNB.
APPAREL," petitioner,
vs. Accordingly, private respondent, which was also unaware that petitioner had already
MANUFACTURERS HANOVER & TRUST CORPORATION and COURT OF received the remittance of $10,000.00 from PNB instructed the PCIB to pay $10,000.00 to
APPEALS, respondents. petitioner. Hence, on September 11, 1980, petitioner received a second $10,000.00
remittance.
Roque A. Tamayo for petitioner.
Private respondent debited the account of FNSB for the second $10,000.00 remittance
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for private respondent. effected through PCIB. However, when FNSB discovered that private respondent had made a
duplication of the remittance, it asked for a recredit of its account in the amount of
CORTES, J.: $10,000.00. Private respondent complied with the request.

Assailed in this petition for review on certiorari is the judgment of the Court of Appeals, Private respondent asked petitioner for the return of the second remittance of $10,000.00
which, applying the doctrine of solutio indebiti, reversed the decision of the Regional Trial but the latter refused to pay. On May 12, 1982 a complaint was filed with the Regional Trial
Court, Branch CV, Quezon City by deciding in favor of private respondent. Court, Branch CV, Quezon City which was decided in favor of petitioner as defendant. The
trial court ruled that Art. 2154 of the New Civil Code is not applicable to the case because the
second remittance was made not by mistake but by negligence and petitioner was not
Petitioner, using the business name "Irene's Wearing Apparel," was engaged in the unjustly enriched by virtue thereof [Record, p. 234]. On appeal, the Court of Appeals held
manufacture of ladies garments, children's wear, men's apparel and linens for local and that Art. 2154 is applicable and reversed the RTC decision. The dispositive portion of the
foreign buyers. Among its foreign buyers was Facets Funwear, Inc. (hereinafter referred to as Court of Appeals' decision reads as follows:
FACETS) of the United States.
WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE
In the course of the business transaction between the two, FACETS from time to time and another one entered in favor of plaintiff-appellant and against
remitted certain amounts of money to petitioner in payment for the items it had purchased. defendant-appellee Domelita (sic) M. Andres, doing business under the
Sometime in August 1980, FACETS instructed the First National State Bank of New Jersey, name and style "Irene's Wearing Apparel" to reimburse and/or return to
Newark, New Jersey, U.S.A. (hereinafter referred to as FNSB) to transfer $10,000.00 to plaintiff-appellant the amount of $10,000.00, its equivalent in Philippine
petitioner via Philippine National Bank, Sta. Cruz Branch, Manila (hereinafter referred to as currency, with interests at the legal rate from the filing of the complaint
PNB).

Page 46 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
on May 12, 1982 until the whole amount is fully paid, plus twenty judicial discretion draws whenever the statutory laws are inadequate
percent (20%) of the amount due as attomey's fees; and to pay the costs. because they do not speak or do so with a confused voice. [at p. 632.]

With costs against defendant-appellee. For this article to apply the following requisites must concur: "(1) that he who paid was not
under obligation to do so; and, (2) that payment was made by reason of an essential mistake
SO ORDERED. [Rollo, pp. 29-30.] of fact" [City of Cebu v. Piccio, 110 Phil. 558, 563 (1960)].

Thereafter, this petition was filed. The sole issue in this case is whether or not the private It is undisputed that private respondent delivered the second $10,000.00 remittance.
respondent has the right to recover the second $10,000.00 remittance it had delivered to However, petitioner contends that the doctrine of solutio indebiti, does not apply because its
petitioner. The resolution of this issue would hinge on the applicability of Art. 2154 of the requisites are absent.
New Civil Code which provides that:
First, it is argued that petitioner had the right to demand and therefore to retain the second
Art. 2154. If something received when there is no right to demand it, and $10,000.00 remittance. It is alleged that even after the two $10,000.00 remittances are
it was unduly delivered through mistake, the obligation to return it arises. credited to petitioner's receivables from FACETS, the latter allegedly still had a balance of
$49,324.00. Hence, it is argued that the last $10,000.00 remittance being in payment of a
pre-existing debt, petitioner was not thereby unjustly enriched.
This provision is taken from Art. 1895 of the Spanish Civil Code which provided that:

The contention is without merit.


Art. 1895. If a thing is received when there was no right to claim it and
which, through an error, has been unduly delivered, an obligation to
restore it arises. The contract of petitioner, as regards the sale of garments and other textile products, was
with FACETS. It was the latter and not private respondent which was indebted to petitioner.
On the other hand, the contract for the transmittal of dollars from the United States to
In Velez v. Balzarza, 73 Phil. 630 (1942), the Court, speaking through Mr. Justice Bocobo
petitioner was entered into by private respondent with FNSB. Petitioner, although named as
explained the nature of this article thus:
the payee was not privy to the contract of remittance of dollars. Neither was private
respondent a party to the contract of sale between petitioner and FACETS. There being no
Article 1895 [now Article 2154] of the Civil Code abovequoted, is contractual relation between them, petitioner has no right to apply the second $10,000.00
therefore applicable. This legal provision, which determines the quasi- remittance delivered by mistake by private respondent to the outstanding account of
contract of solution indebiti, is one of the concrete manifestations of the FACETS.
ancient principle that no one shall enrich himself unjustly at the expense
of another. In the Roman Law Digest the maxim was formulated
Petitioner next contends that the payment by respondent bank of the second $10,000.00
thus: "Jure naturae acquum est, neminem cum alterius detrimento et
remittance was not made by mistake but was the result of negligence of its employees. In
injuria fieri locupletiorem." And the Partidas declared: "Ninguno non deue
connection with this the Court of Appeals made the following finding of facts:
enriquecerse tortizeramente con dano de otro." Such axiom has grown
through the centuries in legislation, in the science of law and in court
decisions. The lawmaker has found it one of the helpful guides in framing The fact that Facets sent only one remittance of $10,000.00 is not
statutes and codes. Thus, it is unfolded in many articles scattered in the disputed. In the written interrogatories sent to the First National State
Spanish Civil Code. (See for example, articles, 360, 361, 464, 647, 648, Bank of New Jersey through the Consulate General of the Philippines in
797, 1158, 1163, 1295, 1303, 1304, 1893 and 1895, Civil Code.) This time- New York, Adelaide C. Schachel, the investigation and reconciliation clerk
honored aphorism has also been adopted by jurists in their study of the in the said bank testified that a request to remit a payment for Facet
conflict of rights. It has been accepted by the courts, which have not Funwear Inc. was made in August, 1980. The total amount which the First
hesitated to apply it when the exigencies of right and equity demanded National State Bank of New Jersey actually requested the plaintiff-
its assertion. It is a part of that affluent reservoir of justice upon which appellant Manufacturers Hanover & Trust Corporation to remit to Irene's
Wearing Apparel was US $10,000.00. Only one remittance was requested

Page 47 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
by First National State Bank of New Jersey as per instruction of Facets The rule is that principles of equity cannot be applied if there is a provision of law specifically
Funwear (Exhibit "J", pp. 4-5). applicable to a case [Phil. Rabbit Bus Lines, Inc. v. Arciaga, G.R. No. L-29701, March 16,
1987,148 SCRA 433; Zabat, Jr. v. Court of Appeals, G.R. No. L36958, July 10, 1986, 142 SCRA
That there was a mistake in the second remittance of US $10,000.00 is 587; Rural Bank of Paranaque, Inc. v. Remolado, G.R. No. 62051, March 18, 1985, 135 SCRA
borne out by the fact that both remittances have the same reference 409; Cruz v. Pahati, 98 Phil. 788 (1956)]. Hence, the Court in the case of De Garcia v. Court of
invoice number which is 263 80. (Exhibits "A-1- Deposition of Mr. Stanley Appeals, G.R. No. L-20264, January 30, 1971, 37 SCRA 129, citing Aznar v. Yapdiangco, G.R.
Panasow" and "A-2-Deposition of Mr. Stanley Panasow"). No. L-18536, March 31, 1965, 13 SCRA 486, held:

Plaintiff-appellant made the second remittance on the wrong assumption ... The common law principle that where one of two innocent persons
that defendant-appellee did not receive the first remittance of US must suffer by a fraud perpetrated by another, the law imposes the loss
$10,000.00. [Rollo, pp. 26-27.] upon the party who, by his misplaced confidence, has enabled the fraud
to be committed, cannot be applied in a case which is covered by an
express provision of the new Civil Code, specifically Article 559. Between
It is evident that the claim of petitioner is anchored on the appreciation of the attendant
a common law principle and a statutory provision, the latter must prevail
facts which petitioner would have this Court review. The Court holds that the finding by the
in this jurisdiction. [at p. 135.]
Court of Appeals that the second $10,000.00 remittance was made by mistake, being based
on substantial evidence, is final and conclusive. The rule regarding questions of fact being
raised with this Court in a petition for certiorari under Rule 45 of the Revised Rules of Court Having shown that Art. 2154 of the Civil Code, which embodies the doctrine
has been stated in Remalante v. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus: of solutio indebiti, applies in the case at bar, the Court must reject the common law principle
invoked by petitioner.
The rule in this jurisdiction is that only questions of law may be raised in a
petition for certiorari under Rule 45 of the Revised Rules of Court. "The Finally, in her attempt to defeat private respondent's claim, petitioner makes much of the
jurisdiction of the Supreme Court in cases brought to it from the Court of fact that from the time the second $10,000.00 remittance was made, five hundred and ten
Appeals is limited to reviewing and revising the errors of law imputed to days had elapsed before private respondent demanded the return thereof. Needless to say,
it, its findings of fact being conclusive" [Chan v. Court of Appeals, G.R. No. private respondent instituted the complaint for recovery of the second $10,000.00
L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions]. remittance well within the six years prescriptive period for actions based upon a quasi-
This Court has emphatically declared that "it is not the function of the contract [Art. 1145 of the New Civil Code].
Supreme Court to analyze or weigh such evidence all over again, its
jurisdiction being limited to reviewing errors of law that might have been WHEREFORE, the petition is DENIED and the decision of the Court of Appeals is hereby
committed by the lower court" [Tiongco v. De la Merced, G.R. No. L- AFFIRMED.
24426, July 25, 1974, 58 SCRA 89; Corona v. Court of Appeals, G.R. No. L-
62482, April 28, 1983, 121 SCRA 865; Baniqued v. Court of Appeals, G. R. SO ORDERED.
No. L-47531, February 20, 1984, 127 SCRA 596]. "Barring, therefore, a
showing that the findings complained of are totally devoid of support in
the record, or that they are so glaringly erroneous as to constitute serious
abuse of discretion, such findings must stand, for this Court is not
expected or required to examine or contrast the oral and documentary
evidence submitted by the parties" [Santa Ana, Jr. v. Hernandez, G.R. No.
L-16394, December 17, 1966, 18 SCRA 9731. [at pp. 144-145.]

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

Page 48 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
Marantao, also in the same province. All of these fishponds were sited along the Lake Lanao
SECOND DIVISION shore. Private respondents have spent substantial amounts to construct, maintain, and stock
their respective fishponds with fish fingerlings, and make plantings along the adjoining
G.R. No. 124378 March 8, 2005 foreshore areas between 1984 and 1986.9

NATIONAL POWER CORPORATION, Petitioner, In October and November of 1986, all the improvements were washed away when the water
vs. level of the lake escalated and the subject lakeshore area was flooded. Private respondents
THE HONORABLE COURT OF APPEALS (Ninth Division), HADJI ABDUL CARIM ABDULLAH, blamed the inundation on the Agus Regulation Dam built and operated by the NPC in 1978.
CARIS ABDULLAH, HADJI ALI LANGCO1 and DIAMAEL PANGCATAN, Respondents. They theorized that NPC failed to increase the outflow of water even as the water level of the
lake rose due to the heavy rains.10
DECISION
Thus, in December of 1986, the private respondents, except for Caris Abdullah, wrote
separate letters to the NPC’s Vice-President, a certain "R.B. Santos," who was based in
CHICO-NAZARIO, J.:
Ditucalan, Iligan City. They sought assistance and compensation for the damage suffered by
each of them.11 The private respondents’ pleas were shorn off by NPC on the ground that it
In this petition for review, petitioner seeks the reversal of the Decision2 dated 21 December was mandated under Memorandum Order No. 398 dated 15 November 1973 to build the
1995 of the Court of Appeals in CA-G.R. CV No. 44639, which affirmed with modification the dam and maintain the normal maximum lake level of 702 meters, and that since its operation
Decision3 dated 29 July 1991 of the Regional Trial Court (RTC), 12th Judicial Region, Branch 9, in 1978, the water level never rose beyond 702 meters. Furthermore, NPC retorted that
Marawi City, in Civil Case No. 115-87, for damages. The Resolution4 dated 27 March 1996 visible monuments and benchmarks indicating the 702-meter elevation had been established
that denied petitioner’s motion for reconsideration is likewise assailed. around the lake from 1974 to 1983, which should have served as a warning to the private
respondents not to introduce any improvements below the 702-meter level as this was
The factual milieu, as gleaned from the records, follows: outlawed.12

Petitioner National Power Corporation (NPC) is a government-owned and controlled Left with no other recourse, the private respondents filed a complaint for damages before
corporation created under Commonwealth Act No. 120, as amended.5 It is tasked to the RTC of Marawi City, Branch 9, on 24 February 1987, docketed as Civil Case No. 115-87.
undertake the development of hydroelectric generations of power and the production of They alleged that the negligence and inexperience of NPC’s employees assigned to operate
electricity from nuclear, geothermal and other sources, as well as the transmission of electric the Agus Regulation Dam were the proximate causes of the damage caused to their
power on a nationwide basis.6 Concomitant to its mandate, petitioner has, among other properties and livelihood. They prayed for damages corresponding to the cost of their lost
things, the power to construct, operate and maintain power plants, auxiliary plants, dams, fishes plus the value of their destroyed fishpond and the expenses and the fishes thereof.
reservoirs, pipes, mains, transmission lines, power stations, and substations, and other works They, too, asked for reimbursement of necessary expenses as may be proved in the trial,
for the purpose of developing hydraulic power from any river, creek, lake, spring, and moral and exemplary damages, and the costs.13
waterfalls in the Philippines, and supplying such power to the inhabitants.7
NPC denied the private respondents’ allegations, and tossed back the disputations that: (a)
On 15 November 1973, the Office of the President of the Philippines issued Memorandum the water level of Lake Lanao never went beyond 702 meters, (b) NPC employees were never
Order No. 398 - "Prescribing Measures to Preserve the Lake Lanao Watershed, To Enforce the remiss in the performance of their duties, and (c) the private respondents’ alleged fishponds
Reservation of Areas Around the Lake Below Seven Hundred And Two Meters Elevation, and were either located below the 702-meter level, or must have been introduced when the
for Other Purposes." Said decree instructed the NPC to build the Agus Regulation Dam at the water level was abnormally low and as such, were within the prohibited area as defined in
mouth of Agus River in Lanao del Sur, at a normal maximum water level of Lake Lanao at 702 Memorandum Order No. 398. In fine, the NPC posited that the private respondents had no
meters elevation.8 Pursuant thereto, petitioner built and operated the said dam in 1978. cause of action against it.14

Private respondents Hadji Abdul Carim Abdullah and Caris Abdullah were owners of The trial court created a committee composed of representatives of both parties to conduct
fishponds in Barangay Bacong, Municipality of Marantao, Lanao del Sur, while private an ocular inspection of the dam and its surrounding areas. On 29 July 1991, the trial court
respondents Hadji Ali Langco and Diamael Pangcatan had their fishponds built in Poona- rendered a Decision in favor of the private respondents. Thus, the trial court disposed:

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Chapter 1 (General Provisions (Art. 1156-1162)
WHEREFORE, for all the foregoing consideration, judgment is hereby rendered in V. …awarded temperate and moderate damages in lieu of actual and compensatory
favor of plaintiffs Hadji Abdul Carim Abdullah, Caris Abdullah, Hadji Langco and damages, at unreasonable amounts at that, despite the clear absence OF LEGAL
Diamael Pangcatan and against defendant National Power Corporation directing AND FACTUAL BASES FOR SUCH AWARD.17
said defendant National Power Corporation to pay unto Plaintiff Hadji Abdul Carim
Abdullah the sum of P410,000.00 in actual or compensatory damages; to pay unto Despite the manifold spin-off subjects raised, the pertinent issue worthy of exploration at the
plaintiff Caris Abdullah the sum of P208,000.00 in actual or compensatory core is whether or not the Court of Appeals erred in affirming the trial court’s verdict that
damages; to pay unto plaintiff Hadji Ali Langco or his substitutes Said Langco; Jalila petitioner was legally answerable for the damages endured by the private respondents.
Langco; Raga Langco; Namolawan Langco; Alikan Langco; Dibolawan Langco;
Binolawan Langco; Ismael Langco; Bokari Langco; and Diamael Pangcatan the total
From the above-mentioned assignment of errors, petitioner palpably disputes the findings of
sum of P260,000.00 in actual or compensatory damages; and the further sum
facts and the appreciation of evidence made by the trial court and later affirmed by
of P20,000.00 in litigation expenses and the costs.15
respondent court. It is apodictic that in a petition for review, only questions of law may be
raised18 for the reason that the Supreme Court is not a trier of facts and generally does not
Unflinched, the petitioner appealed to the Court of Appeals, which in a Decision dated 21 weigh anew the evidence already passed upon by the Court of Appeals.19 Corollarily, the
December 1995, affirmed the decision of the court a quo with modification on the award of factual findings of the Court of Appeals affirming those of the trial court bind this Court when
damages, to wit: such findings are supported by substantial evidence. In the case at hand, no reversible error
could be attributed to the Court of Appeals in espousing conclusions of facts similar to the
WHEREFORE, for all the foregoing considerations, judgment is hereby rendered in trial court on petitioner’s liability for the damages suffered by private respondents.20
favor of plaintiffs Hadji Abdul Carim Abdullah, Caris Abdullah, Hadji Langco and
Diamael Pangcatan and against defendant National Power Corporation directing Here are the reasons why:
said defendant National Power Corporation to pay unto plaintiff Hadji Abdul Carim
Abdullah the sum of P350,000.00; unto plaintiff Caris Abdullah the sum
Memorandum Order No. 398, also known as the law "Prescribing Measures to
of P150,000.00; unto plaintiff Hadji Ali Langco’s heirs and Diamael Pangcatan the
Preserve the Lake Lanao Watershed, To Enforce the Reservation of Areas Around
sum of P210,000.00 as and for temperate or moderate damages; as well
the Lake Below Seven Hundred And Two Meters Elevation, and for Other
as P20,000.00 as and for litigation expenses and costs.
Purposes," clothes the NPC with the power to build the Agus Regulation Dam and
to operate it for the purpose of generating energy. Twin to such power are the
Costs against appellant.16 duties: (1) to maintain the normal maximum lake elevation at 702 meters, and (2)
to build benchmarks to warn the inhabitants in the area that cultivation of land
The subsequent motion for reconsideration having been denied, petitioner interposes this below said elevation is forbidden. The wordings of the said presidential order
appeal, contending that the Court of Appeals seriously erred when it: cannot be any clearer on this point. Thus –

I. …disregarded the mandate of Presidential Memorandum Order No. 398. 4. The National Power Corporation shall render financial assistance to
forest protection, tree farming, reforestation and other conservation
II. …concluded that petitioner was negligent in applying Presidential Memorandum measures in coordination with private timber concessionaires and the
Order No. 398, despite the clear absence of evidence of such alleged negligence. Bureau of Forest Development. With the assistance and cooperation of
provincial and municipal officials, as well as the Provincial Commander of
the Philippine Constabulary, NPC shall place in every town around the
III. …concluded that the adverse result of an ocular inspection conducted by the
lake, at the normal maximum lake elevation of seven hundred and two
trial court at a much later date and during the trial could be used, as it did, as proof
meters, benchmarks warning that cultivation of land below said
of the alleged flooding in October/November 1986.
elevation is prohibited. (Emphasis supplied)

IV. …concluded and so held that petitioner allegedly failed to prove that private
By the bulk of evidence, NPC ostensibly reneged on both duties.
respondents’ fishponds were situated below the 702-meter elevation of the lake.

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Chapter 1 (General Provisions (Art. 1156-1162)
With respect to its job to maintain the normal maximum level of the lake at 702 meters, the proof that the water level did rise above the benchmarks and inundated the properties in the
Court of Appeals, echoing the trial court, observed with alacrity that when the water level area.
rises due to the rainy season, the NPC ought to release more water to the Agus River to avoid
flooding and prevent the water from going over the maximum level. And yet, petitioner In the absence of any clear explanation on what other factors could have explained the
failed to do so, resulting in the inundation of the nearby estates.21 The facts, as unraveled by flooding in the neighboring properties of the dam, it is fair to reasonably infer that the
the trial court from the evidence on record, established that before the construction of the incident happened because of want of care on the part of NPC to maintain the water level of
Agus Regulation Dam across the Agus River just beyond the Marawi City Bridge, no report of the dam within the benchmarks at the maximum normal lake elevation of 702 meters. An
damages to landowners around the lake was ever heard. After its construction and when it application of the doctrine of res ipsa loquitur, the thing speaks for itself, comes to
started functioning in 1978, reports and complaints of damages sustained by landowners fore.24 Where the thing which causes injury is shown to be under the management of the
around the lake due to overflooding became widespread. The factual findings of the trial defendant, and the accident is such as in the ordinary course of things does not happen if
court rightly support its conclusions on this respect - those who have the management use proper care, it affords reasonable evidence, in the
absence of an explanation by the defendant, that the accident arose from want of care. 25
…Lake Lanao has only one outlet, the Agus River which in effect is the natural
regulator. When the Lake level is high, more water leaves the lakes towards the NPC further attempts to dodge its burden by turning the tables against private respondents.
Agus River. Under such a natural course, overflooding is remote because excess in Petitioner would entice this Court to believe that private respondents brought the
water level of the lake, there is a corresponding increase in the volume of water catastrophe upon themselves by constructing their fishponds below the 702-meter level in
drain down towards the Agus River and vice versa. defiance of Memorandum Order No. 398. Yet, petitioner failed to demonstrate that the
subject fishponds were situated at an area below the 702-meter level yardstick. Allegation is
In order to achieve its goal of generating hydroelectric power, defendant NPC one thing; proof is another. Save for its bare claim, NPC was unable to indicate the position
constructed the Intake Regulation Dam, the purpose of which being to control and of the fishponds vis-à-vis its benchmarks. But, how can it do so when it cannot show its own
regulate the amount of water discharged into the Agus River. With this dam, benchmarks as they were submerged in water?
defendant NPC is able to either increase or decrease the volume of water
discharged into the Agus River depending on the amount of power to be This brings us to the second duty of NPC under Memorandum Order No. 398 - to build and
generated. When the lake level rises, specially during rainy days, it is indispensable maintain benchmarks to warn the inhabitants in the area that cultivation of land below the
to wide open the dam to allow more water to flow to the Agus River to prevent 702-meter elevation is forbidden.
overflowing of the lakeshore and the land around it. But the NPC cannot allow the
water to flow freely into its outlet – the Agus River, because it will adversely affect
Notably, despite the clear mandate of Memorandum Order No. 398, petitioner’s own
its hydroelectric power plants. It has to hold back the water by its dam in order to
witness, Principal Hydrologist Mama Manongguiring, testified that although the dam was
maintain the volume of water required to generate the power supply. As a
built in 1978, the benchmarks were installed only in July and August of 1984 and that
consequence of holding back the water, the lands around the lake are inundated.
apparently, many had already worn-out, to be replaced only in October of 1986.26 As
This is even admitted by defendant’s witness Mama Manongguiring. Consequently,
adroitly observed by the Court of Appeals, it was only after many years from the time it was
in October, November and December of 1986 when the lake level increased,
built that NPC installed said benchmarks. At that time, many farms and houses were already
farmlands in the Basak area around Lake Lanao and fishponds were inundated as a
swamped and many fishponds, including those of the private respondents, damaged. 27
result of such holding back of water by defendant NPC.22 (Emphasis supplied)

Consequently, even assuming that the fishponds were erected below the 702-meter level,
Petitioner adduced in evidence its company records to bear out its claim that the water level
NPC must, nonetheless, bear the brunt for such damages inasmuch as it has the duty
of the lake was, at no point in time, higher than 702 meters. The trial court and the Court of
to erect and maintain the benchmarks precisely to warn the owners of the neighboring
Appeals, however, did not lend credence to this piece of evidence. Both courts below held
properties not to build fishponds below these marks. Such benchmarks, likewise, serve the
that the data contained in petitioner’s records collapse in the face of the actual state of the
evidentiary purpose of extricating NPC from liability in cases of overflooding in the
affected areas. During the ocular inspection conducted by the lower court where
neighboring estates because all NPC would have to do is point out that such constructions
representatives of both parties were present, it was established that in the subject areas, the
are below the 702-meter allowable elevation. Without such points of reference, the
benchmarks as pointed out by the NPC representative, could not be seen nor reached
inhabitants in said areas are clueless whether or not their improvements are within the
because they were totally covered with water.23This fact, by itself, constitutes an unyielding
prohibited area. Conversely, without such benchmarks, NPC has no way of telling if the

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Chapter 1 (General Provisions (Art. 1156-1162)
fishponds, subject matter of the present controversy, are indeed below the prescribed reasonable under the circumstances conformably with Articles 2224 and 2225 of the New
maximum level of elevation. Civil Code.32

NPC staunchly asserts that the damages, if any, were due to a fortuitous event. Again, we WHEREFORE, the instant petition is DENIED. The Decision dated 21 December 1995 and the
cannot agree with petitioner. We defer instead to the findings and opinions expressed by the Resolution dated 27 March 1996 of the Court of Appeals in CA-G.R. CV No. 44639 are hereby
Court of Appeals that NPC cannot escape liability on the mere excuse that the rise of water AFFIRMED. Costs against petitioner.
was due to heavy rains that were acts of God. The rainy season is an expected occurrence
and the NPC cannot stop doing its duty when the rains fall. In fact, it is during these critical SO ORDERED.
times that the NPC needs to be vigilant to make sure that the lake level does not exceed the
maximum level.28Indeed, negligence or imprudence is human factor which makes the whole
Republic of the Philippines
occurrence humanized, as it were, and removed from the rules applicable to acts of God.29
SUPREME COURT
Manila
NPC further enthuses that the principle of damnum absque injuria, or damage without injury,
applies in the present case.
SECOND DIVISION

Again, we disagree. This principle means that although there was physical damage, there was
G.R. No. 71049 May 29, 1987
no legal injury, as there was no violation of a legal right. The negligence of NPC as a result of
its inability to maintain the level of water in its dams has been satisfactorily and extensively
established. BERNARDINO JIMENEZ, petitioner,
vs.
CITY OF MANILA and INTERMEDIATE APPELLATE COURT, respondents.
Article 2176 of the New Civil Code provides that "whoever by act or omission causes damage
to another, there being fault or negligence, is obliged to pay for the damage done. Such fault
or negligence, if there is no pre-existing contractual relation between the parties, is called a PARAS, J.:
quasi-delict." In crimes and quasi-delicts, the defendant shall be liable for all damages, which
are the natural and probable consequences of the act or omission complained of. It is not This is a petition for review on certiorari of: (1) the decision * of the Intermediate Appellate
necessary that such damages have been foreseen or could have reasonably been foreseen by Court in AC-G.R. No. 013887-CV Bernardino Jimenez v. Asiatic Integrated Corporation and
the defendant.30 City of Manila, reversing the decision ** of the Court of First Instance of Manila, Branch XXII
in Civil Case No. 96390 between the same parties, but only insofar as holding Asiatic
In the case at bar, both the appellate court and the trial court uniformly found that it was Integrated Corporation solely liable for damages and attorney's fees instead of making the
such negligence on the part of NPC which directly caused the damage to the fishponds of City of Manila jointly and solidarily liable with it as prayed for by the petitioner and (2) the
private respondents. The degree of damages suffered by the latter remains unrebutted and resolution of the same Appellate Court denying his Partial Motion for Reconsideration (Rollo,
there exists adequate documentary evidence that the private respondents did have p. 2).
fishponds in their respective locations and that these were inundated and damaged when
the water level escalated in October 1986.31 The dispositive portion of the Intermediate Appellate Court's decision is as follows:

However, as observed by the Court of Appeals, while the private respondents claim WHEREFORE, the decision appealed from is hereby REVERSED. A new one is hereby
reimbursement for actual or compensatory damages, they failed to present independent entered ordering the defendant Asiatic Integrated Corporation to pay the plaintiff
evidence to prove with a reasonable degree of certainty the actual amount of loss. The P221.90 actual medical expenses, P900.00 for the amount paid for the operation
private respondents could only testify as to the amounts they had spent to build and stock and management of a school bus, P20,000.00 as moral damages due to pains,
their respective fishponds and as to the amount of earnings they would have made had the sufferings and sleepless nights and P l0,000.00 as attorney's fees.
fish been sold at current market prices. We find no reason to deflect from the award of
temperate or moderate damages by the Court of Appeals in reduced amounts, but are SO ORDERED. (p. 20, Rollo)

Page 52 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
The findings of respondent Appellate Court are as follows: In compliance with the resolution of July 1, 1985 of the First Division of this Court (Rollo, p.
29) respondent City of Manila filed its comment on August 13, 1985 (Rollo, p. 34) while
The evidence of the plaintiff (petitioner herein) shows that in the morning of August 15, 1974 petitioner filed its reply on August 21, 1985 (Reno, p. 51).
he, together with his neighbors, went to Sta. Ana public market to buy "bagoong" at the time
when the public market was flooded with ankle deep rainwater. After purchasing the Thereafter, the Court in the resolution of September 11, 1985 (Rollo, p. 62) gave due course
"bagoong" he turned around to return home but he stepped on an uncovered opening which to the petition and required both parties to submit simultaneous memoranda
could not be seen because of the dirty rainwater, causing a dirty and rusty four- inch nail,
stuck inside the uncovered opening, to pierce the left leg of plaintiff-petitioner penetrating to Petitioner filed his memorandum on October 1, 1985 (Rollo, p. 65) while respondent filed its
a depth of about one and a half inches. After administering first aid treatment at a nearby memorandum on October 24, 1985 (Rollo, p. 82).
drugstore, his companions helped him hobble home. He felt ill and developed fever and he
had to be carried to Dr. Juanita Mascardo. Despite the medicine administered to him by the
In the resolution of October 13, 1986, this case was transferred to the Second Division of this
latter, his left leg swelled with great pain. He was then rushed to the Veterans Memorial
Court, the same having been assigned to a member of said Division (Rollo, p. 92).
Hospital where he had to be confined for twenty (20) days due to high fever and severe pain.

The petition is impressed with merit.


Upon his discharge from the hospital, he had to walk around with crutches for fifteen (15)
days. His injury prevented him from attending to the school buses he is operating. As a result,
he had to engage the services of one Bienvenido Valdez to supervise his business for an As correctly found by the Intermediate Appellate Court, there is no doubt that the plaintiff
aggregate compensation of nine hundred pesos (P900.00). (Decision, AC-G.R. CV No. 01387, suffered injuries when he fell into a drainage opening without any cover in the Sta. Ana
Rollo, pp. 13-20). Public Market. Defendants do not deny that plaintiff was in fact injured although the Asiatic
Integrated Corporation tries to minimize the extent of the injuries, claiming that it was only a
small puncture and that as a war veteran, plaintiff's hospitalization at the War Veteran's
Petitioner sued for damages the City of Manila and the Asiatic Integrated Corporation under
Hospital was free. (Decision, AC-G.R. CV No. 01387, Rollo, p. 6).
whose administration the Sta. Ana Public Market had been placed by virtue of a
Management and Operating Contract (Rollo, p. 47).
Respondent City of Manila maintains that it cannot be held liable for the injuries sustained by
the petitioner because under the Management and Operating Contract, Asiatic Integrated
The lower court decided in favor of respondents, the dispositive portion of the decision
Corporation assumed all responsibility for damages which may be suffered by third persons
reading:
for any cause attributable to it.

WHEREFORE, judgment is hereby rendered in favor of the defendants


It has also been argued that the City of Manila cannot be held liable under Article 1, Section 4
and against the plaintiff dismissing the complaint with costs against the
of Republic Act No. 409 as amended (Revised Charter of Manila) which provides:
plaintiff. For lack of sufficient evidence, the counterclaims of the
defendants are likewise dismissed. (Decision, Civil Case No. 96390, Rollo,
p. 42). The City shall not be liable or held for damages or injuries to persons or property
arising from the failure of the Mayor, the Municipal Board, or any other City
Officer, to enforce the provisions of this chapter, or any other law or ordinance, or
As above stated, on appeal, the Intermediate Appellate Court held the Asiatic Integrated
from negligence of said Mayor, Municipal Board, or any other officers while
Corporation liable for damages but absolved respondent City of Manila.
enforcing or attempting to enforce said provisions.

Hence this petition.


This issue has been laid to rest in the case of City of Manila v. Teotico (22 SCRA 269-272
[1968]) where the Supreme Court squarely ruled that Republic Act No. 409 establishes a
The lone assignment of error raised in this petition is on whether or not the Intermediate general rule regulating the liability of the City of Manila for "damages or injury to persons or
Appellate Court erred in not ruling that respondent City of Manila should be jointly and property arising from the failure of city officers" to enforce the provisions of said Act, "or any
severally liable with Asiatic Integrated Corporation for the injuries petitioner suffered. other law or ordinance or from negligence" of the City "Mayor, Municipal Board, or other
officers while enforcing or attempting to enforce said provisions."

Page 53 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
Upon the other hand, Article 2189 of the Civil Code of the Philippines which provides that: however, that the SECOND PARTY shall have the right, subject to prior approval of
the FIRST PARTY to discharge any of the present employees for cause. (Rollo, p. 45).
Provinces, cities and municipalities shall be liable for damages for the death of, or
injuries suffered by any person by reason of defective conditions of roads, streets, VII
bridges, public buildings and other public works under their control or supervision.
That the SECOND PARTY may from time to time be required by the FIRST PARTY, or
constitutes a particular prescription making "provinces, cities and municipalities ... liable for his duly authorized representative or representatives, to report, on the activities
damages for the death of, or injury suffered by any person by reason" — specifically — "of and operation of the City public markets and talipapas and the facilities and
the defective condition of roads, streets, bridges, public buildings, and other public works conveniences installed therein, particularly as to their cost of construction,
under their control or supervision." In other words, Art. 1, sec. 4, R.A. No. 409 refers to operation and maintenance in connection with the stipulations contained in this
liability arising from negligence, in general, regardless of the object, thereof, while Article Contract. (lbid)
2189 of the Civil Code governs liability due to "defective streets, public buildings and other
public works" in particular and is therefore decisive on this specific case. The fact of supervision and control of the City over subject public market was admitted by
Mayor Ramon Bagatsing in his letter to Secretary of Finance Cesar Virata which reads:
In the same suit, the Supreme Court clarified further that under Article 2189 of the Civil
Code, it is not necessary for the liability therein established to attach, that the defective These cases arose from the controversy over the Management and Operating
public works belong to the province, city or municipality from which responsibility is exacted. Contract entered into on December 28, 1972 by and between the City of Manila
What said article requires is that the province, city or municipality has either "control or and the Asiatic Integrated Corporation, whereby in consideration of a fixed service
supervision" over the public building in question. fee, the City hired the services of the said corporation to undertake the physical
management, maintenance, rehabilitation and development of the City's public
In the case at bar, there is no question that the Sta. Ana Public Market, despite the markets and' Talipapas' subject to the control and supervision of the City.
Management and Operating Contract between respondent City and Asiatic Integrated
Corporation remained under the control of the former. xxx xxx xxx

For one thing, said contract is explicit in this regard, when it provides: It is believed that there is nothing incongruous in the exercise of these powers vis-
a-vis the existence of the contract, inasmuch as the City retains the power of
II supervision and control over its public markets and talipapas under the terms of the
contract. (Exhibit "7-A") (Emphasis supplied.) (Rollo, p. 75).
That immediately after the execution of this contract, the SECOND PARTY shall
start the painting, cleaning, sanitizing and repair of the public markets and In fact, the City of Manila employed a market master for the Sta. Ana Public Market whose
talipapas and within ninety (90) days thereof, the SECOND PARTY shall submit a primary duty is to take direct supervision and control of that particular market, more
program of improvement, development, rehabilitation and reconstruction of the specifically, to check the safety of the place for the public.
city public markets and talipapas subject to prior approval of the FIRST PARTY.
(Rollo, p. 44) Thus the Asst. Chief of the Market Division and Deputy Market Administrator of the City of
Manila testified as follows:
xxx xxx xxx
Court This market master is an employee of the City of Manila?
VI
Mr. Ymson Yes, Your Honor.
That all present personnel of the City public markets and talipapas shall be retained
by the SECOND PARTY as long as their services remain satisfactory and they shall be Q What are his functions?
extended the same rights and privileges as heretofore enjoyed by them. Provided,

Page 54 of 55
Chapter 1 (General Provisions (Art. 1156-1162)
A Direct supervision and control over the market area assigned to him."(T.s.n.,pp. taken during good weather to minimize the dangers to life and limb under those difficult
41-42, Hearing of May 20, 1977.) circumstances.

xxx xxx xxx For instance, the drainage hole could have been placed under the stalls instead of on the
passage ways. Even more important is the fact, that the City should have seen to it that the
Court As far as you know there is or is there any specific employee assigned with openings were covered. Sadly, the evidence indicates that long before petitioner fell into the
the task of seeing to it that the Sta. Ana Market is safe for the public? opening, it was already uncovered, and five (5) months after the incident happened, the
opening was still uncovered. (Rollo, pp. 57; 59). Moreover, while there are findings that
during floods the vendors remove the iron grills to hasten the flow of water (Decision, AC-
Mr. Ymson Actually, as I stated, Your Honor, that the Sta. Ana has its own market
G.R. CV No. 0 1387; Rollo, p. 17), there is no showing that such practice has ever been
master. The primary duty of that market master is to make the direct supervision
prohibited, much less penalized by the City of Manila. Neither was it shown that any sign had
and control of that particular market, the check or verifying whether the place is
been placed thereabouts to warn passersby of the impending danger.
safe for public safety is vested in the market master. (T.s.n., pp. 2425, Hearing of
July 27, 1977.) (Emphasis supplied.) (Rollo, p. 76).
To recapitulate, it appears evident that the City of Manila is likewise liable for damages under
Article 2189 of the Civil Code, respondent City having retained control and supervision over
Finally, Section 30 (g) of the Local Tax Code as amended, provides:
the Sta. Ana Public Market and as tort-feasor under Article 2176 of the Civil Code on quasi-
delicts
The treasurer shall exercise direct and immediate supervision administration and
control over public markets and the personnel thereof, including those whose
Petitioner had the right to assume that there were no openings in the middle of the
duties concern the maintenance and upkeep of the market and ordinances and
passageways and if any, that they were adequately covered. Had the opening been covered,
other pertinent rules and regulations. (Emphasis supplied.) (Rollo, p. 76)
petitioner could not have fallen into it. Thus the negligence of the City of Manila is the
proximate cause of the injury suffered, the City is therefore liable for the injury suffered by
The contention of respondent City of Manila that petitioner should not have ventured to go the peti- 4 petitioner.
to Sta. Ana Public Market during a stormy weather is indeed untenable. As observed by
respondent Court of Appeals, it is an error for the trial court to attribute the negligence to
Respondent City of Manila and Asiatic Integrated Corporation being joint tort-feasors are
herein petitioner. More specifically stated, the findings of appellate court are as follows:
solidarily liable under Article 2194 of the Civil Code.

... The trial court even chastised the plaintiff for going to market on a rainy day just
PREMISES CONSIDERED, the decision of the Court of Appeals is hereby MODIFIED, making
to buy bagoong. A customer in a store has the right to assume that the owner will
the City of Manila and the Asiatic Integrated Corporation solidarily liable to pay the plaintiff
comply with his duty to keep the premises safe for customers. If he ventures to the
P221.90 actual medical expenses, P900.00 for the amount paid for the operation and
store on the basis of such assumption and is injured because the owner did not
management of the school bus, P20,000.00 as moral damages due to pain, sufferings and
comply with his duty, no negligence can be imputed to the customer. (Decision, AC-
sleepless nights and P10,000.00 as attorney's fees.
G. R. CV No. 01387, Rollo, p. 19).

SO ORDERED.
As a defense against liability on the basis of a quasi-delict, one must have exercised the
diligence of a good father of a family. (Art. 1173 of the Civil Code).

There is no argument that it is the duty of the City of Manila to exercise reasonable care to
keep the public market reasonably safe for people frequenting the place for their marketing
needs.

While it may be conceded that the fulfillment of such duties is extremely difficult during
storms and floods, it must however, be admitted that ordinary precautions could have been

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