G.R. No. 143360. September 5, 2002.

EQUITABLE LEASING CORPORATION, Petitioner, v. LUCITA SUYOM, MARISSA ENANO,

MYRNA TAMAYO and FELIX OLEDAN, Respondents.

DECISION

PANGANIBAN, J.:

In an action based on quasi delict, the registered owner of a motor vehicle is solidarily liable for the
injuries and damages caused by the negligence of the driver, in spite of the fact that the vehicle may
have already been the subject of an unregistered Deed of Sale in favor of another person. Unless
registered with the Land Transportation Office, the sale — while valid and binding between the parties
— does not affect third parties, especially the victims of accidents involving the said transport
equipment. Thus, in the present case, Petitioner, which is the registered owner, is liable for the acts of
the driver employed by its former lessee who has become the owner of that vehicle by virtue of an
unregistered Deed of Sale. chanrob1es virtua1 1aw 1ibrary

Statement of the Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the May 12, 2000
Decision 1 of the Court of Appeals 2 (CA) in CA-G.R. CV No. 55474. The decretal portion of the
Decision reads as follows: jgc:chanrobles.com.ph

"WHEREFORE, premises considered, the instant appeal is hereby DISMISSED for lack of merit. The
assailed decision, dated May 5, 1997, of the Regional Trial Court of Manila, Branch 14, in Civil Case
No. 95-73522, is hereby AFFIRMED with MODIFICATION that the award of attorney’s fees is
DELETED." 3

On the other hand, in Civil Case No. 95-73522, the Regional Trial Court (RTC) of Manila (Branch 14)
had earlier disposed in this wise: jgc:chanrobles.com.ph

"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant
Equitable Leasing Corporation ordering said defendant to pay to the plaintiffs the following: chanrob1es virtual 1aw library

A. TO MYRNA TAMAYO

1. the sum of P50,000.00 for the death of Reniel Tamayo;

2. P50,000.00 as moral damages; and

3. P56,000.00 for the damage to the store and its contents, and funeral expenses.

B. TO FELIX OLEDAN

1. the sum of P50,000.00 for the death of Felmarie Oledan;

2. P50,000.00 as moral damages; and

3. P30,000.00 for medical expenses, and funeral expenses.

C. TO MARISSA ENANO

1. P7,000.00 as actual damages

D. TO LUCITA SUYOM

1. The sum of P5,000.00 for the medical treatment of her two sons.

The sum of P120,000.00 as and for attorney’s fees." 4

The Facts

On July 17, 1994, a Fuso Road Tractor driven by Raul Tutor rammed into the house cum store of
Myrna Tamayo located at Pier 18, Vitas, Tondo, Manila. A portion of the house was destroyed. Pinned
to death under the engine of the tractor were Respondent Myrna Tamayo’s son, Reniel Tamayo, and
Respondent Felix Oledan’s daughter, Felmarie Oledan. Injured were Respondent Oledan himself,
Respondent Marissa Enano, and two sons of Respondent Lucita Suyom. chanrob1es virtua1 1aw 1ibrary

Tutor was charged with and later convicted of reckless imprudence resulting in multiple homicide and
multiple physical injuries in Criminal Case No. 296094-SA, Metropolitan Trial Court of Manila,
Branch 12. 5

Upon verification with the Land Transportation Office, respondents were furnished a copy of Official
Receipt No. 62204139 6 and Certificate of Registration No. 08262797, 7 showing that the registered
owner of the tractor was "Equitable Leasing Corporation/leased to Edwin Lim." On April 15, 1995,
respondents filed against Raul Tutor, Ecatine Corporation ("Ecatine") and Equitable Leasing
Corporation ("Equitable") a Complaint 8 for damages docketed as Civil Case No. 95-73522 in the RTC
of Manila, Branch 14.

The trial court, upon motion of plaintiffs’ counsel, issued an Order dropping Raul Tutor, Ecatine and
Edwin Lim from the Complaint, because they could not be located and served with summonses. 9 On
the other hand, in its Answer with Counterclaim, 10 petitioner alleged that the vehicle had already been
sold to Ecatine and that the former was no longer in possession and control thereof at the time of the
incident. It also claimed that Tutor was an employee, not of Equitable, but of Ecatine.

After trial on the merits, the RTC rendered its Decision ordering petitioner to pay actual and moral
damages and attorney’s fees to respondents. It held that since the Deed of Sale between petitioner and
Ecatine had not been registered with the Land Transportation Office, (LTO), the legal owner was still
Equitable. 11 Thus, petitioner was liable to respondents. 12

Ruling of the Court of Appeals

Sustaining the RTC, the CA held that petitioner was still to be legally deemed the owner/operator of the
tractor, even if that vehicle had been the subject of a Deed of Sale in favor of Ecatine on December 9,
1992. The reason cited by the CA was that the Certificate of Registration on file with the LTO still
remained in petitioner’s name. 13 In order that a transfer of ownership of a motor vehicle can bind third
persons, it must be duly recorded in the LTO. 14

The CA likewise upheld respondents’ claim for moral damages against petitioner because the appellate
court considered Tutor, the driver of the tractor, to be an agent of the registered owner/operator. 15

Hence, this Petition. 16 chanrob1es virtua1 1aw 1ibrary

Issues

In its Memorandum, petitioner raises the following issues for the Court’s consideration: chanrob1es virtual 1aw library

"Whether or not the Court of Appeals and the trial court gravely erred when they decided and held that
petitioner [was] liable for damages suffered by private respondents in an action based on quasi delict
for the negligent acts of a driver who [was] not the employee of the petitioner.

II

"Whether or not the Court of Appeals and the trial court gravely erred when they awarded moral
damages to private respondents despite their failure to prove that the injuries they suffered were
brought by petitioner’s wrongful act." 17

This Court’s Ruling

The Petition has no merit.

First Issue: chanrob1es virtual 1aw library

Liability for Wrongful Acts

Petitioner contends that it should not be held liable for the damages sustained by respondents and that
arose from the negligence of the driver of the Fuso Road Tractor, which it had already sold to Ecatine
at the time of the accident. Not having employed Raul Tutor, the driver of the vehicle, it could not have
controlled or supervised him. 18

We are not persuaded. In negligence cases, the aggrieved party may sue the negligent party under (1)
Article 100 19 of the Revised Penal Code, for civil liability ex delicto; or (2) under Article 2176 20 of
the Civil Code, for civil liability ex quasi delicto. 21 chanrob1es virtua1 1aw 1ibrary

Furthermore, under Article 103 of the Revised Penal Code, employers may be held subsidiarily liable
for felonies committed by their employees in the discharge of the latter’s duties. 22 This liability
attaches when the employees who are convicted of crimes committed in the performance of their work
are found to be insolvent and are thus unable to satisfy the civil liability adjudged. 23

On the other hand, under Article 2176 in relation to Article 2180 24 of the Civil Code, an action
predicated on quasi delict may be instituted against the employer for an employee’s act or omission.
The liability for the negligent conduct of the subordinate is direct and primary, but is subject to the
defense of due diligence in the selection and supervision of the employee. 25 The enforcement of the
judgment against the employer for an action based on Article 2176 does not require the employee to be
insolvent, since the liability of the former is solidary — the latter being statutorily considered a joint
tortfeasor. 26 To sustain a claim based on quasi delict, the following requisites must be proven: (a)
damage suffered by the plaintiff, (b) fault or negligence of the defendant, and (c) connection of cause
and effect between the fault or negligence of the defendant and the damage incurred by the plaintiff. 27

These two causes of action (ex delicto or ex quasi delicto) may be availed of, subject to the caveat 28
that the offended party cannot "recover damages twice for the same act or omission" or under both
causes. 29 Since these two civil liabilities are distinct and independent of each other, the failure to
recover in one will not necessarily preclude recovery in the other. 30 chanrob1es virtua1 1aw 1ibrary

In the instant case, respondents — having failed to recover anything in the criminal case — elected to
file a separate civil action for damages, based on quasi delict under Article 2176 of the Civil Code. 31
The evidence is clear that the deaths and the injuries suffered by respondents and their kins were due to
the fault of the driver of the Fuso tractor.

Dated June 4, 1991, the Lease Agreement 32 between petitioner and Edwin Lim stipulated that "it is the
intention of the parties to enter into a FINANCE LEASE AGREEMENT." 33 Under such scheme,
ownership of the subject tractor was to be registered in the name of petitioner, until the value of the
vehicle has been fully paid by Edwin Lim. 34 Further, in the "Lease Schedule," 35 the monthly rental
for the tractor was stipulated, and the term of the Lease was scheduled to expire on December 4, 1992.
After a few months, Lim completed the payments to cover the full price of the tractor. 36 Thus, on
December 9, 1992, a Deed of Sale 37 over the tractor was executed by petitioner in favor of Ecatine
represented by Edwin Lim. However, the Deed was not registered with the LTO. cral aw : red

We hold petitioner liable for the deaths and the injuries complained of, because it was the registered
owner of the tractor at the time of the accident on July 17, 1994. 38 The Court has consistently ruled
that, regardless of sales made of a motor vehicle, the registered owner is the lawful operator insofar as
the public and third persons are concerned; consequently, it is directly and primarily responsible for the
consequences of its operation 39 In contemplation of law, the owner/operator of record is the employer
of the driver, the actual operator and employer being considered as merely its agent. 40 The same
principle applies even if the registered owner of any vehicle does not use it for public service 41

Since Equitable remained the registered owner of the tractor, it could not escape primary liability for
the deaths and the injuries arising from the negligence of the driver. 42

The finance-lease agreement between Equitable on the one hand and Lim or Ecatine on the other has
already been superseded by the sale. In any event, it does not bind third persons. The rationale for this
rule has been aptly explained in Erezo v. Jepte, 43 which we quote hereunder: jgc:chanrobl es.com.ph

". . . .The main aim of motor vehicle registration is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the vehicle on the public highways, responsibility
therefor can be fixed on a definite individual, the registered owner. Instances are numerous where
vehicles running on public highways caused accidents or injuries to pedestrians or other vehicles
without positive identification of the owner or drivers, or with very scant means of identification. It is
to forestall these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the determination of persons responsible for
damages or injuries caused on public highways." 44 chanrobles virtuallawlibrary

Further, petitioner’s insistence on FGU Insurance Corp. v. Court of Appeals 45 is misplaced. First, in
FGU Insurance, the registered vehicle owner, which was engaged in a rent-a-car business, rented out
the car. In this case, the registered owner of the truck, which is engaged in the business of financing
motor vehicle acquisitions, has actually sold the truck to Ecatine, which in turn employed Tutor.
Second, in FGU Insurance, the registered owner of the vehicle was not held responsible for the
negligent acts of the person who rented one of its cars, because Article 2180 of the Civil Code was not
applicable. We held that no vinculum juris as employer and employee existed between the owner and
the driver. 46 In this case, the registered owner of the tractor is considered under the law to be the
employer of the driver, while the actual operator is deemed to be its agent. 47 Thus, Equitable, the
registered owner of the tractor, is — for purposes of the law on quasi delict — the employer of Raul
Tutor, the driver of the tractor. Ecatine, Tutor’s actual employer, is deemed as merely an agent of
Equitable. 48

True, the LTO Certificate of Registration, dated "5/31/91," qualifies the name of the registered owner as
"EQUITABLE LEASING CORPORATION/Leased to Edwin Lim." But the lease agreement between
Equitable and Lim has been overtaken by the Deed of Sale on December 9, 1992, between petitioner
and Ecatine. While this Deed does not affect respondents in this quasi delict suit, it definitely binds
petitioner because, unlike them, it is a party to it.chanrob1es virtua1 1aw 1ibrary

We must stress that the failure of Equitable and/or Ecatine to register the sale with the LTO should not
prejudice respondents, who have the legal right to rely on the legal principle that the registered vehicle
owner is liable for the damages caused by the negligence of the driver. Petitioner cannot hide behind its
allegation that Tutor was the employee of Ecatine. This will effectively prevent respondents from
recovering their losses on the basis of the inaction or fault of petitioner in failing to register the sale.
The non-registration is the fault of petitioner, which should thus face the legal consequences thereof.

Second Issue: chanrob1es virtual 1aw library

Moral Damages

Petitioner further claims that it is not liable for moral damages, because respondents failed to establish
or show the causal connection or relation between the factual basis of their claim and their wrongful act
or omission, if any. 49

Moral damages are not punitive in nature, but are designed to compensate 50 and alleviate in some way
the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury unjustly caused a person. 51 Although
incapable of pecuniary computation, moral damages must nevertheless be somehow proportional to and
in approximation of the suffering inflicted. 52 This is so because moral damages are in the category of
an award designed to compensate the claimant for actual injury suffered, not to impose a penalty on the
wrongdoer. 53 chanrob1es virtua1 1aw 1ibrary
Viewed as an action for quasi delict, the present case falls squarely within the purview of Article 2219
(2), 54 which provides for the payment of moral damages in cases of quasi delict. 55 Having
established the liability of petitioner as the registered owner of the vehicle, 56 respondents have
satisfactorily shown the existence of the factual basis for the award 57 and its causal connection to the
acts of Raul Tutor, who is deemed as petitioner’s employee. 58 Indeed, the damages and injuries
suffered by respondents were the proximate result of petitioner’s tortious act or omission. 59

Further, no proof of pecuniary loss is necessary in order that moral damages may be awarded, the
amount of indemnity being left to the discretion of the court. 60 The evidence gives no ground for
doubt that such discretion was properly and judiciously exercised by the trial court. 61 The award is in
fact consistent with the rule that moral damages are not intended to enrich the injured party, but to
alleviate the moral suffering undergone by that party by reason of the defendant’s culpable action. 62chanrob1es virtua1 1aw 1ibrary

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioner.

SO ORDERED.

G.R. No. 143363 February 6, 2002

ST. MARY'S ACADEMY, petitioner,
vs.
WILLIAM CARPITANOS and LUCIA S. CARPITANOS, GUADA DANIEL, JAMES DANIEL
II, JAMES DANIEL, SR., and VIVENCIO VILLANUEVA, respondents.
DECISION
PARDO, J.:
The Case
The case is an appeal via certiorari from the decision1 of the Court of Appeals as well as the resolution
denying reconsideration, holding petitioner liable for damages arising from an accident that resulted in
the death of a student who had joined a campaign to visit the public schools in Dipolog City to solicit
enrollment.
The Facts
The facts, as found by the Court of Appeals, are as follows:
"Claiming damages for the death of their only son, Sherwin Carpitanos, spouses William Carpitanos
and Lucia Carpitanos filed on June 9, 1995 a case against James Daniel II and his parents, James
Daniel Sr. and Guada Daniel, the vehicle owner, Vivencio Villanueva and St. Mary’s Academy before
the Regional Trial Court of Dipolog City.
"On 20 February 1997, Branch 6 of the Regional Trial Court of Dipolog City rendered its decision the
dispositive portion of which reads as follows:
"‘WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in the following manner:
1. Defendant St. Mary’s Academy of Dipolog City, is hereby ordered to pay plaintiffs William
Carpitanos and Luisa Carpitanos, the following sums of money:
a. FIFTY THOUSAND PESOS (P50,000.00) indemnity for the loss of life of Sherwin S. Carpitanos;
b. FORTY THOUSAND PESOS (P40,000.00) actual damages incurred by plaintiffs for burial and
related expenses;
c. TEN THOUSAND PESOS (P10,000.00) for attorney’s fees;
d. FIVE HUNDRED THOUSAND PESOS (P500,000.00) for moral damages; and to pay costs.
2. Their liability being only subsidiary, defendants James Daniel, Sr. and Guada Daniel are hereby
ordered to pay herein plaintiffs the amount of damages above-stated in the event of insolvency of
principal obligor St. Mary’s Academy of Dipolog City;
3. Defendant James Daniel II, being a minor at the time of the commission of the tort and who was
under special parental authority of defendant St. Mary’s Academy, is ABSOLVED from paying the
above-stated damages, same being adjudged against defendants St. Mary’s Academy, and subsidiarily,
against his parents;
4. Defendant Vivencio Villanueva is hereby ABSOLVED of any liability. His counterclaim not being in
order as earlier discussed in this decision, is hereby DISMISSED.
IT IS SO ORDERED."’ (Decision, pp. 32-33; Records, pp. 205-206)."
"From the records it appears that from 13 to 20 February 1995, defendant-appellant St. Mary’s
Academy of Dipolog City conducted an enrollment drive for the school year 1995-1996. A facet of the
enrollment campaign was the visitation of schools from where prospective enrollees were studying. As
a student of St. Mary’s Academy, Sherwin Carpitanos was part of the campaigning group. Accordingly,
on the fateful day, Sherwin, along with other high school students were riding in a Mitsubishi jeep
owned by defendant Vivencio Villanueva on their way to Larayan Elementary School, Larayan,
Dapitan City. The jeep was driven by James Daniel II then 15 years old and a student of the same
school. Allegedly, the latter drove the jeep in a reckless manner and as a result the jeep turned turtle.
"Sherwin Carpitanos died as a result of the injuries he sustained from the accident."2
In due time, petitioner St. Mary’s academy appealed the decision to the Court of Appeals.3
On February 29, 2000, the Court of Appeals promulgated a decision reducing the actual damages to
P25,000.00 but otherwise affirming the decision a quo, in toto.4
On February 29, 2000, petitioner St. Mary’s Academy filed a motion for reconsideration of the
decision. However, on May 22, 2000, the Court of Appeals denied the motion.5
Hence, this appeal.6
The Issues
1) Whether the Court of Appeals erred in holding the petitioner liable for damages for the death
of Sherwin Carpitanos.
2) Whether the Court of Appeals erred in affirming the award of moral damages against the
petitioner.
The Court’s Ruling
We reverse the decision of the Court of Appeals.
The Court of Appeals held petitioner St. Mary’s Academy liable for the death of Sherwin Carpitanos
under Articles 2187 and 2198 of the Family Code, pointing out that petitioner was negligent in allowing
a minor to drive and in not having a teacher accompany the minor students in the jeep.
Under Article 218 of the Family Code, the following shall have special parental authority over a minor
child while under their supervision, instruction or custody: (1) the school, its administrators and
teachers; or (2) the individual, entity or institution engaged in child care. This special parental authority
and responsibility applies to all authorized activities, whether inside or outside the premises of the
school, entity or institution. Thus, such authority and responsibility applies to field trips, excursions and
other affairs of the pupils and students outside the school premises whenever authorized by the school
or its teachers.9
Under Article 219 of the Family Code, if the person under custody is a minor, those exercising special
parental authority are principally and solidarily liable for damages caused by the acts or omissions of
the unemancipated minor while under their supervision, instruction, or custody.10
However, for petitioner to be liable, there must be a finding that the act or omission considered as
negligent was the proximate cause of the injury caused because the negligence must have a causal
connection to the accident.11
"In order that there may be a recovery for an injury, however, it must be shown that the ‘injury for
which recovery is sought must be the legitimate consequence of the wrong done; the connection
between the negligence and the injury must be a direct and natural sequence of events, unbroken by
intervening efficient causes.’ In other words, the negligence must be the proximate cause of the injury.
For, ‘negligence, no matter in what it consists, cannot create a right of action unless it is the proximate
cause of the injury complained of.’ And ‘the proximate cause of an injury is that cause, which, in
natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and
without which the result would not have occurred.’"12
In this case, the respondents failed to show that the negligence of petitioner was the proximate cause of
the death of the victim.
Respondents Daniel spouses and Villanueva admitted that the immediate cause of the accident was not
the negligence of petitioner or the reckless driving of James Daniel II, but the detachment of the
steering wheel guide of the jeep.
In their comment to the petition, respondents Daniel spouses and Villanueva admitted the documentary
exhibits establishing that the cause of the accident was the detachment of the steering wheel guide of
the jeep. Hence, the cause of the accident was not the recklessness of James Daniel II but the
mechanical defect in the jeep of Vivencio Villanueva. Respondents, including the spouses Carpitanos,
parents of the deceased Sherwin Carpitanos, did not dispute the report and testimony of the traffic
investigator who stated that the cause of the accident was the detachment of the steering wheel guide
that caused the jeep to turn turtle.
Significantly, respondents did not present any evidence to show that the proximate cause of the
accident was the negligence of the school authorities, or the reckless driving of James Daniel II. Hence,
the respondents’ reliance on Article 219 of the Family Code that "those given the authority and
responsibility under the preceding Article shall be principally and solidarily liable for damages caused
by acts or omissions of the unemancipated minor" was unfounded.
Further, there was no evidence that petitioner school allowed the minor James Daniel II to drive the
jeep of respondent Vivencio Villanueva. It was Ched Villanueva, grandson of respondent Vivencio
Villanueva, who had possession and control of the jeep. He was driving the vehicle and he allowed
James Daniel II, a minor, to drive the jeep at the time of the accident.
Hence, liability for the accident, whether caused by the negligence of the minor driver or mechanical
detachment of the steering wheel guide of the jeep, must be pinned on the minor’s parents primarily.
The negligence of petitioner St. Mary’s Academy was only a remote cause of the accident. Between the
remote cause and the injury, there intervened the negligence of the minor’s parents or the detachment of
the steering wheel guide of the jeep.
"The proximate cause of an injury is that cause, which, in natural and continuous sequence, unbroken
by any efficient intervening cause, produces the injury, and without which the result would not have
occurred."13
Considering that the negligence of the minor driver or the detachment of the steering wheel guide of
the jeep owned by respondent Villanueva was an event over which petitioner St. Mary’s Academy had
no control, and which was the proximate cause of the accident, petitioner may not be held liable for the
death resulting from such accident.
Consequently, we find that petitioner likewise cannot be held liable for moral damages in the amount of
P500,000.00 awarded by the trial court and affirmed by the Court of Appeals.
Though incapable of pecuniary computation, moral damages may be recovered if they are the
proximate result of the defendant’s wrongful act or omission.14 In this case, the proximate cause of the
accident was not attributable to petitioner.
For the reason that petitioner was not directly liable for the accident, the decision of the Court of
Appeals ordering petitioner to pay death indemnity to respondent Carpitanos must be deleted.
Moreover, the grant of attorney’s fees as part of damages is the exception rather than the rule. 15 The
power of the court to award attorney’s fees under Article 2208 of the Civil Code demands factual, legal
and equitable justification.16 Thus, the grant of attorney’s fees against the petitioner is likewise deleted.
Incidentally, there was no question that the registered owner of the vehicle was respondent Villanueva.
He never denied and in fact admitted this fact.1âwphi1 We have held that the registered owner of any
vehicle, even if not used for public service, would primarily be responsible to the public or to third
persons for injuries caused the latter while the vehicle was being driven on the highways or streets." 17
Hence, with the overwhelming evidence presented by petitioner and the respondent Daniel spouses that
the accident occurred because of the detachment of the steering wheel guide of the jeep, it is not the
school, but the registered owner of the vehicle who shall be held responsible for damages for the death
of Sherwin Carpitanos.
The Fallo
WHEREFORE, the Court REVERSES and SETS ASIDE the decision of the Court of Appeals 18 and
that of the trial court.19 The Court remands the case to the trial court for determination of the liability of
defendants, excluding petitioner St. Mary’s Academy, Dipolog City.
No costs.

G.R. No. 125018 April 6, 2000

REMMAN ENTERPRISES, INC., petitioner,

vs.
COURT OF APPEALS and CRISPIN E. LAT, respondents.
BELLOSILLO, J.:
REMMAN ENTERPRISES, INC. (REMMAN), and CRISPIN E. LAT are adjoining landowners in
Barangay Bugtong Na Pulo, Lipa City. The land of Lat containing an area of 1.8 hectares is agricultural
and planted mostly with fruit trees while REMMAN occupies a land area of fifteen (15) hectares six (6)
hectares of which are devoted to its piggery business. REMMAN's land is one and a half (1 1/2) meters
higher in elevation than that of respondent Lat.
Sometime in July 1984 Lat noticed that REMMAN's waste disposal lagoon was already overflowing
and inundating one-fourth (1/4) of Lat's plantation. He made several representations with REMMAN
but they fell on deaf ears. On 14 March 1985, after almost one (1) hectare of Lat's plantation was
already inundated with water containing pig manure, as a result of which the trees growing on the
flooded portion started to wither and die, Lat filed a complaint for damages with preliminary
mandatory injunction against REMMAN. Lat alleged that the acidity of the soil in his plantation
increased because of the overflow of the water heavy with pig manure from REMMAN's piggery farm.
REMMAN denied all the allegations of Lat and raised as an affirmative defense that measures such as
the construction of additional lagoons were already adopted to contain the waste water coming from its
piggery to prevent any damage to the adjoining estates.
After conducting an ocular inspection and evaluating the evidence of both parties the Regional Trial
Court found that indeed REMMAN’s waste disposal lagoon overflowed with the contaminated water
flooding one (1) hectare of Lat's plantation. The waste water was ankle-deep and caused death and
destruction to one (1) jackfruit tree, fifteen (15) coconut trees, one hundred twenty-two (122) coffee
trees, and an unspecified number of mango trees, bananas and vegetables. As a consequence, the trial
court ordered REMMAN to indemnify Lat P186,975.00 for lost profits for three (3) crop years and
P30,000.00 as attorney's fees.1
The decision of the court a quo was affirmed in toto by the Court of Appeals.2
In this Petition for Review on Certiorari REMMAN prays that we pass upon the findings of the trial
court as well as of the appellate court. REMMAN insists that factual findings of lower courts may be
passed upon, reviewed and reversed: (a) when the conclusion is a finding grounded entirely on
speculation, surmises or conjectures; (b) when the inference made is manifestly mistaken, absurd or
impossible; (c) when there is grave abuse of discretion; (d) when the judgment is based on a
misapprehension of facts; (e) when the Court of Appeals manifestly overlooked certain relevant facts
not disputed by the parties and which, if properly considered, would justify a different conclusion; (f)
when the conclusions of the Court of Appeals are not supported by the evidence on record; (g) when
facts of substance were overlooked which, if correctly considered, might have changed the outcome of
the case; and, (h) when the findings of the Court of Appeals are not in accord with what reasonable men
would readily accept are the correct inferences from the evidence extant in the records.3
Indeed, in the abovementioned instances, the factual milieu of a particular case may be passed upon,
reversed or modified by this Court. But examination of the record reveals that all the above instances
are unavailing. From this point of view alone the instant petition is dismissible. Nevertheless, we shall
discuss them hereunder to dispose finally of the contentions of REMMAN.
First, REMMAN argues that its liability for the damages suffered by Lat was not clearly established.
We disagree. During the ocular inspection conducted by the lower court where representatives of both
parties were present, it was established that the waste water containing pig manure was continuously
flowing from REMMAN's piggery farm to Lat's plantation. The water was ankle-deep and flooded one
(1) hectare of Lat's plantation. The overflow of the "acidic, malodorous and polluted water" continued
from June 1984 to March 1985 thus destroying one (1) jackfruit tree, fifteen (15) coconut trees, one
hundred an twenty-two (122) coffee trees, and an unspecified number of mango trees, bananas and
vegetables.4
In addition, the appellate court found that there was indeed negligence on the part of REMMAN which
directly caused the damage to the plantation of Lat. Thus —
. . . Negligence was clearly established. It is uncontroverted that the land of appellee was
flooded on account of the overflow of acidic, malodorous and polluted water coming from the
adjacent piggery farm of appellant sometime in May 1984. This resulted in the impairment of
the productivity of appellee's land as well as the eventual destruction and death of several fruit
trees, such as coconuts, coffee, jackfruits, bananas and other plants . . . . Appellant cannot avoid
liability because their negligence was the proximate cause of the damage. Appellee's property
was practically made a catch-basin of polluted water and other noxious substances emptying
from appellant's piggery which could have been prevented had it not been for the negligence of
appellant arising from its: (a) failure to monitor the increases in the level of water in the lagoons
before, during and after the heavy downpours which occurred during the rainy months of 1984;
(b) failure to augment the existing lagoons prior to the incident, notwithstanding the fact that at
the time of the flooding, the piggery had grown to a capacity of 11,000 heads, and considering
that it was reasonably forseeable that the existing waste disposal facilities were no longer
adequate to accomodate the increasing volume of waste matters in such a big farm; and more
importantly, (c) the repeated failure to comply with their promise to appellee.5
Second, REMMAN argues that the trial court as well as the Court of Appeals should not have rejected
its request for the production of Lat's income tax returns. According to REMMAN had Lat's income tax
returns been produced, the issue of the alleged damages suffered by Lat would have been settled.
This argument is moot, if not trite. For this matter has been laid to rest when we affirmed the Court of
Appeals' decision in an earlier case involving the same parties. 6 In sustaining the trial court's quashal of
the subpoena duces tecum previously issued compelling Lat to produce his income tax returns for the
years 1982-1986, the appellate court explained that the production of the income tax returns would not
necessarily serve to prove the special and affirmative defenses set up by REMMAN nor rebut Lat's
testimony regarding the losses he sustained due to the piggery. The tax returns per se could not reflect
the total amount of damages suffered by Lat, as income losses from a portion of the plantation could be
offset by any profit derived from the rest of the plantation or from other sources of income. Conversely,
losses incurred from other sources of income would be totally unrelated to the income from the
particular portion of the plantation flooded with waste matter coming from REMMAN's piggery.7
Third, REMMAN contends that the damages allegedly sustained by Lat have not been satisfactorily
established.1âwphi1
We a not convinced. The factual findings of the court a quo rightly support its conclusions on this
respect —
Coming now to the issue of damages, We find appellant's allegations not well-taken. Appellant
contends that actual and compensatory damages require evidentiary proof, and there being no
evidence presented as to the necessity of the award for damages, it was erroneous for the lower
court to have made such award. It must be remembered that after the ocular inspection, the court
a quo rendered an inventory of dead and rotten trees and plants found in appellee's property.
Appellee also testified on the approximate annual harvest and fair market value thereof.
Significantly, no opposition or controverting evidence was presented by appellant on the matter.
Hence, appellant is bound thereby and cannot now be heard to complain. As correctly held by
the court a quo:
An ocular inspection has been conducted by the trial court. The inventory of the trees
damaged and the itemized valuation placed therein by private respondent after the ocular
 inspection which is not rebutted by the petitioner, is the more accurate indicator of the
said amount prayed for as damages. If the valuation is indeed unreasonable, petitioner
should present controverting evidence of the fair market value of the crops involved. The
trial court held that the private respondent himself had been subjected to extensive cross
and re-cross examination by the counsel for the petitioner on the amount of damages.8
Finally, REMMAN complains that the damages, if any, were due to a fortuitous event.
Again, we cannot agree with petitioner. We defer instead to the findings opinions expressed by the
lower courts —
Even assuming that the heavy rains constituted an act of God, by reason of their negligence, the
fortuitous event became humanized, rendering appellants liable for the ensuing damages. In
National Power Corporation v. Court of Appeals, 233 SCRA 649 (1993), the Supreme Court
held:
Accordingly, petitioners cannot be heard to invoke the act of God or force majeure to
escape liability for the loss or damage sustained by private respondents since they, the
petitioners, were guilty of negligence. This event then was not occasioned exclusively by
an act of God or force majeure; a human factor — negligence or imprudence — had
intervened. The effect then of the force majeure in question may be deemed to have,
even if only partly, resulted from the participation of man. Thus, the whole occurrence
was thereby humanized, as it were, and removed from the rules applicable to acts of
God.
As regards the alleged natural easement imposed upon the property of appellee, resort to
pertinent provisions of applicable law is imperative. Under the Civil Code, it is provided:
Art. 637. Lower estates are obliged to receive the waters which naturally and without the
intervention of man descend from the higher estates, as well as the stones or earth which
they carry with them.
The owner of the lower estate cannot construct works which will impede this easement;
neither can the owner of the higher estate make works which will increase the burden.
A similar provision is found in the Water Code of the Philippines (P.D. No. 1067), which
provides:
Art. 50. Lower estates are obliged to receive the water which naturally and without the
intervention of man flow from the higher estates, as well as the stone or earth which they
carry with them.
The owner of the lower estate cannot construct works which will impede this natural
flow, unless he provides an alternative method of drainage; neither can the owner of the
higher estate make works which will increase this natural flow.
As worded, the two (2) aforecited provisions impose a natural easement upon the lower estate to
receive the waters which naturally and without the intervention of man descend from higher
states. However, where the waters which flow from a higher state are those which are artificially
collected in man-made lagoons, any damage occasioned thereby entitles the owner of the lower
or servient estate to compensation.9
On the basis of the foregoing discussion, it is crystal clear that REMMAN is directly accountable to Lat
for the damages sustained by him. The negligence of REMMAN in maintaining the level of waste
water in its lagoons has been satisfactorily established. The extent of damages suffered by Lat remains
unrebutted; in fact, has been proved.
WHEREFORE, the petition is DENIED. The 19 October 1995 Decision of the Court of Appeals
affirming that of the Regional Trial Court-Br. 16, Lipa City, holding petitioner Remman Enterprises,
Inc. (REMMAN) liable to private respondent Crispin E. Lat for damages and to indemnify the latter
P186,975.00 for lost profits for three (3) crop years and P30,000.00 as attorneys fees, is AFFIRMED.
Costs against petitioner.1âwphi1.nêt
SO ORDERED.

G.R. No. 157906 November 2, 2006

JOAQUINITA P. CAPILI, Petitioner,
vs.
SPS. DOMINADOR CARDAÑA and ROSALITA CARDAÑA, Respondents.
DECISION
QUISUMBING, J.:
Before us is a petition for review assailing the Decision 1 dated October 18, 2002 of the Court of
Appeals in CA-G.R. CV. No. 54412, declaring petitioner liable for negligence that resulted in the death
of Jasmin Cardaña, a school child aged 12, enrolled in Grade 6, of San Roque Elementary School,
where petitioner is the principal. Likewise assailed is the Resolution 2 dated March 20, 2003 denying
reconsideration.
The facts are as follows:
On February 1, 1993, Jasmin Cardaña was walking along the perimeter fence of the San Roque
Elementary School when a branch of a caimito tree located within the school premises fell on her,
causing her instantaneous death. Thus, her parents - Dominador and Rosalita Cardaña - filed a case for
damages before the Regional Trial Court of Palo, Leyte against petitioner.
The Cardañas alleged in their complaint that even as early as December 15, 1992, a resident of the
barangay, Eufronio Lerios, reported on the possible danger the tree posed to passersby. Lerios even
pointed to the petitioner the tree that stood near the principal’s office. The Cardañas averred that
petitioner’s gross negligence and lack of foresight caused the death of their daughter.
Petitioner denied the accusation and said that at that time Lerios had only offered to buy the tree. She
also denied knowing that the tree was dead and rotting. To prove her point, she presented witnesses
who attested that she had brought up the offer of Lerios to the other teachers during a meeting on
December 15, 1992 and assigned Remedios Palaña to negotiate the sale.
In a Decision3 dated February 5, 1996, the trial court dismissed the complaint for failure of the
respondents to establish negligence on the part of the petitioner.
On appeal, the Court of Appeals reversed the trial court’s decision. The appellate court found the
appellee (herein petitioner) liable for Jasmin’s death, as follows:
Foregoing premises considered, the instant appeal is GRANTED. Appellee Joaquinita Capili is hereby
declared liable for negligence resulting to the death of Jasmin D. Cardaña. She is hereby ordered to
indemnify appellants, parents of Jasmin, the following amounts:
1. For the life of Jasmin D. Cardaña P50,000.00;
2. For burial expenses 15,010.00;
 3. For moral damages 50,000.00;
4. For attorney’s fees and litigation 10,000.00.
expenses
SO ORDERED.4
Petitioner’s motion for reconsideration was denied. Petitioner now comes before us submitting the
following issues for our resolution:
I
WHETHER OR NOT THE COURT OF APPEALS VIS-À-VIS THE SET OF FACTS STATED
IN THE CHALLENGED DECISION, ERRED IN FINDING THE PETITIONER
NEGLIGENT AND THEREFORE LIABLE FOR DAMAGES UNDER ARTICLE 2206 OF
THE CIVIL CODE AND IN ORDERING THE PETITIONER TO PAY DAMAGES TO THE
RESPONDENTS; AND
II
WHETHER OR NOT THE COURT OF APPEALS ERRED IN DENYING PETITIONER’S
MOTION FOR RECONSIDERATION.5
On the other hand, respondents posit the following issue:
Whether or not the Decision of the Honorable Court of Appeals, Twelfth Division, in CA G.R. CV. No.
54412 promulgated on October 18, 2002 … should be affirmed and respected, thus remain
undisturbed.6
Primarily, the issue is whether petitioner is negligent and liable for the death of Jasmin Cardaña.
Petitioner asserts that she was not negligent about the disposal of the tree since she had assigned her
next-in-rank, Palaña, to see to its disposal; that despite her physical inspection of the school grounds,
she did not observe any indication that the tree was already rotten nor did any of her 15 teachers inform
her that the tree was already rotten; 7 and that moral damages should not be granted against her since
there was no fraud nor bad faith on her part.
On the other hand, respondents insist that petitioner knew that the tree was dead and rotting, yet, she
did not exercise reasonable care and caution which an ordinary prudent person would have done in the
same situation.
To begin, we have to point out that whether petitioner was negligent or not is a question of fact which
is generally not proper in a petition for review, and when this determination is supported by substantial
evidence, it becomes conclusive and binding on this Court. 8 However, there is an exception, that is,
when the findings of the Court of Appeals are incongruent with the findings of the lower court. 9 In our
view, the exception finds application in the present case.
The trial court gave credence to the claim of petitioner that she had no knowledge that the tree was
already dead and rotting and that Lerios merely informed her that he was going to buy the tree for
firewood. It ruled that petitioner exercised the degree of care and vigilance which the circumstances
require and that there was an absence of evidence that would require her to use a higher standard of
care more than that required by the attendant circumstances.10 The Court of Appeals, on the other hand,
ruled that petitioner should have known of the condition of the tree by its mere sighting and that no
matter how hectic her schedule was, she should have had the tree removed and not merely delegated
the task to Palaña. The appellate court ruled that the dead caimito tree was a nuisance that should have
been removed soon after petitioner had chanced upon it.11
A negligent act is an inadvertent act; it may be merely carelessly done from a lack of ordinary prudence
and may be one which creates a situation involving an unreasonable risk to another because of the
expectable action of the other, a third person, an animal, or a force of nature. A negligent act is one
from which an ordinary prudent person in the actor’s position, in the same or similar circumstances,
would foresee such an appreciable risk of harm to others as to cause him not to do the act or to do it in
a more careful manner.12
The probability that the branches of a dead and rotting tree could fall and harm someone is clearly a
danger that is foreseeable. As the school principal, petitioner was tasked to see to the maintenance of
the school grounds and safety of the children within the school and its premises. That she was unaware
of the rotten state of a tree whose falling branch had caused the death of a child speaks ill of her
discharge of the responsibility of her position.
In every tort case filed under Article 2176 of the Civil Code, plaintiff has to prove by a preponderance
of evidence: (1) the damages suffered by the plaintiff; (2) the fault or negligence of the defendant or
some other person for whose act he must respond; and (3) the connection of cause and effect between
the fault or negligence and the damages incurred.13
The fact, however, that respondents’ daughter, Jasmin, died as a result of the dead and rotting tree
within the school’s premises shows that the tree was indeed an obvious danger to anyone passing by
and calls for application of the principle of res ipsa loquitur.
The doctrine of res ipsa loquitur applies where (1) the accident was of such character as to warrant an
inference that it would not have happened except for the defendant’s negligence; (2) the accident must
have been caused by an agency or instrumentality within the exclusive management or control of the
person charged with the negligence complained of; and (3) the accident must not have been due to any
voluntary action or contribution on the part of the person injured.14
The effect of the doctrine of res ipsa loquitur is to warrant a presumption or inference that the mere
falling of the branch of the dead and rotting tree which caused the death of respondents’ daughter was a
result of petitioner’s negligence, being in charge of the school.
In the case of D.M. Consunji, Inc. v. Court of Appeals,15 this Court held:
…As a rule of evidence, the doctrine of res ipsa loquitur is peculiar to the law of negligence which
recognizes that prima facie negligence may be established without direct proof and furnishes a
substitute for specific proof of negligence.
The concept of res ipsa loquitur has been explained in this wise:
While negligence is not ordinarily inferred or presumed, and while the mere happening of an accident
or injury will not generally give rise to an inference or presumption that it was due to negligence on
defendant’s part, under the doctrine of res ipsa loquitur, which means, literally, the thing or transaction
speaks for itself, or in one jurisdiction, that the thing or instrumentality speaks for itself, the facts or
circumstances accompanying an injury may be such as to raise a presumption, or at least permit an
inference of negligence on the part of the defendant, or some other person who is charged with
negligence.
x x x where it is shown that the thing or instrumentality which caused the injury complained of was
under the control or management of the defendant, and that the occurrence resulting in the injury was
such as in the ordinary course of things would not happen if those who had its control or management
used proper care, there is sufficient evidence, or, as sometimes stated, reasonable evidence, in the
absence of explanation by the defendant, that the injury arose from or was caused by the defendant’s
want of care.
The procedural effect of the doctrine of res ipsa loquitur is that petitioner’s negligence is presumed
once respondents established the requisites for the doctrine to apply. Once respondents made out a
prima facie case of all requisites, the burden shifts to petitioner to explain. The presumption or
inference may be rebutted or overcome by other evidence and, under appropriate circumstances a
disputable presumption, such as that of due care or innocence, may outweigh the inference.16
Was petitioner’s explanation as to why she failed to have the tree removed immediately sufficient to
exculpate her?
As the school principal, petitioner was tasked to see to the maintenance of the school grounds and
safety of the children within the school and its premises. That she was unaware of the rotten state of the
tree calls for an explanation on her part as to why she failed to be vigilant.
Petitioner contends she was unaware of the state of the dead and rotting tree because Lerios merely
offered to buy the tree and did not inform her of its condition. Neither did any of her teachers inform
her that the tree was an imminent danger to anyone. She argues that she could not see the immediate
danger posed by the tree by its mere sighting even as she and the other teachers conducted ground
inspections. She further argues that, even if she should have been aware of the danger, she exercised
her duty by assigning the disposition of the tree to another teacher.
We find petitioner’s explanation wanting. As school principal, petitioner is expected to oversee the
safety of the school’s premises.1âwphi1 The fact that she failed to see the immediate danger posed by
the dead and rotting tree shows she failed to exercise the responsibility demanded by her position.
Moreover, even if petitioner had assigned disposal of the tree to another teacher, she exercises
supervision over her assignee.17 The record shows that more than a month had lapsed from the time
petitioner gave instruction to her assistant Palaña on December 15, 1992, to the time the incident
occurred on February 1, 1993. Clearly, she failed to check seasonably if the danger posed by the rotting
tree had been removed. Thus, we cannot accept her defense of lack of negligence.
Lastly, petitioner questions the award of moral damages. Moral damages are awarded if the following
elements exist in the case: (1) an injury clearly sustained by the claimant; (2) a culpable act or omission
factually established; (3) a wrongful act or omission by the defendant as the proximate cause of the
injury sustained by the claimant; and (4) the award of damages predicated on any of the cases stated in
Article 2219 of the Civil Code.18 However, the person claiming moral damages must prove the
existence of bad faith by clear and convincing evidence for the law always presumes good faith. It is
not enough that one merely suffered sleepless nights, mental anguish, and serious anxiety as the result
of the actuations of the other party. Invariably, such action must be shown to have been willfully done
in bad faith or with ill motive.19 Under the circumstances, we have to concede that petitioner was not
motivated by bad faith or ill motive vis-à-vis respondents’ daughter’s death. The award of moral
damages is therefore not proper.
In line with applicable jurisprudence, we sustain the award by the Court of Appeals of P50,000 as
indemnity for the death of Jasmin,20 and P15,010 as reimbursement of her burial expenses.21
WHEREFORE, the petition is DENIED. The Decision dated October 18, 2002 and the Resolution
dated March 20, 2003, of the Court of Appeals in CA-G.R. CV. No. 54412 are AFFIRMED with
MODIFICATION such that the award of moral damages is hereby deleted.
Costs against petitioner.
SO ORDERED.

G.R. No. 118664 August 7, 1998

JAPAN AIRLINES, petitioner,

vs.
THE COURT OF APPEALS, ENRIQUE AGANA., MARIA ANGELA NINA AGANA, ADALIA B. FRANCISCO and JOSE MIRANDA, respondents.

ROMERO, J.:

which
Before us is an appeal by certiorari filed by petitioner Japan Airlines, Inc. (JAL) seeking the reversal of the decision of the Court of Appeals,
1
affirmed with modification the award of damages made by the trial court in favor of herein private respondents
Enrique Agana, Maria Angela Nina Agana, Adelia Francisco and Jose Miranda.
On June 13, 1991, private respondent Jose Miranda boarded JAL flight No. JL 001 in San Francisco, California
bound for Manila. Likewise, on the same day private respondents Enrique Agana, Maria Angela Nina Agana and
Adelia Francisco left Los Angeles, California for Manila via JAL flight No. JL 061. As an incentive for travelling on
the said airline, both flights were to make an overnight stopover at Narita, Japan, at the airlines' expense,
thereafter proceeding to Manila the following day.
Upon arrival at Narita, Japan on June 14, 1991, private respondents were billeted at Hotel Nikko Narita for the
night. The next day, private respondents, on the final leg of their journey, went to the airport to take their flight to
Manila. However, due to the Mt. Pinatubo eruption, unrelenting ashfall blanketed Ninoy Aquino International
Airport (NAIA), rendering it inaccessible to airline traffic. Hence, private respondents' trip to Manila was cancelled
indefinitely.
To accommodate the needs of its stranded passengers, JAL rebooked all the Manila-bound passengers on flight
No. 741 due to depart on June 16, 1991 and also paid for the hotel expenses for their unexpected overnight stay.
On June 16, 1991, much to the dismay of the private respondents, their long anticipated flight to Manila was
again cancelled due to NAIA's indefinite closure. At this point, JAL informed the private respondents that it would
no longer defray their hotel and accommodation expense during their stay in Narita.
Since NAIA was only reopened to airline traffic on June 22, 1991, private respondents were forced to pay for
their accommodations and meal expenses from their personal funds from June 16 to June 21, 1991. Their
unexpected stay in Narita ended on June 22, 1991 when they arrived in Manila on board JL flight No. 741.
Obviously, still reeling from the experience, private respondents, on July 25, 1991, commenced an action for
damages against JAL before the Regional Trial Court of Quezon City, Branch 104. 2 To support their claim,
private respondents asserted that JAL failed to live up to its duty to provide care and comfort to its stranded
passengers when it refused to pay for their hotel and accommodation expenses from June 16 to 21, 1991 at
Narita, Japan. In other words, they insisted that JAL was obligated to shoulder their expenses as long as they
were still stranded in Narita. On the other hand, JAL denied this allegation and averred that airline passengers
have no vested right to these amenities in case a flight is cancelled due to "force majeure."
On June 18, 1992, the trial court rendered its judgment in favor of private respondents holding JAL liable for
damages, viz.:
WHEREFORE, judgment is rendered in favor of plaintiffs ordering the defendant Japan Airlines to pay the plaintiffs Enrique Agana, Adalia
B. Francisco and Maria Angela Nina Agana the sum of One million Two Hundred forty-six Thousand Nine Hundred Thirty-Six Pesos
(P1,246,936.00) and Jose Miranda the sum of Three Hundred Twenty Thousand Six Hundred sixteen and 31/100 (P320,616.31) as actual,
moral and exemplary damages and pay attorney's fees in the amount of Two Hundred Thousand Pesos (P200,000.00), and to pay the
costs of suit.

Undaunted, JAL appealed the decision before the Court of Appeals, which, however, with the exception of lowering the damages awarded affirmed the trial
court's finding,
3 thus:

Thus, the award of moral damages should be as it is hereby reduced to P200,000.00 for each of the plaintiffs, the exemplary damages to
P300,000.00 and the attorney's fees to P100,000.00 plus the costs.

WHEREFORE, with the foregoing Modification, the judgment appealed from is hereby AFFIRMED in all other respects.

JAL filed a motion for reconsideration which proved futile and

unavailing.
4

Failing in its bid to reconsider the decision, JAL has now filed this instant petition.
The issue to be resolved is whether JAL, as a common carrier has the obligation to shoulder the hotel and meal
expenses of its stranded passengers until they have reached their final destination, even if the delay were
caused by "force majeure."
To begin with, there is no dispute that the Mt. Pinatubo eruption prevented JAL from proceeding to Manila on
schedule. Likewise, private respondents concede that such event can be considered as "force majeure" since
their delayed arrival in Manila was not imputable to JAL. 5
However, private respondents contend that while JAL cannot be held responsible for the delayed arrival in
Manila, it was nevertheless liable for their living expenses during their unexpected stay in Narita since airlines
have the obligation to ensure the comfort and convenience of its passengers. While we sympathize with the
private respondents' plight, we are unable to accept this contention.
We are not unmindful of the fact that in a plethora of cases we have consistently ruled that a contract to transport
passengers is quite different in kind, and degree from any other contractual relation. It is safe to conclude that it
is a relationship imbued with public interest. Failure on the part of the common carrier to live up to the exacting
standards of care and diligence renders it liable for any damages that may be sustained by its passengers.
However, this is not to say that common carriers are absolutely responsible for all injuries or damages even if the
same were caused by a fortuitous event. To rule otherwise would render the defense of "force majeure," as an
exception from any liability, illusory and ineffective.
Accordingly, there is no question that when a party is unable to fulfill his obligation because of "force majeure,"
the general rule is that he cannot be held liable for damages for non-performance. 6 Corollarily, when JAL was
prevented from resuming its flight to Manila due to the effects of Mt. Pinatubo eruption, whatever losses or
damages in the form of hotel and meal expenses the stranded passengers incurred, cannot be charged to JAL.
Yet it is undeniable that JAL assumed the hotel expenses of respondents for their unexpected overnight stay on
June 15, 1991.
Admittedly, to be stranded for almost a week in a foreign land was an exasperating experience for the private
respondents. To be sure, they underwent distress and anxiety during their unanticipated stay in Narita, but their
predicament was not due to the fault or negligence of JAL but the closure of NAIA to international flights. Indeed,
to hold JAL, in the absence of bad faith or negligence, liable for the amenities of its stranded passengers by
reason of a fortuitous event is too much of a burden to assume.
Furthermore, it has been held that airline passengers must take such risks incident to the mode of travel. 7 In this
regard, adverse weather conditions or extreme climatic changes are some of the perils involved in air travel, the
consequences of which the passenger must assume or expect. After all, common carriers are not the insurer of
all risks. 8
Paradoxically, the Court of Appeals, despite the presence of "force majeure," still ruled against JAL relying in our
decision in PAL v. Court of Appeals, 9 thus:
The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard required by law. Undisputably, PAL's
diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence did not terminate PAL's contract with
its passengers. Being in the business of air carriage and the sole one to operate in the country, PAL is deemed equipped to deal with
situations as in the case at bar. What we said in one case once again must be stressed, i.e., the relation of carrier and passenger
continues until the latter has been landed at the port of destination and has left the carrier's premises. Hence, PAL necessarily would still
have to exercise extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded passengers until they have
reached their final destination. On this score, PAL grossly failed considering the then ongoing battle between government forces and
Muslim rebels in Cotabato City and the fact that the private respondent was a stranger to the place.

The reliance is misplaced. The factual background of the PAL case is different from the instant petition. In that case there was indeed a fortuitous event resulting
in the diversion of the PAL flight. However, the unforeseen diversion was worsened when "private respondents (passenger) was left at the airport and could not
10 not
to mention the apparent apathy of the PAL station manager as
even hitch a ride in a Ford Fiera loaded with PAL personnel,"
to the predicament of the stranded passengers. 11
In light of these circumstances, we held that if the fortuitous
event was accompanied by neglect and malfeasance by the carrier's employees, an action for damages against
the carrier is permissible. Unfortunately, for private respondents, none of these conditions are present in the
instant petition.
We are not prepared, however, to completely absolve petitioner JAL from any liability. It must be noted that
private respondents bought tickets from the United States with Manila as their final destination. While JAL was
no longer required to defray private respondents' living expenses during their stay in Narita on account of the
fortuitous event, JAL had the duty to make the necessary arrangements to transport private respondents on the
first available connecting flight to Manila. Petitioner JAL reneged on its obligation to look after the comfort and
convenience of its passengers when it declassified private respondents from "transit passengers" to "new
passengers" as a result of which private respondents were obliged to make the necessary arrangements
themselves for the next flight to Manila. Private respondents were placed on the waiting list from June 20 to June
24. To assure themselves of a seat on an available flight, they were compelled to stay in the airport the whole
day of June 22, 1991 and it was only at 8:00 p.m. of the aforesaid date that they were advised that they could be
accommodated in said flight which flew at about 9:00 a.m. the next day.
We are not oblivious to the fact that the cancellation of JAL flights to Manila from June 15 to June 21, 1991
caused considerable disruption in passenger booking and reservation. In fact, it would be unreasonable to
expect, considering NAIA's closure, that JAL flight operations would be normal on the days affected.
Nevertheless, this does not excuse JAL from its obligation to make the necessary arrangements to transport
private respondents on its first available flight to Manila. After all, it had a contract to transport private
respondents from the United States to Manila as their final destination.
Consequently, the award of nominal damages is in order. Nominal damages are adjudicated in order that a right
of a plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized and not for
the purpose of indemnifying any loss suffered by him. 12 The court may award nominal damages in every
obligation arising from any source enumerated in article 1157, or in every case where any property right has
been invaded. 13
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated December 22, 1993 is hereby
MODIFIED. The award of actual, moral and exemplary damages is hereby DELETED. Petitioner JAL is ordered
to pay each of the private respondents nominal damages in the sum of P100,000.00 each including attorney' s
fees of P50,000.00 plus costs.
SO ORDERED.

G.R. No. 161803 February 4, 2008

DY TEBAN TRADING, INC., petitioner,
vs.
JOSE CHING AND/OR LIBERTY FOREST, INC. and CRESILITO M. LIMBAGA, respondents.
DECISION
REYES, R.T., J.:
THE vehicular collision resulting in damages and injuries in this case could have been avoided if the
stalled prime mover with trailer were parked properly and equipped with an early warning device. It is
high time We sounded the call for strict enforcement of the law and regulation on traffic and vehicle
registration. Panahon na para mahigpit na ipatupad ang batas at regulasyon sa trapiko at
pagpapatala ng sasakyan.
Before Us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA)
modifying that2 of the Regional Trial Court (RTC) in Butuan City finding private respondents Liberty
Forest, Inc. and Cresilito Limbaga liable to petitioner Dy Teban Trading, Inc. for damages.
Facts
On July 4, 1995, at around 4:45 a.m., Rogelio Ortiz, with helper Romeo Catamora, was driving a
Nissan van owned by petitioner Dy Teban Trading, Inc. along the National Highway in Barangay
Sumilihon, Butuan City, going to Surigao City. They were delivering commercial ice to nearby
barangays and municipalities. A Joana Paula passenger bus was cruising on the opposite lane towards
the van. In between the two vehicles was a parked prime mover with a trailer, owned by private
respondent Liberty Forest, Inc.3
The night before, at around 10:00 p.m., the prime mover with trailer suffered a tire blowout. The driver,
private respondent Cresilito Limbaga, parked the prime mover askew occupying a substantial portion
of the national highway, on the lane of the passenger bus. He parked the prime mover with trailer at the
shoulder of the road with the left wheels still on the cemented highway and the right wheels on the sand
and gravel shoulder of the highway. 4 The prime mover was not equipped with triangular, collapsible
reflectorized plates, the early warning device required under Letter of Instruction No. 229. As
substitute, Limbaga placed a banana trunk with leaves on the front and the rear portion of the prime
mover to warn incoming motorists. It is alleged that Limbaga likewise placed kerosene lighted tin cans
on the front and rear of the trailer.5
To avoid hitting the parked prime mover occupying its lane, the incoming passenger bus swerved to the
right, onto the lane of the approaching Nissan van. Ortiz saw two bright and glaring headlights and the
approaching passenger bus. He pumped his break slowly, swerved to the left to avoid the oncoming bus
but the van hit the front of the stationary prime mover. The passenger bus hit the rear of the prime
mover.6
Ortiz and Catamora only suffered minor injuries. The Nissan van, however, became inoperable as a
result of the incident. After the collision, SPO4 Teofilo Pame conducted an investigation and submitted
a police traffic incident investigation report.7
On October 31, 1995, petitioner Nissan van owner filed a complaint for damages 8 against private
respondents prime mover owner and driver with the RTC in Butuan City. The Joana Paula passenger
bus was not impleaded as defendant in the complaint.
RTC Disposition
On August 7, 2001, the RTC rendered a decision in favor of petitioner Dy Teban Trading, Inc. with a
fallo reading:
WHEREFORE, judgment is hereby rendered directing, ordaining and ordering:
a) That defendants Liberty Forest, Inc. and Cresilito M. Limbaga pay, jointly and solidarily,
plaintiff Dy Teban Trading, Inc. the amounts of P279,832.00 as actual and compensatory
damages, P30,000.00 as attorney’s fees and P5,000.00 as expenses of litigation;
b) That all money claims of plaintiff Rogelio C. Ortiz are dismissed;
c) That defendant Jose Ching is absolved from any civil liability or the case against him
dismissed;
d) That the counterclaim of all the defendants is dismissed; and
e) That defendants Liberty Forest, Inc. and Cresilito M. Limbaga to pay, jointly and solidarily,
the costs.
SO ORDERED.9
The RTC held that the proximate cause of the three-way vehicular collision was improper parking of
the prime mover on the national highway and the absence of an early warning device on the vehicle,
thus:
The court finds that the proximate cause of the incidents is the negligence and carelessness
attributable to the defendants. When the trailer being pulled by the prime mover suffered two
(2) flat tires at Sumilihon, the prime mover and trailer were parked haphazardly, as the right
tires of the prime mover were the only ones on the sand and gravel shoulder of the highway
while the left tires and all the tires of the trailer were on the cemented pavement of the highway,
 occupying almost the whole of the right lane on the direction the prime mover and trailer were
traveling. The statement of Limbaga that he could not park the prime mover and trailer deeper
into the sand and gravel shoulder of the highway to his right because there were banana plants is
contradicted by the picture marked Exhibit "F." The picture shows that there was ample space
on the shoulder. If defendant Limbaga was careful and prudent enough, he should have the
prime mover and trailer traveled more distance forward so that the bodies of the prime mover
and trailer would be far more on the shoulder rather than on the cemented highway when they
were parked. x x x The court has some doubts on the statement of witness-driver Limbaga that
there were banana trunks with leaves and lighted tin cans with crude oil placed 3 strides in front
of the prime mover and behind the trailer because the testimonies of witnesses Rogelio C. Ortiz,
driver of the ice van, Romeo D. Catamora, helper of the ice van, and Police Traffic Investigator
SPO3 Teofilo M. Pame show that there were no banana trunks with leaves and lighted tin cans
at the scene of the incident. But even assuming that there were banana trunks with leaves but
they were placed close to the prime mover and trailer as they were placed 3 strides away which
to the mind of the court is equivalent approximately to 3 meters and with this distance,
approaching vehicles would have no sufficient time and space to make a complete stop,
especially if the vehicles are heavy and loaded. If there were lighted tin cans, it was not
explained by the defendants why the driver, especially driver witness Ortiz, did not see them.
xxxx
Defendant Liberty Forest, Inc. did not exercise the diligence of a good father of a family in
managing and running its business. The evidence on record shows that it failed to provide its
prime mover and trailer with the required "early warning devices" with reflectors and it did not
keep proper maintenance and condition of the prime mover and the trailer. The circumstances
show that the trailer were provided with wornout tires and with only one (1) piece of spare tire.
The pictures marked Exhibit "3" and "4" show that two (2) flat tires suffered by the trailer and
these two (2) tires were attached to one of the two (2) I-beams or axles attached to the rear of
the trailer which axle is very near but behind the other axle and with the location of the 2 I-
beams, it would have the other I-beam that would have suffered the flat tires as it has to bear the
brunt of weight of the D-8 bulldozer. The bulldozer was not loaded directly above the two (2) I-
beams as 2 I-beams, as a pair, were attached at the far rear end of the trailer.
xxxx
However, defendant Jose Ching should be absolved of any liability as there is no showing that
he is the manager or CEO of defendant Liberty Forest, Inc. Although in the answer, it is
admitted that he is an officer of the defendant corporation, but it is not clarified what kind of
position he is holding, as he could be an officer as one of the members of the Board of Directors
or a cashier and treasurer of the corporation. Witness Limbaga in his testimony mentioned a
certain Boy Ching as the Manager but it was never clarified whether or not Boy Ching and
defendant Jose Ching is one and the same person.10
Private respondents appealed to the CA.
CA Disposition
On August 28, 2003, the CA reversed the RTC decision, disposing as follows:
WHEREFORE, premises considered, the decision dated August 7, 2001 of the Regional Trial
Court, Branch 2, Butuan City in Civil Case No. 4360 is hereby PARTLY MODIFIED by
absolving the defendants-appellants/appellees of any liability to plaintiffs-appellants/appellees
by reason of the incident on July 4, 1995.
 The dismissal of the case against Jose Ching, the counterclaim of defendants-
appellants/appellees and the money claim of Rogelio Ortiz STANDS.
SO ORDERED.11
In partly reversing or partly modifying the RTC decision, the CA held that the proximate cause of the
vehicular collision was the failure of the Nissan van to give way or yield to the right of way of the
passenger bus, thus:
It was stated that the Joana Paula bus in trying to avoid a head-on collision with the truck,
sideswept the parked trailer loaded with bulldozer.
Evidently, the driver of the Joana Paula bus was aware of the presence on its lane of the parked
trailer with bulldozer. For this reason, it proceeded to occupy what was left of its lane and part
of the opposite lane. The truck occupying the opposite lane failed to give way or yield the right
of way to the oncoming bus by proceeding with the same speed. The two vehicles were, in
effect, trying to beat each other in occupying a single lane. The bus was the first to occupy the
said lane but upon realizing that the truck refused to give way or yield the right of way, the bus,
as a precaution, geared to its right where the trailer was parked. Unfortunately, the bus
miscalculated its distance from the parked trailer and its rear right side hit the protruding blade
of the bulldozer then on the top of the parked trailer. The impact of the collision on its right rear
side with the blade of the bulldozer threw the bus further to the opposite lane, landing its rear
portion on the shoulder of the opposite lane.
xxxx
Facts of the case reveal that when Ortiz, the driver of the truck, failed to give the Joana Paula
bus the space on the road it needed, the latter vehicle scraped its rear right side on the protruded
bulldozer blade and the impact threw the bus directly on the path of the oncoming truck. This
made plaintiffs-appellants/appellees conclude that the Joana Paula bus occupied its lane which
forced Ortiz, the driver of the truck, to swerve to its left and ram the front of the parked trailer.
xxxx
The trailer was parked because its two (2) rear-left tires were blown out. With a bulldozer on top
of the trailer and two (2) busted tires, it would be dangerous and quite impossible for the trailer
to further park on the graveled shoulder of the road. To do so will cause the flat car to tilt and
may cause the bulldozer to fall from where it was mounted. In fact, it appeared that the driver of
the trailer tried its best to park on the graveled shoulder since the right-front tires were on the
graveled shoulder of the road.
The lower court erred in stating that the Joana Paula bus swerved to the left of the truck because
it did not see the parked trailer due to lack of warning sign of danger of any kind that can be
seen from a distance. The damage suffered by the Joana Paula bus belied this assessment. As
stated before, the Joana Paula bus, with the intention of passing first which it did, first
approached the space beside the parked trailer, veered too close to the parked trailer thereby
hitting its rear right side on the protruding bulldozer blade. Since the damage was on the rear
right most of the bus, it was clearly on the space which was wide enough for a single passing
vehicle but not sufficient for two (2) passing vehicles. The bus was thrown right to the path of
the truck by the impact of the collision of its rear right side with the bulldozer blade.12
The CA disagreed with the RTC that the prime mover did not have an early warning device. The
appellate court accepted the claim of private respondent that Limbaga placed kerosene lighted tin cans
on the front and rear of the trailer which, in Baliwag Transit, Inc. v. Court of Appeals,13 may act as
substitute early warning device. The CA stated:
Likewise, it was incorrect for the lower court to state that there was no warning sign of danger
of any kind, most probably referring to the absence of the triangular reflectorized plates. The
police sketch clearly indicated the stack of banana leaves placed at the rear of the parked trailer.
The trailer’s driver testified that they placed kerosene lighted tin can at the back of the parked
trailer.
A pair of triangular reflectorized plates is not the only early warning device allowed by law. The
Supreme Court (in Baliwag Transit, Inc. v. Court of Appeals) held that:
"x x x Col. Dela Cruz and Romano testified that they did not see any early warning
device at the scene of the accident. They were referring to the triangular reflectorized
plates in red and yellow issued by the Land Transportation Office. However, the
evidence shows that Recontique and Ecala placed a kerosene lamp or torch at the edge
of the road, near the rear portion of the truck to serve as an early warning device. This
substantially complies with Section 34(g) of the Land Transportation and Traffic Code x
xx
Baliwag’s argument that the kerosene lamp or torch does not substantially comply with
the law is untenable. The aforequoted law clearly allows the use not only of an early
warning device of the triangular reflectorized plates’ variety but also parking lights or
flares visible one hundred meters away. x x x."
This Court holds that the defendants-appellants/appellees were not negligent in parking the
trailer on the scene of the accident. It would have been different if there was only one flat tire
and defendant-appellant/appellee Limbaga failed to change the same and left immediately.
As such, defendants-appellants/appellees are not liable for the damages suffered by plaintiffs-
appellants/appellees. Whatever damage plaintiffs-appellants/appellees suffered, they alone must
bear them.14
Issues
Petitioner raises two issues15 for Our consideration, to wit:
I.
THE HONORABLE COURT OF APPEALS, WITHOUT ANY AVAILABLE CONCRETE
EVIDENCE, ERRONEOUSLY DETERMINED THAT THERE WERE EARLY WARNING
DEVICES PLACED IN FRONT OF THE DEFENDANT-APPELLANTS/APPELLEES’
TRUCK AND FLAT CAR TO WARN PLAINTIFF-APPELLANT/APPELLEE ROGELIO
ORTIZ OF THEIR PRESENCE.
II.
WITH DUE RESPECT, IT IS HIGH TIME TO ENFORCE THE LAW ON EARLY WARNING
DEVICES IN THE PUBLIC INTEREST.
Our Ruling
The petition is meritorious.
The meat of the petition is whether or not the prime mover is liable for the damages suffered by the
Nissan van. The RTC ruled in the affirmative holding that the proximate cause of the vehicular
collision was the negligence of Limbaga in parking the prime mover on the national highway without
an early warning device on the vehicle. The CA reversed the RTC decision, holding that the proximate
cause of the collision was the negligence of Ortiz in not yielding to the right of way of the passenger
bus.
Article 2176 of the 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 quasi-delict. To sustain a claim
based on quasi-delict, the following requisites must concur: (a) damage suffered by plaintiff; (b) fault
or negligence of defendant; and (c) connection of cause and effect between the fault or negligence of
defendant and the damage incurred by plaintiff.16
There is no dispute that the Nissan van suffered damage. That is borne by the records and conceded by
the parties. The outstanding issues are negligence and proximate cause. Tersely put, the twin issues are:
(a) whether or not prime mover driver Limbaga was negligent in parking the vehicle; and (b) whether
or not his negligence was the proximate cause of the damage to the Nissan van.
Limbaga was negligent in parking the prime mover on the national highway; he failed to prevent or
minimize the risk to oncoming motorists.
Negligence is defined as the failure to observe for the protection of the interests of another person that
degree of care, precaution, and vigilance which the circumstances justly demand, whereby such other
person suffers injury.17 The Supreme Court stated the test of negligence in the landmark case Picart v.
Smith18 as follows:
The test by which to determine the existence or negligence in a particular case may be stated as
follows: Did the defendant in doing the alleged negligent act use that reasonable care and
caution which an ordinary person would have used in the same situation? If not, then he is
guilty of negligence. The law here in effect adopts the standard supposed to be supplied by the
imaginary conduct of the discreet paterfamilias of the Roman law. The existence of negligence
in a given case is not determined by reference to the personal judgment of the actor in the
situation before him. The law considers what would be reckless, blameworthy, or negligent in
the man of ordinary intelligence and prudence and determines liability by that. (Underscoring
supplied)
The test of negligence is objective. We measure the act or omission of the tortfeasor with that of an
ordinary reasonable person in the same situation. The test, as applied to this case, is whether Limbaga,
in parking the prime mover, used that reasonable care and caution which an ordinary reasonable person
would have used in the same situation.
We find that Limbaga was utterly negligent in parking the prime mover askew on the right side of the
national highway. The vehicle occupied a substantial portion of the national road on the lane of the
passenger bus. It was parked at the shoulder of the road with its left wheels still on the cemented
highway and the right wheels on the sand and gravel shoulder of the highway. It is common sense that
the skewed parking of the prime mover on the national road posed a serious risk to oncoming motorists.
It was incumbent upon Limbaga to take some measures to prevent that risk, or at least minimize it.
We are unable to agree with the CA conclusion "it would have been dangerous and quite impossible to
further park the prime mover on the graveled shoulder of the road because the prime mover may tilt
and the bulldozer may fall off." The photographs taken after the incident show that it could have been
possible for Limbaga to park the prime mover completely on the shoulder of the national road without
risk to oncoming motorists. We agree with the RTC observation on this point, thus:
x x x The statement of Limbaga that he could not park the prime mover and trailer deeper into
the sand and gravel shoulder of the highway to his right because there were banana plants is
 contradicted by the picture marked Exhibit "F." The picture shows that there was ample space
on the shoulder. If defendant Limbaga was careful and prudent enough, he should have the
prime mover and trailer traveled more distance forward so that the bodies of the prime mover
and trailer would be far more on the shoulder rather than on the cemented highway when they
were parked. Although at the time of the incident, it was about 4:45 in the morning and it was
drizzling but there is showing that it was pitch dark that whoever travels along the highway
must be extra careful. If the Joana Paula bus swerved to the lane on which the "Nissan" ice van
was properly traveling, as prescribed by Traffic Rules and Regulations, it is because the driver
of the bus did not see at a distance the parked prime mover and trailer on the bus’ proper lane
because there was no warning signs of danger of any kind that can be seen from a distance.19
Limbaga also failed to take proper steps to minimize the risk posed by the improperly parked prime
mover. He did not immediately inform his employer, private respondent Liberty Forest, Inc., that the
prime mover suffered two tire blowouts and that he could not have them fixed because he had only one
spare tire. Instead of calling for help, Limbaga took it upon himself to simply place banana leaves on
the front and rear of the prime mover to serve as warning to oncoming motorists. Worse, Limbaga slept
on the prime mover instead of standing guard beside the vehicle. By his own account, Limbaga was
sleeping on the prime mover at the time of the collision and that he was only awakened by the impact
of the Nissan van and the passenger bus on the prime mover.20
Limbaga also admitted on cross-examination that it was his first time to drive the prime mover with
trailer loaded with a D-8 caterpillar bulldozer. 21 We find that private respondent Liberty Forest, Inc.
was utterly negligent in allowing a novice driver, like Limbaga, to operate a vehicle, such as a truck
loaded with a bulldozer, which required highly specialized driving skills. Respondent employer clearly
failed to properly supervise Limbaga in driving the prime mover.
The RTC noted that private respondent Liberty Forest, Inc. also failed to keep the prime mover in
proper condition at the time of the collision. The prime mover had worn out tires. It was only equipped
with one spare tire. It was for this reason that Limbaga was unable to change the two blown out tires
because he had only one spare. The bulldozer was not even loaded properly on the prime mover, which
caused the tire blowouts.
All told, We agree with the RTC that private respondent Limbaga was negligent in parking the prime
mover on the national highway. Private respondent Liberty Forest, Inc. was also negligent in failing to
supervise Limbaga and in ensuring that the prime mover was in proper condition.
The case of Baliwag Transit, Inc. v. Court of Appeals is inapplicable; Limbaga did not put lighted
kerosene tin cans on the front and rear of the prime mover.
Anent the absence of an early warning device on the prime mover, the CA erred in accepting the bare
testimony of Limbaga that he placed kerosene lighted tin cans on the front and rear of the prime mover.
The evidence on records belies such claim. The CA reliance on Baliwag Transit, Inc. v. Court of
Appeals22 as authority for the proposition that kerosene lighted tin cans may act as substitute early
warning device is misplaced.
First, the traffic incident report did not mention any lighted tin cans on the prime mover or within the
immediate vicinity of the accident. Only banana leaves were placed on the prime mover. The report
reads:
VIII – RESULT OF INVESTIGATION: A Joana Pa_ula Bus, with Body No. 7788, with Plate
No. LVA-137, driven by one Temestocles Relova v. Antero, of legal age, married and a resident
of San Roque, Kitcharao, Agusan del Norte, while traveling along the National Highway,
coming from the east going to the west direction, as it moves along the way and upon reaching
 Brgy. Sumilihon, Butuan City to evade bumping to the approaching Nissan Ice Van with Plate
No. PNT-247, driven by one Rogelio Cortez y Ceneza. As the result, the Joana Paula Bus
accidentally busideswept (sic) to the parked Prime Mover with Trailer loaded with Bulldozer
without early warning device, instead placing only dry banana leaves three (3) meters at the
rear portion of the Trailer, while failure to place at the front portion, and the said vehicle
occupied the whole lane. As the result, the Joana Paula Bus hit to the left edge blade of the
Bulldozer. Thus, causing the said bus swept to the narrow shouldering, removing the rear four
(4) wheels including the differential and injuring the above-stated twelve (12) passengers and
damaged to the right side fender above the rear wheel. Thus, causing damage on it. While the
Nissan Ice Van in evading, accidentally swerved to the left lane and accidentally bumped to the
front bumper of the parked Prime Mover with Trailer loaded with Bulldozer. Thus, causing
heavy damage to said Nissan Ice Van including the cargoes of the said van.23
Second, SPO4 Pame, who investigated the collision, testified24 that only banana leaves were placed on
the front and rear of the prime mover. He did not see any lighted tin cans in the immediate vicinity of
the collision.
Third, the claim of Limbaga that he placed lighted tin cans on the front and rear of the prime mover
belatedly surfaced only during his direct examination. No allegation to this effect was made by private
respondents in their Answer to the complaint for damages. Petitioner’s counsel promptly objected to
the testimony of Limbaga, thus:
ATTY. ROSALES:
Q. Now you mentioned about placing some word signs in front and at the rear of the prime
mover with trailer, will you please describe to us what this word signs are?
A. We placed a piece of cloth on tin cans and filled them with crude oil. And these tin cans
were lighted and they are like torches. These two lights or torches were placed in front and at
the rear side of the prime mover with trailer. After each torch, we placed banana trunk. The
banana trunk is placed between the two (2) torches and the prime mover, both on the rear and on
the front portion of the prime mover.
Q. How far was the lighted tin cans with wick placed in front of the prime mover.
ATTY. ASIS:
At this point, we will be objecting to questions particularly referring to the alleged tin cans as
some of the warning-sign devices, considering that there is no allegation to that effect in the
answer of the defendants. The answer was just limited to the numbers 4 & 5 of the answer. And,
therefore, if we follow the rule of the binding effect of an allegation in the complaint, then the
party will not be allowed to introduce evidence to attack jointly or rather the same, paragraph 5
states, warning device consisting of 3 banana trunks, banana items and leaves were filed. He can
be cross-examined in the point, Your Honor.
COURT:
Q. Put that on record that as far as this tin cans are concerned, the plaintiffs are interposing
continuing objections. But the Court will allow the question.25
We thus agree with the RTC that Limbaga did not place lighted tin cans on the front and rear of the
prime mover. We give more credence to the traffic incident report and the testimony of SPO4 Pame that
only banana leaves were placed on the vehicle. Baliwag Transit, Inc. v. Court of Appeals 26 thus finds
no application to the case at bar.
The skewed parking of the prime mover was the proximate cause of the collision.
Proximate cause is defined as that cause, which, in natural and continuous sequence, unbroken by any
efficient intervening cause, produces the injury, and without which the result would not have occurred.
More comprehensively, proximate cause is that cause acting first and producing the injury, either
immediately or by setting other events in motion, all constituting a natural and continuous chain of
events, each having a close causal connection with its immediate predecessor, the final event in the
chain immediately effecting the injury as natural and probable result of the cause which first acted,
under such circumstances that the person responsible for the first event should, as an ordinarily prudent
and intelligent person, have reasonable ground to expect at the moment of his act or default that an
injury to some person might probably result therefrom.27
There is no exact mathematical formula to determine proximate cause. It is based upon mixed
considerations of logic, common sense, policy and precedent.28 Plaintiff must, however, establish a
sufficient link between the act or omission and the damage or injury. That link must not be remote or
far-fetched; otherwise, no liability will attach. The damage or injury must be a natural and probable
result of the act or omission. In the precedent-setting Vda. de Bataclan v. Medina,29 this Court
discussed the necessary link that must be established between the act or omission and the damage or
injury, viz.:
It may be that ordinarily, when a passenger bus overturns, and pins down a passenger, merely
causing him physical injuries, if through some event, unexpected and extraordinary, the
overturned bus is set on fire, say, by lightning, or if some highwaymen after looting the vehicle
sets it on fire, and the passenger is burned to death, one might still contend that the proximate
cause of his death was the fire and not the overturning of the vehicle. But in the present case and
under the circumstances obtaining in the same, we do not hesitate to hold that the proximate
cause of the death of Bataclan was the overturning of the bus, this for the reason that when the
vehicle turned not only on its side but completely on its back, the leaking of the gasoline from
the tank was not unnatural or unexpected; that the coming of the men with a lighted torch was in
response to the call for help, made not only by the passengers, but most probably, by the driver
and the conductor themselves, and that because it was very dark (about 2:30 in the morning),
the rescuers had to carry a light with them; and coming as they did from a rural area where
lanterns and flashlights were not available, they had to use a torch, the most handy and
available; and what was more natural than that said rescuers should innocently approach the
overturned vehicle to extend the aid and effect the rescue requested from them. In other words,
the coming of the men with the torch was to be expected and was natural sequence of the
overturning of the bus, the trapping of some of its passengers’ bus, the trapping of some of its
passengers and the call for outside help.
The ruling in Bataclan has been repeatedly cited in subsequent cases as authority for the proposition
that the damage or injury must be a natural or probable result of the act or omission. Here, We agree
with the RTC that the damage caused to the Nissan van was a natural and probable result of the
improper parking of the prime mover with trailer. As discussed, the skewed parking of the prime mover
posed a serious risk to oncoming motorists. Limbaga failed to prevent or minimize that risk. The
skewed parking of the prime mover triggered the series of events that led to the collision, particularly
the swerving of the passenger bus and the Nissan van.
Private respondents Liberty Forest, Inc. and Limbaga are liable for all damages that resulted from the
skewed parking of the prime mover. Their liability includes those damages resulting from
precautionary measures taken by other motorist in trying to avoid collision with the parked prime
mover. As We see it, the passenger bus swerved to the right, onto the lane of the Nissan van, to avoid
colliding with the improperly parked prime mover. The driver of the Nissan van, Ortiz, reacted swiftly
by swerving to the left, onto the lane of the passenger bus, hitting the parked prime mover. Ortiz
obviously would not have swerved if not for the passenger bus abruptly occupying his van’s lane. The
passenger bus, in turn, would not have swerved to the lane of the Nissan van if not for the prime mover
improperly parked on its lane. The skewed parking is the proximate cause of the damage to the Nissan
van.
In Phoenix Construction, Inc. v. Intermediate Appellate Court,30 this Court held that a similar vehicular
collision was caused by the skewed parking of a dump truck on the national road, thus:
The conclusion we draw from the factual circumstances outlined above is that private
respondent Dionisio was negligent the night of the accident. He was hurrying home that night
and driving faster than he should have been. Worse, he extinguished his headlights at or near the
intersection of General Lacuna and General Santos Streets and thus did not see the dump truck
that was parked askew and sticking out onto the road lane.
Nonetheless, we agree with the Court of First Instance and the Intermediate Appellate Court that
the legal and proximate cause of the accident and of Dionisio’s injuries was the wrongful or
negligent manner in which the dump truck was parked – in other words, the negligence of
petitioner Carbonel. That there was a reasonable relationship between petitioner Carbonel’s
negligence on the one hand and the accident and respondent’s injuries on the other hand, is quite
clear. Put in a slightly different manner, the collision of Dionisio’s car with the dump truck was
a natural and foreseeable consequence of the truck driver’s negligence.
xxxx
We believe, secondly, that the truck driver’s negligence far from being a "passive and static
condition" was rather an indispensable and efficient cause. The collision between the dump
truck and the private respondent’s car would in all probability not have occurred had the dump
truck not been parked askew without any warning lights or reflector devices. The improper
parking of the dump truck created an unreasonable risk of injury for anyone driving down
General Lacuna Street and for having so created this risk, the truck driver must be held
responsible. In our view, Dionisio’s negligence, although later in point of time than the truck
driver’s negligence and, therefore, closer to the accident, was not an efficient intervening or
independent cause. What the Petitioner describes as an "intervening cause" was no more than a
foreseeable consequence of the risk created by the negligent manner in which the truck driver
had parked the dump truck. In other words, the petitioner truck driver owed a duty to private
respondent Dionisio and others similarly situated not to impose upon them the very risk the
truck driver had created. Dionisio’s negligence was not of an independent and overpowering
nature as to cut, as it were, the chain of causation in fact between the improper parking of the
dump truck and the accident, nor to sever the juris vinculum of liability. x x x (Underscoring
supplied)
We cannot rule on the proportionate or contributory liability of the passenger bus, if any, because it
was not a party to the case; joint tortfeasors are solidarily liable.
The CA also faults the passenger bus for the vehicular collision. The appellate court noted that the
passenger bus was "aware" of the presence of the prime mover on its lane, but it still proceeded to
occupy the lane of the Nissan van. The passenger bus also miscalculated its distance from the prime
mover when it hit the vehicle.
We cannot definitively rule on the proportionate or contributory liability of the Joana Paula passenger
bus vis-à-vis the prime mover because it was not a party to the complaint for damages. Due process
dictates that the passenger bus must be given an opportunity to present its own version of events before
it can be held liable. Any contributory or proportionate liability of the passenger bus must be litigated
in a separate action, barring any defense of prescription or laches. Insofar as petitioner is concerned, the
proximate cause of the collision was the improper parking of the prime mover. It was the improper
parking of the prime mover which set in motion the series of events that led to the vehicular collision.
Even granting that the passenger bus was at fault, it’s fault will not necessarily absolve private
respondents from liability. If at fault, the passenger bus will be a joint tortfeasor along with private
respondents. The liability of joint tortfeasors is joint and solidary. This means that petitioner may hold
either of them liable for damages from the collision. In Philippine National Construction Corporation
v. Court of Appeals,31 this Court held:
According to the great weight of authority, where the concurrent or successive negligent acts or
omission of two or more persons, although acting independently of each other, are, in
combination, the direct and proximate cause of a single injury to a third person and it is
impossible to determine in what proportion each contributed to the injury, either is responsible
for the whole injury, even though his act alone might not have caused the entire injury, or the
same damage might have resulted from the acts of the other tort-feasor x x x.
In Far Eastern Shipping Company v. Court of Appeals, the Court declared that the liability of joint
tortfeasors is joint and solidary, to wit:
It may be said, as a general rule, that negligence in order to render a person liable need not be
the sole cause of an injury. It is sufficient that his negligence, concurring with one or more
efficient causes other than plaintiff’s, is the proximate cause of the injury. Accordingly, where
several causes combine to produce injuries, a person is not relieved from liability because he is
responsible for only one of them, it being sufficient that the negligence of the person charged
with injury is an efficient cause without which the injury would not have resulted to as great an
extent, and that such cause is not attributable to the person injured. It is no defense to one of the
concurrent tortfeasors that the injury would not have resulted from his negligence alone, without
the negligence or wrongful acts of the other concurrent tortfeasors. Where several causes
producing an injury are concurrent and each is an efficient cause without which the injury
would not have happened, the injury may be attributed to all or any of the causes and recovery
may be had against any or all of the responsible persons although under the circumstances of the
case, it may appear that one of them was more culpable, and that the duty owed by them to the
injured person was not the same. No actor’s negligence ceases to be a proximate cause merely
because it does not exceed the negligence of other actors. Each wrongdoer is responsible for the
entire result and is liable as though his acts were the sole cause of the injury.
There is no contribution between joint tortfeasors whose liability is solidary since both of them
are liable for the total damage. Where the concurrent or successive negligent acts or omissions
of two or more persons, although acting independently, are in combination with the direct and
proximate cause of a single injury to a third person, it is impossible to determine in what
proportion each contributed to the injury and either of them is responsible for the whole injury.
Where their concurring negligence resulted in injury or damage to a third party, they become
joint tortfeasors and are solidarily liable for the resulting damage under Article 2194 of the Civil
Code. (Underscoring supplied)
All told, all the elements of quasi delict have been proven by clear and convincing evidence. The CA
erred in absolving private respondents from liability for the vehicular collision.
Final Note
It is lamentable that the vehicular collision in this case could have been easily avoided by following
basic traffic rules and regulations and road safety standards. In hindsight, private respondent Limbaga
could have prevented the three-way vehicular collision if he had properly parked the prime mover on
the shoulder of the national road. The improper parking of vehicles, most especially along the national
highways, poses a serious and unnecessary risk to the lives and limbs of other motorists and
passengers. Drivers owe a duty of care to follow basic traffic rules and regulations and to observe road
safety standards. They owe that duty not only for their own safety, but also for that of other motorists.
We can prevent most vehicular accidents by simply following basic traffic rules and regulations.
We also note a failure of implementation of basic safety standards, particularly the law on early
warning devices. This applies even more to trucks and big vehicles, which are prone to mechanical
breakdown on the national highway. The law, as crafted, requires vehicles to be equipped with
triangular reflectorized plates.32 Vehicles without the required early warning devices are ineligible for
registration.33 Vehicle owners may also be arrested and fined for non-compliance with the law.34
The Land Transportation Office (LTO) owes a duty to the public to ensure that all vehicles on the road
meet basic and minimum safety features, including that of early warning devices. It is most unfortunate
that We still see dilapidated and rundown vehicles on the road with substandard safety features. These
vehicles not only pose a hazard to the safety of their occupants but that of other motorists. The prime
mover truck in this case should not have been granted registration because it failed to comply with the
minimum safety features required for vehicles on the road.
It is, indeed, time for traffic enforcement agencies and the LTO to strictly enforce all pertinent laws and
regulations within their mandate.
WHEREFORE, the petition is GRANTED. The Court of Appeals decision dated August 28, 2003 is
hereby SET ASIDE. The RTC decision dated August 7, 2001 is REINSTATED IN FULL.
SO ORDERED.

G.R. No. 118492 August 15, 2001

GREGORIO H. REYES and CONSUELO PUYAT-REYES, petitioners,
vs.
THE HON. COURT OF APPEALS and FAR EAST BANK AND TRUST COMPANY,
respondents.
DE LEON, JR., J.:
Before us is a petition for review of the Decision 1 dated July 22, 1994 and Resolution2 dated December
29, 1994 of the Court of Appeals 3 affirming with modification the Decision 4 dated November 12, 1992
of the Regional Trial Court of Makati, Metro Manila, Branch 64, which dismissed the complaint for
damages of petitioners spouses Gregorio H. Reyes and Consuelo Puyat-Reyes against respondent Far
East Bank and Trust Company.
The undisputed facts of the case are as follows:
In view of the 20th Asian Racing Conference then scheduled to be held in September, 1988 in Sydney,
Australia, the Philippine Racing Club, Inc. (PRCI, for brevity) sent four (4) delegates to the said
conference. Petitioner Gregorio H. Reyes, as vice-president for finance, racing manager, treasurer, and
director of PRCI, sent Godofredo Reyes, the club's chief cashier, to the respondent bank to apply for a
foreign exchange demand draft in Australian dollars.
Godofredo went to respondent bank's Buendia Branch in Makati City to apply for a demand draft in the
amount One Thousand Six Hundred Ten Australian Dollars (AU$1,610.00) payable to the order of the
20th Asian Racing Conference Secretariat of Sydney, Australia. He was attended to by respondent
bank's assistant cashier, Mr. Yasis, who at first denied the application for the reason that respondent
bank did not have an Australian dollar account in any bank in Sydney. Godofredo asked if there could
be a way for respondent bank to accommodate PRCI's urgent need to remit Australian dollars to
Sydney. Yasis of respondent bank then informed Godofredo of a roundabout way of effecting the
requested remittance to Sydney thus: the respondent bank would draw a demand draft against Westpac
Bank in Sydney, Australia (Westpac-Sydney for brevity) and have the latter reimburse itself from the
U.S. dollar account of the respondent in Westpac Bank in New York, U.S.A. (Westpac-New York for
brevity). This arrangement has been customarily resorted to since the 1960's and the procedure has
proven to be problem-free. PRCI and the petitioner Gregorio H. Reyes, acting through Godofredo,
agreed to this arrangement or approach in order to effect the urgent transfer of Australian dollars
payable to the Secretariat of the 20th Asian Racing Conference.
On July 28, 1988, the respondent bank approved the said application of PRCI and issued Foreign
Exchange Demand Draft (FXDD) No. 209968 in the sum applied for, that is, One Thousand Six
Hundred Ten Australian Dollars (AU$ 1,610.00), payable to the order of the 20 th Asian Racing
Conference Secretariat of Sydney, Australia, and addressed to Westpac-Sydney as the drawee
bank.1âwphi1.nêt
On August 10, 1988, upon due presentment of the foreign exchange demand draft, denominated as
FXDD No. 209968, the same was dishonored, with the notice of dishonor stating the following: "xxx
No account held with Westpac." Meanwhile, on August 16, 1988, Wespac-New York sent a cable to
respondent bank informing the latter that its dollar account in the sum of One Thousand Six Hundred
Ten Australian Dollars (AU$ 1,610.00) was debited. On August 19, 1988, in response to PRCI's
complaint about the dishonor of the said foreign exchange demand draft, respondent bank informed
Westpac-Sydney of the issuance of the said demand draft FXDD No. 209968, drawn against the
Wespac-Sydney and informing the latter to be reimbursed from the respondent bank's dollar account in
Westpac-New York. The respondent bank on the same day likewise informed Wespac-New York
requesting the latter to honor the reimbursement claim of Wespac-Sydney. On September 14, 1988,
upon its second presentment for payment, FXDD No. 209968 was again dishonored by Westpac-
Sydney for the same reason, that is, that the respondent bank has no deposit dollar account with the
drawee Wespac-Sydney.
On September 17, 1988 and September 18, 1988, respectively, petitioners spouses Gregorio H. Reyes
and Consuelo Puyat-Reyes left for Australia to attend the said racing conference. When petitioner
Gregorio H. Reyes arrived in Sydney in the morning of September 18, 1988, he went directly to the
lobby of Hotel Regent Sydney to register as a conference delegate. At the registration desk, in the
presence of other delegates from various member of the conference secretariat that he could not register
because the foreign exchange demand draft for his registration fee had been dishonored for the second
time. A discussion ensued in the presence and within the hearing of many delegates who were also
registering. Feeling terribly embarrassed and humiliated, petitioner Gregorio H. Reyes asked the lady
member of the conference secretariat that he be shown the subject foreign exchange demand draft that
had been dishonored as well as the covering letter after which he promised that he would pay the
registration fees in cash. In the meantime he demanded that he be given his name plate and conference
kit. The lady member of the conference secretariat relented and gave him his name plate and
conference kit. It was only two (2) days later, or on September 20, 1988, that he was given the
dishonored demand draft and a covering letter. It was then that he actually paid in cash the registration
fees as he had earlier promised.
Meanwhile, on September 19, 1988, petitioner Consuelo Puyat-Reyes arrived in Sydney. She too was
embarassed and humiliated at the registration desk of the conference secretariat when she was told in
the presence and within the hearing of other delegates that she could not be registered due to the
dishonor of the subject foreign exchange demand draft. She felt herself trembling and unable to look at
the people around her. Fortunately, she saw her husband, coming toward her. He saved the situation for
her by telling the secretariat member that he had already arranged for the payment of the registration
fee in cash once he was shown the dishonored demand draft. Only then was petitioner Puyat-Reyes
given her name plate and conference kit.
At the time the incident took place, petitioner Consuelo Puyat-Reyes was a member of the House of
Representatives representing the lone Congressional District of Makati, Metro Manila. She has been an
officer of the Manila Banking Corporation and was cited by Archbishop Jaime Cardinal Sin as the top
lady banker of the year in connection with her conferment of the Pro-Ecclesia et Pontifice Award. She
has also been awarded a plaque of appreciation from the Philippine Tuberculosis Society for her
extraordinary service as the Society's campaign chairman for the ninth (9th) consecutive year.
On November 23, 1988, the petitioners filed in the Regional Trial Court of Makati, Metro Manila, a
complaint for damages, docketed as Civil Case No. 88-2468, against the respondent bank due to the
dishonor of the said foreign exchange demand draft issued by the respondent bank. The petitioners
claim that as a result of the dishonor of the said demand draft, they were exposed to unnecessary shock,
social humiliation, and deep mental anguish in a foreign country, and in the presence of an international
audience.
On November 12, 1992, the trial court rendered judgment in favor of the defendant (respondent bank)
and against the plaintiffs (herein petitioners), the dispositive portion of which states:
WHEREFORE, judgment is hereby rendered in favor of the defendant, dismissing plaintiff's
complaint, and ordering plaintiffs to pay to defendant, on its counterclaim, the amount of
P50,000.00, as reasonable attorney's fees. Costs against the plaintiff.
SO ORDERED.5
The petitioners appealed the decision of the trial court to the Court of Appeals. On July 22, 1994, the
appellate court affirmed the decision of the trial court but in effect deleted the award of attorney's fees
to the defendant (herein respondent bank) and the pronouncement as to the costs. The decretal portion
of the decision of the appellate court states:
WHEREFORE, the judgment appealed from, insofar as it dismissed plaintiff's complaint, is
hereby AFFIRMED, but is hereby REVERSED and SET ASIDE in all other respect. No special
pronouncement as to costs.
SO ORDERED.6
According to the appellate court, there is no basis to hold the respondent bank liable for damages for
the reason that it exerted every effort for the subject foreign exchange demand draft to be honored. The
appellate court found and declared that:
xxx xxx xxx
Thus, the Bank had every reason to believe that the transaction finally went through smoothly,
considering that its New York account had been debited and that there was no
miscommunication between it and Westpac-New York. SWIFT is a world wide association used
by almost all banks and is known to be the most reliable mode of communication in the
international banking business. Besides, the above procedure, with the Bank as drawer and
 Westpac-Sydney as drawee, and with Westpac-New York as the reimbursement Bank had been
in place since 1960s and there was no reason for the Bank to suspect that this particular demand
draft would not be honored by Westpac-Sydney.
From the evidence, it appears that the root cause of the miscommunications of the Bank's
SWIFT message is the erroneous decoding on the part of Westpac-Sydney of the Bank's SWIFT
message as an MT799 format. However, a closer look at the Bank's Exhs. "6" and "7" would
show that despite what appears to be an asterick written over the figure before "99", the figure
can still be distinctly seen as a number "1" and not number "7", to the effect that Westpac-
Sydney was responsible for the dishonor and not the Bank.
Moreover, it is not said asterisk that caused the misleading on the part of the Westpac-Sydney of
the numbers "1" to "7", since Exhs. "6" and "7" are just documentary copies of the cable
message sent to Wespac-Sydney. Hence, if there was mistake committed by Westpac-Sydney in
decoding the cable message which caused the Bank's message to be sent to the wrong
department, the mistake was Westpac's, not the Bank's. The Bank had done what an ordinary
prudent person is required to do in the particular situation, although appellants expect the Bank
to have done more. The Bank having done everything necessary or usual in the ordinary course
of banking transaction, it cannot be held liable for any embarrassment and corresponding
damage that appellants may have incurred.7
xxx xxx xxx
Hence, this petition, anchored on the following assignment of errors:
I
THE HONORABLE COURT OF APPEALS ERRED IN FINDING PRIVATE RESPONDENT
NOT NEGLIGENT BY ERRONEOUSLY APPLYING THE STANDARD OF DILIGENCE OF
AN "ORDINARY PRUDENT PERSON" WHEN IN TRUTH A HIGHER DEGREE OF
DILIGENCE IS IMPOSED BY LAW UPON THE BANKS.
II
THE HONORABLE COURT OF APPEALS ERRED IN ABSOLVING PRIVATE
RESPONDENT FROM LIABILITY BY OVERLOOKING THE FACT THAT THE
DISHONOR OF THE DEMAND DRAFT WAS A BREACH OF PRIVATE RESPONDENT'S
WARRANTY AS THE DRAWER THEREOF.
III
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT AS SHOWN
OVERWHELMINGLY BY THE EVIDENCE, THE DISHONOR OF THE DEMAND DRAFT
AS DUE TO PRIVATE RESPONDENT'S NEGLIGENCE AND NOT THE DRAWEE BANK. 8
The petitioners contend that due to the fiduciary nature of the relationship between the respondent bank
and its clients, the respondent should have exercised a higher degree of diligence than that expected of
an ordinary prudent person in the handling of its affairs as in the case at bar. The appellate court,
according to petitioners, erred in applying the standard of diligence of an ordinary prudent person only.
Petitioners also claim that the respondent bank violate Section 61 of the Negotiable Instruments Law 9
which provides the warranty of a drawer that "xxx on due presentment, the instrument will be accepted
or paid, or both, according to its tenor xxx." Thus, the petitioners argue that respondent bank should be
held liable for damages for violation of this warranty. The petitioners pray this Court to re-examine the
facts to cite certain instances of negligence.
It is our view and we hold that there is no reversible error in the decision of the appellate court.
Section 1 of Rule 45 of the Revised Rules of Court provides that "(T)he petition (for review) shall raise
only questions of law which must be distinctly set forth." Thus, we have ruled that factual findings of
the Court of Appeals are conclusive on the parties and not reviewable by this Court – and they carry
even more weight when the Court of Appeals affirms the factual findings of the trial court.10
The courts a quo found that respondent bank did not misrepresent that it was maintaining a deposit
account with Westpac-Sydney. Respondent bank's assistant cashier explained to Godofredo Reyes,
representing PRCI and petitioner Gregorio H. Reyes, how the transfer of Australian dollars would be
effected through Westpac-New York where the respondent bank has a dollar account to Westpac-
Sydney where the subject foreign exchange demand draft (FXDD No. 209968) could be encashed by
the payee, the 20th Asian Racing Conference Secretariat. PRCI and its Vice-President for finance,
petitioner Gregorio H. Reyes, through their said representative, agreed to that arrangement or
procedure. In other words, the petitioners are estopped from denying the said arrangement or
procedure. Similar arrangements have been a long standing practice in banking to facilitate
international commercial transactions. In fact, the SWIFT cable message sent by respondent bank to the
drawee bank, Westpac-Sydney, stated that it may claim reimbursement from its New York branch,
Westpac-New York, where respondent bank has a deposit dollar account. The facts as found by the
courts a quo show that respondent bank did not cause an erroneous transmittal of its SWIFT cable
message to Westpac-Sydney. It was the erroneous decoding of the cable message on the part of
Westpac-Sydney that caused the dishonor of the subject foreign exchange demand draft. An employee
of Westpac-Sydney in Sydney, Australia mistakenly read the printed figures in the SWIFT cable
message of respondent bank as "MT799" instead of as "MT199". As a result, Westpac-Sydney
construed the said cable message as a format for a letter of credit, and not for a demand draft. The
appellate court correct found that "the figure before '99' can still be distinctly seen as a number '1' and
not number '7'." Indeed, the line of a "7" is in a slanting position while the line of a "1" is in a
horizontal position. Thus, the number "1" in "MT199" cannot be construed as "7".11
The evidence also shows that the respondent bank exercised that degree of diligence expected of an
ordinary prudent person under the circumstances obtaining. Prior to the first dishonor of the subject
foreign exchange demand draft, the respondent bank advised Westpac-New York to honor the
reimbursement claim of Westpac-Sydney and to debit the dollar account12 of respondent bank with the
former. As soon as the demand draft was dishonored, the respondent bank, thinking that the problem
was with the reimbursement and without any idea that it was due to miscommunication, re-confirmed
the authority of Westpac-New York to debit its dollar account for the purpose of reimbursing Westpac-
Sydney.13 Respondent bank also sent two (2) more cable messages to Westpac-New York inquiring
why the demand draft was not honored.14
With these established facts, we now determine the degree of diligence that banks are required to exert
in their commercial dealings. In Philippine Bank of Commerce v. Court of Appeals15 upholding a long
standing doctrine, we ruled that the degree of diligence required of banks, is more than that of a good
father of a family where the fiduciary nature of their relationship with their depositors is concerned. In
other words banks are duty bound to treat the deposit accounts of their depositors with the highest
degree of care. But the said ruling applies only to cases where banks act under their fiduciary capacity,
that is, as depositary of the deposits of their depositors. But the same higher degree of diligence is not
expected to be exerted by banks in commercial transactions that do not involve their fiduciary
relationship with their depositors.
Considering the foregoing, the respondent bank was not required to exert more than the diligence of a
good father of a family in regard to the sale and issuance of the subject foreign exchange demand draft.
The case at bar does not involve the handling of petitioners' deposit, if any, with the respondent bank.
Instead, the relationship involved was that of a buyer and seller, that is, between the respondent bank as
the seller of the subject foreign exchange demand draft, and PRCI as the buyer of the same, with the
20th Asian Racing conference Secretariat in Sydney, Australia as the payee thereof. As earlier
mentioned, the said foreign exchange demand draft was intended for the payment of the registration
fees of the petitioners as delegates of the PRCI to the 20th Asian Racing Conference in Sydney.
The evidence shows that the respondent bank did everything within its power to prevent the dishonor of
the subject foreign exchange demand draft. The erroneous reading of its cable message to Westpac-
Sydney by an employee of the latter could not have been foreseen by the respondent bank. Being
unaware that its employee erroneously read the said cable message, Westpac-Sydney merely stated that
the respondent bank has no deposit account with it to cover for the amount of One Thousand Six
Hundred Ten Australian Dollar (AU $1610.00) indicated in the foreign exchange demand draft. Thus,
the respondent bank had the impression that Westpac-New York had not yet made available the amount
for reimbursement to Westpac-Sydney despite the fact that respondent bank has a sufficient deposit
dollar account with Westpac-New York. That was the reason why the respondent bank had to re-
confirm and repeatedly notify Westpac-New York to debit its (respondent bank's) deposit dollar account
with it and to transfer or credit the corresponding amount to Westpac-Sydney to cover the amount of
the said demand draft.
In view of all the foregoing, and considering that the dishonor of the subject foreign exchange demand
draft is not attributable to any fault of the respondent bank, whereas the petitioners appeared to be
under estoppel as earlier mentioned, it is no longer necessary to discuss the alleged application of
Section 61 of the Negotiable Instruments Law to the case at bar. In any event, it was established that
the respondent bank acted in good faith and that it did not cause the embarrassment of the petitioners in
Sydney, Australia. Hence, the Court of Appeals did not commit any reversable error in its challenged
decision.
WHEREFORE, the petition is hereby DENIED, and the assailed decision of the Court of Appeals is
AFFIRMED. Costs against the petitioners.
SO ORDERED.1âwphi1.nêt

C. CULPA CONTRACTUAL

G.R. No. 141910 August 6, 2002

FGU INSURANCE CORPORATION, petitioner,
vs.
G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M. EROLES, respondents.
VITUG, J.:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of
Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles, from the
plant site of Concepcion Industries, Inc., along South Superhighway in Alabang, Metro Manila, to the
Central Luzon Appliances in Dagupan City. While the truck was traversing the north diversion road
along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck,
causing it to fall into a deep canal, resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the
value of the covered cargoes in the sum of P204,450.00. FGU, in turn, being the subrogee of the rights
and interests of Concepcion Industries, Inc., sought reimbursement of the amount it had paid to the
latter from GPS. Since the trucking company failed to heed the claim, FGU filed a complaint for
damages and breach of contract of carriage against GPS and its driver Lambert Eroles with the
Regional Trial Court, Branch 66, of Makati City. In its answer, respondents asserted that GPS was the
exclusive hauler only of Concepcion Industries, Inc., since 1988, and it was not so engaged in business
as a common carrier. Respondents further claimed that the cause of damage was purely
accidental.1âwphi1.nêt
The issues having thus been joined, FGU presented its evidence, establishing the extent of damage to
the cargoes and the amount it had paid to the assured. GPS, instead of submitting its evidence, filed
with leave of court a motion to dismiss the complaint by way of demurrer to evidence on the ground
that petitioner had failed to prove that it was a common carrier.
The trial court, in its order of 30 April 1996,1 granted the motion to dismiss, explaining thusly:
"Under Section 1 of Rule 131 of the Rules of Court, it is provided that ‘Each party must prove
his own affirmative allegation, xxx.’
"In the instant case, plaintiff did not present any single evidence that would prove that defendant
is a common carrier.
"x x x xxx xxx
"Accordingly, the application of the law on common carriers is not warranted and the
presumption of fault or negligence on the part of a common carrier in case of loss, damage or
deterioration of goods during transport under 1735 of the Civil Code is not availing.
"Thus, the laws governing the contract between the owner of the cargo to whom the plaintiff
was subrogated and the owner of the vehicle which transports the cargo are the laws on
obligation and contract of the Civil Code as well as the law on quasi delicts.
"Under the law on obligation and contract, negligence or fault is not presumed. The law on
quasi delict provides for some presumption of negligence but only upon the attendance of some
circumstances. Thus, Article 2185 provides:
‘Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a
motor vehicle has been negligent if at the time of the mishap, he was violating any
traffic regulation.’
"Evidence for the plaintiff shows no proof that defendant was violating any traffic regulation.
Hence, the presumption of negligence is not obtaining.
"Considering that plaintiff failed to adduce evidence that defendant is a common carrier and
defendant’s driver was the one negligent, defendant cannot be made liable for the damages of
the subject cargoes."2
The subsequent motion for reconsideration having been denied, 3 plaintiff interposed an appeal to the
Court of Appeals, contending that the trial court had erred (a) in holding that the appellee corporation
was not a common carrier defined under the law and existing jurisprudence; and (b) in dismissing the
complaint on a demurrer to evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate court,
in its decision of 10 June 1999,4 discoursed, among other things, that -
 "x x x in order for the presumption of negligence provided for under the law governing common
carrier (Article 1735, Civil Code) to arise, the appellant must first prove that the appellee is a
common carrier. Should the appellant fail to prove that the appellee is a common carrier, the
presumption would not arise; consequently, the appellant would have to prove that the carrier
was negligent.
"x x x xxx xxx
"Because it is the appellant who insists that the appellees can still be considered as a common
carrier, despite its `limited clientele,’ (assuming it was really a common carrier), it follows that
it (appellant) has the burden of proving the same. It (plaintiff-appellant) `must establish his case
by a preponderance of evidence, which means that the evidence as a whole adduced by one side
is superior to that of the other.’ (Summa Insurance Corporation vs. Court of Appeals, 243 SCRA
175). This, unfortunately, the appellant failed to do -- hence, the dismissal of the plaintiff’s
complaint by the trial court is justified.
"x x x xxx xxx
"Based on the foregoing disquisitions and considering the circumstances that the appellee
trucking corporation has been `its exclusive contractor, hauler since 1970, defendant has no
choice but to comply with the directive of its principal,’ the inevitable conclusion is that the
appellee is a private carrier.
"x x x xxx xxx
"x x x the lower court correctly ruled that 'the application of the law on common carriers is not
warranted and the presumption of fault or negligence on the part of a common carrier in case of
loss, damage or deterioration of good[s] during transport under [article] 1735 of the Civil Code
is not availing.' x x x.
"Finally, We advert to the long established rule that conclusions and findings of fact of a trial
court are entitled to great weight on appeal and should not be disturbed unless for strong and
valid reasons."5
Petitioner's motion for reconsideration was likewise denied; 6 hence, the instant petition,7 raising the
following issues:
I
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS
DEFINED UNDER THE LAW AND EXISTING JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE
CARRIER, MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS IT
UNDERTOOK TO TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED WHILE
IN ITS PROTECTIVE CUSTODY AND POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE
INSTANT CASE.
On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to be amply
justified. GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering or
offering its services to no other individual or entity, cannot be considered a common carrier. Common
carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for hire or compensation, offering their
services to the public,8 whether to the public in general or to a limited clientele in particular, but never
on an exclusive basis.9 The true test of a common carrier is the carriage of passengers or goods,
providing space for those who opt to avail themselves of its transportation service for a fee. 10 Given
accepted standards, GPS scarcely falls within the term "common carrier."
The above conclusion nothwithstanding, GPS cannot escape from liability.
In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion
Industries, Inc., the mere proof of the existence of the contract and the failure of its compliance justify,
prima facie, a corresponding right of relief. 11 The law, recognizing the obligatory force of contracts, 12
will not permit a party to be set free from liability for any kind of misperformance of the contractual
undertaking or a contravention of the tenor thereof.13 A breach upon the contract confers upon the
injured party a valid cause for recovering that which may have been lost or suffered. The remedy serves
to preserve the interests of the promisee that may include his "expectation interest," which is his
interest in having the 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 for
loss caused by reliance on the contract by being put in as good a position as he would 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. 14 Indeed, agreements can accomplish little, either
for their makers or for society, unless they are made the basis for action. 15 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 contractual obligation16 unless he can show extenuating
circumstances, like proof of his exercise of due diligence (normally that of the diligence of a good
father of a family or, exceptionally by stipulation or by law such as in the case of common carriers, that
of extraordinary diligence) or of the attendance of fortuitous event, to excuse him from his ensuing
liability.
Respondent trucking corporation recognizes the existence of a contract of carriage between it and
petitioner’s assured, and admits that the cargoes it has assumed to deliver have been lost or damaged
while in its custody. In such a situation, a default on, or failure of compliance with, the obligation – in
this case, the delivery of the goods in its custody to the place of destination - gives rise to a
presumption of lack of care and corresponding liability on the part of the contractual obligor the burden
being on him to establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not
himself be ordered to pay petitioner. The driver, not being a party to the contract of carriage between
petitioner’s principal and defendant, may not be held liable under the agreement. A contract can only
bind the parties who have entered into it or their successors who have assumed their personality or their
juridical position.17 Consonantly with the axiom res inter alios acta aliis neque nocet prodest, such
contract can neither favor nor prejudice a third person. Petitioner’s civil action against the driver can
only be based on culpa aquiliana, which, unlike culpa contractual, would require the claimant for
damages to prove negligence or fault on the part of the defendant.18
A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant liable
where the thing which caused the injury complained of is shown to be under the latter’s management
and the accident is such that, in the ordinary course of things, cannot be expected to happen if those
who have its management or control use proper care. It affords reasonable evidence, in the absence of
explanation by the defendant, that the accident arose from want of care. 19 It is not a rule of substantive
law and, as such, it does not create an independent ground of liability. Instead, it is regarded as a mode
of proof, or a mere procedural convenience since it furnishes a substitute for, and relieves the plaintiff
of, the burden of producing specific proof of negligence. The maxim simply places on the defendant
the burden of going forward with the proof.20 Resort to the doctrine, however, may be allowed only
when (a) the event is of a kind which does not ordinarily occur in the absence of negligence; (b) other
responsible causes, including the conduct of the plaintiff and third persons, are sufficiently eliminated
by the evidence; and (c) the indicated negligence is within the scope of the defendant's duty to the
plaintiff.21 Thus, it is not applicable when an unexplained accident may be attributable to one of several
causes, for some of which the defendant could not be responsible.22
Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists between the
plaintiff and the defendant, for the inference of negligence arises from the circumstances and nature of
the occurrence and not from the nature of the relation of the parties. 23 Nevertheless, the requirement
that responsible causes other than those due to defendant’s conduct must first be eliminated, for the
doctrine to apply, should be understood as being confined only to cases of pure (non-contractual) tort
since obviously the presumption of negligence in culpa contractual, as previously so pointed out,
immediately attaches by a failure of the covenant or its tenor. In the case of the truck driver, whose
liability in a civil action is predicated on culpa acquiliana, while he admittedly can be said to have
been in control and management of the vehicle which figured in the accident, it is not equally shown,
however, that the accident could have been exclusively due to his negligence, a matter that can allow,
forthwith, res ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant shall
be deemed to have waived the right to present evidence. 24 Thus, respondent corporation may no longer
offer proof to establish that it has exercised due care in transporting the cargoes of the assured so as to
still warrant a remand of the case to the trial court.1âwphi1.nêt
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of Makati
City, and the decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED only insofar as
respondent Lambert M. Eroles is concerned, but said assailed order of the trial court and decision of the
appellate court are REVERSED as regards G.P. Sarmiento Trucking Corporation which, instead, is
hereby ordered to pay FGU Insurance Corporation the value of the damaged and lost cargoes in the
amount of P204,450.00. No costs.
SO ORDERED.

PURE OBLIGATION

G.R. No. L-16449 August 31, 1962

PAUL SCHENKER, plaintiff-appellant,
vs.
WILLIAM F. GEMPERLE, defendant-appellee.
Campos, Mendoza & Hernandez, Jose C. Zulueta and A. R. Narvasa for plaintiff-appellant.
Angel S. Gamboa for defendant-appellee.
PAREDES, J.:
The amended complaint, in a nutshell, avers that sometime in the summer of 1953, at Zurich,
Switzerland, plaintiff Paul Schenker and defendant William F. Gemperle agreed to organize a
Philippine Corporation, later named as "The Philippine Swiss Trading Co., Inc.", and to divide the
capital stock equally between themselves and/or their associates. This verbal agreement was
acknowledged and confirmed in writing by defendant in his letter of September 14, 1953 (Annex A,
amended complaint). Defendant caused articles of incorporation to be drafted and sent to plaintiff at
Zurich. In a moment of indiscretion and mistaken trust, according to him, the plaintiff signed and
remitted to the defendant at Manila, the said articles which placed in the name of plaintiff only 24% of
the total subscription and the balance of 76% being in the name of defendant and his relatives.
Explaining the discrepancy between the articles and their verbal covenant, the defendant stated in said
letter Annex A, that "Temporarily, I had to place in my name 75% of the shares because there is a local
law which provides that when one intends to make contracts with the government, 75% of the
subscribed capital has to be Filipino as otherwise the Flag Law will be applied." In the same letter, how
ever defendant assured the plaintiff that he would give the latter "exactly the same share holding as I
have". The plaintiff paid to the defendant the sum of P7,000. for his subscription. In view of the
consistent refusal of the defendant to live up to their agreement, notwithstanding repeated demands, the
plaintiff filed the present complaint, praying that defendant be condemned:
(a) upon the first cause of action, to transfer or cause to be transferred or assigned to the
plaintiff 26% of the entire capital stock issued and subscribed, as of the date he obeys said
judgment, of Philippine Swiss Trading Co., Inc., or enough thereof to make the plaintiff's
interest and participation in said corporation total 50% of said entire capital stock issued an
subscribed, which ever may be more;
(b) upon the second cause of action, to return to the plaintiff or properly account to him for the
unexpended balance, in the sum of P2,000.00, Philippine Currency, of the remittance alleged in
paragraph 18(a) of the complaint;
(c) Upon the third cause of action, to pay the plaintiff the sum of P25,000.00, Philippine
Currency, by way of recompense for business lost, profits unrealized and goodwill impaired or
destroyed; and
(d) upon all three causes of actions, to pay the plaintiff the additional sum of P100,000.00,
Philippine Currency, .... The plaintiff also prays for costs, and for such other an further relief as
to the Court may appear just and equitable.
An Answer was filed, with the customary admissions an denials and with affirmative defenses
and counterclaims.
On November 21, 1958, the defendant filed a pleading styled "manifestation and motion to dismiss"
(Section 10 Rule 9) — alleging that — "With reference to the first cause of action, the amended
complaint states no cause of action".
In support of the motion to dismiss, defendant claimed that
There is no allegation in the amended complaint that the alleged obligation of the defendant to
have the plaintiff's share holding in the capital stock subscribed in Articles of Incorporation in
the proportion of 50% thereof is already due.1äwphï1.ñët
Such being the situation, the demands allegedly made upon the defendant for his compliance
with the obligation sued upon have been futile, because legally the alleged obligation is not yet
due. It not having fixed a period for its compliance, there has been no default thereof.
xxx xxx xxx
In his opposition to the motion to dismiss, filed on November 3, 1958, plaintiff contended that the oral
agreement was the actual as well as the expressed basis of plaintiff's cause of action; the letter Annex
A, was not the agreement but only an evidence of it and if the references of Annex A were deleted from
the amended complaint, the latter would not, for that reason alone, cease to state a cause of action; the
obligation being pure, it is demandable immediately (Art. 1179, Civil Code); the filing of the complaint
itself constituted a judicial demand for performance, thereby making the defendant's obligation to
become due; even if Annex A is considered as the basis of the action, it is still a pure obligation,
because it says "will give you, however, exactly the same share holding as I have" — which imparts an
unconditional promise; and supposing that from the allegations of the complaint, it may reasonably be
inferred that it was intended to give the defendant time to fulfill his obligation, the present action can
be considered one for the fixing of such time (Art. 1197, Civil Code).
On September 30, 1959; the trial court granted the motion to dismiss in so far as the first cause of
action is concerned, predicating its ruling upon the following considerations: that the agreement did not
fix the time within which the defendant sought to perform its alleged promise and, therefore, the
obligation was not due and the action for its compliance was premature (Barreto v. City of Manila, 7
Phil. 416-420); that the obligation is not pure, because its compliance is dependent upon a future or
uncertain event; that the alleged oral agreement had been novated, after the execution of the articles of
incorporation, and that the action being for specific performance and there being a need to fix the
period for compliance of the agreement and the present complaint does not allege facts or lacks the
characteristics for an action to fix the period, a separate action to that effect should have been filed,
because the action to that effect be brought in order to have a term fixed is different from the action to
enforce the obligation; thus conveying the notion that the fixing of the period is incompatible with an
action for specific performance. Plaintiff appealed questions of law.
Article 1197 of the Civil Code, provides —
If the obligation does not fix a period, but from its nature and the circumstances it can be
inferred that a period was intended, the courts may fix the duration thereof.
The courts shall also fix the duration of the period when it depends upon the will of the debtor.
In every case, the courts shall determine such period may under the circumstances have been
probably contemplate by the parties. Once fixed by the courts, the period cannot be changed by
them.
The ultimate facts to be alleged in a complaint to properly and adequately plead the right of action
granted the above quoted provision of law are (1) Facts showing that a contract was entered into,
imposing on one the parties an obligation or obligations in favor of the other; (2) Facts showing that the
performance of the obligation was left to the will of the obligor or clean showing or from which an
inference may reasonably drawn, that a period was intended by the parties. The first cause of action,
under consideration, sets out fact describing an obligation with an indefinite period, there by bringing
the case within the pale of the article above quoted, albeit it fails to specifically and categorically
demand that the court fix the duration of the period. Under the circumstances, the court could render
judgment granting the remedy indicated in said article 1197, notwithstanding standing the fact that the
complaint does not positive and by explicit expression ask for such relief. What determines the nature
and character of an action is not the prayer but the essential basic allegations of fact set forth in the
pertinent pleading. A judgment may grant the relief to which a party in whose favor it is entered is
entitled, even if the party has not demanded such relief in his pleadings (Sec. 9, Rule 35; Baguioro v.
Barrios, 77 Phil. 120). The amended complaint in question moreover, "prays for . . . such other and
further relief as the Court may appear just and equitable" which is broad and comprehensive enough, to
justify the extension of a remedy different from or together with, the right to be declared owner or to
recover the ownership or the possession of Twenty-six (26%) percent of the capital stock of the
Philippine Swiss Trading Co., Inc. presently in the name of the defendant. The case of Barrette v. City
of Manila, supra, cited by the trial court, is of little help to the defendant-appellee. It strengthens rather
the plaintiff-appellant's position. In the Barreto case as in the present, the essential allegations of the
pleadings made out an obligation subject to an indefinite period. In the Barretto case, like the one at
bar, the complaint did not risk for the fixing of the period, but for immediate and more positive relief,
yet this Court remanded the said case to the court of origin "for determination of the time within which
the contiguous property must be acquired by the city in order to comply with the condition of the
donation" — all of which go to show that the fixing of the period in the case at bar, may and/or could
be properly undertaken by the trial court.
Even discarding the above considerations, still there is no gainsaying the fact that the obligation in
question, is pure, because "its performance does not depend upon a future or uncertain event or upon a
past event unknown to the parties" and as such, "is demandable at once" (Art. 1179, New York Code).
It was so understood and treated by the defendant-appellee himself. The immediate payment by the
plaintiff-appellant of his subscriptions, after the organization of the corporation, can only mean that the
obligation should be immediately fulfilled. giving the defendant only such time as might reasonably be
necessary for its actual fulfillment. The contract was to organize the corporation and to divide equally,
after its organization, its capital stock.
IN VIEW HEREOF, the order appealed from is reversed and the case remanded to the court of origin,
for further and appropriate proceedings. No costs.

SUSPENSIVE CONDTION

G.R. No. 188064 June 1, 2011

MILA A. REYES, Petitioner,
vs.
VICTORIA T. TUPARAN, Respondent.
DECISION
MENDOZA, J.:
Subject of this petition for review is the February 13, 2009 Decision 1 of the Court of Appeals (CA)
which affirmed with modification the February 22, 2006 Decision2 of the Regional Trial Court, Branch
172, Valenzuela City (RTC), in Civil Case No. 3945-V-92, an action for Rescission of Contract with
Damages.
On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract with
Damages against Victoria T. Tuparan (respondent) before the RTC. In her Complaint, petitioner
alleged, among others, that she was the registered owner of a 1,274 square meter residential and
commercial lot located in Karuhatan, Valenzuela City, and covered by TCT No. V-4130; that on that
property, she put up a three-storey commercial building known as RBJ Building and a residential
apartment building; that since 1990, she had been operating a drugstore and cosmetics store on the
ground floor of RBJ Building where she also had been residing while the other areas of the buildings
including the sidewalks were being leased and occupied by tenants and street vendors.
In December 1989, respondent leased from petitioner a space on the ground floor of the RBJ Building
for her pawnshop business for a monthly rental of ₱4,000.00. A close friendship developed between the
two which led to the respondent investing thousands of pesos in petitioner’s financing/lending business
from February 7, 1990 to May 27, 1990, with interest at the rate of 6% a month.
On June 20, 1988, petitioner mortgaged the subject real properties to the Farmers Savings Bank and
Loan Bank, Inc. (FSL Bank) to secure a loan of ₱2,000,000.00 payable in installments. On November
15, 1990, petitioner’s outstanding account on the mortgage reached ₱2,278,078.13. Petitioner then
decided to sell her real properties for at least ₱6,500,000.00 so she could liquidate her bank loan and
finance her businesses. As a gesture of friendship, respondent verbally offered to conditionally buy
petitioner’s real properties for ₱4,200,000.00 payable on installment basis without interest and to
assume the bank loan. To induce the petitioner to accept her offer, respondent offered the following
conditions/concessions:
1. That the conditional sale will be cancelled if the plaintiff (petitioner) can find a buyer of said
properties for the amount of ₱6,500,000.00 within the next three (3) months provided all
amounts received by the plaintiff from the defendant (respondent) including payments actually
made by defendant to Farmers Savings and Loan Bank would be refunded to the defendant with
additional interest of six (6%) monthly;
2. That the plaintiff would continue using the space occupied by her and drugstore and
cosmetics store without any rentals for the duration of the installment payments;
3. That there will be a lease for fifteen (15) years in favor of the plaintiff over the space for
drugstore and cosmetics store at a monthly rental of only ₱8,000.00 after full payment of the
stipulated installment payments are made by the defendant;
4. That the defendant will undertake the renewal and payment of the fire insurance policies on
the two (2) subject buildings following the expiration of the then existing fire insurance policy
of the plaintiff up to the time that plaintiff is fully paid of the total purchase price of
₱4,200,000.00.3
After petitioner’s verbal acceptance of all the conditions/concessions, both parties worked together to
obtain FSL Bank’s approval for respondent to assume her (petitioner’s) outstanding bank account. The
assumption would be part of respondent’s purchase price for petitioner’s mortgaged real properties.
FSL Bank approved their proposal on the condition that petitioner would sign or remain as co-maker
for the mortgage obligation assumed by respondent.
On November 26, 1990, the parties and FSL Bank executed the corresponding Deed of Conditional
Sale of Real Properties with Assumption of Mortgage. Due to their close personal friendship and
business relationship, both parties chose not to reduce into writing the other terms of their agreement
mentioned in paragraph 11 of the complaint. Besides, FSL Bank did not want to incorporate in the
Deed of Conditional Sale of Real Properties with Assumption of Mortgage any other side agreement
between petitioner and respondent.
Under the Deed of Conditional Sale of Real Properties with Assumption of Mortgage, respondent was
bound to pay the petitioner a lump sum of ₱1.2 million pesos without interest as part of the purchase
price in three (3) fixed installments as follows:
a) ₱200,000.00 – due January 31, 1991
b) ₱200,000.00 – due June 30, 1991
c) ₱800,000.00 – due December 31, 1991
Respondent, however, defaulted in the payment of her obligations on their due dates. Instead of paying
the amounts due in lump sum on their respective maturity dates, respondent paid petitioner in small
amounts from time to time. To compensate for her delayed payments, respondent agreed to pay
petitioner an interest of 6% a month. As of August 31, 1992, respondent had only paid ₱395,000.00,
leaving a balance of ₱805,000.00 as principal on the unpaid installments and ₱466,893.25 as unpaid
accumulated interest.
Petitioner further averred that despite her success in finding a prospective buyer for the subject real
properties within the 3-month period agreed upon, respondent reneged on her promise to allow the
cancellation of their deed of conditional sale. Instead, respondent became interested in owning the
subject real properties and even wanted to convert the entire property into a modern commercial
complex. Nonetheless, she consented because respondent repeatedly professed friendship and assured
her that all their verbal side agreement would be honored as shown by the fact that since December
1990, she (respondent) had not collected any rentals from the petitioner for the space occupied by her
drugstore and cosmetics store.
On March 19, 1992, the residential building was gutted by fire which caused the petitioner to lose
rental income in the amount of ₱8,000.00 a month since April 1992. Respondent neglected to renew the
fire insurance policy on the subject buildings.
Since December 1990, respondent had taken possession of the subject real properties and had been
continuously collecting and receiving monthly rental income from the tenants of the buildings and
vendors of the sidewalk fronting the RBJ building without sharing it with petitioner.
On September 2, 1992, respondent offered the amount of ₱751,000.00 only payable on September 7,
1992, as full payment of the purchase price of the subject real properties and demanded the
simultaneous execution of the corresponding deed of absolute sale.
Respondent’s Answer
Respondent countered, among others, that the tripartite agreement erroneously designated by the
petitioner as a Deed of Conditional Sale of Real Property with Assumption of Mortgage was actually a
pure and absolute contract of sale with a term period. It could not be considered a conditional sale
because the acquisition of contractual rights and the performance of the obligation therein did not
depend upon a future and uncertain event. Moreover, the capital gains and documentary stamps and
other miscellaneous expenses and real estate taxes up to 1990 were supposed to be paid by petitioner
but she failed to do so.
Respondent further averred that she successfully rescued the properties from a definite foreclosure by
paying the assumed mortgage in the amount of ₱2,278,078.13 plus interest and other finance charges.
Because of her payment, she was able to obtain a deed of cancellation of mortgage and secure a release
of mortgage on the subject real properties including petitioner’s ancestral residential property in Sta.
Maria, Bulacan.
Petitioner’s claim for the balance of the purchase price of the subject real properties was baseless and
unwarranted because the full amount of the purchase price had already been paid, as she did pay more
than ₱4,200,000.00, the agreed purchase price of the subject real properties, and she had even
introduced improvements thereon worth more than ₱4,800,000.00. As the parties could no longer be
restored to their original positions, rescission could not be resorted to.
Respondent added that as a result of their business relationship, petitioner was able to obtain from her a
loan in the amount of ₱400,000.00 with interest and took several pieces of jewelry worth ₱120,000.00.
Petitioner also failed and refused to pay the monthly rental of ₱20,000.00 since November 16, 1990 up
to the present for the use and occupancy of the ground floor of the building on the subject real property,
thus, accumulating arrearages in the amount of ₱470,000.00 as of October 1992.
Ruling of the RTC
On February 22, 2006, the RTC handed down its decision finding that respondent failed to pay in full
the ₱4.2 million total purchase price of the subject real properties leaving a balance of ₱805,000.00. It
stated that the checks and receipts presented by respondent refer to her payments of the mortgage
obligation with FSL Bank and not the payment of the balance of ₱1,200,000.00. The RTC also
considered the Deed of Conditional Sale of Real Property with Assumption of Mortgage executed by
and among the two parties and FSL Bank a contract to sell, and not a contract of sale. It was of the
opinion that although the petitioner was entitled to a rescission of the contract, it could not be permitted
because her non-payment in full of the purchase price "may not be considered as substantial and
fundamental breach of the contract as to defeat the object of the parties in entering into the contract." 4
The RTC believed that the respondent’s offer stated in her counsel’s letter dated September 2, 1992 to
settle what she thought was her unpaid balance of ₱751,000.00 showed her sincerity and willingness to
settle her obligation. Hence, it would be more equitable to give respondent a chance to pay the balance
plus interest within a given period of time.
Finally, the RTC stated that there was no factual or legal basis to award damages and attorney’s fees
because there was no proof that either party acted fraudulently or in bad faith.
Thus, the dispositive portion of the RTC Decision reads:
WHEREFORE, judgment is hereby rendered as follows:
1. Allowing the defendant to pay the plaintiff within thirty (30) days from the finality hereof the
amount of ₱805,000.00, representing the unpaid purchase price of the subject property, with
interest thereon at 2% a month from January 1, 1992 until fully paid. Failure of the defendant to
pay said amount within the said period shall cause the automatic rescission of the contract
(Deed of Conditional Sale of Real Property with Assumption of Mortgage) and the plaintiff and
the defendant shall be restored to their former positions relative to the subject property with
each returning to the other whatever benefits each derived from the transaction;
2. Directing the defendant to allow the plaintiff to continue using the space occupied by her for
drugstore and cosmetic store without any rental pending payment of the aforesaid balance of the
purchase price.
3. Ordering the defendant, upon her full payment of the purchase price together with interest, to
execute a contract of lease for fifteen (15) years in favor of the plaintiff over the space for the
drugstore and cosmetic store at a fixed monthly rental of ₱8,000.00; and
4. Directing the plaintiff, upon full payment to her by the defendant of the purchase price
together with interest, to execute the necessary deed of sale, as well as to pay the Capital Gains
Tax, documentary stamps and other miscellaneous expenses necessary for securing the BIR
Clearance, and to pay the real estate taxes due on the subject property up to 1990, all necessary
to transfer ownership of the subject property to the defendant.
No pronouncement as to damages, attorney’s fees and costs.
SO ORDERED.5
Ruling of the CA
On February 13, 2009, the CA rendered its decision affirming with modification the RTC Decision. The
CA agreed with the RTC that the contract entered into by the parties is a contract to sell but ruled that
the remedy of rescission could not apply because the respondent’s failure to pay the petitioner the
balance of the purchase price in the total amount of ₱805,000.00 was not a breach of contract, but
merely an event that prevented the seller (petitioner) from conveying title to the purchaser
(respondent). It reasoned that out of the total purchase price of the subject property in the amount of
₱4,200,000.00, respondent’s remaining unpaid balance was only ₱805,000.00. Since respondent had
already paid a substantial amount of the purchase price, it was but right and just to allow her to pay the
unpaid balance of the purchase price plus interest. Thus, the decretal portion of the CA Decision reads:
WHEREFORE, premises considered, the Decision dated 22 February 2006 and Order dated 22
December 2006 of the Regional Trial Court of Valenzuela City, Branch 172 in Civil Case No. 3945-V-
92 are AFFIRMED with MODIFICATION in that defendant-appellant Victoria T. Tuparan is hereby
ORDERED to pay plaintiff-appellee/appellant Mila A. Reyes, within 30 days from finality of this
Decision, the amount of ₱805,000.00 representing the unpaid balance of the purchase price of the
subject property, plus interest thereon at the rate of 6% per annum from 11 September 1992 up to
finality of this Decision and, thereafter, at the rate of 12% per annum until full payment. The ruling of
the trial court on the automatic rescission of the Deed of Conditional Sale with Assumption of
Mortgage is hereby DELETED. Subject to the foregoing, the dispositive portion of the trial court’s
decision is AFFIRMED in all other respects.
SO ORDERED.6
After the denial of petitioner’s motion for reconsideration and respondent’s motion for partial
reconsideration, petitioner filed the subject petition for review praying for the reversal and setting aside
of the CA Decision anchored on the following
ASSIGNMENT OF ERRORS

A. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION

IN DISALLOWING THE OUTRIGHT RESCISSION OF THE SUBJECT DEED OF
CONDITIONAL SALE OF REAL PROPERTIES WITH ASSUMPTION OF
MORTGAGE ON THE GROUND THAT RESPONDENT TUPARAN’S FAILURE TO
PAY PETITIONER REYES THE BALANCE OF THE PURCHASE PRICE OF
₱805,000.00 IS NOT A BREACH OF CONTRACT DESPITE ITS OWN FINDINGS
THAT PETITIONER STILL RETAINS OWNERSHIP AND TITLE OVER THE
SUBJECT REAL PROPERTIES DUE TO RESPONDENT’S REFUSAL TO PAY THE
BALANCE OF THE TOTAL PURCHASE PRICE OF ₱805,000.00 WHICH IS EQUAL
TO 20% OF THE TOTAL PURCHASE PRICE OF ₱4,200,000.00 OR 66% OF THE
STIPULATED LAST INSTALLMENT OF ₱1,200,000.00 PLUS THE INTEREST
THEREON. IN EFFECT, THE COURT OF APPEALS AFFIRMED AND ADOPTED THE
TRIAL COURT’S CONCLUSION THAT THE RESPONDENT’S NON-PAYMENT OF
THE ₱805,000.00 IS ONLY A SLIGHT OR CASUAL BREACH OF CONTRACT.

B. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS

DISCRETION IN DISREGARDING AS GROUND FOR THE RESCISSION OF
THE SUBJECT CONTRACT THE OTHER FRAUDULENT AND MALICIOUS
ACTS COMMITTED BY THE RESPONDENT AGAINST THE PETITIONER
WHICH BY THEMSELVES SUFFICIENTLY JUSTIFY A DENIAL OF A GRACE
PERIOD OF THIRTY (30) DAYS TO THE RESPONDENT WITHIN WHICH TO
PAY TO THE PETITIONER THE ₱805,000.00 PLUS INTEREST THEREON.

C. EVEN ASSUMING ARGUENDO THAT PETITIONER IS NOT ENTITLED TO THE

RESCISSION OF THE SUBJECT CONTRACT, THE COURT OF APPEALS STILL
SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN REDUCING THE
INTEREST ON THE ₱805,000.00 TO ONLY "6% PER ANNUM STARTING FROM THE
DATE OF FILING OF THE COMPLAINT ON SEPTEMBER 11, 1992" DESPITE THE
 PERSONAL COMMITMENT OF THE RESPONDENT AND AGREEMENT BETWEEN
THE PARTIES THAT RESPONDENT WILL PAY INTEREST ON THE ₱805,000.00 AT
THE RATE OF 6% MONTHLY STARTING THE DATE OF DELINQUENCY ON
DECEMBER 31, 1991.

D. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION

IN THE APPRECIATION AND/OR MISAPPRECIATION OF FACTS RESULTING
INTO THE DENIAL OF THE CLAIM OF PETITIONER REYES FOR ACTUAL
DAMAGES WHICH CORRESPOND TO THE MILLIONS OF PESOS OF
RENTALS/FRUITS OF THE SUBJECT REAL PROPERTIES WHICH RESPONDENT
TUPARAN COLLECTED CONTINUOUSLY SINCE DECEMBER 1990, EVEN WITH
THE UNPAID BALANCE OF ₱805,000.00 AND DESPITE THE FACT THAT
RESPONDENT DID NOT CONTROVERT SUCH CLAIM OF THE PETITIONER AS
CONTAINED IN HER AMENDED COMPLAINT DATED APRIL 22, 2006.

E. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION

IN THE APPRECIATION OF FACTS RESULTING INTO THE DENIAL OF THE
CLAIM OF PETITIONER REYES FOR THE ₱29,609.00 BACK RENTALS THAT
WERE COLLECTED BY RESPONDENT TUPARAN FROM THE OLD TENANTS OF
THE PETITIONER.

F. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION

IN DENYING THE PETITIONER’S EARLIER "URGENT MOTION FOR ISSUANCE
OF A PRELIMINARY MANDATORY AND PROHIBITORY INJUNCTION" DATED
JULY 7, 2008 AND THE "SUPPLEMENT" THERETO DATED AUGUST 4, 2008
THEREBY CONDONING THE UNJUSTIFIABLE FAILURE/REFUSAL OF JUDGE
FLORO ALEJO TO RESOLVE WITHIN ELEVEN (11) YEARS THE PETITIONER’S
THREE (3) SEPARATE "MOTIONS FOR PRELIMINARY INJUNCTION/
TEMPORARY RESTRAINING ORDER, ACCOUNTING AND DEPOSIT OF RENTAL
INCOME" DATED MARCH 17, 1995, AUGUST 19, 1996 AND JANUARY 7, 2006
THEREBY PERMITTING THE RESPONDENT TO UNJUSTLY ENRICH HERSELF BY
CONTINUOUSLY COLLECTING ALL THE RENTALS/FRUITS OF THE SUBJECT
REAL PROPERTIES WITHOUT ANY ACCOUNTING AND COURT DEPOSIT OF THE
COLLECTED RENTALS/FRUITS AND THE PETITIONERS "URGENT MOTION TO
DIRECT DEFENDANT VICTORIA TUPARAN TO PAY THE ACCUMULATED
UNPAID REAL ESTATE TAXES AND SEF TAXES ON THE SUBJECT REAL
PROPERTIES" DATED JANUARY 13, 2007 THEREBY EXPOSING THE SUBJECT
REAL PROPERTIES TO IMMINENT AUCTION SALE BY THE CITY TREASURER
OF VALENZUELA CITY.

G. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION

IN DENYING THE PETITIONER’S CLAIM FOR MORAL AND EXEMPLARY
DAMAGES AND ATTORNEY’S FEES AGAINST THE RESPONDENT.

In sum, the crucial issue that needs to be resolved is whether or not the CA was correct in ruling that
there was no legal basis for the rescission of the Deed of Conditional Sale with Assumption of
Mortgage.
Position of the Petitioner
The petitioner basically argues that the CA should have granted the rescission of the subject Deed of
Conditional Sale of Real Properties with Assumption of Mortgage for the following reasons:
1. The subject deed of conditional sale is a reciprocal obligation whose outstanding
characteristic is reciprocity arising from identity of cause by virtue of which one obligation is
correlative of the other.
2. The petitioner was rescinding – not enforcing – the subject Deed of Conditional Sale pursuant
to Article 1191 of the Civil Code because of the respondent’s failure/refusal to pay the
₱805,000.00 balance of the total purchase price of the petitioner’s properties within the
stipulated period ending December 31, 1991.
3. There was no slight or casual breach on the part of the respondent because she (respondent)
deliberately failed to comply with her contractual obligations with the petitioner by violating the
terms or manner of payment of the ₱1,200,000.00 balance and unjustly enriched herself at the
expense of the petitioner by collecting all rental payments for her personal benefit and
enjoyment.
Furthermore, the petitioner claims that the respondent is liable to pay interest at the rate of 6% per
month on her unpaid installment of ₱805,000.00 from the date of the delinquency, December 31, 1991,
because she obligated herself to do so.
Finally, the petitioner asserts that her claim for damages or lost income as well as for the back rentals in
the amount of ₱29,609.00 has been fully substantiated and, therefore, should have been granted by the
CA. Her claim for moral and exemplary damages and attorney’s fees has been likewise substantiated.
Position of the Respondent
The respondent counters that the subject Deed of Conditional Sale with Assumption of Mortgage
entered into between the parties is a contract to sell and not a contract of sale because the title of the
subject properties still remains with the petitioner as she failed to pay the installment payments in
accordance with their agreement.
Respondent echoes the RTC position that her inability to pay the full balance on the purchase price may
not be considered as a substantial and fundamental breach of the subject contract and it would be more
equitable if she would be allowed to pay the balance including interest within a certain period of time.
She claims that as early as 1992, she has shown her sincerity by offering to pay a certain amount which
was, however, rejected by the petitioner.
Finally, respondent states that the subject deed of conditional sale explicitly provides that the
installment payments shall not bear any interest. Moreover, petitioner failed to prove that she was
entitled to back rentals.
The Court’s Ruling
The petition lacks merit.
The Court agrees with the ruling of the courts below that the subject Deed of Conditional Sale with
Assumption of Mortgage entered into by and among the two parties and FSL Bank on November 26,
1990 is a contract to sell and not a contract of sale. The subject contract was correctly classified as a
contract to sell based on the following pertinent stipulations:
8. That the title and ownership of the subject real properties shall remain with the First Party until the
full payment of the Second Party of the balance of the purchase price and liquidation of the mortgage
obligation of ₱2,000,000.00. Pending payment of the balance of the purchase price and liquidation of
the mortgage obligation that was assumed by the Second Party, the Second Party shall not sell, transfer
and convey and otherwise encumber the subject real properties without the written consent of the First
and Third Party.
9. That upon full payment by the Second Party of the full balance of the purchase price and the
assumed mortgage obligation herein mentioned the Third Party shall issue the corresponding Deed of
Cancellation of Mortgage and the First Party shall execute the corresponding Deed of Absolute Sale in
favor of the Second Party.7
Based on the above provisions, the title and ownership of the subject properties remains with the
petitioner until the respondent fully pays the balance of the purchase price and the assumed mortgage
obligation. Thereafter, FSL Bank shall then issue the corresponding deed of cancellation of mortgage
and the petitioner shall execute the corresponding deed of absolute sale in favor of the respondent.
Accordingly, the petitioner’s obligation to sell the subject properties becomes demandable only upon
the happening of the positive suspensive condition, which is the respondent’s full payment of the
purchase price. Without respondent’s full payment, there can be no breach of contract to speak of
because petitioner has no obligation yet to turn over the title. Respondent’s failure to pay in full the
purchase price is not the breach of contract contemplated under Article 1191 of the New Civil Code but
rather just an event that prevents the petitioner from being bound to convey title to the respondent. The
2009 case of Nabus v. Joaquin & Julia Pacson8 is enlightening:
The Court holds that the contract entered into by the Spouses Nabus and respondents was a contract to
sell, not a contract of sale.
A contract of sale is defined in Article 1458 of the Civil Code, thus:
Art. 1458. By the contract of sale, one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money
or its equivalent.
xxx
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential
elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the
price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first
essential element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of
title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to
transfer ownership of the property subject of the contract to sell until the happening of an event, which
for present purposes we shall take as the full payment of the purchase price. What the seller agrees or
obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the
purchase price is delivered to him. In other words, the full payment of the purchase price partakes of a
suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and,
thus, ownership is retained by the prospective seller without further remedies by the prospective buyer.
xxx xxx xxx
Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, the prospective seller’s obligation to sell the subject property by entering into a contract
of sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code
which states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon
the promissor if the promise is supported by a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite delivery thereof to the prospective
buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of
the condition agreed upon, that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale
where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a
suspensive condition, because in a conditional contract of sale, the first element of consent is present,
although it is conditioned upon the happening of a contingent event which may or may not occur. If the
suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated.
However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if
there had already been previous delivery of the property subject of the sale to the buyer, ownership
thereto automatically transfers to the buyer by operation of law without any further act having to be
performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, ownership will not automatically transfer to the buyer although the property may have
been previously delivered to him. The prospective seller still has to convey title to the prospective
buyer by entering into a contract of absolute sale.
Further, Chua v. Court of Appeals, cited this distinction between a contract of sale and a contract to
sell:
In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in
a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee
until full payment of the purchase price. Otherwise stated, in a contract of sale, the vendor loses
ownership over the property and cannot recover it until and unless the contract is resolved or rescinded;
whereas, in a contract to sell, title is retained by the vendor until full payment of the price. In the latter
contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an
event that prevents the obligation of the vendor to convey title from becoming effective.
It is not the title of the contract, but its express terms or stipulations that determine the kind of contract
entered into by the parties. In this case, the contract entitled "Deed of Conditional Sale" is actually a
contract to sell. The contract stipulated that "as soon as the full consideration of the sale has been paid
by the vendee, the corresponding transfer documents shall be executed by the vendor to the vendee for
the portion sold." Where the vendor promises to execute a deed of absolute sale upon the completion by
the vendee of the payment of the price, the contract is only a contract to sell." The aforecited stipulation
shows that the vendors reserved title to the subject property until full payment of the purchase price.
xxx
Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale executed in their favor was
merely a contract to sell, the obligation of the seller to sell becomes demandable only upon the
happening of the suspensive condition. The full payment of the purchase price is the positive
suspensive condition, the failure of which is not a breach of contract, but simply an event that
prevented the obligation of the vendor to convey title from acquiring binding force. Thus, for its
non-fulfilment, there is no contract to speak of, the obligor having failed to perform the suspensive
condition which enforces a juridical relation. With this circumstance, there can be no rescission or
fulfillment of an obligation that is still non-existent, the suspensive condition not having occurred as
yet. Emphasis should be made that the breach contemplated in Article 1191 of the New Civil Code is
the obligor’s failure to comply with an obligation already extant, not a failure of a condition to render
binding that obligation. [Emphases and underscoring supplied]
Consistently, the Court handed down a similar ruling in the 2010 case of Heirs of Atienza v. Espidol, 9
where it was written:
Regarding the right to cancel the contract for non-payment of an installment, there is need to initially
determine if what the parties had was a contract of sale or a contract to sell. In a contract of sale, the
title to the property passes to the buyer upon the delivery of the thing sold. In a contract to sell, on the
other hand, the ownership is, by agreement, retained by the seller and is not to pass to the vendee until
full payment of the purchase price. In the contract of sale, the buyer’s non-payment of the price is a
negative resolutory condition; in the contract to sell, the buyer’s full payment of the price is a positive
suspensive condition to the coming into effect of the agreement. In the first case, the seller has lost and
cannot recover the ownership of the property unless he takes action to set aside the contract of sale. In
the second case, the title simply remains in the seller if the buyer does not comply with the condition
precedent of making payment at the time specified in the contract. Here, it is quite evident that the
contract involved was one of a contract to sell since the Atienzas, as sellers, were to retain title of
ownership to the land until respondent Espidol, the buyer, has paid the agreed price. Indeed, there
seems no question that the parties understood this to be the case.
Admittedly, Espidol was unable to pay the second installment of P1,750,000.00 that fell due in
December 2002. That payment, said both the RTC and the CA, was a positive suspensive condition
failure of which was not regarded a breach in the sense that there can be no rescission of an
obligation (to turn over title) that did not yet exist since the suspensive condition had not taken
place. x x x. [Emphases and underscoring supplied]
Thus, the Court fully agrees with the CA when it resolved: "Considering, however, that the Deed of
Conditional Sale was not cancelled by Vendor Reyes (petitioner) and that out of the total purchase price
of the subject property in the amount of ₱4,200,000.00, the remaining unpaid balance of Tuparan
(respondent) is only ₱805,000.00, a substantial amount of the purchase price has already been paid. It is
only right and just to allow Tuparan to pay the said unpaid balance of the purchase price to Reyes."10
Granting that a rescission can be permitted under Article 1191, the Court still cannot allow it for the
reason that, considering the circumstances, there was only a slight or casual breach in the fulfillment of
the obligation.
Unless the parties stipulated it, rescission is allowed only when the breach of the contract is substantial
and fundamental to the fulfillment of the obligation. Whether the breach is slight or substantial is
largely determined by the attendant circumstances.11 In the case at bench, the subject contract
stipulated the following important provisions:
2. That the purchase price of ₱4,200,000.00 shall be paid as follows:
a) ₱278,078.13 received in cash by the First Party but directly paid to the Third Party as partial
payment of the mortgage obligation of the First Party in order to reduce the amount to
₱2,000,000.00 only as of November 15, 1990;
b) ₱721,921.87 received in cash by the First Party as additional payment of the Second Party;
c) ₱1,200,000.00 to be paid in installments as follows:
 1. ₱200,000.00 payable on or before January 31, 1991;
2. ₱200,000.00 payable on or before June 30, 1991;
3. ₱800,000.00 payable on or before December 31, 1991;
Note: All the installments shall not bear any interest.
d) ₱2,000,000.00 outstanding balance of the mortgage obligation as of November 15, 1990
which is hereby assumed by the Second Party.
xxx
3. That the Third Party hereby acknowledges receipts from the Second Party P278,078.13 as partial
payment of the loan obligation of First Party in order to reduce the account to only ₱2,000,000.00 as of
November 15, 1990 to be assumed by the Second Party effective November 15, 1990.12
From the records, it cannot be denied that respondent paid to FSL Bank petitioner’s mortgage
obligation in the amount of ₱2,278,078.13, which formed part of the purchase price of the subject
property. Likewise, it is not disputed that respondent paid directly to petitioner the amount of
₱721,921.87 representing the additional payment for the purchase of the subject property. Clearly, out
of the total price of ₱4,200,000.00, respondent was able to pay the total amount of ₱3,000,000.00,
leaving a balance of ₱1,200,000.00 payable in three (3) installments.
Out of the ₱1,200,000.00 remaining balance, respondent paid on several dates the first and second
installments of ₱200,000.00 each. She, however, failed to pay the third and last installment of
₱800,000.00 due on December 31, 1991. Nevertheless, on August 31, 1992, respondent, through
counsel, offered to pay the amount of ₱751,000.00, which was rejected by petitioner for the reason that
the actual balance was ₱805,000.00 excluding the interest charges.
Considering that out of the total purchase price of ₱4,200,000.00, respondent has already paid the
substantial amount of ₱3,400,000.00, more or less, leaving an unpaid balance of only ₱805,000.00, it is
right and just to allow her to settle, within a reasonable period of time, the balance of the unpaid
purchase price. The Court agrees with the courts below that the respondent showed her sincerity and
willingness to comply with her obligation when she offered to pay the petitioner the amount of
₱751,000.00.
On the issue of interest, petitioner failed to substantiate her claim that respondent made a personal
commitment to pay a 6% monthly interest on the ₱805,000.00 from the date of delinquency, December
31, 1991. As can be gleaned from the contract, there was a stipulation stating that: "All the installments
shall not bear interest." The CA was, however, correct in imposing interest at the rate of 6% per annum
starting from the filing of the complaint on September 11, 1992.1avvphi1
Finally, the Court upholds the ruling of the courts below regarding the non-imposition of damages and
attorney’s fees. Aside from petitioner’s self-serving statements, there is not enough evidence on record
to prove that respondent acted fraudulently and maliciously against the petitioner. In the case of Heirs
of Atienza v. Espidol,13 it was stated:
Respondents are not entitled to moral damages because contracts are not referred to in Article 2219 of
the Civil Code, which enumerates the cases when moral damages may be recovered. Article 2220 of the
Civil Code allows the recovery of moral damages in breaches of contract where the defendant acted
fraudulently or in bad faith. However, this case involves a contract to sell, wherein full payment of the
purchase price is a positive suspensive condition, the non-fulfillment of which is not a breach of
contract, but merely an event that prevents the seller from conveying title to the purchaser. Since there
is no breach of contract in this case, respondents are not entitled to moral damages.
In the absence of moral, temperate, liquidated or compensatory damages, exemplary damages cannot
be granted for they are allowed only in addition to any of the four kinds of damages mentioned.
WHEREFORE, the petition is DENIED.

G.R. No. 179965 February 20, 2013

NICOLAS P. DIEGO, Petitioner,
vs.
RODOLFO P. DIEGO and EDUARDO P. DIEGO, Respondents.
DECISION
DEL CASTILLO, J.:
It is settled jurisprudence, to the point of being elementary, that an agreement which stipulates that the
seller shall execute a deed of sale only upon or after tl1ll payment of the purchase price is a contract to
sell, not a contract of sale. In Reyes v. Tuparan, 1 this Court declared in categorical terms that "[w]here
the vendor promises to execute a deed of absolute sale upon the completion by the vendee of the
payment of the price, the contract is only a contract to sell. The aforecited stipulation shows that
the vendors reserved title to the subject property until full payment of the purchase price."
In this case, it is not disputed as in tact both parties agreed that the deed of sale shall only be executed
upon payment of the remaining balance of the purchase price. Thus, pursuant to the above stated
jurisprudence, we similarly declare that the transaction entered into by the parties is a contract to sell.
Before us is a Petition for Review on Certiorari2 questioning the June 29, 2007 Decision 3 and the
October 3, 2007 Resolution4 of the Court of Appeals (CA) in CA-G.R. CV No. 86512, which affirmed
the April 19, 2005 Decision5 of the Regional Trial Court (RTC), Branch 40, of Dagupan City in Civil
Case No. 99-02971-D.
Factual Antecedents
In 1993, petitioner Nicolas P. Diego (Nicolas) and his brother Rodolfo, respondent herein, entered into
an oral contract to sell covering Nicolas’s share, fixed at P500,000.00, as co-owner of the family’s
Diego Building situated in Dagupan City. Rodolfo made a downpayment of P250,000.00. It was agreed
that the deed of sale shall be executed upon payment of the remaining balance of P250,000.00.
However, Rodolfo failed to pay the remaining balance.
Meanwhile, the building was leased out to third parties, but Nicolas’s share in the rents were not
remitted to him by herein respondent Eduardo, another brother of Nicolas and designated administrator
of the Diego Building. Instead, Eduardo gave Nicolas’s monthly share in the rents to Rodolfo. Despite
demands and protestations by Nicolas, Rodolfo and Eduardo failed to render an accounting and remit
his share in the rents and fruits of the building, and Eduardo continued to hand them over to Rodolfo.
Thus, on May 17, 1999, Nicolas filed a Complaint 6 against Rodolfo and Eduardo before the RTC of
Dagupan City and docketed as Civil Case No. 99-02971-D. Nicolas prayed that Eduardo be ordered to
render an accounting of all the transactions over the Diego Building; that Eduardo and Rodolfo be
ordered to deliver to Nicolas his share in the rents; and that Eduardo and Rodolfo be held solidarily
liable for attorney’s fees and litigation expenses.
Rodolfo and Eduardo filed their Answer with Counterclaim7 for damages and attorney’s fees. They
argued that Nicolas had no more claim in the rents in the Diego Building since he had already sold his
share to Rodolfo. Rodolfo admitted having remitted only P250,000.00 to Nicolas. He asserted that he
would pay the balance of the purchase price to Nicolas only after the latter shall have executed a deed
of absolute sale.
Ruling of the Regional Trial Court
After trial on the merits, or on April 19, 2005, the trial court rendered its Decision 8 dismissing Civil
Case No. 99-02971-D for lack of merit and ordering Nicolas to execute a deed of absolute sale in favor
of Rodolfo upon payment by the latter of the P250,000.00 balance of the agreed purchase price. It made
the following interesting pronouncement:
It is undisputed that plaintiff (Nicolas) is one of the co-owners of the Diego Building, x x x. As a co-
owner, he is entitled to [his] share in the rentals of the said building. However, plaintiff [had] already
sold his share to defendant Rodolfo Diego in the amount of P500,000.00 and in fact, [had] already
received a partial payment in the purchase price in the amount of P250,000.00. Defendant Eduardo
Diego testified that as per agreement, verbal, of the plaintiff and defendant Rodolfo Diego, the
remaining balance of P250,000.00 will be paid upon the execution of the Deed of Absolute Sale. It
was in the year 1997 when plaintiff was being required by defendant Eduardo Diego to sign the Deed
of Absolute Sale. Clearly, defendant Rodolfo Diego was not yet in default as the plaintiff claims which
cause [sic] him to refuse to sign [sic] document. The contract of sale was already perfected as early as
the year 1993 when plaintiff received the partial payment, hence, he cannot unilaterally revoke or
rescind the same. From then on, plaintiff has, therefore, ceased to be a co-owner of the building and is
no longer entitled to the fruits of the Diego Building.
Equity and fairness dictate that defendant [sic] has to execute the necessary document regarding the
sale of his share to defendant Rodolfo Diego. Correspondingly, defendant Rodolfo Diego has to
perform his obligation as per their verbal agreement by paying the remaining balance of P250,000.00.9
To summarize, the trial court ruled that as early as 1993, Nicolas was no longer entitled to the fruits of
his aliquot share in the Diego Building because he had "ceased to be a co-owner" thereof. The trial
court held that when Nicolas received the P250,000.00 downpayment, a "contract of sale" was
perfected. Consequently, Nicolas is obligated to convey such share to Rodolfo, without right of
rescission. Finally, the trial court held that the P250,000.00 balance from Rodolfo will only be due and
demandable when Nicolas executes an absolute deed of sale.
Ruling of the Court of Appeals
Nicolas appealed to the CA which sustained the trial court’s Decision in toto. The CA held that since
there was a perfected contract of sale between Nicolas and Rodolfo, the latter may compel the former
to execute the proper sale document. Besides, Nicolas’s insistence that he has since rescinded their
agreement in 1997 proved the existence of a perfected sale. It added that Nicolas could not validly
rescind the contract because: "1) Rodolfo ha[d] already made a partial payment; 2) Nicolas ha[d]
already partially performed his part regarding the contract; and 3) Rodolfo opposes the rescission."10
The CA then proceeded to rule that since no period was stipulated within which Rodolfo shall deliver
the balance of the purchase price, it was incumbent upon Nicolas to have filed a civil case to fix the
same. But because he failed to do so, Rodolfo cannot be considered to be in delay or default.
Finally, the CA made another interesting pronouncement, that by virtue of the agreement Nicolas
entered into with Rodolfo, he had already transferred his ownership over the subject property and as a
consequence, Rodolfo is legally entitled to collect the fruits thereof in the form of rentals. Nicolas’
remaining right is to demand payment of the balance of the purchase price, provided that he first
executes a deed of absolute sale in favor of Rodolfo.
Nicolas moved for reconsideration but the same was denied by the CA in its Resolution dated October
3, 2007.
Hence, this Petition.
Issues
The Petition raises the following errors that must be rectified:
I

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THERE

WAS NO PERFECTED CONTRACT OF SALE BETWEEN PETITIONER NICOLAS
DIEGO AND RESPONDENT RODOLFO DIEGO OVER NICOLAS’S SHARE OF THE
BUILDING BECAUSE THE SUSPENSIVE CONDITION HAS NOT YET BEEN
FULFILLED.

II

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE

CONTRACT OF SALE BETWEEN PETITIONER AND RESPONDENT RODOLFO
DIEGO REMAINS LEGALLY BINDING AND IS NOT RESCINDED GIVING
MISPLACED RELIANCE ON PETITIONER NICOLAS’ STATEMENT THAT THE
SALE HAS NOT YET BEEN REVOKED.

III

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT

PETITIONER NICOLAS DIEGO ACTED LEGALLY AND CORRECTLY WHEN HE
UNILATERALLY RESCINDED AND REVOKED HIS AGREEMENT OF SALE WITH
RESPONDENT RODOLFO DIEGO CONSIDERING RODOLFO’S MATERIAL,
SUBSTANTIAL BREACH OF THE CONTRACT.

IV

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER

HAS NO MORE RIGHTS OVER HIS SHARE IN THE BUILDING, DESPITE THE
FACT THAT THERE WAS AS YET NO PERFECTED CONTRACT OF SALE
BETWEEN PETITIONER NICOLAS DIEGO AND RODOLFO DIEGO AND THERE
WAS YET NO TRANSFER OF OWNERSHIP OF PETITIONER’S SHARE TO
RODOLFO DUE TO THE NON-FULFILLMENT BY RODOLFO OF THE SUSPENSIVE
CONDITION UNDER THE CONTRACT.

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT

RESPONDENT RODOLFO HAS UNJUSTLY ENRICHED HIMSELF AT THE
EXPENSE OF PETITIONER BECAUSE DESPITE NOT HAVING PAID THE
BALANCE OF THE PURCHASE PRICE OF THE SALE, THAT RODOLFO HAS NOT
YET ACQUIRED OWNERSHIP OVER THE SHARE OF PETITIONER NICOLAS, HE
HAS ALREADY BEEN APPROPRIATING FOR HIMSELF AND FOR HIS PERSONAL
 BENEFIT THE SHARE OF THE INCOME OF THE BUILDING AND THE PORTION
OF THE BUILDING ITSELF WHICH WAS DUE TO AND OWNED BY PETITIONER
NICOLAS.

VI

THE HONORABLE COURT OF APPEALS ERRED IN NOT AWARDING ACTUAL

DAMAGES, ATTORNEY’S FEES AND LITIGATION EXPENSES TO THE
PETITIONER DESPITE THE FACT THAT PETITIONER’S RIGHTS HAD BEEN
WANTONLY VIOLATED BY THE RESPONDENTS.11

Petitioner’s Arguments
In his Petition, the Supplement12 thereon, and Reply,13 Nicolas argues that, contrary to what the CA
found, there was no perfected contract of sale even though Rodolfo had partially paid the price; that in
the absence of the third element in a sale contract – the price – there could be no perfected sale; that
failing to pay the required price in full, Nicolas had the right to rescind the agreement as an unpaid
seller.
Nicolas likewise takes exception to the CA finding that Rodolfo was not in default or delay in the
payment of the agreed balance for his (Nicolas’s) failure to file a case to fix the period within which
payment of the balance should be made. He believes that Rodolfo’s failure to pay within a reasonable
time was a substantial and material breach of the agreement which gave him the right to unilaterally
and extrajudicially rescind the agreement and be discharged of his obligations as seller; and that his
repeated written demands upon Rodolfo to pay the balance granted him such rights.
Nicolas further claims that based on his agreement with Rodolfo, there was to be no transfer of title
over his share in the building until Rodolfo has effected full payment of the purchase price, thus, giving
no right to the latter to collect his share in the rentals.
Finally, Nicolas bewails the CA’s failure to award damages, attorney’s fees and litigation expenses for
what he believes is a case of unjust enrichment at his expense.
Respondents’ Arguments
Apart from echoing the RTC and CA pronouncements, respondents accuse the petitioner of "cheating"
them, claiming that after the latter received the P250,000.00 downpayment, he "vanished like thin air
and hibernated in the USA, he being an American citizen," 14 only to come back claiming that the said
amount was a mere loan.
They add that the Petition is a mere rehash and reiteration of the petitioner’s arguments below, which
are deemed to have been sufficiently passed upon and debunked by the appellate court.
Our Ruling
The Court finds merit in the Petition.
The contract entered into by Nicolas and Rodolfo was a contract to sell.
a) The stipulation to execute a deed of sale upon full payment of the purchase price is a unique
and distinguishing characteristic of a contract to sell. It also shows that the vendor reserved title
to the property until full payment.
There is no dispute that in 1993, Rodolfo agreed to buy Nicolas’s share in the Diego Building for the
price of P500,000.00. There is also no dispute that of the total purchase price, Rodolfo paid, and
Nicolas received, P250,000.00. Significantly, it is also not disputed that the parties agreed that the
remaining amount of P250,000.00 would be paid after Nicolas shall have executed a deed of sale.
This stipulation, i.e., to execute a deed of absolute sale upon full payment of the purchase price, is a
unique and distinguishing characteristic of a contract to sell. In Reyes v. Tuparan,15 this Court ruled
that a stipulation in the contract, "[w]here the vendor promises to execute a deed of absolute sale
upon the completion by the vendee of the payment of the price," indicates that the parties entered
into a contract to sell. According to this Court, this particular provision is tantamount to a reservation
of ownership on the part of the vendor. Explicitly stated, the Court ruled that the agreement to execute a
deed of sale upon full payment of the purchase price "shows that the vendors reserved title to the
subject property until full payment of the purchase price."16
In Tan v. Benolirao,17 this Court, speaking through Justice Brion, ruled that the parties entered into a
contract to sell as revealed by the following stipulation:
d) That in case, BUYER has complied with the terms and conditions of this contract, then the
SELLERS shall execute and deliver to the BUYER the appropriate Deed of Absolute Sale;18
The Court further held that "[j]urisprudence has established that where the seller promises to
execute a deed of absolute sale upon the completion by the buyer of the payment of the price, the
contract is only a contract to sell."19
b) The acknowledgement receipt signed by Nicolas as well as the contemporaneous acts of the
parties show that they agreed on a contract to sell, not of sale. The absence of a formal deed of
conveyance is indicative of a contract to sell.
In San Lorenzo Development Corporation v. Court of Appeals,20 the facts show that spouses Miguel
and Pacita Lu (Lu) sold a certain parcel of land to Pablo Babasanta (Pablo). After several payments,
Pablo wrote Lu demanding "the execution of a final deed of sale in his favor so that he could effect full
payment of the purchase price."21 To prove his allegation that there was a perfected contract of sale
between him and Lu, Pablo presented a receipt signed by Lu acknowledging receipt of P50,000.00 as
partial payment.22
However, when the case reached this Court, it was ruled that the transaction entered into by Pablo and
Lu was only a contract to sell, not a contract of sale. The Court held thus:
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos
(P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta. Rosa,
Laguna. While there is no stipulation that the seller reserves the ownership of the property until full
payment of the price which is a distinguishing feature of a contract to sell, the subsequent acts of the
parties convince us that the Spouses Lu never intended to transfer ownership to Babasanta except
upon full payment of the purchase price.
Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated
requests for the execution of the final deed of sale in his favor so that he could effect full payment of
the price, Pacita Lu allegedly refused to do so. In effect, Babasanta himself recognized that
ownership of the property would not be transferred to him until such time as he shall have
effected full payment of the price. Moreover, had the sellers intended to transfer title, they could
have easily executed the document of sale in its required form simultaneously with their
acceptance of the partial payment, but they did not. Doubtlessly, the receipt signed by Pacita Lu
should legally be considered as a perfected contract to sell.23
In the instant case, records show that Nicolas signed a mere receipt 24 acknowledging partial payment
of P250,000.00 from Rodolfo. It states:
July 8, 1993

Received the amount of [P250,000.00] for 1 share of Diego Building as partial payment for
Nicolas Diego.

(signed)
Nicolas Diego25

As we ruled in San Lorenzo Development Corporation v. Court of Appeals,26 the parties could have
executed a document of sale upon receipt of the partial payment but they did not. This is thus an
indication that Nicolas did not intend to immediately transfer title over his share but only upon full
payment of the purchase price. Having thus reserved title over the property, the contract entered into by
Nicolas is a contract to sell. In addition, Eduardo admitted that he and Rodolfo repeatedly asked
Nicolas to sign the deed of sale27 but the latter refused because he was not yet paid the full amount. As
we have ruled in San Lorenzo Development Corporation v. Court of Appeals, 28 the fact that Eduardo
and Rodolfo asked Nicolas to execute a deed of sale is a clear recognition on their part that the
ownership over the property still remains with Nicolas. In fine, the totality of the parties’ acts convinces
us that Nicolas never intended to transfer the ownership over his share in the Diego Building until the
full payment of the purchase price. Without doubt, the transaction agreed upon by the parties was a
contract to sell, not of sale.
In Chua v. Court of Appeals,29 the parties reached an impasse when the seller wanted to be first paid
the consideration before a new transfer certificate of title (TCT) is issued in the name of the buyer.
Contrarily, the buyer wanted to secure a new TCT in his name before paying the full amount. Their
agreement was embodied in a receipt containing the following terms: "(1) the balance of
P10,215,000.00 is payable on or before 15 July 1989; (2) the capital gains tax is for the account of x x
x; and (3) if [the buyer] fails to pay the balance x x x the [seller] has the right to forfeit the earnest
money x x x."30 The case eventually reached this Court. In resolving the impasse, the Court, speaking
through Justice Carpio, held that "[a] perusal of the Receipt shows that the true agreement between the
parties was a contract to sell."31 The Court noted that "the agreement x x x was embodied in a receipt
rather than in a deed of sale, ownership not having passed between them."32 The Court thus concluded
that "[t]he absence of a formal deed of conveyance is a strong indication that the parties did not
intend immediate transfer of ownership, but only a transfer after full payment of the purchase
price."33 Thus, the "true agreement between the parties was a contract to sell."34
In the instant case, the parties were similarly embroiled in an impasse. The parties’ agreement was
likewise embodied only in a receipt. Also, Nicolas did not want to sign the deed of sale unless he is
fully paid. On the other hand, Rodolfo did not want to pay unless a deed of sale is duly executed in his
favor. We thus say, pursuant to our ruling in Chua v. Court of Appeals35 that the agreement between
Nicolas and Rodolfo is a contract to sell.
This Court cannot subscribe to the appellate court’s view that Nicolas should first execute a deed of
absolute sale in favor of Rodolfo, before the latter can be compelled to pay the balance of the price.
This is patently ridiculous, and goes against every rule in the book. This pronouncement virtually
places the prospective seller in a contract to sell at the mercy of the prospective buyer, and sustaining
this point of view would place all contracts to sell in jeopardy of being rendered ineffective by the act
of the prospective buyers, who naturally would demand that the deeds of absolute sale be first executed
before they pay the balance of the price. Surely, no prospective seller would accommodate.
In fine, "the need to execute a deed of absolute sale upon completion of payment of the price
generally indicates that it is a contract to sell, as it implies the reservation of title in the vendor
until the vendee has completed the payment of the price." 36 In addition, "[a] stipulation reserving
ownership in the vendor until full payment of the price is x x x typical in a contract to sell." 37 Thus,
contrary to the pronouncements of the trial and appellate courts, the parties to this case only entered
into a contract to sell; as such title cannot legally pass to Rodolfo until he makes full payment of the
agreed purchase price.
c) Nicolas did not surrender or deliver title or possession to Rodolfo.
Moreover, there could not even be a surrender or delivery of title or possession to the prospective buyer
Rodolfo. This was made clear by the nature of the agreement, by Nicolas’s repeated demands for the
return of all rents unlawfully and unjustly remitted to Rodolfo by Eduardo, and by Rodolfo and
Eduardo’s repeated demands for Nicolas to execute a deed of sale which, as we said before, is a
recognition on their part that ownership over the subject property still remains with Nicolas.
Significantly, when Eduardo testified, he claimed to be knowledgeable about the terms and conditions
of the transaction between Nicolas and Rodolfo. However, aside from stating that out of the total
consideration of P500,000.00, the amount of P250,000.00 had already been paid while the remaining
P250,000.00 would be paid after the execution of the Deed of Sale, he never testified that there was a
stipulation as regards delivery of title or possession.38
It is also quite understandable why Nicolas belatedly demanded the payment of the rentals. Records
show that the structural integrity of the Diego Building was severely compromised when an earthquake
struck Dagupan City in 1990.39 In order to rehabilitate the building, the co-owners obtained a loan
from a bank.40 Starting May 1994, the property was leased to third parties and the rentals received were
used to pay off the loan.41 It was only in 1996, or after payment of the loan that the co-owners started
receiving their share in the rentals. 42 During this time, Nicolas was in the USA but immediately upon
his return, he demanded for the payment of his share in the rentals which Eduardo remitted to Rodolfo.
Failing which, he filed the instant Complaint. To us, this bolsters our findings that Nicolas did not
intend to immediately transfer title over the property.
It must be stressed that it is anathema in a contract to sell that the prospective seller should deliver title
to the property to the prospective buyer pending the latter’s payment of the price in full. It certainly is
absurd to assume that in the absence of stipulation, a buyer under a contract to sell is granted ownership
of the property even when he has not paid the seller in full. If this were the case, then prospective
sellers in a contract to sell would in all likelihood not be paid the balance of the price.
This ponente has had occasion to rule that "[a] contract to sell is one where the prospective seller
reserves the transfer of title to the prospective buyer until the happening of an event, such as full
payment of the purchase price. What the seller obliges himself to do is to sell the subject property only
when the entire amount of the purchase price has already been delivered to him. ‘In other words, the
full payment of the purchase price partakes of a suspensive condition, the nonfulfillment of which
prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer.’ It does not, by itself, transfer ownership to the
buyer."43
The contract to sell is terminated or cancelled.
Having established that the transaction was a contract to sell, what happens now to the parties’
agreement?
The remedy of rescission is not available in contracts to sell. 44 As explained in Spouses Santos v. Court
of Appeals:45
In view of our finding in the present case that the agreement between the parties is a contract to sell, it
follows that the appellate court erred when it decreed that a judicial rescission of said agreement was
necessary. This is because there was no rescission to speak of in the first place. As we earlier pointed
out, in a contract to sell, title remains with the vendor and does not pass on to the vendee until the
purchase price is paid in full. Thus, in a contract to sell, the payment of the purchase price is a positive
suspensive condition. Failure to pay the price agreed upon is not a mere breach, casual or serious, but a
situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force.
This is entirely different from the situation in a contract of sale, where non-payment of the price is a
negative resolutory condition. The effects in law are not identical. In a contract of sale, the vendor has
lost ownership of the thing sold and cannot recover it, unless the contract of sale is rescinded and set
aside. In a contract to sell, however, the vendor remains the owner for as long as the vendee has not
complied fully with the condition of paying the purchase price. If the vendor should eject the vendee
for failure to meet the condition precedent, he is enforcing the contract and not rescinding it. When the
petitioners in the instant case repossessed the disputed house and lot for failure of private respondents
to pay the purchase price in full, they were merely enforcing the contract and not rescinding it. As
petitioners correctly point out, the Court of Appeals erred when it ruled that petitioners should have
judicially rescinded the contract pursuant to Articles 1592 and 1191 of the Civil Code. Article 1592
speaks of non-payment of the purchase price as a resolutory condition. It does not apply to a contract to
sell. As to Article 1191, it is subordinated to the provisions of Article 1592 when applied to sales of
immovable property. Neither provision is applicable in the present case.46
Similarly, we held in Chua v. Court of Appeals47 that "Article 1592 of the Civil Code permits the buyer
to pay, even after the expiration of the period, as long as no demand for rescission of the contract has
been made upon him either judicially or by notarial act. However, Article 1592 does not apply to a
contract to sell where the seller reserves the ownership until full payment of the price," 48 as in this
case.1âwphi1
Applying the above jurisprudence, we hold that when Rodolfo failed to fully pay the purchase price,
the contract to sell was deemed terminated or cancelled. 49 As we have held in Chua v. Court of
Appeals,50 "[s]ince the agreement x x x is a mere contract to sell, the full payment of the purchase price
partakes of a suspensive condition. The non-fulfillment of the condition prevents the obligation to
sell from arising and ownership is retained by the seller without further remedies by the buyer."
Similarly, we held in Reyes v. Tuparan51 that "petitioner’s obligation to sell the subject properties
becomes demandable only upon the happening of the positive suspensive condition, which is the
respondent’s full payment of the purchase price. Without respondent’s full payment, there can be no
breach of contract to speak of because petitioner has no obligation yet to turn over the title.
Respondent’s failure to pay in full the purchase price in full is not the breach of contract contemplated
under Article 1191 of the New Civil Code but rather just an event that prevents the petitioner from
being bound to convey title to respondent." Otherwise stated, Rodolfo has no right to compel Nicolas to
transfer ownership to him because he failed to pay in full the purchase price. Correlatively, Nicolas has
no obligation to transfer his ownership over his share in the Diego Building to Rodolfo.52
Thus, it was erroneous for the CA to rule that Nicolas should have filed a case to fix the period for
Rodolfo’s payment of the balance of the purchase price. It was not Nicolas’s obligation to compel
Rodolfo to pay the balance; it was Rodolfo’s duty to remit it.
It would appear that after Nicolas refused to sign the deed as there was yet no full payment, Rodolfo
and Eduardo hired the services of the Daroya Accounting Office "for the purpose of estimating the
amount to which [Nicolas] still owes [Rodolfo] as a consequence of the unconsummated verbal
agreement regarding the former’s share in the co-ownership of [Diego Building] in favor of the
latter."53 According to the accountant’s report, after Nicolas revoked his agreement with Rodolfo due to
non-payment, the downpayment of P250,000.00 was considered a loan of Nicolas from Rodolfo. 54 The
accountant opined that the P250,000.00 should earn interest at 18%.55 Nicolas however objected as
regards the imposition of interest as it was not previously agreed upon. Notably, the contents of the
accountant’s report were not disputed or rebutted by the respondents. In fact, it was stated therein that
"[a]ll the bases and assumptions made particularly in the fixing of the applicable rate of interest have
been discussed with [Eduardo]."56
We find it irrelevant and immaterial that Nicolas described the termination or cancellation of his
agreement with Rodolfo as one of rescission. Being a layman, he is understandably not adept in legal
terms and their implications. Besides, this Court should not be held captive or bound by the conclusion
reached by the parties. The proper characterization of an action should be based on what the law says it
to be, not by what a party believed it to be. "A contract is what the law defines it to be x x x and not
what the contracting parties call it."57
On the other hand, the respondents’ additional submission – that Nicolas cheated them by "vanishing
and hibernating" in the USA after receiving Rodolfo’s P250,000.00 downpayment, only to come back
later and claim that the amount he received was a mere loan – cannot be believed. How the respondents
could have been cheated or disadvantaged by Nicolas’s leaving is beyond comprehension. If there was
anybody who benefited from Nicolas’s perceived "hibernation", it was the respondents, for they
certainly had free rein over Nicolas’s interest in the Diego Building. Rodolfo put off payment of the
balance of the price, yet, with the aid of Eduardo, collected and appropriated for himself the rents
which belonged to Nicolas.
Eduardo is solidarily liable with Rodolfo as regards the share of Nicolas in the rents.
For his complicity, bad faith and abuse of authority as the Diego Building administrator, Eduardo must
be held solidarily liable with Rodolfo for all that Nicolas should be entitled to from 1993 up to the
present, or in respect of actual damages suffered in relation to his interest in the Diego Building.
Eduardo was the primary cause of Nicolas’s loss, being directly responsible for making and causing the
wrongful payments to Rodolfo, who received them under obligation to return them to Nicolas, the true
recipient.1âwphi1 As such, Eduardo should be principally responsible to Nicolas as well. Suffice it to
state that every person must, in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith; and every person who, contrary to
law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.58
Attorney’s fees and other costs.
"Although attorney’s fees are not allowed in the absence of stipulation, the court can award the same
when the defendant’s act or omission has compelled the plaintiff to incur expenses to protect his
interest or where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s
plainly valid, just and demandable claim."59 In the instant case, it is beyond cavil that petitioner was
constrained to file the instant case to protect his interest because of respondents’ unreasonable and
unjustified refusal to render an accounting and to remit to the petitioner his rightful share in rents and
fruits in the Diego Building. Thus, we deem it proper to award to petitioner attorney’s fees in the
amount of P50,000.00,60 as well as litigation expenses in the amount of P20,000.00 and the sum of
P1,000.00 for each court appearance by his lawyer or lawyers, as prayed for.
WHEREFORE, premises considered, the Petition is GRANTED. The June 29, 2007 Decision and
October 3, 2007 Resolution of the Court of Appeals in CA-G.R. CV No. 86512, and the April 19, 2005
Decision of the Dagupan City Regional Trial Court, Branch 40 in Civil Case No. 99-02971-D, are
hereby ANNULLED and SET ASIDE.
The Court further decrees the following:
1. The oral contract to sell between petitioner Nicolas P. Diego and respondent Rodolfo P. Diego
is DECLARED terminated/cancelled;
2. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED to surrender possession
and control, as the case may be, of Nicolas P. Diego’s share in the Diego Building. Respondents
are further commanded to return or surrender to the petitioner the documents of title, receipts,
papers, contracts, and all other documents in any form or manner pertaining to the latter’s share
in the building, which are deemed to be in their unauthorized and illegal possession;
3. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED to immediately render
an accounting of all the transactions, from the period beginning 1993 up to the present,
pertaining to Nicolas P. Diego’s share in the Diego Building, and thereafter commanded to
jointly and severally remit to the petitioner all rents, monies, payments and benefits of whatever
kind or nature pertaining thereto, which are hereby deemed received by them during the said
period, and made to them or are due, demandable and forthcoming during the said period and
from the date of this Decision, with legal interest from the filing of the Complaint;
4. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED, immediately and
without further delay upon receipt of this Decision, to solidarily pay the petitioner attorney’s
fees in the amount of P50,000.00; litigation expenses in the amount of P20,000.00 and the sum
of P1,000.00 per counsel for each court appearance by his lawyer or lawyers;
5. The payment of P250,000.00 made by respondent Rodolfo P. Diego, with legal interest from
the filing of the Complaint, shall be APPLIED, by way of compensation, to his liabilities to the
petitioner and to answer for all damages and other awards and interests which are owing to the
latter under this Decision; and
6. Respondents’ counterclaim is DISMISSED.
SO ORDERED.

RESOLUTORY CONDITION

G.R. No. 77425 June 19, 1991

THE ROMAN CATHOLIC ARCHBISHOP OF MANILA, THE ROMAN CATHOLIC BISHOP
OF IMUS, and the SPOUSES FLORENCIO IGNAO and SOLEDAD C. IGNAO, petitioners,
vs.
HON. COURT OF APPEALS, THE ESTATE OF DECEASED SPOUSES EUSEBIO DE
CASTRO and MARTINA RIETA, represented by MARINA RIETA GRANADOS and
THERESA RIETA TOLENTINO, respondents.
G.R. No. 77450 June 19, 1991
THE ROMAN CATHOLIC ARCHBISHOP OF MANILA, THE ROMAN CATHOLIC BISHOP
OF IMUS, and the SPOUSES FLORENCIO IGNAO and SOLEDAD C. IGNAO, petitioners,
vs.
HON. COURT OF APPEALS, THE ESTATE OF DECEASED SPOUSES EUSEBIO DE
CASTRO and MARTINA RIETA, represented by MARINA RIETA GRANADOS and
THERESA RIETA TOLENTINO, respondents.
Severino C. Dominguez for petitioner Roman Catholic Bishop of Imus, Cavite.
Dolorfino and Dominguez Law Offices for Sps. Ignao.
Joselito R. Enriquez for private respondents.

REGALADO, J.:
These two petitions for review on certiorari1 seek to overturn the decision of the Court of Appeals in
CA-G.R. CV No. 054562 which reversed and set aside the order of the Regional Trial Court of Imus,
Cavite dismissing Civil Case No. 095-84, as well as the order of said respondent court denying
petitioner's motions for the reconsideration of its aforesaid decision.
On November 29, 1984, private respondents as plaintiffs, filed a complaint for nullification of deed of
donation, rescission of contract and reconveyance of real property with damages against petitioners
Florencio and Soledad C. Ignao and the Roman Catholic Bishop of Imus, Cavite, together with the
Roman Catholic Archbishop of Manila, before the Regional Trial Court, Branch XX, Imus, Cavite and
which was docketed as Civil Case No. 095-84 therein.3
In their complaint, private respondents alleged that on August 23, 1930, the spouses Eusebio de Castro
and Martina Rieta, now both deceased, executed a deed of donation in favor of therein defendant
Roman Catholic Archbishop of Manila covering a parcel of land (Lot No. 626, Cadastral Survey of
Kawit), located at Kawit, Cavite, containing an area of 964 square meters, more or less. The deed of
donation allegedly provides that the donee shall not dispose or sell the property within a period of one
hundred (100) years from the execution of the deed of donation, otherwise a violation of such condition
would render ipso facto null and void the deed of donation and the property would revert to the estate
of the donors.
It is further alleged that on or about June 30, 1980, and while still within the prohibitive period to
dispose of the property, petitioner Roman Catholic Bishop of Imus, in whose administration all
properties within the province of Cavite owned by the Archdiocese of Manila was allegedly transferred
on April 26, 1962, executed a deed of absolute sale of the property subject of the donation in favor of
petitioners Florencio and Soledad C. Ignao in consideration of the sum of P114,000. 00. As a
consequence of the sale, Transfer Certificate of Title No. 115990 was issued by the Register of Deeds
of Cavite on November 15, 1980 in the name of said petitioner spouses.
What transpired thereafter is narrated by respondent court in its assailed decision.4
On December 17, 1984, petitioners Florencio Ignao and Soledad C. Ignao filed a motion to dismiss
based on the grounds that (1) herein private respondents, as plaintiffs therein, have no legal capacity to
sue; and (2) the complaint states no cause of action.
On December 19, 1984, petitioner Roman Catholic Bishop of Imus also filed a motion to dismiss on
three (3) grounds, the first two (2) grounds of which were identical to that of the motion to dismiss filed
by the Ignao spouses, and the third ground being that the cause of action has prescribed.
On January 9, 1985, the Roman Catholic Archbishop of Manila likewise filed a motion to dismiss on
the ground that he is not a real party in interest and, therefore, the complaint does not state a cause of
action against him.
After private respondents had filed their oppositions to the said motions to dismiss and the petitioners
had countered with their respective replies, with rejoinders thereto by private respondents, the trial
court issued an order dated January 31, 1985, dismissing the complaint on the ground that the cause of
action has prescribed.5
Private respondents thereafter appealed to the Court of Appeals raising the issues on (a) whether or not
the action for rescission of contracts (deed of donation and deed of sale) has prescribed; and (b)
whether or not the dismissal of the action for rescission of contracts (deed of donation and deed of sale)
on the ground of prescription carries with it the dismissal of the main action for reconveyance of real
property.6
On December 23, 1986, respondent Court of Appeals, holding that the action has not yet prescibed,
rendered a decision in favor of private respondents, with the following dispositive portion:
WHEREFORE, the Order of January 31, 1985 dismissing appellants' complaint is SET ASIDE
and Civil Case No. 095-84 is hereby ordered REINSTATED and REMANDED to the lower
court for further proceedings. No Costs.7
Petitioners Ignao and the Roman Catholic Bishop of Imus then filed their separate motions for
reconsideration which were denied by respondent Court of Appeals in its resolution dated February 6,
1987,8 hence, the filing of these appeals by certiorari.
It is the contention of petitioners that the cause of action of herein private respondents has already
prescribed, invoking Article 764 of the Civil Code which provides that "(t)he donation shall be revoked
at the instance of the donor, when the donee fails to comply with any of the conditions which the
former imposed upon the latter," and that "(t)his action shall prescribe after four years from the non-
compliance with the condition, may be transmitted to the heirs of the donor, and may be exercised
against the donee's heirs.
We do not agree.
Although it is true that under Article 764 of the Civil Code an action for the revocation of a donation
must be brought within four (4) years from the non-compliance of the conditions of the donation, the
same is not applicable in the case at bar. The deed of donation involved herein expressly provides for
automatic reversion of the property donated in case of violation of the condition therein, hence a
judicial declaration revoking the same is not necessary, As aptly stated by the Court of Appeals:
By the very express provision in the deed of donation itself that the violation of the condition
thereof would render ipso facto null and void the deed of donation, WE are of the opinion that
there would be no legal necessity anymore to have the donation judicially declared null and
void for the reason that the very deed of donation itself declares it so. For where (sic) it
otherwise and that the donors and the donee contemplated a court action during the execution of
the deed of donation to have the donation judicially rescinded or declared null and void should
the condition be violated, then the phrase reading "would render ipso facto null and void" would
not appear in the deed of donation.9
In support of its aforesaid position, respondent court relied on the rule that a judicial action for
rescission of a contract is not necessary where the contract provides that it may be revoked and
cancelled for violation of any of its terms and conditions.10 It called attention to the holding that there
is nothing in the law that prohibits the parties from entering into an agreement that a violation of the
terms of the contract would cause its cancellation even without court intervention, and that it is not
always necessary for the injured party to resort to court for rescission of the contract.11 It reiterated the
doctrine that a judicial action is proper only when there is absence of a special provision granting the
power of cancellation.12
It is true that the aforesaid rules were applied to the contracts involved therein, but we see no reason
why the same should not apply to the donation in the present case. Article 732 of the Civil Code
provides that donations inter vivos shall be governed by the general provisions on contracts and
obligations in all that is not determined in Title III, Book III on donations. Now, said Title III does not
have an explicit provision on the matter of a donation with a resolutory condition and which is subject
to an express provision that the same shall be considered ipso facto revoked upon the breach of said
resolutory condition imposed in the deed therefor, as is the case of the deed presently in question. The
suppletory application of the foregoing doctrinal rulings to the present controversy is consequently
justified.
The validity of such a stipulation in the deed of donation providing for the automatic reversion of the
donated property to the donor upon non-compliance of the condition was upheld in the recent case of
De Luna, et al. vs. Abrigo, et al.13 It was held therein that said stipulation is in the nature of an
agreement granting a party the right to rescind a contract unilaterally in case of breach, without need of
going to court, and that, upon the happening of the resolutory condition or non-compliance with the
conditions of the contract, the donation is automatically revoked without need of a judicial declaration
to that effect. While what was the subject of that case was an onerous donation which, under Article
733 of the Civil Code is governed by the rules on contracts, since the donation in the case at bar is also
subject to the same rules because of its provision on automatic revocation upon the violation of a
resolutory condition, from parity of reasons said pronouncements in De Luna pertinently apply.
The rationale for the foregoing is that in contracts providing for automatic revocation, judicial
intervention is necessary not for purposes of obtaining a judicial declaration rescinding a contract
already deemed rescinded by virtue of an agreement providing for rescission even without judicial
intervention, but in order to determine whether or not the rescission was proper.14
When a deed of donation, as in this case, expressly provides for automatic revocation and reversion of
the property donated, the rules on contract and the general rules on prescription should apply, and not
Article 764 of the Civil Code. Since Article 1306 of said Code authorizes the parties to a contract to
establish such stipulations, clauses, terms and conditions not contrary to law, morals, good customs,
public order or public policy, we are of the opinion that, at the very least, that stipulation of the parties
providing for automatic revocation of the deed of donation, without prior judicial action for that
purpose, is valid subject to the determination of the propriety of the rescission sought. Where such
propriety is sustained, the decision of the court will be merely declaratory of the revocation, but it is not
in itself the revocatory act.
On the foregoing ratiocinations, the Court of Appeals committed no error in holding that the cause of
action of herein private respondents has not yet prescribed since an action to enforce a written contract
prescribes in ten (10) years.15 It is our view that Article 764 was intended to provide a judicial remedy
in case of non-fulfillment or contravention of conditions specified in the deed of donation if and when
the parties have not agreed on the automatic revocation of such donation upon the occurrence of the
contingency contemplated therein. That is not the situation in the case at bar.
Nonetheless, we find that although the action filed by private respondents may not be dismissed by
reason of prescription, the same should be dismissed on the ground that private respondents have no
cause of action against petitioners.
The cause of action of private respondents is based on the alleged breach by petitioners of the
resolutory condition in the deed of donation that the property donated should not be sold within a
period of one hundred (100) years from the date of execution of the deed of donation. Said condition, in
our opinion, constitutes an undue restriction on the rights arising from ownership of petitioners and is,
therefore, contrary to public policy.
Donation, as a mode of acquiring ownership, results in an effective transfer of title over the property
from the donor to the donee. Once a donation is accepted, the donee becomes the absolute owner of the
property donated. Although the donor may impose certain conditions in the deed of donation, the same
must not be contrary to law, morals, good customs, public order and public policy. The condition
imposed in the deed of donation in the case before us constitutes a patently unreasonable and undue
restriction on the right of the donee to dispose of the property donated, which right is an indispensable
attribute of ownership. Such a prohibition against alienation, in order to be valid, must not be perpetual
or for an unreasonable period of time.
Certain provisions of the Civil Code illustrative of the aforesaid policy may be considered applicable
by analogy.1âwphi1 Under the third paragraph of Article 494, a donor or testator may prohibit partition
for a period which shall not exceed twenty (20) years. Article 870, on its part, declares that the
dispositions of the testator declaring all or part of the estate inalienable for more than twenty (20) years
are void.
It is significant that the provisions therein regarding a testator also necessarily involve, in the main, the
devolution of property by gratuitous title hence, as is generally the case of donations, being an act of
liberality, the imposition of an unreasonable period of prohibition to alienate the property should be
deemed anathema to the basic and actual intent of either the donor or testator. For that reason, the
regulatory arm of the law is or must be interposed to prevent an unreasonable departure from the
normative policy expressed in the aforesaid Articles 494 and 870 of the Code.
In the case at bar, we hold that the prohibition in the deed of donation against the alienation of the
property for an entire century, being an unreasonable emasculation and denial of an integral attribute of
ownership, should be declared as an illegal or impossible condition within the contemplation of Article
727 of the Civil Code. Consequently, as specifically stated in said statutory provision, such condition
shall be considered as not imposed. No reliance may accordingly be placed on said prohibitory
paragraph in the deed of donation. The net result is that, absent said proscription, the deed of sale
supposedly constitutive of the cause of action for the nullification of the deed of donation is not in truth
violative of the latter hence, for lack of cause of action, the case for private respondents must fail.
It may be argued that the validity of such prohibitory provision in the deed of donation was not
specifically put in issue in the pleadings of the parties. That may be true, but such oversight or inaction
does not prevent this Court from passing upon and resolving the same.
It will readily be noted that the provision in the deed of donation against alienation of the land for one
hundred (100) years was the very basis for the action to nullify the deed of d donation. At the same
time, it was likewise the controverted fundament of the motion to dismiss the case a quo, which motion
was sustained by the trial court and set aside by respondent court, both on the issue of prescription.
That ruling of respondent court interpreting said provision was assigned as an error in the present
petition. While the issue of the validity of the same provision was not squarely raised, it is ineluctably
related to petitioner's aforesaid assignment of error since both issues are grounded on and refer to the
very same provision.
This Court is clothed with ample authority to review matters, even if they are not assigned as errors on
appeal, if it finds that their consideration is necessary in arriving at a just decision of the case:16 Thus,
we have held that an unassigned error closely related to an error properly assigned,17 or upon which
the determination of the question properly assigned is dependent, will be considered by the appellate
court notwithstanding the failure to assign it as error.18
Additionally, we have laid down the rule that the remand of the case to the lower court for further
reception of evidence is not necessary where the Court is in a position to resolve the dispute based on
the records before it. On many occasions, the Court, in the public interest and for the expeditious
administration of justice, has resolved actions on the merits instead of remanding them to the trial court
for further proceedings, such as where the ends of justice, would not be subserved by the remand of the
case.19 The aforestated considerations obtain in and apply to the present case with respect to the matter
of the validity of the resolutory condition in question.
WHEREFORE, the judgment of respondent court is SET ASIDE and another judgment is hereby
rendered DISMISSING Civil Case No. 095-84 of the Regional Trial Court, Branch XX, Imus, Cavite.
SO ORDERED.