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FIRST DIVISION [G.R. No. 141538.

March 23, 2004]

Hermana R. Cerezo, petitioner, vs. David Tuazon, respondent. DECISION CARPIO, J.: The Case

This is a petition for review on certiorari[1] to annul the Resolution[2] dated 21 October 1999 of the Court of Appeals in CA-G.R. SP No. 53572, as well as its Resolution dated 20 January 2000 denying the motion for reconsideration. The Court of Appeals denied the petition for annulment of the Decision[3] dated 30 May 1995 rendered by the Regional Trial Court of Angeles City, Branch 56 (trial court), in Civil Case No. 7415. The trial court ordered petitioner Hermana R. Cerezo (Mrs. Cerezo) to pay respondent David Tuazon (Tuazon) actual damages, loss of earnings, moral damages, and costs of suit. Antecedent Facts

Around noontime of 26 June 1993, a Country Bus Lines passenger bus with plate number NYA 241 collided with a tricycle bearing plate number TC RV 126 along Captain M. Palo Street, Sta. Ines, Mabalacat, Pampanga. On 1 October 1993, tricycle driver Tuazon filed a complaint for damages against Mrs. Cerezo, as owner of the bus line, her husband Attorney Juan Cerezo (Atty. Cerezo), and bus driver Danilo A. Foronda (Foronda). The complaint alleged that: 7. At the time of the incident, plaintiff [Tuazon] was in his proper lane when the second-named defendant [Foronda], being then the driver and person in charge of the Country Bus with plate number NYA 241, did then and there willfully, unlawfully, and feloniously operate the said motor vehicle in a negligent, careless, and imprudent manner without due regard to traffic rules and regulations, there being a Slow Down sign near the scene of the incident, and without taking the necessary precaution to prevent loss of lives or injuries, his negligence, carelessness and imprudence resulted to severe damage to the tricycle and serious physical injuries to plaintiff thus making him unable to walk and becoming disabled, with his thumb and middle finger on the left hand being cut[.][4] On 1 October 1993, Tuazon filed a motion to litigate as a pauper. Subsequently, the trial court issued summons against Atty. Cerezo and Mrs. Cerezo (the Cerezo spouses) at the Makati address stated in the complaint. However, the summons was returned unserved on 10 November 1993 as the Cerezo spouses no longer held office nor resided in Makati. On 18 April 1994, the trial court issued alias summons against the Cerezo spouses at their address in Barangay Sta. Maria, Camiling, Tarlac. The alias summons and a copy of the complaint were finally served on 20 April 1994 at the office of Atty. Cerezo, who was then working as Tarlac Provincial Prosecutor. Atty. Cerezo reacted angrily on learning of the service of summons upon his person. Atty. Cerezo allegedly told Sheriff William Canlas: Punyeta, ano ang gusto mong mangyari? Gusto mong hindi ka makalabas ng buhay dito? Teritoryo ko ito. Wala ka sa teritoryo mo.[5] The records show that the Cerezo spouses participated in the proceedings before the trial court. The Cerezo spouses filed a comment with motion for bill of particulars dated 29 April 1994 and a reply to opposition to comment with motion dated 13 June 1994.[6] On 1 August 1994, the trial court issued an order directing the Cerezo spouses to file a comment to the opposition to the bill of particulars. Atty. Elpidio B. Valera (Atty. Valera) of Valera and Valera Law Offices appeared on behalf of the Cerezo spouses. On 29 August 1994, Atty. Valera filed an urgent ex-parte motion praying for the resolution of Tuazons motion to litigate as a pauper and for the issuance of new summons on the Cerezo spouses to satisfy proper service in accordance with the Rules of Court.[7] On 30 August 1994, the trial court issued an order resolving Tuazons motion to litigate as a pauper and the Cerezo spouses urgent ex-parte motion. The order reads: At the hearing on August 30, 1994, the plaintiff [Tuazon] testified that he is presently jobless; that at the time of the filing of this case, his son who is working in Malaysia helps him and sends him once in a while P300.00 a month, and that he does not have any real property. Attached to the Motion to Litigate as Pauper are his Affidavit that he is unemployed; a Certification by the Barangay Captain of his poblacion that his income is not enough for his familys subsistence; and a Certification by the Office of the Municipal Assessor that he has no landholding in the Municipality of Mabalacat, Province of Pampanga. The Court is satisfied from the unrebutted testimony of the plaintiff that he is entitled to prosecute his complaint in this case as a pauper under existing rules. On the other hand, the Court denies the prayer in the Appearance and Urgent Ex-Parte Motion requiring new summons to be served to

the defendants. The Court is of the opinion that any infirmity in the service of the summons to the defendant before plaintiff was allowed to prosecute his complaint in this case as a pauper has been cured by this Order. If within 15 days from receipt of this Order, the defendants do not question on appeal this Order of this Court, the Court shall proceed to resolve the Motion for Bill of Particulars.[8] On 27 September 1994, the Cerezo spouses filed an urgent ex-parte motion for reconsideration. The trial court denied the motion for reconsideration. On 14 November 1994, the trial court issued an order directing the Cerezo spouses to file their answer within fifteen days from receipt of the order. The Cerezo spouses did not file an answer. On 27 January 1995, Tuazon filed a motion to declare the Cerezo spouses in default. On 6 February 1995, the trial court issued an order declaring the Cerezo spouses in default and authorizing Tuazon to present his evidence. [9] On 30 May 1995, after considering Tuazons testimonial and documentary evidence, the trial court ruled in Tuazons favor. The trial court made no pronouncement on Forondas liability because there was no service of summons on him. The trial court did not hold Atty. Cerezo liable as Tuazon failed to show that Mrs. Cerezos business benefited the family, pursuant to Article 121(3) of the Family Code. The trial court held Mrs. Cerezo solely liable for the damages sustained by Tuazon arising from the negligence of Mrs. Cerezos employee, pursuant to Article 2180 of the Civil Code. The dispositive portion of the trial courts decision reads: WHEREFORE, judgment is hereby rendered ordering the defendant Hermana Cerezo to pay the plaintiff: a) For Actual Damages 1) Expenses for operation and medical Treatment P69,485.35 2) Cost of repair of the tricycle 39,921.00 b) For loss of earnings 43,300.00 c) For moral damages 20,000.00 d) And to pay the cost of the suit. The docket fees and other expenses in the filing of this suit shall be lien on whatever judgment may be rendered in favor of the plaintiff. SO ORDERED.[10] Mrs. Cerezo received a copy of the decision on 25 June 1995. On 10 July 1995, Mrs. Cerezo filed before the trial court a petition for relief from judgment on the grounds of fraud, mistake or excusable negligence. Testifying before the trial court, both Mrs. Cerezo and Atty. Valera denied receipt of notices of hearings and of orders of the court. Atty. Valera added that he received no notice before or during the 8 May 1995 elections, when he was a senatorial candidate for the KBL Party, and very busy, using his office and residence as Party National Headquarters. Atty. Valera claimed that he was able to read the decision of the trial court only after Mrs. Cerezo sent him a copy.[11] Tuazon did not testify but presented documentary evidence to prove the participation of the Cerezo spouses in the case. Tuazon presented the following exhibits: Exhibit 1 Exhibit 1-A Exhibit 2 Exhibit 3 Exhibit 3-A Exhibit 4 Exhibit 4-A Exhibit 5 Exhibit 6 Exhibit 6-A Exhibit 7 Exhibit 7-A Exhibit 7-B Exhibit 8 Exhibit 8-A Exhibit 8-B Exhibit 9 Exhibit 9-A Exhibit 9-B Exhibit 9-C Sheriffs return and summons; Alias summons dated April 20, 1994; Comment with Motion; Minutes of the hearing held on August 1, 1994; Signature of defendants counsel; Minutes of the hearing held on August 30, 1994; Signature of the defendants counsel; Appearance and Urgent Ex-Parte Motion; Order dated November 14, 1994; Postal certification dated January 13, 1995; Order dated February [illegible]; Courts return slip addressed to Atty. Elpidio Valera; Courts return slip addressed to Spouses Juan and Hermana Cerezo; Decision dated May [30], 1995 Courts return slip addressed to defendant Hermana Cerezo; Courts return slip addressed to defendants counsel, Atty. Elpidio Valera; Order dated September 21, 1995; Second Page of Exhibit 9; Third page of Exhibit 9; Fourth page of Exhibit 9;

Exhibit 9-D Exhibit 9-E

- Courts return slip addressed to Atty. Elpidio Valera; and - Courts return slip addressed to plaintiffs counsel, Atty. Norman Dick de Guzman.[12]

On 4 March 1998, the trial court issued an order[13] denying the petition for relief from judgment. The trial court stated that having received the decision on 25 June 1995, the Cerezo spouses should have filed a notice of appeal instead of resorting to a petition for relief from judgment. The trial court refused to grant relief from judgment because the Cerezo spouses could have availed of the remedy of appeal. Moreover, the Cerezo spouses not only failed to prove fraud, accident, mistake or excusable negligence by conclusive evidence, they also failed to prove that they had a good and substantial defense. The trial court noted that the Cerezo spouses failed to appeal because they relied on an expected settlement of the case. The Cerezo spouses subsequently filed before the Court of Appeals a petition for certiorari under Section 1 of Rule 65. The petition was docketed as CA-G.R. SP No. 48132.[14] The petition questioned whether the trial court acquired jurisdiction over the case considering there was no service of summons on Foronda, whom the Cerezo spouses claimed was an indispensable party. In a resolution[15] dated 21 January 1999, the Court of Appeals denied the petition for certiorari and affirmed the trial courts order denying the petition for relief from judgment. The Court of Appeals declared that the Cerezo spouses failure to file an answer was due to their own negligence, considering that they continued to participate in the proceedings without filing an answer. There was also nothing in the records to show that the Cerezo spouses actually offered a reasonable settlement to Tuazon. The Court of Appeals also denied Cerezo spouses motion for reconsideration for lack of merit. The Cerezo spouses filed before this Court a petition for review on certiorari under Rule 45. Atty. Cerezo himself signed the petition, docketed as G.R. No. 137593. On 13 April 1999, this Court rendered a resolution denying the petition for review on certiorari for failure to attach an affidavit of service of copies of the petition to the Court of Appeals and to the adverse parties. Even if the petition complied with this requirement, the Court would still have denied the petition as the Cerezo spouses failed to show that the Court of Appeals committed a reversible error. The Courts resolution was entered in the Book of Entries and Judgments when it became final and executory on 28 June 1999.[16] Undaunted, the Cerezo spouses filed before the Court of Appeals on 6 July 1999 a petition for annulment of judgment under Rule 47 with prayer for restraining order. Atty. Valera and Atty. Dionisio S. Daga (Atty. Daga) represented Mrs. Cerezo in the petition, docketed as CA-G.R. SP No. 53572.[17] The petition prayed for the annulment of the 30 May 1995 decision of the trial court and for the issuance of a writ of preliminary injunction enjoining execution of the trial courts decision pending resolution of the petition. The Court of Appeals denied the petition for annulment of judgment in a resolution dated 21 October 1999. The resolution reads in part: In this case, records show that the petitioner previously filed with the lower court a Petition for Relief from Judgment on the ground that they were wrongfully declared in default while waiting for an amicable settlement of the complaint for damages. The court a quo correctly ruled that such petition is without merit. The defendant spouses admit that during the initial hearing they appeared before the court and even mentioned the need for an amicable settlement. Thus, the lower court acquired jurisdiction over the defendant spouses. Therefore, petitioner having availed of a petition for relief, the remedy of an annulment of judgment is no longer available. The proper action for the petitioner is to appeal the order of the lower court denying the petition for relief. Wherefore, the instant petition could not be given due course and should accordingly be dismissed. SO ORDERED.[18] On 20 January 2000, the Court of Appeals denied the Cerezo spouses motion for reconsideration.[19] The Court of Appeals stated: A distinction should be made between a courts jurisdiction over a person and its jurisdiction over the subject matter of a case. The former is acquired by the proper service of summons or by the parties voluntary appearance; while the latter is conferred by law. Resolving the matter of jurisdiction over the subject matter, Section 19(1) of B[atas] P[ambansa] 129 provides that Regional Trial Courts shall exercise exclusive original jurisdiction in all civil actions in which the subject of the litigation is incapable of pecuniary estimation. Thus it was proper for the lower court to decide the instant case for damages. Unlike jurisdiction over the subject matter of a case which is absolute and conferred by law; any defects [sic] in the acquisition of jurisdiction over a person (i.e., improper filing of civil complaint or improper service of summons) may be waived by the voluntary appearance of parties. The lower court admits the fact that no summons was served on defendant Foronda. Thus, jurisdiction over the person of defendant Foronda was not acquired, for which reason he was not held liable in this case. However, it has been proven that jurisdiction over the other defendants was validly acquired by the court a quo.

The defendant spouses admit to having appeared in the initial hearings and in the hearing for plaintiffs motion to litigate as a pauper. They even mentioned conferences where attempts were made to reach an amicable settlement with plaintiff. However, the possibility of amicable settlement is not a good and substantial defense which will warrant the granting of said petition. xxx Assuming arguendo that private respondent failed to reserve his right to institute a separate action for damages in the criminal action, the petitioner cannot now raise such issue and question the lower courts jurisdiction because petitioner and her husband have waived such right by voluntarily appearing in the civil case for damages. Therefore, the findings and the decision of the lower court may bind them. Records show that the petitioner previously filed with the lower court a Petition for Relief from Judgment on the ground that they were wrongfully declared in default while waiting for an amicable settlement of the complaint for damages. The court a quo correctly ruled that such petition is without merit, jurisdiction having been acquired by the voluntary appearance of defendant spouses. Once again, it bears stressing that having availed of a petition for relief, the remedy of annulment of judgment is no longer available. Based on the foregoing, the motion for reconsideration could not be given due course and is hereby DENIED. SO ORDERED.[20] The Issues

On 7 February 2000, Mrs. Cerezo, this time with Atty. Daga alone representing her, filed the present petition for review on certiorari before this Court. Mrs. Cerezo claims that: 1. In dismissing the Petition for Annulment of Judgment, the Court of Appeals assumes that the issues raised in the petition for annulment is based on extrinsic fraud related to the denied petition for relief notwithstanding that the grounds relied upon involves questions of lack of jurisdiction. 2. In dismissing the Petition for Annulment, the Court of Appeals disregarded the allegation that the lower court[s] findings of negligence against defendant-driver Danilo Foronda [whom] the lower court did not summon is null and void for want of due process and consequently, such findings of negligence which is [sic] null and void cannot become the basis of the lower court to adjudge petitioner-employer liable for civil damages. 3. In dismissing the Petition for Annulment, the Court of Appeals ignored the allegation that defendant-driver Danilo A. Foronda whose negligence is the main issue is an indispensable party whose presence is compulsory but [whom] the lower court did not summon. 4. In dismissing the Petition for Annulment, the Court of Appeals ruled that assuming arguendo that private respondent failed to reserve his right to institute a separate action for damages in the criminal action, the petitioner cannot now raise such issue and question the lower courts jurisdiction because petitioner [has] waived such right by voluntarily appearing in the civil case for damages notwithstanding that lack of jurisdiction cannot be waived.[21] The Courts Ruling

The petition has no merit. As the issues are interrelated, we shall discuss them jointly. Remedies Available to a Party Declared in Default An examination of the records of the entire proceedings shows that three lawyers filed and signed pleadings on behalf of Mrs. Cerezo, namely, Atty. Daga, Atty. Valera, and Atty. Cerezo. Despite their number, Mrs. Cerezos counsels failed to avail of the proper remedies. It is either by sheer ignorance or by malicious manipulation of legal technicalities that they have managed to delay the disposition of the present case, to the detriment of pauper litigant Tuazon. Mrs. Cerezo claims she did not receive any copy of the order declaring the Cerezo spouses in default. Mrs. Cerezo asserts that she only came to know of the default order on 25 June 1995, when she received a copy of the decision. On 10 July 1995, Mrs. Cerezo filed before the trial court a petition for relief from judgment under Rule 38, alleging fraud, mistake, or excusable negligence as grounds. On 4 March 1998, the trial court denied Mrs. Cerezos petition for relief from judgment. The trial court stated that Mrs. Cerezo could have availed of appeal as a remedy and that she failed to prove that the judgment was entered through fraud, accident, mistake, or excusable negligence. Mrs. Cerezo then filed before the Court of Appeals a petition for certiorari under Section 1 of Rule 65 assailing the denial of the petition for relief from judgment. On 21 January 1999, the Court of Appeals dismissed Mrs. Cerezos

petition. On 24 February 1999, the appellate court denied Mrs. Cerezos motion for reconsideration. On 11 March 1999, Mrs. Cerezo filed before this Court a petition for review on certiorari under Rule 45, questioning the denial of the petition for relief from judgment. We denied the petition and our resolution became final and executory on 28 June 1999. On 6 July 1999, a mere eight days after our resolution became final and executory, Mrs. Cerezo filed before the Court of Appeals a petition for annulment of the judgment of the trial court under Rule 47. Meanwhile, on 25 August 1999, the trial court issued over the objection of Mrs. Cerezo an order of execution of the judgment in Civil Case No. 7415. On 21 October 1999, the Court of Appeals dismissed the petition for annulment of judgment. On 20 January 2000, the Court of Appeals denied Mrs. Cerezos motion for reconsideration. On 7 February 2000, Mrs. Cerezo filed the present petition for review on certiorari under Rule 45 challenging the dismissal of her petition for annulment of judgment. Lina v. Court of Appeals[22] enumerates the remedies available to a party declared in default: a) The defendant in default may, at any time after discovery thereof and before judgment, file a motion under oath to set aside the order of default on the ground that his failure to answer was due to fraud, accident, mistake or excusable negligence, and that he has a meritorious defense (Sec. 3, Rule 18 [now Sec. 3(b), Rule 9]); b) If the judgment has already been rendered when the defendant discovered the default, but before the same has become final and executory, he may file a motion for new trial under Section 1 (a) of Rule 37; c) If the defendant discovered the default after the judgment has become final and executory, he may file a petition for relief under Section 2 [now Section 1] of Rule 38; and d) He may also appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no petition to set aside the order of default has been presented by him (Sec. 2, Rule 41). (Emphasis added) Moreover, a petition for certiorari to declare the nullity of a judgment by default is also available if the trial court improperly declared a party in default, or even if the trial court properly declared a party in default, if grave abuse of discretion attended such declaration.[23] Mrs. Cerezo admitted that she received a copy of the trial courts decision on 25 June 1995. Based on this admission, Mrs. Cerezo had at least three remedies at her disposal: an appeal, a motion for new trial, or a petition for certiorari. Mrs. Cerezo could have appealed under Rule 41[24] from the default judgment within 15 days from notice of the judgment. She could have availed of the power of the Court of Appeals to try cases and conduct hearings, receive evidence, and perform all acts necessary to resolve factual issues raised in cases falling within its appellate jurisdiction.[25] Mrs. Cerezo also had the option to file under Rule 37[26] a motion for new trial within the period for taking an appeal. If the trial court grants a new trial, the original judgment is vacated, and the action will stand for trial de novo. The recorded evidence taken in the former trial, as far as the same is material and competent to establish the issues, shall be used at the new trial without retaking the same.[27] Mrs. Cerezo also had the alternative of filing under Rule 65[28] a petition for certiorari assailing the order of default within 60 days from notice of the judgment. An order of default is interlocutory, and an aggrieved party may file an appropriate special civil action under Rule 65.[29] In a petition for certiorari, the appellate court may declare void both the order of default and the judgment of default. Clearly, Mrs. Cerezo had every opportunity to avail of these remedies within the reglementary periods provided under the Rules of Court. However, Mrs. Cerezo opted to file a petition for relief from judgment, which is available only in exceptional cases. A petition for relief from judgment should be filed within the reglementary period of 60 days from knowledge of judgment and six months from entry of judgment, pursuant to Rule 38 of the Rules of Civil Procedure.[30] Tuason v. Court of Appeals[31] explained the nature of a petition for relief from judgment: When a party has another remedy available to him, which may either be a motion for new trial or appeal from an adverse decision of the trial court, and he was not prevented by fraud, accident, mistake or excusable negligence from filing such motion or taking such appeal, he cannot avail himself of this petition. Indeed, relief will not be granted to a party who seeks avoidance from the effects of the judgment when the loss of the remedy at law was due to his own negligence; otherwise the petition for relief can be used to revive the right to appeal which has been lost thru inexcusable negligence. Evidently, there was no fraud, accident, mistake, or excusable negligence that prevented Mrs. Cerezo from filing an appeal, a motion for new trial or a petition for certiorari. It was error for her to avail of a petition for relief from judgment. After our resolution denying Mrs. Cerezos petition for relief became final and executory, Mrs. Cerezo, in her last ditch attempt to evade liability, filed before the Court of Appeals a petition for annulment of the judgment of the trial court. Annulment is available only on the grounds of extrinsic fraud and lack of jurisdiction. If based on extrinsic fraud, a party must file the petition within four years from its discovery, and if based on lack of jurisdiction, before laches or estoppel bars the petition. Extrinsic fraud is not a valid ground if such fraud was used as a ground, or could have been used as a ground, in a motion for new trial or petition for relief from judgment.[32] Mrs. Cerezo insists that lack of jurisdiction, not extrinsic fraud, was her ground for filing the petition for annulment of judgment. However, a party may avail of the remedy of annulment of judgment under Rule 47 only if the ordinary remedies of new trial,

appeal, petition for relief from judgment, or other appropriate remedies are no longer available through no fault of the party.[33] Mrs. Cerezo could have availed of a new trial or appeal but through her own fault she erroneously availed of the remedy of a petition for relief, which was denied with finality. Thus, Mrs. Cerezo may no longer avail of the remedy of annulment. In any event, the trial court clearly acquired jurisdiction over Mrs. Cerezos person. Mrs. Cerezo actively participated in the proceedings before the trial court, submitting herself to the jurisdiction of the trial court. The defense of lack of jurisdiction fails in light of her active participation in the trial court proceedings. Estoppel or laches may also bar lack of jurisdiction as a ground for nullity especially if raised for the first time on appeal by a party who participated in the proceedings before the trial court, as what happened in this case.[34] For these reasons, the present petition should be dismissed for utter lack of merit. The extraordinary action to annul a final judgment is restricted to the grounds specified in the rules. The reason for the restriction is to prevent this extraordinary action from being used by a losing party to make a complete farce of a duly promulgated decision that has long become final and executory. There would be no end to litigation if parties who have unsuccessfully availed of any of the appropriate remedies or lost them through their fault could still bring an action for annulment of judgment.[35] Nevertheless, we shall discuss the issues raised in the present petition to clear any doubt about the correctness of the decision of the trial court. Mrs. Cerezos Liability and the Trial Courts Acquisition of Jurisdiction Mrs. Cerezo contends that the basis of the present petition for annulment is lack of jurisdiction. Mrs. Cerezo asserts that the trial court could not validly render judgment since it failed to acquire jurisdiction over Foronda. Mrs. Cerezo points out that there was no service of summons on Foronda. Moreover, Tuazon failed to reserve his right to institute a separate civil action for damages in the criminal action. Such contention betrays a faulty foundation. Mrs. Cerezos contention proceeds from the point of view of criminal law and not of civil law, while the basis of the present action of Tuazon is quasi-delict under the Civil Code, not delict under the Revised Penal Code. The same negligent act may produce civil liability arising from a delict under Article 103 of the Revised Penal Code, or may give rise to an action for a quasi-delict under Article 2180 of the Civil Code. An aggrieved party may choose between the two remedies. An action based on a quasi-delict may proceed independently from the criminal action.[36] There is, however, a distinction between civil liability arising from a delict and civil liability arising from a quasi-delict. The choice of remedy, whether to sue for a delict or a quasidelict, affects the procedural and jurisdictional issues of the action.[37] Tuazon chose to file an action for damages based on a quasi-delict. In his complaint, Tuazon alleged that Mrs. Cerezo, without exercising due care and diligence in the supervision and management of her employees and buses, hired Foronda as her driver. Tuazon became disabled because of Forondas recklessness, gross negligence and imprudence, aggravated by Mrs. Cerezos lack of due care and diligence in the selection and supervision of her employees, particularly Foronda.[38] The trial court thus found Mrs. Cerezo liable under Article 2180 of the Civil Code. Article 2180 states in part: Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. Contrary to Mrs. Cerezos assertion, Foronda is not an indispensable party to the case. An indispensable party is one whose interest is affected by the courts action in the litigation, and without whom no final resolution of the case is possible.[39] However, Mrs. Cerezos liability as an employer in an action for a quasi-delict is not only solidary, it is also primary and direct. Foronda is not an indispensable party to the final resolution of Tuazons action for damages against Mrs. Cerezo. The responsibility of two or more persons who are liable for a quasi-delict is solidary.[40] Where there is a solidary obligation on the part of debtors, as in this case, each debtor is liable for the entire obligation. Hence, each debtor is liable to pay for the entire obligation in full. There is no merger or renunciation of rights, but only mutual representation.[41] Where the obligation of the parties is solidary, either of the parties is indispensable, and the other is not even a necessary party because complete relief is available from either.[42] Therefore, jurisdiction over Foronda is not even necessary as Tuazon may collect damages from Mrs. Cerezo alone. Moreover, an employers liability based on a quasi-delict is primary and direct, while the employers liability based on a delict is merely subsidiary.[43] The words primary and direct, as contrasted with subsidiary, refer to the remedy provided by law for enforcing the obligation rather than to the character and limits of the obligation.[44] Although liability under Article 2180 originates from the negligent act of the employee, the aggrieved party may sue the employer directly. When an employee causes damage, the law presumes that the employer has himself committed an act of negligence in not preventing or avoiding the damage. This is the fault that the law condemns. While the employer is civilly liable in a subsidiary capacity for the employees criminal negligence, the employer is also civilly liable directly and separately for his own civil negligence in failing to exercise due diligence in selecting and supervising his employee. The idea that the employers liability is solely subsidiary is wrong.[45] The action can be brought directly against the person responsible (for another), without including the author of the act. The action against the principal is accessory in the sense that it implies the existence of a prejudicial act committed by the employee, but it is not subsidiary in the sense that it can not be instituted till after the judgment against the author of the act or at least, that it is subsidiary to the principal action; the action for responsibility (of the employer) is in itself a principal action.[46] Thus, there is no need in this case for the trial court to acquire jurisdiction over Foronda. The trial courts acquisition of

jurisdiction over Mrs. Cerezo is sufficient to dispose of the present case on the merits. In contrast, an action based on a delict seeks to enforce the subsidiary liability of the employer for the criminal negligence of the employee as provided in Article 103 of the Revised Penal Code. To hold the employer liable in a subsidiary capacity under a delict, the aggrieved party must initiate a criminal action where the employees delict and corresponding primary liability are established.[47] If the present action proceeds from a delict, then the trial courts jurisdiction over Foronda is necessary. However, the present action is clearly for the quasi-delict of Mrs. Cerezo and not for the delict of Foronda. The Cerezo spouses contention that summons be served anew on them is untenable in light of their participation in the trial court proceedings. To uphold the Cerezo spouses contention would make a fetish of a technicality.[48] Moreover, any irregularity in the service of summons that might have vitiated the trial courts jurisdiction over the persons of the Cerezo spouses was deemed waived when the Cerezo spouses filed a petition for relief from judgment.[49] We hold that the trial court had jurisdiction and was competent to decide the case in favor of Tuazon and against Mrs. Cerezo even in the absence of Foronda. Contrary to Mrs. Cerezos contention, Foronda is not an indispensable party to the present case. It is not even necessary for Tuazon to reserve the filing of a separate civil action because he opted to file a civil action for damages against Mrs. Cerezo who is primarily and directly liable for her own civil negligence. The words of Justice Jorge Bocobo in Barredo v. Garcia still hold true today as much as it did in 1942: x x x [T]o hold that there is only one way to make defendants liability effective, and that is, to sue the driver and exhaust his (the latters) property first, would be tantamount to compelling the plaintiff to follow a devious and cumbersome method of obtaining relief. True, there is such a remedy under our laws, but there is also a more expeditious way, which is based on the primary and direct responsibility of the defendant under article [2180] of the Civil Code. Our view of the law is more likely to facilitate remedy for civil wrongs, because the procedure indicated by the defendant is wasteful and productive of delay, it being a matter of common knowledge that professional drivers of taxis and other similar public conveyances do not have sufficient means with which to pay damages. Why, then, should the plaintiff be required in all cases to go through this roundabout, unnecessary, and probably useless procedure? In construing the laws, courts have endeavored to shorten and facilitate the pathways of right and justice.[50] Interest at the rate of 6% per annum is due on the amount of damages adjudged by the trial court.[51] The 6% per annum interest shall commence from 30 May 1995, the date of the decision of the trial court. Upon finality of this decision, interest at 12% per annum, in lieu of 6% per annum, is due on the amount of damages adjudged by the trial court until full payment. WHEREFORE, we DENY the instant petition for review. The Resolution dated 21 October 1999 of the Court of Appeals in CAG.R. SP No. 53572, as well as its Resolution dated 20 January 2000 denying the motion for reconsideration, is AFFIRMED with the MODIFICATION that the amount due shall earn legal interest at 6% per annum computed from 30 May 1995, the date of the trial courts decision. Upon finality of this decision, the amount due shall earn interest at 12% per annum, in lieu of 6% per annum, until full payment. SO ORDERED. Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 83851. March 3, 1993. VISAYAN SAWMILL COMPANY, INC., and ANG TAY, petitioners, vs. THE HONORABLE COURT OF APPEALS and RJH TRADING, represented by RAMON J. HIBIONADA, proprietor, respondents. Saleto J. Erames and Edilberto V. Logronio for petitioners. Eugenio O. Original for private respondent. SYLLABUS 1. CIVIL LAW; CONTRACT TO SELL; EFFECT OF VENDEE'S FAILURE TO COMPLY WITH POSITIVE SUSPENSIVE CONDITION; CASE AT BAR. The petitioner corporation's obligation to sell is unequivocally subject to a positive suspensive condition, i.e., the private respondent's opening, making or indorsing of an irrevocable and unconditional letter of credit. The former agreed to deliver the scrap iron only upon payment of the purchase price by means of an irrevocable and unconditional letter of credit. Otherwise stated, the contract is not one of sale where the buyer acquired ownership over the property subject to the resolutory condition that the purchase price would be paid after delivery. Thus, there was to be no actual sale until the opening, making or indorsing of the irrevocable and unconditional letter of credit. Since what obtains in the case at bar is a mere promise to sell, the failure of the private respondent to comply with the positive suspensive condition cannot even be considered a breach casual or serious but simply an event that prevented the obligation of petitioner corporation to convey title from acquiring binding force. In Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc., this Court stated: ". . . The upshot of all these stipulations is that in seeking the ouster of Maritime for failure to pay

the price as agreed upon, Myers was not rescinding (or more properly, resolving) the contract, but precisely enforcing it according to its express terms. In its suit Myers was not seeking restitution to it of the ownership of the thing sold (since it was never disposed of), such restoration being the logical consequence of the fulfillment of a resolutory condition, express or implied (Article 1190); neither was it seeking a declaration that its obligation to sell was extinguished. What it sought was a judicial declaration that because the suspensive condition (full and punctual payment) had not been fulfilled, its obligation to sell to Maritime never arose or never became effective and, therefore, it (Myers) was entitled to repossess the property object of the contract, possession being a mere incident to its right of ownership. It is elementary that, as stated by Castan, -- 'b) Si la condicion suspensiva llega a faltar, la obligacion se tiene por no existente, y el acreedor pierde todo derecho, incluso el de utilizar las medidas conservativas.'(3 Castan, Derecho Civil, 7a Ed., p. 107). (Also Puig Pea, Der. Civ., T. IV (1), p. 113).'" 2. ID.; ID.; ID.; RESCISSION. The obligation of the petitioner corporation to sell did not arise; it therefore cannot be compelled by specific performance to comply with its prestation. In short, Article 1191 of the Civil Code does not apply; on the contrary, pursuant to Article 1597 of the Civil Code, the petitioner corporation may totally rescind, as it did in this case, the contract. Said Article provides: "ART. 1597. Where the goods have not been delivered to the buyer, and the buyer has repudiated the contract of sale, or has manifested his inability to perform his obligations, thereunder, or has committed a breach thereof, the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer." 3. ID.; ID.; IN CASE AT BAR, VENDOR'S CONSENT TO DIGGING UP AND GATHERING OF SCRAP IRON NOT CONSTRUED AS DELIVERY THEREOF; REASONS THEREFOR. Paragraph 6 of the Complaint reads: "6. That on May 17, 1983 Plaintiff with the consent of defendant Ang Tay sent his men to the stockyard of Visayan Sawmill Co., Inc. at Cawitan, Sta. Catalina, Negros Oriental to dig and gather the scrap iron and stock the same for weighing." This permission or consent can, by no stretch of the imagination, be construed as delivery of the scrap iron in the sense that, as held by the public respondent, citing Article 1497 of the Civil Code, petitioners placed the private respondent in control and possession thereof. In the first place, said Article 1497 falls under the Chapter Obligations of the Vendor, which is found in Title VI (Sales), Book IV of the Civil Code. As such, therefore, the obligation imposed therein is premised on an existing obligation to deliver the subject of the contract. In the instant case, in view of the private respondent's failure to comply with the positive suspensive condition earlier discussed, such an obligation had not yet arisen. In the second place, it was a mere accommodation to expedite the weighing and hauling of the iron in the event that the sale would materialize. The private respondent was not thereby placed in possession of and control over the scrap iron. Thirdly, We cannot even assume the conversion of the initial contract or promise to sell into a contract of sale by the petitioner corporation's alleged implied delivery of the scrap iron because its action and conduct in the premises do not support this conclusion. Indeed, petitioners demanded the fulfillment of the suspensive condition and eventually cancelled the contract. 4. ID.; CONTRACTS; DAMAGES; MORAL DAMAGES; PURPOSE OF AWARD THEREOF; EXEMPLARY DAMAGES. In contracts, such as in the instant case, moral damages may be recovered if defendants acted fraudulently and in bad faith, while exemplary damages may only be awarded if defendants acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. In the instant case, the refusal of the petitioners to deliver the scrap iron was founded on the non-fulfillment by the private respondent of a suspensive condition. It cannot, therefore, be said that the herein petitioners had acted fraudulently and in bad faith or in a wanton, reckless, oppressive or malevolent manner. What this Court stated in Inhelder Corp. vs. Court of Appeals needs to be stressed anew: "At this juncture, it may not be amiss to remind Trial Courts to guard against the award of exhorbitant (sic) damages that are way out of proportion to the environmental circumstances of a case and which, time and again, this Court has reduced or eliminated. Judicial discretion granted to the Courts in the assessment of damages must always be exercised with balanced restraint and measured objectivity." For, indeed, moral damages are emphatically not intended to enrich a complainant at the expense of the defendant. They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to obviate the moral suffering he has undergone, by reason of the defendant's culpable action. Its award is aimed at the restoration, within the limits of the possible, of the spiritual status quo ante, and it must be proportional to the suffering inflicted. ROMERO, J., dissenting: 1. CIVIL LAW; CONTRACT OF SALE; DEFINED; WHEN PERFECTED; CASE AT BAR. Article 1458 of the Civil Code has this definition: "By a 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." Article 1475 gives the significance of this mutual undertaking of the parties, thus: "The contract of sale is perfected at the moment there is a meeting of minds upon th e thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts." Thus, when the parties entered into the contract entitled "Purchase and Sale of Scrap Iron" on May 1, 1983, the contract reached the stage of perfection, there being a meeting of the' minds upon the object which is the subject matter of the contract and the price which is the consideration. Applying Article 1475 of the Civil Code, from that moment, the parties may reciprocally demand performance of the obligations incumbent upon them, i.e., delivery by the vendor and payment by the vendee. 2. ID.; ID.; DELIVERY; HOW ACCOMPLISHED; CASE AT BAR. From the time the seller gave access to the buyer to enter his premises, manifesting no objection thereto but even sending 18 or 20 people to start the operation, he has placed the goods in the control and possession of the vendee and delivery is effected. For according to Article 1497, "The thing sold shall be unders tood as delivered when it is placed in the control and possession of the vendee." Such action or real delivery (traditio) is the act that transfers ownership. Under Article 1496 of the Civil Code, "The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee."

3. ID.; ID.; PROVISION IN CONTRACT REGARDING MODE OF PAYMENT NOT ESSENTIAL REQUISITE THEREOF; WHEN PROVISION CONSIDERED A SUSPENSIVE CONDITION. a provision in the contract regarding the mode of payment, like the requirement for the opening of the Letter of Credit in this case, is not among the essential requirements of a contract of sale enumerated in Articles 1305 and 1474, the absence of any of which will prevent the perfection of the contract from happening. Likewise, it must be emphasized that not every provision regarding payment should automatically be classified as a suspensive condition. To do so would change the nature of most contracts of sale into contracts to sell. For a provision in the contract regarding the payment of the price to be considered a suspensive condition, the parties must have made this clear in certain and unambiguous terms, such as for instance, by reserving or withholding title to the goods until full payment by the buyer. This was a pivotal circumstance in the Luzon Brokerage case where the contract in question was replete with very explicit provisions such as the following: "Title to the properties subject of this contract remains with the Vendor and shall pass to, and be transferred in the name of the Vendee only upon complete payment of the full price . . .;" 10 the Vendor (Myers) will execute and deliver to the Vendee a definite and absolute Deed of Sale upon full payment of the Vendee . . .; and "should the Vendee fail to pay any of the monthly installments, when due, or otherwise fail to comply with any of the terms and conditions herein stipulated, then this Deed of Conditional Sale shall automatically and without any further formality, become null and void." It is apparent from a careful reading of Luzon Brokerage, as well as the cases which preceded it and the subsequent ones applying its doctrines, that the mere insertion of the price and the mode of payment among the terms and conditions of the agreement will not necessarily make it a contract to sell. The phrase in the contract "on the following terms and conditions" is standard form which is not to be construed as imposing a condition, whether suspensive or resolutory, in the sense of the happening of a future and uncertain event upon which an obligation is made to depend. There must be a manifest understanding that the agreement is in what may be referred to as "suspended animation" pending compliance with provisions regarding payment. The reservation of title to the object of the contract in the seller is one such manifestation. Hence, it has been decided in the case of Dignos v. Court of Appeals that, absent a proviso in the contract that the title to the property is reserved in the vendor until full payment of the purchase price or a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within the fixed period, the transaction is an absolute contract of sale and not a contract to sell. 4. ID.; ID.; CONTRACT OF SALE DISTINGUISHED FROM CONTRACT TO SELL; EFFECT OF NON-PAYMENT OF PURCHASE PRICE; EFFECT OF DELIVERY ON OWNERSHIP OF OBJECT OF CONTRACT. In a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the transaction that, for a time, existed and discharges the obligations created thereunder. On the other hand, "the parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price." In such a contract to sell, the full payment of the price is a positive suspensive condition, such that in the event of non-payment, the obligation of the seller to deliver and transfer ownership never arises. Stated differently, in a contract to sell, ownership is not transferred upon delivery of property but upon full payment of the purchase price. Consequently, in a contract of sale, after delivery of the object of the contract has been made, the seller loses ownership and cannot recover the same unless the contract is rescinded. But in the contract to sell, the seller retains ownership and the buyer's failure to pay cannot even be considered a breach, whether casual or substantial, but an event that prevented the seller's duty to transfer title to the object of the contract. 5. ID.; ID.; CASE OF SYCIP V. NATIONAL COCONUT CORPORATION, ET AL., G.R. NO. L-6618, APRIL 28, 1956, DISTINGUISHED FROM CASE AT BAR. Worthy of mention before concluding is Sycip v. National Coconut Corporation, et al. since, like this case, it involves a failure to open on time the Letter of Credit required by the seller. In Sycip, after the buyer offered to buy 2,000 tons of copra, the seller sent a telegram dated December 19, 1946 to the buyer accepting the offer but on condition that the latter opens a Letter of Credit within 48 hours. It was not until December 26, 1946, however, that the Letter of Credit was opened. The Court, speaking through Justice Bengzon, held that because of the delay in the opening of the Letter of Credit; the seller was not obliged to deliver the goods. Two factors distinguish Sycip from the case at bar. First, while there has already been a perfected contract of sale in the instant case, the parties in Sycip were still undergoing the negotiation process. The seller's qualified acceptance in Sycip served as a counter offer which prevented the contract from being perfected. Only an absolute and unqualified acceptance of a definite offer manifests the consent necessary to perfect a contract. Second, the Court found in Sycip that time was of the essence for the seller who was anxious to sell to other buyers should the offeror fail to open the Letter of Credit within the stipulated time. In contrast, there are no indicia in this case that can lead one to conclude that time was of the essence for petitioner as would make the eleven-day delay a fundamental breach of the contract. 6. ID.; OBLIGATIONS AND CONTRACTS; RESCISSION UNDER ARTICLE 1191 OF THE CIVIL CODE; WHEN PROPER; DELAY IN PAYMENT FOR TWENTY DAYS NOT CONSIDERED A SUBSTANTIAL BREACH OF CONTRACT; CASE AT BAR. The right to rescind pursuant to Article 1191 is not absolute. Rescission will not be permitted for slight or casual breach of the contract. Here, petitioners claim that the breach is so substantial as to justify rescission . . . I am not convinced that the circumstances may be characterized as so substantial and fundamental as to defeat the object of the parties in making the agreement. None of the alleged defects in the Letter of Credit would serve to defeat the object of the parties. It is to be stressed that the purpose of the opening of a Letter of Credit is to effect payment. The above-mentioned factors could not have prevented such payment. It is also significant to note that petitioners sent a telegram to private respondents on May 23, 1983 cancelling the contract. This was before they had even received on May 26, 1983 the notice from the bank about the opening of the Letter of Credit. How could they have made a judgment on the materiality of the provisions of the Letter of Credit for purposes of rescinding the contract even before setting eyes on said document? To be sure, in the contract, the private respondents were supposed to open the Letter of Credit on May 15, 1983 but, it was not until May 26, 1983 or eleven (11) days later that they did so. Is the eleven-day delay a substantial breach of the contract as could justify the rescission of the contract? In Song Fo and Co. v. Hawaiian-Philippine Co., it was held that a delay in payment for twenty (20) days was not a violation of an essential condition of the contract which would warrant rescission for non-performance. In the instant case, the contract is bereft of any suggestion that time was of the essence. On the contrary, it is noted that petitioners allowed private respondents' men to dig and remove the scrap iron located in petitioners' premises between May 17, 1983 until May 30, 1983 or beyond the May 15, 1983 deadline for the opening of the Letter of Credit. Hence, in the absence of any indication that the time was of the essence, the eleven-day delay must be deemed a casual breach which cannot justify a rescission.

DECISION DAVIDE, JR., J p: By this petition for review under Rule 45 of the Rules of Court, petitioners urge this Court to set aside the decision of public respondent Court of Appeals in C.A.-G.R. CV No. 08807, 1 promulgated on 16 March 1988, which affirmed with modification, in respect to the moral damages, the decision of the Regional Trial Court (RTC) of Iloilo in Civil Case No. 15128, an action for specific performance and damages, filed by the herein private respondent against the petitioners. The dispositive portion of the trial court's decision reads as follows: "IN VIEW OF THE ABOVE FINDINGS, judgment is hereby rendered in favor of plaintiff and against the defendants ordering the latter to pay jointly and severally plaintiff, to wit: 1) The sum of Thirty-Four Thousand Five Hundred Eighty Three and 16/100 (P34,583.16), as actual damages; 2) The sum of One Hundred Thousand (P100,000.00) Pesos, as moral damages; 3) The sum of Ten Thousand (P10,000.00) Pesos, as exemplary damages; 4) The sum of TWENTY Five Thousand (P25,000.00) Pesos, as attorney's fees; and 5) The sum of Five Thousand (P5,000.00) Pesos as actual litis expenses." 2 The public respondent reduced the amount of moral damages to P25,000.00. The antecedent facts, summarized by the public respondent, are as follows: "On May 1, 1983, herein plaintiff-appellee and defendants-appellants entered into a sale involving scrap iron located at the stockyard of defendant-appellant corporation at Cawitan, Sta. Catalina, Negros Oriental, subject to the condition that plaintiff-appellee will open a letter of credit in the amount of P250,000.00 in favor of defendant-appellant corporation on or before May 15, 1983. This is evidenced by a contract entitled `Purchase and Sale of Scrap Iron' duly signed by both parties. On May 17, 1983, plaintiff-appellee through his man (sic), started to dig and gather and (sic) scrap iron at the defendant-appellant's (sic) premises, proceeding with such endeavor until May 30 when defendants-appellants allegedly directed plaintiff-appellee's men to desist from pursuing the work in view of an alleged case filed against plaintiff-appellee by a certain Alberto Pursuelo. This, however, is denied by defendants-appellants who allege that on May 23, 1983, they sent a telegram to plaintiff-appellee cancelling the contract of sale because of failure of the latter to comply with the conditions thereof. On May 24, 1983, plaintiff-appellee informed defendants-appellants by telegram that the letter of credit was opened May 12, 1983 at the Bank of the Philippine Islands main office in Ayala, but then (sic) the transmittal was delayed. On May 26, 1983, defendants-appellants received a letter advice from the Dumaguete City Branch of the Bank of the Philippine Islands dated May 26, 1983, the content of which is quited (sic) as follows: 'Please be advised that we have received today cable advise from our Head Office which reads as follows: 'Open today our irrevocable Domestic Letter of Credit No. 01456-d fot (sic) P250,000.00 favor ANG TAY c/o Visayan Sawmill Co., Inc. Dumaguete City, Negros Oriental Account of ARMACO-MARSTEEL ALLOY CORPORATION 2nd Floor Alpap 1 Bldg., 140 Alfaro stp (sic) Salcedo Village, Makati, Metro Manila Shipments of about 500 MT of assorted steel scrap marine/heavy equipment expiring on July 24, 1983 without recourse at sight draft drawn on Armaco Marsteel Alloy Corporation accompanied by the following documents: Certificate of Acceptance by Armaco-Marsteel Alloy Corporation shipment from Dumaguete City to buyer's warehouse partial shipment allowed/transhipment (sic) not allowed'. For your information'. On July 19, 1983, plaintiff-appellee sent a series of telegrams stating that the case filed against him by Pursuelo had been dismissed and demanding that defendants-appellants comply with the deed of sale, otherwise a case will be filed against them. In reply to those telegrams, defendants-appellants' lawyer, on July 20, 1983 informed plaintiff-appellee's lawyer that defendantappellant corporation is unwilling to continue with the sale due to plaintiff-appellee's failure to comply with essential pre-conditions of the contract.

On July 29, 1983, plaintiff-appellee filed the complaint below with a petition for preliminary attachment. The writ of attachment was returned unserved because the defendant-appellant corporation was no longer in operation and also because the scrap iron as well as other pieces of machinery can no longer be found on the premises of the corporation." 3 In his complaint, private respondent prayed for judgment ordering the petitioner corporation to comply with the contract by delivering to him the scrap iron subject thereof; he further sought an award of actual, moral and exemplary damages, attorney's fees and the costs of the suit. 4 In their Answer with Counterclaim, 5 petitioners insisted that the cancellation of the contract was justified because of private respondent's non-compliance with essential pre-conditions, among which is the opening of an irrevocable and unconditional letter of credit not later than 15 May 1983. During the pre-trial of the case on 30 April 1984, the parties defined the issues to be resolved; these issues were subsequently embodied in the pre-trial order, to wit: "1. Was the contract entitled Purchase and Sale of Scrap Iron, dated May 1, 1983 executed by the parties cancelled and terminated before the Complaint was filed by anyone of the parties; if so, what are the grounds and reasons relied upon by the cancelling parties; and were the reasons or grounds for cancelling valid and justified? 2. Are the parties entitled to damages they respectively claim under the pleadings?" 6 On 29 November 1985, the trial court rendered its judgment, the dispositive portion of which was quoted earlier. Petitioners appealed from said decision to the Court of Appeals which docketed the same as C.A.-G.R. CV No. 08807. In their Brief, petitioners, by way of assigned errors, alleged that the trial court erred: "1. In finding that there was delivery of the scrap iron subject of the sale; 2. In not finding that plaintiff had not complied with the conditions in the contract of sale; 3. In finding that defendants-appellants were not justified in cancelling the sale; 4. In awarding damages to the plaintiff as against the defendants-appellants; 5. In not awarding damages to defendants-appellants." 7 Public respondent disposed of these assigned errors in this wise: "On the first error assigned, defendants-appellants argue that there was no delivery because the purchase document states that the seller agreed to sell and the buyer agreed to buy 'an undetermined quantity of scrap iron and junk which the seller will identify and designate.' Thus, it is contended, since no identification and designation was made, there could be no delivery. In addition, defendantsappellants maintain that their obligation to deliver cannot be completed until they furnish the cargo trucks to haul the weighed materials to the wharf. The arguments are untenable. Article 1497 of the Civil Code states: 'The thing sold shall be understood as delivered when it is placed in the control and possession of the vendee.' In the case at bar, control and possession over the subject matter of the contract was given to plaintiff-appellee, the buyer, when the defendants-appellants as the sellers allowed the buyer and his men to enter the corporation's premises and to dig-up the scrap iron. The pieces of scrap iron then (sic) placed at the disposal of the buyer. Delivery was therefore complete. The identification and designation by the seller does not complete delivery. On the second and third assignments of error, defendants-appellants argue that under Articles 1593 and 1597 of the Civil Code, automatic rescission may take place by a mere notice to the buyer if the latter committed a breach of the contract of sale. Even if one were to grant that there was a breach of the contract by the buyer, automatic rescission cannot take place because, as already (sic) stated, delivery had already been made. And, in cases where there has already been delivery, the intervention of the court is necessary to annul the contract. As the lower court aptly stated:

'Respecting these allegations of the contending parties, while it is true that Article 1593 of the New Civil Code provides that with respect to movable property, the rescission of the sale shall of right take place in the interest of the vendor, if the vendee fails to tender the price at the time or period fixed or agreed, however, automatic rescission is not allowed if the object sold has been delivered to the buyer (Guevarra vs. Pascual, 13 Phil. 311; Escueta vs. Pando, 76 Phil 256), the action being one to rescind judicially and where (sic) Article 1191, supra, thereby applies. There being already an implied delivery of the items, subject matter of the contract between the parties in this case, the defendant having surrendered the premises where the scraps (sic) were found for plaintiff's men to dig and gather, as in fact they had dug and gathered, this Court finds the mere notice of resolution by the defendants untenable and not conclusive on the rights of the plaintiff (Ocejo Perez vs. Int. Bank, 37 Phi. 631). Likewise, as early as in the case of Song Fo vs. Hawaiian Philippine Company, it has been ruled that rescission cannot be sanctioned for a slight or casual breach (47 Phil. 821).' In the case of Angeles vs. Calasanz (135 (1935) SCRA 323), the Supreme Court ruled: 'Article 1191 is explicit. In reciprocal obligations, either party has the right to rescind the contract upon failure of the other to perform the obligation assumed thereunder. Of course, it must be understood that the right of a party in treating a contract as cancelled or resolved on account of infractions by the other contracting party must be made known to the other and is always provisional, being ever subject to scrutiny and review by the proper court.' Thus, rescission in cases falling under Article 1191 of the Civil Code is always subject to review by the courts and cannot be considered final. In the case at bar, the trial court ruled that rescission is improper because the breach was very slight and the delay in opening the letter of credit was only 11 days. 'Where time is not of the essence of the agreement, a slight delay by one party in the performance of his obligation is not a sufficient ground for rescission of the agreement. Equity and justice mandates (sic) that the vendor be given additional (sic) period to complete payment of the purchase price.' (Taguda vs. Vda. de Leon, 132 SCRA (1984), 722).' There is no need to discuss the fourth and fifth assigned errors since these are merely corollary to the first three assigned errors." 8 Their motion to reconsider the said decision having been denied by public respondent in its Resolution of 4 May 1988, 9 petitioners filed this petition reiterating the abovementioned assignment of errors. There is merit in the instant petition. Both the trial court and the public respondent erred in the appreciation of the nature of the transaction between the petitioner corporation and the private respondent. To this Court's mind, what obtains in the case at bar is a mere contract to sell or promise to sell, and not a contract of sale. The trial court assumed that the transaction is a contract of sale and, influenced by its view that there was an "implied delivery" of the object of the agreement, concluded that Article 1593 of the Civil Code was inapplicable; citing Guevarra vs. Pascual 10 and Escueta vs. Pando, 11 it ruled that rescission under Article 1191 of the Civil Code could only be done judicially. The trial court further classified the breach committed by the private respondent as slight or casual, foreclosing, thereby, petitioners' right to rescind the agreement. Article 1593 of the Civil Code provides: "ARTICLE 1593. With respect to movable property, the rescission of the sale shall of right take place in the interest of the vendor, if the vendee, upon the expiration of the period fixed for the delivery of the thing, should not have appeared to receive it, or, having appeared, he should not have tendered the price at the same time, unless a longer period has been stipulated for its payment." Article 1191 provides: "ARTICLE 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period." xxx xxx xxx

Sustaining the trial court on the issue of delivery, public respondent cites Article 1497 of the Civil Code which provides: "ARTICLE 1497. The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee." In the agreement in question, entitled PURCHASE AND SALE OF SCRAP IRON, 12 the seller bound and promised itself to sell the scrap iron upon the fulfillment by the private respondent of his obligation to make or indorse an irrevocable and unconditional letter of credit in payment of the purchase price. Its principal stipulation reads, to wit: xxx xxx xxx "Witnesseth: That the SELLER agrees to sell, and the BUYER agrees to buy, an undetermined quantity of scrap iron and junk which the SELLER will identify and designate now at Cawitan, Sta. Catalina, Negros Oriental, at the price of FIFTY CENTAVOS (P0.50) per kilo on the following terms and conditions: 1. Weighing shall be done in the premises of the SELLER at Cawitan, Sta. Catalina, Neg. Oriental. 2. To cover payment of the purchase price, BUYER will open, make or indorse an irrevocable and unconditional letter of credit not later than May 15, 1983 at the Consolidated Bank and Trust Company, Dumaguete City, Branch, in favor of the SELLER in the sum of TWO HUNDRED AND FIFTY THOUSAND PESOS (P250,000.00), Philippine Currency. 3. The SELLER will furnish the BUYER free of charge at least three (3) cargo trucks with drivers, to haul the weighed materials from Cawitan to the TSMC wharf at Sta. Catalina for loading on BUYER's barge. All expenses for labor, loading and unloading shall be for the account of the BUYER. 4. SELLER shall be entitled to a deduction of three percent (3%) per ton as rust allowance." (Emphasis supplied). The petitioner corporation's obligation to sell is unequivocally subject to a positive suspensive condition, i.e., the private respondent's opening, making or indorsing of an irrevocable and unconditional letter of credit. The former agreed to deliver the scrap iron only upon payment of the purchase price by means of an irrevocable and unconditional letter of credit. Otherwise stated, the contract is not one of sale where the buyer acquired ownership over the property subject to the resolutory condition that the purchase price would be paid after delivery. Thus, there was to be no actual sale until the opening, making or indorsing of the irrevocable and unconditional letter of credit. Since what obtains in the case at bar is a mere promise to sell, the failure of the private respondent to comply with the positive suspensive condition cannot even be considered a breach casual or serious but simply an event that prevented the obligation of petitioner corporation to convey title from acquiring binding force. In Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc., 13 this Court stated: " . . . The upshot of all these stipulations is that in seeking the ouster of Maritime for failure to pay the price as agreed upon, Myers was not rescinding (or more properly, resolving) the contract, but precisely enforcing it according to its express terms. In its suit Myers was not seeking restitution to it of the ownership of the thing sold (since it was never disposed of), such restoration being the logical consequence of the fulfillment of a resolutory condition, express or implied (article 1190); neither was it seeking a declaration that its obligation to sell was extinguished. What it sought was a judicial declaration that because the suspensive condition (full and punctual payment) had not been fulfilled, its obligation to sell to Maritime never arose or never became effective and, therefore, it (Myers) was entitled to repossess the property object of the contract, possession being a mere incident to its right of ownership. It is elementary that, as stated by Castan, 'b) Si la condicion suspensiva llega a faltar, la obligacion se tiene por no existente, y el acreedor pierde todo derecho, incluso el de utilizar las medidas conservativas.' (3 Cast n, Derecho Civil, 7a Ed., p. 107). (Also Puig Pea, Der. Civ., T. IV (1), p. 113)'." In the instant case, not only did the private respondent fail to open, make or indorse an irrevocable and unconditional letter of credit on or before 15 May 1983 despite his earlier representation in his 24 May 1983 telegram that he had opened one on 12 May 1983, the letter of advice received by the petitioner corporation on 26 May 1983 from the Bank of the Philippine Islands Dumaguete City branch explicitly makes reference to the opening on that date of a letter of credit in favor of petitioner Ang Tay c/o Visayan Sawmill Co. Inc., drawn without recourse on ARMACO-MARSTEEL ALLOY CORPORATION and set to expire on 24 July 1983, which is indisputably not in accordance with the stipulation in the contract signed by the parties on at least three (3) counts: (1) it was not opened, made or indorsed by the private respondent, but by a corporation which is not a party to the contract; (2) it was not opened with the bank agreed upon; and (3) it is not irrevocable and unconditional, for it is without recourse, it is set to expire on a specific date and it stipulates certain conditions with respect to shipment. In all probability, private respondent may have sold the subject scrap iron to ARMACOMARSTEEL ALLOY CORPORATION, or otherwise assigned to it the contract with the petitioners. Private respondent's complaint fails to disclose the sudden entry into the picture of this corporation. Consequently, the obligation of the petitioner corporation to sell did not arise; it therefore cannot be compelled by specific performance to comply with its prestation. In short, Article 1191 of the Civil Code does not apply; on the contrary, pursuant to Article 1597 of the Civil

Code, the petitioner corporation may totally rescind, as it did in this case, the contract. Said Article provides: "ARTICLE 1597. Where the goods have not been delivered to the buyer, and the buyer has repudiated the contract of sale, or has manifested his inability to perform his obligations, thereunder, or has committed a breach thereof, the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer." The trial court ruled, however, and the public respondent was in agreement, that there had been an implied delivery in this case of the subject scrap iron because on 17 May 1983, private respondent's men started digging up and gathering scrap iron within the petitioner's premises. The entry of these men was upon the private respondent's request. Paragraph 6 of the Complaint reads: "6. That on May 17, 1983 Plaintiff with the consent of defendant Ang Tay sent his men to the stockyard of Visayan Sawmill Co., Inc. at Cawitan, Sta. Catalina, Negros Oriental to dig and gather the scrap iron and stock the same for weighing." 14 This permission or consent can, by no stretch of the imagination, be construed as delivery of the scrap iron in the sense that, as held by the public respondent, citing Article 1497 of the Civil Code, petitioners placed the private respondent in control and possession thereof. In the first place, said Article 1497 falls under the Chapter 15 Obligations of the Vendor, which is found in Title VI (Sales), Book IV of the Civil Code. As such, therefore, the obligation imposed therein is premised on an existing obligation to deliver the subject of the contract. In the instant case, in view of the private respondent's failure to comply with the positive suspensive condition earlier discussed, such an obligation had not yet arisen. In the second place, it was a mere accommodation to expedite the weighing and hauling of the iron in the event that the sale would materialize. The private respondent was not thereby placed in possession of and control over the scrap iron. Thirdly, We cannot even assume the conversion of the initial contract or promise to sell into a contract of sale by the petitioner corporation's alleged implied delivery of the scrap iron because its action and conduct in the premises do not support this conclusion. Indeed, petitioners demanded the fulfillment of the suspensive condition and eventually cancelled the contract. All told, Civil Case No. 15128 filed before the trial court was nothing more than the private respondent's preemptive action to beat the petitioners to the draw. One last point. This Court notes the palpably excessive and unconscionable moral and exemplary damages awarded by the trial court to the private respondent despite a clear absence of any legal and factual basis therefor. In contracts, such as in the instant case, moral damages may be recovered if defendants acted fraudulently and in bad faith, 16 while exemplary damages may only be awarded if defendants acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 17 In the instant case, the refusal of the petitioners to deliver the scrap iron was founded on the non-fulfillment by the private respondent of a suspensive condition. It cannot, therefore, be said that the herein petitioners had acted fraudulently and in bad faith or in a wanton, reckless, oppressive or malevolent manner. What this Court stated in Inhelder Corp. vs. Court of Appeals 18 needs to be stressed anew: "At this juncture, it may not be amiss to remind Trial Courts to guard against the award of exhorbitant (sic) damages that are way out of proportion to the environmental circumstances of a case and which, time and again, this Court has reduced or eliminated. Judicial discretion granted to the Courts in the assessment of damages must always be exercised with balanced restraint and measured objectivity." For, indeed, moral damages are emphatically not intended to enrich a complainant at the expense of the defendant. They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to obviate the moral suffering he has undergone, by reason of the defendant's culpable action. Its award is aimed at the restoration, within the limits of the possible, of the spiritual status quo ante, and it must be proportional to the suffering inflicted. 19 WHEREFORE, the instant petition is GRANTED. The decision of public respondent Court of Appeals in C.A.-G.R. CV No. 08807 is REVERSED and Civil Case No. 15128 of the Regional Trial Court of Iloilo is ordered DISMISSED. Costs against the private respondent. SO ORDERED. Narvasa, C .J ., Cruz, Feliciano, Padilla, Bidin and Bellosillo, JJ ., concur. Gutierrez, Jr., J ., On terminal leave. Melo and Quiason, JJ ., No part. Separate Opinions ROMERO, J., dissenting: I vote to dismiss the petition.

Petitioner corporation, Visayan Sawmill Co., Inc., entered into a contract on May 1, 1983 with private respondent RJH Trading Co. represented by private respondent Ramon J. Hibionada. The contract, entitled "PURCHASE AND SALE OF SCRAP IRON," stated: This contract for the Purchase and Sale of Scrap Iron, made and executed at Dumaguete City, Phil., this 1st day of May, 1983 by and between: VISAYAN SAWMILL CO., INC., . . . hereinafter called the SELLER, and RAMON J. HIBIONADA, . . . hereinafter called the BUYER, witnesseth: That the SELLER agrees to sell, and the BUYER agrees to buy, an undetermined quantity of scrap iron and junk which the SELLER will identify and designate now at Cawitan, Sta. Catalina, Negros Oriental, at the price of FIFTY CENTAVOS (P.50) per kilo on the following terms and conditions: 1. Weighing shall be done in the premises of the SELLER at Cawitan, Sta. Catalina, Negros Oriental. 2. To cover payment of the purchase price BUYER will open, make or indorse an irrevocable and unconditional letter of credit not later than May 15, 1983 at the Consolidated Bank and Trust Company, Dumaguete City Branch, in favor of the SELLER in the sum of TWO HUNDRED AND FIFTY THOUSAND PESOS (P250,000.00), Philippine currency. 3. The SELLER will furnish the BUYER free of charge at least three (3) cargo trucks with drivers, to haul the weighed materials from Cawitan to the TSMC wharf at Sta. Catalina for loading on BUYER'S barge. All expenses for labor, loading and unloading shall be for the account of the BUYER. 4. SELLER shall be entitled to a deduction of three percent (3%) per ton as rust allowance. xxx xxx xxx On May 17, 1983, the workers of private respondents were allowed inside petitioner company's premises in order to gather the scrap iron. However, on May 23, 1983, petitioner company sent a telegram which stated: "RAMON HIBIONADA RJH TRADING 286 QUEZON STREET ILOILO CITY DUE YOUR FAILURE TO COMPLY WITH CONDITIONS BEFORE DEADLINE OUR CONTRACT FOR PURCHASE SCRAP IRON CANCELLED VISAYAN SAWMILL CO., INC." Hibionada wired back on May 24, 1983 the following: "ANG TAY VISAYAN SAWMILL DUMAGUETE CITY LETTER OF CREDIT AMOUNTING P250,000.00 OPENED MAY 12, 1983 BANK OF PI MAIN OFFICE AYALA AVENUE MAKATI METRO MANILA BUT TRANSMITTAL IS DELAYED PLEASE CONSIDER REASON WILL PERSONALLY FOLLOW-UP IN MANILA THANKS REGARDS. RAMON HIBIONADA" On May 26, 1983, petitioner company received the following advice from the Dumaguete City Branch of The Bank of Philippine Islands: cdll

"Opened today our Irrevocable Domestic Letter of Credit 2-01456-4 for P250,000.00 in favor ANG TAY c/o Visayan Sawmill Co., Inc. Dumaguete City Negros Oriental Account of ARMACO-MARSTEEL ALLOW (sic) CORPORATION 2nd Floor Alpap 1 Bldg., 140 Alfaro st. Salcedo Village Makati Metro Manila Shipments of about 500 MT of assorted steel scrap marine/heavy equipment expiring on July 23, 1983 without recourse at slight draft drawn on Armaco-Marsteel Alloy Corporation accompanied by the following documents: Certificate of acceptance by Armaco-Marsteel Allow (sic) Corporation shipment from Dumaguete City to buyer's warehouse partial shipment allowed/transhipment not allowed." Subsequently, petitioners' counsel sent another telegram to private respondents stating that: "VISAYAN SAWMILL COMPANY UNWILLING TO CONTINUE SALE OF SCRAP IRON TO HIBIONADA DUE TO NON COMPLIANCE WITH ESSENTIAL PRE CONDITIONS" Consequently, private respondents filed a complaint for specific performance and damages with the Regional Trial Court (RTC) of Iloilo (Branch XXXV) which decided in favor of private respondents. The RTC decision having been affirmed by the Court of Appeals, the present petition was filed. Finding the petition meritorious, the ponencia reversed the decision of the Court of Appeals. Based on its appreciation of the contract in question, it has arrived at the conclusion that herein contract is not a contract of sale but a contract to sell which is subject to a positive suspensive condition, i.e., the opening of a letter of credit by private respondents. Since the condition was not fulfilled, the obligation of petitioners to convey title did not arise. The lengthy decision of Luzon Brokerage Co., Inc. v. Maritime Co. Inc. 1 penned by Justice J.B.L. Reyes, was cited as authority on the assumption that subject contract is indeed a contract to sell but which will be shown herein as not quite accurate. Evidently, the distinction between a contract to sell and a contract of sale is crucial in this case. Article 1458 of the Civil Code has this definition: "By a 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." Article 1475 gives the significance of this mutual undertaking of the parties, thus: "The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts." Thus, when the parties entered into the contract entitled "Purchase and Sale of Scrap Iron" on May 1, 1983, the contract reached the stage of perfection, there being a meeting of the' minds upon the object which is the subject matter of the contract and the price which is the consideration. Applying Article 1475 of the Civil Code, from that moment, the parties may reciprocally demand performance of the obligations incumbent upon them, i.e., delivery by the vendor and payment by the vendee. Petitioner, in its petition, admits that "[b]efore the opening of the letter of credit, buyer Ramon Hibionada went to Mr. Ang Tay and informed him that the letter of credit was forthcoming and if it was possible for him (buyer) to start cutting and digging the scrap iron before the letter of credit arrives and the former (seller) manifested no objection, and he immediately sent 18 or 20 people to start the operation." 2 From the time the seller gave access to the buyer to enter his premises, manifesting no objection thereto but even sending 18 or 20 people to start the operation, he has placed the goods in the control and possession of the vendee and delivery is effected. For according to Article 1497, "The thing sold shall be understood as delivered when it is placed in the control and possession of the vendee." 3 Such action or real delivery (traditio) is the act that transfers ownership. Under Article 1496 of the Civil Code, "The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee." That payment of the price in any form was not yet effected is immaterial to the transfer of the right of ownership. In a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the transaction that, for a time, existed and discharges the obligations created thereunder. 4 On the other hand, "the parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price." 5 In such a contract to sell, the full payment of the price is a positive suspensive condition, such that in the event of non-payment, the obligation of the seller to deliver and transfer ownership never arises. Stated differently, in a contract to sell, ownership is not transferred upon delivery of property but upon full payment of the purchase price. 6 Consequently, in a contract of sale, after delivery of the object of the contract has been made, the seller loses ownership and cannot recover the same unless the contract is rescinded. But in the contract to sell, the seller retains ownership and the buyer's failure to pay cannot even be considered a breach, whether casual or substantial, but an event that prevented the seller's duty to transfer title to the object of the contract.

At the outset, it must be borne in mind that a provision in the contract regarding the mode of payment, like the requirement for the opening of the Letter of Credit in this case, is not among the essential requirements of a contract of sale enumerated in Articles 1305 7 and 1474, 8 the absence of any of which will prevent the perfection of the contract from happening. Likewise, it must be emphasized that not every provision regarding payment should automatically be classified as a suspensive condition. To do so would change the nature of most contracts of sale into contracts to sell. For a provision in the contract regarding the payment of the price to be considered a suspensive condition, the parties must have made this clear in certain and unambiguous terms, such as for instance, by reserving or withholding title to the goods until full payment by the buyer. 9 This was a pivotal circumstance in the Luzon Brokerage case where the contract in question was replete with very explicit provisions such as the following: "Title to the properties subject of this contract remains with the Vendor and shall pass to, and be transferred in the name of the Vendee only upon complete payment of the full price . . .;" 10 the Vendor (Myers) will execute and deliver to the Vendee a definite and absolute Deed of Sale upon full payment of the Vendee . . .; 11 and "should the Vendee fail to pay any of the monthly installments, when due, or otherwise fail to comply with any of the terms and conditions herein stipulated, then this Deed of Conditional Sale shall automatically and without any further formality, become null and void." 12 It is apparent from a careful reading of Luzon Brokerage, as well as the cases which preceded it 13 and the subsequent ones applying its doctrines, 14 that the mere insertion of the price and the mode of payment among the terms and conditions of the agreement will not necessarily make it a contract to sell. The phrase in the contract "on the following terms and conditions" is standard form which is not to be construed as imposing a condition, whether suspensive or resolutory, in the sense of the happening of a future and uncertain event upon which an obligation is made to depend. There must be a manifest understanding that the agreement is in what may be refer red to as "suspended animation" pending compliance with provisions regarding payment. The reservation of title to the object of the contract in the seller is one such manifestation. Hence, it has been decided in the case of Dignos v. Court of Appeals 15 that, absent a proviso in the contract that the title to the property is reserved in the vendor until full payment of the purchase price or a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within the fixed period, the transaction is an absolute contract of sale and not a contract to sell. 16 In the instant case, nowhere in the contract did it state that the petitioners reserve title to the goods until private respondents have opened a letter of credit. Nor is there any provision declaring the contract as without effect until after the fulfillment of the condition regarding the opening of the letter of credit. Examining the contemporaneous and subsequent conduct of the parties, which may be relevant in the determination of the nature and meaning of the contract, 17 it is significant that in the telegram sent by petitioners to Hibionada on May 23, 1983, it stated that "DUE [TO] YOUR FAILURE TO COMPLY WITH CONDITIONS BEFORE DEADLINE OUR CONTRACT FOR PURCHASE SCRAP IRON CANCELLED." And in some of the pleadings in the course of this litigation, petitioners referred to the transaction as a contract of sale. 18 In light of the provisions of the contract, contemporaneous and subsequent acts of the parties and the other relevant circumstances surrounding the case, it is evident that the stipulation for the buyer to open a Letter of Credit in order to cover the payment of the purchase price does not bear the marks of a suspensive condition. The agreement between the parties was a contract of sale and the "terms and conditions" embodied therein which are standard form, are clearly resolutory in nature, the breach of which may give either party the option to bring an action to rescind and/or seek damages. Contrary to the conclusions arrived at in the ponencia, the transaction is not a contract to sell but a contract of sale. However, the determination of the nature of the contract does not settle the controversy. A breach of the contract was committed and the rights and liabilities of the parties must be established. The ponencia, notwithstanding its conclusion that no contract of sale existed, proceeded to state that petitioner company may rescind the contract based on Article 1597 of the Civil Code which expressly applies only to a contract of sale. It provides: "ARTICLE 1597. Where the goods have not been delivered to the buyer, and the buyer has repudiated the contract of sale, or has manifested his inability to perform his obligations, thereunder, or has committed a breach thereof, the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer." (Emhasis supplied). The ponencia was then confronted with the issue of delivery since Article 1597 applies only "[w]here the goods have not yet been delivered." In this case, as aforestated, the workers of private respondents were actually allowed to enter the petitioners' premises, thus, giving them control and possession of the goods. At this juncture, it is even unnecessary to discuss the issue of delivery in relation to the right of rescission nor to rely on Article 1597. In every contract which contains reciprocal obligations, the right to rescind is always implied under Article 1191 of the Civil Code in case one of the parties fails to comply with his obligations. 19 The right to rescind pursuant to Article 1191 is not absolute. Rescission will not be permitted for slight or casual breach of the contract. 20 Here, petitioners claim that the breach is so substantial as to justify rescission, not only because the Letter of Credit was not opened on May 15, 1983 as stipulated in the contract but also because of the following factors: (1) the Letter of Credit, although opened in favor of petitioners was made against the account of a certain Marsteel Alloy Corporation, instead of private respondent's account; (2) the Letter of Credit referred to "assorted steel scrap" instead of "scrap iron and junk" as provided in the contract; (3) the Letter of Credit placed the quantity of the goods at "500 MT" while the contract mentioned "an undetermined quantity of scrap iron and junk"; (4) no amount from the Letter of Credit will be released unless accompanied by a Certificate of Acceptance; and (5) the Letter of Credit had an expiry date.

I am not convinced that the above circumstances may be characterized as so substantial and fundamental as to defeat the object of the parties in making the agreement. 21 None of the alleged defects in the Letter of Credit would serve to defeat the object of the parties. It is to be stressed that the purpose of the opening of a Letter of Credit is to effect payment. The above-mentioned factors could not have prevented such payment. It is also significant to note that petitioners sent a telegram to private respondents on May 23, 1983 cancelling the contract. This was before they had even received on May 26, 1983 the notice from the bank about the opening of the Letter of Credit. How could they have made a judgment on the materiality of the provisions of the Letter of Credit for purposes of rescinding the contract even before setting eyes on said document? To be sure, in the contract, the private respondents were supposed to open the Letter of Credit on May 15, 1983 but, it was not until May 26, 1983 or eleven (11) days later that they did so. Is the eleven-day delay a substantial breach of the contract as could justify the rescission of the contract? In Song Fo and Co. v. Hawaiian-Philippine Co. 22 it was held that a delay in payment for twenty (20) days was not a violation of an essential condition of the contract which would warrant rescission for non-performance. In the instant case, the contract is bereft of any suggestion that time was of the essence. On the contrary, it is noted that petitioners allowed private respondents' men to dig and remove the scrap iron located in petitioners' premises between May 17, 1983 until May 30, 1983 or beyond the May 15, 1983 deadline for the opening of the Letter of Credit. Hence, in the absence of any indication that the time was of the essence, the eleven-day delay must be deemed a casual breach which cannot justify a rescission. Worthy of mention before concluding is Sycip v. National Coconut Corporation, et al. 23 since, like this case, it involves a failure to open on time the Letter of Credit required by the seller. In Sycip, after the buyer offered to buy 2,000 tons of copra, the seller sent a telegram dated December 19, 1946 to the buyer accepting the offer but on condition that the latter opens a Letter of Credit within 48 hours. It was not until December 26, 1946, however, that the Letter of Credit was opened. The Court, speaking through Justice Bengzon, held that because of the delay in the opening of the Letter of Credit; the seller was not obliged to deliver the goods. Two factors distinguish Sycip from the case at bar. First, while there has already been a perfected contract of sale in the instant case, the parties in Sycip were still undergoing the negotiation process. The seller's qualified acceptance in Sycip served as a counter offer which prevented the contract from being perfected. Only an absolute and unqualified acceptance of a definite offer manifests the consent necessary to perfect a contract. 24 Second, the Court found in Sycip that time was of the essence for the seller who was anxious to sell to other buyers should the offeror fail to open the Letter of Credit within the stipulated time. In contrast, there are no indicia in this case that can lead one to conclude that time was of the essence for petitioner as would make the eleven-day delay a fundamental breach of the contract. In sum, to my mind, both the trial court and the respondent Court of Appeals committed no reversible error in their appreciation of the agreement in question as a contract of sale and not a contract to sell, as well as holding that the breach of the contract was not substantial and, therefore, petitioners were not justified in law in rescinding the agreement. PREMISES CONSIDERED, the Petition must be DISMISSED and the decision of the Court of Appeals AFFIRMED.

SECOND DIVISION [G.R. No. 164401, June 25, 2008] LILIBETH SUNGA-CHAN AND CECILIA SUNGA, PETITIONERS, VS. THE HONORABLE COURT OF APPEALS; THE HONORABLE PRESIDING JUDGE, REGIONAL TRIAL COURT, BRANCH 11, SINDANGAN, ZAMBOANGA DEL NORTE; THE REGIONAL TRIAL COURT SHERIFF, BRANCH 11, SINDANGAN, ZAMBOANGA DEL NORTE; THE CLERK OF COURT OF MANILA, AS EX-OFFICIO SHERIFF; AND LAMBERTO T. CHUA, RESPONDENTS. DECISION VELASCO JR., J.: The Case Before us is a petition for review under Rule 45, seeking to nullify and set aside the Decision and Resolution dated November 6, 2003 and July 6, 2004, respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 75688. The impugned CA Decision and Resolution [2] denied the petition for certiorari interposed by petitioners assailing the Resolutions dated November 6, 2002 and January 7, 2003, respectively, of the Regional Trial Court (RTC), Branch 11 in Sindangan, Zamboanga Del Norte in Civil Case No. S-494, a suit for winding up of partnership affairs, accounting, and recovery of shares commenced thereat by respondent Lamberto T. Chua. The Facts In 1977, Chua and Jacinto Sunga formed a partnership to engage in the marketing of liquefied petroleum gas. For convenience, the business, pursued under the name, Shellite Gas Appliance Center (Shellite), was registered as a sole proprietorship in the name of Jacinto, albeit the partnership arrangement called for equal sharing of the net profit.
[1]

After Jacinto's death in 1989, his widow, petitioner Cecilia Sunga, and married daughter, petitioner Lilibeth Sunga-Chan, continued with the business without Chua's consent. Chua's subsequent repeated demands for accounting and winding up went unheeded, prompting him to file on June 22, 1992 a Complaint for Winding Up of a Partnership Affairs, Accounting, Appraisal and Recovery of Shares and Damages with Writ of Preliminary Attachment, docketed as Civil Case No. S-494 of the RTC in Sindangan, Zamboanga del Norte and raffled to Branch 11 of the court. After trial, the RTC rendered, on October 7, 1997, judgment finding for Chua, as plaintiff a quo. The RTC's decision would subsequently [3] be upheld by the CA in CA-G.R. CV No. 58751 and by this Court per its Decision dated August 15, 2001 in G.R. No. 143340. The [4] corresponding Entry of Judgment would later issue declaring the October 7, 1997 RTC decision final and executory as of December 20, 2001. The fallo of the RTC's decision reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, as follows: (1) DIRECTING them to render an accounting in acceptable form under accounting procedures and standards of the properties, assets, income and profits of [Shellite] since the time of death of Jacinto L. Sunga, from whom they continued the business operations including all businesses derived from [Shellite]; submit an inventory, and appraisal of all these properties, assets, income, profits, etc. to the Court and to plaintiff for approval or disapproval; (2) ORDERING them to return and restitute to the partnership any and all properties, assets, income and profits they misapplied and converted to their own use and advantage that legally pertain to the plaintiff and account for the properties mentioned in pars. A and B on pages 4-5 of this petition as basis; (3) DIRECTING them to restitute and pay to the plaintiff shares and interest of the plaintiff in the partnership of the listed properties, assets and good will in schedules A, B and C, on pages 4-5 of the petition; (4) ORDERING them to pay the plaintiff earned but unreceived income and profits from the partnership from 1988 to May 30, 1992, when the plaintiff learned of the closure of the store the sum of P35,000.00 per month, with legal rate of interest until fully paid; (5) ORDERING them to wind up the affairs of the partnership and terminate its business activities pursuant to law, after delivering to the plaintiff all the interest, shares, participation and equity in the partnership, or the value thereof in money or money's worth, if the properties are not physically divisible; (6) FINDING them especially Lilibeth Sunga-Chan guilty of breach of trust and in bad faith and hold them liable to the plaintiff the sum of P50,000.00 as moral and exemplary damages; and, (7) DIRECTING them to reimburse and pay the sum of P25,000.00 as attorney's [fee] and P25,000.00 as litigation expenses. NO special pronouncements as to COSTS. SO ORDERED. (Emphasis supplied.) [6] Via an Order dated January 16, 2002, the RTC granted Chua's motion for execution. Over a month later, the RTC, acting on another [7] motion of Chua, issued an amended writ of execution. It seems, however, that the amended writ of execution could not be immediately implemented, for, in an omnibus motion of April 3, 2002, Chua, inter alia, asked the trial court to commission a certified public accountant (CPA) to undertake the accounting work and inventory of the partnership assets if petitioners refuse to do it within the time set by the court. Chua later moved to withdraw his motion and instead ask the admission of an accounting report prepared by CPA Cheryl A. Gahuman. In the report under the heading, [8] Computation of Claims, Chua's aggregate claim, arrived at using the compounding-of-interest method, amounted to PhP 14,277,344.94. Subsequently, the RTC admitted and approved the computation of claims in view of petitioners' failure and refusal, despite notice, to appear and submit an accounting report on the winding up of the partnership on the scheduled hearings on April 29 [9] and 30, 2002. After another lengthy proceedings, petitioners, on September 24, 2002, submitted their own CPA- certified valuation and accounting report. In it, petitioners limited Chua's entitlement from the winding up of partnership affairs to an aggregate amount of PhP [10] [11] 3,154,736.65 only. Chua, on the other hand, submitted a new computation, this time applying simple interest on the various items covered by his claim. Under this methodology, Chua's aggregate claim went down to PhP 8,733,644.75. On November 6, 2002, the RTC issued a Resolution, rejecting the accounting report petitioners submitted, while approving the new computation of claims Chua submitted. The fallo of the resolution reads: WHEREFORE, premises considered, this Court resolves, as it is hereby resolved, that the Computation of Claims submitted by the plaintiff dated October 15, 2002 amounting to P8,733,644.75 be APPROVED in all respects as the final computation and accounting of the defendants' liabilities in favor of the plaintiff in the above-captioned case, DISAPPROVING for the purpose, in its entirety, the computation and accounting filed by the defendants. SO RESOLVED. [14] Petitioners sought reconsideration, but their motion was denied by the RTC per its Resolution of January 7, 2003. In due time, petitioners went to the CA on a petition for certiorari
[15] [13] [12] [5]

under Rule 65, assailing the November 6, 2002 and January 7, 2003

resolutions of the RTC, the recourse docketed as CA-G.R. SP No. 75688. The Ruling of the CA As stated at the outset, the CA, in the herein assailed Decision of November 6, 2003, denied the petition for certiorari, thus: WHEREFORE, the foregoing considered, the Petition is hereby DENIED for lack of merit. SO ORDERED. The CA predicated its denial action on the ensuing main premises: 1. Petitioners, by not appearing on the hearing dates, i.e., April 29 and 30, 2002, scheduled to consider Chua's computation of claims, or rendering, as required, an accounting of the winding up of the partnership, are deemed to have waived their right to interpose any objection to the computation of claims thus submitted by Chua. 2. The 12% interest added on the amounts due is proper as the unwarranted keeping by petitioners of Chua's money passes as an involuntary loan and forbearance of money. 3. The reiterative arguments set forth in petitioners' pleadings below were part of their delaying tactics. Petitioners had come to the appellate court at least thrice and to this Court twice. Petitioners had more than enough time to question the award and it is now too late in the day to change what had become final and executory. [17] Petitioners' motion for reconsideration was rejected by the appellate court through the assailed Resolution dated July 6, 2004. Therein, the CA explained that the imposition of the 12% interest for forbearance of credit or money was proper pursuant to paragraph 1 of the October 7, 1997 RTC decision, as the computation done by CPA Gahuman was made in "acceptable form under accounting [18] procedures and standards of the properties, assets, income and profits of [Shellite]." Moreover, the CA ruled that the imposition of interest is not based on par. 3 of the October 7, 1997 RTC decision as the phrase "shares and interests" mentioned therein refers not to an imposition of interest for use of money in a loan or credit, but to a legal share or right. The appellate court also held that the imposition of interest on the partnership assets falls under par. 2 in relation to par. 1 of the final RTC decision as the restitution mentioned therein does not simply mean restoration but also reparation for the injury or damage committed against the rightful owner of the property. Finally, the CA declared the partnership assets referred to in the final decision as "liquidated claim" since the claim of Chua is ascertainable by mathematical computation; therefore, interest is recoverable as an element of damage. The Issues Hence, the instant petition with petitioners raising the following issues for our consideration: I. Whether or not the Regional Trial Court can [impose] interest on a final judgment of unliquidated claims. II. Whether or not the Sheriff can enforce the whole divisible obligation under judgment only against one Defendant. III. Whether or not the absolute community of property of spouses Lilibeth Sunga Chan with her husband Norberto Chan can be lawfully [19] made to answer for the liability of Lilibeth Chan under the judgment. Significant Intervening Events In the meantime, pending resolution of the instant petition for review and even before the resolution by the CA of its CA-G.R. SP No. 75688, the following relevant events transpired: 1. Following the RTC's approval of Chua's computation of claims in the amount of PhP 8,733,644.75, the sheriff of Manila levied upon petitioner Sunga-Chan's property located along Linao St., Paco, Manila, covered by Transfer Certificate of Title (TCT) No. [20] 208782, over which a building leased to the Philippine National Bank (PNB) stood. In the auction sale of the levied lot, Chua, [21] with a tender of PhP 8 million, emerged as the winning bidder. 2. On January 21, 2005, Chua moved for the issuance of a final deed of sale and a writ of possession. He also asked the RTC to order the Registry of Deeds of Manila to cancel TCT No. 208782 and to issue a new certificate. Despite petitioners' opposition on the [22] ground of prematurity, a final deed of sale was issued on February 16, 2005. 3. On February 18, 2005, Chua moved for the confirmation of the sheriff's final deed of sale and for the issuance of an order for the cancellation of TCT No. 208782. Petitioners again interposed an opposition in which they informed the RTC that this Court had already granted due course to their petition for review on January 31, 2005; 4. On April 11, 2005, the RTC, via a Resolution, confirmed the sheriff's final deed of sale, ordered the Registry of Deeds of Manila to [23] cancel TCT No. 208782, and granted a writ of possession in favor of Chua. 5. On May 3, 2005, petitioners filed before this Court a petition for the issuance of a temporary restraining order (TRO). On May 24, [24] 2005, the sheriff of Manila issued a Notice to Vacate against petitioners, compelling petitioners to repair to this Court anew for the resolution of their petition for a TRO. [25] 6. On May 31, 2005, the Court issued a TRO, enjoining the RTC and the sheriff from enforcing the April 11, 2005 writ of possession [26] and the May 24, 2005 Notice to Vacate. Consequently, the RTC issued an Order on June 17, 2005, suspending the execution proceedings before it. 7. Owing to the clashing ownership claims over the leased Paco property, coupled with the filing of an unlawful detainer suit before the
[16]

Metropolitan Trial Court (MeTC) in Manila against PNB, the Court, upon the bank's motion, allowed, by Resolution April 26, 2006, the consignation of the monthly rentals with the MeTC hearing the ejectment case. The Court's Ruling The petition is partly meritorious. First Issue: Interest Proper in Forbearance of Credit

[27]

dated

Petitioners, citing Article 2213 of the Civil Code, fault the trial court for imposing, in the execution of its final judgment, interests on what they considered as unliquidated claims. Among these was the claim for goodwill upon which the RTC attached a monetary value of PhP 250,000. Petitioners also question the imposition of 12% interest on the claimed monthly profits of PhP 35,000, reckoned from 1988 to October 15, 1992. To petitioners, the imposable rate should only be 6% and computed from the finality of the RTC's underlying decision, i.e., from December 20, 2001. Third on the petitioners' list of unliquidated claims is the yet-to-be established value of the one-half partnership share and interest adjudicated to Chua, which, they submit, must first be determined with reasonable certainty in a judicial proceeding. And in this regard, [29] petitioners, citing Eastern Shipping Lines, Inc. v. Court of Appeals, would ascribe error on the RTC for adding a 12% per annum interest on the approved valuation of the one-half share of the assets, inclusive of goodwill, due Chua. Petitioners are partly correct. For clarity, we reproduce the summary valuations and accounting reports on the computation of claims certified to by the parties' respective CPAs. Chua claimed the following: 50% share on assets (exclusive of goodwill) at fair market value (Schedule 1) A P 1,613,550.00 B C 50% share in the monetary value of goodwill (P500,000 x 50%) Legal interest on share of assets from June 1, 1992 to Oct. 15, 2002 at 12% interest per year (Schedule 2) 2,008,869.75 D Unreceived profits from 1988 to 1992 and its corresponding interest from Jan. 1, 1988 to Oct. 15, 2002 (Schedule 3) Damages Attorney's fees Litigation fees 250,000.00

[28]

4,761,225.00 50,000.00 25,000.00 25,000.00 P 8,733,644.75

E F G

TOTAL AMOUNT On the other hand, petitioners acknowledged the following to be due to Chua: Total Assets - Schedule 1 P2,431,956.35 50% due to Lamberto Chua P1,215,978.16 Total Alleged Profit, Net of Payments Made, May 1992-Sch. 2 1,613,758.49 50% share in the monetary value of goodwill (500,000 x 50%) Moral and Exemplary Damages Attorney's Fee Litigation Fee 250,000.00 50,000.00 25,000.00 25,000.00

P3,154,736.65 TOTAL AMOUNT As may be recalled, the trial court admitted and approved Chua's computation of claims amounting to PhP 8,733,644.75, but rejected that of petitioners, who came up with the figure of only PhP 3,154,736.65. We highlight the substantial differences in the accounting reports on the following items, to wit: (1) the aggregate amount of the partnership assets bearing on the 50% share of Chua thereon; (2) interests added on Chua's share of the assets; (3) amount of profits from 1988 through May 30, 1992, net of alleged payments made to Chua; and (4) interests added on the amount entered as profits. From the foregoing submitted valuation reports, there can be no dispute about the goodwill earned thru the years by Shellite. In fact, the parties, by their own judicial admissions, agreed on the monetary value, i.e., PhP 250,000, of this item. Clearly then, petitioners contradict themselves when they say that such amount of goodwill is without basis. Thus, the Court is loathed to disturb the trial court's approval of the amount of PhP 250,000, representing the monetary value of the goodwill, to be paid to Chua. Neither is the Court inclined to interfere with the CA's conclusion as to the total amount of the partnership profit, that is, PhP 1,855,000, generated for the period January 1988 through May 30, 1992, and the total partnership assets of PhP 3,227,100, 50% of which, or PhP 1,613,550, pertains to Chua as his share. To be sure, petitioners have not adduced adequate evidence to belie the above CA's factual

determination, confirmatory of the trial court's own. Needless to stress, it is not the duty of the Court, not being a trier of facts, to analyze or weigh all over again the evidence or premises supportive of such determination, absent, as here, the most compelling and cogent reasons. This brings us to the question of the propriety of the imposition of interest and, if proper, the imposable rate of interest applicable. In Reformina v. Tomol, Jr., the Court held that the legal interest at 12% per annum under Central Bank (CB) Circular No. 416 shall be adjudged only in cases involving the loan or forbearance of money. And for transactions involving payment of indemnities in the concept of damages arising from default in the performance of obligations in general and/or for money judgment not involving a loan or forbearance of money, goods, or credit, the governing provision is Art. 2209 of the Civil Code prescribing a yearly 6% interest. Art. 2209 pertinently provides: Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum. The term "forbearance," within the context of usury law, has been described as a contractual obligation of a lender or creditor to refrain, [31] during a given period of time, from requiring the borrower or debtor to repay the loan or debt then due and payable. Eastern Shipping Lines, Inc. synthesized the rules on the imposition of interest, if proper, and the applicable rate, as follows: The 12% per annum rate under CB Circular No. 416 shall apply only to loans or forbearance of money, goods, or credits, as well as to judgments involving such loan or forbearance of money, goods, or credit, while the 6% per annum under Art. 2209 of the Civil Code applies "when the transaction involves the payment of indemnities in the concept of damage arising from the breach or a delay in the performance of [32] obligations in general," with the application of both rates reckoned "from the time the complaint was filed until the [adjudged] amount [33] is fully paid." In either instance, the reckoning period for the commencement of the running of the legal interest shall be subject to the [34] condition "that the courts are vested with discretion, depending on the equities of each case, on the award of interest." Otherwise formulated, the norm to be followed in the future on the rates and application thereof is: I. - When an obligation, regardless of its source, is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages. II. - With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation breached consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation not constituting loans or forbearance of money is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim [35] period being deemed to be by then an equivalent to a forbearance of credit. Guided by the foregoing rules, the award to Chua of the amount representing earned but unremitted profits, i.e.. PhP 35,000 monthly, from January 1988 until May 30, 1992, must earn interest at 6% per annum reckoned from October 7, 1997, the rendition date of the RTC decision, until December 20, 2001, when the said decision became final and executory. Thereafter, the total of the monthly profits inclusive of the add on 6% interest shall earn 12% per annum reckoned from December 20, 2001 until fully paid, as the award for that item is considered to be, by then, equivalent to a forbearance of credit. Likewise, the PhP 250,000 award, representing the goodwill value of the business, the award of PhP 50,000 for moral and exemplary damages, PhP 25,000 attorney's fee, and PhP 25,000 litigation fee shall earn 12% per annum from December 20, 2001 until fully paid. Anent the impasse over the partnership assets, we are inclined to agree with petitioners' assertion that Chua's share and interest on such assets partake of an unliquidated claim which, until reasonably determined, shall not earn interest for him. As may be noted, the legal norm for interest to accrue is "reasonably determinable," not, as Chua suggested and the CA declared, determinable by mathematical computation. The Court has certainly not lost sight of the fact that the October 7, 1997 RTC decision clearly directed petitioners to render an accounting, inventory, and appraisal of the partnership assets and then to wind up the partnership affairs by restituting and delivering to Chua his one-half share of the accounted partnership assets. The directive itself is a recognition that the exact share and interest of Chua over the partnership cannot be determined with reasonable precision without going through with the inventory and accounting process. In fine, a liquidated claim cannot validly be asserted without accounting. In net effect, Chua's interest and share over the partnership asset, exclusive of the goodwill, assumed the nature of a liquidated claim only after the trial court, through its November 6, 2002 resolution, approved the assets inventory and accounting report on such assets. Considering that Chua's computation of claim, as approved by the trial court, was submitted only on October 15, 2002, no interest in his favor can be added to his share of the partnership assets. Consequently, the computation of claims of Chua should be as follows:
[30]

(1) (2) (3)

50% share on assets (exclusive of goodwill) at fair market value 50% share in the monetary value of goodwill (PhP 500,000 x 50%) 12% interest on share of goodwill from December 20, 2001 to October 15, 2000 [PhP 250,000 x 0.12 x 299/365 days] Unreceived profits from 1988 to May 30, 1992 6% interest on unreceived profits from January 1, 1988 to December 20, 2001
[36]

PhP 1,613,550.00 250,000.00

24,575.34 1,855,000.00 1,360,362.50

(4) (5) (6)

12% interest on unreceived profits from December 20, 2001 to October 15, 2002 [PhP 3,215,362.50 x 12% x 299/365 days] Moral and exemplary damages

316,074.54 50,000.00

(7) (8) (9) (1 0)

Attorney's fee Litigation fee 12% interest on moral and exemplary damages, attorney's fee, and litigation fee from December 20, 2001 to October 15, 2002 [PhP 100,000 x 12% x 299/365 days]

25,000.00 25,000.00

9,830.14

TOTAL AMOUNT

PhP 5,529,392.52 Second Issue: Petitioners' Obligation Solidary

Petitioners, on the submission that their liability under the RTC decision is divisible, impugn the implementation of the amended writ of execution, particularly the levy on execution of the absolute community property of spouses petitioner Sunga-Chan and Norberto Chan. Joint, instead of solidary, liability for any and all claims of Chua is obviously petitioners' thesis. Under the circumstances surrounding the case, we hold that the obligation of petitioners is solidary for several reasons. For one, the complaint of Chua for winding up of partnership affairs, accounting, appraisal, and recovery of shares and damages is clearly a suit to enforce a solidary or joint and several obligation on the part of petitioners. As it were, the continuance of the business and management of Shellite by petitioners against the will of Chua gave rise to a solidary obligation, the acts complained of not being severable in nature. Indeed, it is well-nigh impossible to draw the line between when the liability of one petitioner ends and the liability of the other starts. In this kind of situation, the law itself imposes solidary obligation. Art. 1207 of the Civil Code thus provides: Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each of the latter is bound to render, entire compliance with the prestation. There is solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. (Emphasis ours.) Any suggestion that the obligation to undertake an inventory, render an accounting of partnership assets, and to wind up the partnership affairs is divisible ought to be dismissed. For the other, the duty of petitioners to remit to Chua his half interest and share of the total partnership assets proceeds from petitioners' indivisible obligation to render an accounting and inventory of such assets. The need for the imposition of a solidary liability becomes all the more pronounced considering the impossibility of quantifying how much of the partnership assets or profits was misappropriated by each petitioner. And for a third, petitioners' obligation for the payment of damages and attorney's and litigation fees ought to be solidary in nature, they having resisted in bad faith a legitimate claim and thus compelled Chua to litigate. Third Issue: Community Property Liable Primarily anchored as the last issue is the erroneous theory of divisibility of petitioners' obligation and their joint liability therefor. The Court needs to dwell on it lengthily. Given the solidary liability of petitioners to satisfy the judgment award, respondent sheriff cannot really be faulted for levying upon and then selling at public auction the property of petitioner Sunga-Chan to answer for the whole obligation of petitioners. The fact that the levied parcel of land is a conjugal or community property, as the case may be, of spouses Norberto and Sunga-Chan does not per se vitiate the levy and the consequent sale of the property. Verily, said property is not among those exempted from execution under [37] Section 13, Rule 39 of the Rules of Court. And it cannot be overemphasized that the TRO issued by the Court on May 31, 2005 came after the auction sale in question. Parenthetically, the records show that spouses Sunga-Chan and Norberto were married on February 4, 1992, or after the effectivity of the Family Code on August 3, 1988. Withal, their absolute community property may be held liable for the obligations contracted by

either spouse. Specifically, Art. 94 of said Code pertinently provides: Art. 94. The absolute community of property shall be liable for: (1) x x x x (2) All debts and obligations contracted during the marriage by the designated administrator- spouse for the benefit of the community, or by both spouses, or by one spouse with the consent of the other. (3) Debts and obligations contracted by either spouse without the consent of the other to the extent that the family may have been benefited. (Emphasis ours.) Absent any indication otherwise, the use and appropriation by petitioner Sunga-Chan of the assets of Shellite even after the business was discontinued on May 30, 1992 may reasonably be considered to have been used for her and her husband's benefit. It may be stressed at this juncture that Chua's legitimate claim against petitioners, as readjusted in this disposition, amounts to only PhP 5,529,392.52, whereas Sunga-Chan's auctioned property which Chua acquired, as the highest bidder, fetched a price of PhP 8 million. In net effect, Chua owes petitioner Sunga-Chan the amount of PhP 2,470,607.48, representing the excess of the purchase price over his legitimate claims. Following the auction, the corresponding certificate of sale dated January 15, 2004 was annotated on TCT No. 208782. On January 21, 2005, Chua moved for the issuance of a final deed of sale (1) to order the Registry of Deeds of Manila to cancel TCT No. 208782; (2) to issue a new TCT in his name; and (3) for the RTC to issue a writ of possession in his favor. And as earlier stated, the RTC granted Chua's motion, albeit the Court restrained the enforcement of the RTC's package of orders via a TRO issued on May 31, 2005. Therefore, subject to the payment by Chua of PhP 2,470,607.48 to petitioner Sunga-Chan, we affirm the RTC's April 11, 2005 resolution, confirming the sheriff's final deed of sale of the levied property, ordering the Registry of Deeds of Manila to cancel TCT No. 208782, and issuing a writ of possession in favor of Chua. WHEREFORE, this petition is PARTLY GRANTED. Accordingly, the assailed decision and resolution of the CA in CA-G.R. SP No. 75688 are hereby AFFIRMED with the following MODIFICATIONS: (1) The Resolutions dated November 6, 2002 and January 7, 2003 of the RTC, Branch 11 in Sindangan, Zamboanga Del Norte in Civil Case No. S-494, as effectively upheld by the CA, are AFFIRMED with the modification that the approved claim of respondent Chua is hereby corrected and adjusted to cover only the aggregate amount of PhP 5,529,392.52; (2) Subject to the payment by respondent Chua of PhP 2,470,607.48 to petitioner Sunga-Chan, the Resolution dated April 11, 2005 of the RTC, confirming the sheriff's final deed of sale of the levied property, ordering the Registry of Deeds of Manila to cancel TCT No. 208782, and issuing a writ of possession in favor of respondent Chua, is AFFIRMED; and The TRO issued by the Court on May 31, 2005 in the instant petition is LIFTED. No pronouncement as to costs. SO ORDERED. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 100594. March 10, 1993.] BINALBAGAN TECH. INC., and HERMILO J. NAVA, petitioners, vs. THE COURT OF APPEALS, MAGDALENA L. PUENTEVELLA, ANGELINA P. ECHAUS, ROMULO L. PUENTEVELLA, RENATO L. PUENTEVELLA, NOLI L. PUENTEVELLA and NELIA LOURDES P. JACINTO, respondents. Mateo Valenzuela for petitioners. Hilado, Hagad & Hilado for private respondents. SYLLABUS 1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; PARTY CANNOT DEMAND PERFORMANCE OF AN OBLIGATION UNLESS HE IS IN A POSITION TO COMPLY WITH HIS OWN OBLIGATIONS. A party to a contract cannot demand performance of the other party's obligations unless he is in a position to comply with his own obligations. Similarly, the right to rescind a contract can be demanded only if a party thereto is ready, willing and able to comply with his own obligations thereunder (Art. 1191, Civil Code; Seva vs. Berwin, 48 Phil. 581 [1926]; Paras, Civil Code of the Philippines, 12th ed. Vol. IV, p. 200). In a contract of sale, the vendor is bound to

transfer the ownership of and deliver, as well as warrant, the thing which is the object of the sale (Art. 1495, Civil Code); he warrants that the buyer shall, from the time ownership is passed, have and enjoy the legal and peaceful possession of the thing. 2. ID.; PRESCRIPTIVE PERIOD WITHIN WHICH TO INSTITUTE ACTION UPON A WRITTEN CONTRACT; CASE AT BAR. The prescriptive period within which to institute an action upon a written contract is ten years (Art. 1144, Civil Code). The cause of action of private respondent Echaus is based on the deed of sale executed on May 11, 1967, whereby ownership of the subdivision lots was transferred to petitioner. She filed Civil Case No. 1354 for recovery of title and damages only on October 8, 1982. From May 11, 1967 to October 8, 1982, more than fifteen (15) years elapsed. Seemingly, the 10-year prescriptive period had expired before she brought her action to recover title. However, the period 1974 to 1982 should be deducted in computing the prescriptive period for the reason that from 1974 to 1982, private respondent Echaus was not in a legal position to initiate action against petitioner since as aforestated, through no fault of hers, her warranty against eviction was breached. Deducting eight years (1974 to 1982) from the period 1967 to 1982, only seven years elapsed. Consequently, Civil Case No. 1354 was filed within the 10-year prescriptive period. DECISION MELO, J p: The petition for review on certiorari now before us seeks to reverse the decision of the Court of Appeals promulgated on March 27, 1991 in CA-G.R. CV No. 24635 (de Pano, Cacdac (P), and Vailoces, JJ .). The facts of the case, as borne out by the record, are as follows: On May 11, 1967, private respondents, through Angelina P. Echaus, in her capacity as Judicial Administrator of the intestate estate of Luis B. Puentevella, executed a Contract to Sell and a Deed of Sale of forty-two subdivision lots within the Phib-Khik Subdivision of the Puentebella family, conveying and transferring said lots to petitioner Binalbagan Tech., Inc. (hereinafter referred to as Binalbagan). In turn Binalbagan, through its president, petitioner Hermilio J. Nava (hereinafter referred to as Nava), executed an Acknowledgment of Debt with Mortgage Agreement, mortgaging said lots in favor of the estate of Puentebella. Upon the transfer to Binalbagan of titles to the 42 subdivision lots, said petitioner took possession of the lots and the building and improvements thereon. Binalbagan started operating a school on the property from 1967 when the titles and possession of the lots were transferred to it. It appears that there was a pending case, Civil Case No. 7435 of Regional Trial Court stationed at Himamaylan, Negros Occidental. Relative to said case we shall quote the findings of fact of the Court of Appeals in its decision dated October 30, 1978 in CA-G.R. No. 4211-R: To have a better perspective of the background facts leading to the filing of this instant case on appeal, there is a need to make reference to the circumstances surrounding the filing of Civil Case No. 7435, to wit: The intestate estate of the late Luis B. Puentebella as registered owner of several subdivision lots, specifically mentioned in paragraph 2 of plaintiffs' complaint, thru Judicial Administratrix, Angelina L. Puentevella sold said aforementioned lots to Raul Javellana with the condition that the vendee-promisee would not transfer his rights to said lots without the express consent of Puentevella and that in case of the cancellation of the contract by reason of the violation of any of the terms thereof, all payments therefor made and all improvements introduced on the property shall pertain to the promissor and shall be considered as rentals for the use and occupation thereof. Javellana having failed to pay the installments for a period of five years, Civil Case No. 7435 was filed by defendant Puentevella against Raul Javellana and the Southern Negros Colleges which was impleaded as a party defendant it being in actual possession thereof, for the rescission of their contract to sell and the recovery of possession of the lots and buildings with damages. Accordingly, after trial, judgment was rendered in favor of Puentevella and thereafter, defendants Deputy Sheriffs served a copy of the writ of execution on the Acting Director of the Southern Negros College and delivered possession of the lots and buildings to defendant Puentevella's representative, Mrs. Manuel Gentapanan, and further levied execution on the books and school equipment, supplies, library, apparatus, etc. to satisfy the monetary portion of the judgment under execution on October 27, 1967. Said books, equipment, etc. as reflected in the Depositary Receipt, (Exh. "B") dated October 28, 1965, were delivered by the Sheriffs to the Acting Director of the Southern Negros College as depositary of the same. Came December 29, 1965 when the plaintiffs in the instant case on appeal filed their Third-Party Claim based on an alleged Deed of Sale executed in their favor by spouses Jose and Lolita Lopez, thus Puentevella was constrained to assert physical possession of the premises to counteract the fictitious and unenforceable claim of herein plaintiffs. Upon the filing of the instant case for injunction and damages on January 3, 1966, an ex-parte writ of preliminary injunction was issued by the Honorable Presiding Judge Carlos Abiera, which order, however, was elevated to the Honorable Court of Appeals which issued a writ of preliminary injunction ordering Judge Carlos Abiera or any other persons or persons in his behalf to refrain from further

enforcing the injunction issued by him in this case and from further issuing any other writs or prohibitions which would in any manner affect the enforcement of the judgment rendered in Civil Case 7435, pending the finality of the decision of the Honorable Court of Appeals in the latter case. Thus, defendant Puentevella was restored to the possession of the lots and buildings subject of this case. However, plaintiffs filed a petition for review with the Supreme Court which issued a restraining order against the sale of the properties claimed by the spouses-plaintiffs [in Abierra vs. Court of Appeals, 45 SCRA 314]. When the Supreme Court dissolved the aforesaid injunction issued by the Court of Appeals, possession of the building and other property was taken from petitioner Binalbagan and given to the third-party claimants, the de la Cruz spouses. Petitioner Binalbagan transferred its school to another location. In the meantime, an appeal was interposed by the defendants in Civil Case No. 293 with the Court of Appeals where the appeal was docketed as CA-G.R. No. 42211-R. On October 30, 1978, the Court of Appeals rendered judgment, reversing the appealed decision in Civil Case No. 293. On April 29, 1981, judgment was entered in CA-G.R. No. 42211, and the record of the case was remanded to the court of origin on December 22, 1981. Consequently, in 1982 the judgment in Civil Case No. 7435 was finally executed and enforced, and petitioner was restored to the possession of the subdivision lots on May 31, 1982. It will be noted that petitioner was not in possession of the lots from 1974 to May 31, 1982. After petitioner Binalbagan was again placed in possession of the subdivision lots, private respondent Angelina Echaus demanded payment from petitioner Binalbagan for the subdivision lots, enclosing in the letter of demand a statement of account as of September 1982 showing a total amount due of P367,509.93, representing the price of the land and accrued interest as of that date. As petitioner Binalbagan failed to effect payment, private respondent Angelina P. Echaus filed on October 8, 1982 Civil Case No. 1354 of the Regional Trial Court of the Sixth Judicial Region stationed in Himamaylan, Negros Occidental against petitioners for recovery of title and damages. An amended complaint was filed by private respondent Angelina P. Echaus by including her mother, brothers, and sisters as co-plaintiffs, which was admitted by the trial court on March 18, 1983. After trial, the trial court rendered a decision on August 30, 1989, the dispositive portion of which reads as follows: IN VIEW OF THE FOREGOING, and inasmuch as there is no fraud and since the action on the written contract, Exh. "C", has long prescribed, judgment is hereby rendered in favor of the defendants and against the plaintiffs dismissing the amended complaint. The counterclaim is likewise dismissed for lack of sufficient proof. Each shall bear their respective expenses of litigation (pp. 71-72, Rollo). Private respondents appealed to the Court of Appeals which rendered a decision on March 27, 1991, disposing: WHEREFORE, premises considered, the appealed decision is REVERSED and SET ASIDE and a new one is rendered ordering the appellee Binalbagan Tech. Inc., through any of its officers, to execute a deed of conveyance or any other instrument, transferring and returning unto the appellants the ownership and titles of the subject 42 subdivision lots. Costs against appellees. (pp. 51-52, Rollo) Thus, this petition for review on certiorari wherein petitioners assign the following alleged errors of the Court of Appeals: First Error The Court of Appeals erred in holding that the cause of action of the respondents has not prescribed. Second Error The Court of Appeals erred in holding that Civil Case No. 293 interrupts the running of the period of the prescription. Third Error The Court of Appeals erred in citing the cases of David-Garlitos and Rivero vs. Rivero to support its contention that the period of prescription was interrupted in the case at bar. Fourth Error The finding of facts of the Honorable Court of Appeals in reversing the lower court decision has no basis and is contradicted by the evidence on record of the case at bar as well as the admission of parties." (p. 16, Rollo) The main issue of this case is: Whether private respondents' cause of action in Civil Case No. 1354 is barred by prescription. On this point the Court of Appeals held:

As it is evident that there was an interruption during the period from 1974 up to 1982, the period of prescription, as correctly maintained by the appellants, was tolled during such period, due to the injunctive writ in Civil Case No. 293 as discussed earlier when the vendors could not maintain the vendee in possession, and consequently was in no position to legally demand payment of the price. Accordingly, while it may be conceded that appellants' cause of action to demand performance had accrued on June 10, 1967 due to the appellee institution's default in the payment of the first installment which became due on that date, the running of prescription was interrupted in 1974 when, from the words of the lower court itself, "the Supreme Court reversed the Court of Appeal's decision and dissolved the injunction which the latter court had earlier issued in Civil Case No. 293, possession of the building and other properties was taken from defendant Binalbagan Tech. Inc. and given to the de la Cruz spouses, through Southern Negros College". And the period of prescription commenced to run anew only on May 31, 1982 when the appellants were finally able to fully implement the already executory judgment in Case No. 7435, and thus restore appellees in possession of the 42 subdivision lots. In other words, the period of prescription was interrupted, because from 1974 up to 1982, the appellants themselves could not have restored unto the appellees the possession of the 42 subdivision lots precisely because of the preliminary injunction mentioned elsewhere. Consequently, the appellants could not have prospered in any suit to compel performance or payment from the appelleesbuyers, because the appellants themselves were in no position to perform their own corresponding obligation to deliver to and maintain said buyers in possession of the lots subject matter of the sale. (Article 1458, 1495, 1537, Civil Code). (pp 49-50, Rollo) We agree with the Court of Appeals. A party to a contract cannot demand performance of the other party's obligations unless he is in a position to comply with his own obligations. Similarly, the right to rescind a contract can be demanded only if a party thereto is ready, willing and able to comply with his own obligations thereunder (Art. 1191, Civil Code; Seva vs. Berwin, 48 Phil. 581 [1926]; Paras, Civil Code of the Philippines, 12th ed. Vol. IV, p. 200). In a contract of sale, the vendor is bound to transfer the ownership of and deliver, as well as warrant, the thing which is the object of the sale (Art. 1495, Civil Code); he warrants that the buyer shall, from the time ownership is passed, have and enjoy the legal and peaceful possession of the thing ARTICLE 1547. In a contract of sale, unless a contrary intention appears, there is: (1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass, and that the buyer shall from that time have and enjoy the legal and peaceful possession of the thing. xxx xxx xxx As afore-stated, petitioner was evicted from the subject subdivision lots in 1974 by virtue of a court order in Civil Case No. 293 and reinstated to the possession thereof only in 1982. During the period, therefore, from 1974 to 1982, seller private respondent Angelina Echaus' warranty against eviction given to buyer petitioner was breached though, admittedly, through no fault of her own. It follows that during that period, 1974 to 1982, private respondent Echaus was not in a legal position to demand compliance of the prestation of petitioner to pay the price of said subdivision lots. In short, her right to demand payment was suspended during that period, 1974-1982. The prescriptive period within which to institute an action upon a written contract is ten years (Art. 1144, Civil Code). The cause of action of private respondent Echaus is based on the deed of sale aforementioned. The deed of sale whereby private respondent Echaus transferred ownership of the subdivision lots was executed on May 11, 1967. She filed Civil Case No. 1354 for recovery of title and damages only on October 8, 1982. From May 11, 1967 to October 8, 1982, more than fifteen (15) years elapsed. Seemingly, the 10-year prescriptive period had expired before she brought her action to recover title. However, the period 1974 to 1982 should be deducted in computing the prescriptive period for the reason that, as above discussed, from 1974 to 1982, private respondent Echaus was not in a legal position to initiate action against petitioner since as aforestated, through no fault of hers, her warranty against eviction was breached. In the case of Daniel vs. Garlitos, (95 Phil. 387 [1954]), it was held that a court order deferring action on the execution of judgment suspended the running of the 5-year period for execution of a judgment. Here the execution of the judgment in Civil Case No. 7435 was stopped by the writ of preliminary injunction issued in Civil Case No. 293. It was only when Civil Case No. 293 was dismissed that the writ of execution in Civil Case Na. 7435 could be implemented and petitioner Binalbagan restored to the possession of the subject lots. Deducting eight years (1974 to 1982) from the period 1967 to 1982, only seven years elapsed. Consequently, Civil Case No. 1354 was filed within the 10-year prescriptive period. Working against petitioner's position too is the principle against unjust enrichment which would certainly be the result if petitioner is allowed to own the 42 lots without full payment thereof. WHEREFORE, the petition is DENIED and the decision of the Court of Appeals in CA-G.R. CV No. 24635 is AFFIRMED. SO ORDERED. Feliciano, Bidin, Davide, Jr. and Romero, JJ ., concur. Gutierrez, Jr., J ., on terminal leave.

Republic of the Philippines Supreme Court Manila SECOND DIVISION

SOLAR HARVEST, INC., Petitioner,

G.R. No. 176868 Present: CARPIO, J., Chairperson, NACHURA, PERALTA, ABAD, and MENDOZA, JJ.

- versus -

DAVAO CORRUGATED CARTON CORPORATION, Respondent.

Promulgated: July 26, 2010

x------------------------------------------------------------------------------------x DECISION NACHURA, J.:

Petitioner seeks a review of the Court of Appeals (CA) Decision[1] dated September 21, 2006 and Resolution[2] dated February 23, 2007, which denied petitioners motion for reconsideration. The assailed Decision denied petitioners claim for reimbursement for the amount it paid to respondent for the manufacture of corrugated carton boxes.

The case arose from the following antecedents: In the first quarter of 1998, petitioner, Solar Harvest, Inc., entered into an agreement with respondent, Davao Corrugated Carton Corporation, for the purchase of corrugated carton boxes, specifically designed for petitioners business of exporting fresh bananas, at US$1.10 each. The agreement was not reduced into writing. To get the production underway, petitioner deposited, on March 31, 1998, US$40,150.00 in respondents US Dollar Savings Account with Westmont Bank, as full payment for the ordered boxes. Despite such payment, petitioner did not receive any boxes from respondent. On January 3, 2001, petitioner wrote a demand letter for reimbursement of the amount paid.[3] On February 19, 2001, respondent replied that the boxes had been completed as early as April 3, 1998 and that petitioner failed to pick them up from the formers warehouse 30 days from completion, as agreed upon. Respondent mentioned that petitioner even placed an additional order of 24,000 boxes, out of which, 14,000 had been manufactured without any advanced payment from petitioner. Respondent then demanded petitioner to remove the boxes from the factory and to pay the balance of US$15,400.00 for the additional boxes and P132,000.00 as storage fee. On August 17, 2001, petitioner filed a Complaint for sum of money and damages against respondent. The Complaint averred that the parties agreed that the boxes will be delivered within 30 days from payment but respondent failed to manufacture and deliver the boxes within such time. It further alleged 6. That repeated follow-up was made by the plaintiff for the immediate production of the ordered boxes, but every time, defendant [would] only show samples of boxes and ma[k]e repeated promises to deliver the said ordered boxes. 7. That because of the failure of the defendant to deliver the ordered boxes, plaintiff ha[d] to cancel the same and demand payment and/or refund from the defendant but the latter refused to pay and/or refund the US$40,150.00 payment made by the former for the ordered boxes.[4] In its Answer with Counterclaim,[5] respondent insisted that, as early as April 3, 1998, it had already completed production of the 36,500 boxes, contrary to petitioners allegation. According to respondent, petitioner, in fact, made an additional order of 24,000 boxes, out of which, 14,000 had been completed without waiting for petitioners payment. Respondent stated that petitioner was to pick up the boxes at the factory as agreed upon, but petitioner failed to do so. Respondent averred that, on October 8, 1998, petitioners representative, Bobby Que (Que), went to the factory and saw that the boxes were ready for pick up. On February 20, 1999, Que visited the factory again and supposedly advised respondent to sell the boxes as rejects to recoup the cost of the unpaid 14,000 boxes, because petitioners transaction to ship bananas to China did not materialize. Respondent claimed that the boxes were occupying

warehouse space and that petitioner should be made to pay storage fee at P60.00 per square meter for every month from April 1998. As counterclaim, respondent prayed that judgment be rendered ordering petitioner to pay $15,400.00, plus interest, moral and exemplary damages, attorneys fees, and costs of the suit. In reply, petitioner denied that it made a second order of 24,000 boxes and that respondent already completed the initial order of 36,500 boxes and 14,000 boxes out of the second order. It maintained that respondent only manufactured a sample of the ordered boxes and that respondent could not have produced 14,000 boxes without the required pre-payments.[6] During trial, petitioner presented Que as its sole witness. Que testified that he ordered the boxes from respondent and deposited the money in respondents account.[7] He specifically stated that, when he visited respondents factory, he saw that the boxes had no print of petitioners logo.[8] A few months later, he followed-up the order and was told that the company had full production, and thus, was promised that production of the order would be rushed. He told respondent that it should indeed rush production because the need for the boxes was urgent. Thereafter, he asked his partner, Alfred Ong, to cancel the order because it was already late for them to meet their commitment to ship the bananas to China.[9] On cross-examination, Que further testified that China Zero Food, the Chinese company that ordered the bananas, was sending a ship to Davao to get the bananas, but since there were no cartons, the ship could not proceed. He said that, at that time, bananas from Tagum Agricultural Development Corporation (TADECO) were already there. He denied that petitioner made an additional order of 24,000 boxes. He explained that it took three years to refer the matter to counsel because respondent promised to pay.[10] For respondent, Bienvenido Estanislao (Estanislao) testified that he met Que in Davao in October 1998 to inspect the boxes and that the latter got samples of them. In February 2000, they inspected the boxes again and Que got more samples. Estanislao said that petitioner did not pick up the boxes because the ship did not arrive.[11] Jaime Tan (Tan), president of respondent, also testified that his company finished production of the 36,500 boxes on April 3, 1998 and that petitioner made a second order of 24,000 boxes. He said that the agreement was for respondent to produce the boxes and for petitioner to pick them up from the warehouse.[12] He also said that the reason why petitioner did not pick up the boxes was that the ship that was to carry the bananas did not arrive.[13] According to him, during the last visit of Que and Estanislao, he asked them to withdraw the boxes immediately because they were occupying a big space in his plant, but they, instead, told him to sell the cartons as rejects. He was able to sell 5,000 boxes at P20.00 each for a total of P100,000.00. They then told him to apply the said amount to the unpaid balance. In its March 2, 2004 Decision, the Regional Trial Court (RTC) ruled that respondent did not commit any breach of faith that would justify rescission of the contract and the consequent reimbursement of the amount paid by petitioner. The RTC said that respondent was able to produce the ordered boxes but petitioner failed to obtain possession thereof because its ship did not arrive. It thus dismissed the complaint and respondents counterclaims, disposing as follows: WHEREFORE, premises considered, judgment is hereby rendered in favor of defendant and against the plaintiff and, accordingly, plaintiffs complaint is hereby ordered DISMISSED without pronouncement as to cost. Defendants counterclaims are similarly dismissed for lack of merit. SO ORDERED.[14] Petitioner filed a notice of appeal with the CA. On September 21, 2006, the CA denied the appeal for lack of merit.[15] The appellate court held that petitioner failed to discharge its burden of proving what it claimed to be the parties agreement with respect to the delivery of the boxes. According to the CA, it was unthinkable that, over a period of more than two years, petitioner did not even demand for the delivery of the boxes. The CA added that even assuming that the agreement was for respondent to deliver the boxes, respondent would not be liable for breach of contract as petitioner had not yet demanded from it the delivery of the boxes.[16] Petitioner moved for reconsideration,[17] but the motion was denied by the CA in its Resolution of February 23, 2007.[18] In this petition, petitioner insists that respondent did not completely manufacture the boxes and that it was respondent which was obliged to deliver the boxes to TADECO. We find no reversible error in the assailed Decision that would justify the grant of this petition. Petitioners claim for reimbursement is actually one for rescission (or resolution) of contract under Article 1191 of the Civil Code, which reads: Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law.

The right to rescind a contract arises once the other party defaults in the performance of his obligation. In determining when default occurs, Art. 1191 should be taken in conjunction with Art. 1169 of the same law, which provides: Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. However, the demand by the creditor shall not be necessary in order that delay may exist: (1) When the obligation or the law expressly so declares; or

(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or (3) When demand would be useless, as when the obligor has rendered it beyond his power to perform. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. In reciprocal obligations, as in a contract of sale, the general rule is that the fulfillment of the parties respective obligations should be simultaneous. Hence, no demand is generally necessary because, once a party fulfills his obligation and the other party does not fulfill his, the latter automatically incurs in delay. But when different dates for performance of the obligations are fixed, the default for each obligation must be determined by the rules given in the first paragraph of the present article,[19] that is, the other party would incur in delay only from the moment the other party demands fulfillment of the formers obligation. Thus, even in reciprocal obligations, if the period for the fulfillment of the obligation is fixed, demand upon the obligee is still necessary before the obligor can be considered in default and before a cause of action for rescission will accrue. Evident from the records and even from the allegations in the complaint was the lack of demand by petitioner upon respondent to fulfill its obligation to manufacture and deliver the boxes. The Complaint only alleged that petitioner made a follow-up upon respondent, which, however, would not qualify as a demand for the fulfillment of the obligation. Petitioners witness also testified that they made a follow-up of the boxes, but not a demand. Note is taken of the fact that, with respect to their claim for reimbursement, the Complaint alleged and the witness testified that a demand letter was sent to respondent. Without a previous demand for the fulfillment of the obligation, petitioner would not have a cause of action for rescission against respondent as the latter would not yet be considered in breach of its contractual obligation. Even assuming that a demand had been previously made before filing the present case, petitioners claim for reimbursement would still fail, as the circumstances would show that respondent was not guilty of breach of contract. The existence of a breach of contract is a factual matter not usually reviewed in a petition for review under Rule 45.[20] The Court, in petitions for review, limits its inquiry only to questions of law. After all, it is not a trier of facts, and findings of fact made by the trial court, especially when reiterated by the CA, must be given great respect if not considered as final.[21] In dealing with this petition, we will not veer away from this doctrine and will thus sustain the factual findings of the CA, which we find to be adequately supported by the evidence on record. As correctly observed by the CA, aside from the pictures of the finished boxes and the production report thereof, there is ample showing that the boxes had already been manufactured by respondent. There is the testimony of Estanislao who accompanied Que to the factory, attesting that, during their first visit to the company, they saw the pile of petitioners boxes and Que took samples thereof. Que, petitioners witness, himself confirmed this incident. He testified that Tan pointed the boxes to him and that he got a sample and saw that it was blank. Ques absolute assertion that the boxes were not manufactured is, therefore, implausible and suspicious. In fact, we note that respondents counsel manifested in court, during trial, that his client was willing to shoulder expenses for a representative of the court to visit the plant and see the boxes.[22] Had it been true that the boxes were not yet completed, respondent would not have been so bold as to challenge the court to conduct an ocular inspection of their warehouse. Even in its Comment to this petition, respondent prays that petitioner be ordered to remove the boxes from its factory site,[23] which could only mean that the boxes are, up to the present, still in respondents premises. We also believe that the agreement between the parties was for petitioner to pick up the boxes from respondents warehouse, contrary to petitioners allegation. Thus, it was due to petitioners fault that the boxes were not delivered to TADECO. Petitioner had the burden to prove that the agreement was, in fact, for respondent to deliver the boxes within 30 days from payment, as alleged in the Complaint. Its sole witness, Que, was not even competent to testify on the terms of the agreement and,

therefore, we cannot give much credence to his testimony. It appeared from the testimony of Que that he did not personally place the order with Tan, thus: Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. No, my question is, you went to Davao City and placed your order there? I made a phone call. You made a phone call to Mr. Tan? The first time, the first call to Mr. Alf[re]d Ong. Alfred Ong has a contact with Mr. Tan. So, your first statement that you were the one who placed the order is not true? Thats true. The Solar Harvest made a contact with Mr. Tan and I deposited the money in the bank. You said a while ago [t]hat you were the one who called Mr. Tan and placed the order for 36,500 boxes, isnt it? First time it was Mr. Alfred Ong. It was Mr. Ong who placed the order[,] not you? Yes, sir.[24] Is it not a fact that the cartons were ordered through Mr. Bienvenido Estanislao? Yes, sir.[25]

Moreover, assuming that respondent was obliged to deliver the boxes, it could not have complied with such obligation. Que, insisting that the boxes had not been manufactured, admitted that he did not give respondent the authority to deliver the boxes to TADECO: Q. A. Did you give authority to Mr. Tan to deliver these boxes to TADECO? No, sir. As I have said, before the delivery, we must have to check the carton, the quantity and quality. But I have not seen a single carton. Are you trying to impress upon the [c]ourt that it is only after the boxes are completed, will you give authority to Mr. Tan to deliver the boxes to TADECO[?] Sir, because when I checked the plant, I have not seen any carton. I asked Mr. Tan to rush the carton but not[26] Did you give any authority for Mr. Tan to deliver these boxes to TADECO? Because I have not seen any of my carton. You dont have any authority yet given to Mr. Tan? None, your Honor.[27]

Q. A.

Q. A. Q. A.

Surely, without such authority, TADECO would not have allowed respondent to deposit the boxes within its premises. In sum, the Court finds that petitioner failed to establish a cause of action for rescission, the evidence having shown that respondent did not commit any breach of its contractual obligation. As previously stated, the subject boxes are still within respondents premises. To put a rest to this dispute, we therefore relieve respondent from the burden of having to keep the boxes within its premises and, consequently, give it the right to dispose of them, after petitioner is given a period of time within which to remove them from the premises. WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated September 21, 2006 and Resolution dated February 23, 2007 are AFFIRMED. In addition, petitioner is given a period of 30 days from notice within which to cause the removal of the 36,500 boxes from respondents warehouse. After the lapse of said period and petitioner fails to effect such removal, respondent shall have the right to dispose of the boxes in any manner it may deem fit. SO ORDERED. Tayag vs. CA Art. 1191 on Reciprocal Obligations 1. Reciprocal Obligations on Contract of Purchase 2. Right to rescind, when partial payments have been accepted by creditors Facts 4. Petitioners are heirs of Juan Galicia, Sr., who executed a deed of conveyance in favor of private respondent including a piece of land 5. Suit for specific performance was filed by PR for failure of P to execute final deed of sale 6. P argued that remaining balance was not paid by PR Ruling

8. In a perfected contract of sale of land under an agreed schedule of payments, while the parties may mutually oblige each other to compel the specific performance of the monthly amortization plan and upon failure of buyer to make the payment, the seller has the right to ask for rescission of contract under Art. 1191, this shall be deemed waived by acceptance of posterior payments (DBP vs. Sarandi) 9. When the obligee accepts the performance, knowing its completeness or irregularity and without expressing any protest or objection, the obligation is deemed fully complied with (Art. 1235, Civil Code) 10. n reciprocal obligation like contract of purchase, both parties are mutually obligors and also obligees and any of the contracting parties, upon non-fulfillment by other privy of his part of the prestation, rescind the contract or seek fulfillment