Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

L-46179 January 31, 1978 CANDIDA VIRATA, TOMAS VIRATA, MANOLITO VIRATA, EDERLINDA VIRATA, NAPOLEON VIRATA, ARACELY VIRATA, ZENAIDA VIRATA, LUZMINDA VIRATA, PACITA VIRATA, and EVANGELINA VIRATA, petitioners, vs. VICTORIO OCHOA, MAXIMO BORILLA and THE COURT OF FIRST INSTANCE OF CAVITE, 7th JUDICIAL DISTRICT, BRANCH V, stationed at BACOOR, CAVITE, respondents. Remulla, Estrella & Associates for petitioners Exequil C. Masangkay for respondents.

FERNANDEZ, J.: This is an appeal by certiorari, from the order of the Court of First Instance of Cavite, Branch V, in Civil Case No. B-134 granting the motion of the defendants to dismiss the complaint on the ground that there is another action pending between the same parties for the same cause. 1 The record shows that on September 24, 1975 one Arsenio Virata died as a result of having been bumped while walking along Taft Avenue, Pasay City by a passenger jeepney driven by Maximo Borilla and registered in the name Of Victoria Ochoa; that Borilla is the employer of Ochoa; that for the death of Arsenio Virata, a action for homicide through reckless imprudence was instituted on September 25, 1975 against Maximo Borilla in the Court of First Instance of Rizal at Pasay City, docketed as C Case No. 3162-P of said court; that at the hearing of the said criminal case on December 12, 1975, Atty. Julio Francisco, the private prosecutor, made a reservation to file a separate civil action for damages against the driver on his criminal liability; that on February 19, 1976 Atty. Julio Francisco filed a motion in said c case to withdraw the reservation to file a separate civil action; that thereafter, the private prosecutor actively participated in the trial and presented evidence on the damages; that on June 29, 1976 the heirs of Arsenio Virata again reserved their right to institute a separate civil action; that on July 19, 1977 the heirs of Arsenio Virata, petitioners herein, commenced Civil No. B-134 in the Court of First Instance of Cavite at Bacoor, Branch V, for damages based on quasi-delict against the driver Maximo Borilla and the registered owner of the jeepney, Victorio Ochoa; that on August 13, 1976 the defendants, private respondents filed a motion to dismiss on the ground that there is another action, Criminal Case No. 3162-P, pending between the same parties for the same cause; that on September 8, 1976 the Court of First Instance of Rizal at Pasay City a decision in Criminal Case No. 3612-P acquitting the accused Maximo Borilla on the ground that he caused an injury by name accident; and that on January 31, 1977, the Court of First Instance of Cavite at Bacoor granted the motion to Civil Case No. B-134 for damages. 2 The principal issue is weather or not the of the Arsenio Virata, can prosecute an action for the damages based on quasi-delict against Maximo Borilla and Victoria Ochoa, driver and owner, respectively on the passenger jeepney that bumped Arsenio Virata.

It is settled that in negligence cases the aggrieved parties may choose between an action under the Revised Penal Code or of quasi-delict under Article 2176 of the Civil Code of the Philippines. What is prohibited by Article 2177 of the Civil Code of the Philippines is to recover twice for the same negligent act. The Supreme Court has held that: According to the Code Commission: 'The foregoing provision (Article 2177) though at first sight startling, is not so novel or extraordinary when we consider the exact nature of criminal and civil negligence. The former is a violation of the criminal law, while the latter is a 'culpa aquiliana' or quasi-delict, of ancient origin, having always had its own foundation and individuality, separate from criminal negligence. Such distinction between criminal negligence and 'culpa extra-contractual' or quasi-delito has been sustained by decision of the Supreme Court of Spain and maintained as clear, sound and perfectly tenable by Maura, an outstanding Spanish jurist. Therefore, under the proposed Article 2177, acquittal from an accusation of criminal negligence, whether on reasonable doubt or not, shall not be a bar to a subsequent civil action, not for civil liability arising from criminal negligence, but for damages due to a quasi-delict or 'culpa aquiliana'. But said article forestalls a double recovery. (Report of the Code Commission, p. 162.)
Although, again, this Article 2177 does seem to literally refer to only acts of negligence, the same argument of Justice Bocobo about construction that upholds 'the spirit that given life' rather than that which is literal that killeth the intent of the lawmaker should be observed in applying the same. And considering that the preliminary chapter on human relations of the new Civil Code definitely establishes the separability and independence of liability in a civil action for acts criminal in character (under Articles 29 to 32) from the civil responsibility arising from crime fixed by Article 100 of the Penal Code, and, in a sense, the Rules of Court, under Sections 2 and 3(c), Rule 111, contemplate also the same separability, it is 'more congruent' with the spirit of law, equity and justice, and more in harmony with modern progress', to borrow the felicitous language in Rakes vs. Atlantic Gulf and Pacific Co., 7 Phil. to 359, to hod as We do hold, that Article 2176, where it refers to 'fault covers not only acts 'not punishable by law' but also criminal in character, whether intentional and voluntary or consequently, a separate civil action lies against the in a criminal act, whether or not he is criminally prosecuted and found guilty and acquitted, provided that the offended party is not allowed, if he is actually charged also criminally, to recover damages on both scores, and would be entitled in such eventuality only to the bigger award of the, two assuming the awards made in the two cases vary. In other words the extinction of civil liability refereed to in Par. (c) of Section 13, Rule 111, refers exclusively to civil liability founded on Article 100 of the Revised Penal Code, whereas the civil liability for the same act considered as a quasi-delict only and not as a crime is not extinguished even by a declaration in the criminal case that the criminal act charged has not happened or has not been committed by the accused. Brief stated, We hold, in reitration of Garcia, that culpa aquilina includes voluntary and negligent acts which may be punishable by law.3

The petitioners are not seeking to recover twice for the same negligent act. Before Criminal Case No. 3162-P was decided, they manifested in said criminal case that they were filing a separate civil action for damages against the owner and driver of the passenger jeepney based on quasidelict. The acquittal of the driver, Maximo Borilla, of the crime charged in Criminal Case No. 3162-P is not a bar to the prosecution of Civil Case No. B-134 for damages based on quasi-delict The source of the obligation sought to be enforced in Civil Case No. B-134 isquasi-delict, not an act or omission punishable by law. Under Article 1157 of the Civil Code of the Philippines, quasi-delict and an act or omission punishable by law are two different sources of obligation.

Moreover, for the petitioners to prevail in the action for damages, Civil Case No. B-134, they have only to establish their cause of action by preponderance of the evidence. WHEREFORE, the order of dismissal appealed from is hereby set aside and Civil Case No. B-134 is reinstated and remanded to the lower court for further proceedings, with costs against the private respondents. SO ORDERED. Teehankee (Chairman), Makasiar, Muoz Palma and Guerrero, JJ., concur.

Footnotes 1 Annex "A", Rollo, pp. 38-42. 2 Comment of Respondents, Rollo, pp. 48-51. 3 Elcano vs. Hill. 77 SCRA 98, 105-107.
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Sagrada Orden vs. Nacoco 91 Phil. 503 (1952) Nature: appeal from judgment of CFI of Manila Facts and Background of the Case - On Jan 4, 1942, during the Japanese occupation, Taiwan Tekkosho (Japanese corporation) acquired the plaintiffs property (land with warehouse in Pandacan, Manila) for Php140K - On April 4, 1946, after the liberation, the US took control and custody of the aforementioned enemys land under Sect 12 of the Trading with the Enemy Act - In the same year, the Copra Export Management Company occupied the property under custodianship agreement with the United States Alien Property Custodian - In August 1946, when the Copra Export Management Co. vacated the property, the National Coconut Corporation (NACOCO), the defendant, occupied it next - Sagrada Orden (plaintiff) files claims on the property with the Court of First Instance of Manila and against the Philippine Alien Property Administrator - Plaintiff petitions that the sale of the property to Taiwan Tekkosho should be declared null and void as it was executed under duress, that the interest of the Alien Property Custodian be cancelled, and that NACOCO be given until February 28, 1949 to recover its equipment form the property and vacate the premise - The Republic of the Philippines is allowed to intervene - CFI: the defendant (Philippine Alien Property Administrator) and the intervenor (RP) are released from any liability but the plaintiff may reserve the right to recover from NACOCO reasonable rentals for the use and occupation of the premises - The sale of the property to the Taiwan Takkesho was declared void and the plaintiff was given the right to recover Php3,000/month as reasonable rental from August 1946 (date when NACOCO occupied property) to the date NACOCO vacates the premises - the judgment is appealed to the SC Legal Issues 1. WON the defendant is liable to pay rent for occupying the property in question Judgment 1. The CFIs decision that the defendant should pay rent from August 1946 to February 28, 1949 was reversed, costs against the plaintiff Ratio Obligations can only arise from four sources: law, contracts or quasi-contracts, crime, or negligence (Art 1089, Spanish Civil Code). There were no laws or an express agreement between the defendant or the Alien Property Custodian with the plaintiff regarding payment of rent. The property was acquired by the Alien Property Administrator through law (Trading with the Enemy Act) on the seizure of alien property and not as a successor to the interests of the latter. There was no contract of rental b/w them and Taiwan Takkesho. NACOCO entered possession of the property from the Alien Property Custodian without any expectation of liability for its use. NACOCO did not commit any negligence or offense, and there was no contract, implied or otherwise, entered into, that can be used as basis for claiming rent on the property before the plaintiff obtained the judgment annulling the sale to Taiwan Takkesho. The plaintiff has no right to claim rent from NACOCO.

Important Notes Article 1157 of the New Civil Code states that there are 5 sources of obligations: laws, contracts, quasi-contracts, felonies (acts or omissions punished by law), and quasi-delicts.

Sagrada Orden Vs Nacoco Kinuha ng Hapon ang lupa. Action to recover parcel of land owned by P, and then because of Japanese war was acquired by other parties, then possessed by the US govt thru its custodian then possessed by the defendant without agreement with the US or with the plaintiff, and def then leased a part of the land. Issue: WON defendant is liable to Sagrada and must pay the rentals. Held: No. If liable at all must arise from any of the four sources of obligations. APA was a trustee of the US and if def liable, not to plaintiff but to US govt. But defendant not liable for rentals bec no express agreement bet the APA and Nacoco. Existence of implied agreement is contrary to the circumstances. Source: Contract. But there was none.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-2899 April 29, 1949

NATIONAL COCONUT CORPORATION, petitioner, vs. JUDGE FRANCISCO GERONIMO and SAGRADA ORDEN DE PREDICADORES DEL SANTISIMO ROSARIO DE FILIPINA, respondents. Government Corporate Counsel Marcial P. Lichauco for the petitioner. Ramirez and Ortigas for the respondents. FERIA, J.: From the allegations in the complaint filed with the Municipal Court of the City of Manila (copy of which is attached to the petition) by the Sagrada Orden de Predicadores against the petitioner herein, is clearly appears, notwithstanding the plaintiff's contention, that the possession of the property in question by the Philippines Alien Property Custodian and of the petitioner to whom said possession was transferred by the said Custodian in August 1946, was in transferred by the said Custodian in August 1946, was in good faith (Arts. 434, 435, 436 and 1950, Civil Code); and it only lost its character as such when the Court of First Instance rendered judgment in Civil Case No. 5007 declaring null and void the sale of the property by the respondent Sagrada Orden de Predicadores to a Japanese corporation, from which the Philippine Alien Property Custodian, predecessor in interest of the petitioner, obtained the said property in accordance with law. Under Art. 451 of the Civil Code the fruits received by one in possession in good faith before the possession is legally interrupted, becomes his own (White vs. Williams and Co., 5 Phil., 571), and the possession in good faith of the petitioner and its predecessor in interest, the Philippine Alien Property Custodian, was not interrupted upon the filing of the complaint against, and service of summons upon, the latter; because the Philippine Alien Property Custodian was not the purchaser of the property and, under the circumstances, was not supposed to be aware of any vice which may have attended the sale of the property by the Sagrada Orden de Predicadores to the Japanese corporation. The possession of the petitioner lost its character of possession in good faith from the rendition of the judgment against the Philippine Alien Property Custodian, and the latter or his successor in interest is liable from that time to pay the rents or fruits of the property until the possession of the property has been delivered to the adjudged owner thereof. The possession of the property by the petitioner became illegal only from the time she was notified or required by the Sagrada Orden de Predicadores to return said possession to it and the former failed to do so, because before said notice or demand was made the possession of the petitioner was legal or consented to, without prejudice to the obligation of said petitioner to pay the reasonable compensation for the use and occupation of the premises from the time the latter's possession ceased to be in good faith. From the notice to vacate the premises up to the filing of the complaint of illegal detainer against the petitioner by the respondent Sagrada Orden de Predicadores, one year had not elapsed, and therefore the respondent Municipal Judge or Court has jurisdiction to try and decide case.

To uphold the contention of the dissenting opinion that the possession of the petitioner was illegal since August 1946, would be to hold that an action of illegal detainer could have been successfully instituted by the Sagrada Orden de Predicadores within one year from that date, Orden de Predicadores to the Japanese corporation has was still vested in the petitioner's predecessor in interest, which is absolutely untenable. Petition for prohibition with preliminary injunction is therefore denied. So ordered. Moran, C.J., Pablo, Bengzon, Tuason, Montemayor and A. Reyes, JJ., concur.

Separate Opinions PARAS, J., dissenting: The complaint for ejectment filed in the Municipal Court admits that plaintiff (respondent Sagrada Orden de Predicadores del Santisimo Rosario de Filipinas) has been deprived of the premises in question since 1946, and that the defendants (petitioner National Coconut Corporation) has had that possession since that year. The claim for P93,00 represents damages from August, 1946 to February, 1949. The result is that, under the very allegations of the complaint for ejectment, more than one year has elapsed between the commencement of the alleged illegal deprivation of possession and the filing of the complaint in the Municipal Court. The one-year period specified in the Rule of Court that confers jurisdiction on the Municipal Court does not refer to the time when a plaintiff in a forcibly entry and detainer case shall have acquired proprietary rights, but principally to the possession of the actual occupant. If the respondents Sagrada Orden de Predicadores wanted the judgment in the case against the Philippines Alien Property Custodian to be binding against the petitioner, the latter should have been included as party defendant in the case. Again, the 5-day notice given to the defendant in an illegal detainer case refers to the class of persons expressly enumerated in section 2 of Rule of Court No. 72, to which the petitioner plainly does not belong. Perfecto, J., concurs in this dissent.

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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-13602 April 6, 1918

LEUNG BEN, plaintiff, vs. P. J. O'BRIEN, JAMES A OSTRAND and GEO. R. HARVEY, judges of First Instance of city of Manila,defendants. Thos. D. Aitken and W. A. Armstrong for plaintiff. Kincaid & Perkins for defendants. STREET, J.: This is an application for a writ of certiorari, the purpose of which is to quash an attachment issued from the Court of First Instance of the City of Manila under circumstances hereinbelow stated. Upon December 12, 1917, an action was instituted in the Court of First Instance of the city of Manila by P. J. O'Brien to recover of Leung Ben the sum of P15,000 alleged to have been lost by the plaintiff to the defendant in a series of gambling, banking and percentage games conducted ruing the two or three months prior to the institution of the suit. In his verified complaint the plaintiff asked for an attachment, under section 424, and 412 (1) of the Code of Civil Procedure, against the property of the defendant, on the ground that the latter was about to depart from the Philippine islands with intent to defraud his creditors. This attachment was issued; and acting under the authority thereof, the sheriff attached the sum of P15,000 which had been deposited by the defendant with the International Banking Corporation. The defendant thereupon appeared by his attorney and moved the court to quash the attachment. Said motion having dismissed in the Court of First Instance, the petitioner, Leung Ben, the defendant in that action, presented to this court, upon January 8, 1918 his petition for the writ of certiorari directed against P. J. O'Brien and the judges of the Court of First Instance of the city of Manila whose names are mentioned in the caption hereof. The prayer is that the Honorable James A. Ostrand, as the judge having cognizance of the action in said court be required to certify the record to this court for review and that the order of attachment which had been issued should be revoked and discharged. with costs. Upon the filing of said petition in this court the usual order was entered requiring the defendants to show cause why the writ should not issue. The response of the defendants, in the nature of a demurrer, was filed upon January 21, 1918; and the matter is now heard upon the pleadings thus presented. The provision of law under which this attachment was issued requires that there should be accuse of action arising upon contract, express or implied. The contention of the petitioner is that the statutory action to recover money lost at gaming is that the statutory action to recover money lost at gaming is no such an action as is contemplated in this provision, and he therefore insists that the original complaint shows on its face that the remedy of attachment is not available in aid thereof; that the Court of First Instance acted in excess of its jurisdiction in granting the writ of attachment; that the petitioner has no plain, speedy, and adequate remedy by appeal or otherwise; and that consequently the writ of certiorari supplies the appropriate remedy for his relief.

The case presents the two following questions of law, either of which, if decided unfavorably to the petitioner, will be fatal to his application: (1) Supposing that the Court of First Instance has granted an attachment for which there is no statutory authority, can this court entertain the present petition and grant the desired relief? (2) Is the statutory obligation to restore money won at gaming an obligation arising from "contract, express or implied?" We are of the opinion that the answer to the first question should be in the affirmative. Under section 514 of the Code of Civil Procedure the Supreme Court has original jurisdiction by the writ of certiorari over the proceedings of Courts of First Instance, wherever said courts have exceeded their jurisdiction and there is no plaint, speedy, and adequate remedy. In the same section, it is further declared that the proceedings in the Supreme Court in such cases hall be as prescribed for Courts of First Instance in section 217-221, inclusive, of said Code. This Supreme Court, so far as applicable, the provisions contained in those section to the same extent as if they had been reproduced verbatim immediately after section 514. Turning to section 217, we find that, in defining the conditions under which certiorari can be maintained in a Court of First Instance substantially the same language is used as is the same remedy can be maintained in the Supreme Court of First Instance, substantially the same language is used as is found in section 514 relative to the conditions under which the same remedy can be maintained in the Supreme Court, namely, when the inferior tribunal has exceeded its jurisdiction and there is no appeal, nor any plain, speedy and adequate remedy. In using these expressions the author of the Code of Civil Procedure merely adopted the language which, in American jurisdictions at least, had long ago reached the stage of stereotyped formula. In section 220 of the same Code, we have a provision relative to the final proceedings in certiorari, and herein it is stated that the court shall determine whether the inferior tribunal has regularly pursued its authority it shall give judgment either affirming annulling, or modifying the proceedings below, as the law requires. The expression, has not regularly pursued its authority as here used, is suggestive, and we think it should be construed in connection with the other expressions have exceeded their jurisdiction, as used in section 514, and has exceeded their jurisdiction as used in section 217. Taking the three together, it results in our opinion that any irregular exercise of juridical power by a Court of First Instance, in excess of its lawful jurisdiction, is remediable by the writ of certiorari, provided there is no other plain, speedy, and adequate remedy; and in order to make out a case for the granting of the writ it is not necessary that the court should have acted in the matter without any jurisdiction whatever. Indeed the repeated use of expression excess of jurisdiction shows that the lawmaker contemplated the situation where a court, having jurisdiction should irregularly transcend its authority as well as the situation where the court is totally devoid of lawful power. It may be observed in this connection that the word jurisdiction as used in attachment cases, has reference not only to the authority of the court to entertain the principal action but also to its authority to issue the attachment, as dependent upon the existence of the statutory ground. (6 C. J., 89.) This distinction between jurisdiction to issue the attachment as an ancillary remedy incident to the principal litigation is of importance; as a court's jurisdiction over the main action may be complete, and yet it may lack authority to grant an attachment as ancillary to such action. This distinction between jurisdiction over the ancillary has been recognized by this court in connection with actions involving the appointment of a receiver. Thus in Rocha & Co. vs. Crossfield and Figueras (6 Phil. Rep., 355), a receiver had been appointed without legal justification. It was held that the order making the appointment was beyond the jurisdiction of the court; and though the court admittedly had jurisdiction of the main cause, the order was vacated by this court upon application a writ

of certiorari. (See Blanco vs. Ambler, 3 Phil. Rep., 358, Blanco vs. Ambler and McMicking 3 Phil. Rep., 735, Yangco vs. Rohde, 1 Phil. Rep., 404.) By parity of reasoning it must follow that when a court issues a writ of attachment for which there is no statutory authority, it is acting irregularly and in excess of its jurisdiction, in the sense necessary to justify the Supreme Court in granting relief by the writ of certiorari. In applying this proposition it is of course necessary to take account of the difference between a ground of attachment based on the nature of the action and a ground of attachment based on the acts or the conditions of the defendant. Every complaint must show a cause of action some sort; and when the statue declares that the attachment may issue in an action arising upon contract, the express or implied, it announces a criterion which may be determined from an inspection of the language of the complaint. The determination of this question is purely a matter of law. On the other hand, when the stature declares that an attachment may be issued when the defendant is about to depart from the Islands, a criterion is announced which is wholly foreign to the cause of action; and the determination of it may involve a disputed question of fact which must be decided by the court. In making this determination, the court obviously acts within its powers; and it would be idle to suppose that the writ of certiorari would be available to reverse the action of a Court of First Instance in determining the sufficiency of the proof on such a disputed point, and in granting or refusing the attachment accordingly. We should not be understood, in anything that has been said, as intending to infringe the doctrine enunciated by this court in Herrera vs. Barretto and Joaquin (25 Phil. Rep., 245), when properly applied. It was there held that we would not, upon application for a writ of certiorari, dissolve an interlocutory mandatory injunction that had been issued in a Court of First Instance as an incident in an action of mandamus. The issuance of an interlocutory injunction depends upon conditions essentially different from those involved in the issuance of an attachment. The injunction is designed primarily for the prevention of irreparable injury and the use of the remedy is in a great measure dependent upon the exercise of discretion. Generally, it may be said that the exercise of the injunctive powers is inherent in judicial authority; and ordinarily it would be impossible to distinguish between the jurisdiction of the court in the main litigation and its jurisdiction to grant an interlocutory injunction, for the latter is involved in the former. That the writ of certiorari can not be used to reverse an order denying a motion for a preliminary injunction is of course not to cavil. (Somes vs. Crossfield and Molina, 8 Phil. Rep., 284.) But it will be said that the writ of certiorari is not available in this cae, because the petitioner is protected by the attachment bond, and that he has a plain, speedy, and adequate remedy appeal. This suggestion seems to be sufficiently answered in the case of Rocha & Co vs. Crossfield and Figueras (6 Phil. Rep., 355), already referred to, and the earlier case there cited. The remedy by appeal is not sufficiently speedy to meet the exigencies of the case. An attachment is extremely violent, and its abuse may often result in infliction of damage which could never be repaired by any pecuniary award at the final hearing. To postpone the granting of the writ in such a case until the final hearing and to compel the petitioner to bring the case here upon appeal merely in order to correct the action of the trial court in the matter of allowing the attachment would seem both unjust and unnecessary. Passing to the problem propounded in the second question it may be observed that, upon general principles,. recognize both the civil and common law, money lost in gaming and voluntarily paid by the loser to the winner can not in the absence of statue, be recovered in a civil action. But Act No. 1757 of the Philippine Commission, which defines and penalizes several forms of gambling, contains numerous provisions recognizing the right to recover money lost in gambling or in the playing of certain games (secs. 6, 7, 8, 9, 11). The original complaint in the action in the Court of First Instance is not clear as to the particular section of Act No. 1757 under which the action is brought, but it is alleged that the money was lost at gambling, banking, and percentage game in which the defendant

was banker. It must therefore be assumed that the action is based upon the right of recovery given in Section 7 of said Act, which declares that an action may be brought against the banker by any person losing money at a banking or percentage game. Is this a cause arising upon contract, express or implied, as this term is used in section 412 of the Code of Civil Procedure? To begin the discussion, the English version of the Code of Civil Procedure is controlling (sec. 15, Admin. Code, ed. of 1917). Furthermore it is universally admitted to be proper in the interpretation of any statute, to consider its historical antecedents and its juris prudential sources. The Code of Civil Procedure, as is well known, is an American contribution to Philippine legislation. It therefore speaks the language of the common-law and for the most part reflects its ideas. When the draftsman of this Code used the expression contract, express or implied, he used a phrase that has been long current among writers on American and English law; and it is therefore appropriate to resort to that system of law to discover the appropriate to resort to that system of law to discover the meaning which the legislator intended to convey by those meaning which the legislator intended to convey by those terms. We remark in passing that the expression contrato tracito, used in the official translation of the Code of Civil Procedure as the Spanish equivalent of implied contract, does not appear to render the full sense of the English expression. The English contract law, so far as relates to simple contracts is planted upon two foundations, which are supplied by two very different conceptions of legal liability. These two conceptions are revealed in the ideas respectively underlying (1) the common- law debt and (2) the assumptual promise. In the early and formative stages of the common-law the only simple contract of which the courts took account was the real contract or contract re, in which the contractual duty imposed by law arises upon the delivery of a chattle, as in the mutuum, commodatum,depositum, and the like; and the purely consensual agreements of the Roman Law found no congenial place in the early common law system. In course of time the idea underlying the contract re was extended so as to include from one person to another under such circumstances as to constitute a justa cuas debendi. The obligation thereby created was a debt. The constitutive element in this litigation is found in the fact that the debtor has received something from the creditor, which he is bound by the obligation of law to return or pay for. From an early day this element was denominated the quid pro quo, an ungainly phrase coined by Mediaeval Latinity. The quid pro quo was primarily a materials or physical object, and its constituted the recompense or equivalent acquired by the debtor. Upon the passage of thequid pro quo from one party to the other, the law imposed that real contractual duty peculiar to the debt. No one conversant with the early history of English law would ever conceive of the debt as an obligation created by promise. It is the legal duty to pay or deliver a sum certain of money or an ascertainable quantity of ponderable or measurable chattles. The ordinary debt, as already stated, originates in a contract in which a quid pro quo passes to the debtor at the time of the creation of the debt, but the term is equally applicable to duties imposed by custom or statute, or by judgment of a court. The existence of a debt supposes one person to have possession of thing (res) which he owes and hence ought to turn over the owner. This obligation is the oldest conception of contract with which the common law is familiar; and notwithstanding the centuries that have rolled over Westminster Hall that conception remains as one of the fundamental bases of the common-law contract. Near the end of the fifteenth century there was evolved in England a new conception of contractual liability, which embodied the idea of obligation resulting from promise and which found expression in the common law assumpsit, or parol promise supported by a consideration. The application of this novel conception had the effect of greatly extending the filed of contractual liability and by this

means rights of action came to be recognized which had been unknown before. The action of assumpsit which was the instrument for giving effect to this obligation was found to be a useful remedy; and presently this action came to be used for the enforcement of common-law debts. The result was to give to our contract law the superficial appearance of being based more or less exclusively upon the notion of the obligation of promise. An idea is widely entertained to the effect that all simple contracts recognized in the common-law system are referable to a singly category. They all have their roots, so many of us imagine, in one general notion of obligation; and of course the obligation of promise is supposed to supply this general notion, being considered a sort of menstruum in which all other forms of contractual obligation have been dissolved. This a mistake. The idea of contractual duty embodied in the debt which was the first conception of contract liability revealed in the common law, has remained, although it was detained to be in a measure obscured by the more modern conception of obligation resulting from promise. What has been said is intended to exhibit the fact that the duty to pay or deliver a sum certain of money or an ascertainable quantity of ponderable or measurable chattles which is indicated by them debt has ever been recognized, in the common-law system, as a true contract, regardless, of the source of the duty or the manner in which it is create whether derived from custom, statue or some consensual transaction depending upon the voluntary acts of the parties. the form of contract known as the debt is of the most ancient lineage; and when reference is had to historical antecedents, the right of the debt to be classed as a contract cannot be questioned. Indeed when the new form of engagement consisting of the parol promise supported by a consideration first appeared, it was looked upon as an upstart and its right to be considered a true contract was questioned. It was long customary to refer to it exclusively as an assumpsit, agreement, undertaking, or parol promise, in fact anything but a contract. Only in time did the new form of engagement attain the dignity of being classed among true contract. The term implied takers us into shadowy domain of those obligations the theoretical classification of which has engaged the attention of scholars from the time of Gaius until our own day and has been a source of as much difficulty to the civilian as to the common-law jurist. There we are concerned with those acts which make one person debtor to another without there having intervened between them any true agreement tending to produce a legal bond (vinculum juris). Of late years some American and English writers have adopted the term quasi-contract as descriptive of these obligations or some of them; but the expression more commonly used is implied contract. Upon examination of these obligations, from the view point of the common-law jurisprudence, it will be found that they fall readily into two divisions according as they bear an analogy to the commonlaw debt or to the common law assumpsit. To exhibit the scope of these different classes of obligations is here impracticable. It is only necessary in this connection to observe that the most conspicuous division is that which comprises duties in the nature of debt. The characteristic feature of these obligations is that upon certain states of fact the law imposes an obligation to pay a sum certain of money; and it is characteristic of this obligation that the money in respect to which the duty is raised is conceived as being equivalent of something taken or detained under circumstances giving rise to the duty to return or compensate therefore. The proposition that no one shall be allowed to enrich himself unduly at the expense of another embodies the general principle here lying at the basis of obligation. The right to recover money improperly paid (repeticion de lo indebido) is also recognized as belong to this class of duties. It will observed that according to the Civil Code obligations are supposed to be derived either from (1) the law, (2) contracts and quasi-contracts, (3) illicit acts and omission, or (4) acts in which some sort ob lame or negligence is present. This enumeration of sources of obligations and the obligation

imposed by law are different types. The learned Italian jurist, Jorge Giorgi, criticises this assumption and says that the classification embodied in the code is theoretically erroneous. His conclusion is that one or the other of these categories should have been suppressed and merged in the other. (Giorgi, Teoria de las Obligaciones, Spanish ed., vol. 5 arts. 5, 7, 9.) The validity of this criticism is, we thin, self-evident; and it is of interest to note that the common law makes no distinction between the two sources of liability. The obligations which in the Code are indicated as quasi-contracts, as well as those arising ex lege, are in the common la system, merged into the category of obligations imposed by law, and all are denominated implied contracts. Many refinements, more or less illusory, have been attempted by various writers in distinguishing different sorts of implied contracts, as for example, the contract implied as of fact and the contract implied as of law. No explanation of these distinctions will be here attempted. Suffice it to say that the term contract, express or implied, is used to by common-law jurists to include all purely personal obligations other than those which have their source in delict, or tort. As to these it may be said that, generally speaking, the law does not impose a contractual duty upon a wrongdoer to compensate for injury done. It is true that in certain situations where a wrongdoer unjustly acquired something at the expense of another, the law imposes on him a duty to surrender his unjust acquisitions, and the injured party may here elect to sue upon this contractual duty instead of suing upon the tort; but even here the distinction between the two liabilities, in contract and in tort, is never lost to sight; and it is always recognized that the liability arising out of the tort is delictual and not of a contractual or quasi-contractual nature. In the case now under consideration the duty of the defendant to refund the money which he won from the plaintiff at gaming is a duty imposed by statute. It therefore arises ex lege. Furthermore, it is a duty to return a certain sum which had passed from the plaintiff to the defendant. By all the criteria which the common law supplies, this a duty in the nature of debt and is properly classified as an implied contract. It is well- settled by the English authorities that money lost in gambling or by lottery, if recoverable at all, can be recovered by the loser in an action ofindebitatus assumpsit for money had and received. (Clarke vs. Johnson. Lofft, 759; Mason vs. Waite, 17 Mass., 560; Burnham vs. Fisher, 25 Vt., 514.) This means that in the common law the duty to return money won in this way is an implied contract, or quasi-contract. It is no argument to say in reply to this that the obligation here recognized is called an implied contract merely because the remedy commonly used in suing upon ordinary contract can be here used, or that the law adopted the fiction of promise in order to bring the obligation within the scope of the action of assumpsit. Such statements fail to express the true import of the phenomenon. Before the remedy was the idea; and the use of the remedy could not have been approved if it had not been for historical antecedents which made the recognition of this remedy at one logical and proper. Furthermore, it should not be forgotten that the question is not how this duty but what sort of obligation did the author of the Code of Civil Procedure intend to describe when he sued the term implied contract in section 412. In what has been said we have assumed that the obligation which is at the foundation of the original action in the court below is not a quasi-contract, when judge by the principles of the civil law. A few observations will show that this assumption is not by any means free from doubt. The obligation in question certainly does not fall under the definition of either of the two-quasi- contracts which are made the subject of special treatment in the Civil Code, for its does not arise from a licit act as contemplated in article 1895. The obligation is clearly a creation of the positive law a circumstance which brings it within the purview of article 1090, in relation with article, 1089; and it is also derived from an illicit act, namely, the playing of a prohibited game. It is thus seen that the provisions of the Civil Code which might be consulted with a view to the correct theoretical classification of this obligation are unsatisfactory and confusing.

The two obligations treated in the chapter devoted to quasi-contracts in the Civil Code are (1) the obligation incident to the officious management of the affairs of other person (gestion de negocios ajenos) and (2) the recovery of what has been improperly paid (cabro de lo indebido). That the authors of the Civil Code selected these two obligations for special treatment does not signify an intention to deny the possibility of the existence of other quasi-contractual obligations. As is well said by the commentator Manresa. The number of the quasi-contracts may be indefinite as may be the number of lawful facts, the generations of the said obligations; but the Code, just as we shall see further on, in the impracticableness of enumerating or including them all in a methodical and orderly classification, has concerned itself with two only namely, the management of the affairs of other person and the recovery of things improperly paid without attempting by this to exclude the others. (Manresa, 2d ed., vol. 12, p. 549.) It would indeed have been surprising if the authors of the Code, in the light of the jurisprudence of more than a thousand years, should have arbitrarily assumed to limit the quasi-contract to two obligations. The author from whom we have just quoted further observes that the two obligations in question were selected for special treatment in the Code not only because they were the most conspicuous of the quasi-contracts, but because they had not been the subject of consideration in other parts of the Code. (Opus citat., 550.) It is well recognized among civilian jurists that the quasi- contractual obligations cover a wide range. The Italian jurist, Jorge Giorgi, to whom we have already referred, considers under this head, among other obligations, the following: payments made upon a future consideration which is not realized or upon an existing consideration which fails; payments wrongfully made upon a consideration which is contrary to law, or opposed to public policy; and payments made upon a vicious consideration or obtained by illicit means (Giorgi, Teoria de las Obligaciones, vol. 5, art. 130.) Im permitting the recovery of money lost at play, Act No. 1757 has introduced modifications in the application of articles 1798, 180`, and 1305 of the Civil Code. The first two of these articles relate to gambling contracts, while article 1305 treats of the nullity of contracts proceeding from a vicious or illicit consideration. Taking all these provisions together, it must be apparent that the obligation to return money lost at play has a decided affinity to contractual obligations; and we believe that it could, without violence to the doctrines of the civil law, be held that such obligations is an innominate quasi-contract. It is, however, unnecessary to place the decision on this ground. From what has been said it follows that in our opinion the cause of action stated in the complaints in the court below is based on a contract, express or implied and is therefore of such nature that the court had authority to issue writ of attachment. The application for the writ of certiorari must therefore be denied and the proceedings dismissed. So ordered. Arellano, C.J., Torres, Johnson and Carson, JJ., concur.

Separate Opinions MALCOLM, J., concurring: As I finished reading the learned and interesting decision of the majority, the impression which remained was that the court was enticed by the nice and unusual points presented to make a hard

case out of an easy one and unfortunately t do violence to the principles of certiorari. The simple questions are : Di the Court of First Instance of city of Manila exceed its jurisdiction in granting an attachments against the property of the defendant, now plaintiff? Has this defendant, now become the plaintiff, any other plain, speedy and adequate remedy? The answer are found in the decision of thinks court, in Herrera vs. Barretto and Joaquin ([1913], 25 Phil., 245), from which I quote the following: It has been repeatedly held by this court that a writ of certiorari will not be issued unless it clearly appears that the court to which it is to be directed acted without or in excess of jurisdiction. It will not be issued to cure errors in the proceedings or to correct erroneous conclusions of law or of fact. If the court has jurisdiction. It will not be issued to cure errors in the proceedings to correct jurisdiction of the subject matter and f the person, decisions upon all question pertaining to the cause are decisions within its jurisdiction and, however irregular or erroneous they may be, cannot be corrected by certiorari. The Code of Civil Procedure giving Courts of First Instance general jurisdiction in actions for mandamus, it goes without saying that the Court of First Instance had jurisdiction in the present case to resolve every question arising in such an action and t decide every question presented to it which pertained to the cause. It has already been held by this court, that while it is a power to be exercised only in extreme case, a Court of First Instance has power to issue a mandatory injunction t stand until the final determination of the action in which it is issued. While the issuance of the mandatory injunction in this particular case may have been irregular and erroneous, a question concerning which we express no opinion, nevertheless its issuance was within the jurisdiction of the court and its action is not reveiwable on certiorari. It is not sufficient to say that it was issued wrongfully and without sufficient grounds and in the absence of the other party. The question is, Did the court act with jurisdiction? It has been urged that the court exceeded its jurisdiction in requiring the municipal president t issue the license, for the reason that he was not the proper person to issue it and that, if he was the proper person, he had the right to exercise a discretion as to whom the license should be issued. We do not believe that either of these questions goes to the jurisdiction of the court to act. One of the fundamental question in amandamus against a public officer is whether or not that officer has the right to exercise discretion in the performance of the act which the plaintiff asks him to perform. It is one of the essential determinations of the cause. To claim that the resolution of that question may deprive the court of jurisdiction is to assert a novel proposition. It is equivalent to the contention that a court has jurisdiction if he decides right but no jurisdiction if he decides wrong. It may be stated generally that it is never necessary to decide the fundamental questions of a cause to determine whether the court has jurisdiction. The question of jurisdiction is preliminary and never touches the merits of the case. The determination of the fundamental questions of a cause are merely the exercise of a jurisdiction already conceded. In the case at bar no one denies the power, authority or jurisdiction of the Court of First Instance to take cognizance of an action formandamus and to decide very question which arises in that cause and pertains thereto. The contention that the decision of one of those question, if wrong, destroys jurisdiction involves an evident contradiction. Jurisdiction is the authority to hear and determine a cause the right to act in a case. Since it is the power to hear and determine, it does not depend either upon the regularity of the exercise of that power or upon the rightfulness of the decision made. Jurisdiction should therefore be distinguished from the exercise of jurisdiction. The authority to decide a case at all, and not the decision rendered therein, is what makes up jurisdiction. Where there is jurisdiction of the person and subject matter, as we have said before, the decision of all other questions arising in the case an exercise of that jurisdiction.

Then follows an elaborate citation and discussion of American authorities, including a decision of the United States Supreme Court and of the applicable Philippine cases. The decision continues" The reasons givens in these cases last cited for the allowance of the writ of prohibition are applicable only to the class of cases with which the decision deal and do not in any way militate against the general proposition herein asserted. Those which relate to election contest are based upon the principle that those proceedings, are special in their nature and must be strictly followed, a material departure from the statute resulting a loss, or in an excess of jurisdiction. The cases relating to receivers are based, in a measure, upon the principle the appointment of a receiver being governed by the statute; and in part upon the theory that the appointment of a receiver in an improper case is in substance a bankruptcy proceeding, the taking of which is expressly prohibited by law. The case relative to the allowance of alimony pendente lite when the answer denies the marriage is more difficult to distinguish. The reasons in support of the doctrine laid down in that case are given the opinion in full and they seem to place the particular case to which they refer in a class by itself. It is not alight things that the lawmakers have abolished writs of error and with them certiorari and prohibition, in so far as they were methods by which the mere errors of an inferior curt could be corrected. As instruments to that end they no longer exist. Their place is no taken by the appeal. So long as the inferior court retains jurisdiction its errors can be corrected only by that method. The office of the writ ofcertiorari has been reduced to the correction of defects of jurisdiction solely and cannot legally be used for any other purpose. It is truly an extra ordinary remedy and in this jurisdiction, its use is restricted to truly extraordinary cases cases in which the action of the inferior court is wholly void, where any further steps in the case would result in a waste of time and money and would produce no result whatever; where the parties, or their privies, would be utterly deceived; where a final judgment or decree would be nought but a snare and a delusion, deciding nothing, protecting nobody, a juridical pretension, a recorded falsehood, a standing menace. It is only to avoid such result as these that a writ of certiorari is issuable; and even here an appeal will lie if the aggrieved party prefers to prosecute it. A full and thorough examination of all the decided cases in this court touching the question of certiorari and prohibition fully supports the proposition already stated that, where a Court of First Instance has jurisdiction of the subject matter and of the person, its decision of any question pertaining to the cause, however, erroneous, cannot be reviewed by certiorari, but must be corrected by appeal. I see no reason to override the decision in Herrera vs. Barretto and Joaquin (supra). Accordingly, I can do no better than to make the language of Justice Moreland my own. applying these principles, it is self-evident that this court should no entertain the present petition and should not grant the desired relief.

FISHER, J., dissenting: I am in full accord with the view that the remedy of certiorari may be invoked in such cases as this, but I am constrained to dissent from the opinion of the majority as regards the meaning of the term implied contract.

Section 412 of the code of Civil Procedure in connection with section 424, authorizes the preliminary attachment of the property of the defendant: "(1) In an action for the recovery of money or damages on a cause of action arising upon contract, express or implied, when the defendant is about to depart from the Philippine Islands, with intent to defraud his creditors; (2) . . .; (3) . . .; (4) . . .; (5) When the defendant has removed or disposed of his property, or is about to do so, with intent to defraud his creditors." It is evident that the terms of paragraph five of the article cited are much broader than those of the first paragraph. The fifth paragraph is not limited to action arising from contract, but is by its terms applicable to actions brought for the purpose of enforcing extra-contractual rights as well as contract rights. The limitation upon cases falling under paragraph five is to be found, not in the character of the obligation for the enforcement for which the action is brought, but in the terms of article 4265, which requires that the affidavit show that the amount due the plaintiff . . . is as much as the sum for which the order is granted. That is to say, when application is made for a preliminary attachment upon the ground that the plaintiff is about to dispose of his property with intent to defraud his creditors thus bringing the case within the terms of paragraph five of the section it is not necessary to show that the obligation in suit is contractual in its origin, but is sufficient to show that the breach of the obligation, as shown by the facts stated in the complaint and affidavit, imposes upon the defendant the obligation to pay a specific and definite sum. For example, if it is alleged in the complaint that the defendant by negligence, has caused the destruction by fire of a building belonging to plaintiff, and that such building was worth a certain sum of money, these facts would show a definite basis upon which to authorize the granting of the writ. But if it were averred that the defendant has published a libel concerning the plaintiff, to the injury of his feeling and reputation, there is no definite basis upon which to grant an attachment, because the amount of the damage suffered, being necessarily uncertain and indeterminate, cannot be ascertained definitely until the trail has been completed. But it appears that the legislature although it has seen fit to authorize a preliminary attachment in aid of action of all kinds when the defendant is concealing his property with intent to defraud his creditors, has provided is about to depart from the country with intent to defraud his creditos, the writ will issue only when the action in aid of which it is sought arises from a contract express or implied. If an attachment were permitted upon facts bringing the application with the first paragraph of the section in support of action of any kind, whether the obligation sued upon is contractual or not, then paragraph five would by construction be made absolutely identical with paragraph one, and this would be in effect equivalent to the complete eliminated of the last two lines of the first paragraph. It is a rule of statutory construction that effect should be given to all parts of the statue, if possible. I can see no reason why the legislature should have limited cases falling within the firs paragraph to action arising from contract and have refrained from imposing this limitation with respect to cases falling within the terms of the fifth paragraph, but this should have no effect upon us in applying the law. Whether there be a good reason for it or not the distinction exists. Had the phrase express or implied not been used to qualify contract, there would be no doubt whatever with regard to the meaning of the word. In the Spanish Civil law contract are always consensual, and it would be impossible to define as a contract the judicial relation existing between a person who has lost money at gaming and the winner of such money, simple because the law imposes upon the winner the obligation of making restitution. An obligation of this kind, far from being consensual in its origin, arises against the will of the debtor. To call such a relation a contract is, from the standpoint of the civil law, a contradiction in terms. But is said that as the phase express or implied has been used to qualify the word contract and these words are found in statue which speaks the language of the common law, this implies the

introduction into our law of the concept of the implied contract of the English common-law, a concept which embraces a certain class of obligation originating ex lege, which have been arbitrarily classified as contracts, so that they might be enforced by one of the formal actions of the common law which legal tradition and practice has reserved for the enforcement of contract. I cannot concur in this reasoning. I believe that when a technical juridical term of substantive law is used in the adjective law of these islands, we should seek its meaning in our own substantive law rather than in the law of America or of England. The code of Civil Procedure was not enacted to establish rules of substantive law, but upon the assumption of the existence of these rules. In the case of Cayce vs. Curtis (Dallam's Decisions Texas Reports, 403), it appears that the legislature, at a time when that State still retained to a large extent the Spanish substantive civil law, enacted a statue in which the word bonds is used. In litigation involving the construction of that statute, one of the parties contended that the work bond should be given the technical meaning which it had in the English Common Law. The court rejected this contention saying On the first point it is urged by counsel for the appellant that the word bond used in the statute being a common law term, we must refer to the common law for its legal signification; and that by that law no instrument is a bond which is not under seal. The truth of the proposition that sealing is an absolute requisite to the validity of a bond at common law is readily admitted; but the applicability of that rule of the case under consideration is not perceived. This bond was taken at a time when the common law afforded no rule of decision or practice in this country, and consequently that law cannot be legitimately resorted to, even for the purpose for which it is invoked by the counsel for the appellant, unless it be shown that the civil law had not term of similar import for we regard it as a correct rule of construction, that where technical terms are used in a statute they are to be referred for their signification to terms f similar import in the system of laws which prevails in the country where the statues is passed, and not to another system which is entirely foreign t the whole system of municipal regulations by which that country is governed. (Martin's Reports, vol. 3, 185; 7 Martin [N. S.], 162.)" Consequently, I believe that in the interpretation of phase "contract, express or implied," we should apply the rules of our own substantive law. The phrase in itself offers no difficulty. The concept of the contract, under the Civil Code, as a legal relation of exclusively consensual origin, offers no difficulty. Nor is any difficulty encountered in the gramatical sense of the words express and "implied". Express according to the New International Dictionary is that which is directly and distinctly stated; expressed, not merely implied or left to interference. Therefore, a contract entered into by means of letters, in which the offer and the acceptance have been manifested by appropriate words, would be an "express contract." The word "imply" according to the same dictionary, is to involve in substance or essence, or by fair inference, or by construction of law, when not expressly stated in words or signs; to contain by implication to include virtually. Therefore, if I enter a tailor shop and order a suit of clothes, although nothing is said regarding payment, it is an inference, both logical and legal, from my act that is my intention to pay the reasonable value of the garments. The contract is implied, therefore, is that in which the consent of the parties is implied. Manresa, commenting upon article 1262 of the Civil Code, says: The essence of consent is the agreement of the parties concerning that which is to constitute the contract . . . . The forms of this agreement may vary according to whether it is expressed verbally or in writing, by words or by acts. Leaving the other differences for consideration hereafter, we will only refer now to those which exist between express consent

and implied consent . . . . It is unquestionable that implied consentmanifested by act or conduct, produces a contract. . . . If it were necessary to have recourse to the English common law for the purpose of ascertaining the meaning of the phrase under consideration, we could find many decisions which gave it the same meaning as that for which I contend. An implied contract is where one party receives benefits from another party, under such circumstances that the law presume a promise on the part of the party benefited to pay a reasonable price for the same. (Jones vs. Tucker [Del.], 84 Atlantic, 1012.) It is true that English courts have extended the concept of the term contract to include certain obligations arisingex lege without consent, express or implied. True contracts created by implied consent are designated in the English common law as contracts implied in the fact, while the socalled contracts in which the consent is a fiction of law are called contracts implied by law. But is evident that the latter are not real contracts. They have been called contract arbitrarily by the courts of England, and those of the Untied States in which the English common law is in force, in order that certain actions arising ex lege may be enforced by the action of assumpsit. In the rigid formulism of the English common law the substantive right had to be accommodated to the form of action. As is stated in the monograph on the action of assumpsit in Ruling Case Law. (volume 2, 743) In theory it wan action to recover for the nonperformance f simple contracts, and the formula and proceedings were constructed and carried on accordingly. . . . From the reign of Elizabeth this action has been extended to almost every case where an obligation arises from natural reason, . . . and it is now maintained in many cases which its principles do not comprehend and where fictions and intendments are resorted to, to fit the actual cause of action to the theory of the remedy. It is thus sanctioned where there has been no . . . real contract, but where some duty is deemed sufficient to justify the court in imputing the promise to perform its, and hence in bending the transaction to the form of action. In the ancient English common law procedure the form of the action was regarded as being much more important than the substantive right to be enforced. If no form of action was found in which the facts would fit, so much the worse for the facts! to avoid the injustices to which this condition of affairs gave rise, the judges invented those fictions which permitted them to preserve the appearance of conservatism and change the law without expressly admitting that they were doing so. The indispensable averment, that they were doing so. The indispensable avernment without which the action of assumpsit would not lie, was that the defendant promised to pay plaintiff the amount demanded. (Sector vs. Holmes, 17 Vs., 566.) In true contracts, whether express or implied, this promise in fact exists. In obligations arising ex lege there is no such promise, and therefore the action of assumpsit could not be maintained, and therefore the action of assumpsit could not be maintained, although by reason of its relative simplicity it was one of the most favored forms of action. In order to permit the litigant to make use of this form of action for the enforcement of ascertain classes of obligations arising ex lege, the judges invented the fiction of the promise of the defendant to pay the amount of the obligation, and as this fictitious promise give the appearance of consensuality to the legal relations of the parties, the name of implied contract is given to that class of extra-contractual obligations enforcible by the action of assumpsit. Now, it is not be supposed that it was the intention of the Legislature in making use in the first paragraph of article 412 of the phrase contract, express or implied to corrupt the logical simplicity of our concept of obligations by importing into our law the antiquated fictions of the mediaeval English common law. If one of the concepts of the term "implied contract" in the English common law, namely, that in which consent is presume from the conduct of the debtor, harmonizes with the

concept of the contract in our law, why should we reject that meaning and hold that the Legislature intended to use this phrase in the foreign and illogical sense of a contract arising without consent? This is a civil law country. why should we be compelled to study the fictions of the ancient English common law, in order to be informed as to the meaning of the word contract in the law of the Philippine Islands? Much more reasonable to my mind was the conclusion of the Texas court, under similar circumstances, to the effect to be referred for their signification to terms of similar import in the system of laws which prevails in the country where the statue is passed." (Cayce vs. Curtis, supra.) My conclusion is that the phase contract, express or implied should be interpreted in the grammatical sense of the words and limited to true contracts, consensual obligations arising from consent, whether expressed in words, writing or signs, or presumed from conduct. As it is evident that the defendant in the present case never promised, him in the gambling game in question, his obligation to restor the amounts won, imposed by the law, is no contractual, but purely extra-contractual and therefore the action brought not being one arising upon contract express or implied, the plaintiff is not entitled to a preliminary attachment upon the averment that the defendant is about to depart from the Philippine Islands with with intent t defraud his creditors, no averment being made in the compliant or in the affidavit that the defendant has removed or disposed of his property, or is about to depart with intent to defraud his creditors, so as to bring the case within the terms of the fifth paragraph of section 412. I am unable to agree with the contention of the application (Brief, p. 39) here that the phase in question should be interpreted in such a way as to include all obligations, whether arising from consent or ex lege, because that is equivalent to eliminating all distinction between the first and the fifth paragraphs by practically striking out the first two lines of paragraph one. The Legislature has deliberately established this distinction, and while we may be unable to see any reason why it should have been made, it is our duty to apply and interpret the law, and we are not authorized under the guise of interpretation to virtually repeal part of the statute. Nor can it be said that the relations between the parties litigant constitute a quasi-contract. In the first place, quasi- contracts are "lawful and purely voluntary acts by which the authors thereof become obligated in favor of a third person. . . ." The act which gave rise to the obligation ex lege relied upon by the plaintiff in the court below is illicit an unlawful gambling game. In the second place, the first paragraph of section 412 of the Code of Civil Procedure does not authorize an attachment in actions arising out of quasi contracts, but only in actions arising out of contract, express or implied. I am therefore of the opinion that the court below was without jurisdiction to issue that writ of attachment and that the writ should be declared null and void. Avancea, J., concurs.

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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-4089 January 12, 1909

ARTURO PELAYO, plaintiff-appellant, vs. MARCELO LAURON, ET AL., defendants-appellees. J.H. Junquera, for appellant. Filemon Sotto, for appellee. TORRES, J.: On the 23rd of November, 1906, Arturo Pelayo, a physician residing in Cebu, filed a complaint against Marcelo Lauron and Juana Abella setting forth that on or about the 13th of October of said year, at night, the plaintiff was called to the house of the defendants, situated in San Nicolas, and that upon arrival he was requested by them to render medical assistance to their daughter-in-law who was about to give birth to a child; that therefore, and after consultation with the attending physician, Dr. Escao, it was found necessary, on account of the difficult birth, to remove the fetus by means of forceps which operation was performed by the plaintiff, who also had to remove the afterbirth, in which services he was occupied until the following morning, and that afterwards, on the same day, he visited the patient several times; that the just and equitable value of the services rendered by him was P500, which the defendants refuse to pay without alleging any good reason therefor; that for said reason he prayed that the judgment be entered in his favor as against the defendants, or any of them, for the sum of P500 and costs, together with any other relief that might be deemed proper. In answer to the complaint counsel for the defendants denied all of the allegation therein contained and alleged as a special defense, that their daughter-in-law had died in consequence of the said childbirth, and that when she was alive she lived with her husband independently and in a separate house without any relation whatever with them, and that, if on the day when she gave birth she was in the house of the defendants, her stay their was accidental and due to fortuitous circumstances; therefore, he prayed that the defendants be absolved of the complaint with costs against the plaintiff. The plaintiff demurred to the above answer, and the court below sustained the demurrer, directing the defendants, on the 23rd of January, 1907, to amend their answer. In compliance with this order the defendants presented, on the same date, their amended answer, denying each and every one of the allegations contained in the complaint, and requesting that the same be dismissed with costs. As a result of the evidence adduced by both parties, judgment was entered by the court below on the 5th of April, 1907, whereby the defendants were absolved from the former complaint, on account of the lack of sufficient evidence to establish a right of action against the defendants, with costs against the plaintiff, who excepted to the said judgment and in addition moved for a new trial on the ground that the judgment was contrary to law; the motion was overruled and the plaintiff excepted and in due course presented the corresponding bill of exceptions. The motion of the defendants requesting that the declaration contained in the judgment that the defendants had demanded therefrom, for the reason that, according to the evidence, no such request had been made, was also denied, and to the decision the defendants excepted.

Assuming that it is a real fact of knowledge by the defendants that the plaintiff, by virtue of having been sent for by the former, attended a physician and rendered professional services to a daughterin-law of the said defendants during a difficult and laborious childbirth, in order to decide the claim of the said physician regarding the recovery of his fees, it becomes necessary to decide who is bound to pay the bill, whether the father and mother-in-law of the patient, or the husband of the latter. According to article 1089 of the Civil Code, obligations are created by law, by contracts, by quasicontracts, and by illicit acts and omissions or by those in which any kind of fault or negligence occurs. Obligations arising from law are not presumed. Those expressly determined in the code or in special laws, etc., are the only demandable ones. Obligations arising from contracts have legal force between the contracting parties and must be fulfilled in accordance with their stipulations. (Arts. 1090 and 1091.) The rendering of medical assistance in case of illness is comprised among the mutual obligations to which the spouses are bound by way of mutual support. (Arts. 142 and 143.) If every obligation consists in giving, doing or not doing something (art. 1088), and spouses are mutually bound to support each other, there can be no question but that, when either of them by reason of illness should be in need of medical assistance, the other is under the unavoidable obligation to furnish the necessary services of a physician in order that health may be restored, and he or she may be freed from the sickness by which life is jeopardized; the party bound to furnish such support is therefore liable for all expenses, including the fees of the medical expert for his professional services. This liability originates from the above-cited mutual obligation which the law has expressly established between the married couple. In the face of the above legal precepts it is unquestionable that the person bound to pay the fees due to the plaintiff for the professional services that he rendered to the daughter-in-law of the defendants during her childbirth, is the husband of the patient and not her father and mother- in-law, the defendants herein. The fact that it was not the husband who called the plaintiff and requested his assistance for his wife is no bar to the fulfillment of the said obligation, as the defendants, in view of the imminent danger, to which the life of the patient was at that moment exposed, considered that medical assistance was urgently needed, and the obligation of the husband to furnish his wife in the indispensable services of a physician at such critical moments is specially established by the law, as has been seen, and compliance therewith is unavoidable; therefore, the plaintiff, who believes that he is entitled to recover his fees, must direct his action against the husband who is under obligation to furnish medical assistance to his lawful wife in such an emergency. From the foregoing it may readily be understood that it was improper to have brought an action against the defendants simply because they were the parties who called the plaintiff and requested him to assist the patient during her difficult confinement, and also, possibly, because they were her father and mother-in-law and the sickness occurred in their house. The defendants were not, nor are they now, under any obligation by virtue of any legal provision, to pay the fees claimed, nor in consequence of any contract entered into between them and the plaintiff from which such obligation might have arisen. In applying the provisions of the Civil Code in an action for support, the supreme court of Spain, while recognizing the validity and efficiency of a contract to furnish support wherein a person bound himself to support another who was not his relative, established the rule that the law does impose the obligation to pay for the support of a stranger, but as the liability arose out of a contract, the stipulations of the agreement must be held. (Decision of May 11, 1897.)

Within the meaning of the law, the father and mother-in-law are strangers with respect to the obligation that devolves upon the husband to provide support, among which is the furnishing of medical assistance to his wife at the time of her confinement; and, on the other hand, it does not appear that a contract existed between the defendants and the plaintiff physician, for which reason it is obvious that the former can not be compelled to pay fees which they are under no liability to pay because it does not appear that they consented to bind themselves. The foregoing suffices to demonstrate that the first and second errors assigned to the judgment below are unfounded, because, if the plaintiff has no right of action against the defendants, it is needless to declare whether or not the use of forceps is a surgical operation. Therefore, in view of the consideration hereinbefore set forth, it is our opinion that the judgment appealed from should be affirmed with the costs against the appellant. So ordered. Mapa and Tracey, JJ., concur. Arellano, C.J., and Carson, J., concurs in the result. Willard, J., dissents.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-7089 August 31, 1954

DOMINGO DE LA CRUZ, Plaintiff-Appellant, vs. NORTHERN THEATRICAL ENTERPRISES INC., ET AL., Defendants-Appellees. MONTEMAYOR, J.:
chanroble s virtual law l ibra ry

The facts in this case based on an agreed statement of facts are simple. In the year 1941 the Northern Theatrical Enterprises Inc., a domestic corporation operated a movie house in Laoag, Ilocos Norte, and among the persons employed by it was the plaintiff DOMINGO DE LA CRUZ, hired as a special guard whose duties were to guard the main entrance of the cine, to maintain peace and order and to report the commission of disorders within the premises. As such guard he carried a revolver. In the afternoon of July 4, 1941, one Benjamin Martin wanted to crash the gate or entrance of the movie house. Infuriated by the refusal of plaintiff De la Cruz to let him in without first providing himself with a ticket, Martin attacked him with a bolo. De la Cruz defendant himself as best he could until he was cornered, at which moment to save himself he shot the gate crasher, resulting in the latter's death.
chanrob lesvi rtua lawlib rary chan roble s virtual law l ibra ry

For the killing, De la Cruz was charged with homicide in Criminal Case No. 8449 of the Court of First Instance of Ilocos Norte. After a re-investigation conducted by the Provincial Fiscal the latter filed a motion to dismiss the complaint, which was granted by the court in January 1943. On July 8, 1947, De la Cruz was again accused of the same crime of homicide, in Criminal Case No. 431 of the same Court. After trial, he was finally acquitted of the charge on January 31, 1948. In both criminal cases De la Cruz employed a lawyer to defend him. He demanded from his former employer reimbursement of his expenses but was refused, after which he filed the present action against the movie corporation and the three members of its board of directors, to recover not only the amounts he had paid his lawyers but also moral damages said to have been suffered, due to his worry, his neglect of his interests and his family as well in the supervision of the cultivation of his land, a total of P15,000. On the basis of the complaint and the answer filed by defendants wherein they asked for the dismissal of the complaint, as well as the agreed statement of facts, the Court of First Instance of Ilocos Norte after rejecting the theory of the plaintiff that he was an agent of the defendants and that as such agent he was entitled to reimbursement of the expenses incurred by him in connection with the agency (Arts. 1709-1729 of the old Civil Code), found that plaintiff had no cause of action and dismissed the complaint without costs. De la Cruz appealed directly to this Tribunal for the reason that only questions of law are involved in the appeal.
chanroble svirtualawl ibra ry cha nro bles vi rtua l law lib ra ry

We agree with the trial court that the relationship between the movie corporation and the plaintiff was not that of principal and agent because the principle of representation was in no way involved. Plaintiff was not employed to represent the defendant corporation in its dealings with third parties. He was a mere employee hired to perform a certain specific duty or task, that of acting as special guard and staying at the main entrance of the movie house to stop gate crashers and to maintain peace and order within the premises. The question posed by this appeal is whether an employee or servant who in line of duty and while in the performance of the task assigned to him, performs an act which eventually results in his incurring in expenses, caused not directly by his master or employer or his fellow servants or by reason of his performance of his duty, but rather by a third party or stranger not in the employ of his employer, may recover said damages against his employer.
chanrob lesvi rtua lawlib rary c han robles v irt ual law l ibra ry

The learned trial court in the last paragraph of its decision dismissing the complaint said that "after studying many laws or provisions of law to find out what law is applicable to the facts submitted and admitted by the parties, has found none and it has no other alternative than to dismiss the complaint." The trial court is right. We confess that we are not aware of any law or judicial authority

that is directly applicable to the present case, and realizing the importance and far-reaching effect of a ruling on the subject-matter we have searched, though vainly, for judicial authorities and enlightenment. All the laws and principles of law we have found, as regards master and servants, or employer and employee, refer to cases of physical injuries, light or serious, resulting in loss of a member of the body or of any one of the senses, or permanent physical disability or even death, suffered in line of duty and in the course of the performance of the duties assigned to the servant or employee, and these cases are mainly governed by the Employer's Liability Act and the Workmen's Compensation Act. But a case involving damages caused to an employee by a stranger or outsider while said employee was in the performance of his duties, presents a novel question which under present legislation we are neither able nor prepared to decide in favor of the employee.
chanroblesvi rt ualawlib ra ry chan roble s virtual law l ib rary

In a case like the present or a similar case of say a driver employed by a transportation company, who while in the course of employment runs over and inflicts physical injuries on or causes the death of a pedestrian; and such driver is later charged criminally in court, one can imagine that it would be to the interest of the employer to give legal help to and defend its employee in order to show that the latter was not guilty of any crime either deliberately or through negligence, because should the employee be finally held criminally liable and he is found to be insolvent, the employer would be subsidiarily liable. That is why, we repeat, it is to the interest of the employer to render legal assistance to its employee. But we are not prepared to say and to hold that the giving of said legal assistance to its employees is a legal obligation. While it might yet and possibly be regarded as a normal obligation, it does not at present count with the sanction of man-made laws.
cha nrob lesvi rtua lawlib rary chan roble s virtual law l ibra ry

If the employer is not legally obliged to give, legal assistance to its employee and provide him with a lawyer, naturally said employee may not recover the amount he may have paid a lawyer hired by him.
chan roble svirtualawl ibra ry cha nrob les vi rtua l law lib rary

Viewed from another angle it may be said that the damage suffered by the plaintiff by reason of the expenses incurred by him in remunerating his lawyer, is not caused by his act of shooting to death the gate crasher but rather by the filing of the charge of homicide which made it necessary for him to defend himself with the aid of counsel. Had no criminal charge been filed against him, there would have been no expenses incurred or damage suffered. So the damage suffered by plaintiff was caused rather by the improper filing of the criminal charge, possibly at the instance of the heirs of the deceased gate crasher and by the State through the Fiscal. We say improper filing, judging by the results of the court proceedings, namely, acquittal. In other words, the plaintiff was innocent and blameless. If despite his innocence and despite the absence of any criminal responsibility on his part he was accused of homicide, then the responsibility for the improper accusation may be laid at the door of the heirs of the deceased and the State, and so theoretically, they are the parties that may be held responsible civilly for damages and if this is so, we fail to see now this responsibility can be transferred to the employer who in no way intervened, much less initiated the criminal proceedings and whose only connection or relation to the whole affairs was that he employed plaintiff to perform a special duty or task, which task or duty was performed lawfully and without negligence.
chanro blesvi rtua lawlib rary chan roble s virtual law l ibra ry

Still another point of view is that the damages incurred here consisting of the payment of the lawyer's fee did not flow directly from the performance of his duties but only indirectly because there was an efficient, intervening cause, namely, the filing of the criminal charges. In other words, the shooting to death of the deceased by the plaintiff was not the proximate cause of the damages suffered but may be regarded as only a remote cause, because from the shooting to the damages suffered there was not that natural and continuous sequence required to fix civil responsibility.
chanrob lesvi rtualaw lib rary c hanrobles vi rt u al law lib rary

In view of the foregoing, the judgment of the lower court is affirmed. No costs.

chanro bl esvirt ualawli bra ry chan roble s vi rtual law lib rary

Bengzon, Padilla, Reyes, A., Bautista Angelo, Labrador, Concepcion, and Reyes, J.B.L., JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-14382 November 29, 1960

REMEDIOS CUENCO VDA. DE BORROMEO, petitioner, vs. THE COURT OF APPEALS and TOMAS L. BORROMEO, respondents. M. J. Cuenco, N. R. Pacquiao and J. C. Borromeo for petitioner. Crispin D. Baizas for respondent. PADILLA, J.: Appeal by certiorari under Rule 46 from a judgement of the Court of Appeals(C.A.-G.R. No 22136R). Remedios Cuenco Borromeo, as administratrix of the estate of the late Teofilo Borromeo, an action against Tomas L. Borromeo in the Court of First Instance of Cebu praying for accounting, liquidation and payment of her late husband's share in the proceeds of the war damage claim paid to and received by the defendant as his attorney-in-fact and of the sum of P17,100 as moral and actual damages and attorney's fees (Civil No. R-5031, Annex A, C.A.-G.R. No. 22136-R). The defendant answered the complaint denying the plaintiffs claim and averring that such share has been fully paid to Teofilo Borromeo (Annex B, C.A.-G.R. No. 22136-R). Aside from this case, they were pending in the same Court Civil No. R-3808, entitled "Estate of Vito Borromeo vs. Tomas Borromeo," and special proceedings No. R-916, entitled "Testate Estate of the Vito Borromeo." For the convenience of Attorney Crispin D. Baizas, counsel for Tomas L. Borromeo in Civil No. R. 5031 and special proceedings was set by the Court to enable attorney Baizas to be in Cebu City on consecutive days. The hearing of Civil No. R-916 for 10, 11 and 12 July 1957. On 8 July 1957 Attorney Baizas received by mail a copy of an urgent motion dated 5 July 1957 of the Solicitor General, who represented the Government in the special proceedings, praying for postponement of the hearing set for 10, 11 and 12 July 1957 (Annex C, C.A.-G.R. No. 22136-R). Attorney Baizas, who had previously made reservation with the Philippine Air Lines to fly to Cebu City, cancelled his reservation and wired Attorney Filberto Leonardo (who was collaborating with him in handling the cases) in Cebu City, requesting him to ask for postponement of the hearing of Civil No. R-5031, which he referred to in the telegram as the "Cuenco Case," or, should the Court deny his request, to appear in his behalf at the trial of the case. On 9 July, Attorney Leonardo, believing that the "Cuenco Case" referred to by Attorney Baizas in his telegram was Civil No. R-3808, was proceeded to the Court presided over by Hon. Edmundo Piccio but after reading the court calendar found that Civil No. R-3808 was not set for hearing on that day. So he went home. For that reason, when Civil No. R-5031 was called for hearing at the Court presided over by Hon. Jose S. Rodriguez, neither the defendant Tomas L. Borromeo nor his counsel appeared, and the plaintiff Remedios Cuenco Borromeo was allowed to present her evidence. On 11 July 1957 the Court rendered judgment for the plaintiff and against the defendant, copy of which was received by counsel for the defendant on 2 August 1957 (Annex B, C.A.-G.R. No. 22136). On 29 August 1957 the defendant filed a verified motion for new trial, dated 26 August 1957, on the ground of mistake or excusable neglect, supported by affidavits of merit attached thereto (Annexes B, E-1 and E-2, C.A.-G.R. No. 22136). On 23 September 1957. On 17

October 1957, or 24 days after receipt of a copy of the order denying his motion for new trial, the defendant perfected his appeal from the last mentioned order. In a motion dated 21 October 1957, copy of which counsel for the defendant received on 26 October 1957, the plaintiff prayed for dismissal of the appeal on the ground that it was filed beyond the reglementary period (Annex H, C.A.-G.R. No. 22136). On 29 October 1957 the defendant filed an objection thereto stating that he was appealing from the order dated 13 September 1957 denying his motion for new trial, and not from the judgment dated 11 July 1957 (Annex I, C.A.-G.R. No. 22136). The Court set the hearing of the plaintiff's motion to dismiss on 26 October 1957 and thereafter on the same day entered an order as follows: Finding the motion of counsel for the plaintiff dated October 21, 1957, well founded, it appearing that the appeal filed by the defendant was presented outside of the 30 day period for appeal, it was filed after 44th day as shown by the records, as prayed for, the appeal filed by the defendant is hereby DISMISSED (Annex J, C.A.-G.R. No. 22136). On 6 November 1957 the defendant moved for reconsideration of the foregoing order, reiterating that his appeal was from the order dated 13 September 1957 denying his motion for new trial and not from the judgment dated 11 July 1957 (Annex K, C.A.-G.R. No. 22136); the plaintiff, an objection thereto(Annex L, C.A.-G.R. No. 22136). On 2 December 1957 the defendant received a copy of an order dated 25 November 1957 denying the motion for reconsideration (Annex M, C.A.-G.R. No. 22136); on 23 December 1959 the defendant filed a petition for a writ of certiorari in the Court of Appeals praying that after hearing the order dated 26 October 1957 dismissing his appeal from the denial of his motion of new trial be set aside. (C.A.-G.R. No. 22136). He also prayed that after filing the requisite bond, a writ of preliminary injunction be issued enjoining the respondent court from issuing a writ of execution of the judgment rendered in Civil No. R-5031. After he had posted a bond in the sum of P1,000, the Court of Appeals issued a writ of preliminary injunction prayed for. On 28 February 1958 the Court of Appeals rendered judgment, the dispositive part of which is: IN VIEW OF THE FOREGOING, the judgment rendered in Civil Case No. 5031, set aside, and the respondent judge should be, as he is hereby ordered, to grant the NEW TRIAL prayed for and permit the petitioner to present such evidence as may be lawfully warranted and relevant in the premises. The injunction issued heretofore, is made permanent, without special pronouncement as to costs. The herein respondent, petitioner in the Court of Appeals, insists the he is appealing from the order dated 13 September 1957, denying his motion for new trial and not from the judgement dated 11 July 1957. Taking into consideration the facts set forth in the motion for new trial supported by affidavits attached thereto and the answer filed by the herein respondent Tomas L. Borromeo in the Court of First Instance of Cebu where he denies the claim of the herein petitioner, plaintiff in the said Court, and avers that the claim for war damage of the late Teofilo Borromeo, husband of the herein petitioner, has been fully paid to him, said motion may be deemed one filed under Rule 38, of the Rules of Court. A denial thereof is final and appealable. The period for taking an appeal from a denial of a motion praying for the setting aside of a judgment or order rendered or entered against a party through fraud, accident, mistake, or excusable negligence is thirty days from the receipt of the copy of such judgment or order. Indeed, it would be futile to appeal from the judgment sought to be set aside by a motion or relief under Rule 38, because the aggrieved party would have no evidence upon which to rely to secure a reversal of the judgment sought to be set aside by a motion for relief under Rule 38, unless he would rely for its reversal on insufficiency or perhaps inherent improbability of the evidence presented by the winning party. The appeal by the herein respondent Tomas L.

Borromeo from the order denying his motion for relief had been taken within the reglementary period and should have been allowed. The judgment rendered by the Court of Appeals under review granting the writ prayed for by the herein respondent Tomas L. Borromeo should be, as it is hereby, affirmed, with costs against the herein petitioner Remedios Cuenco Vda. de Borromeo. Paras, C.J., Bengzon, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Gutierrez David, Paredes, and Dizon, JJ., concur.

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Republic of the Philippines SUPREME COURT Manila

EN BANC

DECISION

November 14, 1908 G.R. No. L-4517 HIJOS DE I. DE LA RAMA, plaintiffs-appellees, vs. VALENTIN INVENTOR, defendant-appellant. M. Hilado, for appellant. M. Locsin, for appellees. Torres, J.: On the 10th day of July, 1907, the firm of Hijos de I. de la Rama presented an amended complaint setting forth: That a contract of rental on shares had been entered into the town of Kabankalan, Ilog, on the 20th of October, 1903, between it and Valentin Inventor by virtue of which the plaintiff assigned to the defendant the possession of a portion of the lands comprised in the Hacienda de San Lucas, the property of the plaintiff company, in order that the defendant should cultivate them and plant thereon sugar-cane and rice; the defendant was under the obligation to deliver annually to the plaintiff company one-half of the sugar and rice produced by the land, the company engaging to furnish the funds for necessary working expenses with the obligation on the part of the defendant, Inventor, to refund such advances as were made, with interest thereon at the rate of 15 percent per annum, which amount was to be deducted from the defendant's annual share of the sugar; that, in accordance with the contract, the balance standing against the defendant's account was P7,431.44, payment of which had been demanded, but the debtor had made no settlement up to the time of the filing of the complaint; that, since the month of March, 1907, the defendant, Inventor, had abandoned the lands in question, and disposed of his property, and was even trying to sell other property which he still possessed, to the prejudice of the plaintiff company and with the intent to defraud the same; that, for this reason, the plaintiffs asked for the temporary attachment of the 30 head of carabao owned by the debtor, and that he be finally sentenced to pay the said amount owed by him together with the interest as agreed, and with the legal interest thereon from the time when the complaint was filed, with costs, and that the temporary attachment be held to subsist upon the corresponding bond being furnished. The defendant, by his written amended answer, dated July 18, 1907, denied each and every allegation of the foregoing complaint, admitting only such as were contained in paragraphs 1 and 2 of the same; as to paragraph 3, he alleged that it was not true that he had bound himself to deliver to the plaintiff company one-half of the rice grown upon the leased lands, and that, with respect to the sugar, it was to be divided by halves, all expenses incurred in working the cane within the camarin to be defrayed by the said company. As a special defense he alleged: That, of the three crops gathered since the contract went into effect, the plaintiffs kept one-half of the sugar that should have been apportioned to the defendant, and that the latter has not been informed of the result of the liquidation of accounts corresponding to the last crop; that, though the liquidation might show a balance in favor of the plaintiff, the said balance was not demandable at the present time; and that it was not true that the land had been abandoned, inasmuch as he had

250 lacsas of cane in very good condition when the carabaos with which he worked the land were attached, the land having been carefully cultivated up to that time; he therefore asked that the complaint be dismissed with costs. At the trial, evidence was adduced by both parties and their exhibit were made of record; the trial judge entered judgment on the 2d of October, 1907, and sentenced the defendant to pay the sum of P7,150.86 for which he was indebted on the 30th of June, 1906, with interest at the rate of 15 per cent per annum from the said date, and the legal interest thereon from the time the complaint was interposed until full payment of the debt, with cost, the right being reserved to the plaintiffs to take such action as they might be entitled by the reason of the corresponding accounts from the 30th of June, 1906, to the 15th of May, 1907. The defendant excepted to the above decision and moved for a new trial; said motion was overruled, to which he also excepted and presented the corresponding bill of exception which was submitted to the court. The contract hereinbefore referred to is of the following tenor: Seores Hijos de I. de la Rama, owners of the Hacienda "San Lucas," and Seor Valentin Inventor, an agriculturist and resident of the town of Kabankalan, Occidental Negros, have agreed to the following:

First. H. de I. de la Rama cede to Inventor that portion of their lands close to the town of Kabankalan, comprised within the Hacienda "San Lucas," in order that the latter may cultivate the same and plant thereon sugar cane and rice under the system of rental on shares; all expenses in connection with the field, such as clearing the land, sowing, etc., and the cutting and hauling of the cane to thecamarin shall be for account of the said Inventor; H. de I. de la Rama shall deliver to Inventor the carts and such cattle as may be necessary for the said cutting and hauling, the latter engaging to take good care of everything and not to use the same except for the purpose mentioned.

Second. Seores H. de I. de la Rama hereby engage to erect on the land one camarin, machinery and furnace, all expenses in connection with the working of the sugar cane inside the camarin being for their account.

Third. All the produce obtained shall be divided: the sugar by halves from the "cooler," each party to provide for the packing of his share, and the rice and corn into four parts, of which three parts shall be for the aparcero (lessee on shares), and one part for the Hacienda.

Fourth. Seores H. de I. de la Rama shall pay to the said Inventor all expenses necessary to carry out the work mentioned above, under the supervision and management of the administrator of the Hacienda "San Lucas," at 15 per cent interest per annum, payable in sugar, out of the one-half pertaining to him; the rest of the sugar shall remain free as soon as Inventor has paid the whole of his debt. H. de I. de la Rama shall be free at any time to cease to provide Inventor with funds for the expenses; in this case Inventor may look for his expenses elsewhere, but he shall be under the obligation to pay to H. de I. de la Rama whatever he may owe them with interest as stipulated above, out of the first sugar produced.

Fifth. The duration of this contract shall be of four consecutive crops beginning with the crop of 1904-1905, unless both parties thereto agree as to its renewal at the expiration of the said term; all the calaanan and

other sowings made by Inventor during the four years shall remain in favor of H. de I. de la Rama as well as the houses that he may have erected.

Both parties executed the present contract and found the same in order in all of its parts, and for the effectiveness thereof and to insure compliance therewith, sign the same at Kabankalan on this 20th day of October, 1903. (Signed) Hijos de I. de la Rama. Valentin Inventor. The complaint calls for the payment of a certain sum which appeared as balance of the account of the sugar business carried on between the plaintiff company and the defendant. In his judgment the trial judge reversed the plaintiffs' right to the balance of the account of May 15,1907; held that the balance of P7,150.86 in the account of June 30, 1906, was demandable and sentenced the defendant to pay the same, inasmuch as it is a net balance admitted by the debtor, from whom payment was demanded without result. The defendant appellant assigned as error the declaration that the aforesaid balance is demandable for the reason that, according to the fourth clause of the contact, everything that the defendant owed to the plaintiff company as balance of account could not be demanded before the expiration of the term of four crops and should be carried over, as was done prior to the filing of the complaint. It is assumed by the contract that, from the liquidation of the expenses paid by the plaintiffs, and from the proceeds of each annual crop, there would remain a balance in favor of the defendant who, without waiting for the term agreed to, is entitled to receive his said annual balance, for the same reason that he has the unquestionable right to keep one-half of the sugar produced and three-fourths of the rice and corn, after deducting the amount of the advances made by the plaintiffs. However, the fact that from the annual liquidation a debit balance would result, as has been the case, certainly does not appear to have been foreseen in the said contract. The verbal engagement entered into by the defendant debtor, whereby he offered to pay the balance of the account of June 30, 1906, during the month of January, 1907, duly proven in the case as considered by the judge below, saves the necessity of demonstrating which is the right and proper interpretation of said contract, because even if it is admitted to be legally true that said balance can only be claimed after the fourth crop, the promise to pay it during the month of January conferred on the creditor the right to demand its payment, as has been done, because the debtor did not fulfill his agreement. Article 1278 of the Civil Code provides Contracts shall be binding, whatever may be the form in which they may have been executed, provided the essential condition required for their validity exist. The Supreme Court of Spain, in applying the provisions of this article, in its decision of the 4th of July, 1899, and 19th of October, 1901, established the following doctrine: Contracts are binding and therefore enforceable reciprocally by the contracting parties, whatever maybe the form in which the contract has been entered into, provided that the essential conditions for their validity are present. The observance of this general rule expressly established by article 1278 of the Civil Code, is not in opposition to the provisions of the two following articles, as this supreme court has repeatedly held, and especially in its judgment of July 4, 1899; because article 1280 is limited to an enumeration of the acts and contracts which should be reduced to writing in a public or private document, and article 1279, far from making the enforceability of the contract dependent upon any special extrinsic form, recognizes its enforceability by the mere act of granting to the contracting parties an adequate remedy whereby to compel the execution of a public writing, or any other special form, whenever such form is necessary in order that the contract may produce the effect which is desired, according to whatever may be its object. This, in

substance, is equivalent to establishing, as an implied condition of every contract, that these formal requisites shall be complied with, notwithstanding the absence of any express agreement by the contracting parties to that effect, but does not subordinate the principal action for the enforcement of the agreement to the bringing of the secondary action concerning the form. Such subordination would be the same in both cases, i. e., the existence of a valid contract. It is an old doctrine established by the courts that obligations must be fulfilled just as they are contracted, and, whatever may be the form whereby one desires to bind himself, he remains efficiently bound; these legal principles were subsequently sanctioned by article 1091 of the Civil Code which reads: Obligations arising from contracts have legal force between the contracting parties, and must be fulfilled in accordance with their stipulations. If Valentin Inventor promised or bound himself to pay within the month of January, 1907, the balance appearing from the account offered in evidence as Exhibit No. 3, to which he agreed, the fact that four crops were fixed as the duration of the contract of rental on shares is no legal reason to exempt him from the fulfillment of his obligation; because if, after every crop, a corresponding liquidation of the proceeds and of the amounts advanced to the aparcero is made, since he engaged to settle the balance of the account independently of the term of the contract, compliance with what was promised is not contrary to law or good morals, and the obligated party must be compelled to pay that which he legally owes. If to the failure to pay in January, 1907, as promised, the facts proven in the case are added, that is, that the debtor disposed of his carabaos and abandoned his sugarcane plantation and placed himself in such a position that he could not fulfill his obligations when the term of the contract expired, such facts demonstrate the propriety of the complaint in the form in which the same was limited by the judgment of the court below. Therefore, accepting the considerations stated by the judge below in so far as they agree with such as are herein set forth, it is our opinion that the judgment appealed from should be affirmed and it is hereby affirmed with costs. So ordered. Arellano, C.J., Mapa, Carson, Willard, and Tracey, JJ., concur. . Referring Cases Sorry, no referring cases.

Republic of the Philippines SUPREME COURT Manila

EN BANC

DECISION

January 19, 1904 G.R. No. 1267 CO-TIANGCO, plaintiff-appellee, vs. TO-JAMCO, defendant-appellant. Alfredo Chicote for appellant. W. H. Kitchens for appellee. Mapa, J.: The appellant made a motion in the trial court for a new trial on the ground of newly discovered evidence. The motion was not based upon the ground that the findings of fact were contrary to the weight of the evidence, and consequently under the provisions of section 497 of the Code of Civil Procedure, our jurisdiction in this case is limited to determining the questions of law raised in the bill of exceptions, but without reviewing the evidence. The court below in its decision says that "the Chinamen, Ong-Congco, Chua-Checo, and Cua-Ohco, testified that the defendant To-Jamco promised to pay them for the services they were to render, and that they have assigned the amount of their claims against the defendant to the plaintiff." He also says that "the plaintiff testified to the same effect, and it may be regarded as an uncontroverted fact that the assignment was legally made." As a result of his construction of the evidence introduced by the parties, the court below concludes that "the direct testimony of the Chinamen who have testified in this case must be considered as constituting more weighty evidence that the testimony of the defendant." This is equivalent to the statement that the court considers the above-named Chinamen's testimony concerning the fact that defendant undertook to pay them for their services as worthy of credence, and therefore in his opinion true; and that it is also true that Ong-Congco, Chua-Checo, and Cua-Ohco have assigned to the plaintiff their right to recover the amount due for such services from the defendant. The court below also considered it proven that the said Chinamen and the plaintiff actually rendered the services upon which the complaint is based, and that the sum of 110 pesos and 80 cents is still owing for the services rendered Ong-Congco; 116 pesos and 96 cents for Chua-Checo's services; 146 pesos and 85 cents for Cua-Ohco's services; and 123 pesos and 55 cents for the services rendered by the plaintiff. From these facts it is to be inferred that the defendant entered into a contract of hire with the plaintiff, and the three other Chinamen above named, by which he undertook to pay them the value of their services contracted for, and that the defendants is still indebted to them for wages in the amounts above expressed.

This being so, the judgment of the court below is evidently in conformity with the law. Contracts bind the contracting parties to the performance of the agreement entered into. The obligations arising therefrom have the force of law between the contracting parties and must be executed in accordance with the tenor thereof. (Arts. 1258 and 1091 of the Civil Code.) Consequently the court below in entering his judgement has not committed any of the errors assigned in the bill of exceptions bScPhpug4V. It is unnecessary to consider the legal effects of the note made by the defendant at the bottom of the contract entered into between the Philippine Lumber and Development Company and the Chinaman ToChaco, a copy of which appears in the judgement. Whatever might be its legal effects, the fact that the defendant agreed to pay the plaintiff and his companions for their services is in itself sufficient to produce the obligation on his part to make such payment, the services which were the object of the contract having been rendered by the plaintiff and companions. This is entirely independent of the obligation which on the other hand, he may have incurred by reason of the undertaking expressed in the said note. From that personal stipulation entered into with the said Chinamen and the plaintiff and not from the note (which constitutes another distinct juridical act and which has not even been mentioned as the ground of the action brought in the complaint), arises the right accruing to the plaintiff, personally and as assignee of the others, to demand the payment of the money whose recovery is the purpose of this action. For the reasons stated we affirm the judgment of the court below, with the costs of this instance against the appellant. Judgment will be entered in conformity with this opinion twenty days from the date of its filing, and the case remanded to the court below. So ordered. Arellano, C.J. Torres, Cooper, Willard and McDonough, JJ., concur. . Referring Cases

Serrano et al. v. Reyes

Republic of the Philippines SUPREME COURT Manila

SECOND DIVISION SPOUSES NATALIO and G.R. No. 151333 FELICIDAD SALONGA, Petitioners, Present: PUNO, J., Chairman, ' AUSTRIA-MARTINEZ, - versus - CALLEJO, SR., TINGA, and

CHICO-NAZARIO, JJ.

SPOUSES MANUEL and NENITA ' Promulgated: CONCEPCION and FLORENCIA REALTY CORPORATION, Respondents. September 20, 2005 x----------------------------------------------------x DECISION CALLEJO, SR., J.:

The spouses Natalio Salonga and Felicidad Salonga were the owners of eight (8) prime parcels of land located in Dagupan City covered by Transfer Certificate of Title (TCT) Nos. 40886, 40887, 43547, 26506, 35156, 49460, 49459 and 53650.[1] They had a commercial building with four floors which stood on their property located along A.B. Fernandez Avenue, Dagupan City and covered by TCT No. 53650. The spouses leased the building to traders and merchants, and

lived in a house along Arellano Street. The house stood on a lot which they also owned, covered by TCT No. 26506.

To finance their business, the spouses secured a loan from the Associated Bank. To secure the payment thereof, they executed a Real Estate Mortgage in favor of the bank over the property covered by TCT Nos. 40886, 40887, 43547, 35156 and 49459.[2] The spouses likewise secured a loan from the Philippine National Bank (PNB), and also executed a real estate mortgage over their property covered by TCT No. 26506.[3] A real estate mortgage over their property covered by TCT No. 53650 was also executed, including the commercial building thereon, as security for their loan from the Development Bank of the Philippines (DBP).[4] Their loan from the Rural Bank of Malasiqui, Inc. (Pangasinan) was secured by a real estate mortgage over their property covered by TCT No. 49460.[5]

The devastating earthquake of July 16, 1990 severely damaged the spouses' commercial building, adversely affecting their business.[6] Consequently, they defaulted in the payment of their loans. The creditor banks foreclosed or threatened to foreclose their real estate mortgages. On September 4, 1991, their property covered by TCT No. 49460 mortgaged to the Rural Bank of Malasiqui, Inc. was sold at public auction with the said bank as the highest bidder.[7] The DBP had the property covered by TCT No.

53650 sold at public auction on November 21, 1991.[8] The Certificate of Sale in favor of the bank as the winning bidder was filed with the Office of the Register of Deeds on January 2, 1992.[9]

On October 1, 1992, the Associated Bank filed a petition with the Regional Trial Court (RTC) of Dagupan City for the extrajudicial foreclosure of the Real Estate Mortgage over the property of the spouses covered byTCT Nos. 49459, 40886, 40887, 43547 and 35156, for the satisfaction of the balance of their loans and the increments thereof totaling P571,132.70 as of August 31, 1992. The sheriff set the sale at public auction on December 10, 1992.[10]

Beleaguered, the spouses Salonga secured a loan, this time, from the spouses Manuel and Nenita Concepcion, who were engaged in the business of lending money, to repay their loan to the PNB. The spouses Salonga borrowed P500,000.00 from the spouses Concepcion, which the latter remitted to the PNBon November 6, 1992 in payment of the spouses Salonga's account. The latter were issued a receipt.[11]They also paid P2,756.85 to the PNB for surcharges.[12] Thus, on November 11, 1992, the PNB executed a Deed of Release of Real Estate Mortgage[13] which the bank delivered to Manuel Concepcion; the receipt of the said payment and

the

owner's

duplicate

of TCT No.

26506

was

likewise

released

to

Manuel

Concepcion.

The spouses Concepcion also agreed to the spouses Salonga's plea for another loan to enable them to settle their obligations with the Associated Bank. Concepcion remitted the amount of P200,000.00 to the bank on December 8, 1992;[14] P200,000.00, on December 21, 1992;[15] and P186,520.50 on January 18, 1993[16] for the account of the spouses Salonga, for which the latter were issued receipts by the bank.[17]The bank executed a Cancellation of the Real Estate Mortgage[18] on January 20, 1993 and delivered the amount together with the owner's duplicate of the titles over the five parcels of land, and the aforesaid receipt to spouses Concepcion.

'The spouses Salonga secured another loan from the spouses Concepcion in the amount of P2,042,377.19, which the latter paid to the DBP for the account of the spouses Salonga. The bank executed a Deed of Redemption and Cancellation of Liens[19] on January 5, 1993. The spouses Concepcion took delivery of the deed and the owner's duplicate of TCT No. 53650 and the receipt issued by the DBP for said amount in the names of the spouses Salonga.

The spouses Concepcion required the spouses Salonga to pay 3% of the loans as monthly interest, on top of a 5% commission if the property was sold to thirdparties. The spouses Salonga failed to pay the loans, interest and commission despite the lapse of several months. In the meantime, they continued residing in the same house. Much as they tried, the spouses Salonga failed to sell their property to any interested buyer. Worse, the spouses Concepcion pressed them to pay their loan accounts, plus the interests thereon. Their property covered by TCT No. 49460 was sold at public auction with the Rural Bank of Malasiqui, Inc. as the winning bidder.

The bank consolidated its title on August 20, 1993.[20] The Register of Deeds cancelled TCT No. 49460 and issued TCT No. 60384 to the bank.[21]

On August 31, 1993, the spouses Salonga executed, in favor of the spouses Concepcion, a Deed of Absolute Sale[22] over their property previously mortgaged to the Associated Bank covered by TCT Nos. 43547, 40886, 40887, 35156 and 49459. It appears on the said deed that the property was sold for the price ofP575,000.00, and that the spouses Salonga received the amount from the spouses Concepcion.

On September 20, 1993, the spouses Concepcion executed a Deed of Absolute Sale over the property covered by TCT Nos. 40886, 40887, and 43547 in favor of the Florencia Realty Corporation forP600,000.00. On September 21, 1993, the spouses Concepcion filed the said deed in the Office of the Register of Deeds. The spouses Concepcion then filed the cancellation of real estate mortgage executed by the Associated Bank, the

deed of absolute sale executed by the spouses Salonga, and the deed of absolute sale in favor of the Florencia Realty Corporation in the Office of the Register of Deeds, which issued TCT Nos. 60530, 60531 and 60532 in the names of the Florencia Realty Corporation, and TCT Nos. 60533, 60534 and 60694 in the names of the spouses Concepcion on September 21, 1993.

On October 18, 1993, the Spouses Salonga executed a Deed of Absolute Sale[23] over their properties previously mortgaged with the PNB and DBP, covered by TCT Nos. 53650 and 26506 including the improvements therein in favor of the spouses Concepcion. It appears that the lots were sold forP1,500,000.00, receipt of which was acknowledged by the spouses Salonga in the said deed. The spouses Concepcion filed the deed of absolute sale on the same day with the Office of the Register of Deeds, which issued TCT Nos. 60694 and 60695 in the names of the spouses Concepcion following the payment of the capital gains taxes. However, the spouses Salonga continued to reside in the same house.

Sometime in 1994, the daughter of the spouses Salonga arrived from abroad. The spouses and their daughter offered to redeem the property from the spouses Concepcion. However, the latter informed the spouses Salonga and their daughter that the title to the property had already been transferred to their names, and agreed to the redemption of the property for P8,000,000.00 and the spouses Concepcion increased it to P10,000,000.00.

On July 12, 1994, the spouses Salonga filed a complaint against the spouses Concepcion and the Florencia Realty Corporation with the RTC of Dagupan City for annulment of the August 31, 1993 and October 18, 1993 Deeds of Absolute Sale, as well as the reconveyance of the property subject of said deeds with damages.

The spouses Salonga alleged that the two deeds of absolute sale were simulated and did not reflect their true agreements, that is, that their property would guarantee the 'payment of the total amount of remittances the defendants had paid to the mortgagors-banks for the redemption of their property, plus 3% a month of their loans as interests, and if the property were sold to a third-party, a 5% commission of the purchase price thereof. They also alleged that their agreement with the spouses Concepcion that the latter would not register the said deeds in the Office of the Register of Deeds and secure titles over the properties in their names; the defendants, in evident bad faith, registered the said deeds and secured titles in their names; the market price of the whole property amounted to P10,000,000.00, but it appeared that the property was sold to the spouses Concepcion for only P2,000,000.00, which was the amount the spouses Concepcion remitted to the bank in their account; they offered to repay their loans and their offers were rejected. The spouses Salonga prayed that judgment be rendered in their favor, thus: WHEREFORE, it is respectfully prayed that after due hearing, judgment be rendered in accordance with the several causes of action hereof;

1.

Declaring the Deed[s] of Absolute Sales, (sic), (Annexes 'I and 'J') dated August 31, 1993 and October 18, 1993, respectively as a simulated contracts and therefore VOID AB INITIO; Ordering the Register of Deeds of Dagupan City to cancel TCT Nos. 60533, 60534, 60695, 60694, 60624 in the name of the defendants and TCT Nos. 60530, 60531 and 60532 in the name of Florencia Realty Corporation, Inc., and to restore TCT Nos. 40886, 40887, 43547, 20506, 35156, 49460, 49459 and

2.

53650 in the name of the plaintiffs Spouses Natalio Salonga and Felicidad Salonga;

3.

Ordering defendants spouses Manuel Concepcion and Nenita Viado to pay plaintiffs the sum of P500,000.00 as damages authorized to be awarded under Article 19 of the same code;

4.

Ordering defendants Spouses Manuel Concepcion and Nenita Viado to pay plaintiffs the sum of P2,000,000.00 for moral damages; the sum ofP100,000.00 for exemplary damages;

5.

Ordering defendants Spouses Manuel Concepcion and Nenita Viado to pay plaintiffs the sum of P100,000.00 as and for attorney's fees plus the sum ofP1,000.00 as per Court appearance fee; the sum of P100,000.00 for litigation expenses.

PLAINTIFFS further pray for such other reliefs just and equitable in the premises.[24]

In their answer to the complaint, the spouses Concepcion admitted that they gave loans to the spouses Salonga in the total amount of P3,131,154.54 which they remitted to the DBP, the PNB and Associated Bank for the plaintiffs' account, with the assurance that they would sell the property within three months; from the proceeds of the sale, their loans and the interest thereof at 3% per month and a commission of 5% of the purchase price of the property would be paid. They further alleged that despite extensions granted to them, the plaintiffs failed to pay their loans, and offered, instead, to sell their property for the price equivalent to the spouses Concepcion's remittances to the creditors-banks, plus an additional

amount; the lots covered byTCT Nos. 53650 and 26506 were not part of the said sale; the spouses Salonga requested for more time to sell the remaining two lots.

The spouses Concepcion further alleged that they agreed to spouses Salonga's offer, and the latter executed a deed of absolute sale on August 31, 1993 covering the lots described in TCT Nos. 43547, 40886, 40887, 35156 and 49459; when the plaintiffs failed to sell the lots covered by TCT Nos. 53650 and 26506, they executed a deed of absolute sale over the said lots on October 18, 1993 and received the additional purchase price of P1,500.000.00 from the defendants; the plaintiffs promised to vacate their house in April 1994, but refused to do so; worse, the plaintiffs filed a complaint against them.

Subsequently, the spouses Concepcion as plaintiffs filed an action for ejectment against the spouses Salonga on August 23, 1994 with the Municipal Trial Court of Dagupan City, praying for their eviction from the subject property.[25] The case was docketed as Civil Case No. CV-95- 00671-D.[26]

Felicidad Salonga testified that there was no period agreed upon to repay their loans from the defendants, and while they executed the Deeds of Absolute Sale dated August 31, 1993 and October 18, 1993 in favor of the defendants, they did not receive the amounts stated therein. The plaintiffs also adduced in evidence Olivia Arafiles' valuation of the property, pegged

at P10,270,600.00.[27] Julio A. Garcia testified that he was in the house of the plaintiffs and affixed his signature on a document signed by the defendant Manuel Concepcion, quoted, infra:

I Manuel Concepcion of legal aged (sic), married to Nenita Viado and resident of Bautista Pangasinan have agreed (sic) to Mr. And Mrs. Natalio Salonga a resident of Dagupan city to sign a Deed of Sale and I will not registered (sic) as long as the spouses Salonga will pay the principal cash involved plus the interest of 3% per month.[28]

Felicidad further testified that she and her husband continued residing in their house even after the spouses Concepcion had paid their loans to the creditor banks. However, upon the latter's suggestion, they had the commercial building repainted and leased to a tenant, with the agreement that the rentals would be credited to their (spouses Salonga's) account. The latter paid interests on their account, but the spouses Concepcion refused to issue receipts therefor. Felicidad further declared that on March 10, 1993, Manuel Concepcion arrived in their house and suggested that a deed of sale over the property be executed in their favor while looking for prospective buyers. The spouses Salonga agreed, provided that said deed would not be registered in the Office of the Register of Deeds. Felicidad wrote an undertaking on a piece of paper, in which the spouses Concepcion promised not to register the said deed of sale in the Office of the Register of Deeds. Manuel Concepcion signed the note in the presence of Julio Garcia.[29]

Felicidad likewise testified that when she and her husband failed to sell their property and pay their account with the spouses Concepcion, she and her husband executed on August 31, 1993 a deed of sale over five (5) parcels of land previously mortgaged with the Associated Bank, for the latter to assume the right of the creditor banks to collect their loan account and interests; the property will only serve as security for the payment of their account. She further testified that she and her husband did not receive from the defendant the P575,000.00

and P1,500,000.00 stated in the said deeds as the purchase price of the subject properties.

Felicidad further narrated that when her daughter arrived in the Philippines in 1994, they sought to redeem the property from the spouses Concepcion, but the latter informed them that the titles to the property had already been transferred in their names and that the property could be redeemed for P10,000,000.00. In April 1996, they were finally evicted from the property by a sheriff and soldiers.

Manuel Concepcion testified that he and his wife agreed to grant loans to the plaintiffs to enable them to pay their loan account with their creditor banks, with their assurance that they will be able to sell their property within 60 days and pay their accounts plus interests and 5% commission. Despite several extensions granted to the spouses Salonga, they failed to sell their properties. Sometime in April 1993, the spouses Salonga offered to sell their properties previously mortgaged with the Associated Bank in payment for theP586,520.50 advanced by them to the Associated Bank, plus P575,000.00 on top of said amount. The spouses Salonga agreed. The

latter's lawyers then prepared a Deed of Absolute Sale dated August 31, 1993, which they signed following their receipt of P575,000.00. The spouses Salonga pleaded that they be given a period of one month to execute a deed of absolute sale over the two parcels of land previously mortgaged to the PNB and DBP and to a third-party, to which the spouses Concepcion also agreed. However, the spouses Salonga failed to sell the properties.

On October 18, 1993, the spouses Salonga executed a Deed of Absolute Sale[30] over the parcels of land covered by TCT Nos. 53650 and 26506 as payment of their loan account, plus P1,500,000.00. Manuel Concepcion further narrated that they spent P1,200,000.00 for the renovation of the commercial building[31]and had it leased to tenants. They also paid for the realty taxes due for the building.[32] He denied having known Julio Garcia and having signed the note[33] on March 10, 1993.

In the meantime, the MTC rendered judgment ordering the spouses Salonga to vacate the property. They appealed to the RTC of Dagupan City, docketed as Civil Case No. 94-00249-D. On December 4, 1995, the spouses Salonga filed a motion to stay the execution of the appealed decision, which the RTC denied. The spouses Salonga were ejected by a sheriff sometime in April 1996.

On December 10, 1996, the court a quo rendered judgment in favor of the spouses Concepcion ordering the dismissal of the complaint. The fallo of the decision reads: WHEREFORE, the Complaint is DISMISSED. In this' connection, the plaintiffs are ordered to pay defendants the sum of P500,000.00 as moral damages and the sum of P200,000.00 as exemplary damages.

The plaintiffs are also ordered to pay defendants the sum of P50,000.00 as and by way of attorney's fee plus P10,000.00 as litigation expenses aside from the costs of suit.

Furnish copies of this Decision to Atty. Mariano Mel Ramos and Atty. Rodolfo Palma.

SO ORDERED.[34]

The RTC ruled that the August 31 and October 18, 1993 Deeds of Absolute Sale were valid in fact and in law.

The spouses Salonga appealed the decision to the Court of Appeals (CA) wherein they alleged that:

1.

THE TRIAL COURT GRAVELY ERRED IN DISMISSING THE COMPLAINT OF PLAINTIFFS-APPELLANTS AND IN NOT HOLDING THAT THE DEEDS OF SALE SIGNED BY PLAINTIFFS-APPELLANTS CONVEYING THE PROPERTIES IN QUESTION TO DEFENDANTSAPPELLEES ARE ACTUALLY EQUITABLE MORTGAGE;

2.

THE TRIAL COURT GRAVELY ERRED IN HOLDING PLAINTIFFSAPPELLANTS LIABLE FOR MORAL AND EXEMPLARY DAMAGES AS WELL AS ATTORNEY'S FEES AND LITIGATION EXPENSES.[35]

They averred that, as admitted by Manuel Concepcion, the parties had agreed that the former would return their advance/s for their account, with

3% interest a month, and that no sale was agreed upon by the parties. They even granted extensions to the spouses Salonga to repay their loans.

The spouses Salonga assert that their transactions with the spouses Concepcion relative to their property were in the nature of equitable mortgages' as shown, inter alia, by the fact that the prices of the property as' appearing in the deeds of absolute sale were a little more than P2,000,000.00, grossly inadequate as compared to their market value of P10,000,000.00;[36] the parties had agreed that the deeds of sale would not be registered in the Office of the Register of Deeds, but that the spouses Concepcion registered the said deeds in gross and evident bad faith; despite the existence of the deeds of absolute sale, the spouses Salonga remained in possession of the property.

On December 21, 2001, the CA rendered judgment dismissing the appeal and affirming the appealed decision with modification.[37] The CA ruled that the spouses Salonga had sold their property to the spouses Concepcion with a right to repurchase, and that the said spouses failed to repurchase the same. The appellate court also declared that the spouses Salonga failed to prove that the said transactions were in the nature of equitable mortgages. They took possession of the house for a limited period of time, while the spouses Concepcion took possession of the estate of the property after the execution of the deed of absolute sale.

The spouses Salonga, now the petitioners, filed the present petition for review on certiorari with this Court, assailing the decision and resolution of the CA. They contend that:

THE COURT OF APPEALS ERRED IN THAT ITS CONCLUSIONS ARE CONTRARY TO LAW AND JURISPRUDENCE, AS

I THE DEEDS OF SALE IN FAVOR OF RESPONDENTS CONCEPCIONS ARE NULL AND VOID AS THEY ARE ABSOLUTELY SIMULATED AND THEIR CAUSES WERE INEXISTENT AT THE TIME OF THE TRANSACTION, AND IF UPHELD THEIR PURPOSE IS CONTRARY TO LAW AND PUBLIC POLICY, THUS VOID.

II THE PETITIONERS DID NOT GIVE THEIR CONSENT TO A SALE.

III ASSUMING EX GRATIA ARGUMENTI THAT THE DEEDS WERE NOT VOID AB INITIO, THEY ARE VOIDABLE OR AT LEAST THE PETITIONERS ARE ENTITLED TO REFORMATION OF THE DEEDS AS THEY DID NOT EXPRESS THE TRUE INTENT OF THE PARTIES AS THEY ARE EQUITABLE MORTGAGES AT BEST.[38]

The issues in this case are factual. Under Rule 45 of the Rules of Court, only questions of law may be raised in a petition for review on certiorari, the reason being that the Court is not a trier of facts; hence, is not to re-examine and reevaluate the evidence on record. Furthermore, the conclusions of the CA on appeal are binding and conclusive on the Court, unless there is a convincing showing that the appellate court ignored, misapplied or misconstrued cogent facts and circumstances which, if considered, would warrant the modification or reversal of the outcome of the case.[39]

The Court is not proscribed, however, from delving into and resolving factual issues, if the findings and conclusions of the trial court are inconsistent with those of the appellate court; or where the findings of the trial court and the CA are contrary to the evidence on record or were arrived at arbitrarily.[40]

The petition is impressed with merit.

Article 1602 of the New Civil Code of the Philippines provides that a contract shall be presumed to be an equitable mortgage, in any of the following cases:

(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall

secure the payment of a debt or the performance of any other obligation.

In any of the foregoing case, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws.

The provision shall apply to a contract purporting to be an absolute sale.[41] In case of doubt, a contract purporting to be a sale with right to repurchase shall be considered as an equitable mortgage.[42] In a contract of mortgage, the mortgagor merely subjects the property to a lien, but the ownership and possession thereof are retained by him.[43]

For the presumption in Article 1602 of the New Civil Code to arise, two requirements must concur: (a) that the parties entered into a contract denominated as a contract of sale; and (b) that their intention was to secure an existing debt by way of a mortgage. The existence of any of the circumstances defined in Article 1602 of the New Civil Code, not the concurrence nor an overwhelming number of such circumstances is sufficient for a contract of sale to be presumed an equitable mortgage.[44]

If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.[45] However, if the records appear to be contrary to the evident intention of the contracting parties, the latter shall prevail.

The nomenclature given by the parties to the contract is not conclusive of the nature and legal effects thereof.[46] Even if a document appears on its face to be a

sale, the owner of the property may prove that the contract is really a loan with mortgage, and that the document does not express the true intent of the parties.[47]

There is no conclusive test to determine whether a deed absolute on its face is really a simple loan accommodation secured by a mortgage. The decisive factor in evaluating such deed is the intention of the parties as shown by all the surrounding circumstances, such as the relative situation of the parties at that time, the attitude, acts, conduct, and declarations of the parties before, during and after the execution of said deed, and generally all pertinent facts having a tendency to determine the real nature of their design and understanding.[48] As such, documentary and parol evidence may be adduced by the parties. When in doubt, courts are generally inclined to construe a transaction purporting to be a sale as an equitable mortgage, which involves a lesser transmission of rights and interests over the property in controversy.[49]

Articles 1602, 1603 and 1604 of the New Civil Code were designed to prevent the circumvention of the use of usury[50] and the prohibition against the creditor appropriating the mortgaged properties. Besides, in times of grave financial distress which render persons hard-pressed to answer an emergency, such persons would have no choice but to sign a deed of absolute sale of property if only to obtain a much-needed loan from unscrupulous money lenders.[51]

The notarization of the document does not guarantee its validity because it is not the function of the notary public to validate an instrument

that was never intended by the parties to have any binding legal effect on him. Neither is the notarization of a document conclusive of the nature of the transaction conferred by the said document, nor is it conclusive of the true agreement of the parties thereto.

After a thorough examination of the records, we find and so hold that the August 31 and October 18, 1993 Deeds of Absolute Sale are mere equitable mortgages and not bona fide absolute sale of the parcels of land therein described.

FIRST. The petitioners were hard-pressed to pay their account to the respondents in the total principal amount of P3,198,886.47; the said amount paid by the respondents for the account of the petitioners to the PNB, the Associated Bank and the DBP, excluding the amount of 36% interest a month or 36% interest per annum. The petitioners tried to sell the property to third-persons, but failed. The respondents refused to give the petitioners any further extensions of time to sell the property, unless they execute the deeds of absolute sale in favor of the respondents and insure the payment of their account. The specter of the petitioners being evicted from their residence loomed large in the horizon. To give themselves more time to sell their property and avert eviction from their house, the petitioners opted to execute the deeds of absolute sale.

SECOND. 'It was made to appear under the August 31, 1993 Deed of Absolute Sale that the petitioners had sold their five parcels of land to the respondents for the principal amount of P575,000.00, and that the petitioners received the said amount from the respondents. However, at the time of the execution of said deed, the petitioners were indebted to the respondents for the principal amount of P586,520.50, which the respondents had remitted to the Associated Bank for the account of the petitioners. It is incredible that the petitioners would sell the said parcels of land to the respondents, and that the latter would remit the purchase

price of P575,000.00 to the petitioners, and retain the said amount to be applied as payment to the petitioners' account of P586,520.50.

It was also made to appear under the October 18, 1993 Deed of Absolute 0Sale that the petitioners sold two parcels of land to the respondents (on which their commercial building and their house were constructed) for P1,500,000.00, and that the petitioners received the said amount from the respondents following the execution of the deed. However, the evidence on record shows that the petitioners had an outstanding account of P2,042,377.19 as of October 18, 1993 to the respondents. It is incredible that, instead of applying the aforesaid amount of P1,500,000.00 in partial payment of the petitioners' outstanding account, the respondents would choose to remit the same upon the execution of the October 18, 1993 deed of absolute sale. In fine, the petitioners' account to the respondents, in the total amount ofP3,198,886.47, remained outstanding despite the sale of the petitioners' seven parcels of land in favor of the respondents.

We reject the respondents' contention that the petitioners sold their seven parcels of land, not only forP2,078,000.00 but also for the outstanding account of P3,198,886.47, for the total price of P5,876,886.47. The respondents were burdened to prove that the petitioners agreed to sell their property partly in payment of the said account; the respondents failed to do so.

A plain reading of the two (2) deeds of absolute sale shows that the seven lots were sold to the respondents for only P2,078,000.00. There is no provision in said deeds stating that the petitioners sold their property in partial payment of their outstanding account to the respondents (P3,198,886.47), and partly for an additional P2,078,000.00 If it is true, as claimed by the respondents, that the petitioners sold the seven parcels of land to them not only for P2,078,000.00 as appearing in said deeds, but also for the outstanding account of P3,198,886.47, the same should have been specifically and positively stated in the said deeds. No such

provision appears in the two deeds. There is likewise no provision in the said deeds that, by the execution thereof, the petitioners' outstanding account to the respondents in the amount of P3,198,886.47 was extinguished and paid. The absence of any provision in the two deeds of absolute sale that the seven parcels of land were sold by the petitioners to the respondents in partial payment of their outstanding account, and partly for P2,078,000.00, and any declaration therein that the said outstanding account was thereby extinguished negates the respondents' contention.

THIRD. Respondent Manuel Concepcion had earlier signed on March 10, 1993 an undertaking that he would not register the deed of

absolute sale as long as the petitioners will pay their outstanding account plus interests thereon at the rate of 3% per month:

I Manuel Concepcion, of legal aged (sic), married to Nenita Viado and resident of Bautista, Pangasinan have agreed to Mr. & Mrs. Natalio Salonga, a resident of Dagupan City to sign a Deed of Sale and I will not registered (sic) as long as the spouses Salonga will pay the principal cash involved plus the interest of 3% per month.

8 Titles

Witness: Sgd. ILLEGIBLE

ILLEGIBLE ' MANUEL D. CONCEPCION[52]

Respondent Manuel Concepcion's undertaking not to register the deed of sale with the Office of the Register of Deeds fortifies the petitioners' contention that the subject transaction under the two deeds of absolute sale was an equitable mortgage, and not bona fide conveyances of the said lots. Indeed, the respondents did not present the August 31, 1993 Deed of Absolute Sale to the Office of the Register of Deeds; the said deeds were only presented on September 21, 1993 when the respondents sold the five (5) parcels of land to Florencia Realty Corporation. The respondents likewise failed to adduce clear and convincing evidence that respondent Manuel Concepcion's signature on the undertaking is a forgery. The bare claim that the signature on the note purporting to be that of the respondent is a forgery is not sufficient. It bears stressing that forgery is not presumed. Forgery must be proved with clear and convincing evidence.[53] The fact that respondent Manuel Concepcion signed the note on

March 10, 1993, before the petitioners executed the said deeds of absolute sale in August and October 1993, does not militate against the probative weight thereof. The petitioners had only 60 days from January 1993 within which to repay the respondents from the proceeds of the sale; however, the petitioners failed to sell their property and repay the respondents. When the respondents pressed the petitioners for the payment of their account, the latter agreed to execute deeds of absolute sale by the petitioners over the property, with the agreement not to present the said deed to the Office of the Register of Deeds for registration. However, despite their written undertaking to the contrary, the respondents filed the August 31 and October 18, 1993 Deeds of Sale in the Office of the Register of Deeds and registered the same.

THIRD. When the petitioners' daughter arrived in the Philippines from abroad, they had offered to redeem the parcels of land from the respondents, only to discover that the two deeds of absolute sale had already been registered in the Office of the Register of Deeds; that the respondents had acquired titles over the said parcels of land; and that the said lots had been sold to Florencia Realty Corporation. Worse, the respondents demanded the amount of P8,000,000.00, later increased to P10,000,000.00, for the redemption of the property. WITNESS:

A When my daughter arrived from abroad, were trying to pay same, there is no one year yet from that time when my daughter is trying to redeem the property.

Q And you claim that Mr. Concepcion refuse to accept the payment? A He wanted that it may pay in accordance with the price which he is going to peg, and my daughter said, could it be possible that it be paid in the amount in respect to the principal and plus the interest. Q When was that?

A 1994, Sir.

Q How much did Mr. Concepcion allegedly inform your daughter that you pay to him? A First he said 10 million and then earlier he said 8 million.

Q Now, after your daughter went to his house Mr. Concepcion, allegedly to pay your indebtedness, and which was refuse[d] by Mr. Concepcion, what did you do, Madam Witness? A We went to the register of deeds, and we found out that it was already in the name of Mr. Concepcion, that (sic) why we already sought the help of a lawyer.

Q Did you pay any interest in connection with this agreement? A Yes, Sir.

Q Do you have any evidence to show that you really pay the interest? A He refused to issue as (sic) receipts.

Q In other words, you dont have document or piece of paper to show that indeed you pay (sic) the interest? A None, Sir, because actually if we are going to ask for a receipt for the payment of the interest, he will say 'why, are you going to pay the entire amount of your indebtedness.

Q Despite the fact, Madam Witness, that you claimed that there was an agreement that you have to pay also the interest of the principal and you claim, that he refused to accept payments of that agreed upon you?

ATTY. PALMA: That is misleading, Your Honor, the testimony of this witness Mr. Concepcion refused to issue a receipt, not to refuse to accept the payments.

ATTY. PALMA: That is in respect to the daughter.

COURT: Answer.

WITNESS: He received the interest but he refused to received (sic) the payment made by my daughter.

ATTY. RAMOS: Q You claim Madam Witness, that Mr. Concepcion already sold the 3 parcels which is adjacent to the Lyceum University when did you learn that? A 1994, Sir.

Q After learning that Mr. Concepcion sold that (sic) parcels of land, what did you do? A That was the time we sought a help from a lawyer.

Q Who is now in possession of that (sic) 3 parcels of land? A Lyceum, Sir.[54]

FOURTH. The petitioners remained in possession of the residential house even after October 18, 1993 without paying any rentals therefor. It was only on August 23, 1994, after the petitioners filed their complaint against the respondents in the trial court, that the respondents filed their complaint for ejectment against the petitioners.

FIFTH. The parcels of land covered by TCT Nos. 43547, 40886, 40887, 35156 and 49459 and TCT Nos. 53650 and 26506 had a total market value of P10,270,600.00.[55] However, under the two deeds of absolute sale, the seven parcels of land, including the petitioners' house, were sold to the respondents for only P2,078,000.00, an amount grossly disproportionate to the market value of the property. The respondents failed to adduce any evidence to controvert the petitioners' evidence relative to the market value of the seven parcels of land.

On the issue of whether respondent Florencia Realty Corporation is a purchaser in good faith or not, case law has it that he who alleges that he is a purchaser of registered land is burdened to prove such statement. Such burden is not discharged by involving the ordinary presumption of good faith.[56] The defense of having purchased the property in good faith may be availed of only where registered land is involved and the buyer had relied in good faith on the clean title of the registered owner.[57] In this case, it appears that the respondent purchased the parcels of land on September 20, 1993. At that time, the petitioners were still the registered owners of the property. The respondent did not allege in its answer to the complaint that it was a purchaser in good faith of the property; neither did it adduce a morsel of evidence to prove that it purchased the property in good faith.

IN LIGHT OF ALL THE FOREGOING, the Petition is GRANTED. The decisions of the Regional Trial Court and the Court of Appeals are REVERSED and SET ASIDE. Judgment is hereby rendered in favor of the petitioners, as follows:

(1) The August 31 and October 18, 1993 Deeds of Absolute Sale executed by the petitioners in favor of the respondents are NULLIFIED. The transactions covered by said deeds are declared equitable mortgages, not bona fide sales of the lots therein covered; and (2) The petitioners' claims for damages and attorney's fees, and the respondents' counterclaims for damages and attorney's fees are DISMISSED. No costs.

SO ORDERED.

ROMEO J. CALLEJO, SR. ' Associate Justice

WE CONCUR:

REYNATO S. PUNO Associate Justice Chairman

MA. ALICIA AUSTRIA-MARTINEZ DANTE O. TINGA Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

REYNATO S. PUNO ' Associate Justice Chairman, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairman's Attestation, it is hereby certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

HILARIO G. DAVIDE, JR. Chief Justice

Endnotes:

[1] Records, pp. 2-4.cralaw [2] Records, pp. 16, 18, 20, 25 and 29. (dorsal side thereof)cralaw [3] Id. at 22. (dorsal side thereof)cralaw [4] Id. at 31.cralaw [5] Id. at 27.cralaw [6] Id. at 5.cralaw [7] Id. at 27.cralaw [8] Records, p. 31.cralaw [9] Exhibit 'I.cralaw [10] Exhibit '1.cralaw [11] Exhibit '2.cralaw [12] Exhibit '2-A.cralaw [13] Exhibit '3.cralaw [14] Exhibit '4.cralaw

[15] Exhibit '4-A.cralaw [16] Exhibit '4-B.cralaw [17] Exhibits '4 to '4-B.cralaw [18] Exhibit '5.cralaw [19] Exhibit '12.cralaw [20] Exhibit 'G.cralaw [21] Ibid.cralaw [22] Exhibit 'J. cralaw [23] Exhibits 'K. cralaw [24] Rollo, pp. 72-73.cralaw [25] The plaintiffs in the court a quo.cralaw [26] Rollo, pp. 80-83.cralaw [27] Exhibit 'U.cralaw [28] Rollo, p. 229.cralaw [29] Exhibit 'A.cralaw [30] Exhibit 'K. cralaw [31] TSN, 27 June 1996, p. 10.cralaw [32] Exhibits '13', '13-A to '13-F.cralaw [33] Exhibit 'A.cralaw [34] Records, p. 223.cralaw [35] Rollo, p. 42.cralaw [36] Exhibit 'U.cralaw [37] Penned by Associate Justice Conchita Carpio Morales (now an Associate Justice of the Supreme Court) with Associate Justices Martin S. Villarama, Jr. and Sergio L. Pestao, concurring; Rollo, pp. 39-47.cralaw [38] Rollo, p. 18.cralaw [39] Milestone Realty and Co., Inc. v. Court of Appeals, G.R. No. 135999, 19 April 2002, 38l SCRA 406.cralaw [40] Villanueva v. Court of Appeals, G.R. No. 107624, 28 January 1997, 267 SCRA 89.cralaw [41] Article 1604, New Civil Code.cralaw [42] Article 1603, New Civil Code.cralaw [43] Ching Sen Ben Court of Appeals, G.R. No. 124355, 21 September 1999, 314 SCRA 762.cralaw [44] Reyes v. Court of Appeals, G.R. No. 134166, 25 August 2000, 339 SCRA 97.cralaw [45] Article 1370, New Civil Code.cralaw [46] Ching Sen Ben v. Court of Appeals, supra..cralaw [47] Hilado v. Heirs of Rafael Medalla, G.R. No. 144227, 15 February 2002, 377 SCRA 257.cralaw [48] Lorbes v. Court of Appeals, G.R. No. 139884, 15 February 2001, 351 SCRA 716.cralaw [49] Reyes v. Court of Appeals, G.R. No. 134166, 25 August 2000, 339 SCRA 97.cralaw [50] Ibid.cralaw [51] Matanguihan v. Court of Appeals, G.R. No. 115033, 11 July 1997, 275 SCRA 380.cralaw [52] Exhibit 'A.cralaw [53] Fernandez v. Fernandez, G.R. No. 143256, 28 August 2001, 363 SCRA 811; R.F. Navarro & Co., Inc. v. Vailoces, G.R. No. 102313, 12 July 2001, 361 SCRA 139.cralaw [54] TSN, 8 February 1996, pp. 22-26.cralaw [55] Exhibit 'U.cralaw

[56] Rayos v. Reyes, G.R. No. 150913, 20 February 2003, 398 SCRA 24. cralaw [57] David v. Bandin, G.R. No. L-48322, 8 April 1987, 149 SCRA 140; Sales v. Court of Appeals, G.R. No. 40145, 29 July 1992, 211 SCRA 858.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 1698 September 26, 1905

JULIAN BORROMEO, plaintiff-appellant, vs. JOSE FRANCO Y FRANCO, ET AL., defendants-appellees. Jose Maria Rosado for appellant. Jose Maria Memije for appellees. TORRES, J.: On the 29th of April, 1902, and before the notary public Jose Maria Rosado y Calvo, a resident attorney of the city of Manila, Jose Franco, Cesar Franco, Antonio Franco, Manuel Franco, Soledad Franco, and Catalina Franco, as parties of the first part, the latter in her own behalf and in behalf of her minor child, Concepcion Franco, and Julian Borromeo y Galan, as party of the second part, executed a contract as follows: (1) The six Francos, parties of the first part, declare themselves to be the joint owners of the frame houses, with nipa roofs built upon lots belonging to the said parties of the first part in Plaza Recoletos of the city of Cebu, and within the jurisdiction of the Registry of Property of the Province of Cebu. (2) That no description is given of the said property for lack of the necessary date; that the property is free from any lien or incumbrance; that they have agreed to sell the said property to Borromeo y Galan, the party of the second part, and that as evidence of such agreement they have executed the present instrument, and in virtue thereof they solemnly bind themselves to transfer absolutely and forever to the said Borromeo, the party of the second part the aforesaid property under the following terms and conditions, to wit: (a) The consideration for the sale to be the sum of 2,500 pesos, Mexican currency, the payment of which shall be made upon the execution of the final deed of sale. (b) The expenses incurred in the execution of the said deed, as well as in any judicial and extrajudicial proceedings which may be necessary for the purpose of perfecting the title papers to the said property, including their inscription in the Registry of Property in the name of the purchaser, Borromeo, shall be borne exclusively by the latter, whatever the amount of such expense may be. (c) Borromeo, the party of the second part, is hereby given six months from the date of the execution of this instrument within which to arrange and complete the documents and papers relating to the said property. (d) Whatever rent there may be due from the said property from the aforesaid date shall be paid to Borromeo, the party of the second part, who in consideration thereof shall defray such expenses as may be or may have been incurred for the preservation and repair of the said property, and who shall pay all taxes and make all other necessary disbursements, whatever the amount may be, the parties of the first part assuming no liability therefor. (e) The parties of the first part do not guarantee the title which they undertake to transfer to Borromeo, party of the second part, nor this promise to sell. (f) Julian Borromeo shall defray whatever expenses may be incurred by Catalina Franco in obtaining the necessary judicial authority for the sale of the interest of her minor child in the said property. The foregoing conditions were accepted by the said Borromeo (p. 13 of the bill of exceptions). On the 7th day of January, 1903, Jose Maria Rosado y Calvo, as counsel for Julian Borromeo y Galan, filed a complaint in the Court of First Instance praying that judgment be rendered in his favor

and against the defendants Jose, Cesar, Manuel, and Catalina Franco, the latter in her own behalf and in her capacity as guardian of her minor children Antonio and Soledad Franco, compelling the said defendants to sell to him the property in question under the terms of the agreement entered into April 29, 1902, and also to pay the costs of proceedings and such damages as the plaintiff may have sustained and that, in case the property had been transferred to a third party, a notice of the pendency of this action be served upon the registrar of Cebu, and alleging that the plaintiff, under the terms of the aforesaid agreement, had taken some judicial and extra-judicial steps and defrayed the necessary expenses for the completion of the papers and other documents relating to the property which the defendant had agreed to sell to him; that although the plaintiff had been unable to complete the said documents he had, nevertheless, called upon the defendants to comply with their aforesaid promise to sell by executing to him the necessary deed, but that the defendants refused to do so, alleging that he had not completed the documents in question within the six months allowed him for this purpose; that defendants intended to sell, or had already sold the property in question to another person and that Antonio Franco and Soledad Franco had died on the 9th of June and on the 14th of July, 1903, respectively, without leaving wills and without descendants; Catalina Franco, the mother of the deceased, Antonio and Soledad Franco, being the only heir of the said deceased. Jose Maria Memije, counsel for the defendants, filed his answer on the 22nd of January, 1903, and asked that the complaint be dismissed and plaintiff ordered to pay the costs of proceedings and damages, alleging that if the terms of the aforesaid agreement are true, the defendants still deny that the plaintiff has made any disbursements in connection with the judicial and extra-judicial steps taken by him as alleged; that, assuming that the plaintiff had made such disbursements, the promise of sale made by the defendants was conditional and the plaintiff failed to comply with such condition; that Catalina Franco was in fact the heir of her deceased minor children, Antonio and Soledad; and that the defendants admit the allegations contained in the fourth paragraph of the complaint, because the plaintiff has failed to comply with the conditions under which the promise to sell the property to him was made, the defendants being, therefore, at liberty to dispose of this property in any way they might see fit. This is an action by the plaintiff to compel the defendants, the owners of the two houses and lots in question, to comply with their agreement to sell to the former the said property and, inasmuch as the said agreement is perfectly valid and binding upon the contracting parties in the absence of any allegation or proof which would preclude the performance of the same, we hold that plaintiff's petition is in conformity with the law. It was agreed in the aforesaid instrument, among other things, that the purchaser, Borromeo, as set out in clause (c), should have six months' time to complete the documents and other papers relating to the property in question. The six months having expired, and the plaintiff not having completed the title deeds to the said property, he now seeks to compel the defendants to carry out their agreement to sell by executing to him the necessary deed of sale. The agreement on the part of the purchaser to complete the title papers to the said property within the six months allowed him for this purpose in clause (c) of the agreement is not a condition subsequent of the obligation to sell, but a mere incidental stipulation which the parties saw fit to include in the agreement. By virtue of the provisions of article 1255 of the Civil Code which gives to every person the right to freely contract, the parties to the aforesaid agreement could have stipulated, among other things, what they actually stipulated in clause (c). That stipulation is not contrary to law, public morals, or public policy. But a failure to comply with such a stipulation, and the fact that the purchaser was unable to complete his title papers to the property in question do not preclude the performance of the sale which the purchaser now demands.

The vendors should comply with their agreement under such terms and conditions as may be legally possible in view of the statements made by them as owners of the property in question in the aforesaid instrument and accepted by the purchaser, that they did not describe the property by metes and bounds for lack of sufficient information, and that they did not guarantee the deed of sale which they might execute in favor of the vendee, Borromeo, nor the promise to sell. If the purchaser accepts the transfer of the property under the terms and conditions stipulated in the agreement in question and in such a form as to enable the vendors to make such transfer, even though the documents and other papers relating to the property are not yet completed, the defendants can not, under the circumstances, refuse to comply with their agreement. The stipulation contained in the clause in question was merely incidental and not inherent or essential to the agreement or promise to sell. Such an agreement could have existed without the clause in question. The purchaser having failed to comply with the said stipulation, and having sought to enforce the sale agreed upon, the vendors are bound to effect such sale after all the other conditions stipulated have been complied with. Article 1451 of the Civil Code provides as follows: A promise to sell or buy, there being an agreement as to the thing and price, gives a right to the contracting parties to mutually demand the fulfillment of the contract. Whenever the promise to purchase and sell can not be fulfilled, the provisions relating to obligations and contracts of this book shall be observed by the vendor and by the vendee, as the case may be. The purchaser having demanded the fulfillment of the promise to sell the two houses herein referred to, the question arises whether the defendants can properly refuse so to do for the reason that the purchaser has failed to complete the titles papers thereto as stipulated. We think not. When the plaintiff, Borromeo, demanded the execution of the sale, even though the documents were not in proper shape, it must be assumed that he was willing to buy the property even with a defective title, the perfection of which he expressly undertook to obtain. The contract in question contains various clauses and stipulations but the defendants refused to fulfill their promise to sell on the ground that the vendee had not perfected the title papers to the property in question within the six months agreed upon in clause (c). That stipulation was not an essential part of the contract and a failure to comply therewith is no obstacle to the fulfillment of the promise to sell. The contract in question is a bilateral one containing mutual obligations and the fulfillment of which may be demanded after the expiration of the aforesaid six months. The obligation to buy the property in question is correlative with the obligation to sell it, so that upon the execution of the deed of transfer the purchaser shall pay the sum of 2,500 pesos, Mexican currency, as stipulates in the written contract referred to. The obligation which the purchaser, Borromeo, imposed upon himself, to perfect the papers to the property within a period of six months, is not correlative with the obligation to sell the property. These obligations to not arise from the same cause. They create no reciprocal rights between the contracting parties, so that a failure to comply with the stipulation contained in clause (c) on the part of the plaintiff purchaser within the period of six months provided for in the said contract, as he, the plaintiff, himself admits, does not give the defendants the right to cancel the obligation which they imposed upon themselves to sell the two houses in question in accordance with the provisions of

article 1224 of the Civil Code, since no real juridical bilaterality of reciprocity existed between the two obligations, because the obligation to perfect the title papers to the houses in question is not correlative with the obligation to fulfill the promise to sell such property. One obligation is entirely independent of the other. The latter obligation is not subordinate to nor does it depend upon the fulfillment of the obligation to perfect the title deeds to the property. Obligations arising from contracts have legal force between the contracting parties, and must be fulfilled in accordance with their stipulations. (Art. 1091 of the Civil Code.) The six months provided for in clause (c) having expired and all the other conditions stipulated in the agreement of the 29th of April, 1902, having been complied with, and the purchaser, Borromeo, who was the one principally interested in the perfecting of the title papers to the property, having demanded the execution of the sale agreed upon in the said instrument, the vendors must comply with the obligation by them contracted. In case the aforesaid promise to sell can not be fulfilled, both vendor and vendee may seek their remedy under the provisions of the Civil Code relating to contracts and obligations, as contemplated in the last paragraph of article 1451 of the Civil Code above cited. For the reasons above stated we are of the opinion that the judgment of the court below, dated October 5, 1903, should be reversed and it is held that the defendants Jose, Cesar, Manuel, and Catalina Franco are under obligation to sell to the plaintiff, Julian Borromeo, the two houses in question and the lots upon which they stand, and referred to in the agreement of the 29th of April, 1902, under the terms and conditions therein stipulated, and without any special order as to costs. After the expiration of twenty days let judgment be entered in accordance herewith and the case be remanded to the court below for proper action. So ordered. Arellano, C.J., Mapa, Johnson, and Carson, JJ., concur. Willard, J., did not sit in this case. The Lawphil Project - Arellano Law Foundation

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 3227 March 22, 1907 PEDRO ALCANTARA, Plaintiff-Appellee , vs. AMBROSIO ALINEA, ET AL., Defendants-Appellants. TORRES, J.:
chanrob les vi rtua l law lib rary

On the 13th day of March, 1905, the plaintiff filed a complaint in the Court of First Instance of La Laguna, praying that judgment be rendered in his behalf ordering the defendants to de liver to him the house and lot claimed, and to pay him in addition thereto as rent the sum of 8 pesos per month from February of that year, and to pay the costs of the action; and the plaintiff alleged in effect that on the 29th day of February, 1904, the defendants, Ambrosio Alinea and Eudosia Belarmino, borrowed from him the sum of 480 pesos, payable in January of said year 1905 under the agreement that if, at the expiration of the said period, said amount should not be paid it would be understood that the house and lot, the house being constructed of strong materials, owned by the said defendants and located in the town of San Pablo on the street of the same name, Province of La Laguna, be considered as absolutely sold to the plaintiff for the said sum; that the superficial extent and boundaries of said property are described in the complaint; and that, notwithstanding that the time for the payment of said sum has expired and no payment has been made, the defendants refuse to deliver to plaintiff the said property, openly violating that which they contracted to do and depriving him to his loss of the rents which plaintiff should received, the same counting from February, 1905.
chanroblesv irt ualawli bra ry c hanro bles vi rt ual law li bra ry

The defendants, after the overruling of a demurrer to the complaint herein, answered denying generally and specifically all the allegations contained in the complaint, except those which were expressly admitted, and alleged that the amount claimed included the interest; and that the principal borrowed was only 200 pesos and that the interest was 280 pesos, although in drawing the document by mutual consent of the parties thereto the amount of indebtedness was made to appear in the sum of 480 pesos; and that as their special defense defendants alleged that they offered to pay the plaintiff the sum of 480 pesos, but the plaintiff had refused to accept the same, therefore they persisted in making said offer and tender of payment, placing at the disposal of the plaintiff the said 480 pesos first tendered; and defendants asked for the costs of action.
chanro blesvi rt ualawlib ra ry cha nro bles vi rtua l law lib ra ry

After having taken the evidence of both parties and attaching the documents presented in evidence to the record, the judge on November 27, 1905, rendered a judgment ordering the defendants to deliver to the plaintiff the house and lot, the object of this litigation, and to pay the costs of the action, not making any finding upon the question of loss or damages by reason of the absence of proof on these points. The defendants duly took exception to this decision, and asked for a new trial of the case on the ground that the findings of the court below in its decision were plainly contrary to law, which motion was overruled and from which ruling defendants also excepted.
chanroblesvi rt ualawlib ra ry cha nro bles vi rtua l law lib ra ry

We have in this case a contract of loan and a promise of sale of a house and lot, the price of which should be the amount loaned, if within a fixed period of time such amount should not be paid by the debtor-vendor of the property to the creditor-vendee of same.
cha nrob lesvi rtua lawlib rary cha nrob les vi rtual law lib rary

Either one of the contracts are perfectly legal and both are authorized respectively by articles 1451, 1740, and 1753, and those following, of the Civil Code. The fact that the parties have agreed at the same time, in such a manner that the fulfillment of the promise of sale would depend upon the nonpayment or return of the amount loaned, has not produced any charge in the nature and legal conditions of either contract, or any essential defect which would tend to nullify the same.
chan roble svi rtualaw lib rary chan roble s virtual law lib rary

If the promise of sale is not vitiated because, according to the agreement between the parties thereto, the price of the same is to be the amount loaned and not repaid, neither would the loan be null or illegal, for the reason that the added agreement provides that in the event of failure of payment the sale of property as agreed will take effect, the consideration being the amount loaned and not paid. No article of the Civil Code, under the rules or regulations of which such double contract was executed, prohibits expressly, or by inference from any of its provisions, that an agreement could not be made in the form in which the same has been executed; on the contrary, article 1278 of the aforesaid code provides that "contracts shall be binding, whatever may be the form in which they may have been executed, provided the essential conditions required for their validity exist." This legal prescription appears firmly sustained by the settled practice of the courts.
chanrob lesvi rtua lawlib rary cha nrob les vi rtua l law li brary

The property, the sale of which was agreed to by the debtors, does not appear mortgaged in favor of the creditor, because in order to constitute a valid mortgage it is indispensable that the instrument be registered in the Register of Property, in accordance with article 1875 of the Civil Code, and the document of contract, Exhibit A, does not constitute a mortgage, nor could it possibly be a mortgage, for the reason of said document is not vested with the character and conditions of a public instrument.
chan roblesv irt ualawli bra ry c hanrobles vi rt ual law li bra ry

By the aforesaid document, Exhibit A, said property could not be pledged, not being personal property, and notwithstanding the said double contract the debtor continued in possession thereof and the said property has never been occupied by the creditor.
chanrob lesvi rtua lawlib rary cha nrob les vi rtual law lib rary

Neither was there ever nay contract of antichresis by reason of the said contract of loan, as is provided in articles 1881 and those following of the Civil Code, inasmuch as the creditor-plaintiff has never been in possession thereof, nor has he enjoyed the said property, nor for one moment ever received its rents; therefore, there are no proper terms in law, taking into consideration the terms of the conditions contained in the aforesaid contract, whereby this court can find that the contract was null, and under no consideration whatever would it be just to apply to the plaintiff articles 1859 and 1884 of the same code.
chanroblesvi rtu alawlib ra rycha nroble s virtual law l ib rary

The contract ( pactum commissorium) referred to in Law 41, title 5, and law 12, title 12, of the fifth Partida, and perhaps included in the prohibition and declaration of nullity expressed in articles 1859 and 1884 of the Civil Code, indicates the existence of the contracts of mortgage or of pledge or that of antichresis, none of which have coincided in the loan indicated herein.
chanroble svi rtualaw li brary cha nrob les vi rtual law lib rary

It is a principle in law, invariably applied by the courts in the decisions of actions instituted in the matter of compliance with obligations, that the will of the contracting parties is the law of contracts and that a man obligates himself to that to which he promises to be bound, a principle in accordance with Law 1, title 1, book 10 of the Novisima Recopilacion, and article 1091 of the Civil Code. That which is agreed to in a contract is law between the parties, a doctrine established, among others, in judgments of the supreme court of Spain of February 20, 1897, and February 13, 1904.
chanroble svirtualawl ibra ry chan roble s virtual law l ibra ry

It was agreed between plaintiff and defendants herein that if defendants should not pay the loan of 480 pesos in January, 1905, the property belonging to the defendants and described in the contract should remain sold for the aforesaid sum, and such agreement must be complied with, inasmuch as there is no ground in law to oppose the compliance with that which has been agreed upon, having been so acknowledged by the obligated parties.
chanrob lesvi rtua lawlib rary chan rob les vi rtual l aw libra ry

The supreme court of Spain, applying the aforementioned laws of Spanish origin to a similar case, establishes in its decision of January 16, 1872, the following legal doctrine: Basing the complaint upon the obligation signed by the debtor, which judicially recognized his signature; and after confessing to have received from the plaintiff a certain amount, binding himself to return same to the satisfaction of the plaintiff within the term of four years, or in case of default to transfer direct domain of the properties described in the obligation and to execute the necessary sale; and the term having expired and the aforesaid amount not having

been paid, said plaintiff has his right free from impediment to claim same against the heirs of the debtor. The document of contract has been recognized by the defendant Alinea and by the witnesses who signed same with him, being therefore an authentic and efficacious document, in accordance with article 1225 of the Civil Code; and as the amount loaned has not been paid and continues in possession of the debtor, it is only just that the promise of sale be carried into effect, and the necessary instrument be executed by the vendees.
chan roble svi rtualaw lib rary chan roble s virtual law lib rary

Therefore, by virtue of the reasons given above and accepting the findings given in the judgment appealed from, we affirm the said judgment herein, with the costs against the appellants.
chanrob lesvi rtua lawlib rary cha nrob les vi rtua l law lib rary

After expiration of twenty days from the date of the notification of this decision let judgment be entered in accordance herewith and ten days thereafter let the case be remanded to the court from whence it came for proper action. So ordered.
chanrob lesvi rtua lawlib rary cha nrob les vi rtua l law lib rary

Arellano, C.J., Mapa, Johnson, and Tracey, JJ., concur.

Separate Opinions WILLARD, J., dissenting:

chanro bles virtual law lib rary

chanrobles virtual law librar y

This contract violates the fundamental principle of the Spanish law, which does not permit a debtor, at the time he secures a loan of money, to make an agreement whereby the mere failure to pay the loan at maturity shall divest him irrevocably of allow his interest in the specific property mentioned in the agreement without any right on his part to redeem or to have the property sold to pay the debt. (Civil Code, arts. 1859, 1872, and 1884.) I therefore dissent.

EN BANC [G. R. No. 4226. March 31, 1909.] LA COMPANIA GENERAL DE TABACOS DE FILIPINAS, Plaintiff-Appellee, vs. CANDIDA OBED, Viuda de Gallegos, ET AL., Defendants-Appellants.

DECISION TORRES, J.: On the 3d of August, 1906, the representative of the Compania General de Tabacos de Filipinas filed a complaint against Candida Obed, widow of Gallegos, and against Felipe Gallegos, alleging, among other things, that on February 10, 1904, in Guinobatan, Province of Albay, accounts between the Defendants and the copartnership Ballester y Puiggros of Legaspi were liquidated up to January 31, 1904, and there appeared a balance of 2,359. 91 pesos in favor of the said copartnership. The Defendants engaged to settle the said sum by installments of 200 pesos, payable on the last day of each month, together with interest at the rate of 10 per cent per annum, to be charged at the end of every month on the unpaid balance. As guaranty for said obligation the Defendants mortgaged to the said copartnership, Ballester y Puiggros, and to their successors and assigns, certain real and personal property belonging to them, in February, 1904, and which they had received from the late Tomas Gallegos y Zabala, the husband and father of the respective Defendants, which property was still undivided; that the said copartnership of Ballester y Puiggros was reorganized under the firm name of Ballester y Albaladejo, and the said credit was transferred thereto as shown by an instrument executed in Legaspi, on the 8th of April, 1905, in the presence of a notary, and by other documents connected therewith; that by means of a public instrument executed and ratified on the 4th of August, 1905, before a notary public of this capital city and other documents connected therewith, the copartnership Ballester y Albaladejo transferred the said credit, among others, to the Compania General de Tabacos, for which reason the latter is at the present time the lawful owner of the said credit and of its security; and that, as theDefendants have not paid in full the amount of the same, the Plaintiff prayed that theDefendants be sentenced to pay the sum of P1,658. 93, and interest thereon at the rate of 10 per cent per annum to be charged in account at the end of each month from the 1st of August, 1906, and costs. Upon the Defendant being duly summoned, Candida Obed answered in writing to the foregoing complaint on the 28th of August, 1906, and set forth: that she admitted the facts as alleged in the first paragraph of the complaint, as well as paragraphs 5 and 6 thereof, only in so far as it concerned the transfer of the credits of the copartnership Ballester y Puiggros to Ballester y Albaladejo, and by the latter to the Plaintiff company, and denied all and each one of the allegations in said complaint not expressly admitted in her answer. As a counterclaim, she alleged that the liquidation of accounts of January 31, 1904, referred to in paragraph 2 of the complaint, took place between Ballester y Puiggros and the Defendant Felipe Gallegos, and was the result of transactions carried out solely and exclusively by the said Felipe Gallegos without the least intervention on the part of the Defendant Candida Obed; that in consequence of the said liquidation of accounts, Candida Obed and her son, the otherDefendant, had executed and signed a document whereby they jointly and severally acknowledged that they were
chanrobles virtualawlibrary

indebted to the copartnership Ballester y Puiggros in the sum of 2,359. 91 pesos, engaging to settle the same by monthly installments of 200 pesos until the debt should be paid in full; that the signature of Candida Obed was obtained by Felipe Gallegos by means of fraud and deceit, he causing her to believe that the said amount was a former debt due by her late husband to Ballester y Puiggros, which substantial error induced the Defendant Obed to sign the said document; that the late Tomas Gallegos did not owe any amount whatever to the firm of Ballester y Puiggros, nor to any of their successors; therefore, the cause of the supposed obligation executed by the Defendant Obed is a false one, and for said reason she prayed the court to absolve her of the complaint and to declare that the said document was null and void in so far as it referred to the Defendant, and to absolve her from the payment of the costs. On the 4th of September, counsel for the Plaintiff company answered the foregoing counterclaim in writing and denied each and all of the paragraphs of the same, praying the court below to enter judgment as requested in his complaint. On the 4th of September, 1906, an order was issued by the court declaring the otherDefendant, Felipe Gallegos, to be in default by reason of his nonappearance in the case. At the trial evidence was adduced by both parties to the suit, and the documents produced by them were made of record; in view thereof the court below rendered judgment on the 24th of September, 1906, sentencing the Defendants to pay jointly and severally the sum of P1,658. 93 with interest thereon at the rate of 10 per cent per annum to be charged in account at the end of each month beginning on the 1st of August, 1906, until the full payment of the debt, and costs. The representative of the Defendant excepted to the foregoing judgment and moved for a new trial on the ground that the conclusions therein contained were openly and manifestly contrary to the weight and the result of the evidence, and because said judgment was contrary to law; the motion was overruled, to which the Petitioner excepted and presented the corresponding bill of exceptions, and, notwithstanding the objections of thePlaintiff, the same was approved by the lower court and forwarded to the clerk of this court. The matter in controversy is the collection of a certain sum of money resulting from a liquidation of accounts, and set forth as a debt in a private document which was acknowledged as authentic by the debtors who signed it. Under article 1091 of the Civil Code, obligations arising from contracts have legal force between the contracting parties, and must be fulfilled in accordance with their stipulations; and according to the decisions of the supreme court of Spain when applying the provisions of the said article, among which are those of February 20, 1897, and February 13, 1904, the stipulations of a contract are binding on the parties thereto. Candida Obed, widow of the late Tomas Gallegos, and her son, Felipe Gallegos, acknowledged that they were indebted to the firm of Ballester y Puiggros in the sum of 2,359. 91 pesos, Mexican currency, as the balance resulting from the liquidation of accounts effected on January 31, 1904, and they engaged to pay at the end of each month, commencing from the following February, the sum of 200 pesos until the whole amount was paid, together with interest at the rate of 10 per cent per annum to be charged on

the balance resulting at the expiration of each month. In addition to this they engaged to pay in Philippine currency at par when the same would become legal tender and the Mexican money be prohibited or depreciated. All this, including other particulars, appears in document Exhibit A signed by the debtors, who, in their sworn testimony, acknowledged the signatures appearing at the foot thereof as being theirs. Candida Obed was the only Defendant who appeared at the trial and appealed from the judgment; the other Defendant, Felipe Gallegos, was held to be in default; she alleged, as the basis of her petition to be absolved from the complaint and that the said document be declared null and void in so far as she was concerned, that her signature had been obtained by her son, the said Felipe, by means of fraud and deceit, he having caused her to believe that the debt shown in said document marked A was a debt contracted by her late husband, Tomas Gallegos, and that the cause of said obligation was a false one, because her deceased husband, in life, was not indebted to the said copartnership. In order to assert that Candida Obed was deceived by her son Felipe when signing the document marked A, it is indespensable to prove that fraud and deceit were practiced on her, and that she signed the document without being acquainted with its contents; this does not appear from the record, but on the contrary, according to her son, the said Felipe, the contents of the documents were interpreted to her in the Bicol dialect before the Defendantaffixed her signature to it. Besides, that Candida Obed knows and understands Spanish was attested by the witness Pedro Albaladejo, and was also so considered by the trial judge in his judgment; therefore, the first error assigned cannot be sustained. If before Candida Obed signed the document marked A. she and her codebtor Felipe had already requested by letter from the creditors an extension of the term agreed upon, or promised to effect payment of the debt in question, after the document was executed and signed they again requested in like manner a further extension by reason of lack of means; hence, though it was not proven at the trial that the debtor Obed had signed the said document unknowingly, induced by means of deceit by her aforesaid son and codebtor, the letters which, jointly with the latter, she addressed to the creditors, and the later payments made on account of the indebtedness are equally spontaneous acts which confirm the truth and legitimacy of the obligation contracted by her together with the other Defendant. The record shows that Tomas Gallegos, while in life, received from Ballester y Puiggros the sum of 1,000 pesos on account and by order of his son Felipe. The latter avers that the said sum was not refunded to him by his father, and that he now owes it to the Compania General de Tabacos which has acquired the rights of the original creditors, and that the same formed part of the debit balance of his account. Even though the right to recover the 1,000 pesos from Tomas Gallegos, and now from his estate, pertains to the other Defendant, Felipe Gallegos, on whose account and order said sum was paid by Ballester y Puiggros, yet since Candida Obed and her said son Felipe have engaged and bound themselves to pay it to the said copartnership as having been received by the deceased husband and father of the obligated parties, in the absence of proof that he had paid his debt while in life, it is strictly just that they be compelled to pay jointly or by halves such amount as they may still owe, together with the interest agreed upon.

To effect the annulment of the obligation contracted by means of document marked A it would be necessary to prove that a false reason for the debt was expressed therein. If it is true that the sum of 1,000 pesos, which Tomas Gallegos received from Ballester y Puiggros, while in life, is still unpaid, the obligation contained in the said document is valid and efficient, because it acknowledges a real cause, and the Defendant is liable for one-half of the indebtedness; consequently the provisions of article 1276 of the Civil Code, which serve as a basis for the second and fourth errors assigned in the brief of the Appellant are not applicable herein. With regard to the third error, and in spite of the answer and counterclaim presented by theDefendant Obed, the obligations contains absolutely nothing to prove that the debtors had contracted an obligation in solidum; for said reason the Appellant can only be sentenced to pay one-half of the amount claimed, in accordance with the provisions of articles 1137 and 1138 of the Civil Code. In order that an obligation may be considered as in solidum it is necessary that it be so expressed in the contract, because as a general rule, in the absence of such positive stipulation, it is presumably mancomunal, and the debt is presumed to be divided equally among those obligated. The fact that it was stated in the document above alluded to that mother and son had acknowledged the document marked A to mean that hey owed jointly and severally the amount therein contained, does not prevent the establishment of the true character of the agreement, to-wit, that the obligation is mancomunal, but not in solidum. The conclusions in a judgment must be established not in accordance with the briefs of the parties, but according to the evidence adduced, and it should be noted that document marked A. the enforcement of which is sought, does not state that the obligation is in solidum. (Sec. 109, Code of Civil Procedure.)
cralaw

In view of the foregoing considerations, it is our opinion that the judgment appealed from should be affirmed, as we do hereby affirm it: Provided, however, That the Defendants Felipe Gallegos, and Manuel Gallegos, the judicial administrator of the interstate estate of the late Candida Obed, shall be sentenced jointly, or to pay by halves the amount stated in said judgment, with interest thereon at the rate of 10 per cent [per annum] from the 1st of August, 1906, with the costs of the first instance also by halves, and the said administrator to pay all the costs of this second instance.
chanroble s virtualawlibrary

Arellano, C.J., Mapa, Johnson, Carson and Willard, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-14617 December 9, 1920 R. Y. HANLON, plaintiff-appellee, vs. JOHN W. HAUSSERMANN and A. W. BEAM, defendants-appellants. GEORGE C. SELLNER, intervener.1 Cohn and Fisher for appellants Thomas D. Aitken and Gibbs, McDonough & Johnson for appellee.

STREET, J.: We take occasion, from the presentation of a motion to rehear, to add a few words to an opinion already perhaps unduly extended. Directing attention again to the interpretation of clause (d) of paragraph II of the profit sharing agreement, which is the central feature of the case, we note that the proponents of the motion reiterate their contention to the effect that the discharge contemplated in that clause is merely a discharge of the guaranty, so-called, to raise the capital which Sellner on the one part, and Haussermann and Beam on the other, had respectively agreed to raise on or before May 6, 1914; and that the discharge of Haussermann and Beam from this obligation left intact the broad obligation, expressed in paragraph I of the same contract, to do all in their power to promote the Hanlon project. Upon this point counsel say that not only the language but the punctuation of clause (d) shows conclusively that the antecedent of the word "obligation," twice employed therein, is the guaranty, or promise, to obtain the subscriptions within the period stated. This may possibly be true, but the statement is apparently barren of significance; for when the contract is carefully examined, it will be found that his promise (guaranty?) expresses exactly the principal thing that these parties had agreed to do towards realizing the projects. To be more specific: In one of the introductory clauses of the contract it is recited that the parties have agreed to cooperate and assist Hanlon in the flotation of the project for the rehabilitation of the Benguet Consolidated Mining Company; in paragraph I it is stipulated that each shall do all in his power to float said project and make the same a success; and in paragraph II it is agreed that said project shall be floated by the raising of capital in a certain manner and within a certain time. In other words, that which in the beginning is expressed in general terms as an undertaking to cooperate is finally reduced by a process of definition to the precise obligation indicated in the mutual promises of Sellner, Haussermann, and Beam, to raise the necessary capital within the period of six months. Of course nobody will be misled, by the use of the very guarantee in clause (d), into supposing that the obligation there created is of a distinct type, different from that created by any ordinary and direct promise. In its ordinary significance the word "guarantee" implies the creation of a collateral obligation, but here it is evidently used for emphasis simply in the sense of promise. What has been said shows the impossibility of separating the duty of the three associates abovementioned to assist in the promotion of the Hanlon project from the more specific duty to raise the

necessary capital in the particular manner set forth in clause (d). When the one obligation was discharged the other was necessarily extinguished also.
lawphi1.net

A single observation will be made upon another point, which may be indicated in the following question: What are the conditions under which an attorney in fact is bound to exercise a power in behalf of and for the benefit of his principal? Manifestly, before the attorney in fact can be held liable for the breach of duty towards his principal there must have existed a specific obligation on the part of the attorney in fact to act for the principal. Such obligation is sometimes discoverable from an examination of the power itself, but is more often discoverable by implication in the circumstances surrounding the parties and their special relations with reference to each other and the subjectmatter of the power. In the present case the specific power of attorney executed by Hanlon in favor of Beam on November 10, 1913, prior to Hanlon's departure for the United States, clearly shows that it was executed in relation with the contract of November 5 and 6, and was to be used in carrying those contracts into effect. Those contracts, however, as we have shown in the principal opinion, failed and became inoperative without fault of the defendants on May 6, 1914; and so far as the record shows, there was no act which could have been done in furtherance of those contracts prior to that date which was neglected by Beam under that power. Burt it will be said that, even conceding that Beam was under no positive duty to act for Hanlon under the power of attorney in the matter of rehabilitating the mine after the sixth of May, nevertheless as he did afterwards in fact proceed in that matter under new and different auspices, he must now be held in equity to have been acting, in cooperation with Haussermann, for the benefit of the old joint enterprise. The difficulty here is and this we consider to be one of the fundamental fallacies underlying the case that the plaintiff is attempting to enforce an equitable obligation inconsistent with the specific contract. It is a well-known rule that no implied obligation, either legal or equitable, is ever created or imposed by law in respect to a matter which has been made the subject of express contract. Likewise, no implied duty can ever spring from the same solid where an express contract has existed and has been discharged. It follows that the discharge of Haussermann and Beam under the express provisions of clause (d), paragraph I, of the profit-sharing agreement, is a fatal obstacle to the creation of any implied duty, legal or equitable, derived from that contract or from the relation of the parties as incident thereto. the rights of the parties must be determined by the contract. And this applied not only with reference to the extent of the contractual obligation but to the conditions under which the obligation was extinguished.
itc-alf

The motion to rehear is denied. So ordered. Mapa, C.J., Araullo, Malcolm, Avancea and Villamor, JJ., concur. Footnotes 1 See main decision in 40 Phil., 796.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 13228 September 13, 1918

WILLIAM OLLENDORFF, plaintiff-appellee, vs. IRA ABRAHAMSON, defendant-appellant. Lawrence & Ross for appellant. Wolfson & Wolfson for appellee. FISHER, J.: This is an appeal by defendant from a judgment of the Court of First Instance of Manila by which he was enjoined for a term of five years, from September 10, 1915, from engaging in the Philippine Islands in any business similar to or competitive with that of plaintiff. The record discloses that plaintiff is and for a long time past has been engaged in the city of Manila and elsewhere in the Philippine Islands in the business of manufacturing ladies embroidered underwear for export. Plaintiff imports the material from which this underwear is made and adopts decorative designs which are embroidered upon it by Filipino needle workers from patterns selected and supplied by him. Most of the embroidery work is done in the homes of the workers. The embroidered material is then returned to plaintiff's factory in Manila where it is made into finished garments and prepared for export. The embroiderers employed by plaintiff are under contract to work for plaintiff exclusively. Some fifteen thousand home workers and eight hundred factory workers are engaged in this work for plaintiff, and some two and a half million pesos are invested in his business. On September 10, 1915, plaintiff and defendant entered into a contract in the following terms: Contract of agreement made and entered into this date by and between William Ollendorff, of Manila, Philippine Islands, party of the first part, and Ira Abrahamson, of Manila, Philippine Islands, party of the second part: The party of first part hereby agrees to employ the party of the second part, and the party of the second part hereby obligates and binds himself to work for the party of the first part for a term of two years from date commencing from the sixth of September, one thousand nine hundred and fifteen and ending on the fifth day of September, one thousand nine hundred seventeen, at a salary of fifty peso (50) per week payable at the end of each week. The party of the second part hereby obligates and binds himself to devote his entire time, attention, energies and industry to the promotion of the furtherance of the business and interest of the party of the first part and to perform during the term of this contract such duties as may be assigned to him by the party of the first part, and failure by the said party of the second part to comply with these conditions to the satisfaction of the party of the first shall entitle the party of the first part to discharge and dismiss the said party of the second part from the employ of the party of the first part.

It is mutually understood and agreed by the parties hereto that this contract, upon its termination, may be extended for a like for a longer or a shorter period by the mutual consent of both contracting parties. The said party of the second part hereby further binds and obligates himself, his heirs, successors and assigns, that he will not enter into or engage himself directly or indirectly, nor permit any other person under his control to enter in or engage in a similar or competitive business to that of the said party of the first part anywhere within the Philippine Islands for a period of five years from this date. Under the terms of this agreement defendant entered the employ of plaintiff and worked for him until April, 1916, when defendant, on account of ill health, left plaintiff's employ and went to the United States. While in plaintiff's establishment, and had full opportunity to acquaint himself with plaintiff's business method and business connection. The duties performed by him were such as to make it necessary that he should have this knowledge of plaintiff's business. Defendant had a general knowledge of the Philippine embroidery business before his employment by plaintiff, having been engaged in similar work for several years. Some months after his departure for the United States, defendant returned to Manila as the manager of the Philippine Underwear Company, a corporation. This corporation does not maintain a factory in the Philippine Islands, but send material and embroidery designs from New York to its local representative here who employs Filipino needle workers to embroider the designs and make up the garments in their homes. The only difference between plaintiff's business and that of the firm by which the defendant is employed, is the method of doing the finishing work -- the manufacture of the embroidered material into finished garments. Defendant admits that both firms turn out the same class of goods and that they are exported to the same market. It also clearly appears from the evidence that defendant has employed to work his form some of the same workers employed by the plaintiff. Shortly after defendant's return to Manila and the commencement by him of the discharge of the duties of his position as local manager of the Philippine Embroidery Company, as local manager of the Philippine Embroidery Company, plaintiff commenced this action, the principal purpose of which is to prevent by injunction, any further breach of that part of defendant's contract of employment by plaintiff, by which he agreed that he would not "enter into or engage himself directly or indirectly . . . in a similar or competitive business to that of (plaintiff) anywhere within the Philippine Islands for a period of five years . . ." from the date of the agreement. The lower court granted a preliminary injunction, and upon trial the injunction was made perpetual. Defendant, as appellant, argues that plaintiff failed to substantiate the averments of his complaints to the effect that the business in which the defendant is employed is competitive with that of plaintiff. The court below found from the evidence that the business was "very similar." We have examined the evidence and rare of the opinion that the business in which defendant is engaged is not only very similar to that of plaintiff, but that it is conducted in open competition with that business within the meaning of the contract in question. Defendant himself expressly admitted, on cross-examination, that the firm by which he is now employed puts out the same class of foods as that which plaintiff is engaged in producing. When two concerns operate in the same field, produce the same class of goods and dispose them in the same market, their businesses are of necessity competitive. Defendant having engaged in the Philippine Islands in a business directly competitive with that of plaintiff, within five years from the date of his contract of employment by plaintiff, under the terms of which he expressly agreed that he would refrain form doing that very thing, his conduct constitutes a breach of that agreement.

Defendant argues that even assuming that there has been a breach of the agreement, the judgment of the court below is nevertheless erroneous, contending that (1) the contract is void for lack of mutuality; (2) that the contract is void as constituting an unreasonable restraint of trade; (3) that plaintiff has failed to show that he has suffered any estimable pecuniary damage; and (4) that even assuming that such damage as to warrant the court in restraining by injunction its continuance. The contention that the contract is void for lack of mutuality is based upon that part of the agreement which authorizes plaintiff to discharge the defendant before the expiration of the stipulated term, should defendant fail to comply with its conditions to plaintiff's satisfaction. It is argued that by this contracts it was sought to impose upon defendant the absolute obligation of rendering service, while reserving to plaintiff the right to rescind it at will. We are of the opinion that this question is largely academic. It is admitted that defendant left plaintiff's employ at his own request before the expiration of the stipulated terms of the contract. Had plaintiff sought to discharge defendant without just cause, before the expiration of the term of the employment, it might have been a serious question whether he could lawfully do so, notwithstanding the terms in which the contract was drawn. (Civil Code, art. 1256.) But even assuming this particular clause of the contract to be invalid, this would not necessarily affect the rest of the agreement. The inclusion is an agreement of one or more pacts which are invalid does not of necessity invalidate the whole contract. We are of the opinion that the contract was not void as constituting an unreasonable restraint of trade. We have been cited to no statutory expression of the legislative will to which such an agreement is directly obnoxious. The rule in this jurisdiction is that the obligations created by contracts have the force of law between the contracting parties and must be enforce in accordance with their tenor. (Civil Code, art 1091.) The only limitation upon the freedom of contractual agreement is that the pacts established shall not be contrary to "law, morals or public order." (Civil Code, Art. 1255.) The industry of counsel has failed to discover any direct expression of the legislative will which prohibits such a contract as that before us. It certainly is not contrary to any recognized moral precept, and it therefore only remains to consider whether it is contrary to "public order." This term, as correctly stated by Manresa (Commentaries, vol. 8, p. 606) "does not mean, as here used, the actual keeping of the public peace, but signifies the public weal . . . that which is permanent, and essential in institutions . . . ." It is the equivalent, as here used and as defined by Manresa, of the term "public policy" as used in the law of the United States. Public policy has been defined as being that principle under which freedom of contract or private dealing is restricted for the freedom of contract or private dealing is restricted for the good of the community. (People's Bankvs. Dalton, 2 Okla., 476.) It is upon this theory that contracts between private individuals which result in an unreasonable restraint of trade have frequently being recognized by article 1255 of our Civil Code, the court of these Islands are vested with like authority. In the nature of things, it is impossible to frame a general rule by which to determine in advance the precise point at which the right of freedom of contract must yield to the superior interest of community in keeping trade and commerce free from unreasonable restrictions. Originally the English courts adopted the view that any agreement which imposed restrictions upon a man's right to exercise his trade or calling was void as against public policy. (Cyc. vol. 9, p. 525.) In the course of time this opinion was abandoned and the American and English courts adopted the doctrine that where the restraint was unlimited as to space but unlimited as to time were valid. In recent years there has been a tendency on the part of the courts of England and America to discard these fixed rules and to decide each case according to its peculiar circumstances, and make the validity of the restraint depend upon its reasonableness. If the restraint is no greater than is reasonably necessary for the protection of the party in whose favor it is imposed it is upheld, but if it goes beyond this is declared void. This is the principle followed in such cases by the Supreme Court of the United States. In the case of Gibbs vs. Consolidated Gas Co. of Baltimore (130 U.S., 396) the court said:

The decision in Mitchel vs. Reynolds (1P. Wms. 181 [Smith's Leading Cases, Vol. 1, Pt. II, 508]), is the foundation of rule in relation to the invalidity of contracts in restraint of trade; but as it was made under a condition of things, and a state of society, different from those which now prevail, the rule laid down is not regarded as inflexible, and has been considerably modified. Public welfare is first considered, and if it be not involved, and the restraint upon one party is not greater than protection to the other party requires, the contract may be sustained. The question is, whether, under the particular circumstances of the case and the nature of the particular contract involved in it, the contract is, or is not, unreasonable. (Rousillon vs.Rousillon, L. R. 14 Ch. Div., 351; Leather Cloth Co. vs. Lorsont, L. R. 9 Eq., 345.) Following this opinion, we adopt the modern rule that the validity of restraints upon trade or employment is to be determined by the intrinsinc reasonableness of restriction in each case, rather than by any fixed rule, and that such restrictions may be upheld when not contrary to afford a fair and reasonable protection to the party in whose favor it is imposed. Examining the contract here in question from this stand point, it does not seem so with respect to an employee whose duties are such as of necessity to give him an insight into the general scope and details of his employers business. A business enterprise may and often does depend for its success upon the owner's relations with other dealers, his skill in establishing favorable connections, his methods of buying and selling -- a multitude of details, none vital if considered alone, but which in the aggregate constitute the sum total of the advantages which the result of the experience or individual aptitude and ability of the man or men by whom the business has been built up. Failure or success may depend upon the possession of these intangible but all important assets, and it is natural that their possessor should seek to keep them from falling into the hands of his competitors. It is with this object in view that such restrictions as that now under consideration are written into contracts of employment. Their purpose is the protection of the employer, and if they do not go beyond what is reasonably necessary to effectuate this purpose they should be upheld. We are of the opinion, and so hold, that in the light of the established facts the restraint imposed upon defendant by his contract is not unreasonable. As was well said in the case of Underwood vs. Barker (68 Law J. Ch., 201). "If there is one thing more than another which is essential to the trade and commerce of this country, it is the inviolability of contract deliberately entered into; and to allow a person of mature age, and not imposed upon, to enter into a contract, to obtain the benefit of it, and then to repudiate it and the obligation which he has undertaken, is prima facie, at all events, contrary to the interest of any and every country . . . . The public policy which allows a person to obtain employment on certain terms understood by and agreed to by him, and to repudiate his contract, conflicts with, and must, to avail the defendant, for some sufficient reason, prevail over, the manifest public policy, which, as a rule holds him to his bond . . . . Having held that the contract is valid, we pass to a consideration of defendant's objections to its enforcement by injunction. It is contended that plaintiff has not proved that he has suffered any estimable pecuniary damage by reason of defendant's breach of the contract, and that for that reason his action must fail. It is further contended that in no event is it proper to enforce such a contract as this by injunction, because it has not been alleged and proved that the continuance of the acts complained of will cause plaintiff "irreparable damage." These objections can conveniently be considered together. The obligation imposed upon defendant by the particular clause of his contract now under consideration is negative in character. Unless defendant voluntarily complies with his undertaking there is no way by which the contract can be enforced except by the injunctive power of judicial

process. Such negative obligations have long been enforced by the courts in this manner. As stated by High in his well-known work on Injunctions (vol. 2, pp. 877-878): The remedy by injunction to prevent the violation of negative agreements, or contracts not to do a particular thing, is closely akin to the remedy by way of specific performance of agreements of an affirmative nature. In both cases the object sought is substantially one and the same, and by enjoining the violation of a negative agreement the court of equity in effect decrees its specific performance. (Lumley vs. Wagner, 1 DeGex, M. & G., 604.) Where by the terms of a contract imposing a positive obligation the obligor is entitled to a specific performance, it will not avail the defendant to show that plaintiff will suffer no pecuniary damage if the contract is not performed. Upon like reasons, when the undertaking is negative in character and defendant is violating the obligation imposed upon him the court may interfere without requiring proof of actual damage. (High on Injunctions, par. 1135, citing Dickenson vs. Grand Junction Canal Co., 15 Beav., 270.) The admitted fact that plaintiff has failed to establish proof of pecuniary damage by reason of the breach of the contract by defendant by the acts committed prior to the issuance of the preliminary injunction is, of course, a bar or nay money judgment for damages for the breach of the contract, but will not justify us in permitting defendant tocontinue to break his contract over plaintiff's objection. The injury is a continuous one. The fact that the court may not be able to give damages for that part of the breach of the contract which had already taken place when its aid was invoked is no reason why it should countenance a continuance of such disregard of plaintiff's rights. With respect to the contention that an injunction may only be granted to prevent irreparable injury, the answer is that any continuing breach of a valid negative covenant is irreparable by the ordinary process of courts of law. As stated by High, (vol. 2, p. 906) injunctive relief is granted in cases like this "upon the ground that the parties cannot be placed in statu quo, and that damages at law can afford no adequate compensation, the injury being a continuous one irreparable by the ordinary process of courts of law." In the case of Gilchrist vs. Cuddy (29 Phil. rep., 542), at page 552, this court said, citing with approval the case of Wahle vs. Reinbach (76 Ill., 322): By "irreparable injury" is not meant such injury as is beyond the possibility of repair, or beyond possible compensation in damages, nor necessarily great injury or great damage, but that species of injury, whether great or small, that ought not be submitted to on the one hand or inflicted on the other; and, because it is so large on the one hand, or so small on the other, is of such constant and frequent recurrence that no fair or reasonable redress can be had therefor in a court of law. This definition was quoted with approval by the Supreme Court of the United States in the case of Donovan vs.Pennsylvania Co., (199 U.S., 279), in which the injury complained of was continuous in its nature. It is true, as held in the case of Liongson vs. Martinez (36 Phil. Rep., 948) that "an injunction should never issue when an action for damages would adequately compensate the injuries caused" But it frequently happens that the acts of the defendant, while constituting a very substantial invasion of plaintiff's rights are of such a character that the damages which result therefrom "cannot be measured by any certain pecuniary standard." (Eau Claire Water Co. vs. City of Eau Claire, 127 Wis., 154.) The Civil Code (art. 1908) casts upon real estate owners liability in damages for the emission, upon their premises, of excessive smoke, which may be noxious to person or property.

The injury caused by such a nuisance might bring about a depreciation in the value of adjoining properties, but there is no "certain pecuniary standard" by which such damages can be measured, and in that sense the threatened injury is "irreparable" and may appropriately be restrained by injunction. . . . If the nuisance is a continuing one, invading substantial rights of the complainant in such a manner that he would thereby lose such rights entirely but for the assistance of a court of equity he will entitled but for the assistance of a court of equity he will be entitled to an injunction upon a proper showing, notwithstanding the fact the he might recover some damages in an action at law. (Tise vs. Whitaker-Harvey Co., 144 N. C., 507.) The injury done the business of a merchant by illegal or unfair competition is exceedingly difficult to measure. A diminution of the volume of a business may be due to so many different causes that it is often impossible to demonstrate that it has in fact been caused by the illegal competition of the defendant. This is frequently the case in suit for the infringement of trademark rights, in which the courts may enjoin the continued use of the infringing mark, although unable to assess damages for the past injury. The judgment of the trial court is affirmed with costs. So ordered. Arellano, C.J., Torres, Johnson, Street and Avancea, JJ., concur. Malcolm, J., concurs in result.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-21127

February 9, 1924

ALFONSO DEL CASTILLO, plaintiff-appellant, vs. SHANNON RICHMOND, defendant-appellee. F.R. Feria for appellant. Manly, Goddard and Lockwood for appellee.

JOHNSON, J.: This action was commenced in the Court of First Instance of the Province of Albay on the 18th day of October, 1922. Its purpose was to have declared null and of no effect the following contract executed and delivered on the 20th day of July, 1915:

CONTRACT FOR RENDERING SERVICES Know all men by these presents: That Shannon Richmond, of lawful age and a resident of the district of Legaspi, and Alfonso del Castillo, also of lawful age and a resident of the district of Daraga of the municipality and Province of Albay, Philippine Islands, have covenanted and agreed one with the other as follows: 1. That Alfonso del Castillo, in consideration of a monthly remuneration of P125 to be paid to him by Shannon Richmond, agrees to enter the employ of said Shannon Richmond beginning this date, as pharmacist, and to take charge of the prescription department of the drugstore known as the Botica Americana situated in the district of Legaspi of the municipality and Province of Albay, Philippine Islands, and to perform all the duties and obligations as such pharmacist together with such other duties in connection with the same that by custom correspond to the pharmacist in a drugstore of this kind. 2. That in consideration of the performance of the duties and obligations above indicated by the said Alfonso del Castillo, Shannon Richmond hereby agrees to pay the said Alfonso del Castillo the salary of P125 each month. 3. That in consideration of the fact that the said Alfonso del Castillo has just graduated as a pharmacist and up to the present time has not been employed in the capacity of a pharmacist and in consideration of this employment and the monthly salary mentioned in this contract, the said Alfonso del Castillo also agrees not to open, nor own nor have any interest directly or indirectly in any other drugstore either in his own name or in the name of another; nor have any connection with or be employed by any other drugstore situated within a radius of our miles from the district of Legaspi, municipality and Province of Albay, while the said Shannon Richmond or his heirs may own or have open a drugstore, or have an interest in any other one within the limits of the districts of Legaspi, Albay, and Daraga of the municipality of Albay, Province of Albay. 4. That either of the parties to this contract may terminate his relations as employer and employee with or without reason, and upon thirty days' notice; remaining, nevertheless, in full force and effect all the other conditions and agreements stipulated in this contract. 5. That the said Alfonso del Castillo furthermore agrees not to divulge or make use of any of the business secrets or private formulas of the said Shannon Richmond. In these terms, we execute this contract for the rendering of services on this 20th day of July, 1915, in the district of Legaspi, municipality and Province of Albay Philippine Islands. (Sgd.) "SHANNON RICHMOND "ALFONSO DEL CASTILLO Signed in the presence of:

(Sgd.) "M. GOYENA "L. AZANA" The said contract was acknowledge before a notary on the same day of its execution. The plaintiff alleges that the provisions and conditions contained in the third paragraph of said contract constitute an illegal and unreasonable restriction upon his liberty to contract, are contrary to public policy, and are unnecessary in order to constitute a just and reasonable protection to the defendant; and asked that the same be declared null and void and of no effect. The defendant interposed a general and special defense. In his special defense he alleges "that during the time the plaintiff was in the defendant's employ he obtained knowledge of his trade and professional secrets and came to know and became acquainted and established friendly relations with his customers so that to now annul the contract and permit plaintiff to establish a competing drugstore in the town of Legaspi, as plaintiff has announced his intention to do, would be extremely prejudicial to defendant's interest." The defendant further, in an amended answer, alleges "that this action not having been brought within four years from the time the contract referred to in the complaint was executed, the same has prescribed." During the trial of the cause an effort was made to sustain the allegations of the complaint that paragraph 3 of the said contract constituted an illegal and unreasonable restriction upon the right of the plaintiff to contract and was contrary to public policy. The lower court found that it was unnecessary to pass upon the question of prescription presented by the defendant. Upon a consideration of the merits, the court a quo concluded "that the contract the annulment of which is sought by the plaintiff is neither oppressive to him, nor unreasonably necessary to protect the defendant's business, nor prejudicial to the public interest." From that judgment the plaintiff appealed to this court. In this court the appellant still insists that said contract is illegal, unreasonable, and contrary to public policy. From a reading of paragraph 3 of the contract above quoted, it will be seen that the only restriction placed upon the right of the plaintiff is, that he shall "not open, nor own, nor have any interest directly or indirectly in any other drugstore either in his own name or in the name of another; nor have any connection with or be employed by any other drugstore as pharmacist or in any capacity in any drugstore situated within a radius of four miles from the district of Legaspi, municipality and Province of Albay, while the said Shannon Richmond or his heirs may own or have open a drugstore, or to have an interest in any other one within the limits of the districts of Legaspi, Albay, and Daraga of the municipality of Albay, Province of Albay." It will be noted that the restrictions placed upon the plaintiff are strictly limited (a) to a limited district or districts, and (b) during the time while the defendant or his heirs may own or have open a drugstore, or have an interest in any other one within said limited district. The law concerning contracts which tend to restrain business or trade has gone through a long series of changes from time to time with the changing conditions of trade and commerce. With trifling exceptions, said changes have been a continuous development of a general rule. The early cases show plainly a disposition to avoid and annul all contract which prohibited or restrained any one from using a lawful trade "at any time or at any place," as being against the benefit of the state. Later, however, the rule became well established that if the restriant was limited to "a certain time" and within "a certain place," such contracts were valid and not "against the benefit of the state." Later cases, and we think the rule is now well established, have held that a contract in restraint of trade is valid providing there is a limitation upon either time or place. A contract, however, which restrains a man from entering into a business or trade without either a limitation as to time or place, will be held invalid. (Anchor Electric Co. vs.Hawkes, 171 Mass., 101; Alger vs. Thacher, 19 Pickering [Mass.] 51;

Taylor vs. Blanchard, 13 Allen [Mass.], 370; Lufkin Rule Co. vs. Fringeli, 57 Ohio State, 596; Fowle vs. Park, 131 U.S., 88, 97; Diamond Match Co. vs. Roeber, 106 N.Y., 473; National Benefit Co. vs. Union Hospital Co., 45 Minn., 272; Swigert and Howard vs. Tilden, 121 Iowa, 650.) The public welfare of course must always be considered, and if it be not involved and the restraint upon one party is not greater than protection to the other requires, contracts like the one we are discussing will be sustained. The general tendency, we believe, of modern authority, is to make the test whether the restraint is reasonably necessary for the protection of the contracting parties. If the contract is reasonably necessary to protect the interest of the parties, it will be upheld. (Ollendorff vs. Abrahamson, 38 Phil., 585.) In that case we held that a contract by which an employee agrees to refrain for a given lenght of time, after the expiration of the term of his employment, from engaging in a business, competitive with that of his employer, is not void as being in restraint of trade if the restraint imposed is not greater than that which is necessary to afford a reasonable protection. In all cases like the present, the question is whether, under the particular circumstances of the case and the nature of the particular contract involved in it, the contract is, or is not, unreasonable. Of course in establishing whether the contract is a reasonable or unreasonable one, the nature of the business must also be considered. What would be a reasonable restriction as to time and place upon the manufacture of railway locomotive engines might be a very unreasonable restriction when imposed upon the employment of a day laborer. Considering the nature of the business in which the defendant is engaged, in relation with the limitation placed upon the plaintiff both as to time and place, we are of the opinion, and so decide, that such limitation is legal and reasonable and not contrary to public policy. Therefore the judgment appealed from should be and is hereby affirmed, with costs. So ordered. Araullo, C.J., Street, Malcolm, Avancea, Ostrand, Johns and Romualdez, JJ., concur.

Republic of the Philippines SUPREME COURT Manila

EN BANC

DECISION August 7, 1935 G.R. No. L-41715 THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-appellee, vs. MARIANO CONDE, defendant-appellant. Isabel Artacho-Ocampo for appellant. Office of the Solicitor-General Hilado for appellee. Imperial, J.: The Government of the Philippine Islands brought this action to recover from the defendant the amount of a promissory note executed by him, together with the stipulated interest, and to foreclose the mortgage constituted by said defendant on a real property to secure the obligation contracted by him. The defendant appealed from the judgment ordering him to pay to the plaintiff the sum of P10,678.75 with interest thereon at eight per cent (8%) per annum, computed semi-annually, with costs. It was provided in the same judgment that the defendant should make payment or deposit it with the clerk of court within three (3) months and, in case of failure to do so, the mortgaged property should be sold and the proceeds thereof applied to satisfy the judgment. The present appeal was taken by the defendant to modify the judgment in so far as it orders him to pay compound interest. There is no question as to the existence of the debt and the defendant's default. the promissory note incorporated with the mortgage deed which was duly registered in the registry of deeds, contains a stipulation to the effect that the defendant would pay interest at the rate of eight percent (8%) per annum, payable semi-annually, on the capital of P8,300 and on any other amount due and unpaid. Pursuant to this stipulation, the plaintiff liquidated the defendant's account and charged him the interest accrued semiannually plus the interest on the interest so liquidated and the unpaid capital, resulting in the amount stated in the judgment. The defendant contends that to collect the interest accrued semi-annually plus the interest on said interest at eight per cent (8%) per annum violates the Usury Law because the rate of interest so charged would exceed twelve per cent (12%) per annum. This contention lacks merit because it is well settled in this jurisdiction that when there is an express agreement to charge interest on interest, such fact should not be taken into consideration in determining whether or not the stipulated interest exceeds the limit prescribed by the Usury Law. (Government of the Philippine Islands vs. Schenkel and Gonzales, 43 Phil. 616; Villaruel vs. Alvayda and Vicencio, 46 Phil. 277; Valdezco vs. Francisco, 52 Phil. 350.) In the last case above cited, this court, passing upon the same question then raised, stated as follows: Defendant also contends in this instance that the transaction between her and plaintiff is usurious, because interest was charged on interest due, so that if the former is added to the stipulated interest, the sum would exceed the rate fixed by law. It is sufficient to state on this point that such interest upon interest was collected on March 20, 1924, and defendant claims it only in her answer to this case filed February 12, 1927. The law fixes the period of two years within which to claim the usurious interest, and this period has already elapsed (Arevalo vs. Dimayuga, 49 Phil. 894). Furthermore, this court has already held (Government of the Philippine Islands vs. Schenkel and Gonzales, 43 Phil. 616; Villaruel vs. Alvayda and Vicencio 46 Phil. 277), that interest charged upon the stipulated interest, if agreed upon, should not counted in determining whether the interest exceeds the legal rate or not.

The stipulation in question is contrary to no law, morals nor public order, and is perfectly valid and binding (article 1255, Civil Code). And the obligations arising therefrom to perform them in accordance with their stipulation (article 1091, Civil Code). Finding no merit in any of the three assignments of error relied upon by the defendant, and the appealed judgment being in accordance with law, it is affirmed in all its parts, with the costs of this instance to the appellant. So ordered. Malcolm, Villa-Real, Butte, and Goddard, JJ., concur. . Referring Cases Sorry, no referring cases.

Republic of the Philippines SUPREME COURT Manila

EN BANC

DECISION August 9, 1935 G.R. No. L-41917 THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-appelle, vs. DOLORES LIM Y CHUMBUQUE, ANTONIA LIM Y CHUMBUQUE, JOSEFA LIM Y CHUMBUQUE, and CHINA INSURANCE AND SURETY CO., INC., defendants-appellants. Cardenas and Casal for appellants. Office of the Solicitor-General Hilado for appellee. , J.: This appeal was taken by the defendants, except the corporation China Insurance and Surety Co., Inc., from a judgment of the Court of First Instance of Manila, sentencing them to pay the plaintiff, jointly and severally upon the first cause of action, the sum of P13,278.04 with 8 per cent interest per annum, payable quarterly, on the principal of P10,000 from December 20, 1933 until fully paid, plus 8 per cent interest per annum on all unpaid quarterly interest from the said date until fully paid, plus the further interest of 10 per cent per annum on the amount of P128.23, from December 20, 1933, until fully paid; and, upon the second cause of action, the sum of P3,944.91 with 8 per cent interest per annum payable quarterly on the principal of P3,000 from December 20, 1933, until fully paid, plus 8 per cent interest per annum on all unpaid quarterly interest from the said date until fully paid, and such other sum as the Pension and Investment Board may have advanced from the date of the judgment by way of taxes, insurance premiums, and repair of the mortgaged property. The judgment likewise provides that, in case the aforesaid amounts should not be paid or deposited with the court within three months, the mortgaged property be sold at public auction and the proceeds thereof applied to the judgment. The action was brought by the plaintiff to foreclose the mortgages executed by the defendants. It was established at the trial that the defendants, on July 28, and October 28, 1930, obtained loans from the plaintiff of P10,000 and P3,000, respectively, and that they bound themselves to pay, jointly and severally, the first amount within five years and the second amount within four years and nine months, as well as the interest which they were ordered to pay, the taxes, the insurance premiums, the expenses of repair, and the stipulated penalties. Having failed to pay the stipulated interest, the obligations and mortgages became due and demandable, and on December 19, 1933, the defendants were indebted for the amounts and interest set forth in the appealed judgment. The defendants do not deny their indebtedness, their obligation to pay the stipulated interest and the other amounts advanced by the plaintiff, nor question the latter's right to foreclose the mortgages. The only question raised in their sole assignment of error is plaintiff's right to recover the sum of P1,300 representing 10 per cent on the principal indebtedness of P13,000, for cost, expenses of collection, and attorney's fees. They contend that the enforcement of this penalty is unjustified in view of the fact that the Government has its own salaried counsel, and that it did not employ private counsel in the instant case. They finally contend that the affirmance of this portion of the judgment would be tantamount to the allowance of double compensation. In the promissory notes executed by the defendants and incorporated in the mortgage deeds, they voluntary undertook to pay the sum of P1,300 as court costs, expenses of collection, and attorney's fees, whether incurred or not. This stipulation is a valid and permissible penal clause, not contrary to any law, morals, or public order, and is, therefore, strictly binding upon the defendants. (Articles 1091, 1152, and 1258, Civil Code; Lambert vs. Fox, 26 Phil. 588; Bachrach vs. Golingco, 39 Phil. 138; Compaia General

de Tabacos vs. Jalandoni, 50 Phil. 501; Bachrach Motor Co vs. Espiritu, 52 Phil. 346; Manila Building & Loan Association vs. Green, 54 Phil. 507.) It is neither excessive nor exorbitant, and the defendants have not made any payment upon their principal obligations, wherefore, the discretion conferred by article 1154 of the Civil Code may not be exercised to reduce the penalty. There being no merit in the appeal taken by the defendants, the appealed judgment is affirmed in toto, with the costs of this instance to the defendants. So ordered. Malcolm, Villa-Real, Butte, and Goddard, JJ., concur. . Referring Cases Sorry, no referring cases.

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-26872 July 25, 1975 VILLONCO REALTY COMPANY, plaintiff-appellee and EDITH PEREZ DE TAGLE, intervenorappellee, vs. BORMAHECO, INC., FRANCISCO N. CERVANTES and ROSARIO N. CERVANTES, defendantsappellants. Meer, Meer & Meer for plaintiff-appellee. J. Villareal, Navarro and Associates for defendants-appellants. P. P. Gallardo and Associates for intervenor-appellee.

AQUINO, J.: This action was instituted by Villonco Realty Company against Bormaheco, Inc. and the spouses Francisco N. Cervantes and Rosario N. Cervantes for the specific performance of a supposed contract for the sale of land and the improvements thereon for one million four hundred thousand pesos. Edith Perez de Tagle, as agent, intervened in order to recover her commission. The lower court enforced the sale. Bormaheco, Inc. and the Cervantes spouses, as supposed vendors, appealed. This Court took cognizance of the appeal because the amount involved is more than P200,000 and the appeal was perfected before Republic Act No. 5440 took effect on September 9, 1968. The facts are as follows: Francisco N. Cervantes and his wife, Rosario P. Navarra-Cervantes, are the owners of lots 3, 15 and 16 located at 245 Buendia Avenue, Makati, Rizal with a total area of three thousand five hundred square meters (TCT Nos. 43530, 43531 and 43532, Exh. A, A-1 and A-2). The lots were mortgaged to the Development Bank of the Phil (DBP) on April 21, 1959 as security for a loan of P441,000. The mortgage debt was fully paid on July 10, 1969. Cervantes is the president of Bormaheco, Inc., a dealer and importer of industrial and agricultural machinery. The entire lots are occupied by the building, machinery and equipment of Bormaheco, Inc. and are adjacent to the property of Villonco Realty Company situated at 219 Buendia Avenue. In the early part of February, 1964 there were negotiations for the sale of the said lots and the improvements thereon between Romeo Villonco of Villonco Realty Company "and Bormaheco, Inc., represented by its president, Francisco N. Cervantes, through the intervention of Edith Perez de Tagle, a real estate broker".

In the course of the negotiations, the brothers Romeo Villonco and Teofilo Villonco conferred with Cervantes in his office to discuss the price and terms of the sale. Later, Cervantes "went to see Villonco for the same reason until some agreement" was arrived at. On a subsequent occasion, Cervantes, accompanied by Edith Perez de Tagle, discussed again the terms of the sale with Villonco. During the negotiations, Villonco Realty Company assumed that the lots belonged to Bormaheco, Inc. and that Cervantes was duly authorized to sell the same. Cervantes did not disclose to the broker and to Villonco Realty Company that the lots were conjugal properties of himself and his wife and that they were mortgaged to the DBP. Bormaheco, Inc., through Cervantes, made a written offer dated February 12, 1964, to Romeo Villonco for the sale of the property. The offer reads (Exh. B): BORMAHECO, INC. February 12,1964 Mr. Romeo Villonco Villonco Building Buendia Avenue Makati, Rizal. Dear Mr. Villonco: This is with reference to our telephone conversation this noon on the matter of the sale of our property located at Buendia Avenue, with a total area of 3,500 sq. m., under the following conditions: (1) That we are offering to sell to you the above property at the price of P400.00 per square meter; (2) That a deposit of P100,000.00 must be placed as earnest money on the purchase of the above property which will become part payment of the property in the event that the sale is consummated; (3) That this sale is to be consummated only after I shall have also consummated my purchase of another property located at Sta. Ana, Manila; (4) That if my negotiations with said property will not be consummated by reason beyond my control, I will return to you your deposit of P100,000 and the sale of my property to you will not also be consummated; and (5) That final negotiations on both properties can be definitely known after 45 days. If the above terms is (are) acceptable to your Board, please issue out the said earnest money in favor of Bormaheco, Inc., and deliver the same thru the bearer, Miss Edith Perez de Tagle.

Very truly yours, SGD. FRANCISCO N. CERVANTES President The property mentioned in Bormaheco's letter was the land of the National Shipyards & Steel Corporation (Nassco), with an area of twenty thousand square meters, located at Punta, Sta. Ana, Manila. At the bidding held on January 17, 1964 that land was awarded to Bormaheco, Inc., the highest bidder, for the price of P552,000. The Nassco Board of Directors in its resolution of February 18, 1964 authorized the General Manager to sign the necessary contract (Exh. H). On February 28, 1964, the Nassco Acting General Manager wrote a letter to the Economic Coordinator, requesting approval of that resolution. The Acting Economic Coordinator approved the resolution on March 24, 1964 (Exh. 1). In the meanwhile, Bormaheco, Inc. and Villonco Realty Company continued their negotiations for the sale of the Buendia Avenue property. Cervantes and Teofilo Villonco had a final conference on February 27, 1964. As a result of that conference Villonco Realty Company, through Teofilo Villonco, in its letter of March 4, 1964 made a revised counter- offer (Romeo Villonco's first counter-offer was dated February 24, 1964, Exh. C) for the purchase of the property. The counter-offer was accepted by Cervantes as shown in Exhibit D, which is quoted below: VILLONCO REALTY COMPANY V. R. C. Building 219 Buendia Avenue, Makati, Rizal, Philippines March 4, 1964 Mr. Francisco Cervantes. Bormaheco, Inc. 245 Buendia Avenue Makati, Rizal Dear Mr. Cervantes: In reference to the letter of Miss E. Perez de Tagle dated February 12th and 26, 1964 in respect to the terms and conditions on the purchase of your property located at Buendia Ave., Makati, Rizal, with a total area of 3,500 sq. meters., we hereby revise our offer, as follows: 1. That the price of the property shall be P400.00 per sq. m., including the improvements thereon; 2. That a deposit of P100,000.00 shall be given to you as earnest money which will become as part payment in the event the sale is consummated; 3. This sale shall be cancelled, only if your deal with another property in Sta. Ana shall not be consummated and in such case, the P100,000-00 earnest money will be returned to us with a 10% interest p.a. However, if our deal with you is finalized, said

P100,000.00 will become as part payment for the purchase of your property without interest: 4. The manner of payment shall be as follows: a. P100,000.00 earnest money and 650,000.00 as part of the down payment, or P750,000.00 as total down payment b. The balance is payable as follows: P100,000.00 after 3 months 125,000.00 -do212,500.00 -doP650,000.00 Total As regards to the other conditions which we have discussed during our last conference on February 27, 1964, the same shall be finalized upon preparation of the contract to sell.* If the above terms and conditions are acceptable to you, kindly sign your conformity hereunder. Enclosed is our check for ONE HUNDRED THOUSAND (P100,000.00) PESOS, MBTC Check No. 448314, as earnest money. Very truly yours, VILLONCO REALTY COMPANY (Sgd.) TEOFILO VILLONCO CONFORME: BORMAHECO, INC. (Sgd.) FRANCISCO CERVANTES That this sale shall be subject to favorable consummation of a property in Sta. Ana we are negotiating. (Sgd.) FRANCISCO CERVANTES The check for P100,000 (Exh. E) mentioned in the foregoing letter-contract was delivered by Edith Perez de Tagle to Bormaheco, Inc. on March 4, 1964 and was received by Cervantes. In the voucher-receipt evidencing the delivery the broker indicated in her handwriting that the earnest money was "subject to the terms and conditions embodied in Bormaheco's letter" of February 12 and Villonco Realty Company's letter of March 4, 1964 (Exh. E-1; 14 tsn). Then, unexpectedly, in a letter dated March 30, 1964, or twenty-six days after the signing of the contract of sale, Exhibit D, Cervantes returned the earnest money, with interest amounting to P694.24 (at ten percent per annum). Cervantes cited as an excuse the circumstance that "despite the lapse of 45 days from February 12, 1964 there is no certainty yet" for the acquisition of the Punta property (Exh. F; F-I and F-2). Villonco Realty Company refused to accept the letter and the checks

of Bormaheco, Inc. Cervantes sent them by registered mail. When he rescinded the contract, he was already aware that the Punta lot had been awarded to Bormaheco, Inc. (25-26 tsn). Edith Perez de Tagle, the broker, in a letter to Cervantes dated March 31, 1964 articulated her shock and surprise at Bormaheco's turnabout. She reviewed the history of the deal and explained why Romeo Villonco could not agree to the rescission of the sale (Exh. G).** Cervantes in his letter of April 6, 1964, a reply to Miss Tagle's letter, alleged that the forty-five day period had already expired and the sale to Bormaheco, Inc. of the Punta property had not been consummated. Cervantes said that his letter was a "manifestation that we are no longer interested to sell" the Buendia Avenue property to Villonco Realty Company (Annex I of Stipulation of Facts). The latter was furnished with a copy of that letter. In a letter dated April 7, 1964 Villonco Realty Company returned the two checks to Bormaheco, Inc., stating that the condition for the cancellation of the contract had not arisen and at the same time announcing that an action for breach of contract would be filed against Bormaheco, Inc. (Annex G of Stipulation of Facts).
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On that same date, April 7, 1964 Villonco Realty Company filed the complaint (dated April 6) for specific performance against Bormaheco, Inc. Also on that same date, April 7, at eight-forty-five in the morning, a notice oflis pendens was annotated on the titles of the said lots. Bormaheco, Inc. in its answers dated May 5 and 25, 1964 pleaded the defense that the perfection of the contract of sale was subject to the conditions (a) "that final acceptance or not shall be made after 45 days" (sic) and (b) that Bormaheco, Inc. "acquires the Sta. Ana property". On June 2, 1964 or during the pendency of this case, the Nassco Acting General Manager wrote to Bormaheco, Inc., advising it that the Board of Directors and the Economic Coordinator had approved the sale of the Punta lot to Bormaheco, Inc. and requesting the latter to send its duly authorized representative to the Nassco for the signing of the deed of sale (Exh. 1). The deed of sale for the Punta land was executed on June 26, 1964. Bormaheco, Inc. was represented by Cervantes (Exh. J. See Bormaheco, Inc. vs. Abanes, L-28087, July 31, 1973, 52 SCRA 73). In view of the disclosure in Bormaheco's amended answer that the three lots were registered in the names of the Cervantes spouses and not in the name of Bormaheco, Inc., Villonco Realty Company on July 21, 1964 filed an amended complaint impleading the said spouses as defendants. Bormaheco, Inc. and the Cervantes spouses filed separate answers. As of January 15, 1965 Villonco Realty Company had paid to the Manufacturers' Bank & Trust Company the sum of P8,712.25 as interests on the overdraft line of P100,000 and the sum of P27.39 as interests daily on the same loan since January 16, 1965. (That overdraft line was later settled by Villonco Realty Company on a date not mentioned in its manifestation of February 19, 1975). Villonco Realty Company had obligated itself to pay the sum of P20,000 as attorney's fees to its lawyers. It claimed that it was damaged in the sum of P10,000 a month from March 24, 1964 when the award of the Punta lot to Bormaheco, Inc. was approved. On the other hand, Bormaheco, Inc. claimed that it had sustained damages of P200,000 annually due to the notice of lis pendens which had prevented it from constructing a multi-story building on the three lots. (Pars. 18 and 19, Stipulation of Facts).
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Miss Tagle testified that for her services Bormaheco, Inc., through Cervantes, obligated itself to pay her a three percent commission on the price of P1,400,000 or the amount of forty-two thousand pesos (14 tsn). After trial, the lower court rendered a decision ordering the Cervantes spouses to execute in favor of Bormaheco, Inc. a deed of conveyance for the three lots in question and directing Bormaheco, Inc. (a) to convey the same lots to Villonco Realty Company, (b) to pay the latter, as consequential damages, the sum of P10,000 monthly from March 24, 1964 up to the consummation of the sale, (c) to pay Edith Perez de Tagle the sum of P42,000 as broker's commission and (d) pay P20,000 as to attorney's fees (Civil Case No. 8109). Bormaheco, Inc. and the Cervantes spouses appealed. Their principal contentions are (a) that no contract of sale was perfected because Cervantes made a supposedly qualified acceptance of the revised offer contained in Exhibit D, which acceptance amounted to a counter-offer, and because the condition that Bormaheco, inc. would acquire the Punta land within the forty-five-day period was not fulfilled; (2) that Bormaheco, Inc. cannot be compelled to sell the land which belongs to the Cervantes spouses and (3) that Francisco N. Cervantes did not bind the conjugal partnership and his wife when, as president of Bormaheco, Inc., he entered into negotiations with Villonco Realty Company regarding the said land. We hold that the appeal, except as to the issue of damages, is devoid of merit. "By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determining thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional" (Art. 1458, Civil Code). "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" (Art. 1475, Ibid.). "Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law" (Art. 1315, Civil Code). "Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer" (Art. 1319, Civil Code). "An acceptance may be express or implied" (Art. 1320, Civil Code). Bormaheco's acceptance of Villonco Realty Company's offer to purchase the Buendia Avenue property, as shown in Teofilo Villonco's letter dated March 4, 1964 (Exh. D), indubitably proves that there was a meeting of minds upon the subject matter and consideration of the sale. Therefore, on that date the sale was perfected. (Compare with McCullough vs. Aenlle & Co., 3 Phil. 285; Goyena vs. Tambunting, 1 Phil. 490). Not only that Bormaheco's acceptance of the part payment of one hundred ,thousand pesos shows that the sale was conditionally consummated or partly executed subject to the purchase by Bormaheco, Inc. of the Punta property. The nonconsummation of that purchase would be a negative resolutory condition (Taylor vs. Uy Tieng Piao, 43 Phil. 873). On February 18, 1964 Bormaheco's bid for the Punta property was already accepted by the Nassco which had authorized its General Manager to sign the corresponding deed of sale. What was

necessary only was the approval of the sale by the Economic Coordinator and a request for that approval was already pending in the office of that functionary on March 4, 1964. Bormaheco, Inc. and the Cervantes spouses contend that the sale was not perfected because Cervantes allegedly qualified his acceptance of Villonco's revised offer and, therefore, his acceptance amounted to a counter-offer which Villonco Realty Company should accept but no such acceptance was ever transmitted to Bormaheco, Inc. which, therefore, could withdraw its offer. That contention is not well-taken. It should be stressed that there is no evidence as to what changes were made by Cervantes in Villonco's revised offer. And there is no evidence that Villonco Realty Company did not assent to the supposed changes and that such assent was never made known to Cervantes. What the record reveals is that the broker, Miss Tagle, acted as intermediary between the parties. It is safe to assume that the alleged changes or qualifications made by Cervantes were approved by Villonco Realty Company and that such approval was duly communicated to Cervantes or Bormaheco, Inc. by the broker as shown by the fact that Villonco Realty Company paid, and Bormaheco, Inc. accepted, the sum of P100,000 as earnest money or down payment. That crucial fact implies that Cervantes was aware that Villonco Realty Company had accepted the modifications which he had made in Villonco's counter-offer. Had Villonco Realty Company not assented to those insertions and annotations, then it would have stopped payment on its check for P100,000. The fact that Villonco Realty Company allowed its check to be cashed by Bormaheco, Inc. signifies that the company was in conformity with the changes made by Cervantes and that Bormaheco, Inc. was aware of that conformity. Had those insertions not been binding, then Bormaheco, Inc. would not have paid interest at the rate of ten percent per annum, on the earnest money of P100,000. The truth is that the alleged changes or qualifications in the revised counter offer (Exh. D) are not material or are mere clarifications of what the parties had previously agreed upon. Thus, Cervantes' alleged insertion in his handwriting of the figure and the words "12th and" in Villonco's counter-offer is the same as the statement found in the voucher-receipt for the earnest money, which reads: "subject to the terms and conditions embodied in Bormaheco's letter of Feb. 12, 1964 and your letter of March 4, 1964" (Exh. E-1). Cervantes allegedly crossed out the word "Nassco" in paragraph 3 of Villonco's revised counter-offer and substituted for it the word "another" so that the original phrase, "Nassco's property in Sta. Ana", was made to read as "another property in Sta. Ana". That change is trivial. What Cervantes did was merely to adhere to the wording of paragraph 3 of Bormaheco's original offer (Exh. B) which mentions "another property located at Sta. Ana." His obvious purpose was to avoid jeopardizing his negotiation with the Nassco for the purchase of its Sta. Ana property by unduly publicizing it. It is noteworthy that Cervantes, in his letter to the broker dated April 6, 1964 (Annex 1) or after the Nassco property had been awarded to Bormaheco, Inc., alluded to the "Nassco property". At that time, there was no more need of concealing from the public that Bormaheco, Inc. was interested in the Nassco property. Similarly, Cervantes' alleged insertion of the letters "PA" ( per annum) after the word "interest" in that same paragraph 3 of the revised counter-offer (Exh. D) could not be categorized as a major alteration of that counter-offer that prevented a meeting of the minds of the parties. It was understood that the parties had contemplated a rate of ten percent per annum since ten percent a month or semi-annually would be usurious.

Appellants Bormaheco, Inc. and Cervantes further contend that Cervantes, in clarifying in the voucher for the earnest money of P100,000 that Bormaheco's acceptance thereof was subject to the terms and conditions embodied in Bormaheco's letter of February 12, 1964 and your (Villonco's) letter of March 4, 1964" made Bormaheco's acceptance "qualified and conditional". That contention is not correct. There is no incompatibility between Bormaheco's offer of February 12, 1964 (Exh. B) and Villonco's counter-offer of March 4, 1964 (Exh. D). The revised counter-offer merely amplified Bormaheco's original offer. The controlling fact is that there was agreement between the parties on the subject matter, the price and the mode of payment and that part of the price was paid. "Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract" (Art. 1482, Civil Code). "It is true that an acceptance may contain a request for certain changes in the terms of the offer and yet be a binding acceptance. 'So long as it is clear that the meaning of the acceptance is positively and unequivocally to accept the offer, whether such request is granted or not, a contract is formed.' " (Stuart vs. Franklin Life Ins. Co., 165 Fed. 2nd 965, citing Sec. 79, Williston on Contracts). Thus, it was held that the vendor's change in a phrase of the offer to purchase, which change does not essentially change the terms of the offer, does not amount to a rejection of the offer and the tender of a counter-offer (Stuart vs. Franklin Life Ins. Co., supra). The instant case is not governed by the rulings laid down in Beaumont vs. Prieto, 41 Phil. 670, 985, 63 L. Ed. 770, and Zayco vs. Serra, 44 Phil. 326. In those two cases the acceptance radically altered the offer and, consequently, there was no meeting of the minds of the parties. Thus, in the Zayco case, Salvador Serra offered to sell to Lorenzo Zayco his sugar central for P1,000,000 on condition that the price be paid in cash, or, if not paid in cash, the price would be payable within three years provided security is given for the payment of the balance within three years with interest. Zayco, instead of unconditionally accepting those terms, countered that he was going to make a down payment of P100,000, that Serra's mortgage obligation to the Philippine National Bank of P600,000 could be transferred to Zayco's account and that he (plaintiff) would give a bond to secure the payment of the balance of the price. It was held that the acceptance was conditional or was a counter-offer which had to be accepted by Serra. There was no such acceptance. Serra revoked his offer. Hence, there was no perfected contract. In the Beaumont case, Benito Valdes offered to sell to W Borck the Nagtahan Hacienda owned by Benito Legarda, who had empowered Valdes to sell it. Borck was given three months from December 4, 1911 to buy the hacienda for P307,000. On January 17, 1912 Borck wrote to Valdes, offering to purchase the hacienda for P307,000 payable on May 1, 1912. No reply was made to that letter. Borck wrote other letters modifying his proposal. Legarda refused to convey the property. It was held that Borck's January 17th letter plainly departed from the terms of the offer as to the time of payment and was a counter-offer which amounted to a rejection of Valdes' original offer. A subsequent unconditional acceptance could not revive that offer. The instant case is different from Laudico and Harden vs. Arias Rodriguez, 43 Phil. 270 where the written offer to sell was revoked by the offer or before the offeree's acceptance came to the offeror's knowledge.

Appellants' next contention is that the contract was not perfected because the condition that Bormaheco, Inc. would acquire the Nassco land within forty-five days from February 12, 1964 or on or before March 28, 1964 was not fulfilled. This contention is tied up with the following letter of Bormaheco, Inc. (Exh. F): BORMAHECO, INC. March 30, 1964 Villonco Realty Company V.R.C. Building 219 Buendia Ave., Makati, Rizal Gentlemen: We are returning herewith your earnest money together with interest thereon at 10% per annum. Please be informed that despite the lapse of the 45 days from February 12, 1964 there is no certainty yet for us to acquire a substitute property, hence the return of the earnest money as agreed upon. Very truly yours, SGD. FRANCISCO N. CERVANTES President Encl.: P.N.B. Check No. 112994 J P.N.B. Check No. 112996J That contention is predicated on the erroneous assumption that Bormaheco, Inc. was to acquire the Nassco land within forty-five days or on or before March 28, 1964. The trial court ruled that the forty-five-day period was merely an estimate or a forecast of how long it would take Bormaheco, Inc. to acquire the Nassco property and it was not "a condition or a deadline set for the defendant corporation to decide whether or not to go through with the sale of its Buendia property". The record does not support the theory of Bormaheco, Inc. and the Cervantes spouses that the forty-five-day period was the time within which (a) the Nassco property and two Pasong Tamo lots should be acquired, (b) when Cervantes would secure his wife's consent to the sale of the three lots and (c) when Bormaheco, Inc. had to decide what to do with the DBP encumbrance. Cervantes in paragraph 3 of his offer of February 12, 1964 stated that the sale of the Buendia lots would be consummated after he had consummated the purchase of the Nassco property. Then, in paragraph 5 of the same offer he stated "that final negotiations on both properties can be definitely known after forty-five days" (See Exh. B). It is deducible from the tenor of those statements that the consummation of the sale of the Buendia lots to Villonco Realty Company was conditioned on Bormaheco's acquisition of the Nassco land. But it was not spelled out that such acquisition should be effected within forty-five days from

February 12, 1964. Had it been Cervantes' intention that the forty-five days would be the period within which the Nassco land should be acquired by Bormaheco, then he would have specified that period in paragraph 3 of his offer so that paragraph would read in this wise: "That this sale is to be consummated only after I shall have consummated my purchase of another property located at Sta. Ana, Manila within forty-five days from the date hereof ." He could have also specified that period in his "conforme" to Villonco's counter-offer of March 4, 1964 (Exh. D) so that instead of merely stating "that this sale shall be subject to favorable consummation of a property in Sta. Ana we are negotiating" he could have said: "That this sale shall be subject to favorable consummation within forty-five days from February 12, 1964 of a property in Sta. Ana we are negotiating". No such specification was made. The term of forty-five days was not a part of the condition that the Nassco property should be acquired. It is clear that the statement "that final negotiations on both property can be definitely known after 45 days" does not and cannot mean that Bormaheco, Inc. should acquire the Nassco property withinforty-five days from February 12, 1964 as pretended by Cervantes. It is simply a surmise that after forty-five days (in fact when the forty-five day period should be computed is not clear) it would be known whether Bormaheco, Inc. would be able to acquire the Nassco property and whether it would be able to sell the Buendia property. That aforementioned paragraph 5 does not even specify how long after the forty-five days the outcome of the final negotiations would be known. It is interesting to note that in paragraph 6 of Bormaheco's answer to the amended complaint, which answer was verified by Cervantes, it was alleged that Cervantes accepted Villonco's revised counter-offer of March 4, 1964 subject to the condition that "the final negotiations (acceptance) will have to be made by defendant within 45 daysfrom said acceptance" (31 Record on Appeal). If that were so, then the consummation of Bormaheco's purchase of the Nassco property would be made within forty-five days from March 4, 1964. What makes Bormaheco's stand more confusing and untenable is that in its three answers it invariably articulated the incoherent and vague affirmative defense that its acceptance of Villonco's revised counter-offer was conditioned on the circumstance "that final acceptance or not shall be made after 45 days" whatever that means. That affirmative defense is inconsistent with the other aforequoted incoherent statement in its third answer that "the final negotiations (acceptance) will have to be made by defendant within 45 days from said acceptance" (31 Record on Appeal).
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Thus, Bormaheco's three answers and paragraph 5 of his offer of February 12, 1964 do not sustain at all its theory that the Nassco property should be acquired on or before March 28, 1964. Its rescission or revocation of its acceptance cannot be anchored on that theory which, as articulated in its pleadings, is quite equivocal and unclear. It should be underscored that the condition that Bormaheco, Inc. should acquire the Nassco property was fulfilled. As admitted by the appellants, the Nassco property was conveyed to Bormaheco, Inc. on June 26, 1964. As early as January 17, 1964 the property was awarded to Bormaheco, Inc. as the highest bidder. On February 18, 1964 the Nassco Board authorized its General Manager to sell the property to Bormaheco, Inc. (Exh. H). The Economic Coordinator approved the award on March 24, 1964. It is reasonable to assume that had Cervantes been more assiduous in following up the transaction, the Nassco property could have been transferred to Bormaheco, Inc. on or before March 28, 1964, the supposed last day of the forty-five-day period. The appellants, in their fifth assignment of error, argue that Bormaheco, Inc. cannot be required to sell the three lots in question because they are conjugal properties of the Cervantes spouses. They aver that Cervantes in dealing with the Villonco brothers acted as president of Bormaheco, Inc. and

not in his individual capacity and, therefore, he did not bind the conjugal partnership nor Mrs. Cervantes who was allegedly opposed to the sale. Those arguments are not sustainable. It should be remembered that Cervantes, in rescinding the contract of sale and in returning the earnest money, cited as an excuse the circumstance that there was no certainty in Bormaheco's acquisition of the Nassco property (Exh. F and Annex 1). He did not say that Mrs. Cervantes was opposed to the sale of the three lots. He did not tell Villonco Realty Company that he could not bind the conjugal partnership. In truth, he concealed the fact that the three lots were registered "in the name of FRANCISCO CERVANTES, Filipino, of legal age, married to Rosario P. Navarro, as owner thereof in fee simple". He certainly led the Villonco brothers to believe that as president of Bormaheco, Inc. he could dispose of the said lots. He inveigled the Villoncos into believing that he had untrammelled control of Bormaheco, Inc., that Bormaheco, Inc. owned the lots and that he was invested with adequate authority to sell the same. Thus, in Bormaheco's offer of February 12, 1964, Cervantes first identified the three lots as "our property" which "we are offering to sell ..." (Opening paragraph and par. 1 of Exh. B). Whether the prounoun "we" refers to himself and his wife or to Bormaheco, Inc. is not clear. Then, in paragraphs 3 and 4 of the offer, he used the first person and said: "I shall have consummated my purchase" of the Nassco property; "... my negotiations with said property" and "I will return to you your deposit". Those expressions conveyed the impression and generated the belief that the Villoncos did not have to deal with Mrs. Cervantes nor with any other official of Bormaheco, Inc. The pleadings disclose that Bormaheco, Inc. and Cervantes deliberately and studiously avoided making the allegation that Cervantes was not authorized by his wife to sell the three lots or that he acted merely as president of Bormaheco, Inc. That defense was not interposed so as not to place Cervantes in the ridiculous position of having acted under false pretenses when he negotiated with the Villoncos for the sale of the three lots. Villonco Realty Company, in paragraph 2 of its original complaint, alleged that "on February 12, 1964, after some prior negotiations, the defendant (Bormaheco, Inc.) made a formal offer to sell to the plaintiff the property of the said defendant situated at the abovenamed address along Buendia Avenue, Makati, Rizal, under the terms of the letter-offer, a copy of which is hereto attached as Annex A hereof", now Exhibit B (2 Record on Appeal). That paragraph 2 was not, repeat, was not denied by Bormaheco, Inc. in its answer dated May 5, 1964. It did not traverse that paragraph 2. Hence, it was deemed admitted. However, it filed an amended answer dated May 25, 1964 wherein it denied that it was the owner of the three lots. It revealed that the three lots "belong and are registered in the names of the spouses Francisco N. Cervantes and Rosario N. Cervantes." The three answers of Bormaheco, Inc. contain the following affirmative defense: 13. That defendant's insistence to finally decide on the proposed sale of the land in question after 45 days had not only for its purpose the determination of its acquisition of the said Sta. Ana (Nassco) property during the said period, but also to negotiate with the actual and registered owner of the parcels of land covered by T.C.T. Nos. 43530, 43531 and 43532 in question which plaintiff was fully aware that the same were not in the name of the defendant (sic; Par. 18 of Answer to Amended Complaint, 10, 18 and 34, Record on Appeal). In that affirmative defense, Bormaheco, Inc. pretended that it needed forty- five days within which to acquire the Nassco property and "to negotiate" with the registered owner of the three lots. The

absurdity of that pretension stands out in bold relief when it is borne in mind that the answers of Bormaheco, Inc. were verified by Cervantes and that the registered owner of the three lots is Cervantes himself. That affirmative defense means that Cervantes as president of Bormaheco, Inc. needed forty-five days in order to "negotiate" with himself (Cervantes). The incongruous stance of the Cervantes spouses is also patent in their answer to the amended complaint. In that answer they disclaimed knowledge or information of certain allegations which were well-known to Cervantes as president of Bormaheco, Inc. and which were admitted in Bormaheco's three answers that were verified by Cervantes. It is significant to note that Bormaheco, Inc. in its three answers, which were verified by Cervantes, never pleaded as an affirmative defense that Mrs. Cervantes opposed the sale of the three lots or that she did not authorize her husband to sell those lots. Likewise, it should be noted that in their separate answer the Cervantes spouses never pleaded as a defense that Mrs. Cervantes was opposed to the sale of three lots or that Cervantes could not bind the conjugal partnership. The appellants were at first hesitant to make it appear that Cervantes had committed the skullduggery of trying to sell property which he had no authority to alienate. It was only during the trial on May 17, 1965 that Cervantes declared on the witness stand that his wife was opposed to the sale of the three lots, a defense which, as already stated, was never interposed in the three answers of Bormaheco, Inc. and in the separate answer of the Cervantes spouses. That same viewpoint was adopted in defendants' motion for reconsideration dated November 20, 1965. But that defense must have been an afterthought or was evolved post litem motam since it was never disclosed in Cervantes' letter of rescission and in his letter to Miss Tagle (Exh. F and Annex 1). Moreover, Mrs. Cervantes did not testify at the trial to fortify that defense which had already been waived for not having been pleaded (See sec. 2, Rule 9, Rules of Court). Taking into account the situation of Cervantes vis-a-vis Bormaheco, Inc. and his wife and the fact that the three lots were entirely occupied by Bormaheco's building, machinery and equipment and were mortgaged to the DBP as security for its obligation, and considering that appellants' vague affirmative defenses do not include Mrs. Cervantes' alleged opposition to the sale, the plea that Cervantes had no authority to sell the lots strains the rivets of credibility (Cf. Papa and Delgado vs. Montenegro, 54 Phil. 331; Riobo vs. Hontiveros, 21 Phil. 31). "Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith" (Art. 1159, Civil Code). Inasmuch as the sale was perfected and even partly executed, Bormaheco, Inc., and the Cervantes spouses, as a matter of justice and good faith, are bound to comply with their contractual commitments. Parenthetically, it may be observed that much misunderstanding could have been avoided had the broker and the buyer taken the trouble of making some research in the Registry of Deeds and availing themselves of the services of a competent lawyer in drafting the contract to sell. Bormaheco, Inc. and the Cervantes spouses in their sixth assignment of error assail the trial court's award to Villonco Realty Company of consequential damage amounting to ten thousand pesos monthly from March 24, 1964 (when the Economic Coordinator approved the award of the Nassco property to Bormaheco, Inc.) up to the consummation of the sale. The award was based on paragraph 18 of the stipulation of facts wherein Villonco Realty Company "submits that the delay in the consummation of the sale" has caused it to suffer the aforementioned damages.

The appellants contend that statement in the stipulation of facts simply means that Villonco Realty Company speculates that it has suffered damages but it does not mean that the parties have agreed that Villonco Realty Company is entitled to those damages. Appellants' contention is correct. As rightly observed by their counsel, the damages in question were not specifically pleaded and proven and were "clearly conjectural and speculative". However, appellants' view in their seventh assignment of error that the trial court erred in ordering Bormaheco, Inc. to pay Villonco Realty Company the sum of twenty thousand pesos as attorney's fees is not tenable. Under the facts of the case, it is evident that Bormaheco, Inc. acted in gross and evident bad faith in refusing to satisfy the valid and just demand of Villonco Realty Company for specific performance. It compelled Villonco Realty Company to incure expenses to protect its interest. Moreover, this is a case where it is just and equitable that the plaintiff should recover attorney's fees (Art. 2208, Civil Code). The appellants in their eighth assignment of error impugn the trial court's adjudication of forty-two thousand pesos as three percent broker's commission to Miss Tagle. They allege that there is no evidence that Bormaheco, Inc. engaged her services as a broker in the projected sale of the three lots and the improvements thereon. That allegation is refuted by paragraph 3 of the stipulation of facts and by the documentary evidence. It was stipulated that Miss Tagle intervened in the negotiations for the sale of the three lots. Cervantes in his original offer of February 12, 1964 apprised Villonco Realty Company that the earnest money should be delivered to Miss Tagle, the bearer of the letter-offer. See also Exhibit G and Annex I of the stipulation of facts. We hold that the trial court did not err in adjudging that Bormaheco, Inc. should pay Miss Tagle her three percent commission. WHEREFORE, the trial court's decision is modified as follows: 1. Within ten (10) days from the date the defendants-appellants receive notice from the clerk of the lower court that the records of this case have been received from this Court, the spouses Francisco N. Cervantes and Rosario P. Navarra-Cervantes should execute a deed conveying to Bormaheco, Inc. their three lots covered by Transfer Certificate of Title Nos. 43530, 43531 and 43532 of the Registry of Deeds of Rizal. 2. Within five (5) days from the execution of such deed of conveyance, Bormaheco, Inc. should execute in favor of Villonco Realty Company, V. R. C. Building, 219 Buendia Avenue, Makati, Rizal a registerable deed of sale for the said three lots and all the improvements thereon, free from all lien and encumbrances, at the price of four hundred pesos per square meter, deducting from the total purchase price the sum of P100,000 previously paid by Villonco Realty Company to Bormaheco, Inc. 3. Upon the execution of such deed of sale, Villonco Realty Company is obligated to pay Bormaheco, Inc. the balance of the price in the sum of one million three hundred thousand pesos (P1,300,000). 4. Bormaheco, Inc. is ordered (a) to pay Villonco Realty Company twenty thousand pesos (P20,000) as attorney's fees and (b) to pay Edith Perez de Tagle the sum of forty-two thousand pesos (P42,000) as commission. Costs against the defendants-appellants. SO ORDERED.

Makalintal, C.J, Castro. Fernando, Makasiar, Antonio, Esguerra, Muoz Palma, Concepcion Jr. and Martin, JJ., concur. Teehankee, J., is on leave.

epublic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-26058 October 28, 1977 AMPARO JOVEN DE CORTES & NOEL J. CORTES (Jesus Noel plaintiff-appellees, vs. MARY E. VENTURANZA, ETC., JOSE OLEDAN & ERLINDA M. OLEDAN, defendants-appellants.

MAKASIAR, J.:

chanro bles vi rtua l law lib ra ry

Direct appeal by the defendants-appellants from the decision of the Court of First Instance of Bulacan against them in its Civil Case No. 2693, entitled "Felix Cortes y Ochoa, and Noel J. Cortes (Jesus Noel plaintiffs, versus Gregorio Venturanza, Mary E. Venturanza, Jose Oledan and Erlinda M. Oledan, defendants."
chan roble s virtual law lib rary

The original plaintiffs in this case were Felix Cortes y Ochoa and Noel J. Cortes, and the original defendants were Gregorio Venturanza, Mary E. Venturanza, Jose Oledan and Erlinda M. Oledan. On December 11, 1967, defendant Gregorio Venturanza died. Accordingly, as prayed for by appellees, Mary E. Venturanza, Edna Lucille, Greymar, Sylvia, Edward and Mary Grace, all surnamed Venturanza, surviving spouse and children of the deceased Gregorio Venturanza, were substituted as appellants, in place of the deceased, by resolution of this Court dated February 28, 1968. On September 12, 1968, Felix Cortes y Ochoa died. Appellees, through counsel, thereupon filed a petition praying that the title of this case be changed to read: "Amparo Joven de Cortes and Noel J. Cortes (Jesus Noel plaintiffsappellant, versus Mary E. Venturanza, etc., Jose Oledan and Erlinda M. Oledan, defendantsappellants," which petition was granted by this Court in its resolution dated April 11, 1969.
chanrob lesvi rtua lawlib rary c han robles v irt ual law li bra ry

The background facts may be gleaned from the pertinent portions of the decision of the court a quo, as follows: Plaintiff Felix Cortes y Ochoa and Noel J. Cortes filed the instant action for foreclosure of real estate against the defendants Gregorio Venturanza, Mary E. Venturanza, Jose Oledan and Erlinda M. Oledan. The complaint alleges that plaintiff Felix Cortez y Ochoa was the original owner of nine (9) parcels of land covered by Transfer Certificates of Title Nos. 21334 to 21342, inclusive, while plaintiff Noel J. Cortes was likewise the original owner of twenty-four (24) parcels of land covered by Transfer Certificates off Title Nos. 21343, 21345, 21347 to 21367, inclusive, all of the land records of Bulacan; that on October 24, 1958 said plaintiffs sold and delivered to the defendants all the above-mentioned thirty-three (33) parcels of land with all the improvements thereon for the total sum of P716,573.90 of which defendants agreed to pay jointly and severally the plaintiffs the sum of P100,000.00 upon the signing and execution of a deed of sale and P40,000.00 on January 1, 1959 thereby leaving a balance of P576,573.90 which the defendants agreed and bound themselves to pay plaintiffs jointly and severally within three (3) years from January 1, 1959 with interest thereon at the rate of 6% per annum; that defendants further agreed and bound themselves to secure the payment of the said balance of P576,573.90 with a first mortgage upon the said 33 parcels of land with improvements; that the defendants have already paid the plaintiffs the total sum of P140,000.00; that of the unpaid balance owing to plaintiffs, P169,484.24 pertaining to plaintiff Felix Cortes and P407,089.66 pertains to plaintiff Noel J. Cortes; that upon the registration of the deed of sale and mortgage with the office of the register of deeds of Bulacan new certificates of title for the 33 parcels of land were issued in the names of the defendants and the mortgage obligation was

noted thereon; that the mortgage obligation fell due on January 1, 1962, but despite repeated demands for payment, defendants failed and refused to pay the said balance of P576,573.90 to plaintiffs; that from the time the mortgage obligation fell due and demandable up to December 1, 1962 the total interest due from the defendants on the balance of their obligation is P103,783.32 computer led at the stipulated interest of 6%per annum; that it is stipulated in the deed of sale with purchase money mortgage that in the event or default by defendants to pay the obligation secured by the mortgage and a suit is brought for the foreclosure of the mortgage or any other legal proceedings is instituted for the enforcement of plaintiffs' right, defendants would be obligated and hound to pay the plaintiffs reasonable compensation for attorney's fees which plaintiffs fixed at P50,000.00.
chanroblesvi rt ualawlib ra ry chan roble s virtual law lib rary

Defendants Spouses Venturanza admit the allegations of the complaint regarding plaintiffs's former ownership of the lands in question as well as their execution of the mortgage in favor of plaintiffs but allege that they are at present the registered owners of the same parcels of land by virtue of the sale thereof made to them; they likewise admit the allotment of payment to plaintiffs of the balance of their obligation but allege that the said balance has not yet become due and demandable so that they have not incurred in default. As special affirmative defense defendants Venturanza allege that the document designated as deed of sale with purchase money mortgage does not express the true intent and agreement of the parties with respect to the manner of payment of the balance of the purchase price, the truth being that defendants will pay the balance of the purchase price in,the amount of P576,573.90 to the plaintiffs, and the latter agreed, as soon as defendants will have received from the Land Tenure Administration the purchase price of their (defendants') hacienda in Bugo, Cagayan de Oro in the amount of P360,000.00 which hacienda is the object of exporpiration proceedings before the Court of First Instance of said City; that it was agreed moreover that defendants will complete payment of the balance of the purchase price upon the consummation of the sale of their other hacienda at Buhi, Camarines Sur to one Mr. De Castro for P837, 00.00 more or less; that this negotiation was known to plaintiffs who agreed to wait for the sale of the same properties by defendants; that the property in question was bought by defendant for speculative purposes. As second special and affirmative defenses defendants allege that the deed of sale with purchase money mortgage had been novated by a subsequent agreement regarding the manner and period of payment to be made by defendants and that, therefore, the cause of action has not yet accrued.
cha nrob lesvi rtua lawlib rary chan roble s virtual law l ibra ry

Defendants Jose Oledan and Erlinda M. Oledan deny the material allegations of the complaint with respect to the mortgage obligation alleging that plaintiffs cause of action against them has been extinguished and, therefore did not become due against them on January 1, 1962; that even as regards their co-defendants Venturanzas the mortgage obligation did not become due on January 1, 1962 there hating been a novation of the original agreement which affected material changes in the manner and condition of time of payment of the balance of the mortgage obligation. By way of affirmative defenses defendants Oledans alleged that the deed of sale with purchase money mortgage fails to express the true intent and agreement of the parties thereto insofar as the nature of the liability of the defendants is concerned, the true intention being to hold them (defendants Oledan) obligated unto plaintiffs only to the extent of the proportion of their share, ownership and interests in the property conveyed; that their obligation to plaintiffs has been extinguished by novation; that their obligation to plaintiffs has been extinguished by the assumption of the obligation by defendants Venturanza as provided for in the agreement among defendants dated December 28, 1959, such assumption of the obligation being inside' with full knowledge (of) and consent of plaintiffs which partakes of the character of a novation of the original agreement and that by their failure to seasonably interrupt any opposition to the assumption of any obligation by defendants Venturanza and to take appropriate action thereon, plaintiffs have waived their right to proceed against them.
chanro blesvi rtua lawlib rary chan roble s virtual law l ibra ry

By way of cross-claim against their co-defendants Venturanza, defendants Oledan allege that on December 28, 1958 they and their co-defendants executed and entered into an agreement whereby they sold, transferred unto their co-defendants all their shares, ownership and interest in the property subject of a deed of sale with purchase money mortgage for and in consideration of the sum of P44,571.66 payable at the time and in the manner specified in the written agreement; that of the aforementioned consideration cross-defendants have paid to them the sum of P22,285.83 thereby leaving a balance still due and unpaid in the amount of P22,285.83 which crossdefendants have failed to pay within the period stipulated in their agreement; that it is further stipulated in their agreement with cross-defendants that in the event of failure by the latter to pay the said balance within the period agreed upon they (crossdefendants) shall pay to them the sum of P6,367.30 for the period August 8, 1960 to August 28, 1961; another amount of P6,367.30 for the period August 28,1961 to August 28, 1962 and still another amount of P6,367.30 for the period August 28, 1963 by way of penalty, which despite repeated demands cross-defendants have failed to pay; that it is further stipulated in their agreement that in the event of default on the part of cross-defendants, interest in the legal rate of 6% per annum shall be borne by the unpaid balance in the amount of P22,285.83 plus the penalties aforementioned.
chanrob lesvi rtualaw lib rary c han robles vi rt ual law li bra ry

By way of counter-claim, defendants-cross-plaintiffs allege that at the time defendants executed the agreement dated December 28, 1958 plaintiffs had full knowledge of and gave their consent to the transfer of their shares, ownership and interest in favor of their co-defendants, as well as the assumption by the latter of the mortgage obligation; that despite such knowledge and consent, plaintiffs induced crossdefendants not to register the agreement and effect the issuance of new transfer certificate of title in the name solely of defendants Venturanza, evidently for the purpose of preversing cause of action against them under the deed of sale with purchase money mortgage; that as a consequence of plaintiffs' injurious and malicious suit against them they suffered mental anguish, serious anxiety, besmirched reputation and moral shock on the basis of which plaintiffs should he held answerable to them in moral damages in the amount of P100,000.00 aside from exemplary damages; and that a, a consequence of plaintiffs' having filed the instant action against them they were compelled to engage the services of counsel and incurred expenses of litigation in the total amount of P20,000.00 for which plaintiffs should be held liable to them (pp. 93-100, Corrected Rec. on Appeal, pp. 320-323, rec ). After due trial, the court a quo rendered its judgment with the following rationale and dispositive portion: There is no question that defendants are indebted to plaintiffs on the mortgage executed by them contained in the document denominated as 'Deed of Sale with Purchase Money Mortgage' (Exhibit 'A') to the tune of P576,573.90 with interest thereon at the stipulate rate of 6% per annum. The pertinent portion of the document in question is quoted, as follows: '(c) The remaining balance of the purchase price, after deducting the sums of P100,000.00 and P40,000.00, mentioned in Paragraphs (a) and (b) of this Article II, aggregating the sum of Five Hundred Seventy Six Thousand Five Hundred Seventy Three Pesos and Ninety Centavos (P576,573.90) shall be paid jointly and severally, by the vendees to the vendors within three (3) Nears from January 1, 1959, with interest thereon at the rate of six per annum, until fully paid, of which the sum of P169,484.24, plus the corresponding interest thereon, shall be paid by the vendees to the vendor, Felix Cortes y Ochoa, and the balance of P407,089.66, plus the corresponding interest thereon, shall be paid by the Vendees to the Vendor, Noel J. Cortes.'

Defendants do not deny their failure to make good their obligation to pay plaintiffs the balance of the purchase price within the three-year period agreed upon in their document. However, defendants Venturanzas explained their failure as being due to their inability to collect the payment of the sale of their own property located in Buhi, Camarines Sur, and Bugo, Cagayan de Oro. in this connection, we are again quoting a specific provision of the agreement between the parties as regards the payment of the obligation, thus: C. In the event that the vendees shall fail to pay to the vendors, in the form and manner provided in Paragraphs (b) and (c) of Article II hereof, the said sums of P40,000.00 and P576,573.90, and the interest thereon, or should the vendees make default in the performance of any one or more of the conditions stipulated herein, the Vendors shall have the right, at their election, to foreclos(ur)e this mortgage, and to that end the vendors are hereby appointed the attorneys-in-fact for the Vendees with full power of substitution, to enter upon and take possession of the mortgaged properties, without the order of any court or any other authority other than herein granted, and to sell and dispose of the same to the highest bidder at public auction, ... .' Defendants claim that there had been a novation of the contract between them and plaintiffs on account of the transfer made by defendants Oledans of their interest in the property in favor of their defendants Venturanzas, with the knowledge and consent of the plaintiffs As regards this claim of defendants, we have another pertinenent provision of their contract which reads as follows: 'B. The vendees may, during the existence of this mortgage, sell the property hereby mortgaged, or any part thereof, or encumber the same with a second mortgage, with the previous written consent of the vendors. ... .' In view of the foregoing stipulations in the contract between the parties, while plaintiffs may have knowledge of the transfer made by defendants Oledans of their interest in the property in question in favor of their co-defendants, yet insofar as the original contract between plaintiffs and defendants are concerned, 'the provisions thereof shall govern. For plaintiffs' written consent to any transfer is required by the provisions of their contract. Since defendants were of the said provision, they should have taken steps to obtain plaintiffs' written consent if only to effect a novation. To the mind of the court, it must have been due to a premonition on the part of plaintiffs that there might be a substitution of debtor that gave rise to the incIusion of the aforequoted provision in their original contract.
chanroblesv irt ualawli bra ry cha nrob les vi rtual law lib rary

It having been satisfactorily established that defendants are indeed indebted to plaintiffs on the mortgage constituted by them over the parcels of land in question, the period of payment of the obligations having become due, plaintiffs are, therefore, entitled to a foreclosure of the said mortgage.
chanrob lesvi rtua lawlib rary chan roble s virtual law l ibra ry

The next question that crops up for determination is whether or not defendants Oledans have a right against their co-defendants Venturanzas in this case. Exhibit 1Oledan which is an Agreement and Deed of Sale of Undivided Share in Real Estate entered into by and between the Venturanzas and the Oledans clearly shows that by virtue of said document, the Venturanzas assumed the whole obligation to plaintiffs for and in consideration of the sum of P44,571.66, one-half of which amount was paid to the Oledans upon the execution and signing thereof and the balance payable within 8 months therefrom. The Venturanzas do not assail the veracity of the document However, they seem to deny having agreed to the divisions of the penalty clause

claiming that the Oledans assured them that the same was just incorporated therein as a matter of form but that it would not be enforced. The Venturanzas having agreed to time, as in fact, they have assumed the whole obligation to the plaintiffs, they should, therefore, be held liable to the Oledans for ,Alexander the latter shall be bound to pay to plaintiffs under the original contract known as Deed of Sale with Purchase Money Mortgage.
chanroble svirtualawl ibra ry c hanro bles vi rtua l law li bra ry

WHEREFORE, judgment is hereby rendered in favor of pIaintiffs and against the defendants, ordering the latter jointly and severally to pay to the former or to deposit with the clerk of court the sum of P576,573.90 with interest thereon at the stipulated rate of 6% per annum until fully paid, within 90 days from notice hereof. In default of such payment the mortgaged property will be sold at public auction to realize the mortgage indebtedness and costs. in accordance with law.
cha nrob lesvi rtua lawlib rary chan robles v irt ual law l ibra ry

On the cross-claim filed by defendants-cross-claimants Oledans, cross-defendants Venturanzas are ordered to reimburse to the former the amount which cross-claimants are to pay to plaintiffs under the above judgment.
chanrob lesvi rtualaw lib rary c ha nroble s virtual law l ib rary

The parties will bear their own costs and expensive of litigation" (pp. 107-113, Corrected Record on Appeal, pp. 327-330, rec.). Not satisfied with the foregoing decision of the court a quo, particularly with respect to its dispositive portion, plaintiffs filed a motion for reconsideration and/or new trial, dated October 19, 1965, and an urgent supplemental ration for reconsideration, dated November 2, 1965. The defendants Oledans likewise filed their motion for reconsideration dated November 2, 1965, and the defendants Venturanzas also filed a motion for reconsideration dated November 10, 1965.
chanroblesv irtua lawlib rary chan roble s virtual law l ibra ry

Resolving the aforesaid motions of the parties litigants, the trial court amended the dispositive portion of its in question in its order dated November 22, 1965, which reads as follows: This case is again before the Court upon a motion for reconsideration and/or new trial filed by plaintiffs dated October 19, 1965, an urgent supplemental motion for reconsideration dated November 2, 1965 filed by the same plaintiffs, a motion for reconsideration dated November 2, 1965 filed by defendants Oledans, and a motion for reconsideration dated November 10, 1965 filed by defendants Venturanzas.
ch anroble svirtualawl ibra ry cha nro bles vi rtua l law lib ra ry

After a careful deliberation of the different motions for filed by the parties, the Court believes a further modification of the decision of September 30, 1965, as amended by the order of October l, 1965, is in order. This, in accordance with the agreement entered into by the parties embodied in the document designated as Deed of Sale with Purchase Money Mortgage.
chanrob lesvi rtua lawlib rary c han robles v irt ual law l ibra ry

WHEREFORE, the dispositive part of the decision of September 30, 1965 is hereby reamended so as to read as follows: 'WHEREFORE, judgment is hereby rendered in favor of plaintiff.s, and against the defendants ordering the latter, jointly and severally, to pay the former or to deposit with the clerk of court the sum of P576,573.90 with interest thereon at the stipulated rate of 6 % per annum from January 1, 1959 until fully paid, within 90 days from notice hereof. In default of such payment the mortgaged property will be sold at public auction to realize the mortgage indebtedness and costs, in accordance with law.'
cha nrob les vi rtua l law lib rary

'On the cross-claim by the defendants-cross-claimants Venturanzas are ordered to reimburse to the former the amount which crossclaimants are to pay to plaintiff under the judgment.
cha nrob le svirt ualawli bra ry chan rob les vi rtual law lib rary

'The parties will bear their own costs and expenses of litigation.' With the foregoing resolution the motion for reconsideration filed by defendants Venturanzas and Oledans are, therefore, DENIED (pp. 151-152, Corrected Record on Appeal, pp. 349-350, rec.). From the foregoing judgment, as amended, the defendants Venturanzas and Oledans now appeal directly before this Court. The Venturanzas assigned four (4) errors while the Oledans assinged five (5) errors allegedly committed by the trial court. WE believe these errors taken together all boil down to the following issues:
chanrob les vi rtual law lib rary

a. Whether, upon the filing by plaintiffs of their complaint against the defendants on December 12, 1962, the obligation of the defendants had not yet become due and demandable and, hence, the complaint was filed prematurely.
chan roble svirtualawl ibra ry c hanro bles vi rtua l law lib ra ry

b. Whether the payment of P576,573.90 with interest thereon at the stipulated rate of 6 % per annum was to be made dependent upon the consummation of the sale of the two haciendas of defendants Venturanzas and, hence, there was a novation of the contract of sale with purchase money mortgage, Exhibit B, as a result of a change in the manner of payment.
chan roble svirtualawl ibra ryc hanro bles vi rtua l law lib ra ry

c. Whether the sale on December 28, 1959 by the defendants Oledans to their co-defendants Venturanzas, of all their rights and interests in the property, subject-matter of the deed of sale with purchase money mortgage, Exhibit B, likewise constituted a novation thereof and, therefore, had the effect of discharging the defendants Oledans from their original obligation to the plaintiffs.
chanrob lesvi rtua lawlib rary chan robles v irt ual law l ibra ry

1. The first and second issues involve an interpretation of paragraph II (c) of the Deed of Sale with Purchase Money Mortgage, Exhibit B, which provides as follows: (c) The remaining balance of the purchase price, after deducting the sums of P100,000.00 and P40,000.00, mentioned in Paragraphs (a) and (b) of this Article II, aggregating the sum of FIVE HUNDRED SEVENTY-SIX THOUSAND FIVE HUNDRED SEVENTY-THREE PESOS AND NINETY CENTAVOS (P576,573.90) shall be paid, jointly and severally, by the VENDEES to the VENDORS WITHIN THREE (3) years from January 1, 1959, with interest at the rate of Six Per Centrum (6%) per annum, until fully paid of which the sum of P169,484.24, plus the corresponding interest thereon, shall be paid by the VENDEES to the VENDOR, FELIX CORTES y OCHOA, and the balance of P407,089.66, plus the corresponding interest thereon, shall be paid by the VENDEES to the VENDOR, NOEL J. CORTES. ... With respect to the first issue - whether the complaint was filed prematurely - there is no dispute that plaintiffs filed their complaint on December 12, 1962; that under the term of the contract, the pertinent portion of which is quoted above, the defendants were given until January 1, 1962 within which to pay their obligation; and that January 1, 1962 had passed without the defendants having paid to the plaintiffs the sum of P576,573.90 and the corresponding interest thereon notwithstanding repeated demands for payment made upon and duly received by them (Exhs. D, D-3 E, E-3, pp. 72, 73, 73-A, 74- 75, Folder of Exhibits). Therefore, when plaintiffs filed the complaint on December 12, 1962, the effects of default as against the defendants had already arisen. Besides, no less than the defendants Venturanzas themselves admitted in their brief that they were delayed in the payment of the balance of their obligation to the plaintiffs. Let us turn to page 25 of their brief. The delay in the payment of the balance of the purchase price due to the plaintiffsappellees was caused by the delay in the receipt of the payment of the purchase price

of the two haciendas of the herein defendants-appellants Venturanza spouses. The non-compliance of herein defendants-appellants with their obligations to pIaintiffsappellees was due to circumstances not within their control ... . One cannot admit being delayed in the payment of his obligation unless he believes that his obligation is already due and demandable. Stated otherwise, there is no delay if the obligation is not yet due.
chan roblesv irtualawli bra ry cha nrob les vi rtua l law lib rary

The alleged cause of their default in paying the balance of the price, is not force majeure nor an act of God. Hence, their failure to pay is not justified.
chanrob lesvi rtualaw lib rary c hanrobles vi rt ual law li brary

2. With respect to the second issue, defendants Venturanzas contend that the three-year period provided for in the Deed of Sale with Purchase Money Mortgage, Exhibit B, was dependent on the date when they would be able to collect the purchase price of the two properties they were trying to sell. For this purpose, they claim that Dr. Cortes, one of the plaintiffs, granted them an extension of time within which to pay and this act of Dr. Cortes constituted a novation of the contract.
chanro blesvi rt ualawlib ra ry chan roble s virtual law lib rary

This claim of defendants Venturanzas is equally devoid of merit. A careful reading of the Deed of Sale with Purchase Money Mortgage, Exhibit B, reveals the conspicuous absence of any provision making the consummation of the said contract dependent on the ability of defendants Venturanzas to collect the purchase price of their two haciendas. If this were the intention of the parties, they should have clearly stated it in the contract. It is true the defendants wrote two letters to Dr. Cortes and/or his lawyer (Exhibits H and I-Venturanza, p. 90, Folder of Exhibits), wherein the defendants Venturanzas requested an extension of time within which to pay and Dr. Cortes admitted having been informed of the alleged projected sale of defendants Venturanzas' properties. Dr. Cortes, however, vehemently denied having given said defendants any extension of time.
chanroble svirtualawl ibrary c hanro bles vi rtua l law li bra ry

The deed of sale with purchase money mortgage clearly indicates that the balance of P576,573.90 shall be paid by the defendants, jointly and severally, within three (3) years from January 1, 1959, with interest at the rate of 6% per annum, until fully paid. On January 1, 1962, the defendants failed and refused to pay their obligation. This is a clear case of an obligation with a definite period ex die, which period was incidentally established for the benefit of the defendants. The evidence presented by the plaintiffs to substantiate these facts approaches moral certainty, not merely preponderance of evidence. Hence, defendants' defense of novation as to the period for payment, fails.
chan roble svirtualawl ibra ry cha nro bles vi rtua l law lib ra ry

Furthermore, according to Article 1159 of the New Civil Code, obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. The deed, Exhibit B, does not show on its face that any of the limitation of the freedom of contract under Article 1306 of the same Code, such as law, morals, good customs, public order, or public policy, exists, On the contrary, the terms of said exhibit are so clear and leave no doubt with respect to the intention of the contracting parties. Hence, the literal meaning of its stipulations shall control (Art. 1370, New Civil Code). This is so because the intention of the parties is clearly manifested and they are presumed to intend the consequences of their voluntary acts ft. 5, par. [c], Rule 131, Revised Rules of Court). There being nothing in the deed, Exhibit B, which would argue against its enforcement, it follows that there is no ground or reason why it should not be given effect.
c hanro blesvi rt ualawlib ra ry chan roble s virtual law lib rary

WE therefore, see no reason to overturn the finding of the court a quo that the defendants are indebted to the plaintiffs on the mortgage constituted by them over the 33 parcels of land in question since the period for payment of the obligation had become due and, therefore, plaintiffs are entitled to a foreclosure of the said mortgage
chanrob les vi rtua l law lib rary

3. The third and last issue pertains to the principal defense of the defendants Oledans. These defendants claim that because they transferred their interest and participation in the property subject of the Deed of Sale with Purchase Money Mortgage, Exhibit B, to the defendants Venturanzas allegedly with the knowledge of the plaintiffs, novation by substitution of the person of the debtor took place and, therefore, their obligation to the plaintiffs had been extinguished.
chanro blesvi rt ualawlib ra ry chan roble s virtual law l ib rary

In resolving this issue, it is important to state some principles and jurisprudence underlying the concept and nature of novation as a mode of extinguishing obligations.
chanro blesvi rt ualawlib ra ry chan roble s virtual law lib rary

According to Manresa, novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or Principal conditions, or by substituting the person of the debtor, or by subrogating a third person to the rights of the creditor (8 Manresa 428, cited in IV Civil Code of the Philippines by Tolentino 1962 ed., p. 352). Unlike other modes of extinction of obligations, novation is a juridical act with a dual function - it extinguishes an obligation and creates a new one in lieu of the old.
chanro blesvi rtua lawlib rary chan roble s virtual law l ibra ry

Article 1293 of the New Civil Code provides: Novation which consists in substituting a new debtor ,in the place of the original one, may be made even without the knowledge or -i , it the will of the latter, but not without the without of the creditor (Emphasis supplied). Under this provision, there are two forms of novation by substituting the person of the debtor, and they are: (1) expromision and (2) delegacion. In the former,the initiative for the change does not come from the debtor and may even be made without his knowledge, since it consists in a third person assuming the obligation. As such, it logically requires the consent of the third person and the creditor. In the latter, the debtor offers and the creditor accepts a third person who consents to the substitution and assumes the obligation, so that the intervention and the consent of these three persons are necessary (8 Manresa 436-437, cited in IV Civil Code of the Philippines by Tolentino, 1962 ed., p. 360). In these two modes of substitution, the consent of the creditor is an indispensable requirement (Garcia vs. Khu Yek Chiong, 65 Phil. 466, 468)
chanroble s virtual law l ib rary

Defendants Oledans' theory is that the Agreement and Deed of Sale of Undivided Share in Real Estate (Exhibit 1-Oledan, p. 91, Folder of Exhibits), executed and entered into by and between them and their co-defendants Venturanzas, and which in effect transferred all their interest and participation in the property subject of the deed of mortgage (Exhibit B) to their co-defendants Venturanzas, extinguished their obligation to the plaintiffs. In support of their theory, they cited Article 1293 of the New Civil Code, quoted above, and then concluded that the creditor's consent to the novation which consists one "is entirely unnecessary and senseless." They also cited the cases of Rio Grande Oil Co. vs. Coleman (39 O.G. No. 38, 986) and Santisimo Rosario de Molo vs. Gemperle (39 O.G. No. 59, 1410), both decided by the Court of Appeals, through the learned Mr. Justice Sabino Padilla, who later became an active and respected member of this Court.
chanro blesvi rtua lawlib rary chan roble s virtual law l ibra ry

A perusal of the aforecited cases shows the following: From the Coleman case: ... A personal novation by substitution of another in place of the debtor may be effected with or without the knowledge of the debtor but not without the consent of the creditor (Art. 1205, Civil Code [now Art 1293, New Civil code]). this is the legal provision applicable to the case at bar. the reason for the requirement that the creditor give his consent to the substitution is obvious. the substitution of another in place of the debtor may prevent or delay the fulfillment or performance of the obligation by reason of the inability or insolvency of the new debtor; hence, the consent of the creditor is necessary. This kind of substitution may take place without the knowledge of the debtor when a third party assumes the obligation of the debtor with the consent of the creditor. The novation effected in this way is called delegacion. (Art. 1206, Civil Code [now Art. 1295, New Civil Code]). In these two modes of substitution, the consent of the creditor is always required.... (emphasis supplied). From the Gemperle case:

A personal novation by substitution of another in place of the debtor may take place with or without the knowledge of the debtor but not without the consent of the creditor (Article 1205, Civil code the creditor's consent to such substitution is obvious. Substitution of one debtor, for another may delay or prevent the fulfillment or performance of the obligation by reason of the temporary inability or insolvency of the new debtor. In a novation that takes place when the debtor offers and the creditor accepts a third party in place of the former debtor, the consent of the creditor is also necessary (art. 1206, Civil Code [now Art. 1295, New civil Code]). ... After going over carefully the aforecited portions of the decisions of the Court of Appeal cited by the defendants Oledans, WE find that they do not help any the cause of said defendants; on the contrary, they both militate against their theory. Be that as it may, suffice it to state that while the Agreement and Deed of Sale of Undivided Share in Real Estate, Exhibit 1-Oledan, might have created a juridical relation as between defendants Venturanzas and Oledans, it cannot however affect the relation between them on one hand, and the plaintiffs, on the other, since the latter are not privies to the said agreement, and this kind of novation cannot be made without the consent of the plaintiffs (Garcia vs. Khu Yek Chiong, et al., supra). One reason for the requirement of the creditor's consent to such substitution is obvious. Substitution of one debtor for another may delay or prevent the fulfillment of the obligation by reason of the financial inability or insolvency of the new debtor; hence, the creditor should agree to accept the substitution in order that it may be binding on him.
cha nrob lesvi rtua lawlibra ry cha nro bles vi rtua l law lib ra ry

Incidentally, this case is, in practically all respects, similar to, if not Identical with, the case of McCullough & Co. vs. Veloso and Serna (46 Phil. 1). In that case, plaintiff sold to defendant Veloso its property known as "McCullough Building" consisting of a land with the building thereon, for the price of P700,000.00. Veloso paid a down payment of P50,000.00 cash on account at the execution of the contract, and the balance of P650,000.00 to be paid on installment basis. To secure the payment of the balance, Veloso mortgaged the property purchased in favor of McCullough. It was stipulated that in case of failure on the part of Veloso to comply with any of the stipulations contained in the mortgage deed, all the installments with the interest thereon at the rate of 7% per annum shall become due, and the creditor shall then have the right to bring the proper action in court.
cha nrob lesvi rtua lawlib rary chan robles v irt ual law l ibra ry

Subsequently, Veloso sold the property with the improvements thereon for P100,000.00 to Serna, who agreed to respect the mortgage on the property in favor of McCullough and to assume Veloso's obligation to pay the plaintiff the balance. Veloso paid P50,000.00 on account of the P650,000.00 and Serna made several payments up to the total sum of P250.000.00 Subsequently, however, neither Veloso nor Serna made any payment upon the last installments, by virtue of which delay, the whole obligation became due McCullough went to court.
chan roble svirtualawl ibra ry cha nrobles vi rtual law lib rary

After due trial, the court sentenced defendant Veloso to pay the plaintiff the sum of P510,047.34, with interest thereon at 7%per annum, within three months; otherwise, the property mortgaged shall be sold at public auction to the highest bidder and in the manner provided by law, the proceeds of the sale to be applied to the payment of the judgment, after deducting the fees of the court's officer.
libra ry

cha nrob lesvi rtua lawlib rary c han robles v irt ual law

On appeal, defendant Veloso contended that having sold the property to Serna and the otter having assumed the obligation to pay the plaintiff"the unpaid balance of the price secured by the he was relieved from the obligation to pay the plaintiff. This means contract between the appellant and Serna, contract between him and the plaintiff was novated by the substitution of Serna as a new debtor.
libra ry

chanrob lesvi rtua lawlib rary chan robles v irt ual law

The Supreme Court ruled In order that this novation may take place, the law requires the consent of the creditor (Art. 1205 of the Old Civil code; now Art. 1293 of the New Civil Code). The plaintiff did not intervene in the contract between Veloso and Serna and did not expressly give his consent to this substitution. Novation must be express, and cannot be presumed.

In the case at bar, the agreement, Exhibit 1-Oledan relied upon by the defendants Oledans, does not show on its face that the plaintiffs intervened in, much less gave their consent to, the substitution; as a matter of fact, plaintiff Cortes vehemently denied having consented to the transfer of rights from the Oledans to the Venturanzas alone. Res inter alios acta alteri nocere non debet , no less than defendant lose Oledan himself testified that he did not personally see Dr. Cortes about the transfer of rights in Exhibit 1-Oledan, despite his commitment with his co-defendants in said agreement 'to inform Messrs. Felix Cortes and Noel J. Cortes (Jesus Noel) of the execution of the said agreement" (p. 15, t.s.n. hearing of January 19, 1965). There is thus a complete absence of animus novandi, whether express or implied, on the part of the creditors - the Corteses.
chan roble svirtualawl ibra ry cha nrob les vi rtua l law lib rary

With respect to the claim of plaintiffs for reasonable attorney's fees, paragraph III (G) of the Deed of Sale with Purchase Money Mortgage, Exhibit B, provides: G In the event of default on the part of the VENDEES and by reason thereof a suit is brought for the foreclosure of this mortgage or any other legal proceedings is instituted for the enforcement of any of the rights of the VENDORS hereunder, a reasonable compensation shall be paid, jointly and severally, by the VENDEES to the VENDORS for attorney's fees, in addition to the fees and costs allowed by the Rules of Court. The validity of the above agreement for reasonable attorney's fees was questioned in the pleadings of the defendants before the trial court. Before this Court, the plaintiffs in their brief (pp. 121-123, 126), called OUR attention to the oversight in respect thereto committed by the court a quo.
chan roble svirtualawl ibra ry cha nro bles vi rtua l law lib ra ry

With respect, however, to the interest due to the plaintiffs on the indebtedness of the defendants, WE are reminded of the mandate of Article 2212 of the New Civil Code, which provides: Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. Per stipulation, plaintiffs are entitled to collect from defendants interest at the rate of six per centum (6%) per annum on the remaining balance of P576,573.90 from January 1, 1959. Hence, for the period from January 1, 1959 to December 12, 1962, the date of the riling of the complaint, plaintiffs are entitled to collect from the defendants, by way of interest at six percent per annum, the sum of P136,482.13. Applying the aforequoted legal provision, this amount of P136,482.13 should be added to the principal of P576,573.90, making a total of P713,056.03, which shall earn legal interest stipulated at six percent per annum from December 13, 1962 until fully paid. Such interest is not due to stipulation; rather it is due to the mandate of the law hereinbefore quoted.
chanroblesv irt ualawli brary chan roble s virtual law lib rary

Now, considering that the total amount recoverable in this case approximates 1.4 million pesos as of October 31, 1977 (consisting of principal of P576,573.90, plus P136,482.13 interest from January 1, 1959 to December 12, 1962, plus P636,827.37 interest from December 13, 1962 to October 31, 1977), and that every step in the foreclosure proceedings had been tenaciously contested, not to mention the work it will still require counsel for the plaintiffs to collect the same by judicial proceedings, WE find that P50,000.00 is a reasonable amount to which the plaintiffs are entitled as and for attorney's fees.
cha nrob lesvi rtua lawlib rary chan robles vi rtual law lib rary

Anent the cross-claim of defendants Oledans against their co-defendants Venturanzas to the effect "that the defendants Venturanzas are liable to them for the balance of P22,285.83 in addition to the penalties stipulated in the agreement and deed of sale, Exhibit 1-Oledan, and the interests provided therein, WE find the claim for the balance of P22,285.83 meritorious.
chan roble svirtualawl ibra ry cha nrob les vi rtua l law lib rary

On their claim for penalties and interests as provided for in the same agreement, cross-claimants and defendants Oledans rely on the pertinent portions of the agreement, which read: xxx xxx xxx
chan robles v irt ual law l ibra ry

2. That upon the execution and signing of this Agreement, the PARTIES/OF THE FIRST PART (the Venturanzas will pay to the PARTIES OF THE SECOND PART (the Oledans and the latter hereby, acknowledge receipt thereof, of the sum of TWENTY TWO THOUSAND (TWO HUNDRED) AND EIGHTY FIVE PESOS AND EIGHTY THREE CENTAVOS (P22,285-83), Philippine Currency (Prudential Bank Check No. 965159) and the balance of Twenty Two Thousand Two Hundred and Eighty Five Pesos and Eighty Three centavos (P22,285.83), Philippine Currency, shall be paid by the PARTIES OF THE FIRST PART to the PARTIES OF THE SECOND PART within eight (8) months from the date and execution of this Agreement and Deed of Sale;
chanrobles v irt ual law li bra ry

xxx xxx xxx

chan robles v irt ual law l ibra ry

4. That in the event of failure on the part of the PARTIES OF THE FIRST PART to pay the said balance of Twenty Two Thousand Two Hundred and Eighty Five Pesos and Eighty Centavos (P22,285.80) within the said period of eight (8) months stipulated above, the said PARTIES OF THE FIRST PART will pay to the PARTIES OF THE SECOND PART a penalty of Six Thousand Three Hundred Sixty Seven Pesos and Thirty Centavos (P6,367.30) for the period from August 28, 1960 to August 28, 1961; another penalty of P6,367.30 for the period from August 28, 1961 to August 28, 1962; and another penalty of P6,367.30 for the period from August 28, 1962 to August 28, 1963. It is agreed that any part payment on the said balance of P22,285.80 has no effect on the payment of the penalty provided for herein, and in case of non-payment of the full amount of the balance of P22,285.80 within the said period of three years aforementioned or up to August 28, 1963, then the said balance left unpaid plus the penalties due, as provided for herein, shall bear an interest at the legal rate. It is of course understood, that the penalties and interest provided for herein shall not apply if the PARTIES OF THE FIRST PART shall pay the said balance of Twenty Two Thousand Two Hundred and Eighty Five Pesos and Eighty Centavos (P22,285.80) within the eight (8) months stipulated in paragraph 2 above, or on or before August 28, 1960;
chanroble s virt ual law lib rary

xxx xxx xxx

chan robles v irt ual law l ibra ry

(Brief for defendants Oledans, pp. 32-34, Folder of Exhibits, pp. 92- 93). A meticulous analysis of the aforequoted portions of Exhibit 1-Oledan shows:
cha nrob les vi rtua l law libra ry

1. That the Venturanzas were given a period of eight (8) months from and after December 28, 1959 the date of the execution of the agreement - within which to pay the balance of P22,285.80;
chanrobles vi rtual law lib rary

2. That in the event of failure on the part of the Venturanzas to pay the said balance of P22,285.80 within the said period of eight (8) months, the Venturanzas would pay to the Oledans a penalty of P6,367.30 annually, beginning August 28, 1960, for a period of three (3) years lip to August 28, 1963, regardless of any partial payment which the Venturanzas might make on the balance of P22,285.80; and
chan robles v irt ual law l ibra ry

3. That in case of non-payment of the whole obligation of P22,285.80 within the stipulated period of three (3) years from August 28, 1960 to August 28, 1963, such obligation or any balance thereof remaining unpaid, plus the penalties due at the rate of P6,367.30 annually for three (3) years, shall earn interest at the legal rate.
chanrob lesvi rtualaw lib rary c han robles v irt ual law li bra ry

Going over the entire agreement, Exhibit 1-Oledan, WE have noted the following:

cha nrob les vi rtual law lib rary

1. That in connection with the deed of sale with mortgage, Exhibit B, the Venturanzas were the ones who paid out of their own personal funds the One Hundred Thousand Pesos (P100,000.00) to the plaintiffs, representing the down payment on the purchase price of the property, with the

understanding that the Oledans would reimburse the Venturanzas their one-half (1/2) share of P50,000.00;
chanrobles vi rtual law lib rary

2. That subsequently, the Oledans decided not to continue with the payment or reimbursement to the Venturanzas of their one-half (1/2) share of P50,000.00 as above indicated, but they agreed to share in the amount of their investment of only P20,000.00;
chanro bles vi rt ual law li bra ry

3. That the Venturanzas were again the ones who paid out of their own personal funds the succeeding P40,000.00, which fell due on January 1, 1959, to the plaintiffs;
chanroble s virtual law lib rary

4. That it was only on January 16, 1959 that the Oledans were able to reimburse to the Venturanzas their one-half (1/2) share of the P40,000.00; and
chanro bles vi rt ual law li bra ry

5. That the sum of P20,000.00 was the only amount paid by the Oledans to and/or invested with the Venturanzas in their joint venture envisioned in the deed of sale with mortgage, Exhibit B.
chan roblesv irt ualawli bra ry cha nrob les vi rtual law lib rary

In support of their claim for penalties and interests, the cross-claimants and defendants Oledans contend that "this is a normal stipulation in contracts of this character." WE do not agree and hereby reject such claim for penalties as well as for interests.
chan roble svirtualawl ibra ry cha nrob les vi rtua l law lib rary

Settled is the rule that the contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy (Art. 1306, New Civil Code). The onwards show that crossclaimants and defendants Oledans more than broke even on their investment of P20,000.00 when they received from their co-defendants Venturanzas the sum of P22,285.F3 on December 28, 1959. From all indications, it would seem that defendants Venturanzas threw caution to the four winds, so to say, and bound themselves to pay to their co-defendants Oledans the stipulated penalty of P6,367.30 annually for three (3) years, beginning August 28, 1960, in their belief that within the said period of time they would have more than enough money with which to pay their obligation to the plaintiffs. Unfortunately, however, to their great disappointment, the unexpected happened as they ended up with no money with which to pay not only the balance of their obligation to the plaintiffs in the sum of P576,573.90, but also the balance of their obligation to their co-defendants Oledans in the sum of P22,285.30. Be that as it may justice and morality cannot consent to and sanction a clearly iniquitous deprivation of property, repulsive to the common sense of man. This is what this Court said some sixty (60) years ago in the case of Ibarra vs. Aveyro and Pre (37 Phil 273, 282), which WE cannot help but quote hereunder: Notwithstanding the imprudence and temerity shown by the defendants by their execution of a ruinous engagement, assumed, as it appears, knowingly and voluntarily, morality and justice cannot consent to and sanction a repugnant spoliation and iniquitous deprivation of property, repulsive to the common sense of man; and therefore, as all acts performed against the provisions of law are null and void, and as the penal clause referred to, notwithstanding its being an ostensible violation of morals, was inserted in said promissory note, and as there is no law that expressly authorizes it, we must conclude that the contracting party favored by said penal clause totally lacks all right of action to enforce its fulfillment (emphasis supplied). WHEREFORE, THE APPEALED JUDGMENT IS MODIFIED AND ANOTHER ONE IS RENDERED, DIRECTING:
chan roble s virtual law l ib rary

I. ALL THE DEFENDANTS APPELLANTS VENTURANZAS AND OLEDANS TO PAY JOINTLY AND SEVERALLY THE PLAINTIFFS-APPELLEES: A. THE SUM OF FIVE HUNDRED SEVENTY SIX THOUSAND FIVE HUNDRED SEVENTY THREE PESOS AND NINETY CENTAVOS (P576,573.90), PLUS ONE HUNDRED THIRTY SIX THOUSAND FOUR HUNDRED EIGHTY TWO PESOS AND THIRTEEN CENTAVOS

(P136,482.13) INTEREST AT THE RATE OF SIX PER CENTUM (6%) PER ANNUM FROM JANUARY 1, 1959 TO DECEMBER 12, 1962, PLUS INTEREST AT THE SAME RATE ON THE PRINCIPAL AMOUNT OF P576, 573.90 ADDED TO THE ACCRUED INTEREST FOR THE PERIOD FROM DECEMBER 13,1962 UNTIL THE WHOLE OBLIGATION IS FULLY PAID, WITHIN NINETY (90) DAYS FROM NOTICE HEREOF. IN DEFAULT OF SUCH PAYMENT, THE MORTGAGED PROPERTIES SHALL BE SOLD AT PUBLIC AUCTION TO REALIZE THE MORTGAGE INDEBTEDNESS AND COSTS IN ACCORDANCE WITH LAW; AND
chan robles v irt ual law l ibra ry

B. THE SUM OF FIFTY THOUSAND PESOS (P50,000.00) AS ATTORNEY'S FEES: II. THE CROSS-DEFENDANT'S VENTURANZAS TO PAY AND/OR REIMBURSE THE CROSS-CLAIMANTS OLEDANS: A. THE SUM OF TWENTY TWO THOUSAND TWO HUNDRED AND EIGHTY FIVE PESOS AND EIGHTY THREE CENTAVOS (P22,285.83), PLUS INTEREST AT THE RATE OF SIX PERCENT (6%) PER ANNUM COUNTED FROM THE FINALITY OF THIS DECISION, UNTIL THE SAW IS FULLY PAID;
c hanrob les virtual law l ibra ry

B. THE AMOUNT WHICH SAID CROSS-CLAIMANT'S MAY PAY TO PLAINTIFFSAPPELLEES UNDER THIS JUDGMENT;AND III. THE DEFENDANTS-APPELLANTS VENTURANZAS TO PAY TREBLE COSTS. Teehankee (Chairman), Mu;oz Palma, Martin, Fernandez and Guerrero, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-36902 January 30, 1982 LUIS PICHEL, Petitioner, vs. PRUDENCIO ALONZO, Respondent.
chanrobles v irt ual law li bra ry

GUERRERO, J.:

chanrob les vi rtual law lib rary

This is a petition to review on certiorari the decision of the Court of First Instance of Basilan City dated January 5, 1973 in Civil Case No. 820 entitled "Prudencio Alonzo, plaintiff, vs. Luis Pichel, defendant."
cha nro bles vi rtua l law lib ra ry

This case originated in the lower Court as an action for the annulment of a "Deed of Sale" dated August 14, 1968 and executed by Prudencio Alonzo, as vendor, in favor of Luis Pichel, as vendee, involving property awarded to the former by the Philippine Government under Republic Act No. 477. Pertinent portions of the document sued upon read as follows:
chanro bles vi rtua l law li bra ry

That the VENDOR for and in consideration of the sum of FOUR THOUSAND TWO HUNDRED PESOS (P4,200.00), Philippine Currency, in hand paid by the VENDEE to the entire satisfaction of the VENDOR, the VENDOR hereby sells transfers, and conveys, by way of absolute sale, all the coconut fruits of his coconut land, designated as Lot No. 21 - Subdivision Plan No. Psd- 32465, situated at Balactasan Plantation, Lamitan, Basilan City, Philippines;
chan robles v irt ual law l ibra ry

That for the herein sale of the coconut fruits are for all the fruits on the aforementioned parcel of land presently found therein as well as for future fruits to be produced on the said parcel of land during the years period; which shag commence to run as of SEPTEMBER 15,1968; up to JANUARY 1, 1976 (sic);
chan roble s virtual law l ibra ry

That the delivery of the subject matter of the Deed of Sale shall be from time to time and at the expense of the VENDEE who shall do the harvesting and gathering of the fruits;
chan roble s virtual l aw lib rary

That the Vendor's right, title, interest and participation herein conveyed is of his own exclusive and absolute property, free from any liens and encumbrances and he warrants to the Vendee good title thereto and to defend the same against any and all claims of all persons whomsoever. 1
chanroble s virtual law lib rary

After the pre-trial conference, the Court a quo issued an Order dated November 9, 1972 which in part read thus:
cha nro bles vi rtua l law lib ra ry

The following facts are admitted by the parties:

chanrobles v irt ual law l ibra ry

Plaintiff Prudencio Alonzo was awarded by the Government that parcel of land designated as Lot No. 21 of Subdivision Plan Psd 32465 of Balactasan, Lamitan, Basilan City in accordance with Republic Act No. 477. The award was cancelled by the Board of Liquidators on January 27, 1965 on the ground that, previous thereto, plaintiff was proved to have alienated the land to another, in violation of law. In 197 2, plaintiff's rights to the land were reinstated.
chanroblesv irt ualawli bra ry c hanro bles vi rtua l law li bra ry

On August 14, 1968, plaintiff and his wife sold to defendant an the fruits of the coconut trees which may be harvested in the land in question for the period, September 15, 1968 to January 1, 1976, in consideration of P4,200.00. Even as of the date of sale, however, the land was still under lease to one,

Ramon Sua, and it was the agreement that part of the consideration of the sale, in the sum of P3,650.00, was to be paid by defendant directly to Ramon Sua so as to release the land from the clutches of the latter. Pending said payment plaintiff refused to snow the defendant to make any harvest.
chan roble svi rtualaw lib rary chan roble s virtual law lib rary

In July 1972, defendant for the first time since the execution of the deed of sale in his favor, caused the harvest of the fruit of the coconut trees in the land.
chanroblesv irt ualawli bra ry c hanro bles vi rt ual law li bra ry

xxx xxx xxx

chan robles v irt ual law l ibra ry

Considering the foregoing, two issues appear posed by the complaint and the answer which must needs be tested in the crucible of a trial on the merits, and they are:
c hanro bles vi rt ual law li bra ry

First.- Whether or nor defendant actually paid to plaintiff the full sum of P4,200.00 upon execution of the deed of sale.
chanroblesv irtualawl ibra ry c han robles v irt ual law l ibra ry

Second.- Is the deed of sale, Exhibit 'A', the prohibited encumbrance contemplated in Section 8 of Republic Act No. 477? 2 Anent the first issue, counsel for plaintiff Alonzo subsequently 'stipulated and agreed that his client ... admits fun payment thereof by defendant. 3 The remaining issue being one of law, the Court below considered the case submitted for summary judgment on the basis of the pleadings of the parties, and the admission of facts and documentary evidence presented at the pre-trial conference.
chanro blesvi rt ualawlib ra ry chan roble s virtual law l ib rary

The lower court rendered its decision now under review, holding that although the agreement in question is denominated by the parties as a deed of sale of fruits of the coconut trees found in the vendor's land, it actually is, for all legal intents and purposes, a contract of lease of the land itself. According to the Court:
chanrob les vi rtua l law lib rary

... the sale aforestated has given defendant complete control and enjoyment of the improvements of the land. That the contract is consensual; that its purpose is to allow the enjoyment or use of a thing; that it is onerous because rent or price certain is stipulated; and that the enjoyment or use of the thing certain is stipulated to be for a certain and definite period of time, are characteristics which admit of no other conclusion. ... The provisions of the contract itself and its characteristics govern its nature. 4 The Court, therefore, concluded that the deed of sale in question is an encumbrance prohibited by Republic Act No. 477 which provides thus:
chan roble s virtual law lib rary

Sec. 8. Except in favor of the Government or any of its branches, units, or institutions, land acquired under the provisions of this Act or any permanent improvements thereon shall not be thereon and for a term of ten years from and after the date of issuance of the certificate of title, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of such period.
chanroblesvi rtua lawlib rary cha nrob les vi rtua l law lib rary

Any occupant or applicant of lands under this Act who transfers whatever rights he has acquired on said lands and/or on the improvements thereon before the date of the award or signature of the contract of sale, shall not be entitled to apply for another piece of agricultural land or urban, homesite or residential lot, as the case may be, from the National Abaca and Other Fibers Corporation; and such transfer shall be considered null and void. 5
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The dispositive portion of the lower Court's decision states:

chanrobles vi rtua l law lib ra ry

WHEREFORE, it is the judgment of this Court that the deed of sale, Exhibit 'A', should be, as it is, hereby declared nun and void; that plaintiff be, as he is, ordered to pay back to defendant the consideration of the sale in the sum of P4,200.00 the same to bear legal interest from the date of the

filing of the complaint until paid; that defendant shall pay to the plaintiff the sum of P500.00 as attorney's fees.
chanro blesvi rt ualawlib ra ry cha nro bles vi rtua l law lib ra ry

Costs against the defendant.

6
chan robles v irt ual law l ibra ry

Before going into the issues raised by the instant Petition, the matter of whether, under the admitted facts of this case, the respondent had the right or authority to execute the "Deed of Sale" in 1968, his award over Lot No. 21 having been cancelled previously by the Board of Liquidators on January 27, 1965, must be clarified. The case in point is Ras vs. Sua 7 wherein it was categorically stated by this Court that a cancellation of an award granted pursuant to the provisions of Republic Act No. 477 does not automatically divest the awardee of his rights to the land. Such cancellation does not result in the immediate reversion of the property subject of the award, to the State. Speaking through Mr. Justice J.B.L. Reyes, this Court ruled that "until and unless an appropriate proceeding for reversion is instituted by the State, and its reacquisition of the ownership and possession of the land decreed by a competent court, the grantee cannot be said to have been divested of whatever right that he may have over the same property." 8
c hanro bles vi rt ual law li bra ry

There is nothing in the record to show that at any time after the supposed cancellation of herein respondent's award on January 27, 1965, reversion proceedings against Lot No. 21 were instituted by the State. Instead, the admitted fact is that the award was reinstated in 1972. Applying the doctrine announced in the above-cited Ras case, therefore, herein respondent is not deemed to have lost any of his rights as grantee of Lot No. 21 under Republic Act No. 477 during the period material to the case at bar, i.e., from the cancellation of the award in 1965 to its reinstatement in 1972. Within said period, respondent could exercise all the rights pertaining to a grantee with respect to Lot No. 21.
chanroblesv irt ualawli bra ry virtua l law lib rary

c hanro bles

This brings Us to the issues raised by the instant Petition. In his Brief, petitioner contends that the lower Court erred:
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1. In resorting to construction and interpretation of the deed of sale in question where the terms thereof are clear and unambiguous and leave no doubt as to the intention of the parties;
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2. In declaring - granting without admitting that an interpretation is necessary - the deed of sale in question to be a contract of lease over the land itself where the respondent himself waived and abandoned his claim that said deed did not express the true agreement of the parties, and on the contrary, respondent admitted at the pre-trial that his agreement with petitioner was one of sale of the fruits of the coconut trees on the land;
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3. In deciding a question which was not in issue when it declared the deed of sale in question to be a contract of lease over Lot 21;
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4. In declaring furthermore the deed of sale in question to be a contract of lease over the land itself on the basis of facts which were not proved in evidence;
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5. In not holding that the deed of sale, Exhibit "A" and "2", expresses a valid contract of sale;

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6. In not deciding squarely and to the point the issue as to whether or not the deed of sale in question is an encumbrance on the land and its improvements prohibited by Section 8 of Republic Act 477; and
cha nrob les vi rtual law lib rary

7. In awarding respondent attorney's fees even granting, without admitting, that the deed of sale in question is violative of Section 8 of Republic Act 477. The first five assigned errors are interrelated, hence, We shall consider them together. To begin with, We agree with petitioner that construction or interpretation of the document in question is not called for. A perusal of the deed fails to disclose any ambiguity or obscurity in its provisions, nor is there

doubt as to the real intention of the contracting parties. The terms of the agreement are clear and unequivocal, hence the literal and plain meaning thereof should be observed. Such is the mandate of the Civil Code of the Philippines which provides that:
chan roble s virtual law l ib rary

Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control ... . Pursuant to the afore-quoted legal provision, the first and fundamental duty of the courts is the application of the contract according to its express terms, interpretation being resorted to only when such literal application is impossible. 9
chanrobles v irt ual law li bra ry

Simply and directly stated, the "Deed of Sale dated August 14, 1968 is precisely what it purports to be. It is a document evidencing the agreement of herein parties for the sale of coconut fruits of Lot No. 21, and not for the lease of the land itself as found by the lower Court. In clear and express terms, the document defines the object of the contract thus: "the herein sale of the coconut fruits are for an the fruits on the aforementioned parcel of land during the years ...(from) SEPTEMBER 15, 1968; up to JANUARY 1, 1976." Moreover, as petitioner correctly asserts, the document in question expresses a valid contract of sale. It has the essential elements of a contract of sale as defined under Article 1485 of the New Civil Code which provides thus:
c hanro bles vi rt ual law li bra ry

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
chanroble svirtualawl ibra ry cha nro bles vi rtua l law lib ra ry

A contract of sale may be absolute or conditional. The subject matter of the contract of sale in question are the fruits of the coconut trees on the land during the years from September 15, 1968 up to January 1, 1976, which subject matter is a determinate thing. Under Article 1461 of the New Civil Code, things having a potential existence may be the object of the contract of sale. And in Sibal vs. Valdez, 50 Phil. 512, pending crops which have potential existence may be the subject matter of the sale. Here, the Supreme Court, citing Mechem on Sales and American cases said which have potential existence may be the subject matter of sale. Here, the Supreme Court, citing Mechem on Sales and American cases said:
cha nrob les vi rtua l law lib rary

Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as the natural increment or usual incident of something already in existence, and then belonging to the vendor, and the title will vest in the buyer the moment the thing comes into existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep. 63) Things of this nature are said to have a potential existence. A man may sell property of which he is potentially and not actually possess. He may make a valid sale of the wine that a vineyard is expected to produce; or the grain a field may grow in a given time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow upon sheep; or what may be taken at the next case of a fisherman's net; or fruits to grow; or young animals not yet in existence; or the goodwill of a trade and the like. The thing sold, however, must be specific and Identified. They must be also owned at the time by the vendor. (Hull vs. Hull 48 Conn. 250 (40 Am. Rep., 165) (pp. 522-523). We do not agree with the trial court that the contract executed by and between the parties is "actually a contract of lease of the land and the coconut trees there." (CFI Decision, p. 62, Records). The Court's holding that the contract in question fits the definition of a lease of things wherein one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain and for a period which may be definite or indefinite (Art. 1643, Civil Code of the Philippines) is erroneous. The essential difference between a contract of sale and a lease of things is that the delivery of the thing sold transfers ownership, while in lease no such transfer of ownership results as the rights of the lessee are limited to the use and enjoyment of the thing leased.
chanrob lesvi rtua lawlib rary cha nrob les vi rtual law lib rary

In Rodriguez vs. Borromeo, 43 Phil. 479, 490, the Supreme Court held:

chanrob les vi rtual law lib rary

Since according to article 1543 of the same Code the contract of lease is defined as the giving or the concession of the enjoyment or use of a thing for a specified time and fixed price, and since such contract is a form of enjoyment of the property, it is evident that it must be regarded as one of the means of enjoyment referred to in said article 398, inasmuch as the terms enjoyment, use, and benefit involve the same and analogous meaning relative to the general utility of which a given thing is capable. (104 Jurisprudencia Civil, 443) In concluding that the possession and enjoyment of the coconut trees can therefore be said to be the possession and enjoyment of the land itself because the defendant-lessee in order to enjoy his right under the contract, he actually takes possession of the land, at least during harvest time, gather all of the fruits of the coconut trees in the land, and gain exclusive use thereof without the interference or intervention of the plaintiff-lessor such that said plaintiff-lessor is excluded in fact from the land during the period aforesaid, the trial court erred. The contract was clearly a "sale of the coconut fruits." The vendor sold, transferred and conveyed "by way of absolute sale, all the coconut fruits of his land," thereby divesting himself of all ownership or dominion over the fruits during the seven-year period. The possession and enjoyment of the coconut trees cannot be said to be the possession and enjoyment of the land itself because these rights are distinct and separate from each other, the first pertaining to the accessory or improvements (coconut trees) while the second, to the principal (the land). A transfer of the accessory or improvement is not a transfer of the principal. It is the other way around, the accessory follows the principal. Hence, the sale of the nuts cannot be interpreted nor construed to be a lease of the trees, much less extended further to include the lease of the land itself.
chan roblesv irt ualawli bra ry c han robles v irt ual law li bra ry

The real and pivotal issue of this case which is taken up in petitioner's sixth assignment of error and as already stated above, refers to the validity of the "Deed of Sale", as such contract of sale, vis-a-vis the provisions of Sec. 8, R.A. No. 477. The lower Court did not rule on this question, having reached the conclusion that the contract at bar was one of lease. It was from the context of a lease contract that the Court below determined the applicability of Sec. 8, R.A. No. 477, to the instant case.
chan roble svirtualawl ibra ry chan roble s virtual law l ibra ry

Resolving now this principal issue, We find after a close and careful examination of the terms of the first paragraph of Section 8 hereinabove quoted, that the grantee of a parcel of land under R.A. No. 477 is not prohibited from alienating or disposing of the natural and/or industrial fruits of the land awarded to him. What the law expressly disallows is the encumbrance or alienation of the land itself or any of the permanent improvements thereon. Permanent improvements on a parcel of land are things incorporated or attached to the property in a fixed manner, naturally or artificially. They include whatever is built, planted or sown on the land which is characterized by fixity, immutability or immovability. Houses, buildings, machinery, animal houses, trees and plants would fall under the category of permanent improvements, the alienation or encumbrance of which is prohibited by R.A. No. 477. While coconut trees are permanent improvements of a land, their nuts are natural or industrial fruits which are meant to be gathered or severed from the trees, to be used, enjoyed, sold or otherwise disposed of by the owner of the land. Herein respondents, as the grantee of Lot No. 21 from the Government, had the right and prerogative to sell the coconut fruits of the trees growing on the property.
chanro blesv irt ualawli bra ry c hanro bles vi rtua l law li bra ry

By virtue of R.A. No. 477, bona fide occupants, veterans, members of guerilla organizations and other qualified persons were given the opportunity to acquire government lands by purchase, taking into account their limited means. It was intended for these persons to make good and productive use of the lands awarded to them, not only to enable them to improve their standard of living, but likewise to help provide for the annual payments to the Government of the purchase price of the lots awarded to them. Section 8 was included, as stated by the Court a quo, to protect the grantees from themselves and the incursions of opportunists who prey on their misery and poverty." It is there to insure that the grantees themselves benefit from their respective lots, to the exclusion of other persons.
chan roble svirtualawl ibra ry c han robles v irt ual law l ibra ry

The purpose of the law is not violated when a grantee sells the produce or fruits of his land. On the contrary, the aim of the law is thereby achieved, for the grantee is encouraged and induced to be

more industrious and productive, thus making it possible for him and his family to be economically self-sufficient and to lead a respectable life. At the same time, the Government is assured of payment on the annual installments on the land. We agree with herein petitioner that it could not have been the intention of the legislature to prohibit the grantee from selling the natural and industrial fruits of his land, for otherwise, it would lead to an absurd situation wherein the grantee would not be able to receive and enjoy the fruits of the property in the real and complete sense.
chanroblesv irt ualawli bra ry chan rob l es virt ual law li bra ry

Respondent through counsel, in his Answer to the Petition contends that even granting arguendo that he executed a deed of sale of the coconut fruits, he has the "privilege to change his mind and claim it as (an) implied lease," and he has the "legitimate right" to file an action for annulment "which no law can stop." He claims it is his "sole construction of the meaning of the transaction that should prevail and not petitioner. (sic). 10 Respondent's counsel either misapplies the law or is trying too hard and going too far to defend his client's hopeless cause. Suffice it to say that respondent-grantee, after having received the consideration for the sale of his coconut fruits, cannot be allowed to impugn the validity of the contracts he entered into, to the prejudice of petitioner who contracted in good faith and for a consideration.
chanro blesvi rt ualawlib ra ry chan roble s virtual law l ib rary

The issue raised by the seventh assignment of error as to the propriety of the award of attorney's fees made by the lower Court need not be passed upon, such award having been apparently based on the erroneous finding and conclusion that the contract at bar is one of lease. We shall limit Ourselves to the question of whether or not in accordance with Our ruling in this case, respondent is entitled to an award of attorney's fees. The Civil Code provides that:
chan roble s virtual l aw lib rary

Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except:
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(1) When exemplary damages are awarded;

chanrobles vi rt ual law li bra ry

(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest;
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(3) In criminal cases of malicious prosecution against the plaintiff;

chanroble s virtual law l ibra ry

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

chan roble s virtual l aw lib rary

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim;
chanroble s virtual law l ibra ry

(6) In actions for legal support;

chanroble s virtual law l ibra ry

(7) In actions for the recovery of wages of household helpers, laborers and skilled workers; (8) In actions for indemnity under workmen's compensation and employer's liability laws; (9) In a separate civil action to recover civil liability arising from a crime; (10) When at least double judicial costs are awarded;
chan roble s virtual law l ib rary chan roble s virtual law l ibra ry

chanroble s virtual law lib rary

chan roble s virtual law l ibra ry

(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered.
chanrob lesvi rtua lawlib rary cha nrob les vi rtua l law lib rary

In all cases, the attorney's fees and expenses of litigation must be reasonable.

We find that none of the legal grounds enumerated above exists to justify or warrant the grant of attorney's fees to herein respondent.
chanroblesv irtualawl ibra ry c han robles v irt ual law l ibra ry

IN VIEW OF THE FOREGOING, the judgment of the lower Court is hereby set aside and another one is entered dismissing the Complaint. Without costs.
chanro blesvi rtua lawlib rary ch anroble s virtual law l ib rary

SO ORDERED. Teehankee (Chairman), Makasiar, Fernandez, Melencio-Herrera and Plana, JJ., concur.

Endnotes: 1 Exhibit "A", Folder of Exhibits.

chanroble s virtual law l ibra ry

2 Order of the lower Court dated November 9, 1972, Original Record on Appeal pp. 910. The first issue was originally phrased thus: "Was the partial consideration of sale in the sum of P 3,650.00 paid by defendant to Ramon Sua as agreed upon by the parties?," but was later changed to what appears above, in an Order dated November 21, 197 2, Original Record on Appeal p. 12.
chan robles v irt ual law l ibra ry

3 Decision of the lower Court dated January 5, 1973, Original Record on Appeal p. 16.
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4 Ibid, pp. 17-18.

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5 This provision has been amended by Section 2 of Presidential Decree No. 967, promulgated on June 24, 1976, to read as follows: "Sec. 8. Any provision of law, executive order, rules or regulations to the contrary notwithstanding, an applicant who has acquired land pursuant to the provisions of this Act and to whom a certificate of title has been issued covering such land may sell, cede, transfer, or convey his rights and interests therein, including the permanent improvements on the land, to any interested party." 6 Decision of the lower Court dated January 5, 1973, Original Record on Appeal, p. 19.
chanrob les vi rtua l law lib rary

7 L-23302, September 25, 1968, 25 SCRA 153. 8 Ibid, p. 160.

chanrobles vi rt ual law li bra ry

chan roble s virtual law l ibra ry

9 See Pacific Oxygen and Acetylene Co. vs. Central Bank, L-21881, March 1, 1968, 22 SCRA 917, 921.
chan roble s virtual law lib rary

10 Respondent's Answer to Petition for Review, p. 5; Rollo, p. 74.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-21676 February 28, 1969

VICENTE ALDABA, ET AL. Petitioners, vs. COURT OF APPEALS, CESAR ALDABA, ET AL., Respondents. ZALDIVAR, J.:
chanro bles vi rtua l law lib ra ry

This is a petition to review the decision of the Court of Appeals in case CA-G.R. No. 27561-R, entitled "Vicente Aldaba, et al., plaintiffs-appellants, versus Cesar Aldaba, et al., defendantsappellees", affirming the decision of the Court of First Instance of Manila in its Civil Case No. 41260.
chanrob lesvi rtua lawlib rary chan robles v irt ual law l ibra ry

When Belen Aldaba, a rich woman of Malolos, Bulacan, died on February 25, 1955, she left as her presumptive heirs her surviving husband Estanislao Bautista, and her brother Cesar Aldaba. Belen Aldaba was childless. Among the properties that she left were the two lots involved in this case, situated at 427 Maganda Street, Santa Mesa, Manila.
cha nro blesvi rtualaw lib rary c hanro bles vi rt ual law li bra ry

Petitioners Dr. Vicente Aldaba and Jane Aldaba, father and daughter, respectively, lived during the last war in their house in Malate, Manila. Belen Aldaba used to go to their house to seek the advice and medical assistance of Dr. Vicente Aldaba. When the latter's house was burned during the liberation of Manila in 1945, Belen Aldaba invited Dr. Aldaba and his daughter, who was then a student in medicine, to live in one of her two houses standing on the lots in question, and the Aldaba father and daughter accepted the offer of Belen and they actually lived in one of those two houses until sometime in 1957 when respondent Emmanuel Bautista filed an ejectment case against them in the city court of Manila. Dr. Vicente Aldaba continued to act as a sort of adviser of Belen and Jane, after becoming a qualified doctor of medicine, became the personal physician of Belen until the latter's death on February 25, 1955.
chanro blesvi rt ualawlib ra ry chan roble s virtual law lib rary

On June 24, 1955, the presumptive heirs Estanislao Bautista and Cesar Aldaba, executed a deed of extrajudicial partition of the properties left by the deceased Belen Aldaba, by virtue of which deed the two lots in question were alloted to Cesar Aldaba. Subsequently, on August 26, 1957, herein respondents Cesar Aldaba and Emmanuel Bautista, the latter being a grandson of Estanislao Bautista by his first marriage, executed a deed whereby the two lots that were alloted to Cesar Aldaba were ceded to Emmanuel Bautista in exchange of the latter's lot situated at San Juan, Rizal. By virtue of the deed of extra-judicial partition and the deed of exchange, Transfer certificates of Title Nos. 1334 and 1335, respectively, covering lots Nos. 32 and 34 - now in question - both in the name of Belen Aldaba, were cancelled by the Register of Deeds of Manila, and Transfer Certificates of Title Nos. 49996 and 49997 in the name of Emmanuel Bautista were issued in lieu thereof.
chanroble svi rtualawl ib rary c hanro bles vi rt ual law li bra ry

Emmanuel Bautista then required Dr. Vicente Aldaba to vacate the lots in question and, upon the latter's refusal, filed an ejectment case against him in the City Court of Manila. Without awaiting the final result of the ejectment case, herein petitioners filed, on August 22, 1959, a complaint in the Court of First Instance of Manila, docketed as Civil Case No. 41260, against herein respondents Cesar Aldaba and Emmanuel Bautista and the Register of Deeds of Manila, alleging that they had become the owners of the two lots in question, and praying that the deed of partition entered into by Estanislao Bautista and Cesar Aldaba be declared null and void with respect to Lot No. 32, covered by Transfer Certificate of Title No. 1334, and lot No. 34 covered by Transfer Certificate of Title No 1335; that said lots be declared the property of therein plaintiffs (herein petitioners); and that the Register of Deeds of Manila be ordered to cancel TCT Nos. 49996 and 49997 in the name of Emmanuel Bautista and in lieu thereof issue two new TCTs in the name of therein plaintiffs.
chanrob lesvi rtua lawlib rary chan roble s virt ual law l ibra ry

After hearing, the court a quo rendered a decision dismissing the complaint, and declaring, among others, that if the deceased Belen Aldaba intended to convey the lots in question to Vicente Aldaba and Jane Aldaba, by way of donation, the conveyance should be considered a donation inter vivos, for the validity of which a public instrument was necessary pursuant to Article 749 of the Civil Code. The dispositive portion of the decision of the trial court reads as follows: IN VIEW WHEREOF both complaint and counterclaim dismissed; the Court holds Emmanuel Bautista to be the absolute owner of the property in question, land and improvement, but with the right of plaintiffs to stay until they should have been reimbursed of P5,000.00 but without any obligation, until such reimbursement, to pay any rental unto defendant Emmanuel Bautista. No pronouncement as to costs. From this decision, therein plaintiffs appealed to the Court of Appeals, and the latter court rendered a decision, on June 21, 1963, raising from P5,000 to P8,000 the amount to be reimbursed to plaintiffs-appellants, but affirming in all other respects the decision of the lower court. Herein petitioners' motion for reconsideration of the decision having been denied by the Court of Appeals, they forthwith filed the present petition in this Court.
cha nro blesvi rtualaw lib rary c hanro bles vi rt ual law li bra ry

Before this Court, petitioners now contend that the Court of Appeals erred: (1) in affirming the decision of the Court of First Instance; (2) in holding that the donation, as found by the Court of First Instance of Manila, was a simple donation inter vivos and not a donation "con causa onerosa and so it was void for it did not follow the requirements of Article 749 of the Civil Code; (3) in not holding that the property in question had already been donated to herein petitioners in consideration of the latter's services; (4) in not declaring petitioners to be the absolute owners of the property in dispute; and (5) in considering testimonies which had been stricken out.
chan roble svirtualawl ibra ry cha nro bles vi rtua l law lib ra ry

The errors assigned by petitioners being interrelated, We are going to discuss them together.
chanroble svi rtualaw lib rary c hanro bles vi rt ual law li bra ry

Petitioners contend that petitioners Dr. Vicente Aldaba and Jane Aldaba had rendered services to the deceased Belen Aldaba for more than ten years without receiving any compensation, and so in compensation for their services Belen Aldaba gave them the lots in dispute including the improvements thereon. It is the stand of petitioners that the property in question was conveyed to them by way of an onerous donation which is governed by Article 733, and not Article 749, of the Civil Code. Under Article 733 of the Civil Code an onerous donation does not have to be done by virtue of a public instrument. The petitioners point to the note, Exhibit 6, as indicating that a donation had been made, which note reads as follows: June 18, 1953 Jane,
chan roble s vi rtual law lib rary

Huag kayong umalis diyan. Talagang iyan ay para sa inyo. Alam nila na iyan ay sa inyo. Belen A. Bautista. Petitioners maintain that the note, although it could not transmit title, showed, nevertheless, that a donation had already been made long before its writing, in consideration of the services rendered before the writing and to be rendered after its writing. And the donation being with an onerous cause, petitioners maintain that it was valid even if it was done orally. Petitioners further maintain that if Exhibit 6 labors under some ambiguity, this ambiguity is cured by Exhibit 7, which reads as follows: June 27, 1956

Dear Nana Tering,

cha nro bles vi rtua l law lib ra ry

Narito po ang notice tungkol sa amillaramiento na pagbabayaran diyan sa lupa at bahay na kinatatayuan ninyo. Sa Malolos po ito tinanggap. Ang pagbabayaran po ng Inkong ay bayad na. Gumagalang,

"Cely."

The addressee, Tering, was the wife of Dr. Vicente Aldaba, and the sender, Cely was the wife of respondent Emmanuel Bautista. This note, petitioners argue, proves that respondents had recognized the ownership of the petitioners of the house and lot, for, otherwise, Cely should have sent the notice of real estate tax to respondent Cesar Aldaba, to whom was alloted the property in question by virtue of the extra-judicial partition.
chan roble svirtualawl ibra ry cha nrob les vi rtua l law lib rary

Respondents, Cesar Aldaba and Emmanuel Bautista, on the other hand, contend that the evidence of the plaintiff does not disclose clearly that a donation had been made. Respondents point out that the note, Exhibit 6, as worded, is vague, in that it could not be interpreted as referring to the lots in question, or that which was given therein was given for a valuable consideration. And finally, respondents contend that if the property had really been given to petitioners, why did they not take any step to transfer the property in their names?
chanroble s virtual law lib rary

The Court of Appeals, in its decision, made the following findings and conclusions: (1) The note Exhibit 6 did not make any reference to the lots in question, nor to the services rendered, or to be rendered, in favor of Belen. The note was insufficient is a conveyance, and hence could not be considered as evidence of a donation with onerous cause. This note can be considered, at most, as indicative of the intention to donate.
chanrob lesvi rtua lawlib rary c han robles v irt ual law l ibra ry

(2) There is no satisfactory explanation why from 1945 to 1955, no notarial document was executed by Belen in favor of petitioners who were educated persons. The reason given was "extremada delicadeza" which reason the Court of Appeals considered as unsatisfactory.

chanro blesvi rt ualawlib ra ry chan roble s virtual law lib rary

(3) The evidence regarding the value of the services (P53,000.00) rendered by petitioners (father and daughter) to Belen does not improve the proof regarding the alleged donation. If petitioners believed that the gratuitous use of the property was not sufficient to compensate them for their services, they could have presented their claims in the intestate proceedings, which they themselves could have initiated, if none was instituted. The conclusion of the Court of Appeals, as well as that of the trial court, that there was no onerous donation made by Belen Aldaba to petitioners is based upon their appreciation of the evidence, and this Court will not disturb the factual findings of those courts.
chan roble svirtualawl ibra ry cha nro ble s virt ual law li bra ry

The question to be resolved in the instant case is: Was there a disposition of the property in question made by the deceased Belen Aldaba in favor of herein petitioners? The note, Exhibit 6, considered alone, was, as held by the Court of Appeals, confirming the opinion of the lower court, only an indication of the intention of Belen Aldaba to donate to the petitioners the property occupied by the latter. We agree with this conclusion of the trial court and the Court of Appeals. The note, in fact, expressed that the property was really intended for the petitioners, "talagang iyan ay para sa inyo." If the property was only intended for petitioners then, at the time of its writing, the property had not yet been disposed of in their favor. There is no evidence in the record that such intention was effectively carried out after the writing of the note. Inasmuch as the mere expression of an intention is not a promise, because a promise is an undertaking to carry the intention into effect, 1 We cannot, considering Exhibit 6 alone, conclude that the deceased promised, much less did convey, the property in question to the petitioners. That the note, Exhibit 6, was only an indication of an intention to give

was also the interpretation given by petitioners themselves, when they said in their memorandum, dated February 2, 1960, in the lower court 2 thus: Legally speaking, there was a contractual relation created between Belen Aldaba and the plaintiff since 1945 whereby the former would give to the latter the two parcels of land, together with the house standing thereon, upon the rendition of said services. This fact can be gleaned from the note (Exh. "6", Plaintiffs) which in part says: TALAGANG IYAN AY PARA SAINYO We have said that Exhibit 6 expressed only the intention to donate. Let us suppose, for the sake of argument, that previous to the writing of the note there had already been a disposition of the property in favor of the petitioners. This disposition alone, would not make the donation a donation for a valuable consideration. We still have to ask: What was the consideration of such disposition? We do not find in the record that there had been an express agreement between petitioners and Belen Aldaba that the latter would pay for the services of the former. If there was no express agreement, could it not be at least implied? There could not be an implied contract for payment because We find in the record that Jane did not expect to be paid for her services. In the memorandum of counsel for the petitioners in the trial court We find this statement: For all she did to her aunt she expected not to be paid.3 When a person does not expect to be paid for his services, there cannot be a contract implied in fact to make compensation for said services. However, no contract implied in fact to make compensation for personal services performed for another arises unless the party furnishing the services then expected or had reason to expect the payment or compensation by the other party. To give rise to an implied contract to pay for services, they must have been rendered by one party in expectation that the other party would pay for them, and have been accepted by the other party with knowledge of that expectation. (58 Am. Jur. p. 512 and cases cited therein). In the same manner when the person rendering the services has renounced his fees, the services are not demandable obligations. 4
chan robles vi rt ual law li bra ry

Even if it be assumed for the sake of argument that the services of petitioners constituted a demandable debt, We still have to ask whether in the instant case this was the consideration for which the deceased made the (alleged) disposition of the property to the petitioners. As we have adverted to, we have not come across in the record even a claim that there was an express agreement between petitioners and Belen Aldaba that the latter would give the property in question in consideration of the services of petitioners. All that petitioners could claim regarding this matter was that "it was impliedly understood" between them. 5 How said agreement was implied and from what facts it was implied, petitioners did not make clear. The question of whether or not what is relied upon as a consideration had been knowingly accepted by the parties as a consideration, is a question of fact, 6 and the Court of Appeals has not found in the instant case that the lots in question were given to petitioners in consideration of the services rendered by them to Belen Aldaba.
chanro blesvi rtua lawlib rary chan roble s virtual law l ibra ry

We find, therefore, that the conditions to constitute a donation cum causa onerosa are not present in the instant case, and the claim of petitioners that the two lots in question were donated to them by Belen Aldaba cannot be sustained.
chanrob lesvi rtua lawlib rary c han robles v irt ual law l ibra ry

WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against the petitioners. It is so ordered.
chanroblesv irt ualawli bra ry chan roble s vi rtual law lib rary

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Castro, Fernando, Capistrano, Teehankee and Barredo, JJ., concur. Sanchez, J., took no part.

Endnotes:
1

17 American Jurisprudence, 2d. p. 334. Record on Appeal, pp. 87-88. Emphasis supplied. Record on Appeal, p. 83. Manresa, Commentaries al Codigo Civil Espaol, 5th ed. Vol. V, p. 73. Brief for petitioners, p. 14. 17 American Jurisprudence 2d. pp. 434-435.

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-36840 May 22, 1973 PEOPLE'S CAR INC., plaintiff-appellant, vs. COMMANDO SECURITY SERVICE AGENCY, Defendant-Appellee.

TEEHANKEE, J.: In this appeal from the adverse judgment of the Davao court of first instance limiting plaintiffappellant's recovery under its complaint to the sum of P1,000.00 instead of the actual damages of P8,489.10 claimed and suffered by it as a direct result of the wrongful acts of defendant security agency's guard assigned at plaintiff's premises in pursuance of their "Guard Service Contract", the Court finds merit in the appeal and accordingly reverses the trial court's judgment.
chanro blesv irt ualawlib ra ry chan roble s virtual law lib rary

The appeal was certified to this Court by a special division of the Court of Appeals on a four-to-one vote as per its resolution of April 14, 1973 that "Since the case was submitted to the court a quo for decision on the strength of the stipulation of facts, only questions of law can be involved in the present appeal."
chanrobles vi rt ual law li bra ry

The Court has accepted such certification and docketed this appeal on the strength of its own finding from the records that plaintiff's notice of appeal was expressly to this Court (not to the appellate court)" on pure questions of law" 1 and its record on appeal accordingly prayed that" the corresponding records be certified and forwarded to the Honorable Supreme Court." 2 The trial court so approved the same 3 on July 3, 1971 instead of having required the filing of a petition for review of the judgment sought to be appealed from directly with this Court, in accordance with the provisions of Republic Act 5440. By some unexplained and hitherto undiscovered error of the clerk of court, furthermore, the record on appeal was erroneously forwarded to the appellate court rather than to this Court.
chan roble svirtualawl ibra ry cha nrob les vi rtua l law lib rary

The parties submitted the case for judgment on a stipulation of facts. There is thus no dispute as to the factual bases of plaintiff's complaint for recovery of actual damages against defendant, to wit, that under the subsisting "Guard Service Contract" between the parties, defendant-appellee as a duly licensed security service agency undertook in consideration of the payments made by plaintiff to safeguard and protect the business premises of (plaintiff) from theft, pilferage, robbery, vandalism and all other unlawful acts of any person or person prejudicial to the interest of (plaintiff)." 4
chan robles v irt ual law li bra ry

On April 5, 1970 at around 1:00 A.M., however, defendant's security guard on duty at plaintiff's premises, "without any authority, consent, approval, knowledge or orders of the plaintiff and/or defendant brought out of the compound of the plaintiff a car belonging to its customer, and drove said car for a place or places unknown, abandoning his post as such security guard on duty inside the plaintiff's compound, and while so driving said car in one of the City streets lost control of said car, causing the same to fall into a ditch along J.P. Laurel St., Davao City by reason of which the plaintiff's complaint for qualified theft against said driver, was blottered in the office of the Davao City Police Department." 5
chanrob les vi rtua l law lib rary

As a result of these wrongful acts of defendant's security guard, the car of plaintiff's customer, Joseph Luy, which had been left with plaintiff for servicing and maintenance, "suffered extensive damage in the total amount of P7,079." 6 besides the car rental value "chargeable to defendant" in the sum of P1,410.00 for a car that plaintiff had to rent and make available to its said customer to enable him to pursue his business and occupation for the period of forty-seven (47) days (from April 25 to June 10, 1970) that it took plaintiff to repair the damaged car, 7 or total actual damages incurred by plaintiff in the sum of P8,489.10.
chan roble svirtualawl ibra ryc hanro bles vi rt ual law lib rary

Plaintiff claimed that defendant was liable for the entire amount under paragraph 5 of their contract whereunder defendant assumed "sole responsibility for the acts done during their watch hours" by its guards, whereas defendant contended, without questioning the amount of the actual damages incurred by plaintiff, that its liability "shall not exceed one thousand (P1,000.00) pesos per guard post" under paragraph 4 of their contract.
chanroblesv irt ualawli bra ry chan roble s virtual law lib rary

The parties thus likewise stipulated on this sole issue submitted by them for adjudication, as follows: Interpretation of the contract, as to the extent of the liability of the defendant to the plaintiff by reason of the acts of the employees of the defendant is the only issue to be resolved.
chanroblesvi rt ualawlib ra ry chan roble s virtual law lib rary

The defendant relies on Par. 4 of the contract to support its contention while the plaintiff relies on Par. 5 of the same contract in support of its claims against the defendant. For ready reference they are quoted hereunder: 'Par. 4. - Party of the Second Part (defendant) through the negligence of its guards, after an investigation has been conducted by the Party of the First Part (plaintiff) wherein the Party of the Second Part has been duly represented shall assume full responsibilities for any loss or damages that may occur to any property of the Party of the First Part for which it is accountable, during the watch hours of the Party of the Second Part, provided the same is reported to the Party of the Second Part within twenty-four (24) hours of the occurrence, except where such loss or damage is due to force majeure, provided however that after the proper investigation to be made thereof that the guard on post is found negligent and that the amount of the loss shall not exceed ONE THOUSAND (P1,000.00) PESOS per guard post.'
chanroble s virtual law l ibrary

'Par. 5 - The party of the Second Part assumes the responsibility for the proper performance by the guards employed, of their duties and (shall) be solely responsible for the acts done during their watch hours, the Party of the First Part being specifically released from any and all liabilities to the former's employee or to the third parties arising from the acts or omissions done by the guard during their tour of duty.' ... 8 The trial court, misreading the above-quoted contractual provisions, held that "the liability of the defendant in favor of the plaintiff falls under paragraph 4 of the Guard Service Contract" and rendered judgment "finding the defendant liable to the plaintiff in the amount of P1,000.00 with costs."
chan roble s virtual law l ib rary

Hence, this appeal, which, as already indicated, is meritorious and must be granted.

chanroble svirtualawl ibra ry cha nrob les vi rtua l law lib rary

Paragraph 4 of the contract, which limits defendant's liability for the amount of loss or damage to any property of plaintiff to "P1,000.00 per guard post," is by its own terms applicable only for loss or damage 'through the negligence of its guards ... during the watch hours" provided that the same is duly reported by plaintiff within 24 hours of the occurrence and the guard's negligence is verified after

proper investigation with the attendance of both contracting parties. Said paragraph is manifestly inapplicable to the stipulated facts of record, which involve neither property of plaintiff that has been lost or damaged at its premises nor mere negligence of defendant's security guard on duty.
c hanro blesvi rt ualawlib ra ry chan roble s virtual law lib rary

Here, instead of defendant, through its assigned security guards, complying with its contractual undertaking 'to safeguard and protect the business premises of (plaintiff) from theft, robbery, vandalism and all other unlawful acts of any person or persons," defendant's own guard on duty unlawfully and wrongfully drove out of plaintiffs premises a customer's car, lost control of it on the highway causing it to fall into a ditch, thereby directly causing plaintiff to incur actual damages in the total amount of P8,489.10.
chanroblesv irt ualawli bra ry chan roble s virtual law lib rary

Defendant is therefore undoubtedly liable to indemnify plaintiff for the entire damages thus incurred, since under paragraph 5 of their contract it "assumed the responsibility for the proper performance by the guards employed of their duties and (contracted to) be solely responsible for the acts done during their watch hours" and "specifically released (plaintiff) from any and all liabilities ... to the third parties arising from the acts or omissions done by the guards during their tour of duty." As plaintiff had duly discharged its liability to the third party, its customer, Joseph Luy, for the undisputed damages of P8,489.10 caused said customer, due to the wanton and unlawful act of defendant's guard, defendant in turn was clearly liable under the terms of paragraph 5 of their contract to indemnify plaintiff in the same amount.
chan roble svirtualawl ibrary c hanro bles vi rtua l law li bra ry

The trial court's approach that "had plaintiff understood the liability of the defendant to fall under paragraph 5, it should have told Joseph Luy, owner of the car, that under the Guard Service Contract, it was not liable for the damage but the defendant and had Luy insisted on the liability of the plaintiff, the latter should have challenged him to bring the matter to court. If Luy accepted the challenge and instituted an action against the plaintiff, it should have filed a third-party complaint against the Commando Security Service Agency. But if Luy instituted the action against the plaintiff and the defendant, the plaintiff should have filed a crossclaim against the latter," 9 was unduly technical and unrealistic and untenable.
chan roble svirt ualawli bra ry chan rob les vi rtual law lib rary

Plaintiff was in law liable to its customer for the damages caused the customer's car, which had been entrusted into its custody. Plaintiff therefore was in law justified in making good such damages and relying in turn on defendant to honor its contract and indemnify it for such undisputed damages, which had been caused directly by the unlawful and wrongful acts of defendant's security guard in breach of their contract. As ordained in Article 1159, Civil Code, "obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith."
chanro bles vi rtua l law li bra ry

Plaintiff in law could not tell its customer, as per the trial court's view, that "under the Guard Service Contract it was not liable for the damage but the defendant" - since the customer could not hold defendant to account for the damages as he had no privity of contract with defendant. Such an approach of telling the adverse party to go to court, notwithstanding his plainly valid claim, aside from its ethical deficiency among others, could hardly create any goodwill for plaintiff's business, in the same way that defendant's baseless attempt to evade fully discharging its contractual liability to plaintiff cannot be expected to have brought it more business. Worse, the administration of justice is prejudiced, since the court dockets are unduly burdened with unnecessary litigation.
chanroble svi rtualawl ib rary c hanro bles vi rt ual law li bra ry

ACCORDINGLY, the judgment appealed from is hereby reversed and judgment is hereby rendered sentencing defendant-appellee to pay plaintiff-appellant the sum of P8,489.10 as and by way of reimbursement of the stipulated actual damages and expenses, as well as the costs of suit in both instances. It is so ordered. Makalintal, Zaldivar, Castro, Fernando, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.

Endnotes:

1 Rec. on appeal, p. 39. 2 Idem, pp. 40-41. 3 Idem, p. 42. 4 Annex A, complaint, Rec. on app., pp. 8-13. 5 Par. 1. Stipulation of Facts, Rec. on app., p. 24. 6 Par. 2, idem. 7 Par. 3, idem. 8 Rec. on app., pp. 26-27; notes in emphasis supplied. 9 Decision, Rec. on App, pp. 29-30.

EN BANC [G.R. No. L-8171. August 16, 1956.] EMILIO MANALO and CLARA SALVADOR, Plaintiffs-Appellees, vs. ROBLES TRANSPORTATION COMPANY, INC., Defendant-Appellant.

DECISION MONTEMAYOR, J.: Robles Transportation Company, Inc., later referred to as the Company, is appealing from the decision of the Court of First Instance of Rizal, civil case No. 2013, ordering it to pay PlaintiffsEmilio Manalo and his wife, Clara Salvador, the sum of P3,000 with interest at 12 per cent per annum from November 14, 1952 plus the amount of P600 for attorneys fees and expenses of litigation, with costs. The facts involved in this case are simple and without dispute. On August 9, 1947, a taxicab owned and operated by Defendant Appellant Company and driven by Edgardo Hernandez its driver, collided with a passenger truck at Paraaque, Rizal. In the course of and as a result of the accident, the taxicab ran over Armando Manalo, an eleven year old, causing him physical injuries which resulted in his death several days later. Edgardo Hernandez was prosecuted for homicide through reckless imprudence and after trial was found guilty of the charge and sentenced to one year prision correccional, to indemnify the heirs of the deceased in the amount of P3,000, in case of insolvency to suffer subsidiary imprisonment, and to pay costs. Edgardo Hernandez served out his sentence but failed to pay the indemnity. Two writs of execution were issued against him to satisfy the amount of the indemnity, but both writs were returned unsatisfied by the sheriff who certified that no property, real or personal, in Hernandez name could be found. On February 17, 1953, Plaintiffs Emilio Manalo and his wife Clara Salvador, father and mother respectively of Armando, filed the present action against the Company to enforce its subsidiary liability, pursuant to Articles 102 and 103 of the Revised Penal Code. The Company filed its appearance and answer and later an amended answer with special defenses and counterclaim. It also filed a motion to dismiss the complaint unless and until the convicted driver Hernandez was included as a party Defendant, the Company considering him an indispensable party. The trial court denied the motion to dismiss, holding that Hernandez was not an indispensable party Defendant. Dissatisfied with this ruling, the Company filed certiorari proceedings with the Court of Appeals, but said appellate court held that Hernandez was not an indispensable party Defendant, and consequently, the trial court in denying the motion to dismiss acted within the proper limits of its discretion. Eventually, the trial court rendered judgment sentencing the Defendant Company to pay to Plaintiffs damages in the amount of P3,000 with interest at 12 per cent per annum from November 14, 1952, plus P600 for attorneys fees and expenses for litigation, with costs. As aforestated, the Company is appealing from this decision. To prove their case against the Defendant Company, the Plaintiffs introduced a copy of the decision in the criminal case convicting Hernandez of homicide through reckless imprudence, the writs of execution to enforce the civil liability, and the returns of the sheriff showing that the two writs of execution were not satisfied because of the insolvency of Hernandez, the sheriff being unable to locate any property in his name. Over the objections of the Company, the trial court admitted this evidence and based its decision in the present case on the same. Defendant-Appellant now contends that this kind of evidence is inadmissible and cites in support of its contention the cases of City of Manila vs. Manila Electric Company (52 Phil., 586), and Arambulo vs.

Manila Electric Company (15 Phil., 75). This point has already been decided by this tribunal in the case of Martinez vs. Barredo (81 Phil., 1). After considering the same two cases now cited by Appellant, this court held that the judgment of conviction, in the absence of any collusion between the Defendant and offended party, is binding upon the party subsidiarily liable. The Appellant also claims that in admitting as evidence the sheriffs return of the writs of execution to prove the insolvency of Hernandez, without requiring said officials appearance in court, it was deprived of the opportunity to cross-examine said sheriff. A sheriffs return is an official statement made by a public official in the performance of a duty specially enjoined by law and forming part of official records, and is prima facie evidence of the facts stated therein. (Rule 39, section 11 and Rule 123, section 35, Rules of Court.) The sheriff making the return need not testify in court as to the facts stated in his entry. In the case of Antillon vs. Barcelon, 37 Phil., 151, citing Wigmore on Evidence, this court said:
chanroblesvirtuallawlibrary

To the foregoing rules with reference to the method of proving private documents an exception is made with reference to the method of proving public documents executed before and certified to, under the hand and seal of certain public officials. The courts and the legislature have recognized the valid reason for such an exception. The litigation is unlimited in which testimony by officials is daily needed, the occasions in which the officials would be summoned from his ordinary duties to declare as a witness are numberless. The public officers are few in whose daily work something is not done in which testimony is not needed from official sources. Were there no exception to official statements, hosts of officials would be found devoting the greater part of their time to attending as witnesses in court or delivering their depositions before an officer. The work of Administration of government and the interest of the public having business with officials would alike suffer in consequence. And this Court added:
chanroblesvirtuallawlibrary

The law reposes a particular confidence in public officers that it presumes they will discharge their several trusts with accuracy and fidelity; and, therefore, whatever acts they do in discharge of their public duty may be given in evidence and shall be taken to be true under such a degree of caution as the nature and circumstances of each case may appear to require.
chan roblesvirtualawlibrary

The Appellant also contends that Articles 102 and 103 of the Revised Penal Code were repealed by the New Civil Code, promulgated in 1950, particularly, by the repealing clause under which comes Article 2270 of the said code. We find the contention untenable. Article 2177 of the New Civil Code expressly recognizes civil liabilities arising from negligence under the Penal Code, only that it provides that Plaintiff cannot recover damages twice for the same act of omission of the Defendant. ART. 2177. Responsibility for fault or negligence under the preceding article is entirely separate and distinct from the civil liability arising from negligence under the Penal Code. But the Plaintiff cannot recover damages twice for the same act of omission of the Defendant. Invoking prescription, Appellant claims that the present action is barred by the Statute of Limitations for the reason that it is an action either upon an injury to the rights of the Plaintiff, or upon a quasi delict, and that according to Article 1146 of the New Civil Code, such action must be instituted within four years. We agree with the Appellee that the present action is based upon a judgment, namely, that in the criminal case, finding Hernandez guilty of homicide through reckless imprudence and sentencing him to indemnify the heirs of the deceased in the sum of P3,000, and, consequently may be instituted within ten years. As regards the other errors assigned by Appellant, we find it unnecessary to discuss and rule upon them. Finding the decision appealed from to be in accordance with law, the same is hereby affirmed, with costs.

Paras, C.J., Bengzon, Padilla, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., and Endencia, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-4920 June 29, 1953

FRANCISCO DIANA and SOLEDAD DIANA, Plaintiffs-Appellants, vs. BATANGAS TRANSPORTATION CO., Defendant-Appellee. BAUTISTA ANGELO, J.:
chanrob les vi rt ual law lib rary

The present appeal stems from a case originally instituted in the Court of First Instance of Laguna wherein plaintiffs seek to recover from defendant as a party subsidiarily liable for the crime committed by an employee in the discharge of his duty the sum of P2,500 as damages, plus legal interest, and the costs of action.
chanrob lesvi rtualaw lib rary c hanrobles vi rt ual law li bra ry

The appeal was originally taken to the Court of Appeals but the case was certified to this court on the ground that it poses merely a question of law.
chan roblesv irtualawl ibra ry cha nrob les vi rtua l law lib rary

Plaintiffs are the heirs of one Florenio Diana, a former employee of the defendant. On June 21, 1945, while Florenio Diana was riding in Truck No. 14, belonging to the defendant, driven by Vivencio Bristol, the truck ran into a ditch at Bay, Laguna, resulting in the death of Florenio Diana and other passengers. Subsequently, Vivencio Bristol was charged and convicted of multiple homicide through reckless imprudence wherein, among other things, he was ordered to indemnify the heirs of the deceased in the amount of P2,000. When the decision became final, a writ of execution was issued in order that the indemnity may be satisfied but the sheriff filed a return stating that the accused had no visible leviable property. The present case was started when defendant failed to pay the indemnity under its subsidiary liability under article 103 of the Revised Penal Code. The complaint was filed on October 19, 1948 (civil case No. 9221).
chanroble svirtualawl ibra ry c hanro bles vi rtua l law li bra ry

On December 13, 1948, defendant filed a motion to dis- miss on the ground that there was another action pending between the same parties for the same cause (civil case No. 8023 of the Court of First Instance of Laguna) in which the same plaintiffs herein sought to recover from the same defendant the amount of P4,500 as damages resulting from the death of Florenio Diana who died while on board a truck of defendant due to the negligent act of the driver Vivencio Bristol. This first action was predicated on culpa aquiliana.
cha nrob les vi rtua l law lib rary

On December 16, 1948, plaintiffs filed a written opposition to the motion to dismiss. On February 3, 1949, the lower court, having found the motion well founded, dismissed the complaint, without special pronouncement as to costs; and their motion for reconsideration having been denied, plaintiffs took the present appeal.
chanrob lesvi rtua lawlib rary chan roble s virtual law l ibra ry

The only question to be determined is whether the lower court correctly dismissed the complaint on the sole ground that there was another action pending between the same parties for the same cause under Rule 8, section 1(d) of the Rules of Court.
c han roblesv irt ualawli bra rycha nrob les vi rtua l law li brary

The determination of this issue hinges on the proper interpretation of Rule 8, section 1 (d) which allows the dismissal of a case on the ground that "there is another action pending between the same parties for the same cause." Former Justice Moran, commenting on this ground, says: "In order that this ground may be invoked, there must be between the action under consideration and the other action, (1) identity of parties, or at least such as representing the same interest in both actions; (2) identity of rights asserted and relief prayed for, the relief being found on the same facts; and (3) the identity on the two preceding particulars should be such that any judgment which may be rendered on

the other action will, regardless of which party is successful, amount to res adjudicata in the action under consideration." [I Moran, Comments on the Rules of Court, (1952), p. 168.].
chan roble svirtualawl ibra ry cha nro bles vi rtua l law lib ra ry

There is no doubt with regard to the identity of parties. In both cases, the plaintiffs and the defendant are the same. With regard to the identity of reliefs prayed for, a different consideration should be made. It should be noted that the present case (civil case No. 9221) stems from a criminal case in which the driver of the defendant was found guilty of multiple homicide through reckless imprudence and was ordered to pay an indemnity of P2,000 for which the defendant is made subsidiarily liable under article 103 of the Revised Penal Code, while the other case (civil case No. 8023) is an action for damages based on culpa aquiliana which underlies the civil liability predicated on articles 1902 to 1910 of the old Civil Code. These two cases involve two different remedies. As this court aptly said: "A quasi-delict or culpa aquiliana is a separate legal institution under the Civil Code, with a substantivity all its own, and individuality that is entirely apart and independent from a delict or crime. * * *. A distinction exists between the civil liability arising from a crime and the responsibility for cuasi-delictos or culpa extra-contractual. The same negligent act causing dam- ages may produce civil liability arising from a crime under article 100 of the Revised Penal Code, or create an action for cuasi-delito or culpa extra-contractual under articles 1902-1910 of the Civil Code (Barredo vs. Garcia and Al- mario, 73 Phil., 607). The other differences pointed out between crimes and culpa aquiliana are:. 1. That crimes affect the public interest, while cuasi-delitos are only of private concern.
chan rob lesvi rtua lawlib rary c han robles v irt ual law li bra ry

2. That, consequently, the Penal Code punishes or corrects the criminal act, while the Civil Code, by means of indemnification, merely repairs the damage.
chanrob lesvi rtualaw lib rary c hanrobles vi rt ual law li bra ry

3. That delicts are not as broad as quasi-delicts, because the former are punished only if there is a penal law clearly covering them, while the latter, cuasi-delitos, include all acts in which 'any kind of fault or negligence intervenes. (P. 611, supra.). Considering the distinguishing characteristics of the two cases, which involve two different remedies, it can hardly be said that there is identity of reliefs in both actions as to make the present case fall under the operation of Rule 8, section 1(d) of the Rules of Court. In other words, it is a mistake to say that the present action should be dismissed because of the pendency of another action between the same parties involving the same cause. Evidently, both cases involve different causes of action. In fact, when the Court of Appeals dismissed the action based on culpa aquiliana (civil case No. 8023), this distinction was stressed. It was there said that the negligent act committed by defendant's employee is not a quasi crime, for such negligence is punishable by law. What plaintiffs should have done was to institute an action under article 103 of the Revised Penal Code (CA-G.R. No. 3632-R). And this is what plaintiffs have done. To deprive them now of this remedy, after the conviction of defendant's employee, would be to deprive them altogether of the indemnity to which they are entitled by law and by a court decision, which injustice it is our duty to prevent.
chanroblesvi rtualaw lib rary c hanrobles vi rt ual law li bra ry

Wherefore, the order appealed from is reversed and the case is hereby remanded to the lower court for further proceedings. No pronouncement as to costs.
chanroblesv irt ualawli bra ry chan roble s virtual law lib rary

Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Montemayor, Jugo, and Labrador, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-4555 July 23, 1953

SOFRONIO G. ALCANTARA, ET AL., Plaintiffs-Appellants, vs. PATRICIO SURRO and MANILA ELECTRIC COMPANY, Defendants-Appellants. BAUTISTA ANGELO, J.:
chanrob les vi rt ual law lib rary

This is an appeal from a decision of the Court of First Instance of Manila which awards to plaintiffs as indemnity in the amount of P25,155 itemized as follows: P18,000 as total salary the deceased Hermenegildo L. Co would have received for the period of four years, 1946 to 1949; P5,000 as moral and "patrimonial" damages for the physical and moral sufferings of his family; and P2,155 as "pecuniary expenses", with legal interest thereon from the filing of the complaint until its full payment. It was declared in the judgment that the liability of defendant Manila Electric Company shall not be executory until after the writ of execution against its co-defendant Patricio Surro has been returned unsatisfied.
chanro blesvi rt ualawlib ra ry chan roble s virtual law lib rary

The facts as found by the lower court and which are not disputed by the parties are quoted hereunder for ready reference:. This is an action to recover damages for wrongful death. The plaintiffs are the legitimate children and heirs of the deceased Hermenegildo L. Co namely, Lolita, Hermenegildo Jr., Carlos, Eduardo, Romeo and Manuel, who were 13, 11, 9, 8, 6 and 5 years old respectively at the time of his death, and are now represented by their judicial guardians Sofronio G. Alcantara and Cornelia L. Co. (Exhibit A). The defendant Patricio Surro was a chauffeur of the Manila Electric Company.
chan roble svi rtual awlibra rycha nrob les vi rtual law lib rary

Surro was charged with and convicted of the crime of homicide through reckless imprudence in the Court of First Instance of Manila for having caused the death of the late Hermenegildo L. Co on November 24, 1945 (Criminal Case No. 72534). Before the hearing, the private prosecutor, in behalf of the heirs of the offended party, reserved their right to institute a separate civil action for damages. Surro appealed but the Court of Appeals affirmed the decision of the lower court with the modification of the designation of the penalties in view of the fact that the offense committed did not come within the purview of the Revised Penal Code but of the provision of section 67(d) of Act No. 3992 known as the Automobile Law. No payment of indemnity was ordered in view of the express reservation that the heirs of the offended party made of their right to institute a separate action for damages.
chan roblesv irt ualawli b rary c hanro bles vi rt ual law li bra ry

The facts found by the Court of Appeals were as follows: that on November 24, 1945, Surro was a chauffeur of the Manila Electric Company who, at about 7:50 a.m. of that day, was incharge of driving passenger truck No. 50 of said company, along Rizal Avenue of this City of Manila, north bound; that on that occasion said truck was following passenger truck No. 55 of the same company; that when both these truck were approaching the intersection of Rizal Avenue and Blumentritt Streets, the traffic policemen posted at said intersection ordered the vehicles coming from the south of Rizal Avenue to stop in order to let those from Blumentritt to pass; that the chauffeur of Meralco truck No. 55 forthwith stopped his car, and by so doing enabled one Hermenegildo Co to board the same; that this man had hardly grasped the hand rails and set his right foot on the first step of the rear step board of truck No. 55, when truck No. 50, driven by the accused, closed in and bumped the former truck from behind, with the result that the front bumper of appellant's truck struck said Hermenegildo Co who was thus crushed between the two Meralco autobuses Nos. 55 and 50; and that Hermenegildo Co fell

down unconscious and was taken to the Chinese General Hospital where he died a few minutes later in that day due to "shock, secondary to severe fracture of the pelvis, of the left leg, with evisceration of the intestines," caused by the crush (Exhibit B and B-1.)
c hanro bles vi rt ual law li bra ry

It was admitted that on or about November 24, 1945, the defendant Manila Electric Company was engaged in the business of land transportation in the City of Manila. (Exhibit BB.)
c hanrobles vi rt ual law li bra ry

In their complaint, the plaintiffs pray that the defendant Surro be sentenced to pay them the sum of P120,177.98 with interest, and that, in the event of his failure to pay the same and the return of the writ of execution against him unsatisfied, the defendant Manila Electric Company be sentenced to pay the said sum with interest. Both parties have appealed from the decision of the lower court, but their assignments of error merely center on the amount of damages awarded to the plaintiffs.
chan roble svirtualawl ibra ry cha nro bles vi rtua l law lib ra ry

The factors that were considered by the lower court in fixing the indemnity awarded to the plaintiffs in view of the death of their father are: (1) the tender ages of the plaintiffs at the time of death ranging from 5 to 13 years; (2) the age and life expectancy of the deceased;(3) the state of health of the deceased at the time of death; (4) the earning capacity of the deceased; (5)the actual pecuniary damages; (6) the pain and suffering of the deceased and the plaintiffs; and (7) the pecuniary situation of the party liable, as contemplated by Commonwealth Act No. 284. It should be noted that while the lower court elaborated on those factors in an effort to reach a fair and reasonable conclusion as regards the indemnity to be awarded to the plaintiffs, not all of them were actually taken into account; only a few were considered, such as the salary which the deceased would have received during the years 1946, 1947, 1948 and 1949, the physical and moral suffering of the plaintiffs for the loss of their father, and the expenses actually incurred as a necessary incident of his death. Has the lower court erred in following this pattern?.
chanrob lesvi rtua lawlib rary chan robles v irt ual law l ibra ry

In this jurisdiction, the civil liability arising from crimes is governed by the provisions of the Revised Penal Code. Under article 104, this liability includes restitution, reparation of the damage caused, and indemnification for consequential damages. And under Article 107, indemnification for consequential damages includes not only those caused the injured party, but also those suffered by his family or by a third person by reason of the crime.
chan roble svirtualawl ibra ry c hanro bles vi rtua l law lib ra ry

Again, Commonwealth Act No. 284 provides that the civil liability for the death of a person shall be fixed by the competent court at a reasonable sum, upon consideration of the pecuniary situation of the party liable and other circumstances; but it shall in no case be less than P2,000. And under this statute, it has been the uniform policy of this Court to award to the heirs of the deceased in criminal cases as a matter of course an indemnity in the amount of P2,000. After liberation, this policy has been liberalized, and since then up to the present the amount of indemnity awarded in criminal cases as a matter of right and without the necessity of proof was generally fixed at P6,000. (People vs. Amansec, 80 Phil., 424.)In addition, we may cite cases wherein this Court awarded certain indemnity for patrimonial and moral damages to injured persons considering their physical condition and their social standing (Lilius vs. Manila Railroad Company, 59 Phil., 758; Castro vs. Acro Taxicab Co., Inc., G.R. No. 49155; Layda vs. Court of Appeals, 90 Phil. 724).
chanroble svirtualawl ibra ry c hanro bles vi rtua l law lib ra ry

In the United States, a similar pattern is followed. As stated by Mr. Justice Malcolm, "Many American statutes have arbitrarily limited the amounts that could be re-covered (as damages for the death of a person) to $5,000 or $10,000. In Louisiana, $2,500, $3,000, $4,000 and $6,000 were allowed in the respective cases for the death of a child. In Porto Rico, $1,000 and $1,500 has been allowed for such a loss" (Manzanares vs. Moreta, 38 Phil. 821, 823).
chanro blesvi rt ualawlib rary c han robles v irt ual law l ibra ry

The determination of the indemnity to be awarded to the heirs of a deceased person has therefore no fixed basis. Much is left to the discretion of the court considering the moral and material damages involved, and so it has been said that "There can be no exact or uniform rule for measuring the value of a human life and the measure of damages cannot be arrived at by precise mathematical calculation, but the amount recoverable depends on the particular facts and circumstances of each case. The life

expectancy of the deceased or of the beneficiary, whichever is shorter, is an important factor." (25 C.J.S. 1241.)Other factors that are usually considered are: (1) pecuniary loss to plaintiff or beneficiary (25 C.J.S. 1243-1250); (2) loss of support (25 C.J.S., 1250-1251); (3)loss of service (25 C.J.S. 12511255); (4) loss of society (25 C.J.S. 1254-1255); (5) mental suffering of beneficiaries (25 C.J.S., 1258-1259); and (6) medical and funeral expenses (25 C.J.S., 1254-1260).
chanroblesvi rtu alawlib ra ry chan robl es virt ual law li bra ry

We therefore find that the factors considered by the lower court in determining the indemnity under consideration are reasonable and within the realm sanctioned bylaw and precedents. The only thing to be determined is whether they had been properly applied to the particular case under consideration.
chanrob lesvi rtua lawlib rary c han robles v irt ual law li bra ry

Take the item of P18,000. This amount was arrived at by considering the salary to which the deceased would have been entitled had he survived the years 1946, 1947,1948 and 1949. It was proven that the deceased was earning a salary of P250 a month as vice-president of Go Soc & Sons and Sy Gui Huat, Inc., a closed family corporation. This was testified to by Cornelia L. Co, president of the corporation and sister of the deceased, and by Patricio Fajardo, chief accountant of the corporation. This salary also appears in the income tax return of the deceased. In October, 1948; the salaries of all the officers of the corporation were increased, and on the basis of this increase the deceased would have received at least P750 a month. This is the reason why the lower court considered the salary of P250 a month, or P3,000 a year, for the years 1946, 1947, 1948 and a salary of P750 a month, or P9,000 a year, for the year 1949.
chanroble svirtualawl ibra ry c hanro bles vi rtua l law lib ra ry

This finding is reasonable considering the life expectancy of the deceased. The records show that the deceased was 39 years old at the time of his death and according to the American Experience Table of Mortality, he had a life expectancy of 28.90 years. Yet, the lower court did not take this duration as basis, but limited its scope to four years. This action of the court is fair and reasonable. The rule is that "The introduction of mortality tables is not absolutely essential to prove the life expectancy of a deceased or his beneficiary, and if introduced they are not conclusive, and the jury are not bound by them. The value of these tables when applied to a particular case, it is said, must depend largely upon other circumstances, such as the state of health, habits, and the manner of life, and the social condition of the person injured." (25 C.J.S., 1299-1300.) This is what the lower court has done.
c hanroblesv irt ualawli bra ry chan roble s vi rtual law lib rary

With regard to the state of health of the deceased, the court found that his health was normal at the time of his death and that he has not been seriously ill since 1927 and 1928 except for food poisoning which he suffered on November 8, 1941, as testified to by the family physician, Dr. Castro Pineda. True, Doctor Andaya, medical officer of the Insular Life Assurance Co., testified that when he examined the deceased on November 6, 1943, he found that his pulse pressure was low and was informed by him that he had an attack of encephalitis on November 8,1941, for which reasons his application for insurance was rejected. But this was belied by Dr. Pineda, who said that as family physician he had taken the blood pressure of the deceased from time to time since 1927 or 1928 and has found it to be normal, and the lower court gave credence to this testimony. We find no reason to disturb this finding.
chanrob lesvi rtua lawlib rary chan roble s virtual law l ibra ry

Counsel for Defendants-appellants make mention of the portion of the decision of the lower court concerning the pecuniary situation of the Manila Electric Company which they consider to be erroneous because in their opinion the only criterion in determining its civil liability is the pecuniary situation of its co-defendant Patricio Surro. And they base this claim upon the fact that under Commonwealth Act No. 284, "the pecuniary situation of the party liable" should be the only basis of the civil liability for the death of a person, and the party liable primarily herein is Patricio Surro. This may be true under Commonwealth Act No. 284, but it should be observed that this Act is not the only criterion. The civil liability of the Defendants can also be determined in the light of the provisions of articles 104 and 107 of the Revised Penal Code. At any rate, this claim seems academic for the lower court does not seem to have taken much into account the financial condition of the defendant company in fixing the indemnity in question.
chanrob lesvi rtualaw lib rary c han robles vi rt ual law lib rary

As regards the claim of plaintiffs-appellants that the lower court erred in not considering the bonus which the corporation in which the deceased was employed has re-solved to award to its deserving

officers and employees, it should be noted that the resolution granting said bonus was intended to apply only to the profits earned up to September 30, 1945. Moreover, the granting of bonus is merely a privilege which may be given depending upon the financial condition of the employer and the behavior and conduct of the employee and it cannot be claimed as a matter of right, and so we believe that the lower a court acted rightly in not considering such bonus as a factor in determining the indemnity in this case. (Philippine Education Company, Inc. vs. Court of Industrial Relations, 92 Phil., 381.).
chanrob lesvi rtua lawlib rary chan robles v irt ual law l ibra ry

The other items awarded to the plaintiffs such as the sum of P5,000 as moral and "patrimonial" damages for their physical and moral sufferings, and the sum of P2,155 as actual expenses, should not be disturbed since they are supported by proof and precedents.
chanrob lesvi rtualaw lib rary c hanrobles vi rt ual law li bra ry

Finding no error in the decision appealed from, the same is hereby affirmed, without pronouncement as to costs.
chanrob lesvi rtualaw lib rary c hanrobles vi rt ual law li bra ry

Paras, C.J., Pablo, Bengzon, Tuason, Montemayor, Reyes, Jugo, and Labrador, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-25913 February 29, 1969

HEIRS OF RAYMUNDO CASTRO, petitioners, vs. APOLONIO BUSTOS, respondent. Sotto, Consengco and Dizon for petitioners. Sipin, Abarcar and Baluyot for respondent. BARREDO, J.: Appeal from the Court of Appeals. Respondent Apolonio Bustos was charged in the Court of First Instance of Pampanga on October 26, 1962 with the crime of murder for the killing of Raymundo Castro whose heirs are now the petitioners. The trial court found Bustos guilty only of homicide and, crediting him with two mitigating circumstances, namely, passion or obfuscation and voluntary surrender, sentenced him to an indeterminate prison term of 2 years, 4 months and 1 day of prision correccional, as minimum, to 8 years and 1 day of prision mayor, as maximum, and to indemnify the petitioners, who were represented in the case by a private prosecutor, in the sum of six thousand pesos (P6,000) "without prejudice to whatever the accused (respondent) is entitled from the Government Service Insurance System (GSIS) for his services of around twenty-six (26) years as a public school teacher, prior to October 20, 1962." Both respondent and petitioners appealed to the Court of Appeals, respondent asking that appellate, court acquit him and petitioners praying, on the other hand, that respondent be convicted of murder, that the portion regarding what said respondent will receive from the GSIS be deleted and that he be ordered to pay petitioners "the aggregate sum of P50,764.00 as indemnity and actual, moral, temperate and exemplary damages." For the purposes of their appeal, petitioners even filed unnecessarily a printed record on appeal. On October 18, 1965, the Court of Appeals rendered judgment modifying that of the trial court insofar as it concerned (1) the amount of damages to be awarded petitioners thus: ... Aside from the P6,000 indemnity awarded by the trial court, which we uphold, we feel justified, in the exercise of our discretion, to award to the heirs of the deceased moral damages in the amount of P6,000 plus P13,380.00 to compensate for the loss of earning of the decedent at the annual salary of P2,676.00 .... and (2) the mitigating circumstance of "obfuscation", appreciated as such by the trial court, which was changed to "vindication of a grave offense", but affirming it in all other respects. Upon motion, however, of respondent for the reconsideration of said decision, reiterating his plea for acquittal, or, in the alternative, praying for the elimination of the award of moral and compensatory damages, the Court of Appeals promulgated on November 13, 1965, an amended decision, the pertinent portions of which are: The arguments interposed by the appellant in his Motion for consideration to support the complete reversal of the judgment appealed from, have been considered and passed upon in our decision, and we see no reason to alter the same in so far as the appellant's guilt

of the crime is concerned. On the other hand, we agree with the appellant that in the interest of justice and equity and in view of the presence of two mitigating circumstances, without any aggravating one to offset them, the award of moral and compensatory damages should be eliminated. WHEREFORE, the decision promulgated October 18, 1965, is hereby amended by eliminating therefrom the award of P6,000.00 representing moral damages, and of P13,380.00 representing the decedent's loss of earnings. From this amended decision, only petitioners have appealed to Us. The prayer in their petition for certiorari asks for nothing more than that the amended decision of the Court of Appeals be revoked and reversed, and its original decision be affirmed in toto insofar as the award of indemnity and damages is concerned. Since We find the grounds of the appeal meritorious, We grant fully the prayer in the petition. This case affords this Court as appropriate an opportunity, as any other, to restate, in a more comprehensive way, the law regarding the items of damages that are recoverable in cases of death caused by a crime, whether the claim therefor is made in the criminal proceedings itself or in a separate civil action. In the instant case, recovery of such damages is being sought in the criminal proceedings but even if it were claimed otherwise, the indemnity and damages would be the same, for generally, the items of damages are identical in both procedures, except with respect to attorney's fees and expenses of litigation which can be awarded only when a separate civil action is instituted. (Art. 2208, Civil Code) With the clarifications We are making herein, at least the writer of this opinion expects that litigations regarding the aspects of the law herein passed upon may be minimized. As a start, it is to be noted that in the matter of damages, the original decision of the Court of Appeals, while correct in making a particularization in the award of indemnity and damages, nonetheless, still failed to comply strictly with the constitutional requirement that all decisions of courts of record must state both the facts and thelaw on which they are based. (Sec. 12, Art. VIII, Constitution) In said original decision, the Court of Appeals held: Coming now to the damages asked by the heirs of the deceased: Aside from the P6,000.00 indemnity awarded by the trial court which we uphold, we feel justified, in the exercise of our discretion, to award to the heirs of the deceased moral damages in the amount of P6,000 plus P13,380.00 to compensate for the loss of earning of the decedent at the annual salary of P2,676.00 (Exh. V; p. 42 t.s.n. Vergara). WHEREFORE, the appealed judgment is modified as above indicated in so far as it concerns the amount of indemnity and damages to be awarded to the heirs of the deceased, and the mitigating circumstance of vindication of a grave offense which takes the place of the circumstance of obfuscation appreciated by the trial court; and affirmed in all other respects. Costs against the appellant. As can be seen, no legal or factual basis is stated therein for the award of indemnity and damages to petitioners; worse, the impression is given that the said award is purely a matter of discretion on the part of the court. Clearly, this is not in accordance with the law. Indeed, it must have been this failure to refer to the pertinent legal provisions which induced the appellate court, at the mere invocation by respondent of Art. 2204 of the Civil Code, to commit the error of readily eliminating in the amended decision the items on moral damages and compensation for loss of earning of the decedent which its original decision had correctly contained. Having held that it had discretion in the premises, the court easily yielded to the argument that simply because it had

credited the respondent with two mitigating circumstances, it was already justified in eliminating the items of damages already adverted to, presumably having in mind said Art. 2204 which provides that: In crimes, the damages to be adjudicated may be respectively increased or lessened according to the aggravating or mitigating circumstances. Of course, this was clear error, inasmuch as construed literally or otherwise, the quoted provision does not warrant a complete deletion of said items of damages. In any event the court evidently failed to take into account that several other provisions can come into play considering the circumstances in this case. When the commission of a crime results in death, the civil obligations arising therefrom are governed by the penal laws, "... subject to the provisions of Art. 2177, and of the pertinent provisions of Chapter 2, Preliminary Title on Human Relations, and of Title XVIII of this Book (Book IV) regulating damages." (Art. 1161, Civil Code) Thus, "every person criminally liable for a felony is also civily liable." (Art. 100, Revised Penal Code). This civil liability, in case the felony involves death, includes indemnification for consequential damages (Art. 104, id.) and said consequential damages in turn include "... those suffered by his family or by a third person by reason of the crime." (Art. 107, id.) Since these provisions are subject, however, as above indicated, to certain provisions of the Civil Code, We will now turn to said provisions. The general rule in the Civil Code is that: In crimes and quasi-delicts, the defendant shall be liable for all damages which are the natural and probable consequences of the act or omission complained of. It is not necessary that such damages have been foreseen or could have reasonably been foreseen by the defendant. (Art. 2202) When, however, the crime committed involves death, there is Art. 2206 which provides thus: The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. In addition: (1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death; (2) If the deceased was obliged to give support according to the provisions of article 291, the recipient who is not an heir called to the decedent's inheritance by law of testate or intestate succession may demand support from the person causing the death, for a period not exceeding five years, the exact duration to be fixed by the court; (3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased.

The amount of P3,000 referred to in the above article has already been increased by this Court first, to P6,000.00 in People v. Amansec, 80 Phil. 426, and lately to P12,000.00 in the case of People v. Pantoja, G. R. No. L-18793, promulgated October 11, 1968, and it must be stressed that this amount, as well as the amount of moral damages, may be adjudicated even without proof of pecuniary loss, the assessment of the moral damages being "left to the discretion of the court, according to the circumstances of each case." (Art. 2216) Exemplary damages may also be imposed as a part of this civil liability when the crime has been committed with one or more aggravating circumstances, such damages being "separate and distinct from fines and shall be paid to the offended party," (Art. 2230). Exemplary damages cannot however be recovered as a matter of right; the court will decide whether or not they should be given. (Art. 2233) In any event, save as expressly provided in connection with the indemnity for the sole fact of death (1st par., Art. 2206) and in cases wherein exemplary damages are awarded precisely because of the attendance of aggravating circumstances, (Art. 2230) "... damages to be adjudicated may be respectively increased or lessened according to the aggravating or mitigating circumstances," (Art. 2204) but "the party suffering the loss or injury must exercise the diligence of a good father of a family to minimize the damages resulting from the act or omisson in question." (Art. 2203) "Interest as a part of the damages, may, in a proper case, be adjudicated in the discretion of the Court." (Art. 2211) As to attorneys' fees and expenses of litigation, the same may be recovered only when exemplary damages have been granted (Art. 2208, par. 1) or, as We have already stated, when there is a separate civil action. Stated differently, when death occurs as a result of a crime, the heirs of the deceased are entitled to the following items of damages: 1. As indemnity for the death of the victim of the offense P12,000.00, without the need of any evidence or proof of damages, and even though there may have been mitigating circumstances attending the commission of the offense. 2. As indemnity for loss of earning capacity of the deceased an amount to be fixed by the Court according to the circumstances of the deceased related to his actual income at the time of death and his probable life expectancy, the said indemnity to be assessed and awarded by the court as a matter of duty, unless the deceased had no earning capacity at said time on account of permanent disability not caused by the accused. If the deceased was obliged to give support, under Art. 291, Civil Code, the recipient who is not an heir, may demand support from the accused for not more than five years, the exact duration to be fixed by the court. 3. As moral damages for mental anguish, an amount to be fixed by the court. This may be recovered even by the illegitimate descendants and ascendants of the deceased. 4. As exemplary damages, when the crime is attended by one or more aggravating circumstances, an amount to be fixed in the discretion of the court, the same to be considered separate from fines. 5. As attorney's fees and expresses of litigation, the actual amount thereof, (but only when a separate civil action to recover civil liability has been filed or when exemplary damages are awarded). 6. Interests in the proper cases.

7. It must be emphasized that the indemnities for loss of earning capacity of the deceased and for moral damages are recoverable separately from and in addition to the fixed sum of P12,000.00 corresponding to the indemnity for the sole fact of death, and that these damages may, however, be respectively increased or lessened according to the mitigating or aggravating circumstances, except items 1 and 4 above, for obvious reasons. In the light of the foregoing discussion, it is clear that the Court of Appeals erred in eliminating in its amended decision, the items of moral damages and compensation for loss of earning capacity of the deceased. Indeed, as to the award of moral damages in case of death, this Court has already held in Mercado v. Lira, etc., G. R. Nos. L-13328-29, September 29, 1961, that once the heirs of the deceased claim moral damages and are able to prove they are entitled thereto, it becomes the duty of the court to make the award. We held: Art. 2206 states further that "In addition" to the amount of at least P3,000.00 to be awarded for the death of a passenger, the spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages as a consequence of the death of their deceased kin, which simply means that once the above-mentioned heirs of the deceased claim compensation for moral damages and are able to prove that they are entitled to such award, it becomes the duty of the court to award moral damages to the claimant in an amount commensurate with the mental anguish suffered by them. This doctrine was reiterated in Maranan v. Perez, G. R. No. L-22272, June 26, 1967: In connection with the award of damages, the court a quo granted only P3,000 to plaintiff-appellant. This is the minimum compensatory damages amount recoverable under Art. 1764 in connection with Art. 2206 of the Civil Code when a breach of contract results in the passenger's death. As has been the policy followed by this Court, this minimal award should be increased to P6,000 .... Still, Art. 2206 and 1764 award moral damages in addition to compensatory damages, to the parents of the passenger killed to compensate for the mental anguish they suffered. A claim therefor, having been properly made, it becomes the court's duty to award moral damages. Plaintiff demands P5,000 as moral damages; however, in the circumstances, We consider P3,000 moral damages, in addition to the P6,000 damages aforestated, as sufficient. Interest upon such damages are also due to plaintiff-appellant. Likewise, in the matter of the compensatory damages for the loss of earning capacity of the deceased, We also held in the case of Daniel Bulante v. Chu Liante, G.R. Nos. L- 21583 and L21591-92, May 20, 1968 that: The next item objected to refers to the damages awarded to the heirs of the deceased passengers for loss of earning capacity, separately from the indemnities by reason of death. The ground for the objection is that loss of earning capacity was not specifically pleaded or claimed in the complaint. This item, however, may be considered included in the prayer for "actual damages" and for other "just and equitable reliefs", especially if taken in the light of Art. 2206, in connection with Art. 1764, of the Civil Code, which allows, in addition to an indemnity of at least P3,000 by reason of death, recovery for loss of earning capacity on the part of the deceased, the same to be paid to his heirs "in every case ... unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death." To be sure, these cases of Mercado v. Lira, Maranan v. Perez and Bulante v. Chu Liante from which We have quoted, were actions based on contracts of common carriers. But the above-

mentioned doctrines are equally applicable to civil liability ex delicto because, after all, Art. 2206 of the Civil Code which was applied in said cases is precisely the provision pertinent to liability arising from crimes (and quasi-delicts). No doubt, said Article must have been relied upon by the court in the above cases only because Art. 1764 of the Civil Code provides that said "Art. 2206 shall also apply to the death of a passenger caused by the breach of contract of a common carrier." Accordingly, the interpretation given to said article in those cases are applicable to the case at bar. In other words, this must be so because under the Civil Code, the same rules on damages are generally to be observed, whether death results from a crime or a quasi-delict or a breach of the contract of common carriage. As to the amount of the indemnity for moral damages and loss of earning capacity of the deceased in the present case, the original decision of the Court of Appeals awarding them, does not afford sufficient basis for Us to increase the amounts fixed by said court, as prayed for by appellants. As has already been stated, the said decision failed to follow the Constitution, not only in not stating the law on which it is based but also in not making the necessary findings of fact on which it based its discretion in fixing the respective amounts it awarded for moral and compensatory damages. Legally, therefore, We can, if We wish to, return this case to that court for it to supply these constitutional omissions. We opt however, to save time and further difficulties for and damages to, the petitioners. Extant in the records before Us is the fact that the respondent has never disputed that petitioners are the widow and seven children of the deceased, three of whom were still minors at the time of his death, nor that the said deceased was a public school teacher, 56 years old, and earning P2,276.00 a year. These facts appear to have been repeatedly asserted in the briefs of petitioners in the Court of Appeals and in this Court. No denial was ever made by the respondent. When respondent moved for the reconsideration of the original decision of the Court of Appeals, (Annex E of Petition for Certiorari) he only argued that in view of the mitigating circumstances credited to him by said court, petitioners were not entitled to moral damages and to indemnity for loss of earning capacity of the deceased; the amounts fixed therefor by said court he never questioned. When petitioners filed their motion for reconsideration of the amended decision of the Court of Appeals, these facts (relationship, earnings, etc.) were reiterated. (Annex G, id.) Respondent did not file any answer to said motion despite the resolution requiring him to do so. (Par. 12, Petition for Certiorari) Neither has respondent filed any brief in the present instance, notwithstanding repeated requests on his part for extension to file the same, which, incidentally, were all granted. Under these circumstances, We feel justified in brushing aside strict technicalities of procedure in order to accomplish substantial justice more expeditiously. Anyway, as We said at the outset, petitioners are asking Us, in the prayer of their petition for certiorari, for nothing more than to affirm "in toto" the original decision of the Court of Appeals, and in their lone assignment of error in the present instance, their only claim is that "the Court of Appeals erred when it issued the amended decision eliminating the award of P6,000 moral damages and the award of P13,380.00 loss of earnings of the deceased Raymundo Castro." In these circumstances, even if We should award the amounts of damages just mentioned, inspite of the absence of the pertinent findings of fact by the Court of Appeals, We would not have to reach beyond amounts that are undisputed by the respondent. We, therefore, overrule the prayer for additional damages in petitioners' brief and We hold that, on the basis of the facts not questioned by respondent, they are entitled only to the P6,000.00 as moral damages and the P13,380.00 as compensatory damages for the loss of earning capacity of the deceased awarded in the original decision of the Court of Appeals in addition, of course, to the indemnity for death fixed also by said court at P6,000.00. This amount of P6,000.00 We cannot increase to P12,000.00, as allowed in People v. Pantoja,supra, and the subsequent cases, (People v. Mongaya G. R. No. L-23708, October 31, 1968, and People v. Ramos, G. R. No. L-19143, November 29, 1968) because in the instant suit, neither party has appealed in relation thereto. This case is now before Us on appeal by the offended party only as to specific portions of the civil indemnity to be paid by the respondent. It would have been different if the whole criminal case were

up for our review because then, even without any appeal on the part of the offended party, We could have still increased the said liability of the accused, here-in respondent. (See Mercado v. Lira, supra.) At this juncture, for the guidance of parties similarly situated as petitioners herein, and so that there may be no useless expenses in appeals by offended parties in regard to the civil aspect of a criminal case when no separate civil action has been filed by them, it should be made clear that when there is no such separate civil action and the claim for civil indemnity is joined with the criminal case, no record on appeal, whether printed, typewritten or mimeographed, is necessary, except perhaps when formal pleading raising complicated questions are filed in connection therewith, and still, this would be purely optional on the appellant because anyway the whole original record of the case is elevated in appeals in criminal cases. It is already settled that appeals relating to the civil aspects of a criminal case should follow the procedure for appeal required by rules of criminal procedure. (People vs. Lorredo, 50 Phil. 209, 220-221; People v. ViIlanueva, G.R. No. L-18769, May 27, 1966)
lawphi1.nt

WHEREFORE, the amended decision of the Court of Appeals is modified as hereinabove indicated, in so far as the civil liability of respondent is concerned, with costs against him in this instance. Dizon, Makalintal, Zaldivar, Fernando and Teehankee, JJ., concur. Concepcion, C.J., Reyes, J.B.L. and Sanchez, JJ., concur in the result. Castro, J., reserves his vote.

Separate Opinions

CAPISTRANO, J., concurring: I concur, and take this opportunity to express my views on certain points not covered by the majority opinion. 1. In the criminal action for death by crime, as murder, homicide, and homicide through reckless imprudence it is the duty of the Fiscal, unless the heirs reserve their right to file a separate civil action, to demand payment, for the benefit of the heirs of the deceased, of the damages ordained in Article 2206 and 2230 of the Civil Code. This duty is apparent from the following considerations: (a) A crime is an offense against both the State and the offended party. This is so because before the State intervened in its punishment, a crime was an offense purely against the injured party calling for private vengeance. It was only after "the period of private vengeance" in the history of criminal law that the State decided to intervene in the punishment of crime for reasons of social defense. (b) The civil liability in crime is generally determined in the criminal action pursuant to the basic principle that "every person criminally liable is civilly liable." Since the Fiscal has full control of the criminal action, he is the only one who may demand payment therein of the civil indemnity for the benefit of the heirs of the deceased. (c) In case the Fiscal does not demand payment of the civil indemnity in the criminal action and the judgment does not order its payment, said judgment will constitute a bar to a future civil action to recover the civil indemnity. (d) Most of the injured parties in crime are poor or ignorant. For this reason, the intervention of a private prosecutor,

hired by the heirs of the deceased, in the criminal action, is rare. (e) The trial court usually awards only the amount of P12,000 as damages for the death unless the other items of damages specified in Articles 2206 and 2230 of the Civil Code are demanded by the Fiscal. The failure of the Fiscals throughout the country to make such demand in the criminal actions has resulted in the law (Art. 2206, except par. 1, and Art. 2230) having fallen into disuse for a period of more than 18 years (from 1950 when the New Civil Code took effect, until now), contrary to the great expectations of the Code Commission and the Legislature. Said failure has also resulted in great injustice to the countless heirs of the victims of murder, homicide and homicide through reckless imprudence during said period of 18 years. 2. Accordingly, unless the heirs reserve their right to file a separate civil action, the Fiscal should also allege in the information all the items of damages recoverable for the benefit of the heirs of the deceased as follows: (a) P12,000 for the death of the victim; (b) the amount constituting loss of the earning capacity of the deceased; (e) the amount of monthly support to be given by the accused for the period not exceeding five years in case the deceased was obligated to give support under Article 291 of the Civil Code to a recipient who is not an intestate heir of the deceased; (d) that moral damages are demanded by and on behalf of the surviving spouse, legitimate and illegitimate descendants, and ascendants of the deceased for mental anguish by reason of the death of the deceased, the amount of award to each of them individually to be determined in the discretion of the court on proof of mental anguish and the depth or intensity of the same; and (e) exemplary damages in the amount to be determined by the court to be paid to the heirs of the deceased in case of the presence of one or more aggravating circumstance in the commission of the crime. 3. Where a private prosecutor, hired by the heirs of the deceased, intervenes in the criminal action, as in the case at bar, the heirs may also demand and recover reasonable attorney's fees and expenses of litigation. This is just. From the provision of Article 2208(9) of the Civil Code which allows recovery of attorney's fees and expenses of litigation in case of a separate civil action to recover civil liability arising from a crime, it does not follow that the converse is true. Whether the heirs recover the civil liability through a private prosecutor in criminal action or through counsel in a separate civil action, they are entitled to attorney's fees and expenses of litigation. What is important is not in what action the civil liability is recovered, but the fact that in either action the heirs have paid attorney's fees and expenses of litigation. 4. Those heirs entitled to the civil indemnity are the intestate heirs of the deceased in the order of intestate succession. The Fiscal should therefore give in the information the names and personal circumstances of the heirs entitled to the civil indemnity in accordance with the law of intestate succession so that the trial court may make the award in their names. This will avoid further or subsequent litigation on who, among several claimants, are really the heirs entitled to the civil indemnity. The practice of the trial courts in awarding the civil indemnity to "the heirs of the deceased," does not satisfy the law and should be abandoned. Does the term "heirs" include testamentary heirs? An affirmative answer is proper. According to Manresa "Donde la ley no distingue, no debemos distinguir." The heirs, whether testate or intestate, are a continuation of the juridical personality of the decedent. The law has a tender regard for the will of the testator expressed in his last will and testament on the ground that any disposition made by the testator is better than that which the law can make. For this reason, intestate succession is nothing more than a disposition based upon the presumed will of the decedent.

5. The award of moral damages to the surviving spouse, legitimate and illegitimate descendants, and ascendants of the deceased, should be made to each of them individually and in varying amounts depending upon proof of mental anguish and the depth or intensity of the same. Where it is shown that one or some did not suffer mental anguish or could not have suffered the same, no award of moral damages should be made to him or to them. For example: The evidence shows that the surviving widow, who had a paramour, when informed of the death of her husband, said: "Mabuti nga. Ngayon maaari na akong pakasal kay Pepe." Another example: The evidence shows that the legitimate children (or grandchildren) were aged one, two and four at the time their father was killed. In the very nature of things these children (or descendants) could not have suffered mental anguish. In these examples there should be no award of moral damages to the widow and the infant children.

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