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G.R. No.

L-9188 December 4, 1914

ENGRACIO ORENSE, defendant-appellant.


William A. Kincaid, Thos. L. Hartigan, and Ceferino M. Villareal for appellant.

Rafael de la Sierra for appellee.

Appeal through bill of exceptions filed by counsel for the appellant from the judgment on April
14, 1913, by the Honorable P. M. Moir, judge, wherein he sentenced the defendant to make
immediate delivery of the property in question, through a public instrument, by transferring and
conveying to the plaintiff all his rights in the property described in the complaint and to pay it the
sum of P780, as damages, and the costs of the suit.
On March 5, 1913, counsel for Gutierrez Hermanos filed a complaint, afterwards amended, in
the Court of First Instance of Albay against Engacio Orense, in which he set forth that on and
before February 14, 1907, the defendant Orense had been the owner of a parcel of land, with the
buildings and improvements thereon, situated in the pueblo of Guinobatan, Albay, the location,
area and boundaries of which were specified in the complaint; that the said property has up to
date been recorded in the new property registry in the name of the said Orense, according to
certificate No. 5, with the boundaries therein given; that, on February 14, 1907, Jose Duran, a
nephew of the defendant, with the latter's knowledge and consent, executed before a notary a
public instrument whereby he sold and conveyed to the plaintiff company, for P1,500, the
aforementioned property, the vendor Duran reserving to himself the right to repurchase it for the
same price within a period of four years from the date of the said instrument; that the plaintiff
company had not entered into possession of the purchased property, owing to its continued
occupancy by the defendant and his nephew, Jose Duran, by virtue of a contract of lease
executed by the plaintiff to Duran, which contract was in force up to February 14, 1911; that the
said instrument of sale of the property, executed by Jose Duran, was publicly and freely
confirmed and ratified by the defendant Orense; that, in order to perfect the title to the said
property, but that the defendant Orense refused to do so, without any justifiable cause or reason,
wherefore he should be compelled to execute the said deed by an express order of the court, for
Jose Duran is notoriously insolvent and cannot reimburse the plaintiff company for the price of
the sale which he received, nor pay any sum whatever for the losses and damages occasioned by
the said sale, aside from the fact that the plaintiff had suffered damage by losing the present
value of the property, which was worth P3,000; that, unless such deed of final conveyance were
executed in behalf of the plaintiff company, it would be injured by the fraud perpetrated by the
vendor, Duran, in connivance with the defendant; that the latter had been occupying the said

property since February 14, 1911, and refused to pay the rental thereof, notwithstanding the
demand made upon him for its payment at the rate of P30 per month, the just and reasonable
value for the occupancy of the said property, the possession of which the defendant likewise
refused to deliver to the plaintiff company, in spite of the continuous demands made upon him,
the defendant, with bad faith and to the prejudice of the firm of Gutierrez Hermanos, claiming to
have rights of ownership and possession in the said property. Therefore it was prayed that
judgment be rendered by holding that the land and improvements in question belong legitimately
and exclusively to the plaintiff, and ordering the defendant to execute in the plaintiff's behalf the
said instrument of transfer and conveyance of the property and of all the right, interest, title and
share which the defendant has therein; that the defendant be sentenced to pay P30 per month for
damages and rental of the property from February 14, 1911, and that, in case these remedies were
not granted to the plaintiff, the defendant be sentenced to pay to it the sum of P3,000 as damages,
together with interest thereon since the date of the institution of this suit, and to pay the costs and
other legal expenses.
The demurrer filed to the amended complaint was overruled, with exception on the part of the
defendant, whose counsel made a general denial of the allegations contained in the complaint,
excepting those that were admitted, and specifically denied paragraph 4 thereof to the effect that
on February 14, 1907, Jose Duran executed the deed of sale of the property in favor of the
plaintiff with the defendant's knowledge and
As the first special defense, counsel for the defendant alleged that the facts set forth in the
complaint with respect to the execution of the deed did not constitute a cause of action, nor did
those alleged in the other form of action for the collection of P3,000, the value of the realty.
As the second special defense, he alleged that the defendant was the lawful owner of the property
claimed in the complaint, as his ownership was recorded in the property registry, and that, since
his title had been registered under the proceedings in rem prescribed by Act No. 496, it was
conclusive against the plaintiff and the pretended rights alleged to have been acquired by Jose
Duran prior to such registration could not now prevail; that the defendant had not executed any
written power of attorney nor given any verbal authority to Jose Duran in order that the latter
might, in his name and representation, sell the said property to the plaintiff company; that the
defendant's knowledge of the said sale was acquired long after the execution of the contract of
sale between Duran and Gutierrez Hermanos, and that prior thereto the defendant did not
intentionally and deliberately perform any act such as might have induced the plaintiff to believe
that Duran was empowered and authorized by the defendant and which would warrant him in
acting to his own detriment, under the influence of that belief. Counsel therefore prayed that the
defendant be absolved from the complaint and that the plaintiff be sentenced to pay the costs and
to hold his peace forever.
After the hearing of the case and an examination of the evidence introduced by both parties, the
court rendered the judgment aforementioned, to which counsel for the defendant excepted and
moved for a new trial. This motion was denied, an exception was taken by the defendant and,

upon presentation of the proper bill of exceptions, the same was approved, certified and
forwarded to the clerk of his court.
This suit involves the validity and efficacy of the sale under right of redemption of a parcel of
land and a masonry house with the nipa roof erected thereon, effected by Jose Duran, a nephew
of the owner of the property, Engracio Orense, for the sum of P1,500 by means of a notarial
instrument executed and ratified on February 14, 1907.
After the lapse of the four years stipulated for the redemption, the defendant refused to deliver
the property to the purchaser, the firm of Gutierrez Hermanos, and to pay the rental thereof at the
rate of P30 per month for its use and occupation since February 14, 1911, when the period for its
repurchase terminated. His refusal was based on the allegations that he had been and was then
the owner of the said property, which was registered in his name in the property registry; that he
had not executed any written power of attorney to Jose Duran, nor had he given the latter any
verbal authorization to sell the said property to the plaintiff firm in his name; and that, prior to
the execution of the deed of sale, the defendant performed no act such as might have induced the
plaintiff to believe that Jose Duran was empowered and authorized by the defendant to effect the
said sale.
The plaintiff firm, therefore, charged Jose Duran, in the Court of First Instance of the said
province, with estafa, for having represented himself in the said deed of sale to be the absolute
owner of the aforesaid land and improvements, whereas in reality they did not belong to him, but
to the defendant Orense. However, at the trial of the case Engracio Orense, called as a witness,
being interrogated by the fiscal as to whether he and consented to Duran's selling the said
property under right of redemption to the firm of Gutierrez Hermanos, replied that he had. In
view of this statement by the defendant, the court acquitted Jose Duran of the charge of estafa.
As a result of the acquittal of Jose Duran, based on the explicit testimony of his uncle, Engacio
Orense, the owner of the property, to the effect that he had consented to his nephew Duran's
selling the property under right of repurchase to Gutierrez Hermanos, counsel for this firm filed a
complainant praying, among other remedies, that the defendant Orense be compelled to execute
a deed for the transfer and conveyance to the plaintiff company of all the right, title and interest
with Orense had in the property sold, and to pay to the same the rental of the property due from
February 14, 1911.itc-alf
Notwithstanding the allegations of the defendant, the record in this case shows that he did give
his consent in order that his nephew, Jose Duran, might sell the property in question to Gutierrez
Hermanos, and that he did thereafter confirm and ratify the sale by means of a public instrument
executed before a notary.
It having been proven at the trial that he gave his consent to the said sale, it follows that the
defendant conferred verbal, or at least implied, power of agency upon his nephew Duran, who
accepted it in the same way by selling the said property. The principal must therefore fulfill all

the obligations contracted by the agent, who acted within the scope of his authority. (Civil Code,
arts. 1709, 1710 and 1727.)
Even should it be held that the said consent was granted subsequently to the sale, it is
unquestionable that the defendant, the owner of the property, approved the action of his nephew,
who in this case acted as the manager of his uncle's business, and Orense'r ratification produced
the effect of an express authorization to make the said sale. (Civil Code, arts. 1888 and 1892.)
Article 1259 of the Civil Code prescribes: "No one can contract in the name of another without
being authorized by him or without his legal representation according to law.
A contract executed in the name of another by one who has neither his authorization nor
legal representation shall be void, unless it should be ratified by the person in whose
name it was executed before being revoked by the other contracting party.
The sworn statement made by the defendant, Orense, while testifying as a witness at the trial of
Duran for estafa, virtually confirms and ratifies the sale of his property effected by his nephew,
Duran, and, pursuant to article 1313 of the Civil Code, remedies all defects which the contract
may have contained from the moment of its execution.
The sale of the said property made by Duran to Gutierrez Hermanos was indeed null and void in
the beginning, but afterwards became perfectly valid and cured of the defect of nullity it bore at
its execution by the confirmation solemnly made by the said owner upon his stating under oath to
the judge that he himself consented to his nephew Jose Duran's making the said sale. Moreover,
pursuant to article 1309 of the Code, the right of action for nullification that could have been
brought became legally extinguished from the moment the contract was validly confirmed and
ratified, and, in the present case, it is unquestionable that the defendant did confirm the said
contract of sale and consent to its execution.
On the testimony given by Engacio Orense at the trial of Duran for estafa, the latter was
acquitted, and it would not be just that the said testimony, expressive of his consent to the sale of
his property, which determined the acquittal of his nephew, Jose Duran, who then acted as his
business manager, and which testimony wiped out the deception that in the beginning appeared
to have been practiced by the said Duran, should not now serve in passing upon the conduct of
Engracio Orense in relation to the firm of Gutierrez Hermanos in order to prove his consent to
the sale of his property, for, had it not been for the consent admitted by the defendant Orense, the
plaintiff would have been the victim of estafa.
If the defendant Orense acknowledged and admitted under oath that he had consented to Jose
Duran's selling the property in litigation to Gutierrez Hermanos, it is not just nor is it permissible
for him afterward to deny that admission, to the prejudice of the purchaser, who gave P1,500 for
the said property.

The contract of sale of the said property contained in the notarial instrument of February 14,
1907, is alleged to be invalid, null and void under the provisions of paragraph 5 of section 335 of
the Code of Civil Procedure, because the authority which Orense may have given to Duran to
make the said contract of sale is not shown to have been in writing and signed by Orense, but the
record discloses satisfactory and conclusive proof that the defendant Orense gave his consent to
the contract of sale executed in a public instrument by his nephew Jose Duran. Such consent was
proven in a criminal action by the sworn testimony of the principal and presented in this civil suit
by other sworn testimony of the same principal and by other evidence to which the defendant
made no objection. Therefore the principal is bound to abide by the consequences of his agency
as though it had actually been given in writing (Conlu vs. Araneta and Guanko, 15 Phil. Rep.,
387; Gallemit vs. Tabiliran, 20 Phil. Rep., 241; Kuenzle & Streiff vs. Jiongco, 22 Phil. Rep.,
The repeated and successive statements made by the defendant Orense in two actions, wherein
he affirmed that he had given his consent to the sale of his property, meet the requirements of the
law and legally excuse the lack of written authority, and, as they are a full ratification of the acts
executed by his nephew Jose Duran, they produce the effects of an express power of agency.
The judgment appealed from in harmony with the law and the merits of the case, and the errors
assigned thereto have been duly refuted by the foregoing considerations, so it should be affirmed.
The judgment appealed from is hereby affirmed, with the costs against the appellant.

G.R. No. L-44546 January 29, 1988


In issue herein are property and property rights, a familiar subject of controversy and a wellspring of enormous conflict that has led not only
to protracted legal entanglements but to even more bitter consequences, like strained relationships and even the forfeiture of lives. It is a
question that likewise reflects a tragic commentary on prevailing social and cultural values and institutions, where, as one observer notes,
wealth and its accumulation are the basis of self-fulfillment and where property is held as sacred as life itself. "It is in the defense of his
property," says this modern thinker, that one "will mobilize his deepest protective devices, and anybody that threatens his possessions will
arouse his most passionate enmity."

The task of this Court, however, is not to judge the wisdom of values; the burden of reconstructing the
social order is shouldered by the political leadership-and the people themselves.
The parties have come to this Court for relief and accordingly, our responsibility is to give them that relief
pursuant to the decree of law.
The antecedent facts are quoted from the decision 2 appealed from:
xxx xxx xxx
... [T]he land in question Lot 14694 of Cadastral Survey of Albay located in Legaspi City
with an area of some 11,325 sq. m. originally belonged to one Felisa Alzul as her own
private property; she married twice in her lifetime; the first, with one Bernabe Adille, with
whom she had as an only child, herein defendant Rustico Adille; in her second marriage
with one Procopio Asejo, her children were herein plaintiffs, now, sometime in 1939,
said Felisa sold the property in pacto de retro to certain 3rd persons, period of
repurchase being 3 years, but she died in 1942 without being able to redeem and after
her death, but during the period of redemption, herein defendant repurchased, by himself
alone, and after that, he executed a deed of extra-judicial partition representing himself to
be the only heir and child of his mother Felisa with the consequence that he was able to
secure title in his name alone also, so that OCT. No. 21137 in the name of his mother was
transferred to his name, that was in 1955; that was why after some efforts of compromise
had failed, his half-brothers and sisters, herein plaintiffs, filed present case for partition
with accounting on the position that he was only a trustee on an implied trust when he

redeemed,-and this is the evidence, but as it also turned out that one of plaintiffs,
Emeteria Asejo was occupying a portion, defendant counterclaimed for her to vacate that,

Well then, after hearing the evidence, trial Judge sustained defendant in his position that
he was and became absolute owner, he was not a trustee, and therefore, dismissed case
and also condemned plaintiff occupant, Emeteria to vacate; it is because of this that
plaintiffs have come here and contend that trial court erred in:
I. ... declaring the defendant absolute owner of the property;
II. ... not ordering the partition of the property; and
III. ... ordering one of the plaintiffs who is in possession of the portion of the property to
vacate the land, p. 1 Appellant's brief.
which can be reduced to simple question of whether or not on the basis of evidence and law, judgment
appealed from should be maintained. 3
xxx xxx xxx
The respondent Court of appeals reversed the trial Court, 4 and ruled for the plaintiffs-appellants, the
private respondents herein. The petitioner now appeals, by way of certiorari, from the Court's decision.
We required the private respondents to file a comment and thereafter, having given due course to the
petition, directed the parties to file their briefs. Only the petitioner, however, filed a brief, and the private
respondents having failed to file one, we declared the case submitted for decision.
The petition raises a purely legal issue: May a co-owner acquire exclusive ownership over the property
held in common?
Essentially, it is the petitioner's contention that the property subject of dispute devolved upon him upon
the failure of his co-heirs to join him in its redemption within the period required by law. He relies on the
provisions of Article 1515 of the old Civil Article 1613 of the present Code, giving the vendee a retro the
right to demand redemption of the entire property.
There is no merit in this petition.
The right of repurchase may be exercised by a co-owner with aspect to his share alone. 5 While the
records show that the petitioner redeemed the property in its entirety, shouldering the expenses therefor,
that did not make him the owner of all of it. In other words, it did not put to end the existing state of coownership.
Necessary expenses may be incurred by one co-owner, subject to his right to collect reimbursement from
the remaining co-owners. 6 There is no doubt that redemption of property entails a necessary expense.
Under the Civil Code:
ART. 488. Each co-owner shall have a right to compel the other co-owners to contribute
to the expenses of preservation of the thing or right owned in common and to the taxes.
Any one of the latter may exempt himself from this obligation by renouncing so much of

his undivided interest as may be equivalent to his share of the expenses and taxes. No
such waiver shall be made if it is prejudicial to the co-ownership.
The result is that the property remains to be in a condition of co-ownership. While a vendee a retro, under
Article 1613 of the Code, "may not be compelled to consent to a partial redemption," the redemption by
one co-heir or co-owner of the property in its totality does not vest in him ownership over it. Failure on the
part of all the co-owners to redeem it entitles the vendee a retro to retain the property and consolidate title
thereto in his name. 7 But the provision does not give to the redeeming co-owner the right to the entire
property. It does not provide for a mode of terminating a co-ownership.
Neither does the fact that the petitioner had succeeded in securing title over the parcel in his name
terminate the existing co-ownership. While his half-brothers and sisters are, as we said, liable to him for
reimbursement as and for their shares in redemption expenses, he cannot claim exclusive right to the
property owned in common. Registration of property is not a means of acquiring ownership. It operates as
a mere notice of existing title, that is, if there is one.
The petitioner must then be said to be a trustee of the property on behalf of the private respondents. The
Civil Code states:
ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefit of the person from
whom the property comes.
We agree with the respondent Court of Appeals that fraud attended the registration of the property. The
petitioner's pretension that he was the sole heir to the land in the affidavit of extrajudicial settlement he
executed preliminary to the registration thereof betrays a clear effort on his part to defraud his brothers
and sisters and to exercise sole dominion over the property. The aforequoted provision therefore applies.
It is the view of the respondent Court that the petitioner, in taking over the property, did so either on behalf
of his co-heirs, in which event, he had constituted himself a negotiorum gestor under Article 2144 of the
Civil Code, or for his exclusive benefit, in which case, he is guilty of fraud, and must act as trustee, the
private respondents being the beneficiaries, under the Article 1456. The evidence, of course, points to the
second alternative the petitioner having asserted claims of exclusive ownership over the property and
having acted in fraud of his co-heirs. He cannot therefore be said to have assume the mere management
of the property abandoned by his co-heirs, the situation Article 2144 of the Code contemplates. In any
case, as the respondent Court itself affirms, the result would be the same whether it is one or the other.
The petitioner would remain liable to the Private respondents, his co-heirs.
This Court is not unaware of the well-established principle that prescription bars any demand on property
(owned in common) held by another (co-owner) following the required number of years. In that event, the
party in possession acquires title to the property and the state of co-ownership is ended . 8 In the case at
bar, the property was registered in 1955 by the petitioner, solely in his name, while the claim of the private
respondents was presented in 1974. Has prescription then, set in?
We hold in the negative. Prescription, as a mode of terminating a relation of co-ownership, must have
been preceded by repudiation (of the co-ownership). The act of repudiation, in turn is subject to certain
conditions: (1) a co-owner repudiates the co-ownership; (2) such an act of repudiation is clearly made
known to the other co-owners; (3) the evidence thereon is clear and conclusive, and (4) he has been in
possession through open, continuous, exclusive, and notorious possession of the property for the period
required by law. 9

The instant case shows that the petitioner had not complied with these requisites. We are not convinced
that he had repudiated the co-ownership; on the contrary, he had deliberately kept the private
respondents in the dark by feigning sole heirship over the estate under dispute. He cannot therefore be
said to have "made known" his efforts to deny the co-ownership. Moreover, one of the private
respondents, Emeteria Asejo, is occupying a portion of the land up to the present, yet, the petitioner has
not taken pains to eject her therefrom. As a matter of fact, he sought to recover possession of that portion
Emeteria is occupying only as a counterclaim, and only after the private respondents had first sought
judicial relief.
It is true that registration under the Torrens system is constructive notice of title, 10 but it has likewise been
our holding that the Torrens title does not furnish a shield for fraud. 11 It is therefore no argument to say
that the act of registration is equivalent to notice of repudiation, assuming there was one, notwithstanding
the long-standing rule that registration operates as a universal notice of title.
For the same reason, we cannot dismiss the private respondents' claims commenced in 1974 over the
estate registered in 1955. While actions to enforce a constructive trust prescribes in ten years, 12
reckoned from the date of the registration of the property, 13 we, as we said, are not prepared to count the
period from such a date in this case. We note the petitioner's sub rosa efforts to get hold of the property
exclusively for himself beginning with his fraudulent misrepresentation in his unilateral affidavit of
extrajudicial settlement that he is "the only heir and child of his mother Feliza with the consequence that
he was able to secure title in his name also." 14 Accordingly, we hold that the right of the private
respondents commenced from the time they actually discovered the petitioner's act of defraudation. 15
According to the respondent Court of Appeals, they "came to know [of it] apparently only during the
progress of the litigation." 16 Hence, prescription is not a bar.
Moreover, and as a rule, prescription is an affirmative defense that must be pleaded either in a motion to
dismiss or in the answer otherwise it is deemed waived, 17 and here, the petitioner never raised that
defense. 18 There are recognized exceptions to this rule, but the petitioner has not shown why they apply.
WHEREFORE, there being no reversible error committed by the respondent Court of Appeals, the petition
is DENIED. The Decision sought to be reviewed is hereby AFFIRMED in toto. No pronouncement as to

G.R. No. 82670 September 15, 1989

DOMETILA M. ANDRES, doing business under the name and style "IRENE'S
APPEALS, respondents.
Roque A. Tamayo for petitioner.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for private respondent.

Assailed in this petition for review on certiorari is the judgment of the Court of Appeals,
which, applying the doctrine of solutio indebiti, reversed the decision of the Regional
Trial Court, Branch CV, Quezon City by deciding in favor of private respondent.
Petitioner, using the business name "Irene's Wearing Apparel," was engaged in the
manufacture of ladies garments, children's wear, men's apparel and linens for local and
foreign buyers. Among its foreign buyers was Facets Funwear, Inc. (hereinafter referred
to as FACETS) of the United States.
In the course of the business transaction between the two, FACETS from time to time
remitted certain amounts of money to petitioner in payment for the items it had

purchased. Sometime in August 1980, FACETS instructed the First National State Bank
of New Jersey, Newark, New Jersey, U.S.A. (hereinafter referred to as FNSB) to
transfer $10,000.00 to petitioner via Philippine National Bank, Sta. Cruz Branch, Manila
(hereinafter referred to as PNB).
Acting on said instruction, FNSB instructed private respondent Manufacturers Hanover
and Trust Corporation to effect the above- mentioned transfer through its facilities and to
charge the amount to the account of FNSB with private respondent. Although private
respondent was able to send a telex to PNB to pay petitioner $10,000.00 through the
Pilipinas Bank, where petitioner had an account, the payment was not effected
immediately because the payee designated in the telex was only "Wearing Apparel."
Upon query by PNB, private respondent sent PNB another telex dated August 27, 1980
stating that the payment was to be made to "Irene's Wearing Apparel." On August 28,
1980, petitioner received the remittance of $10,000.00 through Demand Draft No.
225654 of the PNB.
Meanwhile, on August 25, 1980, after learning about the delay in the remittance of the
money to petitioner, FACETS informed FNSB about the situation. On September 8,
1980, unaware that petitioner had already received the remittance, FACETS informed
private respondent about the delay and at the same time amended its instruction by
asking it to effect the payment through the Philippine Commercial and Industrial Bank
(hereinafter referred to as PCIB) instead of PNB.
Accordingly, private respondent, which was also unaware that petitioner had already
received the remittance of $10,000.00 from PNB instructed the PCIB to pay $10,000.00
to petitioner. Hence, on September 11, 1980, petitioner received a second $10,000.00
Private respondent debited the account of FNSB for the second $10,000.00 remittance
effected through PCIB. However, when FNSB discovered that private respondent had
made a duplication of the remittance, it asked for a recredit of its account in the amount
of $10,000.00. Private respondent complied with the request.
Private respondent asked petitioner for the return of the second remittance of
$10,000.00 but the latter refused to pay. On May 12, 1982 a complaint was filed with the
Regional Trial Court, Branch CV, Quezon City which was decided in favor of petitioner
as defendant. The trial court ruled that Art. 2154 of the New Civil Code is not applicable
to the case because the second remittance was made not by mistake but by negligence
and petitioner was not unjustly enriched by virtue thereof [Record, p. 234]. On appeal,
the Court of Appeals held that Art. 2154 is applicable and reversed the RTC decision.
The dispositive portion of the Court of Appeals' decision reads as follows:

WHEREFORE, the appealed decision is hereby REVERSED and SET

ASIDE and another one entered in favor of plaintiff-appellant and against
defendant-appellee Domelita (sic) M. Andres, doing business under the
name and style "Irene's Wearing Apparel" to reimburse and/or return to
plaintiff-appellant the amount of $10,000.00, its equivalent in Philippine
currency, with interests at the legal rate from the filing of the complaint on
May 12, 1982 until the whole amount is fully paid, plus twenty percent
(20%) of the amount due as attomey's fees; and to pay the costs.
With costs against defendant-appellee.
SO ORDERED. [Rollo, pp. 29-30.]
Thereafter, this petition was filed. The sole issue in this case is whether or not the
private respondent has the right to recover the second $10,000.00 remittance it had
delivered to petitioner. The resolution of this issue would hinge on the applicability of Art.
2154 of the New Civil Code which provides that:
Art. 2154. If something received when there is no right to demand it, and it
was unduly delivered through mistake, the obligation to return it arises.
This provision is taken from Art. 1895 of the Spanish Civil Code which provided that:
Art. 1895. If a thing is received when there was no right to claim it and
which, through an error, has been unduly delivered, an obligation to
restore it arises.
In Velez v. Balzarza, 73 Phil. 630 (1942), the Court, speaking through Mr. Justice
Bocobo explained the nature of this article thus:
Article 1895 [now Article 2154] of the Civil Code abovequoted, is therefore
applicable. This legal provision, which determines the quasi-contract of
solution indebiti, is one of the concrete manifestations of the ancient
principle that no one shall enrich himself unjustly at the expense of
another. In the Roman Law Digest the maxim was formulated thus: "Jure
naturae acquum est, neminem cum alterius detrimento et injuria fieri
locupletiorem." And the Partidas declared: "Ninguno non deue
enriquecerse tortizeramente con dano de otro." Such axiom has grown
through the centuries in legislation, in the science of law and in court
decisions. The lawmaker has found it one of the helpful guides in framing
statutes and codes. Thus, it is unfolded in many articles scattered in the
Spanish Civil Code. (See for example, articles, 360, 361, 464, 647, 648,
797, 1158, 1163, 1295, 1303, 1304, 1893 and 1895, Civil Code.) This
time-honored aphorism has also been adopted by jurists in their study of

the conflict of rights. It has been accepted by the courts, which have not
hesitated to apply it when the exigencies of right and equity demanded its
assertion. It is a part of that affluent reservoir of justice upon which judicial
discretion draws whenever the statutory laws are inadequate because
they do not speak or do so with a confused voice. [at p. 632.]
For this article to apply the following requisites must concur: "(1) that he who paid was
not under obligation to do so; and, (2) that payment was made by reason of an essential
mistake of fact" [City of Cebu v. Piccio, 110 Phil. 558, 563 (1960)].
It is undisputed that private respondent delivered the second $10,000.00 remittance.
However, petitioner contends that the doctrine of solutio indebiti, does not apply
because its requisites are absent.
First, it is argued that petitioner had the right to demand and therefore to retain the
second $10,000.00 remittance. It is alleged that even after the two $10,000.00
remittances are credited to petitioner's receivables from FACETS, the latter allegedly
still had a balance of $49,324.00. Hence, it is argued that the last $10,000.00 remittance
being in payment of a pre-existing debt, petitioner was not thereby unjustly enriched.
The contention is without merit.
The contract of petitioner, as regards the sale of garments and other textile products,
was with FACETS. It was the latter and not private respondent which was indebted to
petitioner. On the other hand, the contract for the transmittal of dollars from the United
States to petitioner was entered into by private respondent with FNSB. Petitioner,
although named as the payee was not privy to the contract of remittance of dollars.
Neither was private respondent a party to the contract of sale between petitioner and
FACETS. There being no contractual relation between them, petitioner has no right to
apply the second $10,000.00 remittance delivered by mistake by private respondent to
the outstanding account of FACETS.
Petitioner next contends that the payment by respondent bank of the second
$10,000.00 remittance was not made by mistake but was the result of negligence of its
employees. In connection with this the Court of Appeals made the following finding of
The fact that Facets sent only one remittance of $10,000.00 is not
disputed. In the written interrogatories sent to the First National State
Bank of New Jersey through the Consulate General of the Philippines in
New York, Adelaide C. Schachel, the investigation and reconciliation clerk
in the said bank testified that a request to remit a payment for Facet
Funwear Inc. was made in August, 1980. The total amount which the First

National State Bank of New Jersey actually requested the plaintiffappellant Manufacturers Hanover & Trust Corporation to remit to Irene's
Wearing Apparel was US $10,000.00. Only one remittance was requested
by First National State Bank of New Jersey as per instruction of Facets
Funwear (Exhibit "J", pp. 4-5).
That there was a mistake in the second remittance of US $10,000.00 is
borne out by the fact that both remittances have the same reference
invoice number which is 263 80. (Exhibits "A-1- Deposition of Mr. Stanley
Panasow" and "A-2-Deposition of Mr. Stanley Panasow").
Plaintiff-appellant made the second remittance on the wrong assumption
that defendant-appellee did not receive the first remittance of US
$10,000.00. [Rollo, pp. 26-27.]
It is evident that the claim of petitioner is anchored on the appreciation of the attendant
facts which petitioner would have this Court review. The Court holds that the finding by
the Court of Appeals that the second $10,000.00 remittance was made by mistake,
being based on substantial evidence, is final and conclusive. The rule regarding
questions of fact being raised with this Court in a petition for certiorari under Rule 45 of
the Revised Rules of Court has been stated in Remalante v. Tibe, G.R. No. 59514,
February 25, 1988, 158 SCRA 138, thus:
The rule in this jurisdiction is that only questions of law may be raised in a
petition for certiorari under Rule 45 of the Revised Rules of Court. "The
jurisdiction of the Supreme Court in cases brought to it from the Court of
Appeals is limited to reviewing and revising the errors of law imputed to it,
its findings of fact being conclusive" [Chan v. Court of Appeals, G.R. No. L27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions].
This Court has emphatically declared that "it is not the function of the
Supreme Court to analyze or weigh such evidence all over again, its
jurisdiction being limited to reviewing errors of law that might have been
committed by the lower court" [Tiongco v. De la Merced, G.R. No. L24426, July 25, 1974, 58 SCRA 89; Corona v. Court of Appeals, G.R. No.
L-62482, April 28, 1983, 121 SCRA 865; Baniqued v. Court of Appeals, G.
R. No. L-47531, February 20, 1984, 127 SCRA 596]. "Barring, therefore, a
showing that the findings complained of are totally devoid of support in the
record, or that they are so glaringly erroneous as to constitute serious
abuse of discretion, such findings must stand, for this Court is not
expected or required to examine or contrast the oral and documentary
evidence submitted by the parties" [Santa Ana, Jr. v. Hernandez, G.R. No.
L-16394, December 17, 1966, 18 SCRA 9731. [at pp. 144-145.]

Petitioner invokes the equitable principle that when one of two innocent persons must
suffer by the wrongful act of a third person, the loss must be borne by the one whose
negligence was the proximate cause of the loss.
The rule is that principles of equity cannot be applied if there is a provision of law
specifically applicable to a case [Phil. Rabbit Bus Lines, Inc. v. Arciaga, G.R. No. L29701, March 16, 1987,148 SCRA 433; Zabat, Jr. v. Court of Appeals, G.R. No. L36958,
July 10, 1986, 142 SCRA 587; Rural Bank of Paranaque, Inc. v. Remolado, G.R. No.
62051, March 18, 1985, 135 SCRA 409; Cruz v. Pahati, 98 Phil. 788 (1956)]. Hence, the
Court in the case of De Garcia v. Court of Appeals, G.R. No. L-20264, January 30,
1971, 37 SCRA 129, citing Aznar v. Yapdiangco, G.R. No. L-18536, March 31, 1965, 13
SCRA 486, held:
... The common law principle that where one of two innocent persons must
suffer by a fraud perpetrated by another, the law imposes the loss upon
the party who, by his misplaced confidence, has enabled the fraud to be
committed, cannot be applied in a case which is covered by an express
provision of the new Civil Code, specifically Article 559. Between a
common law principle and a statutory provision, the latter must prevail in
this jurisdiction. [at p. 135.]
Having shown that Art. 2154 of the Civil Code, which embodies the doctrine of solutio
indebiti, applies in the case at bar, the Court must reject the common law principle
invoked by petitioner.
Finally, in her attempt to defeat private respondent's claim, petitioner makes much of the
fact that from the time the second $10,000.00 remittance was made, five hundred and
ten days had elapsed before private respondent demanded the return thereof. Needless
to say, private respondent instituted the complaint for recovery of the second
$10,000.00 remittance well within the six years prescriptive period for actions based
upon a quasi-contract [Art. 1145 of the New Civil Code].
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals is
hereby AFFIRMED.

G.R. No. L-17447

April 30, 1963

Feria, Manglapus & Associates for plainttiff-appelle.Asst. City Fiscal Manuel T. Reyes for
This is an appeal from the judgment of the CFI of Manila, the dispostive portion of which reads:
"xxx Of the payments made by the plaintiff, only that made on October 25, 1950 in the
amount of P1,250.00 has prescribed Payments made in 1951 and thereafter are still
recoverable since the extra-judicial demand made on October 30, 1956 was well within
the six-year prescriptive period of the New CivilCode.
In view of the foregoing considerations, judgment is hereby rendered in favor of the
plaintiff, ordering the defendants to refund the amount of P29,824.00, without interest.
No costs.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted
and approved by this Honorable Court, without prejudice to the parties adducing other
evidence to prove their case not covered by this stipulation of facts. 1wph1.t
Defendants' counterclaim is hereby dismissed for not having been substantiated."
On August 11, 1958, the plaintiff Gonzalo Puyat & Sons, Inc., filed an action for refund of Retail
DealerlsTaxes paid by it, corresponding to the first Quarter of 1950 up to the third Quarter of
1956, amounting to P33,785.00, against the City of Manila and its City Treasurer.The case was
submitted on the following stipulation of facts, to wit-"1. That the plaintiff is a corporation duly organized and existing according to the laws of
the Philippines, with offices at Manila; while defendant City Manila is a Municipal
Corporation duly organized in accordance with the laws of the Philippines, and defendant
Marcelino Sarmiento is the dulyqualified incumbent City Treasurer of Manila;
"2. That plaintiff is engaged in the business of manufacturing and selling all kinds of
furniture at its factory at 190 Rodriguez-Arias, San Miguel, Manila, and has a display
room located at 604-606 Rizal Avenue, Manila, wherein it displays the various kind of
furniture manufactured by it and sells some goods imported by it, such as billiard balls,
bowling balls and other accessories;

"3. That acting pursuant to the provisions of Sec. 1. group II, of Ordinance No. 3364,
defendant City Treasurer of Manilaassessed from plaintiff retail dealer's tax
corresponding to the quarters hereunder stated on the sales of furniture manufactured and
sold by it at its factory site, all of which assessments plaintiff paid without protest in the
erroneous belief that it was liable therefor, on the dates and in the amount enumerated
herein below:


Date Paid

O.R. No.

and Paid.

First Quarter 1950

Jan. 25, 1950



Second Quarter 1950

Apr. 25, 1950



Third Quarter 1950

Jul. 25, 1950



Fourth Quarter 1950

Oct. 25, 1950



1953, 1954 and 1955, fixing the same amount quarterly.) x x x..



First Quarter 1956

Jan. 25, 1956



Second Quarter 1956

Apr. 25, 1956



Third Quarter 1956

Jul. 25, 1956






"4. That plaintiff, being a manufacturer of various kinds of furniture, is exempt from the
payment of taxes imposed under the provisions of Sec. 1, Group II, of Ordinance No.
3364,which took effect on September 24, 1956, on the sale of the various kinds of
furniture manufactured by it pursuant to the provisions of Sec. 18(n) of Republic Act No.
409 (Revised Charter of Manila), as restated in Section 1 of Ordinance No.3816.
"5. That, however, plaintiff, is liable for the payment of taxes prescribed in Section 1,
Group II or Ordinance No. 3364mas amended by Sec. 1, Group II of Ordinance No.
3816, which took effect on September 24, 1956, on the sales of imported billiard balls,
bowling balls and other accessories at its displayroom. The taxes paid by the plaintiff on
the sales of said article are as follows:




"6. That on October 30, 1956, the plaintiff filed with defendant City Treasurer of Manila,
a formal request for refund of the retail dealer's taxes unduly paid by it as aforestated in
paragraph 3, hereof.
"7. That on July 24, 1958, the defendant City Treasurer of Maniladefinitely denied said
request for refund.
"8. Hence on August 21, 1958, plaintiff filed the present complaint.
"9. Based on the above stipulation of facts, the legal issues to be resolved by this
Honorable Court are: (1) the period of prescription applicable in matters of refund of
municipal taxes errenously paid by a taxpayer and (2) refund of taxes not paid under
protest. x x x."
Said judgment was directly appealed to this Court on two dominant issues to wit: (1) Whether or
not the amounts paid by plaintiff-appelle, as retail dealer's taxes under Ordinance 1925, as
amended by Ordinance No. 3364of the City of Manila, without protest, are refundable;(2)
Assuming arguendo, that plaintiff-appellee is entitled to the refund of the retail taxes in question,
whether or not the claim for refund filed in October 1956, in so far as said claim refers to taxes
paid from 1950 to 1952 has already prescribed. .
Under the first issue, defendants-appellants contend tht the taxes in question were voluntarily
paid by appellee company and since, in this jurisdiction, in order that a legal basis arise for claim
of refund of taxes erroneously assessed, payment thereof must be made under protest, and this
being a condition sine qua non, and no protest having been made, -- verbally or in writing,
therebyindicating that the payment was voluntary, the action must fail. Cited in support of the
above contention, are the cases of Zaragoza vs. Alfonso, 46 Phil. 160-161, and Gavino v.
Municipality of Calapan, 71 Phil. 438..
In refutation of the above stand of appellants, appellee avers tht the payments could not have
been voluntary.At most, they were paid "mistakenly and in good faith"and "without protest in the
erroneous belief that it was liable thereof." Voluntariness is incompatible with protest and
mistake. It submits that this is a simple case of "solutio indebiti"..
Appellants do not dispute the fact that appellee-companyis exempted from the payment of the tax
in question.This is manifest from the reply of appellant City Treasurer stating that sales of
manufactured products at the factory site are not taxable either under the Wholesalers Ordinance
or under the Retailers' Ordinance. With this admission, it would seem clear that the taxes
collected from appellee were paid, thru an error or mistake, which places said act of payment
within the pale of the new Civil Code provision on solutio indebiti. The appellant City of Manila,
at the very start, notwithstanding the Ordinance imposing the Retailer's Tax, had no right to
demand payment thereof..
"If something is received when there is no right to demand it, and it was unduly delivered
through mistake, the obligationto retun it arises" (Art. 2154, NCC)..

Appelle categorically stated that the payment was not voluntarily made, (a fact found also by the
lower court),but on the erronoues belief, that they were due. Under this circumstance, the amount
paid, even without protest is recoverable. "If the payer was in doubt whether the debt was due, he
may recover if he proves that it was not due" (Art. 2156, NCC). Appellee had duly proved that
taxes were not lawfully due. There is, therefore, no doubt that the provisions of solutio indebtiti,
the new Civil Code, apply to the admitted facts of the case..
With all, appellant quoted Manresa as saying: "x x x De la misma opinion son el Sr. Sanchez
Roman y el Sr. Galcon, et cual afirma que si la paga se hizo por error de derecho, ni existe el
cuasi-contrato ni esta obligado a la restitucion el que cobro, aunque no se debiera lo que se pago"
(Manresa, Tomo 12, paginas 611-612). This opinion, however, has already lost its
persuasiveness, in view of the provisions of the Civil Code, recognizing "error de derecho" as a
basis for the quasi-contract, of solutio indebiti. .
"Payment by reason of a mistake in the contruction or application of a doubtful or difficult
question of law may come within the scope of the preceding article" (Art. 21555)..
There is no gainsaying the fact that the payments made by appellee was due to a mistake in the
construction of a doubtful question of law. The reason underlying similar provisions, as applied
to illegal taxation, in the United States, is expressed in the case of Newport v. Ringo, 37 Ky. 635,
636; 10 S.W. 2, in the following manner:.
"It is too well settled in this state to need the citation of authority that if money be paid through a
clear mistake of law or fact, essentially affecting the rights of the parties, and which in law or
conscience was not payable, and should not be retained by the party receiving it, it may be
recovered. Both law and sound morality so dictate. Especially should this be the rule as to illegal
taxation. The taxpayer has no voice in the impositionof the burden. He has the right to presume
that the taxing power has been lawfully exercised. He should not be required to know more than
those in authority over him, nor should he suffer loss by complying with what he bona fide
believe to be his duty as a good citizen. Upon the contrary, he should be promoted to its ready
performance by refunding to him any legal exaction paid by him in ignorance of its illegality;
and, certainly, in such a case, if be subject to a penalty for nonpayment, his compliance under
belief of its legality, and without awaitinga resort to judicial proceedings should not be regrded in
law as so far voluntary as to affect his right of recovery.".
"Every person who through an act or performance by another, or any other means, acquires or
comes into possession of something at the expense of the latter without just or legal grounds,
shall return the same to him"(Art. 22, Civil Code). It would seems unedifying for the
government, (here the City of Manila), that knowing it has no right at all to collect or to receive
money for alleged taxes paid by mistake, it would be reluctant to return the same. No one should
enrich itself unjustly at the expense of another (Art. 2125, Civil Code)..
Admittedly, plaintiff-appellee paid the tax without protest.Equally admitted is the fact that
section 76 of the Charter of Manila provides that "No court shall entertain any suit assailing the
validity of tax assessed under this article until the taxpayer shall have paid, under protest the
taxes assessed against him, xx". It should be noted, however, that the article referred to in said

section is Article XXI, entitled Department of Assessment and the sections thereunder manifestly
show that said article and its sections relate to asseessment, collection and recovery of real estate
taxes only. Said section 76, therefor, is not applicable to the case at bar, which relates to the
recover of retail dealer taxes..
In the opinion of the Secretary of Justice (Op. 90,Series of 1957, in a question similar to the case
at bar, it was held that the requiredment of protest refers only to the payment of taxes which are
directly imposed by the charter itself, that is, real estate taxes, which view was sustained by
judicial and administrative precedents, one of which is the case of Medina, et al., v. City of
Baguio, G.R. No. L-4269, Aug. 29, 1952. In other words, protest is not necessary for the
recovery of retail dealer's taxes, like the present, because they are not directly imposed by the
charter. In the Medina case, the Charter of Baguio (Chap. 61, Revised Adm. Code), provides that
"no court shall entertain any suit assailing the validity of a tax assessed unde this charter until the
tax-payer shall have paid, under protest, the taxes assessed against him (sec.25474[b], Rev. Adm.
Code), a proviso similar to section 76 of the Manila Charter. The refund of specific taxes paid
under a void ordinance was ordered, although it did not appear that payment thereof was made
under protest..
In a recent case, We said: "The appellants argue that the sum the refund of which is sought by the
appellee, was not paid under protest and hence is not refundable. Again, the trial court correctly
held that being unauthorized, it is not a tax assessed under the Charter of the Appellant City of
Davao and for that reason, no protest is necessary for a claim or demand for its refund" (Citing
the Medina case, supra; East Asiatic Co., Ltd. v. City of Davao, G.R. No. L-16253, Aug. 21,
1962). Lastly, being a case of solutio indebiti, protest is not required as a condition sine qua non
for its application..
The next issue in discussion is that of prescription. Appellants maintain that article 1146 (NCC),
which provides for a period of four (4) years (upon injury to the rights of the plaintiff), apply to
the case. On the other hand, appellee contends that provisions of Act 190 (Code of Civ.
Procedure) should apply, insofar as payments made before the effectivity of the New Civil Code
on August 30, 1950, the period of which is ten (10) years, (Sec. 40,Act No. 190; Osorio v. Tan
Jongko, 51 O.G. 6211) and article 1145 (NCC), for payments made after said effectivity,
providing for a period of six (6) years (upon quasi-contracts like solutio indebiti). Even if the
provisionsof Act No. 190 should apply to those payments made before the effectivity of the new
Civil Code, because "prescription already runnig before the effectivity of this Code shall be
governed by laws previously in force x x x" (art. 1116, NCC), for payments made after said
effectivity,providing for a period of six (6) years (upon quasi-contracts like solutio indebiti).
Even if the provisions of Act No. 190should apply to those payments made before the effectivity
of the new Civil Code, because "prescription already running before the effectivity of of this
Code shall be govern by laws previously in force xxx " (Art. 1116, NCC), Still payments made
before August 30, 1950 are no longer recoverable in view of the second paragraph of said article
(1116), which provides:"but if since the time this Code took effect the entire period herein
required for prescription should elapse the present Code shall be applicable even though by the
former laws a longer period might be required". Anent the payments made after August 30, 1950,
it is abvious that the action has prescribed with respect to those made before October 30, 1950
only, considering the fact that the prescription of action is interrupted xxx when is a writteen

extra-judicial demand x x x" (Art. 1155, NCC), and the written demand in the case at bar was
made on October 30, 1956 (Stipulation of Facts). MODIFIED in the sense that only payments
made on or after October 30, 1950 should be refunded, the decision appealed from is affirmed, in
all other respects. No costs. .

G.R. No. L-13667

April 29, 1960

AL., defendants-appellees.
Juan C. Jimenez, for appellees.




On July 25, 1956, appellants filed against appellees in the Court of First Instance of Manila a
complaint praying for a 20% Christmas bonus for the years 1954 and 1955. The court a quo on
appellees' motion to dismiss, issued the following order:
Considering the motion to dismiss filed on 15 August, 1956, set for this morning;
considering that at the hearing thereof, only respondents appeared thru counsel and there
was no appearance for the plaintiffs although the court waited for sometime for them;
considering, however, that petitioners have submitted an opposition which the court will
consider together with the arguments presented by respondents and the Exhibits marked
and presented, namely, Exhibits 1 to 5, at the hearing of the motion to dismiss;
considering that the action in brief is one to compel respondents to declare a Christmas
bonus for petitioners workers in the National Development Company; considering that
the Court does not see how petitioners may have a cause of action to secure such bonus
(a) A bonus is an act of liberality and the court takes it that it is not within its judicial
powers to command respondents to be liberal;

(b) Petitioners admit that respondents are not under legal duty to give such bonus but that
they had only ask that such bonus be given to them because it is a moral obligation of
respondents to give that but as this Court understands, it has no power to compel a party
to comply with a moral obligation (Art. 142, New Civil Code.).
IN VIEW WHEREOF, dismissed. No pronouncement as to costs.
A motion for reconsideration of the afore-quoted order was denied. Hence this appeal.
Appellants contend that there exists a cause of action in their complaint because their claim rests
on moral grounds or what in brief is defined by law as a natural obligation.
Since appellants admit that appellees are not under legal obligation to give such claimed bonus;
that the grant arises only from a moral obligation or the natural obligation that they discussed in
their brief, this Court feels it urgent to reproduce at this point, the definition and meaning of
natural obligation.
Article 1423 of the New Civil Code classifies obligations into civil or natural. "Civil obligations
are a right of action to compel their performance. Natural obligations, not being based on
positive law but on equity and natural law, do not grant a right of action to enforce their
performance, but after voluntary fulfillment by the obligor, they authorize the retention of what
has been delivered or rendered by reason thereof".
It is thus readily seen that an element of natural obligation before it can be cognizable by the
court is voluntary fulfillment by the obligor. Certainly retention can be ordered but only after
there has been voluntary performance. But here there has been no voluntary performance. In fact,
the court cannot order the performance.
At this point, we would like to reiterate what we said in the case of Philippine Education Co. vs.
CIR and the Union of Philippine Education Co., Employees (NUL) (92 Phil., 381; 48 Off. Gaz.,



From the legal point of view a bonus is not a demandable and enforceable obligation. It is
so when it is made a part of the wage or salary compensation.
And while it is true that the subsequent case of H. E. Heacock vs. National Labor Union, et al.,
95 Phil., 553; 50 Off. Gaz., 4253, we stated that:
Even if a bonus is not demandable for not forming part of the wage, salary or
compensation of an employee, the same may nevertheless, be granted on equitable
consideration as when it was given in the past, though withheld in succeeding two years
from low salaried employees due to salary increases.

still the facts in said Heacock case are not the same as in the instant one, and hence the ruling
applied in said case cannot be considered in the present action.
Premises considered, the order appealed from is hereby affirmed, without pronouncement as to

G.R. No. L-47362

December 19, 1940

BERNARDINO ESTRADA, recurrido-apelado.
D. Crispin Oben en representacion del recurrido-apelado.





El 9 de mayo de 1912, Alejandro F. Callao, madre del demandado Juan F. Villarroel, obtuvo de
los esposos Mariano Estrada y Severina un prestamo de P1,000 pagadero al cabo de siete aos
(Exhibito A). Alejandra fallecio, dejando como unico heredero al demandado. Los esposos
Mariano Estrada y Severina fallecieron tambien, dejando como unico heredero al demandante
Bernardino Estrada. El 9 de agosto de 1930, el demandado suscribio un documento (Exhibito B)
por el cual declara en deber al demandante la cantidad de P1,000, con un interes de 12 por ciento
al ao. Esta accion versa sobre el cobro de esta cantidad.
El Juzgado de primera Instancia de Laguna, en el cual se interpuso esta accion, condeno al
demandado a pagar al demandante la cantidad reclamada de P1,000 con sus intereses legales de
12 por ciento al ao desde el 9 de agosto de 1930 hasta su completo pago. Se apelo de esta
Se notara que las partes en la presente causa son, respectivamente, los unicos herederos de los
acreedores y de la deudora originales. Esta accion se ejercita en virtud de la obligacion que el
demandado como unico hijo de la primitiva deudora contrajo en favor del demandante, unico
heredero de loa primitivos acreedores. Se admite que la cantidad de P1,000 a que se contrae esta
obligacion es la misma deuda de la madre del demandado a los padres del
Aunque la accion para recobrar la deuda original ha prescrito ya cuando se interpuso la demanda
en esta causa, la cuestion que se suscita en esta apelacion es principalmente la de si, no obstante
tal prescripcion, es procedente la accion entablada. Sin embargo, no se funda la presente accion
en la obligacion original contraida por la madre del demandado, que ya ha prescrito, sino en la
que contrajo el demandado el 9 de agosto de 1930 (Exhibito B) al asumir el cumplimiento de
aquella obligacion, ya prescrita. Siendo el demandado el unico herdero de la primitiva deudora,
con derecho a sucederla en su herencia, aquella deuda con traida por su madre legalmente,
aunque perdio su eficacia por prescripcion, ahora es, sin embargo, para el una obligacion moral,
que es consideracion suficiente a crear y hacer eficaz y exigible su obligacion voluntariamente
contraida el 9 de agosto de 1930 en el Exhibito B.
La regla de que una promesa nueva de pagar una deuda prrescrita debe ser hecha por la misma
persona obligada o por otra legalmente autorizada por ella, no es aplicable al caso presente en
que no se exige el cumplimiento de la obligacion de la obligada orignalmente, sino del que des
pues quiso voluntariamente asumir esta obligacion.
Se confirma la sentencia apelada, con las costas al apelante. Asi se ordena.

G.R. No. 179337

April 30, 2008

President of FEU, respondents.
This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assails the June 29,
2007 Decision2 of the Court of Appeals in CA-G.R. CV No. 87050, nullifying and setting aside
the November 10, 2004 Decision3 of the Regional Trial Court of Manila, Branch 2, in Civil Case
No. 98-89483 and dismissing the complaint filed by petitioner; as well as its August 23, 2007
Resolution4 denying the Motion for Reconsideration.5
The antecedent facts are as follows:
Petitioner Joseph Saludaga was a sophomore law student of respondent Far Eastern University
(FEU) when he was shot by Alejandro Rosete (Rosete), one of the security guards on duty at the
school premises on August 18, 1996. Petitioner was rushed to FEU-Dr. Nicanor Reyes Medical
Foundation (FEU-NRMF) due to the wound he sustained. 6 Meanwhile, Rosete was brought to
the police station where he explained that the shooting was accidental. He was eventually
released considering that no formal complaint was filed against him.
Petitioner thereafter filed a complaint for damages against respondents on the ground that they
breached their obligation to provide students with a safe and secure environment and an
atmosphere conducive to learning. Respondents, in turn, filed a Third-Party Complaint7 against
Galaxy Development and Management Corporation (Galaxy), the agency contracted by
respondent FEU to provide security services within its premises and Mariano D. Imperial
(Imperial), Galaxy's President, to indemnify them for whatever would be adjudged in favor of
petitioner, if any; and to pay attorney's fees and cost of the suit. On the other hand, Galaxy and
Imperial filed a Fourth-Party Complaint against AFP General Insurance.8
On November 10, 2004, the trial court rendered a decision in favor of petitioner, the dispositive
portion of which reads:

WHEREFORE, from the foregoing, judgment is hereby rendered ordering:

1. FEU and Edilberto de Jesus, in his capacity as president of FEU to pay jointly
and severally Joseph Saludaga the amount of P35,298.25 for actual damages with
12% interest per annum from the filing of the complaint until fully paid; moral
damages of P300,000.00, exemplary damages of P500,000.00, attorney's fees of
P100,000.00 and cost of the suit;
2. Galaxy Management and Development Corp. and its president, Col. Mariano
Imperial to indemnify jointly and severally 3rd party plaintiffs (FEU and
Edilberto de Jesus in his capacity as President of FEU) for the above-mentioned
3. And the 4th party complaint is dismissed for lack of cause of action. No
pronouncement as to costs.
Respondents appealed to the Court of Appeals which rendered the assailed Decision, the decretal
portion of which provides, viz:
WHEREFORE, the appeal is hereby GRANTED. The Decision dated November 10,
2004 is hereby REVERSED and SET ASIDE. The complaint filed by Joseph Saludaga
against appellant Far Eastern University and its President in Civil Case No. 98-89483 is
Petitioner filed a Motion for Reconsideration which was denied; hence, the instant petition based
on the following grounds:


Petitioner is suing respondents for damages based on the alleged breach of student-school
contract for a safe learning environment. The pertinent portions of petitioner's Complaint read:
6.0. At the time of plaintiff's confinement, the defendants or any of their representative
did not bother to visit and inquire about his condition. This abject indifference on the part
of the defendants continued even after plaintiff was discharged from the hospital when
not even a word of consolation was heard from them. Plaintiff waited for more than one
(1) year for the defendants to perform their moral obligation but the wait was fruitless.
This indifference and total lack of concern of defendants served to exacerbate plaintiff's
miserable condition.
11.0. Defendants are responsible for ensuring the safety of its students while the latter are
within the University premises. And that should anything untoward happens to any of its
students while they are within the University's premises shall be the responsibility of the
defendants. In this case, defendants, despite being legally and morally bound, miserably
failed to protect plaintiff from injury and thereafter, to mitigate and compensate plaintiff
for said injury;
12.0. When plaintiff enrolled with defendant FEU, a contract was entered into between
them. Under this contract, defendants are supposed to ensure that adequate steps are
taken to provide an atmosphere conducive to study and ensure the safety of the plaintiff
while inside defendant FEU's premises. In the instant case, the latter breached this
contract when defendant allowed harm to befall upon the plaintiff when he was shot at
by, of all people, their security guard who was tasked to maintain peace inside the
In Philippine School of Business Administration v. Court of Appeals,13 we held that:
When an academic institution accepts students for enrollment, there is established a
contract between them, resulting in bilateral obligations which both parties are bound to
comply with. For its part, the school undertakes to provide the student with an education

that would presumably suffice to equip him with the necessary tools and skills to pursue
higher education or a profession. On the other hand, the student covenants to abide by the
school's academic requirements and observe its rules and regulations.
Institutions of learning must also meet the implicit or "built-in" obligation of providing
their students with an atmosphere that promotes or assists in attaining its primary
undertaking of imparting knowledge. Certainly, no student can absorb the intricacies of
physics or higher mathematics or explore the realm of the arts and other sciences when
bullets are flying or grenades exploding in the air or where there looms around the school
premises a constant threat to life and limb. Necessarily, the school must ensure that
adequate steps are taken to maintain peace and order within the campus premises and to
prevent the breakdown thereof.14
It is undisputed that petitioner was enrolled as a sophomore law student in respondent FEU. As
such, there was created a contractual obligation between the two parties. On petitioner's part, he
was obliged to comply with the rules and regulations of the school. On the other hand,
respondent FEU, as a learning institution is mandated to impart knowledge and equip its students
with the necessary skills to pursue higher education or a profession. At the same time, it is
obliged to ensure and take adequate steps to maintain peace and order within the campus.
It is settled that in culpa contractual, the mere proof of the existence of the contract and the
failure of its compliance justify, prima facie, a corresponding right of relief. 15 In the instant case,
we find that, when petitioner was shot inside the campus by no less the security guard who was
hired to maintain peace and secure the premises, there is a prima facie showing that respondents
failed to comply with its obligation to provide a safe and secure environment to its students.
In order to avoid liability, however, respondents aver that the shooting incident was a fortuitous
event because they could not have reasonably foreseen nor avoided the accident caused by
Rosete as he was not their employee;16 and that they complied with their obligation to ensure a
safe learning environment for their students by having exercised due diligence in selecting the
security services of Galaxy.
After a thorough review of the records, we find that respondents failed to discharge the burden of
proving that they exercised due diligence in providing a safe learning environment for their
students. They failed to prove that they ensured that the guards assigned in the campus met the
requirements stipulated in the Security Service Agreement. Indeed, certain documents about
Galaxy were presented during trial; however, no evidence as to the qualifications of Rosete as a
security guard for the university was offered.
Respondents also failed to show that they undertook steps to ascertain and confirm that the
security guards assigned to them actually possess the qualifications required in the Security
Service Agreement. It was not proven that they examined the clearances, psychiatric test results,
201 files, and other vital documents enumerated in its contract with Galaxy. Total reliance on the

security agency about these matters or failure to check the papers stating the qualifications of the
guards is negligence on the part of respondents. A learning institution should not be allowed to
completely relinquish or abdicate security matters in its premises to the security agency it hired.
To do so would result to contracting away its inherent obligation to ensure a safe learning
environment for its students.
Consequently, respondents' defense of force majeure must fail. In order for force majeure to be
considered, respondents must show that no negligence or misconduct was committed that may
have occasioned the loss. An act of God cannot be invoked to protect a person who has failed to
take steps to forestall the possible adverse consequences of such a loss. One's negligence may
have concurred with an act of God in producing damage and injury to another; nonetheless,
showing that the immediate or proximate cause of the damage or injury was a fortuitous event
would not exempt one from liability. When the effect is found to be partly the result of a person's
participation - whether by active intervention, neglect or failure to act - the whole occurrence is
humanized and removed from the rules applicable to acts of God.17
Article 1170 of the Civil Code provides that those who are negligent in the performance of their
obligations are liable for damages. Accordingly, for breach of contract due to negligence in
providing a safe learning environment, respondent FEU is liable to petitioner for damages. It is
essential in the award of damages that the claimant must have satisfactorily proven during the
trial the existence of the factual basis of the damages and its causal connection to defendant's
In the instant case, it was established that petitioner spent P35,298.25 for his hospitalization and
other medical expenses.19 While the trial court correctly imposed interest on said amount,
however, the case at bar involves an obligation arising from a contract and not a loan or
forbearance of money. As such, the proper rate of legal interest is six percent (6%) per annum of
the amount demanded. Such interest shall continue to run from the filing of the complaint until
the finality of this Decision.20 After this Decision becomes final and executory, the applicable
rate shall be twelve percent (12%) per annum until its satisfaction.
The other expenses being claimed by petitioner, such as transportation expenses and those
incurred in hiring a personal assistant while recuperating were however not duly supported by
receipts.21 In the absence thereof, no actual damages may be awarded. Nonetheless, temperate
damages under Art. 2224 of the Civil Code may be recovered where it has been shown that the
claimant suffered some pecuniary loss but the amount thereof cannot be proved with certainty.
Hence, the amount of P20,000.00 as temperate damages is awarded to petitioner.
As regards the award of moral damages, there is no hard and fast rule in the determination of
what would be a fair amount of moral damages since each case must be governed by its own
peculiar circumstances.22 The testimony of petitioner about his physical suffering, mental
anguish, fright, serious anxiety, and moral shock resulting from the shooting incident 23 justify the
award of moral damages. However, moral damages are in the category of an award designed to

compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer.
The award is not meant to enrich the complainant at the expense of the defendant, but to enable
the injured party to obtain means, diversion, or amusements that will serve to obviate the moral
suffering he has undergone. It is aimed at the restoration, within the limits of the possible, of the
spiritual status quo ante, and should be proportionate to the suffering inflicted. Trial courts must
then guard against the award of exorbitant damages; they should exercise balanced restrained
and measured objectivity to avoid suspicion that it was due to passion, prejudice, or corruption
on the part of the trial court. 24 We deem it just and reasonable under the circumstances to award
petitioner moral damages in the amount of P100,000.00.
Likewise, attorney's fees and litigation expenses in the amount of P50,000.00 as part of damages
is reasonable in view of Article 2208 of the Civil Code. 25 However, the award of exemplary
damages is deleted considering the absence of proof that respondents acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.
We note that the trial court held respondent De Jesus solidarily liable with respondent FEU. In
Powton Conglomerate, Inc. v. Agcolicol,26 we held that:
[A] corporation is invested by law with a personality separate and distinct from those of
the persons composing it, such that, save for certain exceptions, corporate officers who
entered into contracts in behalf of the corporation cannot be held personally liable for the
liabilities of the latter. Personal liability of a corporate director, trustee or officer along
(although not necessarily) with the corporation may so validly attach, as a rule, only
when - (1) he assents to a patently unlawful act of the corporation, or when he is guilty of
bad faith or gross negligence in directing its affairs, or when there is a conflict of interest
resulting in damages to the corporation, its stockholders or other persons; (2) he consents
to the issuance of watered down stocks or who, having knowledge thereof, does not
forthwith file with the corporate secretary his written objection thereto; (3) he agrees to
hold himself personally and solidarily liable with the corporation; or (4) he is made by a
specific provision of law personally answerable for his corporate action.27
None of the foregoing exceptions was established in the instant case; hence, respondent De Jesus
should not be held solidarily liable with respondent FEU.
Incidentally, although the main cause of action in the instant case is the breach of the schoolstudent contract, petitioner, in the alternative, also holds respondents vicariously liable under
Article 2180 of the Civil Code, which provides:
Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own
acts or omissions, but also for those of persons for whom one is responsible.

Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not
engaged in any business or industry.
The responsibility treated of in this article shall cease when the persons herein mentioned
prove that they observed all the diligence of a good father of a family to prevent damage.
We agree with the findings of the Court of Appeals that respondents cannot be held liable for
damages under Art. 2180 of the Civil Code because respondents are not the employers of Rosete.
The latter was employed by Galaxy. The instructions issued by respondents' Security Consultant
to Galaxy and its security guards are ordinarily no more than requests commonly envisaged in
the contract for services entered into by a principal and a security agency. They cannot be
construed as the element of control as to treat respondents as the employers of Rosete.28
As held in Mercury Drug Corporation v. Libunao:29
In Soliman, Jr. v. Tuazon,30 we held that where the security agency recruits, hires and
assigns the works of its watchmen or security guards to a client, the employer of such
guards or watchmen is such agency, and not the client, since the latter has no hand in
selecting the security guards. Thus, the duty to observe the diligence of a good father of a
family cannot be demanded from the said client:
[I]t is settled in our jurisdiction that where the security agency, as here,
recruits, hires and assigns the work of its watchmen or security guards, the agency
is the employer of such guards or watchmen. Liability for illegal or harmful acts
committed by the security guards attaches to the employer agency, and not to the
clients or customers of such agency. As a general rule, a client or customer of a
security agency has no hand in selecting who among the pool of security guards
or watchmen employed by the agency shall be assigned to it; the duty to observe
the diligence of a good father of a family in the selection of the guards cannot, in
the ordinary course of events, be demanded from the client whose premises or
property are protected by the security guards.
The fact that a client company may give instructions or directions to the security guards
assigned to it, does not, by itself, render the client responsible as an employer of the
security guards concerned and liable for their wrongful acts or omissions.31
We now come to respondents' Third Party Claim against Galaxy. In Firestone Tire and Rubber
Company of the Philippines v. Tempengko,32 we held that:

The third-party complaint is, therefore, a procedural device whereby a 'third party' who is
neither a party nor privy to the act or deed complained of by the plaintiff, may be brought
into the case with leave of court, by the defendant, who acts as third-party plaintiff to
enforce against such third-party defendant a right for contribution, indemnity, subrogation
or any other relief, in respect of the plaintiff's claim. The third-party complaint is actually
independent of and separate and distinct from the plaintiff's complaint. Were it not for
this provision of the Rules of Court, it would have to be filed independently and
separately from the original complaint by the defendant against the third-party. But the
Rules permit defendant to bring in a third-party defendant or so to speak, to litigate his
separate cause of action in respect of plaintiff's claim against a third-party in the original
and principal case with the object of avoiding circuitry of action and unnecessary
proliferation of law suits and of disposing expeditiously in one litigation the entire
subject matter arising from one particular set of facts.33
Respondents and Galaxy were able to litigate their respective claims and defenses in the course
of the trial of petitioner's complaint. Evidence duly supports the findings of the trial court that
Galaxy is negligent not only in the selection of its employees but also in their supervision.
Indeed, no administrative sanction was imposed against Rosete despite the shooting incident;
moreover, he was even allowed to go on leave of absence which led eventually to his
disappearance.34 Galaxy also failed to monitor petitioner's condition or extend the necessary
assistance, other than the P5,000.00 initially given to petitioner. Galaxy and Imperial failed to
make good their pledge to reimburse petitioner's medical expenses.
For these acts of negligence and for having supplied respondent FEU with an unqualified
security guard, which resulted to the latter's breach of obligation to petitioner, it is proper to hold
Galaxy liable to respondent FEU for such damages equivalent to the above-mentioned amounts
awarded to petitioner.
Unlike respondent De Jesus, we deem Imperial to be solidarily liable with Galaxy for being
grossly negligent in directing the affairs of the security agency. It was Imperial who assured
petitioner that his medical expenses will be shouldered by Galaxy but said representations were
not fulfilled because they presumed that petitioner and his family were no longer interested in
filing a formal complaint against them.35
WHEREFORE, the petition is GRANTED. The June 29, 2007 Decision of the Court of
Appeals in CA-G.R. CV No. 87050 nullifying the Decision of the trial court and dismissing the
complaint as well as the August 23, 2007 Resolution denying the Motion for Reconsideration are
REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Manila, Branch 2,
in Civil Case No. 98-89483 finding respondent FEU liable for damages for breach of its
obligation to provide students with a safe and secure learning atmosphere, is AFFIRMED with
the following MODIFICATIONS:

a. respondent Far Eastern University (FEU) is ORDERED to pay petitioner actual damages in
the amount of P35,298.25, plus 6% interest per annum from the filing of the complaint until the
finality of this Decision. After this decision becomes final and executory, the applicable rate shall
be twelve percent (12%) per annum until its satisfaction;
b. respondent FEU is also ORDERED to pay petitioner temperate damages in the amount of
P20,000.00; moral damages in the amount of P100,000.00; and attorney's fees and litigation
expenses in the amount of P50,000.00;
c. the award of exemplary damages is DELETED.
The Complaint against respondent Edilberto C. De Jesus is DISMISSED. The counterclaims of
respondents are likewise DISMISSED.
Galaxy Development and Management Corporation (Galaxy) and its president, Mariano D.
Imperial are ORDERED to jointly and severally pay respondent FEU damages equivalent to the
above-mentioned amounts awarded to petitioner.

G.R. No. L-3756

June 30, 1952



First Assistant Corporate Counsel Federico C. Alikpala and Assistant Attorney Augusto Kalaw
Ramirez and Ortigas for appellee.
This is an action to recover the possession of a piece of real property (land and warehouses)
situated in Pandacan Manila, and the rentals for its occupation and use. The land belongs to the
plaintiff, in whose name the title was registered before the war. On January 4, 1943, during the
Japanese military occupation, the land was acquired by a Japanese corporation by the name of
Taiwan Tekkosho for the sum of P140,00, and thereupon title thereto issued in its name (transfer
certificate of title No. 64330, Register of Deeds, Manila). After liberation, more specifically on
April 4, 1946, the Alien Property Custodian of the United States of America took possession,
control, and custody thereof under section 12 of the Trading with the Enemy Act, 40 Stat., 411,
for the reason that it belonged to an enemy national. During the year 1946 the property was
occupied by the Copra Export Management Company under a custodianship agreement with
United States Alien Property Custodian (Exhibit G), and when it vacated the property it was
occupied by the defendant herein. The Philippine Government made representations with the
Office Alien Property Custodian for the use of property by the Government (see Exhibits 2, 2-A,
2-B, and 1). On March 31, 1947, the defendant was authorized to repair the warehouse on the
land, and actually spent thereon the repairs the sum of P26,898.27. In 1948, defendant leased
one-third of the warehouse to one Dioscoro Sarile at a monthly rental of P500, which was later
raised to P1,000 a month. Sarile did not pay the rents, so action was brought against him. It is not
shown, however, if the judgment was ever executed.
Plaintiff made claim to the property before the Alien Property Custodian of the United States, but
as this was denied, it brought an action in court (Court of First Instance of Manila, civil case No.
5007, entitled "La Sagrada Orden Predicadores de la Provinicia del Santisimo Rosario de
Filipinas," vs. Philippine Alien Property Administrator, defendant, Republic of the Philippines,
intervenor) to annul the sale of property of Taiwan Tekkosho, and recover its possession. The
Republic of the Philippines was allowed to intervene in the action. The case did not come for
trial because the parties presented a joint petition in which it is claimed by plaintiff that the sale
in favor of the Taiwan Tekkosho was null and void because it was executed under threats, duress,
and intimidation, and it was agreed that the title issued in the name of the Taiwan Tekkosho be
cancelled and the original title of plaintiff re-issued; that the claims, rights, title, and interest of
the Alien Property Custodian be cancelled and held for naught; that the occupant National
Coconut Corporation has until February 28, 1949, to recover its equipment from the property and
vacate the premises; that plaintiff, upon entry of judgment, pay to the Philippine Alien Property
Administration the sum of P140,000; and that the Philippine Alien Property Administration be
free from responsibility or liability for any act of the National Coconut Corporation, etc.
Pursuant to the agreement the court rendered judgment releasing the defendant and the
intervenor from liability, but reversing to the plaintiff the right to recover from the National

Coconut Corporation reasonable rentals for the use and occupation of the premises. (Exhibit A1.)
The present action is to recover the reasonable rentals from August, 1946, the date when the
defendant began to occupy the premises, to the date it vacated it. The defendant does not contest
its liability for the rentals at the rate of P3,000 per month from February 28, 1949 (the date
specified in the judgment in civil case No. 5007), but resists the claim therefor prior to this date.
It interposes the defense that it occupied the property in good faith, under no obligation
whatsoever to pay rentals for the use and occupation of the warehouse. Judgment was rendered
for the plaintiff to recover from the defendant the sum of P3,000 a month, as reasonable rentals,
from August, 1946, to the date the defendant vacates the premises. The judgment declares that
plaintiff has always been the owner, as the sale of Japanese purchaser was void ab initio; that the
Alien Property Administration never acquired any right to the property, but that it held the same
in trust until the determination as to whether or not the owner is an enemy citizen. The trial court
further declares that defendant can not claim any better rights than its predecessor, the Alien
Property Administration, and that as defendant has used the property and had subleased portion
thereof, it must pay reasonable rentals for its occupation.
Against this judgment this appeal has been interposed, the following assignment of error having
been made on defendant-appellant's behalf:
The trial court erred in holding the defendant liable for rentals or compensation for the
use and occupation of the property from the middle of August, 1946, to December 14,
1. Want to "ownership rights" of the Philippine Alien Property Administration did not
render illegal or invalidate its grant to the defendant of the free use of property.
2. the decision of the Court of First Instance of Manila declaring the sale by the plaintiff
to the Japanese purchaser null and void ab initio and that the plaintiff was and has
remained as the legal owner of the property, without legal interruption, is not conclusive.
3. Reservation to the plaintiff of the right to recover from the defendant corporation not
binding on the later;
4. Use of the property for commercial purposes in itself alone does not justify payment of
5. Defendant's possession was in good faith.
6. Defendant's possession in the nature of usufruct.
In reply, plaintiff-appellee's counsel contends that the Philippine Allien Property Administration
(PAPA) was a mere administrator of the owner (who ultimately was decided to be plaintiff), and

that as defendant has used it for commercial purposes and has leased portion of it, it should be
responsible therefore to the owner, who had been deprived of the possession for so many years.
(Appellee's brief, pp. 20, 23.)
We can not understand how the trial court, from the mere fact that plaintiff-appellee was the
owner of the property and the defendant-appellant the occupant, which used for its own benefit
but by the express permission of the Alien Property Custodian of the United States, so easily
jumped to the conclusion that the occupant is liable for the value of such use and occupation. If
defendant-appellant is liable at all, its obligations, must arise from any of the four sources of
obligations, namley, law, contract or quasi-contract, crime, or negligence. (Article 1089, Spanish
Civil Code.) Defendant-appellant is not guilty of any offense at all, because it entered the
premises and occupied it with the permission of the entity which had the legal control and
administration thereof, the Allien Property Administration. Neither was there any negligence on
its part. There was also no privity (of contract or obligation) between the Alien Property
Custodian and the Taiwan Tekkosho, which had secured the possession of the property from the
plaintiff-appellee by the use of duress, such that the Alien Property Custodian or its permittee
(defendant-appellant) may be held responsible for the supposed illegality of the occupation of the
property by the said Taiwan Tekkosho. The Allien Property Administration had the control and
administration of the property not as successor to the interests of the enemy holder of the title,
the Taiwan Tekkosho, but by express provision of law (Trading with the Enemy Act of the
United States, 40 Stat., 411; 50 U.S.C.A., 189). Neither is it a trustee of the former owner, the
plaintiff-appellee herein, but a trustee of then Government of the United States (32 Op. Atty.
Gen. 249; 50 U.S.C.A. 283), in its own right, to the exclusion of, and against the claim or title of,
the enemy owner. (Youghioheny & Ohio Coal Co. vs. Lasevich [1920], 179 N.W., 355; 171 Wis.,
347; U.S.C.A., 282-283.) From August, 1946, when defendant-appellant took possession, to the
late of judgment on February 28, 1948, Allien Property Administration had the absolute control
of the property as trustee of the Government of the United States, with power to dispose of it by
sale or otherwise, as though it were the absolute owner. (U.S vs. Chemical Foundation [C.C.A.
Del. 1925], 5 F. [2d], 191; 50 U.S.C.A., 283.) Therefore, even if defendant-appellant were liable
to the Allien Property Administration for rentals, these would not accrue to the benefit of the
plaintiff-appellee, the owner, but to the United States Government.
But there is another ground why the claim or rentals can not be made against defendantappellant. There was no agreement between the Alien Property Custodian and the defendantappellant for the latter to pay rentals on the property. The existence of an implied agreement to
that effect is contrary to the circumstances. The copra Export Management Company, which
preceded the defendant-appellant, in the possession and use of the property, does not appear to
have paid rentals therefor, as it occupied it by what the parties denominated a "custodianship
agreement," and there is no provision therein for the payment of rentals or of any compensation
for its custody and or occupation and the use. The Trading with the Enemy Act, as originally
enacted, was purely a measure of conversation, hence, it is very unlikely that rentals were
demanded for the use of the property. When the National coconut Corporation succeeded the
Copra Export Management Company in the possession and use of the property, it must have been

also free from payment of rentals, especially as it was Government corporation, and steps where
then being taken by the Philippine Government to secure the property for the National Coconut
Corporation. So that the circumstances do not justify the finding that there was an implied
agreement that the defendant-appellant was to pay for the use and occupation of the premises at
The above considerations show that plaintiff-appellee's claim for rentals before it obtained the
judgment annulling the sale of the Taiwan Tekkosho may not be predicated on any negligence or
offense of the defendant-appellant, or any contract, express or implied, because the Allien
Property Administration was neither a trustee of plaintiff-appellee, nor a privy to the obligations
of the Taiwan Tekkosho, its title being based by legal provision of the seizure of enemy property.
We have also tried in vain to find a law or provision thereof, or any principle in quasi contracts
or equity, upon which the claim can be supported. On the contrary, as defendant-appellant
entered into possession without any expectation of liability for such use and occupation, it is only
fair and just that it may not be held liable therefor. And as to the rents it collected from its lessee,
the same should accrue to it as a possessor in good faith, as this Court has already expressly held.
(Resolution, National Coconut Corporation vs. Geronimo, 83 Phil. 467.)
Lastly, the reservation of this action may not be considered as vesting a new right; if no right to
claim for rentals existed at the time of the reservation, no rights can arise or accrue from such
reservation alone.
Wherefore, the part of the judgment appealed from, which sentences defendant-appellant to pay
rentals from August, 1946, to February 28, 1949, is hereby reversed. In all other respects the
judgment is affirmed. Costs of this appeal shall be against the plaintiff-appellee.

G.R. No. L-36840 May 22, 1973



In this appeal from the adverse judgment of the Davao court of first instance limiting plaintiff-appellant'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.
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."
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

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.
appeal was expressly to this Court (not to the appellate court)" on pure questions of law"

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
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
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
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.

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

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.
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.
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."
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.
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.

G.R. No. L-12191

October 14, 1918

MANILA RAILROAD CO., defendant-appellee.
Kincaid & Hartigan for appellee.




At the time of the occurrence which gave rise to this litigation the plaintiff, Jose Cangco, was in
the employment of Manila Railroad Company in the capacity of clerk, with a monthly wage of
P25. He lived in the pueblo of San Mateo, in the province of Rizal, which is located upon the line
of the defendant railroad company; and in coming daily by train to the company's office in the
city of Manila where he worked, he used a pass, supplied by the company, which entitled him to
ride upon the company's trains free of charge. Upon the occasion in question, January 20, 1915,
the plaintiff arose from his seat in the second class-car where he was riding and, making, his exit
through the door, took his position upon the steps of the coach, seizing the upright guardrail with
his right hand for support.
On the side of the train where passengers alight at the San Mateo station there is a cement
platform which begins to rise with a moderate gradient some distance away from the company's
office and extends along in front of said office for a distance sufficient to cover the length of
several coaches. As the train slowed down another passenger, named Emilio Zuiga, also an
employee of the railroad company, got off the same car, alighting safely at the point where the
platform begins to rise from the level of the ground. When the train had proceeded a little farther
the plaintiff Jose Cangco stepped off also, but one or both of his feet came in contact with a sack
of watermelons with the result that his feet slipped from under him and he fell violently on the
platform. His body at once rolled from the platform and was drawn under the moving car, where
his right arm was badly crushed and lacerated. It appears that after the plaintiff alighted from the
train the car moved forward possibly six meters before it came to a full stop.
The accident occurred between 7 and 8 o'clock on a dark night, and as the railroad station was
lighted dimly by a single light located some distance away, objects on the platform where the
accident occurred were difficult to discern especially to a person emerging from a lighted car.
The explanation of the presence of a sack of melons on the platform where the plaintiff alighted
is found in the fact that it was the customary season for harvesting these melons and a large lot
had been brought to the station for the shipment to the market. They were contained in numerous
sacks which has been piled on the platform in a row one upon another. The testimony shows that
this row of sacks was so placed of melons and the edge of platform; and it is clear that the fall of

the plaintiff was due to the fact that his foot alighted upon one of these melons at the moment he
stepped upon the platform. His statement that he failed to see these objects in the darkness is
readily to be credited.
The plaintiff was drawn from under the car in an unconscious condition, and it appeared that the
injuries which he had received were very serious. He was therefore brought at once to a certain
hospital in the city of Manila where an examination was made and his arm was amputated. The
result of this operation was unsatisfactory, and the plaintiff was then carried to another hospital
where a second operation was performed and the member was again amputated higher up near
the shoulder. It appears in evidence that the plaintiff expended the sum of P790.25 in the form of
medical and surgical fees and for other expenses in connection with the process of his curation.
Upon August 31, 1915, he instituted this proceeding in the Court of First Instance of the city of
Manila to recover damages of the defendant company, founding his action upon the negligence
of the servants and employees of the defendant in placing the sacks of melons upon the platform
and leaving them so placed as to be a menace to the security of passenger alighting from the
company's trains. At the hearing in the Court of First Instance, his Honor, the trial judge, found
the facts substantially as above stated, and drew therefrom his conclusion to the effect that,
although negligence was attributable to the defendant by reason of the fact that the sacks of
melons were so placed as to obstruct passengers passing to and from the cars, nevertheless, the
plaintiff himself had failed to use due caution in alighting from the coach and was therefore
precluded form recovering. Judgment was accordingly entered in favor of the defendant
company, and the plaintiff appealed.
It can not be doubted that the employees of the railroad company were guilty of negligence in
piling these sacks on the platform in the manner above stated; that their presence caused the
plaintiff to fall as he alighted from the train; and that they therefore constituted an effective legal
cause of the injuries sustained by the plaintiff. It necessarily follows that the defendant company
is liable for the damage thereby occasioned unless recovery is barred by the plaintiff's own
contributory negligence. In resolving this problem it is necessary that each of these conceptions
of liability, to-wit, the primary responsibility of the defendant company and the contributory
negligence of the plaintiff should be separately examined.
It is important to note that the foundation of the legal liability of the defendant is the contract of
carriage, and that the obligation to respond for the damage which plaintiff has suffered arises, if
at all, from the breach of that contract by reason of the failure of defendant to exercise due care
in its performance. That is to say, its liability is direct and immediate, differing essentially, in
legal viewpoint from that presumptive responsibility for the negligence of its servants, imposed
by article 1903 of the Civil Code, which can be rebutted by proof of the exercise of due care in
their selection and supervision. Article 1903 of the Civil Code is not applicable to obligations
arising ex contractu, but only to extra-contractual obligations or to use the technical form of
expression, that article relates only to culpa aquiliana and not to culpa contractual.

Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of the Civil Code,
clearly points out this distinction, which was also recognized by this Court in its decision in the
case of Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil. rep., 359). In commenting upon article
1093 Manresa clearly points out the difference between "culpa, substantive and independent,
which of itself constitutes the source of an obligation between persons not formerly connected by
any legal tie" and culpa considered as an accident in the performance of an obligation already
existing . . . ."
In the Rakes case (supra) the decision of this court was made to rest squarely upon the
proposition that article 1903 of the Civil Code is not applicable to acts of negligence which
constitute the breach of a contract.
Upon this point the Court said:
The acts to which these articles [1902 and 1903 of the Civil Code] are applicable are
understood to be those not growing out of pre-existing duties of the parties to one
another. But where relations already formed give rise to duties, whether springing from
contract or quasi-contract, then breaches of those duties are subject to article 1101, 1103,
and 1104 of the same code. (Rakes vs. Atlantic, Gulf and Pacific Co., 7 Phil. Rep., 359 at
This distinction is of the utmost importance. The liability, which, under the Spanish law, is, in
certain cases imposed upon employers with respect to damages occasioned by the negligence of
their employees to persons to whom they are not bound by contract, is not based, as in the
English Common Law, upon the principle of respondeat superior if it were, the master would
be liable in every case and unconditionally but upon the principle announced in article 1902
of the Civil Code, which imposes upon all persons who by their fault or negligence, do injury to
another, the obligation of making good the damage caused. One who places a powerful
automobile in the hands of a servant whom he knows to be ignorant of the method of managing
such a vehicle, is himself guilty of an act of negligence which makes him liable for all the
consequences of his imprudence. The obligation to make good the damage arises at the very
instant that the unskillful servant, while acting within the scope of his employment causes the
injury. The liability of the master is personal and direct. But, if the master has not been guilty of
any negligence whatever in the selection and direction of the servant, he is not liable for the acts
of the latter, whatever done within the scope of his employment or not, if the damage done by the
servant does not amount to a breach of the contract between the master and the person injured.
It is not accurate to say that proof of diligence and care in the selection and control of the servant
relieves the master from liability for the latter's acts on the contrary, that proof shows that the
responsibility has never existed. As Manresa says (vol. 8, p. 68) the liability arising from extracontractual culpa is always based upon a voluntary act or omission which, without willful intent,
but by mere negligence or inattention, has caused damage to another. A master who exercises all
possible care in the selection of his servant, taking into consideration the qualifications they

should possess for the discharge of the duties which it is his purpose to confide to them, and
directs them with equal diligence, thereby performs his duty to third persons to whom he is
bound by no contractual ties, and he incurs no liability whatever if, by reason of the negligence
of his servants, even within the scope of their employment, such third person suffer damage.
True it is that under article 1903 of the Civil Code the law creates a presumption that he has been
negligent in the selection or direction of his servant, but the presumption is rebuttable and yield
to proof of due care and diligence in this respect.
The supreme court of Porto Rico, in interpreting identical provisions, as found in the Porto Rico
Code, has held that these articles are applicable to cases of extra-contractual culpa exclusively.
(Carmona vs. Cuesta, 20 Porto Rico Reports, 215.)
This distinction was again made patent by this Court in its decision in the case of Bahia vs.
Litonjua and Leynes, (30 Phil. rep., 624), which was an action brought upon the theory of the
extra-contractual liability of the defendant to respond for the damage caused by the carelessness
of his employee while acting within the scope of his employment. The Court, after citing the last
paragraph of article 1903 of the Civil Code, said:
From this article two things are apparent: (1) That when an injury is caused by the
negligence of a servant or employee there instantly arises a presumption of law that there
was negligence on the part of the master or employer either in selection of the servant or
employee, or in supervision over him after the selection, or both; and (2) that that
presumption is juris tantum and not juris et de jure, and consequently, may be rebutted. It
follows necessarily that if the employer shows to the satisfaction of the court that in
selection and supervision he has exercised the care and diligence of a good father of a
family, the presumption is overcome and he is relieved from liability.
This theory bases the responsibility of the master ultimately on his own negligence and
not on that of his servant. This is the notable peculiarity of the Spanish law of negligence.
It is, of course, in striking contrast to the American doctrine that, in relations with
strangers, the negligence of the servant in conclusively the negligence of the master.
The opinion there expressed by this Court, to the effect that in case of extra-contractual culpa
based upon negligence, it is necessary that there shall have been some fault attributable to the
defendant personally, and that the last paragraph of article 1903 merely establishes a rebuttable
presumption, is in complete accord with the authoritative opinion of Manresa, who says (vol. 12,
p. 611) that the liability created by article 1903 is imposed by reason of the breach of the duties
inherent in the special relations of authority or superiority existing between the person called
upon to repair the damage and the one who, by his act or omission, was the cause of it.
On the other hand, the liability of masters and employers for the negligent acts or omissions of
their servants or agents, when such acts or omissions cause damages which amount to the breach
of a contact, is not based upon a mere presumption of the master's negligence in their selection or

control, and proof of exercise of the utmost diligence and care in this regard does not relieve the
master of his liability for the breach of his contract.
Every legal obligation must of necessity be extra-contractual or contractual. Extra-contractual
obligation has its source in the breach or omission of those mutual duties which civilized society
imposes upon it members, or which arise from these relations, other than contractual, of certain
members of society to others, generally embraced in the concept of status. The legal rights of
each member of society constitute the measure of the corresponding legal duties, mainly negative
in character, which the existence of those rights imposes upon all other members of society. The
breach of these general duties whether due to willful intent or to mere inattention, if productive
of injury, give rise to an obligation to indemnify the injured party. The fundamental distinction
between obligations of this character and those which arise from contract, rests upon the fact that
in cases of non-contractual obligation it is the wrongful or negligent act or omission itself which
creates the vinculum juris, whereas in contractual relations the vinculum exists independently of
the breach of the voluntary duty assumed by the parties when entering into the contractual
With respect to extra-contractual obligation arising from negligence, whether of act or omission,
it is competent for the legislature to elect and our Legislature has so elected whom such an
obligation is imposed is morally culpable, or, on the contrary, for reasons of public policy, to
extend that liability, without regard to the lack of moral culpability, so as to include responsibility
for the negligence of those person who acts or mission are imputable, by a legal fiction, to others
who are in a position to exercise an absolute or limited control over them. The legislature which
adopted our Civil Code has elected to limit extra-contractual liability with certain welldefined exceptions to cases in which moral culpability can be directly imputed to the persons
to be charged. This moral responsibility may consist in having failed to exercise due care in the
selection and control of one's agents or servants, or in the control of persons who, by reason of
their status, occupy a position of dependency with respect to the person made liable for their
The position of a natural or juridical person who has undertaken by contract to render service to
another, is wholly different from that to which article 1903 relates. When the sources of the
obligation upon which plaintiff's cause of action depends is a negligent act or omission, the
burden of proof rests upon plaintiff to prove the negligence if he does not his action fails. But
when the facts averred show a contractual undertaking by defendant for the benefit of plaintiff,
and it is alleged that plaintiff has failed or refused to perform the contract, it is not necessary for
plaintiff to specify in his pleadings whether the breach of the contract is due to willful fault or to
negligence on the part of the defendant, or of his servants or agents. Proof of the contract and of
its nonperformance is sufficient prima facie to warrant a recovery.
As a general rule . . . it is logical that in case of extra-contractual culpa, a suing creditor
should assume the burden of proof of its existence, as the only fact upon which his action
is based; while on the contrary, in a case of negligence which presupposes the existence

of a contractual obligation, if the creditor shows that it exists and that it has been broken,
it is not necessary for him to prove negligence. (Manresa, vol. 8, p. 71 [1907 ed., p. 76]).
As it is not necessary for the plaintiff in an action for the breach of a contract to show that the
breach was due to the negligent conduct of defendant or of his servants, even though such be in
fact the actual cause of the breach, it is obvious that proof on the part of defendant that the
negligence or omission of his servants or agents caused the breach of the contract would not
constitute a defense to the action. If the negligence of servants or agents could be invoked as a
means of discharging the liability arising from contract, the anomalous result would be that
person acting through the medium of agents or servants in the performance of their contracts,
would be in a better position than those acting in person. If one delivers a valuable watch to
watchmaker who contract to repair it, and the bailee, by a personal negligent act causes its
destruction, he is unquestionably liable. Would it be logical to free him from his liability for the
breach of his contract, which involves the duty to exercise due care in the preservation of the
watch, if he shows that it was his servant whose negligence caused the injury? If such a theory
could be accepted, juridical persons would enjoy practically complete immunity from damages
arising from the breach of their contracts if caused by negligent acts as such juridical persons can
of necessity only act through agents or servants, and it would no doubt be true in most instances
that reasonable care had been taken in selection and direction of such servants. If one delivers
securities to a banking corporation as collateral, and they are lost by reason of the negligence of
some clerk employed by the bank, would it be just and reasonable to permit the bank to relieve
itself of liability for the breach of its contract to return the collateral upon the payment of the
debt by proving that due care had been exercised in the selection and direction of the clerk?
This distinction between culpa aquiliana, as the source of an obligation, and culpa contractual
as a mere incident to the performance of a contract has frequently been recognized by the
supreme court of Spain. (Sentencias of June 27, 1894; November 20, 1896; and December 13,
1896.) In the decisions of November 20, 1896, it appeared that plaintiff's action arose ex
contractu, but that defendant sought to avail himself of the provisions of article 1902 of the Civil
Code as a defense. The Spanish Supreme Court rejected defendant's contention, saying:
These are not cases of injury caused, without any pre-existing obligation, by fault or
negligence, such as those to which article 1902 of the Civil Code relates, but of damages
caused by the defendant's failure to carry out the undertakings imposed by the
contracts . . . .
A brief review of the earlier decision of this court involving the liability of employers for damage
done by the negligent acts of their servants will show that in no case has the court ever decided
that the negligence of the defendant's servants has been held to constitute a defense to an action
for damages for breach of contract.
In the case of Johnson vs. David (5 Phil. Rep., 663), the court held that the owner of a carriage
was not liable for the damages caused by the negligence of his driver. In that case the court

commented on the fact that no evidence had been adduced in the trial court that the defendant
had been negligent in the employment of the driver, or that he had any knowledge of his lack of
skill or carefulness.
In the case of Baer Senior & Co's Successors vs. Compania Maritima (6 Phil. Rep., 215), the
plaintiff sued the defendant for damages caused by the loss of a barge belonging to plaintiff
which was allowed to get adrift by the negligence of defendant's servants in the course of the
performance of a contract of towage. The court held, citing Manresa (vol. 8, pp. 29, 69) that if
the "obligation of the defendant grew out of a contract made between it and the plaintiff . . . we
do not think that the provisions of articles 1902 and 1903 are applicable to the case."
In the case of Chapman vs. Underwood (27 Phil. Rep., 374), plaintiff sued the defendant to
recover damages for the personal injuries caused by the negligence of defendant's chauffeur
while driving defendant's automobile in which defendant was riding at the time. The court found
that the damages were caused by the negligence of the driver of the automobile, but held that the
master was not liable, although he was present at the time, saying:
. . . unless the negligent acts of the driver are continued for a length of time as to give the
owner a reasonable opportunity to observe them and to direct the driver to desist
therefrom. . . . The act complained of must be continued in the presence of the owner for
such length of time that the owner by his acquiescence, makes the driver's acts his own.
In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage & Taxicab Co. (33 Phil.
Rep., 8), it is true that the court rested its conclusion as to the liability of the defendant upon
article 1903, although the facts disclosed that the injury complaint of by plaintiff constituted a
breach of the duty to him arising out of the contract of transportation. The express ground of the
decision in this case was that article 1903, in dealing with the liability of a master for the
negligent acts of his servants "makes the distinction between private individuals and public
enterprise;" that as to the latter the law creates a rebuttable presumption of negligence in the
selection or direction of servants; and that in the particular case the presumption of negligence
had not been overcome.
It is evident, therefore that in its decision Yamada case, the court treated plaintiff's action as
though founded in tort rather than as based upon the breach of the contract of carriage, and an
examination of the pleadings and of the briefs shows that the questions of law were in fact
discussed upon this theory. Viewed from the standpoint of the defendant the practical result must
have been the same in any event. The proof disclosed beyond doubt that the defendant's servant
was grossly negligent and that his negligence was the proximate cause of plaintiff's injury. It also
affirmatively appeared that defendant had been guilty of negligence in its failure to exercise
proper discretion in the direction of the servant. Defendant was, therefore, liable for the injury
suffered by plaintiff, whether the breach of the duty were to be regarded as constituting culpa
aquiliana or culpa contractual. As Manresa points out (vol. 8, pp. 29 and 69) whether negligence
occurs an incident in the course of the performance of a contractual undertaking or its itself the

source of an extra-contractual undertaking obligation, its essential characteristics are identical.

There is always an act or omission productive of damage due to carelessness or inattention on the
part of the defendant. Consequently, when the court holds that a defendant is liable in damages
for having failed to exercise due care, either directly, or in failing to exercise proper care in the
selection and direction of his servants, the practical result is identical in either case. Therefore, it
follows that it is not to be inferred, because the court held in the Yamada case that defendant was
liable for the damages negligently caused by its servants to a person to whom it was bound by
contract, and made reference to the fact that the defendant was negligent in the selection and
control of its servants, that in such a case the court would have held that it would have been a
good defense to the action, if presented squarely upon the theory of the breach of the contract,
for defendant to have proved that it did in fact exercise care in the selection and control of the
The true explanation of such cases is to be found by directing the attention to the relative spheres
of contractual and extra-contractual obligations. The field of non- contractual obligation is much
more broader than that of contractual obligations, comprising, as it does, the whole extent of
juridical human relations. These two fields, figuratively speaking, concentric; that is to say, the
mere fact that a person is bound to another by contract does not relieve him from extracontractual liability to such person. When such a contractual relation exists the obligor may
break the contract under such conditions that the same act which constitutes the source of an
extra-contractual obligation had no contract existed between the parties.
The contract of defendant to transport plaintiff carried with it, by implication, the duty to carry
him in safety and to provide safe means of entering and leaving its trains (civil code, article
1258). That duty, being contractual, was direct and immediate, and its non-performance could
not be excused by proof that the fault was morally imputable to defendant's servants.
The railroad company's defense involves the assumption that even granting that the negligent
conduct of its servants in placing an obstruction upon the platform was a breach of its contractual
obligation to maintain safe means of approaching and leaving its trains, the direct and proximate
cause of the injury suffered by plaintiff was his own contributory negligence in failing to wait
until the train had come to a complete stop before alighting. Under the doctrine of comparative
negligence announced in the Rakes case (supra), if the accident was caused by plaintiff's own
negligence, no liability is imposed upon defendant's negligence and plaintiff's negligence merely
contributed to his injury, the damages should be apportioned. It is, therefore, important to
ascertain if defendant was in fact guilty of negligence.
It may be admitted that had plaintiff waited until the train had come to a full stop before
alighting, the particular injury suffered by him could not have occurred. Defendant contends, and
cites many authorities in support of the contention, that it is negligence per se for a passenger to
alight from a moving train. We are not disposed to subscribe to this doctrine in its absolute form.
We are of the opinion that this proposition is too badly stated and is at variance with the
experience of every-day life. In this particular instance, that the train was barely moving when

plaintiff alighted is shown conclusively by the fact that it came to stop within six meters from the
place where he stepped from it. Thousands of person alight from trains under these conditions
every day of the year, and sustain no injury where the company has kept its platform free from
dangerous obstructions. There is no reason to believe that plaintiff would have suffered any
injury whatever in alighting as he did had it not been for defendant's negligent failure to perform
its duty to provide a safe alighting place.
We are of the opinion that the correct doctrine relating to this subject is that expressed in
Thompson's work on Negligence (vol. 3, sec. 3010) as follows:
The test by which to determine whether the passenger has been guilty of negligence in
attempting to alight from a moving railway train, is that of ordinary or reasonable care. It
is to be considered whether an ordinarily prudent person, of the age, sex and condition of
the passenger, would have acted as the passenger acted under the circumstances disclosed
by the evidence. This care has been defined to be, not the care which may or should be
used by the prudent man generally, but the care which a man of ordinary prudence would
use under similar circumstances, to avoid injury." (Thompson, Commentaries on
Negligence, vol. 3, sec. 3010.)
Or, it we prefer to adopt the mode of exposition used by this court in Picart vs. Smith (37 Phil.
rep., 809), we may say that the test is this; Was there anything in the circumstances surrounding
the plaintiff at the time he alighted from the train which would have admonished a person of
average prudence that to get off the train under the conditions then existing was dangerous? If so,
the plaintiff should have desisted from alighting; and his failure so to desist was contributory
As the case now before us presents itself, the only fact from which a conclusion can be drawn to
the effect that plaintiff was guilty of contributory negligence is that he stepped off the car without
being able to discern clearly the condition of the platform and while the train was yet slowly
moving. In considering the situation thus presented, it should not be overlooked that the plaintiff
was, as we find, ignorant of the fact that the obstruction which was caused by the sacks of
melons piled on the platform existed; and as the defendant was bound by reason of its duty as a
public carrier to afford to its passengers facilities for safe egress from its trains, the plaintiff had
a right to assume, in the absence of some circumstance to warn him to the contrary, that the
platform was clear. The place, as we have already stated, was dark, or dimly lighted, and this also
is proof of a failure upon the part of the defendant in the performance of a duty owing by it to the
plaintiff; for if it were by any possibility concede that it had right to pile these sacks in the path
of alighting passengers, the placing of them adequately so that their presence would be revealed.
As pertinent to the question of contributory negligence on the part of the plaintiff in this case the
following circumstances are to be noted: The company's platform was constructed upon a level
higher than that of the roadbed and the surrounding ground. The distance from the steps of the
car to the spot where the alighting passenger would place his feet on the platform was thus

reduced, thereby decreasing the risk incident to stepping off. The nature of the platform,
constructed as it was of cement material, also assured to the passenger a stable and even surface
on which to alight. Furthermore, the plaintiff was possessed of the vigor and agility of young
manhood, and it was by no means so risky for him to get off while the train was yet moving as
the same act would have been in an aged or feeble person. In determining the question of
contributory negligence in performing such act that is to say, whether the passenger acted
prudently or recklessly the age, sex, and physical condition of the passenger are
circumstances necessarily affecting the safety of the passenger, and should be considered.
Women, it has been observed, as a general rule are less capable than men of alighting with safety
under such conditions, as the nature of their wearing apparel obstructs the free movement of the
limbs. Again, it may be noted that the place was perfectly familiar to the plaintiff as it was his
daily custom to get on and of the train at this station. There could, therefore, be no uncertainty in
his mind with regard either to the length of the step which he was required to take or the
character of the platform where he was alighting. Our conclusion is that the conduct of the
plaintiff in undertaking to alight while the train was yet slightly under way was not characterized
by imprudence and that therefore he was not guilty of contributory negligence.
The evidence shows that the plaintiff, at the time of the accident, was earning P25 a month as a
copyist clerk, and that the injuries he has suffered have permanently disabled him from
continuing that employment. Defendant has not shown that any other gainful occupation is open
to plaintiff. His expectancy of life, according to the standard mortality tables, is approximately
thirty-three years. We are of the opinion that a fair compensation for the damage suffered by him
for his permanent disability is the sum of P2,500, and that he is also entitled to recover of
defendant the additional sum of P790.25 for medical attention, hospital services, and other
incidental expenditures connected with the treatment of his injuries.
The decision of lower court is reversed, and judgment is hereby rendered plaintiff for the sum of
P3,290.25, and for the costs of both instances. So ordered.
Arellano, C.J., Torres, Street and Avancea, JJ., concur.

Separate Opinions

MALCOLM, J., dissenting:

With one sentence in the majority decision, we are of full accord, namely, "It may be admitted
that had plaintiff waited until the train had come to a full stop before alighting, the particular
injury suffered by him could not have occurred." With the general rule relative to a passenger's
contributory negligence, we are likewise in full accord, namely, "An attempt to alight from a
moving train is negligence per se." Adding these two points together, should be absolved from
the complaint, and judgment affirmed.
Johnson, J., concur.

G.R. No. 34840

September 23, 1931

ABELARDO VELASCO, and SATURNINO CORTEZ, defendants-appellants.
Ramon Diokno for appellee.




This is an action brought by the plaintiff in the Court of First Instance of Manila against the five
defendants, to recover damages in the amount of P10,000, for physical injuries suffered as a
result of an automobile accident. On judgment being rendered as prayed for by the plaintiff, both
sets of defendants appealed.

On February 2, 1930, a passenger truck and an automobile of private ownership collided while
attempting to pass each other on the Talon bridge on the Manila South Road in the municipality
of Las Pias, Province of Rizal. The truck was driven by the chauffeur Abelardo Velasco, and
was owned by Saturnino Cortez. The automobile was being operated by Bonifacio Gutierrez, a
lad 18 years of age, and was owned by Bonifacio's father and mother, Mr. and Mrs. Manuel
Gutierrez. At the time of the collision, the father was not in the car, but the mother, together will
several other members of the Gutierrez family, seven in all, were accommodated therein. A
passenger in the autobus, by the name of Narciso Gutierrez, was en route from San Pablo,
Laguna, to Manila. The collision between the bus and the automobile resulted in Narciso
Gutierrez suffering a fracture right leg which required medical attendance for a considerable
period of time, and which even at the date of the trial appears not to have healed properly.
It is conceded that the collision was caused by negligence pure and simple. The difference
between the parties is that, while the plaintiff blames both sets of defendants, the owner of the
passenger truck blames the automobile, and the owner of the automobile, in turn, blames the
truck. We have given close attention to these highly debatable points, and having done so, a
majority of the court are of the opinion that the findings of the trial judge on all controversial
questions of fact find sufficient support in the record, and so should be maintained. With this
general statement set down, we turn to consider the respective legal obligations of the
In amplification of so much of the above pronouncement as concerns the Gutierrez family, it may
be explained that the youth Bonifacio was in incompetent chauffeur, that he was driving at an
excessive rate of speed, and that, on approaching the bridge and the truck, he lost his head and so
contributed by his negligence to the accident. The guaranty given by the father at the time the
son was granted a license to operate motor vehicles made the father responsible for the acts of
his son. Based on these facts, pursuant to the provisions of article 1903 of the Civil Code, the
father alone and not the minor or the mother, would be liable for the damages caused by the
We are dealing with the civil law liability of parties for obligations which arise from fault or
negligence. At the same time, we believe that, as has been done in other cases, we can take
cognizance of the common law rule on the same subject. In the United States, it is uniformly
held that the head of a house, the owner of an automobile, who maintains it for the general use of
his family is liable for its negligent operation by one of his children, whom he designates or
permits to run it, where the car is occupied and being used at the time of the injury for the
pleasure of other members of the owner's family than the child driving it. The theory of the law
is that the running of the machine by a child to carry other members of the family is within the
scope of the owner's business, so that he is liable for the negligence of the child because of the
relationship of master and servant. (Huddy On Automobiles, 6th ed., sec. 660; Missell vs. Hayes
[1914], 91 Atl., 322.) The liability of Saturnino Cortez, the owner of the truck, and of his
chauffeur Abelardo Velasco rests on a different basis, namely, that of contract which, we think,
has been sufficiently demonstrated by the allegations of the complaint, not controverted, and the

evidence. The reason for this conclusion reaches to the findings of the trial court concerning the
position of the truck on the bridge, the speed in operating the machine, and the lack of care
employed by the chauffeur. While these facts are not as clearly evidenced as are those which
convict the other defendant, we nevertheless hesitate to disregard the points emphasized by the
trial judge. In its broader aspects, the case is one of two drivers approaching a narrow bridge
from opposite directions, with neither being willing to slow up and give the right of way to the
other, with the inevitable result of a collision and an accident.
The defendants Velasco and Cortez further contend that there existed contributory negligence on
the part of the plaintiff, consisting principally of his keeping his foot outside the truck, which
occasioned his injury. In this connection, it is sufficient to state that, aside from the fact that the
defense of contributory negligence was not pleaded, the evidence bearing out this theory of the
case is contradictory in the extreme and leads us far afield into speculative matters.
The last subject for consideration relates to the amount of the award. The appellee suggests that
the amount could justly be raised to P16,517, but naturally is not serious in asking for this sum,
since no appeal was taken by him from the judgment. The other parties unite in challenging the
award of P10,000, as excessive. All facts considered, including actual expenditures and damages
for the injury to the leg of the plaintiff, which may cause him permanent lameness, in connection
with other adjudications of this court, lead us to conclude that a total sum for the plaintiff of
P5,000 would be fair and reasonable. The difficulty in approximating the damages by monetary
compensation is well elucidated by the divergence of opinion among the members of the court,
three of whom have inclined to the view that P3,000 would be amply sufficient, while a fourth
member has argued that P7,500 would be none too much.
In consonance with the foregoing rulings, the judgment appealed from will be modified, and the
plaintiff will have judgment in his favor against the defendants Manuel Gutierrez, Abelardo
Velasco, and Saturnino Cortez, jointly and severally, for the sum of P5,000, and the costs of both
Avancea, C.J., Johnson, Street, Villamor, Ostrand, Romualdez, and Imperial, JJ., concur.

G.R. No. 178610

November 17, 2010


G.R. No. 178610 is a petition for review1 assailing the Decision2 promulgated on 30 March 2006
by the Court of Appeals (CA) in CA-G.R. SP No. 62685. The appellate court granted the petition
filed by Fe Gerong (Gerong) and Spouses Bienvenido and Editha Broqueza (spouses Broqueza)
and dismissed the consolidated complaints filed by Hongkong and Shanghai Banking
Corporation, Ltd. - Staff Retirement Plan (HSBCL-SRP) for recovery of sum of money. The
appellate court reversed and set aside the Decision 3 of Branch 139 of the Regional Trial Court of
Makati City (RTC) in Civil Case No. 00-787 dated 11 December 2000, as well as its Order4 dated
5 September 2000. The RTCs decision affirmed the Decision5 dated 28 December 1999 of
Branch 61 of the Metropolitan Trial Court (MeTC) of Makati City in Civil Case No. 52400 for
Recovery of a Sum of Money.
The Facts
The appellate court narrated the facts as follows:
Petitioners Gerong and [Editha] Broqueza (defendants below) are employees of Hongkong and
Shanghai Banking Corporation (HSBC). They are also members of respondent Hongkong
Shanghai Banking Corporation, Ltd. Staff Retirement Plan (HSBCL-SRP, plaintiff below). The
HSBCL-SRP is a retirement plan established by HSBC through its Board of Trustees for the
benefit of the employees.
On October 1, 1990, petitioner [Editha] Broqueza obtained a car loan in the amount of
Php175,000.00. On December 12, 1991, she again applied and was granted an appliance loan in
the amount of Php24,000.00. On the other hand, petitioner Gerong applied and was granted an
emergency loan in the amount of Php35,780.00 on June 2, 1993. These loans are paid through
automatic salary deduction.
Meanwhile [in 1993], a labor dispute arose between HSBC and its employees. Majority of
HSBCs employees were terminated, among whom are petitioners Editha Broqueza and Fe
Gerong. The employees then filed an illegal dismissal case before the National Labor Relations
Commission (NLRC) against HSBC. The legality or illegality of such termination is now

pending before this appellate Court in CA G.R. CV No. 56797, entitled Hongkong Shanghai
Banking Corp. Employees Union, et al. vs. National Labor Relations Commission, et al.
Because of their dismissal, petitioners were not able to pay the monthly amortizations of their
respective loans. Thus, respondent HSBCL-SRP considered the accounts of petitioners
delinquent. Demands to pay the respective obligations were made upon petitioners, but they
failed to pay.6
HSBCL-SRP, acting through its Board of Trustees and represented by Alejandro L. Custodio,
filed Civil Case No. 52400 against the spouses Broqueza on 31 July 1996. On 19 September
1996, HSBCL-SRP filed Civil Case No. 52911 against Gerong. Both suits were civil actions for
recovery and collection of sums of money.
The Metropolitan Trial Courts Ruling
On 28 December 1999, the MeTC promulgated its Decision7 in favor of HSBCL-SRP. The
MeTC ruled that the nature of HSBCL-SRPs demands for payment is civil and has no
connection to the ongoing labor dispute. Gerong and Editha Broquezas termination from
employment resulted in the loss of continued benefits under their retirement plans. Thus, the
loans secured by their future retirement benefits to which they are no longer entitled are reduced
to unsecured and pure civil obligations. As unsecured and pure obligations, the loans are
immediately demandable.
The dispositive portion of the MeTCs decision reads:
WHEREFORE, premises considered and in view of the foregoing, the Court finds that the
plaintiff was able to prove by a preponderance of evidence the existence and immediate
demandability of the defendants loan obligations as judgment is hereby rendered in favor of the
plaintiff and against the defendants in both cases, ordering the latter:
1. In Civil Case No. 52400, to pay the amount of Php116,740.00 at six percent interest
per annum from the time of demand and in Civil Case No. 52911, to pay the amount of
Php25,344.12 at six percent per annum from the time of the filing of these cases, until the
amount is fully paid;
2. To pay the amount of Php20,000.00 each as reasonable attorneys fees;
3. Cost of suit.
Gerong and the spouses Broqueza filed a joint appeal of the MeTCs decision before the RTC.
Gerongs case was docketed Civil Case No. 00-786, while the spouses Broquezas case was
docketed as Civil Case No. 00-787.

The Regional Trial Courts Ruling

The RTC initially denied the joint appeal because of the belated filing of Gerong and the spouses
Broquezas memorandum. The RTC later reconsidered the order of denial and resolved the issues
in the interest of justice.
On 11 December 2000, the RTC affirmed the MeTCs decision in toto.9
The RTC ruled that Gerong and Editha Broquezas termination from employment disqualified
them from availing of benefits under their retirement plans. As a consequence, there is no longer
any security for the loans. HSBCL-SRP has a legal right to demand immediate settlement of the
unpaid balance because of Gerong and Editha Broquezas continued default in payment and their
failure to provide new security for their loans. Moreover, the absence of a period within which to
pay the loan allows HSBCL-SRP to demand immediate payment. The loan obligations are
considered pure obligations, the fulfillment of which are demandable at once.
Gerong and the spouses Broqueza then filed a Petition for Review under Rule 42 before the CA.
The Ruling of the Court of Appeals
On 30 March 2006, the CA rendered its Decision10 which reversed the 11 December 2000
Decision of the RTC. The CA ruled that the HSBCL-SRPs complaints for recovery of sum of
money against Gerong and the spouses Broqueza are premature as the loan obligations have not
yet matured. Thus, no cause of action accrued in favor of HSBCL-SRP. The dispositive portion
of the appellate courts Decision reads as follows:
WHEREFORE, the assailed Decision of the RTC is REVERSED and SET ASIDE. A new one is
hereby rendered DISMISSING the consolidated complaints for recovery of sum of money.
HSBCL-SRP filed a motion for reconsideration which the CA denied for lack of merit in its
Resolution12 promulgated on 19 June 2007.
On 6 August 2007, HSBCL-SRP filed a manifestation withdrawing the petition against Gerong
because she already settled her obligations. In a Resolution 13 of this Court dated 10 September
2007, this Court treated the manifestation as a motion to withdraw the petition against Gerong,
granted the motion, and considered the case against Gerong closed and terminated.
HSBCL-SRP enumerated the following grounds to support its Petition:

I. The Court of Appeals has decided a question of substance in a way not in accord with
law and applicable decisions of this Honorable Court; and
II. The Court of Appeals has departed from the accepted and usual course of judicial
proceedings in reversing the decision of the Regional Trial Court and the Metropolitan
Trial Court.14
The Courts Ruling
The petition is meritorious. We agree with the rulings of the MeTC and the RTC.
The Promissory Notes uniformly provide:
P_____ Makati, M.M. ____ 19__
FOR VALUE RECEIVED, I/WE _____ jointly and severally promise to pay to THE HSBC
RETIREMENT PLAN (hereinafter called the "PLAN") at its office in the Municipality of
Makati, Metro Manila, on or before until fully paid the sum of PESOS ___ (P___) Philippine
Currency without discount, with interest from date hereof at the rate of Six per cent (6%) per
annum, payable monthly.
I/WE agree that the PLAN may, upon written notice, increase the interest rate stipulated in this
note at any time depending on prevailing conditions.
I/WE hereby expressly consent to any extensions or renewals hereof for a portion or whole of the
principal without notice to the other(s), and in such a case our liability shall remain joint and
In case collection is made by or through an attorney, I/WE jointly and severally agree to pay ten
percent (10%) of the amount due on this note (but in no case less than P200.00) as and for
attorneys fees in addition to expenses and costs of suit.
In case of judicial execution, I/WE hereby jointly and severally waive our rights under the
provisions of Rule 39, Section 12 of the Rules of Court.15
In ruling for HSBCL-SRP, we apply the first paragraph of Article 1179 of the Civil Code:
Art. 1179. Every obligation whose performance does not depend upon a future or uncertain
event, or upon a past event unknown to the parties, is demandable at once.
x x x. (Emphasis supplied.)

We affirm the findings of the MeTC and the RTC that there is no date of payment indicated in
the Promissory Notes. The RTC is correct in ruling that since the Promissory Notes do not
contain a period, HSBCL-SRP has the right to demand immediate payment. Article 1179 of the
Civil Code applies. The spouses Broquezas obligation to pay HSBCL-SRP is a pure obligation.
The fact that HSBCL-SRP was content with the prior monthly check-off from Editha Broquezas
salary is of no moment. Once Editha Broqueza defaulted in her monthly payment, HSBCL-SRP
made a demand to enforce a pure obligation.
In their Answer, the spouses Broqueza admitted that prior to Editha Broquezas dismissal from
HSBC in December 1993, she "religiously paid the loan amortizations, which HSBC collected
through payroll check-off."16 A definite amount is paid to HSBCL-SRP on a specific date. Editha
Broqueza authorized HSBCL-SRP to make deductions from her payroll until her loans are fully
paid. Editha Broqueza, however, defaulted in her monthly loan payment due to her dismissal.
Despite the spouses Broquezas protestations, the payroll deduction is merely a convenient mode
of payment and not the sole source of payment for the loans. HSBCL-SRP never agreed that the
loans will be paid only through salary deductions. Neither did HSBCL-SRP agree that if Editha
Broqueza ceases to be an employee of HSBC, her obligation to pay the loans will be suspended.
HSBCL-SRP can immediately demand payment of the loans at anytime because the obligation to
pay has no period. Moreover, the spouses Broqueza have already incurred in default in paying
the monthly installments.
Finally, the enforcement of a loan agreement involves "debtor-creditor relations founded on
contract and does not in any way concern employee relations. As such it should be enforced
through a separate civil action in the regular courts and not before the Labor Arbiter."17
WHEREFORE, we GRANT the petition. The Decision of the Court of Appeals in CA-G.R. SP
No. 62685 promulgated on 30 March 2006 is REVERSED and SET ASIDE. The decision of
Branch 139 of the Regional Trial Court of Makati City in Civil Case No. 00-787, as well as the
decision of Branch 61 of the Metropolitan Trial Court of Makati City in Civil Case No. 52400
against the spouses Bienvenido and Editha Broqueza, are AFFIRMED. Costs against

G.R. No. L-29900 June 28, 1974

SEGUNDINA CHUA VDA. DE PALANCA, oppositor-appellee.
Florentino B. del Rosario for petitioner-appellant.
Manuel V. San Jose for oppositor-appellee.

There is no difficulty attending the disposition of this appeal by petitioner on questions of law. While several points were raised, the decisive
issue is whether a creditor is barred by prescription in his attempt to collect on a promissory note executed more than fifteen years earlier
with the debtor sued promising to pay either upon receipt by him of his share from a certain estate or upon demand, the basis for the action
being the latter alternative. The lower court held that the ten-year period of limitation of actions did apply, the note being immediately due and
demandable, the creditor admitting expressly that he was relying on the wording "upon demand." On the above facts as found, and with the
law being as it is, it cannot be said that its decision is infected with error. We affirm.
From the appealed decision, the following appears: "The parties in this case agreed to submit the matter for resolution on the basis of their
pleadings and annexes and their respective memoranda submitted. Petitioner George Pay is a creditor of the Late Justo Palanca who died in
Manila on July 3, 1963. The claim of the petitioner is based on a promissory note dated January 30, 1952, whereby the late Justo Palanca
and Rosa Gonzales Vda. de Carlos Palanca promised to pay George Pay the amount of P26,900.00, with interest thereon at the rate of 12%
per annum. George Pay is now before this Court, asking that Segundina Chua vda. de Palanca, surviving spouse of the late Justo Palanca,
he appointed as administratrix of a certain piece of property which is a residential dwelling located at 2656 Taft Avenue, Manila, covered by
Tax Declaration No. 3114 in the name of Justo Palanca, assessed at P41,800.00. The idea is that once said property is brought under

It then stated that the petition could not

prosper as there was a refusal on the part of Segundina Chua Vda. de Palanca to be appointed as
administratrix; that the property sought to be administered no longer belonged to the debtor, the late Justo
Palanca; and that the rights of petitioner-creditor had already prescribed. The promissory note, dated
January 30, 1962, is worded thus: " `For value received from time to time since 1947, we [jointly and
severally promise to] pay to Mr. [George Pay] at his office at the China Banking Corporation the sum of
[Twenty Six Thousand Nine Hundred Pesos] (P26,900.00), with interest thereon at the rate of 12% per
annum upon receipt by either of the undersigned of cash payment from the Estate of the late Don Carlos
Palanca or upon demand'. . . . As stated, this promissory note is signed by Rosa Gonzales Vda. de Carlos
Palanca and Justo Palanca." 2 Then came this paragraph: "The Court has inquired whether any cash
payment has been received by either of the signers of this promissory note from the Estate of the late
Carlos Palanca. Petitioner informed that he does not insist on this provision but that petitioner is only
claiming on his right under the promissory note ." 3 After which, came the ruling that the wording of the
promissory note being "upon demand," the obligation was immediately due. Since it was dated January
30, 1952, it was clear that more "than ten (10) years has already transpired from that time until to date.
The action, therefore, of the creditor has definitely prescribed." 4 The result, as above noted, was the
dismissal of the petition.
administration, George Pay, as creditor, can file his claim against the administratrix."

In an exhaustive brief prepared by Attorney Florentino B. del Rosario, petitioner did assail the correctness
of the rulings of the lower court as to the effect of the refusal of the surviving spouse of the late Justo
Palanca to be appointed as administratrix, as to the property sought to be administered no longer

belonging to the debtor, the late Justo Palanca, and as to the rights of petitioner-creditor having already
prescribed. As noted at the outset, only the question of prescription need detain us in the disposition of
this appeal. Likewise, as intimated, the decision must be affirmed, considering the clear tenor of the
promissory note.
From the manner in which the promissory note was executed, it would appear that petitioner was hopeful
that the satisfaction of his credit could he realized either through the debtor sued receiving cash payment
from the estate of the late Carlos Palanca presumptively as one of the heirs, or, as expressed therein,
"upon demand." There is nothing in the record that would indicate whether or not the first alternative was
fulfilled. What is undeniable is that on August 26, 1967, more than fifteen years after the execution of the
promissory note on January 30, 1952, this petition was filed. The defense interposed was prescription. Its
merit is rather obvious. Article 1179 of the Civil Code provides: "Every obligation whose performance does
not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable
at once." This used to be Article 1113 of the Spanish Civil Code of 1889. As far back as Floriano v.
Delgado, 5 a 1908 decision, it has been applied according to its express language. The well-known
Spanish commentator, Manresa, on this point, states: "Dejando con acierto, el caracter mas teorico y
grafico del acto, o sea la perfeccion de este, se fija, para determinar el concepto de la obligacion pura, en
el distinctive de esta, y que es consecuencia de aquel: la exigibilidad immediata." 6
The obligation being due and demandable, it would appear that the filing of the suit after fifteen years was
much too late. For again, according to the Civil Code, which is based on Section 43 of Act No. 190, the
prescriptive period for a written contract is that of ten years. 7 This is another instance where this Court
has consistently adhered to the express language of the applicable norm. 8 There is no necessity
therefore of passing upon the other legal questions as to whether or not it did suffice for the petition to fail
just because the surviving spouse refuses to be made administratrix, or just because the estate was left
with no other property. The decision of the lower court cannot be overturned.
WHEREFORE, the lower court decision of July 24, 1968 is affirmed. Costs against George Pay.

G.R. No. L-16570

March 9, 1922

VICENTE SOTELO MATTI, defendant-appellant.
Ramon Sotelo for defendant-appellant.








In August, 1918, the plaintiff corporation and the defendant, Mr. Vicente Sotelo, entered into
contracts whereby the former obligated itself to sell, and the latter to purchase from it, two steel
tanks, for the total price of twenty-one thousand pesos (P21,000), the same to be shipped from
New York and delivered at Manila "within three or four months;" two expellers at the price of
twenty five thousand pesos (P25,000) each, which were to be shipped from San Francisco in the
month of September, 1918, or as soon as possible; and two electric motors at the price of two
thousand pesos (P2,000) each, as to the delivery of which stipulation was made, couched in these
words: "Approximate delivery within ninety days. This is not guaranteed."
The tanks arrived at Manila on the 27th of April, 1919: the expellers on the 26th of October,
1918; and the motors on the 27th of February, 1919.
The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of these goods, but Mr.
Sotelo refused to receive them and to pay the prices stipulated.
The plaintiff brought suit against the defendant, based on four separate causes of action, alleging,
among other facts, that it immediately notified the defendant of the arrival of the goods, and
asked instructions from him as to the delivery thereof, and that the defendant refused to receive
any of them and to pay their price. The plaintiff, further, alleged that the expellers and the motors
were in good condition. (Amended complaint, pages 16-30, Bill of Exceptions.)
In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila Oil Refining and ByProducts Co., Inc., denied the plaintiff's allegations as to the shipment of these goods and their
arrival at Manila, the notification to the defendant, Mr. Sotelo, the latter's refusal to receive them
and pay their price, and the good condition of the expellers and the motors, alleging as special
defense that Mr. Sotelo had made the contracts in question as manager of the intervenor, the
Manila Oil Refining and By-Products Co., Inc which fact was known to the plaintiff, and that "it
was only in May, 1919, that it notified the intervenor that said tanks had arrived, the motors and
the expellers having arrived incomplete and long after the date stipulated." As a counterclaim or
set-off, they also allege that, as a consequence of the plaintiff's delay in making delivery of the
goods, which the intervenor intended to use in the manufacture of cocoanut oil, the intervenor
suffered damages in the sums of one hundred sixteen thousand seven hundred eighty-three pesos
and ninety-one centavos (P116,783.91) for the nondelivery of the tanks, and twenty-one
thousand two hundred and fifty pesos (P21,250) on account of the expellers and the motors not
having arrived in due time.
The case having been tried, the court below absolved the defendants from the complaint insofar
as the tanks and the electric motors were concerned, but rendered judgment against them,
ordering them to "receive the aforesaid expellers and pay the plaintiff the sum of fifty thousand
pesos (P50,00), the price of the said goods, with legal interest thereon from July 26, 1919, and

Both parties appeal from this judgment, each assigning several errors in the findings of the lower
The principal point at issue in this case is whether or not, under the contracts entered into and the
circumstances established in the record, the plaintiff has fulfilled, in due time, its obligation to
bring the goods in question to Manila. If it has, then it is entitled to the relief prayed for;
otherwise, it must be held guilty of delay and liable for the consequences thereof.
To solve this question, it is necessary to determine what period was fixed for the delivery of the
As regards the tanks, the contracts A and B (pages 61 and 62 of the record) are similar, and in
both of them we find this clause:
To be delivered within 3 or 4 months The promise or indication of shipment carries
with it absolutely no obligation on our part Government regulations, railroad
embargoes, lack of vessel space, the exigencies of the requirement of the United States
Government, or a number of causes may act to entirely vitiate the indication of shipment
as stated. In other words, the order is accepted on the basis of shipment at Mill's
convenience, time of shipment being merely an indication of what we hope to
In the contract Exhibit C (page 63 of the record), with reference to the expellers, the following
stipulation appears:
The following articles, hereinbelow more particularly described, to be shipped at San
Francisco within the month of September /18, or as soon as possible. Two Anderson
oil expellers . . . .
And in the contract relative to the motors (Exhibit D, page 64, rec.) the following appears:
Approximate delivery within ninety days. This is not guaranteed. This sale is
subject to our being able to obtain Priority Certificate, subject to the United States
Government requirements and also subject to confirmation of manufactures.
In all these contracts, there is a final clause as follows:
The sellers are not responsible for delays caused by fires, riots on land or on the sea,
strikes or other causes known as "Force Majeure" entirely beyond the control of the
sellers or their representatives.
Under these stipulations, it cannot be said that any definite date was fixed for the delivery of the
goods. As to the tanks, the agreement was that the delivery was to be made "within 3 or 4
months," but that period was subject to the contingencies referred to in a subsequent clause. With

regard to the expellers, the contract says "within the month of September, 1918," but to this is
added "or as soon as possible." And with reference to the motors, the contract contains this
expression, "Approximate delivery within ninety days," but right after this, it is noted that "this is
not guaranteed."
The oral evidence falls short of fixing such period.
From the record it appears that these contracts were executed at the time of the world war when
there existed rigid restrictions on the export from the United States of articles like the machinery
in question, and maritime, as well as railroad, transportation was difficult, which fact was known
to the parties; hence clauses were inserted in the contracts, regarding "Government regulations,
railroad embargoes, lack of vessel space, the exigencies of the requirements of the United States
Government," in connection with the tanks and "Priority Certificate, subject to the United State
Government requirements," with respect to the motors. At the time of the execution of the
contracts, the parties were not unmindful of the contingency of the United States Government
not allowing the export of the goods, nor of the fact that the other foreseen circumstances therein
stated might prevent it.
Considering these contracts in the light of the civil law, we cannot but conclude that the term
which the parties attempted to fix is so uncertain that one cannot tell just whether, as a matter of
fact, those articles could be brought to Manila or not. If that is the case, as we think it is, the
obligations must be regarded as conditional.
Obligations for the performance of which a day certain has been fixed shall be
demandable only when the day arrives.
A day certain is understood to be one which must necessarily arrive, even though its date
be unknown.
If the uncertainty should consist in the arrival or non-arrival of the day, the obligation is
conditional and shall be governed by the rules of the next preceding section. (referring to
pure and conditional obligations). (Art. 1125, Civ. Code.)
And as the export of the machinery in question was, as stated in the contract, contingent upon the
sellers obtaining certificate of priority and permission of the United States Government, subject
to the rules and regulations, as well as to railroad embargoes, then the delivery was subject to a
condition the fulfillment of which depended not only upon the effort of the herein plaintiff, but
upon the will of third persons who could in no way be compelled to fulfill the condition. In cases
like this, which are not expressly provided for, but impliedly covered, by the Civil Code, the
obligor will be deemed to have sufficiently performed his part of the obligation, if he has done
all that was in his power, even if the condition has not been fulfilled in reality.
In such cases, the decisions prior to the Civil Code have held that the obligee having done
all that was in his power, was entitled to enforce performance of the obligation. This

performance, which is fictitious not real is not expressly authorized by the Code,
which limits itself only to declare valid those conditions and the obligation thereby
affected; but it is neither disallowed, and the Code being thus silent, the old view can be
maintained as a doctrine. (Manresa's commentaries on the Civil Code [1907], vol. 8, page
The decisions referred to by Mr. Manresa are those rendered by the supreme court of Spain on
November 19, 1896, and February 23, 1871.
In the former it is held:
First. That when the fulfillment of the conditions does not depend on the will of the
obligor, but on that of a third person who can in no way be compelled to carry it out, and
it is found by the lower court that the obligor has done all in his power to comply with the
obligation, the judgment of the said court, ordering the other party to comply with his
part of the contract, is not contrary to the law of contracts, or to Law 1, Tit. I, Book 10, of
the "Novsima Recopilacin," or Law 12, Tit. 11, of Partida 5, when in the said finding of
the lower court, no law or precedent is alleged to have been violated. (Jurisprudencia
Civil published by the directors of the Revista General de Legislacion y Jurisprudencia
[1866], vol. 14, page 656.)
In the second decision, the following doctrine is laid down:
Second. That when the fulfillment of the condition does not depend on the will of the
obligor, but on that of a third person, who can in no way be compelled to carry it out, the
obligor's part of the contract is complied withalf Belisario not having exercised his right
of repurchase reserved in the sale of Basilio Borja mentioned in paragraph (13) hereof,
the affidavit of Basilio Borja for the consolidacion de dominio was presented for record
in the registry of deeds and recorded in the registry on the same date.
(32) The Maximo Belisario left a widow, the opponent Adelina Ferrer and three minor
children, Vitaliana, Eugenio, and Aureno Belisario as his only heirs.
(33) That in the execution and sales thereunder, in which C. H. McClure appears as the
judgment creditor, he was represented by the opponent Peter W. Addison, who prepared
and had charge of publication of the notices of the various sales and that in none of the
sales was the notice published more than twice in a newspaper.
The claims of the opponent-appellant Addison have been very fully and ably argued by
his counsel but may, we think, be disposed of in comparatively few words. As will be
seen from the foregoing statement of facts, he rest his title (1) on the sales under the
executions issued in cases Nos. 435, 450, 454, and 499 of the court of the justice of the
peace of Dagupan with the priority of inscription of the last two sales in the registry of

deeds, and (2) on a purchase from the Director of Lands after the land in question had
been forfeited to the Government for non-payment of taxes under Act No. 1791.
The sheriff's sales under the execution mentioned are fatally defective for what of
sufficient publication of the notice of sale. Section 454 of the Code of civil Procedure
reads in part as follows:
SEC. 454. Before the sale of property on execution, notice thereof must be given, as
1. In case of perishable property, by posing written notice of the time and place of the
sale in three public places of the municipality or city where the sale is to take place, for
such time as may be reasonable, considering the character and condition of the property;
2. *

3. In cases of real property, by posting a similar notice particularly describing the

property, for twenty days in three public places of the municipality or city where the
property is situated, and also where the property is to be sold, and publishing a copy
thereof once a week, for the same period, in some newspaper published or having general
circulation in the province, if there be one. If there are newspaper published in the
province in both the Spanish and English languages, then a like publication for a like
period shall be made in one newspaper published in the Spanish language, and in one
published in the English language: Provided, however, That such publication in a
newspaper will not be required when the assessed valuation of the property does not
exceed four hundred pesos;
4. *

Examining the record, we find that in cases Nos. 435 and 450 the sales took place on October 14,
1916; the notice first published gave the date of the sale as October 15th, but upon discovering
that October 15th was a Sunday, the date was changed to October 14th. The correct notice was
published twice in a local newspaper, the first publication was made on October 7th and the
second and last on October 14th, the date of the sale itself. The newspaper is a weekly periodical
published every Saturday afternoon.
In case No. 454 there were only two publications of the notice in a newspaper, the first
publication being made only fourteen days before the date of the sale. In case No. 499, there
were also only two publications, the first of which was made thirteen days before the sale. In the
last case the sale was advertised for the hours of from 8:30 in the morning until 4:30 in the
afternoon, in violation of section 457 of the Code of Civil Procedure. In cases Nos. 435 and 450
the hours advertised were from 9:00 in the morning until 4.30 in the afternoon. In all of the cases
the notices of the sale were prepared by the judgment creditor or his agent, who also took
charged of the publication of such notices.

In the case of Campomanes vs. Bartolome and Germann & Co. (38 Phil., 808), this court held
that if a sheriff sells without the notice prescribe by the Code of Civil Procedure induced thereto
by the judgment creditor and the purchaser at the sale is the judgment creditor, the sale is
absolutely void and not title passes. This must now be regarded as the settled doctrine in this
jurisdiction whatever the rule may be elsewhere.
It appears affirmatively from the evidence in the present case that there is a newspaper published
in the province where the sale in question took place and that the assessed valuation of the
property disposed of at each sale exceeded P400. Comparing the requirements of section 454,
supra, with what was actually done, it is self-evident that notices of the sales mentioned were not
given as prescribed by the statute and taking into consideration that in connection with these
sales the appellant Addison was either the judgment creditor or else occupied a position
analogous to that of a judgment creditor, the sales must be held invalid.
The conveyance or reconveyance of the land from the Director of Lands is equally invalid. The
provisions of Act No. 1791 pertinent to the purchase or repurchase of land confiscated for nonpayment of taxes are found in section 19 of the Act and read:
. . . In case such redemption be not made within the time above specified the Government
of the Philippine Islands shall have an absolute, indefeasible title to said real property.
Upon the expiration of the said ninety days, if redemption be not made, the provincial
treasurer shall immediately notify the Director of Lands of the forfeiture and furnish him
with a description of the property, and said Director of Lands shall have full control and
custody thereof to lease or sell the same or any portion thereof in the same manner as
other public lands are leased or sold: Provided, That the original owner, or his legal
representative, shall have the right to repurchase the entire amount of his said real
property, at any time before a sale or contract of sale has been made by the director of
Lands to a third party, by paying therefore the whole sum due thereon at the time of
ejectment together with a penalty of ten per centum . . . .
The appellant Addison repurchased under the final proviso of the section quoted and was allowed
to do so as the successor in interest of the original owner under the execution sale above
discussed. As we have seen, he acquired no rights under these sales, was therefore not the
successor of the original owner and could only have obtained a valid conveyance of such titles as
the Government might have by following the procedure prescribed by the Public Land Act for
the sale of public lands. he is entitled to reimbursement for the money paid for the redemption of
the land, with interest, but has acquired no title through the redemption.
The question of the priority of the record of the sheriff's sales over that of the sale from Belisario
to Borja is extensively argued in the briefs, but from our point of view is of no importance; void
sheriff's or execution sales cannot be validated through inscription in the Mortgage Law registry.

The opposition of Adelina Ferrer must also be overruled. She maintained that the land in
question was community property of the marriage of Eulalio Belisario and Paula Ira: that upon
the death of Paula Ira inealed from is modified, and the defendant Mr. Vicente Sotelo Matti,
sentenced to accept and receive from the plaintiff the tanks, the expellers and the motors in
question, and to pay the plaintiff the sum of ninety-six thousand pesos (P96,000), with legal
interest thereon from July 17, 1919, the date of the filing of the complaint, until fully paid, and
the costs of both instances. So ordered.

G.R. No. 168338

February 15, 2008

RAUL M. GONZALES, in his capacity as the Secretary of the Department of Justice; and
The Case
This is a petition for the writs of certiorari and prohibition to set aside "acts, issuances, and
orders" of respondents Secretary of Justice Raul M. Gonzalez (respondent Gonzales) and the
National Telecommunications Commission (NTC), particularly an NTC "press release" dated 11
June 2005, warning radio and television stations against airing taped conversations allegedly
between President Gloria Macapagal-Arroyo and Commission on Elections (COMELEC)
Commissioner Virgilio Garcillano (Garcillano)1 under pain of suspension or revocation of their
airwave licenses.
The Facts

On 24 June 2004, Congress, acting as national board of canvassers, proclaimed President Arroyo
winner in the 2004 presidential elections. 2 President Arroyo received a total of 12,905,808 votes,
1,123,576 more than the votes of her nearest rival, Fernando Poe, Jr. Sometime before 6 June
2005, the radio station dzMM aired the Garci Tapes where the parties to the conversation
discussed "rigging" the results of the 2004 elections to favor President Arroyo. On 6 June 2005,
Presidential spokesperson Ignacio Bunye (Bunye) held a press conference in Malacaang Palace,
where he played before the presidential press corps two compact disc recordings of
conversations between a woman and a man. Bunye identified the woman in both recordings as
President Arroyo but claimed that the contents of the second compact disc had been "spliced" to
make it appear that President Arroyo was talking to Garcillano.
However, on 9 June 2005, Bunye backtracked and stated that the woman's voice in the compact
discs was not President Arroyos after all. 3 Meanwhile, other individuals went public, claiming
possession of the genuine copy of the Garci Tapes.4 Respondent Gonzalez ordered the National
Bureau of Investigation to investigate media organizations which aired the Garci Tapes for
possible violation of Republic Act No. 4200 or the Anti-Wiretapping Law.
On 11 June 2005, the NTC issued a press release warning radio and television stations that airing
the Garci Tapes is a "cause for the suspension, revocation and/or cancellation of the licenses or
authorizations" issued to them.5 On 14 June 2005, NTC officers met with officers of the
broadcasters group, Kapisanan ng mga Broadcasters sa Pilipinas (KBP), to dispel fears of
censorship. The NTC and KBP issued a joint press statement expressing commitment to press
On 21 June 2005, petitioner Francisco I. Chavez (petitioner), as citizen, filed this petition to
nullify the "acts, issuances, and orders" of the NTC and respondent Gonzalez (respondents) on
the following grounds: (1) respondents conduct violated freedom of expression and the right of
the people to information on matters of public concern under Section 7, Article III of the
Constitution, and (2) the NTC acted ultra vires when it warned radio and television stations
against airing the Garci Tapes.
In their Comment to the petition, respondents raised threshold objections that (1) petitioner has
no standing to litigate and (2) the petition fails to meet the case or controversy requirement in
constitutional adjudication. On the merits, respondents claim that (1) the NTC's press release of
11 June 2005 is a mere "fair warning," not censorship, cautioning radio and television networks
on the lack of authentication of the Garci Tapes and of the consequences of airing false or
fraudulent material, and (2) the NTC did not act ultra vires in issuing the warning to radio and
television stations.
In his Reply, petitioner belied respondents' claim on his lack of standing to litigate, contending
that his status as a citizen asserting the enforcement of a public right vested him with sufficient
interest to maintain this suit. Petitioner also contests respondents' claim that the NTC press

release of 11 June 2005 is a mere warning as it already prejudged the Garci Tapes as inauthentic
and violative of the Anti-Wiretapping Law, making it a "cleverly disguised x x x gag order."
The principal issue for resolution is whether the NTC warning embodied in the press release of
11 June 2005 constitutes an impermissible prior restraint on freedom of expression.
I vote to (1) grant the petition, (2) declare the NTC warning, embodied in its press release dated
11 June 2005, an unconstitutional prior restraint on protected expression, and (3) enjoin the NTC
from enforcing the same.
1. Standing to File Petition
Petitioner has standing to file this petition. When the issue involves freedom of expression, as in
the present case, any citizen has the right to bring suit to question the constitutionality of a
government action in violation of freedom of expression, whether or not the government action
is directed at such citizen. The government action may chill into silence those to whom the action
is directed. Any citizen must be allowed to take up the cudgels for those who have been cowed
into inaction because freedom of expression is a vital public right that must be defended by
everyone and anyone.
Freedom of expression, being fundamental to the preservation of a free, open and democratic
society, is of transcendental importance that must be defended by every patriotic citizen at the
earliest opportunity. We have held that any concerned citizen has standing to raise an issue of
transcendental importance to the nation,7 and petitioner in this present petition raises such issue.
2. Overview of Freedom of Expression, Prior Restraint and Subsequent Punishment
Freedom of expression is the foundation of a free, open and democratic society. Freedom of
expression is an indispensable condition8 to the exercise of almost all other civil and political
rights. No society can remain free, open and democratic without freedom of expression. Freedom
of expression guarantees full, spirited, and even contentious discussion of all social, economic
and political issues. To survive, a free and democratic society must zealously safeguard freedom
of expression.
Freedom of expression allows citizens to expose and check abuses of public officials. Freedom
of expression allows citizens to make informed choices of candidates for public office. Freedom
of expression crystallizes important public policy issues, and allows citizens to participate in the
discussion and resolution of such issues. Freedom of expression allows the competition of ideas,
the clash of claims and counterclaims, from which the truth will likely emerge. Freedom of
expression allows the airing of social grievances, mitigating sudden eruptions of violence from
marginalized groups who otherwise would not be heard by government. Freedom of expression

provides a civilized way of engagement among political, ideological, religious or ethnic

opponents for if one cannot use his tongue to argue, he might use his fist instead.
Freedom of expression is the freedom to disseminate ideas and beliefs, whether competing,
conforming or otherwise. It is the freedom to express to others what one likes or dislikes, as it is
the freedom of others to express to one and all what they favor or disfavor. It is the free
expression for the ideas we love, as well as the free expression for the ideas we hate. 9 Indeed, the
function of freedom of expression is to stir disputes:
[I]t may indeed best serve its high purpose when it induces a condition of unrest, creates
dissatisfaction with conditions as they are, or even stirs people to anger. Speech is often
provocative and challenging. It may strike at prejudices and preconceptions and have
profound unsettling effects as it presses for acceptance of an idea.10
Section 4, Article III of the Constitution prohibits the enactment of any law curtailing freedom of
No law shall be passed abridging the freedom of speech, of expression, or the press, or
the right of the people peaceably to assemble and petition the government for redress of
Thus, the rule is that expression is not subject to any prior restraint or censorship because the
Constitution commands that freedom of expression shall not be abridged. Over time, however,
courts have carved out narrow and well defined exceptions to this rule out of necessity.
The exceptions, when expression may be subject to prior restraint, apply in this jurisdiction to
only four categories of expression, namely: pornography,11 false or misleading advertisement,12
advocacy of imminent lawless action,13 and danger to national security.14 All other expression is
not subject to prior restraint. As stated in Turner Broadcasting System v. Federal
Communication Commission, "[T]he First Amendment (Free Speech Clause), subject only to
narrow and well understood exceptions, does not countenance governmental control over the
content of messages expressed by private individuals."15
Expression not subject to prior restraint is protected expression or high-value expression. Any
content-based prior restraint on protected expression is unconstitutional without exception. A
protected expression means what it says it is absolutely protected from censorship. Thus, there
can be no prior restraint on public debates on the amendment or repeal of existing laws, on the
ratification of treaties, on the imposition of new tax measures, or on proposed amendments to the
Prior restraint on expression is content-based if the restraint is aimed at the message or idea of
the expression. Courts will subject to strict scrutiny content-based restraint. If the content-based
prior restraint is directed at protected expression, courts will strike down the restraint as
unconstitutional because there can be no content-based prior restraint on protected expression.

The analysis thus turns on whether the prior restraint is content-based, and if so, whether such
restraint is directed at protected expression, that is, those not falling under any of the recognized
categories of unprotected expression.
If the prior restraint is not aimed at the message or idea of the expression, it is content-neutral
even if it burdens expression. A content-neutral restraint is a restraint which regulates the time,
place or manner of the expression in public places 16 without any restraint on the content of the
expression. Courts will subject content-neutral restraints to intermediate scrutiny.17
An example of a content-neutral restraint is a permit specifying the date, time and route of a rally
passing through busy public streets. A content-neutral prior restraint on protected expression
which does not touch on the content of the expression enjoys the presumption of validity and is
thus enforceable subject to appeal to the courts. 18 Courts will uphold time, place or manner
restraints if they are content-neutral, narrowly tailored to serve a significant government interest,
and leave open ample alternative channels of expression.19
In content-neutral prior restraint on protected speech, there should be no prior restraint on the
content of the expression itself. Thus, submission of movies or pre-taped television programs to a
government review board is constitutional only if the review is for classification and not for
censoring any part of the content of the submitted materials. 20 However, failure to submit such
materials to the review board may be penalized without regard to the content of the materials. 21
The review board has no power to reject the airing of the submitted materials. The review
boards power is only to classify the materials, whether for general patronage, for adults only, or
for some other classification. The power to classify expressions applies only to movies and pretaped television programs22 but not to live television programs. Any classification of live
television programs necessarily entails prior restraint on expression.
Expression that may be subject to prior restraint is unprotected expression or low-value
expression. By definition, prior restraint on unprotected expression is content-based 23 since the
restraint is imposed because of the content itself. In this jurisdiction, there are currently only four
categories of unprotected expression that may be subject to prior restraint. This Court recognized
false or misleading advertisement as unprotected expression only in October 2007.24
Only unprotected expression may be subject to prior restraint. However, any such prior
restraint on unprotected expression must hurdle a high barrier. First, such prior restraint is
presumed unconstitutional. Second, the government bears a heavy burden of proving the
constitutionality of the prior restraint.25
Courts will subject to strict scrutiny any government action imposing prior restraint on
unprotected expression.26 The government action will be sustained if there is a compelling State
interest, and prior restraint is necessary to protect such State interest. In such a case, the prior
restraint shall be narrowly drawn - only to the extent necessary to protect or attain the
compelling State interest.

Prior restraint is a more severe restriction on freedom of expression than subsequent punishment.
Although subsequent punishment also deters expression, still the ideas are disseminated to the
public. Prior restraint prevents even the dissemination of ideas to the public.
While there can be no prior restraint on protected expression, such expression may be subject to
subsequent punishment,27 either civilly or criminally. Thus, the publication of election surveys
cannot be subject to prior restraint,28 but an aggrieved person can sue for redress of injury if the
survey turns out to be fabricated. Also, while Article 201 (2)(b)(3) of the Revised Penal Code
punishing "shows which offend any race or religion" cannot be used to justify prior restraint on
religious expression, this provision can be invoked to justify subsequent punishment of the
perpetrator of such offensive shows.29
Similarly, if the unprotected expression does not warrant prior restraint, the same expression may
still be subject to subsequent punishment, civilly or criminally. Libel falls under this class of
unprotected expression. However, if the expression cannot be subject to the lesser restriction of
subsequent punishment, logically it cannot also be subject to the more severe restriction of prior
restraint. Thus, since profane language or "hate speech" against a religious minority is not
subject to subsequent punishment in this jurisdiction, 30 such expression cannot be subject to prior
If the unprotected expression warrants prior restraint, necessarily the same expression is subject
to subsequent punishment. There must be a law punishing criminally the unprotected expression
before prior restraint on such expression can be justified. The legislature must punish the
unprotected expression because it creates a substantive evil that the State must prevent.
Otherwise, there will be no legal basis for imposing a prior restraint on such expression.
The prevailing test in this jurisdiction to determine the constitutionality of government action
imposing prior restraint on three categories of unprotected expression pornography,31 advocacy
of imminent lawless action, and danger to national security - is the clear and present danger
test.32 The expression restrained must present a clear and present danger of bringing about a
substantive evil that the State has a right and duty to prevent, and such danger must be grave and
Prior restraint on unprotected expression takes many forms - it may be a law, administrative
regulation, or impermissible pressures like threats of revoking licenses or withholding of
benefits.34 The impermissible pressures need not be embodied in a government agency
regulation, but may emanate from policies, advisories or conduct of officials of government
3. Government Action in the Present Case
The government action in the present case is a warning by the NTC that the airing or
broadcasting of the Garci Tapes by radio and television stations is a "cause for the

suspension, revocation and/or cancellation of the licenses or authorizations" issued to radio

and television stations. The NTC warning, embodied in a press release, relies on two grounds.
First, the airing of the Garci Tapes "is a continuing violation of the Anti-Wiretapping Law and
the conditions of the Provisional Authority and/or Certificate of Authority issued to radio and TV
stations." Second, the Garci Tapes have not been authenticated, and subsequent investigation
may establish that the tapes contain false information or willful misrepresentation.
Specifically, the NTC press release contains the following categorical warning:
Taking into consideration the countrys unusual situation, and in order not to
unnecessarily aggravate the same, the NTC warns all radio stations and television
networks owners/operators that the conditions of the authorizations and permits issued to
them by Government like the Provisional Authority and/or Certificate of Authority
explicitly provides that said companies shall not use its stations for the broadcasting or
telecasting of false information or willful misrepresentation. Relative thereto, it has come
to the attention of the Commission that certain personalities are in possession of alleged
taped conversation which they claim, (sic) involve the President of the Philippines and a
Commissioner of the COMELEC regarding their supposed violation of election laws.
These personalities have admitted that the taped conversations are product of illegal
wiretapping operations.
Considering that these taped conversations have not been duly authenticated nor could it
be said at this time that the tapes contain an accurate or truthful representation of what
was recorded therein, (sic) it is the position of the Commission that the continuous
airing or broadcast of the said taped conversations by radio and television stations is
a continuing violation of the Anti-Wiretapping Law and the conditions of the
Provisional Authority and/or Certificate of Authority issued to these radio and
television stations. If it has been (sic) subsequently established that the said tapes are
false and/or fraudulent after a prosecution or appropriate investigation, the
concerned radio and television companies are hereby warned that their
broadcast/airing of such false information and/or willful misrepresentation shall be
just cause for the suspension, revocation and/or cancellation of the licenses or
authorizations issued to the said companies. (Boldfacing and underscoring supplied)
The NTC does not claim that the public airing of the Garci Tapes constitutes unprotected
expression that may be subject to prior restraint. The NTC does not specify what substantive evil
the State seeks to prevent in imposing prior restraint on the airing of the Garci Tapes. The NTC
does not claim that the public airing of the Garci Tapes constitutes a clear and present danger of a
substantive evil, of grave and imminent character, that the State has a right and duty to prevent.
The NTC did not conduct any hearing in reaching its conclusion that the airing of the Garci
Tapes constitutes a continuing violation of the Anti-Wiretapping Law. At the time of issuance of
the NTC press release, and even up to now, the parties to the conversations in the Garci Tapes

have not complained that the wire-tapping was without their consent, an essential element for
violation of the Anti-Wiretapping Law.35 It was even the Office of the President, through the
Press Secretary, that played and released to media the Garci Tapes containing the alleged
"spliced" conversation between President Arroyo and Commissioner Garcillano. There is also the
issue of whether a wireless cellular phone conversation is covered by the Anti-Wiretapping Law.
Clearly, the NTC has no factual or legal basis in claiming that the airing of the Garci Tapes
constitutes a violation of the Anti-Wiretapping Law. The radio and television stations were not
even given an opportunity to be heard by the NTC. The NTC did not observe basic due process
as mandated in Ang Tibay v. Court of Industrial Relations.36
The NTC claims that the Garci Tapes, "after a prosecution or the appropriate investigation," may
constitute "false information and/or willful misrepresentation." However, the NTC does not
claim that such possible false information or willful misrepresentation constitutes misleading
commercial advertisement. In the United States, false or deceptive commercial speech is
categorized as unprotected expression that may be subject to prior restraint. Recently, this Court
upheld the constitutionality of Section 6 of the Milk Code requiring the submission to a
government screening committee of advertising materials for infant formula milk to prevent false
or deceptive claims to the public.37 There is, however, no claim here by respondents that the
Garci Tapes constitute false or misleading commercial advertisement.
The NTC concedes that the Garci Tapes have not been authenticated as accurate or truthful. The
NTC also concedes that only "after a prosecution or appropriate investigation" can it be
established that the Garci Tapes constitute "false information and/or willful misrepresentation."
Clearly, the NTC admits that it does not even know if the Garci Tapes contain false
information or willful misrepresentation.
4. Nature of Prior Restraint in the Present Case
The NTC action restraining the airing of the Garci Tapes is a content-based prior restraint
because it is directed at the message of the Garci Tapes. The NTCs claim that the Garci Tapes
might contain "false information and/or willful misrepresentation," and thus should not be
publicly aired, is an admission that the restraint is content-based.
5. Nature of Expression in the Present Case
The public airing of the Garci Tapes is a protected expression because it does not fall under any
of the four existing categories of unprotected expression recognized in this jurisdiction. The
airing of the Garci Tapes is essentially a political expression because it exposes that a
presidential candidate had allegedly improper conversations with a COMELEC Commissioner
right after the close of voting in the last presidential elections.
Obviously, the content of the Garci Tapes affects gravely the sanctity of the ballot. Public
discussion on the sanctity of the ballot is indisputably a protected expression that cannot be

subject to prior restraint. Public discussion on the credibility of the electoral process is one of the
highest political expressions of any electorate, and thus deserves the utmost protection. If ever
there is a hierarchy of protected expressions, political expression would occupy the highest
rank,38 and among different kinds of political expression, the subject of fair and honest elections
would be at the top. In any event, public discussion on all political issues should always remain
uninhibited, robust and wide open.
The rule, which recognizes no exception, is that there can be no content-based prior restraint
on protected expression. On this ground alone, the NTC press release is unconstitutional. Of
course, if the courts determine that the subject matter of a wiretapping, illegal or not, endangers
the security of the State, the public airing of the tape becomes unprotected expression that may
be subject to prior restraint. However, there is no claim here by respondents that the subject
matter of the Garci Tapes involves national security and publicly airing the tapes would endanger
the security of the State.39
The alleged violation of the Anti-Wiretapping Law is not in itself a ground to impose a prior
restraint on the airing of the Garci Tapes because the Constitution expressly prohibits the
enactment of any law, and that includes anti-wiretapping laws, curtailing freedom of
expression.40 The only exceptions to this rule are the four recognized categories of unprotected
expression. However, the content of the Garci Tapes does not fall under any of these categories
of unprotected expression.
The airing of the Garci Tapes does not violate the right to privacy because the content of the
Garci Tapes is a matter of important public concern. The Constitution guarantees the peoples
right to information on matters of public concern. 41 The remedy of any person aggrieved by the
public airing of the Garci Tapes is to file a complaint for violation of the Anti-Wiretapping Law
after the commission of the crime. Subsequent punishment, absent a lawful defense, is the
remedy available in case of violation of the Anti-Wiretapping Law.
The present case involves a prior restraint on protected expression. Prior restraint on protected
expression differs significantly from subsequent punishment of protected expression. While there
can be no prior restraint on protected expression, there can be subsequent punishment for
protected expression under libel, tort or other laws. In the present case, the NTC action seeks
prior restraint on the airing of the Garci Tapes, not punishment of personnel of radio and
television stations for actual violation of the Anti-Wiretapping Law.
6. Only the Courts May Impose Content-Based Prior Restraint
The NTC has no power to impose content-based prior restraint on expression. The charter of the
NTC does not vest NTC with any content-based censorship power over radio and television

In the present case, the airing of the Garci Tapes is a protected expression that can never be
subject to prior restraint. However, even assuming for the sake of argument that the airing of the
Garci Tapes constitutes unprotected expression, only the courts have the power to adjudicate on
the factual and legal issue of whether the airing of the Garci Tapes presents a clear and present
danger of bringing about a substantive evil that the State has a right and duty to prevent, so as to
justify the prior restraint.
Any order imposing prior restraint on unprotected expression requires prior adjudication by the
courts on whether the prior restraint is constitutional. This is a necessary consequence from the
presumption of invalidity of any prior restraint on unprotected expression. Unless ruled by the
courts as a valid prior restraint, government agencies cannot implement outright such prior
restraint because such restraint is presumed unconstitutional at inception.
As an agency that allocates frequencies or airwaves, the NTC may regulate the bandwidth
position, transmitter wattage, and location of radio and television stations, but not the content of
the broadcasts. Such content-neutral prior restraint may make operating radio and television
stations more costly. However, such content-neutral restraint does not restrict the content of the
7. Government Failed to Overcome Presumption of Invalidity
Assuming that the airing of the Garci Tapes constitutes unprotected expression, the NTC action
imposing prior restraint on the airing is presumed unconstitutional. The Government bears a
heavy burden to prove that the NTC action is constitutional. The Government has failed to meet
this burden.
In their Comment, respondents did not invoke any compelling State interest to impose prior
restraint on the public airing of the Garci Tapes. The respondents claim that they merely "fairly
warned" radio and television stations to observe the Anti-Wiretapping Law and pertinent NTC
circulars on program standards. Respondents have not explained how and why the observance by
radio and television stations of the Anti-Wiretapping Law and pertinent NTC circulars
constitutes a compelling State interest justifying prior restraint on the public airing of the Garci
Violation of the Anti-Wiretapping Law, like the violation of any criminal statute, can always be
subject to criminal prosecution after the violation is committed. Respondents have not explained
why there is a need in the present case to impose prior restraint just to prevent a possible future
violation of the Anti-Wiretapping Law. Respondents have not explained how the violation of the
Anti-Wiretapping Law, or of the pertinent NTC circulars, can incite imminent lawless behavior
or endanger the security of the State. To allow such restraint is to allow prior restraint on all
future broadcasts that may possibly violate any of the existing criminal statutes. That would be
the dawn of sweeping and endless censorship on broadcast media.

8. The NTC Warning is a Classic Form of Prior Restraint

The NTC press release threatening to suspend or cancel the airwave permits of radio and
television stations constitutes impermissible pressure amounting to prior restraint on protected
expression. Whether the threat is made in an order, regulation, advisory or press release, the
chilling effect is the same: the threat freezes radio and television stations into deafening silence.
Radio and television stations that have invested substantial sums in capital equipment and market
development suddenly face suspension or cancellation of their permits. The NTC threat is thus
real and potent.
In Burgos v. Chief of Staff,42 this Court ruled that the closure of the We Forum newspapers under
a general warrant "is in the nature of a previous restraint or censorship abhorrent to the freedom
of the press guaranteed under the fundamental law." The NTC warning to radio and television
stations not to air the Garci Tapes or else their permits will be suspended or cancelled has the
same effect a prior restraint on constitutionally protected expression.
In the recent case of David v. Macapagal-Arroyo,43 this Court declared unconstitutional
government threats to close down mass media establishments that refused to comply with
government prescribed "standards" on news reporting following the declaration of a State of
National Emergency by President Arroyo on 24 February 2006. The Court described these
threats in this manner:
Thereafter, a wave of warning[s] came from government officials. Presidential Chief
of Staff Michael Defensor was quoted as saying that such raid was "meant to show a
'strong presence,' to tell media outlets not to connive or do anything that would help the
rebels in bringing down this government." Director General Lomibao further stated that
"if they do not follow the standards and the standards are if they would contribute to
instability in the government, or if they do not subscribe to what is in General Order No.
5 and Proc. No. 1017 we will recommend a 'takeover.'" National
Telecommunications Commissioner Ronald Solis urged television and radio
networks to "cooperate" with the government for the duration of the state of
national emergency. He warned that his agency will not hesitate to recommend the
closure of any broadcast outfit that violates rules set out for media coverage during
times when the national security is threatened.44 (Emphasis supplied)
The Court struck down this "wave of warning[s]" as impermissible restraint on freedom of
expression. The Court ruled that "the imposition of standards on media or any form of prior
restraint on the press, as well as the warrantless search of the Tribune offices and whimsical
seizure of its articles for publication and other materials, are declared
The history of press freedom has been a constant struggle against the censor whose weapon is the
suspension or cancellation of licenses to publish or broadcast. The NTC warning resurrects the

weapon of the censor. The NTC warning is a classic form of prior restraint on protected
expression, which in the words of Near v. Minnesota is "the essence of censorship."46 Long
before the American Declaration of Independence in 1776, William Blackstone had already
written in his Commentaries on the Law of England, "The liberty of the press x x x consists in
laying no previous restraints upon publication x x x."47
Although couched in a press release and not in an administrative regulation, the NTC threat to
suspend or cancel permits remains real and effective, for without airwaves or frequencies, radio
and television stations will fall silent and die. The NTC press release does not seek to advance a
legitimate regulatory objective, but to suppress through coercion information on a matter of vital
public concern.
9. Conclusion
In sum, the NTC press release constitutes an unconstitutional prior restraint on protected
expression. There can be no content-based prior restraint on protected expression. This rule has
no exception.
I therefore vote to (1) grant the petition, (2) declare the NTC warning, embodied in its press
release dated 11 June 2005, an unconstitutional prior restraint on protected expression, and (3)
enjoin the NTC from enforcing the same.

G.R. No. L-264

October 4, 1946

JACINTA BALDOMAR, ET AL., defendants-appellants.
Tolentino and Aguas for appellee.





Vicente Singson Encarnacion, owner of the house numbered 589 Legarda Street, Manila, some
six years ago leased said house to Jacinto Baldomar and her son, Lefrado Fernando, upon a
month-to-month basis for the monthly rental of P35. After Manila was liberated in the last war,
specifically on March 16, 1945, and on April 7, of the same year, plaintiff Singson Encarnacion
notified defendants, the said mother and son, to vacate the house above-mentioned on or before
April 15, 1945, because plaintiff needed it for his offices as a result of the destruction of the
building where said plaintiff had said offices before. Despite this demand, defendants insisted on
continuing their occupancy. When the original action was lodged with the Municipal Court of
Manila on April 20, 1945, defendants were in arrears in the payment of the rental corresponding
to said month, the agrees rental being payable within the first five days of each month. That
rental was paid prior to the hearing of the case in the municipal court, as a consequence of which
said court entered judgment for restitution and payment of rentals at the rate of P35 a month
from May 1, 1945, until defendants completely vacate the premises. Although plaintiff included
in said original complaint a claim for P500 damages per month, that claim was waived by him
before the hearing in the municipal court, on account of which nothing was said regarding said
damages in the municipal court's decision.
When the case reached the Court of First Instance of Manila upon appeal, defendants filed
therein a motion to dismiss (which was similar to a motion to dismiss filed by them in the
municipal court) based upon the ground that the municipal court had no jurisdiction over the
subject matter due to the aforesaid claim for damages and that, therefore, the Court of First
Instance had no appellate jurisdiction over the subject matter of the action. That motion to
dismiss was denied by His Honor, Judge Mamerto Roxas, by order dated July 21, 1945, on the
ground that in the municipal court plaintiff had waived said claim for damages and that,
therefore, the same waiver was understood also to have been made in the Court of First
In the Court of First Instance the graveman of the defense interposed by defendants, as it was
expressed defendant Lefrado Fernando during the trial, was that the contract which they had
celebrated with plaintiff since the beginning authorized them to continue occupying the house
indefinetly and while they should faithfully fulfill their obligations as respects the payment of the
rentals, and that this agreement had been ratified when another ejectment case between the

parties filed during the Japanese regime concerning the same house was allegedly compounded
in the municipal court. The Court of First Instance gave more credit to plaintiff's witness, Vicente
Singson Encarnacion, jr., who testified that the lease had always and since the beginning been
upon a month-to-month basis. The court added in its decision that this defense which was put up
by defendant's answer, for which reason the Court considered it as indicative of an eleventh-hour
theory. We think that the Court of First Instance was right in so declaring. Furthermore, carried to
its logical conclusion, the defense thus set up by defendant Lefrado Fernando would leave to the
sole and exclusive will of one of the contracting parties (defendants in this case) the validity and
fulfillment of the contract of lease, within the meaning of article 1256 of the Civil Code, since
the continuance and fulfillment of the contract would then depend solely and exclusively upon
their free and uncontrolled choice between continuing paying the rentals or not, completely
depriving the owner of all say in the matter. If this defense were to be allowed, so long as
defendants elected to continue the lease by continuing the payment of the rentals, the owner
would never be able to discontinue it; conversely, although the owner should desire the lease to
continue, the lessees could effectively thwart his purpose if they should prefer to terminate the
contract by the simple expedient of stopping payment of the rentals. This, of course, is prohibited
by the aforesaid article of the Civil Code. (8 Manresa, 3d ed., pp. 626, 627; Cuyugan vs. Santos,
34 Phil., 100.)
During the pendency of the appeal in the Court of First Instance and before the judgment
appealed from was rendered on October 31, 1945, the rentals in areas were those pertaining to
the month of August, 1945, to the date of said judgment at the rate of P35 a month. During the
pendency of the appeal in that court, certain deposits were made by defendants on account of
rentals with the clerk of said court, and in said judgment it is disposed that the amounts thus
deposited should be delivered to plaintiff.
Upon the whole, we are clearly of opinion that the judgment appealed from should be, as it is
hereby, affirmed, with the costs of the three instances to appellants. So ordered.

G.R. No. 967

May 19, 1903

THE MANILA LAWN TENNIS CLUB, defendant-appellant.
Manuel Torres Vergara for appellee.





This suit concerns the lease of a piece of land for a fixed consideration and to endure at the will
of the lessee. By the contract of lease the lessee is expressly authorized to make improvements
upon the land, by erecting buildings of both permanent and temporary character, by making fills,
laying pipes, and making such other improvements as might be considered desirable for the
comfort and amusement of the members.
With respect to the term of the lease the present question has arisen. In its decision three theories
have been presented: One which makes the duration depend upon the will of the lessor, who,
upon one month's notice given to the lessee, may terminate the lease so stipulated; another
which, on the contrary, makes it dependent upon the will of the lessee, as stipulated; and the
third, in accordance with which the right is reversed to the courts to fix the duration of the term.
The first theory is that which has prevailed in the judgment below, as appears from the language
in which the basis of the decision is expressed: "The court is of the opinion that the contract of
lease was terminated by the notice given by the plaintiff on August 28 of last year . . . ." And
such is the theory maintained by the plaintiffs, which expressly rests upon article 1581 of the
Civil Code, the law which was in force at the time the contract was entered into (January 25,
1890). The judge, in giving to this notice the effect of terminating the lease, undoubtedly
considers that it is governed by the article relied upon by the plaintiffs, which is of the following
tenor: "When the term has not been fixed for the lease, it is understood to be for years when an
annual rental has been fixed, for months when the rent is monthly. . . ." The second clause of the
contract provides as follows: "The rent of the said land is fixed at 25 pesos per month." (P. 11,
Bill of Exceptions.)
In accordance with such a theory, the plaintiffs might have terminated the lease the month
following the making of the contract at any time after the first month, which, strictly
speaking, would be the only month with respect to which they were expressly bound, they not
being bound for each successive month except by a tacit renewal (art. 1566) an effect which
they might prevent by giving the required notice.
Although the relief asked for in the complaint, drawn in accordance with the new form of
procedure established by the prevailing Code, is the restitution of the land to the plaintiffs (a
formula common to various actions), nevertheless the action which is maintained can be no other
than that of desahucio, in accordance with the substantive law governing the contract. The lessor

says article 1569 of the Civil Code may judicially dispossess the lessee upon the expiration
of the conventional term or of the legal term; the conventional term that is, the one agreed
upon by the parties; the legal term, in defect of the conventional, fixed for leases by articles 1577
and 1581. We have already seen what this legal term is with respect to urban properties, in
accordance with article 1581.
Hence, it follows that the judge has only to determine whether there is or is not conventional
term. If there be a conventional term, he can not apply the legal term fixed in subsidium to cover
a case in which the parties have made no agreement whatsoever with respect to the duration of
the lease. In this case the law interprets the presumptive intention of the parties, they having said
nothing in the contract with respect to its duration. "Obligations arising from contracts have the
force of law between the contracting parties and must be complied with according to the tenor of
the contracts." (Art. 1091 of the Civil Code.)
The obligations which, with the force of law, the lessors assumed by the contract entered into, so
far as pertaining to the issues, are the following: "First. . . . They lease the above-described land
to Mr. Williamson, who takes it on lease, . . . for all the time the members of the said club may
desire to use it . . . Third. . . . the owners of the land undertake to maintain the club as tenant as
long as the latter shall see fit, without altering in the slightest degree the conditions of this
contract, even though the estate be sold."
It is necessary, therefore, to answer the first question: Was there, or was there not, a conventional
term, a duration, agreed upon in the contract in question? If there was an agreed duration, a
conventional term, then the legal term the term fixed in article 1581 has no application; the
contract is the supreme law of the contracting parties. Over and above the general law is the
special law, expressly imposed upon themselves by the contracting parties. Without these clauses
1 and 3, the contract would contain no stipulation with respect to the duration of the lease, and
then article 1581, in connection with article 1569, would necessarily be applicable. In view of
these clauses, however, it can not be said that there is no stipulation with respect to the duration
of the lease, or that, notwithstanding these clauses, article 1581, in connection with article 1569,
can be applied. If this were so, it would be necessary to hold that the lessors spoke in vain that
their words are to be disregarded a claim which can not be advanced by the plaintiffs nor
upheld by any court without citing the law which detracts all legal force from such words or
despoils them of their literal sense.
It having been demonstrated that the legal term can not be applied, there being a conventional
term, this destroys the assumption that the contract of lease was wholly terminated by the notice
given by the plaintiffs, this notice being necessary only when it becomes necessary to have
recourse to the legal term. Nor had the plaintiffs, under the contract, any right to give such
notice. It is evident that they had no intention of stipulating that they reserved the right to give
such notice. Clause 3 begins as follows: "Mr. Williamson, or whoever may succeed him as
secretary of said club, may terminate this lease whenever desired without other formality than
that of giving a month's notice. The owners of the land undertake to maintain the club as tenant

as long as the latter shall see fit." The right of the one and the obligation of the others being thus
placed in antithesis, there is something more, much more, than the inclusio unius, exclusio
alterius. It is evident that the lessors did not intend to reserve to themselves the right to rescind
that which they expressly conferred upon the lessee by establishing it exclusively in favor of the
It would be the greatest absurdity to conclude that in a contract by which the lessor has left the
termination of the lease to the will of the lessee, such a lease can or should be terminated at the
will of the lessor.
It would appear to follow, from the foregoing, that, if such is the force of the agreement, there
can be no other mode of terminating the lease than by the will of the lessee, as stipulated in this
case. Such is the conclusion maintained by the defendant in the demonstration of the first error of
law in the judgment, as alleged by him. He goes so far, under this theory, as to maintain the
possibility of a perpetual lease, either as such lease, if the name can be applied, or else as an
innominate contract, or under any other denomination, in accordance with the agreement of the
parties, which is, in fine, the law of the contract, superior to all other law, provided that there be
no agreement against any prohibitive statute, morals, or public policy.
It is unnecessary here to enter into a discussion of a perpetual lease in accordance with the law
and doctrine prior to the Civil Code now in force, and which has been operative since 1889.
Hence the judgment of the supreme court of Spain of January 2, 1891, with respect to a lease
made in 1887, cited by the defendant, and a decision stated by him to have been rendered by the
Audiencia of Pamplona in 1885 (it appears to be rather a decision by the head office of land
registration of July 1, 1885), and any other decision which might be cited based upon the
constitutions of Cataluna, according to which a lease of more than ten years is understood to
create a life tenancy, or even a perpetual tenancy, are entirely out of point in this case, in which
the subject-matter is a lease entered into under the provisions of the present Civil Code, in
accordance with the principles of which alone can this doctrine be examined.
It is not to be understood that we admit that the lease entered into was stipulated as a life tenancy,
and still less as a perpetual lease. The terms of the contract express nothing to this effect. They
do, whatever, imply this idea. If the lease could last during such time as the lessee might see fit,
because it has been so stipulated by the lessor, it would last, first, as long as the will of the lessee
that is, all his life; second, during all the time that he may have succession, inasmuch as he
who contracts does so for himself and his heirs. (Art. 1257 of the Civil Code.) The lease in
question does not fall within any of the cases in which the rights and obligations arising from a
contract can not be transmitted to heirs, either by its nature, by agreement, or by provision of
law. Furthermore, the lessee is an English association.
Usufruct is a right of superior degree to that which arises from a lease. It is a real right and
includes all the jus utendi and jus fruendi. Nevertheless, the utmost period for which a usufruct
can endure, if constituted in favor a natural person, is the lifetime of the usufructuary (art. 513,

sec. 1); and if in favor of juridical person, it can not be created for more than thirty years. (Art.
515.) If the lease might be perpetual, in what would it be distinguished from an emphyteusis?
Why should the lessee have a greater right than the usufructuary, as great as that of an
emphyteuta, with respect to the duration of the enjoyment of the property of another? Why did
they not contract for a usufruct or an emphyteusis? It was repeatedly stated in the document that
it was a lease, and nothing but a lease, which was agreed upon: "Being in the full enjoyment of
the necessary legal capacity to enter into this contract of lease . . . they have agreed upon the
lease of said estate . . . They lease to Mr. Williamson, who receives it as such. . . . The rental is
fixed at 25 pesos a month. . . . The owners bind themselves to maintain the club as tenant. . . .
Upon the foregoing conditions they make the present contract of lease. . . ." (Pp. 9, 11, and 12,
bill of exceptions.) If it is a lease, then it must be for a determinate period. (Art. 1543.) By its
very nature it must be temporary, just as by reason of its nature an emphyteusis must be
perpetual, or for an unlimited period. (Art. 1608.)
On the other hand, it can not be concluded that the termination of the contract is to be left
completely at the will of the lessee, because it has been stipulated that its duration is to be left to
his will.
The Civil Code has made provision for such a case in all kinds of obligations. In speaking in
general of obligations with a term it has supplied the deficiency of the former law with respect to
the "duration of the term when it has been left to the will of the debtor," and provides that in this
case the term shall be fixed by the courts. (Art. 1128, sec. 2.) In every contract, as laid down by
the authorities, there is always a creditor who is entitled to demand the performance, and a debtor
upon whom rests the obligation to perform the undertaking. In bilateral contracts the contracting
parties are mutually creditors and debtors. Thus, in this contract of lease, the lessee is the creditor
with respect to the rights enumerated in article 1554, and is the debtor with respect to the
obligations imposed by articles 1555 and 1561. The term within which performance of the latter
obligation is due is what has been left to the will of the debtor. This term it is which must be
fixed by the courts.
The only action which can be maintained under the terms of the contract is that by which it is
sought to obtain from the judge the determination of this period, and not the unlawful detainer
action which has been brought an action which presupposes the expiration of the term and
makes it the duty of the judge to simply decree an eviction. To maintain the latter action it is
sufficient to show the expiration of the term of the contract, whether conventional or legal; in
order to decree the relief to be granted in the former action it is necessary for the judge to look
into the character and conditions of the mutual undertakings with a view to supplying the lacking
element of a time at which the lease is to expire. In the case of a loan of money or a
commodatum of furniture, the payment or return to be made when the borrower "can
conveniently do so" does not mean that he is to be allowed to enjoy the money or to make use of
the thing indefinitely or perpetually. The courts will fix in each case, according to the
circumstances, the time for the payment or return. This is the theory also maintained by the
defendant in his demonstration of the fifth assignment of error. "Under article 1128 of the Civil

Code," thus his proposition concludes, "contracts whose term is left to the will of one of the
contracting parties must be fixed by the courts, . . . the conditions as to the term of this lease has
a direct legislative sanction," and he cites articles 1128. "In place of the ruthless method of
annihilating a solemn obligation, which the plaintiffs in this case have sought to pursue, the Code
has provided a legitimate and easily available remedy. . . . The Code has provided for the proper
disposition of those covenants, and a case can hardly arise more clearly demonstrating the
usefulness of that provision than the case at bar." (Pp. 52 and 53 of appellant's brief.)
The plaintiffs, with respect to this conclusion on the part of their opponents, only say that article
1128 "expressly refers to obligations in contracts in general, and that it is well known that a lease
is included among special contracts." But they do not observe that if contracts, simply because
special rules are provided for them, could be excepted from the provisions of the articles of the
Code relative to obligations and contracts in general, such general provisions would be wholly
without application. The system of the Code is that of establishing general rules applicable to all
obligations and contracts, and then special provisions peculiar to each species of contract. In no
part of Title VI of Book IV, which treats of the contract of lease, are there any special rules
concerning pure of conditional obligations which may be stipulated in a lease, because, with
respect to these matters, the provisions of section 1, chapter 3, Title I, on the subject of
obligations are wholly sufficient. With equal reason should we refer to section 2, which deals
with obligations with a term, in the same chapter and title, if a question concerning the term
arises out of a contract of lease, as in the present case, and within this section we find article
1128, which decides the question.
The judgment was entered below upon the theory of the expiration of a legal term which does
not exist, as the case requires that a term be fixed by the courts under the provisions of article
1128 with respect to obligations which, as is the present, are terminable at the will of the obligee.
It follows, therefore, that the judgment below is erroneous.
The judgment is reversed and the case will be remanded to the court below with directions to
enter a judgment of dismissal of the action in favor of the defendant, the Manila Lawn Tennis
Club, without special allowance as to the recovery of costs. So ordered.
Mapa and Ladd, JJ., concur.

G.R. No. L-17587

September 12, 1967


LUI SHE in her own behalf and as administratrix of the intestate estate of Wong Heng,
deceased, defendant-appellant.
Ozaeta, Gibbs & Ozaeta for defendant-appellant.



Justina Santos y Canon Faustino and her sister Lorenzo were the owners in common of a piece of
land in Manila. This parcel, with an area of 2,582.30 square meters, is located on Rizal Avenue
and opens into Florentino Torres street at the back and Katubusan street on one side. In it are two
residential houses with entrance on Florentino Torres street and the Hen Wah Restaurant with
entrance on Rizal Avenue. The sisters lived in one of the houses, while Wong Heng, a Chinese,
lived with his family in the restaurant. Wong had been a long-time lessee of a portion of the
property, paying a monthly rental of P2,620.
On September 22, 1957 Justina Santos became the owner of the entire property as her sister died
with no other heir. Then already well advanced in years, being at the time 90 years old, blind,
crippled and an invalid, she was left with no other relative to live with. Her only companions in
the house were her 17 dogs and 8 maids. Her otherwise dreary existence was brightened now and
then by the visits of Wong's four children who had become the joy of her life. Wong himself was
the trusted man to whom she delivered various amounts for safekeeping, including rentals from
her property at the corner of Ongpin and Salazar streets and the rentals which Wong himself paid
as lessee of a part of the Rizal Avenue property. Wong also took care of the payment; in her
behalf, of taxes, lawyers' fees, funeral expenses, masses, salaries of maids and security guard,
and her household expenses.
"In grateful acknowledgment of the personal services of the lessee to her," Justina Santos
executed on November 15, 1957 a contract of lease (Plff Exh. 3) in favor of Wong, covering the
portion then already leased to him and another portion fronting Florentino Torres street. The
lease was for 50 years, although the lessee was given the right to withdraw at any time from the
agreement; the monthly rental was P3,120. The contract covered an area of 1,124 square meters.

Ten days later (November 25), the contract was amended (Plff Exh. 4) so as to make it cover the
entire property, including the portion on which the house of Justina Santos stood, at an additional
monthly rental of P360. For his part Wong undertook to pay, out of the rental due from him, an
amount not exceeding P1,000 a month for the food of her dogs and the salaries of her maids.
On December 21 she executed another contract (Plff Exh. 7) giving Wong the option to buy the
leased premises for P120,000, payable within ten years at a monthly installment of P1,000. The
option, written in Tagalog, imposed on him the obligation to pay for the food of the dogs and the
salaries of the maids in her household, the charge not to exceed P1,800 a month. The option was
conditioned on his obtaining Philippine citizenship, a petition for which was then pending in the
Court of First Instance of Rizal. It appears, however, that this application for naturalization was
withdrawn when it was discovered that he was not a resident of Rizal. On October 28, 1958 she
filed a petition to adopt him and his children on the erroneous belief that adoption would confer
on them Philippine citizenship. The error was discovered and the proceedings were abandoned.
On November 18, 1958 she executed two other contracts, one (Plff Exh. 5) extending the term of
the lease to 99 years, and another (Plff Exh. 6) fixing the term of the option of 50 years. Both
contracts are written in Tagalog.
In two wills executed on August 24 and 29, 1959 (Def Exhs. 285 & 279), she bade her legatees
to respect the contracts she had entered into with Wong, but in a codicil (Plff Exh. 17) of a later
date (November 4, 1959) she appears to have a change of heart. Claiming that the various
contracts were made by her because of machinations and inducements practiced by him, she now
directed her executor to secure the annulment of the contracts.
On November 18 the present action was filed in the Court of First Instance of Manila. The
complaint alleged that the contracts were obtained by Wong "through fraud, misrepresentation,
inequitable conduct, undue influence and abuse of confidence and trust of and (by) taking
advantage of the helplessness of the plaintiff and were made to circumvent the constitutional
provision prohibiting aliens from acquiring lands in the Philippines and also of the Philippine
Naturalization Laws." The court was asked to direct the Register of Deeds of Manila to cancel
the registration of the contracts and to order Wong to pay Justina Santos the additional rent of
P3,120 a month from November 15, 1957 on the allegation that the reasonable rental of the
leased premises was P6,240 a month.
In his answer, Wong admitted that he enjoyed her trust and confidence as proof of which he
volunteered the information that, in addition to the sum of P3,000 which he said she had
delivered to him for safekeeping, another sum of P22,000 had been deposited in a joint account
which he had with one of her maids. But he denied having taken advantage of her trust in order
to secure the execution of the contracts in question. As counterclaim he sought the recovery of
P9,210.49 which he said she owed him for advances.

Wong's admission of the receipt of P22,000 and P3,000 was the cue for the filing of an amended
complaint. Thus on June 9, 1960, aside from the nullity of the contracts, the collection of various
amounts allegedly delivered on different occasions was sought. These amounts and the dates of
their delivery are P33,724.27 (Nov. 4, 1957); P7,344.42 (Dec. 1, 1957); P10,000 (Dec. 6, 1957);
P22,000 and P3,000 (as admitted in his answer). An accounting of the rentals from the Ongpin
and Rizal Avenue properties was also demanded.
In the meantime as a result of a petition for guardianship filed in the Juvenile and Domestic
Relations Court, the Security Bank & Trust Co. was appointed guardian of the properties of
Justina Santos, while Ephraim G. Gochangco was appointed guardian of her person.
In his answer, Wong insisted that the various contracts were freely and voluntarily entered into
by the parties. He likewise disclaimed knowledge of the sum of P33,724.27, admitted receipt of
P7,344.42 and P10,000, but contended that these amounts had been spent in accordance with the
instructions of Justina Santos; he expressed readiness to comply with any order that the court
might make with respect to the sums of P22,000 in the bank and P3,000 in his possession.
The case was heard, after which the lower court rendered judgment as follows:
[A]ll the documents mentioned in the first cause of action, with the exception of the first
which is the lease contract of 15 November 1957, are declared null and void; Wong Heng
is condemned to pay unto plaintiff thru guardian of her property the sum of P55,554.25
with legal interest from the date of the filing of the amended complaint; he is also ordered
to pay the sum of P3,120.00 for every month of his occupation as lessee under the
document of lease herein sustained, from 15 November 1959, and the moneys he has
consigned since then shall be imputed to that; costs against Wong Heng.
From this judgment both parties appealed directly to this Court. After the case was submitted for
decision, both parties died, Wong Heng on October 21, 1962 and Justina Santos on December 28,
1964. Wong was substituted by his wife, Lui She, the other defendant in this case, while Justina
Santos was substituted by the Philippine Banking Corporation.
Justina Santos maintained now reiterated by the Philippine Banking Corporation that the
lease contract (Plff Exh. 3) should have been annulled along with the four other contracts (Plff
Exhs. 4-7) because it lacks mutuality; because it included a portion which, at the time, was in
custodia legis; because the contract was obtained in violation of the fiduciary relations of the
parties; because her consent was obtained through undue influence, fraud and misrepresentation;
and because the lease contract, like the rest of the contracts, is absolutely simulated.
Paragraph 5 of the lease contract states that "The lessee may at any time withdraw from this
agreement." It is claimed that this stipulation offends article 1308 of the Civil Code which
provides that "the contract must bind both contracting parties; its validity or compliance cannot
be left to the will of one of them."

We have had occasion to delineate the scope and application of article 1308 in the early case of
Taylor v. Uy Tieng Piao.1 We said in that case:
Article 1256 [now art. 1308] of the Civil Code in our opinion creates no impediment to
the insertion in a contract for personal service of a resolutory condition permitting the
cancellation of the contract by one of the parties. Such a stipulation, as can be readily
seen, does not make either the validity or the fulfillment of the contract dependent upon
the will of the party to whom is conceded the privilege of cancellation; for where the
contracting parties have agreed that such option shall exist, the exercise of the option is as
much in the fulfillment of the contract as any other act which may have been the subject
of agreement. Indeed, the cancellation of a contract in accordance with conditions agreed
upon beforehand is fulfillment.2
And so it was held in Melencio v. Dy Tiao Lay 3 that a "provision in a lease contract that the
lessee, at any time before he erected any building on the land, might rescind the lease, can hardly
be regarded as a violation of article 1256 [now art. 1308] of the Civil Code."
The case of Singson Encarnacion v. Baldomar 4 cannot be cited in support of the claim of want
of mutuality, because of a difference in factual setting. In that case, the lessees argued that they
could occupy the premises as long as they paid the rent. This is of course untenable, for as this
Court said, "If this defense were to be allowed, so long as defendants elected to continue the
lease by continuing the payment of the rentals, the owner would never be able to discontinue it;
conversely, although the owner should desire the lease to continue the lessees could effectively
thwart his purpose if they should prefer to terminate the contract by the simple expedient of
stopping payment of the rentals." Here, in contrast, the right of the lessee to continue the lease or
to terminate it is so circumscribed by the term of the contract that it cannot be said that the
continuance of the lease depends upon his will. At any rate, even if no term had been fixed in the
agreement, this case would at most justify the fixing of a period 5 but not the annulment of the
Nor is there merit in the claim that as the portion of the property formerly owned by the sister of
Justina Santos was still in the process of settlement in the probate court at the time it was leased,
the lease is invalid as to such portion. Justina Santos became the owner of the entire property
upon the death of her sister Lorenzo on September 22, 1957 by force of article 777 of the Civil
Code. Hence, when she leased the property on November 15, she did so already as owner
thereof. As this Court explained in upholding the sale made by an heir of a property under
judicial administration:
That the land could not ordinarily be levied upon while in custodia legis does not mean
that one of the heirs may not sell the right, interest or participation which he has or might
have in the lands under administration. The ordinary execution of property in custodia
legis is prohibited in order to avoid interference with the possession by the court. But the

sale made by an heir of his share in an inheritance, subject to the result of the pending
administration, in no wise stands in the way of such administration.6
It is next contended that the lease contract was obtained by Wong in violation of his fiduciary
relationship with Justina Santos, contrary to article 1646, in relation to article 1941 of the Civil
Code, which disqualifies "agents (from leasing) the property whose administration or sale may
have been entrusted to them." But Wong was never an agent of Justina Santos. The relationship
of the parties, although admittedly close and confidential, did not amount to an agency so as to
bring the case within the prohibition of the law.
Just the same, it is argued that Wong so completely dominated her life and affairs that the
contracts express not her will but only his. Counsel for Justina Santos cites the testimony of Atty.
Tomas S. Yumol who said that he prepared the lease contract on the basis of data given to him by
Wong and that she told him that "whatever Mr. Wong wants must be followed."7
The testimony of Atty. Yumol cannot be read out of context in order to warrant a finding that
Wong practically dictated the terms of the contract. What this witness said was:
Q Did you explain carefully to your client, Doa Justina, the contents of this document
before she signed it?
A I explained to her each and every one of these conditions and I also told her these
conditions were quite onerous for her, I don't really know if I have expressed my opinion,
but I told her that we would rather not execute any contract anymore, but to hold it as it
was before, on a verbal month to month contract of lease.
Q But, she did not follow your advice, and she went with the contract just the same?
A She agreed first . . .
Q Agreed what?
A Agreed with my objectives that it is really onerous and that I was really right, but after
that, I was called again by her and she told me to follow the wishes of Mr. Wong Heng.



Q So, as far as consent is concerned, you were satisfied that this document was perfectly



A Your Honor, if I have to express my personal opinion, I would say she is not, because,
as I said before, she told me "Whatever Mr. Wong wants must be followed."8

Wong might indeed have supplied the data which Atty. Yumol embodied in the lease contract, but
to say this is not to detract from the binding force of the contract. For the contract was fully
explained to Justina Santos by her own lawyer. One incident, related by the same witness, makes
clear that she voluntarily consented to the lease contract. This witness said that the original term
fixed for the lease was 99 years but that as he doubted the validity of a lease to an alien for that
length of time, he tried to persuade her to enter instead into a lease on a month-to-month basis.
She was, however, firm and unyielding. Instead of heeding the advice of the lawyer, she ordered
him, "Just follow Mr. Wong Heng." 9 Recounting the incident, Atty. Yumol declared on cross
Considering her age, ninety (90) years old at the time and her condition, she is a wealthy
woman, it is just natural when she said "This is what I want and this will be done." In
particular reference to this contract of lease, when I said "This is not proper," she said
"You just go ahead, you prepare that, I am the owner, and if there is any illegality, I am
the only one that can question the illegality."10
Atty. Yumol further testified that she signed the lease contract in the presence of her close friend,
Hermenegilda Lao, and her maid, Natividad Luna, who was constantly by her side. 11 Any of
them could have testified on the undue influence that Wong supposedly wielded over Justina
Santos, but neither of them was presented as a witness. The truth is that even after giving his
client time to think the matter over, the lawyer could not make her change her mind. This
persuaded the lower court to uphold the validity of the lease contract against the claim that it was
procured through undue influence.
Indeed, the charge of undue influence in this case rests on a mere inference 12 drawn from the fact
that Justina Santos could not read (as she was blind) and did not understand the English language
in which the contract is written, but that inference has been overcome by her own evidence.
Nor is there merit in the claim that her consent to the lease contract, as well as to the rest of the
contracts in question, was given out of a mistaken sense of gratitude to Wong who, she was made
to believe, had saved her and her sister from a fire that destroyed their house during the liberation
of Manila. For while a witness claimed that the sisters were saved by other persons (the brothers
Edilberto and Mariano Sta. Ana)13 it was Justina Santos herself who, according to her own
witness, Benjamin C. Alonzo, said "very emphatically" that she and her sister would have
perished in the fire had it not been for Wong. 14 Hence the recital in the deed of conditional option
(Plff Exh. 7) that "[I]tong si Wong Heng ang siyang nagligtas sa aming dalawang magkapatid sa
halos ay tiyak na kamatayan", and the equally emphatic avowal of gratitude in the lease contract
(Plff Exh. 3).
As it was with the lease contract (Plff Exh. 3), so it was with the rest of the contracts (Plff Exhs.
4-7) the consent of Justina Santos was given freely and voluntarily. As Atty. Alonzo, testifying
for her, said:

[I]n nearly all documents, it was either Mr. Wong Heng or Judge Torres and/or both.
When we had conferences, they used to tell me what the documents should contain. But,
as I said, I would always ask the old woman about them and invariably the old woman
used to tell me: "That's okay. It's all right."15
But the lower court set aside all the contracts, with the exception of the lease contract of
November 15, 1957, on the ground that they are contrary to the expressed wish of Justina Santos
and that their considerations are fictitious. Wong stated in his deposition that he did not pay P360
a month for the additional premises leased to him, because she did not want him to, but the trial
court did not believe him. Neither did it believe his statement that he paid P1,000 as
consideration for each of the contracts (namely, the option to buy the leased premises, the
extension of the lease to 99 years, and the fixing of the term of the option at 50 years), but that
the amount was returned to him by her for safekeeping. Instead, the court relied on the testimony
of Atty. Alonzo in reaching the conclusion that the contracts are void for want of consideration.
Atty. Alonzo declared that he saw no money paid at the time of the execution of the documents,
but his negative testimony does not rule out the possibility that the considerations were paid at
some other time as the contracts in fact recite. What is more, the consideration need not pass
from one party to the other at the time a contract is executed because the promise of one is the
consideration for the other.16
With respect to the lower court's finding that in all probability Justina Santos could not have
intended to part with her property while she was alive nor even to lease it in its entirety as her
house was built on it, suffice it to quote the testimony of her own witness and lawyer who
prepared the contracts (Plff Exhs. 4-7) in question, Atty. Alonzo:
The ambition of the old woman, before her death, according to her revelation to me, was
to see to it that these properties be enjoyed, even to own them, by Wong Heng because
Doa Justina told me that she did not have any relatives, near or far, and she considered
Wong Heng as a son and his children her grandchildren; especially her consolation in life
was when she would hear the children reciting prayers in Tagalog.17
She was very emphatic in the care of the seventeen (17) dogs and of the maids who
helped her much, and she told me to see to it that no one could disturb Wong Heng from
those properties. That is why we thought of the ninety-nine (99) years lease; we thought
of adoption, believing that thru adoption Wong Heng might acquire Filipino citizenship;
being the adopted child of a Filipino citizen.18
This is not to say, however, that the contracts (Plff Exhs. 3-7) are valid. For the testimony just
quoted, while dispelling doubt as to the intention of Justina Santos, at the same time gives the
clue to what we view as a scheme to circumvent the Constitutional prohibition against the
transfer of lands to aliens. "The illicit purpose then becomes the illegal causa"19 rendering the
contracts void.

Taken singly, the contracts show nothing that is necessarily illegal, but considered collectively,
they reveal an insidious pattern to subvert by indirection what the Constitution directly prohibits.
To be sure, a lease to an alien for a reasonable period is valid. So is an option giving an alien the
right to buy real property on condition that he is granted Philippine citizenship. As this Court
said in Krivenko v. Register of Deeds:20
[A]liens are not completely excluded by the Constitution from the use of lands for
residential purposes. Since their residence in the Philippines is temporary, they may be
granted temporary rights such as a lease contract which is not forbidden by the
Constitution. Should they desire to remain here forever and share our fortunes and
misfortunes, Filipino citizenship is not impossible to acquire.
But if an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of
which the Filipino owner cannot sell or otherwise dispose of his property, 21 this to last for 50
years, then it becomes clear that the arrangement is a virtual transfer of ownership whereby the
owner divests himself in stages not only of the right to enjoy the land ( jus possidendi, jus utendi,
jus fruendi and jus abutendi) but also of the right to dispose of it ( jus disponendi) rights the
sum total of which make up ownership. It is just as if today the possession is transferred,
tomorrow, the use, the next day, the disposition, and so on, until ultimately all the rights of which
ownership is made up are consolidated in an alien. And yet this is just exactly what the parties in
this case did within the space of one year, with the result that Justina Santos' ownership of her
property was reduced to a hollow concept. If this can be done, then the Constitutional ban against
alien landholding in the Philippines, as announced in Krivenko v. Register of Deeds,22 is indeed in
grave peril.
It does not follow from what has been said, however, that because the parties are in pari delicto
they will be left where they are, without relief. For one thing, the original parties who were guilty
of a violation of the fundamental charter have died and have since been substituted by their
administrators to whom it would be unjust to impute their guilt. 23 For another thing, and this is
not only cogent but also important, article 1416 of the Civil Code provides, as an exception to
the rule on pari delicto, that "When the agreement is not illegal per se but is merely prohibited,
and the prohibition by law is designed for the protection of the plaintiff, he may, if public policy
is thereby enhanced, recover what he has paid or delivered." The Constitutional provision that
"Save in cases of hereditary succession, no private agricultural land shall be transferred or
assigned except to individuals, corporations, or associations qualified to acquire or hold lands of
the public domain in the Philippines" 24 is an expression of public policy to conserve lands for the
Filipinos. As this Court said in Krivenko:
It is well to note at this juncture that in the present case we have no choice. We are
construing the Constitution as it is and not as we may desire it to be. Perhaps the effect of
our construction is to preclude aliens admitted freely into the Philippines from owning
sites where they may build their homes. But if this is the solemn mandate of the

Constitution, we will not attempt to compromise it even in the name of amity or

equity . . . .
For all the foregoing, we hold that under the Constitution aliens may not acquire private
or public agricultural lands, including residential lands, and, accordingly, judgment is
affirmed, without costs.25
That policy would be defeated and its continued violation sanctioned if, instead of setting the
contracts aside and ordering the restoration of the land to the estate of the deceased Justina
Santos, this Court should apply the general rule of pari delicto. To the extent that our ruling in
this case conflicts with that laid down in Rellosa v. Gaw Chee Hun 26 and subsequent similar
cases, the latter must be considered as pro tanto qualified.
The claim for increased rentals and attorney's fees, made in behalf of Justina Santos, must be
denied for lack of merit.
And what of the various amounts which Wong received in trust from her? It appears that he kept
two classes of accounts, one pertaining to amount which she entrusted to him from time to time,
and another pertaining to rentals from the Ongpin property and from the Rizal Avenue property,
which he himself was leasing.
With respect to the first account, the evidence shows that he received P33,724.27 on November
8, 1957 (Plff Exh. 16); P7,354.42 on December 1, 1957 (Plff Exh. 13); P10,000 on December 6,
1957 (Plff Exh. 14) ; and P18,928.50 on August 26, 1959 (Def. Exh. 246), or a total of
P70,007.19. He claims, however, that he settled his accounts and that the last amount of
P18,928.50 was in fact payment to him of what in the liquidation was found to be due to him.
He made disbursements from this account to discharge Justina Santos' obligations for taxes,
attorneys' fees, funeral services and security guard services, but the checks (Def Exhs. 247-278)
drawn by him for this purpose amount to only P38,442.84. 27 Besides, if he had really settled his
accounts with her on August 26, 1959, we cannot understand why he still had P22,000 in the
bank and P3,000 in his possession, or a total of P25,000. In his answer, he offered to pay this
amount if the court so directed him. On these two grounds, therefore, his claim of liquidation and
settlement of accounts must be rejected.
After subtracting P38,442.84 (expenditures) from P70,007.19 (receipts), there is a difference of
P31,564 which, added to the amount of P25,000, leaves a balance of P56,564.35 28 in favor of
Justina Santos.
As to the second account, the evidence shows that the monthly income from the Ongpin property
until its sale in Rizal Avenue July, 1959 was P1,000, and that from the Rizal Avenue property, of
which Wong was the lessee, was P3,120. Against this account the household expenses and
disbursements for the care of the 17 dogs and the salaries of the 8 maids of Justina Santos were
charged. This account is contained in a notebook (Def. Exh. 6) which shows a balance of

P9,210.49 in favor of Wong. But it is claimed that the rental from both the Ongpin and Rizal
Avenue properties was more than enough to pay for her monthly expenses and that, as a matter
of fact, there should be a balance in her favor. The lower court did not allow either party to
recover against the other. Said the court:
[T]he documents bear the earmarks of genuineness; the trouble is that they were made
only by Francisco Wong and Antonia Matias, nick-named Toning, which was the way
she signed the loose sheets, and there is no clear proof that Doa Justina had authorized
these two to act for her in such liquidation; on the contrary if the result of that was a
deficit as alleged and sought to be there shown, of P9,210.49, that was not what Doa
Justina apparently understood for as the Court understands her statement to the
Honorable Judge of the Juvenile Court . . . the reason why she preferred to stay in her
home was because there she did not incur in any debts . . . this being the case, . . . the
Court will not adjudicate in favor of Wong Heng on his counterclaim; on the other hand,
while it is claimed that the expenses were much less than the rentals and there in fact
should be a superavit, . . . this Court must concede that daily expenses are not easy to
compute, for this reason, the Court faced with the choice of the two alternatives will
choose the middle course which after all is permitted by the rules of proof, Sec. 69, Rule
123 for in the ordinary course of things, a person will live within his income so that the
conclusion of the Court will be that there is neither deficit nor superavit and will let the
matter rest here.
Both parties on appeal reiterate their respective claims but we agree with the lower court that
both claims should be denied. Aside from the reasons given by the court, we think that the claim
of Justina Santos totalling P37,235, as rentals due to her after deducting various expenses, should
be rejected as the evidence is none too clear about the amounts spent by Wong for food 29
masses30 and salaries of her maids.31 His claim for P9,210.49 must likewise be rejected as his
averment of liquidation is belied by his own admission that even as late as 1960 he still had
P22,000 in the bank and P3,000 in his possession.
ACCORDINGLY, the contracts in question (Plff Exhs. 3-7) are annulled and set aside; the land
subject-matter of the contracts is ordered returned to the estate of Justina Santos as represented
by the Philippine Banking Corporation; Wong Heng (as substituted by the defendant-appellant
Lui She) is ordered to pay the Philippine Banking Corporation the sum of P56,564.35, with legal
interest from the date of the filing of the amended complaint; and the amounts consigned in court
by Wong Heng shall be applied to the payment of rental from November 15, 1959 until the
premises shall have been vacated by his heirs. Costs against the defendant-appellant.

G.R. No. L-34338 November 21, 1984



Petitioner Lourdes Valerio Lim was found guilty of the crime of estafa and was
sentenced "to suffer an imprisonment of four (4) months and one (1) day as minimum to
two (2) years and four (4) months as maximum, to indemnify the offended party in the
amount of P559.50, with subsidize imprisonment in case of insolvency, and to pay the
costs." (p. 14, Rollo)
From this judgment, appeal was taken to the then Court of Appeals which affirmed the
decision of the lower court but modified the penalty imposed by sentencing her "to suffer
an indeterminate penalty of one (1) month and one (1) day of arresto mayor as
minimum to one (1) year and one (1) day of prision correccional as maximum, to
indemnify the complainant in the amount of P550.50 without subsidiary imprisonment,
and to pay the costs of suit." (p. 24, Rollo)
The question involved in this case is whether the receipt, Exhibit "A", is a contract of
agency to sell or a contract of sale of the subject tobacco between petitioner and the
complainant, Maria de Guzman Vda. de Ayroso, thereby precluding criminal liability of
petitioner for the crime charged.
The findings of facts of the appellate court are as follows:
... The appellant is a businesswoman. On January 10, 1966, the appellant
went to the house of Maria Ayroso and proposed to sell Ayroso's tobacco.
Ayroso agreed to the proposition of the appellant to sell her tobacco
consisting of 615 kilos at P1.30 a kilo. The appellant was to receive the
overprice for which she could sell the tobacco. This agreement was made
in the presence of plaintiff's sister, Salud G. Bantug. Salvador Bantug drew
the document, Exh. A, dated January 10, 1966, which reads:

To Whom It May Concern:

This is to certify that I have received from Mrs. Maria de
Guzman Vda. de Ayroso. of Gapan, Nueva Ecija, six
hundred fifteen kilos of leaf tobacco to be sold at Pl.30 per
kilo. The proceed in the amount of Seven Hundred Ninety
Nine Pesos and 50/100 (P 799.50) will be given to her as
soon as it was sold.
This was signed by the appellant and witnessed by the complainant's
sister, Salud Bantug, and the latter's maid, Genoveva Ruiz. The appellant
at that time was bringing a jeep, and the tobacco was loaded in the jeep
and brought by the appellant. Of the total value of P799.50, the appellant
had paid to Ayroso only P240.00, and this was paid on three different
times. Demands for the payment of the balance of the value of the
tobacco were made upon the appellant by Ayroso, and particularly by her
sister, Salud Bantug. Salud Bantug further testified that she had gone to
the house of the appellant several times, but the appellant often eluded
her; and that the "camarin" the appellant was empty. Although the
appellant denied that demands for payment were made upon her, it is a
fact that on October 19, 1966, she wrote a letter to Salud Bantug which
reads as follows:
Dear Salud,
Hindi ako nakapunta dian noon a 17 nitong nakaraan, dahil
kokonte pa ang nasisingil kong pera, magintay ka hanggang
dito sa linggo ito at tiak na ako ay magdadala sa iyo. Gosto
ko Salud ay makapagbigay man lang ako ng marami para
hindi masiadong kahiyahiya sa iyo. Ngayon kung gosto mo
ay kahit konte muna ay bibigyan kita. Pupunta lang kami ni
Mina sa Maynila ngayon. Salud kung talagang kailangan mo
ay bukas ay dadalhan kita ng pera.
Medio mahirap ang maningil sa palengke ng Cabanatuan
dahil nagsisilipat ang mga suki ko ng puesto. Huwag kang
mabahala at tiyak na babayaran kita.
Patnubayan tayo ng mahal na panginoon Dios. (Exh. B).
Pursuant to this letter, the appellant sent a money order for P100.00 on
October 24, 1967, Exh. 4, and another for P50.00 on March 8, 1967; and

she paid P90.00 on April 18, 1967 as evidenced by the receipt Exh. 2,
dated April 18, 1967, or a total of P240.00. As no further amount was paid,
the complainant filed a complaint against the appellant for estafa. (pp. 14,
15, 16, Rollo)
In this petition for review by certiorari, Lourdes Valerio Lim poses the following
questions of law, to wit:
1. Whether or not the Honorable Court of Appeals was legally right in
holding that the foregoing document (Exhibit "A") "fixed a period" and "the
obligation was therefore, immediately demandable as soon as the tobacco
was sold" (Decision, p. 6) as against the theory of the petitioner that the
obligation does not fix a period, but from its nature and the circumstances
it can be inferred that a period was intended in which case the only action
that can be maintained is a petition to ask the court to fix the duration
2. Whether or not the Honorable Court of Appeals was legally right in
holding that "Art. 1197 of the New Civil Code does not apply" as against
the alternative theory of the petitioner that the fore. going receipt (Exhibit
"A") gives rise to an obligation wherein the duration of the period depends
upon the will of the debtor in which case the only action that can be
maintained is a petition to ask the court to fix the duration of the period;
3. Whether or not the honorable Court of Appeals was legally right in
holding that the foregoing receipt is a contract of agency to sell as against
the theory of the petitioner that it is a contract of sale. (pp. 3-4, Rollo)
It is clear in the agreement, Exhibit "A", that the proceeds of the sale of the tobacco
should be turned over to the complainant as soon as the same was sold, or, that the
obligation was immediately demandable as soon as the tobacco was disposed of.
Hence, Article 1197 of the New Civil Code, which provides that the courts may fix the
duration of the obligation if it does not fix a period, does not apply.
Anent the argument that petitioner was not an agent because Exhibit "A" does not say
that she would be paid the commission if the goods were sold, the Court of Appeals
correctly resolved the matter as follows:
... Aside from the fact that Maria Ayroso testified that the appellant asked
her to be her agent in selling Ayroso's tobacco, the appellant herself
admitted that there was an agreement that upon the sale of the tobacco
she would be given something. The appellant is a businesswoman, and it

is unbelievable that she would go to the extent of going to Ayroso's house

and take the tobacco with a jeep which she had brought if she did not
intend to make a profit out of the transaction. Certainly, if she was doing a
favor to Maria Ayroso and it was Ayroso who had requested her to sell her
tobacco, it would not have been the appellant who would have gone to the
house of Ayroso, but it would have been Ayroso who would have gone to
the house of the appellant and deliver the tobacco to the appellant. (p. 19,
The fact that appellant received the tobacco to be sold at P1.30 per kilo and the
proceeds to be given to complainant as soon as it was sold, strongly negates transfer of
ownership of the goods to the petitioner. The agreement (Exhibit "A') constituted her as
an agent with the obligation to return the tobacco if the same was not sold.
ACCORDINGLY, the petition for review on certiorari is dismissed for lack of merit. With

G.R. No. L-22558

May 31, 1967

Rosauro Alvarez and Ernani Cruz Pao for respondent.
REYES, J.B.L., J.:



Petition for certiorari to review a judgment of the Court of Appeals, in its CA-G.R. No. 28249R, affirming with modification, an amendatory decision of the Court of First Instance of Manila,
in its Civil Case No. 36303, entitled "Philippine Sugar Estates Development Co., Ltd., plaintiff,
versus J. M. Tuason & Co., Inc. and Gregorio Araneta, Inc., defendants."
As found by the Court of Appeals, the facts of this case are:
J. M. Tuason & Co., Inc. is the owner of a big tract land situated in Quezon City, otherwise
known as the Sta. Mesa Heights Subdivision, and covered by a Torrens title in its name. On July
28, 1950, through Gregorio Araneta, Inc., it (Tuason & Co.) sold a portion thereof with an area of
43,034.4 square meters, more or less, for the sum of P430,514.00, to Philippine Sugar Estates
Development Co., Ltd. The parties stipulated, among in the contract of purchase and sale with
mortgage, that the buyer will
Build on the said parcel land the Sto. Domingo Church and Convent
while the seller for its part will
Construct streets on the NE and NW and SW sides of the land herein sold so that the
latter will be a block surrounded by streets on all four sides; and the street on the NE side
shall be named "Sto. Domingo Avenue;"
The buyer, Philippine Sugar Estates Development Co., Ltd., finished the construction of Sto.
Domingo Church and Convent, but the seller, Gregorio Araneta, Inc., which began constructing
the streets, is unable to finish the construction of the street in the Northeast side named (Sto.
Domingo Avenue) because a certain third-party, by the name of Manuel Abundo, who has been
physically occupying a middle part thereof, refused to vacate the same; hence, on May 7, 1958,
Philippine Sugar Estates Development Co., Lt. filed its complaint against J. M. Tuason & Co.,
Inc., and instance, seeking to compel the latter to comply with their obligation, as stipulated in
the above-mentioned deed of sale, and/or to pay damages in the event they failed or refused to
perform said obligation.
Both defendants J. M. Tuason and Co. and Gregorio Araneta, Inc. answered the complaint, the
latter particularly setting up the principal defense that the action was premature since its
obligation to construct the streets in question was without a definite period which needs to he
fixed first by the court in a proper suit for that purpose before a complaint for specific
performance will prosper.
The issues having been joined, the lower court proceeded with the trial, and upon its termination,
it dismissed plaintiff's complaint (in a decision dated May 31, 1960), upholding the defenses
interposed by defendant Gregorio Araneta, Inc.1wph1.t
Plaintiff moved to reconsider and modify the above decision, praying that the court fix a period
within which defendants will comply with their obligation to construct the streets in question.

Defendant Gregorio Araneta, Inc. opposed said motion, maintaining that plaintiff's complaint did
not expressly or impliedly allege and pray for the fixing of a period to comply with its obligation
and that the evidence presented at the trial was insufficient to warrant the fixing of such a period.
On July 16, 1960, the lower court, after finding that "the proven facts precisely warrants the
fixing of such a period," issued an order granting plaintiff's motion for reconsideration and
amending the dispositive portion of the decision of May 31, 1960, to read as follows:
WHEREFORE, judgment is hereby rendered giving defendant Gregorio Araneta, Inc., a
period of two (2) years from notice hereof, within which to comply with its obligation
under the contract, Annex "A".
Defendant Gregorio Araneta, Inc. presented a motion to reconsider the above quoted order,
which motion, plaintiff opposed.
On August 16, 1960, the lower court denied defendant Gregorio Araneta, Inc's. motion; and the
latter perfected its appeal Court of Appeals.
In said appellate court, defendant-appellant Gregorio Araneta, Inc. contended mainly that the
relief granted, i.e., fixing of a period, under the amendatory decision of July 16, 1960, was not
justified by the pleadings and not supported by the facts submitted at the trial of the case in the
court below and that the relief granted in effect allowed a change of theory after the submission
of the case for decision.
Ruling on the above contention, the appellate court declared that the fixing of a period was
within the pleadings and that there was no true change of theory after the submission of the case
for decision since defendant-appellant Gregorio Araneta, Inc. itself squarely placed said issue by
alleging in paragraph 7 of the affirmative defenses contained in its answer which reads
7. Under the Deed of Sale with Mortgage of July 28, 1950, herein defendant has a
reasonable time within which to comply with its obligations to construct and complete
the streets on the NE, NW and SW sides of the lot in question; that under the
circumstances, said reasonable time has not elapsed;
Disposing of the other issues raised by appellant which were ruled as not meritorious and which
are not decisive in the resolution of the legal issues posed in the instant appeal before us, said
appellate court rendered its decision dated December 27, 1963, the dispositive part of which
IN VIEW WHEREOF, judgment affirmed and modified; as a consequence, defendant is
given two (2) years from the date of finality of this decision to comply with the obligation
to construct streets on the NE, NW and SW sides of the land sold to plaintiff so that the
same would be a block surrounded by streets on all four sides.

Unsuccessful in having the above decision reconsidered, defendant-appellant Gregorio Araneta,

Inc. resorted to a petition for review by certiorari to this Court. We gave it due course.
We agree with the petitioner that the decision of the Court of Appeals, affirming that of the Court
of First Instance is legally untenable. The fixing of a period by the courts under Article 1197 of
the Civil Code of the Philippines is sought to be justified on the basis that petitioner (defendant
below) placed the absence of a period in issue by pleading in its answer that the contract with
respondent Philippine Sugar Estates Development Co., Ltd. gave petitioner Gregorio Araneta,
Inc. "reasonable time within which to comply with its obligation to construct and complete the
streets." Neither of the courts below seems to have noticed that, on the hypothesis stated, what
the answer put in issue was not whether the court should fix the time of performance, but
whether or not the parties agreed that the petitioner should have reasonable time to perform its
part of the bargain. If the contract so provided, then there was a period fixed, a "reasonable
time;" and all that the court should have done was to determine if that reasonable time had
already elapsed when suit was filed if it had passed, then the court should declare that petitioner
had breached the contract, as averred in the complaint, and fix the resulting damages. On the
other hand, if the reasonable time had not yet elapsed, the court perforce was bound to dismiss
the action for being premature. But in no case can it be logically held that under the plea above
quoted, the intervention of the court to fix the period for performance was warranted, for Article
1197 is precisely predicated on the absence of any period fixed by the parties.
Even on the assumption that the court should have found that no reasonable time or no period at
all had been fixed (and the trial court's amended decision nowhere declared any such fact) still,
the complaint not having sought that the Court should set a period, the court could not proceed to
do so unless the complaint in as first amended; for the original decision is clear that the
complaint proceeded on the theory that the period for performance had already elapsed, that the
contract had been breached and defendant was already answerable in damages.
Granting, however, that it lay within the Court's power to fix the period of performance, still the
amended decision is defective in that no basis is stated to support the conclusion that the period
should be set at two years after finality of the judgment. The list paragraph of Article 1197 is
clear that the period can not be set arbitrarily. The law expressly prescribes that
the Court shall determine such period as may under the circumstances been probably
contemplated by the parties.
All that the trial court's amended decision (Rec. on Appeal, p. 124) says in this respect is that
"the proven facts precisely warrant the fixing of such a period," a statement manifestly
insufficient to explain how the two period given to petitioner herein was arrived at.
It must be recalled that Article 1197 of the Civil Code involves a two-step process. The Court
must first determine that "the obligation does not fix a period" (or that the period is made to
depend upon the will of the debtor)," but from the nature and the circumstances it can be inferred

that a period was intended" (Art. 1197, pars. 1 and 2). This preliminary point settled, the Court
must then proceed to the second step, and decide what period was "probably contemplated by the
parties" (Do., par. 3). So that, ultimately, the Court can not fix a period merely because in its
opinion it is or should be reasonable, but must set the time that the parties are shown to have
intended. As the record stands, the trial Court appears to have pulled the two-year period set in
its decision out of thin air, since no circumstances are mentioned to support it. Plainly, this is not
warranted by the Civil Code.
In this connection, it is to be borne in mind that the contract shows that the parties were fully
aware that the land described therein was occupied by squatters, because the fact is expressly
mentioned therein (Rec. on Appeal, Petitioner's Appendix B, pp. 12-13). As the parties must have
known that they could not take the law into their own hands, but must resort to legal processes in
evicting the squatters, they must have realized that the duration of the suits to be brought would
not be under their control nor could the same be determined in advance. The conclusion is thus
forced that the parties must have intended to defer the performance of the obligations under the
contract until the squatters were duly evicted, as contended by the petitioner Gregorio Araneta,
The Court of Appeals objected to this conclusion that it would render the date of performance
indefinite. Yet, the circumstances admit no other reasonable view; and this very indefiniteness is
what explains why the agreement did not specify any exact periods or dates of performance.
It follows that there is no justification in law for the setting the date of performance at any other
time than that of the eviction of the squatters occupying the land in question; and in not so
holding, both the trial Court and the Court of Appeals committed reversible error. It is not denied
that the case against one of the squatters, Abundo, was still pending in the Court of Appeals
when its decision in this case was rendered.
In view of the foregoing, the decision appealed from is reversed, and the time for the
performance of the obligations of petitioner Gregorio Araneta, Inc. is hereby fixed at the date
that all the squatters on affected areas are finally evicted therefrom.
Costs against respondent Philippine Sugar Estates Development, Co., Ltd. So ordered.

G.R. No. L-55480 June 30, 1987

HON. HAROLD M. HERNANDO, In his capacity as Presiding Judge, Court of
Instance of Abra, Second Judicial District, Branch I, ANTONIO CO and ELSA CO,

On 17 June 1975, a five-year Contract of Lease

1 was executed between petitioner Pacifica Millare as lessor

and private respondent Elsa Co, married to Antonio Co, as lessee. Under the written agreement, which was scheduled to expire on 31 May
1980, the lessor-petitioner agreed to rent out to thelessee at a monthly rate of P350.00 the "People's Restaurant", a commercial
establishment located at the corner of McKinley and Pratt Streets in Bangued, Abra.
The present dispute arose from events which transpired during the months of May and July in 1980. According to the Co spouses, sometime
during the last week of May 1980, the lessor informed them that they could continue leasing the People's Restaurant so long as they were
amenable to paying creased rentals of P1,200.00 a month. In response, a counteroffer of P700.00 a month was made by the Co spouses. At
this point, the lessor allegedly stated that the amount of monthly rentals could be resolved at a later time since "the matter is simple among
us", which alleged remark was supposedly taken by the spouses Co to mean that the Contract of Lease had been renewed, prompting them

In contrast, the lessor flatly

denied ever having considered, much less offered, a renewal of the Contract of Lease.
to continue occupying the subject premises and to forego their search for a substitute place to rent.

The variance in versions notwithstanding, the record shows that on 22 July 1980, Mrs. Millare wrote the
Co spouses requesting them to vacate the leased premises as she had no intention of renewing the
Contract of Lease which had, in the meantime, already expirecl. 3 In reply, the Co spouses reiterated their
unwillingness to pay the Pl,200.00 monthly rentals supposedly sought bv Mrs. Millare which they
considered "highly excessive, oppressive and contrary to existing laws". They also signified their intention
to deposit the amount of rentals in court, in view of Mrs. Millare's refusal to accept their counter-offer. 4
Another letter of demand from Mrs. Millare was received on 28 July 1980 by the Co spouses, who
responded by depositing the rentals for June and July (at 700.00 a month) in court.
On 30 August 1980, a Saturday, the Co spouses jumped the gun, as it were, and filed a Complaint 5
(docketed as Civil Case No. 1434) with the then Court of First Instance of Abra against Mrs. Millare and
seeking judgment (a) ordering the renewal of the Contract of Lease at a rental rate of P700.00 a nionth
and for a period of ten years, (b) ordering the defendant to collect the sum of P1,400.00 deposited by
plaintiffs with the court, and (c) ordering the defendant to pay damages in the amount of P50,000.00. The
following Monday, on 1 September 1980, Mrs. Millare filed an ejectment case against the Co spouses in
the Municipal Court of Bangued, Abra, docketed as Civil Case No. 661. The spouses Co, defendants
therein, sut)sequently set up lis pendens as a Civil Case No. 661. The spouses Co, defendants therein,
subsequently set up lis pendens as a defense against the complaint for ejectment.
Mrs. Millare, defendant in Civil Case No. 1434, countered with an Omnibus Motion to Dismiss 6 rounded
on (a) lack of cause of action due to plaintiffs' failure to establish a valid renewal of the Contract of Lease,
and (b) lack of jurisdiction by the trial court over the complaint for failure of plaintiffs to secure a

certification from the Lupong Tagapayapa of the barangay wherein both disputants reside attesting that
no amicable settlement between them had been reached despite efforts to arrive at one, as required by
Section 6 of Presidential Decree No. 1508. The Co spouses opposed the motion to dismiss. 7
In an Order dated 15 October 1980, respondent judge denied the motion to dismiss and ordered the
renewal of the Contract of Lease. Furthermore plaintiffs were allowed to deposit all accruing monthly
rentals in court, while defendant Millare was directed to submit her answer to the complaint. 8 A motion for
reconsideration 9 was subsequently filed which, however, was likewise denied. 10 Hence, on 13 November 1980,
Mrs. Millare filed the instant Petition for Certiorari, Prohibition and Mandamus, seeking injunctive relief from the abovementioned orders. This
Court issued a temporary restraining order on 21 November 1980 enjoining respondent, judge from conducting further proceedings in Civil
Case No. 1434. 11 Apparently, before the temporary restraining order could be served on the respondent judge, he rendered a "Judgment by
Default" dated 26 November 1980 ordering the renewal of the lease contract for a term of 5 years counted from the expiration date of the
original lease contract, and fixing monthly rentals thereunder at P700.00 a month, payable in arrears. On18 March 1981, this Court gave due
course to the Petition for Certiorari, Prohibition and Mandamus. 12
Two issues are presented for resolution: (1) whether or not the trial court acquired jurisdiction over Civil Case No. 1434; and (2) whether or
not private respondents have a valid cause of action against petitioner.
Turning to the first issue, petitioner's attack on the jurisdiction of the trial court must fail, though for reasons different from those cited by the
respondent judge. 13 We would note firstly that the conciliation procedure required under P.D. 1508 is not a jurisdictional requirement in the
sense that failure to have prior recourse to such procedure would not deprive a court of its jurisdiction either over the subject matter or over
the person of the defendant.14 Secondly, the acord shows that two complaints were submitted to the barangay authorities for conciliation
one by petitioner for ejectment and the other by private respondents for renewal of the Contract of Lease. It appears further that both
complaints were, in fact, heard by the Lupong Tagapayapa in the afternoon of 30 August 1980. After attempts at conciliation had proven
fruitless, Certifications to File Action authorizing the parties to pursue their respective claims in court were then issued at 5:20 p.m. of that
same aftemoon, as attested to by the Barangay Captain in a Certification presented in evidence by petitioner herself. 15
Petitioner would, nonetheless, assail the proceedings in the trial court on a technicaety, i.e., private respondents allegedly filed their
complaint at 4:00 p.m. of 30 August 1980, or one hour and twenty minutes before the issuance of the requisite certification by the Lupng
Tagapayapa. The defect in procedure admittedly initially present at that particular moment when private respondents first filed the complaint
in the trial court, was cured by the subsequent issuance of the Certifications to File Action by the barangay Lupong Tagapayapa Such
certifications in any event constituted substantial comphance with the requirement of P.D. 1508.
We turn to the second issue, that is, whether or not the complaint in Civil Case No. 1434 filed by the respondent Co spouses claiming
renewal of the contract of lease stated a valid cause of action. Paragraph 13 of the Contract of Lease reads as follows:
13. This contract of lease is subject to the laws and regulations ofthe goverrunent; and that this contract of lease may
be renewed after a period of five (5) years under the terms and conditions as will be mutually agreed upon by the
parties at the time of renewal; ... (Emphasis supplied.)
The respondent judge, in his Answer and Comment to the Petition, urges that under paragraph 13 quoted above.
there was already a consummated and finished mutual agreement of the parties to renew the contract of lease after
five years; what is only left unsettled between the parties to the contract of lease is the amount of the monthly rental;
the lessor insists Pl,200 a month, while the lessee is begging P700 a month which doubled the P350 monthly rental
under the original contract .... In short, the lease contract has never expired because paragraph 13 thereof had
expressly mandated that it is renewable. ... 16
In the "Judgment by Default" he rendered, the respondent Judge elaborated his views obviously highly emotional in character in the
following extraordinary tatements:
However, it is now the negative posture of the defendant-lessor to block, reject and refuse to renew said lease contract.
It is the defendant-lessor's assertion and position that she can at the mere click of her fingers, just throw-out the
plaintiffs-lessees from the leased premises and any time after the original term of the lease contract had already
expired; This negative position of the defendantlessor, to the mind of this Court does not conform to the principles and
correct application of the philosophy underlying the law of lease; for indeed, the law of lease is impressed with public
interest, social justice and equity; reason for which, this Court cannot sanction lot owner's business and commercial
speculations by allowing them with "unbridled discretion" to raise rentals even to the extent of "extraordinary
gargantuan proportions, and calculated to unreasonably and unjustly eject the helpless lessee because he cannot
afford said inflated monthly rental and thereby said lessee is placed without any alternative, except to surrender and
vacate the premises mediately,-" Many business establishments would be closed and the public would directly suffer
the direct consequences; Nonetheless, this is not the correct concept or perspective the law of lease, that is, to place

the lessee always at the mercy of the lessor's "Merchant of Venice" and to agit the latter's personal whims and
caprices; the defendant-lessor's hostile attitude by imposing upon the lessee herein an "unreasonable and
extraordinary gargantuan monthly rental of P1,200.00", to the mind of this Court, is "fly-by night unjust enrichment" at
the expense of said lessees; but, no Man should unjustly enrich himself at the expense of another; under these facts
and circumstances surrounding this case, the action therefore to renew the lease contract! is " tenable" because it falls
squarely within the coverage and command of Articles 1197 and 1670 of the New Civil Code, to wit:
xxx xxx xxx
The term "to be renewed" as expressly stipulated by the herein parties in the original contract of lease means that the
lease may be renewed for another term of five (5) years; its equivalent to a promise made by the lessor to the lessee,
and as a unilateral stipulation, obliges the lessor to fulfill her promise; of course the lessor is free to comply and honor
her commitment or back-out from her promise to renew the lease contract; but, once expressly stipulated, the lessor
shall not be allowed to evade or violate the obligation to renew the lease because, certainly, the lessor may be held
hable for damages caused to the lessee as a consequence of the unjustifiable termination of the lease or renewal of
the same; In other words, the lessor is guilty of breach of contract: Since the original lease was fixed for five (5) years,
it follows, therefore, that the lease contract is renewable for another five (5) years and the lessee is not required before
hand to give express notice of this fact to the lessor because it was expressly stipulated in the original lease contract to
be renewed; Wherefore, the bare refusal of the lessor to renew the lease contract unless the monthly rental is
P1,200.00 is contrary to law, morals, good customs, public policy, justice and equity because no one should unjustly
enrich herself at the expense of another. Article 1197 and 1670 of the New Civil Code must therefore govern the case
at bar and whereby this Court is authorized to fix the period thereof by ordering the renewal of the lease contract to
another fixed term of five (5) years. 17
Clearly, the respondent judge's grasp of both the law and the Enghsh language is tenuous at best. We are otherwise unable to comprehend
how he arrived at the reading set forth above. Paragraph 13 of the Contract of Lease can only mean that the lessor and lessee may agree to
renew the contract upon their reaching agreement on the terms and conditions to be embodied in such renewal contract. Failure to reach
agreement on the terms and conditions of the renewal contract will of course prevent the contract from being renewed at all. In the instant
case, the lessor and the lessee conspicuously failed to reach agreement both on the amount of the rental to be payable during the renewal
term, and on the term of the renewed contract.
The respondent judge cited Articles 1197 and 1670 of the Civil Code to sustain the "Judgment by Default" by which he ordered the renewal of
the lease for another term of five years and fixed monthly rentals thereunder at P700.00 a month. Article 1197 of the Civil Code provides as
If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was
intended, the courts may fix the duration thereof.
The courts shall also fix the duration of the period when it depends upon the will of the debtor.
In every case, the courts shall determine such period as may, under the circumstances, have been probably
contemplated by the parties. Once fixed by the courts, the period cannot be changed by them. (Emphasis supplied.)
The first paragraph of Article 1197 is clearly inapplicable, since the Contract of Lease did in fact fix an original period of five years, which had
expired. It is also clear from paragraph 13 of the Contract of Lease that the parties reserved to themselves the faculty of agreeing upon the
period of the renewal contract. The second paragraph of Article 1197 is equally clearly inapplicable since the duration of the renewal period
was not left to the wiu of the lessee alone, but rather to the will of both the lessor and the lessee. Most importantly, Article 1197 applies only
where a contract of lease clearly exists. Here, the contract was not renewed at all, there was in fact no contract at all the period of which
could have been fixed.
Article 1670 of the Civil Code reads thus:
If at the end of the contract the lessee should continue enjoying the thing left for 15 days with the acquiescence of the
lessor and unless a notice to the contrary by either party has previously been given. It is understood that there is an
implied new lease, not for the period of the original contract but for the time established in Articles 1682 and 1687. The
ther terms of the original contract shall be revived. (Emphasis suplied.)
The respondents themselves, public and private, do not pretend that the continued occupancy of the leased premises after 31 May 1980, the
date of expiration of the contract, was with the acquiescence of the lessor. Even if it be assumed that tacite reconduccion had occurred, the
implied new lease could not possibly have a period of five years, but rather would have been a month-to-month lease since the rentals
(under the original contract) were payable on a monthly basis. At the latest, an implied new lease (had one arisen) would have expired as of
the end of July 1980 in view of the written demands served by the petitioner upon the private respondents to vacate the previously leased

It follows that the respondent judge's decision requiring renewal of the lease has no basis in law or in fact. Save in the limited and
exceptional situations envisaged inArticles ll97 and 1670 of the Civil Code, which do not obtain here, courts have no authority to prescribe
the terms and conditions of a contract for the parties. As pointed out by Mr. Justice J.B.L. Reyes in Republic vs. Philippine Long Distance
Telephone,Co., 18
[P]arties cannot be coerced to enter into a contract where no agreement is had between them as to the principal terms
and conditions of the contract. Freedom to stipulate such terms and conditions is of the essence of our contractual
system, and by express provision of the statute, a contract may be annulled if tainted by violence, intimidation or undue
influence (Article 1306, 1336, 1337, Civil Code of the Philippines).
Contractual terms and conditions created by a court for two parties are a contradiction in terms. If they are imposed by a judge who draws
upon his own private notions of what morals, good customs, justice, equity and public policy" demand, the resulting "agreement" cannot, by
definition, be consensual or contractual in nature. It would also follow that such coerced terms and conditions cannot be the law as between
the parties themselves. Contracts spring from the volition of the parties. That volition cannot be supplied by a judge and a judge who
pretends to do so, acts tyrannically, arbitrarily and in excess of his jurisdiction. 19
WHEREFORE, the Petition for Certiorari, Prohibition and mandamus is granted. The Orders of the respondent judge in Civil Case No. 1434
dated 26 September 1980 (denying petitioner's motion to dismiss) and 4 November 1980 (denying petitioner's motion for reconsideration),
and the "Judgment by Default" rendered by the respondent judge dated 26 November 1980, are hereby annulled and set aside and Civil
Case No. 1434 is hereby dismissed. The temporary restraining order dated 21 November 1980 issued by this ourt, is hereby made
permanent. No pronouncement as to costs.