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G.R. No.

L-44349 October 29, 1976 Respondent pray of the Rizal court of first instance that "after due trial, this Honorable Court
render judgment modifying the terms and conditions of the contract ... by fixing the proer
JESUS V. OCCENA and EFIGENIA C. OCCENA, petitioners, shares that shouls pertain to the herein parties out of the gross proceeds from the sales of
vs. subdivided lots of subjects subdivision".
HON. RAMON V. JABSON, Presiding Judge of the Court Of First Instance of Rizal,
Branch XXVI; COURT OF APPEALS and TROPICAL HOMES, INC., respondents. Petitioners moved to dismiss the complaint principally for lack of cause of action, and upon
denial thereof and of reconsideration by the lower court elevated the matter on certiorari to
Occena Law Office for petitioners. respondent Court of Appeals.

Serrano, Diokno & Serrano for respondents. Respondent court in its questioned resolution of June 28, 1976 set aside the preliminary
injunction previously issued by it and dimissed petition on the ground that under Article 1267
of the Civil Code which provides that

ART. 1267. When the service has become so difficult as to be manifestly
TEEHANKEE, J.: beyond the contemplation of the parties, the obligor may also be released
therefrom, in whole or in part. 1
The Court reverses the Court of Appeals appealed resolution. The Civil Code authorizes the
release of an obligor when the service has become so difficult as to be manifestly beyond the ... a positive right is created in favor of the obligor to be released from the
contemplation of the parties but does not authorize the courts to modify or revise the performance of an obligation in full or in part when its performance 'has
subdivision contract between the parties or fix a different sharing ratio from that contractually become so difficult as to be manifestly beyond the contemplation of the
stipulated with the force of law between the parties. Private respondent's complaint for parties.
modification of the contract manifestly has no basis in law and must therefore be dismissed for
failure to state a cause of action. On February 25, 1975 private respondent Tropical Homes,
Inc. filed a complaint for modification of the terms and conditions of its subdivision contract Hence, the petition at abar wherein petitioners insist that the worldwide increase inprices cited
with petitioners (landowners of a 55,330 square meter parcel of land in Davao City), making by respondent does not constitute a sufficient casue of action for modification of the
the following allegations: subdivision contrct. After receipt of respondent's comment, the Court in its Resolution of
September 13, 1976 resolved to treat the petition as special civil actionand declared the case
submitted for decision.
"That due to the increase in price of oil and its derivatives and the concomitant worldwide
spiralling of prices, which are not within the control of plaintiff, of all commodities including
basis raw materials required for such development work, the cost of development has risen to The petition must be granted.
levels which are unanticipated, unimagined and not within the remotest contemplation of the
parties at the time said agreement was entered into and to such a degree that the conditions and While respondent court correctly cited in its decision the Code Commission's report giving the
factors which formed the original basis of said contract, Annex 'A', have been totally changed; rationale for Article 1267 of the Civil Code, to wit;
'That further performance by the plaintiff under the contract.
The general rule is that impossibility of performance releases the obligor.
That further performance by the plaintiff under the contract,Annex 'S', will However, it is submitted that when the service has become so difficult as
result in situation where defendants would be unustly enriched at the to be manifestly beyond the contemplation of the parties, the court should
expense of the plaintiff; will cause an inequitous distribution of proceeds be authorized to release the obligor in whole or in part. The intention of
from the sales of subdivided lots in manifest actually result in the unjust the parties should govern and if it appears that the service turns out to be
and intolerable exposure of plaintiff to implacable losses, all such so difficult as have been beyond their contemplation, it would be doing
situations resulting in an unconscionable, unjust and immoral situation violence to that intention to hold the obligor still responsible. ... 2
contrary to and in violation of the primordial concepts of good faith,
fairness and equity which should pervade all human relations. It misapplied the same to respondent's complaint.

Under the subdivision contract, respondent "guaranteed (petitioners as landowners) as the If respondent's complaint were to be released from having to comply with the subdivision
latter's fixed and sole share and participation an amount equivalent to forty (40%) percent of contract, assuming it could show at the trial that the service undertaken contractually by it had
all cash receifpts fromthe sale of the subdivision lots" "become so difficult as to be manifestly beyond the contemplation of the parties", then
respondent court's upholding of respondet's complaint and dismissal of the petition would be
justifiable under the cited codal article. Without said article, respondent would remain bound

1958. Manila-Canlubang and Sta. as assignee of Biñan P836. the courts cannot even in equity grant the that such approval was subject to relief sought. Transportation Company for the sum of FRANCISCO C. L-23546 August 29. the defendants The undisputed facts are recounted by the Court of Appeals assured the plaintiff that the lease rentals through then Associate Justice Salvador Esguerra thus: . A final procedural note.R. The defendants This is an appeal by certiorari from a judgment of the Court neither refunded the deductions nor paid of Appeals dated August 31. claiming that the contract of lease would be suspended only if the defendants could not operate Domingo E. or a total of P1. B- Where the remedy of appeal would not. Company against the Biñan vs. This deduction was based on the ground that ACCORDINGLY. Concordia & V. But respondent's complaint seeks not release from the and to the Batangas Transportation subdivision contract but that the court "render judgment I Company its certificate of public modifying the terms and Conditions of the Contract by fixing convenience over the line known as the proper shares that should pertain to the herein parties out Manila-Batangas Wharf. The cited article does not grant the five years.92 amounted to a fraudulent preference in the insolvency proceedings as whatever judgment might have been rendered in favor of any of the MAKASIAR.' insolvent in Special Proceedings No. and Francisco C. to commence from the approval or to fix the division of shares between the parties as of the lease contract by the Public contractually stipulated with the force of law between the Service Commission. notwithstanding demands therefor made from time to time.by its contract under the theretofore prevailing doctrine that On January 20. 1956. the plaintiff Biñan within the recognized exception that certiorari will lie when Transportation Company was declared appeal would not prove to be a speedy and adequate remedy. 3 since in case a party desires Laguna-Tayabas Bus Company at a to be excuse from performance in the event of such monthly rental of P2..:p lessees should have been filed as a claim in said proceedings. for a period of subject subdivision". so as to substitute its own terms for those covenanted the Public Service Commission by the parties themselves. Manabat was patently erroneous order maintaining respondent's baseless appointed as its assignee. and that in Civil Case No. Respondent cites the general rule that an erroneous order denying a motion to dismiss is interlocutory and should not be corrected by certiorari but by Sometime after the execution of the lease appeal in due course. 696 of the Court of First G. which WE AFFIRM. renewable for another similar courts this authority to remake. modify or revise the contract period. petitioners. No. A. From time to action and compelling petitioners needlessly to go through a time. 30 of the Court of First Instance of promptly relieve petitioners from the injurious effects of the Laguna. J. the rentals beginning January. de Lara for petitioners. the resolution of respondent appellate the employees of the defendants on the court is reversed and the petition for certiorari is granted and leased lines went on strike for 6 days in private respondent's complaint in the lower court is ordered June and another 6 days in July. 1964. lessor but not of the lessees. together with of the gross proceed. dismissed for failure to state a sufficient cause of action. 1957. from the sales of subdivided lots of one "International" truck. employees or laborers of the M. respondent. objected to such deduction. certiorari will issue as the plain. the lines known as Manila-Biñan. At first.A. This case however manifestly falls contract. there was deducted the sum of P1. Insolvent. Guevarra for respondent. 1957. Branch II. the leased lines due to the action of the officers.92. MANABAT.00.836. as in this case. it is his duty to provide threfor in the certificates of public convenience over contract. Respondent's complaint for provisionally approved the lease contract modification of contract manifestly has no basis in law and on condition that the lessees should therefore states no cause of action. a contract was performance therewith is ot excused "by the fact that the executed whereby the Biñan contract turns out to be hard and improvident. Rosa-Manila. the defendants paid the lease rentals protracted trial and clogging the court dockets by one more up to December.500. and that the deduction of P836. 1974 Instance of Batangas. Transportation Company leased to the or unespectedly burdensome". modification or cancellation and to whatever decision that in due time might be rendered in the case.000. judgment was rendered in favor of LAGUNA TAYABAS BUS COMPANY and BATANGAS defendant Batangas Transportation TRANSPORTATION COMPANY. unprofitable.00 its contingencies arising. speedy and of the rental for August 1957. costs in all instances against private respondent. On the same date parties. The assignee of the plaintiff Transportation Company. with the exception futile case. from which adequate remedy of an aggrieved party.92 without the consent of the plaintiff. With and caused a loss of P500 for each strike. Under the particular operate on the leased lines in accordance allegations of respondent's complaint and the circumstances with the prescribed time schedule and therein averred.

The Public Service Transportation Company. . holding that upon its the herein defendants for authority to approval of the lease contract. The motion to dismiss was. assignee.000.would be paid. the petitioners had not asked for the inclusive.92 suspension of the operation of the lines which was deducted by the defendants covered by their own certificates of from the rentals due for August. that period from January 1958. Meanwhile — On October 15. Manabat. that became due and payable. The defendants further its regulatory power over the leased alleged that the high cost of operation. the lessees suspend operation on the lines leased to acquired the operating rights of the lessor them by the plaintiff. the Commissioner of the another case pending in the Public Internal Revenue and other creditors of Service Commission between the same the Biñan Transportation Company.. coupled with the lack of passenger traffic on the leased lines resulted in financial While proceedings before the Public Service Commission losses. The defendants Commission further ruled that being a alleged as reasons the reduction in the quasi-judicial body of limited amount of dollars allowed by the jurisdiction. to May 1959. 1958. 1959.836. there being assignee. and their the lease contract as the authority of the procurement at exorbitant costs. denied. 1957. Francisco C. filed this action against defendants Laguna Plaintiff's assignee opposed the petition Tayabas Bus Company and Batangas on the ground that the Public Service Transportation Company for the recovery Commission had no jurisdiction to grant of the sum of P42. Parsons Hardware Company. the and assumed full responsibility for assignee of the plaintiff and other compliance with all the terms and creditors of the insolvent presented . but in the end they failed to convenience. the alleged difficulty encountered call for interpretation of any provision of in securing said parts. plaintiff Biñan realize a reasonable margin of profit from Transportation Company represented by their operation.. that to grant the together with all subsequent rentals from petition would amount to an impairment June. 54-55. ROA). public convenience. corresponding to the jurisdiction of the ordinary courts. certificates of public convenience of the which act falls exclusively within the former to the latter. 20-21.00 for attorney's fees and such defendants have no legal personality to corrective and exemplary damages as the ask for suspension of the operation of the court may find reasonable. Aside from the subject matter of the action. and that the P5. leased lines since they belonged exclusively to the plaintiffwho is the The defendants moved to dismiss the grantee of the corresponding certificate complaint for lack of jurisdiction over the of public convenience. as a consequence of the continuing permission to suspend the operation of failure of the lessees to fulfill their earlier promise to pay the the leased lines until such time as the accruing rentals on the leased certificates. The defendants. thus Public Service Commission to grant or rendering the operation of the leased lines deny the prayer therein was derived from prohibitive. however..500 representing the the relief prayed for as it should involve accrued rentals for the lease of the the interpretation of the lease contract. The Public Service comply with their promise. although it might be conditions of the certificate of public delayed. Commission further stated that the petition to suspend operation did not On February 18. 1959. certificates of public convenience. the Standard Vacuum Oil Co. and that the suspension operation on the lines covered by the prayed for was but an incident of the certificates of public convenience leased operation of the lines leased to the to each of them by the Biñan defendants. it had no authority to Monetary Board of the Central Bank of interpret contracts. pp. like parties for the same cause. of the obligation of contract. operating expenses were restored to normal levels so as to allow the lessees to On May 19. but the petition did not trucks. (pp. the Batangas pertain to any act of dominion or Transportation Company and Laguna. ownership but only to the use of the Tayabas Bus Company separately filed certificate of public convenience which with the Public Service Commission a had been transferred by the plaintiff to petition for authority to suspend the the defendants. which function the Philippines for the purchase of spare belongs to the exclusive domain of the parts needed in the operation of their ordinary courts. and rec. plus the sum of P1. the Public Service The Public Service Commission Commission overruled all oppositions delegated its Chief Attorney to receive filed by the assignee and other creditors evidence of the parties on the petition of of the insolvent. filed oppositions to the petitions for suspension of operation. For these reasons they asked were thus going on. 1958.

In view of the (pp. ordering the defendants jointly and severally to pay to the former On October 12. during the period of suspension presentation by the parties herein of their of the lease from January. the day the Court's resolution was to P836. that such 1958. the authority and powersconferred authorized the suspension of operation on the Public Service Commission." In said motion. 25-26. 1964. Transportation Company between On September 21. 1964. rendered judgment in 20. 1956 from the date of the between petitioners and Biñan filing of their petition Transportation Company upon the on February 18. 1961.92 from the rentals for August. corresponding to the period from January. (p. Said decision was trips of the Biñan received by the appellants on September 7. defendants authorized to suspend appealed to the Court of Appeals. the Public complaint. including the withheld amount of On October 31. 1958 up to the respective memoranda. to February. in due time might be rendered in the case. that law and decisions of this Honorable the Public Service Commission Court. 1959. condition. Honorable Court relieving the lessee from the obligation to pay rent where there is failure to use or enjoy the thing The Court of Appeals proceeded to state that — leased...) favor of plaintiff." (p. petitioners explained — at the rate of P2. force and effect and payment of rentals thereafter was made under a mistake and should be refunded to the defendants. appellants filed the present appeal.00 as attorney's fees. rec. ROA). and the cost of the suit. On October 20.500. Rosa- Manila and 1. rec. raising the following questions of law: Manila.). The motion (to dismiss) having been due hearing covering the lines leased to denied. p.. plus the rentals that might become Petition and to Give Due Course Thereto. 1960. that as a operation without the corresponding result of the plaintiff being declared liability for rentals during the period of insolvent the lease contract lost further suspension. The Court of Appeals misapplied the hence the lease contract should be statutory rules on interpreting contracts deemed suspended during that period. the defendants answered the petitioners thereby nullifying. 1958. 7. 1960.00 for the rentals of dismissing said petition "for lack of merit. rec. over the leased lines from February 18. Batangas Piers. 1964. contrary to complaint. with interest on the Service Commission issued an order the subsequent rentals at the same rate dispositive part of which reads as beginning the first of the following follows: month. and 2. (p. due and payable beginning March. amongothers. 1959. and erred in its construction of the that plaintiff failed to place defendants in clauses in the lease agreement peaceful and adequate enjoyment and authorizing petitioners to suspend possession of the things leased. alleging among others. until December approval was subject to modification and 31.92 at the rate of 6% per annum the hearing was concluded on June 29. the Court ofAppeals erred in giving no legal effect and significance whatever to Going back to the Court of First Instance of Laguna — the suspension of operations later granted by the Public Service Commission after . which affirmed the same in their operation of the toto in its decision dated August 31. Said the certificates of public convenience resolution was received by petitioners on October 16. Considering that the Court of Appeals Canlubang-Manila found that the Public Service authorized in the Commission provisionally approved the aforementioned cases lease contract of January 20. Contrary to various decisions of this 21.) foregoing. (p. Biñan- Manila. 43.500 and .. ROA). evidence before the Chief Attorney and P836. 1959. 1964. with interest on the sums of P42. become final. 25.00 a month. with After hearing in the court a quo and interest. 1964. petitioners filed a "Motion to Admit Amended 1957. 1950. 1960.000. inclusive. 1964. the Court of Appeals erroneously required petitioners to pay rentals. cancellation and towhatever decision that pp. the trial court on expiration of the agreement on January March 18. the petitioners herein are From the decision of the Court of First Instance. 60-61. the Supreme Court issued a resolution the sum of P65. Sta. up to December 31. 55. from the date of the filing of the 1959. 3.000. rec. rec. plus the sum of P3.

Domingo. One of shall be considered pro forma. notice of The undisguised object of petitioners' discussion on the which was received on October 16. 7 Amended Petition for Certiorari. which supposedly applied said article by analogy to a lease other IV than that covered by said legal provision. in view of II the apparent position taken by this Honorable Court. sterility of the land leased. (See Estrada v. respondents filed. 1203-1204) (p. 1964. 52. the Supreme right in case of the loss ofmore than one- Court required respondents herein to file half of the fruits through extraordinary an answer to the amended petition. the petitioners advanced special character. an opposition to the motion of stipulation to the contrary.G. Nor can the article be applied only in the light of the fourth legal issue raised but also on analogously to ordinary leases. 1680. Art. No other legal provision makes it appealed decision of the Court of Appeals. war. the petitioners. they would have placed the article among petitioners sought a reconsideration of the said resolution not the general provisions on lease.) Inc. Caltex (Phil. equitably reduce the rentals payableby however. should this Honorable Court adopt the position of the Courtof Article 1680 of the Civil Code reads thus: Appeals and the lower court that petitioners have not been releived from thepayment of rentals on the leased lines. or I others which are uncommon. property must be an "extraordinary and unforeseen fortuitous . it will be observed is a special provision for petition for lack of merit. Extraordinary fortuitous events are understood to be: fire. to a reduction of the rent on accountof the 46. law raised by petitioners were already disposed of in Our resolution dated October 12. the petitioners. in their applicable to ordinary leases. In support of said plea. It is a provision of social justice designed to of their stand on the first three questions of law. through the amended petition. it was meant to apply only to a special no additional arguments nor cited new authorities in support specie of lease. 905-906. for precisely because of its the said first three legal questions. And taken in that light. Had theintention of the motion to admit amended petition dated October 31.pp. rec). 47 O. quite always when there is a specific belatedly. are not applicable to the case at bar. of the lease was allegedly not used by them as a result of the There is decisional authority for the suspension of operations on the lines authorized by the Public reduction of rentals payable (see Reyes v. the discussion on said questions. should have been absolved from all liabilities whatever. 911) and hence is without merit. On and unforeseen fortuitous events.). the reduction of the rentals payable by taking into consideration the discussion on the first three them. it must be pointed out that the first three questions of reasonably foreseen. 1964. Caltex. the lessor as To the extent therefore that the motion filed by the petitioner in the case at bar. earthquake. Service Commission. fourth question of law raised is to justify their plea for a petitioners now squarely submit their reduction of the rentals on the ground that the subject matter alternative position for consideration. the very Even if the cited article were a general rule on lease. and which thecontracting parties could not have First. 1964. article provides no refuge to lessees whose financial standing or social position is equal to. Said opposition was later "noted" by the Court in its resolution dated December 1. pestilence. lawmakers been so. or even better than. we limit the resolution of this case solely on ground relating to petitioners' prayer for the discussions on the last (fourth) question of law raised... its requisites is that the cause of loss of the fruits of the leased 28 SCRA 890. which in effect affirmed the leases of rural lands. The amendment includes an alternative Consequently. save the same date. petitioners invoke article 1680 of the Civil Code which grants lessees of rural lands a right to a The new question raised is presented thus: reduction of rentals whenever the harvest on the land leased is considerably damaged by an extraordinary fortuitous event. However. 1964. but he shall have such On November 5. locusts. This Honorable Court is authorized to The authorities from which the petitioners draw support. This alternative petition was not questions only insofar as they place the petitioners' included in the original one as petitioners discussion on the fourth question in its proper context and where genuinely convinced that they perspective. Although. as implied in its resolution on October 12. the motion provisions nevertheless do not extend to petitioners.. Reliance was also placed by the petitioners on Our decision xxx xxx xxx in Reyes v. Sto. 654. The lessee shall have no right (p. its same arguments already dismissed by this Court. or by reason of the loss of fruits due toordinary fortuitous events. 1193. They merely relieve poor farmers from the harsh consequences of their reproduced verbatim from their original petition their contracts with rich landowners. . seeks a reconsideration of our order of dismissal by submitting anew. unusual flood. 1964 dismissing the original Article 1680. 1964. rec. 44. 84 Phil.

Emphasis passenger traffic along the leased lines not only remains same supplied). Justice Esguerra. speaking for the Court of Appeals. jurisprudence. Petitioners' profits may be burdensome.. inevitable accident. the Public Service Commission might to wit: "(S)ince. by convenience. Dizon. consequently. holding that: Indeed. it being the rule that in case the alleged causes for the suspension of operations on the lines party desires to be excused from the leased. so that public interest will always be run the hazard of casual losses during the term and not lay the promoted by a continuous flow of transportation facilities to whole burden upon the lessor. therefore. by the lease. 32. opens with the statement: "The lessee shall have no right to Neither is performance excused by the reduction of the rent on account of the sterility of the land fact that the contract turns out to be hard leased . 11. transportation business along the same lines — and to hold a Thus. absent the requisite of fortuitous event. THE ORIGINAL AND AMENDED American treatises which is also the rule. lines. namely. by breaking of machinery. petitioners came to court with unclean hands. why was it that only plaintiff-appellee's certificate lessees on account of the lease contract. 1994 performed. by be ascribed to fortuitous events or circumstances beyond their unforeseen difficulties. he should in several instances. In other words. Later. it is his duty to when the contract of lease was executed" (p. Cuyugan v. Hence. they reneged right to operate the lines covered by the contract. WE denied the plea oflessee therein for an equitable reduction of the stipulated rentals. by financial article would speak strongly against their plea. obtaining under the Civil DECISION OF THE COURT OF APPEALS DATED Code. by danger. by If the petitioners would predicate their plea on the basis failure of a party to avail himself of the solely of their inability to use the certificates of public benefits tobe had under the contract. petitioners' option to a forbearance on the part of the lessor to operate suspend operation on the leased lines appears malicious. supra. AUGUST 31. Militating further against a grant of reduction of the rentals to the petitioners is the petitioners' conduct which is not in Furthermore. The citizenry and 664). Caltex. Decision). or even upon the mere speculation that it would yield no substantial foolish. when they believed they found a contract not only stipulated for the transfer of the lessor's convenient excuse for escaping their obligation. As correctly ruled by the Court of Appeals. 1964 IS HEREBY AFFIRMED. subsequent inability to perform. Decision. 80). after all. but to their own voluntary desistance (p. however. 13. Where a person by his contract charges himself with an obligation possible to be G.Article 1680 stringency or bystagnation of business. promised to pay the accrued rentals in due period of suspension." The circumstances of the instant case fail tosatisfy the act of God. by strikes. supra. we are not at all convinced that the lease accord with the rules of fair play and justice. Moreover. Petitioners.R. 14. unless the performance is rendered impossible by . the contractual commitment of the lessor not to operate gasoline and needed materials and the reduction of the dollar on the lines would sufficiently insure added profit to the allocation." (Reyes vs. It must be recalled that the lease time. No. 109172 August 19. Hence. by Decision. 664. but the volume of vs.. or less profitable. PETITIONS ARE HEREBY DISMISSED. by unusual or control. ill-advised." (p. the of public convenience was sought to be suspended? Why did commitment alone of the lessor under the contract would not the defendants-appellants ask for a corresponding enable the lessees to reap full benefits therefrom since the reduction or suspension under their own certificate along the commuting public would. AND THE in our opinion. rec. certificate for that purpose. the high prices of spare parts and gasoline performance in the event of and the reduction of the dollar allocations. would the defendants-appellants have remaining buses. 89 Phil. he must perform it. as it has done so advantage of casual profits of the leased premises. . p. no reduction can be sustained on the and improvident. rec. or ground that the operation of the leased lines was suspended impracticable. unexpectedly profit for the lessee bus company. service the population and the economy.. which found relevance again in the case at bar. Moreover. paid more than what is stipulated in the lease contract? We believe not. to apply by analogy Article 1680 and with the expectation of greater profit. 30. but also for on their earlier promise. unprofitable. even if the lessee would not propounded the following questions: "If it were true that actually make use of the lessor's certificates over the leased thecause of the suspension was the high prices of spare parts. the party. the lessee was to have the have granted petitioners an increase in rates. by sickness. the economy will suffer by reason of any disruption in the transportation facilities. WE refused in lines was conceived as a scheme to lessen operation costs the Reyes case. The cause of performance is not excused by petitioners' inability to operate on the lines cannot. but may even increase as the tempo of the movement of population is intensified by the industrial development of the Also expressed in said case is a ruling in American areas covered or connected by the leased routes." Obviously. (17 CJS 946-948) (Reyes reduced due to increase operating costs. upon proper showing. The general rule on performance of contracts is graphically set forth in WHEREFORE. by the law. "already existed contingencies arising. supra. which fact militates against their plea for equity. the cited weather conditions.event. unexpected expenses. the suspension of operation on the leased Contrary to what petitioners want to suggest. or by the other such requisite. it contract brought no material advantage to the lessor for the must be recalled. Caltex. Thus. provide therefor in his contract. be forced — at their same route? Suppose the prices of the spare parts and needed inconvenience and prejudice — to patronize petitioner's materials were cheap. p.). WITH COSTS AGAINST PETITIONERS.

166.213.00 by respondent Associated Bank. The released parcels of land were then sold and the proceeds amounting to P1. J. a (50858) real estate mortgage covering three parcels of land and a S-10086 and TCT chattel mortgage over petitioner's stock and inventories. According to the bank. a restructuring of the fifteen (15) days remaining indebtedness which then amounted to from the finality P1. petitioner Trans- Pacific Industrial Supplies. (d) orders defendant to pay plaintiffs the sum of P30. and on the (a) declares plaintiff's counterclaim.00 denominated as restructured interest. Costs against Transpacific. Initially.00. pp. the court a quo rendered judgment in favor of Trans-Pacific. Br.20. plus mortgage covering two other parcels of land and a chattel expenses of the suit. Jr. TL-9077-82 for the amount of Romana Bataclan- P1. SO ORDERED. and 1991 is SET ASIDE and NULLIFIED. Subsequently. INC. TL-9078-82 for the amount of P50. (Rollo. the decretal portion of which upon a clear preponderance of evidence reads: in support of the stated causes of action. 113-115).00 as The mortgaged parcels of land were substituted by another attorney's fees.000. it had a change Gancayco Law Offices for petitioners. for lack of merit. damages. the decision of June 11.050.000. (c) orders defendant To secure the re-structured loan of P1.00 as and for P121. been already fully paid. and Promissory Note No. Associated Bank demanded from Trans-Pacific payment of . TL-9077-82. The COURT OF APPEALS and ASSOCIATED BANK.000. BIDIN. (b) orders defendant SO ORDERED. Inc. according to petitioner. the Court finds for the plaintiffs and WHEREFORE. TL-9079-82 for the amount of P42. (Rollo. (50859) S-109087. as all the previous payments made were hereof. and ii December 20.000. respondents. Soluta. the amount of P492. PN No.400.00 denominated as working capital. 146.614. There it prayed that the mortgage over the two parcels of land be released and its stock inventory be lifted and that its obligation to the bank be declared as having been fully paid.000. for specific performance and Jose A. within and was granted by respondent bank. The loans mortgage over TCT were evidenced and secured by four (4) promissory notes.300.00 denominated similarly as restructured interest (Rollo. against defendant.500. Trans-Pacific expressed its willingness to pay the amount demanded by respondent bank. 1981 P1. 1983 chattel Unable to settle its obligation in full. mortgage. or on December 12.: After trial. (2) Javier the sum of Promissory Note No. (3) moral damages. the promissory vs. were turned over to Defendant's counterclaims are dismissed the bank and applied to Trans-Pacific's restructured loan. applied to penalties and interests.00.057. Transpacific is ordered to obligations to pay Associated attorney's fees of defendant to have P15.100.TRANS-PACIFIC INDUSTRIAL SUPPLIES. word "PAID" stamped thereon. & Associates for private respondent. the complaint is dismissed. 1985. p. p.00. to wit: In this petition for review on certiorari. premises considered and decision of respondent court.00 representing accrued interest on petitioner.234. petitioner applied for and was granted release on the i several financial accommodations amounting to September 11. respondent bank returned the duplicate original copies of the three promissory notes to Trans-Pacific with the With costs against defendant. 47) to execute and deliver to plaintiffs a Sometime in 1979. petitioner requested for. seeks the reversal of the WHEREFORE. mortgage on petitioner's stock inventory. of heart and instead initiated an action before the Regional Trial Court of Makati. notes were erroneously released.. 101) Despite the return of the notes. Later. three new to pay plaintiffs promissory notes were executed by Trans-Pacific as follows: Romeo Javier and (1) Promissory Note No.386.

00 HAS NOT . as in the case FEES IN FAVOR OF ASSOCIATED of respondent bank. such III signature being thus reproduced by the same stroke of pen which made the surface or exposed impression.Respondent bank elevated the case to the appellate court Art. 42) II The above pronouncement of respondent court is manifestly groundless. p. . by the respondent court. all of the RESPONDENT APPELLATE COURT sheets so written on are regarded as ERRED IN NOT HOLDING THAT duplicate originals and either of them PETITIONER HAS FULLY PAID ITS may be introduced in evidence as such OBLIGATION CONFORMABLY WITH without accounting for the nonproduction ARTICLE 1234 OF THE CIVIL CODE. Accordingly. NCC). This notwithstanding. their resolution border on the common issue. thus: ACCRUED INTEREST IN THE AMOUNT OF 492. 1271 of the The surrender and return to plaintiffs of Civil Code. . presumptions. . p. Tan. 15). we said: ANCILLARY OBLIGATION OF PAYING INTEREST WAS NOT When carbon sheets are inserted between RENOUNCED CONTRARY TO THE two or more sheets of writing paper so PROVISIONS OF ART. not the PRINCIPAL MUST BE RESERVED originals but the duplicates of the three OTHERWISE IT IS DEEMED PAID. to wit: Applying the legal presumption provided by Art. Further. of the others. appellees RECEIPT OF PAYMENT OF THE (Trans-Pacific) presented. produces a legal presumption that Respondent court disagreed and held. Upon a clear the petitioner does not merit the application of Article 1271 perception that Associated's record (1st par. petitioner raises four errors allegedly committed voluntarily by the creditor to the debtor." (Rollo. (105 Phil. In document evidencing a credit. i.) of the Civil Code which reads: keeping has been less than exemplary . The presumption is fortified obligation has been fully paid. it must be noted that respondent bank itself THE DELIVERY OF THE did not bother to challenge the authenticity of the duplicate DOCUMENTS EVIDENCING THE copies submitted by petitioner. the party to be charged thereby. 2[b]. IV A duplicate copy of the original may be admitted in evidence when the original is in the possession of the party against RESPONDENT APPELLATE COURT whom the evidence is offered. promissory notes. judgment not petitioner has indeed paid in full its obligation to was rendered in favor of petitioner on the basis of respondent bank. . duplicates and cannot be the basis of petitioner's claim that its 1271.100. THE 1242 [1959]). Rule 130). whether or As gleaned from the decision of the court a quo. made this appeal. that the Associated had thereby renounced its documents found in possession of Trans-Pacific are mere actionable claim against plaintiffs (Art. including the signature of EVIDENCE ON RECORD. documents (stamped "PAID") evidencing its indebtedness. as aforesaid. In People vs. 1271. It is undisputed that the documents presented RESPONDENT APPELLATE COURT were duplicate originals and are therefore admissible as ERRED IN HOLDING THAT WITH evidence. reversed the decision of the trial court. it must be construed as referring to SUCH CLAIM FOR INTEREST UPON the original. I Respondent court is of the view that the above provision must RESPONDENT APPELLATE COURT be construed to mean the original copy of the document ERRED IN HOLDING THAT THE evidencing the credit and not its duplicate.. namely: implies the renunciation of the action which the former had against the latter. In this case. and the latter fails to produce ERRED IN AWARDING ATTORNEY'S it after reasonable notice (Sec. 1273 OF THE that the writing of a contract upon the CIVIL CODE AND THE UNDISPUTED outside sheet. and has not not the originals. the delivery thereof by respondent bank to been otherwise overcome. The delivery of a private which. BANK (Rollo. produces a facsimile upon the sheets beneath. a proffer of bank copies of the promissory notes without the . since the by a showing that said promissory notes promissory notes submitted by petitioner were duplicates and all bear the stamp "PAID". [W]hen the law speaks of the delivery BEEN PAID WHEN ARTICLE 1176 OF of the private document evidencing a THE CIVIL CODE PROVIDES THAT credit.e. among others. PRINCIPAL OBLIGATION. the trial court ruled that petitioner has fully the promissory notes evidencing the discharged its obligation by virtue of its possession of the consolidated obligation as restructured.. we find no reversible error committed The first three assigned errors will be treated jointly since by the respondent court in disposing of the appealed decision.

the Court is satisfied that plaintiffs must be found to have settled their obligations in full. interest Q Notwithstanding.050. therefore. and penalties had been fully paid (TSN. 18). the interest. moreover. "PAID" stamps thereon does not impress debtor would normally retain a copy. yes.00. While it has been consistently held that findings of facts are Indeed. Petitioner could have easily adduced the receipts the chattel mortgage. sir. have been corresponding to the amounts paid inclusive of the interest to extinguished by the renunciation of the prove that it has fully discharged its obligation but it did not. 224 SCRA 437 [1993]). there is actually none submitted by petitioner to prove that the contested As corollary. applicable law is supportive of a not reviewable by this Court. Your unlike that of a public instrument. 1253. not of payment. There There is likewise nothing on the records relied upon by the is. In civil cases. has been paid in full. we find sufficient justification to overthrow the presumption of payment generated by the delivery of the A Yes. the presumption consolidated balance stands. fully original rather than to the original duplicate of which the . compelled that plaintiffs (sic) accessory the party that alleges a fact has the burden of proving it obligations under the real estate mortgage (Imperial Victory Shipping Agency v. 1273. following the time-honored axiom that the accessory follows the principal. as follows: Records show that Associated's Salvador M. It is. premised by: Mesina anent the outstanding balance pertaining to interest. does not concern itself with the demeanor of witnesses. of principal (sic) shall not be deemed to have been made until the interests have been covered (Art. NLRC 200 SCRA 178 over two (2) substituted lots as well as [1991]). It may not be amiss to add that Article 1271 of the Civil Code Q Fully settled? raises a presumption. by empirical evidence. copy of the evidence of credit. v. accordingly returned to Romeo Javier. principal debt (Art. Crisostomo v. however. 100) liquidated by the respondent's act of delivering the instrument evidencing the principal obligation. Rebuttable as they are. competent showing that the be sustained because of its advantage in observing the principal has been paid. p. the court a quo chose to ignore an earlier testimony of Mr. however. It would thus be absurd the Court as sufficient to overcome if Article 1271 were to be applied differently. documents evidencing petitioners indebtedness. that the find in favor of plaintiffs insofar as amount corresponding to the interest has indeed been paid. In the case before us.e. per P1. CA. the Court get it 1271 of the Civil Code is not conclusive but merely prima correctly that this facie. Conversely. (Rollo. Inc. This case. The presumption created by the Art. 1990 promissory notes for the consolidated principal obligation. 197 SCRA 833) more so where it is supported by the records (Roman Catholic Bishop of Malolos v.) amount of consolidated principal of The above disquisition finds no factual support. compelling warrant (sic) to trial court to support its claim. In fine. Mesina is on record as having Court: testified that all three (3) December 8.. If there be no evidence to the contrary. 1990. not been paid. NCC). i. let us go now July 18. the principal. Does review of the records.000. NCC). but of the renunciation of the credit where more convincing evidence would be A Fully settled. As for the records. a finding is accordingly amount. militates against demeanor of the witnesses while testifying (citing postured entitlement to unpaid interests. this rule does not find finding that in interest bearing application where both the trial and the appellate courts differ obligations-as is the case here. 9077-82 in the (Ibid. The rationale for allowing the presumption of promissory note has renunciation in the delivery of a private instrument is that. Court of Appeals. p. but required than what normally would be called for to prove the interest of that payment. payment thereon (Asia Brewery. 192 SCRA 169). would thus be to refer to the delivery only of the original you are saying. Where several originals are made out of a private document. the intendment of the law Q In other words. the presumption loses its legal efficacy in has been fully paid? the face of proof or evidence to the contrary. specifically to admitted that said promissory notes were promissory note No. specific performance for the release of The trial court totally relied on a disputable presumption that the mortgages on the substituted lots and the obligation of petitioner as regards interest has been fully chattel is concerned. Court of Appeals. Petitioner maintains that the findings of the trial court should Conversely. there could be just one Honor. presumed remission of the obligation vis- a-vis the return of said promissory notes.

As petitioner would rather vehemently deny. Indeed. addressed to respondent bank. 155. Under the As you may be able to glean from these circumstances.100. Exhs. 3 & 4. . settled but not truly . then. Emphasis supplied) We believe otherwise. 1271 is not conclusive and was successfully rebutted by private respondent. the offer of settlement is inadmissible. the an effective admission of a borrower's loan balance (L.00. Exactly.ed. if a party denies the existence of a debt but offers to p. petitioner claims that it was way of the equipments (sic) and spare compelled to file the suit for damages in the honest belief that parts under chattel mortgage to you to it has fully discharged its obligations in favor of respondent the extent of their latest appraised bank and therefore not unfounded. 9 L. 325 [1973 ed. Fundamentally on account of this. Notwithstanding the P492. (TSN. But ignorance of the existence of the two because of interest and other charges. Holbrook. the promissory note? To determine the admissibility or non-admissibility of an A We returned the offer to compromise. p. we quote with approval to you which had not been faithfully respondent court's observation: serviced on account of unfortunate business reverses.e. Comments on the Rules of Court. True. 22) pay the same for the purpose of buying peace and avoiding litigation.100 through a payment in awarded in a case of clearly unfounded civil action (Art. . an offer of settlement is unhealthy economic conditions. the presumption generated by Art. Emphasis not paid. we had proposed to settle our remaining obligations to you by way of dacion en pago of the equipments (sic) Q Not fully settled? and spare parts mortgaged to you to (the) extent of their applicable loan A The interest was values. . the admission is admissible to 1985." (Rollo. we propose that you permit us to fully Finally. However. that because of the prevailing Pac. 1990. p. (Rollo. we letters. If in the That petitioner has not fully liquidated its financial obligation course thereof. 99) who advised that not even the claim for with your bank regarding our proposal interests could be recovered. petitioner's attempt to for the eventual settlement of our seek refuge under Art. viz. As previously discussed. 12 . Principally for not paid. the party making the offer admits the to the Associated Bank finds more than ample confirmation existence of an indebtedness combined with a proposal to and self-defeating posture in its letter dated December 16. It cannot profess principal amount of our obligation. letters.00 representing interests. but the supplied) principal obligation was removed from Petitioner claims that the above offer of settlement or our books. .100. Vol. inadmissible against the party making the offer (Sec. this is what petitioner did in the case before us for review. Court of Appeals. . In this regard. Francisco. or of the import of find ourselves still obligated to you by what they contain. 1986 letter unpaid balance of P492. 153-154. We continue to find ourselves in a fully settled? very fluid (sic) situation in as much as the overall outlook of the industry has not A The interest was substantially improved. outright and honest letters of admission letters and from your credit files. undisputed is the fact of its admission regarding the Followed by its August 20. i. 5. intent of the party making the offer should be considered. . Your compromise is not an admission that anything is due and is Honor.M. . Unfortunately. p. remaining obligations . there could hardly be always been conscious of our obligation honest belief. There was thus an . pp. 1009). 233 [1980 ed. kind (dacion en pago) arrangement by 2208 [4]. v. 24. . hence. July 18. Thus. VII. p. this reason. .). business is unable to generate sufficient Handicraft Manufacturing Corp. Transpacific opted to file suit and insist(ed) that its liabilities had already been paid. Notwithstanding these The countervailing evidence against the however. values.: prove such indebtedness (Moran. respondent court is faulted in awarding attorney's liquidate the remaining obligations to fees in favor of Associated Bank. settle the claim amicably. (US) 84. Rules of Court). 186 resources for debt servicing. It which reads: cannot also be denied that petitioner opted to sue for specific performance and damages after consultation with a lawyer We have had a series of communications (Rollo. Vol. SCRA 640 [1990]). this is not an iron-clad Q And you returned rule. the circumstances of the case and the promissory note. total payments thus far remitted claim of full payment emanated from to you already exceede (sic) the original Transpacific itself. CC).] citing McNiel v. we have vis-a-vis counsel-induced recalcitrance. 1271 (CC).. attorney's fees may be you of P492. Rule 130. Rules of Court.

the courts operation on the lines covered by the certificates of cannot even in equity grant the relief sought. pp. subdivision". public convenience leased to each of them by the Biñan Transportation Company.  ART. the plaintiff Biñan Transportation Company was declared insolvent and Francisco C. On the same date the Public Service Commission provisionally approved the lease contract on condition that the lessees should SO ORDERED. ill-advised attempt on the part of Tayabas Bus Company at a monthly rental of Transpacific to capitalize on the delivery P2. 1958.000. 696 of the Court of First Instance of REVISE CONTRACTS BETWEEN PARTIES Batangas. Under separately filed with the Public Service the particular allegations of respondent's complaint Commission a petition for authority to suspend the and the circumstances therein averred. or a total of P1. notwithstanding demands therefor made courts this authority to remake. Presiding Judge of the Court  Sometime after the execution of the lease contract. and their procurement at exorbitant costs. and caused a loss of P500 for ISSUE: each strike. Respondent's complaint for  On February 18. be suspended only if the defendants could not the obligor may also be released therefrom. rendered in the case. own terms for those covenanted by the parties themselves. The defendants LAGUNA v MANABAT alleged as reasons the reduction in the amount of dollars allowed by the Monetary Board of the FACTS: Central Bank of the Philippines for the purchase of spare parts needed in the operation of their trucks. The defendants neither refunded the proceed from the sales of subdivided lots of subject deductions nor paid the rentals beginning January. Rosa‐Manila. the defendants paid the lease rentals up to December. and to the records show.00. modify or revise from time to time. and upon denial deduction was based on the ground that the thereof and of reconsideration by the lower court elevated the employees of the defendants on the leased lines matter on certiorari to respondent Court of Appeals. operate on the leased lines in accordance with the prescribed time schedule and that such approval CASE DIGEST: FEB. with the exception of the rental for August modification of the terms and conditions of its subdivision 1957. and that in Civil WON COURTS ARE AUTHORIZED TO MODIFY OR Case No. the petition is DENIED for lack of merit.500. vs.92  Respondent's complaint seeks not release from the amounted to a fraudulent preference in the subdivision contract but that the court "render insolvency proceedings as whatever judgment judgment I modifying the terms and Conditions of might have been rendered in favor of any of the the Contract by fixing the proper shares that should lessees should have been filed as a claim in said pertain to the herein parties out of the gross proceedings. The sum of P15. officers.836. . together with one "International" fair and equitable. Petitioners dismissed the complaint P1. the parties as contractually stipulated with the force although it might be delayed. OCCENA. Manabat was FACTS: appointed as its assignee. over the lines known as Manila‐Biñan. approval of the lease contract by the Public Service Costs against petitioner.00 its certificates of public convenience of the duplicates of the promissory notes. renewable for another similar period. Manila‐ in complete disregard of what its own Canlubang and Sta. from which there was deducted the sum of contract with petitioners. filed a complaint for 1957.1957. the defendants assured the contract or to fix the division of shares between the plaintiff that the lease rentals would be paid. In the circumstances.92 without the consent of the plaintiff. Private respondent Tropical Homes. Branch II. judgment was rendered in favor of defendant Batangas Transportation RULING: Company against the Biñan Transportation Company for the sum of P836. 2017 was subject to modification or cancellation and to whatever decision that in due time might be JESUS V. went on strike for 6 days in June and another 6 days in July. to commence from the WHEREFORE. OCCENA and EFIGENIA C. for a period of five years. From time to time.92.00 is Batangas Wharf. The cited article does not grant the 1958.  A contract was executed whereby the Biñan the alleged difficulty encountered in securing said Transportation Company leased to the Laguna‐ parts. Of First Instance of Rizal. 1267 of the Civil Code:  The assignee of the plaintiff objected to such “When the service has become so difficult as to be deduction. JABSON. Batangas Transportation Company its certificate of 2208 (4) and (11) justify the award of public convenience over the line known as Manila‐ attorney's fees. employees or laborers of the lessor but not of the lessees. but in the end they of law between the parties. (Rollo. claiming that the contract of lease would manifestly beyond the contemplation of the parties. NO. At first. Inc. the Batangas Transportation modification of contract manifestly has no basis in Company and Laguna‐Tayabas Bus Company law and therefore states no cause of action. This principally for lack of cause of action.000. Commission. and that the deduction of P836. HON. in operate the leased lines due to the action of the whole or in part. Art. 23. so as to substitute its failed to comply with their promise. RAMON V. 46-47) truck.

were more  Since.836. suspend operation on the leased lines appears malicious. . petitioners' option to indebtedness. however. a real estate mortgage covering 3 parcels of sum of P42. Later. Trans-pacific expressed the willingness to  Where a person by his contract charges himself pay but later it had a change of heart & initiated an with an obligation possible to be performed.000.92 which was deducted by 3 new promissory notes were executed by Trans- the defendants from the rentals due for August. the advised. or even foolish. by danger. The loans were secured by 4 promissory Transportation Company for the recovery of the notes. loses its legal efficacy in the face of proof or evidence to the contrary. it being the rule that in case the party ISSUE: desires to be excused from the performance in the event of contingencies arising. For these reasons they asked conceived as a scheme to lessen operation costs permission to suspend the operation of the leased with the expectation of greater profit. of the former to the latter. pacific. or impracticable.  Petitioners.00. Moreover. PSC granted the suspension.00 for attorney's fees and such corrective stock inventory. by failure of a party to avail himself of voluntarily by the creditor to the debtor implies the the benefits tobe had under the contract.  Subsequently. 1271. inclusive. ( 235 s 494 )  On May 19. they reneged on their delivery of the documents evidencing petitioner’s earlier promise. 1959. plaintiff Biñan Transportation FACTS: Company represented by Francisco C. Despite the return of the notes. or less profitable. restored to normal levels so as to allow the lessees to realize a reasonable margin of profit from their TRANSPACIFIC INDUSTRIAL SUPPLIES INC. to May 1959. not of payment but of the renunciation of the credit. the presumption unexpectedly burdensome. or by the other party. high cost of operation.3 M by respondent Associated Laguna Tayabas Bus Company and Batangas Bank. by breaking of machinery. that became due and payable. it is his duty to WON respondent has indeed paid in full its obligation to provide therefor in his contract. together with all subsequent rentals from substituted by another mortgage covering 2 other June. VS CA operation. Neither is performance excused by the fact that the contract turns out to be hard and  Art.213.500 representing the accrued rentals for land & a chattel mortgage over petitioner’s stock & the lease of the certificates of public convenience inventories. by the law. normally would be called for to prove payment. impossible by the act of God. parcels of land & chattel mortgage on petitioner’s P5.400. respondent bank? NO performance is not excused by subsequent inability to perform. plus the sum of P1. by the lease. raises a presumption. corresponding to the period from January 1958. when  The SC found sufficient justification to overthrow they believed they found a convenient excuse for the presumption of payment generated by the escaping their obligation. by unusual HELD: or unexpected expenses. by unforeseen difficulties. it must be recalled. RULING:  Initially. by financial stringency or by stagnation against the latter”. unprofitable. the lessee was to have the convincing evidence would be required than what advantage of casual profits of the leased premises. The mortgage parcels of land were 1957. Conversely. 1271. presumption stands. unless the performance is rendered damages.  The release parcels of land were then sold & the proceeds were turned over to the bank & applied to ISSUE: petitioner’s restructured loan. Manabat. he action before the RTC for specific performance & must perform it. ill‐ if there be no evidence to the contrary. 1959. respondent bank returned the  W/N Petitioner is entitled to a reduced amount of duplicate original copies of the 3 promissory notes rentals on the subject matter of the lease was to trans-pacific with the word “Paid” stamped allegedly not used by them as a result of the thereon. The lines until such time as the operating expenses were petitioners are thus not entitled to reduced rentals. The defendants further alleged that the term and not lay the whole burden upon the lessor. coupled with the lack of passenger traffic on the leased lines resulted in  The suspension of operation on the leased lines was financial losses. is not conclusive but merely prima-facie improvident. by weather renunciation of the action which the former had conditions. of business. 1271. the bank suspension of operations on the lines authorized by demanded from petitioner the accrued interest of the Public Service Commission? one of the promissory notes.  Art. and exemplary damages as the court may find reasonable. Hence. thus rendering the operation of the leased lines he should run the hazard of casual losses during the prohibitive. filed this action against defendants amounting to P 1. According to the bank the notes were erroneously released. promised to pay the accrued rentals in due time.  To secure the re-structured loan of P1. by strikes.  Petitioner was granted financial accommodation assignee. provides that “The delivery of a accident. by private document evidencing a credit made sickness. by inevitable  Under Art.

were to be applied obligation to the associated bank by its differently. Mesina rather than to the original duplicate f which the anent the outstanding balance pertaining to interest.  Petitioner could have easily adduce the receipts corresponding to the amounts paid inclusive of the . is that. the intendment of the law would thus be liquidated by respondents act of delivering the to refer to the delivery only of the original original instrument and ignore the testimony of Mr. Where  The trial court totally relied on a disputable several originals are made out of a private presumption that the interest has been fully document. 1271. The rationale for allowing the presumption of interest to prove that it has fully discharged its renunciation in the delivery of a private instrument obligation but it did not. confirmation & self-defeating posture in its letter addressed to respondent bank. debtor would normally retain a copy it would thus Petitioner has not fully liquidated its financial be absurd if Art. unlike that a public instrument. there could be just on copy of the evidence of credit.