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Article 1768

ALFREDO N. AGUILA, JR, petitioner, vs. (4) During the said grace period, the FIRST PARTY
HONORABLE COURT OF APPEALS and obliges herself not to file any lis pendens or whatever
FELICIDAD S. VDA. DE ABROGAR, respondents. claims on the property nor shall be cause the
annotation of say claim at the back of the title to the
said property;
DECISION

(5) With the execution of the deed of absolute sale,


MENDOZA, J.: the FIRST PARTY warrants her ownership of the
property and shall defend the rights of the SECOND
PARTY against any party whom may have any
interests over the property;
This is a petition for review on certiorari of the
decision[1] of the Court of Appeals, dated November
29, 1990, which reversed the decision of the
Regional Trial Court, Branch 273, Marikina, Metro (6) All expenses for documentation and other
Manila, dated April 11, 1995. The trial court incidental expenses shall be for the account of the
dismissed the petition for declaration of nullity of a FIRST PARTY;
deed of sale filed by private respondent Felicidad S.
Vda. de Abrogar against petitioner Alfredo N. Aguila,
Jr. (7) Should the FIRST PARTY fail to deliver peaceful
possession of the property to the SECOND PARTY
after the expiration of the 15-day grace period given
The facts are as follows: in paragraph 3 above, the FIRST PARTY shall pay
an amount equivalent to Five Percent of the principal
amount of TWO HUNDRED PESOS (P200.00) or
P10,000.00 per month of delay as and for rentals
Petitioner is the manager of A.C. Aguila & Sons, Co.,
and liquidated damages;
a partnership engaged in lending activities. Private
respondent and her late husband, Ruben M.
Abrogar, were the registered owners of a house and
lot, covered by Transfer Certificate of Title No. (8) Should the FIRST PARTY fail to exercise her
195101, in Marikina, Metro Manila. On April 18, option to repurchase the property within ninety (90)
1991, private respondent, with the consent of her days period above-mentioned, this memorandum of
late husband, and A.C. Aguila & Sons, Co., agreement shall be deemed cancelled and the Deed
represented by petitioner, entered into a of Absolute Sale, executed by the parties shall be
Memorandum of Agreement, which provided: the final contract considered as entered between the
parties and the SECOND PARTY shall proceed to
transfer ownership of the property above described
to its name free from lines and encumbrances.[2]
(1) That the SECOND PARTY [A.C. Aguila & Sons,
Co.] shall buy the above-described property from the
FIRST PARTY [Felicidad S. Vda. de Abrogar], and
pursuant to this agreement, a Deed of Absolute Sale On the same day, April 18, 1991, the parties likewise
shall be executed by the FIRST PARTY conveying executed a deed of absolute sale,[3] dated June 11,
the property to the SECOND PARTY for and in 1991, wherein private respondent, with the consent
consideration of the sum of Two Hundred Thousand of her late husband, sold the subject property to A.C.
Pesos (P200,000.00), Philippine Currency; Aguila & Sons, Co., represented by petitioner, for
P200,000.00. In a special power of attorney dated
the same day, April 18, 1991, private respondent
authorized petitioner to cause the cancellation of
(2) The FIRST PARTY is hereby given by the
TCT No. 195101 and the issuance of a new
SECOND PARTY the option to repurchase the said
certificate of title in the name of A.C. Aguila and
property within a period of ninety (90) days from the
Sons, Co., in the event she failed to redeem the
execution of this memorandum of agreement
subject property as provided in the Memorandum of
effective April 18, 1991, for the amount of TWO
Agreement.[4]
HUNDRED THIRTY THOUSAND PESOS
(P230,000.00);
Private respondent failed to redeem the property
within the 90-day period as provided in the
(3) In the event that the FIRST PARTY fail to
Memorandum of Agreement. Hence, pursuant to the
exercise her option to repurchase the said property
special power of attorney mentioned above,
within a period of ninety (90) days, the FIRST
petitioner caused the cancellation of TCT No.
PARTY is obliged to deliver peacefully the
195101 and the issuance of a new certificate of title
possession of the property to the SECOND PARTY
in the name of A.C. Aguila and Sons, Co.[5]
within fifteen (15) days after the expiration of the said
90 day grace period;
Private respondent then received a letter dated the defendant. Common sense dictates that an
August 10, 1991 from Atty. Lamberto C. Nanquil, established lending and realty firm like the Aguila &
counsel for A.C. Aguila & Sons, Co., demanding that Sons, Co. would not part with P200,000.00 to the
she vacate the premises within 15 days after receipt Abrogar spouses, who are virtual strangers to it,
of the letter and surrender its possession peacefully without the simultaneous accomplishment and
to A.C. Aguila & Sons, Co. Otherwise, the latter signing of all the required documents, more
would bring the appropriate action in court.[6] particularly the Deed of Absolute Sale, to protect its
interest.

Upon the refusal of private respondent to vacate the


subject premises, A.C. Aguila & Sons, Co. filed an ....
ejectment case against her in the Metropolitan Trial
Court, Branch 76, Marikina, Metro Manila. In a
decision, dated April 3, 1992, the Metropolitan Trial WHEREFORE, foregoing premises considered, the
Court ruled in favor of A.C. Aguila & Sons, Co. on case in caption is hereby ORDERED DISMISSED,
the ground that private respondent did not redeem with costs against the plaintiff.
the subject property before the expiration of the 90-
day period provided in the Memorandum of
Agreement. Private respondent appealed first to the
On appeal, the Court of Appeals reversed. It held:
Regional Trial Court, Branch 163, Pasig, Metro
Manila, then to the Court of Appeals, and later to this
Court, but she lost in all the cases.
The facts and evidence show that the transaction
between plaintiff-appellant and defendant-appellee
is indubitably an equitable mortgage. Article 1602 of
Private respondent then filed a petition for
the New Civil Code finds strong application in the
declaration of nullity of a deed of sale with the
case at bar in the light of the following
Regional Trial Court, Branch 273, Marikina, Metro
circumstances.
Manila on December 4, 1993. She alleged that the
signature of her husband on the deed of sale was a
forgery because he was already dead when the
deed was supposed to have been executed on June First: The purchase price for the alleged sale with
11, 1991. right to repurchase is unusually inadequate. The
property is a two hundred forty (240) sq. m. lot. On
said lot, the residential house of plaintiff-appellant
stands. The property is inside a subdivision/village.
It appears, however, that private respondent had
The property is situated in Marikina which is already
filed a criminal complaint for falsification against
part of Metro Manila. The alleged sale took place in
petitioner with the Office of the Prosecutor of
1991 when the value of the land had considerably
Quezon City which was dismissed in a resolution,
increased.
dated February 14, 1994.

For this property, defendant-appellee pays only a


On April 11, 1995, Branch 273 of RTC-Marikina
measly P200,000.00 or P833.33 per square meter
rendered its decision:
for both the land and for the house.

Plaintiffs claim therefore that the Deed of Absolute


Second: The disputed Memorandum of Agreement
Sale is a forgery because they could not personally
specifically provides that plaintiff-appellant is obliged
appear before Notary Public Lamberto C. Nanquil on
to deliver peacefully the possession of the property
June 11, 1991 because her husband, Ruben
to the SECOND PARTY within fifteen (15) days after
Abrogar, died on May 8, 1991 or one month and 2
the expiration of the said ninety (90) day grace
days before the execution of the Deed of Absolute
period. Otherwise stated, plaintiff-appellant is to
Sale, while the plaintiff was still in the Quezon City
retain physical possession of the thing allegedly
Medical Center recuperating from wounds which she
sold.
suffered at the same vehicular accident on May 8,
1991, cannot be sustained. The Court is convinced
that the three required documents, to wit: the
Memorandum of Agreement, the Special Power of In fact, plaintiff-appellant retained possession of the
Attorney, and the Deed of Absolute Sale were all property sold as if they were still the absolute
signed by the parties on the same date on April 18, owners. There was no provision for maintenance or
1991. It is a common and accepted business expenses, much less for payment of rent.
practice of those engaged in money lending to
prepare an undated absolute deed of sale in loans
of money secured by real estate for various reasons, Third: The apparent vendor, plaintiff-appellant
foremost of which is the evasion of taxes and herein, continued to pay taxes on the property sold.
surcharges. The plaintiff never questioned receiving It is well-known that payment of taxes accompanied
the sum of P200,000.00 representing her loan from by actual possession of the land covered by the tax
declaration, constitute evidence of great weight that In this case, defendant-appellee in reality extended
a person under whose name the real taxes were a P200,000.00 loan to plaintiff-appellant secured by
declared has a claim of right over the land. a mortgage on the property of plaintiff-appellant. The
loan was payable within ninety (90) days, the period
within which plaintiff-appellant can repurchase the
It is well-settled that the presence of even one of the property. Plaintiff-appellant will pay P230,000.00
circumstances in Article 1602 of the New Civil Code and not P200,000.00, the P30,000.00 excess is the
is sufficient to declare a contract of sale with right to interest for the loan extended. Failure of plaintiff-
repurchase an equitable mortgage. appellee to pay the P230,000,00 within the ninety
(90) days period, the property shall automatically
belong to defendant-appellee by virtue of the deed
of sale executed.
Considering that plaintiff-appellant, as vendor, was
paid a price which is unusually inadequate, has
retained possession of the subject property and has
continued paying the realty taxes over the subject Clearly, the agreement entered into by the parties is
property, (circumstances mentioned in par. (1) (2) in the nature of pactum commissorium. Therefore,
and (5) of Article 1602 of the New Civil Code), it must the deed of sale should be declared void as we
be conclusively presumed that the transaction the hereby so declare to be invalid, for being violative of
parties actually entered into is an equitable law.
mortgage, not a sale with right to repurchase. The
factors cited are in support to the finding that the
Deed of Sale/Memorandum of Agreement with right ....
to repurchase is in actuality an equitable mortgage.

WHEREFORE, foregoing considered, the appealed


Moreover, it is undisputed that the deed of sale with decision is hereby REVERSED and SET ASIDE.
right of repurchase was executed by reason of the The questioned Deed of Sale and the cancellation of
loan extended by defendant-appellee to plaintiff- the TCT No. 195101 issued in favor of plaintiff-
appellant. The amount of loan being the same with appellant and the issuance of TCT No. 267073
the amount of the purchase price. issued in favor of defendant-appellee pursuant to the
questioned Deed of Sale is hereby declared VOID
and is hereby ANNULLED. Transfer Certificate of
.... Title No. 195101 of the Registry of Marikina is
hereby ordered REINSTATED. The loan in the
amount of P230,000.00 shall be paid within ninety
(90) days from the finality of this decision. In case of
Since the real intention of the party is to secure the
failure to pay the amount of P230,000.00 from the
payment of debt, now deemed to be repurchase
period therein stated, the property shall be sold at
price: the transaction shall then be considered to be
public auction to satisfy the mortgage debt and costs
an equitable mortgage.
and if there is an excess, the same is to be given to
the owner.

Being a mortgage, the transaction entered into by


the parties is in the nature of a pactum
Petitioner now contends that: (1) he is not the real
commissorium which is clearly prohibited by Article
party in interest but A.C. Aguila & Co., against which
2088 of the New Civil Code. Article 2088 of the New
this case should have been brought; (2) the
Civil Code reads:
judgment in the ejectment case is a bar to the filing
of the complaint for declaration of nullity of a deed of
sale in this case; and (3) the contract between A.C.
ART. 2088. The creditor cannot appropriate the Aguila & Sons, Co. and private respondent is a pacto
things given by way of pledge or mortgage, or de retro sale and not an equitable mortgage as held
dispose of them. Any stipulation to the contrary is by the appellate court.
null and void.

The petition is meritorious.


The aforequoted provision furnishes the two
elements for pactum commissorium to exist: (1) that
there should be a pledge or mortgage wherein a
Rule 3, 2 of the Rules of Court of 1964, under which
property is pledged or mortgaged by way of security
the complaint in this case was filed, provided that
for the payment of principal obligation; and (2) that
every action must be prosecuted and defended in
there should be a stipulation for an automatic
the name of the real party in interest. A real party in
appropriation by the creditor of the thing pledged and
interest is one who would be benefited or injured by
mortgaged in the event of non-payment of the
the judgment, or who is entitled to the avails of the
principal obligation within the stipulated period.
suit.[7] This ruling is now embodied in Rule 3, 2 of
the 1997 Revised Rules of Civil Procedure. Any
decision rendered against a person who is not a real
party in interest in the case cannot be executed.[8] The Petition for Review on Certiorari before us
Hence, a complaint filed against such a person challenges the March 23, 2000 Decision[1] and the
should be dismissed for failure to state a cause of July 26, 2000 Resolution[2] of the Court of
action.[9] Appeals[3] (CA) in CA-GR CV No. 41026. The
assailed Decision disposed as follows:

Under Art. 1768 of the Civil Code, a partnership has


a juridical personality separate and distinct from that WHEREFORE, foregoing premises considered, the
of each of the partners. The partners cannot be held Decision dated July 21, 1992 rendered by the
liable for the obligations of the partnership unless it Regional Trial Court, Branch 148, Makati City is
is shown that the legal fiction of a different juridical hereby SET ASIDE and NULLIFIED and in lieu
personality is being used for fraudulent, unfair, or thereof a new decision is rendered ordering the
illegal purposes.[10] In this case, private respondent [petitioners] jointly and severally to pay and
has not shown that A.C. Aguila & Sons, Co., as a reimburse to [respondents] the amount of
separate juridical entity, is being used for fraudulent, P253,114.00. No pronouncement as to costs.[4]
unfair, or illegal purposes. Moreover, the title to the
subject property is in the name of A.C. Aguila &
Sons, Co. and the Memorandum of Agreement was Reconsideration was denied in the impugned
executed between private respondent, with the Resolution.
consent of her late husband, and A. C. Aguila &
Sons, Co., represented by petitioner. Hence, it is the
partnership, not its officers or agents, which should
The Facts
be impleaded in any litigation involving property
registered in its name. A violation of this rule will
result in the dismissal of the complaint.[11] We
cannot understand why both the Regional Trial On July 25, 1984, Luzviminda J. Villareal, Carmelito
Court and the Court of Appeals sidestepped this Jose and Jesus Jose formed a partnership with a
issue when it was squarely raised before them by capital of P750,000 for the operation of a restaurant
petitioner. and catering business under the name Aquarius
Food House and Catering Services.[5] Villareal was
appointed general manager and Carmelito Jose,
operations manager.
Our conclusion that petitioner is not the real party in
interest against whom this action should be
prosecuted makes it unnecessary to discuss the
other issues raised by him in this appeal. Respondent Donaldo Efren C. Ramirez joined as a
partner in the business on September 5, 1984. His
capital contribution of P250,000 was paid by his
parents, Respondents Cesar and Carmelita
WHEREFORE, the decision of the Court of Appeals
Ramirez.[6]
is hereby REVERSED and the complaint against
petitioner is DISMISSED.

After Jesus Jose withdrew from the partnership in


January 1987, his capital contribution of P250,000
SO ORDERED.
was refunded to him in cash by agreement of the
partners.[7]
UZVIMINDA J. VILLAREAL, DIOGENES
VILLAREAL and CARMELITO JOSE, petitioners,
In the same month, without prior knowledge of
vs. DONALDO EFREN C. RAMIREZ and Spouses
respondents, petitioners closed down the restaurant,
CESAR G. RAMIREZ JR. and CARMELITA C.
allegedly because of increased rental. The
RAMIREZ, respondents.
restaurant furniture and equipment were deposited
in the respondents house for storage.[8]
DECISION
On March 1, 1987, respondent spouses wrote
petitioners, saying that they were no longer
PANGANIBAN, J.: interested in continuing their partnership or in
reopening the restaurant, and that they were
accepting the latters offer to return their capital
A share in a partnership can be returned only after contribution.[9]
the completion of the latters dissolution, liquidation
and winding up of the business.
On October 13, 1987, Carmelita Ramirez wrote
another letter informing petitioners of the
The Case deterioration of the restaurant furniture and
equipment stored in their house. She also reiterated
the request for the return of their one-third share in
the equity of the partnership. The repeated oral and
written requests were, however, left unheeded.[10] (c) Costs of suit.

Before the Regional Trial Court (RTC) of Makati, The CA Ruling


Branch 59, respondents subsequently filed a
Complaint[11] dated November 10, 1987, for the
collection of a sum of money from petitioners. The CA held that, although respondents had no right
to demand the return of their capital contribution, the
partnership was nonetheless dissolved when
In their Answer, petitioners contended that petitioners lost interest in continuing the restaurant
respondents had expressed a desire to withdraw business with them. Because petitioners never gave
from the partnership and had called for its dissolution a proper accounting of the partnership accounts for
under Articles 1830 and 1831 of the Civil Code; that liquidation purposes, and because no sufficient
respondents had been paid, upon the turnover to evidence was presented to show financial losses,
them of furniture and equipment worth over the CA computed their liability as follows:
P400,000; and that the latter had no right to demand
a return of their equity because their share, together
with the rest of the capital of the partnership, had Consequently, since what has been proven is only
been spent as a result of irreversible business the outstanding obligation of the partnership in the
losses.[12] amount of P240,658.00, although contracted by the
partnership before [respondents] have joined the
partnership but in accordance with Article 1826 of
In their Reply, respondents alleged that they did not the New Civil Code, they are liable which must have
know of any loan encumbrance on the restaurant. to be deducted from the remaining capitalization of
According to them, if such allegation were true, then the said partnership which is in the amount of
the loans incurred by petitioners should be regarded P1,000,000.00 resulting in the amount of
as purely personal and, as such, not chargeable to P759,342.00, and in order to get the share of
the partnership. The former further averred that they [respondents], this amount of P759,342.00 must be
had not received any regular report or accounting divided into three (3) shares or in the amount of
from the latter, who had solely managed the P253,114.00 for each share and which is the only
business. Respondents also alleged that they amount which [petitioner] will return to [respondents]
expected the equipment and the furniture stored in representing the contribution to the partnership
their house to be removed by petitioners as soon as minus the outstanding debt thereof.[19]
the latter found a better location for the
restaurant.[13]
Hence, this Petition.[20]

Respondents filed an Urgent Motion for Leave to Sell


or Otherwise Dispose of Restaurant Furniture and Issues
Equipment[14] on July 8, 1988. The furniture and the
equipment stored in their house were inventoried
and appraised at P29,000.[15] The display freezer In their Memorandum,[21] petitioners submit the
was sold for P5,000 and the proceeds were paid to following issues for our consideration:
them.[16]

9.1. Whether the Honorable Court of Appeals


After trial, the RTC[17] ruled that the parties had decision ordering the distribution of the capital
voluntarily entered into a partnership, which could be contribution, instead of the net capital after the
dissolved at any time. Petitioners clearly intended to dissolution and liquidation of a partnership, thereby
dissolve it when they stopped operating the treating the capital contribution like a loan, is in
restaurant. Hence, the trial court, in its July 21, 1992 accordance with law and jurisprudence;
Decision, held them liable as follows:[18]

9.2. Whether the Honorable Court of Appeals


WHEREFORE, judgment is hereby rendered in decision ordering the petitioners to jointly and
favor of [respondents] and against the [petitioners] severally pay and reimburse the amount of
ordering the [petitioners] to pay jointly and severally [P]253,114.00 is supported by the evidence on
the following: record; and

(a) Actual damages in the amount of P250,000.00 9.3. Whether the Honorable Court of Appeals was
correct in making [n]o pronouncement as to
costs.[22]
(b) Attorneys fee in the amount of P30,000.00
other words, sold and converted to cash -- and all
partnership creditors, if any, paid. The CAs
On closer scrutiny, the issues are as follows: (1) computation of the amount to be refunded to
whether petitioners are liable to respondents for the respondents as their share was thus erroneous.
latters share in the partnership; (2) whether the CAs
computation of P253,114 as respondents share is
correct; and (3) whether the CA was likewise correct
in not assessing costs. First, it seems that the appellate court was under the
misapprehension that the total capital contribution
was equivalent to the gross assets to be distributed
to the partners at the time of the dissolution of the
This Courts Ruling partnership. We cannot sustain the underlying idea
that the capital contribution at the beginning of the
partnership remains intact, unimpaired and available
The Petition has merit. for distribution or return to the partners. Such idea is
speculative, conjectural and totally without factual or
legal support.
First Issue:
Share in Partnership
Generally, in the pursuit of a partnership business,
its capital is either increased by profits earned or
decreased by losses sustained. It does not remain
Both the trial and the appellate courts found that a static and unaffected by the changing fortunes of the
partnership had indeed existed, and that it was business. In the present case, the financial
dissolved on March 1, 1987. They found that the statements presented before the trial court showed
dissolution took place when respondents informed that the business had made meager profits.[26]
petitioners of the intention to discontinue it because However, notable therefrom is the omission of any
of the formers dissatisfaction with, and loss of trust provision for the depreciation[27] of the furniture and
in, the latters management of the partnership affairs. the equipment. The amortization of the goodwill[28]
These findings were amply supported by the (initially valued at P500,000) is not reflected either.
evidence on record. Respondents consequently Properly taking these non-cash items into account
demanded from petitioners the return of their one- will show that the partnership was actually
third equity in the partnership. sustaining substantial losses, which consequently
decreased the capital of the partnership. Both the
trial and the appellate courts in fact recognized the
We hold that respondents have no right to demand decrease of the partnership assets to almost nil, but
from petitioners the return of their equity share. the latter failed to recognize the consequent
Except as managers of the partnership, petitioners corresponding decrease of the capital.
did not personally hold its equity or assets. The
partnership has a juridical personality separate and
distinct from that of each of the partners.[23] Since Second, the CAs finding that the partnership had an
the capital was contributed to the partnership, not to outstanding obligation in the amount of P240,658
petitioners, it is the partnership that must refund the was not supported by evidence. We sustain the
equity of the retiring partners.[24] contrary finding of the RTC, which had rejected the
contention that the obligation belonged to the
partnership for the following reason:
Second Issue:
What Must Be Returned?
x x x [E]vidence on record failed to show the exact
loan owed by the partnership to its creditors. The
balance sheet (Exh. 4) does not reveal the total loan.
Since it is the partnership, as a separate and distinct The Agreement (Exh. A) par. 6 shows an
entity, that must refund the shares of the partners, outstanding obligation of P240,055.00 which the
the amount to be refunded is necessarily limited to partnership owes to different creditors, while the
its total resources. In other words, it can only pay out Certification issued by Mercator Finance (Exh. 8)
what it has in its coffers, which consists of all its shows that it was Sps. Diogenes P. Villareal and
assets. However, before the partners can be paid Luzviminda J. Villareal, the former being the nominal
their shares, the creditors of the partnership must party defendant in the instant case, who obtained a
first be compensated.[25] After all the creditors have loan of P355,000.00 on Oct. 1983, when the original
been paid, whatever is left of the partnership assets partnership was not yet formed.
becomes available for the payment of the partners
shares.
Third, the CA failed to reduce the capitalization by
P250,000, which was the amount paid by the
Evidently, in the present case, the exact amount of partnership to Jesus Jose when he withdrew from
refund equivalent to respondents one-third share in the partnership.
the partnership cannot be determined until all the
partnership assets will have been liquidated -- in
Because of the above-mentioned transactions, the reasons, to decree otherwise. When a lower court is
partnership capital was actually reduced. When reversed, the higher court normally does not award
petitioners and respondents ventured into business costs, because the losing party relied on the lower
together, they should have prepared for the fact that courts judgment which is presumed to have been
their investment would either grow or shrink. In the issued in good faith, even if found later on to be
present case, the investment of respondents erroneous. Unless shown to be patently capricious,
substantially dwindled. The original amount of the award shall not be disturbed by a reviewing
P250,000 which they had invested could no longer tribunal.
be returned to them, because one third of the
partnership properties at the time of dissolution did
not amount to that much. WHEREFORE, the Petition is GRANTED, and the
assailed Decision and Resolution SET ASIDE. This
disposition is without prejudice to proper
It is a long established doctrine that the law does not proceedings for the accounting, the liquidation and
relieve parties from the effects of unwise, foolish or the distribution of the remaining partnership assets,
disastrous contracts they have entered into with all if any. No pronouncement as to costs.
the required formalities and with full awareness of
what they were doing. Courts have no power to
relieve them from obligations they have voluntarily SO ORDERED.
assumed, simply because their contracts turn out to
be disastrous deals or unwise investments.[29]

Petitioners further argue that respondents acted


negligently by permitting the partnership assets in
their custody to deteriorate to the point of being
almost worthless. Supposedly, the latter should
have liquidated these sole tangible assets of the
partnership and considered the proceeds as
payment of their net capital. Hence, petitioners
argue that the turnover of the remaining partnership
assets to respondents was precisely the manner of
liquidating the partnership and fully settling the
latters share in the partnership.

We disagree. The delivery of the store furniture and


equipment to private respondents was for the
purpose of storage. They were unaware that the
restaurant would no longer be reopened by
petitioners. Hence, the former cannot be faulted for
not disposing of the stored items to recover their
capital investment.

Third Issue:
Costs

Section 1, Rule 142, provides:

SECTION 1. Costs ordinarily follow results of suit.


Unless otherwise provided in these rules, costs shall
be allowed to the prevailing party as a matter of
course, but the court shall have power, for special
reasons, to adjudge that either party shall pay the
costs of an action, or that the same be divided, as
may be equitable. No costs shall be allowed against
the Republic of the Philippines unless otherwise
provided by law.

Although, as a rule, costs are adjudged against the


losing party, courts have discretion, for special