G.R. No.

L-48889 May 11, 1989

DEVELOPMENT BANK OF THE PHILIPPINES (DBP), petitioner,

vs.
THE HONORABLE MIDPAINTAO L. ADIL, Judge of the Second Branch of the Court of First Instance of Iloilo and SPOUSES
PATRICIO CONFESOR and JOVITA VILLAFUERTE, respondents.

The issue posed in this petition for review on certiorari is the validity of a promissory note which was executed in consideration of a
previous promissory note the enforcement of which had been barred by prescription.

On February 10, 1940 spouses Patricio Confesor and Jovita Villafuerte obtained an agricultural loan from the Agricultural and Industrial
Bank (AIB), now the Development of the Philippines (DBP), in the sum of P2,000.00, Philippine Currency, as evidenced by a promissory
note of said date whereby they bound themselves jointly and severally to pay the account in ten (10) equal yearly amortizations. As the
obligation remained outstanding and unpaid even after the lapse of the aforesaid ten-year period, Confesor, who was by then a member
of the Congress of the Philippines, executed a second promissory note on April 11, 1961 expressly acknowledging said loan and promising
to pay the same on or before June 15, 1961. The new promissory note reads as follows —

I hereby promise to pay the amount covered by my promissory note on or before June 15, 1961. Upon my failure to do
so, I hereby agree to the foreclosure of my mortgage. It is understood that if I can secure a certificate of indebtedness
from the government of my back pay I will be allowed to pay the amount out of it.

Said spouses not having paid the obligation on the specified date, the DBP filed a complaint dated September 11, 1970 in the City Court
of Iloilo City against the spouses for the payment of the loan.

After trial on the merits a decision was rendered by the inferior court on December 27, 1976, the dispositive part of which reads as follows:

WHEREFORE, premises considered, this Court renders judgment, ordering the defendants Patricio Confesor and
Jovita Villafuerte Confesor to pay the plaintiff Development Bank of the Philippines, jointly and severally, (a) the sum
of P5,760.96 plus additional daily interest of P l.04 from September 17, 1970, the date Complaint was filed, until said
amount is paid; (b) the sum of P576.00 equivalent to ten (10%) of the total claim by way of attorney's fees and incidental
expenses plus interest at the legal rate as of September 17,1970, until fully paid; and (c) the costs of the suit.

Defendants-spouses appealed therefrom to the Court of First Instance of Iloilo wherein in due course a decision was rendered on April
28, 1978 reversing the appealed decision and dismissing the complaint and counter-claim with costs against the plaintiff.

A motion for reconsideration of said decision filed by plaintiff was denied in an order of August 10, 1978. Hence this petition wherein
petitioner alleges that the decision of respondent judge is contrary to law and runs counter to decisions of this Court when respondent
judge (a) refused to recognize the law that the right to prescription may be renounced or waived; and (b) that in signing the second
promissory note respondent Patricio Confesor can bind the conjugal partnership; or otherwise said respondent became liable in his
personal capacity. The petition is impressed with merit. The right to prescription may be waived or renounced. Article 1112 of Civil Code
provides:

Art. 1112. Persons with capacity to alienate property may renounce prescription already obtained, but not the right to
prescribe in the future.

Prescription is deemed to have been tacitly renounced when the renunciation results from acts which imply the
abandonment of the right acquired.

There is no doubt that prescription has set in as to the first promissory note of February 10, 1940. However, when respondent Confesor
executed the second promissory note on April 11, 1961 whereby he promised to pay the amount covered by the previous promissory
note on or before June 15, 1961, and upon failure to do so, agreed to the foreclosure of the mortgage, said respondent thereby effectively
and expressly renounced and waived his right to the prescription of the action covering the first promissory note.

This Court had ruled in a similar case that –

... when a debt is already barred by prescription, it cannot be enforced by the creditor. But a new contract recognizing
and assuming the prescribed debt would be valid and enforceable ... . 1

Thus, it has been held —

Where, therefore, a party acknowledges the correctness of a debt and promises to pay it after the same has prescribed
and with full knowledge of the prescription he thereby waives the benefit of prescription. 2
This is not a mere case of acknowledgment of a debt that has prescribed but a new promise to pay the debt. The consideration of the
new promissory note is the pre-existing obligation under the first promissory note. The statutory limitation bars the remedy but does not
discharge the debt.

A new express promise to pay a debt barred ... will take the case from the operation of the statute of limitations as this
proceeds upon the ground that as a statutory limitation merely bars the remedy and does not discharge the debt, there
is something more than a mere moral obligation to support a promise, to wit a – pre-existing debt which is a sufficient
consideration for the new the new promise; upon this sufficient consideration constitutes, in fact, a new cause of
action. 3

... It is this new promise, either made in express terms or deduced from an acknowledgement as a legal implication,
which is to be regarded as reanimating the old promise, or as imparting vitality to the remedy (which by lapse of time
had become extinct) and thus enabling the creditor to recover upon his original contract. 4

However, the court a quo held that in signing the promissory note alone, respondent Confesor cannot thereby bind his wife, respondent
Jovita Villafuerte, citing Article 166 of the New Civil Code which provides:

Art. 166. Unless the wife has been declared a non compos mentis or a spend thrift, or is under civil interdiction or is
confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal partnership
without, the wife's consent. If she ay compel her to refuses unreasonably to give her consent, the court m grant the
same.

We disagree. Under Article 165 of the Civil Code, the husband is the administrator of the conjugal partnership. As such administrator, all
debts and obligations contracted by the husband for the benefit of the conjugal partnership, are chargeable to the conjugal
partnership. 5 No doubt, in this case, respondent Confesor signed the second promissory note for the benefit of the conjugal partnership.
Hence the conjugal partnership is liable for this obligation.

WHEREFORE, the decision subject of the petition is reversed and set aside and another decision is hereby rendered reinstating the
decision of the City Court of Iloilo City of December 27, 1976, without pronouncement as to costs in this instance. This decision is
immediately executory and no motion for extension of time to file motion for reconsideration shall be granted.

SO ORDERED.
 G.R. No. L-23749 April 29, 1977

FAUSTINO CRUZ, plaintiff-appellant,

vs.
J. M. TUASON & COMPANY, INC., and GREGORIO ARANETA, INC., defendants-appellees.

Appeal from the order dated August 13, 1964 of the Court of First Instance of Quezon City in Civil Case No. Q-7751, Faustino Cruz vs.
J.M. Tuason & Co., Inc., and Gregorio Araneta, Inc., dismissing the complaint of appellant Cruz for the recovery of improvements he has
made on appellees' land and to compel appellees to convey to him 3,000 square meters of land on three grounds: (1) failure of the
complaint to state a cause of action; (2) the cause of action of plaintiff is unenforceable under the Statute of Frauds; and (3) the action of
the plaintiff has already prescribed.

Actually, a perusal of plaintiff-appellant's complaint below shows that he alleged two separate causes of action, namely: (1) that upon
request of the Deudors (the family of Telesforo Deudor who laid claim on the land in question on the strength of an "informacion posesoria"
) plaintiff made permanent improvements valued at P30,400.00 on said land having an area of more or less 20 quinones and for which
he also incurred expenses in the amount of P7,781.74, and since defendants-appellees are being benefited by said improvements, he is
entitled to reimbursement from them of said amounts and (2) that in 1952, defendants availed of plaintiff's services as an intermediary
with the Deudors to work for the amicable settlement of Civil Case No. Q-135, then pending also in the Court of First Instance of Quezon
City, and involving 50 quinones of land, of Which the 20 quinones aforementioned form part, and notwithstanding his having performed
his services, as in fact, a compromise agreement entered into on March 16, 1963 between the Deudors and the defendants was approved
by the court, the latter have refused to convey to him the 3,000 square meters of land occupied by him, (a part of the 20 quinones above)
which said defendants had promised to do "within ten years from and after date of signing of the compromise agreement", as consideration
for his services.

Within the Period allowed by the rules, the defendants filed separate motions to dismiss alleging three Identical grounds: (1) As regards
that improvements made by plaintiff, that the complaint states no cause of action, the agreement regarding the same having been made
by plaintiff with the Deudors and not with the defendants, hence the theory of plaintiff based on Article 2142 of the Code on unjust
enrichment is untenable; and (2) anent the alleged agreement about plaintiffs services as intermediary in consideration of which,
defendants promised to convey to him 3,000 square meters of land, that the same is unenforceable under the Statute of Frauds, there
being nothing in writing about it, and, in any event, (3) that the action of plaintiff to compel such conveyance has already prescribed.

Plaintiff opposed the motion, insisting that Article 2142 of the applicable to his case; that the Statute of Frauds cannot be invoked by
defendants, not only because Article 1403 of the Civil Code refers only to "sale of real property or of an interest therein" and not to
promises to convey real property like the one supposedly promised by defendants to him, but also because, he, the plaintiff has already
performed his part of the agreement, hence the agreement has already been partly executed and not merely executory within the
contemplation of the Statute; and that his action has not prescribed for the reason that defendants had ten years to comply and only after
the said ten years did his cause of action accrue, that is, ten years after March 16, 1963, the date of the approval of the compromise
agreement, and his complaint was filed on January 24, 1964.

Ruling on the motion to dismiss, the trial court issued the herein impugned order of August 13, 1964:

In the motion, dated January 31, 1964, defendant Gregorio Araneta, Inc. prayed that the complaint against it be
dismissed on the ground that (1) the claim on which the action is founded is unenforceable under the provision of the
Statute of Frauds; and (2) the plaintiff's action, if any has already prescribed. In the other motion of February 11, 1964,
defendant J. M. Tuason & Co., Inc. sought the dismissal of the plaintiffs complaint on the ground that it states no cause
of action and on the Identical grounds stated in the motion to dismiss of defendant Gregorio Araneta, Inc. The said
motions are duly opposed by the plaintiff.

From the allegations of the complaint, it appears that, by virtue of an agreement arrived at in 1948 by the plaintiff and
the Deudors, the former assisted the latter in clearing, improving, subdividing and selling the large tract of land
consisting of 50 quinones covered by the informacion posesoria in the name of the late Telesforo Deudor and incurred
expenses, which are valued approximately at P38,400.00 and P7,781.74, respectively; and, for the reasons that said
improvements are being used and enjoyed by the defendants, the plaintiff is seeking the reimbursement for the services
and expenses stated above from the defendants.

Defendant J. M. Tuason & Co., Inc. claimed that, insofar as the plaintiffs claim for the reimbursement of the amounts
of P38,400.00 and P7,781.74 is concerned, it is not a privy to the plaintiff's agreement to assist the Deudors n improving
the 50 quinones. On the other hand, the plaintiff countered that, by holding and utilizing the improvements introduced
by him, the defendants are unjustly enriching and benefiting at the expense of the plaintiff; and that said improvements
constitute a lien or charge of the property itself

On the issue that the complaint insofar as it claims the reimbursement for the services rendered and expenses incurred
by the plaintiff, states no cause of action, the Court is of the opinion that the same is well-founded. It is found that the
defendants are not parties to the supposed express contract entered into by and between the plaintiff and the Deudors
for the clearing and improvement of the 50 quinones. Furthermore in order that the alleged improvement may be
considered a lien or charge on the property, the same should have been made in good faith and under the mistake as
 to the title. The Court can take judicial notice of the fact that the tract of land supposedly improved by the plaintiff had
been registered way back in 1914 in the name of the predecessors-in-interest of defendant J. M. Tuason & Co., Inc.
This fact is confirmed in the decision rendered by the Supreme Court on July 31, 1956 in Case G. R. No. L-5079
entitled J.M. Tuason & Co. Inc. vs. Geronimo Santiago, et al., Such being the case, the plaintiff cannot claim good faith
and mistake as to the title of the land.

On the issue of statute of fraud, the Court believes that same is applicable to the instant case. The allegation in par. 12
of the complaint states that the defendants promised and agreed to cede, transfer and convey unto the plaintiff the
3,000 square meters of land in consideration of certain services to be rendered then. it is clear that the alleged
agreement involves an interest in real property. Under the provisions of See. 2(e) of Article 1403 of the Civil Code, such
agreement is not enforceable as it is not in writing and subscribed by the party charged.

On the issue of statute of limitations, the Court holds that the plaintiff's action has prescribed. It is alleged in par. 11 of
the complaint that, sometime in 1952, the defendants approached the plaintiff to prevail upon the Deudors to enter to
a compromise agreement in Civil Case No. Q-135 and allied cases. Furthermore, par. 13 and 14 of the complaint
alleged that the plaintiff acted as emissary of both parties in conveying their respective proposals and couter-proposals
until the final settlement was effected on March 16, 1953 and approved by Court on April 11, 1953. In the present
action, which was instituted on January 24, 1964, the plaintiff is seeking to enforce the supposed agreement entered
into between him and the defendants in 1952, which was already prescribed.

WHEREFORE, the plaintiffs complaint is hereby ordered DISMISSED without pronouncement as to costs.

SO ORDERED. (Pp. 65-69, Rec. on Appeal,)

On August 22, 1964, plaintiff's counsel filed a motion for reconsideration dated August 20, 1964 as follows:

Plaintiff through undersigned counsel and to this Honorable Court, respectfully moves to reconsider its Order bearing
date of 13 August 1964, on the following grounds:

1. THAT THE COMPLAINT STATES A SUFFICIENT CAUSE OF ACTION AGAINST DEFENDANTS IN SO FAR AS
PLAINTIFF'S CLAIM PAYMENT OF SERVICES AND REIMBURSEMENT OF HIS EXPENSES, IS CONCERNED;

II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE 3,000 SQ. MS., THE SAME HAS NOT PRESCRIBED AND
THE STATUTE OF FRAUDS IS NOT APPLICABLE THERETO;

ARGUMENT

Plaintiff's complaint contains two (2) causes of action — the first being an action for sum of money in the amount of
P7,781.74 representing actual expenses and P38,400.00 as reasonable compensation for services in improving the 50
quinones now in the possession of defendants. The second cause of action deals with the 3,000 sq. ms. which
defendants have agreed to transfer into Plaintiff for services rendered in effecting the compromise between the Deudors
and defendants;

Under its order of August 3, 1964, this Honorable Court dismissed the claim for sum of money on the ground that the
complaint does not state a cause of action against defendants. We respectfully submit:

1. THAT THE COMPLAINT STATES A SUFFICIENT CAUSE OF ACTION AGAINST DEFENDANTS IN SO FAR AS
PLAINTIFF'S CLAIM FOR PAYMENT OF SERVICES AND REIMBURSEMENT OF HIS EXPENSES IS CONCERNED.

Said this Honorable Court (at p. 2, Order):

ORDER

xxx xxx xxx

On the issue that the complaint, in so far as it claims the reimbursement for the services rendered and expenses
incurred by the plaintiff, states no cause of action, the Court is of the opinion that the same is well-founded. It is found
that the defendants are not parties to the supposed express contract entered into by and between the plaintiff and the
Deudors for the clearing and improvement of the 50 quinones. Furthermore, in order that the alleged improvement may
he considered a lien or charge on the property, the same should have been made in good faith and under the mistake
as to title. The Court can take judicial notice of the fact that the tract of land supposedly improved by the plaintiff had
been registered way back in 1914 in the name of the predecessors-in-interest of defendant J. M. Tuason & Co., Inc.
This fact is confirmed in the decision rendered by the Supreme Court on July 31, 1956 in case G. R. No. L-5079
entitled 'J M. Tuason & Co., Inc. vs, Geronimo Santiago, et al.' Such being the case, the plaintiff cannot claim good
faith and mistake as to the title of the land.

The position of this Honorable Court (supra) is that the complaint does not state a cause of action in so far as the claim
for services and expenses is concerned because the contract for the improvement of the properties was solely between
the Deudors and plaintiff, and defendants are not privies to it. Now, plaintiff's theory is that defendants are nonetheless
liable since they are utilizing and enjoying the benefit's of said improvements. Thus under paragraph 16 of "he
complaint, it is alleged:

(16) That the services and personal expenses of plaintiff mentioned in paragraph 7 hereof were
rendered and in fact paid by him to improve, as they in fact resulted in considerable improvement of
the 50 quinones, and defendants being now in possession of and utilizing said improvements should
reimburse and pay plaintiff for such services and expenses.

Plaintiff's cause of action is premised inter alia, on the theory of unjust enrichment under Article 2142 of the civil Code:

ART. 2142. Certain lawful voluntary and unilateral acts give rise to the juridical relation of quasi-
contract to the end that no one shill be unjustly enriched or benefited at the expense of another.

In like vein, Article 19 of the same Code enjoins that:

ART. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give
every-one his due and observe honesty and good faith.

We respectfully draw the attention of this Honorable Court to the fact that ARTICLE 2142 (SUPRA) DEALS WITH
QUASI-CONTRACTS or situations WHERE THERE IS NO CONTRACT BETWEEN THE PARTIES TO THE ACTION.
Further, as we can readily see from the title thereof (Title XVII), that the Same bears the designation 'EXTRA
CONTRACTUAL OBLIGATIONS' or obligations which do not arise from contracts. While it is true that there was no
agreement between plaintiff and defendants herein for the improvement of the 50 quinones since the latter are presently
enjoying and utilizing the benefits brought about through plaintiff's labor and expenses, defendants should pay and
reimburse him therefor under the principle that 'no one may enrich himself at the expense of another.' In this posture,
the complaint states a cause of action against the defendants.

II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE 3,000 SQ. MS. THE SAME HAS NOT PRESCRIBED AND
THE STATUTE OF FRAUDS IS NOT APPLICABLE THERETO.

The Statute of Frauds is CLEARLY inapplicable to this case:

At page 2 of this Honorable Court's order dated 13 August 1964, the Court ruled as follows:

ORDER

xxx xxx xxx

On the issue of statute of fraud, the Court believes that same is applicable to the instant Case, The
allegation in par. 12 of the complaint states that the defendants promised and agree to cede, transfer
and convey unto the plaintiff, 3,000 square meters of land in consideration of certain services to be
rendered then. It is clear that the alleged agreement involves an interest in real property. Under the
provisions of Sec. 2(e) of Article 1403 of the Civil Code, such agreement is not enforceable as it is
not in writing and subscribed by the party charged.

To bring this issue in sharper focus, shall reproduce not only paragraph 12 of the complaint but also the other pertinent
paragraphs therein contained. Paragraph 12 states thus:

COMPLAINT

xxx xxx xxx

12). That plaintiff conferred with the aforesaid representatives of defendants several times and on these occasions, the
latter promised and agreed to cede, transfer and convey unto plaintiff the 3,000 sq. ms. (now known as Lots 16-B, 17
and 18) which plaintiff was then occupying and continues to occupy as of this writing, for and in consideration of the
following conditions:
 (a) That plaintiff succeed in convincing the DEUDORS to enter into a compromise agreement and
that such agreement be actually entered into by and between the DEUDORS and defendant
companies;

(b) That as of date of signing the compromise agreement, plaintiff shall be the owner of the 3,000 sq.
ms. but the documents evidencing his title over this property shall be executed and delivered by
defendants to plaintiff within ten (10) years from and after date of signing of the compromise
agreement;

(c) That plaintiff shall, without any monetary expense of his part, assist in clearing the 20 quinones
of its occupants;

13). That in order to effect a compromise between the parties. plaintiff not only as well acted as emissary of both parties
in conveying their respective proposals and counter- proposals until succeeded in convinzing the DEUDORS to settle
with defendants amicably. Thus, on March 16, 1953, a Compromise Agreement was entered into by and between the
DEUDORS and the defendant companies; and on April 11, 1953, this agreement was approved by this Honorable
Court;

14). That in order to comply with his other obligations under his agreement with defendant companies, plaintiff had to
confer with the occupants of the property, exposing himself to physical harm, convincing said occupants to leave the
premises and to refrain from resorting to physical violence in resisting defendants' demands to vacate;

That plaintiff further assisted defendants' employees in the actual demolition and transfer of all the
houses within the perimeter of the 20 quinones until the end of 1955, when said area was totally
cleared and the houses transferred to another area designated by the defendants as 'Capt. Cruz
Block' in Masambong, Quezon City. (Pars. 12, 13 and 14, Complaint; Emphasis supplied)

From the foregoing, it is clear then the agreement between the parties mentioned in paragraph 12 (supra) of the
complaint has already been fully EXECUTED ON ONE PART, namely by the plaintiff. Regarding the applicability of the
statute of frauds (Art. 1403, Civil Code), it has been uniformly held that the statute of frauds IS APPLICABLE ONLY
TO EXECUTORY CONTRACTS BUT NOT WHERE THE CONTRACT HAS BEEN PARTLY EXECUTED:

SAME ACTION TO ENFORCE. — The statute of frauds has been uniformly interpreted to be
applicable to executory and not to completed or contracts. Performance of the contracts takes it out
of the operation of the statute. ...

The statute of the frauds is not applicable to contracts which are either totally or partially performed,
on the theory that there is a wide field for the commission of frauds in executory contracts which can
only be prevented by requiring them to be in writing, a facts which is reduced to a minimum in
executed contracts because the intention of the parties becomes apparent buy their execution and
execution, in mots cases, concluded the right the parties. ... The partial performance may be proved
by either documentary or oral evidence. (At pp. 564-565, Tolentino's Civil Code of the Philippines,
Vol. IV, 1962 Ed.; Emphasis supplied).

Authorities in support of the foregoing rule are legion. Thus Mr. Justice Moran in his 'Comments on the Rules of Court',
Vol. III, 1974 Ed., at p. 167, states:

2 THE STATUTE OF FRAUDS IS APPLICABLE ONLY TO EXECUTORY CONTRACTS:

CONTRACTS WHICH ARE EITHER TOTALLY OR PARTIALLY PERFORMED ARE WITHOUT THE
STATUE. The statute of frauds is applicable only to executory contracts. It is neither applicable to
executed contracts nor to contracts partially performed. The reason is simple. In executory contracts
there is a wide field for fraud because unless they be in writing there is no palpable evidence of the
intention of the contracting parties. The statute has been enacted to prevent fraud. On the other hand
the commission of fraud in executed contracts is reduced to minimum in executed contracts because
(1) the intention of the parties is made apparent by the execution and (2) execution concludes, in
most cases, the rights of the parties. (Emphasis supplied)

Under paragraphs 13 and 14 of the complaint (supra) one can readily see that the plaintiff has fulfilled ALL his obligation
under the agreement between him defendants concerning the 3,000 sq. ms. over which the latter had agreed to execute
the proper documents of transfer. This fact is further projected in paragraph 15 of the complaint where plaintiff states;

15). That in or about the middle of 1963, after all the conditions stated in paragraph 12 hereof had
been fulfilled and fully complied with, plaintiff demanded of said defendants that they execute the
Deed of Conveyance in his favor and deliver the title certificate in his name, over the 3,000 sq. ms.
 but defendants failed and refused and continue to fail and refuse to heed his demands. (par. 15,
complaint; Emphasis supplied).

In view of the foregoing, we respectfully submit that this Honorable court erred in holding that the statute of frauds is
applicable to plaintiff's claim over the 3,000 sq. ms. There having been full performance of the contract on plaintiff's
part, the same takes this case out of the context of said statute.

Plaintiff's Cause of Action had NOT Prescribed:

With all due respect to this Honorable court, we also submit that the Court committed error in holding that this action
has prescribed:

ORDER

xxx xxx xxx

On the issue of the statute of limitations, the Court holds that the plaintiff's action has prescribed. It
is alleged in par. III of the complaint that, sometime in 1952, the defendants approached the plaintiff
to prevail upon the Deudors to enter into a compromise agreement in Civil Case No. Q-135 and allied
cases. Furthermore, pars. 13 and 14 of the complaint alleged that plaintiff acted as emissary of both
parties in conveying their respective proposals and counter-proposals until the final settlement was
affected on March 16, 1953 and approved by the Court on April 11, 1953. In the present actin, which
was instituted on January 24, 1964, the plaintiff is seeking to enforce the supposed agreement
entered into between him and the defendants in 1952, which has already proscribed. (at p. 3, Order).

The present action has not prescribed, especially when we consider carefully the terms of the agreement between
plaintiff and the defendants. First, we must draw the attention of this Honorable Court to the fact that this is an action
to compel defendants to execute a Deed of Conveyance over the 3,000 sq. ms. subject of their agreement. In paragraph
12 of the complaint, the terms and conditions of the contract between the parties are spelled out. Paragraph 12 (b) of
the complaint states:

(b) That as of date of signing the compromise agreement, plaintiff shall be the owner of the 3,000 sq.
ms. but the documents evidencing his title over this property shall be executed and delivered by
defendants to plaintiff within ten (10) years from and after date of signing of the compromise
agreement. (Emphasis supplied).

The compromise agreement between defendants and the Deudors which was conclude through the efforts of plaintiff,
was signed on 16 March 1953. Therefore, the defendants had ten (10) years signed on 16 March 1953. Therefore, the
defendants had ten (10) years from said date within which to execute the deed of conveyance in favor of plaintiff over
the 3,000 sq. ms. As long as the 10 years period has not expired, plaintiff had no right to compel defendants to execute
the document and the latter were under no obligation to do so. Now, this 10-year period elapsed on March 16, 1963.
THEN and ONLY THEN does plaintiff's cause of action plaintiff on March 17, 1963. Thus, under paragraph 15, of the
complaint (supra) plaintiff made demands upon defendants for the execution of the deed 'in or about the middle of
1963.

Since the contract now sought to be enforced was not reduced to writing, plaintiff's cause of action expires on March
16, 1969 or six years from March 16, 1963 WHEN THE CAUSE OF ACTION ACCRUED (Art. 1145, Civil Code).

In this posture, we gain respectfully submit that this Honorable Court erred in holding that plaintiff's action has
prescribed.

PRAYER

WHEREFORE, it is respectfully prayed that " Honorable Court reconsider its Order dated August 13, 1964; and issue
another order denying the motions to dismiss of defendants G. Araneta, Inc. and J. M. Tuason Co. Inc. for lack of merit.
(Pp. 70-85, Record on Appeal.)

Defendants filed an opposition on the main ground that "the arguments adduced by the plaintiff are merely reiterations of his arguments
contained in his Rejoinder to Reply and Opposition, which have not only been refuted in herein defendant's Motion to Dismiss and Reply
but already passed upon by this Honorable Court."

On September 7, 1964, the trial court denied the motion for reconsiderations thus:
 After considering the plaintiff's Motion for Reconsideration of August 20, 1964 and it appearing that the grounds relied
upon in said motion are mere repetition of those already resolved and discussed by this Court in the order of August
13, 1964, the instant motion is hereby denied and the findings and conclusions arrived at by the Court in its order of
August 13, 1964 are hereby reiterated and affirmed.

SO ORDERED. (Page 90, Rec. on Appeal.)

Under date of September 24, 1964, plaintiff filed his record on appeal.

In his brief, appellant poses and discusses the following assignments of error:

I. THAT THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT ON THE GROUND THAT APPELLANT'S
CLAIM OVER THE 3,000 SQ. MS. IS ALLEGEDLY UNENFORCEABLE UNDER THE STATUTE OF FRAUDS;

II. THAT THE COURT A QUO FURTHER COMMITTED ERROR IN DISMISSING APPELLANT'S COMPLAINT ON
THE GROUND THAT HIS CLAIM OVER THE 3,000 SQ. MS. IS ALLEGEDLY BARRED BY THE STATUTE OF
LIMITATIONS; and

III. THAT THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT FOR FAILURE TO STATE A CAUSE OF
ACTION IN SO FAR AS APPELLANT'S CLAIM FOR REIMBURSEMENT OF EXPENSES AND FOR SERVICES
RENDERED IN THE IMPROVEMENT OF THE FIFTY (50) QUINONES IS CONCERNED.

We agree with appellant that the Statute of Frauds was erroneously applied by the trial court. It is elementary that the Statute refers to
specific kinds of transactions and that it cannot apply to any that is not enumerated therein. And the only agreements or contracts covered
thereby are the following:

(1) Those entered into in the name of another person by one who has been given no authority or legal representation,
or who has acted beyond his powers;

(2) Those do not comply with the Statute of Frauds as set forth in this number, In the following cases an agreement
hereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing,
and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without
the writing, or a secondary evidence of its contents:

(a) An agreement that by its terms is not to be performed within a year from the making thereof;

(b) A special promise to answer for the debt, default, or miscarriage of another;

(c) An agreement made in consideration of marriage, other than a mutual promise to marry;

(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five
hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the
evidences, or some of them of such things in action, or pay at the time some part of the purchase
money; but when a sale is made by auction and entry is made by the auctioneer in his sales book,
at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the
purchasers and person on whose account the sale is made, it is a sufficient memorandum:

(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or
of an interest therein:

(f) a representation as to the credit of a third person.

(3) Those where both parties are incapable of giving consent to a contract. (Art. 1403, civil Code.)

In the instant case, what appellant is trying to enforce is the delivery to him of 3,000 square meters of land which he claims defendants
promised to do in consideration of his services as mediator or intermediary in effecting a compromise of the civil action, Civil Case No.
135, between the defendants and the Deudors. In no sense may such alleged contract be considered as being a "sale of real property or
of any interest therein." Indeed, not all dealings involving interest in real property come under the Statute.

Moreover, appellant's complaint clearly alleges that he has already fulfilled his part of the bargains to induce the Deudors to amicably
settle their differences with defendants as, in fact, on March 16, 1963, through his efforts, a compromise agreement between these parties
was approved by the court. In other words, the agreement in question has already been partially consummated, and is no longer merely
executory. And it is likewise a fundamental principle governing the application of the Statute that the contract in dispute should be purely
executory on the part of both parties thereto.

We cannot, however, escape taking judicial notice, in relation to the compromise agreement relied upon by appellant, that in several
cases We have decided, We have declared the same rescinded and of no effect. In J. M. Tuason & Co., Inc. vs. Bienvenido Sanvictores,
4 SCRA 123, the Court held:

It is also worthy of note that the compromise between Deudors and Tuason, upon which Sanvictores predicates his
right to buy the lot he occupies, has been validly rescinded and set aside, as recognized by this Court in its decision in
G.R. No. L-13768, Deudor vs. Tuason, promulgated on May 30, 1961.

We repeated this observation in J.M. Tuason & Co., Inc. vs. Teodosio Macalindong, 6 SCRA 938. Thus, viewed from what would be the
ultimate conclusion of appellant's case, We entertain grave doubts as to whether or not he can successfully maintain his alleged cause
of action against defendants, considering that the compromise agreement that he invokes did not actually materialize and defendants
have not benefited therefrom, not to mention the undisputed fact that, as pointed out by appellees, appellant's other attempt to secure
the same 3,000 square meters via the judicial enforcement of the compromise agreement in which they were supposed to be reserved
for him has already been repudiated by the courts. (pp. 5-7. Brief of Appellee Gregorio Araneta, Inc.)

As regards appellant's third assignment of error, We hold that the allegations in his complaint do not sufficiently Appellants' reliance. on
Article 2142 of Civil Code is misplaced. Said article provides:

Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one
shall be unjustly enriched or benefited at the expense of another.

From the very language of this provision, it is obvious that a presumed qauasi-contract cannot emerge as against one party when the
subject mater thereof is already covered by an existing contract with another party. Predicated on the principle that no one should be
allowed to unjustly enrich himself at the expense of another, Article 2124 creates the legal fiction of a quasi-contract precisely because
of the absence of any actual agreement between the parties concerned. Corollarily, if the one who claims having enriched somebody has
done so pursuant to a contract with a third party, his cause of action should be against the latter, who in turn may, if there is any ground
therefor, seek relief against the party benefited. It is essential that the act by which the defendant is benefited must have been voluntary
and unilateral on the part of the plaintiff. As one distinguished civilian puts it, "The act is voluntary. because the actor in quasi-contracts
is not bound by any pre-existing obligation to act. It is unilateral, because it arises from the sole will of the actor who is not previously
bound by any reciprocal or bilateral agreement. The reason why the law creates a juridical relations and imposes certain obligation is to
prevent a situation where a person is able to benefit or take advantage of such lawful, voluntary and unilateral acts at the expense of said
actor." (Ambrosio Padilla, Civil Law, Vol. VI, p. 748, 1969 ed.) In the case at bar, since appellant has a clearer and more direct recourse
against the Deudors with whom he had entered into an agreement regarding the improvements and expenditures made by him on the
land of appellees. it Cannot be said, in the sense contemplated in Article 2142, that appellees have been enriched at the expense of
appellant.

In the ultimate. therefore, Our holding above that appellant's first two assignments of error are well taken cannot save the day for him.
Aside from his having no cause of action against appellees, there is one plain error of omission. We have found in the order of the trial
court which is as good a ground as any other for Us to terminate this case favorably to appellees. In said order Which We have quoted
in full earlier in this opinion, the trial court ruled that "the grounds relied upon in said motion are mere repetitions of those already resolved
and discussed by this Court in the order of August 13, 1964", an observation which We fully share. Virtually, therefore. appellant's motion
for reconsideration was ruled to be pro-forma. Indeed, a cursory reading of the record on appeal reveals that appellant's motion for
reconsideration above-quoted contained exactly the same arguments and manner of discussion as his February 6, 1964 "Opposition to
Motion to Dismiss" of defendant Gregorio Araneta, Inc. ((pp. 17-25, Rec. on Appeal) as well as his February 17, 1964 "Opposition to
Motion to Dismiss of Defendant J. M. Tuason & Co." (pp. 33-45, Rec. on Appeal and his February 29, 1964 "Rejoinder to Reply Oil
Defendant J. M. Tuason & Co." (pp. 52-64, Rec. on Appeal) We cannot see anything in said motion for reconsideration that is substantially
different from the above oppositions and rejoinder he had previously submitted and which the trial court had already considered when it
rendered its main order of dismissal. Consequently, appellant's motion for reconsideration did not suspend his period for appeal. (Estrada
vs. Sto. Domingo, 28 SCRA 890, 905-6.) And as this point was covered by appellees' "Opposition to Motion for Reconsideration" (pp.
8689), hence, within the frame of the issues below, it is within the ambit of Our authority as the Supreme Court to consider the same here
even if it is not discussed in the briefs of the parties. (Insular Life Assurance Co., Ltd. Employees Association-NATU vs. Insular Life
Assurance Co., Ltd. [Resolution en banc of March 10, 1977 in G. R. No. L-25291).

Now, the impugned main order was issued on August 13, 1964, while the appeal was made on September 24, 1964 or 42 days later.
Clearly, this is beyond the 30-day reglementary period for appeal. Hence, the subject order of dismissal was already final and executory
when appellant filed his appeal.

WHEREFORE, the appeal of Faustino Cruz in this case is dismissed. No costs.

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

RUSTICO ADILLE, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, EMETERIA ASEJO, TEODORICA ASEJO, DOMINGO ASEJO, JOSEFA ASEJO and
SANTIAGO ASEJO, respondents.

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." 1

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 co-ownership.

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 costs.

SO ORDERED,
 G.R. Nos. 193383-84, January 14, 2015

CBK POWER COMPANY LIMITED, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

[G.R. NOS. 193407-08]

COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. CBK POWER COMPANY LIMITED, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in these consolidated petitions for review on certiorari1 are the Decision2 dated March 29, 2010 and the Resolution3 dated August
16, 2010 of the Court of Tax Appeals (CTA) En Banc in C.T.A. E.B. Nos. 469 and 494, which affirmed the Decision 4 dated August 28,
2008, the Amended Decision5 dated February 12, 2009, and the Resolution6 dated May 7, 2009 of the CTA First Division in CTA Case
Nos. 6699, 6884, and 7166 granting CBK Power Company Limited (CBK Power) a refund of its excess final withholding tax for the taxable
years 2001 to 2003.cralawred

The Facts

CBK Power is a limited partnership duly organized and existing under the laws of the Philippines, and primarily engaged in the
development and operation of the Caliraya, Botocan, and Kalayaan hydroelectric power generating plants in Laguna (CBK Project). It is
registered with the Board of Investments (BOI) as engaged in a preferred pioneer area of investment under the Omnibus Investment
Code of 1987.7chanRoblesvirtualLawlibrary

To finance the CBK Project, CBK Power obtained in August 2000 a syndicated loan from several foreign banks, 8 i.e., BNP Paribas, Dai-
ichi Kangyo Bank, Limited, Industrial Bank of Japan, Limited, and Societe General (original lenders), acting through an Inter-Creditor
Agent, Dai-ichi Kangyo Bank, a Japanese bank that subsequently merged with the Industrial Bank of Japan, Limited (Industrial Bank of
Japan) and the Fuji Bank, Limited (Fuji Bank), with the merged entity being named as Mizuho Corporate Bank (Mizuho Bank). One of the
merged banks, Fuji Bank, had a branch in the Philippines, which became a branch of Mizuho Bank as a result of the merger. The Industrial
Bank of Japan and Mizuho Bank are residents of Japan for purposes of income taxation, and recognized as such under the relevant
provisions of the income tax treaties between the Philippines and Japan. 9chanRoblesvirtualLawlibrary

Certain portions of the loan were subsequently assigned by the original lenders to various other banks, including Fortis Bank (Nederland)
N.V. (Fortis-Netherlands) and Raiffesen Zentral Bank Osterreich AG (Raiffesen Bank). Fortis-Netherlands, in turn, assigned its portion of
the loan to Fortis Bank S.A./N.V. (Fortis-Belgium), a resident of Belgium. Fortis-Netherlands and Raiffesen Bank, on the other hand, are
residents of Netherlands and Austria, respectively. 10chanRoblesvirtualLawlibrary

In February 2001, CBK Power borrowed money from Industrial Bank of Japan, Fortis-Netherlands, Raiffesen Bank, Fortis-Belgium, and
Mizuho Bank for which it remitted interest payments from May 2001 to May 2003. 11 It allegedly withheld final taxes from said payments
based on the following rates, and paid the same to the Revenue District Office No. 55 of the Bureau of Internal Revenue (BIR): (a) fifteen
percent (15%) for Fortis-Belgium, Fortis-Netherlands, and Raiffesen Bank; and (b) twenty percent (20%) for Industrial Bank of Japan and
Mizuho Bank.12chanRoblesvirtualLawlibrary

However, according to CBK Power, under the relevant tax treaties between the Philippines and the respective countries in which each
of the banks is a resident, the interest income derived by the aforementioned banks are subject only to a preferential tax rate of
10%, viz.:13chanRoblesvirtualLawlibrary

BANK COUNTRY OF PREFERENTIAL RATE

RESIDENCE UNDER THE RELEVANT TAX TREATY
Fortis Bank S.A./N.V. Belgium 10% (Article 111, RP-Belgium Tax Treaty)
Industrial Bank of Japan Japan 10% (Article 113, RP-Japan Tax Treaty)
Raiffesen Zentral Bank Osterreich AG Austria 10% (Article 113, RP-Austria Tax Treaty)
Mizuho Corporate Bank Japan 10% (Article 113, RP-Japan Tax Treaty)

Accordingly, on April 14, 2003, CBK Power filed a claim for refund of its excess final withholding taxes allegedly erroneously withheld and
collected for the years 2001 and 2002 with the BIR Revenue Region No. 9. The claim for refund of excess final withholding taxes in 2003
was subsequently filed on March 4, 2005.14chanRoblesvirtualLawlibrary

The Commissioner of Internal Revenue’s (Commissioner) inaction on said claims prompted CBK Power to file petitions for review before
the CTA, viz.:15chanRoblesvirtualLawlibrary

(1) CTA Case No. 6699 was filed by CBK Power on June 6, 2003 seeking the refund of excess final withholding tax in the total amount
of P6,393,267.20 covering the year 2001 with respect to interest income derived by [Fortis-Belgium], Industrial Bank of Japan, and
[Raiffesen Bank]. An Answer was filed by the Commissioner on July 25, 2003.
(2) CTA Case No. 6884 was filed by CBK Power on March 5, 2004 seeking for the refund of the amount of P8,136,174.31 covering [the]
year 2002 with respect to interest income derived by [Fortis-Belgium], Industrial Bank of Japan, [Mizuho Bank], and [Raiffesen Bank].
The Commissioner filed his Answer on May 7, 2004.

x x x x

(3) CTA Case No. 7166 was filed by CBK [Power] on March 9, 2005 seeking for the refund of [the amount of] P1,143,517.21 covering
[the] year 2003 with respect to interest income derived by [Fortis-Belgium], and [Raiffesen Bank]. The Commissioner filed his Answer on
May 9, 2005. (Emphases supplied)

CTA Case Nos. 6699 and 6884 were consolidated first on June 18, 2004. Subsequently, however, all three cases – CTA Case Nos.
6699, 6884, and 7166 – were consolidated in a Resolution dated August 3, 2005. 16chanRoblesvirtualLawlibrary

The CTA First Division Rulings

In a Decision17 dated August 28, 2008, the CTA First Division granted the petitions and ordered the refund of the amount
of P15,672,958.42 upon a finding that the relevant tax treaties were applicable to the case.18 It cited DA-ITAD Ruling No. 099-0319 dated
July 16, 2003, issued by the BIR, confirming CBK Power’s claim that the interest payments it made to Industrial Bank of Japan and
Raiffesen Bank were subject to a final withholding tax rate of only 10% of the gross amount of interest, pursuant to Article 11 of the
Republic of the Philippines (RP)-Austria and RP-Japan tax treaties. However, in DA-ITAD Ruling No. 126-0320 dated August 18, 2003,
also issued by the BIR, interest payments to Fortis-Belgium were likewise subjected to the same rate pursuant to the Protocol Amending
the RP-Belgium Tax Treaty, the provisions of which apply on income derived or which accrued beginning January 1, 2000. With respect
to interest payments made to Fortis-Netherlands before it assigned its portion of the loan to Fortis-Belgium, the CTA First Division likewise
granted the preferential rate.21chanRoblesvirtualLawlibrary

The CTA First Division categorically declared in the August 28, 2008 Decision that the required International Tax Affairs Division (ITAD)
ruling was not a condition sine qua non for the entitlement of the tax relief sought by CBK Power, 22 however, upon motion for
reconsideration23 filed by the Commissioner, the CTA First Division amended its earlier decision by reducing the amount of the refund
from P15,672,958.42 to P14,835,720.39 on the ground that CBK Power failed to obtain an ITAD ruling with respect to its transactions
with Fortis-Netherlands.24 In its Amended Decision25 dated February 12, 2009, the CTA First Division adopted26 the ruling in the case
of Mirant (Philippines) Operations Corporation (formerly: Southern Energy Asia-Pacific Operations [Phils.], Inc.) v. Commissioner of
Internal Revenue (Mirant),27 cited by the Commissioner in his motion for reconsideration, where the Court categorically pronounced in
its Resolution dated February 18, 2008 that an ITAD ruling must be obtained prior to availing a preferential tax rate.

CBK Power moved for the reconsideration28 of the Amended Decision dated February 12, 2009, arguing in the main that the Mirant case,
which was resolved in a minute resolution, did not establish a legal precedent. The motion was denied, however, in a Resolution29 dated
May 7, 2009 for lack of merit.

Undaunted, CBK Power elevated the matter to the CTA En Banc on petition for review,30 docketed as C.T.A E.B. No. 494. The
Commissioner likewise filed his own petition for review, 31 which was docketed as C.T.A. E.B. No. 469. Said petitions were subsequently
consolidated.32chanRoblesvirtualLawlibrary

CBK Power raised the lone issue of whether or not an ITAD ruling is required before it can avail of the preferential tax rate. On the other
hand, the Commissioner claimed that CBK Power failed to exhaust administrative remedies when it filed its petitions before the CTA First
Division, and that said petitions were not filed within the two-year prescriptive period for initiating judicial claims for
refund.33chanRoblesvirtualLawlibrary

The CTA En Banc Ruling

In a Decision34 dated March 29, 2010, the CTA En Banc affirmed the ruling of the CTA First Division that a prior application with the
ITAD is indeed required by Revenue Memorandum Order (RMO) 1-2000,35 which administrative issuance has the force and effect of law
and is just as binding as a tax treaty. The CTA En Banc declared the Mirant case as without any binding effect on CBK Power, having
been resolved by this Court merely through minute resolutions, and relied instead on the mandatory wording of RMO 1-2000, as
follows:36chanRoblesvirtualLawlibrary

III. Policies:

xxxx

2. Any availment of the tax treaty relief shall be preceded by an application by filing BIR Form No. 0901 (Application for
Relief from Double Taxation) with ITAD at least 15 days before the transaction i.e. payment of dividends,
royalties, etc., accompanied by supporting documents justifying the relief. x x x.

The CTA En Banc further held that CBK Power’s petitions for review were filed within the two-year prescriptive period provided under
Section 22937 of the National Internal Revenue Code of 199738 (NIRC), and that it was proper for CBK Power to have filed said petitions
without awaiting the final resolution of its administrative claims for refund before the BIR; otherwise, it would have completely lost its right
to seek judicial recourse if the two-year prescriptive period lapsed with no judicial claim filed.

CBK Power’s motion for partial reconsideration and the Commissioner’s motion for reconsideration of the foregoing Decision were
both denied in a Resolution39 dated August 16, 2010 for lack of merit; hence, the present consolidated petitions.

The Issues Before the Court

In G.R. Nos. 193383-84, CBK Power submits the sole legal issue of whether the BIR may add a requirement – prior application for an
ITAD ruling – that is not found in the income tax treaties signed by the Philippines before a taxpayer can avail of preferential tax rates
under said treaties.40chanRoblesvirtualLawlibrary

On the other hand, in G.R. Nos. 193407-08, the Commissioner maintains that CBK Power is not entitled to a refund in the amount of
P1,143,517.21 for the period covering taxable year 2003 as it allegedly failed to exhaust administrative remedies before seeking judicial
redress.41chanRoblesvirtualLawlibrary

The Court’s Ruling

The Court resolves the foregoing in seriatim.

A. G.R. Nos. 193383-84

The Philippine Constitution provides for adherence to the general principles of international law as part of the law of the land. The time-
honored international principle of pacta sunt servanda demands the performance in good faith of treaty obligations on the part of the
states that enter into the agreement. In this jurisdiction, treaties have the force and effect of law. 42chanRoblesvirtualLawlibrary

The issue of whether the failure to strictly comply with RMO No. 1-2000 will deprive persons or corporations of the benefit of a tax treaty
was squarely addressed in the recent case of Deutsche Bank AG Manila Branch v. Commissioner of Internal Revenue 43 (Deutsche Bank),
where the Court emphasized that the obligation to comply with a tax treaty must take precedence over the objective of RMO No.
1-2000, viz.:chanroblesvirtuallawlibrary

We recognize the clear intention of the BIR in implementing RMO No. 1-2000, but the CTA’s outright denial of a tax treaty relief for failure
to strictly comply with the prescribed period is not in harmony with the objectives of the contracting state to ensure that the benefits
granted under tax treaties are enjoyed by duly entitled persons or corporations.

Bearing in mind the rationale of tax treaties, the period of application for the availment of tax treaty relief as required by RMO No. 1-
2000 should not operate to divest entitlement to the relief as it would constitute a violation of the duty required by good faith in
complying with a tax treaty. The denial of the availment of tax relief for the failure of a taxpayer to apply within the prescribed period under
the administrative issuance would impair the value of the tax treaty. At most, the application for a tax treaty relief from the BIR
should merely operate to confirm the entitlement of the taxpayer to the relief.

The obligation to comply with a tax treaty must take precedence over the objective of RMO No. 1-2000. Logically, noncompliance
with tax treaties has negative implications on international relations, and unduly discourages foreign investors. While the consequences
sought to be prevented by RMO No. 1-2000 involve an administrative procedure, these may be remedied through other system
management processes, e.g., the imposition of a fine or penalty. But we cannot totally deprive those who are entitled to the benefit
of a treaty for failure to strictly comply with an administrative issuance requiring prior application for tax treaty
relief.44 (Emphases and underscoring supplied)

The objective of RMO No. 1-2000 in requiring the application for treaty relief with the ITAD before a party’s availment of the preferential
rate under a tax treaty is to avert the consequences of any erroneous interpretation and/or application of treaty provisions, such as claims
for refund/credit for overpayment of taxes, or deficiency tax liabilities for underpayment. 45 However, as pointed out in Deutsche Bank, the
underlying principle of prior application with the BIR becomes moot in refund cases – as in the present case – where the very basis of
the claim is erroneous or there is excessive payment arising from the non-availment of a tax treaty relief at the first instance. Just as
Deutsche Bank was not faulted by the Court for not complying with RMO No. 1-2000 prior to the transaction,46 so should CBK Power. In
parallel, CBK Power could not have applied for a tax treaty relief 15 days prior to its payment of the final withholding tax on the interest
paid to its lenders precisely because it erroneously paid said tax on the basis of the regular rate as prescribed by the NIRC, and not
on the preferential tax rate provided under the different treaties. As stressed by the Court, the prior application requirement under RMO
No. 1-2000 then becomes illogical.47chanRoblesvirtualLawlibrary

Not only is the requirement illogical, but it is also an imposition that is not found at all in the applicable tax treaties. In Deutsche Bank,
the Court categorically held that the BIR should not impose additional requirements that would negate the availment of the reliefs provided
for under international agreements, especially since said tax treaties do not provide for any prerequisite at all for the availment of the
benefits under said agreements.48chanRoblesvirtualLawlibrary

It bears reiterating that the application for a tax treaty relief from the BIR should merely operate to confirm the entitlement of the taxpayer
to the relief.49 Since CBK Power had requested for confirmation from the ITAD on June 8, 2001 and October 28, 200250 before it filed on
April 14, 2003 its administrative claim for refund of its excess final withholding taxes, the same should be deemed substantial
compliance with RMO No. 1-2000, as in Deutsche Bank. To rule otherwise would defeat the purpose of Section 229 of the NIRC in
providing the taxpayer a remedy for erroneously paid tax solely on the ground of failure to make prior application for tax treaty relief.51 As
the Court exhorted in Republic v. GST Philippines, Inc.,52 while the taxpayer has an obligation to honestly pay the right taxes, the
government has a corollary duty to implement tax laws in good faith; to discharge its duty to collect what is due to it; and to justly return
what has been erroneously and excessively given to it.53chanRoblesvirtualLawlibrary

In view of the foregoing, the Court holds that the CTA En Banc committed reversible error in affirming the reduction of the amount of
refund to CBK Power from P15,672,958.42 to P14,835,720.39 to exclude its transactions with Fortis-Netherlands for which no ITAD ruling
was obtained.54 CBK Power’s petition in G.R. Nos. 193383-84 is therefore granted.

The opposite conclusion is, however, reached with respect to the Commissioner’s petition in G.R. Nos. 193407-08.

B. G.R. Nos. 193407-08

The Commissioner laments55 that he was deprived of the opportunity to act on the administrative claim for refund of excess final
withholding taxes covering taxable year 2003 which CBK Power filed on March 4, 2005, a Friday, then the following Wednesday, March
9, 2005, the latter hastily elevated the case on petition for review before the CTA. He argues56 that the failure on the part of CBK Power
to give him a reasonable time to act on said claim is violative of the doctrines of exhaustion of administrative remedies and of primary
jurisdiction.

For its part, CBK Power maintains57 that it would be prejudicial to wait for the Commissioner’s ruling before it files its judicial claim since
it only has 2 years from the payment of the tax within which to file both its administrative and judicial claims.

The Court rules for CBK Power.

Sections 204 and 229 of the NIRC pertain to the refund of erroneously or illegally collected taxes. Section 204 applies to administrative
claims for refund, while Section 229 to judicial claims for refund. In both instances, the taxpayer’s claim must be filed within two (2) years
from the date of payment of the tax or penalty. However, Section 229 of the NIRC further states the condition that a judicial claim for
refund may not be maintained until a claim for refund or credit has been duly filed with the Commissioner. These provisions respectively
read:chanroblesvirtuallawlibrary

SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. – The Commissioner may -

x x x x

(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue
stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have
been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed
unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or
penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund.

x x x x

SEC. 229. Recovery of Tax Erroneously or Illegally Collected. – No suit or proceeding shall be maintained in any court for the recovery
of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed
to have been collected without authority, of any sum alleged to have been excessively or in any manner wrongfully collected without
authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has
been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has
been paid under protest or duress.

In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty
regardless of any supervening cause that may arise after payment: x x x. (Emphases and underscoring supplied)

Indubitably, CBK Power’s administrative and judicial claims for refund of its excess final withholding taxes covering taxable year 2003
were filed within the two-year prescriptive period, as shown by the table below:58chanRoblesvirtualLawlibrary

WHEN FINAL WHEN LAST DAY OF WHEN WHEN PETITION

INCOME REMITTANCE THE 2-YEAR ADMINISTRATIVE FOR REVIEW
TAXES WERE RETURN PRESCRIPTIVE CLAIM WAS FILED WAS FILED
WITHHELD FILED PERIOD
February 2003 03/10/03 03/10/05 March 4, 2005 03/09/05
May 2003 06/10/03 06/10/05 March 4, 2005 03/09/05

With respect to the remittance filed on March 10, 2003, the Court agrees with the ratiocination of the CTA En Banc in debunking the
alleged failure to exhaust administrative remedies. Had CBK Power awaited the action of the Commissioner on its claim for refund prior
to taking court action knowing fully well that the prescriptive period was about to end, it would have lost not only its right to seek judicial
recourse but its right to recover the final withholding taxes it erroneously paid to the government thereby suffering irreparable
damage.59chanRoblesvirtualLawlibrary
Also, while it may be argued that, for the remittance filed on June 10, 2003 that was to prescribe on June 10, 2005, CBK Power could
have waited for, at the most, three (3) months from the filing of the administrative claim on March 4, 2005 until the last day of the two-
year prescriptive period ending June 10, 2005, that is, if only to give the BIR at the administrative level an opportunity to act on said claim,
the Court cannot, on that basis alone, deny a legitimate claim that was, for all intents and purposes, timely filed in accordance with Section
229 of the NIRC. There was no violation of Section 229 since the law, as worded, only requires that an administrative claim be priorly
filed.

In the foregoing instances, attention must be drawn to the Court’s ruling in P.J. Kiener Co., Ltd. v. David60 (Kiener), wherein it was held
that in no wise does the law, i.e., Section 306 of the old Tax Code (now, Section 229 of the NIRC), imply that the Collector of Internal
Revenue first act upon the taxpayer’s claim, and that the taxpayer shall not go to court before he is notified of the Collector’s action. In
Kiener, the Court went on to say that the claim with the Collector of Internal Revenue was intended primarily as a notice of warning that
unless the tax or penalty alleged to have been collected erroneously or illegally is refunded, court action will
follow, viz.:chanroblesvirtuallawlibrary

The controversy centers on the construction of the aforementioned section of the Tax Code which reads:ChanRoblesVirtualawlibrary
SEC. 306. Recovery of tax erroneously or illegally collected. — No suit or proceeding shall be maintained in any court for the recovery of
any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed
to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a
claim for refund or credit has been duly filed with the Collector of Internal Revenue; but such suit or proceeding may be maintained,
whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be begun
after the expiration of two years from the date of payment of the tax or penalty.
The preceding provisions seem at first blush conflicting. It will be noticed that, whereas the first sentence requires a claim to be filed with
the Collector of Internal Revenue before any suit is commenced, the last makes imperative the bringing of such suit within two years from
the date of collection. But the conflict is only apparent and the two provisions easily yield to reconciliation, which it is the office of statutory
construction to effectuate, where possible, to give effect to the entire enactment.

To this end, and bearing in mind that the Legislature is presumed to have understood the language it used and to have acted with full
idea of what it wanted to accomplish, it is fair and reasonable to say without doing violence to the context or either of the two provisions,
that by the first is meant simply that the Collector of Internal Revenue shall be given an opportunity to consider his mistake, if mistake
has been committed, before he is sued, but not, as the appellant contends that pending consideration of the claim, the period of two years
provided in the last clause shall be deemed interrupted. Nowhere and in no wise does the law imply that the Collector of Internal
Revenue must act upon the claim, or that the taxpayer shall not go to court before he is notified of the Collector’s action. x x
x. We understand the filing of the claim with the Collector of Internal Revenue to be intended primarily as a notice of warning
that unless the tax or penalty alleged to have been collected erroneously or illegally is refunded, court action will follow. x x
x.61 (Emphases supplied)

That being said, the foregoing refund claims of CBK Power should all be granted, and, the petition of the Commissioner in G.R. Nos.
193407-08 be denied for lack of merit.chanrobleslaw

WHEREFORE, the petition in G.R. Nos. 193383-84 is GRANTED. The Decision dated March 29, 2010 and the Resolution dated August
16, 2010 of the Court of Tax Appeals (CTA) En Banc in C.T.A. E.B. Nos. 469 and 494 are hereby REVERSED and SET ASIDE and a
new one entered REINSTATING the Decision of the CTA First Division dated August 28, 2008 ordering the refund in favor of CBK Power
Company Limited the amount of P15,672,958.42 representing its excess final withholding taxes for the taxable years 2001 to 2003. On
the other hand, the petition in G.R. Nos. 193407-08 is DENIED for lack of merit.

SO ORDERED.cralawlawlibrary
 G.R. No. L-3756 June 30, 1952

SAGRADA ORDEN DE PREDICADORES DEL SANTISMO ROSARIO DE FILIPINAS, plaintiff-appellee,

vs.
NATIONAL COCONUT CORPORATION, defendant-appellant.

First Assistant Corporate Counsel Federico C. Alikpala and Assistant Attorney Augusto Kalaw for appellant.
Ramirez and Ortigas for appellee.

LABRADOR, J.:

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 A-1.)

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, 1948.

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 rentals.
 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 defendant-appellant. There was no agreement between
the Alien Property Custodian and the defendant-appellant 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 all.

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 thereo f, 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.