CIVIL LAW FULL CASE
G.R. No. L-33254 & G.R. No. L-33253 January 20, 1978 Paragraph 3 contains these words: "Approved for pre-audit and payment,
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
LICERIO P. SENDAYDIEGO, JUAN SAMSON and ANASTACIO
QUIRIMIT, defendants. JUAN SAMSON and defendant-appellant.
PROVINCE OF PANGASINAN, offended party-appellee,
vs.
HEIRS OF LICERIO P. SENDAYDIEGO, defendants-appellants. *
Norberto J. Quisumbing for appellant Sendaydiego.
Donato & Rillera for appellant Samson.
Office of the Solicitor General for appellee.
AQUINO, J.:
In these three cases of malversation through falsification, the prosecution's theory is
that in 1969 Licerio P. Sendaydiego, the provincial treasurer of Pangasinan, in
conspiracy with Juan Samson y Galvan, an employee of a lumber and hardware store
in Dagupan City, and with Anastacio Quirimit, the provincial auditor, as an
accomplice, used six (6) forged provincial vouchers in order to embezzle from the road
and bridge fund the total sum of P57,048.23.
The provincial voucher in these cases has several parts. In the upper part with the
legend "ARTICLE OR SERVICE" the nature of the obligation incurred is indicated.
That part is supposed to be signed by two officials of the provincial engineer's office
and by the governor's representative.
The middle part of the voucher contains five numbered printed paragraphs. Paragraph
1 is a certificate to be signed by the creditor. It is stated therein that the creditor
vouches that the expenses "were actually and necessarily incurred". In the instant cases
paragraph 1 was not signed presumably because it is not relevant to the purchase of
materials for public works projects.
Paragraph 2 is a certification that the expenses are correct and have been lawfully
incurred. It is signed by the provincial engineer.
appropriations and funds being available therefore." This is signed by the provincial
treasurer.
Paragraph 4 is a certification which, as filed up in Exhibit K, Voucher No. 10724 dated
February 28, 1969, reads:
I certify that this voucher has been pre-audited and same may be paid in the
amount of sixteen thought seven hundred twenty-seven and 52/100 (P16,727.52) in
cash or in check, provided there is sufficient fund cover the payment.
This is signed by the auditor.
Paragraph 5 is a certification signed by the provincial treasurer that the account
mentioned in the provincial engineer's certification "was paid in the amount and on the
date shown below and is chargeable as shown in the summary hereof. ... ." It may be
noted that the provincial treasurer signs two part of the voucher.
Following paragraph 5, and as referred to therein, is the receipt of the signed by the
creditor. As accomplished in Exhibit K, the receipt reads (it was signed according to
the prosecution by Juan Samson, a point which is disputed by him):
Received this 31st day of March, 1969, from L P. Sendaydiego, Province of
Pangasinan the sum of seven hundred twenty-seven pesos & 52/100 (16,727.52) in full
payment of the above stated account, which I hereby certify to be correct. Paid by
Check No. .................................
CARRIED CONSTR. SUPPLY CO. By: (Sgd.) JUAN SAMSON
According to the prosecution, Samson also signed on the left margin of the six
vouchers below the stamped words: "Presented to Prov. Treasurer. By Juan Samson."
Voucher No. 10724 (Exh. K). — This Provincial voucher, dated February 28, 1969,
evidences the payment of PI 6,727.52 to the Carried Construction Supply Co. of
Dagupan City for lumber and hardware materials supposedly used in the repair of the
bridge in Barrio Libertad at the Umingan-Tayug road in Pangasinan along the Nueva
Ecija boundary (Exh. K). The voucher makes reference to invoice No. 3327 and other
supporting papers.
CIVIL LAW FULL CASE
The falsity of that provincial voucher is proven by the following intances:
(a) That there was no project for the repair of the bridge at Barrio Libertad (P.
1; Exh. Z).
(b) That the amount of P16,727.52 was never received by the Carried
Construction Supply Co The alleged official receipt No. 3025 of the company dated
March, 1969 (Exh. K-6) is forged.
(c) That the lumber and materials mentioned in Exhibit K were never delivered
by the company to the provincial government
(d) That in the provincial voucher, Exhibit K, and in the supporting requisition
and issue voucher (RIV) No. 2206 dated January 29, 1969 (Exh. A), covering the same
lumber and hardware ma the signatures of the following office were forged: Salvador
F. Oropilla senior civil engineer; Rodolfo P. Mencias, supervising civil engineer
Victoriano M. Sevilleja, acting provincial engineer, and Ricardo B. Probincias, chief
of equipment of the governor's office. These four office denied that their signatures in
the two vouchers, Exhibits A and B, are their genuine signatures.
(e) That the imprint of the rubber stamp on Exhibits A and B, containing the
words "Approved: For and By Authority of the Governor (signed) Ricardo B.
Primicias, Chief of Equipment", is not the imprint of the genuine rubber stamp used
in Primicias office.
(f) That charge invoice No. 3327 of the Carried Construction Supply Co. dated
February 18, 1969, containing a description and the prices of the lumber and hardware
material (Exh. B), is fake because, according to Ambrosio Jabanes, the company's
assistant manager, the company's invoice No. 3327 was issued to the Mountain
Agricultural College (Exh. II-1). Oropilla denied that his alleged signature on Exhibit
B is his signature.
(g) That three other documents, supporting the provincial voucher (Exh. K),
were also forged. Those documents are the taxpayer's cate dated February 10, 1969
(Exh. C) stating that no tax is due on the goods sold in the fake invoice No. 3327 and
the two certificates as to the samples of lumber allegedly purchased from the Carried
Construction Supply Co., (Exh. D and E). Narciso P. Martinez, a district forester,
denied that his signatures in Exhibits D and E are his signatures.
(h) That Angelo C. Manuel the checker of the provincial auditor's office,
denied that his signature on the left margin is his signature (Exh. A-10).
The forged character of provincial voucher No. 10724 (Exh. K) is incontrovertible.
Other five forged voucher. — Five other provincial vouchers evidencing supposed
payments of certain amounts to the Carried Construction Supply Co. for lumber and
hardware materials supposingly used in the repair of other bridges were also falsified.
These five vouchers are the following:
(1) Voucher No. 11995 dated April 29, 1969 evidencing the payment of
P14,571.81 for number and hardware materials allegedly used in the repair of Bayaoas
bridge at the Urbiztondo-Pasibi Road (Exh. O).
(2) Voucher No. 11869 dated April 15, 1969 evidencing the payment of
P5,187.28 'or lumber and hardware materials allegedly used in the repair of the
Panganiban bridge at the UminganTayug Road (Exh. P)
(3) Voucher No. 11870 dated April 28, 1969 evidencing the payment of
P6,290.60 for lumber and hardware materials allegedly used in the repair of the
Cabatuan bridge at the Umingan-Guimba Road (Exh. Q).
(4) Voucher No. 11871 dated April 15, 1969 evidencing the payment of
P9,769.64 for lumber and hardware materials allegedly used in the repair of the
Casabar bridge at the Binalonan-San Manuel Road (Exh. R).
(5) Voucher No. 11872 dated April 15, 1969 evidencing the Payment of
P4,501.38 for lumber and hardware materials allegedly used in the repair of the
Baracbac bridge at the Umingan-Guimba Road (Exh. S).
As in the case of voucher No. 10724 (Exh. K), Oropilla, Mencias, and Primicias
declared that their signatures in the said five vouchers are not their genuine signatures.
Samson, who hand-carried the said vouchers for processing, did not turn over to the
provincial auditor's office the papers supporting the said vouchers after the vouchers
had been pre-audited. Hence, those supporting papers could not be presented in
evidence.
Jabanes, the aforementioned assistant manager of the Carried Construction Supply
Co., testified that the lumber and hardware materials mentioned in the five vouchers
were never delivered by his company to the provincial government. The charge
CIVIL LAW FULL CASE
invoices mentioned in the said vouchers were cancelled invoices issued to the
Mountain Agricultural College. The projected repairs of the bridges were fictitious.
The company's cashier testified that the company never received the payments for the
lumber and hardware materials. The receipts evidencing payments (Exh. K-6, KK to
KK-4 are fake official receipts. The cashier produced in court the genuine official
receipts (Exh. LL to LL-7) bearing the serial numbers of the fake receipts. The genuine
receipts do not refer to transactions with the provincial government.
Samson played a stellar role in the processing of the six vouchers. He used to be an
employee of the pro treasurer's office. He resigned and worked with several firms
doing business with the provincial government. In 1969 he was the collector of the
Carried Construction Supply Co. He represented that firm in its dealings with the
offices of the governor, provincial auditor, provincial engineer and provincial
treasurer. He was personally known to those provincial officials and the employees of
their offices (21-22 Sendaydiego's brief).
The six (6) forged provincial vouchers, with their respective supporting papers, were
hand-carried by Samson. He delivered the papers to Carmencita Castillo, the ledger
clerk in the provincial engineer's office, for recording and for her signature (Ekh. DD).
Thereafter, Samson brought the papers to the provincial treasurer's office. Marcelo
Crusade, a laborer in that office who performed the chore of recording the vouchers
and payrolls, recorded Vouchers Nos. 11869, 11871 and 11872 (Exh. P, R and S).
Crusadas initials appear on the upper lefthand corner of the said vouchers with the date
4/17/69.
Samson signed on the left margin of the vouchers to indicate that he presented them
to the provincial t r's office. Crusade said that after Samson had presented the said
papers to him, Samson brought them to Ricardo Baraan, the book-keeper of the
provincial treasurer's office for processing and for the latter's signature (Exh. WW).
From Baraan's office, Samson hand-carried the vouchers to the provincial auditor's
office. He asked Virginia Cruz, a clerk to record the same (Exh. CC).
Afterwards, Samson asked Donato Rosete the assistant provincial treasurer, to
initialled the voucher After
Rosete had initialled the vouchers, Samson went to the provincial treasurer's office
where the amounts covered by the voucher were paid by Sendaydiego to him in cash
(instead of by check) as representative of the Carried Construction Supply Co. (Exh.
EE). He received the payments on March 31 and April 29 and 28 (four payments on
that date) as shown on the face of the vouchers.
The signature of Sendaydiego and Quirimit, the auditor, on the said six vouchers are
admittedly authentic. Sendaydiego signed the vouchers ahead of Rosete, his assistant.
Sendaydiego's defense is that he signed the vouchers in the honest belief that the
signatures therein of the provincial office concerned were genuine because the voucher
had been pre-audited and approved by the auditor.
Samson denied the authenticity of his two signatures on each of the six vouchers
showing that he received from Sendaydiego the amounts covered thereby as
representative of the lumber and hardware firm (Exh. OO to TT) and that he presented
the vouchers to the provincial s treasurer 's office (Exh. 6-12 — Samson). Sendaydiego
testified that Samson's signatures are genuine.
In connection with the six vouchers, Sendaydiego, Samson and Quirimit were charged
with malversation through falsification in three docketed as follows:
1. Criminal Case No. 23349 involving provincial voucher No. 10724 dated
February 28, 1969 in the sum of P16,7Z7.52 (Exh. X), L-33252.
2. Criminal Case No. 23350 involving provincial vouchers Nos. 11869, 11870,
11871 dated April 15 (two dates) 28 and 15, 1969 for the respective amounts of
P5,187.28, P6,290.60, P9,769-64 and P4,501.38 (four vouchers, Exh. P, Q, R and S),
now L-33253.
3. Criminal Case No. 23351 involving provincial voucher No. 11955 dated
April 29, 1969 in the sum of P14,571.81 (Exh. O), now L-33254.
After trial the lower court acquitted the auditor, Quirimit and found Sendaydiego and
Samnson guilty of malversation through falsification of public or official documents
imposing each of the following penalties:
CIVIL LAW FULL CASE
(1) In Criminal Case No. 23349, an indeterminate sentence of twelve years, ten
months and twenty-one-days, as minimum, to eighteen years, two months and twenty-
one days of reclusion temporal, as maximum, and a fine of P16,727.52 and to
indemnify solidarity the provincial government of Pangasinan in the same amount;
(2) In Criminal Case No. 23350, the penalty of reclusion perpetua and a fine
of P29,748.90 and to indemnify solidarily the provincial government of Pangasinan in
the same amount; and
(3) In Criminal Case No. 23351, an indeterminate sentence of twelve years, ten
months and twenty-one days, as minimum, to eighteen year two months and twenty-
one days of reclusion temporal as maximum , and a fine of P14,571.81 and to
indemnify solidarity the provincial government of Pangasinan in the same amount.
Sendaydiego and Samson appealed to this Court.
Sendaydiego died on October 5, 1976. His appeal as to his criminal liability was
dismissed. Death extinguished his criminal liability remained. The resolution of July
8, 1977 dismissing Sendaydiego's appeal read s follows:
The death of appellant Sendaydiego during the pendency of his appeal or
before the judgment of conviction rendered against him by the lower court became
final and executory extinguished his criminal liability meaning his obligation to serve
the personal or imprisonment penalties and his liability to pay the fines or pecuniary
penalties (Art. 89[1], Revised Penal Code; 1 Viada, Codigo Penal, 4th Ed., 565).
The claim of complainant Province of Pangasinan for the civil liability survived
Sendaydiego because his death occurred after final judgment was rendered by the
Court of First Instance of Pangasinan, which convicted him of three complex crimes
of malversation through falsification and ordered him to indemnify the Province in the
total sum of P61,048.23 (should be P57,048.23).
The civil action for the civil liability is deemed impliedly instituted with the criminal
action in the absence of express waiver or its reservation in a separate action (Sec. 1,
Rule 111 of the Rules of court). The civil action for the civil liability is separate and
distinct from the criminal action (People and Manuel vs. Coloma, 105 Phil. 1287; Roa
vs. De la Cruz, 107 Phil. 8).
When the action is for the recovery of money and the defendant dies before final
judgment in the Court of First Instance, it shall be dismissed to be prosecuted in the
manner especially provided' in Rule 87 of the Rules of Court (Sec. 21, Rule 3 of the
Rules of Court).
The implication is that, if the defendant dies after a money judgment had been rendered
against him by the Court of First Instance, the action survives him. It may be continued
on appeal (Torrijos vs. Court of Appeals, L-40336, October 24, 1975; 67 SCRA 394).
The accountable public officer may still be civilly liable for the funds improperly
disbursed although he has no criminal liability (U S. vs. Elvina, 24 Phil. 230;
Philippine National Bank vs. Tugab, 66 Phil. 583).
In view of the foregoing, notwithstanding the dismissal of the appeal of the deceased
Sendaydiego insofar as his criminal liability is concerned, the Court Resolved to
continue exercising appellate jurisdiction over his possible civil liability for the money
claims of the Province of Pangasinan arising from the alleged criminal acts complained
of, as if no criminal case had been instituted against him, thus making applicable, in
determining his civil liability, Article 30 of the Civil Code (Note: The lower court had
issued an order of attachment against him on January 13, 1970 for the sum of P36,487
and in the brief for said appellant, there is no specific assignment of error affecting the
civil liability fixed by the trial court.) and, for that purpose, his counsel is directed to
inform this Court within ten (10) days of the names and addresses of the decedent's
heirs or whether or not his estate is under administration and has a duly appointed
judicial administrator. Said heirs or administrator will be substituted for the deceased
insofar as the civil action for the civil liability is concerned (Secs. 16 and 17, Rule 3,
Rules of Court). According to Sendaydiego's brief, he had a wife and ten children
named Arturo, Licerio, Jr., Prospero, Regulo, Eduardo, Cesar, Nola, Aida, Wilfredo
and Manolo (deceased).
The title of this case should be amended to show its civil aspect by adding thereto the
following. Province of Pangasinan vs. Heirs of Licerio P. Sendaydiego.
CIVIL LAW FULL CASE
Sendaydiego's appeal will be resolved only for the purpose of showing his criminal
liability which is the basis of the civil liability for which his estate would be liable for
which his estate would be liable.
Sendaydiedo's appeal; civil liability of his estate. — In view of Sendaydiego's death,
it is not necessary to resolve his first two assignments of error, wherein he assails the
imposition of reclusion perpetua as a cruel and unusual penalty and wherein it is
argued that there is no complex crime of malversation through falsification committed
by negligence.
In the third assignment of error, it is contended that the trial court erred in allowing
private prosecutors Millora and Urbiztondo to prosecute the case thereby allegledly
subjecting the accused to proceedings marked by undue publicity, pre-judgment, bias
and political self-interest.
Atty. Vicente D. Millora, a senior member of the provincial board actually handled the
prosecution of the case from the preliminary investigation, which started on June 5,
1969, up to the termination of the trial on July 29, 1970.
At the commencement of the preliminary investigation, the counsel for the accused
auditor inquired whether Atty. Millora was authorized by the provincial board to act
as private prosecutor in representation of the province of Pangasinan, the offended
party. Atty. Millora replied that there was a board resolution designating him as a
private prosecutor.
The acting provincial commander, who filed the complaints manifested to the trial
court that he had authorized Atty. Millora to act as private prosecutor (4-8 tsn June 5,
1969).
Another defense counsel filed a written motion to inhibit Millora and the others as
private prosecutors. The lower court denied the motion in its order of June 18, 1969
(p. 40, Record of Criminal Case No. 23350).
After the termination of the p investigation conducted by the lower court, the
provincial fiscal of Pangasinan and the city final of Dagupan City filed three
informations against the accused all dated November 4, 1969.
At the commencement of the trial on February 23, 1970 the city fiscal, an assistant
provincial fiscal and Atty. Millora, the private prosecutor, appeared for the
prosecution. The city fiscal moved "that the private prosecutor (Millora) be authorized
to conduct the examination subject to our (the fiscal's) control and supervision". The
trial court granted the motion (7 tsn).
At the hearing on April 23, 1970 the same city fiscal moved that Atty. Urbiztondo be
authorized to examine the prosecution witnesses under his supervision and control The
trial court granted the motion (155 tsn).
The record shows that at every hearing the provincial fiscal, the city fiscal or an
assistant fiscal were present together with the private prosecutor.
Under the foregoing circumstances, we believe that there was substantial compliance
with the rule that the criminal action should be "prosecuted under the direction and
control of the fiscal" and that "the provincial fiscal shall represent the province" in any
court (Sec.4, Rule 110, Rules of Court; sec. 1683, Revised Administrative Code).
The observation of Sendaydiego's counsel, that the imposition of reclusion perpetua
"could have been the result of the undue publicity, prejudgment, bias and political
interest which attended the proceedings ", is not well-founded. The trial court's
decision dispels any doubt as to its impartiality. The evidence in the three cases is
mainly documentary. The unassailable probative value of the documents involved
rather than bias and prejudice, was the decisive factor on which the trial court anchored
the judgment of conviction.
Moreover, as already adverted to, Sendaydiego's death had rendered moot the issue as
to the propriety of the imposition of reclusion perpetua. And, as will be shown later,
CIVIL LAW FULL CASE
reclusion perpetua cannot be imposed in these cases because the crimes committed
were not complex.
The other seven assigmments of error made by Sendaydiego's counsel refer to the trial
court's conclusion that Sendaydiego and Samson are guilty beyond reasonable doubt
of malversation through falsification or, specifically, that the provincial treasurer, in
signing the six vouchers, evinced "malice or fraud and that there must have been
connivance between" the two.
Several lances indicate that Sendaydiego conspired with Samson. Donato N. Rosete,
the assistant provincial treasurer, testified that, contrary to the usual procedure, he
affixed his initial to paragraph 3 of the vouchers after Sendaydiego had signed it.
Rosete adhered to that unusual procedure because the interested party, Samson who
hand-carried the vouchers, approached Rosete after he (Samson) had conferred with
the provincial treasurer and Samson told Rosete to initial the voucher because it was
areglado na (already settled) since the treasurer had already signed the voucher (54 tsn
July 3, 1969).
Rosete's testimony and affidavit confute appellant Sendaydiego's contention that the
trial court erred in finding that he signed the questioned vouchers before Rosete had
placed his initial in them. After the treasurer had signed the voucher, Rosete's duty to
initial it was only ministerial (75 tsn July 3, 1969).
The bookkeeper in the treasurer's office testified that he indicated in the vouchers that
the amounts covered thereby should be paid in cash. That indication was made by
means of the symbol "A-1-1" placed at the bottom of the vouchers under the column
"Account Number". The bookkeeper was in. instructed by Samson to place that
symbol Samson told him that he (Samson) had an understanding with Treausrer
Sendaydiego that the payment should be made in cas. There were instances when the
treasurer insisted on payment by check to creditors other than Juan Samson.
The cash payments were made to Samson in the inner office of the provincial treasurer
where the cashier was summoned to make the cash payments (11-12 ton July 9, 1969;
p. 11, Exh. EE). As noted by the trial court, it was unusual that the payments should
be made in the treasurer's office when that was a ministerial chore of the cashier.
The cash payments were made to Samson even if Samson had no power of attorney
from the Carried Construction Supply Co. authorizing him to receive the payments.
The space in the vouchers for the signature of the witness, who should be present when
the payments were received, was blank. The treasurer did not bother to have a witness
to attest to the payments or to require the exhibition of Samson's residence certificate.
Another apt observation of the trial court is that the forged character of the six vouchers
would have been unmasked by the supposed creditor, Carried Construction Supply
Co., if the payments had been made by means of checks. The company on receiving
the checks would have returned them to the treasurer because it knew that there was
no reason to make any payments at all. The trial court said that the cash payments
prove Sendaydiego's collusion with Samson.
Sendaydiego's counsel assails the lower court's finding that there was a conspiracy
between the provincial and Samson as shown by the fact that the amounts covered by
the vouchers were paid to Samson by the cashier in the treasurer's inner office. That
point was testified to by Rosete, the assistant provincial treasurer.
The cashier, Napoleon Ulanday, would have been the beet witness on how and where
the payments were made. However, Ulanday died before the preliminary investigation
was started. On May 27, 1969, after the anomalies were unearthed, he wrote a letter to
the provincial , stating that he paid to Samson the amounts covered by five vouchers
in the of Salazar K. Misal and Josefina E. Pulido (Exh. 13).
Rosete was in a position to state that the cash payments were made to Samson in the
treasurers inner office because his table was near the main door of the treasurers office
or was about fifteen meters away (18 tsn). Rosete always knew when the cashier went
to the treasurers office because the cashier was oned by means of a buzzer (long buzz),
and when the cashier came out of the treasurer's office, he would be holding the
voucher (12-13 tsn).
Sendaydiego's counsel that no gross negligence can be imputed to the treasurer
(malversation is a crime which can be committed by means of dolo or culpa and the
penalty in either case is the same). This argument does not deserve serious
CIVIL LAW FULL CASE
consideration because the facts proven by the prosecution show that he had a tieup
with Samson and that he acted maliciously in signing the six questioned vouchers.
The last contention put forward for Sendaydiego is that, because the trial court
acquitted the auditor, then the treasurer's exoneration follows as a matter of course.
We see no merit in that contention because the evidence for the prosecution against
Sendaydiego is not the same as its evidence against the auditor. For that reason the
auditor was charged only as an accomplice, whereas, the treasurer was charged as a
principal. The auditor based his defense on the undeniable fact that the treasurer had
approved the six vouchers "for pre-audit and payment" before they were passed upon
by the auditor. In short, the auditor was misled by the treasurer's certification which
the auditor apparently assumed to have been made in good faith when in truth it was
made in bad faith.
We are convinced after a minutiose examination of the documentary and oral evidence
and an unprejudiced consideration of the arguments of Sendaydiego's counsel that his
criminal liability was established beyond reasonable doubt and, therefore, the civil
liability fo his estate for the amounts malversed was duly substantial.
Samson's appeal. — Samson's brief has no statement of facts. He contends that the
trial court erred in disregarding the expert testimony that his signatures on the vouchers
are not his signature; in finding that he forged the vouchers and received the proceeds
thereof, and in relying on circumstantial evidence as proof of conspiracy.
As a preliminary issue, Samson argues that Judge Eloy B. Bello should have inhibited
himself "in fairness to the accused, in the interest of justice, and as a gesture of
delivadeza" because he had conducted the preliminary investigation.
Our searching study of the recrod fails to sustain Samson's insinuation that he was
prejudiced by the fact that Judge, who conducted the preliminary investigation, was
the one who tried the case and convicted him. Judge Bello tried the case fairly. His
conduct of the trial does not show that he had already prejudged their guilt.
Section 13, Rule 112 of the Rules of court, in allowing a Court of First Instance to
conduct a preliminary investigation, does not disqualify it from trying the case after it
had found probable cause and after the fiscal, as directed by the Court, had filed the
corresponding information. The rule assumes that the Judge, who conducted the
preliminary investigation, could impartially try the case on the merits.
We cannot assume that judges as a rule are opinionated and narrow-minded insomuch
that they would invariably be iron-bound by their findings at the preliminary
investigation.
The case of a Judge of the Court of First Instance, who conducts a preliminary
investigation and then tries the case on the merits, is similar to a situation where an
inferior court conducts a preliminary investigation of a grave or less grave offense
falling within the concurrent jurisdiction of the Court of First Instance and tghe inferior
court. In such a case, the inferior court after terminating the preliminary investigation
is not obligated (por delivadeza) to remand the case to the Court of First Instance for
trial. The inferior court has the option to try the case on the merits (People vs. Palmon,
86 Phil. 350; Natividad vs. Robles, 87 Phil. 834; People vsw. Colicio, 88 Phil. 196).
The assumption is that the inferior court can try the case without any ingrained bias or
undue prejudice.
Samson sought to prove, through Lieutenant Colonel Jose G. Fernandez, retired chief
of the Constabulary crime laboratory, a handwriting expert, that his signatures on the
vouchers are not his signatures.
Fernandez found that the questioned signatures and the alleged genuine signatures
(exemplars) of Samson have fundamental differences. The expert concluded that the
questioned signatures and the exemplar signatures of Samson were not written by one
and the same person (Exh. 20).
After examining the questioned and genuine signatures and analysing the evidence and
contentions of the parties, we find that the expert is correct in declaring that (as
CIVIL LAW FULL CASE
admitted by the trial court) there are radical differences between the questioned and
authentic signatures.
But the expert is in error in concluding that Samson did not forge the questioned
signatures or in implying that Samson had no hand in the writing thereof.
The truth is that Samson used two forms of signature. His supposed genuine signatures
found in his residence certificates, income tax returns and the genuine office receipt
of the Carried Construction Supply Co. are "in an arcade form or rounded form of
writing". The surname Samson is encircled.
On the other hand, the questioned signatures used in Samson's transactions with the
provincial government are in angular form; his surname is not encircled, and the
questioned signatures terminate in angular and horizontal strokes.
Samson was consistent in his fakeries. Knowing that the six vouchers evidenced
fictitious transactions, he used therein his fake signature, or the signature which is
different from his signature in genuine documents. He used his forged signatures in
the six fake official receipts of the Carried Construction Supply Co., stating that the
amounts covered by the six vouchers were received by him (Exh. K-6, KK to KK-4).
the expert admitted that a person may have two forms of signature (186 tsn July 16,
1970).
Signatures may be deliberately disguised with the dishonest intention of denying the
same as and when necessary (Mehta, Identification of Handwriting and Cross
Examination of Experts, pp. 4th Ed., 1970, p. 224; Harrison, Suspect Documents 418-
419).
Sendaydiego himself testified that the questioned signatures of Samson in the six
vouchers were Samson's signatures (94-99 tsn July 31, 1969).
Fernandez, the handwriting expert, declared that the questioned signatures of Samson
in the vouchers were written by only one person (264-265 tsn July 16, 1970).
The evidence conclusively proves that Samson, as the representative or collector of
the supposed creditor, Carried Construction Supply Co., hand-carried the vouchers in
question to the offices of the provincial engineer, treasurer and auditor and then back
to the treasurer's office for payment. He actually received the cash payments. Under
those circumstances, Samson is presumed to be the forger of the vouchers.
The rule is that if a person had in his possession a falsified document and be made use
of it (uttered it), taking advantage of it and profiting thereby, the presumption is that
he is the material author of the falsification. This is especially true if the use or uttering
of the forged documents was so closely connected in time with the forgery that the
user or possessor may be proven to have the capacity of committing the forgery, or to
have close connection with the forgers, and therefore, had complicity in the forgery.
(U.S. vs. Castillo, 6 Phil., 453; People vs. De Lara, 45 Phil. 754; People vs. Domingo,
49 Phil. 28; People vs. Astudillo, 60 Phil. 338 People vs. Manansala, 105 Phil. 1253).
In the absence of a satisfactory explanation, one who is found in possession of a forged
document and who used or uttered it is presumed to be the forger (Alarcon vs. Court
of Appeals, L-21846, March 31, 1967, 19 SCRA 688; People vs.Caragao, L-28258,
December 27, 1969, 30 SCRA 993).
Samson's use of one form of signature for his crooked transactions with the provincial
government and another form of signatures of his valid transactions or papers shows
the deviousness of the falsifications perpetrated in these cases. (Note that Sendaydiego
signed the certification in the first voucher, Exhibit K, stating that proceeds thereof
were paid to
Samson but Sendaydiego did not sign the same certification in the other five forged
vouchers, Exhibits O, P, Q, R and S).
As to the question of conspiracy, the statement of Samson's on page 19 of his brief,
that "the trial court made absolutely no finding of any supposed conspiracy' between
Samson and Sendaydiego, is not correct.
CIVIL LAW FULL CASE
We have already noted that the trial court explicitly stated that the circumstance that
Sendaydiego signed the six vouchers ahead of his assistant shows that there was
"malice or fraud" on the part of Sendaydiego and that there was conivance between
Samson and Sendaydiego when the proceeds of the vouchers were paid to Samson in
Sendaydiego's inner office, instead of in the cashier's office (p. 23, 26, Decision,
Appendix to Samson's brief). The trial court said that the fact that Sendaydiego
allowed payment in cash shows "his collission with Samson (Ibid, p. 26).
Samson's contention that the trial court merely conjectured that he had received the
proceeds of the vouchers is not well taken. The trial court's finding on that point is
based on very strong circumstantial evidence (assuming that it was not proven that
Samson signed the vouchers).
Samson vehemently argues that there is no evidence that the total sum of P57,048. 23
paid under the six vouchers "was really misappropriated". He asserts that the six
vouchers are genuine (although he contends that his signatures thereon are forgeries)
and that there is no proof that the amounts covered thereby were not paid for the
construction materials shown in the six vouchers were never delivered by the company
(Exh. HH).
These contentions appear to be untenable in thelight of the declaration of Jabanes, the
assistant manager of Carried Construction Supply Co., the alleged supplier, that the
materials shown in the six vouchers were never delivered by the company (Exh. HH).
And Leticia Sevilleja (wife of the provincial engineer), who was employed as cashier
of the carried Construction Supply Co., denied that Samson turned over to the
company the proceeds of the six vouchers which he was supposed to have collected
for the company from Sendaydiego. The six vouchers appear to be fake principally
because they evidence fictitious sales of construction materials.
Under the said circumstances, it cannot be contended that there was no malversation
after Sendaydiego admtte that Samson acknowledged in the six vouchers that he
received from Treasurer Sendaydiego the total sum of P57,048.23.
The assertion of Samson's counsel on pgae 29 of his brief, that the finding as to his
guilt is based on a shaky foundation or is predicated on circumstances which wre not
proven, is not correct.
Recapitulations. — In resume, it appears that the provincial treasurer wants to base his
exculpation on his belief that in the six vouchers the signatures of Samson and the
officials in the provincial engineer's office appeared to be genuine and on the fact that
the auditor had approved the vouchers. The tresurer claimed that he acted in good faith
in approving the payments of the proceeds of the vouchers to Samson as the
representative of the supplier, Carried Construction Co.
On the other hand, Samson, by impugning his signatures in the vouchers, denied that
he received the said amounts from the cashier of the treasurer's office.
These conflicting versions of the treasurer and Samson have to be resolved in the light
of the inexpugnable fact that Samson had hand-carried the voucehrs and followed up
their processing in the offices of the provicial government the construction materials
described in the six vouchers and denied having received from Samson the prices of
the alleged sales.
The result is the Samson's denial of his signatures in the six vouchers and in the six
receipts (Exh. K-6 and KK to KK-4) and the provicial treasurer's pretension of having
acted in good faith or having committed an honest mistake have to be disbelieved.
The unavoidable conclusion is that Sendaydiego and Samson were in cahoots to
defraud the provincial government and to camouflage the defraudation by means of
the six vouchers which have some genuine features and which appear to be
extrinsically authentic but which were intrinsically fake.
Penalties. — The trial court and the assumed that three complex crimes of
malversation through falsification of public documents were committed in this case.
That assumption is wrong.
The crimes committed in these three cases are not complex. Separate crimes of
falsification and malversation were committed. These are not cases where the
CIVIL LAW FULL CASE
execution of a single act constitutes two grave or less grave felonies or where the
falsification was used as a means to commit malversation.
In the six vouchers the falsification was used to conceal the malversation. It is settled
that if the falsification was resorted to for the purpose of hiding the malversation, the
falsification and malversation are separate offenses (People vs. Cid, 66 Phil 354;
People vs. Villanueva, 58 Phil. 671; People vs. Geralde 52 Phil. 1000; People vs.
Regis, 67 Phil. 43).
In the Regis case, supra where the modus operandi is similar to the instant cases, the
municipal treasurer made it appear in two official payrolls dated April .30 and May 2,
1931 that some persons worked as laborers in a certain street project at Pinamungahan,
Cebu. In that way, the two amounts covered by the payrolls, P473.70 and P271.60,
were appropriated and taken from the municipal funds. As a matter of fact, no such
work was done in the said street project and the persons mentioned in both payrolls
had not performed any labor.
It was held in the Regis case, that the falsification and malversation did not constitute
a complex crime because the falsifications were not necessary means for the co on of
the malversations. Each falsification and each malversation constituted independent
offenses which must be punished separately.
The municipal treasurer was convicted of two falsifications and two malversations.
Four distinct penalties were imposed.
In the instant cases, the provincial , as the custodian than of the money forming part
of the road and bridge could have malversed or misappropriated it without falsifiying
any voucher. The falsification was used as a device to prevent detection of the
malversation.
The falsifications cannot be regarded as constituting one continuing offense impelled
by a single criminal impulse.
Each falsification of a voucher constitutes one crime. The falsification of six vouchers
constitutes six separate or distinct offenses (People vs. Madrigal-Gonzales, 117 Phil.
956).
And each misappropriation as evidenced by a provincial voucher constitutes a separate
crimes of malversation were committed. Appellant Samson is a co-principal in each
of the said twelve offenses.
As already stated, he is presumed to be the author of the falsification because he was
in possession of the forged vouchers and he used them in order to receive public
monies from the provincial treasurer.
He is a co-principal in the six crimes of malversation because he conspired with the
provincial treasurer in committing those offenses. The trial court correctly ruled that a
private person conspiring with an accountable public officer in committing
malversation is also guilty of malversation (People vs. Rodis, 105 Phil. 1294; U.S. vs.
Ponte, 20 Phil. 379; U.S. vs. Dato and Lustre, 37 Phil. 359; U.S. vs. Dowdell, 11 Phil.
4; People vs. Caluag, 94 Phil. 457).
Note that a different rule prevails with respect to a stranger taking part in the
commission of parricide or qualified theft. In such cases, the stranger is not guilty of
parricide or qualfied theft but only of murder or homicide, as the case may be, and
simple theft, by reason of paragraph 3, article 62 of the Revised Penal Code (People
vs. Patricio, 46 Phil. 245).
Falsification of a public document committed by a private person is punished in article
172(1) of the Revised Penal Code by prision correccional in its medium and maximum
periods and a fine of not more than P5,000.
For the malversation of the sum of P5,187.28 and P4,501.38, respectively covered by
vouchers Nos. 11869 and 11872 (Exh. P and S), the penalty provided in paragraph 2
of article of the Revised Penal Code is prision mayor minimum and medium.
CIVIL LAW FULL CASE
For the malversation of the sums of P6,290.60 andP9,769.64, respectively covered by
vouchers Nos. 1187 and11871 (Exh. Q and R) the penalty provided in paragraph 3 of
article 217 is prision mayor maximum to reclusion temporal minimum.
For the malversation of the sums of P16,727.52 and 10995 (Exh. K and O), the penalty
provided in paragraph 4 of article 217 is reclusion temporal medium and maximum.
In each of the malversation cases, a fine equal to the amount malversed should be
added to the imprisonment penalty.
In the twelve cases the penalty should be imposed in the medium peiod since there are
no modifying circumstances (Arts. 64[1] and 685, Revised Penal Code). Samson is
entitled to an indeterminate sentence.
WHEREFORE, Samson is convicted of six crimes of falsification of a public
document and six crimes of malversation.
In lieu of the penalties imposed by the trial court, he is sentenced to the following
penalties:
For each of the six falsification of the vouchers (Exh. K, O, P, Q, R and S), Samson is
sentenced to an indeterminate penalty of two (2) years of prison correccional
minimum, as minimum, to four (4) years of prision correccional medium, as
maximum, and to pay a fine of three thousand pesos.
For the malversation of the sum of P16,727.52 covered by voucher No. 10724 (Exh.
K), Samson is sentenced to an indeterminate penalty of twelve (12) years of prision
mayor maximum, as minimum, to seventeen (17) years of reclusion temporal medium,
as maximum; to pay a fine in the amount of P16,727.52, and to indemnify the province
of Pangasinan in the same amount (Criminal Case NO. 23349, L-33252).
For the malversation of the sum of P14,571.81 covered by voucher No. 11995 (Exh.
O), Samson is sentenced to an indeterminate penalty of twelve (12) years of prision
mayor maximum, as minimum, to seventeen (17) years of reclusion temporal medium,
as maximum; to pay a fine in the sum of P14,571.81, and to indemnify the province
of Pangasinan in the same amount (Criminal Case No. 23351, L-33254).
For the malversation of the sum of P6,290.60 covered by voucher No. 11870 (Exh. Q),
Samson is sentenced to an indertiminate penalty of nine (9) years of prision mayor
medium, as minimum, to thirteen (13) years of reclusion temporal minimum, as
maximum; to pay a fine of P6,290.60, and to indemnify the province of Pangasinan in
the same amount (Criminal Case No. 23350, L-33253).
For the malversation of the sum of P9,769.64 covered by voucher No. 11871 (Exh. R),
Samson is sentenced to an indeterminate penalty of nine (9) years of prision mayor
medium, as minimum, to thirteen (13) years of reclusion temporal minimum, as
maximum; to pay a fine of P9,769.64, and to indemnify the province of Pangasinan in
the same amount (Criminal Case No. 23350, L-33253).
For the malversation of the sum of P5,187.28, covered by voucher No. 11869 (Exh.
P), Samson is sentenced to an indeterminate penalty of five (5) years of prision
correccional maximum, as minimum, to eight (8) of prision mayor minimum, as
maximum; to pay a fine of P5,187.28, and to indemnify the province of Pangasinan in
the same amount (Criminal Case No. 23350, L-33253).
For the malversation of the sum of P4,501.38 covered by voucher no. 11872 (Exh. S),
Samson is sentenced to an indeterminate penalty of five (5) years of prision
correccional maximum, as minimum, to eight (8) years of prision mayor minimum, as
maximum; to pay a fine of P4,501.38, and to indemnify the province of Pangasinan in
the same amount (Criminal Case No. 23350, L-33253).
In the service of the twelve penalties meted to Samson, the threefold limit provided
for in article 70 of the Revised Penal Code should be observed (People vs. Escares,
102 Phil. 677), meaning that the maximum penalty that he should serve is three times
the indeterminate sentence of twelve (12) years to seventeen (17) years, the severest
penalty imposed on him, or thirty-six (36) years to fifty-one (51) years (see People vs.
Peñas, 68 Phil. 533).
CIVIL LAW FULL CASE
The maximum duration of his sentences should not exceed forty (40) years
(Penultimate par. of art. 70; People vs. Alisub, 69 Phil. 362; People vs. Concepcion,
59 Phil. 518, 68 Phil. 530 and 69 Phil. 58).
The estate of the late Licerio P. Sendaydiego is ordered to indemnify the province of
Pangasinan in the sum of P57,048.23.
Samson and the said estate are sojidarily liable for the said indemnity (Art. 110,
Revised Penal Code). Samson should pay one-half of the costs.
SO ORDERED.
Antonio, Concepcion, Jr., and Santos, JJ., concur.
Fernando, J., took no part.
Separate Opinions
BARREDO, J., concurring:
While I concur in the judgment finding the accused-appellant Juan Samson guilty of
six separate crimes each of falsification and malversation as elucidated in the very well
studied and ably prepared main opinion of our distinguished colleague, Mr. Justice
Aquino, and while I further agree that said appellant and the estate of the deceased
Licerio P. Sendaydiego are lointtv and solidarity liable to the Province of Pangasinan
for the amounts stated ir. the dispositive portion of the decision herein, I have my own
legal basis for holding that the estate of Sendaydiego is indeed liable for the, said
amount&
To start with, I find it difficult to share the view that "notwithstanding the dismissal of
the appeal of the deceased Sendaydiego (he died during the pendency of this appeal)
insofar as his liability is concerned, ... Sendaydiego's appeal will (nevertheless) be
resolved only for the purpose of showing his liability which is the basis of the civil
liability for which his estate is liable." It seems to me that there is some degree of
irreconcilable incontency in dismissing a case, thereby acquitting the accused therein
of criminal liability because of death or any other cause not amounting to a finding
that he had not committed the act complaint of and at the same nine holding that he or
his estate has in civil liability based on his criminal liability. It is to me clearly obvious
that the dismiss of an appml due to death of the appellant, from a judgment of
conviction by a trial court does not result in the affirmance of sruch conviction contrary
to the general rule when an appeal in a case is dismissed but, on the contrary, it
amounts to an acquittal of the appellant based on the constitutionally mandated
presumption of innocence in his favor that can be overcome only by a finding of guilt,
something that his death prevents the court from making. In a sense, the death of an
accused-appellant has the effect of his total absolution by God from any earthly
responsibility for the offense as such, a divine act of clemency no human court can
reverse, qualify, much less disregard. It is an inherent inalienable human right of every
individual not to be subject to imputation of criminal liability in any sense, unless his
guilt of the crime charged against him has been duly proven beyond reasonable doubt
in a duly held criminal proceeding. The intervention of death of the accused in any
case is an injunction by fate itself that no criminal liability whatsoever should be
imposed on him, not only because from the very nature of the situation, it is impossible
to do so but also because it would be a juridical absurdity to contemplate such a legal
concept. In short, death ex-anguishes the crime, and, corollarily, all its consequences.
Indeed, it is but logical to hold that the civil liability resulting from criminal liability
under Artide 100 of the Revised Penal Code would have no basis unless criminal
responsibih"ly is fixed or exists. It has been said that civil liabilitv under this provision
"is rooted in the criminal liability". 1 In this connection and adjectively, Section 1 of
Rule 111 stipulates that "when a criminal action is instituted, the civil action for
recovery of civil liability arising from the offense charged is impliedly instituted with
the criminal action, etc." But it must be emphasized that these legal precepts refer
exclusively to the civil liability consequent of the offense in its juridical essence as a
crime, it being elementary on our legal system that the same act my give rise to civil
responsibility independent of that resulting from the commission of the act as a crime.
Thus it is entirely possible for one to be fee from civil ability directly rooted in the act
viewed as a violation of the penal law and still be liable civilly for it considered
CIVIL LAW FULL CASE
otherwise as an infringement of a right based on a created by contract or by laws other
than the criminal law. A consistent host of jurisprudence, too to the bench and bar to
need particular citation hem exists upholding the right of a party aggrieved by an act
in nature to indemnity, restitution or reparation, notwithstanding the absence or failure
of the usual prosecution, in view of the provisions of the pertinent articles of the Civil
Code on Human Relations and Section 2 of Rule III. Stated the same act or got Of
facts can be the subject of obligations arise at the same time thru the different modes
contemplated in Article 1157 of the Civil Code providing that "obligations arise from
(1) lave, (2) contracts; (3) quasi-contracts; (4) acts or omissions punished by law, and
(5) quasi-delicts." Thus, that an act or omission is punished by law, thereby making
the actor civilly liable therefor, does not exclude simultaneous liability of the for the
same act viewed also as one giving rise to an obligation under the another law, and/or
under a contract, quasi-contract or quasi-delict, with the sole qualification that the
aggrieved party cannot recover damages more than once for the same act or omission.
(See Art. 2177, Civil Code.)
I am confident that the points I have just discussed are beyond debate. And as I see it
my learned colleagues in the majority and I are agreed that in the light of the legal
Principles I have stated, there can be no doubt that the estate of Sendaydiego could be
held liable for the acts of the d that can be proven to have damaged the Province of
Pangasinan in spite of the of Sendaydiego's appeal by reason of his death. Our possible
disagreement relates only to the procedural aspect of the matter.
The main opinion justifies the imposition of civil liability upon said estate within this
appeal proceedings, thereby sing with the filing of a separate civil action for the In my
view, the dismissal of Sendaydiego's appeal amounts, as I have said to his acquittal
This acquittal to my mind is different juridically from one based on liable doubt
bemuse as I have only intimated earlier, it is a total absolution by fate itself which
carries with it y, exemption from or extinction of the civil liability as if the Court had
hold that the act from which the civil (action) might arise did not exist (Section 2 (e),
Rule 111.) But this is not to say that the state is already exonerated altogether from
another kind of civil liability for indemnity, restitution or reparation, for under the
unbroken line of precedents I have already referred to, the pertinent provisions on
Human Relations of the Civil Code, particularly Article 30, come into play, for under
this cited provision, the total absolution of Sendaydiego based on his death becomes
virtually immaterial, since ths provision contemplates prosecution of the civil liability
arising from a criminal offense without the need of any criminal proceeding to prove
the commission of the crime as such, that is, without having to prove the criminal
liability of the defendant so long as his act causign damage or prejudice to the offended
party is proven by a preponderance of evidence. This article provides, "when a seperate
civil action is brought to demand civil liability arising from a criminal offense, and no
criminal proceedings, are instituted during the pendency of the civil case, a
preponderance of evidence shall likewise be sufficient to prove the act complained of."
My reading of the existing jurisprudence is that the civil liability not based on the act
as crime has to be prosecuted in a te civil action and not within the same criminal
proceedings wherein the accused has been acquitted or the case against him is
terminated with exonerative consequence. If there is any jurisprudence to the contrary,
it is still isolated and is not binding precedent. Worse, in my opinion, it is based on
what I consider to be the erroneous premise that Article 29 of the Civil Code does not
mean literally what it says.
Textually, this article states:
When the accused in a criminal prosecution is acquitted on the ground that his guilt
has not been beyond reasonable doubt, a civil action for damages for the same act or
omission may be instituted. Such action requires only a preponderance of evidence.
Upon motion of the defendant, the court may require the plaintiff to file a bond to
answer for damages in case the complaint should be found to be malicious.
If in a criminal case the judgment of acquittal is based upon reasonable doubt, the court
shall so declare. In the absence of any declaration to that effect, it may be inferred
from the text of the decision whether or not the acquittal is due to that ground.
Definitely and unequivocally, what it authorizes is that "a civil action for damages for
the same act or omission may be instituted." It does not say that the civil action joined
with the criminal action, as provided for in Section 1 of Rule 111, shall survive and be
the one continued. I reiterate that what is left to the offended party after the death of
an accused before conviction is the right to institute a civil action for damages for the
CIVIL LAW FULL CASE
same act or omission pursuant to Articles 29 and 30 of the Civil Code and Sections 2
and 3 (c) of Rule 111 of the Rules of Court.
All these notwithstanding, for the purposes of the instant case, I am willing to take the
position that since the point I am pressing on is more or less procedural or remedial in
nature, and perhaps, the failure of the parties concerned to seriously object to the
procedure pursued in the main opinion could be a sufficient excuse for not following
what I feel is the proper way of dealing with the civil liability incurred by the estate of
the deceased Sendaydiego, hence my concurrence, in the qualified sense implicit in
this separate opinion, in the dispositive portion of the decision herein.
May I add here that the foregoing reasons explain why I have always insisted that
when appeals in criminal cases before us have to be dismissed by reason of the death
of the appellant, it is not proper to qualify such dismissal as limited to that of the
criminal liability of the appellant. It is my humble view that the dismissal should be
unqualified and that the offended parties concerned should be left to pursue their
remedies, if they so desire, in the appropriate separate civil action contemplated both
in the Civil Code and in Rule 111, as explained above. I admit this view might entail
the institution of what is virtually a repetitive proceeding, but I cannot see any way of
avoiding what the unequivocal language of the pertinent legal provisions mandate,
unless I make myself a party to judicial legislation, which I believe it is not
constitutionally permissible for me to do, no matter how practical the procedure might
be.
——————————————————————————————————
G.R. No. 102007 September 2, 1994
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
ROGELIO BAYOTAS y CORDOVA, accused-appellant.
The Solicitor General for plaintiff-appellee.
Public Attorney's Office for accused-appellant.
ROMERO, J.:
In Criminal Case No. C-3217 filed before Branch 16, RTC Roxas City, Rogelio
Bayotas y Cordova was charged with Rape and eventually convicted thereof on June
19, 1991 in a decision penned by Judge Manuel E. Autajay. Pending appeal of his
conviction, Bayotas died on February 4, 1992 at the National Bilibid Hospital due to
cardio respiratory arrest secondary to hepatic encephalopathy secondary to hipato
carcinoma gastric malingering. Consequently, the Supreme Court in its Resolution of
May 20, 1992 dismissed the criminal aspect of the appeal. However, it required the
Solicitor General to file its comment with regard to Bayotas' civil liability arising from
his commission of the offense charged.
In his comment, the Solicitor General expressed his view that the death of accused-
appellant did not extinguish his civil liability as a result of his commission of the
offense charged. The Solicitor General, relying on the case of People v. Sendaydiego
1
insists that the appeal should still be resolved for the purpose of reviewing his
conviction by the lower court on which the civil liability is based.
Counsel for the accused-appellant, on the other hand, opposed the view of the Solicitor
General arguing that the death of the accused while judgment of conviction is pending
appeal extinguishes both his criminal and civil penalties. In support of his position,
said counsel invoked the ruling of the Court of Appeals in People v. Castillo and
Ocfemia 2 which held that the civil obligation in a criminal case takes root in the
criminal liability and, therefore, civil liability is extinguished if accused should die
before final judgment is rendered.
We are thus confronted with a single issue: Does death of the accused pending appeal
of his conviction extinguish his civil liability?
In the aforementioned case of People v. Castillo, this issue was settled in the
affirmative. This same issue posed therein was phrased thus: Does the death of Alfredo
Castillo affect both his criminal responsibility and his civil liability as a consequence
of the alleged crime?
CIVIL LAW FULL CASE
It resolved this issue thru the following disquisition:
Article 89 of the Revised Penal Code is the controlling statute. It reads, in part:
Art. 89. How criminal liability is totally extinguished. — Criminal liability is totally
extinguished:
1. By the death of the convict, as to the personal penalties; and as to the
pecuniary penalties liability therefor is extinguished only when the death of the
offender occurs before final judgment;
With reference to Castillo's criminal liability, there is no question. The law is plain.
Statutory construction is unnecessary. Said liability is extinguished.
The civil liability, however, poses a problem. Such liability is extinguished only when
the death of the offender occurs before final judgment. Saddled upon us is the task of
ascertaining the legal import of the term "final judgment." Is it final judgment as
contradistinguished from an interlocutory order? Or, is it a judgment which is final
and executory?
We go to the genesis of the law. The legal precept contained in Article 89 of the
Revised Penal Code heretofore transcribed is lifted from Article 132 of the Spanish El
Codigo Penal de 1870 which, in part, recites:
La responsabilidad penal se extingue.
1. Por la muerte del reo en cuanto a las penas personales siempre, y respecto a
las pecuniarias, solo cuando a su fallecimiento no hubiere recaido sentencia firme.
xxx xxx xxx
The code of 1870 . . . it will be observed employs the term "sentencia firme."
What is "sentencia firme" under the old statute?
XXVIII Enciclopedia Juridica Española, p. 473, furnishes the ready answer: It says:
SENTENCIA FIRME. La sentencia que adquiere la fuerza de las definitivas por no
haberse utilizado por las partes litigantes recurso alguno contra ella dentro de los
terminos y plazos legales concedidos al efecto.
"Sentencia firme" really should be understood as one which is definite.
Because, it is only when judgment is such that, as Medina y Maranon puts it, the crime
is confirmed — "en condena determinada;" or, in the words of Groizard, the guilt of
the accused becomes — "una verdad legal." Prior thereto, should the accused die,
according to Viada, "no hay legalmente, en tal caso, ni reo, ni delito, ni responsabilidad
criminal de ninguna clase." And, as Judge Kapunan well explained, when a defendant
dies before judgment becomes executory, "there cannot be any determination by final
judgment whether or not the felony upon which the civil action might arise exists," for
the simple reason that "there is no party defendant." (I Kapunan, Revised Penal Code,
Annotated, p. 421. Senator Francisco holds the same view. Francisco, Revised Penal
Code, Book One, 2nd ed., pp. 859-860)
The legal import of the term "final judgment" is similarly reflected in the Revised
Penal Code. Articles 72 and 78 of that legal body mention the term "final judgment"
in the sense that it is already enforceable. This also brings to mind Section 7, Rule 116
of the Rules of Court which states that a judgment in a criminal case becomes final
"after the lapse of the period for perfecting an appeal or when the sentence has been
partially or totally satisfied or served, or the defendant has expressly waived in writing
his right to appeal."
By fair intendment, the legal precepts and opinions here collected funnel down to one
positive conclusion: The term final judgment employed in the Revised Penal Code
means judgment beyond recall. Really, as long as a judgment has not become
executory, it cannot be truthfully said that defendant is definitely guilty of the felony
charged against him.
Not that the meaning thus given to final judgment is without reason. For where, as in
this case, the right to institute a separate civil action is not reserved, the decision to be
rendered must, of necessity, cover "both the criminal and the civil aspects of the case."
People vs. Yusico (November 9, 1942), 2 O.G., No. 100, p. 964. See also: People vs.
Moll, 68 Phil., 626, 634; Francisco, Criminal Procedure, 1958 ed., Vol. I, pp. 234,
236. Correctly, Judge Kapunan observed that as "the civil action is based solely on the
felony committed and of which the offender might be found guilty, the death of the
offender extinguishes the civil liability." I Kapunan, Revised Penal Code, Annotated,
supra.
Here is the situation obtaining in the present case: Castillo's criminal liability is out.
His civil liability is sought to be enforced by reason of that criminal liability. But then,
CIVIL LAW FULL CASE
if we dismiss, as we must, the criminal action and let the civil aspect remain, we will
be faced with the anomalous situation whereby we will be called upon to clamp civil
liability in a case where the source thereof — criminal liability — does not exist. And,
as was well stated in Bautista, et al. vs. Estrella, et al., CA-G.R. No. 19226-R,
September 1, 1958, "no party can be found and held criminally liable in a civil suit,"
which solely would remain if we are to divorce it from the criminal proceeding.” This
ruling of the Court of Appeals in the Castillo case 3 was adopted by the Supreme Court
in the cases of People of the Philippines v. Bonifacio Alison, et al., 4 People of the
Philippines v. Jaime Jose, et al. 5 and People of the Philippines v. Satorre 6 by
dismissing the appeal in view of the death of the accused pending appeal of said cases.
As held by then Supreme Court Justice Fernando in the Alison case:
The death of accused-appellant Bonifacio Alison having been established, and
considering that there is as yet no final judgment in view of the pendency of the appeal,
the criminal and civil liability of the said accused-appellant Alison was extinguished
by his death (Art. 89, Revised Penal Code; Reyes' Criminal Law, 1971 Rev. Ed., p.
717, citing People v. Castillo and Ofemia C.A., 56 O.G. 4045); consequently, the case
against him should be dismissed.
On the other hand, this Court in the subsequent cases of Buenaventura Belamala v.
Marcelino Polinar 7 and Lamberto Torrijos v. The Honorable Court of Appeals 8 ruled
differently. In the former, the issue decided by this court was: Whether the civil
liability of one accused of physical injuries who died before final judgment is
extinguished by his demise to the extent of barring any claim therefore against his
estate. It was the contention of the administrator-appellant therein that the death of the
accused prior to final judgment extinguished all criminal and civil liabilities resulting
from the offense, in view of Article 89, paragraph 1 of the Revised Penal Code.
However, this court ruled therein:
We see no merit in the plea that the civil liability has been extinguished, in
view of the provisions of the Civil Code of the Philippines of 1950 (Rep. Act No. 386)
that became operative eighteen years after the revised Penal Code. As pointed out by
the Court below, Article 33 of the Civil Code establishes a civil action for damages on
account of physical injuries, entirely separate and distinct from the criminal action.
Art. 33. In cases of defamation, fraud, and physical injuries, a civil action for
damages, entirely separate and distinct from the criminal action, may be brought by
the injured party. Such civil action shall proceed independently of the criminal
prosecution, and shall require only a preponderance of evidence.
Assuming that for lack of express reservation, Belamala's civil action for damages was
to be considered instituted together with the criminal action still, since both
proceedings were terminated without final adjudication, the civil action of the
offended party under Article 33 may yet be enforced separately.
In Torrijos, the Supreme Court held that:
xxx xxx xxx
It should be stressed that the extinction of civil liability follows the extinction
of the criminal liability under Article 89, only when the civil liability arises from the
criminal act as its only basis. Stated differently, where the civil liability does not exist
independently of the criminal responsibility, the extinction of the latter by death, ipso
facto extinguishes the former, provided, of course, that death supervenes before final
judgment. The said principle does not apply in instant case wherein the civil liability
springs neither solely nor originally from the crime itself but from a civil contract of
purchase and sale. (Emphasis ours)
xxx xxx xxx
In the above case, the court was convinced that the civil liability of the accused who
was charged with estafa could likewise trace its genesis to Articles 19, 20 and 21 of
the Civil Code since said accused had swindled the first and second vendees of the
property subject matter of the contract of sale. It therefore concluded: "Consequently,
while the death of the accused herein extinguished his criminal liability including fine,
his civil liability based on the laws of human relations remains."
Thus it allowed the appeal to proceed with respect to the civil liability of the accused,
notwithstanding the extinction of his criminal liability due to his death pending appeal
of his conviction.
CIVIL LAW FULL CASE
To further justify its decision to allow the civil liability to survive, the court relied on
the following ratiocination: Since Section 21, Rule 3 of the Rules of Court 9 requires
the dismissal of all money claims against the defendant whose death occurred prior to
the final judgment of the Court of First Instance (CFI), then it can be inferred that
actions for recovery of money may continue to be heard on appeal, when the death of
the defendant supervenes after the CFI had rendered its judgment. In such case,
explained this tribunal, "the name of the offended party shall be included in the title of
the case as plaintiff-appellee and the legal representative or the heirs of the deceased-
accused should be substituted as defendants-appellants."
It is, thus, evident that as jurisprudence evolved from Castillo to Torrijos, the rule
established was that the survival of the civil liability depends on whether the same can
be predicated on sources of obligations other than delict. Stated differently, the claim
for civil liability is also extinguished together with the criminal action if it were solely
based thereon, i.e., civil liability ex delicto.
However, the Supreme Court in People v. Sendaydiego, et al. 10 departed from this
long-established principle of law. In this case, accused Sendaydiego was charged with
and convicted by the lower court of malversation thru falsification of public
documents. Sendaydiego's death supervened during the pendency of the appeal of his
conviction.
This court in an unprecedented move resolved to dismiss Sendaydiego's appeal but
only to the extent of his criminal liability. His civil liability was allowed to survive
although it was clear that such claim thereon was exclusively dependent on the
criminal action already extinguished. The legal import of such decision was for the
court to continue exercising appellate jurisdiction over the entire appeal, passing upon
the correctness of Sendaydiego's conviction despite dismissal of the criminal action,
for the purpose of determining if he is civilly liable. In doing so, this Court issued a
Resolution of July 8, 1977 stating thus:
The claim of complainant Province of Pangasinan for the civil liability
survived Sendaydiego because his death occurred after final judgment was rendered
by the Court of First Instance of Pangasinan, which convicted him of three complex
crimes of malversation through falsification and ordered him to indemnify the
Province in the total sum of P61,048.23 (should be P57,048.23).
The civil action for the civil liability is deemed impliedly instituted with the criminal
action in the absence of express waiver or its reservation in a separate action (Sec. 1,
Rule 111 of the Rules of Court). The civil action for the civil liability is separate and
distinct from the criminal action (People and Manuel vs. Coloma, 105 Phil. 1287; Roa
vs. De la Cruz, 107 Phil. 8).
When the action is for the recovery of money and the defendant dies before final
judgment in the Court of First Instance, it shall be dismissed to be prosecuted in the
manner especially provided in Rule 87 of the Rules of Court (Sec. 21, Rule 3 of the
Rules of Court).
The implication is that, if the defendant dies after a money judgment had been rendered
against him by the Court of First Instance, the action survives him. It may be continued
on appeal (Torrijos vs. Court of Appeals, L-40336, October 24, 1975; 67 SCRA 394).
The accountable public officer may still be civilly liable for the funds improperly
disbursed although he has no criminal liability (U.S. vs. Elvina, 24 Phil. 230;
Philippine National Bank vs. Tugab, 66 Phil. 583).
In view of the foregoing, notwithstanding the dismissal of the appeal of the deceased
Sendaydiego insofar as his criminal liability is concerned, the Court Resolved to
continue exercising appellate jurisdiction over his possible civil liability for the money
claims of the Province of Pangasinan arising from the alleged criminal acts complained
of, as if no criminal case had been instituted against him, thus making applicable, in
determining his civil liability, Article 30 of the Civil Code . . . and, for that purpose,
his counsel is directed to inform this Court within ten (10) days of the names and
addresses of the decedent's heirs or whether or not his estate is under administration
and has a duly appointed judicial administrator. Said heirs or administrator will be
substituted for the deceased insofar as the civil action for the civil liability is concerned
(Secs. 16 and 17, Rule 3, Rules of Court).
CIVIL LAW FULL CASE
11
Succeeding cases raising the identical issue have maintained adherence to our ruling
in Sendaydiego; in other words, they were a reaffirmance of our abandonment of the
settled rule that a civil liability solely anchored on the criminal (civil liability ex
delicto) is extinguished upon dismissal of the entire appeal due to the demise of the
accused.
But was it judicious to have abandoned this old ruling? A re-examination of our
decision in Sendaydiego impels us to revert to the old ruling.
To restate our resolution of July 8, 1977 in Sendaydiego: The resolution of the civil
action impliedly instituted in the criminal action can proceed irrespective of the latter's
extinction due to death of the accused pending appeal of his conviction, pursuant to
Article 30 of the Civil Code and Section 21, Rule 3 of the Revised Rules of Court.
Article 30 of the Civil Code provides:
When a separate civil action is brought to demand civil liability arising from a
criminal offense, and no criminal proceedings are instituted during the pendency of
the civil case, a preponderance of evidence shall likewise be sufficient to prove the act
complained of.
Clearly, the text of Article 30 could not possibly lend support to the ruling in
Sendaydiego. Nowhere in its text is there a grant of authority to continue exercising
appellate jurisdiction over the accused's civil liability ex delicto when his death
supervenes during appeal. What Article 30 recognizes is an alternative and separate
civil action which may be brought to demand civil liability arising from a criminal
offense independently of any criminal action. In the event that no criminal proceedings
are instituted during the pendency of said civil case, the quantum of evidence needed
to prove the criminal act will have to be that which is compatible with civil liability
and that is, preponderance of evidence and not proof of guilt beyond reasonable doubt.
Citing or invoking Article 30 to justify the survival of the civil action despite extinction
of the criminal would in effect merely beg the question of whether civil liability ex
delicto survives upon extinction of the criminal action due to death of the accused
during appeal of his conviction. This is because whether asserted in the criminal action
or in a separate civil action, civil liability ex delicto is extinguished by the death of the
accused while his conviction is on appeal.
Article 89 of the Revised Penal Code is clear on this matter:
Art. 89. How criminal liability is totally extinguished. — Criminal liability is
totally extinguished:
1. By the death of the convict, as to the personal penalties; and as to pecuniary
penalties, liability therefor is extinguished only when the death of the offender occurs
before final judgment;
xxx xxx xxx
However, the ruling in Sendaydiego deviated from the expressed intent of Article 89.
It allowed claims for civil liability ex delicto to survive by ipso facto treating the civil
action impliedly instituted with the criminal, as one filed under Article 30, as though
no criminal proceedings had been filed but merely a separate civil action. This had the
effect of converting such claims from one which is dependent on the outcome of the
criminal action to an entirely new and separate one, the prosecution of which does not
even necessitate the filing of criminal proceedings. 12 One would be hard put to
pinpoint the statutory authority for such a transformation. It is to be borne in mind that
in recovering civil liability ex delicto, the same has perforce to be determined in the
criminal action, rooted as it is in the court's pronouncement of the guilt or innocence
of the accused. This is but to render fealty to the intendment of Article 100 of the
Revised Penal Code which provides that "every person criminally liable for a felony
is also civilly liable." In such cases, extinction of the criminal action due to death of
the accused pending appeal inevitably signifies the concomitant extinction of the civil
liability. Mors Omnia Solvi. Death dissolves all things.
In sum, in pursuing recovery of civil liability arising from crime, the final
determination of the criminal liability is a condition precedent to the prosecution of
the civil action, such that when the criminal action is extinguished by the demise of
accused-appellant pending appeal thereof, said civil action cannot survive. The claim
for civil liability springs out of and is dependent upon facts which, if true, would
constitute a crime. Such civil liability is an inevitable consequence of the criminal
liability and is to be declared and enforced in the criminal proceeding. This is to be
CIVIL LAW FULL CASE
distinguished from that which is contemplated under Article 30 of the Civil Code
which refers to the institution of a separate civil action that does not draw its life from
a criminal proceeding. The Sendaydiego resolution of July 8, 1977, however, failed to
take note of this fundamental distinction when it allowed the survival of the civil action
for the recovery of civil liability ex delicto by treating the same as a separate civil
action referred to under Article 30. Surely, it will take more than just a summary
judicial pronouncement to authorize the conversion of said civil action to an
independent one such as that contemplated under Article 30.
Ironically however, the main decision in Sendaydiego did not apply Article 30, the
resolution of July 8, 1977 notwithstanding. Thus, it was held in the main decision:
Sendaydiego's appeal will be resolved only for the purpose of showing his criminal
liability which is the basis of the civil liability for which his estate would be liable. 13
In other words, the Court, in resolving the issue of his civil liability, concomitantly
made a determination on whether Sendaydiego, on the basis of evidenced adduced,
was indeed guilty beyond reasonable doubt of committing the offense charged. Thus,
it upheld Sendaydiego's conviction and pronounced the same as the source of his civil
liability. Consequently, although Article 30 was not applied in the final determination
of Sendaydiego's civil liability, there was a reopening of the criminal action already
extinguished which served as basis for Sendaydiego's civil liability. We reiterate:
Upon death of the accused pending appeal of his conviction, the criminal action is
extinguished inasmuch as there is no longer a defendant to stand as the accused; the
civil action instituted therein for recovery of civil liability ex delicto is ipso facto
extinguished, grounded as it is on the criminal.
Section 21, Rule 3 of the Rules of Court was also invoked to serve as another basis for
the Sendaydiego resolution of July 8, 1977. In citing Sec. 21, Rule 3 of the Rules of
Court, the Court made the inference that civil actions of the type involved in
Sendaydiego consist of money claims, the recovery of which may be continued on
appeal if defendant dies pending appeal of his conviction by holding his estate liable
therefor. Hence, the Court's conclusion:
"When the action is for the recovery of money" "and the defendant dies before
final judgment in the court of First Instance, it shall be dismissed to be prosecuted in
the manner especially provided" in Rule 87 of the Rules of Court (Sec. 21, Rule 3 of
the Rules of Court).
The implication is that, if the defendant dies after a money judgment had been rendered
against him by the Court of First Instance, the action survives him. It may be continued
on appeal.
Sadly, reliance on this provision of law is misplaced. From the standpoint of
procedural law, this course taken in Sendaydiego cannot be sanctioned. As correctly
observed by Justice Regalado:
xxx xxx xxx
I do not, however, agree with the justification advanced in both Torrijos and
Sendaydiego which, relying on the provisions of Section 21, Rule 3 of the Rules of
Court, drew the strained implication therefrom that where the civil liability instituted
together with the criminal liabilities had already passed beyond the judgment of the
then Court of First Instance (now the Regional Trial Court), the Court of Appeals can
continue to exercise appellate jurisdiction thereover despite the extinguishment of the
component criminal liability of the deceased. This pronouncement, which has been
followed in the Court's judgments subsequent and consonant to Torrijos and
Sendaydiego, should be set aside and abandoned as being clearly erroneous and
unjustifiable.
Said Section 21 of Rule 3 is a rule of civil procedure in ordinary civil actions. There
is neither authority nor justification for its application in criminal procedure to civil
actions instituted together with and as part of criminal actions. Nor is there any
authority in law for the summary conversion from the latter category of an ordinary
civil action upon the death of the offender. . . .
Moreover, the civil action impliedly instituted in a criminal proceeding for recovery
of civil liability ex delicto can hardly be categorized as an ordinary money claim such
as that referred to in Sec. 21, Rule 3 enforceable before the estate of the deceased
accused.
CIVIL LAW FULL CASE
Ordinary money claims referred to in Section 21, Rule 3 must be viewed in light of
the provisions of Section 5, Rule 86 involving claims against the estate, which in
Sendaydiego was held liable for Sendaydiego's civil liability. "What are contemplated
in Section 21 of Rule 3, in relation to Section 5 of Rule 86, 14 are contractual money
claims while the claims involved in civil liability ex delicto may include even the
restitution of personal or real property." 15 Section 5, Rule 86 provides an exclusive
enumeration of what claims may be filed against the estate. These are: funeral
expenses, expenses for the last illness, judgments for money and claim arising from
contracts, expressed or implied. It is clear that money claims arising from delict do not
form part of this exclusive enumeration. Hence, there could be no legal basis in (1)
treating a civil action ex delicto as an ordinary contractual money claim referred to in
Section 21, Rule 3 of the Rules of Court and (2) allowing it to survive by filing a claim
therefor before the estate of the deceased accused. Rather, it should be extinguished
upon extinction of the criminal action engendered by the death of the accused pending
finality of his conviction.
Accordingly, we rule: if the private offended party, upon extinction of the civil liability
ex delicto desires to recover damages from the same act or omission complained of,
he must subject to Section 1, Rule 111 16 (1985 Rules on Criminal Procedure as
amended) file a separate civil action, this time predicated not on the felony previously
charged but on other sources of obligation. The source of obligation upon which the
separate civil action is premised determines against whom the same shall be enforced.
If the same act or omission complained of also arises from quasi-delict or may, by
provision of law, result in an injury to person or property (real or personal), the
separate civil action must be filed against the executor or administrator 17 of the estate
of the accused pursuant to Sec. 1, Rule 87 of the Rules of Court:
Sec. 1. Actions which may and which may not be brought against executor or
administrator. — No action upon a claim for the recovery of money or debt or interest
thereon shall be commenced against the executor or administrator; but actions to
recover real or personal property, or an interest therein, from the estate, or to enforce
a lien thereon, and actions to recover damages for an injury to person or property,
real or personal, may be commenced against him.
This is in consonance with our ruling in Belamala 18 where we held that, in recovering
damages for injury to persons thru an independent civil action based on Article 33 of
the Civil Code, the same must be filed against the executor or administrator of the
estate of deceased accused and not against the estate under Sec. 5, Rule 86 because
this rule explicitly limits the claim to those for funeral expenses, expenses for the last
sickness of the decedent, judgment for money and claims arising from contract,
express or implied. Contractual money claims, we stressed, refers only to purely
personal obligations other than those which have their source in delict or tort.
Conversely, if the same act or omission complained of also arises from contract, the
separate civil action must be filed against the estate of the accused, pursuant to Sec. 5,
Rule 86 of the Rules of Court.
From this lengthy disquisition, we summarize our ruling herein:
1. Death of the accused pending appeal of his conviction extinguishes his
criminal liability as well as the civil liability based solely thereon. As opined by Justice
Regalado, in this regard, "the death of the accused prior to final judgment terminates
his criminal liability and only the civil liability directly arising from and based solely
on the offense committed, i.e., civil liability ex delicto in senso strictiore."
2. Corollarily, the claim for civil liability survives notwithstanding the death
of accused, if the same may also be predicated on a source of obligation other than
delict. 19 Article 1157 of the Civil Code enumerates these other sources of obligation
from which the civil liability may arise as a result of the same act or omission:
a) Law 20
b) Contracts
c) Quasi-contracts
d) . . .
e) Quasi-delicts
3. Where the civil liability survives, as explained in Number 2 above, an action
for recovery therefor may be pursued but only by way of filing a separate civil action
and subject to Section 1, Rule 111 of the 1985 Rules on Criminal Procedure as
amended. This separate civil action may be enforced either against the
CIVIL LAW FULL CASE
executor/administrator or the estate of the accused, depending on the source of
obligation upon which the same is based as explained above.
4. Finally, the private offended party need not fear a forfeiture of his right to
file this separate civil action by prescription, in cases where during the prosecution of
the criminal action and prior to its extinction, the private-offended party instituted
together therewith the civil action. In such case, the statute of limitations on the civil
liability is deemed interrupted during the pendency of the criminal case, conformably
with provisions of Article 1155 21 of the Civil Code, that should thereby avoid any
apprehension on a possible privation of right by prescription. 22
Applying this set of rules to the case at bench, we hold that the death of appellant
Bayotas extinguished his criminal liability and the civil liability based solely on the
act complained of, i.e., rape. Consequently, the appeal is hereby dismissed without
qualification.
WHEREFORE, the appeal of the late Rogelio Bayotas is DISMISSED with costs de
oficio.
SO ORDERED.
Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Bellosillo, Melo,
Quiason, Puno, Vitug, Kapunan and Mendoza, JJ., concur.
Cruz, J., is on leave.
——————————————————————————————————
G.R. No. 230751
ESTRELLITA TADEO-MATIAS, Petitioner
vs
REPUBLIC OF THE PHILIPPINES, Respondent
DECISION
VELASCO, JR., J.:
This is an appeal1 assailing the Decision2 dated November 28, 2016 and Resolution3
dated March 20, 2017 of the Court of Appeals (CA) in CA-G.R. SP No. 129467.
The facts are as follows:
On April 10, 2012, petitioner Estrellita Tadco-Matias filed before the Regional
Trail Court (RTC) of Tarlac City a petition for the declaration of presumptive death of
her husband, Wifredo N. Matias (Wilfredo).4 The allegations of the petition read:
1. [Petitioner] is of legal age, married to [Wilfredo], Filipino and curr[e]ntly a residnet
of 106 Molave street, Zone B. San Miguel Tarlac City;
2. [Wifredo] is of legal age, a member of the Philippine Constabulary and was assigned
in Araya, Pampanga since August 24, 1967[;]
3. The[p]etitioner and [Wilfredo] entered into a lawful marriage on January 7, 1968 in
Imbo, Anda, Pangasinan x x x;
4. After the solemnization of their marriage vows, the couple put up their conjugal
home at 106 Molave street, Zone B. San Miguel, Tarlac City;
5. [Wilfredo] continued to serve the Philippines and on September 15, 1979, he set out
from their conjugal home to again serve as a member of the Philippine Constabulary;
6. [Wilfredo] never came back from his tour of duty in Arayat, Pampanga since 1979
and he never made contact or communicated with the [p]etitioner nor to his relatives;
7. That according to the service record of [Wilfredo] issued by the National Police
Commission, [Wilfredo] was already declared missing since 1979 x x x;
8. Petitioner constantly pestered the then Philippine Constabulary for any news
regarding [her] beloved husband [Wilfredo], but the Philippine Constabulary had no
answer to his whereabouts, [neither] did they have any news of him going AWOL, all
they know was he was assigned to a place frequented by the New People's Army;
9. [W]eeks became years and years became decades, but the [p]etitioner never gave
up hope, and after more than three (3) decades of awaiting, the [p]etitioner is still
hopeful, but the times had been tough on her, specially with a meager source of income
coupled with her age, it is now necessary for her to request for the benefits that
rightfully belong to her in order to survive;
10. [T]hat one of the requirements to attain the claim of benefits is for a proof of death
or at least declaration of presumptive death by the Honorable Court;
CIVIL LAW FULL CASE
11. That this petition is being filed not for any other purpose but solely to claim for
the benefit under P.D. No. 1638 as amended.
The petition was docketed as Spec. Proc. No. 4850 and was raffled to Branch 65 of
the Tarlac City RTC. A copy of the petition was then furnished to the Office of the
Solicitor General (OSG)_.
Subsequently, the OSG filed its notice of appearance on behalf of herein respondent
Republic of the Philippines (Republic).5
6
On January 15, 2012, the RTC issued a Decision in Spec. Proc. No. 4850 granting the
petition. The dispositive portion of the Decision reads:7
WHEREFORE in view of the foregoing the Court hereby declared (sic) WILFREDO
N. MATIAS absent or presumptively dead under Article 41 of the Family Code of
the Philippines for purpose of claiming financial benefits due to him as former
military officer.
xxxx
SO ORDERED. (Emphasis supplied)
The Republic questioned the decision of the RTC via a petition for certiotrari.8
On November 28, 2012, the CA rendered a decision granting the certiorari petition of
the Republic and setting aside the decision of the RTC. It accordingly disposed:
WHEREFORE, premises considered, the petition for certiorari is GRANTED. The
Decision dated January 15, 2012 of the Regional Trial Court, branch 65, Tarlac City,
in Special Proceeding no. 4850 is ANNULED and SET ASIDE, and the petition is
DISMISSED.
The CA premised its decision on the following ratiocinations:
1. The RTC erred when it declared Wilfredo presumptively dead on the basis of Article
41 of the Family Code (FC). Article 41 of the FC does not seek to remarry. If anything,
the petition was invoking the presumption of death established under Articles 390 and
391 of the Civil Code, and not that provided for under Article 41 of the FC.
2. Be that it may, the petition to declare Wilfredo presumptively dead should have
been dismissed by the RTC. The RTC is without authority to take cognizance of a
petition whose sole purpose is to have a person declared presumptively dead under
either Article 390 or Article 391 of the Civil Code. As been held by jurisprudence,
Articles 390 and 391 of the Civil Code merely express rules of evidence that allow a
court or a tribunal to presume that a person is dead-which presumption may be invoked
in any action or proceeding, but itself cannot be the subject of an independent action
or proceeding.
Petitioner moved for reconsideration, but the CA remained steadfast. Hence,this
appeal.
Our Ruling
We deny the appeal
I
The CA was correct. The petition for the declaration of presumptive death filed by the
petitioner is not an authorized suit and should have been dismissed by the RTC. The
RTC's decision must, therefore, be set aside.
RTC Erred I Declaring the
Presumptive Death of Wilfredo under
Article 41 of the FC; Petitioner's
Petition for the Declaration of
Presumptive Death is Not Based on
Article 41 of the FC, but on the Civil
Code
A conspicuous error in the decision of the RTC must first be addressed.
It can be recalled that the RTC, in fallo of its January 15, 2012 Decision, granted the
petitioner's petition by declaring Wilfredo presumptively dead "under Article 41 of the
FC." By doing so, RTC gave the impression that the petition for the declaration of
presumptive death filed by petitioner was likewise filed pursuant to Article 41 of the
FC.9 This is wrong.
CIVIL LAW FULL CASE
The petition for the declaration of presumptive death filed by petitioner is not an action
that would have warranted the application of Article 41 of the FC shows that the
presumption of death established therein is only applicable for the purpose of
contracting a valid subsequent marriage under the said law. Thus:
Art. 41. A marriage contracted by any person during subsistence of a previous
marriage shall be null and void, unless before the celebration of the subsequent
marriage, the prior spouse had been absent for four consecutive years and the spouse
present has a well-founded belief that the absent spouse was already dead. In case of
disappearance where there is danger of death under the circumstances set forth in the
provisions of Article 391 of the Civil Code, an absence of only two years shall be
sufficient.
For the purpose of contracting the subsequent marriage under the preceding paragraph
the spouse present must institute a summary proceeding as provided in this Code for
the declaration of presumptive death of the absentee, without prejudice to the effect of
reappearance of the absent spouse.
Here, petitioner was forthright that she was not seeking the declaration of the
presumptive death Wilfredo as a prerequisite for remarriage. In her petition for the
declaration of presumptive death, petitioner categorically stated that the same was filed
"not for any other purpose but solely to claim for the benefit under P.D. No. 1638 a
amended.10
Given that her petition for the declaration of presumptive death was not filed for the
purpose of remarriage, petitioner was clearly relying on the presumption of death
under either Article 390 or Article 391 of the Civil Code11 as the basis of her
petition. Articles 390 and 391 of the Civil Code express the general rule regarding
presumption s of death for any civil purpose, to wit:
Art. 390. After an absence of seven years, it being unknown whether or not the
absence still lives, he shall be presumed dead for all purposes except for those of
succession.
The absentee shall not be presumed dead for the purpose of opening his succession till
after an absence of five years shall be sufficient in order that his succession may be
opened.
Art. 391. The following shall be presumed dead for all purposes, including the division
of the estate among the heirs:
(1) A person on board a vessel lost during a sea voyage, or an aeroplane which is
missing, who has not been heard of for four years since the loss of the vessel or
aeroplane;
(2) A person in the armed forces who has taken part in war, and has been missing for
four years;
(3) a person who has been in danger of death under other circumstances and his
existence has not been known for four years.
Verily, the RTC's use of Article 41 of the FC as its basis in declaring the presumptive
death of Wilfredo was misleading and grossly improper.The petition for the
declaration of presumptive death filed by the petitioner was based on the Civil
Code, and not on Article 41 of the FC.
Petitioner's Petition for Declaration of
Presumptive Death Ought to Have Been
Dismissed; A Petition Whose Sole Objective is
To Declare a Person Presumptively Dead Under
the CivilCode, Like that Filed by the Petitioner
Before the RTC, Is Not a Viable Suit in Our
Jurisdiction
The true fault in the RTC's decision, however, goes beyond its misleading fallo. The
decision itself is objectionable.
Since the petition filed by the petitioner merely seeks the declaration of presumptive
death of Wilfredo under the Civil Code, the RTC should have dismissed such petition
outright. This is because, in our jurisdiction, a petition whose sole objective is to have
a person declared presumptively dead under the Civil Code is not regarded as a valid
suit and no court has any authority to take cognizance of the same.
CIVIL LAW FULL CASE
The above norm had its conceptual roots in the 1948 case of In re: Petition for the
Presumption of Death of Nicolai Szatraw.12 In the said case, we held that a rule
creating a presumption of death13 is merely one of the evidence that-while may be
invoked in any action or proceeding-cannot be the lone subject of an independent
action or proceeding. Szatraw explained:
The rule invoked by the latter is merely one of the evidence which permits the
court to presume that a person had been unheard from in seven years had been
established. This presumption may arise and be invoked and made in a case, either in
an action or in a special proceeding, which is tried or heard by, and submitted for
decision to, a competent court. Independently of such an action or special
proceeding, the presumption of death cannot be invoked, nor can it be made the
subject of an action or special proceeding. In this case, there is no right ti be
enforced nor is there a remedy prayed for by the petitioner against her absent
husband. Neither is there a prayer for the final determination of his right or status or
for the ascertainment of particular fact, for the petition does not pray for the declaration
that the petitioner 's husband us dead, but merely asks for a declaration that he be
presumed dead because he had been unheard from in seven years. If there is any
pretense at securing a declaration that the petitioner's husband os dead, such a
pretension cannot be granted because it is unauthorized. The petition is for a
declaration, even if judicially made, would not improve the petitioner's situation,
because such a presumption is already established by law. A judicial
pronouncement to that effect, even if final and executory, would be a prima facie
presumption only. It is still disputable. It is for that reason that it cannot be the
subject of judicial pronouncement or declaration, if it is tha only question or
matter involved in a case, or upon which a competent court has to pass. The latter
must decide finally the controversy between the parties, or determine finally the right
or status of a party or establish finally a particular fact, out of which certain rights and
obligations arise or may arise; and once such controversy is decided by a final decree,
then the judgement on the subject of the controversy, or the decree upon the right or
status of a party or upon the existence of a particular fact, becomes res judicata, subject
to no collateral attack, except in a few rare instances especially provided by law. It is,
therefore, clear that judicial declaration that a person is presumptively dead, because
he had been unheard from in seven years, being a presumption juris tantum only,
subject to contrary proof, cannot reach the stage of finality or become final. (Citations
omitted and emphasis supplied)
The above ruling in Szatraw has since been ussed by the subsequent cases of Lukban
v. Republic14 and Gue v. Republic15 in disallowing petitions for declaration of
presumptive death based on Article 390 of the Civil Code (and, implicity, also those
based on the Civil based on Article 391 of the Civil Code).
Dissecting the rulings of Szatraw, Gue and Lukban collectively, we are able to
ascertain the considerations why a petition for declaration of presumptive death based
on the Civil Code was disallowed in our jurisdiction, viz:16
1. Articles 390 and 391 of the Civil Code merely express rules of evidence that
only allow a court or a tribunal to presume that a person is dead upon the establishment
of certain facts.
2. Since Articles 390 an d 391 of the Civil Code merely express rules of
evidence, an action brought exclusively to declare a person presumptively dead
under either of the said articles actually presents
no actual controversy that a court could decide. In such action, there would be no
actual rights to be enforces, no wrong to be remedied nor any status to be established.
3. A judicial pronouncement declaring a person presumptively dead under
Article 390 or Article 391 of the Civil Code, in an action exclusively based thereon,
would never really become "final" as the same only confirms tha existence of a prima
facie or disputable presumption. The function of a court to render decisions that is
supposed to be final and binding between litigants is thereby compromised.
4. Moreove, a court action to declare a person presumptively dead under
Articles 390 and 391 of the Civil Code would be unnecessary. The presumption in
the said articles is already established by law.
CIVIL LAW FULL CASE
Verily, under prevailing case law, courts are without any authority to take cognizance
of a petition that-like the one filed by the petitioner in the case at bench-only seeks to
have a person declared presumptively dead under the Civil Code. Such a petition is
not authorized by law.17 Hence, by acting upon and eventually granting the petitioner's
petition for the declaration of presumptive death, the RTC violated prevailing
jurisprudence and thereby committed grave abuse of discretion. The CA, therefore,
was only correct in setting aside the RTC's decision.
II
Before bringing this case to its logical conclusion, however, there are a few points the
Court is minded to make.
It is not lost on this Court that much of the present controversy stemmed from the
misconception that a court declaration is required in order to establish a person is
presumptively dead for purposes of claiming his death benefits as a military
serviceman under pertinent laws.18 This misconception is what moved petitioner to
file her misguided petition for the declaration of presumptive death of Wilfredo and
what ultimately exposed her to unnecessary difficulties in prosecuting an otherwise
simple claim for death benefits either before the Philippine Veterans' Affair Office
(PVAO) of the Armed Forces of the Philippines (AFP).
What the Court finds deeply disconnecting, however, is the possibility that such
misconception may have been peddles by no less than the PVAO and the AFP
themselves; that such agencies, as a matter of practice, had been requiring claimants,
such as the petitioner, to first secure a court declaration of presumptive death before
processing the death before processing the death benefits of missing serviceman.
In view of the foregoing circumstances, the Court deems it necessary to issue the
following guidelines-culled from relevant law and jurisprudential pronouncements-to
aid the public, PVAO and the AFP in making or dealing with claims of death benefits
which are similar to that of the petitioner:
1. The PVAO and the AFP can decide claims of death benefits of a missing
soldier without requiring the claimant to first produce a court declaration of the
presumptive death of such soldier. In such claims, the PVAO and the AFP can make
their own determination, on the basis of the evidence presented by the claimant,
whether the presumption of death under Articles 390 and 391 of the Civil Code may
be applied or not.
It must be stressed that the presumption of death under Articles 390 and 391 of the
Civil Code arises by operation of law, without need of a court declaration, once the
factual conditions mentioned in the said articles are established.19 Hence, requiring the
claimant to further secure a court declaration in order to establish the presumptive
death of a missing soldier is not proper and contravenes established jurisprudence on
the matter.20
2. In order to avail of the presumption, therefore, the claimant need only
present before the PVAO or the appropriate office of the AFP, as the case may be, any
"evidence"21 which shows that the concerned soldier had been missing for such
number of years and or under the circumstances prescribed under Articles 390 and 391
of the Civil Code. Obviously, the "evidence" referred to here excludes a court
declaration of presumptive death.
3. The PVAO or the AFP, as the case may be, may then weigh the evidence
submitted by the claimant and determine their sufficiency to establish the requisite
factual conditions specified under Article 390 or 391 of the Civil Code in order for the
presumption of death to arise. If the PVAO or the AFP determines that the evidence
submitted by the claimant is sufficient, they should not hesitate to apply the
presumption of death and pay the latter's claim.
4. If the PVAO or the AFP determines that the evidence submitted by the
claimant is not sufficient to invoke the presumption of death under the Civil Code and
denies the latter's claim by reason thereof, the claimant may file an appeal with the
Office of the President (OP) pursuant to the principle of exhaustion of administrative
remedies.
If the OP denies the appeal, the claimant may next seek recourse via a petition for
review with the CA under Rule 43 of the Rules of the Court.1avvphi1 And finally,
shold such recourse still fail, the claimant may file an appeal by certiorari with the
Supreme Court.
CIVIL LAW FULL CASE
While we are constrained by case law to deny the instant petition, the Court is hopeful
that, by the foregoing guidelines, the unfortunate experience of the petitioner would
no longer be replicated in the future.
WHEREFORE, the instant appeal is DENIED. The Decision dated November 28,
2016 and Resolution dated March 20, 2017 of the Court of Appeals in CA-G.R. SP
No. 129467 are AFFIRMED. The Court declares that a judicial decision of a court of
law that a person is presumptively dead is not requirement before the Philippine
Veterans' Affairs Office and the Armed Forces of the Philippines for their
consideration.
SO ORDERED.
——————————————————————————————————
G.R. No. L-21438 September 28, 1966
AIR FRANCE, petitioner,
vs.
RAFAEL CARRASCOSO and the HONORABLE COURT OF APPEALS,
respondents.
Lichauco, Picazo and Agcaoili for petitioner.
Bengzon Villegas and Zarraga for respondent R. Carrascoso.
SANCHEZ, J.:
The Court of First Instance of Manila 1 sentenced petitioner to pay respondent Rafael
Carrascoso P25,000.00 by way of moral damages; P10,000.00 as exemplary damages;
P393.20 representing the difference in fare between first class and tourist class for the
portion of the trip Bangkok-Rome, these various amounts with interest at the legal
rate, from the date of the filing of the complaint until paid; plus P3,000.00 for
attorneys' fees; and the costs of suit.
On appeal,2 the Court of Appeals slightly reduced the amount of refund on
Carrascoso's plane ticket from P393.20 to P383.10, and voted to affirm the appealed
decision "in all other respects", with costs against petitioner.
The case is now before us for review on certiorari.
The facts declared by the Court of Appeals as " fully supported by the evidence of
record", are:
Plaintiff, a civil engineer, was a member of a group of 48 Filipino pilgrims that left
Manila for Lourdes on March 30, 1958.
On March 28, 1958, the defendant, Air France, through its authorized agent, Philippine
Air Lines, Inc., issued to plaintiff a "first class" round trip airplane ticket from Manila
to Rome. From Manila to Bangkok, plaintiff travelled in "first class", but at Bangkok,
the Manager of the defendant airline forced plaintiff to vacate the "first class" seat that
he was occupying because, in the words of the witness Ernesto G. Cuento, there was
a "white man", who, the Manager alleged, had a "better right" to the seat. When asked
to vacate his "first class" seat, the plaintiff, as was to be expected, refused, and told
defendant's Manager that his seat would be taken over his dead body; a commotion
ensued, and, according to said Ernesto G. Cuento, "many of the Filipino passengers
got nervous in the tourist class; when they found out that Mr. Carrascoso was having
a hot discussion with the white man [manager], they came all across to Mr. Carrascoso
and pacified Mr. Carrascoso to give his seat to the white man" (Transcript, p. 12,
Hearing of May 26, 1959); and plaintiff reluctantly gave his "first class" seat in the
plane.3
1. The trust of the relief petitioner now seeks is that we review "all the findings" 4 of
respondent Court of Appeals. Petitioner charges that respondent court failed to make
CIVIL LAW FULL CASE
complete findings of fact on all the issues properly laid before it. We are asked to
consider facts favorable to petitioner, and then, to overturn the appellate court's
decision.
Coming into focus is the constitutional mandate that "No decision shall be rendered
by any court of record without expressing therein clearly and distinctly the facts and
the law on which it is based". 5 This is echoed in the statutory demand that a judgment
determining the merits of the case shall state "clearly and distinctly the facts and the
law on which it is based"; 6 and that "Every decision of the Court of Appeals shall
contain complete findings of fact on all issues properly raised before it". 7
A decision with absolutely nothing to support it is a nullity. It is open to direct attack.
8
The law, however, solely insists that a decision state the "essential ultimate facts"
upon which the court's conclusion is drawn. 9 A court of justice is not hidebound to
write in its decision every bit and piece of evidence 10 presented by one party and the
other upon the issues raised. Neither is it to be burdened with the obligation "to specify
in the sentence the facts" which a party "considered as proved". 11 This is but a part of
the mental process from which the Court draws the essential ultimate facts. A decision
is not to be so clogged with details such that prolixity, if not confusion, may result. So
long as the decision of the Court of Appeals contains the necessary facts to warrant its
conclusions, it is no error for said court to withhold therefrom "any specific finding of
facts with respect to the evidence for the defense". Because as this Court well
observed, "There is no law that so requires". 12 Indeed, "the mere failure to specify (in
the decision) the contentions of the appellant and the reasons for refusing to believe
them is not sufficient to hold the same contrary to the requirements of the provisions
of law and the Constitution". It is in this setting that in Manigque, it was held that the
mere fact that the findings "were based entirely on the evidence for the prosecution
without taking into consideration or even mentioning the appellant's side in the
controversy as shown by his own testimony", would not vitiate the judgment. 13 If the
court did not recite in the decision the testimony of each witness for, or each item of
evidence presented by, the defeated party, it does not mean that the court has
overlooked such testimony or such item of evidence. 14 At any rate, the legal
presumptions are that official duty has been regularly performed, and that all the
matters within an issue in a case were laid before the court and passed upon by it. 15
Findings of fact, which the Court of Appeals is required to make, maybe defined as
"the written statement of the ultimate facts as found by the court ... and essential to
support the decision and judgment rendered thereon". 16 They consist of the court's
"conclusions" with respect to the determinative facts in issue". 17 A question of law,
upon the other hand, has been declared as "one which does not call for an examination
of the probative value of the evidence presented by the parties." 18
2. By statute, "only questions of law may be raised" in an appeal by certiorari from a
judgment of the Court of Appeals. 19 That judgment is conclusive as to the facts. It is
not appropriately the business of this Court to alter the facts or to review the questions
of fact. 20
With these guideposts, we now face the problem of whether the findings of fact of the
Court of Appeals support its judgment.
3. Was Carrascoso entitled to the first class seat he claims?
It is conceded in all quarters that on March 28, 1958 he paid to and received from
petitioner a first class ticket. But petitioner asserts that said ticket did not represent the
true and complete intent and agreement of the parties; that said respondent knew that
he did not have confirmed reservations for first class on any specific flight, although
he had tourist class protection; that, accordingly, the issuance of a first class ticket was
no guarantee that he would have a first class ride, but that such would depend upon
the availability of first class seats.
These are matters which petitioner has thoroughly presented and discussed in its brief
before the Court of Appeals under its third assignment of error, which reads: "The trial
court erred in finding that plaintiff had confirmed reservations for, and a right to, first
class seats on the "definite" segments of his journey, particularly that from Saigon to
Beirut". 21
And, the Court of Appeals disposed of this contention thus:
CIVIL LAW FULL CASE
Defendant seems to capitalize on the argument that the issuance of a first-class ticket
was no guarantee that the passenger to whom the same had been issued, would be
accommodated in the first-class compartment, for as in the case of plaintiff he had yet
to make arrangements upon arrival at every station for the necessary first-class
reservation. We are not impressed by such a reasoning. We cannot understand how a
reputable firm like defendant airplane company could have the indiscretion to give out
tickets it never meant to honor at all. It received the corresponding amount in payment
of first-class tickets and yet it allowed the passenger to be at the mercy of its
employees. It is more in keeping with the ordinary course of business that the company
should know whether or riot the tickets it issues are to be honored or not.22
Not that the Court of Appeals is alone. The trial court similarly disposed of petitioner's
contention, thus:
On the fact that plaintiff paid for, and was issued a "First class" ticket, there
can be no question. Apart from his testimony, see plaintiff's Exhibits "A", "A-1", "B",
"B-1," "B-2", "C" and "C-1", and defendant's own witness, Rafael Altonaga,
confirmed plaintiff's testimony and testified as follows:
Q. In these tickets there are marks "O.K." From what you know, what does this OK
mean?
A. That the space is confirmed.
Q. Confirmed for first class?
A. Yes, "first class". (Transcript, p. 169)
xxx xxx xxx
Defendant tried to prove by the testimony of its witnesses Luis Zaldariaga and Rafael
Altonaga that although plaintiff paid for, and was issued a "first class" airplane ticket,
the ticket was subject to confirmation in Hongkong. The court cannot give credit to
the testimony of said witnesses. Oral evidence cannot prevail over written evidence,
and plaintiff's Exhibits "A", "A-l", "B", "B-l", "C" and "C-1" belie the testimony of
said witnesses, and clearly show that the plaintiff was issued, and paid for, a first class
ticket without any reservation whatever.
Furthermore, as hereinabove shown, defendant's own witness Rafael Altonaga
testified that the reservation for a "first class" accommodation for the plaintiff was
confirmed. The court cannot believe that after such confirmation defendant had a
verbal understanding with plaintiff that the "first class" ticket issued to him by
defendant would be subject to confirmation in Hongkong. 23
We have heretofore adverted to the fact that except for a slight difference of a few
pesos in the amount refunded on Carrascoso's ticket, the decision of the Court of First
Instance was affirmed by the Court of Appeals in all other respects. We hold the view
that such a judgment of affirmance has merged the judgment of the lower court. 24
Implicit in that affirmance is a determination by the Court of Appeals that the
proceeding in the Court of First Instance was free from prejudicial error and "all
questions raised by the assignments of error and all questions that might have been
raised are to be regarded as finally adjudicated against the appellant". So also, the
judgment affirmed "must be regarded as free from all error". 25 We reached this policy
construction because nothing in the decision of the Court of Appeals on this point
would suggest that its findings of fact are in any way at war with those of the trial
court. Nor was said affirmance by the Court of Appeals upon a ground or grounds
different from those which were made the basis of the conclusions of the trial court. 26
If, as petitioner underscores, a first-class-ticket holder is not entitled to a first class
seat, notwithstanding the fact that seat availability in specific flights is therein
confirmed, then an air passenger is placed in the hollow of the hands of an airline.
What security then can a passenger have? It will always be an easy matter for an airline
aided by its employees, to strike out the very stipulations in the ticket, and say that
there was a verbal agreement to the contrary. What if the passenger had a schedule to
fulfill? We have long learned that, as a rule, a written document speaks a uniform
language; that spoken word could be notoriously unreliable. If only to achieve stability
in the relations between passenger and air carrier, adherence to the ticket so issued is
desirable. Such is the case here. The lower courts refused to believe the oral evidence
intended to defeat the covenants in the ticket.
The foregoing are the considerations which point to the conclusion that there are facts
upon which the Court of Appeals predicated the finding that respondent Carrascoso
had a first class ticket and was entitled to a first class seat at Bangkok, which is a
stopover in the Saigon to Beirut leg of the flight. 27 We perceive no "welter of
CIVIL LAW FULL CASE
distortions by the Court of Appeals of petitioner's statement of its position", as charged
by petitioner. 28 Nor do we subscribe to petitioner's accusation that respondent
Carrascoso "surreptitiously took a first class seat to provoke an issue". 29 And this
because, as petitioner states, Carrascoso went to see the Manager at his office in
Bangkok "to confirm my seat and because from Saigon I was told again to see the
Manager". 30 Why, then, was he allowed to take a first class seat in the plane at
Bangkok, if he had no seat? Or, if another had a better right to the seat?
4. Petitioner assails respondent court's award of moral damages. Petitioner's trenchant
claim is that Carrascoso's action is planted upon breach of contract; that to authorize
an award for moral damages there must be an averment of fraud or bad faith;31 and
that the decision of the Court of Appeals fails to make a finding of bad faith. The
pivotal allegations in the complaint bearing on this issue are:
3. That ... plaintiff entered into a contract of air carriage with the Philippine Air Lines
for a valuable consideration, the latter acting as general agents for and in behalf of the
defendant, under which said contract, plaintiff was entitled to, as defendant agreed to
furnish plaintiff, First Class passage on defendant's plane during the entire duration of
plaintiff's tour of Europe with Hongkong as starting point up to and until plaintiff's
return trip to Manila, ... .
4. That, during the first two legs of the trip from Hongkong to Saigon and from Saigon
to Bangkok, defendant furnished to the plaintiff First Class accommodation but only
after protestations, arguments and/or insistence were made by the plaintiff with
defendant's employees.
5. That finally, defendant failed to provide First Class passage, but instead furnished
plaintiff only Tourist Class accommodations from Bangkok to Teheran and/or
Casablanca, ... the plaintiff has been compelled by defendant's employees to leave the
First Class accommodation berths at Bangkok after he was already seated.
6. That consequently, the plaintiff, desiring no repetition of the inconvenience and
embarrassments brought by defendant's breach of contract was forced to take a Pan
American World Airways plane on his return trip from Madrid to Manila.32
xxx xxx xxx
2. That likewise, as a result of defendant's failure to furnish First Class
accommodations aforesaid, plaintiff suffered inconveniences, embarrassments, and
humiliations, thereby causing plaintiff mental anguish, serious anxiety, wounded
feelings, social humiliation, and the like injury, resulting in moral damages in the
amount of P30,000.00. 33
xxx xxx xxx
The foregoing, in our opinion, substantially aver: First, That there was a contract to
furnish plaintiff a first class passage covering, amongst others, the Bangkok-Teheran
leg; Second, That said contract was breached when petitioner failed to furnish first
class transportation at Bangkok; and Third, that there was bad faith when petitioner's
employee compelled Carrascoso to leave his first class accommodation berth "after he
was already, seated" and to take a seat in the tourist class, by reason of which he
suffered inconvenience, embarrassments and humiliations, thereby causing him
mental anguish, serious anxiety, wounded feelings and social humiliation, resulting in
moral damages. It is true that there is no specific mention of the term bad faith in the
complaint. But, the inference of bad faith is there, it may be drawn from the facts and
circumstances set forth therein. 34 The contract was averred to establish the relation
between the parties. But the stress of the action is put on wrongful expulsion.
Quite apart from the foregoing is that (a) right the start of the trial, respondent's counsel
placed petitioner on guard on what Carrascoso intended to prove: That while sitting in
the plane in Bangkok, Carrascoso was ousted by petitioner's manager who gave his
seat to a white man; 35 and (b) evidence of bad faith in the fulfillment of the contract
was presented without objection on the part of the petitioner. It is, therefore,
unnecessary to inquire as to whether or not there is sufficient averment in the
complaint to justify an award for moral damages. Deficiency in the complaint, if any,
was cured by the evidence. An amendment thereof to conform to the evidence is not
even required. 36 On the question of bad faith, the Court of Appeals declared:
CIVIL LAW FULL CASE
That the plaintiff was forced out of his seat in the first class compartment of
the plane belonging to the defendant Air France while at Bangkok, and was transferred
to the tourist class not only without his consent but against his will, has been
sufficiently established by plaintiff in his testimony before the court, corroborated by
the corresponding entry made by the purser of the plane in his notebook which notation
reads as follows:
"First-class passenger was forced to go to the tourist class against his will, and
that the captain refused to intervene”, and by the testimony of an eye-witness, Ernesto
G. Cuento, who was a co-passenger. The captain of the plane who was asked by the
manager of defendant company at Bangkok to intervene even refused to do so. It is
noteworthy that no one on behalf of defendant ever contradicted or denied this
evidence for the plaintiff. It could have been easy for defendant to present its manager
at Bangkok to testify at the trial of the case, or yet to secure his disposition; but
defendant did neither. 37
The Court of appeals further stated —
Neither is there evidence as to whether or not a prior reservation was made by the
white man. Hence, if the employees of the defendant at Bangkok sold a first-class
ticket to him when all the seats had already been taken, surely the plaintiff should not
have been picked out as the one to suffer the consequences and to be subjected to the
humiliation and indignity of being ejected from his seat in the presence of others.
Instead of explaining to the white man the improvidence committed by defendant's
employees, the manager adopted the more drastic step of ousting the plaintiff who was
then safely ensconsced in his rightful seat. We are strengthened in our belief that this
probably was what happened there, by the testimony of defendant's witness Rafael
Altonaga who, when asked to explain the meaning of the letters "O.K." appearing on
the tickets of plaintiff, said "that the space is confirmed for first class. Likewise,
Zenaida Faustino, another witness for defendant, who was the chief of the Reservation
Office of defendant, testified as follows:
"Q How does the person in the ticket-issuing office know what reservation the
passenger has arranged with you?
A They call us up by phone and ask for the confirmation." (t.s.n., p. 247, June 19,
1959)
In this connection, we quote with approval what the trial Judge has said on this point:
Why did the, using the words of witness Ernesto G. Cuento, "white man" have a "better
right" to the seat occupied by Mr. Carrascoso? The record is silent. The defendant
airline did not prove "any better", nay, any right on the part of the "white man" to the
"First class" seat that the plaintiff was occupying and for which he paid and was issued
a corresponding "first class" ticket.
If there was a justified reason for the action of the defendant's Manager in Bangkok,
the defendant could have easily proven it by having taken the testimony of the said
Manager by deposition, but defendant did not do so; the presumption is that evidence
willfully suppressed would be adverse if produced [Sec. 69, par (e), Rules of Court];
and, under the circumstances, the Court is constrained to find, as it does find, that the
Manager of the defendant airline in Bangkok not merely asked but threatened the
plaintiff to throw him out of the plane if he did not give up his "first class" seat because
the said Manager wanted to accommodate, using the words of the witness Ernesto G.
Cuento, the "white man".38
It is really correct to say that the Court of Appeals in the quoted portion first
transcribed did not use the term "bad faith". But can it be doubted that the recital of
facts therein points to bad faith? The manager not only prevented Carrascoso from
enjoying his right to a first class seat; worse, he imposed his arbitrary will; he forcibly
ejected him from his seat, made him suffer the humiliation of having to go to the tourist
class compartment - just to give way to another passenger whose right thereto has not
been established. Certainly, this is bad faith. Unless, of course, bad faith has assumed
a meaning different from what is understood in law. For, "bad faith" contemplates a
"state of mind affirmatively operating with furtive design or with some motive of self-
interest or will or for ulterior purpose." 39
And if the foregoing were not yet sufficient, there is the express finding of bad faith
in the judgment of the Court of First Instance, thus:
The evidence shows that the defendant violated its contract of transportation with
plaintiff in bad faith, with the aggravating circumstances that defendant's Manager in
Bangkok went to the extent of threatening the plaintiff in the presence of many
CIVIL LAW FULL CASE
passengers to have him thrown out of the airplane to give the "first class" seat that he
was occupying to, again using the words of the witness Ernesto G. Cuento, a "white
man" whom he (defendant's Manager) wished to accommodate, and the defendant has
not proven that this "white man" had any "better right" to occupy the "first class" seat
that the plaintiff was occupying, duly paid for, and for which the corresponding "first
class" ticket was issued by the defendant to him.40
5. The responsibility of an employer for the tortious act of its employees need not be
essayed. It is well settled in law. 41 For the willful malevolent act of petitioner's
manager, petitioner, his employer, must answer. Article 21 of the Civil Code says:
ART. 21. Any person who willfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall compensate the latter
for the damage.
In parallel circumstances, we applied the foregoing legal precept; and, we held
that upon the provisions of Article 2219 (10), Civil Code, moral damages are
recoverable. 42
6. A contract to transport passengers is quite different in kind and degree from any
other contractual relation. 43 And this, because of the relation which an air-carrier
sustains with the public. Its business is mainly with the travelling public. It invites
people to avail of the comforts and advantages it offers. The contract of air carriage,
therefore, generates a relation attended with a public duty. Neglect or malfeasance of
the carrier's employees, naturally, could give ground for an action for damages.
Passengers do not contract merely for transportation. They have a right to be treated
by the carrier's employees with kindness, respect, courtesy and due consideration.
They are entitled to be protected against personal misconduct, injurious language,
indignities and abuses from such employees. So it is, that any rule or discourteous
conduct on the part of employees towards a passenger gives the latter an action for
damages against the carrier. 44
Thus, "Where a steamship company 45 had accepted a passenger's check, it was a
breach of contract and a tort, giving a right of action for its agent in the presence of
third persons to falsely notify her that the check was worthless and demand payment
under threat of ejection, though the language used was not insulting and she was not
ejected." 46 And this, because, although the relation of passenger and carrier is
"contractual both in origin and nature" nevertheless "the act that breaks the contract
may be also a tort". 47 And in another case, "Where a passenger on a railroad train,
when the conductor came to collect his fare tendered him the cash fare to a point where
the train was scheduled not to stop, and told him that as soon as the train reached such
point he would pay the cash fare from that point to destination, there was nothing in
the conduct of the passenger which justified the conductor in using insulting language
to him, as by calling him a lunatic," 48 and the Supreme Court of South Carolina there
held the carrier liable for the mental suffering of said passenger.1
Petitioner's contract with Carrascoso is one attended with public duty. The stress of
Carrascoso's action as we have said, is placed upon his wrongful expulsion. This is a
violation of public duty by the petitioner air carrier — a case of quasi-delict. Damages
are proper.
7. Petitioner draws our attention to respondent Carrascoso's testimony, thus —
Q You mentioned about an attendant. Who is that attendant and purser?
A When we left already — that was already in the trip — I could not help it. So one
of the flight attendants approached me and requested from me my ticket and I said,
What for? and she said, "We will note that you transferred to the tourist class". I said,
"Nothing of that kind. That is tantamount to accepting my transfer." And I also said,
"You are not going to note anything there because I am protesting to this transfer".
Q Was she able to note it?
A No, because I did not give my ticket.
Q About that purser?
A Well, the seats there are so close that you feel uncomfortable and you don't have
enough leg room, I stood up and I went to the pantry that was next to me and the purser
was there. He told me, "I have recorded the incident in my notebook." He read it and
translated it to me — because it was recorded in French — "First class passenger was
forced to go to the tourist class against his will, and that the captain refused to
intervene."
Mr. VALTE —
CIVIL LAW FULL CASE
I move to strike out the last part of the testimony of the witness because the best
evidence would be the notes. Your Honor.
COURT —
I will allow that as part of his testimony. 49
Petitioner charges that the finding of the Court of Appeals that the purser made an
entry in his notebook reading "First class passenger was forced to go to the tourist
class against his will, and that the captain refused to intervene" is predicated upon
evidence [Carrascoso's testimony above] which is incompetent. We do not think so.
The subject of inquiry is not the entry, but the ouster incident. Testimony on the entry
does not come within the proscription of the best evidence rule. Such testimony is
admissible. 49a
Besides, from a reading of the transcript just quoted, when the dialogue happened, the
impact of the startling occurrence was still fresh and continued to be felt. The
excitement had not as yet died down. Statements then, in this environment, are
admissible as part of the res gestae. 50 For, they grow "out of the nervous excitement
and mental and physical condition of the declarant". 51 The utterance of the purser
regarding his entry in the notebook was spontaneous, and related to the circumstances
of the ouster incident. Its trustworthiness has been guaranteed. 52 It thus escapes the
operation of the hearsay rule. It forms part of the res gestae.
At all events, the entry was made outside the Philippines. And, by an employee of
petitioner. It would have been an easy matter for petitioner to have contradicted
Carrascoso's testimony. If it were really true that no such entry was made, the
deposition of the purser could have cleared up the matter.
We, therefore, hold that the transcribed testimony of Carrascoso is admissible in
evidence.
8. Exemplary damages are well awarded. The Civil Code gives the court ample power
to grant exemplary damages — in contracts and quasi- contracts. The only condition
is that defendant should have "acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner." 53 The manner of ejectment of respondent Carrascoso from his
first class seat fits into this legal precept. And this, in addition to moral damages.54
9. The right to attorney's fees is fully established. The grant of exemplary damages
justifies a similar judgment for attorneys' fees. The least that can be said is that the
courts below felt that it is but just and equitable that attorneys' fees be given. 55 We do
not intend to break faith with the tradition that discretion well exercised — as it was
here — should not be disturbed.
10. Questioned as excessive are the amounts decreed by both the trial court and the
Court of Appeals, thus: P25,000.00 as moral damages; P10,000.00, by way of
exemplary damages, and P3,000.00 as attorneys' fees. The task of fixing these amounts
is primarily with the trial court. 56 The Court of Appeals did not interfere with the same.
The dictates of good sense suggest that we give our imprimatur thereto. Because, the
facts and circumstances point to the reasonableness thereof.57
On balance, we say that the judgment of the Court of Appeals does not suffer from
reversible error. We accordingly vote to affirm the same. Costs against petitioner. So
ordered.
——————————————————————————————————
G.R. No. L-28589 January 8, 1973
RAFAEL ZULUETA, ET AL., plaintiffs-appellees,
vs.
PAN AMERICAN WORLD AIRWAYS, INC., defendant-appellant.
Alfredo L. Benipayo for plaintiffs-appellee Rafael Zulueta and Carolina Zulueta.
Justo L. Albert for plaintiff-appellee Telly Albert Zulueta.
V.E. del Rosario and Associates and Salcedo, Del Rosario, Bito, Misa and Lozada
for defendant-appellant.
RESOLUTION
CONCEPCION, C.J.:
CIVIL LAW FULL CASE
Both parties in this case have moved for the reconsideration of the decision of this
Court promulgated on February 29, 1972. Plaintiffs maintain that the decision
appealed from should be affirmed in toto. The defendant, in turn, prays that the
decision of this Court be "set aside ... with or without a new trial, ... and that the
complaint be dismissed, with costs; or, in the alternative, that the amount of the award
embodied therein be considerably reduced." .
Subsequently to the filing of its motion for reconsideration, the defendant filed a
"petition to annul proceedings and/or to order the dismissal of plaintiffs-appellees'
complaint" upon the ground that "appellees' complaint actually seeks the recovery of
only P5,502.85 as actual damages, because, for the purpose of determining the
jurisdiction of the lower court, the unspecified sums representing items of alleged
damages, may not be considered, under the settled doctrines of this Honorable Court,"
and "the jurisdiction of courts of first instance when the complaint in the present case
was filed on Sept. 30, 1965" was limited to cases "in which the demand, exclusive of
interest, or the value of the property in controversy amounts to more than ten thousand
pesos" and "the mere fact that the complaint also prays for unspecified moral damages
and attorney's fees, does not bring the action within the jurisdiction of the lower court."
We find no merit in this contention. To begin with, it is not true that "the unspecified
sums representing items or other alleged damages, may not be considered" — for the
purpose of determining the jurisdiction of the court — "under the settled doctrines of
this Honorable Court." In fact, not a single case has been cited in support of this
allegation.
Secondly, it has been held that a clam for moral damages is one not susceptible of
pecuniary estimation.1 In fact, Article 2217 of the Civil Code of the Philippines
explicitly provides that "(t)hough incapable of pecuniary computation, moral damages
may be recovered if they are the proximate result of the defendant's wrongful act or
omission." Hence, "(n)o proof pecuniary loss necessary" — pursuant to Article 2216
of the same Code — "in order that moral ... damages may be adjudicated." And "(t)he
assessment of such damages ... is left to the discretion of the court" - said article adds
- "according to the circumstances of each case." Appellees' complaint is, therefore,
within the original jurisdiction of courts of first instance, which includes "all civil
actions in which the subject of the litigation is not capable of pecuniary estimation."2
Thirdly, in its answer to plaintiffs' original and amended complainants, defendant had
set up a counterclaim in the aggregate sum of P12,000, which is, also, within the
original jurisdiction of said courts, thereby curing the alleged defect if any, in
plaintiffs' complaint.3
We need not consider the jurisdictional controversy as to the amount the appellant sues
to recover because the counterclaim interposed establishes the jurisdiction of the
District Court. Merchants' Heat & Light Co. v. James B. Clow & Sons, 204 U.S. 286,
27 S. Ct. 285, 51 L. Ed. 488; O. J. Lewis Mercantile Co. v. Klepner, 176 F. 343 (C.C.A.
2), certiorari denied 216 U.S. 620, 30 S Ct. 575, 54 L. Ed. 641. ... .4
... courts have said that "when the jurisdictional amount is in question, the tendering
of a counterclaim in an amount which in itself, or added to the amount claimed in the
petition, makes up a sum equal to the amount necessary to the jurisdiction of this court,
jurisdiction is established, whatever may be the state of the plaintiff's complaint."
American Sheet & Tin Plate Co. v. Winzeler (D.C.) 227 F. 321, 324.5
Thus, in Ago v. Buslon,6 We held:
... . Then, too, petitioner's counterclaim for P37,000.00 was, also, within the exclusive
original jurisdiction of the latter courts, and there are ample precedents to the effect
that "although the original claim involves less than the jurisdictional amount, ...
jurisdiction can be sustained if the counterclaim (of the compulsory type)" — such as
the one set up by petitioner herein, based upon the damages allegedly suffered by him
in consequence of the filing of said complaint — "exceeds the jurisdictional amount."
(Moore Federal Practice, 2nd ed. [1948], Vol. 3, p. 41; Ginsburg vs. Pacific Mutual
Life Ins. Co. of California, 69 Fed. [2d] 97; Home Life Ins. Co. vs. Sipp., 11 Fed.
[2d]474; American Sheet & Tin Plate Co. vs. Winzeler [D.C.], 227 Fed. 321, 324; Brix
vs. People's Mutual Life Ins. Co., 41 P. 2d. 537, 2 Cal. 2d. 446; Emery vs. Pacific
Employees Ins. Co., 67 P. 2d. 1046, 8 Cal. 2d. 663).
Needless to say, having not only failed to question the jurisdiction of the trial court —
either in that court or in this Court, before the rendition of the latter's decision, and
even subsequently thereto, by filing the aforementioned motion for reconsideration
CIVIL LAW FULL CASE
and seeking the reliefs therein prayed for — but, also, urged both courts to exercise
jurisdiction over the merits of the case, defendant is now estopped from impugning
said jurisdiction.7
Before taking up the specific questions raised in defendant's motion for
reconsideration, it should be noted that the same is mainly predicated upon the premise
that plaintiffs' version is inherently incredible, and that this Court should accept the
theory of the defense to the effect that petitioner was off-loaded because of a bomb-
scare allegedly arising from his delay in boarding the aircraft and subsequent refusal
to open his bags for inspection. We need not repeat here the reasons given in Our
decision for rejecting defendant's contention and not disturbing the findings of fact of
His Honor, the Trial Judge, who had the decided advantage — denied to Us — of
observing the behaviour of the witnesses in the course of the trial and found those of
the plaintiffs worthy of credence, not the evidence for the defense.
It may not be amiss however, to stress the fact that, in his written report, made in
transit from Wake to Manila — or immediately after the occurrence and before the
legal implications or consequences thereof could have been the object of mature
deliberation, so that it could, in a way, be considered as part of the res gestae — Capt.
Zentner stated that Zulueta had been off-loaded "due to drinking" and "belligerent
attitude," thereby belying the story of the defense about said alleged bomb-scare, and
confirming the view that said agent of the defendant had acted out of resentment
because his ego had been hurt by Mr. Zulueta's adamant refusal to be bullied by him.
Indeed, had there been an iota of truth in said story of the defense, Capt. Zentner would
have caused every one of the passengers to be frisked or searched and the luggage of
all of them examined — as it is done now — before resuming the flight from Wake
Island. His failure to do so merely makes the artificious nature of defendant's version
more manifest. Indeed, the fact that Mrs. Zulueta and Miss Zulueta were on board the
plane shows beyond doubt that Mr. Zulueta could not possibly have intended to blow
it up.
The defense tries to explain its failure to introduce any evidence to contradict the
testimony of Mr. Zulueta as to why he had gone to the beach and what he did there,
alleging that, in the very nature of things, nobody else could have witnessed it.
Moreover, the defense insists, inter alia, that the testimony of Mr. Zulueta is inherently
incredible because he had no idea as to how many toilets the plane had; it could not
have taken him an hour to relieve himself in the beach; there were eight (8) commodes
at the terminal toilet for men ; if he felt the need of relieving himself, he would have
seen to it that the soldiers did not beat him to the terminal toilets; he did not tell
anybody about the reason for going to the beach, until after the plane had taken off
from Wake.
We find this pretense devoid of merit. Although Mr. Zulueta had to look for a secluded
place in the beach to relieve himself, beyond the view of others, defendant's airport
manager, whom Mr. Zulueta informed about it, soon after the departure of the plane,
could have forthwith checked the veracity of Mr. Zulueta's statement by asking him to
indicate the specific place where he had been in the beach and then proceeding thereto
for purposes of verification.
Then, again, the passenger of a plane seldom knows how many toilets it has. As a
general rule, his knowledge is limited to the toilets for the class — first class or tourist
class — in which he is. Then, too, it takes several minutes for the passengers of big
aircrafts, like those flying from the U.S. to the Philippines, to deplane. Besides, the
speed with which a given passenger may do so depends, largely, upon the location of
his seat in relation to the exit door. He cannot go over the heads of those nearer than
he thereto. Again, Mr. Zulueta may have stayed in the toilet terminal for some time,
expecting one of the commodes therein to be vacated soon enough, before deciding to
go elsewhere to look for a place suitable to his purpose. But he had to walk, first, from
the plane to the terminal building and, then, after vainly waiting therein for a while,
cover a distance of about 400 yards therefrom to the beach, and seek there a place not
visible by the people in the plane and in the terminal, inasmuch as the terrain at Wake
Island is flat. What is more, he must have had to takeoff part, at least, of his clothing,
because, without the facilities of a toilet, he had to wash himself and, then, dry himself
up before he could be properly attired and walk back the 400 yards that separated him
from the terminal building and/or the plane. Considering, in addition to the foregoing,
CIVIL LAW FULL CASE
the fact that he was not feeling well, at that time, We are not prepared to hold that it
could not have taken him around an hour to perform the acts narrated by him.
But, why — asks the defendant — did he not reveal the same before the plane took
off? The record shows that, even before Mr. Zulueta had reached the ramp leading to
the plane, Capt. Zentner was already demonstrating at him in an intemperate and
arrogant tone and attitude ("What do you think you are?), thereby impelling Mr.
Zulueta to answer back in the same vein. As a consequence, there immediately ensued
an altercation in the course of which each apparently tried to show that he could not
be cowed by the other. Then came the order of Capt. Zentner to off-load all of the
Zuluetas, including Mrs. Zulueta and the minor Miss Zulueta, as well as their luggage,
their overcoats and other effects handcarried by them; but, Mr. Zulueta requested that
the ladies be allowed to continue the trip. Meanwhile, it had taken time to locate his
four (4) pieces of luggage. As a matter of fact, only three (3) of them were found, and
the fourth eventually remained in the plane. In short, the issue between Capt. Zentner
and Mr. Zulueta had been limited to determining whether the latter would allow
himself to be browbeaten by the former. In the heat of the altercation, nobody had
inquired about the cause of Mr. Zulueta's delay in returning to the plane, apart from
the fact that it was rather embarrassing for him to explain, in the presence and within
the hearing of the passengers and the crew, then assembled around them, why he had
gone to the beach and why it had taken him some time to answer there a call of nature,
instead of doing so in the terminal building.
Defendant's motion for reconsideration assails: (1) the amount of damages awarded as
excessive; (2) the propriety of accepting as credible plaintiffs' theory; (3) plaintiffs'
right to recover either moral or exemplary damages; (4) plaintiffs' right to recover
attorney's fees; and (5) the non-enforcement of the compromise agreement between
the defendant and plaintiff's wife, Mrs. Zulueta. Upon the other hand, plaintiffs' motion
for reconsideration contests the decision of this Court reducing the amount of damages
awarded by the trial court to approximately one-half thereof, upon the ground, not only
that, contrary to the findings of this Court, in said decision, plaintiff had not
contributed to the aggravation of his altercation or incident with Capt. Zentner by
reacting to his provocation with extreme belligerency thereby allowing himself to be
dragged down to the level on which said agent of the defendant had placed himself,
but, also, because the purchasing power of our local currency is now much lower than
when the trial court rendered its appealed decision, over five (5) years ago, on July 5,
1967, which is an undeniable and undisputed fact. Precisely, for this reason,
defendant's characterization as exorbitant of the aggregate award of over P700,000 by
way of damages, apart from attorney's fees in the sum of P75,000, is untenable. Indeed,
said award is now barely equivalent to around 100,000 U. S. dollars.
It further support of its contention, defendant cites the damages awarded in previous
cases to passengers of airlines,8 as well as in several criminal cases, and some cases
for libel and slander. None of these cases is, however, in point. Said cases against
airlines referred to passengers who were merely constrained to take a tourist class
accommodation, despite the fact that they had first class tickets, and that although, in
one of such cases, there was proof that the airline involved had acted as it did to give
preference to a "white" passenger, this motive was not disclosed until the trial in court.
In the case at bar, plaintiff Rafael Zulueta was "off-loaded" at Wake Island, for having
dared to retort to defendant's agent in a tone and manner matching, if not befitting his
intemperate language and arrogant attitude. As a consequence, Capt. Zentner's attempt
to humiliate Rafael Zulueta had boomeranged against him (Zentner), in the presence
of the other passengers and the crew. It was, also, in their presence that defendant's
agent had referred to the plaintiffs as "monkeys," a racial insult not made openly and
publicly in the abovementioned previous cases against airlines.
In other words, Mr. Zulueta was off-loaded, not to protect the safety of the aircraft and
its passengers, but to retaliate and punish him for the embarrassment and loss of face
thus suffered by defendant's agent. This vindictive motive is made more manifest by
the note delivered to Mr. Zulueta by defendant's airport manager at Wake Island, Mr.
Sitton, stating that the former's stay therein would be "for a minimum of one week,"
during which he would be charged $13.30 per day. This reference to a "minimum of
one week" revealed the intention to keep him there stranded that long, for no other
plane, headed for Manila, was expected within said period of time, although Mr.
Zulueta managed to board, days later, a plane that brought him to Hawaii, whence he
flew back to the Philippines, via Japan.
CIVIL LAW FULL CASE
Neither may criminal cases, nor the cases for libel and slander cited in the defendant's
motion for reconsideration, be equated with the present case. Indeed, in ordinary
criminal cases, the award for damages is, in actual practice, of purely academic value,
for the convicts generally belong to the poorest class of society. There is, moreover, a
fundamental difference between said cases and the one at bar. The Zuluetas had a
contract of carriage with the defendant, as a common carrier, pursuant to which the
latter was bound, for a substantial monetary consideration paid by the former, not
merely to transport them to Manila, but, also, to do so with "extraordinary diligence"
or "utmost diligence."9 The responsibility of the common carrier, under said contract,
as regards the passenger's safety, is of such a nature, affecting as it does public interest,
that it "cannot be dispensed with" or even "lessened by stipulation, by the posting of
notices, by statements on tickets, or otherwise." 10 In the present case, the defendant
did not only fail to comply with its obligation to transport Mr. Zulueta to Manila, but,
also, acted in a manner calculated to humiliate him, to chastise him, to make him
suffer, to cause to him the greatest possible inconvenience, by leaving him in a desolate
island, in the expectation that he would be stranded there for a "minimum of one week"
and, in addition thereto, charged therefor $13.30 a day.
It is urged by the defendant that exemplary damages are not recoverable in quasi-
delicts, pursuant to Article 2231 of our Civil Code, except when the defendant has
acted with "gross negligence," and that there is no specific finding that it had so acted.
It is obvious, however, that in off-loading plaintiff at Wake Island, under the
circumstances heretofore adverted to, defendant's agents had acted with malice
aforethought and evident bad faith. If "gross negligence" warrants the award of
exemplary damages, with more reason is its imposition justified when the act
performed is deliberate, malicious and tainted with bad faith. Thus, in Lopez v.
PANAM, 11 We held:
The rationale behind exemplary or corrective damages is, as the name implies, to
provide an example or correction for public good. Defendant having breached its
contracts in bad faith, the court, as stated earlier, may award exemplary damages in
addition to moral damages (Articles 2229, 2232, New Civil Code.)
Similarly, in NWA v. Cuenca, 12 this Court declared that an award for exemplary
damages was justified by the fact that the airline's "agent had acted in a wanton,
reckless and oppressive manner" in compelling Cuenca, upon arrival at Okinawa, to
transfer, over his objection, from the first class, where he was accommodated from
Manila to Okinawa, to the tourist class, in his trip to Japan, "under threat of otherwise
leaving him in Okinawa," despite the fact that he had paid in full the first class fare
and was issued in Manila a first class ticket.
Defendant cites Rotea v. Halili, 13 in support of the proposition that a principal is not
liable for exemplary damages owing to acts of his agent unless the former has
participated in said acts or ratified the same. Said case involved, however, the
subsidiary civil liability of an employer arising from criminal acts of his employee,
and "exemplary damages ... may be imposed when the crime was committed with one
or more aggravating circumstances." 14 Accordingly, the Rotea case is not in point, for
the case at bar involves a breach of contract, as well as a quasi-delict.
Neither may the case of Palisoc v. Brillantes, 15 invoked by the defendant, be equated
with the case at bar. The Palisoc case dealt with the liability of school officials for
damages arising from the death of a student (Palisoc) due to fist blows given by another
student (Daffon), in the course of a quarrel between them, while in a laboratory room
of the Manila Technical Institute. In an action for damages, the head thereof and the
teacher in charge of said laboratory were held jointly and severally liable with the
student who caused said death, for failure of the school to provide "adequate
supervision over the activities of the students in the school premises," to protect them
"from harm, whether at the hands of fellow students or other parties." Such liability
was predicated upon Article 2180 of our Civil Code, the pertinent part of which reads:
ART. 2180. The obligation imposed by Article 2176 is demandable not only for one's
own acts or omissions, but also for those of persons for whom one is responsible.
xxx xxx xxx
Lastly, teachers or heads of establishments of arts and trades shall be liable for
damages caused by their pupils and students or apprentices, so long as they remain in
their custody.
xxx xxx xxx
CIVIL LAW FULL CASE
Obviously, the amount of damages warded in the Palisoc case is not and cannot serve
as the measure of the damages recoverable in the present case, the latter having been
caused directly and intentionally by an employee or agent of the defendant, whereas
the student who killed the young Palisoc was in no wise an agent of the school.
Moreover, upon her arrival in the Philippines, Mrs. Zulueta reported her husband's
predicament to defendant's local manager and asked him to forthwith have him (Mr.
Zulueta) brought to Manila, which defendant's aforementioned manager refused to do,
thereby impliedly ratifying the off-loading of Mr. Zulueta at Wake Island.
It is next urged that, under the contract of carriage with the defendant, Mr. Zulueta was
bound to be present at the time scheduled for the departure of defendant's plane and
that he had, consequently, violated said contract when he did not show up at such time.
This argument might have had some weight had defendant's plane taken off before Mr.
Zulueta had shown up. But the fact is that he was ready, willing and able to board the
plane about two hours before it actually took off, and that he was deliberately and
maliciously off-loaded on account of his altercation with Capt. Zentner. It should, also,
be noted that, although Mr. Zulueta was delayed some 20 to 30 minutes, the arrival or
departure of planes is often delayed for much longer periods of time. Followed to its
logical conclusion, the argument adduced by the defense suggests that airlines should
be held liable for damages due to the inconvenience and anxiety, aside from actual
damages, suffered by many passengers either in their haste to arrive at the airport on
scheduled time just to find that their plane will not take off until later, or by reason of
the late arrival of the aircraft at its destination.
PANAM impugns the award of attorney's fees upon the ground that no penalty should
be imposed upon the right to litigate; that, by law, it may be awarded only in
exceptional cases; that the claim for attorney's fees has not been proven; and that said
defendant was justified in resisting plaintiff's claim "because it was patently
exorbitant."
Nothing, however, can be farther from the truth. Indeed apart from plaintiff's claim for
actual damages, the amount of which is not contested, plaintiffs did not ask any
specific sum by way of exemplary and moral damages, as well as attorney's fees, and
left the amount thereof to the "sound discretion" of the lower court. This, precisely, is
the reason why PANAM, now, alleges — without justification that the lower court had
no jurisdiction over the subject matter of the present case.
Moreover, Article 2208 of our Civil Code expressly authorizes the award of attorney's
fees "when exemplary damages are awarded," — as they are in this case —as well as
"in any other case where the court deems it just and equitable that attorney's fees ... be
recovered," and We so deem it just and equitable in the present case, considering the
"exceptional" circumstances obtaining therein, particularly the bad faith with which
defendant's agent had acted, the place where and the conditions under which Rafael
Zulueta was left at Wake Island, the absolute refusal of defendant's manager in Manila
to take any step whatsoever to alleviate Mr. Zulueta's predicament at Wake and have
him brought to Manila — which, under their contract of carriage, was defendant's
obligation to discharge with "extra-ordinary" or "utmost" diligence — and, the "racial"
factor that had, likewise, tainted the decision of defendant's agent, Capt. Zentner, to
off-load him at Wake Island.
As regards the evidence necessary to justify the sum of P75,000 awarded as attorney's
fees in this case, suffice it to say that the quantity and quality of the services rendered
by plaintiffs' counsel appearing on record, apart from the nature of the case and the
amount involved therein, as well as his prestige as one of the most distinguished
members of the legal profession in the Philippines, of which judicial cognizance may
be taken, amply justify said award, which is a little over 10% of the damages
(P700,000) collectible by plaintiffs herein. Indeed, the attorney's fees in this case is
proportionally much less than that adjudged in Lopez v. PANAM 16 in which the
judgment rendered for attorney's fees (P50,000) was almost 20% of the damages
(P275,000) recovered by the plaintiffs therein.
The defense assails the last part of the decision sought to be reconsidered, in which —
relying upon Article 172 of our Civil Code, which provides that "(t)he wife cannot
bind the conjugal partnership without the husband's consent, except in cases provided
by law," and it is not claimed that this is one of such cases — We denied a motion,
filed by Mrs. Zulueta, for the dismissal of this case, insofar as she is concerned - she
CIVIL LAW FULL CASE
having settled all her differences with the defendant, which appears to have paid her
the sum of P50,000 therefor - "without prejudice to this sum being deducted from the
award made in said decision." Defendant now alleges that this is tantamount to holding
that said compromise agreement is both effective and ineffective.
This, of course, is not true. The payment is effective, insofar as it is deductible from
the award, and, because it is due (or part of the amount due) from the defendant, with
or without its compromise agreement with Mrs. Zulueta. What is ineffective is the
compromise agreement, insofar as the conjugal partnership is concerned. Mrs.
Zulueta's motion was for the dismissal of the case insofar as she was concerned, and
the defense cited in support thereof Article 113 of said Code, pursuant to which "(t)he
husband must be joined in all suits by or against the wife except: ... (2) If they have in
fact been separated for at least one year." This provision, We held, however, refers to
suits in which the wife is the principal or real party in interest, not to the case at bar,
"in which the husband is the main party in interest, both as the person principally
aggrieved and as administrator of the conjugal partnership ... he having acted in this
capacity in entering into the contract of carriage with PANAM and paid the amount
due to the latter, under the contract, with funds of the conjugal partnership," to which
the amounts recoverable for breach of said contract, accordingly, belong. The damages
suffered by Mrs. Zulueta were mainly an in accident of the humiliation to which her
husband had been subjected. The Court ordered that said sum of P50,00 paid by
PANAM to Mrs. Zulueta be deducted from the aggregate award in favor of the
plaintiffs herein for the simple reason that upon liquidation of the conjugal partnership,
as provided by law, said amount would have to be reckoned with, either as part of her
share in the partnership, or as part of the support which might have been or may be
due to her as wife of Rafael Zulueta. It would surely be inane to sentence the defendant
to pay the P700,000 due to the plaintiffs and to direct Mrs. Zulueta to return said
P50,000 to the defendant.
In this connection, it is noteworthy that, for obvious reasons of public policy, she is
not allowed by law to waive her share in the conjugal partnership, before the
dissolution thereof. 17 She cannot even acquire any property by gratuitous title, without
the husband's consent, except from her ascendants, descendants, parents-in-law, and
collateral relatives within the fourth degree. 18
It is true that the law favors and encourages the settlement of litigations by compromise
agreement between the contending parties, but, it certainly does not favor a settlement
with one of the spouses, both of whom are plaintiffs or defendants in a common cause,
such as the defense of the rights of the conjugal partnership, when the effect, even if
indirect, of the compromise is to jeopardize "the solidarity of the family" — which the
law 19 seeks to protect — by creating an additional cause for the misunderstanding that
had arisen between such spouses during the litigation, and thus rendering more
difficult a reconciliation between them.
It is urged that there is no proof as to the purpose of the trip of the plaintiffs, that
neither is there any evidence that the money used to pay the plane tickets came from
the conjugal funds and that the award to Mrs. Zulueta was for her personal suffering
or injuries. There was, however, no individual or specific award in favor of Mrs.
Zulueta or any of the plaintiffs. The award was made in their favor collectively. Again,
in the absence of said proof, the presumption is that the purpose of the trip was for the
common benefit of the plaintiffs and that the money had come from the conjugal funds,
for, unless there is proof to the contrary, it is presumed "(t)hat things have happened
according to the ordinary course of nature and the ordinary habits of life." 20 In fact
Manresa maintains 21 that they are deemed conjugal, when the source of the money
used therefor is not established, even if the purchase had been made by the wife. 22
And this is the rule obtaining in the Philippines. Even property registered, under the
Torrens system, in the name of one of the spouses, or in that of the wife only, if
acquired during the marriage, is presumed to belong to the conjugal partnership, unless
there is competent proof to the contrary. 23
PANAM maintains that the damages involved in the case at bar are not among those
forming part of the conjugal partnership pursuant to Article 153 of the Civil Code,
reading:
ART. 153. The following are conjugal partnership property:
(1) That which is acquired by onerous title during the marriage at the expense of the
common fund, whether the acquisition be for the partnership, or for only one of the
spouses;
CIVIL LAW FULL CASE
(2) That which is obtained by the industry, or work, or as salary of the spouses, or of
either of them;
(3) The fruits, rents or interests received or due during the marriage, coming from the
common property or from the exclusive property of each spouse.
Considering that the damages in question have arisen from, inter alia, a breach of
plaintiffs' contract of carriage with the defendant, for which plaintiffs paid their fare
with funds presumably belonging to the conjugal partnership, We hold that said
damages fall under paragraph (1) of said Article 153, the right thereto having been
"acquired by onerous title during the marriage ... ." This conclusion is bolstered up by
Article 148 of our Civil Code, according to which:
ART. 148. The following shall be the exclusive property of each spouse:
(1) That which is brought to the marriage as his or her own;
(2) That which each acquires, during the marriage, by lucrative title;
(3) That which is acquired by right of redemption or by exchange with other property
belonging to only one of the spouses;
(4) That which is purchased with exclusive money of the wife or of the husband.
The damages involved in the case at bar do not come under any of these provisions or
of the other provisions forming part of Chapter 3, Title VI, of Book I of the Civil Code,
which chapter is entitled "Paraphernal Property." What is more, if "(t)hat which is
acquired by right of redemption or by exchange with other property belonging to only
one of the spouses," and "(t)hat which is purchased with exclusive money of the wife
or of the husband," 24 belong exclusively to such wife or husband, it follows
necessarily that that which is acquired with money of the conjugal partnership belongs
thereto or forms part thereof. The rulings in Maramba v. Lozano 25 and Perez v. Lantin,
26
cited in defendant's motion for reconsideration, are, in effect, adverse thereto. In
both cases, it was merely held that the presumption under Article 160 of our Civil
Code — to the effect that all property of the marriage belong to the conjugal
partnership — does not apply unless it is shown that it was acquired during marriage.
In the present case, the contract of carriage was concededly entered into, and the
damages claimed by the plaintiffs were incurred, during marriage. Hence, the rights
accruing from said contract, including those resulting from breach thereof by the
defendant, are presumed to belong to the conjugal partnership of Mr. and Mrs. Zulueta.
The fact that such breach of contract was coupled, also, with a quasi-delict constitutes
an aggravating circumstance and can not possibly have the effect of depriving the
conjugal partnership of such property rights.
Defendant insists that the use of conjugal funds to redeem property does not make the
property redeemed conjugal if the right of redemption pertained to the wife. In the
absence, however, of proof that such right of redemption pertains to the wife — and
there is no proof that the contract of carriage with PANAM or the money paid therefor
belongs to Mrs. Zulueta — the property involved, or the rights arising therefrom, must
be presumed, therefore, to form part of the conjugal partnership.
It is true that in Lilius v. Manila Railroad Co., 27 it was held that the "patrimonial and
moral damages" awarded to a young and beautiful woman by reason of a scar — in
consequence of an injury resulting from an automobile accident — which disfigured
her face and fractured her left leg, as well as caused a permanent deformity, are her
paraphernal property. Defendant cites, also, in support of its contention the following
passage from Colin y Capitant:
No esta resuelta expresamente en la legislacion española la cuestion de si las
indemnizaciones debidas por accidentes del trabaho tienen la consideracion de
gananciales, o son bienes particulares de los conyuges.
Inclinan a la solucion de que estas indemnizaciones deben ser consideradas como
gananciales, el hecho de que la sociedad pierde la capacidad de trabajocon el
accidente, que a ella le pertenece, puesto que de la sociedad son losfrutos de ese
trabajo; en cambio, la consideracion de que igual manera que losbienes que sustituyen
a los que cada conyuge lleva al matrimonio como propiostienen el caracter de propios,
hace pensar que las indemnizaciones que vengana suplir la capacidad de trabajo
aportada por cada conyuge a la sociedad, debenser juridicamente reputadas como
bienes propios del conyuge que haya sufrido elaccidente. Asi se llega a la misma
solucion aportada por la jurisprudencia francesca. 28
This opinion is, however, undecisive, to say the least. It should be noted that Colin y
Capitant were commenting on the French Civil Code; that their comment referred to
indemnities due in consequence of "accidentes del trabajo "resulting in physical
injuries sustained by one of the spouses (which Mrs. Zulueta has not suffered); and
CIVIL LAW FULL CASE
that said commentators admit that the question whether or not said damages are
paraphernal property or belong to the conjugal partnership is not settled under the
Spanish law. 29 Besides, the French law and jurisprudence — to which the comments
of Planiol and Ripert, likewise, refer — are inapposite to the question under
consideration, because they differ basically from the Spanish law in the treatment of
the property relations between husband and wife. Indeed, our Civil Code, like the
Spanish Civil Code, favors the system of conjugal partnership of gains. Accordingly,
the former provides that, "(i)n the absence of marriage settlements, or when the same
are void, the system of relative community or conjugal partnership of gains ... shall
govern the property relations between" the spouses. 30 Hence, "(a)ll property of the
marriage is presumed to belong to the conjugal partnership, unless it be proved that it
pertains exclusively to the husband or to the wife." 31
No similar rules are found in the French Civil Code. What is more, under the
provisions thereof, the conjugal partnership exists only when so stipulated in the
"capitulaciones matrimoniales" or by way of exception. In the language of Manresa
— of the Court of First Instance of Manila dismissing their complaint against defendants
Prescindimos de los preceptos de los Condigos de Francia, Italia, Holanda, Portugal,
Alemania y Suiza, porsue solo excepcionalmente, o cuando asi se pacta en las
capitulaciones, admiten el sistema de gananciales. 32
Again, Colin y Capitant, as well as the Lilius case, refer to damages recovered for
physical injuries suffered by the wife. In the case at bar, the party mainly injured,
although not physically, is the husband.
Accordingly, the other Philippine cases 33 and those from Louisiana — whose civil
law is based upon the French Civil Code — cited by the defendant, which similarly
refer to moral damages due to physical injuries suffered by the wife, are, likewise,
inapplicable to the case at bar.
We find, therefore, no plausible reason to disturb the views expressed in Our decision
promulgated on February 29, 1972.
WHEREFORE, the motions for reconsideration above-referred to should be, as they
are hereby denied.
Makalintal, Zaldivar, Fernando, Makasiar, Antonio and Esguerra, JJ., concur.
Castro and Teehankee, JJ., took no part.
Barredo, J., voted to modify the judgment by reducing the amount of the awarded
damages and individualizing the same, and now reserves the filing of a separate
concurring and dissenting opinion in support of his vote.
G.R. No. L-24837 June 27, 1968
JULIAN C. SINGSON and RAMONA DEL CASTILLO, plaintiffs,
vs.
BANK OF THE PHILIPPINE ISLANDS and SANTIAGO FREIXAS, in his
capacity as President of the said Bank, defendants.
Gil B. Galang for plaintiffs.
Aviado and Aranda for defendants.
CONCEPCION, C.J.:
Appeal by plaintiffs, Julian Singson and his wife, Ramona del Castillo, from a decision
herein, the Bank of the Philippine Islands and Santiago Freixas.
It appears that Singson, was one of the defendants in civil case No. 23906 of the Court
of First Instance, Manila, in which judgment had been rendered sentencing him and
his co-defendants therein, namely, Celso Lobregat and Villa-Abrille & Co., to pay the
sum of P105,539.56 to the plaintiff therein, Philippine Milling Co. Singson and
Lobregat had seasonably appealed from said judgment, but not Villa-Abrille & Co., as
against which said judgment, accordingly, became final and executory. In due course,
a writ of garnishment was subsequently served upon the Bank of the Philippine Islands
— in which the Singsons had a current account — insofar as Villa-Abrille's credits
against the Bank were concerned. What happened thereafter is set forth in the decision
appealed from, from which we quote:
Upon receipt of the said Writ of Garnishment, a clerk of the bank in charge of
all matters of execution and garnishment, upon reading the name of the plaintiff herein
in the title of the Writ of Garnishment as a party defendants, without further reading
the body of the said garnishment and informing himself that said garnishment was
merely intended for the deposits of defendant Villa-Abrille & Co., Valentin Teus,
CIVIL LAW FULL CASE
Fernando F. de Villa-Abrille and Joaquin Bona, prepared a letter for the signature of
the President of the Bank informing the plaintiff Julian C. Singson of the garnishment
of his deposits by the plaintiff in that case. Another letter was also prepared and signed
by the said President of the Bank for the Special Sheriff dated April 17, 1963.
Subsequently, two checks issued by the plaintiff Julian C. Singson, one for the
amount of P383 in favor of B. M. Glass Service dated April 16, 1963 and bearing No.
C-424852, and check No. C-394996 for the amount of P100 in favor of the Lega
Corporation, and drawn against the said Bank, were deposited by the said drawers with
the said bank. Believing that the plaintiff Singson, the drawer of the check, had no
more control over the balance of his deposits in the said bank, the checks were
dishonored and were refused payment by the said bank. After the first check was
returned by the bank to the B. M. Glass Service, the latter wrote plaintiff Julian C.
Singson a letter, dated April 19, 1963, advising him that his check for P383.00 bearing
No. C-424852 was not honored by the bank for the reason that his account therein had
already been garnished. The said B. M. Glass Service further stated in the said letter
that they were constrained to close his credit account with them. In view thereof,
plaintiff Julian C. Singson wrote the defendant bank a letter on April 19, 1963,
claiming that his name was not included in the Writ of Execution and Notice of
Garnishment, which was served upon the bank. The defendant President Santiago
Freixas of the said bank took steps to verify this information and after having
confirmed the same, apologized to the plaintiff Julian C. Singson and wrote him a
letter dated April 22, 1963, requesting him to disregard their letter of April 17, 1963,
and that the action of garnishment from his account had already been removed. A
similar letter was written by the said official of the bank on April 22, 1963 to the
Special Sheriff informing him that his letter dated April 17, 1963 to the said Special
Sheriff was considered cancelled and that they had already removed the Notice of
Garnishment from plaintiff Singson's account. Thus, the defendants lost no time to
rectify the mistake that had been inadvertently committed, resulting in the temporary
freezing of the account of the plaintiff with the said bank for a short time.
xxx xxx xxx
On May 8, 1963, the Singsong commenced the present action against the Bank and its
president, Santiago Freixas, for damages1 in consequence of said illegal freezing of
plaintiffs' account.
After appropriate proceedings, the Court of First Instance of Manila rendered
judgment dismissing the complaint upon the ground that plaintiffs cannot recover from
the defendants upon the basis of a quasi-delict, because the relation between the parties
is contractual in nature; because this case does not fall under Article 2219 of our Civil
Code, upon which plaintiffs rely; and because plaintiffs have not established the
amount of damages allegedly sustained by them.
The lower court held that plaintiffs' claim for damages cannot be based upon a tort or
quasi-delict, their relation with the defendants being contractual in nature. We have
repeatedly held, however, that the existence of a contract between the parties does not
bar the commission of a tort by the one against the order and the consequent recovery
of damages therefor.2 Indeed, this view has been, in effect, reiterated in a
comparatively recent case. Thus, in Air France vs. Carrascoso,3 involving an airplane
passenger who, despite his first-class ticket, had been illegally ousted from his first-
class accommodation and compelled to take a seat in the tourist compartment, was
held entitled to recover damages from the air-carrier, upon the ground of tort on the
latter's part, for, although the relation between a passenger and a carrier is "contractual
both in origin and nature ... the act that breaks the contract may also be a tort".
In view, however, of the facts obtaining in the case at bar, and considering,
particularly, the circumstance, that the wrong done to the plaintiff was remedied as
soon as the President of the bank realized the mistake he and his subordinate employee
had committed, the Court finds that an award of nominal damages — the amount of
which need not be proven4 — in the sum of P1,000, in addition to attorney's fees in
the sum of P500, would suffice to vindicate plaintiff's rights.5
WHEREFORE, the judgment appealed from is hereby reversed, and another one shall
be entered sentencing the defendant Bank of the Philippine Islands to pay to the
plaintiffs said sums of P1,000, as nominal damages, and P500, as attorney's fees, apart
from the costs. It is so ordered.
CIVIL LAW FULL CASE
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro and Angeles, JJ., concur.
Fernando, J., took no part.
——————————————————————————————————
G.R. No. L-22415 March 30, 1966
FERNANDO LOPEZ, ET AL., plaintiffs-appellants,
vs.
PAN AMERICAN WORLD AIRWAYS, defendant-appellant.
Ross, Selph and Carrascoso for the defendant-appellant.
Vicente J. Francisco for the plaintiffs-appellants.
BENGZON, J.P., J.:
Plaintiffs and defendant appeal from a decision of the Court of First Instance of Rizal.
Since the value in controversy exceeds P200,000 the appeals were taken directly to
this Court upon all questions involved (Sec. 17, par. 3[5], Judiciary Act).
Stated briefly the facts not in dispute are as follows: Reservations for first class
accommodations in Flight No. 2 of Pan American World Airways — hereinafter
otherwise called PAN-AM — from Tokyo to San Francisco on May 24, 1960 were
made with PAN-AM on March 29, 1960, by "Your Travel Guide" agency,
specifically, by Delfin Faustino, for then Senator Fernando Lopez, his wife Maria J.
Lopez, his son-in-law Alfredo Montelibano, Jr., and his daughter, Mrs. Alfredo
Montelibano, Jr., (Milagros Lopez Montelibano). PAN-AM's San Francisco head
office confirmed the reservations on March 31, 1960.
First class tickets for the abovementioned flight were subsequently issued by
PAN-AM on May 21 and 23, 1960, in favor of Senator Lopez and his party. The total
fare of P9,444 for all of them was fully paid before the tickets were issued.
As scheduled Senator Lopez and party left Manila by Northwest Airlines on May 24,
1960, arriving in Tokyo at 5:30 P.M. of that day. As soon as they arrived Senator
Lopez requested Minister Busuego of the Philippine Embassy to contact PAN-AM's
Tokyo office regarding their first class accommodations for that evening's flight. For
the given reason that the first class seats therein were all booked up, however, PAN-
AM's Tokyo office informed Minister Busuego that PAN-AM could not accommodate
Senator Lopez and party in that trip as first class passengers. Senator Lopez thereupon
gave their first class tickets to Minister Busuego for him to show the same to PAN-
AM's Tokyo office, but the latter firmly reiterated that there was no accommodation
for them in the first class, stating that they could not go in that flight unless they took
the tourist class therein.
Due to pressing engagements awaiting Senator Lopez and his wife, in the United States
— he had to attend a business conference in San Francisco the next day and she had
to undergo a medical check-up in Mayo Clinic, Rochester, Minnesota, on May 28,
1960 and needed three days rest before that in San Francisco — Senator Lopez and
party were constrained to take PAN-AM's flight from Tokyo to San Francisco as
tourist passengers. Senator Lopez however made it clear, as indicated in his letter to
PAN-AM's Tokyo office on that date (Exh. A), that they did so "under protest" and
without prejudice to further action against the airline.1äwphï1.ñët
Suit for damages was thereafter filed by Senator Lopez and party against PAN-AM on
June 2, 1960 in the Court of First Instance of Rizal. Alleging breach of contracts in
bad faith by defendant, plaintiffs asked for P500,000 actual and moral damages,
P100,000 exemplary damages, P25,000 attorney's fees plus costs. PAN-AM filed its
answer on June 22, 1960, asserting that its failure to provide first class
accommodations to plaintiffs was due to honest error of its employees. It also
interposed a counterclaim for attorney's fees of P25,000.
Subsequently, further pleadings were filed, thus: plaintiffs' answer to the counterclaim,
on July 25, 1960; plaintiffs' reply attached to motion for its admittance, on December
2, 1961; defendant's supplemental answer, on March 8, 1962; plaintiffs' reply to
supplemental answer, on March 10, 1962; and defendant's amended supplemental
answer, on July 10, 1962.
After trial — which took twenty-two (22) days ranging from November 25, 1960 to
January 5, 1963 — the Court of First Instance rendered its decision on November 13,
1963, the dispositive portion stating:
CIVIL LAW FULL CASE
In view of the foregoing considerations, judgment is hereby rendered in favor of the
plaintiffs and against the defendant, which is accordingly ordered to pay the plaintiffs
the following: (a) P100,000.00 as moral damages; (b) P20,000.00 as exemplary
damages; (c) P25,000.00 as attorney's fees, and the costs of this action.
So ordered.
Plaintiffs, however, on November 21, 1963, moved for reconsideration of said
judgment, asking that moral damages be increased to P400,000 and that six per cent
(6%) interest per annum on the amount of the award be granted. And defendant
opposed the same. Acting thereon the trial court issued an order on December 14,
1963, reconsidering the dispositive part of its decision to read as follows:
In view of the foregoing considerations, judgment is hereby rendered in favor of the
plaintiffs and against the defendant, which is accordingly ordered to pay the plaintiffs
the following: (a) P150,000.00 as moral damages; (b) P25,000.00 as exemplary
damages; with legal interest on both from the date of the filing of the complaint until
paid; and (c) P25,000.00 as attorney's fees; and the costs of this action.
So ordered.
It is from said judgment, as thus reconsidered, that both parties have appealed.
Defendant, as stated, has from the start admitted that it breached its contracts with
plaintiffs to provide them with first class accommodations in its Tokyo-San Francisco
flight of May 24, 1960. In its appeal, however, it takes issue with the finding of the
court a quo that it acted in bad faith in the branch of said contracts. Plaintiffs, on the
other hand, raise questions on the amount of damages awarded in their favor, seeking
that the same be increased to a total of P650,000.
Anent the issue of bad faith the records show the respective contentions of the parties
as follows.
According to plaintiffs, defendant acted in bad faith because it deliberately refused to
comply with its contract to provide first class accommodations to plaintiffs, out of
racial prejudice against Orientals. And in support of its contention that what was done
to plaintiffs is an oftrepeated practice of defendant, evidence was adduced relating to
two previous instances of alleged racial discrimination by defendant against Filipinos
in favor of "white" passengers. Said previous occasions are what allegedly happened
to (1) Benito Jalbuena and (2) Cenon S. Cervantes and his wife.
And from plaintiffs' evidence this is what allegedly happened; Jalbuena bought a first
class ticket from PAN-AM on April 13, 1960; he confirmed it on April 15, 1960 as to
the Tokyo-Hongkong flight of April 20, 1960; PAN-AM similarly confirmed it on
April 20, 1960. At the airport he and another Oriental — Mr. Tung — were asked to
step aside while other passengers - including "white" passengers — boarded PAN-
AM's plane. Then PAN-AM officials told them that one of them had to stay behind.
Since Mr. Tung was going all the way to London, Jalbuena was chosen to be left
behind. PAN-AM's officials could only explain by saying there was "some mistake".
Jalbuena thereafter wrote PAN-AM to protest the incident (Exh. B).
As to Cenon S. Cervantes it would appear that in Flight No. 6 of PAN-AM on
September 29, 1958 from Bangkok to Hongkong, he and his wife had to take tourist
class, although they had first class tickets, which they had previously confirmed,
because their seats in first class were given to "passengers from London."
Against the foregoing, however, defendant's evidence would seek to establish its
theory of honest mistake, thus:
The first class reservations of Senator Lopez and party were made on March 29, 1960
together with those of four members of the Rufino family, for a total of eight (8) seats,
as shown in their joint reservation card (Exh. 1). Subsequently on March 30, 1960,
two other Rufinos secured reservations and were given a separate reservation card
(Exh. 2). A new reservation card consisting of two pages (Exhs. 3 and 4) was then
made for the original of eight passengers, namely, Senator Lopez and party and four
members of the Rufino family, the first page (Exh. 3) referring to 2 Lopezes, 2
Montelibanos and 1 Rufino and the second page (Exh. 4) referring to 3 Rufinos. On
April 18, 1960 "Your Travel Guide" agency cancelled the reservations of the Rufinos.
A telex message was thereupon sent on that date to PAN-AM's head office at San
Francisco by Mariano Herranz, PAN-AM's reservations employee at its office in
Escolta, Manila. (Annex A-Acker's to Exh. 6.) In said message, however, Herranz
mistakenly cancelled all the seats that had been reserved, that is, including those of
Senator Lopez and party.
CIVIL LAW FULL CASE
The next day — April 1960 — Herranz discovered his mistake, upon seeing the
reservation card newly prepared by his co-employee Pedro Asensi for Sen. Lopez and
party to the exclusion of the Rufinos (Exh. 5). It was then that Herranz sent another
telex wire to the San Francisco head office, stating his error and asking for the
reinstatement of the four (4) first class seats reserved for Senator Lopez and party
(Annex A-Velasco's to Exh. 6). San Francisco head office replied on April 22, 1960
that Senator Lopez and party are waitlisted and that said office is unable to reinstate
them (Annex B-Velasco's to Exh. 6).
Since the flight involved was still more than a month away and confident that
reinstatement would be made, Herranz forgot the matter and told no one about it except
his co-employee, either Armando Davila or Pedro Asensi or both of them (Tsn., 123-
124, 127, Nov. 17, 1961).
Subsequently, on April 27, 1960, Armando Davila, PAN-AM's reservations employee
working in the same Escolta office as Herranz, phoned PAN-AM's ticket sellers at its
other office in the Manila Hotel, and confirmed the reservations of Senator Lopez and
party.
PAN-AM's reservations supervisor Alberto Jose, discovered Herranz's mistake after
"Your Travel Guide" phone on May 18, 1960 to state that Senator Lopez and party
were going to depart as scheduled. Accordingly, Jose sent a telex wire on that date to
PAN-AM's head office at San Francisco to report the error and asked said office to
continue holding the reservations of Senator Lopez and party (Annex B-Acker's to
Exh. 6). Said message was reiterated by Jose in his telex wire of May 19, 1960 (Annex
C-Acker's to Exh. 6). San Francisco head office replied on May 19, 1960 that it regrets
being unable to confirm Senator Lopez and party for the reason that the flight was
solidly booked (Exh. 7). Jose sent a third telex wire on May 20, 1960 addressed to
PAN-AM's offices at San Francisco, New York (Idlewild Airport), Tokyo and
Hongkong, asking all-out assistance towards restoring the cancelled spaces and for
report of cancellations at their end (Annex D-Acker's to Exh. 6). San Francisco head
office reiterated on May 20, 1960 that it could not reinstate the spaces and referred
Jose to the Tokyo and Hongkong offices (Exh. 8). Also on May 20, the Tokyo office
of PAN-AM wired Jose stating it will do everything possible (Exh. 9).
Expecting that some cancellations of bookings would be made before the flight time,
Jose decided to withhold from Senator Lopez and party, or their agent, the information
that their reservations had been cancelled.
Armando Davila having previously confirmed Senator Lopez and party's first class
reservations to PAN-AM's ticket sellers at its Manila Hotel office, the latter sold and
issued in their favor the corresponding first class tickets on the 21st and 23rd of May,
1960.
From the foregoing evidence of defendant it is in effect admitted that defendant —
through its agents — first cancelled plaintiffs, reservations by mistake and thereafter
deliberately and intentionally withheld from plaintiffs or their travel agent the fact of
said cancellation, letting them go on believing that their first class reservations stood
valid and confirmed. In so misleading plaintiffs into purchasing first class tickets in
the conviction that they had confirmed reservations for the same, when in fact they
had none, defendant wilfully and knowingly placed itself into the position of having
to breach its a foresaid contracts with plaintiffs should there be no last-minute
cancellation by other passengers before flight time, as it turned out in this case. Such
actuation of defendant may indeed have been prompted by nothing more than the
promotion of its self-interest in holding on to Senator Lopez and party as passengers
in its flight and foreclosing on their chances to seek the services of other airlines that
may have been able to afford them first class accommodations. All the time, in legal
contemplation such conduct already amounts to action in bad faith. For bad faith
means a breach of a known duty through some motive of interest or ill-will (Spiegel
vs. Beacon Participations, 8 NE 2d 895, 907). As stated in Kamm v. Flink, 113 N.J.L.
582, 175 A. 62, 99 A.L.R. 1, 7: "Self-enrichment or fraternal interest, and not personal
ill-will, may well have been the motive; but it is malice nevertheless."
As of May 18, 1960 defendant's reservations supervisor, Alberto Jose knew that
plaintiffs' reservations had been cancelled. As of May 20 he knew that the San
Francisco head office stated with finality that it could not reinstate plaintiffs' cancelled
reservations. And yet said reservations supervisor made the "decision" — to use his
own, word — to withhold the information from the plaintiffs. Said Alberto Jose in his
testimony:
CIVIL LAW FULL CASE
Q Why did you not notify them?
A Well, you see, sir, in my fifteen (15) years of service with the air lines business my
experience is that even if the flights are solidly booked months in advance, usually the
flight departs with plenty of empty seats both on the first class and tourist class. This
is due to late cancellation of passengers, or because passengers do not show up in the
airport, and it was our hope others come in from another flight and, therefore, are
delayed and, therefore, missed their connections. This experience of mine, coupled
with that wire from Tokyo that they would do everything possible prompted me to
withhold the information, but unfortunately, instead of the first class seat that I was
hoping for and which I anticipated only the tourists class was open on which Senator
and Mrs. Lopez, Mr. and Mrs. Montelibano were accommodated. Well, I fully realize
now the gravity of my decision in not advising Senator and Mrs. Lopez, Mr. and Mrs.
Montelibano nor their agents about the erroneous cancellation and for which I would
like them to know that I am very sorry.
xxx xxx xxx
Q So it was not your duty to notify Sen. Lopez and parties that their reservations had
been cancelled since May 18, 1960?
A As I said before it was my duty. It was my duty but as I said again with respect to
that duty I have the power to make a decision or use my discretion and judgment
whether I should go ahead and tell the passenger about the cancellation. (Tsn., pp. 17-
19, 28-29, March 15, 1962.)
At the time plaintiffs bought their tickets, defendant, therefore, in breach of its known
duty, made plaintiffs believe that their reservation had not been cancelled. An
additional indication of this is the fact that upon the face of the two tickets of record,
namely, the ticket issued to Alfredo Montelibano, Jr. on May 21, 1960 (Exh. 22) and
that issued to Mrs. Alfredo Montelibano, Jr., on May 23, 1960 (Exh. 23), the
reservation status is stated as "OK". Such willful-non-disclosure of the cancellation or
pretense that the reservations for plaintiffs stood — and not simply the erroneous
cancellation itself — is the factor to which is attributable the breach of the resulting
contracts. And, as above-stated, in this respect defendant clearly acted in bad faith.
As if to further emphasize its bad faith on the matter, defendant subsequently promoted
the employee who cancelled plaintiffs' reservations and told them nothing about it.
The record shows that said employee — Mariano Herranz — was not subjected to
investigation and suspension by defendant but instead was given a reward in the form
of an increase of salary in June of the following year (Tsn., 86-88, Nov. 20, 1961).
At any rate, granting all the mistakes advanced by the defendant, there would at least
be negligence so gross and reckless as to amount to malice or bad faith (Fores vs.
Miranda, L-12163, March 4, 1959; Necesito v. Paras, L-10605-06, June 30, 1958).
Firstly, notwithstanding the entries in the reservation cards (Exhs. 1 & 3) that the
reservations cancelled are those of the Rufinos only, Herranz made the mistake, after
reading said entries, of sending a wire cancelling all the reservations, including those
of Senator Lopez and party (Tsn., pp. 108-109, Nov. 17, 1961). Secondly, after
sending a wire to San Francisco head office on April 19, 1960 stating his error and
asking for reinstatement, Herranz simply forgot about the matter. Notwithstanding the
reply of San Francisco head Office on April 22, 1960 that it cannot reinstate Senator
Lopez and party (Annex B-Velasco's to Exh. 6), it was assumed and taken for granted
that reinstatement would be made. Thirdly, Armando Davila confirmed plaintiff's
reservations in a phone call on April 27, 1960 to defendant's ticket sellers, when at the
time it appeared in plaintiffs' reservation card (Exh. 5) that they were only waitlisted
passengers. Fourthly, defendant's ticket sellers issued plaintiffs' tickets on May 21 and
23, 1960, without first checking their reservations just before issuing said tickets. And,
finally, no one among defendant's agents notified Senator Lopez and party that their
reservations had been cancelled, a precaution that could have averted their entering
with defendant into contracts that the latter had already placed beyond its power to
perform.
Accordingly, there being a clear admission in defendant's evidence of facts amounting
to a bad faith on its part in regard to the breach of its contracts with plaintiffs, it
becomes unnecessary to further discuss the evidence adduced by plaintiffs to establish
CIVIL LAW FULL CASE
defendant's bad faith. For what is admitted in the course of the trial does not need to
be proved (Sec. 2, Rule 129, Rules of Court).
Addressing ourselves now to the question of damages, it is well to state at the outset
those rules and principles. First, moral damages are recoverable in breach of contracts
where the defendant acted fraudulently or in bad faith (Art. 2220, New Civil Code).
Second, in addition to moral damages, exemplary or corrective damages may be
imposed by way of example or correction for the public good, in breach of contract
where the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner (Articles 2229, 2232, New Civil Code). And, third, a written contract for an
attorney's services shall control the amount to be paid therefor unless found by the
court to be unconscionable or unreasonable (Sec. 24, Rule 138, Rules of Court).
First, then, as to moral damages. As a proximate result of defendant's breach in bad
faith of its contracts with plaintiffs, the latter suffered social humiliation, wounded
feelings, serious anxiety and mental anguish. For plaintiffs were travelling with first
class tickets issued by defendant and yet they were given only the tourist class. At
stop-overs, they were expected to be among the first-class passengers by those
awaiting to welcome them, only to be found among the tourist passengers. It may not
be humiliating to travel as tourist passengers; it is humiliating to be compelled to travel
as such, contrary to what is rightfully to be expected from the contractual undertaking.
Senator Lopez was then Senate President Pro Tempore. International carriers like
defendant know the prestige of such an office. For the Senate is not only the Upper
Chamber of the Philippine Congress, but the nation's treaty-ratifying body. It may also
be mentioned that in his aforesaid office Senator Lopez was in a position to preside in
impeachment cases should the Senate sit as Impeachment Tribunal. And he was former
Vice-President of the Philippines. Senator Lopez was going to the United States to
attend a private business conference of the Binalbagan-Isabela Sugar Company; but
his aforesaid rank and position were by no means left behind, and in fact he had a
second engagement awaiting him in the United States: a banquet tendered by Filipino
friends in his honor as Senate President Pro Tempore (Tsn., pp. 14-15, Nov. 25, 1960).
For the moral damages sustained by him, therefore, an award of P100,000.00 is
appropriate.
Mrs. Maria J. Lopez, as wife of Senator Lopez, shared his prestige and therefore his
humiliation. In addition she suffered physical discomfort during the 13-hour trip,(5
hours from Tokyo to Honolulu and 8 hours from Honolulu to San Francisco). Although
Senator Lopez stated that "she was quite well" (Tsn., p. 22, Nov. 25, 1960) — he
obviously meant relatively well, since the rest of his statement is that two months
before, she was attackedby severe flu and lost 10 pounds of weight and that she was
advised by Dr. Sison to go to the United States as soon as possible for medical check-
up and relaxation, (Ibid). In fact, Senator Lopez stated, as shown a few pages after in
the transcript of his testimony, that Mrs. Lopez was sick when she left the Philippines:
A. Well, my wife really felt very bad during the entire trip from Tokyo to San
Francisco. In the first place, she was sick when we left the Philippines, and then with
that discomfort which she [experienced] or suffered during that evening, it was her
worst experience. I myself, who was not sick, could not sleep because of the
discomfort. (Tsn., pp. 27-28, Nov. 25, 1960).
It is not hard to see that in her condition then a physical discomfort sustained
for thirteen hours may well be considered a physical suffering. And even without
regard to the noise and trepidation inside the plane — which defendant contends, upon
the strengh of expert testimony, to be practically the same in first class and tourist class
— the fact that the seating spaces in the tourist class are quite narrower than in first
class, there beingsix seats to a row in the former as against four to a row in the latter,
and that in tourist class there is very little space for reclining in view of the closer
distance between rows (Tsn., p. 24, Nov. 25, 1960), will suffice to show that the
aforesaid passenger indeed experienced physical suffering during the trip. Added to
this, of course, was the painfull thought that she was deprived by defendant — after
having paid for and expected the same — of the most suitable, place for her, the first
class, where evidently the best of everything would have been given her, the best seat,
service, food and treatment. Such difference in comfort between first class and tourist
class is too obvious to be recounted, is in fact the reason for the former's existence,
and is recognized by the airline in charging a higher fare for it and by the passengers
in paying said higher rate Accordingly, considering the totality of her suffering and
CIVIL LAW FULL CASE
humiliation, an award to Mrs. Maria J. Lopez of P50,000.00 for moral damages will
be reasonable.
Mr. and Mrs. Alfredo Montelibano, Jr., were travelling as immediate members of the
family of Senator Lopez. They formed part of the Senator's party as shown also by the
reservation cards of PAN-AM. As such they likewise shared his prestige and
humiliation. Although defendant contends that a few weeks before the flight they had
asked their reservations to be charged from first class to tourist class — which did not
materialize due to alleged full booking in the tourist class — the same does not mean
they suffered no shared in having to take tourist class during the flight. For by that
time they had already been made to pay for first class seats and therefore to expect
first class accommodations. As stated, it is one thing to take the tourist class by free
choice; a far different thing to be compelled to take it notwithstanding having paid for
first class seats. Plaintiffs-appellants now ask P37,500.00 each for the two but we note
that in their motion for reconsideration filed in the court a quo, they were satisfied
with P25,000.00 each for said persons. (Record on Appeal, p. 102). For their social
humiliation, therefore, the award to them of P25,000.00 each is reasonable.
The rationale behind exemplary or corrective damages is, as the name implies, to
provide an example or correction for public good. Defendant having breached its
contracts in bad faith, the court, as stated earlier, may award exemplary damages in
addition to moral damages (Articles 2229, 2232, New Civil Code).
In view of its nature, it should be imposed in such an amount as to sufficiently and
effectively deter similar breach of contracts in the future by defendant or other airlines.
In this light, we find it just to award P75,000.00 as exemplary or corrective damages.
Now, as to attorney's fees, the record shows a written contract of services executed on
June 1, 1960 (Exh. F) whereunder plaintiffs-appellants engaged the services of their
counsel — Atty. Vicente J. Francisco — and agreedto pay the sum of P25,000.00 as
attorney's fees upon the termination of the case in the Court of First Instance, and an
additional sum of P25,000.00 in the event the case is appealed to the Supreme Court.
As said earlier, a written contract for attorney's services shall control the amount to be
paid therefor unless found by the court to be unconscionable or unreasonable. A
consideration of the subject matter of the present controversy, of the professional
standing of the attorney for plaintiffs-appellants, and of the extent of the service
rendered by him, shows that said amount provided for in the written agreement is
reasonable. Said lawyer — whose prominence in the legal profession is well known
— studied the case, prepared and filed the complaint, conferred with witnesses,
analyzed documentary evidence, personally appeared at the trial of the case in twenty-
two days, during a period of three years, prepared four sets of cross-interrogatories for
deposition taking, prepared several memoranda and the motion for reconsideration,
filed a joint record on appeal with defendant, filed a brief for plaintiffs as appellants
consisting of 45 printed pages and a brief for plaintiffs as appellees consisting of 265
printed pages. And we are further convinced of its reasonableness because defendant's
counsel likewise valued at P50,000.00 the proper compensation for his services
rendered to defendant in the trial court and on appeal.
In concluding, let it be stressed that the amount of damages awarded in this appeal has
been determined by adequately considering the official, political, social, and financial
standing of the offended parties on one hand, and the business and financial position
of the offender on the other (Domingding v. Ng, 55 O.G. 10). And further considering
the present rate of exchange and the terms at which the amount of damages awarded
would approximately be in U.S. dollars, this Court is all the more of the view that said
award is proper and reasonable.
Wherefore, the judgment appealed from is hereby modified so as to award in favor of
plaintiffs and against defendant, the following: (1) P200,000.00 as moral damages,
divided among plaintiffs, thus: P100,000.00 for Senate President Pro Tempore
Fernando Lopez; P50,000.00 for his wife Maria J. Lopez; P25,000.00 for his son-in-
law Alfredo Montelibano, Jr.; and P25,000.00 for his daughter Mrs. Alfredo
Montelibano, Jr.; (2) P75,000.00 as exemplary or corrective damages; (3) interest at
the legal rate of 6% per annum on the moral and exemplary damages aforestated, from
December 14, 1963, the date of the amended decision of the court a quo, until said
damages are fully paid; (4) P50,000.00 as attorney's fees; and (5) the costs.
Counterclaim dismissed.So ordered.
CIVIL LAW FULL CASE
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Regala,
Makalintal, Zaldivar and Sanchez, JJ., concur.
Dizon, J., is on leave.
——————————————————————————————————
G.R. No. L-20392 December 18, 1968
MARCIAL T. CAEDO, JUANA SANGALANG CAEDO, and the Minors,
EPHRAIM CAEDO, EILEEN CAEDO, ROSE ELAINE CAEDO, suing
through their father, MARCIAL T. CAEDO, as guardian ad litem, plaintiffs-
appellants,
vs.
YU KHE THAI and RAFAEL BERNARDO, defendants-appellants.
Norberto J. Quisumbing for plaintiffs-appellants.
De Joya, Lopez, Dimaguila, Hermoso and Divino for defendants-appellants
MAKALINTAL, J.:
As a result of a vehicular accident in which plaintiff Marcial Caedo and several
members of his family were injured they filed this suit for recovery of damages from
the defendants. The judgment, rendered by the Court of First Instance of Rizal on
February 26, 1960 (Q-2952), contains the following disposition:
IN VIEW OF THE FOREGOING, the court renders a judgment, one in favor
of the plaintiffs and against the defendants, Yu Khe Thai and Rafael Bernardo, jointly
and severally, to pay to plaintiffs Marcial Caedo, et al., the sum of P1,929.70 for actual
damages; P48,000.00 for moral damages; P10,000.00 for exemplary damages; and
P5,000.00 for attorney's fees, with costs against the defendants. The counterclaim of
the defendants against the plaintiffs is hereby ordered dismissed, for lack of merits.
On March 12, 1960 the judgment was amended so as to include an additional award
of P3,705.11 in favor of the plaintiffs for the damage sustained by their car in the
accident.
Both parties appealed to the Court of Appeals, which certified the case to us in view
of the total amount of the plaintiffs' claim.
There are two principal questions posed for resolution: (1) who was responsible for
the accident? and (2) if it was defendant Rafael Bernardo, was his employer, defendant
Yu Khe Thai, solidarily liable with him? On the first question the trial court found
Rafael Bernardo negligent; and on the second, held his employer solidarily liable with
him.
The mishap occurred at about 5:30 in the morning of March 24, 1958 on Highway 54
(now E. de los Santos Avenue) in the vicinity of San Lorenzo Village. Marcial was
driving his Mercury car on his way from his home in Quezon City to the airport, where
his son Ephraim was scheduled to take a plane for Mindoro. With them in the car were
Mrs. Caedo and three daughters. Coming from the opposite direction was the Cadillac
of Yu Khe Thai, with his driver Rafael Bernardo at the wheel, taking the owner from
his Parañaque home to Wack Wack for his regular round of golf. The two cars were
traveling at fairly moderate speeds, considering the condition of the road and the
absence of traffic — the Mercury at 40 to 50 kilometers per hour, and the Cadillac at
approximately 30 to 35 miles (48 to 56 kilometers). Their headlights were mutually
noticeable from a distance. Ahead of the Cadillac, going in the same direction, was a
caretella owned by a certain Pedro Bautista. The carretela was towing another horse
by means of a short rope coiled around the rig's vertical post on the right side and held
at the other end by Pedro's son, Julian Bautista.
Rafael Bernardo testified that he was almost upon the rig when he saw it in front of
him, only eight meters away. This is the first clear indication of his negligence. The
carretela was provided with two lights, one on each side, and they should have given
him sufficient warning to take the necessary precautions. And even if he did not notice
the lights, as he claimed later on at the trial, the carretela should anyway have been
visible to him from afar if he had been careful, as it must have been in the beam of his
headlights for a considerable while.
CIVIL LAW FULL CASE
In the meantime the Mercury was coming on its own lane from the opposite direction.
Bernardo, instead of slowing down or stopping altogether behind the carretela until
that lane was clear, veered to the left in order to pass. As he did so the curved end of
his car's right rear bumper caught the forward rim of the rig's left wheel, wrenching it
off and carrying it along as the car skidded obliquely to the other lane, where it collided
with the oncoming vehicle. On his part Caedo had seen the Cadillac on its own lane;
he slackened his speed, judged the distances in relation to the carretela and concluded
that the Cadillac would wait behind. Bernardo, however, decided to take a gamble —
beat the Mercury to the point where it would be in line with the carretela, or else
squeeze in between them in any case. It was a risky maneuver either way, and the risk
should have been quite obvious. Or, since the car was moving at from 30 to 35 miles
per hour (or 25 miles according to Yu Khe Thai) it was already too late to apply the
brakes when Bernardo saw the carretela only eight meters in front of him, and so he
had to swerve to the left in spite of the presence of the oncoming car on the opposite
lane. As it was, the clearance Bernardo gave for his car's right side was insufficient.
Its rear bumper, as already stated, caught the wheel of the carretela and wrenched it
loose. Caedo, confronted with the unexpected situation, tried to avoid the collision at
the last moment by going farther to the right, but was unsuccessful. The photographs
taken at the scene show that the right wheels of his car were on the unpaved shoulder
of the road at the moment of impact.
There is no doubt at all that the collision was directly traceable to Rafael Bernardo's
negligence and that he must be held liable for the damages suffered by the plaintiffs.
The next question is whether or not Yu Khe Thai, as owner of the Cadillac, is solidarily
liable with the driver. The applicable law is Article 2184 of the Civil Code, which
reads:
ART. 2184. In motor vehicle mishaps, the owner is solidarily liable with his
driver, if the former, who was in the vehicle, could have, by the use of due diligence,
prevented the misfortune. It is disputably presumed that a driver was negligent, if he
had been found guilty of reckless driving or violating traffic regulations at least twice
within the next preceding two months.
Under the foregoing provision, if the causative factor was the driver's negligence, the
owner of the vehicle who was present is likewise held liable if he could have prevented
the mishap by the exercise of due diligence. The rule is not new, although formulated
as law for the first time in the new Civil Code. It was expressed in Chapman vs.
Underwood (1914), 27 Phil. 374, where this Court held:
... The same rule applies where the owner is present, unless the negligent acts
of the driver are continued for such a length of time as to give the owner a reasonable
opportunity to observe them and to direct his driver to desist therefrom. An owner who
sits in his automobile, or other vehicle, and permits his driver to continue in a violation
of the law by the performance of negligent acts, after he has had a reasonable
opportunity to observe them and to direct that the driver cease therefrom, becomes
himself responsible for such acts. The owner of an automobile who permits his
chauffeur to drive up the Escolta, for example, at a speed of 60 miles an hour, without
any effort to stop him, although he has had a reasonable opportunity to do so, becomes
himself responsible, both criminally and civilly, for the results produced by the acts of
the chauffeur. On the other hand, if the driver, by a sudden act of negligence, and
without the owner having a reasonable opportunity to prevent the act or its
continuance, injures a person or violates the criminal law, the owner of the automobile,
although present therein at the time the act was committed, is not responsible, either
civilly or criminally, therefor. The act complained of must be continued in the presence
of the owner for such a length of time that the owner, by his acquiescence, makes his
driver act his own.
The basis of the master's liability in civil law is not respondent superior but rather the
relationship of paterfamilias. The theory is that ultimately the negligence of the
servant, if known to the master and susceptible of timely correction by him, reflects
his own negligence if he fails to correct it in order to prevent injury or damage.
In the present case the defendants' evidence is that Rafael Bernardo had been Yu Khe
Thai's driver since 1937, and before that had been employed by Yutivo Sons Hardware
Co. in the same capacity for over ten years. During that time he had no record of
violation of traffic laws and regulations. No negligence for having employed him at
all may be imputed to his master. Negligence on the part of the latter, if any, must be
CIVIL LAW FULL CASE
sought in the immediate setting and circumstances of the accident, that is, in his failure
to detain the driver from pursuing a course which not only gave him clear notice of the
danger but also sufficient time to act upon it. We do not see that such negligence may
be imputed. The car, as has been stated, was not running at an unreasonable speed.
The road was wide and open, and devoid of traffic that early morning. There was no
reason for the car owner to be in any special state of alert. He had reason to rely on the
skill and experience of his driver. He became aware of the presence of the carretela
when his car was only twelve meters behind it, but then his failure to see it earlier did
not constitute negligence, for he was not himself at the wheel. And even when he did
see it at that distance, he could not have anticipated his driver's sudden decision to pass
the carretela on its left side in spite of the fact that another car was approaching from
the opposite direction. The time element was such that there was no reasonable
opportunity for Yu Khe Thai to assess the risks involved and warn the driver
accordingly. The thought that entered his mind, he said, was that if he sounded a
sudden warning it might only make the other man nervous and make the situation
worse. It was a thought that, wise or not, connotes no absence of that due diligence
required by law to prevent the misfortune.
The test of imputed negligence under Article 2184 of the Civil Code is, to a great
degree, necessarily subjective. Car owners are not held to a uniform and inflexible
standard of diligence as are professional drivers. In many cases they refrain from
driving their own cars and instead hire other persons to drive for them precisely
because they are not trained or endowed with sufficient discernment to know the rules
of traffic or to appreciate the relative dangers posed by the different situations that are
continually encountered on the road. What would be a negligent omission under
aforesaid Article on the part of a car owner who is in the prime of age and knows how
to handle a motor vehicle is not necessarily so on the part, say, of an old and infirm
person who is not similarly equipped.
The law does not require that a person must possess a certain measure of skill or
proficiency either in the mechanics of driving or in the observance of traffic rules
before he may own a motor vehicle. The test of his intelligence, within the meaning of
Article 2184, is his omission to do that which the evidence of his own senses tells him
he should do in order to avoid the accident. And as far as perception is concerned,
absent a minimum level imposed by law, a maneuver that appears to be fraught with
danger to one passenger may appear to be entirely safe and commonplace to another.
Were the law to require a uniform standard of perceptiveness, employment of
professional drivers by car owners who, by their very inadequacies, have real need of
drivers' services, would be effectively proscribed.
We hold that the imputation of liability to Yu Khe Thai, solidarily with Rafael
Bernardo, is an error. The next question refers to the sums adjudged by the trial court
as damages. The award of P48,000 by way of moral damages is itemized as follows:
1. Marcial Caedo P 20,000.00
2. Juana S. Caedo 15,000.00
3. Ephraim Caedo 3,000.00
4. Eileen Caedo 4,000.00
5. Rose Elaine Caedo 3,000.00
6. Merilyn Caedo 3,000.00
Plaintiffs appealed from the award, claiming that the Court should have granted them
also actual or compensatory damages, aggregating P225,000, for the injuries they
sustained. Defendants, on the other hand maintain that the amounts awarded as moral
damages are excessive and should be reduced. We find no justification for either side.
The amount of actual damages suffered by the individual plaintiffs by reason of their
injuries, other than expenses for medical treatment, has not been shown by the
evidence. Actual damages, to be compensable, must be proven. Pain and suffering are
not capable of pecuniary estimation, and constitute a proper ground for granting moral,
not actual, damages, as provided in Article 2217 of the Civil Code.
The injuries sustained by plaintiffs are the following:
CIVIL LAW FULL CASE

C. Contusion with hematoma, shin, lower 1/3, anterior aspect, right. (See Exhibits D,
MARCIAL T. CAEDO: D-1, D-2, D-3, D-4, and D- 5)
A. Contusion, with hematoma, scalp, frontal left; abrasions, chest wall, anterior; It is our opinion that, considering the nature and extent of the above-mentioned
B. Multiple fractures, ribs, right, lst to 5th inclusive. Third rib has a double fracture; injuries, the amounts of moral damages granted by the trial court are not excessive.
Subparieto-plaural hematoma; Basal disc atelectasis, lung, right lower lobe,
secondary; WHEREFORE, the judgment appealed from is modified in the sense of declaring
C. Pseudotosis, left, secondary to probable basal fracture, skull. defendant-appellant Yu Khe Thai free from liability, and is otherwise affirmed with
respect to defendant Rafael Bernardo, with costs against the latter.
JUANA SANGALANG CAEDO: Concepcion, C.J., Reyes, J.B.L., Dizon, Zaldivar, Sanchez, Castro and Capistrano,
A. Abrasions, multiple: JJ., concur.
(1)frontal region, left; (2) apex of nose; (3) upper eyelid, left; (4) knees. Fernando, J., took no part.
B. Wound, lacerated, irregular, deep, frontal; ——————————————————————————————————
C. Fracture, simple, 2nd rib posterior, left with displacement. G.R. No. L-33157 June 29, 1982
D. Fracture, simple, base, proximal phalanx right, big toe. BENITO H. LOPEZ, petitioner,
E. Fracture, simple, base, metatarsals III and V right. vs.
F. Concussion, cerebral. THE COURT OF APPEALS and THE PHILIPPINE AMERICAN GENERAL
INSURANCE CO., INC., respondents.
EPHRAIM CAEDO:
A. Abrasions, multiple: GUERRERO, J.:
(1) left temporal area; (2) left frontal; (3) left supraorbital On June 2, 1959, petitioner Benito H. Lopez obtained a loan in the amount of
P20,000.00 from the Prudential Bank and Trust Company. On the same date, he
EILEEN CAEDO: executed a promissory note for the same amount, in favor of the said Bank, binding
A. Lacerated wound (V-shaped), base, 5th finger, right, lateral aspect. himself to repay the said sum one (1) year after the said date, with interest at the rate
B. Abrasions, multiple: of 10% per annum. In addition to said promissory note, he executed Surety Bond No.
(1) dorsum, proximal phalanx middle finger; (2) Knee, anterior, bilateral; (3) shin, 14164 in which he, as principal, and Philippine American General Insurance Co., Inc.
lower 1/3. (PHILAMGEN) as surety, bound themselves jointly and severally in favor of
Prudential Bank for the payment of the sum of P20,000.00.
ROSE ELAINE CAEDO:
A. Abrasions, multiple: (1) upper and lower lids; (2) left temporal; (3) nasolabial On the same occasion, Lopez also executed in favor of Philamgen an indemnity
region; (4) leg, lower third, anterior. agreement whereby he agreed "to indemnify the Company and keep it indemnified and
hold the same harmless from and against any and all damages, losses, costs, stamps,
MARILYN CAEDO: taxes, penalties, charges and expenses of whatever kind and nature which the
A. Abrasions, multiple: (1)shin, lower 1/3 right; (2) arm, lower third Company shall or may at any time sustain or incur in consequence of having become
CIVIL LAW FULL CASE
surety upon the bond." 1 At the same time, Lopez executed a deed of assignment of
4,000 shares of the Baguio Military Institution entitled "Stock Assignment Separate
from Certificate", which reads:
This deed of assignment executed by BENITO H. LOPEZ, Filipino, of legal
age, married and with residence and postal address at Baguio City, Philippines, now
and hereinafter called the "ASSIGNOR", in favor of the PHILIPPINE AMERICAN
GENERAL INSURANCE CO., INC., a corporation duly organized and existing under
and by virtue of the laws of the Philippines, with principal offices at Wilson Building,
Juan Luna, Manila, Philippines, now and hereinafter called the "ASSIGNEE-
SURETY COMPANY"
— WITNESSETH —
That for and in consideration of the obligations undertaken by the ASSIGNEE-
SURETY COMPANY under the terms and conditions of SURETY BOND NO.
14164, issued on behalf of said BENITO H. LOPEZ and in favor of the
PRUDENTIAL BANK & TRUST COMPANY, Manila, Philippines, in the amount of
TWENTY THOUSAND PESOS ONLY (P20,000.00), Philippine Currency, and for
value received, the ASSIGNOR hereby sells, assigns, and transfers unto THE
PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC., Four Thousand
(4,000) shares of the Baguio military Institute, Inc. standing in the name of said
Assignor on the books of said Baguio Military Institute, Inc. represented by Certificate
No. 44 herewith and do hereby irrevocably constitutes and appoints THE PHILIPPINE
AMERICAN GENERAL INSURANCE CO., INC. as attorney to transfer the said
stock on the books of the within named military institute with full power of substitution
in the premises. 2
With the execution of this deed of assignment, Lopez endorsed the stock certificate
and delivered it to Philamgen.
It appears from the evidence on record that the loan of P20,000.00 was approved
conditioned upon the posting of a surety bond of a bonding company acceptable to the
bank. Thus, Lopez persuaded Emilio Abello, Assistant Executive Vice-President of
Philamgen and member of the Bond Under writing Committee to request Atty.
Timoteo J. Sumawang, Assistant Vice- President and Manager of the Bonding
Department, to accommodate him in putting up the bond against the security of his
shares of stock with the Baguio Military Institute, Inc. It was their understanding that
if he could not pay the loan, Vice-President Abello and Pio Pedrosa of the Prudential
Bank would buy the shares of stocks and out of the proceeds thereof, the loan would
be paid to the Prudential Bank.
On June 2, 1960, Lopez' obligation matured without it being settled. Thus, the
Prudential Bank made demands for payment both upon Lopez and Philamgen. In turn,
Philamgen sent Lopez several written demands for the latter to pay his note (Exhibit
H, H-1 & H-2), but Lopez did not comply with said demands. Hence, the Prudential
Bank sometime in August, 1961 filed a case against them to enforce payment on the
promissory note plus interest.
Upon receipt of the copies of complaint, Atty. Sumawang confronted Emilio Abello
and Pio Pedrosa regarding their commitment to buy the shares of stock of Lopez in the
event that the latter failed to pay his obligations to the Prudential Bank. Vice-President
Abello then instructed Atty. Sumawang to transfer the shares of stock to Philamgen
and made a commitment that thereafter he (Abello) and Pio Pedrosa will buy the shares
of stock from it so that the proceeds could be paid to the bank, and in the meantime
Philamgen will not pay the bank because it did not want payment under the terms of
the bank. 3
Due to said commitment and instruction of Vice-President Abello, Assistant Treasurer
Marcial C. Cruz requested the transfer of Stock Certificate No. 44 for 4,000 shares to
Philamgen in a letter dated October 31, 1961. Stock Certificate No. 44 in the name of
Lopez was accordingly cancelled and in lieu thereof Stock Certificate No. 171 was
issued by the Baguio Military Institute in the name of Philamgen on November 17,
1961.
The complaint was thereafter dismissed. But when no payment was still made by the
principal debtor or by the surety, the Prudential Bank filed on November 8, 1963
another complaint for the recovery of the P20,000.00. On November 18, 1963, after
being informed of said complaint, Lopez addressed the following letter to Philamgen:
Dear Mr. Sumawang:
CIVIL LAW FULL CASE
This is with reference to yours of the 13th instant advising me of a complaint
filed against us by Prudential Bank & Trust Co. regarding my loan of P20,000.00. In
this connection, I would like to know what happened to my shares of stocks of Baguio
Military Academy which were pledged to your goodselves to secure said obligation.
These shares of stock I think are more than enough to answer for said obligation. 4
On December 9, 1963, Philamgen was forced to pay the Prudential Bank the sum of
P27,785.89 which included the principal loan and accumulated interest and the
Prudential Bank executed a subrogation receipt on the same date.
On March 18, 1965, Philamgen brought an action in the Court of First Instance of
Manila (Civil Case No. 60272, "The Philippine American General Insurance Co., Inc.
vs. Benito H. Lopez") for reimbursement of the said amount. After hearing, the said
court rendered judgment dismissing the complaint holding:
The contention of the plaintiff that the stock of the defendant were merely
pledged to it by the defendant is not borne out by the evidence. On the contrary, it
appears to be contradicted by the facts of the case. The shares of stock of the defendant
were actually transferred to the plaintiff when it became clear after the plaintiff and
the defendant had been sued by the Prudential Bank that plaintiff would be compelled
to make the payment to the Prudential Bank, in view of the inability of the defendant
Benito H. Lopez to pay his said obligation. The certificate bearing No. 44 was
cancelled and upon request of the plaintiff to the Baguio Military Institute a new
certificate of stock was issued in the name of the plaintiff bearing No. 171, by means
of which plaintiff became the registered owner of the 4,000 shares originally belonging
to the defendant.
It is noteworthy that the transfer of the stocks of the defendant in the name of
the plaintiff company was made at the instance of Messrs. Abello and Pedrosa, who
promised to buy the same from the plaintiff. Now that these shares of stock of the
defendant had already been transferred in the name of the plaintiff, the defendant has
already divested himself of the said stocks, and it would seem that the remedy of the
plaintiff is to go after Messrs. Abello and Pedrosa on their promise to pay for the said
stocks. To go after the defendant after the plaintiff had already become the owner of
his shares of stock and compel him to pay his obligation to the Prudential Bank would
be most unfair, unjust and illogical for it would amount to double payment on his part.
After the plaintiff had already appropriated the said shares of stock, it has already lost
its right to recover anything from the defendant, for the reason that the transfer of the
said stocks was made without qualification. This transfer takes the form of a
reimbursement of what plaintiff had paid to the Prudential Bank, thereby depriving the
plaintiff of its right to go after the defendant herein. 5
Philamgen appealed to the Court of Appeals raising these assignments of errors:
I
The lower court erred in finding that the evidence does not bear out the
contention of plaintiff that the shares of stock belonging to defendant were transferred
by him to plaintiff by way of pledge.
II
The lower court erred in finding that plaintiff company appropriated unto itself
the shares of stock pledged to it by defendant Benito Lopez and in finding that, with
the transfer of the stock in the name of plaintiff company, the latter has already been
paid or reimbursed what it paid to Prudential Bank.
III
The lower court erred in not finding that the instant case is one where the
pledge has abandoned the security and elected instead to enforce his claim against the
pledgor by ordinary action. 6
On December 17, 1970, the Court of Appeals promulgated a decision in favor of the
Philamgen, thereby upholding the foregoing assignments of errors. It declared that the
stock assignment was a mere pledge that the transfer of the stocks in the name of
Philamgen was not intended to make it the owner thereof; that assuming that
Philamgen had appropriated the stocks, this appropriation is null and void as a
stipulation authorizing it is a pactum commissorium; and that pending payment,
CIVIL LAW FULL CASE
Philamgen is merely holding the stock as a security for the payment of Lopez'
obligation. The dispositive portion of the said decision states:
WHEREFORE, the decision of the lower court is hereby reversed, and another
one is hereby entered ordering the defendant to pay the plaintiff the sum of P27,785.89
with interest at the rate of 12% per annum from December 9, 1963, 10% of the
P27,785.89 as attorney's fees and the costs of the suit. 7
The motion for reconsideration with prayer to set the same for oral argument having
been denied, Lopez brought this petition for review on certiorari presenting for
resolution these questions:
a) Where, as in this case, a party "sells, assigns and transfers" and delivers shares of
stock to another, duly endorsed in blank, in consideration of a contingent obligation of
the former to the latter, and, the obligations having arisen, the latter causes the shares
of stock to be transferred in its name, what is the juridical nature of the transaction-a
dation in payment or a pledge?
b) Where, as in this case, the debtor assigns the shares of stock to the creditor under
an agreement between the latter and determinate third persons that the latter would
buy the shares of stock so that the obligations could be paid out of the proceeds, was
there a novation of the obligation by substitution of debtor? 8
Philamgen failed to file its comment on the petition for review on certiorari within the
extended period which expired on March 19, 1971. This Court thereby resolved to
require Lopez to file his brief. 9
Under the first assignment of error, Lopez argues in his brief:
That the Court of Appeals erred in holding that when petitioner "sold, assigned,
transferred" and delivered shares of stock, duly endorsed in blank, to private
respondent in consideration of a contingent obligation of the former to the latter and
the obligation having thereafter arisen, the latter caused the shares of stock to be
transferred to it, taking a new certificate of stock in its name, the transaction was a
pledge, and in not holding instead that it was a dation in payment. 10
Considering the explicit terms of the deed denominated "Stock Assignment Separate
from Certificate", hereinbefore copied verbatim, Lopez sold, assigned and transferred
unto Philamgen the stocks involved "for and in consideration of the obligations
undertaken" by Philamgen "under the terms and conditions of the surety bond executed
by it in favor of the Prudential Bank" and "for value received". On its face, it is neither
pledge nor dation in payment. The document speaks of an outright sale as there is a
complete and unconditional divestiture of the incorporeal property consisting of stocks
from Lopez to Philamgen. The transfer appears to have been an absolute conveyance
of the stocks to Philamgen whether or not Lopez defaults in the payment of P20,000.00
to Prudential Bank. While it is a conveyance in consideration of a contingent
obligation, it is not itself a conditional conveyance.
It is true that if Lopez should "well and truly perform and fulfill all the undertakings,
covenants, terms, conditions, and agreements stipulated" in his promissory note to
Prudential Bank, the obligation of Philamgen under the surety bond would become
null and void. Corollarily, the stock assignment, which is predicated on the obligation
of Philamgen under the surety bond, would necessarily become null and void likewise,
for want of cause or consideration under Article 1352 of the New Civil Code. But this
is not the case here because aside from the obligations undertaken by Philamgen under
the surety bond, the stock assignment had other considerations referred to therein as
"value received". Hence, based on the manifest terms thereof, it is an absolute transfer.
Notwithstanding the express terms of the "Stock Assignment Separate from
Certificate", however, We hold and rule that the transaction should not be regarded as
an absolute conveyance in view of the circumstances obtaining at the time of the
execution thereof.
It should be remembered that on June 2, 1959, the day Lopez obtained a loan of
P20,000.00 from Prudential Bank, Lopez executed a promissory note for ?20,000.00,
plus interest at the rate of ten (10%) per cent per annum, in favor of said Bank. He
likewise posted a surety bond to secure his full and faithful performance of his
obligation under the promissory note with Philamgen as his surety. In return for the
undertaking of Philamgen under the surety bond, Lopez executed on the same day not
only an indemnity agreement but also a stock assignment.
CIVIL LAW FULL CASE
The indemnity agreement and the stock assignment must be considered together as
related transactions because in order to judge the intention of the contracting parties,
their contemporaneous and subsequent acts shall be principally considered. (Article
1371, New Civil Code). Thus, considering that the indemnity agreement connotes a
continuing obligation of Lopez towards Philamgen while the stock assignment
indicates a complete discharge of the same obligation, the existence of the indemnity
agreement whereby Lopez had to pay a premium of P1,000.00 for a period of one year
and agreed at all times to indemnify Philamgen of any and all kinds of losses which
the latter might sustain by reason of it becoming a surety, is inconsistent with the
theory of an absolute sale for and in consideration of the same undertaking of
Philamgen. There would have been no necessity for the execution of the indemnity
agreement if the stock assignment was really intended as an absolute conveyance.
Hence, there are strong and cogent reasons to conclude that the parties intended said
stock assignment to complement the indemnity agreement and thereby sufficiently
guarantee the indemnification of Philamgen should it be required to pay Lopez' loan
to Prudential Bank.
The character of the transaction between the parties is to be determined by their
intention, regardless of what language was used or what the form of the transfer was.
If it was intended to secure the payment of money, it must be construed as a pledge;
but if there was some other intention, it is not a pledge. However, even though a
transfer, if regarded by itself, appears to have been absolute, its object and character
might still be qualified and explained by a contemporaneous writing declaring it to
have been a deposit of the property as collateral security. It has been said that a transfer
of property by the debtor to a creditor, even if sufficient on its face to make an absolute
conveyance, should be treated as a pledge if the debt continues in existence and is not
discharged by the transfer, and that accordingly, the use of the terms ordinarily
importing conveyance, of absolute ownership will not be given that effect in such a
transaction if they are also commonly used in pledges and mortgages and therefore do
not unqualifiedly indicate a transfer of absolute ownership, in the absence of clear and
unambiguous language or other circumstances excluding an intent to pledge. 11
We agree with the holding of the respondent Court of Appeals that the stock
assignment, Exhibit C, is in truth and in fact, a pledge. Indeed, the facts and
circumstances leading to the execution of the stock assignment, Exhibit C, and the
admission of Lopez prove that it is in fact a pledge. The appellate court is correct in
ruling that the following requirements of a contract of pledge have been satisfied: (1)
that it be constituted to secure the fulfillment of a principal obligation; (2) that the
pledgor be the absolute owner of the thing pledged; and (3) that the person constituting
the pledge has the free disposal of the property, and in the absence thereof, that he be
legally authorized for the purpose. (Article 2085, New Civil Code).
Article 2087 of the New Civil Code providing that it is also the essence of these
contracts (pledge, mortgage, and antichresis) that when the principal obligation
becomes due, the things in which the pledge or mortgage consists may be alienated for
the payment to the creditor, further supports the appellate court's ruling, which We
also affirm. On this point further, the Court of Appeals correctly ruled:
In addition to the requisites prescribed in article 2085, it is necessary, in order
to constitute the contract of pledge, that the thing pledged be placed in the possession
of the creditor, or of a third person by common agreement. (Art. 2093, N.C.C.)
Incorporeal rights, including shares of stock may also be pledged (Art. 2095, N.C.C.)
All these requisites are found in the transaction between the parties leading to the
execution of the Stock Assignment, Exhibit C. And that it is a pledge was admitted by
the defendant in his letter of November 18, 1963, Exhibit G, already quoted above,
where he asked what had happened to his shares of stock "which were pledged to your
goodselves to secure the said obligation". The testimony of the defendant-appellee that
it was their agreement or understanding that if he would be unable to pay the loan to
the Prudential Bank, plaintiff could sell the shares of stock or appropriate the same in
full payment of its debt is a mere after-thought, conceived after he learned of the
transfer of his stock to the plaintiff in the books of the Baguio Military Institute.
We also do not agree with the contention of petitioner that "petitioner's 'sale
assignment and transfer' unto private respondent of the shares of stock, coupled with
their endorsement in blank and delivery, comes exactly under the Civil Code's
CIVIL LAW FULL CASE
definition of dation in payment, a long recognized and deeply rooted concept in Civil
Law denominated by Spanish commentators as 'adjudicacion en pago'".
According to Article 1245 of the New Civil Code, dation in payment, whereby
property is alienated to the creditor in satisfaction of a debt in money, shall be
governed by the law of sales.
Speaking of the concept of dation in payment, it is well to cite that:
Dation in payment is the delivery and transmission of ownership of a thing by the
debtor to the creditor as an accepted equivalent of the performance of the obligation.
(2 Castan 525; 8 Manresa, 324) The property given may consist, not only of a thing,
but also of a real right (such as a usufruct) or of a credit against a third person. (Perez
Gonzales & Alguer :2-I Enneccerus, Kipp & Wolff 317). Thus, it has been held that
the assignment to the creditor of the interest of the debtor in an inheritance in payment
of his debt, is valid and extinguishes the debt. (Ignacio vs. Martinez, 33 Phil. 576)
The modern concept of dation in payment considers it as a novation by change of the
object, and this is to our mind the more juridically correct view. Our Civil Code,
however, provides in this article that, where the debt is in money, the law on sales shall
govern; in this case, the act is deemed to be a sale, with the amount of the obligation
to the extent that it is extinguished being considered as the price. Does this mean that
there can be no dation in payment if the debt is not in money? We do not think so. It
is precisely in obligations which are not money debts, in which the true juridical nature
of dation in payment becomes manifest. There is a real novation with immediate
performance of the new obligation. The fact that there must be a prior agreement of
the parties on the delivery of the thing in lieu of the original prestation shows that there
is a novation which, extinguishes the original obligation, and the delivery is a mere
performance of the new obligation.
The dation in payment extinguishes the obligation to the extent of the value of
the thing delivered, either as agreed upon by the parties or as may be proved, unless
the parties by agreement, express or implied, or by their silence, consider the thing as
equivalent to the obligation, in which case the obligation is totally extinguished. (8
Manresa 324; 3 Valverde 174 fn
Assignment of property by the debtor to his creditors, provided for in article
1255, is similar to dation in payment in that both are substitute forms of performance
of an obligation. Unlike the assignment for the benefit of creditors, however, dation in
payment does not involve plurality of creditors, nor the whole of the property of the
debtor. It does not suppose a situation of financial difficulties, for it may be made even
by a person who is completely solvent. It merely involves a change of the object of the
obligation by agreement of the parties and at the same time fulfilling the same
voluntarily. (8 Manresa 324). 12
Considering the above jurisprudence, We find that the debt or obligation at bar has not
matured on June 2, 1959 when Lopez "alienated" his 4,000 shares of stock to
Philamgen. Lopez' obligation would arise only when he would default in the payment
of the principal obligation (the loan) to the bank and Philamgen had to pay for it. Such
fact being adverse to the nature and concept of dation in payment, the same could not
have been constituted when the stock assignment was executed. Moreover, there is no
express provision in the terms of the stock assignment between Philamgen and Lopez
that the principal obligation (which is the loan) is immediately extinguished by reason
of such assignment.
In case of doubt as to whether a transaction is a pledge or a dation in payment, the
presumption is in favor of pledge, the latter being the lesser transmission of rights and
interests. Under American jurisprudence,
A distinction might also be made between delivery of property in payment of
debt and delivery of such property as collateral security for the debt. Generally, such
a transfer was presumed to be made for collateral security, in the absence of evidence
tending to show an intention on the part of the parties that the transfer was in
satisfaction of the debt. This presumption of a transfer for collateral security arose
particularly where the property given was commercial paper, or some other 'specialty'
chose of action, that conferred rights upon transfer by delivery of a different nature
CIVIL LAW FULL CASE
from the debt, whose value was neither intrinsic nor apparent and was not agreed upon
by the parties. 13
Petitioner's argument that even assuming, arguendo that the transaction was at its
inception a pledge, it gave way to a dation in payment when the obligation secured
came into existence and private respondent had the stocks transferred to it in the
corporate books and took a stock certificate in its name, is without merit. The fact that
the execution of the stock assignment is accompanied by the delivery of the shares of
stock, duly endorsed in blank to Philamgen is no proof that the transaction is a dation
in payment. Likewise, the fact that Philamgen had the shares of stock transferred to it
in the books of the corporation and took a certificate in its name in lieu of Lopez which
was cancelled does not amount to conversion of the stock to one's own use. The
transfer of title to incorporeal property is generally an essential part of the delivery of
the same in pledge. It merely constitutes evidence of the pledgee's right of property in
the thing pledged.
By the contract of pledge, the pledgor does not part with his general right of
property in the collateral. The general property therein remains in him, and only a
special property vests in the pledgee. The pledgee does not acquire an interest in the
property, except as a security for his debt. Thus, the pledgee holds possession of the
security subject to the rights of the pledgor; he cannot acquire any interest therein that
is adverse to the pledgor's title. Moreover, even where the legal title to incorporeal
property which may be pledged is transferred to a pledgee as collateral security, he
takes only a special property therein Such transfer merely performs the office that the
delivery of possession does in case of a pledge of corporeal property.
xxx xxx xxx
The pledgee has been considered as having a lien on the pledged property. The
extent of such lien is measured by the amount of the debt or the obligation that is
secured by the collateral, and the lien continues to exist as long as the pledgee retains
actual or symbolic possession of the property, and the debt or obligation remains
unpaid. Payment of the debt extinguishes the lien.
Though a pledgee of corporation stock does not become personally liable as a
stockholder of the company, he may have the shares transferred to him on the books
of the corporation if he has been authorized to do so.
The general property in the pledge remains in the pledgor after default as well
as prior thereto. The failure of the pledgor to pay his debt at maturity in no way affects
the nature of the pledgee's rights concerning the property pledged, except that he then
becomes entitled to proceed to make the security available in the manner prescribed
by law or by the terms of the contract, ... . 14
In his second assignment of error, petitioner contends that the Court of Appeals erred
in not holding that since private respondent entered into an agreement with determinate
third persons whereby the latter would buy the said shares so sold, assigned and
transferred to the former by the petitioner for the purpose of paying petitioner's
obligation out of the proceeds, there was a novation of the obligation by substitution
of debtor.
We do not agree.
Under Article 1291 of the New Civil Code, obligations may be modified by: (1)
changing their object or principal condition; (2) substituting the person of the debtor;
(3) subrogating a third person in the rights of the creditor. And in order that an
obligation may be extinguished by another which substitute the same, it is imperative
that it be so declared in unequivocal terms, or that the old and the new obligations be
on every point incompatible with each other. (Article 1292, N.C.C.) Novation which
consists in substituting a new debtor in the place of the original one, may be made
even without the knowledge or against the will of the latter, but not without the consent
of the creditor. Payment by the new debtor gives him the rights mentioned in Articles
1236 and 1237. (Article 1293, N.C.C.)
Commenting on the second concept of novation, that is, substituting the person of the
debtor, Manresa opines, thus:
In this kind of novation it is pot enough to extend the juridical relation to a third person;
it is necessary that the old debtor be released from the obligation, and the third person
CIVIL LAW FULL CASE
or new debtor take his place in the relation. Without such release, there is no novation;
the third person who has assumed the obligation of the debtor merely becomes a co-
debtor or a surety. If there is no agreement as to solidarity, the first and the new debtor
are considered obligated jointly. (8 Manresa 435, cited in Tolentino, Commentaries
and Jurisprudence on the Civil Code of the Philippines, Vol. IV, p. 360)
In the case at bar, the undertaking of Messrs. Emilio Abello and Pio Pedrosa that they
would buy the shares of stock so that Philamgen could be reimbursed from the
proceeds that it paid to Prudential Bank does not necessarily imply the extinguishment
of the liability of petitioner Lopez. Since it was not established nor shown that Lopez
would be released from responsibility, the same does not constitute novation and
hence, Philamgen may still enforce the obligation. As the Court of Appeals correctly
held that "(t)he representation of Mr. Abello to Atty. Sumawang that he and Mr.
Pedrosa would buy the stocks was a purely private arrangement between them, not an
agreement between (Philamgen) and (Lopez)" and which We hereby affirm,
petitioner's second assignment of error must be rejected.
In fine, We hold and rule that the transaction entered into by and between petitioner
and respondent under the Stock Assignment Separate From Certificate in relation to
the Surety Bond No. 14164 and the Indemnity Agreement, all executed and dated June
2, 1959, constitutes a pledge of the 40,000 shares of stock by the petitioner-pledgor in
favor of the private respondent-pledgee, and not a dacion en pago. It is also Our ruling
that upon the facts established, there was no novation of the obligation by substitution
of debtor.
The promise of Abello and Pedrosa to buy the shares from private respondent not
having materialized (which promise was given to said respondent only and not to
petitioner) and no action was taken against the two by said respondent who chose
instead to sue the petitioner on the Indemnity Agreement, it is quite clear that this
respondent has abandoned its right and interest over the pledged properties and must,
therefore, release or return the same to the petitioner-pledgor upon the latter's
satisfaction of his obligation under the Indemnity Agreement.
It must also be made clear that there is no double payment nor unjust enrichment in
this case because We have ruled that the shares of stock were merely pledged. As the
Court of Appeals said:
The appellant (Philam) is not enriching himself at the expense of the appellee.
True, the stock certificate of the appellee had been in the name of the appellant but the
transfer was merely nominal, and was not intended to make the plaintiff the owner
thereof. No offer had been made for the return of the stocks to the defendant. As the
appellant had stated, the appellee could have the stocks transferred to him anytime as
long as he reimburses the plaintiff the amount it had paid to the Prudential Bank.
Pending payment, plaintiff is merely holding the certificates as a pledge or security for
the payment of defendant's obligation.
The above holding of the appellate court is correct and We affirm the same.
As to the third assignment of error which is merely the consequence of the first two
assignments of errors, the same is also devoid of merit.
WHEREFORE, IN VIEW OF ALL THE FOREGOING, the decision of the Court of
Appeals is hereby AFFIRMED in toto, with costs against the petitioner.
SO ORDERED.
____________________________________________________________________
G.R. No. L-51767 June 29, 1982
LETICIA CO, assisted by her husband MUI YUK KONG, in substitution of
CITADEL INSURANCE & SURETY CO., INC., plaintiff-appellee,
vs.
PHILIPPINE NATIONAL BANK, defendant-appellant.
BARREDO, J:
Direct appeal to this Supreme Court pursuant to Republic Act 5440 from the decision
of the Court of First Instance of Rizal, Branch XXI in its Civil Case No. 23101 entitled
CIVIL LAW FULL CASE
"Citadel Insurance & Surety Co., Inc. vs. Philippine National Bank", the dispositive
portion of which reads:
WHEREFORE, this Court finds that plaintiff has validly exercised the right of
redemption herein-before discussed and orders the defendant to:
(a) Accept the amount consigned and deposited pursuant to the Order
of this Court on March 11, 1976;
(b) Execute and specifically comply to the effects of the exercise of the
right of redemption so that whatever title is due to the plaintiff after redemption may
properly accrue to plaintiff;
(c) Deliver and surrender to plaintiff possession over the property in
question.
Considering that this case has been submitted for decision based upon four (4) limited
questions of law and there being no evidence presented and submitted to support any
claim for damages, there is no pronouncement and award of damages as well as costs.
SO ORDERED. (Pp. 180-181, Record on Appeal.)
It goes without saying that under the Act aforementioned by virtue of which this appeal
is before Us, the issues We are called upon to resolve are only questions of law.
Briefly stated, the undisputed material facts of this case, as may be culled from the
decision of the trial court and elsewhere in the record, are as follows:
On November 10, 1961, the Standard Parts Manufacturing Corporation, hereinafter to
be referred to simply as STANDARD, executed a real estate mortgage in favor of
herein defendant-appellant Philippine National Bank, hereinafter to be referred to
simply as PNB, over properties covered by Transfer Certificates of Title Nos. T-5108
and T-5320, both situated in Baguio City, as collateral for a loan consideration of
P500,000.00. On February 20, 1963, the same debtor corporation executed an
amended real estate mortgage to include as collateral for the increase of the above loan
to P1,000,000.00 a property located at Pasong Tamo Extension within the
Municipality of Makati (then part of Rizal Province and now of Metro Manila) covered
by Transfer Certificate of Title No. 54474. Additionally, on February 20, 1963, the
same corporation executed in favor of PNB a chattel mortgage of its personal
properties listed on pages 96 to 108 of the Record on Appeal. On pages 6-7 of
appellant's brief it is stated that as of July 19, 1974, the "borrowed loan" of
STANDARD totalled P4,296,803.56, and that the said obligation was secured, as
aforementioned, by the mortgages on the Baguio and Makati real estates of
STANDARD and the chattel mortgage on its personal properties above referred to.
When STANDARD failed to pay its obligation, PNB extrajudicially foreclosed the
mortgage on the Baguio properties as well as the chattel mortgage on July 19, 1974,
with PNB as the highest bidder for P1,514,305.00. Subsequently, on August 8, 1974,
PNB also foreclosed the mortgage on the Makati property and purchased the same, as
highest bidder, for P1,363,000.00.
We quote further from appellant's brief:
When Standard Parts failed to pay its obligation, PNB foreclosed the Baguio
properties and chattels on July 19, 1974 with it as the highest bidder for P1,514,305.00
and the Pasong Tamo property on August 8, 1974 also with it as the highest bidder for
P1,363,000.00. Hence, after foreclosure of the above-mentioned mortgage, the
deficiency claim of the Bank against Standard Parts as of August 8, 1974 amounted to
P1,434,521.07. Subsequently, a Certificate of Sale dated July 19, 1974 was issued by
the Sheriff of Baguio City covering TCT Nos. T-5708 and T-5320 (Annex "C", P.S.F.).
A Certificate of Sale dated August 8, 1974 covering TCT No. 54474 was also issued
by the Sheriff of Rizal (Annex "D", P.S.F.) and registered on March 14, 1976 in the
Registry of Deeds. Upon failure of Standard Parts to redeem the foreclosed properties
within the reglementary period, the PNB consolidated titles to the Baguio properties
and TCT Nos. 26080 and 26081 (Annexes "E" and "E-1", respectively, P.S.F.) were
issued by the Register of Deeds of Baguio City on May 5, 1976 in the name of the
Bank. On May 14, 1976, TCT No. 54474 was cancelled and TCT No. S-28133 issued
in the name of the PNB.
Meantime, on March 5, 1976, Citadel wrote PNB a letter (Annex "H", P.S.F.)
stating therein its desire to redeem the property covered by TCT No. 54474, it being
CIVIL LAW FULL CASE

the alleged assignee of the right of redemption of Standard Parts with respect only to
said property. Citadel, however, offered to redeem the property for only
P1,621,970.00. In its reply to said letter, PNB, in a letter dated March 5, 1976 (Annex
"I", P.S.F.), justifiably refused to accept the tender of payment of Citadel considering
that the amount of P1,621,970.00 was very much lower than the Bank's total amount
of P3,366,546.42 as of March 5, 1976 per the Statement of Account of Standard Parts
(Annex "G", P.S.F.). (Pp. 7-9, Brief of PNB)
To Our mind then, the facts that are decisive herein are the following:
1. The mortgages here in question were constituted way back in 1961 to 1963.
2. The foreclosure sale of the Baguio properties and the chattels took place on July 19,
1974 and that of the Makati estate on August 8, 1974.
3. Citadel Insurance & Surety Co., Inc. (CITADEL, for short) to whom STANDARD
had in the meanwhile (or on February 20, 1976) transferred its rights in the mortgages
here in issue, wrote PNB on March 5, 1976 stating that it was redeeming the Makati
property, offering to pay therefor as redemption price P1,621,970.00. The letter of
CITADEL in this regard reads thus:
CITADEL INSURANCE & SURETY CO., INC.
Suite 202 Sikatuna Bldg., Ayala Ave.
Makati, Rizal
Tel. No. 87-33-07 & 87-34-44
March 5, 1976
PHILIPPINE NATIONAL BANK
Escolta, Manila
Re: Legal Redemption of Extra-Judicial
Foreclosed Property of Standard
Parts Manufacturing Corporation
Under Act No. 3135, As amended
Gentlemen:
In connection with the above-mentioned property which is covered by TCT
No. 54474 of the Register of Deeds For the Province of Rizal we wish to inform you
that the CITADEL INSURANCE & SURETY CO., INC., is the Assignee of the right
of redemption, which will expire on March 11, 1976, by virtue of a "Deed of
Assignment and Waiver of Redemption Rights" dated February 29, 1976, photostat
copy of which is attached to this letter as Annex "A".
As assignee of the aforementioned Right of Redemption, our Company is now
exercising the same by tendering to you the redemption price computed as follows:
P1,363,000.00 — total bid of the PNB per its letter to the Sheriff dated August
8, 1974;
P 258,970.00 — interest at the rate of 1% a month from the date of auction,
August 8, 1974, up to the time of redemption;
P1,621,970.00 — TOTAL
as evidenced by RCBC Manager's Check No. MC 194188 dated March 4, 1976, which
is attached to this letter as Annex "B".
In view of the foregoing, kindly acknowledge the receipt of the redemption amount
and cause the issuance of the corresponding Certificate of Redemption in favor of our
Company.
Thank you.
Very truly yours,
(Sgd.) FRANCISCO S. CORPUS
President
Atty.: a/s (Pages 131-133, Record on Appeal)
4. Immediately or on even date PNB rejected the above tender, contending that the
offered price was much lower than P3,366,546.42, 1 as of said date March 5, 1976,
which PNB maintained was the correct redemption price. The following was the reply
of PNB:
CIVIL LAW FULL CASE

6. On March 11, 1976, CITADEL filed the instant action in the court below with the
PHILIPPINE NATIONAL BANK following prayer:
LEGAL DEPARTMENT
March 5, 1976 PRAYER
Mr. Francisco S. Corpus
President WHEREFORE, it is respectfully prayed that upon the filing of this complaint
Citadel Insurance & Surety Co., Inc. this Honorable Court forthwith issue an order authorizing its Branch Clerk to accept a
202 Sikatuna Bldg., Ayala Ave. Manager's Check in the amount of P1,621,970.00 and deposit the same with the Rizal
Makati, Rizal Commercial Banking Corporation under a Savings Account in order that the same
shall not remain Idle, and in the name, of defendant PNB, subject to the control and
Dear Mr. Corpus: disposition of this Honorable Court; and after hearing, judgment be rendered;
This refers to your letter of March 5, 1976 wherein you expressed your
desire to redeem the property covered by TCT No. 54474 of the Register of Deeds of (a) Ordering defendant to accept the amount so deposited, and/or such amount
Rizal which we acquired from Standard Parts Manufacturing Corp. in the amount of as may be found by this Honorable Court to be the lawful redemption price for the
P1,621,970.00 in the form of RCBC Manager's Check No. MC 194188 dated March particular property in question;
4, 1976.
(b) Ordering defendant to turn over the title and possession of the property in
We feel that the Legal Department is in no position to decide the question to plaintiff together with its fruits from March 11, 1976 up to the time
acceptance of your offer because it appears that the amount offered is less than our possession is actually surrendered to the plaintiff, plus the interests thereon counted
total claim. We suggest, therefore, that you see either Vice President Andres L. Africa from the date of filing of this complaint;
or Asst. Vice Pres. Raul Leveriza on Monday March 8,1976.
(c) Ordering defendant to execute such documents and papers that may be
Very truly yours, necessary for the transfer of the title and possession of the property in question to
(Sgd.) ARTEMIO S. TIPON plaintiff;
Senior Supervising Atty.
(Pp. 133-134, Record on Appeal.) (d) Ordering defendant to pay plaintiff damages in the form of attorney's fees
and expenses of litigation, the amount of which is left to the sound discretion of this
5. The Certificate of Sale dated August 8, 1974 covering TCT No. 54474 was issued Honorable Court;
by the Sheriff of Rizal and registered on March 14, 1976 in the Registry of Deeds.
(Page 8, PNB's brief) Notably, however, according to the decision of the trial court, (e) Ordering the defendant to pay the costs of suit.
the certificate of sale was registered on March 11, 1976. (Page 176, Record on
Appeal.) PLAINTIFF FURTHER PRAYS for such other relief as may be found just and
equitable in the premises. (Pp. 6-8, Record on Appeal.)
CIVIL LAW FULL CASE
7. There is no dispute that a manager's check of the Rizal Commercial Banking
Corporation No. MC 194188 dated March 4, 1976 and in the amount of P1,621,970.00
(Pp. 14-15, Record on Appeal) accompanied the complaint and was actually deposited
under a savings account with the same bank by order of the trial court of the same date
"in the name of the PNB subject to the control and disposition of the Court." (p. 20,
Record on Appeal.)
In the light of the foregoing facts, the parties stipulated in the partial stipulation facts
they submitted to the trial court that:
B. Limitation of issues
The parties agreed that the issues raised by the pleadings are one of law,
to wit:
1. Whether the redemption period has expired.
2. What is the correct redemption amount required under the
law?
3. Whether there was a valid and effective tender of payment.
4. Whether the Deed of Assignment is binding and enforceable
against
5. defendant PNB. (P. 151, Record on Appeal)
Timeliness of the redemption
To be sure, We find the opposing postures of the parties on the timeliness of the
redemption here in question a little blurred and confusing. So, rather than to try to
extricate Ourselves out of such maze, We feel it is sufficient to point out that according
to the brief of appellant, the foreclosure sale of the subject property was made on
August 8, 1974 (pp. 7-8) and the corresponding certificate of sale was issued by sheriff
on the same day and "registered on March 14, 1976 in the Register of Deeds." (p. 8,
Record on Appeal.) "On May 14, 1976 TCT 54474 was cancelled and TCT No. S-
28133 issued in the name of
PNB". (id.) 2
In such ambiguous premises, We have no alternative than to use March 11, 1975 3 as
point of reference regarding the date of the registration of the certificate of sale.
Appellant assumes that on this basis the period of redemption was up to March 10,
1976. Well, the truth of the matter is that this detail is tied up inextricably to the main
question of law that pervades the whole of this controversy.
What is the law applicable to this case as to the period of redemption?
Let us not forget that the mortgage at issue was executed in 1963. True it is that as
underscored by counsel for PNB, STANDARD, the predecessor-in-interest of
CITADEL, who signed the deed of mortgage agreed, and CITADEL is bound by such
agreement, "to abide and to be bound by the provisions of the Charter of the PNB ".
Specifically paragraph (g) of said real estate mortgage provides:
(g) The mortgagor hereby waives the right granted him under Section 119 of
Commonwealth Act No. 141, known as the Public Land Act, as amended and agrees
to abide to be bound by the provisions of Act No. 3135 or Act No. 2933, which
amended Act No. 1612, or Republic Act No. 1300, as amended, known as the New
Charter." (Page 15, PNB's Brief.)
Going by the literal terms of this quoted provision, STANDARD/CITADEL stand
bound by the same. In other words, paragraph (g) of the mortgage contract made the
provisions of Act No. 3135 or Act 2933, which amended Act No. 1612, or Republic
Act 1300, as amended, known as the new Charter part and parcel of the mortgage
contract. Now, what is the legal import or consequence of such express incorporation
of and submission to Act 3135 and Republic Act 1300 by STANDARD/CITADEL?
Republic Act 1300 entitled "An Act Revising the Charter of the Philippine National
Bank" was approved and made effective on June 16, 1955. It was therefore the law
when in 1963 the mortgage here in dispute was executed. It was the very law that the
CIVIL LAW FULL CASE
above-quoted paragraph (g) of the mortgage contract made reference to. In this
connection, evidently overlooked by counsel for PNB is that Republic Act 1300 does
not contemplate extrajudicial procedure. Clearly indicative of this is Section 20 thereof
which provides:
Sec. 20. Right of redemption of property foreclosed. — The mortgagor shall
have the right, within the year after the sale of real estate as a result of the foreclosure
of a mortgage, to redeem the property by paying the amount fixed by the court in the
order of execution, with interest thereon at the rate specified in the mortgage, and all
the costs and other judicial expenses incurred by the Bank by reason of the execution
and sale and for the custody of said property.
Indeed, conventional legal and banking business sense dictates that it must have been
because of such omission that paragraph (g) above had to expressly incorporate Act
3135 which provides for extrajudicial foreclosure. We cannot, therefore, escape the
conclusion that what STANDARD agreed to in respect to the possible foreclosure of
its mortgage was to subject the same to the provisions of Act 3135 should the PNB opt
to utilize said law instead of Republic Act 1300.
On the other hand, Act 3135, as amended by Act 4018, is of 1924 vintage. Its Section
6 very clearly governs the right of redemption in extrajudicial foreclosures thus:
Sec. 6. In an cases in which an extrajudicial sale is made under the special
power hereinbefore referred to, the debtor, his successors in interest or any judicial
creditor or judgment creditor of said debtor, or any person having a lien on the property
subsequent to the mortgage or deed of trust under which the property is sold, may
redeem the same at any time within the term of one year from and after the date of the
sale; and such redemption shall be governed by the provisions of sections four hundred
and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure,
in so far as these are not inconsistent with the provisions of this Act.
Sections four hundred sixty-four to four hundred sixty-six, inclusive, of the Code of
Civil Procedure, since the promulgation of the Rules of Court of 1940, became
Sections 29, 30 and 34 of Rule 39. The same sections were reiterated in the Revised
Rules of Court in July 1964.
From all the foregoing, We are of the considered opinion and so hold that
STANDARD'S/CITADEL'S period of redemption was up to March 10, 1976. 4 That
CITADEL filed its complaint to compel PNB to accept its redemption only on March
11, 1976 is of no moment. The unequivocal tender of redemption was made in the
letter of Francisco S. Corpus, its President, of March 5, 1976 accompanied by a
manager's check of the Rizal Commercial Banking Corporation a well known, big and
reputable banking institution, for the amount it believed it should pay as redemption
price. PNB rejected it on the sole and only ground that it considered the amount
insufficient. The Court, therefore, holds that the redemption was made on time, that is,
within one year (or even twelve months) from the date appearing as the date of the
registration of the certificate of sale.
How about the amount needed for such redemption?
On this score, PNB insists on p. 9 et. seq. of its brief on the applicability to this case
of "Section 25 of Presidential Decree No. 694, otherwise known as the new PNB
Charter" which provides:
Section 25. Right of Redemption of Foreclosed Property — Right of
Possession During Redemption Period — Within one year from the registration of the
foreclosure sale of real estate, the mortgagor shall have the right to redeem the property
by paying all claims of the Bank against him on the date of the sale including all the
costs and other expenses incurred by reason of the foreclosure sale and custody of the
property, as well as charges and accrued interests.
But P.D. 694 took effect only on May 8, 1975. PNB's counsel himself has, as already
mentioned above, taken the position that it was the old PNB Charter, Republic Act
1300, that was expressly made part of the contract. In other words, it was by virtue of
such contractual stipulation and not ex propio vigore that the provisions of the bank's
then current charter bound the mortgagor STANDARD. But prescinding from possible
legal flaw in such pose and that all provisions of the charter are enforceable and must
be read into all mortgages with the PNB as integral parts thereof, in this instant case,
the Court finds its hands inert and shackled in the face of the constitutional proscription
against the impairment of contracts. (Sec. 11, Art. IV, New Constitution) Stated
CIVIL LAW FULL CASE
otherwise, since the contract of mortgage herein was entered into under a specific law,
Republic Act 1300, even the principle that no law is unamendable nor unrepealable
cannot hold, when the subsequent legislative enactment, P.D. 694, would alter and
modify to the prejudice of any of the parties the terms of the contract under the aegis
of the prior law. Indisputably, the application of P.D. 694 to the mortgage herein
involved would violate the Constitution. Hence, it simply cannot apply.
Stated otherwise, by virtue of the provision of the mortgage contract precisely cited
by PNB, namely, its paragraph (g), quoted earlier, PNB had the contractually acquired
option to resort either to its Charter, Republic Act 1300 or to Act 3135. When it
foreclosed the mortgage at issue, it chose Act 3135. That was an option it freely
exercised without the least intervention of appellee. And it was exercised before P.D.
694 came into being. In fact, the foreclosure sales took place in 1974 yet. And so, to
make the redemption subject to a subsequent law would be obviously prejudicial to
the party exercising the right to redeem. Without considering the date the loan was
secured and the date of the mortgage contract, and taking into account only the dates
of the foreclosures and auction sales, it is quite obvious that any change in the law
governing redemption that would make it more difficult than under the law at the time
of the sale cannot be given retroactive effect. Under the terms of the mortgage contract,
the terms and conditions under which redemption may be exercised are deemed part
and parcel thereof whether the same be merely conventional or imposed by law. To
alter those terms in a manner prejudicial to the mortgagor or the person redeeming the
property as his successor-in-interest after the foreclosures and sales would definitely
come within the constitutional proscription against impairment of the obligations of
contracts.
Having thus come to the ineludible conclusion that Act 3135 and Sections 29 to 32 of
Rule 39 of the Rules of Court rather than P.D. 694 are the laws applicable to the right
of redemption invoked by appellee in this case, 5 it would appear that all that remains
for Us to do is to apply the said legal precepts. Pursuant to Section 30 of Rule 39, "the
judgment debtor — (or his successor-in-interest per Section 29, here Leticia Co,) may
redeem the property from the purchaser, (here PNB) at any time within twelve months
after the sale, on paying the purchaser the amount of his purchase, with one per centum
per month interest thereon in addition, up to the time of redemption, together with the
amount of any assessments or taxes which the purchaser may have paid thereon after
the purchase, and interest on such last named amount at the same rate; ..."
In this connection, lest it be argued that CITADEL did not include in its tender the
amount of assessments or taxes PNB might have paid before the redemption, His
Honor, We note that the trial judge, has pointed out that in spite of the requirement in
the certificate of sale issued by the sheriff that the purchaser or highest bidder submits
within 30 days immediately preceding the expiration of the period of redemption, an
appropriate statement of the amount of such assessments or taxes, PNB failed to
comply with such requirement, hence it would be unfair to fault CITADEL for the
non- inclusion thereof in its tender. PNB argues, however, that it did furnish CITADEL
on March 5, 1976 the required data. We note, however, that the statement of
P3,366,546.42 specified by PNB in its reply of March 5, 1976 is not clear enough to
show the details on taxes and assessments under discussion. In any event, considering
that as earlier pointed out by Us, there could be a possibility that March 5, 1976 should
be considered as the last day of redemption, the explanation of PNB is, at least in
equity, unavailing. There was no more time for CITADEL to have a breakdown of the
P3,366,546.42 to find out what items were included therein. Anyway, this discussion
is practically academic because in the manner We are resolving this case, this point
would be of no moment.
Before passing to another aspect of this case, it may not be amiss to mention here that
in Moran's Comments on the Rules of Court (p. 326-327, 1979 ed.), it is stated that
where the judgment debtor, which necessarily includes his successor-in-interest
(Section 29, a, Rule 39) validly tenders the necessary payment for the redemption and
the tender is refused, it is not necessary that it be followed by the deposit of the money
in court or elsewhere (Enage vs. Vda. de Escano, 38 Phil. 687) and no interest after
such tender is demandable on the redemption money. (Martinez vs. Campbell, 10 Phil.
626; Fabros vs. Agustin, 18 Phil. 336).
The jurisprudence cited by PNB are not applicable
CIVIL LAW FULL CASE
Even as We have so far focused Our discussion and resolution of the issues herein on
the pertinent statutory provisions, We have not really closed Our eyes to the
jurisprudence cited by PNB in its brief, four of which are worthy of mention, namely
Medina vs. PNB, 56 Phil. 655. Nepomuceno vs. RFC, G.R. No. L-14877, Nov.
23,1960; Perez vs. PNB, 17 SCRA 833 and DBP vs. Mirang 66 SCRA 141
The case of Perez, supra, did not involve a redemption in the sense that it is in issue in
this case. In fact, the point involved in the instant case is not even touched in the
syllabus thereof in SCRA. This is because what was fundamentally the problem
therein was whether or not it was obligatory on the part of the bank-mortgagee to
foreclose judicially the mortgage inasmuch as the mortgagor died. As the Court said,
"the main issue in this appeal is the application of Section 7, Rule 87 of the Rules of
1940 (now Section 7 of Rule 68), a reproduction of Section 708 of the Code of Civil
Procedure". Hence, anything said therein at issue may be deemed as obiter. If anything
in that opinion is relevant hereto, it is that portion thereof that justly and equitably
holds that from whatever amount should be payable to the mortgagee Bank, should be
deducted "the value of any rents and profits derived by the (said) bank from the
property in question". (at p. 840)
In the Nepomuceno case, supra, what confronted the Court was a question relative to
a mortgage with the Rehabilitation Finance Corporation (RFC for short, now the
Development Bank of the Philippines). The Court found no difficulty in not applying
Section 6 of Act 3135 because it found that there is in Section 31 of the Charter of the
RFC a provision basically similar to Section 25 of Presidential Decree 694, now being
invoked here by PNB. Naturally, the Court upheld the RFC's contention that the whole
amount of the mortgagor's indebtedness should be paid. But in the instant case, as
already discussed earlier, P.D. 694 came too late.
DBP vs. Mirang supra, follows in principle the Nepomuceno ruling that the special
provisions in the charter of DBP govern in matters of redemption of property acquired
by it in a foreclosure sale. So, We need not elucidate any further on its inapplicability
hereto.
It is the earlier case of Medina vs. PNB, supra, that nearly approximates the position
PNB is pressing on Us now, because in a portion of the opinion thereof, Chief Justice
Avenceña as correctly underlined by PNB in its brief, stated:
As we have indicated above, there is no question with regard to the plaintiffs'
right, as successors of the Manila Commercial Company, to repurchase the parcels
covered by the transfer certificates of title Nos. 137 and 139. The question is whether,
as the bank contends and the trial court has held, the redemption should be made by
paying to the bank the entire amount owned to it by the Manila Commercial Company.
The appellants contend that this redemption may be made by only reimbursing the
bank what it has paid for the sale made to it. In this respect we are also of the opinion
that the judgment appealed from is correct. (Page 655)
But this statement needs clarification. Towards the concluding portion of the opinion,
he explained that:
It will be remembered that the mortgage contract between the bank and the
Manila Commercial Company was executed on October 30, 1920, before the approval
of Act No. 3135 in March, 1924. If, before Act No. 3135 took effect, the Manila
Commercial Company had violated the contract, beyond all doubt the bank would
have been able to sell the mortgaged property, without the necessity of a judicial
action, and the sale thus made would carry the right of repurchase on the part of the
debtor through the payment of the entire amount of the debt.
When the bank's right to foreclose the mortgage of the Manila Commercial
Company accrued, Act No. 3135 was already in force. Of course, this law, being
general, did not affect the charter of the bank, which was a special law. Thus, when
the bank, in order to sell the mortgaged property extrajudicially, resorted to Act No.
3135, it did so merely to find a proceeding for the sale; but that action cannot be taken
to mean a waiver of its right to demand the payment of the whole debt before the
property can be redeemed. The record contains nothing to show that the bank made
this waiver of said right. (Pp 656-657)
CIVIL LAW FULL CASE
There is here an implication that in undertaking the foreclosure therein involved, the
PNB relied on Act 3135. This is not quite accurate, for in the opening paragraph of the
same opinion, it is stated that:
On October 30, 1920 the Manila Commercial Co. and La Yebana Co.
mortgaged four parcels of land with Torrens titles, described in the complaint, to the
Philippine National Bank, the first and fourth parcels being in the name of the La
Yebana Co. and the second and third in the name of the Manila Commercial Co. The
mortgage was given to secure the payment of P680,000 or for whatever amount the
Manila Commercial Co. might be indebted to the Philippine National Bank. One of
the clauses of the mortgage provides that in case of a violation by the Manila
Commercial Co. of any of the conditions of the contract the Philippine National Bank
may take possession of the mortgaged property and sell or dispose of it by public or
private sale, without first having to file a complaint or to give any notice, and at such
sale, if public, it may acquire for itself all or any of the parcels of land. (Page 651)
(Emphasis supplied)
Thus, it is to Our mind closer to the truth that it was by virtue of such contractual
clause, rather than Act 3135, even if the request to the sheriff did mention said Act
that PNB foreclosed. In any event, the Court did take into account that the mortgage
at issue in that case was executed before the approval of Act 3135 and observed that
without such Act, the right of the bank to full payment would have been indisputable.
This is the same principle of non-impairment of the contracts by subsequent legislative
action We have made reference to above in precluding the applicability hereto of P.D.
694.
On the minor issues
We are not impressed that PNB is really serious in its pose that the tender by manager's
check by CITADEL was inefficacious. For one thing, that obligation was waived when
in its letter of rejection, the bank did not invoke it. (Gregorio Araneta, Inc. vs. De
Paterno and Vidal, 91 Phil. 786) More importantly, this Court has already sanctioned
redemption by check. (Javellana vs. Mirasol, 40 Phil. 761)
Neither do We find any substantial weight in PNB's pose that the transfer or
conveyance of STANDARD'S right of redemption to CITADEL and the latter to
Leticia Co is not binding on it. In Lichauco vs. Olegario, et al., 43 Phil. 540, this Court
held that "whether or not ... an execution debtor was legally authorized to sell his right
of redemption, is a question already decided by this Court in the affirmative in
numerous decisions on the precepts of Sections 463 and 464 and other sections related
thereto, of the Code of Civil Procedure. " (The mentioned provisions are carried over
in Rule 39 of the Revised Rules of Court.) That the transfers or con. conveyances in
question were not registered is of miniscule significance, there being no showing that
PNB was damaged or could be damaged by such omission, When CITADEL made its
tender on May 5, 1976, PNB did not question the personality of CITADEL at all. It is
now too late and purely technical to raise such an innocuous failure to comply with
Article 1625 of the Civil Code.
The foregoing discussion inexorably points to the conclusion that the price of
redemption of P1,621,970.00 tendered by CITADEL on March 5, 1976 was the correct
amount. Since PNB refused to allow the redemption thus legally tendered, applying
the law strictly, it would stand to lose P1,744,576.42 of what it claims was the total
indebtedness or outstanding obligation of CITADEL as of March 11, 1976.
To avoid this loss, PNB invokes, as already stated above, P.D. No. 694, but We have
also pointed out earlier that to apply said decree would result in the impairment of the
contractual obligation of CITADEL, which cannot be allowed under the Constitution.
However, We are persuaded that all such considerations would render the result of this
case short of what appears to be substantial justice in the light of the situation on hand.
It strikes Us as rather unconscionable that by a literal application of the law and
perhaps due to a mistake in the amount of the bid made by PNB, 6 the bank would not
get full satisfaction of its credit. Indeed, there would be unjust enrichment on the part
of the debtor- mortgagor in such an eventuality. Our sense of justice cannot permit
such inequitous advantage.
With this point in mind, We deem it fairer and so hold that considering the unique
factual milieu of this case, Articles 22 and 2142 of the Civil Code should be the
guideposts of Our decision here. Said articles provide:
CIVIL LAW FULL CASE
ART. 22. Every person who through an act of performance by another, or any
other means, acquires or comes into possession of something at the expense of the
latter without just or legal ground, shall return the same to him.
xxx xxx xxx
ART. 2142. 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.
Although the report of the Code Commission states that:
Another rule is expressed in article 22 which compels the return of a thing
acquired "without just or legal ground." This provision embodies the doctrine that no
person should unjustly enrich himself at the expense of another, which has been one
of the mainstays of every legal system for centuries. It is most needful that this ancient
principle be clearly and specifically consecrated in the proposed Civil Code to the end
that in cases not foreseen by the lawmaker, no one may unjustly benefit himself to the
prejudice of another. The German Civil Code has a similar provision (art. 812).
it may be said that whatever of the principle of unjust enrichment may not be covered
by Article 22, Article 2142 makes its enhancement in this jurisdiction most
comprehensive
Consequently, it is but just and proper that PNB should be paid the full amount of
P3,366,546.42 without any interest as of March 11, 1976, when it refused a redemption
legally and validly tendered. On the other hand, the amount of P1,621,970.00 tendered
by CITADEL on March 5, 1976 and which was deposited in a savings account,
drawing interest apparently less than 12% p.a., in the name of PNB by order of the
trial court should be computed to have earned legal interest or 12% p.a., compounded
annually, since March 11, 1976, provided however that should such amount including
the compounded interest at 12% p.a. so earned be less than P3,366,546.42, petitioner
herein should pay PNB such difference, and provided, on the other hand, that with this
arrangement, PNB does not have to account to CITADEL/LETICIA CO for any of the
rentals it had earned from the time it took possession of the property. In the final
analysis, instead of PNB losing P1,744,576.42, under strict technical legal reasoning,
as explained above, applying hereto the principle of unjust enrichment, which We
deem in the peculiar circumstances at this instant case to be the fairest way of resolving
this controversy, it would still be paid by petitioner a certain amount, not to mention
what must be quite substantial and considerable, the rentals the said bank it has earned,
which it does not have to account for.
In closing, We may add that in Escano, supra, this Court laid down as a policy that
"redemptions are looked upon with favor, and when an injury is to follow, a liberal
construction will be given to our redemption laws to the end that the property of the
debtor may pay as many of the debtor's liabilities", PNB having foreclosed on the
Baguio properties and the chattels of STANDARD for what appears could have been
a fairer price, it is but in consonance with the Escano policy that the redemption herein
involved be allowed on the basis of the injunction against unjust enrichment. 7 We
may add here the observation, taught by common business experience, that when a
bank grants a loan, secured by any collateral, what is of uppermost consideration to
such lender is the borrower's capacity to pay according to the terms stipulated, and not
really the acquisition of the collateral, if only to maintain the bank's liquidity position
as conveniently as possible. Acquired assets generally add to liquidity problems of
banks. The foreclosure of the security is a measure of last resort, hence when by the
exercise of the right of redemption, the bank can recover the money it has loaned,
nothing could be more proper than to allow the borrower to retain his property. Of
course, peculiar instances are naturally excepted. That is why this decision cannot be
invoked as a precedent for other parties not exactly similarly situated as the appellee
in this case. Should there be any thought that Our resolution of this case is not strictly
according to legal principles, let everyone be reminded that this Court has inherent
equity jurisdiction it can always exercise in settings attended by unusual circumstances
to prevent manifest injustice that could result from bare technical adherence to the
letter of the law and unprecise jurisprudence under it.
CIVIL LAW FULL CASE
WHEREFORE, the judgment of the trial court against the Philippine National Bank
herein on appeal is hereby modified and another one is hereby rendered in favor of the
said defendant-appellant bank in accordance with the formula herein above stated, and,
accordingly, upon payment by LETICIA CO of the amount due it pursuant to the
above computation, PNB is hereby ordered to transfer the title to the property in
question to LETICIA CO. This payment must be made within ten (10) days from the
finality of this judgment.
No costs.
____________________________________________________________________
[G.R. No. 115158. September 5, 1997]
EMILIA M. URACA, CONCORDIA D. CHING and ONG SENG, represented
by ENEDINO H. FERRER, Petitioners, v. COURT OF APPEALS, JACINTO
VELEZ, JR., CARMEN VELEZ TING, AVENUE MERCHANDISING, INC.,
FELIX TING AND ALFREDO GO, Respondents.
DECISION
PANGANIBAN, J.:
Novation is never presumed; it must be sufficiently established that a valid new
agreement or obligation has extinguished or changed an existing one. The registration
of a later sale must be done in good faith to entitle the registrant to priority in
ownership over the vendee in an earlier sale.
Statement of the Case
These doctrines are stressed by this Court as it resolves the instant petition challenging
the December 28, 1993 Decision1 of Respondent Court of Appeals2 in CA-G.R. SP
No. 33307, which reversed and set aside the judgment of the Regional Trial Court of
Cebu City, Branch 19, and entered a new one dismissing the petitioners complaint.
The dispositive portion of the RTC decision reads:3
WHEREFORE, judgment is hereby rendered:
1) declaring as null and void the three (3) deeds of sale executed by the Velezes to
Felix C. Ting, Manuel Ting and Alfredo Go;
2) ordering Carmen Velez Ting and Jacinto M. Velez, Jr. to execute a deed of absolute
sale in favor of Concordia D. Ching and Emilia M. Uraca for the properties in question
for P1,400,000.00, which sum must be delivered by the plaintiffs to the Velezes
immediately after the execution of said contract;
3) ordering Carmen Velez Ting and Jacinto M. Velez, Jr. to reimburse Felix C. Ting,
Manuel C. Ting and Alfredo Go whatever amount the latter had paid to the former;
4) ordering Felix C. Ting, Manuel C. Ting and Alfredo Go to deliver the properties in
question to the plaintiffs within fifteen (15) days from receipt of a copy of this
decision;
5) ordering all the defendants to pay, jointly and severally, the plaintiffs the sum of
P20,000.00 as attorneys fees.
SO ORDERED.
The Antecedent Facts
The facts narrated by the Court of Appeals are as follows:4
The Velezes (herein private respondents) were the owners of the lot and commercial
building in question located at Progreso and M.C. Briones Streets in Cebu City.
Herein (petitioners) were the lessees of said commercial building.5
CIVIL LAW FULL CASE
On July 8, 1985, the Velezes through Carmen Velez Ting wrote a letter to herein
(petitioners) offering to sell the subject property for P1,050,000.00 and at the same
time requesting (herein petitioners) to reply in three days.
On July 10, 1985, (herein petitioners) through Atty. Escolastico Daitol sent a reply-
letter to the Velezes accepting the aforesaid offer to sell.
On July 11, 1985, (herein petitioner) Emilia Uraca went to see Carmen Ting about the
offer to sell but she was told by the latter that the price was P1,400,000.00 in cash or
managers check and not P1,050,000.00 as erroneously stated in their letter-offer after
some haggling. Emilia Uraca agreed to the price of P1,400,000.00 but counter-
proposed that payment be paid in installments with a down payment of P1,000,000.00
and the balance of P400,000 to be paid in 30 days. Carmen Velez Ting did not accept
the said counter-offer of Emilia Uraca although this fact is disputed by Uraca.
No payment was made by (herein petitioners) to the Velezes on July 12, 1985 and July
13, 1985.
On July 13, 1985, the Velezes sold the subject lot and commercial building to the
Avenue Group (Private Respondent Avenue Merchandising Inc.) for P1,050,000.00
net of taxes, registration fees, and expenses of the sale.
At the time the Avenue Group purchased the subject property on July 13, 1985 from
the Velezes, the certificate of title of the said property was clean and free of any
annotation of adverse claims or lis pendens.
On July 31, 1985 as aforestated, herein (petitioners) filed the instant complaint against
the Velezes.
On August 1, 1985, (herein petitioners) registered a notice of lis pendens over the
property in question with the Office of the Register of Deeds.6
On October 30, 1985, the Avenue Group filed an ejectment case against (herein
petitioners) ordering the latter to vacate the commercial building standing on the lot in
question.
Thereafter, herein (petitioners) filed an amended complaint impleading the Avenue
Group as new defendants (after about 4 years after the filing of the original complaint).
The trial court found two perfected contracts of sale between the Velezes and the
petitioners, involving the real property in question. The first sale was for
P1,050,000.00 and the second was for P1,400,000.00. In respect to the first sale, the
trial court held that [d]ue to the unqualified acceptance by the plaintiffs within the
period set by the Velezes, there consequently came about a meeting of the minds of
the parties not only as to the object certain but also as to the definite consideration or
cause of the contract.7 And even assuming arguendo that the second sale was not
perfected, the trial court ruled that the same still constituted a mere modificatory
novation which did not extinguish the first sale. Hence, the trial court held that the
Velezes were not free to sell the properties to the Avenue Group.8 It also found that
the Avenue Group purchased the property in bad faith.9
Private respondents appealed to the Court of Appeals. As noted earlier, the CA found
the appeal meritorious. Like the trial court, the public respondent held that there was
a perfected contract of sale of the property for P1,050,000.00 between the Velezes and
herein petitioners. It added, however, that such perfected contract of sale was
subsequently novated. Thus, it ruled: Evidence shows that that was the original
contract. However, the same was mutually withdrawn, cancelled and rescinded by
novation, and was therefore abandoned by the parties when Carmen Velez Ting raised
the consideration of the contract [by] P350,000.00, thus making the price
P1,400,000.00 instead of the original price of P1,050,000.00. Since there was no
agreement as to the second price offered, there was likewise no meeting of minds
between the parties, hence, no contract of sale was perfected.10 The Court of Appeals
added that, assuming there was agreement as to the price and a second contract was
perfected, the later contract would be unenforceable under the Statute of Frauds. It
further held that such second agreement, if there was one, constituted a mere promise
to sell which was not binding for lack of acceptance or a separate consideration.11
The Issues
Petitioners allege the following errors in the Decision of Respondent Court:
CIVIL LAW FULL CASE
I causes as all other obligations, x x x. Article 1231 of the same Code states that novation
Since it ruled in its decision that there was no meeting of the minds on the
second price offered (P1,400,000.00), hence no contract of sale was perfected, the
Court of Appeals erred in not holding that the original written contract to buy and sell
for P1,050,000.00 the Velezes property continued to be valid and enforceable pursuant
to Art. 1279 in relation with Art. 1479, first paragraph, and Art. 1403, subparagraph 2
(e) of the Civil Code.
II
The Court of Appeals erred in not ruling that petitioners have better rights to
buy and own the Velezes property for registering their notice of lis pendens ahead of
the Avenue Groups registration of their deeds of sale taking into account Art. 1544,
2nd paragraph, of the Civil Code.1
The Courts Ruling
The petition is meritorious.
First Issue: No Extinctive Novation
The lynchpin of the assailed Decision is the public respondents conclusion that the
sale of the real property in controversy, by the Velezes to petitioners for
P1,050,000.00, was extinguished by novation after the said parties negotiated to
increase the price to P1,400,000.00. Since there was no agreement on the sale at the
increased price, then there was no perfected contract to enforce. We disagree.
The Court notes that the petitioners accepted in writing and without qualification the
Velezes written offer to sell at P1,050,000.00 within the three-day period stipulated
therein. Hence, from the moment of acceptance on July 10, 1985, a contract of sale
was perfected since undisputedly the contractual elements of consent, object certain
and cause concurred.13 Thus, this question is posed for our resolution: Was there a
novation of this perfected contract?
Article 1600 of the Civil Code provides that (s)ales are extinguished by the same
is one of the ways to wipe out an obligation. Extinctive novation requires: (1) the
existence of a previous valid obligation; (2) the agreement of all the parties to the new
contract; (3) the extinguishment of the old obligation or contract; and (4) the validity
of the new one.14 The foregoing clearly show that novation is effected only when a
new contract has extinguished an earlier contract between the same parties. In this
light, novation is never presumed; it must be proven as a fact either by express
stipulation of the parties or by implication derived from an irreconcilable
incompatibility between old and new obligations or contracts.15 After a thorough
review of the records, we find this element lacking in the case at bar.
As aptly found by the Court of Appeals, the petitioners and the Velezes did not reach
an agreement on the new price of P1,400,000.00 demanded by the latter. In this case,
the petitioners and the Velezes clearly did not perfect a new contract because the
essential requisite of consent was absent, the parties having failed to agree on the terms
of the payment. True, petitioners made a qualified acceptance of this offer by
proposing that the payment of this higher sale price be made by installment, with
P1,000,000.00 as down payment and the balance of P400,000.00 payable thirty days
thereafter. Under Article 1319 of the Civil Code,16 such qualified acceptance
constitutes a counter-offer and has the ineludible effect of rejecting the Velezes offer.17
Indeed, petitioners counter-offer was not accepted by the Velezes. It is well-settled
that (a)n offer must be clear and definite, while an acceptance must be unconditional
and unbounded, in order that their concurrence can give rise to a perfected contract.18
In line with this basic postulate of contract law, a definite agreement on the manner of
payment of the price is an essential element in the formation of a binding and
enforceable contract of sale.19 Since the parties failed to enter into a new contract that
could have extinguished their previously perfected contract of sale, there can be no
novation of the latter. Consequently, the first sale of the property in controversy, by
the Velezes to petitioners for P1,050,000.00, remained valid and existing.
In view of the validity and subsistence of their original contract of sale as previously
discussed, it is unnecessary to discuss public respondents theses that the second
CIVIL LAW FULL CASE
agreement is unenforceable under the Statute of Frauds and that the agreement
constitutes a mere promise to sell.
Second Issue: Double Sale of an Immovable
The foregoing holding would have been simple and straightforward. But Respondent
Velezes complicated the matter by selling the same property to the other private
respondents who were referred to in the assailed Decision as the Avenue Group.
Before us therefore is a classic case of a double sale -- first, to the petitioner; second,
to the Avenue Group. Thus, the Court is now called upon to determine which of the
two groups of buyers has a better right to said property.
Article 1544 of the Civil Code provides the statutory solution:
xxx xxx xxx
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in the possession; and, in the absence thereof, to the person who presents
the oldest title, provided there is good faith.
Under the foregoing, the prior registration of the disputed property by the second buyer
does not by itself confer ownership or a better right over the property. Article 1544
requires that such registration must be coupled with good faith. Jurisprudence teaches
us that (t)he governing principle is primus tempore, potior jure (first in time, stronger
in right). Knowledge gained by the first buyer of the second sale cannot defeat the first
buyers rights except where the second buyer registers in good faith the second sale
ahead of the first, as provided by the Civil Code. Such knowledge of the first buyer
does not bar her from availing of her rights under the law, among them, to register first
her purchase as against the second buyer. But in converso knowledge gained by the
second buyer of the first sale defeats his rights even if he is first to register the second
sale, since such knowledge taints his prior registration with bad faith This is the price
exacted by Article 1544 of the Civil Code for the second buyer being able to displace
the first buyer; that before the second buyer can obtain priority over the first, he must
show that he acted in good faith throughout (i.e. in ignorance of the first sale and of
the first buyers rights) ---- from the time of acquisition until the title is transferred to
him by registration or failing registration, by delivery of possession.20 (Emphasis
supplied)
After a thorough scrutiny of the records of the instant case, the Court finds that bad
faith tainted the Avenue Groups purchase on July 13, 1985 of the Velezes real property
subject of this case, and the subsequent registration thereof on August 1, 1995. The
Avenue Group had actual knowledge of the Velezes prior sale of the same property to
the petitioners, a fact antithetical to good faith. For a second buyer like the Avenue
Group to successfully invoke the second paragraph, Article 1544 of the Civil Code, it
must possess good faith from the time of the sale in its favor until the registration of
the same. This requirement of good faith the Avenue Group sorely failed to meet. That
it had knowledge of the prior sale, a fact undisputed by the Court of Appeals, is
explained by the trial court thus:
The Avenue Group, whose store is close to the properties in question, had
known the plaintiffs to be the lessee-occupants thereof for quite a time. Felix Ting
admitted to have a talk with Ong Seng in 1983 or 1984 about the properties. In the
cross-examination, Manuel Ting also admitted that about a month after Ester
Borromeo allegedly offered the sale of the properties Felix Ting went to see Ong Seng
again. If these were so, it can be safely assumed that Ong Seng had consequently told
Felix about plaintiffs offer on January 11, 1985 to buy the properties for P1,000,000.00
and of their timely acceptance on July 10, 1985 to buy the same at P1,050,000.00.
The two aforesaid admissions by the Tings, considered together with Uracas positive
assertion that Felix Ting met with her on July 11th and who was told by her that the
plaintiffs had transmitted already to the Velezes their decision to buy the properties at
P1,050,000.00, clinches the proof that the Avenue Group had prior knowledge of
plaintiffs interest. Hence, the Avenue Group defendants, earlier forewarned of the
CIVIL LAW FULL CASE
plaintiffs prior contract with the Velezes, were guilty of bad faith when they proceeded
to buy the properties to the prejudice of the plaintiffs.21
The testimony of Petitioner Emilia Uraca supports this finding of the trial court. The
salient portions of her testimony follow:
BY ATTY. BORROMEO: (To witness)
Q According to Manuel Ting in his testimony, even if they know, referring to the
Avenue Group, that you were tenants of the property in question and they were
neighbors to you, he did not inquire from you whether you were interested in buying
the property, what can you say about that?
A It was Felix Ting who approached me and asked whether I will buy the property,
both the house and the land and that was on July 10, 1985.
ATTY BORROMEO: (To witness)
Q What was your reply, if any?
A Yes, sir, I said we are going to buy this property because we have stayed for a long
time there already and we have a letter from Carmen Ting asking us whether we are
going to buy the property and we have already given our answer that we are willing to
buy.
COURT: (To witness)
Q What do you mean by that, you mean you told Felix Ting and you showed him that
letter of Carmen Ting?
WITNESS:
A We have a letter of Carmen Ting where she offered to us for sale the house and lot
and I told him that I have already agreed with Concordia Ching, Ong Seng and my self
that we buy the land. We want to buy the land and the building.22
We see no reason to disturb the factual finding of the trial court that the Avenue Group,
prior to the registration of the property in the Registry of Property, already knew of
the first sale to petitioners. It is hornbook doctrine that findings of facts of the trial
court, particularly when affirmed by the Court of Appeals, are binding upon this
Court23 save for exceptional circumstances24 which we do not find in the factual milieu
of the present case. True, this doctrine does not apply where there is a variance in the
factual findings of the trial court and the Court of Appeals. In the present case, the
Court of Appeals did not explicitly sustain this particular holding of the trial court, but
neither did it controvert the same. Therefore, because the registration by the Avenue
Group was in bad faith, it amounted to no inscription at all. Hence, the third and not
the second paragraph of Article 1544 should be applied to this case. Under this
provision, petitioners are entitled to the ownership of the property because they were
first in actual possession, having been the propertys lessees and possessors for decades
prior to the sale.
Having already ruled that WHEREFORE, the petition is GRANTED. The assailed
Decision of the Court of Appeals is hereby SET ASIDE and the dispositive portion of
the trial courts decision dated October 19, 1990 is REVIVED with the following
MODIFICATION -- the consideration to be paid under par. 2 of the disposition is
P1,050,000.00 and not P1,400,000.00. No Costs.
SO ORDERED.
____________________________________________________________________
GR No. 126712, Apr 14, 1999
LEONIDA C. QUINTO v. PEOPLE 365 Phil. 259
CIVIL LAW FULL CASE
VITUG, J.:
Assailed in this Petition for Review on Certiorari under Rule 45 of the Rules of Court
is the decision of the Court of Appeals, promulgated on 27 September 1996, in People
of the Philippines vs. Leonida Quinto y Calayan, docketed CA-G.R. CR No. 16567,
which has affirmed the decision of Branch 157 of the Regional Trial Court (RTC),
National Capital Judicial Region, Branch 157, Pasig City, finding Leonida Quinto y
Calayan guilty beyond reasonable doubt of the crime of Estafa.
Leonida Quinto y Calayan, herein petitioner, was indicted for the crime of estafa under
Article 315, paragraph 1(b), of the Revised Penal Code, in an information which read:
"That on or about the 23rd day of March 1977, in the Municipality of Makati, Metro
Manila, Philippines and within the jurisdiction of this Honorable Court, the above-
named accused, received in trust from one Aurelia Cariaga the following pieces of
jewelry, to wit:
One (1) set of marques with briliantitos
valued at .............................................P17,500.00
One (1) solo ring (2 karats & 30 points)
valued at .............................................P16,000.00
One (1) diamond ring (rosetas)
valued at .............................................P 2,500.00
with a total value of P36,000.00 for the purpose of selling the same on commission
basis and with the express obligation on the part of the accused to turn over the
proceeds of sale thereof, or to return the said jewelries (sic), if not sold, five (5) days
after receipt thereof, but the accused once in possession of the jewelries (sic), far from
complying with her obligation, with intent of gain, gave abuse of confidence and to
defraud said Aurelia Cariaga, did then and there wilfully, unlawfully and feloniously
misappropriate, misapply and convert to her own personal use and benefit the said
jewelries (sic) and/or the proceeds of sale or to return the pieces of jewelry, to the
damage and prejudice of the said Aurelia Cariaga in the aforementioned amount of P
36,000.00.
"Contrary to law "[1]
Upon her arraignment on 28 March 1978, petitioner Quinto pleaded not guilty; trial
on the merits thereupon ensued.
According to the prosecution, on or about 23 March 1977, Leonida went to see Aurelia
Cariaga (private complainant) at the latter's residence in Makati. Leonida asked
Aurelia to allow her have some pieces of jewelry that she could show to prospective
buyers. Aurelia acceded and handed over to Leonida one (1) set of marques with
briliantitos worth P17,500.00, one (1) solo ring of 2.30 karats worth P16,000.00 and
one (1) rosetas ring worth P2,500.00. Leonida signed a receipt (Exhibit "A") therefor,
thus:
"RECEIPT
Pinatutunayan ko na tinanggap ko kay Gng. Aurelia B. Cariaga (ang) mga alahas na
nakatala sa ibaba, upang aking ipagbili sa pamamagitan ng BIGAY PALA o
Commission at Kaliwaan lamang. Ako'y hindi pinahihintulutan (na) ipagbili ang mga
ito ng Pautang. Pinananagutan ko na ang mga alahas na ito ay hindi ko ipagkakaloob
o ipagkakatiwala sa kanino pa man upang ilagak o maipagbili nila, at ang mga ito ay
ako ang magbibili sa ilalim ng aking pangangasiwa at pananagutan sa halagang
nakatala sa ibaba. At aking isasauli ang mga hindi na maipagbili sa loob ng 5 days
(sic) araw mula sa petsa nito o sa kahilingan, na nasa mabuti at malinis na kalagayan
katulad ng tanggapin ko sa petsang ito.
MGA URI NG ALAHAS
1 set marques with titos 17,500.
1 solo 2 karats & 30 points 16,000.
1 ring Rosetas brill 2,500.
Makati, March 23, 1977
CIVIL LAW FULL CASE
(Sgd.)"[2]
When the 5-day period given to her had lapsed, Leonida requested for and was granted
additional time within which to vend the items. Leonida failed to conclude any sale
and, about six (6) months later, Aurelia asked that the pieces of jewelry be returned.
She sent to Leonida a demand letter which the latter ignored. The inexplicable delay
of Leonida in returning the items spurred the filing of the case for estafa against her.
The defense proffered differently. In its version, the defense sought to prove that
Leonida was engaged in the purchase and sale of jewelry. She was used to buying
pieces of jewelry from a certain Mrs. Antonia Ilagan who later introduced her
(Leonida) to Aurelia. Sometime in 1975, the two, Aurelia and Leonida, started to
transact business in pieces of jewelry among which included a solo ring worth
P40,000.00 which was sold to Mrs. Camacho who paid P20,000.00 in check and the
balance of P20,000.00 in installments later paid directly to Aurelia. The last
transaction Leonida had-with Mrs. Camacho involved a "marques" worth P16,000.00
and a ring valued at P4,000.00. Mrs. Camacho was not able to pay the due amount in
full and left a balance of P13,000.00. Leonida brought Mrs. Camacho to Aurelia who
agreed to allow Mrs. Camacho to pay the balance in installments. Leonida was also
able to sell for Aurelia a 2-karat diamond ring worth P17,000.00 to Mrs. Concordia
Ramos who, unfortunately, was unable to pay the whole amount. Leonida brought
Mrs. Ramos to Aurelia and they talked about the terms of payment. As first payment,
Mrs. Ramos gave Leonida a ring valued at P3,000.00. The next payment made by her
was P5,000.00. Leonida herself then paid P2,000.00.
The RTC, in its 25th January 1993 decision, found Leonida guilty beyond reasonable
doubt of the crime of estafa and sentenced her to suffer the penalty of imprisonment
of seven (7) years and one (1) day of prision mayor as minimum to nine (9) years of
prision mayor as maximum and to indemnify private complainant in the amount of
P36,000.00.
Leonida interposed an appeal to the Court of Appeals which affirmed, in its 27th
September 1996 decision, the RTC's assailed judgment.
The instant petition before this Court would have it that the agreement between
petitioner and private complainant was effectively novated when the latter consented
to receive payment on installments directly from Mrs. Camacho and Mrs. Ramos.
The petition is bereft of merit.
Novation, in its broad concept, may either be extinctive or modificatory. It is
extinctive when an old obligation is terminated by the creation of a new obligation that
takes the place of the former; it is merely modificatory when the old obligation subsists
to the extent it remains compatible with the amendatory agreement. An extinctive
novation results either by changing the object or principal conditions (objective or
real), or by substituting the person of the debtor or subrogating a third person in the
rights of the creditor (subjective or personal).[3] Under this mode, novation would
have dual functions - one to extinguish an existing obligation, the other to substitute a
new one in its place[4] - requiring a conflux of four essential requisites: (1) a previous
valid obligation; (2) an agreement of all parties concerned to a new contract; (3) the
extinguishment of the old obligation; and (4) the birth of a valid new obligation.[5]
Novation is never presumed,[6] and the animus novandi, whether totally or partially,
must appear by express agreement of the parties, or by their acts that are too clear and
unequivocal to be mistaken.[7]
The extinguishment of the old obligation by the new one is a necessary element of
novation which may be effected either expressly or impliedly.[8] The term "expressly"
means that the contracting parties incontrovertibly disclose that their object in
executing the new contract is to extinguish the old one.[9] Upon the other hand, no
specific form is required for an implied novation,[10] and all that is prescribed by law
would be an incompatibility between the two contracts. While there is really no hard
and fast rule to determine what might constitute to be a sufficient change that can bring
about novation, the touchstone for contrariety, however, would be an irreconcilable
incompatibility between the old and the new obligations.[11]
CIVIL LAW FULL CASE
There are two ways which could indicate, in fine, the presence of novation and thereby
produce the effect of extinguishing an obligation by another which substitutes the
same. The first is when novation has been explicitly stated and declared in unequivocal
terms. The second is when the old and the new obligations are incompatible on every
point. The test of incompatibility is whether or not the two obligations can stand
together, each one having its independent existence. If they cannot, they are
incompatible and the latter obligation novates the first.[12] Corollarily, changes that
breed incompatibility must be essential in nature and not merely accidental. The
incompatibility must take place in any of the essential elements of the obligation, such
as its object, cause or principal conditions thereof; otherwise, the change would be
merely modificatory in nature and insufficient to extinguish the original obligation.
The changes alluded to by petitioner consists only in the manner of payment. There
was really no substitution of debtors since private complainant merely acquiesced to
the payment but did not give her consent[13] to enter into a new contract. The appellate
court observed:
"Appellant, however, insists that their agreement was novated when complainant
agreed to be paid directly by the buyers and on installment basis. She adds that her
liability is merely civil in nature.
"We are unimpressed.
"It is to remembered that one of the buyers, Concordia Ramos, was not presented to
testify on the alleged aforesaid manner of payment.
"The acceptance by complainant of partial payment tendered by the buyer, Leonor
Camacho, does not evince the intention of the complainant to have their agreement
novated. It was simply necessitated by the fact that, at that time, Camacho had
substantial accounts payable to complainant, and because of the fact that appellant
made herself scarce to complainant. (TSN, April 15, 1981, 31-32) Thus, to obviate the
situation where complainant would end up with nothing, she was forced to receive the
tender of Camacho. Moreover, it is to be noted that the aforesaid payment was for the
purchase, not of the jewelry subject of this case, but of some other jewelry subject of
a previous transaction. (Ibid. June 8, 1981, 10-11)"[14]
There are two forms of novation by substituting the person of the debtor, depending
on whose initiative it comes from, to wit: expromision and delegacion. In the former,
the initiative for the change does not come from the debtor and may even be made
without his knowledge. Since a third person would substitute for the original debtor
and assume the obligation, his consent and that of the creditor would be required. In
the latter, the debtor offers, and the creditor accepts, a third person who consents to
the substitution and assumes the obligation, thereby releasing the original debtor from
the obligation, here, the intervention and the consent of all parties thereto would
perforce be necessary.[15] In either of these two modes of substitution, the consent of
the creditor, such as can be seen, is an indispensable requirement.[16]
It is thus easy to see why Cariaga's acceptance of Ramos and Camacho's payment on
installment basis cannot be construed as a case of either expromision or delegacion
sufficient to justify the attendance of extinctive novation. Not too uncommon is when
a stranger to a contract agrees to assume an obligation; and while this may have the
effect of adding to the number of persons liable, it does not necessarily imply the
extinguishment of the liability of the first debtor.[17] Neither would the fact alone that
the creditor receives guaranty or accepts payments from a third person who has
agreed to assume the obligation, constitute an extinctive novation absent an
agreement that the first debtor shall be released from responsibility.[18]
Petitioner's reliance on Candida Mariano vs. People[19] is misplaced. The factual
milieu in Mariano would indicate a clear intention on the part of the parties to release
the accused from her responsibility as an agent and for her to instead assume the
obligation of a guarantor. Unfortunately for petitioner in the case at bar, the factual
findings of both the trial court and the appellate court prove just the opposite which is
that there has never been any animus novandi between or among the parties.
Article 315 of the Revised Penal Code defines estafa and penalizes any person who
shall defraud another by "misappropriating or converting, to the prejudice of another,
money, goods, or any other personal property received by the offender in trust or on
CIVIL LAW FULL CASE
commission, or for administration, or under any other obligation involving the duty to
make delivery of or to return the same, even though such obligation be totally or
partially guaranteed by a bond; or by denying having received such money, goods, or
other property." It is axiomatic that the gravamen of the offense is the appropriation
or conversion of money or property received to the prejudice of the owner. The terms
"convert" and "misappropriate" have been held to connote "an act of using or disposing
of another's property as if it were one's own or devoting it to a purpose or use different
from that agreed upon." The phrase, 'to misappropriate to one's own use" has been said
to include "not only conversion to one's personal advantage, but also every attempt to
dispose of the property of another without right."[20] Verily, the sale of the pieces of
jewelry on installments in contravention of the explicit terms of the authority granted
to her in Exhibit "A" (supra) is deemed to be one of conversion. Thus, neither the
theory of "delay in the fulfillment of commission" nor that of novation posed by
petitioner, can avoid the incipient criminal liability. In People vs. Nery,[21] this Court
held:
"It may be observed in this regard that novation is not one of the means
recognized by the Penal Code whereby criminal liability can be extinguished; hence,
the role of novation may only be either to prevent the rise of criminal liability or to
cast doubt on the true nature of the original basic transaction, whether or not it was
such that its breach would not give rise to penal responsibility ..."
The criminal liability for estafa already committed is then not affected by the
subsequent novation of contract, for it is a public offense which must be prosecuted
and punished by the State in its own conation.[22]
Finally, this Court fails to see any reversible error, let alone any grave abuse of
discretion, in the appreciation of the evidence by the Court of Appeals which, in fact,
hews with those of the trial court. Indeed, under the circumstances, this Court must be
deemed bound by the factual findings of those courts.
Article 315, 1st paragraph, of the Revised Penal Code, as amended by Presidential
Decree No. 818, provides that the penalty of "prision correccional in its maximum
period to prison mayor in its minimum period, if the amount of the fraud is over 12,000
but does not exceed 22,000 pesos, and if such amount exceeds the latter sum, the
penalty provided in this paragraph shall be imposed in its maximum period, adding
one year for each additional 10,000 pesos; but the total penalty which may be imposed
shall not exceed twenty years. In such case, and in connection with the accessory
penalties which may be imposed and for the purpose of the other provisions of this
Code, the penalty shall be termed prision mayor or reclusion temporal, as the case
may be."
In the leading case of People vs. Gabres[23] this Court ruled:
"Under the Indeterminate Sentence Law, the maximum term of the penalty shall be
'that which, in view of the attending circumstances, could be properly imposed' under
the Revised Penal Code, and the minimum shall be 'within the range of the penalty
next lower to that prescribed' for the offense. The penalty next lower should be based
on the penalty prescribed by the Code for the offense, without first considering any
modifying circumstance attendant to the commission of the crime. The determination
of the minimum penalty is left by law to the sound discretion of the court and it can be
anywhere within the range of the penalty next lower without any reference to the
periods into which it might be subdivided. The modifying circumstances are
considered only in the imposition of the maximum term of the indeterminate sentence.
"The fact that the amounts involved in the instant case exceed P22,000.00 should not
be considered in the initial determination of the indeterminate penalty; instead, the
matter should be so taken as analogous to modifying circumstances in the imposition
of the maximum term of the full indeterminate sentence. This interpretation of the law
accords with the rule that penal laws should be construed in favor of the accused. Since
the penalty prescribed by law for the estafa charge against accused-appellant is prision
correccional maximum to prision mayor minimum, the penalty next lower would then
be prision correccional minimum to medium. Thus, the minimum term of the
indeterminate sentence should be anywhere within six (6) months and one (1) day to
four (4) years and two (2) months while the maximum term of the indeterminate
sentence should at least be six (6) years and one (1) day because the amounts involved
exceeded P22,000.00, plus an additional one (1) year for each additional
P10,000.00."[24]
CIVIL LAW FULL CASE
The penalty imposed by the trial court, affirmed by the appellate court, should
accordingly be modified.
WHEREFORE, the assailed decision of the Court of Appeals is AFFIRMED except
that the imprisonment term is MODIFIED by now sentencing petitioner to an
indeterminate penalty of from two (2) years, eight (8) months and one (1) day of prison
correccional to seven (7) years and one (1) day of prision mayor. The civil liability of
appellant for P36,000.00 in favor of private complainant is maintained. Costs against
petitioner.
SO ORDERED.
____________________________________________________________________
GR No. 99398, Jan 26, 2001
CHESTER BABST v. CA +
403 Phil. 244
YNARES-SANTIAGO, J.:
These consolidated petitions seek the review of the Decision dated April 29, 1991 of
the Court of Appeals in CA-G.R. CV No. 17282[1] entitled, "Bank of the Philippine
Islands, Plaintiff-Appellee versus Elizalde Steel Consolidated, Inc., Pacific Multi-
Commercial Corporation, and Chester G. Babst, Defendants-Appellants."
The complaint was commenced principally to enforce payment of a promissory note
and three domestic letters of credit which Elizalde Steel Consolidated, Inc.
(ELISCON) executed and opened with the Commercial Bank and Trust Company
(CBTC).
On June 8, 1973, ELISCON obtained from CBTC a loan in the amount of
P8,015,900.84, with interest at the rate of 14% per annum, evidenced by a promissory
note.[2] ELISCON defaulted in its payments, leaving an outstanding indebtedness in
the amount of P2,795,240.67 as of October 31, 1982.[3]
The letters of credit, on the other hand, were opened for ELISCON by CBTC using
the credit facilities of Pacific Multi-Commercial Corporation (MULTI) with the said
bank, pursuant to the Resolution of the Board of Directors of MULTI adopted on
August 31, 1977 which reads:
WHEREAS, at least 90% of the Company's gross sales is generated by the sale of tin-
plates manufactured by Elizalde Steel Consolidated, Inc.;
WHEREAS, it is to the best interests of the Company to continue handling said tin-
plate line;
WHEREAS, Elizalde Steel Consolidated, Inc. has requested the assistance of the
Company in obtaining credit facilities to enable it to maintain the present level of its
tin-plate manufacturing output and the Company is willing to extend said requested
assistance;
NOW, THEREFORE, for and in consideration of the foregoing premises ---
BE IT RESOLVED AS IT IS HEREBY RESOLVED, That the PRESIDENT &
GENERAL MANAGER, ANTONIO ROXAS CHUA, be, as he is hereby empowered
to allow and authorize ELIZALDE STEEL CONSOLIDATED, INC. to avail and
make use of the Credit Line of PACIFIC MULTI-COMMERCIAL CORPORATION
with the COMMERCIAL BANK & TRUST COMPANY OF THE PHILIPPINES,
Makati, Metro Manila;
RESOLVED, FURTHER, That the Pacific Multi-Commercial Corporation guarantee,
as it does hereby guarantee, solidarily, the payment of the corresponding Letters of
Credit upon maturity of the same;
CIVIL LAW FULL CASE
RESOLVED, FINALLY, That copies of this resolution be furnished the Commercial
Bank & Trust Company of the Philippines, Makati, Metro Manila, for their
information.[4]
Subsequently, on September 26, 1978, Antonio Roxas Chua and Chester G. Babst
executed a Continuing Suretyship,[5] whereby they bound themselves jointly and
severally liable to pay any existing indebtedness of MULTI to CBTC to the extent of
P8,000,000.00 each.
Sometime in October 1978, CBTC opened for ELISCON in favor of National Steel
Corporation three (3) domestic letters of credit in the amounts of P1,946,805.73,[6]
P1,702,869.32[7] and P200,307.72,[8] respectively, which ELISCON used to
purchase tin black plates from National Steel Corporation. ELISCON defaulted in its
obligation to pay the amounts of the letters of credit, leaving an outstanding account,
as of October 31, 1982, in the total amount of P3,963,372.08.[9]
On December 22, 1980, the Bank of the Philippine Islands (BPI) and CBTC entered
into a merger, wherein BPI, as the surviving corporation, acquired all the assets and
assumed all the liabilities of CBTC.[10]
Meanwhile, ELISCON encountered financial difficulties and became heavily indebted
to the Development Bank of the Philippines (DBP). In order to settle its obligations,
ELISCON proposed to convey to DBP by way of dacion en pago all its fixed assets
mortgaged with DBP, as payment for its total indebtedness in the amount of
P201,181,833.16. On December 28, 1978, ELISCON and DBP executed a Deed of
Cession of Property in Payment of Debt.[11]
In June 1981, ELISCON called its creditors to a meeting to announce the take-over by
DBP of its assets.
In October 1981, DBP formally took over the assets of ELISCON, including its
indebtedness to BPI. Thereafter, DBP proposed formulas for the settlement of all of
ELISCON's obligations to its creditors, but BPI expressly rejected the formula
submitted to it for not being acceptable.[12]
Consequently, on January 17, 1983, BPI, as successor-in-interest of CBTC, instituted
with the Regional Trial Court of Makati, Branch 147, a complaint[13] for sum of
money against ELISCON, MULTI and Babst, which was docketed as Civil Case No.
49226.
ELISCON, in its Answer,[14] argued that the complaint was premature since DBP had
made serious efforts to settle its obligations with BPI.
Babst also filed his Answer alleging that he signed the Continuing Suretyship on the
understanding that it covers only obligations which MULTI incurred solely for its
benefit and not for any third party liability, and he had no knowledge or information
of any transaction between MULTI and ELISCON.[15]
MULTI, for its part, denied knowledge of the merger between BPI and CBTC, and
averred that the guaranty under its board resolution did not cover purchases made by
ELISCON in the form of trust receipts. It set up a cross-claim against ELISCON
alleging that the latter should be held liable for any judgment which the court may
render against it in favor of BPI.[16]
On February 20, 1987, the trial court rendered its Decision,[17] the dispositive portion
of which reads:
WHEREFORE, in view of all the foregoing, the Court hereby renders judgment in
favor of the plaintiff and against all the defendants:
1) Ordering defendant ELISCON to pay the plaintiff the amount of P2,795,240.67 due
on the promissory note, Annex "A" of the Complaint as of 31 October 1982 and the
amount of P3,963,372.08 due on the three (3) domestic letters of credit, also as of 31
October 1982;
2) Ordering defendant ELISCON to pay the plaintiff interests and related charges on
the principal of said promissory note of P2,102,232.02 at the rates provided in said
note from and after 31 October 1982 until full payment thereof, and on the principal
CIVIL LAW FULL CASE
of the three (3) domestic letters of credit of P3,564,349.25 interests and related charges
at the rates provided in said letters of credit, from and after 31 October 1982 until full
payment;
3) Ordering defendant ELISCON to pay interests at the legal rate on all interests and
related charges but unpaid as of the filing of this complaint, until full payment thereof;
4) Ordering defendant ELISCON to pay attorney's fees equivalent to 10% of the total
amount due under the preceding paragraphs;
5) Ordering defendants Pacific Multi-Commercial Corporation and defendant Chester
Babst to pay, jointly and severally with defendant ELISCON, the total sum of
P3,963,372.08 due on the three (3) domestic letters of credit as of 31 October 1982
with interests and related charges on the principal amount of P3,963,372.08 at the rates
provided in said letters of credit from 30 October 1982 until fully paid, but to the extent
of not more than P8,000,000.00 in the case of defendant Chester Babst;
6) Ordering defendant Pacific Multi-Commercial Corporation and defendant Chester
Babst to pay, jointly and severally plaintiff interests at the legal rate on all interests
and related charges already accrued but unpaid on said three (3) domestic letters of
credit as of the date of the filing of this Complaint until full payment thereof;
7) Ordering defendant Pacific Multi-Commercial Corporation and defendant Chester
Babst to pay, jointly and severally, attorney's fees of not less than 10% of the total
amount due under paragraphs 5 and 6 hereof. With costs.
SO ORDERED.
In due time, ELISCON, MULTI and Babst filed their respective notices of appeal.[18]
On April 29, 1991, the Court of Appeals rendered the appealed Decision as follows:
WHEREFORE, the judgment appealed from is MODIFIED, to now read (with the
underlining to show the principal changes from the decision of the lower court) thus:
1) Ordering appellant ELISCON to pay the appellee BPI the amount of P2,731,005.60
due on the promissory note, Annex "A" of the Complaint as of 31 October 1982 and
the amount of P3,963,372.08 due on the three (3) domestic letters of credit, also as of
31 October 1982;
2) Ordering appellant ELISCON to pay the appellee BPI interests and related charges
on the principal of said promissory note of P2,102,232.02 at the rates provided in said
note from and after 31 October 1982 until full payment thereof, and on the principal
of the three (3) domestic letters of credit of P3,564,349.25 interests and related charges
at the rates provided in said letters of credit, from and after 31 October 1982 until full
payment;
3) Ordering appellant ELISCON to pay appellee BPI interest at the legal rate on all
interests and related charges but unpaid as of the filing of this complaint, until full
payment thereof;
4) Ordering appellant Pacific Multi-Commercial Corporation and appellant Chester G.
Babst to pay appellee BPI, jointly and severally with appellant ELISCON, the total
sum of P3,963,372.08 due on the three (3) domestic letters of credit as of 31 October
1982 with interest and related charges on the principal amount of P3,963,372.08 at the
rates provided in said letters of credit from 30 October 1982 until fully paid, but to the
extent of not more than P8,000,000.00 in the case of defendant Chester Babst;
5) Ordering appellant Pacific Multi-Commercial Corporation and defendant Chester
Babst to pay, jointly and severally, appellee BPI interests at the legal rate on all
interests and related charges already accrued but unpaid on said three (3) domestic
letters of credit as of the date of the filing of this Complaint until full payment thereof
and the plaintiff's lawyer's fees in the nominal amount of P200,000.00;
6) Ordering appellant ELISCON to reimburse appellants Pacific Multi-Commercial
Corporation and Chester Babst whatever amount they shall have paid in said Eliscon's
behalf particularly referring to the three (3) letters of credit as of 31 October 1982 and
other related charges.
CIVIL LAW FULL CASE
No costs.
SO ORDERED.[19]
ELISCON filed a Motion for Reconsideration of the Decision of the Court of Appeals
which was, however, denied in a Resolution dated March 9, 1992.[20] Subsequently,
ELISCON filed a petition for review on certiorari, docketed as G.R. No. 104625, on
the following grounds:
• THE BANK OF THE PHILIPPINE ISLANDS IS NOT ENTITLED TO
RECOVER FROM PETITIONER ELISCON THE LATTER'S
OBLIGATION WITH COMMERCIAL BANK AND TRUST COMPANY
(CBTC)
• 6.
• THERE WAS A VALID NOVATION OF THE CONTRACT BETWEEN
ELISCON AND BPI THERE BEING A PRIOR CONSENT TO AND
APPROVAL BY BPI OF THE SUBSTITUTION BY DBP AS DEBTOR IN
LIEU OF THE ORIGINAL DEBTOR, ELISCON, THEREBY RELEASING
ELISCON FROM ITS OBLIGATION TO BPI.
• 11. Since MULTI and Chester G. Babst are guarantors of the debts incurred by
• PACIFIC MULTI COMMERCIAL CORPORATION AND CHESTER
BABST CANNOT LAWFULLY RECOVER FROM ELISCON
WHATEVER AMOUNT THEY MAY BE REQUIRED TO PAY TO BPI AS
SURETIES OF ELISCON'S OBLIGATION TO BPI; THEIR CAUSE OF
ACTION MUST BE DIRECTED AGAINST DBP AS THE NEWLY
SUBSTITUTED DEBTOR IN PLACE OF ELISCON.
•
• THE DBP TAKEOVER OF THE ENTIRE ELISCON AMOUNTED TO AN
ACT OF GOVERNMENT WHICH WAS A FORTUITOUS EVENT
EXCULPATING ELISCON FROM FURTHER LIABILITIES TO
RESPONDENT BPI.
• the meeting. Moreover, there was no showing that the availment by ELISCON of
• PETITIONER ELISCON SHOULD NOT BE HELD LIABLE TO PAY
RESPONDENT BPI THE AMOUNTS STATED IN THE DISPOSITIVE
PORTION OF RESPONDENT COURT OF APPEALS' DECISION.[21]
BPI filed its Comment[22] raising the following arguments, to wit:
1. Respondent BPI is legally entitled to recover from ELISCON, MULTI and
Babst the past due obligations with CBTC prior to the merger of BPI with
CBTC.
2.
3. BPI did not give its consent to the DBP take-over of ELISCON. Hence, no
valid novation has been effected.
4.
5. Express consent of creditor to substitution should be recorded in the books.
7. Petitioner Chester G. Babst and respondent MULTI are jointly and solidarily
liable to BPI for the unpaid letters of credit of ELISCON.
8.
9. The question of the liability of ELISCON to BPI has been clearly established.
10.
ELISCON, they may recover from the latter what they may have paid for on
account of that guaranty.
Chester Babst filed a Comment with Manifestation,[23] wherein he contends that the
suretyship agreement he executed with Antonio Roxas Chua was in favor of MULTI;
and that there is nothing therein which authorizes MULTI, in turn, to guarantee the
obligations of ELISCON.
In its Comment,[24] MULTI maintained that inasmuch as BPI had full knowledge of
the purpose of the meeting in June 1981, wherein the takeover by DBP of ELISCON
was announced, it was incumbent upon the said bank to formally communicate its
objection to the assumption of ELISCON's liabilities by DBP in answer to the call for
MULTI's credit facilities with CBTC, which was supposedly guaranteed by Antonio
CIVIL LAW FULL CASE
Roxas Chua, was indeed authorized by the latter pursuant to the resolution of the Board
of Directors of MULTI.
In compliance with this Court's Resolution dated March 17, 1993,[25] the parties
submitted their respective memoranda.
Meanwhile, in a petition for review filed with this Court, which was docketed as G.R.
No. 99398, Chester Babst alleged that the Court of Appeals acted without jurisdiction
and/or with grave abuse of discretion when:
1. IT AFFIRMED THE LOWER COURT'S HOLDING THAT THERE WAS
NO NOVATION INASMUCH AS RESPONDENT BANK OF THE
PHILIPPINE ISLANDS (OR BPI) HAD PRIOR CONSENT TO AND
APPROVAL OF THE SUBSTITUTION AS DEBTOR BY THE
DEVELOPMENT BANK OF THE PHILIPPINES (OR DBP) IN THE PLACE
OF ELIZALDE STEEL CONSOLIDATED, INC. (OR ELISCON) IN THE
LATTER'S OBLIGATION TO BPI.
2.
3. IT CONFIRMED THE LOWER COURT'S CONCLUSION THAT THERE
WAS NO IMPLIED CONSENT OF THE CREDITOR BANK OF THE
PHILIPPINE ISLANDS TO THE SUBSTITUTION BY DEVELOPMENT
BANK OF THE PHILIPPINES OF THE ORIGINAL DEBTOR ELIZALDE
STEEL CONSOLIDATED, INC.
4.
5. IT AFFIRMED THE LOWER COURT'S FINDING OF LACK OF MERIT
OF THE CONTENTION OF ELISCON THAT THE FAILURE OF THE
OFFICER OF BPI, WHO WAS PRESENT DURING THE MEETING OF
ELISCON'S CREDITORS IN JUNE 1981 TO VOICE HIS OBJECTION TO
THE ANNOUNCED TAKEOVER BY THE DBP OF THE ASSETS OF
ELISCON AND ASSUMPTION OF ITS LIABILITIES, CONSTITUTED AN
IMPLIED CONSENT TO THE ASSUMPTION BY DBP OF THE
OBLIGATIONS OF ELISCON TO BPI.
6.
7. IN NOT TAKING JUDICIAL NOTICE THAT THE DBP TAKEOVER OF
THE ENTIRE ELISCON WAS AN ACT OF GOVERNMENT
CONSTITUTING A FORTUITOUS EVENT EXCULPATING ELISCON
FROM ANY LIABILITY TO BPI.
8.
9. IN NOT FINDING THAT THE DACION EN PAGO BETWEEN DBP AND
BPI RELIEVED ELISCON, MULTI AND BABST OF ANY LIABILITY TO
BPI.
10.
11. IN FINDING THAT MULTI AND BABST BOUND THEMSELVES
SOLIDARILY WITH ELISCON WITH RESPECT TO THE OBLIGATION
INVOLVED HERE.
12.
13. IN RENDERING JUDGMENT IN FAVOR OF BPI AND AGAINST
ELISCON ORDERING THE LATTER TO PAY THE AMOUNTS STATED
IN THE DISPOSITIVE PORTION OF THE DECISION; AND ORDERING
PETITIONER AND MULTI TO PAY SAID AMOUNTS JOINTLY AND
SEVERALLY WITH ELISCON.[26]
Petitioner Babst alleged that DBP sold all of ELISCON's assets to the National
Development Company, for the latter to take over and continue the operation of its
business. On September 11, 1981, the Board of Governors of the DBP adopted
Resolution No. 2817 which states that DBP shall enter into a contractual arrangement
with NDC for the latter to pay ELISCON's creditors, including BPI in the amount of
P4,015,534.54. This was followed by a Memorandum of Agreement executed on May
4, 1983 by and between DBP and NDC, wherein they stipulated, inter alia, that NDC
shall pay to ELISCON's creditors, through DBP, the amount of P299,524,700.00.
Among the creditors mentioned in the agreement was BPI, with a listed credit of
P4,015,534.54.
Furthermore, petitioner Babst averred that the assets of ELISCON which were
acquired by the DBP, and later transferred to the NDC, were placed under the Asset
Privatization Trust pursuant to Proclamation No. 50, issued by then President Corazon
C. Aquino on December 8, 1986.
CIVIL LAW FULL CASE
In its Comment,[27] BPI countered that by virtue of its merger with CBTC, it acquired
all the latter's rights and interest including all receivables; that in order to effect a valid
novation by substitution of debtors, the consent of the creditor must be express; that
in addition, the consent of BPI must appear in its books, it being a private corporation;
that BPI intentionally did not consent to the assumption by DBP of the obligations of
ELISCON because it wanted to preserve intact its causes of action and legal recourse
against Pacific Multi-Commercial Corporation and Babst as sureties of ELISCON and
not of DBP; that MULTI expressly bound itself solidarily for ELISCON's obligations
to CBTC in its Resolution wherein it allowed the latter to use its credit facilities; and
that the suretyship agreement executed by Babst does not exclude liabilities incurred
by MULTI on behalf of third parties, such as ELISCON.
ELISCON likewise filed a Comment,[28] wherein it manifested that of the seven
errors raised by Babst in his petition, six are arguments which ELISCON itself raised
in its previous pleadings. It is only the sixth assigned error --- that the Court of Appeals
erred in finding that MULTI and Babst bound themselves solidarily with ELISCON -
-- that ELISCON takes exception to. More particularly, ELISCON pointed out the
contradictory positions taken by Babst in admitting that he bound himself to pay the
indebtedness of MULTI, while at the same time completely disavowing and denying
any such obligation. It stressed that should MULTI or Babst be finally adjudged liable
under the suretyship agreement, they cannot lawfully recover from ELISCON, but
from the DBP which had been substituted as the new debtor.
MULTI filed its Comment,[29] admitting the correctness of the petition and adopting
the Comment of ELISCON insofar as it is not inconsistent with the positions of Babst
and MULTI.
At the outset, the preliminary issue of BPI's right of action must first be addressed.
ELISCON and MULTI assail BPI's legal capacity to recover their obligation to CBTC.
However, there is no question that there was a valid merger between BPI and CBTC.
It is settled that in the merger of two existing corporations, one of the corporations
survives and continues the business, while the other is dissolved and all its rights,
properties and liabilities are acquired by the surviving corporation.[30] Hence, BPI
has a right to institute the case a quo.
We now come to the primordial issue in this case - whether or not BPI consented to
the assumption by DBP of the obligations of ELISCON.
Article 1293 of the Civil Code provides:
Novation which consists in substituting a new debtor in the place of the original one,
may be made even without the knowledge or against the will of the latter, but not
without the consent of the creditor. Payment by the new debtor gives him the rights
mentioned in articles 1236 and 1237.
BPI contends that in order to have a valid novation, there must be an express consent
of the creditor. In the case of Testate Estate of Mota, et al. v. Serra,[31] this Court
held:
It should be noted that in order to give novation its legal effect, the law requires that
the creditor should consent to the substitution of a new debtor. This consent must be
given expressly for the reason that, since novation extinguishes the personality of the
first debtor who is to be substituted by a new one, it implies on the part of the creditor
a waiver of the right that he had before the novation, which waiver must be express
under the principle of renuntiatio non præsumitur, recognized by the law in declaring
that a waiver of right may not be performed [should read: presumed] unless the will
to waive is indisputably shown by him who holds the right.[32]
The import of the foregoing ruling, however, was explained and clarified by this Court
in the later case of Asia Banking Corporation v. Elser[33] in this wise:
The aforecited article 1205 [now 1293] of the Civil Code does not state that the
creditor's consent to the substitution of the new debtor for the old be express, or
given at the time of the substitution, and the Supreme Court of Spain, in its judgment
of June 16, 1908, construing said article, laid down the doctrine that "article 1205 of
the Civil Code does not mean or require that the creditor's consent to the change of
debtors must be given simultaneously with the debtor's consent to the substitution, its
evident purpose being to preserve the creditor's full right, it is sufficient that the latter's
consent be given at any time and in any form whatever, while the agreement of the
debtors subsists." The same rule is stated in the Enciclopedia Jurídica Española,
CIVIL LAW FULL CASE
volume 23, page 503, which reads: "The rule that this kind of novation, like all others,
must be express, is not absolute; for the existence of the consent may well be
inferred from the acts of the creditor, since volition may as well be expressed by
deeds as by words." The understanding between Henry W. Elser and the principal
director of Yangco, Rosenstock & Co., Inc., with respect to Luis R. Yangco's stock in
said corporation, and the acts of the board of directors after Henry W. Elser had
acquired said shares, in substituting the latter for Luis R. Yangco, are a clear and
unmistakable expression of its consent. When this court said in the case of Estate
of Mota vs. Serra (47 Phil., 464), that the creditor's express consent is necessary
in order that there may be a novation of a contract by the substitution of debtors,
it did not wish to convey the impression that the word "express" was to be given
an unqualified meaning, as indicated in the authorities or cases, both Spanish and
American, cited in said decision.[34]
Subsequently, in the case of Vda. e Hijos de Pio Barretto y Cía., Inc. v. Albo & Sevilla,
Inc., et al.,[35] this Court reiterated the rule that there can be implied consent of the
creditor to the substitution of debtors.
In the case at bar, Babst, MULTI and ELISCON all maintain that due to the failure of
BPI to register its objection to the take-over by DBP of ELISCON's assets, at the
creditors' meeting held in June 1981 and thereafter, it is deemed to have consented to
the substitution of DBP for ELISCON as debtor.
We find merit in the argument. Indeed, there exist clear indications that BPI was aware
of the assumption by DBP of the obligations of ELISCON. In fact, BPI admits that --
- payment. In fact, DBP, which had stepped into the shoes of ELISCON, was capable
"the Development Bank of the Philippines (DBP), for a time, had proposed a formula
for the settlement of Eliscon's past obligations to its creditors, including the plaintiff
[BPI], but the formula was expressly rejected by the plaintiff as not acceptable (long
before the filing of the complaint at bar)."[36]
The Court of Appeals held that even if the account officer who attended the June 1981
creditors' meeting had expressed consent to the assumption by DBP of ELISCON's
debts, such consent would not bind BPI for lack of a specific authority therefor. In its
petition, ELISCON counters that the mere presence of the account officer at the
meeting necessarily meant that he was authorized to represent BPI in that creditors'
meeting. Moreover, BPI did not object to the substitution of debtors, although it
objected to the payment formula submitted by DBP.
Indeed, the authority granted by BPI to its account officer to attend the creditors'
meeting was an authority to represent the bank, such that when he failed to object to
the substitution of debtors, he did so on behalf of and for the bank. Even granting
arguendo that the said account officer was not so empowered, BPI could have
subsequently registered its objection to the substitution, especially after it had already
learned that DBP had taken over the assets and assumed the liabilities of ELISCON.
Its failure to do so can only mean an acquiescence in the assumption by DBP of
ELISCON's obligations. As repeatedly pointed out by ELISCON and MULTI, BPI's
objection was to the proposed payment formula, not to the substitution itself.
BPI gives no cogent reason in withholding its consent to the substitution, other than
its desire to preserve its causes of action and legal recourse against the sureties of
ELISCON. It must be remembered, however, that while a surety is solidarily liable
with the principal debtor, his obligation to pay only arises upon the principal debtor's
failure or refusal to pay. A contract of surety is an accessory promise by which a person
binds himself for another already bound, and agrees with the creditor to satisfy the
obligation if the debtor does not.[37] A surety is an insurer of the debt; he promises to
pay the principal's debt if the principal will not pay.[38]
In the case at bar, there was no indication that the principal debtor will default in
of payment. Its authorized capital stock was increased by the government.[39] More
importantly, the National Development Company took over the business of ELISCON
and undertook to pay ELISCON's creditors, and earmarked for that purpose the
amount of P4,015,534.54 for payment to BPI.[40]
Notwithstanding the fact that a reliable institution backed by government funds was
offering to pay ELISCON's debts, not as mere surety but as substitute principal debtor,
BPI, for reasons known only to itself, insisted in going after the sureties. The course
CIVIL LAW FULL CASE

of action chosen taxes the credulity of this Court. At the very least, suffice it to state WHEREFORE, the consolidated petitions are GRANTED. The appealed Decision
that BPI's actuation in this regard runs counter to the good faith covenant in contractual of the Court of Appeals, which held ELISCON, MULTI and Babst solidarily liable for
relations, provided for by the Civil Code, to wit: payment to BPI of the promissory note and letters of credit, is REVERSED and SET
ART. 19. Every person must, in the exercise of his rights and in the performance of ASIDE. BPI's complaint against ELISCON, MULTI and Babst is DISMISSED.
his duties, act with justice, give everyone his due, and observe honesty and good faith.
SO ORDERED.
ART. 1159. Obligations arising from contract have the force of law between the
contracting parties and should be complied with in good faith.
BPI's conduct evinced a clear and unmistakable consent to the substitution of DBP for
ELISCON as debtor. Hence, there was a valid novation which resulted in the release
of ELISCON from its obligation to BPI, whose cause of action should be directed
against DBP as the new debtor.
Novation, in its broad concept, may either be extinctive or modificatory. It is extinctive
when an old obligation is terminated by the creation of a new obligation that takes the
place of the former; it is merely modificatory when the old obligation subsists to the
extent it remains compatible with the amendatory agreement. An extinctive novation
results either by changing the object or principal conditions (objective or real), or by
substituting the person of the debtor or subrogating a third person in the rights of the
creditor (subjective or personal). Under this mode, novation would have dual functions
- one to extinguish an existing obligation, the other to substitute a new one in its place
- requiring a conflux of four essential requisites, (1) a previous valid obligation; (2) an
agreement of all parties concerned to a new contract; (3) the extinguishment of the old
obligation; and (4) the birth of a valid new obligation.[41]
The original obligation having been extinguished, the contracts of suretyship executed
separately by Babst and MULTI, being accessory obligations, are likewise
extinguished.[42]

Hence, BPI should enforce its cause of action against DBP. It should be stressed that
notwithstanding the lapse of time within which these cases have remained pending,
the prescriptive period for BPI to file its action was interrupted when it filed Civil Case
No. 49226.[43]